Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2081

DEPARTMENT OF COMMERCE

International Trade Administration

[A–427–801, A–428–801, A–475–801, A–588–

804, A–559–801, A–412–801]

Antifriction Bearings (Other Than

Tapered Roller Bearings) and Parts

Thereof From France, Germany, Italy,

Japan, Singapore, and the United

Kingdom; Final Results of

Antidumping Duty Administrative

Reviews

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of

antidumping duty administrative

reviews.

SUMMARY: On July 8, 1996, the

Department of Commerce (the

Department) published the preliminary

results of administrative reviews of the

antidumping duty orders on antifriction

bearings (other than tapered roller

bearings) and parts thereof (AFBs) from

France, Germany, Italy, Japan,

Singapore, and the United Kingdom.

The classes or kinds of merchandise

covered by these orders are ball bearings

and parts thereof (BBs), cylindrical

roller bearings and parts thereof (CRBs),

and spherical plain bearings and parts

thereof (SPBs). The reviews cover 27

manufacturers/exporters. The period of

review (the POR) is May 1, 1994,

through April 30, 1995.

Based on our analysis of the

comments received, we have made

changes, including corrections of certain

inadvertent programming and clerical

errors, in the margin calculations.

Therefore, the final results differ from

the preliminary results. The final

weighted-average dumping margins for

the reviewed firms are listed below in

the section entitled ‘‘Final Results of the

Reviews.’’

EFFECTIVE DATE: January 15, 1997.

FOR FURTHER INFORMATION CONTACT: The

appropriate case analyst, for the various

respondent firms listed below, of Import

Administration, International Trade

Administration, U.S. Department of

Commerce, Washington, D.C. 20230;

telephone: (202) 482–4733.

France

Andrea Chu (Intertechnique, SNFA,

SNR), Hermes Pinilla (Franke GmbH,

Hoesch Rothe Erde, Rollix Defontaine),

Matthew Rosenbaum (SKF), or Kris

Campbell.

Germany

Thomas Barlow (Torrington

Nadellager), Davina Hashmi (INA), Chip

Hayes (NTN Kugellagerfabrik), Hermes

Pinilla (Franke GmbH, Hoesch Rothe

Erde and Rollix Defontaine), Matthew

Rosenbaum (SKF), Thomas Schauer

(FAG), Kris Campbell, or Richard

Rimlinger.

Italy

Matthew Rosenbaum (SKF), Mark

Ross (FAG), Kris Campbell or Richard

Rimlinger.

Japan

J. David Dirstine (Koyo Seiko), Chip

Hayes (NTN), Michael Panfeld (NPBS),

Mark Ross (Asahi Seiko), Thomas

Schauer (NSK Ltd.), or Richard

Rimlinger.

Singapore

Lyn Johnson (NMB/Pelmec) or

Richard Rimlinger.

United Kingdom

Andrea Chu (Hoffman U.K.), Hermes

Pinilla (NSK-RHP), Matthew

Rosenbaum (Rose Bearing Co., Ltd.),

Thomas Barlow (Timken-UK), or Kris

Campbell.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

Unless otherwise indicated, all

citations to the Tariff Act of 1930, as

amended (the Tariff Act), are references

to the provisions effective January 1,

1995, the effective date of the

amendments made to the Tariff 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 July 8, 1996, the Department of

Commerce (the Department) published

the preliminary results of administrative

reviews of the antidumping duty orders

on antifriction bearings (other than

tapered roller bearings) and parts

thereof (AFBs) from France, Germany,

Italy, Japan, Singapore, and the United

Kingdom (61 FR 35713). The reviews

cover 27 manufacturers/exporters. The

period of review (the POR) is May 1,

1994, through April 30, 1995. We

invited parties to comment on our

preliminary results of review. At the

request of certain interested parties, we

held public hearings as follows: General

Issues, August 16, 1996, Germany,

August 20, 1996, and Japan, August 19,

1996. The Department has conducted

these administrative reviews in

accordance with section 751 of the

Tariff Act.

Scope of Reviews

The products covered by these

reviews are AFBs and constitute the

following classes or kinds of

merchandise: ball bearings and parts

thereof (BBs), cylindrical roller bearings

and parts thereof (CRBs), and spherical

plain bearings and parts thereof (SPBs).

For a detailed description of the

products covered under these classes of

kinds of merchandise, including a

compilation of all pertinent scope

determinations, see the ‘‘Scope

Appendix,’’ which is appended to this

notice of final results.

Use of Facts Available

In accordance with section 776 of the

Tariff Act, we have determined that the

use of the facts available is appropriate

for a number of firms. For a discussion

of our application of facts available, see

the ‘‘Facts Available’’ section of the

Issues Appendix.

Sales Below Cost in the Home Market

The Department disregarded sales

below cost for the following firms and

classes or kinds of merchandise:

Country Company

Class or kind

of merchandise

France .......... SKF .............. BBs

SNR ............. BBs

Germany ...... FAG ............. BBs, CRBs,

SPBs

INA ............... BBs, CRBs

SKF .............. BBs, CRBs,

SPBs

Italy ............... FAG ............. BBs

Japan ........... Asahi Seiko .. BBs

Koyo ............. BBs, CRBs

Nachi ............ BBs, CRBs

NSK ............. BBs, CRBs

NTN ............. BBs, CRBs,

SPBs

Singapore ..... NMB/Pelmec BBs

United Kingdom.NSK-RHP ..... BBs, CRBs

Changes Since the Preliminary Results

Based on our analysis of comments

received, we have made certain

corrections that changed our results. We

have corrected certain programming and

clerical errors in our preliminary

results, where applicable. Any alleged

programming or clerical errors with

which we do not agree are discussed in

the relevant sections of the Issues

Appendix.

Analysis of Comments Received

All issues raised in the case and

rebuttal briefs by parties to these

concurrent administrative reviews of

AFBs are addressed in the ‘‘Issues

Appendix’’ which is appended to this

notice of final results.
2082 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

Final Results of Reviews

We determine that the following

percentage weighted-average margins

exist for the period May 1, 1994,

through April 30, 1995:

Company BBs CRBs SPBs

France

Franke GmbH ....................................................................................................................................................... 1 66.42 (3) (3)

Hoesch Rothe Erde .............................................................................................................................................. (2) (3) (3)

Intertechnique ....................................................................................................................................................... 1.55 (2) (2)

Rollix Defontaine .................................................................................................................................................. (2) (3) (3)

SKF ....................................................................................................................................................................... 17.23 (2) 42.79

SNFA .................................................................................................................................................................... 66.42 18.37 (3)

SNR ...................................................................................................................................................................... 2.37 2.50 (2)

Germany

FAG ...................................................................................................................................................................... 30.68 23.17 12.11

Franke GmbH ....................................................................................................................................................... 1 132.25 (3) (3)

Hoesch Rothe Erde .............................................................................................................................................. (2) (3) (3)

INA ........................................................................................................................................................................ 20.57 19.12 (2)

NTN ...................................................................................................................................................................... 18.38 (2) (2)

Rollix & Defontaine ............................................................................................................................................... (2) (3) (3)

SKF ....................................................................................................................................................................... 2.92 10.22 7.84

Torrington Nadellager ........................................................................................................................................... (2) 76.27 (3)

Italy

FAG ...................................................................................................................................................................... 5.15 (2) (3)

SKF ....................................................................................................................................................................... 2.97 (3) (3)

Japan

Asahi Seiko .......................................................................................................................................................... 2.65 (3) (3)

Koyo Seiko ........................................................................................................................................................... 18.90 3.88 1 0.00

NPB ...................................................................................................................................................................... 45.83 (2) (2)

NSK Ltd. ............................................................................................................................................................... 12.81 22.42 (2)

NTN ...................................................................................................................................................................... 4.01 3.76 1.06

Singapore

NMB Singapore/Pelmec Ind ................................................................................................................................. 2.44 (3) (3)

United Kingdom

NSK–RHP ............................................................................................................................................................. 20.25 25.01 (3)

Hoffman U.K. ........................................................................................................................................................ 61.14 48.29 (3)

Rose Bearings ...................................................................................................................................................... 61.14 48.29 (3)

Timken Bearings .................................................................................................................................................. (2) (2) (3)

1 No shipments or sales subject to this review. Rate is from the last relevant segment of the proceeding in which the firm had shipments/sales.

2 No shipments or sales subject to this review. The firm has no individual rate from any segment of this proceeding.

3 No review.

Cash Deposit Requirements

To calculate the cash deposit rate for

each exporter, we divided the total

dumping margins for each exporter by

the total net value for that exporter’s

sales for each relevant class or kind to

the United States during the review

period under each order.

In order to derive a single deposit rate

for each class or kind of merchandise for

each respondent (i.e., each exporter or

manufacturer included in these

reviews), we weight-averaged the export

price and constructive export price

(CEP) deposit rates (using the export

price and CEP respectively, as the

weighting factors). To accomplish this

where we sampled CEP sales, we first

calculated the total dumping margins

for all CEP sales during the review

period by multiplying the sample CEP

margins by the ratio of total weeks in

the review period to sample weeks. We

then calculated a total net value for all

CEP sales during the review period by

multiplying the sample CEP total net

value by the same ratio. We then

divided the combined total dumping

margins for both export price and CEP

sales by the combined total value for

both export price and CEP sales to

obtain the deposit rate.

We will direct Customs to collect the

resulting percentage deposit rate against

the entered Customs value of each of the

exporter’s entries of subject

merchandise entered, or withdrawn

from warehouse, for consumption on or

after the date of publication of this

notice.

Entries of parts incorporated into

finished bearings before sales to an
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2083

unaffiliated customer in the United

States will receive the exporter’s deposit

rate for the appropriate class or kind of

merchandise.

Furthermore, the following deposit

requirements will be effective upon

publication of this notice of final results

of administrative reviews for all

shipments of AFBs entered, or

withdrawn from warehouse, for

consumption on or after the date of

publication, as provided by section

751(a)(1) of the Tariff Act: (1) The cash

deposit rates for the reviewed

companies will be the rates shown

above, except that for firms whose

weighted-average margins are less than

0.5 percent and therefore de minimis,

the Department shall require a zero

deposit of estimated antidumping

duties; (2) for previously reviewed or

investigated companies not listed above,

the cash deposit rate will continue to be

the company-specific rate published for

the most recent period; (3) if the

exporter is not a firm covered in this

review, a prior review, or the original

less-than-fair-value (LTFV)

investigation, but the manufacturer is,

the cash deposit rate will be the rate

established for the most recent period

for the manufacturer of the

merchandise; and (4) the cash deposit

rate for all other manufacturers or

exporters will continue to be the ‘‘All

Others’’ rate for the relevant class or

kind and country made effective by the

final results of review published on July

26, 1993 (see Final Results of

Antidumping Duty Administrative

Reviews and Revocation in Part of an

Antidumping Duty Order, 58 FR 39729

(July 26, 1993), and, for BBs from Italy,

see Antifriction Bearings (Other Than

Tapered Roller Bearings) and Parts

Thereof From France, et al: Final

Results of Antidumping Duty

Administrative Reviews, Partial

Termination of Administrative Reviews,

and Revocation in Part of Antidumping

Duty Orders, 61 FR 66472 (December 17,

1996). These rates are the ‘‘All Others’’

rates from the relevant LTFV

investigations.

These deposit requirements shall

remain in effect until publication of the

final results of the next administrative

reviews.

Assessment Rates

The Department shall determine, and

the Customs Service shall assess,

antidumping duties on all appropriate

entries. Because sampling and other

simplification methods prevent entryby-entry assessments, we will calculate

wherever possible an exporter/importerspecific assessment rate for each class or

kind of AFBs.

1. Export Price Sales

With respect to export price sales for

these final results, we divided the total

dumping margins (calculated as the

difference between normal value (NV)

and export price) for each importer by

the total number of units sold to that

importer. We will direct Customs to

assess the resulting unit dollar amount

against each unit of merchandise in

each of that importer’s entries under the

relevant order during the review period.

Although this will result in assessing

different percentage margins for

individual entries, the total

antidumping duties collected for each

importer under each order for the

review period will be almost exactly

equal to the total dumping margins.

2. Constructed Export Price Sales

For CEP sales (sampled and nonsampled), we divided the total dumping

margins for the reviewed sales by the

total entered value of those reviewed

sales for each importer. We will direct

Customs to assess the resulting

percentage margin against the entered

Customs values for the subject

merchandise on each of that importer’s

entries under the relevant order during

the review period. While the

Department is aware that the entered

value of sales during the POR is not

necessarily equal to the entered value of

entries during the POR, use of entered

value of sales as the basis of the

assessment rate permits the Department

to collect a reasonable approximation of

the antidumping duties which would

have been determined if the Department

had reviewed those sales of

merchandise actually entered during the

POR.

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 the only

reminder to parties subject to

administrative protective orders (APO)

of their responsibility concerning the

return or destruction of proprietary

information disclosed under APO in

accordance with 19 CFR 353.34(d).

Failure to comply is a violation of the

APO.

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: January 6, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import

Administration.

Scope Appendix Contents

A. Description of the Merchandise

B. Scope Determinations

Issues Appendix Contents

• Abbreviations

• Comments and Responses

1. Assessment

2. Facts Available

3. Discounts, Rebates, and Price

Adjustments

4. Circumstance-of-Sale Adjustments

A. Technical Services and Warranty

Expenses

B. Commissions

C. Credit

D. Indirect Selling Expenses

E. Other Selling Expenses

5. Level of Trade

6. Cost of Production and Constructed

Value

A. Cost-Test Methodology

B. Research and Development

C. Profit for Constructed Value

D. Affiliated-Party Inputs

E. Inventory Write-off

F. Interest Expense Offset

G. Other Issues

7. Further Manufacturing

8. Packing and Movement Expenses

9. Affiliated Parties

10. Samples, Prototypes and Ordinary

Courses of Trade

11. Export Price and Constructed Export

Price

12. Programming

13. Duty Absorption and Reimbursement

14. Miscellaneous Issues

A. U.S. Sales Completeness

B. Pre-Final Reviews

C. Certification of Conformance to Past

Practice

D. Country of Origin

Scope Appendix

A. Description of the Merchandise

The products covered by these orders,

antifriction bearings (other than tapered

roller bearings), mounted or

unmounted, and parts thereof (AFBs),

constitute the following classes or kinds

of merchandise:

1. Ball Bearings and Parts Thereof

These products include all AFBs that

employ balls as the roller element.

Imports of these products are classified

under the following categories:

antifriction balls, ball bearings with

integral shafts, ball bearings (including

radial ball bearings) and parts thereof,

and housed or mounted ball bearing

units and parts thereof. Imports of these

products are classified under the

following Harmonized Tariff Schedule
2084 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

(HTS) subheadings: 4016.93.10,

4016.93.50, 6909.19.5010, 8482.10.10,

8482.10.50, 8482.80.00, 8482.91.00,

8482.99.05, 8482.99.10, 8482.99.35,

8482.99.70, 8483.20.40, 8483.20.80,

8483.30.40, 8483.30.80, 8483.90.20,

8483.90.30, 8483.90.70, 8708.50.50,

8708.60.50, 8708.70.6060, 8708.93.6000,

8708.99.06, 8708.99.3100, 8708.99.4000,

8708.99.4960, 8708.99.50, 8708.99.58,

8708.99.8015, 8708.99.8080.

2. Cylindrical Roller Bearings, Mounted

or Unmounted, and Parts Thereof

These products include all AFBs that

employ cylindrical rollers as the rolling

element. Imports of these products are

classified under the following

categories: antifriction rollers, all

cylindrical roller bearings (including

split cylindrical roller bearings) and

parts thereof, housed or mounted

cylindrical roller bearing units and parts

thereof.

Imports of these products are

classified under the following HTS

subheadings: 4016.93.10, 4016.93.50,

6909.19.5010, 8482.50.00, 8482.80.00,

8482.91.00, 8482.99.25, 8482.99.6530,

8482.99.6560, 8482.99.70, 8483.20.40,

8483.20.80, 8483.30.40, 8483.30.80,

8483.90.20, 8483.90.30, 8483.90.70,

8708.50.50, 8708.60.50, 8708.99.4000,

8708.99.4960, 8708.99.50, 8708.99.8080.

3. Spherical Plain Bearings, Mounted or

Unmounted, and Parts Thereof

These products include all spherical

plain bearings that employ a spherically

shaped sliding element, and include

spherical plain rod ends.

Imports of these products are

classified under the following HTS

subheadings: 6909.19.5010, 8483.30.40,

8483.30.80, 8483.90.20, 8483.90.30,

8485.90.00, 8708.99.4000, 8708.99.4960,

8708.99.50, 8708.99.8080.

The HTS item numbers are provided

for convenience and Customs purposes.

They are not determinative of the

products subject to the orders. The

written description remains dispositive.

Size or precision grade of a bearing

does not influence whether the bearing

is covered by the orders. These orders

cover all the subject bearings and parts

thereof (inner race, outer race, cage,

rollers, balls, seals, shields, etc.)

outlined above with certain limitations.

With regard to finished parts, all such

parts are included in the scope of these

orders. For unfinished parts, such parts

are included if (1) they have been heat

treated, or (2) heat treatment is not

required to be performed on the part.

Thus, the only unfinished parts that are

not covered by these orders are those

that will be subject to heat treatment

after importation.

The ultimate application of a bearing

also does not influence whether the

bearing is covered by the orders.

Bearings designed for highly specialized

applications are not excluded. Any of

the subject bearings, regardless of

whether they may ultimately be utilized

in aircraft, automobiles, or other

equipment, are within the scope of these

orders.

B. Scope Determinations

The Department has issued numerous

clarifications of the scope of the orders.

The following is a compilation of the

scope rulings and determinations the

Department has made.

Scope determinations made in the

Final Determinations of Sales at Less

than Fair Value; Antifriction Bearings

(Other Than Tapered Roller Bearings)

and Parts Thereof from the Federal

Republic of Germany (AFBs

Investigation of SLTFV), 54 FR 19006,

19019 (May 3, 1989):

Products Covered

• Rod end bearings and parts thereof

• AFBs used in aviation applications

• Aerospace engine bearings

• Split cylindrical roller bearings

• Wheel hub units

• Slewing rings and slewing bearings

(slewing rings and slewing bearings

were subsequently excluded by the

International Trade Commission’s

negative injury determination (see

International Trade Commission:

Antifriction Bearings (Other Than

Tapered Roller Bearings) and Parts

Thereof from the Federal Republic of

Germany, France, Italy, Japan,

Romania, Singapore, Sweden,

Thailand and the United Kingdom, 54

FR 21488, (May 18, 1989))

• Wave generator bearings

• Bearings (including mounted or

housed units, and flanged or

enhanced bearings) ultimately

utilized in textile machinery

Products Excluded

• Plain bearings other than spherical

plain bearings

• Airframe components unrelated to the

reduction of friction

• Linear motion devices

• Split pillow block housings

• Nuts, bolts, and sleeves that are not

integral parts of a bearing or attached

to a bearing under review

• Thermoplastic bearings

• Stainless steel hollow balls

• Textile machinery components that

are substantially advanced in

function(s) or value

• Wheel hub units imported as part of

front and rear axle assemblies; wheel

hub units that include tapered roller

bearings; and clutch release bearings

that are already assembled as parts of

transmissions

Scope rulings completed between

April 1, 1990, and June 30, 1990 (see

Scope Rulings, 55 FR 42750 (October 23,

1990)):

Products Excluded

• Antifriction bearings, including

integral shaft ball bearings, used in

textile machinery and imported with

attachments and augmentations

sufficient to advance their function

beyond load-bearing/friction-reducing

capability

Scope rulings completed between July

1, 1990, and September 30, 1990 (see

Scope Rulings, 55 FR 43020 (October 25,

1990)):

Products Covered

• Rod ends

• Clutch release bearings

• Ball bearings used in the manufacture

of helicopters

• Ball bearings used in the manufacture

of disk drives

Scope rulings completed between

April 1, 1991, and June 30, 1991 (see

Notice of Scope Rulings, 56 FR 36774

(August 1, 1991)):

Products Excluded

• Textile machinery components

including false twist spindles, belt

guide rollers, separator rollers,

damping units, rotor units, and

tension pulleys

Scope rulings published in

Antifriction Bearings (Other Than

Tapered Roller Bearings) and Parts

Thereof; Final Results of Antidumping

Administrative Review (AFBs I), 56 FR

31692, 31696 (July 11, 1991):

Products Covered

• Load rollers and thrust rollers, also

called mast guide bearings

• Conveyor system trolley wheels and

chain wheels

Scope rulings completed between July

1, 1991, and September 30, 1991 (see

Scope Rulings, 56 FR 57320 (November

8, 1991)):

Products Covered

• Snap rings and wire races

• Bearings imported as spare parts

• Custom-made specialty bearings

Products Excluded

• Certain rotor assembly textile

machinery components

• Linear motion bearings

Scope rulings completed between

October 1, 1991, and December 31, 1991

(see Notice of Scope Rulings, 57 FR

4597 (February 6, 1992)):
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2085

Products Covered

• Chain sheaves (forklift truck mast

components)

• Loose boss rollers used in textile

drafting machinery, also called top

rollers

• Certain engine main shaft pilot

bearings and engine crank shaft

bearings

Scope rulings completed between

January 1, 1992, and March 31, 1992

(see Scope Rulings, 57 FR 19602 (May

7, 1992)):

Products Covered

• Ceramic bearings

• Roller turn rollers

• Clutch release systems that contain

rolling elements

Products Excluded

• Clutch release systems that do not

contain rolling elements

• Chrome steel balls for use as check

valves in hydraulic valve systems

Scope rulings completed between

April 1, 1992, and June 30, 1992 (see

Scope Rulings, 57 FR 32973 (July 24,

1992)):

Products Excluded

• Finished, semiground stainless steel

balls

• Stainless steel balls for non-bearing

use (in an optical polishing process)

Scope rulings completed between July

1, 1992, and September 30, 1992 (see

Scope Rulings, 57 FR 57420 (December

4, 1992)):

Products Covered

• Certain flexible roller bearings whose

component rollers have a length-todiameter ratio of less than 4:1

• Model 15BM2110 bearings

Products Excluded

• Certain textile machinery components

Scope rulings completed between

October 1, 1992, and December 31, 1992

(see Scope Rulings, 58 FR 11209

(February 24, 1993)):

Products Covered

• Certain cylindrical bearings with a

length-to-diameter ratio of less than

4:1

Products Excluded

• Certain cartridge assemblies

comprised of a machine shaft, a

machined housing and two standard

bearings

Scope rulings completed between

January 1, 1993, and March 31, 1993

(see Scope Rulings, 58 FR 27542 (May

10, 1993)):

Products Covered

• Certain cylindrical bearings with a

length-to-diameter ratio of less than

4:1

Scope rulings completed between

April 1, 1993, and June 30, 1993 (see

Scope Rulings, 58 FR 47124 (September

7, 1993)):

Products Covered

• Certain series of INA bearings

Products Excluded

• SAR series of ball bearings

• Certain eccentric locking collars that

are part of housed bearing units

Scope rulings completed between

October 1, 1993, and December 31, 1993

(see Scope Rulings, 59 FR 8910

(February 24, 1994)):

Products Excluded

• Certain textile machinery components

Scope rulings completed after March

31, 1994:

Products Excluded

• Certain textile machinery components

Scope rulings completed between

October 1, 1994 and December 31, 1994

(see Scope Rulings, 60 FR 12196 (March

6, 1995)):

Products Excluded

• Rotek and Kaydon—Rotek bearings,

models M4 and L6, are slewing rings

outside the scope of the order.

Scope rulings completed between

April 1, 1995 and June 30, 1995 (see

Scope Rulings, 60 FR 36782 (July 18,

1995)):

Products Covered

• Consolidated Saw Mill International

(CSMI) Inc.—Cambio bearings

contained in CSMI’s sawmill debarker

are within the scope of the order.

• Nakanishi Manufacturing Corp.—

Nakanishi’s stamped steel washer

with a zinc phosphate and adhesive

coating used in the manufacture of a

ball bearing is within the scope of the

order.

Scope rulings completed between

January 1, 1996 and March 31, 1996 (see

Scope Rulings, 61 FR 18381 (April 25,

1996)):

Products Covered

• Marquardt Switches—Medium carbon

steel balls imported by Marquardt are

outside the scope of the order.

Scope rulings completed between

April 1, 1996 and June 30, 1996 (see

Scope Rulings, 61 FR 40194 (August 1,

1996)):

Products Excluded

• Dana Corporation—Automotive

component, known variously as a

center bracket assembly, center

bearings assembly, support bracket, or

shaft support bearing, is outside the

scope of the order.

Issues Appendix

Company Abbreviations

Asahi—Asahi Seiko

FAG Germany—FAG Kugelfischer Georg

Schaefer KGaA

FAG Italy—FAG Italia S.p.A.; FAG

Bearings Corp.

Hoesch—Hoesch Rothe Erde AG

INA—INA Walzlager Schaeffler KG; INA

Bearing Company, Inc.

Koyo—Koyo Seiko Co. Ltd.

NMB/Pelmec—NMB Singapore Ltd.;

Pelmec Industries (Pte.) Ltd.

NPB—Nippon Pillow Block

Manufacturing Co., Ltd.; Nippon

Pillow Block Sales Co., Ltd.; FYH

Bearing Units USA, Inc.

NSK—Nippon Seiko K.K.; NSK

Corporation

NSK-RHP—NSK Bearings Europe, Ltd.;

RHP Bearings; RHP Bearings, Inc.

NTN Germany—NTN Kugellagerfabrik

(Deutschland) GmbH

NTN—NTN Corporation; NTN Bearing

Corporation of America; American

NTN Bearing Manufacturing

Corporation

Rollix—Rollix Defontaine, S.A.

SKF France—SKF Compagnie

d’Applications Mecaniques, S.A.

(Clamart); ADR; SARMA

SKF Germany—SKF GmbH; SKF

Service GmbH; Steyr Walzlager

SKF Italy—SKF Industrie; RIV-SKF

Officina de Villar Perosa; SKF

Cuscinetti Speciali; SKF Cuscinetti;

RFT

SKF UK—SKF (UK) Limited; SKF

Industries; AMPEP Inc.

SKF Group—SKF-France; SKFGermany; SKF-UK; SKF USA, Inc.

SNFA—SNFA Bearings, Ltd.

SNR France—SNR Nouvelle Roulements

Torrington—The Torrington Company

Other Abbreviations

COP—Cost of Production

COM—Cost of Manufacturing

CV—Constructed Value

CEP—Constructed Export Price

NV—Normal Value

HM—Home Market

HMP—Home Market Price

ICC(s)—Inventory Carrying Costs

ISE(s)—Indirect Selling Expenses

OEM—Original Equipment

Manufacturer

POR—Period of Review

PSPA—Post-Sale Price Adjustment

SAA—Statement of Administrative

Action

URAA—Uruguay Round Agreements

Act
2086 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

AFB Administrative Determinations

AFBs LTFV Investigation—Final

Determinations of Sales at Less than

Fair Value; Antifriction Bearings (Other

Than Tapered Roller Bearings) and

Parts Thereof from the Federal Republic

of Germany, 54 FR 19006 (May 3, 1989).

AFBs I—Antifriction Bearings (Other

Than Tapered Roller Bearings) and

Parts Thereof from the Federal Republic

of Germany; Final Results of

Antidumping Duty Administrative

Review, 56 FR 31692 (July 11, 1991).

AFBs II—Antifriction Bearings (Other

Than Tapered Roller Bearings) and

Parts Thereof From France, et al.; Final

Results of Antidumping Duty

Administrative Reviews, 57 FR 28360

(June 24, 1992).

AFBs III—Antifriction Bearings (Other

Than Tapered Roller Bearings) and

Parts Thereof From France, et al.; Final

Results of Antidumping Duty

Administrative Reviews and Revocation

in Part of an Antidumping Duty Order,

58 FR 39729 (July 26, 1993).

AFBs IV—Antifriction Bearings (Other

Than Tapered Roller Bearings) and

Parts Thereof From France, et al; Final

Results of Antidumping Duty

Administrative Reviews, Partial

Termination of Administrative Reviews,

and Revocation in Part of Antidumping

Duty Orders, 60 FR 10900 (February 28,

1995).

AFBs V—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).

CIT AFB Decisions

FAG v. United States, Slip Op. 95–158

(CIT 1995) (FAG I).

FAG Kugelfischer Georg Schaefer

KGAa v. United States, 932 F. Supp 315

(CIT 1996) (FAG II).

FAG UK Ltd. v. United States, Slip

Op. 96–177 (CIT 1996) (FAG III).

Federal Mogul Corp. v. United States,

813 F. Supp 856 (CIT 1993) (Federal

Mogul I).

Federal Mogul Corp. v. United States,

839 F. Supp 881 (CIT 1993), vacated,

907 F. Supp 432 (1995) (Federal Mogul

II).

Federal Mogul Corp. v. United States,

884 F. Supp 1391 (CIT 1993) (Federal

Mogul III).

Federal Mogul Corp. v. United States,

17 CIT 1015 (CIT 1993) (Federal Mogul

IV).

Federal Mogul Corp. v. United States,

924 F. Supp 210 (CIT 1996) (Federal

Mogul V).

Koyo Seiko Co., Ltd. v. United States,

796 F. Supp 1526 (CIT 1992) (Koyo).

NPBS v. United States, 903 F. Supp 89

(CIT 1995) (NPB).

NSK Ltd. v. United States, 910 F.Supp

663 (CIT 1995) (NSK I).

NSK Ltd. v. United States, 896 F.Supp

1263 (CIT 1995) (NSK II).

NSK Ltd. v. United States, 919 F.Supp

442 (CIT 1996) (NSK III).

NTN Bearing Corporation of America

v. United States, 903 F. Supp 62 (CIT

1995) (NTN I).

NTN Bearing Corporation of America

v. United States, 905 F.Supp.1083 (CIT

1995) (NTN II).

SKF USA Inc. v. United States, 876 F.

Supp 275 (CIT 1995) (SKF).

The Torrington Company v. United

States, 818 F.Supp 1563 (CIT 1993)

(Torrington I).

The Torrington Company v. United

States, 832 F.Supp. 379 (CIT 1993)

(Torrington II).

The Torrington Company v. United

States, 881 F.Supp 622 (CIT 1995)

(Torrington III).

The Torrington Company v. United

States, 926 F. Supp 1151 (CIT 1996)

(Torrington IV).

CAFC AFB Decisions

NTN Bearing Corp. v. United States,

74 F.3d 1204 (CAFC 1995) (NTN III).

The Torrington Company v. United

States, 44 F. 3d 1572 (CAFC 1994)

(Torrington V).

The Torrington Company v. United

States, 82 F.3d 1039 (CAFC 1996)

(Torrington VI).

1. Assessment

Comment: NMB/Pelmec argues that,

in calculating the assessment rate in this

review, the Department should use the

statute and regulations in effect as of

December 31, 1994, rather than the

antidumping statute effective as of

January 1, 1995. It notes that the

Statement of Administrative Action

(H.R. Doc. 316, Vol. 1, 103d Cong., 2d

sess. (1994)) (SAA) states that ‘‘there are

two express exceptions to the general

transition rule in Article 18.3. In the

case of refund procedures under Article

9.3, national authorities will use the

rules in effect at the time of the most

recent determination or review

applicable to the calculation of dumping

margins,’’ citing the SAA at 819. NMB/

Pelmec argues that this exception must

be interpreted to mean that the

assessment rate should be calculated

using the same rules which were used

to calculate the original deposit rate for

entries subject to the review or refund

procedure. It contends that, because the

most recent cash-deposit determination

which applied to the entries during the

1994/95 administrative review was

AFBs IV, the assessment rate for the

1994/95 entries should also be

determined using the statute and

regulations in effect as of December 31,

1994. Therefore, NMB/Pelmec asserts,

the Department should calculate the

assessment rate under the prior law by

making an exporter’s-sales-price-offset

adjustment, by including any below-cost

sales in the calculation of profit for CV,

and by not making a CEP-profit

adjustment to U.S. sales.

Torrington maintains that the U.S.

practice is not inconsistent with Article

18.3.1 and that the Department should

apply the new law to calculate

assessment rates for this review period.

It notes that, because refund

instructions will not be provided to

Customs until after this review is

completed, the final results for this

review will be the ‘‘most recent

determination or review’’ as referred to

by Article 18.3.1.

Department’s Position: We agree with

Torrington. In this case, the ‘‘most

recent review’’ for purposes of refund

procedures is the final results for 1994/

95 review. Therefore, the rules

applicable to the calculation of dumping

margins for the 1994/95 review are the

provisions of the statute effective

January 1, 1995 and the regulations, as

amended by the interim regulations

effective May 11, 1995 (see SAA at 819

and 895).

2. Facts Available

We determine, in accordance with

section 776(a) of the Tariff Act, that the

use of facts available as the basis for the

weighted-average dumping margin is

appropriate for SNFA, Hoffman U.K.,

and Rose Bearings, all with respect to

BBs and CRBs, for Torrington

Nadellager with respect to CRBs only,

and for SKF France with respect to SPBs

only, because these firms did not

respond to our antidumping

questionnaire. We find that these firms

have withheld ‘‘information that has

been requested by the administering

authority.’’ Furthermore, we determine

that, pursuant to section 776(b) of the

Tariff Act, it is appropriate to make an

inference adverse to the interests of

these companies because they failed to

cooperate by not responding to our

questionnaire. For the weighted-average

dumping margins of these firms, we

have used the highest rate from any

prior segment of the respective

proceeding as adverse facts available.

Such data is considered secondary

information within the meaning of

section 776(c) of the Tariff Act.

Section 776(c) of the Tariff Act

provides that the Department shall, to

the extent practicable, corroborate

secondary information from
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2087

independent sources reasonably at its

disposal. The Statement of

Administrative Action (SAA) provides

that ‘‘corroborate’’ means simply that

the Department will satisfy itself that

the secondary information to be used

has probative value (see H.R. Doc. 316,

Vol. 1, 103d Cong., 2d sess. 870 (1994)).

To corroborate secondary information,

the Department will, to the extent

practicable, examine the reliability and

relevance of the information to be used.

However, unlike for other types of

information, such as input costs or

selling expenses, there are no

independent sources for calculated

dumping margins. Thus, in an

administrative review, if the Department

chooses as total adverse facts available

a calculated dumping margin from a

prior segment of the proceeding, it is not

necessary to question the reliability of

the margin for that time period. With

respect to the relevance aspect of

corroboration, however, the Department

will consider information reasonably at

its disposal as to whether there are

circumstances that would render a

margin not relevant. Where

circumstances indicate that the selected

margin is not appropriate as adverse

facts available, the Department will

disregard the margin and determine an

appropriate margin (see, e.g., Fresh Cut

Flowers from Mexico; Final Results of

Antidumping Duty Administrative

Review, 61 FR 6812, 6814 (February 22,

1996) (Fresh Cut Flowers) (where the

Department disregarded the highest

margin as adverse best information

available because the margin was based

on another company’s uncharacteristic

business expense resulting in an

unusually high margin)).

In this case, for SKF France, SNFA,

Torrington Nadellager, Hoffman U.K.

and Rose Bearings, we have used the

highest rate from any prior segment of

the respective proceeding as adverse

facts available. These rates are the

highest available rates and no evidence

exists in the record that indicates that

the selected margins are not appropriate

as adverse facts available.

We also determine, in accordance

with section 776(a) of the Tariff Act,

that the use of facts available as the

basis for the weighted-average dumping

margin is appropriate for NPB because,

despite the Department’s attempts to

verify necessary information provided

by NPB, the Department could not

verify the information as required under

section 782(i) of the Tariff Act.

Furthermore, section 782(e) of the Tariff

Act authorizes the Department to

decline to consider information that is

submitted by an interested party that is

necessary to the determination under

certain circumstances, such as when

such information is so incomplete that

it cannot serve as a reliable basis for

reaching the applicable determination

or when such information cannot be

verified.

Generally, and in the process of

verification, the Department’s analysis

of the completeness of a respondent’s

U.S. sales database is essential because

the database is used to calculate the

dumping duties. Where we have

allowed for reduced reporting but

determine that U.S. sales are missing

from the database, we are especially

concerned about the reliability and

accuracy of any margin we might

calculate. An incomplete U.S. and HM

sales database is normally sufficient to

render a respondent’s response

inadequate for the purpose of

calculating a dumping margin. See, e.g.,

Persico Pizzamiglio, S.A. v. United

States, Slip Op. 94–61 (CIT 1994)

(Persico) (upholding the Department’s

use of best information available for a

respondent who was unable to

demonstrate the completeness of its U.S.

sales at verification).

It is our practice to examine at

verification only a selected subset of the

reported U.S. sales, a practice that the

CIT has upheld. See Bomont Industries

v. United States, 733 F.Supp. 1507,

1508 (CIT 1990) (‘‘verification is like an

audit, the purpose of which is to test

information provided by a party for

accuracy and completeness. Normally

an audit entails selective examination

rather than testing of an entire

universe’’); see also Monsanto Co. v.

United States, 698 F. Supp. 275, 281

(CIT 1988) (‘‘verification is a spot check

and is not intended to be an exhaustive

examination of the respondent’s

business’’). Generally, we assume that

the selected subset of U.S. sales is

representative of the entire universe of

U.S. sales.

Where we find discrepancies in this

subset, we judge the effect on the

unexamined portion of the response.

Where we determine that U.S. sales are

misreported (in critical areas, such as

model number and furthermanufacturing status) in a selected

subset, we are particularly concerned

about the reliability and accuracy of any

margin or duties we might calculate

from the database.

In addition, the Department’s

identification of further-manufactured

sales is essential in order for the

Department to conduct two critical

portions of its analysis. First, in the

course of the Department’s model

matching analysis, the unique model

number associated with a particular

model determines the appropriate home

market model to match to the U.S. sale.

Second, in determining the adjustments

to CEP, we are dependent on the data

a respondent provides in order for us to

identify whether to deduct such costs of

further manufacturing. In fact, section

772(d)(2) of the Tariff Act requires us to

reduce the price we use to establish CEP

by ‘‘the cost of any further manufacture

or assembly.’’ Thus, our questionnaire

requires that respondents identify

further-manufactured sales and provide

a unique code to identify the bearing

model as entered on a sale-by-sale basis.

The questionnaire also requires that the

cost of further manufacturing be

reported on a model-specific basis.

Despite our efforts at verification, we

were unable to verify information which

is necessary and must be verified in

order for us to make a determination

under section 751 of the Tariff Act.

Specifically, we were unable to verify

the data NPB provided concerning its

U.S. and HM sales. Most significantly,

we found that NPB’s U.S. and HM

databases were incomplete. In this case,

we examined at verification the sales

reported for three of the six sample

weeks and found missing U.S. sales in

all three weeks. As we have indicated

above, incompleteness of these

databases, particularly the

incompleteness of the U.S. sales

database, was crucial and was a factor

which, by itself, was an adequate basis

for our determination to use facts

available.

We also found that NPB’s U.S.

database was inaccurate. In a

supplemental response, NPB reported

that only 12 models entered the United

States as housed models during the

POR. Yet at verification, during which

we selected, at random, a limited

number of entry documents, we

discovered an additional five models

that entered as housed models during

the POR. NPB’s U.S. sales listing

contained sales of these five models.

However, NPB reported that these sales

entered as unhoused bearings that were

further-manufactured in the United

States. The contradiction between NPB’s

entry documents and its response

prompted us to elicit support for its

further-manufacturing claim. While

records NPB provided do demonstrate

that some assembly did take place

during the POR, these same records

document assembly that occurred six

months after the last of the five U.S.

sales. NPB could not support its claim

that further manufacturing occurred

prior to the selected sales, nor did NPB

provide evidence of entries of unhoused

bearings prior to the dates of sale.

Therefore, NPB could not support the

designation of these sales as being
2088 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

further-manufactured merchandise. See

United States Sales Verification Report,

dated June 13, 1996. Because we

reviewed a limited number of randomlyselected entry documents and U.S.

sales, we must conclude that, had we

examined all possible documentation,

we would have found additional models

and sales that were incorrectly reported

as further-manufactured merchandise.

Because we found NPB’s reporting of

this information to be inaccurate, we

cannot calculate CEP properly as

directed by section 772(d) of the Tariff

Act nor can we match approximately

two-thirds of NPB’s sales to the correct

HM model.

Thus we have determined that

although NPB provided information we

requested which was necessary in order

for the us to perform our analysis, the

information could not be verified as

required by section 782(i) of the Tariff

Act. Thus, in accordance with section

782(e)(2) of the Tariff Act, we have

declined to consider information

submitted by NPB because it could not

be verified. Because we were unable to

verify necessary information, in

addition to the fact that NPB failed to

support its designation of certain sales

as being further-manufactured

merchandise, we were unable to employ

our normal antidumping analysis.

Under section 776(a) of the Tariff Act,

we are required, in reaching our

determination, to use facts available

because we could not verify NPB’s data.

Thus, for NPB, we have determined that

it is appropriate to select from the facts

otherwise available to the Department.

In selecting from among the facts

otherwise available, the Department is

authorized, under section 776(b) of the

Tariff Act, to use an inference that is

adverse to the interests of a party if the

Department finds that the party has

failed to cooperate by not acting to the

best of its ability to comply with (the

Department’s) request for information.

We examined whether NPB had acted to

the best of its ability in responding to

our requests for information, such as

U.S. sales data. We took into

consideration the fact that, as an

experienced respondent in reviews of

the AFBs orders, its ability to comply

with our requests for information could

be distinguished from, for example, the

ability of a less experienced company.

Thus, NPB can reasonably be expected

to know which types of essential data

we request in each review under this

order, and to be conversant with the

form and manner in which we require

submission of the data. We note that

NPB committed, in this review, some of

the same errors and discrepancies

regarding the completeness and

accuracy of its sales databases that it

made in previous reviews of the instant

order.

In addition to taking into account the

experience of a respondent, the

Department may find it appropriate to

examine whether the respondent has

control of the data which the

Department is unable to verify or rely

upon. The record reflects that NPB was

in control of the data which was vital to

our dumping calculations and which we

were unable to verify or rely upon. See

analysis memorandum from Holly A.

Kuga to Joseph A. Spetrini, dated June

27, 1996.

An additional factor we have

considered, is the extent to which NPB

might have benefitted from its own lack

of cooperation. The SAA states that

‘‘[w]here a party has not cooperated,

[the Department] may employ adverse

inferences about the missing

information to ensure that the party

does not obtain a more favorable result

by failing to cooperate than if it had

cooperated fully.’’ Id. at 870. In

accordance with our policy, we

considered the overall effect of NPB’s

errors. In this case, we have determined

that the use of the flawed response

would have yielded a more favorable

margin for NPB. See analysis

memorandum from Holly A. Kuga to

Joseph A. Spetrini, dated June 27, 1996.

In light of NPB’s familiarity with the

annual review process under the order

on AFBs from Japan, its control of the

necessary data, and the potential

benefits it may have received, we have

determined that NPB failed to act to the

best of its ability in providing the data

we requested. Therefore, in accordance

with section 776(b) of the Tariff Act, we

have, on the basis of the record in this

case, determined that it is appropriate

for us to make the adverse inference

authorized under that subsection of the

statute. Accordingly, for these final

results, we continue to base NPB’s

margin on adverse facts available.

In selecting a margin which would

appropriately reflect our decision to use

adverse facts available for NPB, we

examined the rates applicable to ball

bearings from Japan throughout the

course of the proceeding. As adverse

facts available, we have selected a rate

of 45.83 percent, which reflects the allothers rate from the Less Than Fair

Value (LTFV) investigation and is a rate

which we have applied to NPB in

previous proceedings under the old law

concerning AFBs from Japan. Given

NPB’s level of participation in this

segment of the proceeding, we

determine that this rate is sufficiently

adverse to encourage full cooperation in

future segments of the proceeding.

As indicated above, section 776(c) of

the Tariff Act requires the Department

to corroborate secondary information

used as facts available to the extent

practicable. ‘‘Secondary information is

information derived from the petition

that gave rise to the investigation or

review, the final determination

concerning the subject merchandise, or

any previous review under section 751

concerning the subject merchandise.’’

SAA at 870. Because the facts available

applied to NPB for this review is

secondary information within the

meaning of section 776(c) of the Tariff

Act, we have, in accordance with

section 776(c), corroborated this

information with independent sources.

As noted above in our discussion of

corroboration with regard to other

respondents, the SAA provides that

‘‘corroborate’’ means simply that the

Department will satisfy itself that the

secondary information to be used has

probative value (see SAA at 870). After

reviewing the record, we are satisfied

that this information has probative

value because it includes the average of

calculated margins from the LTFV

investigation of this order. Thus, we

have determined that information and

inferences which we have applied are

reasonable to use under the

circumstances of this review. See SAA

at 869. Furthermore, there is no reliable

evidence on the record indicating that

this selected margin is not appropriate

as adverse facts available. (See, e.g.,

Fresh Cut Flowers.)

Comment: NPB contends that the

Department erred in assigning it a

margin based on adverse facts available.

NPB contends the following: (1) It

classified all U.S. housed, unhoused,

and further-manufactured models

properly; (2) it reported its U.S. sales

properly; (3) errors in its reporting of

certain U.S. sales and adjustments are

limited and correctable; and (4) it

reported nearly all of its home market

sales properly. NPB argues that,

although it did make some errors in its

response, the errors are small in number

and are determinable in extent. NPB

requests that the Department use that

portion of its response which is free of

errors and, if it still finds NPB’s

reporting of further-manufactured items

in error, limit its application of facts

available to the U.S. sales of five

particular models the Department

identified as improperly reported in its

verification report. Moreover, NPB

contends that application of adverse

facts available is not appropriate

because NPB acted to the best of its

ability.

NPB notes that the dominant issue in

the Department’s analysis memorandum
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2089

of June 27, 1996, regards NPB’s

reporting of housed, unhoused, and

further-manufactured models. NPB

contends that all of its U.S. sales are

CEP sales, and, as such, the

questionnaire required NPB to report its

sales to the first unaffiliated customer

during the POR and not its entries of the

merchandise during the POR. NPB

states that approximately one-third of

NPB’s U.S. sales are of unhoused

bearings and are imported as such, and

that it sells the vast majority of the

remaining sales as housed bearings

which are further-manufactured from

unhoused bearings. NPB contends that

it reported both of these categories of

U.S. sales properly. NPB asserts that

only five models (which the Department

discovered at verification had entered

the United States as housed models) are

in dispute. NPB contends that its

reporting of sales of the five models is

appropriate. NPB argues that, because a

bearing imported as a housed unit and

a bearing that is imported as an

unhoused unit and furthermanufactured into a housed unit are

physically indistinguishable, it is

impossible to determine whether the

particular merchandise withdrawn from

inventory for sale was imported as a

housed bearing or was further

manufactured into a housed bearing

without tracing the particular

merchandise to a particular U.S.

Customs entry. NPB argues that it

cannot make such a link and contends

that the Department has recognized that,

generally, it cannot tie sales to entries,

citing AFBs III at 28360.

Because the five models, which NPB

contends were imported as both housed

and unhoused models, contain

‘‘bearings exported to the United States

prior to any further processing in the

United States,’’ and because each model

which underwent a furthermanufacturing process contains

‘‘bearings exported to the United States

prior to any further processing in the

United States,’’ NPB asserts that it

identified each of these five models

properly as further-manufactured

models. NPB states that the

Department’s analysis memorandum,

dated June 27, 1996, failed to cite any

statute, regulation, or questionnaire

instruction that required NPB to report

otherwise. Moreover, NPB contends that

it provided ‘‘assembly audit lists’’ that

demonstrate that there was some further

manufacturing of these models during

the POR. Therefore, NPB contends that

it responded properly to the

questionnaire.

Torrington argues that the Department

is statutorily required to use facts

available in cases where it is unable to

verify the accuracy of the information

respondent submits and may apply an

adverse assumption if it determines that

the firm has not complied to the best of

its ability. Torrington asserts that, as a

whole, the number and significance of

NPB’s errors and omissions constitute a

failed verification, noting that the most

serious of NPB’s deficiencies was the

Department’s inability to verify the

completeness of the HM and U.S. sales

databases. Torrington asserts that the

complete and accurate reporting of sales

databases goes to the heart of the

antidumping proceeding, citing FederalMogul IV at 1020. Further, Torrington

states that in AFBs II, the Department

applied best information available to

NPB because NPB failed to report a

substantial number of its HM sales.

Torrington contends that both the

significance and number of omissions

and errors with NPB’s response in this

review call for a similar result, citing

NPB at 93–95.

Moreover, Torrington argues that,

because NPB had control of the data

requested in the Department’s

questionnaire and, given that NPB has

participated in many previous reviews

and is knowledgeable of the correct data

to report, NPB did not act to the best of

its ability. Torrington requests that the

Department apply a margin based on

adverse facts available for the final

results.

Department’s Position: We agree with

Torrington. In this case, we are required

to use facts available because we were

unable to verify NPB’s response.

Furthermore, in using facts available,

we are authorized to employ an

inference adverse to the interests of NPB

because we have determined that NPB

has failed to act to the best of its ability

in responding to our requests for

necessary information. Thus, for these

final results, as adverse facts available,

we have selected a rate of 45.83 percent,

which reflects the all-others rate from

the LTFV investigation and is a rate

which we have applied to NPB in

previous proceedings under the old law

concerning AFBs from Japan. As stated

above, in light of NPB’s level of

participation in this segment of the

proceeding, we determine that this rate

is sufficiently adverse to encourage full

cooperation in future segments of the

proceeding.

We disagree with NPB’s view that it

reported its U.S. sales correctly, that

errors in its reporting of certain U.S.

sales and adjustments are limited and

correctable, and that it reported nearly

all of its home market sales properly. As

we have stated above, it is our practice

to examine at verification only a

selected subset of the reported U.S.

sales, a practice that the CIT has upheld.

See Bomont Industries v. United States,

733 F.Supp. 1507, 1508 (CIT 1990); see

also Monsanto Co. v. United States, 698

F. Supp. 275, 281 (CIT 1988). As

discussed above, we assume that the

randomly selected subset of U.S. sales is

representative of the entire universe of

U.S. sales. In this case, we found

discrepancies and omissions in this

subset. Thus, in accordance with our

normal practice, we judged the effect on

the unexamined portion of NPB’s

response. Because we determined that

U.S. sales had been omitted, we are

concerned about the reliability and

accuracy of any margin or duties we

might calculate from NPB’s database.

We reiterate that an incomplete U.S. and

HM sales database is normally sufficient

to render a respondent’s response

inadequate for the purpose of

calculating a dumping margin. See, e.g.,

Persico Pizzamiglio, S.A. v. United

States, Slip Op. 94–61 (CIT 1994)

(Persico) (upholding the Department’s

use of best information available for a

respondent who was unable to

demonstrate the completeness of its U.S.

sales at verification).

We also disagree with NPB’s assertion

that it classified all housed, unhoused,

and further-manufactured models

properly. NPB was unable to support its

designation of certain U.S. sales as

further-manufactured sales. See U.S.

Sales Verification Report, dated June 13,

1996 at 9. We also disagree with NPB

that it was required to report its furthermanufactured sales in a sales-specific

manner.

As explained above, identification of

further-manufactured sales is essential

in order for the Department to conduct

two critical portions of its analysis.

First, the unique model number

determines the appropriate home

market model to match to the U.S. sale.

(In this case, NPB reported HM sales of

models that matched both the ‘‘housed’’

bearings and the ‘‘unhoused’’ bearings.)

Second, in determining the price

adjustments to calculate CEP, we are

dependent on the data NPB provides to

identify whether to deduct such costs of

further manufacturing. Section 772(d)(2)

of the Tariff Act requires us to reduce

the price we use to establish CEP by

‘‘the cost of any further manufacture or

assembly * * *.’’ Our questionnaire

requires that respondents identify

further-manufactured sales and provide

a unique code to identify the bearing

model as entered on a sale-by-sale basis.

The questionnaire also requires that the

cost of further manufacturing be

reported on a model-specific basis.

Thus, contrary to NPB’s assertion, we

have determined that NPB had an
2090 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

obligation to identify and report this

data on a sales-specific basis.

NPB suggests that its misreportings

are limited to the five particular models

that we discovered at verification.

However, as we have indicated above,

because we reviewed a limited number

of randomly-selected entry documents,

we must conclude that, had we

examined all possible documentation,

we would have found additional models

and sales that were incorrectly reported

as further-manufactured merchandise.

Moreover, because NPB did not identify

the unique model number on a salespecific basis correctly, we are unable to

match approximately two-thirds of

NPB’s U.S. sales of housed models to an

appropriate NV or calculate CEP

properly.

As we have indicated above, in this

case, inaccuracy of NPB’s databases,

particularly the inaccuracy of its U.S.

sales database, was crucial and was a

factor which, by itself, was an adequate

basis for our determination to use facts

available. However, our attempted

verifications yielded additional flaws in

NPB’s response, providing further bases

for our decision to employ facts

available. For example, we found that

NPB did not report a particular type of

price adjustment for sales to its largest

HM customer, and that NPB understated

entered values and thus under-reported

all adjustments to CEP that were

allocated by entered value. (For a

complete listing of all flaws, see the

analysis memorandum from Holly A.

Kuga to Joseph A. Spetrini, dated June

27, 1996. For a more detailed discussion

of NPB’s post-preliminary arguments

and our position on these flaws, see

analysis memorandum dated January 3,

1997.)

Because of the gravity and the

magnitude of the flaws in NPB’s

response, we have determined that

NPB’s information is unverifiable, and

that there is no record evidence

demonstrating that errors in NPB’s

reporting of certain of its U.S. sales are

limited and correctable. Accordingly,

we disagree with NPB’s view on this

issue. Thus, as explained above, we

must use facts available in determining

a margin for NPB, as required under

section 776(a) of the Tariff Act.

We also disagree with NPB that an

adverse inference is not warranted in

determining a margin for NPB because,

as required under section 776(b), we

find that NPB has not acted to the best

of its ability in responding to our

requests for information. As noted

above, NPB has participated in

numerous reviews and verifications in

this proceeding and is aware of the type

of information we require. However,

NPB has failed to provide two

fundamental elements of a response: a

complete sales listing and correct

identification of further-manufactured

sales and models. The identification of

further-manufactured sales and their

unique model numbers (as entered) is

not a new requirement of the URAA.

Contrary to NPB’s assertions, the fact

that NPB could not support its reporting

of this critical information cannot be

attributed to one of the ‘‘subtle changes’’

in the antidumping law which, as NPB

suggests, prevented it from knowing

which data to report. Nor was the

questionnaire vague in this regard.

Likewise, the complete reporting of U.S.

and HM sales is not a new concept

under the URAA. Furthermore, we note

that NPB made numerous other errors in

its response that worked in its favor. See

the analysis memorandum from Holly

A. Kuga to Joseph A. Spetrini, dated

June 27, 1996.

As we have indicated above, in

accordance with our policy, we

considered the overall effect of the

errors to ensure that NPB does not

obtain a more favorable result by failing

to cooperate than if it had cooperated

fully. Thus, an additional factor we have

considered is the extent to which NPB

might have benefited from failing to

cooperate fully if we had not made our

determination on the basis of facts

available. See SAA at 870. In this case,

we have determined that the use of the

flawed response would have yielded a

more favorable margin for NPB. See

analysis memorandum from Holly A.

Kuga to Joseph A. Spetrini, dated June

27, 1996. Furthermore, no comments

have dissuaded us from our view that

NPB has failed to act to the best of its

ability in responding to our requests for

necessary information. Thus, in

disagreement with NPB’s view, for these

final results, we have applied adverse

facts available to NPB in accordance

with section 776(c) of the Tariff Act.

3. Discounts, Rebates, and Post-Sale

Price Adjustments (PSPAs)

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

adjustments as direct (or indirect)

selling expenses, but rather as direct

adjustments necessary to identify the

correct starting price. While we prefer

that respondents report these

adjustments on a transaction-specific

basis (or, where a single adjustment was

granted for a group of sales, as a fixed

and constant percentage of the value of

those sales), we recognize that this is

not always feasible, particularly given

the extremely large volume of

transactions involved in these AFBs

reviews. It is inappropriate to reject

allocations that are not unreasonably

distortive in favor of facts otherwise

available where a fully cooperating

respondent is unable to report the

information in a more specific manner.

See section 776 of the Tariff Act; see

also Facts Available, above.

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 the respondent

used does 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 merchandise

that is not subject to these reviews (outof-scope merchandise). However, such

allocations are not acceptable where we

have reason to believe that respondents

did not grant such adjustments in

proportionate amounts with respect to

sales of out-of-scope and in-scope

merchandise. We have made this

determination by examining the extent

to which the out-of-scope merchandise

included in the allocation pool is

different from the in-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 inscope and out-of-scope merchandise.

While we carefully scrutinize any such

differences between in-scope and out-ofscope 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 that respondents submit salespecific adjustment data on out-of-scope

merchandise in order to prove that there

is no possibility for 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.

Where we have found that a company

has not acted to the best of its ability in

reporting the adjustment in the most

specific and non-distortive manner

feasible, we have made an adverse

inference in using the facts available

with respect to this adjustment,

pursuant to section 776(b) of the Tariff

Act. With respect to HM adjustments, in

accordance with the CAFC’s decision in
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2091

Torrington VI (at 1047–51), we have not

treated improperly allocated HM price

adjustments as if they were indirect

selling expenses (ISEs), but we have

instead disallowed downward

adjustments in their entirety. However,

we have included positive (upward) HM

price adjustments (e.g., positive billing

adjustments that increase the final sales

price) in our analysis of such

companies. The treatment of positive

HM 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 V at 66498.

Comment 1: Torrington asserts that

some respondents reported homemarket discounts, rebates, and PSPAs by

allocating amounts across all sales, or

across all sales to a given customer,

even when some sales were not entitled

to the adjustment. Torrington contends

that the CAFC, in Torrington VI at 1047–

51, ruled that direct PSPAs must be

reported on a sale-specific basis before

the Department can make a downward

adjustment to foreign market value (now

normal value), and that the Department

may not make an indirect-sellingexpense adjustment for improperly

allocated direct expenses. Torrington

contends that the new statute does not

change the CAFC’s rulings and,

therefore, the Department should deny

all rebates, discounts, and PSPAs that

respondents did not report on a

transaction-specific basis or which they

did not allocate in such a manner as to

be tantamount to reporting on a

transaction-specific basis.

Koyo, NSK, NSK/RHP, SKF Germany,

SKF France, and SKF Italy argue that

the Department should make

adjustments to NV so long as the

allocation methodology is reasonable.

Koyo, SKF Germany, SKF France, and

SKF Italy argue further that the SAA at

823–24 indicates that the Department

will accept allocations of certain direct

expenses when transaction-specific

reporting is not feasible. SKF Germany,

SKF France, and SKF Italy also contend

that denial of such adjustments, when

the party acted to the best of its ability

and the data can be used without undue

difficulties, would be the unlawful use

of adverse inferences in applying facts

available, while Koyo argues that the

denial of such adjustments would be

unjustly punitive. Koyo also argues that

the Department should not disallow an

improperly allocated downward

adjustment while allowing the same

adjustment if it increases NV and

contends that the CIT rejected such an

approach in Torrington IV at 1151.

FAG Germany, FAG Italy, INA, NTN

Japan, and NTN Germany contend that

they reported such adjustments on a

transaction-specific basis.

Department’s Position: We agree with

Koyo, NSK, NSK/RHP, SKF Germany,

SKF France, and SKF Italy in part. As

discussed in the introductory remarks to

this section, our practice is to accept

these adjustments when it was not

feasible for a respondent to report the

adjustment on a more specific basis,

provided that the allocation method the

respondent used does not cause

unreasonable inaccuracies or

distortions. We agree with Torrington,

however, that when we find that a

respondent has allocated a HM

discount, rebate, or PSPA in a distortive

manner or if we determine that a

respondent has not acted to the best of

its ability, then we should deny such

adjustments rather than treat them as an

indirect expense.

In our view, Torrington VI is of

limited relevance to this issue because

the CAFC did not address the propriety

of the allocation methods respondents

used in reporting the price adjustments

in question. Although the CAFC

appeared to question whether price

adjustments constituted expenses at all

(see Torrington VI 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. The CAFC did

not address appropriate allocation

methodologies.

However, we disagree with Koyo that

we should not treat positive HM billing

adjustments as direct adjustments. As

discussed in our introductory remarks

above, the treatment of positive HM

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 minimize

margins.

Comment 2: NSK and Torrington

submitted comments regarding the

treatment of NSK’s HM lump-sum

rebates (REBATE2H). NSK argues that

the Department’s treatment of this

rebate as an indirect expense in the

preliminary results was incorrect and

requests that the Department treat this

adjustment as a direct expense. NSK

asserts that the CIT has determined,

pursuant to the CAFC’s decision in

Torrington VI, that this expense is a

direct expense (citing The Timken Co. v.

United States, Slip Op. 96–86 at 38 (CIT

1996)).

NSK argues that it did not grant this

adjustment on a product-specific or

transaction-specific basis and that the

rebate does not relate to specific sales to

a customer. NSK notes that it allocated

this adjustment by summing all such

POR rebates by customer and dividing

this amount by total POR sales to the

customer. NSK contends that its

allocation methodology accurately

apportions the adjustment between

subject and non-subject merchandise

because, although NSK used a customerspecific factor, the ratio of subject to

non-subject merchandise purchased by

its customers was relatively constant

throughout the POR. NSK notes that it

submitted evidence to support its

contention that this ratio was relatively

constant during the POR in its response

to the Department’s supplemental

questionnaire. NSK argues that the

Department accepted this approach in

principle in the 1992/93 review but did

not allow the adjustment due to the

small number of customers for which

NSK provided information regarding

sales of subject versus non-subject

merchandise. NSK contends that, in the

current review, it submitted such

information for a substantially larger

number of customers.

NSK suggests that its situation should

not be confused with that of another

respondent, Koyo, which granted PSPAs

on a product-specific basis but reported

them on an aggregate basis. NSK argues

that its reporting methodology is

customer-specific by necessity, not

because of imprecise record-keeping,

and, for the reasons described above, is

not distortive. Finally, NSK argues that,

at a minimum, the Department should

treat PSPAs respondents granted to

certain customers that only purchased

subject merchandise during the POR as

direct expenses.

Torrington responds to NSK’s

arguments, claiming that NSK’s

description of the allocation

methodology for this expense

demonstrates that NSK’s reporting is not

consistent with a ‘‘fixed and constant’’

allocation, which the Department and

the CIT have held is necessary for an

allocation of such expenses to be

accepted (citing AFBs IV at 10929 and

Torrington I at 1578–79). Torrington

also contends that the Department

should reject NSK’s argument that the

Department should, at a minimum,

allow a direct adjustment for those

customers who purchased only subject

merchandise during the POR for the

same reasons. Torrington argues that,

even if certain customers purchased
2092 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

only subject merchandise during the

POR, NSK’s allocation fails to target

those specific sales related to the PSPAs

or to report the specific PSPA amounts

actually incurred by those sales and is,

therefore, distortive.

In its affirmative brief, Torrington

argues that, because NSK failed to report

lump-sum rebates on a transactionspecific basis or as a fixed and constant

percentage of the sales on which the

rebates were granted, the Department

should disallow the adjustment entirely.

Torrington suggests three reasons for

rejecting NSK’s lump-sum rebates as an

adjustment to NV. First, citing

Torrington VI at 1050, Torrington argues

that the CAFC has stated that expenses

that are directly related to particular

sales cannot be treated as ISEs.

Therefore, Torrington contends, because

NSK did not report PSPAs on the basis

on which they were incurred, the

Department cannot deduct them as

direct adjustments to NV and, because

expenses that are direct in nature cannot

be treated as indirect expenses, the

Department has no choice but to make

no adjustment to NV for this item.

Second, Torrington argues that NSK

failed to demonstrate that it paid all

reported PSPAs on sales of subject

merchandise. Torrington argues that the

Department has previously rejected

NSK’s argument that an analysis of

certain customers’ sales sufficiently

indicates that all customers receiving

PSPAs had stable purchasing patterns

and states that the Department should

reject NSK’s assertion that ‘‘relatively

constant’’ purchasing patterns constitute

the basis for a reasonable allocation.

Torrington asserts that the CIT has held

repeatedly that the Department may not

‘‘use a methodology which allows for

the inclusion of [PSPAs] and rebates on

out-of-scope merchandise in calculating

adjustments to FMV’’ (citing Torrington

I at 1578–79).

Third, Torrington argues that NSK did

not demonstrate that all PSPAs were

contemplated at the time of sale.

Torrington argues that NSK itself stated

that, in certain instances, lump-sum

amounts were paid retroactively and

that, therefore, NSK has not shown that

the terms of these rebates were known

at the time of sale. Torrington argues

that the Department’s policy is to allow

rebates only when the terms of sale are

predetermined (citing AFBs IV at

10932).

NSK responds that the Department

verified NSK’s lump-sum rebates and

that the Department found no

discrepancies in the data which it

examined. Second, NSK argues that it

has fully explained the circumstances

under which it grants lump-sum PSPAs

and that Torrington’s argument that

NSK did not show that the rebates were

contemplated at the time of sale is not

supported by the record and has been

previously rejected by the Department.

Department’s Position: We agree with

NSK that we should treat its lump-sum

rebates as a direct adjustment to NV.

Although NSK allocates these rebates on

a customer-specific basis, we determine

that NSK acted to the best of its ability

in reporting this information using

customer-specific allocations. Our

review of the information NSK

submitted and our findings at

verification indicate that, given the

lump-sum nature of this adjustment, the

fact that NSK’s records do not readily

identify a discrete group of sales to

which each rebate pertains, and the

extremely large number of POR sales

NSK made, it is not feasible for NSK to

report this adjustment on a more

specific basis.

We also do not find that the customerspecific POR-allocation methodology

NSK used shifts expenses incurred on

sales of out-of-scope merchandise to

sales of in-scope merchandise or that it

is otherwise unreasonably distortive.

NSK submitted evidence to support its

contention that the ratio of subject to

non-subject merchandise purchased by

its customers was relatively constant

throughout the POR. We examined this

evidence and found that it adequately

supported NSK’s contention.

Further, our analysis of the record

evidence and our findings at verification

give us no reason to believe that NSK is

more likely to grant these rebates on

sales of non-subject merchandise than it

is on sales of subject merchandise. In

this regard, we note that, as with other

respondents in these reviews, NSK is

primarily in the business of selling

bearings, some of which are within the

scope of the AFB antidumping orders

and others of which are non-subject

merchandise. In addition, we have not

found that the subject and non-subject

merchandise NSK sold varies

significantly in terms of value, physical

characteristics, and the manner in

which it is sold and, therefore, we find

that it is likely that NSK granted this

adjustment in proportionate amounts

with respect to sales of out-of-scope and

in-scope merchandise.

Regarding the relevance of the

holding of the CAFC in Torrington VI,

see our response to comment 1, above.

Comment 3: Torrington argues that

the Department improperly allowed a

direct adjustment to NV for NSK’s

return rebates (REBATE1H). Torrington

contends that NSK grants return rebates

on individual transactions and that NSK

did not report return rebates on a

transaction-specific basis or as a fixed

and constant percentage of sales.

Torrington argues that, because NSK

failed to tie actual rebate amounts to the

particular transactions to which they

relate, the Department should not make

any adjustment to NV for return rebates

(citing Torrington VI at 1050).

NSK responds that the Department

properly deducted return rebates as a

direct adjustment to NV. NSK notes that

its methodology allocates return rebates

on a part-number and customer-specific

basis and that the Department fully

verified its methodology. NSK also

argues that Torrington raised this issue

prior to the preliminary results and the

Department rejected its argument at that

time. NSK states that Torrington has

offered no new arguments in its case

brief.

Department’s Position: We disagree

with Torrington. Initially, we note that

we consider NSK’s return rebates to be

a promotional expense, as opposed to a

price adjustment, because NSK grants

these rebates to promote sales made by

distributors. As such, NSK incurred this

expense on behalf of NSK’s customers.

Because NSK has shown that this

expense relates directly to the products

under review, we consider it to be a

direct selling expense. Further, the

company has demonstrated that it has

reported this expense on a modelspecific and customer-specific basis,

which satisfies our standard for

treatment of promotional expenses as

direct selling expenses. See our

response to comment 2 of section 4.B

(Commissions), below, and AFBs V at

66503. Therefore, we have made a direct

adjustment to NV for NSK’s return

rebates for the final results. With regard

to the relevance of Torrington VI, see

our response to comment 1, above.

Comment 4: Torrington argues that

the Department should use actual 1995

rebates instead of the estimated 1995

U.S. rebates reported by NSK, FAG

Germany, and FAG Italy. Torrington

notes that, at verification, NSK

submitted, and the Department verified,

actual rebate percentages. Torrington

also contends that improving economic

activity in the United States may result

in higher U.S. rebates granted than

estimated. Torrington argues that the

Department should use, therefore, the

actual rebate information it gathered

from NSK at verification and should

request FAG to provide updated U.S.

rebate information for use in the final

results.

NSK argues that the Department

examined the actual rebate percentages

at verification in order to determine

whether NSK’s estimated rebates were

reasonable. NSK notes that it was
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2093

unable to report actual 1995 rebates in

its original response because its

response was due prior to the end of

1995. NSK argues that its estimated

rebates were reasonably calculated and

that the Department should use them for

the final results.

FAG argues that, because the response

had to be filed before the end of 1995,

rebates ultimately paid on 1995 sales

had to be estimated. FAG argues that its

methodology conforms to the

Department’s practice and was fully

verified by the Department.

Department’s Position: We disagree

with Torrington. The purpose of

examining the actual rebates at

verification was to determine the

accuracy of the responses. Verification

is not normally an appropriate venue for

the submission of new factual

information, and we generally collect

and use information gleaned at

verification only when minor

discrepancies are found or when we

believe a respondent’s methodology

may not have been reasonable. In this

case, verification was an opportunity to

determine whether the companies’

estimates represented a reasonable

approximation of their experience in

granting rebates. Our conclusion was

that there was no reason to believe that

the actual data would differ

significantly from the estimates. For

instance, as a result of verifying NSK’s

response, we determined that while the

rebate percentages were overestimated

for some customers and underestimated

for others, on balance NSK’s estimates

were a reasonable reflection of its actual

experience and that any distortion

caused by such estimates would be

insignificant. Torrington’s proposal

would convert verification, which is an

opportunity to check the accuracy of

information previously submitted, into a

data-gathering exercise.

In fact, the actual information

concerning rebates granted in 1995 is

not generally available until

approximately the end of the first

quarter of 1996, after the end-of-year

1995 rebates are granted and recorded in

the companies’ records. A requirement

that respondents calculate actual perunit rebate amounts for 1995 sales using

this data would be unreasonable, given

the stage in the proceeding at which the

actual 1995 data becomes available.

Furthermore, in NSK’s case, although

we have the data to replace the

estimated rebates with actual rebates,

the change to our calculations, given the

advanced stage of the review, would

impose an unreasonable burden upon

both us and respondents with no

significant increase in accuracy in light

of the results of our verification.

Therefore, we have relied on NSK’s

estimated rebates.

Moreover, while we have the

discretion to solicit new information at

any time during an administrative

review, we generally do so only when

we learn of information not on the

record that has the potential of having

a substantial impact on the margin. See

Certain Fresh Cut Flowers from

Colombia; Final Results of Antidumping

Duty Administrative Reviews, 61 FR

42833, 42837 (August 19, 1996).

Therefore, for the reasons stated

above, we have used these companies’

estimated rebates on 1995 sales for the

final results, as we have with

respondents generally in these reviews.

Comment 5: Torrington argues that

the Department should disallow the

following HM PSPAs reported by SKF

Germany: early-payment discounts

(EARLYPYH), support rebates

(REBATE2H), and downward homemarket billing adjustments (BILLAD2H).

Torrington makes the following general

comments regarding these adjustments:

(1) section 782(e) of the Tariff Act,

previously cited by SKF Germany,

provides the rules governing when the

Department may reject a response due to

systematic difficulties, which is not the

case here; (2) the language in the

proposed regulations concerning when

the Department may allow allocations

does not govern this situation because

the items at issue are price adjustments,

not direct selling expenses; and (3) even

assuming such proposed regulatory

language did apply, SKF Germany’s

allocations are sufficiently distortive as

not to meet the standard for allowing

such allocations.

With respect to early-payment

discounts, Torrington states that,

because SKF Germany’s reporting

method fails to identify early payment

discounts actually taken on subject

merchandise, the Department should

deny these adjustments to NV.

Torrington argues that

disproportionately greater amounts may

be paid on out-of-scope merchandise

than on in-scope, resulting in the misallocation of out-of-scope discounts to

subject merchandise. The Department,

according to Torrington, should

continue to reject this claim, as it did in

AFBs IV.

With respect to support rebates,

Torrington states that SKF Germany

reported them on a customer-specific

basis only because these rebates are

earned on sales by SKF Germany’s

customer rather than by SKF Germany

and cannot be associated with specific

SKF Germany transactions. Torrington

claims that there is no evidence that

distributors were allowed these rebates

as a result of poor sales results on

subject merchandise as distinct from

products not covered by the

antidumping order, and suggests that

this evidence is clearly necessary under

what Torrington refers to as the

‘‘Torrington VI rule.’’ Torrington argues

that SKF Germany cannot claim that any

poor sales results which may be

experienced by distributors on resales of

SKF Germany products necessarily

justify rebates allocated to given classes

or kinds. According to Torrington, the

Department rejected the same claim by

SKF Germany in the 1992/93 review

(citing AFBs IV and Torrington VI).

With respect to billing adjustment 2,

Torrington argues that SKF Germany’s

claim for an adjustment cannot be

allowed because its reporting is

inconsistent with the so-called

Torrington VI rule. Torrington argues

further that, because this is the sixth

administrative review, SKF Germany

has had ample time to modify its recordkeeping system to permit the reporting

of accurate amounts. Torrington adds

that the Department rejected the same

basic claim in AFBs IV. Torrington

contends that, to avoid a benefit to

respondent, the Department should only

reject the downward adjustments to NV

for billing adjustment 2. Torrington also

asserts that the Department should

reject SKF Germany’s argument, in

which it cites the Final Results of

Redetermination Pursuant to Court

Remand (August 14, 1995) at 18–19, in

The Torrington Company v. United

States, Ct. No. 92–07–00483, that the

Department must either accept SKF

Germany’s reporting as is or reject all

reported adjustments. Torrington claims

that this ruling is not applicable because

the Court’s remand instructions that

SKF Germany develop a methodology to

remove billing adjustments would not

be possible here.

Torrington argues that the Department

should also reject SKF Germany’s

argument, in its May 24, 1996

submission, that selective rejection of

the reported billing adjustment 2 is an

unlawful use of an adverse inference.

Torrington contends that, because this

provision is limited to the selection of

facts among facts otherwise available it

does not detract from the Department’s

authority to reject certain information

provided by the respondent while

retaining other information, also

provided by the respondent.

SKF Germany responds that, in the

preliminary results, the Department

treated SKF Germany’s reported earlypayments discounts, support rebates

and billing adjustment 2 correctly as

direct adjustments to price. According

to SKF Germany, Torrington is mistaken
2094 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

in relying on Torrington VI. SKF

Germany claims that the CAFC did not

hold that the Department must reject

allocations of direct expenses.

Moreover, SKF Germany argues, the

Torrington VI decision is not relevant

under the new law, because the SAA

indicates that the Department will

accept allocations of certain direct

expenses when transaction-specific

reporting is not feasible, citing the SAA

at 823–24. In addition, according to SKF

Germany, the Department indicated in

its explanation to the proposed

regulations, 61 FR 7329, that it will

balance the difficulties of reporting

transaction-specific expenses against the

potential inaccuracies of reporting on an

allocated basis. SKF Germany argues

that, if the Department rejects the

adjustments, it would be acting contrary

to section 782(e) of the statute that

information not meeting all of the

Department’s requirements must still be

accepted if timely, verifiable, reliable,

the party acted to the best of its ability,

and the data can be used without undue

difficulties. SKF Germany states that

Torrington’s position that allocations

involving upward adjustments to

comparison-market prices must be

included in the NV calculation would

contravene this section of the statute.

SKF Germany adds that the Department

rejected a similar suggestion by

Torrington in a remand determination

in the appeal of the 1990/91

administrative review of AFBS, citing

Final Results of Redetermination

Pursuant to Court Remand (August 14,

1995) at 18–19 filed in The Torrington

Co. v. United States, Ct. No. 92–07–

00483. SKF Germany states that

allocations may be necessary and

appropriate and that rejection of such

reporting would mean that actual

expenses incurred on the subject

merchandise or foreign like product

would not be captured in the

antidumping calculation. SKF Germany

argues that, even if the Torrington VI

decision still applies under the new

law, the Department should treat all

PSPAs as direct adjustments if

reasonably reported.

SKF Germany argues further that,

with respect to early payment discounts,

the Department has found that

transaction-by-transaction reporting is

simply not possible because of the

manner in which customers take those

discounts. SKF Germany states that the

Department has verified SKF Germany’s

reporting of this adjustment, and

respondent claims that it could not have

reported the discounts on a more

specific basis.

SKF Germany argues that, with

respect to its allocated rebates, the

Department has found that transactionby-transaction reporting is simply not

possible due to their very nature. SKF

Germany argues further that, with

respect to its allocated billing

adjustments, the Department has found

that transaction-by-transaction reporting

is simply not possible because the

involved adjustments related to

multiple transactions and, therefore, it

could not have reported the adjustments

more specifically. SKF Germany adds

that the Department verified its

reporting of these adjustments.

SKF Germany argues, citing Final

Results of Redetermination Pursuant to

Court Remand (August 14, 1995) at 18–

19 filed in The Torrington Co. v. United

States, Ct. No. 92–07–00483, that the

lesson of the court’s remand order and

the Department’s response thereto is

that when an adjustment is denied it is

denied; it is not allowed in part. In

addition, SKF Germany asserts that the

Department rejected Torrington’s

argument that SKF Germany would

receive a ‘‘windfall benefit’’ if the

Department denied all of SKF

Germany’s billing adjustments 2 as

opposed to denying only the downward

price adjustments, in that same remand.

Department’s Position: We agree with

SKF Germany regarding early payment

discounts, support rebates, and billing

adjustment 2. SKF Germany reported

these adjustments to the best of its

ability. SKF Germany did not report

these adjustments on a transactionspecific basis due to their very nature

and we find that SKF Germany’s

methodology is not unreasonably

distortive. Further, there is no

information on the record that would

lead us to believe that these adjustments

were not granted in proportionate

amounts with respect to sales of out-ofscope and in-scope merchandise.

Torrington’s argument that SKF’s

allocations is distortive is purely

speculative.

SKF Germany calculated customerspecific averages of its early-payment

discounts for the periods January 1994

through December 1994 and January

1995 through April 1995. See SKF

Germany’s September 26, 1995

questionnaire response at pages 28–29.

Our examination of its records and our

findings at verification indicate that it is

not feasible for SKF Germany to allocate

this adjustment more specifically, given

the large volume of transactions

involved, the level of detail contained in

SKF’s normal accounting records, and

the time constraints imposed by the

statutory deadlines under which all

parties must operate. We are satisfied

that this reporting methodology reflects

the nature in which SKF Germany does

business and that SKF Germany

reported early-payment discounts to the

best of its ability, and that its

methodology is not unreasonably

distortive. Regarding the relevance of

the holding of the CAFC in Torrington

VI, see our response to comment 1,

above.

Due to the nature of support rebates,

transaction-specific reporting is not

feasible. While Torrington argues that

there is no evidence that distributors

were allowed these rebates as a result of

poor sales results on subject

merchandise, as distinct from products

not covered by orders, we do not believe

SKF Germany’s allocation to be

distortive, as we believe that such

adjustments were granted in

proportionate amounts with respect to

sales of out-of-scope merchandise. SKF

Germany grants these rebates to

distributors/dealers to ensure that they

obtain a minimum profit level on sales

to select customers. Hence, because SKF

Germany does not issue these rebates

based on specific sales to the

distributor/dealers, SKF Germany

cannot report transaction-specific rebate

amounts. Therefore, we find that SKF

Germany’s reporting methodology is not

unreasonably distortive and that SKF

Germany responded to the best of its

ability.

With respect to billing adjustment 2,

SKF Germany reported billing

adjustments not associated with a

specific transaction. These adjustments

included credit or debit notes that SKF

Germany issued relating to multiple

invoice lines. SKF Germany could not

tie these adjustments to a specific

transaction because the billing

adjustments reported in this field were

part of credit or debit notes, issued to

the customer, that related to multiple

invoices, products, or multiple invoice

lines. In these cases, the most feasible

reporting methodology that SKF

Germany could use was a customerspecific allocation, given the large

volume of transactions involved in these

AFBs reviews and the time constraints

imposed by the statutory deadlines. For

these reasons, we find that this

methodology is not unreasonably

distortive.

As mentioned in the introductory

remarks at the beginning of this section,

we agree with Torrington that, when we

reject a respondent’s allocation, we

should only reject the downward

adjustments to NV. However, since we

are accepting the reporting of SKF

Germany’s billing adjustments,

Torrington’s argument is not applicable.

Comment 6: Torrington argues that

the Department should apply a fivepercent upward adjustment to all of SKF
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France’s HM sales because SKF France

did not report billing adjustments of less

than five percent of gross unit price

(BILLAD2H). Torrington notes that

billing adjustments are invoice-specific

and can either decrease or increase

price. Torrington states that it was not

appropriate for SKF France to decide

what amounts are insignificant for

purposes of 19 CFR 353.59(a). Further,

according to Torrington, the fact that

reporting is inconvenient is not an

excuse for failing to report all amounts

on a sale-by-sale basis. Torrington states

that adverse inferences are appropriate

because SKF France refused to supply

the information. In response to SKF

France’s argument made in a

submission during these reviews that its

failure to report was detrimental to SKF

France as the total net value of billing

adjustments would have decreased NV,

Torrington answers that the total net

value of the adjustment is irrelevant.

Torrington asserts that the statutory

changes introduced by the URAA do not

diminish or invalidate the standard

articulated by Torrington VI. Torrington

contends that the statutory provision

upon which SKF France relies in its prepreliminary comments, section 782(e),

addresses the situation where systemic

difficulties exist with a response, and

does not apply here. In this case,

Torrington asserts, the Department may

reject the response in favor of facts

available. The amended statute,

according to Torrington, makes clear

that the Department should accept a

response only if the response was

timely, verifiable, and reliably complete,

if the respondent acted to the best of its

ability, and if the information can be

used without undue difficulties.

Torrington asserts that these

requirements are not met in this case.

Torrington argues that the abovediscussed grounds for rejection also

apply to Steyr sales, to which SKF

France allocated billing adjustments on

the basis of customer numbers.

Torrington requests that the Department

draw adverse inferences and adjust all

Steyr prices upward by five percent as

facts available.

SKF France asserts that the

Department, in the preliminary results,

correctly rejected Torrington’s argument

regarding adverse facts available for SKF

France’s and Steyr’s billing adjustment

2. SKF France claims that there is no

basis for the Department to reject SKF

France’s reporting methodology, and

notes that it has reported this

adjustment in the same manner in prior

reviews and the Department verified

and accepted this approach in the 1992/

93 review.

Regarding Steyr, SKF France argues

that although the Department, pursuant

to the CIT’s decisions, has disallowed

similar billing adjustments in the 1992/

93 review of AFBs, the URAA and the

SAA require a different result in this

review. Under the new statute, SKF

France contends, the Department is

required to accept information that may

not meet all of the Department’s

requirements, provided certain

conditions are met. SKF France claims

that Steyr reported billing adjustments

using the most specific reporting

method feasible, given the manner in

which the adjustment are incurred and

recorded in the normal course of

business. SKF further claims that it

acted to the best of its ability in

reporting these adjustments and that the

use of these adjustments would cause

no undue difficulty to the Department.

In addition, according to SKF France,

the SAA indicates that the Department

will accept allocations of certain

expenses when transaction-specific

reporting is not feasible and requires the

Department to balance the difficulties of

reporting transaction-specific expenses

against the potential inaccuracies of

reporting on an allocated basis. SKF

France argues that, in light of the recent

decision by the CAFC in The Torrington

Co. v. United States, Ct. Nos. 95–1210–

1211 (CAFC 1996), and the SAA’s

directive to consider allocated expenses,

it is imperative that the Department

retain the discretion to consider how

respondents report a price adjustment,

given that respondent’s ordinary

business practices and the nature of the

specific adjustment rather than simply

reject all allocated expenses.

SKF France states that it would be

inappropriate for the Department to

increase Steyr’s prices by five percent as

facts available, and notes that the

Department rejected a similar suggestion

by Torrington to apply an adverse

inference and selectively accept certain

billing adjustments in a remand

determination in the appeal of the 1990/

91 administrative review of AFBs (citing

Final Results of Redetermination

Pursuant to Court Remand (August 14,

1995) at 18–19 filed in The Torrington

Co. v. United States, Ct. No. 92–07–

00483). Further, according to SKF

France, even if the Department

determines not to accept Steyr’s

reporting of billing adjustments, a fivepercent across-the-board upward price

adjustment would amount to an

unlawful use of an adverse inference.

SKF France states that, according to the

URAA, an adverse inference is only

permitted when a party has failed to

cooperate by not acting to the best of its

ability (citing 782(e) of the statute). SKF

France claims that it cooperated fully

with the Department and has acted to

the best of its ability with respect to its

reporting of billing adjustment 2.

Department’s Position: We agree with

SKF France regarding billing adjustment

2 for SKF France and Steyr. According

to SKF France’s February 16, 1996

supplemental questionnaire response at

pages 36–37, it generally uses the field

for billing adjustment 2 for SKF France

to include those billing adjustments that

were less than five percent of the gross

unit price and less than 1,000 French

Francs. However, in this case SKF

France reported zero values in this field,

as it has for previous reviews, because

it found the total value of these

adjustment to be insignificant. There is

nothing on the record to suggest that

SKF’s information is inaccurate. This

policy of disregarding insignificant

adjustments is consistent with our

policy in prior reviews.

Regarding Steyr’s billing adjustments

as reported in billing adjustment 2, it

was not feasible for SKF France to

allocate these adjustments other than on

a customer-specific basis because they

relate to multiple invoices or multiple

invoice lines. Due to the nontransaction-specific nature of the

expense, the volume of HM transactions

reported by SKF, and the time

constraints imposed by the statutory

deadlines, we believe that SKF France

reported billing adjustments for Steyr to

the best of its ability. Further, even

though SKF France included out-ofscope merchandise in the allocation of

the adjustment, we have no reason to

believe that such adjustments were not

granted in proportionate amounts with

respect to sales of out-of-scope and inscope merchandise. Hence, we believe

that the customer-specific allocation

that SKF France used for Steyr’s

adjustments is not unreasonably

distortive.

Comment 7: Torrington contends that

the Department should disallow all of

INA’s claimed downward billing

adjustments in calculating NV because

INA provided only a brief description of

its home market billing adjustments

which did not indicate whether the

adjustments were limited to in-scope

merchandise. Torrington argues that the

CAFC held that direct PSPAs must be

reported on a sale-specific basis before

the Department can make a downward

adjustment in calculating NV (citing

Torrington VI at 1047–1051).

INA responds that it reported

product- and invoice-specific billing

adjustments in accordance with the

instructions in the Department’s original

questionnaire. INA contends that the
2096 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

Department verified that it reported

home market billing adjustments

properly and cites to the verification

report. INA states that there is no basis

to disregard downward home market

billing adjustments in calculating NV.

Department Position: We disagree

with Torrington. INA reported this

adjustment on an invoice-specific basis.

Where INA had more than one

transaction on an invoice, INA used the

same fixed and constant percentage for

all transactions on the invoice.

Therefore, we determine that this is the

equivalent of reporting the adjustments

on a transaction-specific basis.

Furthermore, we verified INA’s HM

billing adjustment and found no

discrepancies (Memo from Analyst to

File, Verification of HM Sales

Information Submitted by INA

Walzlager Schaeffler KG, at 4, Exhibit 9,

June 28, 1996). We have allowed,

therefore, both INA’s reported upward

and downward home market billing

adjustments.

Comment 8: Torrington argues that

Koyo reported its home market rebates

on a customer-specific basis, even

though they were incurred on an

invoice-specific basis. Torrington

maintains that the Department’s policy

states clearly that it only accepts

rebates, discounts, and price

adjustments as direct adjustments if

respondents report actual amounts for

each transaction.

In rebuttal, Koyo argues that it

reported its rebate expenses in this

review in the same manner as it has in

past reviews and that the Department

has repeatedly verified and accepted the

claimed expense (citing Home Market

Verification Report of Koyo Seiko dated

April 16, 1996).

Department’s Position: We agree with

Koyo. During the verification of Koyo’s

rebates, we noted that, once a

distributor participating in the rebate

program had purchased a preestablished amount of sales, Koyo

applied a pre-established percentage

rebate to all sales to that distributor.

Therefore, reporting the percentage is

the equivalent of reporting its rebates on

a transaction-specific basis because the

rebate was granted as a fixed and

constant percentage of all affected sales.

We also note that, even under the old

law, we would have found Koyo’s

methodology to be permissible. See

AFBs V at 66498. Therefore, we

determine that Koyo acted to the best of

its ability and that its response

methodology is not unreasonably

distortive.

Comment 9: Torrington argues that,

although the Department accepted

Koyo’s billing adjustment (BILLADJ1H)

in the preliminary results, it should

deny Koyo’s downward or negative

billing adjustments. Torrington states

that post-sale price adjustments must be

reported on a sale- or model-specific

basis, if incurred on those bases.

Torrington contends that Koyo failed

the standard set forth in Torrington VI.

Torrington recommends that the

Department deny negative HM billing

adjustments and include positive billing

adjustments in the antidumping

analysis. Torrington further suggests

that, since Koyo did not report positive

billing adjustments on a transactionspecific basis, the Department should

not use the reported positive billing

amounts but should apply, as partial

facts available, Koyo’s highest reported

positive billing adjustment to all sales

involving positive adjustments.

Koyo acknowledges that it reported

billing adjustments using customerspecific allocations. Koyo maintains,

however, that in Torrington VI the

CAFC held that an expense incurred as

a direct expense must be reported as a

direct expense, even if allocated. Koyo

maintains further that this holding

conforms with the decision in SmithCorona Group v. United States, 713 F.2d

1568, 1580 (CAFC 1983), in which the

CAFC, when looking at customerspecific rebates, held that an allocation

methodology did not deprive the rebates

of their direct relationship to the sales

under consideration.

Department’s Position: We agree with

Koyo that we should treat its billing

adjustment as a direct adjustment to NV.

We determined at the home market

verification that in preparing its

response to the Department Koyo

summed, on a customer-specific basis,

the amount of this adjustment, which

was only granted on in-scope

merchandise, and then allocated the

customer-specific total expense over inscope merchandise on a customerspecific basis. Koyo acted to the best of

its ability in reporting this information

using customer-specific allocations.

Information in Koyo’s responses and our

findings at the home market verification

indicate that, although Koyo does not

maintain this information on an invoicespecific basis, the customer-specific

allocation methodology it used to report

this expense to the Department was not

unreasonably distortive. With regard to

Torrington’s discussion of the CAFC’s

decision in Torrington VI, see our

response to Comment 1.

Comment 10: Torrington contends

that the Department should disregard

the U.S. early payment discounts that

NMB/Pelmec reported, and instead use

the highest discount rate for all

transactions or the highest rate any

other respondent reported in these

proceedings. Torrington argues that the

Department should only accept the

reporting of U.S. discounts if NMB/

Pelmec reported actual transactionspecific amounts. Torrington states that

NMB/Pelmec reported U.S. early

payment discounts on a customerspecific basis.

NMB/Pelmec argues that its

methodology accurately reflects the

early payment discounts it granted. It

claims that its records show that it

granted the discount rates to each

customer on all or virtually all sales.

NMB/Pelmec also claims that its records

show that customers always took the

discount because the amount of

discounts it actually granted to each

customer relative to total sales to each

customer comports with the discount

rate it offered. NMB/Pelmec notes that

it used this method, as verified by the

Department, in two prior reviews. NMB/

Pelmec notes that, because it reported a

discount on all sales to eligible

customers at the customer’s rate, any

distortion caused by this allocation

would be to NMB/Pelmec’s detriment .

Department’s Position: We agree with

NMB/Pelmec. We have found that

NMB/Pelmec’s reporting methodology

for early-payment discounts is not

unreasonably distortive. NMB/Pelmec

granted discounts at a fixed and

constant percentage of the value of all

sales to each eligible customer.

Therefore, reporting the percentage is

the equivalent of reporting its rebates on

a transaction-specific basis. Therefore,

we determine that NMB/Pelmec acted to

the best of its ability and that its

response methodology is not

unreasonably distortive. We also note

that, even under the pre-URAA law, we

would have found NMB/Pelmec’s

methodology to be permissible. See

AFBs V at 66498.

Comment 11: Torrington states that

the Department’s verification report

indicates that, as a result of a new

contract INA entered into with two of its

U.S. customers, there were several

retroactive price changes to certain

prices INA reported. Torrington

contends, however, that the verification

exhibit reveals that the record is

incomplete with respect to this issue.

Torrington requests that the Department

correct the reported sales information to

reflect the change in price. Torrington

also states that the Department should

require INA to develop the record to

include a full explanation of the nature

of the contracts into which it entered,

and to reflect the corrections in the

database, including quantities, price,

transaction dates and part numbers.

Torrington states that it is necessary to
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2097

further develop the record because

changes to price as a result of retroactive

price adjustments call into question the

reliability of all reported U.S. sales.

INA responds that the Department

verified all information concerning the

revisions to some prices for U.S.

customers. In addition, INA states that,

as the Department noted in its

verification report, the sales affected by

the retroactive price adjustments were

limited to the sales transactions that

INA presented to the verification team

at the outset of verification.

Department Position: We agree with

respondent and are satisfied that, given

our thorough examination at

verification, the record is complete with

respect to this issue. We included the

corrected retroactive price adjustments

we received from respondent at

verification in our preliminary analysis

because, in our verification of these

adjustments, we found that there were

no price adjustments on other

transactions (verification report, at 1).

Therefore, we do not question the

reliability of INA’s reported U.S. sales

and for these final results, we have

adjusted the U.S. database to reflect

these price changes.

Comment 12: Torrington asserts that

the Department should disallow NTN’s

HM billing adjustments to NV.

Petitioner cites the CAFC’s decision in

Torrington VI that adjustments of this

sort are, by their nature, indirect and

may not be allocated across all sales.

Torrington claims that NTN’s

description of billing adjustments in its

questionnaire response is unclear as to

whether the adjustment is product-and

invoice-specific. Petitioner contends

that NTN has not met its burden of

proof of establishing entitlement to the

adjustment.

NTN counters that it did not allocate

the adjustment broadly across all sales

and that the Department verified the

accuracy of the adjustment and the

methodology NTN used to report it.

NTN maintains the Department was

correct in accepting the adjustment in

the preliminary results and should do so

for the final results.

Department’s Position: We disagree

with Torrington. NTN’s reporting

methodology was consistently

customer-and product-specific for

billing adjustments. As a result of our

verification of NTN’s HM sales, we

found that NTN reported the great

majority of billing adjustments on a

transaction-specific basis. As stated in

our introductory remarks to this section,

we prefer transaction-specific amounts

for these kinds of adjustment claims.

Because NTN acted to the best of its

ability in reporting the adjustment and

its allocations are not unreasonably

distortive, we have accepted the

reported adjustments for the final

results.

Comment 13: Torrington contends

that NTN Germany’s HM discounts and

rebates should be rejected in the

calculation of NV. Petitioner maintains

that these adjustments are direct

adjustments that respondent has

improperly reported on a customerspecific basis. Torrington claims that

respondent has reported its discount

adjustment incorrectly based on

information in the public version of the

home market verification report for the

1992–93 administrative review. Because

the adjustments are not reported on a

transaction-specific basis, petitioner

argues that the Department must reject

them.

NTN Germany counters that it has

reported its discounts and rebates in a

consistent and accurate manner in each

administrative review and that the

Department should accept them as

reported in this review.

Department’s Position: We disagree

with Torrington. NTN Germany

explained in its response that the

adjustments were based on agreements

with customers for eligible products.

Resulting total amounts for each

customer were allocated to sales to the

customer. Based on NTN Germany’s

response and information on the record

from verifications of previous reviews,

we believe respondent has acted to the

best of its ability in reporting the

adjustments and its allocations are not

unreasonably distortive.

4. Circumstance-of-Sale Adjustments

4.A. Technical Services and Warranty

Expenses. Comment 1: Torrington

argues that the Department should reject

NSK’s claim for an adjustment to NV for

technical service expenses. Torrington

asserts that NSK’s description of these

expenses indicates a direct relationship

to specific transactions, despite NSK’s

claim that it could not isolate technical

services for specific sales. Citing

Torrington VI at 1050, Torrington argues

that NSK cannot claim direct expenses

as an indirect adjustment merely

because it is inconvenient for NSK to

report them on the same basis on which

they were incurred. Torrington also

argues that NSK’s reported technical

service expense does not distinguish

between that paid on subject

merchandise and that paid on nonsubject merchandise.

NSK contends that, while it provides

technical service with respect to specific

customers or even to specific part

numbers, it does not incur expenses on

that basis. NSK argues that the expenses

referred to by Torrington are expenses

such as salaries, benefits, rent, utilities,

and depreciation and can be

characterized as fixed expenses. NSK

also argues that, because such expenses

are ISEs, NSK is under no burden to

remove such expenses as might

theoretically relate to sales of nonsubject merchandise because such

expenses are incurred to support NSK’s

sales generally.

Department’s Position: We disagree

with Torrington. We have examined the

information on the record and have

concluded that, based on NSK’s

description, its home market technical

service expense (such as the salaries and

benefits of technical service employees)

is a fixed expense and does not vary

with sales volumes. Therefore, we

conclude that they are of an indirect

nature. We further agree with NSK that,

due to the nature of ISEs, NSK need not

segregate such expenses between those

paid on subject and non-subject

merchandise.

Comment 2: Torrington argues that

the Department should treat NSK’s U.S.

technical service expense as a direct

expense instead of an indirect expense.

Torrington asserts that NSK admitted

that it did incur direct technical service

expenses in the United States but

claimed that allocation of direct

technical service expense resulted in a

de minimis factor, instead aggregating

them with its indirect technical service

expense. Citing AFBs IV at 10911,

Torrington contends that, when a

respondent fails to report U.S. technical

service expenses in direct and indirect

portions, it is the Department’s practice

to treat the expenses as a direct

adjustment to CEP.

NSK argues that it attempted to

identify which portion of its technical

service expenses is direct and which is

indirect, and it found that it had no

direct technical service expenses which

it could identify. NSK asserts that its

technical service expenses are salaries,

repairs, maintenance, and the like,

which NSK asserts the Department has

routinely recognized as indirect

expenses. Finally, NSK contends that

the Department has always treated its

technical service expenses as an indirect

expenses and Torrington has offered no

reason for the Department to reverse

itself.

Department’s Position: We agree with

NSK. In its response to our

questionnaire, NSK identified certain

technical service expenses which NSK

said could be considered direct in

nature. After examining these expenses,

which are separately identified in NSK’s

Proprietary Exhibit C–12, we concluded

that reclassifying these expenses as

direct would have no material impact
2098 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

on the margin calculation. See NSK Ltd.

Final Analysis Memorandum, dated

December 17, 1996. Therefore, we have

treated all of NSK’s U.S. technical

service expenses as indirect expenses

for the final results.

Comment 3: Torrington argues that

the Department should reject FAG

Germany’s reported HM direct warranty

expense because the expense was

allocated over all sales, regardless of

model, class or kind, or customer. Citing

Federal-Mogul V at 220, Torrington

contends that the CIT has affirmed the

Department’s practice of rejecting direct

deductions to foreign market value (now

NV) for warranty and technical service

expense because, although they were

not incurred as a fixed percentage of

sales value, they were allocated over all

sales.

FAG argues that it allocated variable

warranty costs over subject merchandise

only, that it explained its allocation in

its response, and that the Department

verified its direct warranty expense.

FAG argues that the court case

Torrington cites is inapposite because in

that case the allocations were made over

both subject and non-subject

merchandise.

Department’s Position: We agree with

FAG Germany. Similar to discounts and

rebates (see item 3, above), we have

accepted claims for home market direct

selling expenses as direct adjustments to

price if we determined that the

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

inaccuracies or distortions (e.g., if

granted proportionately on sales of outof-scope versus in-scope merchandise).

We have disallowed any allocated HM

direct selling expense which did not

meet this standard pursuant to

Torrington V.

We find that FAG Germany has

reported its HM variable warranty

expenses in the most feasible manner

possible. 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,

FAG may not incur warranty expenses

on POR sales until a future time period.

Therefore, warranty expenses generally

cannot be reported on a transactionspecific basis and an allocation is

necessary. FAG Germany allocated its

warranty expenses related to sales of

scope merchandise and its methodology

is not unreasonably distortive.

Accordingly, we have treated FAG’s

reported HM direct warranty adjustment

as a direct adjustment to NV.

Comment 4: Torrington argues that

the Department should disallow Koyo’s

HM ISE-offset claim because the

company failed to report direct warranty

expenses separately in the manner in

which it incurred them. Torrington,

citing Torrington VI at 1047–1051,

maintains that direct expenses, if not

reported in the manner in which they

are incurred, must be denied altogether.

Koyo responds that its methodology

for reporting its warranty expenses in

this review is the same as that it used

in a number of previous reviews of the

orders on AFBs and tapered roller

bearings. Koyo further states that the

Department has verified and accepted

Koyo’s methodology in previous

reviews and has never raised any

complaints regarding Koyo’s treatment

of warranties.

Department’s Position: We disagree

with Torrington. In general, it is not

possible to tie POR warranty expenses

to POR sales, since the warranty

expenses are incurred on pre-POR sales.

Further, Koyo calculated a warranty

expense factor based on the ratio of total

warranty claims to total bearing sales, as

in AFBs III (at 39743), in AFBs IV (at

10910), and in AFBs V (at 66485), where

Koyo used the same allocation

methodology. In these reviews, we also

find that Koyo’s allocation of warranty

expenses is not unreasonably distortive,

and we have accepted them for these

final results.

Comment 5: Torrington requests that

the Department deny an adjustment to

NV for FAG Italy’s reported HM

technical service expense, arguing that

the company failed to report the

adjustment in the manner the

Department requested. Torrington

contends that FAG Italy averaged total

HM direct technical service expenses

over all POR sales instead of on a

customer-specific basis as requested by

the Department. Moreover, Torrington

claims that the Department should not

treat the claimed HM technical service

expense as an indirect expense because

the expense is direct in nature, citing

Torrington VI at 1050–1051 in support

of its argument that the Department may

not treat direct expenses as indirect.

FAG Italy argues that it properly

calculated and reported its HM

technical service expenses and that the

Department lawfully permitted the

adjustment to NV as it has in all prior

reviews of these AFB orders. In support

of the Department’s treatment of the HM

technical service expenses as direct,

FAG Italy states that the expenses are

variable and that they are dependent

only upon sales of the merchandise

under review. In conclusion, FAG Italy

contends that Torrington’s reference to

Torrington VI is inappropriate because

the adjustments at issue in that case

were indirect expenses allocated over

all sales (scope and non-scope) whereas

FAG Italy’s HM technical service

expenses are direct and are only

allocated over scope merchandise.

Department’s Position: We agree with

FAG Italy. In our questionnaire, we

instructed FAG Italy to report the

technical service expenses directly

related to sales of the foreign like

product, less any reimbursement

received from the customer. In its

questionnaire response, FAG Italy stated

that it first subtracted the fees that it

received from its customers from the

pool of technical service expenses and

allocated the remainder by dividing by

the ‘‘applicable home market sales.’’

This reporting methodology is

consistent with FAG Italy’s accounting

and record-keeping systems and is an

accurate representation of the

company’s technical service expenses.

Since FAG Italy’s reporting of this

information is the most specific that is

feasible and is not unreasonably

distortive, we have accepted the

company’s HM variable technical

service expenses as a direct adjustment

to NV.

Comment 6: Torrington states that

SNR’s response indicates that it

allocated HM warranty expenses over

both scope and non-scope merchandise,

despite the Department’s verification

report indicating that the expenses were

allocated over sales of scope

merchandise only. Torrington urges the

Department to ensure for the final

results that HM warranty expenses were

properly allocated and have not been

overstated.

SNR asserts that the Department

verified its direct warranty expenses,

which it limited to returns of scope

products and allocated over sales of

only scope products. Therefore, SNR

concludes, the Department found its

HM warranty expenses to be properly

allocated and not overstated.

Department Position: We agree with

SNR that it allocated only HM warranty

expenses related to scope products over

scope products. As we indicated in the

verification report, we verified those

warranty expenses and did not find any

discrepancies.

4.B. Commissions. Comment 1:

Torrington argues that the Department

should reject NSK’s claimed adjustment

to NV for commissions paid for delivery

on behalf of NSK. Torrington notes that

NSK summed all commissions paid to a
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2099

commissionaire for deliveries and

allocated that amount over total NSK

sales to the commissionaire. Torrington

contends that it is not evident that NSK

actually incurred commissions on all

sales to the commissionaire. Torrington

also argues that the total commissions

and the total sales to the customer

include commissions paid on sales of

non-subject merchandise, which is

contrary to law, citing Torrington I at

1579. Finally, Torrington argues that,

even if the Department permits an

adjustment for such commissions, the

Department should disregard those

commissions NSK paid to affiliated

commissionaires because NSK failed to

demonstrate that they were made at

arm’s length.

NSK argues that the Department

correctly deducted commissions for

delivery on behalf of NSK as a direct

expense. NSK argues that the proposed

regulations for implementing the URAA

allow respondents to allocate expenses

if transaction-specific reporting is not

feasible, as long as the allocation is not

distortive (citing Antidumping Duties;

Countervailing Duties; Proposed Rule,

61 FR 7308, 7330, 7381 (February 27,

1996) (proposed §351.401(g) and

commentary)). NSK contends that its

records are not maintained on a

transaction-specific basis and, therefore,

it cannot report HM commission

expenses on a transaction-specific basis.

NSK claims that its allocation

methodology is non-distortive.

Department’s Position: We disagree

with Torrington. We conclude that,

although NSK may not have allocated

these commissions on the same basis

that they were incurred, the allocation

methodology is sufficiently accurate

that whatever distortion may exist will

have no material impact on NSK’s

margin. As we noted in the home

market verification report, NSK

calculated customer-specific factors by

dividing the total commission paid to a

commissionaire by the sum of the sales

that generated the commission. See

Home Market Verification Report dated

April 26, 1996, at page five. As the

allocation is customer-specific, there is

no possibility of shifting expenses from

one customer to another. Moreover,

because NSK allocated these

commissions over only those sales that

actually incurred such commissions,

there is no possibility that NSK reported

commissions for sales which did not

incur them. Finally, for business

proprietary reasons discussed in the

analysis memorandum, we conclude

that there is no possibility that NSK

included in its reporting any

commissions paid on non-subject

merchandise. See NSK Ltd. Final

Analysis Memorandum, dated

December 17, 1996. For these reasons

we disagree with Torrington, and we

conclude that NSK’s allocation

methodology is not unreasonably

distortive and that NSK acted to the best

of its ability in reporting these

commissions. Therefore, we determine

that a direct adjustment to NV for

commissions for delivery on behalf of

NSK is appropriate.

We agree with Torrington that we

should disregard commissions that NSK

paid to affiliated commissionaires for

delivery on behalf of NSK. As discussed

in the final results analysis

memorandum, we conclude that the

commissions NSK paid to affiliated

commissionaires were not made at

arm’s-length. See NSK Ltd. Final

Analysis Memorandum, dated

December 17, 1996.

Comment 2: Torrington argues that

the Department should reject NSK’s

claim for an adjustment to NV for

distributor-incentive commissions.

Torrington notes that the Department

treated this as a direct adjustment to NV

for the preliminary results even though

NSK requested that these commissions

be treated as ISEs. Torrington argues

that NSK failed to demonstrate that

these commissions do not include

payments it made on non-subject

merchandise or that it, in fact, paid any

commissions on subject merchandise.

Torrington also claims that NSK’s

allocation methodology is distortive,

because the possibility exists that it

claimed an adjustment on sales for

which it paid no commission.

Torrington asserts that the Department

disallowed this expense in AFBs IV, as

well as in Tapered Roller Bearings from

Japan, 56 FR 64720, 64723 (1993), and

was affirmed by the CIT in NSK III.

Finally, Torrington argues that, even if

the Department permits an adjustment

for such commissions for the final

results, the Department should

disregard commissions NSK paid to

affiliated commissionaires.

NSK argues that the Department

should continue to treat distributorincentive commissions as a direct

expense. NSK contends that, while the

Department rejected its distributorincentive commissions in AFBs IV, it

later treated such commissions as a

direct expense and this practice was

affirmed in Torrington IV.

Department’s Position: We agree with

Torrington that we should not treat

distributor-incentive commissions as a

direct adjustment to NV. Our treatment

of these commissions as a direct

adjustment for the preliminary results

was an inadvertent error on our part. As

NSK explained in its supplemental

response, ‘‘this expense is earned on the

basis of the distributor’s resale, rather

than on NSK’s sale to the distributor.’’

See NSK’s response to our supplemental

questionnaire, dated December 7, 1995.

We later verified this information. See

NSK home market verification report,

dated April 26, 1996. We conclude that

NSK did not incur this expense directly

on its sales to its customers. Based on

the nature of this expense, we conclude

that it is not really a commission.

Rather, we agree with NSK’s

characterization in its supplemental

response that distributor-incentive

commissions are an indirect

promotional expense as opposed to a

price adjustment because NSK grants

these ‘‘commissions’’ to promote sales

made by distributors.

We disagree with Torrington that we

should disregard distributor-incentive

commissions NSK paid to affiliated

commissionaires. As discussed in the

final results analysis memorandum, we

conclude that the commissions NSK

paid to affiliated commissionaires were

made at arm’s length. Therefore, we

have adjusted NV for these

commissions. See NSK Ltd. Final

Analysis Memorandum, dated

December 17, 1996.

4.C. Credit. Comment 1: Torrington

argues that the Department should

adjust NSK’s HM credit expense

calculations by excluding discounted

notes. Torrington argues that discounted

notes are not part of an unpaid balance

but rather represent paid amounts,

albeit at a discount, during the month.

Torrington argues that the burden is on

NSK to demonstrate that it did not

include notes that had been paid, and

contends that NSK did not demonstrate

this on the record. Therefore, Torrington

argues, the Department should either

exclude discounted notes from NSK’s

credit-expense calculation or use the

lowest credit expense NSK reported for

all HM sales during the POR.

NSK argues that the Department

verified that, while NSK included

unpaid notes receivable in its credit

calculation, it did not count notes

receivable that had been paid. NSK also

argues that it used the term

‘‘discounted’’ to differentiate one

specific type of notes receivable from

other types.

Department’s Position: We disagree

with Torrington. While discounted

notes do not technically represent an

unpaid balance, NSK does not obtain

the use of the entire balance owed by

the customer for the note. When a

company discounts a note through a

bank, the bank typically assesses a

charge or fee for discounting the note.

Therefore, when discounting a note
2100 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

through a bank, the company incurs a

cost for obtaining a smaller amount of

money than that to which it would be

entitled had it held onto the note until

maturity. NSK calculated the interest

rate for its discounted notes in a manner

similar to that which it did for other

loans. At verification, we found that

NSK does incur discounted-note

expenses, and we determined in our

analysis of NSK’s reported HM credit

expense that respondent accounted for

discounted notes properly in its

methodology.

Comment 2: Torrington comments

that FAG Germany improperly added

one credit day in calculating credit

expense for HM sales, by claiming that,

under operating procedures common to

the German banking system, there is a

lag in the availability of funds in

Germany which does not exist in the

United States. Torrington contends that,

even if the alleged banking delay was

supported by the record, it would apply

to all payments in Germany, whether

completed upon delivery or after the

expiration of an agreed-upon term.

Thus, Torrington argues, the one-day

period allegedly required by the bank to

process the payment is no more relevant

to the imputed credit expense

calculation than, for example, a

respondent’s own administrative delays.

Torrington argues that the Department

should recalculate FAG Germany’s

reported home market credit expense by

reducing the time between sale and

payment by one day.

FAG Germany argues that, in

accordance with specific procedures

which the Department verified, it does

not technically receive payment from its

customers until the day after its banks

actually received the customer’s check

or transfer. FAG Germany contends that,

in accordance with Departmental

reporting requirements, it reports all

expenses on the same basis in which

they are incurred, and that, where funds

are not available in FAG’s accounts

until one day after deposit by German

law and practice, it has legitimately

incurred an extra day of credit costs.

Department’s Position: We agree with

FAG. As we noted in the HM

verification report, we analyzed several

credit notes, promissory notes, and

short-term loan agreements to determine

the accuracy of FAG’s submission and

found no discrepancies. Therefore, we

found that FAG reported its dates of

payment in its response accurately. Had

FAG not justified the extra day reported

in the home market at verification, we

would have noted it and adjusted FAG’s

HM credit expenses accordingly. As this

was not the case, we have accepted

FAG’s HM credit expenses as reported.

Comment 3: Torrington contends that

the Department should not accept FAG

Italy’s HM credit expense data that the

company provided after verification

unless the Department is fully satisfied

that the amounts are accurate.

Torrington notes that, at verification, the

Department discovered FAG Italy had

failed to report credit amounts for

certain HM customer codes.

Torrington’s concern is that when FAG

Italy submitted the credit expense

information on the record after

verification it may have overstated its

customers’’ actual credit expenses.

Torrington requests that the Department

compare the average credit expenses

FAG Italy reported after verification to

the average credit expenses it reported

originally to ensure that the new credit

expense figures typify FAG Italy’s

experience.

FAG Italy contends that it reported

accurately the missing credit expenses

discovered at verification. FAG Italy

notes that its inadvertent reporting error

affected very few transactions and

argues that Torrington’s concern about

the credit expenses being over-reported

is unfounded since the Department

successfully verified the calculation of

the missing HM credit expenses and the

data used therein.

Department’s Position: We agree with

FAG Italy that it reported accurately the

missing HM credit expenses we

discovered at verification. To test

whether FAG Italy reported these

expenses accurately in its revised

database, we compared the average

credit expenses the company reported

after verification to the average credit

expenses it reported originally. We

found that the new credit expenses

typify FAG Italy’s experience and we

made the adjustment to NV for the final

results.

Comment 4: Torrington argues that

the Department should ensure that it

deducts NSK–RHP’s credit expense on

all relevant U.S. sales. Torrington claims

that NSK–RHP did not report a U.S.

credit expense for those sales for which

it was unable to determine the

appropriate date of payment. Torrington

states further that, in response to

Torrington’s pre-preliminary comments,

NSK–RHP asserted that the Department

should calculate the credit expense

based on the due date of respondent’s

supplemental response, January 11,

1996, which was the last time NSK–RHP

submitted data. Torrington claims that

NSK–RHP left the credit expense for

certain U.S. sales blank even though the

information was subsequently available.

Torrington proposes that an appropriate

amount for credit expense for such sales

should be based on the number of days

from shipment to the date of the

preliminary results.

Torrington states that, with respect to

those U.S. sales for which INA did not

report a payment date, the Department

should estimate a payment period, for

the purpose of calculating credit

expenses, based on the difference

between the date of sale and the date of

the final results of review.

NSK–RHP argues that the Department

instructed NSK–RHP to leave the date of

payment variable blank for all

transactions for which NSK–RHP or its

affiliated companies could not

determine the date of payment. NSK–

RHP contends that it followed the

Department’s instructions and has

cooperated fully with the Department’s

requests for information and, thus, use

of adverse facts available is

inappropriate in this case. NSK–RHP

concludes by stating that the

Department calculated its credit

expense correctly for the preliminary

results.

INA agrees with Torrington that the

Department should estimate a credit

period for U.S. sales without a payment

date but disagrees with Torrington’s

proposed methodology. INA contends

that the period Torrington proposes is

arbitrary and an application of adverse

facts available, for which there is no

basis. Instead, INA argues, the

Department should apply the

methodology it employed in other cases,

where the Department calculated a

surrogate credit period based on the

average number of days between the

date of sale and the date of payment for

all U.S. sales.

Department’s Position: We agree with

Torrington that NSK–RHP did not

provide date of payment information for

those U.S. sales for which it contends

that it could not determine the date of

payment. However, the record

illustrates that, as is the case with INA,

NSK–RHP completed this field for as

many transactions as possible and left it

blank for only those transactions in

which it could not determine the date

of payment as instructed in our original

questionnaire at page C–11, field 12.0.

Under section 776(a)(1), the

Department shall use the facts otherwise

available in reaching its final

determination when the necessary

information is not on the record.

Because the final date of payment is not

known for certain transactions for these

respondents, we must resort to facts

otherwise available in determining a

reasonable period of time for calculating

credit expenses. We agree with

Torrington that we should estimate a

payment period for those sales for

which NSK–RHP and INA did not
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2101

provide the date of payment. However,

we disagree with Torrington’s

recommendation that we use the

number of days from shipment to the

date of the preliminary results as a

surrogate. This treatment would

constitute an adverse inference and is

not warranted by the facts of this case.

Therefore, for these final results, we

used the average credit period for all

transactions with reported shipment

and payment dates as a surrogate for the

actual credit period in calculating credit

expenses for those sales without a

known date of payment. See Final

Determination of Sales at Less Than Fair

Value: Certain Pasta From Italy, 61 FR

30332 (June 14, 1996).

Comment 5: Torrington argues that

the Department should ensure that SKF

France has reported appropriate

payment dates for HM sales. Torrington

contends that SKF France identified the

payment date as the date the payment

is deposited in SKF’s bank and that this

date may be several days after the date

which the customer actually paid SKF.

Torrington asserts that, if the

Department cannot determine that SKF

France reported the actual payment

date, it should apply a facts-available

approach, such as an estimate of the

number of days between receipt of

check and deposit in the bank, and

adjust the credit expense accordingly.

SKF France argues that the

Department has verified and accepted

SKF France’s credit expense calculation,

as well as its record-keeping and

accounting payment on invoices. SKF

France adds that it linked the invoice

number to the dates of payment

electronically such that, in all but a very

few instances, it reported the actual

payment date.

Department’s Position: We agree with

SKF. We have no reason to believe that

SKF France reported payment dates for

HM sales inappropriately. Torrington

does not offer any evidence that SKF

France’s reported payment date is not

the actual date SKF France received

payment. Further, as SKF France stated

in its September 26, 1995 response, only

in a few cases did it not report the actual

payment date. Where SKF France could

not identify the actual payment date it

used an average customer-specific or

company-specific accounts-receivable

days-outstanding date. See SKF France’s

questionnaire response at 48. Hence, we

are satisfied that SKF France’s reporting

of its HM payment date is not

unreasonably distortive.

Comment 6: Torrington contends that,

based on information in NTN’s financial

statements, respondent has underreported the days outstanding for the

calculation of U.S. credit expenses.

Petitioner provides analysis of the

financial statements as applied to

sampled sales and suggests that the

Department recompute the expense.

Department’s Position: We disagree

with Torrington. We examined credit

expenses at our verification of the U.S.

response. NTN reported customerspecific days outstanding on payments

rather than transaction-specific days

outstanding. Although there were

instances of slight variation from the

customer-specific days outstanding to

the transaction-specific days

outstanding, the reported outstanding

periods were largely accurate and

reasonably reflect the days outstanding

basis for the calculation.

4.D. Indirect Selling Expenses.

Comment 1: Torrington contends that

INA’s method of calculating its U.S. ISE

ratio (selling expenses incurred on sales

of imported merchandise to total sales

of imported merchandise) is distortive.

Torrington asserts that INA’s records do

not allow for a distinction to be made

between selling expenses on imported

merchandise and selling expenses on

U.S.-produced merchandise. Torrington

states that some of the cost centers, for

which INA applied ratios to total

expenses accumulated in each cost

center to obtain an estimated amount for

expenses attributable to import sales,

were associated with U.S.-produced

merchandise. Torrington also states that,

for many cost centers, INA was unable

to calculate a specific ratio. Torrington

concludes that the Department should

reject INA’s reported U.S. ISE rate and

recalculate it based on total expenses

and sales.

INA agrees with Torrington’s proposal

that the Department recalculate the U.S.

ISE rate based on total expenses and

sales of produced and imported

merchandise. INA provides proposed

revised rates which it states are based

on corrected data it submitted to the

Department in its supplemental

questionnaire response.

Department Position: We disagree

with Torrington’s assertion that INA’s

U.S. ISE ratio is distortive. We verified

the calculation of this expense

thoroughly and were satisfied with

INA’s methodology. As we indicated in

the verification report, INA applied a

specific ratio for those cost centers for

which INA maintains separate records

in its monthly sales detail. For those

cost centers for which it was unable to

calculate a more specific ratio, INA

applied general ratios to total expenses

associated with U.S.-produced

merchandise. We believe that INA’s

method of allocating its U.S. ISEs is not

unreasonably distortive and have relied

on it for the final results.

Our practice is to adhere to an

individual firm’s recording of costs, if

we are satisfied that such principles

reasonably reflect the costs of producing

the subject merchandise and are in

accordance with the GAAP of its home

country. See, e.g., Canned Pineapple

Fruit from Thailand; Final

Determination of Sales at Less Than Fair

Value (Canned Pineapple from

Thailand), 60 FR 29553, 29559 (June 5,

1995); Certain Stainless Steel Welded

Pipe from the Republic of Korea; Final

Determination of Sales at Less Than Fair

Value, 57 FR 53693, 53705 (November

12, 1992). See also Furfuryl Alcohol

from South Africa: Final Determination

of Sales at Less Than Fair Value, 60 FR

22550, 22556 (May 8, 1995) (‘‘(t)he

Department normally relies on the

respondent’s books and records

prepared in accordance with the home

country GAAP unless these accounting

records do not reasonably reflect the

COP of the merchandise’). The CIT has

upheld the Department’s use of

expenses recorded in a company’s

financial statements, when those

statements are prepared in accordance

with the home country’s GAAP and do

not significantly distort the company’s

actual costs. See, e.g., Laclede Steel Co.

v. United States, Slip Op. 94–160 at 22

(CIT 1994). Normal accounting practices

provide an objective standard by which

to measure costs, while allowing

respondents a predictable basis on

which to compute those costs. However,

in those instances where it determines

that a company’s normal accounting

practices result in a unreasonable

allocation of production costs, the

Department will make certain

adjustments or may use alternative

methodologies that more accurately

capture the costs incurred. See, e.g.,

New Minivans from Japan; Final

Determination of Sales at Less Than Fair

Value, 57 FR 21937, 21952 (May 26,

1992). In this case, we are satisfied that

INA’s calculations reasonably reflect its

ISEs. The fact that INA calculated a

general ratio for only some of its cost

centers does not prevent us from

reasonably using the data provided to us

by INA concerning its ISEs. Thus, the

application of facts available is not

warranted; we have not recalculated

INA’s reported U.S. ISEs.

Comment 2: Torrington contends that

the Department should modify its

calculation of INA’s U.S. ISEs incurred

in the country of exportation in order to

reflect the addition of certain cost

centers INA reported in its

supplemental questionnaire response.

INA asserts that the Department

included the revised U.S. ISE rate in the

preliminary results and that this rate is
2102 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

actually higher than the U.S. ISE rate

that would result under Torrington’s

proposed methodology.

Department Position: We disagree

with Torrington. As stated in response

to Comment 1, we disagree with the

view that we should adopt Torrington’s

methodology for recalculating U.S. ISEs

(see Comment 1 of this section).

Moreover, INA is correct in its assertion

that we included the revised U.S. ISEs

in the preliminary results calculations.

Because no party has adequately

supported an alternative methodology,

we have no basis for determining that

our preliminary results calculations

were not reasonable. Accordingly, we

have maintained this revision of INA’s

U.S. ISEs for the final results of review.

Comment 3: Torrington contends that

the Department’s verification report

indicates that INA did not allocate its

domestic ISE ratio on the same basis as

its export ISE ratio. Torrington argues

that, as a result, INA has overstated its

domestic ISEs because, while the

denominator for the export ISE ratio

includes all export sales, the

denominator for the HM ISE ratio does

not include all domestic sales. In

addition, Torrington cites to the

Department’s verification report as

support for its argument that the

numerator of the domestic ISE ratio

includes costs that are not selling

expenses. Torrington asserts that, by

including such expenses, INA has

overstated the numerator of this ratio.

Torrington contends that, if it is

feasible, the Department should

recalculate the domestic ISE ratio;

otherwise, Torrington argues, the

Department should reject the reported

HM ISEs.

INA responds that it reported home

market indirect selling expenses

properly. INA takes issue with

Torrington’s assertion that the

Department’s verification report stated

that INA’s allocation of its domestic

indirect selling expenses is inconsistent

with its allocation of export selling

expenses. INA explains that it

determined the sales and expenses of

the enterprise that produces the subject

merchandise in the home market on a

consolidated basis, eliminating

transactions between the HM entities

which comprise the HM manufacturing

entity. INA states that the consolidated

entities do not include those outside the

home market because such entities are

not associated with the enterprise that

manufactures subject merchandise;

rather, they are customers of the

enterprise. INA also takes issue with

Torrington’s assertion that the

numerator of the ratio INA used to

allocate domestic ISEs includes costs

which are not selling expenses. INA

contends that, in calculating the

numerator amount, it excluded those

categories that it reported under other

classifications (in accordance with the

Department’s instructions in the

questionnaire), and those which were

not applicable to HM sales. INA states

that it classified the remaining cost

centers as domestic selling expenses as

directed by the questionnaire.

Department Position: We disagree

with Torrington. As we indicated in

response to comment 1, in determining

whether to adhere to an individual

firm’s recording of costs, an important

factor is whether we are satisfied that its

reporting reasonably reflect the

expenses being examined. In this case,

we find that INA’s methodology is not

distortive. Indeed, we examined INA’s

reporting methodology for ISEs

thoroughly at verification. Based on our

examination, we are satisfied that INA’s

allocation of its domestic ISEs is

consistent with its allocation of its

export selling expenses.

Comment 4: Torrington argues that

the Department should adjust NSK’s

claimed HM ISEs to disallow a certain

expense included in the pool of ISEs.

Torrington argues that, although NSK

did not report how it calculated this

expense, NSK claimed this expense as a

direct adjustment to foreign market

value (FMV) in prior reviews.

Torrington contends that NSK incurred

this expense on specific transactions

and that, pursuant to Torrington VI at

1050, the Department cannot treat it as

an indirect expense. Torrington also

argues that NSK’s allocation is distortive

because it is not reported on the basis

on which it is incurred and that NSK’s

allocation does not distinguish between

subject and non-subject merchandise.

NSK argues that the Department has

determined in prior reviews that the

expense is not incurred directly on sales

NSK made. NSK contends that it

reported this expense in a manner

consistent with the Department’s prior

rulings on this expense.

Department’s Position: We disagree

with Torrington and, for these final

results, have treated all of NSK’s

claimed HM ISEs as indirect expenses.

In determining whether to treat these

and other expenses at direct or indirect

expenses, we examined whether they

vary with the quantity of subject

merchandise sold (see Zenith

Electronics Corp. v. United States, 77

F.3d 426, 431 (CAFC 1996)), or were

related to a particular sale (see

Torrington Co. v. United States, 68 F.3d

1347, 1353 (CAFC 1995). This analysis

did not lead us to conclude that, as

argued by Torrington, NSK incurred the

ISEs on specific transactions. Thus,

although the proprietary nature of this

expense makes it impossible to give a

full discussion of this issue in this

notice, we note that it is evident from

the record that NSK did not incur this

expense directly on sales to its

customers. This issue is discussed

further in NSK’s analysis memorandum.

See NSK Ltd. Final Analysis

Memorandum, dated December 17,

1996. Therefore, we conclude that the

expense is not related directly to any

sales NSK reported in its HM sales

database and it is proper to treat it as an

indirect expense.

Comment 5: Torrington argues that

the Department should treat NSK’s U.S.

advertising expense as a direct expense

instead of as an indirect expense.

Torrington contends that NSK did not

adequately prove that its advertising

expenses were indirect, stating that NSK

did not provide examples of U.S.

advertising and that the Department did

not examine examples of NSK’s U.S.

advertising in the course of verification.

NSK argues that the Department has

rejected similar arguments made by

Torrington in prior reviews and argues

that its catalogs and show exhibits are

not aimed at the customer’s customer

and, therefore, are indirect in nature.

Department’s Position: We agree with

NSK. For advertising to be treated as a

direct expense, it must be incurred on

products under review and assumed on

behalf of the respondent’s customer;

that is, it must be shown to be directed

toward the customer’s customer. See

AFBs I at 31725. The examples of U.S.

advertising submitted by NSK are not

specific to bearings but instead are

general in nature, as NSK suggests.

NSK’s supplemental response dated

December 7, 1995, at page 56, described

the advertising expenses that NSK

incurs. We examined these expenses

and determined that they are not aimed

at the customer’s customer. Therefore,

we are satisfied that NSK’s U.S.

advertising expenses are indirect. With

regard to the catalogs, it is apparent that

they are not aimed at any particular

customers or group of customers. While

NSK’s customers’ customers may have

used some catalogs, it is not evident that

only the customers’ customers used

them or that the catalogs were targeted

for the customers’ customer. With

regard to the show exhibit expense, it is

clear from information on the record

that this expense was aimed at NSK’s

customers and not to the customers’

customer. Finally, other NSK

advertising expenses, such as hats and

shirts that carry NSK’s logo, are ‘‘image’’

advertising and not aimed at any

customer or group of customers. The
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record in this review reflects that NSK’s

U.S. advertising expenses are indirect in

nature. Therefore, we conclude that

none of these advertising expenses are

direct in nature and have treated them

as ISEs for these final results.

Comment 6: Torrington contends that

FAG Germany never explained its HM

ISE-allocation methodology in any of its

responses and that the Department

recognized this failure in its verification

report. Torrington contends that,

although the Department included an

explanation of the allocation

methodology in its verification report,

the explanation applies to only one of

the legal entities that comprise FAG

KGS. Torrington claims that, although

FAG Germany indicated that it used the

same methodology for the other entities,

the Department’s verification report

appears to refute FAG Germany’s claim.

Torrington argues that FAG

Germany’s failure to provide an

explanation deprives the domestic

interested party of an adequate

opportunity to comment on the claimed

expenses and distorts the investigative

process. Torrington contends that there

are a number of unexplained

inconsistencies in FAG Germany’s

allocation methodology. Torrington

argues that the Department should reject

FAG Germany’s reported ISEs and

apply, as facts available, a single

expense rate based on the lowest of the

several expense rates FAG Germany

reported.

FAG Germany argues that it did

explain its allocation methodology in

both its original response and its

supplemental response and that the

Department verified its methodology

completely without finding any

discrepancies. FAG Germany contends

that it used the same methodology for

all entities comprising FAG KGS and

notes that the Department’s verification

report states that ‘‘because FAG used the

same allocation methodology for each

entity, [its] discussion below details the

Department’s trace only through that

documentation provided for [FAG

Automobiltechnik AG],’’ citing FAG

Germany Home Market Verification

Report at 7. FAG Germany also argues

that Torrington was afforded adequate

opportunity to comment on the claimed

expenses. Finally, in response to

Torrington’s argument that there are

unexplained inconsistencies in FAG

Germany’s methodology, respondent

notes that the Department found no

discrepancies at verification.

Department’s Position: We agree with

FAG Germany. While it is true that

respondent did not explain the

allocation methodology fully in its

original response, we examined FAG

Germany’s methodology in detail at

verification and described the

methodology in the verification report.

In addition, we took exhibits supporting

our findings at verification. Based upon

the record, inclusive of the verification

report and exhibits, we determined that

FAG Germany’s allocation of ISEs was

not unreasonably distortive.

In response to Torrington’s assertions

that (1) although the Department

included an explanation of the

allocation methodology in its

verification report, the explanation

applies only to one of the legal entities

that comprise FAG KGS, and (2)

although FAG Germany indicated that it

used the same methodology for the

other entities, the Department’s

verification report appears to refute FAG

Germany’s claim, we point out that the

Department’s verification report states

that ‘‘because FAG Germany used the

same allocation methodology for each

entity, our discussion below details the

Department’s trace only through that

documentation provided for (one of the

legal entities).’’ In other words, we used

the same verification process for each

entity we examined, but set out the

steps in detail for only one of the

entities.

With regard to Torrington’s

contention that it was deprived of an

adequate opportunity to comment on

the claimed expenses, we note that we

gave Torrington the same opportunity to

comment on any facet of our

preliminary results that all interested

parties receive. Moreover, Torrington’s

counsel received proprietary versions of

the verification report and exhibits

under administrative protective order.

Therefore, Torrington was not deprived

of an adequate opportunity to comment

on this aspect of the review.

Comment 7: Torrington contends that

FAG Germany’s and FAG Italy’s

reporting methodology for U.S. ISEs

does not accurately reflect selling

expenses on the reviewed U.S. sales

because the allocation methodology

includes expenses on sales of FAG

Canada to U.S. customers. Torrington

requests that the Department reject FAG

Germany’s and FAG Italy’s reported

U.S. ISEs and recalculate the adjustment

based on U.S. sales and U.S. selling

expenses only.

FAG Germany and FAG Italy contend

that their U.S. ISE calculation

methodology properly includes certain

expense and sales data relating to FAG

U.S.’s facilitation of sales by FAG

Canada to the U.S. market. They

contend that it is not possible for FAG

U.S. to isolate expenses it incurred in

providing the sales support to FAG

Canada. FAG Germany and FAG Italy

note that the Department verified their

data and allocation methodology for

U.S. ISEs with no discrepancies noted

and that the Department accepted the

same methodology in previous reviews.

Department’s Position: We disagree

with Torrington. After reviewing the

allocation methodology FAG Germany

and FAG Italy used, we have

determined that it reasonably reflects

the companies’ U.S. ISEs. FAG Germany

and FAG Italy reported that it was

impossible to segregate the ISEs which

FAG U.S. incurred on its own sales from

those it incurred in support of FAG

Canada’s sales to the United States. We

found nothing in the response or at

verification to contradict this statement.

This being the case, were we to

recalculate respondents’ U.S. ISE factors

by excluding FAG Canada’s sales and

expenses, we would effectively

overstate the ISE factors by not

allocating the expenses over all of the

sales on which they were incurred.

Therefore, we must include FAG

Canada’s sales in the calculation. In

order to avoid distortions, we have also

included a portion of FAG Canada’s

ISEs applicable to its U.S. sales. To not

include these expenses would

effectively dilute the ISE factor because,

while all sales incurring the expense

would be included, not all of the

expenses FAG U.S. incurred would be

included in the calculation. Therefore,

given FAG Germany’s and FAG Italy’s

factual situation, the ISE allocation

methodology they employed is

appropriate.

Comment 8: Torrington argues that

the Department incorrectly accepted

certain of Koyo’s claimed HM ISEs,

stating that Koyo did not provide a full

explanation as to why these expenses

are considered ISEs rather than general

administrative expenses. Torrington

identifies these expenses as follows:

benefits and directors fees, tax and rate,

maintenance, environment and safety

control, cleaning, quality control, fuel

and maintenance of forklifts,

intellectual property, enterprise tax, and

a miscellaneous category.

Koyo maintains that it reported its

HM ISEs as it has in previous reviews

and that the Department has verified its

ISEs on various occasions and accepted

the reported expenses, with the

exception of the bad-debt allowance, in

all past reviews.

Department’s Position: We agree with

Koyo. As reported in our verification

report, Koyo’s methodology of

calculating allocation factors reflected

the nature of the expenses involved. See

Verification Report of February 23, 1995

at 10. During verification, Koyo’s

management provided an explanation of
2104 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

these ISE items. When we verified these

various ISE items, we not only tied all

selected expenses to source documents

but we also examined the nature of

these items and found that they were

related to the sales of subject

merchandise. Based on the discussions

and the findings at verification, we

conclude that Koyo properly included

these expenses as ISEs.

Comment 9: Torrington claims that

the Department should disallow

downward adjustments to U.S. ISEs for

interest incurred by respondents when

borrowing to finance deposits for

estimated antidumping duties.

Torrington relies on the Department’s

decision in AFBs IV (at 10918) to

support its position.

Koyo counters that the issue is

directly comparable to the Department’s

policy of not deducting antidumping

duty deposits from CEP, given that these

do not bear a relationship to the actual

dumping duties owed. Koyo argues that

it is likewise inappropriate for the

Department to deduct expenses incurred

for the purpose of making those

deposits, such as the interest incurred to

finance the deposits.

Department’s Position: We disagree

with Torrington that we should disallow

this downward adjustment for interest

expenses respondents incurred when

borrowing to finance cash deposits of

estimated antidumping duties, and we

consider it proper to allow the

downward adjustment to U.S. ISEs. The

Department considers these expenses to

be comparable to expenses for legal fees

related to antidumping proceedings.

The expenses were incurred only

because of the existence of the

antidumping duty orders and

respondents’ involvement therein.

Therefore, the expenses cannot be

categorized as selling expenses. It is the

Department’s longstanding practice not

to treat expenses related to the dumping

proceedings as selling expenses. For

example, in Color Television Receivers

From the Republic of Korea, 58 FR

50336, the Department stated that such

expenses ‘‘are not expenses incurred in

selling merchandise in the United

States.’’ The CIT recognized this line of

reasoning in Daewoo Electronics Co. v

United States, 712 F. Supp. 931 (CIT

1989) (Daewoo), when it concluded that

the classification of such expenses as

selling expenses subject to deduction

from price ‘‘would create artificial

dumping margins and might encourage

frivolous claims * * * which would

result in increased margins.’’

Respondents incurred these expenses as

part of the process attendant to the

antidumping duty orders; had the

antidumping duty orders not existed,

respondents would not have incurred

these expenses. By their nature, such

expenses are not a selling expense, and

we should not deduct them from CEP.

We clarified our position on this issue

in our Results of Redetermination

Pursuant to Court Remand, Slip Op. 96–

37, which we submitted to the CIT on

September 20, 1996. In that remand the

Department was ordered to explain its

acceptance of the downward adjustment

to NTN’s ISEs in AFBs III. In the

redetermination we determined that the

interest expenses to finance cash

deposits were not borne, directly or

indirectly by NTN’s U.S. subsidiary

firm, to sell the subject merchandise in

the United States. The interest expenses

at issue, like legal fees, are an

expenditure which respondents actually

incurred, but clearly did not incur in

selling AFBs to the United States.

Consequently, these expenses were not

eligible to be deducted from CEP under

section 772(e) of the Tariff Act. We also

stated that we believed that we erred in

not allowing the offset to U.S. ISEs in

AFBs IV. For these reasons we consider

it reasonable to accept this offset to U.S.

ISEs for these final results.

We believe that the adjustment should

be allowed, whether a respondent limits

its calculation to only those interest

expenses incurred on cash deposits

during the period under review or

calculates a cumulative adjustment

which reflects not only the interest

expenses incurred on cash deposits

made during the period being reviewed

but the interest expenses incurred

during the POR on cash deposits made

in previous review periods as well.

When a respondent finances cash

deposits it incurs a financing expense

which reflects the opportunity costs

which arise when funds are used to pay

cash deposits rather than in other

interest-yielding financial arrangements.

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 entries during a particular

POR but antidumping duties are not

assessed on entries for several years, the

financing costs of funding the cash

deposits will not only be incurred in the

POR but will be incurred until actual

duties are assessed at the time of

liquidation. As a result, an interest

expense associated with the cash

deposits made in the POR will be

incurred during subsequent review

periods. While a cumulative adjustment

amount does affect a respondent’s

margin, dumping cannot be distorted or

obscured when an adjustment is made

for an expense attributable to an

antidumping duty order. In fact, if we

fail to allow the adjustment, we risk

calculating margins which are

overstated due to our failure to take into

account an expense attributable solely

to an order.

In addition, the Department considers

the acceptance of a cumulative

adjustment amount to be consistent

with the statute. We do not regard cash

deposits as actual antidumping duties

paid at the time of importation for

which subsequent adjustments for overand under-payment are coupled with

interest payments to approximate as

closely as possible the payment of

actual duties at time of import. We have

long maintained the position that ‘‘duty

deposits are not actual antidumping

duties but estimates of future dumping

liability’’ (see AFBs IV at 10900). We

have expressed the identical position in

another antidumping proceeding,

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, 55 FR

38720 (September 20, 1990)). The CIT

and 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,

Court Number 94–1117 (January 13,

1995), that ‘‘(s)ection 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).

Therefore, cash deposits are clearly not

payments of actual antidumping duties

and, by allowing a cumulative

adjustment, the Department is treating

the interest expenses respondents
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2105

incurred on cash deposits as expenses

attributable solely to the antidumping

duty orders.

Comment 10: Torrington claims that

NTN’s adjustments to selling expenses

for expenses of affiliated firms have

distorted the allocation of expenses to

scope and non-scope merchandise.

Petitioner believes NTN’s method of

initially allocating the affiliates’’

expenses was flawed and understates

NTN’s ISEs for AFBs. Torrington asserts

that the Department should add the

affiliates’’ expenses back into the pool of

expenses before allocation to NTN’s

U.S. sales.

Department’s Position: We disagree

with Torrington. We examined NTN’s

allocation methodologies and expenses

associated with affiliated firms at the

verification of the U.S. response. We

found these to be accurately compiled

and NTN’s allocation is not

unreasonably distortive. Therefore, we

have accepted NTN’s allocation for

these final results.

Comment 11: Torrington contends

that the Department should reject NTN’s

allocation of certain U.S. ISEs based on

level of trade. Petitioner notes that the

Department rejected this methodology

in AFBs IV as bearing no relationship to

the way in which NTN incurred

expenses.

NTN responds that the Department

has verified its methodology at several

verifications and found it to be

reasonable. Therefore, NTN believes

that the Department should accept the

methodology.

Department’s Position: We agree with

Torrington. In AFBs III (and

subsequently in AFBs IV at 10940 and

AFBs V at 66489) we determined that

the methods NTN used for allocating its

ISEs did not bear any relationship to the

manner in which it incurred the

expenses in question, thereby leading to

distorted allocations. The CIT upheld

this decision in NTN Bearing Corp. v.

United States, 905 F. Supp. 1083, 1094–

95 (1995). Further, we found that the

allocations NTN calculated according to

levels of trade were misplaced and that

it could not conclusively demonstrate

that its ISEs vary across levels of trade.

In the course of this review respondent

did not provide sufficient evidence

demonstrating that its selling expenses

are attributable to levels of trade.

Therefore, we have recalculated NTN’s

expenses to represent selling expenses

for all U.S. sales for the final results.

Comment 12: Torrington states that

the Department found that SNR had

allocated depreciation expenses to all

sales but, in fact, the respondent did not

include them in the ISEs it reported for

U.S. sales. Accordingly, Torrington

contends, the Department should ensure

that SNR has reported all U.S. ISEs and

should reallocate a portion of the

depreciation expenses SNR incurred in

the home market to its U.S. sales.

SNR contends that, although the

company failed to allocate a portion of

its depreciation expenses to U.S. sales,

the error was harmless. SNR states that

these expenses, incurred in France, are

indirect and the Department has not

deducted such expenses in calculating

CEP. SNR proposes that, if the

Department decides to deduct such

indirect selling expenses as part of U.S.

ISEs incurred in the home market, the

Department can derive a per-unit

amount by the formula SNR provided in

its rebuttal brief. SNR further notes that

the depreciation expenses are de

minimis and can be disregarded under

19 CFR 353.59(a).

Department Position: We agree with

Torrington that SNR’s depreciation

expenses allocated to its U.S. sales

should be part of ISEs we deduct from

CEP. We verified SNR’s response and,

based on our findings at verification, we

have made this deduction for our final

results.

4.E. Other Selling Expenses.

Comment 1: NSK/RHP argues that the

Department should deduct other HM

direct selling expenses from NV. NSK/

RHP notes that, in a supplement to its

questionnaire response, it provided an

explanation for direct selling expenses

which separate cost centers incurred in

selling to OEM-Automotive, OEMIndustrial, and AM customers. NSK/

RHP explains further that the reported

expenses are for selling activities for

specific customers. NSK/RHP asserts

that, since the Department never

questioned whether these expenses are

direct selling expenses, the Department

should deduct them from NV for the

final results.

Torrington contends that the

Department should not deduct NSK/

RHP’s other HM direct selling expenses

from NV, claiming that the record

contains inconsistent information.

Torrington maintains that NSK/RHP

must prove that the expenses are direct.

However, Torrington contends that, due

to contradictions in the submitted data,

the record fails to support NSK/RHP’s

claim for an adjustment. In support of

its argument for not making the

adjustment, Torrington also notes that

NSK/RHP’s HM sales data was not

subject to verification.

Department’s Position: We agree with

NSK/RHP. Although we chose not to

verify NSK/RHP’s HM sales data,

Torrington has not provided, nor is

there evidence on the record to support

Torrington’s claim that NSK/RHP’s

information on other HM direct selling

expenses is not accurate and complete.

Therefore, we have deducted NSK/

RHP’s other HM direct selling from NV

for these final results.

5. Level of Trade

As set forth in section 773(a)(7) of the

Tariff Act and in the SAA at 829–831,

to the extent practicable, we have

determined NV based on sales at the

same level of trade as the export price

or CEP. When we were unable to find

comparison sales at the same level of

trade as the export price or CEP, we

compared the sales in the United States

to sales at a different level of trade in

the comparison market. We determined

the level of trade of export price sales

on the basis of the starting prices of

sales to the United States. We based the

level of trade of CEP sales on the price

in the United States after making the

CEP deductions under section 772(d)

but before making the deductions under

section 772(c). Where HM prices served

as the basis for NV, we determined the

NV level of trade based on starting

prices in the NV market. Where NV was

based on CV, we determined the NV

level of trade based on the level of trade

of the sales from which we derived

SG&A and profit for CV.

In order to determine whether sales in

the comparison market are at a different

level of trade than the export price or

CEP, we examined whether the

comparison sales were at different

stages in the marketing process than the

export price or CEP. We made this

determination on the basis of a review

of the distribution system in the

comparison market, including selling

functions, class of customer, and the

level of selling expenses for each type

of sale. Different stages of marketing

necessarily involve differences in

selling functions, but differences in

selling functions, even substantial ones,

are not alone sufficient to establish a

difference in the level of trade.

Similarly, as further discussed in our

response to Comment 2, below, while

customer categories such as

‘‘distributor’’ and ‘‘wholesaler’’ may be

useful in identifying different levels of

trade, they are insufficient in

themselves to establish that there is a

difference in the level of trade. See

Certain Corrosion-Resistant Carbon

Steel Flat Products and Certain Cut-toLength Carbon Steel Plate from Canada:

Preliminary Results of Antidumping

Duty Administrative Review, 61 FR

51891, 51896 (October 4, 1996).

While we conducted a similar

analysis in the preliminary results, we

limited our inquiry to the selling

functions incurred by respondents at
2106 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

each level of trade. See Preliminary

Results at 35718–35723. As noted, for

these final results we have included in

our analysis the class of customer and

the level of selling expenses at each

marketing stage in addition to selling

functions. However, the inclusion of

these additional factors in our analysis

has not changed our identification of the

levels of trade involved in sales in the

U.S. and comparison markets, nor has it

resulted in a change in our findings

concerning which levels, for each

respondent, are at a more advanced

stage in the distribution process. Our

discussion of the specific selling

functions that we examined, as well as

our company-specific findings in this

regard, are contained in the preliminary

results.

As in the preliminary results, where

we established that the comparison

sales are at a different level of trade than

the sales to the United States, we made

a level-of-trade adjustment if we were

able to determine that the difference in

level of trade affected price

comparability. The effect on price

comparability must be demonstrated by

a pattern of consistent price differences

between sales at the two relevant levels

of trade in the comparison market.

We were able to quantify such price

differences and make a level-of-trade

adjustment for certain comparisons

involving export price sales, in

accordance with section 773(a)(7)(A).

For such sales, the same level of trade

as that of the U.S. sales existed in the

home market but we could only match

the U.S. sale to HM sales at a different

level of trade because there were no

usable sales of the foreign like product

at the same level of trade. Therefore, we

determined whether there was a pattern

of consistent price differences between

these different levels of trade in the

home market. We made this

determination by comparing, for each

model sold at both levels, the average

net price of sales made in the ordinary

course of trade at the two levels of trade.

If the average prices were higher at one

of the levels of trade for a

preponderance of the models, we

considered this to demonstrate a pattern

of consistent price differences. We also

considered whether the average prices

were higher at one of the levels of trade

for a preponderance of sales, based on

the quantities of each model sold, in

making this determination. We applied

the average percentage difference to the

adjusted NV as the level-of-trade

adjustment.

We were unable to quantify such

price differences in other instances

involving comparisons of sales made at

different levels of trade. First, with

respect to CEP sales, the same level of

trade as that of the CEP did not exist in

the home market for any respondent.

We also did not find the same level of

trade in the home market for some

export price sales. Therefore, for

comparisons involving these sales, we

could not determine whether there was

a pattern of consistent price differences

between the levels of trade based on

respondent’s HM sales of merchandise

under review.

In such cases, we looked to alternative

sources of information in accordance

with the SAA. The SAA provides that

‘‘if information on the same product and

company is not available, the [level-oftrade] adjustment may also be based on

sales of other products by the same

company. In the absence of any sales,

including those in recent time periods,

to different levels of trade by the

exporter or producer under

investigation, Commerce may further

consider the selling expenses of other

producers in the foreign market for the

same product or other products.’’ SAA

at 830. Accordingly, where necessary,

we examined the alternative methods

for calculating a level-of-trade

adjustment. In these reviews, however,

we did not have information that would

allow us to apply these alternative

methods.

In those situations where we were

unable to quantify a level-of-trade

adjustment based on a pattern of

consistent price differences, and in

which the U.S. sales were export price

sales, the statute requires no further

adjustments in regard to level of trade.

However, with respect to CEP sales for

which we were unable to quantify a

level-of-trade adjustment, we granted a

CEP offset where the comparison sales

were at a more advanced level of trade

than the sales to the United States, in

accordance with section 773(a)(7)(B) of

the Tariff Act.

Comment 1: Torrington argues that

the Department improperly analyzed

U.S. levels of trade for purposes of levelof-trade adjustments and CEP offsets by

reference to what are in effect ex-factory

export transactions instead of CEP resale

transactions. Torrington argues that the

statute makes resale transactions to

unaffiliated purchasers the relevant

sales for identifying the U.S. levels of

trade, not ex-factory sales to the U.S.

affiliate. In this regard, Torrington first

notes that the statute requires a finding

of differences in levels of trade between

the ‘‘constructed export price’’ and NV

before making a level-of-trade

adjustment or a CEP offset (citing

section 773(a)(7)(A) of the Tariff Act).

Torrington claims that, in turn, the

focus of the statutory definition of

‘‘constructed export price,’’ which

defines CEP as ‘‘the price at which the

subject merchandise is first sold * * *

in the United States * * * to a

purchaser not affiliated with the

producer or exporter, as adjusted

* * *,’’ is on resale transactions in the

United States, not on the transaction

between the home market parent and

the U.S. subsidiary (citing section 772(b)

of the Tariff Act).

Torrington suggests that, in the

preliminary results, the Department

implicitly recognized the incorrectness

of its level-of-trade/CEP offset approach

by comparing, for matching purposes,

HM sales to U.S. sales based on the

distribution channel (customer category)

of the unaffiliated U.S. purchaser in all

instances, including CEP comparisons.

(In Comment 2, below, Torrington

requests that the Department explain the

legal basis for matching sales in this

manner.)

FAG Germany, FAG Italy, INA, NSK,

SKF France, SKF Germany, SKF Italy,

SNR, Koyo, and NMB/Pelmec respond

that the statutory definition of CEP does

not support Torrington’s argument that

the appropriate U.S. level of trade is that

of the U.S. affiliate to the unaffiliated

customer. While respondents agree with

Torrington that the Department must

compare the level of trade of the ‘‘CEP’’

with that of sales made in the home

market in the level-of-trade analysis,

they disagree that the statutory

definition of ‘‘CEP’’ focuses on the

resale to the unaffiliated customer.

Rather, they suggest that a complete

reading of the definition in section

772(b) reveals that the CEP is the resale

price as adjusted for U.S. selling

expenses and profit. Respondents

contend, therefore, that the Department

correctly excluded selling functions

related to such U.S. expenses in its

analysis of the level of trade of the CEP

for the preliminary results.

Koyo takes issue with Torrington’s

argument that, by matching sales using

the customer category of the unaffiliated

U.S. customer, the Department is

implicitly acknowledging that its levelof-trade analysis was in error. Koyo

instead contends that the statute does

not preclude matching U.S. and home

market sales, to the extent possible,

based on parallel channels of

distribution. Koyo argues that this

practice achieves the statutory mandate

of making ‘‘fair comparisons’’ and that

it is well within the Department’s

authority to adopt such a methodology.

NTN Japan and NTN Germany agree

with Torrington that the transaction to

the first unaffiliated party in the United

States should determine the level of

trade.
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2107

Department’s Position: We disagree

with Torrington, NTN Japan, and NTN

Germany. The statutory definition of

‘‘constructed export price’’ contained at

section 772(d) of the Tariff Act indicates

clearly that we are to base CEP on the

U.S. resale price as adjusted for U.S.

selling expenses and profit. As such, the

CEP reflects a price exclusive of all

selling expenses and profit associated

with economic activities occurring in

the United States. See SAA at 823.

These adjustments are necessary in

order to arrive at, as the term CEP makes

clear, a ‘‘constructed’’ export price. The

adjustments we make to the starting

price, specifically those made pursuant

to section 772(d) of the Tariff Act

(‘‘Additional Adjustments for

Constructed Export Price’’), normally

change the level of trade. Accordingly,

we must determine the level of trade of

CEP sales exclusive of the expenses (and

concomitant selling functions) that we

deduct pursuant to this sub-section.

Contrary to Torrington’s assertions,

this approach does not result in a

reliance on what is in effect an exfactory transfer price to the U.S. affiliate

in our level-of-trade analysis. First, we

note for clarity that transfer prices do

not enter into our analysis because the

CEP is a calculated price derived from

the resale price. More importantly,

Torrington’s argument suggests

inaccurately that the deductions we

make under section 772(d) involve all

direct and indirect selling expenses. As

noted above, these deductions remove

only expenses associated with economic

activities in the United States. Thus,

CEP is not a price exclusive of all selling

expenses because it contains the same

type of selling expenses as a directly

observed export price.

Comment 2: Torrington argues that

the Department erred by identifying

levels of trade by reference to selling

activities performed by the seller rather

than functions performed by buyers.

Torrington contends that the statute

assigns independent meaning to the

expression ‘‘level of trade’’ which is

separate from the expression ‘‘selling

activities.’’ Torrington then claims that

the SAA does not require a different

interpretation, despite a statement

suggesting that a ‘‘difference in the level

of trade’’ is equivalent to ‘‘a difference

between the actual functions performed

by the sellers at the different levels of

trade’’ (citing SAA at 829). Torrington

suggests that this statement contrasts

starkly with other relevant SAA

statements that indicate that ‘‘level of

trade’’ has a meaning separate and apart

from ‘‘selling activities.’’ Specifically,

Torrington notes that the SAA speaks in

terms of selling merchandise ‘‘to’’

different levels of trade, and suggests

that it is meaningless to speak of

different activities involved in selling

‘‘to’’ different activities. Finally,

Torrington argues that the Department’s

focus on selling activities is susceptible

to manipulation by respondents.

Torrington proposes that the

Department should determine levels of

trade by conducting its analysis along

traditional lines; that is, the Department

should focus on the functions of

unaffiliated buyers in the market under

consideration. In order to establish a

basis for any level-of-trade adjustment,

Torrington asserts, respondents should

be required to demonstrate that different

levels of trade exist, that different

selling activities are involved at the

levels, and that the differences are

reflected in differences in price patterns.

Torrington suggests that, if the

Department retains the methodology it

employed for the preliminary results, it

should at least clarify the legal

underpinning of that methodology;

specifically, it should explain why it

compared sales on the basis of the U.S.

resale level of trade instead of the CEP

level of trade. Torrington does not

disagree with this approach but argues,

as it did in Comment 1, above, that it

appears to be an attempt to avoid

distortive results inherent in the

Department’s methodology.

FAG Germany, FAG Italy, INA, NSK,

NTN Japan, NTN Germany, SKF France,

SKF Germany, SKF Italy, and SNR argue

that nothing in the statute or SAA refers

to functions performed by buyers in

identifying levels of trade and that the

Department’s interpretation of the

statute and SAA are proper. Koyo argues

that the Department did not in fact

equate level of trade with selling

activities, but that the Department

considered existing channels of

distribution and determined, based on

selling functions, that some channels

constituted a different level of trade

than other channels. Koyo suggests that

this methodology is consistent with

Final Determination of Sales at Less

Than Fair Value: Certain Pasta from

Italy, 61 FR 30326, 30335 (June 14,

1996).

Department’s Position: We agree, in

part, with Torrington. Torrington is

correct that levels of trade are not

defined solely in terms of selling

functions. However, we disagree with

Torrington that we should determine

levels of trade by focusing primarily on

buyer functions. We also disagree that,

for CEP sales, the relevant ‘‘buyer’’ in

the level-of-trade analysis is the

unaffiliated U.S. customer.

While neither the statute nor the SAA

defines level of trade, we agree with

Torrington that the structure of the

relevant provision in the statute (section

773(a)(7)(A)) uses the term ‘‘level of

trade’’ as a concept distinct from selling

activities. Specifically, this sub-section

allows for a level-of-trade adjustment

where there is a difference in levels of

trade and that difference ‘‘involves’’ the

performance of different selling

activities. The SAA (at 829) also

ascribes a meaning to level of trade that

suggests that an analysis of selling

activities alone is insufficient to

establish the level of trade by suggesting

that the Department could reasonably

find that two sales with some common

selling activities were nonetheless made

at different levels of trade.

However, although the identity of the

customer is an important indicator in

identifying differences in levels of trade,

the existence of different classes of

customers, as well as different functions

performed by such customers, is not

sufficient to establish a difference in the

levels of trade. Accordingly, we

consider the class of customer as one

factor, along with selling functions and

the selling expenses associated with

these functions, in determining the stage

of marketing, i.e., the level of trade

associated with the sales in question.

Although we consider customer

identity in determining levels of trade,

we disagree with Torrington that, for

CEP sales, the relevant customer in our

level-of-trade analysis is the unaffiliated

U.S. customer. Rather, it is the customer

at the level of the CEP (i.e., the U.S.

affiliate for all companies with CEP

sales in these reviews) for the reasons

provided in our response to Comment 1,

above.

Although we have not considered the

customer category of unaffiliated U.S.

purchasers in determining the level of

trade of the CEP, we have considered

the customer category of unaffiliated

U.S. purchasers in matching CEP sales

to HM sales (none of which are at the

same level of trade as the level of the

CEP), i.e., in determining the CEP offset.

See our response to Comment 7 for an

explanation of the basis of this aspect of

our methodology.

Comment 3: Torrington argues that

the Department should require

respondents to make a sale-by-sale

demonstration of their level-of-trade

claims. Torrington argues that CEP and

NV are prices in specific sales

transactions and that, even to a given

customer, each sale does not necessarily

involve the same activities. Torrington

contends that, because no respondent

attempted to identify selling activities

on a sale-by-sale basis, the Department

should reject all claimed level-of-trade

adjustments and CEP offsets.
2108 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

FAG Germany, FAG Italy, INA, Koyo,

NMB/Pelmec, NSK, NTN Japan, NTN

Germany, SKF France, SKF Germany,

SKF Italy, and SNR contend that

Torrington’s suggested standard of a

sale-by-sale demonstration would be

impossible given the number of

transactions that respondents make and

is required neither by the statute nor the

SAA.

Department’s Position: We disagree

with Torrington that levels of trade must

be demonstrated on a sale-by-sale basis.

Given the complexity of this case,

combined with the many thousands of

transactions that respondents report, it

would be impossible to make such a

demonstration within statutory

deadlines. This would effectively

neutralize the level-of-trade aspect of

the statute. Further, there is nothing in

the statute or SAA indicating that

determining levels of trade on the basis

of identifiable groups of sales is

inappropriate.

Comment 4: Torrington argues that

the statute requires that level-of-trade

adjustments may only be granted where

it is established that there is a difference

in prices ‘‘due to’’ the different

functions performed by sellers involved.

Torrington contends that no respondent

demonstrated that differences in prices

were due to differences in selling

functions and, citing the response of one

respondent, suggests that factors other

than selling functions (such as

competition) drive prices more than do

selling functions. Torrington argues that

the burden is on respondents to

demonstrate that differences in prices

are due to differences in selling

functions and that, because no

respondent has made such a showing,

the Department should reject all

claimed level-of-trade adjustments and

CEP offsets.

Koyo, NMB/Pelmec, NSK, NTN Japan,

NTN Germany, SKF France, SKF

Germany, SKF Italy, and SNR argue that

there is no ‘‘due to’’ standard for a levelof-trade adjustment as Torrington

suggests. Respondents argue that a levelof-trade adjustment should be made

when two facts are proven: (1) that

different selling functions exist at each

claimed level of trade, and (2) that there

are price differences between claimed

home market levels of trade.

Department’s Position: We disagree

with Torrington. The adoption of

Torrington’s proposed ‘‘due to’’

standard would impose an independent

causation requirement upon both the

level-of-trade-adjustment and CEP-offset

provisions. Such a requirement is

neither required by the statute nor

administratively feasible.

Although Torrington is correct that

the level-of-trade adjustment provision

of the statute (section 773(a)(7) of the

Tariff Act) requires a finding of price

differences between the export price or

CEP and NV ‘‘due to’’ differences in the

levels of trade, Torrington’s analysis

ignores the fact that this provision

provides a specific means of

establishing this price effect: namely,

based on a pattern of consistent price

differences between sales at different

levels of trade in the home market (or

third country). As noted by respondents,

in order to grant a level-of-trade

adjustment, we must find that the

export price or CEP sale (as appropriate)

was made at a different level than that

of the NV sale and that this difference

involved (1) different selling activities,

and (2) affected price comparability

based on a pattern of consistent price

differences between sales at different

levels of trade in the home market (or

third country). See section 773(a)(7)(A)

of the Tariff Act. There is no causation

requirement independent of the ‘‘effect

on price comparability’’ requirement

noted above. We note further that the

statute merely requires that the price

differences be ‘‘wholly or partly due’’ to

differences in levels of trade; it does not

require a determination of the exact

price effect caused by level-of-trade

differences and it would not be possible

to do so, given the variety of market

forces that affect the sales price of each

transaction we review.

Comment 5: Torrington asserts that

the SAA (at 830) instructs the

Department to ensure that expenses

previously deducted from NV are not

deducted a second time through a levelof-trade adjustment, stating that

‘‘Commerce will ensure that a

percentage difference in price is not

more appropriately attributable to

differences in the quantities purchased

in individual sales.’’ Torrington notes

that a number of respondents admitted

that quantities affect price. Torrington

argues, therefore, that because quantities

may affect price as much as selling

functions, a level-of-trade adjustment

should not be granted.

Koyo, NMB/Pelmec, NSK, NTN Japan,

NTN Germany, SKF France, SKF

Germany, SKF Italy, and SNR respond

that the SAA language Torrington cites

serves simply as a reminder not to

double-count adjustments.

Department’s Position: We agree with

Torrington that we must not ‘‘doublecount’’ expenses we deduct from NV.

This is why we calculate level-of-trade

adjustments and CEP offsets after

making other adjustments to NV, so that

we do not, in effect, deduct expenses

such as rebates or warranty expenses

twice. As far as quantity adjustments are

concerned, we made no quantity

adjustments for any respondents in this

review. Therefore, no possibility of

double-counting quantity adjustments

exists.

Comment 6: Torrington argues that

the selling function charts respondents

prepared are inadequately supported by

factual evidence. While Torrington

acknowledges that the Department

attempted to verify respondents’’

claims, Torrington argues that the

evidence the Department collected does

not support all of the assertions

respondents made. Torrington also

claims that some of the assertions

respondents made, such as the paucity

of reported selling functions between a

respondent and its U.S. affiliate, defy

common sense.

FAG Germany, FAG Italy, Koyo, NSK,

NTN Japan, NTN Germany, SKF France,

SKF Germany, SKF Italy, and SNR argue

that the Department conducted

extensive verification of the information

they provided in the charts to which

Torrington refers, and NSK adds that it

is less important whether the

Department verified any individual

assertion than that all assertions were

subject to verification.

Department’s Position: We disagree

with Torrington. We have established an

adequate factual base upon which to

make determinations with regard to the

levels of trade involved in the sales

under review. As respondents note, we

collected voluminous information prior

to our verifications and, at verification,

we examined the information

respondents provided in detail. While

we did not examine every piece of

information that respondents submitted,

it is not our practice, nor is it possible

or required that we do so. See Bomont

Industries v. United States, 733 F.Supp.

1507 (CIT 1990). As NSK suggests, the

fact that the information is subject to

verification is a strong incentive for

accurate reporting. In these reviews, we

have invested considerable time and

effort at each verification to ensure the

accuracy of respondents’ level-of-trade

claims and have found no discrepancies

with regard to respondents’ reported

selling activities.

Comment 7: NSK and NSK/RHP argue

that the Department should match CEP

sales to home market OEM sales because

home market OEM sales are the closest

home market level of trade to the level

of the CEP sales. NSK and NSK/RHP

contend that, because the Department

deducts all U.S. expenses from the sales

price to arrive at CEP and because they

reported similar selling activities

associated with all sales to the affiliated

reseller in the United States, all CEP
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2109

sales belong to the same level of trade.

NSK and NSK/RHP state further that the

CEP level of trade is a different and lessadvanced level of trade than that

involved in all home market sales. NSK

and NSK/RHP contend that the statute

and SAA direct the Department to

identify and use the HM level of trade

that is closest to that involved in the

U.S. sale, since more remote HM levels

are associated with higher prices. NSK

and NSK/RHP contend that they and

other respondents have demonstrated

that prices to distributors for the

aftermarket are higher than prices to

OEM customers in the home market.

NSK and NSK/RHP argue that it follows

that the aftermarket level of trade is

more remote than the OEM level of

trade, and that the Department must

compare CEP sales to home market OEM

sales, excepting only those CEP sales for

which no home market OEM matches

exist.

NMB/Pelmec argues that the

Department must base NV upon the

most comparable level of trade as the

U.S. sale and that HM distributor sales

are the closest level of trade in the home

market to CEP sales. NMB/Pelmec

contends that the Department found that

HM OEM sales were at a more advanced

level of trade than HM distributor sales

and that CEP sales were less advanced

that either HM level of trade. NMB/

Pelmec asserts that the Department’s

refusal to compare all CEP sales to its

HM distributor level of trade is contrary

to law.

Torrington responds to NSK by stating

that, because U.S. resale transactions

should be the relevant transactions for

identifying level of trade, CEP sales do

not necessarily represent a single level

of trade. Torrington contends further

that, even if CEP sales could be

considered a single level of trade, all

home market sales must still be

considered and the Department must

identify home market groups that

correlate to U.S. transactions to ensure

‘‘apples-to-apples’’ comparisons.

Finally, Torrington argues that price

levels do not define levels of trade in

either the statute or SAA.

Torrington responds to NMB/Pelmec

by stating that the Department did not

find that HM OEM sales were more

advanced than HM distributor sales for

NMB/Pelmec.

Department’s Position: We disagree

with NSK and NSK/RHP that we should

prefer HM OEM sales in our matching

methodology. We also disagree with

NMB/Pelmec that we should prefer its

HM distributor sales. We have

determined that there is a single level of

trade of the CEP for NSK, NSK/RHP,

and NMB/Pelmec. For these

respondents, and for respondents with

CEP sales generally in these reviews, we

usually had two possible home market

levels of trade from which to choose

when comparing CEP sales to home

market sales. We concluded from the

evidence on the record that CEP sales

are all made at a less-advanced level of

trade than any home market level of

trade. See Preliminary Results at 35718–

35723. We then determined which

home market sales to compare with CEP

sales.

Where there are no home market sales

at the same level of trade as the U.S.

sale, the statute does not require that we

match the U.S. sale to home market

sales at the closest level of trade. Under

the circumstances of these reviews, in

order to calculate the CEP offset as

accurately as possible, we matched sales

in each market likely to include similar

categories of selling expenses—OEM

sales in the United States to OEM sales

in the home market and aftermarket

sales in the United States to aftermarket

sales in the home market. Thus, we

determined the CEP-offset ‘‘cap’’ for

home market sales to OEMs on the basis

of the indirect selling expenses for sales

in the United States to OEMs and we

determined the CEP-offset cap for

aftermarket sales in the home market on

the basis of the indirect selling expenses

for aftermarket sales in the United

States.

NSK and NSK/RHP have asserted that

we should have compared their CEP

sales to their home market OEM level of

trade because it is closer to the level of

the CEP than their aftermarket level of

trade; conversely, NMB/Pelmec

contends that we should compare its

CEP sales to its home market distributor

sales because such sales are made at a

level of trade that is closer to the level

of the CEP. As described above, under

the circumstances presented in these

reviews, it is more appropriate to match

CEP sales to HM sales based on the

category of the unaffiliated U.S.

customer. Furthermore, these

respondents’ assertions are not

sufficiently supported by factual

evidence. We did not find that one HM

level of trade for either company, or for

any respondent in these reviews, has

conclusively more selling functions

than another HM level. Rather, the HM

levels of trade each involve different

degrees of various selling functions.

For instance, we found that selling

functions at the OEM level typically

emphasize technical services, sales calls

to end users, and price negotiation with

the customer, among other services,

while selling functions at the

distributor/aftermarket level typically

emphasize advertising, inventory

maintenance, and packing. This shows

that the HM levels of trade are different,

but it does not demonstrate that one

level is necessarily more advanced than

the other. Indeed, the fact that NSK and

NSK/RHP argue that the OEM level is

less advanced than the distributor/

aftermarket level, while NMB/Pelmec

argues the reverse, demonstrates the

difficulty in ranking these HM levels.

We have concluded therefore that we

can make no determination from the

evidence on the record that any home

market level of trade is more or less

advanced than any other home market

level of trade. The conclusion we draw

from the evidence on the record is, as

a general matter, that levels of trade

defined as ‘‘OEM’’ are different from,

but not necessarily more or less

advanced than, those defined as

‘‘distributor/aftermarket.’’ As Koyo

points out correctly with regard to

another comment (see Comment 1,

above), there is no prohibition or

denigration of such a practice in either

the statute or SAA. However, this still

leaves us with an uneven match because

the level of trade of the CEP is less

advanced than either home market level

of trade. Therefore, in such cases,

because we have no basis upon which

to calculate a level-of-trade adjustment

and because the level of trade of the CEP

is less advanced than either home

market level of trade, we have granted

a CEP offset.

We also disagree with NSK’s and

NSK/RHP’s assertion that, because OEM

prices are lower than distributor/

aftermarket prices, the OEM level of

trade is less advanced than the

distributor/aftermarket level of trade. As

described above, we concluded that the

OEM level of trade and the distributor/

aftermarket level of trade are different

from each other but neither is more or

less advanced than the other. The fact

that OEM prices were higher for some

respondents and lower for other

respondents than distributor/

aftermarket prices in spite of the

relatively constant selling functions

among respondents suggests to us that

our conclusions about the home market

levels of trade are correct.

In any event, differences in prices do

not determine the existence of levels of

trade. As noted above, we only make

level-of-trade adjustments when there is

a difference in prices shown to be

wholly or partly due to differences in

levels of trade. The differences in prices,

however, have nothing to do with our

determination of whether different

levels of trade exist. We determine

whether one level of trade is more

advanced than another on the basis of

the selling functions performed by a
2110 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

respondent with respect to the two

levels of trade. OEM and distributor/

aftermarket sales are more advanced

than the level of trade of the CEP

because comparatively fewer selling

functions are associated with the CEP

than are performed for sales to either of

the other levels of trade. This, and not

any likelihood that sales to the level of

trade of the CEP may be made at a lower

price than sales to the other two levels

of trade, is the basis for our granting a

CEP offset.

Comment 8: NTN Japan and NTN

Germany argue that it is inconsistent for

the Department to deny NTN a pricebased level-of-trade adjustment merely

because there is no home market

equivalent to CEP. NTN argues further

that the Department should use the

transaction to the first unaffiliated

customer in the United States to

determine the level-of-trade adjustment

and that this would be consistent with

the Department’s matching

methodology. NTN argues that the

Department’s approach effectively

precludes a level-of-trade adjustment for

CEP sales and contends that there is

nothing in the SAA or the legislative

history that specifies that a level-oftrade adjustment can only apply to

export price transactions.

Torrington argues that NTN should

not be granted a level-of-trade

adjustment for the reasons given in

Torrington’s affirmative case brief. See

Comments 1 through 6 of this section,

above.

Department’s Position: We disagree

with NTN Japan and NTN Germany. As

we noted in response to Comment 1,

above, the level of trade is determined

for the transaction between the exporter

and its affiliated importer. As with other

respondents in these reviews, after we

have deducted the importer’s expenses

from resale prices pursuant to section

772(d), the level of trade of the CEP was

not equivalent to the levels reported for

any HM sales. Because NTN Japan’s and

NTN Germany’s level of trade of the

CEP sales was less advanced than any

of their HM levels, we made a CEP offset

to NV for all of NTN Japan’s and NTN

Germany’s CEP sales.

Comment 9: Koyo argues that it

qualified for a level-of-trade adjustment

for CEP sales but that the Department

erroneously granted only a CEP offset.

Koyo contends that the Department

calculated the level of trade for CEP

sales correctly on the basis of the sale

to the unaffiliated party as adjusted for

selling, movement, and other expenses

pursuant to the statute. Koyo argues that

it established that it had different levels

of trade in both the United States and

the home market and that it

demonstrated that these differences

affected price comparability. Koyo

argues that the fact that there is no HM

level of trade analogous to the level of

trade of the CEP should not prevent the

Department from making a level-of-trade

adjustment. Rather, the Department

should use Koyo’s suggested

methodology of constructing a home

market level of trade analogous to the

adjusted CEP. Koyo argues that this

provides the Department with the data

and means necessary to provide a pricebased level-of-trade adjustment for CEP

comparisons. Koyo contends that its

suggested methodology implements the

relevant instructions of the URAA

properly. Finally, Koyo argues that the

Department’s denial of a level-of-trade

adjustment for CEP sales effectively

eviscerates the statutory level-of-trade

provision, since there will never be a

HM level equivalent to the level of trade

of the CEP.

Torrington argues that Koyo’s

suggested use of constructed NV is an

attempt to circumvent the statute and

should be rejected. Torrington contends

that nowhere does the statute suggest

that a level-of-trade adjustment can be

based on constructed HM prices and

that, if the data available do not allow

the demonstration required by the

statute, then no level-of-trade

adjustment is permitted.

Department’s Position: We agree with

Torrington. We may not base level-oftrade determinations or adjustments

upon ‘‘constructed,’’ or artificial, HM

levels. Koyo’s claimed constructed NV

levels of trade are not levels at which

Koyo actually sold AFBs in the home

market during the POR. As stated above,

we use starting prices in determining

whether different levels of trade exist.

There is no statutory basis for us to

‘‘construct’’ levels in the home market

or elsewhere. Because Koyo was unable

to show a pattern of consistent price

differences between its level of trade of

the CEP and its HM levels, we did not

make a level of trade adjustment for

Koyo’s CEP sales. However, because the

level of Koyo’s CEP was less advanced

than any of its HM levels, we made a

CEP offset to NV for all of our

comparisons of Koyo’s CEP sales.

Comment 10: SNR argues that the

Department should have granted it a

level-of-trade adjustment, rather than a

CEP offset, for comparisons of CEP sales

to HM distributor sales. SNR notes that

the Department determined correctly

that there were two HM levels of trade,

which were both more advanced than

CEP. SNR argues, however, that,

although the HM OEM level is more

advanced than the level of the CEP, the

HM OEM and CEP are similar, and that

the Department should make a level-oftrade adjustment when comparing CEP

sales to HM distributor sales, which

SNR contends are made at a more

advanced level of trade. SNR asserts

that, because the OEM level of trade is

more advanced than the level of trade of

the CEP, its claim of the price difference

between the distributor level of trade

and OEM level of trade is less than it

would be were a HM level of trade

equivalent to the level of trade of the

CEP. SNR also argues that it should

continue to receive the CEP offset when

the Department compares CEP sales to

HM OEM sales.

Torrington argues that SNR is not

entitled to its claimed level-of-trade

adjustment because it did not provide

supporting evidence for its contention

that the level of trade of the CEP and

OEM sales were similar. Moreover,

Torrington contends, the Department

did not indicate that it found the levels

of the CEP and OEM sales to be similar.

Department’s Position: We disagree

with SNR. We found SNR’s CEP level of

trade and its home market OEM level of

trade to be separate, distinct levels of

trade. There is no HM level of trade

analogous to that of CEP sales.

Therefore, there is no basis upon which

to calculate a level-of-trade adjustment.

Concerning SNR’s suggestion that we

grant a level-of-trade adjustment equal

to the difference between HM OEM and

HM distributor sales because OEM sales

are allegedly similar to CEP sales and

are, in any event, closer to CEP sales

than distributor sales, we note that SNR

demonstrated neither that HM OEM

sales are similar to CEP sales nor that

OEM sales are less advanced than

distributor sales. SNR demonstrated

only that it had two distinct HM levels

of trade, both of which were more

advanced than the level of trade of the

CEP. Therefore, we conclude that a CEP

offset is appropriate for all of SNR’s CEP

sales.

Comment 11: NTN contends that the

Department should make a CEP offset to

NV based on CV in instances where it

matches U.S. sales to CV. NTN claims

that NV based on CV is not comparable

to the level of trade of the CEP.

Therefore, NTN asserts, those sales are

eligible for a CEP offset. NTN requests

that the Department make such an

adjustment for the final results.

Department’s Position: We agree with

NTN. As noted in the introductory

remarks to this section, where NV was

based on CV, we determined the NV

level of trade based on the level of trade

of the sales from which we derived

SG&A and profit for CV. Therefore,

because we derived SG&A and profit for

CV from home market sales, we
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2111

determined that the NV levels of trade

for CV are equivalent to levels of trade

in the home market. Furthermore, we

note that the statute, at section 773(a)(8),

permits us to make the same

adjustments to NV when it is based

upon CV as we make to NV based upon

prices. Thus, for NTN’s CEP sales, we

determine that a CEP offset is

appropriate when NV is based upon CV.

See our introductory remarks for this

section, above, for a discussion of why

we determine that a CEP offset is

appropriate for CEP sales in this case.

Finally, we note that we made CEP

offsets to CEP sales we compared to CV

in the preliminary results, and we have

not changed this practice for the final

results.

6. Cost of Production and Constructed

Value

A. Cost-Test Methodology. Comment

1: Torrington argues that the statute

requires the Department to apply two

tests to determine whether sales are

below the cost of production and to

disregard sales if either test is met.

Torrington contends that below-cost

sales must be disregarded if either: (1)

The volume of such sales represents 20

percent or more of the volume of sales

during the period of review, or (2) the

weighted-average per-unit price of the

sales under consideration is less than

the weighted-average per-unit cost of

production. Torrington contends that

the Department only applied the first

test in the preliminary results and

argues that the Department should

apply both tests for the final results.

FAG Germany argues that the

Department correctly and reasonably

declined to invoke the second

substantial-quantities test in its cost

investigation. Respondent contends that

the statute does not specifically direct

the Department to use both tests and

argues further that the SAA, at 832,

indicates that the second test was meant

to be used in cases involving highly

perishable products.

Department’s Position: We disagree

with Torrington. We first note that both

of the above tests concern only one

aspect of the determination whether to

disregard below-cost sales from our

analysis, namely whether sales made at

prices below the cost of production

were made in substantial quantities.

Neither the statute at section

773(b)(2)(C) nor the SAA require that

both tests be performed in any given

proceeding; the SAA in fact indicates

that the second test is the measurement

of substantial quantities in cases

involving highly perishable agricultural

products (as was the case under the preURAA statute). Not only does this

indicate that only one substantialquantities test is to be performed, but it

also clarifies the circumstances under

which use of the second test is

appropriate.

Comment 2: Torrington claims that

the Department should default to NV

based on a family match when sales of

an identical match are disregarded as

below cost, rather than default to NV

based on CV. Petitioner argues that,

because family matches are sales of the

foreign like product, section 773(b)(1)

requires the Department to use these

‘‘remaining sales of the foreign like

product in the ordinary course of trade’’

in its comparisons to U.S. sales when

sales of identical matches have been

disregarded as below cost. Torrington

believes that defaulting to family

matches conforms to the Department’s

long-standing preference for using sales

rather than costs. INA, FAG-Italy, and

FAG-Germany agree with Torrington.

SKF responds that Torrington

misconstrues the selection process for

sales comparisons. Respondent points

out that the selection of the foreign like

product is conducted prior to, and

independently of, the cost test. SKF

explains that section 771(16) of the

Tariff Act authorizes the selection of the

foreign like product based on a

comparison of physical characteristics

to those of the U.S. merchandise

whereby once a match is determined,

that specific home market merchandise

is the single foreign like product. SKF

comments that there is no devolution to

a ‘‘second-best’’ foreign like product.

Therefore, SKF contends, in AFBs,

when there are sales of identical

merchandise, that merchandise is the

foreign like product and there is no

authority to then default to a family

match, even when the identical match is

disregarded as below cost.

SNR notes that the changes in the

language of section 773(b) of the Tariff

Act were made to implement the new

twenty-percent cost test in place of the

Department’s previous 10–90–10 test. In

SNR’s view, Congress did not intend

that this change alter the selection of

foreign like product. SNR mirrors SKF’s

contention that section 771(16) of the

Tariff Act does not sanction a cascade

search for foreign like product. SNR

contends that section 771(16) of the

Tariff Act identifies merchandise in the

first applicable category as the foreign

like product, not any applicable

category of merchandise.

Department’s Position: We disagree

with Torrington, INA, FAG-Italy, and

FAG-Germany. While our cost-test

methodology has changed in accordance

with the new law, our methodology for

selecting the foreign like product has

not. Section 771(16) of the Tariff Act

directs us to select the foreign like

product ‘‘in the first’’ of several

categories: identical in physical

characteristics, similar in physical

characteristics and commercial value, or

of the same general class or kind that

can be reasonably compared. The

Department interprets the reference in

section 773(b)(1)(B) of the Tariff Act to

basing NV ‘‘on the remaining sales of

the foreign like product in the ordinary

course of trade’’ to mean the selected

foreign like product, not a succession of

foreign like products.

We clarified our methodology in AFBs

V at 66490–91 when we stated that, in

pre-URAA instances where between ten

and ninety percent of sales of a model

are below cost, we disregarded the

individual below-cost sales in

calculating foreign market value and we

used the remaining contemporaneous

above-cost sales of such models in our

analysis, matching such sales in the

same manner that we matched all HM

sales. Where we did not have remaining

contemporaneous above-cost sales of the

most physically comparable model, we

relied on CV as the basis for foreign

market value. Otherwise, we would

have made successive model matches

and allowed the effects of the cost test

to play a role in determining the

comparability of merchandise, a

criterion not found in the definition of

such or similar merchandise at section

771(15) of the pre-URAA law.

Similarly, the definition of foreign

like product at section 771(15) of the

Tariff Act does not include the results

of the cost test as a criterion for

comparability. Therefore, when section

773(b) of the Tariff Act, as amended by

the URAA, directs us to rely on CV

when ‘‘no sales made in the ordinary

course of trade remain,’’ we search our

90/60-day contemporaneity window to

determine whether sales of the best

model for comparison survive the cost

test. We have a longstanding practice of

considering sales within 90 days before

and 60 days after the month of the U.S.

sale to be acceptable as potential

comparators (see Certain Small Business

Telephone Systems and Subassemblies

Thereof form Korea: Final Results of

Antidumping Administrative Review,

57 FR 8300 (March 9, 1993); Certain

Circular Welded Carbon Steel Pipes and

Tubes from Thailand: Final Results of

Antidumping Administrative Review,

61 FR 1332 (January 19, 1996); AFBs III

at 39735). Consistent with this practice

and section 773(b) of the Tariff Act, we

have resorted directly to CV where we

have disregarded all contemporaneous

identical HM sales as below cost instead

of determining whether
2112 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

contemporaneous sales of a less-similar

model would survive the cost test and

remain available as comparators.

Comment 3: NSK–RHP argues that the

Department should either adjust COP to

exclude credit expenses or not deduct

these expenses from home market prices

it uses in the below-cost test. NSK–RHP

asserts that, since the Department

deducted credit expense from home

market price, it must make the same

deduction from the interest expense it

added as part of the SG&A expenses to

NSK–RHP’s COP to avoid comparing a

home market price net of credit

expenses to a COP that includes this

expense.

Torrington argues that the Department

should neither adjust COP to exclude

credit expense nor deduct these

expenses from the home market prices

it uses in the below-cost test. Torrington

suggests that it is not proper to deduct

imputed credit expenses from COP

unless the COP included an amount for

imputed credit expenses. Torrington

claims that NSK–RHP fails to

demonstrate that the Department

included these expenses in its COP

calculations. Also, Torrington contends,

the record does not indicate that the

COP that NSK-RHP reported included

an amount for the imputed credit

expenses. Torrington states that the

Department should therefore not adjust

its methodology.

Department’s Position: We agree with

NSK-RHP that we should not deduct

credit expenses from home market

prices we used in the below-cost test.

We do not adjust for imputed expenses

in the COP analysis. For the final

results, we have corrected our

calculations and have not adjusted the

HM prices for credit expenses before

applying the below-cost test. In

accordance with section 773(b)(3)(B) of

the Tariff Act, which requires that we

base COP on actual costs, we have not

included imputed costs, such as the

imputed credit expense at issue, in

calculating NSK-RHP’s COP. We have

included an interest expense in deriving

COP based on actual expenses. Because

we include actual interest expenses in

deriving the COP, it is inappropriate to

reduce home market prices that we

compare to COP in the below-cost test

by the amount of any imputed expenses.

B. Research and Development.

Comment 1: Torrington asserts that the

Department must apply facts available

to SNR’s R&D costs due to the lack of

more precise information from the

respondent. Torrington alleges that SNR

reported R&D as ‘‘general expenses’’ in

its response and did not assign R&D on

a model-specific basis although SNR’s

Annual Report suggests that it incurred

product-specific and/or product-line

R&D. Torrington contends that because

SNR did not provide R&D on a modelspecific basis, the Department should

apply, as facts available, the highest

R&D costs by any other respondent,

which will ensure that none of SNR’s

bearing models has understated R&D.

SNR responds that Torrington

provides no support for its suggestion

that the Department use facts available

to restate R&D costs. SNR argues that it

treated R&D as a general expense

because the expenses are of a general

nature and the company’s records do

not segregate these expenses by product

or product line. SNR contends that the

general references in its Annual Report

do not suggest that SNR segregates R&D

expenses by product or product line.

Moreover, SNR contends that

Torrington did not provide any specific

facts to illustrate that SNR has records

to separate R&D expenses on a productline basis.

Department’s Position: We disagree

with Torrington that SNR’s Annual

Report’s references to certain products

indicates that the company keeps track

of R&D expenses on a product-specific

basis. Neither the record nor our

verification has provided us with any

basis for concluding that SNR’s R&D

expenses are recorded on a productspecific basis. Furthermore, at

verification, we did not find that SNR’s

R&D allocation methodology was

unreasonable, given SNR’s recordkeeping practices. Accordingly, for the

final results, we have accepted SNR’s

reported R&D costs as general expenses.

Comment 2: Torrington suggests that

the Department should ensure that SKF

Germany has allocated the R&D

expenses of ERC (the SKF group’s basic

R&D operation) properly to German

merchandise. Torrington argues that it is

not clear that SKF Germany’s allocation

is a rational allocation, i.e., that SKF

Germany’s ownership share is

proportional to the R&D benefit it

receives. Torrington notes that the

parent company, AB SKF, holds an

ownership interest in ERC, which

Torrington contends could dilute the

proportion of expenses attributed to the

producing entities such as SKF

Germany. In addition, Torrington claims

that the allocation does not account for

differences among several classes or

kinds of products. Torrington suggests

that, as facts available, the Department

should allocate the total R&D expense of

ERC to each SKF company, thus

ensuring that R&D is not understated for

any given country.

SKF Germany responds that, because

the R&D expenses are allocated based on

ownership of the producing companies,

no disproportionate amount could have

been allocated to the producing

company not under review, SKF Sverige

AB, as Torrington suggests.

Department’s Position: We agree with

SKF Germany. The CIT has upheld our

use of expenses recorded in a

company’s financial statements when

those statements are prepared in

accordance with the home country’s

GAAP and do not significantly distort

the company’s actual costs. See Laclede

Steel Co. v. United States, Slip Op. 94–

160 at 22 (CIT 1994). In this review, we

are satisfied that SKF Germany allocated

ERC expenses properly and Torrington

provides no evidence to the contrary, so

we have accepted SKF Germany’s

methodology, as we have in prior

reviews. As SKF Germany indicated in

its May 24, 1996 pre-preliminary

comments, it did not allocate any ERC

expenses to the parent company, AB

SKF, but only to the producing

companies based on their proportionate

ownership shares in ERC. We have no

reason to believe that this allocation

methodology is unreasonable.

C. Profit for Constructed Value.

Comment 1: Torrington contends that

the Department improperly included

home market sales that failed the belowcost test, as set forth in section 773(b)

of the Tariff Act, in the calculation of

profit for CV. Torrington states that the

Department calculated CV profit

pursuant to the ‘‘preferred’’

methodology as provided at section

773(e)(2)(A) of the Tariff Act, which

requires that the sales used to calculate

profit must be made in the ordinary

course of trade. Torrington claims that

sales that fail the below-cost test are

outside the ordinary course of trade, as

defined in section 771(15) of the Tariff

Act and, therefore, must be excluded

from the CV-profit calculation.

Torrington states that applying the

statute in this manner is the only way

to implement the compromise made in

the URAA legislation, whereby the

statutory minima for profit and SG&A

were eliminated subject to the

understanding that the Department

would generally not include below-cost

sales in the CV-profit calculation.

Torrington contends further that this

failure to disregard sales that failed the

below-cost test runs contrary to sections

2.2.1 (ordinary course of trade) and 2.2.2

(profit for CV) of the Uruguay Round

Antidumping Agreement.

SKF, NSK, SNR, FAG, and NTN

respond that the Department properly

included sales that failed the below-cost

test in the CV-profit calculation because

this calculation was not made under the

authority of section 773(e)(2)(A), but

was instead made pursuant to the
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2113

‘‘alternative’’ profit methodologies

provided at section 773(e)(2)(B). These

latter methodologies do not require that

CV profit be based on sales made in the

ordinary course of trade (alternatives

(B)(i) and (B)(iii)).

SKF and NSK state that section

773(e)(2)(A) is inappropriate in this case

because this section bases the CV profit

calculation on sales of the ‘‘foreign like

product,’’ which do not exist when NV

is based on CV. SKF argues that, where

CV is used because there are no

appropriate identical or family matches,

there would be no sales of ‘‘a foreign

like product’’ to calculate a profit

amount, and notes that the URAA’s

specific use of ‘‘a foreign like product’’

and the SAA’s use of the words

‘‘particular merchandise’’ make clear

that the first method for the calculation

of CV profit requires reliance on a

narrow universe of products. SKF and

NSK state that the most appropriate

methodology is that established in

section 773(e)(2)(B)(i), which requires

the use of company-specific data

regarding the same general category of

merchandise. SKF adds that this

provision does not require that such

sales be made in the ordinary course of

trade.

SNR and FAG state that section

773(e)(2)(A) is inappropriate because

this provision requires that CV profit be

based on the ‘‘actual amounts’’ of home

market profits realized by respondents,

which is not possible in this case due

to sampled home market databases. SNR

and FAG assert that sampled sales do

not provide complete actual profits and

cannot be guaranteed as representative

of actual profits. SNR and FAG contend

that sections 773(e)(2)(B) (i) and (ii) are

inappropriate for the same reason and

recommend the calculation of profit

under section 773(e)(2)(B)(iii) (any other

reasonable method), which does not

require that CV profit be based on sales

made in the ordinary course of trade.

NTN agrees with these respondents that

profit amounts in this case could

reasonably be based on the ‘‘alternative’’

profit methodologies established at

section 773(e)(2)(B) of the Tariff Act.

INA, FAG, NTN, and NMB/Pelmec

contend further that, even if the

Department calculates CV profit

pursuant to a provision that requires the

use of sales made in the ordinary course

of trade (e.g., section 773(e)(2)(A)), sales

that fail the below-cost test are not

necessarily outside the ordinary course

of trade. INA and FAG note that the

section 771(15) definition of ‘‘ordinary

course of trade’’ states that the

Department shall consider such sales to

be outside the ordinary course of trade,

not that the Department shall conclude

that such sales are in fact outside the

ordinary course of trade. FAG and INA

note further that the SAA (at 839)

provides that the Department may

disregard such sales in calculating CV

profit using the section 773(e)(2)(A)

methodology, not that it shall disregard

such sales. INA suggests that the sales

of AFBs that fail the below-cost test are

not outside the ordinary course of trade,

as the Department has consistently

found that producers regularly sell

AFBs below cost as well as above cost

in their home markets. INA notes

further that it is rational for firms to sell

at prices below fully allocated costs,

provided that they are above marginal

costs. INA contends that including sales

at one end of the spectrum while

excluding sales at the other end of the

spectrum (i.e., sales transactions with

abnormally high profits) would result in

irrational and unrepresentative profit

figures, which would be contrary to the

objective set forth in the SAA.

SKF and NTN argue that, if the

Department disregards sales that failed

the below-cost test in the calculation of

profit for CV, it should make certain

adjustments to the calculation in order

to derive a non-distortive profit rate.

SKF requests that the Department

include such sales in the denominator

of the calculation and assign a profit

rate of zero to such sales in the

numerator. SKF argues that, by doing so,

the Department would ensure that it is

using a methodology that results in a

numerator that reflects the ‘‘actual

amounts [of profit] * * * realized’’ by

foreign producers on sales ‘‘in the

ordinary course of trade.’’ In other

words, SKF suggests that the

Department set profit for disregarded

sales to zero while retaining the full

costs of those sales in the calculation.

NTN requests that the Department

exclude sales that earned abnormally

high profits from the calculation,

asserting that these sales are also

outside the ordinary course of trade.

Department’s Position: We agree with

Torrington that we should not include

sales that failed the below-cost test in

the calculation of profit for CV, because

these sales fall outside the ordinary

course of trade. As we stated in the

preliminary results of review, we have

calculated CV profit using the profit

methodology as stated in section

773(e)(2)(A) of the Tariff Act. This

provision requires that profit be based

on sales made in the ordinary course of

trade which, in turn, do not include

sales that we disregarded as a result of

the below-cost test. See section 771(15)

of the Tariff Act. The fact that our

preliminary margin calculations did not

reflect our decision to disregard such

sales in the CV-profit calculation was a

ministerial error on our part.

We disagree with SKF and NSK that

we do not have any ‘‘foreign like

products’’ for use in calculating CV

profit, and that we should therefore

calculate profit using one of the

alternative profit calculations contained

at section 773(e)(2)(B). Respondents’

definition of the term ‘‘foreign like

product’’ is overly narrow with respect

to its use in the CV-profit provisions. In

applying the ‘‘preferred’’ method for

calculating profit (as well as SG&A)

under section 773(e)(2)(A), the use of

aggregate data that encompasses all

foreign like products under

consideration for NV represents a

reasonable interpretation of the statute

and results in a practical measure of

profit that we can apply consistently in

each case. By contrast, an interpretation

of section 773(e)(2)(A) that would result

in a method based on varied groupings

of foreign like products, each defined by

a minimum set of matching criteria

shared with a particular model of the

subject merchandise, would add an

additional layer of complexity and

uncertainty to antidumping proceedings

without generating more accurate

results. It would also make the

statutorily preferred CV-profit

methodology inapplicable to most cases

involving CV.

We also disagree with SNR and FAG

that we must base our CV profit

calculation on ‘‘any other reasonable

method,’’ as provided in section

773(e)(2)(B)(iii), due to a lack of ‘‘actual

data’’ regarding profit amounts realized

by respondents. Although the home

market sales and cost data that we use

in calculating CV profit was provided

on a sampled basis, this does not render

such data inappropriate or ‘‘not actual’’

for purposes of this calculation.

Pursuant to the statutory authority

provided at section 777A of the Tariff

Act, we routinely use data in our

analysis that has been reported on a

sampled basis, due to the large number

of reviews that we must conduct as well

as the large number of individual

transactions involved therein,

particularly in these AFBs reviews.

Sampled data is, nonetheless, actual

data regarding the sales, costs, and

profits involved in sales made during

the POR. In fact, we are permitted to use

sampled data only when such samples

are statistically valid. Further, an

interpretation that sampled data is not

actual data could render alternative CVprofit methodologies, including the

preferred methodology provided at

section 773(e)(2)(A), inappropriate in

any case involving sampled home

market reporting. As the statute does not
2114 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

explicitly provide for such an automatic

elimination of these profit

methodologies in such cases, it is not

reasonable to read such an

interpretation into it.

We disagree with INA, FAG, NTN,

and NMB/Pelmec that, in calculating CV

profit pursuant to the preferred

methodology, we should nonetheless

consider that sales that failed the belowcost test are not outside the ordinary

course of trade in this case. Contrary to

respondents’ assertions, the statutory

definition of ‘‘ordinary course of trade’’

explicitly provides that sales that are

disregarded under section 773(b)(1) of

the Tariff Act are automatically

considered to be outside the ordinary

course of trade. See section 771(15) of

the Tariff Act. Respondents are

ascribing a discretionary meaning to the

term ‘‘consider’’ that does not exist in

the context of this provision.

Finally, we disagree with SKF that, in

using section 773(e)(2)(A), we should

retain the full costs of disregarded sales

while setting those sales’ profits to zero.

Because these sales are not in the

ordinary course of trade, the use of

partial information from the sales would

distort the profit rate for sales in the

ordinary course of trade. We disagree

with NTN that we should consider sales

that earned allegedly abnormally high

profits as outside the ordinary course of

trade for the reasons provided in the

Samples, Prototypes, and Ordinary

Course of Trade section of these final

results.

Comment 2: Torrington argues that

the Department should presume that

individual below-cost sales of models

for which below-cost sales comprised

between zero and twenty percent of

total sales are outside the ordinary

course of trade, and should exclude

them from its CV-profit calculations.

Torrington submits that these belowcost sales are outside the ordinary

course of trade unless respondents make

a definitive showing to the contrary,

such as for obsolete or end-of-year

merchandise, and states that no such

demonstrations were made in this

review.

Respondents disagree with

Torrington’s suggestion that individual

below-cost sales of models that passed

the below-cost test, but for which

certain transactions were identified as

below cost, should be eliminated from

the CV-profit calculation. Respondents

contend that section 771(15) identifies

only below-cost sales that have been

disregarded under section 773(b)(1) as

outside the ordinary course of trade.

Respondents assert that the Department

cannot presume that all below-cost sales

are outside ordinary course of trade.

Department’s Position: We disagree

with Torrington that individual belowcost sales of models that passed the cost

test, but for which certain transactions

were identified as below cost, should be

excluded from the calculation of CV

profit. We agree with SKF that these

sales do not meet the criteria of section

771(15) as being outside the ordinary

course of trade.

In calculating CV profit, the automatic

exclusion of all below-cost sales would

be contrary to the statute. Although we

have included only sales made in the

ordinary course of trade for the reasons

stated in our response to Comment 1,

above, the definition of ordinary course

of trade provides that only those belowcost sales that are ‘‘disregarded under

section 773(b)(1)’’ of the Tariff Act are

automatically considered to be outside

the ordinary course of trade. In other

words, the fact that sales of the foreign

like product are below cost does not

automatically trigger their exclusion.

Instead, such sales must have been

disregarded under the cost test before

we will exclude these sales from the

calculation of CV profit.

Comment 3: FAG Italy and FAG

Germany assert that the Department’s

methodology for calculating CV profit in

the preliminary results was incorrect for

three reasons. The FAG companies first

contend that the Department must

calculate CV profit based on home

market sales of merchandise having

equivalent commercial value to

matching U.S. sales. FAG claims that

reported home market bearings that are

equivalent in commercial value to

comparable U.S. bearings are those

having an equivalent actual profit, and

any home market sales with rates of

profitability greater than the weightedaverage rate of profitability of reported

U.S. sales should be disregarded as

outside the ordinary course of trade.

FAG also contends that, in accordance

with section 771(16), CV profit must be

manufacturer-specific, claiming that this

requires separate CV-profit calculations

for each bearing type manufactured by

respondents or purchased by

respondents from an unrelated supplier.

Finally, FAG argues that the Department

must calculate CV profit based on the

entire selling experiences and pricing

patterns of the company throughout the

review period rather than on only those

sales reported in the home market

database (citing AFBs IV at 10959).

Torrington responds that the

Department should not revise its

methodology for calculating CV profit as

FAG suggests. Torrington argues that

none of the statutory provisions

respondents cite provide that the

Department must base CV profit on

home market sales of merchandise

having equivalent commercial value to

matching U.S. sales. Torrington

contends further that FAG has failed to

demonstrate that home market sales

with rates of profitability greater than

the weighted-average rate of profitability

of reported U.S. sales are outside the

ordinary course of trade. Torrington

asserts that neither the statute nor the

SAA impose such a ‘‘profitability cap.’’

Torrington also disagrees with FAG’s

contention that the Department must

calculate CV profit for each bearing type

manufactured by respondents or

purchased by respondents from

unrelated suppliers, arguing that the

statute respondents cite does not

support the companies’’ position.

Regarding FAG’s final argument that the

Department should calculate CV profit

based on the entire selling experiences

and pricing patterns of the company

throughout the review period,

Torrington contends that the

Department’s approach of using a

sample of the entire selling experience

and pricing patterns (i.e., the home

market sales database) is appropriate

and in accordance with the statutory

authority to use sampling techniques.

Department’s Position: We agree with

Torrington. First, there is no statutory

provision or SAA reference requiring a

determination of equivalent commercial

value in the calculation of profit for CV.

To the contrary, the imposition of a CVprofit ‘‘cap’’ based on profits realized on

U.S. sales is at odds with the statutory

requirement that we calculate CV using

home market SG&A and profit figures

for comparison with U.S. sales. Second,

we disagree with FAG that we are

required to calculated manufacturerspecific CV-profit rates as it suggests.

Pursuant to section 773(3)(2)(A) of the

Tariff Act, we calculated profit for the

specific exporter, i.e., FAG, being

examined. Therefore, we have

computed profit based on all sales of the

foreign like product occurring in the

ordinary course of trade. With respect to

FAG’s argument that we should base CV

profit on the company’s entire POR

selling experience, and not on sampled

home market sales of the foreign like

product, as noted in our response to

Comment 1, we calculated CV profit

using the HM database because the

applicable CV-profit provision (section

773(e)(2)(A)) requires that we calculate

profit based on the actual profit

amounts realized on sales of the foreign

like product in the ordinary course of

trade.

Comment 4: Asahi contends that the

Department’s calculation of profit for

CV is incorrect. Asahi states that, if the

Department had applied the arm’s-
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2115

length test with an adjustment to prices

for differences in level of trade, the

Department would not have eliminated

certain sales to affiliated parties from

the profit calculation. Asahi contends

that, to calculate profit correctly, the

Department must use all sales Asahi

reported that are at arm’s length as

determined by an arm’s-length test that

includes an adjustment for differences

in levels of trade.

Department’s Position: We disagree

with Asahi. For the reasons specified in

our response to the comment in section

9, we are not revising the arm’s-length

test as suggested by Asahi and,

therefore, the universe of sales used in

the calculation of profit for CV remains

the same.

D. Affiliated-Party Inputs. Comment

1: NSK argues that the Department

should use the transfer price paid by

NSK to affiliated suppliers for parts

instead of the affiliated suppliers’ COP

data. NSK argues that the Department

has no authority to request COP data

from affiliated suppliers for any inputs.

NSK contends that the finding of belowcost sales in prior reviews does not

provide a reasonable basis to infer that

NSK’s suppliers are transferring inputs

to NSK at prices below the cost of

production. NSK asserts that there is a

burden on the petitioner to come

forward with some evidence that input

dumping is occurring before the

Department can collect, or use,

supplier’s cost information, and NSK

comments that the petitioner has never

alleged and the Department has not

substantiated that there were reasonable

grounds to believe or suspect that the

prices at which NSK purchased major

inputs from affiliated suppliers were

less than their costs of production

before the Department requested the

cost data. NSK also argues that the fact

that the Department found below-cost

sales in prior reviews suggests that NSK

is paying prices at or above market

prices for inputs and, accordingly, has

higher costs.

Torrington responds that the

Department’s request for, and use of,

COP data for parts purchased from

affiliated suppliers was proper and in

accordance with law. Torrington asserts

that the statute does not impose the

burden upon petitioner to submit

evidence that transfer prices for parts

purchased from affiliated suppliers were

made at prices less than their COP.

Torrington contends that, because

affiliated-party transfers are a suspect

category under the law and because the

foreign manufacturers and their

subsidiaries have access to the best

information for purposes of analyzing

transfer prices, it has been the

Department’s practice to require

respondents to submit evidence

concerning affiliated-party inputs since

enactment of section 773(e)(3) (now

section 773(f)(3)). Torrington also

contends that the Department has

rejected this argument in prior reviews

and that the CAFC has upheld the

Department in this practice, citing NSK

III at 6.

Department’s Position: We disagree

with NSK. Section 773(f)(2) of the Tariff

Act, which refers to both minor and

major inputs, states that, with regard to

calculating COP and CV:

‘‘[a] transaction * * * between affiliated

persons may be disregarded if, in the case of

any element of value required to be

considered, the amount representing that

element does not fairly reflect the amount

usually reflected in sales of merchandise

under consideration in the market under

consideration. If a transaction is disregarded

under the preceding sentence and no other

transactions are available for consideration,

the determination of the amount shall be

based on the information available as to what

the amount would have been if the

transaction had occurred between persons

who are not affiliated.’’

We do not interpret this language to

impose any prohibitions or limitation to

the Department’s authority to request

COP data on inputs from affiliated

suppliers. Further, the CIT, in NSK I,

held that ‘‘section 1677b(e)(3) [which

corresponds to section 773(f)(3) in the

current law] does not limit Commerce’s

authority to request COP data pursuant

to section 1677b(e)(2) [which

corresponds to section 773(f)(2) in the

current law]’’ (NSK I at 669).

We generally use the transfer price of

inputs purchased from an affiliated

supplier in determining COP and CV,

provided that the transaction occurred

at an arm’s-length price. In determining

whether a transaction occurred at an

arm’s-length price, we generally

compare the transfer price between the

affiliated parties to the price of similar

merchandise between two unaffiliated

parties. If transactions of similar

merchandise between two unaffiliated

parties are not available, we may use the

affiliated supplier’s cost of production

for that input as the information

available as to what the amount would

have been if the transaction had

occurred between unaffiliated parties.

In the case of a transaction between

affiliated persons involving a major

input, we will use the highest of the

transfer price between the affiliated

parties, the market price between

unaffiliated parties, and the affiliated

supplier’s cost of producing the major

input.

We cannot assume that, because we

found below-cost sales in prior reviews,

NSK is paying prices at or above market

prices for inputs, as NSK asserts.

Further, the statute does not impose any

burden on either the petitioner or the

Department to demonstrate that major

inputs were purchased at below-cost

transfer prices, so long as we have other

reasonable grounds to believe or suspect

that a respondent purchased major

inputs at below-cost transfer prices.

Such grounds exist when we also have

reasonable grounds to believe or suspect

that a respondent’s sales of subject

merchandise in the home market are or

may be occurring at below-cost prices.

With regard to NSK’s situation, we

note that we made an error in our

preliminary results. NSK submitted

market prices as well as transfer prices

for those inputs which it also purchased

from unaffiliated suppliers. On the basis

of our review of this evidence, we have

concluded that the transfer prices were

generally not made at arm’s length.

Therefore, for the final results, we used

the market price reported for all inputs,

unless the market price was below the

transfer price. For major inputs, if both

the market price and transfer price were

below cost, we used the cost of

production of the input. For minor

inputs, we used the cost of production

as a surrogate for market price only

where market prices did not exist.

Where NSK reported market prices from

more than one unaffiliated supplier, we

used the weighted-average price of the

unaffiliated suppliers’ prices as the

market price.

Comment 2: NSK argues that, in the

case of a certain affiliated supplier, the

Department should determine that

transfer prices of parts NSK purchased

from this supplier fairly reflect market

value and use those prices instead of the

COP of those parts, even if it does not

make such a determination with regard

to other affiliated suppliers. NSK argues

that affiliation per se does not require

the rejection of transaction prices

between affiliated parties and that, even

if the Department cannot be sure

whether the amount reflected in the

transfer price fairly reflects market

value, it retains the discretion to accept

the transfer price and, further, that the

statute does not prescribe nor prohibit

the use of specific methods to determine

whether a transaction price fairly

reflects market value. NSK contends

that the situation of the affiliated

supplier in question is unique and

requests that the Department recognize

that the nature of the affiliation does not

provide a basis for price manipulation

or for the affiliated supplier to favor

NSK in any way.

Torrington argues that the

Department’s reliance on price and cost
2116 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

for analyzing arm’s-length transactions

was proper. Torrington argues that, if it

were true that there was no possibility

for price manipulation between the

affiliated supplier and NSK, then NSK’s

purchase price for inputs from the

supplier would always be above cost

and NSK would have no basis for

objecting to the use of those costs.

Torrington also argues that there is

nothing in the statute which requires

the Department to consider factors other

than price or cost in determining

whether affiliated-supplier inputs

reflect fair market value. Torrington

claims that the Department has rejected

a similar argument made by NSK in a

prior review and that evidence on the

record supports the Department’s

determination of arm’s-length

transactions between affiliated parties

on the basis of price and cost.

Department’s Position: We disagree

with NSK. Whether the possibility of

price manipulation theoretically exists

has no bearing on our determining

whether a sale is made at an arm’slength price. Although NSK submitted

certain evidence, in addition to the

price information we requested, in

support of its contention that the prices

were arm’s length, we have determined

that the prices were not made at arm’s

length solely on the basis of the price

information NSK submitted.

Comment 3: NSK contends that

certain parts for which the Department

required NSK to submit affiliated

suppliers’ COP instead of the transfer

price are not major inputs. NSK argues

that the statute provides for the

Department to obtain and use COP

information only for major inputs

purchased from affiliated suppliers and

that major inputs are defined in the

questionnaire as ‘‘an essential

component of the finished merchandise

which accounts for a significant

percentage of the total cost of materials,

the total labor costs, or the overhead

costs incurred to produce one unit of

the merchandise under review.’’ NSK

argues that the parts in question do not

account for a significant percentage of

the cost of the bearings in which they

are used, and that the Department

therefore has no statutory authority to

request or use the COP data for those

parts.

Torrington notes that the parts to

which NSK refers are major inputs

because they represent significant

percentages of the cost of the bearings

in which they are used. Torrington also

notes that the Department has

specifically identified one of the parts as

a major input in prior reviews.

Department’s Position: We disagree

with NSK that one of the part types to

which NSK refers is not a major input,

but we agree that the other part type is

a minor input. However, because of the

proprietary nature of the issue, we have

discussed our rationale on our treatment

of these parts in the analysis

memorandum for these final results of

review. See NSK Ltd. Final Analysis

Memorandum, dated December 17,

1996.

We disagree with NSK’s contention

that the statute restricts our use of COP

information to major inputs. As noted

above, section 773(f)(2) places no

limitation on the data we may collect to

determine the fair price of major or

minor inputs.

Comment 4: Torrington argues that

the Department should use NSK-RHP’s

transfer prices if those prices are higher

than the COP of the input in question.

Torrington recommends that the

Department examine each input and

determine whether instances exist

where transfer prices are below cost

and, if they are, apply the higher value.

Torrington states that, in response to its

pre-preliminary comments, NSK-RHP

asserted that Exhibit S–11 to its

supplemental questionnaire response

demonstrates that the transfer prices for

the major inputs exceed the cost of

producing the relevant inputs in almost

every case. Torrington requests,

therefore, that the Department use the

higher of transfer prices or production

costs for the value of affiliated-party

major inputs.

NSK-RHP asserts that, although the

Department failed to establish a

reasonable basis under section 773(f)(3)

of the Tariff Act by which to request

data about the cost of major inputs

respondent purchased from affiliated

parties, NSK-RHP placed this data on

the record. NSK-RHP contends that, if

the Department examines this data, it

will see that transfer prices for the major

inputs exceed the costs for producing

the relevant inputs in almost every case.

Further, for those limited cases in which

transfer prices do not exceed costs,

NSK-RHP asserts that the Department

found correctly that it was unnecessary

to substitute the cost data for the

transfer prices. NSK-RHP concludes

that, if the Department decides to ignore

the restrictions on its authority to

request cost data set by section 773(f)(3)

of the Tariff Act, it will find evidence

on record nevertheless that fully

supports NSK-RHP’s decision to use,

where relevant, the transfer prices for

major inputs it purchased from affiliated

parties.

Department’s Position: We disagree

with NSK-RHP’s contention that we did

not establish, under section 773(f)(3) of

the Tariff Act, a reasonable basis to

request cost data from affiliated

suppliers. As explained in our response

to comment 1 of this sub-section, if we

have reason to believe or suspect that

the price paid to an affiliated party for

a major input is below the COP of that

input, we may investigate whether the

transfer price is in fact lower than the

supplier’s actual COP of that input even

if the transfer price reflects the market

value of the input. If the transfer price

is below the affiliated supplier’s COP for

that input, we may use the actual COP

as the value for that input. In this case,

because we have reasonable grounds to

believe or suspect that NSK’s HM sales

may be occurring at below-cost prices,

we have reasonable grounds to believe

or suspect that it purchased major

inputs at below-cost transfer prices.

Therefore, for these final results, we

have used the higher of transfer prices

or COP for the value of affiliated-party

major inputs.

Comment 5: Torrington contends that

INA refused to provide COP and transfer

price information regarding major

affiliated inputs as the Department

requested in its supplemental

questionnaire. Torrington asserts that,

instead, INA calculated COP and CV on

the basis of actual cost without regard

to internal transfer prices. Torrington

argues that INA’s calculation inhibits

the Department from applying INA’s

situation to section 773(f)(3) of the Tariff

Act, which requires the Department to

use the highest value among transfer

price, cost of production or, in certain

situations, alternative information.

Torrington states that the Department

should restate all reported values of

affiliated-party major inputs in

accordance with the manner in which

INA calculated internal transfers of

finished parts and goods, as indicated in

its supplemental COP/CV response.

Torrington also states that, if the

Department is unable to identify the

major inputs, it should, in accordance

with Federal-Mogul V at 219, restate all

material costs, which would ensure that

no material costs are understated.

INA rebuts Torrington’s view that the

methodology for reporting all inputs

produced by the home market

manufacturing entity, INA-FRG, and

used in the calculation of COP is

improper. INA states that INA-FRG, as

a whole, provides the necessary

functions for the development,

manufacture, and sale of the subject

merchandise. INA states that it reported

the activities of INA-FRG on a

consolidated basis which the

Department has approved in all prior

reviews of these orders. Further, INA

contends that, since INA-FRG is the

producer of subject merchandise,
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2117

internal transfers between the entities

which comprise INA-FRG are irrelevant.

In addition, INA argues that the

Department has not requested any

changes in the reporting methodology of

INA-FRG and such a change would not

make sense because the INA-FRG

entities are intertwined and entirely

interdependent in the production and

selling of subject merchandise.

INA also contends that the manner in

which it reported its cost-accounting

system is fully consistent with the

Department’s questionnaire

instructions. Further, INA states that its

reported cost-accounting system is

organized for the complete business,

INA-FRG, and not for the individual

entities which comprise INA-FRG.

Thus, INA states, the inter-entity

transfers are consolidated. INA also

states that in computing COP and CV,

the methodology INA-FRG used is both

current and reflects actual cost

accurately. Further, INA argues, it does

not have a cost-accounting system that

eliminates inter-entity transfers,

particularly for the voluminous number

of articles reported. INA states that INAFRG has no system in place to reestablish the data on transfers or

otherwise trace the requested data for

the thousands of models involved and

also states that it would not be

practicable to complete such a massive

task in the time constraints of an

administrative review. Thus, INA states

that it was not unwilling to provide the

information the Department requested,

rather, it was not able to provide such

requested information.

Department Position: We agree with

Torrington that INA-FRG failed to

provide us with internal transfer prices

of major inputs from within the

affiliated entities that comprise INAFRG. Although INA-FRG responded to

our questionnaire on a consolidated

basis, INA-FRG is comprised of several

separate, corporate entities that engage

in activities related to the production

and sale of subject merchandise (see

Memo from Analyst to File: Verification

of Home Market Sales Information

Submitted by INA Walzlager Schaeffler

KG, at 1 and 2, June 28, 1996). Each of

the entities has its own accounting

system and, thus, its own method by

which it accounts for purchases of

inputs from suppliers and, in particular,

affiliated parties. Further, each of the

entities is affiliated in accordance with

section 771(33)(F) of the Tariff Act.

Therefore, in accordance with section

773(f)(3), we requested that INA-FRG

submit the per-unit transfer price it

charged for the major input by the

affiliated party so that we could

determine the value of the input

compared with its COP. While INA-FRG

maintains that it has reported cost

information on a consolidated basis in

this and in all previous reviews, we

maintain that our request for transferprice information is in accordance with

the section 773(f) requirement that we

analyze such information to determine

the appropriate value for major inputs.

We requested that INA-FRG provide

this transfer-price information in both

our original and supplemental

questionnaires. In its response to our

requests for such information, INA-FRG

stated that it calculated COP and CV in

this review on the basis of actual cost

without regard to transfer prices.

However, given the separateness of the

entities and the fact that each of the

entities has its own accounting system,

we maintain our position that, in

accordance with the statute and INAFRG’s own accounting systems, INAFRG should have provided us with the

transfer prices at issue. Given INAFRG’s failure to provide us with this

requested information, we are restating

the material costs of INA-FRG’s cost of

manufacturing as facts available, in

accordance with section 776(a)(2)(A) of

the Tariff Act.

In its response, INA-FRG stated that it

added fifteen percent to its standard

manufacturing costs in order to value

internal transfers of finished parts and

finished goods. For each entity of which

INA-FRG is comprised, we calculated

the percentage of SG&A plus net interest

to cost of goods sold. For the entity with

the lowest percentage of SG&A plus net

interest to cost of goods sold, we

calculated the difference between the

fifteen percent and the resulting

percentage of SG&A plus net interest to

cost of goods sold. As facts available, we

increased INA-FRG’s reported cost of

materials by this percentage difference.

Based on INA-FRG’s response, we are

unable to distinguish between

transactions that represent sales of

finished parts and goods from those

which are unfinished parts and goods.

We have, therefore, applied this

calculation to all reported material

costs.

E. Inventory Write-downs and Writeoffs. Comment 1: Torrington argues that

the Department should adjust NSK’s

reported COP and CV so as to include

both inventory write-offs and writedowns. Torrington, citing AFBs III at

39756, contends that it is the

Department’s practice to consider writeoffs and write-downs as constituent

parts of the cost of production.

NSK argues that it reported inventory

write-offs and write-downs in

accordance with Japanese GAAP and

that it reported write-offs and writedowns in the same manner as in prior

reviews of these orders. NSK also argues

that, even if the Department agrees with

Torrington, it should still decline to

adjust NSK’s reported G&A factor

because the amount of the write-offs is

de minimis under 19 CFR 353.59(a).

Department’s Position: We agree with

Torrington. We regard NSK’s inventory

write-offs and write-downs as part of the

fully-absorbed cost of goods sold which

should be included in the calculation of

cost of production. See AFBs III at

39756. Therefore, we have included

both inventory write-offs and writedowns in NSK’s reported COP.

Comment 2: Torrington argues that

the Department should adjust FAG

Italy’s and FAG Germany’s reported

costs to include inventory write-downs.

Citing Canned Pineapple Fruit from

Thailand, 60 FR 29553, 29571 (June 5,

1995), Tapered Roller Bearings and

Parts Thereof, Finished and Unfinished,

from Japan, 57 FR 4960, 4973 (February

11, 1992), and Mechanical Transfer

Presses from Japan, 55 FR 335, 347

(January 4, 1990), Torrington contends

that the write-downs are costs for

antidumping purposes.

FAG Italy and FAG Germany suggest

that Torrington has confused inventory

write-downs with inventory write-offs.

The respondents explain that they

included inventory write-offs in the

reported G&A expenses, but that they

excluded write-downs on the basis that

they are contingent reserves provided

for at the end of the accounting year to

account for the possibility that they may

not eventually sell some merchandise

for full value. FAG Italy and FAG

Germany argue that their write-downs

are not actual costs and only become

actual reportable events for

antidumping purposes when they sell

the bearing for less than its inventory

value. Respondents state that the

realized loss on the resale is a revenue

issue and not a cost issue. FAG Italy and

FAG Germany contend that to increase

their costs by the contingent reserve for

write-downs and also use the lower

resale value as part of their per-unit

price would constitute double-counting

and that the Department has recognized

this in all prior reviews of these orders.

FAG Italy and FAG Germany contend

that the cases cited by Torrington are

not dispositive, given the facts in this

case. FAG Italy and FAG Germany note

that there is no indication whether the

write-downs referred to were contingent

or realized and contend that it is

possible that the cases involved writeoffs as opposed to write-downs.

Department’s Position: We agree with

FAG Italy and FAG Germany that the

cases Torrington cites are inapposite,
2118 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

given the facts of this case. We reviewed

the record and determined that the

inventory write-downs these

respondents reported are not actual

costs but are a provisional reduction-ininventory value in anticipation of a

lower resale value. FAG Italy’s and FAG

Germany’s inventory write-downs are,

as it appears from the record, not a cost

but a potential loss of revenue that is

ultimately reflected in the sales price.

FAG Italy’s and FAG Germany’s writedowns, then, are not realized expenses

but simply a contingent reduction in

how much revenue the companies

expect to make from the sale of the

merchandise. Since these particular

inventory write-downs are not a realized

expense, and are not reflected in their

accounting of costs of goods in

inventory, we have not included them

in the calculation of COP and CV for

FAG Italy and FAG Germany.

F. Interest Expense Offset. Comment:

Torrington argues that the Department

should adjust NSK’s reported financial

expenses for COP and CV by

disallowing NSK’s interest income

offset. Torrington contends that the

Department requires respondents to

demonstrate that interest income is

related to the production of subject

merchandise before allowing an offset to

interest expense. Torrington cites

Erasable Programmable Read Only

Memories (EPROMS) from Japan, 51 FR

39684 (1986), AFBs IV at 10925–26,

Tapered Roller Bearings from Japan, 59

FR 56035, 56045 (1994), and Tapered

Roller Bearings from Japan, 58 FR

64720, 64728 (1994), in support of this

contention. Torrington argues that NSK

did not substantiate that its reported

interest income is related to the

production of subject merchandise and

that the Department adjusted NSK’s

financing expense in AFBs IV because

NSK failed to make such a

demonstration in that review.

NSK argues that the Department’s

standards for allowing an offset for

interest income have changed since the

issuance of the cases Torrington cites.

Citing Certain Corrosion-Resistant

Carbon Steel Flat Products and Certain

Cut-to-Length Carbon Steel Plate from

Canada, 61 FR 13815, 13819 (March 28,

1996), NSK contends that the

Department has expanded its view of

what constitutes an appropriate offset to

interest expense, including interest

earned on short-term deposits, advance

payments to suppliers and late

payments. NSK claims that its interestincome offset consists of these types of

income and, therefore, the Department

should not make any adjustment to its

reported interest expense.

Department’s Position: We disagree

with Torrington. We are satisfied from

information on the record that NSK’s

business records do not report

separately the short-and long-term

nature of the interest income earned by

the company and its subsidiaries. NSK’s

alternative calculation of its income

offset reasonably reflects the short-term

interest income related to production

activities and the investment of working

capital. Therefore, we have allowed

NSK’s offset to interest expense for

interest income.

G. Other Issues. Comment 1:

Torrington contends that INA failed to

provide relevant cost information in its

supplemental questionnaire response,

such as the reconciliation of standard

and actual cost factors, as well as an

itemization of the reported variable and

fixed overhead costs reported for subject

merchandise. Torrington argues that, in

light of INA’s failure to provide this

information, the Department should

explain why it remains satisfied with

INA’s cost-reporting methodology.

Otherwise, Torrington contends, the

Department should adjust INA’s

reported data by appropriate facts

available.

Department’s Position: We disagree

with Torrington. INA-FRG provided

detailed responses to our supplemental

cost questionnaire concerning INA’s

standard and actual cost-accounting

system and its standard cost-revision

practice. We are satisfied by INA’s

explanation and, therefore, we believe

that INA-FRG has provided the

necessary cost information for us to use

in our final results.

Comment 2: Torrington argues that

the Department should revise NSK’s

reported COP and CV by adding an

amount for idle-asset depreciation.

Torrington asserts that NSK did not

report the depreciation of idle assets in

its COM. Although Japanese GAAP does

not require companies to calculate such

depreciation, Torrington contends that

it is the Department’s practice to adjust

respondents’ cost data if depreciation

expense of idle assets is not reported as

an element of production cost.

Moreover, Torrington asserts, the CAFC

upheld this practice in NTN III.

Torrington argues that, as facts

available, the Department should add

the highest amount of depreciation of

idle assets reported by any other

respondent to NSK’s COP and CV.

NSK contends that it did include in

its COM all costs associated with the

depreciation of idle assets and cites its

questionnaire response in support of

this contention.

Department’s Position: We agree with

NSK. It is evident from NSK’s response

to our cost questionnaire that it

included an amount for idle-asset

depreciation in its COM. Therefore, we

do not need to modify NSK’s response

with regard to idle-asset depreciation.

Comment 3: Torrington argues that

the Department should revise NSK’s

reported COP and CV by including

losses and gains on the disposal of fixed

assets. Torrington asserts that the

Department considers such losses as a

normal cost of production. Torrington

suggests that, because NSK did not

specifically identify the amount of

expense associated with the disposal of

fixed assets in its non-operating

expenses, the Department should assign

a reasonable portion of NSK’s

‘‘miscellaneous loss’’ to expenses

incurred in disposal of fixed assets as

facts available.

NSK argues that its gains and losses

as a result of the disposal of fixed assets

are not related to production but are

non-operating expenses and

extraordinary gain. NSK argues that

such gains and losses should not be

included in its COP data.

Department’s Position: We regard

gains and losses as a result of the

disposal of fixed assets as a normal cost

of production. See AFBs III at 39756. We

reviewed NSK’s response and

concluded that such gains or losses, in

NSK’s case, are related to its production

operations. Since we have no reason to

believe that these gains or losses on the

sales of fixed assets do not relate to the

general production activity of NSK as a

whole, we included the net amount as

a general expense. We have not done as

Torrington suggests, however, because

NSK did specifically report the total

amount of gains and losses associated

with the disposal of fixed assets in its

non-operating expenses in its response

to our cost questionnaire.

Comment 4: Torrington contends that

FAG Germany did not provide variance

rates it actually applied to the 1995

standard costs for all models produced

in 1994 and 1995 and did not provide

explanations where variances differ

substantially between 1994 and 1995

production, even though the

Department specifically requested this

information. Torrington notes that FAG

Germany alleged that it would be

impractical to provide variances on a

model-specific basis and that the

relationship of particular models and

variances was more appropriately

reviewed in the context of verification.

Torrington contends that model-specific

variance rates are important to test the

reasonableness of FAG Germany’s

standard costs, and that allowing FAG

Germany to selectively disregard

requests for information adversely
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2119

affects the credibility of the

Department’s investigative process.

Torrington argues that, in light of this

failure, the Department should apply

adverse facts available by selecting the

highest reported variance and

recalculate reported costs accordingly.

FAG Germany argues that it does not

calculate variances in its costaccounting system on a model-specific

basis but on a cost-center area-specific

basis. FAG Germany contends that all

bearings and components whose sales

and costs were reported were produced

in one of the cost-center areas listed in

the supplemental response and that it

calculates variance ratios for each costcenter area once per year at year-end.

FAG Germany contends that it provided

the precise formulae it used in the

variance calculation and a sample

calculation in order to clarify its

methodology. Finally, FAG Germany

states that the Department has verified

FAG Germany’s standard costs and costsubmission methodology in prior

reviews and the Department has always

accepted the information.

Department’s Position: We agree with

FAG Germany. Although we requested

model-specific information, FAG

Germany does not maintain variance

records on a model-specific basis but

rather on a cost center-specific basis. We

reviewed FAG Germany’s response and

conclude that reporting such

information, in FAG Germany’s case, on

a cost-center basis is reasonable

because: (1) That is the basis on which

it maintain its records, and (2) the

variance ratios do not change for

specific models within a cost-center

area in FAG Germany’s cost-accounting

system. We reviewed FAG Germany’s

original response in light of its

supplemental response and found no

evidence that FAG Germany had

misrepresented the actual costs of

subject merchandise in its response.

Comment 5: Torrington argues that

the Department should satisfy itself that

FAG Germany’s supplemental

explanations of how it determined and

distributed variances is reasonable, and

that, if the Department finds the

evidence submitted by FAG Germany to

be inadequate, the Department should

reject it.

Department’s Position: We have

examined FAG Germany’s original

response and its supplemental response,

and we have concluded that FAG

Germany’s reporting methodology

reasonably captured the actual costs

incurred in the production of subject

merchandise in its response.

Comment 6: Torrington contends that

FAG Germany did not adequately

describe how it determined the COP and

CV costs for DKFL, the subsidiary that

entered bankruptcy proceedings in July

1993. Torrington comments that, in its

supplemental response, FAG Germany

claimed that it had based its reported

costs for the models involved on an

average of 1993 DKFL costs and POR

FAG Germany costs and that, because

there is no current DKFL production,

FAG Germany had weighted the average

based on the relative sales quantities.

Torrington claims that, in a later

submission, FAG Germany asserted that

it did not weight-average costs.

Torrington argues that, in light of this

contradictory record, the Department

should resort to facts available for all

models, not just sales, which involved

DKFL production.

FAG Germany contends that it fully

explained its cost-calculation

methodologies in its response and its

supplemental response. FAG Germany

claims that it weight-averaged COM data

for identical products made by both

DKFL and FAG Germany in all

preceding review periods when DKFL

was operating. FAG Germany also states

that, in those instances where DKFL and

FAG Germany made identical

merchandise in different periods (that

is, when FAG Germany actually

produced the identical merchandise in

a POR after DKFL’s bankruptcy), it was

impossible for FAG Germany to

calculate a weighted-average cost of

manufacture for DKFL and FAG

Germany bearings. FAG Germany

contends that any attempt to calculate a

weighted-average production cost for

DKFL would have resulted in a

distorted cost of manufacture based on

different production periods.

Department’s Position: We agree with

FAG Germany. We reviewed the record

and found no inconsistencies in FAG

Germany’s reporting of the cost of

bearings produced by DKFL. Although

FAG Germany used two different

methodologies for calculating DKFL

costs, one of the methodologies was an

alternate to the other methodology that

was only used when the original

methodology (i.e., weight-averaging)

was inappropriate because the bearings

were produced during different periods.

We find, therefore, that FAG Germany’s

reporting methodology for DKFL costs is

appropriate in the context of this

review.

Comment 7: NSK and INA argue that

the Department should deduct imputed

credit expenses from CV-derived home

market prices, as it has in previous

practice. NSK contends that failure to

deduct the imputed expense distorts

margins based on CV comparisons and

argues further that the statute and

regulations call for an adjustment for

differences in circumstances of sale,

which include imputed credit expenses.

Respondent notes that the Department

made an adjustment for imputed credit

expenses for CEP in all instances and

NV when based on home market price.

According to NSK and INA, the failure

to make such an adjustment when NV

is based on CV results in an unfair

comparison between CEP and NV when

the Department calculates NV using CV.

NSK contends that the Department’s

apparent intention to interpret section

773(e)(2)(A) of the Tariff Act as allowing

only a respondent’s actual SG&A

expenses in the calculation of CV, citing

Large Newspaper Printing Presses and

Components Thereof, Whether

Assembled or Unassembled, From

Germany, 61 FR 38166, 38187 (July 23,

1996), misconstrues the law. NSK

contends that, while the Department did

not explain its rationale in the

preliminary results, it appears that it did

not make the deductions on the basis of

the language of the URAA, which states

that CV is now to be calculated using

respondent’s actual SG&A expenses.

NSK argues that this provision was

meant to overrule the prior statutory

authority to use a minimum SG&A

expense, but notes that, under prior law,

if a respondent’s actual SG&A expenses

exceeded the minimum, the Department

always used respondent’s actual

expenses and still deducted imputed

expenses. NSK notes that the

Department’s proposed regulations (61

FR 7346) state that ‘‘the Department’s

practice with respect to adjustments for

direct selling expenses and assumptions

of expenses remains unchanged.’’

Torrington argues that the Department

should deduct imputed credit expenses

from NV based on CV only when it is

apparent that such an expense is

included in the SG&A expenses

reported by a respondent. Absent such

a showing, the imputed expense is not

an element of the actual amounts

required by section 773(e) of the Tariff

Act. Without the inclusion of the

imputed expense in the build-up of

SG&A, Torrington contends there is no

basis for making a deduction, since

doing so would understate CV.

Department’s Position: We agree with

NSK and INA. Under the URAA, for

both COP and CV, the statute provides

that SG&A be based on actual amounts

incurred by the exporter for production

and sale of the foreign like product (see

sections 773(b) and (e) of the Tariff Act).

After calculating CV in accordance with

the statute, we have, in essence, a NV.

Consistent with section 773(a)(8) of the

Tariff Act, adjustments to NV are

appropriate when CV is the basis for

NV. The Department uses imputed
2120 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

credit expenses to measure the effect of

specific respondent selling practices in

the United States and the comparison

market. Therefore, for these final results,

we have deducted imputed credit

expenses as a COS adjustment from CV

in the calculation of NV.

7. Further Manufacturing

Comment: Torrington comments that

the Department excused many

respondents from reporting U.S. furtherprocessing information and that the

Department determined dumping

margins for the affected sales on the

basis of the weighted-average dumping

margins found on sales of identical or

other subject merchandise sold to

unaffiliated customers. Torrington

argues that, under the statute, this

method is proper only if (i) there is a

sufficient quantity of non-value-added

sales to provide a reasonable basis for

comparison, and (ii) use of such sales is

appropriate. Torrington argues further

that the Department failed to articulate

standards for determining whether

quantities were sufficient or how the

method was appropriate based on the

facts of this record. Torrington asserts

that the Department should either

articulate and justify its standards for

excusing reporting of such information

or re-open the record and require full

further-manufacturing reporting.

Torrington proposes the following

standards: (i) that no more than 10

percent of all U.S. sales, by quantity of

the particular model in question,

involve U.S. value added, and (ii) that

there be adequate facts supporting a

finding that no reason exists for the

Department to believe that the valueadded sales somehow involve larger

dumping margins than the proxy

transactions. Torrington concludes that

it would not be appropriate for the

Department to use any methodology that

would dilute dumping margins.

FAG, NMB/Pelmec, and SNR contend

that requiring a respondent to report

further-manufacturing cost data

pursuant to the Department’s

questionnaire after that respondent has

demonstrated that the amount of value

added in the United States exceeds

substantially the cost of the imported

merchandise defeats the clear purpose

and design of the statutory waiver in

section 772(e) of the Tariff Act. Citing

the SAA, FAG argues that section 772(e)

of the Tariff Act was intended to reduce

reporting burdens on respondents and

to reduce analysis and processing

burdens on the Department.

The NTN companies argue that, in

demanding the reopening of the furtherprocessing reporting, Torrington is

trying to invalidate the statute’s special

rule for further-manufactured

merchandise by grafting extra statutory

requirements to a provision meant to

simplify, not complicate, the review

process.

Koyo argues that Torrington can point

to no error in the Department’s excusing

many of the respondents from full

reporting of further-processing data and

that the Department applied its

discretion precisely as anticipated by

Congress. Koyo also contends that the

Department articulated its standard in

the proposed regulations and that the

intent of section 772(e) of the Tariff Act

is to reduce the burden on both

respondents and the Department. Koyo

argues further that Torrington’s

proposed methodology ignores the

rationale underlying the statutory

amendment that the simplified

reporting methodologies were to be used

in cases in which the value added

substantially exceeds the value of the

imported merchandise, and adds that

the number of sales involved does not

affect whether the value added in those

transactions is or is not ‘‘substantial.’’

Koyo also contends that Torrington’s

suggestion that the calculation should

be model-specific defeats the purpose of

section 772(e) of the Tariff Act.

SKF argues that, even if the

Department agrees with Torrington that

its selection of proxy transactions was

somehow flawed, the next logical and

statutorily mandated step is not a full

response to the cost-of-furthermanufacturing section of the

questionnaire, but rather to select

another method to derive surrogate

information. SKF also argues that, in

SKF’s case, it is clear that there is a

sufficient quantity of non-furthermanufactured sales to provide a

reasonable basis for comparison.

Finally, SKF contends that Torrington

has presented no evidence or argument

that the Department’s practice was

inappropriate and that doing as

Torrington suggests would defeat the

purpose of section 772(e) of the Tariff

Act.

Finally, the FAG companies assert

that requiring the Department to gather

and analyze complete further-processing

information after respondents have

satisfied the requirement that value

added exceeds substantially the value of

the imported subject merchandise

completely defeats the clear purpose

and design of the statutory waiver

subsection.

Department’s Position: Section 772(e)

of the statute 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 Tariff

Act as the ‘‘special rule’’). The statute

further provides that, where there is a

sufficient quantity of sales of identical

subject merchandise 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 the CEP of

the further-processed subject

merchandise on any other reasonable

basis.

We disagree with Torrington’s

argument that the test to determine

whether the U.S. value added exceeds

substantially the value of the imported

merchandise should be done on a

model-by-model basis. The statute does

not require application of the ‘‘special

rule’’ on a model-specific basis.

Moreover, application on a modelspecific basis would be inconsistent

with the purpose of the ‘‘special rule’’

as discussed in the SAA:

* * * for purposes of estimating whether

the value added in the United States is likely

to substantially exceed the value of the

imported product, it is the Administration’s

intent that Commerce not be required to

perform a precise calculation of the value

added. Requiring such a precise calculation

would defeat the purpose of the new rule of

saving Commerce the considerable effort of

measuring precisely the U.S. value added.

SAA at 826.

A model-by-model analysis and

determination to apply the special rule

would substantially undermine the

intent of the provision, which is to

relieve the Department of the burden of

a further-manufacturing analysis.

Therefore, for these reviews, we

estimated the ratio of value added to the

final sales price on an aggregate classor-kind basis; that is, we calculated the

value added to imported subject

merchandise in relationship to the sales

price to the first unaffiliated customer

for that imported subject merchandise.

We disagree that we should be

required, at this time, to articulate a

standard for determining whether

quantities of identical or other subject

merchandise are sufficient to provide a

reasonable basis for comparison. We

have had limited opportunity to apply

the ‘‘special rule’’ and we are reluctant

to articulate a standard which might

have applicability beyond these reviews

without the benefit of further

experience. For purposes of these
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2121

reviews, however, the Department has

found that each of the respondents to

which the ‘‘special rule’’ was applied

had a sufficient quantity of non-furtherprocessed sales to provide a reasonable

basis of comparison. In particular, the

non-further-processed sales constituted

at least 21 percent of the respondent’s

total quantity of sales of subject

merchandise and a simple average of 55

percent of all excused respondents’’

total quantity of sales of subject

merchandise. In the context of these

reviews, we determine that these

percentages provide a sufficient basis

for comparison, particularly because the

above percentages understate the

amount of non-further-processed

merchandise. Specifically, the above

calculations equate bearing parts, rolling

elements, cages, rings, etc. (which are

usually further manufactured in the

United States by the respondents

excused from providing furtherprocessing data) with complete bearings

(which are not usually further

manufactured in the United States by

the same respondents). Based on the

entered value of entries, we find that

non-further-processed merchandise

constituted at least 71 percent of the

respondent’s total sales of all subject

merchandise and a simple average of 89

percent of all excused respondents’’

sales of subject merchandise. This

further confirms that we had an

adequate quantity of non-furtherprocessed sales for our comparison.

In order to provide an appropriate

basis for comparison, the Department

need not find that the non-furtherprocessed sales were dumped at the

same rate as the further-processed sales.

To impose such a requirement would

necessitate the Department calculating

the actual dumping margins on the

further-processed merchandise,

defeating the purpose of the ‘‘special

rule.’’ Moreover, Torrington has pointed

to no information on the record which

suggests that dumping margins on the

further-processed merchandise differ

significantly from the weighted-average

margins of the non-further-processed

merchandise. Therefore, we conclude

that excusing certain respondents from

providing further-manufacturing data

was consistent with the intent of the

special rule and our calculations are not

distorted by our decision not to conduct

a further-manufacturing analysis.

8. Packing and Movement Expenses

Comment 1: FAG Italy contends that

the Department unlawfully reduced CEP

for expenses incident to transporting

merchandise from the country of origin

(Italy) to Germany for ultimate

distribution to the United States. FAG

Italy notes that, pursuant to section

772(c)(2)(A) of the Tariff Act, the

Department has the authority to reduce

CEP by any additional costs, charges or

expenses incident to bringing the

subject merchandise from the original

place of shipment in the exporting

country to the place of delivery in the

United States. FAG Italy contends that,

in accordance with this statutory

provision, Germany is the ‘‘exporting

country’’ of the reviewed sales and,

therefore, the Department does not have

the authority to adjust CEP for costs

incident to bringing the merchandise

from the factory in Italy to the

warehouse in Germany.

Torrington contends that the

Department properly reduced CEP by all

costs incident to bringing the

merchandise from the country of origin

to Germany. Torrington contends that,

with respect to the FAG Italy-produced

bearings, Italy remained the exporting

country regardless of whether the

bearings were physically in Italy,

Germany, or the United States.

Torrington asks that the Department

disregard the alleged differences,

suggested by FAG Italy, between the

statutory terms ‘‘exporting country’’ and

the ‘‘country of origin.’’

Department Position: We disagree

with FAG Italy that Germany is the

‘‘exporting country’’ of the reviewed

sales, and for the final results we have

adjusted CEP for costs incident to

bringing merchandise from its factory in

Italy to the warehouse in Germany. For

calculating CEP in our review of FAG

Italy’s subject merchandise, Germany is

the intermediary country and not the

exporting country. Since FAG Italy is

the producer and exporter of subject

merchandise, Italy is both the ‘‘country

of origin’’ and the ‘‘exporting country.’’

Section 771(28) of the Tariff Act

defines ‘‘exporter or producer’’ to

include both the exporter of the subject

merchandise and the producer of the

same subject merchandise to the extent

necessary to accurately calculate the

total amount incurred and realized for

costs, expenses, and profits in

connection with production and sale of

the merchandise. Since FAG Italy is

both the exporter of the subject

merchandise and the producer of the

same subject merchandise, we have

deducted from CEP all costs incident to

transporting the merchandise from FAG

Italy’s factory in Italy to the company’s

warehouse in the United States.

Comment 2: Torrington argues that

the Department has allowed Koyo to

report aggregated air- and ocean-freight

expenses. Torrington contends that the

Department should require Koyo to

report air-freight expenses on a modelor customer-specific basis or apply

expense data obtained at verification as

facts available.

Koyo responds that the Department

has repeatedly rejected Torrington’s

arguments on this issue in previous

reviews. According to Koyo, the

Department’s verification report for this

review supports its contention that,

although it tracks its costs of air freight,

Koyo is unable to tie individual air

shipments to particular sales to

unrelated customers in the United

States.

Department’s Position: We agree with

Koyo. The manner in which Koyo

records these expenses in its accounting

system, and the reporting of these

expenses, has not changed from the

1993/94 review. As in the 1993/94

review, we determine that Koyo is not

able to provide air-freight on a

transaction-specific basis. At the U.S.

sales verification we verified Koyo’s airand ocean-freight expense data

successfully and found that the use of

aggregated expense data in the

allocations was not unreasonably

distortive. Therefore, we have accepted

Koyo’s reporting of these movement

expenses for the final results.

Comment 3: Torrington asserts that

the Department must be satisfied that

SKF France reported HM packing costs

properly before using these expenses to

adjust NV in the final results.

Torrington notes that SKF France based

its reporting on standard costs from its

cost and financial accounting system.

Torrington claims that it is not clear

whether SKF France’s standard-cost

system yields sufficiently precise results

for direct reporting of packing expense

on a model-by-model basis. Thus,

Torrington maintains the reporting of

these expenses might not be acceptable

in accordance with Torrington VI (at

1050–1051), in which the CAFC ruled

that companies must report direct

expenses accurately and not allocate

them broadly across sales. Torrington

suggests that, if the Department is not

satisfied with SKF France’s reporting of

HM packing expenses, it should use as

facts available the packing expenses of

another producer.

SKF France contends that

Torrington’s concern about the expenses

being broadly allocated is without basis

and notes that the Department has

accepted the same reporting

methodology in all prior AFB reviews.

In addition, SKF France claims that

Torrington is misreading Torrington VI.

SKF France contends that the CAFC did

not prohibit companies from allocating

direct expenses broadly across sales, but

instead held that, when companies

allocate direct expenses, the expenses
2122 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

must not lose their direct nature, i.e., the

Department should not treat them as

indirect selling expenses.

Department’s Position: We agree with

SKF France. In our supplemental

questionnaire we requested SKF France

to provide a worksheet listing, for all

packing materials, the average cost of

each material and how much of each

material it used. In response, SKF

France explained that it could not

provide the information in the manner

requested since it is not available in its

accounting records. SKF France

explained that its packing-expense

methodology relies on costs recorded in

the company’s cost-accounting and

financial-accounting systems and that it

allocates this information to the

reported bearings. SKF France reported

packing costs in a manner consistent

with how it records the expenses in its

accounting system. Moreover, we have

no reason to believe that the reporting

methodology is distortive of SKF

France’s actual experience, and we note

that Torrington has not provided

evidence indicating otherwise. This is

the same methodology that SKF France

used in each prior completed review,

and we see no reason to reject it now;

this reporting methodology is consistent

with SKF France’s accounting and

record-keeping systems and leads to an

accurate representation of the

company’s packing cost. Therefore, for

the final results we used the company’s

HM packing costs to adjust NV.

Comment 4: Torrington claims that

the Department should reject NTN’s HM

pre-sale and post-sale transportation

expenses because NTN did not

adequately describe the adjustments in

its response. Torrington maintains that

respondents are obligated to support all

claims for adjustments in great detail

and that, since NTN has not done this,

the Department should deny the

adjustments. NTN disagrees with

Torrington and requests that the

Department accept its movement

expenses for the final results.

Department’s Position: We disagree

with Torrington. We examined NTN’s

movement expenses at the HM

verification and, during this process, the

respondent provided us with a complete

description of the data and allocation

methodology it used to report the

adjustments and we found no

discrepancies. See the August 14, 1996,

HM verification report for NTN.

Furthermore, we determined that the

reporting of the adjustments is accurate,

given NTN’s financial records, and is

not unreasonably distortive. Therefore,

we have accepted NTN’s HM movement

expenses for the final results.

9. Affiliated Parties

Comment: Asahi contends that the

Department incorrectly performed the

arm’s-length test as it did not take into

account differences in levels of trade.

Asahi points out that it provided

information on price differences

between levels of trade in its

questionnaire response and that the

Department verified this data.

Department’s Position: We disagree

with Asahi. The arm’s-length test

compares, at the same level of trade, the

price of foreign like products sold to

affiliated parties to the price of the same

products sold to unaffiliated parties. See

Certain Flat-Rolled Carbon Steel

Products from Canada, 58 FR 37099

(July 9, 1993), and Certain CorrosionResistant Carbon Steel Flat Products

from Germany, 60 FR 65264 (December

19, 1995). We did not use Asahi’s sales

to a certain affiliated party in the

calculation of NV because there were no

unaffiliated party sales at the same level

of trade for making such comparisons

and, therefore, we were unable to

analyze whether prices to this affiliated

party were at arm’s length.

A level-of-trade adjustment is based

on differences in prices at two home

market levels of trade. Even if we were

to consider a level-of-trade adjustment

as part of the arm’s-length test, basing

the adjustment on price differences

where one side of the analysis is based

solely on untested affiliated-party sales

would defeat the purpose of the arm’slength test. In such a case, the level-oftrade adjustment would include not

only differences in prices associated

with the sales at different levels of trade,

but would also include the amount of

any difference in prices associated with

the party’s affiliated status. Therefore,

we have not made a level-of-trade

adjustment in order to conduct an

arm’s-length test on the affiliated-party

sales.

10. Samples, Prototypes, and

Ordinary Course of Trade

We do not exclude HM or U.S. sales

from our review solely on the basis of

their designation as ‘‘samples’’ or

‘‘prototypes,’’ but we do exclude such

transactions if they meet certain criteria.

With respect to HM sales, we may

exclude sales designated as samples or

prototypes from our analysis pursuant

to section 773(a)(1) of the Tariff Act

where we determine that those sales

were not made in the ordinary course of

trade, as defined by section 771(15).

With respect to U.S. sales, there is no

parallel ‘‘ordinary course of trade’’

provision allowing for the exclusion of

sample or prototype sales from the U.S.

database. See Floral Trade Council of

Davis, Cal. v. United States, 775 F.

Supp. 1492, 1503 n.18 (CIT 1991).

Except in the case of sampling, we will

only exclude U.S. sales from our review

in unusual situations, i.e., where those

sales are unrepresentative and

extremely distortive. See, e.g., Chang

Tieh Indus. Co. v. United States, 840 F.

Supp. 141, 145–46 (CIT 1993)

(exclusion of sales may be necessary to

prevent fraud on the Department’s

proceedings). See also AFBs II at 28395

and AFBs III at 39744, 39775.

We acknowledge that we may exclude

small quantities of U.S. sales in

investigations; however, we do not

follow the same policy in reviews. This

is because, under the statute, the

Department is required in an

administrative review to calculate an

amount of duties to be assessed on all

entries of subject merchandise and not

merely to establish a cash deposit rate.

The CIT recently upheld our

treatment of samples and prototypes in

FAG III. In that case, the court

recognized the limitations on our

authority to exclude U.S. sales in an

administrative review. The CIT upheld

our procedural requirements for

establishing whether a sale is a true

sample, which requires the respondents

to establish that: (1) Ownership of the

merchandise has not changed hands, or

(2) the sample was returned to the

respondent or destroyed in the testing

process. Id. at 11, citing Granular

Polytetrafluoroethylene Resin from

Japan, 58 FR 50343, 50345 (September

27, 1993). Therefore, the fact that

merchandise is sold at a very low price

or even priced at zero is not sufficient

to establish that the sale is a sample. We

require additional evidence that sales

are true samples before we will exclude

them from the home market or U.S.

sales database.

Comment 1: SKF Germany and SKF

Italy argue that the Department has the

discretion to exclude sample sales from

both the U.S. and HM databases and

should do so for the final results. These

SKF companies assert that they have

demonstrated that their reported sample

sales in both the U.S. market and the

HM are samples and, therefore, they

should be excluded.

Torrington argues that the Department

should deny SKF Germany’s and SKF

Italy’s requests to exclude their sample

and prototype sales from the U.S. or HM

databases. Torrington notes that the

Department properly did not exclude

such sales in its preliminary results of

review.

Department’s Position: We agree with

Torrington. As we noted above, merely

designating a sale as a ‘‘sample’’ does

not entitle a respondent to exclusion of

that sale from the database. The

respondent must provide evidence to
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2123

prove its claim that the designated sales

are actually sample sales. Further, the

sales must meet the criteria discussed

above in order to merit exclusion as U.S.

sample sales, and must demonstrate that

HM ‘‘sample’’ sales are outside the

ordinary course of trade. In this

instance, SKF Germany and SKF Italy

failed to provide any evidence to

support their sample-sale claims.

Therefore, we have continued to review

and calculate margins on the basis of

SKF Germany’s and SKF Italy’s sample

sales.

Comment 2: NSK and NSK-RHP argue

that the Department should exclude

from the U.S. sales database free

samples given away in the United

States. Respondents contend that the

Department must apply the ordinary

meaning of ‘‘sale’’ to the antidumping

law, which involves not only the

transfer of ownership, but also the

payment, or promise, of consideration.

Respondents claim that they provided

extensive documentation to support

their claim that samples provided at no

charge did not constitute sales.

Respondents also contend that the act

of providing free samples with the

expectation that respondents might

eventually become one of the customer’s

suppliers is not sufficient to constitute

legal consideration. Finally,

respondents argue that excluding free

samples does not create a loophole in

the antidumping law. Citing Torrington

IV at 1039, respondents argue that the

Department asserted that, for purposes

of calculating antidumping duties, the

Department reviews sales, not entries.

Respondents contend that the

Department violates its duty to

determine dumping margins as

accurately as possible when it fails to

recognize the normal business practice

of giving away free samples as a

promotional expense and instead

calculates dumping margins as if the

free samples constituted sales.

Torrington responds that the

Department properly included

respondent’s free samples, or zeropriced sales, in the U.S. sales database

and should continue to do so for the

final results. Torrington argues that the

statute directs the Department to review

each entry of the subject merchandise,

citing section 751(a) of the Tariff Act.

Torrington asserts that to exclude free

samples given away in the United States

would create a loophole whereby

respondents could eliminate dumping

margins by raising prices on their

merchandise and then providing free

samples or gifts in consideration for the

sales. Torrington states that the

Department has previously rejected

respondents’ arguments and that this

rejection has been upheld by the CIT,

citing NSK III at 6–7.

Department’s Position: We disagree

with respondents. Respondents failed to

demonstrate either that ownership of

the merchandise has not changed hands

or that the sample was returned to the

respondents or destroyed in a testing

process (see discussion at the beginning

of this section). Therefore, we have

continued to review and calculate

margins on the basis of respondents’

claimed samples. With regard to

respondents’ argument that the

‘‘samples’’ are not true ‘‘sales,’’ we note

that we cannot accept a sample-sales

claim simply on the basis of

designation. Unless respondent

demonstrates that a transaction meets

our criteria for consideration of a

sample, we treat claimed sample

transactions with no price as zeropriced sales. Furthermore, as noted

above, were we to accept respondents’

argument that the alleged samples are

not actually sales per se, we would be

allowing a loophole that respondents

could use to mask dumping.

Comment 3: FAG Italy requests that

the Department exclude sample/

prototype transactions from the U.S.

sales database when calculating the

antidumping margin. FAG Italy argues

that the Department has consistently

held that where merchandise is not sold

within the meaning of section 772 of the

Tariff Act, the transaction is not a sale

for antidumping purposes. FAG Italy

notes that section 772 defines CEP sales

as the price at which merchandise is

sold or agreed to be sold in the United

States and claims that, since all sample

transactions were zero-priced, these

transactions cannot be considered CEP

sales, despite the Department’s

treatment of them as such in the

preliminary results. In conclusion, FAG

Italy refers to the Department’s

description of sales outside the ordinary

course of trade in the SAA and contends

that, under the new law, the Department

has the discretion to treat zero-priced

sample transactions as outside the

ordinary course of trade.

Torrington contends that the

Department should treat FAG Italy’s

alleged U.S. sample sales as sales for the

margin analysis. Torrington notes that

the Department has determined in the

past that there is neither a statutory nor

a regulatory basis for excluding any U.S.

sales from review, citing AFBs I at

31713, AFBs II at 28394–95, AFBs III at

39776, and AFBs IV at 10947.

Torrington also notes that, in past

reviews, the Department only excluded

sample transactions where there was no

transfer of ownership between the

exporter and the U.S. purchaser. FAG

Italy, Torrington contends, neither

demonstrated nor claimed that it

retained ownership of any sample

bearings.

Department’s Position: We agree with

Torrington that we should include FAG

Italy’s U.S. sample transactions in our

analysis. Except under the limited

circumstances discussed at the

beginning of this section, there is no

statutory basis for excluding U.S. sales

from review. Since FAG Italy failed to

demonstrate either of the two criteria

required for the exclusion of sample

transactions from the U.S. sales

database, we included these

transactions in the U.S. sales database

we used to calculate margins for the

final results. Moreover, as discussed

above, although we have the discretion

to set aside home market sales that are

outside the ordinary course of trade, this

statutory criterion does not apply to

U.S. sales.

Comment 4: NTN claims that the

Department should exclude home

market sales outside the ordinary course

of trade, which it defines as sample

sales and sales with abnormally high

profits. NTN argues further that the SAA

lists sales made at aberrational prices as

a category of sales not in the ordinary

course of trade. NTN contends that both

the SAA and the proposed regulations

classify these sales as sales outside the

ordinary course of trade which the

Department should disregard for the

purposes of calculating NV in order to

avoid unrepresentative results.

Torrington argues that NTN has failed

to meet its burden of demonstrating that

the sales in question were outside the

ordinary course of trade. Furthermore,

Torrington states that, given the lack of

evidence on the record, NTN’s argument

that the Department should have

excluded sales with ‘‘abnormally high

profits’’ from the home market database

is irrelevant. In conclusion,Torrington

asserts that, given the evidence of

record, NTN did not meet its burden of

demonstrating that such sales were

outside the ordinary course of trade.

Department’s Position: We disagree

with NTN. We have determined that

NTN’s characterization of its reported

data is not substantiated by the

administrative record. NTN’s sales

information merely identifies certain

sales as home market sample sales and

other sales with ‘‘abnormally high

profits’’ as not in the ordinary course of

trade. NTN examined only quantity and

frequency of sales in determining which

sales to report as outside the ordinary

course of trade. NTN’s supplemental

questionnaire response provided no

additional information; it simply

identified the sales as having been made
2124 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

outside the ordinary course of trade. As

stated above, the fact that a respondent

identifies sales as sample and prototype

sales does not necessarily render such

sales outside the ordinary course of

trade. Verification of the designation of

certain sales as samples merely proves

that respondent identified sales

recorded as samples in its own records.

Such evidence does not indicate that

such sales were made outside the

ordinary course of trade for purposes of

calculating NV in these reviews. In

addition, the Department noted at the

home market verification of NTN’s data

that the firm was unable to substantiate

that all sales coded as samples were

sample sales. Accordingly, we have

included NTN’s sample sales in the

calculation of NV.

Comment 5: Koyo argues that the

Department matched U.S. sales of one

model to a home market model which

it sold outside the normal course of

trade and which also does not meet the

criteria of a foreign like product as

defined by the antidumping statute.

Koyo first states that the HM model is

produced to unusual product

specifications. Second, Koyo argues, the

HM bearing was sold aberrational

prices. Furthermore, Koyo argues that

the HM model is not a foreign like

product because it is not identical in

physical characteristics and is not like

the U.S. model being compared to it

because of a different end-use.

Torrington argues that Koyo did not

provide data to support its claim and

that the Department should reject

Koyo’s claim.

Department’s Position: We disagree

with Koyo. In spite of Koyo’s arguments,

this model and the respective bearing

family meet the matching criteria as

outlined in the Department’s

questionnaire. Also, the difference-ofmerchandise adjustment for the family

to which we matched the U.S. model

does not exceed plus or minus 20

percent of the U.S. model’s COM. The

Department has long held that U.S. and

home market models are similar where

the difference between the U.S. and

home market models’ variable COMs is

less than 20 percent of the U.S. model’s

COM. See Policy Bulletin 93/1,

September 1, 1993. Koyo has not

demonstrated how the model’s costs can

meet our 20-percent test yet be so

dissimilar. Moreover, sales of models at

high prices is insufficient to establish a

sale outside the ordinary course of

trade. See Final Results of Antidumping

Duty Administrative Reviews; Tapered

Roller Bearings and Parts Thereof,

Finished or Unfinished, From Japan and

Tapered Roller Bearings, Four Inches or

Less in Outside Diameter, and

Components Thereof, From Japan, 58 FR

64720 (December 9, 1993).

11. Export Price and Constructed Export

Price Methodology

Comment 1: Torrington states that, in

a radical departure from old-law

practice, the Department failed to make

deductions when calculating CEP for

export selling expenses which

respondents incurred in the home

market in selling subject merchandise to

the United States. Torrington states that

the Department also did not consistently

deduct inventory carrying costs

respondents incurred in the home

market on U.S. sales when calculating

CEP. Torrington notes that, under the

pre-URAA statute, the Department

deducted all selling expenses incurred

in exporting to the United States.

Torrington argues that the new law is

not intended to change the Department’s

practice with respect to the calculation

of export price or constructed export

price and that the SAA at 824 and 828

and the Senate Report (S. Rep. No. 103–

412, 103d Cong., 2d Sess. 65 (1994))

provide for the deduction of selling

expenses which are assumed by the

seller on behalf of the buyer.

The FAG companies, INA, Koyo,

NMB/Pelmec, NSK, NSK/RHP, NTN, the

SKF companies, and SNR all argue that

the Department was correct in not

deducting the export selling expenses in

question from CEP. A number of

respondents cite the SAA at 823 which

indicates that the Department will

deduct only those expenses associated

with economic activities occurring in

the United States. The FAG companies,

INA, the SKF companies, and SNR note

that the assumed-expense language in

the Senate Report and the SAA that

Torrington cites is limited to selling

expenses assumed by the seller on

behalf of the buyer, not the selling

expenses in question which the foreign

manufacturer incurred in selling to its

affiliated U.S. importer.

Department’s Position: We agree with

respondents. It is clear from the SAA

that under the new statute we should

deduct only expenses associated with

economic activities in the United States

from CEP. 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 only deducted 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’).

Torrington’s citation of statements in

the SAA to support the proposition that

the new law is not intended to change

our practice in this regard is misplaced.

Torrington 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 seller in the

home market 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.’’ The issue

of assumptions is unrelated to the issue

of selling expenses incurred in the home

market in selling to the affiliated

importer. Such expenses 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.

Therefore, because the selling

expenses Torrington cites were not

specifically related to commercial

activity in the United States, we did not

deduct them from CEP.

Comment 2: NSK and Koyo argue that

the Department deducted the cost of

carrying inventory in the HM from CEP

incorrectly for the preliminary results of

these reviews. Both firms argue that HM

inventory carrying costs reflect costs

associated with economic activity

occurring in the home market, not in the

United States. NSK also argues that the

CEP calculation is intended to construct

an export price and that inventory

carrying costs are not deducted in

export price calculations.

Torrington contends that the

Department’s deduction of HM

inventory carrying costs from CEP was

proper. Torrington argues that carrying

inventory is a selling activity involved

in selling to the affiliated U.S. importer

and is one of the expenses the

Department must deduct in arriving at

an appropriate ex-factory price.

Department’s Position: We agree with

Koyo and NSK. We regard the inventory

carrying costs the respondents incurred

in the home market, which are incurred

prior to the sale, transfer, or shipment

of the merchandise to the U.S. affiliate,

as an expense incurred on behalf of the

sale to the U.S. affiliate. As described in

response to Comment 1 above, we do

not consider this to reflect a commercial

activity in the United States. Therefore,

we have not deducted domestic

inventory carrying costs from CEP for

the final results.
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2125

Comment 3: SKF France and SKF

Germany claim that, because their

imputed inventory carrying costs, which

they incurred in the country of

exportation or which were associated

with the transit time between Europe

and the United States, relate to periods

before the subject merchandise arrived

in the United States, the Department

cannot consider them to represent

selling, distribution, and furthermanufacturing activities in the United

States, as required by 772(d)(3) of the

Tariff Act. SKF France and Germany

also cite the SAA at 824 to support their

position that the Department must

derive the profit it deducts in

determining CEP from selling,

distribution, and further-manufacturing

activities in the United States. In

addition, SKF France and SKF Germany

claim that these imputed expenses are

not deductible under sections 772(d) (1)

and (2) of the Tariff Act since these

imputed expenses are not incurred in

the United States.

Torrington contends that SKF

France’s and SKF Germany’s position is

in conflict with the statute (section

772(d)(3)) and the SAA at 154.

Torrington argues that the Tariff Act

makes clear that all expenses are

properly part of the CEP-profit

allocation and that the SAA provides

that 772(d)(3) of the Tariff Act requires

the Department, in determining CEP, to

identify and deduct from the starting

price in the U.S. market an amount for

profit allocable to selling, distribution,

and further-manufacturing activities in

the United States. Torrington claims

that the SAA does not limit the CEPprofit adjustment to expenses incurred

in the United States.

Department’s Position: We agree with

SKF France and SKF Germany in part.

For the reasons indicated in our

response to comment 1 above, we have

deducted from CEP only expenses

associated with economic activities in

the United States. The inventory

carrying costs at issue are not associated

with such activities. We disagree,

however, that the geographical location

is necessarily determinative. Thus, as

discussed in our proposed regulations at

7331, we will deduct an expense

associated with economic activities in

the United States no matter where it is

paid.

Comment 4: Torrington contends that

the Department should make a

deduction to CEP for certain selling

expenses that FAG Italy incurred in

selling merchandise to the United

States. Torrington identifies costs which

FAG OEM und Handel AG (FAG OH),

a subsidiary of FAG Italy’s parent

company, incurred in Germany to

support the sale of bearings to the

United States. Torrington asserts that

the deduction of these costs is

appropriate because these costs consist

of expenses for maintaining an

electronic data interface with the U.S.

affiliate, expediting and handling

functions in connection with the U.S.

affiliate’s orders, and printing costs

associated with the publication of

catalogs and technical data material in

English.

FAG Italy contends that the

Department properly excluded HM

export selling expenses and HM

inventory carrying costs from the pool

of CEP deductions in accordance with

Section 772(d) of the Tariff Act.

Department’s Position: We disagree

with Torrington in part. Based on the

record, we determined that the expenses

in question are not deductible from CEP

under section 772(d) of the Tariff Act.

However, the record suggests that one of

the three expenses Torrington identifies,

i.e., printing costs associated with the

publication of catalogs and technical

materials in English, is a direct

advertising cost that FAG OH assumed

on behalf of FAG Italy’s U.S. affiliate for

sales to its unaffiliated customers in the

United States. The SAA, at 828, requires

that the Department make a COS

adjustment (rather than a CEP

adjustment) for ‘‘assumptions of

expenses incurred in the foreign country

on sales to the affiliated importer.’’

Thus, we have determined that it is

proper to add this expense to NV as a

COS adjustment under section

773(a)(6)(C)(iii) of the Tariff Act (see

7331 of our proposed regulations).

Regarding the other two expenses

Torrington identifies, we have

determined from the description on the

record that they are not associated with

economic activity in the United States

nor are they direct selling expenses

within the meaning of section

773(a)(6)(C)(iii) of the Tariff Act.

However, FAG Italy did not provide

sufficient information to permit us to

isolate them from the sum of all three

expenses. Therefore, as facts available,

we included the total amount FAG Italy

reported for these three expenses in our

COS adjustment.

Comment 5: NTN disagrees with the

Department’s calculation of a profit

deduction from CEP based on each class

or kind of merchandise without regard

to level of trade. NTN argues that, since

selling expenses differed by level of

trade and had an effect on prices, this

difference does not entirely account for

the different prices at the different

levels of trade. NTN asserts that the

statute expresses a preference for the

profit calculation to be done as

specifically as possible with respect to

sales in the appropriate markets of the

subject merchandise or the narrowest

category of merchandise which includes

the subject merchandise. Therefore,

NTN argues the Department should

calculate CEP profit on a level-of-trade

basis which would result in more

accurate margins since it would better

account for price differences at the

various levels of trade.

Torrington argues that the statute

specifies that the Department is to

calculate CEP profit on all sales of

subject merchandise without regard to

level of trade.

Department’s Position: Neither the

statute nor the SAA require us to

calculate CEP profit on bases more

specific than the subject merchandise as

a whole. Indeed, while we cannot at this

time rule out the possibility that the

facts of a particular case may require

division of CEP profit, the statute and

SAA, by referring to ‘‘the’’ profit, ‘‘total

actual profit,’’ and ‘‘total expenses’’

imply that we should prefer calculating

a single profit figure. NTN’s suggested

approach would also add a layer of

complexity to an already complicated

exercise with no guarantee that the

result will provide any increase in

accuracy. We need not undertake such

a calculation (see Daewoo Electronics v.

International Union, 6 F.3d 1511, 1518–

19 (CAFC 1993)). Finally, subdivision of

the CEP-profit calculation would be

more susceptible to manipulation.

Congress has specifically warned us to

be wary of such manipulation of the

profit allocation (see S. Rep. 103–412,

103d Cong., 2d Sess at 66–67).

Comment 6: Torrington argues that

the Department should deduct from CEP

any credit provided by the foreign seller

to its U.S. subsidiary. Torrington asserts

that credit is always a direct expense

and that this is an expense that the

seller pays on behalf of the buyer in CEP

transactions.

NSK and NSK/RHP assert that

imputed costs for home market

activities cannot lawfully be deducted

from CEP. Koyo argues that deducting

expenses it incurred not in selling to the

unaffiliated customer in the United

States, but rather in its transactions with

its U.S. affiliate, is contrary to the

statute. Koyo argues further that to

accept Torrington’s argument would be

to double-count the inventory carrying

cost of the merchandise. The FAG

companies argue that there is no

statutory authority to deduct export

credit expenses incurred in the home

market from CEP. The SKF companies

note that such a credit expense, if

calculated, could never constitute a

direct selling expense, as it is totally
2126 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

unrelated to the sale to the first

unrelated customer.

Department’s Position: We do not

consider credit expenses incurred

between a foreign producer and its U.S.

affiliate to be expenses associated with

economic activities in the United States

(see our responses to Comments 1 and

2). Therefore, we have not deducted

them from CEP.

Comment 7: Torrington asserts that

CEP profit is understated where the

Department excused particular

respondents from answering the furthermanufacturing section of the

questionnaire, because the Department

did not deduct profits on U.S. valueadded operations when calculating CEP.

While Torrington acknowledges that

section 772(e) of the Tariff Act allows

the Department to consider non-U.S.-

value-added sales in determining CEPs

for value-added sales, Torrington argues

that the statute merely provides that the

Department may use other transactions

if it determines such use is appropriate.

Torrington asserts that this does not

authorize the Department to disregard

the value-added profit. Torrington

argues further that the specific language

of 772(d)(3) of the Tariff Act does not

yield to the general methodology

allowed in section 772(e). When one

reads the provisions, in pari materia,

Torrington claims that it is clear that

sales used as proxies must be adjusted

for value-added profit in order to

implement the intention of the statute.

Torrington concludes that the

Department must calculate appropriate

profit amounts on the basis of ratios of

U.S. value added to total cost of

production of the bearing in question

and deduct that amount in its final

calculations. If the appropriate data are

not on the record, then Torrington

concludes that the Department must

apply adverse facts available.

Koyo argues that the Department is

not disregarding profit on furtherprocessed merchandise but is actually

assuming that the profit percentage

earned (like the expenses incurred) on

further-processed merchandise was

consistent with that earned (or incurred)

on non-further-processed merchandise.

Moreover, Koyo asserts, there is no

evidence in the record to suggest that

this is an unreasonable assumption, and

there is no question that the Department

has ample authority under section

772(e) to support its decision to apply

the margins calculated on non-furtherprocessed sales to further-processed

sales.

The SKF companies argue that

Torrington is attempting to have the

Department eviscerate 772(e) by

suggesting a CEP-profit deduction that

would ‘‘back-door’’ the Department into

requiring respondents to report full cost

data pertaining to all sales of furthermanufactured merchandise. The SKF

companies also argue that Torrington’s

interpretation of the law is incorrect and

that nothing in section 772(d)(3)

requires profit to be deducted for sales

subject to the simplified reporting

provisions of 772(e). SKF asserts that

the opposite is true in that 772(d)(3), by

referencing (d)(2), plainly exempts sales

eligible for simplified reporting from the

CEP profit deduction. The SKF

companies explain that the statute

requires that CEP be reduced by, inter

alia, ‘‘the cost of any further

manufacture or assembly (including

additional material and labor), except in

circumstances described in subsection

(e) [(the special rule for simplified

reporting)] * * *’’ (citing section

772(d)(2) of the Tariff Act).

The FAG companies argue that to

adopt Torrington’s in pari materia

reading of the statute would render 772

(e) completely meaningless. The FAG

companies assert that waiving full

further-processing reporting of sales and

costs while, at the same time, requiring

full further-processing reporting so that

a value-added profit could be calculated

would render the waiver subsection

entirely meaningless and re-encumber

the Department with burdens Congress

explicitly intended to alleviate.

NSK and NSK/RHP argue that furtherprocessing information is irrelevant to

CEP-profit calculations in that the

Department is not establishing NV and

CEP for further-processed merchandise

which has had substantial value added

in the United States.

Department’s Position: Section 772(e)

of the statute 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 also referred to in the

statute as the ‘‘special rule’’). In

implementing this special rule for

certain respondents, we determined that

it was appropriate to use an alternative

method to calculate CEP for the

transactions involving substantial valueadded in the United States (in such

situations we determined dumping

margins for the sales in question on the

basis of weighted-average dumping

margins found on sales of identical or

other subject merchandise sold to

unaffiliated customers). Our waiving of

the full reporting requirements of the

further-processing section of our

questionnaire was, in effect, a decision

not to base CEP on any data relating to

these transactions, including expense

and profit data. By using the sales of

other subject merchandise sold in the

United States as a proxy or surrogate for

the further-processed transactions, we

were making an assumption that the

expense and profit percentages incurred

on the non-further-processed

transactions were representative of the

expense and profit percentages incurred

on further-processed transactions. In

other words, while a greater absolute

amount of expenses may be incurred in

further processing, and a

commensurately greater profit earned,

there is no reason to believe that when

the expenses and profits are deducted,

there is any difference between the

value of further-processed and nonfurther-processed merchandise. There is

no evidence that the value of imported

merchandise varies depending on

whether it will be further-processed or

not. Therefore, there is no record

evidence suggesting that our assumption

was erroneous and that profits for the

transactions in question were

understated.

Furthermore, we disagree with

Torrington’s interpretation of the

statute. The SAA in discussing the

special rule at 826 indicates that the

purpose of the new rule is to save the

Department the considerable effort of

measuring the U.S. value added

precisely. Requiring the Department to

gather and analyze this data for the

purpose of a profit calculation for these

transactions would defeat the purpose

of this provision.

Comment 8: FAG Italy and FAG

Germany argue that the CEP selling

expense total to which the Department

applied the CEP-profit ratio improperly

includes credit expense. Respondents

maintain that the Department’s

calculation excludes credit expenses

from the numerator and denominator of

the CEP-profit ratio, but that the U.S.

selling expense to which the

Department applied this ratio includes

credit expenses. Respondents contend

that this improperly skews the

calculation of total CEP profit. FAG

Germany suggests that the Department

correct this error by excluding credit

from the U.S. selling expenses or by

including credit expenses in the

denominator of the CEP-profit ratio.

Torrington agrees in part with

respondents. Torrington requests that

the Department include credit expenses

in the denominator of the CEP-profit

ratio rather than exclude them from the

U.S. selling expense.

Department’s Position: We disagree

with respondents and Torrington.

Sections 772(f)(1) and 772(f)(2)(D) of the

Tariff Act state that the per-unit profit
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2127

amount shall be an amount determined

by multiplying the total actual profit by

the applicable percentage (ratio of total

U.S. expenses to total expenses) and

that the total actual profit means the

total profit earned by the foreign

producer, exporter, and affiliated

parties. In accordance with the statute,

we base the calculation of the total

actual profit used in calculating the perunit profit amount for CEP sales on

actual revenues and expenses

recognized by the company. In

calculating the per-unit cost of the U.S.

sales, we have included net interest

expense. Therefore, we do not need to

include imputed interest expenses in

the ‘‘total actual profit’’ calculation

since we have already accounted for

actual interest in computing this

amount under section 772(f)(1).

When we allocated a portion of the

actual profit to each CEP sale, we have

included imputed credit and inventory

carrying costs as part of the total U.S.

expense allocation factor. This

methodology is consistent with section

772(f)(1) of the statute which defines

‘‘total United States Expense’’ as the

total expenses described under section

772(d)(1) and (2). Such expenses

include both imputed credit and

inventory carrying costs. See Certain

Stainless Wire Rods from France, 61 FR

47874, 47882 (September 11, 1996).

12. Programming

FAG Germany, FAG Italy, INA, Koyo,

NSK, NSK/RHP, NTN Japan, NTN

Germany, SKF Italy, SKF Germany, SKF

France, SNR France, and Torrington

commented on alleged errors in the

Department’s computer programs.

Where all parties and the Department

agreed with a programming-error

allegation, we made the necessary

changes to correct the error. Our final

results analysis memoranda describe the

programming errors and any changes we

made to correct the problems. The

following comments address allegations

of programming-errors that are in

dispute.

Comment 1: FAG Italy and FAG

Germany claim that, in calculating the

net unit price it used as NV, the

Department neglected to deduct HM

credit expenses. FAG Italy requests that

in the calculation of net unit price for

the final results the Department include

credit expenses in the pool of direct

selling expenses that it deducts from the

HM unit price and, ultimately, from NV.

Torrington agrees that the Department

should adjust FAG Germany’s and FAG

Italy’s NV for credit expenses. However,

Torrington contends that the

Department should not treat FAG Italy’s

credit expenses as direct because the

credit periods the company used to

calculate the adjustment were not

transaction-specific. Torrington

maintains that, if the Department makes

the adjustments FAG Germany and FAG

Italy request, it must exclude credit

expenses from the calculation of ISEs to

avoid double-counting.

Department’s Position: We calculate

net unit price in two sections of our

analysis. For the preliminary results, we

neglected to deduct HM credit expenses

from the net unit prices we used to

determine whether respondents’’ sales

to related parties were at arm’s-length

prices. This was a clerical error, and we

have made this deduction for the final

results. However, when we calculated

net unit price for NV purposes in the

preliminary results we did deduct credit

expenses; therefore, changing the NV as

respondents request is not necessary.

We disagree with Torrington that we

should not treat FAG Italy’s HM credit

expenses as a direct expense. FAG

Italy’s calculation of a customer-specific

average credit period instead of a

transaction-specific credit period is

reasonable given that, as confirmed by

the Department at verification, the latter

information is not available in FAG

Italy’s accounting records. Through

verification we found that FAG Italy’s

credit-period calculation methodology

is not unreasonably distortive.

Regarding Torrington’s suggestion that

we exclude credit expenses from FAG

Germany’s and FAG Italy’s calculations

of ISEs to avoid double-counting, we

checked our calculations to ensure that

we did not include credit expenses in

the calculation of ISEs.

Comment 2: FAG Italy, FAG Germany,

and NSK maintain that the Department

made a clerical error by not including

manufacturer codes when sorting and

defining the U.S. and HM sales and cost

databases. Respondents contend that the

Department must include the

manufacturer codes in order to calculate

NV in accordance with the statutory

definition of foreign like product. In

support, respondents cite section

773(a)(1)(B)(i) of the Tariff Act, the

reference for NV, and section 771(16) of

the Tariff Act, the statutory definition of

foreign like product.

Regarding FAG Italy, Torrington

claims that the Department’s analysis is

in accordance with the statute and,

therefore, there is no clerical error. In

support of this argument, Torrington

notes that FAG Italy reported that it has

a single manufacturing plant. Torrington

claims that FAG Italy has neither argued

nor demonstrated that unaffiliated

manufacturers produced the subject

merchandise, a situation that would

require the consideration of

manufacturer codes in the calculations.

Torrington states that it cannot

determine from FAG Germany’s

response whether it reported products

manufactured by other producers.

Department’s Position: We agree with

respondents and have considered

manufacturer codes when establishing

U.S. and HM sales and cost databases

for use in our analysis. Not using

manufacturer codes in the preliminary

analysis was an inadvertent error. Thus,

for the final results we have calculated

NV in accordance with section

773(a)(1)(B)(i) of the Tariff Act and the

statutory definition of foreign like

product (see section 771(16) of the Tariff

Act).

We disagree with Torrington’s

contention that we should not change

the analysis for FAG Italy because the

company reported having a single

manufacturing plant. While FAG Italy

reported having a single manufacturing

plant, the company also reported that it

purchased some bearings from

unaffiliated manufacturers which it sold

to the United States. Therefore, we

included the manufacturer codes in our

analysis.

Comment 3: FAG Germany argues that

the Department’s decision to rely on CV

when the model the Department

selected as most comparable fails the

cost test leads to inaccurate and

distorted results. FAG Germany argues

that the Department should correct this

clerical error for the final results so that

NV is based on a family match when

sales of an identical match are

disregarded as below cost rather than

CV.

Torrington supports FAG Germany’s

suggested revision.

Department’s Position: We disagree

with the revision FAG Germany and

Torrington suggest. For the reasons

described in response to comment 2 of

section 6.A. above, our reliance on CV

when the model we selected as most

comparable fails the cost test is a

methodological decision and not a

clerical error. Still, the parties are

correct in suggesting that the mechanics

of our concordance did not function

properly. This was the result of an error

in how we defined the U.S. and HM

periods, and we have corrected it for the

final results.

Comment 4: Koyo argues that the

Department incorrectly used the COM of

bearings produced in-house instead of

the weighted-average COM based on

both the quantities produced in-house

and purchased in calculating COP and

CV. Koyo explains that this results in no

COM or CV values for purchased

bearings in the COM calculations.
2128 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

Torrington agrees with Koyo that the

Department should not use the COM of

bearings produced in-house for those

particular models that Koyo only

purchased and did not produce.

However, Torrington argues that the use

of a weighted-average COM, as Koyo

suggests, is only appropriate where

Koyo has purchased the bearing from an

unaffiliated party. Torrington contends

that, for purchases from affiliated

suppliers, the Department should use

the highest of either the reported

transfer price or the COP of the affiliated

supplier.

Department’s Position: We agree with

Koyo and have corrected this clerical

error for these final results. Koyo

explained in its cost questionnaire

response that it has taken into

consideration the difference between

transfer price and COP of the affiliatedparty inputs in the calculation of the

weighted-average variable COM for COP

purposes and weighted-average total

COM for CV.

Comment 5: NTN Germany contends

that the Department made a clerical

error in the model-match portion of its

preliminary analysis. NTN Germany

asserts that this error resulted in the

Department not matching sales at the

same or closest level of trade.

Department’s Position: We disagree

with NTN Germany. The model-match

portion of our analysis does not use

level of trade as part of the criteria for

selecting the best foreign like product

because level of trade is not a criterion

under section 771(16) of the Tariff Act.

After selecting the most comparable

product match according to the statute,

we attempt to find contemporaneous

sales of that product at the same level

of trade, if possible. For a detailed

explanation of our level-of-trade

analysis, see the introduction to Section

5 above.

Comment 6: SNR contends that the

Department’s analysis double-counts

HM quantity adjustments. Torrington

concurs with SNR regarding this error.

Department Position: We disagree

with SNR and Torrington. While we

make an adjustment to HM quantities in

two parts of our analysis, i.e., once in

connection with the arm’s-length test

and a second time in calculating NV,

this does not result in double-counting

because these portions of our analysis

are independent of one another.

13. Duty Absorption and

Reimbursement of Dumping Duties

Comment 1: Torrington argues that

the Department should deduct dumping

duties from CEP as part of ‘‘all charges

and expenses incident to bringing

subject merchandise from the place of

shipment in the exporting country to the

place of delivery in the U.S.,’’ citing

section 772(c)(2)(A) of the Tariff Act.

Petitioner asserts that, if the Department

does not deduct these duties, the law

does not have its remedial effect.

Torrington maintains that dumping

duties are ‘‘special duties’’ that are

included in the definition of ‘‘import

duties’’ in the contemplation of U.S.

Customs law. Torrington believes that

deducting dumping duties from CEP

double-counts those duties only in

situations where the importer does not

absorb the duties on behalf of the

unaffiliated buyer. Petitioner cites to

regulations for adjustment to price in

European Community law, which

permit the deduction of dumping duties

paid to an importer by any party

associated with that importer. Petitioner

also contends that deducting dumping

duties is not prohibited by the CIT’s

decision in Federal Mogul I (at 856),

since that decision dealt with the

deduction of cash deposits, which are a

reflection of past behavior rather than

current behavior. Petitioner suggests

that calculating a margin without regard

to dumping duties and, if there is a

positive margin, then making an

additional deduction for the duties is

consistent with the CIT’s decision and

section 772(c) of the Tariff Act.

Koyo and SNR argue that the

Department lacks statutory authority to

treat antidumping duties as a cost. Koyo

refers to the SAA to underscore that the

law regarding duty absorption ‘‘is not

intended to provide for the treatment of

duties as a cost,’’ citing the SAA at 885.

Respondent contends that Torrington’s

method for treating duties as an expense

would incumber respondents with an

expense that bears no relation to their

pricing policies during the POR as

respondents would be unable to

anticipate the rate at which entries

would finally be liquidated. In addition,

Koyo states that Torrington’s suggestion

is contrary to the remedial purpose of

the law.

NTN and SKF point out that nothing

in the URAA indicates a statutory

change in the treatment of antidumping

duties. SKF notes that section

772(c)(2)(A) refers to duties ‘‘incident to

bringing subject merchandise * * * to

the place of delivery in the U.S.’’ and

opines that dumping duties do not fall

under this definition since liability for

the dumping duties arises from sales of

the merchandise in the United States.

INA counters that U.S. Customs practice

is not germane to interpretation of the

antidumping duty statute, citing

American NTN Bearing Mfg. Corp. v.

United States, 739 F. Supp. 1555, 1565

(CIT 1990). All five respondents refer to

the Department’s consistent practice in

AFBs I, AFBs II, and AFBS III of not

treating antidumping duties as a cost

and note that the CIT has upheld the

Department’s policy, citing Federal

Mogul.

Department’s Position: We disagree

with Torrington. The wording of section

772(c)(2)(A) did not change under the

URAA. The Department has consistently

interpreted the provision to mean that

antidumping duties are not eligible for

deduction from the price of the

imported product in that they would

result in double-counting (AFBs IV at

10900, 10907; Certain CorrosionResistant Carbon Steel Flat Products

from Korea, 61 FR 18547; Certain HotRolled Lead and Bismuth Carbon Steel

Products from the United Kingdom, 60

FR 44009, 44010). Likewise, section

751(a)(4) does not require that duties

‘‘absorbed’’ by an importer be deducted

from CEP, only that they be considered

in a review of the likelihood of

continuation of dumping. We maintain

our position stated in AFBs V, at 66519,

that we do not consider antidumping

duties to be themselves a selling

expense, similar to ordinary customs

duties, movement expenses, or credit

terms, which we should deduct from

CEP as a selling cost.

Comment 2: Torrington believes that,

if the Department declines to deduct

dumping duties from CEP, it should

apply the reimbursement regulation to

merchandise with transfer prices below

the COP whenever it finds dumping

margins on that merchandise. Petitioner

contends that below-cost transfer prices

constitute an indirect transfer of funds

relieving importers from having to raise

resale prices to finance assessment of

antidumping duties. Petitioner believes

that the Department’s decision in Color

Television Receivers for Korea, 61 FR

4408, 4411 (February 6, 1996), that the

reimbursement regulation applies in

exporter’s-sales price situations,

sanctions the adoption of such a policy

for CEP transactions under the new law.

Petitioner also argues that, when

Congress enacted the URAA, it

approved the reimbursement regulation

and expressed its wish that the concept

be extended to reimbursements of

countervailing duties.

Koyo counters that the Department’s

authority to deduct reimbursed duties is

the same as the authority to deduct

rebates or discounts, in that it applies to

a sale to the first unaffiliated purchaser

in the United States, not to the transfer

from the exporter to the affiliated

importer. Thus, Koyo interprets the

reimbursement regulation as applying

only to sales described in section 772 of

the Tariff Act.
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2129

INA, SKF, and SNR contend that

URAA did not change the substance or

intent of the reimbursement regulation.

Respondents believe that the

Department’s reliance on explicit and

specific factual evidence that an

affiliated importer has been directly

reimbursed for dumping duties should

be maintained. SNR states that

Torrington’s allegations of below-cost

transfer prices do not establish a

specific and direct link between transfer

pricing and reimbursement.

Department’s Position: We disagree

with Torrington. Although we agree that

reimbursement may be applicable in

CEP situations, we also hold that there

must be evidence that the parent has

reimbursed its subsidiary for estimated

deposits or assessed duties. See Color

Television Receivers from the Republic

of Korea, 61 FR 4408, 4410–11

(February 6, 1996), Brass Sheet and

Strip from the Netherlands, 57 FR 9534,

9537 (March 19, 1992), Brass Sheet and

Strip from Sweden, 57 FR 2706, 2708

(January 23, 1992), and Brass Sheet and

Strip from Korea, 54 FR 33257, 33258

(August 14, 1989). In this case,

Torrington has presented no evidence of

reimbursement. The presence of both

below-cost transfer prices and actual

dumping margins do not, in and of

themselves, constitute evidence that

reimbursement is taking place. See

AFBs III (39736), AFBs IV (10906–07),

and AFBs V (66519).

14. Miscellaneous Issues

A. U.S. Sales Completeness.

Comment: Torrington asserts that the

Department should include all repair

merchandise bearings SNR imported

into the United States in the U.S.

database. Torrington cites sections 751

and 753 of the Tariff Act, which state

that all merchandise covered by an

antidumping duty order must be

appraised for antidumping duties, and

asserts that there is no exception for

repair merchandise. As support,

Torrington cites to a scope ruling the

Department issued in response to a

request by Wafios Machinery

Corporation, July 22, 1991. Torrington

suggests that, if SNR cannot assign a

price to those bearings, the Department

should treat them as zero-priced sales

and assess duties accordingly.

SNR states that the Department

calculated margins for imported parts

used in repair jobs properly. SNR asserts

that it reported all U.S. sales of scope

product as requested by the

questionnaire. SNR does not disagree

with the scope ruling Torrington cites,

but contends that the ruling relates to

the issue of whether bearings imported

for use as spare-parts replacement

bearings are subject to the antidumping

order. SNR comments further that it did

not sell the parts which were used to

repair bearings sold by other

manufacturers. Instead, SNR explains, it

charged an inspection-and-repair fee.

SNR states the Department could apply

antidumping duties to these parts using

SNR’s weighted-average margin.

However, SNR contends that it is not

possible to calculate individual margins

for these parts. SNR cites section 772(e)

of the Tariff Act, which allows the

Department to calculate margins using

the weighted-average dumping margin

on sales of complete bearings to assess

dumping duties on importations such as

repair parts.

Department’s Position: We agree that,

although these bearings are subject to

the antidumping orders on AFBs, it is

not possible to calculate export price or

CEP because SNR does not sell the

bearings themselves. Rather, SNR uses

the bearings in the context of

performing a service for which SNR

charges a fee. It is not possible to

discern, from this fee, an amount which

would be appropriate to attribute to the

sale of the bearings. Therefore, we will

liquidate the entries of this merchandise

at the weighted-average rate we have

calculated for SNR’s other sales.

B. Pre-Final Reviews. Comment: Asahi

requests that, if the Department makes

any methodological changes from the

preliminary results other than those

commented on in respondent’s brief, the

Department provide the company with

an opportunity to comment on any such

changes before issuance of the final

results of review. In addition, Asahi

requests disclosure of the Department’s

calculations before issuance of the final

results so that it can review the

Department’s calculations for changes

and comment on any clerical or

ministerial errors.

Department’s Position: As noted in

previous reviews (see AFBs III (at

39786), AFBs IV (at 10957) and AFBs V

at 66520), in the interest of issuing the

final results in a timely manner, the

Department cannot implement the steps

Asahi requests. Since the current

reviews are governed by statutory

deadlines, Asahi’s requests are now

even less feasible than previously.

Moreover, the regulations provide a

procedure for correcting ministerial

errors in the final results of review. See

19 CFR 353.28.

C. Certification of Conformance To

Past Practice. Comment: Torrington

argues that the Department should

require respondents to affirm that their

responses conform to prior

Departmental determinations for

reviews of these orders. Torrington

states that the Department or domestic

interests should not be responsible for

detecting a respondent’s unilateral

departure from the Department’s rulings

in prior reviews. Torrington suggests, at

a minimum, that respondents identify

where they have continued to use any

methodology that the Department

rejected in a prior review, accompanied

by a statement justifying the departure

from established practice. Torrington

proposes that, in such cases, the

Department require respondents to

supply data both in the format

established by past practice and the

manner that respondents hope will be

acceptable to the Department despite

the prior practice. Torrington suggests

that, without such identification, the

emergence of a consistent Departmental

practice is dependent on the continued

vigilance of the Department in analyzing

responses and in the availability of

funding for repeated verification.

Torrington cites examples of

respondents’ unidentified use of

reporting methodologies that do not

conform to Department practice and

which the Department has previously

rejected.

INA argues that the Department

should reject Torrington’s proposal that

respondents be required to state that

their questionnaire responses conform

to prior rulings. INA asserts that

Torrington’s proposal merely imposes

an additional make-work burden upon

respondents. INA states that

respondents respond to the

Department’s questionnaire in

accordance with the antidumping law,

the Department’s regulations, and the

questionnaire instructions. INA also

states that the statute and regulations do

not contemplate anything else.

NSK says that it reports the

information requested by the

Department, and it is the Department, as

the administering authority, which

determines what to do with the reported

information. NSK contends that

Torrington’s request that respondents

certify compliance with past

Department rulings must be rejected as

needless information and an

unwarranted intrusion by the petitioner

into the administration of the

antidumping law.

FAG Germany and FAG Italy contend

that they have completely conformed to

all prior applicable Departmental

rulings and have never been accused or

found to be deviating from applicable

Departmental policy or precedent. FAG

Germany and FAG Italy also assert that

Torrington has not cited any examples

underlying Torrington’s allegations.

FAG Germany and FAG Italy argue

further that the Department has long
2130 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

adhered to the proposition that each

administrative review is a separate and

distinct proceeding and that, while

Department practice is helpful and

instructive in succeeding reviews, it is

not binding. Finally, FAG Germany and

FAG Italy contend that Torrington’s

request would place a burden on

respondents by making them recite the

history of each adjustment permitted or

rejected over all previous reviews. FAG

Italy and FAG Germany state that such

a burden would be overwhelming and

unnecessary.

Department’s Position: We disagree

with Torrington that we should require

that all respondents conform their

submissions, their allocations, and their

methodology to our most recent prior

determinations and rulings. We also

disagree with Torrington that

respondents should identify where they

have continued to use any methodology

that we rejected in a prior review and

justify the departure from established

practice. Each administrative review is

a separate reviewable segment of the

proceeding involving different sales,

adjustments, and underlying facts. What

transpired in previous reviews is not

binding precedent in later reviews, and

parties are entitled, at the risk of the

Department’s determining otherwise, to

argue against a prior Department

determination. As a practical matter,

methodologies the Department accepts

in one review are generally used by

respondents in subsequent reviews and

methodologies the Department rejects

are not perpetuated in later reviews. The

Department, however, may reconsider

its position on an issue during the

course of the proceeding in light of facts

and arguments presented by the parties.

D. Country of Origin. Comment 1:

Torrington claims that SKF Germany

did not disclose its methodology for

determining country of origin after the

Department asked it in its supplemental

questionnaire to do so. Torrington

claims that SKF Germany asserted in its

supplemental questionnaire response

that its methodology had not changed

over the past reviews, but that it did not

indicate the product’s essential

characteristics for purposes of

determining country of origin. In

addition, Torrington contends that SKF

Germany did not indicate what

manufacturing steps convey origin, and

SKF Germany did not indicate the

methodology which it has consistently

applied. Torrington argues further that

SKF Germany does not describe how it

arrived at its origin determination.

Torrington asserts that if the company

cannot clear up these questions the

Department should conclude that it is

unable to determine whether SKF

Germany has reported all sales of

German bearings in its HM and U.S.

sales listings and apply facts available.

Torrington suggests that an appropriate

facts available solution would be to

apply the highest margin found for any

SKF company in this review.

SKF Germany contends that, as it

stated in its questionnaire and

supplemental questionnaire responses,

it considers the complexity and extent

of the manufacturing processes involved

and the origin of each bearing’s major

components when identifying country

of origin for its bearings. SKF Germany

claims that the accurate determination

of origin is important to the proper

reporting of its sales in an

administrative review and in order to

comply with European and United

States marking and other requirements.

SKF Germany contends further that in

multiple prior verifications the

Department has confirmed the accuracy

and completeness of SKF Germany’s

sales reporting. In addition, SKF

Germany claims that, in this review, the

Department also affirmed the accuracy

of its sales reporting, including a

description of the specific steps taken at

verification to confirm SKF’s origin

determinations. SKF Germany contends

that, as the Department verified, it

reported sales of all German origin

bearings.

Department’s Position: We agree with

SKF Germany. We are satisfied that SKF

Germany reported all of its Germanorigin bearings and did not report sales

of non-German origin bearings in this

review. We verified, in this review, SKF

Germany’s methodology and were able

to trace the procedure that SKF

Germany uses in determining the

country of origin for its bearings. We did

not find any discrepancies in SKF

Germany’s reporting methodology in

our examination of invoices, inventory

records, and sales registers.

Comment 2: Torrington argues that

the Department should confirm that

NSK–RHP has determined the country

of origin properly for all reported

bearings. Torrington asserts that NSK–

RHP did not answer fully a question

that the Department asked in its

supplemental questionnaire on the

country of origin of bearings NSK–RHP

sold in or to the U.S. market. Torrington

contends that NSK–RHP did not clarify

how it determines whether a bearing is

a U.K.-produced (versus a Japaneseproduced) bearing in its supplemental

response. For these reasons, Torrington

requests that Department consider

applying facts available for these final

results. Torrington also suggests that an

appropriate facts-available solution

would be to apply the highest margin

found for any NSK–related company for

this review period.

NSK–RHP argues that it only sold

RHP-brand bearings in, or to, the United

States during the POR. Further, NSK–

RHP asserts that almost all of these

bearings were produced at factories

owned and controlled by RHP Bearings,

Ltd. NSK–RHP maintains that the few

remaining RHP-brand bearings

manufactured by NSK Bearings Europe

were sold in the United States during

the sample weeks. NSK–RHP argues that

NSK-brand bearings manufactured by

NSK Bearings Europe were not sold in,

or to, the United States during the

review period. Moreover, NSK–RHP

argues that it has already reported the

degree to which affiliated companies

provided raw materials or components

either to RHP Bearings, NSK Bearings

Europe, or both, during the POR.

Therefore, NSK–RHP asserts, an

examination of this material

demonstrates that bearings

manufactured in Japan were not

reported as U.K. merchandise.

Department’s Position: We disagree

with Torrington. We addressed the

question in our supplemental

questionnaire in relation to NSK–RHP’s

further-manufactured sales. NSK–RHP

reported these sales as being of U.K.

origin. There is nothing on the record

that suggests these sales are not of U.K.

origin and Torrington has not provided

any evidence to suggest otherwise.

Furthermore, we have examined NSK–

RHP’s methodology for reporting its

bearings and are satisfied that NSK–RHP

properly determined the country of

origin of all reported bearings.

[FR Doc. 97–923 Filed 1–14–97; 8:45 am]

BILLING CODE 3510–DS–P

[A–428–801]

Antifriction Bearings (Other Than

Tapered Roller Bearings) and Parts

Thereof from Germany: Amended Final

Results of Antidumping Administrative

Review

AGENCY: International Trade

Administration, Import Administration,

Department of Commerce.

ACTION: Notice of amended final results

of antidumping duty administrative

review.

SUMMARY: On January 6, 1997, the

Department of Commerce (The

Department) issued the final results of

administrative review of the

antidumping duty orders on Antifriction

Bearings (Other Than Tapered Roller

Bearings) and Parts Thereof from

France, Germany, Italy, Japan,