Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From the People's Republic of China; Final Results of Antidumping Duty Administrative Reviews

DEPARTMENT OF COMMERCE

[A-570-601]

Tapered Roller Bearings and Parts Thereof, Finished and

Unfinished, From the People's Republic of China; Final Results of

Antidumping Duty Administrative Reviews

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

reviews of tapered roller bearings and parts thereof, finished and

unfinished, from the People's Republic of China.

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SUMMARY: On August 25, 1995, the Department of Commerce (the

Department) published the preliminary results of its administrative

reviews of the antidumping duty order on tapered roller bearings (TRBs)

and parts thereof, finished and unfinished, from the People's Republic

of China (PRC). The periods of review (PORs) are June 1, 1990, through

May 31, 1991; June 1, 1991, through May 31, 1992; and June 1, 1992,

through May 31, 1993.

Based on our analysis of comments received, we have made changes to

the margin calculations, including corrections of certain clerical

errors. Therefore, the final results differ from the preliminary

results. The final weighted-average dumping margins are listed below in

the section entitled ``Final Results of Review.''

We have determined that sales have been made below foreign market

value (FMV) during each of the above periods. Accordingly, we will

instruct the U.S. Customs Service to assess antidumping duties equal to

the difference between United States price (USP) and FMV.Q

EFFECTIVE DATE: December 13, 1996.

FOR FURTHER INFORMATION CONTACT: Charles Riggle, Hermes Pinilla, Andrea

Chu, Donald Little, or Kris Campbell, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone

(202) 482-4733.

APPLICABLE STATUTE AND REGULATIONS: Unless otherwise indicated, all

citations to the statute and to the Department's regulations are

references to the provisions as they existed on December 31, 1994.

SUPPLEMENTARY INFORMATION:

Background

On August 25, 1995, the Department published in the Federal

Register the preliminary results of its administrative reviews of the

antidumping duty order on TRBs from the PRC. See Tapered Roller

Bearings and Parts Thereof, Finished and Unfinished, From the People's

Republic of China; Preliminary Results of Antidumping Duty

Administrative Reviews, 60 FR 44302 (August 25, 1995) (Preliminary

Results). We gave interested parties an opportunity to comment on our

preliminary results and held a public hearing on October 19, 1995. The

following parties submitted comments: The Timken Company (petitioner);

Shanghai General Bearing Company, Limited (Shanghai); Guizhou Machinery

Import and Export Corporation (Guizhou Machinery), Henan Machinery and

Equipment Import and Export Corporation (Henan), Jilin Province

Machinery Import and Export Corporation (Jilin), Liaoning MEC Group

Company Limited (Liaoning), Luoyang Bearing Factory (Luoyang), Premier

Bearing and Equipment Limited (Premier), and Wafangdian Bearing

Industry Corporation (Wafangdian) (collectively referred to as Guizhou

Machinery et al.); Chin Jun Industrial Limited (Chin Jun); Transcom,

Incorporated (Transcom); and L&S Bearing Company/LSB Industries (L&S).

We have conducted these administrative reviews in accordance with

section 751(a)(1) of the Tariff Act of 1930, as amended (the Act), and

19 CFR 353.22.

Scope of Reviews

Imports covered by these reviews are shipments of TRBs and parts

thereof, finished and unfinished, from the PRC. This merchandise is

classifiable under the Harmonized Tariff Schedule (HTS) item numbers

8482.20.00, 8482.91.00.60, 8482.99.30, 8483.20.40, 8483.20.80,

8483.30.80, 8483.90.20, 8483.90.30 and 8483.90.80. Although the HTS

item numbers are provided for convenience and customs purposes, our

written description of the scope of these proceedings is dispositive.

Best Information Available

In accordance with section 776(c) of the Act, we have determined

that the use of the best information available (BIA) is appropriate for

a number of firms. For certain firms, total BIA was necessary, while

for other firms only partial BIA was applied. Our application of BIA is

further discussed in the Analysis of Comments Received section of this

notice.

Analysis of Comments Received

Comment 1: Petitioner argues that the Department's preliminary

finding that there are nine independent Chinese TRB producers entitled

to separate antidumping margins and duty rates is inconsistent with the

preliminary determination that the TRB industry is not sufficiently

market-oriented to allow for the use of home market prices. Petitioner

states that, where the government retains significant control over an

entire industry, there is sufficient direct or indirect control to

warrant treating all of the producers as ``related'' for purposes of

section 773(e)(4)(F) of the Act and, therefore, to calculate only a

single margin for these companies. Petitioner contends that, if

separate rates are calculated, there is a strong incentive to channel

U.S. exports through exporters with the lowest margins, and that the

record establishes that various TRB producers not only market their own

bearings but also perform sales and marketing functions with respect to

TRB models produced by other companies.

Petitioner further contends that the Department's de jure and de

facto separate rates analysis places an impossible burden of proof on

domestic

[[Page 65528]]

interested parties due to the fact that a state-controlled economy can

amend its laws and regulations without in fact relinquishing control,

and domestic parties, as well as the Department, lack access to

information that would indicate whether such control continues after

the de jure amendments.

Respondents Guizhou Machinery et al. respond that the Department

properly employed its standard separate rates methodology, as

enunciated in Silicon Carbide from the People's Republic of China, 59

FR 22585 (May 2, 1994).

Department's Position: We disagree with petitioner. A determination

that a company is entitled to a separate rate differs from a market-

oriented industry determination with respect to both the analysis

performed by the Department and the impact of the decision. A separate

rates determination does not presume to speak to more than an

individual company's independence in its export activities. The

analysis is narrowly focused and the result, if independence is found,

is resultingly narrow--the Department analyzes that single company's

U.S. sales separately and calculates a company-specific antidumping

rate. Thus, for purposes of calculating margins, we analyze whether

specific exporters are free of government control over their export

activities, using the criteria set forth in Silicon Carbide. Those

exporters who establish their independence from government control are

entitled to a separate margin calculation.

A finding that a company is entitled to a separate rate does not

constitute a finding that its home market or third country prices are

sufficiently market-driven so that such prices may be used to establish

FMV (which would be the result of a market-oriented industry

determination). Rather, it indicates that the company has sufficient

control over its export activities so as to prevent the manipulation of

such activities by a government seeking to channel exports through

companies with relatively low dumping rates. See Disposable Pocket

Lighters from the People's Republic of China; Final Determination of

Sales at Less Than Fair Value, 60 FR 22359, 22363 (May 5, 1995).

Petitioner's argument that there is sufficient direct or indirect

government control to treat all exporters as ``related'' is unsupported

by the record. The PRC companies that responded to our questionnaire

submitted information indicating a lack of both de jure and de facto

control over their export activities. Contrary to petitioner's claim

that the necessary information concerning the de facto portion of the

analysis is inaccessible to both petitioner and to the Department, such

information was in fact subject to verification and was discussed in

the relevant verification reports. Based on our analysis of the Silicon

Carbide factors, the verified information on the record supports our

determination that these nine respondents are, both in law and in fact,

free of government control over their export activities. Thus, it would

be inappropriate to treat these firms as a single enterprise and give

them a single margin. Therefore, we have continued to calculate

separate margins for these companies.

Comment 2: Petitioner argues that the Department should base the

values of all factors of production (FOP) on the annual report of SKF

India (SKF). In the preliminary results, the Department used the SKF

report to value three factors (overhead; selling, general, and

administrative expenses (SG&A); profit), and the Department derived

values for the direct labor and raw material factors from two other,

unrelated sources (International Labor Office (ILO) statistics and

Indian import statistics, respectively). Petitioner argues that the

annual report of SKF is the only record source that yields values for

all five factors and that, as such, the SKF report is a single,

coherent source that includes segregable information on each of the

principal factors of production and other costs necessary to construct

FMV. Petitioner further claims that using other sources to value labor

and raw materials, while using SKF's labor and raw materials

information to derive overhead, SG&A and profit, is inherently

distortive. (The Department included SKF's material and labor expenses

in the denominator of the calculation of percentages for factory

overhead, SG&A and profit.)

Petitioner states that the use of the SKF report for all FOP values

is consistent with the importance the courts attach to use of a single

source when possible (citing Timken Co. v. United States, 12 CIT 955,

962, 963, 699 F. Supp. 300, 306, 307 (1988), affirmed 894 F.2d 385

(Fed. Cir. 1990) (collectively Timken)), and suggests that the SKF

report most nearly approximates a verified, surrogate questionnaire

response of the type the Department formerly sought from producers in

potential surrogate countries.

Petitioner further contends that, whereas SKF's costs and expenses

represent those of a producer of the class or kind of merchandise

subject to review, the surrogate data for direct labor and raw

materials the Department used cover a broad range of industries and

products. Petitioner claims that the direct labor classification the

Department used covers, in addition to bearings producers, hundreds of

industry sectors under broad headings unrelated to bearings production,

and argues that there is no rational basis for using such a non-

specific source as a surrogate when the actual cost data of an Indian

bearings producer is available.

Petitioner notes that record evidence shows the costs of raw

materials and labor incurred by actual bearings producers in India to

be consistently higher than the trade statistics values used by the

Department in the preliminary results, either because the industries or

product categories covered by the labor and raw materials sources are

overly broad or because domestic prices are different from those of

imports. Finally, petitioner adds that the information in the SKF

report could be adjusted by the Department using its normal price-index

approach for use in all three review periods.

Petitioner argues in the alternative that, in the event that the

Department does not use the SKF report to value all FOP, the overhead

and SG&A rates must be adjusted to reflect the use of lower materials

and labor values from the separate sources. Petitioner claims it would

be distortive to include SKF's full materials and labor costs in the

cost of manufacture (COM) denominator of the overhead and SG&A

calculations unless they are also the basis for valuing the raw

materials and direct labor factors in the constructed value (CV)

calculation. Petitioner proposes that the Department multiply the total

weight of materials for SKF by the average value of steel that will be

used in the final results and the total number of hours worked at SKF

by the ILO labor value used for the material and labor figures the

Department included in the overhead and SG&A calculations.

Petitioner states that the most obvious adjustment needed to the

materials element of the overhead and SG&A calculations is due to the

Department's use of Indian values free of duties; specifically, because

the Indian import data applied in the preliminary results are based on

pre-duty import values, it is inappropriate to use an SKF materials

value that includes duties in the overhead and SG&A calculations.

Petitioner suggests that, if the Department does not apply the

adjustment proposed above, i.e., total SKF material weight times the

Indian value used, the amount of duties paid by SKF on imported

materials, as indicated in the SKF annual report, should be deducted

from the materials total in the overhead and SG&A

[[Page 65529]]

calculations in order to derive apples-to-apples ratios.

Guizhou Machinery et al. respond by arguing that it is irrelevant

whether the SKF report represents a single, coherent source for valuing

all FOP components and note that the Department consistently uses

multiple sources of information for surrogate data in NME cases (citing

Final Determination of Sales at Less Than Fair Value: Sebacic Acid from

the People's Republic of China, 59 FR 28053 (May 31, 1994) (Sebacic

Acid), and Final Determination of Sales at Less Than Fair Value:

Certain Cased Pencils from the People's Republic of China, 59 FR 55625

(November 8, 1994) (Certain Cased Pencils)). Guizhou Machinery et al.

add that petitioner's citation to Timken is misplaced and state that,

in that case, the Department was not criticized for the use of

different sources but for the disparity between the ratios resulting

from the Department's calculation and other ratios on the record.

Guizhou Machinery et al. further state that the fact that the SKF

report contains costs and expenses incurred by a producer of the class

or kind of merchandise subject to review does not make the report a

better source of surrogate data. On the contrary, Guizhou Machinery et

al. state, whereas there is no evidence to indicate that SKF used the

same type of steel as respondents, the Indian import statistics enable

the Department to pinpoint a particular type of steel.

In response to petitioner's argument that it is inherently

distortive to use the SKF report for overhead, SG&A and profit, but not

for materials and labor, Guizhou Machinery et al. and Chin Jun argue

that it would be more distortive to use the SKF report for the

materials component due to a lack of detail regarding the types of

steel SKF used. Chin Jun notes that the SKF steel prices do not provide

separate prices for bar, rod or steel sheet, but instead provide a

single figure for all steel used in the factory, including steel used

in the production of non-subject merchandise. Chin Jun submits that the

petitioner, the Department, and respondents do not have any idea what

types of steel were included in SKF's material cost calculation.

Guizhou Machinery et al. add that petitioner has provided no

information demonstrating that the SKF report covers the specific steel

inputs relevant to subject merchandise.

Guizhou Machinery et al. and Chin Jun also dismiss petitioner's

claim that the SKF report most nearly approximates a verified surrogate

questionnaire response. Respondents state that an annual report, though

perhaps audited, is not verified and note that the Department has a

preference for verifiable, public information (citing Sebacic Acid and

Final Determination of Sales at Less Than Fair Value: Manganese

Sulphate from the People's Republic of China, 60 FR 52155 (October 5,

1995) (Manganese Sulphate); Final Determination of Sales at Less Than

Fair Value: Certain Carbon Steel Butt-Weld Pipe Fittings from the

People's Republic of China, 58 FR 21058 (May' 18, 1992)).

Guizhou Machinery et al. respond to petitioner's contention that

the cost of direct materials of actual bearings producers in India is

shown to be consistently higher than the trade- statistics values used

in the preliminary results by stating that such a fact does not render

the trade statistics incorrect and that, furthermore, there is nothing

in the law requiring the Department to use the highest value in

choosing surrogate values.

Shanghai states that, in the event that the Department rejects the

use of SKF materials, labor, and other costs except overhead, profit

and SG&A, the Department should not further adjust overhead and SG&A as

suggested by petitioner's argument in the alternative. Shanghai notes

that the SKF report indicates that, in addition to TRB production, SKF

has other lines of business, including the manufacture of textile

machine components and other types of bearings. Shanghai contends that

the report does not allow for the allocation of labor or materials to

TRB production for SKF's overhead and SG&A, and there is insufficient

information on which to base adjustments to overhead and SG&A based on

different valuations of materials and labor used for TRB production.

Finally, Shanghai notes that, since the report contains no information

concerning the proportion of material represented by TRB steel costs,

what portion of SKF's steel was imported, or how much was paid in

duties, if the Department continues to use the SKF report for overhead

and SG&A it should make no further adjustment to the rate used for the

preliminary results.

Department's Position: We agree with respondents. Section 773(c)(1)

of the Act states that, for purposes of determining FMV in a non-market

economy, ``the valuation of the factors of production shall be based on

the best available information regarding the values of such factors. *

* *'' Our preference is to value factors using public information (PI)

that is most closely concurrent to the specific POR. See Final

Determination of Sales at Less Than Fair Value: Drawer Slides from the

PRC, 60 FR 54472, 54476 (October 24, 1995) (Drawer Slides). Based on

the record evidence for each of these three reviews we have determined

that surrogate country import statistics (Indonesian for valuing steel

used to produce cups and cones, and Indian for steel used to produce

rollers and cages), exclusive of import duties, comprise the best

available information for valuing raw material costs. Our reasons for

preferring Indonesia, rather than our primary surrogate, India, for

valuing steel used to produce cups and cones are set forth in our

response to Comment 4.

We prefer published import data to the SKF data in valuing the

material FOP for the following reasons. First, we are able to obtain

data specific to each POR, which more closely reflect the costs to

producers during the POR. Second, the raw materials costs from the SKF

report do not specify the types of steel purchased by SKF. Although we

agree with petitioner's point that SKF is a producer of subject

merchandise, the report identifies other products it manufactures. From

the information contained in the SKF report, we are unable to allocate

direct labor and raw materials expenses to the production of subject

merchandise. Therefore, contrary to petitioner's assertion, we find

that the use of the SKF data in valuing material and labor costs would

lead to distortive results.

We also disagree with petitioner's contention that the overhead and

SG&A rates should be adjusted if we continue to use the SKF report to

value these rates while valuing the material and labor FOP using other

sources.

In deriving these rates, we used the SKF India data both with

respect to the numerators (total overhead and SG&A expenses,

respectively) and denominator (total cost of manufacturing (COM)),

because this most accurately reflects the ratios of overhead to COM and

of SG&A to COM in the surrogate country. These ratios, when multiplied

by the product-specific material and labor factors of production of

each respondent in these reviews, thereby constitute the best available

information concerning the overhead and SG&A expenses that would be

incurred by those bearings producers given their particular factors of

production for those products. Petitioner's recommended adjustment

would affect (reduce) the denominator by introducing elements unrelated

to SKF's experience, but would leave the overhead and SG&A expenses in

the numerator unchanged. We find that this adjustment would itself

distort the

[[Page 65530]]

overhead and SG&A experience of the surrogate, rather than curing any

distortion in our calculations.

We also disagree with petitioner's argument that an adjustment

should be made for duties paid on material imports included in the

denominator of the overhead and SG&A expense ratios. We multiplied the

overhead and SG&A rates by the material and labor values we used in our

factors calculation. Such values do not include import duties because

they are an estimate of a PRC producer's domestically sourced material

and labor production expenses. Although we would not include duties

paid on the importation of merchandise by SKF, we have no evidence as

to the amount of duties, if any, included in SKF's raw materials costs.

Therefore, we did not subtract any amount for import duties in our

calculation of overhead and SG&A percentages.

Comment 3: Petitioner argues that, in order to conform with the

Department's standard practice of using surrogate values from a time

period contemporaneous with the POR, the Department should use data

relating as closely as possible to each POR (citing Heavy Forged Hand

Tools, Finished or Unfinished, With or Without Handles, from the

People's Republic of China; Final Results of Administrative Review, 60

FR 49251, 49253 (September 22, 1995) (Hand Tools)). Petitioner states

that, although the April-December 1991 surrogate value data assigned

for raw material inputs in the preliminary results could rationally be

used for the 1991-92 POR, Indian import data from the relevant periods

should be used for the 1990-91 and the 1992-93 PORs. Alternatively,

citing Tapered Roller Bearings and Parts Thereof, Finished and

Unfinished, from the People's Republic of China; Preliminary Results of

Antidumping Duty Administrative Review, 60 FR 49572 (September 26,

1995), petitioner suggests that data for the 1993-94 review might be

used for the 1992-93 POR.

Guizhou Machinery et al, note that petitioner's preferred source

from which the Department would value raw material inputs is the annual

report from SKF, which covers the period April 1, 1990, through March

31, 1991, and argue that the data the Department used in the

preliminary results is more contemporaneous than the SKF report in that

it overlaps--at least in part--two of the three PORs in question. In

addition, Guizhou Machinery et al. claim that data used for the 1993-94

review (the September 26, 1995, preliminary results) should not be

considered because these statistics are not included in the

administrative records for the reviews at issue, nor are they relevant

to the time periods of these reviews.

Department's Position: We agree with petitioner that, consistent

with Hand Tools, it is preferable, for the sake of accuracy, to apply

surrogate values coincident with the POR whenever possible. For these

final results, we have applied surrogate steel values coincident to

each POR. The Indian import statistics and the Indonesian import

statistics that we used are compiled on a monthly basis. Accordingly,

we calculated POR weighted-average values using the months June through

May for each POR.

Comment 4: Petitioner and respondents Shanghai, Guizhou Machinery

et al., and Chin Jun all submitted comments regarding the appropriate

Indian import classification number(s) to be used in valuing the steel

that comprises the raw materials factor of production. Petitioner

argues that, in the event that the Department does not use the SKF

report to derive this factor, the eight-digit Indian import

classification number 7228.30.19 should be used to value steel bar and

rod that was used to manufacture cups and cones. Petitioner notes that,

whereas the Department used eight-digit categories to value steel sheet

that was used for cages and steel rod that was used for rollers, the

Department used a broader six-digit category (7228.30) for steel bar

used to manufacture cups and cones. Petitioner argues that category

7228.30 includes sub-categories of steel that are not appropriate to

the manufacture of TRBs. Specifically, categories 7228.30.01 and

7228.30.09 include ``bright bars of alloy tool steel'' and ``bright

bars of other steel,'' respectively. Petitioner states that these are

bars with bright, high-finish surfaces, which are not used in the

manufacture of TRBs, as the high finish would be useless given the

cutting, grinding and honing involved in TRB production.

Petitioner further claims that categories 7228.30.12, ``bars and

rods of spring steel,'' and 7228.30.14, ``bars and rods of tool and die

steel,'' contain steel used for specific applications apart from TRB

manufacture. Thus, petitioner argues, the Department should use the

``others'' category (7228.30.19), which it claims is a residual

category containing the steel used in the manufacture of TRBs.

Shanghai submits that category 7228.30.01, ``bright bars of alloy

tool steel,'' is the only category of Indian imports that could

possibly contain the type of steel used in the production of cups and

cones. Shanghai claims that this category shares with U.S. HTS category

7228.30.20 the particular characteristics of hot-rolled, hot-drawn or

extruded steel used for cups and cones.

Shanghai notes that the Department's past use of import statistics

as a surrogate source of data has been affirmed if the import

categories accurately reflect the material used to produce the product

in question (citing Sigma Corp. v. United States, Slip Op. 93-230 (CIT

Dec. 8, 1993); Tehnoimportexport v. United States, 766 F. Supp. 1169

(CIT 1991); and Tehnoimportexport v. United States, 783 F. Supp. 1401

(CIT 1992)). Shanghai states it follows that use of an inappropriate

import category would not be affirmed and argues that the inclusion of

steel categories other than 7228.30.01 to value cups and cones renders

the Department's surrogate steel costs for cups and cones inaccurate.

Shanghai notes that the ``others'' category put forward by petitioner,

7228.30.19, includes all types of steel within the 7228.30 basket other

than those specifically covered by separate eight-digit categories.

Shanghai contends that such ``others'' categories are not intended to

duplicate what is contained in the separate individual categories, and

it is unreasonable, therefore, to conclude that the ``others'' category

includes merchandise that falls within 7228.30.01.

Shanghai additionally argues that category 7228.30.01 should be

further adjusted to exclude exports from Poland and Italy. Shanghai

argues that Indian imports from Poland should be excluded on the basis

that the Department considered Poland to be an NME country during the

period covered by the Indian import statistics, and that Indian imports

from Italy should be deleted because the Italian prices are

aberrational compared with other imports in the category. Shanghai

contends that it is reasonable to assume that this import was of a type

of steel different from that used in the production of cups and cones

and, as such, should be excluded as unrepresentative of the type of

steel used by PRC producers (citing Final Determination of Sales at

Less Than Fair Value: Circular Welded Non-Alloy Steel Pipe From

Romania, 57 FR 42957 (September 7, 1992) (Steel Pipe)).

Petitioner contends that Shanghai's claim regarding category

7228.30.01 (bright bar) as the only category of Indian steel imports

that could possibly contain the type of steel used in the production of

cups and cones is contrary to fact because, to the best of its

knowledge, no one has ever before suggested in the course of this or

any

[[Page 65531]]

other bearing proceeding that bright bars are used to manufacture

bearings. Petitioner states that, by similarly excluding other specific

eight- digit categories which, like 7228.30.01, are known not to

include bearing steel, category 7228.30.19 remains the only category in

subchapter 7228 that would contain bearing steel.

With respect to Shanghai's argument that Indian imports from Italy

be excluded from 7228.30.01 as unrepresentative of the steel type used

to manufacture bearings, petitioner reasserts its argument that the

entire category, 7228.30.01, is unrepresentative of bearing steel and

that Shanghai's argument is therefore irrelevant. Notwithstanding this

point, petitioner takes issue with Shanghai's citing to Steel Pipe as

an example in which the Department excluded certain higher priced

imports as unrepresentative of the type of steel used to manufacture

the product in question. Petitioner claims, first, that bearing quality

steel is inherently higher quality steel than the non-alloy product at

issue in Steel Pipe. Petitioner further argues that a higher value in a

basket category might represent the only bearing quality import in the

category.

With respect to Shanghai's argument concerning the exclusion of

steel imports from Poland, petitioner asserts that Poland is properly

regarded as a market-economy country for purposes of these reviews and,

thus, Indian steel imports from Poland should not be excluded.

Petitioner notes that the Department determined that Poland had

completed the transition to a market economy by 1992, citing Final

Determination of Sales at Less Than Fair Value: Certain Cut-to-Length

Carbon Steel Plate From Poland, 58 FR 37205 (July 9, 1993) (Steel

Plate). Petitioner contends that, while the finding was limited to 1992

because the period of investigation at issue was 1992, it is reasonable

to consider Poland to have been a market-economy country for these PORs

because such a transformation could not be instantaneous.

Guizhou Machinery et al. dispute petitioner's argument regarding

the use of steel category 7228.30.19, contending that petitioner

suggests replacing one basket category, 7228.30, with another basket

category, 7228.30.19. Guizhou Machinery et al. insist that petitioner's

reasons for opposing the use of category 7228.30 apply as well to

category 7228.30.19 and, therefore, do not provide compelling reasons

for the Department to change categories.

In its rebuttal comments, Shanghai concurs with Guizhou Machinery

et al. that the Department should reject petitioner's suggestion that

the eight digit ``others'' category (7228.30.19) is the best category

for valuing steel used to produce cups and cones. Although Shanghai

agrees with petitioner that there is no eight-digit category in the

Indian import statistics isolating bearing quality steel (noting that

7228.30.12 and 7228.30.14 are clearly inapplicable), Shanghai contends

that the ``others'' category recommended by petitioner is too general

and anonymous, containing steel imports of unknown types and

quantities. Shanghai suggests in its rebuttal that the Department could

use category 7227.90.11 (coil steel), speculating that the type of ball

bearing steel used by Chinese producers might enter India under this

category number.

Chin Jun argues that use of the basket category 7228.30 is

unreliable, in that it contains a wide variety of steel products with a

corresponding wide variety of prices. With regard to petitioner's

argument that the Department use category 7228.30.19, Chin Jun asserts

that use of this category would be incorrect unless aberrational data

are excluded. Chin Jun states that the range of prices within this

category is staggering and notes that as a residual category it

contains many different types of steel. Although acknowledging that it

is unclear whether category 7228.30.19 is directly comparable to U.S.

HTS category 7228.30.80--the residual category under HTS 7228.30--Chin

Jun states that the Indian data are aberrational by comparison to U.S.

data from HTS 7228.30.80. Chin Jun argues that the Department should,

as it has in the past, adjust the basket category in order to obtain a

``more reasonable indication of the market-based price for the type of

steel used'' (citing Steel Pipe). Chin Jun suggests that the Department

could accomplish such an adjustment by excluding all steel priced more

than $1,000 per metric ton.

Chin Jun also contends that category 7227.90.11 is the correct

category for steel used in the manufacture of rollers and that the

Department erred in using category 7228.50.09, which is comprised of

cold-rolled steel.

With respect to this last contention, petitioner notes that Chin

Jun placed on the record its supplier's statement that the supplier

``uses cold-rolled alloy steel rod to manufacture rollers.'' Public

Version of Questionnaire Response of Chin Jun Supplier, August 31,

1994, at 6. In addition, petitioner notes, other companies responded

the same way.

Department's Position: We agree with petitioner that none of the

eight-digit tariff categories within the 7228.30 steel group correspond

specifically to bearing quality steel used to manufacture cups and

cones, but do not agree that the best recourse is to the eight-digit

``others'' category (7228.30.19) within this group. We have determined

that the use of Indian import data is not appropriate to value cups and

cones in this case because, as noted in the arguments above and as

shown below, we are unable to isolate bearing quality steel and, as

discussed below, the value of the Indian import data is not reliable.

See Drawer Slides at 54475-76.

We have examined each of the eight-digit categories within the

Indian 7228.30 group and have found that, although bearing quality

steel used to manufacture cups and cones is most likely contained

within this basket category, there is no eight-digit sub-category that

is reasonably specific to this type of steel. We eliminated the

specific categories of alloy steel, commonly identified by petitioner

and respondents, that are clearly not bearing quality steel, as

follows. Under the Indian tariff system, bearing quality steel used to

manufacture cups and cones is contained within the broad category

7228.30 (Other Bars & Rods, Hot-Rolled, Hot-Drawn & Extruded). However,

none of the named sub-categories of this grouping (7228.30.01--bright

bars of alloy tool steel; 7228.30.09--bright bars of other steel;

7228.30.12--bars and rods of spring steel; and 7228.30.14--bars and

rods of tool and die steel) contains steel used in the production of

subject merchandise. This leaves an ``others'' category of steel,

7228.30.19. However, we have no information concerning what this

category contains, and none of the parties in this proceeding has

suggested that this category specifically isolates bearing quality

steel. Further, the value of steel in this eight digit residual

category is greater than the value of the general six-digit basket

category (7228.30), which in turn is valued too high to be considered a

reliable indicator of the price of bearing quality steel, as shown

below.

Where questions have been raised about PI with respect to

particular material inputs in a chosen surrogate country, it is the

Department's responsibility to examine that PI. See Drawer Slides at

54475-76; Certain Cased Pencils, 59 FR 55633, 55629 (1994). Because all

parties raised questions about the validity of the Indian import data

used to value cups and cones in the preliminary results, we compared

the value of Indian imports in category 7228.30 with the only record

source that specifically isolates bearing quality steel used to

manufacture cups and cones: import data regarding U.S.

[[Page 65532]]

tariff category 7228.20.30 (``bearing quality steel''). We found that,

for the time period covered by the PORs, the value of the Indian basket

category 7228.30 was approximately 50 percent higher than the bearing

quality steel imported into the United States. The Indian eight-digit

``others'' category recommended by petitioner, valued approximately 75

percent higher than the U.S. import data, was even more unreliable in

comparison with the value of bearing-quality steel.

In light of these findings, we have determined that the Indian

import data that we used to value cups and cones in the preliminary

results is not reliable. For these final results, we are using import

data from a secondary surrogate, Indonesia, a producer of merchandise

comparable to TRBs, to value steel used to produce these components. As

with India, we were unable to isolate the value of bearing-quality

steel or identify an eight-digit category containing such steel

imported into Indonesia; however, unlike the Indian data, the

Indonesian six-digit category 7228.30 closely approximates the value of

U.S. imports of bearing-quality steel, as well as the comparable six-

digit category in the United States. Thus, we have determined that

Indonesian category 7228.30, which is the narrowest category we can

determine would contain bearing-quality steel, is the best available

information for valuing steel used to produce cups and cones. Although

Indonesia is not the first-choice surrogate country in these reviews,

in past cases the Department has used values from other surrogate

countries for inputs where the value for the first-choice surrogate

country was determined to be unreliable. See Drawer Slides at 54475-76;

Cased Pencils at 55629; Certain Helical Spring Lock Washers, 58 FR

48833, 48835 (Sept. 20, 1993). Because we are valuing the steel used to

produce cups and cones using Indonesian import data, we are valuing the

scrap offset to this steel value using the same source.

We also disagree with Shanghai regarding the appropriateness of

Indian category 7227.90.11 as the steel type for cups and cones.

Respondents reported that they use hot-rolled steel bar to manufacture

cups and cones. Category 7227.90.11 is coil steel and is necessarily

produced by a different mill than bar steel. No respondent reported

using coil steel to manufacture cups and cones. In addition, during

factory tours of various PRC-based bearings producers we found no

evidence that any producer uses coil steel to manufacture cups and

cones. Finally, we note that in its case brief (at 7) Shanghai claimed

that ``the only category of Indian steel imports which could possibly

contain the type of steel used in the production of cups and cones is

AC 72283001, Bright Bars of Alloy Tool Steel.''

With respect to the valuation of steel used in the production of

rollers and cages, we have applied the Indian import statistics used in

the preliminary results. We note that the interested party comments

regarding the validity of Indian import category 7228.30, as discussed

above, pertain only to the valuation of steel used in the production of

cups and cones. We also note that we disagree with Chin Jun concerning

the appropriate category for steel used in the manufacture of rollers.

We selected category 7228.50.09 based on respondents' statements that

they used cold-rolled steel rod to manufacture rollers. In addition to

the response from Chin Jun's own supplier, record evidence indicates

that other manufacturers used the same type of steel. See, e.g., public

versions of Questionnaire Response for 1991-92 and 1992-93 Reviews of

Luoyang, June 13, 1994, at 13, and Questionnaire Response for 1990-91

Review of Henan, December 19, 1991, at 8.

Concerning Shanghai's request that imports from Poland be excluded

from the valuation of the steel input used to manufacture cups and

cones, we note that we revoked Poland's NME status effective January 1,

1992. See Steel Plate at 37207. Therefore, for these final results, we

have, to the extent possible, excluded imports from Poland prior to the

1992-93 POR because such steel was imported from an NME country.

Comment 5: Petitioner contends that market-currency acquisitions of

raw materials should be disregarded in favor of Indian surrogate values

with respect to Luoyang and Henan for several reasons. Petitioner first

argues that the Department should disregard purchases of raw materials

in which the purchase contract provided for delivery after the PORs

because the steel received under such contracts could not have been

used to produce bearings sold during those PORs.

In addition, petitioner claims that steel import contracts do not

reflect market-economy transactions. Petitioner notes that Luoyang did

not purchase steel directly and that contracts examined by the

Department at verification indicated that the sale consisted of a

transaction between a German trading company as the seller and China

Foreign Trade Development Companies, Inc. as the buyer. Citing

Memorandum to Division Director, Office of Antidumping Compliance from

Case Analyst, Office of Antidumping Compliance: Verification Report for

Luoyang Bearing Factory in the Fifth and Sixth Reviews of the

Antidumping Duty Order of Tapered Roller Bearings and Parts Thereof

From the People's Republic of China (August 3, 1995), petitioner

observes that Luoyang has explained that steel is a controlled

commodity and, as such, must be imported through a trading company.

Petitioner insists that, given this fact pattern involving

contracts concerning a controlled commodity, the purchase of which must

be carried out through the mandatory intervention of a state trading

company, any such purchase cannot rationally be considered an arm's-

length transaction reflecting uncontrolled market prices. Petitioner

claims that the Department departs from using surrogate values only

when the actual imports from a market economy reflect market-economy

practices and prices (citing Oscillating Fans and Ceiling Fans from the

PRC, 56 FR 55271 (October 25, 1991) (Ceiling Fans)). Petitioner

contends that, under the circumstances of this case, the state-

controlled trading company is by law given a leading role in

negotiating the terms of sale and such trading companies, acting as

coordinators of steel purchases for the entire Chinese economy, would

enjoy such market power as to enable them to obtain better prices than

any individual bearings producer. Petitioner suggests, in addition,

that steel supplied to Luoyang from the PRC trading company was part

of, or related to, broader deals between Luoyang and the trading

company, which could affect the prices paid by Luoyang for reasons

unrelated to the factors that would govern normal commercial

transactions between market-oriented companies.

Finally, petitioner claims that there are no scrap values

attributable to Luoyang's steel acquisition costs. Petitioner notes

that the net cost of raw materials inputs is based on the steel cost

minus a value for scrap credit and argues that applying a value to the

steel from one source and scrap credit from a different source is

inherently distortive. Petitioner adds that the courts have ruled this

practice to be unsupported, citing Timken, and states that the

Department addressed the issue on remand in Timken by using a single

source, telexes from the U.S. Consulate in Bombay. Petitioner further

notes that, in its remand calculations, the Department derived a scrap

value for one material input, steel sheet, using a ratio as stated in

the telex (which provided that scrap was equal to 20 percent of the

value of the steel sheet),

[[Page 65533]]

instead of the absolute value of scrap provided in the telex, where

this absolute value of scrap was an unreasonable percentage of the

absolute value of steel sheet. Petitioner recommends that if the

Department maintains its position taken in the preliminary results to

use steel prices paid by Luoyang and Henan to value certain steel

inputs while using Indian import statistics to value scrap, it should

use ratios, rather than absolute amounts, to derive the per-unit value

of scrap.

Guizhou Machinery et al. respond that, consistent with section

773(c) of the Act and with 19 C.F.R. 353.52, the Department has

established a practice of using actual import prices if they are from

market-economy countries. Guizhou Machinery et al. contend that the

``Department practice allows for the valuation of inputs in NME cases

based on market prices paid by the manufacturer for goods obtained from

a market-economy source because these prices reflect commercial

reality'' (citing Final Determination of Sales at Less Than Fair Value:

Coumarin From the People's Republic of China, 59 FR 66895 (December 28,

1994) (Coumarin)). Guizhou Machinery et al. state that petitioner's

assertion that the contracts do not reflect market-economy transactions

because steel is a ``controlled commodity'' and because the contracts

involved ``state trading companies'' is irrelevant because such

arguments do not negate the fact that the sellers, who establish the

sales prices, are market-economy companies (citing Hand Tools and Final

Determination of Sales at Less Than Fair Value: Saccharin from the

People's Republic of China, 59 FR 58818 (November 15, 1994)

(Saccharin)). In addition, Guizhou Machinery et al. contend that

petitioner's statement that steel supplied to Luoyang from the PRC

trading company might have been part of related or broader deals is

nothing more than speculation, with no support on the administrative

record.

Guizhou Machinery et al. argue that, because the contracts in

question were all effective and legally binding during the PORs, the

Department should use the market prices contained in the contracts as

the basis for valuing the steel.

Finally, Guizhou Machinery et al. contend that, in Timken, which

petitioner cited in support of its argument that the Department cannot

use one source to value steel inputs and a different source to value

steel scrap, the Court of International Trade (CIT) and the Court of

Appeals for the Federal Circuit (CAFC) did not rule that the Department

cannot use different sources to obtain surrogate values for the various

constructed value components but, rather, that the Department cannot

use surrogate value data which yield distortive results and which are

inconsistent with other record evidence. Guizhou Machinery et al. argue

that petitioner has not shown that the use of market-oriented import

prices for steel together with Indian import statistics for scrap

credit yields distortive results or that it is inconsistent with other

information on the administrative record for these reviews. Guizhou

Machinery et al. contest petitioner's claim that the use of two

different sources to value steel and scrap is ``inherently

distortive,'' and point out that in many cases the Department has used

different sources to value input materials and scrap.

Department's Position: We agree with petitioner that purchases of

steel from PRC trading companies should not be used in these reviews.

Our established policy allows for the valuation of inputs in NME cases

based on market prices paid by the manufacturer for inputs purchased

from a market-economy source because those prices reflect commercial

reality. See Saccharin at 58822-23. However, in these reviews the

transactions were conducted by trading companies instead of the

manufacturers. Therefore, the manufacturer obtained the input from the

trading company--a PRC source--and paid for the input in PRC currency.

Therefore, we determine that the prices paid by the trading companies

do not reflect the producers' prices and the prices paid by the

producers for these inputs do not reflect market prices. We note here

that Guizhou Machinery et al. misread Coumarin. In that case, as in

this case, we did not use purchases from market-economy suppliers but

instead applied surrogate values because producers obtained the input

from a PRC trading company. See Coumarin at 66900.

Because we agree with petitioner that it is not appropriate to use

the value of steel purchased by Luoyang and Henan in our calculations,

and since we used information from the same source to value both the

steel input and the scrap offset, we do not reach petitioner's argument

that we should value scrap using a ratio, rather than an absolute scrap

value, in the event that raw material input values and scrap values are

taken from discrete sources. As noted in our response to Comment 4, we

used Indonesian import data to value the steel input and scrap offset

for cups and cones, and used Indian data to value the steel input and

scrap offset for rollers and cages.

Comment 6: Petitioner argues that the Department should not have

accepted Luoyang and Henan's request that the ``scrap input'' they used

to produce certain cups and cones be valued as scrap. Petitioner argues

that new material remains new product throughout the production process

and the value of the raw material input piece is the same whether the

companies produce one or two finished pieces from the input piece.

Petitioner states that there is no reason for the Department to depart

from its position in the 1989-90 review, in which the Department stated

that the scrap steel input should not be valued at the cost of scrap.

Petitioner argues that the respondents have failed to present rational

alternatives in these PORs for taking account of their production of

two pieces from one bar.

Luoyang and Henan argue that the Department was correct in valuing

the ``scrap input'' as scrap. Luoyang states that it accumulates scrap

pieces and stores them and, from time to time, uses large scrap pieces

to manufacture smaller size bearings. Luoyang argues that petitioner's

argument that new steel costs be used to value scrap input ignores the

fact that different inputs are used in Luoyang's manufacturing process.

Luoyang further contends that steel bar is a high quality material and

can be used ``as is'' and requires no further processing or labor other

than the production itself, while scrap consists of ``leftover'' steel

pieces which have already been ``stressed'' once. Luoyang contends that

petitioner's argument would artificially inflate Luoyang's materials

costs.

Department's Position: We agree with petitioner. The ``scrap

input'' used by Luoyang to produce certain TRBs was not purchased as

scrap. Luoyang paid the full purchase price for this input. Sales of

bearings produced from scrap are indistinguishable from those produced

from new steel in Luoyang's U.S. sales listing. Valuation of the input

as scrap instead of as new steel would result in an undervaluation of

Luoyang's factors of production. Accordingly, we have valued the

``scrap'' steel input as new steel for the final results.

Comment 7: Petitioner claims that the ILO report used by the

Department to derive surrogate labor rates indicates a 46.2-hour work

week in India. Thus, petitioner argues, the Department should calculate

the hourly wage rate in rupees using a 46.2-hour week instead of the

48-hour week it used in the preliminary results.

Petitioner further states that the Department incorrectly used the

labor

[[Page 65534]]

value associated with International Standard Industrial Classification

(ISIC) major group 381, which covers the ``manufacture of metal

products, except machinery and equipment,'' rather than that relevant

to bearing production, 382, which covers the ``manufacture of

machinery, except electrical.'' (citing ILO 1993 Yearbook of Labor

Statistics at 1163). Petitioner suggests that the use of category 382

would be consistent with past practice.

Guizhou Machinery et al. respond that the machinery industry rates

suggested by petitioner are inflated rates that should not be used in

these reviews because the manufacture of machinery products involves

sophisticated manufacturing processes and highly skilled labor.

Respondents also contend that petitioner's argument that a 46.2-hour

work week rather than a 48-hour work week should be used is not

adequately supported by petitioner's brief.

Department's Position: We agree with petitioner with respect to the

use of ISIC major group 382. Upon further inquiry, we found that labor

associated with bearing production is included in this category and

that the labor categories that comprise ISIC major group 381 are not

relevant to bearing production. Therefore, the Department has used

major group 382 for the final results of these reviews. See (ISIC)

series M, No. 4, Rev. 3 at pg. 153.

We also agree with petitioner that we should use a 46.2-hour work

week instead of a 48-hour work week. The ILO data that we used to value

direct labor indicates that the average number of hours worked for ISIC

major group 382 was 46.2 hours per week. Because we are basing the

direct labor value on ILO data as stated above (which provide

information on the basis of average daily wages), it is appropriate to

use the average labor hours per week from the same source to derive an

hourly labor rate from this annual wage data. Although a 48-hour work

week was established as standard under Indian law, we note that other

sources that we have examined (e.g., the Economist Intelligence Unit)

indicate that, in practice, the average number of hours worked is 45-47

hours per week.

Comment 8: Petitioner claims that indirect labor is not reflected

in the SG&A and overhead rates, contrary to the Department's statement

in the preliminary results that ``indirect labor is reflected in the

selling, general and administrative and overhead rates.'' Petitioner

notes that no portion of the amount shown as ``payments to and

provisions for employees'' in SKF's annual report is included in either

the overhead or the SG&A calculation. Petitioner states that,

consistent with the 1989-90 administrative review, indirect labor must

be added to the constructed value.

Petitioner further contends that the indirect labor amounts

supplied by respondents are inadequate since the submitted indirect

labor data, reported as a percentage of direct labor costs, are

generally unsupported by explanation, calculations or documentation.

Petitioner suggests that the Department should use as BIA the highest

indirect labor rate on the record in these reviews.

Chin Jun claims that its supplier provided indirect labor data and

was subject to verification, and that the Department should therefore

reject petitioner's argument.

Guizhou Machinery et al. note that the Department used the SKF

annual report to calculate the SG&A rate and that, since that

calculated rate was below the statutory minimum, the Department applied

the statutory minimum of 10 percent in the calculation. Guizhou

Machinery et al. contend that there is no basis for asserting that the

Department must add an amount to the statutory minimum for indirect

SG&A labor since this is not the Department's practice.

With respect to overhead, Guizhou Machinery et al. contend that the

Department can reasonably conclude that the activities listed as

overhead in the SKF annual report are inclusive of the labor costs

associated with such activities.

Department's Position: We agree with petitioner that indirect

labor, which is attributable to overhead, and labor attributable to

SG&A were not included in our constructed value calculations in the

preliminary results. For these final results, we calculated overhead

and SG&A expenses using the line items pertaining to these expenses

from the SKF annual report. We did not use the statutory minimum since

our calculations from the SKF report resulted in an SG&A rate that

exceeded the minimum. We did not include any item from the SKF report

specifically representing indirect labor costs in calculating the

overhead and SG&A expenses, nor did we include the item ``payments to

and provisions for employees'', since this item does not segregate

direct from indirect labor. Further, contrary to Guizhou Machinery et

al.'s suggestion, there is no evidence in the SKF report to indicate

that the line items (e.g., power and fuel) that we used to calculate

these expenses included the indirect labor costs, if any, associated

with each line item.

However, we disagree with petitioner that the indirect labor

amounts supplied by respondents are inadequate. The record evidence in

this case, based on our initial and supplemental questionnaires as well

as verification, does not indicate any misreporting of the indirect

labor ratios supplied by respondents. For these final results, we have

calculated the expenses for indirect and SG&A labor using the ratios of

indirect and SG&A labor to direct labor, as reported in the responses.

Comment 9: Petitioner states that the Department did not include

interest expenses incurred by SKF in the constructed value calculation.

Petitioner contends that interest expenses and other financing charges

are ordinarily incurred in market economies and should be included in

the constructed value calculation as instructed by the Department's

Antidumping Manual, Ch. 8 at 55 (7/93 ed.). Petitioner notes that Jilin

and Henan identified ``loan interest'' in their itemized list of

expenses and that, in the 1989-90 review, the Department included

interest expense in SG&A for its constructed value calculations.

Guizhou Machinery et al. argue that petitioner provides no basis

for its assertion that SKF's interest expenses are in fact

representative of producers in appropriate market-economy surrogate

countries. Guizhou Machinery et al. state further that petitioner only

cites legal authority for the proposition that the SG&A should include

an amount for interest expenses but does not specify which charges from

SKF's annual report should be included in the calculations.

Department's Position: We agree with petitioner that, consistent

with our practice, financing charges should be treated as ordinary

business expenses. Therefore, we have included interest expenses, as

listed in SKF's 1991-92 financial statements, in the SG&A calculation

in the final results. As noted in our response to Comment 8, we

calculated the SG&A expenses by adding each line item from the SKF

report that pertained to such expenses. The line items used in the

preliminary results did not include interest expense, which was

included in a separate category in the SKF report.

Concerning Guizhou Machinery et al.'s comment that petitioner has

not sufficiently demonstrated the representativeness of SKF's interest

expense, we note that this source constitutes the best available

information and that Guizhou Machinery et al. have provided no

alternative source for the valuation of this expense.

[[Page 65535]]

Comment 10: Petitioner argues that section 772(e)(2) of the Act

requires the Department to deduct direct and indirect selling expenses

incurred by respondents' U.S. subsidiaries from exporter's sales price

(ESP). Petitioner states that the Department lacks the discretion to

create an exception for selling expenses incurred by U.S. companies in

NME countries, arguing that section 772 has never been amended to

distinguish USPs with respect to NME-produced imports; rather, the

adjustments required to calculate dumping margins with respect to NME

cases have been codified in section 773.

Petitioner recognizes that the Department declined to make ESP

adjustments in Ceiling Fans on the grounds that ``there is a lack of

information on the record to make adjustment to both sides of the

equation. * * * '' (citing Ceiling Fans at 55276). Petitioner claims

that these reviews are distinct from Ceiling Fans because the U.S.

importers of TRBs function at a different level of trade than that

derived by the Department's constructed value of home market sales.

Petitioner explains that the U.S. importers are resellers that function

as distributors while, conversely, the Department's constructed value

does not include SG&A expenses that represent expenses associated with

reselling. Petitioner adds that in the preliminary results the

Department relied on the statutory minimum, which represents the

minimum activities of the manufacturer, to determine SG&A expenses to

include in constructed value.

Petitioner further distinguishes the current reviews from Ceiling

Fans by arguing that the SKF Annual Report provides sufficient evidence

to calculate an adjustment to FMV as provided in 19 C.F.R. 353.56(b)(2)

(ESP offset), which would not necessarily equal the U.S. selling

expenses, if the Department chooses to make such an adjustment.

With respect to deductions of selling expenses from FMV, petitioner

contends that, by using the SG&A expenses of SKF in the final results,

the Department would exclude those expenses analogous to resale

activities. Therefore, petitioner contends, there is no basis to

conclude that constructed value requires any deduction similar to the

statutory deduction from ESP. Petitioner also asserts that the home

market or third-country selling expenses of the foreign producer/U.S.

importer are not relevant to the derivation of constructed value and

that these expenses cannot therefore be deducted from the surrogate or

statutory minimum SG&A expenses used in constructed value. Finally,

petitioner asserts that, if the Department does choose to grant an ESP

offset, there is no basis on which to assume that an ESP offset would

be equal to U.S. selling expenses; rather, the Department should

subtract only that portion of SG&A attributable to indirect selling

expenses (referencing schedule 6(d), ``Other Expenses,'' of the SKF

Annual Report).

Shanghai supports the Department's preliminary decision not to

deduct direct and indirect selling expenses from ESP, stating that

there is insufficient information to make a corresponding adjustment to

FMV which would thereby permit the fair and accurate comparison between

USP and FMV required by the antidumping statute. Shanghai points out

that the SKF Annual Report does not present the breakdown of selling

expenses necessary to make the required adjustments. Shanghai further

states that the Department recognized in Ceiling Fans that section

772(e) of the statute does not require the unfair adjustment of USP in

ESP transactions without the corresponding adjustments to FMV. Shanghai

asserts that the antidumping statute requires the Department to make

fair comparisons between USP and FMV, pursuant to The Budd Company v.

United States, 746 F. Supp. 1093, 1098. Shanghai concludes that a fair

comparison cannot be made if the information available does not permit

the FMV adjustment.

Guizhou Machinery et al. state that an adjustment to ESP without

the companion ESP offset to FMV would lead to distorted results.

Guizhou Machinery et al. argue that, while deductions for U.S. selling

expenses and the ESP offset can be made in market-economy cases without

difficulty, it is problematic to do so in NME cases because there is no

market-based value for indirect selling expenses on the FMV side of the

dumping equation.

Guizhou Machinery et al. cite Ceiling Fans as the Department's best

explanation of the calculation problem and of the Department's reasons

for traditionally declining to adjust both USP and FMV for U.S. selling

expenses in an NME case, and they suggest that Ceiling Fans is a direct

precedent for the Department's treatment of selling expenses in this

case. Guizhou Machinery et al. state that the U.S. importers in Ceiling

Fans, as in virtually every ESP case, were resellers and that the

current reviews cannot therefore be distinguished from Ceiling Fans on

this basis. Guizhou Machinery et al. also state that petitioner's

argument does not deal with the fact that the statutory minimum SG&A

the Department used as a surrogate value includes all selling expenses

necessary to sell TRBs, including an amount for indirect selling

expenses that would normally be deducted from FMV as an ESP offset.

With respect to petitioner's argument that, if necessary, there is

record evidence that will allow for an ESP offset to FMV, Guizhou

Machinery et al. further contend that petitioner's reference to

schedule 6(d) in the SKF Annual Report as an appropriate source of

indirect selling expenses is unsupported by any evidence.

Department's Position: We agree with petitioner with respect to the

deduction of U.S. selling expenses from USP. We have reevaluated our

practice concerning the deduction of expenses incurred by U.S.

affiliates of respondent companies in NME cases and have concluded that

such deductions are explicitly required by section 772(e)(2) of the

statute, which states that ESP shall be reduced by the amount of

``expenses generally incurred by or for the account of the exporter in

the United States in selling identical or substantially identical

merchandise.'' See Notice of Final Determination of Sales at Less Than

Fair Value: Bicycles from the PRC, 61 FR 19026, 19031 (April 30, 1996)

(Bicycles) 1. The statute provides no exceptions for cases

involving NME countries. We have subtracted, therefore, direct and

indirect selling expenses incurred by such U.S. affiliates from the

starting price in deriving the USP.

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

1 Although the statutory citation in this case is to the

law as it existed on December 31, 1994, whereas the relevant

citation in Bicycles is to the law as it exists subsequent to that

date, both versions explicitly require the deduction of expenses

generally incurred by or for the account of the exporter (or a U.S.

affiliate) in the United States.

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

We have made an ESP offset to FMV which, in conformance with

section 353.56 of our regulations, is in an amount not to exceed

indirect selling expenses incurred in the United States. We based this

offset on the ``other expenses'' item from the SKF report, and

subtracted from this item the amount for debentures as indicated in a

footnote to ``other expenses'' in the SKF report. The SKF report notes

that the general category of expenses containing the ``other expenses''

item includes ``selling expenses.'' However, none of the named items

(e.g., ``power and fuel'') pertain to selling expenses. We have

concluded that, as suggested by petitioner, the ``other expenses''

item, minus debentures, represents these ``selling expenses.''

Comment 11: Petitioner claims that verification of Jilin and

Liaoning revealed that these companies function in some circumstances

as sales agents

[[Page 65536]]

and states that the Department's calculation of USP does not

distinguish between sales for which Jilin and Liaoning acted as agents

and sales for which they purchased the bearings for their own accounts

and then resold them for export to the United States. Petitioner argues

that, in a market economy, the functions of an agent involve additional

selling activities for which the agent would be compensated by

commissions. Petitioner states that commissions, as selling expenses,

should be reflected in constructed value. If commissions are not taken

into account in constructed value, petitioner contends, these sales are

not at the same level of trade as the Indian sales by SKF that are the

basis for assigning values to the factors of production. Petitioner

suggests that the Department use the commission rate reported by

Premier and Henan as a proxy.

Guizhou Machinery et al. state that petitioner misunderstood the

verification reports. Guizhou Machinery et al. state that in this

situation Jilin and Liaoning do not act as commission agents, but

simply provide assistance with transaction details after the factory

has found a buyer. According to Guizhou Machinery et al., the factory

and the customer negotiate a sales price, which includes a fixed profit

amount for Jilin or Liaoning, adding that the only difference between

the two types of transactions is the nature of the profit. Guizhou

Machinery et al. further state that if the Department does classify

this fee as a commission it would be inappropriate to impute a

commission in the manner suggested by petitioner because (1) all of the

factories' selling expenses have been included in the statutory minimum

SG&A, and (2) it would be improper to use one respondent's proprietary

data to calculate a margin for another respondent.

Department's Position: We disagree with petitioner. With respect to

petitioner's suggestion that we make an adjustment to FMV for

commission expenses, we first note that all transactions by Jilin and

Liaoning under review were purchase price transactions. We do not make

circumstance-of-sale (COS) adjustments for selling expenses incurred on

purchase price sales in NME cases because the surrogate data on the

record do not allow us to quantify the direct surrogate home market

selling expenses necessary for such an adjustment. See Final

Determination of Sales at Less Than Fair Value: Certain Helical Spring

Lock Washers From the People's Republic of China, 58 FR 48833, 48839

(Sept. 20, 1993) (Lock Washers). (Pursuant to our COS methodology, we

first subtract home market direct selling expenses from FMV, then add

U.S. direct selling expenses.) As noted in our response to Comment 10,

we have adjusted for home market indirect selling expenses in ESP

situations by deducting the ``other expenses'' item as listed in the

SKF report. However, there is insufficient data to allow for a direct

home market selling expense adjustment because we are unable to isolate

direct selling expenses in the SKF report.

Second, even if we were to make COS adjustments for purchase price

sales, we would make this adjustment using the U.S. selling expenses

incurred by Jilin and Liaoning on these transactions. The commission

expenses at issue are not incurred by Jilin and Liaoning; rather, they

are paid by the PRC suppliers. We reviewed export transactions between

the PRC exporter and the unrelated U.S. customer. We did not examine

internal PRC transactions between the suppliers and the exporters.

Comment 12: Petitioner and Shanghai both submitted comments

concerning the appropriate basis for valuing the ocean freight expense.

Petitioner asserts that the freight rate for shipments from Japan to

the United States used as the surrogate value by the Department to

calculate ocean freight is inappropriate because the distance between

Japan and the United States is shorter than that between China and the

United States. Petitioner further states that, since Japan is

considered one of the world's most advanced countries, it is not

appropriate to use the port and maritime transportation system of Japan

to calculate ocean freight expenses for the PRC, which is a developing

country. Petitioner suggests that, in the absence of market-economy

freight rates from China to the United States, the Department use ocean

freight from India instead of Japan, since India is the surrogate

country selected by the Department. Petitioner suggests that an Indian

rate can be established by adding 30 percent to the Japanese rate based

on a comparison of the CIF/FOB ratios for the two countries published

by the International Monetary Fund (IMF) (1.09 for Japan and 1.117 for

India, i.e., 11.7 percent is approximately 30 percent greater than 9

percent).

Shanghai contends that the Department should have used the publicly

available rate for shipments from the PRC to the United States, using

data from the Federal Maritime Commission (FMC). Shanghai claims that

publicly available information on file with the FMC indicates that the

Asia North America Eastbound Rate Agreement (ANERA) maintained rates

for shipments from the PRC to the United States by several market-

country carriers throughout the periods of review.

Shanghai further argues that the port costs in Japan are among the

highest in the world and are several times as high as those in other

Asian ports and that, therefore, if the Department rejects the use of

publicly available ocean freight rates from the PRC to the United

States, it should not continue to use the inflated Japanese ocean

freight rates but should instead use publicly available rates to the

United States from other Asian ports (e.g., Hong Kong/Macau and

Taiwan). Shanghai states, in addition, that the Department erroneously

applied a USD 3.00 surcharge to the ocean freight value. Shanghai

contends that such a surcharge was applicable only on cargo from Japan

during the period prior to September 30, 1993 and that there is no

evidence of a fuel surcharge on ocean freight from the PRC to the

United States. Finally, Shanghai responds to petitioner's suggested

approach by stating that Indian rates are totally unrepresentative when

compared with the market-based rates from the PRC to the United States.

Guizhou Machinery et al. respond to petitioner's suggested approach

by arguing that the Department's ocean freight calculation is

reasonable because it is based on market-economy rates and relates to

the transportation between the United States and an Asian country

within reasonable proximity to the PRC. Guizhou Machinery et al.

further state that a comparison of the CIF/FOB ratios for Japan and

India does not reflect the difference in ocean freight expenses charged

by ocean freight providers in those counties or the actual freight

rates charged in India. Guizhou Machinery et al. note that the

valuation methodology used by the Department, which relies on the

actual rates provided by the FMC, specifically accounts for the

transportation of bearing products. Finally, Guizhou Machinery et al.

suggest that the use of Japanese shipping rates is consistent with

Department practice in many other NME cases.

Department's Position: We agree with Guizhou Machinery et al. and

have used Japanese shipping rates for the final results. We are not

using FMC data involving shipments from the PRC to the United States

because we were not able to obtain ocean freight information for

shipments of subject merchandise from the PRC to the United States

during the periods of review. Although we found a shipment of bearings

from Hong Kong to the United States during

[[Page 65537]]

the periods of review, it was provided on a per-container basis and we

were unable to allocate these charges on a per-unit basis. The Indian

rate suggested by petitioner is inappropriate due to the significantly

greater distance involved in shipments from India to the United States

compared with shipments from the PRC to the United States. Although the

distance from Japan to the United States is shorter than the distance

from the PRC to the United States, the Japan-to-United States distance

more closely approximates the PRC-to-United States distance than does

the distance from India to the United States. Thus, the Japan rate is

the best available information by which to value this expense.

Comment 13: Petitioner contends that the Department has understated

the marine insurance expense by applying an insurance rate based on

weight applicable to sulfur dyes from India rather than on value.

Petitioner argues that the value of one ton of sulfur dye may be

significantly less than the value of one ton of TRBs, in which case the

payment for loss of one ton of sulfur dye would be less than the

payment for the loss of bearings. Petitioner recommends that the

Department calculate a marine insurance factor based on the ratio of

the insurance charge per ton of sulfur dye divided by the value of

sulfur dye per ton (based on U.S. Customs value) and apply this factor

to the price of TRBs sold in the United States.

Guizhou Machinery et al. respond to petitioner by stating that

value is not the only basis for insurance rates and that it is not

reasonable to assume that the difference in Indian marine insurance

rates applicable to sulfur dye and TRBs can be accurately measured

simply by comparing the difference in product values. Guizhou Machinery

et al. note that petitioner's argument about the customs values of

sulfur dye is new information and has not been previously submitted on

the record for these reviews. Guizhou Machinery et al. further state

that the Department's approach of using the marine insurance rates from

the Sulfur Dyes investigation is consistent with its calculations in

NME cases. Finally, Guizhou Machinery et al. argue that the Department

did not understate but rather overstated the marine insurance expenses

due to ministerial errors in calculating several respondents' marine

insurance expenses. Guizhou Machinery et al. urge the Department to

therefore reject petitioner's request to make an upward adjustment to

the marine insurance calculations.

Department's Position: We disagree with petitioner. We have relied

on the publicly available information on marine insurance for sulfur

dyes that we used for the preliminary results. These data are the only

publicly available information that are available to us; further, we

have used the same rate repeatedly for other PRC analyses. See, e.g.,

Final Results of Administrative Review: Certain Helical Spring Lock

Washers from the PRC, 61 FR 41994 (August 13, 1996).

Comment 14: Petitioner argues that, where the Department discovered

significant errors or omissions during verification of the information

pertaining to one of the current review periods (1990-91, 91-92 or 92-

93), such findings should also be applied to the other periods.

Petitioner states that it requested verifications for all three

outstanding review periods, but that the Department elected to verify

only one or two of the periods. Petitioner states that, with respect to

several of the exporters or producers, the Department subsequently

rejected responses for one POR because of verification findings and

applied BIA either in whole or in part with respect to that period, but

accepted unverified responses for an earlier or later POR.

Citing section 751(a)(2) of the Act, petitioner argues that the

Department is directed to consider all relevant information in its

possession at the time the Department determines antidumping duties.

Petitioner states that in Floral Trade Council of Davis, California v.

United States, 709 F. Supp. 229, 230 (CIT 1989) (Floral Trade Council),

the court held that documents in the Department's possession which had

become sufficiently intertwined with the relevant inquiry are part of

the record, no matter how or when they arrive at the Department.

Petitioner asserts that, because the three reviews at issue have become

intertwined, errors or omissions discovered during verification of one

review period cannot be ignored for purposes of another review period.

Petitioner argues that, since the results of verification were known to

the Department before publication of the preliminary results for any of

the three pending reviews, relevant information obtained with respect

to a company in the course of one review is also before the Department

for purposes of the other intertwined reviews. Noting the fact that

there was a single briefing schedule, one hearing and one disclosure

conference, petitioner argues that the Department is treating these

reviews virtually as a unified proceeding.

Petitioner further argues that the Department routinely applies BIA

from past reviews and cites as an example a review of a countervailing

duty order on fabricated auto glass from Mexico, in which the

Department relied upon information contained in a verification report

from a past review of litharge, red lead and lead stabilizers from

Mexico (citing PPG, Inc. v. United States, 708 F. Supp. 1327 (CIT 1989)

(PPG)). Petitioner distinguishes Cabot Corp. v. United States, 664 F.

Supp. 525, 527 (CIT 1987) (Cabot), in which the CIT held that a

verification report for a subsequent review of the same order was not

before the Department for consideration in the previous review, by

noting that in Cabot the Department issued the final results of the

previous review prior to issuance of the verification report in

question. Petitioner argues that, in the pending review, because

verification reports for subsequent reviews have been issued prior to

the issuance of final results of the previous reviews, those reports

are before the Department for consideration in the previous reviews.

Petitioner further contends that the failure to consider

information from the verification reports in the other intertwined

reviews shifts an impossible burden to petitioner. Petitioner asserts

that such was the case in Final Results of Antidumping Duty

Administrative Review; 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, 64723 (December 9, 1993) (TRBs from Japan), in which the

Department refused to consider knowledge gained from a verification for

the 1991-92 review to correct errors likely to have been made in the

1990-91 review in order to avoid holding respondent in that case

responsible for the Department's delay in conducting the earlier

review. Petitioner claims that, because domestic interested parties

necessarily depend upon information from a variety of sources,

including verification reports from other review periods, in order to

rebut arguments made by respondents, denying petitioner the ability to

consult such reports and show inaccuracies in reported information

interferes with fundamental rights of participation.

Finally, petitioner argues that, even if the Department refuses to

consider verification results in the context of an earlier review, to

the extent that the Department applied partial or complete BIA for the

1991-92 POR based on verification, the same BIA should be applied with

respect to the 1992-93 POR.

Guizhou Machinery et al. respond that the Department should reject

petitioner's request to combine the

[[Page 65538]]

administrative records of the three reviews in question. Citing Win-Tex

Products, Inc. v. United States, 797 F. Supp. 1025 (CIT 1992) (Win-

Tex), Guizhou Machinery et al. argue that the results of each

proceeding must be based upon substantial evidence of the

administrative record for that proceeding. Guizhou Machinery et al.

argue that each administrative review is considered a separate

administrative proceeding and, absent affirmative incorporation,

documents contained in the administrative record of one review are not

part of the administrative record of another review.

Guizhou Machinery et al. further claim that petitioner's argument,

based on its citation of Floral Trade Council, in which the CIT granted

plaintiff's motion to supplement the administrative record of a scope

proceeding with information from the underlying investigations by the

Department and the International Trade Commission (ITC), is flawed.

Guizhou Machinery et al. note that the CIT's decision was based on the

fact that the Department itself stated in its scope decision that it

had examined both original investigations. Thus, respondents argue, the

CIT did not hold that the Department had to examine documents from

earlier parts of the proceeding, but allowed the documents to be

incorporated, not because plaintiff deemed them relevant, but, rather,

because the Department itself had incorporated the documents in its

determination.

Department's Position: We disagree with petitioner. Section

516A(b)(2)(A) of the Act states that the record for review includes ``a

copy of all information presented to or obtained by the [Department]

during the course of the administrative proceeding, including all

government memoranda pertaining to the case and the record of ex parte

meetings required to be kept by section 777(a)(3)'' as well as ``a copy

of the determination, all transcripts or records of conferences or

hearings, and all notices published in the Federal Register.'' As

elaborated in our regulations, ``[f]or purposes of section 516A(b)(2)

of the Act, the record is the official record of each judicially

reviewable segment of the proceeding.'' 19 C.F.R. 353.3(a) (1994). The

CIT has consistently held that antidumping investigations and

administrative reviews are wholly independent segments of a proceeding.

See, e.g., Outokumpu Copper Rolled Products AB v. United States, 829 F.

Supp. 318, 322 (CIT 1992) (``Each of Commerce's subsequent

determinations must be supported by the record obtained during the

course of [the] respective administrative proceeding.'').

We agree with respondents with respect to Floral Trade Council.

There, the Court reviewed a scope decision in which the Department

stated ``without qualification that it has examined `the original

investigations by the ITC and the Department.* * *' '' Floral Trade

Council at 230. Thus, the Court allowed the plaintiff to supplement the

record with certain documents from the investigation that had become

``sufficiently intertwined'' with the Department's scope inquiry. Here,

in contrast, the Department is conducting a review pursuant to section

751 to determine whether, and to what extent, the respondents have sold

subject merchandise at less than foreign market value during three

separate periods of review. To make these determinations, we have

relied on information pertaining to each separate period; we have not

relied on administrative records for other segments of the proceeding

in reaching any of these determinations.

With respect to PPG, in which we relied on a verification report

from another case in making our determination, the report from the

unrelated case was placed on the record of the case in question because

it contained public information regarding Mexican interest rates. See

PPG at 1328. Thus, the Department relied on the verification report in

a similar manner as our current use of publicly available information

from the Sulfur Dyes petition in valuing marine insurance. See Comment

13.

Although the preliminary results for these three reviews were

published in the same notice and we conducted them concurrently,

including a single briefing schedule, one hearing and one disclosure

conference, as noted by petitioner, we did so for the convenience of

all parties involved in these reviews. However, each review is a

separate segment of the proceeding as defined in our regulations. See

19 C.F.R. 353.3(q). Despite the fact that reviews sometimes proceed

concurrently or overlap, we generally do not apply the results of

verification of one review period to other review periods. See TRBs

from Japan at 64723. In this instance, we found no discrepancies during

verifications of one POR that would also apply to other PORs based on

record evidence.

Comment 15: Petitioner argues that the Department erred in its

choice of the BIA rate to apply to certain transactions by Jilin,

Liaoning, Chin Jun, Guizhou, and Henan. Petitioner states that the

appropriate BIA rate for U.S. sales involving models for which

insufficient data was supplied to allow the calculation of FMVs should

be the highest rate found for any individual U.S. transaction, instead

of the greater of the highest company-specific rate from a prior review

or the highest rate calculated in the current review. Petitioner

asserts that to do otherwise is to encourage respondents to selectively

withhold relevant data whenever by doing so the Department would select

a BIA rate lower than the actual margin of dumping.

Respondents Jilin, Liaoning, and Guizhou respond that they

cooperated in these reviews and that petitioner has provided no reason

to deviate from the Department's established practice concerning

cooperative firms, nor has petitioner shown that the Department's

results are aberrational as a result of the use of its policy.

Chin Jun responds that the highest single transaction recommended

by petitioner is punitive and must be rejected because the Department

expressly found in its preliminary results that Chin Jun was

cooperative in the reviews at issue. Chin Jun further notes that it was

unable to supply the missing information because such information was

under the control of unrelated third parties.

Department's Position: We disagree with petitioner. The BIA that we

have selected, as detailed in our response to Comment 29, is in

accordance with the BIA policy for antidumping administrative reviews.

See Antifriction Bearings (Other Than Tapered Roller Bearings) and

Parts Thereof from France, et al.; Final Results of Antidumping

Administrative Reviews, 58 FR 39729, 39739 (July 26, 1993). All of the

companies in question, except Chin Jun during the 1990-91 review,

substantially cooperated with our requests for information for the

periods in question but failed to provide complete or accurate

information with respect to certain transactions. For these specific

transactions, we find that our BIA approach accomplishes the statutory

goal of encouraging compliance with our requests for information as

well as allowing us to determine current margins as accurately as

possible. See Rhone Poulenc, Inc. v. United States, 899 F.2d 1185, 1190

(Fed. Cir. 1990). Petitioner's suggested BIA (i.e., the highest rate

found for any individual U.S. transaction) is unwarranted given the

level of cooperation and the nature of the reporting deficiencies.

Comment 16: Petitioner states that Shanghai's bearing weights and

scrap weights were unverifiable and that the

[[Page 65539]]

Department should therefore resort to partial BIA by adjusting the

reported amounts to reflect the highest actual materials or lowest

actual scrap costs.

Shanghai argues that the Department weighed actual bearings and

scrap samples at verification and determined that any discrepancies

found at verification were insignificant. Shanghai states that the

Department has previously found no cause to resort to BIA on the basis

of insignificant discrepancies (citing Silicon Carbide at 19749).

Department's Position: We disagree with petitioner. Although at

verification we did find discrepancies from the reported weights, we

determined these discrepancies to be insignificant. Therefore, they did

not undermine the validity of Shanghai's responses. In addition, we

found some discrepancies to be above reported weights and others to be

below; we found no pattern of under-reporting.

Comment 17: Petitioner argues that the Department reported that it

was unable to verify the number of Shanghai's employees assigned to the

production of TRBs, citing the verification report for the 5th and 6th

PORs. Petitioner claims that, as a result, the Department could not

verify reported indirect labor nor was it able to determine the extent

to which labor costs were understated by the omission of trained

employee hours from the direct labor costs reported. Petitioner further

argues that, given that overhead costs, SG&A and profit are all derived

on the basis of materials and labor costs, the inability to verify

labor hours is fatal to Shanghai's entire questionnaire response.

Petitioner argues that, if the Department uses the partial information

submitted by Shanghai, labor hours should be adjusted to account for

trained employees. Petitioner refers to the verification report, which

notes that, although Shanghai reported only skilled workers, the

Department determined at verification that production teams consisted

of both skilled and trained workers. Thus, petitioner asserts, the

Department should, as BIA, reject the response entirely, or,

alternatively, calculate the ratio of all workers to skilled workers

and apply that ratio to Shanghai's reported labor hours.

Shanghai claims that petitioner has misinterpreted the verification

report. Rather than stating that the number of employees assigned to

TRB production was unverifiable, Shanghai says the report noted that it

was not verifiable from personnel department worksheets, which do not

contain such information. Shanghai says that it did report the number

of employees assigned to TRB production and that such information was

verifiable through a variety of means. Shanghai further claims that its

reported labor hours accounted for trained workers. Shanghai counters

petitioner's argument for use of BIA on the basis that it did not

refuse information and it was able to produce, in a timely manner, any

information requested by the Department.

Department's Position: We agree with Shanghai's contention that

petitioner misinterpreted our verification report. In the report, we

noted that there was nothing to which we could trace the numbers from a

worksheet prepared for these administrative reviews in order to verify

the number of employees assigned to the production of subject

merchandise. However, based on company records examined at

verification, we determined that Shanghai accurately reported the

number of employees assigned to the production of TRBs.

We were able to verify the direct labor hours from Shanghai's

internal record-keeping derived from work tickets. We found at

verification that by reporting direct labor from the work tickets

Shanghai did not account for trained workers. To calculate direct labor

for the preliminary results, we adjusted Shanghai's reported labor

hours in order to account for trained workers by adding the direct

labor hours for trained workers to the direct labor hours for skilled

workers. We have applied this same methodology for these final results.

Because we were able to verify Shanghai's direct labor and there was no

evidence indicating that indirect labor was misreported, we have used

the indirect labor as reported.

Comment 18: Petitioner notes that the Department's analysis

memoranda for Jilin and Liaoning for the fifth and sixth reviews do not

indicate whether it corrected the databases for clerical errors

discovered during verification.

Department's Position: For these final results, we have corrected

Jilin and Liaoning's sales databases for the clerical errors we

discovered during verification.

Comment 19: Petitioner states that, whether or not verified, the

Department should make an adjustment for commissions incurred on U.S.

sales (valued in a market economy) in the Department's analysis of

Guizhou Machinery based on the commission rates reported by Premier and

Henan, both of which disclosed sales through commission agents and the

commission rates.

Guizhou Machinery states that the failure to report certain

commission payments amounted to an insignificant ``clerical error.''

Guizhou Machinery further argues that it would be unfair to make

wholesale adjustments to Guizhou's calculations which would affect all

sales, including those sales which are unaffected by the error, and

that it would be inappropriate to base an adjustment on the average

commission rate reported by Premier and Henan because it would violate

the administrative protective order (APO) rules applicable to that

information.

Department's Position: We disagree with petitioner. Guizhou

Machinery had only purchase price sales. Therefore, any adjustments for

commissions would be circumstance-of-sale adjustments, which we do not

make in NME cases. See our response to Comment 11.

Comment 20: Petitioner argues that, with respect to Guizhou

Machinery and the 1992-93 review, the Department should reclassify as

U.S. sales those transactions with purchase orders placed by a U.S.

firm that were listed as third-country sales.

Guizhou Machinery argues that the administrative record indicates

that the merchandise was shipped to a third country, not the United

States, and that, although purchase orders were placed by a U.S.

company, Guizhou Machinery did not know the ultimate destination of the

TRBs because the merchandise was shipped to a third country. Guizhou

Machinery argues that it would therefore be inappropriate to reclassify

these third country sales as U.S. sales.

Department's Position: We disagree with petitioner. Section

773(f)(2) of the Act requires that the producer of the merchandise

know, at the time of sale to the reseller, the country to which the

reseller intends to export the merchandise in order for the Department

to treat sales to a reseller as sales to the United States. Although

there were certain purchase orders placed by a U.S. company, there is

insufficient evidence that the respondent had knowledge of whether the

subject merchandise was destined for the United States. During

verification of Guizhou Machinery, the Department confirmed that these

sales were shipped and sold to a Hong Kong-based company. Accordingly,

we have classified these transactions as third country sales for the

final results.

Comment 21: Petitioner asserts that the factory that supplies

Guizhou Machinery with TRBs failed to report ``helpers'' (i.e., workers

assisting the basic production workers) in its reporting of direct

labor. Petitioner requests that the Department increase the labor hours

to account for unreported workers.

[[Page 65540]]

Guizhou Machinery responds that the Department's verification

report clearly states that ``helpers'' are ``auxiliary workers,'' which

are different than the ``basic production workers.'' Guizhou Machinery

further argues that the auxiliary workers typically perform maintenance

work and move containers and that ``auxiliary workers'' labor is

indirect labor and is not part of direct labor.

Department's Position: We agree with petitioner. The Department

verified that the function of ``helpers'' is to support the basic

workers in the production of TRBs. Although ``helpers'' have a

supporting role in the production process, they do perform a function

in the production of TRBs. Therefore, the Department has adjusted its

calculations for direct labor to account for unreported workers.

Comment 22: Petitioner notes that the Department stated that

reported duties and charges incurred by Central Bearing, Luoyang's

wholly owned subsidiary in the United States, on ESP sales were

deducted from the unit price. Petitioner argues that, because printouts

associated with Luoyang's ESP sales do not reflect such calculations,

such expenses should be deducted in the calculation of USP for the

final results.

Luoyang notes that, although the printout for ESP sales appears to

be incomplete, the calculation of net USP does include relevant

information regarding these expenses, and a review of the calculation

formula indicates that the Department deducted duties and other

charges. Thus, Luoyang argues, no revision is necessary for the final

results.

Department's Position: We agree with Luoyang. A review of the

formula we used to calculate net USP, which was provided to petitioner,

indicates that net USP was the price after making deductions for duties

and charges incurred by Central Bearing. Therefore, for these final

results, we have made no further adjustment with respect to these

expenses.

Comment 23: Petitioner contends that the Department should reject

the factors data submitted by one of the suppliers involved in these

reviews because it under reported its material consumption by using

theoretical instead of actual yields in the denominator of the gross

weight factor. Petitioner argues in the alternative that, if these data

are not disregarded, the Department should adjust the data to account

for this error.

Guizhou Machinery et al. respond that petitioner has not

established that the error was so substantial as to justify the

rejection of the supplier's response in its entirety.

Department's Position: We disagree with petitioner concerning its

claim that the supplier response in question should be disregarded in

its entirety. However, we agree that an adjustment should be made to

the data submitted to correct for the difference between theoretical

and actual yields. We have made this correction for the final results.

Comment 24: Shanghai argues that the SKF overhead rate that the

Department used in the preliminary results should not be used for the

final results because it is excessive and unrepresentative of Chinese

producers for the following reasons. First, Shanghai argues that the

Department's analysis improperly allocates the full amount of the

depreciation expense to overhead, and it does not consider that certain

depreciation expenses are allocable to SG&A. Shanghai notes that, for

the final results of the 1989-90 review, the Department allocated a

portion of depreciation to SG&A. Shanghai states that, according to the

SKF annual report, 7.3 percent of total depreciation pertains to SG&A.

Second, Shanghai notes that the SKF annual report does not identify

the nature of rent and lease expenses. Shanghai claims that office

space and housing for executives should be charged to SG&A and that

these lease and rent payments should therefore be allocated to SG&A,

not to overhead.

Third, Shanghai argues that it is not reasonable to allocate

``Rates and Taxes'' to overhead since they are not characterized as

such in the SKF annual report. Shanghai states that this treatment is

inconsistent with the 1989-90 administrative review, in which the

Department allocated the rates and taxes to SG&A. Shanghai requests

that the Department accordingly reduce the SKF overhead by this amount

in the event that it continues to rely on the SKF overhead rate.

Shanghai suggests that, since there is inadequate information to

determine SG&A in the SKF Report, the Department should use the Tata

Iron and Steel Company (TISCO) overhead figure of 19.24 percent of

materials and direct labor as indicated in the July 16, 1991, cable

from the Indian Embassy or use the data compiled by the Reserve Bank of

India (RBI) for the overhead calculation.

Chin Jun also claims that attributing the entire amount of SKF's

depreciation to overhead is improper because some depreciation, e.g.,

depreciation on buildings, computer and furniture, should be included

in SG&A. Chin Jun requests, therefore, that at least one quarter of

depreciation should be allocated to SG&A. Chin Jun also recommends an

alternative method for calculation of SG&A, resulting in an overhead

rate of 11.76 percent.

Department's Response: We disagree with Shanghai that we should

either use TISCO's SG&A rate or the RBI information for the calculation

of SG&A and overhead rates instead of using SKF's annual report. TISCO,

Tata Iron and Steel Company, as the name implies, is an iron and steel

company, not a bearing company such as SKF. The information published

by RBI represents over 600 companies in India from various industries.

It is the Department's practice to utilize industry-specific PI when

possible. See Notice of Final Determination of Sales at Less Than Fair

Value; Disposable Pocket Lighters From the People's Republic of China,

60 FR 22359, 22364 (May 5, 1995). Accordingly, for the final results,

we have continued to calculate SG&A and overhead rates based on the

information stated in SKF's annual report.

However, we agree that it is appropriate to adjust the SKF overhead

rate as follows. We agree with Shanghai and Chin Jun that it is

improper to include all of SKF's depreciation in overhead because

depreciation associated with office buildings and office equipment

should be included in SG&A. Therefore, for the final results we

allocated depreciation costs to overhead and SG&A according to the

function and value of the assets; that is, we included in overhead only

the depreciation expenses allocated to manufacturing. The information

pertaining to the function and value of SKF's assets was obtained from

the SKF annual report.

We also agree with Shanghai that rates and taxes should be

allocated to SG&A and not to overhead. This allocation methodology is

consistent with our practice in the 1989-90 administrative review of

this proceeding and with other recent PRC cases. See memorandum from

analyst to file Factor Values Used for the Preliminary Results of the

First Administrative Review of Certain Helical Spring Lock Washers from

the People's Republic of China, for the Period October 15, 1993,

through September 30, 1994 dated August 3, 1995.

With respect to lease rental expenses, we agree with Shanghai that

the SKF annual report does not identify the nature of those expenses.

However, we do not agree that all of the lease rental expenses are for

SG&A, since a portion of those expenses could be attributed to overhead

as well. Accordingly, we allocated lease rental expenses equally to

SG&A and overhead, i.e., 50 percent for SG&A and 50 percent for

overhead.

[[Page 65541]]

Comment 25: Shanghai states that the Department should correct

apparent calculation errors that, Shanghai contends, resulted in a

higher reported steel cost for cups and cones. Shanghai notes a

discrepancy between the steel cost for cups and cones reported in the

analysis memorandum and that provided in surrogate data source

memorandum.

Department's Position: For the final results, we have changed the

surrogate source with which we valued the steel used to manufacture

cups and cones, necessitating a recalculation. This change renders

Shanghai's argument moot.

Comment 26: Shanghai argues that the actual prices at which it

purchased steel from PRC steel producers are sufficiently market-driven

to be used instead of surrogate values. In support of its contention

that the use of market-driven NME prices is appropriate, Shanghai cites

Ceiling Fans, wherein the Department has stated that the presumption

that no domestic factor of production is valued on market principles

``can be overcome for individual factors by individual respondents with

a showing that a particular NME value is market driven'' (citing

Ceiling Fans at 55273). Shanghai argues that, where this standard is

met, the Department should apply its normal (non-NME) methodology

(citing S. Rep. No. 71, 100th Cong., 1st Sess., 108 (1987)).

Shanghai states that the domestic steel producers from which it

purchased steel compete against steel producers from market-economy

countries. Shanghai also notes that there are no import restrictions

limiting its ability to purchase either domestic or imported steel and

that, under PRC joint venture law, it has the legal right to purchase

steel from any supplier in the world. Shanghai states that the prices

at which it purchased steel from domestic suppliers during these PORs

were consistent with world steel prices for comparable types of steel.

Shanghai argues in the alternative that, if the Department

determines Shanghai's steel purchases were not sufficiently market-

driven, it should use the verified market costs of PRC steel imports

otherwise on the record as the basis for valuing steel inputs. Shanghai

claims that, in view of the Department's policy stated in Ceiling Fans

of accepting market-based costs incurred during the POR, the Department

should apply such costs to all respondents as the best evidence of the

market cost of steel available to PRC producers during the PORs.

Finally, Shanghai proposes that the Department should consider

using Shanghai's verified steel imports placed on the record of the

1993-94 review. Shanghai claims that, when adjusted for inflation,

these costs would also represent a reliable alternative as to the

market cost of steel available during these PORs. Shanghai argues that

the Department has previously determined that, if an NME producer

reports prices that are market-based, it is appropriate to use those

prices as opposed to surrogate values. Shanghai claims that ``market-

based costs incurred by the respondents in producing the subject

merchandise . . . are the most accurate and appropriate values for . .

. the purposes of calculating FMV'' (quoting Ceiling Fans at 55275).

Petitioner counters that there is no basis for adopting Shanghai's

claim that its actual domestic steel purchases were market-driven,

claiming that steel purchased in the PRC is not free of the effects of

state controls on labor, energy, input and infrastructure prices.

Petitioner adds that the participation of a market-economy investor

will not purge the PRC inputs of the effects of state control.

In response to Shanghai's argument that the Department should value

steel inputs based on import costs incurred by other respondents during

the PORs, petitioner responds that Shanghai has not shown that it had

any connection with any other companies' market-economy acquisitions

during these PORs. Petitioners adds that the fact that Shanghai made

market purchases of these inputs in subsequent years is irrelevant to

these reviews.

Department's Position: We agree with petitioner. In order to use

the prices paid by Shanghai for domestically produced steel inputs in

our analysis, we must find that the PRC steel industry as a whole is

governed by market-driven prices. The absence of explicit government

involvement in the transactions involving Shanghai's steel purchases is

not sufficient to warrant the conclusion that the prices for these

inputs are market-driven. See Amendment to Final Determination of Sales

at Less Than Fair Value and Amendment to Antidumping Duty Order: Chrome

Plated Lug Nuts from the People's Republic of China, 57 FR 15052, 15053

(April 24, 1992). Shanghai has provided no evidence that would indicate

that either the steel industry or the bearings industry in the PRC is a

market-oriented industry.

As stated in Ceiling Fans, we will use, outside the context of a

market-oriented industry, actual prices paid for inputs by NME-based

producers to market-economy suppliers in a convertible or market

currency. See Ceiling Fans, 56 FR at 55275. However, because Shanghai

provided no evidence of having paid such prices for its steel inputs we

have, for the final results, valued Shanghai's steel inputs using

surrogate values. Regarding Shanghai's claim that we should value its

steel inputs based on import costs incurred by other respondents, we

note that we have not valued any respondent's steel inputs in these

reviews based on the company's steel purchases. See Comment 5.

Comment 27: Chin Jun argues that the Department should use the

verified import price incurred by other respondents as the steel value

for all PRC producers on the basis that the Indian import data used by

the Department far exceeds the value of steel used to produce TRBs, as

evidenced by copies of invoices submitted by Chin Jun showing the

acquisition price of steel by companies in market-economy countries.

Chin Jun claims that the Department has previously determined that it

must compare the surrogate price it selects with world prices to

determine whether the proposed surrogate values are aberrational

(citing Hand Tools).

Petitioner responds that the steel values used in the preliminary

results are very low when compared with actual steel prices paid by

Indian bearing producers, including prices on the record for the less-

than-fair-value investigation (LTFV) remand results.

Department's Position: We disagree with Chin Jun. As noted in our

response to Comments 5 and 26, we have not used the value of any

respondent's imported steel in calculating factor values in these

reviews because no respondent purchased such steel directly from

market-economy suppliers. We have also not considered prices indicated

on the invoices provided by Chin Jun because such a small number of

invoices as was provided by Chin Jun cannot be deemed indicative,

absent additional supportive data, of the values of steel used to

produce TRBs. Finally, the invoices submitted by Chin Jun contain

business proprietary information, and, as noted in our response to

Comment 2, we prefer to base surrogate values on PI where possible.

However, we note that we have determined that the Indian import

data on steel used to produce cups and cones is not reliable in

comparison with U.S. import data regarding bearing quality steel.

Therefore, we have used Indonesian import data to value such steel. See

Comment 4.

[[Page 65542]]

Comment 28: Shanghai claims that the Department arbitrarily

inflated Shanghai's dumping margin for the 1990-91 POR by rounding its

calculations of per unit dumping duties and of total value to four

decimal places. Shanghai argues that, had the Department rounded the

numbers to two decimal places, the result would have been a de minimis

margin of 0.47 percent instead of the 0.51 percent rate published in

the preliminary results. Shanghai states that, although the

Department's calculations display the numbers in the AD column rounded

to two decimal places, the Department advised it that the calculations

actually extended the figures to four decimal places. Shanghai asserts

that the only apparent reason for using the four-digit method is to

inflate the margin. Shanghai adds that the Department should not

exercise its judgment in a manner that denies a respondent a de minimis

margin.

Department's Position: We disagree with Shanghai. Although the

computer printout of the Department's preliminary margin calculations

shows numbers that appear to be rounded to four decimal places, the

actual margin calculation was based on unrounded numbers, consistent

with our standard practice for antidumping analysis. We calculate

margins using unrounded numbers to obtain more accurate results. The

numbers are displayed to only four decimal places for ease of printing.

Furthermore, changes to Shanghai's margin calculation for these final

results have yielded a de minimis margin.

Comment 29: Premier contends that the Department inappropriately

based its dumping margin entirely on a so-called cooperative BIA rate

for all three review periods at issue. Premier notes that, for each

period, the cooperative rate assigned is identical to the uncooperative

rate and states that such rates are punitive as applied to Premier,

since the company cooperated to the best of its ability, including

participating in a three-day verification. Premier states that it was

unable to provide certain factors of production information to the

Department because such information resides with unrelated suppliers

that often compete with Premier and that the Department's application

of BIA under such circumstances constitutes an abuse of discretion

since it amounts to penalizing a company for failing to provide

information it does not have. Premier cites Usinor Sacilor v. United

States, 872 F. Supp. 1000 (CIT 1994), in support of its contention that

the Department cannot select a severely adverse BIA rate when the

deficiencies in the data are outside the respondent's control.

Premier further states that this data is not necessary in order to

calculate a dumping margin for Premier, since it is a Hong Kong company

for which the Department can use acquisition costs in lieu of factors

of production data. Premier notes that in the 1989-90 review the

Department did not disregard the entire response, which lacked factors

data, and instead applied cooperative BIA only to those U.S. sales for

which there was no identical foreign market match.

Finally, Premier notes that the Department has modified its

standard two-tiered approach in the past where strict application of

this methodology would result in aberrational margins (citing Certain

Steel Products from Mexico, 58 FR 37352 (July 9, 1993), and

Professional Electric Cutting Tools and Professional Electric Sanding

Grinding Tools from Japan, 58 FR 30144 (May 26, 1993)). Premier

suggests that the Department could reasonably use other alternatives

other than the two-tiered methodology in the pending reviews, including

(1) the highest rate calculated for Premier in any prior segment of the

proceeding (0.97 percent); (2) the second highest calculated rate in

each of the three reviews; or (3) the highest calculated rate from the

prior (1989-90) review (8.83 percent).

Similarly, Chin Jun contends that the cooperative BIA rate that the

Department applied to transactions for which it was unable to provide

factors of production data is unnecessarily punitive and that, if the

Department applies BIA to such transactions in the final results, it

should use the actual dumping margins found for Chin Jun's transactions

for which factors data was provided. Alternatively, Chin Jun states

that, for those models for which Chin Jun was unable to provide factors

data, the Department should have used factors data from any PRC-based

producer which provided such data.

Petitioner responds that the BIA rate applied to Premier was not

punitive but was in fact a cooperative rate under the Department's two-

tiered methodology. Petitioner also contends that the deficiencies in

Premier's response extend beyond a lack of supplier data and include

significant errors in Premier's U.S. sales database. Petitioner

requests that the Department apply a non-cooperative BIA rate to

Premier and to each of its non-cooperative suppliers.

Petitioner further states that Chin Jun's suggestion that its

actual calculated dumping margins should be used with respect to U.S.

sales for which it could not provide factors data is inappropriate and

requests that the Department adhere to the BIA guidelines provided in

petitioner's case brief.

Department's Position: We do not accept Premier's contention that

it is being penalized for factors that are outside of its control. We

are using a cooperative BIA rate due to several failures on the part of

Premier to supply information, including the failure to provide, at

verification, certain information which was within Premier's control.

The company's responses had several deficiencies. In addition to its

failure to provide factors information on a transaction-specific basis,

Premier was unable to accurately identify its suppliers or provide the

quantities of merchandise supplied to the company during the PORs. See

Memorandum from Analysts to File: Verification Report for Premier

Bearing and Equipment, Ltd. (August 3, 1995) at 2. Therefore, we

applied, to all U.S. sales, as cooperative BIA, the higher of the

highest rate ever applicable to Premier or the highest calculated rate

in the review period for each of the three reviews. Since these

cooperative BIA rates are lower than the highest rate found for the

1989-90 review, we do not reach Premier's suggestion that we use the

highest rate from 1989-90 review of this order. Further, our policy of

requiring factor-of-production information for NME cases was adopted

subsequent to that review.

Chin Jun substantially cooperated with our requests for information

in the 1991-92 and 1992-93 reviews, but failed to provide FOP

information with respect to sales of certain models. Under section

776(c) of the Act we have the authority to use BIA ``whenever a party

or any other person refuses or is unable to produce information

requested.'' Therefore, we can use BIA not only when a party

``refuses,'' but also when a party is ``unable'' to provide

information.

Accordingly, we applied, as partial BIA for those specific

transactions where Chin Jun was unable to provide us with the requested

cost information, the highest rate ever applicable to Chin Jun in any

previous review. See Fresh and Chilled Atlantic Salmon From Norway;

Final Results of Antidumping Duty Administrative Review, 58 FR 37912

(July 14, 1993); see also our response to Comment 15.

Furthermore, we do not accept Chin Jun's argument that, for those

models for which Chin Jun was unable to provide factors data, we should

use factors data from any PRC-based producer because such data

constitutes business proprietary information.

[[Page 65543]]

Finally, we disagree with petitioner's claim that an uncooperative

BIA rate is appropriate under these circumstances. As stated in the

preliminary results, we apply uncooperative BIA only in those

circumstances where a party refuses to provide the information

requested in the form required or otherwise significantly impedes the

Department's review. Although both Premier and Chin Jun failed to

provide certain information, they otherwise cooperated with our

requests for information. Therefore, we decline to apply uncooperative

BIA for these companies.

Comment 30: Henan claims that the Department made several clerical

errors in its preliminary calculations with respect to several models

in the 1991-92 and 1992-93 administrative reviews. Henan states that

the errors are in the columns entitled ``Net Cost of Materials'' and

``Total Net Cost of Materials.'' Henan states that these errors created

further distortions when the Department added SG&A and profit as a

percentage of the inflated cost of production. As a result, Henan

contends, the constructed value for these models exceeded the USP,

creating the dumping margins found in the preliminary results. Henan

requests that the Department reconstruct the calculations by using the

correct figures for the total net cost of materials. Petitioner also

asserts that there were clerical errors made in the calculations for

Henan's 1991-92 and 1992-93 administrative reviews.

Department's Position: The Department agrees with both Henan and

petitioner and has corrected the errors for the final results.

Comment 31: Luoyang claims that the Department erroneously assigned

a value of zero for saleable scrap in calculating the margin for the

1992-93 POR. Luoyang argues that the Department should have allowed a

credit as in the 1991-92 POR and as stated in the analysis memorandum

for both PORs.

Petitioner states that an adjustment is not warranted for one POR

simply on the basis that such an adjustment was made in the previous

review. Petitioner further notes that it has long argued that a scrap

adjustment is warranted only if the sale of scrap is documented in the

particular POR in question, and, on that basis, Luoyang is not entitled

to a scrap adjustment for the 1992-93 POR. Petitioner adds that the

Department should explain why it stated in the analysis memo that it

made a scrap adjustment yet in its calculations it denied the scrap

adjustment for the 1992-93 POR.

Department's Position: We agree with Luoyang. We verified Luoyang's

sale of scrap for the 1992-93 POR and intended to adjust for saleable

scrap as we did in the previous PORs. See Verification Report for

Luoyang Bearing Factory in the Fifth and Sixth Reviews of the

Antidumping Duty Order of Tapered Roller Bearings and Parts Thereof

From the People's Republic of China (August 3, 1995) at 6. For these

final results, we have deducted scrap credit from Luoyang's gross cost

of manufacture.

Comment 32: Chin Jun argues that the Department should use steel

data on the record related to European Union (EU) and Japanese steel

exports to India. Chin Jun states that, in addition to being reliable,

the data is contemporaneous with the PORs. Chin Jun further submits

that invoices showing prices paid by a U.S. producer of bearings to

market-economy steel producers constitutes an acceptable alternative

source of steel values, in that such information establishes a world

price for bearing-quality steel which shows the Indian import

statistics used for the preliminary results to be aberrational.

Petitioner counters that two of the three invoices supplied by Chin

Jun in support of its argument that prices paid by a U.S. bearings

producer are a valid source of steel values are dated outside the PORs.

Petitioner also says that Chin Jun fails to explain how these selective

data are more reliable than the data used by the Department.

Department's Position: We agree with Chin Jun that certain of the

Indian import statistics should not be used to value bearing-quality

steel. We compared the Indian import data with other sources and found

it to be unreliable. See our response to Comment 4. However, we have

not used EU and Japanese export data submitted by Chin Jun because we

prefer import statistics to export statistics, as import statistics

more accurately reflect the costs incurred by the bearings producer to

procure the raw material inputs. Accordingly, we have, for these final

results, used the Indonesian import statistics to value steel used to

manufacture cups and cones.

Comment 33: Chin Jun asserts that the Department incorrectly

inflated steel prices, noting that, from 1990 to 1992, average import

prices under U.S. HTS 7228.30.80--a basket category which contains the

type of steel used to produce cups and cones--dropped in the United

States. Chin Jun says it is logical that steel prices in India also

dropped during the PORs.

Petitioner responds that U.S. steel prices are irrelevant in these

reviews. In addition, petitioner argues, according to Chin Jun's

reasoning there would be uniform prices everywhere and no need to argue

as to which surrogates to use.

Department's Position: For these final results we have applied

surrogate steel values coincident with each POR. Therefore, we have not

used price inflators for these final results, rendering Chin Jun's

argument moot.

Comment 34: Transcom and L&S, domestic importers of subject

merchandise, argue that the Department's decision to apply what they

consider to be punitive BIA appraisement and deposit rates to companies

that were never part of any of the reviews is unlawful. Transcom and

L&S state that, for each of the three reviews in question, there were

various companies from which they purchased subject merchandise, none

of which received a questionnaire, nor were any named in the notice of

initiation of review. Transcom states that entries from each of the

unnamed companies were subject to estimated antidumping duty deposits

at the ``all others'' rate in effect at the time of entry and argues

that the Department is precluded as a matter of law from either

assessing final antidumping duties on the unreviewed companies at any

rate other than that at which estimated antidumping duty deposits were

made or imposing the new BIA-based deposit rate on shipments from

unreviewed companies.

Transcom and L&S, citing section 751(a) of the Act, state that the

Department is directed to determine the amount of antidumping duties to

be imposed pursuant to periodic reviews. They add that, in accordance

with 19 C.F.R. 353.22(e), unreviewed companies are subject to automatic

assessment of antidumping duties and a deposit of estimated duties at

the rate previously established.

Transcom and L&S note that the CIT has concluded that in situations

where a company's entries are not reviewed, the prior cash deposit rate

from the LTFV investigation becomes the assessment rate, ``which must

in turn become the new cash deposit rate for that company'' (citing

Federal Mogul Corp. v. United States, 822 F. Supp. 782, 787-88 (CIT 19

3) (Federal Mogul II)). Transcom and L&S claim that the CIT has

affirmed this rationale in other more recent decisions as well,

concluding that the Department's use of a new ``all other'' rate

calculated during a particular administrative review as the new cash

deposit rate for unreviewed companies which have previously received

the ``all other'' rating is not in accordance with law (citing Federal

Mogul Corp. v. United States, 862 F. Supp. 384 (CIT 1994), and also

citing

[[Page 65544]]

UCF America, Inc. v. United States, 870 F. Supp. 1120, 1127-28 (CIT

1994) (UCF America)).

Based on the cited CIT decisions, Transcom says that an exporter

that is not under review would have no reason to anticipate that

antidumping duties assessed on its merchandise would vary from the

amount deposited. Transcom notes that Federal Mogul II (at 788) states

that parties rely on the cash deposit rates in making their decision

whether to request an administrative review of certain merchandise. In

view of the Department's regulations, Transcom claims that the absence

of any notice from the Department that unnamed companies faced the

possibility of increased antidumping duty liability is fundamentally

prejudicial to the unnamed companies. Transcom states that previous

attempts by the Department to impose the BIA rate on an exporter

neither named in the review request nor in the notice of initiation

have been overturned, citing Sigma Corp. v. United States, 841 F. Supp.

1255 (CIT 1993) (Sigma Corp. I). In that case, Transcom contends, the

CIT held that the Department was required to provide the company in

question adequate notice to defend its interests, and, because it

failed to do so, ordered that the merchandise exported by that company

was to be liquidated at the entered deposit rate.

Transcom also explains that it purchased subject merchandise from

certain provincial branches of China National Machinery Import & Export

Corporation (CMC) and from China National Machinery & Equipment Import

& Export Company (CMEC), both of which were named in the notice of

initiation. Certain other provincial branches of both CMC and CMEC,

from which Transcom did not purchase subject merchandise, were also

named in the notice of initiation and received questionnaires. Rather

than establishing that the branches from which Transcom purchased

subject merchandise were subject to review, Transcom argues, the

initiation notice implies that the unnamed branches were not subject to

review. As a result, Transcom argues, the unnamed companies were not

afforded an opportunity to defend their interests by demonstrating that

they were independent from the umbrella company and, therefore, the

Department should assign company-specific margins to these unnamed

exporters.

Transcom contends that, in accordance with section 776 of the Act,

the Department must have requested, and been unable to obtain,

information before applying punitive BIA. Transcom claims that the

Department may not resort to BIA ``because of an alleged failure to

provide further explanation when that additional explanation was never

requested'' (quoting Olympic Adhesives, Inc. v. United States, 889 F.

2d 1565 (Fed. Cir. 1990), and citing Mitsui & Co., Ltd. v. United

States, Slip Op. 94-44 (CIT March 11, 1994), and Usinor Sacilor v.

United States, 872 F. Supp. 1000 (CIT 1994)).

Petitioner claims that at the outset of this order CMEC was

identified by the PRC authorities as the only PRC exporter of subject

merchandise to the United States, i.e., CMEC was the umbrella

organization through which all companies in the PRC exported TRBs to

the United States (see Final Results of Antidumping Duty Administrative

Review: Tapered Roller Bearings and Parts Thereof From the People's

Republic of China, 56 FR 67590, 67596 (December 31, 1991)). Petitioner

adds that, during the 1989-90 review, PRC authorities stated, for the

first time, that there were other producers/exporters of the subject

merchandise and that the Department stated that the review initiated

for CMEC was ``meant to include all exports of TRBs from the PRC.'' Id.

Petitioner also contends that there is no reason to believe that there

is any meaningful difference between CMEC and CMC. Furthermore,

petitioner notes, CMEC was specifically named in the notices of

initiation for all three reviews in question. Finally, petitioner

argues that all branches and subsidiaries, or provincial companies, of

a company covered by a review are themselves included in that review,

and the fact that certain individual entities within the organization

were found to be entitled to separate rates does not exempt other

entities within the organization from the review.

Department's Position: We disagree with Transcom and L&S. It is our

policy to treat all exporters of subject merchandise in NME countries

as a single government-controlled enterprise and assign them a single

rate, except for those exporters which demonstrate an absence of

government control, both in law and in fact, with respect to exports.

Our guidelines concerning the de jure! and de facto separate rates

analyses, as well as the company-specific separate rates

determinations, are discussed in the Preliminary Results at 44303-

44304. We have determined that companies in the government-controlled

enterprise failed to respond to our requests for information and,

accordingly, have established the rate applicable to such companies

(the PRC rate) using uncooperative BIA. As discussed below, the Act

mandates application of BIA for such companies because they were

properly included in the review and did not respond to the Department's

requests for information.

Pursuant to our NME policy, all PRC exporters or producers that

have not demonstrated that they are separate from PRC government

control are presumed to belong to a single, state- controlled entity

(the ``NME entity''), for which we must calculate a single rate (the

``PRC rate''). Previously the CIT has upheld our presumption of a

single, state-controlled entity in NME cases. See UCF America, Inc. v.

United States, 870 F. Supp. 1120, 1126 (CIT 1994); Sigma Corp. v.

United States, 841 F. Supp. 1255, 1266-67 (CIT 1993); Tianjin Machinery

Import & Export Corp. v. United States, 806 F. Supp. 1008, 1013-15 (CIT

1992). Section 353.22(a) of our regulations allows interested parties

to request an administrative review of an antidumping duty order once a

year during the anniversary month. This regulation specifically states

that interested parties must list the ``specified individual

producers'' to be covered by the review. 19 CFR 353.22(a) (1994). In

the context of NME cases, we interpret this regulation to mean that, if

at least one named producer or exporter does not qualify for a separate

rate, all exporters that are part of the NME entity are part of the

review. On the other hand, if all named producers or exporters are

entitled to separate rates, the NME entity is not represented in the

review and, therefore, the NME rate remains unchanged. Accord Federal-

Mogul Corp. v. United States, 822 F. Supp. 782, 788 (CIT 1993) (``In a

situation where a company's entries are unreviewed, the prior cash

deposit rate from the LTFV investigation becomes the assessment rate,

which must in turn become the new cash deposit rate for that

company.'').

In these reviews, numerous companies named in the notices of

initiation did not respond to our questionnaires. On March 15, 1994, we

sent a letter to the PRC embassy in Washington and to the Ministry of

Foreign Trade and Economic Cooperation (MOFTEC), requesting the

identification of TRB producers and manufacturers, as well as

information on the production of TRBs and the sale of TRBs to the

United States. We sent a second request to MOFTEC on July 26, 1994.

MOFTEC informed us that the China Chamber of Commerce for Machinery and

Electronics Products Import & Export (CCCME) was responsible for

coordinating the TRBs case. MOFTEC also said it forwarded our letter

and questionnaire to the CCCME. We sent a copy of our letter and the

questionnaire directly to the

[[Page 65545]]

CCCME, asking that the questionnaire be transmitted to all companies in

the PRC that produced TRBs for export to the United States and to all

companies that exported TRBs to the United States during the PORs.

Since we did not receive information concerning many of the

companies named in the notices of initiation, we have presumed that

these companies are under government control. In accordance with our

NME policy, therefore, the government-controlled enterprise, which is

comprised of all exporters of subject merchandise that have not

demonstrated they are separate from PRC control, is part of this review

and we must calculate a ``PRC'' rate for that enterprise. Since we did

not receive responses from these exporters, we have based the PRC rate

on BIA, pursuant to section 776(c) of the Act. This rate will form the

basis of assessment for these reviews as well as the cash deposit rate

for future entries.

We acknowledge a recent CIT decision, UCF America Inc. v. United

States, Slip Op. 96-42 (CIT Feb. 27, 1996), in which the Court affirmed

the Department's remand results for reinstatement of the relevant cash

deposit rate but expressed disagreement with the PRC rate methodology,

which formed the underlying rationale for reinstatement. The Court

raised various concerns with the Department's application of a PRC

rate.

The Court suggested that the Department lacks authority for

applying a PRC rate in lieu of an ``all others'' rate. However, despite

the concerns expressed by the Court, it is the Department's view that

it has the authority to use the PRC rate in lieu of an ``all others''

rate. See Heavy Forged Hand Tools, Finished or Unfinished, With or

Without Handles, from the People's Republic of China; Preliminary

Results of Antidumping Duty Administrative Review, 61 FR 15218, 15221

(April 5, 1996).

The PRC rate is consistent with the statute and regulations. As

discussed above, in NME cases we presume that all producers and

exporters comprise a single entity. Thus, we assign the PRC rate to the

NME entity just as we assign an individual rate to a single exporter or

producer, or group of related exporters or producers, operating in a

market economy. Because the PRC rate is the equivalent of a company-

specific rate, it changes only when we review the NME entity. As noted

above, all exporters or producers will either qualify for a separate

company-specific rate or will be part of the NME enterprise and receive

the PRC rate. Consequently, whenever the NME enterprise has been

investigated or reviewed, calculation of an ``all others'' rate is

unnecessary, since there can be no exporters or producers that are not

reviewed. Thus, contrary to the argument by Transcom and L&S, the

Department's automatic assessment regulation (19 CFR 353.22(e)) does

not apply to these reviews except in the case of companies that

demonstrate that they are separate from PRC government control and are

not part of this review, as discussed below.

We also disagree with Transcom and L&S's assertion that companies

not named in the initiation notices did not have an opportunity to

defend their interests by demonstrating their independence from the PRC

entity. Any company that believes it is entitled to a separate rate may

place evidence on the record supporting its claim, as two companies

(Hubei and Guizhou Automotive) did in the 1991-92 and 1992-93 reviews.

The companies referenced by Transcom and L&S made no such showing,

despite our efforts to transmit the questionnaire to all PRC companies

that produce TRBs for export to the United States.

Comment 35: Transcom argues that, in the event that the Department

assigns a punitive BIA margin to the unnamed PRC exporters, it should

not assign the ``all others'' rate to exports made by companies outside

of the PRC. As with respondents Premier and Chin Jun, Transcom insists

that a separate rate analysis is unnecessary for privately owned

trading companies located in Hong Kong or Japan from which Transcom

purchased subject merchandise. Transcom argues that, because such

companies are independent from government control and because a timely

request for review of their entries was not made, these reviews should

not effect those companies.

Department's Position: We disagree with Transcom and L&S. We have

not assigned an all others rate to non-PRC exporters of subject

merchandise that we have not reviewed. Instead, in accordance with our

standard policy regarding such exporters, the cash deposit rate is the

rate applicable to the PRC supplier of that exporter. See Heavy Forged

Hand Tools, Finished and Unfinished, With or Without Handles, from the

People's Republic of China; Final Results of Antidumping Duty

Administrative Review, 61 FR 15028, 15033 (April 4, 1996).

Final Results of Reviews

As a result of our analysis of the comments we received, we

determine the following weighted-average margins to exist:

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

Margin (percent)

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

Manufacturer/exporter 6/1/90 to 5/31/ 6/1/91 to 5/31/

91 92 6/1/92 to 5/31/93

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

Premier Bearing and Equipment, Limited.......... \2\ 4.24 \2\ 5.25 5.25 2.

Guizhou Machinery Import and Export Corporation. 2.48 \2\ 3.70 0.00.

Henan Machinery and Equipment Import and Export 0.00 0.14 0.00.

Corporation.

Luoyang Bearing Factory......................... 1.14 0.00 0.00.

Shanghai General Bearing Company, Ltd........... 0.00 0.00 0.24.

Jilin Machinery Import and Export Corporation... 4.24 5.05 0.00.

Chin Jun Industrial Ltd......................... \1\ 8.83 0.61 1.54.

Wafangdian Bearing Factory...................... \1\ 8.83 5.25 No sales.

Liaoning Co., Ltd............................... \1\ 8.83 1.75 0.66.

PRC rate........................................ 8.83 8.83 8.83.

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

\1\ This party did not respond to the questionnaire or did not respond to the supplemental questionnaire;

therefore, as uncooperative BIA, we assigned the highest rate calculated in the investigation or in this or

any other review of sales of subject merchandise from the PRC. This does not constitute a separate rate

finding for this firm.

\2\ As cooperative BIA, we assigned in each review the higher of 1) the highest rate ever applicable to that

company in the investigation or any previous review; or 2) the highest calculated margin for any respondent in

the same review.

[[Page 65546]]

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between USP and FMV may vary from the percentages stated

above. The Department will issue appraisement instructions directly to

the Customs Service.

Furthermore, the following cash deposit requirements will be

effective upon publication of these final results for all shipments of

the subject merchandise entered, or withdrawn from warehouse, for

consumption on or after the publication date, as provided for by

section 751(a)(1) of the Act: (1) for the companies named above that

have separate rates and were reviewed (Premier, Guizhou, Henan, Jilin,

Luoyang, Shanghai, Liaoning, Chin Jun, and Wafangdian), the cash

deposit rates will be the rates for these firms established in the

final results of the 1992-93 administrative review, except that when

margins are de minimis, i.e., less than 0.5 percent, no cash deposit

will be required; (2) for Hubei and Guizhou Automotive, both of which

we determine to be entitled to separate rates, the rates will continue

be those that currently apply to these companies (8.83 percent for

both); (3) for all remaining PRC exporters, all of which were found not

to be entitled to separate rates, the cash deposit will be 8.83

percent; and (4) for other non-PRC exporters of subject merchandise

from the PRC, the cash deposit rate will be the rate applicable to the

PRC supplier of that exporter. These deposit requirements shall remain

in effect until publication of the final results of the next

administrative review.

This notice serves as a reminder to importers of their

responsibility under 19 C.F.R. 353.26 to file a certificate regarding

the reimbursement of antidumping duties prior to liquidation of the

relevant entries during this review period. Failure to comply with this

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This notice also serves as a reminder to parties subject to APOs of

their responsibility concerning disposition of proprietary information

disclosed under APO in accordance with 19 C.F.R. 353.34(d). Timely

written notification of the return/destruction of APO materials or

conversion to judicial protective order is hereby requested. Failure to

comply with the regulations and the terms of an APO is a sanctionable

violation.

These administrative reviews and notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 C.F.R

353.22.

Dated: December 5, 1996.

Jeffrey P. Bialos,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-31589 Filed 12-12-96; 8:45 am]

BILLING CODE 3510-DS-P