The International Trade Administration, U.S. Department of Commerce, conducted its 20th annual administrative review of antidumping duties on tapered roller bearings and parts from the Peoples Republic of China (PRC).

73 FR 41033
On each anniversary month of an antidumping duty order, an administrative review can be requested, but they are not automatic and can be requested by involved parties. The review requested can be wide-ranging or narrowly focused.

In this case, for the period under review -- June 1, 2006 through May 31, 2007 -- Koyo Corporation of USA successfully petitioned for an administrative review of tapered roller bearings produced and/or exported by Yantai Timken. Similarly, Peer Bearing Changshan (CPZ) requested an administrative review of its own sales into the USA.

While the Peer request was predictable, the outcome of Yantai Timken's review was anything but predictable. Timken later made a seemingly minor move which snowballed into Commerce recalculating antidumping duties across the entire Chinese tapered roller bearing industry.

Since June 2007, Timken and CPZ have been answering information requests, providing surrogate values and factor values. In certain reviews, more producing-market information such as this is needed because the country involved (in this case, China) is considered by Commerce to be a non-market economy (NME).

Essentially, this means direct and indirect costs and factors of production calculations must be adjusted so that they can be properly compared against a free market economy such as the U.S. In most cases, cost factors from a country with similar economic situation but a freer market are substituted. Costs and factors of production from India, Indonesia, the Philippines, Egypt and Sri Lanka are most often used by Commerce in those situations. For bearing industry investigations, Commerce has been using India as the surrogate for China.

Because all manufacturing in a non-market economy is assumed to be under government control unless proven otherwise, by default all antidumping duties are applied equally across all manufacturers in that country.

In order to break out from that country-wide rate -- which is usually the highest calculated for any single producer -- individual manufacturers can petition Commerce for a separate rate review. Commerce applies a series of specific tests to review and find if a company is under private control or is an operating division of a company located in a market economy, not subject to substantial government control.

In this case, Peer Bearing Changshan (CPZ) asserts that it is a China-Foreign joint venture: jointly owned by Changshan Jingmi Bearing Group Co. Ltd. (China) and Illinois Peer Bearing Company LLC (USA); it is asking Commerce to find it is independent and then calculate a different -- hopefully much lower -- duty and tariff structure just for CPZ.

Commerce reviewed Peer's petition and agreed it operates as a separate entity, not under government control of costs, prices or export situation. Commerce agreed to calculate a new duty specifically for CPZ. However, that process had to wait.

Although it did not seem meaningful at the time, Timken made a move which turned the entire China TRB antidumping duty situation on its head.

In September 2007, Timken withdrew its participation in Commerce's review of Yantai Timken, saying it was not worthwhile: "Yantai Timken reported that its U.S. sales of subject merchandise (from pre-existing U.S. inventory) were few in number and small in value. Moreover, Yantai Timken stated that given the small volume of exports and sales it made during the period of review, it has determined to forgo the expense of preparing and filing a questionnaire response."

While it might have been an entirely sensible business move by Timken, dropping out of the analysis triggered a domino effect resulting in Commerce re-reviewing China's entire antidumping duty program.

By failing to respond to the questionnaire, Yantai Timken lost its separate tariff treatment and was thrown back into the pool of "all other" Chinese tapered roller bearing manufacturers, all with the same level of industry-wide antidumping duties.

But the makeup of the pool changed with the addition of Yantai Timken ... which meant Commerce had to recalculate antidumping duties for all tapered roller bearings from China.

The review process took a shortcut, however, because other Chinese producers have failed to cooperate or participate in Commerce's previous antidumping reviews on tapered roller bearings. Failing to cooperate puts Commerce in the position of applying Adverse Facts Available (AFA).

Commerce first hit China's tapered roller bearings with a country-wide rate of 60.95% duties back in 1993 (based on Premier Bearing), and it had been at that level ever since. In the current review, "the Department has received no information to date that warrants revisiting the issue of the reliability of the rate calculation itself. Thus the Department finds that the information contained in the 1993-1994 review is reliable." Also, the 60.95% margin passes another test in that it is within the range of margins calculated in the most recent reviews.

By taking the highest rate calculated, then slapping every producer with it, Commerce hopes usually to, "induce respondents to provide the Department with complete and accurate information in a timely manner."

Some bearing manufacturers have argued convincingly that the 60.95% margin, even though it was the highest calculated, is not high enough. If it were, they argue, Chinese TRB producers would be arguing against it and providing documentation to refute the high level. Commerce said, "selecting the highest prior margin reflects a common sense inference that the highest prior margin is the most probative evidence of current margins, because, if it were not no, the importer, knowing of the rule, would have produced current information showing the margin to be less."

So by refusing to cooperate with U.S. Commerce, China's tapered roller bearing producers continue to be hit with 60.95% dumping duties, the highest allowed. But at the same time, they avoid the risk that Commerce might be able to recalculate a new rate even higher than 60.95%.

After finding the PRC-wide antidumping rate for tapered roller bearings should continue at 60.95%, now including Yantai Timken, Commerce turned its review to Peer Bearing Changshan. Following a prolonged series of exchanges, reviews and recalculations, Commerce found the antidumping margin applied to CPZ should be 59.41%.

The current antidumping duty margins:

Tapered roller bearings and parts from the Peoples Republic of China

            59.41 %   -- Peer Bearing Company Changshan
            60.95 %   -- PRC-wide rate for all others, now including Yantai Timken