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6206 Federal Register / Vol. 62, No. 28 / Tuesday, February 11, 1997 / Notices1989–90 administrative review, theDepartment allocated a portion ofdepreciation to SG&A. Shanghai andChin Jun argue that depreciation onoffice buildings, furniture, fixtures andoffice equipment, and vehicles shouldbe allocated to SG&A. Shanghaicalculates that, according to the SKFreport, 7.3 percent of total depreciationpertains to SG&A assets. Shanghaiargues that total current depreciationshould be decreased by 7.3 percent forSG&A, thereby reducing the amount ofdepreciation allocable to overhead.Second, Shanghai notes that the SKFreport does not identify to which itemsrent and lease expenses were applied.Shanghai points out that the line itemfor lease rental payments was notincluded under the same category as‘‘expenses for manufacture,administration and selling.’’ Shanghainotes references to residential rentalproperties in the SKF report, adding thatoffice space and housing for executivesshould be charged to SG&A and thatthese lease and rental payments,therefore, should be allocated to SG&Aand not to overhead. Chin Jun adds thata portion of insurance should be appliedto SG&A, as there is no evidence thatthese expenses are manufacturingexpenses.Third, Shanghai and Chin Jun arguethat, consistent with the final results ofthe 1989–90 review, the Departmentshould apply the ‘‘rates and taxes’’ lineitem to SG&A. Shanghai states that it isnot reasonable to allocate the totalamount for ‘‘rates and taxes’’ tooverhead, as they are not characterizedas such in the SKF report.Chin Jun argues further that theoverhead rate based on the SKF reportis inappropriate because it is typical ofneither China nor India. Chin Junmaintains that the Department haspreviously held that companies in lessdevelopedcountries, which normallyuse less-sophisticated technology, havelower overhead rates than companieslocated in developed countries (citingthe investigation for this case, 52 FR19748, 19749 (May 27, 1987)). Chin Junand Shanghai both suggest that theDepartment use record evidencecontained in a November 18, 1994,submission by Chin Jun, which containsdata compiled by the Reserve Bank ofIndia (RBI) as a representative surrogateoverheadfigure.Finally, Shanghai argues that, if theDepartment continues to use the SKFreport to value overhead, theDepartment should adjust those rates sothat they are more representative ofoverhead expenses of Chineseproducers. Shanghai proposes that theDepartment adjust the overhead rate toinclude only those items included inShanghai’s overhead cost.Petitioner counters that depreciationis one of the items the statute intendedto be included among factors ofproduction, before non-factor-ofproductionitems, such as SG&A andprofit, were added (citing sections773(e)(1) and (c)(3) of the Act). The onlyalternative, Petitioner claims, would beto add depreciation as a separatepercentage, which would not alter thecalculation. Furthermore, Petitionerargues, even if the Department decidedto allocate a portion of depreciation andother expenses to SG&A, any suchallocation would be arbitrary.Petitioner dismisses Shanghai’s andChin Jun’s proposed alternativesource—the RBI data—as covering anincredibly broad range of industries, ofwhich the bearings industry wouldrepresent only a small part. Petitionerasserts that the SKF report providesinformation for a bearing producer inIndia and to reject it in favor of the RBIdata would be unreasonable. Likewise,Petitioner rebuts Chin Jun’s argumentthat SKF represents a modern companysuch as is found in developed countries,pointing out that the Department didnot use data relevant to SKF Swedennor consolidated data from the SKFGroup but data from SKF India, whichreflects the operating conditions of abearings producer in India.Finally, Petitioner rejects Shanghai’ssuggestion that the SKF report beadjusted to include only those itemsincluded in Shanghai’s overhead. Giventhe non-market nature of PRC-basedcompanies, Petitioner asserts that thosecompanies may not incur, itemize orsegregate all of the expenses recognizedin a market-economy producer’sfinancial statement. Nevertheless,Petitioner insists, expenses of the typegenerally incurred in the production orsale of the merchandise, even if notitemized by the NME company, wouldhave to be added into the CV calculationsomewhere.Department’s ResponseWe disagree with Shanghai and ChinJun that we should use the RBIinformation instead of the SKF reportfor the calculation of the SG&A and theoverhead rates. The information in thiscase published by RBI represents morethan 600 companies in India fromvarious industries. Because the extent towhich companies incur overhead andSG&A expenses can differ so greatlybetween industries, we have based ouroverhead and SG&A surrogate values onthe industry-specific experience closestto that of the merchandise under review,when appropriate industry-specific dataare available. See Final Determination ofSales at Less Than Fair Value; PolyvinylAlcohol From the People’s Republic ofChina (Polyvinyl Alcohol), 61 FR 14057,14059 (March 29, 1996). We haveoverhead and SG&A information fromSKF India, a producer of subjectmerchandise. Accordingly, for the finalresults, we have continued to calculateoverhead and SG&A based on theinformation in the SKF report.We agree with Chin Jun andShanghai, however, that certainadjustments to the calculation ofoverhead and SG&A are appropriate. Forinstance, we agree that it is improper toinclude all of SKF’s depreciation inoverhead because depreciationassociated with office buildings andoffice equipment should be apportionedto SG&A expenses. Therefore, for thefinal results we have allocateddepreciation costs to overhead andSG&A according to the function andvalue of the assets by including inoverhead only the depreciationexpenses allocated to manufacturing.We obtained the information pertainingto the function and value of SKF’s assetsfrom the SKF report.We also agree with Chin Jun andShanghai that we should allocate ‘‘ratesand taxes’’ to SG&A and not tooverhead. This allocation methodologyis consistent with our practice in the1989–90 administrative review of thisproceeding and with other recent PRCcases (see, e.g., TRBs IV–VI at 65540).With respect to lease rental expenses,we agree with Shanghai that the SKFreport does not identify the nature ofthose expenses. However, we do notagree with Shanghai’s contention thatall of the lease rental expenses are forSG&A, as a portion of those expensescould be attributed to overhead as well.Accordingly, we allocated lease rentalexpenses equally to SG&A and overhead(i.e., 50 percent for SG&A and 50percent for overhead).Comment 25Shanghai, assuming that theDepartment disclosed all observationswith calculated margins, requestsclarification as to how the reportedmargin for each observation correlateswith the total margin the Departmentcalculated. Shanghai asserts that,because the value for total dumpingduties due exceeds the sum of thetransaction-specific dumping margins,some error in the Department’scalculations of the total dumping dutiesdue has occurred.Department’s PositionShanghai is incorrect in assuming thatall observations with calculated margins