[Federal Register Volume 64, Number 126 (Thursday, July 1, 1999)]
[Notices]
[Pages 35590-35625]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16657]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-427-801, A-428-801, A-475-801, A-588-804, A-485-801, A-559-801, A-
412-801]
Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, Germany, Italy, Japan, Romania, Sweden, and
the United Kingdom; Final Results of Antidumping Duty Administrative
Reviews
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty administrative
reviews.
-----------------------------------------------------------------------
SUMMARY: On February 23, 1999, the Department of Commerce published the
preliminary results of administrative reviews of the antidumping duty
orders on antifriction bearings (other than tapered roller bearings)
and parts thereof from France, Germany, Italy, Japan, Romania, Sweden,
and the United Kingdom. The classes or kinds of merchandise covered by
these orders are ball bearings and parts thereof, cylindrical roller
bearings and parts thereof, and spherical plain bearings and parts
thereof. The reviews cover 21 manufacturers/exporters. The period of
review is May 1, 1997, through April 30, 1998.
Based on our analysis of the comments received, we have made
changes, including corrections of certain programming and other
clerical errors, in the margin calculations. Therefore, the final
results differ from the preliminary results. The final weighted-average
dumping margins for the reviewed firms are listed below in the section
entitled ``Final Results of the Reviews.''
EFFECTIVE DATE: July 1, 1999.
FOR FURTHER INFORMATION: Please contact the appropriate case analysts
for the various respondent firms as listed below, at Import
Administration, International Trade Administration, U.S. Department of
Commerce, Washington, D.C. 20230; telephone: (202) 482-4733.
France
Lyn Johnson (SKF), Larry Tabash or Davina Hashmi (SNFA), J. David
Dirstine (SNR), Robin Gray, or Richard Rimlinger.
Germany
Mark Ross (INA and Torrington Nadellager), Farah Naim or Davina
Hashmi (SKF), Thomas Schauer (FAG), Robin Gray, or Richard Rimlinger.
Italy
Anne Copper or J. David Dirstine (SKF), Edythe Artman or Mark Ross
(FAG), Minoo Hatten (Somecat), Robin Gray, or Richard Rimlinger.
Japan
J. David Dirstine (Koyo and Nachi), Thomas Schauer (NTN), Davina
Hashmi (NPBS), Diane Krawczun (NSK), Robin Gray, or Richard Rimlinger.
Romania
Suzanne Flood (TIE, S.A.) or Robin Gray.
Sweden
Davina Hashmi (SKF) or Richard Rimlinger.
United Kingdom
Stacey King (Barden), Diane Krawczun (NSK/RHP), Hermes Pinilla
(FAG), Lyn Johnson (SNFA U.K.), Robin Gray, or Richard Rimlinger.
SUPPLEMENTARY INFORMATION:
The Applicable Statute
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (the Act), are references to the provisions effective
January 1, 1995, the effective date of the amendments made to the Act
by the Uruguay Round Agreements Act (URAA). In addition, unless
otherwise indicated, all citations to the Department of Commerce's (the
Department's) regulations are to 19 CFR Part 351 (1998).
Background
On February 23, 1999, the Department of Commerce (the Department)
published the preliminary results of administrative reviews of the
antidumping duty orders on antifriction bearings (other than tapered
roller bearings) and parts thereof (AFBs) from France, Germany, Italy,
Japan, Romania, Sweden, and the United Kingdom (64 FR 8790). The
reviews cover 21 manufacturers/exporters. The period of review (POR) is
May 1, 1997, through April 30, 1998. We invited parties to comment on
the preliminary results of reviews. At the request of certain
interested parties, we held hearings for Germany-specific issues on
April 1, 1999, and for Japan-specific issues on April 6, 1999. The
Department has conducted these administrative reviews in accordance
with section 751 of the Act.
Scope of Reviews
The products covered by these reviews are AFBs and constitute the
[[Page 35591]]
following classes or kinds of merchandise: ball bearings and parts
thereof (BBs), cylindrical roller bearings and parts thereof (CRBs),
and spherical plain bearings and parts thereof (SPBs). For a detailed
description of the products covered under these classes or kinds of
merchandise, including a compilation of all pertinent scope
determinations, see the ``Scope Appendix,'' which is appended to this
notice of final results.
Duty Absorption
We have determined that duty absorption has occurred with respect
to the following firms and with respect to the following percentages of
sales which these firms made through their U.S. affiliated parties:
------------------------------------------------------------------------
Percentage
of U.S.
affiliate's
Name of firm Class or kind sales with
dumping
margins
------------------------------------------------------------------------
France
------------------------------------------------------------------------
SKF.................................. BBs 18.44
SNR.................................. BBs 5.14
CRBs 10.27
------------------------------------------------------------------------
Germany
------------------------------------------------------------------------
SKF.................................. BBs 3.17
CRBs 33.52
SPBs 20.31
Torrington Nadellager................ CRBs 0.26
FAG.................................. BBs 10.31
CRBs 24.59
INA.................................. BBs 9.14
CRBs 9.24
SPBs 3.53
------------------------------------------------------------------------
Italy
------------------------------------------------------------------------
FAG.................................. BBs 10.38
SKF.................................. BBs 20.73
------------------------------------------------------------------------
Japan
------------------------------------------------------------------------
Koyo................................. BBs 29.73
CRBs 47.46
Nachi................................ BBs 43.96
CRBs 8.04
NPBS................................. BBs 9.75
NSK.................................. BBs 4.89
CRBs 16.23
NTN.................................. BBs 28.83
CRBs 32.57
SPBs 57.17
------------------------------------------------------------------------
Sweden
------------------------------------------------------------------------
SKF.................................. BBs 4.16
CRBs 100.00
------------------------------------------------------------------------
United Kingdom
------------------------------------------------------------------------
Barden............................... BBs 19.43
NSK/RHP.............................. BBs 31.46
CRBs 47.88
------------------------------------------------------------------------
For a discussion of our determination with respect to this matter,
see the ``Duty Absorption'' section of the Issues Appendix.
Use of Facts Available
For a discussion of our application of facts available, see the
``Facts Available'' section of the Issues Appendix.
Sales Below Cost in the Home Market
The Department disregarded home-market sales that failed the cost
test for the following firms and classes or kinds of merchandise for
these final results of reviews:
----------------------------------------------------------------------------------------------------------------
Country Company Subject merchandise
----------------------------------------------------------------------------------------------------------------
France.................................. SKF............................ BBs.
SNR............................ BBs.
Germany................................. SKF............................ BBs, CRBs, SPBs.
FAG............................ BBs, CRBs.
INA............................ BBs, CRBs, SPBs.
Italy................................... FAG............................ BBs.
SKF............................ BBs.
Japan................................... Koyo........................... BBs, CRBs.
Nachi.......................... BBs, CRBs.
NSK............................ BBs, CRBs.
NTN............................ BBs, CRBs, SPBs.
NPBS........................... BBs.
Sweden.................................. SKF............................ BBs.
United Kingdom.......................... Barden......................... BBs.
NSK-RHP........................ BBs, CRBs.
----------------------------------------------------------------------------------------------------------------
Changes Since the Preliminary Results
Based on our analysis of comments received, we have made revisions
that have changed our results. We have corrected programming and
clerical errors in our preliminary results, where applicable. Any
alleged programming or clerical errors about which we or the parties do
not agree are discussed in the relevant sections of the Issues
Appendix.
Analysis of Comments Received
All issues raised in the case and rebuttal briefs by parties to
these concurrent administrative reviews of AFBs are addressed in the
``Issues Appendix,'' which is appended to this notice of final results.
Final Results of Reviews
We determine that the following percentage weighted-average margins
exist for the period May 1, 1997, through April 30, 1998:
------------------------------------------------------------------------
Company BBs CRBs SPBs
------------------------------------------------------------------------
France
------------------------------------------------------------------------
SKF.......................................... 7.40 (2) 7.39
SNFA......................................... 0.41 0.21 (2)
SNR.......................................... 0.31 0.37 (1)
------------------------------------------------------------------------
Germany
------------------------------------------------------------------------
SKF.......................................... 1.23 5.47 3.06
Torrington................................... (2) 0.45 (3)
Nadellager
FAG.......................................... 2.93 8.92 (1)
INA.......................................... 7.38 3.88 0.87
------------------------------------------------------------------------
Italy
------------------------------------------------------------------------
FAG.......................................... 0.96 (1)
SKF.......................................... 3.42 (3)
Somecat...................................... 0.45 (2)
------------------------------------------------------------------------
Japan
------------------------------------------------------------------------
Koyo Seiko................................... 7.23 11.15 (1)
[[Page 35592]]
Nachi........................................ 4.33 1.02 (1)
NPBS......................................... 1.20 (2) (2)
NSK Ltd...................................... 1.12 4.55 (2)
NTN.......................................... 6.13 3.48 12.49
------------------------------------------------------------------------
Romania
------------------------------------------------------------------------
TIE.......................................... 0.07
------------------------------------------------------------------------
Sweden
------------------------------------------------------------------------
SKF.......................................... 2.87 13.69
------------------------------------------------------------------------
United Kingdom
------------------------------------------------------------------------
Barden....................................... 2.89 (1)
FAG (U.K.)................................... (1) (1)
NSK-RHP...................................... 21.02 49.13
SNFA......................................... 0.00 (2)
------------------------------------------------------------------------
(\1\) No shipments or sales subject to this review. The cash-deposit
rate is from the last relevant segment of the proceeding in which the
firm had shipments/sales.
(\2\) No shipments or sales subject to this review. The firm has no
individual rate from any segment of this proceeding.
(\3\) No review.
Assessment Rates
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. In accordance
with 19 CFR 351.212(b)(1), we have calculated, whenever possible, an
exporter/importer- or customer-specific assessment rate or value for
subject merchandise.
a. Export Price Sales
With respect to export price (EP) sales for these final results, we
divided the total dumping margins (calculated as the difference between
normal value and EP) for each importer/customer by the total number of
units sold to that importer/customer. We will direct the Customs
Service to assess the resulting per-unit dollar amount against each
unit of merchandise on each of that importer's/customer's entries under
the relevant order during the review period.
b. Constructed Export Price Sales
For constructed export price (CEP) sales (sampled and non-sampled),
we divided the total dumping margins for the reviewed sales by the
total entered value of those reviewed sales for each importer. When an
affiliated party acts as an importer for EP sales we have included the
applicable EP sales in this assessment-rate calculation. We will direct
the Customs Service to assess the resulting percentage margin against
the entered customs values for the subject merchandise on each of that
importer's entries under the relevant order 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.
Cash-Deposit Requirements
To calculate the cash-deposit rate for each respondent (i.e., each
exporter and/or manufacturer included in these reviews) we divided the
total dumping duties due for each company by the total net value for
that company's sales of merchandise during the review period subject to
each order.
In order to derive a single deposit rate for each order for each
respondent, we weight-averaged the EP and CEP deposit rates (using the
EP and CEP, respectively, as the weighting factors). To accomplish this
when we sampled CEP sales, we first calculated the total dumping
margins for all CEP sales during the review period by multiplying the
sample CEP margins by the ratio of total days in the review period to
days in the sample weeks. We then calculated a total net value for all
CEP sales during the review period by multiplying the sample CEP total
net value by the same ratio. We then divided the combined total dumping
margins for both EP and CEP sales by the combined total value for both
EP and CEP sales to obtain the deposit rate.
We will direct the Customs Service to collect the resulting
percentage deposit rate against the entered customs value of each of
the exporter's entries of subject merchandise entered, or withdrawn
from warehouse, for consumption on or after the date of publication of
this notice.
Entries of parts incorporated into finished bearings before sales
to an unaffiliated customer in the United States will receive the
respondent's deposit rate applicable to the order.
Furthermore, the following deposit requirements will be effective
upon publication of this notice of final results of administrative
reviews for all shipments of AFBs 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
reviewed companies will be the rates shown above except that, for firms
whose weighted-average margins are less than 0.5 percent and therefore
de minimis, the Department shall not require a deposit of estimated
antidumping duties; (2) for previously reviewed or investigated
companies not listed above, the cash-deposit rate will continue to be
the company-specific rate published for the most recent period; (3) if
the exporter is not a firm covered in this review, a prior review, or
the original less-than-fair-value (LTFV) investigation, but the
manufacturer is, the cash-deposit rate will be the rate established for
the most recent period for the manufacturer of the merchandise; and (4)
the cash-deposit rate for all other manufacturers or exporters will
continue to be the ``All Others'' rate for the relevant order made
effective by the final results of review published on July 26, 1993
(see Final Results of Antidumping Duty Administrative Reviews and
Revocation in Part of an Antidumping Duty Order, 58 FR 39729 (July 26,
1993), and, for BBs from Italy, see Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof From France, et al: Final
Results of Antidumping Duty Administrative Reviews, Partial Termination
of Administrative Reviews, and Revocation in Part of Antidumping Duty
Orders, 61 FR 66472 (December 17, 1996)). These rates are the ``All
Others'' rates from the relevant LTFV investigation.
These deposit requirements shall remain in effect until publication
of the final results of the next administrative reviews.
This notice serves as a reminder to importers of their
responsibility under 19 CFR 351.402(f) 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 Department's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of doubled 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 351.305(a)(3) 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.
We are issuing and publishing this determination in accordance with
sections 751(a)(1) and 777(i)(1) of the Act.
[[Page 35593]]
Dated: June 23, 1999.
Richard W. Moreland
Acting Assistant Secretary for Import Administration.
Scope Appendix Contents
A. Description of the Merchandise
B. Scope Determinations
Issues Appendix Contents
Abbreviations
Comments and Responses
1. Facts Available
2. Duty Absorption
3. Discounts, Rebates, and Price Adjustments
4. Circumstance-of-Sale Adjustments
A. Credit
B. Technical Services and Warranties
C. Commissions
D. Other Direct Selling Expenses
E. Indirect Selling Expenses
5. Level of Trade
6. Cost of Production and Constructed Value
A. Profit for Constructed Value
B. Affiliated-Party Inputs
C. General, Selling, and Administrative Expenses
D. When to Use Constructed Value
E. Miscellaneous
7. Packing and Movement Expense
A. Repacking
B. Inland Freight
C. Ocean and Air Freight
D. Inventory Carrying Costs
8. Sales to Affiliated Parties
9. Samples, Prototypes, and Sales Outside the Ordinary Course of
Trade
10. Constructed Export Price Profit
11. Miscellaneous
A. Clerical Errors
B. Other
12. Romania-Specific Issues
Scope Appendix
A. Description of the Merchandise
The products covered by these orders, antifriction bearings (other
than tapered roller bearings), mounted or unmounted, and parts thereof
(AFBs), constitute the following classes or kinds of merchandise:
1. Ball Bearings and Parts Thereof: These products include all AFBs
that employ balls as the roller element. Imports of these products are
classified under the following categories: antifriction balls, ball
bearings with integral shafts, ball bearings (including radial ball
bearings) and parts thereof, and housed or mounted ball bearing units
and parts thereof. Imports of these products are classified under the
following Harmonized Tariff Schedule (HTS) subheadings: 3926.90.45,
4016.93.00, 4016.93.10, 4016.93.50, 6909.19.5010, 8431.20.00,
8431.39.0010, 8482.10.10, 8482.10.50, 8482.80.00, 8482.91.00,
8482.99.05, 8482.99.2580, 8482.99.35, 8482.99.6595, 8483.20.40,
8483.20.80, 8483.50.8040, 8483.50.90, 8483.90.20, 8483.90.30,
8483.90.70, 8708.50.50, 8708.60.50, 8708.60.80, 8708.70.6060,
8708.70.8050, 8708.93.30, 8708.93.5000, 8708.93.6000, 8708.93.75,
8708.99.06, 8708.99.31, 8708.99.4960, 8708.99.50, 8708.99.5800,
8708.99.8080, 8803.10.00, 8803.20.00, 8803.30.00, 8803.90.30, and
8803.90.90.
2. Cylindrical Roller Bearings, Mounted or Unmounted, and Parts
Thereof: These products include all AFBs that employ cylindrical
rollers as the rolling element. Imports of these products are
classified under the following categories: antifriction rollers, all
cylindrical roller bearings (including split cylindrical roller
bearings) and parts thereof, housed or mounted cylindrical roller
bearing units and parts thereof.
Imports of these products are classified under the following HTS
subheadings: 3926.90.45, 4016.93.00, 4016.93.10, 4016.93.50,
6909.19.5010, 8431.20.00, 8431.39.0010, 8482.40.00, 8482.50.00,
8482.80.00, 8482.91.00, 8482.99.25, 8482.99.35, 8482.99.6530,
8482.99.6560, 8482.99.70, 8483.20.40, 8483.20.80, 8483.50.8040,
8483.90.20, 8483.90.30, 8483.90.70, 8708.50.50, 8708.60.50,
8708.93.5000, 8708.99.4000, 8708.99.4960, 8708.99.50, 8708.99.8080,
8803.10.00, 8803.20.00, 8803.30.00, 8803.90.30, and 8803.90.90.
3. Spherical Plain Bearings, Mounted or Unmounted, and Parts
Thereof: These products include all spherical plain bearings that
employ a spherically shaped sliding element and include spherical plain
rod ends.
Imports of these products are classified under the following HTS
subheadings: 3926.90.45, 4016.93.00, 4016.93.10, 4016.93.50,
6909.50.10, 8483.30.80, 8483.90.30, 8485.90.00, 8708.93.5000,
8708.99.50, 8803.10.00, 8803.20.00, 8803.30.00, 8803.90.30, and
8803.90.90.
The HTS item numbers are provided for convenience and customs
purposes. They are not determinative of the products subject to the
orders. The written descriptions remain dispositive.
Size or precision grade of a bearing does not influence whether the
bearing is covered by the orders. These orders cover all the subject
bearings and parts thereof (inner race, outer race, cage, rollers,
balls, seals, shields, etc.) outlined above with certain limitations.
With regard to finished parts, all such parts are included in the scope
of these orders. For unfinished parts, such parts are included if (1)
they have been heat-treated, or (2) heat treatment is not required to
be performed on the part. Thus, the only unfinished parts that are not
covered by these orders are those that will be subject to heat
treatment after importation.
The ultimate application of a bearing also does not influence
whether the bearing is covered by the orders. Bearings designed for
highly specialized applications are not excluded. Any of the subject
bearings, regardless of whether they may ultimately be utilized in
aircraft, automobiles, or other equipment, are within the scopes of
these orders.
B. Scope Determinations
The Department has issued numerous clarifications of the scope of
the orders. The status of the following products was decided during the
investigation:
Products covered:
Rod end bearings and parts thereof
AFBs used in aviation applications
Aerospace engine bearings
Split cylindrical roller bearings
Wheel hub units
Wave generator bearings
Bearings (including mounted or housed units and flanged or
enhanced bearings) ultimately utilized in textile machinery
Products excluded:
Plain bearings other than spherical plain bearings
Airframe components unrelated to the reduction of friction
Linear motion devices
Split pillow block housings
Nuts, bolts, and sleeves that are not integral parts of a
bearing or attached to a bearing under review
Thermoplastic bearings
Stainless steel hollow balls
Textile machinery components that are substantially
advanced in function(s) or value
Wheel hub units imported as part of front and rear axle
assemblies; wheel hub units that include tapered roller bearings; and
clutch release bearings that are already assembled as parts of
transmissions
Slewing rings and slewing bearings
In addition, since the time of the investigation the Department has
issued the following rulings:
Scope rulings completed between April 1, 1990, and June 30, 1990
(see Scope Rulings, 55 FR 42750 (October 23, 1990)):
Products excluded:
Antifriction bearings, including integral shaft ball
bearings, used in textile machinery and imported with attachments and
augmentations sufficient to advance their function beyond load-bearing/
friction-reducing capability
Scope rulings completed between July 1, 1990, and September 30,
1990 (see
[[Page 35594]]
Scope Rulings, 55 FR 43020 (October 25, 1990)):
Products covered:
Rod ends
Clutch release bearings
Ball bearings used in the manufacture of helicopters
Ball bearings used in the manufacture of disk drives
Scope rulings published in Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof; Final Results of
Antidumping Administrative Review, 56 FR 31692, 31696 (July 11, 1991):
Products covered:
Load rollers and thrust rollers, also called mast guide
bearings
Conveyor system trolley wheels and chain wheels
Scope rulings completed between April 1, 1991, and June 30, 1991
(see Scope Rulings, 56 FR 36774 (August 1, 1991)):
Products excluded:
Textile machinery components including false twist
spindles, belt guide rollers, separator rollers, damping units, rotor
units, and tension pulleys
Scope rulings completed between July 1, 1991, and September 30,
1991 (see Scope Rulings, 56 FR 57320 (November 8, 1991)):
Products covered:
Snap rings and wire races
Bearings imported as spare parts
Custom-made specialty bearings
Products excluded:
Certain rotor assembly textile machinery components
Linear motion bearings
Scope rulings completed between October 1, 1991, and December 31,
1991 (see Scope Rulings, 57 FR 4597 (February 6, 1992)):
Products covered:
Chain sheaves (forklift truck mast components)
Loose boss rollers used in textile drafting machinery,
also called top rollers
Certain engine main shaft pilot bearings and engine crank
shaft bearings
Scope rulings completed between January 1, 1992, and March 31, 1992
(see Scope Rulings, 57 FR 19602 (May 7, 1992)):
Products covered:
Ceramic bearings
Roller turn rollers
Clutch release systems that contain rolling elements
Products excluded:
Clutch release systems that do not contain rolling
elements
Chrome steel balls for use as check valves in hydraulic
valve systems
Scope rulings completed between April 1, 1992, and June 30, 1992
(see Scope Rulings, 57 FR 32973 (July 24, 1992)):
Products excluded:
Finished, semiground stainless steel balls
Stainless steel balls for non-bearing use (in an optical
polishing process)
Scope rulings completed between July 1, 1992, and September 30,
1992 (see Scope Rulings, 57 FR 57420 (December 4, 1992)):
Products covered:
Certain flexible roller bearings whose component rollers
have a length-to-diameter ratio of less than 4:1
Model 15BM2110 bearings
Products excluded:
Certain textile machinery components
Scope rulings completed between October 1, 1992, and December 31,
1992 (see Scope Rulings, 58 FR 11209 (February 24, 1993)):
Products covered:
Certain cylindrical bearings with a length-to-diameter
ratio of less than 4:1
Products excluded:
Certain cartridge assemblies comprised of a machine shaft,
a machined housing and two standard bearings
Scope rulings completed between January 1, 1993, and March 31, 1993
(see Scope Rulings, 58 FR 27542 (May 10, 1993)):
Products covered:
Certain cylindrical bearings with a length-to-diameter
ratio of less than 4:1
Scope rulings completed between April 1, 1993, and June 30, 1993
(see Scope Rulings, 58 FR 47124 (September 7, 1993)):
Products covered:
Certain series of INA bearings
Products excluded:
SAR series of ball bearings
Certain eccentric locking collars that are part of housed
bearing units
Scope rulings completed between October 1, 1993, and December 31,
1993 (see Scope Rulings, 59 FR 8910 (February 24, 1994)):
Products excluded:
Certain textile machinery components
Scope rulings completed between January 1, 1994, and March 31,
1994:
Products excluded:
Certain textile machinery components
Scope rulings completed between October 1, 1994 and December 31,
1994 (see Scope Rulings, 60 FR 12196 (March 6, 1995)):
Products excluded:
Rotek and Kaydon--Rotek bearings, models M4 and L6, are
slewing rings outside the scope of the order.
Scope rulings completed between April 1, 1995 and June 30, 1995
(see Scope Rulings, 60 FR 36782 (July 18, 1995)):
Products covered:
Consolidated Saw Mill International (CSMI) Inc.--Cambio
bearings contained in CSMI's sawmill debarker are within the scope of
the order.
Nakanishi Manufacturing Corp.--Nakanishi's stamped steel
washer with a zinc phosphate and adhesive coating used in the
manufacture of a ball bearing is within the scope of the order.
Scope rulings completed between January 1, 1996 and March 31, 1996
(see Scope Rulings, 61 FR 18381 (April 25, 1996)):
Products excluded:
Marquardt Switches--Medium carbon steel balls imported by
Marquardt are outside the scope of the order.
Scope rulings completed between April 1, 1996 and June 30, 1996
(see Scope Rulings, 61 FR 40194 (August 1, 1996)):
Products excluded:
Dana Corporation--Automotive component, known variously as
a center bracket assembly, center bearings assembly, support bracket,
or shaft support bearing, is outside the scope of the order.
Rockwell International Corporation--Automotive component,
known variously as a cushion suspension unit, cushion assembly unit, or
center bearing assembly, is outside the scope of the order.
Enkotec Company, Inc.--``Main bearings'' imported for
incorporation into Enkotec Rotary Nail Machines are slewing rings and,
therefore, are outside the scope of the order.
Scope ruling January 19, 1999, memorandum from Laurie Parkhill to
Richard W. Moreland:
Products excluded:
Nissei Sangyo America, Ltd.--Certain vacuum nozzle
assembly, designated as part 630-063-2316, is outside the scope of the
order.
[[Page 35595]]
Scope ruling February 26, 1999, memorandum from Laurie Parkhill to
Richard W. Moreland:
Products excluded:
Holland Hitch--``Turntable bearing'' (slewing rings,
gearless slewing rings, or slewing bearings) is outside the scope of
the order.
Issues Appendix
Company Abbreviations
Barden--Barden Corporation (U.K.) Ltd.; the Barden Corporation
FAG Italy--FAG Italia S.p.A.
FAG Germany--FAG Kugelfischer Georg Shaefer AG
FAG U.K.--FAG (U.K.) Ltd.
INA--INA Walzlager Schaeffler KG
Koyo--Koyo Seiko Co. Ltd.
Nachi--Nachi-Fujikoshi Corp.; Nachi America Inc.; Nachi Technology,
Inc.
NPBS--Nippon Pillow Block Manufacturing Co., Ltd.; Nippon Pillow Block
Sales Co., Ltd.; FYH Bearing Units USA, Inc.
NSK--Nippon Seiko K.K.; NSK Corporation
NSK/RHP--NSK Bearings Europe, Ltd.; RHP Bearings; RHP Bearings, Inc.
NTN--NTN Corporation; NTN Bearing Corporation of America; American NTN
Bearing Manufacturing Corporation
SNR France--SNR Roulements
SKF France--SKF Compagnie d'Applications Mecaniques, S.A. (Clamart);
ADR; SARMA
SKF Germany--SKF GmbH; SKF Service GmbH; Steyr Walzlager
SKF Italy--SKF Industrie; RIV-SKF Officina de Villar Perosa; SKF
Cuscinetti Speciali; SKF Cuscinetti; RFT
SKF Group--SKF-France; SKF-Germany; SKF-Italy; SKF-Sweden; SKF USA,
Inc.
SKF Sweden--SKF Sverige AB
SNFA France--SNFA S.A.
SNFA U.K.-SNFA Bearings, Ltd.
Somecat--Somecat S.p.A.
TIE--Tehnoimportexport
Torrington--The Torrington Company
Torrington Nadellager--Torrington Nadellager, GmbH
Other Abbreviations
CAFC--Court of Appeals for the Federal Circuit
COP--Cost of Production
CV--Constructed Value
CEP--Constructed Export Price
CIT--Court of International Trade
G&A--General and Administrative Expenses
EP--Export Price
NME--Non-market Economy
OEM--Original Equipment Manufacturer
POR--Period of Review
SAA--Statement of Administrative Action
URAA--Uruguay Round Agreements Act
AFB Administrative Determinations
LTFV Investigation--Final Determinations of Sales at Less than Fair
Value; Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof from the Federal Republic of Germany, 54 FR 19006 (May 3,
1989).
AFBs 1--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof from the Federal Republic of Germany; Final Results
of Antidumping Duty Administrative Review, 56 FR 31692 (July 11, 1991).
AFBs 2--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al.; Final Results of Antidumping
Duty Administrative Reviews, 57 FR 28360 (June 24, 1992).
AFBs 3--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al.; Final Results of Antidumping
Duty Administrative Reviews and Revocation in Part of an Antidumping
Duty Order, 58 FR 39729 (July 26, 1993).
AFBs 4--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews, Partial Termination of Administrative Reviews,
and Revocation in Part of Antidumping Duty Orders, 60 FR 10900
(February 28, 1995).
AFBs 5--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews and Partial Termination of Administrative
Reviews, 61 FR 66472 (December 17, 1996).
AFBs 6--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews and Partial Termination of Administrative
Reviews, 62 FR 2081 (January 15, 1997).
AFBs 7--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews and Partial Termination of Administrative
Reviews, 62 FR 54043 (October 17, 1997).
AFBs 8--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews and Partial Termination of Administrative
Reviews, 63 FR 33320 (June 18, 1998).
Comments and Responses
1. Facts Available
Comment 1: Torrington contends that NTN refused to (1) explain its
method for distinguishing subject CRBs from nonsubject needle roller
bearings, (2) provide adequate documentation to support its claim that
it could not obtain sales information from affiliated home-market
resellers, (3) report the total downstream value of merchandise sold by
affiliated home-market resellers on a class-or-kind basis for companies
in which NTN owns a majority interest, (4) revise its calculation of
home-market and U.S. inventory carrying costs in accordance with the
Department's instructions, (5) explain an apparent discrepancy between
its narrative description and its reported home-market packing
expenses, (6) provide supplemental information regarding its U.S.
indirect selling expenses for which the Department asked, (7)
recalculate its freight and packing expenses on the basis on which they
were incurred, and 8) segregate U.S. warehousing expenses as instructed
by the Department. Citing Koyo Seiko Co., Ltd. v. United States, 92
F.3d 1162, 1166-1167 (CAFC 1996), Torrington argues that the Department
should apply total adverse facts available because of NTN's refusal to
cooperate.
NTN asserts that it answered all of the Department's requests for
information fully and completely. NTN contends that the case Torrington
cites is irrelevant because it interpreted the pre-URAA statutory
provision for best information available. NTN also contends that the
Department has verified and approved NTN's data and methodologies in
almost every single past review of this case. Citing Borden v. United
States, 4 F. Supp. 2d 1221, 1244 (CIT 1998) (Borden), NTN argues that
the Department must use a respondent's information, regardless of the
condition of the information, if the criteria of section 782(e) of the
Act have been met. Regarding its own situation, NTN claims that it has
met the statutory criteria.
NTN argues that, in contrast to Torrington's argument, it has
explained how it segregated subject CRBs from nonsubject needle roller
bearings and that the Department has verified its methodology in prior
reviews. NTN argues that the Department asked that NTN report
downstream-sales information only where possible and that NTN explained
that it was not possible to provide such information. With respect to
inventory carrying costs, NTN argues that the Department asked that NTN
report these costs on a
[[Page 35596]]
particular basis only where possible and that NTN explained that it was
not possible. With respect to indirect selling expenses, NTN contends
that it provided detailed explanations of each of its worksheets and
that Torrington did not offer any substantive argument regarding the
merit of the worksheets. With respect to freight and packing expenses,
NTN contends that it explained why it could not allocate the expenses
on the basis on which they were incurred and that the Department has
verified NTN's methodology in prior reviews. Finally, NTN argues that
the Department segregated warehousing expenses itself in the
preliminary results.
Department's Position: For the majority of items which Torrington
raised, NTN provided adequate information which we could use to
calculate NTN's margin. More specifically, with respect to the
segregation of subject CRBs from nonsubject needle roller bearings, we
have verified NTN's methodology in past reviews and found it to be
acceptable and there is no evidence in these reviews that NTN either
reported sales of nonsubject merchandise or did not report sales of
subject merchandise. With regard to warehousing expenses, as NTN
observes, we were able to segregate these expenses for the preliminary
results. With regard to U.S. indirect selling expenses, we find that
NTN excluded the adjustments to which Torrington refers from its
indirect selling expense calculation properly.
We find, however, that NTN should have addressed an adjustment
elsewhere in the response but did not. We are unable to discuss this
adjustment further due to the proprietary nature of this data (see NTN
final results analysis memorandum dated June 16, 1999, for our
analysis, a description of this adjustment, and how we addressed it in
our analysis of NTN).
Because NTN's responses to our requests for information allowed us
to calculate margins, it would not be appropriate to base NTN's margin
on total facts available.
However, we find that NTN's responses to our requests for the total
value of sales by home-market affiliates and for revised home-market
packing expenses is not adequate for us to use in calculating NTN's
margin. Therefore, the use of partial facts available for these items
is appropriate. Further, we determine that, because NTN did not act to
the best of its ability in responding to our requests for information
concerning these items, the use of adverse facts available is warranted
for these items.
With regard to sales by home-market affiliates, we requested that
NTN report the total value of sales by affiliates on a class-or-kind
basis. We also requested that, if NTN could not ``obtain this
information for all affiliated resellers, please provide it for at
least those companies in which NTN owns a majority interest.'' See
supplemental questionnaire dated September 24, 1998, at 1. We asked
this question to determine whether sales to affiliates would be a
reasonable substitute for sales by affiliates in our calculation of
normal value. Because NTN did not provide this information, we are not
able to make this determination. Therefore, the use of facts available
is warranted.
Contrary to NTN's assertion, we did not indicate in our
supplemental questionnaire that NTN should only report this ``where
possible.'' Instead, we indicated that, if NTN could not obtain this
information from affiliates in which it does not own a majority
interest, NTN should at least obtain this information from affiliates
in which it does own a majority interest. Furthermore, NTN's
explanation for why it could not obtain this information from those
companies in which it owns a majority interest is not convincing. We
are unable to go into further detail due to the proprietary nature of
the explanation. See NTN final results analysis memorandum dated June
16, 1999, for our analysis of NTN's explanation and why we find it
unsatisfactory.
As a result of our analysis, we determine that NTN did not act to
the best of its ability in responding to our requests for information
concerning sales by affiliated resellers. Therefore, the use of the
adverse facts available with regard to NTN's sales by affiliated
resellers in which NTN owns a majority interest is appropriate. The use
of facts available affects the calculation of normal value. Therefore,
where we compared U.S. sales to weighted-average normal values which
are wholly or partly comprised of sales to affiliated resellers in
which NTN owns a majority interest, we applied facts available. Because
it is appropriate to use the facts available to the extent we use these
sales to calculate normal value, we have adjusted the calculated net
prices of these sales by increasing them by the class-or-kind-specific
adverse facts-available rate applicable to NTN. In this manner, we
ensure that the facts available are being used only when the sales are
used to calculate normal value and, in instances where such sales are
weight-averaged with sales to unaffiliated companies, the facts
available are ``diluted'' accordingly.
Finally, with regard to home-market packing expenses, NTN did not
revise its packing-expense calculation in the manner we requested nor
did it attempt to do so. NTN stated merely that it does not keep
records in that manner and made no attempt at a more reasonable
segregation pursuant to our request. In addition, NTN's methodology is
distortive. However, due to the proprietary nature of NTN's
calculation, we are unable to explain the decision. See NTN final
results analysis memorandum dated June 16, 1999, for an explanation of
why we consider NTN's calculation to be distortive. Therefore, because
NTN did not attempt to revise its packing expenses in the manner we
requested and did not offer a reasonable alternative and because the
methodology it used is manifestly distortive, we have denied NTN's
home-market packing adjustment for these final results.
Comment 2: Torrington contends that NTN did not include either
retirement benefits for directors and statutory auditors or a certain
proprietary expense in its general and administrative (G&A) expenses.
Torrington argues that the Department should include amounts for these
expenses using, where necessary, non-punitive facts available.
With respect to retirement benefits, NTN argues that it explained
that these expenses have no effect on its responses because the
expenses in question were extraordinary. With regard to the certain
proprietary expense, NTN contends that the Department's questionnaire
instructed NTN to report costs for subject merchandise only. Therefore,
NTN asserts that its cost response complies fully with the Department's
instructions.
Department's Position: NTN did not include an amount for retirement
benefits for directors and statutory auditors in its reported costs on
the grounds that it does ``not have any effect on the questionnaire
response because it was an extraordinary expense.'' See NTN's
supplemental response dated October 19, 1998, at A-7. However, it is
incumbent upon the respondent to demonstrate that it is entitled to a
favorable expense adjustment. NTN did not explain how retirement
benefits are an ``extraordinary expense'' and provided no other
justification for exclusion of these expenses. Therefore, we have
recalculated NTN's G&A expenses to include these benefits.
With regard to the certain proprietary expense, we determine that,
based on the evidence on the record of this review, it is appropriate
to exclude this
[[Page 35597]]
expense from G&A. Because of the proprietary nature of this expense,
please see NTN final results analysis memorandum dated June 16, 1999,
for an explanation of our determination.
Comment 3: SKF Sweden disagrees with the Department's
characterization of it as a non-cooperative respondent. SKF Sweden
contends that the Department's assignment of the highest SKF Sweden-
specific CRB margin, 13.69 percent, as total adverse facts available
for its CRB sales is unlawful. SKF Sweden asserts that it informed the
Department in a timely manner that its production of CRBs sold to the
United States during the POR had ceased in 1993. SKF Sweden submits
that, in light of this fact, it cooperated fully with the Department by
providing aggregated U.S. quantity and value sales data, informing the
Department that there were no home-market sales of CRBs made during the
review period, and that no detailed cost data existed with respect to
this merchandise. Accordingly, SKF Sweden argues, it did not have
sufficient information to provide detailed cost or CV data in response
to the Department's questionnaire.
SKF Sweden contends that the Department should not resort to facts
available because it was unable to comply with the Department's
requests for information, citing Borden. SKF Sweden argues that,
because it no longer produced CRBs, its inability to provide the
requested CRB data should not lead to the mischaracterization of SKF
Sweden as a non-cooperative respondent and therefore to the use of
adverse facts available. To do otherwise, SKF Sweden asserts, would be
opposite to the position the Department took recently in Final Results
Administrative Review; Certain Pasta from Italy, 64 FR 6615 (February
10, 1999) (Pasta Italy Review), in which the Department determined that
adverse facts available should not be applied to a company which
informs the Department in a timely manner of its inability to comply
with information requests due to the liquidation of assets. Finally,
SKF Sweden argues that the Department determined erroneously that SKF
Sweden absorbed 100 percent of the dumping duties on its CRB
transactions.
Torrington contends that it was appropriate for the Department to
determine SKF Sweden as a non-cooperative respondent and assign an
adverse facts-available rate to its CRB sales. Torrington posits that
inconsistencies in the record demonstrate that SKF Sweden has not
cooperated fully with the Department. Torrington points to several
discrepancies on the record where SKF Sweden states that it sold CRBs
during the review period and where it states it did not sell CRBs.
Torrington also identifies language in SKF Sweden's case brief that
indicates SKF Sweden's acknowledgment that it could have provided some
information about the CRB sales. Torrington argues that reporting all
sales of CRBs would not have been burdensome given that SKF Sweden had
already provided aggregate quantity and value data.
Torrington also contends that it is unlikely that SKF Sweden would
not retain cost and CV data of its CRBs for at least a five-year period
following ceased production of such merchandise, given the existence of
the antidumping duty order. Torrington also asserts that SKF Sweden did
not address the issue of why it did not retain such data and that SKF
Sweden should not benefit from having destroyed the cost data for CRBs.
Torrington points out that the Department requested the CRB data in
both the original and second supplemental questionnaires and never
informed SKF Sweden that it was not required to report such data.
Torrington also argues that SKF Sweden has not established the basis on
which the Department would not assess duties on its CRBs, citing The
Torrington Company v. United States, 82 F.3d 1039, 1047 (CAFC 1996)
(Torrington I). Accordingly, Torrington argues that SKF Sweden did not
act or cooperate to the best of its ability to provide the requested
information.
Torrington asserts that, while the Department should, at the least,
assign the highest SKF Sweden-specific CRB margin to SKF Sweden's
unreported CRBs, a higher more punitive facts-available rate should be
assigned to the unreported sales. Torrington suggests that, owing to
the fact that SKF Sweden continued to withhold requested data, the LTFV
margins of 76.2 percent assigned to SKF Germany or 212.45 percent
assigned to SKF Italy would be more appropriate to use as the total
facts-available rate for SKF Sweden's CRB sales. Finally, Torrington
contends that the Department should continue to determine that SKF
Sweden absorbed duties on all of its CRB transactions.
SKF Sweden rebuts Torrington's claim that the record demonstrates
inconsistencies in SKF Sweden's responses and argues that Torrington is
misconstruing the facts on the record. SKF Sweden contends that it
never stated that there were no sales of CRBs in the United States
during the review period. Rather, SKF Sweden submits that it stated
that there were no home-market sales of CRBs during the review period.
SKF Sweden asserts that there is no justification to use the SKF
Germany or SKF Italy facts-available rates Torrington suggests, arguing
that the investigation must pertain to the same class or kind of
merchandise in the same country of origin, citing Peer Bearing Company
v. United States, 12 F. Supp. 2d 445, 451 n.4 (CIT 1998) (Peer
Bearing). SKF Sweden contends that, given that the SKF Germany and SKF
Italy rates Torrington suggests relate to different orders from
different countries, the underlying price and cost data of merchandise
involved in those orders is in no way indicative of the prices or costs
of CRBs from Sweden.
Department's Position: SKF Sweden sold CRBs in the United States
during the POR but did not provide CRB sales or cost data, thereby
precluding us from conducting an analysis of its CRB sales. Section
776(a) of the Act requires us to make a determination on the basis of
the facts available where requested information is missing from the
record and, thus, cannot be used because it was not provided.
Therefore, in accordance with the Act, we must rely upon facts
available for these final results of review.
In order to determine whether we should make an adverse inference
in the application of facts available, we considered whether SKF Sweden
cooperated to the best of its ability in the instant administrative
review with respect to its CRB sales. We requested CRB sales and cost
data in both our original and supplemental questionnaires. However,
despite our requests for CRB information, SKF Sweden did not provide
such information, indicating that, because (a) SKF Sweden ceased
production of CRBs in 1993, (b) the imports of the CRBs in question
were de minimis during the review period, and (c) the cost involved to
prepare the data would outweigh the benefits of submitting the
requested data for the administrative review, it would not respond to
our requests for CRB information. See SKF Sweden's original
questionnaire response, dated August 28, 1998, at 1.
Section 776(b) of the Act permits us to draw an adverse inference
where a party has not cooperated in a proceeding. This section of the
Act deems a respondent uncooperative where it has not acted to the best
of its ability to comply with requests for necessary information. See
the SAA at 870. Because SKF Sweden chose not to provide the requested
CRB information, we find that SKF Sweden was not cooperative.
Specifically, we are not convinced that SKF Sweden could not provide
the requested cost data.
[[Page 35598]]
Accordingly, we find that SKF Sweden did not act to the best of its
ability to comply with our requests for this information. Therefore we
have made an adverse inference and assigned a total facts-available
rate to SKF Sweden's sales of CRBs.
In its original and supplemental questionnaire responses, SKF
Sweden submitted only total quantity and value data with respect to its
CRB sales. At no time did SKF Sweden indicate that it did not have the
sales data underlying its CRB sales transactions. It appears that SKF
Sweden could have provided all of the data maintained in its records as
it pertains to the sales of CRBs, albeit only the U.S. sales data. We
also note that the quantity of CRBs sold during the review period is
irrelevant.
SKF Sweden also claimed in its original questionnaire response that
because it did not make any sales of CRBs in the comparison market it
would have to provide cost information for purposes of CV, but it no
longer had such cost information because it ceased production of CRBs
in 1993. As discussed below, we find that ceasing production of subject
merchandise does not relieve SKF Sweden of its responsibility to
provide requested information. On May 15, 1989, we published in the
Federal Register the orders on AFBs from Sweden for both BBs and CRBs.
Thus, while SKF Sweden ceased production of CRBs in 1993, it was aware
of the order on the subject merchandise and had already participated in
several administrative reviews. SKF Sweden pointed out in its response
that it retained in its inventory the CRBs that it sold in this review
period. Given that SKF Sweden retained this merchandise in inventory,
it anticipated that it might sell such merchandise in the future. Based
on SKF Sweden's experience as a participant in these administrative
reviews, it was well informed that, upon selling those CRBs during a
period in which we are conducting an administrative review and in which
it was a participant, we would, in accordance with our statute and
regulations, request sales and possibly cost data and other information
with regard to that merchandise. Accordingly, SKF Sweden cannot benefit
from its failure to maintain relevant records merely because it ceased
production of the subject merchandise.
In addition, SKF Sweden's reliance upon Pasta Italy Review is
misplaced. In Pasta Italy Review, the respondent was precluded from
using financial and personnel resources in responding to our
questionnaires due to legal proceedings underlying the liquidation of
its assets. In Certain Fresh Cut Flowers from Colombia; Final Results
of Antidumping Administrative Review, 59 FR 15159, 15173 (March 31,
1994) (Flowers from Colombia), a case cited in Pasta Italy Review which
elaborated on the issue of how liquidation affects a respondent's
ability to provide information to the Department, the companies that
went out of business were required by law to sell or dispose of their
assets. Herein lies the difference between the situation that SKF
Sweden faces after ceasing production of its CRBs and the situation
that the respondents faced in Pasta Italy Review and Flowers from
Colombia. Unlike those respondents, SKF Sweden was not required to
relinquish its assets and dispose of its records with regard to its
CRBs. SKF Sweden merely chose not to maintain such records, despite its
knowledge of and experience in the AFB proceedings. In fact, SKF Sweden
decided to retain some of its assets, the physical merchandise in
question, in its inventory. In contrast, the respondents which
liquidated their assets were legally required to sell or dispose of all
of their assets. Therefore, SKF Sweden's decision not to maintain its
CRB cost records does not excuse SKF from responding to our requests
for cost and sales information with respect to CRBs. See Koyo Seiko Co.
v. United States, 796 F. Supp. 517, 525-26 (CIT 1992), and Pulton Chain
Co., Inc, v. United States, 17 CIT 1136 (October 18, 1993).
The Department's practice when selecting an adverse rate from among
the possible sources of information is to ensure that the margin is
sufficiently adverse ``as to effectuate the purpose of the facts
available rule to induce respondents to provide the Department with
complete and accurate information in a timely manner.'' See Static
Random Access Memory Semiconductors from Taiwan; Final Determination of
Sales at Less Than Fair Value, 63 FR 8909, 8932 (February 23, 1998).
The Department also considers the extent to which a party may benefit
from its own lack of cooperation in selecting a rate. See Roller Chain
Other Than Bicycle, From Japan; Notice of Final Results and Partial
Recission of Antidumping Duty Administrative Review, 62 FR 69472, 60477
(November 10, 1997).
We disagree with Torrington's suggestion that we use the LTFV
margins assigned to SKF Germany and SKF Italy because the rate used as
facts available normally should pertain to the same class or kind of
merchandise from the same country of origin. See Peer Bearing. In order
to ensure that the rate is sufficiently adverse so as to induce SKF
Sweden's cooperation, we have assigned to SKF Sweden's CRB sales as
adverse total facts available a rate of 13.69 percent, which we
determined in the LTFV investigation and which is the highest margin
ever calculated for CRBs from Sweden. Finally, because we have
determined that a dumping margin does exist on the sales in question
based on adverse facts available and lacking other information, we find
duty absorption on all U.S. sales of CRBs made by SKF Sweden.
Comment 4: Torrington argues that NSK provided inadequate responses
to the Department's supplemental questionnaire regarding NSK's
downstream sales for certain affiliates. Torrington asserts that NSK's
claim that it need not report downstream sales of certain affiliates
because it did not have to do so in the LTFV investigation is
irrelevant to this review. Torrington also contends that, in spite of
the Department's request, NSK did not provide documentation
demonstrating that sales to certain affiliates were made at arm's
length. Torrington argues that the Department should apply facts
available to all U.S. sales matched to models sold to affiliates in the
home market for which NSK did not provide resale data.
NSK argues that the Department should not apply facts available
regarding its home-market downstream-sales information because it
responded fully to the Department's requests. NSK argues that it is for
the Department, not Torrington, to decide whether NSK's explanations
were adequate. NSK notes that the downstream-sales information with
which Torrington takes issue represents a de minimis amount of NSK's
home-market sales of scope merchandise. NSK argues further that
Torrington's argument regarding arm's-length sales is irrelevant
because the Department's arm's-length test removes from the home-market
database all sales that fail the test.
Department's Position: We normally do not calculate normal value
based on the sales by an affiliated party if sales of the foreign like
product by an exporter or producer to affiliated parties account for
less than five percent of the total value (or quantity) of the foreign
like product in the market in question (see 19 CFR 351.403(d)(1998)).
Based on information NSK submitted for the record, the sales in
question comprise less than five percent of the total quantity of home-
market sales. See NSK's section A response dated August 28, 1998, at A-
26. Therefore, we consider NSK's response to be adequate with respect
to this matter and have not used facts available.
[[Page 35599]]
Comment 5: Torrington argues that NSK did not respond to the
Department's request that NSK report price adjustments made after NSK
submitted its home-market sales listing. Torrington argues that, as
facts available, the Department should assume that all home-market
sales had unreported upward adjustments in the amount of the highest
upward adjustment on any reported home-market sale.
NSK responds that it explained in its response, and the Department
verified, the issue of NSK's updated billing-adjustments. NSK contends
that the Department's decision not to resort to facts available in the
preliminary results was appropriate and should be the same in the final
results.
Department's Position: NSK claimed in its response and at
verification that it was impractical to report post-submission billing
adjustments and that such an exercise would require NSK to recreate its
entire database. Based on records we examined at verification, we found
evidence that NSK's exclusion of this price-adjustment has no material
impact on our margin calculation and, thus, does not warrant the use of
facts available. The details of our findings are not susceptible to
public summary. See Verification Report of NSK's Sales Response at 8
and Exhibit VI. Accordingly, we have not applied facts available for
NSK's unreported billing adjustments.
Comment 6: Torrington argues that NSK did not cooperate with the
Department's request that NSK demonstrate the estimated period during
which subject merchandise remains in home-market distribution centers.
According to Torrington, this precludes the proper calculation of NSK's
inventory carrying cost calculation for U.S. sales. Torrington argues
that, as facts available, the Department should apply the highest
inventory carrying cost rate (expenses to sales value) in the home
market for any other Japanese respondent.
NSK responds that Torrington's argument is irrelevant to the margin
calculation because the Department does not deduct inventory carrying
costs in the home market from CEP or EP. NSK argues that, nonetheless,
it responded fully to the Department's supplemental questionnaire.
Department's Position: NSK cooperated with our request for
information regarding this issue adequately. In response to our request
that NSK explain how it calculated the estimated period during which
merchandise destined for the United States remains in distribution
centers, NSK stated that it based the reported time period on its
normal shipping schedules and average experience for shipping
merchandise. See NSK's Supplemental Response at 27. NSK explained that
it did not provide worksheets pursuant to our request because there
were none to provide. Thus, we determined that NSK cooperated with our
request as best it was able. Accordingly, we did not apply facts
available for NSK's inventory carrying costs. However, contrary to
NSK's assertion, inventory carrying costs are germane to our margin
calculation because these costs comprise part of the expenses used to
calculate a commission offset.
Comment 7: Torrington argues that NSK did not respond to the
Department's request that NSK justify its reporting of depreciation
costs for equipment obtained from affiliated suppliers. Torrington
argues that NSK's statement that any adjustment to the purchase price
of machinery from affiliates would result in a de minimis change to COP
is inadequate and unresponsive. Torrington argues, therefore, the
Department should restate depreciation based on facts available.
NSK responds that the Department should not restate NSK's
depreciation costs based on facts available because NSK responded fully
to the Department's question regarding equipment from affiliated
suppliers. NSK notes that, according to its standard accounting
practices and Japanese Generally Accepted Accounting Practices (GAAP),
equipment purchases from affiliated companies were treated no
differently than those purchases from unaffiliated companies. NSK
argues further that, since any adjustment to the purchase price of
equipment from affiliates would result in a de minimis adjustment to
COP, it would gain nothing by attempting to alter the treatment of
these depreciation costs.
Department's Position: NSK's supplemental response dated October
29, 1998, at 36, demonstrates that the amount of depreciation costs on
equipment from affiliates is small enough that any adjustment to NSK's
purchase price of equipment from affiliates would have an insignificant
impact on NSK's reported COP. Also, NSK's methodology was in accordance
with GAAP of the country of exportation, which we generally accept
unless the methodology is determined to be distortive. That is not the
case in this situation. Furthermore, NSK responded adequately to our
requests for information. Therefore, we have not used facts available.
Comment 8: Torrington argues that the Department should use facts
available for certain major inputs obtained from affiliated parties for
which SKF France did not provide market prices. For valuing major
inputs, Torrington notes that the Department's questionnaire instructs
respondents to report the highest of the following values: (a) The
transfer price from the affiliate, (b) the affiliate's COP, or (c) the
market price. Torrington asserts that SKF France only reported the
higher of the transfer price or the affiliate's COP. Therefore,
Torrington argues, since SKF France has not responded fully to the
questionnaire, the Department should use facts available for the inputs
at issue.
SKF France states that, in response to the Department's
supplemental questionnaire, it reported the overlap of components that
it purchased from both affiliated and unaffiliated parties. SKF France
notes that it explained in its response that the number of overlaps is
insignificant compared to the thousands of parts used. SKF France
argues that this substantiates its contention that market prices are
generally not available for such components and notes that during
verification the Department examined the issue of SKF France's
valuation of materials purchased from affiliated parties and found no
discrepancies. Therefore, SKF France contends, the Department is
correct in accepting its reporting of values for these inputs.
Department's Position: SKF France did not respond fully to our
questionnaire and the use of partial facts available is appropriate.
SKF France admits in its questionnaire response and case brief that it
valued major inputs purchased from affiliated suppliers based on the
higher of transfer price or COP and that it did not take into
consideration the market prices for some components which it purchased
from both affiliated and unaffiliated suppliers. Therefore, SKF's
reporting is not in accordance with section 351.407 of the Department's
regulations which states that, for purposes of section 773(f)(3) of the
Act, the value of a major input purchased from an affiliated person
will be based on the higher of: (1) The price paid by the exporter or
producer to the affiliated person for the major input; (2) the amount
usually reflected in sales of the major input in the market under
consideration; or (3) the cost to the affiliated person of producing
the major input. In an effort to obtain market values for major inputs
in usable form, we sent SKF France a supplemental questionnaire
requesting that it provide a chart listing, for each
[[Page 35600]]
major input, the per-unit transfer price charged by the affiliated
party and the per-unit COP incurred by the affiliated party. In
addition, we asked that SKF France include in its chart the sales
prices charged by unaffiliated parties (where possible) and that SKF
France provide documentation to support these prices. See supplemental
questionnaire dated October 26, 1998, at 9. In response to our
question, SKF provided a chart with the requested information for COP
and transfer prices. However, the market-price information it provided
for components purchased by unaffiliated parties was not comparable to
the manner in which it reported the COP and transfer price information.
Therefore, we could not determine whether the market prices were higher
than the reported COP or transfer prices. Since SKF France did not
provide the market-price data in the form which we requested, it could
not be used. In addition, contrary to SKF France's contention, the
market value of materials was not examined during verification.
Section 776(a) of the Act provides for the use of facts available
where a company fails to provide requested information in the form and
manner requested. See also the SAA at 869 (providing that the
Department may use facts available to fill gaps in the record due to
deficient submissions). As a result of SKF France's failure to provide
requested information, we have used partial facts available to ensure
that these market prices are taken into consideration. We applied
partial facts available by making an adjustment to SKF France's
reported total cost of manufacturing on a transaction-specific basis.
Because of the proprietary nature of the information, we cannot discuss
the details of the facts available we are applying in this public
notice. See SKF France's final results analysis memorandum dated June
16, 1999.
2. Duty Absorption
Section 751(a)(4) of the Act provides that, if requested, the
Department will determine whether antidumping duties have been absorbed
by a foreign producer or exporter subject to the order if the subject
merchandise is sold in the United States through an importer who is
affiliated with such foreign producer or exporter. Section 751(a)(4) of
the Act authorizes this type of inquiry during an administrative review
initiated two years or four years after publication of an order.
For transition orders as defined in section 751(c)(6)(C) of the Act
(i.e., orders in effect as of January 1, 1995), section 351.213(j)(2)
of the Department's regulations provides that the Department will make
a duty-absorption determination, if requested, for any administrative
review initiated in 1996 or 1998. On May 29, 1998, and July 29, 1998,
Torrington requested the Department to determine, with respect to all
respondents except Torrington Nadellager and SNFA UK, whether
antidumping duties had been absorbed during the POR. On May 29, 1998,
FAG Bearings Corp. requested that the Department determine for
Torrington Nadellager whether antidumping duties had been absorbed
during the POR. Since these reviews were initiated in 1998 and we
received timely requests, we have made a duty-absorption determination
as part of these administrative reviews.
In our preliminary results of review, we calculated the percentage
of sales by a U.S. affiliate with dumping margins for each exporter. We
stated that, with respect to those companies (with affiliated
importer(s)) that had dumping margins, we would rebuttably presume that
the duties will be absorbed for those sales which were dumped. We
received several comments responding to these preliminary findings.
Comment 1: Certain respondents argue that the statute only permits
the Department to conduct a duty-absorption inquiry initiated two or
four years after the publication of an antidumping duty order. These
respondents claim that, although the Department defended its decision
to conduct a duty-absorption inquiry in these reviews on the grounds
that these cases involve transition orders, there is nothing in section
751(c) of the Act that suggests that the definition of ``transition
order'' for purposes of sunset reviews applies to the definition of
``antidumping duty order'' in section 751(a)(4) of the Act for purposes
of duty-absorption inquiries. Therefore, these respondents argue, the
Department is incorrect in justifying the duty-absorption inquiry by
calling AFBs orders ``transition orders'' in accordance with section
751(c)(6)(C) of the Act as this section only applies to ``sunset''
reviews. These respondents conclude that the lack of explicit
Congressional approval for duty-absorption inquiries for transition
orders shows that Congress did not intend for duty-absorption inquiries
to be initiated more than four years after publication of an
antidumping duty order. Finally, these respondents assert that the
Department cannot rely on its own regulation to create an exception for
transition orders when such an exception is not authorized by the
statute.
Torrington argues that, in AFBs 7, the Department rejected
respondents' claim that the statute only permits duty-absorption
determinations in the second and fourth reviews following the initial
publication of the order. Citing the SAA at 885-886, Torrington
contends that the respondents' position, if accepted, would ``gut'' the
statute since the existence of duty absorption is a critical factor in
the context of both the Department's determination in sunset reviews of
whether dumping is likely to continue or recur and the International
Trade Commission's determination in sunset reviews of whether injury is
likely to continue or recur. Torrington argues that accepting the
respondents' restrictive reading of the statute would mean that duty
absorption, while remaining as an analytical tool in sunset reviews of
new orders, would no longer be available in sunset reviews of any
transition orders. Torrington argues further that even new orders would
be affected, as the respondents' narrow reading of the statute would
allow an absorption inquiry only in the second and fourth year after
the issuance of an order. Finally, citing Antidumping Duties;
Countervailing Duties; Final Rule, 62 FR at 27317 (May 19, 1997) (Final
Rule) (discussing 19 CFR 351.213(j)(1)), Torrington argues that, in the
context of drafting its revised regulations in order to implement the
new law, the Department considered the statute and the comments of
interested parties carefully and determined that the duty-absorption
inquiry is equally applicable to transition orders.
Department's Position: With regard to the time frame in which we
are conducting these reviews, section 351.213(j)(1) of our regulations,
in accordance with section 751(a)(4) of the Act, provides for the
conduct, upon request, of absorption inquiries in reviews initiated two
and four years after the publication of an antidumping duty order. With
respect to transition orders, the preamble to the proposed antidumping
regulations explains that reviews initiated in 1996 will be considered
initiated in the second year and reviews initiated in 1998 will be
considered initiated in the fourth year (61 FR at 7317). Because these
orders on AFBs have been in effect since 1989, these are transition
orders in accordance with section 751(c)(6)(C) of the Act. This being a
review initiated in 1998 and a request having been made, we have made
duty-absorption determinations as part of these administrative reviews.
We believe that Congress intended that the International Trade
Commission would consider the issue of duty
[[Page 35601]]
absorption in all sunset reviews. In this regard, the statutory
provision requiring the consideration of duty absorption does not
distinguish between antidumping orders issued after January 1, 1995,
and transition orders. See section 752(a)(1)(D) of the Act. Moreover,
in all of the legislative history, Congress explained the implications
of affirmative duty-absorption findings and clearly contemplated that
such findings would be considered in all sunset reviews. See S. Rep.
103-412 at 50 (1994). See also H. Rep. 103-826 at 60-61 (1994)
(``Commerce will inform the Commission of its findings regarding duty
absorption, and the Commission will take such findings into account in
determining whether injury is likely to continue or recur if an order
were revoked''). Thus, we have made duty-absorption determinations as
part of these administrative reviews.
Comment 2: Certain respondents state that gauging absorption on
information that they do not know until completion of an administrative
review is unfair. More specifically, they claim that the nature of the
review process prevents them from determining the U.S. price increase
necessary to pass dumping duties on to customers because the ultimate
liability is not known until the end of a review. The respondents claim
further that, other than dumping deposits paid at the time of entry,
they have no means of estimating the price increases necessary to pass
dumping duties to the customers.
The respondents also argue that the Department cannot presume that
duty absorption on sales to the U.S. affiliate exists if the record
does not contain evidence of the U.S. purchaser's assumption of
liability for ultimate assessment. They claim that the Department's
rebuttable presumption ignores commercial reality in that no U.S. buyer
would agree to assume liability for an unascertainable amount of
duties. The respondents claim that the Department has not provided any
reason for adopting the presumption of duty absorption and that the
presumption is not allowable by law.
SKF states that the Department's 15-day deadline for submitting
evidence to rebut the assumption that unaffiliated U.S. purchasers will
pay the assessed dumping duty is too short, given the amount of
evidence that would have to be collected and the number of customers
that would have to be contacted.
FAG argues that, notwithstanding the fact that the Department does
not have the authority to conduct an absorption review in this review,
the methodology chosen by the Department is arbitrary and capricious.
FAG argues that the Department has simply calculated the percentage of
FAG's U.S. affiliate's sales with dumping margins versus total sales
and concluded that this figure demonstrates duty absorption within the
meaning of the statute. FAG contends that, absent some explanation of
the relevance of this information, there is no connection between the
percentage of sales of a U.S. importer with dumping margins and any
alleged duty absorption by the affiliated foreign producer or exporter.
Therefore, FAG argues, the Department should demonstrate how its
methodology has performed the analysis required by the statute (i.e.,
determining whether the foreign producer or exporter has absorbed
antidumping duties). Finally, FAG contends that, if the Department
cannot explain how its methodology has fulfilled the task specified by
the statute, then the results of the absorption inquiry should be
disregarded.
Torrington contends that the Department's decision was fair.
According to Torrington, it was correct to reject SKF's arguments that
the Department's methodology does not give respondents enough time and
that the use of a presumption renders the duty-absorption provision
superfluous. Torrington states further that in AFBs 7 the Department
rejected SKF's argument that the record shows SKF did not absorb duties
correctly. Torrington also states that the Department rejected FAG's
argument that there is no connection between the percentage of sales
dumped and the presence of duty absorption in AFBs 7.
Department's Position: An investigation as to whether there is duty
absorption does not simply involve publishing the margin in the final
results of review. As we noted in the preliminary results of these
reviews, the determination that duty absorption exists is also based on
the lack of any information on the record that the first unaffiliated
customer will be responsible for paying the duty that is ultimately
assessed. Absent an irrevocable agreement between the affiliated U.S.
importer(s) and the first unaffiliated customer, there is no basis for
us to conclude that the duty attributable to the margin is not being
absorbed.
Section 751(a)(4) of the Act does not specify the methodology we
are to use in an administrative review in determining whether duty
absorption occurred. Similarly, the SAA at 885 simply notes that the
Department ``will examine * * * whether absorption has taken place.''
Moreover, the legislative history provides no guidance on what
methodology the Department is to employ in making its determination.
See also S. Rep. No. 103-412 at 44 (1994).
In considering methodologies that might be used for a duty-
absorption inquiry, the Department sought to adopt one that would
comply with the statute, as well as one that would be administrable
within the time frame of a review period and still provide respondents
with a sufficient opportunity to cure any deficiencies. The method the
Department adopted accomplishes these goals. As the Department
explained in AFBs 7, 62 FR at 54076, the ``existence of a margin raises
an initial presumption that the respondent and its affiliated
importer(s) are absorbing the duty.'' This is a reasonable presumption
because the continued existence of dumping duties indicates that the
producer and its affiliated U.S. importer have not adjusted their
prices to eliminate dumping. If the producer has not set its price to
the first unaffiliated U.S. customer high enough to eliminate dumping,
it is reasonable to presume that the producer is also absorbing the
dumping duties. The reasonableness of this presumption is also
reflected in the SAA at 885, which states that ``the affiliated
importer may choose to pay the antidumping duty rather than eliminate
the dumping'' (emphasis added). In sum, the existence of dumping gives
rise to a reasonable presumption that the affiliated importer is
absorbing dumping duties.
This is an instance where the existence of a margin raises an
initial presumption that the respondent and its affiliated importer(s)
are absorbing the duty. As such, the burden of producing evidence to
the contrary shifts to the respondent. See Creswell Trading Co., Inc.
v. United States, 15 F.3d 1054 (CAFC 1994). Here the respondents have
not placed evidence on the record, despite being given ample time to do
so, in support of their position that they and their affiliated
importer(s) are not absorbing the duties. Regarding FAG's argument that
there is no connection between the percentage of sales of a U.S.
importer with dumping margins and any alleged duty absorption by the
affiliated foreign producer or exporter, the percentage of sales with
dumping margins is an indication of the volume of imports for which
antidumping duties are being absorbed.
Comment 3: SKF argues that, by using data already available on the
record, the Department is able to conduct an accurate analysis of
whether dumping duties are being absorbed by comparing
[[Page 35602]]
the total profit of CEP sales to the total amount of the antidumping
liability. SKF, Koyo, and NSK also emphasize that, while dumping must
be measured on a transaction-specific basis, there are no reasons why a
duty-absorption inquiry can not be done on an aggregate basis. SKF
argues that the Department must consider aggregate sales if an accurate
duty-absorption determination is to be made. SKF states that, when the
Department calculates dumping margins for transactions where the U.S.
price exceeds normal value, the margin is set to zero. SKF contends
that these ``negative'' margins need to be taken into account since
``negative'' margins indicate that, overall, duties are not being
absorbed but, rather, that a company is offsetting dumping prices
completely by passing on the cost of duties to its customers through
universally higher prices. SKF also argues that, at a minimum, the
Department's duty-absorption methodology must be modified to exclude
from the percentage of dumped sales those transactions with de minimis
margins. SKF contends that, if this is not done, a nonsensical result
could be achieved where a respondent is found not to be dumping yet is
found to be absorbing antidumping duties. SKF states that to disregard
de minimis margins for purposes of the duty-absorption analysis is
consistent with the Department's treatment of such margins for other
purposes. NSK contends that, by adopting an aggregate approach, the
Department would be creating a much more equitable standard consistent
with World Trade Organization obligations for measuring duty
absorption.
Torrington argues that the Department should reject SKF's
proposals, as it did in AFBs 7, that sales with negative margins should
be used for purposes of the duty-absorption determination and that no
inquiry should proceed where total CEP profit exceeds the dumping
duties due. Torrington argues further that the fact that there are
sales by an importer at fair value is of no consequence for duty-
absorption inquiries just as they are of no consequence for dumping-
margin calculations. Torrington states that, as there is no basis in
the antidumping law to use negative margins as an offset or credit
against positive margins, the same consideration applies in the context
of duty absorption.
Department's Position: The Department treats so-called ``negative''
margins as being equal to zero in calculating a weighted-average margin
because otherwise exporters would be able to mask their dumped sales
with non-dumped sales. See Tapered Roller bearings and Parts Thereof,
Finished and Unfinished from Japan; Final Results of Antidumping Duty
Administrative Reviews, 63 FR 2559, 2576 (January 15, 1998), and AFBs
7, 62 FR at 54076. It would be inconsistent on one hand to calculate
margins using only positive-margin sales, which is the Department's
practice, and then effectively argue for duty absorption purposes that
there are no margins for duty-absorption purposes because a deduction
from the total duties determined should be made for non-margin sales.
See Certain Hot-Rolled Lead and Bismuth Carbon Steel Products from the
United Kingdom; Final Results of Antidumping Duty Administrative
Review, 62 FR 18744, 18745 (April 17, 1997). In addition, accounting
for negative margins would allow respondents to absorb duties
selectively (on a customer, regional, or some other basis). With
respect to de minimis margins, we apply de minimis margins on an
aggregate, not on a sale-by-sale, basis. We disregard aggregate de
minimis weighted-average margins for cash-deposit purposes, but we do
not disregard individual sales that may have been dumped at less than
0.5 percent from a company's weighted-average margin.
Finally, a company's profit on CEP sales is not relevant to a duty-
absorption inquiry. The existence of profit on such sales does not
negate the fact that the dumping duties assessed on the entries are
absorbed by the affiliate.
3. Discounts, Rebates and Price Adjustments
Comment 1: Torrington argues that the Department should not deduct
FAG's reported home-market rebates because FAG used a broad allocation
to report its rebates. Torrington contends that the CAFC, in Torrington
I, ruled that direct expenses must be reported on a transaction-
specific basis. Torrington argues that FAG's reported rebates are
distortive because they assign a rebate amount to all sales of a
particular customer rather than only to the individual sales on which
the rebate was incurred. Torrington also asserts that FAG has not shown
that it reported these rebates to the best of its ability.
FAG argues that, where a rebate program only applied to a
customer's purchase of specific products, the rebate FAG paid was
factored only over those product purchases rather than all of the
customer's purchases. Thus, FAG contends, the rebate is only reported
for those sales on which it incurred the expense. FAG also observes
that the Department has examined this issue in prior reviews and
rejected Torrington's argument.
Department's Position: Under section 351.401(g) of the Department's
regulations, we accept allocated price adjustments, such as rebates,
when transaction-specific reporting is not feasible and the allocation
method used does not cause unreasonable inaccuracies or distortions. In
judging the feasibility of transaction-specific reporting, we take into
account the records maintained by a respondent, as well as such factors
as the accounting practices in the country and industry in question and
the number of sales made during the POR. See also AFBs 7, 62 FR at
54049.
FAG's home-market rebates were reported in the same manner as in
prior reviews (see AFBs 7, 62 FR at 54051) and are limited to the sales
on which FAG actually incurred the rebate expense. FAG stated in its
supplemental response that rebates that were payable in connection with
purchases of certain types of products or for purchases made during
certain select periods were reported on the basis on which they were
granted. See FAG's supplemental response dated October 27, 1998, at 6.
In addition, Exhibit B-6 of FAG's section B response dated August 28,
1998, shows that FAG allocated the rebate only over those sales which
received a rebate and it applied the allocation only to the sales for
which it paid a rebate. Based on these facts, we determine that FAG's
methodology for reporting its home-market rebates is reasonable and not
distortive because it assigns rebates only to those sales which
incurred rebates on a customer-specific basis.
With regard to Torrington's reliance on Torrington I, as we have
stated in prior determinations and in the preamble to our regulations,
Torrington I does not address the propriety of allocation methods but
rather holds that we may not treat direct price adjustments as if they
were indirect selling expenses. See Final Rule, 62 FR at 27347, and
AFBs 7, 62 FR at 54050.
Comment 2: Torrington asserts that the Department should reject SKF
Germany's claim for home-market billing adjustment two, which applies
to multiple transactions involving the same customer. Torrington
contends that SKF Germany summed all adjustments applicable to the
customer number involved and allocated this amount over all sales to
that customer. Torrington asserts that this allocation is contrary to
the court's decision in Torrington I regarding the reporting of direct
selling expenses. Torrington alleges that, by accepting SKF
[[Page 35603]]
Germany's allocation, the Department in effect treated these as
indirect expenses. Torrington argues that SKF Germany's reporting
method is distortive because it does not tie the reported adjustment to
specific transactions (or specific groups of transactions) to which
they actually applied, but instead it allocates adjustments across
product lines. Torrington argues that SKF Germany's reporting method is
therefore contrary to the Department's post-URAA practice regarding
such adjustments and that, as facts available, only positive billing
adjustments should be retained for purposes of calculating the net
home-market price. Furthermore, Torrington contends that, to the extent
the facts seem to indicate that customers are simply awarded certain
lump sums, the adjustment claimed by SKF Germany is not a billing
adjustment but a rebate. Torrington argues that the Department does not
accept rebates unless they were contemplated at the time of sale or are
understood from past dealings of the parties.
SKF Germany responds that its reporting of billing adjustment two
is not distortive, is consistent with the way that it incurs this
expense, and constitutes a reasonable allocation under U.S. law. SKF
Germany asserts further that the Department has accepted this
adjustment in the last three reviews, as well as verified it in the
last administrative review where it found that transaction-by-
transaction reporting is simply not possible because the adjustments
related to multiple transactions and, therefore, could not have been
reported more specifically. SKF Germany contends that Torrington I was
decided under the pre-URAA law and that the 1994 amendments emphasized
that reasonable allocations of direct expenses are acceptable. SKF
Germany contends further that, in Torrington I, the CAFC merely held
that the Department could not treat direct adjustments as indirect
selling expenses and that, therefore, acceptance of an allocation is
not incompatible with its holding. SKF Germany insists that there is no
factual or legal basis for distinguishing between upward and downward
billing adjustments with respect to the amounts reported in its home
market billing-adjustments-two field since it has reported this
adjustment in a manner consistent with its business records. Moreover,
SKF Germany asserts, the Department examined these adjustments in prior
reviews and found them to be allocated reasonably.
Department's Position: We accept post-sale billing adjustments as
direct adjustments to price if we determine that a respondent, in
reporting these adjustments, acted to the best of its ability to
associate the adjustment with the sale on which the adjustment was
made, rendering its reporting methodology not unreasonably distortive.
See AFBs 6, 62 FR at 2090. While we prefer that respondents report
these adjustments on a transaction-specific basis (or, where a single
adjustment was granted for a group of sales, as a fixed and constant
percentage of the value of those sales), we recognize that this is not
always feasible, particularly given the extremely large volume of
transactions involved in these reviews and the time constraints imposed
by the statutory deadlines.
SKF Germany's two billing adjustments were part of credit or debit
notes issued to the customer that related to multiple invoices,
products, or invoice lines, and which, therefore, could not be tied to
a single specific transaction. In these cases, the most feasible
reporting methodology that SKF Germany could use was a customer-
specific allocation, which is not unreasonably inaccurate or
distortive.
It is inappropriate to reject allocations that are not unreasonably
distortive where a fully cooperating respondent is unable to report the
information in a more specific manner. Because these adjustments are
associated with multiple invoices, products, or product lines, they
could not be tied to a specific transaction. Verification in the 96/97
review was an opportunity to determine whether billing adjustment two
represented a reasonable approximation of SKF Germany's experience in
granting this adjustment. Our conclusion in that review was that there
was no reason to believe that the actual data would differ
significantly. In this review, there is no evidence on the record to
indicate that the bearings included in SKF Germany's current
allocations vary significantly, either in terms of value, physical
characteristics, or the manner in which they were sold. For this
reason, we find that this methodology is not unreasonably distortive.
With regard to the holding in Torrington I, see our response to the
previous comment.
Comment 3: Torrington argues that the Department should reject all
of Koyo's downward billing adjustments to home-market prices reported
as billing adjustment two because the reporting methodology was
incorrect and distortive. Torrington contends that billing adjustment
two is distortive because it includes adjustments which Koyo granted on
a model-specific basis but allocated over all sales to the customer
involved, as well as lump-sum adjustments granted on a customer-
specific basis, with the result that adjustments are made to
transactions for which no adjustment actually applied. Citing
Torrington I, the petitioner argues further that expenses which vary
from sale to sale are direct expenses and must be reported as such
(i.e., varying from sale to sale) or be denied. Torrington contends
that, by accepting Koyo's allocation, the Department in effect is
treating Koyo's reported billing adjustments as an indirect expense
(i.e., not varying from sale to sale) and, thus, reaching a result that
is incompatible with Torrington I.
In rebuttal, Koyo argues that Torrington has offered no new reason
why the Department should not reject Torrington's arguments in these
reviews as it has done in the past three AFB reviews. Koyo contends
that the petitioner continues to rely on Torrington I even though the
Department dismissed Torrington I as inapplicable to the issue at hand,
citing AFBs 6, 62 FR at 2091.
Department's Position: Koyo has reported billing adjustment two to
the best of its ability. We have based this determination on the fact
that this post-sale price adjustment is comprised of two types of
adjustments: (1) Lump-sum adjustments negotiated with customers without
reference to model-specific prices, and (2) adjustments granted on a
model-specific basis but which Koyo records in its computer system on a
customer-specific basis only. Given the large number of sales involved,
it is not feasible to report this on a more specific basis. See AFBs 7,
62 FR at 54050-51, and AFBs 8, 63 FR at 33328. Furthermore, we examined
this expense closely at verification and found no indication that
Koyo's methodology would result in distortive allocations. Therefore,
we have allowed Koyo's billing adjustment two as a direct adjustment to
normal value.
4. Circumstance-of-Sale Adjustments
4.A. Credit
Comment 1: Torrington notes that a home-market verification exhibit
discloses that FAG Italy was uncertain of the dates of payments for
some home-market sales. Torrington requests that the Department accept
revised, post-verification data from FAG Italy only to the extent that
it is satisfied that the payment dates have been reported accurately.
Torrington requests that the Department otherwise apply partial facts
available to the imputed credit calculation.
FAG Italy responds that, after verification, it revised its home-
market
[[Page 35604]]
credit expense calculation properly; it notes that it based the dates
of payments for transactions of April and May 1998 on the customer-
specific averages of the prior six months and that it recalculated
imputed credit using these new dates. It asserts that, because the
payment dates have now been reported accurately, the Department should
accept its revised data.
Department Position: We have no reason to believe that FAG Italy
reported payment dates for home-market sales inappropriately. Per our
request, on December 18, 1998, FAG Italy submitted its post-
verification amendments to account for corrections it presented at the
beginning of verification and to correct certain errors that we
discovered during verification. The revised payment dates for April and
May 1998, based on customer-specific averages, comprised part of FAG
Italy's post-verification amendments. In these reviews, as in past
reviews, we allowed FAG Italy to calculate its payment dates on the
basis of customer-specific averages because it did not maintain its
payment records in a manner which provided transaction-specific payment
dates. See FAG Italy's August 28, 1998, Section B questionnaire
response at 31. We have not found the use of the averages to be
unreasonably inaccurate or distortive. Moreover, this methodology is
consistent with ones we have accepted in other segments of these
proceedings where companies were not able to provide transaction-
specific payment dates. See, e.g., AFBs 6, 62 FR at 2101, and AFBs 7,
62 FR at 54053. For these reasons, we have accepted FAG Italy's
methodology and, consequently, its revised data for these final
results.
Comment 2: Torrington argues that the Department should either
reject or recalculate Koyo's home-market credit adjustment because its
reporting method accounts for neither actual payment periods nor
special agreements between Koyo and its customers for reducing
accounts-receivable balances. Torrington contends that, since Koyo is
able to distinguish all home-market transactions by product code, the
sale date, the customer code, and the sales branch, reporting of actual
payment periods is possible. Torrington concludes that, since Koyo
calculates a customer-specific average, based on the ratio between
receivables and sales rather than reporting actual payment periods, its
methodology is inherently flawed.
Koyo argues that, although Torrington states that Koyo can
distinguish home-market transactions by product code, the sale date,
the customer code, and the sales branch, Torrington does not mention
that these data are all invoice items, not payment information. Koyo
states that it keeps its customer receivables on a customer-specific
basis but not on an invoice-specific basis. When Koyo receives payment
from a customer, the respondent explains, it applies the payment to
that customer's accounts receivable balance and not to a specific
invoice. Koyo states that its methodology of calculating the average
number of days until receipt of payment by dividing the accumulated
month-end receivables for each customer by the average daily sales to
that customer is acknowledged widely as a standard measure of accounts
receivable turnover. Koyo maintains that the Department has accepted
this methodology in previous reviews. Finally, Koyo argues that certain
arrangements it has with specific customers regarding payment types,
e.g., cash and 30-day notes, do not distort Koyo's home-market credit
expenses because it accounted for these payments in its calculation of
the average number of days outstanding which it then used for
calculation of home-market credit expense.
Department's Position: Based on our review of information on the
record, we find no indication that Koyo has changed its computerized
payment-record system so that it can link specific shipments to
payments. We examined Koyo's credit expense calculations during
verification and found, as in AFBs 4, 5, 6, and 7, that Koyo's
methodology reflects that which it reported in its questionnaire
response dated August 28, 1998, at B-11. Therefore, in these reviews,
as in AFBs 4 through 7, we have accepted Koyo's calculation of its
home-market credit expense for each customer on the basis of the
average number of days that receivables are outstanding. We are also
satisfied by information on the record of this and previous reviews
that the arrangements that Koyo has with certain customers regarding
payments do not distort Koyo's home-market credit expense calculations.
4.B. Technical Services and Warranties
Comment 1: Torrington argues that SNR's claim that it incurred no
direct technical-service expenses on its EP sales is not supported by
information on the record. Torrington states that SNR's description of
its selling functions regarding EP sales reveals that EP sales benefit
from considerable technical-service expenditures by SNR and that such
service expenditures are likely to have a significant direct expense
portion. Since SNR did not distinguish direct and indirect technical-
service expenses, Torrington asserts that the Department should treat
such expenses as direct expenses.
SNR argues that Torrington completely ignores the fact that SNR did
distinguish its technical-service expenses in its August 28, 1998,
questionnaire response at C-32. SNR concludes that, since Torrington
has not rebutted SNR's evidence illustrating why SNR's treatment of
technical-services expenses was correct, the Department should accept
these expenses as indirect in nature.
Department's Position: We have examined the information on the
record and have concluded that the record supports SNR's contention
that the technical services rendered were indirect. In particular,
SNR's Section C questionnaire response dated August 28, 1998, at C-32
indicates that the expenses reported under this item covered the fixed
expenses incurred in providing technical advice to salesmen concerning
subject and non-subject merchandise. We have found that SNR's U.S.
technical expense (i.e., salary and benefit expense) is a fixed expense
that can neither be related to individual sales nor subject or
nonsubject merchandise. We examined the information on the record and
found no support for Torrington's allegation that SNR's EP sales
benefit from ``considerable technical service expenditures'' by SNR.
Since there is no indication on the record that SNR incurred direct
technical expenses, we have made no changes to our treatment of SNR's
technical services as an indirect expense.
Comment 2: Torrington argues that the Department should review
Nachi's direct and indirect technical-services expenses and, if Nachi
included any direct technical-service expense in indirect technical-
service expense, the Department should restate Nachi's indirect
expenses and reduce the CEP-offset ``cap.'' Torrington contends that
Nachi replaces faulty bearings as part of its technical-services
program and reported the costs of replacements as an indirect
technical-service expense.
Nachi argues that the Department's practice has been to accept
Nachi's reporting of the costs associated with the activities of Nachi
Technical Center (NTC) as an indirect technical-service expense since
NTC does not provide services, whether related to sales, repairs, or
replacement of bearings, to customers directly. Nachi contends that it
did not report the costs of replacements as indirect technical-service
expense but as a direct expense in another expense category.
[[Page 35605]]
Department's Position: Based on our analysis of the record, we
agree that Nachi reported the costs associated with NTC as indirect
expenses correctly. Because such expenses, consisting principally of
salaries and benefits of NTC personnel, are fixed expenses, it was
proper to report them as indirect expenses. In addition, the record
supports Nachi's claim that replacement costs are captured as a direct
expense in another expense category. Due to the proprietary nature of
this argument, see the Department's Analysis Memorandum for Nachi,
dated June 15, 1999, for a more detailed discussion of this expense.
Comment 3: Torrington argues that SKF France's claim that it incurs
no direct expenses for technical services on its EP sales to the United
States for merchandise manufactured by its affiliate, Sarma, is not
supported by the record. It argues that, due to the demanding nature of
the market to which Sarma sells (i.e., OEMs in the aerospace industry),
it is likely that Sarma incurs significant direct selling expenses for
technical and engineering services. Torrington contends that this is
confirmed by SKF's reporting of a high degree of engineering services
performed by Sarma. Torrington adds that the ledger of Sarma's indirect
selling expenses includes items traditionally regarded as variable
expenses. Citing AFBs 3 and AFBs 4, Torrington argues that, where the
Department finds that the respondent has not distinguished between
direct and indirect technical-services expenses, it is the Department's
policy to treat such expenses as direct in the United States. When such
information is lacking, Torrington continues, the Department calculates
a direct-expense deduction on the basis of facts available. Torrington
concludes that the Department should calculate and apply a direct-
expense rate based on facts available in this case.
SKF France states that its reporting of indirect selling expenses
for Sarma is correct and that the Department should continue to accept
such expenses as reported. SKF France asserts that its response to the
Department's questionnaire indicates that Sarma does not provide direct
technical services or advice to its customers and that Sarma's
technical department only provides general design and quality-control
advice for future bearing development. Thus, the respondent contends,
the response supports SKF France's claim that expenses are indirect in
nature. SKF notes that its selling-function chart, which depicts the
levels of activity and functions for indirect selling activities and
which shows a high level of engineering services, is consistent with
its narrative response. It argues that the expenses related to the
activity the petitioner identifies (in Sarma's indirect selling expense
ledger as being traditionally regarded as a variable expense) are not
direct since they do not vary with the quantity sold nor are they tied
to specific sales.
Department's Position: SKF France stated in response to our
questionnaire that its affiliate, Sarma, does not provide direct
technical services to its U.S. customers. We found no record evidence
that SKF France misclassified these expenses as indirect selling
expenses. Moreover, there is no presumption that a company operating in
Sarma's market should have direct selling expenses. Thus, the
petitioner's allegation alone does not call into question Sarma's
responses. In response to the petitioner's reference to AFBs 3 and AFBs
4, it is clear that in these cases the Department found that the
respondents did not distinguish direct and indirect expenses.
Furthermore, in AFBs 3, in addition to not distinguishing between
direct and indirect expenses, the respondent did not indicate that the
expenses were all indirect in nature. Because there is no indication
from the record of these reviews that certain indirect expenses should
be reclassified as direct expenses, we have accepted SKF France's
expenses as reported.
Comment 4: Torrington argues that the Department should reallocate
FAG Germany's U.S. technical-service expenses because FAG Germany's
allocation methodology is distortive. Torrington contends that FAG
Germany's selling-functions chart indicates that these expenses are
incurred in greater amounts for some types of sales than for others and
argues that the Department should reallocate these expenses to take
this into account. Torrington argues further that the record shows that
FAG Germany likely incurred significant direct technical-service
expenses on certain EP sales even though FAG Germany did not report
such expenses. Torrington argues that the Department should, consistent
with its policy where a respondent has not distinguished direct and
indirect technical-service expenses, treat all of FAG Germany's
indirect technical-service expenses as direct expenses.
FAG Germany argues that there is no demonstrative correlation on
the record between selling functions and selling expenses. In this
regard, FAG Germany notes that the description of selling functions in
the selling-functions chart includes indirect as well as direct
technical-service expenses and thus cannot be used as a basis for
determining the accuracy of its reported direct expenses. FAG Germany
contends further that, because it had no reported U.S. sales of the
type that Torrington contends should incur more expense, the issue is
essentially moot. Thus, FAG Germany concludes that there is no basis
for imputing a facts-available direct technical-service expense for FAG
Germany's EP sales.
Department's Position: FAG Germany reported no direct technical-
service expenses on its EP sales. See FAG Germany's supplemental
response dated October 27, 1998, at 12. Because the chart of selling
functions FAG Germany provided in its response includes all technical-
service expenses, including indirect selling expenses, it is not a
reliable guide for demonstrating an inconsistency in FAG Germany's
response with regard to technical-service expenses. Moreover,
Torrington's suggestion that FAG Germany should have incurred such
expenses, without record evidence demonstrating the existence of such
expenses, is insufficient to call the record evidence into question.
Therefore, we have not made any adjustment to FAG Germany's claimed
amount.
Comment 5: Torrington argues that the Department should reject NSK-
RHP's claim that RHP Aerospace incurred no direct technical-service
expenses for EP sales. Torrington argues that NSK-RHP's questionnaire
response contradicts the respondent's claim that this expense is
indirect in nature and, therefore, the Department should calculate a
direct-expense factor for technical-service expenses as a basis for
facts available.
NSK-RHP responds that the Department verified NSK-RHP's reported
U.S. indirect technical service expenses and found no discrepancy,
thereby confirming that there was no direct link between RHP
Aerospace's technical services and sales. NSK-RHP argues that
Torrington has attempted to refute NSK-RHP's claim by overlapping
different sections of NSK-RHP's response inaccurately.
Department's Position: We verified the accuracy of NSK-RHP's claim
that it incurred no direct technical-service expenses for EP sales and
found no discrepancies. See Verification Report of NSK-RHP's Response
to Sections A, B and C of the Department's Questionnaire at 14, dated
January 21, 1999. Accordingly, we have not calculated a direct
technical-service expense factor for RHP Aerospace based on facts
available.
[[Page 35606]]
4.C. Commissions
Comment: NTN argues that the Department's methodology for
determining that its home-market commissions were not made at arm's
length is unreasonable. NTN contends that commission rates vary
significantly between selling agents according to the services provided
by each agent and that the Department's methodology does not account
for these differences. NTN also asserts that the Department's
methodology does not account for differences related solely to levels
of trade. Finally, NTN asserts that the fact that commissions paid to
related parties are often much higher than those paid to unrelated
parties demonstrates that the Department's methodology is distortive.
By reviewing commission rates on an individual basis rather than a
weighted-average basis, NTN asserts, the Department can determine which
sales were made on an arm's-length basis accurately.
Torrington argues that the Department's methodology is appropriate.
Torrington contends that NTN provides no concrete evidence that the
Department's reliance on a commission-rate comparison is not
appropriate to determine whether commissions paid to related sales
agents were at arm's length. Citing AFBs 6, 62 FR at 2099, Torrington
observes that the Department's test of NTN's commissions conforms with
it prior practice with regard to other respondents.
Department's Position: There is no evidence on the record
supporting NTN's claim that commission rates vary significantly between
selling agents according to the services provided by each agent. As NTN
notes, its response indicates that it negotiates commission rates with
each selling agent. However, NTN has not provided any explanation as to
how or why commission rates might vary or any information regarding the
differences in services rendered by different selling agents. In the
absence of such information, it is reasonable to presume that
commissions paid to affiliates which are higher than those paid to
unaffiliated parties are not at arm's length.
Furthermore, NTN's assertion that ``commissions paid to related
parties are often much higher than those paid to unrelated parties'
does not demonstrate that our methodology is unreasonable. Rather, it
indicates that the commissions paid to those related parties are more
favorable than those paid to unrelated parties and, therefore, are not
at arm's length. In addition, while it is true that NTN performs a
number of different selling functions for different levels of trade,
the record does not show or suggest that the selling functions
performed by the selling agent vary by level of trade.
The record also does not show or suggest that NTN pays different
commissions to selling agents depending on the level of trade of the
ultimate customer. Finally, with respect to this issue, it is important
to note that the purpose of our commission arm's-length test is to
determine whether the commissions paid are at arm's-length amounts, not
whether the sales themselves made to affiliated parties were at arm's-
length prices. Indeed, we have a separate test for determining whether
sales were made at arm's-length prices. Therefore, we have not altered
our methodology.
4.D. Other Direct Selling Expenses
Comment 1: Torrington argues that the Department should recalculate
Koyo's U.S. direct selling expenses. Torrington asserts that Koyo did
not account for the expenses of administering a certain sales program
sponsored by Koyo Corporation of the U.S.A. (KCU). Koyo argues that
Torrington's argument is a misrepresentation of the record because Koyo
accounted for the expenses fully in KCU's U.S. selling expenses
reported in Section C of its questionnaire response.
Department's Position: We are satisfied by information on the
record that Koyo has accounted for these expenses in its response. We
have verified this item in previous reviews and find no information for
these reviews that would indicate that the reporting of this expense
has changed. Due to the proprietary nature of the comments raised by
Torrington, see the Department's Analysis Memorandum for Koyo, dated
June 16, 1999, for a more detailed discussion of this expense.
Comment 2: NPBS argues that the statute makes no provision for the
deduction of repacking expenses from U.S. price. Accordingly, NPBS
asserts that the Department should not make any adjustment to U.S.
price for repacking expenses.
Department's Position: As we discussed in the CEP-profit section of
this notice (see below) we view repacking expenses as direct selling
expenses that the respondent incurs as a result of the sale.
Accordingly, we deduct such expenses from U.S. price pursuant to
section 772(d)(1)(B) of the Act which directs us to deduct from the CEP
``* * * expenses that result from, and bear a direct relationship to,
the sale, such as credit expenses, guarantees and warranties.'' See
also AFBs 8, 63 FR at 33339, and Porcelain-on-Steel Cookware from
Mexico; Final Results of Antidumping Duty Administrative Review, 64 FR
26934, 26942 (May 18, 1999). Therefore, we have deducted repacking
expenses from the CEP.
4.E. Indirect Selling Expenses
Comment 1: Torrington argues that the Department should not deduct
from normal value Koyo's indirect selling expenses and those reported
for two consolidated affiliated resellers (distributors) in the home
market. Torrington contends that Koyo has not supported its claim that
the former are in addition to the latter expenses.
Koyo contends that it was appropriate to accept its reported
indirect selling expenses. Koyo argues that all three companies--Koyo
Seiko and its two consolidated distributors--are involved in the
selling of the product to the ultimate customer. Koyo argues,
therefore, that it is appropriate to deduct the indirect selling
expenses of each of the three from the gross home-market price. Koyo
states that Torrington bases its argument incorrectly on a situation
where the product is sold to a related party. In the instant situation,
Koyo argues, it does not sell the bearings to its consolidated
distributors but rather simply shifts the responsibilities of some of
the selling functions to the consolidated distributors.
In response to Torrington's assertion that Koyo's indirect selling
expenses are the same as those reported for its two consolidated
distributors, Koyo argues that, at each stage in the chain from Koyo
Seiko to the ultimate customer, Koyo Seiko and the two consolidated
distributors incur expenses individually in support of those sales to
the ultimate customer. Koyo contends further that, because each company
incurred discrete expenses in the process of selling the merchandise to
the ultimate customer, the Department adjusted home-market price for
those expenses correctly. Finally, Koyo concludes that there has been
no double-counting of indirect selling expenses and therefore there is
no need for the Department to recalculate Koyo's home-market indirect
selling expenses.
Department's Position: We examined Koyo's distributors' expenses
closely at verification. We found no indication that there had been
double-counting of indirect selling expenses. We were able to verify
that each company incurred discrete expenses in the process of selling
the merchandise to the ultimate customer. Therefore, we have not
recalculated Koyo's home-market indirect selling expenses.
[[Page 35607]]
Comment 2: Torrington notes that INA reported that its U.S.
affiliate reimbursed the parent company for certain indirect selling
expenses incurred in Germany to support sales to the United States. The
petitioner contends that these reimbursements are associated with U.S.
commercial activity and should be deducted from CEP. As facts
available, the petitioner suggests that the Department deduct from CEP
all of the reported indirect selling expenses incurred in Germany to
support sales to the United States.
INA argues that it has included the reimbursed expenses in the
total U.S. indirect selling expenses incurred by its U.S. affiliate.
INA asserts that, as a result, the Department has already deducted such
expenses from the CEP.
Department's Position: The evidence on the record indicates that
the reimbursements in question are reflected in INA's ISE totals. Thus,
we have already deducted the reimbursements at issue from CEP and the
use of facts available is not warranted.
Comment 3: Torrington argues that the Department should review
NTN's U.S. ISE calculation to ensure that it is not distortive.
Torrington contends that NTN apparently removed a portion of the
warehousing expense from its total indirect selling expenses on the
ground that these expenses were not allocable to subject merchandise.
Torrington argues that, because NTN allocated the remaining indirect
selling expenses to both subject and non-subject merchandise, NTN's
methodology may be distortive.
NTN indicates that it removed a portion of its warehousing expense
from total warehousing expenses because this portion was associated
exclusively with warehousing non-subject merchandise. NTN asserts that
the remaining expenses have to be allocated between subject and non-
subject merchandise because these expenses were incurred on both
subject and non-subject merchandise.
Department's Position: It is appropriate to remove the warehousing
expenses incurred exclusively on non-subject merchandise to the extent
that the sales of the non-subject merchandise in question are not
included in the sales total used to allocate the expenses. A comparison
of Exhibit C-8 to the financial statements NTN submitted in Exhibit A-
18 of its September 5, 1998, response suggests that NTN did not include
the sales on which these warehousing expenses were incurred in its
calculation of per-unit indirect selling expenses. Therefore, we
determine that NTN's allocation of warehousing expenses is not
distortive.
Comment 4: NTN argues that the Department should not have
recalculated its home-market and U.S. indirect selling expenses without
regard to its customer categories. NTN observes that its selling
functions differ between levels of trade and NTN contends that, by
reallocating selling expenses without regard to the level of trade, the
Department distorted the margin calculation because the expenses are
not the same for each level of trade. NTN argues this is particularly
true of sales made by NSCL, an affiliated party in the home market,
because NSCL sells only to distributors.
Torrington observes that the Department has rejected NTN's argument
in prior reviews. Torrington contends further that NTN neither
acknowledges the Department's prior decisions nor does it acknowledge
any changes in its reporting.
Department's Position: We rejected NTN's allocation methodology
because the method that NTN used to allocate its indirect selling
expenses does not bear any relationship to the manner in which NTN
incurs the expenses in question, thereby leading to distorted
allocations. We have addressed this issue in prior reviews. See AFBs 8,
63 FR at 33329, first addressed in AFBs 3, 58 FR at 39750. NTN has not
changed the methodology we rejected in these prior reviews nor has it
presented any evidence that its selling expenses are incurred in the
manner in which it allocated the expenses. In addition, we note that we
allocated expenses incurred by NSCL only to NSCL's sales. The only
change we made to NSCL's expenses was to segregate warehousing expenses
so we could treat them as a movement expense. Therefore, we have not
distorted the selling expenses attributable to NSCL's sales.
Comment 5: Torrington notes that, under a reserve for doubtful
accounts, SKF Italy reported negative amounts as revenue for the
account and reported positive amounts as bad-debt expenses. Torrington
argues that the Department should not accept the positive amount in SKF
Italy's reserve for doubtful accounts as indirect selling expenses
because SKF Italy has not demonstrated that the bad-debt expense was
incurred on sales of subject merchandise and contends that, without
supporting evidence, no adjustment should be made. In support of its
position, Torrington cites AFBs 4, 60 FR at 10916: ``(a)lthough [the
respondent] claimed as an expense an amount set aside in reserve in the
event that its customers fail to pay outstanding charges in the future,
Koyo failed to demonstrate that it actually wrote off any bad debts
during the [POR]'' (material in brackets added).
SKF Italy contends that Torrington misapprehends the nature of the
respondent's reserve for doubtful accounts. SKF Italy explains that the
negative amount represents the actual collection of bad debt that was
outstanding and written off which offsets the positive amount that
represents bad debt that was actually written off. SKF Italy indicates
that it considers and records such expenses as indirect and argues
that, since indirect selling expenses are allocated over all home-
market sales, whether such expenses relate strictly to subject
merchandise is not an appropriate issue.
Department's Position: As SKF Italy reported in its response that
it incurred actual bad-debt expenses during the instant review from the
write-off of actual bearing sales, this situation differs from the one
cited by Torrington, and we believe an expense adjustment is
appropriate. Further, as we said in AFBs 4, 60 FR at 10917, we consider
bad-debt expense to be either direct or indirect depending on the
relationship between the bad-debt expense and the sale. Based on the
information reported in SKF Italy's response, we find that the bad-debt
expense does not bear a direct relationship to the sale of merchandise
made during the POR because SKF Italy is unable to tie these expenses
to particular sales. Accordingly, we have treated its bad-debt expenses
as indirect for these final results.
5. Level of Trade
Comment 1: Torrington argues that NTN has not demonstrated that it
is entitled to a level-of-trade adjustment or CEP offset because it did
not provide information that the Department requested. In addition,
Torrington argues that NTN's descriptions of the selling functions it
performs for its EP level of trade demonstrates that the EP level of
trade is not comparable to any level of trade in the home market and,
therefore, NTN is not entitled to a level-of-trade adjustment with
respect to any of its home-market sales. Torrington asserts that NTN
has an office which serves the EP customer and performs a number of
selling functions that are not performed at any other level of trade.
Torrington also observes that Exhibit A-7 of NTN's September 5, 1998,
questionnaire response indicates that all merchandise is packaged and
shipped to the EP customer's specifications and, Torrington argues, NTN
does not provide this service to customers at any level of trade in the
home market.
[[Page 35608]]
Finally, Torrington asserts that the record does not demonstrate that
there are patterns of consistent price differences among sales at
different levels of trade in the home market. Torrington bases its
argument on its assertion that there is significant overlap between the
prices at the different levels of trade. Torrington asserts that,
because a popular model could skew the relative figures significantly
and distort the analysis of consistent price patterns, the Department's
analysis of the patterns of price differences by quantity is
misleading.
NTN contends that it provided the information which the Department
requested. NTN also argues that the Department issues supplemental
questionnaires routinely and that the fact that the Department asks a
question does not necessarily mean that a response contains a
deficiency.
With respect to its EP sales, NTN contends that it provides
essentially the same services for its EP sales as it does for one of
its home-market levels of trade. NTN argues that the fact that it has
an office which acts as a facilitator for EP sales is no more
remarkable than the existence of branch sales offices throughout Japan
to service customers in particular regions. NTN also argues that the
fact that merchandise shipped to the EP customer is shipped to that
customer's specifications is not unique because NTN packs all
merchandise to its customers' specifications. Finally, NTN argues that
the record demonstrates that there is a pattern of consistent price
differences, that Torrington's arguments are based on conjecture, and
that Torrington's claims are not supported by the record. NTN also
contends that the Department's analytical methodology removed the
distortions that Torrington suggests could occur.
Department's Position: For the preliminary results, we granted a
level-of-trade adjustment for NTN's EP sales and made a CEP offset for
NTN's CEP sales based on an analysis of NTN's responses to our requests
for information. See Level of Trade Memorandum dated January 26, 1999.
We have not changed the analysis for these final results.
We disagree with Torrington's assertion that NTN did not provide
information to justify a level-of-trade adjustment. The information NTN
provided was adequate for us to make an determination regarding NTN's
level-of trade claims; therefore, Torrington's cite to NTN's
supplemental response in support of its contention is inappropriate.
NTN's supplemental response indicated that there was no additional
information beyond that originally reported and we made our
determination that NTN was entitled to a level-of-trade adjustment for
EP sales and a CEP offset for CEP sales on the basis of NTN's original
submissions.
With regard to EP sales, we find that the record demonstrates that
the level of trade of EP sales is the same as that of one of the home-
market levels of trade. First, the existence of a separate sales office
to service EP sales does not demonstrate, by itself, that the level of
trade is necessarily different from one of the home-market levels of
trade. Rather, what is important is whether the selling functions
performed by NTN (including the functions performed by the selling
office) for EP sales are similar to those performed for one of the
home-market levels of trade. We find that this is, in fact, the case.
We disagree with Torrington's claim that the selling functions
performed by NTN's EP sales office are not performed for any of the
home-market levels of trade. Rather, we find that most of the expenses
incurred by the EP sales office to which Torrington refers are likely
to be incurred by any sales office and that the others can reasonably
be correlated with the home-market selling functions NTN performed. See
NTN final results analysis memorandum dated June 16, 1999.
Second, we do not find remarkable that merchandise shipped to the
EP customer is packaged and shipped to that customer's specifications,
given the nature of the customer for EP sales. There is no evidence on
the record, nor any logical reason to believe, that merchandise shipped
to customers which comprise one of the home-market levels of trade are
not also packaged and shipped to the customer's specifications.
Furthermore, the SAA at 830 directs that, ``[w]hile the pattern of
pricing at the two levels of trade under section 773(a)(7)(A) must be
different, the prices at the levels need not be mutually exclusive;
there may be some overlap between prices at the different levels of
trade.'' We agree with Torrington that the amount of overlap measured
in the number of models sold is substantial. However, the record
demonstrates that the overlapping models account for a very small
percentage of the total quantity of sales. The record also demonstrates
that, for the vast majority of sales, measured by quantity, prices are
higher at one level of trade than for the other. It is on this basis
that we conclude that there is a pattern of consistent price
differences between the two levels of trade.
Finally, while it may be theoretically possible that one popular
model could skew the relative figures significantly and distort the
analysis of consistent price patterns, Torrington does not cite any
evidence on the record to suggest that this is happening. In addition,
if one accepts Torrington's premise, it is also just as possible that a
popular model could skew the relative figures so that we would not find
a pattern of consistent price differences. More importantly, however,
if we do not incorporate the figures from our analysis of the pattern
of price differences by quantity into our calculations, it would be
possible that a number of models that are sold infrequently and in low
quantities could influence our analysis unduly. Therefore, we continue
to base our findings on all of the information available to us and, on
this basis, we find that there is a pattern of consistent price
differences between the home-market levels of trade. Because there is
such a pattern and because the level of trade of NTN's EP sales is the
same as one of its home-market levels of trade, we made a level-of-
trade adjustment whenever we compared NTN's EP sales to home-market
sales made at a different level of trade for these final results.
Comment 2: NTN argues that the Department should use the
transaction to the first unaffiliated customer in the United States to
determine the level of trade of CEP sales. NTN contends that it would
then qualify for a price-based level-of-trade adjustment. NTN also
asserts that the Department's methodology of examining the level of CEP
sales net of the functions whose expenses are deducted from CEP
effectively bars all CEP transactions from ever being granted a price-
based level-of-trade adjustment because the selling functions which a
respondent performs in the home market are performed by its affiliated
U.S. importer for CEP sales. NTN argues that this is contrary to the
intent of the SAA and the legislative history of the Act.
Torrington observes that the Department has rejected NTN's argument
in prior reviews. Torrington contends further that NTN neither
acknowledges the Department's prior decisions nor discusses why the
Department should reach a different decision in these reviews.
Department's Position: The statutory definition of ``constructed
export price'' contained at section 772(d) of the Act indicates clearly
that we are to base CEP on the U.S. resale price adjusted for selling
expenses and profit. As such, the CEP reflects a price exclusive of all
selling expenses and profit associated with economic activities
occurring in
[[Page 35609]]
the United States. See SAA at 823. These adjustments are necessary in
order to arrive at, as the term CEP makes clear, a ``constructed''
export price. The adjustments we make to the starting price,
specifically those made pursuant to section 772(d) of the Act
(``Additional Adjustments for Constructed Export Price''), normally
change the level of trade. Accordingly, we must determine the level of
trade of CEP sales exclusive of the expenses (and concomitant selling
functions) that we deduct pursuant to this sub-section. Therefore,
because no home-market levels of trade reported by NTN were equivalent
to the level of trade of its CEP sales, we were unable to make a level-
of-trade adjustment for such sales.
The CIT has held recently that the Department's level-of-trade
practice (basing the level-of-trade comparisons of CEP after making CEP
deductions) is an impermissible interpretation of section 772(d) of the
Act. See Borden at 58; see also Micron Technology v. United States,
Court No. 96-06-01529, Slip Op. 99-02 (CIT January 28, 1999) (Micron).
The Department believes, however, that its practice is in full
compliance with the statute and that the CIT decision does not contain
persuasive statutory analysis. The Borden decision became final on June
4, 1999 (Slip. Op. 99-50, Court No. 96-08-01970 (CIT 1999)). Because
the time for filing an appeal of Borden has not yet run and Micron is
not yet final, the Department has continued to follow its normal
practice of adjusting CEP under section 772(d) of the Act prior to
starting a level-of-trade analysis, as articulated in 19 CFR 351.412.
Comment 3: NSK and NSK-RHP argue that the Department should make a
level-of-trade adjustment when CEP sales are matched to home-market
aftermarket sales. NSK and NSK-RHP contend that the Department can make
a level-of-trade adjustment on the basis of the difference between the
OEM and aftermarket levels of trade in the home market. NSK asserts
that, although the home-market OEM sales and the level of CEP sales are
not equivalent, the Department is not required to adjust for the entire
amount of the difference between levels of trade when making a level-
of-trade adjustment and could make a partial adjustment instead. NSK
and NSK-RHP contend that the levels of home-market OEM sales are closer
to the levels of CEP sales than the levels of home-market aftermarket
sales because the prices for home-market OEM sales are lower than the
prices for home-market aftermarket sales. NSK and NSK-RHP assert that
it would be appropriate, therefore, to adjust normal value with a
level-of-trade adjustment based on the difference between the home-
market levels of trade whenever CEP sales are compared to home-market
aftermarket sales.
Torrington notes that the Department rejected this argument in AFBs
8 when NSK raised it for those reviews. Torrington, citing the
Department's position from the prior reviews, argues that the
Department should maintain its position.
Department's Position: There is no provision in the statute for
making such a partial adjustment. We make a level-of-trade adjustment
when there is ``any difference between the export price or constructed
export price and the normal value that is shown to be wholly or partly
due to a difference in level of trade between the export price or
constructed export price and the normal value.'' See section
773(a)(7)(A) of the Act. We interpret the statutory phrase ``wholly or
partly due to a difference in level of trade'' to mean that we may make
a level-of-trade adjustment only if part of the differences in prices
between levels of trade is attributable to the difference in level of
trade. In other words, we need not demonstrate that no factor other
than level of trade influenced a pattern of price differences. Thus, we
do not read into this language of the statute the authority to make a
level-of-trade adjustment between two home-market levels of trade where
neither level is equivalent to the level of trade of the U.S. sale. See
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,
From Japan and Tapered Roller Bearings, Four Inches or Less in Outside
Diameter, and Components Thereof, From Japan; Final Results of
Antidumping Duty Administrative Reviews, 63 FR 2558, 2578 (January 15,
1998), and AFBs 8, 63 FR at 33330.
Comment 4: Torrington argues that Nachi's sales to affiliated and
unaffiliated resellers do not constitute one level of trade. Torrington
asserts that selling-expense levels must differ for Nachi's affiliated
and unaffiliated customers due to the nature of the affiliated
customers' relationships to Nachi and, in certain cases, the Department
should not allow a CEP offset to Nachi's home-market prices (the
proprietary nature of the information does not permit us to describe
this issue with more specificity). Torrington supports its position by
citing the SAA at 829, which states that ``a sales subsidiary created
merely to perform the role of a de facto sales department is not an
appropriate basis for level-of-trade adjustments.''
Nachi argues that Torrington does not cite any information on the
record to demonstrate how Nachi's sales to affiliated and unaffiliated
parties involve ``different selling activities.'' Nachi argues that,
when it provided the Department with an analysis of its selling
functions performed in sales to OEMs and sales to distributors, it did
not distinguish between affiliated and unaffiliated distributors
precisely because there are no differences in selling functions between
the two. Nachi maintains that the Department was correct in finding
that one level of trade exists in Nachi's home market and that a level-
of-trade difference from the CEP level of trade justifies the
application of a CEP-offset adjustment to normal value in accordance
with section 773(a)(7)(B) of the Act.
Nachi argues that Torrington's reference to the SAA is irrelevant
and taken out of context. Nachi maintains that it is clear that its
affiliated resellers are not subsidiaries created merely to act as de
facto Nachi sales offices. Nachi contends that Nachi has its own sales
branches and that it reported the selling expenses of these sales
branches as indirect selling expenses. Nachi argues further that a
close reading of the SAA reveals that it is addressing the potential
for manipulation that could result when a company incorporates a sales
branch, thereby turning the sales branch into a subsidiary. Nachi
states that the parent company may then claim that sales made by the
subsidiary are at a different and higher level of trade than that of
the parent, even though there has been no change at all in the
functions performed, in order to gain the benefits of the CEP offset.
Nachi states that Torrington's argument is focused on the selling
activities which Nachi performed when selling to the affiliates and not
the selling activities of the affiliated distributors. Nachi also
argues that, through the application of the arm's-length test, the
Department eliminates sales by Nachi to its affiliates that are not
made at an arm's-length price. Nachi states that those remaining sales
are made at the same or higher price than the prices of sales made to
unaffiliated parties. Nachi maintains that the similarity in pricing of
the sales that are used in the margin calculation is further assurance
that Nachi incurs the same costs and performs the same selling
functions in sales to both affiliated and unaffiliated parties.
Department's Position: Based on our review of the information on
the record, we find no indication that Nachi's dealings with both
affiliated and unaffiliated parties involve different selling functions
and services. We
[[Page 35610]]
reviewed the selling functions and services Nachi performed in sales to
OEMs and sales to distributors and found that the selling functions and
services performed were similar in making sales to both. There is no
information on the record that indicates that Nachi's actual experience
in the home market is contrary to that reported in its submissions.
Therefore, we determined that there was one level of trade in Nachi's
home market. Based upon our examination of the information on the
record, we found that the home-market level is not equivalent to the
level of the CEP. Our determination is supported further by the arm's-
length test, through which we found that Nachi dealt with its resellers
on an arm's-length basis with respect to pricing. Also, there is
insufficient evidence on the record to indicate that any of Nachi's
resellers performed the role of a de facto sales department. Therefore,
since we determined that the home-market level of trade was at a more
advanced stage than the CEP level of trade, a CEP-offset adjustment to
home-market price is appropriate.
6. Cost of Production and Constructed Value
6.A. Profit for Constructed Value
Comment 1: FAG Germany and FAG Italy (collectively, FAG), Barden,
INA, NSK, NSK-RHP, SNR, and SKF France, SKF Germany, SKF Italy, SKF
Sweden (collectively, SKF) argue that the Department's calculation of
profit for CV is unlawful in that it excludes below-cost sales from the
calculation. The respondents argue that the profit-calculation
methodology, which the Department based on all reported sales at each
level of trade within each class or kind of merchandise, is not
permitted under section 773(e)(2)(A) of the Act, which requires the
Department to calculate profit ``in connection with the production and
sale of a foreign like product, in the ordinary course of trade, for
consumption in the foreign country.'' The respondents argue that
``foreign like product'' is indisputably a much smaller group than the
``class or kind'' of merchandise. Moreover, they argue, the
Department's interpretation of ``foreign like product'' for the
purposes of calculating CV profit is contrary to the definition of the
term under section 771(16) of the Act. Under this section, the
respondents continue, ``foreign like product'' is defined as
merchandise in the first of three enumerated categories which is
merchandise sold in the home market that is either identical or
sufficiently similar to particular subject merchandise. They contend
that calculating profit by aggregating different foreign like products
results in the use of merchandise classified on a class-or-kind basis,
which is consistent with the provision under section 773(e)(2)(B)(i) of
the Act, requiring the Department to calculate profits ``in connection
with the production and sale, for consumption in the foreign country,
of merchandise that is in the same general category of products as the
subject merchandise.''
The respondents contend further that, when calculating CV profit
pursuant to section 773(e)(2)(B)(i) of the Act, it would be proper to
assume that sales outside the ordinary course of trade should be
included in the calculation because language limiting the calculation
to sales within the ordinary course of trade is included in sections
773(e)(2)(A) and 773(e)(2)(B)(ii) of the Act but not in section
773(e)(2)(B)(i) of the Act. INA argues that, since the Department did
not actually apply the methodology set forth in section 773(e)(2)(A) of
the Act but, in fact, applied the methodology in section
773(e)(2)(B)(i) of the Act, the Department had no authority to exclude
below-cost sales from its calculation of CV profit. SKF comments that
the ``normal rule of statutory construction [is] that identical words
used in different parts of the same act are intended to have the same
meaning,'' citing Sullivan v. Stroop, 496 U.S. 478, 484 (1990)
(internal quotations and citations omitted). SKF asserts further that,
when the relevant act includes an explicit definition of the word or
term in the same subchapter, this presumption is strengthened, citing
Sorenson v. Treasury, 475 U.S. 851, 860 (1986). Thus, SKF concludes,
the term ``foreign like product'' for purposes of the CV-profit
calculation should be consistent with the definition of the term as
used for matching purposes. FAG and Barden argue that, although the
Department has stated in the past that it has adopted a different
meaning for ``foreign like product'' for the purposes of calculating CV
profit, this reasoning cannot prevail because Congress was aware of the
statutory definition of ``foreign like product'' at the time it chose
to include the term within the language of section 773(e)(2)(A) of the
Act. Furthermore, FAG and Barden contend, the SAA states that section
773(e)(2)(B)(i) of the Act is consistent with the existing practice of
relying on a producer's sales of products in the ``general class or
kind of merchandise,'' which the SAA indicates ``encompasses a category
of merchandise broader than the `foreign like product,' '' citing the
SAA at 840. INA adds that calculating profit on a foreign-like-product
basis, as required by the plain language of the statute, is not any
more complicated than other calculations performed routinely by the
Department in a review, noting that the Department calculates weighted-
average prices for each foreign like product and that CV is already
calculated separately for each different bearing model, based on model-
specific costs. INA argues further that, since CV serves as a proxy for
a sales price, the logical reason for establishing section 773(e)(2)(A)
of the Act as the preferred method of profit calculation is that it
results in normal value that most closely approximates the normal value
that would be determined based on sales of the foreign like product.
Therefore, INA explains, under this method, if the profit earned on
sales of the foreign product that is like the U.S. product is
relatively high, then the profit add-on would be relatively high,
resulting in CV for the U.S. product that correlates to price-based
normal value. Conversely, INA continues, if the profit earned on sales
of the foreign product that is like the U.S. product is relatively low,
the profit add-on for CV would be relatively low. INA concludes that
this differentiation, and thus the purpose of the section 773(e)(2)(A)
method, is lost under the aggregated approach the Department applied in
the preliminary results. INA, NSK, and NSK/RHP argue that, if all
merchandise sold in the home market constituted a single foreign like
product, then an average of all such sales would be used to determine a
single normal value applicable to sales of every type of subject
merchandise.
INA observes that the Department has made a subtle change in its
description of foreign like product comparisons for AFBs. In prior
reviews, citing Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From France, et al.; Preliminary Results of
Antidumping Duty Administrative Reviews, Termination of Administrative
Reviews, 61 FR 35713, 35717 (July 8, 1996), among others, INA contends
that the Department stated ``[a]s defined in the questionnaire, a
bearing family consists of all bearings within a class or kind of
merchandise that are the same in the following physical characteristics
* * *,'' However, in these reviews, INA continues, the Department
stated that, ``[a]s defined in the questionnaire, a bearing family
consists of all bearings which are the foreign like product that are
the same in the following physical characteristics * * *,'' referring
to
[[Page 35611]]
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts
Thereof From France, et al; Preliminary Results of Antidumping Duty
Administrative Review and Partial Rescission of Administrative Reviews,
64 FR 8790, 8795 (February 23, 1999). INA believes that this is
evidence of a shift by the Department in the rationale for its
aggregate profit-calculation approach. ``Foreign like product'' is a
product-specific concept and not a collective description of all
foreign like products sold in the home market, INA asserts.
Torrington contends that the Department has already addressed the
respondents' proposal to make multiple product-specific CV-profit
calculations in AFBs 7, 62 FR at 54062, and that the Department
concluded correctly that the respondents' proposal would be overly
complex and make the statutorily preferred method inapplicable in most
cases. Torrington concludes that the Department's method results in the
application of the statutorily preferred method and is consistent with
the similar use of aggregate data for profit and selling and general
expenses in pre-URAA practice.
Department's Position: As we stated in AFBs 7, 62 FR at 54062, and
AFBs 8, 63 at 33333, we believe that an aggregate calculation that
encompasses all foreign like products under consideration for normal
value represents a reasonable interpretation of section 773(e)(2)(A) of
the Act. Moreover, we believe that, in applying the preferred method
for computing CV profit under section 773(e)(2)(A) of the Act, the use
of aggregate data results in a reasonable and practical measure of
profit that we can apply consistently where there are sales of the
foreign like product in the ordinary course of trade. In the preamble
to our regulations, we stated:
The Department recognizes that there are other methods available
for computing SG&A and profit for CV under section 773(e)(2)(A) of
the Act, including those suggested by the commenters. We continue to
believe, however, that an aggregate calculation that encompasses all
foreign like products under consideration for normal value
represents a reasonable interpretation of the statute. This approach
is consistent with the Department's method of computing SG&A and
profit under the pre-URAA version of the statute, and, while the
URAA revised certain aspects of the SG&A and profit calculation, we
do not believe that Congress intended to change this particular
aspect of our practice.
Moreover, the Department believes that in applying the preferred
method for computing SG&A and profit under section 773(e)(2)(A), the
use of aggregate data results in a reasonable and practical measure
of profit that the Department can apply consistently in each case.
By contrast, a method based on varied groupings of foreign like
products, each defined by a minimum set of matching criteria shared
with a particular model of the subject merchandise, would add an
additional layer of complexity and uncertainty to [antidumping]
proceedings without generating more accurate results.
Final Rule
In addition, we disagree with the respondents' interpretation of
the term ``foreign like product.'' In accordance with the definition of
foreign like product under section 771(16) of the Act, it is clear that
``foreign like product'' is not limited to the product which is
identical in physical characteristics to the subject merchandise
(section 771(16)(A)) or even to the product that is similar to the
subject merchandise (section 771(16)(B)). Merchandise of the ``same
general class or kind'' as the subject merchandise (section 771(16)(C))
will qualify as the ``foreign like product'' in cases where either the
identical or the similar merchandise is not available. There is no
indication that, by referring to ``a foreign like product'' in section
773(e)(2)(A) of the Act, Congress intended that profit be calculated
upon the basis of merchandise that is identical or similar to the
subject merchandise. If Congress had such intentions, then the
``preferred'' method provided in section 773(e)(2)(A) of the Act would
rarely be applicable since CV ordinarily becomes necessary for
determining normal value when identical or similar home market
merchandise is not available for comparison to the U.S. merchandise.
Furthermore, the respondents imply that the term ``general category of
products'' is synonymous with the class or kind of merchandise.
However, there is no statutory indication that, for purposes of
sections 773(e)(2)(B)(i) or 773(e)(2)(B)(iii) of the Act, the ``general
category of products'' must correspond to the ``same class or kind of
merchandise.'' It has been our past practice to interpret the term
``general category of products'' to ``encompass a group of products
that is broader than the subject merchandise.'' See 19 CFR 351.405. For
example, if the profit amount for AFBs were unavailable and the
``general category of products'' were available, then the Department
could consider a profit amount for the general category of
``bearings,'' which could include all AFBs as well as tapered roller
bearings (i.e., subject and non-subject merchandise). This general
category is broader than the ``subject bearings,'' which, in these
cases, would be limited to ball, cylindrical, and spherical plain
bearings, respectively. See Shop Towels from Bangladesh, Preliminary
Results of Antidumping Duty Administrative Review, 61 FR 55957, 55961
(October 30, 1996), and Silicomanganese from Brazil; Final Results of
Antidumping Duty Administrative Review, 62 FR 37869, 37878 (July 15,
1997).
We also disagree with INA that calculating profit on a product-by-
product basis is not any more complicated than calculating weighted-
average prices or CV for each product. In general, the respondents have
reported numerous varieties of bearings which fall into hundreds of
product or family categories. Calculating CV profit on a product-by-
product basis would require a product-by-product analysis and profit-
calculation determination. For certain products, if there were sales
(i.e., sales in the ordinary course of trade) of identical or family
bearings, we would be able to use the preferred method under section
773(e)(2)(A) of the Act to calculate profit. However, for other bearing
families, we would need to determine which of the three alternative
methods under section 773(e)(2)(B) of the Act would be appropriate
based on the factual situation before us. Given the number of bearing
families, this would add layers of complexity which the Department does
not face in calculating weighted-average prices or in calculating an
aggregate profit figure. In the Department's view, Congress did not
intend such a result when it enacted section 773(e)(2) of the Act.
Finally, we disagree with INA's comment that we have changed our
description of bearing families in an effort to support our rationale
for our CV-profit calculation. In describing bearing families for
comparison purposes, we replaced the term ``class or kind'' with
``foreign like product'' simply because the term ``foreign like
product'' is reflective of the new-law terminology concerning the
merchandise subject to an order.
Comment 2: The SKF companies argue that, assuming that the
Department continues to rely on section 773(e)(2)(A) of the Act for the
CV-profit calculation, it should take the revenue from non-disregarded
profitable sales, subtract from that figure the COP for those sales,
and then divide by the total COP for all sales, both profitable and
unprofitable (total sales revenue on non-disregarded profitable sales
minus total COP on non-disregarded profitable sales divided by total
COP on all sales). SKF asserts that the URAA requires that CV profit
reflect the ``actual amounts * * * realized'' by foreign producers. It
also
[[Page 35612]]
asserts that this proposed methodology would arrive at a more realistic
assessment of a foreign producer's actual profit.
Torrington argues that the Department has rejected SKF's argument
previously that non-profitable sales could be used in calculating
profit and cites AFBs 7, 62 FR at 54062.
Department's Position: As we concluded in AFBs 7, section
773(e)(2)(A) of the Act requires us to use the actual amount for profit
in connection with the production and sale of a foreign like product in
the ordinary course of trade. Section 771(15) of the Act defines sales
outside the ordinary course of trade as those sales disregarded under
section 773(b)(1) of the Act because they failed the cost test. Thus,
as required by law, the Department has continued to exclude sales that
failed the cost test from the CV-profit calculation under section
773(e)(2)(A) of the Act.
6.B. Affiliated-Party Inputs
Comment 1: NTN disagrees with the Department's recalculation of the
value of NTN's affiliated-party inputs. It contends that the Department
should use NTN's reported actual costs for affiliated-party inputs. NTN
observes that, while sections 773(f)(2) and 773(f)(3) of the Act
provide for disregarding certain affiliated transactions, these
provisions do not apply to NTN's factual situation. With regard to
section 773(f)(2) of the Act, NTN contends that there is no evidence
that its affiliated-party inputs do not reflect the amount usually
reflected in the sales of merchandise under consideration. NTN also
claims that the fact that an input may be sold at less than its COP
does not necessarily mean that it is not reflective of a fair market
price.
With regard to section 773(f)(3) of the Act, NTN contends that the
Department must have reasonable grounds to believe that inputs are
being sold at less than the COP before it may use COP information to
value the inputs. NTN also contends that, while the statute permits the
use of the rule only for major inputs, the Department did not
distinguish between major and minor inputs in its recalculation of
NTN's costs for the preliminary results. NTN also contends that the
Department applied this methodology inappropriately to production
processes performed by affiliated parties, which are, according to NTN,
clearly different from major inputs.
Finally, NTN argues that, assuming the Department was justified in
making the adjustment, the Department's calculation is distortive
because it does not take into account NTN's cost accounting system. NTN
claims that its reported costs are based on standard costs multiplied
by variances. Thus, according to NTN, if the transfer price of a
particular component were 100 yen and the variance was 5 percent, NTN
reported a cost of 105 yen. Thus, NTN argues, if the affiliated
supplier's actual cost was 103 yen, the Department would have made an
adjustment based on the difference between the transfer price and the
supplier's actual cost rather than NTN's actual cost.
Torrington observes that the Department has rejected this argument
made by NTN in AFBs 8 and should continue to reject it for the reasons
the Department enunciated in that decision.
Department's Position: Pursuant to section 773(f)(3) of the Act, in
the case of a transaction between affiliated persons involving the
production of a major input, the Department may consider whether the
amount represented as the value of the major input is less than its
COP. In addition, section 351.407 of the Department's regulations
states that, for purposes of section 773(f)(3) of the Act, the value of
a major input purchased from an affiliated person will be based on the
higher of (1) the price paid by the exporter or producer to the
affiliated person for the major input, (2) the amount usually reflected
in sales of the major input in the market under consideration, or (3)
the cost to the affiliated person of producing the major input. We have
relied upon this methodology in past AFB reviews as well as in other
cases. See, e.g., AFBs 6, 62 FR at 2117, AFBs 7, 62 FR at 54065, AFBs
8, 63 FR at 33337, and Final Determination of Sales at Less Than Fair
Value: Stainless Steel Round Wire from Taiwan, 64 FR 17336 (April 9,
1999) (Round Wire from Taiwan).
In this case, we asked NTN in our COP questionnaire to provide a
list of the major inputs it received from affiliated parties which it
used to produce the subject merchandise. NTN responded to the question
by directing us to several exhibits. These exhibits list inputs which
NTN considered to be major inputs and identify the respective transfer
prices and supplier's cost information for the inputs. We examined this
information and determined that in some instances the company's
reported transfer prices were less than its respective costs. As there
were no other market prices available in most instances, we restated
NTN's COP and CV in the instances where the affiliated supplier's cost
of producing the inputs was higher than the transfer price. Therefore,
since we reasonably relied upon the information provided by NTN
regarding the cost of major inputs it used in manufacturing the subject
merchandise, we applied section 773(f)(3) of the Act correctly for
purposes of determining COP and CV for our analysis.
NTN argues that the Department must have reasonable grounds to
believe that inputs are being sold at less than COP before it may use
COP information. The Department considers the initiation of a cost
investigation concerning home-market sales a specific and objective
reason to believe or suspect that the transfer price from a related
party for any element of value may be below the related suppliers' COP.
See Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,
From Japan, and Tapered Roller Bearings, Four Inches or Less in Outside
Diameter, and Components Thereof, From Japan; Final Results of
Antidumping Duty Administrative Reviews and Termination in Part, 63 FR
20585 (April 27, 1998). This practice was affirmed by the Court of
International Trade in NSK Ltd. v. United States, 910 F. Supp 663 (CIT
1995). Therefore, based upon prior case precedent, it was appropriate
to consider the cost data available on the record in determining how to
value major inputs.
Regarding NTN's allegation that we should not apply the major-input
rule to production processes performed by affiliates, section 773(f)(3)
of the Act directs us to examine the costs incurred for transactions
between affiliated persons. These transactions may involve either the
purchase of materials, subcontracted labor, or other services. Thus, we
applied the major-input rule properly to the production processes
performed by affiliates. This decision is consistent with our practice
in prior reviews. See AFBs 8, 63 FR at 33337.
Finally, we disagree with NTN that our methodology is distortive.
NTN's cost-reporting methodology does not account for the fact that the
affiliate's cost is higher than the transfer price. NTN calculated its
variances by comparing its standard costs to its actual costs, which
are, for all inputs it purchased from all suppliers, based on the
transfer prices from each supplier. As a result, the affiliate's costs
do not enter into the calculation of NTN's variances and NTN's reported
``actual'' costs are based on transfer prices. Therefore, because the
reported costs are based on transfer prices, it was appropriate to
adjust the reported costs for the difference between the affiliate's
cost and the transfer price when the affiliate's cost is higher than
the transfer
[[Page 35613]]
price. Therefore, we conclude that there is no reason to alter our
methodology.
Comment 2: Torrington asserts that the Department should use facts
available to value certain major inputs SKF Germany obtained from
affiliated parties for which it did not provide market prices, contrary
to the Department's questionnaire instructions.
SKF Germany rebuts that, since its related supplier does not sell
these major inputs to unaffiliated parties, it does not have a
comparable market value or price for the inputs it purchased from its
affiliated suppliers. SKF Germany argues that its reporting is
consistent with the questionnaire instructions as it has reported the
higher of COP or transfer price for these inputs.
Department's Position: In its August 28, 1998, Section D response
at 14, SKF Germany stated that the components it buys from affiliated
suppliers are not sold by these affiliates to unaffiliated customers in
Germany. In addition, at 17 of its Section D response, SKF Germany
asserted that, ``[a]bsent an observable market for such purchases, the
higher of cost/transfer price necessarily defines the statutory value
for those inputs.'' Pursuant to section 773(f)(3) of the Act and 19 CFR
351.407(b), we have accepted SKF Germany's reporting of its major-input
costs. As cited above in response to comment 1, we have relied upon
this methodology in past AFB reviews as well as in other cases.
Comment 3: Citing the Department's February 16, 1999, verification
report for FAG Italy's COP and CV data, Torrington contends that the
Department determined that FAG Italy's unaffiliated supplier's prices
were not always lower than prices from affiliates even though FAG Italy
claimed otherwise in an earlier submission. According to the
petitioner, at the beginning of verification, FAG Italy presented
revised COP and CV information that valued affiliated-party inputs on
the higher of cost, transfer price, or arm's-length price. Further, the
petitioner asserts, the Department's preliminary analysis memorandum
regarding FAG Italy indicates that, for the preliminary results, the
Department used the revised COP and CV information. The petitioner
argues that, for the final results, the Department should only accept
FAG Italy's revised COP and CV information to the extent that it is
satisfied that FAG Italy reported the values of the affiliated-party
inputs accurately based on the higher of COP, transfer prices, or
arm's-length prices.
FAG Italy contends that it reported the revised costs for materials
purchased from affiliated parties correctly and that the Department
should accept them. Citing the Department's verification report, FAG
Italy argues that the Department verified these corrections fully.
Department's Position: FAG Italy reported its revised costs of
materials accurately and we have used the revised information for the
final results of these reviews.
Comment 4: Citing the verification report, Torrington contends that
FAG Italy excluded net financing expenses from its calculation of the
COP of materials purchased from affiliated parties. The petitioner
argues that the Department should only accept FAG Italy's revised data
to the extent that it is satisfied that the correct amounts have been
reported. Otherwise, Torrington contends, the Department should make
all appropriate adjustments to FAG Italy's reported costs, thereby
increasing the company's COP by the full net financing expenses for
materials purchased from affiliated parties.
FAG Italy argues that it added financial expenses to the revised
cost information specifically at the request of the Department. The
respondent also contends that the Department verified this issue fully
and accepted the information during the cost verification. FAG Italy
contends that Torrington's concerns are unwarranted because the
percentage of affiliated-party inputs to total inputs (by value and
volume) is negligible and these revised material costs have no effect
on the ultimate margin calculation.
Department's Position: FAG Italy included the net financial
expenses in its revised cost information. We verified and accepted
these new costs during our verification. See February 16, 1999,
verification report on FAG Italy at 16.
Comment 5: Citing INA's August 28, 1998, section D questionnaire
response at 7, Torrington notes that the respondent purchased inputs
such as cages, blanks, and subcontracted processing from certain
affiliates. The petitioner also notes that the Department requested
that INA report the highest of transfer price, the affiliated
supplier's cost, or the input's market price for major inputs purchased
from an affiliated supplier. The petitioner asserts that INA did not
comply with the Department's request since it reported neither transfer
prices nor market values for the inputs purchased from a Slovakian
affiliate and did not provide market values for the inputs obtained
from a Hungarian affiliate. Furthermore, with respect to the inputs
provided by the Slovakian affiliate, Torrington contends that, while
INA valued the inputs at the affiliated supplier's costs, such costs
are not reliable since INA ``grossed up'' the reported amounts to
account for situations where INA supplied the affiliate with raw
materials free of charge. For the inputs provided by the Hungarian
affiliate, the petitioner also contends that INA did not support its
claim that the transfer prices exceeded the affiliate's costs
consistently. In light of the alleged reporting deficiencies, the
petitioner requests that the Department not accept INA's reported costs
for models incorporating inputs supplied by these affiliates and
instead use facts available for the models involved.
INA contends that it followed the Department's instructions in
reporting the value of the inputs which it obtained from its
affiliates. It states that it reported the value of inputs purchased
from the Slovakian affiliate at the affiliate's costs since no market
prices were available and compiling transfer prices was extremely
burdensome because to do so would have required tracing information
manually through thousands of transactions. INA notes, however, that in
its original questionnaire response it provided information to support
its assertion that the cost figures were higher than the transfer
prices. Moreover, for its supplemental questionnaire response, INA
states that it conducted a manual search for transfer-price information
and provided a comparison of transfer prices with costs to substantiate
that the costs were almost always higher than the transfer prices.
Furthermore, in situations where INA discovered that the transfer
prices were higher than costs, it says it revised the COP and CV
submissions to value the inputs from the affiliate based on the
transfer prices.
INA rebuts the petitioner's assertion that the reported costs of
inputs from the Slovakian supplier are not reliable. It contends that
the petitioner has misconstrued the manner in which INA determined the
costs and that the allegedly distortive ``gross up'' to which the
petitioner refers was necessary for converting standard costs to actual
costs, an adjustment that is consistent with the Department's
instructions in its questionnaire. INA clarifies that, for situations
in which it provided materials free of charge to its affiliate for the
production of bearing inputs, it included standard and actual material
consumption to calculate the gross-up factor for converting the
standard material cost to an actual material cost.
[[Page 35614]]
INA asserts that this results in costs that reflect the cost of
material consumed in producing the parts supplied by the affiliate
accurately. INA cites the criteria set forth under section 782(e) of
the Act for accepting information: the information is acceptable if it
is timely, verifiable, sufficiently complete to serve as a reliable
basis for a determination, provided to the best of the respondent's
ability, and can be used without undue difficulty. INA contends that
its valuation of the inputs meets these criteria.
INA contends that it provided both transfer price and cost data
concerning purchases from its Hungarian affiliate as requested by the
Department, and it clarifies that it did not provide market prices
since it did not purchase the inputs from other sources and the
affiliate did not sell the inputs to unaffiliated purchasers. INA
contends that its valuation of these inputs on the basis of transfer
prices is proper since the transfer prices were in all instances higher
than the affiliate's costs. Finally, INA contends that it supported its
claim by referring to the exhibit of its questionnaire response that
contains a comparison of costs with transfer prices.
Department's Position: We find that the information INA used to
value cages, blanks, and subcontracted processing provided by
affiliates is proper in light of the information that it had available.
Moreover, INA's reporting methodology complies with our regulatory
requirements for valuing inputs from affiliates. Section 351.407 of our
regulations states that, for purposes of calculating the COP and CV
under section 773(f)(3) of the Act, the value of a major input
purchased from an affiliated person will be based on the higher of the
following: (1) the price paid by the exporter or producer to the
affiliated person for the major input; (2) the amount usually reflected
in sales of the major input in the market under consideration; or (3)
the cost to the affiliated person of producing the major input. INA's
reporting methodology fulfills this requirement considering the
information that was reasonably available to it. Moreover, we have
relied upon this methodology for valuing inputs in past AFB reviews as
well as in other cases. See, e.g., AFBs 8, 63 FR at 33337, and Round
Wire from Taiwan, 64 FR 17336 (April 9, 1999). Thus, we find that this
situation does not warrant the use of facts available.
6.C. General and Administrative Expenses
Comment 1: Torrington argues that the Department should deny FAG
Germany's claimed offset to its G&A for the gain on the sale and
leaseback of certain assets. Torrington contends that, even if the
Department agrees with FAG Germany that these assets are related to
production, the Department should reject this offset because FAG
Germany's sales-and-leaseback arrangement is not a routine disposition
of fixed assets. Torrington cites Certain Welded Stainless Steel Pipe
from the Republic of Korea, Final Determination of Sales at Less than
Fair Value, 57 FR 53693, 53704 (November 12, 1992), in support of this
contention. Torrington also claims that other evidence on the record
suggests that the assets in question are related to real property owned
by FAG Germany rather than to production.
FAG Germany argues that the case Torrington cites is inapposite to
this case because, in that case, the plant that the respondent sold was
not related to the production of the subject merchandise and the
transaction was not a routine disposition of fixed assets. In this
case, FAG Germany contends, the asset in question is the plant where
most of the AFBs shipped to the United States are manufactured. FAG
Germany also argues that a sale-and-leaseback transaction is a common
commercial financing method and that the annual lease payments, as well
as the amortized gain, FAG Germany made relative to the sale-and-
leaseback transaction are included routinely in its G&A calculation.
FAG Germany cites Certain Steel Concrete Reinforcing Bars from Turkey,
62 FR 9737, 9748 (March 4, 1997), and Oil Country Tubular Goods from
Mexico, 60 FR 33567, 33574 (June 28, 1995), in support of its
contention that its offset to G&A is proper. Finally, FAG Germany
argues that, while the transaction included the land upon which the
facilities are located, it was not simply a real-estate transaction but
also included assets involved in the production of subject merchandise.
Department's Position: It is our practice to adjust G&A expenses
for miscellaneous revenue and expenses related to the production of
subject merchandise. See, e.g., Certain Steel Concrete Reinforcing Bars
from Turkey, 62 FR 9737, 9748 (March 4, 1997), and Oil Country Tubular
Goods from Mexico, 60 FR 33567, 33574 (June 28, 1995).
In this case, FAG Germany demonstrated, and the petitioner does not
dispute, that the plant in question produced subject merchandise during
the POR. See Exhibit D-1 of FAG Germany's section D response dated
August 28, 1998. Further, FAG Germany's claimed offset to G&A expenses
corresponds to the portion of the gain on the plant sale attributable
to the current period, which FAG Germany amortized over the life of the
lease. See FAG Germany's section D response dated August 28, 1998, at
28. In addition, FAG Germany included the expense from this lease in
its calculation of the reported G&A expenses. See Exhibit 14 of FAG
Germany's section D response dated August 28, 1998 (compare lessor's
name to 18 of FAG Germany's supplemental response dated October 27,
1998). Therefore, we conclude that it is appropriate to offset FAG
Germany's G&A expenses by the amortized gain on the sale of the plant.
6.D. When To Use Constructed Value
Comment: NTN argues that the Department should base normal value on
CV where all contemporaneous sales of identical merchandise were
disregarded because they were sold below cost. NTN argues that the
Department's interpretation of CEMEX v. United States, 133 F.3d 897
(CAFC 1998) (CEMEX), the basis of the Department's current practice, is
erroneous because it is inconsistent with the current statutory scheme.
NTN contends that the statute provides that normal value be based on
the foreign like product, which the statute defines as the first of
several categories. NTN argues that, if there is identical merchandise,
that merchandise is the foreign like product. NTN also contends that
the statute directs that, if no sales made in the ordinary course of
trade remain, the normal value shall be based on CV.
NTN argues that the CEMEX decision was for a pre-URAA case with
facts different than those in the instant case. NTN claims that below-
cost sales were not an issue in the CEMEX case. NTN also contends that
the treatment of both sales below cost and sales outside the ordinary
course of trade has changed under the revised statutory scheme.
Torrington observes that the Department addressed this issue in the
prior review and should not alter its methodology.
Department's Position: The CAFC stated in CEMEX that ``[t]he
language of the statute requires Commerce to base foreign market value
on nonidentical but similar merchandise * * * rather than CV when sales
of identical merchandise have been found to be outside the ordinary
course of trade.'' See CEMEX, 133 F.3d at 904. NTN is correct that
there was no cost test in CEMEX and CEMEX was under the pre-URAA
statute; however, under the URAA, below-cost sales which are
disregarded pursuant to section
[[Page 35615]]
773(b)(1) of the Act are now defined to be outside the ordinary course
of trade and, therefore, not included in normal value. Therefore,
consistent with CEMEX, when making comparisons in accordance with
section 771(16) of the Act, we considered all products sold in the home
market that were comparable to merchandise within the scope of each
order and which were sold in the ordinary course of trade for purposes
of determining appropriate product comparisons to U.S. sales. Where
there were no sales of identical merchandise in the home market made in
the ordinary course of trade to compare to U.S. sales, we compared U.S.
sales to sales of the most similar foreign like product made in the
ordinary course of trade. Only where there were no sales of foreign
like product in the ordinary course of trade did we resort to CV.
6.E. Miscellaneous
Comment 1: Torrington argues that the Department should
recharacterize certain expenses NSK claimed as non-operating expenses.
NSK responds that the Department characterized certain NSK expenses
as non-operating expenses correctly. NSK argues that the Department
verified thoroughly that NSK reported each of its claimed non-operating
expenses properly. Moreover, NSK argues, any adjustment for non-
operating expenses would be de minimis and would require the Department
to offset the non-operating expenses by comparable non-operating income
so as to avoid double-counting.
Department's Position: Based on our findings at verification, NSK
recorded the expenses in question properly as non-operating expenses.
Torrington provided no argument or explanation as to why these expenses
were not non-operating expenses. Thus, we have not recharacterized
these expenses as Torrington argued that we should.
Comment 2: Torrington raises four other arguments regarding NSK's
section D costs. Because of their proprietary nature, the arguments are
not susceptible to public summary.
Department's Position: We have summarized the arguments and
addressed them in the Final Analysis Memorandum of NSK, dated June 15,
1999. For the reasons explained therein, we have not made any
adjustments to NSK's section D costs based on these four arguments.
Comment 3: Torrington states that, based on its concerns about
certain aspects of verification, the Department asked FAG Italy to
explain instances where the reported cost for a model deviated
significantly from the average cost for models within the product
family. Because the Department found that the product code had been
entered incorrectly in some of the instances, Torrington asserts that
the Department should reject FAG Italy's COP/CV data. According to
Torrington, the Department's verification report also shows that FAG
Italy had entered incorrect cost into the data for one transaction.
According to Torrington, these discoveries indicate that there are
other errors in the cost data and that the Department should accept
only revised COP/CV data from FAG Italy where it is satisfied that
accurate product codes and costs have been reported.
FAG Italy rebuts that Torrington identified code and costs
anomalies prior to verification, at which time the Department verified
the corrections for any errors. FAG Italy affirms that the identified
anomalies were the only inaccuracies the Department or Torrington
discovered in the COP/CV data. It dismisses Torrington's conclusion
that additional errors exist as untrue and a distortion of the record
evidence.
Department's Position: As discussed in our CV and COP verification
report, we examined at verification the records Torrington had
identified. See Constructed Value and Cost-of-Production Verification
Report for FAG Italia S.p.A., dated February 16, 1999, at 20-21. We
concluded that product codes had been entered erroneously in some
instances due to input errors in source documentation. In reviewing the
records, FAG Italy acknowledged that it had made an error in entering
the cost for one of the observations. We examined reported costs for
other models at verification and confirmed that they were reported
accurately. On this basis, we do not have reason to find that the
anomalous records are reflective of FAG's entire database.
We continue to be satisfied that the revised COP/CV information
which FAG Italy presented is accurate and, accordingly, have used it in
our final results.
7. Packing and Movement Expenses
7.A. Repacking Expenses
Comment: Torrington argues that Nachi reported labor costs incurred
for repacking in the United States incorrectly as U.S. indirect selling
expenses and thereby increased the CEP offset eligible for deduction
from home-market prices improperly. Torrington contends that the
Department should correct Nachi's error by restating U.S. repacking
costs and U.S. indirect selling expenses. Torrington argues that, if
this adjustment cannot be made on the basis of information on the
record, the Department should use data of another Japanese respondent
as facts available.
Nachi argues that repacking labor costs incurred by Nachi America
are characterized correctly as an ISE. Since such costs are not
identified in Nachi's books and records separately, Nachi argues that
any attempt to state repacking labor costs separately would require it
to make an allocation. Nachi states that, before this review, it has
not allocated repacking labor costs because it would result in an
infinitesimal amount. Nachi states further that the Department should
determine that its repacking labor costs meet the definition of an
insignificant adjustment under section 351.413 of the Department's
regulations. Nachi suggests that, if the Department wishes to segregate
repacking labor expense, it should use the U.S. repacking labor costs
that Nachi reported in its November 20, 1998, supplemental
questionnaire response.
Department's Position: We have recalculated repacking expenses, a
direct selling expense, to include repacking labor costs for these
final results. We also have recalculated U.S. indirect selling expenses
to exclude repacking labor costs which had been included by Nachi
incorrectly. We made our recalculations based on information in Nachi's
November 20, 1998, supplemental questionnaire response.
7.B. Inland Freight
Comment 1: Torrington argues that questionnaire responses from FAG
Italy contradict one another with regard to inland-freight expenses.
Torrington asserts that FAG Italy stated in one response that it could
only report freight expenses on an allocation basis and that, in
another response, FAG Italy stated that freight arrangements were
recorded on a transaction-specific manner, thus allowing for home-
market price adjustments where the invoice did not reflect the freight
arrangements properly. Torrington asserts that FAG Italy should be
required either to explain the discrepancies between the two statements
or to report freight expenses on a transaction-specific basis. It
requests that the Department apply a partial facts-available approach
in the event that FAG Italy does not undertake one of these two
actions.
FAG Italy responds that Torrington has confused freight charges,
which are billed to FAG Italy by freight forwarders at the end of each
month for shipments from FAG Italy to its home-market customers, with
freight reimbursements, which are charged to certain customers
[[Page 35616]]
by FAG Italy on an invoice-specific basis. FAG Italy states that the
freight costs it reported in the inland-freight data element are based
on an allocation of freight charges invoiced to FAG Italy at the end of
each month by freight companies. It states that it cannot link these
charges to individual orders because the bills for these charges do not
specify the individual shipments underlying the charges. FAG Italy
asserts that therefore it cannot tie the monthly freight charges to the
individual orders of its customers. It clarifies, however, that it
maintains terms of sale with certain home-market customers which
dictate that the customer reimburses FAG Italy for freight charges. FAG
Italy states that, when this occurs, the reimbursements are billed to
the customer on its invoice. FAG Italy asserts that, because these
reimbursements are not traceable to the original freight charges, there
is no inconsistency in its questionnaire responses.
Department's Position: While we prefer that respondents report
freight charges on a transaction-specific basis, we are satisfied with
FAG Italy's explanation that it is unable to report its freight
expenses on that basis. As we stated in AFBs 8, 63 FR at 33340, the
averaging of home-market prices, for the purpose of calculating a
weighted-average home-market price, has the effect of averaging the
components used to calculate those net prices, including inland
freight. Therefore, the use of an allocated freight expense would not
necessarily result in a distortion of home-market prices and a partial
facts-available approach is not appropriate.
We are satisfied that FAG Italy reported the components of its
inland-freight expenses accurately and allocated these expense
reasonably for the calculation of normal value. Accordingly, we have
used these expenses in our final results.
Comment 2: Torrington argues that FAG Germany and FAG Italy did not
report certain freight which apparently was incurred on U.S. sales made
by an affiliated party. Torrington argues that, if the reported price
includes this freight charge, the Department should calculate this
expense and deduct it from the price of these sales.
FAG Germany and FAG Italy contend that the reported prices do not
reflect freight charges because the customer pays the freight on these
sales. The respondents state further that, for some sales, they grant a
freight allowance but that this allowance is reflected as a reduction
in the sales price to the customer. Thus, the respondents conclude, no
adjustment to their reported freight or prices is warranted.
Department's Position: FAG Germany's section C response dated
August 28, 1998, at 34 makes clear that this affiliated party did not
incur freight charges on sales to U.S. customers. Furthermore, FAG
Germany's section C response dated August 28, 1998, at 20 makes clear
that the prices charged by this affiliated party are net of any freight
allowance granted to a customer. Similarly, we have reviewed FAG
Italy's Section C response dated August 28, 1998, at 34 which shows
that no freight charges were incurred on sales by the affiliate to U.S.
customers. FAG Italy's Section B response dated August 28, 1998, at 20
clarifies that prices charged by the affiliate were net of any freight
allowance. Thus, no adjustments are necessary.
Comment 3: Torrington argues that Nachi's pre-sale warehousing
expense incurred after shipment from the factory should be treated as
movement expense, not U.S. indirect selling expenses, citing section
351.401(e)(2) of the Department's regulations.
Nachi argues that the Department's long-standing practice has been
to treat Nachi's U.S. pre-sale warehousing as a U.S. ISE.
Department's Position: The practice Nachi cites pre-dates the URAA.
The SAA states that warehousing expenses should be treated as movement
expenses. SAA at 823. This treatment is reflected in our regulations.
For these final results we treated Nachi's warehousing expense incurred
after the merchandise left the factory as a movement expense in
accordance with 19 CFR 351.401(e)(2).
Comment 4: Torrington argues that the Department should ensure that
amounts Barden reported as freight reimbursements in one data element
have a corresponding amount billed in another element.
Barden contends that it reported both the freight reimbursements
and the amount billed in the two data elements correctly and on a
corresponding basis.
Department's Position: We have compared the billing amounts Barden
reported and find that the information corresponds correctly.
7.C. Ocean and Air Freight
Comment 1: Torrington asserts that FAG Italy incurred air-freight
expenses as the result of specific existing orders and that, as a
result, it should not be permitted to aggregate its ocean-freight and
air-freight expenses. Torrington states that other respondents in the
reviews were able to report the two expenses separately. Asserting that
air freight is generally substantially more expensive than ocean
freight, it argues that FAG Italy should be required to identify the
sales which were subject to air freight and apply an air-freight rate
to these sales.
FAG Italy responds that the Department's past practice and
decisions, which permitted the aggregation of ocean and air freight
where a respondent was unable to identify freight charges on a
transaction-specific basis and the record evidence did not show
aggregation to be distortive, is the correct approach. It asserts that
Torrington misinterprets a statement by FAG Italy in reaching the
conclusion that FAG Italy was, and is, able to relate an air or sea
shipment to a specific order. On the contrary, FAG Italy contends, its
business practices do not permit traceable linkage between a U.S.
customer's order, the air or sea shipment, inventoried bearings, and
the ultimate resale. FAG Italy states that whether another respondent
can trace its specific transactions to a mode of shipping is not a
relevant consideration.
Department's Position: We have found that it is generally not
feasible for respondents to report air and ocean freight on a
transaction-specific basis in these proceedings. See AFBs 8, 63 FR at
33340, and AFBs 7, 62 FR at 54081. Where respondents were unable to
report ocean and air freight separately, we have accepted aggregated
international freight data. See AFBs 6, 62 FR at 2121; see also The
Torrington Company v. United States, 965 F. Supp. 40 (CIT 1997)
(Torrington II) (affirming the Department's methodology for accepting
combined ocean and air freight where a respondent could not report the
two expenses separately). Furthermore, section 351.401(g) of our
regulations provides that we may consider allocated expenses and price
adjustments when transaction-specific reporting is not feasible,
provided we are satisfied that the allocation method used does not
cause inaccuracies or distortions.
At 29 of its section C response, FAG Italy explained that it could
not tie resales of merchandise in the United States to its shipment of
that merchandise. FAG Italy stated that it delivered merchandise to the
United States by both air and freight and that, once delivered, the
merchandise was entered into the inventories of importing companies.
From that point, the merchandise was resold to unaffiliated U.S.
customers. FAG Italy could not trace its shipment costs to this resale.
Because the use of air freight was not limited to particular models or
customers, allocated reporting of the air-
[[Page 35617]]
freight and ocean-freight expenses is not unreasonably distorted in
this case. Therefore, we have accepted FAG Italy's data concerning
these expenses.
Comment 2: Torrington argues that the Department should not accept
Koyo's continued failure to account for air-freight expenses for
shipments to the United States separately when direct links between the
sale and the air shipment exist. Torrington argues further that, given
the relative cost of air freight versus ocean freight, the Department
should apply an appropriate facts-available adjustment to increase the
reported freight costs of all U.S. transactions.
Koyo states that Torrington admits that the Department does not
require companies to report their air and ocean freight separately when
there is an absence of a direct link between the air shipment and the
resale to the unaffiliated U.S. customer. Koyo contends that it is
because Koyo cannot tie its air-freight shipments to specific customer
invoices that the Department does not require Koyo to segregate its
air-freight expenses. Finally, Koyo argues that Torrington provides no
new evidence that Koyo can now tie those shipments to specific
invoices.
Department's Position: We find no new information on the record
that would indicate that Koyo has changed the manner in which it
records these expenses in its accounting system and is now able to
determine a direct link between a sale and an air shipment. We have
discussed this issue extensively in previous reviews. See AFBs 4, 60 FR
at 10942, AFBs 5, 61 FR at 66510, AFBs 6, 62 FR at 2121, and AFBs 8, 63
FR at 33340. We have found that it is generally not feasible for
respondents to report air and ocean freight on a transaction-specific
basis in these proceedings. Therefore, we have accepted Koyo's
reporting of these movement expenses for the final results.
Comment 3: Torrington contends that SKF Germany, SKF Italy, and SKF
Sweden should report their air-freight and ocean-freight expenses for
EP and CEP sales separately. Torrington posits that it is general
knowledge that air freight is substantially more expensive than ocean
freight. Torrington asserts that, given that this is the ninth
administrative review of these orders, the respondents have had ample
time to modify their reporting systems. Torrington also argues that the
respondents' alleged inconvenience in segregating these expenses is not
a valid excuse, citing Torrington II. The petitioner states that other
respondents participating in these administrative reviews, including
SKF Germany, have identified separately those sales that were shipped
by air freight and calculated separate factors for such sales.
Torrington argues further that, if these respondents do not report such
expenses separately, the Department should use some form of facts
available, suggesting that it rely upon the highest air-freight rate
reported by any other respondent participating in the current AFB
reviews.
The respondents state that their reporting of combined air-freight
and ocean-freight expenses is factually and legally correct, and they
contend that it is consistent with the manner in which such expenses
have been reported in all prior reviews and with the Department's
determinations in those reviews. The respondents state that the
reporting capabilities of other respondents is not a measure of their
own reporting capabilities. SKF Germany indicates that it did not
report its air-freight and ocean-freight factors separately even though
it identified those transactions for which the subject merchandise was
transported by air.
The respondents submit that it is not an issue of inconvenience to
report such expenses separately but, rather, as explained in their
responses, they do not incur the international freight expenses on a
transaction-specific basis. SKF Sweden points out further that, as
stated in its responses, shipments from its European consolidation
point to SKF USA are not segregated by country of manufacture and,
thus, the expenses at issue relate to products shipped from Italy,
Germany, France, and Sweden. Moreover, the respondents contend that
they receive cumulated bills which are independent of the invoices they
issued to their customers and their pricing is unrelated to the manner
in which goods are shipped internationally.
The SKF respondents also assert that they can identify post-hoc
whether the merchandise sold out of SKF USA's inventory was shipped via
air or ocean freight but argue that post-hoc linkage does not affect
the pricing of merchandise for any given transaction. SKF Sweden
contends further that, before the Department can make a determination
of whether a respondent is uncooperative and, thus, resort to adverse
facts available, the Department is required to request information at
issue from a respondent in a supplemental questionnaire, citing Olympic
Adhesives, Inc. v. United States, 899 F. 2d 1565, 1572-75 (CAFC 1990).
SKF Sweden contends that the Department is precluded from resorting to
facts available because the issue of reporting air-freight and ocean-
freight expenses separately was not raised in either of the two
supplemental questionnaires it received from the Department.
Department's Position: With respect to SKF Italy and SKF Sweden, we
were not informed until the submission of the respondents' rebuttal
briefs that these firms were capable of segregating air freight for
particular U.S. resales in the United States. Since we did not request
in our questionnaires and, thus, did not receive this information in
questionnaire responses for these reviews, we have used the combined
freight charges of those firms for these final results. For other
respondents which were unable to report ocean and air freight
separately, we have accepted aggregated international freight data. See
AFBs 8, 63 FR at 33340; see also Torrington II. Furthermore, section
351.401(g) of our regulations provides that we may consider allocated
expenses and price adjustments when transaction-specific reporting is
not feasible, provided we are satisfied that the allocation method does
not cause inaccuracies or distortions. In addition, because the use of
air freight is not limited to particular models or customers, allocated
reporting of freight expenses is not unreasonably distortive in this
case. Because we determine that these respondents acted to the best of
their ability, it would be improper to make adverse inferences about
their reported data by applying facts available simply because their
record-keeping system does not record the data on a transaction-
specific basis.
Our practice in prior AFB reviews has been to accept aggregated
ocean-freight and air-freight expenses in cases where the respondent
indicates that it cannot report such expenses separately. SKF Germany
demonstrated in response to our supplemental questionnaire, however,
that it could identify separately the relevant sales transactions for
which it incurred air-freight expenses. While SKF Germany identified
the relevant transactions in its supplemental questionnaire response,
it did not provide the actual air-freight expenses specific to these
transactions. However, it did provide calculations yielding separate
air-freight and ocean-freight factors. Because we did not have
transaction-specific air-freight expenses, we used these factors and
other information reported in its supplemental questionnaire response
to determine a separate amount for air and ocean freight for purposes
of our margin calculation. See the Final Analysis Memorandum for SKF
Germany for a complete discussion of the proprietary data we used in
the air-freight and
[[Page 35618]]
ocean-freight calculations for these final results.
Comment 4: Torrington argues that the Department should not permit
Barden to aggregate air and ocean freight but should require that
Barden report air freight separately for those U.S. sales which were
shipped by air, particularly those shipped directly to the U.S.
customer. Torrington argues that, in such instances, Barden UK should
know whether the shipment was by ocean or air. Torrington argues that
the Department should require Barden to identify those sales shipped by
air and apply the air-freight rate to those sales.
Barden argues that it did not incur ocean-freight expenses on
bearing shipments made during this review period and all expenses
reported as ``air and ocean freight'' are indeed air-freight expenses.
Department's Position: Barden reported, at 32 of its November 24,
1998, supplemental questionnaire response, that it shipped all bearings
via air freight. As Barden reported in its August 28, 1998, Section C
questionnaire response, the ocean-freight data element includes all
freight charges from Barden UK to Barden US, i.e., air freight. Since
Barden does not incur ocean freight, the air-freight rate was applied
to all sales.
7.D. Inventory Carrying Costs
Comment 1: Torrington argues that the Department should deduct
inventory carrying costs for the time that merchandise was in transit
from the exporting country to the United States from CEP.
With regard to SKF Italy and SKF Sweden, Torrington argues that
amended section 772(d) of the Act provides for such a deduction under
subsection (d)(1)(B) as a credit expense or, alternatively, under
subsection (d)(1)(D) as a selling expense. Torrington asserts that the
SAA at 823 provides broad categories under which the deduction can be
undertaken, that the SAA is silent as to a prohibition of such a
deduction, and that 19 CFR 351.402(b) does not preclude the deduction.
It asserts that inventory carrying costs should be deducted pursuant to
this regulation, as they are expenses associated with commercial
activities in the United States that relate to the sale to an
unaffiliated purchaser, regardless of where or when the costs are paid,
citing Notice of Final Determination of Sales at Less Than Fair Value:
Certain Pasta from Italy, 61 FR 30326, 30352 (June 14, 1996) (Pasta
Italy LTFV) (where the Department deducted inventory carrying costs for
time in transit after finding that the costs were attributable to U.S.
economic activity because virtually all the subject merchandise was
sold in the United States), and Notice of Final Results and Partial
Rescission of Antidumping Duty Administrative Review: Certain Pasta
from Turkey, 63 FR 68429 (December 11, 1998) (Pasta Turkey Review)
(where a deduction for inventory carrying costs was permitted for time
that the merchandise was held in U.S. Customs). Torrington argues that
the Department should follow the approach taken in the above-referenced
Pasta notices because, in these AFB reviews, the inventory carrying
costs were borne on the books of the U.S. affiliate and because the
subject merchandise would not have been placed in transit to the United
States if not intended for that market. Torrington asserts that these
circumstances establish the inventory carrying costs for time in
transit are attributable to U.S. economic activity. Torrington also
argues that, in the event the Department retains its current position,
SKF Italy and SKF Sweden have not demonstrated that the costs were not
associated with commercial activities in the United States and did not
relate to the resale to the unaffiliated customer which, according to
Torrington, is an affirmative burden on the respondent. Finally,
Torrington asserts that, at minimum, the Department should deduct
inventory carrying costs for the time that merchandise was held in U.S.
Customs or otherwise remained at the port of entry, pursuant to its
finding in Pasta Turkey Review, 63 FR at 68432.
With regard to SKF Germany, INA, and FAG Germany, Torrington argues
that the Department's position in AFBs 8 was based in part on the
finding that inventory carrying costs in transit reflected part of the
interest expense incurred by the home-market company when it extended
credit on the sale to the U.S. affiliate. It requests that the
Department reconsider its AFBs 8 rationale in light of Pasta Italy
LTFV, 61 FR at 30326. Torrington argues that, with respect to the
German respondents, SKF France, Barden UK, NSK-RHP, and SNR France,
regardless of credit arrangements between the exporting company and the
U.S. affiliate, the cost of carrying inventory is borne by the company
owning the inventory. It asserts that, because the costs are listed on
the books of the U.S. affiliate, the affiliate has assumed
responsibility for the merchandise. Torrington argues that, moreover,
the business purpose of these companies is to sell bearings in the
United States. Thus, it concludes that inventory carrying costs relate
to commercial activity in the United States and should be deducted from
CEP.
Torrington argues similarly for a deduction of in-transit inventory
carrying costs for NTN. Torrington asserts that, through transference
of ownership of the inventory to a U.S. affiliate who will resell the
goods in the United States, inventory carrying costs for time in
transit have been incurred in connection with commercial activities in
the United States.
Torrington contends, with regard to SKF Germany, that the inventory
carrying costs should be deducted from CEP because these expenses
appear on the books of SKF USA and are associated with U.S. commercial
activity.
SKF Italy, SKF Sweden, and SKF Germany rebut that there is no legal
or factual support for Torrington's position and that, therefore as in
prior reviews, the inventory carrying costs should not be deducted from
CEP. They assert that the Department has interpreted the provisions of
the law properly. The companies argue that reliance upon Pasta Italy
LTFV is misplaced since, unlike the pasta manufacturer, they do not
sell their products exclusively in the United States. They distinguish
Pasta Turkey Review because there the exporting company had not
calculated any U.S. inventory carrying costs, having alleged that the
importer did not inventory the merchandise and thus had not incurred
any such costs. According to the respondents, in that review the
Department found that U.S. inventory carrying costs had been incurred
by the importer because of a 16-day delay of the merchandise at U.S.
Customs. The respondents contrast this situation to their own, noting
that these are not issues in the instant administrative reviews. The
respondents cite several recent determinations by the Department,
including Stainless Steel Butt-Weld Pipe Fittings from Taiwan: Final
Results of Antidumping Duty Administrative Review, 63 FR 67855
(December 9, 1998), which support their position that inventory
carrying costs incurred in transit are not associated with commercial
activity in the United States and do not relate to resale of the
merchandise to the U.S. unaffiliated customer.
INA responds that, as determined in AFBs 8, inventory carrying
costs in transit are deductible neither as a movement expense under
section 772(c) of the Act, since they are not associated with bringing
merchandise to the United States, or as a CEP selling expense under
section 772(d) of the Act. INA cites to Color Picture Tubes from Japan;
Final Results of Antidumping
[[Page 35619]]
Administrative Review, 62 FR 34201, 34207 (June 25, 1997), in which the
Department declined to apply its decision of Pasta Italy LTFV on two
grounds. According to INA, the first reason was that in-transit
inventory carrying costs were incurred regardless of the final
destination of the merchandise; the second reason was that the in-
transit costs were not considered to be associated with U.S. commercial
activity but rather were associated with the sale by the foreign
producer to its U.S. affiliate. INA asserts that these same
considerations apply in the current reviews. It rebuts Torrington's
argument that the destination of the bearings relates inventory
carrying costs to U.S. commercial activity by asserting that costs in
transit are not related to such activity and do not relate to the
resale of the merchandise to an unaffiliated purchaser. It responds to
Torrington's argument regarding ownership of the merchandise by noting
that the costs are incurred by the party incurring an imputed interest
cost, a cost that is not associated with ownership and which does
relate to the sale by the foreign producer to the U.S. affiliate.
FAG Germany asserts that Torrington has presented no new argument
in support of its request for a deduction. It notes that AFBs which the
U.S. affiliate imports from FAG Germany are shipped on a Delivered-
Duty-Unpaid basis, which means that the exporter bears all costs and
risks in delivering the merchandise to a named place in the country of
importation. It asserts that, therefore, in-transit inventory carrying
costs are not associated with U.S. commercial activity.
SKF France agrees with the Department's decision regarding the
deduction. SKF France argues that the fact that SKF USA paid the costs
is irrelevant; it asserts that the relevant consideration is where the
economic activity associated with the expense has occurred. It cites
recent determinations of the Department which support the position that
inventory carrying costs in transit are not associated with U.S.
economic activity and do not relate to resale of the merchandise to the
unaffiliated customer.
Barden UK rebuts that the SAA at 823 states that CEP can only be
reduced by amounts associated with economic activities occurring in the
United States. It also cites to the Notice of Proposed Rulemaking and
Request for Public Comments, 61 FR 7308, 7331 (February 27, 1996), in
which the Department set forth its intent not to deduct a foreign
seller's expenses associated with selling to the affiliated reseller in
the United States under section 772(d) of the Act. Barden UK asserts
that this is the correct approach and asks that the Department not
reconsider its methodology.
NSK-RHP responds that the Department should reject Torrington's
argument because the Department already deducts inventory carrying
costs incurred in the United States from CEP. NSK-RHP notes that,
moreover, the Department has concluded consistently that inventory
carrying costs incurred for the time merchandise was in transit should
not be deducted from CEP, as decided in AFBs 8.
SNR France notes that, in AFBs 8, the Department found that
deducting inventory carrying costs for time in transit would be
contrary to the SAA and its own regulations. It asserts that Torrington
offers no new justification for a departure from prior practice and
that, accordingly, Torrington's argument should be rejected.
NTN rebuts that section 351.402(b) of the Department's regulation
and the SAA at 823 prohibit the deduction; it asserts that the in-
transit inventory carrying costs are not associated with commercial
activities in the United States that relate to the unaffiliated
purchaser, a position that the Department took in AFBs 8. NTN argues
that, because the facts in the current reviews are consistent with
those in the previous reviews and those in other cases in which the
Department has declined to make the deduction, it should continue its
practice.
Department's Position: In AFBs 8, 63 FR at 33344, we concluded that
both the SAA at 823 and section 772(d) of the Act permit us to deduct
from CEP only those expenses which were associated with commercial
activity in the United States and which related to the resale to an
unaffiliated purchaser. We concluded that in-transit inventory carrying
costs did not meet these criteria but rather reflected the interest
expense of the exporting company. As such, we found the costs to be
related solely to the sale to the affiliated importer in the United
States. Moreover, we noted that section 351.402 of our regulations
directs us not to deduct from CEP starting price any expenses related
to the sale to the affiliate.
The Department clarified its position further in Stainless Steel
Butt-Weld Pipe Fittings from Taiwan, 63 FR at 67856. We stated there
that, according to the SAA at 823, CEP should be calculated to be, as
closely as possible, a price which corresponds to a price between non-
affiliated exporters and importers. This approach is codified at
section 351.402(b) of the Department's regulations, which provides that
the Department will make adjustments to CEP under section 772(d) of the
Act for expenses associated with commercial activity in the United
States that relate to the sale to an unaffiliated purchaser, no matter
where it was incurred. Therefore, in Stainless Steel Butt-Weld Pipe
Fittings from Taiwan, we concluded that, consistent with section 772(d)
of the Act and the SAA, we could deduct only those expenses
representing activities undertaken to make the sale to the unaffiliated
customer in the United States and not indirect expenses incurred in
selling to the affiliated U.S. importer.
We maintain that in-transit inventory carrying costs are indirect
selling expenses relating to the sale to the affiliate and,
consequently, are not associated with U.S. economic activity or related
to the resale of the merchandise. The issue of whether the exporting
company or the affiliate holds title to the merchandise is irrelevant
in light of this finding. Likewise, it does not matter whether the
expenses are listed on the accounts of the exporting company or the
affiliate. Our decision in Pasta Italy LTFV, 61 FR at 30352, that the
in-transit costs should be deducted was based on the fact that the
subject merchandise was produced solely for the U.S. market. Here,
there is no evidence that any of the bearings under review were
produced solely for the U.S. market. Thus, the finding in Pasta Italy
LTFV is not applicable here. Torrington's reliance on Pasta Turkey
Review is misplaced because, contrary to that case, the respondents'
inventory carrying costs do not reflect costs for a period of time when
the merchandise was being stored or held at U.S. Customs.
For all of these reasons, we have not deducted inventory carrying
costs for time in transit from CEP.
Comment 2: Torrington argues that U.S. interest rates should be
applied in the calculation of in-transit and U.S. inventory carrying
costs for NTN and NSK, since U.S. dollars are the functional currency
for the U.S. affiliates. It notes that this approach conforms to the
fundamental scheme of the amended antidumping law; it asserts that
another approach would undermine the objective, when calculating CEP,
of arriving at arm's-length, ex-factory prices that are not influenced
by affiliations. It asserts that, in the attempt to construct arm's-
length ex-factory prices, the Department should not assume that the
costs are being financed by the exporting company at the most favorable
rates that it can obtain.
NTN argues that Torrington ignores regulatory and administrative
authority
[[Page 35620]]
concerning the calculation of inventory carrying costs. It asserts that
the use of the yen borrowing rate for calculation of inventory carrying
costs in the preliminary results was appropriate and that the facts of
the current reviews support the use of the yen. It observes that this
issue was settled by the CIT in Timken Co. v. United States, 858 F.
Supp. 206 (CIT 1994).
NSK responds that Torrington's argument has been rejected for years
and that the law is settled on the point of the proper interest rate to
be applied.
Department's Position: Normally, the Department calculates U.S.
inventory carrying costs using the U.S. interest rate because the
affiliate bears the costs of carrying the merchandise. However, where
the payment terms that an exporting company extends to its affiliate
and the time that the merchandise remains in the affiliate's inventory,
indicate that the exporting company bears the cost of carrying the
merchandise for a portion of the time that the merchandise is in
inventory, then the exporting company's short-term interest rate will
be used to calculate that portion of the inventory carrying costs. As
noted by NTN, this practice was sustained by the CIT in Timken, 858 F.
Supp. at 212 (citing Tapered Roller Bearings, Four Inches or Less in
Outside Diameter, and Certain Components Thereof, from Japan; Final
Results of Antidumping Duty Administrative Review, 56 FR 65228, 65236
(Dec. 16, 1991)).
Both NTN and NSK have demonstrated that they extended their
financing terms to their affiliates through the time in transit and the
time that merchandise remained in inventory in the United States.
Therefore, we have applied the yen borrowing rate to the calculation of
in-transit and U.S. inventory carrying costs.
Comment 3: Torrington argues that the Department should restate
Nachi's U.S. inventory carrying costs. Nachi does not make a rebuttal.
Department's Position: We are satisfied from information on the
record that Nachi calculated its U.S. inventory carrying costs
correctly. For a more detailed explanation of this expense, see page 4
of the Department's Analysis Memorandum for Nachi, dated June 16, 1999
(which provides, inter alia, the Department's position on Torrington's
proprietary argument).
8. Sales to Affiliated Parties
Comment: Torrington asserts that the chairman of SKF Germany's
parent company, AB SKF, also chairs six other companies, including
Investor AB, which is the largest single shareholder of AB SKF.
Torrington states further that Investor AB also holds shares in seven
companies and that SKF Germany made home-market sales to one of those
seven companies during the POR. Torrington asserts that the Department
should apply the affiliated-party test to determine whether sales to
this customer are in fact at arm's-length prices.
SKF Germany contends that Investor AB's share of the specified
customer is not large enough to be considered a controlling interest.
SKF Germany claims that it does not own any shares in the specified
company and the company is not a shareholder in SKF Germany. SKF
Germany claims further that the entities do not share management teams
or have supply, sales, marketing, or financial agreements with each
other. SKF Germany believes that all of these elements confirm an
absence of common control.
Department's Position: SKF Germany and the specified customer are
not affiliated parties and, therefore, have not applied our arm's-
length test to transactions between the two entities. Section
771(33)(E) of the Act states that ``[a]ny person directly or indirectly
owning, controlling, or holding with power to vote, five percent or
more of the outstanding voting stock or shares of any organization and
such organization'' shall be considered to be ``affiliated''. Record
evidence shows that SKF Germany does not own any shares of the customer
concerned and that the customer in turn is not a shareholder of SKF
Germany. Section 771(33)(F) of the Act states that ``[t]wo or more
persons directly or indirectly * * * controlled by * * * any person''
shall also be considered to be ``affiliated''. However, there is no
evidence indicating the presence of management control of any kind
between SKF Germany and the specified customer. Since there is no
evidence of affiliation in the context of the remaining provisions of
section 771(33) of the Act, we conclude that SKF Germany and the
specified customer are not affiliated parties and have not applied our
arm's-length test to transactions between the two entities.
9. Samples, Prototypes and Sales Outside the Ordinary Course of Trade
Comment 1: NTN argues that the Department should exclude its
reported sales made outside the ordinary course of trade from the
calculation of normal value and CV profit. NTN contends that the
purpose of the ordinary-course-of-trade provision of the statute is to
prevent dumping margins from being based on sales which are not
representative of the home market. NTN claims that the Department
should regard all of its sales which have abnormally high profits as
outside the ordinary course of trade. Citing CEMEX, NTN contends that
the Department has regarded sales as outside the ordinary course of
trade in other cases because of significant differences in profit
levels.
NTN also argues that the Department should exclude its claimed
sample sales from its normal-value calculation because they are outside
the ordinary course of trade. Citing Granular Polytetrafluoroethylene
Resin from Japan; Preliminary Results of Antidumping Administrative
Review, 60 FR 5622 (January 30, 1995), and Notice of Final
Determinations of Sales at Less than Fair Value: Hot-Rolled Carbon
Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat Products,
Certain Corrosion-Resistant Carbon Steel Flat Products, and Cut-to-
Length Carbon Steel Plate from France, 58 FR 73125, 73126 (July 9,
1993), NTN claims that the Department has regarded sample sales as
outside the ordinary course of trade in other cases.
Torrington argues that NTN has not justified its claim that these
sales should be regarded as outside the ordinary course of trade.
Torrington contends that NTN did not provide the information the
Department requested with regard to its claim and that the only
information NTN did provide was the profit amounts for its sales.
Torrington observes that the Department has rejected identical claims
made by NTN in prior AFB reviews.
Department's Position: Our practice is to exclude home-market sales
transactions from the margin calculation as outside the ordinary course
of trade based on all the circumstances particular to the sales in
question. See Murata Mfg. Co. v. United States, 820 F. Supp. 603, 607
(CIT 1993). This practice has been codified in section 351.102 of the
Department's regulations, which states:
[t]he Secretary may consider sales or transactions to be outside the
ordinary course of trade if the Secretary determines, based on an
evaluation of all of the circumstances particular to the sales in
question, that such sales or transactions have characteristics that
are extraordinary for the market in question. Examples of sales that
the Secretary might consider as being outside the ordinary course of
trade are sales or transactions involving off-quality merchandise or
merchandise produced according to unusual product specifications,
merchandise sold at aberrational prices or with abnormally high
profits, merchandise sold pursuant to unusual terms of sale, or
merchandise sold to an affiliated party at a non-arm's-length price.
(Emphasis added.)
[[Page 35621]]
In these reviews, NTN provided no evidence, other than the
allegedly high profits of some sales, to suggest that any of these
sales, whether ``high profit'' or sample sales, are outside the
ordinary course of trade. The simple fact of high profits, standing
alone, is not sufficient for us to determine that a sale is outside the
ordinary course of trade. See AFBs 8, 63 FR at 33344: ``the presence of
profits higher than those of numerous other sales does not necessarily
place the sales outside the ordinary course of trade. In order to
determine that a sale is outside the ordinary course of trade due to
abnormally high profits, there must be unique and unusual
characteristics related to the sale in question which make it
unrepresentative of the home market.'' Thus, it would only be
appropriate to exclude these sales from our normal-value calculation if
there were circumstances surrounding these sales which would lead us to
conclude that they were, in fact, made outside the ordinary course of
trade.
NTN's citation to CEMEX is inapposite to this situation. In CEMEX,
the profitability of the sales in question was merely one of the
factors we considered in our determination that those sales were made
outside the ordinary course of trade. In addition to profits, we found
the sales in question were sales of ``specialty [products] that were
sold to a niche market,'' that these ``sales represent[ed] a minuscule
percentage of [the respondent's] total sales of cement,'' that ``the
shipping arrangements for home market sales of Types II and V cements
were not ordinary,'' and that the record ``indicated that the home
market sales of Types II and V cements were of a promotional nature.''
See CEMEX, 133 F.3d at 901. Thus, it was the totality of circumstances,
rather than the relative profitability alone, which, in CEMEX, led us
to conclude that the sales were made outside the ordinary course of
trade. In this case, the level of profitability is the only indicator
that the sales might have been made outside the ordinary course of
trade.
Furthermore, NTN provided no evidence which demonstrated that the
profit amounts experienced on its claimed outside-the-ordinary-course-
of-trade sales are particularly, much less abnormally, high. NTN has
selected an arbitrary profit margin which it defines as ``high,'' but
it provides no evidence or analysis which suggests that the profit
margin it chose is in any way unusual. To the contrary, there are
enough of these claimed ``high profit'' sales in NTN's home-market
database that it is apparent that these sales are not unusual but,
rather, occur typically within NTN's normal course of business.
With regard to NTN's claimed non-zero-priced sample sales (we
excluded all zero-priced sales because the record suggests that NTN did
not receive consideration for these sales), NTN provided no evidence to
support its contention that these sales were made outside the ordinary
course of trade. The mere labeling of a sale as a sample, absent any
other evidence, is an insufficient basis on which to find the sale
outside the ordinary course of trade.
Finally, while we agree with NTN as to the purpose of the ordinary-
course-of-trade provision of the statute, the burden is on respondents
to demonstrate that the sales in question were made outside the
ordinary course of trade. NTN did not demonstrate this with regard to
any of its claimed outside-the-ordinary-course-of-trade sales.
Accordingly, we have not excluded NTN's ``high-profit'' sales or sample
sales from our analysis.
Comment 2: Torrington argues that, with respect to SKF Sweden and
SKF Italy (collectively SKF), the Department should include U.S. sample
sales in the margin calculation. Torrington comments that exclusion of
sample sales is not automatic, citing NSK Ltd. v. United States, 115
F.3d 965 (CAFC 1997), and asserts that SKF did not provide all of the
information the Department requested. For instance, Torrington
observes, SKF did not provide price and quantity comparisons and
described only in vague terms the ultimate disposition of the sample
sales.
SKF argues that it provided detailed responses to the Department's
questions concerning sample and prototype sales. SKF argues that, with
regard to Torrington's assertion that it discussed the ultimate
disposition of the sample sales vaguely, SKF provided as complete an
answer as it could. SKF contends that, while Torrington desires more
detailed information on the record, it responded fully to the
Department's questions and, accordingly, the Department should continue
to exclude the U.S. sample and prototype sales from the margin
calculation.
Department's Position: Contrary to Torrington's assertions, we find
that there is sufficient information provided in SKF Italy's and SKF
Sweden's responses for us to make a determination as to whether the
respondents received consideration for these sales. SKF Italy and SKF
Sweden described how orders for sample or prototype sales were
communicated, identified the documents available to demonstrate that
the sales in question were sample or prototype sales, explained the
ultimate disposition of the bearings, indicated whether such bearings
were tested and destroyed during trial application, and, to the extent
possible, contrasted sample or prototype sales prices and quantities
with the prices and quantities of normal-priced sales. Based on this
information, we determined that no consideration was provided for their
reported U.S. zero-priced sample and prototype sales. Therefore, we did
not calculate a margin on U.S. sales which SKF Italy and SKF Sweden
designated as zero-priced samples and prototypes.
10. Constructed Export Price Profit
Comment 1: NTN argues that the Department should calculate CEP
profit on a level-of-trade-specific basis. NTN asserts that prices
differed significantly between levels of trade and contends that, to
account fully for price differences between levels of trade, the
Department must consider profit levels. NTN claims that there is a
clear statutory preference for the Department to calculate CEP profit
on the narrowest basis.
Torrington observes that the Department has rejected NTN's argument
in prior reviews and that NTN neither acknowledges the Department's
prior decisions nor discusses why the Department should alter its
decision.
Department's Position: It is not our practice to calculate CEP
profit for different levels of trade. See, e.g., AFBs 7, 62 FR at
54072, and Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or
Less in Outside Diameter, and Components Thereof, From Japan; Final
Results of Antidumping Duty Administrative Reviews, 63 FR 2570, 2583
(January 15, 1998) (TRBs).
We believe that NTN's reliance on the term ``narrowest'' as used in
sections 772(f)(2)(c)(ii) and (iii) of the Act is misplaced. While the
statute uses the term ``narrowest'' in describing the second and third
alternative methods, methods in which CEP profit is calculated based on
financial reports, for NTN we used the first alternative method since
the company provided the necessary data (i.e., U.S. and home-market
sales information as well as CV and COP data for the subject
merchandise and the foreign like product, respectively). This is
consistent with the instructions set forth in section 772(f)(2)(C) of
the Act and the SAA at 824-825. Moreover, regardless of the basis for
the CEP-profit calculation,
[[Page 35622]]
neither the statute nor the SAA requires us to calculate CEP profit on
a basis more specific than subject merchandise and foreign like
product. See Toyota Motor Sales, USA v. United States, Court No. 97-
0300415, Slip Op. 98-95 (CIT July 2, 1998) (Toyota). Thus, we have not
adopted NTN's suggestion.
Comment 2: NTN argues that the Department should exclude EP sales
from its CEP-profit calculation. NTN contends that section
772(f)(2)(C)(i) of the Act directs the Department to calculate CEP
profit based on ``[t]he expenses incurred with respect to the subject
merchandise sold in the United States and the foreign like product sold
in the exporting country if such expenses were requested by the
administering authority for the purposes of establishing normal value
and constructed export price.'' NTN argues that, because this section
refers specifically to CEP sales and not EP sales, it precludes the
Department from including EP sales in the CEP-profit calculation.
Torrington contends that the Department's approach in these reviews
is consistent with Policy Bulletin 97.1 and that the Department
rejected NTN's argument in a prior review.
Department's Position: It is our practice to include EP sales in
the calculation of CEP profit. See, e.g., AFBs 8, 63 FR at 33345, TRBs,
63 FR at 2570, and Certain Fresh Cut Flowers From Colombia; Final
Results and Partial Rescission of Antidumping Duty Administrative
Review, 62 FR 53295 (October 14, 1997). In addition, our analysis in
these reviews is consistent with Policy Bulletin 97.1 of September 4,
1997.
The basis for total actual profit is the same as the basis for
total expenses under section 772(f)(2)(C) of the Act. The first
alternative under this section states that, for purposes of determining
profit, the term ``total expenses'' refers to all expenses incurred
with respect to the subject merchandise sold in the United States (as
well as the foreign like product sold in the exporting country). Thus,
where the respondent makes both EP and CEP sales to the United States,
sales of the subject merchandise would encompass all such transactions.
Therefore, because NTN had EP sales, we have included these sales in
the calculation of CEP profit.
Comment 3: NPBS, NSK, and NSK-RHP argue that the Department erred
in deducting U.S. repacking expenses under section 772(d)(1) of the Act
and including such expenses in the pool of selling expenses for which
it then calculated CEP profit. NPBS contends that section 772(d)(3) of
the Act does not provide for profit to be attributed to repacking
expenses because the statute limits the application of profit to
selling expenses and further-manufacturing costs and, according to
NPBS, repacking expenses are neither. NSK and NSK-RHP argue that the
Department should treat U.S. repacking expenses as movement expenses
deductible from U.S. price under section 772(c)(2)(A) of the Act. The
respondents contend that section 772(c)(2)(A) of the Act does not
preclude the Department from including U.S. repacking just because the
expenses may relate directly to particular sales. As support, the
respondents point out the direct nature of certain movement expenses
which the Department deducts from U.S. price in accordance with section
772(c)(2)(A) of the Act. NSK and NSK-RHP also assert that U.S.
repacking does not qualify as a deductible expense under section
772(d)(1)(B) of the Act because the selling expenses included under
this part of the statute do not involve bringing the goods from the
exporting country to the U.S. unaffiliated customer. The respondents
also assert that, unlike the deductible selling expenses under section
772(d)(1)(B) of the Act, repacking expenses do not entice a customer to
purchase a product. NSK and NSK-RHP request that, for the final
results, the Department reclassify U.S. repacking as a movement expense
and exclude it from the selling expenses it uses to calculate CEP
profit.
Torrington argues that the Department should not treat U.S.
repacking expenses as a movement expense. Citing AFBs 8 at 33338,
Torrington asserts that the Department has rejected the respondents'
argument in prior reviews and that the Department's position is valid.
Department's Position: Section 772(c)(2)(A) of the Act covers
``transportation and other expenses, including warehousing expenses,
incurred in bringing the subject merchandise from the original place of
shipment in the exporting country to the place of delivery in the
United States.'' See SAA at 824. As we stated in AFBs 8, 63 FR at
33339, we do not view repacking expenses as movement expenses. The
repacking of subject merchandise in the United States bears no
relationship to moving the merchandise from one point to another. The
fact that repacking is not necessary to move merchandise is borne out
by the fact that the merchandise was moved from the exporting country
to the United States prior to repacking. We regard repacking expense as
a direct selling expense because the company incurred the expense on
individual products in order to sell the merchandise to the
unaffiliated customer in the United States. We deducted this repacking
expense pursuant to section 772(d)(1)(B) of the Act, which directs us
to reduce CEP by ``expenses that result from, and bear a direct
relationship to, the sale, such as credit expenses, guarantees, and
warranties.'' Furthermore, because these expenses are direct selling
expenses, we attribute profit to them pursuant to section 772(d)(3) of
the Act by including them in the calculation of total CEP selling
expenses.
Comment 4: INA argues that the Department erred by calculating the
CEP-profit rate on a class-or-kind basis rather than a product-specific
basis. To support this argument, INA contends that section 772(d) of
the Act requires the Department to calculate and apply all CEP
deductions on sales of subject merchandise on a transaction-specific
basis. In addition, INA asserts that the use of the term ``subject
merchandise'' in section 772(f)(2)(C)(i) of the Act was intended to
mean the specific product in the particular transaction for which the
Department is calculating CEP.
Torrington contends that the Department has calculated the CEP-
profit rate correctly. Torrington notes that the Department rejected
INA's arguments for a product-specific CEP-profit rate calculation in
AFBs 7. Citing AFBs 7, 62 FR at 54071, Torrington argues that the
Department stated correctly that INA's proposed methodology for
calculating a product-specific CEP-profit rate is not required by the
statute, would complicate the margin calculation, would not increase
accuracy, and would invite manipulation.
Department's Position: Section 772(d)(3) of the Act requires that
we adjust CEP for an amount of profit allocable to U.S. sales, and our
practice is to base this calculated profit on revenues and expenses
associated with total sales of subject merchandise (both in the home
market and the United States). As discussed in AFBs 6, 61 FR at 2125,
AFBs 7, 62 FR at 54072, and our response to Comment 1 of this section,
we find that neither the statute nor the SAA requires us to calculate
CEP profit on a basis that is more specific than the one applied
currently. See also Toyota (upholding our decision to calculate total
expenses and total actual profit for all subject merchandise sold in
the United States and all foreign like products sold in the home market
rather than segregating certain products when performing the CEP-profit
calculation). Consistent with the rationale in these
[[Page 35623]]
cases, we have not altered our CEP-profit calculation methodology.
Comment 5: INA argues that the Department erred by excluding
imputed expenses (credit and inventory carrying costs) from the
calculation of the ratio that it applied to total U.S. selling expenses
(including imputed expenses) to determine CEP profit. INA argues that
excluding the imputed interest expenses from the calculation of the
ratio and then applying the ratio to a value that includes imputed
interest expenses results in an unlawful double deduction of imputed
expenses in determining CEP (once as an expense and once as a component
of profit). INA cites Circular Welded Non-Alloy Steel Pipe from the
Republic of Korea; Amended Final Results of Antidumping Duty
Administrative Review, 63 FR 39071 (July 21, 1998), as an example of a
situation where the Department recognized the necessity for consistency
in calculating and applying a profit rate. INA asserts that the
Department's exclusion of the imputed expenses from the calculation of
the CEP-profit ratio is at odds with the statute since imputed expenses
are recognized as an expense under section 772(f) of the Act, which
establishes the rules for determining profit.
Torrington contends that the Department calculated CEP profit
correctly and refers to the Department's position on this topic in AFBs
7, 62 FR at 54072. The petitioner also asserts that by including
imputed expenses in the U.S. expenses the Department recognizes that
related parties may shift expenses among them, thus affecting the
accuracy of the calculation. The petitioner asserts that such shifting
is not a concern when calculating the total expenses mentioned under
section 772(f)(2)(C) of the Act.
Department's Position: It is our practice to exclude imputed
selling expenses in calculating the total actual profit for sales of
the subject merchandise and the foreign like product. See, e.g., Notice
of Final Results of Antidumping Duty Administrative Review; Canned
Pineapple Fruit From Thailand, 63 FR 7395 (February 13, 1998). In the
preamble to our Final Rule we address INA's issue directly. In response
to a comment that we should include imputed expenses in the total
selling expenses used to derive total profit to avoid double-counting,
we stated, ``(w)e have not adopted this suggestion, because the
Department does not take imputed expenses into account in calculating
cost. Moreover, normal accounting principles permit the deduction of
only actual booked expenses, not imputed expenses, in calculating
profit.'' See the preamble to our new regulations at section 351.402
(Final Rule, 62 FR at 27354).
In Policy Bulletin 97.1 of September 4, 1997, which describes our
methodology for calculating profit for CEP transactions, we explain why
it is appropriate to exclude imputed selling expenses in calculating
the total actual profit for sales of the subject merchandise and the
foreign like product while including these expenses as part of the
total U.S. expenses when allocating a portion of the total actual
profit to U.S. sales. Specifically, we stated that ``there is no need
to include imputed interest amounts in the profit calculation since we
have already accounted for actual interest in computing ``actual
profit'' under section 772(f).'' See Policy Bulletin 97.1 at fn. 5.
Furthermore, we stated that, ``when allocating a portion of the actual
profit to each U.S. CEP sale, we will include imputed credit and
inventory carrying costs as part of the total U.S. expenses allocation
factor.'' Id. As noted in the Policy Bulletin, the latter statement is
consistent with section 772(f)(1) of the Act which defines the term
``total U.S. expenses'' as those expenses described in sections
772(d)(1) and (2) of the Act. Therefore, we have not altered our CEP-
profit calculation methodology for these final results of reviews.
11. Miscellaneous
11.A. Clerical Errors FAG Germany, FAG Italy, INA, Koyo, NSK, NSK-
RHP, Nachi, NPBS, NTN, SKF France, SKF Germany, SKF Italy, Somecat,
SNR, and the petitioner have alleged that we made certain programming
and/or clerical errors in the preliminary results calculations. Where
we and all parties agree that a programming or clerical error occurred,
we have made the necessary correction and addressed the comment only in
the final-results analysis memoranda. (See company-specific Final
Results Analysis Memoranda of June 1999.) The comments included in this
notice address situations where parties alleged that we made a
programming or clerical error but either we disagree or a party to the
proceedings disagrees with the allegation.
Comment 1: FAG Germany argues that the Department neglected to add
to U.S. price amounts for ``other revenue'' it received from customers
on U.S. sales. FAG Germany argues further that in all prior reviews the
Department has acknowledged this type of revenue and added it to U.S.
price.
Torrington contends that some of the revenue at issue includes
amounts FAG Germany received where the company arranged freight and
collected freight charges for transportation between the U.S. warehouse
and the unaffiliated customer. Torrington concludes that an addition of
such revenue is appropriate only on sales for which FAG Germany
reported freight expenses and that the Department should limit the
revenue adjustment to the amount reported for freight.
Department's Position: FAG Germany stated in its response that, for
``CEP sales, FAG US bills to and collects from its customer the freight
charges incurred and prepaid by FAG.'' See FAG Germany's section C
response dated August 29, 1998, at 65. Therefore, we find it is
appropriate to add the revenue reported only to the extent that it
offsets the reported freight expense and we have done this for the
final results. In addition, we have only added the revenue to CEP sales
since FAG Germany did not receive this revenue on its EP sales.
Comment 2: NTN argues that the Department made a clerical error in
recalculating inventory carrying costs for home-market sales.
Torrington agrees with NTN.
Department's Position: NTN calculated its inventory carrying costs
for home-market sales erroneously by using 360 days as the period of
inventory. For the preliminary results, we adjusted these miscalculated
inventory carrying costs by multiplying the reported amounts, which
presumably were calculated using the formula NTN indicated in its
brief, by a ratio we calculated by dividing the actual number of days
in inventory by 360 days. Therefore, no adjustment is necessary.
Comment 3: Torrington argues that the Department made a clerical
error in calculating the CEP offset for SNR by suppressing certain
programming language. Torrington claims that this error could lead to a
potential overstatement or understatement of the CEP offset.
SNR argues that the alleged clerical error is part of a new set of
standard programming language the Department uses to calculate the CEP
offset properly when there are commissions on only some of the home-
market sales. SNR asserts that, since it did not pay commissions on
home-market sales, the suppressed programming language was not
necessary for the Department's margin calculation.
Department's Position: We did not need to use the programming
language concerning home-market commissions in our calculation of SNR's
margin. However, to avoid the appearance of a
[[Page 35624]]
programming error, we have not suppressed the programming instruction
for the final results of these reviews. This change did not affect the
weighted-average margin for SNR.
Comment 4: SKF Germany contends that, in its preliminary analysis
memorandum, the Department listed inventory carrying costs for ocean
transit time between Europe and the United States as subtracted in the
calculation of the CEP incorrectly but that the calculations were
accurate.
Torrington argues that, consistent with SKF Germany's recording of
such expenses, the Department should have deducted these costs as an
expense associated with U.S. commercial activity.
Department's Position: Listing these particular inventory carrying
costs in the analysis memorandum as a subtraction from the calculation
of CEP was a clerical error. With regard to Torrington's argument for
subtracting the expenses at issue, we disagree because we find that the
expenses are not associated with U.S. economic activity. See our
response to Comment 1 in the section on inventory carrying costs above.
Comment 5: Nachi asserts that the Department made a clerical error
that exaggerates values for ``Other U.S. Direct Selling Expenses'' by a
factor of one hundred.
Torrington expresses concern over whether Nachi has identified the
alleged error adequately and states that it only concurs with the
respondent's argument to the extent that a clerical error occurred.
Department's Position: Upon examining Nachi's U.S. sales database,
we determined that we made a formatting error that caused the values
for ``Other U.S. Direct Selling Expenses'' to be overstated by a factor
of 100 which may have occurred when we processed the U.S. sales
database Nachi submitted. We have corrected this error for the final
results of review.
Comment 6: NPBS argues that the Department made a clerical error in
calculating the ratio it used to determine CEP profit. Specifically,
NPBS asserts that, in calculating the total profit for use in
determining the CEP-profit ratio, the Department ``grossed up'' the
profit and costs for the U.S. sales made in the sample weeks but
neglected to ``gross up'' the profit and costs for the home-market
sales made in the sample months, thereby understating profit on home-
market sales. NPBS asserts that this error led to an overstatement of
the CEP-profit ratio and, therefore, an inflation of its dumping
margin. To correct this error, NPBS proposes a methodology for
``grossing-up'' the sampled home-market sales.
Torrington argues that the Department's calculation of the ratio
used to determine CEP profit was reasonable and consistent with the
section 772(f)(2)(C) of the Act. Torrington therefore contends that the
Department should not alter its calculation of the ratio.
Department's Position: We find that we made a clerical error in our
calculation of the total actual profit we used to determine the ratio
for CEP profit. Since NPBS reported sales on a sampled basis, before
calculating total actual profit it is necessary to ``gross up'' the
revenues and expenses for the U.S. and comparison-market sales to
ensure that they are on a comparable basis. Due to a clerical error, we
did not make this adjustment to NPBS's sampled home-market sales for
the preliminary results. We have corrected this error for the final
results by applying our customary ``grossing-up'' ratio to the sampled
home-market sales. We did not use NPBS's proposed methodology because
it is not consistent with our practice in these proceedings.
Comment 7: NPBS argues that the Department treated its reported
U.S. advertising expenses erroneously as direct selling expenses. NPBS
states that, in its response, it explained that its U.S. affiliate does
not assume expenses for advertising directed at its customers'
customers. NPBS states that, despite the fact that it identified its
U.S. advertising expenses separately, this does not deem such expenses
as direct in nature. NPBS concludes that the Department should treat
the reported U.S. advertising expenses as indirect selling expenses. In
addition, NPBS requests that the Department add its reported U.S.
advertising expenses to the calculation of U.S. indirect selling
expenses in the margin calculations.
Torrington disagrees with NPBS, stating that the burden rests upon
NPBS to prove that its reported U.S. selling expenses are indirect.
Torrington contends that, because NPBS did not satisfy this burden, the
Department should continue to treat these expenses as direct selling
expenses for the final results.
Department's Position: We treated NPBS's reported advertising
expenses inadvertently as a direct expense for the preliminary results
of review. Since NPBS stated in its questionnaire response that the
advertising expenses were indirect in nature and we did not find it
necessary to subject this response to additional verification, we have
accepted its description of these expenses as indirect and have treated
them as indirect for these final results. In addition, because NPBS
removed its reported U.S. advertising expenses from its per-unit ISE
calculation and reported these expenses separately from one another, we
added the advertising expenses to its reported indirect selling
expenses in our final margin calculations.
Comment 8: SNR argues that the Department's arm's-length test
contains a clerical error which distorts the calculation of the
customer-specific percentage ratio of affiliated-to-unaffiliated sales
prices. SNR contends that the error occurs when there is a sale of a
model to an affiliated party but no sale of that same model to an
unaffiliated party. SNR states that in these situations the Department
assigns a zero to these sales which distorts the overall average
because the ratios are weighted by the total quantity of affiliated-
party sales. SNR argues that this distortion virtually guarantees that
the overall average will drop below 99.5 percent and that, as a result,
the Department disregards all sales of models to affiliated parties
without corresponding sales to unaffiliated parties in the
calculations.
Torrington did not rebut this issue.
Department's Position: We find that the test does contain a
clerical error. We have made the appropriate changes to our
calculations for these final results. For the same reason, we have also
made the appropriate changes to the calculations for SKF Sweden, SKF
Italy, SKF France, SKF Germany, NTN, Nachi, Koyo, FAG Germany, FAG
Italy, NSK-RHP, NSK, Somecat S.p.A., the Barden Corporation, Torrington
Nadellager, and INA.
11.B. Miscellaneous Other
Comment 1: Somecat contends that the Department should clarify that
Somecat's dumping margin applies to Italian bearings marked ``SNFA'' to
reduce the likelihood of confusion for the Customs Service at the time
of entry and for liquidation purposes. The respondent asserts that the
record demonstrates that Somecat bearings are laser-marked with the
label ``SNFA ITALY'' and that Somecat's bearings are packaged in boxes
marked with the SNFA trade name. In addition, Somecat contends, the
cover page to its product catalog plainly shows a bearing marked ``SNFA
Italy'.
The petitioner takes no position with respect to Somecat's request
for clarifying that its dumping margin applies to Italian bearings
marked ``SNFA Italy'.
Department's Position: The record reflects that Somecat's bearings
are
[[Page 35625]]
marked ``SNFA ITALY''. To reduce the possibility of confusion at the
time of entry and to ensure that the Customs Service assesses dumping
duties on Somecat's bearings properly, we will refer to Somecat as
``Somecat or SNFA Italy'' in our cash-deposit instructions and
liquidation instructions.
Comment 2: Torrington asserts that it requested that the Department
make a determination at verification as to whether FAG Italy reimbursed
its U.S. affiliate for antidumping duties. It now requests that the
Department pursue additional inquiries into this issue or make a
determination of the issue based on the current record.
FAG Italy rebuts that the Department stated in its report on the
home-market sales verification that the verification was not the
appropriate forum at which to conduct a reimbursement inquiry. It
asserts that the Department was correct in this assessment. FAG Italy
argues that, notwithstanding this point, Torrington has actually
presented record evidence which supports the position that no
reimbursement occurs. It contends that Torrington has cited to the
consolidated 1997 FAG Group financial statement, which accounts for FAG
US's antidumping duty liabilities. FAG Italy asserts that Torrington
must submit either record evidence of financial intermingling between
group companies or the existence of a written agreement between these
companies regarding reimbursement before the Department is obligated to
conduct a further inquiry into reimbursement.
Department's Position: There is no obligation to conduct an inquiry
into reimbursement based on the information on the record.
Reimbursement, within the meaning of section 351.402(f) of the
Department's regulations, takes place between affiliated parties if
evidence demonstrates that the exporter pays antidumping duties on
behalf of the affiliated importer or reimburses the importer for such
duties. In this case, the petitioner has not presented evidence that a
reimbursement agreement exists. Mere allegations of reimbursement are
not sufficient to sustain a more in-depth reimbursement inquiry. See
AFBs 7, 62 FR at 54043. See also Torrington v. United States, 881 F.
Supp. 622, 632 (CIT 1997), aff'd, 127 F.3d 1077, 1080 (CAFC 1997).
Therefore, we have not conducted any further inquiry into
reimbursement.
12. Romania-Specific Issues
Comment 1: Torrington argues that the Department should modify the
calculation of normal value in its analysis of TIE by applying the
appropriate inflators, based on changes in the published Consumer Price
Index (CPI), to the base data used in the Department's memorandum
entitled ``Expected Wage Rates of Selected NME Countries--1995 Income
Data'' (wage memorandum). Torrington argues that the wage values upon
which the Department relied in the preliminary results have not been
updated to account for changes due to inflation since 1995. Citing
section 351.408(c)(3) of the Department's regulations, Torrington
claims that the Department's calculation of wage rates should be based
on current data. Torrington also asserts that the Department's wage
memorandum uses a CPI inflator to adjust pre-1995 wage data and that,
in prior reviews, the Department valued wages based on a single
surrogate by applying an inflator to values obtained for wages whenever
the values pertained to periods preceding the investigation period,
citing Preliminary Results of Antidumping Administrative Review;
Tapered Roller Bearings and Parts Thereof, Finished or Unfinished, From
Romania, 63 FR 11217, 11218 (March 6, 1998).
Department's Position: We have updated the 1995 base data by
applying 1997 data in accordance with section 351.408(c)(3) of our
regulations and used this information in calculating normal value for
our analysis of TIE.
Comment 2: TIE argues that the Department's preliminary margin
calculation for one model contains an obvious ministerial error,
causing an abnormally high normal value for this model. TIE claims that
it provided an overstated weight value for low-density foil in its
questionnaire response inadvertently and the Department then used this
erroneous value in its margin calculation. TIE points out that the low-
density foil weight exceeds the total weight of the bearing. TIE claims
further that the Department has the authority to correct errors which
are obvious and has done so in previous cases, citing
Technoimportexport, S.A. v. United States, 766 F. Supp. 1169, 1178 (CIT
1991). Therefore, for purposes of the final results, TIE requests that
the Department correct this error and use the low-density foil weight
listed in its March 22, 1999, case brief or the low-density foil weight
found in TIE's response for similar models.
In rebuttal, Torrington contests TIE's argument that an obvious
ministerial error occurred in the reporting of this packaging factor.
Torrington asserts that the new information is untimely and unreliable,
citing section 351.301 of the Department's regulations. Torrington
argues further that the Department recognizes an exception to the
general rule in the case of obvious errors, provided that: (1) the
error is of a clerical nature; (2) the fact of the error is obvious
from the record at the time the new data are submitted; and (3) the
correctness of the new data is obvious, citing RHP Bearings v. United
States, 19 CIT 1389, 1392 (1995), and RHP Bearings v. United States,
875 F. Supp. 854, 857 (CIT 1995). Torrington claims that there is
nothing on the record which supports the corrections of the new data
offered by TIE. Therefore, Torrington argues, the Department should not
accept TIE's amended data.
Department's Position: We will accept corrections of clerical
errors made in a party's submission under the following conditions: (1)
The error in question must be demonstrated to be a clerical error, not
a methodological error, an error in judgment or a substantive error;
(2) the Department must be satisfied that the corrective documentation
provided in support of the clerical error allegation is reliable; (3)
the respondent must have availed itself of the earliest reasonable
opportunity to correct the error; (4) the clerical-error allegation,
and any corrective documentation, must be submitted to the Department
no later than the due date for the respondent's administrative case
brief; (5) the clerical error must not entail a substantive revision of
the response; and (6) the respondent's corrective documentation must
not contradict information previously determined to be accurate at
verification. See Final Results of the Antidumping Duty Administrative
Review; Heavy Forged Hand Tools, Finished or Unfinished, With or
Without Handles, From the People's Republic of China, 63 FR 16758
(April 6, 1998). TIE's alleged clerical error satisfies these six
criteria. We agree that the error is obvious and clerical in nature. It
is not a substantive error and does not entail a substantive revision
of TIE's response. We have reviewed the record and found that similar
models had approximately the same weight for low-density foil as
reported in TIE's case brief. Therefore, we accept TIE's request that
we revise this error and have used the information in TIE's case brief
in our final margin calculations.
[FR Doc. 99-16657 Filed 6-30-99; 8:45 am]
BILLING CODE 3510-DS-P