.
United States Court of Appeals
for the Federal Circuit
__________________________
JTEKT CORPORATION AND
KOYO CORPORATION OF U.S.A.
Plaintiffs-Appellants,
and
AISIN SEIKI COMPANY, LTD. AND
AISIN HOLDING AMERICA, INC.,
Plaintiffs,
and
NTN CORPORATION, NTN BEARING
CORPORATION OF AMERICA,
AMERICAN NTN BEARING MANUFACTURING
CORP.,
NTN DRIVESHAFT, INC., NTN-BOWER
CORPORATION,
AND NTN-BCA CORPORATION,
Plaintiffs-Appellants
v.
UNITED STATES,
Defendant-Appellee
and
THE TIMKEN COMPANY
Defendant-Appellee.
__________________________
2010-1516, -1518
__________________________
JTEKT CORP v. US 2
Appeals from the United States Court of International
Trade in consolidated case Nos. 08-CV-0324, 08-CV-0329,
and 08-CV-0370, Judge Timothy C. Stanceu.
___________________________
Decided: June 29, 2011
___________________________
NEIL R. ELLIS, Sidley Austin LLP, of Washington, DC,
for the plaintiffs-appellants JTEKT Corporation, et al.
With him on the brief was JILL CAIAZZO. Of counsel was
LAWRENCE R. WALDERS.
DIANE A. MACDONALD, Baker & McKenzie, LLP, of
Chicago, Illinois, argued for the plaintiffs-appellants NTN
Corporation, et al. With her on the brief was KEVIN M.
O’BRIEN. Of counsel were CHRISTINE M. STREATFEILD and
KEVIN J. SULLIVAN, of Washington, DC.
L. MISHA PREHEIM, Trial Attorney, Commercial Liti-
gation Branch, Civil Division, United States Department
of Justice, of Washington, DC, argued for the defendant-
appellee United States. With him on the brief were TONY
WEST, Assistant Attorney General, JEANNE E. DAVIDSON,
Director, and PATRICIA M. MCCARTHY, Assistant Director.
Of counsel on the brief was DEBORAH R. KING, Attorney,
Office of the Chief Counsel for Import Administration,
United States Department of Commerce, of Washington,
DC.
GEERT M. DE PREST, Stewart & Stewart, of Washing-
ton, DC, argued for the defendant-appellee The Timken
Company. With him on the brief were TERENCE P.
STEWART and LANE S. HUREWITZ. Of counsel was WILLIAM
A. FENNELL.
3 JTEKT CORP v. US
__________________________
Before DYK, MOORE, and O’MALLEY, Circuit Judges.
MOORE, Circuit Judge.
Appellants JTEKT Corporation and Koyo Corporation
of U.S.A. (JTEKT, collectively), and NTN Corporation,
NTN Bearing Corporation of America, American NTN
Bearing Manufacturing Corporation, NTN-Driveshaft,
Inc., NTN Bower Corporation, and NTN-BCA Corporation
(NTN, collectively) appeal the final judgment in JTEKT
Corp. v. United States, 717 F. Supp. 2d 1322 (Ct. Int’l
Trade 2010) sustaining the final results of the United
States Department of Commerce’s (Commerce) eighteenth
administrative review of ball bearings from Japan. See
Ball Bearings and Parts Thereof From France, Germany,
Italy, Japan, and the United Kingdom, 73 Fed. Reg.
52,823 (Dep’t of Commerce Sept. 11, 2008). Because
Commerce failed to adequately explain why it continues
to use zeroing in Administrative Reviews while discon-
tinuing the practice in investigations, we vacate and
remand. In this remand, Commerce need not reconsider
its model match methodology because we explicitly af-
firmed its use of the sum of the deviations approach in
SKF USA, Inc. v. United States, 537 F.3d 1373, 1380 (Fed.
Cir. 2008). Further, we find no error in the method that
Commerce used to break ties as a part of its model match
method.
BACKGROUND
In order to determine an antidumping margin, Com-
merce must compare sales in the exporter’s home market
(foreign like product sales) with sales in the United
States. 19 U.S.C. § 1677(16). Ideally, Commerce would
match sales of identical merchandise. Because this is not
JTEKT CORP v. US 4
always possible, the statute allows Commerce to consider
sales of similar merchandise. Id. § 1677(16)(B), (C).
The merchandise in this case is ball bearings. The
dispute centers on the method Commerce used to deter-
mine what constitutes similar merchandise. In its first
fourteen reviews of ball bearings, Commerce used the
family model match methodology. Under this methodol-
ogy, Commerce considered sales of products in the ex-
porter’s home market that had the same physical
characteristics as the United States sale. Commerce
considered eight characteristics: load direction, bearing
design, number of rows of rolling elements, precision
rating, inner diameter, outer diameter, width, and load
rating. Any bearing that shared these eight characteris-
tics with the merchandise sold in the United States was
considered part of the family of merchandise. Commerce
then averaged the prices of the family of bearings for its
dumping calculations.
In the fifteenth administrative review, Commerce
changed to a new method for determining similar mer-
chandise called the sum of the deviations method. This
method allows Commerce to compare the United States
sale to the sales of a single product in the exporter’s home
market rather than an average of sales of a family of
merchandise. The method uses the same eight character-
istics, but weighs them differently. The matching sale
must be identical on four of the eight characteristics: load
direction, bearing design type, number of rows of rolling
elements, and precision rating. For the remaining char-
acteristics, Commerce will consider products that differ
from the subject merchandise. For each characteristic,
Commerce determines a percentage difference between
the product sold in the United States and the product sold
in the comparison market. The sum total of these per-
centage differences must be less than 40%. Additionally,
5 JTEKT CORP v. US
the cost of manufacturing the good sold in the United
States must be within 20% of the cost of manufacturing
the home market good. This difference in manufacturing
cost is called a DIFMER. If all of these criteria are met,
the United States sale is a match with the foreign sale—
and DIFMER is accounted for by adjusting the price of the
foreign sold good.
Under this method, it is possible for there to be more
than one matching product, thus, Commerce breaks ties
between matching products to determine the single most
similar sale. To break these ties, Commerce compares the
level of trade and contemporaneity of the sales. If the tie
remains, then Commerce selects the sale with the lowest
DIFMER.
Appellants argued to the Court of International Trade
that Commerce’s use of the sum of the deviations ap-
proach is not supported by substantial evidence, that
Commerce should have included an additional character-
istic in its analysis, and that Commerce’s tie breaking
method is improper. The Court of International Trade
agreed with Commerce on all issues. It held that our
opinions in Koyo Seiko Co. v. United States, 551 F.3d
1286, 1290 (Fed. Cir. 2009) (Koyo III) and SKF USA, Inc.
v. United States, 537 F.3d 1373, 1379 (Fed. Cir. 2008)
(SKF II) expressly decided that Commerce is free to use
the sum of the deviations methodology. JTEKT, 717 F.
Supp. 2d at 1329-30. Further, the Court of International
Trade determined that it was reasonable for Commerce to
refuse to add a ninth characteristic to its analysis because
that characteristic, the presence of lubricant, was ade-
quately accounted for in the DIFMER. Id. at 1332-33.
Finally, the Court of International Trade determined that
Commerce has considerable discretion in breaking ties
between similar merchandise and the use of level of trade
JTEKT CORP v. US 6
and contemporaneity over DIFMER is reasonable. Id. at
1339-40.
DISCUSSION
We review the Court of International Trade’s deter-
minations de novo, stepping into its shoes and applying
the same standard of review. SKF II, 537 F.3d at 1377.
We uphold Commerce’s determination unless it is “un-
supported by substantial evidence on the record, or oth-
erwise not in accordance with law.” NSK Ltd v. United
States, 510 F.3d 1375, 1377 (Fed. Cir. 2007).
I. Model Match Methodology
NTN broadly argues that the sum of the deviations
methodology is not supported by substantial evidence. It
argues that the family methodology, used in the first
fourteen reviews, provides a more accurate result because
it relies on exact matches between United States and
foreign sales. NTN contends that Commerce has failed to
show evidence that the sum of the deviations approach is
more accurate than the family methodology. It argues
that there is no support for Commerce’s statement that
the sum of the deviations approach is “more accurate in
that it selects a single most-similar model and results in
more price-to-price comparisons.” J.A. 1066. NTN notes
that the only reason there are more price-to-price com-
parisons is because the sum of the deviations approach
loosens the standard for a “match” by allowing certain
characteristics to differ between the merchandise. In
sum, NTN argues that because the sum of the deviations
approach allows for differences between the matched
products, it is necessarily less accurate than the family
matching approach and that we should therefore preclude
its application. NTN argues that this argument is dis-
tinct from the arguments made in SKF II and Koyo III
because, in those cases, no party argued that Commerce
7 JTEKT CORP v. US
failed to support its use of the sum of the deviations
approach with substantial evidence.
We agree with the government that SKF II forecloses
this argument. In SKF II we stated that “we have specifi-
cally affirmed changes to model-match methodologies by
Commerce where reasonable.” 537 F.3d at 1380. In SKF
II we considered the exact issue in this case, whether
Commerce erred by switching from a family model match
to a sum of the deviations approach. We credited Com-
merce’s reasoning for making the change—that superior
technology allowed it to perform the more complicated
sum of the deviations approach and that by using the sum
of the deviations approach, it was able to compare a single
sale rather than an averaged group of sales. Id. at 1380-
81. We held that this was sufficient justification for
Commerce’s changed method.
NTN’s newly phrased argument—that Commerce
must support its method with substantial evidence—does
not overcome our previous determination that the sum of
the deviations approach is reasonable. NTN argues that
the sum of the deviations approach cannot be more accu-
rate than the family model match method. But this
argument misunderstands our standard of review. We
can not review Commerce’s methods for relative accuracy,
only for reasonableness. SKF II, 537 F.3d at 1380. As we
stated in SKF II, Commerce has provided ample justifica-
tion for the use of this method and it is therefore reason-
able.
II. Bearing Type
As an alternative basis for reversal, NTN argues that
Commerce erred by refusing to further break down one of
the characteristics in the model—bearing design type.
NTN argues that insert bearing design types should be
broken down further because customers view different
JTEKT CORP v. US 8
models of insert bearing distinctly. We have held that in
order to overturn Commerce’s determination of design
types, the appellant must show that “Commerce’s choice
of design types . . . was unreasonable.” Koyo III, 551 F.3d
at 1292. In fact, we addressed this issue in Koyo III and
held that Commerce’s determination of a single design
type for insert bearings was reasonable. In this case,
Commerce found that in light of the similarities in price,
costs, and design, it was appropriate to group insert
bearings into a single category. Specifically, Commerce
noted that appellant “has not shown, however, why bear-
ings with these specific physical differences and commer-
cial distinctions cannot be reasonably compared.” J.A.
194. As we stated in Koyo III, Commerce did not act
unreasonably and its determination is supported by
substantial evidence.
III. Ninth Characteristic
Appellant JTEKT argues that Commerce should have
included a ninth characteristic in the method—the pres-
ence or absence of lubrication. JTEKT argues that lubri-
cation affects the potential application of the ball
bearings. But we have held that the potential application
of a product is not decisive of its classification. Koyo Seiko
Co. v. United States, 66 F.3d 1204, 1210 (Fed. Cir. 1995).
Further, we have held that Congress has granted Com-
merce considerable discretion to determine what consti-
tutes “foreign like product” under the statute. SKF II,
537 F.3d at 1379. Thus, we will not second guess Com-
merce’s determination that it selected the appropriate
eight characteristics that result in accurate matches for
the subject merchandise.
IV. Commerce’s Tie-Breaker Methodology
As discussed above, Commerce’s method for determin-
ing like merchandise can result in more than one model
9 JTEKT CORP v. US
match. Because Commerce’s goal is to compare individual
products or models, it must break these ties. To break
ties, Commerce first looks to the level of trade and con-
temporaneity of the sales. If this does not break the tie,
then Commerce will select the product with the lowest
DIFMER.
NTN argues that this process is flawed and that
Commerce must elevate DIFMER above level of trade and
contemporaneity in its tie-breaking determinations. NTN
posits that DIFMER, as a measure of the cost of manufac-
turing a good, relates to the good’s physical characteris-
tics. NTN then notes that level of trade and
contemporaneity are characteristics of a particular sale,
rather than the physical characteristics of the good itself.
NTN argues that we should require that Commerce
elevate DIFMER ahead of any characteristics of a particu-
lar sale because the physical characteristics of the product
are more important than any commercial considerations
in determining similar merchandise.
NTN argues that the relevant statutes require this
result. It notes that under 19 U.S.C. § 1677b(a), a “fair
comparison shall be made between the export price or
constructed export price and normal value.” NTN then
points to the statute that defines “normal value” as the
“price at which the foreign like product is first sold . . . to
the extent practicable at the same level of trade as the
export price or constructed export price,” citing
§ 1677b(a)(1)(B). NTN argues that this shows that con-
siderations like “level of trade” can only come into play
once Commerce has already determined the foreign like
product. Thus, NTN contends that it is contrary to the
statute to use level of trade to determine the foreign like
product.
JTEKT CORP v. US 10
NTN also points to the statute that defines “foreign
like product” which states:
A) The subject merchandise and other merchan-
dise which is identical in physical characteris-
tics with, and was produced in the same
country by the same person as, that merchan-
dise.
B) Merchandise –
i. Produced in the same country and by the
same person as the subject merchandise,
ii. Like that merchandise in component ma-
terial or materials and in the purposes for
which used, and
iii. Approximately equal in commercial value
to that merchandise.
Under the statute, if a product falls under category A (i.e.,
is identical in physical characteristics), then there is no
need to resort to category B. Thus, NTN argues that the
statutory scheme requires Commerce to place DIFMER
above level of trade and contemporaneity of sale because
DIFMER relates to physical characteristics.
Appellees respond that the Court of International
Trade was correct and that Commerce has significant
discretion in breaking ties between equally similar prod-
ucts. Appellees argue that NTN’s statutory arguments
are misguided because the fact that two products are
equally similar means that they both qualify as foreign
like product, thus, the statute that defines foreign like
product cannot dictate the tie breaker. Further, the
government argues that, before applying the tie breaker,
Commerce has already considered DIFMER because only
products with a DIFMER of 20% or less can be considered
like merchandise.
11 JTEKT CORP v. US
We agree with the government that Commerce is
within its discretion to break ties between equally similar
products using level of trade and contemporaneity and
only using DIFMER if ties still remain. The statute is
silent as to any tie breaking methodology. We have
already determined that Commerce’s sum of the devia-
tions approach is proper. Thus, if two products are
equally similar under the sum of the deviations method,
they both qualify as foreign like product. There is no
statutory mandate to tell Commerce how to break the tie.
Thus, Commerce may, in its discretion, determine a
reasonable tie-breaking methodology. We agree with the
Court of International Trade that the level of trade and
contemporaneity of sales are both relevant to the deter-
mination of the most appropriate merchandise, and thus
are reasonable to use as a tie-breaker before resorting to
the DIFMER. Further, NTN overstates the nature of
DIFMER as a physical characteristic similar to an inner
diameter of a bearing. As the Court of International
Trade stated, “[t]he DIFMER adjustment, although
related to differences in physical characteristics . . . is not
itself a physical characteristic.” JTEKT, 717 F. Supp. 2d
at 1340. We agree with the Court of International Trade
that Commerce did not err in its use of level of trade and
contemporaneity to break ties before resorting to the
DIFMER.
V. Commerce’s Use of Zeroing
We have long held that Commerce’s practice of zero-
ing is a reasonable statutory interpretation entitled to
deference. See, e.g., Timken Co. v. United States, 354 F.3d
1334, 1342 (Fed. Cir. 2004). Zeroing is the practice
whereby the values of positive dumping margins are used
in calculating the overall margin, but negative dumping
margins are included in the sum of margins as zeroes.
Dongbu Steel Co. Ltd. v. United States, 635 F.3d 1363,
JTEKT CORP v. US 12
1366 (Fed. Cir. 2011). Historically, Commerce used
zeroing in both the initial investigation to determine
whether dumping occurred, and in the subsequent admin-
istrative reviews of its dumping determination. But this
practice has changed. In response to pressure from the
World Trade Organization (WTO), Commerce changed its
practice with respect to investigations and no longer
zeroes in that phase. Id. at 1367.
We addressed Commerce’s conflicting treatment of ze-
roing in investigations and administrative reviews in
Dongbu. Due to the procedural posture in Dongbu, Com-
merce had provided no justification for using zeroing in
administrative reviews and not in investigations. In that
case, we vacated and remanded in order for Commerce to
explain its reasoning for such disparate treatment. Id. at
1373.
NTN argues that Dongbu requires that we vacate and
remand this case in order for Commerce to provide rea-
soning for its current practice. Appellee Timken argues
that NTN failed to properly raise this issue on appeal.
Further, appellees argue that Dongbu does not require
vacatur because Commerce, unlike in Dongbu, provided
reasons for its zeroing practice in this case.
As an initial matter, NTN did not waive this argu-
ment. NTN focuses a significant portion of its brief to
challenging Commerce’s use of zeroing. Although NTN
acknowledges that we have consistently upheld the prac-
tice, NTN nonetheless raised the issue and specifically
pointed out the contradiction of using zeroing in adminis-
trative reviews, but not in investigations. NTN Appel-
lant’s Br. 34. NTN did not have the benefit of the Dongbu
opinion before filing its briefs and thus could not have
argued that the case requires us to vacate, but it nonethe-
less preserved the issue on appeal by arguing that Com-
13 JTEKT CORP v. US
merce’s continuing practice of zeroing in administrative
reviews, but not in investigations, is unreasonable.
We agree with NTN that Dongbu requires us to va-
cate and remand. Appellees argue that, unlike Dongbu,
Commerce explained its reasoning for continuing to zero
in administrative reviews, but not in investigations.
Appellees are correct that Commerce attempted to ad-
dress the exact issue in this case:
Antidumping investigations and administrative
reviews are different proceedings with different
purposes. Specifically, in antidumping investiga-
tions, the Act specifies particular types of com-
parisons . . . . In antidumping investigations, the
Department generally uses average-to-average
comparisons whereas in administrative reviews
the Department generally uses average-to-
transaction comparisons.
The purpose of the dumping-margin calculation
also varies significantly between antidumping in-
vestigations and reviews. In antidumping inves-
tigations, the primary function of the dumping
margin is to determine whether an antidumping
duty order will be imposed on the subject imports.
In administrative reviews, in contrast, the dump-
ing margin is the basis for the assessment of anti-
dumping duties on entries of subject merchandise
to the antidumping duty order
J.A. 173-74 (citations omitted). While Commerce did
point to differences between investigations and adminis-
trative reviews, it failed to address the relevant ques-
tion—why is it a reasonable interpretation of the statute
to zero in administrative reviews, but not in investiga-
tions? It is not illuminating to the continued practice of
zeroing to know that one phase uses average-to-average
JTEKT CORP v. US 14
comparisons while the other uses average-to-transaction
comparisons. In order to satisfy the requirement set out
in Dongbu, Commerce must explain why these (or other)
differences between the two phases make it reasonable to
continue zeroing in one phase, but not the other. Thus,
we vacate and remand in order for Commerce to provide
its reasoning.
VACATED and REMANDED