[Federal Register Volume 63, Number 80 (Monday, April 27, 1998)]
[Notices]
[Pages 20585-20612]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-10570]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-588-604; A-588-054]


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

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

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

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SUMMARY: On May 20, 1996, the Department of Commerce (the Department) 
published the preliminary results of its 1992-93 and 1993-94 
administrative reviews of the antidumping duty order on tapered roller 
bearings (TRBs) and parts thereof, finished and unfinished, from Japan 
(A-588-604), and of the finding on TRBs, four inches or less in outside 
diameter, and components thereof, from Japan (A-588-054). The review of 
the A-588-054 finding covers four manufacturers/exporters and ten 
resellers/exporters of the subject merchandise to the United States 
during the period October 1, 1993, through September 30, 1994, and one 
manufacturer/exporter for the period October 1, 1992, through September 
30, 1993. The review of the A-588-604 order covers five manufacturers/
exporters, ten resellers/exporters, and seventeen firms identified by 
the petitioner in this case as forging producers, and the period 
October 1, 1993, through September 30, 1994. The A-588-604 review also 
covers one manufacturer/exporter for the period October 1, 1992, 
through September 30, 1993.
    We gave interested parties an opportunity to comment on our 
preliminary results. Based upon our analysis of the comments received 
we have changed the results from those presented in the preliminary 
results of review.

EFFECTIVE DATE: April 27, 1998.

FOR FURTHER INFORMATION CONTACT: Robert James at (202) 482-5222 or John 
Kugelman at (202) 482-0649, Antidumping and Countervailing Duty 
Enforcement Group III, Office 8, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, D.C. 20230.

APPLICABLE STATUTE AND REGULATIONS: Unless otherwise indicated, all 
citations to the statute and to the Department's regulations are in 
reference to the provisions as they existed on December 31, 1994.

SUPPLEMENTARY INFORMATION:

Background

    On August 18, 1976, the Treasury Department published in the 
Federal Register (41 FR 34974) the antidumping finding on TRBs from 
Japan, and on October 6, 1987, the Department published the antidumping 
duty order

[[Page 20586]]

on TRBs from Japan (52 FR 37352). On October 7, 1994 (59 FR 51166), the 
Department published the notice of ``Opportunity to Request an 
Administrative Review'' for the 1993-94 reviews of both TRBs cases. The 
petitioner, the Timken Co. (Timken), and two respondents requested 
administrative reviews. We initiated the A-588-054 and A-588-604 
administrative reviews for the period October 1993 through September 
1994 on November 14, 1994 (59 FR 56459). On May 20, 1996, we published 
in the Federal Register the preliminary results of the 1993-94 
administrative reviews of the antidumping duty order and finding on 
TRBs from Japan (see Tapered Roller Bearings and Parts Thereof, 
Finished and Unfinished, from Japan, and Tapered Roller Bearings, Four 
Inches or Less in Outside Diameter, and Components Thereof, from Japan; 
Preliminary Results of Antidumping Duty Administrative Reviews and 
Termination in Part, 61 FR 25200 (Prelim Results).
    The Prelim Results also included the preliminary results for the 
1992-93 administrative reviews of both TRBs cases for Koyo Seiko 
Company, Ltd. (Koyo). While we initiated the 1992-93 reviews of both 
TRBs cases on November 17, 1993 (58 FR 60600) and published our final 
results of administrative reviews for the 1992-93 period in the Federal 
Register on November 7, 1996, we did not include Koyo in these 1992-93 
reviews (see Tapered Roller Bearings and Parts Thereof, Finished and 
Unfinished, from Japan, and Tapered Roller Bearings, Four Inches or 
Less in Outside Diameter, and Components Thereof, from Japan; Final 
Results of Antidumping Duty Administrative Reviews and Revocation in 
Part of an Antidumping Finding, 61 FR 57629 (TRBs 92-93)). Rather, as 
explained in our Prelim Results, we determined that, because we had yet 
to make our final scope determination concerning Koyo's rough forgings, 
rather than delay our 1992-93 results of review for all other reviewed 
firms, we would conduct Koyo's 1992-93 reviews after making our final 
scope determination. On February 2, 1995, we published in the Federal 
Register our final scope determination in which we found Koyo's rough 
forgings to be within the scope of the A-588-604 TRBs order (60 FR 
6519). We provided Koyo additional time to submit sales and cost 
information concerning its rough forgings for both the 1992-93 and 
1993-94 administrative reviews and determined that, due to the timing 
of our receipt of this information and the timing of our 1993-94 
administrative review analysis, it would be appropriate to conduct the 
1992-93 and 1993-94 reviews for Koyo concurrently (see Prelim Results 
at 25200). As a result, both Koyo's 1992-93 and 1993-94 final results 
are included in this instant notice.
    On August 21, 1996, we held a hearing which covered the 1993-94 
reviews of both the A-588-054 and A-588-604 TRBs cases and the 1992-93 
reviews of Koyo in both the TRBs cases. In addition, the Department re-
opened the administrative record of these proceedings on March 16, 1998 
to afford Kawasaki an additional opportunity to submit a complete 
response to the Department's antidumping questionnaire. On March 23, 
1998, Kawasaki declined to do so.
    The Department has now completed these reviews in accordance with 
section 751 of the Tariff Act of 1930, as amended (the Tariff Act).

Scope of the Review

    Imports covered by the A-588-054 finding are sales or entries of 
TRBs, four inches or less in outside diameter when assembled, including 
inner race or cone assemblies and outer races or cups, sold either as a 
unit or separately. This merchandise is classified under the Harmonized 
Tariff Schedule (HTS) item numbers 8482.20.00 and 8482.99.30.
    Imports covered by the A-588-604 order include TRBs and parts 
thereof, finished and unfinished, which are flange, take-up cartridge, 
and hanger units incorporating TRBs, and tapered roller housings 
(except pillow blocks) incorporating tapered rollers, with or without 
spindles, whether or not for automotive use. Products subject to the A-
588-054 finding are not included within the scope of this order, except 
for those manufactured by NTN Bearing Corporation, Ltd. (NTN). This 
merchandise is currently classifiable under HTS item numbers 
8482.99.30, 8483.20.40, 8482.20.20, 8483.20.80, 8482.91.00, 8484.30.80, 
8483.90.20, 8483.90.30, and 8483.90.60. In addition, in accordance with 
our February 2, 1995, final scope determination concerning Koyo's rough 
forgings, Koyo's rough forgings are also included within the scope of 
the A-588-604 order.
    The HTS numbers listed above for both the A-588-054 finding and the 
A-588-604 order are provided for convenience and Customs purposes. The 
written description remains dispositive.
    The period for each 1993-94 review is October 1, 1993, through 
September 30, 1994. These reviews cover TRBs sales by five TRBs 
manufacturers/exporters (Koyo, NSK Ltd. (NSK), NTN, Nachi-Fujikoshi 
Corporation (Nachi), and Maekawa Bearing Mfg. Co., Ltd. (Maekawa)), and 
ten resellers/exporters (Honda Motor Company (Honda), Fuji Heavy 
Industries, Ltd. (Fuji), Kawasaki Heavy Industries, Ltd. (Kawasaki), 
Yamaha Motor Co., Ltd. (Yamaha), Sumitomo Corporation (Sumitomo), 
Itochu Co., Ltd. (Itochu), Suzuki Motor Co., Ltd. (Suzuki), Nigata 
Converter Co., Ltd. (Nigata), Toyosha Co., Ltd. (Toyosha), and MC 
International (MC Int'l)). These reviews also cover U.S. sales/
importations of forgings by Koyo, NTN, and seventeen firms identified 
by the petitioner as Japanese forging producers (Daido Steel Co., Ltd. 
(Daido Steel), Asakawa Screw Co., Ltd. (Asakawa), Fuse Rashi Co., Ltd. 
(Fuse), Hamanaka Nut Mfg. Co., Ltd. (Hamanaka), Ichiyanagi Tekko 
(Ichiyanagi), Isshi Nut Industries (Isshi Nut), Kawada Tekko, Kinki 
Maruseo Nut Kogyo Kumiai (Kinki), Kitazawa Valve Co., Ltd. (Kitz 
Corp.), Nittetsu Bolten (Nittstsu), Shiga Bolt, Shinko Bolt, Sugiura 
Seisakusho (Sugiura), Sumikin Seiatsu (Sumikin), Toyo Valve Co. (Toyo 
Valve), Unytite Fastener Mfg. Co., Ltd. (Unytite Kogyo), and Showa 
Seiko Co., Ltd. (Showa)).
    As explained in the Prelim Results, we have terminated the 1993-94 
reviews of the A-588-604 case for Fuse, Hamanaka, Kinki, Kitz Corp., 
Shiga Bolt, Shinko Bolt, Sugiura, Toyo Valve, Nittetsu, Sumikin, and 
Unytite Kogyo (see Prelim Results at 25202). As also explained in the 
Prelim Results, we used for Nachi, Kawasaki, Daido Steel, Kawanda 
Tekko, Asakawa, Ichiyanagi, and Isshi Nut a first-tier non-cooperative 
total best information available (BIA) rate of 40.37 percent in the A-
588-604 case. In addition, we used a first-tier total BIA rate of 47.63 
percent for Kawasaki and Nachi in the A-588-054 case (see Prelim 
Results at 25201).
    Because Fuji and MC Int'l did not make any shipments of subject 
merchandise during the POR in the A-588-604 case and because Showa did 
not make any shipments of subject merchandise during the POR in the A-
588-604 case, as explained in our Prelim Results, we have not assigned 
a rate to Fuji and MC Int'l in the A-588-604 nor to Showa in the A-588-
604 case (see Prelim Results at 25202).
    Because we determined in the Prelim Results that Itochu and 
Sumitomo have no influence over the sale prices and quantities of those 
shipments of TRBs they made to the United States, we have determined 
that the supplier's rates, and not unique Sumitomo and Itochu rates,

[[Page 20587]]

should be applied for cash deposit and appraisement purposes (see 
Prelim Results at 25202).
    Finally, we have terminated the 1993-94 A-588-054 review for Honda 
since we recently revoked Honda from the A-588-054 finding in our 1992-
93 final results (see TRBs 92-93 at 57650).
    The period for the 1992-93 reviews is October 1, 1992, through 
September 30, 1993. The 1992-93 reviews of both the A-588-054 and A-
588-604 cases included in this notice cover TRBs sales by Koyo.

Analysis of Comments Received

    We received case briefs from Timken, Koyo, NTN, NSK, Fuji, and 
Kawasaki. We received rebuttal briefs from Timken, Koyo, NTN, and NSK. 
In addition, at the request of the presiding official at the hearing, 
we received additional comments from NTN on August 28, 1996, and 
additional comments from Timken on September 9, 1996, regarding the 
issue of new information in NTN's rebuttal brief. These comments, and 
those contained in all of the case and rebuttal briefs, are addressed 
below in the following order:

1. Miscellaneous Comments Concerning Model Match, Set-Splitting, 
Level of Trade, Sales Not in the Ordinary Course of Trade, Arm's 
Length Test, Annual Averaging, and Assessment
2. Adjustments to United States Price (USP)
3. Discounts, Rebates, and Post-Sale Price Adjustments (PSPAs)
4. Cost of Production (COP) and Constructed Value (CV)
5. Clerical and Computer Programming Errors

1. Miscellaneous Comments

    Comment 1: NTN argues that the Department incorrectly split home 
market TRB sets which are ``unsplittable.'' NTN claims that, because 
certain of its TRB models contain cups and cones which are never sold 
individually in any market, it is illogical to split such models into 
individual cup and cone sales. Furthermore, NTN states that because the 
rationale behind the Department's set-splitting methodology is to find 
merchandise ``such or similar'' to individual cups and cones sold in 
the United States, the Department may only split TRB sets sold in the 
home market which contain cups and cones identical or similar to those 
cups and cones sold individually in the United States. NTN argues that, 
because cups and cones contained in its ``unsplittable'' sets are never 
sold individually, they do not represent merchandise which is 
potentially similar to individually sold cups and cones. Therefore, NTN 
asserts, the Department creates, by splitting such sets, a pool of home 
market cups and cones which cannot be fairly considered as candidates 
for matching to cups and cones sold separately in the United States.
    Timken argues that, in accordance with section 771(16) of the 
Tariff Act, the Department's model-match methodology reasonably 
assesses objective physical criteria and the variable costs of 
production when identifying that home market merchandise which is such 
or similar to merchandise sold in the United States. Timken asserts 
that if the cup or cone split from an ``unsplittable'' set is 
physically identical, or most physically similar, to a cup or cone 
individually sold in the United States, there is no statutory basis for 
the Department to reject such a comparison. Timken further states that 
NTN's argument, which basically asserts that a cup or cone sold within 
a set can never be found to be such or similar to a cup or cone that is 
sold separately, calls for an additional matching factor which is 
unwarranted by the statute. Finally, Timken argues that if the 
Department were not to split NTN's claimed ``unsplittable'' sets, the 
pool of home market such or similar merchandise would be narrowed and 
the Department's ability to match U.S. and home market merchandise 
would be curtailed.
    Department's Position: We agree with Timken. Section 771(16) of the 
Tariff Act does not require that such or similar merchandise be sold in 
the same manner as merchandise under review. TRB components that are 
sold solely within sets do not lose their status as merchandise such or 
similar to individually-sold TRB components simply by virtue of the 
fact that they are sold as components of sets instead of as individual 
cups and cones. The fact that a home market cup or cone was never sold 
individually in any market does not preclude the possibility that that 
cup or cone may be the most physically similar merchandise to cups and 
cones NTN sold separately in the United States. Because they may be the 
most similar products, it is appropriate to include this merchandise in 
the pool of home market sales and, if such cups and cones are 
determined to be the most similar merchandise to products sold in the 
United States, it is appropriate to use them in our dumping 
comparisons, as we have done in past reviews of NTN and as has been 
approved by the Court of International Trade (CIT) (see, e.g., NTN 
Bearing Corp. v. United States, 747 F. Supp. 726, 741 (CIT 1990), NTN 
Bearing Corp. v. United States, 924 F.Supp. 200, 206 (CIT 1996) TRBs 
1992-93 at 58631, and Final Results of Antidumping Duty Administrative 
Reviews; Tapered Roller Bearings and Parts Thereof, Finished and 
Unfinished, From Japan and Tapered Roller Bearings, Four Inches or Less 
in Outside Diameter, and Components Thereof, From Japan, 58 FR 64720 
(December 9, 1992) (TRBs 1990-92)).
    Comment 2: NTN contends that the Department improperly determined 
its reported home market sample and small-quantity sales to be in the 
ordinary course of trade and included such sales in its margin 
calculations. NTN argues that its home market sample sales cannot be 
considered as in the ordinary course of trade because they are items 
which enable a customer to make a buying decision, and maintains that 
its reported home market small-quantity sales cannot be considered 
ordinary, given the extremely small quantities involved. Citing to past 
TRBs reviews in which the Department excluded these sample and small-
quantity sales from its margin calculations for NTN, NTN asserts that, 
in view of the Department's past exclusion of such sales as outside the 
ordinary course of trade, the Department should do so in these final 
results as well in accordance with Shikoku Chemicals Corp v. United 
States, 795 F. Supp. 417 (CIT 1992) (``At some point Commerce must be 
bound by its prior actions so that parties have a chance to purge 
themselves of antidumping liabilities'') and in accordance with the 
Supreme Court's observation that ``long-continued methodologies 
naturally serve to provide the basis from which subjects of agency 
investigation adjust their behavior'' (Id. at 12, n.8. (quoting United 
States v. Midwest Oil Co., 236 U.S. 459 (1915)).
    Timken argues that, while the Department did grant NTN's claim in 
some past proceedings, it has denied the claim in the most recent TRBs 
reviews and in several of the reviews of the antidumping duty order on 
antifriction bearings (AFBs) from Japan. In addition, Timken points out 
that two of the TRBs determinations NTN relies on have been remanded by 
the CIT, and in both cases the Department reversed its position and 
included NTN's sample and small-quantity sales within its margin 
calculations (the Department's Final Remand Results Pursuant to The 
Timken Company v. United States, Court No. 92-03-0061, transmitted to 
the CIT on December 13, 1994, and the Department's Final Remand Results 
Pursuant to The Timken Company v. United States, Court No. 92-03-00162, 
transmitted to the CIT on December 16, 1994). Given these changes, 
Timken contends, it is clear that the

[[Page 20588]]

Department's preliminary determination to include these sales in its 
margin calculations is in accordance with established precedent.
    Further, Timken argues that it has been the Department's long-
standing policy to require a respondent to provide sufficient evidence 
to support any claim for the exclusion of sales as not in the ordinary 
course of trade. Therefore, Timken contends, because NTN failed to 
demonstrate that its alleged small-quantity and sample sales were 
outside the ordinary course of trade, the Department reasonably 
determined that NTN failed to meet the burden of demonstrating that the 
sales in question were outside the ordinary course of trade.
    Department's Position: We agree with Timken. Section 773(a)(1)(A) 
of the Tariff Act states that the Department is required to compare the 
price of the merchandise imported into the United States to the price 
of the merchandise sold or offered for sale ``in the principal markets 
of the country from which exported in the usual commercial quantities 
and in the ordinary course of trade for home market comparison.'' As 
defined in section 771(15) of the Tariff Act, ordinary course of trade 
means the ``conditions and practices which, for a reasonable time prior 
to exportation of the merchandise which is the subject of an 
investigation, have been normal in the trade under consideration with 
respect to merchandise of the same class or kind.''
    Generally, when determining whether home market sales are within 
the ordinary course of trade, the Department applies the standards set 
forth in Murata Mfg. Co., Ltd. v. United States, 820 F. Supp. 603, 606 
(CIT 1993) (Murata), Nachi-Fujikoshi Corp. v. United States, 798 F. 
Supp. 716, 718-719 (CIT 1992) (Nachi), and Mantex, Inc., et. al., v. 
United States, 841 F. Supp. 1290, 1305-1309 (CIT 1993) (Mantex). In 
Murata the CIT quoted with approval the Department's statement in 
Certain Welded Steel Standard Pipes and Tubes from India; Final Results 
of Antidumping Duty Administrative Reviews, 56 FR 64753 (1991), that 
the Department, in determining whether home market sales are in the 
ordinary course of trade, does not rely on one factor considered in 
isolation, but rather considers all circumstances of the sales in 
question. In addition, the CIT noted that in other cases the Department 
determined that sales were outside the ordinary course of trade based 
not only on the presence of small quantities or high prices, but also 
because the Department found other factors that supported the outside-
the-ordinary-course-of-trade categorization (see Murata at 9). In Nachi 
the CIT held that the Department must make determinations regarding 
sample sales by examining the relevant facts of each individual case 
and that the burden of proof to demonstrate that such sales are outside 
the ordinary course of trade lies with the respondent (see Nachi at 
718). In Mantex the CIT restated its previous opinion in Nachi (see 
Mantex at 1306).
    In its response NTN described its sample sales as sales of items to 
a customer which are used by the customer to determine whether or not 
to buy the product. NTN explained that, through statements and other 
representations the customer makes, NTN determines the ``sample'' 
nature of the sale and codes the sale accordingly. Concerning its 
small-quantity sales reported as not in the ordinary course of trade, 
NTN explained that for each transaction where the total quantity was 
three units or less, and the total number of transactions during the 
POR was seven or less, NTN searched back to fiscal year 1990 and, if 
certain conditions were met, it considered the sale as outside the 
ordinary course of trade. The only other information on the record 
regarding these sales are NTN's computer data files in which it 
reported such sales separately from the rest of its home market data 
base.
    In accordance with Murata, we attempted to examine all factors 
surrounding NTN's reported sample and small-quantity sales to determine 
if they were outside the ordinary course of trade. However, NTN 
provided us with little information other than a general description of 
these sales upon which to base such a determination. The administrative 
record contains no other narrative explanation, supporting 
documentation, or other evidence to demonstrate why these sales are not 
representative of NTN's normal practices in selling TRBs in Japan, or 
otherwise demonstrates the ``aberrational'' nature of these sales. For 
example, we have no evidence supporting the notion that NTN's sample 
sales were sold only for the purpose of allowing the customer to make a 
decision to buy. Likewise, we have no evidence supporting NTN's 
categorization of its ``small-quantity'' sales as abnormal, other than 
the fact that they were small-quantity sales. In accordance with Nachi, 
the burden of proving that its sales are outside the ordinary course of 
trade lies clearly with the respondent, and in this instance NTN has 
failed to meet that burden.
    Furthermore, this is not the first review or the first case in 
which we have rejected NTN's categorization of certain of its sales as 
not in the ordinary course of trade. In our last three TRBs reviews we 
clearly explained that we applied the Murata and Nachi standards to our 
determination of whether such sales were indeed outside the ordinary 
course of trade (see TRBs 92-93 at 57639 and TRBs 90-92 at 64732). In 
those reviews we determined that NTN did not supply sufficient evidence 
to allow us to determine that these sales were outside the ordinary 
course of trade. As a result, NTN has had clear notice prior to these 
current reviews that its response failed to demonstrate the ``not-in-
the-ordinary-course-of-trade'' status of its sample and small-quantity 
sales. However, NTN took no steps to improve its response regarding 
this issue, but rather provided only the same general information with 
little other explanation.
    Therefore, for the reasons stated above, and in accordance with our 
established practice, we have not changed our treatment of NTN's sample 
and small-quantity home market sales for these final results. Rather, 
we have again determined these sales to be within the ordinary course 
of trade and we have included them in our margin calculations.
    Comment 3: NSK argues that the Department must apply the ordinary 
meaning of ``sale'' to the antidumping law (which involves not only the 
transfer of ownership, but the payment, or promise, of consideration), 
and should exclude from its analysis those free samples NSK reported as 
given away to its customers in the United States. NSK claims that it 
has provided evidence demonstrating that this free U.S. merchandise 
constitutes promotional samples, and contends that, by including this 
promotional merchandise in its analysis, the Department fails to 
recognize the normal business practice of giving away free samples and 
calculates distortive margins. Finally, NSK argues that, in accordance 
with the Torrington Company v. United States, 926 F. Supp. 1151 (CIT 
1996), for the purpose of calculating antidumping duties, the 
Department reviews sales, not entries. Therefore, NSK concludes, there 
is no basis for including this merchandise in the Department's margin 
calculations.
    Timken argues that not only does the statute require the Department 
to calculate a value for each U.S. entry of subject merchandise, but, 
if the Department accepts NSK's arguments, it would allow NSK to evade 
the law by providing zero-priced merchandise as gifts while raising its 
prices on other subject merchandise identified as sales.

[[Page 20589]]

    Department's Position: On June 10, 1997, the CAFC held that the 
term ``sold'' requires both a transfer of ownership to an unrelated 
party and consideration. NSK Ltd. v. United States, 115 F.3d 965, 975 
(Fed. Cir. 1997) (NSK). The CAFC determined that samples which NSK had 
given to potential customers at no charge and with no other obligation 
lacked consideration. Moreover, the CAFC found that, since free samples 
did not constitute ``sales,'' they should not have been included in 
calculating U.S. price.
    In light of the CAFC's opinion, we have revised our policy with 
respect to samples. The Department will now exclude from its dumping 
calculations sample transactions for which a respondent has established 
that there is either no transfer of ownership or no consideration.
    This new policy does not mean that the Department automatically 
will exclude from analysis any transaction to which a respondent 
applies the label ``sample.'' It is well-established that the burden of 
proof rests with the party making a claim and in possession of the 
needed information (see, e.g., NTN Bearing Corporation of America v. 
United States, 997 F.2d 1453, 1458-59 (CAFC 1993), (citing Zenith 
Elecs. Corp. v. United States, 988 F.2d 1573, 1583 (CAFC 1993), and 
Tianjin Mach. Import & Export Corp. v. United States, 806 F. Supp. 
1008, 1015 (CIT 1992)). When respondents fail to support their sample 
claim, we did not exclude the alleged samples from our margin analysis.
    In light of the policy above, we have determined that the record 
indicates that NSK's reported sample transactions did not involve 
consideration. Accordingly, pursuant to the CAFC's decision in NSK, we 
have excluded NSK's reported U.S. sample sales from the U.S. sales 
database.
    In addition, with regard to assessment rates, in order to ensure 
that we collect duties only on sales of subject merchandise, we 
included the entered values and quantities of the sample transactions 
in our calculation of NSK's assessment rate and set the dumping duties 
due for such transactions to zero. We have done this because U.S. 
Customs will collect the ad valorem duties on all entries of subject 
merchandise whether or not the merchandise was a sample transaction. 
However, to ensure that sample transactions do not dilute the cash 
deposit rates, we excluded both the calculated U.S. prices and 
quantities for sample transactions from our calculation of the cash 
deposit rates.
    Comment 4: NTN claims that the Department's sum-of-the-deviations 
model-match methodology inconsistently treats the Y2 factor variable. 
Specifically, NTN questions why the Department sets the variable 
``Y2H'' equal to ``Y2DEV'' when the Department sets the deviation for 
the outside diameter (OD) variable equal to zero.
    Timken argues that the Department's sum-of-the-deviations model-
match methodology properly reflects the reality of bearing 
characteristics. For example, Timken states, because thrust TRBs have a 
zero Y2 factor, when comparing thrust to non-thrust TRBs, the 
Department correctly set the Y2 factor deviation equal to the non-zero 
Y2 factor value because the difference between a zero and non-zero 
value will always be the non-zero value. Timken further asserts that, 
because the Department only compares TRB cups to cups and TRB cones to 
cones, if the inside diameter (ID) or OD for the U.S. TRB is zero, the 
value for the ID or OD for the home market TRB being compared will 
automatically be zero. Therefore, Timken concludes, if the ID or OD for 
the U.S. TRB is zero, and the ID or OD for the home market TRB is also 
zero, the ID or OD deviation between the U.S. and home market cups or 
cones compared will automatically be zero.
    Department's Position: We agree with Timken. In order to determine 
the home market merchandise most similar to U.S. merchandise, we apply 
our sum-of-the-deviations model-match methodology using five physical 
criteria of TRBs: ID, OD, width, load rating, and the Y2 factor. 
Because each of these criteria are quantitatively measured, we compare 
the value for each criterion for the U.S. model to that for the home 
market merchandise and calculate the difference. Once we determine the 
deviation for each criterion, we derive the overall sum of the 
deviations for all five criteria and use this value to rank the most 
similar home market merchandise.
    When we first developed this methodology we realized that, in 
certain instances, the ID, OD, or Y2 factor of a TRB would be equal to 
zero. For example, TRB cups do not have an ID, TRB cones do not have an 
OD, and thrust TRBs may not have a Y2 factor. Because we only compare 
U.S. cups to home market cups and U.S. cones to home market cones, the 
ID for each U.S. and home market cup compared would be equal to zero 
and the OD for each U.S. and home market cone compared would be equal 
to zero. As a result, the ID deviation for cup comparisons would 
automatically equal zero and the OD deviation for cone comparisons 
would automatically equal zero. In order to account for this in our 
sum-of-the-deviations model-match methodology, if the ID or OD of the 
U.S. TRB is equal to zero, we automatically set the ID or OD deviation 
equal to zero.
    In contrast to the above, we do not compare U.S. thrust TRBs to 
only home market thrust TRBs (see TRBs 92-93 at 57631 and TRBs 90-92 at 
64721). Therefore, if the Y2 factor for the U.S. model is equal to 
zero, the Y2 factor for the comparison home market model will not 
automatically be equal to zero. Because we calculate the deviation 
between U.S. and home market criteria as the absolute value of one 
minus the home market TRBs criterion value divided by the value of the 
U.S. TRBs criterion, if the U.S. Y2 factor value is equal to zero, we 
would, in effect, be dividing by zero in our computer program. 
Therefore, to ensure the proper calculation of the Y2 factor deviation 
when the U.S. model's Y2 factor is equal to zero, we automatically set 
the Y2 deviation equal to the home market TRBs value.
    Comment 5: Both Fuji and Kawasaki argue that, because merchandise 
which meets the criteria for the application of the ``Roller Chain'' 
principle is outside the scope of the Japanese TRBs order and finding, 
the Department should adopt an assessment strategy which would ensure 
that antidumping duties are not assessed on this ``Roller Chain'' 
merchandise.
    Fuji proposes that one method would be for the Department to assess 
duties on an entry-by-entry basis. Fuji claims that not only would this 
ensure proper assessment of Fuji's entries, but it would be 
administratively easy for the Department to do given the fact that Fuji 
has provided the Department with its entry numbers. Alternatively, Fuji 
suggests that, because all of those TRBs which qualify for exclusion 
under the ``Roller Chain'' principle were imported by a single related 
importer, Subaru-Isuzu Automotive, Inc. (SIA), the Department should 
assess duties on an importer-specific basis and apply zero duties to 
all SIA imports. Fuji adds that if the Department selects this option 
it should also adjust the cash deposit rate it calculates for Fuji to 
take into account the ``Roller Chain'' merchandise by including the 
value of the ``Roller Chain'' merchandise in the cash deposit rate 
calculation denominator. Finally, Fuji proposes that, if the Department 
rejects these first two proposals, the Department should, at a minimum, 
adjust both the cash deposit and assessment rates it calculates for 
Fuji by including the value of the TRBs meeting the ``Roller Chain'' 
criteria in the

[[Page 20590]]

denominators used when calculating these rates.
    Kawasaki contends that not only is there sufficient evidence on the 
record to demonstrate that all A-588-054 TRBs imported by Kawasaki 
Motors Manufacturing Corporation (KMM) meet the ``Roller Chain'' 
principle, but there is also sufficient evidence allowing the 
Department to identify the total value of KMM's A-588-054 TRB imports. 
Thus, Kawasaki asserts, the Department has the information necessary to 
calculate an A-588-054 assessment rate for Kawasaki which would 
effectively exclude KMM's entries of TRBs from antidumping duty 
assessment.
    With regard to Fuji, Timken argues that if the Department decides 
to apply a single assessment rate to all of Fuji's imports, and 
recalculates Fuji's assessment rate to take into account Fuji's 
``Roller Chain'' merchandise, the Department should first be certain 
that liquidation was suspended and antidumping duty deposits were paid 
on Fuji's ``Roller Chain'' merchandise. If Fuji's ``Roller Chain'' 
entries were suspended, Timken argues, the Department should not use 
the assessment rate Fuji proposed in its comments. Rather, Timken 
asserts, because duties are assessed on entered value, the Department 
should calculate Fuji's assessment rate by including in the calculation 
denominator the sum of the entered values of both Fuji's non-``Roller 
Chain'' and ``Roller Chain'' merchandise.
    In response to Fuji's contention that the Department should apply 
to Fuji cash deposit and assessment rates which are identical, Timken 
argues that, while the statutory scheme requires estimates of 
antidumping duties to be as accurate as possible, it is not necessary 
that cash deposit rates be absolutely accurate (Badger-Powhatan, a 
Division of Figgie International, Inc. v. United States, 633 F. Supp. 
1364, appeal dismissed, 808 F.2d 823 (Fed. Cir. 1986)). Timken 
therefore urges the Department to apply to all of Fuji's entries a cash 
deposit rate equal to the final margin rate the Department calculates 
for Fuji's non-``Roller Chain'' merchandise.
    With regard to Kawasaki, Timken contends that the Department cannot 
make a determination that any of Kawasaki's entries were subject to the 
``Roller Chain'' principle not only because the record lacks the 
information necessary for the Department to do so, but also because 
Kawasaki was an uncooperative respondent to which the Department 
applied a first-tier total BIA rate in both the A-588-054 and A-588-604 
reviews. Timken contends that the Department applied total adverse BIA 
to Kawasaki because it submitted only partial information in response 
to the Department's questionnaire, which was insufficient for the 
Department to conduct its analysis. Timken claims that, the Department 
cannot accept partial data because to do so would place control of the 
review in the hands of Kawasaki by permitting Kawasaki to selectively 
provide information. Timken argues that this reasoning was upheld in 
Persico Pizzamiglio, S.A. v. United States, 18 CIT 299, Slip. Op. 94-61 
(April 14, 1994) (Persico), in which the CIT explained that the 
acceptance of partial submissions will only encourage respondents to 
selectively disclose only that information which would serve to 
decrease a dumping margin based on BIA. Therefore, Timken states, the 
Department should assess Kawasaki's entries of A-588-054 TRBs at a rate 
equivalent to the total adverse BIA rate it assigns to Kawasaki in 
these final results and not make any adjustments to this rate to 
effectively exclude KMM's entries of TRBs.
    Department's Position: We agree with the petitioner and in part 
with the respondents. It is important to first clarify that merchandise 
which meets the criteria of the ``Roller Chain'' principle is not out-
of-scope merchandise. Our determination in an administrative review 
that the ``Roller Chain'' principle is applicable to certain 
merchandise is not equivalent to a determination that the merchandise 
is non-scope merchandise. To the contrary, in these TRBs reviews, that 
merchandise which we have deemed to be ``Roller Chain'' merchandise 
clearly falls within the scope of the A-588-054 finding and the A-588-
604 order, as described earlier in this notice. Based on section 
772(e)(3) of the Tariff Act and the applicable legislative history, we 
have developed a practice whereby we do not calculate and do not assess 
antidumping duties on subject merchandise which is imported by a 
related party and which is further processed where the subject 
merchandise comprises less than one percent of the value of the 
finished product sold to the first unrelated customer in the United 
States (see, e.g., Roller Chain Other Than Bicycle From Japan, 48 FR 
51804 (November 14, 1983), and TRBs 92-93 at 57548)). The statute 
provides for the assessment of antidumping duties only to the extent of 
the dumping that occurs. If there can be no determination of any 
dumping margin where the imported merchandise is an insignificant part 
of the product sold, then there is no dumping to offset and antidumping 
duties are not appropriate. Therefore, we do not consider ``Roller 
Chain'' merchandise as non-scope merchandise, but rather as scope-
merchandise which is not subject to duty assessment.
    We disagree with Fuji that our cash deposit rates should somehow 
take into account merchandise meeting the ``Roller Chain'' criteria 
because we have no way of knowing at the time of entry whether any 
particular entry qualifies under the ``Roller Chain'' principle for 
exclusion from assessment of antidumping duties. Our decision to 
exclude any merchandise is made on a case-by-case basis within the 
course of an administrative review, which takes place after the actual 
entry of the potentially excludable merchandise. For this reason, at 
the time of entry we must require cash deposits of estimated 
antidumping duties on all entries, including those entries of 
merchandise potentially excludable from assessment under the ``Roller 
Chain'' principle. Furthermore, cash deposit rates are estimates of 
dumping liability. Because at the time of entry we have no idea of the 
value of merchandise which we may ultimately determine meets the 
``Roller Chain'' criteria, we cannot alter our cash deposit rate to 
effectively compensate for the value of the ``Roller Chain'' 
merchandise in the current review, which may be a value significantly 
different from that in the future.
    We also disagree with Fuji that entry-by-entry assessment is a 
viable option for its assessment. Entry-by-entry assessment requires 
the traditional appraisement instructions which list each entry and the 
margin calculated for it. The disadvantages of such assessment are 
numerous. For example, because our dumping analysis focuses on sales, 
it is necessary for us to associate reviewed sales with entries in some 
way. However, companies are generally unable to make such a link. In 
addition, such appraisement instructions are burdensome, time-
consuming, and at risk for error. It is therefore the position of the 
Department that assessment rates applicable to all covered entries are 
preferable. In comparison to entry-by-entry assessment, the use of an 
assessment rate which applies to all entries during the POR is far less 
burdensome and time-consuming, and the risk of incorrect assessment is 
minimized. In general, we have tried to calculate assessment rates on 
an importer-specific basis to prevent one importer from paying 
antidumping duties attributable to margins found on sales to a 
different importer. However, this concern for importer-specific rates 
is limited to

[[Page 20591]]

those instances where the importer is not related to the foreign 
exporter. Where the importer is related to the foreign exporter, we 
consider the related parties to constitute one corporate entity and the 
use of manufacturer/exporter-specific assessment rates to be 
appropriate. Therefore, we also reject Fuji's proposal that we adopt an 
importer-specific rate for SIA, its related U.S. subsidiary, and we 
will calculate one rate for Fuji's related importers.
    We have determined that Fuji's final proposal, that the assessment 
rate take into account the value of the ``Roller Chain'' merchandise, 
is the most viable assessment option and would ensure that antidumping 
duties are not assessed on that merchandise we determined to meet the 
``Roller Chain'' principle criteria. As explained above, we do not 
agree that the cash deposit rate should be altered in any way. 
Therefore, after ensuring that liquidation was suspended for SIA's 
entries of TRBs, we will ensure that assessment does not occur on this 
``Roller Chain'' merchandise by including the total entered value of 
Fuji's ``Roller Chain'' merchandise in our assessment rate calculation 
denominator. This will have the effect of lowering the percentage 
assessment rate so that, even though antidumping duties will be 
assessed on all entries, the lower percentage assessment rate (which 
will still result in the collection of the actual amount of antidumping 
duties owed) will effectively exclude the ``Roller Chain'' merchandise 
from assessment.
    Concerning Kawasaki's alleged ``Roller Chain'' merchandise, as the 
record for these reviews demonstrates, Kawasaki only provided a 
response to the general information section of our questionnaire 
(section A) and included within this partial response a statement 
indicating that it declined to provide the information requested in the 
remaining sections of the questionnaire. Because the information 
Kawasaki declined to provide was its detailed home market and U.S. 
sales and adjustment information, we were unable to conduct an analysis 
of, or calculate a margin for, Kawasaki. Therefore, Kawasaki's refusal 
to provide a response to the additional sections of our questionnaire 
significantly impeded our ability to conduct a review for Kawasaki and 
we used a total first-tier uncooperative BIA rate of 40.47 for Kawasaki 
in the A-588-604 review and of 47.63 percent in the A-588-054 review 
(see Prelim Results at 25201).
    Kawasaki now argues that, because it submitted information 
demonstrating that all of KMM's entries of A-588-054 TRBs during the 
POR met the requirements of the ``Roller Chain'' principle, the 
Department should not assess duties against this merchandise. Kawasaki, 
therefore, makes an argument identical to Fuji's third proposal in that 
it calls for the recalculation (i.e., lowering) of its A-588-054 
assessment rate such that duties will not be assessed against KMM's 
entries of TRBs.
    Kawasaki's argument, however, not only overlooks the fact that the 
information it wants the Department to rely on to ensure that duties 
are not assessed on KMM's entries represented only a partial response 
to the questionnaire, but it ignores the fact that it was an 
uncooperative respondent that refused to provide the information 
necessary for us to conduct an analysis. Furthermore, our March 16, 
1998 letter requesting once more that Kawasaki provide a complete 
response to our questionnaire stated specifically that failure to do so 
would result in our proceeding on the basis of total BIA, including 
issuing appraisement instructions to Customs to liquidate all Kawasaki 
entries, including those allegedly subject to the ``Roller Chain'' 
principle, at the appropriate BIA rate. On March 23, 1998, Kawasaki 
stated for a third time that it would not provide the requested 
information necessary to complete our analysis and calculate dumping 
margins for Kawasaki.
    The CIT has ruled on several occasions that the use of a 
respondent's incomplete questionnaire response would only reward the 
respondent for failing to report requested information. For example, in 
Persico, the case cited by Timken in its comments, the CIT rejected the 
argument that the Department should have used some of the information 
submitted by the respondent instead of relying on other information as 
BIA. The CIT stated:

    ``If the court were to accept Persico's argument, such result 
might encourage respondents to analyze information Commerce would 
employ as BIA should that agency ignore a questionnaire response for 
being unresponsive or incomplete. Presumably, the respondent would 
then selectively disclose only that information which would decrease 
a dumping margin calculated from BIA. . .  . In this way, it would 
be in a respondent's best interest to only partially respond to 
Commerce's inquiry. . .  . By allowing Commerce to reject a 
submission in toto, the court encourages full disclosure by the 
respondent, because only full disclosure will lead to a dumping 
margin lower than that established by employing BIA.''

    (See Persico at 23). In Nippon Pillow Block Sales Co., Ltd. and FYH 
Bearing Units USA, Inc. v. United States, 903 F. Supp 89 (CIT 1995) 
(Nippon), the CIT, applying the same reasoning as in Persico, stated 
that ``if Commerce were required to use the small portion of the 
requested information that Nippon submitted, there would be no 
incentive for Nippon to provide Commerce with complete information 
since the submission of partial information would result in a decreased 
dumping margin.'' See Nippon at 95.
    In the instant case, the partial information submitted by Kawasaki 
allegedly demonstrates that KMM's imports met the requirements of the 
``Roller Chain'' principle. If we were to take this information into 
account, as Kawasaki argues, Kawasaki's assessment rate would be 
reduced and duties would not be assessed on a significant portion of 
its TRBs entries. As a result, this uncooperative respondent, who 
refused to provide the information necessary for us to conduct an 
analysis, would actually benefit from its refusal to provide the 
Department with a complete response. In this way, we would encourage 
Kawasaki to selectively disclose only that information which would 
benefit its position, and control over the proceedings would 
effectively move from the Department to the respondent. Furthermore, 
because Kawasaki was an uncooperative respondent to which we assigned a 
first-tier total adverse BIA rate in the reviews of both TRBs cases, 
there was no basis on which to verify the limited information Kawasaki 
submitted. Therefore, given Kawasaki's uncooperativeness, we have no 
basis upon which to conclude that the limited information in Kawasaki's 
partial submission is accurate and reliable. For these reasons we 
disagree with Kawasaki that, because information on the record 
allegedly demonstrates that KMM's entries of TRBs were subject to the 
``Roller Chain'' principle, we have an obligation to take that 
information into account for assessment purposes. Rather, we will 
assess duties for Kawasaki in both the TRBs cases at rates equivalent 
to the first-tier total BIA rates we assigned to Koyo for these final 
results.
    Comment 6: Fuji argues that the Department failed to make a 
difference-in-merchandise (difmer) adjustment when it compared Fuji's 
U.S. TRBs to most similar, rather than identical, home market TRBs. 
Fuji asserts that because it is a reseller, the acquisition costs it 
provided to the Department are its variable costs and the Department 
should calculate a difmer adjustment based on the difference in 
acquisition costs between U.S. merchandise and the non-identical 
comparison home market merchandise.

[[Page 20592]]

    While Timken does not object to the Department making a difmer 
adjustment for Fuji based on Fuji's acquisition costs, Timken contends 
that the computer programming language Fuji included in its brief 
demonstrating how the Department should incorporate the adjustment into 
Fuji's computer program is deficient because it applies the adjustment 
to comparisons of identical U.S. and home market merchandise and does 
not properly convert the adjustment from yen to U.S. dollars.
    Department's Position: We agree with Fuji that a difmer adjustment 
is warranted and have based that adjustment on the difference in Fuji's 
reported acquisition costs. However, we also agree with Timken that 
Fuji's suggested programming language is deficient. Therefore, we have 
incorporated the difmer adjustment into our computer program for Fuji 
by using computer programming language which ensures that the 
adjustment is (1) only applied to comparisons between U.S. merchandise 
and the most similar, rather than identical, home market merchandise, 
and (2) is properly converted from yen to U.S. dollars.
    Comment 7: Fuji argues that because it is a reseller which does not 
have access to the variable costs of manufacturing (VCOM) and total 
costs of manufacturing (TCOM) of the TRBs it resells in the U.S. and 
home markets, it agrees with the Department's use of its acquisition 
costs as the basis for the 20 percent difmer test. Fuji contends that 
in those cases where VCOM and TCOM are available, the Department allows 
non-identical home market models to be included within the pool of 
potential home market matches if the difference in the VCOMs between 
the U.S. and home market models is less than 20 percent of the U.S. 
model's TCOM. In other words, Fuji states, the Department uses the U.S. 
model's costs as the benchmark for its comparison. However, Fuji 
asserts, rather than use the U.S. model's acquisition cost as the 
benchmark for the 20 percent difmer test the Department conducted for 
Fuji, the Department incorrectly used the home market model's 
acquisition costs as the basis for the 20 percent difmer comparison.
    Department's Position: We agree with Fuji. In our margin 
calculation computer program for Fuji we inadvertently used programming 
language which incorrectly applied the 20 percent difmer test. We have 
corrected this error for these final results.
    Comment 8: Fuji argues that the Department's 99.5 percent arm's-
length test, in which it calculates home market customer-specific 
weighted-average related/unrelated price ratios and excludes from its 
margin calculations all sales to a home market customer if its ratio is 
not greater than 99.5 percent, is too restrictive and inappropriately 
rejects bona fide sales to related home market customers that are made 
at the same prices as sales to unrelated home market customers. Fuji 
asserts that, even though it sold from the same price list at the same 
prices to all home market customers during the POR for any given 
product during any given month, the Department's arm's-length test 
nevertheless resulted in the exclusion of a large percentage of its 
related customer sales from the Department's preliminary margin 
calculations.
    For example, Fuji asserts that the Department's reliance on POR 
weighted-average prices results in the exclusion of related party sales 
simply because different quantities may have been purchased by a 
related party after a monthly price change took effect, even though the 
prices charged to related and unrelated customers during any given 
month were the same. In addition, Fuji contends that, even if the same 
number of units are sold to both the related and unrelated customer, 
all sales to the related customer will fail the test even if a majority 
of the sales to the related customer during the POR were priced higher 
than the sales of the identical product to the unrelated customer.
    Fuji claims that, to avoid these inaccuracies, the Department 
should adopt a new arm's-length test in which individual transactions 
to related customers are determined to be at arm's length unless the 
prices to the related customer deviate from the weighted-average prices 
to unrelated customers by more than two standard deviations. Fuji 
asserts that this method not only better reflects commercial reality, 
but it eliminates abnormally high and low priced sales while still 
ensuring that only those related-customer sales prices which are 
statistically comparable to unrelated-party sales prices are included 
in the Department's margin calculations.
    Fuji further asserts that, if the Department does not adopt this 
new test, it should at least modify its existing arm's-length test such 
that it would use the same methodology, but apply it on a monthly, 
rather than a POR, basis. Fuji explains that if the Department compares 
the average monthly weighted-average price of a product sold to an 
related customer to the monthly weighted-average sales prices of the 
same product to an unrelated customer, it would capture the fact that 
Fuji's monthly average sales prices to related and unrelated customers 
are the same. In this way, Fuji concludes, the Department will avoid 
the arbitrary results produced by its current test and correctly 
include within its margin calculations those sales to related home 
market customers which were clearly at arm's length.
    Timken argues that Fuji's arguments are hypothetical in nature and 
fail to demonstrate that the Department's methodology actually produced 
distortive results. In addition, Timken asserts, given that the 
Department employed a reasonable methodology, there is no basis for the 
Department to change it's arm's-length analysis. Finally, Timken states 
that it is the Department, and not an interested party, who makes the 
determination as to what methodology should be used (NTN Bearing Corp. 
v. United States, 747 F. Supp. 726 (CIT 1990)).
    Department's Position: We agree with Timken. While Fuji argues that 
our 99.5 percent arm's-length test produces arbitrary results, it 
failed to provide a single example from its own data supporting its 
assertions. Fuji presents only theoretical examples of why the arm's-
length test is distortive and we have no basis upon which to conclude 
that our test is unreasonable. Furthermore, not only is our 99.5 
percent arm's-length test methodology well established (see, e.g., 
Certain Cut-to-Length Carbon Steel Plate from Sweden; Final Results of 
Antidumping Duty Administrative Review, 61 FR 15772 (April 9, 1996)), 
but the CIT has repeatedly sustained this methodology (see e.g., Usinor 
Sacilor v. United States, 872 F. Supp. 1000 (CIT 1994) (Usinor), Micron 
Technology, Inc. v. United States, 893 F. Supp. 21 (CIT 1995) (Micron), 
and NTN Bearing Corp. of America, Inc. v. United States, 905 F. Supp. 
1083 (CIT 1995)). Consistent with our view that a party must provide 
evidence of distortion in order for us to verify its allegations that 
our arm's-length test is distortive, in Usinor  the CIT specifically 
stated that ``[g]iven the lack of evidence showing any distortion of 
price comparability, the court finds the application of Commerce's 
arm's-length test reasonable.'' See  Unisor at 1004. Likewise, in 
Micron, because the CIT found that the plaintiff/respondent failed to 
``demonstrate that Commerce's customer-based arm's length test inquiry 
is unreasonable'' and failed to ``point to record evidence which tends 
to undermine Commerce's conclusion,'' the CIT sustained the 99.5 
percent arm's-length test based on the lack of evidence showing a 
distortion of price comparability (see Micron at 45-46).

[[Page 20593]]

Therefore, for these final results we have not altered our 99.5 percent 
arm's-length test for Fuji, and have continued to apply the test as we 
have in other cases upheld by the CIT and as we did in our preliminary 
results.
    Comment 9: Fuji contends that, because it changes its home market 
prices only at the beginning of a month, the Department's use of annual 
weighted-average home market prices fails to capture the monthly 
fluctuations in its prices. Therefore, Fuji asserts, the Department 
should calculate monthly weighted-average home market prices. Fuji 
contends that not only would this change be a minimal burden on the 
Department, but such a change would ensure greater accuracy in the 
Department's margin calculations for Fuji. Fuji further asserts that, 
if the Department chooses not to rely on monthly weighted-average home 
market prices, it should at least calculate semiannual home market 
weighted-average prices based on the two periods within the POR which 
reflect the timing of Fuji's price changes.
    Timken argues that not only did the Department conduct a detailed 
analysis which demonstrated that Fuji's home market prices were stable 
over the POR such that the calculation of annual weighted-average home 
market prices was reasonable, but there is no evidence on the record 
indicating that the use of monthly weighted-average home market prices 
for Fuji would be more accurate or reasonable than annual weighted-
average prices.
    Department's Position: We agree with Timken. Pursuant to the law in 
effect prior to January 1, 1995, although it is our normal practice to 
calculate monthly weighted-average home market FMVs, it has been our 
established practice in TRBs reviews to conduct a three-step price 
stability test in order to determine if a respondent's pricing 
practices in the home market were sufficiently stable throughout the 
POR such that we may reasonably calculate annual weighted-average home 
market FMVs. (see, e.g., Tapered Roller Bearings, Four Inches or Less 
in Outside Diameter, and Certain Components Thereof, From Japan; Final 
Results of Antidumping Duty Administrative Review, 56 FR 65228 
(December 16, 1991) (054 TRBs 88-89), and Tapered Roller Bearings, Four 
Inches or Less in Outside Diameter, and Certain Components Thereof, 
From Japan; Final Results of Antidumping Duty Administrative Review, 56 
FR 26054 (June 6, 1991) (054 TRBs 87-88)). We began this practice in an 
effort to simplify our TRBs calculations which involve extremely large 
data bases and complex, time-consuming analysis.<SUP>1</SUP> Although 
Fuji's 1993-94 databases were less voluminous than other respondents' 
databases, the amount of data Fuji submitted, as well as the overall 
complexity of the analysis we conducted for Fuji, prompted us to 
determine if annual weighted-average FMVs were appropriate for our 
calculations. Therefore, consistent with section 777A of the Act, we 
determined whether the use of annual weighted-average FMVs was 
appropriate by performing our established three-step price stability 
test. First, we compared the annual/POR weighted-average home market 
price for each home market TRB model with each of the model's 12 
monthly weighted-average prices during the POR. We then calculated the 
proportion of each model's sales for which the annual weighted-average 
price did not vary more than plus or minus 10 percent from the monthly 
weighted-average prices. Second, we compared the volume of sales of all 
models for which annual weighted-average prices did not vary more than 
plus or minus 10 percent from the monthly weighted-average prices with 
the total volume of sales of TRBs. Because the annual weighted-average 
price of at least 90 percent of Fuji's home market TRBs sales did not 
vary more than plus or minus 10 percent from the monthly weighted-
average prices, we considered Fuji's annual weighted-average prices to 
be representative of the transactions under consideration. Finally, we 
tested whether there was any correlation between price and time for 
each model by calculating a Pierson coefficient. Because the 
correlation coefficient we calculated for Fuji was less than 0.05 
(where a coefficient approaching 1.0 indicates a direct correlation 
between price and time), we concluded that there was no significant 
relationship between price and time.
---------------------------------------------------------------------------

    \1\ For example, if our three-step price stability test reveals 
that price variations have no relation to time, we eliminate from 
our multiple searches for contemporaneous home market such or 
similar merchandise. This results in a dramatic simplification of 
the highly complex TRBs sum-of-the-deviations model-match 
methodology and ensures less errors in computer programs and margin 
calculations.
---------------------------------------------------------------------------

    Because this three-step analysis demonstrated that over 90 percent 
of Fuji's annual weighted-average prices were within 10 percent of its 
monthly weighted-average prices and that there was no relationship 
between Fuji's pricing practices and time, we concluded that Fuji's 
home market pricing practices were sufficiently stable over time such 
that annual FMVs were representative of home market prices.
    Therefore, while Fuji argues that monthly weighted-average FMVs 
would be more accurate, our analysis and all the evidence on the record 
indicate that our use of annual weighted-average FMVs for Fuji produced 
accurate and reliable results.
    We also disagree with Fuji that we should, at a minimum, rely on 
FMVs based on certain semiannual weighted-averages. Since we have 
confirmed that annual weighted-average FMVs will not differ 
significantly from monthly weighted-average FMVs, we have no reason to 
suspect that annual weighted-average FMVs would differ significantly 
from weighted-average FMVs calculated on a greater-than-one-month or 
semiannual basis. Furthermore, Fuji has provided no evidence supporting 
its contention that its proposed semiannual weighted-average FMVs would 
produce results more accurate than those we achieved by using annual 
weighted-average FMVs. Therefore, we have continued to rely on annual 
weighted-average FMVs for Fuji for these final results.
    Comment 10: In its responses for both the 1992-93 and 1993-94 
reviews, Koyo reported four different categories of sales in the home 
market: (1) sales to original equipment manufacturers (OEM) for the OEM 
market, (2) sales to OEM customers for the after-market (AM), (3) sales 
to AM customers for the OEM market, and (4) sales to AM customers for 
the AM market. In order to determine whether any of these four 
categories of sales represented distinct levels of trade (LOT), we 
conducted an analysis in which we calculated and compared the weighted-
average prices for each category in order to determine if patterns of 
pricing differences existed between these categories. Based on our 
analysis we concluded that sales in category 1 clearly represented an 
OEM LOT while sales in category 4 clearly represented an AM LOT. 
However, because sales within categories 2 and 3 did not clearly 
reflect distinct LOTs, we examined whether sales in these two 
categories were more appropriately defined as within the category 1 OEM 
LOT or the category 4 AM LOT. Based on further analysis we concluded 
that sales in category 2 were most similar to those in category 1 and 
sales in category 3 were most like the sales in category 4. Therefore, 
we collapsed sales categories 1 and 2 into one OEM LOT and sales within 
categories 3 and 4 into one AM LOT.
    Koyo contends that, in all its questionnaire responses since the 
1990-92 TRBs reviews (where the Department

[[Page 20594]]

first recognized the complexity of the bearing distribution system), it 
has explained its distribution system and identified the identical four 
home market sales categories as in these 1992-93 and 1993-94 reviews. 
Koyo states that in the most recently completed final results for Koyo 
( the 1990-92 TRBs reviews), the Department determined that category 1 
was the OEM LOT, and collapsed categories 2, 3, and 4 into a single AM 
LOT. Koyo asserts that because (1) no party ever objected to the 
Department's determination and (2) Koyo has not changed its 
distribution system or its explanation of this system for these 
reviews, there is no reason for the Department to change its LOT 
identification for these 1992-93 and 1993-94 reviews.
    Koyo also argues that the Department's LOT analysis was flawed 
because the Department relied on an over-inclusive pool of sales when 
calculating the weighted-average prices it used to identify Koyo's home 
market LOTs. Koyo asserts that the Department calculated weighted-
average prices for categories 1, 2, 3, and 4 by including all models 
sold rather than eliminating from the calculation those models sold 
only in a given category but not sold to the category being compared. 
As a result, Koyo contends, the Department's analysis is distorted. 
Based on its own analysis Koyo argues that, by removing from the 
calculation of each category's weighted-average price those sales of 
models which were sold only in that category, the comparison of the 
revised weighted-average prices for each category reveals that 
categories 2 and 3 are most similar to category 4, and categories 2, 3, 
and 4 are distinctly different from category 1. Therefore, Koyo 
concludes, the Department should have collapsed categories 2, 3, and 4 
into a single AM LOT and treated category 1 as the distinct OEM LOT.
    Timken argues that the elaborate analysis Koyo presented in its 
comments is flawed because it lacks any support on the record 
explaining why sales have been put into sub-categories within the OEM 
and AM LOTs. Timken asserts that, absent an explanation as to why there 
should be distinctions within the OEM and AM LOTs, Koyo's analysis is 
nothing more than a post-hoc rationalization of its original, 
unsupported LOT designations. Timken concludes that, regardless of any 
possible flaws in the Department's analysis, given the lack of 
information on the record, the Department should continue to categorize 
categories 1 and 2 as a single OEM LOT and categories 3 and 4 as a 
single AM LOT.
    Department's Position: We agree in part with both the petitioner 
and the respondent. As explained above, in its 1992-93 and 1993-94 
responses Koyo claims two distinct LOTs in the home market, an OEM LOT 
and an AM LOT. However, Koyo reported four separate home market 
categories of sales based on the customer category (OEM or AM) and 
market in which the sale was made (OEM or AM). Because Koyo's response 
lacked both a detailed explanation of these four subgroups and an 
explanation whether these four subgroups represented distinct LOTs, we 
determined that it was necessary to conduct a detailed analysis using 
Koyo's reported home market pricing data to identify any pricing 
patterns and determine whether these categories reflected distinct 
LOTs. As also indicated above, our analysis revealed that four separate 
LOTs did not exist, and we concluded that certain categories of sales 
should be collapsed into two separate LOTs. Therefore, we agree with 
Timken that Koyo's responses lacked the information necessary to 
demonstrate four distinct LOTs. However, we disagree with Timken that 
Koyo's comments and analysis are an attempt to argue that four separate 
LOTs exist. Rather, in its comments Koyo only asserts that inherent 
flaws in the Department's LOT analysis resulted in the Department's 
improper combining of category 1 sales with category 2 sales and 
category 3 sales with category 4 sales.
    In light of Koyo's comments we have reexamined our LOT analysis for 
Koyo in both the 1992-93 and 1993-94 reviews and have determined that 
the computer analysis we used to identify Koyo's home market LOTs 
produced accurate and reliable results. For example, we began our 
analysis by calculating an overall weighted-average price for each of 
Koyo's four categories and compared these prices to one another. We 
relied on this comparison as a means to ascertain the general pricing 
trends that existed between Koyo's categories such that we would have 
some basis upon which to proceed with a more detailed model-specific 
comparison. In other words, while this macro-comparison did allow us to 
draw some general conclusions, we recognized that it was not detailed 
enough to provide conclusive results concerning each category and its 
relationship, if any, to the other three categories. Therefore, in 
order to identify Koyo's LOTs and resolve the issue of whether 
categories 2 and 3 reflected distinct and separate LOTs or were more 
like category 1 or 4 such that they should be collapsed with category 1 
or 4 in some way, we conducted a model-specific analysis in which we 
calculated and compared the model-specific weighted-average prices for 
each model sold in each category. For example, we compared the model-
specific weighted-average prices for each model sold in categories 1 
and 2, 1 and 3, 3 and 4, and 2 and 4. In doing so, we compared only the 
weighted-average prices for those models which were sold in two 
categories. For example, when we compared the pricing practices between 
categories 1 and 2, we only compared the prices for models sold to both 
categories 1 and 2. As a result, contrary to Koyo's assertion, we did 
not rely on our macro-comparison as the basis of our overall LOT 
determinations and we did not base our analysis on an over-inclusive 
pool of models. Rather, we conducted a more detailed model-specific 
analysis in which we excluded from our comparisons those models which 
were not sold in both of the categories being compared. Therefore, we 
disagree with Koyo that our analysis was inherently flawed.
    However, while we have concluded that our computer analysis was 
accurate and reliable, we have discovered that, when we interpreted the 
results of this analysis in our preliminary results, we misidentified 
Koyo's four categories. This led to us draw incorrect conclusions 
concerning the manner in which Koyo's categories were to be combined 
for LOT purposes. Therefore, for these final results we have properly 
identified Koyo's categories and have reexamined the results of our LOT 
analysis. Based on our reexamination of our model-specific comparisons 
we have concluded that our original determination that categories 1 and 
4 were distinct from each other and reflected separate OEM and AM LOTs 
was correct. Furthermore, we have concluded that there is a clear 
pattern of pricing differences between categories 1 and 2 and 
categories 1 and 3 such that we cannot consider sales in categories 2 
and 3 to be at the same LOT as category 1. In addition, our 
reexamination of our comparisons between categories 2 and 4 and 
categories 3 and 4 reveal that there is no distinct pattern of pricing 
differences between categories 2 and 4 and categories 3 and 4 such that 
we could consider sales in categories 2 and 3 as at a separate LOT than 
category 4. Therefore, we agree with Koyo that we improperly collapsed 
its home market sales categories in our preliminary results of review. 
As a result, for these

[[Page 20595]]

final results we have collapsed categories 2, 3, and 4 into one 
distinct AM LOT and treated category 1 as the OEM LOT.

2. Comments Concerning Adjustments to United States Price (USP)

    Comment 11: Timken argues that it is not clear why NTN did not 
report its U.S. credit expenses on a transaction-specific basis and, 
based on its own analysis, claims that NTN has under-reported these 
credit expenses.
    NTN argues that not only has it consistently reported its U.S. 
credit expenses on a customer-specific basis, but the Department has 
consistently accepted NTN's methodology in all past reviews. NTN states 
that Timken has provided no evidence indicating that NTN's customer-
specific methodology is unreasonable, and is only attempting to 
persuade the Department to adopt a position which would yield the 
results that Timken wants.
    Department's Position: We disagree with Timken. While we prefer to 
have credit calculated on a transaction-specific basis, when there is a 
massive number of transactions in a review, we generally will not 
require the respondent to calculate and report individual credit costs 
for each transaction. Rather, when there is a voluminous number of 
transactions involved, we permit a respondent to report credit 
calculations based on the average credit days outstanding on a 
customer-specific basis. This has been upheld by the CIT (see, e.g., 
The Torrington Company v United States, 818 F. Supp 1563 (CIT 1993)), 
and is in accordance with our established practice (see, e.g., 
Antifriction Bearings (Other than Tapered Roller Bearings) and Parts 
Thereof From the Federal Republic of Germany; Final Results of 
Antidumping Administrative Review, 56 FR 31692 (1991)).
    Given the massive number of transactions NTN has reported in this 
review, we have allowed NTN to report its U.S. credit expenses on a 
customer-specific basis. Furthermore, not only have we allowed NTN to 
report its credit expenses on a customer-specific basis in all previous 
TRBs reviews, but NTN has explained in past reviews that it derived its 
customer-specific credit ratio based on information directly from its 
accounts receivables ledgers concerning the average number of days 
payment was outstanding for each of its customers. As such, NTN's 
reported credit amounts are based on a customer's actual payment 
information as maintained in NTN's books and records (see, e.g., TRBs 
92-93 at 57637)). We have verified this method in previous reviews, 
and, because there is no evidence that NTN has changed its methodology 
for this review, we are satisfied that NTN has again reported U.S. 
credit expenses which are derived directly from actual customer payment 
information. Therefore, we have not altered our treatment of NTN's U.S. 
credit expenses for these final results.
    Comment 12: Timken argues that, because it appears on the record 
that NTN USA is some form of holding company which provides support to 
its wholly-owned subsidiaries, some portion of NTN USA's expenses 
should be allocated to sales of subject merchandise. Therefore, Timken 
contends, the Department should increase the pool of U.S. indirect 
selling expenses by a portion of NTN USA's general and administrative 
expenses.
    NTN argues that, because these G&A expenses are not provided for, 
as Timken suggests, NTN USA's expenses should not be allocated to sales 
of subject merchandise.
    Department's Position: We disagree with Timken. The record 
indicates that those expenses incurred by NTN USA on behalf of the 
various NTN U.S. subsidiaries are already included in NTN's reported 
U.S. indirect selling expenses. Therefore, there is no basis to 
recalculate NTN's reported U.S. indirect selling expenses to account 
for those expenses incurred by NTN USA.
    Comment 13: Timken asserts that, because there is no evidence on 
the record justifying the various adjustments NTN made to the pool of 
U.S. indirect selling expenses it reported to be deducted from USP, the 
Department should not allow these adjustments, and should include the 
adjustment amounts in the total amount of U.S. indirect selling 
expenses deducted from USP.
    NTN states that, because its reporting of its U.S. indirect selling 
expenses has remained consistent throughout all TRBs administrative 
reviews to date and because the Department has consistently accepted 
this reporting methodology, the Department should disregard Timken's 
contentions and again allow NTN to make the adjustments at issue to its 
reported U.S. indirect selling expenses.
    Department's Position: We agree with NTN. We have examined certain 
of these adjustment's in previous verifications of NTN without 
discrepancy (see TRBs 90-92 at 64726) and, absent evidence from Timken 
supporting its contention that these adjustments are unreasonable, we 
have no reason to reject them for these final results.
    Comment 14: Timken contends that NTN's adjustment to its U.S. 
indirect selling expenses for a certain interest expense amount should 
not be allowed because there is no explanation on the record of what 
this amount represents, what it is attributable to, or why it should be 
removed from the pool of U.S. indirect selling expenses to be deducted 
from USP.
    NTN states that both the Department and Timken are well aware that 
the interest expense in question reflects those interests expenses NTN 
incurred in regard to antidumping duty cash deposits. NTN contends 
that, just as antidumping duties are not a basis for adjustment to USP, 
the costs related to them should also not be the basis for an 
adjustment to USP.
    Department's Position: We agree with Timken that we should deny an 
adjustment to NTN's U.S. indirect selling expenses for expenses which 
NTN claims are related to financing of cash deposits.
    The statute does not contain a precise definition of what 
constitutes a selling expense. Instead, Congress gave the administering 
authority discretion in this area. It is a matter of policy whether we 
consider there to be any financing expenses associated with cash 
deposits. We recognize that we have, to a limited extent, removed such 
expenses from indirect selling expenses for such financing expenses in 
past reviews of this finding, this order, and other orders. However, we 
have reconsidered our position on this matter and have now concluded 
that this practice is inappropriate. Further, we note that the Court's 
affirmance of our prior policy does not preclude us from following this 
new, reasonable policy.
    We have long maintained, and continue to maintain, that antidumping 
duties, and cash deposits of antidumping duties, are not expenses that 
we should deduct from U.S. price. To do so would involve a circular 
logic that could result in an unending spiral of deductions for an 
amount that is intended to represent the actual offset for the dumping 
(see, e.g., 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 II)). We 
have also declined to deduct legal fees associated with participation 
in an antidumping case, reasoning that such expenses are incurred 
solely as a result of the existence of the antidumping duty order (see 
AFBs II). Underlying our logic in both these instances is an attempt to 
distinguish between business expenses

[[Page 20596]]

that arise from economic activities in the United States and business 
expenses that are direct, inevitable consequences of an antidumping 
duty order.
    Financial expenses allegedly associated with cash deposits are not 
a direct, inevitable consequence of an antidumping duty order. Money is 
fungible. If an importer acquires a loan to cover one operating cost, 
that may simply mean that it will not be necessary to borrow money to 
cover a different operating cost. Companies may choose to meet 
obligations for cash deposits in a variety of ways that rely on 
existing capital resources or that require raising new resources 
through debt or equity. For example, companies may choose to pay 
deposits by using cash on hand, obtaining loans, increasing sales 
revenues, or raising capital through the sale of equity shares. In 
fact, companies face these choices every day regarding all their 
expenses and financial obligations. There is nothing inevitable about a 
company having to finance cash deposits and there is no way for the 
Department to trace the motivation or use of such funds even if it 
were.
    In a different context, we have made similar observations. For 
example, we stated that ``debt is fungible and corporations can shift 
debt and its related expenses toward or away from subsidiaries in order 
to manage profit'' (see Ferrosilicon from Brazil, 61 FR at 59412 
(regarding whether the Department should allocate debt to specific 
divisions of a corporation)).
    So, while under the statute we may allow a limited exemption from 
deductions from U.S. price for cash deposits themselves and legal fees 
associated with participation in dumping cases, we do not see a sound 
basis for extending this exemption to financing expenses allegedly 
associated with financing cash deposits. By the same token, for the 
reasons stated above, we would not allow an offset for financing the 
payment of legal fees associated with participation in a dumping case.
    We see no merit to the argument that, since we do not deduct cash 
deposits from U.S. price, we should also not deduct financing expenses 
that are arbitrarily associated with cash deposits. To draw an analogy 
as to why this logic is flawed, we also do not deduct corporate taxes 
from U.S. price; however, we would not consider a reduction in selling 
expenses to reflect financing alleged to be associated with payment of 
such taxes.
    Finally, we also determine that we should not use an imputed amount 
that would theoretically be associated with financing of cash deposits. 
There is no real opportunity cost associated with cash deposits when 
the paying of such deposits is a precondition for doing business in the 
United States. Like taxes, rent, and salaries, cash deposits are simply 
a financial obligation of doing business. Companies cannot choose not 
to pay cash deposits if they want to import nor can they dictate the 
terms, conditions, or timing of such payments. By contrast, we impute 
credit and inventory carrying costs when companies do not show an 
actual expense in their records because companies have it within their 
discretion to provide different payment terms to different customers 
and to hold different inventory balances for different markets. We 
impute costs in these circumstances as a means of comparing different 
conditions of sale in different markets. Thus, our policy on imputed 
expenses is consistent; under this policy, the imputation of financing 
costs to actual expenses is inappropriate.
    Comment 15: In its response NTN reported that it paid commissions 
to NBCA for certain purchase price sales. In addition, NTN indicated 
that NBCA incurred other expenses associated with the services it 
provided with regard to these purchase price sales. In our preliminary 
results we determined that it was necessary to determine the arm's-
length nature of these related-party commissions by comparing the 
related-party commission rate to those commission rates NTN reported it 
paid to unrelated U.S. commissionaires. However, because the record did 
not explicitly indicate the related-party commission rate, we attempted 
to calculate this commission rate based on data NTN provided in exhibit 
B-8 of its response. In exhibit B-8 NTN demonstrates its calculation of 
NBCA's total U.S. indirect selling expenses for all merchandise (both 
scope and non-scope), as well as its allocation of these total expense 
amounts to scope and non-scope merchandise. In addition, it is 
important to note that the purpose of this exhibit was for NTN to 
calculate the indirect selling expense NBCA incurred for its reported 
U.S. exporter's sales price (ESP) sales. Because the expenses NBCA 
incurred in relation to those services it provided for certain purchase 
price sales were not expenses NBCA incurred in association with its ESP 
sales, NTN removed these expenses from its reported total NBCA expenses 
in exhibit B-8 by making a downward adjustment to specific total 
expense accounts. These downward adjustments were clearly identified in 
exhibit B-8 as related to those expenses incurred by NBCA for certain 
purchase price sales. Based on these reported downward adjustments we 
calculated a total commission amount and divided this by the total 
sales value of NTN's TRB purchase price sales, which we derived 
directly from NTN's U.S. computer sales file. We considered the 
resulting ratio the related-party commission rate and, upon comparing 
it to the commission rates NTN reported it had paid to unrelated U.S. 
parties, we determined the related-party commission not to be at arm's 
length. Therefore, we treated it as an indirect selling expense and 
adjusted for it accordingly in margin calculations for purchase price 
sales.
    NTN argues that, while it agrees with the Department's disregarding 
the related-party commission, the Department's additional arm's-length 
analysis was unnecessary because, in accordance with the Department's 
practice, related-party commissions are treated as intra-company 
transfers of funds and, as such, are not proper adjustments to price. 
NTN further claims that, while the Department should not have conducted 
an arm's-length analysis, it is nevertheless important for the 
Department to recognize that it made two errors when calculating the 
related-party commission rate. First, NTN asserts, the Department 
relied on a numerator which reflected all expenses incurred by NBCA for 
the services it provided for certain purchase price sales, rather than 
on a numerator which reflected only the related-party commission NBCA 
was paid. Second, NTN argues, even if the Department had used the 
correct numerator, the calculation would still be incorrect because the 
Department used a denominator which reflected only scope merchandise. 
NTN asserts that exhibit B-8 clearly indicates that the downward 
adjustments for purchase price sales reflected all merchandise, not 
only TRBs. As a result, because the numerator for the calculation would 
reflect both scope and non-scope merchandise, the Department should 
have used a denominator which reflected NTN's purchase price sales of 
all merchandise, rather than only the purchase price sales of TRBs. In 
order to further demonstrate its point, NTN reported its actual 
related-party commission rate and referred to the difference between 
this rate and the one calculated by the Department.
    Timken argues that NTN seeks to alter the Department's judgment 
regarding these related-party commissions by supplementing the record 
with new factual information. Timken asserts that NTN has reported for 
the first time its actual related-party commission rate

[[Page 20597]]

and has indicated for the first time that the downward adjustments it 
made in exhibit B-8 for those expenses NBCA incurred for services it 
provided for certain purchase price sales reflect both scope and non-
scope merchandise. Therefore, Timken asserts, the Department should 
reject this untimely information and disregard NTN's arguments.
    Department's Position: Based on Timken's assertion that NTN's brief 
contained new information, we reviewed the information and 
preliminarily concluded that it most likely constituted new factual 
information. Therefore, at the August 21, 1996 hearing, we explained 
our position to the parties and requested that NTN and Timken refrain 
from discussing the information in question. Based on the objections 
raised by NTN at the hearing and the fact that we had yet to make a 
final decision regarding the nature of the information in question 
(i.e., we had not yet officially rejected or returned the information 
to NTN), we reopened the record on the issue and provided both NTN and 
Timken additional time to comment on the issue of whether the 
information in question constituted new information which should be 
rejected and not considered by the Department. The additional comments 
submitted by NTN and Timken, our final determination concerning the 
issue of new information, and our position on the related-party 
commission issue are discussed in Comment 16 below.
    Comment 16: NTN argues that the Department's decision to disallow 
discussion of the related-party commission issue at the hearing was not 
only unwarranted, but, because it prevented NTN from sufficiently 
making its case, it served to render the administrative review process 
useless. NTN also asserts that, because the Department failed to 
communicate coherently which information in NTN's case brief it had 
rejected, NTN was only able to surmise which information was in 
question. NTN further asserts that, regardless of what the specific 
information is, it is its contention that none of the information 
contained in its pre-hearing case brief can be considered new factual 
information. For example, NTN claims, even a brief review of exhibit B-
8 reveals that the numerator used by the Department in its calculation 
reflected all expenses incurred by NBCA for services it provided for 
certain purchase price sales, rather than only the commission amount. 
NTN contends that this is demonstrated by the fact that the 
Department's numerator corresponds to the sum of all the expenses 
(i.e., the total amount of downward adjustments for these purchase 
price-related NBCA expenses) as identified on worksheet 4 of exhibit B-
8. As a result, NTN concludes, there is no way the numerator used by 
the Department could be considered as reflective of only a commission 
amount.
    NTN further argues that the Department has verified that the 
downward adjustments made in exhibit B-8 reflect expenses incurred for 
all merchandise, both scope and non-scope. Therefore, NTN claims, 
because the adjustments clearly reflect all merchandise, rather than 
only TRBs, it is patently absurd for the Department to now claim that 
it did not realize this.
    As for the related-party commission rate NTN reported in its case 
brief, NTN contends that it was never instructed by the Department to 
report this rate in this review or any other previous TRBs review. In 
fact, NTN claims, it only submitted this rate in its brief in an effort 
to point out the inaccuracy of the Department's calculation. NTN 
asserts that, to refuse to accept this corrected figure, which the 
Department was attempting to calculate itself, is arbitrary and 
capricious.
    In addition, NTN argues, one of the primary purposes of the pre-
hearing briefing process is to allow respondents to address 
methodologies and correct clerical errors. NTN asserts that not only 
was the information in question clearly not new information, but it is 
apparent that NTN submitted the information in order to correct the 
Department's clerical errors. Citing NTN Bearing Corp. v. United 
States, Slip Op. 94-1186 (Fed. Cir. 1995) and Koyo Seiko v. United 
States, 14 CIT 680 (CIT 1990), NTN asserts that, because the Department 
has an obligation to correct errors which are timely identified by a 
respondent and because fair and accurate determinations are fundamental 
to the proper administration of the antidumping laws, the Department 
cannot simply reject the information in question. Rather, NTN urges the 
Department to either reconvene the hearing to allow comments on the 
related-party commission issue or allow NTN to submit the comments it 
was prevented from making at the August 28, 1996 hearing.
    Timken argues that the Department could draw only one conclusion 
from the information NTN provided in exhibit B-8 concerning the 
expenses NBCA incurred when providing services for certain purchase 
price sales. Therefore, Timken asserts, because the additional 
information NTN provided in its case brief provides a different 
interpretation of exhibit B-8, the Department should reject the new 
information and not change how it treated NTN's related-party 
commissions.
    Department's Position: We both agree and disagree in part with NTN. 
First, it is important to clarify that, while we indicated to NTN and 
Timken at the hearing that we considered certain information in NTN's 
case brief to constitute new factual information, we did not consider 
this to be our final decision on the issue. For example, we did not, in 
accordance with 19 CFR 353.31(3), officially reject and return the 
information in question to NTN at any time prior to the hearing. 
Rather, we decided that the hearing was the appropriate forum for 
explaining our initial determination and to determine whether the issue 
required additional examination and/or comment. Due to the controversy 
surrounding the issue at the hearing, we decided that, in order to make 
a reasonable and equitable decision, we would allow additional comment 
and discussion. Therefore, we reopened the record on this issue and 
provided both NTN and Timken time to submit additional argument and 
rebuttal concerning the nature of the information in question. Given 
that we never officially rejected and returned the information in 
question and that we reopened the record to allow further examination, 
we disagree with NTN that we arbitrarily made a final decision on this 
issue without providing NTN proper notice.
    We also disagree with NTN that our decision to disallow discussion 
of the new information at the hearing undermined the administrative 
review process and prevented NTN from adequately presenting its 
position. While we acknowledge that we did not allow NTN and Timken to 
specifically discuss this new information at the hearing, this only 
prevented NTN from discussing the more detailed points of its position. 
It did not, in any manner, prevent NTN from voicing its assertion that 
the calculation was inaccurate, from objecting to the Department's 
treatment of the related-party commission, or from asserting that the 
additional analysis we performed concerning the commission was 
unwarranted. Furthermore, while NTN may not have been able to address 
the detailed points of its position at the hearing, it nevertheless 
fully briefed these specific points in its pre-hearing briefs. Given 
that parties to a hearing, in accordance with 19 CFR 353.38, may only 
discuss at the hearing that which has already been presented in their

[[Page 20598]]

written briefs, both the Department and Timken were fully aware of 
NTN's specific arguments upon receipt of its brief and no party would 
have been permitted to provide any additional, new arguments at the 
hearing. In addition, since most of the information at issue was 
identified as proprietary by NTN, no party (NTN, Timken or the 
Department) would have been able to discuss the information at the 
hearing regardless of our decision to disallow its discussion. 
Furthermore, by reopening the record, we clearly provided NTN with the 
opportunity to make any additional arguments to support its position. 
Thus, we do not agree that NTN had no opportunity to present its case.
    We also disagree with NTN that we never clarified which information 
in its case brief we considered to be new information. Because Timken's 
case brief clearly identified that information which it alleged to be 
new information, NTN was on notice of the fact that the issue of 
whether the information in question is new might be addressed in the 
course of the hearing. In addition, immediately following the hearing 
Department officials discussed with NTN the new information issue to 
ensure that NTN understood the parameters of the additional comments we 
requested at the hearing. Thus, at this time NTN had every opportunity 
to request clarification where necessary. Furthermore, our reopening of 
the record regarding this issue provided NTN with an additional 
opportunity and additional time to request clarification or 
explanation.
    Therefore, we disagree with NTN's assertions that we mistreated NTN 
and failed to extend NTN the opportunity to fully state its position 
and/or to participate in the administrative review proceeding. However, 
we do agree with NTN that the additional analysis we conducted in our 
preliminary results, in which we found it necessary to calculate a 
related-party commission rate, was unnecessary. We also agree with NTN 
that certain information we initially deemed as new factual information 
was not actually new information.
    It has been the Department's practice to treat NTN's related-party 
``commissions'' for certain purchase price sales as intra-company 
transfer of funds which are not an allowable adjustment to price (see, 
e.g., AFBs 93-94 at 66489). Thus, it has been our practice not to 
include these ``commissions'', the transfer payment between NTN and 
NBCA, in our analysis. Rather, we have consistently taken into account 
the actual expenses which NBCA incurred with respect to these purchase 
price sales and, based on our determination that these expenses are 
those that we typically consider to be indirect expenses incurred by 
sales organizations, we have treated these expenses as indirect selling 
expenses and made the appropriate adjustment for these expenses in our 
purchase price margin calculations for commission offset purposes (see 
id.).
    In light of our past treatment of NTN's related-party commission, 
and the fact that the record in this review contains no evidence which 
would support a change in this treatment, we have determined for these 
final results that it was unnecessary for us to calculate NTN's 
related-party commission rate. Rather, we have determined that, in 
accordance with our previous policy regarding NTN's related-party 
commission, the appropriate adjustment is not to consider NTN's intra-
company transfers as commissions or direct selling expenses, but rather 
to consider as indirect selling expenses those expenses which NBCA 
incurred for those services it provided for certain purchase price 
sales. Because NTN's claimed U.S. related-party ``commissions'' are not 
a proper basis for a COS adjustment, the actual calculation of NTN's 
related-party commission rate is irrelevant to our treatment of the 
related-party commission and those expenses NBCA incurred for those 
services it provided for certain purchase price sales. Given the fact 
that all the information Timken alleged to be new in NTN's brief 
addressed the inaccuracies in our attempt to calculate NTN's related-
party commission rate, the new information issue is moot with regard to 
our commission rate calculation.
    However, because Timken did allege that NTN's brief contained new 
information concerning the nature of the expenses NBCA incurred in 
relation to certain purchase price sales, and because it is these 
expense amounts that we consider in our margin calculations, we have 
determined that the new information issue is relevant with regard to 
our adjustment for these expenses. Therefore, for these final results 
we have examined the record in order to determine whether the fact that 
both scope and non-scope merchandise are reflected in NTN's exhibit B-8 
downward adjustments for these purchase price-related expenses is new 
information and whether there are any inaccuracies in NTN's exhibit B-8 
which would cast doubt on the reliability of these reported purchase 
price-related expense amounts.
    As indicated earlier, NTN reported and allocated indirect selling 
expenses incurred by NBCA for ESP sales. Because NBCA does not maintain 
separate records for the merchandise it sells, the initial, unadjusted 
expenses NTN reported in this exhibit reflect both scope and non-scope 
merchandise sold by NBCA. Prior to allocating these expenses to scope 
and non-scope merchandise NTN made a series of downward adjustments to 
the total expense amounts, including the downward adjustments for those 
expenses NBCA incurred with regard to purchase price sales. Based on 
our examination of exhibit B-8 for these final results, it is clear 
from the exhibit that the total unadjusted expenses reported by NTN 
reflect both scope and non-scope merchandise and that all downward 
adjustments NTN made to these total U.S. indirect selling expenses 
reflect both scope and non-scope merchandise. Therefore, we agree with 
NTN that the purchase price-related adjustments NTN claimed in exhibit 
B-8 clearly reflect both scope and non-scope merchandise, and that this 
fact is not new information. Furthermore, we have determined that NTN's 
removal of these expenses was warranted, given that the purpose of 
exhibit B-8 was to calculate ESP-related indirect selling expenses. We 
also find NTN's methodology for calculating and allocating these ESP-
related indirect selling expenses to scope and non-scope merchandise 
was reasonable and non-distortive. NTN adjusted total expense amounts 
which reflected all merchandise by adjustments which also reflected all 
merchandise. Because it was only after the adjustments were made that 
NTN allocated the total expenses to scope merchandise, the fact that 
the adjustments reflected both scope and non-scope merchandise did not 
distort the allocation of these expenses to scope merchandise.
    Therefore, based on the fact that the information NTN provided 
concerning NBCA's purchase price-related expenses was not new 
information, and the fact that there is no reason to doubt the nature 
of these expenses as reported by NTN, for these final results we have 
considered these expenses as indirect selling expenses in our purchase 
price margin calculations (for commission offset purposes), rather than 
making a COS adjustment for NTN's related-party ``commissions''.
    Comment 17: Timken argues that the Department should recalculate 
Koyo's reported U.S. selling, general and administrative expenses 
(SG&A) to include those expenses incurred by American Koyo 
Manufacturing

[[Page 20599]]

Corporation (AKBMC), Koyo's U.S. manufacturing affiliate.
    Koyo contends that AKBMC's G&A expenses are already included as an 
element of its reported further-processing expenses. Thus, Koyo argues, 
to include these G&A expenses in the pool of U.S. indirect selling 
expenses would obviously result in an impermissible double counting of 
AKBMC's G&A expenses.
    Department's Position: We agree with Koyo. In our verification of 
Koyo's 1992-93 U.S. sales and further-manufacturing information we not 
only verified the accuracy of Koyo's reported U.S. SG&A expenses (see 
the Department's U.S. further-manufacturing verification report for 
Koyo dated September 8, 1995). Therefore, if we were to include AKBMC's 
G&A expenses in Koyo's U.S. indirect selling expenses, we would, in 
essence, be deducting these expenses from U.S. price twice. Therefore, 
we have not changed our treatment of AKBMC's G&A expenses for these 
final results.
    Comment 18: Timken contends that Koyo's reported Japanese pre-sale 
freight expenses are misallocated because Koyo used an improper 
denominator in its allocation methodology. Timken argues that, because 
Koyo incurs these expenses for both domestic and export sales, but does 
not record the expenses separately for export and domestic sales, the 
expenses should be allocated equally to bearings sold domestically and 
abroad. However, Timken asserts, Koyo's allocation methodology instead 
results in greater pro rata amounts being allocated to domestic sales 
in comparison to export sales. Timken contends that this is due to the 
fact that Koyo's allocation denominator is the sum of a home market 
total sales value which reflects the total sales value to unrelated 
parties and a U.S. sales value which reflects the total transfer prices 
between related parties. Timken argues that, because these two total 
sales values represent different stages in the stream of commerce, the 
expenses are over-allocated to home market sales and under-allocated to 
U.S. sales. Timken suggests that one method to ensure an even 
allocation of the expenses would be to allocate them on the basis of 
the ratios of the home market and export sales to the total costs of 
sales. Timken concludes that, even if the Department does not choose 
this method, it still has an obligation to correct the allocation of 
these expenses such that they are evenly allocated to Koyo's domestic 
and export sales.
    Koyo first argues that not only is its Japanese pre-sale freight 
allocation methodology well-established, but it has been repeatedly 
verified and accepted by the Department in numerous reviews of both the 
TRBs and AFBs cases. Next, Koyo argues that it allocated these expenses 
in the manner in which they were incurred. Koyo states that because the 
expenses, by definition, cannot be distinguished between the two 
markets, it calculated a single allocation ratio by dividing the total 
expense amount, which was incurred entirely by Koyo Japan, by Koyo 
Japan's total sales value for both the export and domestic markets, as 
taken directly from Koyo's financial reports. Third, Koyo asserts that 
Timken is incorrect in assuming that the denominator includes U.S. and 
home market total sales values at different stages. Koyo points out 
that the total home market sales value does not reflect only the total 
sales value to unrelated parties but also accounts for the total sales 
values to several related home market customers as well. Likewise, Koyo 
states, the entire export sales value is based not only on sales to its 
related affiliate in the United States, but includes all export sales, 
including sales to unrelated parties in third-country markets. As a 
result, Koyo concludes, the home market, U.S., and third-country sales 
values which constitute the denominator reflect a mix of sales to 
related and unrelated parties such that Koyo's allocation results in a 
fair ``apples-to-apples'' comparison.
    Department's Position: We agree with Koyo. In general, when a 
respondent relies on an allocation to calculate its per-unit adjustment 
amounts, we require that allocation to reflect the manner in which the 
expenses were actually incurred (see, e.g., TRBs 92-93 at 57635 and 
Certain Fresh Cut Flowers From Columbia; Final Results of Antidumping 
Duty Administrative Reviews, 61 FR 42848 (August 19, 1996)). In 
addition, we examine the respondent's allocation methodology to 
determine if there is internal consistency between the numerator and 
denominator and in the methodology as a whole. For example, if an 
expense is allocated on the basis of total sales value, as are the 
expenses at issue here, the expense amount (the numerator) and the 
total sales value (the denominator) should reflect the same pool of 
sales such that the total expense amount reported by the respondent is 
divided into the total value of the sales for which the expense was 
actually incurred. Likewise, the allocation ratio should be applied to 
the same sales price reflected in the denominator. For example, we 
would not accept the application of an allocation ratio to gross sales 
price if the denominator was calculated by totaling the value of all 
sales on the basis of a net price.
    In the instant case, Koyo Seiko, the Japanese parent, incurred the 
pre-sale freight expenses at issue for all merchandise, whether 
destined for sale to the U.S., third-country, or home market. Because 
Koyo does not maintain its records such that it is able to calculate 
the total expense amount incurred for each market, it was unable to 
separately calculate the specific pre-sale freight expenses 
attributable to each market. Therefore, Koyo used as its allocation 
numerator the total expense amount incurred by Koyo Seiko for all 
merchandise, as derived from Koyo Seiko's sales records. The sales for 
which these expenses were incurred were Koyo Seiko's sales to all its 
various customers, which encompassed a mix of related and unrelated 
entities in both the export and home markets. Thus, Koyo calculated its 
pre-sale freight allocation denominator by totaling the value for all 
of Koyo Seiko's sales to all its customers, as derived from Koyo 
Seiko's records.
    Because Koyo Seiko's customers encompassed a mix of related and 
unrelated parties in both the home and export markets, Koyo's 
denominator includes sales values which reflect both transfer and 
resale prices. Because Koyo Seiko's customer in the United States is 
KCU, its wholly-owned U.S. affiliate, the U.S. sales transactions 
relevant to Koyo's allocation are those between Koyo Seiko and KCU. 
Thus, Koyo correctly included within its denominator the total value of 
its sales to KCU, which were made at transfer prices. Similarly, in the 
home and third-country markets Koyo Seiko sold to both related and 
unrelated customers. Therefore, Koyo properly included within its 
allocation denominator the total value of Koyo Seiko's sales to its 
home and third-country market customers, some of which were at resale 
prices, while others were at transfer prices. Koyo's methodology, 
therefore, not only relies on a numerator and denominator which reflect 
the same pool of sales, but its denominator is calculated on the basis 
of the value of those sales for which the reported total expense amount 
was actually incurred.
    When calculating the per-unit expense adjustment amount for each 
U.S. and home market transaction, Koyo applied its allocation ratio 
(which was the same for all sales) to the appropriate unit price. For 
U.S. sales it applied the ratio to the transfer prices Koyo reported 
between Koyo Seiko and KCU, which

[[Page 20600]]

were the U.S. prices upon which the expense was incurred and the U.S. 
sales values reflected in Koyo's allocation denominator. For home 
market sales, Koyo applied the ratio to either a resale price (for 
unrelated customers) or transfer price (for related customers) because 
these were the home market prices upon which the expense was incurred 
and the home market sales values reflected in the allocation 
denominator.
    Therefore, because Koyo's allocation properly reflects the manner 
in which, and the sales upon which, Koyo actually incurred this 
expense, we do not agree with the petitioner that Koyo's allocation is 
unreasonable and have made no changes to this methodology for these 
final results.
    Comment 19: In its response Koyo reported inventory carrying costs 
(ICC) it incurred in the United States as well as the ICC it incurred 
in Japan for both further-manufactured and non-further-manufactured 
TRBs it sold in the United States. In those instances where the average 
number of days a TRB spent in inventory in the United States was 
shorter than the number of days in which KCU, Koyo's U.S. sales 
subsidiary, was required to pay Koyo, we set the U.S. ICCs equal to 
zero, added the number of days of KCU's payment terms to the number of 
days Koyo reported for inventory in Japan, and calculated a revised ICC 
for U.S. sales using this revised number of days in inventory and the 
home market borrowing rate. This is in accordance with our practice to 
use the interest rate applicable to the foreign parent's borrowings in 
calculating U.S. ICCs when there is evidence on the record that the 
foreign parent assumed the financial burden of this imputed expense 
through delayed payment by the U.S. subsidiary (see, e.g., Federal-
Mogul Final Remand Results at Comment 1 and The Timken Company v. 
United States, 865 F. Supp. 881 (CIT 1994)). We then applied our 
recalculated factor for Japanese ICC to the transfer price between Koyo 
and KCU and our recalculated U.S. ICC factor to the landed cost of the 
TRB to derive per-unit ICCs for Koyo's U.S. sales.
    Timken argues that, because there are inventory carrying costs 
associated with that portion of merchandise which has been further 
manufactured, any calculation of the inventory carrying costs for 
further-manufactured merchandise should not rely on the transfer price 
between Koyo and KCU, because it fails to deduct from USP those 
inventory carrying costs attributable to further-manufacturing. In 
addition, Timken contends that, with respect to the Department's 
recalculation methodology, it incorrectly used the home market 
borrowing rate, rather than Koyo's U.S. borrowing rate.
    Koyo argues that the Department should not adjust USP for the 
imputed carrying costs associated with its further-manufacturing costs 
because, during the period that forgings are held at AKBMC's Orangeburg 
facility, they are considered raw materials used in the production of 
TRBs. Because the Department bases inventory carrying costs on the 
value of finished goods only, Timken's argument should be dismissed. In 
addition, Koyo adds that the imputed costs of AKBMC's raw material 
inventory are already included in its further-manufacturing costs 
through the inclusion of financing costs. As a result, Koyo argues that 
to make an additional adjustment, as Timken suggests, would constitute 
the double-counting of these inventory carrying costs.
    However, Koyo states that if Timken is only suggesting that the 
Department apply the inventory carrying cost factor for U.S. sales to 
the cost of manufacturing TRBs, rather than the transfer price, Koyo 
agrees. Koyo asserts that the Department should apply its recalculated 
inventory carrying cost factor to the total cost of manufacturing for 
both finished and further-manufactured TRBs sold in the United States 
because it would allow the Department to apply the same general formula 
to both the U.S. sales of finished TRBs and U.S. further-manufactured 
TRBs.
    Finally, Koyo argues that the Department properly used the home 
market borrowing rate in its recalculation because, for those 
situations in which the number of days in inventory in the United 
States is less that the terms of payment between Koyo and KCU, the 
applicable rate is the home market rate. However, Koyo adds, while it 
agrees with the Department's recalculation methodology, the Department 
erroneously applied the home market rate to the full period covered by 
the terms of payment between Koyo and KCU, rather than only to the 
actual number of days that the merchandise spent in inventory in the 
United States.
    Department's Position: We disagree with Timken and agree in part 
with Koyo. As indicated above, we applied our recalculation methodology 
to both Koyo's further-manufactured and non-further-manufactured U.S. 
sales. However, for these final results we have determined that it is 
inappropriate to recalculate the ICCs Koyo reported for its further-
manufactured sales because Koyo's methodology accurately reflects the 
ICCs it incurred for these sales.
    In our preliminary results we determined that it was necessary to 
recalculate Koyo's reported ICCs for U.S. sales in order to account for 
those instances where the foreign parent assumed the financial burden 
of the imputed expenses through the delayed payment by the U.S. 
subsidiary. As the record indicates, with respect to Koyo's non-
further-manufactured U.S. sales, where KCU purchases finished TRBs from 
Koyo and resells the finished bearings to unrelated U.S. customers, 
there were instances where the total time in inventory (in both the 
United States and Japan) of the finished TRBs was shorter than the 
number of days in which KCU was required to pay Koyo. Accordingly, 
because Koyo incurred the financial burden of the imputed expense in 
these instances, we recalculated Koyo's reported ICCs for its U.S. 
sales in accordance with our practice in such instances to use the 
interest rate applicable to the foreign parent's borrowings. We 
therefore disagree with Timken that we should not have applied the home 
market interest rate in our recalculation.
    As was the case with its non-further-manufactured U.S. sales, Koyo 
reported ICCs for both the time in inventory in Japan and in the United 
States for the further-manufactured sales. However, the Japanese ICC 
Koyo reported for its further-manufactured U.S. sales reflected the 
time in inventory in Japan for forgings, while the reported U.S. ICC 
reflected the time in inventory in the United States for the finished 
TRBs. This is consistent with the fact that (1) Koyo treated forgings 
as finished merchandise in Japan, (2) once the forgings were purchased 
by AKBMC, Koyo's U.S. manufacturing subsidiary, the forgings became 
part of AKBMC's raw material inventory, and (3) it wasn't until the 
forgings were further processed into finished TRBs that ICCs were 
incurred in the United States for finished goods. Because the forgings 
became raw material inventory upon purchase by AKBMC, the ICCs for the 
forgings at this point were not U.S. selling expenses, but rather 
reflected and were captured in AKBMC's production costs. Because it is 
our policy to make an ICC adjustment to USP for only finished goods in 
inventory because unfinished goods represent production expenses rather 
than U.S. selling expenses (see, e.g., Dynamic Random Access Memory 
Semiconductors of One Megabit or Above From the Republic of Korea;

[[Page 20601]]

Final Results of Antidumping Duty Administrative Review, 61 FR 20216 
(May 6, 1996)), it would be inappropriate to apply our recalculation 
methodology to Koyo's further-manufactured sales because this 
methodology would not only treat the ICCs incurred during the time the 
forgings are unfinished goods as U.S. selling expenses, but it would 
result in the double-counting of these expense as well. Therefore, we 
have not applied our recalculation methodology to Koyo's further-
manufactured sales for these final results and have relied on Koyo's 
originally reported ICC expense calculations.
    With respect to Timken's argument that any calculation of Koyo's 
ICC for further-manufactured sales should not rely on the transfer 
price between Koyo and KCU because it excludes the ICCs incurred during 
the time of further-manufacture, we disagree. As noted above, we only 
calculate ICCs for finished goods. Because the forgings are clearly not 
finished merchandise during the further-manufacturing process, these 
expenses were properly captured in AKBMC's production costs. In 
addition, we note that as a general rule we prefer ICCs to be 
calculated using cost-based information because it represents the 
imputed cost to the firm for storing merchandise in inventory. However, 
as explained in our Federal-Mogul Final Remand Results, transfer prices 
represent the actual cost to a U.S. subsidiary of acquiring the subject 
merchandise and, as such, reflect the actual cost of the merchandise as 
it entered the subsidiary's inventory (see Federal-Mogul Final Remand 
Results at Comment 1). Because the reporting and subsequent 
verification of the U.S. ICCs typically requires that the U.S. 
subsidiary establish the average cost of merchandise held in inventory 
as well as the total cost of merchandise sold during the time period at 
issue (generally one year), subsidiaries often base such costs on 
transfer prices, which are maintained in the normal course of business, 
and provide an accurate basis upon which to calculate the cost to the 
subsidiary of holding inventory prior to the sale to an unrelated 
customer. Based on these reasons, as well as the fact that there is no 
evidence on the record to impugn the reliability of Koyo's reported 
transfer prices, we have determined that the use of the transfer price 
as the basis for Koyo's calculation of the ICC expenses incurred in 
Japan for its U.S. further-manufactured sales and as the basis for our 
calculation of the ICC expense incurred by Koyo for non-further-
manufactured U.S. sales is appropriate and accurate.
    Finally, we agree with Koyo that, when recalculating Koyo's ICCs 
for its U.S. non-further-manufactured sales where the time in inventory 
in the United States was less than the terms of payment between Koyo 
Seiko and KCU, we incorrectly included within our calculation of the 
revised number of days in inventory the full number of days of KCU's 
payment terms to Koyo Seiko, despite the fact that the actual number of 
days the merchandise spent in inventory in the United States was less 
than the payment terms. As a result, we agree that our recalculation 
overstates Koyo's ICCs for these U.S. TRBs sales. Therefore, for these 
final results we have corrected this error by calculating the number of 
days in inventory for Koyo's non-further-manufactured U.S. merchandise 
by adding to the number of days the U.S. merchandise spent in inventory 
in the home market the actual number of days in inventory in the United 
States, rather than the number of days reflected by the full payment 
terms between KCU and Koyo Seiko.
    Comment 20: Timken argues that, because TRBs manufactured by 
American NTN Bearing Corporation (ANBC), NTN's U.S. manufacturing 
subsidiary, are maintained in ANBC's inventory until sold to NBCA, the 
time in inventory at ANBC should be added to NBCA's time in inventory 
in NTN's U.S. inventory carrying cost calculation for further-
manufactured merchandise.
    NTN contends that Timken's argument is misplaced because NBCA 
incurs all inventory expenses relative to further-manufactured 
merchandise from the point ANBC completes the manufacture of the 
finished merchandise.
    Department's Position: We agree with NTN. Because NBCA incurs all 
the inventory expenses relative to further-manufactured merchandise 
from the point that ANBC completes the production of the finished 
merchandise, the ICCs Timken refers to are already included in NBCA's 
reported ICCs for U.S. sales. Therefore, we have made no changes to 
NTN's reported ICCs for these final results.
    Comment 21: Timken argues that the Department improperly treated 
NSK's reported U.S. technical service expenses as indirect selling 
expenses. Timken contends that not only did NSK report technical 
service expenses which the Department considers to be directly related 
to sales, but NSK failed to segregate its technical service expenses 
into direct and indirect portions. Timken asserts that, because it is 
the Department's practice to treat all of a respondent's U.S. technical 
service expenses as direct selling expenses when a respondent fails to 
segregate the expenses into direct and indirect portions, the 
Department should make an adverse inference and treat all of NSK's 
reported U.S. technical service expenses as direct selling expenses.
    NSK argues that the record demonstrates that its reported U.S. 
technical service expenses reflect indirect expenses such as salaries 
and fringe benefits, and that any expenses which could be potentially 
identified as direct selling expenses would have a de minimis impact on 
the expense calculation. Furthermore, NSK asserts, the Department has 
verified and accepted its reported technical service expenses in past 
reviews of both the TRBs and AFBs cases (TRBs 90-92 at 64726) and 
should do so again in these instant reviews.
    Department's Position: We agree with Timken. Our questionnaire 
specifically requests respondents to separate the fixed and variable 
portions of technical service expenses because we treat fixed technical 
servicing costs as indirect expenses and variable technical servicing 
costs as direct expenses. Our review of NSK's response indicates that, 
although NSK incurred both fixed and variable technical service 
expenses, it did not separate these expenses into direct and indirect 
portions. While we recognize that, in order to achieve this segregation 
it would be necessary for NSK to trace certain expenses, such as travel 
and travel-related expenses, to individual customer calls, the 
difficulty that may be associated with such an exercise does not 
relieve NSK of its responsibility to provide the Department with actual 
expense information. Therefore, for these final results we have applied 
BIA and treated all of NSK's U.S. technical service expenses as direct 
selling expenses (see, e.g., AFBs 93-94 at 66486).
    Comment 22: Timken contends that Koyo has identified an imported 
component for a certain TRB, that was further manufactured and sold in 
the United States during the 1992-93 POR, as an AFB part rather than as 
a TRB part. Timken contends that the Department must ensure that Koyo 
is properly identifying its imported TRBs components as TRB parts and 
is paying the appropriate antidumping duty cash deposit rates on these 
components. Furthermore, Timken asserts, given Koyo's failure to 
identify this TRB part as a TRB part in its response, the Department 
should apply a first-tier BIA rate to all of Koyo's reported U.S. sales

[[Page 20602]]

of the model which contains this misidentified component.
    Koyo argues that, when calculating its reported further-processing 
expenses for a particular TRB model, it did improperly identify that 
component as non-scope merchandise. However, Koyo contends, Timken's 
contention that the Department should resort to first-tier BIA to 
calculate the margin for all sales of the model which contained this 
component is extreme and unwarranted. Koyo claims that the only impact 
of its error was to slightly inflate its reported material costs. Koyo 
contends that the Department, therefore, should simply neutralize the 
impact of the error by making the appropriate offsetting adjustment to 
the material costs Koyo reported for the TRB model which contains this 
component prior to deducting the model's further-processing costs from 
USP.
    Department's Position: We agree with Koyo. Not only is this the 
first time Koyo has submitted its further-processing costs for TRBs 
further manufactured from forgings and sold in the United States, but 
there is no evidence on the record to suggest that Koyo intentionally 
identified the component in question as an AFBs part or that Koyo is 
paying AFBs antidumping duty cash deposit rates on entries of 
merchandise subject to the TRBs antidumping duty order or finding. 
Rather, the record indicates that Koyo made an error when compiling its 
further-processing costs for the purpose of responding to our 
questionnaire. Because information on the record allows us to correct 
this error, and because the correction of the error does not entail a 
substantial revision to Koyo's response, we have made the appropriate 
corrections for these final results. See the proprietary version of the 
Department's final results analysis memorandum for Koyo for a detailed 
description of our corrections.

3. Discounts, Rebates, and Post-Sale Price Adjustments (PSPAs)

    Comment 23: Timken argues that, while the Department properly 
determined that NTN's discounts, Koyo's billing adjustments (BILLADJI), 
and NSK's return rebates should not be treated as direct selling 
expenses because they were neither reported on a transaction-specific 
basis nor granted at a fixed and constant percentage of the sales upon 
which they were allocated, the Department incorrectly treated these 
expenses as indirect selling expenses. Timken contends that in 
Torrington Company v. United States, 82 F.3d 1039 (Fed. Cir. 1996) 
(Torrington), the Court of Appeals for the Federal Circuit (CAFC) 
emphasized that indirect selling expenses are those types of expenses 
that are not related to particular sales, but are incurred on all 
sales, and concluded that expenses that are, by their nature, directly 
related to particular sales cannot be treated and deducted from FMV as 
indirect selling expenses. Timken asserts that, although NTN's 
discount, Koyo's BILLADJI, and NSK's return-rebate reporting 
methodologies prevent the Department from treating these expenses as 
direct selling expenses, the record demonstrates that they are 
nevertheless related to particular sales and are, therefore, direct by 
their nature. Timken concludes that the Department, in accordance with 
Torrington, cannot treat these expenses as indirect selling expenses; 
rather, it must deny each adjustment in its entirety.
    NTN argues that, because its home market discounts are not related 
to particular sales and do not vary with the quantity of a particular 
item sold, Torrington does not apply to these discounts and the 
Department properly adjusted for the expenses as indirect selling 
expenses.
    Koyo argues that Timken has mischaracterized the CAFC's ruling in 
Torrington by contending that the CAFC held that direct expenses may 
not be allocated to all sales. Koyo argues that the Torrington decision 
was in fact much more limited, deciding only that, because PSPAs were 
incurred as direct expenses, the Department could not treat them as 
indirect expenses under the ESP offset provision. Koyo asserts that in 
Torrington the CAFC merely reaffirmed its earlier determination in 
Smith Corona Group v. United Sates, 713 F.2d 1568 (Fed. Cir. 1983) 
(Smith Corona), which permits the Department to accept allocated 
expenses as direct selling expenses, provided that the allocation does 
not distort the margins. In fact, Koyo contends, contrary to Timken's 
assertion, there is nothing within the Torrington decision which 
undermines the authority of the Department to treat expenses allocated 
over scope merchandise as direct expenses. Koyo explains that, because 
its BILLADJI adjustment was allocated across sales of only scope 
merchandise, the Department must reject Timken's arguments and adjust 
FMV for these billing adjustments as direct, rather than indirect, 
selling expenses.
    NSK contends that the evidence on the record clearly demonstrates 
that its reported return rebates warrant deduction from FMV as direct 
selling expenses. NSK contends that, in accordance with Torrington, 
these return rebates are direct in nature. Furthermore, NSK states that 
the evidence on the record also clearly demonstrates that NSK reported 
these expenses as specifically as its records permitted and calculated 
the adjustments to avoid inaccuracies or distortions to FMV. NSK 
concludes that, because the Department allows non-distortive 
allocations where transaction-specific reporting is not feasible and 
because its reporting methodology reflects its actual experience, the 
Department's decision to treat these expenses as indirect selling 
expenses in its preliminary results was incorrect.
    Department's Position: We agree in part with Timken. As a general 
matter, pursuant to the law in effect prior to January 1, 1995, the 
Department only accepts claims for discounts, rebates, or other PSPAs 
as direct adjustments to price if actual amounts are reported for each 
transaction (see, e.g., AFBs 93-94 at 66498). One way in which a 
respondent may report actual adjustment amounts is if the PSPA is 
reported on a transaction-specific basis. Because allocated price 
adjustments can have the effect of distorting individual prices by 
diluting the PSPAs received on some sales, inflating them on other 
sales, and attributing them to still other sales that did not actually 
receive any adjustment at all, such allocations do not result in the 
actual amount of the adjustment being reported for each individual 
sale. Rather, allocations have the effect of partially averaging 
prices. Just as we do not allow respondents to report average prices, 
we do not allow respondents to average direct additions to or 
subtractions from price. However, if the PSPA is allocated, we consider 
the actual amount of the adjustment to be reported and will treat the 
PSPA as a direct selling expense if the respondent demonstrates that 
the PSPA was granted as a fixed and constant percentage of the sales 
price of all transactions for which it was reported and to which it was 
allocated. We do so because such an allocation does not distort the 
amount of the adjustment the respondent granted because the same 
percentage adjustment applies to all sales. This policy is consistent 
with the policy we established and followed in numerous reviews of both 
the TRBs and AFBs orders (see, e.g., TRBs 92-93 at 57640 and AFBs 93-94 
at 66498).
    In the past, if a respondent allocated a PSPA such that it was 
limited to scope merchandise, but did not result in the actual amount 
of the adjustment being reported for each sale (i.e., it was reported 
on a customer- or product-specific basis) we treated the PSPA as an 
indirect expense and adjusted FMV accordingly. However, in light of

[[Page 20603]]

Torrington, in which the CAFC determined that we cannot treat a PSPA as 
an indirect selling expense when it is, by its nature, a direct selling 
expense, we no longer treat improperly allocated home market price 
adjustments as indirect selling expenses, but instead disallow negative 
(downward) adjustments in their entirety. However, we will continue to 
treat positive (upward) home market price adjustments (e.g., positive 
billing adjustments that increase the final sales price) as direct 
selling expenses in our analysis. The treatment of positive billing 
adjustments as direct selling expenses is appropriate because 
disallowing such adjustments would provide an incentive to a respondent 
to report positive billing adjustments on an allocated basis in order 
to minimize their effect on the margin calculations. That is, if we 
were to disregard positive billing adjustments which would be upward 
adjustments to FMV, respondents would have no incentive to report these 
adjustments on a transaction-specific basis (see AFBs 93-94 at 66498).
    We note that this policy is in direct accordance with Torrington 
and Smith Corona which hold that we must disallow home market price 
adjustments that are allocated in a manner that does not allow us to 
separate expenses incurred on sales of scope merchandise from those 
incurred on sales of non-scope merchandise. Our policy incorporates 
this decision in that we do not allow allocated price adjustments 
except for those granted at a fixed and constant percentage of the 
sales price on all transactions for which the adjustment was reported. 
If a respondent grants and reports a PSPA as a fixed percentage of the 
sales to which it pertains, the fact that this pool of sales may 
include non-scope merchandise does not distort the amount of the 
expense the respondent granted and reported on sales of subject 
merchandise because the same adjustment percentage applied to both 
scope and non-scope merchandise (see id.).
    Therefore, contrary to Koyo's assertion that we have based our 
policy on an overly narrow interpretation of the CIT and CAFC rulings 
requiring us to reject allocated PSPAs in all cases, our policy allows 
for the acceptance of allocated PSPA amounts as direct selling expenses 
when a respondent demonstrates that no distortion has occurred as a 
result of its allocation. The only manner in which an allocated PSPA 
would not result in distortion is if it was granted and reported as a 
fixed and constant percentage of the sales to which it has been 
allocated.
    For these final results we have applied this policy to NTN's home 
market discounts, Koyo's home market BILLADJI adjustment, and NSK's 
return rebates and have made the following determinations:
    First, concerning NTN's discounts, NTN did not report these 
discounts on a transaction-specific basis, but, rather, reported the 
adjustments on a product-or customer-specific basis. Furthermore, NTN 
did not grant and report these discounts as a fixed and constant 
percentage of sales. Therefore, because NTN's discounts are clearly 
direct in nature (i.e., they are directly related to particular sales 
rather than related to all sales), but were not allocated 
appropriately, we have disallowed this adjustment to FMV for these 
final results (see AFBs 93-94 at 66501).
    Concerning Koyo's BILLADJI adjustment, while Koyo reported this 
adjustment based on a scope-specific allocation, Koyo did not report it 
on a transaction-specific basis and we found no evidence that Koyo 
granted the adjustment as a fixed and constant percentage of the sales 
for which it was reported. As a result, because this allocation does 
not result in the actual amount of the adjustment being reported for 
each transaction, we have, in accordance with our established practice, 
denied all negative BILLADJI adjustments in their entirety. However, 
because Koyo also reported positive BILLADJI adjustments, in accordance 
with our policy stated above, we have treated these as direct selling 
expense adjustments to FMV.
    With respect to NSK's return rebates, we have determined for these 
final results that NSK's return rebates are promotional expenses, 
rather than price adjustments, because NSK grants these rebates to 
promote sales made by distributors. Because NSK demonstrated in its 
response that it incurred and reported these expenses on a model-
specific basis and tied these expenses to subject merchandise, we 
consider the expenses to be direct selling expenses and have adjusted 
FMV accordingly.
    Comment 24: Timken argues that the Department improperly treated 
NSK's lump-sum PSPAs as indirect selling expenses. Timken contends that 
the CIT has clearly stated that the Department may not allow an 
adjustment to FMV for any rebates allocated on the basis of sales of 
non-scope merchandise (Torrington Co. v. United States, 818 F. Supp. 
1563 (CIT 1993)). Timken contends that the record demonstrates that NSK 
did not report its lump-sum PSPAs on the basis of sales of in-scope 
merchandise only, and, as a result, the Department must deny this 
adjustment to FMV in its entirety.
    Citing Torrington, NSK contends that the CAFC has clearly 
determined that this type of PSPA constitutes a direct selling expense. 
Furthermore, NSK contends, it has submitted evidence demonstrating that 
the monthly purchasing patterns of customers receiving these 
adjustments are relatively stable for purchases of scope and non-scope 
merchandise. NSK asserts that, because these customers consistently buy 
about the same percentage of scope and non-scope products from month to 
month, without any variance, the PSPA granted is fairly apportioned to 
scope sales and does not distort FMV. Thus, NSK contends, its method 
for reporting lump-sum PSPAs accurately calculates the per-unit 
adjustment for sales of scope merchandise and the Department must treat 
these expenses as direct selling expenses.
    Department's Position: We agree with Timken. We have denied this 
adjustment for these final results because it is a direct price 
adjustment and NSK failed to tie the PSPA to the particular sales 
affected by the adjustment. NSK explained in its response that it 
granted these lump-sum PSPAs as a fixed percentage of a certain group 
of sales. However, rather than tying the adjustment to the particular 
transactions for which the adjustment was incurred, NSK allocated the 
lump-sum PSPAs by dividing the total amount of the lump-sum PSPAs it 
paid to a customer during the POR by the total sales value of all 
merchandise (scope and non-scope) sold to the customer during the POR. 
As a result, NSK allocated the PSPAs across a broader base of sales 
than those for which it was granted. Accordingly, we have denied this 
adjustment in its entirety for these final results.
    Comment 25: Timken contends that the record demonstrates that NSK's 
home market early payment discounts are, by their nature, directly 
related to sales. However, Timken asserts, NSK did not report these 
discounts on a transaction-specific basis and its allocation of these 
discounts included non-scope merchandise. Timken argues that, in an 
effort to eliminate the flaws in NSK's reporting methodology, the 
Department attempted to recalculate NSK's early payment discounts. 
However, Timken contends, not only is it unclear how the Department's 
recalculation methodology accurately established the payment period for 
each customer receiving such a discount, but, because the recalculation 
is neither transaction-specific nor limited to scope

[[Page 20604]]

merchandise, it also fails to result in the derivation of the actual 
discount earned on individual transactions of scope merchandise. 
Therefore, Timken concludes, the Department should abandon its attempts 
to recalculate NSK's discounts and should deny the adjustment in its 
entirety for these final results.
    NSK argues that, while non-scope merchandise was included in both 
its original allocation and the Department's recalculation, the record 
clearly demonstrates that it granted these discounts as a fixed and 
constant percentage of the sales to which they were allocated. As a 
result, NSK claims, there is no need for the Department to remove non-
scope merchandise from its recalculation. Furthermore, NSK argues, the 
Department's recalculation accurately assigned the applicable payment 
period to each customer receiving such a discount. In addition, NSK 
asserts, because the record demonstrates that customers' payment 
patterns were stable throughout the POR, the Department's recalculation 
resulted in accurate per-transaction discount amounts for scope 
merchandise. As a result, NSK concludes, the Department should not 
abandon its recalculation methodology and should continue to adjust FMV 
for these discounts as direct selling expenses.
    Department's Position: We agree with NSK. The record demonstrates 
that NSK granted a discount to those customers who remitted payment 
earlier than the terms of payment for that particular customer called 
for. The record also reveals that NSK granted different rates depending 
upon how early the payment was received. In other words, NSK had in 
place a rebate schedule which offered a different discount rate on the 
basis of the payment category, such that when NSK received a payment, 
for example, zero to thirty days early NSK granted one discount rate, 
while when NSK received a payment thirty to sixty days early, it 
granted a different discount rate. The record also indicates that NSK 
offered the same discounts equally to sales of both scope and non-scope 
merchandise; thus, regardless of the merchandise, whenever payment was 
received early, NSK granted the applicable discount rate on the basis 
of the payment category. In addition, the record demonstrates that NSK 
periodically changed the discount rates for each payment category 
throughout the POR such that, even if a customer consistently paid the 
same number of days early every month in the POR, it received different 
discount rates during the POR. Finally, the record demonstrates that 
each customer had a stable payment pattern. In other words, each 
customer remitted payment within the same number days early each month 
such that it consistently received the discount rate in effect for the 
same payment category.
    NSK calculated its reported discount amounts by dividing the total 
discounts paid to a customer during the POR by the total sales value of 
merchandise sold to that customer during the POR. As a result, even 
though each customer's payment category remained stable over time, the 
discount rate NSK reported for a customer reflected an average POR 
percentage rather than the actual rate granted to the customer at the 
time the actual transaction was made. In other words, NSK averaged a 
customer's discount rate and applied that rate to each transaction 
rather than the actual rate granted. In our preliminary results, based 
on our review of the information NSK submitted in regard to these 
discounts, we determined that information on the record enabled us to 
remove this distortion. Therefore, we recalculated NSK discounts as 
follows:
    First, because a customer's payment category was stable over time, 
it was mathematically possible to determine the payment category for a 
customer for a given transaction by dividing the discount amount 
reported for the transaction by the unit price. By comparing this ratio 
to the individual POR averages NSK reported for each customer, we were 
able to ascertain the payment category for that customer. For example, 
if a customer consistently remitted payment 0-30 days early and the 
discount rate for this category was 1.5 percent for the first half of 
the POR and 2.0 percent for the second half of the POR, the average POR 
rate NSK would have reported for the transaction would be 1.75 percent. 
If we divided the discount amount reported for a transaction by the 
unit price of that transaction and arrived at 1.75 percent, we would 
know that that transaction fell in the zero to thirty day payment 
category. However, because the discount rate NSK applied to the unit 
price reported for a transaction reflected the average POR rate for the 
customer (1.75 percent) and not the actual discount rate granted during 
the period in which the transaction took place (either 1.5 percent or 
2.0 percent), NSK's allocation failed to result in actual transaction-
specific discounts. Therefore, after determining the payment category 
for each transaction, we applied a revised discount rate to that 
transaction depending upon the date of the transaction and applicable 
payment category discount rate. In this way, we applied to each 
transaction the discount rate which actually applied to the sale.
    We disagree with Timken that this recalculation suffers from the 
same flaws as NSK's original methodology. Because NSK granted the same 
discount rate on sales of all merchandise (i.e., granted the discount 
as a fixed and constant percentage of all applicable sales prices), the 
inclusion of non-scope merchandise in our allocation is non-distortive. 
Furthermore, our methodology clearly results in the application of 
transaction-specific discounts because we apply the discount rate 
granted to a customer within a given time period to sales to that 
customer within the corresponding time period. Therefore, we have not 
altered our recalculation of NSK early payment discounts for these 
final results and have continued to treat these discounts, as 
recalculated, as direct selling expenses.
    Comment 26: NSK argues that the record demonstrates that it granted 
and reported its distributor incentives as a fixed and constant 
percentage of all applicable sales. Furthermore, NSK asserts that in a 
recent remand determination the Department determined that, because 
NSK's distributor incentives were granted and reported as a fixed 
percentage of all sales, both scope and non-scope, NSK's allocation was 
reasonable and non-distortive, and the Department subsequently treated 
the adjustment as a direct selling expense (Final Results of 
Redetermination Pursuant to Remand, Torrington Co. v. United States, 
Court No. 92-07-00483 (CIT 1995), aff'd Slip Op. 96-85 (CIT 1996)). NSK 
concludes, because there is no difference in the methodology it used in 
this review and the one at issue in the remand, the Department should 
treat these distributor incentives as direct selling expenses in these 
reviews as well.
    Timken contends that there is no evidence on the record 
demonstrating that the sales upon which NSK calculated its incentive 
rebates included only sales of subject merchandise. Therefore, Timken 
concludes, because the Department cannot allow the inclusion of non-
scope merchandise when calculating adjustments to FMV, the Department 
should continue to deny this adjustment for these final results.
    Department's Position: We disagree with NSK. Based on our 
reexamination of the record, we have determined that, while NSK granted 
its distributor incentives as a fixed and constant percentage of its 
distributors' gross sales, NSK did not allocate these expenses on the 
basis of this same group of sales. Rather, NSK allocated the

[[Page 20605]]

expenses on the basis of its sales to its distributors. Therefore, 
while NSK may have incurred the expenses as a fixed and constant 
percentage of its distributors' sales, NSK provided no evidence 
indicating that the adjustment was granted as a fixed and constant 
percentage of its sales to its distributors (the sales upon which NSK 
actually allocated the expense for the purpose of its response). 
Therefore, we have denied this adjustment in its entirety for these 
final results.
    Comment 27: Fuji argues that the Department incorrectly disallowed 
its claimed adjustment for home market rebates. First, Fuji explains 
that it allocated its rebates to scope merchandise using both scope and 
non-scope merchandise because the rebates were incurred on the basis of 
both scope and non-merchandise. As a result, Fuji asserts, its records 
do not provide a separate breakout for TRB rebates alone, and it is 
unable to provide TRB-specific rebate amounts. However, Fuji adds, 
under its rebate program the same rebate amounts are paid on scope and 
non-scope merchandise regardless of whether the merchandise is scope- 
or non-scope. Therefore, Fuji asserts, its allocation methodology 
accurately allocates the rebates to TRBs and the Department should 
adjust FMV for these expenses as direct selling expenses.
    Fuji further contends that, even if the Department does not agree 
that these rebates warrant a direct adjustment to FMV, the Department 
must nevertheless adjust for these rebates as indirect selling 
expenses. Fuji asserts that the Department routinely includes the 
amount of a disallowed rebate within home market indirect selling 
expenses even in situations where the rebate amount includes both scope 
and non-scope merchandise.
    Timken argues that the Department properly denied Fuji an 
adjustment for its home market rebates because the record demonstrates 
that Fuji provided rebates for selected periods of time and, as a 
result, the POR encompasses several rebate periods. Timken asserts 
that, while it may be the case that in a given period Fuji granted the 
same rebate for both scope and non-scope merchandise, the existence of 
multiple rebate periods indicates that, if the recipient of the rebate 
sold only non-scope merchandise within a period and earned a large 
rebate, but in the next period sold both scope and non-scope 
merchandise, the rebate for the non-scope merchandise would be 
allocated to all sales even though it was only earned for non-scope 
merchandise. As a result, Timken concludes, the Department must deny 
this adjustment as it did in its preliminary results.
    Department's Position: We agree in part with Timken. The record 
indicates that Fuji offered two different types of rebate programs to 
its dealers. Fuji calculated the rebate amounts it reported for each 
transaction by dividing the total amount of rebate paid to each dealer 
during the POR by the total sales to the dealer during the POR. As a 
result, Fuji reported its rebates on a customer-specific rather than a 
transaction-specific basis. Therefore, in order for us to accept Fuji's 
allocation, Fuji must demonstrate that it granted its rebates to each 
customer at a fixed and constant percentage of its sales of all 
products, both scope and non-scope. We examined the record to determine 
if, as Fuji claims, its rebates were granted and reported as a fixed 
and constant percentage of all sales such that the inclusion of non-
scope merchandise in its denominator would not produce distortions. 
Fuji noted several times that its rebates were granted at a fixed and 
constant percentage. However, we are unable to find any evidence on the 
record supporting this contention. Furthermore, it is unclear from 
Fuji's response whether there are multiple rebate periods in a POR, 
and, if so, whether the rebate percentage granted to a customer was the 
same for each period. Given that Fuji calculated an overall POR rebate 
percentage for each dealer, if we are unable to determine if multiple 
rebate periods existed within the POR, we are unable to determine 
whether the POR rebate percentage Fuji reported for each transaction 
truly reflects the rebate percentage applicable to each transaction. 
Therefore, because the information Fuji submitted is insufficient for 
the purpose of determining whether the rebate percentage reported for 
each dealer reflected the actual rebate percentage applicable to a 
given transaction to that dealer, we have not treated these rebates as 
direct selling expenses.
    Finally, because the record demonstrates that Fuji's rebates are 
direct by their nature, in accordance with Torrington we cannot treat 
these rebates as indirect selling expenses. Therefore, for these final 
results we have continued to deny Fuji's rebate adjustments in their 
entirety.

4. COP and CV

    Comment 28: Timken argues that, in accordance with Certain Hot-
Rolled, Cold-Rolled, Corrosion-Resistant and Cut-to-Length Steel Flat 
Products from Korea (58 FR 37176) and Certain Stainless Steel Wire Rods 
from France (58 FR 68865), the Department should exclude from its 
profit calculation for CV those sales to related parties which were not 
at arm's length.
    NTN argues that nothing in the statute suggests that the Department 
must examine whether sales were made at arm's length for the purposes 
of calculating CV. NTN argues that the Department did not exclude such 
sales in its calculation of CV profit for NTN in the 1992-93 TRBs 
review and nothing on the record in this review supports any such 
change.
    Koyo argues that, because neither the statute nor case law requires 
the pool of sales for determining FMV based on price-to-price 
comparisons to be the same as the pool of sales used to calculate 
profit for CV, the Department has the authority to base CV profit on 
all home market sales. Furthermore, Koyo asserts, because section 
773(e)(1)(A) of the Act specifies that profit is to be ``equal to that 
usually reflected in sales of merchandise of the same general class or 
kind as the merchandise under consideration,'' the statute clearly 
requires CV profit to be calculated on the basis of all sales of the 
general class or kind of merchandise under consideration. Moreover, 
citing to Antifriction Bearings (Other Than Tapered Roller Bearings) 
and Parts Thereof From France, et. al.; Final Results of Antidumping 
Duty Administrative Reviews, 60 FR 10900, 10922 (February 28, 1995) 
(AFBs 92-93), Koyo contends that the Department does not support the 
exclusion of all related-party sales that fail the arm's-length test 
from the CV profit calculation. Thus, Koyo concludes, the fact that 
sales may fail the arm's-length test does not warrant the automatic 
exclusion of the sales from the CV profit calculation.
    Department's Position: We agree with Timken in part. As explained 
in numerous reviews of the AFBs orders (see, e.g., AFBs 93-94 at 
66493), section 773(e)(2) of the Act provides that a transaction 
between related parties may be ``disregarded if, in the case of an 
element of value required to be considered, the amount representing 
that element does not fairly reflect the amount usually reflected in 
sales in the market under consideration.'' Our arm's-length test 
determines whether prices to related parties are equal to, or higher 
than, sales prices to unrelated parties in the same market. Therefore, 
this test is not dispositive of whether an element of profit on 
related-party sales is somehow not reflective of the amount usually 
earned on sales of the merchandise under consideration.
    Related-party sales that fail the arm's-length test do give rise to 
the possibility, however, that certain elements of value,

[[Page 20606]]

such as profit, may not fairly reflect an amount usually earned on 
sales of the merchandise. For these final results we considered whether 
the amount for profit on sales to related parties which failed the 
arm's-length test was reflective of an amount of profit usually 
experienced on sales of TRBs. To do so, we compared profit on sales to 
related parties that failed the arm's-length test to profit on sales to 
unrelated parties. If the profit on sales to related parties varied 
significantly from the profit on sales to unrelated parties, we 
disregarded the related-party sales when calculating profit for CV. 
Specifically, we first calculated the profit on sales to unrelated 
parties. If the profit on these sales was less than the statutory 
minimum of eight percent, we used the eight-percent minimum in the 
calculation of CV. If the profit on these sales was equal to, or 
greater than, the eight-percent minimum, we calculated profit on the 
sales to related parties that failed the arm's-length test and compared 
it to the profit on sales to unrelated parties as described above. If 
the profits on such sales to related parties varied significantly from 
the profits on sales to unrelated parties, we excluded those related-
party sales when calculating profit for CV .
    We note that this is identical to the steps we took in AFBs 92-93 
at 10922 and AFBs 93-94 at 66493. However, these TRBs reviews mark the 
first time since our adoption of this policy that we needed to conduct 
this analysis in the TRB cases. We did not apply this policy in TRBs 
92-93 because we found that none of the respondents' related-party 
sales failed the arm's-length test. As a result, the issue was moot for 
those reviews. Therefore, we do not agree with NTN that, because we 
have not applied this policy in past TRBs reviews, we have no basis to 
do so in these instant reviews. Rather, because we found non-arm's-
length related-party sales for those firms for which we based FMV on CV 
(NTN, NSK, and Koyo), we have applied our policy as explained above and 
made changes, where appropriate, in our respective company-specific 
analyses.
    Comment 29: NSK claims that the Department violated the antidumping 
law by never establishing the grounds for collecting cost data from 
related-party suppliers. NSK contends that, pursuant to section 
773(e)(3) of the Act, the Department has the right to disregard sales 
prices NSK paid to related-party suppliers in favor of the supplier's 
COP only if (1) the Department has reasonable grounds to believe or 
suspect that an amount represented as the value of such input is less 
than the COP of the input, and (2) the information being requested is 
for a ``major'' input. NSK argues that, because the language in section 
773(e)(3) of the Act is identical to that in section 773(b) of the Act 
(the provision which grants the Department the authority to conduct 
cost investigations), the same threshold standard is applicable. In 
other words, NSK argues that, because the petitioner never alleged that 
NSK purchased an input from a related supplier at less than COP, and 
because the Department never alleged or substantiated that transfer 
prices from related suppliers were less than COP, let alone whether the 
input was a ``major'' input, reasonable grounds for the collection of 
this data did not exist.
    NSK further contends that the Department has no other statutory 
authority for requesting related-supplier COP data and that there is no 
evidence on the record to support the Department's disregard of NSK's 
related-supplier transfer prices. Therefore, NSK concludes, the 
Department should not use this illegally-obtained related-supplier 
information and should strike it from the record of these reviews.
    Timken argues that the Department's preliminary results decision 
regarding NSK's related-supplier transfer prices was justified and in 
accordance with the law. Timken contends that the standard for 
analyzing below-cost sales pursuant to section 773(b) of the Act does 
not require any allegation by domestic parties. Likewise, accepting 
NSK's position that the identical language of sections 773(e)(3) and 
773(b) constitutes the application of the same standard, Timken 
maintains that there is therefore no requirement that the domestic 
party has the burden of submitting evidence of below-cost related-party 
supplier transfer prices. In fact, Timken maintains, the respondent 
should bear the responsibility of providing such evidence because 
related-party input transfers are already ``suspect'' and domestic 
producers simply do not have access to the respondent's books and 
records, or access to what inputs were purchased from related 
suppliers. Timken adds that, given the nature of TRB production, it is 
also nearly impossible to submit data regarding the production costs at 
every stage of production that might be a transfer point. Furthermore, 
the petitioner states that to require allegations from the domestic 
party as a prerequisite for the Department to investigate would 
effectively curtail the inherent authority of the Department to conduct 
below-cost sales and related-party transfer price investigations. 
Timken also maintains that the Department's collection of NSK's 
related-supplier transfer prices was justified because NSK has engaged 
in below-cost selling. Timken argues that, given that NSK does sell at 
below-cost prices, it is reasonable to infer that its losses are passed 
back to related suppliers which are forced to transfer inputs at a 
loss. In addition, Timken asserts that there is ample evidence on the 
record for these reviews supporting the Department's decision to 
disregard NSK's related-party transfer prices.
    Finally, Timken argues, because NSK's arguments were rejected by 
the CIT in NSK Ltd. v. United States, 910 F. Supp. 663 (CIT 1995) 
(NSK), the Department should adhere to its preliminary determination 
and adjust NSK's reported COP and CV to reflect the actual COP of 
related-party inputs. However, Timken notes, while the Department 
indicated in its preliminary results that it did adjust NSK's COP and 
CV to reflect the actual COP of related-party inputs, it is not 
apparent from the Department's preliminary results computer program 
that it did so. Timken, therefore, requests that the Department ensure 
that NSK's COP and CV are properly adjusted for these final results.
    Department's Position: We disagree with NSK. As we explained in 
detail in TRBs 92-93 at 57643, two separate sections of the Act direct 
the Department to disregard transfer prices for certain transactions: 
section 773(e)(2) which directs us to disregard transfer prices if the 
transfer prices for ``any element of value'' do not reflect their 
normal market value, and section 773(e)(3) which directs the Department 
to disregard transactions if the transfer prices for ``major inputs'' 
are below the COP.
    For CV purposes, pursuant to section 773(e)(2) of the Act, in 
general we determine whether the transfer prices for any element of 
value were below the normal market value of that element. Pursuant to 
the statute, we do not use transfer prices between related companies to 
value any element of value if such prices do not fairly reflect the 
amount usually reflected in sales of the merchandise under 
consideration in the market under consideration. This is sometimes 
referred to as the requirement for an ``arm's-length'' price. To 
determine whether the transfer prices reflect arm's-length prices, we 
normally compare the transfer price to (1) the prices related suppliers 
charge to unrelated parties, or (2) the prices charged by unrelated 
suppliers to the respondent. If we disregard a transaction because the 
respondent

[[Page 20607]]

cannot demonstrate that the transaction was made at arm's length, and 
there are no other transactions available for consideration, then we 
must rely on the ``best evidence available'' to determine the value of 
the element. In other words, if there are no arm's-length prices for 
components to compare to transfer prices, ``Commerce generally use[s] 
the cost of the components as representative of the value reflected in 
the market under consideration'' (see 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 et 
al., 54 FR 18992 (1989) (AFBs LTFV)). In that situation we must 
determine whether to use the reported cost data as the ``best evidence 
available.'' Otherwise, we cannot fulfill our statutory obligation of 
valuing elements of value for CV purposes.
    NSK erroneously argues that, before we can request cost data for 
inputs, we must have a specific and objective basis for suspecting that 
the transfer price paid to a particular related supplier for a major 
input is below the related supplier's COP. NSK's argument is based on 
the erroneous assumption that we must rely upon section 773(e)(3) of 
the Act to request information regarding the cost of components parts. 
As demonstrated above, section 773(e)(3) of the Act simply provides an 
alternative basis for requesting cost information. However, there also 
exists a basis for examining whether the transfer prices of major 
inputs were below cost under section 773(e)(3). We agree with the 
petitioner's argument that, when a domestic party files a COP 
allegation, it does not necessarily have the information necessary to 
allege that a particular input or element of value from a related party 
is priced below COP. Therefore, the petitioner cannot necessarily make 
COP allegations regarding specific related-party inputs. As a result, 
we consider our initiation of a cost investigation concerning home 
market sales a specific and objective reason to believe or suspect that 
the transfer price from a related party for any element of value may be 
below the related suppliers' COP.
    In accordance with our standard practice (see, e.g., Final 
Determination of Sales at Less Than Fair Value: Certain Carbon Steel 
Butt-Weld Pipe Fittings From France, 60 FR 10538 (February 27, 1995)), 
we asked NSK to provide cost data for inputs produced by related 
parties. NSK complied with our request for information and supplied the 
transfer prices and cost of production of inputs from its related 
parties. The record for these reviews demonstrates that in its response 
NSK also submitted a comparison of the weighted-average transfer prices 
for those inputs NSK purchased from both related and unrelated 
suppliers. By this comparison NSK intended to show the arm's-length 
nature of its transfer prices where inputs were purchased from both 
related and unrelated suppliers. This comparison, however, was not 
useful in determining whether related-supplier transfer prices were at 
arm's length because it listed only a limited number of instances where 
NSK purchased an identical or similar input from both a related and 
unrelated supplier. Because we could not rely on NSK's related-party 
transfer price comparison, we examined in detail the submitted COP and 
transfer prices for all of NSK's related suppliers. We found that, 
contrary to NSK's claim, transfer prices from related suppliers were 
often below the suppliers' COP for that input. Because NSK was unable 
to demonstrate that elements of value included in its submitted CV 
calculations were reflective of their normal market value, the 
submitted related-party cost information was required by law. Hence, we 
did not strike NSK's reported related-party cost information from the 
record. On the contrary, for these final results we relied on NSK's 
submitted related-party cost information if the COP for the input 
exceeded the transfer price NSK reported for the input.
    Furthermore, as indicated by Timken, in NSK the CIT upheld our 
authority to request cost data from a company's related suppliers. The 
CIT determined that ``1677b(e)(2) does not limit Commerce's authority 
to request COP data pursuant to 1677b(e)(2) * * * . [T]he purpose of 
1677b(e)(3) is to permit Commerce to use the best evidence available 
when it has reasonable grounds to suspect below cost sales occurred. 
There is no support in the legislative history of 1677b(e)(3) for the 
claim that Commerce may not request COP data for other purposes' (see 
NSK at 669).
    Finally, concerning Timken's assertion that it is unclear whether 
our preliminary results computer program for NSK adjusts NSK's reported 
COP and CV to take into account related-party transfer prices for 
inputs which were below the COP of the input, we note that our 
preliminary results computer program for NSK clearly makes this 
adjustment. We adjusted NSK's reported COP values in lines 79 and 80 
and NSK's reported CV values in lines 570 through 591.
    Comment 30: NTN argues that, when the Department recalculated NTN's 
COP and CV values to reflect those related-party inputs for which NTN's 
transfer prices were less than the COP of the input, the Department 
applied an inappropriate allocation ratio. NTN asserts that, in an 
attempt to calculate the ratio for the total excess of COP over 
transfer price for related-party inputs, the Department used a 
denominator based on the sum of transfer prices for those related-party 
inputs where transfer price was below COP rather than the sum of all 
related-party input transfer prices.
    Timken asserts that, while the ratio NTN describes in its comments 
could be used in the Department's recalculation, the record contains 
neither the quantity data for those inputs transferred below COP nor 
the identification of which TRBs included related-party inputs. As a 
result, Timken claims, the Department is unable to determine the actual 
sum of the difference between COP and transfer price for all parts 
purchased by NTN and has, instead, used a reasonable proxy for this 
absent information.
    Department's Position: We agree with NTN. As explained in our 
preliminary results analysis memorandum for NTN dated April 12, 1996, 
NTN submitted COP and CV values which reflected the value of related-
party inputs based on transfer price. Based on a schedule submitted by 
NTN's related supplier, we determined that a significant number of 
inputs were sold to NTN at transfer prices below COP. Therefore, we 
calculated a percentage adjustment that, when applied to NTN's reported 
COP and CV values, would increase COP by an amount reflective of the 
difference between COP and transfer price where transfer price was less 
than COP. The first step of our calculation of this percentage 
adjustment involved the derivation of the total difference between COP 
and transfer price for all related-party inputs where transfer price 
was below COP, and the expression of this difference as a percentage of 
transfer price. It is the denominator we used to calculate the amount 
of COP that exceeded transfer price that NTN objects to based on the 
assertion that it reflects only a portion of, rather than the total sum 
of, transfer prices. Based on our reexamination of our calculation for 
these final results we have determined that the denominator in question 
is inconsistent with the methodology of our overall COP/CV adjustment 
calculation and have made the appropriate changes to our calculation 
for these final results. Please see the proprietary version of our 
final results analysis memorandum for NTN for a detailed explanation of 
these changes.
    Comment 31: Timken states that in the Department's preliminary 
results for

[[Page 20608]]

Koyo the Department calculated modified home market indirect and direct 
selling expenses for use in those comparisons where the Department 
based FMV on CV. Timken argues that, because Koyo's originally-reported 
CV values included expense amounts different from the revised expense 
amounts the Department deducted from CV to calculate FMV, the 
Department should have deducted the originally-reported expense amounts 
from CV and added its revised expenses amounts to the CV calculation 
prior to deducting the revised expenses from CV when calculating FMV.
    Department's Position: We agree with Timken. As explained in our 
preliminary results analysis memoranda for Koyo, for those comparisons 
in which we based FMV on CV we deducted home market direct and indirect 
selling expense from CV. Because Koyo reported in its response the 
overall direct selling expense ratio and the overall indirect selling 
expense ratio it used to calculate its reported COP and CV, we 
recalculated these ratios to include Koyo's reported home market pre-
sale and post-sale inland freight expense and used these recalculated 
ratios to calculate the amount of direct and indirect expenses to be 
deducted from CV. We recalculated Koyo's overall ratios because, in 
accordance with the law in effect prior to January 1, 1995, where we 
adjust for home market movement expenses under the circumstance-of-sale 
provision of 19 CFR 352.56 and the ESP offset provision of 19 CFR 
353.56 (b)(2), we treated Koyo's reported home market pre-sale freight 
expenses as indirect selling expenses and Koyo's reported home market 
post-sale freight expenses as direct selling expenses. Because Koyo's 
overall direct selling expense ratio did not reflect home market post-
sale freight and Koyo's overall indirect selling expense ratio did not 
include home market pre-sale freight, in order to ensure the proper 
application of our home market freight expense policy when FMV was 
based on CV, we determined that it was necessary to recalculate Koyo's 
reported indirect and direct selling expense ratios to reflect these 
expenses. However, Koyo's originally reported CV values relied on the 
ratios Koyo originally reported in its response. As a result, we when 
we deducted our calculated indirect and direct selling expenses from 
CV, we adjusted for expenses which were not originally included in CV. 
This had the effect of artificially lowering CV for our margin 
calculations. Therefore, for these final results, prior to deducting 
our calculated home market indirect and direct selling expenses from 
CV, we first recalculated Koyo's reported CV to reflect its home market 
pre-sale and post-sale freight expenses.
    Comment 32: NTN argues that, when calculating the overall weighted-
average ratios for NTN's home market direct and indirect selling 
expenses, which the Department used to derive the amount of direct and 
indirect selling expenses to be deducted from CV in those comparisons 
in which FMV was based on CV, the Department made two errors. First, 
NTN claims that the ratios the Department calculated in the beginning 
of its margin calculation computer program, as contained on the first 
page of the preliminary results computer program printout, are not the 
same as the ratios the Department used in a subsequent portion of the 
computer program. Second, NTN claims that the Department calculated a 
single overall weighted-average indirect selling expense ratio which 
reflected all home market sales, rather than taking into account 
exhibit D-11 of NTN's response where NTN calculated three separate 
ratios reflecting the differences in indirect selling expenses NTN 
incurred for sales to each of its three home market levels of trade 
(LOT).
    Department's Position: We agree with NTN that, when transferring 
the results of our calculation of the overall weighted-average ratios 
for certain of NTN's home market direct and indirect selling expenses 
(as they appeared on page 1 of our preliminary results margin 
calculation computer program printouts for NTN) to a subsequent portion 
of our preliminary results computer program, we incorrectly transcribed 
these ratios. Therefore, for these final results we have corrected this 
inadvertent error. However, we do not agree with NTN that the single 
overall weighted-average ratio we calculated for its home market 
indirect selling expenses should not have been a single ratio, but, 
rather, three separate ratios reflecting the difference in indirect 
selling expenses NTN incurred as a result of the differences in its 
three home market LOTs. The LOT-specific indirect selling expenses 
ratios NTN refers to in exhibit D-11 of its response were derived 
directly from exhibit C-5 of its response, where NTN allocated the 
indirect selling expenses it incurred in the home market during the POR 
according to its LOTs. While we agree that NTN had three distinct LOTs 
in the home market, we do not agree that it incurred its home market 
indirect selling expenses differently according to LOT due to the 
difference in its LOTs such that LOT-specific allocations are 
warranted.
    The CIT addressed the issue of LOT-specific expense allocations in 
the Timken Company v. United States, 930 F. Supp 621 (CIT 1996) 
(Timken). This decision not only has general relevance, but it is 
especially significant for the instant reviews because the CIT ruled on 
the issue of LOT-specific expense allocations specifically with regard 
to NTN and the 1990-91 and 1991-92 TRBs reviews. Recognizing that there 
may be a difference between a respondent's methodology for response 
purposes which allocates expenses to a LOT and how a respondent 
actually incurs the expenses due to differences when selling to each 
LOT, the CIT clearly stated that, in order for the Department to accept 
NTN's LOT-specific expense allocations, NTN's expenses must 
``demonstrably vary according to level of trade'' (see Timken at 628). 
In other words, the fact that a respondent allocates according to LOT 
in an antidumping questionnaire response does not indicate whether a 
respondent actually incurred the expenses differently due to 
differences in LOTs. Rather, in order to determine if a respondent's 
expenses demonstrably varied according to LOT, additional narrative and 
quantitative evidence must exist which demonstrates that the respondent 
either performed different activities/functions or performed 
activities/functions to a different degree when selling to each LOT 
such that the amount of expenses incurred for the sale of the identical 
merchandise to different LOTs would vary. Based on our review of the 
record for this review, we have determined that NTN did not provide any 
evidence demonstrating that it actually incurred its reported home 
market indirect selling expenses differently due to differences in LOT. 
Rather, NTN's sole support for its LOT-specific allocations is the 
allocations themselves. As a result, the record does not support our 
using three separate LOT-specific indirect selling expense ratios to 
derive the home market indirect selling expense amounts in those 
comparisons where FMV is based on CV.
    Furthermore, while we recognize that, for these final results, the 
issue of LOT-specific allocations appears to be limited to NTN's 
comments concerning our calculation of indirect selling expense ratios 
for comparisons in which FMV is based on CV, the CIT's determination in 
Timken that a respondent must demonstrate that the expenses 
demonstrably vary according to LOT in order to allocate those expenses 
according to LOT has

[[Page 20609]]

implications for other aspects of our analysis of NTN as well.
    For example, using the LOT-specific allocations it calculated for 
its home market indirect selling expenses in exhibit C-5, NTN 
calculated LOT-specific per-unit indirect selling expense amounts by 
multiplying its exhibit C-5 LOT-specific allocation ratios by its 
reported unit prices. As a result, NTN reported for each of its home 
market transactions indirect selling expense adjustments which varied 
according to the LOT at which the transaction occurred. Based on our 
determination for these final results that the record does not contain 
evidence demonstrating that NTN actually incurred these indirect 
selling expenses differently due to the differences in LOTs, we cannot 
accept NTN's reported LOT-specific per-unit indirect selling expense 
adjustments. Therefore, we have recalculated NTN's home market indirect 
selling expense allocations such that we derived a single allocation 
ratio applicable to all sales regardless of LOT. We then applied this 
ratio to NTN's reported home market unit prices and calculated per-unit 
adjustment amounts which also did not vary according to LOT.
    NTN's exhibit C-5 allocations, however were not limited to only 
indirect selling expenses. NTN also calculated LOT-specific allocations 
and per-unit adjustments for its home market pre-sale and post-sale 
freight expenses. We have examined the record and have found no 
evidence demonstrating that NTN actually incurred these freight 
expenses differently due to differences in LOTs. Therefore, as was the 
case with NTN's indirect selling expenses, for these final results we 
recalculated a single allocation ratio for each of these freight 
expenses and applied this single ratio to NTN's reported unit prices so 
that NTN's allocation ratios and expense adjustments did not vary 
according to LOT.
    The CIT's requirement that LOT allocations must be supported by 
evidence that a respondent's expenses demonstrably varied according to 
LOTs applies to U.S. expenses as well. As a result, because NTN 
allocated several of its reported U.S. expenses according to LOT in 
exhibit B-8 of its response, and calculated LOT-specific U.S. expense 
allocation ratios and LOT-specific U.S. per-unit expense amounts, we 
examined the record to determine if there was any evidence which 
demonstrated that NTN actually incurred these expenses differently due 
to differences in LOTs. Based on our review we have determined that 
there is no evidence that NTN incurred its U.S. direct technical 
service expenses, freight expenses, indirect advertising expenses, or 
other indirect selling expenses differently due to the differences in 
its U.S. LOTs. Therefore, because there is no evidence that these U.S. 
expenses demonstrably varied according to NTN's U.S. LOTs, we have not 
allowed NTN's LOT-specific allocations, allocation ratios, and per-unit 
amounts for these U.S. expenses. Rather, for these final results we 
have calculated a single allocation ratio for each expense which 
reflects all U.S. sales and have recalculated NTN's reported U.S. per-
unit amounts for these expenses without regard to LOTs.
    In addition to the above, we have made one more change to our 
preliminary results for NTN based on our determination that NTN's home 
market expenses did not demonstrably vary according to LOT. In this 
review NTN requested and we preliminarily granted a LOT adjustment 
based on the differences in certain home market indirect selling 
expenses between NTN's LOTs whenever we compared U.S. merchandise to 
such or similar home market merchandise at a home market LOT different 
than the LOT of the U.S. sale. In accordance with our regulations and 
policy concerning LOT adjustments pursuant to the law in effect prior 
to January 1, 1995, NTN bears the burden of demonstrating that it was 
entitled to an adjustment for differences in LOTs (see 19 CFR 353.54) 
and is required to provide evidence that its claimed adjustment was in 
fact attributable to differences in LOTs (see, e.g., NAR S.p.A. v. 
United States, 707 F. Supp. 553 (CIT 1989), and Silver Reed et. al. v. 
United States, 669 F.Supp 291 (CIT 1988)). In our preliminary results, 
which were published prior to the CIT's determination in Timken, we 
considered NTN's LOT-specific allocations of its home market expenses 
in exhibit C-5 to indicate that NTN actually incurred these expenses 
differently due to a difference in LOT. As a result, we considered the 
LOT differences NTN reported in exhibit C-5 for certain home market 
indirect selling expenses to constitute quantitative evidence that NTN 
incurred these indirect selling expenses differently due to the 
difference in LOTs and subsequently based our calculation of NTN's LOT 
adjustment on the indirect selling expense differentials in exhibit C-
5. However, in light of (1) Timken, (2) our determination that NTN 
failed to provide evidence that its home market expenses demonstrably 
varied according to LOTs, and (3) our denial of nearly all of NTN's 
LOT-specific home market and U.S. allocations in these final results, 
we can not rely on NTN's LOT-specific allocations of certain of its 
home market indirect selling expenses alone as evidence that NTN 
actually incurred these expenses differently due to LOT differences. In 
addition, we can not consider NTN's exhibit C-5 home market indirect 
selling expense differentials as a reliable basis for a LOT adjustment. 
Therefore, for these final results we have eliminated from our margin 
calculation for NTN the LOT adjustment we allowed in our preliminary 
results.
    Comment 33: Timken states that NSK's response indicates that it did 
not include inventory write-offs and write-downs for damaged or 
obsolete merchandise in its reported COP. Timken asserts that, because 
the Department considers inventory write-offs/write-downs as part of 
COP, the Department should revise NSK's reported COP to include these 
costs.
    NSK contends that its inventory write-off/write-down methodology 
has been the same for decades and is in accordance with the Japanese 
Generally Accepted Accounting Principles (GAAP). Furthermore, NSK 
argues, its inventory write-offs and write-downs have no relation to 
the cost of producing the subject merchandise. Finally, NSK asserts, 
even if the Department should agree with Timken, it still should not 
include these costs in COP because the effect of any such inclusion 
would be de minimis.
    Department's Position: We agree with Timken. 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 COP (see, 
e.g., AFBs 94-95 at 2117). Therefore, for these final results we have 
included both NSK's inventory write-offs and write-downs in its 
reported COP.
    Comment 34: Timken argues that NSK's response indicates that NSK 
did not include idled asset depreciation as an element of its 
production costs. Timken asserts that, because the Department has an 
established practice of adjusting a respondent's cost data to reflect 
depreciation on idled assets, if, as under the Japanese GAAP, the 
respondent does not report this depreciation as an element of its 
production costs, the Department should revise NSK's reported COP and 
CV by including an amount for NSK's idled asset depreciation. In 
addition, Timken contends, because NSK did not report the amount of its 
idled asset depreciation, the Department should use as BIA the highest 
idled asset

[[Page 20610]]

depreciation reported by any other respondent in the review.
    NSK argues that, because it has already accounted for its idled 
asset depreciation in its reported cost of manufacturing (COM), it is 
unnecessary for the Department to make any adjustment to its reported 
COP and CV.
    Department's Position: We agree with NSK. It is evident from NSK's 
response that it included an amount for idle-asset depreciation in its 
COM. Therefore, for these final results it is unnecessary for us to 
modify NSK's reported COP and CV to reflect this depreciation.
    Comment 35: Timken asserts that, because (1) it is the Department's 
practice to allow offsetting interest income only if it is related to 
COP and (2) NSK has failed to demonstrate that its reported interest 
income is related to normal production, the Department should revise 
NSK's reported financing expenses by disallowing NSK's claimed interest 
income offset.
    NSK contends that its interest income offset is appropriate because 
its short-term interest is generated by short-term investment of its 
working capital. Therefore, NSK argues, in accordance with the 
Department's policy to accept interest income offsets when the offset 
is attributed to short-term investments of working capital, the 
Department should adhere to its preliminary results determination and 
continue to accept NSK's claimed offset.
    Department's Position: We agree with NSK. We have determined in 
past AFB reviews that NSK's business records do not separately report 
the short-and long-term nature of the interest income earned by the 
company and its subsidiaries and that its alternative calculation of 
its income offset reasonably reflects short-term interest income 
related to production activities and the investment of working capital 
(see AFBs 93-94 at 66495 and AFBs 94-95 at 2118). Because there is 
nothing on the record in these TRBs reviews to suggest that NSK has 
altered its reporting methodology or that its claimed interest income 
offset is no longer attributed to short-term investments of working 
capital, we have not altered NSK's reported financing expenses for 
these final results.
    Comment 36: Timken argues that, because NSK failed to include in 
its reported COP and CV an amount reflecting NSK's losses and gains on 
the disposal of fixed assets, the Department should revise NSK's 
reported COP and CV to include these amounts.
    NSK argues that, because gains and losses as a result of the 
disposal of fixed assets are not related to its production, the 
Department correctly concluded in its preliminary results that these 
extraordinary losses and gains should not be included in COP.
    Department's Position: We regard gains and losses as a result of 
the disposal of fixed assets as a normal cost of production (see, e.g., 
AFBs 94-95 at 2118). Based on our review of NSK's response, we have 
found no evidence to suggest that NSK's gains and losses were unrelated 
to the general production activity of NSK overall. Therefore, we have 
included this amount as a general expense and recalculated NSK's 
reported COP and CV accordingly.

5. Clerical and Computer Programming Errors

    Comment 37: Timken asserts that, as NTN's preliminary margin 
calculation computer printouts demonstrate, the Department apparently 
erred when uploading NTN's U.S. database such that the values for 
several U.S. variables were misaligned. As a result, Timken contends, 
the U.S. database the Department relied upon to calculate NTN's 1993-94 
margin contains variables for which the wrong values have been 
reported.
    Department's Position: We agree with Timken and have corrected 
these errors for these final results.
    Comment 38: Timken argues that, while the Department properly 
determined that certain of Koyo's sales to related home market 
customers were not at arm's length, when transcribing the results of 
its arm's-length test to its margin calculation computer program for 
Koyo in order to exclude non-arm's-length sales from its analysis, the 
Department failed to include the codes for all customers who had sales 
which were not at arm's length.
    While Koyo agrees with Timken that the Department incorrectly 
transcribed the results of its arm's-length test to its margin 
calculation program, it argues that Timken's proposed method for 
correcting this error only addresses half of the problem. Koyo asserts 
that Timken only identifies the error as the Department's failure to 
exclude those sales to certain customers which did not pass the arm's-
length test. However, Koyo argues, the Department also excluded certain 
customer codes in its margin calculation program which should have been 
included on the basis that the sales to these customers were found by 
the Department to be at arm's length. Koyo contends that the 
Department's errors are apparently due to the Department's transcribing 
the results of the arm's-length test for the A-588-054 review to the A-
588-604 portion of the margin calculation program. In addition, Koyo 
asserts, the Department also made certain keypunch errors when 
transferring customer codes from the arm's-length test to the margin 
calculation computer program and it should correct these errors as 
well.
    Department's Position: We agree with Koyo. For both the 1992-93 and 
1993-94 reviews of both TRBs cases we conducted an arm's-length test 
for Koyo to determine those home market related customers to which 
Koyo's sales were not at arm's length. In our analysis we determined 
these customers for each TRBs case in each review period. Because we 
used computer programs separate from our margin calculation computer 
programs for Koyo, it was necessary to transcribe the results of the 
arm's-length tests for each case in each review period to the 
corresponding portions of our margin calculation programs. However, 
when doing so, we inadvertently transcribed the arm's-length test 
results for the 1992-93 A-588-054 review to the 1992-93 A-588-604 
portion of our margin calculation computer program. We made the same 
error for the 1993-94 reviews as well. This resulted in the 
inaccuracies both Koyo and Timken describe in their comments above. For 
these final results we have corrected this error by transcribing the 
results of our arm's-length test for each case in each review period to 
the appropriate sections of our margin calculation computer programs. 
In addition, we agree with Koyo that we also made other keypunch errors 
when entering certain customer codes in our margin calculation 
programs, and we have corrected these errors for these final results as 
well.
    Comment 39: Koyo argues that, in accordance with the Department's 
practice of correcting inadvertent errors in a respondent's response, 
provided that these errors are obvious from the administrative record 
and the Department is able to verify the correct information, the 
Department should correct two errors which occurred within Koyo's 
reported computer databases.
    First, Koyo explains, in its 1992-93 and 1993-94 computer tape 
files for U.S. further-manufactured sales, it erroneously reported a 
fixed adjustment amount for its ocean freight and marine insurance. 
Koyo contends that, as a result, it reported the identical ocean 
freight and marine insurance amount for every transaction contained in 
this file. Koyo contends that, in its narrative responses, it clearly 
explained that its intention was to calculate these adjustment amounts 
by applying its calculated ocean freight allocation ratio to the net 
weight it reported for each individual transaction and its marine

[[Page 20611]]

insurance allocation ratio to the CIF value it reported for each 
individual transaction. Koyo argues that this methodology would clearly 
result in a different amount being reported for each transaction. 
Therefore, Koyo asserts, it is obvious that it made an error in these 
two adjustments when compiling its U.S. further-manufacturing 
databases. Furthermore, citing the Department's 1992-93 home market 
sales verification report dated November 22, 1995, Koyo contends that 
the Department clearly verified that Koyo's intention was always to 
calculate these two adjustments using its reported allocation ratios.
    Koyo argues that it also inadvertently misreported the nomenclature 
for one A-588-054 TRB cone which was sold as part of a set in the home 
market during the 1993-94 POR. Koyo asserts that, after examining the 
nomenclature of the nine TRBs sets most similar to the TRB set 
containing this cone, it is apparent that a keypunch error resulted in 
the incorrect product code being entered into the computer databases 
for this cone.
    Department's Position: Pursuant to the CAFC's decision in NTN 
Bearing Corp. v. United States, 74 F.3d 1204 (Fed. Cir. 1995), we will 
correct alleged clerical errors made by a respondent if the following 
conditions are met: (1) The error in question must be demonstrated to 
be a clerical error, not a methodological error, an error in judgment, 
or a substantive error; (2) the Department must be satisfied that the 
corrective documentation provided in support of the clerical error 
allegation is reliable; (3) the respondent must have availed itself of 
the earliest reasonable opportunity to correct the error; (4) the 
clerical error allegation, and any corrective documentation, must be 
submitted to the Department no later than the due date of the 
respondent's administrative case brief; (5) the clerical error must not 
entail a substantial revision of the response; and (6) the respondent's 
corrective documentation must not contradict information previously 
determined to be accurate at verification (see Certain Fresh Cut 
Flowers From Columbia; Final Results of Antidumping Duty Administrative 
Reviews, 61 FR 42833 (August 19, 1996)).
    Concerning Koyo's claim that it erred when reporting its ocean 
freight and marine insurance adjustments in its U.S. further-
manufacturing computer tape sales file, we have determined that, not 
only is the error obvious from the record in existence prior to Koyo's 
submission of its pre-hearing case brief, but Koyo's allegation clearly 
meets each of the six conditions outlined above. Therefore, we have 
corrected this error for these final results.
    In regard to Koyo's nomenclature error, we have examined the 
argument and documentation submitted by Koyo in its case brief, and 
have again found that each of the six conditions described above were 
met. Therefore, we have also corrected this error for these final 
results.
    Comment 40: Timken argues that, when calculating the amount of home 
market value-added tax (VAT) to be used when calculating NSK's VAT 
adjustment, the Department used computer programming language which 
resulted in the calculation of inaccurate home market VAT values.
    Department's Position: We agree with Timken and have corrected this 
error for these final results.

Final Results of Review

    Based on our review of the arguments presented above, for these 
final results we have made changes in our margin calculations for NTN, 
Koyo, and NSK. All of our Prelim Results determinations concerning the 
application of BIA, no shipments, and the termination of reviews remain 
unchanged for these final results (see Prelim Results at 25201-25202).
    As a result of our comparison of USP to FMV, we have determined 
that the following margins exist for Koyo for the period October 1, 
1992, through September 30, 1993:

For the A-588-054 Review

Manufacturer/Exporter and Margin:
    Koyo Seiko--38.07%

For the A-588-604 Review

    Koyo Seiko--40.12%

    In addition, we have determined that the following margins exist 
for the period October 1, 1993, through September 30, 1994 for the 
following firms:

For the A-588-054 Review

Manufacturer/Reseller/Exporter and Margin:
    Koyo Seiko--35.27%
    Nachi--47.63%
    NSK--11.25%
    Fuji--6.04%
    Kawasaki--47.63%
    Yamaha--47.63%
    MC International--2.36%
    Maekawa--47.63%
    Toyosha--47.63%
    Nigata Converter--47.63%
    Suzuki--47.63%

For the A-588-604 Review

    NTN--20.80%
    Koyo Seiko--41.04%
    Nachi-Fujikoshi Corp.--40.37%
    NSK--12.78%
    Fuji--____\2\
    Kawasaki--40.37%
    Yamaha--40.37%
    MC International--____\2\
    Maekawa--40.37%
    Toyosha--40.37%
    Nigata Converter--40.37%
    Suzuki--40.37%
    Showa Seiko--____\2\
---------------------------------------------------------------------------

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

    Daido--40.37%
    Ichiyanagi Tekko--40.37%
    Kawada Tekkosho--40.37%
    Asakawa Screw Co.--40.37%
    Isshi Nut--40.37%
    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. Individual 
differences between USP and FMV may vary from the percentages stated 
above. The Department will issue appraisement instructions on each 
exporter directly to the Customs Service.
    Furthermore, the following deposit requirements will be effective 
for all shipments of the subject merchandise entered, or withdrawn from 
warehouse, for consumption on or after the publication date of these 
final results, as provided for by section 751(a)(1) of the Tariff Act:
    (1) The cash deposit rates for Kawasaki, Nigata, Suzuki, and Yamaha 
for the A-588-054 case and Kawasaki, Yamaha, Nigata, and Suzuki for the 
A-588-604 case are those rates we determined for these firms for our 
administrative reviews of the October 1, 1994, through September 30, 
1995 period for both the TRBs finding and order (see Tapered Roller 
Bearings and Parts Thereof, Finished and Unfinished, From Japan and 
Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and 
Components Thereof, From Japan; Final Results of Antidumping Duty 
Administrative Reviews and Termination in Part, 62 FR 11825, 11843 
(March 13, 1997) (TRBs 1994-95). The cash deposit rates for Koyo, NSK, 
Fuji, and MC International in the A-588-054 case and for NTN, NSK, and 
Koyo in the A-588-604 case are the rates we determined for these firms 
for our recently published administrative reviews of the October 1, 
1995, through September 30, 1996 period for both the TRBs finding and 
order (TRBs 1995-96). The cash deposit rates for all other firms listed 
above will be the rates outlined above;
    (2) For previously reviewed or investigated companies not listed 
above

[[Page 20612]]

and not listed in TRBs 1994-95 or TRBs 1995-96, the cash deposit rate 
will continue to be the company-specific rate published for the most 
recent period;
    (3) If the exporter is not a firm covered in these reviews, a prior 
review, or the original less-than-fair-value (LTFV) investigations, but 
the manufacturer is, the cash deposit rate will be the rate established 
for the most recent period for the manufacturer of the merchandise;
    (4) If neither the exporter nor the manufacturer is a firm covered 
in these or any previous reviews conducted by the Department, the cash 
deposit rate for the A-588-054 finding will be 18.07 percent and 36.52 
percent for the A-588-604 order (see Preliminary Results of Antidumping 
Duty Administrative Reviews; Tapered Roller Bearings and Parts Thereof, 
Finished and Unfinished, From Japan and Tapered Roller Bearings, Four 
Inches or Less in Outside Diameter, and Components Thereof, From Japan, 
58 FR 51058 (September 30, 1993)).
    The cash deposit rate has been determined on the basis of the 
selling price to the first unrelated customer in the United States. For 
appraisement purposes, where information is available, the Department 
will use the entered value of the merchandise to determine the 
assessment rate. In the case of Fuji, the Department will calculate an 
assessment rate in the A-588-054 case which reflects the total value of 
that merchandise which we deemed to meet the criteria of the ``Roller 
Chain'' principle.
    This notice also serves as a final reminder to importers of their 
responsibility under 19 CFR 353.26 to file a certificate regarding the 
reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This notice also serves as a reminder to parties subject to 
administrative protective orders (APOs) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 353.34(d). Timely written notification of 
return/destruction of APO materials or conversion to judicial 
protective order is hereby requested. Failure to comply with the 
regulations and the terms of an APO is a sanctionable violation.
    These administrative reviews and this notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.

    Dated: April 15, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-10570 Filed 4-24-98; 8:45 am]
BILLING CODE 3510-DS-P