Preliminary Affirmative Determination of Scope Inquiry on Antidumping Duty Order on Tapered Roller Bearings and Parts Thereof From Japan

DEPARTMENT OF COMMERCE

[A-588-604]

Preliminary Affirmative Determination of Scope Inquiry on

Antidumping Duty Order on Tapered Roller Bearings and Parts Thereof

From Japan

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of preliminary determination of scope inquiry.

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SUMMARY: We preliminarily determine that subject forgings are within

the scope of the antidumping duty order on tapered roller bearings and

parts thereof, finished or unfinished, from Japan. Interested parties

are invited to comment on this preliminary determination.

EFFECTIVE DATE: February 28, 1994.

FOR FURTHER INFORMATION CONTACT: Maureen Shields at (202) 482-1690 or

John Kugelman at (202) 482-5253, Office of Antidumping Compliance,

Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue, NW.,

Washington, DC 20230.

SUPPLEMENTARY INFORMATION:

Background

On September 17, 1993, Koyo Seiko Company Ltd. and Koyo Corporation

of U.S.A. (Koyo) requested that the Department of Commerce (the

Department) issue a ruling that Koyo's imported forgings, including

tower forgings, hot forgings, and cold forgings, be found outside the

scope of the antidumping duty order on tapered roller bearings and

parts thereof from Japan (52 FR 37352, October 6, 1987). The Department

initiated its scope inquiry on September 28, 1993, and granted

interested parties an opportunity to comment on whether these forgings

fall within the scope of the order. We received comments on November

15, 1993, from the petitioner, the Timken Company, and rebuttal

comments from Koyo on November 22, 1993. Due to the significant

difficulty presented by this scope inquiry, we have determined that it

is appropriate to issue a preliminary determination, in accordance with

the Department's regulations (19 CFR 353.29(d)(3) (1993)).

Koyo requested the scope ruling in response to a change in the U.S.

Customs classification of Koyo's imported forgings. At the time of the

original investigation, Koyo's imported forgings were classified as

forgings under the Tariff Schedules of the United States (TSUS)

606.7340. When the Harmonized Tariff Schedule (HTS) replaced the TSUS

in 1989 and a specific provision for forgings ceased to exist, Koyo

classified its forgings as ``semifinished steel'' under HTS 7224.90,

and later, based on the advice of a Customs port, as ``steel articles''

under HTS 7326.19. Customs recently examined the subject forgings and

informed Koyo that it considers them to be ``parts of tapered roller

bearings (TRBs)'' under HTS 8482.99. Customs generally classifies an

article as a ``part'' of another article if that is its chief or

principal use. Based on this general principle, Customs determined that

under the HTS Koyo's forged rings should be classified as TRB parts as

long as they are chiefly used for incorporation into TRBs. Although

Koyo's scope clarification request was prompted at least in part by the

action of Customs, neither classification choices made by producers nor

classification decisions made by Customs determine the scope of

antidumping duty orders. Rather, the scope of antidumping duty orders

is determined by the Department at the time of the original

investigation and issuance of an order.

In accordance with 19 CFR 353.29(i)(1), in analyzing the scope

request in this proceeding, the Department took into account the

descriptions of the merchandise contained in the petition, the initial

investigation, and the determinations of the Department and the

International Trade Commission (ITC). The regulations provide that if

the Department determines these descriptions are ambiguous, it will

further consider the factors provided for under 19 CFR 353.29(i)(2),

known commonly as Diversified Products criteria (see Diversified

Products Corp. v. United States, 572 F. Supp. 883 (CIT 1983)).

Analysis

Koyo makes the forgings at issue from bearing grade steel bar,

which is sheared, pierced, and extruded into the shape of the forging.

The forgings are not machined in any way prior to exportation.

We note that the term ``forgings'' covers a broad spectrum of

products. The Summaries of Trade and Tariff Information (Schedule 6,

Volume 4) identifies two basic types of forgings in its description of

the product. Open-die forgings are large shapes produced by hammering

or pressing heated ingots, blooms, billets, slabs, or bars on

regulation press-and-hammer forging equipment with dies that are flat

or slightly shaped. Closed-die or drop forgings are small- or medium-

size shapes forged by using dies accurately formed to the size and

shape of the desired finished product. Open-die forgings require

machining to acquire the desired dimensions of the finished product.

Closed-die forgings require little or no subsequent machining and are

generally considered parts for import classification purposes. The

forgings at issue have not been categorized as either open-die or

closed-die forgings.

The Language of the Petition

The original petition describes the subject merchandise as follows:

The merchandise covered by this petition is all tapered roller

bearings, tapered rollers and other parts thereof (both finished and

unfinished) including, but not limited to, single-row, multiple-row

(e.g., two-, four-), and thrust bearings and self-contained bearing

packages (generally pre-set, pre-sealed, and pre-greased), but only

to the extent that such merchandise is not presently covered by an

outstanding antidumping duty order or finding in the United States.

In the petition, Timken stressed that it had identified TSUS

numbers to the best of its ability, but that it did not intend that

products under other classification numbers be excluded from the scope

if they fell within the description of the product in the petition.

Timken argues that the language of the petition unambiguously includes

Koyo's forgings, since the petition requested coverage for all

unfinished TRB parts not included in the A-588-054 finding which covers

TRBs four inches or less in outside diameter. Timken takes the position

that the instant forgings fall under the category of unfinished parts

and they should properly have been classified that way. The fact that

they were not named specifically in the petition does not imply that

Timken did not intend to include them. Timken states that it was

impossible for it to name each item that might be considered a TRB

part.

Koyo, however, claims that since the petition never mentioned

forgings, they were not included. In its ruling request Koyo argues

that forgings are outside the scope of the order because they are

``precursor materials'' that have not yet begun the manufacturing

process. Koyo claims that including forgings would be tantamount to

including bearing grade steel in the scope of the order.

The Department's position is that the petition clearly includes

unfinished TRB parts in its scope. However, the language in the

petition is ambiguous with respect to whether forgings are considered

unfinished parts.

The Language of the Commerce Department's Determinations

The products covered by the preliminary and final determinations

and the order as it was published in 1987 are ``tapered roller bearings

and parts thereof, currently classified under Tariff Schedules of the

United States (TSUS) item numbers 680.30 and 680.39; flange, take-up

cartridge, and hanger units incorporating tapered roller bearings,

currently classified under TSUS item number 661.10; and tapered roller

housings (except pillow blocks) incorporating tapered rollers, with or

without spindles, whether or not for automotive use, and currently

classified under TSUS item number 692.32 or elsewhere in the TSUS.

Products subject to the outstanding antidumping duty order covering

certain tapered roller bearings from Japan (T.D. 76-227, 41 FR 34974)

were not included within the scope of this investigation'' (see

Antidumping Duty Order: Tapered Roller Bearings and Parts Thereof,

Finished and Unfinished, from Japan, 52 FR 37352, October 6, 1987). At

issue is whether forgings should be considered unfinished parts within

the scope of the order.

Timken claims that at the time of the order Koyo's imported

forgings should have properly been classified as TRB parts, and that

they are clearly included within the scope of the order. Koyo argues

that the language of the order unambiguously excludes forgings, since

at the time of the investigation Koyo was importing forgings under TSUS

606.7340 as ``non-machined steel forgings'', a provision not mentioned

in the order. Koyo clearly stated in each of the first three

administrative reviews that it considered its imported forgings to be

outside the scope of the order, and neither the Department nor the

petitioner objected. Therefore, Koyo argues that forgings have been

considered outside the scope since the order was published.

The Department's position is that, absent the rare case in which

there is no narrative description of the subject merchandise, any TSUS

or HTS numbers mentioned in the scope of an order are for reference

only, and do not limit the scope in any way. The Department's position

in this respect is supported by the fact that the scope description for

each of the administrative reviews has contained a statement to the

effect that the Customs classification numbers are provided for

reference purposes only. However, the language used in the order to

describe the products is ambiguous with respect to forgings, since

forgings are not mentioned and there is no explicit indication of what

products are included as unfinished parts. Moreover, while Koyo stated

in its review responses that it did not report forgings, it is not

apparent from these statements the form the imports took. As was

described earlier, the term ``forgings'' covers a wide range of

products. The question this scope inquiry poses for the Department is

whether the instant forgings are advanced to the point that the

Department considers them TRB parts.

The ITC's Determination

The International Trade Commission's (ITC) questionnaires in the

investigation defined unfinished parts as ``* * * those that have been

shaped sufficiently that they may be used only in the manufacture of

tapered roller bearings.'' (p. 5). Likewise, the ITC considered whether

to treat unfinished parts as separate like products in its final

determination. It rejected Koyo's request to consider each of the

following groups as discrete like products:

1. ``Precursor materials'' (i.e., unfinished forged rings) and

``finished bulk parts'' (i.e., rollers and cages) of tapered roller

bearings;

2. Unfinished tapered roller bearing components (i.e.--

unfinished outer rings and inner rings);

3. Finished tapered roller bearings.

(Tapered Roller Bearings and Parts Thereof, and Certain Housings

Incorporating Tapered Rollers, from Japan, Inv. No. 731-TA-343 (Final),

USITC Pub 2020, September 1987, p. 5). The ITC reasoned that all parts

are destined to become complete, finished TRBs and that neither

finished nor unfinished parts have commercial value except as

components of TRBs. To the extent that the ITC considered the items in

this list a single like product, this statement suggests that the ITC

considered forged rings to be unfinished parts.

The ITC also states in its final determination that:

Unfinished bearing components are the cones, cups, and rollers

that have been green machined and heat treated, but that require

final finishing * * * Green machining is an industry term that

relates to the machining operations performed on the raw materials

prior to heat treatment for cups, cones, and rollers. (p. A-8)

However, Timken points out that the ITC was discussing cups and cones

made from tubing rather than forgings, and argues that the ITC's view

that green machining is the first stage in the production process

applies only to tubing. Timken claims that, in the bar-based

manufacturing process Koyo uses, the first step in production is

forging.

This is consistent with an ITC footnote (p. A-8) that the forging

process is used instead of green machining, indicating that at least

some of the green machining necessary on rings cut from tube steel is

not necessary on forgings. Although the ITC considered green machining

to be the turning point in Timken's tube-based production process, the

distinction is blurred when forgings are used. Since forging can

accomplish some of the same results as green machining, the ITC's

description of the production process does not necessarily imply that

forged rings are outside the scope of the order.

Diversified Products Analysis

While stages of production can be helpful in determining when raw

material becomes an unfinished part, the descriptions of the

merchandise in the petition and the Department's determinations are

ambiguous with respect to the question of whether these forgings are

unfinished parts. The ITC's final determination, though not perfectly

clear, points toward the conclusion that forgings are within the scope

of the order. However, because there is some ambiguity, the Department

considered it appropriate to analyze the Diversified Products criteria.

The four additional criteria the Department considered in determining

if forgings are within the order are listed at 19 CFR 353.29(i)(2): (1)

the physical characteristics of the product; (2) the expectations of

the ultimate purchasers; (3) the ultimate use of the product; and (4)

the channels of trade.

Physical Characteristics

Timken points out that forgings are similar in size and shape to

finished cups and cones. However, Koyo argues that there are dramatic

differences between forgings and finished cups and cones. Some forgings

are split in two to form both the cup and the cone. In the

manufacturing steps that take place during the turning process, between

24% and 30% of the steel is removed from a forging, resulting in a

green machined ring with the specific dimensions and tolerance of the

finished cup or cone, or inner and outer raceways.

Koyo argues further that the forged rings are most similar to steel

tube rings, which undergo the same processes (green machining, heat

treatment, polishing, and grinding) before becoming a finished TRB

part. Koyo states that ``both rings cut from tube and forged rings are

intermediate donut-shaped pieces of steel that are first produced from

steel bar and later further processed into parts for bearings'' (Koyo's

letter to the Department, November 22, 1993, p.4). Both parties agree

that rings cut from tube are outside the scope of the order, as

indicated by Koyo's statement to that effect on page 24 of its letter

and Timken's reference to rings cut from tube as raw material (p.23).

However, Timken points out that the forgings in question are a much

more processed product than rings cut from tube steel. Forged rings

have the approximate shapes of the cups and cones that they will be

turned into. Indeed, forging gives them much of the definition that

green machining would otherwise give. As a result, the forgings are

effectively dedicated to use as TRB parts. Conversely, rings cut from

tube steel bear little resemblance to cups or cones. Tube rings lose

50% to 75% of the weight of the ring during green machining, and can

only be considered TRB parts after this process takes place. Given the

advanced shape that forging gives the components, and the consequent

reduction in green machining, the green machining process does not

appear determinative in this case. Rather, it is the advanced physical

characteristics of the component forgings that are definitive.

The Department preliminarily determines that forged rings are more

processed than rings from tube stock, and, as such, are physically

distinct from rings cut from tube steel. While some final machining is

necessary, the forging process used in this case effectively transforms

the metal input into a product sufficiently advanced in state that it

is essentially a TRB component. Consequently, an examination of

physical characteristics indicates that forgings are included in the

scope of the order.

Channels of Trade

The forgings at issue are either produced by Koyo or purchased from

steel forgers and sold by Koyo to AKBMC, its related subsidiary.

Forgings move through the same channel of trade as unfinished parts,

namely, to bearings producers for incorporation into tapered roller or

antifriction bearings. Therefore, the Department preliminarily

determines that the channels of trade criterion indicates that forgings

are within the scope of the order.

Expectations of the Ultimate Purchaser

The forgings in question are imported into the United States for

use in the production of TRBs. Timken points out that these forgings

have undergone initial processing which renders them dedicated to use

in a limited range of part numbers. Timken notes that the bearings

producers who purchase these forgings have no expected use other than

the production of finished bearings. Koyo submits, however, that

finding forgings to be within the scope of the order based on the

expectation criterion is comparable to concluding that bearing grade

steel is also within the scope, since it too is imported for use in

production of TRBs and has almost no alternative uses. Koyo argues

further that rings cut from tube steel, which are outside the scope,

are also limited to use in a specific range of models.

The Department notes that although the expectations of the

purchasers of bearing grade steel and of rings cut from tube steel are

the same as those of purchasers of in-scope TRB parts, no one argues

that bearing grade steel or rings cut from tube are steel are covered

by the order. Moreover, bearing steel might be destined for bearing-

related production but it has not been advanced to the point of

dedicating it to a TRB component, finished or unfinished. By the same

token, it is also possible that some rings cut from tube steel may not

necessarily be intended for use in TRBs. However, the forgings in

question have been advanced to the point that some use other than a TRB

component is highly unlikely. Because the expectation of the parties

importing the instant forgings is to make TRBs, the Department's

position is that this criterion indicates that forgings are within the

scope of the order.

Ultimate Use

Timken points out that forgings are more dedicated to use in TRBs

than rings cut from tube steel, since these forgings more closely

approximate the dimensions of the finished cup or cone and do not

require as extensive a turning process as steel tube rings. Koyo

contends that a ring cut from steel tube is as dedicated to use in TRBs

as a forging is, because both are made from bearing grade steel, which

Koyo claims is too expensive to be used for other purposes.

Furthermore, Koyo argues, a steel tube ring and these forgings are

equally limited in the range of bearings for which they can be used.

However, Koyo uses the overwhelming portion of its imported forgings in

the production of TRBs. Koyo suggests that it is possible to use some

of the forgings to make both TRB and ball bearing parts (Koyo submitted

an example of a ball bearing and a TRB that have inner rings made from

the same forged ring), and it is theoretically possible for the

manufacturer to use a forging originally intended for use in a TRB to

produce a ball bearing instead, if production needs change after

importation. In practice, this possibility is seldom realized because

it is not cost efficient to create a forging with multiple uses.

Forgings are used to limit the amount of machining that is necessary.

The very concept of forging embodies shaping a blank to the degree that

it appears dedicated to one product.

The Department preliminarily determines that since the instant

forgings appear dedicated to the production of TRBs, these forgings are

essentially parts of TRBs. Therefore, the ultimate use criterion

indicates that these forgings are within the scope of the order.

Conclusion

Based on our analysis of the comments provided by interested

parties on the language of the petition and the determinations of the

ITC and the Department, and on the physical characteristics, channels

of trade, expectations of the ultimate purchasers, and the ultimate use

of the product, in accordance with 19 CFR 353.29(i), we preliminarily

determine that such forgings are the same class or kind of merchandise

as unfinished TRB parts, and therefore are within the scope of the

order on tapered roller bearings and parts thereof from Japan. The

Department preliminarily determines these forgings to be within the

scope based on the totality of the facts presented above and especially

for the following reasons: (1) the ITC clearly includes precursor

materials such as forgings within its definition of like product; (2)

the physical characteristics, channels of trade, ultimate use of

forgings, and expectations of ultimate purchasers indicate that such

forgings are within the scope of the order.

We invite interested parties to comment on this preliminary

determination no later than March 18, 1994. Rebuttal comments are due

no later than March 25, 1994. The Department will consider such

comments in reaching its final determination.

This preliminary scope ruling is in accordance with 19 CFR

353.29(d)(3).

Dated: February 18, 1994.

Joseph A. Spetrini,

Deputy Assistant Secretary for Compliance.

[FR Doc. 94-4506 Filed 2-25-94; 8:45 am]

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