[Federal Register Volume 62, Number 49 (Thursday, March 13, 1997)]
[Notices]
[Pages 11825-11843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-6375]


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DEPARTMENT OF COMMERCE
[A-588-604, A-588-054]


Tapered Roller Bearings and Parts Thereof, Finished and 
Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or 
Less in Outside Diameter, and Components Thereof, From Japan; Final 
Results of Antidumping Duty Administrative Reviews and Termination in 
Part

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

ACTION: Notice of final results of antidumping duty administrative 
reviews and termination in part.

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SUMMARY: On November 6, 1996, the Department of Commerce (the 
Department) published the preliminary results of its 1994-95 
administrative reviews of the antidumping duty order on tapered roller 
bearings (TRBs) and parts thereof, finished and unfinished, from Japan 
(A-588-604), and of the finding on TRBs, four inches or less in outside 
diameter, and components thereof, from Japan (A-588-054). The review of 
the A-588-054 finding covers one manufacturer/exporter and seven 
resellers/exporters of the subject merchandise to the United States 
during the period October 1, 1994, through September 30, 1995. The 
review of the A-588-604 order covers two manufacturers/exporters, seven 
resellers/exporters, four firms identified by the petitioner in this 
case as forging producers, and the period October 1, 1994, through 
September 30, 1995.
    We gave interested parties an opportunity to comment on our

[[Page 11826]]

preliminary results. Based upon our analysis of the comments received 
we have changed the results from those presented in our preliminary 
results of review.

EFFECTIVE DATE: March 13, 1997.

FOR FURTHER INFORMATION CONTACT: Valerie Owenby or John Kugelman, 
Office of AD/CVD Enforcement III, Office 8, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230, 
telephone: (202) 482-0145 or 482-0649, respectively.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are in 
reference 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). In addition, unless otherwise 
indicated, all citations to the Department's regulations are to the 
current regulations, as amended by the interim regulations published in 
the Federal Register on May 11, 1995 (60 FR 25130).

Background

    On August 18, 1976, the Treasury Department published in the 
Federal Register (41 FR 34974) the antidumping finding on TRBs from 
Japan, and on October 6, 1987, the Department published the antidumping 
duty order on TRBs from Japan (52 FR 37352). On October 5, 1995 (60 FR 
52149), the Department published the notice of ``Opportunity to Request 
an Administrative Review'' for both TRBs cases. The petitioner, the 
Timken Company (Timken), and two respondents requested administrative 
reviews. We initiated the A-588-054 and A-588-604 administrative 
reviews for the period October 1, 1994, through September 30, 1995, on 
November 11, 1995 (60 FR 57573). On November 6, 1996, we published in 
the Federal Register the preliminary results of the 1994-95 
administrative reviews of the antidumping duty order and finding on 
TRBs from Japan (see, Tapered Roller Bearings and Parts Thereof, 
Finished and Unfinished, from Japan, and Tapered Roller Bearings, Four 
Inches or Less in Outside Diameter, and Components Thereof, from Japan; 
Preliminary Results of Antidumping Duty Administrative Reviews and 
Termination in Part, 61 FR 57391 (November 6, 1996) (1994-95 TRB 
Prelim)). We held a hearing for the 1994-95 administrative reviews of 
both the A-588-054 and A-588-604 TRBs cases on December 20, 1996. The 
Department has now completed these reviews in accordance with section 
751 of the Act, as amended.

Scope of the Review

    Imports covered by the A-588-054 finding are sales or entries of 
TRBs, four inches or less in outside diameter when assembled, including 
inner race or cone assemblies and outer races or cups, sold either as a 
unit or separately. This merchandise is classified under the Harmonized 
Tariff Schedule (HTS) item numbers 8482.20.00 and 8482.99.30.
    Imports covered by the A-588-604 order include TRBs and parts 
thereof, finished and unfinished, which are flange, take-up cartridge, 
and hanger units incorporating TRBs, and tapered roller housings 
(except pillow blocks) incorporating tapered rollers, with or without 
spindles, whether or not for automotive use. Products subject to the A-
588-054 finding are not included within the scope of this order, except 
for those manufactured by NTN Corporation (NTN). This merchandise is 
currently classifiable under HTS item numbers 8482.99.30, 8483.20.40, 
8482.20.20, 8483.20.80, 8482.91.00, 8484.30.80, 8483.90.20, 8483.90.30, 
and 8483.90.60. These HTS item numbers and those for the A-588-054 
finding are provided for convenience and Customs purposes. The written 
description remains dispositive.
    The period for each review is October 1, 1994, through September 
30, 1995. The A-588-054 reviews cover TRB sales by one TRB 
manufacturer/exporter (Koyo Seiko Ltd. (Koyo)), and seven resellers/
exporters (Honda Motor Corporation (Honda), Fuji Heavy Industries 
(Fuji), Kawasaki Heavy Industries (Kawasaki), Yamaha Motor Company Ltd. 
(Yamaha), Nigata Convertor Co. Ltd. (Nigata), Suzuki Motor Company Ltd. 
(Suzuki), and Toyosha Company Ltd. (Toyosha)). The reviews of the A-
588-604 case cover TRB sales by two manufacturers/exporters (Koyo and 
NTN), seven resellers/exporters (Honda, Fuji, Yamaha, Kawasaki, Nigata, 
Suzuki, and Toyosha), and four firms identified by the petitioner as 
forging producers (Nittetsu Bolten (Nittetsu), Showa Seiko Company Ltd. 
(Showa), Ichiyanagi Tekko (Ichiyanagi), and Sumikin Seiatsu (Sumiken)).
    As explained in our preliminary results of review, we have 
terminated the A-588-054 review for Honda and Toyosha, and the A-588-
604 review for NTN, Koyo, Ichiyanagi, Sumikin, and Toyosha (see 1994-95 
TRB Prelim at 7392). As also explained in our preliminary results, we 
have used 47.63 percent in the A-588-054 case and 40.37 percent in the 
A-588-604 case as total adverse facts available for Yamaha, Kawasaki, 
Nigata, and Suzuki (see id.). In addition, because Fuji, Honda, Showa, 
and Nittetsu had no shipments in the A-588-604 review, for the reasons 
explained in our notice of preliminary results, we have not assigned a 
rate to these firms for these final results (see id.). The period of 
review (POR) for both cases is October 1, 1994, through September 30, 
1995.

Analysis of Comments Received

    We received case briefs from Koyo, Fuji, and Timken on December 6, 
1996. We received rebuttal briefs from the same three parties on 
December 13, 1996. In addition, on December 20, 1996, we reopened the 
record for the A-588-054 review for Koyo in order to receive additional 
comments from Koyo and Timken concerning Koyo's downward adjustment to 
its U.S. indirect selling expenses for those imputed interest expenses 
it incurred when financing antidumping duty cash deposits. We received 
these additional comments from Koyo on December 27, 1996, and from 
Timken on January 3, 1997. These comments, as well as those which were 
contained in all of the case and rebuttal briefs we received, are 
addressed below in the following order:

1. Adjustments to United States Price
2. Adjustments to Normal Value
3. Cost of Production and Constructed Value
4. Miscellaneous Comments Related to Assessment, Level of Trade, the 
Arm's-Length Test, and the 20% Difference-in-Merchandise Test
    5. Clerical Errors

1. Adjustments to United States Price

    Comment 1: Timken argues that the Department's preliminary results 
decision to accept Koyo's downward adjustment to its U.S. indirect 
selling expenses for interest expenses incurred when financing cash 
deposits is unclear. Timken asserts that the Department did not address 
issues concerning the exact nature of the calculation, such as (1) how 
long a respondent may adjust its expenses for a given duty deposit, (2) 
whether a respondent may deduct for interest on duty deposits for as 
long as the order exists, (3) whether liquidation and the conversion of 
the deposits into actual payments terminates the right to claim the 
adjustment, and, if so, why, (4) whether the fact that a respondent 
expenses its payments on duty deposits in the year they occur has any 
bearing on the issue, and (5) if the respondent

[[Page 11827]]

is subject to more than one order, whether interest payments on duty 
deposits on entries subject to some other order may be allocated as an 
adjustment to expenses for imports under the subject order.
    Timken further contends that, as a result, the Department has 
provided no idea of what information is required from a respondent to 
justify this adjustment. For example, Timken states, (1) if the 
Department allows the adjustment only for interest on deposits made 
during the POR, the record must contain information on what deposits 
the respondent made during the POR, (2) if the Department allows the 
adjustment for all deposits previously made, the record must contain 
the sum of these deposits, (3) if liquidation ends the right to the 
adjustment, the record must allow the Department to determine which 
entries have been liquidated and which deposits were converted to 
actual payments so that such deposits are not included in the sum for 
which the interest expenses are calculated, and (4) if only interest on 
deposits made for subject merchandise is allowed, the record must 
indicate that any importer of merchandise subject to more than one 
order properly separated its interest claims. Because the Department 
has failed to address these issues, Timken argues, it is unable to 
comment on the reasonableness of the Department's policy.
    Nevertheless, for the purpose of further discussion, Timken 
presumes that the Department's apparent policy is to allow interest 
expenses attributable to deposits on subject merchandise until the 
entries associated with such deposits have been liquidated, and makes 
the following arguments:
    First, Timken states that, under this approach, the act of 
liquidation transforms duty deposits from an ongoing burden to the 
importer in the form of interest payments into actual expenses which 
can be written off the importer's books. Timken contends that this is 
contrary to the 1979 legislation, in which Congress changed the 
antidumping law to require the payment of cash deposits and the payment 
of interest on underdeposits. Timken claims that it was Congress' 
intent that no party benefit from any delay in payment and, as a 
result, it made it clear that actual antidumping duties must be paid at 
the time of import and that subsequent adjustments for over-or under-
payment should be coupled with interest payments to approximate as 
closely as possible the payment of actual duties at the time of import. 
Timken contends that by accepting an adjustment for the interest 
expenses attributable to all cash deposits previous to the POR, the 
Department, in essence, is treating cash deposits as something other 
than an actual payment of antidumping duties and is, therefore, acting 
contrary to the expressed intent of Congress.
    Second, Timken argues that, by allowing an adjustment for interest 
expenses attributable to all previous cash deposits, the Department 
provides respondents with a mechanism to mask dumping because the 
adjustment has the effect of reducing the ad valorem duty deposit rate 
over time. As a result, Timken asserts, the Department's policy will 
encourage respondents to prolong and delay liquidation as long as 
possible, knowing that as long as liquidation is delayed, they can 
reduce the margin determined for any ongoing dumping.
    Third, Timken argues that Koyo has failed to meet its obligation to 
document its claimed adjustment. Therefore, Timken asserts, because 
Koyo has not provided any information to support its adjustment, the 
Department has limited information to determine whether Koyo's claim is 
reasonable.
    Finally, Timken argues that because the record demonstrates that 
Koyo expensed this interest on cash deposits, Koyo is claiming an 
adjustment for interest expenses which it has already written off for 
accounting purposes. In addition, using information on the record, 
Timken calculates a figure reflecting the actual amount of duty 
deposits for which Koyo would have incurred interest and, based on the 
fact that this figure does not correspond to the total cash deposits 
Koyo reported in its financial statements, Timken concludes that Koyo's 
claimed adjustment amount is inaccurate.
    Koyo argues that the Department properly excluded those imputed 
interest expenses Koyo incurred when financing its cash deposits. Koyo 
asserts that, since the publication of the preliminary results for 
these TRB reviews, the Department has clearly articulated a policy 
concerning these interest expenses in the antifriction bearings (AFB) 
case (Antifriction Bearings (Other Than Tapered Roller Bearings) and 
Parts Thereof From France, et. al.; Final Results of Antidumping Duty 
Administrative Reviews and Partial Termination of Administrative 
Reviews, 61 FR 66472 (December 17, 1996 ) (AFBs 93-94)) and in the 
Department's September 20, 1996, final remand results pursuant to 
Federal-Mogul Corp. and the Torrington Company v. United States, Slip 
Op. 96-37 (February 13, 1996) (Federal-Mogul Final Remand Results)). 
Koyo states that the Department has explained that the imputed expenses 
in question are comparable to expenses for legal fees related to 
antidumping proceedings because they were incurred only because of the 
antidumping duty order. As a result, these expenses cannot be 
categorized as selling expenses (AFBs 93-94 at 66488 and Federal-Mogul 
Remand Results at Comment 5). Koyo argues that this policy is in 
accordance with section 751(d)(1) of the Act, which directs the 
Department to deduct from USP only those expenses incurred in the 
selling of the subject merchandise, and the Statement of Administrative 
Action (SAA), which states that deposits of estimated antidumping 
duties are not to be treated as a cost. Koyo asserts that if deposits 
of antidumping duties are not to be treated as costs, the imputed 
interest expenses incurred on financing these deposits likewise cannot 
be considered as a cost.
    Koyo further argues that exclusion of these interest expenses is 
not in conflict with the intent of Congress'' 1979 change in the 
antidumping duty law. Koyo contends that, since Koyo Corporation of the 
United States (KCU), Koyo's U.S. subsidiary, has paid deposits at the 
time of the entry of TRBs, it has in fact felt an immediate financial 
effect at the time of import, which was precisely what Congress 
anticipated in passing the 1979 Act.
    Koyo also maintains that the Department's policy does not mask 
dumping, but, rather, neutralizes the impact on the calculation of 
antidumping margins of having to borrow money to finance cash deposits 
and ensures that antidumping duties are not artificially inflated. In 
addition, Koyo contends that the Department's allowance of this 
adjustment is in accordance with the CAFC's directive that the 
antidumping statute is intended to be remedial, not punitive, in nature 
(Federal Mogul Corp. v. United States, 63 F.3d 1572 (Fed. Cir. 1995)).
    Furthermore, Koyo asserts, in the event that the Department has 
questions concerning its calculation of this adjustment, at this late 
date in this proceeding, it would be improper for the Department to 
reject the adjustment altogether, particularly in light of the 
Department's failure to ask for additional information in its 
supplemental questionnaire. Rather, Koyo claims, the proper course of 
action would be for the Department to reopen the record for the purpose 
of gathering additional information from Koyo on this topic.
    Finally, Koyo contends, Timken's suggestion that the adjustment is 
improper because it was already

[[Page 11828]]

expensed confuses the difference between cash deposits and the imputed 
interest incurred in financing these deposits, and overlooks the fact 
that this interest expense is a real financial burden which is not 
affected by the accounting convention of expensing deposits.
    Department's Position: While we agree with Timken that, in our 
preliminary results of review, we did not provide a detailed 
explanation why we allowed Koyo's adjustment for those imputed interest 
expenses it incurred when financing cash deposits, we disagree that we 
have failed to articulate a clear policy on this issue. Shortly before 
the publication of the 1994-95 TRB Prelim, we explained our policy 
concerning this adjustment in detail in our September 20, 1996, 
Federal-Mogul Final Remand Results, which were upheld by the CIT on 
December 12, 1996 in Federal-Mogul Corp. v. United States, Slip Op. 96-
193 (CIT 1996). In addition, since the publication of our preliminary 
results, we have clarified our position not only in AFBs 93-94 and 
Antifriction Bearings (Other than Tapered Roller Bearings) and Parts 
Thereof From France, et. al.; Final Results of Antidumping Duty 
Administrative Review, 62 FR 2081 (January 15, 1997) (AFBs 94-95), but 
also in our December 17, 1996, final remand results pursuant to The 
Timken Company v. United States, Slip Op. 96-86 (May 31, 1996) (Timken 
Final Remand Results). As explained in these determinations, it is 
reasonable for a respondent to deduct from its reported U.S. indirect 
selling expenses an amount which reflects those interest expenses it 
incurred when financing cash deposits. Our decision is based on the 
fact that the respondent incurred the interest expenses at issue as a 
result of the need to pay antidumping duty cash deposits. Therefore, we 
consider these interest expenses to be comparable to expenses for legal 
fees related to antidumping proceedings in that they were incurred only 
because of the existence of an antidumping duty order and a 
respondent's involvement therein (see, e.g., AFBs 93-94 at 66488, AFBs 
94-95 at 2104, Federal-Mogul Final Remand Results at Comment 5, and 
Timken Final Remand Results at 23). In addition, it has been our 
longstanding policy to not treat expenses related to antidumping 
proceedings as selling expenses (see Color Television Receivers From 
the Republic of Korea; Final Results of Administrative Review of 
Antidumping Duty Order, 68 FR 50336). The CIT recognized this line of 
reasoning in Daewoo Electronics Co. v. United States, 712 F. Supp. 931 
(CIT 1989), when it recognized that legal fees are not selling expenses 
subject to deduction from United States Price (USP), and concluded that 
the classification of such expenses as selling expenses subject to 
deduction from USP would ``create artificial dumping margins and might 
encourage frivolous claims * * *which would result in increased 
margins'' (see id. at 947).
    We consider the interest expenses at issue in these final results 
of review to be directly comparable. Koyo did not incur these interest 
expenses in any effort to sell merchandise in the United States. 
Rather, the expenses were incurred as part of the process attendant to 
the antidumping duty order. Had the order not existed, Koyo would not 
need to finance cash deposits, and the expenses would not have been 
incurred. Section 772(d) of the Act states that ``* * * the price used 
to establish constructed export price shall also be reduced by the 
amount of any of the following expenses generally incurred by or for 
the account of the producer or exporter, or the affiliated seller in 
the United States in selling the subject merchandise.'' (Emphasis 
added.) The statute therefore clearly provides that the expenses to be 
deducted from USP are those borne, directly or indirectly, to sell the 
subject merchandise in the United States. The interest expenses at 
issue in these final results, like legal fees, are an expenditure which 
Koyo actually incurred, but clearly did not incur in selling TRBs to 
the United States.
    In its comments to our preliminary results Timken further suggests 
that because we did not specifically articulate within our 1994-95 TRB 
Prelim our position concerning numerous issues related to a 
respondent's calculation of the adjustment, it is unable to comment on 
the reasonableness of our policy. We disagree: not only have we clearly 
articulated a policy concerning this adjustment, as discussed above, 
but it is our position that the exact calculation of the adjustment is 
secondary to the numerous compelling reasons why the adjustment should 
be allowed. In fact, the CIT has recognized a similar line of reasoning 
in regard to antidumping legal expenses. In Zenith Electronics Corp. v. 
United States, Slip Op. 91-66 (July 29, 1991) (Zenith), the CIT stated 
that it is ``not a question of whether or not legal expenses can be 
related to the time period of the importation of the merchandise under 
review. Nor does it relate to the question of whether or not the legal 
expenses have a tendency to ultimately aid the sale of merchandise in 
the United States * * *. The fundamental reason for not allowing the 
use of legal expenses related to antidumping is that the expenses of a 
party's participation in legal proceedings provided by law should not 
become an element in the decision of those selfsame proceedings.'' 
Nevertheless, because Timken has raised, for these final results, 
issues specific to the calculation of this adjustment, we address the 
detailed points of Timken's arguments below.
    First, we do not agree with Timken that the adjustment should be 
denied if it is a cumulative adjustment which reflects those interest 
expenses incurred during the POR for cash deposits made prior to the 
POR. Rather, we believe the adjustment should be allowed whether a 
respondent (1) limits its calculation to only those interest expenses 
incurred on cash deposits made during the period under review, (2) 
calculates a cumulative adjustment which reflects not only the interest 
expenses incurred on cash deposits made during the period being 
reviewed, but also reflects the interest expenses incurred during the 
POR on cash deposits from previous review periods as well, or, as Koyo 
has done in the instant review, (3) calculates a cumulative adjustment 
which reflects only those interest expenses incurred during the POR for 
cash deposits paid in previous PORs. In its comments Timken argues 
that, by accepting a cumulative adjustment amount, as a result of the 
fact that the adjustment will ``eat away'' at a respondent's margin, 
the Department allows respondents to ``mask'' dumping. Thus, Timken 
argues, the Department provides respondents with the impetus to delay 
litigation and liquidation. Timken's argument is, however, based on a 
results-oriented rationale which overlooks the fundamental reasons for 
allowing the adjustment, as discussed in detail above, and ignores the 
fact that the adjustment reflects a genuine expense solely attributable 
to the antidumping duty order.
    As we explained in our Timken Final Remand Results, with the 
exception of cost-of-production (COP) and constructed-value (CV) 
calculations, it is the Department's practice to recognize an 
adjustment for imputed expenses (e.g., inventory carrying costs and 
credit) when the expenses reflect a real cost to the firm, but are 
difficult to identify or isolate within a respondent's records. For 
example, in Television Receivers, Monochrome and Color, From Japan; 
Final Results of Antidumping Duty Administrative Review, 56 FR 38417 
(August 13, 1991) we explained:


[[Page 11829]]


    The Department imputes an interest expense for time in inventory 
in order to adjust for the opportunity cost of holding the 
merchandise in inventory. An opportunity cost arises because funds 
could have been invested in alternative financial arrangements 
yielding interest * * *. Since the interest expenses associated with 
time in inventory cannot be isolated from other interest expenses, 
the Department must impute this expense amount. However, the 
Department's long-standing policy is to treat the opportunity cost 
of holding inventory as a real expense.

In other words, we recognize that opportunity costs associated with an 
activity like holding inventory or extending credit have a real 
financial impact for the firm (see, e.g., Fujitsu General Ltd. v. 
United States, 883 F.Supp 728, 737 (CIT 1995) (where the Department 
calculated a respondent's imputed interest adjustment to exporter's 
sales price (ESP) for time in inventory in order to adjust for ``missed 
opportunity'' costs of maintaining merchandise in inventory and the CIT 
found that the use of actual inventory periods to calculate imputed 
interest expense was reasonable and in accordance with law)). Because 
these costs are not readily identifiable, we allow the claimed 
adjustment to be imputed. In addition, while a firm may choose to 
finance its cash deposits by obtaining loans specifically for that 
purpose, a firm may also choose to divert funds from other corporate 
activities to pay cash deposits. By diverting funds for the purpose of 
paying cash deposits, the firm is forgoing the income which could have 
been earned had it used these funds for any number of other activities. 
In this way, an opportunity cost arises because the funds could have 
been invested in alternative financial arrangements yielding interest 
(i.e., interest-bearing accounts or loans to other parties at 
interest). Therefore, it is not always the case that interest expenses 
incurred when financing cash deposits will be easily identified. 
Rather, when the cash deposits are funded through the diversion of 
funds from another activity or investment vehicle, the expenses may not 
be easily traced to a company's books and records or easily isolated 
from the company's other interest expenses. However, the opportunity 
costs associated with the diversion nevertheless reflect a real cost to 
the firm in the same way the opportunity costs of extending credit and 
holding inventory constitute real costs (see Timken Final Remand 
Results at 26).
    Because the monies used to fund cash deposits for a given POR are 
unavailable until final antidumping duties are assessed for that POR, 
this opportunity cost will accrue until liquidation. For example, if a 
respondent pays cash deposits for TRB entries during the October 1, 
1988, through September 30, 1989, TRB review period, but antidumping 
duties are not assessed on entries during this period until November 1, 
1992, the financing costs of funding the 1988-89 cash deposits will not 
only be incurred in the 1988-89 POR, but will be incurred until actual 
duties are assessed at the time of liquidation in 1992. As a result, an 
interest expense associated with the 1988-89 cash deposits will be 
incurred during the 1989-90, 1990-91, and 1991-92 review periods. While 
a cumulative adjustment amount does affect a respondent's margin, 
dumping cannot be ``masked'' when an adjustment is made for a genuine 
expense attributable only to the order itself. In fact, if we fail to 
allow the adjustment, we risk calculating margins which are overstated 
due to our failure to take into account the fact that no such expense 
would have been incurred absent the order. Furthermore, we have no 
basis for suspecting that a large international corporation with 
millions of dollars tied up in cash deposits would purposely choose to 
delay assessment in order to realize a potential decrease in its 
dumping margin at some indeterminate point in the future.
    As also explained earlier, interest expenses incurred when 
financing cash deposits are incurred solely due to the existence of the 
antidumping order and, like antidumping legal expenses, these interest 
expenses cannot be treated as U.S. selling expenses. It is irrelevant 
whether the expenses relate to cash deposits made during the current 
POR or a prior POR, as any such expenses are not selling expenses. Just 
as we do not expect antidumping legal expenses to be limited to those 
for the period under review, we do not expect interest expenses 
incurred when funding cash deposits to be limited to only the expenses 
for cash deposits made during the period under review. For example, 
legal expenses incurred during one POR may reflect legal fees for 
antidumping litigation from several previous reviews. Likewise, legal 
expenses for a given POR will accrue from period to period until all 
litigation for the period has ended. Therefore, because we conclude 
that it is reasonable to treat interest on cash deposits in the same 
way as we treat antidumping legal fees, it is reasonable not to limit 
the interest expense adjustment to only interest expenses tied to 
deposits made during the POR.
    Timken also argues that we cannot accept a cumulative adjustment 
amount because to do so would be contrary to the Congressional intent 
of the 1979 change in the antidumping law. Timken's argument is based 
on its assumption that cash deposits are actual antidumping duty 
payments and, by allowing a cumulative adjustment, the Department is 
treating them as something other than actual payments. The Department 
has long maintained the position that ``duty deposits are not actual 
antidumping duties but estimates of future dumping liability'' (see 
Antifriction Bearings (Other than Tapered Roller Bearings) and Parts 
Thereof From France, et. al.; Final Results of Antidumping Duty 
Administrative Reviews, 60 FR 10900 (February 28, 1995). We have 
expressed the identical position in the TRBs cases, stating that ``the 
cash deposit requirements are estimates of antidumping duties. The 
actual dumping margins applicable * * * will be reflected in final 
assessment'' (see Tapered Roller Bearings, Four Inches or Less in 
Outside Diameter, and Certain Components Thereof From Japan; Final 
Results of Antidumping Administrative Review, 55 FR 38720 (September 
20, 1990)). Furthermore, the CIT and Court of Appeals for the Federal 
Circuit (CAFC) have consistently recognized that a distinction exists 
between cash deposits and actual antidumping duties and that cash 
deposits are only estimates of final antidumping duties. For example, 
when ruling on the issue of whether the Department must calculate the 
cash deposit and antidumping duty rates using an identical methodology, 
the CAFC stated in The Torrington Company and Federal-Mogul Corp. v. 
United States, 44 F. 3d 1572, 1578-79 (Fed. Cir. 1995):

    Section 1675(a)(2) does not require the same methodology of 
calculation for assessment rates and cash deposits rates * * *. 
Moreover, Title 19 bases the cash deposits rate on estimated 
antidumping duties on future entries * * *. Thus, Title 19 requires 
only cash deposit estimates, not absolute accuracy. This estimate 
need only be reasonably correct pending the submission of complete 
information for an actual and accurate assessment * * *. No evidence 
compels this court to find that deriving cash deposit rates from 
entered values leads to a more accurate estimation of future duties 
* * *.'' (Emphasis added)(citations omitted).

Therefore, cash deposits are clearly not payments of actual antidumping 
duties.
    In its comments Timken suggests that, in instances where a 
respondent is subject to more than one antidumping duty order, the 
adjustment should be

[[Page 11830]]

limited to those interest expenses incurred when financing cash 
deposits only for the merchandise subject to the order being reviewed. 
While we generally believe that the adjustment should be limited to 
only merchandise subject to the order under review, depending upon a 
respondent's calculation methodology, this issue may be irrelevant, as 
it was with regard to NTN in Timken Final Remand Results (q.v. at 35). 
Therefore, we believe it is necessary to examine the specifics of each 
case before it can be determined whether the scope/non-scope 
distinction is relevant to the adjustment at issue, as we have done in 
the instant case with regard to Koyo, and as is explained in our 
response to Comment 2 below.
    We also disagree with Timken's contention that we must deny Koyo's 
downward adjustment because the record demonstrates that Koyo expensed 
its interest on cash deposits expenses. While the record demonstrates 
that Koyo expensed its cash deposits, there is no evidence that the 
interest expenses incurred when financing these cash deposits were also 
expensed. Furthermore, Koyo is claiming an imputed interest amount 
because these expenses are not readily identifiable in its records. As 
a result, there is no identifiable amount of interest for Koyo to 
expense. In addition, as explained above, these interest expenses 
reflect a real, ongoing financial burden to Koyo which is neither 
dissolved nor impacted by Koyo's use of an accounting convention which 
expenses antidumping cash deposits.
    Finally, while we agree with Timken that at the time of the 1994-95 
TRB Prelim the record in this case did not contain detailed information 
supporting Koyo's calculation of its claimed adjustment, we do not 
agree that this warrants denial of the adjustment. Prior to these final 
results we reopened the record for these reviews to allow additional 
comment on Koyo's calculation of its reported adjustment amount. We did 
this because our policy concerning this adjustment was in its 
developmental stages throughout most of these administrative review 
proceedings. For example, at the time we issued our 1994-95 TRBs 
questionnaire to Koyo, and throughout the supplemental questionnaire 
stage of these review proceedings, it was our practice to deny this 
downward adjustment. Then, as a result of litigation in both the AFBs 
and TRBs cases, shortly before our 1994-95 TRB Prelim, we articulated 
and began to apply a clear policy on this issue of allowing the 
adjustment. As a result of this change in policy, we allowed Koyo's 
claimed downward adjustment in our 1994-95 TRB Prelim. Since we adopted 
this revised policy prior to the publication of the preliminary results 
for these reviews, we followed this policy in our preliminary review 
results. However, this was the first opportunity for the Department and 
the parties to address the rationale underlying our policy. Due to the 
changing nature of the policy throughout the course of these review 
proceedings, this is also the first opportunity for all parties, the 
Department included, to properly comment on and address the detailed 
specifics of Koyo's actual adjustment calculation. Thus, while we 
believe that there are numerous compelling reasons why the adjustment 
should be granted, to ensure a fair and reasonable application of this 
policy to these reviews, we determined that it was necessary to reopen 
the record for these reviews in regard to Koyo's calculation of its 
reported adjustment. In this way the Department would have the 
information and argument before us necessary to make a reasonable 
determination whether to allow Koyo's adjustment. Therefore, on 
December 20, 1996, we reopened the record and received additional 
information and comment from Koyo on December 27, 1996, and from Timken 
on January 3, 1997. These comments, as well as our position on the 
issues raised, are addressed in Comment 2 below.
    Comment 2: Koyo argues that not only is its calculation of those 
imputed interest expenses it incurred when financing antidumping cash 
deposits based on information derived directly from its financial 
statements, but its calculation methodology is both conservative and 
reasonable. Koyo explains that it calculated the imputed interest 
expense it incurred as a result of having to finance cash deposits 
rather than use the monies in other interest-yielding financial 
arrangements by first calculating the total amount of cash deposits it 
paid for TRBs up to the beginning of the 1994-95 POR. Koyo argues that 
it derived these cash deposit figures directly from its 1993/94 
financial statements, but, because the 1993-94 financial statement 
included the entire FY 1994, the figures reported in the financial 
statement included cash deposits paid during the months of October, 
November, and December of 1994. Because the 1994-95 POR only began on 
October 1, 1994, Koyo stated that, in order to calculate cash deposits 
paid only prior to the 1994-95 POR, it deducted from the figure in its 
financial statement those cash deposits paid from October 1994 through 
December 1994. Koyo explained that it then multiplied this total cash 
deposit amount by the KCU borrowing rate in effect during the 1994-95 
POR, which it reported in exhibit C-9 of its 1994-95 TRBs questionnaire 
response. Koyo states that the result, which reflected the imputed 
interest expenses it incurred during the POR for cash deposits paid 
prior to the POR, is identical to the figure it deducted from its 
reported U.S. indirect selling expenses, as indicated in exhibit C-13 
of its 1994-95 TRBs questionnaire response.
    Timken argues that because there is no evidence that Koyo actually 
obtained loans in order to finance its antidumping cash deposits, Koyo 
failed to demonstrate that it actually incurred any interest expenses. 
Timken asserts that the Department should therefore deny the adjustment 
in question.
    Timken further contends that it is unclear from the record whose 
opportunity was actually lost. Timken contends that, if Koyo, in 
accordance with the TRB antidumping duty order raised its U.S. prices 
in order to finance its cash deposits, it could not have lost any 
opportunity because its deposits would be paid for by the additional 
cash flow and, as a result, loans to finance cash deposits would be 
unnecessary. In addition, Timken asserts that if Koyo Seiko, the 
Japanese parent company, eased KCU's cash deposit requirements by 
either lowering transfer prices or reimbursing KCU, KCU would not have 
lost any opportunity to use the money it deposited. Therefore, Timken 
concludes, because Koyo has not demonstrated that KCU actually incurred 
the opportunity costs at issue, the Department should not allow the 
adjustment.
    Timken also maintains that Koyo is not entitled to claim any lost 
opportunity income based on cash deposits that it will actually owe and 
which will not be refunded upon liquidation. Timken asserts that it is 
clear that Koyo will owe antidumping duties on those POR shipments for 
which it has paid cash deposits. Timken argues that, as a result, some 
or even all of its cash deposits reflect what will be owed to the U.S. 
Treasury as antidumping duties. Because these are lawful debts to the 
U.S. Treasury, Timken asserts, they cannot represent lost opportunity 
costs. Therefore, Timken states, Koyo's calculation formula is grossly 
overstated because it fails to take into account that portion of the 
cash deposits which reflect legal debts.
    Timken further contends that Koyo's calculation fails to take into 
account the

[[Page 11831]]

fact that Koyo will owe antidumping duties for the 1974-1979 TRB 
shipments, periods during which Koyo was not required to make cash 
deposits. Timken asserts that, to the extent that Koyo enjoyed the 
opportunity income from these funds that should have otherwise been 
required as cash deposits during the 1974-79 PORs, Koyo reaped a 
windfall which it has omitted from its calculation.
    Finally, Timken argues that, even though the Department conducted a 
1994-95 review for Koyo only in the A-588-054 TRBs case, Koyo 
nevertheless included within its calculation those interest expenses it 
allegedly incurred for the A-588-604 TRB shipments as well. Timken 
therefore asserts that, because TRBs within the scope of the A-588-604 
case are non-scope merchandise within the context of the A-588-054 
finding, to the extent that the Department allows Koyo's claimed 
adjustment, it should recalculate Koyo's adjustment to reflect only 
those interest expenses incurred with regard to cash deposits paid for 
A-588-054 TRBs.
    Department's Position: As indicated in Comment 1, we believe that 
there are numerous reasons why the adjustment at issue should be 
allowed. However, as also explained in Comment 1, before making a final 
determination on whether to accept Koyo's adjustment, we determined 
that it was necessary to gather additional information regarding the 
details of Koyo's calculation of the adjustment. Based upon our review 
of the additional comments and information we received, we have 
determined that Koyo's calculation of its reported adjustment was 
reasonable and accurate and have allowed the adjustment for the 
following reasons.
    First, we disagree with Timken that, in order to qualify for the 
adjustment at issue, Koyo must demonstrate that it obtained loans for 
the sole purpose of financing cash deposits. As explained in detail in 
our response to Comment 1 above, while a firm may choose to obtain 
loans specifically for the purpose of financing cash deposits, a firm 
may also choose to divert funds from other corporate activities to pay 
cash deposits. By diverting funds for the purpose of paying cash 
deposits, the firm is forgoing the income which could have been earned 
had it used these funds for any number of other activities. As a 
result, an opportunity cost arises because the funds could have been 
invested in alternative financial arrangements yielding interest. 
Therefore, because it is not always the case that interest expenses 
incurred when financing cash deposits will be easily identified, easily 
traced to a company's books and records, or easily isolated from the 
company's other interest expenses, we have determined that it is 
reasonable for the expense to be imputed. It is therefore unnecessary 
for a respondent to demonstrate that a loan was obtained for the sole 
purpose of financing cash deposits in order to qualify for the 
adjustment at issue.
    We also disagree with Timken's contention that, because Koyo has 
failed to demonstrate that KCU actually incurred the opportunity costs 
at issue, the adjustment should be denied. Timken's argument relies 
first on the notion that, if KCU raised its U.S. prices in response in 
response to the TRB antidumping duty order or finding, the additional 
cash flow would have been sufficient to offset the cash deposits. Thus, 
Timken concludes that no opportunity cost would be incurred and loans 
to finance the cash deposits would be unnecessary. The purpose of the 
antidumping duty statute is to offset the effect of discriminatory 
pricing between the U.S. and home markets (see Certain Hot-rolled Lead 
and Bismuth Carbon Steel Products From the United Kingdom, 60 FR 4409 
(August 24, 1995)). Thus, while there is no statutory requirement that 
a firm must act to eliminate price discrimination, if it decides to do 
so, how it does so is within its own discretion. For example, upon the 
imposition of antidumping duties, a respondent may act to eliminate the 
price differential by (1) increasing its U.S. prices, (2) lowering its 
home market prices, or (3) undertaking a combination of the two. If a 
firm chooses to eliminate the price discrimination solely by lowering 
its home market prices, there would be no need to increase U.S. prices. 
A firm may also choose to increase its U.S. prices and lower its home 
market prices at the same time. Thus, there is no requirement that a 
firm must raise its U.S. prices. There is also no guarantee that any 
increase in U.S. price would increase the cash flow in an amount that 
would offset the respondent's cash deposits. Even if a firm chose to 
rely solely on an increase in its U.S. prices, such that the increase 
would eliminate any dumping margins, the fact remains that the 
company's funds are tied up in cash deposits until liquidation occurs 
and final duties are assessed and this results in a financing cost to 
the company that is wholly attributable to application of the 
antidumping duty order.
    Furthermore, by arguing that the Department must ensure that Koyo 
Seiko did not compensate KCU for the antidumping duty expenses it 
incurred, Timken is, in effect, simply restating a position it raised 
in a previous TRB review concerning the issue of duty reimbursement. In 
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, 
From Japan, and Tapered Roller Bearings, Four Inches or Less in Outside 
Diameter, and Components Thereof, From Japan; Final Results of 
Antidumping Duty Administrative Reviews and Revocation in Part of an 
Antidumping Finding, 61 FR 57629 (November 7, 1996) (TRBs 92-93), a 
review conducted in accordance with the law in effect prior to the 
URAA, Timken argued, and we rejected, the contention that the 
Department was required to adjust USP for reimbursed duties pursuant to 
19 CFR 353.26 of the Department's regulations. We explained that we 
have consistently held that, absent evidence of reimbursement, we do 
not have the authority to make such an adjustment (see TRBs 92-93 at 
57637). Furthermore, in Torrington Company and Federal-Mogul Corp. v. 
United States, 881 F. Supp. 622, 631 (CIT 1995), the CIT clearly 
explained that in order for 19 CFR 353.26 to apply, it must be shown 
that the foreign manufacturer either paid the antidumping duty on 
behalf of the U.S. importer or reimbursed the U.S. importer and that 
the regulation does not impose upon the Department an obligation to 
investigate based on mere allegations. The CIT went on to state that, 
before the Department is required to commit resources to investigate 
the transfer of funds and the reimbursement of antidumping duties, the 
party who requests the investigation must produce some link between the 
transfer of funds and the reimbursement of antidumping duties (see id. 
at 632). In addition, the CIT pointed out that once an importer has 
indicated on its certificate at the time of liquidation that it has not 
been reimbursed for antidumping duties, it is unnecessary for the 
Department to conduct additional inquiry absent a sufficient allegation 
of Customs fraud (see id.).
    Other than the changes in language required by the URAA, section 
351.402 (f) of the Department's proposed regulations, with respect to 
antidumping duties, is unchanged from 19 CFR 353.26, our current 
regulation. As a result, the rationale upon which we based our 
determination to not make an adjustment under section 353.26 still 
applies (see AFBs 94-95 at 2129). In addition, while we recognize that 
the issue at hand is not whether we should make an adjustment in 
accordance with section 351.402(f) of the proposed regulations, our 
reasons for rejecting Timken's position with regard to that

[[Page 11832]]

issue apply in this instance as well. As clearly explained in our 
response to Comment 1 above, interest expenses incurred when financing 
cash deposits are due solely to the existence of the antidumping duty 
order. Thus, like antidumping legal fees, these expenses are 
antidumping duty-related expenses. Timken provided no link between any 
of Koyo's intercorporate transfers and the reimbursement of antidumping 
duties in the earlier stages of this review nor has it done so for 
these final results. Considering that we have no evidence of the 
reimbursement of antidumping duties themselves, we clearly have no 
evidence of the reimbursement cash deposits or of any antidumping duty-
related expenses. Therefore, absent this evidence, we are under no 
obligation to investigate the issue of reimbursement on the basis of 
mere allegations (see, e.g., AFBs 94-95 at 2129). As a result, we 
disagree with Timken that we must ensure that reimbursement has not 
occurred prior to accepting Koyo's adjustment for those imputed 
interest expenses it incurred when financing antidumping duty cash 
deposits.
    We also disagree with Timken that, because Koyo's cash deposits 
reflect legal debts, they cannot result in opportunity costs. Not only 
does this position overlook the basic fact that interest on cash 
deposits are incurred solely due to the existence of the antidumping 
duty order, and, as such, cannot be considered selling expenses and 
cannot be deducted from USP, but it ignores the fact that it is 
precisely because Koyo is required to pay cash deposits that the 
opportunity cost arises in the first place. If Koyo was not legally 
required to pay cash deposits, it would have the opportunity to use 
these funds in other financial arrangements. It is only because Koyo is 
required to pay cash deposits that it forgoes the opportunity to use 
the funds with which it pays cash deposits in other interest-yielding 
financial arrangements.
    Timken's contention that Koyo incurred interest income during the 
1974-79 PORs as a result of not having to pay cash deposits is also 
without merit. The law in effect pursuant to which the 1974-79 TRBs 
reviews were conducted did not require cash deposits upon entry (see 
The Tariff Act of 1930, as amended (1978)). Rather, importers were 
required to post other securities such as bonds. The legal basis for 
the requirement of cash deposits only came into effect with the 
introduction in 1978 of section 778 of the law (see The Trade 
Agreements Act of 1979 (1979 Act). Because the 1979 Act repeatedly 
linked the words ``deposit'' and ``cash'' (see, e.g., sections 
733(d)(2) and 734 (f)(2)(A)(iii) of the 1979 Act), we interpreted the 
words ``amounts deposited'' in section 778 to refer only to cash 
deposits of estimated antidumping duties upon entry and not to other 
types of securities such as bonds (see Tapered Roller Bearings Four 
Inches or Less in Outside Diameter From Japan; Final Results of 
Antidumping Duty Administrative Review, 55 FR 22369 (June 1, 1990) 
(TRBs 74-79)). Thus, we concluded that, since a bond is not cash, it 
does not constitute an amount deposited within the meaning of section 
778 of the Act of 1979 (see TRBs 74-79 at 22370). In addition, there 
was no provision in the 1979 Act which provided for the immediate 
conversion for existing antidumping findings from bonds to cash (see 
id.).
    Therefore, because the 1974-79 reviews were conducted pursuant to 
the law in effect prior to the 1979 Act, which did not require cash 
deposits, the cash deposit requirement is irrelevant to the 1974-79 
period. Therefore, Koyo's funds during the 1974-79 reviews cannot be 
characterized as funds which would have otherwise been required as cash 
deposits. Thus, Koyo correctly excluded from its adjustment calculation 
any consideration of that which occurred within the context of the 
1974-79 period.
    Finally, as we explained in our response to Comment 1 above, 
depending upon a respondent's U.S. indirect selling expense calculation 
methodology, the issue of whether the adjustment in question reflects 
scope and non-scope merchandise may be irrelevant, as it is in the 
instant case. During the POR Koyo manufactured TRBs which were subject 
to both the A-588-054 and A-588-604 cases, AFBs subject to the A-588-
804 AFBs order, and other merchandise not subject to any antidumping 
duty order. KCU sold TRBs, AFBs, and other products in the United 
States. In addition, Koyo Seiko and KCU did not maintain separate 
financial statements for AFBs, TRBs and other merchandise. Because 
these financial statements reflect expenses incurred for all sales of 
all merchandise sold during the POR, Koyo calculated a U.S. indirect 
selling expense factor reflecting all merchandise, not only TRBs, by 
dividing the total U.S. indirect selling expenses incurred for all 
merchandise sold during the POR by the total value of all sales of all 
merchandise during the POR. However, prior to calculating this ratio, 
Koyo removed from its total U.S. indirect selling expense amount those 
expenses reported elsewhere in the response and made other adjustments, 
which included the adjustment for interest incurred on cash deposits. 
Because the total U.S. indirect selling expense amount reflected 
expenses for all sales (both scope and non-scope), the deductions Koyo 
made from this total expense correctly reflected all sales of all 
merchandise. However, in regard to its deduction for interest on cash 
deposits, Koyo only deducted from the total U.S. indirect selling 
expense amount those interest expenses incurred on TRB cash deposits. 
Given that Koyo's total U.S. indirect selling expense amount reflected 
all sales, this was a conservative calculation in that Koyo effectively 
left in its allocated expense amount those interest expenses incurred 
on its cash deposits for non-TRB merchandise. Thus, Koyo's inclusion of 
these expenses within its U.S. indirect selling expense amount results 
in the overstatement of its U.S. indirect selling expenses and a 
greater deduction from USP. Timken argues that Koyo's adjustment should 
be even more limited, suggesting that, because this review was only for 
the A-588-054 case, interest expenses incurred on cash deposits for A-
588-604 TRBs should not be deducted. Given that the expense amount from 
which Koyo is making its interest on cash deposit adjustment reflects 
interest expenses related to all antidumping duty orders applicable to 
all merchandise, Timken's suggested methodology would result in an even 
greater overstatement of Koyo's U.S. indirect selling expenses than 
Koyo's current methodology. Therefore, in the instant case, the issue 
of whether the adjustment must be scope-specific is irrelevant because 
the indirect selling expense amount Koyo is adjusting reflects all 
sales of all merchandise and not only scope merchandise. If, however, 
Koyo calculated and reported scope-specific U.S. indirect selling 
expenses (those only incurred for the A-588-054 case) prior to making 
the adjustment for interest on cash deposits, we would have expected 
Koyo to adjust its scope-specific U.S. indirect selling expenses for 
those interest expenses incurred on cash deposits for A-588-054 
merchandise only.
    Comment 3: Timken argues that the Department incorrectly based its 
calculation of profit for Fuji's constructed export price (CEP) sales 
on Fuji's financial statements rather than on information on the record 
which would yield a more accurate calculation. Timken contends that, 
because the COP for a non-producer like Fuji is its acquisition costs, 
the Department is able to calculate the profit for all of Fuji's CEP 
sales by using

[[Page 11833]]

Fuji's reported acquisition costs as well as Fuji's reported U.S. 
selling and movement expenses. In addition to providing a sample of how 
CEP profit for Fuji should be calculated, Timken also states that, 
because section 772(d)(3) of the Act provides for CEP profit to be 
calculated using a respondent's reported expenses before using a 
respondent's financial statements, the Department should alter its 
calculation of Fuji's CEP profit for its final results of review.
    Fuji argues that, while Timken is correct that the new law provides 
a hierarchy for the Department to determine the proper expenses to be 
used for calculating CEP profit, Timken overlooks that the SAA clearly 
indicates that the Department will ``request the information necessary 
to determine total expenses under the first alternative if Commerce is 
conducting a cost of production investigation,'' and ``if Commerce is 
not conducting a cost of production investigation, the respondent may 
submit the necessary information on a voluntary basis'' (SAA at 155). 
As a result, Fuji asserts, the Department should only use the first 
alternative in the statute if there is a cost investigation or if the 
respondent voluntarily submits the necessary information. Fuji contends 
that, if these circumstances are not present, the statute explicitly 
directs the Department to resort to a respondent's financial reports to 
calculate CEP profit (id.). Thus, Fuji maintains, because Fuji was not 
subject to a cost investigation during the POR and did not provide the 
information voluntarily, the Department acted in accordance with 
section 772 (d)(3) of the Act by using its financial reports to 
calculate CEP profit.
    Furthermore, Fuji contends, Timken's argument implies that Fuji's 
reported acquisition costs, which it reported for model match purposes, 
are a surrogate for the detailed expense data requested in a COP 
investigation. Fuji argues that the Department has repeatedly rejected 
the notion that a reseller's acquisition costs are equivalent to COP 
data.
    Fuji also rejects Timken's assertion that the Department's use of 
Fuji's financial reports led to an inaccurate calculation of CEP 
profit. Fuji maintains that, even though its financial statements 
incorporate data on other Fuji product lines, this is of no consequence 
because the SAA recognizes that calculating costs from a larger product 
line is not distortive (SAA at 155). Finally, Fuji objects to Timken's 
suggested calculation of Fuji's CEP profit, stating that Timken 
neglected to include fundamental packing, selling, and movement 
expenses and committed other errors which serve to undermine the 
reliability and credibility of Timken's argument.
    Department's Position: We agree with Fuji. Section 772(d)(3) of the 
Act requires the Department, in determining CEP, to identify and deduct 
from the U.S. starting price an amount for profit. The SAA explains 
that this profit will be calculated by ``multiplying the total profit 
by the percentage determined by dividing total U.S. expenses by total 
expenses'' (SAA at 154). Section 772(f), the special rule for 
determining profit, defines total expenses as ``all expenses in the 
first of the following categories which applies and which are incurred 
by or on the behalf of the foreign producer and foreign exporter of the 
subject merchandise and by or on the behalf of the United States seller 
affiliated with the producer or exporter with respect to the production 
or sales of the merchandise; (1) the expenses incurred with respect to 
the subject merchandise * * * if the expenses were requested by the 
administering authority for the purpose of establishing NV and CEP; (2) 
the expenses incurred with respect to the narrowest category of 
merchandise * * * which includes the subject merchandise; or (3) the 
expenses incurred with respect to the narrowest category of merchandise 
sold in all countries which includes the subject merchandise.'' Thus, 
section 772(f) establishes a hierarchy of methods for calculating total 
expenses. The SAA clarifies these alternatives, explaining that, under 
the first alternative, ``Commerce will request the information 
necessary * * * if Commerce is conducting a COP investigation'' (see 
SAA at 155). If there is no COP information the SAA states that the 
``respondent may submit the necessary information on a voluntary 
basis'' (see id.) However, if the information is not collected in the 
course of a COP investigation or submitted by the respondent 
voluntarily, the Department will then resort to the second two 
alternatives. The SAA states that, under the second two alternatives, 
``the information will be obtained from financial reports'' (see id.). 
Finally, because section 772(f)(2)(D) of the Act and the SAA instruct 
the Department to calculate total profit on the same basis as total 
expenses, the SAA also explains that ``no distortion in the profit 
allocable to U.S. sales is created if total profit is determined on the 
basis of a broader product-line than the subject merchandise, because 
the total expenses are also determined on the basis of the same 
expanded product line'' (see id.).
    Because we did not conduct a cost investigation of Fuji in either 
TRB review of the 1994-95 POR, we determined in our preliminary results 
that we did not have the information necessary to calculate CEP profit 
in accordance with the first alternative. As a result, we resorted to 
Fuji's financial reports for the POR to calculate the CEP profit 
percentage to be applied to U.S. expenses to calculate the CEP profit 
amount to be deducted from Fuji's CEP sales. In its arguments Timken 
suggests that, because Fuji submitted its acquisition costs, the 
Department has the information necessary to calculate profit under the 
first alternative. However, the only information we have concerning 
certain costs, such as general and administrative expenses, is from 
Fuji's financial statements. Because we do not have all the actual 
expenses necessary to calculate a CEP profit percentage based on the 
first of the alternatives, we have based this information on Fuji's 
financial statements, in accordance with section 772(f) of the Act and 
the SAA at 155.
    Comment 4: Koyo argues that the Department incorrectly deducted 
from USP those indirect selling expenses Koyo incurred in Japan for its 
U.S. sales (export selling expenses). Koyo contends that the SAA 
clearly states that, under section 772(d) of the Act, CEP will be 
reduced by only those expenses and profit associated with economic 
activities occurring in the United States. Citing to Antifriction 
Bearings (Other than Tapered Roller Bearings) and Parts Thereof From 
France et. al., 61 FR 35713 (July 8, 1996) and Calcium Aluminate Flux 
from France, 61 FR 40396 (August 2, 1996), Koyo contends that the 
Department has interpreted section 772(d) to exclude the deduction of 
export selling expenses from USP in other administrative review 
proceedings and should apply the same interpretation in these final 
results of review as well.
    Timken argues that under the law in effect prior to January 1, 
1995, the Department made an adjustment for those indirect selling 
expenses incurred in Japan for Koyo's U.S. sales because these expenses 
were relevant to the sale of U.S. merchandise. Timken asserts that, 
because the definition of indirect selling expenses under the new 
antidumping law has not changed, the Department must continue to make 
this adjustment to USP. For example, Timken states that the Senate 
indicated that the category of indirect selling expenses which U.S. 
prices are adjusted for is to remain the same as under the old law 
(Committee on Finance, Committee on Agriculture, Nutrition, and 
Forestry, Committee on Governmental Affairs, Uruguay Round

[[Page 11834]]

Agreements Act, S. Rep. No. 412, 103d Congress. 2d Sess. 65 (1994)). 
Timken also contends that not only does the SAA support this position, 
but the Department itself has indicated that in implementing the URAA 
it will make ``adjustments to constructed export price under section 
772(d) of the Act for expenses associated with economic activities in 
the United States, no matter where incurred'' (Antidumping Duties; 
Countervailing Duties, Notice of Proposed Rulemaking and Request for 
Public Comments, 61 FR 7308 (February 27, 1996) (Draft Regulations)).
    Department's Position: We agree with Koyo. It is clear from the SAA 
that under the new statute we should deduct from CEP only those 
expenses associated with economic activities in the United States. The 
SAA also indicates that ``constructed export price is now calculated to 
be, as closely as possible, a price corresponding to an export price 
between non-affiliated exporters and importers'' (see SAA at 823). 
Therefore, we have deducted from CEP only those expenses associated 
with commercial activities in the United States. Our proposed 
regulations reflect this logic at 351.402(b) (``(t)he Secretary will 
make adjustments to constructed export price under 772 (d) for expenses 
associated with commercial activities in the United States, no matter 
where incurred'').
    Timken's reference to the SAA to support the proposition that the 
new law is not intended to change our practice in this regard is 
misplaced. Timken cites various provisions of the SAA which state that 
our practice with respect to ``assumptions'' would not change. The SAA 
explains that ``assumptions'' are selling expenses of the purchaser for 
which the foreign seller agrees to pay (see SAA at 824). Thus, if the 
home market producer agrees to pay for the affiliated importer's cost 
of advertising in the U.S. market the Department would deduct such an 
expense as an ``assumption.'' It should be noted that assumptions are 
different than selling expenses incurred in the home market in selling 
to the affiliated importer, which are not incurred ``on behalf of the 
buyer'' (i.e., the affiliated importer). Rather, the exporter incurs 
such expenses on its own behalf, and for its own benefit, in order to 
complete the sale to the affiliated importer (see AFBs 94-95 at 2124).
    In this case, Koyo's reported selling expenses at issue are not 
specifically associated directly to commercial activity in the United 
States, such as the subsidiary's activity of selling the merchandise in 
the United States. Rather, the expenses at issue were associated 
directly with the sale between Koyo and its subsidiary and were 
incurred prior to the commercial activity in the United States. 
Therefore, because Koyo's reported export selling expenses did not 
represent commercial activities performed in the United States, we did 
not deduct these expenses from CEP for these final results.
    Comment 5: In its response Koyo reported those inventory carrying 
costs (ICC) it incurred in the United States for its U.S. sales as well 
as the ICC it incurred in Japan for TRBs sold in the United States. 
Because the average number of days a TRB spent in inventory in the 
United States was shorter than the number of days in which KCU, Koyo's 
U.S. subsidiary, was required to pay Koyo, we set U.S. ICC equal to 
zero, added the number of days of KCU's payment terms to the number of 
days Koyo reported for inventory in Japan, and calculated a revised ICC 
for U.S. sales using this revised number of days in inventory and the 
home market borrowing rate. This is in accordance with our practice to 
use the interest rate applicable to the foreign parent's borrowings in 
calculating U.S. ICC when there is evidence on the record that the 
foreign parent assumed the financial burden of this imputed expense 
through delayed payment by the U.S. subsidiary (see, e.g., Federal-
Mogul Final Remand Results at Comment 1 and The Timken Company v. 
United States, 865 F. Supp. 881 (CIT 1994)).
    Koyo states that while it agrees in principle with the Department's 
recalculation of its U.S. ICC, it disagrees with the Department's 
calculation of the number of days in inventory. Koyo contends that the 
Department's method assumes that a TRB will be held in inventory in the 
United States for the same number of days as KCU's payment terms, when, 
as the record demonstrates, the number of days in inventory in the 
United States is less than the number of days of KCU's payment terms. 
Koyo contends that, as a result, the Department's recalculation of its 
U.S. ICC calculates ICC beyond the period for which TRBs were actually 
held in inventory in the United States.
    Department's Position: We agree with the respondent. When 
recalculating Koyo's ICC for its U.S. sales of TRBs, we incorrectly 
included within our calculation of the revised number of days in 
inventory for U.S. merchandise the full number of days of KCU's payment 
terms to Koyo Seiko, despite the fact that the actual number of days 
the merchandise spent in inventory in the United States was less than 
the payment terms. As a result, we agree that our recalculation 
overstates Koyo's ICC for its U.S. TRBs sales. Therefore, for these 
final results we have corrected this error by calculating the number of 
days in inventory for Koyo's U.S. merchandise by adding to the number 
of days the U.S. merchandise spent in inventory in the home market the 
actual number of days in inventory in the United States, rather than 
the number of days reflected by the full payment terms between KCU and 
Koyo Seiko.
    Comment 6: Koyo states that, while it does not challenge the 
Department's splitting of home market TRBs sets, the Department 
incorrectly calculated CEP and CV profit after it split Koyo's home 
market TRBs sets into individual cup and cone sales. Koyo asserts that, 
as a result, the calculation of home market total revenue, total cost 
of goods sold, total selling expenses, and total movement expenses, 
includes not only the amount of the expense for home market sets, but 
the amounts for the individual components of the set as well. 
Consequently, Koyo claims, all home market elements of the Department's 
CEP and CV profit calculations are double-counted and Koyo's margin 
calculation is distorted. Koyo concludes that the Department should 
correct this error by either performing its set splitting after its 
calculation of the home market elements for CEP and CV profit, or by 
identifying within its computer program for Koyo those cups and cones 
split from home market sets and excluding them from the CEP and CV 
profit calculations.
    Department's Position: We agree with Koyo. By performing the set-
splitting portion of our analysis prior to our derivation of the home 
market elements necessary for the calculation of CEP and CV profit, we 
inadvertently double-counted home market total revenue, total cost of 
goods sold, total selling expenses, and total movement expenses. We 
have corrected this error for these final results by performing our 
derivation of the home market elements for our CEP and CV profit 
calculation prior to the set-splitting portion of our margin 
calculation computer program for Koyo.

Adjustments to Normal Value

    Comment 7: Timken disagrees with Koyo's allocation of those home 
market expenses it incurred when transporting bearings from its plant 
to its warehouses (pre-sale freight). Timken contends that, based on 
its review of Koyo's response, only those bearings that Koyo sold for 
export and through home market affiliated distributors were shipped to 
warehouses. Other bearings (e.g., those

[[Page 11835]]

sold to home market original equipment manufacturers (OEMs)), appear to 
have been stored at the warehouse located at Koyo's plant. Timken 
asserts that, because Koyo's home market pre-sale freight allocation 
includes the sales of all bearings, Koyo actually allocated its pre-
sale freight expenses to home market sales for which the expense was 
not incurred. As a result, Timken asserts, the Department must re-
allocate and re-calculate Koyo's reported home market pre-sale freight 
expenses to exclude that merchandise which was not shipped from Koyo's 
plant to one of its warehouses.
    Furthermore, Timken argues that, when reallocating this expense, 
the Department should also ensure that it is allocated equally to all 
sales for which it was incurred. Timken contends that, because Koyo 
incurred this expense equally for its domestic and export sales, and 
because Koyo was unable to report the expense separately for its 
domestic and export sales, the expense should be reported equally for 
all of Koyo's home market and U.S. sales. However, Timken asserts, 
while Koyo calculates the same pre-sale freight allocation ratio for 
its home market and U.S. sales, Koyo applies the ratio to U.S. transfer 
prices and home market resale prices. Timken claims that Koyo's 
calculation of per-unit pre-sale freight expenses for U.S. sales on the 
basis of transfer prices, rather than resale prices, results in greater 
expense amounts reported for Koyo's home market sales. Timken states 
that, because this distorts the commercial reality of the expense and 
the manner in which it was incurred, the Department should reallocate 
this expense accordingly.
    Koyo maintains that its response to section B of the Department's 
questionnaire explains that Koyo operates two central warehouses in 
order to distribute the foreign like product in the home market. Thus, 
Koyo asserts, Timken's assertion that Koyo did not incur home market 
pre-sale freight for certain home market sales is based on Timken's 
failure to read the relevant section of Koyo's response. Furthermore, 
Koyo asserts, because Koyo Seiko incurred all pre-sale home market 
freight expenses, Koyo properly allocated the expense on the basis of 
the total sales value of Koyo Seiko's sales of TRBs. Koyo argues that 
this is a well-established methodology that the Department has verified 
and accepted in past TRBs and AFBs reviews, and Timken has provided the 
Department with no evidence that would compel the Department to reject 
this methodology at this late stage in the instant proceeding. In 
addition, Koyo contends that the Department has already resolved this 
issue in a closely related context. Koyo states that in its Federal-
Mogul Final Remand Results the Department rejected a very similar 
argument in which Timken claimed that the ICC incurred by Koyo Seiko in 
Japan for U.S. sales should have been calculated on the basis of KCU's 
U.S. resale prices rather than Koyo Seiko's price to KCU (the transfer 
price). Koyo contends that the same reasoning the Department applied in 
those final remand results, in which it determined that the relevant 
sales for the calculation of the ICC expense were Koyo Seiko's sales to 
KCU, should apply here as well, and the Department should accept Koyo's 
calculation methodology using the sales from Koyo Seiko to KCU as the 
basis for its home market pre-sale freight expense allocation.
    Department's Position: While we agree with Timken that Koyo's 
questionnaire response does indicate that it did not incur pre-sale 
freight expenses for certain home market sales, we disagree with Timken 
that Koyo's allocation of these expenses is otherwise unreasonable. In 
its response Koyo reported home market pre-sale freight expenses which 
reflected those expenses it incurred when transporting TRBs destined 
for sale in both the U.S. and home markets from the home market plant 
to home market warehouses. While Koyo reported these pre-sale freight 
expenses for all of its home market and U.S. export sales, its 
questionnaire response indicates that there are certain home market 
sales for which Koyo did not incur this expense because the merchandise 
was not transported from the plant to a warehouse at a location 
different from the plant. For example, on page 38 of its section B 
response to our questionnaire, Koyo explains that, prior to sale, not 
only did it store TRBs at its two home market central warehouses, 
warehouses at its branch and sales offices, and at the warehouses of 
its four consolidated distributors, but it also stored certain 
merchandise at its plant warehouse. In the proprietary explanation 
following this description on page 38 Koyo again indicates that there 
are certain types of home market sales for which the merchandise was 
stored at its plant warehouse. In addition, on page 25 of its section B 
response, when explaining its post-sale home market freight expenses, 
Koyo states that it incurred post-sale freight expenses either in 
shipping merchandise from the plant directly to a customer or when 
transporting merchandise from a warehouse to a customer. Again, the 
implication is that there are certain home market sales for which the 
merchandise is shipped directly from the plant to a customer and, 
therefore, is not transported to a warehouse at a location different 
from the plant. Therefore, we agree with Timken that the record 
demonstrates that there are certain home market sales for which Koyo 
did not incur home market pre-sale freight expenses.
    We have determined, therefore, that for these final results it is 
necessary to (1) reallocate Koyo's reported home market pre-sale 
freight expenses such that the total sales value of those home market 
sales for which the expense was not incurred is excluded from the 
allocation denominator, and (2) apply the expense only to those home 
market sales for which the expense was incurred. However, Koyo's 
response does not enable us to specifically identify within Koyo's home 
market database those sales for which the expense was not incurred. In 
light of this, we have determined to rely on facts available to 
determine those sales for which the expense was not incurred. Based on 
Koyo's proprietary narrative explanation on page 38 of its response, we 
have concluded that Koyo most likely did not incur this expense on 
certain sales to home market OEM customers. While we recognize that it 
is likely that not all of Koyo's home market OEM sales were exempt from 
this expense, because we are unable to identify exactly which OEM sales 
were exempt, we have applied non-adverse facts available and 
recalculated the expense adjustment by (1) removing from Koyo's 
reported allocation denominator the total sales value of Koyo's home 
market OEM sales and (2) applying the recalculated expense adjustment 
to U.S. sales and only non-OEM home market sales.
    However, despite the fact that we have determined for these final 
results that Koyo's pre-sale freight allocation denominator is 
overstated and the expense was reported for home market sales for which 
it was not incurred, we disagree with Timken that Koyo's allocation 
otherwise fails to reflect the manner in which the expense was actually 
incurred. In general, when a respondent relies on an expense allocation 
to calculate its per-unit adjustment amounts, we require that 
allocation to reflect the manner in which the expense was actually 
incurred (see, e.g., TRBs 92-93 at 57635 and Certain Fresh Cut Flowers 
From Columbia; Final Results of Antidumping Duty Administrative 
Reviews, 61 FR 42848 (August 19, 1996)). In addition, we examine the 
respondent's allocation methodology to determine if there is

[[Page 11836]]

internal consistency between the numerator and denominator and within 
the methodology as a whole. For example, if an expense is allocated on 
the basis of total sales value, as is the expense at issue here, the 
expense amount (the numerator) and the total sales value (the 
denominator) should reflect the same pool of sales such that the total 
expense amount reported by the respondent is divided by the total value 
of the sales for which the expense was actually incurred. Likewise, the 
allocation ratio should be applied to the same sales price reflected in 
the denominator. For example, we would not accept the application of an 
allocation ratio to gross sales price if the denominator was calculated 
by totaling the value of all sales on the basis of a net price.
    In the instant case, Koyo Seiko, the Japanese parent, incurred the 
pre-sale freight expenses at issue for all merchandise, whether 
destined for sale to the U.S., third-country, or home market (with the 
exception of the home market OEM sales described above). Because Koyo 
does not maintain its records such that it is able to calculate the 
total expense amount incurred for each market, it was unable to 
separately calculate the specific pre-sale freight expense attributable 
to each market. Therefore, Koyo used as its allocation numerator the 
total expense amount incurred by Koyo Seiko for all merchandise, as 
derived from Koyo Seiko's sales records.
    The sales for which this expense was incurred were Koyo Seiko's 
sales to all its various customers, which encompassed a mix of 
affiliated and unaffiliated entities in both the export and home 
markets. Thus, Koyo calculated its pre-sale freight allocation 
denominator by totaling the value for all of Koyo Seiko's sales to all 
its customers, as derived from Koyo Seiko's records. While for these 
final results we have adjusted this denominator to exclude the total 
sales value of home market OEM sales, we have nevertheless preserved 
Koyo's basic allocation methodology for the following reasons:
    Because Koyo Seiko's customers encompassed a mix of affiliated and 
unaffiliated parties in both the home and export markets, Koyo's 
denominator includes sales values which reflect both transfer and 
resale prices. Because Koyo Seiko's customer in the United States is 
KCU, its wholly-owned U.S. affiliate, the U.S. sales transactions 
relevant to Koyo's allocation are those between Koyo Seiko and KCU. 
Thus, Koyo correctly included within its denominator the total value of 
its sales to KCU, which were made at transfer prices. Similarly, in the 
home and third-country markets Koyo Seiko sold to both affiliated and 
unaffiliated customers. Therefore, Koyo properly included within its 
allocation denominator the total value of Koyo Seiko's sales to its 
home and third-country market customers, some of which were made at 
resale prices and others of which were at transfer prices. Koyo's 
methodology therefore not only relies on a numerator and denominator 
which reflect the same pool of sales, but its denominator is calculated 
on the basis of the value of those sales for which the reported total 
expense amount was actually incurred.
    When calculating the per-unit expense adjustment amount for each 
U.S. and home market transaction, Koyo applied its allocation ratio 
(which was the same for all sales) to the appropriate unit price. For 
U.S. sales it applied the ratio to the transfer prices Koyo reported 
between Koyo Seiko and KCU, which were the U.S. prices upon which the 
expense was incurred and the U.S. sales values reflected in Koyo's 
allocation denominator. For home market sales, Koyo applied the ratio 
to either a resale price (for unaffiliated customers) or transfer price 
(for affiliated customers) because these were the home market prices 
upon which the expense was incurred and the home market sales values 
reflected in the allocation denominator.
    Timken argues that, in order to properly reflect commercial reality 
and avoid distortion, Koyo should instead apply its expense ratio to 
U.S. resale prices, the price of the sale between KCU and the first 
unaffiliated U.S. customer. However, Timken overlooks the fact that 
this transaction is not the sale for which the expense was actually 
incurred. As a result, Timken's proposed methodology would neither 
reflect the manner in which, nor the sales upon which, Koyo actually 
incurred the expense. Timken's argument also ignores the fact that 
Koyo's allocation denominator includes not only U.S. transfer values 
but home market and third-country transfer values as well. Thus, 
Timken's assertion that Koyo always calculates the home market expense 
adjustment on the basis of resale prices is incorrect. Rather, the 
record demonstrates that, for sales to affiliated home market parties, 
Koyo calculated the adjustment on the basis of the transfer price 
between Koyo Seiko and the affiliated home market customer. In 
addition, rather than argue that all transfer values included in Koyo's 
denominator should be excluded from the allocation methodology, Timken 
limits its argument to only U.S. transfer prices and fails to 
demonstrate why U.S. transfer values are an improper factor in the 
denominators calculation while home market and third-country transfer 
values are not.
    Finally, the record does not contain, and Timken has not provided, 
any evidence demonstrating that the transfer prices Koyo reported 
between Koyo Seiko and KCU are unreliable. Rather, the record indicates 
that these transfer prices were maintained by KCU, independent of the 
antidumping proceedings, within the ordinary course of business. 
Furthermore, we note that antidumping proceedings are only one of the 
forces applicable to a respondent's transfer pricing practices in that 
transfer prices are also subject to Internal Revenue Service audits for 
U.S. tax purposes.
    Therefore, based on the above reasons, we do not agree with the 
petitioner that Koyo's basic allocation methodology is unreasonable. 
Therefore, for these final results, while we have recalculated Koyo's 
originally reported allocation ratio to exclude home market OEM sales, 
we have made no other changes to Koyo's overall allocation methodology.
    Comment 8: Koyo and Fuji disagree with the Department's preliminary 
results treatment of their respective home market post-sale-price 
adjustments (PSPAs) . Koyo argues that the Department's denial of its 
PSPAs is based on an overly narrow interpretation of The Timken Company 
v. United States, 930 F. Supp. 621 (CIT 1996) (Timken) and The 
Torrington Company v. United States, 818 F. Supp. 1563 (CIT 1993) 
(TorringtonI), aff'd 82 F.3d (Fed. Cir. 1996) (TorringtonII), which the 
Department interprets as requiring it to reject home market PSPA 
adjustments allocated on a customer-and scope-specific basis. Koyo 
contends that, in Torrington II, rather than prohibit the allocation of 
direct home market expenses, the CAFC actually confirmed its earlier 
decision in Smith Corona Group v. United States, 713 F.2d 1568, 1580 
(Fed Cir. 1983) that the Department may treat allocated expenses as 
direct selling expenses, provided that the allocation does not distort 
the margin. Koyo further asserts that the URAA and the Department's 
draft regulations confirm this position. Koyo states that the SAA 
explains that the Department does not intend to change its current 
practice of allowing companies to allocate direct expenses when 
transaction-specific reporting is not feasible, provided that the 
allocation method does not cause inaccuracies or distortions (SAA at 
823-824). Koyo also asserts that, while the Department's draft 
regulations state a preference for

[[Page 11837]]

transaction-specific reporting of direct expenses, it notes that 
allocated expenses may be treated as direct expenses when transaction-
specific reporting is not feasible. Koyo further argues that its 
allocation of its home market PSPAs is consistent with the CIT's 
decision in Federal-Mogul Corp. v. United States, 862 F. Supp. 384 (CIT 
1994) that direct selling expenses be allocated only over scope 
merchandise. Therefore, Koyo concludes, because its home market PSPA 
allocation methodologies meet the requirements established by the CAFC 
and the CIT for the treatment of direct expenses, the Department should 
accept these adjustments in its final results of review.
    Fuji disagrees with the Department's denial of its reported home 
market rebate adjustment. Fuji contends that, while its allocation 
methodology includes non-scope merchandise, this was necessary because 
it is the basis upon which the rebates were incurred. In addition, Fuji 
asserts that, since the same rebate amounts are paid on scope and non-
scope merchandise, its use of non-scope merchandise was not only 
appropriate, but it accurately allocated the rebates to TRBs. 
Furthermore, Fuji asserts, not only did it report its rebates on a 
dealer-specific basis, but, while it could have allocated its rebates 
to TRBs by taking a portion of the rebates paid based on the ratio of 
TRBs purchased to total parts and accessories purchased by each dealer, 
as suggested by the CIT in The Torrington Company v. United States,0 
832 F. Supp. 379 (CIT), this methodology results in the same allocation 
for each dealer as its current methodology.
    Fuji also contends that, even if the Department disallows its 
rebates as a direct adjustment to NV, the Department must nevertheless 
treat its reported rebates as indirect selling expenses. Fuji claims 
that the Department routinely treats those home market PSPAs which it 
denies as direct adjustments to NV as indirect selling expenses, even 
if the expense allocation includes both scope and non-scope 
merchandise.
    Timken argues that, while Koyo granted its home market PSPA's on a 
customer and model-specific basis, Koyo nevertheless allocated these 
adjustments to all sales to a given customer during the POR. Timken 
asserts that Koyo therefore allocated the expenses to sales for which 
the adjustments were not actually granted. Timken states that, because 
neither the statute nor the Department's regulations allow such 
adjustments, the Department acted properly in denying all of Koyo's 
home market PSPAs in its preliminary results and should not alter its 
determination for these final results of review.
    Timken also argues that the Department's treatment of Fuji's home 
market rebates was correct because these rebates were (1) incurred and 
allocated on the basis of sales of both scope and non-scope 
merchandise, (2) were not allocated on a transaction-specific basis, 
and (3) were not granted as a fixed and constant percentage of all 
sales upon which they were incurred. Timken argues that, not only has 
the CIT repeatedly held that merchandise which is outside the scope of 
an antidumping duty order cannot be used in the calculation of 
antidumping duties (Torrington Company v. United States, 818 F. Supp. 
1563 (CIT 1993) and Federal-Mogul Corp. v. United States, 918 F. Supp. 
386 (CIT 1996)), but the Department has repeatedly rejected adjustments 
which include non-scope merchandise within their allocations (TRBs 92-
93 and AFBs 93-94).
    Further, Timken contends that, while Fuji claims that it accurately 
allocated its rebates to TRBs, Fuji failed to demonstrate that its 
reported amounts are the actual rebates earned on its home market 
sales. As a result, Timken asserts, it is not evident that every home 
market sale to a particular customer for which Fuji reported a rebate 
adjustment was eligible for, and earned, a rebate. In addition, Timken 
contends, given that Fuji's rebates were not transaction-specific and 
included sales of non-scope merchandise, Fuji failed to demonstrate 
that its rebates were granted at a fixed and constant percentage of all 
sales such that its allocation to scope merchandise yielded the exact 
amount of per-unit rebate granted on TRB sales.
    Finally, Timken argues that the Department should not, as Fuji 
suggests, treat Fuji's rebates as indirect selling expenses. Timken 
maintains that the CAFC definitively held that direct expenses, such as 
rebates and other price adjustments, which, by their nature, are 
directly related to particular sales, cannot be treated as indirect 
selling expenses (Torrington II at 1050 and 1051). Timken claims that, 
because Fuji's rebates are clearly direct expenses, the Department 
correctly denied this adjustment in its preliminary review results and 
should not alter its determination for these final review results.
    Department's Position: For these final results we have accepted 
claims for discounts, rebates, and other billing adjustments as direct 
adjustments to price if we determined that the respondent, in reporting 
these adjustments, acted to the best of its ability and that its 
reporting methodology was not unreasonably distortive. We did not treat 
such PSPAs as direct or indirect selling expenses, but rather as direct 
adjustments necessary to identify the correct starting price. While we 
prefer respondents to report these adjustments on a transaction-
specific basis (or, where a single adjustment was granted for a group 
of sales, as a fixed and constant percentage of the value of those 
sales), we recognize that this is not always feasible, particularly 
given the extremely large volume of transactions involved in these TRBs 
reviews. It is inappropriate to reject allocations that are not 
unreasonably distortive in favor of the facts otherwise available if a 
respondent is unable to report the information in a more specific 
manner (see section 776 of the Act and AFBs 94-95 at 2090). 
Accordingly, we have accepted these adjustments when it was not 
feasible for a respondent to report the adjustment on a more specific 
basis, provided that the allocation method used by the respondent did 
not cause unreasonable inaccuracies or distortions.
    In applying this standard, we have not rejected an allocation 
method solely because the allocation includes adjustments granted on 
non-scope merchandise. However, such allocations may be unacceptable 
where we have reason to believe that a respondent did not grant such 
adjustments in proportionate amounts with respect to sales of scope and 
non-scope merchandise and, thus, may have resulted in unreasonable 
distortions. We have examined the extent to which non-scope merchandise 
included within the allocation pool is different from the scope 
merchandise in terms of value, physical characteristics, and the manner 
in which it is sold. Significant differences in such areas may increase 
the likelihood that respondents did not grant price adjustments in 
proportionate amounts with respect to sales of scope and non-scope 
merchandise. While we carefully scrutinize any such differences between 
scope and non-scope sales in terms of their potential for distorting 
reported per-unit adjustments on the sales involved in our analysis, it 
would not be reasonable to require respondents to submit specific 
adjustment data on non-scope merchandise in order to prove that there 
is no possibility of distortion. Such a requirement would defeat the 
purpose of permitting the use of reasonable allocations by respondents 
that have cooperated to the best of their ability (see AFBs 94-95 at 
2091).
    Where we find that a company has not acted to the best of its 
ability in

[[Page 11838]]

reporting the adjustment in the most specific and non-distortive manner 
feasible, we have made an adverse inference in using facts available 
with respect to the adjustment, pursuant to section 776(b) of the Act. 
Therefore, we agree with Timken that, when we find a respondent has 
allocated a home market PSPA in a distortive manner, or if we determine 
that a respondent has not acted to the best of its ability, we should 
deny the adjustment rather than treat it as an indirect expense. This 
is in accordance with the CAFC's decision in Torrington II at 1047-51. 
However, we note that Torrington II is of limited additional relevance 
to the issue at hand because the CAFC did not address the 
reasonableness of the allocation methods respondents used in reporting 
the PSPAs in question. Although the CAFC appeared to question whether 
price adjustments constituted expenses at all (see Torrington II at n. 
15), it merely held that, assuming the adjustments were expenses, they 
had to be treated as direct selling expenses rather than indirect 
selling expenses.
    In addition, we have included positive (upward) HM price 
adjustments (e.g., positive billing adjustments which increase the 
final sales price) in our analysis. The treatment of positive home 
market billing adjustments as direct adjustments is appropriate because 
disallowing such adjustments would provide an incentive to report 
positive billing adjustments on an unacceptably broad basis in order to 
reduce NV and margins. That is, if we were to disregard positive 
billing adjustments, which would be upward adjustments to NV, 
respondents would have no incentive to report these adjustments in the 
most specific and non-distortive manner feasible (see AFBs 94-95 at 
2091).
    In its response Koyo claimed direct adjustments to home market 
price for two types of billing adjustments and rebates. Because certain 
of Koyo's billing adjustments were positive, in accordance with our 
policy, we automatically made a direct adjustment to Koyo's reported 
home market gross unit prices for these upward adjustments. Concerning 
those billing adjustments which were negative (e.g., resulted in a 
downward adjustment), based on our examination of the record in this 
review and our verification of Koyo's records in past reviews of the A-
588-054 case, we are satisfied that Koyo's records do not allow it to 
report these billing adjustments on a transaction-specific basis and 
that Koyo acted to the best of its ability in calculating the reported 
adjustments on as narrow a basis as its records allowed. Furthermore, 
because Koyo's allocation was both scope-and customer-specific, we are 
satisfied that Koyo's reported billing adjustments are reasonably 
accurate and non-distortive. Therefore, for these final results we have 
made direct adjustments to home market price for both Koyo's negative 
and positive billing adjustments.
    In contrast to its billing adjustments, Koyo reported its rebates 
only on a customer-specific basis. While we are satisfied that Koyo 
acted to the best of its ability in reporting this adjustment insofar 
as its records did not allow for it to report the adjustment on a more 
specific basis, its allocation nevertheless included non-scope 
merchandise. We therefore examined Koyo's allocation to determine if it 
is was reasonably non-distortive. Our review of the record indicated 
that the non-scope merchandise included in Koyo's allocation reflected 
sales of bearings other than TRBs. Not only has our review and analysis 
of the record given us no reason to believe that Koyo is more likely to 
grant its rebates on sales of bearings other than TRBs than it is on 
sales of TRBs, but we note that Koyo is primarily in the business of 
selling bearings, some of which are within the scope of the TRB orders 
and others which are not. While we recognize that there are differences 
in bearings, we have not found that the scope and non-scope bearings 
included in Koyo's allocation vary significantly in terms of value, 
physical characteristics, nor the manner in which they are sold such 
that Koyo's allocation would result in an unreasonably inaccurate or 
distortive allocation. Thus, we have made a direct adjustment to home 
market price for Koyo's rebates.
    Concerning Fuji's rebates, our review of the record indicates that 
Fuji granted two different types of rebates, both of which were 
applicable to sales of all automobile parts (not only TRBs), and both 
of which were granted to only those dealers meeting the specific 
requirements of the individual rebate program. In order to derive the 
rebate amount it reported for each appropriate home market transaction, 
Fuji calculated dealer-specific allocation ratios by dividing the total 
rebate paid to a dealer during the POR (for all parts sales) by the 
total value of all parts sales to the dealer during the POR. Based on 
our review of the record, we are satisfied that Fuji reported these 
rebates to the best of its ability insofar as its records allow neither 
the reporting of invoice-specific rebates nor the identification of 
those rebates paid to each dealer specifically for TRBs purchases. 
Furthermore, as explained in the proprietary version of the 
Department's final results analysis memorandum for Fuji, we are also 
satisfied that Fuji reported the first of these rebates, ``Rebate 1,'' 
to the best of its ability in that its records allow neither the 
reporting of invoice-specific rebates nor the identification of those 
rebates paid to each dealer specifically for purchases of TRBs. 
Furthermore, as explained in the proprietary version of the 
Department's final results analysis memorandum for Fuji, we are also 
satisfied that Fuji's allocation methodology is not unreasonably 
distortive or inaccurate.
    The same cannot be said for Fuji's other rebate program, ``Rebate 
2.'' Fuji reported that it granted these rebates not on the basis of 
the dealers'' purchases from Fuji but, rather, on the basis of the 
dealers'' subsequent sales of automotive parts. In reporting ``Rebate 
2,'' however, Fuji did not calculate its reported dealer-specific 
allocation ratios using the dealers' total sales values. Instead, Fuji 
used the value of Fuji's sales to the dealer. The use of this amount in 
calculating the dealer-specific allocation ratios for ``Rebate 2'' has 
the effect of overstating the appropriate amount of the rebates 
granted. In addition, as Fuji based the ``Rebate 2'' program on the 
total value of the dealers' subsequent sales of TRBs and other 
automotive parts, Fuji had the data at hand to correctly allocate 
``Rebate 2'' on the same basis as originally granted. Therefore, unlike 
``Rebate 1,'' we find that Fuji did not act to the best of its ability 
in reporting ``Rebate 2'' and, further, used an allocation methodology 
which is unreasonably inaccurate or distortive. Therefore, we have 
disallowed this adjustment for these final results.
    Comment 9: Fuji argues that the Department incorrectly treated its 
reported home market warranty expenses as indirect selling expenses. 
Fuji contends that not only did it clearly provide the ``direct 
expense'' nature of its warranties in response to the Department's 
questionnaire, but the Department's questionnaire itself identifies 
warranties as a common example of a direct expense.
    Timken argues that, rather than treat Fuji's home market warranty 
expenses as indirect selling expenses, the Department should have 
denied the adjustment in its entirety. Timken asserts that Fuji's 
response indicates that Fuji allocated its home market warranty 
expenses by dividing its total warranty expenses for all replacement 
parts by the total value of parts and vehicle sales during the POR. In 
other words, Timken contends, Fuji allocated its home market warranty 
expenses on

[[Page 11839]]

the basis of sales of both scope and non-scope merchandise. Timken 
maintains that, because the CIT has held that it cannot allow the 
Department to accept a methodology which allows for the inclusion of 
warranty expenses on non-scope merchandise in calculating adjustments 
to NV (Federal-Mogul Corp. v. United States, 862 F. Supp. 384 (CIT 
1994) (Federal-Mogul II), the Department must deny Fuji's home market 
warranty expense adjustment in its final results of review.
    Department's Position: Similar to our policy concerning PSPAs, we 
accept claims for home market direct selling expenses as direct 
adjustments to price if we determine that a respondent reported the 
expense: (1) on a transaction-specific basis; (2) as a fixed and 
constant percentage of the value of sales on which it was incurred; or 
(3) on an allocated basis, provided that it was not feasible for the 
respondent to report the expense on a more specific basis and the 
allocation does not cause unreasonable distortions (i.e., was likely to 
have been granted proportionately on sales of scope and non-scope 
merchandise). In addition, in accordance with Torrington II, we 
disallow any allocated home market direct selling expenses which do not 
meet any one of these standards (see AFBs 94-95 at 2098).
    Furthermore, in regard to warranty expenses, the Department has 
long recognized that it is not possible to tie POR warranty expenses to 
POR sales, since the warranty expenses can be incurred on pre-POR 
sales. Likewise, a respondent may not incur warranty expenses on POR 
sales until a future time period. Therefore, warranty expenses 
generally cannot be reported on a transaction-specific basis and an 
allocation is necessary (see id.).
    In its response Fuji reported its warranty expenses using an 
allocation because it was unable to tie its POR warranty expenses to 
POR sales. While we do not object to Fuji's use of an allocation in 
this instance, we are not satisfied that Fuji's allocation is 
reasonably non-distortive. Fuji's reported total warranty expenses for 
the POR include those incurred for all automotive parts, not only TRBs. 
In addition, Fuji's warranties cover the full replacement of a 
defective automobile part, including all parts and labor. As a result, 
the warranty expense amount reported by Fuji includes not only the cost 
of all replaced automobile parts, but the labor for replacing a large 
variety of automobile parts as well. Considering the fact that there 
are numerous automobile parts which are far more expensive and far more 
labor-intensive to replace than a TRB and, likewise, numerous parts far 
less expensive and more easily replaced than TRBs, it is highly 
unlikely that Fuji incurred warranties for TRBs in an amount 
proportionate to other automobile parts. Therefore, we are not 
satisfied that Fuji's warranty expense allocation is reasonably non-
distortive and we have denied this adjustment for these final results.
    Comment 10: Timken states that Koyo incorrectly applied its 
allocation ratios for its home market pre-sale inland freight, post-
sale inland freight, credit, and indirect selling expenses to its gross 
unit prices, rather than to unit prices net of rebates and discounts. 
Timken contends that Koyo's response demonstrates that the denominator 
Koyo used to allocate these home market expenses reflected its total 
home market sales value net of rebates and discounts. However, Timken 
asserts, rather than apply the allocation ratio it calculated for each 
expense to a unit price net of discounts and rebates, Koyo instead 
applied its allocation ratios to its gross home market unit prices. 
Timken claims that, as a result, Koyo over-allocated the expenses to 
its home market sales. Timken concludes that the Department should, 
therefore, recalculate these per-unit expense amounts by applying 
Koyo's reported allocation ratios to home market unit prices net of 
discounts and rebates. Timken also states that, even though the 
Department disallowed Koyo's home market rebate and discount 
adjustments to NV, the Department may use Koyo's reported discount and 
rebate amounts as facts available in order to avoid the over-allocation 
of the expenses at issue while still denying Koyo's rebate and discount 
adjustments to NV.
    Koyo argues that the methodology it used to calculate its home 
market pre-sale inland freight, post-sale inland freight, credit, and 
indirect selling expenses is well-established and has been repeatedly 
verified and accepted by the Department in all past TRBs and AFBs 
reviews. Koyo asserts that, because the Department has never found any 
fault with Koyo's methodology in the past, it should again accept the 
methodology as reasonable for these final review results.
    Department's Position: We disagree with Timken. While Timken 
asserts that Koyo has excluded rebates and discounts from the 
denominators it used in its pre-sale inland freight, post-sale inland 
freight, credit, and indirect selling expenses allocations, Timken 
points to no evidence on the record demonstrating this. Furthermore, 
based on our own re-examination of the record, we have found no 
evidence that this is the case. Rather, in regard to Koyo's pre-sale 
inland freight and post-sale inland freight allocations, exhibit B-4 of 
Koyo's response indicates that the allocation denominators used by Koyo 
were net only of internal sales between Koyo and its four affiliated 
home market distributors. There is no evidence that the denominators 
also excluded rebates and discounts. Likewise, we found no evidence on 
the record that Koyo excluded rebates and discounts from the customer-
specific total sales values it used in its customer-specific credit 
allocations or the total home market sales value used in its indirect 
selling expense allocation. Furthermore, while we did not verify these 
allocations for these reviews, we note that Koyo's allocation 
methodologies are identical to those which Koyo used in past TRBs 
reviews which the Department did verify. Based on our review of the 
record and the fact that we have verified these allocations in past 
TRBs reviews without discrepancy and have found no evidence in past 
verifications that Koyo excluded rebates and discounts from the 
denominators in question (see, e.g., the Department's 1992-93 home 
market verification report for Koyo dated November 28, 1995), we have 
no reason to suspect that Koyo misallocated and/or overstated these 
adjustments in these reviews. Therefore, we have made no changes to 
Koyo's reported home market pre-sale inland freight, post-sale inland 
freight, credit, or indirect selling expenses for these final results.

COP and CV

    Comment 11: Timken states that in the computer program the 
Department used to determine the preliminary results margin for Koyo, 
the Department incorrectly excluded sales below cost from the home 
market database before U.S. and home market models were matched to 
determine like merchandise. Timken contends that, because this is 
contrary to the Department's policy to use CV when the NV of the like 
merchandise fails the cost test, the Department should correct this 
error for its final review results.
    Koyo agrees with Timken that the Department should use CV when a 
U.S. TRB matches to a foreign like product which has failed the below-
cost test.
    Department's Position: We agree with both the petitioner and Koyo. 
In our preliminary results computer program for Koyo we inadvertently 
omitted computer programming language which would result in CV being 
used for NV in those instances where the U.S. model matched a home 
market model which

[[Page 11840]]

failed the below-cost test. We have corrected this error for these 
final results of review.
    Comment 12: Koyo argues that, for the purpose of determining 
whether any of Koyo's home market sales were below cost, the Department 
incorrectly compared home market prices net of indirect selling and 
packing expenses to COPs which included indirect selling expenses and 
packing. Koyo asserts that, to ensure a fair and balanced comparison, 
the Department should deduct from COP all indirect selling and packing 
expenses prior to comparing it to the home market price net of these 
expenses.
    Department's Position: We agree with Koyo and have deducted from 
COP all indirect selling and packing expenses prior to comparing COP to 
home market prices net of these same expenses.
    Comment 12: Koyo argues that, when calculating CV, the Department 
added indirect selling expenses and commissions in a fixed amount 
rather than applying a factor. Koyo asserts that, in doing so, the 
Department deducted the exact same amount of indirect selling expenses 
and commissions in every CV calculation, ignoring the differences in 
sizes and types of TRBs. Koyo contends that in the most recent AFBs 
review (AFBs 94-95), the Department calculated CV expense amounts on a 
transaction-specific basis such that the calculated expense accurately 
reflected the actual expenses which would have been incurred had the 
AFBs model been sold in the home market above cost. Koyo contends that 
the Department should adopt the AFBs approach in these final results 
not only because it is more accurate, but because it is consistent with 
the Department's rejection of calculations of average expense amounts 
when transaction-specific calculations are possible.
    Department's Position: We agree with Koyo and have made the 
appropriate changes to our margin calculation computer program for Koyo 
for these final results.

Miscellaneous Issues Related to Assessment, Level of Trade (LOT), the 
Arm's-Length Test, and the 20% Difference-in-Merchandise (Difmer) Test

    Comment 13: Timken states that, because the Department determined 
that the value added to those TRBs imported by Subaru-Isuzu Automotive 
(SIA), Fuji's manufacturing U.S. subsidiary, for use in the manufacture 
of automobiles in the United States substantially exceeded the value of 
the imported TRBs, in the preliminary results of review for Fuji the 
Department explained that it would use the weighted-average dumping 
margins it calculated for sales of identical or similar TRB models sold 
as replacement parts by Subaru of America (SOA), Fuji's U.S. selling 
subsidiary, to determine the margin for those TRBs imported by SIA. 
Timken contends that, while the Department's preliminary results makes 
it clear that the Department will apply SOA's cash deposit rate to 
SIA's TRB imports, the Department did not specifically indicate at what 
rate it would assess antidumping duties on SIA's imports. Timken 
asserts that, (1) because the value available to Customs' for 
liquidation purposes is the transfer value between Fuji and SIA, (2) 
because there is a difference between transfer and resale prices, and 
(3) because the Department has already calculated an assessment rate 
for Fuji using the total entered value of SOA's imports in the 
denominator, the Department should apply this assessment rate to SIA's 
imports as well.
    Fuji argues that, not only is there nothing within section 772(e) 
of the Act, the statutory provision for merchandise with value added 
after importation, directing the Department to use the same assessment 
rate for each importer, but section 351.212(b)(1) of the Department's 
proposed regulations indicates that assessment rates will be specific 
to each importer. Therefore, Fuji asserts, the Department is not 
required to apply the assessment rate it calculated for SOA to SIA's 
imports. Furthermore, Fuji argues, because SIA is not a reseller of 
TRBs, as is SOA, there is no reason for one to assume, as Timken does, 
that SIA's transfer values would be different from its TRB resale 
prices to unrelated U.S. customers. Indeed, Fuji claims, there is no 
evidence on the record to support any such conclusion. In addition, 
Fuji contends, because SIA is not a reseller of TRBs, it would be 
grossly unfair for the Department to apply SOA's assessment rate, a 
reseller's assessment rate, to SIA's imports.
    Therefore, Fuji asserts, the Department should either use SOA's 
calculated deposit rate as SIA's assessment rate, or calculate a new 
assessment rate for SIA. Fuji maintains that, because SIA is not a 
reseller of TRBs, the use of SOA's cash deposit rate as SIA's 
assessment rate would ensure an accurate assessment of SIA's TRB 
imports. Furthermore, Fuji argues, the use of SOA's cash deposit rate 
as both SIA's cash deposit and assessment rate would be in accordance 
with the Department's policy to calculate cash deposits rates which 
correspond as closely as possible to the eventual assessment rate.
    If the Department decides not to use SOA's cash deposit rate as 
SIA's assessment rate, Fuji asserts, the Department should, in the 
alternative, calculate a separate assessment rate for SIA using only 
the dumping margins the Department calculated on sales of the identical 
TRBs imported by SOA. Fuji states that in the preliminary results the 
Department calculated SOA's cash deposit rate based on all its TRB 
imports. However, Fuji asserts, SIA only imports two TRB models. 
Therefore, Fuji concludes, the Department should apply to SIA an 
assessment rate based only on SOA's sale of the identical two TRB 
models and not the SOA rate it calculated based on SOA's sales of all 
TRB models. Fuji maintains that this approach is more consistent with 
section 772(e) of the Act and results in a more accurate assessment of 
SIA's imports because it is based only on the margins the Department 
calculated for the identical TRBs imported by SOA.
    Department's Position: We disagree with Fuji. Section 772(e) of the 
new law allows us to determine the CEP of further-processed subject 
merchandise in a manner that does not require the calculation and 
subtraction of U.S. value added if the U.S. value added is likely to 
exceed substantially the value of the imported merchandise (this 
procedure is identified in the Act as the ``special rule''). The 
statute further provides that, where there is a sufficient quantity of 
sales of identical or other subject merchandise sold to unaffiliated 
persons and the use of such sales is appropriate, the Department shall 
use the prices of such sales to determine the CEP of the further-
processed subject merchandise. If there is not a sufficient quantity of 
sales of identical or other subject merchandise, or if the use of such 
sales is inappropriate, the Department may determine CEP of the 
further-processed subject merchandise on any other reasonable basis.
    In accordance with section 772(e), in our questionnaire we request 
that respondents provide information to demonstrate whether the value 
added to the subject merchandise in the United States is likely to 
exceed substantially the value of the subject merchandise. If we 
determine that it is likely, we will normally not require the 
respondent to report the detailed further-manufacturing and sales 
information for its further-manufactured sales. In this way, section 
772(e) not only relieves the Department of the burden of the detailed 
further-manufacturing analysis which would be required to determine the 
CEP of further-manufactured subject

[[Page 11841]]

merchandise where the U.S. value added substantially exceeds the value 
of the subject merchandise, but it has the additional benefit of 
eliminating the burden on a respondent to collect and submit the 
detailed data necessary for the Department to conduct such an analysis.
    However, if a respondent's U.S. value added is likely to exceed 
substantially the value of the subject merchandise and the Department 
chooses not to perform a detailed further-manufacturing analysis, in 
accordance with section 772(e) of the Act, we will rely on surrogate 
prices to determine the dumping margins, if any, for the further-
manufactured subject merchandise.
    In the instant case, SIA imports TRBs from Fuji for the sole 
purpose of using the TRBs in the further manufacture of automobiles in 
the United States, whereas SOA imports TRBs for the sole purpose of 
reselling the merchandise in the U.S. replacement market. In its 
response Fuji demonstrated that the value added in the United States to 
all TRBs imported by SIA is likely to exceed substantially the value of 
the TRBs. Accordingly, we did not require Fuji to report detailed 
further manufacturing and sales information for SIA's sales. Therefore, 
in accordance with section 772(e), we relied on surrogate prices (i.e., 
those of SOA's sales of identical and other subject merchandise) to 
determine the dumping margins for SIA's sales.
    While Fuji's arguments focus primarily on the manner in which the 
Department should calculate a separate assessment rate for SIA, this 
issue and Fuji's assertions are moot in light of the fact that our 
preference to calculate importer-specific assessment rates is limited 
to only those instances where the importer is not related to the 
foreign exporter. This is to prevent one importer from being liable for 
antidumping duties attributable to margins found on sales to a 
different importer. In those instances where the importer, or 
importers, are related to the foreign exporter, we consider the related 
parties to constitute one corporate entity and consider the use of a 
manufacturer/exporter-specific assessment rate to be appropriate (see, 
e.g., TRBs 92-93 at 57648). In the instant case, because both SOA and 
SIA are Fuji's affiliated U.S. subsidiaries, we consider all three 
entities to constitute one corporate entity and, therefore, find no 
basis for the calculation of SIA or SOA-specific dumping margins, cash 
deposit rates, or assessment rates. Even if section 772(e) did not 
apply, we still would not calculate a separate assessment rate for SIA. 
Rather, because these entities constitute a single corporate entity, 
the margins we calculate for SIA's sales would have been combined with 
SOA's in order to calculate an overall Fuji-specific weighted-average 
margin, cash deposit rate, and assessment rate.
    In addition, there is no evidence on the record supporting Fuji's 
contention that because SIA does not resell TRBs for the replacement 
market, its selling practices are significantly different from SOA such 
that SOA's assessment rate is inappropriate. Fuji has provided no 
information which suggests that the weighted-average dumping margin for 
SIA's sales would differ significantly from the weighted-average margin 
we calculated for SOA's sales, nor has Fuji provided any information 
demonstrating that SIA would sell at resale prices equivalent to the 
transfer prices it paid Fuji. Rather, the evidence on the record 
demonstrates that SIA would most likely engage in selling and pricing 
practices similar to SOA. We therefore have no basis to suspect that 
the application of SOA's assessment rate to all subject merchandise 
imported by SOA and SIA would be unreasonable.
    Comment 14: Fuji argues that because it is a reseller which does 
not have access to the variable costs of manufacturing (VCOM) and total 
costs of manufacturing (TCOM) of the TRBs it resells in the U.S. and 
home markets, it agrees with the Department's use of its acquisition 
costs as the basis for the 20% difmer test. Fuji contends that in those 
cases where VCOM and TCOM are available, the Department allows non-
identical home market models to be included within the pool of 
potential home market matches if the difference in the VCOMs between 
the U.S. and home market models is less than 20 percent of the U.S. 
model's TCOM. In other words, Fuji states, the Department uses the U.S. 
model's costs as the benchmark for its comparison. However, Fuji 
asserts, rather than use the U.S. model's acquisition cost as the 
benchmark for the 20% difmer test the Department conducted for Fuji, 
the Department incorrectly used the home market model's acquisition 
costs as the basis for the 20% difmer comparison.
    Department's Position: We agree with Fuji. In our margin 
calculation computer program for Fuji we inadvertently used programming 
language which incorrectly applied the 20% difmer test. We have 
corrected this error for these final results.
    Comment 15: Koyo argues that, in order to ensure a fair comparison 
between NV and USP, the URAA implemented section 773(a)(7)(A) of the 
Act, which provides for a LOT adjustment to be made if the respondent 
demonstrates that different LOTs exist due to a difference in selling 
activities between LOTs, and that the differences in LOT affect price 
comparability. Koyo argues that, while the Department correctly 
recognized that one LOT, a CEP LOT, existed in the United States, and 
two different LOTs existed in Koyo's home market (an OEM LOT and an 
after-market (AM) LOT), the Department nevertheless incorrectly 
concluded that Koyo did not meet the statutory requirements for a LOT 
adjustment. Koyo states that the Department did not grant Koyo a LOT 
adjustment because it could not find a LOT in the home market the same 
as the U.S. CEP LOT, and concluded that it lacked the data necessary to 
determine whether there was a consistent pattern of price differences 
between LOTs, based on Koyo's home market sales of TRBs. Koyo contends 
that this methodology, in which the Department requires a LOT to exist 
in the home market which is the same as the U.S. CEP LOT in order to 
determine if a pattern of price differences exists between established 
home market LOTs, overlooks the fact that there will almost never be a 
home market LOT equal to the U.S. CEP LOT. As a result, Koyo asserts, 
in almost every CEP situation, there will be no basis upon which to 
grant a LOT adjustment. Koyo further argues that in this case, and in 
virtually every case involving CEP sales thus far, the Department has 
applied this methodology and has never granted a LOT adjustment in CEP 
calculations. Koyo contends that this prevents a fair comparison 
between NV and USP and eviscerates the URAA's entire LOT adjustment 
provision in CEP cases.
    Furthermore, Koyo asserts, the fact that a LOT like the U.S. CEP 
LOT does not exist in the home market does not mean that the data to 
determine a consistent pattern of price differences does not exist. 
Rather, Koyo claims, in the instant case, it provided the Department 
with exactly the type of data it needs to determine price 
comparability. Koyo contends that it provided the Department with a 
home market price, which reflects the price of home market TRBs if they 
were sold at a home market LOT identical to the U.S. CEP LOT. Koyo 
states that when this ``constructed normal value'' is compared to the 
NV of its home market sales, it becomes apparent that a pattern of 
price differences exists between the home market constructed CEP LOT 
and the other two home market LOTs. Therefore, Koyo concludes, because 
it has met the statutory requirement to demonstrate that a pattern of 
price

[[Page 11842]]

differences exists and has met all other statutory requirements for a 
LOT adjustment, the Department is required to grant Koyo a LOT 
adjustment.
    Timken argues that, in CEP calculations, the only way the 
Department can determine, in accordance with section 773(a)(7)(A) of 
the Act, if there is a consistent pattern of price differences between 
sales at different LOTs in the country in which NV is determined is if 
one of the home market LOTs is the same as the U.S. CEP LOT. Timken 
asserts that Koyo's constructed normal values, which Koyo claims 
reflect the prices that would exist if there was a home market LOT like 
the U.S. CEP LOT, do not serve as a reliable substitute for the absence 
of an actual home market CEP LOT. Furthermore, Timken claims that not 
only is it unclear which of Koyo's constructed normal values is the 
analog to the U.S. CEP LOT, but Koyo's deduction of indirect selling 
expenses to derive these constructed normal values is contrary to the 
underlying premise of a LOT adjustment. Timken states that the whole 
purpose of a LOT adjustment is to adjust for those price differences 
which are not reflected in selling expenses. Therefore, Timken 
maintains, if one does make prices at different LOTs equivalent by 
adjusting for differences in selling expenses, as Koyo does in this 
case, there is no need or statutory basis for the additional LOT 
adjustment.
    Department's Position: We agree with Timken. We may not base LOT 
determinations or adjustments upon ``constructed'' or artificial home 
market levels. Koyo's constructed normal value LOTs are not LOTs at 
which Koyo actually sold TRBs in the home market during the POR. 
Furthermore, not only do we rely on actual starting prices in 
determining whether different LOTs exist, but there is no statutory 
basis for us to construct LOTs in the home market or elsewhere. 
Therefore, because Koyo was unable to demonstrate a pattern of 
consistent price differences between a home market LOT equivalent to 
its CEP and other home market LOTs, we did not have the information 
necessary to make a LOT adjustment. However, because Koyo's CEP LOT was 
less advanced than its HM LOTs, we made a CEP offset adjustment to NV 
for all our comparisons of Koyo's CEP sales.
    Comment 16: Fuji argues that the Department's 99.5 percent arm's-
length test, in which it calculates home market customer-specific 
weighted-average affiliated/unaffiliated price ratios and excludes from 
its margin calculations all sales to a home market customer if its 
ratio is not greater than 99.5 percent, is too restrictive and 
inappropriately rejects bona fide sales to affiliated home market 
customers that are made at the same prices as sales to unaffiliated 
home market customers. Fuji asserts that, even though it sold from the 
same price list at the same prices to all home market customers during 
the POR for any given product during any given month, the Department's 
arm's-length test nevertheless resulted in the exclusion of a large 
percentage of its affiliated customer sales from the Department's 
preliminary margin calculations.
    For example, Fuji asserts that the Department's reliance on POR-
weighted average prices results in the exclusion of affiliated party 
sales simply because different quantities may have been purchased by an 
affiliated party after a monthly price change took effect even though 
the prices charged to affiliated and unaffiliated customers during any 
given month were the same. In addition, Fuji contends that even if the 
same number of units are sold to both the affiliated and unaffiliated 
customer, all sales to the affiliated customer will fail the test even 
if a majority of the sales to the affiliated customer during the POR 
were priced higher than the sales of the identical product to the 
unaffiliated customer.
    Fuji claims that, to avoid these inaccuracies, the Department 
should adopt a new arm's-length test in which individual transactions 
to affiliated customers are determined to be at arm's length unless the 
prices to the affiliated customer deviate from the weighted-average 
prices to unaffiliated customers by more than two standard deviations. 
Fuji asserts that this method not only better reflects commercial 
reality, but it eliminates abnormally high and low priced sales while 
still ensuring that only those affiliated-customer sales prices which 
are statistically comparable to unaffiliated-party sales prices are 
included in the Department's margin calculations.
    Fuji further asserts that, if the Department does not adopt this 
new test, it should at least modify its existing arm's-length test such 
that it would use the same methodology, but apply it on a monthly, 
rather than a POR, basis. Fuji explains that if the Department compares 
the average monthly weighted-average price of a product sold to an 
affiliated customer to the monthly weighted-average sales prices of the 
same product to an unaffiliated customer, it would capture the fact 
that Fuji's monthly average sales prices to affiliated and unaffiliated 
customers are the same. In this way, Fuji concludes, the Department 
will avoid the arbitrary results produced by its current test and 
correctly include within its margin calculations those sales to 
affiliated home market customers which were clearly at arm's length.
    Timken argues that, not only has the CIT ruled on several occasions 
that the Department's 99.5 percent arm's-length test is reasonable, but 
Fuji has failed to demonstrate that this test is unreasonable or that 
it results in distortions of price comparability. Timken concludes that 
the Department, therefore, should continue to adhere to its established 
arm's-length test in these final results of review.
    Department's Position: We agree with Timken. Fuji failed to provide 
a single example from its own data supporting its assertions. Fuji 
presents only theoretical examples of why the arm's-length test is 
distortive and we have no basis upon which to conclude that our test is 
unreasonable. In addition, our comparison of Fuji's weighted-average 
net prices to unrelated customers and related customers in the home 
market clearly demonstrated that Fuji did not always sell to its 
related and unrelated customers at the identical net prices. 
Furthermore, not only is our 99.5 percent arm's-length test methodology 
well established, but the CIT has repeatedly sustained this methodology 
(see, e.g., Certain Cut-to-Length Carbon Steel Plate from Sweden; Final 
Results of Antidumping Duty Administrative Review, 61 FR 15772 (April 
9, 1996), Usinor Sacilor v. United States, 872 F. Supp. 1000 (CIT 1994) 
(Usinor), Micron Technology, Inc. v. United States, 893 F. Supp. 21 
(CIT 1995) (Micron), and NTN Bearing Corp. of America, Inc. v. United 
States, 905 F. Supp. 1083 (CIT 1995)). In addition, in Usinor, the CIT 
specifically stated that ``[g]iven the lack of evidence showing any 
distortion of price comparability, the court finds the application of 
Commerce's arm's-length test reasonable.'' Likewise, in Micron, because 
the CIT found that the plaintiff /respondent failed to ``demonstrate 
that Commerce's customer-based arm's length test inquiry is 
unreasonable'' and failed to ``point to record evidence which tends to 
undermine Commerce's conclusion,'' the CIT sustained the 99.5 percent 
arm's-length test, given the lack of evidence showing a distortion of 
price comparability. Therefore, for these final results we have not 
altered our 99.5 percent arm's-length test for Fuji, and have continued 
to apply the test used in our preliminary results.

Clerical Errors

    Comment 17: Koyo argues that in the Department's preliminary 
results computer program for Koyo, the

[[Page 11843]]

Department incorrectly adjusted a quantity value which was already net 
of adjustments. Koyo argues that, to correct this error, the Department 
should either use the quantity value Koyo reported net of adjustments, 
or calculate its own net quantity value by deducting the quantity 
adjustments Koyo reported in its response from the gross quantity value 
Koyo also reported in its response.
    Department's Position: We agree with the respondent. In order to 
correct these errors for these final results we have used the variable 
which reflects that quantity value which is already net of adjustments.
    Comment 18: Fuji argues that in its response it explained that the 
date of sale for its EP sales was the purchase order date and the date 
of sale for its CEP sales was the invoice date. Fuji also states that, 
while it reported the invoice and purchase order dates under separate 
variables, it also reported another sale date variable ``SALEDTU'' 
which reflected the correct date of sale, whether the reported sale was 
an EP or CEP sale. Fuji contends that in the Department's preliminary 
results computer program for Fuji, the Department incorrectly used the 
invoice date variable for all of Fuji's EP sales. To correct this 
error, Fuji suggests that the Department simply use the ``SALEDTU'' 
variable, where appropriate.
    Timken argues that the Department's use of the invoice date as the 
date of sale for Fuji's EP sales is in accordance with its new policy 
and should not be altered for the final results of review.
    Department's Position: We agree with Fuji. While Timken is correct 
that, in recent antidumping reviews of other cases the Department has 
sent to respondents revised questionnaires which request them to report 
the invoice date as the date of sale for all sales, it was not our 
practice to do so at the time we issued our 1994-95 TRBs 
questionnaires. As a result, we had no intention of requiring the 
respondents in the 1994-95 TRBs administrative reviews to report their 
date of sale information in this manner for all sales, and our use of 
the invoice date as the date of sale for Fuji's EP sales was clearly a 
clerical error and does not reflect the application of this new 
practice. Therefore, because we believe it would be both unreasonable 
and unfair to apply this new practice now, a practice we began to use 
several months after our receipt of questionnaire responses in the 
1994-95 TRBs reviews, and because we have determined that the proper 
date of sale for Fuji's EP sales was clearly the purchase order date, 
we have simply corrected our clerical error by using Fuji's reported 
purchase order date as the date of sale for its EP sales.

Final Results of Review

    Based on our review of the arguments presented above, for these 
final results we have made changes in our margin calculations for Fuji 
and Koyo. Our preliminary determinations concerning no shipments, the 
use of total adverse facts available, and the terminations of reviews 
have remained unchanged for these final results (see TRBs 94-95 Prelim 
at 7392).
    As a result of our comparison of CEP and EP to NV, we have 
determined that margins exist for the period October 1, 1994, through 
September 30, 1995, as follows:

------------------------------------------------------------------------
                                                                Margin  
               Manufacturer/reseller/exporter                 (percent) 
------------------------------------------------------------------------
                        For the A-588-054 Review                        
------------------------------------------------------------------------
Koyo Seiko.................................................        21.70
Fuji.......................................................        11.48
Kawasaki...................................................        47.63
Yamaha.....................................................        47.63
Nigata.....................................................        47.63
Suzuki.....................................................        47.63
------------------------------------------------------------------------
                        For the A-588-604 Review                        
------------------------------------------------------------------------
Fuji.......................................................        (\1\)
Honda......................................................        (\1\)
Kawasaki...................................................        40.37
Yamaha.....................................................        40.37
Nigata.....................................................        40.37
Suzuki.....................................................        40.37
Nittetsu...................................................        (\1\)
Showa Seiko................................................       (\1\) 
------------------------------------------------------------------------
\1\ No shipments or sales subject to this review. The firm has no rate  
  from any segment of this proceeding.                                  

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. Individual 
differences between USP and NV may vary from the percentages stated 
above. The Department will issue appraisement instructions on each 
exporter directly to the Customs Service.
    Furthermore, the following deposit requirements will be effective 
for all shipments of the subject merchandise entered, or withdrawn from 
warehouse, for consumption on or after the publication date of these 
final results, as provided for by section 751(a)(1) of the Tariff Act:
    (1) The cash deposit rates for the reviewed companies will be those 
rates outlined above;
    (2) For previously reviewed or investigated companies not listed 
above, the cash deposit rate will continue to be the company-specific 
rate published for the most recent period; (3) If the exporter is not a 
firm covered in these reviews, a prior review, or the original less-
than-fair-value (LTFV) investigations, but the manufacturer is, the 
cash deposit rate will be the rate established for the most recent 
period for the manufacturer of the merchandise; (4) If neither the 
exporter nor the manufacturer is a firm covered in these or any 
previous reviews conducted by the Department, the cash deposit rate for 
the A-588-054 finding will be 18.07 percent and 36.52 percent for the 
A-588-604 order (see Preliminary Results of Antidumping Duty 
Administrative Reviews; Tapered Roller Bearings and Parts Thereof, 
Finished and Unfinished, From Japan and Tapered Roller Bearings, Four 
Inches or Less in Outside Diameter, and Components Thereof, From Japan, 
58 FR 51058 (September 30, 1993)). All U.S. sales by each respondent 
will be subject to one deposit rate according to the proceeding.
    The cash deposit rate has been determined on the basis of the 
selling price to the first unrelated customer in the United States. For 
appraisement purposes, where information is available, the Department 
will use the entered value of the merchandise to determine the 
assessment rate.
    This notice also serves as a final 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 
administrative protective orders (APOs) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 353.34(d). Timely written notification of 
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.
    These administrative reviews and this notice are in accordance with 
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR 
353.22.

    Dated: March 6, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-6375 Filed 3-12-97; 8:45 am]
BILLING CODE 3510-DS-P