Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan; Final Results of Antidumping Duty Administrative Reviews and Termination in Part

DEPARTMENT OF COMMERCE

International Trade Administration

[A-588-604; A-588-054]

Tapered Roller Bearings and Parts Thereof, Finished and

Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or

Less in Outside Diameter, and Components Thereof, From Japan; Final

Results of Antidumping Duty Administrative Reviews and Termination in

Part

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

reviews and termination in part.

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

SUMMARY: On May 20, 1996, the Department of Commerce (the Department)

published the preliminary results of its 1992-93 and 1993-94

administrative reviews of the antidumping duty order on tapered roller

bearings (TRBs) and parts thereof, finished and unfinished, from Japan

(A-588-604), and of the finding on TRBs, four inches or less in outside

diameter, and components thereof, from Japan (A-588-054). The review of

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

resellers/exporters of the subject merchandise to the United States

during the period October 1, 1993, through September 30, 1994, and one

manufacturer/exporter for the period October 1, 1992, through September

30, 1993. The review of the A-588-604 order covers five manufacturers/

exporters, ten resellers/exporters, and seventeen firms identified by

the petitioner in this case as forging producers, and the period

October 1, 1993, through September 30, 1994. The A-588-604 review also

covers one manufacturer/exporter for the period October 1, 1992,

through September 30, 1993.

We gave interested parties an opportunity to comment on our

preliminary results. Based upon our analysis of the comments received

we have changed the results from those presented in the preliminary

results of review.

EFFECTIVE DATE: April 27, 1998.

FOR FURTHER INFORMATION CONTACT: Robert James at (202) 482-5222 or John

Kugelman at (202) 482-0649, Antidumping and Countervailing Duty

Enforcement Group III, Office 8, Import Administration, International

Trade Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, NW, Washington, D.C. 20230.

APPLICABLE STATUTE AND REGULATIONS: Unless otherwise indicated, all

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

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

SUPPLEMENTARY INFORMATION:

Background

On August 18, 1976, the Treasury Department published in the

Federal Register (41 FR 34974) the antidumping finding on TRBs from

Japan, and on October 6, 1987, the Department published the antidumping

duty order

[[Page 20586]]

on TRBs from Japan (52 FR 37352). On October 7, 1994 (59 FR 51166), the

Department published the notice of ``Opportunity to Request an

Administrative Review'' for the 1993-94 reviews of both TRBs cases. The

petitioner, the Timken Co. (Timken), and two respondents requested

administrative reviews. We initiated the A-588-054 and A-588-604

administrative reviews for the period October 1993 through September

1994 on November 14, 1994 (59 FR 56459). On May 20, 1996, we published

in the Federal Register the preliminary results of the 1993-94

administrative reviews of the antidumping duty order and finding on

TRBs from Japan (see Tapered Roller Bearings and Parts Thereof,

Finished and Unfinished, from Japan, and Tapered Roller Bearings, Four

Inches or Less in Outside Diameter, and Components Thereof, from Japan;

Preliminary Results of Antidumping Duty Administrative Reviews and

Termination in Part, 61 FR 25200 (Prelim Results).

The Prelim Results also included the preliminary results for the

1992-93 administrative reviews of both TRBs cases for Koyo Seiko

Company, Ltd. (Koyo). While we initiated the 1992-93 reviews of both

TRBs cases on November 17, 1993 (58 FR 60600) and published our final

results of administrative reviews for the 1992-93 period in the Federal

Register on November 7, 1996, we did not include Koyo in these 1992-93

reviews (see Tapered Roller Bearings and Parts Thereof, Finished and

Unfinished, from Japan, and Tapered Roller Bearings, Four Inches or

Less in Outside Diameter, and Components Thereof, from Japan; Final

Results of Antidumping Duty Administrative Reviews and Revocation in

Part of an Antidumping Finding, 61 FR 57629 (TRBs 92-93)). Rather, as

explained in our Prelim Results, we determined that, because we had yet

to make our final scope determination concerning Koyo's rough forgings,

rather than delay our 1992-93 results of review for all other reviewed

firms, we would conduct Koyo's 1992-93 reviews after making our final

scope determination. On February 2, 1995, we published in the Federal

Register our final scope determination in which we found Koyo's rough

forgings to be within the scope of the A-588-604 TRBs order (60 FR

6519). We provided Koyo additional time to submit sales and cost

information concerning its rough forgings for both the 1992-93 and

1993-94 administrative reviews and determined that, due to the timing

of our receipt of this information and the timing of our 1993-94

administrative review analysis, it would be appropriate to conduct the

1992-93 and 1993-94 reviews for Koyo concurrently (see Prelim Results

at 25200). As a result, both Koyo's 1992-93 and 1993-94 final results

are included in this instant notice.

On August 21, 1996, we held a hearing which covered the 1993-94

reviews of both the A-588-054 and A-588-604 TRBs cases and the 1992-93

reviews of Koyo in both the TRBs cases. In addition, the Department re-

opened the administrative record of these proceedings on March 16, 1998

to afford Kawasaki an additional opportunity to submit a complete

response to the Department's antidumping questionnaire. On March 23,

1998, Kawasaki declined to do so.

The Department has now completed these reviews in accordance with

section 751 of the Tariff Act of 1930, as amended (the Tariff Act).

Scope of the Review

Imports covered by the A-588-054 finding are sales or entries of

TRBs, four inches or less in outside diameter when assembled, including

inner race or cone assemblies and outer races or cups, sold either as a

unit or separately. This merchandise is classified under the Harmonized

Tariff Schedule (HTS) item numbers 8482.20.00 and 8482.99.30.

Imports covered by the A-588-604 order include TRBs and parts

thereof, finished and unfinished, which are flange, take-up cartridge,

and hanger units incorporating TRBs, and tapered roller housings

(except pillow blocks) incorporating tapered rollers, with or without

spindles, whether or not for automotive use. Products subject to the A-

588-054 finding are not included within the scope of this order, except

for those manufactured by NTN Bearing Corporation, Ltd. (NTN). This

merchandise is currently classifiable under HTS item numbers

8482.99.30, 8483.20.40, 8482.20.20, 8483.20.80, 8482.91.00, 8484.30.80,

8483.90.20, 8483.90.30, and 8483.90.60. In addition, in accordance with

our February 2, 1995, final scope determination concerning Koyo's rough

forgings, Koyo's rough forgings are also included within the scope of

the A-588-604 order.

The HTS numbers listed above for both the A-588-054 finding and the

A-588-604 order are provided for convenience and Customs purposes. The

written description remains dispositive.

The period for each 1993-94 review is October 1, 1993, through

September 30, 1994. These reviews cover TRBs sales by five TRBs

manufacturers/exporters (Koyo, NSK Ltd. (NSK), NTN, Nachi-Fujikoshi

Corporation (Nachi), and Maekawa Bearing Mfg. Co., Ltd. (Maekawa)), and

ten resellers/exporters (Honda Motor Company (Honda), Fuji Heavy

Industries, Ltd. (Fuji), Kawasaki Heavy Industries, Ltd. (Kawasaki),

Yamaha Motor Co., Ltd. (Yamaha), Sumitomo Corporation (Sumitomo),

Itochu Co., Ltd. (Itochu), Suzuki Motor Co., Ltd. (Suzuki), Nigata

Converter Co., Ltd. (Nigata), Toyosha Co., Ltd. (Toyosha), and MC

International (MC Int'l)). These reviews also cover U.S. sales/

importations of forgings by Koyo, NTN, and seventeen firms identified

by the petitioner as Japanese forging producers (Daido Steel Co., Ltd.

(Daido Steel), Asakawa Screw Co., Ltd. (Asakawa), Fuse Rashi Co., Ltd.

(Fuse), Hamanaka Nut Mfg. Co., Ltd. (Hamanaka), Ichiyanagi Tekko

(Ichiyanagi), Isshi Nut Industries (Isshi Nut), Kawada Tekko, Kinki

Maruseo Nut Kogyo Kumiai (Kinki), Kitazawa Valve Co., Ltd. (Kitz

Corp.), Nittetsu Bolten (Nittstsu), Shiga Bolt, Shinko Bolt, Sugiura

Seisakusho (Sugiura), Sumikin Seiatsu (Sumikin), Toyo Valve Co. (Toyo

Valve), Unytite Fastener Mfg. Co., Ltd. (Unytite Kogyo), and Showa

Seiko Co., Ltd. (Showa)).

As explained in the Prelim Results, we have terminated the 1993-94

reviews of the A-588-604 case for Fuse, Hamanaka, Kinki, Kitz Corp.,

Shiga Bolt, Shinko Bolt, Sugiura, Toyo Valve, Nittetsu, Sumikin, and

Unytite Kogyo (see Prelim Results at 25202). As also explained in the

Prelim Results, we used for Nachi, Kawasaki, Daido Steel, Kawanda

Tekko, Asakawa, Ichiyanagi, and Isshi Nut a first-tier non-cooperative

total best information available (BIA) rate of 40.37 percent in the A-

588-604 case. In addition, we used a first-tier total BIA rate of 47.63

percent for Kawasaki and Nachi in the A-588-054 case (see Prelim

Results at 25201).

Because Fuji and MC Int'l did not make any shipments of subject

merchandise during the POR in the A-588-604 case and because Showa did

not make any shipments of subject merchandise during the POR in the A-

588-604 case, as explained in our Prelim Results, we have not assigned

a rate to Fuji and MC Int'l in the A-588-604 nor to Showa in the A-588-

604 case (see Prelim Results at 25202).

Because we determined in the Prelim Results that Itochu and

Sumitomo have no influence over the sale prices and quantities of those

shipments of TRBs they made to the United States, we have determined

that the supplier's rates, and not unique Sumitomo and Itochu rates,

[[Page 20587]]

should be applied for cash deposit and appraisement purposes (see

Prelim Results at 25202).

Finally, we have terminated the 1993-94 A-588-054 review for Honda

since we recently revoked Honda from the A-588-054 finding in our 1992-

93 final results (see TRBs 92-93 at 57650).

The period for the 1992-93 reviews is October 1, 1992, through

September 30, 1993. The 1992-93 reviews of both the A-588-054 and A-

588-604 cases included in this notice cover TRBs sales by Koyo.

Analysis of Comments Received

We received case briefs from Timken, Koyo, NTN, NSK, Fuji, and

Kawasaki. We received rebuttal briefs from Timken, Koyo, NTN, and NSK.

In addition, at the request of the presiding official at the hearing,

we received additional comments from NTN on August 28, 1996, and

additional comments from Timken on September 9, 1996, regarding the

issue of new information in NTN's rebuttal brief. These comments, and

those contained in all of the case and rebuttal briefs, are addressed

below in the following order:

1. Miscellaneous Comments Concerning Model Match, Set-Splitting,

Level of Trade, Sales Not in the Ordinary Course of Trade, Arm's

Length Test, Annual Averaging, and Assessment

2. Adjustments to United States Price (USP)

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

4. Cost of Production (COP) and Constructed Value (CV)

5. Clerical and Computer Programming Errors

1. Miscellaneous Comments

Comment 1: NTN argues that the Department incorrectly split home

market TRB sets which are ``unsplittable.'' NTN claims that, because

certain of its TRB models contain cups and cones which are never sold

individually in any market, it is illogical to split such models into

individual cup and cone sales. Furthermore, NTN states that because the

rationale behind the Department's set-splitting methodology is to find

merchandise ``such or similar'' to individual cups and cones sold in

the United States, the Department may only split TRB sets sold in the

home market which contain cups and cones identical or similar to those

cups and cones sold individually in the United States. NTN argues that,

because cups and cones contained in its ``unsplittable'' sets are never

sold individually, they do not represent merchandise which is

potentially similar to individually sold cups and cones. Therefore, NTN

asserts, the Department creates, by splitting such sets, a pool of home

market cups and cones which cannot be fairly considered as candidates

for matching to cups and cones sold separately in the United States.

Timken argues that, in accordance with section 771(16) of the

Tariff Act, the Department's model-match methodology reasonably

assesses objective physical criteria and the variable costs of

production when identifying that home market merchandise which is such

or similar to merchandise sold in the United States. Timken asserts

that if the cup or cone split from an ``unsplittable'' set is

physically identical, or most physically similar, to a cup or cone

individually sold in the United States, there is no statutory basis for

the Department to reject such a comparison. Timken further states that

NTN's argument, which basically asserts that a cup or cone sold within

a set can never be found to be such or similar to a cup or cone that is

sold separately, calls for an additional matching factor which is

unwarranted by the statute. Finally, Timken argues that if the

Department were not to split NTN's claimed ``unsplittable'' sets, the

pool of home market such or similar merchandise would be narrowed and

the Department's ability to match U.S. and home market merchandise

would be curtailed.

Department's Position: We agree with Timken. Section 771(16) of the

Tariff Act does not require that such or similar merchandise be sold in

the same manner as merchandise under review. TRB components that are

sold solely within sets do not lose their status as merchandise such or

similar to individually-sold TRB components simply by virtue of the

fact that they are sold as components of sets instead of as individual

cups and cones. The fact that a home market cup or cone was never sold

individually in any market does not preclude the possibility that that

cup or cone may be the most physically similar merchandise to cups and

cones NTN sold separately in the United States. Because they may be the

most similar products, it is appropriate to include this merchandise in

the pool of home market sales and, if such cups and cones are

determined to be the most similar merchandise to products sold in the

United States, it is appropriate to use them in our dumping

comparisons, as we have done in past reviews of NTN and as has been

approved by the Court of International Trade (CIT) (see, e.g., NTN

Bearing Corp. v. United States, 747 F. Supp. 726, 741 (CIT 1990), NTN

Bearing Corp. v. United States, 924 F.Supp. 200, 206 (CIT 1996) TRBs

1992-93 at 58631, and Final Results of Antidumping Duty Administrative

Reviews; Tapered Roller Bearings and Parts Thereof, Finished and

Unfinished, From Japan and Tapered Roller Bearings, Four Inches or Less

in Outside Diameter, and Components Thereof, From Japan, 58 FR 64720

(December 9, 1992) (TRBs 1990-92)).

Comment 2: NTN contends that the Department improperly determined

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

ordinary course of trade and included such sales in its margin

calculations. NTN argues that its home market sample sales cannot be

considered as in the ordinary course of trade because they are items

which enable a customer to make a buying decision, and maintains that

its reported home market small-quantity sales cannot be considered

ordinary, given the extremely small quantities involved. Citing to past

TRBs reviews in which the Department excluded these sample and small-

quantity sales from its margin calculations for NTN, NTN asserts that,

in view of the Department's past exclusion of such sales as outside the

ordinary course of trade, the Department should do so in these final

results as well in accordance with Shikoku Chemicals Corp v. United

States, 795 F. Supp. 417 (CIT 1992) (``At some point Commerce must be

bound by its prior actions so that parties have a chance to purge

themselves of antidumping liabilities'') and in accordance with the

Supreme Court's observation that ``long-continued methodologies

naturally serve to provide the basis from which subjects of agency

investigation adjust their behavior'' (Id. at 12, n.8. (quoting United

States v. Midwest Oil Co., 236 U.S. 459 (1915)).

Timken argues that, while the Department did grant NTN's claim in

some past proceedings, it has denied the claim in the most recent TRBs

reviews and in several of the reviews of the antidumping duty order on

antifriction bearings (AFBs) from Japan. In addition, Timken points out

that two of the TRBs determinations NTN relies on have been remanded by

the CIT, and in both cases the Department reversed its position and

included NTN's sample and small-quantity sales within its margin

calculations (the Department's Final Remand Results Pursuant to The

Timken Company v. United States, Court No. 92-03-0061, transmitted to

the CIT on December 13, 1994, and the Department's Final Remand Results

Pursuant to The Timken Company v. United States, Court No. 92-03-00162,

transmitted to the CIT on December 16, 1994). Given these changes,

Timken contends, it is clear that the

[[Page 20588]]

Department's preliminary determination to include these sales in its

margin calculations is in accordance with established precedent.

Further, Timken argues that it has been the Department's long-

standing policy to require a respondent to provide sufficient evidence

to support any claim for the exclusion of sales as not in the ordinary

course of trade. Therefore, Timken contends, because NTN failed to

demonstrate that its alleged small-quantity and sample sales were

outside the ordinary course of trade, the Department reasonably

determined that NTN failed to meet the burden of demonstrating that the

sales in question were outside the ordinary course of trade.

Department's Position: We agree with Timken. Section 773(a)(1)(A)

of the Tariff Act states that the Department is required to compare the

price of the merchandise imported into the United States to the price

of the merchandise sold or offered for sale ``in the principal markets

of the country from which exported in the usual commercial quantities

and in the ordinary course of trade for home market comparison.'' As

defined in section 771(15) of the Tariff Act, ordinary course of trade

means the ``conditions and practices which, for a reasonable time prior

to exportation of the merchandise which is the subject of an

investigation, have been normal in the trade under consideration with

respect to merchandise of the same class or kind.''

Generally, when determining whether home market sales are within

the ordinary course of trade, the Department applies the standards set

forth in Murata Mfg. Co., Ltd. v. United States, 820 F. Supp. 603, 606

(CIT 1993) (Murata), Nachi-Fujikoshi Corp. v. United States, 798 F.

Supp. 716, 718-719 (CIT 1992) (Nachi), and Mantex, Inc., et. al., v.

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

Murata the CIT quoted with approval the Department's statement in

Certain Welded Steel Standard Pipes and Tubes from India; Final Results

of Antidumping Duty Administrative Reviews, 56 FR 64753 (1991), that

the Department, in determining whether home market sales are in the

ordinary course of trade, does not rely on one factor considered in

isolation, but rather considers all circumstances of the sales in

question. In addition, the CIT noted that in other cases the Department

determined that sales were outside the ordinary course of trade based

not only on the presence of small quantities or high prices, but also

because the Department found other factors that supported the outside-

the-ordinary-course-of-trade categorization (see Murata at 9). In Nachi

the CIT held that the Department must make determinations regarding

sample sales by examining the relevant facts of each individual case

and that the burden of proof to demonstrate that such sales are outside

the ordinary course of trade lies with the respondent (see Nachi at

718). In Mantex the CIT restated its previous opinion in Nachi (see

Mantex at 1306).

In its response NTN described its sample sales as sales of items to

a customer which are used by the customer to determine whether or not

to buy the product. NTN explained that, through statements and other

representations the customer makes, NTN determines the ``sample''

nature of the sale and codes the sale accordingly. Concerning its

small-quantity sales reported as not in the ordinary course of trade,

NTN explained that for each transaction where the total quantity was

three units or less, and the total number of transactions during the

POR was seven or less, NTN searched back to fiscal year 1990 and, if

certain conditions were met, it considered the sale as outside the

ordinary course of trade. The only other information on the record

regarding these sales are NTN's computer data files in which it

reported such sales separately from the rest of its home market data

base.

In accordance with Murata, we attempted to examine all factors

surrounding NTN's reported sample and small-quantity sales to determine

if they were outside the ordinary course of trade. However, NTN

provided us with little information other than a general description of

these sales upon which to base such a determination. The administrative

record contains no other narrative explanation, supporting

documentation, or other evidence to demonstrate why these sales are not

representative of NTN's normal practices in selling TRBs in Japan, or

otherwise demonstrates the ``aberrational'' nature of these sales. For

example, we have no evidence supporting the notion that NTN's sample

sales were sold only for the purpose of allowing the customer to make a

decision to buy. Likewise, we have no evidence supporting NTN's

categorization of its ``small-quantity'' sales as abnormal, other than

the fact that they were small-quantity sales. In accordance with Nachi,

the burden of proving that its sales are outside the ordinary course of

trade lies clearly with the respondent, and in this instance NTN has

failed to meet that burden.

Furthermore, this is not the first review or the first case in

which we have rejected NTN's categorization of certain of its sales as

not in the ordinary course of trade. In our last three TRBs reviews we

clearly explained that we applied the Murata and Nachi standards to our

determination of whether such sales were indeed outside the ordinary

course of trade (see TRBs 92-93 at 57639 and TRBs 90-92 at 64732). In

those reviews we determined that NTN did not supply sufficient evidence

to allow us to determine that these sales were outside the ordinary

course of trade. As a result, NTN has had clear notice prior to these

current reviews that its response failed to demonstrate the ``not-in-

the-ordinary-course-of-trade'' status of its sample and small-quantity

sales. However, NTN took no steps to improve its response regarding

this issue, but rather provided only the same general information with

little other explanation.

Therefore, for the reasons stated above, and in accordance with our

established practice, we have not changed our treatment of NTN's sample

and small-quantity home market sales for these final results. Rather,

we have again determined these sales to be within the ordinary course

of trade and we have included them in our margin calculations.

Comment 3: NSK argues that the Department must apply the ordinary

meaning of ``sale'' to the antidumping law (which involves not only the

transfer of ownership, but the payment, or promise, of consideration),

and should exclude from its analysis those free samples NSK reported as

given away to its customers in the United States. NSK claims that it

has provided evidence demonstrating that this free U.S. merchandise

constitutes promotional samples, and contends that, by including this

promotional merchandise in its analysis, the Department fails to

recognize the normal business practice of giving away free samples and

calculates distortive margins. Finally, NSK argues that, in accordance

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

1996), for the purpose of calculating antidumping duties, the

Department reviews sales, not entries. Therefore, NSK concludes, there

is no basis for including this merchandise in the Department's margin

calculations.

Timken argues that not only does the statute require the Department

to calculate a value for each U.S. entry of subject merchandise, but,

if the Department accepts NSK's arguments, it would allow NSK to evade

the law by providing zero-priced merchandise as gifts while raising its

prices on other subject merchandise identified as sales.

[[Page 20589]]

Department's Position: On June 10, 1997, the CAFC held that the

term ``sold'' requires both a transfer of ownership to an unrelated

party and consideration. NSK Ltd. v. United States, 115 F.3d 965, 975

(Fed. Cir. 1997) (NSK). The CAFC determined that samples which NSK had

given to potential customers at no charge and with no other obligation

lacked consideration. Moreover, the CAFC found that, since free samples

did not constitute ``sales,'' they should not have been included in

calculating U.S. price.

In light of the CAFC's opinion, we have revised our policy with

respect to samples. The Department will now exclude from its dumping

calculations sample transactions for which a respondent has established

that there is either no transfer of ownership or no consideration.

This new policy does not mean that the Department automatically

will exclude from analysis any transaction to which a respondent

applies the label ``sample.'' It is well-established that the burden of

proof rests with the party making a claim and in possession of the

needed information (see, e.g., NTN Bearing Corporation of America v.

United States, 997 F.2d 1453, 1458-59 (CAFC 1993), (citing Zenith

Elecs. Corp. v. United States, 988 F.2d 1573, 1583 (CAFC 1993), and

Tianjin Mach. Import & Export Corp. v. United States, 806 F. Supp.

1008, 1015 (CIT 1992)). When respondents fail to support their sample

claim, we did not exclude the alleged samples from our margin analysis.

In light of the policy above, we have determined that the record

indicates that NSK's reported sample transactions did not involve

consideration. Accordingly, pursuant to the CAFC's decision in NSK, we

have excluded NSK's reported U.S. sample sales from the U.S. sales

database.

In addition, with regard to assessment rates, in order to ensure

that we collect duties only on sales of subject merchandise, we

included the entered values and quantities of the sample transactions

in our calculation of NSK's assessment rate and set the dumping duties

due for such transactions to zero. We have done this because U.S.

Customs will collect the ad valorem duties on all entries of subject

merchandise whether or not the merchandise was a sample transaction.

However, to ensure that sample transactions do not dilute the cash

deposit rates, we excluded both the calculated U.S. prices and

quantities for sample transactions from our calculation of the cash

deposit rates.

Comment 4: NTN claims that the Department's sum-of-the-deviations

model-match methodology inconsistently treats the Y2 factor variable.

Specifically, NTN questions why the Department sets the variable

``Y2H'' equal to ``Y2DEV'' when the Department sets the deviation for

the outside diameter (OD) variable equal to zero.

Timken argues that the Department's sum-of-the-deviations model-

match methodology properly reflects the reality of bearing

characteristics. For example, Timken states, because thrust TRBs have a

zero Y2 factor, when comparing thrust to non-thrust TRBs, the

Department correctly set the Y2 factor deviation equal to the non-zero

Y2 factor value because the difference between a zero and non-zero

value will always be the non-zero value. Timken further asserts that,

because the Department only compares TRB cups to cups and TRB cones to

cones, if the inside diameter (ID) or OD for the U.S. TRB is zero, the

value for the ID or OD for the home market TRB being compared will

automatically be zero. Therefore, Timken concludes, if the ID or OD for

the U.S. TRB is zero, and the ID or OD for the home market TRB is also

zero, the ID or OD deviation between the U.S. and home market cups or

cones compared will automatically be zero.

Department's Position: We agree with Timken. In order to determine

the home market merchandise most similar to U.S. merchandise, we apply

our sum-of-the-deviations model-match methodology using five physical

criteria of TRBs: ID, OD, width, load rating, and the Y2 factor.

Because each of these criteria are quantitatively measured, we compare

the value for each criterion for the U.S. model to that for the home

market merchandise and calculate the difference. Once we determine the

deviation for each criterion, we derive the overall sum of the

deviations for all five criteria and use this value to rank the most

similar home market merchandise.

When we first developed this methodology we realized that, in

certain instances, the ID, OD, or Y2 factor of a TRB would be equal to

zero. For example, TRB cups do not have an ID, TRB cones do not have an

OD, and thrust TRBs may not have a Y2 factor. Because we only compare

U.S. cups to home market cups and U.S. cones to home market cones, the

ID for each U.S. and home market cup compared would be equal to zero

and the OD for each U.S. and home market cone compared would be equal

to zero. As a result, the ID deviation for cup comparisons would

automatically equal zero and the OD deviation for cone comparisons

would automatically equal zero. In order to account for this in our

sum-of-the-deviations model-match methodology, if the ID or OD of the

U.S. TRB is equal to zero, we automatically set the ID or OD deviation

equal to zero.

In contrast to the above, we do not compare U.S. thrust TRBs to

only home market thrust TRBs (see TRBs 92-93 at 57631 and TRBs 90-92 at

64721). Therefore, if the Y2 factor for the U.S. model is equal to

zero, the Y2 factor for the comparison home market model will not

automatically be equal to zero. Because we calculate the deviation

between U.S. and home market criteria as the absolute value of one

minus the home market TRBs criterion value divided by the value of the

U.S. TRBs criterion, if the U.S. Y2 factor value is equal to zero, we

would, in effect, be dividing by zero in our computer program.

Therefore, to ensure the proper calculation of the Y2 factor deviation

when the U.S. model's Y2 factor is equal to zero, we automatically set

the Y2 deviation equal to the home market TRBs value.

Comment 5: Both Fuji and Kawasaki argue that, because merchandise

which meets the criteria for the application of the ``Roller Chain''

principle is outside the scope of the Japanese TRBs order and finding,

the Department should adopt an assessment strategy which would ensure

that antidumping duties are not assessed on this ``Roller Chain''

merchandise.

Fuji proposes that one method would be for the Department to assess

duties on an entry-by-entry basis. Fuji claims that not only would this

ensure proper assessment of Fuji's entries, but it would be

administratively easy for the Department to do given the fact that Fuji

has provided the Department with its entry numbers. Alternatively, Fuji

suggests that, because all of those TRBs which qualify for exclusion

under the ``Roller Chain'' principle were imported by a single related

importer, Subaru-Isuzu Automotive, Inc. (SIA), the Department should

assess duties on an importer-specific basis and apply zero duties to

all SIA imports. Fuji adds that if the Department selects this option

it should also adjust the cash deposit rate it calculates for Fuji to

take into account the ``Roller Chain'' merchandise by including the

value of the ``Roller Chain'' merchandise in the cash deposit rate

calculation denominator. Finally, Fuji proposes that, if the Department

rejects these first two proposals, the Department should, at a minimum,

adjust both the cash deposit and assessment rates it calculates for

Fuji by including the value of the TRBs meeting the ``Roller Chain''

criteria in the

[[Page 20590]]

denominators used when calculating these rates.

Kawasaki contends that not only is there sufficient evidence on the

record to demonstrate that all A-588-054 TRBs imported by Kawasaki

Motors Manufacturing Corporation (KMM) meet the ``Roller Chain''

principle, but there is also sufficient evidence allowing the

Department to identify the total value of KMM's A-588-054 TRB imports.

Thus, Kawasaki asserts, the Department has the information necessary to

calculate an A-588-054 assessment rate for Kawasaki which would

effectively exclude KMM's entries of TRBs from antidumping duty

assessment.

With regard to Fuji, Timken argues that if the Department decides

to apply a single assessment rate to all of Fuji's imports, and

recalculates Fuji's assessment rate to take into account Fuji's

``Roller Chain'' merchandise, the Department should first be certain

that liquidation was suspended and antidumping duty deposits were paid

on Fuji's ``Roller Chain'' merchandise. If Fuji's ``Roller Chain''

entries were suspended, Timken argues, the Department should not use

the assessment rate Fuji proposed in its comments. Rather, Timken

asserts, because duties are assessed on entered value, the Department

should calculate Fuji's assessment rate by including in the calculation

denominator the sum of the entered values of both Fuji's non-``Roller

Chain'' and ``Roller Chain'' merchandise.

In response to Fuji's contention that the Department should apply

to Fuji cash deposit and assessment rates which are identical, Timken

argues that, while the statutory scheme requires estimates of

antidumping duties to be as accurate as possible, it is not necessary

that cash deposit rates be absolutely accurate (Badger-Powhatan, a

Division of Figgie International, Inc. v. United States, 633 F. Supp.

1364, appeal dismissed, 808 F.2d 823 (Fed. Cir. 1986)). Timken

therefore urges the Department to apply to all of Fuji's entries a cash

deposit rate equal to the final margin rate the Department calculates

for Fuji's non-``Roller Chain'' merchandise.

With regard to Kawasaki, Timken contends that the Department cannot

make a determination that any of Kawasaki's entries were subject to the

``Roller Chain'' principle not only because the record lacks the

information necessary for the Department to do so, but also because

Kawasaki was an uncooperative respondent to which the Department

applied a first-tier total BIA rate in both the A-588-054 and A-588-604

reviews. Timken contends that the Department applied total adverse BIA

to Kawasaki because it submitted only partial information in response

to the Department's questionnaire, which was insufficient for the

Department to conduct its analysis. Timken claims that, the Department

cannot accept partial data because to do so would place control of the

review in the hands of Kawasaki by permitting Kawasaki to selectively

provide information. Timken argues that this reasoning was upheld in

Persico Pizzamiglio, S.A. v. United States, 18 CIT 299, Slip. Op. 94-61

(April 14, 1994) (Persico), in which the CIT explained that the

acceptance of partial submissions will only encourage respondents to

selectively disclose only that information which would serve to

decrease a dumping margin based on BIA. Therefore, Timken states, the

Department should assess Kawasaki's entries of A-588-054 TRBs at a rate

equivalent to the total adverse BIA rate it assigns to Kawasaki in

these final results and not make any adjustments to this rate to

effectively exclude KMM's entries of TRBs.

Department's Position: We agree with the petitioner and in part

with the respondents. It is important to first clarify that merchandise

which meets the criteria of the ``Roller Chain'' principle is not out-

of-scope merchandise. Our determination in an administrative review

that the ``Roller Chain'' principle is applicable to certain

merchandise is not equivalent to a determination that the merchandise

is non-scope merchandise. To the contrary, in these TRBs reviews, that

merchandise which we have deemed to be ``Roller Chain'' merchandise

clearly falls within the scope of the A-588-054 finding and the A-588-

604 order, as described earlier in this notice. Based on section

772(e)(3) of the Tariff Act and the applicable legislative history, we

have developed a practice whereby we do not calculate and do not assess

antidumping duties on subject merchandise which is imported by a

related party and which is further processed where the subject

merchandise comprises less than one percent of the value of the

finished product sold to the first unrelated customer in the United

States (see, e.g., Roller Chain Other Than Bicycle From Japan, 48 FR

51804 (November 14, 1983), and TRBs 92-93 at 57548)). The statute

provides for the assessment of antidumping duties only to the extent of

the dumping that occurs. If there can be no determination of any

dumping margin where the imported merchandise is an insignificant part

of the product sold, then there is no dumping to offset and antidumping

duties are not appropriate. Therefore, we do not consider ``Roller

Chain'' merchandise as non-scope merchandise, but rather as scope-

merchandise which is not subject to duty assessment.

We disagree with Fuji that our cash deposit rates should somehow

take into account merchandise meeting the ``Roller Chain'' criteria

because we have no way of knowing at the time of entry whether any

particular entry qualifies under the ``Roller Chain'' principle for

exclusion from assessment of antidumping duties. Our decision to

exclude any merchandise is made on a case-by-case basis within the

course of an administrative review, which takes place after the actual

entry of the potentially excludable merchandise. For this reason, at

the time of entry we must require cash deposits of estimated

antidumping duties on all entries, including those entries of

merchandise potentially excludable from assessment under the ``Roller

Chain'' principle. Furthermore, cash deposit rates are estimates of

dumping liability. Because at the time of entry we have no idea of the

value of merchandise which we may ultimately determine meets the

``Roller Chain'' criteria, we cannot alter our cash deposit rate to

effectively compensate for the value of the ``Roller Chain''

merchandise in the current review, which may be a value significantly

different from that in the future.

We also disagree with Fuji that entry-by-entry assessment is a

viable option for its assessment. Entry-by-entry assessment requires

the traditional appraisement instructions which list each entry and the

margin calculated for it. The disadvantages of such assessment are

numerous. For example, because our dumping analysis focuses on sales,

it is necessary for us to associate reviewed sales with entries in some

way. However, companies are generally unable to make such a link. In

addition, such appraisement instructions are burdensome, time-

consuming, and at risk for error. It is therefore the position of the

Department that assessment rates applicable to all covered entries are

preferable. In comparison to entry-by-entry assessment, the use of an

assessment rate which applies to all entries during the POR is far less

burdensome and time-consuming, and the risk of incorrect assessment is

minimized. In general, we have tried to calculate assessment rates on

an importer-specific basis to prevent one importer from paying

antidumping duties attributable to margins found on sales to a

different importer. However, this concern for importer-specific rates

is limited to

[[Page 20591]]

those instances where the importer is not related to the foreign

exporter. Where the importer is related to the foreign exporter, we

consider the related parties to constitute one corporate entity and the

use of manufacturer/exporter-specific assessment rates to be

appropriate. Therefore, we also reject Fuji's proposal that we adopt an

importer-specific rate for SIA, its related U.S. subsidiary, and we

will calculate one rate for Fuji's related importers.

We have determined that Fuji's final proposal, that the assessment

rate take into account the value of the ``Roller Chain'' merchandise,

is the most viable assessment option and would ensure that antidumping

duties are not assessed on that merchandise we determined to meet the

``Roller Chain'' principle criteria. As explained above, we do not

agree that the cash deposit rate should be altered in any way.

Therefore, after ensuring that liquidation was suspended for SIA's

entries of TRBs, we will ensure that assessment does not occur on this

``Roller Chain'' merchandise by including the total entered value of

Fuji's ``Roller Chain'' merchandise in our assessment rate calculation

denominator. This will have the effect of lowering the percentage

assessment rate so that, even though antidumping duties will be

assessed on all entries, the lower percentage assessment rate (which

will still result in the collection of the actual amount of antidumping

duties owed) will effectively exclude the ``Roller Chain'' merchandise

from assessment.

Concerning Kawasaki's alleged ``Roller Chain'' merchandise, as the

record for these reviews demonstrates, Kawasaki only provided a

response to the general information section of our questionnaire

(section A) and included within this partial response a statement

indicating that it declined to provide the information requested in the

remaining sections of the questionnaire. Because the information

Kawasaki declined to provide was its detailed home market and U.S.

sales and adjustment information, we were unable to conduct an analysis

of, or calculate a margin for, Kawasaki. Therefore, Kawasaki's refusal

to provide a response to the additional sections of our questionnaire

significantly impeded our ability to conduct a review for Kawasaki and

we used a total first-tier uncooperative BIA rate of 40.47 for Kawasaki

in the A-588-604 review and of 47.63 percent in the A-588-054 review

(see Prelim Results at 25201).

Kawasaki now argues that, because it submitted information

demonstrating that all of KMM's entries of A-588-054 TRBs during the

POR met the requirements of the ``Roller Chain'' principle, the

Department should not assess duties against this merchandise. Kawasaki,

therefore, makes an argument identical to Fuji's third proposal in that

it calls for the recalculation (i.e., lowering) of its A-588-054

assessment rate such that duties will not be assessed against KMM's

entries of TRBs.

Kawasaki's argument, however, not only overlooks the fact that the

information it wants the Department to rely on to ensure that duties

are not assessed on KMM's entries represented only a partial response

to the questionnaire, but it ignores the fact that it was an

uncooperative respondent that refused to provide the information

necessary for us to conduct an analysis. Furthermore, our March 16,

1998 letter requesting once more that Kawasaki provide a complete

response to our questionnaire stated specifically that failure to do so

would result in our proceeding on the basis of total BIA, including

issuing appraisement instructions to Customs to liquidate all Kawasaki

entries, including those allegedly subject to the ``Roller Chain''

principle, at the appropriate BIA rate. On March 23, 1998, Kawasaki

stated for a third time that it would not provide the requested

information necessary to complete our analysis and calculate dumping

margins for Kawasaki.

The CIT has ruled on several occasions that the use of a

respondent's incomplete questionnaire response would only reward the

respondent for failing to report requested information. For example, in

Persico, the case cited by Timken in its comments, the CIT rejected the

argument that the Department should have used some of the information

submitted by the respondent instead of relying on other information as

BIA. The CIT stated:

``If the court were to accept Persico's argument, such result

might encourage respondents to analyze information Commerce would

employ as BIA should that agency ignore a questionnaire response for

being unresponsive or incomplete. Presumably, the respondent would

then selectively disclose only that information which would decrease

a dumping margin calculated from BIA. . . . In this way, it would

be in a respondent's best interest to only partially respond to

Commerce's inquiry. . . . By allowing Commerce to reject a

submission in toto, the court encourages full disclosure by the

respondent, because only full disclosure will lead to a dumping

margin lower than that established by employing BIA.''

(See Persico at 23). In Nippon Pillow Block Sales Co., Ltd. and FYH

Bearing Units USA, Inc. v. United States, 903 F. Supp 89 (CIT 1995)

(Nippon), the CIT, applying the same reasoning as in Persico, stated

that ``if Commerce were required to use the small portion of the

requested information that Nippon submitted, there would be no

incentive for Nippon to provide Commerce with complete information

since the submission of partial information would result in a decreased

dumping margin.'' See Nippon at 95.

In the instant case, the partial information submitted by Kawasaki

allegedly demonstrates that KMM's imports met the requirements of the

``Roller Chain'' principle. If we were to take this information into

account, as Kawasaki argues, Kawasaki's assessment rate would be

reduced and duties would not be assessed on a significant portion of

its TRBs entries. As a result, this uncooperative respondent, who

refused to provide the information necessary for us to conduct an

analysis, would actually benefit from its refusal to provide the

Department with a complete response. In this way, we would encourage

Kawasaki to selectively disclose only that information which would

benefit its position, and control over the proceedings would

effectively move from the Department to the respondent. Furthermore,

because Kawasaki was an uncooperative respondent to which we assigned a

first-tier total adverse BIA rate in the reviews of both TRBs cases,

there was no basis on which to verify the limited information Kawasaki

submitted. Therefore, given Kawasaki's uncooperativeness, we have no

basis upon which to conclude that the limited information in Kawasaki's

partial submission is accurate and reliable. For these reasons we

disagree with Kawasaki that, because information on the record

allegedly demonstrates that KMM's entries of TRBs were subject to the

``Roller Chain'' principle, we have an obligation to take that

information into account for assessment purposes. Rather, we will

assess duties for Kawasaki in both the TRBs cases at rates equivalent

to the first-tier total BIA rates we assigned to Koyo for these final

results.

Comment 6: Fuji argues that the Department failed to make a

difference-in-merchandise (difmer) adjustment when it compared Fuji's

U.S. TRBs to most similar, rather than identical, home market TRBs.

Fuji asserts that because it is a reseller, the acquisition costs it

provided to the Department are its variable costs and the Department

should calculate a difmer adjustment based on the difference in

acquisition costs between U.S. merchandise and the non-identical

comparison home market merchandise.

[[Page 20592]]

While Timken does not object to the Department making a difmer

adjustment for Fuji based on Fuji's acquisition costs, Timken contends

that the computer programming language Fuji included in its brief

demonstrating how the Department should incorporate the adjustment into

Fuji's computer program is deficient because it applies the adjustment

to comparisons of identical U.S. and home market merchandise and does

not properly convert the adjustment from yen to U.S. dollars.

Department's Position: We agree with Fuji that a difmer adjustment

is warranted and have based that adjustment on the difference in Fuji's

reported acquisition costs. However, we also agree with Timken that

Fuji's suggested programming language is deficient. Therefore, we have

incorporated the difmer adjustment into our computer program for Fuji

by using computer programming language which ensures that the

adjustment is (1) only applied to comparisons between U.S. merchandise

and the most similar, rather than identical, home market merchandise,

and (2) is properly converted from yen to U.S. dollars.

Comment 7: Fuji argues that because it is a reseller which does not

have access to the variable costs of manufacturing (VCOM) and total

costs of manufacturing (TCOM) of the TRBs it resells in the U.S. and

home markets, it agrees with the Department's use of its acquisition

costs as the basis for the 20 percent difmer test. Fuji contends that

in those cases where VCOM and TCOM are available, the Department allows

non-identical home market models to be included within the pool of

potential home market matches if the difference in the VCOMs between

the U.S. and home market models is less than 20 percent of the U.S.

model's TCOM. In other words, Fuji states, the Department uses the U.S.

model's costs as the benchmark for its comparison. However, Fuji

asserts, rather than use the U.S. model's acquisition cost as the

benchmark for the 20 percent difmer test the Department conducted for

Fuji, the Department incorrectly used the home market model's

acquisition costs as the basis for the 20 percent difmer comparison.

Department's Position: We agree with Fuji. In our margin

calculation computer program for Fuji we inadvertently used programming

language which incorrectly applied the 20 percent difmer test. We have

corrected this error for these final results.

Comment 8: Fuji argues that the Department's 99.5 percent arm's-

length test, in which it calculates home market customer-specific

weighted-average related/unrelated price ratios and excludes from its

margin calculations all sales to a home market customer if its ratio is

not greater than 99.5 percent, is too restrictive and inappropriately

rejects bona fide sales to related home market customers that are made

at the same prices as sales to unrelated home market customers. Fuji

asserts that, even though it sold from the same price list at the same

prices to all home market customers during the POR for any given

product during any given month, the Department's arm's-length test

nevertheless resulted in the exclusion of a large percentage of its

related customer sales from the Department's preliminary margin

calculations.

For example, Fuji asserts that the Department's reliance on POR

weighted-average prices results in the exclusion of related party sales

simply because different quantities may have been purchased by a

related party after a monthly price change took effect, even though the

prices charged to related and unrelated customers during any given

month were the same. In addition, Fuji contends that, even if the same

number of units are sold to both the related and unrelated customer,

all sales to the related customer will fail the test even if a majority

of the sales to the related customer during the POR were priced higher

than the sales of the identical product to the unrelated customer.

Fuji claims that, to avoid these inaccuracies, the Department

should adopt a new arm's-length test in which individual transactions

to related customers are determined to be at arm's length unless the

prices to the related customer deviate from the weighted-average prices

to unrelated customers by more than two standard deviations. Fuji

asserts that this method not only better reflects commercial reality,

but it eliminates abnormally high and low priced sales while still

ensuring that only those related-customer sales prices which are

statistically comparable to unrelated-party sales prices are included

in the Department's margin calculations.

Fuji further asserts that, if the Department does not adopt this

new test, it should at least modify its existing arm's-length test such

that it would use the same methodology, but apply it on a monthly,

rather than a POR, basis. Fuji explains that if the Department compares

the average monthly weighted-average price of a product sold to an

related customer to the monthly weighted-average sales prices of the

same product to an unrelated customer, it would capture the fact that

Fuji's monthly average sales prices to related and unrelated customers

are the same. In this way, Fuji concludes, the Department will avoid

the arbitrary results produced by its current test and correctly

include within its margin calculations those sales to related home

market customers which were clearly at arm's length.

Timken argues that Fuji's arguments are hypothetical in nature and

fail to demonstrate that the Department's methodology actually produced

distortive results. In addition, Timken asserts, given that the

Department employed a reasonable methodology, there is no basis for the

Department to change it's arm's-length analysis. Finally, Timken states

that it is the Department, and not an interested party, who makes the

determination as to what methodology should be used (NTN Bearing Corp.

v. United States, 747 F. Supp. 726 (CIT 1990)).

Department's Position: We agree with Timken. While Fuji argues that

our 99.5 percent arm's-length test produces arbitrary results, it

failed to provide a single example from its own data supporting its

assertions. Fuji presents only theoretical examples of why the arm's-

length test is distortive and we have no basis upon which to conclude

that our test is unreasonable. Furthermore, not only is our 99.5

percent arm's-length test methodology well established (see, e.g.,

Certain Cut-to-Length Carbon Steel Plate from Sweden; Final Results of

Antidumping Duty Administrative Review, 61 FR 15772 (April 9, 1996)),

but the CIT has repeatedly sustained this methodology (see e.g., Usinor

Sacilor v. United States, 872 F. Supp. 1000 (CIT 1994) (Usinor), Micron

Technology, Inc. v. United States, 893 F. Supp. 21 (CIT 1995) (Micron),

and NTN Bearing Corp. of America, Inc. v. United States, 905 F. Supp.

1083 (CIT 1995)). Consistent with our view that a party must provide

evidence of distortion in order for us to verify its allegations that

our arm's-length test is distortive, in Usinor the CIT specifically

stated that ``[g]iven the lack of evidence showing any distortion of

price comparability, the court finds the application of Commerce's

arm's-length test reasonable.'' See Unisor at 1004. Likewise, in

Micron, because the CIT found that the plaintiff/respondent failed to

``demonstrate that Commerce's customer-based arm's length test inquiry

is unreasonable'' and failed to ``point to record evidence which tends

to undermine Commerce's conclusion,'' the CIT sustained the 99.5

percent arm's-length test based on the lack of evidence showing a

distortion of price comparability (see Micron at 45-46).

[[Page 20593]]

Therefore, for these final results we have not altered our 99.5 percent

arm's-length test for Fuji, and have continued to apply the test as we

have in other cases upheld by the CIT and as we did in our preliminary

results.

Comment 9: Fuji contends that, because it changes its home market

prices only at the beginning of a month, the Department's use of annual

weighted-average home market prices fails to capture the monthly

fluctuations in its prices. Therefore, Fuji asserts, the Department

should calculate monthly weighted-average home market prices. Fuji

contends that not only would this change be a minimal burden on the

Department, but such a change would ensure greater accuracy in the

Department's margin calculations for Fuji. Fuji further asserts that,

if the Department chooses not to rely on monthly weighted-average home

market prices, it should at least calculate semiannual home market

weighted-average prices based on the two periods within the POR which

reflect the timing of Fuji's price changes.

Timken argues that not only did the Department conduct a detailed

analysis which demonstrated that Fuji's home market prices were stable

over the POR such that the calculation of annual weighted-average home

market prices was reasonable, but there is no evidence on the record

indicating that the use of monthly weighted-average home market prices

for Fuji would be more accurate or reasonable than annual weighted-

average prices.

Department's Position: We agree with Timken. Pursuant to the law in

effect prior to January 1, 1995, although it is our normal practice to

calculate monthly weighted-average home market FMVs, it has been our

established practice in TRBs reviews to conduct a three-step price

stability test in order to determine if a respondent's pricing

practices in the home market were sufficiently stable throughout the

POR such that we may reasonably calculate annual weighted-average home

market FMVs. (see, e.g., Tapered Roller Bearings, Four Inches or Less

in Outside Diameter, and Certain Components Thereof, From Japan; Final

Results of Antidumping Duty Administrative Review, 56 FR 65228

(December 16, 1991) (054 TRBs 88-89), and Tapered Roller Bearings, Four

Inches or Less in Outside Diameter, and Certain Components Thereof,

From Japan; Final Results of Antidumping Duty Administrative Review, 56

FR 26054 (June 6, 1991) (054 TRBs 87-88)). We began this practice in an

effort to simplify our TRBs calculations which involve extremely large

data bases and complex, time-consuming analysis.1 Although

Fuji's 1993-94 databases were less voluminous than other respondents'

databases, the amount of data Fuji submitted, as well as the overall

complexity of the analysis we conducted for Fuji, prompted us to

determine if annual weighted-average FMVs were appropriate for our

calculations. Therefore, consistent with section 777A of the Act, we

determined whether the use of annual weighted-average FMVs was

appropriate by performing our established three-step price stability

test. First, we compared the annual/POR weighted-average home market

price for each home market TRB model with each of the model's 12

monthly weighted-average prices during the POR. We then calculated the

proportion of each model's sales for which the annual weighted-average

price did not vary more than plus or minus 10 percent from the monthly

weighted-average prices. Second, we compared the volume of sales of all

models for which annual weighted-average prices did not vary more than

plus or minus 10 percent from the monthly weighted-average prices with

the total volume of sales of TRBs. Because the annual weighted-average

price of at least 90 percent of Fuji's home market TRBs sales did not

vary more than plus or minus 10 percent from the monthly weighted-

average prices, we considered Fuji's annual weighted-average prices to

be representative of the transactions under consideration. Finally, we

tested whether there was any correlation between price and time for

each model by calculating a Pierson coefficient. Because the

correlation coefficient we calculated for Fuji was less than 0.05

(where a coefficient approaching 1.0 indicates a direct correlation

between price and time), we concluded that there was no significant

relationship between price and time.

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

\1\ For example, if our three-step price stability test reveals

that price variations have no relation to time, we eliminate from

our multiple searches for contemporaneous home market such or

similar merchandise. This results in a dramatic simplification of

the highly complex TRBs sum-of-the-deviations model-match

methodology and ensures less errors in computer programs and margin

calculations.

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

Because this three-step analysis demonstrated that over 90 percent

of Fuji's annual weighted-average prices were within 10 percent of its

monthly weighted-average prices and that there was no relationship

between Fuji's pricing practices and time, we concluded that Fuji's

home market pricing practices were sufficiently stable over time such

that annual FMVs were representative of home market prices.

Therefore, while Fuji argues that monthly weighted-average FMVs

would be more accurate, our analysis and all the evidence on the record

indicate that our use of annual weighted-average FMVs for Fuji produced

accurate and reliable results.

We also disagree with Fuji that we should, at a minimum, rely on

FMVs based on certain semiannual weighted-averages. Since we have

confirmed that annual weighted-average FMVs will not differ

significantly from monthly weighted-average FMVs, we have no reason to

suspect that annual weighted-average FMVs would differ significantly

from weighted-average FMVs calculated on a greater-than-one-month or

semiannual basis. Furthermore, Fuji has provided no evidence supporting

its contention that its proposed semiannual weighted-average FMVs would

produce results more accurate than those we achieved by using annual

weighted-average FMVs. Therefore, we have continued to rely on annual

weighted-average FMVs for Fuji for these final results.

Comment 10: In its responses for both the 1992-93 and 1993-94

reviews, Koyo reported four different categories of sales in the home

market: (1) sales to original equipment manufacturers (OEM) for the OEM

market, (2) sales to OEM customers for the after-market (AM), (3) sales

to AM customers for the OEM market, and (4) sales to AM customers for

the AM market. In order to determine whether any of these four

categories of sales represented distinct levels of trade (LOT), we

conducted an analysis in which we calculated and compared the weighted-

average prices for each category in order to determine if patterns of

pricing differences existed between these categories. Based on our

analysis we concluded that sales in category 1 clearly represented an

OEM LOT while sales in category 4 clearly represented an AM LOT.

However, because sales within categories 2 and 3 did not clearly

reflect distinct LOTs, we examined whether sales in these two

categories were more appropriately defined as within the category 1 OEM

LOT or the category 4 AM LOT. Based on further analysis we concluded

that sales in category 2 were most similar to those in category 1 and

sales in category 3 were most like the sales in category 4. Therefore,

we collapsed sales categories 1 and 2 into one OEM LOT and sales within

categories 3 and 4 into one AM LOT.

Koyo contends that, in all its questionnaire responses since the

1990-92 TRBs reviews (where the Department

[[Page 20594]]

first recognized the complexity of the bearing distribution system), it

has explained its distribution system and identified the identical four

home market sales categories as in these 1992-93 and 1993-94 reviews.

Koyo states that in the most recently completed final results for Koyo

( the 1990-92 TRBs reviews), the Department determined that category 1

was the OEM LOT, and collapsed categories 2, 3, and 4 into a single AM

LOT. Koyo asserts that because (1) no party ever objected to the

Department's determination and (2) Koyo has not changed its

distribution system or its explanation of this system for these

reviews, there is no reason for the Department to change its LOT

identification for these 1992-93 and 1993-94 reviews.

Koyo also argues that the Department's LOT analysis was flawed

because the Department relied on an over-inclusive pool of sales when

calculating the weighted-average prices it used to identify Koyo's home

market LOTs. Koyo asserts that the Department calculated weighted-

average prices for categories 1, 2, 3, and 4 by including all models

sold rather than eliminating from the calculation those models sold

only in a given category but not sold to the category being compared.

As a result, Koyo contends, the Department's analysis is distorted.

Based on its own analysis Koyo argues that, by removing from the

calculation of each category's weighted-average price those sales of

models which were sold only in that category, the comparison of the

revised weighted-average prices for each category reveals that

categories 2 and 3 are most similar to category 4, and categories 2, 3,

and 4 are distinctly different from category 1. Therefore, Koyo

concludes, the Department should have collapsed categories 2, 3, and 4

into a single AM LOT and treated category 1 as the distinct OEM LOT.

Timken argues that the elaborate analysis Koyo presented in its

comments is flawed because it lacks any support on the record

explaining why sales have been put into sub-categories within the OEM

and AM LOTs. Timken asserts that, absent an explanation as to why there

should be distinctions within the OEM and AM LOTs, Koyo's analysis is

nothing more than a post-hoc rationalization of its original,

unsupported LOT designations. Timken concludes that, regardless of any

possible flaws in the Department's analysis, given the lack of

information on the record, the Department should continue to categorize

categories 1 and 2 as a single OEM LOT and categories 3 and 4 as a

single AM LOT.

Department's Position: We agree in part with both the petitioner

and the respondent. As explained above, in its 1992-93 and 1993-94

responses Koyo claims two distinct LOTs in the home market, an OEM LOT

and an AM LOT. However, Koyo reported four separate home market

categories of sales based on the customer category (OEM or AM) and

market in which the sale was made (OEM or AM). Because Koyo's response

lacked both a detailed explanation of these four subgroups and an

explanation whether these four subgroups represented distinct LOTs, we

determined that it was necessary to conduct a detailed analysis using

Koyo's reported home market pricing data to identify any pricing

patterns and determine whether these categories reflected distinct

LOTs. As also indicated above, our analysis revealed that four separate

LOTs did not exist, and we concluded that certain categories of sales

should be collapsed into two separate LOTs. Therefore, we agree with

Timken that Koyo's responses lacked the information necessary to

demonstrate four distinct LOTs. However, we disagree with Timken that

Koyo's comments and analysis are an attempt to argue that four separate

LOTs exist. Rather, in its comments Koyo only asserts that inherent

flaws in the Department's LOT analysis resulted in the Department's

improper combining of category 1 sales with category 2 sales and

category 3 sales with category 4 sales.

In light of Koyo's comments we have reexamined our LOT analysis for

Koyo in both the 1992-93 and 1993-94 reviews and have determined that

the computer analysis we used to identify Koyo's home market LOTs

produced accurate and reliable results. For example, we began our

analysis by calculating an overall weighted-average price for each of

Koyo's four categories and compared these prices to one another. We

relied on this comparison as a means to ascertain the general pricing

trends that existed between Koyo's categories such that we would have

some basis upon which to proceed with a more detailed model-specific

comparison. In other words, while this macro-comparison did allow us to

draw some general conclusions, we recognized that it was not detailed

enough to provide conclusive results concerning each category and its

relationship, if any, to the other three categories. Therefore, in

order to identify Koyo's LOTs and resolve the issue of whether

categories 2 and 3 reflected distinct and separate LOTs or were more

like category 1 or 4 such that they should be collapsed with category 1

or 4 in some way, we conducted a model-specific analysis in which we

calculated and compared the model-specific weighted-average prices for

each model sold in each category. For example, we compared the model-

specific weighted-average prices for each model sold in categories 1

and 2, 1 and 3, 3 and 4, and 2 and 4. In doing so, we compared only the

weighted-average prices for those models which were sold in two

categories. For example, when we compared the pricing practices between

categories 1 and 2, we only compared the prices for models sold to both

categories 1 and 2. As a result, contrary to Koyo's assertion, we did

not rely on our macro-comparison as the basis of our overall LOT

determinations and we did not base our analysis on an over-inclusive

pool of models. Rather, we conducted a more detailed model-specific

analysis in which we excluded from our comparisons those models which

were not sold in both of the categories being compared. Therefore, we

disagree with Koyo that our analysis was inherently flawed.

However, while we have concluded that our computer analysis was

accurate and reliable, we have discovered that, when we interpreted the

results of this analysis in our preliminary results, we misidentified

Koyo's four categories. This led to us draw incorrect conclusions

concerning the manner in which Koyo's categories were to be combined

for LOT purposes. Therefore, for these final results we have properly

identified Koyo's categories and have reexamined the results of our LOT

analysis. Based on our reexamination of our model-specific comparisons

we have concluded that our original determination that categories 1 and

4 were distinct from each other and reflected separate OEM and AM LOTs

was correct. Furthermore, we have concluded that there is a clear

pattern of pricing differences between categories 1 and 2 and

categories 1 and 3 such that we cannot consider sales in categories 2

and 3 to be at the same LOT as category 1. In addition, our

reexamination of our comparisons between categories 2 and 4 and

categories 3 and 4 reveal that there is no distinct pattern of pricing

differences between categories 2 and 4 and categories 3 and 4 such that

we could consider sales in categories 2 and 3 as at a separate LOT than

category 4. Therefore, we agree with Koyo that we improperly collapsed

its home market sales categories in our preliminary results of review.

As a result, for these

[[Page 20595]]

final results we have collapsed categories 2, 3, and 4 into one

distinct AM LOT and treated category 1 as the OEM LOT.

2. Comments Concerning Adjustments to United States Price (USP)

Comment 11: Timken argues that it is not clear why NTN did not

report its U.S. credit expenses on a transaction-specific basis and,

based on its own analysis, claims that NTN has under-reported these

credit expenses.

NTN argues that not only has it consistently reported its U.S.

credit expenses on a customer-specific basis, but the Department has

consistently accepted NTN's methodology in all past reviews. NTN states

that Timken has provided no evidence indicating that NTN's customer-

specific methodology is unreasonable, and is only attempting to

persuade the Department to adopt a position which would yield the

results that Timken wants.

Department's Position: We disagree with Timken. While we prefer to

have credit calculated on a transaction-specific basis, when there is a

massive number of transactions in a review, we generally will not

require the respondent to calculate and report individual credit costs

for each transaction. Rather, when there is a voluminous number of

transactions involved, we permit a respondent to report credit

calculations based on the average credit days outstanding on a

customer-specific basis. This has been upheld by the CIT (see, e.g.,

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

and is in accordance with our established practice (see, e.g.,

Antifriction Bearings (Other than Tapered Roller Bearings) and Parts

Thereof From the Federal Republic of Germany; Final Results of

Antidumping Administrative Review, 56 FR 31692 (1991)).

Given the massive number of transactions NTN has reported in this

review, we have allowed NTN to report its U.S. credit expenses on a

customer-specific basis. Furthermore, not only have we allowed NTN to

report its credit expenses on a customer-specific basis in all previous

TRBs reviews, but NTN has explained in past reviews that it derived its

customer-specific credit ratio based on information directly from its

accounts receivables ledgers concerning the average number of days

payment was outstanding for each of its customers. As such, NTN's

reported credit amounts are based on a customer's actual payment

information as maintained in NTN's books and records (see, e.g., TRBs

92-93 at 57637)). We have verified this method in previous reviews,

and, because there is no evidence that NTN has changed its methodology

for this review, we are satisfied that NTN has again reported U.S.

credit expenses which are derived directly from actual customer payment

information. Therefore, we have not altered our treatment of NTN's U.S.

credit expenses for these final results.

Comment 12: Timken argues that, because it appears on the record

that NTN USA is some form of holding company which provides support to

its wholly-owned subsidiaries, some portion of NTN USA's expenses

should be allocated to sales of subject merchandise. Therefore, Timken

contends, the Department should increase the pool of U.S. indirect

selling expenses by a portion of NTN USA's general and administrative

expenses.

NTN argues that, because these G&A expenses are not provided for,

as Timken suggests, NTN USA's expenses should not be allocated to sales

of subject merchandise.

Department's Position: We disagree with Timken. The record

indicates that those expenses incurred by NTN USA on behalf of the

various NTN U.S. subsidiaries are already included in NTN's reported

U.S. indirect selling expenses. Therefore, there is no basis to

recalculate NTN's reported U.S. indirect selling expenses to account

for those expenses incurred by NTN USA.

Comment 13: Timken asserts that, because there is no evidence on

the record justifying the various adjustments NTN made to the pool of

U.S. indirect selling expenses it reported to be deducted from USP, the

Department should not allow these adjustments, and should include the

adjustment amounts in the total amount of U.S. indirect selling

expenses deducted from USP.

NTN states that, because its reporting of its U.S. indirect selling

expenses has remained consistent throughout all TRBs administrative

reviews to date and because the Department has consistently accepted

this reporting methodology, the Department should disregard Timken's

contentions and again allow NTN to make the adjustments at issue to its

reported U.S. indirect selling expenses.

Department's Position: We agree with NTN. We have examined certain

of these adjustment's in previous verifications of NTN without

discrepancy (see TRBs 90-92 at 64726) and, absent evidence from Timken

supporting its contention that these adjustments are unreasonable, we

have no reason to reject them for these final results.

Comment 14: Timken contends that NTN's adjustment to its U.S.

indirect selling expenses for a certain interest expense amount should

not be allowed because there is no explanation on the record of what

this amount represents, what it is attributable to, or why it should be

removed from the pool of U.S. indirect selling expenses to be deducted

from USP.

NTN states that both the Department and Timken are well aware that

the interest expense in question reflects those interests expenses NTN

incurred in regard to antidumping duty cash deposits. NTN contends

that, just as antidumping duties are not a basis for adjustment to USP,

the costs related to them should also not be the basis for an

adjustment to USP.

Department's Position: We agree with Timken that we should deny an

adjustment to NTN's U.S. indirect selling expenses for expenses which

NTN claims are related to financing of cash deposits.

The statute does not contain a precise definition of what

constitutes a selling expense. Instead, Congress gave the administering

authority discretion in this area. It is a matter of policy whether we

consider there to be any financing expenses associated with cash

deposits. We recognize that we have, to a limited extent, removed such

expenses from indirect selling expenses for such financing expenses in

past reviews of this finding, this order, and other orders. However, we

have reconsidered our position on this matter and have now concluded

that this practice is inappropriate. Further, we note that the Court's

affirmance of our prior policy does not preclude us from following this

new, reasonable policy.

We have long maintained, and continue to maintain, that antidumping

duties, and cash deposits of antidumping duties, are not expenses that

we should deduct from U.S. price. To do so would involve a circular

logic that could result in an unending spiral of deductions for an

amount that is intended to represent the actual offset for the dumping

(see, e.g., 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 II)). We

have also declined to deduct legal fees associated with participation

in an antidumping case, reasoning that such expenses are incurred

solely as a result of the existence of the antidumping duty order (see

AFBs II). Underlying our logic in both these instances is an attempt to

distinguish between business expenses

[[Page 20596]]

that arise from economic activities in the United States and business

expenses that are direct, inevitable consequences of an antidumping

duty order.

Financial expenses allegedly associated with cash deposits are not

a direct, inevitable consequence of an antidumping duty order. Money is

fungible. If an importer acquires a loan to cover one operating cost,

that may simply mean that it will not be necessary to borrow money to

cover a different operating cost. Companies may choose to meet

obligations for cash deposits in a variety of ways that rely on

existing capital resources or that require raising new resources

through debt or equity. For example, companies may choose to pay

deposits by using cash on hand, obtaining loans, increasing sales

revenues, or raising capital through the sale of equity shares. In

fact, companies face these choices every day regarding all their

expenses and financial obligations. There is nothing inevitable about a

company having to finance cash deposits and there is no way for the

Department to trace the motivation or use of such funds even if it

were.

In a different context, we have made similar observations. For

example, we stated that ``debt is fungible and corporations can shift

debt and its related expenses toward or away from subsidiaries in order

to manage profit'' (see Ferrosilicon from Brazil, 61 FR at 59412

(regarding whether the Department should allocate debt to specific

divisions of a corporation)).

So, while under the statute we may allow a limited exemption from

deductions from U.S. price for cash deposits themselves and legal fees

associated with participation in dumping cases, we do not see a sound

basis for extending this exemption to financing expenses allegedly

associated with financing cash deposits. By the same token, for the

reasons stated above, we would not allow an offset for financing the

payment of legal fees associated with participation in a dumping case.

We see no merit to the argument that, since we do not deduct cash

deposits from U.S. price, we should also not deduct financing expenses

that are arbitrarily associated with cash deposits. To draw an analogy

as to why this logic is flawed, we also do not deduct corporate taxes

from U.S. price; however, we would not consider a reduction in selling

expenses to reflect financing alleged to be associated with payment of

such taxes.

Finally, we also determine that we should not use an imputed amount

that would theoretically be associated with financing of cash deposits.

There is no real opportunity cost associated with cash deposits when

the paying of such deposits is a precondition for doing business in the

United States. Like taxes, rent, and salaries, cash deposits are simply

a financial obligation of doing business. Companies cannot choose not

to pay cash deposits if they want to import nor can they dictate the

terms, conditions, or timing of such payments. By contrast, we impute

credit and inventory carrying costs when companies do not show an

actual expense in their records because companies have it within their

discretion to provide different payment terms to different customers

and to hold different inventory balances for different markets. We

impute costs in these circumstances as a means of comparing different

conditions of sale in different markets. Thus, our policy on imputed

expenses is consistent; under this policy, the imputation of financing

costs to actual expenses is inappropriate.

Comment 15: In its response NTN reported that it paid commissions

to NBCA for certain purchase price sales. In addition, NTN indicated

that NBCA incurred other expenses associated with the services it

provided with regard to these purchase price sales. In our preliminary

results we determined that it was necessary to determine the arm's-

length nature of these related-party commissions by comparing the

related-party commission rate to those commission rates NTN reported it

paid to unrelated U.S. commissionaires. However, because the record did

not explicitly indicate the related-party commission rate, we attempted

to calculate this commission rate based on data NTN provided in exhibit

B-8 of its response. In exhibit B-8 NTN demonstrates its calculation of

NBCA's total U.S. indirect selling expenses for all merchandise (both

scope and non-scope), as well as its allocation of these total expense

amounts to scope and non-scope merchandise. In addition, it is

important to note that the purpose of this exhibit was for NTN to

calculate the indirect selling expense NBCA incurred for its reported

U.S. exporter's sales price (ESP) sales. Because the expenses NBCA

incurred in relation to those services it provided for certain purchase

price sales were not expenses NBCA incurred in association with its ESP

sales, NTN removed these expenses from its reported total NBCA expenses

in exhibit B-8 by making a downward adjustment to specific total

expense accounts. These downward adjustments were clearly identified in

exhibit B-8 as related to those expenses incurred by NBCA for certain

purchase price sales. Based on these reported downward adjustments we

calculated a total commission amount and divided this by the total

sales value of NTN's TRB purchase price sales, which we derived

directly from NTN's U.S. computer sales file. We considered the

resulting ratio the related-party commission rate and, upon comparing

it to the commission rates NTN reported it had paid to unrelated U.S.

parties, we determined the related-party commission not to be at arm's

length. Therefore, we treated it as an indirect selling expense and

adjusted for it accordingly in margin calculations for purchase price

sales.

NTN argues that, while it agrees with the Department's disregarding

the related-party commission, the Department's additional arm's-length

analysis was unnecessary because, in accordance with the Department's

practice, related-party commissions are treated as intra-company

transfers of funds and, as such, are not proper adjustments to price.

NTN further claims that, while the Department should not have conducted

an arm's-length analysis, it is nevertheless important for the

Department to recognize that it made two errors when calculating the

related-party commission rate. First, NTN asserts, the Department

relied on a numerator which reflected all expenses incurred by NBCA for

the services it provided for certain purchase price sales, rather than

on a numerator which reflected only the related-party commission NBCA

was paid. Second, NTN argues, even if the Department had used the

correct numerator, the calculation would still be incorrect because the

Department used a denominator which reflected only scope merchandise.

NTN asserts that exhibit B-8 clearly indicates that the downward

adjustments for purchase price sales reflected all merchandise, not

only TRBs. As a result, because the numerator for the calculation would

reflect both scope and non-scope merchandise, the Department should

have used a denominator which reflected NTN's purchase price sales of

all merchandise, rather than only the purchase price sales of TRBs. In

order to further demonstrate its point, NTN reported its actual

related-party commission rate and referred to the difference between

this rate and the one calculated by the Department.

Timken argues that NTN seeks to alter the Department's judgment

regarding these related-party commissions by supplementing the record

with new factual information. Timken asserts that NTN has reported for

the first time its actual related-party commission rate

[[Page 20597]]

and has indicated for the first time that the downward adjustments it

made in exhibit B-8 for those expenses NBCA incurred for services it

provided for certain purchase price sales reflect both scope and non-

scope merchandise. Therefore, Timken asserts, the Department should

reject this untimely information and disregard NTN's arguments.

Department's Position: Based on Timken's assertion that NTN's brief

contained new information, we reviewed the information and

preliminarily concluded that it most likely constituted new factual

information. Therefore, at the August 21, 1996 hearing, we explained

our position to the parties and requested that NTN and Timken refrain

from discussing the information in question. Based on the objections

raised by NTN at the hearing and the fact that we had yet to make a

final decision regarding the nature of the information in question

(i.e., we had not yet officially rejected or returned the information

to NTN), we reopened the record on the issue and provided both NTN and

Timken additional time to comment on the issue of whether the

information in question constituted new information which should be

rejected and not considered by the Department. The additional comments

submitted by NTN and Timken, our final determination concerning the

issue of new information, and our position on the related-party

commission issue are discussed in Comment 16 below.

Comment 16: NTN argues that the Department's decision to disallow

discussion of the related-party commission issue at the hearing was not

only unwarranted, but, because it prevented NTN from sufficiently

making its case, it served to render the administrative review process

useless. NTN also asserts that, because the Department failed to

communicate coherently which information in NTN's case brief it had

rejected, NTN was only able to surmise which information was in

question. NTN further asserts that, regardless of what the specific

information is, it is its contention that none of the information

contained in its pre-hearing case brief can be considered new factual

information. For example, NTN claims, even a brief review of exhibit B-

8 reveals that the numerator used by the Department in its calculation

reflected all expenses incurred by NBCA for services it provided for

certain purchase price sales, rather than only the commission amount.

NTN contends that this is demonstrated by the fact that the

Department's numerator corresponds to the sum of all the expenses

(i.e., the total amount of downward adjustments for these purchase

price-related NBCA expenses) as identified on worksheet 4 of exhibit B-

8. As a result, NTN concludes, there is no way the numerator used by

the Department could be considered as reflective of only a commission

amount.

NTN further argues that the Department has verified that the

downward adjustments made in exhibit B-8 reflect expenses incurred for

all merchandise, both scope and non-scope. Therefore, NTN claims,

because the adjustments clearly reflect all merchandise, rather than

only TRBs, it is patently absurd for the Department to now claim that

it did not realize this.

As for the related-party commission rate NTN reported in its case

brief, NTN contends that it was never instructed by the Department to

report this rate in this review or any other previous TRBs review. In

fact, NTN claims, it only submitted this rate in its brief in an effort

to point out the inaccuracy of the Department's calculation. NTN

asserts that, to refuse to accept this corrected figure, which the

Department was attempting to calculate itself, is arbitrary and

capricious.

In addition, NTN argues, one of the primary purposes of the pre-

hearing briefing process is to allow respondents to address

methodologies and correct clerical errors. NTN asserts that not only

was the information in question clearly not new information, but it is

apparent that NTN submitted the information in order to correct the

Department's clerical errors. Citing NTN Bearing Corp. v. United

States, Slip Op. 94-1186 (Fed. Cir. 1995) and Koyo Seiko v. United

States, 14 CIT 680 (CIT 1990), NTN asserts that, because the Department

has an obligation to correct errors which are timely identified by a

respondent and because fair and accurate determinations are fundamental

to the proper administration of the antidumping laws, the Department

cannot simply reject the information in question. Rather, NTN urges the

Department to either reconvene the hearing to allow comments on the

related-party commission issue or allow NTN to submit the comments it

was prevented from making at the August 28, 1996 hearing.

Timken argues that the Department could draw only one conclusion

from the information NTN provided in exhibit B-8 concerning the

expenses NBCA incurred when providing services for certain purchase

price sales. Therefore, Timken asserts, because the additional

information NTN provided in its case brief provides a different

interpretation of exhibit B-8, the Department should reject the new

information and not change how it treated NTN's related-party

commissions.

Department's Position: We both agree and disagree in part with NTN.

First, it is important to clarify that, while we indicated to NTN and

Timken at the hearing that we considered certain information in NTN's

case brief to constitute new factual information, we did not consider

this to be our final decision on the issue. For example, we did not, in

accordance with 19 CFR 353.31(3), officially reject and return the

information in question to NTN at any time prior to the hearing.

Rather, we decided that the hearing was the appropriate forum for

explaining our initial determination and to determine whether the issue

required additional examination and/or comment. Due to the controversy

surrounding the issue at the hearing, we decided that, in order to make

a reasonable and equitable decision, we would allow additional comment

and discussion. Therefore, we reopened the record on this issue and

provided both NTN and Timken time to submit additional argument and

rebuttal concerning the nature of the information in question. Given

that we never officially rejected and returned the information in

question and that we reopened the record to allow further examination,

we disagree with NTN that we arbitrarily made a final decision on this

issue without providing NTN proper notice.

We also disagree with NTN that our decision to disallow discussion

of the new information at the hearing undermined the administrative

review process and prevented NTN from adequately presenting its

position. While we acknowledge that we did not allow NTN and Timken to

specifically discuss this new information at the hearing, this only

prevented NTN from discussing the more detailed points of its position.

It did not, in any manner, prevent NTN from voicing its assertion that

the calculation was inaccurate, from objecting to the Department's

treatment of the related-party commission, or from asserting that the

additional analysis we performed concerning the commission was

unwarranted. Furthermore, while NTN may not have been able to address

the detailed points of its position at the hearing, it nevertheless

fully briefed these specific points in its pre-hearing briefs. Given

that parties to a hearing, in accordance with 19 CFR 353.38, may only

discuss at the hearing that which has already been presented in their

[[Page 20598]]

written briefs, both the Department and Timken were fully aware of

NTN's specific arguments upon receipt of its brief and no party would

have been permitted to provide any additional, new arguments at the

hearing. In addition, since most of the information at issue was

identified as proprietary by NTN, no party (NTN, Timken or the

Department) would have been able to discuss the information at the

hearing regardless of our decision to disallow its discussion.

Furthermore, by reopening the record, we clearly provided NTN with the

opportunity to make any additional arguments to support its position.

Thus, we do not agree that NTN had no opportunity to present its case.

We also disagree with NTN that we never clarified which information

in its case brief we considered to be new information. Because Timken's

case brief clearly identified that information which it alleged to be

new information, NTN was on notice of the fact that the issue of

whether the information in question is new might be addressed in the

course of the hearing. In addition, immediately following the hearing

Department officials discussed with NTN the new information issue to

ensure that NTN understood the parameters of the additional comments we

requested at the hearing. Thus, at this time NTN had every opportunity

to request clarification where necessary. Furthermore, our reopening of

the record regarding this issue provided NTN with an additional

opportunity and additional time to request clarification or

explanation.

Therefore, we disagree with NTN's assertions that we mistreated NTN

and failed to extend NTN the opportunity to fully state its position

and/or to participate in the administrative review proceeding. However,

we do agree with NTN that the additional analysis we conducted in our

preliminary results, in which we found it necessary to calculate a

related-party commission rate, was unnecessary. We also agree with NTN

that certain information we initially deemed as new factual information

was not actually new information.

It has been the Department's practice to treat NTN's related-party

``commissions'' for certain purchase price sales as intra-company

transfer of funds which are not an allowable adjustment to price (see,

e.g., AFBs 93-94 at 66489). Thus, it has been our practice not to

include these ``commissions'', the transfer payment between NTN and

NBCA, in our analysis. Rather, we have consistently taken into account

the actual expenses which NBCA incurred with respect to these purchase

price sales and, based on our determination that these expenses are

those that we typically consider to be indirect expenses incurred by

sales organizations, we have treated these expenses as indirect selling

expenses and made the appropriate adjustment for these expenses in our

purchase price margin calculations for commission offset purposes (see

id.).

In light of our past treatment of NTN's related-party commission,

and the fact that the record in this review contains no evidence which

would support a change in this treatment, we have determined for these

final results that it was unnecessary for us to calculate NTN's

related-party commission rate. Rather, we have determined that, in

accordance with our previous policy regarding NTN's related-party

commission, the appropriate adjustment is not to consider NTN's intra-

company transfers as commissions or direct selling expenses, but rather

to consider as indirect selling expenses those expenses which NBCA

incurred for those services it provided for certain purchase price

sales. Because NTN's claimed U.S. related-party ``commissions'' are not

a proper basis for a COS adjustment, the actual calculation of NTN's

related-party commission rate is irrelevant to our treatment of the

related-party commission and those expenses NBCA incurred for those

services it provided for certain purchase price sales. Given the fact

that all the information Timken alleged to be new in NTN's brief

addressed the inaccuracies in our attempt to calculate NTN's related-

party commission rate, the new information issue is moot with regard to

our commission rate calculation.

However, because Timken did allege that NTN's brief contained new

information concerning the nature of the expenses NBCA incurred in

relation to certain purchase price sales, and because it is these

expense amounts that we consider in our margin calculations, we have

determined that the new information issue is relevant with regard to

our adjustment for these expenses. Therefore, for these final results

we have examined the record in order to determine whether the fact that

both scope and non-scope merchandise are reflected in NTN's exhibit B-8

downward adjustments for these purchase price-related expenses is new

information and whether there are any inaccuracies in NTN's exhibit B-8

which would cast doubt on the reliability of these reported purchase

price-related expense amounts.

As indicated earlier, NTN reported and allocated indirect selling

expenses incurred by NBCA for ESP sales. Because NBCA does not maintain

separate records for the merchandise it sells, the initial, unadjusted

expenses NTN reported in this exhibit reflect both scope and non-scope

merchandise sold by NBCA. Prior to allocating these expenses to scope

and non-scope merchandise NTN made a series of downward adjustments to

the total expense amounts, including the downward adjustments for those

expenses NBCA incurred with regard to purchase price sales. Based on

our examination of exhibit B-8 for these final results, it is clear

from the exhibit that the total unadjusted expenses reported by NTN

reflect both scope and non-scope merchandise and that all downward

adjustments NTN made to these total U.S. indirect selling expenses

reflect both scope and non-scope merchandise. Therefore, we agree with

NTN that the purchase price-related adjustments NTN claimed in exhibit

B-8 clearly reflect both scope and non-scope merchandise, and that this

fact is not new information. Furthermore, we have determined that NTN's

removal of these expenses was warranted, given that the purpose of

exhibit B-8 was to calculate ESP-related indirect selling expenses. We

also find NTN's methodology for calculating and allocating these ESP-

related indirect selling expenses to scope and non-scope merchandise

was reasonable and non-distortive. NTN adjusted total expense amounts

which reflected all merchandise by adjustments which also reflected all

merchandise. Because it was only after the adjustments were made that

NTN allocated the total expenses to scope merchandise, the fact that

the adjustments reflected both scope and non-scope merchandise did not

distort the allocation of these expenses to scope merchandise.

Therefore, based on the fact that the information NTN provided

concerning NBCA's purchase price-related expenses was not new

information, and the fact that there is no reason to doubt the nature

of these expenses as reported by NTN, for these final results we have

considered these expenses as indirect selling expenses in our purchase

price margin calculations (for commission offset purposes), rather than

making a COS adjustment for NTN's related-party ``commissions''.

Comment 17: Timken argues that the Department should recalculate

Koyo's reported U.S. selling, general and administrative expenses

(SG&A) to include those expenses incurred by American Koyo

Manufacturing

[[Page 20599]]

Corporation (AKBMC), Koyo's U.S. manufacturing affiliate.

Koyo contends that AKBMC's G&A expenses are already included as an

element of its reported further-processing expenses. Thus, Koyo argues,

to include these G&A expenses in the pool of U.S. indirect selling

expenses would obviously result in an impermissible double counting of

AKBMC's G&A expenses.

Department's Position: We agree with Koyo. In our verification of

Koyo's 1992-93 U.S. sales and further-manufacturing information we not

only verified the accuracy of Koyo's reported U.S. SG&A expenses (see

the Department's U.S. further-manufacturing verification report for

Koyo dated September 8, 1995). Therefore, if we were to include AKBMC's

G&A expenses in Koyo's U.S. indirect selling expenses, we would, in

essence, be deducting these expenses from U.S. price twice. Therefore,

we have not changed our treatment of AKBMC's G&A expenses for these

final results.

Comment 18: Timken contends that Koyo's reported Japanese pre-sale

freight expenses are misallocated because Koyo used an improper

denominator in its allocation methodology. Timken argues that, because

Koyo incurs these expenses for both domestic and export sales, but does

not record the expenses separately for export and domestic sales, the

expenses should be allocated equally to bearings sold domestically and

abroad. However, Timken asserts, Koyo's allocation methodology instead

results in greater pro rata amounts being allocated to domestic sales

in comparison to export sales. Timken contends that this is due to the

fact that Koyo's allocation denominator is the sum of a home market

total sales value which reflects the total sales value to unrelated

parties and a U.S. sales value which reflects the total transfer prices

between related parties. Timken argues that, because these two total

sales values represent different stages in the stream of commerce, the

expenses are over-allocated to home market sales and under-allocated to

U.S. sales. Timken suggests that one method to ensure an even

allocation of the expenses would be to allocate them on the basis of

the ratios of the home market and export sales to the total costs of

sales. Timken concludes that, even if the Department does not choose

this method, it still has an obligation to correct the allocation of

these expenses such that they are evenly allocated to Koyo's domestic

and export sales.

Koyo first argues that not only is its Japanese pre-sale freight

allocation methodology well-established, but it has been repeatedly

verified and accepted by the Department in numerous reviews of both the

TRBs and AFBs cases. Next, Koyo argues that it allocated these expenses

in the manner in which they were incurred. Koyo states that because the

expenses, by definition, cannot be distinguished between the two

markets, it calculated a single allocation ratio by dividing the total

expense amount, which was incurred entirely by Koyo Japan, by Koyo

Japan's total sales value for both the export and domestic markets, as

taken directly from Koyo's financial reports. Third, Koyo asserts that

Timken is incorrect in assuming that the denominator includes U.S. and

home market total sales values at different stages. Koyo points out

that the total home market sales value does not reflect only the total

sales value to unrelated parties but also accounts for the total sales

values to several related home market customers as well. Likewise, Koyo

states, the entire export sales value is based not only on sales to its

related affiliate in the United States, but includes all export sales,

including sales to unrelated parties in third-country markets. As a

result, Koyo concludes, the home market, U.S., and third-country sales

values which constitute the denominator reflect a mix of sales to

related and unrelated parties such that Koyo's allocation results in a

fair ``apples-to-apples'' comparison.

Department's Position: We agree with Koyo. In general, when a

respondent relies on an allocation to calculate its per-unit adjustment

amounts, we require that allocation to reflect the manner in which the

expenses were actually incurred (see, e.g., TRBs 92-93 at 57635 and

Certain Fresh Cut Flowers From Columbia; Final Results of Antidumping

Duty Administrative Reviews, 61 FR 42848 (August 19, 1996)). In

addition, we examine the respondent's allocation methodology to

determine if there is internal consistency between the numerator and

denominator and in the methodology as a whole. For example, if an

expense is allocated on the basis of total sales value, as are the

expenses at issue here, the expense amount (the numerator) and the

total sales value (the denominator) should reflect the same pool of

sales such that the total expense amount reported by the respondent is

divided into the total value of the sales for which the expense was

actually incurred. Likewise, the allocation ratio should be applied to

the same sales price reflected in the denominator. For example, we

would not accept the application of an allocation ratio to gross sales

price if the denominator was calculated by totaling the value of all

sales on the basis of a net price.

In the instant case, Koyo Seiko, the Japanese parent, incurred the

pre-sale freight expenses at issue for all merchandise, whether

destined for sale to the U.S., third-country, or home market. Because

Koyo does not maintain its records such that it is able to calculate

the total expense amount incurred for each market, it was unable to

separately calculate the specific pre-sale freight expenses

attributable to each market. Therefore, Koyo used as its allocation

numerator the total expense amount incurred by Koyo Seiko for all

merchandise, as derived from Koyo Seiko's sales records. The sales for

which these expenses were incurred were Koyo Seiko's sales to all its

various customers, which encompassed a mix of related and unrelated

entities in both the export and home markets. Thus, Koyo calculated its

pre-sale freight allocation denominator by totaling the value for all

of Koyo Seiko's sales to all its customers, as derived from Koyo

Seiko's records.

Because Koyo Seiko's customers encompassed a mix of related and

unrelated parties in both the home and export markets, Koyo's

denominator includes sales values which reflect both transfer and

resale prices. Because Koyo Seiko's customer in the United States is

KCU, its wholly-owned U.S. affiliate, the U.S. sales transactions

relevant to Koyo's allocation are those between Koyo Seiko and KCU.

Thus, Koyo correctly included within its denominator the total value of

its sales to KCU, which were made at transfer prices. Similarly, in the

home and third-country markets Koyo Seiko sold to both related and

unrelated customers. Therefore, Koyo properly included within its

allocation denominator the total value of Koyo Seiko's sales to its

home and third-country market customers, some of which were at resale

prices, while others were at transfer prices. Koyo's methodology,

therefore, not only relies on a numerator and denominator which reflect

the same pool of sales, but its denominator is calculated on the basis

of the value of those sales for which the reported total expense amount

was actually incurred.

When calculating the per-unit expense adjustment amount for each

U.S. and home market transaction, Koyo applied its allocation ratio

(which was the same for all sales) to the appropriate unit price. For

U.S. sales it applied the ratio to the transfer prices Koyo reported

between Koyo Seiko and KCU, which

[[Page 20600]]

were the U.S. prices upon which the expense was incurred and the U.S.

sales values reflected in Koyo's allocation denominator. For home

market sales, Koyo applied the ratio to either a resale price (for

unrelated customers) or transfer price (for related customers) because

these were the home market prices upon which the expense was incurred

and the home market sales values reflected in the allocation

denominator.

Therefore, because Koyo's allocation properly reflects the manner

in which, and the sales upon which, Koyo actually incurred this

expense, we do not agree with the petitioner that Koyo's allocation is

unreasonable and have made no changes to this methodology for these

final results.

Comment 19: In its response Koyo reported inventory carrying costs

(ICC) it incurred in the United States as well as the ICC it incurred

in Japan for both further-manufactured and non-further-manufactured

TRBs it sold in the United States. In those instances where the average

number of days a TRB spent in inventory in the United States was

shorter than the number of days in which KCU, Koyo's U.S. sales

subsidiary, was required to pay Koyo, we set the U.S. ICCs equal to

zero, added the number of days of KCU's payment terms to the number of

days Koyo reported for inventory in Japan, and calculated a revised ICC

for U.S. sales using this revised number of days in inventory and the

home market borrowing rate. This is in accordance with our practice to

use the interest rate applicable to the foreign parent's borrowings in

calculating U.S. ICCs when there is evidence on the record that the

foreign parent assumed the financial burden of this imputed expense

through delayed payment by the U.S. subsidiary (see, e.g., Federal-

Mogul Final Remand Results at Comment 1 and The Timken Company v.

United States, 865 F. Supp. 881 (CIT 1994)). We then applied our

recalculated factor for Japanese ICC to the transfer price between Koyo

and KCU and our recalculated U.S. ICC factor to the landed cost of the

TRB to derive per-unit ICCs for Koyo's U.S. sales.

Timken argues that, because there are inventory carrying costs

associated with that portion of merchandise which has been further

manufactured, any calculation of the inventory carrying costs for

further-manufactured merchandise should not rely on the transfer price

between Koyo and KCU, because it fails to deduct from USP those

inventory carrying costs attributable to further-manufacturing. In

addition, Timken contends that, with respect to the Department's

recalculation methodology, it incorrectly used the home market

borrowing rate, rather than Koyo's U.S. borrowing rate.

Koyo argues that the Department should not adjust USP for the

imputed carrying costs associated with its further-manufacturing costs

because, during the period that forgings are held at AKBMC's Orangeburg

facility, they are considered raw materials used in the production of

TRBs. Because the Department bases inventory carrying costs on the

value of finished goods only, Timken's argument should be dismissed. In

addition, Koyo adds that the imputed costs of AKBMC's raw material

inventory are already included in its further-manufacturing costs

through the inclusion of financing costs. As a result, Koyo argues that

to make an additional adjustment, as Timken suggests, would constitute

the double-counting of these inventory carrying costs.

However, Koyo states that if Timken is only suggesting that the

Department apply the inventory carrying cost factor for U.S. sales to

the cost of manufacturing TRBs, rather than the transfer price, Koyo

agrees. Koyo asserts that the Department should apply its recalculated

inventory carrying cost factor to the total cost of manufacturing for

both finished and further-manufactured TRBs sold in the United States

because it would allow the Department to apply the same general formula

to both the U.S. sales of finished TRBs and U.S. further-manufactured

TRBs.

Finally, Koyo argues that the Department properly used the home

market borrowing rate in its recalculation because, for those

situations in which the number of days in inventory in the United

States is less that the terms of payment between Koyo and KCU, the

applicable rate is the home market rate. However, Koyo adds, while it

agrees with the Department's recalculation methodology, the Department

erroneously applied the home market rate to the full period covered by

the terms of payment between Koyo and KCU, rather than only to the

actual number of days that the merchandise spent in inventory in the

United States.

Department's Position: We disagree with Timken and agree in part

with Koyo. As indicated above, we applied our recalculation methodology

to both Koyo's further-manufactured and non-further-manufactured U.S.

sales. However, for these final results we have determined that it is

inappropriate to recalculate the ICCs Koyo reported for its further-

manufactured sales because Koyo's methodology accurately reflects the

ICCs it incurred for these sales.

In our preliminary results we determined that it was necessary to

recalculate Koyo's reported ICCs for U.S. sales in order to account for

those instances where the foreign parent assumed the financial burden

of the imputed expenses through the delayed payment by the U.S.

subsidiary. As the record indicates, with respect to Koyo's non-

further-manufactured U.S. sales, where KCU purchases finished TRBs from

Koyo and resells the finished bearings to unrelated U.S. customers,

there were instances where the total time in inventory (in both the

United States and Japan) of the finished TRBs was shorter than the

number of days in which KCU was required to pay Koyo. Accordingly,

because Koyo incurred the financial burden of the imputed expense in

these instances, we recalculated Koyo's reported ICCs for its U.S.

sales in accordance with our practice in such instances to use the

interest rate applicable to the foreign parent's borrowings. We

therefore disagree with Timken that we should not have applied the home

market interest rate in our recalculation.

As was the case with its non-further-manufactured U.S. sales, Koyo

reported ICCs for both the time in inventory in Japan and in the United

States for the further-manufactured sales. However, the Japanese ICC

Koyo reported for its further-manufactured U.S. sales reflected the

time in inventory in Japan for forgings, while the reported U.S. ICC

reflected the time in inventory in the United States for the finished

TRBs. This is consistent with the fact that (1) Koyo treated forgings

as finished merchandise in Japan, (2) once the forgings were purchased

by AKBMC, Koyo's U.S. manufacturing subsidiary, the forgings became

part of AKBMC's raw material inventory, and (3) it wasn't until the

forgings were further processed into finished TRBs that ICCs were

incurred in the United States for finished goods. Because the forgings

became raw material inventory upon purchase by AKBMC, the ICCs for the

forgings at this point were not U.S. selling expenses, but rather

reflected and were captured in AKBMC's production costs. Because it is

our policy to make an ICC adjustment to USP for only finished goods in

inventory because unfinished goods represent production expenses rather

than U.S. selling expenses (see, e.g., Dynamic Random Access Memory

Semiconductors of One Megabit or Above From the Republic of Korea;

[[Page 20601]]

Final Results of Antidumping Duty Administrative Review, 61 FR 20216

(May 6, 1996)), it would be inappropriate to apply our recalculation

methodology to Koyo's further-manufactured sales because this

methodology would not only treat the ICCs incurred during the time the

forgings are unfinished goods as U.S. selling expenses, but it would

result in the double-counting of these expense as well. Therefore, we

have not applied our recalculation methodology to Koyo's further-

manufactured sales for these final results and have relied on Koyo's

originally reported ICC expense calculations.

With respect to Timken's argument that any calculation of Koyo's

ICC for further-manufactured sales should not rely on the transfer

price between Koyo and KCU because it excludes the ICCs incurred during

the time of further-manufacture, we disagree. As noted above, we only

calculate ICCs for finished goods. Because the forgings are clearly not

finished merchandise during the further-manufacturing process, these

expenses were properly captured in AKBMC's production costs. In

addition, we note that as a general rule we prefer ICCs to be

calculated using cost-based information because it represents the

imputed cost to the firm for storing merchandise in inventory. However,

as explained in our Federal-Mogul Final Remand Results, transfer prices

represent the actual cost to a U.S. subsidiary of acquiring the subject

merchandise and, as such, reflect the actual cost of the merchandise as

it entered the subsidiary's inventory (see Federal-Mogul Final Remand

Results at Comment 1). Because the reporting and subsequent

verification of the U.S. ICCs typically requires that the U.S.

subsidiary establish the average cost of merchandise held in inventory

as well as the total cost of merchandise sold during the time period at

issue (generally one year), subsidiaries often base such costs on

transfer prices, which are maintained in the normal course of business,

and provide an accurate basis upon which to calculate the cost to the

subsidiary of holding inventory prior to the sale to an unrelated

customer. Based on these reasons, as well as the fact that there is no

evidence on the record to impugn the reliability of Koyo's reported

transfer prices, we have determined that the use of the transfer price

as the basis for Koyo's calculation of the ICC expenses incurred in

Japan for its U.S. further-manufactured sales and as the basis for our

calculation of the ICC expense incurred by Koyo for non-further-

manufactured U.S. sales is appropriate and accurate.

Finally, we agree with Koyo that, when recalculating Koyo's ICCs

for its U.S. non-further-manufactured sales where the time in inventory

in the United States was less than the terms of payment between Koyo

Seiko and KCU, we incorrectly included within our calculation of the

revised number of days in inventory the full number of days of KCU's

payment terms to Koyo Seiko, despite the fact that the actual number of

days the merchandise spent in inventory in the United States was less

than the payment terms. As a result, we agree that our recalculation

overstates Koyo's ICCs for these U.S. TRBs sales. Therefore, for these

final results we have corrected this error by calculating the number of

days in inventory for Koyo's non-further-manufactured U.S. merchandise

by adding to the number of days the U.S. merchandise spent in inventory

in the home market the actual number of days in inventory in the United

States, rather than the number of days reflected by the full payment

terms between KCU and Koyo Seiko.

Comment 20: Timken argues that, because TRBs manufactured by

American NTN Bearing Corporation (ANBC), NTN's U.S. manufacturing

subsidiary, are maintained in ANBC's inventory until sold to NBCA, the

time in inventory at ANBC should be added to NBCA's time in inventory

in NTN's U.S. inventory carrying cost calculation for further-

manufactured merchandise.

NTN contends that Timken's argument is misplaced because NBCA

incurs all inventory expenses relative to further-manufactured

merchandise from the point ANBC completes the manufacture of the

finished merchandise.

Department's Position: We agree with NTN. Because NBCA incurs all

the inventory expenses relative to further-manufactured merchandise

from the point that ANBC completes the production of the finished

merchandise, the ICCs Timken refers to are already included in NBCA's

reported ICCs for U.S. sales. Therefore, we have made no changes to

NTN's reported ICCs for these final results.

Comment 21: Timken argues that the Department improperly treated

NSK's reported U.S. technical service expenses as indirect selling

expenses. Timken contends that not only did NSK report technical

service expenses which the Department considers to be directly related

to sales, but NSK failed to segregate its technical service expenses

into direct and indirect portions. Timken asserts that, because it is

the Department's practice to treat all of a respondent's U.S. technical

service expenses as direct selling expenses when a respondent fails to

segregate the expenses into direct and indirect portions, the

Department should make an adverse inference and treat all of NSK's

reported U.S. technical service expenses as direct selling expenses.

NSK argues that the record demonstrates that its reported U.S.

technical service expenses reflect indirect expenses such as salaries

and fringe benefits, and that any expenses which could be potentially

identified as direct selling expenses would have a de minimis impact on

the expense calculation. Furthermore, NSK asserts, the Department has

verified and accepted its reported technical service expenses in past

reviews of both the TRBs and AFBs cases (TRBs 90-92 at 64726) and

should do so again in these instant reviews.

Department's Position: We agree with Timken. Our questionnaire

specifically requests respondents to separate the fixed and variable

portions of technical service expenses because we treat fixed technical

servicing costs as indirect expenses and variable technical servicing

costs as direct expenses. Our review of NSK's response indicates that,

although NSK incurred both fixed and variable technical service

expenses, it did not separate these expenses into direct and indirect

portions. While we recognize that, in order to achieve this segregation

it would be necessary for NSK to trace certain expenses, such as travel

and travel-related expenses, to individual customer calls, the

difficulty that may be associated with such an exercise does not

relieve NSK of its responsibility to provide the Department with actual

expense information. Therefore, for these final results we have applied

BIA and treated all of NSK's U.S. technical service expenses as direct

selling expenses (see, e.g., AFBs 93-94 at 66486).

Comment 22: Timken contends that Koyo has identified an imported

component for a certain TRB, that was further manufactured and sold in

the United States during the 1992-93 POR, as an AFB part rather than as

a TRB part. Timken contends that the Department must ensure that Koyo

is properly identifying its imported TRBs components as TRB parts and

is paying the appropriate antidumping duty cash deposit rates on these

components. Furthermore, Timken asserts, given Koyo's failure to

identify this TRB part as a TRB part in its response, the Department

should apply a first-tier BIA rate to all of Koyo's reported U.S. sales

[[Page 20602]]

of the model which contains this misidentified component.

Koyo argues that, when calculating its reported further-processing

expenses for a particular TRB model, it did improperly identify that

component as non-scope merchandise. However, Koyo contends, Timken's

contention that the Department should resort to first-tier BIA to

calculate the margin for all sales of the model which contained this

component is extreme and unwarranted. Koyo claims that the only impact

of its error was to slightly inflate its reported material costs. Koyo

contends that the Department, therefore, should simply neutralize the

impact of the error by making the appropriate offsetting adjustment to

the material costs Koyo reported for the TRB model which contains this

component prior to deducting the model's further-processing costs from

USP.

Department's Position: We agree with Koyo. Not only is this the

first time Koyo has submitted its further-processing costs for TRBs

further manufactured from forgings and sold in the United States, but

there is no evidence on the record to suggest that Koyo intentionally

identified the component in question as an AFBs part or that Koyo is

paying AFBs antidumping duty cash deposit rates on entries of

merchandise subject to the TRBs antidumping duty order or finding.

Rather, the record indicates that Koyo made an error when compiling its

further-processing costs for the purpose of responding to our

questionnaire. Because information on the record allows us to correct

this error, and because the correction of the error does not entail a

substantial revision to Koyo's response, we have made the appropriate

corrections for these final results. See the proprietary version of the

Department's final results analysis memorandum for Koyo for a detailed

description of our corrections.

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

Comment 23: Timken argues that, while the Department properly

determined that NTN's discounts, Koyo's billing adjustments (BILLADJI),

and NSK's return rebates should not be treated as direct selling

expenses because they were neither reported on a transaction-specific

basis nor granted at a fixed and constant percentage of the sales upon

which they were allocated, the Department incorrectly treated these

expenses as indirect selling expenses. Timken contends that in

Torrington Company v. United States, 82 F.3d 1039 (Fed. Cir. 1996)

(Torrington), the Court of Appeals for the Federal Circuit (CAFC)

emphasized that indirect selling expenses are those types of expenses

that are not related to particular sales, but are incurred on all

sales, and concluded that expenses that are, by their nature, directly

related to particular sales cannot be treated and deducted from FMV as

indirect selling expenses. Timken asserts that, although NTN's

discount, Koyo's BILLADJI, and NSK's return-rebate reporting

methodologies prevent the Department from treating these expenses as

direct selling expenses, the record demonstrates that they are

nevertheless related to particular sales and are, therefore, direct by

their nature. Timken concludes that the Department, in accordance with

Torrington, cannot treat these expenses as indirect selling expenses;

rather, it must deny each adjustment in its entirety.

NTN argues that, because its home market discounts are not related

to particular sales and do not vary with the quantity of a particular

item sold, Torrington does not apply to these discounts and the

Department properly adjusted for the expenses as indirect selling

expenses.

Koyo argues that Timken has mischaracterized the CAFC's ruling in

Torrington by contending that the CAFC held that direct expenses may

not be allocated to all sales. Koyo argues that the Torrington decision

was in fact much more limited, deciding only that, because PSPAs were

incurred as direct expenses, the Department could not treat them as

indirect expenses under the ESP offset provision. Koyo asserts that in

Torrington the CAFC merely reaffirmed its earlier determination in

Smith Corona Group v. United Sates, 713 F.2d 1568 (Fed. Cir. 1983)

(Smith Corona), which permits the Department to accept allocated

expenses as direct selling expenses, provided that the allocation does

not distort the margins. In fact, Koyo contends, contrary to Timken's

assertion, there is nothing within the Torrington decision which

undermines the authority of the Department to treat expenses allocated

over scope merchandise as direct expenses. Koyo explains that, because

its BILLADJI adjustment was allocated across sales of only scope

merchandise, the Department must reject Timken's arguments and adjust

FMV for these billing adjustments as direct, rather than indirect,

selling expenses.

NSK contends that the evidence on the record clearly demonstrates

that its reported return rebates warrant deduction from FMV as direct

selling expenses. NSK contends that, in accordance with Torrington,

these return rebates are direct in nature. Furthermore, NSK states that

the evidence on the record also clearly demonstrates that NSK reported

these expenses as specifically as its records permitted and calculated

the adjustments to avoid inaccuracies or distortions to FMV. NSK

concludes that, because the Department allows non-distortive

allocations where transaction-specific reporting is not feasible and

because its reporting methodology reflects its actual experience, the

Department's decision to treat these expenses as indirect selling

expenses in its preliminary results was incorrect.

Department's Position: We agree in part with Timken. As a general

matter, pursuant to the law in effect prior to January 1, 1995, the

Department only accepts claims for discounts, rebates, or other PSPAs

as direct adjustments to price if actual amounts are reported for each

transaction (see, e.g., AFBs 93-94 at 66498). One way in which a

respondent may report actual adjustment amounts is if the PSPA is

reported on a transaction-specific basis. Because allocated price

adjustments can have the effect of distorting individual prices by

diluting the PSPAs received on some sales, inflating them on other

sales, and attributing them to still other sales that did not actually

receive any adjustment at all, such allocations do not result in the

actual amount of the adjustment being reported for each individual

sale. Rather, allocations have the effect of partially averaging

prices. Just as we do not allow respondents to report average prices,

we do not allow respondents to average direct additions to or

subtractions from price. However, if the PSPA is allocated, we consider

the actual amount of the adjustment to be reported and will treat the

PSPA as a direct selling expense if the respondent demonstrates that

the PSPA was granted as a fixed and constant percentage of the sales

price of all transactions for which it was reported and to which it was

allocated. We do so because such an allocation does not distort the

amount of the adjustment the respondent granted because the same

percentage adjustment applies to all sales. This policy is consistent

with the policy we established and followed in numerous reviews of both

the TRBs and AFBs orders (see, e.g., TRBs 92-93 at 57640 and AFBs 93-94

at 66498).

In the past, if a respondent allocated a PSPA such that it was

limited to scope merchandise, but did not result in the actual amount

of the adjustment being reported for each sale (i.e., it was reported

on a customer- or product-specific basis) we treated the PSPA as an

indirect expense and adjusted FMV accordingly. However, in light of

[[Page 20603]]

Torrington, in which the CAFC determined that we cannot treat a PSPA as

an indirect selling expense when it is, by its nature, a direct selling

expense, we no longer treat improperly allocated home market price

adjustments as indirect selling expenses, but instead disallow negative

(downward) adjustments in their entirety. However, we will continue to

treat positive (upward) home market price adjustments (e.g., positive

billing adjustments that increase the final sales price) as direct

selling expenses in our analysis. The treatment of positive billing

adjustments as direct selling expenses is appropriate because

disallowing such adjustments would provide an incentive to a respondent

to report positive billing adjustments on an allocated basis in order

to minimize their effect on the margin calculations. That is, if we

were to disregard positive billing adjustments which would be upward

adjustments to FMV, respondents would have no incentive to report these

adjustments on a transaction-specific basis (see AFBs 93-94 at 66498).

We note that this policy is in direct accordance with Torrington

and Smith Corona which hold that we must disallow home market price

adjustments that are allocated in a manner that does not allow us to

separate expenses incurred on sales of scope merchandise from those

incurred on sales of non-scope merchandise. Our policy incorporates

this decision in that we do not allow allocated price adjustments

except for those granted at a fixed and constant percentage of the

sales price on all transactions for which the adjustment was reported.

If a respondent grants and reports a PSPA as a fixed percentage of the

sales to which it pertains, the fact that this pool of sales may

include non-scope merchandise does not distort the amount of the

expense the respondent granted and reported on sales of subject

merchandise because the same adjustment percentage applied to both

scope and non-scope merchandise (see id.).

Therefore, contrary to Koyo's assertion that we have based our

policy on an overly narrow interpretation of the CIT and CAFC rulings

requiring us to reject allocated PSPAs in all cases, our policy allows

for the acceptance of allocated PSPA amounts as direct selling expenses

when a respondent demonstrates that no distortion has occurred as a

result of its allocation. The only manner in which an allocated PSPA

would not result in distortion is if it was granted and reported as a

fixed and constant percentage of the sales to which it has been

allocated.

For these final results we have applied this policy to NTN's home

market discounts, Koyo's home market BILLADJI adjustment, and NSK's

return rebates and have made the following determinations:

First, concerning NTN's discounts, NTN did not report these

discounts on a transaction-specific basis, but, rather, reported the

adjustments on a product-or customer-specific basis. Furthermore, NTN

did not grant and report these discounts as a fixed and constant

percentage of sales. Therefore, because NTN's discounts are clearly

direct in nature (i.e., they are directly related to particular sales

rather than related to all sales), but were not allocated

appropriately, we have disallowed this adjustment to FMV for these

final results (see AFBs 93-94 at 66501).

Concerning Koyo's BILLADJI adjustment, while Koyo reported this

adjustment based on a scope-specific allocation, Koyo did not report it

on a transaction-specific basis and we found no evidence that Koyo

granted the adjustment as a fixed and constant percentage of the sales

for which it was reported. As a result, because this allocation does

not result in the actual amount of the adjustment being reported for

each transaction, we have, in accordance with our established practice,

denied all negative BILLADJI adjustments in their entirety. However,

because Koyo also reported positive BILLADJI adjustments, in accordance

with our policy stated above, we have treated these as direct selling

expense adjustments to FMV.

With respect to NSK's return rebates, we have determined for these

final results that NSK's return rebates are promotional expenses,

rather than price adjustments, because NSK grants these rebates to

promote sales made by distributors. Because NSK demonstrated in its

response that it incurred and reported these expenses on a model-

specific basis and tied these expenses to subject merchandise, we

consider the expenses to be direct selling expenses and have adjusted

FMV accordingly.

Comment 24: Timken argues that the Department improperly treated

NSK's lump-sum PSPAs as indirect selling expenses. Timken contends that

the CIT has clearly stated that the Department may not allow an

adjustment to FMV for any rebates allocated on the basis of sales of

non-scope merchandise (Torrington Co. v. United States, 818 F. Supp.

1563 (CIT 1993)). Timken contends that the record demonstrates that NSK

did not report its lump-sum PSPAs on the basis of sales of in-scope

merchandise only, and, as a result, the Department must deny this

adjustment to FMV in its entirety.

Citing Torrington, NSK contends that the CAFC has clearly

determined that this type of PSPA constitutes a direct selling expense.

Furthermore, NSK contends, it has submitted evidence demonstrating that

the monthly purchasing patterns of customers receiving these

adjustments are relatively stable for purchases of scope and non-scope

merchandise. NSK asserts that, because these customers consistently buy

about the same percentage of scope and non-scope products from month to

month, without any variance, the PSPA granted is fairly apportioned to

scope sales and does not distort FMV. Thus, NSK contends, its method

for reporting lump-sum PSPAs accurately calculates the per-unit

adjustment for sales of scope merchandise and the Department must treat

these expenses as direct selling expenses.

Department's Position: We agree with Timken. We have denied this

adjustment for these final results because it is a direct price

adjustment and NSK failed to tie the PSPA to the particular sales

affected by the adjustment. NSK explained in its response that it

granted these lump-sum PSPAs as a fixed percentage of a certain group

of sales. However, rather than tying the adjustment to the particular

transactions for which the adjustment was incurred, NSK allocated the

lump-sum PSPAs by dividing the total amount of the lump-sum PSPAs it

paid to a customer during the POR by the total sales value of all

merchandise (scope and non-scope) sold to the customer during the POR.

As a result, NSK allocated the PSPAs across a broader base of sales

than those for which it was granted. Accordingly, we have denied this

adjustment in its entirety for these final results.

Comment 25: Timken contends that the record demonstrates that NSK's

home market early payment discounts are, by their nature, directly

related to sales. However, Timken asserts, NSK did not report these

discounts on a transaction-specific basis and its allocation of these

discounts included non-scope merchandise. Timken argues that, in an

effort to eliminate the flaws in NSK's reporting methodology, the

Department attempted to recalculate NSK's early payment discounts.

However, Timken contends, not only is it unclear how the Department's

recalculation methodology accurately established the payment period for

each customer receiving such a discount, but, because the recalculation

is neither transaction-specific nor limited to scope

[[Page 20604]]

merchandise, it also fails to result in the derivation of the actual

discount earned on individual transactions of scope merchandise.

Therefore, Timken concludes, the Department should abandon its attempts

to recalculate NSK's discounts and should deny the adjustment in its

entirety for these final results.

NSK argues that, while non-scope merchandise was included in both

its original allocation and the Department's recalculation, the record

clearly demonstrates that it granted these discounts as a fixed and

constant percentage of the sales to which they were allocated. As a

result, NSK claims, there is no need for the Department to remove non-

scope merchandise from its recalculation. Furthermore, NSK argues, the

Department's recalculation accurately assigned the applicable payment

period to each customer receiving such a discount. In addition, NSK

asserts, because the record demonstrates that customers' payment

patterns were stable throughout the POR, the Department's recalculation

resulted in accurate per-transaction discount amounts for scope

merchandise. As a result, NSK concludes, the Department should not

abandon its recalculation methodology and should continue to adjust FMV

for these discounts as direct selling expenses.

Department's Position: We agree with NSK. The record demonstrates

that NSK granted a discount to those customers who remitted payment

earlier than the terms of payment for that particular customer called

for. The record also reveals that NSK granted different rates depending

upon how early the payment was received. In other words, NSK had in

place a rebate schedule which offered a different discount rate on the

basis of the payment category, such that when NSK received a payment,

for example, zero to thirty days early NSK granted one discount rate,

while when NSK received a payment thirty to sixty days early, it

granted a different discount rate. The record also indicates that NSK

offered the same discounts equally to sales of both scope and non-scope

merchandise; thus, regardless of the merchandise, whenever payment was

received early, NSK granted the applicable discount rate on the basis

of the payment category. In addition, the record demonstrates that NSK

periodically changed the discount rates for each payment category

throughout the POR such that, even if a customer consistently paid the

same number of days early every month in the POR, it received different

discount rates during the POR. Finally, the record demonstrates that

each customer had a stable payment pattern. In other words, each

customer remitted payment within the same number days early each month

such that it consistently received the discount rate in effect for the

same payment category.

NSK calculated its reported discount amounts by dividing the total

discounts paid to a customer during the POR by the total sales value of

merchandise sold to that customer during the POR. As a result, even

though each customer's payment category remained stable over time, the

discount rate NSK reported for a customer reflected an average POR

percentage rather than the actual rate granted to the customer at the

time the actual transaction was made. In other words, NSK averaged a

customer's discount rate and applied that rate to each transaction

rather than the actual rate granted. In our preliminary results, based

on our review of the information NSK submitted in regard to these

discounts, we determined that information on the record enabled us to

remove this distortion. Therefore, we recalculated NSK discounts as

follows:

First, because a customer's payment category was stable over time,

it was mathematically possible to determine the payment category for a

customer for a given transaction by dividing the discount amount

reported for the transaction by the unit price. By comparing this ratio

to the individual POR averages NSK reported for each customer, we were

able to ascertain the payment category for that customer. For example,

if a customer consistently remitted payment 0-30 days early and the

discount rate for this category was 1.5 percent for the first half of

the POR and 2.0 percent for the second half of the POR, the average POR

rate NSK would have reported for the transaction would be 1.75 percent.

If we divided the discount amount reported for a transaction by the

unit price of that transaction and arrived at 1.75 percent, we would

know that that transaction fell in the zero to thirty day payment

category. However, because the discount rate NSK applied to the unit

price reported for a transaction reflected the average POR rate for the

customer (1.75 percent) and not the actual discount rate granted during

the period in which the transaction took place (either 1.5 percent or

2.0 percent), NSK's allocation failed to result in actual transaction-

specific discounts. Therefore, after determining the payment category

for each transaction, we applied a revised discount rate to that

transaction depending upon the date of the transaction and applicable

payment category discount rate. In this way, we applied to each

transaction the discount rate which actually applied to the sale.

We disagree with Timken that this recalculation suffers from the

same flaws as NSK's original methodology. Because NSK granted the same

discount rate on sales of all merchandise (i.e., granted the discount

as a fixed and constant percentage of all applicable sales prices), the

inclusion of non-scope merchandise in our allocation is non-distortive.

Furthermore, our methodology clearly results in the application of

transaction-specific discounts because we apply the discount rate

granted to a customer within a given time period to sales to that

customer within the corresponding time period. Therefore, we have not

altered our recalculation of NSK early payment discounts for these

final results and have continued to treat these discounts, as

recalculated, as direct selling expenses.

Comment 26: NSK argues that the record demonstrates that it granted

and reported its distributor incentives as a fixed and constant

percentage of all applicable sales. Furthermore, NSK asserts that in a

recent remand determination the Department determined that, because

NSK's distributor incentives were granted and reported as a fixed

percentage of all sales, both scope and non-scope, NSK's allocation was

reasonable and non-distortive, and the Department subsequently treated

the adjustment as a direct selling expense (Final Results of

Redetermination Pursuant to Remand, Torrington Co. v. United States,

Court No. 92-07-00483 (CIT 1995), aff'd Slip Op. 96-85 (CIT 1996)). NSK

concludes, because there is no difference in the methodology it used in

this review and the one at issue in the remand, the Department should

treat these distributor incentives as direct selling expenses in these

reviews as well.

Timken contends that there is no evidence on the record

demonstrating that the sales upon which NSK calculated its incentive

rebates included only sales of subject merchandise. Therefore, Timken

concludes, because the Department cannot allow the inclusion of non-

scope merchandise when calculating adjustments to FMV, the Department

should continue to deny this adjustment for these final results.

Department's Position: We disagree with NSK. Based on our

reexamination of the record, we have determined that, while NSK granted

its distributor incentives as a fixed and constant percentage of its

distributors' gross sales, NSK did not allocate these expenses on the

basis of this same group of sales. Rather, NSK allocated the

[[Page 20605]]

expenses on the basis of its sales to its distributors. Therefore,

while NSK may have incurred the expenses as a fixed and constant

percentage of its distributors' sales, NSK provided no evidence

indicating that the adjustment was granted as a fixed and constant

percentage of its sales to its distributors (the sales upon which NSK

actually allocated the expense for the purpose of its response).

Therefore, we have denied this adjustment in its entirety for these

final results.

Comment 27: Fuji argues that the Department incorrectly disallowed

its claimed adjustment for home market rebates. First, Fuji explains

that it allocated its rebates to scope merchandise using both scope and

non-scope merchandise because the rebates were incurred on the basis of

both scope and non-merchandise. As a result, Fuji asserts, its records

do not provide a separate breakout for TRB rebates alone, and it is

unable to provide TRB-specific rebate amounts. However, Fuji adds,

under its rebate program the same rebate amounts are paid on scope and

non-scope merchandise regardless of whether the merchandise is scope-

or non-scope. Therefore, Fuji asserts, its allocation methodology

accurately allocates the rebates to TRBs and the Department should

adjust FMV for these expenses as direct selling expenses.

Fuji further contends that, even if the Department does not agree

that these rebates warrant a direct adjustment to FMV, the Department

must nevertheless adjust for these rebates as indirect selling

expenses. Fuji asserts that the Department routinely includes the

amount of a disallowed rebate within home market indirect selling

expenses even in situations where the rebate amount includes both scope

and non-scope merchandise.

Timken argues that the Department properly denied Fuji an

adjustment for its home market rebates because the record demonstrates

that Fuji provided rebates for selected periods of time and, as a

result, the POR encompasses several rebate periods. Timken asserts

that, while it may be the case that in a given period Fuji granted the

same rebate for both scope and non-scope merchandise, the existence of

multiple rebate periods indicates that, if the recipient of the rebate

sold only non-scope merchandise within a period and earned a large

rebate, but in the next period sold both scope and non-scope

merchandise, the rebate for the non-scope merchandise would be

allocated to all sales even though it was only earned for non-scope

merchandise. As a result, Timken concludes, the Department must deny

this adjustment as it did in its preliminary results.

Department's Position: We agree in part with Timken. The record

indicates that Fuji offered two different types of rebate programs to

its dealers. Fuji calculated the rebate amounts it reported for each

transaction by dividing the total amount of rebate paid to each dealer

during the POR by the total sales to the dealer during the POR. As a

result, Fuji reported its rebates on a customer-specific rather than a

transaction-specific basis. Therefore, in order for us to accept Fuji's

allocation, Fuji must demonstrate that it granted its rebates to each

customer at a fixed and constant percentage of its sales of all

products, both scope and non-scope. We examined the record to determine

if, as Fuji claims, its rebates were granted and reported as a fixed

and constant percentage of all sales such that the inclusion of non-

scope merchandise in its denominator would not produce distortions.

Fuji noted several times that its rebates were granted at a fixed and

constant percentage. However, we are unable to find any evidence on the

record supporting this contention. Furthermore, it is unclear from

Fuji's response whether there are multiple rebate periods in a POR,

and, if so, whether the rebate percentage granted to a customer was the

same for each period. Given that Fuji calculated an overall POR rebate

percentage for each dealer, if we are unable to determine if multiple

rebate periods existed within the POR, we are unable to determine

whether the POR rebate percentage Fuji reported for each transaction

truly reflects the rebate percentage applicable to each transaction.

Therefore, because the information Fuji submitted is insufficient for

the purpose of determining whether the rebate percentage reported for

each dealer reflected the actual rebate percentage applicable to a

given transaction to that dealer, we have not treated these rebates as

direct selling expenses.

Finally, because the record demonstrates that Fuji's rebates are

direct by their nature, in accordance with Torrington we cannot treat

these rebates as indirect selling expenses. Therefore, for these final

results we have continued to deny Fuji's rebate adjustments in their

entirety.

4. COP and CV

Comment 28: Timken argues that, in accordance with Certain Hot-

Rolled, Cold-Rolled, Corrosion-Resistant and Cut-to-Length Steel Flat

Products from Korea (58 FR 37176) and Certain Stainless Steel Wire Rods

from France (58 FR 68865), the Department should exclude from its

profit calculation for CV those sales to related parties which were not

at arm's length.

NTN argues that nothing in the statute suggests that the Department

must examine whether sales were made at arm's length for the purposes

of calculating CV. NTN argues that the Department did not exclude such

sales in its calculation of CV profit for NTN in the 1992-93 TRBs

review and nothing on the record in this review supports any such

change.

Koyo argues that, because neither the statute nor case law requires

the pool of sales for determining FMV based on price-to-price

comparisons to be the same as the pool of sales used to calculate

profit for CV, the Department has the authority to base CV profit on

all home market sales. Furthermore, Koyo asserts, because section

773(e)(1)(A) of the Act specifies that profit is to be ``equal to that

usually reflected in sales of merchandise of the same general class or

kind as the merchandise under consideration,'' the statute clearly

requires CV profit to be calculated on the basis of all sales of the

general class or kind of merchandise under consideration. Moreover,

citing to Antifriction Bearings (Other Than Tapered Roller Bearings)

and Parts Thereof From France, et. al.; Final Results of Antidumping

Duty Administrative Reviews, 60 FR 10900, 10922 (February 28, 1995)

(AFBs 92-93), Koyo contends that the Department does not support the

exclusion of all related-party sales that fail the arm's-length test

from the CV profit calculation. Thus, Koyo concludes, the fact that

sales may fail the arm's-length test does not warrant the automatic

exclusion of the sales from the CV profit calculation.

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

in numerous reviews of the AFBs orders (see, e.g., AFBs 93-94 at

66493), section 773(e)(2) of the Act provides that a transaction

between related parties may be ``disregarded if, in the case of an

element of value required to be considered, the amount representing

that element does not fairly reflect the amount usually reflected in

sales in the market under consideration.'' Our arm's-length test

determines whether prices to related parties are equal to, or higher

than, sales prices to unrelated parties in the same market. Therefore,

this test is not dispositive of whether an element of profit on

related-party sales is somehow not reflective of the amount usually

earned on sales of the merchandise under consideration.

Related-party sales that fail the arm's-length test do give rise to

the possibility, however, that certain elements of value,

[[Page 20606]]

such as profit, may not fairly reflect an amount usually earned on

sales of the merchandise. For these final results we considered whether

the amount for profit on sales to related parties which failed the

arm's-length test was reflective of an amount of profit usually

experienced on sales of TRBs. To do so, we compared profit on sales to

related parties that failed the arm's-length test to profit on sales to

unrelated parties. If the profit on sales to related parties varied

significantly from the profit on sales to unrelated parties, we

disregarded the related-party sales when calculating profit for CV.

Specifically, we first calculated the profit on sales to unrelated

parties. If the profit on these sales was less than the statutory

minimum of eight percent, we used the eight-percent minimum in the

calculation of CV. If the profit on these sales was equal to, or

greater than, the eight-percent minimum, we calculated profit on the

sales to related parties that failed the arm's-length test and compared

it to the profit on sales to unrelated parties as described above. If

the profits on such sales to related parties varied significantly from

the profits on sales to unrelated parties, we excluded those related-

party sales when calculating profit for CV .

We note that this is identical to the steps we took in AFBs 92-93

at 10922 and AFBs 93-94 at 66493. However, these TRBs reviews mark the

first time since our adoption of this policy that we needed to conduct

this analysis in the TRB cases. We did not apply this policy in TRBs

92-93 because we found that none of the respondents' related-party

sales failed the arm's-length test. As a result, the issue was moot for

those reviews. Therefore, we do not agree with NTN that, because we

have not applied this policy in past TRBs reviews, we have no basis to

do so in these instant reviews. Rather, because we found non-arm's-

length related-party sales for those firms for which we based FMV on CV

(NTN, NSK, and Koyo), we have applied our policy as explained above and

made changes, where appropriate, in our respective company-specific

analyses.

Comment 29: NSK claims that the Department violated the antidumping

law by never establishing the grounds for collecting cost data from

related-party suppliers. NSK contends that, pursuant to section

773(e)(3) of the Act, the Department has the right to disregard sales

prices NSK paid to related-party suppliers in favor of the supplier's

COP only if (1) the Department has reasonable grounds to believe or

suspect that an amount represented as the value of such input is less

than the COP of the input, and (2) the information being requested is

for a ``major'' input. NSK argues that, because the language in section

773(e)(3) of the Act is identical to that in section 773(b) of the Act

(the provision which grants the Department the authority to conduct

cost investigations), the same threshold standard is applicable. In

other words, NSK argues that, because the petitioner never alleged that

NSK purchased an input from a related supplier at less than COP, and

because the Department never alleged or substantiated that transfer

prices from related suppliers were less than COP, let alone whether the

input was a ``major'' input, reasonable grounds for the collection of

this data did not exist.

NSK further contends that the Department has no other statutory

authority for requesting related-supplier COP data and that there is no

evidence on the record to support the Department's disregard of NSK's

related-supplier transfer prices. Therefore, NSK concludes, the

Department should not use this illegally-obtained related-supplier

information and should strike it from the record of these reviews.

Timken argues that the Department's preliminary results decision

regarding NSK's related-supplier transfer prices was justified and in

accordance with the law. Timken contends that the standard for

analyzing below-cost sales pursuant to section 773(b) of the Act does

not require any allegation by domestic parties. Likewise, accepting

NSK's position that the identical language of sections 773(e)(3) and

773(b) constitutes the application of the same standard, Timken

maintains that there is therefore no requirement that the domestic

party has the burden of submitting evidence of below-cost related-party

supplier transfer prices. In fact, Timken maintains, the respondent

should bear the responsibility of providing such evidence because

related-party input transfers are already ``suspect'' and domestic

producers simply do not have access to the respondent's books and

records, or access to what inputs were purchased from related

suppliers. Timken adds that, given the nature of TRB production, it is

also nearly impossible to submit data regarding the production costs at

every stage of production that might be a transfer point. Furthermore,

the petitioner states that to require allegations from the domestic

party as a prerequisite for the Department to investigate would

effectively curtail the inherent authority of the Department to conduct

below-cost sales and related-party transfer price investigations.

Timken also maintains that the Department's collection of NSK's

related-supplier transfer prices was justified because NSK has engaged

in below-cost selling. Timken argues that, given that NSK does sell at

below-cost prices, it is reasonable to infer that its losses are passed

back to related suppliers which are forced to transfer inputs at a

loss. In addition, Timken asserts that there is ample evidence on the

record for these reviews supporting the Department's decision to

disregard NSK's related-party transfer prices.

Finally, Timken argues, because NSK's arguments were rejected by

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

(NSK), the Department should adhere to its preliminary determination

and adjust NSK's reported COP and CV to reflect the actual COP of

related-party inputs. However, Timken notes, while the Department

indicated in its preliminary results that it did adjust NSK's COP and

CV to reflect

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