Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, Singapore, and the United Kingdom; Final Results of Antidumping Duty Administrative Reviews

DEPARTMENT OF COMMERCE

International Trade Administration

[A-427-801, A-428-801, A-475-801, A-588-804, A-559-801, A-412-801]

Antifriction Bearings (Other Than Tapered Roller Bearings) and

Parts Thereof From France, Germany, Italy, Japan, Singapore, 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 July 8, 1996, 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, Singapore, and the United Kingdom. The classes or kinds of

merchandise covered by these orders are ball bearings and parts thereof

(BBs), cylindrical roller bearings and parts thereof (CRBs), and

spherical plain bearings and parts thereof (SPBs). The reviews cover 27

manufacturers/exporters. The period of review (the POR) is May 1, 1994,

through April 30, 1995.

Based on our analysis of the comments received, we have made

changes, including corrections of certain 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: January 15, 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, D.C. 20230; telephone: (202) 482-4733.

France

Andrea Chu (Intertechnique, SNFA, SNR), Hermes Pinilla (Franke

GmbH, Hoesch Rothe Erde, Rollix Defontaine), Matthew Rosenbaum (SKF),

or Kris Campbell.

Germany

Thomas Barlow (Torrington Nadellager), Davina Hashmi (INA), Chip

Hayes (NTN Kugellagerfabrik), Hermes Pinilla (Franke GmbH, Hoesch Rothe

Erde and Rollix Defontaine), Matthew Rosenbaum (SKF), Thomas Schauer

(FAG), Kris Campbell, or Richard Rimlinger.

Italy

Matthew Rosenbaum (SKF), Mark Ross (FAG), Kris Campbell or Richard

Rimlinger.

Japan

J. David Dirstine (Koyo Seiko), Chip Hayes (NTN), Michael Panfeld

(NPBS), Mark Ross (Asahi Seiko), Thomas Schauer (NSK Ltd.), or Richard

Rimlinger.

Singapore

Lyn Johnson (NMB/Pelmec) or Richard Rimlinger.

United Kingdom

Andrea Chu (Hoffman U.K.), Hermes Pinilla (NSK-RHP), Matthew

Rosenbaum (Rose Bearing Co., Ltd.), Thomas Barlow (Timken-UK), or Kris

Campbell.

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 the current regulations, as amended by the interim

regulations published in the Federal Register on May 11, 1995 (60 FR

25130).

Background

On July 8, 1996, 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, Singapore, and the United Kingdom (61 FR 35713). The reviews

cover 27 manufacturers/exporters. The period of review (the POR) is May

1, 1994, through April 30, 1995. We invited parties to comment on our

preliminary results of review. At the request of certain interested

parties, we held public hearings as follows: General Issues, August 16,

1996, Germany, August 20, 1996, and Japan, August 19, 1996. 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

In accordance with section 776 of the Tariff Act, we have

determined that the use of the facts available is appropriate for a

number of firms. 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 sales below cost for the following firms

and classes or kinds of merchandise:

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

Class or kind of

Country Company merchandise

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

France.......................... SKF............... BBs

SNR............... BBs

Germany......................... FAG............... BBs, CRBs, SPBs

INA............... BBs, CRBs

SKF............... BBs, CRBs, SPBs

Italy........................... FAG............... BBs

Japan........................... Asahi Seiko....... BBs

Koyo.............. BBs, CRBs

Nachi............. BBs, CRBs

NSK............... BBs, CRBs

NTN............... BBs, CRBs, SPBs

Singapore....................... NMB/Pelmec........ BBs

United Kingdom.................. NSK-RHP........... BBs, CRBs

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

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.

[[Page 2082]]

Final Results of Reviews

We determine that the following percentage weighted-average margins

exist for the period May 1, 1994, through April 30, 1995:

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

Company BBs CRBs SPBs

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

France

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

Franke GmbH............................ 1 66.42 (3) (3)

Hoesch Rothe Erde...................... (2) (3) (3)

Intertechnique......................... 1.55 (2) (2)

Rollix Defontaine...................... (2) (3) (3)

SKF.................................... 17.23 (2) 42.79

SNFA................................... 66.42 18.37 (3)

SNR.................................... 2.37 2.50 (2)

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

Germany

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

FAG.................................... 30.68 23.17 12.11

Franke GmbH............................ 1 132.25 (3) (3)

Hoesch Rothe Erde...................... (2) (3) (3)

INA.................................... 20.57 19.12 (2)

NTN.................................... 18.38 (2) (2)

Rollix & Defontaine.................... (2) (3) (3)

SKF.................................... 2.92 10.22 7.84

Torrington Nadellager.................. (2) 76.27 (3)

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

Italy

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

FAG.................................... 5.15 (2) (3)

SKF.................................... 2.97 (3) (3)

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

Japan

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

Asahi Seiko............................ 2.65 (3) (3)

Koyo Seiko............................. 18.90 3.88 1 0.00

NPB.................................... 45.83 (2) (2)

NSK Ltd................................ 12.81 22.42 (2)

NTN.................................... 4.01 3.76 1.06

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

Singapore

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

NMB Singapore/Pelmec Ind............... 2.44 (3) (3)

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

United Kingdom

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

NSK-RHP................................ 20.25 25.01 (3)

Hoffman U.K............................ 61.14 48.29 (3)

Rose Bearings.......................... 61.14 48.29 (3)

Timken Bearings........................ (2) (2) (3)

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

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.

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 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 export price and

constructive export price (CEP) deposit rates (using the export price

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 export price and CEP sales by the combined total value for

both export price 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

[[Page 2083]]

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 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.

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 sales for these final results, we

divided the total dumping margins (calculated as the difference between

normal value (NV) and export price) for each importer by the total

number of units sold to that importer. We will direct Customs to assess

the resulting unit dollar amount against each unit of merchandise in

each of that importer'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 under each order for the review period will

be almost exactly equal to the total dumping margins.

2. Constructed Export Price Sales

For 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. 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 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.

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). Failure to

comply is a violation of the APO.

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: January 6, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

Scope Appendix Contents

A. Description of the Merchandise

B. Scope Determinations

Issues Appendix Contents

Abbreviations

Comments and Responses

1. Assessment

2. Facts Available

3. Discounts, Rebates, and Price Adjustments

4. Circumstance-of-Sale Adjustments

A. Technical Services and Warranty Expenses

B. Commissions

C. Credit

D. Indirect Selling Expenses

E. Other Selling Expenses

5. Level of Trade

6. Cost of Production and Constructed Value

A. Cost-Test Methodology

B. Research and Development

C. Profit for Constructed Value

D. Affiliated-Party Inputs

E. Inventory Write-off

F. Interest Expense Offset

G. Other Issues

7. Further Manufacturing

8. Packing and Movement Expenses

9. Affiliated Parties

10. Samples, Prototypes and Ordinary Courses of Trade

11. Export Price and Constructed Export Price

12. Programming

13. Duty Absorption and Reimbursement

14. Miscellaneous Issues

A. U.S. Sales Completeness

B. Pre-Final Reviews

C. Certification of Conformance to Past Practice

D. Country of Origin

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

[[Page 2084]]

(HTS) subheadings: 4016.93.10, 4016.93.50, 6909.19.5010, 8482.10.10,

8482.10.50, 8482.80.00, 8482.91.00, 8482.99.05, 8482.99.10, 8482.99.35,

8482.99.70, 8483.20.40, 8483.20.80, 8483.30.40, 8483.30.80, 8483.90.20,

8483.90.30, 8483.90.70, 8708.50.50, 8708.60.50, 8708.70.6060,

8708.93.6000, 8708.99.06, 8708.99.3100, 8708.99.4000, 8708.99.4960,

8708.99.50, 8708.99.58, 8708.99.8015, 8708.99.8080.

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: 4016.93.10, 4016.93.50, 6909.19.5010, 8482.50.00,

8482.80.00, 8482.91.00, 8482.99.25, 8482.99.6530, 8482.99.6560,

8482.99.70, 8483.20.40, 8483.20.80, 8483.30.40, 8483.30.80, 8483.90.20,

8483.90.30, 8483.90.70, 8708.50.50, 8708.60.50, 8708.99.4000,

8708.99.4960, 8708.99.50, 8708.99.8080.

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: 6909.19.5010, 8483.30.40, 8483.30.80, 8483.90.20,

8483.90.30, 8485.90.00, 8708.99.4000, 8708.99.4960, 8708.99.50,

8708.99.8080.

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.) 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 (AFBs

Investigation of SLTFV), 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 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 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 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)):

[[Page 2085]]

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

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 after 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.

Issues Appendix

Company Abbreviations

Asahi--Asahi Seiko

FAG Germany--FAG Kugelfischer Georg Schaefer KGaA

FAG Italy--FAG Italia S.p.A.; FAG Bearings Corp.

Hoesch--Hoesch Rothe Erde AG

INA--INA Walzlager Schaeffler KG; INA Bearing Company, Inc.

Koyo--Koyo Seiko Co. Ltd.

NMB/Pelmec--NMB Singapore Ltd.; Pelmec Industries (Pte.) Ltd.

NPB--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--NTN Corporation; NTN Bearing Corporation of America; American NTN

Bearing Manufacturing Corporation

Rollix--Rollix Defontaine, S.A.

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 UK--SKF (UK) Limited; SKF Industries; AMPEP Inc.

SKF Group--SKF-France; SKF-Germany; SKF-UK; SKF USA, Inc.

SNFA--SNFA Bearings, Ltd.

SNR France--SNR Nouvelle Roulements

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

HMP--Home Market Price

ICC(s)--Inventory Carrying Costs

ISE(s)--Indirect Selling Expenses

OEM--Original Equipment Manufacturer

POR--Period of Review

PSPA--Post-Sale Price Adjustment

SAA--Statement of Administrative Action

URAA--Uruguay Round Agreements Act

[[Page 2086]]

AFB Administrative Determinations

AFBs 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).

CIT AFB Decisions

FAG v. United States, Slip Op. 95-158 (CIT 1995) (FAG I).

FAG Kugelfischer Georg Schaefer KGAa v. United States, 932 F. Supp

315 (CIT 1996) (FAG II).

FAG UK Ltd. v. United States, Slip Op. 96-177 (CIT 1996) (FAG III).

Federal Mogul Corp. v. United States, 813 F. Supp 856 (CIT 1993)

(Federal Mogul I).

Federal Mogul Corp. v. United States, 839 F. Supp 881 (CIT 1993),

vacated, 907 F. Supp 432 (1995) (Federal Mogul II).

Federal Mogul Corp. v. United States, 884 F. Supp 1391 (CIT 1993)

(Federal Mogul III).

Federal Mogul Corp. v. United States, 17 CIT 1015 (CIT 1993)

(Federal Mogul IV).

Federal Mogul Corp. v. United States, 924 F. Supp 210 (CIT 1996)

(Federal Mogul V).

Koyo Seiko Co., Ltd. v. United States, 796 F. Supp 1526 (CIT 1992)

(Koyo).

NPBS v. United States, 903 F. Supp 89 (CIT 1995) (NPB).

NSK Ltd. v. United States, 910 F.Supp 663 (CIT 1995) (NSK I).

NSK Ltd. v. United States, 896 F.Supp 1263 (CIT 1995) (NSK II).

NSK Ltd. v. United States, 919 F.Supp 442 (CIT 1996) (NSK III).

NTN Bearing Corporation of America v. United States, 903 F. Supp 62

(CIT 1995) (NTN I).

NTN Bearing Corporation of America v. United States, 905

F.Supp.1083 (CIT 1995) (NTN II).

SKF USA Inc. v. United States, 876 F. Supp 275 (CIT 1995) (SKF).

The Torrington Company v. United States, 818 F.Supp 1563 (CIT 1993)

(Torrington I).

The Torrington Company v. United States, 832 F.Supp. 379 (CIT 1993)

(Torrington II).

The Torrington Company v. United States, 881 F.Supp 622 (CIT 1995)

(Torrington III).

The Torrington Company v. United States, 926 F. Supp 1151 (CIT

1996) (Torrington IV).

CAFC AFB Decisions

NTN Bearing Corp. v. United States, 74 F.3d 1204 (CAFC 1995) (NTN

III).

The Torrington Company v. United States, 44 F. 3d 1572 (CAFC 1994)

(Torrington V).

The Torrington Company v. United States, 82 F.3d 1039 (CAFC 1996)

(Torrington VI).

1. Assessment

Comment: NMB/Pelmec argues that, in calculating the assessment rate

in this review, the Department should use the statute and regulations

in effect as of December 31, 1994, rather than the antidumping statute

effective as of January 1, 1995. It notes that the Statement of

Administrative Action (H.R. Doc. 316, Vol. 1, 103d Cong., 2d sess.

(1994)) (SAA) states that ``there are two express exceptions to the

general transition rule in Article 18.3. In the case of refund

procedures under Article 9.3, national authorities will use the rules

in effect at the time of the most recent determination or review

applicable to the calculation of dumping margins,'' citing the SAA at

819. NMB/ Pelmec argues that this exception must be interpreted to mean

that the assessment rate should be calculated using the same rules

which were used to calculate the original deposit rate for entries

subject to the review or refund procedure. It contends that, because

the most recent cash-deposit determination which applied to the entries

during the 1994/95 administrative review was AFBs IV, the assessment

rate for the 1994/95 entries should also be determined using the

statute and regulations in effect as of December 31, 1994. Therefore,

NMB/Pelmec asserts, the Department should calculate the assessment rate

under the prior law by making an exporter's-sales-price-offset

adjustment, by including any below-cost sales in the calculation of

profit for CV, and by not making a CEP-profit adjustment to U.S. sales.

Torrington maintains that the U.S. practice is not inconsistent

with Article 18.3.1 and that the Department should apply the new law to

calculate assessment rates for this review period. It notes that,

because refund instructions will not be provided to Customs until after

this review is completed, the final results for this review will be the

``most recent determination or review'' as referred to by Article

18.3.1.

Department's Position: We agree with Torrington. In this case, the

``most recent review'' for purposes of refund procedures is the final

results for 1994/95 review. Therefore, the rules applicable to the

calculation of dumping margins for the 1994/95 review are the

provisions of the statute effective January 1, 1995 and the

regulations, as amended by the interim regulations effective May 11,

1995 (see SAA at 819 and 895).

2. Facts Available

We determine, in accordance with section 776(a) of the Tariff Act,

that the use of facts available as the basis for the weighted-average

dumping margin is appropriate for SNFA, Hoffman U.K., and Rose

Bearings, all with respect to BBs and CRBs, for Torrington Nadellager

with respect to CRBs only, and for SKF France with respect to SPBs

only, because these firms did not respond to our antidumping

questionnaire. We find that these firms have withheld ``information

that has been requested by the administering authority.'' Furthermore,

we determine that, pursuant to section 776(b) of the Tariff Act, it is

appropriate to make an inference adverse to the interests of these

companies because they failed to cooperate by not responding to our

questionnaire. For the weighted-average dumping margins of these firms,

we have used the highest rate from any prior segment of the respective

proceeding as adverse facts available. Such data is considered

secondary information within the meaning of section 776(c) of the

Tariff Act.

Section 776(c) of the Tariff Act provides that the Department

shall, to the extent practicable, corroborate secondary information

from

[[Page 2087]]

independent sources reasonably at its disposal. The Statement of

Administrative Action (SAA) provides that ``corroborate'' means simply

that the Department will satisfy itself that the secondary information

to be used has probative value (see H.R. Doc. 316, Vol. 1, 103d Cong.,

2d sess. 870 (1994)).

To corroborate secondary information, the Department will, to the

extent practicable, examine the reliability and relevance of the

information to be used. However, unlike for other types of information,

such as input costs or selling expenses, there are no independent

sources for calculated dumping margins. Thus, in an administrative

review, if the Department chooses as total adverse facts available a

calculated dumping margin from a prior segment of the proceeding, it is

not necessary to question the reliability of the margin for that time

period. With respect to the relevance aspect of corroboration, however,

the Department will consider information reasonably at its disposal as

to whether there are circumstances that would render a margin not

relevant. Where circumstances indicate that the selected margin is not

appropriate as adverse facts available, the Department will disregard

the margin and determine an appropriate margin (see, e.g., Fresh Cut

Flowers from Mexico; Final Results of Antidumping Duty Administrative

Review, 61 FR 6812, 6814 (February 22, 1996) (Fresh Cut Flowers) (where

the Department disregarded the highest margin as adverse best

information available because the margin was based on another company's

uncharacteristic business expense resulting in an unusually high

margin)).

In this case, for SKF France, SNFA, Torrington Nadellager, Hoffman

U.K. and Rose Bearings, we have used the highest rate from any prior

segment of the respective proceeding as adverse facts available. These

rates are the highest available rates and no evidence exists in the

record that indicates that the selected margins are not appropriate as

adverse facts available.

We also determine, in accordance with section 776(a) of the Tariff

Act, that the use of facts available as the basis for the weighted-

average dumping margin is appropriate for NPB because, despite the

Department's attempts to verify necessary information provided by NPB,

the Department could not verify the information as required under

section 782(i) of the Tariff Act. Furthermore, section 782(e) of the

Tariff Act authorizes the Department to decline to consider information

that is submitted by an interested party that is necessary to the

determination under certain circumstances, such as when such

information is so incomplete that it cannot serve as a reliable basis

for reaching the applicable determination or when such information

cannot be verified.

Generally, and in the process of verification, the Department's

analysis of the completeness of a respondent's U.S. sales database is

essential because the database is used to calculate the dumping duties.

Where we have allowed for reduced reporting but determine that U.S.

sales are missing from the database, we are especially concerned about

the reliability and accuracy of any margin we might calculate. An

incomplete U.S. and HM sales database is normally sufficient to render

a respondent's response inadequate for the purpose of calculating a

dumping margin. See, e.g., Persico Pizzamiglio, S.A. v. United States,

Slip Op. 94-61 (CIT 1994) (Persico) (upholding the Department's use of

best information available for a respondent who was unable to

demonstrate the completeness of its U.S. sales at verification).

It is our practice to examine at verification only a selected

subset of the reported U.S. sales, a practice that the CIT has upheld.

See Bomont Industries v. United States, 733 F.Supp. 1507, 1508 (CIT

1990) (``verification is like an audit, the purpose of which is to test

information provided by a party for accuracy and completeness. Normally

an audit entails selective examination rather than testing of an entire

universe''); see also Monsanto Co. v. United States, 698 F. Supp. 275,

281 (CIT 1988) (``verification is a spot check and is not intended to

be an exhaustive examination of the respondent's business'').

Generally, we assume that the selected subset of U.S. sales is

representative of the entire universe of U.S. sales.

Where we find discrepancies in this subset, we judge the effect on

the unexamined portion of the response. Where we determine that U.S.

sales are misreported (in critical areas, such as model number and

further-manufacturing status) in a selected subset, we are particularly

concerned about the reliability and accuracy of any margin or duties we

might calculate from the database.

In addition, the Department's identification of further-

manufactured sales is essential in order for the Department to conduct

two critical portions of its analysis. First, in the course of the

Department's model matching analysis, the unique model number

associated with a particular model determines the appropriate home

market model to match to the U.S. sale. Second, in determining the

adjustments to CEP, we are dependent on the data a respondent provides

in order for us to identify whether to deduct such costs of further

manufacturing. In fact, section 772(d)(2) of the Tariff Act requires us

to reduce the price we use to establish CEP by ``the cost of any

further manufacture or assembly.'' Thus, our questionnaire requires

that respondents identify further-manufactured sales and provide a

unique code to identify the bearing model as entered on a sale-by-sale

basis. The questionnaire also requires that the cost of further

manufacturing be reported on a model-specific basis.

Despite our efforts at verification, we were unable to verify

information which is necessary and must be verified in order for us to

make a determination under section 751 of the Tariff Act. Specifically,

we were unable to verify the data NPB provided concerning its U.S. and

HM sales. Most significantly, we found that NPB's U.S. and HM databases

were incomplete. In this case, we examined at verification the sales

reported for three of the six sample weeks and found missing U.S. sales

in all three weeks. As we have indicated above, incompleteness of these

databases, particularly the incompleteness of the U.S. sales database,

was crucial and was a factor which, by itself, was an adequate basis

for our determination to use facts available.

We also found that NPB's U.S. database was inaccurate. In a

supplemental response, NPB reported that only 12 models entered the

United States as housed models during the POR. Yet at verification,

during which we selected, at random, a limited number of entry

documents, we discovered an additional five models that entered as

housed models during the POR. NPB's U.S. sales listing contained sales

of these five models. However, NPB reported that these sales entered as

unhoused bearings that were further-manufactured in the United States.

The contradiction between NPB's entry documents and its response

prompted us to elicit support for its further-manufacturing claim.

While records NPB provided do demonstrate that some assembly did take

place during the POR, these same records document assembly that

occurred six months after the last of the five U.S. sales. NPB could

not support its claim that further manufacturing occurred prior to the

selected sales, nor did NPB provide evidence of entries of unhoused

bearings prior to the dates of sale. Therefore, NPB could not support

the designation of these sales as being

[[Page 2088]]

further-manufactured merchandise. See United States Sales Verification

Report, dated June 13, 1996. Because we reviewed a limited number of

randomly-selected entry documents and U.S. sales, we must conclude

that, had we examined all possible documentation, we would have found

additional models and sales that were incorrectly reported as further-

manufactured merchandise. Because we found NPB's reporting of this

information to be inaccurate, we cannot calculate CEP properly as

directed by section 772(d) of the Tariff Act nor can we match

approximately two-thirds of NPB's sales to the correct HM model.

Thus we have determined that although NPB provided information we

requested which was necessary in order for the us to perform our

analysis, the information could not be verified as required by section

782(i) of the Tariff Act. Thus, in accordance with section 782(e)(2) of

the Tariff Act, we have declined to consider information submitted by

NPB because it could not be verified. Because we were unable to verify

necessary information, in addition to the fact that NPB failed to

support its designation of certain sales as being further-manufactured

merchandise, we were unable to employ our normal antidumping analysis.

Under section 776(a) of the Tariff Act, we are required, in reaching

our determination, to use facts available because we could not verify

NPB's data. Thus, for NPB, we have determined that it is appropriate to

select from the facts otherwise available to the Department.

In selecting from among the facts otherwise available, the

Department is authorized, under section 776(b) of the Tariff Act, to

use an inference that is adverse to the interests of a party if the

Department finds that the party has failed to cooperate by not acting

to the best of its ability to comply with (the Department's) request

for information. We examined whether NPB had acted to the best of its

ability in responding to our requests for information, such as U.S.

sales data. We took into consideration the fact that, as an experienced

respondent in reviews of the AFBs orders, its ability to comply with

our requests for information could be distinguished from, for example,

the ability of a less experienced company. Thus, NPB can reasonably be

expected to know which types of essential data we request in each

review under this order, and to be conversant with the form and manner

in which we require submission of the data. We note that NPB committed,

in this review, some of the same errors and discrepancies regarding the

completeness and accuracy of its sales databases that it made in

previous reviews of the instant order.

In addition to taking into account the experience of a respondent,

the Department may find it appropriate to examine whether the

respondent has control of the data which the Department is unable to

verify or rely upon. The record reflects that NPB was in control of the

data which was vital to our dumping calculations and which we were

unable to verify or rely upon. See analysis memorandum from Holly A.

Kuga to Joseph A. Spetrini, dated June 27, 1996.

An additional factor we have considered, is the extent to which NPB

might have benefitted from its own lack of cooperation. The SAA states

that ``[w]here a party has not cooperated, [the Department] may employ

adverse inferences about the missing information to ensure that the

party does not obtain a more favorable result by failing to cooperate

than if it had cooperated fully.'' Id. at 870. In accordance with our

policy, we considered the overall effect of NPB's errors. In this case,

we have determined that the use of the flawed response would have

yielded a more favorable margin for NPB. See analysis memorandum from

Holly A. Kuga to Joseph A. Spetrini, dated June 27, 1996.

In light of NPB's familiarity with the annual review process under

the order on AFBs from Japan, its control of the necessary data, and

the potential benefits it may have received, we have determined that

NPB failed to act to the best of its ability in providing the data we

requested. Therefore, in accordance with section 776(b) of the Tariff

Act, we have, on the basis of the record in this case, determined that

it is appropriate for us to make the adverse inference authorized under

that subsection of the statute. Accordingly, for these final results,

we continue to base NPB's margin on adverse facts available.

In selecting a margin which would appropriately reflect our

decision to use adverse facts available for NPB, we examined the rates

applicable to ball bearings from Japan throughout the course of the

proceeding. As adverse facts available, we have selected a rate of

45.83 percent, which reflects the all-others rate from the Less Than

Fair Value (LTFV) investigation and is a rate which we have applied to

NPB in previous proceedings under the old law concerning AFBs from

Japan. Given NPB's level of participation in this segment of the

proceeding, we determine that this rate is sufficiently adverse to

encourage full cooperation in future segments of the proceeding.

As indicated above, section 776(c) of the Tariff Act requires the

Department to corroborate secondary information used as facts available

to the extent practicable. ``Secondary information is information

derived from the petition that gave rise to the investigation or

review, the final determination concerning the subject merchandise, or

any previous review under section 751 concerning the subject

merchandise.'' SAA at 870. Because the facts available applied to NPB

for this review is secondary information within the meaning of section

776(c) of the Tariff Act, we have, in accordance with section 776(c),

corroborated this information with independent sources.

As noted above in our discussion of corroboration with regard to

other respondents, the SAA provides that ``corroborate'' means simply

that the Department will satisfy itself that the secondary information

to be used has probative value (see SAA at 870). After reviewing the

record, we are satisfied that this information has probative value

because it includes the average of calculated margins from the LTFV

investigation of this order. Thus, we have determined that information

and inferences which we have applied are reasonable to use under the

circumstances of this review. See SAA at 869. Furthermore, there is no

reliable evidence on the record indicating that this selected margin is

not appropriate as adverse facts available. (See, e.g., Fresh Cut

Flowers.)

Comment: NPB contends that the Department erred in assigning it a

margin based on adverse facts available. NPB contends the following:

(1) It classified all U.S. housed, unhoused, and further-manufactured

models properly; (2) it reported its U.S. sales properly; (3) errors in

its reporting of certain U.S. sales and adjustments are limited and

correctable; and (4) it reported nearly all of its home market sales

properly. NPB argues that, although it did make some errors in its

response, the errors are small in number and are determinable in

extent. NPB requests that the Department use that portion of its

response which is free of errors and, if it still finds NPB's reporting

of further-manufactured items in error, limit its application of facts

available to the U.S. sales of five particular models the Department

identified as improperly reported in its verification report. Moreover,

NPB contends that application of adverse facts available is not

appropriate because NPB acted to the best of its ability.

NPB notes that the dominant issue in the Department's analysis

memorandum

[[Page 2089]]

of June 27, 1996, regards NPB's reporting of housed, unhoused, and

further-manufactured models. NPB contends that all of its U.S. sales

are CEP sales, and, as such, the questionnaire required NPB to report

its sales to the first unaffiliated customer during the POR and not its

entries of the merchandise during the POR. NPB states that

approximately one-third of NPB's U.S. sales are of unhoused bearings

and are imported as such, and that it sells the vast majority of the

remaining sales as housed bearings which are further-manufactured from

unhoused bearings. NPB contends that it reported both of these

categories of U.S. sales properly. NPB asserts that only five models

(which the Department discovered at verification had entered the United

States as housed models) are in dispute. NPB contends that its

reporting of sales of the five models is appropriate. NPB argues that,

because a bearing imported as a housed unit and a bearing that is

imported as an unhoused unit and further-manufactured into a housed

unit are physically indistinguishable, it is impossible to determine

whether the particular merchandise withdrawn from inventory for sale

was imported as a housed bearing or was further manufactured into a

housed bearing without tracing the particular merchandise to a

particular U.S. Customs entry. NPB argues that it cannot make such a

link and contends that the Department has recognized that, generally,

it cannot tie sales to entries, citing AFBs III at 28360.

Because the five models, which NPB contends were imported as both

housed and unhoused models, contain ``bearings exported to the United

States prior to any further processing in the United States,'' and

because each model which underwent a further-manufacturing process

contains ``bearings exported to the United States prior to any further

processing in the United States,'' NPB asserts that it identified each

of these five models properly as further-manufactured models. NPB

states that the Department's analysis memorandum, dated June 27, 1996,

failed to cite any statute, regulation, or questionnaire instruction

that required NPB to report otherwise. Moreover, NPB contends that it

provided ``assembly audit lists'' that demonstrate that there was some

further manufacturing of these models during the POR. Therefore, NPB

contends that it responded properly to the questionnaire.

Torrington argues that the Department is statutorily required to

use facts available in cases where it is unable to verify the accuracy

of the information respondent submits and may apply an adverse

assumption if it determines that the firm has not complied to the best

of its ability. Torrington asserts that, as a whole, the number and

significance of NPB's errors and omissions constitute a failed

verification, noting that the most serious of NPB's deficiencies was

the Department's inability to verify the completeness of the HM and

U.S. sales databases. Torrington asserts that the complete and accurate

reporting of sales databases goes to the heart of the antidumping

proceeding, citing Federal-Mogul IV at 1020. Further, Torrington states

that in AFBs II, the Department applied best information available to

NPB because NPB failed to report a substantial number of its HM sales.

Torrington contends that both the significance and number of omissions

and errors with NPB's response in this review call for a similar

result, citing NPB at 93-95.

Moreover, Torrington argues that, because NPB had control of the

data requested in the Department's questionnaire and, given that NPB

has participated in many previous reviews and is knowledgeable of the

correct data to report, NPB did not act to the best of its ability.

Torrington requests that the Department apply a margin based on adverse

facts available for the final results.

Department's Position: We agree with Torrington. In this case, we

are required to use facts available because we were unable to verify

NPB's response. Furthermore, in using facts available, we are

authorized to employ an inference adverse to the interests of NPB

because we have determined that NPB has failed to act to the best of

its ability in responding to our requests for necessary information.

Thus, for these final results, as adverse facts available, we have

selected a rate of 45.83 percent, which reflects the all-others rate

from the LTFV investigation and is a rate which we have applied to NPB

in previous proceedings under the old law concerning AFBs from Japan.

As stated above, in light of NPB's level of participation in this

segment of the proceeding, we determine that this rate is sufficiently

adverse to encourage full cooperation in future segments of the

proceeding.

We disagree with NPB's view that it reported its U.S. sales

correctly, that errors in its reporting of certain U.S. sales and

adjustments are limited and correctable, and that it reported nearly

all of its home market sales properly. As we have stated above, it is

our practice to examine at verification only a selected subset of the

reported U.S. sales, a practice that the CIT has upheld. See Bomont

Industries v. United States, 733 F.Supp. 1507, 1508 (CIT 1990); see

also Monsanto Co. v. United States, 698 F. Supp. 275, 281 (CIT 1988).

As discussed above, we assume that the randomly selected subset of U.S.

sales is representative of the entire universe of U.S. sales. In this

case, we found discrepancies and omissions in this subset. Thus, in

accordance with our normal practice, we judged the effect on the

unexamined portion of NPB's response. Because we determined that U.S.

sales had been omitted, we are concerned about the reliability and

accuracy of any margin or duties we might calculate from NPB's

database. We reiterate that an incomplete U.S. and HM sales database is

normally sufficient to render a respondent's response inadequate for

the purpose of calculating a dumping margin. See, e.g., Persico

Pizzamiglio, S.A. v. United States, Slip Op. 94-61 (CIT 1994) (Persico)

(upholding the Department's use of best information available for a

respondent who was unable to demonstrate the completeness of its U.S.

sales at verification).

We also disagree with NPB's assertion that it classified all

housed, unhoused, and further-manufactured models properly. NPB was

unable to support its designation of certain U.S. sales as further-

manufactured sales. See U.S. Sales Verification Report, dated June 13,

1996 at 9. We also disagree with NPB that it was required to report its

further-manufactured sales in a sales-specific manner.

As explained above, identification of further-manufactured sales is

essential in order for the Department to conduct two critical portions

of its analysis. First, the unique model number determines the

appropriate home market model to match to the U.S. sale. (In this case,

NPB reported HM sales of models that matched both the ``housed''

bearings and the ``unhoused'' bearings.) Second, in determining the

price adjustments to calculate CEP, we are dependent on the data NPB

provides to identify whether to deduct such costs of further

manufacturing. Section 772(d)(2) of the Tariff Act requires us to

reduce the price we use to establish CEP by ``the cost of any further

manufacture or assembly * * *.'' Our questionnaire requires that

respondents identify further-manufactured sales and provide a unique

code to identify the bearing model as entered on a sale-by-sale basis.

The questionnaire also requires that the cost of further manufacturing

be reported on a model-specific basis. Thus, contrary to NPB's

assertion, we have determined that NPB had an

[[Page 2090]]

obligation to identify and report this data on a sales-specific basis.

NPB suggests that its misreportings are limited to the five

particular models that we discovered at verification. However, as we

have indicated above, because we reviewed a limited number of randomly-

selected entry documents, we must conclude that, had we examined all

possible documentation, we would have found additional models and sales

that were incorrectly reported as further-manufactured merchandise.

Moreover, because NPB did not identify the unique model number on a

sale-specific basis correctly, we are unable to match approximately

two-thirds of NPB's U.S. sales of housed models to an appropriate NV or

calculate CEP properly.

As we have indicated above, in this case, inaccuracy of NPB's

databases, particularly the inaccuracy of its U.S. sales database, was

crucial and was a factor which, by itself, was an adequate basis for

our determination to use facts available. However, our attempted

verifications yielded additional flaws in NPB's response, providing

further bases for our decision to employ facts available. For example,

we found that NPB did not report a particular type of price adjustment

for sales to its largest HM customer, and that NPB understated entered

values and thus under-reported all adjustments to CEP that were

allocated by entered value. (For a complete listing of all flaws, see

the analysis memorandum from Holly A. Kuga to Joseph A. Spetrini, dated

June 27, 1996. For a more detailed discussion of NPB's post-preliminary

arguments and our position on these flaws, see analysis memorandum

dated January 3, 1997.)

Because of the gravity and the magnitude of the flaws in NPB's

response, we have determined that NPB's information is unverifiable,

and that there is no record evidence demonstrating that errors in NPB's

reporting of certain of its U.S. sales are limited and correctable.

Accordingly, we disagree with NPB's view on this issue. Thus, as

explained above, we must use facts available in determining a margin

for NPB, as required under section 776(a) of the Tariff Act.

We also disagree with NPB that an adverse inference is not

warranted in determining a margin for NPB because, as required under

section 776(b), we find that NPB has not acted to the best of its

ability in responding to our requests for information. As noted above,

NPB has participated in numerous reviews and verifications in this

proceeding and is aware of the type of information we require. However,

NPB has failed to provide two fundamental elements of a response: a

complete sales listing and correct identification of further-

manufactured sales and models. The identification of further-

manufactured sales and their unique model numbers (as entered) is not a

new requirement of the URAA. Contrary to NPB's assertions, the fact

that NPB could not support its reporting of this critical information

cannot be attributed to one of the ``subtle changes'' in the

antidumping law which, as NPB suggests, prevented it from knowing which

data to report. Nor was the questionnaire vague in this regard.

Likewise, the complete reporting of U.S. and HM sales is not a new

concept under the URAA. Furthermore, we note that NPB made numerous

other errors in its response that worked in its favor. See the analysis

memorandum from Holly A. Kuga to Joseph A. Spetrini, dated June 27,

1996.

As we have indicated above, in accordance with our policy, we

considered the overall effect of the errors to ensure that NPB does not

obtain a more favorable result by failing to cooperate than if it had

cooperated fully. Thus, an additional factor we have considered is the

extent to which NPB might have benefited from failing to cooperate

fully if we had not made our determination on the basis of facts

available. See SAA at 870. In this case, we have determined that the

use of the flawed response would have yielded a more favorable margin

for NPB. See analysis memorandum from Holly A. Kuga to Joseph A.

Spetrini, dated June 27, 1996. Furthermore, no comments have dissuaded

us from our view that NPB has failed to act to the best of its ability

in responding to our requests for necessary information. Thus, in

disagreement with NPB's view, for these final results, we have applied

adverse facts available to NPB in accordance with section 776(c) of the

Tariff Act.

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

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; see also Facts

Available, above. 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 carefully scrutinize any such differences 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 respondents that

have cooperated to the best of their 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 CAFC's decision in

[[Page 2091]]

Torrington VI (at 1047-51), 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 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 contends that the CAFC,

in Torrington VI at 1047-51, ruled that direct PSPAs must be reported

on a sale-specific basis before the Department can make a downward

adjustment to foreign market value (now normal value), and that the

Department may not make an indirect-selling-expense adjustment for

improperly allocated direct expenses. Torrington contends that the new

statute does not change the CAFC's rulings and, therefore, 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.

Koyo, NSK, NSK/RHP, SKF Germany, SKF France, and SKF Italy argue

that the Department should make adjustments to NV so long as the

allocation methodology is reasonable. Koyo, SKF Germany, SKF France,

and SKF Italy argue further that the SAA at 823-24 indicates that the

Department will accept allocations of certain direct expenses when

transaction-specific reporting is not feasible. SKF Germany, SKF

France, and SKF Italy also contend that denial of such adjustments,

when the party acted to the best of its ability and the data can be

used without undue difficulties, would be the unlawful use of adverse

inferences in applying facts available, while Koyo argues that the

denial of such adjustments would be unjustly punitive. Koyo also argues

that the Department should not disallow an improperly allocated

downward adjustment while allowing the same adjustment if it increases

NV and contends that the CIT rejected such an approach in Torrington IV

at 1151.

FAG Germany, FAG Italy, INA, NTN Japan, and NTN Germany contend

that they reported such adjustments on a transaction-specific basis.

Department's Position: We agree with Koyo, NSK, NSK/RHP, SKF

Germany, SKF France, and SKF Italy in part. As discussed in the

introductory remarks to this section, our practice is to accept 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. We agree with Torrington, however, that when we find that

a respondent has allocated a HM discount, rebate, or PSPA in a

distortive manner or if we determine that a respondent has not acted to

the best of its ability, then we should deny such adjustments rather

than treat them as an indirect expense.

In our view, Torrington VI is of limited relevance to this issue

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 VI at n.15), it

merely held that, assuming the adjustments were expenses, they had to

be treated as direct selling expenses rather than indirect selling

expenses. The CAFC did not address appropriate allocation

methodologies.

However, we disagree with Koyo that we should not treat positive HM

billing adjustments as direct adjustments. As discussed in our

introductory remarks above, 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 minimize

margins.

Comment 2: NSK and Torrington submitted comments regarding the

treatment of NSK's HM lump-sum rebates (REBATE2H). NSK argues that the

Department's treatment of this rebate as an indirect expense in the

preliminary results was incorrect and requests that the Department

treat this adjustment as a direct expense. NSK asserts that the CIT has

determined, pursuant to the CAFC's decision in Torrington VI, that this

expense is a direct expense (citing The Timken Co. v. United States,

Slip Op. 96-86 at 38 (CIT 1996)).

NSK argues that it did not grant this adjustment on a product-

specific or transaction-specific basis and that the rebate does not

relate to specific sales to a customer. NSK notes that it allocated

this adjustment by summing all such POR rebates by customer and

dividing this amount by total POR sales to the customer. NSK contends

that its allocation methodology accurately apportions the adjustment

between subject and non-subject merchandise because, although NSK used

a customer-specific factor, the ratio of subject to non-subject

merchandise purchased by its customers was relatively constant

throughout the POR. NSK notes that it submitted evidence to support its

contention that this ratio was relatively constant during the POR in

its response to the Department's supplemental questionnaire. NSK argues

that the Department accepted this approach in principle in the 1992/93

review but did not allow the adjustment due to the small number of

customers for which NSK provided information regarding sales of subject

versus non-subject merchandise. NSK contends that, in the current

review, it submitted such information for a substantially larger number

of customers.

NSK suggests that its situation should not be confused with that of

another respondent, Koyo, which granted PSPAs on a product-specific

basis but reported them on an aggregate basis. NSK argues that its

reporting methodology is customer-specific by necessity, not because of

imprecise record-keeping, and, for the reasons described above, is not

distortive. Finally, NSK argues that, at a minimum, the Department

should treat PSPAs respondents granted to certain customers that only

purchased subject merchandise during the POR as direct expenses.

Torrington responds to NSK's arguments, claiming that NSK's

description of the allocation methodology for this expense demonstrates

that NSK's reporting is not consistent with a ``fixed and constant''

allocation, which the Department and the CIT have held is necessary for

an allocation of such expenses to be accepted (citing AFBs IV at 10929

and Torrington I at 1578-79). Torrington also contends that the

Department should reject NSK's argument that the Department should, at

a minimum, allow a direct adjustment for those customers who purchased

only subject merchandise during the POR for the same reasons.

Torrington argues that, even if certain customers purchased

[[Page 2092]]

only subject merchandise during the POR, NSK's allocation fails to

target those specific sales related to the PSPAs or to report the

specific PSPA amounts actually incurred by those sales and is,

therefore, distortive.

In its affirmative brief, Torrington argues that, because NSK

failed to report lump-sum rebates on a transaction-specific basis or as

a fixed and constant percentage of the sales on which the rebates were

granted, the Department should disallow the adjustment entirely.

Torrington suggests three reasons for rejecting NSK's lump-sum rebates

as an adjustment to NV. First, citing Torrington VI at 1050, Torrington

argues that the CAFC has stated that expenses that are directly related

to particular sales cannot be treated as ISEs. Therefore, Torrington

contends, because NSK did not report PSPAs on the basis on which they

were incurred, the Department cannot deduct them as direct adjustments

to NV and, because expenses that are direct in nature cannot be treated

as indirect expenses, the Department has no choice but to make no

adjustment to NV for this item.

Second, Torrington argues that NSK failed to demonstrate that it

paid all reported PSPAs on sales of subject merchandise. Torrington

argues that the Department has previously rejected NSK's argument that

an analysis of certain customers' sales sufficiently indicates that all

customers receiving PSPAs had stable purchasing patterns and states

that the Department should reject NSK's assertion that ``relatively

constant'' purchasing patterns constitute the basis for a reasonable

allocation. Torrington asserts that the CIT has held repeatedly that

the Department may not ``use a methodology which allows for the

inclusion of [PSPAs] and rebates on out-of-scope merchandise in

calculating adjustments to FMV'' (citing Torrington I at 1578-79).

Third, Torrington argues that NSK did not demonstrate that all

PSPAs were contemplated at the time of sale. Torrington argues that NSK

itself stated that, in certain instances, lump-sum amounts were paid

retroactively and that, therefore, NSK has not shown that the terms of

these rebates were known at the time of sale. Torrington argues that

the Department's policy is to allow rebates only when the terms of sale

are predetermined (citing AFBs IV at 10932).

NSK responds that the Department verified NSK's lump-sum rebates

and that the Department found no discrepancies in the data which it

examined. Second, NSK argues that it has fully explained the

circumstances under which it grants lump-sum PSPAs and that

Torrington's argument that NSK did not show that the rebates were

contemplated at the time of sale is not supported by the record and has

been previously rejected by the Department.

Department's Position: We agree with NSK that we should treat its

lump-sum rebates as a direct adjustment to NV. Although NSK allocates

these rebates on a customer-specific basis, we determine that NSK acted

to the best of its ability in reporting this information using

customer-specific allocations. Our review of the information NSK

submitted and our findings at verification indicate that, given the

lump-sum nature of this adjustment, the fact that NSK's records do not

readily identify a discrete group of sales to which each rebate

pertains, and the extremely large number of POR sales NSK made, it is

not feasible for NSK to report this adjustment on a more specific

basis.

We also do not find that the customer-specific POR-allocation

methodology NSK used shifts expenses incurred on sales of out-of-scope

merchandise to sales of in-scope merchandise or that it is otherwise

unreasonably distortive. NSK submitted evidence to support its

contention that the ratio of subject to non-subject merchandise

purchased by its customers was relatively constant throughout the POR.

We examined this evidence and found that it adequately supported NSK's

contention.

Further, our analysis of the record evidence and our findings at

verification give us no reason to believe that NSK is more likely to

grant these rebates on sales of non-subject merchandise than it is on

sales of subject merchandise. In this regard, we note that, as with

other respondents in these reviews, NSK is primarily in the business of

selling bearings, some of which are within the scope of the AFB

antidumping orders and others of which are non-subject merchandise. In

addition, we have not found that the subject and non-subject

merchandise NSK sold varies significantly in terms of value, physical

characteristics, and the manner in which it is sold and, therefore, we

find that it is likely that NSK granted this adjustment in

proportionate amounts with respect to sales of out-of-scope and in-

scope merchandise.

Regarding the relevance of the holding of the CAFC in Torrington

VI, see our response to comment 1, above.

Comment 3: Torrington argues that the Department improperly allowed

a direct adjustment to NV for NSK's return rebates (REBATE1H).

Torrington contends that NSK grants return rebates on individual

transactions and that NSK did not report return rebates on a

transaction-specific basis or as a fixed and constant percentage of

sales. Torrington argues that, because NSK failed to tie actual rebate

amounts to the particular transactions to which they relate, the

Department should not make any adjustment to NV for return rebates

(citing Torrington VI at 1050).

NSK responds that the Department properly deducted return rebates

as a direct adjustment to NV. NSK notes that its methodology allocates

return rebates on a part-number and customer-specific basis and that

the Department fully verified its methodology. NSK also argues that

Torrington raised this issue prior to the preliminary results and the

Department rejected its argument at that time. NSK states that

Torrington has offered no new arguments in its case brief.

Department's Position: We disagree with Torrington. Initially, we

note that we consider NSK's return rebates to be a promotional expense,

as opposed to a price adjustment, because NSK grants these rebates to

promote sales made by distributors. As such, NSK incurred this expense

on behalf of NSK's customers. Because NSK has shown that this expense

relates directly to the products under review, we consider it to be a

direct selling expense. Further, the company has demonstrated that it

has reported this expense on a model-specific and customer-specific

basis, which satisfies our standard for treatment of promotional

expenses as direct selling expenses. See our response to comment 2 of

section 4.B (Commissions), below, and AFBs V at 66503. Therefore, we

have made a direct adjustment to NV for NSK's return rebates for the

final results. With regard to the relevance of Torrington VI, see our

response to comment 1, above.

Comment 4: Torrington argues that the Department should use actual

1995 rebates instead of the estimated 1995 U.S. rebates reported by

NSK, FAG Germany, and FAG Italy. Torrington notes that, at

verification, NSK submitted, and the Department verified, actual rebate

percentages. Torrington also contends that improving economic activity

in the United States may result in higher U.S. rebates granted than

estimated. Torrington argues that the Department should use, therefore,

the actual rebate information it gathered from NSK at verification and

should request FAG to provide updated U.S. rebate information for use

in the final results.

NSK argues that the Department examined the actual rebate

percentages at verification in order to determine whether NSK's

estimated rebates were reasonable. NSK notes that it was

[[Page 2093]]

unable to report actual 1995 rebates in its original response because

its response was due prior to the end of 1995. NSK argues that its

estimated rebates were reasonably calculated and that the Department

should use them for the final results.

FAG argues that, because the response had to be filed before the

end of 1995, rebates ultimately paid on 1995 sales had to be estimated.

FAG argues that its methodology conforms to the Department's practice

and was fully verified by the Department.

Department's Position: We disagree with Torrington. The purpose of

examining the actual rebates at verification was to determine the

accuracy of the responses. Verification is not normally an appropriate

venue for the submission of new factual information, and we generally

collect and use information gleaned at verification only when minor

discrepancies are found or when we believe a respondent's methodology

may not have been reasonable. In this case, verification was an

opportunity to determine whether the companies' estimates represented a

reasonable approximation of their experience in granting rebates. Our

conclusion was that there was no reason to believe that the actual data

would differ significantly from the estimates. For instance, as a

result of verifying NSK's response, we determined that while the rebate

percentages were overestimated for some customers and underestimated

for others, on balance NSK's estimates were a reasonable reflection of

its actual experience and that any distortion caused by such estimates

would be insignificant. Torrington's proposal would convert

verification, which is an opportunity to check the accuracy of

information previously submitted, into a data-gathering exercise.

In fact, the actual information concerning rebates granted in 1995

is not generally available until approximately the end of the first

quarter of 1996, after the end-of-year 1995 rebates are granted and

recorded in the companies' records. A requirement that respondents

calculate actual per-unit rebate amounts for 1995 sales using this data

would be unreasonable, given the stage in the proceeding at which the

actual 1995 data becomes available.

Furthermore, in NSK's case, although we have the data to replace

the estimated rebates with actual rebates, the change to our

calculations, given the advanced stage of the review, would impose an

unreasonable burden upon both us and respondents with no significant

increase in accuracy in light of the results of our verification.

Therefore, we have relied on NSK's estimated rebates.

Moreover, while we have the discretion to solicit new information

at any time during an administrative review, we generally do so only

when we learn of information not on the record that has the potential

of having a substantial impact on the margin. See Certain Fresh Cut

Flowers from Colombia; Final Results of Antidumping Duty Administrative

Reviews, 61 FR 42833, 42837 (August 19, 1996).

Therefore, for the reasons stated above, we have used these

companies' estimated rebates on 1995 sales for the final results, as we

have with respondents generally in these reviews.

Comment 5: Torrington argues that the Department should disallow

the following HM PSPAs reported by SKF Germany: early-payment discounts

(EARLYPYH), support rebates (REBATE2H), and downward home-market

billing adjustments (BILLAD2H). Torrington makes the following general

comments regarding these adjustments: (1) section 782(e) of the Tariff

Act, previously cited by SKF Germany, provides the rules governing when

the Department may reject a response due to systematic difficulties,

which is not the case here; (2) the language in the proposed

regulations concerning when the Department may allow allocations does

not govern this situation because the items at issue are price

adjustments, not direct selling expenses; and (3) even assuming such

proposed regulatory language did apply, SKF Germany's allocations are

sufficiently distortive as not to meet the standard for allowing such

allocations.

With respect to early-payment discounts, Torrington states that,

because SKF Germany's reporting method fails to identify early payment

discounts actually taken on subject merchandise, the Department should

deny these adjustments to NV. Torrington argues that disproportionately

greater amounts may be paid on out-of-scope merchandise than on in-

scope, resulting in the mis-allocation of out-of-scope discounts to

subject merchandise. The Department, according to Torrington, should

continue to reject this claim, as it did in AFBs IV.

With respect to support rebates, Torrington states that SKF Germany

reported them on a customer-specific basis only because these rebates

are earned on sales by SKF Germany's customer rather than by SKF

Germany and cannot be associated with specific SKF Germany

transactions. Torrington claims that there is no evidence that

distributors were allowed these rebates as a result of poor sales

results on subject merchandise as distinct from products not covered by

the antidumping order, and suggests that this evidence is clearly

necessary under what Torrington refers to as the ``Torrington VI

rule.'' Torrington argues that SKF Germany cannot claim that any poor

sales results which may be experienced by distributors on resales of

SKF Germany products necessarily justify rebates allocated to given

classes or kinds. According to Torrington, the Department rejected the

same claim by SKF Germany in the 1992/93 review (citing AFBs IV and

Torrington VI).

With respect to billing adjustment 2, Torrington argues that SKF

Germany's claim for an adjustment cannot be allowed because its

reporting is inconsistent with the so-called Torrington VI rule.

Torrington argues further that, because this is the sixth

administrative review, SKF Germany has had ample time to modify its

record-keeping system to permit the reporting of accurate amounts.

Torrington adds that the Department rejected the same basic claim in

AFBs IV. Torrington contends that, to avoid a benefit to respondent,

the Department should only reject the downward adjustments to NV for

billing adjustment 2. Torrington also asserts that the Department

should reject SKF Germany's argument, in which it cites the Final

Results of Redetermination Pursuant to Court Remand (August 14, 1995)

at 18-19, in The Torrington Company v. United States, Ct. No. 92-07-

00483, that the Department must either accept SKF Germany's reporting

as is or reject all reported adjustments. Torrington claims that this

ruling is not applicable because the Court's remand instructions that

SKF Germany develop a methodology to remove billing adjustments would

not be possible here.

Torrington argues that the Department should also reject SKF

Germany's argument, in its May 24, 1996 submission, that selective

rejection of the reported billing adjustment 2 is an unlawful use of an

adverse inference. Torrington contends that, because this provision is

limited to the selection of facts among facts otherwise available it

does not detract from the Department's authority to reject certain

information provided by the respondent while retaining other

information, also provided by the respondent.

SKF Germany responds that, in the preliminary results, the

Department treated SKF Germany's reported early-payments discounts,

support rebates and billing adjustment 2 correctly as direct

adjustments to price. According to SKF Germany, Torrington is mistaken

[[Page 2094]]

in relying on Torrington VI. SKF Germany claims that the CAFC did not

hold that the Department must reject allocations of direct expenses.

Moreover, SKF Germany argues, the Torrington VI decision is not

relevant under the new law, because the SAA indicates that the

Department will accept allocations of certain direct expenses when

transaction-specific reporting is not feasible, citing the SAA at 823-

24. In addition, according to SKF Germany, the Department indicated in

its explanation to the proposed regulations, 61 FR 7329, that it will

balance the difficulties of reporting transaction-specific expenses

against the potential inaccuracies of reporting on an allocated basis.

SKF Germany argues that, if the Department rejects the adjustments, it

would be acting contrary to section 782(e) of the statute that

information not meeting all of the Department's requirements must still

be accepted if timely, verifiable, reliable, the party acted to the

best of its ability, and the data can be used without undue

difficulties. SKF Germany states that Torrington's position that

allocations involving upward adjustments to comparison-market prices

must be included in the NV calculation would contravene this section of

the statute. SKF Germany adds that the Department rejected a similar

suggestion by Torrington in a remand determination in the appeal of the

1990/91 administrative review of AFBS, citing Final Results of

Redetermination Pursuant to Court Remand (August 14, 1995) at 18-19

filed in The Torrington Co. v. United States, Ct. No. 92-07-00483. SKF

Germany states that allocations may be necessary and appropriate and

that rejection of such reporting would mean that actual expenses

incurred on the subject merchandise or foreign like product would not

be captured in the antidumping calculation. SKF Germany argues that,

even if the Torrington VI decision still applies under the new law, the

Department should treat all PSPAs as direct adjustments if reasonably

reported.

SKF Germany argues further that, with respect to early payment

discounts, the Department has found that transaction-by-transaction

reporting is simply not possible because of the manner in which

customers take those discounts. SKF Germany states that the Department

has verified SKF Germany's reporting of this adjustment, and respondent

claims that it could not have reported the discounts on a more specific

basis.

SKF Germany argues that, with respect to its allocated rebates, the

Department has found that transaction-by-transaction reporting is

simply not possible due to their very nature. SKF Germany argues

further that, with respect to its allocated billing adjustments, the

Department has found that transaction-by-transaction reporting is

simply not possible because the involved adjustments related to

multiple transactions and, therefore, it could not have reported the

adjustments more specifically. SKF Germany adds that the Department

verified its reporting of these adjustments.

SKF Germany argues, citing Final Results of Redetermination

Pursuant to Court Remand (August 14, 1995) at 18-19 filed in The

Torrington Co. v. United States, Ct. No. 92-07-00483, that the lesson

of the court's remand order and the Department's response thereto is

that when an adjustment is denied it is denied; it is not allowed in

part. In addition, SKF Germany asserts that the Department rejected

Torrington's argument that SKF Germany would receive a ``windfall

benefit'' if the Department denied all of SKF Germany's billing

adjustments 2 as opposed to denying only the downward price

adjustments, in that same remand.

Department's Position: We agree with SKF Germany regarding early

payment discounts, support rebates, and billing adjustment 2. SKF

Germany reported these adjustments to the best of its ability. SKF

Germany did not report these adjustments on a transaction-specific

basis due to their very nature and we find that SKF Germany's

methodology is not unreasonably distortive. Further, there is no

information on the record that would lead us to believe that these

adjustments were not granted in proportionate amounts with respect to

sales of out-of-scope and in-scope merchandise. Torrington's argument

that SKF's allocations is distortive is purely speculative.

SKF Germany calculated customer-specific averages of its early-

payment discounts for the periods January 1994 through December 1994

and January 1995 through April 1995. See SKF Germany's September 26,

1995 questionnaire response at pages 28-29. Our examination of its

records and our findings at verification indicate that it is not

feasible for SKF Germany to allocate this adjustment more specifically,

given the large volume of transactions involved, the level of detail

contained in SKF's normal accounting records, and the time constraints

imposed by the statutory deadlines under which all parties must

operate. We are satisfied that this reporting methodology reflects the

nature in which SKF Germany does business and that SKF Germany reported

early-payment discounts to the best of its ability, and that its

methodology is not unreasonably distortive. Regarding the relevance of

the holding of the CAFC in Torrington VI, see our response to comment

1, above.

Due to the nature of support rebates, transaction-specific

reporting is not feasible. While Torrington argues that there is no

evidence that distributors were allowed these rebates as a result of

poor sales results on subject merchandise, as distinct from products

not covered by orders, we do not believe SKF Germany's allocation to be

distortive, as we believe that such adjustments were granted in

proportionate amounts with respect to sales of out-of-scope

merchandise. 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, SKF Germany cannot

report transaction-specific rebate amounts. Therefore, we find that SKF

Germany's reporting methodology is not unreasonably distortive and that

SKF Germany responded to the best of its ability.

With respect to billing adjustment 2, SKF Germany reported billing

adjustments not associated with a specific transaction. These

adjustments included credit or debit notes that SKF Germany issued

relating to multiple invoice lines. SKF Germany could not tie these

adjustments to a specific transaction because the billing adjustments

reported in this field were part of credit or debit notes, issued to

the customer, that related to multiple invoices, products, or multiple

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 AFBs reviews and the

time constraints imposed by the statutory deadlines. For these reasons,

we find that this methodology is not unreasonably distortive.

As mentioned in the introductory remarks at the beginning of this

section, we agree with Torrington that, when we reject a respondent's

allocation, we should only reject the downward adjustments to NV.

However, since we are accepting the reporting of SKF Germany's billing

adjustments, Torrington's argument is not applicable.

Comment 6: Torrington argues that the Department should apply a

five-percent upward adjustment to all of SKF

[[Page 2095]]

France's HM sales because SKF France did not report billing adjustments

of less than five percent of gross unit price (BILLAD2H). Torrington

notes that billing adjustments are invoice-specific and can either

decrease or increase price. Torrington states that it was not

appropriate for SKF France to decide what amounts are insignificant for

purposes of 19 CFR 353.59(a). Further, according to Torrington, the

fact that reporting is inconvenient is not an excuse for failing to

report all amounts on a sale-by-sale basis. Torrington states that

adverse inferences are appropriate because SKF France refused to supply

the information. In response to SKF France's argument made in a

submission during these reviews that its failure to report was

detrimental to SKF France as the total net value of billing adjustments

would have decreased NV, Torrington answers that the total net value of

the adjustment is irrelevant.

Torrington asserts that the statutory changes introduced by the

URAA do not diminish or invalidate the standard articulated by

Torrington VI. Torrington contends that the statutory provision upon

which SKF France relies in its pre-preliminary comments, section

782(e), addresses the situation where systemic difficulties exist with

a response, and does not apply here. In this case, Torrington asserts,

the Department may reject the response in favor of facts available. The

amended statute, according to Torrington, makes clear that the

Department should accept a response only if the response was timely,

verifiable, and reliably complete, if the respondent acted to the best

of its ability, and if the information can be used without undue

difficulties. Torrington asserts that these requirements are not met in

this case.

Torrington argues that the above-discussed grounds for rejection

also apply to Steyr sales, to which SKF France allocated billing

adjustments on the basis of customer numbers. Torrington requests that

the Department draw adverse inferences and adjust all Steyr prices

upward by five percent as facts available.

SKF France asserts that the Department, in the preliminary results,

correctly rejected Torrington's argument regarding adverse facts

available for SKF France's and Steyr's billing adjustment 2. SKF France

claims that there is no basis for the Department to reject SKF France's

reporting methodology, and notes that it has reported this adjustment

in the same manner in prior reviews and the Department verified and

accepted this approach in the 1992/93 review.

Regarding Steyr, SKF France argues that although the Department,

pursuant to the CIT's decisions, has disallowed similar billing

adjustments in the 1992/93 review of AFBs, the URAA and the SAA require

a different result in this review. Under the new statute, SKF France

contends, the Department is required to accept information that may not

meet all of the Department's requirements, provided certain conditions

are met. SKF France claims that Steyr reported billing adjustments

using the most specific reporting method feasible, given the manner in

which the adjustment are incurred and recorded in the normal course of

business. SKF further claims that it acted to the best of its ability

in reporting these adjustments and that the use of these adjustments

would cause no undue difficulty to the Department. In addition,

according to SKF France, the SAA indicates that the Department will

accept allocations of certain expenses when transaction-specific

reporting is not feasible and requires the Department to balance the

difficulties of reporting transaction-specific expenses against the

potential inaccuracies of reporting on an allocated basis. SKF France

argues that, in light of the recent decision by the CAFC in The

Torrington Co. v. United States, Ct. Nos. 95-1210-1211 (CAFC 1996), and

the SAA's directive to consider allocated expenses, it is imperative

that the Department retain the discretion to consider how respondents

report a price adjustment, given that respondent's ordinary business

practices and the nature of the specific adjustment rather than simply

reject all allocated expenses.

SKF France states that it would be inappropriate for the Department

to increase Steyr's prices by five percent as facts available, and

notes that the Department rejected a similar suggestion by Torrington

to apply an adverse inference and selectively accept certain billing

adjustments in a remand determination in the appeal of the 1990/91

administrative review of AFBs (citing Final Results of Redetermination

Pursuant to Court Remand (August 14, 1995) at 18-19 filed in The

Torrington Co. v. United States, Ct. No. 92-07-00483). Further,

according to SKF France, even if the Department determines not to

accept Steyr's reporting of billing adjustments, a five-percent across-

the-board upward price adjustment would amount to an unlawful use of an

adverse inference. SKF France states that, according to the URAA, an

adverse inference is only permitted when a party has failed to

cooperate by not acting to the best of its ability (citing 782(e) of

the statute). SKF France claims that it cooperated fully with the

Department and has acted to the best of its ability with respect to its

reporting of billing adjustment 2.

Department's Position: We agree with SKF France regarding billing

adjustment 2 for SKF France and Steyr. According to SKF France's

February 16, 1996 supplemental questionnaire response at pages 36-37,

it generally uses the field for billing adjustment 2 for SKF France to

include those billing adjustments that were less than five percent of

the gross unit price and less than 1,000 French Francs. However, in

this case SKF France reported zero values in this field, as it has for

previous reviews, because it found the total value of these adjustment

to be insignificant. There is nothing on the record to suggest that

SKF's information is inaccurate. This policy of disregarding

insignificant adjustments is consistent with our policy in prior

reviews.

Regarding Steyr's billing adjustments as reported in billing

adjustment 2, it was not feasible for SKF France to allocate these

adjustments other than on a customer-specific basis because they relate

to multiple invoices or multiple invoice lines. Due to the non-

transaction-specific nature of the expense, the volume of HM

transactions reported by SKF, and the time constraints imposed by the

statutory deadlines, we believe that SKF France reported billing

adjustments for Steyr to the best of its ability. Further, even though

SKF France included out-of-scope merchandise in the allocation of the

adjustment, we have no reason to believe that such adjustments were not

granted in proportionate amounts with respect to sales of out-of-scope

and in-scope merchandise. Hence, we believe that the customer-specific

allocation that SKF France used for Steyr's adjustments is not

unreasonably distortive.

Comment 7: 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 home market

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 (citing

Torrington VI at 1047-1051).

INA responds that it reported product- and invoice-specific billing

adjustments in accordance with the instructions in the Department's

original questionnaire. INA contends that the

[[Page 2096]]

Department verified that it reported home market billing adjustments

properly and cites to the verification report. INA states that there is

no basis to disregard downward home market billing adjustments in

calculating NV.

Department Position: We disagree with Torrington. INA reported this

adjustment on an invoice-specific basis. Where INA had more than one

transaction on an invoice, INA used the same fixed and constant

percentage for all transactions on the invoice. Therefore, we determine

that this is the equivalent of reporting the adjustments on a

transaction-specific basis. Furthermore, we verified INA's HM billing

adjustment and found no discrepancies (Memo from Analyst to File,

Verification of HM Sales Information Submitted by INA Walzlager

Schaeffler KG, at 4, Exhibit 9, June 28, 1996). We have allowed,

therefore, both INA's reported upward and downward home market billing

adjustments.

Comment 8: Torrington argues that Koyo reported its home market

rebates on a customer-specific basis, even though they were incurred on

an invoice-specific basis. Torrington maintains that the Department's

policy states clearly that it only accepts rebates, discounts, and

price adjustments as direct adjustments if respondents report actual

amounts for each transaction.

In rebuttal, Koyo argues that it reported its rebate expenses in

this review in the same manner as it has in past reviews and that the

Department has repeatedly verified and accepted the claimed expense

(citing Home Market Verification Report of Koyo Seiko dated April 16,

1996).

Department's Position: We agree with Koyo. During the verification

of Koyo's rebates, we noted that, once a distributor participating in

the rebate program had purchased a pre-established amount of sales,

Koyo applied a pre-established percentage rebate to all sales to that

distributor. Therefore, reporting the percentage is the equivalent of

reporting its rebates on a transaction-specific basis because the

rebate was granted as a fixed and constant percentage of all affected

sales. We also note that, even under the old law, we would have found

Koyo's methodology to be permissible. See AFBs V at 66498. Therefore,

we determine that Koyo acted to the best of its ability and that its

response methodology is not unreasonably distortive.

Comment 9: Torrington argues that, although the Department accepted

Koyo's billing adjustment (BILLADJ1H) in the preliminary results, it

should deny Koyo's downward or negative billing adjustments. Torrington

states that post-sale price adjustments must be reported on a sale- or

model-specific basis, if incurred on those bases. Torrington contends

that Koyo failed the standard set forth in Torrington VI. Torrington

recommends that the Department deny negative HM billing adjustments and

include positive billing adjustments in the antidumping analysis.

Torrington further suggests that, since Koyo did not report positive

billing adjustments on a transaction-specific basis, the Department

should not use the reported positive billing amounts but should apply,

as partial facts available, Koyo's highest reported positive billing

adjustment to all sales involving positive adjustments.

Koyo acknowledges that it reported billing adjustments using

customer-specific allocations. Koyo maintains, however, that in

Torrington VI the CAFC held that an expense incurred as a direct

expense must be reported as a direct expense, even if allocated. Koyo

maintains further that this holding conforms with the decision in

Smith-Corona Group v. United States, 713 F.2d 1568, 1580 (CAFC 1983),

in which the CAFC, when looking at customer-specific rebates, held that

an allocation methodology did not deprive the rebates of their direct

relationship to the sales under consideration.

Department's Position: We agree with Koyo that we should treat its

billing adjustment as a direct adjustment to NV. We determined at the

home market verification that in preparing its response to the

Department Koyo summed, on a customer-specific basis, the amount of

this adjustment, which was only granted on in-scope merchandise, and

then allocated the customer-specific total expense over in-scope

merchandise on a customer-specific basis. Koyo acted to the best of its

ability in reporting this information using customer-specific

allocations. Information in Koyo's responses and our findings at the

home market verification indicate that, although Koyo does not maintain

this information on an invoice-specific basis, the customer-specific

allocation methodology it used to report this expense to the Department

was not unreasonably distortive. With regard to Torrington's discussion

of the CAFC's decision in Torrington VI, see our response to Comment 1.

Comment 10: Torrington contends that the Department should

disregard the U.S. early payment discounts that NMB/Pelmec reported,

and instead use the highest discount rate for all transactions or the

highest rate any other respondent reported in these proceedings.

Torrington argues that the Department should only accept the reporting

of U.S. discounts if NMB/Pelmec reported actual transaction-specific

amounts. Torrington states that NMB/Pelmec reported U.S. early payment

discounts on a customer-specific basis.

NMB/Pelmec argues that its methodology accurately reflects the

early payment discounts it granted. It claims that its records show

that it granted the discount rates to each customer on all or virtually

all sales. NMB/Pelmec also claims that its records show that customers

always took the discount because the amount of discounts it actually

granted to each customer relative to total sales to each customer

comports with the discount rate it offered. NMB/Pelmec notes that it

used this method, as verified by the Department, in two prior reviews.

NMB/Pelmec notes that, because it reported a discount on all sales to

eligible customers at the customer's rate, any distortion caused by

this allocation would be to NMB/Pelmec's detriment .

Department's Position: We agree with NMB/Pelmec. We have found that

NMB/Pelmec's reporting methodology for early-payment discounts is not

unreasonably distortive. NMB/Pelmec granted discounts at a fixed and

constant percentage of the value of all sales to each eligible

customer. Therefore, reporting the percentage is the equivalent of

reporting its rebates on a transaction-specific basis. Therefore, we

determine that NMB/Pelmec acted to the best of its ability and that its

response methodology is not unreasonably distortive. We also note that,

even under the pre-URAA law, we would have found NMB/Pelmec's

methodology to be permissible. See AFBs V at 66498.

Comment 11: Torrington states that the Department's verification

report indicates that, as a result of a new contract INA entered into

with two of its U.S. customers, there were several retroactive price

changes to certain prices INA reported. Torrington contends, however,

that the verification exhibit reveals that the record is incomplete

with respect to this issue. Torrington requests that the Department

correct the reported sales information to reflect the change in price.

Torrington also states that the Department should require INA to

develop the record to include a full explanation of the nature of the

contracts into which it entered, and to reflect the corrections in the

database, including quantities, price, transaction dates and part

numbers. Torrington states that it is necessary to

[[Page 2097]]

further develop the record because changes to price as a result of

retroactive price adjustments call into question the reliability of all

reported U.S. sales.

INA responds that the Department verified all information

concerning the revisions to some prices for U.S. customers. In

addition, INA states that, as the Department noted in its verification

report, the sales affected by the retroactive price adjustments were

limited to the sales transactions that INA presented to the

verification team at the outset of verification.

Department Position: We agree with respondent and are satisfied

that, given our thorough examination at verification, the record is

complete with respect to this issue. We included the corrected

retroactive price adjustments we received from respondent at

verification in our preliminary analysis because, in our verification

of these adjustments, we found that there were no price adjustments on

other transactions (verification report, at 1). Therefore, we do not

question the reliability of INA's reported U.S. sales and for these

final results, we have adjusted the U.S. database to reflect these

price changes.

Comment 12: Torrington asserts that the Department should disallow

NTN's HM billing adjustments to NV. Petitioner cites the CAFC's

decision in Torrington VI that adjustments of this sort are, by their

nature, indirect and may not be allocated across all sales. Torrington

claims that NTN's description of billing adjustments in its

questionnaire response is unclear as to whether the adjustment is

product-and invoice-specific. Petitioner contends that NTN has not met

its burden of proof of establishing entitlement to the adjustment.

NTN counters that it did not allocate the adjustment broadly across

all sales and that the Department verified the accuracy of the

adjustment and the methodology NTN used to report it. NTN maintains the

Department was correct in accepting the adjustment in the preliminary

results and should do so for the final results.

Department's Position: We disagree with Torrington. NTN's reporting

methodology was consistently customer-and product-specific for billing

adjustments. As a result of our verification of NTN's HM sales, we

found that NTN reported the great majority of billing adjustments on a

transaction-specific basis. As stated in our introductory remarks to

this section, we prefer transaction-specific amounts for these kinds of

adjustment claims. Because NTN acted to the best of its ability in

reporting the adjustment and its allocations are not unreasonably

distortive, we have accepted the reported adjustments for the final

results.

Comment 13: Torrington contends that NTN Germany's HM discounts and

rebates should be rejected in the calculation of NV. Petitioner

maintains that these adjustments are direct adjustments that respondent

has improperly reported on a customer-specific basis. Torrington claims

that respondent has reported its discount adjustment incorrectly based

on information in the public version of the home market verification

report for the 1992-93 administrative review. Because the adjustments

are not reported on a transaction-specific basis, petitioner argues

that the Department must reject them.

NTN Germany counters that it has reported its discounts and rebates

in a consistent and accurate manner in each administrative review and

that the Department should accept them as reported in this review.

Department's Position: We disagree with Torrington. NTN Germany

explained in its response that the adjustments were based on agreements

with customers for eligible products. Resulting total amounts for each

customer were allocated to sales to the customer. Based on NTN

Germany's response and information on the record from verifications of

previous reviews, we believe respondent has acted to the best of its

ability in reporting the adjustments and its allocations are not

unreasonably distortive.

4. Circumstance-of-Sale Adjustments

4.A. Technical Services and Warranty Expenses. Comment 1:

Torrington argues that the Department should reject NSK's claim for an

adjustment to NV for technical service expenses. Torrington asserts

that NSK's description of these expenses indicates a direct

relationship to specific transactions, despite NSK's claim that it

could not isolate technical services for specific sales. Citing

Torrington VI at 1050, Torrington argues that NSK cannot claim direct

expenses as an indirect adjustment merely because it is inconvenient

for NSK to report them on the same basis on which they were incurred.

Torrington also argues that NSK's reported technical service expense

does not distinguish between that paid on subject merchandise and that

paid on non-subject merchandise.

NSK contends that, while it provides technical service with respect

to specific customers or even to specific part numbers, it does not

incur expenses on that basis. NSK argues that the expenses referred to

by Torrington are expenses such as salaries, benefits, rent, utilities,

and depreciation and can be characterized as fixed expenses. NSK also

argues that, because such expenses are ISEs, NSK is under no burden to

remove such expenses as might theoretically relate to sales of non-

subject merchandise because such expenses are incurred to support NSK's

sales generally.

Department's Position: We disagree with Torrington. We have

examined the information on the record and have concluded that, based

on NSK's description, its home market technical service expense (such

as the salaries and benefits of technical service employees) is a fixed

expense and does not vary with sales volumes. Therefore, we conclude

that they are of an indirect nature. We further agree with NSK that,

due to the nature of ISEs, NSK need not segregate such expenses between

those paid on subject and non-subject merchandise.

Comment 2: Torrington argues that the Department should treat NSK's

U.S. technical service expense as a direct expense instead of an

indirect expense. Torrington asserts that NSK admitted that it did

incur direct technical service expenses in the United States but

claimed that allocation of direct technical service expense resulted in

a de minimis factor, instead aggregating them with its indirect

technical service expense. Citing AFBs IV at 10911, Torrington contends

that, when a respondent fails to report U.S. technical service expenses

in direct and indirect portions, it is the Department's practice to

treat the expenses as a direct adjustment to CEP.

NSK argues that it attempted to identify which portion of its

technical service expenses is direct and which is indirect, and it

found that it had no direct technical service expenses which it could

identify. NSK asserts that its technical service expenses are salaries,

repairs, maintenance, and the like, which NSK asserts the Department

has routinely recognized as indirect expenses. Finally, NSK contends

that the Department has always treated its technical service expenses

as an indirect expenses and Torrington has offered no reason for the

Department to reverse itself.

Department's Position: We agree with NSK. In its response to our

questionnaire, NSK identified certain technical service expenses which

NSK said could be considered direct in nature. After examining these

expenses, which are separately identified in NSK's Proprietary Exhibit

C-12, we concluded that reclassifying these expenses as direct would

have no material impact

[[Page 2098]]

on the margin calculation. See NSK Ltd. Final Analysis Memorandum,

dated December 17, 1996. Therefore, we have treated all of NSK's U.S.

technical service expenses as indirect expenses for the final results.

Comment 3: Torrington argues that the Department should reject FAG

Germany's reported HM direct warranty expense because the expense was

allocated over all sales, regardless of model, class or kind, or

customer. Citing Federal-Mogul V at 220, Torrington contends that the

CIT has affirmed the Department's practice of rejecting direct

deductions to foreign market value (now NV) for warranty and technical

service expense because, although they were not incurred as a fixed

percentage of sales value, they were allocated over all sales.

FAG argues that it allocated variable warranty costs over subject

merchandise only, that it explained its allocation in its response, and

that the Department verified its direct warranty expense. FAG argues

that the court case Torrington cites is inapposite because in that case

the allocations were made over both subject and non-subject

merchandise.

Department's Position: We agree with FAG Germany. Similar to

discounts and rebates (see item 3, above), we have accepted claims for

home market direct selling expenses as direct adjustments to price if

we determined that the respondent reported the expense: (1) on a

transaction-specific basis; (2) as a fixed and constant percentage of

the value of sales on which it was incurred; or (3) on an allocated

basis, provided that it was not feasible for the respondent to report

the expense on a more specific basis and the allocation does not cause

unreasonable inaccuracies or distortions (e.g., if granted

proportionately on sales of out-of-scope versus in-scope merchandise).

We have disallowed any allocated HM direct selling expense which did

not meet this standard pursuant to Torrington V.

We find that FAG Germany has reported its HM variable warranty

expenses in the most feasible manner possible. The Department has long

recognized that it is not possible to tie POR warranty expenses to POR

sales, since the warranty expenses can be incurred on pre-POR sales.

Likewise, FAG may not incur warranty expenses on POR sales until a

future time period. Therefore, warranty expenses generally cannot be

reported on a transaction-specific basis and an allocation is

necessary. FAG Germany allocated its warranty expenses related to sales

of scope merchandise and its methodology is not unreasonably

distortive. Accordingly, we have treated FAG's reported HM direct

warranty adjustment as a direct adjustment to NV.

Comment 4: Torrington argues that the Department should disallow

Koyo's HM ISE-offset claim because the company failed to report direct

warranty expenses separately in the manner in which it incurred them.

Torrington, citing Torrington VI at 1047-1051, maintains that direct

expenses, if not reported in the manner in which they are incurred,

must be denied altogether.

Koyo responds that its methodology for reporting its warranty

expenses in this review is the same as that it used in a number of

previous reviews of the orders on AFBs and tapered roller bearings.

Koyo further states that the Department has verified and accepted

Koyo's methodology in previous reviews and has never raised any

complaints regarding Koyo's treatment of warranties.

Department's Position: We disagree with Torrington. In general, it

is not possible to tie POR warranty expenses to POR sales, since the

warranty expenses are incurred on pre-POR sales. Further, Koyo

calculated a warranty expense factor based on the ratio of total

warranty claims to total bearing sales, as in AFBs III (at 39743), in

AFBs IV (at 10910), and in AFBs V (at 66485), where Koyo used the same

allocation methodology. In these reviews, we also find that Koyo's

allocation of warranty expenses is not unreasonably distortive, and we

have accepted them for these final results.

Comment 5: Torrington requests that the Department deny an

adjustment to NV for FAG Italy's reported HM technical service expense,

arguing that the company failed to report the adjustment in the manner

the Department requested. Torrington contends that FAG Italy averaged

total HM direct technical service expenses over all POR sales instead

of on a customer-specific basis as requested by the Department.

Moreover, Torrington claims that the Department should not treat the

claimed HM technical service expense as an indirect expense because the

expense is direct in nature, citing Torrington VI at 1050-1051 in

support of its argument that the Department may not treat direct

expenses as indirect.

FAG Italy argues that it properly calculated and reported its HM

technical service expenses and that the Department lawfully permitted

the adjustment to NV as it has in all prior reviews of these AFB

orders. In support of the Department's treatment of the HM technical

service expenses as direct, FAG Italy states that the expenses are

variable and that they are dependent only upon sales of the merchandise

under review. In conclusion, FAG Italy contends that Torrington's

reference to Torrington VI is inappropriate because the adjustments at

issue in that case were indirect expenses allocated over all sales

(scope and non-scope) whereas FAG Italy's HM technical service expenses

are direct and are only allocated over scope merchandise.

Department's Position: We agree with FAG Italy. In our

questionnaire, we instructed FAG Italy to report the technical service

expenses directly related to sales of the foreign like product, less

any reimbursement received from the customer. In its questionnaire

response, FAG Italy stated that it first subtracted the fees that it

received from its customers from the pool of technical service expenses

and allocated the remainder by dividing by the ``applicable home market

sales.'' This reporting methodology is consistent with FAG Italy's

accounting and record-keeping systems and is an accurate representation

of the company's technical service expenses. Since FAG Italy's

reporting of this information is the most specific that is feasible and

is not unreasonably distortive, we have accepted the company's HM

variable technical service expenses as a direct adjustment to NV.

Comment 6: Torrington states that SNR's response indicates that it

allocated HM warranty expenses over both scope and non-scope

merchandise, despite the Department's verification report indicating

that the expenses were allocated over sales of scope merchandise only.

Torrington urges the Department to ensure for the final results that HM

warranty expenses were properly allocated and have not been overstated.

SNR asserts that the Department verified its direct warranty

expenses, which it limited to returns of scope products and allocated

over sales of only scope products. Therefore, SNR concludes, the

Department found its HM warranty expenses to be properly allocated and

not overstated.

Department Position: We agree with SNR that it allocated only HM

warranty expenses related to scope products over scope products. As we

indicated in the verification report, we verified those warranty

expenses and did not find any discrepancies.

4.B. Commissions. Comment 1: Torrington argues that the Department

should reject NSK's claimed adjustment to NV for commissions paid for

delivery on behalf of NSK. Torrington notes that NSK summed all

commissions paid to a

[[Page 2099]]

commissionaire for deliveries and allocated that amount over total NSK

sales to the commissionaire. Torrington contends that it is not evident

that NSK actually incurred commissions on all sales to the

commissionaire. Torrington also argues that the total commissions and

the total sales to the customer include commissions paid on sales of

non-subject merchandise, which is contrary to law, citing Torrington I

at 1579. Finally, Torrington argues that, even if the Department

permits an adjustment for such commissions, the Department should

disregard those commissions NSK paid to affiliated commissionaires

because NSK failed to demonstrate that they were made at arm's length.

NSK argues that the Department correctly deducted commissions for

delivery on behalf of NSK as a direct expense. NSK argues that the

proposed regulations for implementing the URAA allow respondents to

allocate expenses if transaction-specific reporting is not feasible, as

long as the allocation is not distortive (citing Antidumping Duties;

Countervailing Duties; Proposed Rule, 61 FR 7308, 7330, 7381 (February

27, 1996) (proposed Sec. 351.401(g) and commentary)). NSK contends that

its records are not maintained on a transaction-specific basis and,

therefore, it cannot report HM commission expenses on a transaction-

specific basis. NSK claims that its allocation methodology is non-

distortive.

Department's Position: We disagree with Torrington. We conclude

that, although NSK may not have allocated these commissions on the same

basis that they were incurred, the allocation methodology is

sufficiently accurate that whatever distortion may exist will have no

material impact on NSK's margin. As we noted in the home market

verification report, NSK calculated customer-specific factors by

dividing the total commission paid to a commissionaire by the sum of

the sales that generated the commission. See Home Market Verification

Report dated April 26, 1996, at page five. As the allocation is

customer-specific, there is no possibility of shifting expenses from

one customer to another. Moreover, because NSK allocated these

commissions over only those sales that actually incurred such

commissions, there is no possibility that NSK reported commissions for

sales which did not incur them. Finally, for business proprietary

reasons discussed in the analysis memorandum, we conclude that there is

no possibility that NSK included in its reporting any commissions paid

on non-subject merchandise. See NSK Ltd. Final Analysis Memorandum,

dated December 17, 1996. For these reasons we disagree with Torrington,

and we conclude that NSK's allocation methodology is not unreasonably

distortive and that NSK acted to the best of its ability in reporting

these commissions. Therefore, we determine that a direct adjustment to

NV for commissions for delivery on behalf of NSK is appropriate.

We agree with Torrington that we should disregard commissions that

NSK paid to affiliated commissionaires for delivery on behalf of NSK.

As discussed in the final results analysis memorandum, we conclude that

the commissions NSK paid to affiliated commissionaires were not made at

arm's-length. See NSK Ltd. Final Analysis Memorandum, dated December

17, 1996.

Comment 2: Torrington argues that the Department should reject

NSK's claim for an adjustment to NV for distributor-incentive

commissions. Torrington notes that the Department treated this as a

direct adjustment to NV for the preliminary results even though NSK

requested that these commissions be treated as ISEs. Torrington argues

that NSK failed to demonstrate that these commissions do not include

payments it made on non-subject merchandise or that it, in fact, paid

any commissions on subject merchandise. Torrington also claims that

NSK's allocation methodology is distortive, because the possibility

exists that it claimed an adjustment on sales for which it paid no

commission. Torrington asserts that the Department disallowed this

expense in AFBs IV, as well as in Tapered Roller Bearings from Japan,

56 FR 64720, 64723 (1993), and was affirmed by the CIT in NSK III.

Finally, Torrington argues that, even if the Department permits an

adjustment for such commissions for the final results, the Department

should disregard commissions NSK paid to affiliated commissionaires.

NSK argues that the Department should continue to treat

distributor-incentive commissions as a direct expense. NSK contends

that, while the Department rejected its distributor-incentive

commissions in AFBs IV, it later treated such commissions as a direct

expense and this practice was affirmed in Torrington IV.

Department's Position: We agree with Torrington that we should not

treat distributor-incentive commissions as a direct adjustment to NV.

Our treatment of these commissions as a direct adjustment for the

preliminary results was an inadvertent error on our part. As NSK

explained in its supplemental response, ``this expense is earned on the

basis of the distributor's resale, rather than on NSK's sale to the

distributor.'' See NSK's response to our supplemental questionnaire,

dated December 7, 1995. We later verified this information. See NSK

home market verification report, dated April 26, 1996. We conclude that

NSK did not incur this expense directly on its sales to its customers.

Based on the nature of this expense, we conclude that it is not really

a commission. Rather, we agree with NSK's characterization in its

supplemental response that distributor-incentive commissions are an

indirect promotional expense as opposed to a price adjustment because

NSK grants these ``commissions'' to promote sales made by distributors.

We disagree with Torrington that we should disregard distributor-

incentive commissions NSK paid to affiliated commissionaires. As

discussed in the final results analysis memorandum, we conclude that

the commissions NSK paid to affiliated commissionaires were made at

arm's length. Therefore, we have adjusted NV for these commissions. See

NSK Ltd. Final Analysis Memorandum, dated December 17, 1996.

4.C. Credit. Comment 1: Torrington argues that the Department

should adjust NSK's HM credit expense calculations by excluding

discounted notes. Torrington argues that discounted notes are not part

of an unpaid balance but rather represent paid amounts, albeit at a

discount, during the month. Torrington argues that the burden is on NSK

to demonstrate that it did not include notes that had been paid, and

contends that NSK did not demonstrate this on the record. Therefore,

Torrington argues, the Department should either exclude discounted

notes from NSK's credit-expense calculation or use the lowest credit

expense NSK reported for all HM sales during the POR.

NSK argues that the Department verified that, while NSK included

unpaid notes receivable in its credit calculation, it did not count

notes receivable that had been paid. NSK also argues that it used the

term ``discounted'' to differentiate one specific type of notes

receivable from other types.

Department's Position: We disagree with Torrington. While

discounted notes do not technically represent an unpaid balance, NSK

does not obtain the use of the entire balance owed by the customer for

the note. When a company discounts a note through a bank, the bank

typically assesses a charge or fee for discounting the note. Therefore,

when discounting a note

[[Page 2100]]

through a bank, the company incurs a cost for obtaining a smaller

amount of money than that to which it would be entitled had it held

onto the note until maturity. NSK calculated the interest rate for its

discounted notes in a manner similar to that which it did for other

loans. At verification, we found that NSK does incur discounted-note

expenses, and we determined in our analysis of NSK's reported HM credit

expense that respondent accounted for discounted notes properly in its

methodology.

Comment 2: Torrington comments that FAG Germany improperly added

one credit day in calculating credit expense for HM sales, by claiming

that, under operating procedures common to the German banking system,

there is a lag in the availability of funds in Germany which does not

exist in the United States. Torrington contends that, even if the

alleged banking delay was supported by the record, it would apply to

all payments in Germany, whether completed upon delivery or after the

expiration of an agreed-upon term. Thus, Torrington argues, the one-day

period allegedly required by the bank to process the payment is no more

relevant to the imputed credit expense calculation than, for example, a

respondent's own administrative delays. Torrington argues that the

Department should recalculate FAG Germany's reported home market credit

expense by reducing the time between sale and payment by one day.

FAG Germany argues that, in accordance with specific procedures

which the Department verified, it does not technically receive payment

from its customers until the day after its banks actually received the

customer's check or transfer. FAG Germany contends that, in accordance

with Departmental reporting requirements, it reports all expenses on

the same basis in which they are incurred, and that, where funds are

not available in FAG's accounts until one day after deposit by German

law and practice, it has legitimately incurred an extra day of credit

costs.

Department's Position: We agree with FAG. As we noted in the HM

verification report, we analyzed several credit notes, promissory

notes, and short-term loan agreements to determine the accuracy of

FAG's submission and found no discrepancies. Therefore, we found that

FAG reported its dates of payment in its response accurately. Had FAG

not justified the extra day reported in the home market at

verification, we would have noted it and adjusted FAG's HM credit

expenses accordingly. As this was not the case, we have accepted FAG's

HM credit expenses as reported.

Comment 3: Torrington contends that the Department should not

accept FAG Italy's HM credit expense data that the company provided

after verification unless the Department is fully satisfied that the

amounts are accurate. Torrington notes that, at verification, the

Department discovered FAG Italy had failed to report credit amounts for

certain HM customer codes. Torrington's concern is that when FAG Italy

submitted the credit expense information on the record after

verification it may have overstated its customers'' actual credit

expenses. Torrington requests that the Department compare the average

credit expenses FAG Italy reported after verification to the average

credit expenses it reported originally to ensure that the new credit

expense figures typify FAG Italy's experience.

FAG Italy contends that it reported accurately the missing credit

expenses discovered at verification. FAG Italy notes that its

inadvertent reporting error affected very few transactions and argues

that Torrington's concern about the credit expenses being over-reported

is unfounded since the Department successfully verified the calculation

of the missing HM credit expenses and the data used therein.

Department's Position: We agree with FAG Italy that it reported

accurately the missing HM credit expenses we discovered at

verification. To test whether FAG Italy reported these expenses

accurately in its revised database, we compared the average credit

expenses the company reported after verification to the average credit

expenses it reported originally. We found that the new credit expenses

typify FAG Italy's experience and we made the adjustment to NV for the

final results.

Comment 4: Torrington argues that the Department should ensure that

it deducts NSK-RHP's credit expense on all relevant U.S. sales.

Torrington claims that NSK-RHP did not report a U.S. credit expense for

those sales for which it was unable to determine the appropriate date

of payment. Torrington states further that, in response to Torrington's

pre-preliminary comments, NSK-RHP asserted that the Department should

calculate the credit expense based on the due date of respondent's

supplemental response, January 11, 1996, which was the last time NSK-

RHP submitted data. Torrington claims that NSK-RHP left the credit

expense for certain U.S. sales blank even though the information was

subsequently available. Torrington proposes that an appropriate amount

for credit expense for such sales should be based on the number of days

from shipment to the date of the preliminary results.

Torrington states that, with respect to those U.S. sales for which

INA did not report a payment date, the Department should estimate a

payment period, for the purpose of calculating credit expenses, based

on the difference between the date of sale and the date of the final

results of review.

NSK-RHP argues that the Department instructed NSK-RHP to leave the

date of payment variable blank for all transactions for which NSK-RHP

or its affiliated companies could not determine the date of payment.

NSK-RHP contends that it followed the Department's instructions and has

cooperated fully with the Department's requests for information and,

thus, use of adverse facts available is inappropriate in this case.

NSK-RHP concludes by stating that the Department calculated its credit

expense correctly for the preliminary results.

INA agrees with Torrington that the Department should estimate a

credit period for U.S. sales without a payment date but disagrees with

Torrington's proposed methodology. INA contends that the period

Torrington proposes is arbitrary and an application of adverse facts

available, for which there is no basis. Instead, INA argues, the

Department should apply the methodology it employed in other cases,

where the Department calculated a surrogate credit period based on the

average number of days between the date of sale and the date of payment

for all U.S. sales.

Department's Position: We agree with Torrington that NSK-RHP did

not provide date of payment information for those U.S. sales for which

it contends that it could not determine the date of payment. However,

the record illustrates that, as is the case with INA, NSK-RHP completed

this field for as many transactions as possible and left it blank for

only those transactions in which it could not determine the date of

payment as instructed in our original questionnaire at page C-11, field

12.0.

Under section 776(a)(1), the Department shall use the facts

otherwise available in reaching its final determination when the

necessary information is not on the record. Because the final date of

payment is not known for certain transactions for these respondents, we

must resort to facts otherwise available in determining a reasonable

period of time for calculating credit expenses. We agree with

Torrington that we should estimate a payment period for those sales for

which NSK-RHP and INA did not

[[Page 2101]]

provide the date of payment. However, we disagree with Torrington's

recommendation that we use the number of days from shipment to the date

of the preliminary results as a surrogate. This treatment would

constitute an adverse inference and is not warranted by the facts of

this case. Therefore, for these final results, we used the average

credit period for all transactions with reported shipment and payment

dates as a surrogate for the actual credit period in calculating credit

expenses for those sales without a known date of payment. See Final

Determination of Sales at Less Than Fair Value: Certain Pasta From

Italy, 61 FR 30332 (June 14, 1996).

Comment 5: Torrington argues that the Department should ensure that

SKF France has reported appropriate payment dates for HM sales.

Torrington contends that SKF France identified the payment date as the

date the payment is deposited in SKF's bank and that this date may be

several days after the date which the customer actually paid SKF.

Torrington asserts that, if the Department cannot determine that SKF

France reported the actual payment date, it should apply a facts-

available approach, such as an estimate of the number of days between

receipt of check and deposit in the bank, and adjust the credit expense

accordingly.

SKF France argues that the Department has verified and accepted SKF

France's credit expense calculation, as well as its record-keeping and

accounting payment on invoices. SKF France adds that it linked the

invoice number to the dates of payment electronically such that, in all

but a very few instances, it reported the actual payment date.

Department's Position: We agree with SKF. We have no reason to

believe that SKF France reported payment dates for HM sales

inappropriately. Torrington does not offer any evidence that SKF

France's reported payment date is not the actual date SKF France

received payment. Further, as SKF France stated in its September 26,

1995 response, only in a few cases did it not report the actual payment

date. Where SKF France could not identify the actual payment date it

used an average customer-specific or company-specific accounts-

receivable days-outstanding date. See SKF France's questionnaire

response at 48. Hence, we are satisfied that SKF France's reporting of

its HM payment date is not unreasonably distortive.

Comment 6: Torrington contends that, based on information in NTN's

financial statements, respondent has under-reported the days

outstanding for the calculation of U.S. credit expenses. Petitioner

provides analysis of the financial statements as applied to sampled

sales and suggests that the Department recompute the expense.

Department's Position: We disagree with Torrington. We examined

credit expenses at our verification of the U.S. response. NTN reported

customer-specific days outstanding on payments rather than transaction-

specific days outstanding. Although there were instances of slight

variation from the customer-specific days outstanding to the

transaction-specific days outstanding, the reported outstanding periods

were largely accurate and reasonably reflect the days outstanding basis

for the calculation.

4.D. Indirect Selling Expenses. Comment 1: Torrington contends

that INA's method of calculating its U.S. ISE ratio (selling expenses

incurred on sales of imported merchandise to total sales of imported

merchandise) is distortive. Torrington asserts that INA's records do

not allow for a distinction to be made between selling expenses on

imported merchandise and selling expenses on U.S.-produced merchandise.

Torrington states that some of the cost centers, for which INA applied

ratios to total expenses accumulated in each cost center to obtain an

estimated amount for expenses attributable to import sales, were

associated with U.S.-produced merchandise. Torrington also states that,

for many cost centers, INA was unable to calculate a specific ratio.

Torrington concludes that the Department should reject INA's reported

U.S. ISE rate and recalculate it based on total expenses and sales.

INA agrees with Torrington's proposal that the Department

recalculate the U.S. ISE rate based on total expenses and sales of

produced and imported merchandise. INA provides proposed revised rates

which it states are based on corrected data it submitted to the

Department in its supplemental questionnaire response.

Department Position: We disagree with Torrington's assertion that

INA's U.S. ISE ratio is distortive. We verified the calculation of this

expense thoroughly and were satisfied with INA's methodology. As we

indicated in the verification report, INA applied a specific ratio for

those cost centers for which INA maintains separate records in its

monthly sales detail. For those cost centers for which it was unable to

calculate a more specific ratio, INA applied general ratios to total

expenses associated with U.S.-produced merchandise. We believe that

INA's method of allocating its U.S. ISEs is not unreasonably distortive

and have relied on it for the final results.

Our practice is to adhere to an individual firm's recording of

costs, if we are satisfied that such principles reasonably reflect the

costs of producing the subject merchandise and are in accordance with

the GAAP of its home country. See, e.g., Canned Pineapple Fruit from

Thailand; Final Determination of Sales at Less Than Fair Value (Canned

Pineapple from Thailand), 60 FR 29553, 29559 (June 5, 1995); Certain

Stainless Steel Welded Pipe from the Republic of Korea; Final

Determination of Sales at Less Than Fair Value, 57 FR 53693, 53705

(November 12, 1992). See also Furfuryl Alcohol from South Africa: Final

Determination of Sales at Less Than Fair Value, 60 FR 22550, 22556 (May

8, 1995) (``(t)he Department normally relies on the respondent's books

and records prepared in accordance with the home country GAAP unless

these accounting records do not reasonably reflect the COP of the

merchandise'). The CIT has upheld the Department's use of expenses

recorded in a company's financial statements, when those statements are

prepared in accordance with the home country's GAAP and do not

significantly distort the company's actual costs. See, e.g., Laclede

Steel Co. v. United States, Slip Op. 94-160 at 22 (CIT 1994). Normal

accounting practices provide an objective standard by which to measure

costs, while allowing respondents a predictable basis on which to

compute those costs. However, in those instances where it determines

that a company's normal accounting practices result in a unreasonable

allocation of production costs, the Department will make certain

adjustments or may use alternative methodologies that more accurately

capture the costs incurred. See, e.g., New Minivans from Japan; Final

Determination of Sales at Less Than Fair Value, 57 FR 21937, 21952 (May

26, 1992). In this case, we are satisfied that INA's calculations

reasonably reflect its ISEs. The fact that INA calculated a general

ratio for only some of its cost centers does not prevent us from

reasonably using the data provided to us by INA concerning its ISEs.

Thus, the application of facts available is not warranted; we have not

recalculated INA's reported U.S. ISEs.

Comment 2: Torrington contends that the Department should modify

its calculation of INA's U.S. ISEs incurred in the country of

exportation in order to reflect the addition of certain cost centers

INA reported in its supplemental questionnaire response.

INA asserts that the Department included the revised U.S. ISE rate

in the preliminary results and that this rate is

[[Page 2102]]

actually higher than the U.S. ISE rate that would result under

Torrington's proposed methodology.

Department Position: We disagree with Torrington. As stated in

response to Comment 1, we disagree with the view that we should adopt

Torrington's methodology for recalculating U.S. ISEs (see Comment 1 of

this section). Moreover, INA is correct in its assertion that we

included the revised U.S. ISEs in the preliminary results calculations.

Because no party has adequately supported an alternative methodology,

we have no basis for determining that our preliminary results

calculations were not reasonable. Accordingly, we have maintained this

revision of INA's U.S. ISEs for the final results of review.

Comment 3: Torrington contends that the Department's verification

report indicates that INA did not allocate its domestic ISE ratio on

the same basis as its export ISE ratio. Torrington argues that, as a

result, INA has overstated its domestic ISEs because, while the

denominator for the export ISE ratio includes all export sales, the

denominator for the HM ISE ratio does not include all domestic sales.

In addition, Torrington cites to the Department's verification report

as support for its argument that the numerator of the domestic ISE

ratio includes costs that are not selling expenses. Torrington asserts

that, by including such expenses, INA has overstated the numerator of

this ratio. Torrington contends that, if it is feasible, the Department

should recalculate the domestic ISE ratio; otherwise, Torrington

argues, the Department should reject the reported HM ISEs.

INA responds that it reported home market indirect selling expenses

properly. INA takes issue with Torrington's assertion that the

Department's verification report stated that INA's allocation of its

domestic indirect selling expenses is inconsistent with its allocation

of export selling expenses. INA explains that it determined the sales

and expenses of the enterprise that produces the subject merchandise in

the home market on a consolidated basis, eliminating transactions

between the HM entities which comprise the HM manufacturing entity. INA

states that the consolidated entities do not include those outside the

home market because such entities are not associated with the

enterprise that manufactures subject merchandise; rather, they are

customers of the enterprise. INA also takes issue with Torrington's

assertion that the numerator of the ratio INA used to allocate domestic

ISEs includes costs which are not selling expenses. INA contends that,

in calculating the numerator amount, it excluded those categories that

it reported under other classifications (in accordance with the

Department's instructions in the questionnaire), and those which were

not applicable to HM sales. INA states that it classified the remaining

cost centers as domestic selling expenses as directed by the

questionnaire.

Department Position: We disagree with Torrington. As we indicated

in response to comment 1, in determining whether to adhere to an

individual firm's recording of costs, an important factor is whether we

are satisfied that its reporting reasonably reflect the expenses being

examined. In this case, we find that INA's methodology is not

distortive. Indeed, we examined INA's reporting methodology for ISEs

thoroughly at verification. Based on our examination, we are satisfied

that INA's allocation of its domestic ISEs is consistent with its

allocation of its export selling expenses.

Comment 4: Torrington argues that the Department should adjust

NSK's claimed HM ISEs to disallow a certain expense included in the

pool of ISEs. Torrington argues that, although NSK did not report how

it calculated this expense, NSK claimed this expense as a direct

adjustment to foreign market value (FMV) in prior reviews. Torrington

contends that NSK incurred this expense on specific transactions and

that, pursuant to Torrington VI at 1050, the Department cannot treat it

as an indirect expense. Torrington also argues that NSK's allocation is

distortive because it is not reported on the basis on which it is

incurred and that NSK's allocation does not distinguish between subject

and non-subject merchandise.

NSK argues that the Department has determined in prior reviews that

the expense is not incurred directly on sales NSK made. NSK contends

that it reported this expense in a manner consistent with the

Department's prior rulings on this expense.

Department's Position: We disagree with Torrington and, for these

final results, have treated all of NSK's claimed HM ISEs as indirect

expenses. In determining whether to treat these and other expenses at

direct or indirect expenses, we examined whether they vary with the

quantity of subject merchandise sold (see Zenith Electronics Corp. v.

United States, 77 F.3d 426, 431 (CAFC 1996)), or were related to a

particular sale (see Torrington Co. v. United States, 68 F.3d 1347,

1353 (CAFC 1995). This analysis did not lead us to conclude that, as

argued by Torrington, NSK incurred the ISEs on specific transactions.

Thus, although the proprietary nature of this expense makes it

impossible to give a full discussion of this issue in this notice, we

note that it is evident from the record that NSK did not incur this

expense directly on sales to its customers. This issue is discussed

further in NSK's analysis memorandum. See NSK Ltd. Final Analysis

Memorandum, dated December 17, 1996. Therefore, we conclude that the

expense is not related directly to any sales NSK reported in its HM

sales database and it is proper to treat it as an indirect expense.

Comment 5: Torrington argues that the Department should treat NSK's

U.S. advertising expense as a direct expense instead of as an indirect

expense. Torrington contends that NSK did not adequately prove that its

advertising expenses were indirect, stating that NSK did not provide

examples of U.S. advertising and that the Department did not examine

examples of NSK's U.S. advertising in the course of verification.

NSK argues that the Department has rejected similar arguments made

by Torrington in prior reviews and argues that its catalogs and show

exhibits are not aimed at the customer's customer and, therefore, are

indirect in nature.

Department's Position: We agree with NSK. For advertising to be

treated as a direct expense, it must be incurred on products under

review and assumed on behalf of the respondent's customer; that is, it

must be shown to be directed toward the customer's customer. See AFBs I

at 31725. The examples of U.S. advertising submitted by NSK are not

specific to bearings but instead are general in nature, as NSK

suggests. NSK's supplemental response dated December 7, 1995, at page

56, described the advertising expenses that NSK incurs. We examined

these expenses and determined that they are not aimed at the customer's

customer. Therefore, we are satisfied that NSK's U.S. advertising

expenses are indirect. With regard to the catalogs, it is apparent that

they are not aimed at any particular customers or group of customers.

While NSK's customers' customers may have used some catalogs, it is not

evident that only the customers' customers used them or that the

catalogs were targeted for the customers' customer. With regard to the

show exhibit expense, it is clear from information on the record that

this expense was aimed at NSK's customers and not to the customers'

customer. Finally, other NSK advertising expenses, such as hats and

shirts that carry NSK's logo, are ``image'' advertising and not aimed

at any customer or group of customers. The

[[Page 2103]]

record in this review reflects that NSK's U.S. advertising expenses are

indirect in nature. Therefore, we conclude that none of these

advertising expenses are direct in nature and have treated them as ISEs

for these final results.

Comment 6: Torrington contends that FAG Germany never explained its

HM ISE-allocation methodology in any of its responses and that the

Department recognized this failure in its verification report.

Torrington contends that, although the Department included an

explanation of the allocation methodology in its verification report,

the explanation applies to only one of the legal entities that comprise

FAG KGS. Torrington claims that, although FAG Germany indicated that it

used the same methodology for the other entities, the Department's

verification report appears to refute FAG Germany's claim.

Torrington argues that FAG Germany's failure to provide an

explanation deprives the domestic interested party of an adequate

opportunity to comment on the claimed expenses and distorts the

investigative proce

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