Request for Public Comment

DEPARTMENT OF COMMERCE

[A-588-054 and A-588-604]

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

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

reviews and revocation in part of an antidumping finding.

-----------------------------------------------------------------------

SUMMARY: On May 5, 1995, the Department of Commerce (the Department)

published the preliminary results of its 1992-93 administrative reviews

of the antidumping finding on tapered roller bearing (TRBs), four

inches or less in outside diameter, and components thereof, from Japan

(A-588-054 finding) and the antidumping duty order on TRBs and parts

thereof, finished and unfinished, from Japan (A-588-604 order). The

review of the A-588-054 finding covers four manufacturers/exporters and

ten resellers/exporters of the subject merchandise during the period

October 1, 1992, through September 30, 1993. The review of the A-588-

604 order covers five manufacturers/exporters of the subject

merchandise, ten resellers/exporters of the subject merchandise, and 18

alleged forging producers for the period October 1, 1992, through

September 30, 1993.

EFFECTIVE DATE: November 7, 1996.

FOR FURTHER INFORMATION CONTACT:

Valerie Turoscy or John Kugelman, Office of Antidumping Compliance,

Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone (202) 482-5253.

SUPPLEMENTARY INFORMATION:

Background

On May 5, 1995, the Department published in the Federal Register

the preliminary results (60 FR 22349) of the 1992-93 administrative

reviews of the antidumping finding on TRBs, four inches or less in

outside diameter, and components thereof, from Japan (41 FR 34974,

August 18, 1976), and the antidumping duty order on TRBs and parts

thereof, finished and unfinished, from Japan (52 FR 37352, October 6,

1987).

Applicable Statute and Regulations

In accordance with section 751 of the Tariff Act of 1930, as

amended (1988) (the Tariff Act), the Department has now completed these

reviews for all firms except Koyo Seiko Company, Ltd. (Koyo). We will

publish our preliminary and final results for Koyo at later dates.

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.

Scope of the Reviews

Imports covered by the A-588-054 finding are sales and 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 the A-588-604 order, except for those

manufactured by NTN Corporation (NTN). This merchandise is currently

classifiable under HTS item numbers 8482.99.30, 8483.20.40, 8482.20.20,

8483.20.80, 8482.91.00, 8484.30.80, 8483.90.20, 8483.90.30, and

8483.90.60. These HTS item numbers and those for the A-588-054 finding

are provided for convenience and Customs purposes.

[[Page 57630]]

The written descriptions remain dispositive.

In addition, on February 2, 1995, we published in the Federal

Register our final scope determination regarding Koyo's rough forgings

(60 FR 6519). Because we determined that these forgings are within the

scope of the A-588-604 order on TRBs from Japan, we have considered

such forgings as within the scope of this 1992-93 review of the order.

These reviews cover TRBs manufactured and exported by NTN, NSK Ltd.

(NSK), Nachi-Fujikoshi (Nachi), and Maekawa Bearing Mfg., Co., Ltd.

(Maekawa), and TRBs resold/exported by Honda Motor Co., Ltd. (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 of

forgings by NTN and 18 other firms originally identified as Japanese

forging producers (Daido Steel Co., Ltd., Asakawa Screw Co., Ltd., Fuse

Rashi Co., Ltd., Hamanaka Nut Mfg. Co., Ltd., Ichiyanagi Tekko, Isshi

Nut Industries, Kawanda Tekko, Kinki Maruseo Nut Kogyo Kumiai, Kitazawa

Valve Co., Ltd., Nittetsu Bolten, Shiga Bolt, Shinko Bolt, Sugiura

Seisakusho, Sumikin, Seiatsu, Toyo Valve Co., Unytite Fasterner Mfg.

Co., Ltd., Gotoh Nut Seisakusho, and Kawada Tekkosho). However, as

explained in our preliminary results for these reviews, we have

terminated our review for 14 of these 18 firms (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, Termination in Part, and Intent to Revoke in

Part, 60 FR 22350 (May 5, 1995) (TRB 90/92 Prelim)). The period of

review (POR) is October 1, 1992 through September 30, 1993.

Analysis of Comments Received

We gave interested parties an opportunity to comment on our

preliminary results. At the request of the Timken Company (Timken), the

petitioner in these proceedings, NTN, and NSK, we held a hearing

covering both the reviews on August 4, 1995. We received case briefs

from Timken, NTN, NSK, Fuji, and Kawasaki, and rebuttal briefs from

Timken, NTN, NSK, and Honda.

At the request of the presiding official at the hearing, on August

11, 1995, Timken, NSK, and NTN submitted additional comments regarding

specific issues. These comments and those contained in the case and

rebuttal briefs are addressed below in the following order:

1. Model Match, Difference-in-Merchandise (Difmer) Adjustments, 20-

Percent Test, and Set-Splitting

2. Cost Test Methodology

3. Packing and Movement Expenses

4. Adjustments to USP

5. Samples, Prototypes, and Sales Not in the Ordinary Course of

Trade

6. Discounts, Rebates, and Price Adjustments

7. Miscellaneous Comments Regarding Level of Trade, VAT

Methodology, Assessment and Cash Deposit Rates, Supplier's Knowledge,

and Honda's Revocation

8. Cost of Production and Constructed Value

9. Clerical and Computer Programming Errors

Comments Regarding Model Match, Difference-In-Merchandise

Adjustments, 20-Percent Test, and Set-Splitting

Comment 1: NTN and NSK argue that due to decisions by the Court of

International Trade (the CIT) in litigation related to earlier TRB

reviews, the Department is required to include in its sum-of-the

deviations model-match methodology a ten-percent ``cap'' on deviations

in each of the five physical criteria used in this methodology, citing,

as examples, NTN Bearing Corp. v. United States, 881 F. Supp. 595 (CIT

1995) (NTN1), and Koyo Seiko Co. v. United States, 834 F. Supp. 431,

434-35 (CIT 1993) (Koyol). NSK adds that the Department's failure to

apply the ten-percent deviation cap invites comparisons between

physically dissimilar TRBs because the Department's use of the 20

percent diffmer cap alone does not adequately screen out dissimilar

matches.

Petitioner argues that, because the issue of the ten-percent

deviation cap is currently on appeal at the United States Court of

Appeals for the Federal Circuit (Federal Circuit), the Department

should decline to alter its methdology until the final judicial

decision is made on this issue.

Department's Position: We disagree with respondents. Since the

issuance of our preliminary results, the Federal Circuit has

definitively ruled that our choice not to apply the ten-percent

deviation cap is reasonable and that we are not required to apply such

a cap in connection with our sum-of-the-deviations model-match

methodology (see Koyo Seiko Co. v. United States, No. 94-1363 (Fed.

Cir. September 20, 1995)). As a result, we have not applied a ten-

percent deviation cap on our five model-match criteria for these final

results.

Comment 2: 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, by splitting such sets, creates 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. Because the

Department does not consider other factors such as packaging or

invoicing, 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 the

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.

[[Page 57631]]

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 an 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 the

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 cone 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 CIT

(see, e.g., 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 90/92) and NTN Bearing Corp. v. United States, 747 F. Supp.

726, 741 (CIT 1990)).

Comment 3: NTN argues that the Department should not compare TRBs

with different design types and, more specifically, that the Department

should not compare TRBs of different precision ratings. NTN explains

that not only is the physical nature of high precision TRBs much

different than that for normal precision items, but high precision TRBs

are sold at prices much higher than normal precision TRBs, and the two

types of TRBs are never used interchangeably. Therefore, NTN asserts,

the Department's comparison of normal precision TRBs to high precision

TRBs is contrary to law. NTN also argues that, because the Department

did not compare bearings with different precision ratings in the

antifriction bearings (AFBs) investigation and subsequent reviews, and

because the Department noted the use of bearing design type in its

less-than-fair-value (LTFV) final determination in the A-588-604 TRB

case, the Department should include design type and precision rating in

its model-match methodology for these final results.

Timken contends that the Department's AFB model-match methodology,

which reflects a ``family'' approach that includes design type and

precision rating, does not serve as a basis for the use of design type

and precision rating in the Department's TRB model-match methodology,

because the AFB methodology was developed specifically for AFBs and

neither NTN nor any other party has asserted that there are

``families'' of TRBs or identified characteristics of TRBs that would

require a model-match methodology like that of AFBs. Timken also argues

that NTN's reliance on the Department's LTFV determination in the A-

588-604 case is incorrect in that the Department's referral to ``type

of bearing'' in its determination did not encompass design types, but

rather referred to the number of rows of rollers in a TRB, citing Final

Determination of Sales of Less than Fair Value; Tapered Roller Bearings

and Parts Thereof, Finished and Unfinished, From Japan, 52 FR 30700.

Finally, Timken states that NTN has not provided evidence that the

Department's TRB model-match methodology is contrary to law, and,

absent such a demonstration, the Department is not required to alter

its methodology.

Department's Position: We agree with Timken. As we explained in

TRBs 90/92, design type categories are not consistent throughout the

TRB industry. If we could not match across such categories, we would

substantially limit the number of matches, thus working contrary to the

statutory preference for price-to-price comparisons. If the physical

nature of the compared bearings is significantly different, as NTN

states is true for its high precision and low precision TRBs, the sum-

of-the-deviations model-match methodology addresses the differences in

physical criteria. In addition, if the bearings are not of equal

commercial value, our 20 percent difmer cap precludes such a comparison

(see, e.g., TRBs 90/92 at 64721 and Tapered Roller Bearings and Parts

Thereof, Finished and Unfinished, From Japan; Final Results of

Administrative Review, 57 FR 4960 (February 11, 1992) (TRBs 89/90

(604))). Furthermore, concerning NTN's statement that high precision

and low precision TRBs should not be compared because they are not

interchangeable, ``interchangeability'' is not a requisite criterion

for matching similar merchandise. If it were, it would effectively

mandate that all comparison models be identical to ensure the

``interchangeability'' of the comparison merchandise. Finally, while

all TRBs and AFBs are bearing products, because TRBs are different

products than AFBs, it is reasonable for us to employ different model-

match and other methodologies in our calculations for TRBs.

Comment 4: NSK argues that, in prior reviews, when determining the

pool of potential similar home market merchandise, the Department has

calculated its 20 percent difmer cap as 20 percent of the value of U.S.

variable costs of manufacturing (VCOM). NSK states that in the

preliminary results of these reviews the Department departed from its

previous methodology and calculated its 20 percent difmer cap as 20

percent of the total cost of manufacture (TCOM) of the U.S. model. NSK

concludes that, because the TCOM for a model is larger than the VCOM,

the Department's new methodology resulted in an unreasonable and

insupportable increase in the pool of similar home market merchandise.

NSK further states that the Department's previous methodology was

affirmed by the CIT in numerous cases, citing NTN1. NSK contends that

because the Department has not adequately explained its reasons for

using the new methodology, and given the CIT's approval of the

Department's previous methodology, for these final results the

Department should revert to its previous practice and use the VCOM as

the denominator in its 20 percent difmer cap calculation.

Timken argues that the Department's use of the TCOM as the

denominator in its calculation of the 20 percent difmer cap was not

only explained, but, contrary to NSK's assertion, was given notice of

in a 1992 Departmental ``Policy Bulletin.'' Timken adds that in the

third AFBs review, the Department again explained its selection of TCOM

as the reference point of the 20 percent difmer cap, citing

Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts

Thereof, From France, Et. Al.; Final Results of Antidumping

Administrative Reviews and Revocation in Part of an Antidumping Duty

Order, 58 FR 39729 (July 26, 1993) (AFBs 91/92).

Department's Position: In accordance with section 771 (16)(b)(iii)

of the Tariff Act, in order to ensure that the home market merchandise

being compared to the U.S. merchandise is commercially comparable, we

automatically exclude from our pool of comparison home market

merchandise those home market models for which the VCOM deviates by

more than 20 percent from that of the U.S. model. In our preliminary

results of review we calculated this deviation as the absolute value of

the difference between the VCOMs for the home market and U.S. model

divided by the TCOM for the U.S. model. In previous

[[Page 57632]]

TRB reviews we calculated this deviation as the absolute value of the

difference between the VCOMs for the home market and U.S. model divided

by the VCOM of the U.S. model. Our change in methodology for these

preliminary results was based on a policy change announced in a 1992

Departmental policy bulletin which stated, ``because variable

manufacturing costs change as a share of total manufacturing costs from

product to product, the size of the 20 percent difference would vary as

well in relation to both the price and total manufacturing costs.

Therefore, a more stable basis for the denominator is the total

manufacturing costs, and it has been chosen for uniform use'' (see

Import Administration Policy Bulletin, No. 92.2, at 3 (July 29, 1992)

(Policy Bulletin)). We also stated that this change would be

implemented in all future and current reviews and investigations if the

change could be made ``without delaying the cases beyond their due

dates'' (see Policy Bulletin at 4). Upon review of the timing of this

policy and the 1990-92 TRB reviews, the two TRB review periods for

which we had initiated but not yet completed the reviews by the date of

the policy bulletin, we determined that the implementation of this

policy would serve to further delay those reviews. Because the

implementation of this policy would not serve to delay these 1992-93

reviews, we adopted the policy in our preliminary results. In addition

to this policy bulletin, our policy of using TCOM in the denominator

when calculating our 20 percent difmer cap is apparent in the final

results for several other cases published prior to the initiation of

these 1992-93 reviews (see, e.g., Porcelain-on-Steel Cooking Ware From

Mexico; Final Results of Antidumping Duty Administrative Review, 58 FR

43327, 43328 (August 16, 1993), AFBs 91/92 at 39766, and Paving Parts

for Self-Propelled Bituminous Paving Equipment From Canada; Final

Results of Administrative Review of the Antidumping Finding, 58 FR

15481, 15482 (March 23, 1993) (Paving Parts)). It is clear that NSK had

notice of the Department's policy change and that the implementation of

this policy in the TRB reviews was imminent. Concerning NSK's

contention that we have not adequately explained our reasons for using

the new policy, we disagree. As demonstrated above, the Policy Bulletin

clearly stated that TCOM represents a more stable denominator than

VCOM. In AFBs 91/92 we explained that TCOM is the more appropriate

denominator because, unlike VCOM, it more accurately reflects the value

of the model. In addition, it provides a more stable benchmark against

which the absolute size of physical differences in merchandise can be

compared in order to determine if the difference is so large that the

two products being compared cannot be considered similar for model-

matching purposes (AFBs 91/92 at 39766). Furthermore, in Paving Parts

we again explained that ``because the proportion of variable to fixed

costs can vary significantly among products, the Department chooses to

use TCOM, rather than VCOM, as the appropriate denominator, thus

providing a reasonable, stable basis for evaluating comparability which

is not affected by a particular product's proportion of fixed to

variable costs'' (Paving Parts at 15482).

In light of the above, we have not changed our policy for these

final results and have continued to use the TCOM of the U.S. model as

the denominator in our calculation of the 20 percent difmer cap.

Comment 5: Timken argues that for those comparisons in which the

sum of the deviations is zero the Department should set the difmer

adjustment equal to zero such that no difmer adjustment would be made

for comparisons between physically identical merchandise.

NTN argues that the five physical criteria used by the Department

in its sum-of-the-deviations methodology are not the only physical

criteria which TRBs have. Rather, NTN notes, these are simply the five

which the Department relies upon for its model-match methodology. NTN

claims that Timken is attempting to effectively eliminate the difmer

adjustment and the Department should reject the petitioner's argument.

Department's Position: We disagree with Timken. To determine those

home market TRBs which are identical to U.S. products, we compare TRBs

on the basis of nomenclature. Because there are numerous criteria which

define TRBs, the comparison of actual product coding is the only way we

can ensure that two TRBs are physically identical. If we are unable to

match the U.S. merchandise with identical home market merchandise by

means of nomenclature we conclude that there is no physically identical

home market match for that U.S. model. It is at this point in our

model-match methodology that we employ the sum-of-the-deviations

methodology. Therefore, it is only when an identical match can not be

found that we use a comparison between models based on the sum of the

deviations. Once we have found the one home market model whose sum of

the deviations is the closest to that of the U.S. model, we consider

this home market model to be the most similar home market merchandise.

When we begin our search for the most similar model using our sum-of-

the-deviations methodology, it is possible that the most similar home

market model will not differ from the U.S. model in any of the five

physical criteria used in our model-match methodology. However, simply

because the sum of the deviations is zero, we do not assume the

merchandise is identical. There are numerous characteristics which

affect the variable costs incurred when producing that TRB. While we

use a methodology based on the five most prominent characteristics of

TRBs, we do not presume that all TRBs with the identical five physical

criteria are identical bearings. We therefore agree with Timken that a

difmer adjustment should not be made when comparing identical

merchandise and, accordingly, we did not make such an adjustment in

these reviews. However, because the sum-of-the-deviations methodology

does not account for all possible difmers, it is proper to make other

difmer adjustments when we compare the U.S. model to the most similar,

but not identical, home market merchandise, even though it is at times

possible that the sum of the deviations for the two will be zero.

Comments Regarding the Cost Test Methodology

Comment 6: NTN argues that the Department should not have performed

set-splitting of home market set sales prior to conducting its cost-of-

production (COP) test (cost test). NTN contends that, by splitting sets

prior to the cost test, the Department derived fictional COP figures

for its split cup and cone sales which it used to determine whether a

split cup or cone sale was at, above, or below COP. NTN argues that

there is no authority under the antidumping statute or regulations

which allows for the derivation of fictional COP figures. NTN states

that because the Department's current methodology results in the

calculation of split cup and cone COP figures on the basis of the set

the components were split from, the split cup and cone COP figures are

not based on costs and expenses incurred in producing such or similar

merchandise. As a result, NTN contends that the Department is in

violation of its own regulations, citing 19 CFR 353.51(c). Finally, NTN

claims that splitting sets prior to the cost test allows for the absurd

possibility of a split cup or cone sale passing the cost test while the

parent set does not.

[[Page 57633]]

Timken argues that, contrary to NTN's assertion that the Department

derived fictional COP figures for NTN's split cup and cone sales, the

Department derived these figures from actual costs submitted by NTN. In

addition, the petitioner points out that a review of the split

component COP figures derived by the Department indicates that these

split cup and cone COP figures are virtually identical to the component

COPs NTN reported for its sales of individually sold cups and cones

identical to those split from home market sets. As such, Timken argues,

the split component COPs derived by the Department are accurate, fair,

and reasonable. Timken further asserts that, in accordance with section

771(16) of the Tariff Act, the Department correctly determine whether

the split cup and cone sales represented such or similar merchandise on

the basis of the physical characteristics and VCOM of the split cup and

cones and not the parent set. Likewise, Timken comments, in accordance

with section 773(a)(1) of the Tariff Act, the prices and price

adjustments used by the Department to determined the foreign market

value (FMV) of the split cups and cones were correctly based on the

prices and price adjustments attributable to the split cups and cones,

and not the parent sets. Therefore, Timken concludes, just as it would

be absurd for the Department to base the prices, price adjustment

amounts, and the determination of such and similar merchandise for the

split component sales on the parent set, it would be just as absurd to

determine under section 773(b) of the Tariff Act that the split cups

and cones sales were below cost based on the costs of the parent set

rather than on the costs of the split component sales. In light of the

above, Timken argues that NTN's ``absurd'' result that a split cup and

cone sale may pass the cost test while the parent set does not is not

absurd, but the exact result mandated by the statute.

Department's Position: We agree with Timken. It is consistent with

our set-splitting methodology and with the statute to first conduct the

splitting of sets in the home market and then perform the cost test on

all sales of cups and cones, whether they be individually sold cups and

cones or split cup and cone sales. The split-component COP figures we

derive from set splitting are based on NTN's reported cup and cone

ratios for each home market set. These ratios reflect the variable cost

of the cup to the cost of the set and the variable cost of the cone to

the cost of the set, and are based on costs NTN actually incurred in

producing individual cups and cones. Therefore, the resulting split cup

and cone COP figures are not fictional. We have not created COP data

where none existed, but, rather have apportioned actual costs incurred

by NTN for a set to the cup and cone contained in that set.

Furthermore, NTN has not explained why it is unreasonable for us to use

these actual cost-based ratios in deriving the split cup and cone COP

figures.

Because split cups and cones may be found to be the most similar

merchandise to the product sold in the United States, we must ensure,

in accordance with section 773(b) of the Tariff Act and 19 CFR 353.51,

that the transaction price for the split cup and cone is above COP. By

splitting sets prior to the cost test, we are able to separately test

each home market sale, whether it was an individually sold or split

sale, to determine if the sale was at, above, or below COP, rather than

imputing the results of the cost test for the parent set to the split

component sales. Finally, section 771(16) of the Tariff Act requires us

to compare the price of the imported cups and cones with such or

similar home market merchandise. Clearly, the home market merchandise

which is such or similar to the imported cups and cones are home market

cups and cones, whether they are regular or split sales, and not home

market sets. It is, therefore, necessary to perform the cost test on

the merchandise that is actually being compared to the U.S. merchandise

(home market cups and cones), rather than the merchandise that is not

being compared (home market sets) (see TRBs 90/92 at 64729).

Comment 7: NTN argues that the Department has provided no

explanation why a period of 3 months or more represents an ``extended

period of time'' in its analysis of whether to disregard sales NTN made

in the home market at prices below the COP. NTN contends that by

definition, extended means ``covering a great period of time.'' NTN

claims that this indicates that an extended period of time should

account for at least 6 months (fifty percent) of the 12-month review

period.

Petitioner argues that, as the CIT has noted, Congress did not

provide for a specified time period in section 773(b) of the Tariff Act

for determining whether sales below cost were made ``over an extended

period of time,'' citing Toho Titanium Co., Ltd. v. United States, 657

F. Supp. 1280, 1285 (CIT 1987). According to Timken, it has therefore

been left to the Department to determine whether sales below COP were

made over an extended period of time. Timken states that the Department

has correctly selected a period of three months as the time necessary

to meet the goal of the statute and retain for comparison home market

sales of obsolete or end-of-model-year merchandise.

Department's Position: The CIT, ruling on this identical argument

by NTN in NTN Bearing Corporation of America, American NTN Bearing Mfg.

Corporation, and NTN Corporation v. United States, Slip. Op. 94-96 (CIT

1994), clearly stated that the Department's definition of ``extended

period of time'' was reasonable and in accordance with the law. Because

NTN did not provide any evidence indicating that below-cost sales are a

normal and expected characteristic of the TRB industry, and because our

definition of ``extended period of time'' for these reviews is

identical to that which we applied in previous TRB reviews and has been

upheld by the CIT, we have not changed our definition for these final

results.

Comments Concerning Packing and Movement Expenses

Comment 8: Timken argues that while section 772(D)(2)(A) of the

Tariff Act authorizes the deduction of U.S. pre-sale inland freight

expenses from United States price (USP), there is no corresponding

provision authorizing a parallel adjustment to foreign market value

(FMV). Timken states that this, long with the Federal Circuit's

decision in The Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray

Portland Cement v. United States, 13 F.3d 398 (Fed. Cir. 1994) (Ad

Hoc), demonstrates that home market pre-sale inland freight charges

should not be treated differently depending on the basis on which USP

is determined and the Department should therefore not deduct pre-sale

inland freight expenses in either purchase price or exporter's sales

price (ESP) comparisons. Timken also argues that pre-sale movement

expenses may not be deducted as indirect expenses in ESP comparisons

because such expenses are not incurred in the selling of the

merchandise, but rather before a sale occurred. Timken concludes that

because the ESP offset is limited exclusively to selling expenses, pre-

sale inalnd freight expenses cannot be adjsuted for under 19 CFR

353.56(b)(1) or (2) of the Department's regulations and, like pre-sale

warehousing expenses, are best categorized as overhead or general and

administrative expenses. Finally, the petitioner argues that, even if

the Department adheres to its current methodology for adjusting FMV for

pre-sale inland freight expenses, the Department should not

[[Page 57634]]

have made a deduction to FMV for NTN's home market pre-sale inland

freight expenses in purchase price situations because NTN failed to

demonstrate that its pre-sale inland freight expenses were direct

selling expenses.

NTN argues that Timken's position completely ignores the CIT's

decision in Federal-Mogul v. United States, 17 CIT, Slip Op. 94-40

(March 7, 1994) (Federal-Mogul), in which the CIT stated that, in Ad

Hoc the Federal Circuit limited its decision to the calculation of FMV

in purchase price situations only and specifically noted that it was

not ruling on the Department's authority to adjust for pre-sale inland

freight pursuant to the circumstance-of-sale (COS) provisions in

section 773(a)(4)(b) of the Tariff Act (Federal-Mogul at 7). NTN argues

that not only does Federal-Mogul authorize the Department's current

practice of deducting pre-sale inland freight in ESP situations, but,

given the Department's broad authority to make COS adjustments, the

Department may also legitimately make such a deduction from FMV in

purchase price situations as well.

NSK argues that if pre-sale inland freight expenses are deducted

from USP, the plain language of the statute requires that the

Department should deduct pre-sale inland freight expenses from FMV,

regardless of whether it is a purchase price or ESP calculation.

NSK asserts that the Department has correctly defined the place of

shipment in the country of exportation as ex-factory and, having done

so, is bound by section 772(d)(2)(A) of the Tariff Act to deduct ``post

factory'' freight expenses from FMV regardless of whether the

Department designates the freight expense as pre-sale or post-sale.

Like NTN, NSK also argues that the antidumping law grants the

Department the authority to deduct both direct and indirect movement

expenses from FMV as a COS adjustment.

NSK also argues that the Department should not have deducted pre-

sale inland freight expenses in NSK's USP calculations. NSK contends

that section 772(d)(2)(A) of the Tariff Act refers only to those costs

or expenses incident to bringing merchandise from the place of shipment

in the country of exportation to the place of delivery in the United

States. NSK states that the record demonstrates that, after

manufacture, but prior to sale, NSK sends TRBs to distribution centers.

NSK explains that these TRBs are then shipped from the distribution

center to the customers. NSK asserts that, because the freight it

incurred in transporting the merchandise from the factory to the

distribution center was incurred prior to the date of sale, and because

the places of shipment in the country of exportation in NSK's case are

its distribution centers, this pre-sale inland freight expense does not

constitute an expense which was incurred incident to bringing the TRBs

from the place of shipment to the place of delivery and should not be

deducted from USP.

Department's Position: We agree with NSK that the Ad Hoc decision

was limited to the narrow question of our inherent authority to deduct

pre-sale freight expenses in purchase price situations. However, as

noted by the CIT in Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray

Portland Cement v. United States, 865 F. Supp. 857 (CIT 1994), the Ad

Hoc Committee decision ``discussed without disapproval, Commerce's ESP-

COS procedures where, as indicated, indirect expenses, such as most

pre-sale transportation costs, are deductible from FMV to the extent of

the USP level of expenses.'' (emphasis added)

As explained in numerous other Departmental decisions, we have

determined, in light of Ad Hoc and its progeny, that the Department no

longer can deduct home market movement charges from FMV pursuant to its

inherent power to fill in gaps in the antidumping statute. We instead

adjust for those expenses under the COS provision of 19 CFR 353.56 and

the ESP offset provision of 19 CFR 353.56(b) (1) and (2), as

appropriate, in the manner described below (see, e.g., Antifriction

Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From

France, et. al.; Final Results of Antidumping Duty Administrative

Reviews, Partial Termination of Administrative Reviews, and Revocations

in Part of Antidumping Duty Orders, 60 FR 10900 (February 28, 1995)

(AFBs 92/93), Porcelain-on-Steel Cooking Ware From Mexico; Final

Results of Antidumping Duty Administrative Review, 60 FR 2378 January

9, 1995), Final Determination of Sales at Less Than Fair Value; Canned

Pineapple From Thailand, 60 FR 29553 (June 5, 1995)).

When USP is based on either ESP or purchase price, we adjust FMV

for home market movement charges through the COS provision of 19 CFR

353.56(a). Under this adjustment, we capture only direct selling

expenses, which include post-sale movement expenses and, in some

circumstances, pre-sale movement expenses. Specifically, we treat pre-

sale movement expenses as direct expenses if those expenses are

directly related to the home market sales of the merchandise under

consideration.

In order to determine whether pre-sale movement expenses are

direct, the Department examines the respondent's pre-sale warehousing

expenses, since the pre-sale movement charges incurred in positioning

the merchandise at the warehouse are, for analytical purposes, linked

to pre-sale warehousing expenses (see Final Results of Redetermination

Pursuant to Court Remand, dated January 5, 1995 (pertaining to Slip.

Op. 94-151)). If the pre-sale warehousing constitutes an indirect

expense, the expense involved in getting the merchandise to the

warehouse, in the absence of contrary evidence, also must be indirect;

conversely, a direct pre-sale warehousing expense necessarily implies a

direct pre-sale movement expense. We note that although pre-sale

warehousing expenses in most cases have been found to be indirect

expenses, these expenses may be deducted from FMV as a COS adjustment

in a particular case if the respondent is able to demonstrate that the

expenses are directly related to the sales under consideration (see Ad

Hoc Committee of AZ-NM-TX-FL producers of Gray Portland Cement v.

United States, Slip Op. 95-91 (CIT May 15, 1995) (upholding the

Department's pre-sale inland freight methodology set forth in its

January 5, 1995, Remand Results)).

Additionally, when USP is based on ESP, under the ESP offset

provision set forth in 19 CFR 353.56(b) (1) and (2), we adjust for any

pre-sale movement expenses found to be indirect selling expenses.

We disagree with Timken that we deducted pre-sale inland freight

expenses from FMV in our purchase price comparisons for NTN. In our

preliminary results for NTN we determined that NTN's reported inland

freight expenses were not directly related to its sales. As a result,

in our preliminary results computer program for NTN we included pre-

sale inland freight in our home market indirect expenses variable.

However, we used this variable in our ESP calculations only for ESP

offset purposes, in accordance with our policy to adjust FMV for pre-

sale inland freight expenses which are indirect in nature, pursuant to

the ESP offset provision set forth in 19 CFR 353.56(b) (1) and (2). We

did not apply this home market indirect selling expenses variable in

our purchase price calculations. Therefore, contrary to Timken's claim,

in our preliminary results for NTN we did not deduct pre-sale inland

freight from FMV in purchase price comparisons, and, as a result, we

have not changed our calculations in these final results for NTN.

[[Page 57635]]

We also disagree with Timken's argument that pre-sale movement

expenses should not be viewed as selling expenses. The only purpose of

moving merchandise from the factory to a warehouse or distribution

center is in furtherance of the process of selling that merchandise and

no other characterization is sensible.

Concerning NSK's claim that we should not have deducted pre-sale

inland freight from USP because its reported pre-sale inland freight

expenses do not fall within the meaning section 772(d)(2)(A) of the

Tariff Act, we disagree. The crux of NSK's argument is that because it

reports the date the home market merchandise was shipped from the

distribution center as its home market date of shipment, then, in terms

of its U.S. sales, the distribution center must be the point of

shipment from the country of exportation in accordance with section

772(d)(2)(A) of the Tariff Act. We have reviewed NSK's responses to our

original and supplemental questionnaires and have determined that NSK

has provided no evidence which demonstrates that its home market

distribution centers constitute the ``point of shipment in the country

of exportation.'' To the contrary, the evidence on the record suggests

that, for that merchandise which is destined for export, NSK's home

market distribution centers are intermediary points of shipment and not

the original point of shipment in Japan, the country of exportation.

For example, TRBs destined for exportation are first transported from

the plant to distribution centers, and subsequently shipped to NSK's

freight forwarder. From the freight forwarder the merchandise is then

shipped to the port of exportation. The initial packing of all

merchandise is done at the plant, and that merchandise destines for

exportation receives additional packing for export by the freight

forwarder. NSK provided no explanation of what type of processing takes

place (such as what type of paperwork is generated or what type of

activities occur) at the distribution centers with regard to export

merchandise. Nor did NSK provide information on the record concerning

any expenses it might have incurred at the distribution centers for

TRBs destined for export. In other words, we have no information upon

which to make a determination that these distribution centers should be

considered as the shipment point in the country of exportation pursuant

to section 772(d)(2)(A) of the Tariff Act. Rather, this record evidence

leads us to conclude that NSK's home market distribution centers are

merely one stopping point in the transit of merchandise destined for

export, which begins at the factory door and ends with the port of

exportation. Therefore, we have not changed our treatment of this

expense and have deducted from USP NSK's reported pre-sale inland

freight expenses for U.S. merchandise, including those expenses

incurred for the transport of the merchandise from the factory door to

the distribution centers.

Comment 9: Timken points out that NTN reported distinct pre-sale

inland freight expenses for its U.S. and home market sales. Timken

argues that, given the fact that NTN's pre-sale inland freight expenses

represent the costs incurred when moving merchandise from the factory

to the warehouse or distribution center, the allocation ratios NTN

calculated for these expenses should be consistent, whereas NTN's vary.

Timken contends that the Department should either make identical

deductions from USP and FMV for pre-sale inland freight, or eliminate

the adjustment entirely.

Citing previous Departmental decisions on this issue in both the

TRB and AFB cases, NTN argues that the Department has acknowledged in

the past that pre-sale freight expenses do not have to be the same in

both markets and urges the Department to again reject Timken's

position.

Department's Position: We agree with NTN. Because sales in each

market may be handled differently and, thus, different freight expenses

may be incurred, variations in these expenses between markets is

reasonable and such variations are not an adequate basis upon which to

reject NTN's claimed adjustment for home market and U.S. pre-sale

inland freight expenses. Likewise, the deduction of pre-sale inland

freight from either the home market or the U.S. market is not

contingent on whether pre-sale inland freight occurred in the other

market (see TRBs 90/92 at 64723 and AFBs 91/92 at 39768).

Comment 10: The petitioner argues that NSK's reported U.S.

repacking material and labor expense factors, which NSK allocated on

the basis of the total POR sales value of all products sold in the

United States, is incorrect. Timken contends that, while NSK packs both

domestically produced and imported TRBs in the United States, its

allocation methodology does not accurately account for the repacking

costs attributable to imported merchandise only. A a result, Timken

argues that the Department should recalculate NSK's repacking expense

factor by dividing NSK's reported repacking expenses during the POR by

the reported sales value of only that subject merchandise which was

imported during the POR.

NSK contents that, while it normally shipped merchandise from its

U.S. warehouses in its original containers, it occasionally repacked

merchandise to accommodate small orders. NSK added that because it

ships both imported merchandise and domestically-produced merchandise

from its U.S. warehouses, the repacked merchandise may have been

imported or may have been domestically produced. NSK argues that,

because it does not maintain records in the ordinary course of business

concerning this distinction, it cannot calculate the exact repacking

expenses attributable to its imported merchandise only and its

calculation of its repacking expenses is therefore reasonable.

Department's Position: We agree with NSK. NSK explained in its

response that it incurs repacking material and labor expenses for both

imported and domestically-produced merchandise and does not maintain

records which allow it to make a distinction between the repacking

expenses incurred for its imported merchandise separate from those for

its domestically-produced merchandise. As a result, NSK's inclusion in

its numerator of all the repacking expenses it incurred during the POR

for all products sold in the United States is acceptable, given its

ordinary business practices. Because its numerator reflected the

repacking expenses incurred on all products sold in the United States

during the POR, NSK correctly used the total sales value of all

products it sold in the United States as its denominator. In addition,

because the fact that a particular product was imported or domestically

produced did not affect the amount of materials NSK used or the labor

required to repack that product, and because NSK's allocation

methodology reflects the manner in which it incurred and booked its

repacking expenses, we are satisfied that its reported repacking

expenses are accurate and reasonable.

Comments Concerning Various Adjustments to USP

Comment 11: Timken argues that, because NTN has failed to

demonstrate that its allocation of U.S. selling expenses by level of

trade was reasonable and accurate, the Department should re-allocate

NTN's reported U.S. selling expenses without regard to levels of trade.

In addition, Timken asserts that when re-allocating certain of NTN's

reported U.S. selling expenses in its

[[Page 57636]]

preliminary results, the Department used an incorrect allocation base

such that the Department's calculated expense factors failed to yield

the net expense figures NTN reported in its response.

NTN argues that its allocation of U.S. expenses by level of trade

is directly based on its accounting and sales records. NTN also points

out that the Department has consistently accepted all aspects of its

U.S. selling expense allocation methodology in previous segments of

these proceedings, and insofar as its methodology is not unreasonable,

the Department should accept it in these final results as well.

Department's Position: In our preliminary results for NTN we

slightly modified NTN's U.S. selling expense allocations such that

certain expenses incurred by NTN Bearing Company of America (NBCA) in

selling to U.S. customers were more appropriately expressed as a

percentage of U.S. sales value rather than the transfer price between

NTN and NBCA. However, in doing so we accepted NTN's level-of-trade

methodology because we have determined that this methodology prevents,

rather then creates, certain distortions. As demonstrated in NTN's

response, NTN developed its level-of-trade allocations, which it based

on regional sales and the regional average number of employees, to

compensate for the fact that in certain regions NTN sells to only one

level of trade. To avoid the distortions that would arise if expenses

incurred in a region were allocated to a level of trade that does not

exist in that region, NTN developed a complex allocation methodology

which operates to attribute expenses incurred on sales to a particular

level of trade only to that level of trade. NTN achieved this level of

detail because it maintains its books and accounting records according

to levels of trade. In this way, we are satisfied that NTN's detailed

and often complex U.S. expense reporting methodologies result in

reasonable allocations. Therefore, absent specific evidence

demonstrating that NTN's level-of-trade allocations are unreasonable,

we do not agree with Timken that we should disregard these allocations.

However, for these final results, we have re-allocated NTN's U.S.

selling expenses without regard to different levels of trade for a

different reason, as discussed below.

To support its position that the Department's re-allocations of

certain of NTN's reported U.S. expenses in the preliminary results

failed to properly account for the gross expense amounts NTN reported

in its response, the petitioner provided a detailed computer analysis

demonstrating the discrepancy. In reviewing Timken's computer analysis,

we discovered a significant error in NTN's response. In its

supplemental questionnaire response dated May 31, 1994, NTN submitted a

revised total U.S. in-scope sales value and stated that it discovered

an error in its earlier reported figure. We compared this new figure to

the total sales value we derived from NTN's submitted U.S. sales data

computer files and verified its accuracy. However, our further review

of NTN's response revealed that, in its U.S. selling expense

allocations detailed in proprietary exhibit B-8 of its initial

response, NTN did not use the same total sales value, but rather a

figure much different from the revised figure submitted in its

supplemental response, and even significantly different from its

originally-reported ``incorrect'' figure (submitted in proprietary

exhibit A-19 of its original response). We have examined NTN's

responses in detail and are unable to find any explanation for this

discrepancy. Because (1) NTN clearly reported that the sales figure

submitted in its supplemental response was the ``corrected'' figure,

(2) NTN reported this figure subsequent to its submission of

proprietary exhibit B-8, and (3) the revised figure matches that which

we derived from NTN's home market sales computer data files, we have

determined that the figure contained in NTN's supplemental response is

the correct U.S. total sales value for scope merchandise during the POR

and that NTN's U.S. selling expense allocations should be revised to

employ this total amount. However, the complex nature of NTN's U.S.

selling expense reporting methodologies, which incorporate layers of

allocations, makes it impossible for us to simply duplicate NTN's

methodology and preserve any level-of-trade distinctions. We have

therefore reallocated NTN's U.S. selling expenses using a simple

method: we divided the expense amounts attributable to scope sales by

the ``corrected'' total U.S. sales value for scope merchandise. We did

this in our reallocations for NTN's U.S. inland freight from-warehouse-

to-customer expenses, direct technical service expenses, indirect

advertising expenses, other indirect selling expenses, U.S. repacking

material expenses, and U.S. repacking labor expenses, all of which

represent expenses incurred by NBCA on its sales to U.S. customers and

are properly allocated on the basis of total U.S. sale value.

In sum, while we have completely re-allocated certain of NTN's U.S.

expenses without regard to different levels of trade, our determination

to do so in these final results was based solely on our discovery of a

discrepancy in NTN's reported total U.S. sales value for scope

merchandise during the POR.

Comment 12: Timken argues that it is apparent that respondents have

adopted a strategy of absorbing antidumping duties, rather than

correcting their price discrimination. Timken maintains that when a

related U.S. importer absorbs antidumping duties as a cost of doing

business, the duties themselves constitute a selling expense because

the duty represents an additional cost, charge, expense, or import duty

within the meaning of section 771(d)(2)(A) of the Tariff Act.

Therefore, the petitioner contends that the Department must reduce USP

by an amount equal to the antidumping duties absorbed. Timken further

argues that if the Department refuses to treat antidumping duties as a

cost of selling merchandise, then it should at least apply 19 CFR

353.41(a), which addresses situations in which a foreign producer

reimburses its U.S. affiliates for antidumping duties paid. Timken

contends that, contrary to the Department's position on this issue

expressed in other cases, the regulation was always intended to apply

to both ESP and purchase price situations. Timken states that because

the objective of an ESP calculation is to arrive at an appropriate

estimation of arm's-length ex-factory prices from the foreign producer

to the related U.S. buyer, it is not possible to estimate the true

f.o.b. price if the exporter is allowed to reimburse a related importer

for antidumping duties. Timken also maintains that because it is

conceptually incorrect to treat related exporters and importers as

single entities for the purpose of identifying and deducting selling

expenses incurred by the importing entity, it is likewise incorrect to

treat the companies as a single entity for the purpose of determining

whether duties have been reimbursed. Finally, Timken argues that

Outokumpu Copper Rolled Products AB v. United States, 829 F. Supp. 1371

(CIT 1993) (Outokumpu), the case the Department has previously used to

support its position on this issue, is irrelevant because these TRB

reviews address exporters who, Timken asserts, reimburse the entities

who actually pay duties to Customs, that is, the related U.S.

importers.

NSK argues that antidumping duties do not constitute additional

expenses included in USP but only exist as a result of the difference

between USP and FMV, citing Borusan Holding A.S. v. United States, 16

CIT 278 (CIT 1992). NSK contends that to deduct

[[Page 57637]]

antidumping duties from USP would double-count them and, as such, would

constitute a violation of the antidumping duty law (Holmes Prod. Corp.

v. United States, 795 F. Supp 1205 (CIT 1992)). NSK next argues that

the Department and the CIT have consistently held that 19 CFR 353.26

(1992) does not authorize the deduction of reimbursed antidumping

duties from USP, citing Brass Sheet and Strip From Sweden; Final

Results of Antidumping Duty Administrative Reviews, 57 FR 2706 (January

23, 1992) (Swedish Brass). NSK states that the regulation clearly calls

for the deduction of antidumping duties that have been paid on behalf

of the importer and that, because antidumping duties are only paid upon

liquidation, the Department cannot logically adjust USP for an event

that has not yet taken place. NSK also points out that 19 CFR 353.26(b)

specifically requires an importer to file a certificate with Customs

attesting to the fact that it has not entered into an agreement for the

payment or refund of all or part of the antidumping duties due. NSK

states that once an importer has indicated on this certificate that it

has not been reimbursed for antidumping duties, the Department is not

required to expend additional resources on the issue, citing Outokumpu

at 1384.

NTN points out that the CIT and the Department have both rejected

Timken's position concerning the reduction of USP for so-called

absorbed antidumping duties and that there is no reason to depart from

this practice in these present reviews. NTN also argues that the

Department acted correctly by not adjusting USP for the alleged

reimbursement of antidumping duties under 19 CFR 353.26 for several

reasons. First, NTN claims that because this regulation does not

implement a provision of the law and lacks a statutory nexus, it

constitutes an impermissible interpretation and the Department lacks

the authority to implement it. Second, NTN asserts that the regulation

requires an adjustment only where there has been a reimbursement by the

producer and Timken has provided no such evidence. Finally, NTN

maintains that, as upheld in Outokumpu, the regulation permits the

adjustment to USP only where the producer paid duties on behalf of the

importer. NTN argues that because NBCA, for whose account the

merchandise was imported, is a wholly-owned subsidiary of NTN Japan,

NBCA is actually the exporter, not the importer.

Department's Position: We disagree with Timken. First, concerning

Timken's position that we should deduct ``absorbed'' antidumping duties

from USP, Timken has provided no evidence demonstrating that the U.S.

affiliates of the manufacturers/exporters subject to these reviews have

absorbed the antidumping duties as a cost of selling in the United

States. In addition, we agree with NSK that to make this additional

deduction for antidumping duties assessed on imports of subject

merchandise would result in double-counting (see AFBs 92/93 at 10907).

Finally, as stated in AFBs 92/93 at 10907, we do not agree that

antidumping duties constitute a selling expense and should be deducted

from ESP. This position was upheld by the CIT in Federal-Mogul v.

United States, 813 F. Supp 856 (CIT 1993).

Concerning Timken's position that we should apply 19 CFR 353.26 of

our regulations, we again disagree. We have consistently held that,

absent evidence of reimbursement, we do not have the authority to make

such an adjustment to USP (see Swedish Brass at 2708 and Brass Sheet

and Strip From the Republic of Korea; Final Results of Antidumping Duty

Administrative Review, 54 FR 33257 (1989). Furthermore, in Torrington

Co. and Federal-Mogul Corp. v. United States, 881 F. Supp. 622 (CIT

1995), the CIT clearly explained that in order for 19 CFR 353.26 to

apply, it must be shown that the foreign manufacturer either paid the

antidumping duty on behalf of the U.S. importer or reimbursed the U.S.

importer and that the regulation does not impose upon the Department an

obligation to investigate based on mere allegations. The CIT went on

further to state that, before the Department is required to commit

resources to investigate the transfer of funds between related

corporations, the party who requests the investigation must produce

some link between the transfer of funds and the reimbursement of

antidumping duties. In addition, the CIT pointed out that once an

importer has indicated on its certificate at the time of liquidation

that it has not been reimbursed for antidumping duties, it is

unnecessary for the Department to conduct additional inquiry absent a

sufficient allegation of customs fraud. In the present reviews Timken

has provided no evidence demonstrating a link between intracorporate

transfers and the reimbursement of antidumping duties. Absent this

evidence, we have not conducted an investigation concerning this issue

and we have not made an adjustment to USP in accordance with 19 CFR

353.26.

Comment 13: The petitioner questions NTN's reported U.S. credit

expenses, stating that the amounts NTN reported are unrealistic. Timken

argues that the Department, therefore, should use as best information

available (BIA) for NTN's reported U.S. credit expenses the highest

credit expense amount reported for any transaction or a proxy amount

from another respondent.

NTN argues that because Timken's argument is based on speculation

and that Timken has offered no proof to support its assertions, there

is no basis for the use of BIA.

Department's Position: NTN explained in its response that it

derived a customer-specified U.S. credit expense ratio based on

information from its accounts receivables ledgers concerning the

average number of days payment was outstanding for each of its

customers throughout the review period (see proprietary attachment 4 to

NTN's March 31, 1994, supplemental response). As such, NTN's reported

credit expense amounts are based on customer's actual payment

information as maintained in NTN's books and records. We have verified

this method in previous reviews, and, because NTN has not changed its

methodology for these reviews, we are satisfied that NTN has again

reported U.S. credit expense amounts which are derived directly from

actual customer payment information. In its brief, Timken, by comparing

the U.S. credit expenses to home market credit expenses, concludes that

NTN's U.S. credit expenses are unrealistic. We disagree. In light of

the fact that NTN's credit expenses are based on actual customer

payment information and the fact that the home market and U.S. markets

constitute two distinct markets with different customer payment

histories, we are not persuaded that NTN's credit expenses are

unrealistic and we have not altered our treatment of these claimed

expenses for these final results.

Comment 14: The petitioner contends that NTN exclude certain

commissions it paid on specific purchase price sales from its reported

indirect selling expenses and did not otherwise report them as

adjustments to USP. Timken argues that the Department should either

adjust USP for NTN's purchase price commissions, or, in the

alternative, include them in NTN's total U.S. indirect selling expense

adjustment.

NRN argues that the Department has addressed this issue several

times before and there is not reason for the Department to change its

position in these current TRB reviews.

Department's Position: NTN explained in its response that, as a

means of compensating NBCA for expenses it incurred with respect to

[[Page 57638]]

services it provided for certain of NTN's purchase price sales, NTN

made ``commission' payments to NBCA. Because these payments were not

related to ESP sales, NTN excluded them from its reported U.S. indirect

selling expenses for its ESP sales. As stated by the CIT in Outokumpu

Copper Rolled Products AB and Outokumpu Copper (USA) Inc. v. United

States, 850 F. Supp. 16 (March 16, 1994), the Department generally does

not make an adjustment for commissions to related parties because such

commissions are considered intra-company transfers of funds and, as

such, do not qualify for COS adjustments. In order to determine whether

an adjustment for related-party commissions is appropriate, we apply a

two-pronged test. First, we determine if the commissions are directly

related to specific sales and then whether the commission is at arm's

length (see LMI-La Metalli Industriale, S.p.A United States, 912 F.2d

455, 458-459 (Fed. Cir. 1990) and Certain Welded Carbon Steel Standard

Pipes and Tubes from India, 57 FR 54360 (November 18, 1992)). To

determine whether a related-party commission is at arm's length, where

possible, we compare the related-party ``commissions'' to commissions

paid to unrelated parties in the same market (see Coated Groundwood

Paper from the United Kingdom, 56 FR 56403 (November 4, 1991)).

Because in the case of ESP sales NBCA paid commissions to unrelated

sales representatives in the U.S. market, we have a benchmark to which

we can compare NTN's related-party ``commission.'' NTN reported in its

response the range of commission rates granted to its unrelated sales

representatives. The only data we have about the related-party

``commission'' is the POR payment amount NTN reported as an adjustment

to its ESP indirect selling expenses. Therefore, to determine a

percentage rate for the NBCA ``commission,'' we divided this amount by

the total sales value of those purchase price sales for which NBCA

provided services. Our analysis revealed that NTN's percentage payment

to NBCA was not at arm's length when compared to the commissions NBCA

paid to unrelated U.S. commissionaires. As a result, we have treated

this payment to NBCA as an indirect selling expense for NTN's purchase

price sales and have deducted this payment amount from NTN's reported

U.S. indirect selling expenses for its ESP sales.

Comment 15: Timken argues that the Department should not accept

NTN's claimed downward adjustment to its reported U.S. indirect selling

expenses for interest on cash deposits. Timken points out that the

Department clearly rejected such a claim in its last AFB final results

and should do so here as well, citing AFBs 92/93 at 109182.

NTN argues that, just as antidumping duties are not the basis of an

adjustment to ESP, so too the costs that are related to them should not

be an adjustment to ESP. Therefore, the expenses should be treated as a

deduction from its U.S. indirect selling expenses.

Department's Position: We disagree with NTN. Cash deposits of

estimated antidumping duties are provisional in nature because they may

be refunded, with interest, at some future date. Because the cash

deposits are provisional in nature, so too are any interest expenses

that respondents may incur in borrowing to finance cash deposits. To

the extent that respondents receive refunds of cash deposits with

interest, that interest will offset the interest expenses that

respondents may have incurred in financing the cash deposits.

Therefore, we have not allowed NTN's claimed offsets to its reported

interest expenses in the United States to account for that portion of

the interest expenses that NTN estimated to be related to payment of

cash deposits of estimated antidumping duties.

Comment 16: The petitioner contends that the two additional export

selling expenses NTN reported in its supplemental response, foreign

exchange charges and commissions on export sales, were incorrectly

allocated on the basis of the ratio of salaries in NTN's export sales

department. Timken argues that these expenses, unlike NTN's other

reported export selling expenses, are not general overhead expenses but

expenses related to specific sales and, as such, should be allocated

based on sales value.

NTN contends that its allocation of these expenses on the basis of

the salaries of its export sales department is reasonable and should be

accepted by the Department. NTN argues that because the export selling

expenses it incurred bear no relationship to the size or identity of

the export sales, its allocation is actually more accurate than one

based on sales values.

Department's Position: We disagree with Timken. We have found NTN's

export selling expense allocation methodology based on the salaries of

its export department personnel a reasonable measure of its export

selling expenses attributable to U.S. sales. Timken has provided no

evidence demonstrating why the application of this methodology to these

two expenses is distortive or why its suggested methodology would yield

more accurate results. We therefore have no reason to suspect that an

allocation methodology which is reasonable for the export selling

expenses NTN originally reported in its response is unreasonable for

the two additional expenses it reported in its supplemental

questionnaire response. As a result, for these expenses we have

accepted NTN's allocation methodology for these final results.

Samples, Prototypes, and Sales Not in the Ordinary Course of Trade

Comment 17: NTN contends that the Department improperly determined

its reported home market sample and small-quantity sales to be within

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. NTN also maintains

that its reported home market small-quantity sales cannot be considered

ordinary, given the extremely small quantities involved.

The petitioner argues that the Department incorrectly excluded from

its analysis certain of NSK's U.S. and home market sales which the

Department determined were outside the ordinary course of trade. Timken

contends that because NSK failed to demonstrate that its reported home

market sample and prototype sales were outside the ordinary course to

trade in accordance with the standards set out by the CIT in Murata

Mfg. Co., Ltd. v. United States, 820 F. Supp. 603, 606 (CIT 1993)

(Murata), the Department must alter its determination for these final

results and include such sales within NSK's home market data bases.

Likewise, Timken argues that the Department should not have excluded

NSK's reported U.S. zero-priced sample sales from its analysis. Timken

states that not only is there no statutory basis for excluding any

sales from the U.S. data base, but section 751(a)(2)(A) of the Tariff

Act specifically requires that the Department calculate the amount of

duty payable ``on each entry of merchandise'' into the United States.

NSK argues that the Department correctly treated its reported home

market sample and prototype sales and U.S. zero-priced sample sales as

sales outside the ordinary course of trade. NSK points out that the

Department completely verified its classification of its home market

sample and prototype sales as outside the ordinary course of trade and

examined various documentation demonstrating the abnormal nature of

these sales. In

[[Page 57639]]

addition, NSK argues that the zero-priced sample sales given to U.S.

customers constitute promotional expenses and not ``sales.'' NSK states

that, as such, the expense of these zero-priced sales is considered in

accord with NSK's normal accounting practices as an indirect selling

expense, and, to avoid double-counting, the Department must exclude

these samples from the U.S. database. NSK further argues that

merchandise delivered free of charge clearly does not constitute

merchandise ``sold,'' and, finally, citing Ipsco Inc. v. United States,

714 F. Supp. 1211, 1217 (CIT 1989), NSK claims that the Department may

exclude from its U.S. sales data base those sales which are not

representative of the seller's behavior and sales which are so small

that they have an insignificant effect on the margin.

Department's Position: In the case of NSK's claim that its zero-

priced U.S. sales should be considered as outside the ordinary course

of trade and excluded from NSK's U.S. data base, other than for

sampling, there is no statutory nor regulatory basis for excluding any

U.S. sales from an administrative review. Section 751(a)(2)(A) of the

Tariff Act requires that we analyze all U.S. sales within the review

period (see, e.g., AFBs 92/93 at 10948 and Final Results of Antidumping

Administrative Review; Color Television Receivers From the Republic of

Korea, 56 FR 12701, 12709 (March 27, 1991)). We disagree with NSK that

Ipsco is applicable here because that case concerned a LTFV

investigation in which we have the discretion to eliminate from our

analysis unusual U.S. sales. The present proceeding is an

administrative review and section 751(a)(2)(A) of the Tariff Act

requires us to establish a dumping margin for ``each U.S. entry.'' In

addition, in this review we have not used ``averages or generally

recognized sampling techniques'' which, pursuant to section 777A of the

Tariff Act, could also justify the exclusion of certain U.S. sales from

our analysis. However, we do agree with NSK that to include its zero-

priced sample sales in our U.S. data base and allow the inclusion of an

expense in NSK's indirect selling expenses which reflects the cost of

these sample sales would effectively be double-counting. Therefore, for

these final results we have included NSK's zero-priced U.S. sample

sales in our analysis, and, to avoid double-counting, we have deducted

the cost of these samples from NSK's reported U.S. indirect selling

expenses (see AFBs 92/93 at 10948).

In contrast to the above, there is a clear statutory and regulatory

basis for the exclusion from our analysis of those home market sales we

determine to be outside the ordinary course of trade. 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, Nachi-Fujikoshi Corp. v. United States, 708 F. Supp.

716, 718 (1992) (Nachi), and Mantex, Inc., Et. Al., v. United States,

841 F. Supp. 1290, 1305-1309 (CIT 1993) (Mantex). In Murta 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

in demonstrating that such sales are outside the ordinary course of

trade lies with the respondent. In Mantex the CIT restated its previous

opinion in Nachi.

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 90 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. We have 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 TRB reviews we clearly

explained that we applied the Murata and Nachi standards to our

determination of whether NTN's alleged outside-the-ordinary-course-of-

trade sales were indeed outside the ordinary course of trade (see TRBs

90-92 at 64732). In these reviews we determined that NTN did not supply

sufficient evidence to allow us to find these sales as outside the

ordinary course of trade. NTN has had clear notice prior to these

current reviews that its method of responding to our questionnaire

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

[[Page 57640]]

only the same general information with little other explanation.

Therefore, for these reasons we have not changed our treatment of NTN's

sample and small-quantity home market sales for these final results. We

have again determined these sales as within the ordinary course of

trade and we have included them in our margin calculations.

We also re-examined the record to determine if evidence exists

supporting NSK's categorization of its home market prototype and sample

sales as outside the ordinary course of trade, and we agree with NSK

that these sales represent ``atypical'' sales which we consider as

outside the ordinary course of trade. In contrast to NTN, NSK provided

ample narrative explanation and documentation allowing us to examine

all factors of the sales it reported as not in the ordinary course of

trade. Described by NSK as non-commercial quantity sales with abnormal

prices, the small quantities and high-priced nature of these sales were

not the only factors upon which NSK based its characterization of these

sales as outside the ordinary course of trade. Rather, NSK provided at

verification and in its response documentation which clearly

demonstrated the unique circumstances surrounding the limited number of

sales of those models it designated as sample/prototype models. In

general, evidence provided by NSK demonstrated that (1) a prototype

model is made only at the express request of a customer to address a

specific need of the customer, (2) such models are used solely for

testing purposes, (3) a specific prototype model was never sold to more

than one particular customer, (4) there was no other demand for these

models except for that of the specific customer who requested that the

model be manufactured in the first place, (5) the price of the

prototypes included tooling and die charges which are not included in

the prices for ``normal'' home market sales, (6) several of those

customers who requested and purchased a prototype model made only one

purchase of the model during the entire review period, and (7) NSK's

reported prototype/sample home market sales represent an insignificant

portion of NSK's home market sales during the review period.

Clearly, in NSK's case we have been able to examine all factors

surrounding the sale of NSK's home market prototypes/samples and, based

on the evidence on the record, we have determined that these sales are

not within the ordinary course of trade and have excluded them from our

margin calculations.

Comments Concerning Discounts, Rebates, and Price Adjustments

Comment 18: The petitioner argues that in its preliminary results

for NSK the Department incorrectly made direct adjustments to FMV for

NSK's reported early payment discounts, return rebates, distributor

incentives, performance incentives, post-sale price adjustments

(PSPAs), lump-sum PSPAs, and stock transfer commissions. Timken also

states that the Department, in its preliminary results for NTN,

incorrectly allowed a direct adjustment for NTN's reported home market

discounts. Timken contends that in light of recent CIT decisions and

the Department's policy regarding such adjustments, as outlined in AFBs

92/93, the Department should reject entirely NSK's reported home market

early payment discounts, distributor incentives, performance

incentives, and lump-sum PSPAs, and NTN's home market discount

adjustment. Timken also contends that, to the extent that any

adjustment is allowed for NSK's reported home market return rebates and

PSPAs, the Department should adjust for these expenses as indirect

expenses.

NSK, citing numerous passages from the public version of the

Department's 1992-93 NSK home market verification report dated July 8,

1994 (NSK Report), argues that the Department thoroughly verified each

of these reported adjustments and correctly treated them as direct

adjustments to FMV. NSK states that its distributor incentive rebate,

early payment discount, and performance incentive rebate calculations

reflect a fixed and constant percentage of sales and, as such,

accurately reflect individual in-scope specific-transaction expense

amounts. NSK adds that its PSPAs, lump-sum PSPAs, and return rebates

also warrant direct adjustments to FMV. NSK further states that if the

Department accepts Timken's position that none of these expenses

warrant direct adjustment to FMV, the Department should, at a minimum,

treat them as indirect adjustments to FMV.

NTN argues that it correctly allocated its discounts to in-scope

merchandise and that there is no basis for the complete rejection of

this expense.

Department's Position: In light of the CIT's decisions in

Torrington Co. v. United States, 818 F. Supp. 1563, 1579 (1993)

(Torrington 1), and Torrington Co. v. United States, 881 F. Supp. 622,

640 (March 31, 1995) (Torrington II), which state that the Department

may not use a methodology which allows for the inclusion of PSPAs and

rebates on out-of-scope merchandise when calculating adjustments to

FMV, and the CIT's decision in Torrington Co. v. United States, 832 F.

Supp. 379, 390 (1993), which restated the above and also applied the

same rationale to discount adjustments to FMV, for these final results

we have followed our policy as detailed in AFBs 92/93.

In general, we accept claims for direct discount, rebate, and price

adjustments to FMV if actual amounts are reported for each transaction

and the adjustment is not based on allocations. Discounts, rebates, and

price adjustments based on allocations are not allowable as direct

adjustments to FMV because allocated adjustments have the effect of

distorting individual prices by diluting the discounts or rebates

received on some sales, inflating them on other sales, and attributing

them to still other sales that did not actually receive any. Thus, they

have the effect of partially averaging prices. Just as we do not allow

respondents to report average prices, we do not allow average direct

additions to or subtractions from FMV. Although we usually average FMVs

on a monthly or, where appropriate, annual basis, we require individual

prices to be reported for each sale. However, if allocated scope-

specific adjustments were granted as a constant and fixed percentage of

sales on all transactions for which they were reported, such that the

allocations reflected the actual amounts for each individual sale, we

allow the adjustment as a direct adjustment to FMV. Alternatively, if

these scope-specific adjustments were allocated on a customer- or

product-specific basis, but there is no evidence of a fixed or constant

percentage, we treat them as indirect selling expenses (see AFBs 92/93

at 10929).

We also do not allow any direct adjustments to FMV if the

allocation includes non-scope merchandise. The only exception is if the

adjustment was granted as a fixed and constant percentage of all sales

such that the apportionment of the total expense to in-scope and non-

scope merchandise yielded the exact amount per unit paid on sales of

in-scope merchandise (see Torrington II where the CIT cited the Federal

Circuit's decision in Smith Corona Group v. United States, 713 F. 2d

1568, 1580 (Fed. Cir. 1983), cert. denied, 465 U.S. 1022 (1984)).

For these final results we have reviewed NTN's and NSK's reported

discount, rebate, and price adjustments to FMV in light of this policy

and we have made the following determinations:

(1) NSK's Early Payment Discounts: NSK calculated this adjustment

using a distributor-specific allocation

[[Page 57641]]

methodology whereby it divided the total early payment discount amounts

taken by a distributor during the POR by the total payments it received

from the distributor during the review period. To derive its per-

transaction discount expense amounts, NSK applied this ratio to the

unit price of each of its reported transactions which reflected a sale

to the specific distributor. While this adjustment reflects customer-

specific allocations which include non-scope merchandise, we have

determined that NSK's early payment discounts reflect a fixed and

constant percentage of its sales to its distributors and warrant a

direct adjustment to FMV.

NSK's distributors do not pay NSK each time a purchase is made

(i.e., on a transaction-specific basis). Rather, NSK bills the

distributors and the distributors pay NSK for a month's purchases. This

monthly payment reflects all purchases during the month of both in-

scope and non-scope merchandise. Those distributors who pay early

deduct from their monthly payment to NSK an amount equal to the

discount rate NSK established for payment within that specific time

period. The rate thus applies equally to all the merchandise covered by

the payment. As stated by the CIT in Torrington II, ``in Smith Corona

the court approved an apportionment of total rebates paid between in

and out-of-scope sales because the apportionment yielded the actual

amount per unit paid on sales of in-scope merchandise * * *. Such an

apportionment was possible because the rebates in Smith Corona were

granted as a fixed percentage of sales, regardless of the models

sold.'' In the present case, regardless of the combination of in-scope

and non-scope merchandise purchased by the distributor within the

month, the discount rate granted remained the same and we found no

evidence on the record to suggest that the distributor would have paid

differently if only in-scope or only non-scope merchandise was

purchased.

Furthermore, at verification we examined documentation that

demonstrated that, for every distributor who received such discounts,

the distributor's payments qualified it for the same discount category

each month during the POR. In other words, each distributor

consistently remitted payment to NSK the same number of days early each

month during the POR. Although the rates a distributor received varied

throughout the POR due to the fact that NSK altered its discount

schedule throughout the POR, for the segment of the POR where each

discount schedule was in effect, the rate granted to a distributor was

fixed and constant within that segment because the distributor did not

alter its payment pattern. When calculating its reported discounts NSK

combined a distributor's rates throughout the POR such that the

resulting factor reflected the average rate the distributor received

throughout the POR. We have determined that, if NSK were simply to

apply to a distributor's sales within each segment of the POR the rate

in effect for the distributor during that same segment, the allocations

would yield actual individual sale amounts and correctly apportion the

expense to in-scope and non-scope merchandise. It was only when NSK

combined its discounts into a single POR allocation that it distorted

the fixed and constant discount percentages. Therefore, for these final

results we have re-calculated NSK's reported discounts so that, each

time a distributor's rate varied in the POR, that different rate is

attributed to all of NSK's reported sales to that distributor within

that segment of the POR. As a result, we have made a direct adjustment

to FMV for NSK's early payment discounts, re-calculated as discussed

above.

(2) NSK's Return Rebates: For certain home market sales made by

related and unrelated distributors, NSK grants a return rebate on a

customer- and part number-specific basis. To derive this expense

factor, NSK totaled return amounts paid to a distributor for a specific

part number during the POR, then divided this amount by the total sales

value of that part from NSK to the distributor. NSK then applied this

ratio to the unit price reported for each of its sales to the

distributor of the specific part number to yield an expense for each

transaction. Since the allocation was part-specific, it is necessarily

scope-specific and accurately reflects an adjustment attributable to

in-scope merchandise alone. At verification we verified that NSK

correctly reported a return rebate adjustment only for those sales

which may have involved return rebates. However, although NSK's

calculations produce part-specific allocations, there is no evidence on

the record that NSK granted these rebates as a fixed and constant

percentage of its sales. As a result, we cannot ascertain that the

transaction amounts NSK reported are identical to those that were

actually incurred for each individual sale. Therefore, we have treated

NSK's reported return rebates as indirect selling expenses and adjusted

FMV accordingly.

(3) NSK's Distributor Incentives: For those distributors who sold

in-scope and non-scope NSK merchandise to NSK-approved sub-

distributors, NSK granted the distributors incentive rebates equal to a

set percentage of the distributor's gross sales value (based on the

distributor's price to the sub-distributor) to the approved sub-

distributors. We verified that this percentage did not change during

the POR, since throughout the POR the eligible distributors' rebate

amounts were equal to a constant and fixed percentage of each

distributor's sales to the approved sub-distributors. While we

recognize that NSK incurred this expense as a fixed percentage of its

distributors' sales to certain sub-distributors, we note that NSK did

not report this expense in the same manner. Rather, NSK reported its

rebate amounts as a percentage of its own sales to each distributor

during the POR. In other words, the amount of rebates paid to a

distributor during the POR was divided by NSK's sales to the

distributor during the POR and the resulting ratio was applied to the

unit price of each sales transaction to the distributor reported in

NSK's response. While the rebate amounts NSK incurred where a function

of NSK's distributors' sales to certain sub-distributors, they were not

a function of NSK's sales to the distributor. NSK provided no evidence

suggesting that the rebates were a function of the sales to the

distributor over which they were allocated, nor did it provide evidence

demonstrating that there was a direct relationship between its sales to

a distributor and the distributor's sales to a sub-distributor.

Therefore we are not convinced that NSK incurred this expense as a

constant and fixed percentage of NSK's sales to its distributors. In

addition, by reporting this expense on the basis of its sales to

distributors, NSK neither calculated accurate individual-transaction

expense amounts nor did it accurately apportion the expenses to in-

scope and non-scope merchandise. We have, therefore, disallowed an

adjustment to FMV for NSK's reported distributor incentives.

(4) NSK's performance Incentives: During the POR NSK granted to

certain distributors an incentive rebate based on the distributors'

improvement in sales over a specified time period. The percentage of

the rebate granted was directly dependent upon a distributor's

percentage increase in purchases from NSK. NSK calculated its

performance rebates expense factor by dividing the total rebates

granted to a distributor during the POR by NSK's totals sales of both

in-scope and non-scope merchandise to the distributor during the POR.

At verification NSK demonstrated that a distributor received a constant

rebate percentage where its

[[Page 57642]]

percentage improvement in sales was unchanged throughout the POR.

However, the distributor's improvement depended on additional purchases

of both in-scope and non-scope merchandise. NSK did not identify what

portion of that improvement was attributable to in-scope merchandise,

and provided no means by which we could determine that portion

attributable to in-scope purchases. As a result, it is reasonable to

conclude that, if all additional non-scope purchases were excluded, the

improvement attributable to only in-scope merchandise could be at a

percentage rate different from the rate for the overall improvement in

purchases. Based on the evidence, we have determined that NSK's

allocation methodology does not result in an accurate apportionment of

these expenses to in-scope merchandise. In addition, the evidence on

the record does not provide an alternative method that would allow us

to remove the expense amounts reported for non-scope merchandise. We

have, therefore, disallowed this adjustment.

(5) NSK's PSPAs: NSK's PSPAs reflect NSK's alteration of prices for

completed transactions, alterations to provisional prices to reflect

negotiated price agreements, and corrections of clerical errors. NSK

calculated its reported individual-transaction PSPAs by dividing the

total PSPAs made for a customer per part number during the POR by NSK's

total sales of the part to the customer during the POR. NSK applied the

resulting ratio to the unit price for all its reported sales of the

part to the customer. As we stated earlier when discussing NSK's return

rebates, since a part-specific allocation is necessarily scope-

specific, NSK's allocation methodology clearly calculates the actual

expense attributable to in-scope merchandise. However, we have

determined that this allocation is neither transaction-specific nor

representative of a fixed and constant percentage. For example, NSK

does not trace the adjustments directly to the actual transactions for

which they were incurred, but rather aggregates all PSPAs by customer

and by part, allocates them, and applies the allocation ratio equally

to all transactions. In addition, there is no evidence demonstrating

the NSK's PSPAs were granted as a fixed and constant percentage of all

sales to the customer. Rather, the percentage adjustment for each PSPA

varied according to the specifics of each negotiated price, clerical

error, or other alteration in individual prices. We have, therefore,

treated NSK's reported PSPAs as indirect selling expenses.

(6) NSK's Lump-Sum PSPAs: To derive its reported lump-sum PSPA

individual-transaction expense amounts, for each customer NSK totaled

the lump-sum price adjustment granted during the POR and then divided

this by its total POR sales to the customer. Then, for each of its

reported sales to the customer, NSK applied the resulting ratio to the

reported unit price. We verified that NSK either attributed the lump-

sum rebate correctly to the part number to which it applied (i.e., the

rebate was scope-specific), or it correctly attributed a PSPA amount

granted on a group of products to the in-scope merchandise. However, we

found no evidence on the record or at verification that supports the

notion that NSK's lump-sum price adjustments were transaction-specific

or granted as a fixed and constant percentage of all sales to a

customer. Therefore, we have treated NSK's reported lump-sum PSPAs as

indirect selling expenses.

(7) NSK's Stock Transfer Commission: When NSK does not have a

specific part available, whether an in-scope or non-scope part, a

distributor who needs the part may obtain it from another of NSK's

distributors. NSK then grants the latter distributor a percentage of

the price the needy distributor was ultimately paid for the part by its

customer. In this way, these stock transfers are very similar to NSK's

distributor incentive rebates in that the commission amount NSK pays to

the distributor who locates the part is based on the needy

distributor's price to the ultimate customer. Like its distributor

incentive rebates, NSK allocated these commissions on the basis of its

sales to the distributor to which the commission was paid. As a result,

these commissions are reported as a function of a total sales value to

which they have no direct relationship, and there is no evidence that a

direct relationship exists between NSK's sales to the distributor which

had the part and the needy distributor's sales to the end user to which

the part was ultimately sold. Therefore, as we explained for NSK's

distributor incentives, while the commissions were granted as a fixed

and constant percentage of the needy distributor's sales to the end

user, they were not granted as a fixed and constant percentage of NSK's

sales to the supplying distributor. We have, therefore, disallowed this

adjustment.

(8) NTN's Discounts: We have reexamined NTN's discount adjustment

methodology and have concluded that, while NTN's reported discounts

accurately reflect the actual per-unit discount expense NTN incurred on

in-scope merchandise, NTN's allocation methodology is not transaction-

specific and there is no evidence on the record that NTN grants its

discounts as a fixed percentage of its sales. For these final results

we have, therefore, treated NTN's reported home market discounts as

indirect selling expenses.

With the exception of NSK's early payment discounts, our final

determinations regarding the above adjustments to FMV reflect changes

from our preliminary results. We have, therefore, adjusted our final

results margin calculations for NSK and NTN accordingly.

Comments Concerning Cost of Production and Constructed Value

Comment 19: The petitioner argues that, in accordance with section

773(e)(2) of the Tariff Act, when calculating statutory profits added

to CV in accordance with section 773(e)(1)(B) of the Tariff Act, the

Department should exclude those sales to related parties which it

determined were not at arm's length.

NTN argues that nothing in the statute suggests that the Department

should determine whether a sale was at arm's length when calculating

profit for CV. NTN and NSK point out that the issue is moot in this

current review because the Department found that all of NTN's and NSK's

home market related-party sales were at arm's length.

Department's Position: As indicated by both NTN and NSK, the two

respondents in this review for which an arm's-length test was required,

we found all related-party home market sales at arm's length. As a

result, Timken's concerns are unfounded in these reviews and we have

not altered our calculations for NTN and NSK for these final results.

Comment 20: Timken argues that statutory profit calculations should

also exclude home market below-cost sales which have been disregarded

in accordance with section 773(b) of the Tariff Act. Timken argues that

because CV is a proxy for FMV when prices and other data are inadequate

or unavailable, and because below-cost sales are disregarded when sales

form the basis of FMV, balance in the statute requires that the same

sales be disregarded for CV as are disregarded for FMV, citing Timken

Company v. United States, 11 CIT 785, 797, 673 F. Supp. 495, 507 (CIT

1987) and Associacion Colombiana Exportadores de Flores v. United

States, 13 CIT 13, 19 704 F. Supp. 1117, 1124 (CIT 1989). Timken also

argues that below-cost sales should be excluded from the CV profit

[[Page 57643]]

calculation because such sales are not in the ordinary course of trade.

Timken contends that because the definition of CV specifies that

statutory profits should be calculated on the basis of sales in the

ordinary course of trade (section 773(e)(1)(B) of the Tariff Act),

below-cost sales, when in substantial quantities over an extended

period of time, must be disregarded when calculating profit for CV.

Timken also points out that the United States has taken the

position that disregarded below-cost sales are not considered as sales

in the normal course of trade, as referred to in Article VI of the

General Agreement on Tariffs and Trade (GATT) and the Antidumping Code.

Finally, Timken recognizes the recent decision by the CIT against its

position, but respectfully submits that the decision was in error.

NSK argues that the below-cost sales test (section 773(b) of the

Tariff Act) applies only when the Department bases FMV on home market

or third-country prices. It does not extend to the CV provision

because, in NSK's view, Congress specifically did not intend to apply

it to CV. NSK further adds that the statute's definition of ``ordinary

course of trade'' (section 771(15) of the Tariff Act) does not limit

sales in the ordinary course of trade to sales above cost. NSK also

contends that the fact that section 771(15) of the Tariff Act as

amended by the recently passed Uruguay Round Agreements Act (URAA)

specifically characterizes below-cost sales as outside the ordinary

course of trade constitutes evidence that the previous statute, the one

in effect for these TRB reviews, meant the contrary.

NTN argues that the structure of the statute as a whole indicates

that there was no Congressional intent to link the concepts of sales in

the ordinary course of trade and sales below the cost of production.

NTN contends that the Department correctly interprets the statute by

making its ordinary-course-of-trade determination prior to the

determination of whether sales are below cost. To do so any other way,

argues NTN, would be redundant because sales below cost would have

already been excluded as not in the ordinary course of trade. NTN

maintains that the petitioner has provided no evidence of its position

and further states that the very structure of the CV calculation

demonstrates that it is intended to approximate a sale made above cost.

Department's Position: We disagree with Timken that, in these

reviews, the calculation of profit for CV should be based only on sales

that are priced above COP. While we recognize that section 771(15) of

the URAA requires the exclusion of such sales from our CV profit

calculation, these TRB reviews, which were initiated prior to January

1, 1995, are being conducted pursuant to previous law and regulations.

In Torrington II, ruling on the law in effect prior to January 1, 1995,

not only did the CIT affirm that CV is an alternative to price-based

FMV and that sales prices are irrelevant to a CV calculation, but it

specifically stated that ``nowhere does the statute require the

exclusion of below-cost sales when determining the profit amount in

calculating CV'' (Torrington II at 633). We have, therefore, not

excluded below-cost sales from our CV profit calculation for these

final results.

Comment 21: 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 Tariff 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 Tariff Act is identical to that in

773(b) of the Tariff 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. Finally, NSK concludes that 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 Tariff Act

does not require any allegation by domestic parties. Likewise,

accepting NSK's position that the identical language of section

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 that

the respondent should bear the responsibility of providing such

evidence because domestic producers simply to 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's ability

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. Finally, Timken asserts that there is ample evidence

on the record for these reviews supporting the Department's decision to

disregard NSK related-party transfer prices.

Department's Position: We disagree with NSK. NSK erroneously argues

that it was unlawful for the Department to request cost data for parts

purchased from related suppliers. NSK's argument is grounded on the

mistaken notion that section 773(e)(3) of the Tariff Act provides the

sole basis for requesting cost information regarding inputs purchased

from related suppliers. Two separate sections of the Tariff 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 cost of production.

For CV purposes, pursuant to section 773 (e)(2), the Department, in

general, determines whether the transfer prices

[[Page 57644]]

for any element of value occurred below the normal market value of that

element of value. Pursuant to these statutory provisions, 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 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 of

value. 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.

Furthermore, 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) to request information regarding transfer prices of

components parts. As demonstrated above, section 773(e)(3) simply

provides an alternative basis for requesting transfer price

information. We agree with the petitioner's argument that, when a

domestic party files a COP allegation, it does not necessarily have

information about inputs which are obtained from related suppliers. We

also agree that the petitioner does not have the information necessary

to specifically 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

of the subject merchandise that is based on a petitioner's allegation 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)

and AFBS LTFV), 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 (see the proprietary

version of the Department's COP and CV adjustment memorandum for NSK

dated August 9, 1994 (NSK COP/CV Memo)). 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 for these reviews. To 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.

Comment 22: NSK argues that the Department unreasonably adjusted

its reported general and administrative (G&A) expenses to include

certain non-operating expenses which were clearly not G&A expenses and

not part of NSK's COP.

The petitioner argues that the Department's inclusion of certain

expenses NSK omitted from its reported G&A expenses was proper and in

accordance with past Departmental practice.

Department's Position: We agree with the petitioner. At

verification we discovered that NSK excluded from its reported G&A

expenses several items which we consider to be part of the cost of

producing the subject merchandise (see the NSK CV/COP Memo for an

itemization of these expenses). We therefore included these cost items

in NSK's G&A expense calculation and adjusted NSK's reported COP and CV

figures accordingly.

Comment 23: The petitioner argues that the revised credit expense

ratio NTN reported for use in those margins calculations where the

Department based FMV on CV is distortive. To eliminate this distortion,

Timken contends that the Department should use a specific ratio

originally submitted by NTN rather than this revised ratio.

NTN points out that the revised CV credit expense ratio it

submitted was calculated at the specific request of the Department. NTN

further states that the Department may choose to use either this

revised ratio or the separate ratios it originally reported in its

response.

Department's Position: We agree with the petitioner. In its initial

questionnaire response NTN provided us with two separate credit ratios

to be used for CV purposes. One was for NTN sales and it was based on

the weighted-average POR credit expense for NTN. The other was for NTN

Sales Company, Ltd. (NSCL), and it was based on NSCL's weighted-average

POR credit expenses. Upon receipt of these ratios we agreed that they

accurately reflected NTN's and NSCL's average credit expenses

throughout the POR, but we were unable to separate certain of NTN's and

NSCL's sales within our home market sales computer data bases. This

precluded us from applying the separate credit expense ratios. In our

supplemental questionnaire we asked NTN to either submit an NTN/NSCL

combined credit expense ratio or indicate a way in which we could

distinguish between certain of NTN's and NSCL's sales within our data

bases. NTN chose to submit a combined ratio. We agree with Timken that

this combined ratio is distortive. However, since the issuance of our

preliminary results we have derived a method for distinguishing between

certain of NTN's and NSCL's sales within our computer data bases. As a

result, because they

[[Page 57645]]

accurately reflect the average credit expenses incurred by NTN and NSCL

during the POR, we have determined to use the separate NTN and NSCL

credit expense ratios NTN initially reported in our CV margin

calculations and we have done so for these final results.

Comment 24: Timken argues that NSK failed to demonstrate that

interest income was related to the normal production of TRBs. Timken

contends that the Department must recalculate NSK's financing expense

by disallowing the interest income offsets.

NSK argues that at verification the Department reviewed and

accepted its method for calculating interest expense. Therefore, NSK

contends that the Department should not alter its preliminary results

calculations by disallowing NSK's interest income offset.

Department's Position: We agree with NSK. We verified that the

interest income offset was attributed to short-term investments of

NSK's working capital. Therefore, we reduced NSK's interest expense by

the amount of the company's reported short-term interest income.

Comment 25: NTN argues that the adjustment the Department made to

its CV and further-manufacturing calculations with respect to a certain

related party was incorrect for two reasons. First, NTN contends that

the Department's re-calculations, which applied an overall figure to

all products, were, in essence, a de facto use of BIA. NTN argues that

BIA was not justified because it submitted all the necessary CV and

further-manufacturing data the Department would need to recalculate its

CV and further-manufacturing costs without restoring to an overall

figure for all products. Second, NTN states that the Department's

recalculations incorrectly used figures from an exhibit in its original

questionnaire response and NTN indicated the correct figures the

Department should have used from another exhibit in its response.

Timken argues that the Department's recalculations of NTN's

reported CV and further-manufacturing costs were not based on BIA but

on actual data from NTN's response. Timken further notes that the

figures from the exhibit which NTN claims the Department should use are

also incorrect. Timken provided figures from the same exhibit which it

states should be used in the Department's recalculation.

Department's Position: We agree in part with the petitioner and the

respondent. We used information that was submitted by NTN and its

related supplier for our calculation of the adjustment in our

preliminary results. Therefore, our adjustment was not based on BIA.

The submitted cost of inputs from a related party were included at the

transfer price which was below the COP. Therefore, we increased NTN's

cost of manufacturing (COM) to reflect the related-supplier's COP.

However, as both the petitioner and the respondent pointed out, one of

the amounts we used in the related-party input adjustment calculation

for the preliminary results was incorrect. We intended to use the cost

of goods manufactured (COGM) from NTN's sample plant, but, instead, we

used only the material cost of the sample plant. We revised our

adjustment calculation for the final results to reflect the COGM of the

sample plant as we had intended for the preliminary results. In

calculating the COGM, we included the effect of the plant's change in

the work-in-process inventory

Comment 26: Timken argues that NTN's reported repacking expenses

for its further-processed merchandise are unrealistic and that the

Department should re-examine NTN's further-processing calculations,

determine if NTN has misreported these expenses, and make any

appropriate adjustments for the final results.

NTN argues that the U.S. packing expenses it reported for its

further-processed merchandise were accurate and that the Department

should not change its treatment of these expenses for these final

results.

Department's Position: We agree with the respondent. Based on the

information on the record, we have no reason to conclude that NTN's

submitted packing costs are understated. Accordingly, no adjustment to

these packing costs is appropriate.

Comment 27: Timken argues that NTN incorrectly reported its

depreciation on idle production assets by not treating it as an

overhead expense in calculating COM, and that the Department should

adjust NTN's COP calculation accordingly.

NTN argues that the method it used to report its idle asset

depreciation is identical to that used by the Department's accounting

office in a recent AFB verification. NTN further states that its

depreciation on idle assets is unrelated to producing subject

merchandise and is properly not part of COP. NTN also argues that it

has reported its costs in accordance with the Generally Accepted

Accounting Principles (GAPP) of Japan and that the Department should

therefore accept its reported COP calculations.

Department's Position: We agree with NTN that it properly accounted

for costs associated with depreciation of its idled equipment. The

equipment at issue was never used to produce subject merchandise. In

these instances we normally include the depreciation expense of idle

production assets as part of G&A expenses. Because NTN included the

depreciation expense associated with all idle equipment for the entire

plant in its submitted G&A expense calculation, an adjustment for

depreciation of idle equipment is unnecessary.

Comment 28: Timken argues that NTN has not demonstrated that its

reported interest income offsets are related to normal operation or

short-term deposits. in particular, Timken points out that NTN's

interest income includes income from the sales of market securities,

which Timken contends is unlikely to be derived from the short-term

investment of working capital. Timken further argues that the

Department should eliminate the effects of foreign exchange adjustments

on NTN's corporate financing rate. The petitioner states that the

Department has generally rejected accounting adjustments that influence

corporate financing rates and should do so again here.

NTN argues that it has used the exact methodology in this review as

it has in past reviews of TRBs and that, absent a reason for rejecting

this methodology, the Department should accept its reported interest

income offsets and financing expenses.

Department's Position: We agree in part with the petitioner. In our

preliminary results we computed interest expense using the

unconsolidated financial statements of NTN and its related selling

entity NSCL. For the final results we recalculated interest expense

using information from NTN's consolidated financial statements, which

is consistent with our normal practice. We reduced NTN's consolidated

interest expense by NTN's submitted unconsolidated short-term interest

income and we excluded the income from the trading of marketable

securities, gains on foreign exchange transactions, and NSCL's reported

interest income from our recalculation of NTN's financing expense. In

this case, we did not offset NTN's interest expense by amounts received

from marketable securities investments because the income from these

securities was not shown to be derived from the company's short-term

working capital investments. We did not include the foreign exchange

transaction gains because we could not confirm that the reported

amounts related to costs included in NTN's COP and CV figures.

[[Page 57646]]

We excluded the submitted short-term interest income of NSC because the

amount reported exceeded the total amount of interest income reported

in NSCL's submitted financial statements.

Comment 29: Timken contends that level-of-trade differences have no

meaning within the context of CV because CV is intended to reflect

expenses generally incurred on sales of subject merchandise in the home

market. Timken argues that the Department must therefore eliminate from

NTN's CV calculations any data related to differences in levels of

trade.

NTN argues that level-of-trade differences do have meaning within

the context of CV because its selling expenses are incurred in

different amounts for each level of trade. NTN contends that the

Department has consistently accepted its home market expenses

differentiated by level of trade and should not ignore this distinction

in the context of CV.

Department's Position: We agree with NTN. We are satisfied that

NTN's allocation of its home market selling expenses by level of trade

reflects the fact that NTN incurs different selling expenses when

selling at different levels of trade, and that these level-of-trade

differences in selling expenses are reflective of NTN's experience in

selling TRBs in Japan. Section 772(e)(B) of the Tariff Act states that

the CV calculation must include ``an amount for general expenses and

profit equal to that usually reflected * * *.'' By retaining its level

of trade distinction for those expenses it included in its CV

calculation, NTN reported CV amounts which captured its actual

experience in selling TRBs in Japan and ensured that its CV

calculations included expense amounts equal to those which are usually

incurred.

Miscellaneous Comments Regarding Level of Trade, VAT-Adjustment

Methodology, Assessment and Cash Deposit Rates, Suppliers' Knowledge,

and Revocation

Comment 30: NSK contends that the Department should add taxes to

USP whenever such taxes are assessed in the home market, but that it

should not add taxes to FMV or otherwise calculate FMV so as to include

taxes, whether FMV is based on home market price, third country sales,

or CV. NSK argues that the plain language of the statute does not

define FMV to include taxes imposed in the home market. Furthermore,

NSK states that if Congress had meant to include taxes in every

calculation of FMV, the statute, at a minimum, would have defined third

country prices and CV to include such taxes. NSK also argues that, even

if the Department rejects its position, the methodology the Department

used in the preliminary results is incorrect. NSK maintains that in the

preliminary results the Department did not apply the VAT to the proper

tax base. NSK states that the CIT has made it very clear that the VAT

must be applied to USP at the same point in the chain of commerce as

the Japanese tax authorities apply the VAT on home market sales, citing

Federal-Mogul Corp. v. United States, 834 F. Supp. 1391, 1396 (CIT

1993) (Federal-Mogul). NSK contends that, according to Japanese law,

the VAT is applied to the net revenue of the sale with no offset for

expenses, whereas the Department adjusted all expenses for VAT in its

preliminary results.

Timken argues that, contrary to NSK's position, the Federal

Circuit's decision in Zenith Elec. Corp. v. United States, 988 F.2d

1573 (Fed. Cir. 1993), is dispositive that FMV was intended to include

VAT. Timken further contends that, given the language of section

772(d)(1)(C) of the Tariff Act, there is no question that the ``price''

referenced in section 773(a) of the Tariff Act must include VAT, if

applicable. The petitioner also argues that the Department's

preliminary results VAT-adjustment methodology did in fact correctly

apply the tax rate to USP at the same point in the chain of commerce

and appropriately implemented the statute and the CIT's instructions in

Federal-Mogul.

Department's Position: Concerning NSK's first argument that taxes

should never be added to FMV, we disagree. Taxes imposed in the foreign

market are an integral part of the final price paid by the customer and

are only ``added'' when reference is made to a tax-exclusive home

market gross price. Furthermore, section 772(d)(1)(C) of the Tariff Act

directs us to adjust for any taxes which are rebated or uncollected by

reason of exportation to the extent that such taxes are added to or

included in the price of home market such or similar merchandise. This

means that taxes should be included in the prices used by the

Department in its calculation of FMV.

Concerning our preliminary results VAT-adjustment methodology, in

light of the decision by the United States Court of Appeals for the

Federal Circuit (the Federal Circuit) in Federal-Mogul v. United

States, CAFC No. 94-1097, we have changed our treatment of home market

consumption taxes. For these final results, where merchandise exported

to the United States was exempt from the consumption tax, we added to

the U.S. price the absolute amount of such taxes charged on the

comparison sales in the home market. This is the same methodology that

we adopted following the decision of the Federal Circuit in Zenith v.

United States, 988 F.2d 1573, 1582 (1993), and which was suggested by

the Federal Circuit in footnote 4 of its decision. The Court of

International Trade (CIT) overturned this methodology in Federal-Mogul

v. United States, 834 F. Supp. 1391 (1993), and we acquiesced to the

CIT's decision. We then followed the CIT's preferred methodology, which

was to calculate the tax to be added to U.S. price by multiplying the

adjusted U.S. price by the foreign market tax rate; we made adjustments

to this amount so that the tax adjustment would not alter a ``zero''

pre-tax dumping assessment.

The foreign exporters in the Federal-Mogul case, however, appealed

the decision to the Federal Circuit, which reversed the CIT and held

that the statute did not preclude Commerce from using the ``Zenith

footnote 4'' methodology to calculate taxneutral dumping assessments

(i.e., assessments that are unaffected by the existence or amount of

home market consumption taxes). Moreover, the Federal Circuit

recognized that certain international agreements of the United States,

in particular the General Agreement on Tariffs and Trade (GATT) and the

Tokyo Round Antidumping Code, required the calculation of tax-neutral

dumping assessments. The Federal Circuit remanded the case to the CIT

with instructions to direct Commerce to determine which tax methodology

it will employ.

We have determined that the ``Zenith footnote 4'' methodology

should be used. First, as we have explained in numerous administrative

determinations and court filings over the past decade, and as the

Federal Circuit has now recognized, Article VI of the Gatt and Article

2 of the Tokyo Round Antidumping Code required that dumping assessments

be tax-neutral. This requirement continues under the new Agreement on

Implementation of Article VI of the GATT. Second, the Uruguay Round

Agreements Act (URAA) explicitly amended the antidumping law to remove

consumption taxes from the home market price and to eliminate the

addition of taxes to U.S. price, so that no consumption tax is included

in the price in either market. The Statement of Administrative Action

(p. 159) explicitly states that this change was intended to result in

tax neutrality.

While the ``Zenith footnote 4'' methodology is slightly different

from the URAA methodology, in that section

[[Page 57647]]

772(d)(1)(C) of the pre-URAA law required that the tax be added to U.S.

price rather than subtracted from home market price, it does result in

tax-neutral duty assessments. In sum, we have elected to treat

consumption taxes in a manner consistent with our longstanding policy

of tax-neutraility and with the GATT. We have applied this tax-neutral

methodology to our final margin calculations for NTN, NSK, Fuji, and

Honda, the four companies for which we made a VAT-adjustment in our

preliminary margin calculations and for which a VAT-adjustment was

again necessary for these final results.

Comment 31: NSK argues that the Department's margin calculations

for NSK were artificially inflated because the Department failed to

make an appropriate level-of-trade adjustment when comparing home

market such or similar merchandise to U.S. merchandise sold at a

different level of trade. NSK contends that there is sufficient

evidence on the record to quantify a level-of-trade adjustment based on

the weighted-average differences in prices at each level of trade and

concludes that the Department must grant NSK such an adjustment when

the comparison home market merchandise was sold at a different level of

trade than the U.S. merchandise.

NTN argues that, while the Department correctly made a level-of-

trade adjustment when comparing home market such or similar merchandise

to U.S. merchandise sold at a different level of trade, the

Department's adjustment, which was cost-based, did not take into

account the full price differences between NTN's levels of trade. NTN

contends that the recently-enacted URAA endorses such an adjustment,

and that, in accordance with section 1677b(a)(A) of the URAA, the

evidence in this review clearly demonstrates that differences in NTN's

levels of trade affect price comparability based on a consistent

pattern of price differences between sales at different levels of trade

in Japan.

Timken argues that the Department properly did not grant NSK a

level-of-trade adjustment because NSK failed to provide cost-based data

documenting its entitlement to such an ajdustment. The petitioner

points out that the Department and the CIT have consistently held that

cost-based data, and not the existence of price differentials alone,

constitute the evidence necessary to support a level-of-trade

adjustment. Timken maintains that while the record demonstrates that

there are price differences between NSK's reported home market levels

of trade, NSK provided no evidence demonstrating that these price

differences were due to the different costs NSK incurred in selling to

different levels of trade.

The petitioner also argues that, under the governing law for these

reviews, NTN still is not entitled to a price-based level-of-trade

adjustment because it has not met the burden of quantifying the price-

based level-of-trade adjustment that it seeks. Finally, Timken contends

that, while these subject reviews are not governed by the URAA because

they were initiated prior to January 1, 1995, even if the Department

were to apply the requirements of the new law to NTN's analysis, NTN

would still not be entitled to a price-based level-of-trade adjustment

because it has not demonstrated that there is a consistent pattern of

price differences between sales at different levels of trade.

Department's Position: We disagree with NTN and NSK. As described

below, NSK's request for a level-of-trade adjustment was untimely, and

NTN did not qualify for the price-based level-of-trade adjustment it

seeks.

We have examined NSK's initial and supplemental questionnaire

responses and, while NSK provided evidence demonstrating that it sells

to distinct levels of trade, it did not request that we make a level-

of-trade adjustment when comparing home market such or similar

merchandise sold at one level to U.S. merchandise sold at another

level. In fact, only in its case brief did NSK first argue that a

level-of-trade adjustment should be made and first argue that this

adjustment should be price-based. For this reason we find NSK's request

for such an adjustment to be untimely and we have not considered it for

these final results (see, e.g., Fijitsu General Ltd. v. United States,

Slip Op. 95-44 at 28 (CIT March 14, 1995), Industrial Belts and

Components and Parts Thereof, Whether Cured or Uncured, From Italy:

Final Results of Antidumping Duty Administrative Review, 57 FR 8295

(March 9, 1992), Final Determination of Sales at Less Than Fair Value:

Certain Steel Pails From Mexico, 55 FR 12245 (April 2, 1990), and Final

Determination of Sales at Less Than Fair Value: Stainless Steel Woven

Wire Cloth From Japan, 50 FR 10520 (March 15, 1985)).

We have examined the record evidence for NTN to determine if a

price-based level-of-trade adjustment is warranted. Basically, in

accordance with 19 CFR 353.58, in order to make the type of price-based

level-of-trade adjustment NTN seeks, we would have to be satisfied that

the full difference in prices between levels of trade was due solely to

level-of-trade differences and no other factors. If quantitative

analysis reveals that there is a pattern of price differences between

levels of trade, then we can reasonably conclude that level-of-trade

differences alone affected price comparability. If a pattern is not

evident, then we can only conclude that other factors, and not level-

of-trade differences alone, caused the price differences between levels

of trade. For these final results we conducted such a quantatitive

analysis on NTN's home market prices, as reported in its home market

sales computer data base. For each home market model that NTN sold to

each of its three distinct levels of trade, we calculated, for each

level of trade, a weighted-average net price adjusted for all those

home market selling expenses which we determined in our analysis

warranted a direct adjustment to FMV. We then calculated the percentage

differences in the weighted-average prices between levels of trade for

all models in each month the models were sold throughout the POR. We

then compared these monthly, model-specific percentage differences to

determine if a pattern of price differences at different levels of

trade was evident.

Our comparison of NTN's percentage price differences revealed that

there were numerous models for which there was no pattern in price

differences between levels of trade in that the pricing order for

certain random months was the reverse of the pricing order in other

months. For example, for many models the pricing order for several

months was, from highest priced to lowest, level-of-trade 2, level-of-

trade 3 and then level-of-trade 1. However, in other random months the

order was reversed such that, from highest to lowest, the order was

level-of-trade 3, level-of-trade 1, then level-of-trade 2. Furthermore,

even in those months where the pricing order was the same, the range of

percentage price differences between levels was erratic in that a model

may have been sold at a price slightly higher at level 1 in one month,

but much higher at level 1 in another month. Therefore, absent a

discernible pattern in the price differences between level-of-trade, we

lack the evidence necessary to grant NTN a priced-based level-of-trade

adjustment.

Comment 32: Fuji agrees that the Department properly excluded from

its preliminary results margin calculations that merchandise which met

the criteria for the application of the ``Roller Chain'' principle, and

which was, as a result, outside the scope of the Japanese TRBs order

and finding. However, Fuji contends that unless the Department adopts

one of the three assessment

[[Page 57648]]

strategies Fuji proposes, the Department will overassess the amount of

antidumping duties owed by Fuji and will be in violation of the

antidumping duty law because it will apply antidumping duties to non-

scope merchandise.

Fuji first proposes that because it had fewer than fifty entries

during the review period, the Department should assess duties on an

entry-by-entry basis. Alternatively, Fuji proposes 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

its calculated cash deposit rate for Fuji to take into account the

``Roller Chain'' merchandise by including the value of the ``Roller

Chain'' merchandise in the denominator. Finally, Fuji proposes that, if

the Department rejects these first two proposals, the Department, at a

minimum, should then adjust both Fuji's cash deposit and assessment

rates by including the value of the TRBs meeting the ``Roller Chain''

criteria in the denominators the Department uses when calculating these

rates.

Kawasaki argues that although the Department resorted to BIA for

its preliminary results margins for Kawasaki, and will presumably do so

again for these final results, this should not preclude the Department

from determining that those TRBs which meet the ``Roller Chain''

criteria and those TRBs manufactured by a German company but sold by

Kawasaki in the United States constitute out-of-scope merchandise and

are therefore not subject to antidumping duty assessment. Kawasaki

contends that there is sufficient evidence on the record to demonstrate

that certain of its TRBs not only meet the criteria for the ``Roller

Chain'' principle, but all such TRBs were imported only by Kawasaki

Motors Manufacturing Corporation (KMM). Kawasaki further contends that

it has demonstrated that certain other TRBs imported by Kawasaki

Loaders Inc. (KLI) were originally manufactured by a German company and

sold to Kawasaki in Japan by the German company's Japanese affiliate.

Kawasaki maintains that the Department should ensure the exclusion of

its German-made TRBs from assessment by simply identifying to Customs

the unique model numbers for such TRBs as reported in its response.

Kawasaki argues that the record in the A-588-054 case contains the

information necessary for the Department to recalculate its BIA rate

such that duties are not assessed on Kawasaki's ``Roller Chain'' TRBs.

Finally, Kawasaki states that, because KMM did not import any TRBs

which fell within the scope of the A-588-604 order, the Department's

BIA rate would not require any recalculation.

The petitioner argues that because at the time of entry there is no

way of knowing that a particular entry will meet the ``Roller Chain''

principle criteria, the Department should require cash deposits on all

entries. Timken further argues that including the value of Fuji's and

Kawasaki's ``Roller Chain'' TRBs in the denominator of the cash deposit

calculations would result in the underassessment of antidumping duties

because importers ultimately receive refunds of all duty deposits on

``Roller Chain'' entries.

Department's Position: We agree in part with the petitioner and in

part with the respondents. It is important to first make clear 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 the equivalent of a determination that the

merchandise is non-scope merchandise. To the contrary, in these TRB

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 (Roller Chain Other Than Bicycle From Japan, 48 FR 51804

(November 14, 1983), and AFBs 92/93 at 10937)). 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. We therefore 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 as meeting 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. In addition, 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 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

[[Page 57649]]

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, to ensure that assessment does not occur on ``Roller Chain''

merchandise, we will include the value of the ``Roller Chain''

merchandise in our denominator. This will have the effect of

``diluting'' the percentage assessment rate so that, even though

antidumping duties will be assessed on all entries, the lower

``diluted'' 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, due to a consistent pattern of

late submissions in response to our questionnaires and the quality of

the information contained in Kawasaki's timely responses, we rejected

all of Kawasaki's untimely responses and used total cooperative BIA

rates for Kawasaki in our 1992-93 reviews for both the A-588-054 and A-

588-604 cases (see, e.g., the Department's 1992-93 decision memorandum

for Kawasaki, dated April 13, 1995). Kawasaki contends that information

contained in its two timely responses, dated February 10, 1994, and May

24, 1994, respectively, which were not rejected by the Department and,

as such, are part of the administrative record for these 1992-93 TRB

reviews, demonstrates the ``Roller Chain'' nature of KMM's imports. For

these final results we have reviewed Kawasaki's two timely submissions

and have determined that neither submission contains evidence

demonstrating the ``Roller Chain'' nature of KMM's imported TRBs. Our

examination of Kawasaki's May 24, 1994, submission revealed that this

submission dealt exclusively with TRBs imported and sold by KLI and did

not contain any information concerning those TRBs imported by KMM. Our

examination of Kawasaki's February 10, 1994, submission revealed that,

while this submission contained information about KMM's imported TRBs,

it did not contain sufficient evidence demonstrating the ``Roller

Chain'' nature of KMM's imports. For example, page 4 of the submission

indicates that all of KMM's imported TRBs are used solely in the

manufacture of motorcycles and all-terrain vehicles (ATVs). Attachment

3 of the submission contains a listing of the product codes for the

TRBs KMM imported along with the corresponding product copies of the

finished motorcycle or ATV into which the TRBs were incorporated. Page

6 of the submission contains the POR total value of KMM's imports along

with a statement by Kawasaki indicating that the value of these TRBs is

less than one percent of the value of the finished ATVs and

motorcycles. However, this submission does not contain any analysis, or

the raw data necessary for us to conduct an analysis, comparing the

value of the imported TRBs to the value of the finished motorcycles or

ATVs. As a result, we lack the data necessary for use to determine with

certainty that the value of those TRBs imported by KMM and used solely

in the manufacture of motorcycles and ATVs in the United States was

indeed less than one percent of the value of the finished motorcycles

and ATVs. We therefore do not agree with Kawasaki that evidence on the

record demonstrates the ``Roller Chain'' nature of KMM's imports and we

will not calculate Kawasaki's assessment rate for the 1992-93 review of

the A-588-054 case to reflect the value of its alleged ``Roller Chain''

merchandise. However, because KMM imported TRBs within the scope of the

A-588-054 finding only, we agree with Kawasaki that no recalculation of

its A-588-604 assessment rate is warranted.

As for Kawasaki's German-made TRBs, proper identification on entry

documents by Kawasaki of the German origin of the merchandise should

ensure that this merchandise is properly treated as outside the scope

of these TRB cases and not assessed antidumping duties resulting from

these reviews. However, to ensure that only Japanese-made TRBs are

subject to antidumping duties, we will instruct Customs to apply

Kawasaki's rates for both cases to Japanese-made TRBs only.

Comment 33: Timken argues that because Honda has been a part of

numerous reviews and because in Japan a manufacturer/supplier

participates actively in the design, technology, manufacture, and

quality control of the products it supplies, all Japanese suppliers of

TRBs to Honda know for a fact that a portion of the TRBs they supply to

Honda, a reseller, are destined for export to the United States. The

petitioner contends that simply because those of Honda's Japanese

suppliers who are also subject to these reviews claim not to know which

group of TRBs will in fact be shipped to the United States, this does

not overshadow the fact that these suppliers have knowledge that a

portion of those TRBs they supply to Honda are destined for exportation

to the United States. Timken therefore concludes that this portion of

Honda's purchases from its Japanese suppliers should be reclassified as

suppliers' purchase price sales and the Department has an obligation to

review these sales using the prices paid by Honda in Japan as USP.

Honda argues that section 772(b) of the Tariff Act does not apply

to those instances where a supplier might have general knowledge that

merchandise was destined for export to the United States, but only in

those situations where the supplier knew or had reason to know that the

specific merchandise it sold to Honda was subsequently exported by

Honda to the United States. Honda, citing the Department's 1992-93 home

market verification report for Honda dated July 20, 1994 (Honda Ver.

Report), contends that there is no evidence on the record to support

the conclusion that Honda's Japanese suppliers knew or had reason to

know that TRBs purchased by Honda would be exported to the United

States. Both Honda and NTN maintain that in prior reviews of the AFBs

cases, the petitioner in that case raised the identical issue and the

Department repeatedly rejected such a contention. Honda and NTN

therefore conclude that, absent evidence to the contrary, the

Department must reject Timken's position in these current TRB reviews.

Department's Position: We agree with the respondent. It has been

our practice to define a U.S. sale as a sale in which a manufacturer is

informed in advance or has reason to know at the time of sale that the

product sold in the home market was destined for exportation to the

United States. Furthermore, the evidence on the record must demonstrate

this actual or constructed knowledge (see AFBs 92/93 at 10950,

Television Receivers, Monochrome and Color, From Japan; Final Results

of Antidumping Duty Administrative Review, 58 FR 11211 (February 24,

1993), Oil Country Tubular Goods From Canada, Final Results of

Antidumping Duty Administrative Review, 55 FR 50739 (December 10,

1990), and Ferrovanadium and Nitride Vanadium From the Russian

Federation; Notice of

[[Page 57650]]

Final Determination of Sales at Less Than Fair Value, 60 FR 27957 (May

26, 1995)). At our home market verification of Honda for the 1992-93

Japanese TRB reviews we specifically addressed the issue of supplier

knowledge and examined various documents in an effort to determine

whether Honda's Japanese suppliers knew at the time of sale that the

merchandise they sold was to be exported to the United States (see

Honda Ver. Report at 7-8). We concluded that, while Honda's Japanese

suppliers may realize in general that a portion of the parts they

supplied to Honda would eventually be shipped to the United States, we

found no evidence that these suppliers could determine at the time of

sale whether a part was to be sold by Honda domestically, for export,

for export to the United States, or whether it would be sold for

replacement purposes or for original equipment manufacture. We have

therefore treated Honda as a TRB reseller for these final results and

have not reclassified any portion of Honda's purchases from certain

Japanese suppliers as suppliers' purchase price sales.

Comment 34: The petitioner argues that the Department should not

proceed with the final revocation of Honda from the A-588-054 finding

for two fundamental reasons. First, arguing that the determination to

revoke must be based on the most up-to-date information available,

Timken contends that the period of three consecutive years of no

dumping margins which the Department has relied on for Honda is too

outdated to serve as a basis for revocation. Second, Timken points out

that, under the recently-enacted URAA, the ``Roller Chain'' principle

has been effectively eliminated. Thus, Timken contends, imports

previously excluded from margin calculations and assessment are, under

the new law, subject to review and the application of antidumping

duties. While Timken recognizes that these 1992-93 Japanese TRB reviews

are governed by the pre-January 1, 1995, law, the petitioner contends

that the Department cannot reasonably predict that Honda is not likely

to dump in the future because there has never been an analysis of

Honda's ``Roller Chain'' TRBs.

Honda argues that the period of three consecutive years of zero

(0.0) margins the Department has relied on as a basis for revocation is

adequate because there is no limitation on the ``remoteness'' of this

period in 19 CFR 353.25(a)(2) of the Department's regulations. In

addition, Honda states that Timken has overlooked the fact that, in

accordance with its policy to conduct an ``update'' review when a

significant delay in finalizing a tentative revocation has occurred,

the Department has conducted such an update review in this 1992-93

review of the A-588-054 finding and has again found zero percent

dumping margins for Honda. Honda further argues that Timken's position

that the Department cannot reasonably predict that there is no

likelihood that Honda will dump in the future is essentially an attempt

by Timken to retroactively apply the new law to a revocation proceeding

clearly governed by the pre-January 1, 1995, law. Honda maintains that

such a retroactive application is in direct contradiction to Congress's

expressed intent to apply the new law only to those administrative

reviews requested on or after January 1, 1995.

Department's Position: We agree with Honda. As explained in our

preliminary results of review for these 1992-93 reviews, we found no

dumping margins for Honda's sales for the period January 1977 through

July 1980. As a result, in accordance with our revocation requirements

in effect at the time, on September 1, 1981, we published in the

Federal Register (46 FR 43864) our tentative determination to revoke

Honda from the A-588-054 finding. Based on the fact that we again found

no dumping margin for Honda for the period August 1, 1980, through

September 1, 1981 (the ``gap period''), on May 14, 1984, we published

our intent to revoke Honda from the finding (TRB 90/92 Prelim at

22353). Due to a unique pattern of events which we thoroughly detailed

in our preliminary results notice, we did not proceed with final

revocation of Honda and, as a result, the ``Intent to Revoke'' notice

we published in May 1984 has lost its official standing (TRBs 90/92

Prelim at 22353).

In October and November 1992 the petitioner requested and we

initiated a review of Honda in the A-588-054 finding. We conducted a

thorough verification of Honda and preliminarily determined that Honda

again had no margin. As a result, we decided to publish, along with our

preliminary results notice of these current reviews, our intent to

revoke Honda from the A-588-054 finding. We also explained that, under

the revocation procedures in effect at the time Honda's revocation

proceeding began, the intent-to-revoke stage of the renov

This text is long and has been trimmed here. Open the source document for the complete record.