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Federal Register / Vol. 62, No. 28 / Tuesday, February 11, 1997 / Notices6183only steel costs in the cost of materials,not finished products. Petitioner statesthat this prior approach is correct and,because purchases of traded goods arealready manufactured and do not affectproduction, the Department shouldexclude them from the overheaddenominator.East Sea responds that Petitioner’sargument with regard to ‘‘traded goods’’is misguided and that the Department’scalculations in the preliminary resultsconcerning this line item were correct.Department’s PositionWe disagree with Petitioner. In pastreviews we did not include a line itemfor ‘‘purchases of traded goods’’ in theCOM that we used as the denominatorof the overhead, SG&A, and profit-ratecalculations because the SKF reportsthat we used in those reviews did notinclude this line item. In this review,the SKF Report includes a separate lineitem for this cost. We have included itin the denominator of these calculations(as part of the COM) because, incalculating SKF’s COM, we mustinclude those line items listed on theSKF Report that reflect the costsassociated with the production of themerchandise that are not overhead orSG&A expenses.According to the description in theSKF Report, ‘‘purchases of tradedgoods’’ are properly considered as COMexpenses. They are not overhead orSG&A expenses but instead reflect thecommon practice of manufacturerspurchasing finished and semi-finishedgoods to meet their clients’’ demand.SKF does not incur direct materials ordirect labor expenses with respect tothese products but instead incurs theexpense of purchasing them. Becausethese purchased goods are an integralportion of cost of goods sold, they areordinary business expenses that wecannot ignore, as suggested byPetitioner, simply because they involveproducts that SKF did not manufacture.Therefore, for the final results, we haveincluded ‘‘purchases of traded goods’’ aspart of the denominators we used in theoverhead, SG&A, and profit-ratecalculations.Comment 13Petitioner states that the Departmentdid not include interest expenses SKFincurred in the constructed value (CV)calculations. Petitioner recommendsthat the Department include theseexpenses in the calculation of SG&A.Petitioner states that, according to theDepartment’s Antidumping Manual andDepartment practice, interest expensesshould be included in the CV.East Sea responds that, althoughPetitioner points to the AntidumpingManual as support that SKF’s interestexpenses are SG&A expenses, theinterest expenses to which the manualrefers are selling expenses and there isno evidence that any of SKF’s interestexpenses pertain to sales. Accordingly,East Sea asserts that the Departmentshould not include interest expenses inits CV calculations.Department’s PositionWe agree with Petitioner that,consistent with our practice, the interestexpenses in question are ordinarybusiness expenses relating to SG&A.Therefore, we have included, in theSG&A expense for these final results,interest expenses as reported in the SKFReport.Comment 14Petitioner states that, for thepreliminary results, the Departmentcalculated profit on an after-tax basis.This methodology, Petitioner contends,is contrary to the Department’s policy toachieve an ‘‘apples-to-applescomparison’’ (citing the Department’sAntidumping Manual). Petitioner statesthat, because the export prices andconstructed export prices used in themargin calculations include all profits,i.e., are pre-tax values, the Departmentmust calculate the profit used inestablishing NV on the same basis.East Sea responds that Petitioner citesno case law to support its assertion andthe Department should continue tocalculate SKF’s profit net of expenses.Department’s PositionWe agree with Petitioner that weshould use a pre-tax amount to calculatethe profit ratio, for the reasons thatPetitioner provided in its comment.Therefore, for the final results, we havecalculated a profit rate for NV on a pretaxbasis.Comment 15East Sea argues that the Departmentimproperly designated the line item‘‘goodwill,’’ as listed in the SKF Report,as an SG&A expense. East Sea states thatgoodwill expenses are related to fixedassets and are listed as such in the SKFReport. East Sea adds that there is noDepartmental precedent for includinggoodwill as part of SG&A and, therefore,the Department should remove thisexpense from the SG&A calculation.Petitioner responds that the fact thatthe SKF Report states that theseexpenses are related to fixed assets isnot a sufficient reason to disregard themin calculating the SG&A expense.Petitioner states that, using the samereasoning, the Department would haveto eliminate depreciation from theoverhead expense, which would clearlybe incorrect. Petitioner adds that EastSea provided no evidence that SKF, thesurrogate producer, did not comply withIndian Generally Accepted AccountingPrinciples (GAAP) or that its accountingpractices should otherwise bedisregarded and the goodwill expensedisallowed.Department’s PositionWe agree with Petitioner that the factthat the SKF Report states that thegoodwill expense line item is related tofixed assets does not render it a materialcost. However, the evidence on therecord does not allow us to determinethe extent to which SKF’s goodwillexpense is attributable to overhead orSG&A. For these final results, we haveallocated 50 percent of SKF’s goodwillexpense to overhead and 50 percent toSG&A.Comment 16East Sea argues that the Departmentimproperly designated the line item‘‘rates and taxes’’ in the SKF Report asan overhead expense instead ofincluding it in SG&A. East Sea statesthat this expense is an SG&A expensebecause taxes are traditionallyconsidered an administrative expense,not a manufacturing expense.Petitioner responds that shiftingallocations from overhead to SG&A orvise versa should not affect the bottomline of the NV calculation. Petitionerstates, however, that it is morereasonable to assign the ‘‘rates andtaxes’’ line item to overhead becauseSKF is a manufacturing company and,presumably, most of its rates and taxeswould relate to its plant and equipmentand other aspects of its manufacturingoperations.Department’s PositionWe agree with East Sea that weshould allocate the ‘‘rates and taxes’’line item to SG&A and not to overhead.This allocation methodology isconsistent with our practice in previousadministrative reviews of thisproceeding. See TRBs IV–VI at 65540.Comment 17East Sea contends that the Departmentshould not include the line item ‘‘profit(loss) on fixed assets sold’’ as part ofoverhead. East Sea states that SKFincurred this expense independent ofany manufacturing or selling activities;rather, as its title suggests, it is relatedto the value of fixed assets.Petitioner responds that selling fixedassets that were used in manufacturing