Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From the People's Republic of China; Final Results of 1996- 1997 Antidumping Duty Administrative Review and New Shipper Review and Determination Not To Revoke Order in Part

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-601]

Tapered Roller Bearings and Parts Thereof, Finished and

Unfinished, From the People's Republic of China; Final Results of 1996-

1997 Antidumping Duty Administrative Review and New Shipper Review and

Determination Not To Revoke Order in Part

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of 1996-1997 antidumping duty

administrative review and new shipper review and notice of

determination not to revoke order in part of tapered roller bearings

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

of China.

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

SUMMARY: On July 10, 1998, the Department of Commerce published the

preliminary results of its administrative review of the antidumping

duty order on tapered roller bearings and parts thereof, finished and

unfinished, from the People's Republic of China. In addition, on August

5, 1998, the Department of Commerce published a notice of intent not to

revoke the order in part. The period of review is June 1, 1996, through

May 31, 1997. Based on our analysis of comments received, we have made

changes to the margin calculations. Therefore, the final results differ

from the preliminary results. The final weighted-average dumping

margins are listed below in the section entitled Final Results of

Review.

We have determined that sales have been made below normal value

during the period of review. Accordingly, we will instruct the Customs

Service to assess antidumping duties based on the difference between

export price or constructed export price and normal value.

EFFECTIVE DATE: November 17, 1998.

FOR FURTHER INFORMATION CONTACT: Zak Smith or James Breeden, Import

Administration, International Trade Administration, U.S. Department of

Commerce, 14th Street and Constitution Avenue, NW, Washington D.C.

20230; telephone (202) 482-0189 and (202) 482-1174, respectively.

Applicable Statute

Unless otherwise indicated, all citations to the Tariff Act of

1930, as amended (``the Act''), are references to the provisions

effective January 1, 1995, the effective date of the amendments made to

the Act by the Uruguay Round Agreements Act (``URAA''). In addition,

all references to the Department of Commerce's (``the Department's'')

regulations are to 19 CFR 353 (April 1997).

Background

On July 10, 1998, we published in the Federal Register the

preliminary results of administrative review of the antidumping duty

order on tapered roller bearings (``TRBs'') from the People's Republic

of China (``PRC''). See Tapered Roller Bearings and Parts Thereof,

Finished and Unfinished, From the People's Republic of China;

Preliminary Results of Antidumping Duty Administrative Review and New

Shipper Review, 63 FR 37339 (July 10, 1998) (``Preliminary Results'').

In addition, on August 5, 1998, we published a notice of intent not to

revoke the order in part. See Tapered Roller Bearings and Parts

Thereof, Finished and Unfinished, From the People's Republic of China;

Notice of Intent Not to Revoke the Antidumping Duty Order in Part, 63

FR 41801 (August 5, 1998). We gave interested parties an opportunity to

comment on our Preliminary Results and held a public hearing on

September 9, 1998. The following parties submitted comments and/or

rebuttals: The Timken Company (``Timken''); Wafangdian Bearing Factory

(``Wafangdian''), Luoyang Bearing Factory (``Luoyang''); China National

Machinery Import & Export Corp. (``CMC''); Liaoning MEC Group Co. Ltd.

(``Liaoning''); Wanxiang Group Corp. (``Wanxiang''); Xiangfan Machinery

Import & Export (Group) Corp. (``Xiangfan''); Zhejiang Machinery Import

& Export Corp. (``Zhejiang''); Zhejiang Changshan Bearing (Group) Co.,

Ltd. (``ZX''); Premier Bearing and Equipment, Ltd. (``Premier''); Peer

Bearing Company/Chin Jun Industrial Limited (``Chin Jun''); and L&S

Bearing.

We have conducted this administrative review and new shipper review

in accordance with section 751(a) of the Act.

Scope of Review

Merchandise covered by this review includes TRBs and parts thereof,

finished and unfinished, from the PRC; flange, take up cartridge, and

hanger units incorporating tapered roller bearings; and tapered roller

housings (except pillow blocks) incorporating tapered rollers, with or

without spindles, whether or not for automotive use. This merchandise

is classifiable under the Harmonized Tariff Schedule of the United

States (``HTSUS'') item numbers 8482.20.00, 8482.91.00.50, 8482.99.30,

8483.20.40, 8483.20.80, 8483.30.80, 8483.90.20, 8483.90.30, 8483.90.80,

8708.99.80.15, and 8708.99.80.80. Although the HTSUS item numbers are

provided for convenience and customs purposes, the written description

of the scope of the order and this review is dispositive.

Changes Since the Preliminary Results

We have made certain changes to our margin calculations pursuant to

comments we received from interested parties and clerical errors we

discovered since the Preliminary Results.

For All Companies

The changes we have made that affect all companies and the comments

discussing these changes are listed below.

Valuation of Certain Steel Inputs--Comments 3, 4, and 20

Valuation of Scrap--Comment 5

Valuation of Labor--Comment 10

[[Page 63843]]

Valuation of Overhead, SG&A, and Profit--Comments 14, 15, and 18

Valuation of Brokerage and Handling--Comment 24

Valuation of Boxes for Packing--Comment 35

For Premier

We changed our treatment of those sales for which Premier did not

report factors of production (``FOP'') data. As facts available we are

using the weight-averaged margin calculated for those U.S. sales for

which FOP data were reported. See our response to Comment 26.

We have also recalculated Premier's margin to apply its actual

costs for inland freight. See our response to Comment 27.

For CMC

We did not use CMC's most recent database in the Preliminary

Results. We have corrected this error for the final results. See our

response to Comment 34.

For Chin Jun

In the Preliminary Results, we did not match all of Chin Jun's

sales to the appropriate FOP data. We have reviewed our calculations

and made the necessary changes. See our response to Comment 37.

Analysis of Comments Received

1. Valuation of Factors of Production

1(a) Material Valuation

Comment 1: Use of Indian Bearing Manufacturers' Annual Reports for

Steel Input Values

Timken argues that the values for bearing quality steel used in the

production of certain TRB components should be based upon the published

annual reports of Indian bearing manufacturers. Timken contends that

the Department's stated preference is to use reliable domestic market

prices versus equally reliable import prices. Timken cites to Final

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

Carbon Steel Plate From the People's Republic of China, 62 FR 61964

(November 20, 1997) (``Carbon Plate'') for this position. Therefore,

the Department should use the material costs incurred in India by

bearing manufacturers.

Timken argues further that, in comparison to the other values

available to the Department, data on Indian bearing manufacturers' raw

material costs are more narrowly descriptive of bearing quality steel.

Moreover, the Indian bearing manufacturers' price information is

contemporaneous with the period of review (``POR''). Timken notes that,

while the Department has rejected the use of Indian bearing

manufacturers' data in the past, it did so because the available

information was from only one bearing producer. That one manufacturer,

SKF India, produced more than just bearings and its information did not

correspond precisely to the POR. See Tapered Roller Bearings and Parts

Thereof, Finished and Unfinished, From the People's Republic of China;

Final Results of Antidumping Duty Administrative Review and Revocation

in Part of Antidumping Duty Order, 62 FR 6189, 6193 (February 11, 1997)

(``TRBs VII''). Timken notes that, in this review, the information on

the record includes contemporaneous data from eight Indian

manufacturers that produce only or almost exclusively antifriction

bearings.

Moreover, Timken argues that the materials cost data from the

Indian bearing manufacturers are sufficiently detailed to separate the

various steel inputs used in the production of TRB components. In

support of using the Indian bearing manufacturers' data, Timken

contends that the affidavit it submitted from one of its industry

experts attests that the same grade of bearing quality steel is

typically used for all types of antifriction bearings produced in India

and China. Because of this, and the fact that the Indian financial

statements are sufficiently detailed, Timken argues that the costs

reported by the Indian bearing producers are the best source of

surrogate values for bearing quality steel bars used by the Chinese TRB

manufacturers.

Respondents disagree, arguing that the Indian producers' steel

prices are inherently flawed because several of the producers do not

provide separate prices for bar, rod, and sheet steel. Instead, several

companies' annual reports provide a single figure for all types of

steel used in the factory, including steel used in textile bearings,

ball bearings, and other types of products which are not subject to

this review. Furthermore, these companies' annual reports could include

innumerable types of steel including tube steel, stainless steel, or

machined ``green parts.'' Given this fact, the respondents maintain,

the Department cannot know what types of steel were included in the

material cost calculations.

Additionally, respondents argue that the Indian producers' prices

for steel or any other factor input include Indian duties and internal

taxes. Finally, respondents point out that Timken's suggestion of using

Indian producers' values has been rejected by the Department in two

prior reviews. See Tapered Roller Bearings and Parts Thereof, Finished

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

Partial Termination of Antidumping Duty Administrative Review, 62 FR

6173 (February 11, 1997) (``TRBS VIII'') and Tapered Roller Bearings

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

of China; Final Results of Antidumping Administrative Review, 62 FR

61276 (November 17, 1997) (``TRBs IX'').

Department's position: We have not adopted Timken's suggestion to

use Indian bearing manufacturers' data on steel cost. Of the eight

Indian manufacturers cited by Timken, only three break out steel costs

according to the type of steel used in the production of bearings

(e.g., steel bar, steel sheet, steel strip). Because the other five

companies' annual reports do not specify the types of steel used in

production, we are unable to accurately value the specific types of

steel used in the production of subject merchandise.

For the three companies that do break out their steel costs by

broad types of steel, only Asian Bearing separately identifies ``steel

bars,'' the steel input used by the Chinese respondents to produce

certain TRB components (cups, cones, & rollers). However, because Asian

Bearing provides an average cost for steel bar and does not provide

specific costs according to the type of bar used (i.e., hot-rolled

versus cold-rolled), the Department is unable to accurately value the

two types of steel bar used in the production of cups and cones versus

that used in the production of rollers. Furthermore, the annual report

does not specify whether the steel bar is only used by Asian Bearings

in the production of tapered roller bearings or whether it is used to

produce other products manufactured by the company. To the extent that

Asian Bearings uses hot-rolled and cold-rolled steel bars in different

proportions than the PRC TRB producers, Asian Bearings' average cost of

steel bars is not an accurate value to apply to the PRC procucers'

factors.

Additionally, section 773(c)(1) of the Act states that, for

purposes of determining normal value (``NV'') in a nonmarket economy

(``NME'') country, ``the valuation of the factors of production shall

be based on the best available information regarding the values of such

factors * * *.'' As set forth in Tapered Roller Bearings and Parts

Thereof, Finished and Unfinished, From the People's Republic of China;

Final Results of Antidumping Duty Administrative Reviews, 61 FR 65527

[[Page 63844]]

(December 13, 1996) (``TRBs IV-VI''), TRBs VII, and TRBs IX, the

Department's preference is to value factors using published

information. We have a longstanding practice of relying, to the extent

possible, on public statistics on surrogate countries to value any

factors for which such information is available over company-specific

data. See Final Determination of Sales at Less Than Fair Value: Certain

Carbon Steel Butt-Weld Pipe Fittings From the People's Republic of

China, 57 FR 21058 (May 18, 1992). In our view, public statistics

provide a more representative value for these material inputs than a

single company's information.

Because we have other surrogate data that allow us to value hot-

rolled and cold-rolled bar individually and because the other data are

taken from public statistics (not a single company's information), we

are not using the data on materials costs from the Indian bearing

manufacturers' financial statements.

Comment 2: Use of Indian Import Statistics for Steel Input Values

Timken argues that, as an alternative to the cost data of the

Indian bearing producers, Indian (not Indonesian) import statistics are

the next best source from which to value bearing quality steel bar used

in the production of cups and cones. First, Timken questions the

reliability of the benchmark used by the Department to evaluate, and

subsequently discard, Indian import data on bearing quality steel bars.

In doing so, Timken contends that the U.S. import statistics used by

the Department as an indication of the world market price and, hence,

as a benchmark for bearing quality steel are far lower than the world

market price for this type of steel. Second, Timken argues that, when

compared to other indicia of world market prices (including the costs

reported by the Indian bearing manufacturers), the Indian import

statistics are a reliable source from which to obtain steel bar values.

Timken supports its argument by noting that the U.S. import

statistics for bearing quality steel bar are skewed by large volumes of

imports from Japan of carbon steel bar used in the manufacturing of

wheel hub units and not in the production of TRBs. Timken notes that,

when those imports are removed, the average value of U.S. imports is

$889 per MT. Timken states that another reason for the variation in the

prices between U.S. and Indian import statistics is the physical

difference in the steel itself. Timken argues that the U.S. import

statistics include two types of bearing quality steel: case-hardened

and through-hardened, which vary significantly in price. Therefore, the

U.S. statistics do not exclusively represent the type of steel used by

the PRC producers (through-hardened), and they are unreliable as a

basis for evaluation of Indian values.

Timken argues that several market prices confirm a benchmark of

$900 per MT for 52100 grade steel. Timken notes that the price charged

by SKF for sales from its subsidiary Ovako, Timken's own large-quantity

prices, and U.S. imports from Sweden confirm the accuracy of a $900 per

MT benchmark.

Finally, Timken contends that, measured against a more reliable

world benchmark, Indian import statistics for harmonized tariff

schedule (``HTS'') category 7228.30 (for hot-rolled steel bars and

rods) are on par with world market prices, around $900 per MT. Timken

insists that the reliability of the Indian import values is also

supported by the values found in the Indian bearing producers' annual

reports.

Respondents argue against the use of Indian import data when

calculating material costs for steel used in the production of cups and

cones. Respondents note that in prior reviews, as well as in the

Preliminary Results, the Department correctly determined, after a

comprehensive analysis, that the Indian import statistics for category

7228.30 were unreliable.

Respondents contend that Timken's argument that the U.S. import

statistics for category 7228.30.20 are skewed is speculative.

Respondents refute Timken's attempt to distinguish between different

types of steel used by arguing that there is no evidence on the record

that the Chinese producers used case-hardened versus through-hardened

nor is there documentation on the record as to the price differentials

between case-or through-hardened steel or between different grades of

bearing steel.

Respondents also disagree with Timken's suggestion that Indian

bearing manufacturers' steel costs establish the accuracy of Indian

import statistics. Respondents contend that Timken's use of steel bar

prices for Asian Bearing at $938 per MT does not support the validity

of Indian import data at a price of $1,384 per MT. Furthermore,

respondents point out that the information in Asian Bearing's annual

report does not indicate if the steel bars used are hot-rolled, cold-

rolled, case-hardened or through-hardened, nor is the grade indicated,

which Timken has argued is of vital importance when analyzing the

reliability of a surrogate or benchmark. If Timken wanted to compare

import statistics with actual transaction prices, respondents add, it

should look to the actual prices paid by the Chinese respondents

themselves. According to respondents, such prices prove that the Indian

import prices are not reliable or reasonable surrogate values.

Department's position: In selecting a surrogate value for steel

used in the production of cups and cones, the Department has

consistently found that data for Indian import category 7228.30 (hot-

rolled bars and rods of alloy steel) are unreliable. In examining

Indian import statistics, we were unable to isolate bearing quality

steel because none of the eight-digit tariff categories within the

Indian basket category 7228.30 specifically included bearing quality

steel bar. We examined each of the Indian eight-digit categories and

found that only the ``Others'' category (7228.3019) could contain the

type of bearing quality steel used in the production of cups and cones,

in addition to other types of alloy steel. In comparing these data to

other market values, including U.S. imports from category 7228.30.20

(the only import category on the record which explicitly contains only

bearing quality steel), the Department found the Indian values to be

unreliable because the values for these imports were significantly

higher (See Memorandum to the File: ``Selection of a surrogate country

and steel value sources,'' dated June 1, 1998).

The Department used U.S. import data under HTS category

7228.30.2000 (Other Bars and Rod, Ball Bearing Steel, Not Furthermore

Worked Than Hot-Rolled or Extruded) as a benchmark for hot-rolled

bearing quality steel bar because these data are specific to the type

of steel used by the Chinese respondents and are the most precise

source of market prices for this product on the record. The use of such

a benchmark was upheld on numerous occasions and most recently in Peer

Bearing v. United States, 12 F. Supp. 2d 445 (CIT 1998) (``Peer'').

We do not agree that Japanese values included in the U.S. import

statistics create a distortion which would make the U.S. statistics an

inappropriate benchmark. Timken's argument is speculative because the

affidavit submitted in support of this claim does not definitively

indicate that the Japanese imports are not bearing quality steel of the

type used in the production of TRBs.

Furthermore, we disagree with Timken's argument regarding the

unreliability of U.S. import statistics as a benchmark due to the

inclusion of two

[[Page 63845]]

types of bearing quality (case-hardened and through-hardened) steel

which vary significantly in price. There is no definitive evidence on

the record indicating that the Indian import statistics do not also

include case-hardened and through-hardened steel as well.

Finally, even if we were to accept Timken's argument and disregard

U.S. imports from Japan, the Indian import prices of $1,384 per MT

remain substantially higher than a potentially re-calculated average

U.S. import price of $889. Thus, even if the Department were to accept

Timken's argument that an appropriate benchmark for steel used in the

production of cups and cones should be $900 per MT, based on SKF's

transfer prices, Timken's own steel prices, and U.S. imports from

Sweden, the Indian import values are still over 50 percent higher than

Timken's proposed benchmark. We therefore continue to base our

comparison on the U.S. benchmark.

Comment 3: Reliability of Indonesian Import Statistics

Timken argues that Indonesian import statistics are not reliable as

the basis for valuing bearing quality steel bar used by the Chinese

manufacturers in the production of cups and cones because (1) there is

no evidence of a significant bearing industry in Indonesia that would

import substantial amounts of bearing quality steel bar; and (2) the

Indonesian tariff category selected by the Department is too broad to

be a reliable indicator of bearing quality steel prices.

With respect to the first point, Timken contends that the record in

the instant proceeding indicates that there were only two significant

bearing producers operating in Indonesia during the POR: PT Logam and

PT NSK. Timken argues that, using U.S. import statistics to determine

the ratio of bearing units to weight for the size ranges manufactured

at PT Logam and PT NSK, it can be deduced that the two companies

together produced at most 2,650 MT of bearings. However, Timken

maintains, Indonesian imports under heading 7228.30 for the period of

January-October 1997 (excluding NME imports) were 24,853 MT. Timken

therefore argues that because the Indonesian bearing producers could

have used no more than 20 percent of the steel imports for their own

production, the remainder of imports under heading 7228.30 must have

consisted of non-bearing quality steel.

Timken also argues that Japanese export statistics show that only

2,974 MT of Japan's exports to Indonesia during the POR were exported

under tariff categories which might include bearing quality steel bars

used in the production of cups and cones. The balance (9,405 MT),

Timken argues, consisted of other types of alloy steel bar.

Furthermore, looking at the same export statistics, Timken argues that

a substantial quantity (1,570 MT) of the total Japanese exports under

category 7228.30 consisted of ``other'' alloy steel bar that had a

value far below any benchmark estimate of world market prices for

bearing quality steel. Therefore, Timken continues, Indonesian imports

under heading 7228.30 are not solely or even primarily bearing quality

steel.

With respect to the second point, Timken argues that the Indonesian

tariff category selected by the Department is too broad and includes a

variety of hot-rolled alloy steel bars that are excluded from the

corresponding Indian tariff category. For example, Timken states that

the Indonesian category includes different qualities of alloy steel

bar, including bright bar of alloy tool steel, other bright bar, spring

steel, sulphur bearing steel, and tool and die steel.

Respondents argue that Indonesian import statistics are reliable in

valuing steel bar because there is ample evidence of a significant

bearing industry in Indonesia due to the presence of two large

multinational bearing factories and the fact that Indonesia actually

exports bearings. Respondents also argue that the Indonesian import

values are reliable because they are comparable to the U.S. import

values for the same category of steel, unlike the Indian values which

are considerably higher.

Respondents also argue that the volume of Indonesian imports under

7228.30 is not too large to be a reliable indicator of bearing quality

steel. Respondents argue that Timken has not proven that there is not a

significant bearing industry in Indonesia. Respondents also reject

Timken's argument that Indonesian imports are too large. Respondents

explain that Indonesia, unlike the United States, does not produce much

bearing steel, and, therefore, must import most of it.

Respondents state that it is quite possible that both Indonesian

and Indian tariff classifications for this input include steel which is

not bearing quality. Additionally, respondents contend that Timken has

not provided any evidence that the Indian tariff classification

7228.3019 actually includes bearing quality steel. Given these

difficulties, respondents believe that the Department correctly used

U.S. prices as a benchmark to determine steel values for cups and cones

and, thus, cross-check the validity of the Indonesian import

statistics.

Respondents dispute Timken's contention that the Indonesian steel

category is unreliable because it is overly broad. Respondents state

that the Indonesian data are consistent with U.S. prices for bearing

quality steel and, therefore, are more reliable than the Indian values.

Respondents also maintain that even if the Indian category contained

``bearing quality steel bar used in tapered roller bearings,'' the

Department would be under no obligation to use those data unless it

determined that these data were reasonable and reliable, which has not

been the case.

Department's Position: In determining a value for the steel used in

the production of cups and cones, the Department reviewed several data

sources, including: U.S., Indian, and Indonesian import statistics, and

Japanese export data in order to determine the most accurate value for

steel inputs. As explained in comment 2 above, we are not using import

data from India, the primary surrogate country, because the import

category for hot-rolled bars and rods of alloy steel bars is an

``others'' category which includes several types of steel in addition

to bearing quality steel and bearing quality steel cannot be

segregated. Moreover, when compared with the U.S. import statistics for

the HTS category which only includes bearing quality steel bars and

rods, the Indian values are unreliably high.

A similar comparison was made between the U.S. benchmark and

Indonesian import statistics. As correctly pointed out by Timken and

respondents, the Indonesian import category 7228.30 most probably

includes several types of hot-rolled bars and rods of alloy steel, in

addition to the bearing quality steel bars and rods used in cup and

cone production. However, when compared with the benchmark, the

Indonesian data are consistent.

Nevertheless, we were persuaded by Timken's arguments regarding the

volume of steel imported into Indonesia versus the volume of bearing

quality steel that could actually be consumed in Indonesia. Thus, we

have looked more closely at the Indonesian import values. In

particular, we examined Japanese data on exports to Indonesia. The

Japanese export statistics provide a breakdown of the broad six-digit

7228.30 category into several more narrowly defined eight-digit

categories. As Timken correctly points out, these statistics indicate

approximately 2,974 metric tons of exports were made to

[[Page 63846]]

Indonesia during the POR under Japanese HS code 7228.30.900, ``Bars and

Rods, of Other Alloy Steel,'' a category which would include bearing

quality steel bar.

Based on our review of these data, the Department has decided to

use the Japanese export data to Indonesia for category 7228.30.900 to

value steel bar as best available information. In using these data, we

have isolated the narrowest category most likely containing bearing

quality steel bar.

In our calculation of the average per MT price of the Japanese

exports to Indonesia, we excluded one shipment, the value of which was

far below the average price, and another shipment, the value of which

was far above the average price. On this basis, we calculated an

average price of $755 per MT. This value is consistent with the U.S.

benchmark of approximately $750 per MT.

Because this Japanese tariff category is the narrowest category

which could contain bearing quality steel and because it is consistent

with our benchmark, we believe it is the best alternative for valuing

steel used in the production of cups and cones. Moreover, we view the

data on Japanese exports to Indonesia as an Indonesian value, i.e., it

is a value from a country comparable to the PRC. Although the data are

from Japanese statistics, we have used those statistics to ``refine''

the Indonesian data in an attempt to make the import category conform

better to the input used by the PRC TRB producers.

Comment 4: Steel Input Values Falling Outside the Period of Review

Timken argues that, if the Department relies on Indonesian import

statistics, such data should be limited to the POR. Timken contends

that, in the Preliminary Results, the Department departed from recent

precedent in prior TRBs from the PRC cases in using factor values for a

period of time outside the POR.

Respondents contend that Timken's arguments are without merit

because the Department routinely uses data which fall outside the POR

when necessary to ensure a reasonable surrogate value. In Heavy Forged

Hand Tools, Finished or Unfinished, With or Without Handles, From the

People's Republic of China; Final Results of Antidumping Duty

Administrative Reviews, 63 FR 16758 (April 6, 1998) (``Hand Tools

1998''), respondents state that the Department used Indian import

statistics for the period April 1995 through March 1996 to value steel

for a POR of February 1996 through January 1997. Respondents point out

that there was only an overlap of two months in that case, and the rest

of the data were from outside the POR. Furthermore, respondents argue

that data from a greater period of time will include a greater volume

of imports and, thus, will be less likely to be affected by price

fluctuations.

Department's Position: We agree with Timken. Whenever possible, the

Department attempts to use data that are contemporaneous with the POR.

See TRBs IX, 62 FR at 61283. Since we have sufficient data from the POR

to calculate a reasonably accurate value, we do not need to use data

from ouside the POR. Therefore, for the final results, the data used to

value hot-rolled bars and rods used in the production of cups and cones

are contemporaneous with the POR. See Comment 3 above and the

Memorandum to Susan Kuhbach; ``Factors of Production Values Used for

the Final Results,'' dated November 9, 1998.

Comment 5: Proper Import Category for Steel Scrap Valuation

Timken argues that if the Department uses an import category for

alloy steel scrap for purposes of valuing roller scrap, the value used

should be based on Indian imports under HTS category heading

7204.29.09, not 7204.29. Timken contends that the Department departed

from recent precedent in the Preliminary Results by using category

7204.29. Specifically, Timken notes that in TRBs VII, the Department

used the more narrow category of 7204.29.09. Timken further argues that

subcategory 7204.29.09 ``waste and scrap of other alloy steel''

includes bearing steel and is, therefore, a more appropriate

subcategory from which to value roller scrap.

Respondents argue that the Department properly valued roller scrap

steel using the broader six-digit category 7204.29 ``waste and scrap of

other alloy steel.'' Respondents contend that Timken offers no evidence

that bearing quality steel is included only in the ``other'' eight-

digit subcategory (7204.29.09), except for the fact that the Department

has used this subcategory in prior reviews. Furthermore, respondents

assert that it is incumbent upon Timken to establish the reason bearing

quality steel could not be classified under the broader Indian customs

category and by using the broader category, the Department ensures that

bearing quality steel is included in the data.

Department's position: We agree with Timken that it is appropriate

to exclude specific subcategories that do not relate to the type of

scrap that would be generated from TRB roller production. In the

Preliminary Results, the Department used the broad six-digit Indian

import data under category 7204.29 (which included subcategories:

7204.29.01, ``waste and scrap of high speed steel,'' and 7204.29.09,

``others'') to value scrap derived in the production of rollers. We

disagree with respondents that in using the broader 7204.29 category

the Department ensures that bearing quality steel is included in the

data because although both subcategories 7204.29.01 and 7204.29.09

contain scrap derived from alloy steel, subcategory 7204.29.01 (``waste

and scrap of high speed steel'') contains the residue from high speed

steel which is not the same type of steel used in bearing production.

Therefore, subcategory 7204.29.09 (``other'') is the only subcategory

under the broader 7204.29 category that could possibly contain scrap

generated from bearing quality steel.

Therefore, consistent with prior reviews, we determine that

category 7204.29.09 best captures the type of scrap generated from the

production of rollers and we have recalculated the surrogate value for

this scrap excluding data from subcategory 7204.29.01. However, the

Department notes that we continue to use the broad category 7204.29 to

value scrap from the production of cups and cones because the

Indonesian import data do not provide a further breakdown of this

category into subheadings. Therefore, for scrap generated from cups and

cone production, we used data under Indonesian import category 7204.29,

``other waste and scrap of alloy steel.''

Comment 6: Scrap Valuation

Timken argues that the values used by the Department for scrap in

the Preliminary Results are too high when compared with world market

prices for scrap. Timken contends that the PRC bearing producers' scrap

consists of low quality turnings, shavings, and chips. Timken states

that the scrap values selected by the Department reflect prices of

high-quality scrap, not the residue from bearing production. Timken

supports its argument by noting that scrap prices reported in the

American Metal Market for ``shop turnings,'' a low quality scrap,

averaged only $82 per MT delivered, whereas the value the Department

selected cup and cone scrap was $150 per MT. Furthermore, Timken argues

that U.S. import data, which the Department has insisted are a reliable

indicator of world market prices, show that ``turnings'' scrap imported

under heading 7204.41.0060 was valued at $104 per

[[Page 63847]]

MT during the POR. Timken argues, by comparison with these and other

prices, the Indonesian value at $150 per MT is not representative of

Chinese scrap values.

Respondents argue that Timken does not provide evidence that the

scrap it is using as a basis of comparison is derived from bearing

quality steel. Respondents point out that the U.S. import statistics

for HTS 7204.29.00 (the tariff heading used to develop Indonesian

surrogate data for scrap from cup and cone production), shows a scrap

value of $128 per MT. Thus the Indonesian value is consistent with the

U.S. import price for alloy steel waste.

Department's position: We disagree with Timken that the import

categories selected by the Department to value scrap generated from the

production of cups, cones, and rollers do not reasonably reflect the

value of scrap generated in the PRC production process. Timken's

comparison of the surrogate value used for scrap generated from cup and

cone production to other scrap values is the equivalent of comparing

apples to oranges. While the PRC cup and cone production process may

generate lower quality scrap, it remains bearing-quality steel scrap.

Timken, however, is looking at values for scrap from steel which is of

a grade and value inferior to that. The HTS category which Timken uses

for its comparison (7204.41.0060 ``borings, shovelings, and turnings''

does not include scrap generated from bearing quality steel.

Since steel used in the production of cups and cones is bearing

quality steel, the scrap resulting from the production thereof must be

of a corresponding grade. For that reason, it is appropriate to use an

import category for scrap containing alloy steel, as is the case for

import category 7204.29.

Regarding Timken's argument that the scrap values selected by the

Department should be adjusted to reflect the low quality of the scrap

generated in the Chinese production process there are no further

subcategories under 7204.29 which differentiate between different

values of scrap within that particular broad category. Of the

information contained on the record, only the broad U.S. HTS categories

7204.41 and 7204.49 provide for a break-down of scrap into sub-

categories based on the size and quality of scrap. However, these

categories do not include bearing quality steel.

The Department has not adjusted the values for scrap from the

Preliminary Results, with the exception of the change described in

Comment 5 above relating to roller scrap.

1(b) Labor Valuation

Comment 7: Using labor costs reported by Indian bearing manufacturers

Timken argues that the best available information regarding

surrogate labor rates is the data provided by the Indian bearing

producers' financial statements. In response to the Department's

rejection of this information on the basis that it is not possible to

allocate direct labor hours to the subject merchandise because these

companies produce other products, Timken asserts that the Indian

companies produce only or almost exclusively antifriction bearings. See

Memorandum to Susan Kuhbach: ``Selection of surrogate labor wage rates

for preliminary results of review,'' dated June 30, 1998) (``Wage Rates

Memo''). Timken contends that neither in this review nor any other

segment involving TRBs or antifriction bearings has any party indicated

that hourly labor costs within the same company vary according to the

type of antifriction bearing produced. Moreover, Timken argues that the

data from the International Labor Organization's (``ILO'') Yearbook of

Labor Statistics (``YLS''), which the Department used in its

Preliminary Results, are less reliable because the YLS categories cover

broad groups of industries, including companies that do not produce

bearings at all.

Wafangdian and Luoyang disagree with Timken and contend that the

Indian bearing producers' financial statements show that labor rates

vary widely among producers. Furthermore, in contrast to the Chinese

data, the Indian financial statements include labor costs associated

with selling, general, and administrative expenses (``SG&A''). CMC,

Liaoning, Wanxiang, Xiangfan, Zhejiang, and Premier argue that it would

be a vast overstatement to use the Indian bearings producers' labor

rates because they include the costs of senior management and of labor

used in the production of merchandise other than bearings. Moreover, as

upheld recently in Peer, the Department should use objective, industry-

wide values that represent the industry norm rather than company-

specific values because the surrogate producer is not the subject of

valuation. Therefore, the Department should reject Timken's argument

and continue to apply widely published YLS data for the final results.

Department's position: In order to provide for transparency and

predictability, it has been the Department's policy in NME cases to

rely, to the extent possible, on publicly available statistical

information from the first choice surrogate country to value FOP over

company-specific data. See TRBs IX. While we acknowledge that such data

(e.g., YLS data) cover different types of labor and different products,

their public, published nature makes them preferable to financial

report data, which could vary dramatically, depending on which

producers' data go into the calculation. Therefore, contrary to

Timken's assertion, we continue to believe that the use of the Indian

bearing companies' data in valuing labor costs could lead to distortive

results and the use of public statistical information for valuing labor

aids in increasing the transparency and predictability of our

calculations.

Comment 8: The Yearbook of Labor Statistics vs. Investing, Licensing &

Trading Conditions Abroad

If the Department declines to use company-specific data, Timken

argues that the Department should base surrogate labor rates on data

from the Investing, Licensing & Trading Conditions Abroad; India

(``IL&T'') as it has done in the past three administrative reviews of

this case, rather than on the YLS data. According to Timken, the IL&T

is preferable for two reasons: (1) it provides separate wage ranges for

various skill categories, which the YLS does not, and (2) its data are

more contemporaneous with the POR than the YLS data.

In response to the Department's contention that the monthly wages

reported by the IL&T are the wages mandated by Indian law and not the

wages actually paid, Timken argues that the Department has no basis to

assume that the actual wages are different from the wages mandated by

the government. Timken also rejects the Department's argument that the

IL&T rates should not be used because they do not include fringe

benefits paid to workers. Timken argues that the cost of such benefits

is easily calculated as exemplified by the Department's past practice.

CMC, Liaoning, Wanxiang, Xiangfan, Zhejiang, and Premier concur

with the Department that the wages reported in the IL&T are based on

wages stipulated by Indian law rather than a survey of average wages

actually paid, and that these wage rates do not include benefits

normally added to base pay. Respondents refer to the notation in the

IL&T which states that ``these rates are purely indicative; wages vary

greatly by state and industry.'' Accordingly, the Department properly

applied the YLS labor rate which represents the industry norm and more

accurately reflects the cost of labor in India. Furthermore,

respondents argue that Timken has overlooked the Department's extensive

[[Page 63848]]

application of the YLS single average Indian labor rate as a surrogate

in recent antidumping reviews involving China.

Wafangdian and Luoyang argue that the IL&T data are based on

theoretical values. Given the Department's preference to use actual

values, the YLS data are preferable because they are based on actual

values collected by government agencies.

Department's Position: We disagree with Timken's contention that

the IL&T data represent surrogate labor values preferable to the YLS.

Consistent with the Department's practice we have applied a single

average labor rate to all reported skill levels. See, e.g., Manganese

Metal from the People's Republic of China; Final Results and Partial

Rescission of Antidumping Duty Administrative Review, 63 FR 12440,

12446 (March 13, 1998) (``Manganese Metal''); Certain Helical Spring

Lock Washers from the People's Republic of China; Final Results of

Antidumping Duty Administrative Review, 62 FR 61794, 61780 (November

19, 1997); Heavy Forged Hand Tools from the People's Republic of China:

Final Results of Antidumping Administrative Reviews, 62 FR 11814, 11815

(March 13, 1997). Therefore, the specificity afforded by the IL&T data

with regard to different wages for different skill levels is not an

important consideration.

Moreover, the Department learned in a past NME case that the

reported average monthly wages provided in the IL&T are based solely on

wages stipulated by Indian law rather than on any survey of average

wages actually paid. See Manganese Metal. Given that wages in India

vary considerably by industry and region, there is no basis on which to

conclude that wages mandated by Indian law reflect average wage rates

across the Indian economy. Also, it appears from the text in the IL&T

data that the wage rates do not include additional mandatory and

voluntary benefits which normally add an additional 40-50% to the base

pay. The Department, in choosing a surrogate labor value, seeks to

obtain the average fully-loaded cost (i.e., including all costs and

benefits in addition to basic wage) of employing labor on as industry-

specific a basis as possible. Unlike the IL&T, the YLS provides fully-

loaded labor rates for the basic metals industry in India as a whole.

Accordingly, we have continued to use YLS for the final results.

Comment 9: Valuation of SG&A and Indirect Labor

Timken argues that indirect and SG&A labor rates are understated

and are significantly higher than the wage rates applied to direct

labor. Timken claims that all evidence on the record indicates that

indirect and SG&A labor consists of highly skilled workers who would

receive a much higher compensation, compared to direct production

workers who are predominately unskilled. Thus, by using the YLS' single

undifferentiated hourly labor rate for all workers in manufacturing,

the Department disregarded the significant differences in labor costs

among different skill levels for direct workers and different

specialized skills for indirect and administrative workers. Timken

suggests using the IL&T, which provides labor rates by skill levels, to

reflect the higher skill levels of the indirect and SG&A laborers.

Wafangdian and Luoyang reject Timken's contention and suggestion.

They argue against using the IL&T because these data are based on

estimated differences between skill levels and the evidence on the

record does not establish the skill level of indirect laborers involved

in the production of the subject merchandise. Therefore, the Department

has no reliable means to develop a rate for indirect labor.

CMC, Liaoning, Wanxiang, Xiangfan, Zhejiang, and Premier contend

that the Department's valuation of indirect and SG&A labor is

consistent with prior reviews and avoids the aberrations that would

result if a blended rate was applied to direct labor and separate

surrogate skilled rates were applied to indirect and SG&A labor as

suggested by Timken. Respondents also comment that Timken's

recommendation to apply IL&T data is inappropriate as they contain no

basket category for overhead and SG&A labor.

Department's Position: As explained above, we have used YLS data

for wage rates. The YLS data provide a single blended labor rate

relevant to the fabricated metals industry for India as a whole. This

blended labor rate includes direct, indirect, and SG&A labor hours, as

well as among skilled, semi-skilled, and unskilled workers. Also, as

respondents note, it would be inconsistent to apply a blended rate to

direct labor and a separate surrogate skilled rate to indirect and SG&A

labor. For these reasons, we have continued to apply the blended rate

from the YLS to SG&A and indirect labor for our final results.

Comment 10: YLS Category 381 vs. 382

Timken argues that if the Department decides to continue using the

YLS in the final determination, it should apply the wage rate for

category 382 (manufacture of machinery, except electrical) rather than

category 381 (manufacture of fabricated metal products, except

machinery and equipment) as used in the Preliminary Results. Timken

notes that subcategory 3829 02 of the United Nations' International

Standard Industrial Classification of All Economic Activities

(``ISIC'') includes the manufacture of bearings, gears, gearing and

driving elements. Moreover, in previous administrative reviews where

the Department relied upon the YLS, it applied the wage rate for

category 382.

Wafangdian and Luoyang state that it is not clear that the

Department should use category 382. First, they argue that the ISIC

definitions referenced by Timkens may not be used by the ILO. Second,

the ISIC definition for subcategory 3829 02 may be limited to driving

elements that include bearings for driving elements only, rather than

TRBs in general. Absent this information, the Department should

continue to use category 381.

CMC, Liaoning, Wanxiang, Xiangfan, Zhejiang, and Premier note that

in the 1990-93 reviews, Timken argued that the Department should not

use category 382 for purposes of labor costs because the category was

``too broad.'' Respondents argue that Timken cannot have it both ways.

Furthermore, respondents state that category 381 has been used in prior

administrative reviews of bearing and steel cases and that it

accurately reflects the cost of labor engaged in the manufacture of

metal products.

Department's Position: We agree with Timken with respect to the use

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

associated with bearing production is included in category 382 and that

the labor categories that comprise ISIC major group 381 are not

relevant to bearing production. Therefore, the Department has used

major group 382 for the final results of these reviews.

Comment 11: Number of Labor Hours Used To Produce TRBs

Timken argues that the verifications conducted by the Department

confirm its allegation that labor usage is uniformly understated by

respondents. Timken asserts that respondents excluded from their

responses any labor hours in which direct labor workers were not

actively producing bearings. Timken substantiates its argument by

referring to the verifications conducted at Xiangfan and Luoyang in

which the Department discovered that labor hours reported were

understated due to, respectively, the reporting of standard

[[Page 63849]]

processing times as opposed to actual hours worked and the omission of

downtime from the reported direct labor hours. Timken argues the

relevant issue is whether direct laborers would have been paid for idle

time or downtime in the surrogate country. As such, respondents should

have reported total hours on site as opposed to the hours for which

work was paid. Overall, Timken maintains that the Department should

increase the number of labor hours for all respondents, using data

provided by Timken as ``facts available.'' At the least, for those

respondents that reported direct labor hours accurately but omitted

idle time, Timken suggests that the Department increase indirect labor

hours to account for the missing labor.

CMC, Liaoning, Wanxiang, Xiangfan, Zhejiang, and Premier object to

Timken's argument. They contend that Timken is attempting to expand the

definition of direct labor beyond its reasonable terms. Noting that

Timken's argument to capture ``total hours on-site'' and not merely for

which work was paid, would serve to double count the labor dedicated to

indirect labor tasks. Therefore, the Department should not engage in

Timken's speculative adjustments and should apply the reported and

verified labor data from respondents.

Department's Position: It is the Department's practice to value

labor by determining the number of hours (including downtime) which are

needed to produce the subject merchandise in the facilities in the

state-controlled-economy country and applying the surrogate wage rate.

At verification, we closely examined respondents' accounting systems to

determine how they calculated the labor hours reported in their

submissions. As Timken notes, we did find inconsistencies in the labor

data reported by Xiangfan and Luoyang. For these companies, we made

adjustments in our Preliminary Results to accurately reflect the total

amount of actual labor hours worked. Additionally, for Luoyang and

Wafangdian we increased the amount of labor hours by the amount of

unreported downtime associated with the production of the subject

merchandise in order to capture total labor hours. Thus, were we to

adjust indirect labor by the amount of idle time as Timken recommends,

we would increase the indirect labor percentage and decrease the total

direct labor figure by the amount of labor that was reclassified. The

net result of this adjustment would yield no difference in the total

labor used by these companies to produce the subject merchandise.

In summary, for certain companies we discovered at verification

unreported labor hours related to downtime. For these companies, and

for those companies for which we were unable to verify certain aspects

of the labor hours reported, we corrected the reported hours

appropriately. For other companies, the number of labor hours verified.

For these companies, no changes were made to the reported figures.

1(c) Overhead, SG&A and Profit

Comment 12: Adjustment to Factory Overhead and SG&A Ratios

Timken argues that the methodology used by the Department in the

Preliminary Results deliberately understates factory overhead and SG&A

costs and, consequently, NV. This distortion, according to Timken, is

due to the fact that the Department used reported materials and labor

costs, calculated as the average of the reported costs of eight Indian

bearings producers, as the denominator in deriving the surrogate

overhead and SG&A ratios. However, the Department then applied these

ratios to the lower cost of materials and labor it calculated using

other, lower-valued surrogate sources. Timken contends that the Indian

producers' materials costs on average are much higher than the

Department's calculated total materials costs because the Indian

producers use higher cost materials (than those reflected in the

surrogate materials values), and because their material costs include

high import duties paid in India.

Timken argues that the Department has the legal authority to adjust

surrogate overhead and SG&A ratios in order to derive the most accurate

dumping margin possible. Therefore, Timken contends, the Department

should adjust the denominator used in calculating the overhead and SG&A

ratios by the ratio of Indonesian steel and labor values to the eight-

producer average materials and labor costs. An alternative methodology,

Timken suggests, would be to make a similar adjustment using only the

reported costs of Asian Bearing Company (``Asian''), rather than the

eight-producer average. This alternative would be reasonable, Timken

claims, because Asia Bearing reportedly produces only antifriction

bearings and has clearly identified its raw material inputs in its

financial statements.

Respondents state that the Department should continue its practice

of not making these kind of adjustments to surrogate values. They cite

Peer to support the Department's practice of not adjusting surrogates

as upheld by the court in previous reviews. Moreover, the Department

should not make Timken's proposed adjustment because the record is

unclear as to what the exact materials used by the Indian factories

are. Therefore, an adjustment would not necessarily improve the

reliability of the overhead or SG&A data. Furthermore, respondents

contend, the fact that the Indian producers' reported costs are higher

merely reflects the fact that these factories are more modern and

located in a more industrialized country than are the PRC factories. In

fact, argue respondents, the surrogate ratios are already too high and

should, instead, be lowered. Finally, respondents state that

differences in overhead costs reflect the unique circumstances of each

respective company. Adjusting the costs of one to reflect the costs of

another would be ``mixing apples and oranges.''

Likewise, respondents urge the Department to reject Timken's

alternative proposal of adjusting the surrogate values using Asian

Bearing's reported costs only. Respondents argue that the Department

has repeatedly rejected the use of this company's data in the past

because the company is a ``sick'' company. Moreover, it would be

inappropriate to rely simply on the reported costs of one factory where

public data, more reflective of the industry generally, are available.

Respondents also object to Timken's proposal to adjust the

surrogate value ratios. According to respondents, the Act, requires the

Department to value NME factor inputs using the best available

information. The Indian producers' costs, as reported in their

financial statements, represent the best available information for

valuing factory overhead and SG&A. The Act does not, respondents

continue, require the Department to substitute specific Indian

producers' costs for Chinese FOP data.

Department's Position: We disagree with Timken's contention that an

adjustment to our surrogate ratios for factory overhead and SG&A is

necessary. Timken has raised this issue in earlier reviews, and our

position (which was upheld in Peer) is unchanged.

First, Timken is incorrect in stating that the Department

calculated overhead and SG&A costs as a percentage of materials and

labor costs. Rather, we calculated these ratios as a percent of direct

materials inputs, direct energy inputs, as well as the ``Consumption of

Traded Goods.'' Neither direct nor indirect labor was included in

either the numerator or denominator of the surrogate ratios.

[[Page 63850]]

Second, consistent with our methodology discussed, among other

places, in TRBs VIII and TRBS IX (62 FR at 6178 and 62 FR 61287,

respectively) although we prefer to base our surrogate values on

industry-wide, public information for producers of merchandise under

review during the POR, such information is not available for factory

overhead and SG&A rates in this review. For these final results, we

therefore have based our surrogate values for overhead and SG&A

(excluding labor) on the average reported costs of Indian producers of

like or similar merchandise. In deriving these ratios, we used the

average of the Indian producers' reported data with respect to the

numerator (reported overhead and SG&A expenses) and the denominator

(direct input costs excluding labor), thus yielding internally

consistent ratios. These ratios, when multiplied by our calculated FOP

values, constitute the best available information concerning overhead

and SG&A expenses that would be incurred by a PRC bearings producers

given such FOP data. Timken's recommended adjustment (including the

proposed alternative adjustment based solely on Asia Bearing's reported

costs) would itself distort the ratios rather than correct the alleged

distortions in our calculations.

Third, with regard to Timken's assertion that the reported Indian

producers' materials costs include high import duties which have the

effect of lowering the calculated surrogate ratios for overhead and

SG&A, we note that Timken has not provided any information regarding

the amount of import duties that are included, nor has Timken provided

a means of identifying and eliminating such duties from our

calculations. Although we would not normally include import duties in

the surrogate values for materials costs, we have no evidence as to the

amount of duties, if any, included in the Indian producers' reported

costs. Therefore, we did not deduct an amount for import duties from

the reported materials costs for the Indian producers when calculating

the overhead and SG&A ratios.

We likewise disagree with the contention of respondents that the

Department's calculated costs for overhead and SG&A are, in fact, too

high because they are based on the reported costs of Indian producers

which are much more sophisticated than the PRC producers. For the

reasons enumerated above, the average of the reported costs of the

Indian bearings producers represent the best surrogate information

available for valuing overhead and SG&A in this review. (As detailed in

Comment 14 below, for our final results we have only used the reported

cost data of six of the Indian producers.)

Comment 13: Excluding ``Consumption of Traded Goods'' From Overhead

Rate Calculation

Timken argues that the Department should exclude the category

``Consumption of Traded Goods'' from the denominator in calculating the

factory overhead ratio because this traded goods category includes

items which are only purchased and sold--but not produced--by the

Indian bearings producers and, therefore, have nothing to do with the

producers' manufacturing operations. Timken notes that the traded goods

category is listed separately in the producers' financial statements

from those products noted as ``manufactured and sold.'' Thus, because

traded goods are neither produced directly nor used as inputs in

manufacturing other products, the producers do not incur any factory

overhead expense for these products.

Respondents argue that ``Consumption of Traded Goods'' should be

included in the denominator of the factory overhead ratio. Respondents

counter Timken's argument by noting that the Department has

specifically rejected Timken's argument for excluding this category in

previous reviews. See, e.g., TRBs IX. Respondents further contend that

Timken is making an implicit argument that other expenses, such as

depreciation, warehousing and maintenance expenses, incurred as a

result of these traded goods should be included in the numerator of the

overhead ratio, whereas the traded goods amount itself should not be

included in the denominator. This, respondents state, would distort the

costs of these Indian producers and, therefore, is illogical.

Department's Position: The Department has addressed this issue

previously in TRBs VIII and TRBs IX (62 FR at 6182 and 62 FR at 61288,

respectively). In both cases, we rejected Timken's argument that the

``Consumption of Traded Goods'' category should be excluded from the

denominator of the overhead ratio. As we explained in TRBs IX, these

traded goods are not overhead expenses but, instead, reflect the common

practice of manufacturers of purchasing finished and semi-finished

goods to meet their clients' demand. The Indian bearings producers

incur the expense of, inter alia, purchasing and warehousing these

products. Because these purchased goods are an integral portion of the

costs of goods sold, they are ordinary business expenses that we cannot

ignore. Therefore, for the final results we have included ``Consumption

of Traded Goods'' as a component of the denominator of the factory

overhead ratio.

Comment 14: Excluding Asian Bearing Company and National Engineering

Company

Respondents argue that the Department should not include the

companies Asian and National Engineering Company (``NEI'') among the

list of Indian bearings producers utilized for calculating factory

overhead, SG&A and profit ratios. Respondents contend that, in past

reviews, the Department has deliberately excluded data from Asian on

the grounds that it is a ``sick'' company (as defined under Indian law)

and that its accounting practices are suspect. Respondents further

contend that the calculated overhead and SG&A ratios for Asian and NEI

are clearly aberrational and, as such, not reflective of the Indian

bearings industry. Respondents also argue that NEI's data are clearly

extraordinary and, as such, should not be used. Therefore, respondents

argue, the Department should exercise its discretion to exclude

aberrational data by basing its overhead, SG&A and profit calculations

on the reported data for the remaining six Indian bearing producers

only.

Timken counters that Asian's data should not be excluded merely on

the grounds that it is a ``sick'' company. In fact, Timken argues,

having sick company status has enabled Asian to reduce certain overhead

and SG&A costs such as interest and depreciation charges. There is,

moreover, no evidence or reason to believe that any of Asian's other

direct, overhead or SG&A costs would be affected by the company's sick

status. Furthermore, Timken continues, there is no justification for

excluding a sick company from a sample of companies meant to reflect

the industry at large. Any industry or country has a certain number of

non-profitable companies, and this should be reflected in the industry-

wide data. Finally, the fact that Asian's interest expense accounts for

a slightly higher portion of its total costs is not a basis for

excluding this company.

With regard to NEI's data, Timken argues that simply because the

overhead rate of this company is different from that of the other

companies does not establish that NEI's rates are unreliable or

aberrational. Timken argues that if by this logic NEI's data were

aberrational,

[[Page 63851]]

then another Indian producer FAG should also be excluded on the grounds

that its ratios are extraordinarily low. Timken, citing TRBs VIII,

notes that the Department acknowledges that differences in various

companies' overhead and SG&A ratios can be due to differences in the

input materials used, the payment of import duties on the input

materials, the capital structure of the company, and the company's

accounting practices. Thus, in this case, argues Timken, the

differences in the ratios of the various Indian bearings producers

could result from the fact that some of them are more fully integrated

and, therefore, have higher capital costs. Given these differences in

company structure and practice, Timken argues, taking an average of all

eight of the Indian producers' reported costs yields the most

reasonable mix of different practices, and most fairly serves as a

surrogate.

Department's Position: We agree with respondents that data for

Asian and NEI should be excluded from the average of reported costs for

Indian bearings producers. In the Final Results of Antidumping Duty

Administrative Review: Tapered Roller Bearings and Parts Thereof From

the People's Republic of China, 56 FR 67590, 67594 (December 31, 1991),

the Department stated that, ``we believe that Asian is not an

appropriate surrogate primarily because the Auditor's Report notes that

the financial statements are not presented in accordance with the

generally accepted accounting principles (``GAAP'') of India.'' In this

review, the Auditor's Report included with Asian's 1996-97 financial

statements expresses a clear reservation about how certain interest

expenses (with their corresponding effects on depreciation and other

expenses) have been reported, noting that the methodology is not in

accordance with accounting principles recommended by the Institute of

Chartered Accountants of India. The Auditor's Report also notes that

Asian continues to be a ``sick'' company as defined by India's Sick

Industrial Companies Act. Likewise, the auditors' endorsement of NEI's

1996-97 Financial Statements, as contained in the Auditor's Report,

includes qualifications regarding, inter alia, the company's treatment

of various overhead and SG&A expenses.

With regard to Timken's arguments concerning Asian and NEI,

although we recognize, as respondents argue, that the overhead and SG&A

ratios for Asian and NEI generally are higher than those of the other

six producers, this apparent difference is not our primary reason for

excluding the Asian and NEI data. Rather, we have excluded the data for

Asian and NEI in calculating surrogate overhead, SG&A and profit ratios

primarily because, according to the Auditor's Reports, the methodology

used in recording and reporting the financial condition of these two

companies appears, in certain instances, to be inconsistent with the

methodology (i.e., Indian GAAP) used by the remaining six companies.

Given these significant differences, it would be incongruous to combine

the reported data of all eight companies.

Comment 15: Excluding Excise Duties From the Overhead Calculation

Respondents argue that the Department improperly included excise

duties in the overhead costs of the Indian producers on which the

Department based its calculation of the surrogate overhead ratio.

Respondents argue this is incorrect because excise duties are not paid

on exported merchandise but, rather, only on goods consumed in the

domestic market. The Act, respondents note, states that the cost of

materials should be ``exclusive of any internal tax applicable in the

country of exportation directly to such materials or their disposition,

but remitted or refunded upon the exportation of the article in the

production of which such materials are used.'' Respondents further

argue that it has been the established practice of the Department to

exclude Indian excise taxes in other proceedings. See, e.g., Notice of

Final Determination of Sales at Less Than Fair Value: Bicycles from the

PRC, 61 FR 19026, 19039 (April 30, 1996) (``Bicycles from the PRC'').

Respondents also notes that the Department, in the preamble to the

current regulations, states that `` * * * Congress has now established

conclusively that dumping comparisons are to be tax-neutral in all

cases.''

Timken counters that the Indian producers report that this excise

tax is paid on finished products and, therefore, does not apply to raw

materials. Thus, Timken contends, this tax is not within the plain

language of the Act. Moreover, according to Timken, the fact that some

of the Indian producers reported excise tax while others did not

indicates that this amount represents a net excise tax paid, with any

refunded amount already deducted.

Timken continues by arguing that the record only indicates that

such taxes are merely ``refundable,'' and does not explicitly state

that the excise duties were, in fact, actually recovered. They state

that there is no basis to assume that all excise taxes would be

refunded, that all Indian producers obtained or could obtain refunds,

or that PRC producers, operating in a market economy, would not pay any

taxes on finished goods. Timken concludes by arguing that the

Department's past practice of excluding ``refundable'' taxes in PRC

cases is at odds with Department practice in market economy cases where

the respondent is required to show that the refundable taxes were paid

on material inputs that were used in the manufacture of subject

merchandise, and that these taxes were actually recovered from the

government.

Department's Position: We agree with respondents that the excise

tax reportedly paid by the Indian bearings producers should not be

included in the overhead cost calculation. In the final determination

of Bicycles from the PRC (61 FR at 19039), we stated that `` * * * it

is the Department's practice to use, if possible, tax exclusive values

as surrogates in NME cases. * * * Moreover, we have found in previous

cases involving products from India that excise duties and/or taxes

paid by Indian producers were refundable to the producer by the Indian

government. * * * Therefore, we have not only removed the amount of

excise duty and/or tax from TI's financial data, but also from the

financial data of the other Indian producers, where possible, which we

have used to calculate surrogate percentages.''

With regard to Timken's arguments, we note that the fact that some

of the Indian producers do not appear to be reporting excise tax paid

may only reflect that they have not separately itemized that expense in

their statements; it does not necessarily indicate, as Timken contends,

that this represents net excise tax paid, exclusive of any refunded

amount. Moreover, there is no evidence on the record to suggest that

these Indian companies did not recover the refundable taxes. In order,

therefore, to be consistent with the intent of the Act and general

Department practice, in these final results we have excluded the excise

tax, where it has been specifically identified, from the reported costs

of the Indian bearings producers.

Comment 16: Excluding ``Net Loss (Gain) on Fixed Assets Sold''

Respondents contend that the Department improperly included the

category ``Net Loss (Gain) on Fixed Assets Sold'' as an element of

overhead. This category should be excluded from overhead expenses,

respondents argue, because these losses (gains) are incurred

independent of manufacturing or selling activities.

[[Page 63852]]

Timken counters that, contrary to the assertion of respondents, it

is reasonable to expect that the sales of fixed assets by companies,

whose primary business included bearings, would be related to the

production or sale of bearings. Losses arising from the sale of these

assets reflect the fact that depreciation charges for these assets in

prior years were inadequate to fully account for the decline in value

over the assets' life. Likewise, losses on assets employed in sales or

generally in support of corporate operations reflect the same

adjustment to depreciation. Thus, these losses represent overhead costs

tied to bearings manufacture. Timken further notes that in previous

reviews, the Department has included these losses in our overhead

calculation.

Department's Position: We agree with Timken that the ``Net Loss

(Gain) on Fixed Assets Sold'' should be included in the calculation of

the overhead ratio. The Department has addressed this issue previously

in TRBs VIII. In that review, we stated that losses ``* * * incurred in

selling fixed assets used to manufacture merchandise clearly [are]

related to manufacturing activities.'' See TRBs VIII, 62 FR at 6184.

For that reason, in our final results of this review we have continued

to included this category as an overhead expense.

Comment 17: Excluding ``Other Expenses'' From Factory Overhead and SG&A

Calculations

Respondents argue that the category ``Other Expenses'' or

``Miscellaneous Expenses'' noted in several of the Indian producers'

financial statements should not be included in the overhead and SG&A

calculations because there is insufficient information to determine

whether all of these expenses are related to the production of TRBs.

Moreover, assuming all expenses are related to TRBs production, there

is insufficient information to determine the extent to which these

should be properly categorized as overhead, SG&A or some other expense.

Respondents continue by noting that some of these ``other'' expenses,

such as ``auditors' fees,'' ``director's fees,'' and expenses related

to ``Agricultural & Dairy Farm,'' which are specified in some

producers' financial statements are clearly irrelevant to TRBs

production in the PRC and, as such, should be excluded.

Respondents also argue that it is improper to allocate ``other''

and ``miscellaneous'' expenses to only overhead and SG&A because these

may also include expenses related to labor or raw materials. Thus,

argue respondents, these unspecified expenses ought to be allocated

equally to raw materials, labor, overhead and SG&A.

Timken counters that it is unreasonable for respondents to suggest

that the Department exclude an entire category of expenses on the

grounds that its description is not sufficiently precise to either

relate the expenses directly to the production of TRBs, or to classify

them as overhead or SG&A. In allocating these other expenses to

overhead and SG&A, absent specific information as to the cost category

of each expense the Department has relied, as in the past, on its

general expertise of accounting practices and principles. Moreover,

Timken continues, the financial statements of many of the producers do,

in fact, provide considerable detail for a large portion of these other

costs. The line-item detail that is available for some of the expenses

confirms that these expenses are properly classified as either overhead

or SG&A. Thus, absent specific evidence to the contrary, the Department

is correct in categorizing these costs as overhead and SG&A.

Department's Position: We agree with the Timken that the ``other''

and ``miscellaneous'' expenses have been properly classified as part of

factory overhead or SG&A (with the exception of those expenses detailed

in the following comment below). We recognize the fact that there is

limited information regarding any of the expenses included in these

catch-all categories. However, most of the financial statements do

include separate itemized categories for raw materials consumed, and

payments to and provisions for employees. Contrary to the assertion of

respondents, there is no reason to believe that materials and labor

costs are also included in the ``other'' or ``miscellaneous'' expense

categories. Consequently, all expenses not identified as direct

material inputs, direct or indirect labor, energy, or other costs which

the Department values separately (such as packing, freight, etc.) have

been included in either the overhead or SG&A category. Where it was

unclear whether an expense would be more properly categorized as

overhead rather than SG&A (or vice-versa), we generally allocated the

expense amount evenly between the two categories.

With regard to respondents' contention that several of the expenses

included as overhead or SG&A are not relevant to TRB production in the

PRC, and with regard to the issue of surrogate values for overhead and

SG&A in general, we cite to the Department's position on these matters

in Tapered Roller Bearings and Parts Thereof, Finished or Unfinished,

From the Republic of Romania; Final Results and Recission in Part of

Antidumping Duty Administrative Review, 61 FR 51427 (October 2, 1996)

(``TRBs from Romania''). In that review, we stated, ``[t]he Department

generally does not dissect the overhead rate on a surrogate country and

apply only components relevant to the producer. It is generally not

possible to break the surrogate overhead value into its individual

components at a level of detail that would be necessary to value each

individual component of the NME producer's overhead. * * * Rarely, if

ever, will it be known that there is an exact correlation between

overhead expense components of the NME producer and the components of

the surrogate overhead expenses. Therefore, * * * the Department

normally bases normal value completely on factor values from a

surrogate country on the premise that the actual experience in the NME

cannot meaningfully be considered. Accordingly, Department practice is

to accept a valid surrogate overhead rate as wholly applicable to the

NME producer in question.'' See TRBs from Romania, 61 FR at 51429. For

these reasons, we have continued to include these other expenses in our

overhead and SG&A calculations for the final results.

Comment 18: The Double-Counting of Certain Expenses

Respondents argue that, in the Preliminary Results, the Department

included in its surrogate overhead or SG&A calculations expenses

related to packing, freight, discounts and rebates, commissions, and

brokerage. Because these types of expenses are also valued directly

(individually) elsewhere in the Department's FOP calculation, they have

been double-counted. For the final results, respondents argue that

these types of expenses should be excluded from the overhead and SG&A

calculations.

Department's Position: We agree, in part, with respondents that,

where certain costs have been separately calculated elsewhere in the

FOP calculations, they should not be included in overhead or SG&A.

Consequently, where it was possible to distinguish expenses directly

related to packing, freight, discounts and rebates, and brokerage from

other expense categories in the Indian producers' financial statements,

we have excluded those expense items from the overhead and SG&A

calculations for the final results.

We disagree with respondents' contention, however, that commissions

should likewise be excluded. These are

[[Page 63853]]

standard selling costs and, as such, are properly categorized under

SG&A. Whether PRC producers have commissioned sales staff is

irrelevant. As discussed in the Department's Position under the

previous comment, the Department does not tailor surrogate overhead or

SG&A rates to match the circumstances in the NME country. We note that

in our Preliminary Results, where commissions were identified

separately in the Indian producers' financial statements, we

incorrectly included these as labor costs. For these final results,

however, we have included all commission expenses, where possible, as

part of SG&A only.

Comment 19: Offsetting Interest and Other Expense With Interest and

Other Income

Respondents argue that the Department should offset the interest

expense and other expenses which it has included in the surrogate

overhead and SG&A calculations with interest revenue and other

revenues, respectively.

Timken counters that there is no evidence in the financial

statements that the interest or other income earned by these Indian

producers relate to their TRB operations. Timken argues the

Department's practice with regard to market economy cases is to offset

expenses only in cases where the corresponding income is short term in

nature and earned on investment activity related to the subject

merchandise.

Department's Position: We agree with the Timken that interest

expense and other expenses should not be offset with interest and other

income. There is no evidence on the record to indicate that these

expense and income categories are related to each other and to the

production of TRBs. For the final results, therefore, no offsets to

interest and other expenses have been made.

2. Market Economy Inputs

For those TRB producers which purchased steel from market economy

suppliers and paid in hard currency, the Department, in its Preliminary

Results, valued steel inputs at actual prices paid in market economy

currencies. However, consistent with our past practice, we used

surrogate data for TRB producers who purchased imported steel inputs

from trading companies and paid in renminbi. Because this methodology

was subject to court challenge (see Olympia Industrial, Inc. v. United

States), Slip Op. 98-49 (CIT 1998) (``Olympia II''), we have reexamined

our approach for the final results, and considered the comments

received from interested parties as discussed below.

Comment 20: Use of Market Economy Inputs

Timken argues that the Department should not regard the prices paid

by respondents for imported steel inputs as ``market prices.'' In the

final results, Timken urges the Department to reject the import values

used in the Preliminary Results because they are not reliable

indicators of market economy prices for steel inputs.

In support of its position, Timken maintains that the statute

directs the Department to use the prices in one or more market

economies which (1) are at a level of economic development comparable

to that of the NME, and (2) are significant producers of comparable

merchandise (see section 773(c)(4) of the Act). Thus, Timken argues

that, unless the Department determines that the country of origin is

comparable to China and is a significant producer of the subject

merchandise, it would be unlawful to use import values that do not meet

these two criteria.

Furthermore, Timken believes that it is likely that steel exported

to the PRC is dumped or otherwise atypical of the price normally

charged in the country of origin. Therefore, Timken argues, the price

of steel imported to the PRC does not reflect the price charged in the

exporting country, as required by the statute. Moreover, Timken

contends that the use of a steel price from a country that is not at a

level of economic development comparable to that of the PRC will

distort the Department's NME methodology. Timken also argues that if

the Department were to use import prices, it must reject values that do

not represent arm's length sales, that do not reflect commercial

quantities, or that otherwise do not reasonably reflect the actual cost

of production in a comparable market economy country.

Timken also states that in Olympia II, the CIT reviewed its earlier

remand order which instructed the Department to examine whether the

import data submitted by Chinese trading companies were reliable.

Timken argues that the Court did not require the Department to

automatically accept import prices from market economy suppliers as

factor values without examining whether such values are reliable and

adequate in accordance with section 773(c)(4) of the Act.

Wafangdian and Luoyang argue that the Department should apply the

three-pronged test set forth in the Olympia II remand to test the

reliability of the reported import prices (i.e., value and volume of

steel imports, type and quality of the imported steel, and consumption

of imported steel by the NME producers; see Olympia II, Slip Op. 98-49

at 7). Specifically, Wafangdian and Luoyang suggest that the Department

apply the test on a shipper-by-shipper basis by determining if (1) the

trading company imports the steel, (2) the steel is used to produce the

subject merchandise, (3) the value of the steel is reliable and non-

aberrational, and (4) the quantity is meaningful. These respondents

urge the Department to use actual prices wherever possible in the

interest of fairness, accuracy, and predictability.

In response to Timken's arguments, Wafangdian and Luoyang contend

that the statute is silent on the issue of prices on inputs imported

into an NME. However, they argue that section 351.408(c)(1) of the new

regulations directs the Department to use the price paid to the market

economy supplier in cases where an FOP is imported from a market

economy supplier and paid for in hard currency. Citing section

773(c)(1) of the Act, which requires the Department to value the FOP

data using ``the best available information regarding the values of

such factors in a market economy country,'' these respondents claim

that the best available information is the price actually paid for the

input. They agree with Timken that aberrational prices should be

rejected, but argue that as long as the transaction is bona fide, the

price should be presumed to be valid.

With respect to Timken's argument that the Department should

investigate whether the prices of imported inputs are reliable,

Wafangdian and Luoyang assert that it is clear from Lasko Metal

Products, Inc. v. United States, 43 F.3d 1442, 1443 (Fed. Cir. 1994)

(``Lasko''), that the import price is the best available information if

the input is used to produce the subject merchandise and the import

price is not aberrational. The same standard should be applied to

situations where the NME importer is a trading company, which is the

case in Olympia II, according to Wafangdian and Luoyang.

Another group of respondents believes that Timken's argument with

respect to the use of actual import prices involves a strained

interpretation of the statute. They say that Timken is wrong in

asserting that the statute requires that the country of origin must be

at the same level of economic development as the importing country and

that the exporting country must be a significant producer of the

merchandise. These respondents argue that the statute grants the

Department broad discretion to determine which is the best available

[[Page 63854]]

information as demonstrated by long-established Department practice and

court rulings. These respondents urge the Department to use the actual

import prices paid by trading companies in market economy currencies.

Department's Position: The Department interprets section 773(c)(1)

of the Act as authorizing a narrow exception to the statutory

preference for selected surrogate country data. This exception applies

only when the NME producer sources an input from a market-economy

source and pays in a market-economy country currency. The court upheld

this interpretation in Lasko. However, nothing in the Lasko decision

alters the statutory mechanism for selection of surrogate values. Thus,

as the court acknowledged in Olympia Indus., Inc. v. United States,

Slip. Op. 97-44 (April 10, 1997) (``Olympia I''), import prices that

pass through a trading company are not actual costs to the producer but

rather, an alternative surrogate value. Specifically, the court states

in Olympia II, ``As with the surrogate country data, it may be true

that the trading company data does not represent actual prices paid for

the steel input by the PRC * * * manufacturers. And, in this sense, the

use of trading company data would also create a fiction'' (see Olympia

II, Slip Op. 98-49 at 12). Therefore, the question is whether trading

company import prices, as alternate surrogate data, are preferable to

surrogate data from a market-economy country that is a significant

producer and at a level of comparable economic development.

To assess the reliability of the Chinese trading company's steel

prices, we have examined the factors outlined in the Olympia II remand:

(1) the value and volume of steel imports, (2) the type and quality of

the imported steel, and (3) consumption of imported steel by the NME

producer. The record evidence demonstrates that the Chinese trading

company purchased steel from a market-economy country, in a convertible

currency. This company used a portion of the steel in its own

production of TRBs but also sold a portion of the steel to an unrelated

manufacturer. Based on the invoices for the imported steel, and the

specifications of the steel sourced by the factories domestically, we

conclude that the imported steel is of the same grade and has the same

range of sizes as steel that the NME manufacturers used to produce the

subject merchandise.

Regarding the value of the steel imported by the trading company,

we found that the price paid by the trading company is within the range

of prices created by the actual steel prices paid by PRC producers and

our surrogate value. Consequently, the price paid by the PRC trading

company is not aberrational. With respect to volume and consumption of

steel by the NME producer we note that the amount of steel imported by

the trading company was significant and that the NME producer in

question consumed a significant amount of imported steel to produce the

subject merchandise.

Based on the above, we are using the trading company import steel

price as surrogate data for those companies that actually used the

imported steel.

3. Exchange Rates

Comment 21: Exchange Rates

Wafangdian and Luoyang contend that the conversion of foreign-

currency denominated surrogate factor values using the POR average

exchange rate is contrary to the Act which, they argue, requires

conversion based on the date of sale. Section 773A(a) of the Act

states, ``[i]n an antidumping proceeding * * * [the Department] shall

convert foreign currencies into United States dollars using the

exchange rate in effect on the date of sale of the subject merchandise.

* * *'' These parties state that conversion of factor values based on

date of sale would be consistent with Department practice, citing Hand

Tools 1998 and Notice of Final Determination of Sales at Less Than Fair

Value: Brake Drums and Brake Rotors from the People's Republic of

China, 62 FR 9160 (February 28, 1997) (``Brake Drums and Rotors'').

Timken counters that the use of daily exchange rates to convert

foreign-currency denominated surrogate values is ``falsely accurate''

when the surrogate values themselves are annual averages of factor

utilization rates and surrogate values. For example, Timken states that

steel values are based on average import statistics for the POR, labor

rates are based on annual YLS data, and overhead, SG&A and profit are

based on annual reports. Timken states that section 773(c)(1) of the

Act requires that the Department use ``the best information regarding

the values of such factors * * * considered to be appropriate by the

[Department],'' and that the Statement of Administrative Action

(``SAA'') (at 841) states that the Department's practice is to ``ensure

that the process of currency conversion does not distort dumping

margins.'' Consequently, Timken contends that if the best surrogate

values are annual averages then conversion of those values to dollars

requires an average exchange rate. Timken asserts that, by applying an

average exchange rate to the average surrogate values, Commerce is in

fact applying a daily exchange rate.

Alternatively, Timken states that if respondents had desired a

daily exchange rate they should have provided daily production factors.

Timken states that if the Department decides that a daily rate should

be used then, to avoid distortion, it should attempt to compute daily

or, at least, weekly or monthly surrogate values.

Department's Position: In NME cases, the underlying data for

valuing factors are often expressed in multiple currencies, including

U.S. dollars. In fact, many of the factor values, such as the surrogate

values obtained from certain import data and wage rates, will already

be expressed in dollars. Because of this, the Department typically does

not calculate NV in terms of the domestic currency of the surrogate

country. Instead, individual factor values that are expressed in

currencies other than dollars, are converted to dollars using an

average POR exchange rate. Consequently, NV is expressed in dollars and

no currency conversion, pursuant to section 773(A) of the Act, is

necessary.

We acknowledge that the Department converted certain surrogate

factor values denominated in foreign currencies to U.S. dollars on the

date of sale in Hand Tools 1998. However, we disagree with respondents

that it is the Department's practice to put foreign currency

denominated surrogate values in U.S. dollars by using a date of sale

exchange rate. In fact, the Department has had a long-standing practice

of converting such values using a POR/POI average exchange rate. Both

prior to and since the implementation of the URAA, it has been the

Department's practice to convert POR/POI-contemporaneous foreign

currency surrogate values to U.S. dollars using the average POR/POI

exchange rate (see, e.g., Notice of Final Determination of Sales at

Less Than Fair Value: Ferrovanadium and Nitrided Vanadium From the

Russian Federation, 60 FR 27957 (May 26, 1995); and the public versions

of the surrogate valuation memoranda for the following PRC final

determinations: Certain Cased Pencils, Polyvinyl Alcohol, Natural

Bristle Paint Brushes and Brush Heads, Brake Drums and Brake Rotors

1, Collated Roofing Nails, Pure Magnesium, and Manganese

Metal, dated October 31, 1994, March 22, 1996, September 20, 1996,

February 21, 1997, May 15, 1997 and January 14, 1998, and March 9,

1998, respectively. See Memorandum to File, ``Placement of

[[Page 63855]]

Prior Surrogate Valuation Memoranda on Record,'' dated November 9, 1998

(``Prior Surrogate Valuation Memoranda''). Additionally, since the

decision in Hand Tools 1998, the Department has continued to use POR-

average exchange rates in other cases (see, e.g., Porcelain-on-Steel

Cooking Ware From the People's Republic of China: Final Results of

Changed Circumstances Antidumping Duty Administrative Review and Intent

Not To Revoke Antidumping Duty Order, In Part, 63 FR 27261 (May 18,

1998)), continuing the practice of using average exchange rates as

detailed in that cases preliminary determination at 63 FR 1434, 1436;

and the public version of the calculation memorandum dated August 7,

1998 for Sebacic Acid From the People's Republic of China; Final

Results of Antidumping Duty Administrative Review, 63 FR 43373 (August

13, 1998). See Prior Surrogate Valuation Memoranda.

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

\1\ Despite respondents' assertion to the contrary, surrogate

values were converted to U.S. dollars based on a POI average

exchange rate, as is clear in the calculation memorandum.

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

Finally, when read as a whole, along with the SAA and various court

decisions, we do not believe that the Act requires the conversion of

surrogate values to U.S. dollars using a daily exchange rate. The SAA

states that the URAA ``tracks existing practice, the goal of which is

to ensure that the process of currency conversion does not distort

dumping margins.'' See SAA at 841. As detailed above, the use of POR/

POI average exchange rates to convert surrogate values has been the

Department's general practice, with origins prior to the implementation

of the URAA. Given the language of the SAA, we disagree that the intent

of section 773A(a) of the Act was to change the Department's practice

in this regard. Additionally, the courts have given great deference to

the Department in applying section 773(c)(1) of the Act in resolving

any variance between Department practice and other provisions of the

Act in NME cases. See, e.g., Lasko. Section 773(c)(1) states that in

NME cases ``the valuation of the factors of production shall be based

on the best available information,'' and the Department has stated that

it has an obligation to choose surrogate values that emphasize

``accuracy, fairness, and predictability''. See Final Determinations of

Sales at Less Than Fair Value: Oscillating Fans and Ceiling Fans From

the People's Republic of China, 56 FR 55271, 55275 (October 25, 1991).

Since, as Timken notes, we are converting POI/POR average values, use

of a POI/POR average exchange rate may enhance the accuracy of our

calculations.

In addition, there are other instances where the Department uses an

exchange rate other than one tied to a sale date. For example, when

computing NV based on CV in a market economy case, the Department does

not require respondents in antidumping proceedings to convert foreign

currency purchases of input products based on the date of a sale, but

rather on the date the currency transaction took place. In the portion

of section 773A(a) dealing with transactions in the forward market

there is an indication that the intent of this section was to make

currency conversions based on the date of sale only if the conversion

is ``directly linked to an export sale under consideration.'' This

indicates that this section does not address currency conversion for

inputs used in the production process. Instead, this provision seems to

clearly address conversion of NV, circumstance of sale adjustments, and

actual movement charges associated with sales. We therefore are

continuing to use an average currency conversion rate in this case.

4. Freight

Comment 22: Ocean Freight

Respondents argue that the Department should use ocean freight

rates provided by the Federal Maritime Commission (``FMC'') rather than

rate quotes received from private shipping companies when calculating

ocean freight costs. Respondents propose that the Department use these

values because they represent actual costs and fulfill the Department's

statutory obligation of calculating dumping margins as accurately as

possible. Respondents suggest that the shipping company rate quotes are

uncorroborated and potentially inflated. Because the FMC data are

numerically closer to freight costs derived from IM-145 data,

respondents suggest that they are the accurate and appropriate values

to use. Citing Carbon Plate, respondents state that the Department has

consistently relied on actual costs and not theoretical quotations in

dumping cases.

Timken suggests that respondents' data, a 1995 Federal Maritime

Commission & Company Quotes report for 20- and 40-foot containers

shipped from China to the United States, do not reflect actual costs

for the POR. Timken points out that there is neither evidence

supporting the FMC data as actual costs, nor evidence showing that the

Maersk rate quotes the Department used in its Preliminary Results were

inflated. Timken finds that the name of the FMC report, specifically

the phrase ``Company Quotes,'' suggests that the FMC information does

not reflect actual costs. Timken finds that the Maersk rate quotes are

contemporaneous with the POR, where the FMC data are not, and that the

FMC data do not provide any advantage over the source used for the

Preliminary Results. Furthermore, Timken concludes that the Maersk

quotes also contain surcharges and adjustments which may not be

included in the FMC data, making the FMC data more appealing to

respondents. Timken notes that in Carbon Plate, IM-145 data were used

because the values published in Shipping Intelligence Weekly were

``average earnings'' and rates for only the most efficient vessels.

Maersk data are neither averages nor limited to certain vessels. Timken

also points out that the Maersk data are more detailed and not affected

by transfer prices which are possibly included in the values reported

in respondents' exhibit.

Department's Position: We agree with Timken and have continued to

use the Maersk rate quotes for valuing ocean freight. The Maersk rates

quotes reflect actual ocean freight costs that Chinese TRB producers

would face, are contemporaneous with the POR, and include all the

applicable surcharges incurred for the shipment of TRBs.

Comment 23: Application of Sigma

Wafangdian and Luoyang argue that the Department disregarded the

Court's decision in Sigma Corporation v. United States, 117 F.3d 1401

(Fed. Cir. 1997) (``Sigma'') by applying the SG&A, overhead and profit

ratios to the inland freight component of input costs. Additionally,

Wafangdian and Luoyang argue that the Department's practice of limiting

the amount of inland transportation included in the surrogate valuation

of an imported input to the shorter of the distance between the port

and the factory or the distance between the domestic supplier and the

factory is inaccurate in certain circumstances. Specifically,

Wafangdian and Luoyang state that, if the distance is shorter than 25

kilometers, then this distance already is included in the surrogate

value and, therefore, should not be separately valued. Furthermore,

Wafangdian and Luoyang argue that the Department aggravates this

double-counting by applying overhead, SG&A and profit to the surrogate

value calculation.

With respect to respondents' first point, Timken replies that Sigma

does not address the issue of application of overhead, SG&A and profit

rates to the inland freight component of input costs, nor does it

require the Department to distort these rates as suggested. In fact,

Timken states, when the Department adds the freight component prior to

the application of these rates, it takes into

[[Page 63856]]

account the fact that the denominator of the rates includes such

freight costs, as admitted by respondents.

Department's Position: We agree with Timken that Sigma does not

address the issue of the application of the overhead, SG&A and profit

ratios and the appropriateness of applying these ratios to the freight

component of input costs. Given that the Indian financial statements

include these costs, which are included in the denominator of the ratio

calculations, it is appropriate to apply these ratios to the freight

component of input costs. We also disagree with respondents' second

point that the inland freight from the Chinese port to respondents'

factory is included in the import price which we are using as the

surrogate value. Rather, it is clear from the purchase invoice that the

input was sold to respondents under ``Cost and Freight--Chinese Port''

terms. As a result, we have followed our normal practice of including

in the surrogate a valuation of the imported input which is the shorter

of the distance between the port and the factory or the distance

between the domestic supplier and factory (see, e.g., Natural Bristle

Paintbrushes and Brush Heads From The People's Republic of China;

Preliminary Results of Antidumping Duty Administrative Review, 62 FR

60228, 60230 (November 7, 1997)).

Comment 24: Surrogate Value for Brokerage and Handling

Wafangdian and Luoyang argue that the Department made an error when

it calculated the surrogate value for brokerage and handling in the

Preliminary Results. The FOP memorandum used in the Preliminary Results

indicates that the Department used brokerage and handling data for the

period August-October 1993. In order to calculate the corresponding

value for the POR, the Department used an inflator which was obtained

by dividing the average wholesale price index (``WPI'') for the POR by

the WPI for 1993. Wafangdian and Luoyang claim that the surrogate value

used was for the period October 1993-January 1994 (not August-October

1993). Furthermore, they argue, as a denominator, the Department should

use the average WPI for the few months corresponding to the source data

and not the average WPI for the entire 1993.

Timken responds that the Preliminary Results clearly indicates that

the Department used surrogate brokerage and handling data for the

period August-October 1993. Therefore, Timken argues, the Department

should either continue to use the average WPI for the entire 1993 or

use the WPI for the period August-October 1993.

Department's Position: We agree with respondents that the average

WPI for 1993 is unnecessarily broad. Moreover, we note that the FOP

memorandum used in the Preliminary Results incorrectly stated that the

source data were for the period August-October 1993. The dates of the

data should correspond with the shipping dates, which are actually

October 1993 to February 1994. Therefore, to calculate the most

accurate value for brokerage and handling, we have inflated the monthly

source data by the corresponding monthly WPI. In addition, when making

these adjustments, we noted that all observations for each shipment

date were identical, but some shipments had more observations than

others. Consequently, using all observations (as was done in the

Preliminary Results) gives disproportionate weight to certain sales.

Therefore, we determine that it is more appropriate to use only one

observation from each shipment date. We then calculated a simple

average of those values.

5. Miscellaneous Issues

Comment 25: Valuation of Electricity Inputs

Timken contends that the Department should change its methodology

for valuing electricity and use average electricity rates for large

industries in the areas where Indian bearing producers are located

rather than a simple average of Indian regional electricity prices for

large industries. Timken states that it is an abuse of discretion for

the Department to adopt a less accurate national average rate for India

and ignore the available evidence specific to the production of

bearings where there is (data of) greater precision on the record.

Timken dismisses the Department's precedents in Notice of Final

Determination of Sales at Less Than Fair Value; Polyvinyl Alcohol From

the People's Republic of China, 61 FR 14057, 14062 (March 29, 1996)

(``PVA'') and Manganese Metal (63 FR at 12446) as to valuation of

electricity as irrelevant because those cases dealt with the

relationship between energy prices and the location of the industry,

and specifically, with the reasons for regional differences in

electricity prices. Timken argues that the Department should select an

industry-specific surrogate value for electricity as it does for

material inputs such as bearing quality steel, labor and other capital

costs including overhead, SG&A, and profits ratios so that its

surrogate valuation is predictable and rational.

Respondents argue to the contrary that the Department should

continue to apply average Indian electricity rates for the purpose of

the final results. Respondents state that the Department has a well-

settled practice of using electricity rates from the country as a whole

as a surrogate value and cites recent cases. See, e,g., PVA, 61 FR at

14062; Manganese Metal, 63 FR at 12446; Notice of Preliminary Results

of the Antidumping Duty Administrative Review of Chrome-plated Lug Nuts

from the People's Republic of China, 63 FR 31719, 31722 (June 10, 1998)

(``Lug Nuts''); and Notice of Preliminary Results of Antidumping

Administrative Review of Sulfanic Acid from the People's Republic of

China, 62 FR 25917, 25919 (May 12, 1997) (``Sulfanic Acid'').

Department's Position: We agree with respondents. The Department

established a practice of using a simple average of country-wide Indian

state electricity rates as a surrogate value for Chinese electricity

rates unless a party has shown that a company can be located only in a

specific state (See Manganese Metal, 63 FR at 12446, PVA, 61 FR at

14062, Sulfanic Acid, 62 FR at 25919 and Lug Nuts, 63 FR at 31722.)

Timken's argument of using industry and state-specific electricity

rates as a surrogate value was considered and rejected in PVA, 61 FR at

14062, wherein we stated, ``* * * [t]here is insufficient basis to

assume that the electricity rates from the Indian states selected by

Timken are more appropriate for surrogate value than electricity rates

in other states. Other factors beside production level, such as methods

of generation and transmission as well as overall demand, are

determinants of price. Since there is not sufficient information on the

record to weigh the appropriateness of using one Indian state's

electricity rates over those in another, we have based the surrogate

value on the simple average of all Indian state rates. * * *'' In

Manganese Metal, 63 FR at 12446, we again rejected a similar industry

and state-specific electricity rates argument and explained that, ``* *

* [t]here is insufficient evidence on the record from which to conclude

that the developments affecting the electricity prices of Indian

ferromanganese necessarily reflect conditions in which the PRC

manganese metal producers likewise must operate. * * * In lieu of

concrete evidence that the higher state-specific rates are directly a

result of the presence of manufacturers of identical or comparable

merchandise, Departmental

[[Page 63857]]

practice in past cases has been to take a simple average of electricity

rates for the surrogate country as a whole.'' In the instant case,

there is no evidence on the record to show that there is a direct or

causal relationship between the presence of TRB producers in a locale

and the electricity rates for that locale.

We disagree with Timken's assertion that the Department is abusing

its discretion by using a simple average of country-wide electricity

rates as a surrogate value. Electricity prices are subject to a number

of influences specific to the location of the plant. These include:

local market conditions, state intervention, methods of transmission,

distribution of power generation and privatization. Simply put, there

are more variables to consider and weigh than the location of the

industry because of the nature of the electricity industry in India.

Thus, it is fair and reasonable to use a simple average for large

industries in all Indian states as a surrogate value for electricity

rates.

Comment 26: Premier has acted to the best of its ability

Premier argues that the Department's use of adverse facts available

in the Preliminary Results, because it was unable to supply information

from its unaffiliated suppliers, was not appropriate; nor was it

consistent with the Department's past treatment. Premier argues that,

despite its incomplete questionnaire response, it has cooperated to the

best of its ability. Premier notes that it has provided evidence of its

attempts to contact its suppliers in order to acquire FOP data and has

provided, in several cases, its suppliers' letters refusing to provide

these data. Premier suggests that because this concrete evidence is now

on the record, Premier has proven that it acted to the best of its

ability in cooperating with the Department in this review and

therefore, should not be adversely treated in the application of facts

available. According to Premier, its actions in this review are

identical to those in TRBS VIII where Premier cooperated with the

Department, yet was unable to provide FOP data for all of its sales.

The Department should, therefore, not resort to an adverse rate for

those sales not covered by the FOP data supplied by Premier. Premier

suggests that the Department use a methodology like that used for Chin

Jun in the Preliminary Results of this review, where the Department

applied a weighted average margin calculated from those sales for which

acceptable data were available to sales not represented by FOP data.

Timken insists that the Department rely upon adverse facts

available when substantial data are missing for a particular

respondent, as in the case of Premier. Timken cites TRBs IV-VI showing

that the Department applied ``best information available'' to determine

margins for Peer and Chin Jun when FOP data were not available. The

Department used the company specific dumping margin from the previous

POR for these sales. Timken also cites National Steel v. United States,

870 F. Supp. 1130, 1136 (CIT 1994) where the Court of International

Trade found that the ``quality and completeness of the data, and not

Peer's cooperation are the determining factors in establishing the

appropriateness of the partial BIA rate.''

Timken suggests that the Department is not required by the statute

to analyze the reasons why a respondent was not able to provide the

information requested by the Department. According to the Timken,

citing Koyo Seiko Co., Ltd. v. United States, 905 F. Supp. 1112, 1116-

17 (CIT 1995), the Department has the authority to ``resort to the

highest rate assigned * * * in a previous review as partial BIA for

those sales.'' Timken suggests that the Department should create an

incentive for Premier's suppliers to come forward in the future by

applying an adverse rate to those sales that are not represented by FOP

data. According to Timkin, if the Department applies Premier's

calculated margin to sales that are not represented by FOP data, this

only encourages producers to sell through exporters that have separate

rates. If an adverse rate was applied to these producers, it would

encourage them to come forward in the future and supply the factor

values.

Timken further contends that Premier has not shown that it has

acted to the best of its ability to provide factor information in this

review. Timken reminds the Department that Premier has participated in

all of the Department's reviews of this case. According to Timken,

Premier's efforts to prove that it attempted to provide the factors

data bring into question the accuracy and completeness of Premier's

responses. Timken notes that there were inconsistencies between the

lists of suppliers in various responses and suggests that this could

reflect additional insufficiencies in Premier's sales listings. Timken

suggests that the Department reject all of Premier's partial responses

and apply adverse facts available to all of Premier's sales.

Department's Position: We are continuing to apply a partial adverse

facts available rate to Premier's U.S. sales that are lacking

corresponding FOP data. Section 776(b) of the Act provides that an

adverse inference may be used against a party that has failed to

cooperate by not acting to the best of its ability to comply with a

request for information. Furthermore, section 353.37 of the

Department's regulations states that ``[I]f an interested party refuses

to provide factual information requested by the Secretary or otherwise

impedes the proceeding, the Secretary may take that into account in

determining what is the best information available'' (54 FR 12784).

In this case, we determine that Premier has not acted to the best

of its ability. Premier was unable to provide letters from all of its

suppliers responding to Premier's request for information. Instead, it

relies heavily on an affidavit from its marketing executive stating

that he had contacted the companies listed in Premier's response.

Moreover, Premier submitted contradictory information as to whom its

suppliers were, correcting misinformation only after repeated questions

by the Department. Taking into account that this is the tenth review of

the antidumping order on TRBs from the PRC, and that Premier has

participated in several reviews, we find that Premier has not acted to

the best of its ability.

For these reasons, the Department finds that applying adverse facts

available is appropriate. Therefore, as in the Preliminary Results, we

are applying a rate of 25.56 percent ad valorem to Premier's U.S. sales

for which factors data was not provided.

Comment 27: Premier's Inland Freight Expenses

Premier claims that its inland transportation was provided by

market-economy companies. Upon the Department's request, Premier

clarified information in its response concerning the use of market

economy freight forwarders to transport goods from China to the United

States. Premier contends that these freight forwarders are Hong Kong

companies and were paid in hard currency. Premier insists that the

Department should apply the actual market economy inputs to value these

factors for the final results.

Department's Position: Premier has reported that its freight

forwarding expenses, including inland freight charges, were paid in

hard currency. Absent evidence on the record to the contrary, for

purposes of these final results, the Department has recalculated

Premier's margin to apply its actual costs for inland freight.

[[Page 63858]]

Comment 28: Revocation of Order for Luoyang

Luoyang argues that the Department should revoke the order with

respect to TRBs produced and/or exported by Luoyang. Luoyang states

that it provided the Department with the necessary certifications

stating that it had not sold subject merchandise as less than fair

value during the current review period and would not do so in the

future, and agreed to reinstatement of the order if goods were

subsequently sold at less than NV. Luoyang states that after

corrections are made, it will receive a zero dumping margin in the

final results.

Timken argues that Luoyang does not qualify for revocation because

it received a margin of 2.35 percent in TRBs IX and received a margin

of 1.82 percent in the Preliminary Results. Therefore, according to

Timken, Luoyang does not currently have three consecutive years of no

dumping, as required by the Department's regulations (see 19 CFR

353.25(a)(2)(i)), to qualify for revocation, even though it did have

three consecutive years of no dumping prior to the 1995-96 review.

Department's Position: As Timken points out, Luoyang received a

margin of 2.35 percent in the preceding review. Given that Luoyang does

not meet the Department's first criterion for revocation, namely that

at the time of revocation that a respondent have three years of no

sales of subject merchandise at less than fair value, we are not

revoking the order with respect to this respondent.

Comment 29: Luoyang's Imported Steel Surrogate Value

Timken notes several apparent discrepancies between Luoyang's FOP

database, the verification report, and the Department's calculation

memorandum, with regard to Luoyang's use of imported steel.

Luoyang states that any inconsistencies in its database were

clarified prior to verification, confirmed by the Department at

verification, and reflected in the Department's Preliminary Results.

Department's Position: We agree with Luoyang that our Preliminary

Results reflected the clarifications to its FOP database submitted

prior to verification, and that these clarifications were verified by

the Department. Therefore, no adjustments were necessary.

Comment 30: Luoyang's Well and Circulation Pump Electricity

Luoyang contends that the Department improperly included the

electricity Luoyang used to power its well and water circulation pumps

as part of its electricity factor usage. Luoyang argues that, because

this electricity is used to provide water as a coolant for the turning

and grinding stages of production and cannot be directly linked to

production output, it should be included in overhead rather than

considered as a direct cost. Consistent with the Department's decision

in TRBs VIII that power which cannot be directly linked to production

output be incorporated as overhead, Luoyang states that the electricity

used by the well and circulation pumps should be included in overhead.

Timken counters that section 773(c)(3) of the Act requires that the

Department separately identify, quantify and value all ``energy and

utilities consumed'' in producing subject merchandise. Timken contends

that, given the statutory language, there is no basis for allocating

electricity usage between direct costs and other activities.

Furthermore, Timken states that there is no apparent method for

splitting the energy costs of the eight Indian producers between direct

input costs and overhead, nor does Luoyang offer any such methodology.

Department's Position: As explained in the Preliminary Results, we

separately quantified and valued the energy consumed in producing the

subject merchandise separate from overhead. This means that we did not

include the Indian producers' energy in calculating overhead, and our

overhead ratio is net of energy. Therefore, it is appropriate to value

Luoyang's electricity as a direct cost.

Our treatment of electricity in this case can be distinguished from

TRBs VIII, where we incorporated the consumption of energy as part of

overhead. The present case is distinct because we have been able to

directly quantify and value energy as a factor input. Furthermore, as

Timken has noted, it would be impossible to split the energy costs of

the Indian producers between direct input costs and overhead. Thus, any

attempt to make the adjustment Luoyang has recommended, would lead to

inaccurate overhead and SG&A ratios. Therefore, we have not altered our

calculation methodology for these final results.

Comment 31: Factor Value for Cages for Luoyang

Luoyang alleges that, in the Preliminary Results, the Department

erroneously applied an imported steel input value for one of the TRB

components instead of applying the scrap value. Luoyang argues that it

reported that a particular TRB component was manufactured with scrap

sourced within the factory. Luoyang explains that, rather than selling

the scrap derived from the production of non-subject merchandise,

Luoyang instead reuses the recovered scrap in the manufacture of a TRB

component. Accordingly, Luoyang maintains, the factor value of the

reused scrap steel should equate to the scrap value and not the full

imported steel value.

Timken argues that Luoyang does not use ``scrap'' to manufacture

certain components, but Luoyang, as described in the verification

report, uses the same piece of steel sheet to cut patterns for

components of different sizes. Timken contends that these smaller

pieces cannot be defined as ``scrap'' because they are new steel

material. Furthermore, Timken maintains that scrap is not sold in

uniform cut-to-size batches and that the raw material used for both the

larger and smaller components was steel sheet, not scrap.

Department's Position: We agree with Timken. As set forth in TRBs

IV-VII we have valued scrap-steel inputs as new steel because the scrap

input reported by Luoyang was not purchased as scrap, but rather,

Luoyang paid the full price for this steel. According to Luoyang's

verification report, the pattern for the TRB component in question is

cut from the same material that a larger non-subject merchandise

component is made from. See Memorandum to Susan H. Kuhbach:

``Verification of Factors of Production for Luoyang Bering Corporation

(Group) Company Limited'' dated June 18, 1998. Therefore, this

component was made from first quality steel sheet and not from scrap as

Luoyang maintains. Furthermore, as indicated in the verification

report, the steel sheet that remains when the larger component is cut,

is never recorded as scrap nor is it entered into the scrap warehouse.

Therefore, we valued the steel input for this component from the

market-economy source reported by Luoyang and not as scrap.

Comment 32: Reported Amounts for Pallets for Luoyang

Luoyang maintains that in the Preliminary Results the Department

correctly concluded that the pallets used to ship the subject

merchandise were reported in kilograms. Luoyang contends that it

provided the requested per-unit amount of packing materials in its

revised factors of production database. Therefore, Luoyang argues that

the Department should continue to use these data for the final results.

[[Page 63859]]

Timken argues that based on Luoyang's confusing descriptions of the

data, it is unclear whether the pallets were reported in kilograms, on

a per-kilogram basis, or on a per-unit basis, and that the Department

must ascertain what was actually reported and make any necessary

correction to the final results.

Department's Position: We agree with Luoyang. In the Preliminary

Results, we assumed that Luoyang's usage of pallets was reported on a

per kilogram basis. Upon further review, the pallets used by Luoyang

were reported in kilograms. Therefore, we are not changing our

treatment of Luoyang's pallet valuation.

Comment 33: Imported Steel for Tolled Bearing Production

Respondent CMC argues that it appears the Department erroneously

applied surrogate values rather than the actual costs of imported steel

which was used by one of its suppliers through a tolling arrangement.

Citing a memorandum issued in conjunction with the Preliminary Results

(see Memorandum to Richard Moreland: ``Market Economy Inputs,'' dated

June 30, 1998), CMC notes that the Department indicated that it would

use the price actually paid for this imported steel when calculating

CMC's margin in the Preliminary Results. CMC asks the Department to use

the imported price in its final results.

Department's Position: Contrary to CMC's assertion, we did, in

fact, use the price of the steel imported by CMC to value steel for

this producer. We have modified the description in the log of the

margin program to more clearly reflect the use of this value.

Comment 34: Imported Steel for One of CMC's Suppliers

Timken argues that the Department should not apply an imported

steel value to reported steel factors for one of CMC's suppliers, as

CMC provided no evidence that this steel was imported. Further, Timken

notes that it appears that the Department did not use the most recent

database submitted by this supplier in its preliminary calculations.

Respondent CMC agrees with Timken that the Department used the

wrong data submission in its preliminary calculation. CMC argues,

however, that the Department should use the value of imported steel

value for this factor.

Department's Position: We agree that we erred in our Preliminary

Results by using the wrong database, and we have corrected this for the

final results. We have continued to value steel factors for this

producer using the surrogate value for steel. CMC did not provide any

support for its claim in earlier responses that this supplier used

imported steel, and, further, CMC reclassified this steel as

``domestic'' in its most recent data submission.

Comment 35: Surrogate packing costs for boxes

In our Preliminary Results, we calculated surrogate values for the

packing materials using Indian import statistics. Wafangdian argues

that the Indian import statistics for wooden crates (which is one of

several types of packing material used by TRB producers and exporters)

included an aberrational figure, the cost of crates imported from

Germany. According to Wafangdian, the cost of the German crates was not

only extraordinarily high compared to other imported crates, but also

substantially higher than Indonesian surrogate values for packing

materials. Wafangdian, therefore, asks the Department to exclude the

German value from its calculation of the surrogate packing cost.

Timken agrees that the calculation of the surrogate packing cost is

erroneous, but not for the reason claimed by Wafangdian. Timken notes

that, while the Department's calculation is in ``Rs. per kilo,'' Indian

import data for wooden crates are recorded in kilos only for April and

May 1996, whereas later import statistics are recorded in number of

units. Therefore, Timken says, the Department should use only the

import data for the period April-May 1996.

Department's Position: We disagree with Wafangdian that the German

prices should be excluded from the calculation. Because we do not have

specific information on the sizes of the boxes being imported, it is

inappropriate to selectively exclude certain imports from the

calculations. Therefore, we believe it is appropriate to use the

average value for all wooden crates within HTS category 4415.1000 in

its entirety.

We agree with Timken with respect to the reporting of the value in

the Indian import statistics and we acknowledge that the numbers

reported for April 1996--March 1997 are labeled as number of units.

However, we question whether this was simply a labeling error, given

the inconsistent treatment of Nepal's exports to India. In that case,

the data did not change from one reporting period to the next; however,

in one instance the figures are reported in kgs and in another they are

reported in units. Moreover, it is not appropriate to only use April

and May 1996 data, as Timken has suggested, since these data are

outside of the POR. Therefore, to confirm that we are using data

reported only in Rs/kg, we have obtained the same Indian import

statistics for HTS category 4415.1000 for the months June 1996 through

January 1997. The monthly statistics for June 1996 through January 1997

are all reported in kgs. Therefore, for these final results, we used

only data that are clearly labeled as Rs/kg and we calculated a POR

average of 116.31 Rs/kg. Since these data are contemporaneous with the

POR, no inflation adjustment is necessary.

Comment 36: Surrogate for boxes used by Wafangdian

Wafangdian argues that the Department should use Indonesian import

statistics to value its wooden boxes (HTS 4415.10110), rather than

Indian import statistics, because this figure is more specific to the

plywood boxes used by Wafangdian during the POR.

Department's Position: We have not adopted Wafangdian's suggestion.

There is no evidence on the record that indicates that the boxes used

by Wafangdian are more like the boxes covered by Indonesian import

statistics than those covered by Indian import statistics. Therefore,

we have continued to use Indian import statistics for valuing the

wooden boxes used by Wafandian.

Comment 37: Inappropriate use of facts available

Chin Jun claims that the Department inadvertently resorted to facts

available for models where FOP data were available. Chin Jun argues

that these models were produced by ZX and that the Department,

therefore, should use ZX's FOP data.

Department's Position: We agree with Chin Jun that ZX's FOP data

should be applied to the appropriate corresponding U.S. sales. We have

reviewed our calculations and made the necessary changes.

Final Results of the Review

As a result of our analysis of the comments we received, we

determine the following weighted-average margins to exist for the

period June 1, 1996, through May 31, 1997:

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

Margin

Manufacturer/exporter (percent)

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

Wafangdian.................................................. 0.00

Luoyang..................................................... 3.20

CMC......................................................... 0.03

Xiangfan.................................................... 33.18

Zhejiang.................................................... 0.05

Wanxiang.................................................... 0.00

Liaoning.................................................... 0.02

Premier..................................................... 7.21

[[Page 63860]]

Chin Jun.................................................... 0.04

ZX (the new shipper)........................................ 0.00

PRC Rate.................................................... 33.18

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

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. With respect to

export price sales for these final results, we divided the total

dumping margins (calculated as the difference between NV and export

price) for each importer/customer by the total number of units sold to

that importer/customer. We will direct Customs to assess the resulting

per-unit dollar amount against each unit of merchandise in each of that

importer's/customer's entries under the relevant order during the

review period. Although this will result in assessing different

percentage margins for individual entries, the total antidumping duties

collected for each importer/customer for the review period will be

almost exactly equal to the total dumping margins.

For constructed export price sales, we divided the total dumping

margins for the reviewed sales by the total entered value of those

reviewed sales for each importer/customer. We will direct Customs to

assess the resulting percentage margin against the entered Customs

values for the subject merchandise on each of that importer's/

customer's entries during the review period. While the Department is

aware that the entered value of sales during the POR is not necessarily

equal to the entered value of entries during the POR, use of entered

value of sales as the basis of the assessment rate permits the

Department to collect a reasonable approximation of the antidumping

duties which would have been determined if the Department had reviewed

those sales of merchandise actually entered during the POR.

The following deposit requirements will be effective upon

publication of this notice of final results of administrative review

for all shipments of TRBs entered, or withdrawn from warehouse, for

consumption on or after the date of publication, as provided by section

751(a)(1) of the Act: (1) The cash deposit rates for the PRC companies

named above will be the rates shown above, except that for exporters

with de minimis rates, i.e., less than 0.50 percent, no deposit will be

required; (2) for all remaining PRC exporters, all of which were found

not to be entitled to separate rates, the cash deposit will be 33.18

percent (the proceeding's highest margin); (3) for non-PRC exporters,

Premier and Chin Jun, the cash deposit rates will be the rates

established above; (4) for non-PRC exporters of subject merchandise

from the PRC, other than Premier and Chin Jun, the cash deposit rate

will be the rate applicable to the PRC supplier of that exporter. These

deposit requirements shall remain in effect until publication of the

final results of the next administrative review.

This notice also serves as a final reminder to importers of their

responsibility under 19 CFR 353.26(b) to file a certificate regarding

the reimbursement of antidumping duties prior to liquidation of the

relevant entries during this review period. Failure to comply with this

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This notice also serves as the only reminder to parties subject to

administrative protective orders (``APO'') of their responsibility

concerning the return or destruction of proprietary information

disclosed under APO in accordance with 19 CFR 353.34(d) or conversion

to judicial protective order is hereby requested. Failure to comply

with the regulations and terms of an APO is a violation which is

subject to sanction.

This administrative review and this notice are in accordance with

section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR

353.22.

Dated: November 9, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-30739 Filed 11-16-98; 8:45 am]

BILLING CODE 3510-DS-P