[Federal Register Volume 64, Number 219 (Monday, November 15, 1999)]
[Notices]
[Pages 61837-61848]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29752]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-570-601]


Tapered Roller Bearings and Parts Thereof, Finished and 
Unfinished, From the People's Republic of China; Final Results of 1997-
1998 Antidumping Duty Administrative Review and Final Results of New 
Shipper Review

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

ACTION: Notice of final results of 1997-1998 antidumping duty 
administrative review and final results of new shipper review of 
tapered roller bearings and parts thereof, finished and unfinished, 
from the People's Republic of China.

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SUMMARY: On July 8, 1999, the Department of Commerce published the 
preliminary results of its administrative review and partial rescission 
of review of the antidumping duty order on tapered roller bearings and 
parts thereof, finished and unfinished, from the People's Republic of 
China, for the period of June 1, 1997, through May 31, 1998. On August 
20, 1999, the Department of Commerce published the preliminary results 
of its new shipper review of tapered roller bearings and parts thereof, 
finished and unfinished, from the People's Republic of China, for the 
period of June 1, 1998, through November 30, 1998.
    We have combined in this notice the final results of both the 
administrative review and the new shipper review. The segments, 
however, continue to remain separate and distinct. Based on our 
analysis of comments received, we have made changes to the margin 
calculations. Therefore, the final results differ from the preliminary 
results.
    We have determined that sales have been made below normal value 
during the period of review. Accordingly, we will instruct the Customs 
Service to assess antidumping duties based on the difference between 
export price and normal value. The final weighted-average dumping 
margins are listed below in the section entitled Final Results of 
Review.

EFFECTIVE DATE: November 15, 1999.

FOR FURTHER INFORMATION CONTACT: Zak Smith, James Breeden or Melani 
Miller, Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW, 
Washington, D.C. 20230; telephone (202) 482-0189, (202) 482-1174 and 
(202) 482-0166, respectively.

Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (``the Act''), are references to the provisions 
effective January 1, 1995, the effective date of the amendments made to 
the Act by the Uruguay Round Agreements Act (``URAA''). In addition, 
all references to the Department of Commerce's (``the Department's'') 
regulations are to 19 CFR Part 351 (April 1998).

Background

    On July 8, 1999, we published in the Federal Register the 
preliminary results of administrative review of the antidumping duty 
order on tapered roller bearings (``TRBs'') from the People's Republic 
of China (``PRC''). See Tapered Roller Bearings and Parts Thereof, 
Finished and Unfinished, From the People's Republic of China; 
Preliminary Results of 1997-1998 Antidumping Duty Administrative Review 
and Partial Rescission of Antidumping Duty Administrative Review, 64 FR 
36853 (``AR Preliminary Results''). On August 20, 1999, we published 
the preliminary results of new shipper review of the antidumping duty 
order on TRBs from the PRC. See Tapered Roller Bearings and Parts 
Thereof, Finished and Unfinished, From the People's Republic of China; 
Preliminary Results of New Shipper Review, 64 FR 45511 (``NSR 
Preliminary Results''). We gave interested parties an opportunity to 
comment on our AR and NSR Preliminary Results and held a combined 
public hearing on October 13, 1999. The following parties submitted 
comments and/or rebuttals with respect to the administrative review: 
The Timken Company (``referred to hereafter as ``the petitioner''); 
Luoyang Bearing Factory (``Luoyang''); and Premier Bearing and 
Equipment, Ltd. (``Premier'') submitted comments with respect to the 
administrative review. Petitioner, Zhejiang Changshan Changhe Bearing 
Company (``ZCCBC'') and Weihai Machinery Holding (Group) Corporation 
Limited (``Weihai'') submitted comments and/or rebuttals regarding the 
new shipper review.
    We have conducted these reviews in accordance with section 751(a) 
of the Act.

Scope of Review

    Merchandise covered by these reviews includes TRBs and parts 
thereof, finished and unfinished, from the PRC; flange, take up 
cartridge, and hanger units incorporating tapered roller bearings; and 
tapered roller housings (except pillow blocks) incorporating tapered 
rollers, with or without spindles, whether or not for automotive use. 
This merchandise is classifiable under the Harmonized Tariff Schedule 
of the United States (``HTSUS'') item numbers 8482.20.00, 
8482.91.00.50, 8482.99.30, 8483.20.40, 8483.20.80, 8483.30.80, 
8483.90.20, 8483.90.30, 8483.90.80, 8708.99.80.15, and 8708.99.80.80. 
Although the HTSUS item numbers are provided for convenience and 
customs purposes, the written description of the scope of the order and 
this review is dispositive.

Changes Since the Preliminary Results

    We have made certain changes to our margin calculations pursuant to 
comments we received from interested

[[Page 61838]]

parties and clerical errors we discovered since the AR and NSR 
Preliminary Results.

For All Companies

    Many of the changes we have made affect all companies and the 
comments discussing these changes are listed below.

Valuation of Certain Steel Inputs--Comment 2
Valuation of Scrap--Comment 4
Valuation of Overhead, SG&A, and Profit--Comment 13

For Premier

    We have recalculated Premier's margin to apply the revised scrap 
and labor information submitted by one of its suppliers. See our 
response to Comments 18 and 19.

Analysis of Comments Received

    Unless otherwise indicated, all comments apply to both the 
administrative review and new shipper review.

1. Valuation of Factors of Production

1(a) Material Valuation

Comment 1: Use of Indian Producer Financial Statement Data

    Petitioner argues that steel costs of Indian bearing producers 
reported in their audited financial statements are the most accurate, 
narrow, and reliable information regarding the cost of bearing quality 
steel in India and, therefore, should be used by the Department to 
value bearing quality steel used in the production of certain TRB 
components. Petitioner states that this information is industry-
specific and avoids the ``inherent inaccuracy of trade statistics 
covering basket categories of products.'' Petitioner notes that the 
Indian bearing producers' prices are comparable to the market price for 
grade 52100 steel (bearing-quality steel) as reported by petitioner, as 
well as the prices indicated in U.S. import statistics for imports from 
Sweden which, according to petitioner, also consist of grade 52100 
steel bars. (See discussion in Comment 2, below.) Moreover, petitioner 
states that the availability of data from several producers ensures 
that the data are truly representative and do not reflect peculiar 
circumstances of a particular company.
    The respondents argue that the Department has repeatedly recognized 
that the Indian producers' steel prices are inherently flawed and, 
thus, has refused to use these values. See Tapered Roller Bearings and 
Parts Thereof, Finished and Unfinished, From the People's Republic of 
China; Final Results and Partial Termination of Antidumping Duty 
Administrative Review, 62 FR 6173 (February 11, 1997) (``TRBs 8''), 
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, 
From the People's Republic of China; Final Results of Antidumping 
Administrative Review, 62 FR 61276 (November 17, 1997) (``TRBs 9''), 
and Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, 
From the People's Republic of China; Final Results of 1996-1997 
Antidumping Administrative Review and New Shipper Review and 
Determination Not to Revoke Order in Part, 63 FR 63842 (November 17, 
1998) (``TRBs 10'').
    The respondents note that the raw materials listed in the vast 
majority of the financial statements of the Indian producers, including 
SKF and FAG, are not broken down by type of steel and instead could 
include many different types of steel. Thus, the respondents maintain, 
the Department cannot discern the types of steel (e.g. steel bar, steel 
sheet, steel strip) that might be included in this category. Further, 
the respondents state that while Asian Bearing Company (``Asian 
Bearing'') provides a meaningful breakdown of its steel types, the 
Department has not used Asian Bearing data because of its questionable 
accounting practices and its designation in India as a ``sick'' 
company. Furthermore, according to the respondents, this single 
company's figure represents a ``value'' for only one company and, thus, 
cannot be representative of Indian steel values. The respondents also 
contend that the data from Tata Timken is essentially the petitioner's 
data, which the Department has repeatedly refused to use.
    Additionally, the respondents note that even petitioner 
acknowledges that the Indian steel market is protected by high tariffs 
and that domestic prices are higher than U.S. prices, a fact which 
further lessens the reliability of Indian producers steel costs. 
Furthermore, the data from the producers' financial statements would 
include domestic Indian taxes and Indian import duties, information the 
Department has attempted to avoid.
    Finally, respondents state that the Indian producer data is not 
verified. The respondents note that the Department has a clear 
preference for verifiable, public information. See Notice of Final 
Determination of Sales at Less Than Fair Value: Manganese Sulfate From 
the People's Republic of China, 60 FR 52155 (October 5, 1995) and Final 
Determination of Sales at Less Than Fair Value: Certain Carbon Steel 
Butt-Weld Pipe Fittings From the People's Republic of China, 57 FR 
21058 (May 18, 1992) (``Carbon Steel Butt-Weld Pipe Fittings from the 
PRC''). Thus, the respondents argue that the Department should not use 
Indian producer's steel data in the final results.
    Department's position: We disagree with petitioner that Indian 
bearing producers' financial statement data should be used to derive a 
surrogate price to value bearing quality steel. Section 773(c)(1) of 
the Act states that, for purposes of determining normal value in a 
nonmarket-economy country, ``the valuation of the factors of production 
shall be based on the best available information regarding the values 
of such factors in a market economy country or countries considered to 
be appropriate by the administering authority.'' We have indicated in 
past reviews that our preference is to value factors using publicly-
available information. See, e.g., TRBs 8, TRBs 9, and TRBs 10. In 
addition, our longstanding practice is to rely, to the extent possible, 
on public statistics on surrogate country information to value any 
factors for which such information is available over company-specific 
data. See Carbon Steel Butt-Weld Pipe Fittings from the PRC. We view 
public statistics to be the best available information because they 
reflect prices for an entire country and not one specific company. 
Therefore, we continue to rely on import statistics from India and 
Indonesia and not from a particular company.
    Even if we were to look at the individual producer's financial 
statements of the seven companies for which petitioner submitted data 
concurrent with the POR, only two companies, Asian Bearing and Tata 
Timken, break out steel costs according to the type of steel (steel 
bar, steel sheet, steel strip) used to produce specific TRB parts. 
Because the other five companies did not break out the specific types 
of steel used in production, we cannot accurately value each of the 
individual steel types used in the production of the subject 
merchandise as we are able to do based on import statistics.
    Of the two companies that do break out their steel costs by steel 
type, only Asian Bearing separately identifies ``steel bars,'' the 
steel input used by the Chinese respondents to produce cups, cones, and 
rollers. However, Asian Bearing provides a single cost for steel bar 
and does not provide specific costs according to the type of bar used 
(e.g., hot-rolled versus cold-rolled). Therefore, we cannot accurately 
value the two types of steel bar used in the production of cups and 
cones versus that used in the production of rollers. Accordingly, Asian 
Bearing's average

[[Page 61839]]

cost of steel bars is not a sufficiently accurate value for the purpose 
of valuing steel used in the production of cups, cones, and rollers.
    Because we have surrogate data derived from public statistics that 
allow us to value the hot-rolled and cold-rolled bars used to produce 
the components of tapered roller bearings, we continue to rely on such 
data instead of the data on material costs from the Indian bearing 
manufacturers' financial statements.

Comment 2: Reliability of Indian Import Statistics and the U.S. 
Benchmark

    Petitioner argues that, if Indian producer data is not used by the 
Department to value bearing quality steel, Indian import statistics are 
the next best source. Petitioner states that Indian import statistics 
are preferable to any other trade statistics because they are data from 
the primary surrogate; the Indian bearing industry is large, with the 
result that imports into India are likely to include a substantial 
portion of bearing quality steel; and there is no evidence that the 
Indian statistics are unreliable.
    Petitioner further argues that Indian import statistics for steel 
used in the production of cups and cones should not be deemed 
unreliable after comparison to an average of U.S. import statistics 
because the U.S. import category that is being used for comparison 
purposes includes imports of non-alloy steel that require case 
hardening. According to petitioner, case-hardened steel differs from 
the through-hardened grade 52100 steel used by Chinese manufacturers 
because of its carbon content, production process, and use. Petitioner 
further argues that there is a price difference between these two types 
of steel, with case-hardened steel being significantly lower in price. 
Therefore, the range of prices in this category can be only a rough 
gauge of the value of the grade 52100 steel used by Chinese producers.
    Petitioner further argues that a modified U.S. benchmark consisting 
of one of the prices in the U.S. range, U.S. imports from Sweden 
(which, petitioner argues, consists of grade 52100 steel), as well as 
other world-market factor values on the record are similar in price to 
both the Indian producer and the Indian import data. Thus, petitioner 
argues that both sets of Indian data are reasonable and should be found 
to be a reliable source from which to obtain steel values for steel 
used to produce cups and cones.
    The respondents argue that the Department was correct in rejecting 
Indian import data for use in valuing the hot-rolled alloy steel bars 
for the production for cups, cones, and rollers. Respondents note that, 
in the past seven reviews, the Department has declined to use Indian 
import statistics to determine surrogate values for certain types of 
steel because they were found to be unreliable. The respondents further 
note that, after a comprehensive analysis, the Department reaffirmed 
its stance in both the AR and NSR Preliminary Results.
    The respondents state that the Department has exhaustively 
demonstrated in this and previous reviews that Indian import data for 
cups and cones under harmonized tariff schedule (``HTS'') category 
7228.3019 is too general and does not correspond to bearing-quality 
steel. In addition, the respondents argue that the petitioner's 
contention that Indian import statistics are not unreliable when 
compared to a modified U.S. basket category that excludes lower-priced 
case-hardened steel is based purely on conjectural and anecdotal 
evidence. The respondents cite to TRBs 10 in noting that this argument 
was rejected in prior segments of this proceeding. The respondents note 
that when the Indian statistics are compared to the proper U.S. 
benchmark, Indian import prices for steel used in the manufacture of 
cups and cones are almost double in price.
    Moreover, the respondents disagree with petitioner's contention 
that the U.S. benchmark used by the Department for cups and cones, HTS 
category 7228.30.20, contains case-hardened steel. The respondents note 
that Additional U.S. Note 1(h) to Customs chapter 72 defines ball 
bearing steel as ``having not less than .95 percent nor more than 1.13 
percent of carbon.'' The respondents note that the petitioner stated 
that case-hardened steel consists of a carbon content of 0.2 percent. 
Thus, according to the respondents, case-hardened steel cannot be 
included in this category.
    The respondents also argue that, although petitioner is an 
international producer of bearings, it has not made any effort to 
supply its own invoices which could help to establish a surrogate price 
for bearing quality steel. Furthermore, the prices petitioner did 
supply are not supported with any documentation, and, in addition, 
buttress the respondents' contentions that the Indian data are 
unreliable.
    Department's position: In accordance with our practice, we first 
looked at data from the primary surrogate, India, to determine the best 
available information for use in valuing TRB components. Consistent 
with past reviews, we used U.S. import data as a benchmark for 
determining proper values for hot-rolled alloy steel bars for the 
production of cups and cones, cold-rolled bearing quality steel bar 
used in the production of rollers, and cold-rolled steel sheet for the 
production of cages. We used U.S. import data as a benchmark because 
the U.S. HTS category is the only HTS customs category that provides a 
further break-down into a bearing-quality steel category. The use of 
such a benchmark has been upheld by the Court of International Trade 
(``CIT''). See, e.g., Timken Company v. United States, Slip Op. 99-73, 
at 13 (``Timken v. U.S.'').
    Accordingly, consistent with prior reviews, we used U.S. import 
data under HTS category 7228.30.20 as a benchmark for hot-rolled 
bearing quality steel bar used to manufacture cups and cones. We 
disagree with petitioner that data in this U.S. category is skewed due 
to the inclusion of case-hardened steel, which, according to 
petitioner, is not used by Chinese producers and is significantly lower 
in price than through-hardened steel. There is no definitive evidence 
on the record indicating that U.S. imports are comprised of either 
case-hardened or through-hardened steel. There is also no definitive 
evidence on the record that the Indian import statistics do not also 
include case-hardened and through-hardened steel.
    Although we disagree with petitioner that the data in the U.S. 
benchmark category is skewed because of the inclusion of different 
types of bearing quality steel, we agree that the range of prices 
contained in HTS category 7228.30.20 can be used to gauge the 
reliability of Indian import values. In examining the U.S. import data 
from this category, the range of prices from the countries with the 
most significant volumes of sales is approximately $642 to $834 during 
the period covered by the administrative review and $622 to $866 for 
the new shipper review period. The prices comprising this range 
represent sales made in significant quantities to the United States. 
Thus, to determine the reliability of surrogate values for hot-rolled 
alloy steel bars for the production of cups and cones, we compared them 
to the range of U.S. import values in this particular HTS category.
    After comparing the range of U.S. prices to the Indian import data 
from Indian import category 7228.3019, we disagree with petitioner that 
Indian import data from this category should be used for valuing 
certain TRB components. (We note that, as we have repeatedly found in 
the past, we were unable to isolate bearing quality steel in Indian 
import category 7228.30 because none of the eight-digit sub-categories

[[Page 61840]]

within 7228.30 specifically include bearing quality steel bar. Only the 
``Others'' category, 7228.3019, could contain the type of bearing 
quality steel used in the production of cups and cones. Thus, we used 
7228.3019.) In comparing these data from 7228.3019 to the range of 
prices found within U.S. import category 7228.30.20 (the only import 
category on the record which explicitly contains only bearing quality 
steel), the Indian values continue to be unreliable because the values 
for these imports remain significantly higher than any price in the 
U.S. import range. Therefore, we continue to find that Indian import 
prices from category 7228.3019 are unreliable for use in valuing steel 
used in the manufacture of cups and cones.
    Because we found the Indian import statistics and the company-
specific data to be unreliable, we turned to the examination of the 
next best available information: Japanese exports to India. As we found 
in prior reviews (e.g., TRBs 10), the Japanese export statistics 
provide a breakdown of the broad six-digit 7228.30 category into 
several more narrowly defined sub-categories. Japanese category 
7228.30.900, ``Bars and Rods, of Other Alloy Steel,'' is a category 
which would include the type of bearing quality steel bar that would be 
used to manufacture cups and cones. Thus, we consider these Japanese 
data on exports to India to be an appropriate and more accurate 
reflection of Indian import values.
    In comparing this category to the range of values contained in the 
U.S. benchmark category, 7228.30.20, we found that these Japanese 
export prices to India fall within the range of the values in the U.S. 
category. Because this Japanese tariff category is the narrowest 
category which could contain bearing quality steel, and because it is 
consistent with values contained in our U.S. benchmark category, we 
believe that these data are the best alternative for valuing steel used 
in the production of cups and cones. It is the Department's stated 
preference to use information from its primary surrogate to the extent 
possible. (See section 351.408(c)(2) of the Department's regulations.) 
Because these data relate to our primary surrogate and are within the 
price range of the U.S. benchmark category, we have not analyzed data 
from our secondary surrogate, Indonesia, to find a value for steel used 
to produce cups and cones. Therefore, we are using data related to our 
primary surrogate, India, i.e., Japanese data on exports to India from 
category 7228.30.900, to value steel bar used in the manufacture of 
cups and cones.

Comment 3: Use of Indonesia as a Surrogate and Data on Indonesian 
Imports/Japanese Exports to Indonesia

    Petitioner argues that Japanese exports to Indonesia and Indonesian 
imports do not provide appropriate surrogate values for the bearing 
industry. First, petitioner contends that Indonesia is not a proper 
surrogate because its bearing industry is small, does not produce TRBs, 
and is not a significant importer of bearing quality steel. Second, 
petitioner argues that both Indonesian imports and Japanese exports to 
Indonesia must consist of steel other than bearing quality steel since 
the Indonesian bearing industry is so small. Therefore, petitioner 
contends that Indonesian values are not representative of the cost of 
materials incurred by the Chinese bearing industry.
    According to petitioner, there are only two Indonesian bearing 
producers, PT Logam Sari Bearindo and an NSK affiliate. Petitioner 
estimates that the total annual bearing production of the two companies 
combined would be only 1,142 metric tons, which would account for 
substantially less than the total volume of Japanese exports to 
Indonesia under HTS category 7228.30.900 of 1,647 metric tons. 
Petitioner further argues that steel imports into Indonesia are not 
even remotely comparable to the steel requirements of the Chinese 
bearings industry that had over $32 million in bearing exports to the 
United States alone during the POR. Petitioner contends that these data 
indicate that Indonesia is not a significant bearing producer for 
purposes of being used as a surrogate country for China. Furthermore, 
petitioner argues that because Indonesia was more deeply affected by 
the Asian financial crisis, China and India are much more comparable in 
terms of economies for the POR than are China and Indonesia.
    The respondents disagree, arguing that Indonesia is a proper 
surrogate and its import data (including Japanese exports to Indonesia) 
is proper to use for valuing steel inputs. The respondents note that 
the Department has repeatedly determined that Indonesia is a 
significant producer of bearings citing to TRBs 10 and Tapered Roller 
Bearings and Parts Thereof, Finished and Unfinished, From Romania, 
Final Results of Antidumping Duty Administrative Review, 63 FR 11217 
(March 6, 1998) (``TRBs From Romania 98''). Furthermore, the Department 
has confirmed through Indonesian export statistics that Indonesia is a 
significant producer of tapered roller bearings. Thus, the respondents 
argue that Indonesia is a proper surrogate country choice.
    The respondents also disagree with the petitioner's assertion that, 
because the Indonesian industry is small, the majority of the 
Indonesian steel imports and exports from Japan must not be bearing 
quality steel. The respondents argue that even if there are only two 
Indonesian bearing manufacturers (an assertion that respondents note 
the petitioner has not provided evidence of), the record demonstrates 
that the two companies did produce a significant amount of bearings, 
which the respondents estimate to be 2,519 metric tons. Thus, according 
to the respondents, a significant amount of the hot-rolled steel 
exported to Indonesia from Japan and the cold-rolled steel imported by 
Indonesia likely consisted of bearing quality steel. Therefore, these 
prices are representative of the cost of steel used to make TRBs 
components.
    Furthermore, the respondents argue that the Indonesian data are 
consistent with the U.S. benchmark and the prices paid by Chinese 
producers for market-economy inputs imported during these review 
periods. Thus, they are more reliable than Indian steel data. Lastly, 
the respondents note that the benchmark posited by petitioner is 
unsupported and uncorroborated.
    Department's position: We disagree with petitioner that Indonesia 
is not a proper surrogate for use in valuing certain steel inputs for 
TRBs. Although India is the primary surrogate in this review, it is our 
practice to use data from a secondary surrogate when data from the 
primary surrogate is found to be unreliable. See, e.g., Final 
Determination of Sales at Less Than Fair Value: Certain Partial-
Extension Drawer Slides From the PRC, 60 FR 54472, 54475-76 (October 
24, 1995) and Chrome-Plated Lug Nuts from the PRC; Final Results of the 
Antidumping Duty Administrative Review, 61 FR 58514, 58517-18 (November 
15, 1996). We have used Indonesia as a secondary surrogate in several 
cases involving the PRC where, as here, Indian data for certain TRB 
components was found to be unreliable, even though India was the 
primary surrogate. See TRBs 10. Moreover, just as we have determined in 
these reviews, we have repeatedly determined that Indonesia is a 
significant producer of bearings. See TRBs From Romania 98. Thus, we 
have continued to use Indonesia as a secondary surrogate for purposes 
of these reviews.
    As discussed in Comment 2 above, in order to determine the proper 
surrogate to use in valuing steel inputs for certain TRB components, we 
first looked at

[[Page 61841]]

import data from India, our primary surrogate. For cups and cones, we 
looked at both Indian import prices and Japanese export prices to 
India. Because we found that Indian import values, as reflected in the 
export data, were within the range of prices in our U.S. benchmark 
category for cups and cones, we have not resorted to the use of 
Indonesian data.
    With regard to steel used in the production of rollers, we continue 
to use Indonesian import data. In the Preliminary Results of both 
segments, we determined that Indian data were unreliable for purposes 
of valuing steel used in the production of rollers. None of the 
comments submitted by the parties has led us to change that conclusion. 
Thus, because Indonesian import statistics were found to be consistent 
with the U.S. benchmark for steel used in the manufacture of rollers, 
we are continuing to use Indonesian import statistics from HTS category 
7228.50.000 to value steel used in the manufacture of rollers.

Comment 4: Valuation of Alloy Steel Scrap

    Petitioner argues that the scrap value the Department assigned to 
steel scrap generated from the manufacture of cups, cones, and rollers 
in the new shipper review, which was derived from Japanese export data 
to Indonesia from HTS category 7204.29.000, was incorrect. Petitioner 
notes that the ratio of scrap to new steel prices for cups and cones 
was almost 42 percent, a percentage which, according to the petitioner, 
is implausible. Petitioner argues that this indicates that the category 
repeatedly used by the Department to value alloy steel scrap from the 
production of cups, cones, and rollers, HTS category 7204.29, is 
inappropriate.
    Petitioner argues that it is unlikely that scrap generated from the 
production of cups, cones, and rollers consists of only pure alloy 
steel. Instead, petitioner contends that it is commingled with metal 
from the grinding wheels and tools and with sheet steel from the cage-
making operations. According to petitioner, under General Rule of 
Interpretation 3 (``GRI 3''), all scrap from TRBs is properly 
classified under HTS category 7204.41, which covers turnings and 
shavings. Therefore, the Department should use HTS category 7204.41 to 
value cup, cone, and roller scrap.
    The respondents disagree with petitioner, stating that the 
Department has previously rejected the petitioner's argument on this 
issue. The respondents argue that petitioner incorrectly relies on GRI 
3 for the premise that all scrap from TRB production should be 
classified under HTS category 7204.41. The respondents note that GRI 3 
directs that ``the heading which provides the most specific description 
shall be preferred to headings providing more general descriptions.'' 
Furthermore, GRI 3 requires Customs to classify the composite goods 
``as if they consisted of the material or component which gives them 
their essential character'' which, in this case the respondents argue, 
would be alloy steel scrap. Finally, the respondents argue that because 
the Department confirmed its scrap classification with Customs, it 
should continue to use HTS category 7204.29.00 to value waste and scrap 
generated from the manufacture of cups, cones, and rollers.
    With regard to the administrative review, the respondents agree 
with the petitioner's contention that consistency requires that the 
Department apply factor and scrap values from the same surrogate 
country. Thus, the respondents state that for the administrative 
review, the Department should use Japanese exports of alloy steel scrap 
to Indonesia under HTS category 7204.29.000 to value the scrap for the 
production of cups, cones and rollers.
    Department's position: As noted in Comment 2 above, we have valued 
steel used to manufacture cups and cones based on data regarding 
Japanese exports to India for both the new shipper review and the 
administrative review. Therefore, in accordance with our practice, we 
have valued scrap generated from the manufacture of cups and cones from 
the same surrogate source, India, for both reviews. Because we are no 
longer using Japanese export data to Indonesia for this value, 
petitioner's argument regarding Japanese exports to Indonesia is no 
longer applicable.
    We disagree with petitioner that the category repeatedly used by 
the Department to value alloy steel scrap from the production of cups, 
cones, and, in this particular case, rollers, is inappropriate. As 
discussed in our Steel Values Memorandum and as stated in the AR and 
NSR Preliminary Results, we confirmed with the Customs Service that HTS 
category 7204.29 is the proper category to use in valuing this type of 
scrap. As stated in prior reviews, although the PRC cup and cone 
production process may generate lower quality scrap, the by-product is 
still bearing-quality steel scrap. Scrap under HTS category 7204.41 is 
of a grade and value inferior to bearing quality steel scrap contained 
in HTS category 7204.29. Because steel used in the production of cups 
and cones is bearing quality steel, scrap generated through the 
production process must be of a corresponding grade. Therefore, we have 
continued to use HTS category 7204.29 to value scrap derived from the 
production of cups, cones and rollers.
    Additionally, although the respondents' specific arguments with 
respect to the source of scrap valuation are not completely applicable 
because we are no longer using Japanese exports to Indonesia for our 
valuation, we are addressing the comment because we have used Japanese 
export data for our valuation of the steel used in the production of 
cups and cones. We disagree with the respondents that the Department 
should use Japanese exports of alloy steel scrap to the applicable 
country under HTS category 7204.29.000 to value the scrap for the 
production of cups, cones and rollers in order to be consistent in 
valuing the factors and scrap values from the same surrogate country. 
As noted above in Comment 2, the use of data for Japanese exports to 
India or Indonesia is effectively a refinement of Indian and Indonesian 
import data, respectively. As we regard Japanese exports to India as 
reflecting Indian import values, and Japanese exports to Indonesia as 
reflecting Indonesian import values, the use of an Indian or Indonesian 
import value to value scrap is, in fact, consistent.

Comment 5: Elimination of Small Quantities

    Luoyang and ZCCBC argue that the Department should eliminate from 
its calculations of cup and cone values data on two monthly shipments, 
January 1998 and May 1998, that were of small import quantity and 
``whose per-unit value is substantially different''--higher in this 
case--``from the per-unit values of the larger quantity imports of that 
product from other countries.'' According to the respondents, the CIT 
has recently noted that this is the Department's established 
administrative practice. See Shakeproof Assembly Component Division of 
Illinois Tool Works Inc. v. United States, Slip Op. 99-70, at 11 
(``Shakeproof''), Heavy Forged Hand Tools, Finished or Unfinished, With 
or Without Handles, from the People's Republic of China, Final Results 
of Administrative Reviews, 62 FR 11813 (March 13, 1997) and Tapered 
Roller Bearings and Parts Thereof, Finished and Unfinished, From 
Romania, Final Results of Antidumping Duty Administrative Review, 62 FR 
37194 (July 11, 1997).

[[Page 61842]]

    Petitioner agrees with the respondents that the Department's normal 
practice, which has been upheld by the CIT in Shakeproof, is to 
eliminate from the calculation imports from market-economy countries 
that were made in small quantities. However, petitioner notes that this 
practice is to exclude small quantity imports from certain countries as 
a whole when their prices appear aberrational in comparison with 
imports from other countries, not selected monthly entries from a 
certain country. See Shakeproof. Furthermore, if the Department 
excludes entries for these two months because they were too high, by 
the same reasoning the Department should also exclude export prices in 
two other months, August 1997 and March 1998, because they are lower 
than the average price.
    Department's position: Because we are no longer using Japanese 
export data to Indonesia to value steel used in the production of cups 
and cones, it is no longer necessary to address these comments.

Comment 6: Elimination of May 1998 Data

    Luoyang and ZCCBC argue that the May 1998 data used in cup and cone 
calculations that was derived from Japanese exports to Indonesia should 
be excluded from the calculations because some or all of these exports 
probably entered Indonesia after the end of the POR. Thus, these values 
would not represent values during the POR.
    Petitioner disagrees with this argument, indicating that there is 
no prior practice on this issue. Petitioner states that the issue is 
not the precise timing of when the factor values occur, but whether the 
values represent reasonably contemporaneous factor values in the 
surrogate market. Thus, there would be no reason to exclude shipments 
made during the last month of the POR.
    Department's position: Because we are no longer using Japanese 
export data to Indonesia to value steel used in the production of cups 
and cones, this argument is no longer applicable.
1(b) Labor Valuation

Comment 7: The Regression-Based Wage Rate Should Be Adjusted Upwards

    Petitioner argues that the Department should adjust the regression-
based wage rate upwards to reflect a fully-loaded labor cost. 
Petitioner contends that the use of wages as the basis for valuing 
labor substantially understates the cost of labor to the manufacturer 
because wage rates do not include all labor costs such as welfare fund 
payments, unemployment taxes and health care costs. In support of its 
argument, petitioner refers to the International Labor Organization's 
1998 Yearbook of Labor Statistics (``YLS''). Petitioner notes that, in 
addition to the data on ``manufacturing wages'' which the Department 
used for its regression analysis, the YLS also contains a separate 
section on ``labor costs'' that includes the cost of employee benefits 
not captured in the ``manufacturing wages'' section. According to 
petitioner, this information shows that labor costs were 67 percent 
higher than the wage rates used by the Department.
    Petitioner further notes that these expenses are not captured in 
the Department's overhead and SG&A ratios because the Indian bearing 
companies report expenditures associated with labor separately from 
other expenses. Therefore, the Department should recalculate its 
regression analysis using the ``labor costs'' reported in the YLS, 
thereby computing a fully-loaded labor rate.
    The respondents contend that the Department properly applied the 
regression-based wage rate as provided in section 351.408(c)(3) of its 
regulations. The respondents further argue that inclusion of other 
labor costs would distort the Department's valuation of labor because 
Chinese producers do not incur the same labor costs as market economy 
producers.
    Department's Position: Our regulations at section 351.408(c)(3) 
state that ``the Secretary will use regression-based wage rates 
reflective of the observed relationship between wages and national 
income in market economy countries.'' Therefore, to value the labor 
inputs in both reviews, we applied the PRC regression-based wage rate 
published by the Import Administration on its website, which was last 
revised in May 1999.
    With respect to petitioner's argument, we disagree. The YLS states 
that the wage rates, used to calculate the regression analysis are 
comprehensive wage rates which also includes overtime, bonuses, holiday 
pay, incentive pay, pay for piecework, and cost-of-living allowances. 
See Magnesium from the People's Republic of China, Final Results of 
Antidumping Duty New Shipper Administrative Review, 63 FR 3085, 3091 
(January 21, 1998). Thus, for purposes of these final results, we have 
not adjusted the regression-based wage rate used in the preliminary 
results.
1(c) Overhead, SG&A and Profit

Comment 8: Excluding Asian Bearing Company and National Engineering 
Company

    Premier and Weihai state that the Department properly excluded the 
companies Asian Bearing and National Engineering Company (``NEI'') from 
the list of Indian bearings producers utilized for calculating the 
overhead, SG&A and profit ratios because the reporting methodology used 
by these two companies is inconsistent with the Indian GAAP standards 
used by the remaining six companies.
    Petitioner contends that there is no evidence that the accounting 
policies of Asian Bearing and NEI are inconsistent with the methodology 
used by the other six Indian producers. Therefore, the Department 
should include the financial information of Asian Bearing and NEI into 
its calculation of overhead, SG&A and profit. Petitioner further argues 
that incorporating the financial data of all eight Indian bearings 
producers more accurately represents the range of operating results 
that may be expected of bearings producers in China, which is 
consistent with the Department's surrogate methodology.
    Department's Position: We disagree with petitioner and have 
excluded the data for Asian Bearing and NEI in calculating surrogate 
overhead, SG&A and profit ratios because, according to the Auditor's 
Reports, the methodology used in recording and reporting the financial 
condition of these two companies appears, in certain instances, to be 
inconsistent with the methodology (i.e., Indian GAAP) used by the 
remaining six companies.
    In this review, the Auditor's Report included with Asian Bearing's 
1997-98 financial statements expresses a clear reservation about how 
certain interest expenses (with their corresponding effects on 
depreciation and other expenses) have been reported, noting that the 
methodology is not in accordance with accounting principles recommended 
by the Institute of Chartered Accountants of India. The Auditor's 
Report also notes that Asian Bearing continues to be a ``sick'' company 
as defined by India's Sick Industrial Companies Act. Likewise, the 
auditors' endorsement of NEI's 1997-98 Financial Statements, as 
contained in the Auditor's Report, includes qualifications regarding 
the company's treatment of various overhead and SG&A expenses. As in 
TRBs 10, the qualifications indicate that the treatment of these 
expenses is not consistent with Indian GAAP.

[[Page 61843]]

    Given these significant differences, it would be incongruous to 
combine the reported data of all eight companies.

Comment 9: The Department Should Recalculate Surrogate Factory Overhead 
and SG&A

    Luoyang and ZCCBC argue that in order to be consistent with the 
methodology applied in other NME proceedings, the Department should 
calculate overhead and SG&A expenses as a percentage of total cost of 
manufacturing (``COM''), citing to Heavy Forged Hand Tools, Finished 
and Unfinished, With or Without Handles, From the People's Republic of 
China; Final Results and Partial Recession of Antidumping 
Administrative Reviews, 64 FR 43659, 43671 (August 11, 1999) and 
Certain Helical Spring Lock Washers from the People's Republic of 
China; Preliminary Results of Antidumping Duty Administrative Review, 
64 FR 37743, 37744 (July 13, 1999).
    Petitioner contends that the issue to be addressed is whether the 
denominator used in the Department's calculation of the overhead and 
SG&A ratios represents the same expenses to which the ratios are 
applied. According to petitioner, the Department's calculation 
methodology is reasonable because the respondents are unable to 
demonstrate a flaw in our calculation methodology.
    Department's Position: Although we agree with respondents that we 
will normally calculate overhead and SG&A expenses as a percentage of 
COM, we have modified our methodology with respect to this proceeding 
because we are unable to separately value the direct and indirect labor 
expenses reported by the Indian producers. Therefore, we used the 
average of the Indian producers' reported data with respect to the 
numerator (reported overhead and SG&A expenses) and the denominator 
(direct input costs excluding labor), thus yielding internally 
consistent ratios. These ratios, when multiplied by our calculated FOP 
values, constitute the best available information concerning overhead 
and SG&A expenses that would be incurred by a PRC bearings producers 
given such FOP data.

Comment 10: Excluding ``Net Loss (Gain) on Fixed Assets Sold''

    Premier and Weihai contend that the Department improperly included 
the category ``Net Loss (Gain) on Fixed Assets Sold'' as an element of 
overhead. They argue that this category should be excluded from 
overhead expenses because these losses (gains) are incurred independent 
of manufacturing or selling activities.
    Petitioner notes that the Department has specifically rejected the 
respondents' argument in previous reviews. See, e.g., TRBs 10. Further, 
petitioner argues that the respondents have failed to provide any new 
evidence or argument that should persuade the Department to change its 
position.
    Department's Position: We agree with Petitioner that the ``Net Loss 
(Gain) on Fixed Assets Sold'' should be included in the calculation of 
the overhead ratio. As discussed in TRBs 10, the Department has 
addressed this issue previously in TRBs 8. In that review, we stated 
that losses '' * * * incurred in selling fixed assets used to 
manufacture merchandise clearly [are] related to manufacturing 
activities.'' See TRBs 8 at 62 FR 6184. This is so because ``Net Loss 
(Gain) on Fixed Assets Sold'' identifies the relevant capital cost of 
the assets used in manufacturing, and therefore, as with depreciation, 
this line item should be included in overhead. Accordingly, we have 
continued to include this category in our overhead calculation for the 
final results.

Comment 11: Excluding ``Other Expenses'' from Factory Overhead and SG&A 
Calculations

    Premier and Weihai argue that the category ``Other Expenses'' or 
``Miscellaneous Expenses'' reported in several of the Indian producers' 
financial statements should not be included in the overhead and SG&A 
calculations because there is insufficient information to determine 
whether all of these expenses are related to the production of TRBs.
    Department's Position: This issue has been raised in earlier 
reviews, and our position remains unchanged. As stated in TRBs 10, we 
cite to our position on this issue in Tapered Roller Bearings and Parts 
Thereof, Finished or Unfinished, From the Republic of Romania; Final 
Results and Rescission in Part of Antidumping Duty Administrative 
Review, 61 FR 51427 (October 2, 1996) (``TRBs from Romania 96''). In 
that review, we stated, ``[t]he Department generally does not dissect 
the overhead rate on a surrogate country and apply only components 
relevant to the producer. It is generally not possible to break the 
surrogate overhead value into its individual components at a level of 
detail that would be necessary to value each individual component of 
the NME producer's overhead. * * * Rarely, if ever, will it be known 
that there is an exact correlation between overhead expense components 
of the NME producer and the components of the surrogate overhead 
expenses. Therefore, * * * the Department normally bases normal value 
completely on factor values from a surrogate country on the premise 
that the actual experience in the NME cannot meaningfully be 
considered. Accordingly, Department practice is to accept a valid 
surrogate overhead rate as wholly applicable to the NME producer in 
question.'' See TRBs from Romania 96, at 61 FR 51429. For these same 
reasons, we have continued to include these other expenses in our 
overhead and SG&A calculations for the final results.

Comment 12: Commission Expenses

    Premier and Weihai argue that the Department incorrectly included 
``Other Commissions'' in its SG&A calculation. They argue that this 
category should be excluded from SG&A expenses because these types of 
expenses are either valued directly (individually) elsewhere in the 
Department's FOP calculation and are, therefore, double-counted, or are 
otherwise not applicable to the Chinese respondents.
    Department's Position: We disagree that commissions should be 
excluded. In TRBs 10 we explained that commissions are standard selling 
costs and, as such, are properly categorized under SG&A. See TRBs 10, 
63 FR 63852. Whether PRC producers have commissioned sales staff is 
irrelevant. As discussed in our position under the previous comment, we 
cannot tailor surrogate overhead or SG&A rates to match the 
circumstances in the NME country. Therefore, for our final results we 
have included all commission expenses as part of SG&A.

Comment 13: Excluding ``Consumption of Traded Goods'' from Overhead 
Rate Calculation

    With respect to the administrative review, petitioner argues that 
the Department should exclude the category ``Consumption of Traded 
Goods'' from the denominator in calculating the factory overhead ratio 
because this category includes items which are only purchased and 
sold--but not produced--by the Indian bearings producers and, 
therefore, have nothing to do with the producers' manufacturing 
operations. Furthermore, the CIT recently instructed the Department to 
exclude the purchases of traded goods from the cost of manufacture with 
respect to the 1994-95 administrative review of TRBs because ``Commerce 
failed to demonstrate how these already manufactured goods constitute a 
material cost incurred in manufacturing the subject merchandise.'' See 
Timken

[[Page 61844]]

v. U.S. Petitioner notes that the Department followed this ruling in 
the preliminary results of the new shipper review.
    Luoyang and ZCCBC argue that any adjustment to the ``Consumption of 
Traded Goods'' category should be accompanied by a downward adjustment 
to the profit ratio because the sale of ``traded goods'' is a source of 
revenue for Indian bearing producers.
    Department's Position: We disagree that we should exclude 
``Consumption of Traded Goods'' from the direct input costs calculated 
for the Indian bearings producers. Although the CIT did instruct the 
Department to exclude the purchases of traded goods from the cost of 
manufacture with respect to the 1994-95 administrative review of TRBs 
in Timken v. U.S., that ruling is not yet final. Thus, we are not 
compelled to apply the court-directed methodology in these reviews.
    We further note that we excluded ``Consumption of Traded Goods'' 
from our direct input costs calculation in the preliminary results of 
the new shipper review. Again, because Timken v. U.S. ruling is not yet 
final, we have revised our preliminary calculations to include the 
traded goods amount in direct input costs.

Comment 14: Power Should Not Be Classified As A Direct Cost

    Premier and Weihai note that in TRBs 8 the Department properly 
classified power and fuel as an element of overhead rather than as a 
direct material input. Accordingly, the Department should revise its 
preliminary overhead and SG&A calculations to comply with past 
precedent.
    Petitioner counters that section 773(c)(3) of the Act requires that 
the Department separately identify, quantify and value all ``energy and 
utilities consumed'' in producing subject merchandise. Petitioner 
contends that, given the statutory language, there is no basis for 
allocating electricity usage between direct costs and other activities. 
Furthermore, petitioner notes that in TRBs 8 the respondents had not 
reported their energy consumption and, therefore, this factor could not 
be properly valued as required by the statute.
    Department's Position: As noted by petitioner, our treatment of 
electricity in this case can be distinguished from TRBs 8, where we 
incorporated the consumption of energy as part of overhead. The present 
case is distinct because we have been able to quantify and value energy 
as a factor input. Therefore, we have not altered our calculation 
methodology for these final results. See TRBs 10, 63 FR 63858.

Comment 15: Reliability of Market-Economy Input Prices

    The petitioner argues that because the price structure of China's 
domestic market is distorted by pervasive government intervention, 
imports into China are unreliable indicators of market values. 
According to the petitioner, in order for many market-economy exporters 
to compete in China, they must lower their prices to levels below 
world-market price levels. In light of the above, the petitioner states 
that the Department should be ``extra cautious'' in accepting any value 
based on purchases by an NME producer. Thus, the petitioner argues that 
the Department should assume that imports from market-economy countries 
are not reliable market values unless there is evidence that such 
values are otherwise consistent with world-market prices.
    The petitioner further argues that the Act does not compel the 
Department to use market-economy prices of direct imports when valuing 
the factors of production. Rather, the petitioner notes that, based on 
the distortive nature of the Chinese economy, import prices paid by 
Chinese producers are not necessarily the best available information 
concerning the valuation of factors. Citing to Sigma Corp. v. United 
States (117 F.3d 1401, 1408 (Fed. Cir. 1997)), the petitioner notes 
that the Federal Circuit held that the Department must use a 
methodology that produces ``reasonably accurate estimates of the true 
value of the factors of production.'' According to the petitioner, the 
Department should not assume that a price paid in market-economy 
currency to a market-economy producer is a reasonably accurate estimate 
of the true value of the factor of production. The petitioner contends 
that such values should be scrutinized to the same degree that the 
Department examines possible surrogate values.
    Lastly, the petitioner notes that even if the Department uses 
market-economy prices of direct imports to value factors of production, 
the Department should not use such prices to value a larger volume of 
inventory than such purchases actually represent.
    Premier, Weihai, and Luoyang argue that market-based prices 
actually paid by respondents for imported inputs constitute the most 
accurate representation of the respondents' cost and should be used to 
value the inputs. According to Premier and Weihai, the Department's 
policy to use such prices is consistent with the Act, which states that 
the ``valuation of the factors of production shall be based on the best 
available information regarding the values of such factors in a market 
economy country or countries considered to be appropriate by the 
administering authority,'' and with Lasko Metal Products v. U.S. (43 
F.3d 1442, 1446 (Fed. Cir. 1994)) (``Lasko''), in which the Federal 
Circuit held that ``where we can determine that an NME producer's input 
prices are market determined, accuracy, fairness, and predictability 
are enhanced by using those prices.'' Therefore, Premier and Weihai 
argue that the Department should continue to use the actual prices of 
direct imports to value such inputs because the best available 
information is market-driven prices and costs.
    Premier and Weihai find the petitioner's argument concerning NME 
distortion of prices for direct imports to be without merit because, 
according to the respondents, the petitioner has not explained how the 
alleged distortions in the Chinese domestic economy can impact prices 
offered in third countries. Premier and Weihai also note that similar 
arguments were made to the Department in its recent rulemaking for the 
new regulations and the Department rejected such arguments in light of 
the increased accuracy achieved by using prices paid by NME producers 
to market-economy suppliers. See Antidumping Duties; Countervailing 
Duties, 62 FR 27296, 27366 (May 19, 1997) (``Final Rule'').
    Luoyang notes that the Department acted consistently with its 
regulations when it used the producer import price to value the entire 
factor input even though the imported input reflected less than 100 
percent of the factor input used. In support of its argument, Luoyang 
cites Certain Helical Spring Lock Washers From the People's Republic of 
China; Final Results of Antidumping Duty Administrative Review, 62 FR 
61794, 61796 (November 19, 1997) and the Draft Final Results of 
Redetermination On Remand Pursuant to Shakeproof Assembly Components 
Division of Illinois Tool Works, Inc. v. United States, Court No. 97-
12-02066 (September 9, 1999).
    Department's Position: In accordance with our established practice 
and our regulations, we are continuing to use the actual prices of 
directly imported steel to value steel inputs because these prices 
represent the actual market-based prices incurred in producing the 
subject merchandise and, as such, are the most accurate and appropriate 
values for this particular factor for the purpose of calculating NV. As 
noted by the respondents, this practice has been affirmed in court 
decisions, such as

[[Page 61845]]

Lasko, and is codified in our regulations at section 351.408(c)(1).
    As noted in our Final Rule, while we do not view the Lasko decision 
as permitting us to use distorted prices, we believe that the Court's 
emphasis on ``accuracy, fairness and predictability'' provides us with 
the ability to rely on prices paid by NME producers to market-economy 
suppliers in lieu of using surrogate values. See Final Rule at 62 FR 
27366. We disagree with the petitioner that imports into China are 
unreliable indicators of market values because China's domestic market 
is distorted by government intervention. While China's NME status 
indicates that domestic prices in China are unreliable, there is no 
evidence that domestic distortions impact the price at which market-
economy suppliers would offer products for sale to Chinese producers. 
We have no reason to assume that, when dealing with Chinese importers, 
market-economy suppliers ignore rules of supply, demand, and profit-
seeking behavior within a competitive world market.
    Even if we were to accept the petitioner's argument that excess 
steel supply in China leads foreign competitors to ``dump'' steel on 
the Chinese market, the petitioner has not presented evidence that 
there is an excess supply of the particular type of steel used in the 
production of TRBs nor evidence that such excess supply somehow renders 
the steel prices being offered to certain Chinese TRB producers by 
market-economy suppliers unreliable. There are a variety of reasons for 
setting a particular price higher or lower than a world benchmark in an 
arm's length transaction. In examining actual sales between private 
parties, the Department would have to be convinced by evidence on the 
record that the particular sale in question was in some way 
unrepresentative of market-economy forces. For example, we would be 
willing to disregard a price paid by an NME producer to a market-
economy supplier if the quantity of the input purchased in a given 
transaction is, for example, less than the volume that would normally 
be traded. Where the transaction is not in commercial quantities, the 
price may not be truly representative of a market price.

Comment 16: Use of Market-Economy Input Prices Obtained by Trading 
Companies

    Premier and Luoyang argue that, consistent with the Department's 
findings in TRBs 10 at 63 FR 63854 and the Final Results of 
Redetermination Pursuant to Court Remand (August 31, 1998), Olympia 
Indus., Inc. v. United States, Slip Op. 98-49 (April 17, 1998) 
(``Olympia II''), the Department should use import prices paid by PRC 
trading companies as surrogate data. Premier and Luoyang argue that the 
Department's determination in TRBs 10 supports the contention that 
market-based prices actually paid by Chinese producers for imported 
steel constitute the most accurate representation of the producer's 
cost of steel and, thus, should be used as surrogate data to value all 
steel inputs. Premier and Luoyang note that both the courts, in cases 
such as Lasko, and the Department have found that market-economy input 
prices of direct imports are the most appropriate and accurate basis 
for determining the values of the inputs used.
    With respect to trading company import prices, Premier and Luoyang 
cite to the Department's statement in the tenth review in which it said 
that the question is ``whether trading company import prices, as 
alternate surrogate data, are preferable to surrogate data from a 
market-economy country that is a significant producer and at a level of 
comparable economic development'' and notes that in the tenth review 
the Department did use trading company prices as alternate surrogate 
data. Luoyang notes that in Olympia II and as followed in TRBs 10, the 
Department set forth criteria to be used in evaluating whether 
alternate surrogate values would be used. Luoyang specifically cites to 
the Department's statement in TRBs 10 in which it said, ``To assess the 
reliability of the Chinese trading company's steel prices, we have 
examined the factors outlined in the Olympia II remand: (1) The value 
and volume of steel imports, (2) the type and quantity of the imported 
steel, and (3) consumption of imported steel by the NME producer.'' See 
TRBs 10 at 63 FR 63854. In the current case, Luoyang argues that the 
Department must apply these same criteria to determine whether the 
trading company's steel imports meet the Department's standard. 
According to Luoyang, the fact that a trading company rather than the 
producer is the importer should make no difference in determining the 
best surrogate value because the price paid for the actual input has to 
be considered as the ``best available information.''
    The petitioner argues that the record does not indicate that the 
prices of trading company imports were market determined. As discussed 
in Comment 15: Reliability of Market-Economy Input Prices, the 
petitioner notes that even market economy countries do not necessarily 
trade with China on a market-economy basis. According to the 
petitioner, the presence of a Chinese trading company as an 
intermediary adds further elements of distortion. As examples, the 
petitioner notes that in a market economy a trading company would add a 
markup and would get a different price than a producer because of its 
ability to purchase in volume for the needs of several producers. The 
petitioner argues that the Department would not be taking these 
differences into account if it used the price between the trading 
company and the market-economy supplier. Furthermore, the petitioner 
argues that in the absence of evidence that a sale to a trading company 
is a bona fide arm's length transaction, the Department should not 
regard the price of that sale as a reliable surrogate value and that, 
even if this requirement were met, a reasonable markup should be added 
to reflect the trading company's expenses and profit.
    Department's Position: For inputs that were purchased through a 
trading company, we have not used the Chinese trading company values, 
as requested by respondents. Instead, we used surrogate values from the 
appropriate market economy country.
    We recognize that in Olympia (Slip Op. 99-18), the Court, in dicta, 
stated that Commerce must test the reliability of the trading company 
value in order to determine whether it comprises the best available 
information for purposes of the FOP calculation. However, Commerce 
respectfully disagrees with the Court's interpretation of the statute. 
As we stated in our the Final Results of Redetermination Pursuant to 
Court Remand of Olympia Indus., Inc. v. United States, Slip. Op. 98-49 
(April, 17, 1998), page 6, nothing in the Lasko decision alters the 
statutory mechanism for selection of surrogate values. In Lasko, the 
Court merely recognized that, where the actual cost to the producer was 
a market economy price (and paid in a market economy currency), the 
actual cost to the producer was better information than a surrogate 
value. See Lasko, 43 F.3d at 1446. The selection of surrogate values is 
governed by section 773(c)(4) of the Act, which, as discussed above, 
establishes a preference for values from a comparable market economy 
that is a significant producer of comparable merchandise. Had Congress 
intended a preference for using import prices into the NME as surrogate 
values, it could easily have stated this preference.
    For these reasons, we continue to apply values from the selected 
surrogate countries instead of Chinese trading-company values in this 
review.

[[Page 61846]]

Comment 17: Premier Has Acted to the Best of Its Ability

    Premier argues that the Department's use of adverse facts available 
in the AR Preliminary Results, because it was unable to supply 
information from its unaffiliated suppliers, was not appropriate; nor 
was it consistent with the Department's past treatment. Premier argues 
that, despite its incomplete questionnaire response, it has cooperated 
to the best of its ability. Premier notes that it has provided evidence 
of its attempts to contact its suppliers in order to acquire FOP data 
and has also documented its suppliers' refusal to provide the requested 
FOP data. Premier further explains that its suppliers directly compete 
with Premier for sales of TRBs and that their reluctance to provide a 
competitor with sensitive production data does not indicate that 
Premier has acted in a non-cooperative manner.
    Premier suggests that because this concrete evidence is now on the 
record, Premier has proven that it acted to the best of its ability in 
cooperating with the Department in this review and, therefore, should 
not be adversely treated in the application of facts available. 
According to Premier, its actions in this review are identical to those 
in TRBs 8 where Premier cooperated with the Department, yet was unable 
to provide FOP data for all of its sales. The Department should, 
therefore, not resort to an adverse rate for those sales not covered by 
the FOP data supplied by Premier. Premier suggests that the Department 
apply a weighted-average margin calculated from those U.S. sales for 
which acceptable data was reported by Premier. Alternatively, Premier 
urges the Department to use the methodology from TRBs 8 in which the 
Department applied a simple average of the margins calculated for the 
other respondent companies.
    Petitioner insists that the Department rely upon adverse facts 
available when substantial data are missing for a particular 
respondent, as in the case of Premier. Accordingly, petitioner contends 
that Premier should not be allowed to select and apply FOP data 
provided by other respondents to those sales which Premier was unable 
to obtain FOP data. Although it may be correct that there is little 
variation in factor utilization rates among TRB producers from which 
the Department has received FOP data, petitioner notes that the 
Department has never been able to obtain a complete list of TRB 
producers in China, much less FOP data from all of Premier's suppliers. 
Therefore, there is no basis for the Department to assume that the 
similarity it found among the relatively few respondents who submitted 
FOP data also apply to the entire and largely unknown universe of 
Chinese TRB producers.
    Petitioner further argues that the method accepted by the 
Department at the preliminary determination allows Premier to select 
the data it will supply and exclude from the review any suppliers whose 
costs are higher than those reported by other respondents. Petitioner 
suggests that the Department should create an incentive for Premier's 
suppliers to come forward in the future by applying an adverse rate to 
those sales that are not represented by FOP data. If an adverse rate 
was applied to these producers, it would encourage them to come forward 
in the future and supply the factor values. Thus, for those sales in 
which Premier's supplier did not report FOP data, the Department should 
apply adverse facts available or, alternatively, use the highest normal 
value calculated from other respondents' FOP data for that specific 
model number.
    Department's Position: We are continuing to apply a partial adverse 
facts available rate to Premier's U.S. sales that are lacking 
corresponding FOP data. Section 776(b) of the Act provides that an 
adverse inference may be used when a party has failed to cooperate by 
not acting to the best of its ability to comply with a request for 
information. Furthermore, section 351.308 of the Department's 
regulations states that the Secretary may make determinations on the 
basis of the facts available on the record if ``an interested party or 
any other person withholds or fails to provide information requested in 
a timely manner and in the form required or significantly impedes a 
proceeding'' (Final Rule, 62 FR 27408).
    In this case, we determine that Premier has not acted to the best 
of its ability. Premier was unable to provide letters from all of its 
suppliers responding to Premier's request for information. Instead, it 
relies heavily on an affidavit from its marketing executive stating 
that he had contacted the companies listed in Premier's response. 
Moreover, Premier submitted contradictory information about its 
suppliers. Taking into account that this is the eleventh review of the 
antidumping order on TRBs from the PRC, and that Premier has 
participated in several reviews, we find that Premier has not acted to 
the best of its ability.
    Furthermore, Premier's suppliers are interested parties, and those 
who failed to provide factors of production have not acted to the best 
of their ability. Their failure to provide factors information 
prevented the Department from calculating dumping margins accurately, 
thus undermining the antidumping duty law.
    For these reasons, the Department finds that applying adverse facts 
available is appropriate. Therefore, as in the AR Preliminary Results, 
we are applying a rate of 25.56 percent ad valorem to Premier's U.S. 
sales for which factors data was not provided.

Comment 18: Premier's Marine Insurance and International Freight 
Expenses

    Premier claims that the Department incorrectly deducted amounts for 
international freight and marine insurance for certain sales in the AR 
Preliminary Results. Upon the Department's request, Premier clarified 
that certain sales are shipped directly from the supplying factory and 
that the cost of the shipment is included in the purchase of the goods 
from the supplier. For these sales, Premier explains that it did not 
incur expenses for international freight or marine insurance. 
Accordingly, the Department should correct this error in its final 
results.
    Petitioner argues that Premier's U.S. sales are based on the prices 
charged by Premier to its U.S. customers rather than on prices paid by 
Premier to its suppliers. Petitioner contends that the issue of whether 
Premier reimbursed its suppliers for insurance and freight costs is 
irrelevant. The fact that these expenses were incurred with respect to 
these transactions necessitates that these charges be deducted in 
calculating U.S. price.
    Department's Position: We agree with petitioner. Pursuant to 
section 772(c)(2)(A) of the Act, expenses associated with bringing the 
subject merchandise from the original place of shipment in the 
exporting country to the place of delivery in the United States are 
deducted from EP. Because transportation expenses were incurred on 
these sales, regardless of where in the distribution channel, we 
deducted them in calculating EP.

Comment 19: Scrap Reported by Premier's Supplier

    Upon the Department's request, Premier clarified the scrap 
generated by part type for one of its suppliers. Accordingly, the 
Department should make an adjustment to scrap in its final results of 
the administrative review with respect to this supplier.
    Petitioner contends that the Department cannot rely on information 
which is submitted after it is clear that

[[Page 61847]]

no verification will take place and, therefore, the Department should 
not make the requested adjustment.
    Department's Position: We agree with Premier and have made the 
necessary adjustments for purposes of our final results. With respect 
to the petitioner's comment, we note that, although we allowed Premier 
to submit information after issuing the AR Preliminary Results, we did 
not accept such information on the assumption that a verification would 
not be taking place. The Department routinely issues final results 
without verifying information submitted or even expressing that a 
verification will take place. The criteria in using information when 
making a determination is not whether the party in question knew that 
the information would or would not be verified. Where the Department 
elects not to verify, it will rely on timely submitted information, 
unless there is evidence that the information is unreliable. In this 
case, the information submitted by Premier was timely and there is no 
evidence to suggest the information is unreliable. Thus, it is 
appropriate to rely on this data in our calculation.

Comment 20: Labor Reported by Premier's Supplier

    Premier claims that the Department incorrectly double-counted the 
unskilled labor reported for one of its suppliers during the 
administrative review period. Premier explains that it has corrected 
the data submitted on unskilled labor with respect to this supplier 
and, therefore, the Department should correct its error for the final 
results.
    Petitioner contends that Premier's argument should be disregarded 
because it submitted the new labor data after the preliminary results 
and then waited to identify this error in its case brief. Petitioner 
argues that this demonstrates Premier's attempt to manipulate record 
evidence in an effort to reduce its antidumping liability.
    Department's Position: We agree with Premier and have made the 
necessary adjustments for purposes of our final results. At its 
discretion, the Department may accept corrections of previously 
submitted data. In this situation, we requested Premier to correct the 
double-counting error after the AR Preliminary Results.
    We also note that Premier submitted new information on October 4, 
1999. This information has not been accepted because it was neither 
timely nor requested by the Department.

Comment 21: Luoyang's Market-Economy Steel Purchases

    Petitioner argues that the price of steel imported directly by 
Luoyang is considerably lower than the other market-economy steel 
purchases Luoyang reported for the administrative review period. The 
discrepancy in prices suggests that the purchase of imported steel was 
an isolated transaction and, therefore, should not be regarded as 
representative of Luoyang's cost of production.
    Luoyang contends that the difference in prices simply reflects the 
variation in the terms and prices offered by its suppliers. Regardless 
of the documented price variations, Luoyang notes that the Department 
correctly selected the price paid by Luoyang for steel that it imported 
directly for purposes of valuing steel used in the production of the 
subject merchandise.
    Department's Position: We agree with Luoyang. Pursuant to section 
351.408(c)(1) of the Department's regulations, the Secretary will 
normally use the actual price paid to value factors purchased directly 
from market-economy suppliers. Since Luoyang purchased the steel 
directly from a market-economy country and paid for it in hard 
currency, we used the actual price it reported for such steel.

Comment 22: Luoyang's Purchase of Market-Economy Steel Pre-dates the 
POR

    Petitioner argues that the Department should not use Luoyang's 
market-economy purchases of steel that pre-date the administrative 
review period to value the steel inputs of NME producers. Petitioner 
contends that it is not clear from record evidence whether this steel 
was used to produce the subject merchandise during the POR.
    Luoyang rebuts that record evidence establishes that it actually 
used the imported steel to produce the subject merchandise during the 
POR. Luoyang explains that petitioner has ignored the inherent lead 
time between the purchase of steel and the actual production of the 
subject merchandise.
    Department's Position: We agree with Luoyang. Record evidence 
indicates that Luoyang used the steel purchased from the market-economy 
supplier to produce the subject merchandise during the POR. 
Accordingly, we have continued to use this transaction to value steel 
inputs with respect to Luoyang.

Final Results of the Reviews

    As a result of our analysis of the comments we received, we 
determine the following weighted-average margins to exist:

------------------------------------------------------------------------
                                                                 Margin
           Manufacturer/exporter                Time period    (percent)
------------------------------------------------------------------------
Luoyang....................................    6/1/97-5/31/98       3.68
Premier....................................    6/1/97-5/31/98      24.52
ZCCBC......................................   6/1/98-11/30/98       0.00
Weihai.....................................   6/1/98-11/30/98       0.00
PRC Rate...................................    6/1/97-5/31/98      33.18
------------------------------------------------------------------------

    Parties to the proceeding may request disclosure within five days 
after the date of publication of this notice. See 19 CFR 351.224. The 
Department shall determine, and the Customs Service shall assess, 
antidumping duties on all appropriate entries. With respect to export 
price sales for these final results, we divided the total dumping 
margins (calculated as the difference between NV and export price) for 
each importer/customer by the total number of units sold to that 
importer/customer. We will direct Customs to assess the resulting per-
unit dollar amount against each unit of merchandise in each of that 
importer's/customer's entries under the relevant order during the 
review period. Although this will result in assessing different 
percentage margins for individual entries, the total antidumping duties 
collected for each importer/customer for the review period will be 
almost exactly equal to the total dumping margins.
    The following deposit requirements will be effective upon 
publication of this notice of final results of administrative review 
for all shipments of TRBs entered, or withdrawn from warehouse, for 
consumption on or after the date of publication, as provided by section 
751(a)(1) of the Act: (1) The cash deposit rates for the PRC companies 
named above will be the rates shown above, except that for exporters 
with de minimis rates, i.e., less than 0.50 percent, no deposit will be 
required; (2) for all remaining PRC exporters, all of which were found 
not to be entitled to separate rates, the cash deposit will be 33.18 
percent (the proceeding's highest margin); (3) for the non-PRC 
exporter, Premier, the cash deposit rates will be the rates established 
above; (4) for non-PRC exporters of subject merchandise from the PRC, 
other than Premier, the cash deposit rate will be the rate applicable 
to the PRC supplier of that exporter. These deposit requirements shall 
remain in effect until publication of the final results of the next 
administrative review.
    This notice also serves as a final reminder to importers of their 
responsibility under 19 CFR 351.402(f) to file a certificate regarding 
the reimbursement of antidumping duties

[[Page 61848]]

prior to liquidation of the relevant entries during this review period. 
Failure to comply with this requirement could result in the Secretary's 
presumption that reimbursement of antidumping duties occurred and the 
subsequent assessment of double antidumping duties.
    This notice also serves as the only reminder to parties subject to 
administrative protective orders (``APO'') of their responsibility 
concerning the return or destruction of proprietary information 
disclosed under APO in accordance with 19 CFR 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.
    This administrative review and new shipper review and notice are in 
accordance with sections 751(a)(1), 751(a)(2)(B), and 777(i)(1) of the 
Act.

    Dated: November 5, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-29752 Filed 11-12-99; 8:45 am]
BILLING CODE 3510-DS-P