67 FR 10665, March 8, 2002
                                                            A-570-601
                                                  New Shipper Reviews
                                                      PUBLIC DOCUMENT
                                                      DAS I/1: JG, AG

MEMORANDUM TO: Faryar Shirzad 
               Assistant Secretary
                 for Import Administration

FROM:          Richard W. Moreland 
               Deputy Assistant Secretary 
               Import Administration, Group I


SUBJECT: Issues and Decision Memo for the New Shipper Reviews of Tapered
Roller Bearings and Parts Thereof, Finished and Unfinished, from the
People's Republic of China; Final Results
_________________________________________________________________________

SUMMARY 

We have analyzed the briefs and rebuttal briefs of interested parties in
the new shipper reviews of the antidumping duty order covering tapered
roller bearings and parts thereof, finished and unfinished, from the
People's Republic of China. As a result of our analysis, we have made
changes, including corrections of certain inadvertent programming and
clerical errors, in the margin calculations. We recommend that you approve
the positions we have developed in the Discussion of Issues section of
this memorandum. Below is a complete list of the issues in these new
shipper reviews for which we received comments and rebuttal comments from
parties:

  Comment 1: Market Economy Steel Values

  Comment 2: Rescission of Yantai Timken's New Shipper Review

  Comment 3: Surrogate Value for Pallets and Other Factors

  Comment 4: Adding Ocean Freight and Marine Insurance to the Japanese
             Exports to India Data

  Comment 5: CPZ's Indirect Selling Expenses 

  Comment 6: CPZ's Post-Sale Warehousing Expenses

  Comment 7: Price of CPZ's Sample Sale

  Comment 8: CPZ's Credit Expense

  Comment 9: CPZ's Inventory Carrying Cost


BACKGROUND

On November 29, 2001, the Department of Commerce ("the Department")
published the preliminary results of these new shipper reviews of tapered
roller bearings and parts thereof, finished and unfinished ("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 New Shipper Reviews, 66 FR 59569 (November
29, 2001) ("Preliminary Results"). These new shipper reviews cover Yantai
Timken Company Limited ("Yantai Timken") and Peer Bearing Company -
Changshan ("CPZ"). The period of review ("POR") for Yantai Timken is June
1, 2000 through November 30, 2000 and for CPZ the POR is June 1, 2000
through January 31, 2001 (collectively, "PORs"). See Preliminary Results,
66 FR at 59569. We invited parties to comment on the Preliminary Results.
At the request of The Timken Company ("Timken" or "the petitioner") and
Yantai Timken, we held a public hearing on January 31, 2002. 


DISCUSSION OF ISSUES


Comment 1: Market Economy Steel Values

CPZ reported that it produced subject TRBs using steel imported from a
market-economy steel supplier and that it paid for this steel with a
market-economy currency. In the Preliminary Results, consistent with prior
TRBs reviews, the Department found that there was reason to "believe or
suspect" the steel imported by CPZ was subsidized. Consequently, the
Department valued this input using surrogate data, i.e., Japanese export
values to India. 

Respondent's Argument: CPZ objects to the Department's preliminary
finding and claims that it has demonstrated that there is no reason to
believe or suspect that this market economy steel supplier received any
subsidies. In addition to the information submitted prior to the
Preliminary Results, CPZ notes that, in a January 10, 2002, submission,
CPZ provided additional factual information to the Department to establish
that the imported steel was not subsidized, including a declaration from
its market-economy steel supplier. This declaration addressed the issues
raised in the cases cited by the Department to support its preliminary
finding, including the principal program that accounted for the vast
preponderance of the countervailable benefits. Furthermore, the supplier
stated that no U.S. countervailing duty order applies to it. Thus, CPZ
claims that there is record evidence to overcome the Department's reasons
to "believe or suspect" that CPZ's market-economy steel supplier
benefitted from countervailable subsidies. Moreover, even if its market-
economy steel supplier did receive a subsidy in amounts comparable to
those the Department found for other companies in the supplier's country,
CPZ suggests that the Department view such benefits as "upstream
subsidies" and consider the "significant effect" of any net benefit to the
subject merchandise. (1) Regardless, because there is no evidence that
CPZ's market-economy supplier received any subsidy, CPZ concludes that the
Department should use the actual prices CPZ paid for the market-economy
steel that it used to produce the subject merchandise. 

Furthermore, based on the record, CPZ contends that, in disregarding
CPZ's actual prices, the Department has asserted authority based on a
flawed interpretation of the legislative history. (2) In particular, CPZ
claims that, if the Department intends to apply a subsidy standard defined
by CVD law, then the Department should similarly require that the alleged
subsidy be injurious. 

Petitioner's Argument: The petitioner argues that the Department
correctly rejected CPZ's reported market-economy steel values. First, the
petitioner asserts that CPZ has failed to demonstrate that the
Department's Preliminary Results on this issue were factually incorrect,
and, that CPZ's contentions ignore the Department's findings in the two
immediately preceding administrative reviews. Thus, based on the facts on
the record of this review, the petitioner concludes that there continues
to be a reason to believe or suspect that the steel from CPZ's market-
economy supplier benefitted from subsidization, thereby justifying the
exclusion of the claimed market economy prices.

Second, 19 CFR 351.408(c)(1) provides that the Department will "normally"
use public information to calculate NME values, and that using actual
market economy rules is an exception to the rule that the Department need
not employ in this case. 

Finally, the petitioner argues that the Department's decision in the
Preliminary Results is consistent with the legislative history (3) and,
therefore, the Department did not exceed its authority. The petitioner
contends that the legislative history evinces a concern that the
Department should not determine surrogate values based on unfair input
prices from market-economy sources, but says nothing about injury in this
regard. Thus, if there is a reason to believe or suspect that a non-market
economy respondent obtained inputs at unfair prices, then the Department
should disregard these prices in accordance with Congress' intent.
Moreover, the Department can assume that the legislative history is
limited to countervailable subsidies, rather than non-countervailable
subsidies, but the specific subsidies in question have already been deemed
countervailable and made subject to countervailing duty orders. Thus, the
petitioners conclude that the Department should reject CPZ's arguments.

Department's Position: We have continued to reject the actual prices paid
CPZ for this input in these final results. For the reasons explained in
prior reviews of this order, we believe that the Department cannot use
import prices when it has reason to believe or suspect that those prices
are dumped or subsidized. See Tapered Roller Bearings and Parts Thereof,
Finished and Unfinished, From the People's Republic of China; Final
Results of 1999-2000 Administrative Review, Partial Rescission of Review,
and Determination Not to Revoke Order in Part, 66 FR 57420 (November 15,
2001) ("TRBs XIII"); Tapered Roller Bearings and Parts Thereof, Finished
and Unfinished, From the People's Republic of China; Final Results of 1998-
1999 Administrative Review, Partial Rescission of Review, and Notice of
Intent to Revoke Order in Part, 66 FR 1953 (January 10, 2001) and Tapered
Roller Bearings and Parts Thereof, Finished and Unfinished, From the
People's Republic of China; Amended Final Results of 1998-1999
Administrative Review and Determination to Revoke Order in Part, 66 FR
11562 (February 26, 2001) (collectively, "TRBs XII").

CPZ has made two submissions purporting to demonstrate that the input in
question is not subsidized. The first submission was also made in TRBs
XIII and we found that it did not refute the Department's reason to
believe or suspect standard. We continue to rely upon the analysis in that
determination. In CPZ's second submission, the market economy supplier of
CPZ stated that it had not benefitted from the program that accounted for
the vast preponderance of the countervailable benefits. Assuming,
arguendo, that we would accept this statement as evidence that the market
economy supplier did not receive this particular subsidy, this does not
address all of the subsidization of the input in question. We note that
the Department has taken the position that the level of subsidization is
not relevant. So long as any general export subsidy has been found, it may
benefit exports from that country. See, "Issues and Decision Memorandum
for the Final Results of Antidumping Investigation of Automotive
Replacement Glass ("ARG") Windshield from the People's Republic of China"
(February 12, 2002), Comment 1. Although the other export subsidies which
potentially benefit this input were small relative to the major program,
those other programs were addressed in the first submission and that
submission was not sufficient to overcome the evidence of subsidization.
Thus, the record in this proceeding does not support the conclusion that
CPZ's inputs were unsubsidized.

We further disagree with CPZ that the Department's analysis is flawed
because we have not determined that the subsidies in question are
injurious. The legislative history we relied upon states that Commerce
"should avoid using any prices which it has reason to believe or suspect
may be dumped or subsidized prices." (See H.R. Rep. 100-576 at 590-591
(1988).) This language clearly does not require that the subsidized prices
be injurious. Nor does the fact that Commerce considers in its analysis
subsidies which it had found countervailable imply that the subsidies must
be injurious.


Comment 2: Rescission of Yantai Timken's New Shipper Review

Respondent's Argument: CPZ contends that the Department should
discontinue the new shipper review of Yantai Timken, in accordance with 19
CFR 351.214(f), and instead initiate a "changed circumstances" review.
Specifically, CPZ notes that Yantai Timken and Timken are affiliated
parties, which means that Timken, in addition to being the petitioner, is
also a PRC exporter and a U.S. importer of TRBs. In light of this
relationship, CPZ alleges that Timken will not seek to avoid dumping by
Yantai Timken because it will not be injured by any such imports by virtue
of the Continued Dumping and Subsidy Offset Act of 2000 ("CDSOA"), which
provides petitioners with the dumping duties collected by Customs. Thus,
even if Yantai Timken sells below normal value, Timken will receive the
dumping duties that are assessed against Timken's own imports from Yantai
Timken. Accordingly, CPZ concludes that Timken can no longer rely upon the
dumping law as a remedy.

Furthermore, CPZ argues that, because Timken is eligible for distribution
under CDSOA, any distributions received by Timken constitute constructive
reimbursement to Timken for duties paid. See 19 CFR 351.402 (providing
that the Department will deduct from the export price or the constructed
export price the amount of any antidumping duty paid directly on behalf of
the importer or reimbursed to the importer). Thus, Yantai Timken would be
free to sell subject merchandise in the United States at prices below
normal value, yet it would avoid being subject to the antidumping laws by
reason of CDSOA payments to Timken. Consequently, according to CPZ, the
Department should continue to collect reimbursed duties or rescind the new
shipper review of Yantai Timken under 19 CFR 351.214(j). See also Melamine
Chemicals, Inc. v. United States, 732 F.2d 924, 930 (1984) (providing that
the Department may develop methodologies to deal with situations not
expressly addressed by the statute).

Finally, CPZ contends that, in light of Timken's eligibility for a
distribution under CDSOA, it must be presumed that any dumping duties paid
on imports of Yantai Timken products will be constructively reimbursed,
thus overcoming the general presumption of non-reimbursement where
affiliations exist. See Final Regulations, 62 FR at 27366 ("Moreover, in
our view, it is not justifiable to presume that the existence of an
affiliation will result in reimbursement or that an affiliated U.S.
importer, because of its affiliation, is more likely to file a false
certification."). Consequently, CPZ also requests that the Department
initiate a "changed circumstances" review under 19 CFR 351.216.

Yantai Timken's and Timken's Argument: Yantai Timken and Timken argue
that the Department should reject all of CPZ's contentions. First, Yantai
Timken and Timken characterize CPZ's argument, that Timken can no longer
claim the dumping law as a remedy, as arguing that Yantai Timken's imports
are not covered by the antidumping duty order on TRBs from the PRC. Timken
asserts that it was not the intent of Congress to deny domestic industries
the right to a remedy under the law or the right to demonstrate that their
imports were being sold at fair value by virtue of the fact that a
petitioning company owns a foreign subsidiary. In essence, that would mean
that imports by U.S.-owned subsidiaries of foreign producers subject to an
antidumping order would be excluded from coverage by the antidumping laws.

Second, they argue that the statute does not require an importer
requesting and participating in a new shipper review to demonstrate
injury. Moreover, they contend that the antidumping laws allow any
importer to request that the Department conduct an administrative or new
shipper review of its imports, regardless of whether it is related to a
domestic U.S. producer. As a factual matter, they continue, it is always
in the best interest of a domestic producer for there to be no sales at
less than fair value in the U.S. marketplace. 

Third, if, as CPZ argues, CDSOA distributions are sufficient to undo any
injury caused by dumped imports of a related foreign producer, then they
are sufficient to undo any injury caused by dumped imports of any foreign
producer. Under this logic, no domestic producer could claim to need the
dumping law as a remedy.

Fourth, Yantai Timken and Timken agree that the Department should collect
reimbursed duties according to the applicable law and established
practice, but a finding of reimbursement would not be grounds for
rescinding a new shipper review. In fact, they continue, there is no
provision in the Act that prohibits the conduct of new shipper reviews if
reimbursement of antidumping duties is occurring. If reimbursement to an
importer by a producer or exporter is occurring, then the Department's
regulations specify that an adjustment will be made to the U.S. price for
the reimbursed duties, but there is no provision that the U.S. Government
collect the reimbursed duties. Moreover, they further contend that
distributions under CDSOA do not constitute reimbursement of antidumping
duties to an importer by an exporter or producer, but rather are
distributions of money by the U.S. Government to affected domestic
producers.

Finally, Yantai Timken and Timken contend that there are no relevant
changed circumstances because CPZ has not asserted that the domestic
industry no longer supports the antidumping duty order on TRBs from China,
nor has it provided any other basis for a changed circumstances review.

Department's Position: We disagree with CPZ. In accordance with 19 CFR
351.214(f), the Department may rescind a new shipper review, in whole or
in part, if: 1) there has not been an entry and sale to an unaffiliated
customer in the U.S. of subject merchandise as of the end of the POR, or
2) a party withdraws its request for review not later than 60 days after
the date of publication of notice of initiation of the requested review.
Yantai Timken does not meet either of these criteria for discontinuing a
new shipper review. Therefore, the Department is not rescinding the new
shipper review of Yantai Timken.

Moreover, we find that the initiation of a changed circumstances review
pursuant to 19 CFR 351.216 is not warranted. Section 751(b) of the Act
requires a changed circumstances review to be conducted upon receipt of a
request by an interested party that shows changed circumstances sufficient
to warrant a review. The Department determines on a case-by-case basis
whether changed circumstances sufficient to warrant a review exist. In the
instant case, CPZ has not provided the Department with any legal basis
upon which the Department should initiate a changed circumstances review.
We have reviewed the record evidence and do not find existing changed
circumstances that are sufficient to warrant a changed circumstances
review. Moreover, if CPZ believes that there are changed circumstances
with respect to the underlying injury determination, then a request for a
changed circumstances review under section 751(b) of the Act would be
properly filed with the International Trade Commission rather than the
Department. As for CPZ's claims of changed circumstances due to potential
"reimbursement" under the CDSOA, the issue is so far merely hypothetical.
Given the facts of the case, no evidence has been submitted to the
Department demonstrating that actual reimbursement has occurred. When and
if such actual reimbursement is proven, as between a domestic producer and
an affiliated foreign producer, the Department will then review claims of
changed circumstances made in that connection. 


Comment 3: Surrogate Value for Pallets and Other Factors

Respondent's Argument: CPZ contends that, in calculating the surrogate
values for pallets and other factors, the Department should disregard
small quantities of imports. According to CPZ, the preamble to the
Department's regulations states that "aberrational" surrogate input
values, such as the small quantities of imports included in the surrogate
value calculations in the Preliminary Results, should be disregarded. See
Final Regulations, 62 FR at 27366 and e.g., Certain Cased Pencils from the
Peoples Republic of China, 59 FR 55625, 55630, dated November 8, 1994
("Certain Cased Pencils"). CPZ proposes that the Department consider as
"aberrational" and disregard shipments from any country which, during the
period of April 2000 through January 2001, total less than 100 kilograms,
or have values that are very high (e.g., Indian imports of pallets from
Japan).

Furthermore, CPZ claims that, in calculating the surrogate pallet value
for the Preliminary Results, rather than using CPZ's verified pallet
weight the Department used an average weight derived from the tenth
administrative review in this proceeding. CPZ contends that the Department
should use CPZ's pallet weight to calculate the surrogate pallet value for
CPZ for the final results.

Petitioner's Argument: Concerning CPZ's claimed aberrations in the
surrogate value data, the petitioner contends that the Department, in
calculating its surrogate values for each input factor, acted reasonably
by adopting a weighted average of all applicable values on the record,
without attempting to select some values in preference to others. In the
absence of an accepted norm, some benchmark on the record, or a
determinable pattern from which it can be ascertained that values are
aberrational, there is no meaningful reference as to what constitutes
"aberrational" figures. Moreover, the petitioner contends that CPZ has not
provided any evidence as to what constitutes commercial quantities or what
is a high value. Thus, the petitioners conclude that there is no need to
eliminate any "aberrations" or alter its methodology for the final results.

With regard to the pallet weights, the petitioner contends that the
Department followed an appropriate methodology when it determined weights
of CPZ's pallets and that CPZ has not shown any reason why the Department
should decrease the value of the pallets. If, however, the Department
decides to change the preliminary calculations, then it should use the
pallet weight actually verified at the verification of CPZ, as noted in
the memorandum to John Brinkmann, "Peer Bearing Company - Changshan
Verification Report," dated October 3, 2001 ("CPZ Verification Report").

Department's Position: We agree with the petitioner in part and CPZ in
part. The Indian import data used to value pallets reports the number of
pallets imported. In the TRBs X Decision Memo, (4) the Department
ascertained that pallets on average weigh 10 kilograms. See Memorandum to
Office Director, "Factors of Production Values Used for the Tenth
Administrative Review of the Antidumping Duty Order on Tapered Roller
Bearings from the People's Republic of China," dated June 30, 1998.
Therefore, in order to convert the Indian Rupees per pallet amount into
Indian Rupees per kilogram, we divide the per pallet value by 10
kilograms. We disagree with CPZ's request that we utilize company-specific
information for this conversion. In order to be fair to both respondents
participating in these new shipper reviews and to promote predictability
and consistency, we believe that applying a universal 10 kilogram
estimated weight per pallet is the best approach for valuing multiple
pallets produced by various companies. Additionally, it is Department
practice to calculate a surrogate value based on publicly available
information and to apply that information to company-specific data in
order to value the various inputs involved in the manufacture of subject
merchandise. To value the pallets used by CPZ, we multiplied CPZ's
reported kilogram per piece packing factor by the surrogate value
calculated using Indian import data. Therefore, the weight of CPZ's
pallets is being factored into the final value used by the Department in
determining the level of dumping. 

With respect to CPZ's argument that in calculating the surrogate value
for pallets the Department should disregard small quantities of imports,
we agree and have decided to omit Indian imports from Italy and Sweden.
The omitting of small quantities is consistent with the Department's
treatment of Indian imports used to value the steel inputs used in the
production of TRBs. See TRBs XIII. 


Comment 4: Adding Ocean Freight and Marine Insurance to the Japanese
Exports to India Data

In the Preliminary Results, the Department used Japanese exports to India
as the surrogate value for steel, and added to this surrogate value, a
cost for freight from Japan to India. To value the cost of freight, the
Department used, as facts available, a quotation obtained from Maersk
Sealand ("Maersk"). This rate was for shipping between China and the
United States. See Issues and Decision Memorandum, at Comment 4. 

Yantai Timken's and Timken's Argument: Yantai Timken and Timken argue
that the Maersk rate used by the Department is inappropriate because it is
not a freight rate specific to the route from Japan to India. In a factual
submission dated January 10, 2002, Yantai Timken submitted international
freight rates for shipments from Japan to India. Accordingly, they contend
that the Maersk rate used by the Department is no longer the best facts
available because the newly submitted rate is a more accurate measure of
the exact freight rate from Japan to India. Moreover, they assert that the
record evidence shows that the Maersk quote is significantly higher than
the rates offered by other carriers along the Japan-to-India route.
Therefore, they conclude that, in order to produce the most accurate
estimates of Yantai Timken's costs of production for the final results,
the Department should use the actual rates for shipment from Japan to
India provided in their January 10 submission.

CPZ's Argument: CPZ agrees that the new Japan-to-India rate is better
than the freight rate that the Department relied upon for the Preliminary
Results because that rate overstated the ocean freight rate.

Department's Position: We agree with the parties that the Japan to India
freight rate is better information than the rate used in the Preliminary
Results, because it reflects the shipping experience we seek to measure.
We have adjusted this data to account for the marine insurance costs
excluded from the rate quote and to make it contemporaneous with the
current PORs. 


Comment 5: CPZ's Indirect Selling Expenses 

Petitioner's Argument: The petitioner argues that the Department erred
when it relied upon Peer's reported "product line" indirect selling
expenses (as adjusted by the Department). The petitioner asserts that
indirect selling expenses incurred in the United States should not be
limited to the salesmen's salaries or other immediate product line selling
functions as reported by CPZ, but rather should include all selling,
general, and administrative ("SG&A") expenses incurred by CPZ's affiliated
U.S. importer, Peer Bearing Company ("Peer"). In support of its claim, the
petitioner points to CPZ's statement that "all of CPZ's U.S. affiliate's
expenses are sales related since the affiliate does not perform any
manufacturing operations." See CPZ's May 21, 2001, response, at 4. 

The petitioner further alleges that additional expenses, such as,
executive or clerical salaries, should be reclassified as selling expenses
and deducted from CEP. 

Respondent's Argument: CPZ counters that it calculated its indirect
selling expenses correctly and that the calculation suggested by the
petitioner would grossly distort the margin calculation and lead to double-
counting of Peer's expenses. First, CPZ notes that in calculating CPZ's
normal value, the Department used a surrogate value for SG&A that is
inclusive of all of the expenses (plus some additional expenses) that the
Timken Company asserts should be deducted from the CEP starting price.
Second, CPZ argues that, in its questionnaire responses, CPZ fully and
properly reported Peer's U.S. selling expenses related to its tapered
roller bearing product line sales and this information was verified by the
Department. Third, CPZ asserts that, consistent with Notice of Final
Determinations of Sales at Less Than Fair Value: Bicycles from the
People's Republic of China, 61 FR 19026, 19031 (April 30, 1996), the
Department properly applied Peer's SG&A expenses because only selling
expenses associated with U.S. activity (and not third-country activity)
should be deducted from the CEP. CPZ claims that the petitioner's argument
will result in the double deduction of SG&A expenses as well as the
inclusion of expenses associated only with non-subject merchandise,
because the Department would be deducting expenses associated only with
non-subject merchandise. 

Finally, with regard to the petitioner's contention that the Department
should include in Peer's indirect selling expenses an additional category
of tapered roller bearing product line selling expenses, CPZ claims that
these expenses are recorded as part of CPZ's cost of goods sold and, as
such, the Department need not separately include these expenses in the
pool of indirect selling expenses. 

Department's Position: We agree with CPZ that its TRB-specific product
line selling and warehousing expenses (as further adjusted by the
Department in the Preliminary Results) are properly reported as indirect
expenses related to sales of the subject merchandise. However, we agree
with the petitioner that CPZ did not account for all of Peer's indirect
selling expenses. Upon further review of the Peer SG&A accounting
documentation obtained at verification (see CPZ Verification Report, at
Verification Exhibit 11), we believe that Peer also should have included
general administrative expenses and the additional category recorded as a
cost of goods sold, as part of its indirect selling expenses related to
the sale of subject merchandise. It is the Department's normal practice to
consider virtually all expenses as selling expenses in the case of an
affiliated U.S. importer that merely sells in the United States. See
Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296. As
Peer is purely a selling entity, all of its expenses are related to the
selling process. Therefore, for these final results, we included Peer's
administrative expenses as well as the additional indirect selling expense
category in Peer's indirect selling expense ratio. For more discussion on
the additional category issue, see CPZ Calculation Memorandum. 

With regard to CPZ's argument that these expenses are already included in
normal value but are being deducted from CEP, the statute requires that we
deduct all selling expenses associated with economic activity in the
United States. While selling expenses have been included in normal value,
the Department has determined that offsetting adjustments can only be made
to normal value upon a sufficient showing that differences exist
justifying an adjustment. See Bicycles 61 FR 19026, 19031 (April 30, 1996).


Comment 6: CPZ's Post-Sale Warehousing Expenses

Petitioner's Argument: For the reasons explained above in Comment 5
concerning the calculation of indirect selling expenses, the petitioner
contends that the Department should recalculate Peer's indirect selling
expenses to include certain types of warehousing expenses. Due to the
proprietary nature of the petitioner's comments, however, we cannot
provide in this public memorandum a complete summary of the petitioner's
arguments. 

Respondent's Argument: CPZ first notes that, contrary to claims by the
petitioner, Peer incurred no post-sale warehousing expenses for the sale
of subject merchandise during the POR. Inasmuch as the warehouse expense
the Department included in the Preliminary Results included all of the
expenses related to Peer's warehouse operations (e.g., rent and labor) for
TRBs, CPZ concludes that no further adjustment is necessary.

Department's Position: We disagree with the petitioner and, for these
final results, have not made any changes to our calculation of Peer's
indirect selling expense to account for additional warehousing expenses
that were not otherwise added by the Department in the Preliminary
Results. In contrast to Peer's general administrative expenses that, as
noted in Comment 5, did not flow through to the product line expenses, the
warehousing expenses referred to by the petitioner did flow through to
Peer's product line selling expenses. Thus, we are not adding additional
warehousing expenses to Peer's indirect selling expenses. 


Comment 7: Price of CPZ's Sample Sale

Petitioner's Argument: The petitioner notes that, at verification, the
Department found that CPZ made a sample sale to Peer prior to the POR, but
that payment for this sale was apparently recorded in the POR, and
presumably recorded as a cost of goods sold. The petitioner contends that
the cost of this sample sale is a selling expense that is wholly
attributable to sales of merchandise from this new source of supply during
the accounting period in which the expense was incurred. The petitioner
asserts that, unless Peer demonstrates that the cost of this sample is
already included in its selling expenses, the Department should add the
verified cost to Peer's selling expenses.

Respondent's Argument: CPZ argues that the Department properly addressed
the issue of the sample sale by making no adjustments because (1) the
sample was sold and shipped prior to the POR; (2) the costs associated
with the sample are not selling expenses; (3) the non-sales related
expenses relating to the sample have been included in Peer's accounting
records; and (4) the petitioner has not cited any precedent showing that
the Department has ever accepted such a claim. Therefore, CPZ urges the
Department to reject this claim for the final results.

Department's Position: We disagree with the petitioner that expenses
associated with the purchase of the sample from CPZ should be added to
Peer's selling expenses. While the Department did not verify how Peer
recorded this sample in its cost accounting, it is reasonable to believe
that the acquisition cost of the sample would be recorded as inventory by
Peer and upon withdrawal from inventory it would be charged according to
how it was used by Peer. In this case, while the verification report
indicates that the product imported by Peer was "consumed internally by
Peer," we did not verify how Peer charged the expense. However, as Peer is
a sales, rather than manufacturing company, it is reasonable to believe
that any subsequent expenses related to this sample would be recorded by
Peer as selling expenses. In as much as we have revised the calculation of
Peer's indirect selling expenses for subject merchandise to encompass all
appropriate SG&A expenses recorded in Peer's financial information, there
is no reason to believe that any expenses related to the sale of this
product would have not been captured in those indirect selling expenses.
Accordingly, we believe that any selling expenses that may have been
associated with this purchase of the sample from Peer's affiliated
supplier are accounted for in the indirect selling expense ratio, as
revised by the Department.

Comment 8: CPZ's Credit Expenses

Petitioner's Argument: The petitioner notes that, at the U.S.
verification of Peer, the Department calculated a revised short-term
interest rate for the POR. The petitioner contends that the Department did
not consider the petitioner's comments submitted prior to the Preliminary
Results with respect to this expense, which, due to their proprietary
nature, cannot be summarized in this public memorandum.

Respondent's Argument: CPZ argues that the authority cited by the
petitioner is not analogous to CPZ's situation. See Notice of Final
Determinations of Sales at Less Than Fair Value: Brake Drums and Brake
Rotors From the People's Republic of China, 62 FR 9160, 9172 (February 28,
1997) ("Brake Drums and Brake Rotors from China") (determining that credit
in a CEP sale should be based "on the number of days between the date of
shipment to the U.S. customer and the date of payment," but finding that
the shipment was not placed in the U.S. affiliate's inventory). CPZ claims
that, unlike the respondent in Brake Drums and Brake Rotors from China, in
the instant case, CPZ's subject sale went through Peer's warehouse, and
CPZ reported warehouse expenses. Accordingly, CPZ contends that the
Department should reject the petitioner's claim.

Department's Position: We agree with CPZ. In Brake Drums and Brake Rotors
from China, the Department found that the shipment in question was never
placed in the U.S. affiliates's inventory and consequently, that credit
should be calculated from the time the merchandise left the home market.
During verification, we confirmed that the subject merchandise sold by CPZ
through Peer Bearing Company did enter Peer's warehouse inventory.
Therefore, we have continued to calculate the credit expenses as we did in
the Preliminary Results, from the date of shipment from Peer's warehouse
until the date of payment by the U.S. customer. 


Comment 9: CPZ's Inventory Carrying Costs

Petitioner's Argument: The petitioner contends that the Department should
correct its calculation of CPZ's inventory carrying costs in order to
reflect the revised interest rate determined in connection with the
calculation of credit expenses, as noted in the CPZ Verification Report.
See also Issues and Decision Memo, Comment 5.

Respondent's Argument: CPZ does not object to the petitioner's argument
to the extent that it applies only to the verified interest rate and not
the calculation.

Department's Position: We agree with the petitioner and CPZ, and have
made this change for the final results.


RECOMMENDATION 

Based on our analysis of the comments received, we recommend adopting all
of the above positions and adjusting all related margin calculations
accordingly. If these recommendations are accepted, we will publish the 
final results of these new shipper reviews and the final weighted-average 
dumping margins, for both reviewed firms, in the Federal Register.






AGREE _________ DISAGREE _________





Faryar Shirzad 
Assistant Secretary
  for Import Administration


________________________
Date 



________________________________________________________________________



1. According to CPZ, pursuant to 19 CFR 351.523(d), there can be no
presumption of a countervailable subsidy if the effect is less than 1
percent. 

2. The legislative history of the Omnibus Trade and Competitiveness Act
of 1988, which provided the current method for determining normal value in
nonmarket economy cases, states that "in valuing such (nonmarket economy)
factors, Commerce shall avoid using any prices which it has reason to
believe or suspect may be dumped or subsidized prices." See H.R. Rep. 100-
576 at 590-591 (1988). Although this section of the Act has been revised
since this 1988 legislative history was written, there were no changes
made to Section 773(c) of the Act in the 1995 Uruguay Round Agreement Act
("URAA"). See, e.g., S. Rep. 103-412, 2d Sess. at 73 (1994) (stating in
the Senate Joint Committee report accompanying the URAA that "the
Committee . . . intends no substantive changes" to Section 773(c) of the
Act). 

3. H. R. Conf. Rep. 100-576, 100th Cong., 2d Sess. 514, 590-91 (1998),
reprinted in 1988 U.S.C.A.A.N. 1547, 1623 (1988) (authorizing the
Department to avoid using prices that the Department has reason to
"believe or suspect" were unfair in calculating normal value in non-market
economy ("NME") cases). 

4. Memorandum to Office Director, "Factors of Production Values Used for
the Tenth Administrative Review of the Antidumping Duty Order on Tapered
Roller Bearings and Parts Thereof, Finished and Unfinished, From the
People's Republic of China" (June 30, 1998).