SNR Roulements v. United States

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