Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, Romania, Singapore, Sweden and the United Kingdom; Final Results of Antidumping Duty Administrative Reviews
Federal RegisterOct 17, 1997
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-427-801, A-428-801, A-475-801, A-588-804, A-485-801, A-559-801, A-
401-801, A-412-801]
Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, Germany, Italy, Japan, Romania, Singapore,
Sweden and the United Kingdom; Final Results of Antidumping Duty
Administrative Reviews
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty administrative
reviews.
-----------------------------------------------------------------------
SUMMARY: On June 10, 1997, the Department of Commerce (the Department)
published the preliminary results of administrative reviews of the
antidumping duty orders on antifriction bearings (other than tapered
roller bearings) and parts thereof from France, Germany, Italy, Japan,
Romania, Singapore, Sweden, and the United Kingdom. The classes or
kinds of merchandise covered by these orders are ball bearings and
parts thereof, cylindrical roller bearings and parts thereof, and
spherical plain bearings and parts thereof. The reviews cover 21
manufacturers/exporters. The period of review (POR) is May 1, 1995,
through April 30, 1996.
Based on our analysis of the comments received, we have made
changes, including corrections of certain
[[Page 54044]]
inadvertent programming and clerical errors, in the margin
calculations. Therefore, the final results differ from the preliminary
results. The final weighted-average dumping margins for the reviewed
firms are listed below in the section entitled ``Final Results of the
Reviews.''
EFFECTIVE DATE: October 17, 1997.
FOR FURTHER INFORMATION CONTACT: The appropriate case analyst, for the
various respondent firms listed below, of Import Administration,
International Trade Administration, U.S. Department of Commerce,
Washington, DC 20230; telephone: (202) 482-4733.
France
Chip Hayes (SKF), Lyn Johnson (SNFA), Michael Panfeld (SNR), Robin Gray
or Richard Rimlinger.
Germany
John Heires (Torrington Nadellager), J. David Dirstine (SKF), Suzanne
Flood (INA), Michael Panfeld (NTN Kugellagerfabrik), Thomas Schauer
(FAG), Robin Gray or Richard Rimlinger.
Italy
Chip Hayes (SKF), Mark Ross (FAG) or Richard Rimlinger.
Japan
J. David Dirstine (Koyo Seiko), Gregory Thompson (NTN), Kristie
Strecker (NPBS), Thomas Schauer (NSK Ltd., Nachi-Fujikoshi Corp.) or
Richard Rimlinger.
Romania
Kristie Strecker (Tehnoimportexport, S.A.) or Robin Gray.
Singapore
Lyn Johnson (NMB/Pelmec) or Richard Rimlinger.
Sweden
Mark Ross (SKF) or Richard Rimlinger.
United Kingdom
Hermes Pinilla (FAG, Barden, NSK/RHP) or Robin Gray.
SUPPLEMENTARY INFORMATION:
The Applicable Statute
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (the Tariff Act), are references to the provisions
effective January 1, 1995, the effective date of the amendments made to
the Tariff Act by the Uruguay Round Agreements Act (URAA). In addition,
unless otherwise indicated, all citations to the Department's
regulations are to 19 CFR Part 353 (1997).
Background
On June 10, 1997, the Department of Commerce (the Department)
published the preliminary results of administrative reviews of the
antidumping duty orders on antifriction bearings (other than tapered
roller bearings) and parts thereof (AFBs) from France, Germany, Italy,
Japan, Romania, Singapore, Sweden, and the United Kingdom (62 FR
31566). The reviews cover 21 manufacturers/exporters. The period of
review (the POR) is May 1, 1995, through April 30, 1996. We invited
parties to comment on our preliminary results of review. At the request
of certain interested parties, we held public hearings for General
Issues on July 8, 1997, and for Japan-specific issues on July 15, 1997.
The Department has conducted these administrative reviews in accordance
with section 751 of the Tariff Act.
Scope of Reviews
The products covered by these reviews are AFBs and constitute the
following classes or kinds of merchandise: Ball bearings and parts
thereof (BBs), cylindrical roller bearings and parts thereof (CRBs),
and spherical plain bearings and parts thereof (SPBs). For a detailed
description of the products covered under these classes of kinds of
merchandise, including a compilation of all pertinent scope
determinations, see the ``Scope Appendix,'' which is appended to this
notice of final results.
Use of Facts Available
For a discussion of our application of facts available, see the
``Facts Available'' section of the Issues Appendix.
Sales Below Cost in the Home Market
The Department disregarded home market (HM) sales below cost for
the following firms and classes or kinds of merchandise for these final
results of reviews:
----------------------------------------------------------------------------------------------------------------
Country Company Class or kind of merchandise
----------------------------------------------------------------------------------------------------------------
France................................... SKF......................... BBs
SNR......................... BBs
Germany.................................. NTN......................... BBs
FAG......................... BBs, CRBs, SPBs
INA......................... BBs, CRBs, SPBs
SKF......................... BBs, CRBs, SPBs
Italy.................................... FAG......................... BBs
SKF......................... BBs
Japan.................................... Koyo........................ BBs, CRBs
Nachi....................... BBs, CRBs
NSK......................... BBs, CRBs
NTN......................... BBs, CRBs, SPBs
NPBS........................ BBs
Singapore................................ NMB/Pelmec.................. BBs
Sweden................................... SKF......................... BBs
United Kingdom........................... NSK-RHP..................... BBs, CRBs
Barden...................... BBs
----------------------------------------------------------------------------------------------------------------
Duty Absorption
We have determined that duty absorption has occurred with respect
to the following firms and with respect to the following percentages of
sales which these firms made through their U.S. affiliated parties:
------------------------------------------------------------------------
Percentage
of U.S.
affiliate's
Name of Firm Class or kind sales with
dumping
margins
------------------------------------------------------------------------
France
------------------------------------------------------------------------
SKF.................................... BBs 23.24
SPBs 100.00
SNR.................................... BBs 36.22
CRBs 44.64
------------------------------------------------------------------------
Germany
------------------------------------------------------------------------
FAG.................................... BBs 54.57
CRBs 40.14
SPBs 21.10
INA.................................... BBs 64.47
CRBs 40.89
NTN.................................... BBs 36.44
SKF.................................... BBs 7.03
CRBs 53.78
SPBs 21.17
------------------------------------------------------------------------
Italy
------------------------------------------------------------------------
FAG.................................... BBs 20.43
SKF.................................... BBs 8.15
------------------------------------------------------------------------
Japan
------------------------------------------------------------------------
Koyo Seiko............................. BBs 49.49
CRBs 86.02
Nachi.................................. BBs 58.49
CRBs 31.87
NPBS................................... BBs 55.46
NSK.................................... BBs 24.23
CRBs 36.19
NTN.................................... BBs 37.50
CRBs 19.26
SPBs 73.03
------------------------------------------------------------------------
Singapore
------------------------------------------------------------------------
NM Singapore/Pelmec Inc................ BBs 8.51
------------------------------------------------------------------------
Sweden
------------------------------------------------------------------------
SKF.................................... BBs 45.26
United Kingdom
------------------------------------------------------------------------
NSK/RHP................................ BBs 27.76
CRBs 52.51
Barden................................. BBs 13.36
------------------------------------------------------------------------
[[Page 54045]]
For a discussion of our determination with respect to this matter,
see the ``Duty Absorption'' section of the Issues Appendix.
Changes Since the Preliminary Results
Based on our analysis of comments received, we have made certain
corrections that changed our results. We have corrected certain
programming and clerical errors in our preliminary results, where
applicable. Any alleged programming or clerical errors with which we do
not agree are discussed in the relevant sections of the Issues
Appendix.
Analysis of Comments Received
All issues raised in the case and rebuttal briefs by parties to
these concurrent administrative reviews of AFBs are addressed in the
``Issues Appendix'' which is appended to this notice of final results.
Final Results of Reviews
We determine that the following percentage weighted-average margins
exist for the period May 1, 1995, through April 30, 1996:
------------------------------------------------------------------------
Company BBs CRBs SPBs
------------------------------------------------------------------------
France
------------------------------------------------------------------------
SKF.................................... 5.38 (\2\) 42.79
SNFA................................... 66.42 18.37 (\3\)
SNR.................................... 8.60 10.14 (\2\)
------------------------------------------------------------------------
Germany
------------------------------------------------------------------------
FAG.................................... 12.40 19.49 10.32
INA.................................... 49.62 20.08 28.62
NTN.................................... 9.44 (\2\) (\2\)
SKF.................................... 4.25 17.82 4.72
Torring- ton Nadellager................ (\3\) 76.27 (\3\)
------------------------------------------------------------------------
Italy
------------------------------------------------------------------------
FAG.................................... 1.76 (\1\) .........
SKF.................................... 3.59 (\3\) .........
------------------------------------------------------------------------
Japan
------------------------------------------------------------------------
Koyo Seiko............................. 14.20 15.38 (\1\)
NPBS................................... 16.70 (\2\) (\2\)
NSK.................................... 9.88 6.88 (\2\)
NTN.................................... 7.10 3.86 7.69
Nachi.................................. 12.89 3.15 (\2\)
------------------------------------------------------------------------
Romania
------------------------------------------------------------------------
TIE.................................... .20 ......... .........
------------------------------------------------------------------------
Singapore
------------------------------------------------------------------------
NMB Singapore/Pelmec Ind............... 2.10 ......... .........
------------------------------------------------------------------------
Sweden
------------------------------------------------------------------------
SKF.................................... 12.62 ......... .........
------------------------------------------------------------------------
United Kingdom
------------------------------------------------------------------------
NSK-RHP................................ 16.49 68.26 .........
Barden................................. 4.00 (\1\) .........
------------------------------------------------------------------------
\1\ No shipments or sales subject to this review. Rate is from the last
relevant segment of the proceeding in which the firm had shipments/
sales.
\2\ No shipments or sales subject to this review. The firm has no
individual rate from any segment of this proceeding.
\3\ No review.
Assessment Rates
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. Because sampling
and other simplification methods prevent entry-by-entry assessments, we
will calculate wherever possible an exporter/importer-specific
assessment rate for each class or kind of AFBs.
1. Export Price Sales
With respect to export price (EP) sales for these final results, we
divided the total dumping margins (calculated as the difference between
normal value (NV) and EP) for each importer/customer by the total
number of units sold to that importer/customer. We will direct Customs
to assess the resulting per-unit dollar amount against each unit of
merchandise in each of that importer's/customer's entries under the
relevant order during the review period. Although this will result in
assessing different percentage margins for individual entries, the
total antidumping duties collected for each importer/customer under
each order for the review period will be almost exactly equal to the
total dumping margins.
2. Constructed Export Price Sales
For constructed export price (CEP) sales (sampled and non-sampled),
we divided the total dumping margins for the reviewed sales by the
total entered value of those reviewed sales for each importer/customer.
We will direct Customs to assess the resulting percentage margin
against the entered Customs values for the subject merchandise on each
of that importer's/customer's entries under the relevant order during
the review period. While the Department is aware that the entered value
of sales during the POR is not necessarily equal to the entered value
of entries during the POR, use of entered value of sales as the basis
of the assessment rate permits the Department to collect a reasonable
approximation of the antidumping duties which would have been
determined if the Department had reviewed those sales of merchandise
actually entered during the POR.
Cash Deposit Requirements
To calculate the cash deposit rate for each exporter, we divided
the total dumping margins for each exporter by the total net value for
that exporter's sales for each relevant class or kind of merchandise to
the United States during the review period under each order.
In order to derive a single deposit rate for each class or kind of
merchandise for each respondent (i.e., each exporter or manufacturer
included in these reviews), we weight-averaged the EP and CEP deposit
rates (using the EP and CEP, respectively, as the weighting factors).
To accomplish this where we sampled CEP sales, we first calculated the
total dumping margins for all CEP sales during the review period by
multiplying the sample CEP margins by the ratio of total weeks in the
review period to sample weeks. We then calculated a total net value for
all CEP sales during the review period by multiplying the sample CEP
total net value by the same ratio. We then divided the combined total
dumping margins for both EP and CEP sales by the combined total value
for both EP and CEP sales to obtain the deposit rate.
We will direct Customs to collect the resulting percentage deposit
rate against the entered Customs value of each of the exporter's
entries of subject merchandise entered, or withdrawn from warehouse,
for consumption on or after the date of publication of this notice.
Entries of parts incorporated into finished bearings before sales
to an unaffiliated customer in the United States will receive the
exporter's deposit rate for the appropriate class or kind of
merchandise.
Furthermore, the following deposit requirements will be effective
upon publication of this notice of final results of administrative
reviews for all shipments of AFBs entered, or withdrawn from warehouse,
for consumption on or after the date of publication, as provided by
section 751(a)(1) of the Tariff Act: (1) The cash deposit rates for the
reviewed companies will be the rates shown
[[Page 54046]]
above except that, for firms whose weighted-average margins are less
than 0.5 percent and therefore de minimis, the Department shall require
a zero deposit of estimated antidumping duties; (2) for previously
reviewed or investigated companies not listed above, the cash deposit
rate will continue to be the company-specific rate published for the
most recent period; (3) if the exporter is not a firm covered in this
review, a prior review, or the original less-than-fair-value (LTFV)
investigation, but the manufacturer is, the cash deposit rate will be
the rate established for the most recent period for the manufacturer of
the merchandise; and (4) the cash deposit rate for all other
manufacturers or exporters will continue to be the ``All Others'' rate
for the relevant class or kind and country made effective by the final
results of review published on July 26, 1993 (see Final Results of
Antidumping Duty Administrative Reviews and Revocation in Part of an
Antidumping Duty Order, 58 FR 39729 (July 26, 1993) and, for BBs from
Italy, see Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al: Final Results of Antidumping Duty
Administrative Reviews, Partial Termination of Administrative Reviews,
and Revocation in Part of Antidumping Duty Orders, 61 FR 66472
(December 17, 1996)). These rates are the ``All Others'' rates from the
relevant LTFV investigations.
These deposit requirements shall remain in effect until publication
of the final results of the next administrative reviews.
This notice also serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as the only reminder to parties subject to
administrative protective orders (APO) of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with 19 CFR 353.34(d) or conversion
to judicial protective order is hereby requested. Failure to comply
with the regulations and terms of an APO is a violation which is
subject to sanction.
These administrative reviews and this notice are in accordance with
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR
353.22.
Dated: October 8, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
Scope Appendix Contents
A. Description of the Merchandise
B. Scope Determinations
Issues Appendix Contents
Abbreviations
Comments and Responses
1. Facts Available
2. Discounts, Rebates, and Price Adjustments
3. Circumstance-of-Sale Adjustments
A. Technical Services and Warranty Expenses
B. Credit
C. Indirect Selling Expenses
4. Level of Trade
5. Cost of Production and Constructed Value
A. Cost-Test Methodology
B. Research and Development
C. Profit for Constructed Value
D. Affiliated-Party Inputs
E. Abnormally High Profits
F. Credit and Inventory Costs
G. Other Issues
6. Further Manufacturing
7. Packing and Movement Expenses
8. Affiliated Parties
9. Sample Sales and Prototypes/Zero Price Transactions
10. Export Price and Constructed Export Price
11. Programming and Clerical Errors
12. Duty Absorption
13. Reimbursement
14. Tooling Revenue
15. Cash Deposit Financing
16. Romania-Specific Issues
17. Miscellaneous Issues
A. Ocean and Air Freight
B. Burden of Proof
C. HTS
D. Certification of Conformance to Past Practice
E. Pre-Existing Inventory
F. Inland Freight
G. Other Issues
Scope Appendix
A. Description of the Merchandise
The products covered by these orders, antifriction bearings (other
than tapered roller bearings), mounted or unmounted, and parts thereof
(AFBs), constitute the following classes or kinds of merchandise:
1. Ball Bearings and Parts Thereof: These products include all AFBs
that employ balls as the roller element. Imports of these products are
classified under the following categories: antifriction balls, ball
bearings with integral shafts, ball bearings (including radial ball
bearings) and parts thereof, and housed or mounted ball bearing units
and parts thereof. Imports of these products are classified under the
following Harmonized Tariff Schedule (HTS) subheadings: 3926.90.45,
4016.93.00, 4016.93.10, 4016.93.50, 6909.19.5010, 8431.20.00,
8431.39.0010, 8482.10.10, 8482.10.50, 8482.80.00, 8482.91.00,
8482.99.05, 8482.99.35, 8482.99.2580, 8482.99.6595, 8483.20.40,
8483.20.80, 8483.50.8040, 8483.50.90, 8483.90.20, 8483.90.30,
8483.90.70, 8708.50.50, 8708.60.50, 8708.60.80, 8708.70.6060,
8708.70.8050, 8708.93.30, 8708.93.5000, 8708.93.6000, 8708.93.75,
8708.99.06, 8708.99.31, 8708.99.4960, 8708.99.50, 8708.99.5800,
8708.99.8080, 8803.10.00, 8803.20.00, 8803.30.00, 8803.90.30, and
8803.90.90.
2. Cylindrical Roller Bearings, Mounted or Unmounted, and Parts
Thereof: These products include all AFBs that employ cylindrical
rollers as the rolling element. Imports of these products are
classified under the following categories: Antifriction rollers, all
cylindrical roller bearings (including split cylindrical roller
bearings) and parts thereof, housed or mounted cylindrical roller
bearing units and parts thereof.
Imports of these products are classified under the following HTS
subheadings: 3926.90.45, 4016.93.00, 4016.93.10, 4016.93.50,
6909.19.5010, 8431.20.00, 8431.39.0010, 8482.40.00, 8482.50.00,
8482.80.00, 8482.91.00, 8482.99.25, 8482.99.35, 8482.99.6530,
8482.99.6560, 8482.99.70, 8483.20.40, 8483.20.80, 8483.50.8040,
8483.90.20, 8483.90.30, 8483.90.70, 8708.50.50, 8708.60.50,
8708.93.5000, 8708.99.4000, 8708.99.4960, 8708.99.50, 8708.99.8080,
8803.10.00, 8803.20.00, 8803.30.00, 8803.90.30, and 8803.90.90.
3. Spherical Plain Bearings, Mounted or Unmounted, and Parts
Thereof: These products include all spherical plain bearings that
employ a spherically shaped sliding element, and include spherical
plain rod ends.
Imports of these products are classified under the following HTS
subheadings: 3926.90.45, 4016.93.00, 4016.93.00, 4016.93.10,
4016.93.50, 6909.50,10, 8483.30.80, 8483.90.30, 8485.90.00,
8708.93.5000, 8708.99.50, 8803.10.00, 8803.10.00, 8803.20.00,
8803.30.00, and 8803.90.90.
The HTS item numbers are provided for convenience and customs
purposes. They are not determinative of the products subject to the
orders. The written description remains dispositive.
Size or precision grade of a bearing does not influence whether the
bearing is covered by the orders. These orders cover all the subject
bearings and parts thereof (inner race, outer race, cage, rollers,
balls, seals, shields, etc.)
[[Page 54047]]
outlined above with certain limitations. With regard to finished parts,
all such parts are included in the scope of these orders. For
unfinished parts, such parts are included if (1) they have been heat-
treated, or (2) heat treatment is not required to be performed on the
part. Thus, the only unfinished parts that are not covered by these
orders are those that will be subject to heat treatment after
importation.
The ultimate application of a bearing also does not influence
whether the bearing is covered by the orders. Bearings designed for
highly specialized applications are not excluded. Any of the subject
bearings, regardless of whether they may ultimately be utilized in
aircraft, automobiles, or other equipment, are within the scope of
these orders.
B. Scope Determinations
The Department has issued numerous clarifications of the scope of
the orders. The following is a compilation of the scope rulings and
determinations the Department has made:
Scope determinations made in the Final Determinations of Sales at
Less than Fair Value; Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof from the Federal Republic of Germany, 54 FR
19006, 19019 (May 3, 1989):
Products covered:
Rod end bearings and parts thereof.
AFBs used in aviation applications.
Aerospace engine bearings.
Split cylindrical roller bearings.
Wheel hub units.
Slewing rings and slewing bearings (slewing rings and
slewing bearings were subsequently excluded by the International Trade
Commission's negative injury determination (see International Trade
Commission: Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof from the Federal Republic of Germany, France, Italy,
Japan, Romania, Singapore, Sweden, Thailand and the United Kingdom, 54
FR 21488 (May 18, 1989)).
Wave generator bearings.
Bearings (including mounted or housed units and flanged or
enhanced bearings) ultimately utilized in textile machinery.
Products excluded:
Plain bearings other than spherical plain bearings.
Airframe components unrelated to the reduction of friction
Linear motion devices.
Split pillow block housings.
Nuts, bolts, and sleeves that are not integral parts of a
bearing or attached to a bearing under review.
Thermoplastic bearings.
Stainless steel hollow balls.
Textile machinery components that are substantially
advanced in function(s) or value.
Wheel hub units imported as part of front and rear axle
assemblies; wheel hub units that include tapered roller bearings; and
clutch release bearings that are already assembled as parts of
transmissions.
Scope rulings completed between April 1, 1990, and June 30, 1990
(see Scope Rulings, 55 FR 42750 (October 23, 1990)):
Products excluded:
Antifriction bearings, including integral shaft ball
bearings, used in textile machinery and imported with attachments and
augmentations sufficient to advance their function beyond load-bearing/
friction-reducing capability.
Scope rulings completed between July 1, 1990, and September 30,
1990 (see Scope Rulings, 55 FR 43020 (October 25, 1990)):
Products covered:
Rod ends.
Clutch release bearings.
Ball bearings used in the manufacture of helicopters.
Ball bearings used in the manufacture of disk drives.
Scope rulings published in Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof; Final Results of
Antidumping Administrative Review (AFBs I), 56 FR 31692, 31696 (July
11, 1991):
Products covered:
Load rollers and thrust rollers, also called mast guide
bearings.
Conveyor system trolley wheels and chain wheels.
Scope rulings completed between April 1, 1991, and June 30, 1991
(see Notice of Scope Rulings, 56 FR 36774 (August 1, 1991)):
Products excluded:
Textile machinery components including false twist
spindles, belt guide rollers, separator rollers, damping units, rotor
units, and tension pulleys.
Scope rulings completed between July 1, 1991, and September 30,
1991 (see Scope Rulings, 56 FR 57320 (November 8, 1991)):
Products covered:
Snap rings and wire races.
Bearings imported as spare parts.
Custom-made specialty bearings.
Products excluded: .
Certain rotor assembly textile machinery components.
Linear motion bearings.
Scope rulings completed between October 1, 1991, and December 31,
1991 (see Notice of Scope Rulings, 57 FR 4597 (February 6, 1992)):
Products covered:
Chain sheaves (forklift truck mast components).
Loose boss rollers used in textile drafting machinery,
also called top rollers.
Certain engine main shaft pilot bearings and engine crank
shaft bearings.
Scope rulings completed between January 1, 1992, and March 31, 1992
(see Scope Rulings, 57 FR 19602 (May 7, 1992)):
Products covered:
Ceramic bearings.
Roller turn rollers.
Clutch release systems that contain rolling elements.
Products excluded:
Clutch release systems that do not contain rolling
elements.
Chrome steel balls for use as check valves in hydraulic
valve systems.
Scope rulings completed between April 1, 1992, and June 30, 1992
(see Scope Rulings, 57 FR 32973 (July 24, 1992)):
Products excluded:
Finished, semiground stainless steel balls.
Stainless steel balls for non-bearing use (in an optical
polishing process).
Scope rulings completed between July 1, 1992, and September 30,
1992 (see Scope Rulings, 57 FR 57420 (December 4, 1992)):
Products covered:
Certain flexible roller bearings whose component rollers
have a length-to-diameter ratio of less than 4:1.
Model 15BM2110 bearings.
Products excluded:
Certain textile machinery components.
Scope rulings completed between October 1, 1992, and December 31,
1992 (see Scope Rulings, 58 FR 11209 (February 24, 1993)):
Products covered:
Certain cylindrical bearings with a length-to-diameter
ratio of less than 4:1.
Products excluded:
Certain cartridge assemblies comprised of a machine shaft,
a machined housing and two standard bearings.
Scope rulings completed between January 1, 1993, and March 31, 1993
(see Scope Rulings, 58 FR 27542 (May 10, 1993)):
Products covered:
Certain cylindrical bearings with a length-to-diameter
ratio of less than 4:1.
Scope rulings completed between April 1, 1993, and June 30, 1993
(see Scope Rulings, 58 FR 47124 (September 7, 1993)):
Products covered:
Certain series of INA bearings.
[[Page 54048]]
Products excluded:
SAR series of ball bearings.
Certain eccentric locking collars that are part of housed
bearing units.
Scope rulings completed between October 1, 1993, and December 31,
1993 (see Scope Rulings, 59 FR 8910 (February 24, 1994)):
Products excluded:
Certain textile machinery components.
Scope rulings completed between January 1, 1994, and March 31,
1994:
Products excluded:
Certain textile machinery components.
Scope rulings completed between October 1, 1994 and December 31,
1994 (see Scope Rulings, 60 FR 12196 (March 6, 1995)):
Products excluded:
Rotek and Kaydon--Rotek bearings, models M4 and L6, are
slewing rings outside the scope of the order.
Scope rulings completed between April 1, 1995 and June 30, 1995
(see Scope Rulings, 60 FR 36782 (July 18, 1995)):
Products covered:
Consolidated Saw Mill International (CSMI) Inc.--Cambio
bearings contained in CSMI's sawmill debarker are within the scope of
the order.
Nakanishi Manufacturing Corp.--Nakanishi's stamped steel
washer with a zinc phosphate and adhesive coating used in the
manufacture of a ball bearing is within the scope of the order.
Scope rulings completed between January 1, 1996 and March 31, 1996
(see Scope Rulings, 61 FR 18381 (April 25, 1996)):
Products covered:
Marquardt Switches--Medium carbon steel balls imported by
Marquardt are outside the scope of the order.
Scope rulings completed between April 1, 1996 and June 30, 1996
(see Scope Rulings, 61 FR 40194 (August 1, 1996)):
Products excluded:
Dana Corporation--Automotive component, known variously as
a center bracket assembly, center bearings assembly, support bracket,
or shaft support bearing, is outside the scope of the order.
Rockwell International Corporation--Automotive component,
known variously as a cushion suspension unit, cushion assembly unit, or
center bearing assembly, is outside the scope of the order.
Enkotec Company, Inc.--``Main bearings'' imported for
incorporation into Enkotec Rotary Nail Machines are slewing rings and,
therefore, are outside the scope of the order.
Issues Appendix
Company Abbreviations
Barden--Barden Corporation (U.K.) Ltd. and the Barden Corporation
FAG Germany--FAG Kugelfischer Georg Schaefer KGaA
FAG Italy--FAG Italia S.p.A.; FAG Bearings Corp.
FAG U.K.--FAG (U.K.) Ltd.
INA--INA Walzlager Schaeffler KG; INA Bearing Company, Inc.
Koyo--Koyo Seiko Co. Ltd.
Nachi--Nachi-Fujikoshi Corp., Nachi America Inc. and Nachi Technology,
Inc.
NMB/Pelmec--NMB Singapore Ltd.; Pelmec Industries (Pte.) Ltd.
NPBS--Nippon Pillow Block Manufacturing Co., Ltd.; Nippon Pillow Block
Sales Co., Ltd.; FYH Bearing Units USA, Inc.
NSK--Nippon Seiko K.K.; NSK Corporation
NSK-RHP--NSK Bearings Europe, Ltd.; RHP Bearings; RHP Bearings, Inc.
NTN Germany--NTN Kugellagerfabrik (Deutschland) GmbH
NTN Japan--NTN Corporation; NTN Bearing Corporation of America;
American NTN Bearing Manufacturing Corporation
SKF France--SKF Compagnie d'Applications Mecaniques, S.A. (Clamart);
ADR; SARMA
SKF Germany--SKF GmbH; SKF Service GmbH; Steyr Walzlager
SKF Italy--SKF Industrie; RIV-SKF Officina de Villar Perosa; SKF
Cuscinetti Speciali; SKF Cuscinetti; RFT
SKF Group--SKF-France; SKF-Germany; SKF-Italy; SKF-Sweden; SKF USA,
Inc.
SKF Sweden--SKF Sverige AB
SNFA--SNFA Bearings, Ltd.
SNR France--SNR Nouvelle Roulements
TIE--Tehnoimportexport
Torrington--The Torrington Company
Other Abbreviations
COP--Cost of Production
COM--Cost of Manufacturing
CV--Constructed Value
CEP--Constructed Export Price
NV--Normal Value
HM--Home Market
OEM--Original Equipment Manufacturer
POR--Period of Review
PSPA--Post-Sale Price Adjustment
SAA--Statement of Administrative Action
URAA--Uruguay Round Agreements Act
AFB Administrative Determinations
LTFV Investigation--Final Determinations of Sales at Less than Fair
Value; Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof from the Federal Republic of Germany, 54 FR 19006 (May 3,
1989).
AFBs I--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof from the Federal Republic of Germany; Final Results
of Antidumping Duty Administrative Review, 56 FR 31692 (July 11, 1991).
AFBs II--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al.; Final Results of Antidumping
Duty Administrative Reviews, 57 FR 28360 (June 24, 1992).
AFBs III--Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From France, et al.; Final Results of
Antidumping Duty Administrative Reviews and Revocation in Part of an
Antidumping Duty Order, 58 FR 39729 (July 26, 1993).
AFBs IV--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews, Partial Termination of Administrative Reviews,
and Revocation in Part of Antidumping Duty Orders, 60 FR 10900
(February 28, 1995).
AFBs V--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews and Partial Termination of Administrative
Reviews, 61 FR 66472 (December 17, 1996).
AFBs VI--Antifriction Bearings (Other Than Tapered Roller Bearings)
and Parts Thereof From France, et al; Final Results of Antidumping Duty
Administrative Reviews and Partial Termination of Administrative
Reviews, 62 FR 2081 (January 15, 1997).
1. Facts Available
Comment: SKF France maintains that, with respect to its CRBs, the
Department had no basis upon which to make an adverse inference since
SKF companies did not sell French CRBs to the United States during this
review period and since in its questionnaire responses it stated that
SKF France did not make such sales. SKF France maintains that its
response demonstrates that only BBs and SPBs were subject to review
and, further, that SKF's reporting of HM and U.S. sales of SKF's French
AFBs has been verified consistently. Finally, SKF France argues that,
because the Department's use of facts available and an adverse
inference is inappropriate as to CRBs, it is also inappropriate as to
duty absorption by SKF with respect to CRBs.
[[Page 54049]]
Department's Position: We agree with SKF France. We sent a no-
shipment inquiry to U.S. Customs on March 24, 1997. Customs did not
indicate that there were any entries of CRBs from SKF France. Without
such entries during the review period, there is nothing upon which we
may assess any duties we determine in the course of the review.
Therefore, the issue of whether SKF France had any sales of CRBs is
moot.
In addition, we will continue to apply the ``all others'' rate,
which is the rate established in the LTFV investigation, to CRBs from
France for future entries of this merchandise. Because we are not
applying facts available to SKF France's CRBs, we have not applied
facts available in our duty-absorption determination on CRBs from SKF
France.
2. Discounts, Rebates, and Price Adjustments
We have accepted claims for discounts, rebates, and other billing
adjustments as direct adjustments to price if we determined that the
respondent, in reporting these adjustments, acted to the best of its
ability and that its reporting methodology was not unreasonably
distortive. We did not treat such adjustments as direct (or indirect)
selling expenses but, rather, as direct adjustments necessary to
identify the correct starting price. While we prefer that respondents
report these adjustments on a transaction-specific basis (or, where a
single adjustment was granted for a group of sales, as a fixed and
constant percentage of the value of those sales), we recognize that
this is not always feasible, particularly given the extremely large
volume of transactions involved in these AFBs reviews. It is
inappropriate to reject allocations that are not unreasonably
distortive in favor of facts otherwise available where a fully
cooperating respondent is unable to report the information in a more
specific manner. See section 776 of the Tariff Act. Accordingly, we
have accepted these adjustments when it was not feasible for a
respondent to report the adjustment on a more specific basis, provided
that the allocation method the respondent used does not cause
unreasonable inaccuracies or distortions.
In applying this standard, we have not rejected an allocation
method solely because the allocation includes adjustments granted on
merchandise that is not subject to these reviews (out-of-scope
merchandise). However, such allocations are not acceptable where we
have reason to believe that respondents did not grant such adjustments
in proportionate amounts with respect to sales of out-of-scope and in-
scope merchandise. We have made this determination by examining the
extent to which the out-of-scope merchandise included in the allocation
pool is different from the in-scope merchandise in terms of value,
physical characteristics, and the manner in which it is sold.
Significant differences in such areas may increase the likelihood that
respondents did not grant price adjustments in proportionate amounts
with respect to sales of in-scope and out-of-scope merchandise. While
we scrutinize any such differences carefully between in-scope and out-
of-scope sales in terms of their potential for distorting reported per-
unit adjustments on the sales involved in our analysis, it would not be
reasonable to require that respondents submit sale-specific adjustment
data on out-of-scope merchandise in order to prove that there is no
possibility for distortion. Such a requirement would defeat the purpose
of permitting the use of reasonable allocations by a respondent that
has cooperated to the best of its ability.
Where we have found that a company has not acted to the best of its
ability in reporting the adjustment in the most specific and non-
distortive manner feasible, we have made an adverse inference in using
the facts available with respect to this adjustment pursuant to section
776(b) of the Tariff Act. With respect to HM adjustments, in accordance
with the Court of Appeals for the Federal Circuit's (CAFC) decision in
The Torrington Company v. United States, 82 F.3d 1039, 1047-51 (CAFC
1996) (Torrington I) , we have not treated improperly allocated HM
price adjustments as if they were indirect selling expenses (ISEs), but
we have instead disallowed downward adjustments in their entirety.
However, we have included positive (upward) HM price adjustments (e.g.,
positive billing adjustments that increase the final sales price) in
our analysis of such companies. The treatment of positive HM billing
adjustments as direct adjustments is appropriate because disallowing
such adjustments would provide an incentive to report positive billing
adjustments on an unacceptably broad basis in order to reduce NV and
margins. That is, if we were to disregard positive billing adjustments,
which would be upward adjustments to NV, respondents would have no
incentive to report these adjustments in the most specific and non-
distortive manner feasible. See AFBs V at 66498.
Comment 1: Torrington asserts that some respondents reported home-
market discounts, rebates, and post-sale price adjustments (PSPAs) by
allocating amounts across all sales or across all sales to a given
customer, even when some sales were not entitled to the adjustment.
Torrington cites the CAFC's decision in Torrington I (at 1047-51),
arguing that direct PSPAs must be reported on a sale-specific basis in
order for the Department to make a downward adjustment to NV and that
the Department may not make an adjustment for improperly allocated
direct expenses as if these were indirect expenses. Torrington contends
that the new statute retains the distinction between direct and
indirect selling expenses, citing sections 772(d)(1)(B) and (D) and
section 773(a)(7)(B) of the Tariff Act. Petitioner argues that, while
the discussion in the SAA at 823-824 demonstrates the intention to
continue the practice of allowing allocations when allocations were
non-distortive, this statement is no longer valid because it was
written in 1994, prior to Torrington I, when the Administration held
the belief that its practice was sustained by the courts. Therefore,
Torrington asserts, the Department should deny all rebates, discounts,
and PSPAs that respondents did not report on a transaction-specific
basis or which they did not allocate in such a manner as to be
tantamount to reporting on a transaction-specific basis.
FAG, Koyo, Nachi, NSK, and SKF argue that the Department should
make direct adjustments to price when the allocation of PSPAs is
reasonable and not distortive and that such practice conforms with the
SAA and the new regulations at 351.401(g)(1). Koyo, Nachi, NSK, and SKF
contend that, in Torrington I, the CAFC did not disallow an adjustment
merely because it involved an allocation. According to respondents, the
court stated that, regardless of the allocation method, the Department
could not treat direct price adjustments as indirect selling expenses,
but the court did not address the propriety of the allocation
methodology. Additionally, respondents claim, the allocation of these
expenses does not detract from their relation to particular
transactions, thereby making them direct expenses and deductible from
price.
NSK further argues that the Department need not disallow price
adjustments simply because the respondent is unable to report these
expenses on a sales-specific basis (citing Smith-Corona v. United
States, 713 F. 2d 1568, 1580 (CAFC 1983)). Additionally, Koyo argues
that the Department treated the PSPAs properly as direct adjustments to
gross price,
[[Page 54050]]
rather than as direct or indirect selling expenses, since they are
corrections to the sales price and do not arise as a result of
preparing the merchandise for sale or from selling activities.
NTN contends it reported such adjustments on a transaction-specific
basis. Therefore, NTN claims that Torrington's arguments do not apply
to its response.
Department's Position: We agree with FAG, Koyo, Nachi, NSK, SKF,
and NTN. As we discussed in the introductory remarks to this section,
our practice is not to reject an allocation of price adjustments when
it was not feasible for a respondent to report the adjustments on a
more specific basis, provided that the allocation method the respondent
used does not cause unreasonable inaccuracies or distortions.
We see no conflict between Torrington I and our acceptance of
allocated price adjustments subject to the above conditions because the
CAFC did not address the propriety of the allocation methods
respondents used in reporting the price adjustments in question.
Although the CAFC appeared to question whether price adjustments
constituted expenses at all (see Torrington I at n.15), it held that,
assuming the adjustments were expenses, they had to be treated as
direct selling expenses and could not be used to offset the deduction
of U.S. indirect selling expenses. The CAFC did not find that such
price adjustments could not be based on allocations. In fact, such a
holding would have been inconsistent with the CAFC's prior holding in
Smith-Corona Group v. United States, 713 F. 2d 1568, 1580-81 (CAFC
1983), which the Torrington I court did not question.
Comment 2: Torrington asserts that, if the Department accepts
allocated PSPAs as a direct adjustment to NV in these reviews, it
should not follow the method it used in the 1994/95 administrative
reviews to determine whether the allocations are distortive. Rather,
Torrington argues, the Department should judge all allocations using
product-specific sales information. Torrington notes that different
classes or kinds of AFBs cannot be deemed similar for purposes of
expense allocations because the Department found in the original less-
than-fair-value proceeding that there are several ``classes or kinds''
of bearings, each requiring a separate proceeding. Torrington explains
that the physical characteristics of non-subject merchandise should not
be considered similar to those of subject merchandise for purposes of
expense allocations. Torrington argues that, if the physical
characteristics of an out-of-scope bearing are considered similar to
those of an in-scope bearing for purposes of allocating price
adjustments, then the former should be included within the scope of the
order.
FAG, Koyo, NSK, and SKF assert that the Department's 1994/95 review
methodology used to determine the distortiveness of the allocation of
PSPAs is sufficient. These respondents contend that the Department has
reviewed the propriety of their allocation methodologies correctly by
considering those products receiving allocated expenses according to
the value and physical characteristics of the products and the manner
in which they were sold. FAG, Koyo, NSK, and SKF contend that there is
no evidence that the Department's methodology allowed disproportionate
allocations of PSPAs across subject and non-subject merchandise and
conclude that the Department should continue their use.
NTN asserts that Torrington's argument concerning the Department's
methodology for determining distortiveness of allocations does not
apply to it because it reported discounts on a product-specific basis.
Department's Position: We agree with FAG, Koyo, NSK, NTN, and SKF.
As stated above in the introductory remarks to this section, in
determining the propriety of respondents' allocation methodologies for
price adjustments, we have not rejected an allocation method solely
because the allocation includes adjustments granted on merchandise that
is not subject to these reviews (out-of-scope merchandise). However, we
did not accept such allocations where we had reason to believe that a
respondent granted such adjustments in disproportionate amounts with
respect to sales of out-of-scope and in-scope merchandise. We have made
this determination by examining the extent to which the out-of-scope
merchandise included in the allocation pool is different from the in-
scope merchandise in terms of value, physical characteristics, and the
manner in which it was sold. Significant differences in such areas may
increase the likelihood that respondents granted price adjustments in
disproportionate amounts with respect to sales of in-scope and out-of-
scope merchandise.
Comment 3: Torrington contends that the Department should disallow
certain discounts NTN Japan reported. Torrington argues that, based on
documentation the Department obtained at verification which relates to
the negotiation of certain discounts, NTN Japan's reported discounts
were not granted on a customer-and product-specific basis and were not
limited to subject merchandise. In addition, Torrington asserts that
evidence on record indicates that these adjustments may not be
discounts but, rather, may be claims for a different kind of adjustment
for which, Torrington asserts, NTN has not met the Departmental
standard.
NTN Japan maintains that negotiating discounts is a part of its
normal business activity and that the Department verified its reported
discounts in detail and found that they were granted on a customer-and
product-specific basis. NTN asserts that Torrington's argument is based
improperly on limited documentation included on the record and it fails
to consider the overall verification by the Department officials, which
included the examination of numerous documents relevant to these
discounts which were not entered on the record. NTN notes that the
Department is not required to enter all documents examined during
verification on the record.
Department's Position: We disagree with the petitioner. We verified
this discount and found that NTN granted it ``by product for each
customer.'' In addition, it meets the Department's standard for a
discount. We reached this conclusion after reviewing numerous documents
at verification, although we did not include all reviewed information
was included in the record as a verification exhibit. (See Verification
Report dated May 8, 1997, at 5.) Therefore, petitioner's argument
regarding whether the discount should be treated as something other
than a discount is incorrect.
Comment 4: Koyo contends that the Department correctly accepted one
of its billing adjustment claims (designated BILADJ1H in the response)
but inexplicably failed to accept the other billing adjustment claim
(designated BILADJ2H in the response). Koyo contends that both billing
adjustments have been accepted in past AFB and tapered roller bearing
(TRB) administrative reviews and that there have been no changes in its
reporting methodology since the completion of those reviews.
Torrington argues that both of Koyo's billing adjustments, which it
reported on a customer-specific basis, should be rejected. Torrington
contends that BILADJ1H, which it claims was granted on a model-specific
basis but was reported on a customer-specific basis, and BILADJ2H,
which it claims was granted on a lump-sum basis, should both be
rejected as both reporting methods result in the application of
[[Page 54051]]
price adjustments to transactions which were not subject to these
adjustments.
Department's Position: With respect to BILADJ1H, Koyo granted the
adjustment amount on a customer- and model-specific basis. Koyo then
totaled the price adjustments granted and sales of subject merchandise
sold to each customer to calculate an overall adjustment factor per
customer in order to allocate the adjustment over subject merchandise
sales to the respective customer. Our examination of the record leads
us to conclude that, while Koyo has paper records of the adjustment, it
is not feasible for Koyo to retrieve the information electronically or
to allocate this adjustment more specifically, given the large volume
of transactions involved, the level of detail contained in Koyo's
normal accounting records, and the time constraints imposed by the
statutory deadlines under which all parties must operate. Therefore, we
have accepted Koyo's reporting methodology for these billing
adjustments.
With respect to BILADJ2H, Koyo granted both lump-sum adjustments
which it negotiated with its customers without reference to model-
specific selling prices and some adjustments which it granted on a
model-specific basis but which Koyo reported on a customer-specific
basis. Koyo allocated BILADJ2H to subject merchandise on the basis of
sales value.
We have reconsidered our disallowance of BILADJ2H for the
preliminary results and now agree with Koyo that we should allow its
lump-sum billing adjustments as a direct adjustments to NV. We
determine that Koyo acted to the best of its ability in reporting this
information using customer-specific allocations. Given the fact that
Koyo's records do not readily identify a discrete group of sales to
which each billing adjustment pertains and the extremely large number
of POR sales Koyo made, it is not feasible for Koyo to report this
adjustment on a more specific basis. Moreover, we are satisfied that
Koyo's allocation methodology across subject merchandise by sales value
was not distortive.
Comment 5: Torrington argues that FAG Germany reported HM rebates
improperly. Torrington notes that, while some rebates were payable only
in connection with purchases of certain types of products, FAG reported
these rebates on a customer-specific basis, creating the likelihood
that some rebates were reported on sales when no rebates were actually
paid. For this reason, Torrington asserts that the Department should
deny the claimed adjustment.
FAG argues that it reported all rebates properly so that no rebates
were reported where they did not apply. For customer-specific rebates,
FAG claims it reported instances where the rebate was applicable to
only certain products and factored the rebate only over sales of those
products.
Department's Position: We disagree with Torrington. As Exhibit B-6
of FAG's questionnaire response dated September 9, 1996 demonstrates,
FAG allocated its rebates on a customer-specific basis over sales only
of those products that actually received rebates. Therefore, we
determine that FAG's methodology for reporting rebates is reasonable
and not distortive, and, in accordance with our policy, we have
accepted FAG's HM rebates as reported.
Comment 6: Torrington argues that the Department should disallow
certain post-sale price adjustments which SKF Germany reported in an
inaccurate manner. Torrington contends that SKF Germany reported
support rebates to distributors in a manner different from the manner
in which the rebate was actually granted and, therefore, the Department
should reject the adjustment to price. Torrington purports that,
whereas SKF determines eligibility by comparing SKF Germany's invoice
price to the reseller's invoice price, the reporting methodology
allocates the rebate across all sales to the reseller, thereby
reporting rebates on sales where none actually occurred.
Additionally, Torrington argues that the Department should reject
SKF Germany's billing adjustment 2 in the HM, as it was not reported in
an accurate manner. Petitioner contends that customer-specific
reporting of the adjustment is not accurate unless the adjustment
applies equally to all sales to that customer. Torrington also asserts
that SKF did not report the timing of such billing adjustments
accurately. Furthermore, Torrington points out that SKF was able to
report such billing adjustments on a transaction-specific basis for
U.S. sales but did not explain why it was unable to report the same
adjustment on a transaction-specific basis for HM sales.
Finally, Torrington claims that it should not be responsible for
demonstrating the distortive nature of such allocations because it does
not have access to information which would allow such demonstration.
Torrington maintains that it is SKF Germany's responsibility to produce
evidence to demonstrate that its methodology is not distortive.
Torrington concludes that, while the Department requested additional
information for purposes of determining the distortiveness of such
allocations, SKF Germany responded in a general, non-specific manner,
precluding such a judgment by the Department.
SKF Germany argues that the Department was correct in accepting
support rebates and billing adjustment 2 as adjustments to HM price.
SKF Germany contends that Torrington is incorrect in arguing that SKF's
reporting methodology regarding support rebates is likely to result in
rebates on sales where none actually occurred. SKF Germany notes that,
for each customer for whom SKF reported a support rebate, it actually
granted a rebate to that customer and the actual amount granted does
relate to the totality of sales to that customer. SKF Germany argues
that the allocation of the rebate on aggregate sales to that customer
is proper since the amount is based on sales of the customer, not sales
of SKF Germany to the customer. As such, SKF states that it reported
the rebate in exactly the manner in which it was incurred.
SKF Germany also disagrees with Torrington concerning billing
adjustment 2, arguing that this billing adjustment applies only in
instances where transaction-specific attribution was not possible. SKF
disagrees further with Torrington's argument that SKF USA's ability to
report billing adjustments on a transaction-specific manner supports
Torrington's contention that the adjustment should be disallowed in the
HM. Rather, SKF contends this difference in reporting methodology
supports the allowance of SKF Germany's billing adjustment 2 because it
demonstrates the two types of billing adjustments the two companies
made. SKF USA only grants transaction-specific billing adjustments
(billing adjustment 1), while SKF Germany grants rebates associated
with a specific transaction (billing adjustment 1) and those that are
not linked with a particular transaction (billing adjustment 2).
Department's Position: We agree with SKF Germany regarding our
treatment of support rebates and billing adjustment 2. We find that SKF
Germany's allocation methodologies are not unreasonably distortive. Due
to the nature of the support rebates, transaction-specific reporting is
not appropriate. SKF Germany grants these rebates to distributors/
dealers to ensure that they obtain a minimum profit level on sales to
select customers. Hence, because SKF Germany does not issue these
rebates based on specific sales to the distributor/dealers but rather
on the sales of the distributors/dealers, SKF Germany cannot report
transaction-
[[Page 54052]]
specific rebate amounts. Rather, SKF Germany has allocated the rebates
it granted to a specific customer over all sales to that customer. SKF
Germany's allocation methodology is not unreasonably distortive, as we
are satisfied that each adjustment was granted in proportionate amounts
with respect to the value of sales of in-scope and out-of-scope
merchandise.
With respect to billing adjustment 2, SKF Germany reported billing
adjustments not associated with a specific transaction. SKF Germany
could not tie these adjustments to a specific transaction because the
billing adjustments it reported in this field were part of credit or
debit notes, issued to the customer, that related to multiple invoices,
products, or invoice lines. In these cases, the most feasible reporting
methodology that SKF Germany could use was a customer-specific
allocation, given the large volume of transactions involved in these
AFB reviews and the time constraints imposed by the statutory
deadlines. Furthermore, we found that the products which received the
adjustment were similar in terms of value, physical characteristics,
and the manner in which they were sold. For these reasons, we find that
this methodology is not unreasonably distortive.
We agree with Torrington that it should not be responsible for
demonstrating the distortive nature of this allocation; rather it is
the responsibility of the respondent to demonstrate that its
methodology is not unreasonably inaccurate or distortive. SKF Germany
has satisfied this responsibility with regard to the reporting of its
support rebates and billing adjustment 2 with adequate explanation in
its response. SKF Germany demonstrated that its allocation methodology
was reasonable and that the AFB products over which it allocated a PSPA
were similar in terms of value, physical characteristics and the method
in which they were sold.
Comment 7: INA argues that the Department did not transfer negative
billing adjustments from the HM sales database submitted by INA to the
HM sales file used for the preliminary results, since the Department
did not include in its preliminary results calculations the negative
billing adjustments INA reported in the Department's preliminary
results calculations. INA claims that this is a clerical error and that
this error should be corrected in the final results.
In rebuttal, Torrington contends that the Department should
disallow all of INA's claimed downward billing adjustments in
calculating NV because INA provided only a brief description of its HM
billing adjustments which did not indicate whether the adjustments were
limited to in-scope merchandise. Torrington argues that the CAFC held
that direct PSPAs must be reported on a sale-specific basis before the
Department can make a downward adjustment in calculating NV.
Department's Position: We disagree with INA. We do not view the
omission of downward HM billing adjustments as a clerical error and
have disallowed this adjustment for the final results. As we discussed
in the introductory remarks to this section, our practice is to accept
claims for discounts, rebates, and other billing adjustments as direct
adjustments to price if we determined that the respondent, in reporting
these adjustments, acted to the best of its ability and that its
reporting methodology was not unreasonably distortive (see section 776
of the Tariff Act).
In our supplemental questionnaire dated January 23, 1997, we
requested specifically that INA provide additional information to
explain and demonstrate the nature of its reported billing adjustments
and how they were incurred and recorded in INA's accounting system, as
well as to demonstrate that the allocations were not unreasonably
distortive. In INA's February 12, 1997 supplemental questionnaire
response at page 16, the firm provided only a brief description of its
HM billing adjustments by stating that all were made strictly on a
transaction-specific basis and were made in cases in which INA Germany
had to correct billing errors and in cases where the prices were
definitely agreed upon with the customers after the shipments. However,
INA did not provide sufficient evidence to demonstrate that the
allocations of downward billing adjustments were limited to in-scope
merchandise or were not otherwise unreasonably distortive. Because
there is nothing on the record to support the accuracy of INA's claim,
we have denied the adjustment.
As we mentioned in the introductory remarks at the beginning of
this section, when we reject a respondent's allocation of price
adjustments, we only reject the downward adjustments to NV. Therefore
for these final results, we have included INA's upward billing
adjustments in our analysis.
3. Circumstance-of-Sale Adjustments
3.A. Technical Services and Warranty Expenses
Comment 1: Torrington argues that the Department should treat
certain of NTN's U.S. technical service expenses as direct rather than
indirect selling expenses. Torrington asserts that NTN's supplemental
questionnaire response did not meet the burden of demonstrating the
indirect nature of the technical service expenses and, therefore,
maintains that the Department should treat such expenses as direct
selling expenses.
NTN argues that it responded adequately to the Department's
supplemental inquiries regarding NTN's reported U.S. technical service
expenses and notes that Torrington misread the question the Department
posed in its supplemental questionnaire. NTN argues further that, if
the Department determined that the technical service information
provided in its responses did not demonstrate the indirect nature of
such expenses, the Department would have requested NTN to submit
additional information. NTN maintains that the manner in which it
reported the expense in these reviews is based on the same methodology
with which it reported the expense in the 94/95 administrative reviews
and states that, in those reviews, the Department accepted NTN's
methodology of reporting this expense.
Department's Position: We disagree with Torrington. In its
supplemental response, NTN explained that the expenses are fixed
expenses and do not vary with sales volumes. Therefore, because we are
satisfied with NTN's responses to our questions, we have treated these
expenses as indirect in nature.
Comment 2: Torrington asserts that SKF Germany under-reported its
direct warranty expenses with regard to U.S. sales and that the
Department should recalculate the direct adjustment to U.S. prices for
warranty claims, including a facts-available amount for additional
expenses which SKF Germany did not report properly. Torrington explains
that, while SKF Germany reported the cost of replacement bearings as a
direct warranty expense in the U.S. market, elsewhere in its response
SKF Germany describes that in its warranty activities it incurs
expenses associated with ``customer contact, processing warranty
claims, testing of bearings, and directing the shipment of defective
and replacement bearings.'' Therefore, petitioner claims, SKF Germany
incurs direct expenses other than merely the replacement cost of
bearings and the
[[Page 54053]]
Department must account for these expenses in its calculations.
SKF Germany disagrees with Torrington's contention that direct
warranty expenses for SKF USA were under-reported and that the
Department should apply facts available, arguing that certain expenses
which Torrington considers to be direct are indirect expenses and were
reported properly as such.
Department's Position: We disagree with Torrington. Based on our
analysis of the information SKF Germany submitted in these reviews, we
agree with SKF Germany that it referred to fixed types of expense
activities correctly, such as salary expenses for customer service
representatives and salesmen who make customer contacts and process
warranty claims as well as salary expenses for application engineers
who test bearings and other internal testing expenses, as indirect
expenses. Because these are fixed expenses, it was proper to report
them as indirect expenses. Because there are no other issues with
respect to SKF Germany's reporting of its U.S. direct warranty
expenses, we have accepted SKF Germany's U.S. direct warranty expenses
as reported for these final results.
3.B. Credit
Comment 1: Torrington contends that the adjusted price SKF Germany
used to calculate credit expenses in the HM differed in its adjustments
from the adjusted price used to calculate credit expenses in the U.S.
market. According to Torrington, the adjusted price SKF Germany used in
the U.S. market calculation included a deduction of cash discounts from
the gross unit price incorrectly, though the HM adjusted price did not
reflect such a deduction. Torrington contends that, because the
calculation in the U.S. market was therefore lower, the result is an
under-reporting of U.S. credit expenses. Because SKF Germany reported
cash discounts in both the United States and the HM, Torrington asserts
that the Department should recalculate reported credit expenses using
fully adjusted prices in the calculation or apply facts-available
information.
SKF Germany argues that it has not changed its methodology of
calculating credit expense from that it used in prior reviews and notes
that the Department has accepted it in prior reviews.
Department's Position: We agree with Torrington. SKF Germany
calculated U.S. credit expense based on prices net of cash discounts
but did not include deductions for reported cash discounts in the
adjustment of prices SKF Germany used for calculation of HM credit
expense. We have recalculated SKF Germany's HM credit expenses based on
adjusted prices net of discounts for these final results.
Comment 2: Torrington contends that the Department should
recalculate NTN's U.S. credit expense because NTN reported a customer-
specific average credit expense rather than a transaction-specific
credit expense. Torrington argues that reporting credit expense on an
average basis may be distortive in cases where not all U.S. sales are
dumped. Torrington points out that NTN has provided the necessary
information on the record to recalculate a transaction-specific credit
expense.
NTN rebuts Torrington's argument that its credit expense should be
recalculated and points out that the Department has accepted NTN's
methodology of reporting an average credit expense in all previous AFB
administrative reviews. NTN argues that the only argument raised by
Torrington, that reporting credit expense on an average basis may yield
distortive results, is a statement applicable to dumping in general and
is not specific to NTN's calculation of NTN's reported credit expense.
Department's Position: We agree with Torrington with regard to CEP
sales. We have data on the record which allows us to calculate
transaction-specific credit expense for CEP sales. Therefore, we have
recalculated NTN's credit expense using the dates of payment which NTN
reported. However, Torrington is incorrect in asserting that NTN
reported transaction-specific payment dates for EP sales. NTN does not
maintain its payment records in a manner which allows it to provide us
with transaction-specific payment dates for EP sales to the United
States (see NTN's September 9, 1996 submission at C-15). Therefore, in
these reviews, as in past reviews, we are allowing NTN to calculate its
U.S. credit expense for EP sales for each customer on the basis of the
average number of days that receivables are outstanding. See AFBs VI at
201.
3.C. Indirect Selling Expenses
Comment 1: Torrington acknowledges that section 351.402(b) of the
Department's new regulations directs the Department to deduct only
those indirect expenses associated with sales to the unaffiliated
customer in the United States and not those expenses which relate to
the sale by the exporting company to the affiliated sales company in
the United States. However, because SKF Germany has not provided
adequate descriptions that would allow the Department to determine
whether the expenses are associated with the sale to the affiliated
company in the United States or with the subsequent resale to the
unaffiliated U.S. customer, Torrington contends that the Department
should deduct all indirect expenses incurred in Germany from CEP.
Torrington argues that, because Koyo attributed certain indirect
selling expenses to its sales through its U.S. subsidiary, these
expenses are related to sales to unaffiliated customers in the United
States and the Department should deduct such expenses from CEP.
With regard to NSK, Torrington argues that the Department should
deduct indirect selling expenses NSK incurred in Japan from CEP if they
are associated with sales to the unaffiliated customer in the United
States because NSK has not provided adequate descriptions which would
allow the Department to determine with certainty whether indirect
expenses incurred in Japan were associated with the sale to NSK's U.S.
affiliate or with the subsequent resale to the unaffiliated U.S.
customer. Citing NSK's chart of selling functions, Torrington asserts
that it appears from the record that all of these expenses are related
to U.S. resales, rather than sales to the U.S. affiliate, and argues
that the Department should deduct all of these indirect expenses from
CEP. Torrington argues that, at a minimum, the Department should regard
the advertising component of NSK's indirect selling expenses incurred
in Japan as associated with the resale to the unaffiliated U.S.
customer and deduct the amount therefor from CEP.
Torrington argues that FAG has not demonstrated that certain
expenses are associated with its sales to the U.S. affiliate rather
than to the unaffiliated customers. Torrington contends that certain
printing costs could be incurred in connection with sales to
unaffiliated customers and, as such, the Department should deduct such
expenses from CEP.
SKF Germany argues that the Department should not deduct these
expenses from CEP because SKF Gleitlager and SKF GmbH incur the
expenses with respect to their sales to SKF USA, not with respect to
SKF USA's sales to the unaffiliated U.S. customer. SKF claims that the
Department may only make such a deduction when these expenses are
incurred in Germany with respect to sales in the United States to the
unaffiliated customer.
Koyo states that Torrington has mischaracterized Koyo's commercial
structure, which it states has remained unchanged from prior reviews.
Koyo
[[Page 54054]]
further contends that the Department has verified that Koyo produces
the subject merchandise and ships it to its U.S. affiliate, not the
ultimate customer in the United States, and that its U.S. affiliate
inventories the product and ultimately negotiates with and sells the
merchandise to the unaffiliated U.S. customer. Thus, Koyo argues, its
expenses attributable to U.S. sales are almost exclusively incurred in
its transactions with its U.S. affiliate, not in that affiliate's
transactions with the unaffiliated customers.
NSK argues that the indirect selling expenses to which Torrington
refers were all associated with NSK's sales to its U.S. affiliate. NSK
notes that Torrington asked the Department to request more information
regarding these expenses in a supplemental questionnaire and asserts
that, because the Department did not ask NSK any questions regarding
these expenses, the Department must have been satisfied with NSK's
explanation. With regard to advertising expenses, NSK asserts that this
expense is general international advertising which the foreign parent
incurred and is not related to NSK's sales to unaffiliated customers
and, therefore, the Department should not make such a deduction from
CEP.
FAG argues that there is nothing on the record to support
Torrington's assertion that certain selling expenses could be incurred
with regard to sales to unaffiliated customers. FAG argues that it
reported these expenses properly for the following reasons: (1) They
are exclusively related to the sales relationship between FAG Germany
and FAG US; (2) they are not a direct advertising cost of FAG US
incurred by FAG Germany; (3) they are in no way related to economic
activity occurring in the United States and are therefore not
deductible from CEP.
Department's Position: As we stated in AFBs VI at 2124, we will
deduct only those expenses associated with economic activities in the
United States which occurred with respect to sales to the unaffiliated
U.S. customer. We found no information on the record for this review
period to indicate that the indirect selling expenses SKF Germany,
Koyo, NSK, or FAG incurred in their respective HMs were incurred on
sales to the unaffiliated customer in the United States. Regarding NSK,
the evidence on the record does not suggest that NSK incurred these
expenses, including advertising expenses, on its U.S. affiliate's sales
to unaffiliated customers in the United States. Rather, the U.S.
affiliate does its own advertising in the United States which we have
deducted from CEP as a direct expense. Furthermore, NSK has cooperated
with all of our requests for information with regard to indirect
selling expenses. Deducting these expenses from CEP on the basis of
Torrington's speculation that there is a possibility that respondents
may have incurred them on the U.S. affiliates' resales would be
inappropriate. Therefore, because indirect selling expenses respondents
incurred in the foreign countries were not related specifically to
commercial activity in the United States, we did not deduct them from
CEP.
Comment 2: FAG claims the Department treated certain other HM
direct selling expenses improperly as indirect selling expenses. FAG
argues that, while it incurs an indirect expense regardless of whether
a particular sale takes place, the other expenses were related directly
to the distributor's sale of a particular bearing to an unrelated
original equipment manufacturer (OEM) at the behest of FAG. FAG asserts
that it explained in its questionnaire response that the direct credit
to this distributor is functionally equivalent to a commission because
it is a payment to the distributor on account of its sale to FAG's OEM
customer. FAG contends that the Department should not consider this
expense as an indirect selling expense since it incurred the expense
with respect to a particular customer. Furthermore, FAG claims that
allocation of a direct expense on a customer-specific basis is
reasonable and proper when transaction-specific reporting is not
possible, citing the SAA at 823-824.
Torrington counters that the selling expenses under contention
should not be classified as direct selling expenses as FAG requests
because FAG has not demonstrated how these are tied to a specific
transaction. Torrington points out that the Department requested
information from FAG which could demonstrate how the distributor's sale
to its customer was tied directly to FAG's sale to the distributor and
that FAG answered that there was no direct tie between the two sales.
Since FAG did not link these payments directly to sales it made to the
distributor, Torrington asks that the Department continue to treat
these payments as indirect expenses.
Department's Position: We disagree with FAG. As Torrington
observes, we asked FAG in a supplemental questionnaire ``[i]f there is
a direct * * * tie between your sales and the customer's sales for
which this expense is incurred, please explain the tie and submit
documentary evidence to support your claim,'' to which FAG responded
``[t]here is no direct tie between FAG's reported sales to the
distributor and the sales of the distributor that generate the payment
or credit.'' See FAG KGS Section A-D Supplemental Response dated
December 10, 1996 at 30. FAG acknowledges in its case brief that this
expense is ``directly related to the distributor's sale of a particular
bearing to an unrelated OEM at the behest of FAG.'' See FAG's German
Case Brief dated June 30, 1997. Because the expense is related directly
to the distributor's sale, FAG would have to demonstrate that there is
a direct tie between its sales to the distributor and the distributor's
sale that generates the payment for us to regard this as a direct
expense. As noted above, FAG did not demonstrate such a tie.
FAG argues that this expense is functionally equivalent to a
commission. We note, however, that ``[g]enerally speaking, a commission
is a payment to a sales representative for engaging in sales activity,
normally on behalf of the seller but occasionally on behalf of the
customer'' and that ``the key question * * * is whether there was one
transaction between [the respondent] and the ultimate purchaser in
which the trading companies acted as [the respondent's] sales
representatives for a commission `` or `` whether there were two
transactions, one in which the trading companies bought from [the
respondent] and received a [payment or credit] for that initial sale
and the ultimate purchaser then bought from the trading companies.''
See Certain Cold-Rolled Carbon Steel Flat Products From Germany; Final
Results of Antidumping Duty Administrative Review, 60 FR 65264 at
65278. In the instant situation, there are two transactions, one from
FAG to the distributor and one from the distributor to the downstream
customer (e.g., sales to the unaffiliated third party). Thus, these
expenses cannot be considered a commission. Finally, we note that FAG
did not demonstrate that these payments were contemplated at the time
of sale to the distributor. Therefore, because this expense is related
to a downstream sale and not to the sales which FAG reported, this
expense is an indirect selling expense, not a direct selling expense or
a commission.
Finally, we did not treat these selling expenses as indirect
because they were allocated on a customer-specific basis. Had we
concluded that the expense was direct in nature but that FAG had failed
to report it to the best of its ability or that its allocation was
unreasonable, we would have denied the adjustment entirely. The fact
that FAG allocated this expense did not enter into our
[[Page 54055]]
decision to treat it as an indirect expense. As stated above, we
treated these selling expenses as indirect expenses because FAG did not
demonstrate that there is a direct tie between its sales to the
distributor and the distributor's sale that generates the payment.
Comment 3: Torrington contends that NTN excluded certain expenses
improperly from the category of reported U.S. indirect selling expenses
and states that, for the purpose of the final results, the Department
should deduct these expenses from CEP.
NTN argues that the Department has rejected Torrington's claim
previously that the expenses to which Torrington refers were excluded
from the category of reported U.S. indirect selling expenses
improperly. NTN points out that, in the 1994/95 administrative reviews,
the Department found that NTN's reporting of such expenses was not
unreasonably distortive. NTN asserts that it has used the same
methodology to report this category of expenses in the current reviews
and, therefore, Torrington's argument is baseless.
Department Position: We agree with NTN. Having verified these
expenses in past reviews and found the adjustments to be reasonable, we
accepted them in the 1994/95 administrative reviews. See AFBs VI at
2105. For these reviews, after examining the record, we asked
supplemental questions which NTN answered appropriately. Inasmuch as
the record in these reviews indicates no reason that a different
methodology should be used, we have accepted NTN's adjustments to its
reported U.S. indirect selling expenses.
Comment 4: NTN Japan contends that the Department should
recalculate NTN Japan's U.S. selling expenses to reflect its reported
indirect-selling-expenses level-of-trade allocations. NTN Japan argues
that the Department intended to calculate NTN Japan's U.S. selling
expenses based on the reported levels of trade but did not do so in its
preliminary calculations. NTN Japan maintains further that, in the
1992/93 TRB administrative review in which NTN Japan was involved, the
Department accepted NTN Japan's level-of-trade-based U.S. selling
expenses because it concluded that it prevents distortions.
Torrington contends that the Department should reject NTN Japan's
reported selling expense allocations based on level of trade.
Torrington states that, for the preliminary results, the Department
recalculated NTN Japan's U.S. selling expenses without regard to level
of trade correctly. Torrington states further that, in AFBs VI, the
Department rejected NTN Japan's allocation methodology because it was
distortive and unsubstantiated. Finally, Torrington states that NTN
Japan's cite to the TRB case is misplaced because, in that case, the
Department recalculated NTN Japan's U.S. selling expense allocations
based on level of trade as a result of other problems inherent in NTN
Japan's response.
Department's Position: We agree with Torrington. In AFBs III (and
subsequently in AFBs IV at 10940, AFBs V at 66489, and AFBs VI at
2105), we determined that NTN Japan's indirect-selling-expense
allocation methodology based on levels of trade bears no relationship
to the manner in which it actually incurs these U.S. selling expenses,
which ultimately results in distorted allocations. The CIT upheld this
decision in NTN Bearing Corp. v. United States, 905 F. Supp. 1083 at
1094-95 (1995)(NTN III). NTN Japan did not provide record evidence to
substantiate its claim that its indirect selling expenses are
attributable to and vary by its reported levels of trade. Therefore,
for these final results, we have maintained the recalculation of NTN
Japan's U.S. indirect selling expenses we made for the preliminary
results to represent such selling expenses for all U.S. sales.
4. Level of Trade
As set forth in section 773(a)(7) of the Tariff Act and in the SAA
at 829-831, to the extent practicable, we have determined NV based on
sales at the same level of trade as the level of trade of the EP or
CEP. When we were unable to find comparison sales at the same level of
trade as the EP or CEP, we compared the U.S. sales to sales at a
different level of trade in the comparison market.
We determined the level of trade of EP on the basis of the starting
prices of sales to the United States. We based the level of trade of
CEP on the price in the United States after making the CEP deductions
under section 772(d) but before making the deductions under section
772(c). Where HM prices served as the basis for NV, we determined the
NV level of trade based on starting prices in the NV market. Where NV
was based on constructed value (CV), we determined the NV level of
trade based on the level of trade of the sales from which we derived
selling, general and administrative expenses (SG&A) and profit for CV.
In order to determine the level of trade of U.S. sales and
comparison sales, we reviewed and compared distribution systems,
including selling functions, class of customer, and the extent and
level of selling expenses for each claimed level of trade. Customer
categories such as distributor, original equipment manufacturer (OEM),
or wholesaler are commonly used by respondents to describe levels of
trade but are insufficient to establish a level of trade. Different
levels of trade necessarily involve differences in selling functions,
but differences in selling functions, even substantial ones, are not
alone sufficient to establish a difference in the levels of trade.
Different levels of trade are characterized by purchasers at different
stages in the chain of distribution and sellers performing
qualitatively or quantitatively different functions in selling to them.
See AFBs VI at 2105.
As in the preliminary results, where we established that the
comparison sales were made at a different level of trade than the sales
to the United States, we made a level-of-trade adjustment if we were
able to determine that the differences in levels of trade affected
price comparability. We determined the effect on price comparability by
examining sales at different levels of trade in the comparison market.
Any price effect must be manifested in a pattern of consistent price
differences between foreign market sales used for comparison and
foreign market sales at the level of trade of the export transaction.
To quantify the price differences, we calculated the difference in the
average of the net prices of the same models sold at different levels
of trade. We used the average difference in net prices to adjust NV
when NV is based on a level of trade different from that of the export
sale. If there was a pattern of no price differences, the differences
in levels of trade did not have a price effect and, therefore, no
adjustment was necessary.
We were able to quantify such price differences and make a level-
of-trade adjustment for certain comparisons involving EP sales, in
accordance with section 773(a)(7)(A). For such sales, the same level of
trade as that of the U.S. sales existed in the comparison market but we
could only match the U.S. sale to comparison-market sales at a
different level of trade because there were no usable sales of the
foreign like product at the same level of trade. Therefore, we
determined whether there was a pattern of consistent price differences
between these different levels of trade in the HM. We made this
determination by comparing, for each model sold at both levels, the
average net price of sales made in the ordinary course of trade at the
two levels of trade. If the average prices were higher at one of the
levels
[[Page 54056]]
of trade for a preponderance of the models, we considered this to
demonstrate a pattern of consistent price differences. We also
considered whether the average prices were higher at one of the levels
of trade for a preponderance of sales, based on the quantities of each
model sold, in making this determination. We applied the average
percentage difference to the adjusted NV as the level-of-trade
adjustment.
We were unable to quantify price differences in other instances
involving comparisons of sales made at different levels of trade.
First, with respect to CEP sales, the same level of trade as that of
the CEP for merchandise under review did not exist in the comparison
market for any respondent except NMB/Pelmec. We also did not find the
same level of trade in the comparison market for some EP sales of
merchandise under review. Therefore, for comparisons involving these
sales, we could not determine whether there was a pattern of consistent
price differences between the levels of trade based on respondents' HM
sales of merchandise under review.
In such cases, we looked to alternative sources of information in
accordance with the SAA. The SAA provides that ``if information on the
same product and company is not available, the level-of-trade
adjustment may also be based on sales of other products by the same
company. In the absence of any sales, including those in recent time
periods, to different levels of trade by the exporter or producer under
investigation, Commerce may further consider the selling expenses of
other producers in the foreign market for the same product or other
products.'' See SAA at 830. Accordingly, where necessary, we attempted
to examine the alternative methods for calculating a level-of-trade
adjustment. In these reviews, however, we did not have information that
would allow us to apply these alternative methods for companies that,
unlike NMB/Pelmec, did not have a HM level of trade equivalent to the
level of the CEP.
The only company for which we made a level-of-trade adjustment for
CEP sales in these final results was NMB/Pelmec. See the discussion at
Comment 7, below. However, we concluded that it would be inappropriate
to apply the level-of-trade adjustment we calculated for NMB/Pelmec to
any of the other respondents. The SAA at 160 states that ``if
information on the same product and company is not available, the
adjustment may also be based on sales of other products by the same
company. In the absence of any sales, including those in recent time
periods, to different levels of trade by the exporter or producer under
investigation, Commerce may consider the selling experience of other
producers in the foreign market for the same product in other
products.'' Because no respondent reported sales in the same market as
NMB/Pelmec (i.e., Singapore), we have not used NMB/Pelmec's data as the
basis of a level-of-trade adjustment for any other respondents.
In those situations where the U.S. sales were EP sales and we were
unable to quantify a level-of-trade adjustment based on a pattern of
consistent price differences, the statute requires no further
adjustments. However, with respect to CEP sales for which we were
unable to quantify a level-of-trade adjustment, we granted a CEP offset
where the HM sales were at a more advanced level of trade than the
sales to the United States, in accordance with section 773(a)(7)(B) of
the Tariff Act.
Comment 1: Koyo, NMB/Pelmec, NTN Germany, SNR France, NSK, and NSK/
RHP contend that the Department's practice with regard to level of
trade effectively precludes a level-of-trade adjustment to NV for CEP
sales and is thus contrary to law and Congressional intent.
NMB, NSK, and NSK/RHP contend that there is no statutory
requirement that a level-of-trade adjustment be based on the full
difference in prices between the HM comparison level of trade and the
HM level of trade equivalent to CEP and suggest that a partial level-
of-trade adjustment is contemplated by the statute. NMB/Pelmec argues
that neither the URAA nor the SAA specifies which two levels of trade
must be the basis for the adjustment. NSK and NSK/RHP contend that the
plain reading of the statute requires that the Department must adjust
NV for CEP sales for the difference between price levels at the two
levels of trade which do exist in the HM. NSK and NSK/RHP argue further
that the Department should at least make such a level-of-trade
adjustment when comparing CEP to HM aftermarket (AM) sales which, they
contend, is more advanced than HM OEM sales because prices are higher
at the HM AM level of trade than at the HM OEM level of trade. Finally,
NSK and NSK/RHP contend that CEP sales should be matched to HM OEM
sales before they are matched to HM AM sales.
Koyo asserts that it and other respondents have proposed to the
Department alternative methods by which the Department could construct
an appropriate HM level of trade by deducting from NV those HM expenses
that correspond to the expenses that are deducted from CEP, but that
the Department has failed to provide a reasonable explanation for
rejecting the proposals.
SNR France contends that its claim for a level-of-trade adjustment
is based on information on the record that demonstrates a consistent
pattern of price differences between OEM and distributor customers.
Moreover, SNR France claims that its OEM sales are made at a level
similar to the CEP level of trade. It suggests that if the CEP and OEM
level of trade were identical (i.e., if selling functions and
activities performed were the same) price differences between OEM and
distributor customers would be even greater. Thus, SNR France asserts,
its claimed adjustment is understated and it is entitled to this
conservative adjustment when CEP sales are compared to HM sales at the
distributor level of trade.
Torrington contends that an analysis of patterns of consistent
price differences between sales at different levels of trade in the HM
cannot be performed absent a HM level of trade equivalent to the level
of trade of the U.S. sale. Torrington also argues that the Department's
requirement that price differences be due to HM level-of-trade
differences before price-based adjustments are allowed is logical since
many factors, not all of which pertain to level of trade, determine
price. Torrington contends further that the balance achieved by the
Department in selecting the appropriate sales to compare in the two
markets on the basis of level of trade would be disturbed if the
Department allowed a level-of-trade adjustment to eliminate a whole set
of price determinants in one market while not removing them in the
other market. Thus, Torrington concludes, the respondents' suggested
level-of-trade adjustment would result in unfair comparisons. Finally,
Torrington argues that Koyo's position concerning alternative methods
is without supporting authority.
Department's Position: We disagree with respondents. Our
methodology does not preclude level-of-trade adjustments to NV for CEP
sales; we made such an adjustment in the case of NMB/Pelmec. Rather, we
did not make a level-of-trade adjustment to NV for CEP sales where the
facts of the case did not warrant such an adjustment.
Based upon our examination of the information on the record, with
the exception of NMB/Pelmec, we found that no respondent in these
reviews had a HM level equivalent to the level of the CEP. Furthermore,
we find no provision in the statute for making a ``partial''
[[Page 54057]]
level-of-trade adjustment. We may make level-of-trade adjustments when
there is ``any difference * * * between the export price or constructed
export price and the [NV] that is shown to be wholly or partly due to a
difference in level of trade between the export price or constructed
export price and the normal value.'' See section 773(a)(7)(A) of the
statute. While respondents seize on the phrase ``wholly or partly'' to
justify a partial level-of-trade adjustment, we interpret this phrase
to mean that we may make a level-of-trade adjustment if only part of
the differences in prices between two levels of trade is attributable
to a difference in levels of trade. In other words, we need not
demonstrate that no factor other than level of trade influenced a
pattern of price differences. Thus, we do not read into this language
of the statute the authority to make a level-of-trade adjustment
between two HM levels of trade where neither level is equivalent to the
level of the U.S. sale.
With regard to SNR's claim that its OEM sales are made at a level
of trade similar to the CEP level of trade and that SNR should be
granted a level-of-trade adjustment when comparing CEP sales to
distributor sales, we found that all of SNR's HM sales are made at a
different level of trade than the level of the CEP. Therefore, for the
reasons enumerated above, it is inappropriate to grant a level-of-trade
adjustment to SNR for its CEP sales.
We disagree with Koyo that we should adopt proposed alternative
methods by which to construct HM levels of trade. We base HM levels of
trade on the respondent's actual experience in selling in the HM. There
is no statutory basis for us to ``construct'' levels in the HM or
elsewhere. Therefore, we have not used Koyo's claimed constructed NV
levels of trade in order to calculate a level-of-trade adjustment for
Koyo's CEP-sales comparisons.
Finally, we disagree with NSK and NSK/RHP that these companies' CEP
sales should be matched to HM OEM sales before they are matched to HM
AM sales. Based upon our examination of the information on the record,
we found that no HM level of trade for either NSK or NSK/RHP had
conclusively more selling functions than another HM level. Rather, the
HM levels of trade each involved different degrees of various selling
functions. We conclude that, for these companies, and for respondents
generally, while the reported HM levels of trade are different from one
another, no HM level of trade is more advanced than any other based
upon the evidence on the record. We also disagree with NSK's and NSK/
RHP's assertion that, because their OEM prices are generally lower than
their AM prices, their OEM levels of trade is less advanced than the
distributor/aftermarket levels of trade. We determine whether one level
of trade is more advanced than another on the basis of the selling
functions performed by a respondent with respect to the two levels of
trade. NSK and NSK/RHP's HM OEM and AM sales are more advanced than the
level of trade of the CEP because comparatively fewer selling functions
are associated with the CEP than are performed for sales to either of
the other levels of trade. Therefore, we have not altered our matching
methodology.
Comment 2: Torrington contends that SKF Germany and SKF Sweden did
not provide adequate information to support their claims for a CEP
offset and requests that the Department deny this adjustment.
Torrington asserts that respondents' explanation of differences in
selling functions between the CEP level of trade and the two HM levels
do not support an offset because an examination of these selling
functions reveals that they are either duplicative, de minimis, equally
applicable to sales to U.S. affiliate and HM sales, or the Department
adjusts for them otherwise. Torrington concludes that the information
respondents provided regarding differences in selling activities is
insufficient for the Department to determine whether respondents' CEP
is less remote than the level of trade of HM OEM sales.
SKF Germany and SKF Sweden assert that the Department determined
correctly that they are entitled to a CEP offset based on differences
in selling activities and functions between the HM levels of trade and
the CEP level of trade. Respondents contend that they substantiated
their CEP-offset claims fully in submissions to the Department,
including the differences in selling functions between HM levels of
trade and the CEP level of trade. SKF Germany contends further that
these claimed differences are ``identical in all material respects'' to
the information the Department verified in the 1994/95 reviews. SKF
Sweden notes that during the current segment of these proceedings the
Department verified the information it provided concerning selling
activities and functions for each level of trade. Respondents assert
that the preliminary results are in accordance with section
773(a)(7)(B) of the Tariff Act and entirely supported by the record. On
this basis, respondents request that the Department reject Torrington's
arguments and continue to grant the CEP offset in the final results.
Department's Position: We disagree with Torrington and determine
that respondents provided adequate factual information to support their
claims that the HM levels of trade are in fact more advanced than the
CEP level of trade. It appears that Torrington may have misinterpreted
the data presented in respondents' submissions. We conducted a thorough
analysis of the information SKF Sweden and SKF Germany submitted on the
record and determined that after deducting respondents' expenses from
CEP pursuant to section 772(d) there exists adequate factual
information to conclude that fewer selling functions are associated
with the CEP than are performed on sales at their HM levels of trade.
Thus, for both respondents, we considered the CEP level of trade to be
different from either HM level of trade and a less advanced stage of
distribution. See Memorandum to Laurie Parkhill, Level of Trade, March
24, 1997, in Import Administration's Central Records Unit (Room B-099
of the main Commerce building (hereafter, B-099)).
For the final results, because we could neither match the CEP level
of trade to sales at the same level of trade in the HM nor determine a
level-of-trade adjustment based on these respondents' HM sales, to the
extent possible we determined NV at the same level of trade as the U.S.
sale to the unaffiliated customer and made a CEP offset in accordance
with section 773(a)(7)(B) of the Tariff Act (see AFBs VI at 2105).
Comment 3: Torrington claims that the Department's pattern-of-
prices analysis does not support a downward level-of-trade adjustment
to NV for differences between SKF France's EP sales matched to HM sales
at the distributor level of trade.
SKF France disagrees with Torrington, arguing that the Department's
adjustment methodology is correct. SKF France asserts that a clerical
error in the Department's analysis memorandum, which reverses the
relative price levels of the two HM levels, misled Torrington into
thinking that the downward adjustment is inappropriate. SKF France
cites to the results of the Department's level-of-trade adjustment
calculations to support that a downward adjustment to NV is appropriate
when matching its EP sales to HM sales at the distributor level.
Department's Position: We disagree with Torrington. We did not err
in making a downward level-of-trade adjustment for SKF France's EP
sales which we matched to HM distributor sales. Torrington's
contentions are based upon a typographical error in the SKF
[[Page 54058]]
France preliminary results analysis memorandum which reversed the price
levels of the HM levels of trade. Therefore, respondent's downward
level-of-trade adjustment was proper.
Comment 4: NTN Japan and NTN Germany state that the Department
should make a price-based level-of-trade adjustment for CEP sales made
at a different level of trade in the United States than the comparison
home market sales. Respondents suggest that using the transaction to
the first unaffiliated U.S. customer prior to the deduction of expenses
pursuant to section 772(d) would be consistent with the use of those
levels of trade in matching U.S. CEP and HM sales and with evidence
demonstrating that different selling activities are performed at each
level of trade that affect price comparability.
Torrington argues that the Department's requirement that price
differences be due to HM level-of-trade differences before price-based
adjustments are allowed is logical since many factors, not all of which
pertain to level of trade, determine price.
Department's Position: We disagree with NTN Japan and NTN Germany.
The statutory definition of ``constructed export price'' contained at
section 772(d) of the Tariff Act indicates clearly that we are to base
CEP on the U.S. resale price, as adjusted for U.S. selling expenses and
profit. As such, the CEP reflects a price exclusive of all selling
expenses and profit associated with economic activities occurring in
the United States. See SAA at 823. These adjustments are necessary in
order to arrive at, as the term CEP makes clear, a ``constructed'' EP.
The adjustments we make to the starting price, specifically those made
pursuant to section 772(d) of the Tariff Act (``Additional Adjustments
for Constructed Export Price''), normally change the level of trade.
Accordingly, we must determine the level of trade of CEP sales
exclusive of the expenses (and associated selling functions) that we
deduct pursuant to this sub-section. With regard to respondents'
characterization of our matching methodology, we generally matched CEP
sales to HM sales on the basis of the level of trade of the resale by
the U.S. affiliate only where all HM levels of trade were more remote
than the level of the CEP. The purpose of this methodology is to use
the CEP offset to deduct indirect selling expenses from NV similar to
those deducted from the U.S. starting price. For example, we were able
to determine the CEP offset ``cap'' for HM OEM sales on the basis of
indirect selling expenses incurred on OEM sales in the United States.
Therefore, because no HM levels of trade reported by NTN Germany or NTN
Japan were equivalent to the level of trade of these respondents' CEP
sales, we were unable to make a level-of-trade adjustment for such
sales.
Comment 5: Torrington argues that the record does not support NSK/
RHP's claim for a CEP offset. Torrington contends that the Department
improperly found that several selling functions associated with the CEP
level of trade are substantially different from the sales functions
associated with the comparison sales in the HM. For instance,
Torrington states that the Department claimed erroneously that, at the
CEP level of trade, little or no advertising was involved. Torrington
states further that the Department determined incorrectly that certain
selling functions (e.g., technical support and strategic and economic
planning) did not apply to the CEP level of trade. With respect to
repacking expenses, Torrington contends that this function is not
involved in the selling process and therefore should not justify a CEP
offset. Citing Certain Corrosion Resistant Carbon Steel Flat Products,
62 FR 18,452 (April 15, 1997), Torrington argues that differences in
selling functions, even substantial ones, may not be enough to warrant
finding different levels of trade. Torrington suggests that the
Department continue to compare prices within the broad comparison
patterns but reject NSK/RHP's claim for a CEP offset based on these
reasons.
NSK/RHP asserts that Torrington compares incorrectly the activities
in which an international distributor engages when selling to a U.S.
national distributor with activities of a U.K. national distributor
selling to customers. Moreover, NSK/RHP contends that, after the
initial error, Torrington then compares a category of expense (e.g.,
advertising) at different points in the chain of distribution and
suggests that the same function is performed by each national
distributor. NSK/RHP contends further that, for CEP sales, it did not
report advertising for its end-user customers because the Department
deducts expenses for the function of advertising to unaffiliated U.S.
customers in the calculation of CEP pursuant to section 772(d) of the
Tariff Act. NSK/RHP notes that it agrees with Torrington that repacking
is not a selling expense within the scope of section 772(d) of the
statute. NSK/RHP therefore suggests that the Department remove
repacking from the CEP-selling-function variable in the final results.
NSK/RHP asserts that the Department should follow the statute as
written and grant a level-of-trade adjustment for CEP matches or, at a
minimum, grant a level-of-trade adjustment for CEP sales matched to HM
aftermarket sales.
Department's Position: We disagree with Torrington. Torrington
compares erroneously activities of an international distributor when
selling to a U.S. affiliate with activities of a U.K. national
distributor selling to customers. As we stated in our March 24, 1997
Memorandum (Id.), we could not determine whether these sales (i.e.,
sales from the international distributor to the U.K. national
distributor) were made at arm's length. Therefore, we did not use these
sales to determine NV or as the basis of any level-of-trade
adjustments. As a result of this determination, we compared sales made
by the U.K. national distributor to customers in the HM with sales made
at the CEP level of trade (i.e., sales made by the international
distributor to the U.S. affiliate). See NSK/RHP's February 6, 1997,
supplemental questionnaire response (Exhibit S-2). Based on our
analysis, we found that, for CEP sales, NSK/RHP did not engage in any
of these selling activities (e.g., freight and delivery arrangement,
inventory maintenance, repacking, pre-sale warehousing and sales
calls). However, we found that, at the HM levels of trade, NSK/RHP
participated in these activities and therefore the HM levels of trade
were substantially dissimilar from the CEP level of trade. Accordingly,
as we explain in our level-of-trade memorandum, we considered the HM
sales to be at different levels of trade and at a more advanced stage
of distribution than CEP.
We agree with Torrington that differences in selling functions may
not be enough in themselves to warrant finding different levels of
trade. However, consistent with our practice in AFB VI, we consider the
class of customer as one factor, along with selling functions and the
selling expenses associated with these functions, in determining the
stage of marketing, i.e., the level of trade associated with the sales
in question. See AFB VI at 2107.
With respect to expenses associated with repacking, please see our
discussion in comment 1 of section 7 of this notice for an explanation
of our treatment of repacking expenses.
Comment 6: Torrington argues, with respect to Barden's HM sales to
government users, that the Department should not have determined that
government users are at a different level of trade than OEM sales.
Torrington asserts that there is no evidence on the record to support
Barden's claim that
[[Page 54059]]
government sales should be treated separately. In addition, Torrington
contends that Barden's assertion that AM sales to airlines and repair
contractors should be treated separately is also unsupported.
Torrington states that Barden has not submitted adequate evidence to
support its claim that AM sales should be treated separately from
distributor sales. Moreover, Torrington claims that Barden's narrative
explanations for certain selling functions (e.g., computer, legal and
accounting, personnel training, advertising, and strategic and economic
planning) do not support the level-of-trade chart found in Exhibit A-4
of Barden's July 23, 1996, Section A Response. Therefore, according to
Torrington, the Department should treat AM sales as being at the same
level as distributor sales.
Barden states that it agrees with Torrington that the Department's
redesignation of its HM level-of-trade categories was in error. Barden
contends that neither the record nor commercial reality supports the
inclusion of these two very distinct and separate channels of
distribution (airline and repair AM contractors and government
customers) under one level of trade. Therefore, according to Barden,
the Department should use the customer category designations Barden
submitted originally in its responses for these final results. Barden
also contends that the Department should designate sales to its EP
customers (e.g., network distribution customers) as Barden originally
identified on the record. Barden asserts that the Department unlawfully
applied a facts-available level-of-trade adjustment to these sales
because Barden allegedly failed to include them in their proper
channels of distribution. Barden contends that it disclosed the types
of selling activities and functions it incurred on its EP sales fully
in its response to the Department's questionnaire.
Department's Position: We disagree with Torrington and Barden.
While we acknowledge that Barden did not provide sufficient evidence to
warrant a distinction for government sales, we disagree with Torrington
that we should treat these sales as OEM sales. Torrington has provided
no evidence nor any references to information on the record that
supports its conclusion. Moreover, there is no evidence on the record
that would suggest that government sales are similar to OEM sales. In
addition, with respect to Barden's assertion that government sales
differ substantially from any of the other level-of-trade categories,
we determined that Barden's narrative explanation does not provide
sufficient information to support its conclusion. Therefore, we have
not changed our analysis from that in our preliminary results with
respect to this issue.
We also disagree with Torrington's contention that we should treat
AM sales as being at the same level as distributor sales. As we
explained in our March 24, 1997 Memorandum (Id.), we found that the
selling activities for level two (e.g., distributors network) differed
from those of level three (e.g., airlines repair contractors (AM sales)
and government customers) in after-sales services and warranties,
advertising, administrative support and personnel training. While we
agree with Torrington's assertion that there are certain discrepancies
between Barden's narrative explanations and its level-of-trade chart,
we have determined that such inconsistencies were not substantial.
Thus, we have not made any changes with respect to this issue.
Finally, we have reexamined our facts-available determination with
respect to Barden's EP sales. Upon further consideration, we determined
that Barden did provide sufficient information concerning the nature of
its customers and the selling functions it performed with respect to
these sales. Therefore, we have accepted Barden's information and have
not applied facts available to these sales for the final results.
Comment 7: Torrington claims that NMB/Pelmec failed to demonstrate
entitlement to either a level-of-trade adjustment or a CEP offset to
its HM prices and that the Department should not make either adjustment
to NV in the final results.
Torrington notes that, in the preliminary results for NMB/Pelmec,
the Department adjusted NV downward in the amount of the CEP offset.
Torrington also notes that NMB admits that its distributor sales in the
HM are at the same level of trade as the CEP level of trade in the
United States. Torrington concludes that, because NMB/Pelmec reported
no distributor sales in the HM during the POR, NMB is entitled to an
adjustment in the form of a CEP offset only if it demonstrated that OEM
sales in the HM were at a more advanced level of trade than the CEP
level of trade. Torrington argues that this is not the case. It notes
that NMB/Pelmec admits that selling expenses, such as after-sales
service/warranties, technical advice and engineering services, and
direct advertising, were all negligible or non-existent and, therefore,
NMB/Pelmec omitted them from the computer-database fields. Torrington
continues that, because these expenses were not reported, NMB/Pelmec
made no visits to customers for these functions. Therefore, Torrington
argues, these functions do not support NMB/Pelmec's claim for a CEP
offset. Torrington notes further that indirect expenses with regard to
solicitation of customer orders were also admittedly negligible. Thus,
Torrington argues, there is no other information on the record to
support NMB/Pelmec's claim that this function is more active in the
case of sales to OEM customers.
Finally, Torrington alleges that NMB/Pelmec reports substantial
activity at the CEP level of trade, which, at a minimum, undermines
NMB/Pelmec's claim that a downward adjustment to NV is needed when
comparison sales are to OEMs. Torrington points to a description in
NMB/Pelmec's financial report of its U.S. affiliate as evidence.
NMB/Pelmec claims that Torrington's characterizations of its sales
are incorrect. It argues that the Department should find that NMB/
Pelmec is entitled to a level-of-trade adjustment and, at a minimum, a
CEP offset whenever CEP sales are not compared to HM distributor sales.
NMB/Pelmec contends that Torrington's claim that it did not report any
distributor sales in the HM during the period is incorrect. NMB/Pelmec
notes that the Department's preliminary findings that NMB/Pelmec did
not report such sales were also incorrect. NMB/Pelmec points out that
the record in this administrative review demonstrates clearly that it
made substantial sales to distributors. Thus, NMB/Pelmec argues that
the Department should have compared CEP sales to HM distributor sales.
NMB/Pelmec asks that the Department correct its findings in the final
results.
In addition, NMB/Pelmec contests Torrington's argument that NMB/
Pelmec has not demonstrated that its HM OEM sales were at a more
advanced level than the CEP level of trade. NMB/Pelmec replies that it
provided detailed descriptions of selling functions for HM OEMs in its
initial and supplemental responses, explaining that most of these
functions were not performed for distributors, in addition to providing
detailed sample support documentation. NMB/Pelmec states that, during
the Department's verification of the 1994/95 administrative review, the
Department verified NMB/Pelmec's claim that it performed more advanced
selling functions for OEMs. NMB/Pelmec alleges that Torrington's claim
appears to be based on confusion regarding the difference between
direct and indirect selling expenses and on its failure to review the
correction regarding selling
[[Page 54060]]
functions NMB/Pelmec made in its supplemental response. NMB/Pelmec
contends that Torrington ignored the supplemental corrections and based
its claims on obvious errors.
Finally, NMB/Pelmec argues that Torrington failed to support its
claim that NMB/Pelmec reported substantial activity at the CEP level of
trade. It notes that the activities to which Torrington refers in NMB/
Pelmec's consolidated financial statement were between NMB/Pelmec's
parent company and its U.S. affiliate, not between NMB/Pelmec and its
U.S. affiliate. Thus, NMB/Pelmec concludes, these activities do not
support Torrington's claim. NMB/Pelmec also notes that the record shows
that its parent company provides the same types of activities to its
other subsidiaries and affiliates.
Department's Position: NMB/Pelmec reported distributor sales for
the POR. We stated incorrectly in our analysis memorandum for NMB/
Pelmec that it only made sales to OEM/trading companies during the
period. This statement was a result of our mis-coding the customer
categories NMB/Pelmec reported when applying our methodology for
identifying the proper level of trade. We have now made the appropriate
changes to calculate NMB/Pelmec's margins properly for these final
results.
We agree with NMB/Pelmec that it is entitled to a level-of-trade
adjustment whenever CEP sales are not compared to HM distributor sales.
We re-examined NMB/Pelmec's response and determined that NMB/Pelmec's
HM distributor sales are equivalent to the CEP level of trade. The
evidence on the record suggests, contrary to Torrington's assertion,
that NMB/Pelmec performs comparatively few selling activities either
for sales to its U.S. affiliate or for HM sales to distributors.
Furthermore, we determined that NMB/Pelmec's HM sales to OEMs are made
at the same level of trade as its HM sales to trading companies but
that these sales are made at a different level of trade than its HM
distributor sales. Accordingly, we attempted to match CEP sales to HM
distributor sales first and we matched CEP sales to OEM/trading company
sales when no HM distributor sales existed. When we matched CEP sales
to HM distributor sales, we made no level-of-trade adjustment or CEP
offset because the sales are made at the same level of trade. When we
matched CEP sales to HM OEM/trading company sales, we made a level-of-
trade adjustment because we found that there was a pattern of
consistent price differences between the two HM levels of trade. See
NMB/Pelmec Final Results Analysis Memorandum dated September 22, 1997.
Finally, because we made a level-of-trade adjustment for
comparisons involving HM OEM/trading company sales, we did not make a
CEP offset for any comparisons of NMB/Pelmec's sales.
Comment 8: Torrington contends that NTN failed to provide record
evidence demonstrating its entitlement to either a level-of-trade
adjustment to NV for CEP sales or a CEP offset for those sales. With
respect to NTN's identification of comparative selling activities,
Torrington argues that, primarily, NTN identifies selling activities
associated with CEP-resale transactions and states that NTN failed to
provide a complete and accurate list of selling activities. In
addition, Torrington contends that NTN did not provide a comprehensive
description of its distribution and selling processes. Torrington also
maintains that the quantification information that NTN provided in its
response lacks the necessary detail to support a level-of-trade
adjustment. Torrington concludes that, for the purpose of the final
results, the Department should not grant NTN either a level-of-trade
adjustment or a CEP offset to NV.
NTN contends that Torrington misreads the Department's questions
and misinterprets NTN's data. NTN argues that, in its response, it
identified distinct selling functions related to the different LOTs in
the United States for both EP and CEP sales. NTN maintains that it
provided responses to the Department's requests for information related
to the selling functions and sales processes performed for, and the
services offered to, each class of customer in both the United States
and HM. NTN argues that it based its responses to the Department's
level-of-trade and channel-of-distribution inquiries on its responses
in the 1994/95 administrative reviews and states that, in those
reviews, the Department accepted NTN Japan's responses.
Department's Position: We disagree with Torrington. NTN Japan
provided adequate factual information to support its claims that its HM
levels of trade are in fact more remote than the CEP level of trade. We
conducted a thorough analysis of the information NTN Japan submitted on
the record and determined that after deducting NTN Japan's expenses
from CEP pursuant to section 772(d) there exists adequate factual
information to conclude that fewer selling functions are associated
with the CEP than are performed on sales at its HM levels of trade.
Thus, for NTN Japan we considered the CEP level of trade different from
all HM levels of trade and at a less-advanced stage of distribution.
For the final results, because we could neither match the CEP level
of trade to sales at the same level of trade in the HM nor determine a
level-of-trade adjustment based on NTN's HM sales, to the extent
possible we determined NV at the same level of trade as the U.S. sale
to the unaffiliated customer and made a CEP offset in accordance with
section 773(a)(7)(B) of the Tariff Act. See our position in response to
comment 4, above.
Comment 9: Torrington contends that, with respect to the customers
to which NTN made EP sales, the Department should not make a level-of-
trade adjustment to NV based on the record evidence developed in the
instant reviews. Torrington asserts that the record contains little
information pertaining to such sales. In addition, Torrington argues
that the information that is on the record is inadequate to warrant a
level-of-trade adjustment.
NTN argues that it has not changed the facts related to these sales
from those of the 1994/95 administrative reviews and states that, in
those reviews, the Department made a level-of-trade adjustment for such
sales. NTN also points out that the Department verified, in detail,
NTN's response as it relates to its claimed levels of trade and found
no discrepancies. NTN asserts that, because the Department made no
further requests for information, the Department has, in essence,
accepted NTN's responses as sufficient to warrant a level-of-trade
adjustment with respect to EP sales it made to both customers.
Department Position: We disagree with Torrington. NTN Japan
provided adequate factual information to support its claims with regard
to the differences and similarities of its HM levels of trade and the
EP level of trade. Therefore, where possible, we matched EP sales to
sales at the same level of trade in the HM and made no level-of-trade
adjustment. Where we matched EP sales to HM sales made at a different
level of trade, in accordance with section 773(a)(7)(A) of the Tariff
Act, we first determined whether there was a pattern of consistent
price differences between these different levels of trade in the HM
and, if so, made a level-of-trade adjustment accordingly.
5. Cost of Production and Constructed Value
5.A. Cost-Test Methodology
Comment 1: INA claims that the Department used CV for NV rather
than seeking to make a family-match comparison where identical HM
[[Page 54061]]
matches existed but were disregarded because they were below cost. INA
contends that this approach is in error because it gives priority to
the use of CV over price-based NV. Citing section 773(a)(4) of the
Tariff Act, INA contends that the Department is to use CV only when it
determines that the NV of the merchandise cannot be determined by
comparison with sales of the foreign like product. INA asserts further
that section 773(b)(1) reinforces this conclusion by stating that, when
below-cost sales are disregarded, ``normal value shall be based on the
remaining sales of the foreign like product in the ordinary course of
trade. If no sales made in the ordinary course of trade remain, the NV
shall be based on the constructed value of the merchandise.'' INA
contends that the Department has defined potential ``foreign like
products'' in terms of bearing families. INA concludes that, where
there are remaining HM sales in the same family, the Department should
base NV on those sales rather than on CV.
INA notes that, in AFBs VI, the Department defended its methodology
on the ground that it makes the ``foreign like product'' determination
under the criteria of section 771(16) only once and that the result of
the cost test is not a criterion in determining the foreign like
product under section 771(16). INA contends that the Department's
automatic reliance on CV when all identical matches are disregarded as
below cost is inconsistent with its approach with regard to
contemporaneity because the Department applies the contemporaneity rule
as a criterion for comparability even though that rule is not included
in the section 771(16) definition.
Torrington argues that the Department should follow its decision in
AFBs VI and continue to resort to CV rather than HM family sales when
all sales of identical bearings are disregarded pursuant to the cost
test.
Department's Position: We disagree with INA. Section 771(16) of the
Tariff Act directs us to select the foreign like product ``in the
first'' of several categories: identical in physical characteristics,
similar in physical characteristics and commercial value, or of the
same general class or kind that can be reasonably compared. The
Department interprets the reference in section 773(b)(1) of the Tariff
Act that it base NV ``on the remaining sales of the foreign like
product in the ordinary course of trade'' to mean the selected foreign
like product, not a succession of foreign like products. Therefore, we
have resorted directly to CV where we have disregarded all
contemporaneous identical HM sales as below cost instead of determining
whether contemporaneous sales of a less similar model would survive the
cost test and remain available as comparators. We explained this
practice in detail in AFBs V at 66490-91 and AFBs VI at 2111-2112.
We disagree with INA's suggestion that our practice of using CV
when all identical matches are disregarded is inconsistent with our
policy with regard to choosing contemporaneous matches. We conduct a
search for sales of the best model for comparison within a
contemporaneity window pursuant to section 773(a)(1)(A) of the statute,
which directs that ``[t]he NV of the subject merchandise shall be the
price described in subparagraph (B), at a time reasonably corresponding
to the time of the sale used to determine the export price or
constructed export price'' (emphasis added). We have a longstanding
practice of considering sales within 90 days before and 60 days after
the month of the U.S. sale to be acceptable as potential comparators
(see Certain Small Business Telephone Systems and Subassemblies Thereof
from Korea: Final Results of Antidumping Administrative Review, 57 FR
8300 (March 9, 1993); Certain Circular Welded Carbon Steel Pipes and
Tubes from Thailand: Final Results of Antidumping Administrative
Review, 61 FR 1332 (January 19, 1996); AFBs III at 39735). Thus, our
determination of which merchandise will be considered the foreign like
product is based on (1) the product categories set forth in 771(16) and
(2) the ability to review contemporaneous sales as contemplated in
773(a)(1)(A).
5.B. Research and Development
Comment: Torrington notes that the SKF Group companies, i.e., SKF
France, SKF Germany, SKF Italy, and SKF Sweden, allocated the general
research and development (R&D) expenses incurred by their European
Research Center (ERC) based on proportionate share holdings in the
facility. Torrington contends that, if the Department accepts this
methodology, the Department must account for expenses attributable to
the share holding in the ERC by the SKF Group's parent company, AB SKF.
Respondents argue that their allocation methodology is proper and
consistent with determinations in prior segments of this proceeding.
Regarding Torrington's allegation of under-reporting, respondents
explain that their parent company holds shares in the ERC on behalf of
SKF Sweden and that SKF Sweden has reported the general R&D expenses
attributable to these shares.
Department's Position: We agree with respondents. In section A of
SKF Sweden's questionnaire response, respondent identifies the shares
to which Torrington refers as SKF Sweden's share in the ERC. SKF Sweden
reported the R&D expenses attributable to these shares as part of its
general and administrative expenses. Thus, based on record evidence we
are satisfied that respondents allocated the ERC expenses properly.
Accordingly, for the final results, we did not adjust the R&D expenses
reported by these respondents.
5.C. Profit for Constructed Value
Comment 1: NSK, INA, FAG Germany, FAG Italy, SNR France, and Barden
argue that the methodology the Department used in the calculation of CV
profit is unlawful. According to respondents, section 773(e)(2) of the
Tariff Act authorizes the Department to make this calculation using one
of four methods, depending on the information on the record.
Respondents contend that, while in the preliminary results the
Department calculated a CV-profit ratio for each level of trade within
each class or kind of product sold in the HM in the ordinary course of
trade, this method is not authorized by section 773(e)(2)(A) of the
Tariff Act. Citing to this provision, respondents claim that the profit
calculation must be equivalent to the sum of profits ``in connection
with the production and sale of a foreign like product.'' Respondents
argue that ``foreign like product'' is a statutorily defined term of
art equivalent to the first of three enumerated categories of
merchandise as defined by section 771(16) of the Tariff Act and that
these three categories are narrower than ``class or kind''.
FAG Germany, FAG Italy and SNR France disagree with the
Department's assertion that the use of the phrase ``a foreign like
product'' rather than ``the foreign like product'' allows it to
aggregate total profits across each class or kind of merchandise and
that the meaning of ``foreign like product'' remains the same in both
cases, as defined in the statute regardless of the preceding article,
citing the Notice of Proposed Rulemaking, 61 FR at 7335. Thus,
respondents argue, although Congress knew the meaning of ``foreign like
product,'' it adopted this term intentionally in place of ``class or
kind.'' Respondents also contend that, in accordance with section
771(16) of the Tariff Act, the foreign like product must be produced in
the same country by the same person, disallowing the
[[Page 54062]]
Department's method of including sales of merchandise they sold that
other manufacturers produced. Respondents contend further that the SAA
at 840 clears any ambiguity regarding the term ``foreign like product''
in section 773(e)(2)(A) of the Tariff Act by recommending the
alternative methods of 773(e)(2)(B) in instances where 773(e)(2)(A)
cannot be used either because there are no HM sales of the foreign like
product or because all such sales are at below-cost prices.
Torrington counters that the Department need not change its policy
with regard to the CV-profit calculation, claiming that ``foreign like
product'' refers to the entire class of merchandise that meets the
definitions of section 771(16) and not just the identical part number
or family. It notes that such a similar reference is made to foreign
like product with respect to statutory passages concerning the
viability test at section 773(a)(1)(C). Torrington adds that the
interpretation of ``foreign like product'' as a family would
necessarily create a gap in the statutory scheme. As an example,
petitioner describes a situation where, if family-specific profit could
not be calculated, the use of profits on the ``same general category''
would never be considered because ``foreign like product'' is too
narrow to constitute ``the same general category'' as directed in
section 773(e)(2)(B) of the Tariff Act. Torrington continues by arguing
that the use of the indefinite article ``a'' rather than the definite
article ``the'' in section 773(e)(2)(A) of the Tariff Act is
significant and is meant to refer to ``any'' foreign like product, as
in more than one foreign like product. In addition, Torrington
disagrees with respondents' argument that Congress replaced the term
``class or kind of merchandise'' deliberately in order to restrict the
calculation of profit only to the foreign like product corresponding to
a U.S. sale. Torrington contends that the removal of the term was
simply to conform the terminology of the U.S. antidumping law to the
international Antidumping Code. Finally, Torrington contends that the
respondents' suggested methodology would resort to the application of
alternative methodologies too soon in the hierarchy of preferable
methods. Petitioner argues that section 773(e)(2)(B) of the Tariff Act
outlines alternative profit methodologies for use only when the method
described in section 773(e)(2)(A) of the Tariff Act cannot be used, as
in instances where there are no HM sales of the foreign like product or
all such sales are below cost.
Department's Position: We disagree with the respondents. As we
stated in AFBs VI, respondents' definition of the term ``foreign like
product'' is overly narrow with respect to its use in the CV-profit
provisions. In applying the ``preferred'' method for calculating profit
(as well as SG&A) under section 773(e)(2)(A) of the Tariff Act, the use
of aggregate data that encompasses all foreign like products under
consideration for NV results in a practical measure of profit that we
can apply consistently in each case. By contrast, an interpretation of
section 773(e)(2)(A) of the Tariff Act that would result in a method
based on varied groupings of foreign like products, each defined by a
minimum set of matching criteria shared with a particular model of the
subject merchandise, would add an additional layer of complexity and
uncertainty to antidumping proceedings without generating more accurate
results. It would also make the statutorily preferred CV-profit
methodology inapplicable to most cases involving CV. We discussed in
the preamble to our final regulations that, although we recognize that
there are other methods available for computing profit for CV under
section 773(e)(2)(A) of the Tariff Act, we continue to believe that our
method represents a reasonable interpretation of the statute. See Final
Rule, 62 FR at 27359. We also note that this approach is consistent
with our method of computing SG&A and profit under the pre-URAA version
of the statute, and, despite the fact that the URAA revised certain
aspects of the SG&A and profit calculations, we do not believe that
Congress intended to change this particular aspect of our practice.
Therefore, we have not changed our methodology for the final results.
See also Notice of Proposed Rulemaking, 61 FR at 7335 (discussing the
Department's practice for calculating profit (and SG&A) using aggregate
figures).
Comment 2: FAG Italy, FAG Germany, SNR France, and Barden contend
that the Department's CV-profit methodology of calculating profit on an
aggregate basis for all foreign like products is most similar to the
first alternative CV-profit methodology described in 773(e)(2)(B)(i) of
the Tariff Act because it aggregates profits encompassing sales from
multiple foreign like products. However, respondents contend, contrary
to the Department's methodology, section 773(e)(2)(B)(i) does not limit
the CV-profit calculation to sales in the ordinary course of trade.
Citing the SAA at 841, respondents argue that the absence of any
language in section 773(e)(2)(B)(i) of the Tariff Act referring to
sales in the ordinary course of trade and the presence of this precise
limitation in descriptions of the other profit methodologies
necessitates the inclusion of sales outside the ordinary course of
trade in methodologies using all sales of the same class or kind.
SKF argues that below-cost sales should be included in the
calculation of CV profit when grouping products of the same general
category (citing section 773(e)(2)(B)(i) of the Tariff Act). Because
the Department has chosen to calculate profit on a class-or-kind basis
rather than for each family (foreign like product), these respondents
contend that the Department is without authority to exclude sales
outside the ordinary course of trade such as below-cost sales.
SKF argues that, if the Department continues to exclude below-cost
sales from the calculation of total profits for each class or kind of
merchandise, it should include the COP for below-cost sales when
calculating the profit ratio for each class or kind of merchandise.
Before dividing total profits by the total COP of all sales producing
those profits, respondents argue that the Department should add the COP
for below-cost sales back into the total costs of production for each
respective group of sales. Respondents argue that this would allow the
Department to determine the profit rate per sale more accurately.
Torrington asserts that respondents' arguments with respect to the
inclusion of below-cost sales in the calculation of CV profit under
section 773(e)(2)(B) of the Tariff Act is inconsistent logically with
their argument concerning section 773(e)(2)(A) of the Tariff Act.
Torrington contends that under respondents' methodology, before
calculating an overall aggregate profit under section 773(e)(2)(B) of
the Tariff Act, the Department would first have to test all sales of
identical and similar models to determine whether any sales were made
in the ``ordinary course of trade.'' Torrington contends further that
below-cost sales would first be excluded under section 773(e)(2)(A)
before resorting to aggregate profit data under section 773(e)(2)(B).
Torrington argues that below-cost sales must be excluded for
purposes of calculating CV profit and should not be included in the
average-profit calculation as so-called zero-profit sales. Citing
section 771(15) of the Tariff Act and the SAA, Torrington contends that
inclusion of sales outside the ``ordinary course'' are not a proper
basis for determining profit under section 773(e)(2)(A) of the Tariff
Act. Torrington argues that the SAA also establishes that ``only''
ordinary-course-of-trade sales will be the basis for the profit
calculation and, therefore, the
[[Page 54063]]
Department should not include the full costs of sales at a loss in the
denominator of the profit-ratio calculation as this would make these
part of the profit calculation.
Department's Position: We disagree with respondents that our CV-
profit methodology is most similar to the first alternative CV-profit
methodology described in 773(e)(2)(B)(i) of the Tariff Act based on our
interpretation of ``foreign like product.'' We agree with Torrington
that we should not include sales that failed the below-cost test in the
calculation of profit for CV because these sales fall outside the
ordinary course of trade. As we stated in the preliminary results, we
have calculated CV profit using the profit methodology as stated in
section 773(e)(2)(A) of the Tariff Act. This provision requires that we
base profit on sales made in the ordinary course of trade which, in
turn, do not include sales that we disregarded as a result of the
below-cost test. See section 771(15) of the Tariff Act. Furthermore, we
do not believe that we should retain the full costs of disregarded
sales while setting those sales' profits to zero. The use of partial
information from the sales would distort the profit rate for sales in
the ordinary course of trade and frustrate the intent of the statute.
Comment 3: NSK and NSK/RHP argue that the Department erred when it
calculated CV profit based upon the HM database. Respondents contend
that the HM database consists of sample-week sales and is not
representative of its HM profit experiences with respect to the class
or kind of merchandise. NSK and NSK/RHP maintain that the SAA intended
the Department to use Financial Statement profit when determining CV
profit and that the Department must apply the preferred profit
methodology at the model-specific or family-specific level or it must
resort to one of the alternative profit methodologies.
Torrington rebuts that respondents offer no evidentiary or rational
basis for concluding that the HM database is not representative of the
profit experiences in the HM when sample week sales are reported.
Department's Position: We disagree with NSK and NSK/RHP. We
rejected this argument in AFBs VI, stating that HM sales and cost data
provided by respondents on a sampled basis does not render such data
inappropriate for purposes of calculating CV profit. Pursuant to the
statutory authority provided at section 777A of the Tariff Act, we
routinely use data in our analysis that has been reported on a sampled
basis. Thus, the statute does not explicitly provide for such an
automatic elimination of these profit methodologies in such cases. See
our response to Comment 1 of section 6.C of AFBs VI, 62 FR at 2112, for
a more comprehensive discussion on this topic.
Comment 4: SNR France argues that the CV profit the Department
calculated for CRBs is based on U.S. sales rather than on HM sales.
Moreover, SNR France asserts that this calculation is unlawful because
it is not based on the actual profit that SNR France earns on HM sales
of the foreign like product made in the ordinary course of trade.
Specifically, SNR France contends that the Department based its profit
calculation on costs taken from SNR France's U.S. CV database which,
SNR France argues, is a mere microcosm when compared to its total HM
sales. SNR France suggests that the Department should instead calculate
a profit ratio based on its financial statements.
Torrington points to the fact that the Department did not request
COP data from SNR France for CRBs. Torrington states that, while SNR
France suggests that financial-statement data would be a more
appropriate proxy for the entire profit calculation, Torrington
contends that SNR France failed to propose appropriate ratios based on
the financial statements. Moreover, Torrington asserts that this data
would necessarily include non-scope products.
Department's Position: We disagree with SNR-France. We must balance
the need to calculate an accurate margin with the need to reduce the
burden on respondents. Because we did not request complete COP data for
SNR-France's sales of CRBs, we were unable to calculate CV profit under
the ``preferred methodology'' of section 773(e)(2)(A). Instead, we
calculated CV profit based on the following methodology.
We subtracted the home market COP from the home market sales value.
Home market COP consists of three costs: COM, interest expenses, and
G&A expenses. First, we aggregated the expenses reported in the CV
dataset. Then, we calculated the ratio of variable COM to total COM
based on data contained in the CV dataset. We applied this ratio to the
variable COM reported in the home market sales dataset. Thus, we
created a reasonable proxy for home market total COM. Likewise, we
calculated a ratio of G&A and interest expenses to the total COM
reported in the CV dataset. We multiplied each of these ratios by the
home market total COM. Finally, we summed these amounts to arrive at
total home market COP.
This methodology results in a reasonable estimation of COP, since
the major element in COP, the variable COM, is an actual amount and the
proxy is limited to fixed costs, G&A, and interest expenses. Thus, this
is a reasonable methodology allowed under section 773(e)(2)(B)(iii).
We agree with Torrington that SNR-France's financial statements
would contain data for non-scope merchandise. Thus, SNR's suggested
methodology would be a proxy as well. The record does not support the
conclusion that SNR-France's financial statements would form a more
appropriate proxy nor has SNR-France established that the Department's
current methodology is distortive. Therefore, we have not changed the
methodology we used in our preliminary results.
Comment 5: NPBS contends that the Department calculated a level-of-
trade-specific profit mistakenly for purposes of calculating CV. NPBS
asserts that profit for CV should not be calculated by level of trade,
particularly when there is no match between HM and U.S. levels of
trade. NPBS argues further that calculating CV profit by level of trade
is contrary to law. Citing section 733(e) of the Tariff Act, NPBS
asserts that the statute says nothing about level of trade in
describing how to calculate CV. NPBS also asserts that the SAA says
nothing about calculating profit for CV on a level-of-trade basis. To
the contrary, citing the SAA at 839-841, NPBS asserts that Congress
intended the Department to calculate profit for CV on a company-wide
basis. NPBS concludes that it would be bad policy to calculate CV
profit by level of trade because it would make dumping calculations
unpredictable.
Torrington requests that the Department reject NPBS's arguments.
Torrington asserts that the lack of explicit instructions in the law
does not prevent the Department from calculating profit for CV on a
level-of-trade basis. In support of this argument, Torrington cites
Mobile Communications Corp. of America v. F.C.C., 77 F.3d 1399, 1404-05
(D.C. Cir. 1996). Torrington concludes that the methodology represents
a reasonable interpretation of the statute's requirements.
Department's Position: We agree with petitioner. Profit for CV
should be calculated on a level-of-trade basis because the level-of-
trade-specific profit calculation recognizes that profit levels may
differ depending on the level of trade. Thus, in the final results we
calculated NPBS's profit for CV on a level-of-trade-specific basis for
each class or kind of merchandise. See our response to Comment 1 of
section 6.C of
[[Page 54064]]
AFBs VI, 62 FR 2081 at 2112, for more information on our methodology
for the calculation of profit for CV.
5.D. Affiliated-Party Inputs.
Comment 1: NSK contends that the Department has no reasonable basis
for requiring the submission of cost information on inputs from
affiliated suppliers and should therefore accept the transfer prices of
such products as NSK reported.
Torrington argues that the Department should reject NSK's argument
for the reasons the Department set forth in detail in AFBs VI.
Department's Position: We disagree with NSK. NSK made an identical
argument in the prior review with respect to this issue, which we
rejected, and NSK offers no new arguments for altering our position.
Pursuant to section 773(f)(2) of the Tariff Act, we generally use the
transfer price of inputs purchased from an affiliated supplier in
determining COP and CV, provided that the transaction occurred at an
arm's-length price. In determining whether a transaction occurred at an
arm's-length price, we generally compare the transfer price between the
affiliated parties to the price of similar merchandise between two
unaffiliated parties. If transactions of similar merchandise between
two unaffiliated parties are not available, we may use the affiliated
supplier's COP for that input as the information available as to what
the amount would have been if the transaction had occurred between
unaffiliated parties. In the case of a transaction between affiliated
persons involving a major input, we use the highest of the transfer
price between the affiliated parties, the market price between
unaffiliated parties, and the affiliated supplier's cost of producing
the major input. See AFBs VI at 2115. Therefore, we have not altered
our methodology for these final results.
Comment 2: NSK argues that the Department should recognize the
unique situation pertaining to a certain affiliated supplier of inputs
and determine that purchases from this supplier were made at arm's-
length prices.
Torrington argues that the situation pertaining to this supplier
does not demonstrate that purchases from the supplier were necessarily
made at arm's-length prices.
Department's Position: We disagree with NSK. NSK made an identical
argument in the prior review with respect to an affiliated supplier,
which we rejected, and offers no new arguments to convince us to alter
our position. See AFBs VI at 2115. There is no evidence on the record
that indicates that purchases from this supplier were necessarily made
at arm's-length prices. Therefore, we have made no change in our
treatment of this supplier for the final results.
Comment 3: NSK argues that the Department should not regard a
certain type of input as a major input because this type of input does
not meet the statutory definition of major inputs.
Torrington argues that NSK does not dispute that this type of input
is an essential component of many types of bearings and that NSK's
reported data demonstrates that this type of input can account for a
significant percentage of the cost of manufacture.
Department's Position: We disagree with NSK. NSK made an identical
argument in the prior review with respect to this type of input, which
we rejected, and offers no new arguments for altering our position. See
AFBs VI at 2116. Therefore, we have made no change in our treatment of
this type of input for the final results.
Comment 4: Nachi contends that the Department should not reject its
reported cost of affiliated-party inputs. Nachi asserts that the
Department misunderstood its characterization of its methodology for
reporting such costs and the underlying reasons for using this
methodology. Nachi explains that its affiliated suppliers were small,
captive producers that lacked the capability to provide product-
specific cost information. Nachi contends that, if the affiliate is
profitable during the POR, the transfer price must necessarily be above
the affiliate's cost of producing the input. By contrast, if an
affiliate had operated at a loss during the POR, Nachi asserts that it
would have reported the COP for the input. Nachi notes that it reported
the transfer price for purchases from all affiliates because all of its
affiliates were profitable during the POR. Nachi also asserts that the
Department accepted this methodology in every prior review in which
Nachi participated.
Torrington argues that the overall profitability of an affiliated
supplier is not determinative as to whether the transfer prices of
particular inputs are above cost or reflect arm's-length prices.
Torrington notes that Nachi did not provide prices of similar inputs it
obtained from unaffiliated suppliers. Torrington further contends that
the Department's preliminary determination to reject Nachi's reported
cost of affiliated-party inputs is in accordance with the precedent the
Department set in AFBs VI at 2115.
Department's Position: We disagree with Nachi. We require costs to
be reported on a product-specific basis. Though Nachi's affiliated
suppliers may have been captive to Nachi during the POR and though
these suppliers may have all been profitable, the fact remains that
some inputs may have been sold at transfer prices which were below the
affiliate's cost of producing the input during the POR. Finally, we
note that each review stands alone and the fact that we accepted
Nachi's methodology in prior reviews is not determinative of which
methodology we use in this review. Because Nachi did not report its
data in such a way that we could determine whether all affiliated-party
inputs were sold at a transfer price which was below the affiliate's
cost of producing the input on a product-specific basis, for these
final results we have used the facts available as described in our
preliminary analysis memorandum for Nachi dated March 28, 1997.
Comment 5: Torrington contends that NMB/Pelmec reported COP and CV
for all models using transfer prices for inputs purchased from
affiliated parties. Torrington asserts that the transfer price of the
input material did not exceed the COP of that material in all cases.
Torrington argues that, in conformance with the policy the Department
enunciated in AFBs VI, the Department should use the higher of the
transfer price, cost, or market value for major inputs NMB/Pelmec
obtained from its affiliated companies.
NMB/Pelmec rebuts that the Department is not strictly required to
use COP in every instance, especially in the case where transfer price
exceeds COP for the vast majority of inputs. Citing the preamble of
Antidumping Duties; Countervailing Duties Final Rule, 62 FR 27296,
27362 (May 19, 1997), NMB/Pelmec contends that the Department has the
discretion to use transfer prices after considering the specific facts
of each case. NMB/Pelmec also notes that, in other comparable aspects
of the antidumping margin calculation, such as the below-cost test for
HM sales, the Department does not automatically exclude all below-cost
prices as long as the vast majority are above cost.
Department's Position: We agree with Torrington that we should have
used COP in cases where COP exceeded transfer price for the value of
affiliated-party major inputs for NMB/Pelmec. We have made this change
for the final results. See our response to comment 1 of section 6.D of
AFBs VI at 2115 for a comprehensive discussion of our practice with
regard to affiliated-party inputs.
[[Page 54065]]
Comment 6: Torrington argues that NTN Japan
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