FINAL RESULTS OF REDETERMINATION PURSUANT TO COURT REMAND
The Department of Commerce has prepared these final results of redetermination pursuant to the remand order from the U.S. Court of International Trade (CIT) in Peer Bearing Company v. United States, Consol. Court No. 97-01-00023, Slip Op. 98-70 (CIT May 27, 1998) (Peer). In accordance with the CIT's instructions, we have recalculated the margins for the respondents 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 (December 13, 1996), by (1) changing the best-information-available rate for Chin Jun Industrial, Ltd., (2) correcting the clerical error in the calculation of inland freight, (3) recalculating marine insurance expense on a value, rather than weight, basis, and (4) recalculating the exporter's-sales-price offset of foreign market value.
On May 27, 1998, the CIT issued an order in Peer remanding to the Department of Commerce (the Department) 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 (December 13, 1996) (Final Results). These reviews covered the following periods: June 1, 1990, through May 31, 1991; June 1, 1991, through May 31, 1992; and June 1, 1992, through May 31, 1993. Peer Bearing Company and the Timken Company contested the Department's decision in the Final Results. The CIT instructed the Department to make the following changes to its margin calculations for the Final Results: (1) correct the best-information-available (BIA) rate for Chin Jun Industrial, Ltd. (Chin Jun), (2) correct the clerical error in the calculation of inland freight, (3) recalculate marine insurance expense on a value, rather than weight, basis, and (4) recalculate the exporter's-sales-price (ESP) offset of foreign market value (FMV).
We addressed each of these issues in our draft results of redetermination, which we released to interested parties for comment on July 28, 1998. Based on comments received from the petitioner and the correction of certain clerical errors, we have made changes to the draft results of redetermination. These changes are detailed below. Because of these changes, the dumping margins for the relevant producers and exporters involved in this action are changed from the rates we listed in the draft results of redetermination for the relevant periods of review (PORs).
BIA Rate for Chin Jun
In the Final Results, we used a BIA rate of 8.83 percent as the margin for those of Chin Jun's sales for which Chin Jun did not provide factors of production information. However, the margin upon which we based this BIA rate was changed by the CIT in UCF America Inc. v. United States, 18 CIT 1074, 870 F. Supp. 1120 (1994). The margin, amended pursuant to the CIT's order, is 7.07 percent. The CIT in Peer instructed us either to use the amended margin as the BIA rate for Chin Jun's sales or to explain why the amended rate should not be applied.
We determine that 7.07 percent is the appropriate BIA rate for calculating the margin for Chin Jun's sales for which Chin Jun did not provide factors of production information. As the CIT noted, "[i]t is irrational for [the Department] to use a margin that has been invalidated because it ignores the interest in selecting a rate that has some relationship to commercial practices in the particular industry." Therefore, we have recalculated Chin Jun's margin using 7.07 percent as the BIA rate for applicable sales. In addition, because the uncooperative BIA rate we applied to other companies is based on the same margin, we have changed their BIA rate to 7.07 percent.
We received no comments on this issue.
In the Final Results, we erroneously multiplied the surrogate value for inland freight by both the distance shipped and the weight of the merchandise instead of just the weight of the merchandise. The CIT in Peer instructed us to correct this clerical error. In doing so, we multiplied the surrogate value for inland freight by the per-unit net weight of the merchandise in order to calculate inland freight. We note that the surrogate value we used varied according to distance shipped. That is, the surrogate value was 154 rupees per metric ton (MT) for shipments of 500 kilometers (KM) or less, 183.28 rupees per MT for shipments over 500 KM but less than 600 kilometers, 216.5 rupees per MT for shipments over 600 KM but less than 700 KM, and 295.8 rupees per MT for shipments over 700 KM but less than 1000 KM. Because we had no rate for shipments of more than 1000 KM, we used the rate for shipments over 700 KM but less than 1000 KM for shipments in excess of 1000 KM as the best available information, in accordance with section 773(c)(1) of the Tariff Act of 1930 (Tariff Act), as amended, prior to the Uruguay Round Agreements Act (URAA). Furthermore, we corrected the freight calculation both for inland freight of U.S. sales and for the freight component of the direct materials expense for constructed value.
We received no comments on this issue.
Marine Insurance Expense
In the Final Results, we calculated the marine insurance expense by multiplying a per-kilogram surrogate value by the per-unit net weight of the merchandise. The CIT in Peer ruled that this methodology is improper and instructed us to recalculate marine insurance on an ad valorem basis because this is the basis on which the expense was incurred. We have complied with the CIT's instruction. Our new methodology is described in the memorandum from Thomas Schauer to the file dated July 21, 1998. We note that we have included publicly available data from the petition on Sulfur Dyes from India filed on April 10, 1992, and the International Monetary Fund that was not part of the original record in order to comply with the CIT's instruction.
We received no comments on this issue.
In the Final Results, we calculated the ESP offset to FMV using SKF Bearings India Ltd.'s 1990-91 annual report (Report). The surrogate value was based on a line item in the Report described as "Other Expenses" less debenture expenses. The CIT ruled in Peer that this was improper, because "Other Expenses" may include expenses that are not indirect selling expenses, and instructed us to find a more accurate methodology.
As we determined that it is appropriate to grant the respondents an ESP offset, we looked for appropriate data on the record. After reviewing the record, we determined in the draft results of redetermination that there is no data on the record other than U.S. indirect selling expenses incurred by respondents which we can reasonably use to calculate the ESP offset to constructed value (CV). Thus, we calculated an indirect selling expense ratio for each company with ESP sales by dividing the indirect selling expenses incurred on U.S. sales by the total cost of production (COP) of the U.S. sales. We applied this percentage to the COP of the model in order to calculate the per-unit indirect selling expense for CV which we used in the ESP offset to FMV.
Comment: The petitioner argues that, once the CIT rejected SKF India's "other" expenses as the basis for calculating surrogate indirect selling expenses in the foreign market, the Department should not have instead used U.S. indirect selling expenses as a basis for calculating the ESP adjustment to FMV. Because U.S. indirect selling expenses do not constitute an appropriate basis for making this adjustment, the petitioner asserts, the Department should have chosen a different basis for the adjustment or should have rejected the adjustment entirely.
The petitioner contends that, in confronting the identical issue in Bicycles from the People's Republic of China (61 FR 19026, 19031)(April 30, 1996)(Bicycles), the Department denied the respondents an offset to constructed value because there was no record evidence that the Indian producers incurred particular selling expenses in the home market although the Department did deduct indirect selling expenses from the U.S. price. The petitioner asserts that here, as in Bicycles, SKF's India's financial statements do not specify "particular selling expenses" and, therefore, there is no basis for the adjustment.
Furthermore, the petitioner argues that the fact that these reviews involve the statute as it existed prior to the URAA does not change the result required by the Bicycles standard. The petitioner argues that in both the pre- and post-URAA statute the deduction of indirect selling expenses from U.S. price is required, citing a footnote in Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the People's Republic of China, 61 FR 65527, 65535. Likewise, the petitioner contends, just as in the URAA definition of normal value, the pre-URAA statute required a sufficient showing of entitlement in order to make an offsetting adjustment in the home market, referring to section 773(a)(4) of the Tariff Act and section 353.54 of the Department's regulations.
The petitioner argues further that, in the Final Results, the Department approached the same policy question inconsistently for two separate adjustments. The petitioner claims that the Department declined to make an upward adjustment to FMV which the petitioner requested with respect to commissions or selling agent expenses because the Department was unable to isolate direct selling expenses in the SKF financial reports. Conversely, the petitioner asserts, the Department granted a downward adjustment to FMV for indirect selling expenses despite the presence of the same problem with the surrogate data.
The petitioner argues that, in making this downward adjustment to FMV, the Department's use of U.S. indirect selling expenses in its calculation is inconsistent with the purpose of calculating surrogate FMVs for nonmarket-economy cases based on values in a "comparable economy." Citing section 773(c)(4)(A) of the Tariff Act, the petitioner asserts that the Department must utilize costs of factors of production in a market economy that is at a level of economic development comparable to that of the nonmarket-economy country. Moreover, the petitioner argues, selling expenses are factors of production within the meaning of the statute. Following this principle, the petitioner contends, the Department originally selected such selling expense data from an Indian bearing producer for which published information was available. Therefore, the petitioner claims, the use of U.S. indirect selling expenses as a reasonable surrogate for selling expenses that might be incurred in China or India defies the statute and is an arbitrary decision.
While arguing that, given the circumstances of the case, it would be entirely reasonable to conclude that no ESP offset should be granted, in the event the Department should make such an offset, the petitioner suggests that the Department calculate a surrogate for these indirect selling expenses in a more reasonable manner than by using U.S. selling expenses. The petitioner suggests that the Department apportion SKF's "other" expenses between selling, general and administrative categories. Alternatively, the petitioner suggests, the Department could determine the ratio of selling expenses to total G&A costs as incurred by respondents' U.S. affiliates and then apply that ratio to SKF's "other" expenses.
The petitioner argues that the Department's methodology in the draft remand results unfairly rewards respondents for a lack of record evidence. Because the effect of the Department's adjustment in nearly all cases is a complete offset of the deduction from U.S. price, the petitioner contends, the respondents do not have an incentive to obtain or submit surrogate data from an Indian source that might clarify SKF's financial statement or indicate otherwise the level of indirect selling expenses typically incurred by Indian bearing producers. Additionally, the petitioner asserts, domestic interested parties are not permitted to rebut or contest such information. For these reasons, the petitioner argues that the Department should invite participants to submit additional information from India regarding this issue.
Finally, the petitioner argues that the results of these reviews, taken as a whole, are unjust. The petitioner contends that, in several instances where record evidence concerning surrogate values was not clear, the Department's methodology resulted in the lowest constructed value possible. The result of this biased application of the law, the petitioner claims, is the imposition of dumping duties on imports from China that will not give full correction for unfair pricing and the injured U.S. producers will receive proportionately less of the remedial effect of the law.
Department's Position: We disagree with the petitioner that, in rejecting the methodology we used to calculate ESP offset in the Final Results, we should not make any adjustment to FMV. However, we agree with the petitioner that we should not use U.S. indirect selling expenses as a percentage of cost of production to calculate an offset to FMV, as we did in the draft results of redetermination. Given this, we have changed our calculation of the ESP offset from our draft results of redetermination.
We also disagree with the petitioner that, because the CIT rejected our methodology for calculating the ESP offset in the Final Results, we should not make any adjustment to FMV in this redetermination. The CIT did not determine that we should deny an adjustment entirely but, rather, directed that we should find a more appropriate methodology for calculating the offset. We disagree with the petitioner that, as in Bicycles, there is no record evidence to demonstrate that the Indian producers incurred particular selling expenses in the home market. Here, there is clear record evidence that the Indian producers did incur indirect selling expenses in the home market. By stating its concern that SKF India's "Other Expenses" may contain expenses other than indirect selling expenses, for example, the CIT implicitly recognized that SKF India incurred indirect selling expenses in the home market.
However, in making the downward adjustment to FMV by using U.S. indirect selling expenses as we did in the draft results of redetermination, we agree with the petitioner that we did not use a surrogate that most accurately reflected values in a "comparable economy." Section 773(c)(4) of the Tariff Act makes clear that we should value the factors of production in a comparable economy "to the extent possible." In changing the methodology for calculating the ESP offset in these final results of redetermination, we have based the adjustment on SKF India's financial data, as suggested by the petitioner. Because the CIT ruled that SKF's "Other Expenses" may contain expenses other than indirect selling expenses, we have estimated the portion of SKF India's aggregate selling, general and administrative (SG&A) expenses which can reasonably be attributed to indirect selling expenses. To do this, we first determined the ratio of indirect selling expenses to total SG&A expenses incurred by each of the respondents' U.S. affiliates in each POR. We then applied this ratio for each company in each POR to SKF India's aggregate SG&A expenses to determine the portion of those expenses to be reasonably attributed to indirect selling expenses.
Finally, to develop a per-unit adjustment to CV, we first divided the surrogate indirect selling expenses by SKF India's total cost of production (COP). We then applied this percentage to the COP of the model in order to calculate the per-unit indirect selling expense for CV which we then used in the ESP offset to FMV. Using this methodology, we ensure that the factors of production for FMV are derived from a market economy that is at a level of economic development comparable to that of the nonmarket economy, in accordance with section 773(c)(4)(A) of the statute.
Clerical Errors for Liaoning, Chin Jun, and Shanghai
In the course of recalculating the margins for Liaoning Co., Ltd. (Liaoning), Chin Jun, and Shanghai General Bearing Company, Ltd. (Shanghai), we discovered certain clerical errors. For Liaoning in the Final Results of the 1992-93 review, we inadvertently failed to include one sale in our margin calculation and we inadvertently converted certain expenses from rupees to U.S. dollars for certain sales improperly. We have corrected these errors. The precise nature of these errors is further explained in the Liaoning draft analysis memorandum (dated July 15, 1998).
In the Final Results for Chin Jun, in recalculating the inland freight component of materials cost for CV for one model, we inadvertently assigned the steel costs and freight distance for cups and cones to rollers. Furthermore, for the draft remand results, we inadvertently failed to incorporate the revised CV database into the margin program for the 1991-92 review. We have corrected these errors. The precise nature of these errors is further explained in the Chin Jun draft analysis memorandum (dated July 24, 1998) and final analysis memorandum (dated August 21, 1998).
In the Final Results for Shanghai, we inadvertently miscalculated FMV. Furthermore, for the draft remand results, we inadvertently failed to incorporate the revised CV database into the margin program for the 1992-93 review. We corrected these errors for these final results of redetermination. The precise nature of these errors is further explained in the Shanghai draft analysis memorandum (July 24, 1998) and final analysis memorandum (August 21, 1998).
FINAL RESULTS OF REDETERMINATION
As a result of this redetermination, we have recalculated the margins. The weighted-average percentage margins are as follows:
Company 90/91 91/92 92/93
and Equipment, Limited 4.242 5.252 5.252
Guizhou Machinery Import
and Export Corporation 2.59 3.702 0.00
Henan Machinery and Equipment
Import and Export
Corporation 0.00 0.14 0.00
Luoyang Bearing Factory 1.14 0.00 0.00
Shanghai General Bearing
Company, Ltd. 0.00 0.00 0.25
Jilin Machinery Import
and Export Corporation 4.21 5.04 0.00
Chin Jun Industrial, Ltd. 7.071 0.48 1.23
Wafangdian Bearing Factory 7.071 6.15 No sales
Liaoning Co., Ltd. 7.071 3.47 0.73
PRC rate 7.07 7.07 7.07
1 This party did not respond to the questionnaire or did not respond to the supplemental questionnaire; therefore, as uncooperative BIA, we assigned the highest rate calculated in the investigation or in this or any other review of sales of subject merchandise from the PRC. This does not constitute a separate rate finding for this firm. 2 As cooperative BIA, we assigned in each review the higher of 1) the highest rate ever applicable to that company in the investigation or any previous review; or 2) the highest calculated margin for any respondent in the same review.
This redetermination is pursuant to the order of the CIT in Peer Bearing Company v. United States, Consol. Court No. 97-01-00023, Slip Op. 98-70 (CIT May 27, 1998).
Joseph A. Spetrini
Acting Assistant Secretary
for Import Administration