Luoyang Bearing Corp. v. United States

Slip Op. 04-53

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
________________________________________
:
LUOYANG BEARING CORP. (GROUP), :
ZHEJIANG MACHINERY IMPORT & EXPORT :
CORP., and CHINA NATIONAL MACHINERY :
IMPORT & EXPORT CORPORATION, :
:
Plaintiffs, :
:
and :
:
WAFANGDIAN BEARING COMPANY, LTD., :
:
Plaintiff and :
Defendant-Intervenor, : Consol. Court No.
: 01-00036
v. :
:
UNITED STATES, :
:
Defendant, :
:
and :
:
THE TIMKEN COMPANY, :
:
Defendant-Intervenor :
and Plaintiff. :
________________________________________:

This consolidated action concerns the claims raised by
plaintiffs, Luoyang Bearing Corp. (Group) (“Luoyang”), Zhejiang
Machinery Import & Export Corp. (“ZMC”), and China National
Machinery Import & Export Corporation (“CMC”), and plaintiff and
defendant-intervenors, Wafangdian Bearing Company, Ltd.
(“Wafangdian”) and The Timken Company (“Timken”), who move pursuant
to USCIT R. 56.2 for judgment upon the agency record challenging
the Department of Commerce, International Trade Administration’s
(“Commerce”) final determination, entitled Final Results of 1998-
1999 Administrative Review, Partial Rescission of Review, and
Determination Not To Revoke Order in Part on Tapered Roller
Bearings and Parts Thereof, Finished and Unfinished, From the
People’s Republic of China (“Final Results”), 66 Fed. Reg. 1,953
(Jan. 10, 2001), as amended by Amended Final Results of 1998-1999
Administrative Review and Determination To Revoke Order in Part on
Consol. Court No. 01-00036 Page 2

Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,
From the People’s Republic of China (“Amended Final Results”), 66
Fed. Reg. 11,562 (Feb. 26, 2001).

Specifically, CMC and ZMC contend that Commerce improperly
rejected a market economy price of imported steel for the
production of People’s Republic of China (“PRC”) tapered roller
bearings (“TRBs”) based upon a “reason to believe or suspect” that
the price was subsidized. CMC further argues that Commerce erred
in: (1) holding an ex parte meeting with counsel for Timken; (2)
including employer welfare and provident fund expenses in the
selling, general and administrative expenses (“SG&A”) ratio; and
(3) adding ocean freight and insurance costs to the export price of
Japanese steel to determine the surrogate value. Luoyang,
Wafangdian and ZMC maintain that Commerce erred in: (1) rejecting
ZMC’s input value for steel bought from a PRC supplier and paid for
with PRC currency; (2) disregarding actual ocean freight charges
paid in market economy currency to PRC freight forwarders rather
than to the exporter; and (3) using aberrational data in
calculating the surrogate value for wooden cases and the steel used
to make rollers.

Timken contends that: (1) Commerce improperly applied the PRC
rate to all Premier Bearing & Equipment Ltd. (“Premier”) United
States sales; (2) the administrative record does not support the
use of other producers’ factors data to calculate Premier’s normal
values; (3) the upward post-sale price adjustments to certain
Wafangdian sales were unlawful; (4) Commerce failed to account for
defective parts in calculating normal value for Wafangdian; and (5)
Commerce acted contrary to law in revoking the order relating to
Wafangdian imports.

Held: China National’s 56.2 motion is denied. Luoyang’s 56.2
motion is granted in part and denied in part. Timken’s 56.2 motion
is granted in part and denied in part. This case is remanded to
Commerce to: (1)(a) further explain why the surrogate values it
chose for wooden cases and the steel used to produce TRBs for
Wafangdian constitute the “best available information,” and (b)
address the aberrational record data that Luoyang, Wafangdian and
ZMC point to; and (2) conduct the separate rates analysis with
respect to Premier and apply the PRC rate to all of Premier’s
United States sales if Commerce finds that Premier is not
independent of government control.

[China National’s motion is denied. Luoyang’s motion is granted in
part and denied in part. Timken’s motion is granted in part and
denied in part. Case remanded.]
Consol. Court No. 01-00036 Page 3

Dated: May 18, 2004

Hume & Associates PC (Robert T. Hume) for Luoyang and ZMC,
plaintiffs and Wafangdian, plaintiffs and defendant-intervenors.

Venable, Baetjer, Howard & Civiletti, LLP (Lindsay B. Meyer
and Kristin K. Woody) for CMC, plaintiff.

Peter D. Keisler, Assistant Attorney General; David M. Cohen,
Director, Commercial Litigation Branch, Civil Division, United
States Department of Justice (Henry R. Felix); of counsel: John F.
Koeppen, Office of the Chief Counsel for Import Administration,
United States Department of Commerce, for the United States,
defendant.

Stewart and Stewart (Terence P. Stewart, Wesley K. Caine and
Amy A. Karpel) for Timken, defendant-intervenor and plaintiff.

OPINION

TSOUCALAS, Senior Judge: This consolidated action concerns

the claims raised by plaintiffs, Luoyang Bearing Corp. (Group)

(“Luoyang”), Zhejiang Machinery Import & Export Corp. (“ZMC”), and

China National Machinery Import & Export Corporation (“CMC”), and

plaintiff and defendant-intervenors, Wafangdian Bearing Company,

Ltd. (“Wafangdian”) and The Timken Company (“Timken”), who move

pursuant to USCIT R. 56.2 for judgment upon the agency record

challenging the Department of Commerce, International Trade

Administration’s (“Commerce”) final determination, entitled Final

Results of 1998-1999 Administrative Review, Partial Rescission of

Review, and Determination Not To Revoke Order in Part on Tapered

Roller Bearings and Parts Thereof, Finished and Unfinished, From

the People’s Republic of China (“Final Results”), 66 Fed. Reg.
Consol. Court No. 01-00036 Page 4

1,953 (Jan. 10, 2001), as amended by Amended Final Results of 1998-

1999 Administrative Review and Determination To Revoke Order in

Part on Tapered Roller Bearings and Parts Thereof, Finished and

Unfinished, From the People’s Republic of China (“Amended Final

Results”), 66 Fed. Reg. 11,562 (Feb. 26, 2001).

Specifically, CMC and ZMC contend that Commerce improperly

rejected a market economy price of imported steel for the

production of People’s Republic of China (“PRC”) tapered roller

bearings (“TRBs”) based upon a “reason to believe” or suspect that

the price was subsidized. CMC further argues that Commerce erred

in: (1) holding an ex parte meeting with counsel for Timken; (2)

including employer welfare and provident fund expenses in the

selling, general and administrative expenses (“SG&A”) ratio; and

(3) adding ocean freight and insurance costs to the export price of

Japanese steel to determine the surrogate value. Luoyang,

Wafangdian and ZMC maintain that Commerce erred in: (1) rejecting

ZMC’s input value for steel bought from a PRC supplier and paid for

with PRC currency; (2) disregarding actual ocean freight charges

paid in market economy currency to PRC freight forwarders rather

than to the exporter; and (3) using aberrational data in

calculating the surrogate value for wooden cases and the steel used

to make rollers.
Consol. Court No. 01-00036 Page 5

Timken contends that: (1) Commerce improperly applied the PRC

rate to all Premier Bearing & Equipment Ltd. (“Premier”) United

States sales; (2) the administrative record does not support the

use of other producers’ factors data to calculate Premier’s normal

values; (3) the upward post-sale price adjustments to certain

Wafangdian sales were unlawful; (4) Commerce failed to account for

defective parts in calculating normal value for Wafangdian; and (5)

Commerce acted contrary to law in revoking the order relating to

Wafangdian imports.

BACKGROUND

This case concerns the antidumping duty order on TRBs and

parts thereof, finished and unfinished (“subject merchandise”),

from the PRC for the period of review covering June 1, 1998,

through May 31, 1999 (“POR”).1 See Final Results, 66 Fed. Reg. at

1,953. In 1987, Commerce published an antidumping duty order on

TRBs from the PRC. See Antidumping Duty Order on Tapered Roller

Bearings and Parts Thereof, Finished or Unfinished, From the

People’s Republic of China, 52 Fed. Reg. 22,667 (June 15, 1987).

1
Since the administrative review at issue was initiated
after December 31, 1994, the applicable law is the antidumping
statute as amended by the Uruguay Round Agreements Act (“URAA”),
Pub. L. No. 103-465, 108 Stat. 4809 (1994) (effective January 1,
1995). See Torrington Co. v. United States, 68 F.3d 1347, 1352
(Fed. Cir. 1995) (citing URAA § 291(a)(2), (b) (noting effective
date of URAA amendments)).
Consol. Court No. 01-00036 Page 6

Commerce initiated an administrative review of the subject

merchandise on July 23, 1999. See Initiation of Antidumping and

Countervailing Duty Administrative Reviews and Request for

Revocation in Part, 64 Fed. Reg. 41,075 (July 29, 1999).

On July 7, 2000, Commerce published the preliminary results of

the subject review. See Preliminary Results of 1998-1999

Administrative Review, Partial Recission of Review, and Notice of

Intent to Revoke Order in Part for Tapered Roller Bearings and

Parts Thereof, Finished and Unfinished, From the People’s Republic

of China (“Preliminary Results”), 65 Fed. Reg. 41,944. Commerce

published the Final Results on January 10, 2001. See Final

Results, 66 Fed. Reg. 1,953. The Issues and Decision Memo2 which

accompanied the Final Results, is dated January 3, 2001. See Final

Results, 66 Fed. Reg. at 1,954. Commerce later published the

Amended Final Results on February 26, 2001. See Amended Final

Results, 66 Fed. Reg. 11,562.

JURISDICTION

2
The full title of this document is Issues and Decision
Memo for the 1998-99 Administrative Review of Tapered Roller
Bearings and Parts Thereof, Finished and Unfinished, from the
People’s Republic of China; Final Results, compiled as an appendix
to the Final Results, 66 Fed. Reg. at 11,562. The Court, in the
interest of clarity, will refer to this document as Issues &
Decision Mem. and match pagination to the printed documents
provided by the parties. See e.g., Luoyang’s App. 8.
Consol. Court No. 01-00036 Page 7

The Court has jurisdiction over this matter pursuant to 19

U.S.C. § 1516a(a) (2000) and 28 U.S.C. § 1581(c) (2000).

STANDARD OF REVIEW

In reviewing a challenge to Commerce’s final determination in

an antidumping administrative review, the Court will uphold

Commerce’s determination 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)(i) (1994).

I. Substantial Evidence Test

Substantial evidence is “more than a mere scintilla. It means

such relevant evidence as a reasonable mind might accept as

adequate to support a conclusion.” Universal Camera Corp. v. NLRB,

340 U.S. 474, 477 (1951) (quoting Consolidated Edison Co. v. NLRB,

305 U.S. 197, 229 (1938)). Substantial evidence “is something less

than the weight of the evidence, and the possibility of drawing two

inconsistent conclusions from the evidence does not prevent an

administrative agency’s finding from being supported by substantial

evidence.” Consolo v. Federal Maritime Comm’n, 383 U.S. 607, 620

(1966) (citations omitted). Moreover, “[t]he court may not

substitute its judgment for that of the [agency] when the choice is

‘between two fairly conflicting views, even though the court would

justifiably have made a different choice had the matter been before
Consol. Court No. 01-00036 Page 8

it de novo.’” American Spring Wire Corp. v. United States, 8 CIT

20, 22, 590 F. Supp. 1273, 1276 (1984) (quoting Penntech Papers,

Inc. v. NLRB, 706 F.2d 18, 22-23 (1st Cir. 1983) (quoting, in turn,

Universal Camera, 340 U.S. at 488)).

II. Chevron Two-Step Analysis

To determine whether Commerce’s interpretation and application

of the antidumping statute is “in accordance with law,” the Court

must undertake the two-step analysis prescribed by Chevron U.S.A.

Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837

(1984). Under the first step, the Court reviews Commerce’s

construction of a statutory provision to determine whether

“Congress has directly spoken to the precise question at issue.”

Id. at 842. “To ascertain whether Congress had an intention on the

precise question at issue, [the Court] employ[s] the ‘traditional

tools of statutory construction.’” Timex V.I., Inc. v. United

States, 157 F.3d 879, 882 (Fed. Cir. 1998) (citing Chevron, 467

U.S. at 843 n.9). “The first and foremost ‘tool’ to be used is the

statute’s text, giving it its plain meaning. Because a statute’s

text is Congress’ final expression of its intent, if the text

answers the question, that is the end of the matter.” Id.

(citations omitted). Beyond the statute’s text, the tools of

statutory construction “include the statute’s structure, canons of

statutory construction, and legislative history.” Id. (citations
Consol. Court No. 01-00036 Page 9

omitted); but see Floral Trade Council v. United States, 23 CIT 20,

22 n.6, 41 F. Supp. 2d 319, 323 n.6 (1999) (noting that “[n]ot all

rules of statutory construction rise to the level of a canon,

however”) (citation omitted).

If, after employing the first prong of Chevron, the Court

determines that the statute is silent or ambiguous with respect to

the specific issue, the question for the Court becomes whether

Commerce’s construction of the statute is permissible. See

Chevron, 467 U.S. at 843. Essentially, this is an inquiry into the

reasonableness of Commerce’s interpretation. See Fujitsu Gen. Ltd.

v. United States, 88 F.3d 1034, 1038 (Fed. Cir. 1996). Provided

Commerce has acted rationally, the Court may not substitute its

judgment for the agency’s. See Koyo Seiko Co. v. United States,

36 F.3d 1565, 1570 (Fed. Cir. 1994) (holding that “a court must

defer to an agency’s reasonable interpretation of a statute even if

the court might have preferred another”); see also IPSCO, Inc. v.

United States, 965 F.2d 1056, 1061 (Fed. Cir. 1992). The “[C]ourt

will sustain the determination if it is reasonable and supported by

the record as a whole, including whatever fairly detracts from the

substantiality of the evidence.” Negev Phosphates, Ltd. v. United

States, 12 CIT 1074, 1077, 699 F. Supp. 938, 942 (1988) (citations

omitted). In determining whether Commerce’s interpretation is

reasonable, the Court considers the following non-exclusive list of
Consol. Court No. 01-00036 Page 10

factors: the express terms of the provisions at issue, the

objectives of those provisions and the objectives of the

antidumping scheme as a whole. See Mitsubishi Heavy Indus. v.

United States, 22 CIT 541, 545, 15 F. Supp. 2d 807, 813 (1998).

DISCUSSION

I. Commerce Properly Selected Surrogate Values for Imported
Steel Used to Produce TRBs

A. Background

1. Statutory Background

Commerce determines the antidumping duty margin by taking the

difference between the normal value (“NV”) and the United States

price of the merchandise. When merchandise is produced in a non-

market economy country (“NME”), such as the PRC, there is a

presumption that exports are under the control of the state.

Section 1677b(c) of Title 19 of the United States Code provides

that, “the valuation of the factors of production shall be based on

the best available information regarding the values of such factors

in a market economy country or countries considered to be

appropriate by [Commerce].” 19 U.S.C. § 1677b(c)(1) (1994). The

statute, however, does not define the phrase “best available

information,” it only provides that, “[Commerce], in valuing

factors of production . . . shall utilize, to the extent possible,

the prices or costs of factors of production in one or more market
Consol. Court No. 01-00036 Page 11

economy countries that are--(A) at a level of economic development

comparable to that of the nonmarket economy country, and (B)

significant producers of comparable merchandise.” 19 U.S.C. §

1677b(c)(4). Consequently, Commerce is given broad discretion “to

determine margins as accurately as possible, and to use the best

information available to it in doing so.” Lasko Metal Prods., Inc.

v. United States, 43 F.3d 1442, 1443 (Fed. Cir. 1994).

The antidumping duty statute authorizes, but does not mandate,

that Commerce use surrogate countries to estimate the value of the

factors of production (“FOP”). In legislative history, Congress

provided Commerce with guidance by stating that, “[i]n valuing such

[FOP], Commerce shall avoid using any prices which it has reason to

believe or suspect may be dumped or subsidized prices.” H.R. Conf.

Rep. No. 100-576, at 590 (1988), reprinted in 1988 U.S.C.C.A.N.

1547, 1623 (“House Report”). The House Report further states that,

“the conferees do not intend for Commerce to conduct a formal

investigation to ensure that such prices are not dumped or

subsidized, but rather intend that Commerce base its decision on

information generally available to it at that time.” H.R. Conf.

Rep. No. 100-576, at 590-91, reprinted in 1988 U.S.C.C.A.N. at

1623-24. In addition, Commerce has promulgated regulations

regarding the valuation of FOP in the NME context. The relevant

regulations state that “where a factor is purchased from a market
Consol. Court No. 01-00036 Page 12

economy supplier and paid for in a market economy currency,

[Commerce] normally will use the price paid to the market economy

supplier.” 19 C.F.R. § 351.408(c)(1) (1999).

2. Factual Background

In the Preliminary Results, Commerce valued the steel used to

produce the subject TRBs by using the actual import prices paid by

CMC. In particular, Commerce noted:

Certain producers in this review purchased steel from
market economy suppliers and paid for the steel with
market economy currency. Thus, in accordance with
[Commerce’s] regulations, [Commerce] valued all
appropriate steel inputs using the actual price reported
for directly imported inputs from a market economy. For
all other steel inputs, we used a surrogate to value that
steel.

Preliminary Results, 65 Fed. Reg. at 41,948. Commerce later used

surrogate values to determine NV upon a determination that there

was “reason to believe or suspect” that the market economy prices

of imported steel used to produce the subject merchandise sold by

CMC and ZMC was dumped or subsidized. See Final Results, 66 Fed.

Reg. at 1,955; see also CMC’s Mem. Supp. Mot. Under R. 56.2 J.

Agency R. Action Under 28 U.S.C. § 1581(C) (“CMC’s Mem.”) at App.

7. Commerce premised its “reason to believe or suspect,” in part,

on the availability and use of general subsidies in the subject

industry. See CMC’s Mem. at App. 7.
Consol. Court No. 01-00036 Page 13

B. Contentions of the Parties

1. CMC’s Contentions

CMC argues that Commerce exceeded its statutory discretion by

rejecting market economy prices paid for steel inputs in a market-

based currency by NME producers to market economy suppliers.3 See

id. at 17-18. According to CMC, “these market-driven prices

constitute the ‘best available information.’” Id. at 30. Commerce

relied on two United States countervailing duty investigations

involving steel material inputs not used in the production of cups

and cones.4 See id. at 19. CMC argues, therefore, that Commerce

is not entitled to Chevron deference in this determination because

“[t]here is no statutory or regulatory provision that requires the

rejection of either surrogate or actual prices based on a ‘reason

to believe or suspect’ standard that the prices are dumped or

subsidized.” Id. Even Commerce’s regulations are silent on this

3
Specifically, CMC maintains that the United States Court
of Appeals for the Federal Circuit (“CAFC”) held that “the cost of
raw materials paid in convertible currencies to a market economy
supplier provide Commerce with the most accurate approximation of
the cost of producing the goods in a market economy.” CMC’s Mem.
at 28. Thus, when Commerce “can determine that an NME producer’s
input prices are market determined[,] accuracy, fairness, and
predictability are enhanced by using those prices.” Id. (quoting
Lasko, 43 F.3d at 1446).
4
To make cups and cones, CMC and ZMC used hot-rolled steel
bar that was imported from a market economy country and sold to
ZMC’s supplier factory, which paid for the steel in local market
economy currency. See Mot. Pls. Luoyang, Wafangdian & ZMC J.
Agency R. (“Luoyang’s Mot.”) at 7; CMC’s Mem. at 7.
Consol. Court No. 01-00036 Page 14

issue and Commerce relied “exclusively on a statement in

legislative history–-which was neither enacted in the statute nor

codified in the regulations–-to support its novel position.” See

id. at 20. CMC also asserts that the relevant statute does not

directly address the issue of a particular methodology that

Commerce must employ to value the FOP in an NME. See id. at 21

(citing Shakeproof Assembly Components Div. of Ill. Tool Works,

Inc. v. United States, 23 CIT 479, 481, 59 F. Supp. 2d 1354, 1357

(1999)). “[W]hen there is a third country countervailing duty

order [“CVD”] on a different product from the source country[,]”

Commerce’s regulations do not address the use of “actual price to

value an input. See id. at 21. “‘[T]he Court’s task is to assess

the reasonableness of Commerce’s interpretation to allow for

valuation based on the actual value of the inputs imported from a

market economy.’” Id. at 21 (quoting Shakeproof Assembly Div. of

Ill. Tool Works, Inc. v. United States, 24 CIT 485, 489, 102 F.

Supp. 2d 486, 491 (2000)).

Since the statute is silent with respect to the issue at bar,

CMC argues that Commerce should not be accorded Chevron deference.

See id. Instead, the Court should analyze the validity,

thoroughness, persuasiveness, formality and consistency of

Commerce’s decision in accordance with the test delineated in

Skidmore v. Swift & Co., 323 U.S. 134, 139-40 (1944). See CMC’s
Consol. Court No. 01-00036 Page 15

Mem. at 22 (citing United States v. Mead Corp., 533 U.S. 218

(2001)). CMC further contends that Commerce’s analysis is not

persuasive under Skidmore since Commerce expanded its statutory

authority by rejecting the actual prices for two reasons. First,

the “‘reason to believe or suspect’ language applied by [Commerce]

is drawn not from the statute or regulations but from the

legislative history.” Id. Second, Commerce’s determination is not

supported by substantial evidence, but rather depends upon CVD on

different products manufactured by different suppliers than those

at issue in this review. See id. at 23.

CMC also argues that Commerce’s decision to reject actual

prices was a change in methodology that was made without sufficient

notice to the affected parties or public. See id. Chevron

deference, therefore, is not applicable here because Commerce’s

“new course was undertaken through informal rulemaking and without

public deliberation.” Id. at 24. Furthermore, Commerce’s reliance

on the term “subsidies” in the relevant legislative history is

misplaced since the meaning of the term is not clearly defined.

See id. at 24-25. Commerce’s authority to reject actual prices is

limited to situations where specific countervailing subsidies are

in place, and not general subsidies on products different than

those at issue. See id. CMC also argues that Commerce’s proposed

methodology does not promote transparency or predictability and
Consol. Court No. 01-00036 Page 16

mandates respondents to monitor antidumping and countervailing duty

decisions across an entire industry. See id. at 25-26.

CMC distinguishes the determination that Commerce depends

upon5 in its analysis to “support the application of the ‘reason to

believe or suspect’ standard to actual market economy import

prices.” Id. at 34 (emphasis in original). CMC also cites

Tehnoimportexport, UCF Am. Inc. v. United States, 16 CIT 13, 783 F.

Supp. 1401 (1992), and China National Arts and Crafts Import and

Export Corp. v. United States, 15 CIT 417, 771 F. Supp. 407 (1991),

to support its argument that no post-1998 case on point supports

the application of the “reason to believe or suspect” standard to

market economy imports. See CMC’s Mem. at 33-34. CMC contends that

use of this standard to reject an actual price “is akin to

speculation, since the evidence required to ‘suspect’ is very

little,” id. at 34, and that Commerce’s assumption that market

economy inputs were dumped or subsidized is not based on

substantial evidence. See id. at 35.

2. ZMC’s Contentions

ZMC supports the arguments made by CMC with respect to

5
Specifically, Commerce relies on Final Results of
Antidumping Administrative Review of Certain Helical Spring Lock
Washers From The People’s Republic of China, 61 Fed. Reg. 66,255,
66,257 (Dec. 17, 1996), which CMC claims concerned only the
application of surrogate values.
Consol. Court No. 01-00036 Page 17

Commerce’s rejection of market economy prices paid for steel

inputs. See Luoyang’s Mot. at 17-19. Zhejiang adds:

The legislative history on which Commerce relied to
disregard the direct steel sales to the PRC should have
been read in context. As Commerce noted, there was no
countervailing duty imposed on imports of the steel by
the PRC and there was no evidence that any other country,
including the United States, had imposed countervailing
duties on the specific steel.

Id. at 17. Thus, when Commerce avoids using prices it has a

“reason to believe or suspect” may be dumped or subsidized prices,

such a decision must be premised on the fact that injury to the

domestic injury actually occurred. See id. at 17-18. ZMC argues

that Commerce did not provide sufficient evidence to show that

there was injury to the specific domestic industry, and that “if

the sole evidence is . . . the existence of ‘general subsidies’ .

. . [then this] is a standard Commerce should set forth in the form

of rule-making and not a case decision.” Id. at 18.

3. Commerce’s Contentions

Commerce argues that Chevron deference is applicable with

respect to the statutory provision at issue. See Commerce’s Mem.

Opp’n Pls. Mot. J. Upon Agency R. (“Commerce’s Mem.”) at 46 (citing

Shakeproof Assembly Components, Div. of Ill. Tool Works, Inc. v.

United States (“Shakeproof III”), 268 F.3d 1376, 1378 (Fed. Cir.
Consol. Court No. 01-00036 Page 18

2001)).6 Commerce responds to CMC and ZMC’s argument regarding

notice by stating that Shakeproof III and other cases “recognize[]

that Commerce routinely announces through administrative

determinations different interpretive reasons for accepting or

rejecting a particular market-based or surrogate value.” Id.

(citing Lasko, 43 F.3d at 1445 (affirming Commerce’s valuation of

a factor of production by use of surrogate country and actual cost

values)); Baoding Yude Chem. Indus. Co., Ltd. v. United States, 25

CIT ___, 170 F. Supp. 2d 1335 (2001)). Commerce contends that it

is mandated by statute to base FOP valuation on the “best available

information” and to assess antidumping margins accurately. See

Commerce’s Mem. at 47 (citing Shakeproof III, 268 F.3d at 1382).

Commerce does not agree with CMC’s argument that market-based

prices are normally preferred by the agency’s regulations since

Commerce’s primary goal is to use the best available information to

6
The Court agrees that this determination is afforded
Chevron deference. The CAFC in Shakeproof III recognizes that
Commerce has “special expertise” and is granted “‘substantial
deference to its construction of pertinent statutes.’” Shakeproof
III, 268 F.3d at 1381 (quoting Micron Tech., Inc. v. United States,
117 F.3d 1386, 1394 (Fed. Cir. 1997)). Contra CMC’s Reply Mem.
Supp. Mot. R. 56.2 J. Agency R. Act. Under 28 U.S.C. § 1581(C)
(“CMC’s Reply”) at 11 (stating that “[i]n light of Congress’ intent
that Commerce not engage in adjudicatory proceedings . . . the
Court should not apply Chevron deference”). The CAFC further
states that “[e]ven where Commerce has not engaged in notice-and-
comment rulemaking, its statutory interpretations articulated in
the course of antidumping proceedings draw Chevron deference.”
Shakeproof III, 268 F.3d at 1381 (citing Mead, 533 U.S. at 218).
Consol. Court No. 01-00036 Page 19

value FOP. See Commerce’s Mem. at 47-48 (citing 19 C.F.R. §

351.408(a) & (c)(1)). In this review, Commerce contends that it

had a viable “reason to believe or suspect” that the market economy

prices were subsidized and, accordingly, resorted to using

surrogate values. See id. at 48. Commerce argues that its

decision was in line with Chevron since the agency is accorded wide

discretion in the valuation of FOP. See id. at 49. Moreover,

Commerce states that its Issues & Decision Mem. sets forth that

the obligatory language of the pertinent legislative
history most likely refers to surrogate prices as opposed
to actual market economy input prices. However,
Commerce’s approach in this case is a permissible
construction, read in conjunction with the legislative
history, that gives effect to the first principle of the
statute as set out in Shakeproof[III]. That is, Commerce
shall avoid using prices (surrogate or market-based) that
may be dumped or subsidized in order to use the best
available information to value factors.

Id. at 49-50.

Commerce argues that it based its “reason to believe or

suspect” on substantial evidence as required by this Court’s

relevant standard of review and that the agency’s reasoning is set

forth in its Market Economy Steel Memorandum.7 See id. at 50-51.

7
Commerce recognizes the conflicting nature of the
evidence in its Market Economy Steel Memorandum and the Issues and
Decision Memo. Commerce adds that it was “fully cognizant that this
issue was one that had evidence to support a decision either way.
Because the record demonstrates this fact, [Commerce argues that]
this Court should not interfere with Commerce’s legitimate choice
between two conflicting views, each of which is supported by
(continued...)
Consol. Court No. 01-00036 Page 20

Commerce mentions that the “reason to believe or suspect”

requirement merely required “some specific, particularized

evidence, taking into account all the circumstances before the

administrative decision maker at the time of the decision.” Id. at

50-51. According to Commerce, “[t]his is especially true in light

of the congressional statement that Commerce need not investigate

to ensure that prices are actually subsidized.” Id. at 51

(emphasis in original).

4. Timken’s Contentions

Timken generally agrees with Commerce that its decision to

decline market prices was reasonable. See Timken’s Mem. Opp’n

Mots. J. Agency R. CMC, Luoyang, Wafangdian & ZMC (“Timken’s

Opp’n”) at 21. Timken first argues that Chevron and not Skidmore

deference applies in antidumping determinations. See id. at 22.

Second, Timken maintains that Commerce’s determination to reject

subsidized prices passes the Chevron reasonableness test. See id.

at 22-23. Third, Timken contends that CMC’s assertion regarding 19

C.F.R. § 351.408(c)(1) is in error because the relevant statue is

silent on the issue of using prices of inputs from market sources.

See id. at 23. “Therefore, there is no statutory ‘mandate’

precluding Commerce’s action here.” Id. at 23. CMC misreads the

(...continued)
evidence that detracts fairly from the other.” Commerce’s Mem. at
53-54.
Consol. Court No. 01-00036 Page 21

regulation’s “direction” since it merely states that “‘where a

factor is purchased from a market economy supplier and paid for in

a market economy currency, [Commerce] normally will use the price

paid to the market economy supplier.’” 19 C.F.R. § 351.408(c)(1).

Timken asserts that the word “normally” contemplates exceptions, so

that the question becomes whether Commerce, in this particular

review, reasonably invoked an exception to the rule. See id. at

23-24.

C. Analysis

1. Commerce’s Changes of Policy or Methodology

Agency statements provide guidance to regulated industries.

While “‘an agency does not act rationally when it chooses and

implements one policy and decides to consider the merits of a

potentially inconsistent policy in the very near future,’”

Transcom, Inc. v. United States, 24 CIT 1333, 1342, 123 F. Supp. 2d

1372, 1381 (2000) (quoting ITT World Communications, Inc. v. FCC,

725 F.2d 732, 754 (D.C. Cir. 1984)), Commerce, in view of the

rapidly-changing world of global trade and Commerce’s limited

resources, should be able to rely on its “unique expertise and

policy-making prerogatives.” Southern Cal. Edison Co. v. United

States, 226 F.3d 1349, 1357 (Fed. Cir. 2000). “‘The power of an

administrative agency to administer a congressionally created . .

. program necessarily requires the formulation of policy . . . .’”
Consol. Court No. 01-00036 Page 22

Chevron, 467 U.S. at 843 (quoting Morton v. Ruiz, 415 U.S. 199, 231

(1974)).

An agency decision involving the meaning or reach of a statute

that reconciles conflicting policies “‘represents a reasonable

accommodation of conflicting policies that were committed to the

agency’s care by the statute, [and a reviewing court] should not

disturb [the agency decision] unless it appears from the statute or

its legislative history that the accommodation is not one that

Congress would have sanctioned.’” Id. at 845 (quoting United

States v. Shimer, 367 U.S. 374, 382-83 (1961)). Furthermore, an

agency must be allowed to assess the wisdom of its policy on a

continuing basis. Under the Chevron regime, agency discretion to

reconsider policies is inalienable. See id. at 843. Any

assumption that Congress intended to freeze an administrative

interpretation of a statute would be entirely contrary to the

concept of Chevron which assumes and approves the ability of

administrative agencies to change their interpretations. See,

e.g., Maier, P.E. v. United States EPA, 114 F.3d 1032, 1043 (10th

Cir. 1997), J.L. v. Social Sec. Admin., 971 F.2d 260, 265 (9th Cir.

1992), Saco Defense Sys. Div., Maremont Corp. v. Weinberger, 606 F.

Supp. 446, 450-51 (D. Me. 1985). In sum, underlying agency

interpretative policies “are given controlling weight unless they

are arbitrary, capricious, or manifestly contrary to the statute.”
Consol. Court No. 01-00036 Page 23

Chevron, 467 U.S. at 844.

Moreover, “‘[a]n [agency] announcement stating a change in the

method . . . is not a general statement of policy.’” American

Trucking Assns, Inc. v. ICC, 659 F.2d 452, 464 n.49 (5th Cir. 1981)

(quoting Brown Express, Inc. v. United States, 607 F.2d 695, 701

(5th Cir. 1979) (internal quotations omitted)). While a policy

denotes “the general principles by which a government is guided” by

laws, BLACK ’S LAW DICTIONARY 1178 (7th ed. 1999) (emphasis added),

methodology refers only to the “mode of organizing, operating or

performing something, especially to achieve [the goal of a

statute].” Id. at 1005 (defining mode) (emphasis added); accord

Avoyelles Sportsmen’s League, Inc. v. Marsh, 715 F.2d 897 (5th Cir.

1983); Interstate Natural Gas Ass’n of Am. v. Federal Energy

Regulatory Comm’n, 716 F.2d 1 (D.C. Cir. 1983); Hooker Chems. &

Plastics Corp. v. Train, 537 F.2d 620 (2d Cir. 1976).

Consequently, the courts are even less in the position to question

an agency action if the action at issue is a choice of methodology,

rather than policy. See, e.g., Maier, P.E., 114 F.3d at 1043

(citing Professional Drivers Council v. Bureau of Motor Carrier

Safety, 706 F.2d 1216, 1221 (D.C. Cir. 1983)). Similarly, an

agency decision to change its methodology should be examined under

the Chevron test and sustained if the new methodology is

reasonable. See, e.g., Koyo Seiko Co., v. United States, 24 CIT
Consol. Court No. 01-00036 Page 24

364, 374, 110 F. Supp. 2d 934, 942 (2000) (stating that the use of

different methods of calculation does not mean there is a conflict

with the statute). Therefore, Commerce’s rejection of actual

market economy prices and use of a surrogate value for bearing

quality steel bar was a justifiable change of methodology so long

as such change in position was reasonably supported by the record.

2. Commerce’s Determination at Bar

The CAFC has reasoned that the purpose of 19 U.S.C. §

1677b(c)(1) and (4) “is to determine antidumping margins ‘as

accurately as possible.’” Shakeproof III, 268 F.3d at 1382

(quoting Lasko, 43 F.3d at 1446); see also Olympia Indus., Inc. v.

United States, 22 CIT 387, 390, 7 F. Supp. 2d 997, 1000-01 (1988)

(noting that “accuracy is the touchstone of the antidumping

statute” and citing Rhone Poulenc, Inc. v United States, 899 F.2d

1185, 1191 (Fed. Cir. 1990)). Additionally, Commerce’s “task in

[an NME] investigation is to calculate what . . . [the] costs or

prices would be [in the NME] if such prices or costs were

determined by market forces.” Tianjin Mach. Imp. & Exp. Corp. v.

United States, 16 CIT 931, 940, 806 F. Supp. 1008, 1018 (1992).

The Court recognizes that the House Report concerns the

selection of surrogate values to determine NV in the NME context.

Neither the statute nor the House Report address the use of market

value in the calculation of NV. The Court has established,
Consol. Court No. 01-00036 Page 25

however, that “nothing in the antidumping duty statute directs

Commerce to employ actual prices paid to a market economy supplier

by an NME producer in NV calculations.” China Nat’l Mach. Imp. &

Exp. Corp. v. United States, 27 CIT ___, ___, 264 F. Supp. 2d 1229,

1236 (2003). Furthermore, in Lasko, the CAFC recognized that the

purpose of the statute “is to prevent dumping, an activity defined

in terms of the marketplace.” 43 F.3d at 1446. Therefore, the use

of suspect prices to calculate NV, even when paid to a market-

economy supplier, would be contrary to Congress’ intent.

The Court finds that when Commerce has reason to believe or

suspect that a market-economy supplier’s prices are subsidized,

Commerce may reject market prices paid to the supplier in favor of

surrogate prices for its calculation of NV.8 The Court is

unconvinced by CMC’s argument that Commerce’s regulations prefer

that Commerce use actual prices paid whenever available. The Court

finds that the applicable regulations do not require Commerce to

use the market value over a surrogate value. The regulations state

8
The Court notes that the use of surrogate values by
Commerce has been determined to be contrary to the intent of the
law “‘where we can determine that a[n] NME producer’s input prices
are market determined, accuracy, fairness, and predictability are
enhanced by using those prices.’” Lasko, 43 F.3d at 1446 (quoting
Final Determinations of Sales at Less Than Fair Value for
Oscillating Fans and Ceiling Fans From the People’s Republic of
China, 56 Fed. Reg. 55,271, 55,275 (Oct. 25, 1991) (emphasis
added)). If the prices paid are not market determined, however,
Commerce in pursuit of the law’s intent may reject actual prices
paid.
Consol. Court No. 01-00036 Page 26

that Commerce “normally will value the factor using the price paid

to the market economy supplier.” 19 C.F.R. § 351.408(c)(1). The

regulation merely advises Commerce to use actual market values to

calculate NV for an NME supplier in certain circumstances. As the

Court has previously stated, “while Commerce will use market values

under normal circumstances, under certain circumstances Commerce

may choose not to do so.” China Nat’l, 27 CIT at ___, 264 F.

Supp. 2d at 1237 (noting that the regulation “merely indicates a

preference for market prices”); see also Anshan Iron & Steel Co.,

Ltd. v. United States, 27 CIT ___, ___, 2003 Ct. Intl. Trade LEXIS

109, at *40 (CIT 2003) (stating that the language “merely suggests

a particular methodology, but does not impose upon Commerce the

requirement of selecting the market-economy price of a respondent’s

purchases to the exclusion of more appropriate values”).

While the Court recognizes that surrogate country values are

only an estimation of what the product’s NV would have been if the

NME were a market-economy country, see Rhodia, Inc. v. United

States, 25 CIT ___, ___, 185 F. Supp. 2d 1343, 1351 (2001),

Commerce’s decision to use actual prices paid or surrogate values

is predicated on which values provide a more accurate NV. See

Lasko, 43 F.3d at 1446 (noting that the purpose of the statute is

to prevent dumping and that it “sets forth procedures in an effort

to determine margins ‘as accurately as possible’”) (quoting Rhone
Consol. Court No. 01-00036 Page 27

Poulenc, 899 F.2d at 1191). When Commerce has substantial evidence

that prices paid to a market-economy supplier are not market

determined, then the “use of such prices would undermine ‘accuracy,

fairness, and predictability,’ in the calculation of margins and

contravene the antidumping and countervailing duty statute . . . .”

China Nat’l, 27 CIT at ___, 264 F. Supp. 2d at 1237 (quoting Lasko,

43 F.3d at 1446). The overarching principle of the statute

prevents the Court from concluding “that Congress would condone the

use of any value where there is ‘reason to believe or suspect’ that

it reflects dumping or subsidies.” China Nat’l, 27 CIT at ___, 264

F. Supp. 2d at 1238.

Section 1677b(c)(1) of Title 19 of the United States Code

directs Commerce to use “the best available information” concerning

the values for FOP from a market-economy when calculating the NV

for a product exported from an NME country, such as the PRC. See

China Nat’l, 27 CIT at ___, 264 F. Supp. 2d at 1234. The CAFC has

reasoned that “there is much in the statute [19 U.S.C. §

1677b(c)(1) and (4)] that supports the notion that it is Commerce’s

duty to determine margins as accurately as possible, and to use the

best information available to it in doing so.” Lasko, 43 F.3d at

1443; see also Shakeproof III, 268 F.3d at 1382. The Court’s role

in this case is not to evaluate whether the information Commerce

used was the best available, but rather whether Commerce’s choice
Consol. Court No. 01-00036 Page 28

of information is reasonable.9 See China Nat’l, 27 CIT at ___, 264

F. Supp. 2d at 1236. Commerce’s discretion in choosing its

information is limited by the statute’s ultimate goal “to construct

the product’s normal value as it would have been if the NME country

were a market economy country.” Rhodia, 25 CIT at ___, 185 F.

Supp. 2d at 1351. While Commerce enjoys broad discretion in

determining what constitutes the best information available to

calculate NV, Commerce may not act arbitrarily in reaching its

decision. If Commerce’s determination of what constitutes the best

available information is reasonable, then the Court must defer to

Commerce.

The Court must determine whether Commerce had “reason to

believe or suspect” that the market economy prices were distorted

by subsidies. In China Nat’l, 27 CIT at ___, 264 F. Supp. 2d at

1239, the Court recognized that the applicable standard has no

statutory definition. The Court noted, however, that “in order for

reasonable suspicion to exist there must be ‘a particularized and

objective basis for suspecting’ the existence of certain proscribed

9
The statute’s silence regarding the definition of “best
available information” provides Commerce with “broad discretion to
determine the ‘best available information’ in a reasonable manner
on a case-by-case basis.” Timken Co. v. United States, 25 CIT ___,
___, 166 F. Supp. 2d 608, 616 (2001). Furthermore, in evaluating
the data, the statute does not require Commerce to follow any
single approach. See Luoyang Bearing Factory v. United States, 26
CIT ___, ___, 240 F. Supp. 2d 1268, 1284 (2002).
Consol. Court No. 01-00036 Page 29
behavior, taking into account the totality of the circumstances,

the whole picture.” Id. (quoting Al Tech Specialty Steel Corp. v.

United States, 6 CIT 245, 247, 575 F. Supp. 1277, 1280 (1983)).

While Commerce must support its determinations with “substantial,

specific and objective evidence,” China Nat’l, 27 CIT at ___, 264

F. Supp. 2d at 1240, the Court recognizes that the antidumping duty

statute does not require Commerce to initiate a formal

investigation. Congress did not intend for Commerce to undertake

an investigation to determine whether prices were in fact

subsidized. Rather, the statute and House Report merely require

Commerce to have a “reason to believe or suspect” that prices are

being subsidized. Consequently, to determine whether there is a

“reason to believe or suspect” that prices are subsidized, Commerce

may rely on information generally available to it to support its

determination.

The Court finds that Commerce based its determination to

reject the prices CMC and ZMC paid its suppliers on evidence that

adequately supports its decision. Commerce’s reason to believe or

suspect that the supplier prices were subsidized was explained in

the Market Economy Steel Memo where Commerce examined eleven

antidumping orders or investigations and three CVD orders.

Specifically, Commerce states:

The bearing quality steel used by the PRC producers of
TRBs is not covered by any of these orders. . . .
Consol. Court No. 01-00036 Page 30

Although the most recent findings do not cover the
specific products [Commerce] need[s] to value, these
findings may have broader implications for [the] steel
[at issue] . . . . Based on the information submitted by
the PRC producers who import steel from [the subject
countries] . . . we discovered certain subsidies that are
not company specific. For these general subsidies that
were used . . . we believe it is reasonable to infer that
[certain producers] would also use them.

CMC’s Mem. at App. 7 (confidential information omitted). In it’s

opposition memorandum, Commerce further explains that it

considered the evidence and rejected all the [United
States antidumping] orders and the oldest CVD order as a
basis to believe or suspect that the market economy steel
may be unfairly priced because the evidence was either
not applicable to the type of steel used by CMC and ZMC
or the order was not the most current information.

Commerce’s Mem. at 51. Commerce focused on two CVD orders and

found that although the market economy suppliers were not covered

by the specific CVD orders, general nation-wide subsidies that were

not company or product specific were available to any subject steel

producer. See id. at 51-52. Such subsidies were significant and

“all were calculated using recent information generally

contemporaneous with the POR [at issue].” Id. at 52. The Court

finds, therefore, that Commerce made a logical inference that CMC

and ZMC suppliers may have benefitted from the generally available

subsidies.

Once Commerce presents adequate evidence to support its

“reason to believe or suspect” that prices are subsidized, a

rebuttable presumption is established that the prices paid are
Consol. Court No. 01-00036 Page 31

distorted. See Luoyang Bearing Factory v. United States, 27 CIT

___, ___, 2003 Ct. Intl. Trade LEXIS 142 at *10 (CIT 2003). The

presumption is that the market-economy supplier benefitted from

subsidies. Based on this presumption, Commerce may choose to

discard the prices paid and use surrogate values to calculate NV.

The presumption, however, is not conclusive. The presumption

shifts the burden to the party challenging Commerce’s determination

to present evidence demonstrating that its supplier did not benefit

from such subsidies.10

The Court finds that CMC and ZMC did not present sufficient

evidence to rebut this presumption. Both plaintiffs complain that

Commerce did not afford the parties the opportunity to submit

evidence to rebut this presumption during the review. See Reply

Br. Pls. Luoyang, Wafangdian & ZMC at 6-7; CMC’s Mem. at 23-24.

However, the parties do not present any new evidence to rebut

Commerce’s “reason to believe or suspect” in their briefs, but

rather focus on unconvincing arguments regarding what deference

Commerce should be afforded. Since no significant financial data

or other information indicating that the supplier prices were not

subsidized was brought to light, the Court can only conclude that

10
Sufficient evidence that the prices paid were market-
determined, for example, would satisfy the manufacturer’s burden.
Additionally, credible evidence that the supplier did not
participate in any subsidies programs would satisfy the burden.
Consol. Court No. 01-00036 Page 32

no such evidence exists. If there was conclusive evidence to

support the statements that the suppliers at issue did not benefit

from subsidies, CMC and ZMC would certainly have placed such

evidence on the record. Therefore, the Court affirms Commerce’s

determination to deviate from its decision to value the steel used

to produce the subject TRBs upon actual import prices articulated

in the Preliminary Results, and instead to base its FOP valuation

on the “best available information” that Commerce concluded was

surrogate values.

II. Commere’s Ex Parte Meeting With Counsel for Timken

A. Contentions of the Parties

CMC argues that Commerce held an improper ex parte meeting

with Timken “after the briefing and formal hearing on the matter

and after the record had closed to the submission of information.”

CMC’s Mem. at 44 (emphasis in original). CMC complains that this

ex parte meeting, held on October 4, 2000, prevented the plaintiffs

from participating in the discussion of “methodological issues”

pertinent to the Final Results. See id. at 45-46. CMC also argues

that 19 U.S.C. § 1677m(g) affords parties an “‘opportunity to

comment on the information obtained by’” Commerce and that the

regulations “further restrict the time[]frame and manner within

which interested parties may submit arguments during the course of

an antidumping duty proceeding including those for consideration in
Consol. Court No. 01-00036 Page 33

the final results of an administrative review.” Id. at 47. CMC

further complains that only a “truncated recordation” of the

meeting was filed and that such action contradicts the agency’s

“goal of transparency.” See id. at 47-48. Finally, CMC contends

that “Timken’s discussion [fails to] meet the requirements

concerning the submission of information to value factors under” 19

C.F.R. § 351.408(c) because Timken improperly submitted publically

available information in an untimely fashion. Id. at 48.

Commerce argues that CMC improperly relied on Kao Hsing Chang

Iron & Steel Corp. v. United States, 25 CIT ___, ___, 140 F. Supp.

2d 1379 (2001), and Nippon Steel Corp. v. United States, 24 CIT

1158, 118 F. Supp. 2d 1366 (2000), rev’d on other grounds, 337 F.3d

1373 (2003), to support the argument that the agency erred in the

manner in which the ex parte meeting with Timken was memorialized.

Specifically, Commerce contends that the Court in Kao “required

Commerce to place on the record affidavits of persons that attended

an ex parte meeting with Commerce analysts and supervisors, which

meeting had not been otherwise memorialized on the record.”

Commerce’s Mem. at 54. Commerce further argues that the facts of

this case are distinguishable from those in Nippon because the

meeting memorandum was placed on the record immediately. “The

memorandum [summarizing the meeting] was drafted the same day by a

person in attendance and placed on the record.” Id. at 55.
Consol. Court No. 01-00036 Page 34

Commerce also argues that it is not mandated to place a verbatim

transcript on the record, nor is it obligated to initiate a notice

and comment period for an ex parte meeting. Timken generally

agrees with Commerce and adds that Commerce is only required to

maintain an appropriate record of the meeting, which Commerce did.

See Timken’s Opp’n at 29-31.

B. Analysis

Pursuant to 19 U.S.C. § 1516a(b)(2)(A), the administrative

record consists of

(i) a copy of all information presented to or obtained
by the Secretary, the administering authority, or the
Commission during the course of the administrative
proceeding, including all governmental memoranda
pertaining to the case and the record of ex parte
meetings required to be kept by section 1677f(a)(3) of
this title; and

(ii) a copy of the determination, all transcripts or
records of conferences or hearings, and all notices
published in the Federal Register.

The statute also requires Commerce to “maintain a record of any ex

parte meetings between--(A) interested parties or other persons

providing factual information in connection with a proceeding, and

(B) the person charged with making the determination, or any person

charged with making a final recommendation to that person, in

connection with that proceeding . . . .” 19 U.S.C. § 1677f(a)(3).

The record reflects that Commerce properly documented the ex

parte meeting with Timken in a timely fashion. The Court agrees
Consol. Court No. 01-00036 Page 35

with Commerce that the agency followed the letter and spirit of the

applicable statute, and that in no way is Commerce required to

place a verbatim account of the meeting on the record. The record

properly identified the attendees, date, time and place of the

meeting and summarized the matters discussed in accordance with 19

U.S.C. § 1677f(a)(3). Compare Commerce’s Mem. at 54-56, with CMC’s

Mem. at 45-46. Commerce argues that all of the issues raised at

the ex parte meeting were briefed by Timken. See Commerce’s Mem.

at 55. CMC, however, contends that this argument overlooks the

inherent problem in that the meeting served as a second hearing on

important methodological issues pertaining to the Final Results.

CMC’s Reply at 19-20. Nonetheless, Commerce did not act beyond its

authority and CMC has not demonstrated that Commerce’s ex parte

meeting was improper or that CMC was denied the opportunity to

meaningfully participate in this review.

III. Commerce Properly Adjusted the Regression-Based Wage Rate To
Include Employer Welfare and Provident Fund Expenses

A. Background

During the POR, Commerce, pursuant to 19 C.F.R. §

351.408(c)(3), used a regression-based wage rate to value labor

costs. See Preliminary Results, 65 Fed. Reg. at 41,948. In the

Final Results, 66 Fed. Reg. at 1,953, Commerce valued the PRC labor

costs by utilizing the wage rates reported in Chapter 5 of the 1999
Consol. Court No. 01-00036 Page 36

Yearbook of Labour Statistics (“YLS”). According to Commerce:

[The] regulations at section 351.408(c)(3) state that
“[Commerce] will use regression-based wage rates
reflective of the observed relationship between wages and
national income in market economy countries.” These same
regulations also require [Commerce] to determine the
“wage rate to be applied in nonmarket economy proceedings
each year” and make it publicly available. Therefore, to
value the labor inputs in this review, [Commerce] applied
the PRC regression-based wage rate established by
[Commerce] and published by the Import Administration on
its website, which was last revised in May 2000.

App. Timken’s Mem. Opp’n Pls. J. Agency R. CMC, Luoyang, Wagangdian

& ZMC (“Timken’s App.) at Tab 15 p. 15.

B. Contentions of the Parties

CMC contends that Commerce erred in adjusting Chapter 5 wage

rate data to account for provident funds and welfare expenses. See

CMC’s Mem. at 49. Specifically, Commerce added such expenses to

the NV calculation of the surrogate SG&A expenses, which CMC argues

resulted in a double count of a component of labor. See id. at 49-

50. CMC argues that Congress “intended labor to be valued based

upon production hours worked, which are appropriately reflected in

the application of the unadjusted Chapter 5 wage rate data applied

by” Commerce. Id. at 50.

According to CMC, Commerce’s past “practice has been to

include provident fund and welfare expenses as components of total

labor cost and not as part of overhead or SG&A expenses.” Id. at
Consol. Court No. 01-00036 Page 37

51 (citing Final Results of Antidumping Duty New Shipper

Administrative Review of Pure Magnesium From the People’s Republic

of China, 63 Fed. Reg. 3,085, 3,091 (Jan. 21, 1998); Notice of

Final Determination of Sales at Less Than Fair Value on Polyvinyl

Alcohol From the People’s Republic of China, 61 Fed. Reg. 14,057,

14,061 (Mar. 29, 1996)). CMC adds that Timken’s arguments

challenging Commerce’s treatment of labor in past reviews have

consistently been rejected. See id. (citations omitted).

Commerce argues that substantial evidence demonstrates that

the surrogate companies incurred all of the labor expenses included

in Commerce’s calculation. See Commerce’s Mem. at 56. According

to Commerce, the instant review differs from past reviews because

current evidence shows that it “is undisputed and clear[] . . .

that the provident fund and welfare expenses are a part of labor

expenses incurred by the selected surrogates.” Id. at 57.

Commerce points out that the antidumping statute does not direct

Commerce to use a particular method to value labor expenses and

that in accordance with the evidence submitted by Timken, Commerce

properly valued all of its FOP and based this valuation on record

evidence. Such evidence, according to Commerce, did not exist in

prior reviews. See id. at 58. Accordingly, “Commerce was

justified in including these expenses in the SG&A ratio, and, thus,

departing from its practice in the previous review.” Id. Commerce
Consol. Court No. 01-00036 Page 38

further contends that “[t]his change from the previous review is an

interpretation of Commerce’s regulation that should be given

deference by this Court.” Id. Commerce notes “[t]he expenses for

provident fund and welfare incurred by the surrogate companies are

different from those listed in Chapter 5 of the YLS.” Id.

Timken generally argues that Commerce made the appropriate

adjustments with respect to the valuation of labor and explains

that the agency relied on annual reports of a certain Indian

bearing producer to calculate SG&A expenses. See Timken’s Opp’n at

31-32. Timken maintains that Commerce “specifically identified

those labor costs in the Indian annual reports that were above and

beyond mere wages . . . and added them to” SG&A expenses. Id. at

32. This methodology, according to Timken, was reasonable and

logical and CMC’s arguments lack merit. Timken contends that “CMC

misstates the issue when it asserts that ‘Commerce erred in

adjusting the regression-based wage rate to include employer

welfare and provident fund expenses.’” Id. at 33. Timken claims

that Commerce merely adjusted SG&A expenses, “leaving the

regression-based wage rates intact.” Id. Moreover, with regards

to the issue raised by CMC that Commerce “double counted” the

expenses in question, Timken claims that Commerce “merely re-

categorized the expenses to mesh the two sources of data and

thereby account for all factor costs.” Id.
Consol. Court No. 01-00036 Page 39

C. Analysis

As a preliminary matter, the Court finds that Commerce’s

decision to add employer welfare and provident fund expenses to the

NV calculation of the surrogate SG&A expenses was a justifiable

change of methodology as long as such change in position was

reasonably supported by the record. See discussion supra Part

I.C.1.

The applicable statute provides that, when dealing with

imports from an NME such as the PRC, Commerce shall determine the

NV of the subject merchandise based on FOP utilized in producing

the merchandise and Commerce shall value the reported FOP based on

the best available information regarding the values of FOP in an

appropriate market economy. See 19 U.S.C. § 1677b(c)(1).

According to 19 U.S.C. § 1677b(c)(3), the FOP utilized in valuing

merchandise from an NME include, but are not limited to: “(A) hours

of labor required, (B) quantities of raw materials employed, (C)

amounts of energy and other utilities consumed, and (D)

representative capital cost, including depreciation.” The relevant

regulation provides:

[f]or labor, [Commerce] will use regression-based wage
rates reflective of the observed relationship between
wages and national income in market economy countries.
[Commerce] will calculate the wage rate to be applied in
nonmarket economy proceedings each year. The calculation
will be based on current data, and will be made available
to the public.
Consol. Court No. 01-00036 Page 40

19 C.F.R. § 351.408(c)(3).

In the case at bar, Commerce used the wage rates reported in

Chapter 5 of the 1999 YLS, which were made available to the public

by means of the Import Administration’s website, to value the PRC

labor costs. See Timken’s App. at Tab 15 p. 15 (referring to the

Issues & Decision Mem.) The data in Chapter 5 provides the most

comprehensive wage rates since such figures include “overtime,

bonuses and gratuities, holiday pay, incentive pay, pay for

piecework, and cost-of-living allowances.” Id. However, in this

particular review, Commerce was also presented with specific and

undisputed evidence that demonstrated that additional expenses were

incurred by employers in the PRC. See id. at Tab 15 p. 16.

Commerce, therefore, added provident and welfare fund expenses to

its valuation of labor specifically because these two types of

expenses are not expressly included in Chapter 5 data. See id.

Commerce added such expenses in order to calculate the costs that

the PRC producer would incur if its factory were located in the

surrogate country, India as accurately as possible. See id. Tab 4.

Since the relevant statute does not direct Commerce to use a

specific method in its valuation of labor, see 19 U.S.C. §

1677b(c)(3), and given the evidence provided to Commerce by Timken,

the Court upholds Commerce’s valuation of labor. Commerce properly

collected new evidence, analyzed it and reasonably determined that
Consol. Court No. 01-00036 Page 41

the provident and welfare fund expenses must be added to the SG&A

ratio in order to accurately value labor.

IV. Commerce’s Decision to Add Ocean Freight and Marine Insurance
Expenses to Japanese Export Prices to Determine the Surrogate
Value for Cups and Cones

A. Background

The relevant section of the statute provides that Commerce,

“in valuing factors of production . . . shall utilize, to the

extent possible, the prices or costs of factors of production in

one or more market economy countries that are--(A) at a level of

economic development comparable to that of the nonmarket economy

country, and (B) significant producers of comparable merchandise.”

19 U.S.C. § 1677b(c)(4). In its determination of values for steel

used to produce cups and cones, Commerce chose India as the primary

surrogate for China. See Timken’s App. at Tab 15 (citing the

Issues & Decision Mem. at 24-25). Commerce then relied on export

values of relevant Japanese steel exports to ascertain comparable

Indian values, that is to determine an appropriate value of steel

in India available to Indian TRB producers. See id. Commerce also

adjusted data on Japanese exports to India to include ocean freight

and marine insurance costs to determine the surrogate value. See

id. Commerce explained that since no Indian producer could

produce Indian TRBs with steel located in Japan, ocean freight and

insurance costs must be added to determine an accurate value of
Consol. Court No. 01-00036 Page 42

Indian steel. See id.

B. Contentions of the Parties

CMC contends that Commerce’s policy “suggests that the

adjustment to add a freight and marine insurance expense was

erroneous for two reasons. First, this practice is inconsistent

with [Commerce’s past] practice . . . [and s]econd, . . . a

containerized freight and insurance value . . . does not effectuate

the statutory purpose of ‘calculating accurate dumping margins.’”

CMC’s Mem. at 52-53. CMC also argues that Commerce’s adjustment

was arbitrary and should not be sustained.

Luoyang argues that Commerce “did not provide parties a

meaningful opportunity to comment on the adjustment for ocean

freight and marine insurance.” See Mot. Luoyang’s Mem. at 32.

Luoyang also contends that in previous reviews, Commerce used

Japanese export data as a surrogate for steel, however, Commerce

did not make adjustments for additional ocean freight and insurance

expenses. See id. at 32-33. Moreover, Luoyang argues that the

record is devoid of any evidence suggesting that Commerce made any

attempt to determine what most closely approximated the distance

between Japan and India. See id. at 33-34.

Commerce maintains that CMC and Luoyang’s arguments are

without merit. Commerce states that it provided a reasonable
Consol. Court No. 01-00036 Page 43

explanation for its adjustment and that its decision was not

inconsistent with Commerce’s practice in the last administrative

review. See Commerce’s Mem. at 59. Timken generally agrees that

Commerce acted in accordance with law by adding “reasonable” values

for ocean freight and insurance to the Japanese steel values. See

Timken’s Opp’n. at 37-38.

C. Analysis

Commerce added ocean freight and insurance expenses from Japan

to the United States to the Japanese export values in order to

determine usable values for India. See Timken’s App. Tab 15

(referencing Issues & Decision Mem.). Commerce made this

adjustment because it lacked information on such costs from Japan

to India, and found that the data to the United States was the

“best available information.” Id. CMC argues that this adjustment

was inconsistent with Commerce’s past practice. However, the

record of the eleventh administrative review does not indicate that

this precise issue was raised or that there was evidence of freight

and insurance costs that Commerce could have used or actually

rejected. See Final Results of 1997-1998 Antidumping Duty

Administrative Review and Final Results of New Shipper Review on

Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,

From the People’s Republic of China, 64 Fed. Reg. 61,837, 61,839-

40.
Consol. Court No. 01-00036 Page 44

The Court agrees with Commerce. Although CMC complains that

the ocean freight and insurance expenses relied upon were not

accurate, CMC points to no other information on the record that

Commerce could have used or that Commerce rejected. The Court

finds that Commerce properly included the cost of freight and

insurance to get the steel from Japan to India. Moreover, the

Court rejects Luoyang’s argument that the record does not reflect

any attempt by Commerce to closely approximate the distance between

Japan and India, and draws Luoyang’s attention to the Issues and

Decision Memo where Commerce explained that “[o]f the available

freight cost data on the record, the PRC to [United States] West

coast data most closely approximates the shipping distance between

Japan and India.” Timken’s App. at Tab. 15 p. 25.

V. Commerce Properly Rejected ZMC’s Input Value for Steel Bought
From a PRC Supplier and Paid For With PRC Currency

A. Contentions of the Parties

ZMC argues that Commerce departed from past practice and used

surrogate values for the steel used by ZMC’s factory as opposed to

the actual price paid for the steel in United States currency. See

Luoyang’s Mot. at 20. According to ZMC, “[t]here is no evidence on

the record to show that the prices paid by ZMC’s factory . . . were

aberrational. . . Commerce completely disregarded the possibility

that the actual steel price data might in fact constitute the best
Consol. Court No. 01-00036 Page 45

available information that would lead to the most accurate margin

calculation.” Id. at 21.

ZMC adds that Commerce’s regulations “do not limit the use of

import prices to imports made by the manufacturer only.” Id. at

22. As a result, Commerce is free to use import prices paid by

trading companies as surrogate values so long as such prices

constitute the “best available information.” Id. at 23.

Therefore, the question becomes whether “it is reasonable for

Commerce to ignore what is purportedly the best information

available when it employs a[n] NME factors of production analysis.”

Id. (citation omitted). ZMC maintains that the answer to the

question is no. “‘Commerce has an obligation to review all data

and then determine what constitutes the best information available

or, alternatively, to explain why a particular data set is not

methodologically reliable.’” Id. (citation omitted) (emphasis in

original). ZMC maintains that although Commerce had adequate data

reflecting actual prices paid, Commerce rejected this data and used

surrogate value. ZMC contends that this practice was illogical and

that “[t]his methodology cannot possibly be characterized as one

based on the ‘best available information.’” Id. at 24.

Commerce argues that this case is distinguishable because it

involves a sale in a market that is defined by statute as not

reflecting the fair value of merchandise. See Commerce’s Mem. at
Consol. Court No. 01-00036 Page 46

63. Commerce further argues that the very “fact that the PRC

seller obtained the input in a market economy currency from a

market economy producer does not negate the fact that the next

transaction, the sale to ZMC’s factory considered by Commerce,

occurred wholly within a[n NME].” Id. Timken generally agrees

with Commerce and adds that the Court cannot substitute its

judgment for that of the agency. See Timken’s Opp’n at 53-55.

B. Analysis

The Court agrees with Commerce that by definition, ZMC’s

purchase price of steel from a PRC supplier in PRC currency is

unreliable. The Court in Olympia, 22 CIT at 390-92, 7 F. Supp. at

1001, held that Commerce’s conclusion that “[p]rices paid by

trading companies do not represent prices paid by manufacturers”

failed to explain why trading company data is never reliable for

the purpose of FOP analysis. In Olympia, the rejected data

consisted of market-based prices paid by PRC trading companies to

suppliers in market economies. See id. The facts of this review

differ in that the price paid by ZMC’s factory, a PRC producer, was

in PRC currency and was remitted to another PRC producer. See

Luoyang’s Mot. at 7-8 (stating that the steel was purchased and

imported by a certain producer and later purchased by ZMC’s factory

in PRC currency).

Section 1677(18) of Title 19 of the United States Code defines
Consol. Court No. 01-00036 Page 47

an NME as “any foreign country that [Commerce] determines does not

operate on market principles of cost or pricing structures, so that

sales of merchandise in such country do not reflect the fair value

of the merchandise.” 19 U.S.C. § 1677(18) (emphasis added). The

transaction at issue involves a sale in an NME, and this fact is

not negated by ZMC’s argument that the PRC seller obtained the

input by using a market economy currency. Commerce explained in

ZMC’s verification report its reasons for rejecting this value.

Commerce’s Mem. at App. p. 8.; see also 19 C.F.R. § 351.408(c)(1)

(stating that “[f]or purposes of valuing the factors of production,

. . . where a portion of the factor is purchased from a market

economy supplier and the remainder for a[n NME] supplier,

[Commerce] normally will value the factor using the price paid to

the market economy supplier.”) Essentially, the sale occurred in

a market that is defined, by statute, as not reflecting the fair

value of merchandise. The whole transaction, therefore, was

tainted and without evidence showing that the actual prices paid

reflected fair market prices, Commerce reasonably disregarded ZMC’s

steel input and used surrogate values.

VI. Commerce Properly Disregarded Actual Ocean Freight Charges
Paid in Market Economy Currency to PRC Freight Forwarders

A. Background

In the present review, Wafangdian paid its shipping charges to
Consol. Court No. 01-00036 Page 48

a PRC freight forwarder. Commerce found, however, that the record

evidence does not link the amount Wafangdian claims to have paid

for these services to the amount charged by the market economy

supplier. See CMC’s Mem. at App. 8 p. 22. As a result of this

finding, Commerce used surrogate values to calculate the ocean

freight charges Wafangdian incurred using a PRC freight forwarder.

See id.

B. Contentions of the Parties

Luoyang, Wafangdian and ZMC (“Luoyang et al.”) argue that

Commerce improperly disregarded ocean freight charges paid in

market economy currency for shipments on market economy carriers.

See Luoyang’s Mem. at 29. Luoyang et al. also contend that

Commerce’s rejection of Wafangdian’s expenses as a result of absent

documentation is erroneous since “Commerce never asked for any such

documentation. There was no evidence on the record to show that

the price charged was different than that quoted in [United States]

dollars.” Id. at 30. According to Luoyang et al., Commerce

provided no legitimate reasoning to support why the market economy

supplier would not have been paid in market economy currency or why

the supplier would charge the freight forwarder a higher price.

Luoyang et al. further maintain that Commerce’s decision was

contrary to 19 U.S.C. § 1677b(c)(1), which provides that “the

valuation of the factors of production shall be based on the best
Consol. Court No. 01-00036 Page 49

available information regarding the values of such factors in a

market economy country or countries considered to be appropriate by

[Commerce.]” Therefore, Commerce should have used the prices

reported by Wafangdian and ZMC, which represented the actual prices

paid for ocean freight and, accordingly, constituted the best

available information. See Luoyang’s Mem. at 31. “The underlying

surrogate values used were not contemporaneous and were much less

specific to the transactions involved.” Id.

Commerce asserts that the record “is entirely devoid of

documentation demonstrating the actual cost of Wafangdian’s ocean

freight.” Commerce’s Mem. at 64. Accordingly, Commerce properly

used a surrogate to value this expense. Commerce also maintains

that the surrogate value for marine insurance was directly related

to the value of the TRBs at issue. See id. at 65. “Commerce

specifically based its marine insurance upon value, consistent with

this Court’s holding in Peer Bearing [Company v. United States, 22

CIT 472, 495,] 12 F. Supp. 2d 445, 458 (1998).” Commerce adds

that it did not violate the statue by not using a surrogate value

for steel shipped in containers. See Commerce’s Mem. at 66.

C. Analysis

The Court in Yantai Oriental Juice Co. v. United States, 2002

Ct. Intl. Trade LEXIS 56 *30 (CIT June 18, 2002), explains that

“Commerce has [never] accepted a transaction between two nonmarket
Consol. Court No. 01-00036 Page 50

entities as proof of the cost of ocean freight expenses.” Section

351.408(c)(1) of the Code of Federal Regulations requires that an

input be (1) “purchased from a market economy supplier” and (2)

“paid for in a market economy currency.” Given that Wafangdian,

ZMC and the freight forwarders do business in an NME which “does

not operate on market principles,” see 19 U.S.C. § 1677(18)(A), it

hardly seems unreasonable that proof of what was paid to a market

economy supplier should be used to substantiate that the amount

paid for this factor was “determined by market forces.” See

Yantai, 2002 Ct. Intl. Trade LEXIS at *29-*30. Absent such

evidence, Commerce “is justified in its use of a surrogate freight

price.” Id. at 31. Therefore, Commerce's use of surrogate values

to determine ocean freight expenses is in accordance with law.

VII. Commerce’s Use of Surrogate Values for Wooden Cases and for
the Steel Used to Make Rollers

A. Background

In the Final Results, Commerce selected certain surrogate

values for wooden cases and for the steel used to make rollers and

explained its determination as follows:

[Commerce] examined the newer, more contemporaneous data
from India that was placed on the record of this review
by [Luoyang, Wafangdian and ZMC] following the
publication of the Preliminary Results. [Commerce’s]
analysis of this data indicates that the new Indian value
is consistent with the [United States] benchmark.

. . .
Consol. Court No. 01-00036 Page 51

[Accordingly, Commerce used] this import data from India
to value the type of steel used in the manufacture of
rollers.

Regarding wooden cases, the amount derived from the
Indian import statistics is $3.46 per kilogram. This
value is not substantially different from the rate based
on the Indian import statistics used in [the tenth
administrative review] ($2.07 per kilogram). Since
[Commerce] ha[s] no Indonesian data to rely upon for
wooden cases, . . . for the Final Results, [Commerce]
continue[d] to value wooden cases using the Indian import
statistics.

Timken’s App. at Tab 8. Cmts. 5, 10.

B. Contentions of the Parties

1. Luoyang, Wafangdian and ZMC’s Contentions

Luoyang et al. contend that Commerce failed to evaluate the

record data when selecting a surrogate value for wooden cases and

the steel used to make rollers. See Luoyang’s Mem. at 35-39. With

respect to the roller steel surrogate value, Commerce based its

calculation on Indian import statistics for the period of April

1998 through January 1999. See id. at 35. Commerce considered

values from thirteen countries, that included Russia and the PRC

(both NME). See id. Imports from these two were disregarded.

From the remaining eleven countries, four countries actually

produced bearing quality steel. See id. at 35-36. Of the

remaining four, Commerce eventually disregarded Indian imports.

See id.

Luoyang et al. complain that Commerce is under an affirmative
Consol. Court No. 01-00036 Page 52

obligation to determine whether Indian imports were the best

available information. Moreover, in accordance with Commerce’s

explanation in the Issues and Decision Memo, the agency should have

also excluded imports from Austria, Germany and the April through

December 1998 imports from France. See id. at 36-37. “These

prices were substantially above the others and above the upper

[United States] benchmark prices. In addition, the Indian import

data showed that the imports from Austria and France (for April

[through] December 1998) represented extremely small quantities.”

Id. at 37. Luoyang et al., therefore, argue that Commerce should

disregard these import figures since they are aberrational.

With respect to the surrogate value of the wooden cases

Wafangdian used to pack some of its TRBs for shipment to the United

States, Luoyang et al. contend that Commerce failed to properly

evaluate the Indian import statistics. A “cursory review of the

figures shows that the values and quantities vary widely. The

shipment of four boxes from the [United Kingdom] should be

disregarded because of the small quantity involved.” Id. at 39.

Similarly, the value for the wooden cases in Spain is very high

when compared to other values. Luoyang et al. further maintain

that “Commerce should evaluate the imports to determine which

constitute the ‘best available information’ and should disregard

those that are non-commercial shipments and those which are so high
Consol. Court No. 01-00036 Page 53

in value that they are not likely to be used for packing alone.”

Id.

2. Commerce’s Contentions

Commerce responds that it has discretion to select appropriate

surrogate values to determine normal value based upon FOP. See

Commerce’s Mem. at 66. Commerce accepted the Indian import

statistics for steel submitted by the parties. After disregarding

the NME countries, Commerce used the information without further

adjustment, and acted within its discretion as articulated by the

Court in Peer Bearing, 22 CIT at 495, 12 F. Supp. 2d at 458.

3. Timken’s Contentions

Timken argues that Luoyang et al.’s contention constitutes an

“impermissible change in position.” See Timken’s Opp’n at 53.

Timken states that Luoyang itself submitted the data used by

Commerce in an early submission to the agency. “It was only after

the Final Results that Luoyang et al. took the position that

Commerce ‘erred’ by not excluding certain portions of the data,

claiming that the values were aberrations and that using them would

be a ‘clerical error.’” Id. at 54. Timken maintains that Commerce

properly rejected this argument and deemed the error to be

methodological, rather than clerical in nature. See id. Timken

adds that the appropriate time has lapsed in which Luoyang et al.

can raise this issue. Finally, Timken claims that Wafangdian fails
Consol. Court No. 01-00036 Page 54

to show that Commerce erred in valuing wooden cases and the steel

used to make rollers.

C. Analysis

As a preliminary matter, the Court addresses Timken’s argument

that Luoyang et al. failed to exhaust their administrative

remedies. The exhaustion doctrine requires a party to present its

claims to the relevant administrative agency for the agency’s

consideration before raising these claims to the Court. See

Unemployment Compensation Comm’n of Alaska v. Aragon, 329 U.S. 143,

155 (1946) (“A reviewing court usurps the agency’s function when it

sets aside the administrative determination upon a ground not

theretofore presented and deprives the [agency] of an opportunity

to consider the matter, make its ruling, and state the reasons for

its action.”)11 The purpose behind the doctrine of exhaustion is

11
There is however, no absolute requirement of exhaustion in
the Court of International Trade in non-classification cases. See
Alhambra Foundry Co. v. United States, 12 CIT 343, 346-47, 685 F.
Supp. 1252, 1255-56 (1988). Section 2637(d) of Title 28 directs
that “the Court of International Trade shall, where appropriate,
require the exhaustion of administrative remedies.” By its use of
the phrase “where appropriate,” Congress vested discretion in the
Court to determine the circumstances under which it shall require
the exhaustion of administrative remedies. See Cemex, S.A. v.
United States, 133 F.3d 897, 905 (Fed. Cir. 1998). Therefore,
because “each exercise of judicial discretion [does] not requir[e]
litigants to exhaust administrative remedies,” the court is
authorized to determine proper exceptions to the doctrine of
exhaustion. Alhambra, 12 CIT at 347, 685 F. Supp. at 1256 (citing
Timken Co. v. United States, 10 CIT 86, 93, 630 F. Supp. 1327, 1334
(1986), rev’d in part on other grounds, Koyo Seiko Co. v. United
(continued...)
Consol. Court No. 01-00036 Page 55

to prevent courts from premature involvement in administrative

proceedings, and to protect agencies “from judicial interference

until an administrative decision has been formalized and its

effects felt in a concrete way by the challenging parties.” Abbott

Labs. v. Gardner, 387 U.S. 136, 148-49 (1967); see also Public

Citizen Health Research Group v. Comm’r, FDA, 740 F.2d 21, 29 (D.C.

Cir. 1984) (pointing out that the “exhaustion doctrine . . .

serv[es] four primary purposes: [(1)] it ensures that persons do

not flout [legally] established administrative processes . . .;

[(2)] it protects the autonomy of agency decisionmaking; [(3)] it

aids judicial review by permitting factual development [of issues

11
(...continued)
States, 20 F.3d 1156 (Fed. Cir. 1994)).

In the past, the court has exercised its discretion to obviate
exhaustion where: (1) requiring it would be futile, see Rhone
Poulenc, S.A. v. United States, 7 CIT 133, 135, 583 F. Supp. 607,
610 (1984) (“it appears that it would have been futile for
plaintiffs to argue that the agency should not apply its own
regulation”), or would be “inequitable and an insistence of a
useless formality” as in the case where “there is no relief which
plaintiff may be granted at the administrative level,” United
States Cane Sugar Refiners’ Ass’n v. Block, 3 CIT 196, 201, 544 F.
Supp. 883, 887 (1982); (2) a subsequent court decision has
interpreted existing law after the administrative determination at
issue was published, and the new decision might have materially
affected the agency’s actions, see Timken, 10 CIT at 93, 630 F.
Supp. at 1334; (3) the question is one of law and does not require
further factual development and, therefore, the court does not
invade the province of the agency by considering the question, see
id.; R.R. Yardmasters of Am. v. Harris, 721 F.2d 1332, 1337-39
(D.C. Cir. 1983); and (4) plaintiffs had no reason to suspect that
the agency would refuse to adhere to clearly applicable precedent.
See Philipp Bros., Inc. v. United States, 10 CIT 76, 80, 630 F.
Supp. 1317, 1321 (1986).
Consol. Court No. 01-00036 Page 56

relevant to the dispute]; and [(4)] it serves judicial economy by

avoiding [repetitious] administrative and judicial factfinding and

by” resolving sole claims without judicial intervention).

While a plaintiff cannot circumvent the requirements of the

doctrine of exhaustion by merely mentioning a broad issue without

raising a particular argument, plaintiff’s brief statement of the

argument is sufficient if it alerts the agency to the argument with

reasonable clarity and avails the agency with an opportunity to

address it. See generally, Hormel v. Helvering, 312 U.S. 552

(1941); see also Rhone Poulenc, 899 F.2d at 1191. The sole fact of

an agency’s failure to address plaintiff’s challenge does not

invoke the exhaustion doctrine and shall not result in forfeiture

of plaintiff’s judicial remedies. See generally, B-West Imports,

Inc. v. United States, 19 CIT 303, 880 F. Supp. 853 (1995). An

administrative decision not to address the issue cannot be

dispositive of the question whether or not the issue was properly

brought to the agency’s attention. See, e.g., Allnutt v. United

States DOJ, 2000 U.S. Dist. LEXIS 4060 (D. Md. 2000).

In the case at bar, Luoyang et al. sufficiently provided

Commerce with the opportunity to address the issue of Commerce’s

failure to disregard aberrational data. The Issues and Decision

Memo sets forth that Luoyang et al. argued, inter alia, that: (1)

“in valuing rollers used in the production of TRBs, [Commerce]
Consol. Court No. 01-00036 Page 57

should utilize more current Indian import data which was placed on

the record subsequent to the Preliminary Results;” (2) Commerce

“should generally avoid using [United States] values as benchmarks,

and should specifically refrain from doing so for roller steel;”

and (3) “in using [United States] values as benchmarks for the

purpose of factor valuation, [Commerce] risks transforming the

United States into the surrogate country even though the record

does not support the use of the United States as the appropriate

surrogate country.” See Luoyang’s App. 8 at 12. The Court,

therefore, concludes that Luoyang et al. properly exhausted their

administrative remedies and have the right to raise this issue.

The Court is not satisfied that Commerce acted within its

discretion in selecting surrogate values for wooden cases used to

ship TRBs to the United States and the steel used to produce

rollers. The Court recognizes that Commerce has wide discretion to

determine what surrogate values constitute such “best available

information,” however, the record must reasonably support the

agency’s determination. The CAFC has reasoned that “the purpose of

the statutory provisions is to determine antidumping margins ‘as

accurately as possible.’” Shakeproof III, 268 F.3d at 1382

(quoting Lasko, 43 F.3d at 1446); see also Olympia, 22 CIT at 390,

7 F. Supp. 2d at 1000-01 (noting that “accuracy is the touchstone

of the antidumping statute” and citing Rhone Poulenc, 899 F.2d at
Consol. Court No. 01-00036 Page 58

1191. Although Commerce claims that its application of the

surrogate values for wooden cases and the steel used to produce

TRBs reflects this administrative goal, the approach followed by

Commerce, in this instance, relieves the agency of this very

responsibility. Commerce has failed to explain to this Court why

the surrogate values it chose constitute the “best available

information,” and to address the aberrational record data that

Luoyang et al. point to. Thus, this issue is remanded to Commerce

for further explanation.

VIII. Commerce’s Decision Not to Apply the “PRC RATE” to All
Premier United States Sales

A. Background

During the POR, Premier was a privately owned Hong Kong

reseller of the subject merchandise. See Mem. Supp. Timken’s Mot.

J. Upon Agency R. (“Timken’s Mem.”) at 6. Premier resold the

subject Chinese TRBs to seventeen unaffiliated Chinese suppliers.

When this review was commenced, Commerce sent Premier its standard

antidumping questionnaire requesting, inter alia, information

regarding FOP, which “required Premier to obtain responsive data

from its suppliers.” Id. Only three of the seventeen suppliers

provided Premier with any information, which was ultimately found

to be inadequate due to incomplete accompanying explanations. See

id. Commerce later sent FOP questionnaires “directly to the
Consol. Court No. 01-00036 Page 59

suppliers themselves, specifically requesting the needed

information,” id. at 7, but this effort yielded no new information.

During the subject review, Timken argued that Commerce should,

as a matter of law, apply the so-called “PRC Rate,” which was 33.18

percent, to all Premier United States sales. See Amended Final

Results, 66 Fed. Reg. at 11,563. The PRC Rate applies to goods

produced by any Chinese producer who has never established an

independent rate in a prior administrative review. Commerce,

ultimately employed two methods for determining Premier’s NV.

Timken’s Mem. at 7. “[W]hen the record contained Section D data

submitted by another Chinese producer for a particular TRB

model—i.e., data of a non-Premier supplier relevant to a common

model—Commerce borrowed that information and used it for Premier’s

‘normal value,’ treating it as non-adverse ‘facts available.’” Id.

at 7-8. If the record lacked such data, Commerce applied a rate of

25.56 percent for Premier, which was the rate determined in the

eleventh administrative review.

In the Issues and Decision Memo, Commerce explained:

The essence of [Timken’s] argument is that a state
controlled producer might sell to a PRC trading company
at artificially low prices, thereby allowing the latter
to resell to the United States at unfair prices without
the discipline of the dumping order. [Timken’s] fear is
unfounded, however. If the PRC trading company reselling
the supplier’s TRBs in the United States had a separate
rate, we would compare its [United States] prices to
Consol. Court No. 01-00036 Page 60

normal value based on the supplier’s FOP data, and
determine a dumping margin as appropriate. If the
trading company did not have a separate rate, then its
sales to the United States would be subject to the PRC-
wide rate. Either way, the TRBs produced by the supplier
and resold through the trading company are subject to the
discipline of the dumping order. Any “unfair” prices
would be offset by the appropriate amount of the
antidumping duty.

App. Timken’s Mem. at Tab 18 p. 28. Commerce further stated that

Premier’s suppliers were unaware of the ultimate destination of the

goods they sold, and based this finding on Premier’s questionnaire

responses. See id. Tab 18 p. 43.

B. Contentions of the Parties

1. Timken’s Contentions

Timken argues that “a rebuttable presumption [exists] that all

producers in a given [NME] country are parts of a single nonmarket

entity—[in this instance,] the ‘PRC entity.’” Timken’s Mem. at 25.

Timken asserts that the only way a producer can avoid this single

country rate is to provide Commerce with sufficient evidence to

show an “absence of governmental control. . . . The successful

showing establishes the producer as an exception to the general

rule.” Id. (emphasis omitted). In this instance, Premier’s

seventeen suppliers have never affirmatively showed that they are

not under governmental control. See id. at 26. “Therefore,

Commerce acted contrary to law by assigning, to [Premier’s] goods,

anything other than the PRC Rate.” Id.
Consol. Court No. 01-00036 Page 61

Timken next argues that the subject suppliers’ “outright

refusal” to provide information should have resulted in Commerce’s

drawing of adverse facts available. See id. at 26-27. Timken

explains that “[o]nce a respondent refuses to respond to a

questionnaire or does not supply Commerce with an adequate

explanation for refusing to respond, Commerce no longer focuses on

calculating the ‘true’ margin but instead must focus on determining

an adverse margin that will induce cooperation in the future.” Id.

at 27 (quotation omitted).

Timken further contends that Commerce’s explanation that it

followed past agency practice is inconsistent “with the statute’s

focus on determining values based on actual [FOP] consumed in

producing subject merchandise and on the basic methodological

presumptions underlying nonmarket calculations.” Id. at 31. The

statute requires that Commerce determine nonmarket NV on the basis

of the FOP consumed in producing the subject merchandise. See id.

This determination is independent of who actually exports the

goods. See id. Timken, therefore, asserts that Commerce acted

contrary to law since the basic nonmarket methodology and statute

require Commerce to apply the country-wide PRC rate to all of

Premier’s United States sales.
Consol. Court No. 01-00036 Page 62

2. Commerce’s Contention

Commerce responds that this Court “has repeatedly sustained

Commerce’s authority to establish a rate for a non-producing PRC

trading company separate from its PRC producer.” Commerce’s Mem.

at 23. Commerce engages in a separate rates analysis to determine

whether the subject exporter is an independent market participant

as opposed to an entity “closely tied to” a communist government.

See id. According to Commerce, “[t]his principle is in stark

opposition to that offered by Timken, that is, that the focus of

Commerce’s separate rates analysis must always be on the specific

entity that actually produced the subject merchandise.” Id.

(citation omitted) (emphasis in original).

Commerce claims that the refusal of Premier’s suppliers to

fully answer the questionnaires “does not [by itself] negate

Commerce’s correct finding that Premier was entitled to a separate

rate.” Id. at 24. Moreover, the cases Timken relied upon for its

argument actually support Commerce’s application of a separate rate

to Premier’s United States sales. See id. Both cases held “that

it is entirely proper for Commerce to establish separate rates for

a PRC exporter, that is not necessarily the producer of the

merchandise.” Id. at 24-25. Commerce explains that it did not

apply its separate rates analysis to Premier because it is a

privately owned entity that fully participated in the review. See
Consol. Court No. 01-00036 Page 63

id. at 25. “As there is no state ownership and there was full

participation, there was no need to do a separate rates . . . to

determine whether Premier was free from government control.” Id.

at 25-26. Commerce adds that this position was consistent with its

two prior reviews. See id. (citing Preliminary Results of 1997-

1998 Antidumping Duty Administrative Review and Partial Recission

of Antidumping Duty Administrative Review of Tapered Roller

Bearings and Parts Thereof, Finished and Unfinished, From the

People’s Republic of China, 64 Fed. Reg. 36,853 (July 8, 1999);

Preliminary Results of 1996-1997 Antidumping Duty Administrative

Review and New Shipper Review of Tapered Roller Bearings and Parts

Thereof, Finished and Unfinished, From the People’s Republic of

China, 63 Fed. Reg. 37,339 (July 10, 1998)).

Commerce also contends that Timken fails to point to any

practice or precedent that “compels this Court to disturb

Commerce’s determination as to whether Premier was the proper

respondent for [this] review.” Id. at 26. Commerce claims that

the PRC suppliers were not responsible for setting United States

sales prices for Premier. See id. Furthermore, even if Premier’s

suppliers were not entitled to a separate rate, such does not

disqualify Premier from receiving its own rate for domestic sales.

See id.

Commerce rejects Timken’s argument that the agency was
Consol. Court No. 01-00036 Page 64

required to apply adverse inferences and the PRC rate to the

margins for those TRBs supplied to and resold by Premier to the

United States. See id. at 27. Adverse inferences are applied to

parties and not to the subject merchandise. Therefore, the statute

does not “impute an adverse inference to an exporter merely because

its supplier refuses to cooperate with Commerce’s requests for

information.” Id. (citing 19 U.S.C. § 1677e(b)).

Commerce also explains why Premier was the proper respondent

in this review. Commerce states:

If record evidence had demonstrated that a supplier(s)
knew the [United States] destination of its TRBs, then
such supplier(s) may have been the entity that set the
[United States] price and, therefore, it would have been
more appropriate for Commerce to determine whether that
supplier(s) was entitled to a separate rate for purposes
of determining an accurate margin. As set out by
Commerce in the [Issues and] Decision Memo,] however, the
only record evidence concerning this issue is Premier’s
un-rebutted denial that its suppliers had any knowledge
of the destination of the TRBs sold to Premier. Based
upon this evidence, Commerce properly determined that
Premier was the correct entity to consider for review.

Id. at 28-29 (citation omitted). Finally, Commerce asserts that

all of Premier’s statements on the record are not contradicted by

any other record evidence and that Commerce’s determination to

apply a separate rate was consistent with the agency’s past

practice and in accordance with law. See id. at 29.

C. Analysis

It is Commerce’s practice to allow individual exporters in an
Consol. Court No. 01-00036 Page 65

NME to receive separate, company-specific rates upon a showing that

they operate independent of government control. See Final Results

and Partial Rescission of Antidumping Duty Administrative Review of

Manganese Metal From the People’s Republic of China, 63 Fed. Reg.

12,440, 12,441 (Mar. 13, 1998). A presumption of government

control exists, however, it can be rebutted with specific evidence

showing, inter alia, that the exporter: (1) sets its own prices;

(2) keeps the proceeds from its sales; (3) has authority to

negotiate on its behalf; and (4) is autonomous of government

decisions regarding management. See Coalition for Pres. Am. Brake

Drum & Rotor Aftermarket Mfrs. v. United States, 23 CIT at 88, 101,

44 F. Supp. 2d 229, 243 (1999). Commerce has stated that once a

Chinese exporter demonstrates its autonomy and entitlement to a

separate rate, “it is not necessary for that company to resubmit

data supporting a separate rate.” Final Results of Antidumping

Duty Administrative Review of Certain Iron Construction Castings

From the People’s Republic of China, 57 Fed. Reg. 24,245, 24,246

(June 8, 1992).

Some of Premier’s sales did receive a non-PRC rate even though

Commerce did not conduct a separate rates analysis for the company.

Commerce argues that since Premier was a privately owned entity

that fully participated in the review, “there is no state ownership

. . . [and] no need to do a separate rates analysis.” Commerce’s
Consol. Court No. 01-00036 Page 66

Mem. at 25-26. Timken does not dispute Premier’s independence, but

rather contends that Commerce was required to conduct the separate

rates analysis. The Court agrees with Timken.

Fujian Machinery and Equipment Import and Export Corporation

v. United States, explains that “the essence of a separate rates

analysis is to determine whether the exporter is an autonomous

market participant, or whether instead it is so closely tied to the

communist government as to be shielded from the vagaries of the

free market.” 25 CIT ___, ___, 178 F. Supp. 2d 1305, 1331 (2001).

Premier has not established such independence; to the contrary,

Premier’s Chinese suppliers failed to reply to Commerce’s

questionnaires in this review. The Court recognizes that such

supplier’s are not interested parties in this review.12 However,

the suppliers’ refusal to submit information prevented Commerce

from determining whether state-controlled producers sold materials

to Premier at state-controlled prices, thus causing Premier to

12
Accordingly, this Court finds Timken’s arguments
regarding the application of adverse facts available to Premier are
without merit. Premier fully participated in the review, and has
no control over it’s suppliers cooperation. Section 1677e(b) of
Title 19 states that when Commerce finds “that an interested party
failed to cooperate . . . [the agency] may use an” adverse
inference. Premier’s suppliers are not interested parties.
Therefore, the Court will not apply adverse facts to Premier as a
result of its suppliers’ deficiencies. See generally Kompass Food
Trading Int’l v. United States, 24 CIT 678, 682-83 (2000) (holding
that once a respondent refuses to supply information, Commerce no
longer focuses on the “true” margin but rather on determining an
adverse margin that will induce future cooperation).
Consol. Court No. 01-00036 Page 67

resell products to the United States at unfair prices, albeit

unknowingly. If such was the case, Premier would not be entitled

to an NME rate.

The CAFC has stated that “[t]he antidumping statute recognizes

a close correlation between a nonmarket economy and government

control of prices, output decisions, and the allocation of

resources.” Sigma Corp. v. United States, 117 F.3d 1401, 1405-06

(Fed. Cir. 1997). Accordingly, Commerce established the rebuttable

presumption that control exists absent a contrary finding. Such

requires an affirmative demonstration and a specific finding on

point. See Coalition, 23 CIT at 101-103, 44 F. Supp. 2d at 243-46.

Commerce based its finding of Premier’s independence on a statement

made by Premier during the review that “its suppliers had [no]

knowledge of the destination of the TRBs [they] sold to Premier.”

Commerce’s Mem. at 29. The veracity of this statement, however, is

irrelevant. Commerce acted contrary to its responsibility, as

articulated by Coalition, and its finding is not supported by

substantial evidence since Commerce failed to conduct the very

analysis that would have produced the relevant evidence to support

its determination. Thus, this issue is remanded to Commerce to

conduct the separate rates analysis, and apply the PRC rate to all

of Premier’s United States sales if it finds that Premier is not

autonomous.
Consol. Court No. 01-00036 Page 68

IX. Commerce’s Use of Other Producers’ Factors Data to Calculate
Premier’s NV

A. Contentions of the Parties

1. Timken’s Contentions

Timken contends that even if Commerce properly determined not

to apply the PRC rate to Premiers’ suppliers, Commerce should have

applied the Premier “facts available” rate of 25.56 percent to all

reported Premier sales, as opposed to only a limited number of

sales. See Timken’s Mem. at 32. Timken claims that the record

does not support a finding that Premier acted to the best of its

ability to obtain FOP information. See id. Timken cites to

confidential evidence in the record to support its claim that “a

reasonable mind could only conclude that Premier took only

perfunctory steps.” Id. at 34.

Timken also argues that Commerce’s reasons for excusing

Premier’s non-compliance failed the substantial evidence test. See

id. at 35-36. Moreover, Timken asserts that “[b]y resolving all

doubts in Premier’s favor and speculating on Premier’s behalf,

Commerce inappropriately gave priority to that company’s interests

at the expense of [United States] producers.” Id. at 36. Timken

further argues that placing Premier’s interests above every other

interested party goes contrary to the remedial nature of the

antidumping statute. See id. In sum, Timken states that

Commerce’s determination was not supported by substantial record
Consol. Court No. 01-00036 Page 69

evidence and Commerce failed to provide adequate reasons for

excusing Premier’s deficient response. See id. at 38-40.

2. Commerce’s Contentions

Commerce responds that the record evidence actually supports

the agency’s decision in this review. See Commerce’s Mem. at 30.

Commerce explains:

In its original questionnaire, Commerce asked
Premier for its list of suppliers, which Premier
supplied. Commerce also asked whether Premier’s
suppliers knew the ultimate destination of the TRBs sold
to Premier would be the United States.
In its October 15, 1999 response, Premier answered
that its suppliers did not know the ultimate destination,
that Premier’s suppliers did not have access to Premier’s
sales records and that Premier’s suppliers did not
participate in any sales activities related to the United
States.
Commerce next asked Premier to describe the
production process of its suppliers. Premier responded
on November 5, 1999, by providing to Commerce the list of
its suppliers and stated that its suppliers compete with
Premier and have been reluctant to provide such
information in the past. Further, Premier stated that it
was trying to obtain the FOP from its suppliers and
provided a sample letter that was sent to each of its
suppliers. Finally, Premier stated it would attempt to
obtain FOP information from other PRC producers that were
participating in the review, which FOP information would
apply to models sold by Premier during the period of
review. . . .
Commerce next asked Premier to provide the FOP
information Premier had received “at this time,” meaning
the April 2000 deadline for that particular Commerce
supplemental questionnaire. On April 6, 2000, Premier
provided Commerce FOP information for three suppliers and
stated that a fourth supplier (this one participating in
the review) had authorized Premier to use its FOP data.
This response was consistent with Premier’s prior
statement that FOP information was difficult to get from
competing suppliers and also consistent with Premier’s
Consol. Court No. 01-00036 Page 70

attempt to get FOP information from other participating
respondents in the review. . . .
In its next response, Premier told Commerce it was
translating the aforementioned FOP information. Shortly
thereafter, on May 25, 2000 Premier provided translated
FOP information, as requested by Commerce.
Premier timely answered Commerce’s questions,
providing a completely reasonable explanation as to why
it might not be able to obtain suppler FOP information--
it competes with them. Premier provided documentation of
its attempted request for FOP information from its
competing suppliers. Premier timely provided to Commerce
the information it did receive from some of its
suppliers.

Commerce’s Mem. at 30-32 (citations omitted). Commerce contends

that its decision was not based on speculation, but rather on the

record evidence. See id. at 32. Commerce continues that even if

the record evidence may lead Commerce to two inconsistent

conclusions, “this does not mean that Commerce’s findings are not

supported by substantial evidence.” Id. (citation omitted). Thus,

Commerce’s inferences regarding Premier, even if inconsistent with

Timken’s conclusion, “are permissible based upon this record.” Id.

at 33.

Commerce also raised issue with Timken’s contention that

Commerce’s determination was inappropriate under Chevron. Commerce

argues that “the cases cited by Timken stand for the general

proposition that exemptions from the antidumping statute are to be

construed narrowly, given the statute’s remedial purpose.” Id.

Accordingly, Commerce made reasonable inferences regarding
Consol. Court No. 01-00036 Page 71

Premier’s effort to obtain FOP data. Commerce also asserts that

Timken’s arguments regarding its factor utilization rate

methodology was at best an alternative methodology. See id. at 34.

C. Analysis

The Court has remanded the issue of whether Commerce properly

applied separate rates to Premier’s United States sales.

Therefore, the Court will not address the issue of whether Commerce

should have applied the Premier “facts available” rate of 25.56

percent to all reported Premier sales until it receives the remand

results.

X. Commerce’s Addition of Wafangdian’s Post Sale Price Adjustment
to United States Price

A. Background

In the Preliminary Results, Commerce did not make an

adjustment for Wafangdian’s claimed credit in its calculation of

Wafangdian’s net export price. See Preliminary Results, 65 Fed.

Reg. at 41,944. On July 11, 2000, Wafangdian claimed that this was

a clerical error and urged Commerce to add the credit to the United

States’ selling price before calculating export price. See App.

Timken’s Mem. at Tab 14. Commerce eventually accepted Wafangdian’s

credit as a post sale price adjustment (“PSPA”) on the subject

merchandise, ultimately increasing United States price, because the
Consol. Court No. 01-00036 Page 72

credit was not reasonably attributable to subject merchandise but

rather to non-subject merchandise.

B. Contentions of the Parties

Timken argues that a reasonable mind would not have accepted

the adjustment submitted by Wafangdian because it was not tied to

specific transactions to which the PSPA was applied. See Timken’s

Mem. at 40-43. Accordingly, Commerce’s allowance of the subject

PSPA is unsupported by substantial evidence and yielded distorted

results. See id. at 43. Timken proclaims that “there must be a

‘rational connection between the facts found and the choice made’

for the Court to sustain Commerce’s determination.” Id. at 44

(referencing confidential information).

Commerce claims that it properly accepted the PSPA because the

record demonstrates that the adjustment was accurately reported

and, therefore, the agency’s increase to the United States price

was in accordance with law. See Commerce’s Mem. at 35. Commerce

also contends that Commerce’s determination focused on calculating

an accurate buyer’s net outlay for the subject merchandise.

“Commerce properly did this by not attributing the credit to the

cost of the subject merchandise.” Id. at 38.

Wafangdian generally agrees with Commerce and argues that the

PSPA accepted by Commerce was “factually supported and fully
Consol. Court No. 01-00036 Page 73

consistent with the pertinent” regulations. See Mem. Wafangdian

Opp’n Mot. J. Agency R. Timken (“Wafangian’s Mem.”) at 8. The

relevant regulation “places the burden on the ‘interested party

that is in possession of the relevant information’ of ‘establishing

to the satisfaction of [Commerce] the amount and nature of a

particular adjustment.’” Id. (quoting 19 C.F.R. § 351.401(b)).

Wafangdian claims that it met this burden and that Timken’s

argument is based on the assumption that “price adjustments should

be like expenses and the price net of the expense should be lower.”

Id. at 10. Wafangdian, however, explains that the net price is

exclusive of the price adjustment, and is ultimately higher than

the gross price which includes PSPA. See id.

Wafangdian also claims that it provided Commerce with proper

documentation verifying that the allocation was made on a

“transaction specific basis.” See id. Wafangdian further asserts

that the price adjustments were made without regard to the

“question of dumping duties,” and that Commerce has consistently

made adjustments for PSPA in the past. See id. (citing Certain

Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-to-

Length Carbon Steel Plate from Canada, 64 Fed. Reg. 2,173 (Jan. 13,

1999); Final Results of Antidumping Duty Administrative Reviews on

Antifriction Bearings (Other Than Tapered Roller Bearings) and

Parts Thereof From France, Germany, Italy, Japan, Romania,
Consol. Court No. 01-00036 Page 74

Singapore, Sweden and the United Kingdom, 62 Fed. Reg. 54,043 (Oct.

17, 1997)).

C. Analysis

Price adjustments, as defined in 19 C.F.R. § 351.102, reflect

any change in the price charged for subject merchandise or the

foreign like product. Examples of price adjustments include, inter

alia, discounts, rebates and PSPA that are reflected in the

purchaser’s net outlay. See id. To calculate export price,

Commerce will use a price, net of any price adjustment, that is

reasonably attributable to the subject merchandise or the foreign

like product. See 19 C.F.R. § 351.401(c). The purpose of such

price adjustments is to “describe a category of changes to a price

. . . that affect the net outlay of funds by the purchaser. . . .

[S]uch price changes are not ‘expenses’ [as normally described by

Commerce] but rather are changes that [Commerce] must take into

account in identifying the actual starting price.” Antidumping

Duties; Countervailing Duties, 62 Fed. Reg. 27,296, 27,300 (May 19,

1997).

During the POR, Wafangdian (“seller”) and its domestic

customer (“United States” or “buyer”) agreed that “the seller had

sold the buyer some defective non-subject merchandise and that the

seller owed buyer a sum certain in compensation.” Commerce’s Mem.

at 35 (citing App. Timken’s Mem. at Tab 26). A compensation
Consol. Court No. 01-00036 Page 75

agreement was entered into between Wafangdian and the buyer, which

was presented to Commerce in Wafangdian’s amended questionnaire

response. See id. at 36. Wafangdian presented the agreed upon

compensation as a “credit” to those certain United States sales and

reported the same gross unit price for the certain sales in its

original and amended United States sales report. See id. The

credit in the amended United States sales report had the effect of

reducing the price to the buyer for certain United States sales by

the amount that the seller agreed to compensate the buyer for the

defective non-subject merchandise. See id. (citing Issues &

Decision Mem. at 40).

Although Commerce did not include the PSPA in the Preliminary

Results calculation, Commerce received information by Wafangdian

supporting its argument that it was entitled to an adjustment. See

App. Timken’s Mem. at Tab 14. The credit was added as a PSPA “in

order to reflect the actual amount paid by the buyer because the

credit, while owed to the buyer, was not reasonably attributable to

the subject merchandise.” See Commerce’s Mem. at 37; see also 19

C.F.R. § 351.102(b). Commerce has asserted its authority to make

direct adjustments to any price that is reflected in the buyer’s

outlay. See 19 C.F.R. § 351.401(a)-(c) (stating that in

“calculati[ng] export price, constructed export price, and normal

value . . . [Commerce] will use a price that is net of any price
Consol. Court No. 01-00036 Page 76

adjustment”). In this review, Commerce made a direct adjustment

“to twice reported identical gross price, based upon [Wafangdian’s]

reporting of a credit on that price that was not related to the

subject merchandise.” Commerce’s Mem. at 37; see 19 C.F.R. §

351.401(b)(2) (stating that Commerce “will not double count

adjustments”). Commerce acted reasonably because the record

evidence clearly demonstrated a valid reason for the PSPA, and

Commerce verified the existence and amount of the debt owed by

Wafangdian. See App. Timken’s Mem. Tab 14. Thus, Commerce is

affirmed.

XI. Commerce’s Refusal to Make Adjustments to Wafangdian’s NV to
Account for the Production of Defective (or Non-Specification)
Parts

A. Contentions of the Parties

Timken argues that it was Commerce’s “duty” to investigate

whether Wafangdian generated defective parts when producing subject

merchandise. See Timken’s Mem. at 45-46. Timken recognizes that

it was Wafangdian’s burden to “provide relevant quantities

information and then to demonstrate the appropriateness of offsets

[requested] . . . for any sold or reworked parts.” Id. at 47.

However, Timken contends that Commerce erred in not pursuing “key

facts and essentially [by giving] Wafangdian the benefit of the

doubt.” Id. Since the substantial evidence rule applies,
Consol. Court No. 01-00036 Page 77

“Wafangdian’s deficient reporting of all factors of production

consumed in producing defective parts” caused Commerce to arrive at

a defective NV calculation. See id. (citations omitted) (emphasis

in original).

Commerce argues that it “specifically asked Wafangdian to

‘demonstrate how the reported figures for scrap and waste account

for parts that do not meet appropriate specifications (defective

parts).’” Commerce’s Mem. at 39. Commerce adds that Wafangdian

gave specific information relating to how the company arrived at

the percentage of steel that it used in non-specification

production. See id. According to Wafangdian, Commerce was aware

of the percentage of steel that was used to produce defective

parts, and that some of those defective parts were re-worked into

subject merchandise. See id. at 40. To adjust NV accurately,

therefore, Commerce requested additional information about

production and sales of those non-specification parts. See id.

Since Wafangdian did not provide the requested information Commerce

chose “not to apply the percentage of steel used in the production

of defective parts.” Id. at 41. Wafangdian generally agrees with

the arguments made by Commerce.

B. Analysis

Timken’s claim is without merit. During this review, Commerce

specifically investigated how much material was used in the
Consol. Court No. 01-00036 Page 78

production of defective parts but received incomplete information

from Wafangdian. See Commerce’s Mem. at 40; App. Timken’s Mem. at

Tab 18. As a result, Commerce chose not to apply the percentage of

steel used in the production of defective parts. Timken claims

that Commerce’s investigation was inadequate and that the agency

erred in not pursuing certain “key facts.” The Court disagrees.

The record clearly demonstrates that Commerce requested Wafangdian

to show “how the reported figures for scrap and waste account for

parts that do not meet appropriate specifications.” App. Timken’s

Mem. at Tab 15 p. 7. In Wafangdian’s report, the company detailed

how it arrived at the reported percentage of steel used in

defective products and provided backup worksheets. See id. Thus,

Commerce properly refused to adjust Wafangdian’s NV calculation

because the record did not support an adjustment for defective, or

non-specification parts.

XII. Commerce Properly Revoked the Antidumping Order With Respect
to Wafangdian

To qualify for partial revocation, a party must show three

years of zero or de minimis dumping margins. See 19 C.F.R. §

351.222(b)(2)(i). In this review, Commerce revoked the antidumping

duty order with respect to Wafangdian because it calculated a zero

margin and applied the revocation conditions. Timken contends that

revocation was arbitrary because “[l]ess than a year before the
Consol. Court No. 01-00036 Page 79

subject revocation . . . Commerce published its five-year ‘sunset’

determination in [Final Results of Full Sunset Review on Tapered

Roller Bearings From the People’s Republic of China, 65 Fed. Reg.

11,550, 11,551 (Mar. 30, 2000) and] . . . determined that

revocation of the China TRB Order ‘would be likely to lead to

continuation or recurrence of dumping.’” Timken’s Mem. at 48-49.

Timken argues that Commerce’s attempt to rationalize this conflict

was weak. See id. at 49-50.

Commerce may depart from its earlier determinations and its

own prior precedent, “however, [Commerce’s reasoning] must be

clearly set forth [in the record] so that the reviewing court may

understand the basis of the agency’s action and so may judge the

consistency of that action with the agency's mandate.” Atchison,

Topeka & Sante Fe Railwav. Co v. Wichita Bd. of Trade, 412 U.S.

800, 808 (1973). Commerce explained that, inter alia, “a sunset .

. . review examines (a) the weighted-average dumping margins

determined in an investigation and in subsequent reviews, and (b)

the volume of imports of the subject merchandise for the period

before and the period after the issuance of an antidumping order.”

App. Timken’s Mem. at Tab 21 p. 6 n.5. By contrast, under the

revocation procedure, Commerce examines company specific dumping

margins for a period of three years. In the prior sunset review

Commerce, therefore, examined Wafangdian’s sales in a different
Consol. Court No. 01-00036 Page 80

time context. Thus, the Court finds Commerce’s explanation

reasonable and affirms its determination to revoke the antidumping

order regarding Wafangdian.

XIII. Other Issues

The Court has considered plaintiffs’ other challenges to the

Final Results, but finds them unpersuasive. Commerce is affirmed

on all remaining issues.

/s/ Nicholas Tsoucalas
NICHOLAS TSOUCALAS
SENIOR JUDGE

Dated: May 18, 2004
New York, New York