FAG Italia, S.p.A., FAG Bearings Corp., SKF USA Inc. and
Slip Op. 00-154 (CIT November 21, 2000)
FINAL RESULTS OF REDETERMINATION PURSUANT TO COURT REMAND:
ADMINISTRATIVE REVIEW OF THE ANTIDUMPING DUTY ORDER ON ANTIFRICTION BEARINGS (OTHER THAN TAPERED ROLLER BEARINGS) AND PARTS THEREOF FROM ITALY
The Department of Commerce has prepared these final results of redetermination pursuant to the remand order of the U.S. Court of International Trade in FAG Italia, S.p.A., FAG Bearings Corp., SKF USA Inc. and SKF Industrie S.p.A. v. United States and The Torrington Company, Slip Op. 00-154 (CIT November 21, 2000). In accordance with the U.S. Court of International Trade's instructions, the Department of Commerce has made changes to its calculations with respect to FAG Italia S.p.A. and SKF Industrie S.p.A. in the administrative review of the antidumping duty order on ball bearings and parts thereof from Italy covering the period May 1, 1994, through April 30, 1995. Please refer to the section of this notice entitled "Final Results of Redetermination" for the revised weighted-average percentage dumping margins for FAG Italia S.p.A. and SKF Industrie S.p.A. that resulted from making the changes instructed by the U.S. Court of International Trade.
On November 21, 2000, the U.S. Court of International Trade (the Court) issued its ruling in FAG Italia, S.p.A., FAG Bearings Corp., SKF USA Inc. and SKF Industrie S.p.A. v. United States and the Torrington Company, Slip Op. 00-154 (CIT November 21, 2000) (FAG, SKF) remanding to the Department of Commerce (the Department) the final results in Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, Singapore, and the United Kingdom; Final Results of Antidumping Duty Administrative Reviews, 62 FR 2081 (January 15, 1997), as amended by Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, and Singapore; Amended Final Results of Antidumping Duty Administrative Reviews, 62 FR 14391 (March 26, 1997) (collectively AFBs 6). This remand directly affects FAG Italia S.p.A. (FAG) and SKF Industrie S.p.A. (SKF) with respect to the antidumping duty order on ball bearings and parts thereof from Italy.
The Court remanded AFBs 6 to the Department to address the following areas: 1) first attempt to match FAG's and SKF's U.S. sales to similar home-market sales before resorting to constructed value (CV); 2) exclude any transactions that were not supported by consideration from FAG's and SKF's U.S. sales databases and to adjust the dumping margins accordingly; 3) include all expenses included in "total United States expenses" in the calculation of "total expenses" for FAG's constructed-export-price (CEP) profit ratio; 4) remove the circumstance-of-sale adjustment for certain advertising expenses from FAG's normal value; 5) reconsider its decision to calculate SKF's home-market credit-rate expense based upon price and then apply the rate to cost; 6) examine the programming language for converting certain adjustments that SKF reported on export prices for sales made through a foreign trade zone and through Sweden from foreign currency into U.S. dollars and to make appropriate corrections.
On March 13, 2001, we released the draft results of redetermination and invited interested parties to comment. We received no comments.
The first issue remanded concerns the methodology of matching U.S. sales to "similar" home-market sales prior to resorting to CV. As a result of the decision in CEMEX, S.A. v. United States, 133 F.3d 897, 904 (Fed. Cir. 1998), the Department now bases normal value on non-identical but similar merchandise rather than CV when sales of identical merchandise have been found to be outside the ordinary course of trade, under this practice, the Department first attempts to match U.S. sales to similar home-market sales before resorting to CV.
In accordance with the Court's instructions, we have changed our model-matching methodology for FAG and SKF. Instead of relying on CV as the basis for normal value for U.S. models when we disregarded all sales of identical merchandise in the home market because they were made at prices below the cost of production, we attempted first to match models sold in the United States to models sold in the comparison market that fall within the same family of bearings (i.e., similar bearings). We used CV only if there were no sales of similar merchandise we could use to determine normal value.
2. U.S. Sample Sales
The Court directed the Department to exclude any transactions that were not supported by consideration from FAG's and SKF's U.S. sales databases and to adjust the dumping margins accordingly. The Department examined FAG's U.S. sales database and determined that it did not contain any zero-priced transactions or transactions coded as samples. Therefore, the issue of excluding transactions from the U.S. sales database that were not supported by consideration is not applicable to FAG for this administrative review.
With respect to SKF, we found that SKF's U.S. sales database contained sample sales with a zero unit price and, absent other record evidence that these sales received consideration, we determined that these sample sales were not supported by consideration. Accordingly, we have excluded these transactions from SKF's U.S. sales database for the purpose of calculating SKF's dumping margin.
3. CEP-Profit Calculation
Citing its determination in SNR Roulements, SKF USA Inc., SKF France S.A. and SARMA v. United States, Slip Op. 00-131 (October 13, 2000), the Court directed us to "include all expenses included in 'total United States expenses' in the calculation of 'total expenses' for FAG's CEP profit ratio." Since FAG's CEP-profit ratio is zero, this change does not affect the calculation of FAG's margin. To comply with the Court's instruction, however, we have modified the margin-calculation program to include U.S. imputed credit expenses in the calculation of "total expenses" (since we included such expenses in "total United States expenses").
We respectfully reaffirm our position that it is appropriate to base the CEP-profit ratio on actual expenses as indicated in the wording of section 772(f)(1) of the Tariff Act of 1930, as amended (the Act), which directs us to calculate CEP profit on the basis of "total actual profit." As discussed below, the Department's practice with respect to imputed costs is reasonable. Furthermore, recent court decisions support the Department's interpretation concerning the calculation of the CEP-profit ratio.
Normal accounting principles only permit the deduction of actual booked expenses, not imputed expenses, in calculating profit. Inventory-carrying costs and credit expenses are imputed expenses, not actual booked expenses, so we have established a practice of not including them in the calculation of total actual profit. See, e.g., Antidumping Duties; Countervailing Duties; Final Rule, 62 FR at 27317, 27354 (May 19, 1997), Import Administration Policy Bulletin number 97/1, issued on September 4, 1997, concerning the Calculation of Profit for Constructed Export Price Transactions, at 3 and note 5, Notice of Final Results of Antidumping Duty Administrative Review; Canned Pineapple Fruit from Thailand, 63 FR 7392, 7395 (February 13, 1998). Likewise, since the cost of the U.S. and home-market merchandise includes the actual booked interest expenses, it is not appropriate to include imputed interest amounts as well in total expenses. Doing so double-counts this expense to a certain extent and overstates the cost attributed to sales of this merchandise. This overstatement of cost understates the ratio of U.S. selling expenses to total expenses and, consequently, understates the amount of actual profit allocated to selling, distribution, and further-manufacturing activities in the United States.
In addition, there is another inconsistency. Although the imputed credit expenses and imputed inventory-carrying costs incurred on sales of the subject merchandise in the United States are included in "total United States expenses," inclusion of these items in the calculation of "total expenses" as directed by the Court distorts the ratio of U.S. selling expenses to total expenses. The change we have made pursuant to the Court's order results in the addition of imputed expenses incurred on sales of the subject merchandise in the United States, but it does not result in the addition of imputed expenses incurred on sales of the foreign like product sold in the exporting country (i.e., the latter expenses are not included in "total United States expenses"). This cumulation of expenses on sales of the subject merchandise sold in the United States in a manner that is inconsistent with the cumulation of expenses on sales of the foreign like product sold in the exporting country is distortive.
Finally, in this case the Court ruled that "Commerce improperly excluded imputed inventory and carrying costs from 'total expenses' when it had included these expenses in 'total United States expenses.'" The Court concluded that, "since Commerce determined that imputed inventory and carrying costs were to be included in 'total United States expenses,' they must be included in 'total expenses' as well." The United States Court of Appeals for the Federal Circuit (CAFC), however, ruled recently that the statute "does not require or even vaguely suggest symmetry between the definitions of 'United States expenses' and 'total expenses.'" In fact, the CAFC stated that the statutory definitions themselves "undercut symmetrical treatment of 'total United States expenses' and 'total expenses.'" See U.S. Steel Group, et al v. United States, 225 F.3d 1284, 1290 (Fed. Cir. 2000). See also, Thai Pineapple Canning Industry Corp., Ltd. v. United States, 2000 Ct. Intl. Trade LEXIS 17 (CIT September 10, 2000) (affirming the Department's method of avoiding double-counting).
For the above reasons, we respectfully disagree with the Court's instructions to include imputed expenses in "total United States expenses" in the calculation of "total expenses."
The Court directed the Department to remove from FAG's normal value the circumstance-of-sale adjustment for certain advertising expenses which the Department had deemed to be direct expenses. We agree the record does not support our decision to treat these advertising expenses as direct expenses and that we should treat them as indirect expenses since the record indicates that the materials at issue were published for FAG's customer, not the customer's customer. The Court also ruled that we are not permitted to make an adjustment to CEP even though we believe that these expenses were associated with economic activities in the United States. Therefore, we have modified FAG's margin calculations accordingly.
5. CV Credit Expense
The Court also directed the Department to reconsider its decision to calculate SKF's home-market credit-rate expense based upon price and then apply the rate to cost, the result of which we deduct from CV. In calculating these credit expenses for AFBs 6, we first calculated a credit rate by dividing the home-market credit expenses by the total gross unit price and then allocated this expense on the basis of the cost of production (COP)(1) in order to yield an amount for credit expenses to deduct from CV.
SKF contends that the calculation of home-market credit expenses that the Department used to deduct credit from CV is mathematically incorrect and inconsistent because the Department calculated a home-market credit-expense rate based upon price and then applied this rate to the COP for that model. SKF argues that the credit rate should be calculated on the basis of the COP, rather than price, because the credit rate should be based on the same values that serve as the basis upon which the rate is allocated (i.e., the COP of the model). In addition, SKF argues that the current calculation of the CV-credit rate in some instances results in an overstatement or understatement of the amount to deduct from CV, depending upon the value of the gross unit price, and thereby distorts the calculation of normal value as well as the dumping margins.
Having reconsidered the calculation of SKF's CV-credit rate, as per the Court's instructions, we find that the use of a cost figure, rather than price, in the denominator of the credit rate is appropriate. Because the ratio is applied to a cost amount, by using a cost figure in the denominator of the CV-credit ratio, we ensure that the ratio is calculated on the same basis upon which it is applied and allocated.
The credit expenses at issue are one of several circumstance-of-sale adjustments we make to reduce the surrogate price, or CV, in accordance with section 773(a)(6)(C) of the Act. In the case of SKF, we also make a deduction from CV for direct selling expenses and commissions. We extract these direct selling expenses and commissions from SKF's home-market database, sum them, and then divide them by a cost figure that is comprised of the total cost of manufacture, general and administrative expenses, and interest expenses yielding a direct-selling and commission rate. Similar to the CV-credit rate, we apply these rates to a cost figure, the results of which we deduct from the CV. Accordingly, the use of a cost figure in the denominator of the CV-credit rate is consistent with the manner in which we calculate the direct-selling and commission rates. Therefore, for the reasons noted above, we have included the
respective cost figure in the denominator of the CV-credit rate for purposes of deducting credit expenses from CV.
The Court directed the Department to examine its programming language for converting certain adjustments that SKF reported on export prices for sales made through a foreign trade zone and through Sweden from foreign currency into United States dollars and to make appropriate corrections. In accordance with the Court's instructions, we have made the necessary currency conversions to the adjustments at issue.
CHANGES FROM DRAFT RESULTS OF REDETERMINATION
After the release of our draft results of redetermination, we found that we had inadvertently included the wrong margin for SKF in the draft results of redetermination. In the draft results of redetermination, the rate was 2.89. It should have been 2.86. We incorporated the correct recalculated rate for these final results of redetermination.
In addition, for the draft results of redetermination, we calculated the numerator of the CV credit rate by adding together a weighted sum of the total home-market credit expenses on a class-or-kind basis. However, we calculated the denominator of the CV credit rate by adding together a weighted sum of the costs of manufacture, general and administrative expenses, and interest expenses on class-or-kind- and level-of-trade-specific bases. Calculating the CV credit rate using this methodology results in an inconsistent ratio because of the differences in the numerator and denominator. Therefore, we have modified our calculations to ensure that the ratio we calculate is internally consistent. For the final results of redetermination, we calculated both the numerator and the denominator on class-or-kind and level-of-trade-specific bases. This modification did not change the final calculated margin.
FINAL RESULTS OF REDETERMINATION
As a result of recalculating the antidumping duty margins for FAG and SKF in accordance with the remand order, the weighted-average dumping margins for FAG and SKF for the period May 1, 1994, through April 30, 1995, with respect to ball bearings and parts thereof from Italy changed as follows:
Company POR Rate Original Rates FAG 94/95 4.88% Recalculated Rates FAG 94/95 4.12% Original Rates SKF 94/95 2.84% Recalculated Rates SKF 94/95 2.86%
These final results of redetermination are pursuant to the remand order of the CIT in FAG, SKF.
Timothy J. Hauser
Date: April 6, 2001
1. The COP reflects the sum of the costs reported for that particular model which include materials, labor, factory overhead, taxes, general and administrative expenses, and interest expenses (COPCV).