Slip Op. 04-100
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: HONORABLE RICHARD W. GOLDBERG, SENIOR JUDGE
SNR ROULEMENTS, KOYO SEIKO
CO., LTD., KOYO CORPORATION OF
U.S.A., NSK CORPORATION, NSK
BEARINGS EUROPE, LTD., NSK
LTD., NTN-BCA CORPORATION, NTN
BOWER CORPORATION, NTN-
DRIVESHAFT, INC., AMERICAN NTN
BEARING MANUFACTURING CORP.,
NTN BEARING CORPORATION OF
AMERICA, NTN CORPORATION, INA-
SCHAEFFLER KG, INA USA
CORPORATION,
Plaintiffs, Consol. Court No. 01-00686
v.
UNITED STATES,
Defendant,
and
THE TORRINGTON COMPANY,
Defendant-
Intervenor.
[Court sustains administrative review in part and remands in
part.]
Date: August 10, 2004
Grunfeld, Desiderio, Lebowitz & Silverman (Bruce Mitchell) for
plaintiff SNR Roulements.
Sidley Austin Brown & Wood (Neil R. Ellis and Neil C. Pratt) for
plaintiffs Koyo Seiko Co., Ltd. and Koyo Corporation of U.S.A.
Crowell & Moring, LLP (Matthew P. Jaffe and Robert A. Lipstein)
for plaintiffs NSK Corporation, NSK Bearings Europe, Ltd., and
Consol. Court No. 01-00686 Page 2
NSK Ltd.
Barnes, Richardson & Colburn (Donald J. Unger and Kazumone V.
Kano) for plaintiffs NTN-BCA Corporation, NTN Bower Corporation,
NTN-Driveshaft, Inc., American NTN Bearing Manufacturing Corp.,
NTN Bearing Corporation of America and NTN Corporation.
Sonnenschein Nath & Rosenthal (Stephen L. Gibson) for plaintiffs
INA-Schaeffler KG and INA USA Corporation.
Peter D. Keisler, Assistant Attorney General, David M. Cohen,
Director, Patricia McCarthy, Assistant Director, Commercial
Litigation Branch, Civil Division, United States Department of
Justice (Claudia Burke); Philip Curtin and Peter Kaldes, of
counsel, Office of the Chief Counsel for Import Administration,
United States Department of Commerce, for defendant United
States.
Stewart & Stewart (Geert N. DePrest and William A. Fennell) for
defendant-intervenor The Torrington Company.
OPINION
GOLDBERG, Senior Judge: In this action, plaintiffs challenge the
United States Department of Commerce’s (“Commerce”) final
determination in the 11th administrative review of dumping orders
covering antifriction bearings in Antifriction Bearings (Other
than Tapered Roller Bearings) and Parts Thereof from France, et
al.; Notice of Final Results of Antidumping Duty Administrative
Reviews and Revocation, 66 Fed. Reg. 36551 (July 12, 2001)
(“Final Results”).1 Defendant-Intervenor The Torrington Company
1
Plaintiffs in this action are SNR Roulements (“SNR”); Koyo
Seiko Co., Ltd. and Koyo Corporation of U.S.A.(“Koyo”); NSK
Corporation, NSK Bearings Europe, Ltd., and NSK Ltd. (“NSK”);
NTN-BCA Corporation, NTN Bower Corporation, NTN-Driveshaft, Inc.,
American NTN Bearing Manufacturing Corp., NTN Bearing Corporation
of America, and NTN Corporation (“NTN”), and INA-Schaeffler KG
and INA USA Corporation (“INA”).
Consol. Court No. 01-00686 Page 3
(“Torrington”) also challenges certain aspects of the Final
Results. The Final Results covers the period of review May 1,
1999 through April 30, 2000 for ball bearings and May 1, 1999
through December 31, 1999 for cylindrical roller bearings and
spherical plain bearings. Pursuant to USCIT R. 56.2, plaintiffs
and defendant-intervenor move for summary judgment and request
the Court to remand Commerce’s Final Results.
For the reasons that follow, the Court sustains in part and
reverses and remands in part the Final Results. The Court has
jurisdiction over this matter pursuant to 28 U.S.C. § 1581(c).
I. STANDARD OF REVIEW
The Court will sustain the Final Results unless it is
“unsupported by substantial evidence on the record, or otherwise
not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B). To
determine whether Commerce’s construction of the statutes is in
accordance with law, the Court looks to Chevron U.S.A., Inc. v.
Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).
The first step of the test set forth in Chevron requires the
Court to determine “whether Congress has directly spoken to the
precise question at issue.” Id. at 842. It is only if the Court
concludes that “Congress either had no intent on the matter, or
that Congress’s purpose and intent regarding the matter is
ultimately unclear,” that the Court will defer to Commerce’s
Consol. Court No. 01-00686 Page 4
construction under step two of Chevron. Timex V.I., Inc. v.
United States, 157 F.3d 879, 881 (Fed. Cir. 1998). If the
statute is ambiguous, then the second step requires the Court to
defer to the agency’s interpretation so long as it is “a
permissible construction of the statute.” Chevron, 467 U.S. at
842. In addition, “[s]tatutory interpretations articulated by
Commerce during its antidumping proceedings are entitled to
judicial deference under Chevron.” Pesquera Mares Australes
Ltda. v. United States, 266 F.3d 1372, 1382 (Fed. Cir. 2001)
(interpreting United States v. Mead, 533 U.S. 218 (2001)).
Accordingly, the Court will not substitute “its own construction
of a statutory provision for a reasonable interpretation made by
[Commerce].” IPSCO, Inc. v. United States, 965 F.2d 1056, 1061
(Fed. Cir. 1992).
II. DISCUSSION
A. Commerce’s Exclusion of SNR’s Imputed Expenses In
Calculating Total Expenses For Constructed Export Price
Profits Is In Accordance With Law.
SNR challenges Commerce’s calculation of constructed export
price (“CEP”) profits, arguing that the inclusion of imputed
expenses in its calculation of “total U.S. expenses” necessitates
the inclusion of those same imputed expenses in its calculation
of “total expenses.”
CEP profits are determined by multiplying the total actual
Consol. Court No. 01-00686 Page 5
profit by the percentage determined by dividing the total United
States expenses by the total expenses. 19 U.S.C. § 1677a(f)(1);
19 U.S.C. § 1677a(f)(2)(A). “Total actual profit” is defined as
“the total profit earned by the foreign producer, exporter and
affiliated parties . . . with respect to the sale of the same
merchandise for which total expenses are determined[.]” 19
U.S.C. § 1677a(f)(D). “Total expenses” consist of “all expenses
. . . which are incurred by or on behalf of the foreign producer
and foreign exporter of the subject merchandise and by or on
behalf of the U.S. seller affiliated with the producer or
exporter with respect to the production and sale of such
merchandise.” 19 U.S.C. § 1677a(f)(2)(C). The price used to
establish CEP is reduced by “the amount of the following expenses
generally incurred by or for the account of the producer or
exporter, or the affiliated seller in the United States, in
selling the subject merchandise (or merchandise to which value
has been added).” 19 U.S.C. § 1677a(d)(1). These expenses
include “expenses that result from, and bear a direct
relationship to, the sale, such as credit expenses, guarantees
and warranties” and “any selling expenses not deducted under
subparagraph (A), (B), or (C).” 19 U.S.C. § 1677a(d)(1)(B) and
(D).
In short, when calculating CEP profit, the statute permits a
reduction by the applicable percentage (i.e., a portion of total
Consol. Court No. 01-00686 Page 6
profit), thereby ensuring that the CEP profit calculation
accurately reflects whether, and to what degree, the exporter has
an unfair advantage over the domestic producer.
SNR argues that Commerce erred by not including imputed
credit and inventory carrying expenses in its calculation of
“total expenses” – because they were included in its calculation
of “total United States expenses.” SNR requests that this issue
be remanded to Commerce with instructions to include the imputed
credit and inventory carrying expenses in its calculation of
“total expenses” for the purpose of calculating CEP profit.
Commerce denies that it failed to comport with the plain
meaning of the statute and argues instead that its calculations
are based on “normal accounting principles [which] permit the
deduction of only actual booked expenses, not imputed expenses,
in calculating profit.” See Memo of the United States in
Opposition to the Plaintiffs’ Motions for Judgment upon the
Agency Record (“Def.’s Br.”) at 96. Commerce also argues that
the inclusion of imputed expenses in the calculation of total
expenses would result in a partial double counting of the
expenses which would result in a distortion of the ratio of total
U.S. expenses to total expenses. Id. at 95. Additionally,
Commerce argues that if Congress had intended to require both
total U.S. expenses and total expenses to be calculated using the
same figures Congress would not have used disparate definitions
Consol. Court No. 01-00686 Page 7
when defining the two terms. Id. Finally, Commerce cites U.S.
Steel Group v. United States, 225 F.3d 1284 (Fed. Cir. 2000),
followed by the Court of International Trade in Timken v. United
States, 26 CIT ___, 240 F. Supp. 2d 1228 (2002), which
specifically rejects the argument that symmetry must exist in the
ratio of total U.S. expenses to total expenses.
The Court first turns to the plain language of the statute
under Chevron step-one. First, the Court finds the statute does
not clearly address the use of imputed expenses in the
calculation of total expenses or total profit. See Timken, 26
CIT at __, 240 F. Supp. 2d at 1245; cf. SNR Roulements v. United
States, 24 CIT 1130, 1139, 118 F. Supp. 2d 1333, 1341 (2000); NTN
Bearing Corp. of America v. United States, 25 CIT 664, 694, 155
F. Supp. 2d 715, 743 (2001). Second, on the issue of whether
computational symmetry is statutorily required, the Court refers
to U.S. Steel Group, which sustained Commerce’s practice of
including imputed expenses in the calculation of total United
States expenses, but not including imputed expenses in the
calculation of total expenses. See id. at 1290. Symmetry
between the two is not required because “the definitions of the
Act themselves under cut symmetrical treatment of ‘total U.S.
expenses’ and ‘total expenses.’” U.S. Steel Group, 225 F.3d at
1290. Total U.S. expenses are not a subset of total expenses
because “[t]he statute itself defines ‘total U.S. expenses’
Consol. Court No. 01-00686 Page 8
distinctly, both structurally and substantively, from ‘total
expenses.’” Id. at 1289.
Even if U.S. Steel Group was not applicable to selling
expenses, Commerce’s methodology was a reasonable interpretation
of the statute. Timken, 26 CIT at __, 240 F. Supp. 2d at 1246.
“Commerce has some flexibility in determining total United States
expenses under 19 U.S.C. § 1677a(d)(1)-(2) . . . [b]ut if
Commerce decides to include a category of expenses in calculating
total United States expenses . . . it must also include such
expenses in [total expenses] unless they are already represented
in total expenses in some other fashion.” Thai Pineapple Canning
Indus. Corp. Ltd. v. United States, 23 CIT 286, 296 (1999), aff’d
in part, rev’d in part, 273 F.3d 1077 (Fed. Cir. 2001) (emphasis
added).
Although imputed numbers for total U.S. expenses may not be
exactly the same as those for total expenses, they are reasonable
surrogates for each other. See Timken, 26 CIT at __, 240 F.
Supp. 2d at 1247. Following Timken, the Court holds that
“although the definitions of both total United States expenses
and total expenses direct Commerce to include a figure for
selling expenses, it is not clear from the statute that these
figures need to be precisely the same.” Timken, 26 CIT at __,
240 F. Supp. 2d at 37. “Theoretically, the total expenses
denominator would reflect the interest expenses captured in the
Consol. Court No. 01-00686 Page 9
U.S. sales expenses numerator . . . as well as ‘home’ market
interest expenses, because the total expenses denominator is
derived from a net unit figure based on all company interest
expenses without regard to sales destination.” Id. (quoting Thai
Pineapple Canning Indus. Corp. Ltd. v. United States, 24 CIT 107,
115 (2000) (emphasis added)).
Although companies may not track the per customer cost of
maintaining inventory or extending credit, Commerce reasonably
recognizes that companies do actually incur these costs. As a
result, Commerce asks respondents to impute these costs to aid in
the calculation of normal value and U.S. price. If a peculiarity
or discrepancy arises as a result of the use of imputed amounts
in the calculation of total U.S. expenses and the use of actual
amounts in the calculation of total expenses, Commerce’s findings
may be challenged (1) by demonstrating that a distortion was
caused by different expenses over time or (2) that the inclusion
of imputed expenses will not result in double counting because
there were no actual U.S. expenses included in the actual booked
expenses. The Court concludes that SNR has not demonstrated
either condition. Commerce has shown that the actual booked
expenses included in the calculation of total expenses account
for amounts representing the imputed U.S. credit and inventory
carrying expenses, and SNR has failed to demonstrate any
peculiarity or discrepancy which necessitates the inclusion of
Consol. Court No. 01-00686 Page 10
imputed expenses because they are not otherwise accounted for.
Accordingly, Commerce’s exclusion of imputed expenses in its
calculation of total expenses for CEP profit is sustained.
B. Commerce’s Use Of The 99.5 Percent Arm’s Length Test To
Exclude Certain Home Market Sales By Koyo To Affiliates Is
In Accordance With Law.
In comparing Koyo’s export prices to Koyo’s home market
prices, Commerce excluded from Koyo’s home market sales database
any sales to an affiliated party where the weighted average price
was less than 99.5 percent of the weighted average price of non-
affiliated parties. In light of the World Trade Organization
(“WTO”) Appellate Body’s decision in United States - Anti-Dumping
Measures on Certain Hot Rolled Steel Products from Japan,
WT/DS184/AB/R (July 24, 2001) (“Hot Rolled Steel”), Koyo asserts
that this 99.5 percent “arm’s length” test violates U.S.
obligations under international law. In Hot Rolled Steel, the
WTO Appellate Body held that the arm’s length test established
dumping in a manner impermissible under the Agreement on
Implementation of Art. VI of the General Agreement on Tariffs and
Trade (“Anti-Dumping Agreement”).
To determine whether merchandise has been dumped, 19 U.S.C.
§ 1677b(a) requires Commerce to make “a fair comparison” between
the export price and normal value. Commerce excludes from the
calculation of normal value any sale to an affiliated party that
Consol. Court No. 01-00686 Page 11
is not comparable to sales to non-affiliated parties pursuant to
19 C.F.R. § 351.403(c). To ensure that sales to affiliates are
comparable to sales to non-affiliates (i.e., at arm’s length)
under § 351.403(c), Commerce adopted the 99.5 percent arm’s
length test, which was applied in the Final Results.
The ambiguity of the statutes and regulations regarding the
definition of “ordinary course of trade” precludes analysis under
the first step of Chevron. See Timken v. United States, 26 CIT
__, __, 240 F. Supp. 2d 1228, 1240 (2002). Under the second step
of Chevron, Commerce’s use of the 99.5 percent arm’s length test
has been repeatedly upheld as reasonable. See, e.g., Usinor v.
United States, 18 CIT 1155, 1158, 872 F. Supp. 1000, 1004 (1994)
(affirming the test as reasonable where plaintiff failed to show
that it distorted price comparability); SSAB Svenskt Stal Ab v.
United States, 21 CIT 1007, 1010, 976 F. Supp. 1027, 1030 (1997)
(upholding the test as reasonable even though there was no
showing that plaintiff had deliberately manipulated affiliate
prices); Micron Technology, Inc. v. United States, 19 CIT 829,
846, 893 F. Supp. 21, 38 (1995) (sustaining Commerce’s use of the
test where plaintiff made no showing that its excluded affiliate
sales had been made at arm’s length).
1. Koyo Has Standing Under 19 U.S.C. § 3512(c)
Commerce asserts that 19 U.S.C. § 3512(c)2 bars Koyo’s claim
2
Section 3512(c) states that “[n]o person other than the
United States . . . may challenge . . . any action or any
Consol. Court No. 01-00686 Page 12
that the arm’s length test is inconsistent with the WTO’s
decision in Hot Rolled Steel. Section 3512(c) bars private
parties from bringing claims directly against the government
alleging that Commerce acted inconsistently with a WTO agreement.
However, Koyo’s claim does not arise directly under the Anti-
Dumping Agreement or any other WTO agreement. Rather, Koyo is
“free to argue that Congress would never have intended to violate
an agreement it generally intended to implement, without
expressly saying so.” Gov’t of Uzbekistan v. United States, 25
CIT 1084, 1088 (2001). By relying on § 3512(c), Commerce merely
asserts an “erroneous technical bar” in this case, and thus
Koyo’s claim is properly before the Court. See Gov’t of
Uzbekistan, 25 CIT at 1088.
2. Relevance of Hot-Rolled Steel
The effect of WTO dispute settlement decisions on U.S.
domestic trade law is intricate and rife with particularly
delicate issues of statutory interpretation and separation of
powers.
The classic tenet of statutory interpretation in light of
international obligations is that “an act of Congress ought never
to be construed to violate the law of nations if any other
inaction by any department, agency, or other instrumentality of
the United States . . . on the ground that such action or
inaction is inconsistent with [a WTO agreement].” 19 U.S.C. §
3512(c)(1).
Consol. Court No. 01-00686 Page 13
possible construction remains . . . .” Murray v. Schooner
Charming Betsy, 6 U.S. (2 Cranch) 64, 81 (1804) (“The Charming
Betsy”); see also Federal Mogul Corp. v. United States, 63 F.3d
1572, 1581 (Fed. Cir. 1995) (“[A]bsent express Congressional
language to the contrary, statutes should not be interpreted to
conflict with international obligations.”)
The Charming Betsy doctrine may conflict in certain
circumstances with the deference that courts owe to
interpretations of statutory law by agencies.3 A court must
yield to an agency’s interpretation of an ambiguous statute so
long as it “is based on a permissible construction of the
statute.” Chevron, 467 U.S. at 843. Agencies are accountable to
the elected executive, and thus, policy decisions are best left
to them rather than to non-elected judges. See id. at 865-66.
Moreover, the judiciary generally grants the executive branch an
even greater level of deference in the area of foreign affairs.
See United States v. Curtiss-Wright Export Corp., 299 U.S. 304,
320 (1936). However, courts have held that “Chevron must be
applied in concert with the Charming Betsy doctrine when the
latter is implicated.” Usinor v. United States, 26 CIT __, __,
Slip Op. 02-70, 8 (quoting Hyundai, 23 CIT at 313, 53 F. Supp. 2d
at 1344); see also Timken, 26 CIT at __, 240 F. Supp. 2d at 1240
3
See Jane A. Restani & Ira Bloom, Interpreting
International Trade Statutes: Is the Charming Betsy Sinking?, 24
Fordham Int’l L.J. 1533 (2001).
Consol. Court No. 01-00686 Page 14
(determining that “the court must determine if the Department’s
interpretation is reasonable, as informed by Chevron step-two and
Charming Betsy”).
WTO decisions are not binding on the Court nor on Commerce.
See Hyundai Elecs. Co. v. United States, 23 CIT 302, 311, 53 F.
Supp. 2d 1334, 1343 (1999); see also Corus Staal BV v. United
States, 27 CIT __, __, 259 F. Supp. 2d 1253, 1273 (2003)
(upholding Commerce’s practice of zeroing contrary to a WTO
Appellate Body decision concerning the European Communities’ use
of zeroing); see also Timken, 26 CIT at __, 240 F. Supp. 2d at
1242 (sustaining the arm’s length test, in part by distinguishing
Hot Rolled Steel). WTO decisions may, however, shed light on
whether an agency’s practices and policies are in accordance with
U.S. international obligations. See Hyundai, 23 CIT at 311-12,
53 F. Supp. 2d at 1343.
Timken examined the WTO’s decision in Hot Rolled Steel as it
related to the same application of the arm’s length test and
concluded that Commerce’s 99.5 percent test was a reasonable
interpretation of “ordinary course of trade.” Thus, a closer
look at both Hot Rolled Steel and Timken is warranted.
Hot Rolled Steel did not find that 19 U.S.C. § 1677b or 19
C.F.R. § 351.403 violated the Anti-Dumping Agreement. Timken, 26
CIT at __, 240 F. Supp. 2d at 1242. Rather, the WTO Appellate
Body found that Commerce’s 99.5 percent arm’s length test does
Consol. Court No. 01-00686 Page 15
“not rest on a permissible interpretation of the term ‘sales in
the ordinary course of trade’” in Article 2.1 of the Anti-Dumping
Agreement4 due to its lack of “even-handedness.” Hot Rolled
Steel at ¶ 148. First, the test was found to be asymmetric
because it automatically excludes lower-priced affiliate sales
using a numerical threshold of 99.5 percent. Id. at ¶ 149. In
contrast, there is no bright line test for higher-priced
affiliate sales. Instead, such sales can be excluded from the
calculation of home market sales only if Commerce deems the sales
aberrationally high, a fact on which a respondent has the burden
of proof. Id. at ¶ 151. The WTO Appellate Body determined that
the 99.5 percent test is more likely to result in a higher home
market price and, as a consequence, a finding of dumping. Id. at
¶ 154. In essence, Hot Rolled Steel concluded that Commerce is
afforded considerable discretion in determining whether any given
sales to affiliated parties are not in the ordinary course of
trade but held that such discretion must be exercised in an even-
handed manner.
Timken sustained Commerce’s use of the arm’s length test,
4
Article 2.1 of the Anti-Dumping Agreement provides:
[A] product is to be considered as being dumped, i.e.
introduced into the commerce of another country at less
than its normal value, if the export price of the
product exported from one country to another is less
than the comparable price, in the ordinary course of
trade, for the like product when destined for
consumption in the exporting country.
Consol. Court No. 01-00686 Page 16
distinguishing the case from the facts in Hot Rolled Steel.
Hot Rolled Steel reasoned that exporters had no notice of
the aberrationally-high standard and thus had no reason to
supply evidence that high-priced sales to affiliates were
aberrational. Id. at ¶ 155. In contrast, Timken pointed
out that the foreign respondent, Koyo, did have notice of
the aberrationally-high standard. Timken, 240 F. Supp. 2d
at 1241. With such notice and Koyo’s failure to argue that
the arm’s length test had excluded any sales in the ordinary
course of trade, Timken reasoned that Koyo was not
prejudiced as the foreign respondents were in Hot Rolled
Steel.5 See id. at 1242. Timken found compelling
Commerce’s rationale for applying an asymmetric test –
namely, that exporters are likely to provide advantageous
information, such as why a high-priced affiliate sale is not
in the ordinary course of trade, but may withhold
disadvantageous evidence of lower-priced affiliate sales
5
Contrary to the reasoning in Timken, it is at least
arguable that the WTO Appellate Body did not intend to confine
its reasoning to the facts at issue in Hot Rolled Steel. Rather,
Hot Rolled Steel held that “the application of the 99.5 percent
test does not rest on a permissible interpretation of the term
‘sales in the ordinary course of trade.’” Hot Rolled Steel at ¶
158 (emphasis in original). The Hot Rolled Steel decision
rejected the rationale for Commerce’s policy, applied to the
specific case and generally. See id. at ¶ 157 (noting that
Commerce’s test focuses on the distortion of low affiliate prices
whereas the Anti-Dumping Agreement’s language applies to sales
both above and below the home market price established in the
ordinary course of trade).
Consol. Court No. 01-00686 Page 17
that are not in the ordinary course of trade. Id. at 1241-
42.
The relevance of a WTO dispute settlement decision in this
context lies solely in its persuasive force as a means of
properly interpreting a controlling statute. See Marbury v.
Madison, 5 U.S. 137, 177 (“[I]t is emphatically the province and
duty of the judicial department to say what the law is.”). This
persuasive force, however, must be carefully balanced with the
reasoned rulemaking process underlying Chevron step-two
deference. The Court is wary of overstepping the bounds of its
judicial authority under the guise of the Charming Betsy
doctrine. See Hyundai, 23 CIT at 313-14, 53 F. Supp. 2d. at 1345
(stating that “unless the conflict between an international
obligation and Commerce’s interpretation of a statute is
abundantly clear, a court should take special care before it
upsets Commerce’s regulatory authority under the Charming Betsy
doctrine”). The Court is also mindful of the prerogative of the
Executive Branch – most importantly, the Office of the U.S. Trade
Representative – in dealing with the WTO in its diplomatic and
policymaking roles. See id. at 312, 53 F. Supp. 2d at 1343.
Thus, in light of prior decisions that have found the 99.5
percent test to be reasonable, the Court holds that Chevron
Consol. Court No. 01-00686 Page 18
deference controls here.6
Accordingly, Commerce’s use of the 99.5 percent arm’s length
test to exclude certain home market sales by Koyo to affiliated
parties is sustained.7
C. Commerce’s Practice of Zeroing Is In Accordance With
Judicial Precedent and Does Not Violate the Antidumping
Statute.
Koyo and NSK challenge Commerce’s practice of zeroing in its
calculation of dumping margins. Commerce calculates the dumping
6
The Court declines to reach the issue of whether a WTO
dispute settlement decision interpreting a WTO agreement may
constitute an international obligation under any circumstances in
applying the Charming Betsy doctrine.
7
The Court notes that since the publication of the Final
Results and the filing of the instant case, Commerce has adopted
a new policy for its arm’s length test to comply with Hot Rolled
Steel. See Antidumping Proceedings: Affiliated Party Sales in
the Ordinary Course of Trade, 67 Fed. Reg. 69186 (Nov. 15, 2002).
This change in methodology provides for the overall ratio
calculated for an affiliate to be between 98 percent and 102
percent of prices to unaffiliated customers in order for sales to
that affiliate to satisfy the arm’s length test. See id. at
69187; see also Stainless Steel Plate in Coils from Belgium:
Preliminary Results of Antidumping Duty Administrative Review, 69
Fed. Reg. 32501 (June 10, 2004) (applying the new test).
Incorporating the reasoning of Hot Rolled Steel, Commerce has
described this new test as “consistent with the view, expressed
by the WTO Appellate Body, that rules aimed at preventing the
distortion of normal value through sales between affiliates
should reflect, ‘even handedly,’ that both high and low-priced
sales between affiliates might not be ‘in the ordinary course of
trade.’” Id.
Consol. Court No. 01-00686 Page 19
margins on individual U.S. transactions and then calculates the
weighted-average dumping margin “by dividing the aggregate
dumping margins determined for a specific exporter or producer by
the aggregate . . . constructed export prices of such exporter or
producer.” 19 U.S.C. § 1677(35)(B). In calculating the
weighted-average dumping margin, Commerce treats transactions
that produce “negative” dumping margins – that is, transactions
in which the export price exceeds normal value – as if they were
zero, a practice commonly referred to as “zeroing.”
1. EC-Bed Linen Is Not Binding or Persuasive
Koyo first claims that Commerce’s practice of zeroing is
impermissible under U.S. law. Koyo argues that the decision of
the WTO Appellate Body in European Communities - Antidumping
Duties on Import of Cotton-Type Bed Linen from India,
WT/DS141/AB/R (Mar. 1, 2001) (“EC-Bed Linen”) prohibits
Commerce’s practice of zeroing. In EC-Bed Linen, the WTO
Appellate Body found that the European Communities’ (“EC”) use of
zeroing was inconsistent with the Anti-Dumping Agreement. Koyo
argues that Commerce’s practice is the functional equivalent of
the EC’s practice. See Motion of Plaintiffs Koyo Seiko Co., Ltd.
and Koyo Corporation of U.S.A. for Judgment on the Agency Record
(“Koyo Br.”) at 18-21. Koyo claims that zeroing is unlawful
Consol. Court No. 01-00686 Page 20
under the Charming Betsy doctrine.
With respect to Koyo’s EC-Bed Linen argument, the Court is
bound by the Federal Circuit’s recent decision in Timken v.
United States, 354 F.3d 1334 (Fed. Cir. 2004). As a threshold
matter, the Federal Circuit held, as the Court does here, that
Koyo’s claim is not barred by 19 U.S.C. § 3512(c). Id. at 1341;
see also, supra, III.B. Timken, however, rejected Koyo’s WTO-
based arguments by holding that Commerce’s practice of zeroing
was not prohibited by EC-Bed Linen: “In light of the fact that
Commerce’s ‘longstanding and consistent administrative
interpretation is entitled to considerable weight,’ we refuse to
overturn the zeroing practice based on EC-Bed Linen.” Id. at
1344 (quoting Zenith Radio Corp. v. United States, 437 U.S. 443,
450 (1978)). The Federal Circuit distinguished Timken from EC-
Bed Linen, stressing that the United States had not been a party
in the latter and that EC-Bed Linen had dealt with an antidumping
investigation and not an administrative review as was the case in
Timken. Id.
Accordingly, the Court holds that Commerce’s use of zeroing
is not invalidated by EC-Bed Linen.8
8
A divided WTO panel recently found Commerce’s practice of
zeroing to be impermissible under the Anti-Dumping Agreement.
See United States - Final Dumping Determination on Softwood
Consol. Court No. 01-00686 Page 21
2. The Plain Language of the Antidumping Statutes Is
Ambiguous and Mandates Deference to Commerce’s Zeroing
Practice
NSK and Koyo challenge zeroing as contradictory to the plain
language of 19 U.S.C. § § 1673 and 1677. Commerce argues that
the plain language of the antidumping statutes actually mandates
zeroing. The Court holds that the language of 19 U.S.C. § 1673
neither unambiguously requires nor prohibits zeroing under the
first step of Chevron.
NSK suggests that the plain meaning of 19 U.S.C. § 1673
unambiguously renders Commerce’s practice of zeroing
impermissible. See Memorandum of Points and Authorities in
Support of NSK Bearings Europe’s Motion for Judgment on the
Agency Record (“NSK Europe Br.”) at 5. According to NSK, the
focal point of an antidumping inquiry is the class or kind of
merchandise.9 Because § 1673 specifies that antidumping duties
Lumber from Canada, WT/DS264 (Apr. 13, 2004) (“Softwood Lumber”).
The Court finds Softwood Lumber insufficiently persuasive in
light of the Federal Circuit’s decision in Timken.
9
NSK claims that the “entire structure of U.S. antidumping
law” rests upon § 1673, which provides that:
(1) the administering authority determines that a class
or kind of foreign merchandise is being, or is likely
to be sold, in the United States at less than its fair
value, and
(2) the Commission determines that . . .
(b) the establishment of an industry is materially
Consol. Court No. 01-00686 Page 22
apply only when Commerce determines that a “class or kind of
foreign merchandise” is being, or is likely to be sold at less
than its fair value, “Commerce’s dumping calculation violates
this basic principle, because it trivializes the presence of U.S.
sales above fair value by wiping out (i.e., by zeroing) the
difference by which the export price or constructed price of
these sales exceeds normal value.” NSK Europe Br. at 11. NSK
notes that other statutory provisions support the premise that
zeroing is unlawful. NSK claims that the definition of “dumped”
and “dumping” contained within 19 U.S.C. § 1677(34) “reformulates
the first requirement of § 1673 that sales below fair value are
dumped but sales above fair value are not.” Id. at 8. NSK also
maintains that the definition of “dumping margin” contained
within 19 U.S.C. § 1677(35)(A) “reaffirms that dumping only
exists when normal value exceeds the export price or constructed
export price of the subject merchandise, which section [19 U.S.C.
retarded, by reason of imports of that merchandise
or by reasons of sales (or the likelihood of
sales) of that merchandise for importation, then
there shall be imposed upon such merchandise an
antidumping duty . . . in an amount equal to the
amount by which the normal value exceeds the
export price (or the constructed export price) for
the merchandise[.]
19 U.S.C. § 1673 (emphasis added).
Consol. Court No. 01-00686 Page 23
§ 1677(25)] defines as the ‘class or kind of merchandise within
the scope of an investigation.’” Id.
Even though NSK’s argument presents what could be deemed
logical inferences of 19 U.S.C. §§ 1673 and 1677, the logic does
not go so far as to make NSK’s interpretation of the statute
unambiguous. Webster defines “class” as “a group, set, or kind
marked by common attributes . . .” and “kind” as “a group united
by common traits or interests.” Webster’s Third New
International Dictionary (unabridged) 416, 1243 (1986). These
definitions could be construed to require the subject merchandise
to be considered in their entirety and thus bar zeroing. On the
other hand, §§ 1673 and 1677 could also be construed to require
Commerce to evaluate individual transactions only from the
perspective of a common group of merchandise. Such an
interpretation would leave the statutory authority ambiguous.
Koyo contends that Commerce’s argument must fail because 19
U.S.C. § 1677 does not explicitly mention “zeroing.” See Reply
Brief of Plaintiffs Koyo Seiko Co., Ltd. and Koyo Corporation of
U.S.A. in Support of Their Motion for Judgment on the Agency
Record at 13-19.
Commerce argues that the plain language of § 1677
unambiguously requires the zeroing of sales with negative
Consol. Court No. 01-00686 Page 24
margins. Commerce contends that § 1677(34) defines the terms
“dumped” and “dumping” as “the sale or likely sale of goods at
less than fair value” (emphasis added). Commerce also points to
§ 1677(35)(A), which defines the term “dumping margin” as “the
amount by which the normal value exceeds the export price”.
Def.’s Br. at 53. Commerce also argues that a failure to zero out
negative margins would permit those negative margins to
effectively cancel out dumped sales, “effectively eviscerating
the very purpose of the antidumping law.” Def.’s Br. at 55.
A combined reading of §§ 1673 and 1677 does not
unambiguously mandate zeroing. “A plain reading of the statute
discloses no provision for Commerce to offset sales made at [less
than fair value] with sales made at fair value.” Serampore
Indus. Pvt. Ltd. v. Dep’t of Commerce, 11 CIT 866, 873, 675 F.
Supp. 1354, 1360 (1987); see Timken, 354 F.3d at 1342. The use
of the word “exceeds” in § 1677(35)(A) does not explicitly
require that dumping margins be positive. See Timken, 354 F.3d
at 1342. Thus, when considered in conjunction with relevant case
law, NSK’s and Koyo’s respective arguments help serve to refute
Commerce’s claim that the statute unambiguously requires zeroing.
Having found the antidumping statutes ambiguous regarding
zeroing, the Court next considers whether Commerce’s practice is
Consol. Court No. 01-00686 Page 25
based on a permissible construction of the statutes under the
second step of Chevron. In Timken, the Federal Circuit observed
three reasons for affirming Commerce’s practice of zeroing as a
permissible construction of the dumping statute. First, the word
“exceeds” could justify a practice of finding dumping margins
only where the normal value “falls to the right of [the export
price] on the number line.” Id. Second, zeroing was found to be
in accord with Commerce’s practice of assessing dumping duties on
an entry-by-entry basis. Id. Finally, because zeroing checks
the practice of masked dumping – hiding a few transactions with
dumped sales under the curtain of multiple sales at fair price –
the Federal Circuit deemed the practice proper. Id. at 1343.
Where Commerce has construed the statute in a way reasonably
designed to prevent masked dumping, the Court will not substitute
its own interpretation for that of Commerce. See Serampore, 11
CIT at 874, 675 F. Supp. at 1361.
It has been noted that statistical biases inherent in
Commerce’s zeroing practice prevent the statute from being
equivocal. See Bowe Passat v. Reinigungs-Und Waschereitechnik
GmbH v. United States, 20 CIT 558, 570-72, 926 F. Supp. 1138,
1149-50 (1996) (upholding Commerce’s zeroing practice “[u]nless
and until it becomes clear that such a practice is impermissible
Consol. Court No. 01-00686 Page 26
or unreasonable”). The proportion of fair sales to dumped sales
does not affect the Court’s determination of the reasonableness
of Commerce’s interpretation. In Bowe Passat, the Court
sustained Commerce’s zeroing practice even where 92 percent of
Bowe Passat’s U.S. sales were made at or above fair market value.
Id. at 571, 926 F. Supp. at 1149. Here, Commerce found a dumping
margin where 67 percent of NSK Europe’s U.S. sales and 89 percent
of NSK Japan’s U.S. sales exceeded normal value. See NSK Europe
Br. at 2; Memorandum of Points and Authorities in Support of NSK
Ltd.’s Motion for Judgment on the Agency Record (“NSK Japan Br.”)
at 2. The Court cannot find any basis for rejecting Commerce’s
determination on these grounds. See Bowe Passat, 20 CIT at 570-
72, 925 F. Supp. at 1149-50.
NSK further claims that zeroing is not only biased, but
punitive in nature, which is specifically prohibited in the
antidumping statute. See id.; see also Nat’l Knitwear &
Sportswear Ass’n v. United States, 15 CIT 548, 558, 779 F. Supp.
1354, 1373 (1991) (“[A]ntidumping duty law . . . is intended to
be remedial, not punitive”).
To be punitive, a duty must lack relation between the cost
imposed and the harm done. See Huaiyin Foreign Trade Corp. (30)
v. United States, 322 F.3d 1369, 1380 (Fed. Cir. 2003). The
Consol. Court No. 01-00686 Page 27
statistical bias inherent in zeroing is mitigated by the fact
that the denominator used in calculating the dumping margin
includes sales both above and below fair value. See Bowe Passat,
20 CIT at 571-72, 926 F. Supp. at 1150. Such inclusion of fair
value and dumped sales thus creates a rational connection between
the harm done – dumping – and the penalty imposed – the dumping
margin.
Accordingly, Commerce’s zeroing of Koyo’s and NSK’s negative
dumping margins is sustained.
D. Commerce’s Use Of Adverse Facts Available To NTN’s Home
Market and U.S. Freight Expenses Was Reasonable and In
Accordance With Law.
NTN challenges Commerce’s use of adverse facts available to
NTN’s home market and U.S. freight expenses.
Commerce requested that NTN report its freight expense
allocation in terms of weight. Pursuant to 19 C.F.R. §
351.401(g)(2), Commerce’s questionnaire directed that if an
interested party was unable to allocate freight expenses on the
basis on which they were incurred, the party should have (1)
explained how it allocated expenses; (2) explained why the party
could not allocate expenses on any of the bases on which they
were incurred; and (3) demonstrated that the allocation
Consol. Court No. 01-00686 Page 28
methodology used was not distortive. Rule 56.2 Motion and
Memorandum For Judgment Upon the Agency Record Submitted On
Behalf of the Plaintiffs and Defendant-Intervenors, NTN et al. at
6 (“NTN Br.”). Commerce’s regulations, specifically 19 C.F.R. §
351.401(g)(2), emphasize the importance that a party demonstrate
why its own methods are not distortive. NTN determined that it
could not report the freight expense allocation on the basis on
which it was incurred because of multiple, inconsistent
variables. Instead, NTN reported its freight allocation on the
basis of the sales value of the merchandise, claiming it was the
only consistent factor. While Commerce accepted this reporting
methodology in past reviews, for this review, Commerce requested
NTN to report its freight expense allocation in terms of weight,
and sent NTN two supplemental questionnaires specifically
requesting this information. NTN failed to comply. To justify
its use of adverse facts available, Commerce determined that NTN
was not cooperating to its full ability, and specifically that
NTN failed to show why its methodology, in terms of value, was
not distortive. Issues and Decision Memorandum for the
Administrative Reviews of Antifriction Bearings (other than
tapered roller bearings) and parts thereof from France, Germany,
Italy, Japan, Sweden, and the United Kingdom - May 1, 1999,
Consol. Court No. 01-00686 Page 29
through April 30, 2000 (“Issues and Decision Memo”), Comment 34.
Commerce is required to use facts otherwise available if a
respondent “withholds information that has been requested” or
“fails to provide such information by the deadlines for the
submission of the information or in the form and manner
requested.” 19 U.S.C. § 1677e(a) (A) and (B).
The Court finds that Commerce adequately considered NTN’s
submission of freight expenses in terms of weight, and acted
within its statutory authority in applying adverse facts.
Commerce determined that because of NTN’s refusal to submit the
requested weight data, NTN did not cooperate to the best of its
ability as is required by § 1677m(e). If Commerce anticipates
rejecting a party’s submitted information, § 1677m(d) requires
Commerce to give notice of the deficiency to the party. Commerce
complied with § 1677m(d) by giving sufficient notice to NTN in
the two supplemental questionnaires, specifically requesting the
data in terms of weight. Commerce explicitly determined that NTN
did not comply with the requirements to use its own allocation
methodology. Specifically, in pursuing its option of submitting
an alternative methodology based on value, NTN never explicitly
explained to Commerce why its methodology was not distortive as
required by 19 C.F.R. § 351.401(g)(2). In addition, Commerce
Consol. Court No. 01-00686 Page 30
acted in accordance with § 1677m(c)(1), which requires Commerce
to modify its request for information to avoid imposing an
unreasonable burden on the respondent.10 Commerce considered
NTN’s ability to submit the freight expenses in terms of weight
and determined that NTN would have been able to submit such
information, regardless of NTN’s contention that a ruling based
on weight rather than value would have been distortive.
Accordingly, Commerce’s use of adverse facts available for
NTN’s home market and U.S. freight expenses is sustained.
E. Commerce’s Inclusion Of NTN’s Export Price Sales in
Calculating Constructed Export Price Profit Adjustment Is In
Accordance With Law.
NTN argues that Commerce should not have included export
price (“EP”) sales in its calculation of CEP profit adjustment.
NTN asserts that 19 U.S.C. § 1677a(f)(2)(C), which defines total
10
Under 19 U.S.C. § 1677m(c)(1):
If an interested party, promptly after receiving a request
from the administering authority . . . for information,
notifies the administering authority . . . that such party
is unable to submit the information requested in the
requested form and manner . . ., the administering
authority . . . shall consider the ability of the
interested party to submit the information in the requested
form and manner and may modify such requirements to the
extent necessary to avoid imposing an unreasonable burden
on that party.
19 U.S.C. § 1677m(c)(1).
Consol. Court No. 01-00686 Page 31
expenses as “all expenses in the first of three categories which
applies and which are incurred by or on behalf of the foreign
like product sold in the exporting country” does not include any
explicit provision about export price expenses. Therefore, based
on the plain language of the statute, Commerce may not include EP
sales in its CEP profits.
Commerce responds that its inclusion of EP sales in CEP
profits is a reasonable interpretation of § 1677a(f)(2)(C),
consistent with its prior practice, and otherwise in accordance
with law. According to Commerce, “‘total expenses’ refers to all
expenses incurred with respect to the subject merchandise sold in
the United States . . . . Thus, where the respondent makes both
export-price and CEP sales to the United State[s] (sic), sales of
the subject merchandise would encompass all such transactions.”
Def.’s Br. at 32. Therefore, as NTN made both EP and CEP sales
in the United States, Commerce’s inclusion of EP sales is proper.
The Court finds that Commerce’s decision to include EP sales
in the CEP profit adjustment calculation was reasonable and in
accordance with law. The term total expenses is not exclusive to
CEP sales but may also include EP expenses. See Torrington Co.
v. United States, 25 CIT 395, 426, 146 F. Supp. 2d 845, 882
(2001), aff’d, 62 Fed.Appx. 950 (Fed. Cir. 2003). Because
Consol. Court No. 01-00686 Page 32
“subject merchandise” refers to the class or kind of merchandise
that is within the scope, it is reasonable for Commerce to
include EP sales when EP sales were made. Id. In the first
category of expenses, total expenses include “subject merchandise
sold in the United States,” including any merchandise within the
scope of the review. Id. This definition also includes EP
sales, as EP sales were made by NTN.
Accordingly, Commerce’s inclusion of EP sales in the CEP
profit adjustment calculation is sustained.
F. Commerce’s Inclusion of NTN’s CT Scan Bearings in the Margin
Calculation Is Remanded for Clarification.
Commerce included CT scan bearings in its calculation of
NTN’s dumping margin even after informing NTN that CT scan
bearings would be excluded from the scope of the administrative
review. NTN argues that Commerce should exclude NTN’s CT scan
bearings from its margin calculation. In its original
investigation, Commerce found “slewing rings” or “turntable
bearings” to be distinct from antifriction bearings. Seeking to
confirm that Commerce would continue to exclude these bearings
from the scope, NTN requested a ruling from Commerce on this
issue on May 24, 2001. Commerce responded to NTN by letter,
dated July 10, 2001, ruling that “turntable slewing bearings are
Consol. Court No. 01-00686 Page 33
not within the scope of the order.” NTN Br., Attachment A. Two
days later, on July 12, 2001, Commerce issued the Final Results,
which included these same bearings in the margin calculations.
See 66 Fed. Reg. at 36552.
In response, Commerce argues that recalculating the margin
would create an administrative burden, add uncertainty, and
defeat the principle of finality. See Def.’s Br. at 51.
Commerce also claims that the Final Results had already been
signed for five days prior to the issuance of the July 10, 2001
letter.
The Court finds that Commerce did not adequately address the
issue raised by NTN. Accordingly, the Court remands this issue
with instructions to clarify the circumstances in which the July
10, 2001 letter, confirming the exclusion of CT scan bearings,
was published while the Final Results included the same subject
merchandise.
G. Torrington Did Not Exhaust Its Administrative Remedies by
Applying for a Scope Inquiry Regarding INA Steering Column
Supports.
Commerce excluded INA’s steering column supports from the
scope of the antidumping order covering cylindrical roller
bearings from Germany. Torrington asserts that Commerce’s
failure to initiate a scope inquiry was contrary to law;
Consol. Court No. 01-00686 Page 34
alternatively, Torrington argues that Commerce’s determination
that the steering column supports were outside the scope of the
order was not supported by substantial evidence or in accordance
with law.
Under 19 C.F.R. § 351.225(b), Commerce is obligated to self-
initiate a scope inquiry only when, based on the available
information, it cannot determine whether a product is included
within the scope of an order. Commerce argues that it was able
to make a decision as to the scope based on the available product
descriptions, and therefore, was not obligated to self-initiate a
scope inquiry.
Torrington, however, did not have to rely on Commerce’s
judgment. If Torrington was not satisfied with Commerce’s
decision on the matter, the regulations also provide that any
interested party may request a scope inquiry as provided by 19
C.F.R. § 351.225(c)(1). Although Torrington “vigorously
contested Commerce’ [sic] determination to accept INA’s exclusion
of the product based on its informal inquiry,” Torrington did not
formally apply for a scope inquiry. The Torrington Company’s
Reply Brief at 3. As a result, because it failed to apply for a
ruling as permitted by the regulations, Torrington failed to
exhaust its administrative remedies.
Consol. Court No. 01-00686 Page 35
Whenever warranted, the Court is obligated to require the
exhaustion of administrative remedies before an issue can be
properly addressed here. 28 U.S.C. § 2637(d). The “detailed
scope determination procedures that Commerce has provided
constitute precisely the kind of administrative remedy that must
be exhausted before a party may litigate the validity of the
administrative action.” Sandvik Steel Co. v. United States, 164
F.3d 596, 599-600 (Fed. Cir. 1998).
Accordingly, because Torrington did not exhaust its
administrative remedies by applying for a scope inquiry, the
Court does not have jurisdiction to address the issue of whether
certain cylindrical bearings fell within the scope of the
antidumping order.
H. Commerce’s Acceptance of Koyo’s Method of Calculating Air
and Ocean Freight Expenses Is Supported by Substantial
Evidence and Otherwise In Accordance With Law.
Torrington challenges Commerce’s acceptance of Koyo’s method
of calculating air and ocean freight expenses. Koyo calculated a
single international freight expense factor by weight, using the
aggregate expenses for both air and ocean freight divided by the
total weight of all bearings shipped to the United States.
Torrington argues that Koyo could and should have either reported
Consol. Court No. 01-00686 Page 36
its international freight expenses on a transaction-specific
basis or separately reported air and ocean freight expenses,
allocating the air freight expenses in a more specific manner.
The Torrington Company’s Memorandum In Support Of Its Rule 56.2
Motion For Judgment Upon the Agency Record (“Torrington Br.”) at
56. Torrington claims that Koyo’s allocation method led to
significant inaccuracies. According to Torrington, accurate
reporting of air freight expenses would decrease U.S. prices and
therefore increase Koyo’s dumping margins. Id. at 69.
19 U.S.C. § 1677a(c)(2)(A) provides for an adjustment to EP
or CEP for the amount attributable to any costs incident to
bringing subject merchandise into the United States. Pursuant to
§ 1677a(c)(2)(A), Commerce deducts air and ocean freight costs.
Commerce “may consider allocated expenses and price adjustments
when transaction-specific reporting is not feasible, provided . .
. that the allocation method used does not cause inaccuracies or
distortions.” 19 C.F.R. § 351.401(g)(1). A party seeking to
submit allocated expenses and price adjustments must demonstrate
“that the allocation is calculated on as specific a basis as
feasible and must explain why their allocation methodology used
does not cause inaccuracies.” 19 C.F.R. § 351.401(g)(2).
At issue here is whether Koyo was capable of reporting its
Consol. Court No. 01-00686 Page 37
air freight expenses in a more specific manner. Torrington
claims that since Koyo only shipped via air freight on an
emergency basis to deal with low inventories, it would not have
been infeasible for Koyo to have reported transaction-specific
air freight expenses. See Torrington Br. at 64. Koyo responds
that this would not have been feasible because it did not possess
records that would allow the linkage of units shipped by air to
specific sales in the United States. See Memorandum of Koyo
Seiko Co., Ltd. and Koyo Corporation U.S.A. in Response to
Torrington’s Motion for Judgment on the Agency Record (“Koyo
Resp. Br.”) at 15.
To require Koyo to submit more specific air and ocean
freight expenses, Torrington must first establish linkage between
the shipments and specific sales in the United States. See
Torrington Co. v. United States, 21 CIT 491, 498, 965 F. Supp.
40, 45 (1993) (respondent’s reporting methodology is permissible
because “[t]he documents cited by Torrington do not provide a
means of linking individual sales to specific shipments”).
Torrington does not adequately demonstrate such linkage based
upon documents on the record. Torrington erroneously focuses on
how Koyo could have documented its shipments in a manner that
would allow for more specific reporting of its international
Consol. Court No. 01-00686 Page 38
freight expenses. Torrington’s argument is misplaced as §
351.401(g)(1) refers to the feasibility of using existing
documents to use transaction-specific reporting – not the
feasibility of maintaining records that would allow such
reporting. See also 19 U.S.C. § 351.401(g)(3) (Commerce must
consider “the records maintained by the party in question in the
ordinary course of business”). Nothing suggests that companies
are required to make wholesale changes to their record-keeping
practices to comply with § 351.401(g)(1).
The Court must also determine whether Commerce adequately
investigated Koyo’s proposed methodology to determine whether it
was reasonable and representative. See Torrington Co. v. United
States, 21 CIT 686, 695, 965 F. Supp. 1332, 1339 (1997).
Commerce has the authority to accept averages rather than
transaction-specific data “as long as the methodology chosen by a
respondent is reasonable and supported by information contained
in the administrative record.” Torrington, 21 CIT at 497, 965 F.
Supp. 45. As part of the sixth administrative review, Commerce
verified Koyo’s reporting methodology. By tracing data from
freight invoices to reports provided by freight carriers,
Commerce determined that it did accurately represent Koyo’s
shipping expenses. There is nothing in the record that
Consol. Court No. 01-00686 Page 39
demonstrates Koyo has altered its methodology since Commerce
conducted its inquiry in the sixth administrative review.
Accordingly, Commerce’s acceptance of Koyo’s method of
calculating air and ocean freight expenses is sustained.
I. Commerce’s Treatment of NTN’s Sales to Affiliated Parties Is
Supported By Substantial Evidence.
In the Final Results, Commerce applied the arm’s length test
to NTN’s sales to affiliated parties. Torrington challenges
Commerce’s decision on two separate grounds: (1) that Commerce
erred in not applying facts available to NTN’s affiliates and (2)
that Commerce improperly disregarded certain downstream sales in
its calculation of normal value.
Torrington argues that when calculating normal value,
Commerce erred by relying on sales figures to affiliates as
reported by NTN rather than on downstream sales or facts
available. Although downstream sales may be used to calculate
normal value when the foreign like product is sold to an
affiliated party, Commerce may not rely on downstream sales if
the “arm’s length” test is satisfied. 19 C.F.R. § 351.403(c).
Commerce explained that a model-specific comparison of sales to
affiliated and unaffiliated parties showed that sales to
affiliated parties were an average of 99.5 percent or more of the
Consol. Court No. 01-00686 Page 40
price of sales to unaffiliated parties. As a result of this
comparison, Commerce concluded that NTN’s sales to affiliated
parties satisfied the arm’s length test and therefore formed a
reasonable basis for calculating normal value. See Issues and
Decision Memo at Comment 25. Therefore, according to Commerce,
it was unnecessary to rely on downstream sales or facts available
when calculating normal value.
Torrington points out, however, that Commerce has recognized
that the 99.5 percent arm’s length test is not the sole method
for dealing with the issue of sales to affiliated parties. See
Torrington Br. at 46 (citing Antidumping Duties; Countervailing
Duties; Final Rule, 62 Fed. Reg. 27296, 27355 (May 19, 1997)).
However, Torrington fails to point out that in the next sentence
Commerce announced that it will “continue to apply the current
99.5 percent test unless and until [it] develop[s] a new method.”
Id. Commerce found that this 99.5 percent arm’s length test was
suitable and that it was satisfied. Acting in accordance with
19 C.F.R. § 351.403(c), Commerce did not err in relying on NTN’s
reported sales figures rather than on downstream sales or facts
available when calculating normal value.
In prior reviews and the preliminary results of this
administrative review, NTN’s failure to supply all downstream
Consol. Court No. 01-00686 Page 41
sales through affiliated resellers resulted in Commerce’s
application of adverse facts available in its calculation of
normal value. Commerce did not, however, apply adverse facts
available in the Final Results. Issues and Decision Memo at
Comment 2. Citing Queen’s Flowers de Colombia v. United States,
21 CIT 968, 981 F. Supp. 617 (1997), Torrington points out that
an agency is required either to conform to its prior decisions or
to explain the reasons for its departure. As a result,
Torrington argues that Commerce’s failure to use adverse facts in
the Final Results, without providing an explanation of its
reasoning, requires the issue to be remanded for further
explanation.
Commerce argues that its previous decisions are not binding.
In addition, Commerce concluded in the Final Results that because
NTN’s reported sales satisfied the arm’s length test they
provided Commerce with a reasonable basis for calculating normal
value. Therefore, according to Commerce, it can hardly be said
that Commerce failed to comply with its prior decisions.
Commerce may, but is not required to, apply adverse facts
when “an interested party 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). Given Commerce’s
Consol. Court No. 01-00686 Page 42
satisfaction with NTN’s compliance with requests for additional
information and explanations and Commerce’s reasonable conclusion
that it had sufficient information to calculate normal value,
Commerce is not compelled to use adverse facts available.
Because Commerce is not bound by prior decisions based on
different facts and because applying adverse facts available in
the case at hand is unwarranted, the Court holds that there is no
basis for remanding this issue for further clarification.
As to the second issue, Commerce claims that it was unable
to use downstream sales data for sales to affiliates that did not
satisfy the arm’s length test because matching downstream figures
were unavailable. Def.’s Br. at 75. Torrington argues that this
is not supported by the evidence and that Commerce’s failure to
request the allegedly missing data constitutes a blatant
abrogation of its statutory duty to conduct an adequate
investigation. See Freeport Minerals Co. v. United States, 776
F.2d 1029 (Fed. Cir. 1985). Upon reviewing the record, the Court
holds that Commerce did not err by deciding not to use certain
downstream sales data. Commerce’s decision not use these
downstream sales is in accordance with 19 U.S.C. § 1677(16),
which states that Commerce is not required to “obtain information
on all possible sales of the foreign like product.” Furthermore,
Consol. Court No. 01-00686 Page 43
Commerce exercised its discretion pursuant to 19 C.F.R. §
351.403(c), which states that “[i]f an importer or producer sold
the foreign like product through an affiliated party, the
Secretary may calculate normal value based on such sale by the
affiliated party.” Commerce, after reviewing the record
evidence, concluded that it was not “necessary or appropriate to
require the reporing of [downstream sales] . . . in all
instances.” Antidumping Duties; Countervailing Duties; Final
Rule, 62 Fed. Reg. at 27356.
Accordingly, Commerce’s treatment of NTN’s sales to
affiliated parties is sustained.
III. CONCLUSION
For the aforementioned reasons, the Final Results is
sustained in part and reversed and remanded in part.
A separate order will be issued accordingly.
/s/ Richard W. Goldberg
Richard W. Goldberg
Senior Judge
Date: August 10, 2004
New York, New York