[Federal Register Volume 62, Number 28 (Tuesday, February 11, 1997)]
[Notices]
[Pages 6173-6188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3355]


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DEPARTMENT OF COMMERCE
[A-570-601]


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

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

ACTION: Notice of final results and partial termination of antidumping 
duty administrative review on tapered roller bearings and parts 
thereof, finished and unfinished, from the People's Republic of China.

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SUMMARY: On August 5, 1996, the Department of Commerce (the Department) 
published the preliminary results of its administrative review of the 
antidumping duty order on tapered roller bearings (TRBs) and parts 
thereof, finished and unfinished, from the People's Republic of China 
(PRC). The period of review (POR) is June 1, 1994, through May 31, 
1995.
    Based on our analysis of comments received, we have made changes to 
the margin calculations, including corrections of certain clerical 
errors. Therefore, the final results differ from the preliminary 
results. The final weighted-average dumping margins are listed below in 
the section entitled ``Final Results of Review.''
    We have determined that sales have been made below normal value 
(NV) during the POR. Accordingly, we will instruct the U.S. Customs 
Service to assess antidumping duties based on the difference between 
export price (EP) or constructed export price (CEP) and NV.
    We have terminated this review with respect to Shanghai General 
Bearing Company (Shanghai) based on our revocation of the company from 
this order in the final results of the 1993-94 review. See Tapered 
Roller Bearings and Parts Thereof, Finished and Unfinished, from the 
PRC (to be published in Vol. 62 of the Federal Register in February 
1997) (TRBs VII).

EFFECTIVE DATE: February 11, 1997.

FOR FURTHER INFORMATION CONTACT: Charles Riggle, Andrea Chu, Kristie 
Strecker, or Kris Campbell, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington DC 20230; telephone (202) 482-
4733.

APPLICABLE STATUTE AND REGULATIONS: Unless otherwise indicated, all 
citations to the statute and to the Department's regulations are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act) by the 
Uruguay Round Agreements Act (URAA).

SUPPLEMENTARY INFORMATION:

Background

    On August 5, 1996, we published in the Federal Register the 
preliminary results of administrative 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 Antidumping Duty Administrative Review, 61 FR 
40610 (August 5, 1996) (Preliminary Results). We gave interested 
parties an opportunity to comment on our preliminary results and held a 
public hearing on September 25, 1996. The following parties submitted 
comments: The Timken Company (Petitioner); Guizhou Machinery Import and 
Export Corporation (Guizhou Machinery), Jilin Province Machinery Import 
and Export Corporation (Jilin), Liaoning MEC Group Company Limited 
(Liaoning), Luoyang Bearing Corporation (Luoyang), Shandong Machinery 
and Equipment Import & Export Group Corporation (Shandong), Tianshui 
Hailin Bearing Factory (Tianshui), China National Machinery Import and 
Export Corporation (CMC), China National Automotive Industry Import & 
Export Guizhou Corporation (Guizhou Automotive), Wanxiang Group 
Corporation (Wanxiang), Xiangfan Machinery Foreign Trade Corporation 
Hubei China (Xiangfan), Zhejiang Machinery Import & Export Corporation 
(Zhejiang), and Wafangdian Bearing Industry Corporation (Wafangdian) 
(collectively referred to as Guizhou Machinery et al.); Premier Bearing 
and Equipment Company (Premier); Great Wall Industry Corporation (Great 
Wall); East Sea Bearing Company Limited/Peer Bearing Company (East 
Sea); Transcom, Incorporated (Transcom); and L&S Bearing Company/LSB 
Industries (L&S).
    We have conducted this administrative review in accordance with 
section 751(a)(1) of the Act and 19 CFR 353.22.

Scope of Reviews

    Imports covered by these reviews are shipments of TRBs and parts 
thereof, finished and unfinished, from the PRC. This merchandise is 
classifiable under the Harmonized Tariff Schedule (HTS) item numbers 
8482.20.00, 8482.91.00.60, 8482.99.30, 8483.20.40, 8483.20.80, 
8483.30.80, 8483.90.20, 8483.90.30 and 8483.90.80. Although the HTS 
item numbers are provided for convenience and customs purposes, our 
written description of the scope of this proceeding is dispositive.

Facts Available

    In accordance with section 776(a) of the Act, we have determined 
that the use of adverse Facts Available is appropriate for certain 
firms, as discussed in the Preliminary Results at 40613-14.

Analysis of Comments Received

1. Separate Rates

Comment 1
    Petitioner states that the Department incorrectly determined that 
all fourteen PRC companies that participated in this review are 
entitled to a separate rate. Petitioner requests that the Department 
review these firms as a single entity.
    Petitioner claims that the Department's finding that a PRC list of 
products subject to direct government control does not name ``TRBs'' is

[[Page 6174]]

inaccurate because the list does name ``bearings'' (citing ``Temporary 
Provisions for Administration of Export Commodities''). Petitioner 
states that the fact that TRBs, as ``bearings,'' appear on this list 
eliminates a significant reason for the Department's decision to 
determine separate rates.
    Petitioner adds that, in the preliminary results, the Department 
misapplied its standard criteria by ignoring the presumption that 
respondents constitute a single entity. Petitioner argues that, in 
fact, the Department has presumed in favor of the absence of de jure 
and de facto control and has accepted unsupported claims and non-
market-economy (NME) laws as the basis for single rates despite common 
ownership of entities. Petitioner cites as evidence for the switch in 
the presumption the fact that, in the preliminary results, the 
Department stated that ``there is no evidence that [the authority of 
general managers to enter into contracts] is subject to any level of 
government control'' (citing the Preliminary Results at 40612). 
Petitioner claims that, instead, the Department should have to find 
that ``it has firm evidence that this authority is not subject to any 
level of government control.''
    Petitioner also argues that the Department should make its 
separate-rate analysis consistent with rules for evaluating affiliated 
parties and for collapsing firms (citing section 771(33) of the Act 
with respect to the determination of affiliated parties). In this 
regard, Petitioner states that the Department should consider whether 
the common owners have the ability to exercise restraint or direction 
over the companies, including whether the owners can shift production 
or export activities among firms. Petitioner argues that, if the 
Department undertook such an analysis, it would find that none of the 
respondents is entitled to a separate rate because the PRC government 
has the ability, whether or not it exercises it in an apparent manner, 
to control export and pricing activities, select key management, direct 
the disposition of revenues (including export revenues), negotiate 
contracts, and shift exports to firms with low dumping margins.
    Petitioner contends further that the Department's de jure and de 
facto separate-rates analysis places an impossible burden of proof on 
domestic interested parties because a state-controlled economy can 
amend its laws and regulations without in fact relinquishing control. 
Petitioner claims that the state can simply delete any evidence of de 
jure control from laws, regulations, corporate charters and other 
documents. Given this situation, Petitioner argues, both the domestic 
industry and the Department are confronted with the requirement that 
they prove a negative without having access to information that would 
indicate continuing control over production and pricing decisions by 
the state. Thus, Petitioner states, claims made by plant managers, 
themselves interested in obtaining separate rates, become the basis for 
the Department's de facto analysis and, without access to necessary 
information, domestic interested parties confront an irrebuttable 
presumption.
    Guizhou Machinery et al. respond that the Department properly 
determined that the PRC respondents are entitled to separate rates. 
Guizhou Machinery et al. argue that, whether the Department states, 
``there is no evidence of control'' or it has ``firm evidence'' of no 
control, both statements indicate that the Department in fact found no 
evidence of control. Guizhou Machinery et al. assert that Petitioner 
objects to the test itself, not the words the Department used to 
describe its findings.
    Guizhou Machinery et al. also contend that Petitioner's proposal to 
apply the affiliated-party definition in section 771(33) of the Act 
would eliminate the possibility of separate rates for PRC-owned firms. 
Guizhou Machinery et al. acknowledge that, in Compact Ductile Iron 
Waterworks Fittings from the PRC, 58 FR 37908 (July 14, 1993) (CDIW), 
the Department determined that it would not consider a request for 
separate rates for any state-owned company on the basis that no state-
owned company could be sufficiently independent of state control to be 
entitled to separate rates. However, Guizhou Machinery et al. note, the 
Department subsequently departed from the CDIW decision and returned to 
its former practice, with some modifications (citing Final 
Determination of Sales at Less Than Fair Value: Silicon Carbide From 
the People's Republic of China, 59 FR 22585 (May 2, 1994) (Silicon 
Carbide)). Guizhou Machinery et al. argue that, in the preliminary 
results, the Department properly employed its more recent separate-
rates analysis methodology from Silicon Carbide.
    Guizhou Machinery et al. add that nothing in the Statement of 
Administrative Action (SAA) suggests that Congress or the 
Administration intended that the Department would apply the affiliated-
party provision in NME cases in a manner that would result in 
eliminating separate rates and, if the SAA had intended that result, 
the SAA would not be silent on the question. Guizhou Machinery et al. 
add that, in the House Report to the URAA, there is no mention of 
regulatory control by state or provincial governments and no mention of 
``affiliation'' stemming from the fact that two entities are both 
regulated by the same governmental entity. Further, Guizhou Machinery 
et al. claim, while the SAA explicitly discusses the question of 
affiliation with respect to a number of price and cost issues, it does 
not mention separate rates issues. Guizhou Machinery et al. add that 
section 771(33) has its roots in Article 4.1, note 11 of the Agreement 
on Implementation of Article VI of the Uruguay Round of the General 
Agreement on Tariffs and Trade (GATT), which contemplated control only 
over producers and exporters, not affiliation of otherwise competing 
exporters because of government authority or centrally exercised 
control.
    Finally, with respect to Petitioner's argument that the nature of 
the de jure and de facto tests imposes an impossible burden of proof on 
Petitioner, Guizhou Machinery et al. state that it is not reasonable to 
believe that the PRC would repeal all of its laws, regulations, and 
corporate charters solely to guarantee that the Department will be 
incapable of discovering any evidence of de jure control in antidumping 
proceedings.
Department's Position
    We disagree with Petitioner. We have calculated separate rates for 
the responding PRC companies in these final results because each has 
demonstrated an absence of government control over its export 
activities.
    In CDIW, we adopted the position that state ownership (i.e., 
``ownership by all the people'') ``provides the central government the 
opportunity to manipulate [the exporter's] prices, whether or not it 
has taken advantage of that opportunity during the period of 
investigation.'' CDIW at 37909. We determined, therefore, that state-
owned enterprises would not be eligible for separate rates. However, we 
have modified our separate-rates policy as set forth in CDIW. We 
subsequently determined that ownership ``by all the people'' in and of 
itself cannot be considered dispositive in establishing whether a 
company can receive a separate rate. See Silicon Carbide at 22586. As 
such, it is our policy that a PRC-based respondent is entitled to a 
separate rate if it demonstrates on a de jure and a de facto basis that 
there is an absence of government control over its export activities.
    A separate-rate determination does not presume to speak to more 
than an

[[Page 6175]]

individual company's independence in its export activities. The 
analysis is narrowly focused and the result, if independence is found, 
is accordingly narrow--we analyze that single company's U.S. sales of 
the subject merchandise separately and calculate a company-specific 
antidumping rate. Thus, for purposes of calculating margins, we analyze 
whether specific exporters are free of government control over their 
export activities, using the criteria set forth in Silicon Carbide at 
22585. Those exporters who establish their independence from government 
control are entitled to a separate margin calculation. Thus, a finding 
that a company is entitled to a separate rate indicates that the 
company has sufficient control over its export activities such that the 
manipulation of such activities by a government seeking to channel 
exports through companies with relatively low dumping rates is not a 
concern. See Disposable Pocket Lighters from the PRC, 60 FR 22359, 
22363 (May 5, 1995) (Disposable Lighters); Tapered Roller Bearings and 
Parts Thereof, Finished and Unfinished, from the PRC, 61 FR 65527, 
65527-65528 (December 13, 1996) (TRBs IV-VI); TRBs VII, Comment 1.
    Having rejected the CDIW position that state ownership per se 
eliminates the possibility of a company gaining a separate rate, we do 
not accept Petitioner's argument that the statutory definition of 
affiliated persons at section 771(33) of the Act should determine our 
separate-rates analysis. The application of this standard is overly 
broad for the purpose of determining whether to assign separate rates 
to the PRC-owned companies under review.
    First, the type of state ``ownership'' involved (ownership by ``all 
of the people'') is not the type of ``ownership'' addressed by section 
771(33). Ownership by all of the people signifies only that ``no 
individual can take the company . . . it belongs to the community.'' 
Silicon Carbide at 22586. It does not mean that a single entity 
``controls'' all such firms. Id.
    Second, even if such firms did meet the section 771(33) 
``affiliated party'' standard, this definition does not determine the 
issue of whether we should calculate separate rates for the state-owned 
firms in this review. Instead, in order to make that determination, we 
must consider the specific issue of de jure and de facto government 
control over export activities. This is analogous to our practice in 
market-economy cases of calculating individual dumping rates for 
affiliated parties unless we determine that there is a significant 
potential for manipulation of pricing or production decisions. With 
respect to NME firms, we examine the potential for manipulation by the 
government using the de jure and de facto test set forth in Silicon 
Carbide. Thus, if the Silicon Carbide test shows that no government 
entity controls the export activities of the firms in question so as to 
present a significant potential for manipulation of such activities, it 
is not appropriate to assign a single rate.
    In investigating the extent of government control over these 
firms'' export activities, we obtained information regarding this 
specific issue, and the PRC companies that responded to our 
questionnaire submitted information indicating a lack of both de jure 
and de facto government control over their export activities. Contrary 
to Petitioner's assertions, our determination in this regard did not 
hinge on the fact that the term ``TRBs'' does not appear on the 
``Temporary Provisions for Administration of Export Commodities.'' 
Further, we are not persuaded to change our separate-rates 
determinations based on the fact that the term ``bearings'' appears on 
the list, particularly since the term ``bearings'' appears on a section 
of the list that simply indicates that an exporter must obtain an 
``ordinary'' license in order to export bearings. Instead, as detailed 
in the Preliminary Results (at 40611), the record evidence in this 
case, including our verification findings, clearly indicates a lack of 
both de jure and de facto government control over the export activities 
of the firms to which we have assigned separate rates.
    We also do not accept Petitioner's argument that we have misapplied 
the presumption of state control in this case. Given the information 
that respondents provided in this review, our statement in the 
Preliminary Results that ``there is no evidence of government control 
over exports'' is equivalent to an affirmative statement that ``the 
government does not control the export activities of these companies.'' 
We were able to make this determination because the companies provided 
information affirmatively indicating a lack of government control.
    Finally, contrary to Petitioner's claim that the necessary 
information concerning the de facto portion of the analysis is 
inaccessible to both Petitioner and to the Department, such information 
was, in fact, subject to verification and was discussed in the relevant 
verification reports. Based on our analysis of the Silicon Carbide 
factors, the verified information on the record supports our 
determination that these respondents are, both in law and in fact, free 
of government control over their export activities. Thus, it would be 
inappropriate to treat these firms as a single enterprise and assign 
them a single margin. Accordingly, we have continued to calculate 
separate margins for these companies. See TRBs IV-VI at 65528.
Comment 2
    Petitioner claims that the Department improperly granted Shandong 
and Wanxiang separate rates based on voluntary responses to the 
separate-rates questionnaire, although these companies did not request 
review and did not respond to any other part of the Department's 
questionnaire. Petitioner states that the result of this finding, which 
will allow these companies to have their POR entries assessed at their 
POR deposit rates, is an abuse of the single-rate methodology. 
Petitioner states that it is inappropriate that these ``non-
respondents'' are able to obtain more favorable treatment than other 
non-respondents. Petitioner claims that this approach is unfair because 
it did not know of the existence of these companies and could not have 
asked that the review cover them. Petitioner suggests that the 
Department defer granting separate rates for Shandong and Wanxiang 
until it conducts a review in which they are named in a review request, 
in which case they must fully participate in the review. Petitioner 
makes the same suggestion for Great Wall, a company that requested a 
separate rate but whose separate-rates response the Department did not 
analyze in the preliminary results. Petitioner adds that, even if these 
three firms are permitted to establish separate-rate entitlement in 
this review, the rate applicable for this period should be the rate 
applicable had they not submitted their voluntary separate rates 
responses, which is the PRC rate.
    Guizhou Machinery et al. respond that Petitioner provides no 
support for its objection to the Department's stated intention to 
liquidate Shandong and Wanxiang's POR entries at the deposit rate in 
effect at the time of entry. Guizhou Machinery et al. and L&S state 
that, since the Department did not review these companies'' entries 
during this segment of the proceeding, the Act requires the liquidation 
of their POR entries at the deposit rate in effect at the time of 
entry. Guizhou Machinery et al. state no party requested review of 
Shandong and Wanxiang nor did the Department name them in the notice of 
initiation. Citing 19 CFR 353.22(e), Guizhou Machinery et al. contend 
that, pursuant to the Department's regulations, non-reviewed companies

[[Page 6176]]

are subject to assessment of antidumping duties at the rate in effect 
at the time of entry which, for these companies, is 8.83 percent.
    Great Wall requests that the Department analyze the information 
that it submitted during the course of the review regarding the extent 
of government control over export activities and grant Great Wall a 
separate rate, thereby permitting assessment of Great Wall's POR 
entries at its POR deposit rate.
Department's Position
    We disagree with Petitioner. For these final results, we have 
determined that the export activities of Shandong, Wanxiang, and Great 
Wall are not subject to de jure or de facto government control. 
Accordingly, these firms are not part of the ``PRC enterprise'' under 
review and, because no interested party requested a review of these 
firms, they are not subject to this review. Because we did not include 
these firms in this review, we will instruct Customs to apply the 
respective deposit rates to these companies'' POR entries for purposes 
of assessment.
    As explained in our response to comment 1, it is our policy to 
treat all exporters of subject merchandise in NME countries as a single 
government-controlled enterprise in the absence of sufficient evidence 
to the contrary. We assign that enterprise a single rate (the ``PRC 
rate'), except for those exporters that demonstrate an absence of 
government control over export activity. Pursuant to this policy, if 
any company for which a review was requested is found to be part of the 
``PRC enterprise,'' the entire enterprise (including those companies 
that we do not name in the initiation) is subject to the review. Thus, 
we request that the PRC government identify all firms that exported 
during the POR and contact such firms regarding their participation in 
the review. This ensures that we fully capture the presumed ``PRC 
enterprise'' (further explained in our response to comment 27). Any 
company that does not place information on the record indicating that 
it is separate from the PRC government with respect to export 
activities will be covered by the review as part of the PRC enterprise 
and will receive the PRC rate as an assessment rate for POR entries. 
The PRC enterprise is not subject to review only if all firms for which 
a review is requested respond and demonstrate that they are independent 
from government control over exports. That is not the case in this 
review.
    The three firms at issue have demonstrated that they are 
independent from PRC-government control over their export activities. 
See Preliminary Results at 40611-12 regarding Shandong and Wanxiang; 
see Memorandum from Analyst to File: Separate-Rate Determination for 
Great Wall Bearing Company, February 3, 1997, regarding Great Wall. 
Thus, we have determined that they are not part of the PRC enterprise. 
Because these companies are not part of the PRC enterprise and no 
review of these companies was requested, they are not subject to this 
review. Therefore, the automatic assessment provisions (19 CFR 
353.22(e)) apply. Petitioner's contention that we should, in effect, 
review companies for which no review was requested is inconsistent with 
our normal practice of conducting reviews upon request only, as 
provided in section 751(a) of the Act. Accordingly, as with all 
unreviewed companies, POR entries of Shandong, Wanxiang and Great Wall 
will be liquidated at the deposit rates.

2. Valuation of Factors of Production

Comment 3
    Petitioner argues that the Department should base the values of all 
factors of production (FOP) on the annual report of SKF India (SKF). 
Petitioner notes that, for the preliminary results, the Department used 
the SKF report to value three factors (overhead; selling, general, and 
administrative expenses (SG&A); and profit), whereas the Department 
derived values for the direct labor and raw-material factors from two 
other, unrelated, sources (Investing, Licensing & Trading Conditions 
Abroad, India (IL&T India) statistics and Indian import statistics, 
respectively). Petitioner claims that it is inherently distortive to 
use sources other than the SKF report to value labor and raw materials 
because SKF's labor and raw-material costs are included in the costs 
used in calculating SKF's overhead, SG&A, and profit ratios, which the 
Department uses in its surrogate calculation.
    Petitioner also contends that SKF's materials and labor costs are 
the ``best information'' with respect to these factors because they 
represent actual costs in the preferred surrogate country, whereas the 
steel-import statistics and labor data have little connection with 
costs related to production of TRBs.
    Thus, Petitioner argues, whereas SKF's costs and expenses represent 
those of a producer of the class or kind of merchandise subject to 
review, the surrogate data for raw materials and direct labor which the 
Department used cover a broad range of industries and products. With 
respect to raw materials, Petitioner asserts that the ``other'' alloy-
steel category from the Indian import statistics, which the Department 
used to value material costs for the preliminary results, is broad and 
may or may not include imports of the steel used to produce bearings. 
Petitioner contends that, even if this category includes steel used to 
produce bearings, such steel likely represents only a small part of 
steel imports in the basket category. With respect to direct labor, 
Petitioner claims that the classification the Department used covers, 
in addition to bearings producers, hundreds of industry sectors under 
broad headings unrelated to bearings production and argues that there 
is no rational basis for using such a non-specific source as a 
surrogate. Petitioner states that it is appropriate to apply SKF's 
average labor cost to all types of labor, including direct production, 
production overhead, and SG&A, since all of these labor categories 
would be part of the aggregate labor cost in SKF's annual report.
    Petitioner states that the use of the SKF report for all FOP values 
is consistent with the importance the courts attach to internal 
coherence and the use of a single source when possible (citing Timken 
Co. v. United States, 699 F. Supp. 300, 306, 307 (1988), affirmed, 894 
F.2d 385 (Fed. Cir. 1990) (collectively Timken)). Petitioner urges the 
Department to use the same annual report.
    Petitioner argues in the alternative that, in the event the 
Department does not use the SKF report to value all FOP, the Department 
must adjust the overhead, SG&A, and profit rates to reflect the use of 
lower materials and labor values from the separate sources. Petitioner 
claims that the Department's preliminary calculations were distortive 
because the Department used SKF's full material and labor costs in the 
cost of manufacturing (COM) denominator but applied this ratio to 
material and labor factors that it developed using lower-valued sources 
(Indian import statistics and ILT labor data, respectively). Petitioner 
concludes that, because of SKF's overhead, SG&A and profit percentages 
are linked to SKF's own materials and labor costs, those percentages 
must be adjusted upward (by reducing the denominators used to derive 
these percentages) if the Department multiplies these ratios by 
material and labor costs from other sources to derive the per-unit 
overhead, SG&A, and profit rates.
    Petitioner proposes that, in order to derive non-distortive 
material and labor portions of the overhead and SG&A ratio 
denominators, the Department should

[[Page 6177]]

multiply the total weight of materials for SKF by the highest value of 
steel that it uses in the final results and should multiply the total 
number of hours worked at SKF by the IL&T India labor value it uses for 
the final results. Petitioner adds that this calculation is preferable 
to the overhead, SG&A, and profit denominators that the Department used 
in the preliminary results because it will result in a materials cost 
exclusive of Indian import duties.
    Guizhou Machinery et al. respond that it is irrelevant whether the 
SKF report represents a single source for valuing all FOP components 
and note that the Department consistently uses multiple sources of 
information for surrogate data in NME cases, selecting the best source 
for each element of the FOP. Guizhou Machinery et al. argue that the 
fact that SKF India is a producer of TRBs in the surrogate country does 
not mean that its report is a proper source for all surrogate data, 
adding that, in most NME cases, the Department uses multiple sources of 
information for surrogate data, choosing the best one for each element 
for the factors of production. Guizhou Machinery et al. state that 
Petitioner's citation to Timken is misplaced because, in that case, the 
Court of International Trade (CIT) remanded the case to the Department 
because the rationale for selecting a particular value for steel scrap 
was inconsistent with the record and the Department had not explained 
the inconsistency. Guizhou Machinery et al. claim that the Department 
was not criticized in Timken for the use of different sources of 
surrogate data. East Sea adds that the SKF report, though audited, is 
not verified data and notes that the Department has a preference for 
verifiable, public information.
    With respect to Petitioner's proposal that the Department use SKF 
data to determine the raw-material-factor value, East Sea and Guizhou 
Machinery et al. argue that the raw-material data in the SKF report is 
inferior to import statistics due to a lack of detail regarding the 
types of steel SKF used. Guizhou Machinery et al. state that, in this 
review, the raw-material-input value is the critical factor in the 
analysis and there is no evidence to indicate that SKF India used the 
same kind of steel as the respondents, whereas import statistics allow 
the Department to pinpoint a particular input. East Sea notes that the 
SKF report does not provide separate prices for bar, rod or steel sheet 
but instead provides a single value for all steel used in the factory, 
including steel used in the production of non-subject merchandise. East 
Sea submits that Petitioner, Respondents, and the Department do not 
know what types of steel were included in SKF's material-cost 
calculation. East Sea suggests that the steel referenced in the SKF 
report could be tube steel (instead of bar steel), stainless steel (a 
much more expensive product), already machined ``green parts'' supplied 
by SKF's many related companies, or innumerable other types of steel. 
Guizhou Machinery et al. add that Petitioner has provided no 
information demonstrating that the SKF report covers the specific steel 
inputs relevant to subject merchandise.
    With respect to Petitioner's claim that the Department should 
calculate the labor factor using SKF data, Guizhou Machinery et al. 
contend that Petitioner has provided no evidence to support its claim 
that the labor costs of a subsidiary of a Swedish company, SKF, are a 
better surrogate for labor costs than is an average for the surrogate 
country. Guizhou Machinery et al. state that it is the Department's 
practice to use industry-wide data, not producer-specific data, where 
possible, and suggest that Petitioner's proposal would risk introducing 
abnormalities unique to that producer. East Sea adds that, because the 
SKF report does not differentiate between administrative and 
manufacturing personnel, the Department cannot use the SKF data to 
value labor. East Sea explains that the majority of workers producing 
subject merchandise in this review are unskilled laborers and, because 
the Department verified the Chinese bearing producers, the Department 
has specific knowledge of the skill level in China.
    With respect to Petitioner's argument that, if the Department 
continues to value the material and labor factors using non-SKF 
sources, the Department must adjust the overhead, SG&A, and profit 
rates to reflect the use of lower materials and labor values, Guizhou 
Machinery et al. respond that the Department's use of data in SKF's 
annual report to establish percentages or ratios to be used for 
determination of the surrogate values for overhead and SG&A is fully 
consistent with the Department's standard surrogate methodology. 
Guizhou Machinery et al. state that the Department's NME/surrogate-
country methodology is based upon the application of reliable and 
representative ratios and input values from multiple sources and 
contend that the Department does not typically ``adjust'' the component 
values used to derive SG&A and overhead ratios in the manner suggested 
by Petitioner. Consequently, Guizhou Machinery et al. argue, the 
Department should not adjust the expenses taken from the SKF report, as 
suggested by Petitioner, to formulate representative ratios for use in 
determining actual amounts for overhead and SG&A. In support of this 
contention, Guizhou Machinery et al. cite Final Determination of Sales 
at Less Than Fair Value: Coumarin From the People's Republic of China, 
59 FR 66895 (December 28, 1994) (Coumarin), in which the Department 
calculated materials costs from various sources and used the Reserve 
Bank of India Bulletin (RBI) data to calculate SG&A but did not adjust 
SG&A and overhead costs.
    East Sea adds that it would be illogical to adjust overhead and 
SG&A as the Petitioner suggests for three reasons: (1) the Department 
has no idea what kind of steel SKF uses and replacement of SKF's 
material costs in the overhead and SG&A denominators with Indian import 
costs does not improve the reliability of the SKF overhead or SG&A 
data; (2) SKF's overhead rate reflects the experience of a 
sophisticated bearing factory and the Department has long recognized 
that industrialized countries have higher overhead rates than do 
companies in less industrialized countries, so that the overhead rate 
should not be adjusted upward; and (3) SKF's overhead costs reflect the 
unique experience of SKF, which is the leading producer in the world 
and uses the finest raw materials and state-of-the-art technology to 
produce its bearings--as such, the Department would be mixing apples 
and oranges to substitute Indian import steel prices for SKF's own 
prices in order to create a hybrid overhead or SG&A rate.
Department's Position:
    We agree with Respondents. Section 773(c)(1) of the Act states 
that, for purposes of determining NV in a NME, ``the valuation of the 
FOP shall be based on the best available information regarding the 
values of such factors. . . .'' As we stated in TRBs IV-VI and TRBs 
VII, our preference is to value factors using published information 
(PI) that is closest in time with the specific POR. See also Final 
Determination of Sales at Less Than Fair Value: Certain Partial-
Extension Drawer Slides From the People's Republic of China, 60 FR 
54472, 54476 (October 24, 1995) (Drawer Slides). Based on the record 
evidence we have determined that surrogate-country import statistics 
(Indonesian for valuing steel used to produce cups and cones, Indian 
for steel used to produce rollers and cages), exclusive of import 
duties, comprise the best available information for valuing raw-
material costs. Our reasons for preferring data for Indonesia, rather

[[Page 6178]]

than for our primary surrogate, India, for valuing steel used to 
produce cups and cones are set forth in our response to Comment 4.
    We prefer published surrogate import data to the SKF data in 
valuing the material FOP for the following reasons. First, we are able 
to obtain data specific to the POR, which more closely reflect the 
costs to producers during the POR. Second, the raw-material costs from 
the SKF report do not specify the types of steel SKF purchased. The 
record does not indicate whether SKF purchased bar steel (the type used 
by the Chinese manufacturers) or more expensive tube steel to produce 
bearings parts. Third, although we agree with Petitioner that SKF is a 
producer of subject merchandise, the report also identifies other 
products it manufactures. From the information in the SKF report, we 
are unable to allocate direct labor and raw-materials expenses to the 
production of subject merchandise. For these reasons, we have valued 
the material FOP using surrogate import data.
    Furthermore, we agree with Respondents that Petitioner's citation 
to Timken for the proposition that the Department must use a single 
surrogate source when possible is misplaced. That case, although 
critical of the Department, does not state that all factors must be 
valued in the same surrogate country. Indeed, the opinion in Timken 
explicitly states that ``Commerce may avail itself of data from a 
country other than the designated conduit, adoption of such an inter-
surrogate methodology [although departing from the normal practice at 
that time] remains within the scope of Commerce's discretionary 
power.'' Timken at 304.
    We also disagree with Petitioner's contention that we should adjust 
the overhead and SG&A rates if we continue to use the SKF report to 
value these rates while valuing the material and labor FOP using other 
sources. As noted above, we prefer to base our factors information on 
industry-wide PI. Because such information is not available regarding 
overhead and SG&A rates for producers of subject merchandise during the 
POR (except for the indirect labor portion of overhead and SG&A, which 
we valued separately--see Comment 8, below), we used the overhead and 
SG&A rates applicable to SKF India, a company that produces subject and 
non-subject merchandise.
    In deriving these rates, we used the SKF data both with respect to 
the numerators (total overhead and SG&A expenses, respectively) and 
denominator (total cost of manufacturing). This methodology allowed us 
to derive internally consistent ratios of SKF India's overhead and SG&A 
expenses. These ratios, when multiplied by the FOP we used in our 
analysis, thereby constitute the best available information concerning 
the overhead and SG&A expenses that would be incurred by a PRC bearings 
producer given such FOP. Petitioner's recommended adjustment would 
affect (reduce) the denominator, but it would leave the overhead and 
SG&A expenses in the numerator unchanged. As such, we find that this 
adjustment would itself distort the resulting ratio, rather than curing 
the alleged distortion in our calculations.
    Finally, with respect to Petitioner's assertion that the overhead, 
SG&A, and profit denominators we used in the preliminary results 
improperly included import duties paid, we note that Petitioner has not 
provided any information regarding the amount of import duties that are 
included nor has Petitioner provided a means of identifying and 
eliminating such duties from our calculations. Although we would not 
include duties paid on the importation of merchandise by SKF, we have 
no evidence as to the amount of duties, if any, that are included in 
SKF's raw-materials costs. Therefore, we did not subtract any amount 
for import duties in our calculation of overhead and SG&A percentages. 
See TRBs IV-VI at 65529-65530 and TRBs VII, Comment 2.

2. (a)  Material Valuation

Comment 4
    East Sea and Guizhou Machinery et al. contend that the Indian 
import category (7228.30.19) which the Department used to value the 
steel used to produce cups and cones in the preliminary results is an 
inappropriate source because the values derived using this category do 
not accurately reflect the cost to PRC producers of the hot-rolled 
alloy-steel bar used to produce these components. Respondents state 
that the Department should value this steel using a source that more 
accurately reflects the input costs incurred by PRC producers.
    East Sea argues that Indian import category 7228.30.19 contains a 
wide variety of steel products and a correspondingly wide range of 
prices. In this regard, East Sea notes that the average price per 
metric ton of steel contained in this category ranges from $610 to 
$4,860. East Sea states that the overall steel value per metric ton the 
Department derived using this category (over $1,400) far exceeds the 
value of steel used by PRC producers to manufacture TRBs.
    East Sea states that it is Department practice to compare the 
surrogate steel prices it selects with world prices to determine if the 
proposed surrogate values for steel are aberrational. East Sea notes 
that, in Heavy Forged Hand Tools from the PRC, the Department 
determined that Indian import statistics were aberrational in 
comparison with Indonesian and U.S. import statistics (citing Final 
Results of Antidumping Duty Administrative Review: Heavy Forged Hand 
Tools from the PRC, 60 FR 49241, 49254 (September 22, 1995) (Hand 
Tools), Furfuryl Alcohol from the PRC, 60 FR 225444 (May 8, 1995) 
(Furfuryl Alcohol), and Certain Cased Pencils from the PRC, 59 FR 55625 
(November 4, 1994) (Pencils)). East Sea adds that the Department's 
Proposed Rules also indicate that the Department will test surrogate 
values against international prices.
    East Sea suggests, as an alternative to the Indian data the 
Department used in the preliminary results, an ``international'' price 
of $673 per metric ton, which it derived using U.S., Japanese, and 
European Union (E.U.) import statistics. East Sea contends that this 
value approximates the corresponding steel value used in a recent 
review of TRBs from Romania, where the surrogate value for steel used 
in cups and cones was $718 per metric ton (citing Preliminary Results 
of Antidumping Administrative Review: Tapered Roller Bearings from the 
Romania, 68 FR 15465 (April 8, 1996)).
    East Sea argues in the alternative that, if the Department 
continues to value cups and cones using Indian import statistics, it 
should modify this value by excluding from its calculations all 
individual steel import values in excess of $1,421 per metric ton as 
not reflective of the price of bearing-quality steel. East Sea states 
that this ceiling is not arbitrary because it is the average value 
derived in the preliminary results and is the highest surrogate value 
that the Department has ever selected in its bearings cases.
    Guizhou Machinery et al. agree with East Sea that: (1) the 
surrogate value that the Department used in the preliminary results is 
aberrational when compared with U.S., E.U., and Japanese import 
statistics, and (2) the Department has an established practice, as 
noted in the Proposed Regulations, of testing potential surrogate 
values against international prices (citing, inter alia, Disposable 
Lighters; Coumarin; Silicon Carbide; Drawer Slides; Helical Spring Lock 
Washers from the PRC, 58 FR

[[Page 6179]]

48833, 48835 (September 20, 1993) (Lock Washers); and Saccharin from 
the PRC, 59 FR 58818 (November 15, 1994) (Saccharin)). Guizhou 
Machinery et al. add that the Indian import values that the Department 
used in the preliminary results are nearly three times the value of 
Indian export prices of the same steel and state that this constitutes 
further evidence that the import values are aberrational.
    With respect to the appropriate alternative to Indian import 
values, Guizhou Machinery et al. support East Sea's proposed surrogate 
value of $673 per metric ton, based on an average of U.S., E.U., and 
Japanese import statistics, as the best alternative value. Guizhou 
Machinery et al. state that this value is in accord with the 
Department's practice of basing factor values on multiple sources when 
necessary and is preferable to using data from other countries listed 
on the Department's Surrogate Country Selection Memorandum because none 
of these countries is a significant producer of bearings.
    Petitioner contends that Respondents' arguments that the value of 
steel in Indian import category 7228.30.19 used in the preliminary 
results far exceeds the value of steel used to manufacture TRBs are 
incorrect. Petitioner maintains that this category is the best 
valuation source for the steel used to produce cups and cones if the 
Department determines not to use the SKF Report for this purpose (see 
Comment 3).
    Petitioner states that Indian data is preferable to the U.S./E.U./
Japan average import value proposed by Respondents because India meets 
the statutory criteria for factor valuation, i.e., it is a comparable 
economy to the PRC and is a significant producer of comparable 
merchandise (citing section 773(c) of the Act). Petitioner claims that 
the use of a developed-country average, as suggested by Respondents, 
would violate the statute and adds that the Department previously 
rejected the use of E.U. statistics for valuation purposes in the 1989-
90 review of this order. Petitioner adds that Respondents' analysis of 
Japanese import statistics is based on a questionable reading of 
Japanese HTS classifications.
    With respect to the cases that Respondents cite in support of their 
position that their proposal is in accord with Department practice 
regarding seeking alternative valuation sources where the primary 
surrogate value is aberrational, Petitioner responds that, in those 
cases, unlike this proceeding, the Department had a plausible reason to 
deviate from its preferred practice because the preferred data were 
unsupported by reliable evidence and were contradicted by consistent 
information from other sources, which usually included another 
surrogate.
    Petitioner states that the cases Respondents cite may be 
distinguished from the present review as follows: (1) in Coumarin, the 
rejected Indian source conflicted with other sources within India; (2) 
in Silicon Carbide, the Department did not use the preferred data 
because they either pertained to further-processed products or involved 
a small tonnage priced too high to be considered reasonable; (3) in 
Disposable Lighters, the Department used exports from India instead of 
imports because imports were not significant; (4) in Pencils, the 
Department used imports from a secondary surrogate instead of the 
primary surrogate (India) because the Indian values were inconsistent 
with both Pakistani values and values provided in the petition; (5) in 
Lock Washers, the Indian values the Department rejected were over 1,000 
percent higher than the comparison values; (6) in Drawer Slides, the 
Indian values the Department rejected were several times higher than 
the comparison values; (7) in Saccharin, the Department used an average 
of export statistics from five developed countries because it had 
difficulty finding an appropriate surrogate; (8) in Hand Tools, the 
Department rejected Indian import values in favor of Indonesian and 
U.S. values because imports into India were not significant; (9) in 
Furfuryl Alcohol, the Department rejected the primary surrogate's 
(Indonesia) import data in favor of export data from the same 
surrogate; and (10) in Steel Pipe, the Department excluded certain 
imports that were clearly of a higher quality than the steel used by 
Respondent in that case.
    Petitioner adds that East Sea's alternative proposal, that, if the 
Department continues to use Indian import statistics it should exclude 
all individual import values greater than $1,421, is incorrect because 
it focuses only on individual import values that may be aberrationally 
high while ignoring those values that may be aberrationally low.
Department Position
    We agree with East Sea and Guizhou Machinery et al. None of the 
eight-digit tariff categories within the Indian 7228.30 steel group 
corresponds specifically to bearing-quality steel used to manufacture 
cups and cones, and we do not agree with Petitioner that the best 
alternative, aside from valuing steel using the SKF Report, is to use 
the eight-digit ``others'' category (7228.30.19) within this group. 
Instead, we have determined that the use of Indian import data is not 
appropriate to value steel used to produce cups and cones in this case 
because we are unable to isolate an Indian import value for bearing-
quality steel and, more importantly, the steel values in the Indian 
import data are not reliable, as further discussed below.
    As in TRBs IV-VI and TRBs VII, we have examined each of the eight-
digit categories within the Indian 7228.30 group and have found that, 
although bearing-quality steel used to manufacture cups and cones is 
most likely contained within this basket category, there is no eight-
digit sub-category that is reasonably specific to this type of steel. 
We eliminated the specific categories of alloy steel that are clearly 
not bearing-quality steel as follows. Under the Indian tariff system, 
bearing-quality steel used to manufacture cups and cones is contained 
within the broad category 7228.30 (Other Bars & Rods, Hot-Rolled, Hot-
Drawn & Extruded). However, none of the named sub-categories of this 
grouping (7228.30.01--bright bars of alloy tool steel; 7228.30.09--
bright bars of other steel; 7228.30.12--bars and rods of spring steel; 
and 7228.30.14--bars and rods of tool and die steel) contains steel 
used in the production of subject merchandise. This leaves an 
``others'' category of steel, 7228.30.19. However, we have no 
information concerning what this category contains, and none of the 
parties in this proceeding has suggested that this category 
specifically isolates bearing-quality steel. Further, the value of 
steel in this eight-digit residual category is greater than the value 
of the general six-digit basket category (7228.30) which, in turn, is 
valued too high to be considered a reliable indicator of the price of 
bearing-quality steel, as shown below.
    Where questions have been raised about PI with respect to 
particular material input prices in a chosen surrogate country, it is 
the Department's responsibility to examine that PI. See Drawer Slides 
at 54475-76, Cased Pencils, 59 FR 55633, 55629 (1994), TRBs IV-VI at 
65531, and TRBs VII. Because all parties raised questions about the 
validity of the Indian import data used to value cups and cones in the 
preliminary results, we compared the value of Indian imports in 
category 7228.30 with the only record source that specifically isolates 
bearing-quality steel used to manufacture cups and cones: U.S. import 
data regarding tariff category 7228.20.30 (``bearing-quality steel''). 
We found that, for the time period covered by the POR, the value of

[[Page 6180]]

the Indian basket category 7228.30 was significantly higher than that 
for the bearing-quality steel imported into the United States. It was 
also significantly higher in comparison with E.U. import 
statistics.<SUP>1 The Indian eight-digit ``others'' category 
recommended by Petitioner was higher than any of these sources.
---------------------------------------------------------------------------

    \1\ Although the E.U. import data do not explicitly identify 
``bearing-quality steel,'' the relevant subheadings (7228.30.40, 
7228.30.41, and 7228.30.49) provide narrative descriptions that 
closely match the chemical composition of the bar steel that the PRC 
respondents used to produce cups and cones. See Memorandum from 
Analyst to File: Factors of Production for the Final Results of the 
1994-95 Administrative Review of TRBs from the PRC, February 3, 
1997.
---------------------------------------------------------------------------

    In light of these findings, we have determined that the Indian 
import data that we used to value cups and cones in the preliminary 
results are not reliable. For these final results, we have used import 
data from another surrogate country, Indonesia, a producer of 
merchandise comparable to TRBs, to value steel used to produce these 
components. As with the Indian data, we were unable to isolate the 
value of bearing-quality steel or identify an eight-digit category 
containing such steel imported into Indonesia; however, unlike the 
Indian data, the Indonesian six-digit category 7228.30 is consistent 
with the value of U.S. imports of bearing-quality steel, as well as the 
comparable six-digit category in the United States. Thus, we have 
determined that Indonesian category 7228.30, which is the narrowest 
category we can determine would contain bearing-quality steel, is the 
best available information for valuing steel used to produce cups and 
cones. Although Indonesia is not the first-choice surrogate country in 
this review, in past cases the Department has used values from other 
surrogate countries for inputs where the value for the first-choice 
surrogate country was determined to be unreliable. See Drawer Slides at 
54475-76, Cased Pencils at 55629, and Lock Washers at 48835. Further, 
Indonesia has previously been used as a secondary source of surrogate 
data in cases involving the PRC where, as here, use of Indian data was 
inappropriate even though India was the primary surrogate. See, e.g., 
Chrome-Plated Lug Nuts from the PRC; Final Results of Antidumping Duty 
Administrative Review, 61 FR 58514, 58517-18 (November 15, 1996).
    Petitioner's attempt to distinguish the instant proceeding from the 
cases in which we have departed from a primary surrogate in fact 
demonstrates that there are a variety of factual situations in which 
recourse to a secondary source is appropriate with respect to the 
valuation of a given factor. Accordingly, we must determine the 
reliability of each factor based on the facts of each case. In this 
review, as noted above, a comparison of the Indian import values for 
the basket category containing steel used by the PRC respondents to 
produce cups and cones with other, more precise, data regarding such 
``bearing-quality'' steel indicates that the Indian values are 
inappropriate. In contrast, the Indonesian data that we have chosen 
closely approximate observable market prices for this specific input 
and therefore constitute a more appropriate valuation source.
    Finally, we note that, because we are valuing the steel used to 
produce cups and cones using Indonesian import data, we are valuing the 
scrap offset to this steel value using the same source.
Comment 5
    Petitioner asserts that the Department used the incorrect Indian 
tariff classification number to value steel for cages in the 
preliminary results. Petitioner states that the Department used 
subheading 7209.42.00, a category that does not specify carbon content, 
an essential characteristic that Respondents used in their descriptions 
of the Chinese grade GB699-65 steel used to produce cages. Petitioner 
states that this steel type is low-carbon steel, with a carbon content 
ranging between 0.07 and 0.14 percent by weight. Petitioner suggests 
that, if the Department does not value steel using the SKF Report, it 
should use Indian subheading 7211.41.00, which specifies a carbon 
content of less than 0.25 percent carbon by weight, to value steel used 
to produce cages.
    Guizhou Machinery et al. respond that subheading 7211.41.00 is not 
an appropriate valuation source for cage steel because there is 
insufficient information on the record regarding the thickness of steel 
entering into this category. In this regard, Respondents note that all 
that is known is that the thickness of such steel is greater than 600 
mm, while the thickness of subheading 7209.42.00 has more defined 
boundaries (between 0 and 600 mm). Respondents also state that, 
although subheading 7211.41.00 lists carbon content, it does not 
specify the content of a number of other elements, including manganese, 
silicon, and chromium. Accordingly, Respondents contend, the fact that 
Petitioner's preferred subheading specifies carbon content is 
insufficient reason to change its established preference.
Department's Position
    We disagree with Petitioner. As in past reviews, we are using 
Indian tariff subheading 7209.42.00. This subheading involves cold-
rolled steel sheet, which the PRC respondents use to produce cages. 
Conversely, the subheading that petitioner recommends (7211.41.00) 
involves hot-rolled sheet and is not, therefore, an appropriate 
category for valuing steel used to produce cages.
Comment 6
    Petitioner states that the Department's FOP Memorandum indicates 
that it used Indian tariff subheading 7204.49 to value non-alloy scrap 
resulting from the production of cages while the actual calculations 
indicate that the Department used subheading 7204.41.00. Petitioner 
suggests that, if the Department in fact uses subheading 7204.49 for 
the final results, it should only use data for item 7204.49.09 
(``other'), which will allow the Department to exclude the inapplicable 
data for ``defective sheet of iron and steel'' at item 7204.49.01.
    Guizhou Machinery et al. respond that the Department should use 
subheading 7204.49, as it stated in its FOP Memorandum. Respondents 
state that subheading 7204.41.00 is inappropriate because it does not 
include waste from steel-sheet products. Respondents add that, contrary 
to Petitioner's assertion, the Department need not exclude subheading 
7204.40.01, since this category specifically includes scrap from steel 
sheet.
Department's Position
    We disagree with Guizhou Machinery et al. For these final results, 
we have used Indian import category 7204.41.00 to value scrap used in 
the production of cages. As we noted in TRBs VII (Comment 5), this 
category best describes the types of scrap created during the 
production of cages, i.e., turnings, shavings, chips, trimmings, 
stampings, etc. Further, although we agree with Petitioner that our FOP 
Memorandum and our calculations were inconsistent in the preliminary 
results, its comments regarding the exclusion of certain data from 
subheading 7204.49 are moot because we have not used this subheading 
for the final results.
Comment 7
    Petitioner states that Respondents failed to make allowance for 
defective products in their calculations of per-unit material and labor 
quantities. Petitioner recommends adjustment of

[[Page 6181]]

Respondents'' COM upward to account for defective products.
    Petitioner states that, in calculating materials and labor usage 
per unit of output, most Respondents reported that they divided the 
weight of steel issued and the total labor hours worked by the number 
of units produced. Petitioner contends that these calculations do not 
take into account that a percentage of total units produced will 
inevitably be defective products which consume materials, labor, and 
overhead but cannot be sold. Petitioner claims for instance that, in 
the previous review, Shanghai General Bearing Company <SUP>2 reported 
publicly that it uses a ``two-percent allowance . . . based on the 
company's empirical evidence of how much production fails to pass 
inspection'' (citing Shanghai General Public Verification Report for 
1993-94 Review). Petitioner suggests that the Department revise its 
calculations of COM upward by 0.2 percent for all respondents in order 
to account for unreported defective production.
---------------------------------------------------------------------------

    \2\ Because we revoked Shanghai General in the 1993-94 
administrative review, we are not addressing issues involving this 
company in the 1994-95 review. However, we include reference to 
Shanghai General here because Petitioner's contention concerns the 
application of Shanghai General data to other respondents that are 
involved in this review.
---------------------------------------------------------------------------

    Guizhou Machinery et al. respond that the Department's 
questionnaire does not request that Respondents provide any data on 
production defect rates and, therefore, the Department has no basis for 
making any inferences regarding the production of defective bearings. 
Guizhou Machinery et al. add that Petitioner offers no evidence to 
support the theory that the experience of Shanghai General is 
representative of other Chinese producers.
    East Sea claims that Petitioner's suggestion that the Department 
increase COM by 0.2 percent is misguided because there is no evidence 
that Respondents have accounted improperly for defective products. East 
Sea states that, in fact, it has reported FOP for finished products, 
i.e., factors data required to produce satisfactory, non-defective 
products.
Department's Position
    We disagree with Petitioner. While we agree that, in calculating 
per-unit material and labor quantities, Respondents must account for 
defective products properly, Petitioner has provided no evidence that 
Respondents did not do so. The fact that one company, Shanghai General, 
that stated explicitly it accounted for defective products properly 
does not mean that Respondents in this review did not, particularly 
since that statement was made in a previous review. In fact, 
Respondents generally account for defective products by including all 
material and labor quantities for all products produced (including 
defective products) in the numerator of the per-unit material and labor 
calculations while basing the denominator (number of units produced) 
only on those units that pass inspection and are saleable. Where we 
find, generally through verification, that this is not the case, we 
adjust the denominator accordingly. See TRBs IV-VI at 65540 (Comment 
23). However, as Guizhou Machinery et al. note, we did not ask 
Respondents to provide specific data regarding production-defect rates 
in our questionnaire nor would we use such rates in our calculations. 
Therefore, it would be inappropriate to draw an adverse inference from 
the lack of data on the record regarding such rates.

2.(b)  Labor Valuation

Comment 8
    Petitioner objects to the Department's treatment of indirect labor. 
Specifically, Petitioner claims that, in the preliminary results, the 
Department valued indirect labor as a percentage of SKF's total labor 
cost and included a portion of indirect labor in overhead and a portion 
in SG&A. Petitioner contends that, instead of valuing indirect labor in 
this manner, the Department should value this expense using its FOP 
methodology, as it did with direct labor, then combine direct and 
indirect labor to derive a total labor expense. Petitioner states that, 
unlike indirect labor, the Department calculated direct labor in the 
manner the statute envisions, as a factor of production to which the 
Department applied the Indian surrogate value.
    Petitioner suggests valuing indirect labor as follows. Petitioner 
claims that most respondents reported that indirect overhead labor is 
20 percent of direct labor and that indirect SG&A labor is also 20 
percent of direct labor. Petitioner suggests that, since indirect-labor 
hours are 40 percent of direct-labor hours, the Department should 
calculate a total (direct plus indirect) labor value by multiplying the 
direct-labor hours by 1.4, then applying the Indian surrogate-labor 
value to this quantity.
    Guizhou Machinery et al. respond by noting that, in NME cases, the 
Department has treated indirect labor as an overhead cost, not as a 
direct labor cost. Guizhou Machinery et al. add that the questionnaire 
requests that Respondents report assembly labor and indirect labor 
separately and contend, therefore, that the Department should reject 
Petitioner's proposal.
Department's Position
    We agree with Petitioner, in part. Petitioner is correct in 
asserting that, where we have the data to calculate expenses incurred 
by NME respondents using the factors of production methodology (i.e., 
multiplying a respondent's reported per-unit usage rates by surrogate 
values), we should do so. See section 776(c) of the Act. With respect 
to indirect labor, data on the record allow us to calculate the per-
unit quantities of such labor attributable to overhead and to SG&A. We 
also have reliable surrogate information regarding labor values in 
India (IL&T data). Accordingly, for the final results, we valued 
indirect labor attributable to overhead and indirect labor attributable 
to SG&A by multiplying the respective per-unit labor hours by the IL&T 
labor rate.
    However, although we agree with Petitioner regarding the 
appropriate methodology for deriving the indirect labor expense, we 
disagree with Petitioner's proposal that we should include the total 
per-unit indirect-labor expense together with the per-unit direct-labor 
expense, effectively calculating a single, per-unit labor expense. In 
recommending that we create a single, total labor amount, presumably to 
be included as part of COM (Petitioner does not specify where to 
include this total labor value), Petitioner incorrectly attributes all 
indirect labor to COM instead of allocating this expense to both 
overhead and SG&A, as reported by Respondents. In this respect, the 
methodology that we used in the preliminary results, wherein we 
allocated indirect labor to overhead and to SG&A using the allocation 
percentages reported by Respondents, conforms to our practice of 
considering indirect labor as labor attributable to both overhead and 
to SG&A operations (e.g., supervisory and sales personnel). See Final 
Determination of Sales at Less Than Fair Value: Sebacic Acid from the 
PRC, 59 FR 28053, 28059-60 (Sebacic Acid). Accordingly, while we have 
valued indirect labor in the manner that Petitioner recommends, we have 
allocated this expense to both overhead and SG&A.
Comment 9
    Petitioner argues that, in calculating the surrogate value for 
labor, the Department should make allowance for vacation, sick leave 
and casual leave when calculating the number of weeks

[[Page 6182]]

per month actually worked. Petitioner states that the Department 
calculated the hourly wage rate on the basis of 4.333 working weeks per 
month, based on a full 52-week year, which assumes that workers never 
get sick, take vacations or have other days off. Petitioner observes 
that IL&T India shows that mandatory benefits include one day of paid 
vacation for every 20 days worked, sick leave of seven days a year with 
full pay, and seven to ten days of casual leave. Petitioner claims that 
Respondents have not allocated any portion of vacation or sick leave to 
the labor hours they reported as their factors of production. 
Petitioner states that the goal is to determine the cost to an employer 
of each hour that an employee is on the job and, therefore, the labor 
hours used in the denominator of the surrogate labor-rate calculation 
must include only time on the job. Petitioner suggests that the number 
of weeks per month should be recalculated to take into account at least 
the minimum benefits and derives a figure of 3.72 working weeks per 
month using this approach.
    Guizhou Machinery et al. respond that the Department should reject 
Petitioner's argument to adjust the calculated labor rate which the 
Department used in the preliminary results for vacation, sick leave and 
casual leave. Guizhou Machinery et al. claim that Petitioner provides 
no support for the statement that hourly labor costs should reflect 
only the expenses accrued to an employer for the time the employee is 
on the job. Guizhou Machinery et al. state that the real hourly cost to 
the employer reflects many factors, including fringe benefits such as 
paid vacation, sick leave, etc. Guizhou Machinery et al. suggest that 
the Department's calculations should include the cost of fringe 
benefits such as vacation and sick leave in the numerator and, because 
the numerator does include such fringe benefit costs, the denominator 
should likewise reflect these fringe benefits by including hours 
related to vacation and sick leave. .
Department's Position
    We disagree with Petitioner. In our preliminary results we valued 
direct labor using rates reported in IL&T India, which states that 
fringe benefits normally add between 40 percent and 50 percent to base 
pay. See Memorandum to the File from Case Analyst: Factors of 
Production Values Used for the Eighth Antidumping Duty Administrative 
Review (Memorandum), September 1, 1995, attachment 5. Accordingly, we 
multiplied base pay by 1.45 in order to incorporate fringe benefits. 
Memorandum at 3-4.
    Whereas Petitioner suggests we calculate a wage rate based only on 
time spent on the job, we find that expenses related to holidays, 
vacation, sick leave, etc., belong in the numerator of the surrogate 
labor-rate calculation and time spent on vacation and sick leave 
belongs in the denominator of the calculation. Because the employer 
incurs expenses both for employees on vacation and employees on the 
job, it incurs a fully loaded labor cost to produce the merchandise. By 
adjusting the base pay to include such fringe benefits as vacation, 
sick leave, casual leave, etc., we calculated a fully loaded direct-
labor rate that more accurately represents the actual direct-labor cost 
to the manufacturer. See TRBs VII at 49-50.

2.(c)  Overhead, SG&A and Profit Valuation

Comment 10
    Petitioner contends that the Department incorrectly designated the 
line item ``power and fuel'' in the SKF Report as a material cost, not 
an overhead cost, in its calculation of overhead expenses. Petitioner 
argues that power and fuel are not materials incorporated into the 
subject merchandise and Respondents did not report this expense as a 
material factor or any other factor. Rather, Petitioner contends, 
energy is generally used to operate the manufacturing plants and is 
properly considered as part of factory overhead. For the final results, 
Petitioner suggests that the Department include power and fuel costs in 
SKF's overhead cost or calculate this expense as a separate factor but 
notes that no purpose is served by isolating the energy costs as a 
separate factor.
    East Sea argues that the statute does not specifically list ``power 
and fuel'' as part of overhead, citing section 773(c)(3)(C) of the Act. 
East Sea asserts, therefore, that the Department's inclusion of these 
items within raw materials was not improper.
Department's Position
    We agree with Petitioner that power and fuel are not direct 
material inputs. Power and fuel consumption cannot be directly linked 
to the output of the subject merchandise. Therefore, for these final 
results, we have incorporated power and fuel as part of overhead.
Comment 11
    Petitioner contends that the Department incorrectly designated the 
line item ``stores and spares consumed'' in the SKF Report as a 
material cost, not an overhead cost, in its calculation of overhead 
expenses. Petitioner states that this line item concerns expenses 
related to tools, grinding wheels, and spare parts used in the 
production process or incorporated into the equipment and machinery, 
but which are not incorporated into the finished product. Petitioner 
argues that Respondents did not report ``stores and spares consumed'' 
as part of the materials factor of production, which is proper because 
this item is an overhead expense. Petitioner explains that ``stores and 
spares'' are listed under ``expenses for manufacture,'' not under ``raw 
materials'' in the SKF Report, and notes that the SKF Report refers to 
``stores and spares'' as tools.
    East Sea contends that the footnotes of the SKF Report state that 
``stores and spares consumed'' includes ``work-in-process.'' East Sea 
states that it is unclear whether this line item relates to steel or 
other types of materials and, given the lack of clarity, it would be 
unfair to allocate all of this item to overhead. East Sea suggests 
that, because this item relates to ``stores'' taken from inventory, it 
is logical to classify this expense as non-overhead.
Department's Position
    We agree with Petitioner. Because this line item involves expenses 
relating to equipment and machinery used in the production process but 
not incorporated into the finished product, we consider this expense as 
part of overhead, even though the SKF Report does not describe the 
nature of this line item entirely. Accordingly, for the final results, 
we have treated ``stores and spares consumed'' as an overhead item.
Comment 12
    Petitioner argues that the Department incorrectly designated the 
line item ``traded goods'' in the SKF Report as a materials cost to be 
included in the denominator of the calculation of the overhead, SG&A, 
and profit rates. Petitioner states that ``traded goods'' are finished 
products purchased and sold by SKF that have nothing to do with its 
manufacturing operations. Petitioner notes that the SKF Report 
segregates ``purchases of traded goods'' from ``raw materials and 
bought out components consumed'' and, in a different part of the 
report, separates them from products SKF ``manufactured and sold during 
the year.'' Petitioner states further that the report identifies 
``purchases of traded goods'' as ``ball and roller bearings,'' 
``bearing accessories and maintenance products,'' and ``textile 
machinery components.'' Petitioner notes that, in past reviews, the 
Department included

[[Page 6183]]

only steel costs in the cost of materials, not finished products. 
Petitioner states that this prior approach is correct and, because 
purchases of traded goods are already manufactured and do not affect 
production, the Department should exclude them from the overhead 
denominator.
    East Sea responds that Petitioner's argument with regard to 
``traded goods'' is misguided and that the Department's calculations in 
the preliminary results concerning this line item were correct.
Department's Position
    We disagree with Petitioner. In past reviews we did not include a 
line item for ``purchases of traded goods'' in the COM that we used as 
the denominator of the overhead, SG&A, and profit-rate calculations 
because the SKF reports that we used in those reviews did not include 
this line item. In this review, the SKF Report includes a separate line 
item for this cost. We have included it in the denominator of these 
calculations (as part of the COM) because, in calculating SKF's COM, we 
must include those line items listed on the SKF Report that reflect the 
costs associated with the production of the merchandise that are not 
overhead or SG&A expenses.
    According to the description in the SKF Report, ``purchases of 
traded goods'' are properly considered as COM expenses. They are not 
overhead or SG&A expenses but instead reflect the common practice of 
manufacturers purchasing finished and semi-finished goods to meet their 
clients'' demand. SKF does not incur direct materials or direct labor 
expenses with respect to these products but instead incurs the expense 
of purchasing them. Because these purchased goods are an integral 
portion of cost of goods sold, they are ordinary business expenses that 
we cannot ignore, as suggested by Petitioner, simply because they 
involve products that SKF did not manufacture. Therefore, for the final 
results, we have included ``purchases of traded goods'' as part of the 
denominators we used in the overhead, SG&A, and profit-rate 
calculations.
Comment 13
    Petitioner states that the Department did not include interest 
expenses SKF incurred in the constructed value (CV) calculations. 
Petitioner recommends that the Department include these expenses in the 
calculation of SG&A. Petitioner states that, according to the 
Department's Antidumping Manual and Department practice, interest 
expenses should be included in the CV.
    East Sea responds that, although Petitioner points to the 
Antidumping Manual as support that SKF's interest expenses are SG&A 
expenses, the interest expenses to which the manual refers are selling 
expenses and there is no evidence that any of SKF's interest expenses 
pertain to sales. Accordingly, East Sea asserts that the Department 
should not include interest expenses in its CV calculations.
Department's Position
    We agree with Petitioner that, consistent with our practice, the 
interest expenses in question are ordinary business expenses relating 
to SG&A. Therefore, we have included, in the SG&A expense for these 
final results, interest expenses as reported in the SKF Report.
Comment 14
    Petitioner states that, for the preliminary results, the Department 
calculated profit on an after-tax basis. This methodology, Petitioner 
contends, is contrary to the Department's policy to achieve an 
``apples-to-apples comparison'' (citing the Department's Antidumping 
Manual). Petitioner states that, because the export prices and 
constructed export prices used in the margin calculations include all 
profits, i.e., are pre-tax values, the Department must calculate the 
profit used in establishing NV on the same basis.
    East Sea responds that Petitioner cites no case law to support its 
assertion and the Department should continue to calculate SKF's profit 
net of expenses.
Department's Position
    We agree with Petitioner that we should use a pre-tax amount to 
calculate the profit ratio, for the reasons that Petitioner provided in 
its comment. Therefore, for the final results, we have calculated a 
profit rate for NV on a pre-tax basis.
Comment 15
    East Sea argues that the Department improperly designated the line 
item ``goodwill,'' as listed in the SKF Report, as an SG&A expense. 
East Sea states that goodwill expenses are related to fixed assets and 
are listed as such in the SKF Report. East Sea adds that there is no 
Departmental precedent for including goodwill as part of SG&A and, 
therefore, the Department should remove this expense from the SG&A 
calculation.
    Petitioner responds that the fact that the SKF Report states that 
these expenses are related to fixed assets is not a sufficient reason 
to disregard them in calculating the SG&A expense. Petitioner states 
that, using the same reasoning, the Department would have to eliminate 
depreciation from the overhead expense, which would clearly be 
incorrect. Petitioner adds that East Sea provided no evidence that SKF, 
the surrogate producer, did not comply with Indian Generally Accepted 
Accounting Principles (GAAP) or that its accounting practices should 
otherwise be disregarded and the goodwill expense disallowed.
Department's Position
    We agree with Petitioner that the fact that the SKF Report states 
that the goodwill expense line item is related to fixed assets does not 
render it a material cost. However, the evidence on the record does not 
allow us to determine the extent to which SKF's goodwill expense is 
attributable to overhead or SG&A. For these final results, we have 
allocated 50 percent of SKF's goodwill expense to overhead and 50 
percent to SG&A.
Comment 16
    East Sea argues that the Department improperly designated the line 
item ``rates and taxes'' in the SKF Report as an overhead expense 
instead of including it in SG&A. East Sea states that this expense is 
an SG&A expense because taxes are traditionally considered an 
administrative expense, not a manufacturing expense.
    Petitioner responds that shifting allocations from overhead to SG&A 
or vise versa should not affect the bottom line of the NV calculation. 
Petitioner states, however, that it is more reasonable to assign the 
``rates and taxes'' line item to overhead because SKF is a 
manufacturing company and, presumably, most of its rates and taxes 
would relate to its plant and equipment and other aspects of its 
manufacturing operations.
Department's Position
    We agree with East Sea that we should allocate the ``rates and 
taxes'' line item to SG&A and not to overhead. This allocation 
methodology is consistent with our practice in previous administrative 
reviews of this proceeding. See TRBs IV-VI at 65540.
Comment 17
    East Sea contends that the Department should not include the line 
item ``profit (loss) on fixed assets sold'' as part of overhead. East 
Sea states that SKF incurred this expense independent of any 
manufacturing or selling activities; rather, as its title suggests, it 
is related to the value of fixed assets.
    Petitioner responds that selling fixed assets that were used in 
manufacturing

[[Page 6184]]

is not a manufacturing activity, any more than an accounting entry to 
reflect depreciation is a manufacturing activity. Petitioner contends, 
however, that this line item does identify the relevant capital cost of 
the assets used in manufacturing and therefore, as with depreciation, 
the loss on the sale of fixed assets should be included in overhead.
Department Position
    We agree with Petitioner that the loss SKF India incurred in 
selling fixed assets used to manufacture merchandise clearly is related 
to manufacturing activities. Therefore, we have included this loss as 
an overhead item.
Comment 18
    East Sea argues that the Department improperly allocated all of 
SKF's line item ``repairs to buildings'' to overhead in the preliminary 
results. East Sea suggests that Department allocate this item partially 
to SG&A as there is no proof that repairs were made solely to 
manufacturing buildings.
Department's Position
    We agree with East Sea that it is improper to include all of SKF's 
building-repair expenses in overhead because depreciation associated 
with office buildings and office equipment should be included in SG&A. 
Therefore, for the final results, we allocated repair costs to overhead 
and SG&A according to the function and value of the assets; that is, we 
included in overhead only the depreciation expenses allocated to 
manufacturing. We obtained the information pertaining to the function 
and value of SKF's assets from the SKF Report.
Comment 19
    East Sea claims that the Department should allocate insurance to 
both overhead and SG&A on a 75-percent/25-percent basis as there is no 
proof that insurance costs are related to overhead alone.
    Petitioner contends that it does not make a difference in the CV 
calculation whether the insurance is allocated to SG&A or overhead. 
Petitioner adds, however, that SKF is a manufacturing company and most 
of its insurance costs would relate to its plant and equipment and 
similar items related to its manufacturing operations, i.e., overhead. 
Petitioner also asserts that certain PRC companies have included 
insurance as part of factory overhead. Moreover, Petitioner argues that 
East Sea's recommended 75-percent/25-percent ratio is totally 
arbitrary.
Department's Position
    We agree with East Sea that we should allocate insurance expenses 
to both overhead and SG&A. However, because East Sea did not provide 
any support for the 75-percent/25-percent allocation ratio, we are not 
using this ratio for the final results. Furthermore, even though, as 
Petitioner notes, SKF India is a manufacturing company, we have no 
information which will allow us to allocate insurance expenses 
precisely. For the final results, we allocated insurance expenses 
equally to SG&A and overhead (i.e., 50 percent to SG&A and 50 percent 
to overhead), due to the fact that the SKF Report does not identify the 
nature of these expenses.
Comment 20
    East Sea contends that the Department should continue its past 
practice of using an eight-percent profit rate for the final results. 
East Sea emphasizes that SKF India is related to SKF Sweden and, 
therefore, the transfer price and other related-party transactions 
between parent and subsidiary could radically affect SKF's profit 
margins.
    Petitioner argues that the former eight-percent rate was an 
arbitrary rate and is contrary to the new law. Petitioner adds that 
East Sea does not provide any evidence that such related-party 
transactions actually occurred or that, if they occurred, they had any 
actual impact upon SKF India's profits.
Department's Position
    We agree with Petitioner. Consistent with section 773(c) of the 
Act, we calculated a profit rate using surrogate data, in this case the 
SKF Report. Regarding the appropriateness of this report for the profit 
calculation, we note that East Sea did not provide any evidence to 
support its claim that the profit rate is inappropriate because the 
company had affiliated-party transactions.
Comment 21
    Petitioner contends that the Department improperly accepted CMC's 
claim that it incurred no U.S. selling expenses on constructed export 
price sales made during the POR. Petitioner recommends that the 
Department calculate these expenses on the basis of the facts available 
and use the highest SG&A expense of any respondent in this review.
Department's Position
    We disagree with Petitioner. We acknowledge that, aside from our 
initial questionnaire, we did not pursue the issue of CMC's U.S. 
selling expenses in either the supplemental questionnaire or by 
conducting a verification of CMC's U.S. facility. Because we did not 
provide CMC an opportunity to cure any perceived deficiency in its 
response concerning such expenses and because we do not have 
information on the record contradicting the information that CMC 
provided, we have accepted this information for the final results.

3. Freight

Comment 22
    Petitioner claims that the Department calculated freight expenses 
incorrectly by multiplying the surrogate freight rate by the net weight 
of each bearing rather than by the gross weight of the bearing as 
packaged for shipment. Petitioner states that a reasonable allowance 
for the weight of packaging materials should be made in calculating 
both ocean-freight and inland-freight rates, arguing that packaging 
does not travel free of charge. Petitioner suggests that the Department 
could use, as a PI source on the record for this review, a packing list 
of CMC Guizhou, submitted by Distribution Services, Ltd. (DSL), on 
September 27, 1995. Petitioner states that the packing list shows both 
gross and net weights of pallets of several common TRB models and that 
the average weight difference is about eight percent. Therefore, 
Petitioner asserts, the Department should multiply the net weights by 
1.08 to reflect the weight of packaging.
Department's Position
    We agree with Petitioner that a cost is incurred with respect to 
shipment of packing materials. Upon reviewing the packing list of CMC 
Guizhou, we have determined that the packing document DSL submitted in 
this review is an independent and reliable source for such information. 
Accordingly, for the final results, we have derived the gross weight 
used in calculating the ocean-freight expense by multiplying the net 
weight by 1.08.
Comment 23
    Petitioner states that the Department erroneously used the Indian 
wholesale-price index (WPI) to adjust for inflation of ocean-freight 
cost. Petitioner contends that, because the Department used the U.S. 
dollar rates quoted by Maersk, Inc., a U.S. company, any adjustment for 
inflation should be based on dollar inflation. Petitioner suggests that 
the Department adjust ocean freight costs using the U.S. producer-price 
index for finished goods, the U.S. equivalent of the Indian WPI.

[[Page 6185]]

Department's Position
    We agree with Petitioner that we should adjust ocean-freight costs 
using the U.S. producer-price index because ocean-freight costs are 
based on U.S. rates in U.S. dollars. For the final results, we deflated 
the July 1996 ocean-freight-rate quotes from Maersk Inc. using the U.S. 
WPI to reflect the POR costs.
Comment 24
    Petitioner contends that the Department has understated the marine-
insurance expense by applying an insurance rate per ton applicable to 
sulfur dyes from India. Petitioner argues that insurance protects 
against lost value and that, if a container of bearings were lost at 
sea, there is no basis to suppose that payment for the loss of one ton 
of sulfur dyes would have any relationship to the value of the 
bearings. Petitioner adds that the Department's questionnaire indicates 
that insurance premiums are normally based on the value of the 
merchandise. Petitioner recommends that the Department calculate a 
marine-insurance factor based on the ratio of the insurance charge per 
ton of sulfur dye divided by the value of sulfur dye per ton (based on 
U.S. Customs value) and apply this factor to the price of TRBs sold in 
the United States.
    Guizhou Machinery et al. respond that it is not reasonable to 
assume that the difference in Indian marine-insurance rates applicable 
to sulfur dyes and TRBs can be measured accurately simply by comparing 
the difference in product values. Guizhou Machinery et al. further 
assert that Petitioner's argument is based on customs values obtained 
from the Sulfur Dyes petition, information which has not been 
previously submitted on the record for the current review. Guizhou 
Machinery et al. state that the Department's approach of using the 
marine-insurance rates from the sulfur-dyes investigation is consistent 
with its calculations in other NME cases.
Department's Position
    We disagree with Petitioner with respect to our use of the sulfur-
dyes data. We have relied on the public information on marine insurance 
for sulfur dyes that we used for the preliminary results, as these data 
are the only public information available to us; further, we have used 
the same rate repeatedly for other PRC analyses. See Final Results of 
Administrative Review: Certain Helical Spring Lock Washers from the 
PRC, 61 FR 41994 (August 13, 1996) (Lock Washers), and TRBs IV-VI at 
65537.
Comment 25
    Guizhou Machinery et al. claim that, with respect to Guizhou 
Machinery and Guizhou Automotive, the Department did not convert the 
charge for marine insurance from rupees into U.S. dollars and, 
therefore, this expense is overstated. Guizhou Machinery and Guizhou 
Automotive explain that the Department calculated marine insurance by 
multiplying the rate per kilogram by the net weight of the bearing and 
then adjusted for inflation, yielding a figure in rupees, which must be 
converted into U.S. dollars in order to calculate a U.S. price. Guizhou 
Machinery and Guizhou Automotive request that the Department convert 
all marine-insurance rates in rupees to U.S. dollars.
    Additionally, Guizhou Machinery and Guizhou Automotive claim that 
the Department calculated the foreign-inland-freight charge 
incorrectly. Respondents explain that, for all other companies, the 
Department calculated this charge properly but, for Guizhou Machinery 
and Guizhou Automotive, the Department's formula resulted in an 
inflated expense. Guizhou Machinery and Guizhou Automotive request that 
the Department correct this error for the final results.
    Petitioner agrees that the Department should check its calculations 
and ensure that amounts denominated in rupees are converted into 
dollars and that it should apply the proper formula for inland freight.
Department's Position
    We agree with both parties. For the final results, we have 
corrected these errors.

4. Facts Available

Comment 26
    Petitioner disagrees with the Department's acceptance of Premier's 
FOP data even though, in most cases, the data did not relate to the 
manufacturer whose merchandise Premier sold to the United States. 
Petitioner recommends the use of facts available to calculate Premier's 
rate. Petitioner argues that there is no indication that Premier's 
selective reporting is representative of its suppliers'' actual 
experience, noting that the questionnaire states that, if a producer 
uses more than one facility to produce subject merchandise, it must 
report the factor use at each location. Petitioner asserts that the 
Department's acceptance of Premier's selective responses, as well as 
the use of other surrogate producers' costs when those of Premier's 
suppliers were not available, is contrary to the Department's policy 
regarding the appropriate deposit rate for unreviewed non-PRC exporters 
of subject merchandise from the PRC. Petitioner states that Premier and 
its suppliers should not be allowed to select the suppliers on the 
basis of whose data the Department will calculate Premier's margin.
    Petitioner states that only Premier knows the efforts it made to 
supply this information and, moreover, Premier's efforts are irrelevant 
because the focus should be on the efforts Premier's suppliers made. 
Petitioner contends that, since certain suppliers refused to come 
forward and claim eligibility for a separate rate, the Department must 
presume them to be part of the single entity to which the PRC rate 
applies and, as non-responsive companies, they are subject to the use 
of adverse facts available. Petitioner adds that all companies are 
conditionally covered in this review and are subject to the PRC rate.
    Finally, Petitioner argues that the Department cannot justify its 
approach on practical grounds. In this regard, Petitioner contends 
that, although the Department states there is little variation in 
factor-utilization rates among the TRB producers from whom it has FOP 
data, the available data reflects only a small number of PRC producers 
and the preliminary results show margins ranging from zero to 129.97 
percent.
    Premier responds that, despite its repeated efforts to obtain FOP 
data directly from its PRC-based suppliers, it was unsuccessful in 
obtaining this data. Premier claims that it has been as responsive and 
cooperative as possible with the Department in the course of this 
review. Premier explains that, given this lack of supplier data for 
certain U.S. sales, it analyzed the record to identify FOP data that 
could be used in place of the data its suppliers had refused to supply, 
and it submitted FOP data for models that constituted 94 percent of its 
POR U.S. sales as follows: for 69 percent of its U.S. sales, Premier 
provided FOP data for the supplier from whom Premier purchased the 
merchandise; for 25 percent of its U.S. sales, Premier supplied data 
from other Chinese producers. Premier states that, accordingly, it 
could not locate any FOP data for only six percent of its U.S. POR 
sales and the Department was correct to use Premier's U.S. sales and 
FOP data when calculating Premier's dumping margin.
    Premier claims that it did not choose the production facility from 
which to

[[Page 6186]]

obtain cost data selectively, stating that it linked its FOP reporting 
to its suppliers if that supplier's data was on the record. Finally, 
Premier states that Petitioner is incorrect in asserting that the real 
focus should be on the PRC producers. Premier states that any PRC 
producer who sells merchandise to trading companies without prior 
knowledge that the merchandise is destined for the United States is not 
subject to a separate dumping-margin calculation and by law cannot be 
the focus for resolution of this issue.
Department's Position
    We disagree with Petitioner. Premier responded to the best of its 
ability to our requests for information regarding FOP data. Given the 
level of cooperation evidenced by Premier in this review, including the 
submission of responsive initial and supplemental questionnaire 
responses as well as its participation in a complete verification of 
its data, and the amount of usable information provided, Premier's 
inability to provide certain FOP data does not warrant the use of 
adverse facts available in calculating a margin in this case. Premier 
provided enough information to allow us to calculate an accurate 
margin, and we used our discretion appropriately to determine how to 
apply facts available to account for the missing data. Accordingly, for 
these final results, we are following our methodology from the 
preliminary results.
    Premier was able to provide factors data from its suppliers for 
models that represented most of Premier's sales by value. For those 
U.S. sales for which Premier was unable to provide FOP data from its 
own suppliers, it provided FOP data from other PRC suppliers of the 
same models. For such merchandise, we determined that there is little 
variation in factor-utilization rates among TRB producers from whom we 
have received FOP data. Accordingly, we used such data for Premier for 
U.S. sales of those models. For a small percentage of sales, Premier 
was unable to report any FOP data. We determined that a simple average 
of the calculated margins for other companies in this review is a 
reasonable rate to apply, as facts available, for these sales by 
Premier.

5. Assessment

Comment 27
    Transcom and L&S, domestic importers of subject merchandise, argue 
that the Department's decision to apply what they consider to be 
punitive facts-available appraisement and deposit rates to companies 
that were never part of the review is unlawful. Transcom and L&S state 
that, for this review, there were various companies from which they 
purchased subject merchandise, none of which received a questionnaire 
or was named in the notice of initiation of review. Transcom states 
that entries from each of the unnamed companies were subject to 
estimated antidumping duty deposits at the ``all others'' rate in 
effect at the time of entry and argues that the Department is precluded 
as a matter of law from either assessing final antidumping duties on 
the unreviewed companies at any rate other than that at which estimated 
antidumping duty deposits were made or imposing the new facts-
available-based deposit rate on shipments from unreviewed companies.
    Transcom and L&S, citing section 751(a) of the Act, state that the 
Department is directed to determine the amount of antidumping duties to 
be imposed pursuant to periodic reviews. They add that, in accordance 
with 19 CFR 353.22(e), unreviewed companies are subject to automatic 
assessment of antidumping duties and a deposit of estimated duties at 
the rate previously established. Transcom and L&S note that the Court 
of International Trade (CIT) has concluded that, in situations where a 
company's entries are not reviewed, the prior cash deposit rate from 
the less-than-fair-value (LTFV) investigation becomes the assessment 
rate, ``which must in turn become the new cash deposit rate for that 
company'' (citing Federal Mogul Corp. v. United States, 822 F. Supp. 
782, 787-88 (CIT 1993) (Federal Mogul II)). Transcom and L&S claim that 
the CIT has affirmed this rationale in other, more recent, decisions as 
well, concluding that the Department's use of a new ``all others'' rate 
calculated during a particular administrative review as the new cash 
deposit rate for unreviewed companies which have previously received 
the ``all others'' rate is not in accordance with law (citing Federal 
Mogul Corp. v. United States, 862 F. Supp. 384 (CIT 1994), and UCF 
America, Inc. v. United States, 870 F. Supp. 1120, 1127-28 (CIT 1994) 
(UCF America)).
    Based on these CIT decisions, Transcom contends that an exporter 
that is not under review would have no reason to anticipate that 
antidumping duties assessed on its merchandise would vary from the 
amount deposited. Transcom notes that Federal Mogul II (at 788) states 
that parties rely on the cash deposit rates in making their decision 
whether to request an administrative review of certain merchandise. In 
view of the Department's regulations, Transcom claims that the absence 
of any notice from the Department that unnamed companies faced the 
possibility of increased antidumping duty liability is fundamentally 
prejudicial to the unnamed companies. Transcom states that previous 
attempts by the Department to impose a rate based on the facts 
available on an exporter neither named in the review request nor in the 
notice of initiation have been overturned, citing Sigma Corp. v. United 
States, 841 F. Supp. 1255 (CIT 1993) (Sigma Corp. I). In that case, 
Transcom contends, the CIT held that the Department was required to 
provide the company in question adequate notice to defend its interests 
and, because it failed to do so, ordered the liquidation of entries of 
merchandise exported by that company at the entered deposit rate.
    Transcom argues that the Department's statement that all exporters 
of subject merchandise are ``conditionally covered by this review'' 
(Initiation of Antidumping Duty Administrative Reviews and Request for 
Revocation in Part (Initiation Notice), 59 FR 43537, 43539 (August 24, 
1994)) is inadequate in that it fails to explain under what 
``conditions'' exporters are covered and whether such ``conditions'' 
were met. If the statement is meant to include unconditionally all 
unnamed exporters, Transcom asserts that it is contrary to the 
regulatory requirement at 19 CFR 353.22(a)(1) that the review cover 
``specified individual producers or resellers covered by an order.'' 
Because the importers in question were never served notice that they 
were subject, conditionally or otherwise, to review, Transcom claims 
that the Department is precluded from applying a punitive rate to the 
company's exports.
    Transcom contends that, in accordance with section 776 of the Act, 
the Department must have requested and been unable to obtain 
information before applying adverse facts available. Transcom claims 
that the Department may not resort to facts available ``because of an 
alleged failure to provide further explanation when that additional 
explanation was never requested'' (quoting Olympic Adhesives, Inc. v. 
United States, 899 F.2d 1565, 1574 (1990); also citing Mitsui & Co., 
Ltd. v. United States, 18 CIT 185 (March 11, 1994); Usinor Sacillor v. 
United States, 872 F. Supp. 1000 (1994); and Sigma Corp. I at 1263). 
Finally, Transcom argues that the facts-available-based PRC-wide rate 
cannot be applied to exports by companies outside of China because 
these companies are not PRC companies.
    L&S requests that the Department liquidate entries of the company's

[[Page 6187]]

imports from companies that were not specifically reviewed at the 
entered rate rather than the punitive ``PRC-wide'' rate. L&S also 
states that the prospective deposit rate for these unreviewed companies 
should be 2.96 percent, which was the ``all others'' rate in the 
initial investigation.
    Petitioner states that it is its intention that all exporters are 
covered by this review and points out that the Department's notice of 
initiation specified that all ``other exporters * * * are conditionally 
covered.'' Therefore, Petitioner argues, all other suppliers of 
Transcom not entitled to a separate rate should be expressly listed in 
the final results as among those to which the ``PRC rate'' applies.

Department's Position

    We disagree with Transcom and L&S. It is our policy to treat all 
exporters of subject merchandise in NME countries as a single 
government-controlled entity and assign that entity a single rate, 
except for those exporters which demonstrate an absence of government 
control, both in law and in fact, with respect to exports. Our 
guidelines concerning the de jure and de facto separate-rates analyses, 
as well as the company-specific separate-rates determinations, are 
discussed in the Preliminary Results at 40611-12. We have determined 
that companies in the government-controlled entity failed to respond to 
our requests for information in this review and, accordingly, we have 
established the rate applicable to such companies (the PRC rate) using 
uncooperative facts available. As discussed below, the Act mandates 
application of facts available for such companies because they are 
subject to the review and they failed to cooperate by responding to our 
requests for information.
    Pursuant to our NME policy, we presume that all PRC exporters or 
producers that have not demonstrated that they are separate from PRC 
government control belong to a single, state-controlled entity (the 
``PRC enterprise'') for which we must calculate a single rate (the 
``PRC rate'). The CIT has upheld our presumption of a single, state-
controlled entity in NME cases. See UCF America, Inc. v. United States, 
870 F. Supp. 1120, 1126 (CIT 1994), Sigma Corp I, and Tianjin Machinery 
Import & Export Corp. v. United States, 806 F. Supp. 1008, 1013-15 (CIT 
1992). Section 353.22(a) of our regulations allows interested parties 
to request an administrative review of an antidumping duty order once a 
year during the anniversary month. This regulation specifically states 
that interested parties must list the ``specified individual 
producers'' to be covered by the review. In the context of NME cases, 
we interpret this regulation to mean that, if at least one named 
producer or exporter does not qualify for a separate rate, the PRC 
enterprise as a whole (i.e., all exporters that have not qualified for 
a separate rate) is part of the review (this is analogous to our 
practice in market-economy cases of including in reviews persons 
affiliated to a company for which a review was requested). On the other 
hand, if all named producers or exporters are entitled to separate 
rates, there has been no request for a review of the PRC enterprise 
and, therefore, the NME rate remains unchanged. Accord Federal-Mogul II 
(``[i]n a situation where a company's entries are unreviewed, the prior 
cash deposit rate from the LTFV investigation becomes the assessment 
rate, which must in turn become the new cash deposit rate for that 
company'').
    In this review, numerous companies named in the notice of 
initiation did not respond to our questionnaires. We sent a letter to 
the PRC embassy in Washington and to the Ministry of Foreign Trade and 
Economic Cooperation (MOFTEC) in Beijing, requesting the identification 
of TRB producers and manufacturers, as well as information on the 
production of TRBs in the PRC and the sale of TRBs to the United 
States. MOFTEC informed us that the China Chamber of Commerce for 
Machinery and Electronics Products Import & Export (CCCME) was 
responsible for coordinating the TRBs case. MOFTEC also said it 
forwarded our letter and questionnaire to the CCCME. We also sent a 
copy of our letter and the questionnaire directly to the CCCME, asking 
that the questionnaire be transmitted to all companies in the PRC that 
produced TRBs for export to the United States and to all companies that 
exported TRBs to the United States during the POR.
    Because we did not receive information concerning many of the 
companies named in the notice of initiation, we have presumed that 
these companies are under government control. In accordance with our 
NME policy, therefore, the government-controlled enterprise, which is 
comprised of all exporters of subject merchandise that have not 
demonstrated they are separate from PRC control, is part of this 
review. Therefore, we must assign a review-specific ``PRC'' rate to 
that enterprise. Because we did not receive responses from these 
exporters, we have based the PRC rate on the facts available, pursuant 
to section 776(c) of the Act. This rate will form the basis of 
assessment for this review as well as the cash deposit rate for future 
entries. In this regard, Transcom's reliance on Olympic Adhesives and 
other cases is misplaced because the PRC entity to which we assigned 
the review-specific PRC rate was requested to respond to our 
questionnaire.
    We acknowledge a recent CIT decision cited by Transcom and by L&S, 
UCF America Inc. v. United States, Slip Op. 96-42 (CIT Feb. 27, 1996), 
in which the Court affirmed the Department's remand results for 
reinstatement of the relevant cash deposit rate but expressed 
disagreement with the PRC-rate methodology which formed the underlying 
rationale for reinstatement. In UCF, the Court suggested that the 
Department lacks authority for applying a PRC rate in lieu of an ``all 
others'' rate. However, despite the concerns expressed by the Court, it 
is our view that we have the authority to use the PRC rate in lieu of 
an ``all others'' rate. See Hand Tools at 15221. Further, a subsequent 
CIT decision accepted our application of a review-specific PRC rate to 
non-responding PRC firms not individually named in the notice of 
initiation. See Yue Pak, Ltd. v. United States, Slip Op. 96-65, at 66 
(April 18, 1996).
    The PRC rate is consistent with the statute and regulations. As 
discussed above, in NME cases, all producers and exporters which have 
not demonstrated their independence are deemed to comprise a single 
enterprise. Thus, we assign the PRC rate to the PRC enterprise just as 
we may assign a single rate to a group of affiliated exporters or 
producers operating in a market economy. Because the PRC rate is the 
equivalent of a company-specific rate, it changes only when we review 
the PRC enterprise. As noted above, all exporters or producers will 
either qualify for a separate company-specific rate or will be part of 
the PRC enterprise and receive the PRC rate. Consequently, whenever the 
PRC enterprise has been investigated or reviewed, calculation of an 
``all others'' rate for PRC exporters is unnecessary.
    Thus, contrary to the argument by Transcom and L&S, the 
Department's automatic-assessment regulation (19 CFR 353.22(e)) does 
not apply to this review except in the case of companies that 
demonstrate that they are separate from PRC government control and are 
not part of this review. See Comment 2, above.
    We also disagree with the assertion by Transcom and L&S that 
companies not

[[Page 6188]]

named in the initiation notice did not have an opportunity to defend 
their interests by demonstrating their independence from the PRC 
entity. Any company that believes it is entitled to a separate rate may 
place evidence on the record supporting its claim. The companies 
referenced by Transcom and L&S made no such showing, despite our 
efforts to transmit the questionnaire to all PRC companies that produce 
TRBs for export to the United States.
    Furthermore, Transcom's argument that the facts-available-based 
PRC-wide rate cannot be applied to exports by companies outside of 
China because these companies are not PRC companies is also unfounded. 
Because these exporters' Chinese suppliers did not respond to the 
Department's questionnaire, we were unable to determine, with respect 
to sales by these exporters, whether the exporter or the Chinese 
suppliers were the first sellers in the chain of distribution to know 
that the merchandise they sold was destined for the United States. See 
Yue Pak at 6. When resellers choose to use uncooperative suppliers that 
are under an antidumping order, they must bear the consequences. See 
Yue Pak at 16. Otherwise, uncooperative PRC exporters would be free to 
hide behind and continue exporting through low-rate resellers in other 
countries.

6. Miscellaneous Issues

Comment 28
    Guizhou Machinery et al. state that the Department identified 
Xiangfan as ``Xiangfan International Trade Corporation'' in the 
preliminary results, despite the fact the Xiangfan provided information 
on the record indicating that its name had changed to ``Xiangfan 
Machinery Foreign Trade Corporation, Hubei China.'' Guizhou Machinery 
et al. request that the Department identify Xiangfan by this name for 
the final results.
    Petitioner responds that this name change illustrates the ease with 
which entities can make name changes and thereby circumvent the order. 
Petitioner asks that the Department consider such evidence when making 
its separate-rates determinations.
Department's Position
    We agree with Guizhou Machinery et al. and have made this change 
for the final results. This name change by a single company in this 
review does not affect our separate-rates analysis (see our responses 
to Comments 1 and 2).
Comment 29
    Guizhou Machinery et al. request that the Department specifically 
identify all branches of CMC that sold subject merchandise to the 
United States during the POR. Respondents state that, although the 
Department properly included sales made by CMC branches CMC Bali, CMC 
Yantai, and Yantai CMC Bearing Company in its analysis of CMC, it did 
not identify these exporters. Respondents state that such 
identification is necessary in order to ensure that entries of 
merchandise from these exporters receive the appropriate deposit and 
assessment rates.
    Petitioner responds that the Department has not made an individual 
separate-rate finding for each of these firms and, therefore, it should 
deny Respondents' request.
Department's Position
    We agree with Guizhou Machinery et al. We included all sales by the 
above-named companies in our analysis of CMC in these final results and 
our assessment and cash deposit rates reflect this analysis.

Final Results of Review

    As a result of our analysis of the comments we received, we 
determine the following weighted-average margins to exist for the 
period June 1, 1994 through May 31, 1995:

------------------------------------------------------------------------
                                                                 Margin 
                    Manufacturer/exporter                      (percent)
------------------------------------------------------------------------
Premier Bearing and Equipment, Limited.......................       2.76
Guizhou Machinery Import and Export Corporation..............      17.65
Luoyang Bearing Factory......................................       0.00
Jilin Machinery Import and Export Corporation................      29.40
Wafangdian Bearing Factory...................................      29.40
Liaoning Co.; Ltd............................................       9.72
China National Machinery Import and Export Corp..............       0.00
China Nat'l Automotive Industry Import and Export Corp.......      25.66
Tianshui Hailin Import and Export Corp.......................      24.17
Zhejiang Machinery Import and Export Corp....................       2.75
Xiangfan Machinery Foreign Trade Corporation, Hubei China....       0.00
East Sea Bearing Co., Ltd....................................       3.23
PRC Rate.....................................................      29.40
------------------------------------------------------------------------

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. Individual 
differences between export price or constructed export price and NV may 
vary from the percentages stated above. The Department will issue 
appraisement instructions directly to the Customs Service.
    Furthermore, the following cash deposit requirements will be 
effective upon publication of these final results for all shipments of 
the subject merchandise entered, or withdrawn from warehouse, for 
consumption on or after the publication date, as provided for by 
section 751(a)(1) of the Act: (1) for the companies named above that 
have separate rates and were reviewed (Premier, Guizhou Machinery, 
Jilin, Luoyang, Liaoning, Tianshui, Zhejiang, CMC, China National 
Automotive Industry Import and Export Guizhou, Xiangfan, East Sea, and 
Wafangdian), the cash deposit rates will be the rates listed above; (2) 
for Shandong, Wanxiang, and Great Wall, which we determine to be 
entitled to separate rates, the rate will continue be that which 
currently applies (8.83 percent); (3) for all remaining PRC exporters, 
all of which were found not to be entitled to separate rates, the cash 
deposit will be 29.40 percent; and (4) for other non-PRC exporters of 
subject merchandise from the PRC, 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 serves as a reminder to importers of their 
responsibility under 19 CFR 353.26 to file a certificate regarding the 
reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This notice also serves as a reminder to parties subject to APOs of 
their responsibility concerning disposition of proprietary information 
disclosed under APO in accordance with 19 CFR 353.34(d). Timely written 
notification of the return/destruction of APO materials or conversion 
to judicial protective order is hereby requested. Failure to comply 
with the regulations and the terms of an APO is a sanctionable 
violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.

    Dated: February 3, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-3355 Filed 2-10-97; 8:45 am]
BILLING CODE 3510-DS-P