Nsk Ltd. v. United States

United States Court of Appeals for the Federal Circuit

05-1296

NSK LTD., NSK CORPORATION, and NSK BEARINGS EUROPE, LTD.,

Plaintiffs,
and

NTN CORPORATION, NTN BEARING CORPORATION OF AMERICA,
AMERICAN NTN BEARING MANUFACTURING CORPORATION,
NTN-DRIVESHAFT, INC., and NTN-BCA CORPORATION,

Plaintiffs-Appellants,
and

ASAHI SEIKO CO., LTD.,

Plaintiff,
and

ISUZU MOTORS LTD. and MPB CORPORATION,

Plaintiffs,
v.

UNITED STATES,

Defendant-Appellee,
and

TIMKEN U. S. CORPORATION,

Defendant-Appellee.

Diane A. MacDonald, Baker & McKenzie LLP, of Chicago, Illinois, argued for
plaintiffs-appellants. On the brief were Donald J. Unger and Louisa Vassileva Carney.
Of counsel was Nikolay A. Ouzounov, Barnes, Richardson & Colburn, of Chicago,
Illinois.

Claudia Burke, Attorney, Commercial Litigation Branch, Civil Division, United
States Department of Justice, of Washington, DC, argued for defendant-appellee United
States. With her on the brief were Peter D. Keisler, Assistant Attorney General; David
M. Cohen, Director; Patricia M. McCarthy, Assistant Director; and David Silverbrand,
Trial Attorney. Of counsel on the brief was Jennifer I. Johnson, Attorney, Office of the
Chief Counsel for Import Administration, United States Department of Commerce, of
Washington, DC.

Geert M. De Prest, Stewart and Stewart, of Washington, DC, argued for
defendant-appellee, Timken U.S. Corporation. With him on the brief were Terence P.
Stewart and William A. Fennell. Of counsel was Lane S. Hurewitz.

Appealed from: United States Court of International Trade

Judge Evan J. Wallach
United States Court of Appeals for the Federal Circuit

05-1296

NSK LTD., NSK CORPORATION, and NSK BEARINGS EUROPE, LTD.,

Plaintiffs,

and

NTN CORPORATION, NTN BEARING CORPORATION OF AMERICA,
AMERICAN NTN BEARING MANUFACTURING CORPORATION,
NTN-DRIVESHAFT, INC., and NTN-BCA CORPORATION,

Plaintiffs-Appellants,

and

ASAHI SEIKO CO., LTD.,

Plaintiff,

and

ISUZU MOTORS LTD. and MPB CORPORATION,

Plaintiffs,

v.

UNITED STATES,

Defendant-Appellee,

and

TIMKEN U.S. CORPORATION,

Defendant-Appellee.
 ___________________________

DECIDED: March 7, 2007
___________________________

Before BRYSON, GAJARSA, and LINN, Circuit Judges.

BRYSON, Circuit Judge.

This appeal from a decision by the United States Court of International Trade

concerns the twelfth administrative review of an antidumping duty order covering

antifriction bearings from Japan. NSK Ltd. v. United States, 346 F. Supp. 2d 1312 (Ct.

Int’l Trade 2004). The four appellants, which we refer to collectively as NTN, appeal

from the portion of the trial court’s judgment sustaining the Department of Commerce’s

use of “facts otherwise available” and “adverse inferences” when determining NTN’s

antidumping duty margin.

I

On June 19, 2001, Commerce published a notice of initiation of the twelfth

administrative review of an antidumping duty order covering certain antifriction bearings

imported from Japan. Notice of Initiation of Antidumping and Countervailing Duty

Administrative Reviews and Requests for Revocations in Part, 66 Fed. Reg. 32,934

(June 19, 2001). NTN was included in that review.

During the review proceeding, Commerce issued an antidumping duty

questionnaire and a supplemental questionnaire to NTN. Among other things, the

questionnaires inquired into NTN’s method of calculating and reporting freight expenses

for bearings sold in its home market and in the United States. Commerce requires

respondents to report freight expenses incurred on products covered by the

antidumping duty order because it must adjust normal values and U.S. prices for freight

05-1296 2
costs before comparing them. 19 U.S.C. §§ 1677a(c)(2)(A), 1677b(a)(6)(B)(ii).

Commerce prefers to receive freight expense data in terms of the cost per transaction

but has acknowledged that it is not always possible for companies to report freight costs

in that form. See 19 C.F.R. § 351.401(g). Accordingly, Commerce permits respondents

to calculate certain expenses by allocating the total expense incurred to individual

product sales, as long as the allocation method is done on “as specific a basis as is

feasible” and is shown not to cause inaccuracies or distortions. Id. For example,

allocated reporting may be required when multiple items are included in a single

shipment but only some of the items are subject to the antidumping duty order. In that

case, the total freight cost can be apportioned among the shipped products on the basis

of factors such as the weight of the products.

Commerce’s questionnaires specifically requested information about freight

expenses. Commerce stated that if NTN found it necessary to allocate its freight

expenses, it should allocate them according to the basis on which the expenses were

incurred, such as weight or volume. If NTN incurred freight expenses on multiple bases

(e.g., weight and distance), it was directed to allocate them according to at least one of

the bases on which they were incurred. If, however, NTN was unable to allocate its

freight expenses according to the bases on which they were incurred, Commerce

required NTN to (1) explain how it allocated the expenses, (2) explain why it could not

allocate them on the bases on which they were incurred, and (3) demonstrate that the

allocation method that NTN selected in its response was not distortive. Commerce

directed that in selecting the allocation method NTN should use the least distortive

05-1296 3
allocation methodology available. Additionally, Commerce requested that NTN report

the weight of each product that was subject to the antidumping duty order.

NTN responded to the inquiry by noting that its freight expenses were incurred on

multiple bases and that there was no one basis common to all those expenses. NTN

asserted that the only variable on which it had data for all its products was sales value.

It therefore allocated its freight expenses according to that variable. It offered the

following statement to demonstrate that the “sales value” method of allocation was not

distortive: “This allocation methodology is not distortive because it represents the most

consistent method of estimating what the freight expenses would have been.” When

Commerce inquired further into the freight expense issue in its supplemental

questionnaire, NTN asserted that allocation according to sales value “is not distortive

because it bases freight expense on the factor common to each shipment, sales value.

Because [sales value] is common to all shipments, the freight expense cannot be

shifted in favor of one shipment or another.” NTN further argued that sales value is as

non-distortive as weight because larger bearings are more expensive than smaller

ones.

In response to the question about the weight of its products, NTN responded that

it “does not use weight in its calculation of freight expenses,” and it therefore asserted

that Commerce had no need to elicit information about the weight of each product.

When asked a second time about the weights of its products, NTN again stated that it

could not allocate freight expenses on the basis of weight and then asserted that it did

not track and thus did not have available the weights of some of its products. It did not

include either a complete or a partial list of the requested data.

05-1296 4
 Commerce rejected NTN’s allocation methodology and determined the freight

expenses by “drawing adverse inferences” from “facts otherwise available,” pursuant to

19 U.S.C. § 1677e. The Court of International Trade affirmed that determination. NSK,

346 F. Supp. 2d at 1342-43. The court reasoned that Commerce permissibly rejected

NTN’s proffered allocation method because NTN had failed to demonstrate that it had

allocated freight expenses on as specific a basis as was feasible, had failed to

demonstrate that its allocation method was non-distortive, and had failed to provide the

requested weight data from which Commerce might have been able to estimate freight

expenses. Because NTN did not have usable freight expense data in the record, the

court held that it was appropriate, pursuant to 19 U.S.C. § 1677e(a), for Commerce to

use “facts otherwise available” to calculate the freight expenses. Furthermore, the court

held that because NTN had failed, despite two requests, to provide usable freight

expense data or a sufficient explanation as to why its method was not inaccurate or

distortive, Commerce was justified in concluding that NTN had not acted to the “best of

its ability” to comply with Commerce’s review. Accordingly, the court held that it was

appropriate, pursuant to 19 U.S.C. § 1677e(b), for Commerce to apply “adverse

inferences” to the facts otherwise available when determining freight expenses. 346 F.

Supp. 2d at 1342. Because Commerce’s determinations are supported by substantial

evidence and are not erroneous as a matter of law, we affirm.

II

We review antidumping determinations made by Commerce according to the

same standard of review that is used by the Court of International Trade. We will

uphold Commerce’s determinations unless they are unsupported by “substantial

05-1296 5
evidence on the record, or otherwise not in accordance with law.” 19 U.S.C.

§ 1516a(b)(1)(B)(i); F.Lii de Cecco di Filippo Fara S. Martino S.p.A. v. United States,

216 F.3d 1027, 1031 (Fed. Cir. 2000).

A

NTN argues that Commerce was wrong to reject NTN’s proffered freight expense

data. According to NTN, Commerce had the information it needed and was not justified

in using facts otherwise available to determine NTN’s freight expenses. As noted, to

justify allocating expenses on a basis not used in incurring them, a respondent must

demonstrate that the proposed method does not cause inaccuracies or distortions and

that it has allocated its expenses on as specific a basis as is feasible. 19 C.F.R.

§ 351.401(g). Here, NTN failed both requirements.

First, NTN failed to demonstrate that allocation by sales value is not distortive or

inaccurate. Instead of setting forth a full explanation of why sales value is non-

distortive, NTN relied on a brief conclusory assertion to that effect. NTN’s explanation

consisted of little more than a combination of the obvious observation that sales value is

a feature of every product and the unsupported assertion that sales value is “the most

consistent method of estimating what the freight expenses would have been.” That

explanation says nothing about the relationship between sales value and freight

expense and thus provides no reason to conclude that allocation by value is accurate

and non-distortive. The statement that allocation by value prevents freight costs from

being shifted in favor of one shipment or another similarly does not disclose anything

about the relationship between sales value and shipping costs, and it thus also fails to

demonstrate that the “sales value” method is accurate and non-distortive. Even

05-1296 6
assuming that NTN’s statement is true, the most it proves is that NTN cannot

intentionally manipulate the result of the allocation method. It does not show that the

result is accurate and non-distortive absent such manipulation.

Second, NTN argues that allocation by sales value is as specific as is feasible

and that allocation by weight—Commerce’s preferred allocation method—is at least as

distortive as allocation by sales value because larger bearings are more costly than

smaller bearings. NTN failed, however, to provide record evidence in support of that

assertion. Accordingly, in addition to failing to demonstrate that value-based allocation

is accurate and non-distortive, NTN failed to show that its allocation method was the

most specific feasible method. Commerce was therefore justified in rejecting NTN’s

submission as insufficient. See 19 C.F.R. § 351.401(g). Because NTN also did not

provide the requested weight data, the Court of International Trade properly sustained

Commerce’s decision that it did not have the information necessary to conduct its

review and so was justified in using facts otherwise available.1 See 19 U.S.C.

1
NTN makes the related argument that before using facts otherwise available
to calculate its freight expenses, Commerce was required to comply with 19 U.S.C.
§ 1677m(d), which provides that if Commerce determines that a response to a request
for information is insufficient, it must notify the submitter and provide an opportunity to
remedy or explain the deficiency. Commerce, however, satisfied its obligations under
section 1677m(d) when it issued a supplemental questionnaire specifically pointing out
and requesting clarification of NTN’s deficient responses.
NTN further argues that even if its remedial response was unsatisfactory,
section 1677m(e) required Commerce to use the freight expense data NTN provided.
Section 1677m(e) provides that Commerce must use a submitter’s information as long
as the submitter demonstrates that it acted to the best of its ability in complying with the
request for information, and as long as the information is timely, capable of verification,
sufficient to serve as a reliable basis for the determination, and usable without undue
difficulties. NTN’s argument under section 1677m(e) stands or falls with NTN’s last
argument, that Commerce was wrong to use an adverse inference under section
1677e(b) when choosing among the facts otherwise available. Both arguments require

05-1296 7
§ 1677e(a) (facts otherwise available can be used when, for example, “necessary

information is not available on the record”).

B

NTN next argues that even if Commerce was justified in using facts otherwise

available to determine freight expenses, it was not justified in drawing adverse

inferences when doing so. Under 19 U.S.C. § 1677e(b), when making a determination

from facts otherwise available, Commerce may sometimes select which facts to use by

applying an inference adverse to the respondent. This can be done if the respondent

has “failed to cooperate by not acting to the best of its ability to comply with a request

for information.” 19 U.S.C. § 1677e(b). Acting to the best of one’s ability under that

statute “requires the respondent to do the maximum it is able to do.” Nippon Steel

Corp. v. United States, 337 F.3d 1373, 1382 (Fed. Cir. 2003). Whether a respondent

has lived up to that requirement is assessed by determining “whether [the] respondent

has put forth its maximum effort to provide Commerce with full and complete answers to

all inquiries in an investigation.” Id. While that standard does not require perfection, it

“does not condone inattentiveness, carelessness, or inadequate record keeping.” Id.

In finding that an adverse inference was justified in this case, Commerce noted

that NTN failed to explain adequately how its allocation method is non-distortive. That

finding is supported by substantial evidence. It was reasonable for Commerce to

conclude that NTN’s summary statements, unrelated to the relationship between its

NTN to have cooperated with Commerce to the “best of its ability.” 19 U.S.C.
§§ 1677e(b), 1677m(e)(4). Because we hold that NTN failed to satisfy the “best ability”
requirement of section 1677e(b), it also failed to satisfy the “best ability” requirement of
section 1677m(e).

05-1296 8
freight expenses and the basis on which those expenses were allocated, did not reflect

a legitimate attempt to provide Commerce with a “full and complete” demonstration of

the accuracy or non-distortive effect of the allocation methodology. NTN argues that

“Commerce neglected to explain or analyze whether NTN willfully decided not to comply

with its request, or alternatively, whether NTN’s conduct fell below the standard for a

reasonable respondent.” However, we have specifically rejected the argument that

Commerce is required to make such findings, stating that “section 1677e(b) does not by

its terms set a ‘willfulness’ or ‘reasonable respondent’ standard, nor does it require

findings of motivation or intent.” Nippon Steel, 337 F.3d at 1383. NTN also argues that

Commerce did not clearly articulate a reason for its application of an adverse inference.

Commerce, however, separately addressed why it found that NTN had not acted to the

best of its ability. It stated, among other things, that NTN failed to change its allocation

method or expand on why allocation by sales value was not distortive, even after a

second request from Commerce. We agree with the trial court that Commerce’s

explanation was sufficient under the applicable statutory standard and that Commerce

permissibly applied an adverse inference to the facts otherwise available when

calculating NTN’s freight expenses.

AFFIRMED.

05-1296 9