Slip Op. 03-08
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
________________________________________
:
NTN BEARING CORPORATION OF AMERICA, :
AMERICAN NTN BEARING MANUFACTURING :
CORPORATION, NTN BOWER, INC. and :
NTN CORPORATION, :
:
Plaintiffs, :
:
v. : Court No.
: 98-12-03232
UNITED STATES, :
:
Defendant, :
:
and :
:
THE TIMKEN COMPANY, :
:
Defendant-Intervenor. :
________________________________________:
Plaintiffs, NTN Bearing Corporation of America, American NTN
Bearing Manufacturing Corporation, NTN Bower, Inc. and NTN
Corporation (collectively “NTN”), 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 Antidumping Duty
Administrative Reviews of Tapered Roller Bearings and Parts
Thereof, Finished and Unfinished, From Japan, and Tapered Roller
Bearings, Four Inches or Less in Outside Diameter, and Components
Thereof, From Japan (“Final Results”), 63 Fed. Reg. 63,860 (Nov.
17, 1998).
Specifically, NTN contends that Commerce erred in: (1)
adjusting NTN’s reported home market billing adjustment; (2)
denying an adjustment to United States indirect selling expenses
for interest allegedly incurred in financing cash deposits for
antidumping duties; (3) calculating constructed export price profit
without regard to levels of trade; (4) including profits from
export price sales in the calculation of constructed export price
profit; (5) using the affiliated supplier’s cost of production for
Court No. 98-12-03232 Page 2
inputs in those cases when the cost was higher than the transfer
price in Commerce’s calculation of cost of production and
constructed value; (6) recalculating home market and United States
indirect selling expenses without regard to level of trade; (7)
denying a price-based level of trade adjustment for constructed
export price sales; (8) applying a 99.5% test to determine whether
sales to NTN’s affiliated parties were made at arm’s length; (9)
including sample transactions that were allegedly made for no
consideration; (10) including certain NTN sales allegedly outside
the ordinary course of trade in Commerce’s margin calculations and
in Commerce’s constructed value profit calculations; (11) relying
upon the sum-of-deviations methodology for Commerce’s model match
analysis; (12) using its level of trade sales match program; and
(13) using an incorrect level of trade adjustment factor for
certain export price sales.
Held: NTN’s 56.2 motion is granted in part and denied in part.
This case is remanded to Commerce to correct the clerical error
resulting from Commerce’s use of an incorrect level of trade
adjustment factor for NTN’s export price sales and to recalculate
NTN’s margin rates accordingly.
[NTN’s 56.2 motion is granted in part and denied in part. Case
remanded.]
Dated: January 24, 2003
Barnes, Richardson & Colburn (Donald J. Unger, Kazumune V.
Kano, David G. Forgue and Kristen S. Smith) for NTN, plaintiffs.
Robert D. McCallum, Jr., Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Michele D. Lynch, Kenneth J.
Guido and Richard P. Schroeder); 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, William A. Fennell
and Patrick J. McDonough) for Timken, defendant-intervenor.
Court No. 98-12-03232 Page 3
OPINION
TSOUCALAS, Senior Judge: Plaintiffs, NTN Bearing Corporation
of America, American NTN Bearing Manufacturing Corporation, NTN
Bower, Inc. and NTN Corporation (collectively “NTN”), 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
Antidumping Duty Administrative Reviews of Tapered Roller Bearings
and Parts Thereof, Finished and Unfinished, From Japan, and Tapered
Roller Bearings, Four Inches or Less in Outside Diameter, and
Components Thereof, From Japan (“Final Results”), 63 Fed. Reg.
63,860 (Nov. 17, 1998).
Specifically, NTN contends that Commerce erred in: (1)
adjusting NTN’s reported home market billing adjustment; (2)
denying an adjustment to United States indirect selling expenses
for interest allegedly incurred in financing cash deposits for
antidumping duties; (3) calculating constructed export price profit
without regard to levels of trade; (4) including profits from
export price sales in the calculation of constructed export price
profit; (5) using the affiliated supplier’s cost of production for
inputs in those cases when the cost was higher than the transfer
price in Commerce’s calculation of cost of production and
constructed value; (6) recalculating home market and United States
Court No. 98-12-03232 Page 4
indirect selling expenses without regard to level of trade; (7)
denying a price-based level of trade adjustment for constructed
export price sales; (8) applying a 99.5% test to determine whether
sales to NTN’s affiliated parties were made at arm’s length; (9)
including sample transactions that were allegedly made for no
consideration; (10) including certain NTN sales allegedly outside
the ordinary course of trade in Commerce’s margin calculations and
in Commerce’s constructed value profit calculations; (11) relying
upon the sum-of-deviations methodology for Commerce’s model match
analysis; (12) using its level of trade sales match program; and
(13) using an incorrect level of trade adjustment factor for
certain export price sales.
BACKGROUND
The administrative determination at issue concerns the
antidumping duty order on tapered roller bearings (“TRBs”) and
parts thereof, finished and unfinished, from Japan (A-588-604), for
the period of review (“POR”) covering October 1, 1996, through
September 30, 1997.1 See Final Results, 63 Fed. Reg. at 63,860-61.
On July 10, 1998, Commerce published the preliminary results. See
1
Since the administrative review at issue was initiated after
January 1, 1995, the applicable law is the antidumping statute as
amended by the Uruguay Round Agreements Act, Pub. L. No. 103-465,
108 Stat. 4809 (1994). See Torrington Co. v. United States, 68
F.3d 1347, 1352 (Fed. Cir. 1995).
Court No. 98-12-03232 Page 5
Preliminary Results of Antidumping Duty Administrative Reviews of
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,
From Japan, and Tapered Roller Bearings, Four Inches or Less in
Outside Diameter, and Components Thereof, From Japan (“Preliminary
Results”), 63 Fed. Reg. 37,344. Commerce published the Final
Results on November 17, 1998. See 63 Fed. Reg. 63,860.
JURISDICTION
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
Court No. 98-12-03232 Page 6
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
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
Court No. 98-12-03232 Page 7
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
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
Court No. 98-12-03232 Page 8
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
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’s Adjustment to NTN’s Reported Home Market Billing
Adjustment
A. Background
During the POR, NTN provided Commerce with “its [home market]
sales data via computer tape.” Mem. Opp’n Pls.’ Mot. J. Agency R.
(“Def.’s Mem.”) at 9-10. Commerce used the home market sales data
from the computer tape and calculated both a positive and negative
home market billing adjustment for NTN. See id. at 10 (citing App.
NTN’s Mot. and Mem. Supp. J. Agency R. (“NTN’s App. Mem.”) Attach.
3 at 2-3 n.1) (proprietary version). NTN also provided Commerce
Court No. 98-12-03232 Page 9
with “its [home market] sales volume and value reconciliation
worksheet” which contained a total positive home market billing
adjustment. Def.’s Mem. at 10 (citing App. Def.’s Mem. Opp’n Pls.’
Mot. J. Agency R. (“Def.’s App. Mem.”) Ex. 1 (proprietary version);
NTN’s App. Mem. Attach. 2 at A2-a (proprietary version)). In the
Final Results, Commerce stated:
[Commerce] agrees with [Timken]. In [Final Results of
Antidumping Duty Administrative Reviews of Tapered Roller
Bearings and Parts Thereof, Finished and Unfinished, From
Japan, and Tapered Roller Bearings, Four Inches or Less
in Outside Diameter, and Components Thereof, From Japan]
(“95/96 TRB Final”), [63 Fed. Reg. 2558, 2563 (Jan. 15,
1998)], Timken argued that because there were certain
inconsistencies between NTN’s computer tape home market
billing adjustment total and the billing adjustment
figure reported in NTN’s volume and value worksheet,
[Commerce] should modify accordingly the reported
adjustments to be consistent with those appearing on the
volume and value reconciliation worksheets . . . . For
the current review, as Timken has indicated, these same
inconsistencies exist between NTN’s reported data and its
volume and value reconciliation worksheets (provided [in
NTN’s App. Mem. Attach. 2 at] A2-a through A2-c
[(proprietary version)]. . .). NTN attempts to explain
such inconsistencies in its supplemental response at
[Def.’s App. Mem. Ex. 1 at] 4 [(proprietary version)] and
at [NTN’s App. Mem. Attach. 2 at] A2-c [(proprietary
version)], using a hypothetical example which purportedly
demonstrates why it claims the totals reported on the
sales tape and the totals reported on the volume and
value worksheet are not necessarily equal. However,
NTN’s attempt to reconcile these totals does not
sufficiently explain the significant discrepancies
between them. Therefore, for these final results,
[Commerce] ha[s] adjusted NTN’s reported home market
billing adjustment total to be consistent with that on
its volume and value worksheet. . . .
Final Results, 63 Fed. Reg. at 63,861.
Court No. 98-12-03232 Page 10
Commerce explained its methodology stating that
[because the] billing adjustment reconciliation chart
provided by NTN did not clearly demonstrate why there was
such a significant difference between the billing
adjustment totals [that is, between NTN’s volume and
value worksheet and the total billing adjustment derived
from NTN’s home market database] . . . [Commerce]
adjusted NTN’s reported transaction-specific billing
adjustments to reflect the total from its volume and
value worksheet.
. . . . In order to calculate a billing adjustment
amount representative of the volume and value worksheet
[amount], [Commerce] systematically sorted through NTN’s
home market database until [Commerce] arrived at a
[certain value], that, when added to the existing
positive billing adjustment value . . . equaled the total
reported billing adjustment from the worksheet. The
remaining negative billing adjustments were then set
equal to zero.
NTN’s App. Mem. Attach. 3 at 3.
B. Contentions of the Parties
NTN argues that Commerce erred when it used facts available to
“adjust NTN’s total billing adjustment in the home market.” NTN’s
Mot. and Mem. Supp. J. Agency R. (“NTN’s Mem.”) at 12; see NTN’s
Reply Def. and Def.-Int.’s Mem. Opposing Pls.’ Mot. J. Agency R.
(“NTN’s Reply”) at 2-3. In particular, NTN maintains that there is
no basis under 19 U.S.C. § 1677e (1994) for Commerce to use facts
available. See NTN’s Mem. at 13; see also NTN’s Mem. at 13-14
(relying on Olympic Adhesives v. United States, 899 F.2d 1565 (Fed.
Cir. 1990)). Therefore, NTN requests that this Court remand to
Commerce to use NTN’s originally submitted data for the total
Court No. 98-12-03232 Page 11
billing adjustment in the home market. See NTN’s Mem. at 14; NTN’s
Reply at 2-3.
In the alternative, NTN argues that even if Commerce was
correct in adjusting NTN’s reported home market billing
adjustments, Commerce’s “methodology is flawed in that it only
accounts for billing and quantity adjustments during the period of
review” (that is, Commerce ignored billing adjustments made before
and after the period of review). NTN’s Mem. at 14-15.
Commerce responds that its treatment of NTN’s home market
billing adjustments is supported by substantial evidence and is in
accordance with law. See Def.’s Mem. at 9-16. Commerce maintains
that “‘[n]either the pre-URAA nor the amended law imposes standards
establishing the circumstances under which Commerce is to grant or
deny [billing] adjustments to normal value [(“NV”)].’” Def.’s Mem.
at 14 (quoting Timken Co. v. United States, 22 CIT 621, 628, 16 F.
Supp. 2d 1102, 1108 (1998)). Moreover, Commerce argues that
“[t]his Court has previously upheld disparate treatment by Commerce
of upward and downward [home market] billing adjustments.” Def.’s
Mem. at 13; see also Def.’s Mem. at 13-14 (relying on SKF USA Inc.
v. United States, 23 CIT 402 (1999)).2
2
In its reply brief, NTN argues that Commerce’s reliance on
SKF USA Inc., 23 CIT 402, is inapposite because in the case at bar,
“NTN fully responded to [Commerce’s] requests in the requested
(continued...)
Court No. 98-12-03232 Page 12
Additionally, responding to NTN’s argument that Commerce
erroneously ignored billing adjustments made before and after the
period of review, Commerce asserts that “Commerce considered all
the billing adjustment information submitted by NTN[] . . . [and]
chose to accept the positive billing adjustment total from NTN’s
volume and value worksheet because NTN failed to meet its burden to
reconcile that billing adjustment total with the different totals
drawn from NTN’s computer tape sales data.” Def.’s Mem. at 15
(citing Final Results, 63 Fed. Reg. at 63,861). Commerce further
maintains that it requested that NTN clarify its claimed billing
adjustments, and NTN failed to do so. See Def.’s Mem. at 16
(citing Def.’s App. Mem. Ex. 1 at 4 (proprietary version)).
Timken agrees with Commerce and contends that NTN’s argument
that Commerce erroneously used “facts available” to adjust NTN’s
home market billing adjustment is misplaced because “Commerce’s
adjustment to NTN’s billing adjustments was simply an action to
reconcile conflicting data which NTN had submitted on the same
issue.” Resp. Timken Pls.’ Mot. J. Agency R. (“Timken’s Resp.”) at
8; see also Timken’s Resp. at 7-12.
2
(...continued)
format[,]” whereas in SKF USA Inc., 23 CIT 402, Commerce “decided
that a punitive decision to accept only the properly reported part
of the adjustments was in order, so as to deny SKF the benefit of
improper reporting.” NTN’s Reply at 2.
Court No. 98-12-03232 Page 13
C. Analysis
The Court finds that NTN’s argument that Commerce erroneously
used “facts available” under 19 U.S.C. § 1677e when Commerce
adjusted NTN’s billing adjustment in the home market has no merit
since NTN clearly misreads the clear language of that statute. The
antidumping statute mandates that Commerce use “facts otherwise
available” (commonly referred to as “facts available”) if
“necessary information is not available on the record” of an
antidumping proceeding. 19 U.S.C. § 1677e(a)(1). In addition,
Commerce may use facts available where an interested party or any
other person: (1) withholds information that has been requested by
Commerce; (2) fails to provide the requested information by the
requested date or in the form and manner requested, subject to 19
U.S.C. § 1677m(c)(1), (e)3 (1994); (3) significantly impedes an
3
Section 1677m(e) states that:
[i]n reaching a determination under [19 U.S.C.] section
1671b, 1671d, 1673b, 1673d, 1675, or 1675b[,] . . .
[Commerce] shall not decline to consider information that
is submitted by an interested party and is necessary to
the determination but does not meet all the applicable
requirements established by [Commerce], if—-
(1) the information is submitted by the deadline
established for its submission,
(2) the information can be verified,
(3) the information is not so incomplete that it
cannot serve as a reliable basis for reaching the
applicable determination,
(4) the interested party has demonstrated that
it acted to the best of its ability in providing the
(continued...)
Court No. 98-12-03232 Page 14
antidumping proceeding; and (4) provides information that cannot be
verified as provided in 19 U.S.C. § 1677m(i) (1994). See 19 U.S.C.
§ 1677e(a)(2)(A)-(D). Section 1677e(a) provides, however, that the
use of facts available shall be subject to the limitations set
forth in 19 U.S.C. § 1677m(d)(1994).
The legislative goal behind Commerce’s right to use facts
available is to "induce respondents to provide Commerce with
requested information in a timely, complete, and accurate manner .
. . .” National Steel Corp. v. United States, 18 CIT 1126, 1129,
870 F. Supp. 1130, 1134 (1994). Consequently, Commerce enjoys very
broad, although not unlimited, discretion with regard to the
propriety of its use of facts available. See generally, Olympic
Adhesives, 899 F.2d 1565 (acknowledging Commerce’s broad discretion
with regard to the use of facts available but pointing out that
Commerce's resort to facts available is an abuse of discretion
where the information Commerce requests does not and could not
exist).
3
(...continued)
information and meeting the requirements established
by [Commerce] with respect to the information, and
(5) the information can be used without undue
difficulties.
19 U.S.C. § 1677m(e).
Court No. 98-12-03232 Page 15
During the review at issue, NTN reported home market billing
adjustments via its computer tape. See Def.’s Mem. at 9-10; NTN’s
App. Mem. Attach. 3 at 2. Pursuant to Commerce’s supplemental
questionnaire, NTN also provided Commerce with a sales volume and
value reconciliation worksheet. See Def.’s Mem. at 10; NTN’s App.
Mem. Attach. 3 at 2-3 (proprietary version); NTN’s App. Mem.
Attach. 2 at A2-a (proprietary version). In the Final Results,
Commerce stated that
inconsistencies exist between NTN’s reported data and its
volume and value reconciliation worksheets (provided [in
NTN’s App. Mem. Attach. 2 at] A2-a through A2-c
[(proprietary version)]. . .). NTN attempts to explain
such inconsistencies in its supplemental response at
[Def.’s App. Mem. Ex. 1 at] . . . 4 [(proprietary
version)] and at [NTN’s App. Mem. Attach. 2 at] A2-c
[(proprietary version)], using a hypothetical example
which purportedly demonstrates why it claims the totals
reported on the sales tape and the totals reported on the
volume and value worksheet are not necessarily equal.
However, NTN’s attempt to reconcile these totals does not
sufficiently explain the significant discrepancies
between them.
Final Results, 63 Fed. Reg. at 63,861. Faced with the situation
where the “billing adjustment reconciliation chart provided by NTN
did not clearly demonstrate why there was such a significant
difference between the billing adjustment totals” that is, between
NTN’s volume and value worksheet and the total billing adjustment
derived from NTN’s home market database, “[Commerce] adjusted NTN’s
reported transaction-specific billing adjustments to reflect the
Court No. 98-12-03232 Page 16
total from its volume and value worksheet.4” NTN’s App. Mem.
Attach. 3 at 3. Since Commerce did not resort to any data other
than that reported by NTN, Commerce’s adjustment to NTN’s reported
billing adjustment did not constitute the “erroneous” use of “facts
available” under 19 U.S.C. § 1677e.
The Court also finds that Commerce’s methodology of adjusting
NTN’s reported home market billing adjustments is reasonable, is
supported by substantial evidence and is in accordance with law.
See NTN Bearing Corp. of Am. v. United States (“NTN 2002”), 26 CIT
___, ___, 186 F. Supp. 2d 1257, 1295-97 (2002); 95/96 TRB Final, 63
Fed. Reg. at 2563; see also Timken Co., 22 CIT at 628, 16 F. Supp.
2d at 1108 (“Neither the pre-URAA nor the . . . amended [law]
imposes standards establishing the circumstances under which
Commerce is to grant or deny adjustments to NV for [post-sale price
adjustments, that is, billing adjustments]”). Moreover, the Court
4
Commerce explained its methodology of adjusting NTN’s
reported transaction-specific billing adjustments to reflect the
total from NTN’s volume and value worksheet as follows:
. . . . In order to calculate a billing adjustment
amount representative of the volume and value worksheet
[amount], [Commerce] systematically sorted through NTN’s
home market database until [Commerce] arrived at a
[certain value], that, when added to the existing
positive billing adjustment value . . . equaled the total
reported billing adjustment from the worksheet. The
remaining negative billing adjustments were then set
equal to zero.
NTN’s App. Mem. Attach. 3 at 3.
Court No. 98-12-03232 Page 17
is not persuaded by NTN’s argument that Commerce’s methodology is
flawed because NTN fails to point to any record evidence
demonstrating error in Commerce’s adjustment methodology.
Accordingly, the Court sustains Commerce’s adjustment to NTN’s
reported home market billing adjustments.
II. Denial of an Adjustment to United States Indirect Selling
Expenses for Interest Allegedly Incurred in Financing Cash
Deposits for Antidumping Duties
A. Background
During the review at issue, NTN requested Commerce to make an
adjustment to NTN’s United States indirect selling expenses for
interest allegedly incurred by NTN in financing cash deposits for
antidumping duties. See Final Results, 63 Fed. Reg. at 63,865.
“Commerce denied the adjustment and deducted the entire amount of
[NTN’s] indirect selling expenses, including all interest, from the
[constructed export price] (“CEP”).” Def.’s Mem. at 17. Commerce
explained:
Antidumping duties, cash deposits of antidumping duties,
and other expenses such as legal fees associated with
participation in an antidumping case are not expenses
that [Commerce] should deduct from [United States] price.
To do so would involve a circular logic that could result
in an unending spiral of deductions for an amount that is
intended to represent the actual offset for the dumping
. . . . Underlying [Commerce’s] logic in all of these
instances is an attempt to distinguish between business
expenses that arise from economic activities in the
United States and business expenses that are direct,
inevitable consequences of an antidumping duty order.
Court No. 98-12-03232 Page 18
Financial expenses allegedly associated with cash
deposits are not a direct, inevitable consequence of an
antidumping duty order. As [Commerce] stated previously
. . . : money is fungible. If an importer acquires a
loan to cover one operating cost, that may simply mean
that it will not be necessary to borrow money to cover a
different operating cost. . . . There is nothing
inevitable about a company having to finance cash
deposits and there is no way for [Commerce] to trace the
motivation or use of such funds even if it were.
Even if [NTN] has a loan amount that equals its cash
deposits or can demonstrate a “paper trail” connecting
the loan amount to cash deposits, [Commerce] do[es] not
consider the loan amount to be related to the cash
deposits and will not remove it from the [indirect
selling expenses]. Moreover, the result should not be
different where an actual expense can not be associated
in any way with the cash deposits. [Commerce] reject[s]
imputation of an adjustment because there is no real
opportunity cost associated with cash deposits when the
paying of such deposits is a precondition for doing
business in the United States. As a result, [Commerce]
ha[s] not accepted NTN’s reduction in [indirect selling
expenses] based on actual borrowings to finance cash
deposits nor will [Commerce] accept such a reduction
based on imputed borrowings. [Commerce] consider[s] all
financial expenses the affiliated importer incurred with
respect to sales of subject merchandise in the United
States to be [indirect selling expenses]. . . .
. . . . Although in past reviews [Commerce] ha[s]
removed expenses for financing cash deposits, [Commerce]
ha[s] reexamined this issue and [Commerce’s] current
policy is to deny the adjustment. [Commerce] has
concluded that [Commerce’s] new policy is reasonable and
best reflects commercial reality with respect to
affiliated-importer situations. . . .
Final Results, 63 Fed. Reg. at 63,865-66 (internal quotation and
citations omitted).
Court No. 98-12-03232 Page 19
B. Contentions of the Parties
NTN asserts that Commerce wrongly denied an adjustment to
NTN’s United States indirect selling expenses for interest that NTN
allegedly incurred in financing cash deposits for antidumping
duties. See NTN’s Mem. at 4, 15-18. NTN claims that Commerce’s
rationale for denying NTN’s adjustment for interest expenses is
flawed because irrespective of how a company opts to finance the
cash deposits for antidumping duties, the amount of cash deposited
will have to be made up by financing something else, a result that
is a direct inevitable consequence of the antidumping duty order.
See id. at 16.
Further, NTN notes that Commerce has previously taken the
position that interest expenses incurred in financing cash deposits
of antidumping duties cannot be properly treated as indirect
selling expenses and, therefore, has allowed for an interest-
expense adjustment on antidumping duty cash deposits. See id.
(citing Final Results of Antidumping Duty Administrative Reviews of
Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, Germany, Italy, Japan, Singapore, and
the United Kingdom (“Previous Ruling”), 62 Fed Reg. 2087,5 2104
(Jan. 15, 1997)).
5
The Court presumes that NTN, while citing to 62 Fed. Reg.
2087, intended to cite to 62 Fed. Reg. 2081.
Court No. 98-12-03232 Page 20
NTN also asserts that this Court has repeatedly held that the
costs incurred solely in financing antidumping duty cash deposits
cannot be categorized as selling expenses. See NTN’s Mem. at 16-
17. In particular, NTN argues that Federal-Mogul Corp. v. United
States, 20 CIT 1438, 1440-41, 950 F. Supp. 1179, 1182-83 (1996),
clearly refutes Commerce’s decision to deny NTN’s interest-expense
adjustment. See NTN’s Mem. at 18. NTN notes that the court in
Federal-Mogul found that there was no support for a domestic
party’s “assertion that any expense related to antidumping
proceedings is automatically a selling expense related to the sale
of the subject merchandise. Indeed, pursuant to the rationale of
(Daewoo Elecs. Co. v. United States, 13 CIT 253, 270, 712 F. Supp.
931, 947 (1989)), such expenses are not necessarily selling
expenses.” Id. at 17 (quoting Federal-Mogul, 20 CIT at 1440-41,
950 F. Supp. at 1183). NTN points out that the court in Federal-
Mogul found that, similar to the Daewoo court’s holding that legal
expenses related to antidumping proceedings are not selling
expenses, the interest expenses at issue did not qualify as selling
expenses because they were not related to the sale of merchandise,
but to NTN’s participation in the antidumping proceeding. See
NTN’s Mem. at 18. NTN further points out that the court in
Federal-Mogul “rejected the domestic party’s argument that NTN’s
interest adjustment is duplicative of that allowed under the
statute” and found “the adjustment for expenses for interest
Court No. 98-12-03232 Page 21
expenses on cash deposits is an actual expense, although not a
selling expense, for which the statute does not compensate NTN.”
Id. NTN also notes that in NSK Ltd. v. United States, 21 CIT 617,
638, 969 F. Supp. 34, 55 (1997), the Court reaffirmed its decision
in Federal-Mogul to allow NTN’s adjustment for interest expenses on
antidumping duty cash deposits. See id. NTN requests that the
Court remand this issue to Commerce to grant NTN’s indirect selling
expense adjustment for interest NTN allegedly incurred in financing
cash deposits for antidumping duties. See id.; NTN’s Reply at 6.
Commerce maintains that Commerce’s denial of an adjustment to
NTN’s United States indirect selling expenses for interest
allegedly incurred in financing antidumping duty cash deposits
reflected Commerce’s reasonable reading and application of 19
U.S.C. § 1677a(d)(1) (1994). See Def.’s Mem. at 18-20. Commerce
further maintains that it “has set forth a . . . reasonable
rationale for its departure from the previous practice.”6 Id. at
6
In its brief, NTN states:
NTN has not argued that [Commerce] may not reasonably
change its methodologies. Instead, NTN argued in its
memorandum in support of its motion for judgment on the
agency record, and argues here, that the rationale
provided at Final Results, 63 Fed. Reg. at 63,866 does
not comport with economic reality, is not reasonable, and
defies logic. In addition, [Commerce’s] decision
conflicts with judicial precedent, and its own well
reasoned statements supporting an adjustment for this
expense in the past. Therefore, NTN respectfully
(continued...)
Court No. 98-12-03232 Page 22
20.
Timken supports Commerce’s contentions and points out that:
(1) “the purpose of the statutory provision for interest on over
and under deposits of duties would be defeated by allowing an
expense reduction for interest on cash deposits,” Timken’s Resp. at
14; and (2) “NTN failed to demonstrate that it actually incurred
interest expenses due to financing antidumping duty cash deposits,”
6
(...continued)
requests that this Court ignore the United States’
argument regarding the legality of [Commerce] ever
changing its methodology, and find this change by
[Commerce] unreasonable and contrary to law for the
reasons stated in [NTN’s] memorandum in support of
[NTN’s] motion for judgment on the agency record.
NTN’s Reply at 3-4 (emphasis omitted).
As a preliminary matter, the Court does not agree with NTN
that Commerce’s denial of an adjustment to NTN’s United States
indirect selling expenses for interest allegedly incurred by NTN in
financing NTN’s cash deposits for antidumping duties is a change in
methodology. Rather, it is a change of policy. While a
methodology refers to the “performing [of] several operations[] in
the most convenient order,” BLACK ’S LAW DICTIONARY 991 (6th ed. 1990),
policy “denotes . . . [the] general purpose . . . [of the statute]
considered as directed to the welfare or prosperity of the state,”
id. at 1157; 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).
Moreover, the Court does not agree with NTN that the Court
should “ignore the United States’ argument regarding the legality
of” Commerce’s change in policy. NTN’s Reply at 4. The legality
of Commerce’s change in policy is a precondition that the Court
must address in order to subsequently determine whether Commerce’s
decision at issue was in accordance with law and reasonable.
Court No. 98-12-03232 Page 23
id. at 15.7
C. Analysis
1. Commerce’s Changes of Policy
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,’”
7
The Court disagrees with Timken’s contentions that these two
points could be dispositive of the issue. Timken asserts that
allow[ing] respondents to reduce their selling expenses
by amounts of imputed interest allegedly incurred in
financing antidumping duty deposits (with consequent
increase in [United States] prices and reduction of
margins of dumping), Commerce would provide an incentive
to respondents to prolong litigation over entries so as
to avoid actual payment of duties.
Timken’s Resp. at 15.
The Court is not convinced by Timken’s argument. A defeat in
litigation implies the necessity of eventual payment of the duties
due, and the mere possibility of “opportunity use,” possibly
resulting in collection of interest on the funds available calls
for an argument seeking collection of duties together with a
prevailing interest rate rather than for the “anti-incentive”
argument fostered by Timken.
Next, not only does the record contain NTN’s claim for the
amount of imputed interest attributable to NTN’s antidumping duty
deposits (the claim that, under the administrative scheme, is
subject to verification by Commerce rather than Timken), but also
the factual inquiry of whether NTN actually incurred interest
expenses attributable to financing payment is secondary to the
threshold legal inquiry if an adjustment should be allowed for such
expenses.
Court No. 98-12-03232 Page 24
Transcom, Inc. v. United States, 24 CIT ___, ___, 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 . . . .’”
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.’” Chevron, 467 U.S. 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 Chevron, 467
U.S. at 843. Any assumption that Congress intended to freeze an
Court No. 98-12-03232 Page 25
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.”
Chevron, 467 U.S. at 844.
2. Commerce’s Determination at Bar
Certain expenses incurred by the affiliated seller during the
process of selling the subject merchandise in the United States are
subject to deduction from the CEP of the seller. See 19 U.S.C. §
1677a(d)(1). However, Section 1677a(d)(1) of Title 19 does not
provide a closed and exhaustive list of such expenses. See id.
Consequently, Commerce considers certain ancillary expenses as part
of the incurred indirect expenses subject to deduction under
Section 1677a(d)(1). For example, while antidumping duties and
cash deposits have never been considered by Commerce as expenses
deductible from United States price, see Final Results of
Antidumping Duty Administrative Reviews of Antifriction Bearings
(Other Than Tapered Roller Bearings) and Parts Thereof From France,
Court No. 98-12-03232 Page 26
Germany, Italy, Japan, Romania, Singapore, Sweden and the United
Kingdom (“Later Ruling”), 62 Fed. Reg. 54,043, 54,079 (Oct. 17,
1997), interest expenses incurred in connection with selling
activities in the United States were deemed deductible from United
States price. See Final Results, 63 Fed. Reg. at 63,865-66.
Therefore, for those expenses that Commerce deemed to be non-
selling expenses, Commerce allowed an adjustment to indirect
selling expenses. See id.
For some period of time, Commerce’s practice was to deem
financing interest of cash deposits as not a selling expense and,
therefore, Commerce did allow respondents that incurred financing
interest of cash deposits to deduct such interest from indirect
selling expenses prior to the deduction of such indirect selling
expenses from the CEP. See Previous Ruling, 62 Fed. Reg. at 2104.
However, at a later point, Commerce reexamined this practice and
the policies underlying it. Specifically, Commerce observed that
[t]he statute does not contain a precise definition of
what constitutes a selling expense. Instead, Congress
gave [Commerce] discretion in this area. It is a matter
of policy whether [Commerce] consider[s] there to be any
financing expenses associated with cash deposits.
[Commerce] recognize[s] that [Commerce] ha[s], to a
limited extent, removed such expenses from indirect
selling expenses for such financing expenses in past
reviews . . . . However, [Commerce] ha[s] reconsidered
[Commerce’s] position on this matter and ha[s] now
concluded that this practice is inappropriate.
Later Ruling, 62 Fed. Reg. at 54,079.
Court No. 98-12-03232 Page 27
Commerce has the discretion to alter its policy, so long as
Commerce presents a reasonable rationale for its departure from the
previous practice. See Chevron, 467 U.S. at 843; Timken Co., 22
CIT at 628, 16 F. Supp. 2d at 1106. Commerce explained its
rationale for the reconsideration as follows:
Underlying [Commerce’s] logic . . . is an attempt to
distinguish between business expenses that arise from
economic activities in the United States and business
expenses that are direct, inevitable consequences of the
dumping order.
Financial expenses allegedly associated with cash
deposits are not a direct, inevitable consequence of an
antidumping order. . . . Companies may choose to meet
obligations for cash deposits in a variety of ways that
rely on existing capital resources or that require
raising new resources through debt or equity. . . . In
fact, companies face these choices every day regarding
all their expenses and financial obligations. There is
nothing inevitable about a company having to finance cash
deposits and there is no way for [Commerce] to trace the
motivation or use of such funds even if it were.
. . . .
So, while under the statute [Commerce] may allow a
limited exemption from deductions from [United States]
price for cash deposits themselves and legal fees
associated with participation in dumping cases,
[Commerce] do[es] not see a sound basis for extending
this exemption to financing expenses allegedly associated
with financing cash deposits. . . .
[Commerce] see[s] no merit to the argument that,
since [Commerce] do[es] not deduct cash deposits from
[United States] price, [Commerce] should also not deduct
financing expenses that are arbitrarily associated with
cash deposits. To draw an analogy as to why this logic
is flawed, [Commerce] also do[es] not deduct corporate
taxes from [United States] price; however, [Commerce]
would not consider a reduction in selling expenses to
reflect financing alleged to be associated with payment
Court No. 98-12-03232 Page 28
of such taxes.
Later Ruling, 62 Fed. Reg. at 54,079; see also Final Results, 63
Fed. Reg. at 63,865-66 and Final Results of Antidumping Duty
Administrative Reviews of Antifriction Bearings (Other Than Tapered
Roller Bearings) and Parts Thereof From France, Germany, Italy,
Japan, Romania, Singapore, Sweden, and the United Kingdom, 63 Fed.
Reg. 33,320, 33,348 (June 18, 1998).
The Court finds Commerce’s rationale for reconsideration
convincing. Cf. Timken Co., 22 CIT at 628, 16 F. Supp. 2d at 1106
(upholding Commerce’s reconsideration and noting that, while the
Court could be concerned with Commerce’s sudden change in practice,
Commerce is afforded significant deference in its statutory
interpretation). Moreover, the Court holds that Commerce’s current
interpretation of Section 1677a(d)(1) is reasonable. See Chevron,
467 U.S. at 845; Koyo Seiko Co. v. United States, 26 CIT ___, ___,
186 F. Supp. 2d 1332, 1337 (2002); NTN 2002, 26 CIT at___, 186 F.
Supp. 2d at 1278; NTN Bearing Corp. of Am. v. United States (“NTN
2000”), 24 CIT ___, ___, 104 F. Supp. 2d 110, 138 (2000), aff’d,
295 F.3d 1263 (2002). Therefore, the Court affirms Commerce’s
decision to deny an adjustment to NTN’s United States indirect
selling expenses for interest allegedly incurred by NTN in
financing NTN’s cash deposits for antidumping duties.
Court No. 98-12-03232 Page 29
III. Commerce’s Decision to Calculate Constructed Export Price
Profit Without Regard to Levels of Trade
A. Background
1. Statutory Background
In calculating CEP, Commerce must reduce the starting price
used to establish CEP by “the profit allocated to the expenses
described in paragraphs (1) and (2)” of 19 U.S.C. § 1677a(d)
(1994). 19 U.S.C. § 1677a(d)(3). Under 19 U.S.C. § 1677a(f)
(1994), the “profit” that is deducted from this starting price is
“determined by multiplying the total actual profit by [a]
percentage” calculated “by dividing the total United States
expenses by the total expenses.” 19 U.S.C. §§ 1677a(f)(1) and
(2)(A). Section 1677a(f)(2)(B) defines “total United States
expenses” as the total expenses deducted under 19 U.S.C. §
1677a(d)(1) and (2), that is, commissions, direct and indirect
selling expenses, assumptions, and the cost of any further
manufacture or assembly in the United States. Section
1677a(f)(2)(C) establishes a tripartite hierarchy of methods for
calculating “total expenses.” “Total expenses” could be the
“expenses incurred with respect to the subject merchandise sold in
the United States and the foreign like product sold in the
exporting country” if Commerce requested such expenses for the
purpose of determining NV and CEP. Id. 19 U.S.C. §
1677a(f)(2)(C)(i). If Commerce did not request these expenses,
Court No. 98-12-03232 Page 30
then “total expenses” are the “expenses incurred with respect to
the narrowest category of merchandise sold in the United States and
the exporting country which includes the subject merchandise.” 19
U.S.C. § 1677a(f)(2)(C)(ii). If the data necessary to determine
“total expenses” under either of these methods is not available,
then “total expenses” are the “expenses incurred with respect to
the narrowest category of merchandise sold in all countries which
includes the subject merchandise.” 19 U.S.C. §
1677a(f)(2)(C)(iii). “Total actual profit” is based on whichever
category of merchandise is used to calculate “total expenses” under
19 U.S.C. § 1677a(f)(2)(C). See 19 U.S.C. § 1677a(f)(2)(D).
2. Factual Background
During this POR, NTN argued that profit levels differed by
level of trade (“LOT”) and had an effect on prices and CEP profit
and, therefore, Commerce should calculate CEP profit on an LOT-
specific basis rather than for each class or kind of merchandise.
See Final Results, 63 Fed. Reg. at 63,866. NTN reasoned that 19
U.S.C. § 1677a(f)(2)(C) “expresses a preference for the [CEP]
profit calculations to be performed as specifically as possible and
on as narrow a basis as possible.” Id.
Commerce rejected NTN’s argument, concluding that: (1)
“[n]either the statute nor the [Statement of Administrative Action]
Court No. 98-12-03232 Page 31
(“SAA”)8 requires [Commerce] to calculate CEP profit on a basis
more specific than the subject merchandise as a whole”; (2) basing
the CEP profit calculation on an LOT specific basis would “add a
layer of complexity to an already complicated exercise with no
increase in accuracy”; and (3) a “subdivision [of] the CEP profit
calculation would be more susceptible to manipulation.” Id.
(Commerce also relied on its detailed explanation made in the sixth
review of the antifriction bearings (“AFBs”)).9
8
The SAA represents “an authoritative expression by the
Administration concerning its views regarding the interpretation
and application of the Uruguay Round agreements.” H.R. Doc. 103-
316, at 656 (1994), reprinted in 1994 U.S.C.C.A.N. 4040. “[I]t is
the expectation of the Congress that future Administrations will
observe and apply the interpretations and commitments set out in
this Statement.” Id.; see also 19 U.S.C. § 3512(d) (1994) (“The
statement of administrative action approved by the Congress . . .
shall be regarded as an authoritative expression by the United
States concerning the interpretation and application of the Uruguay
Round Agreements and this Act in any judicial proceeding in which
a question arises concerning such interpretation or application”).
9
In the sixth AFB review, Commerce reasoned as follows:
Neither the statute nor the SAA require[s] [Commerce] to
calculate CEP profit on bases more specific than the
subject merchandise as a whole. Indeed, while [Commerce]
cannot at this time rule out the possibility that the
facts of a particular case may require division of CEP
profit, the statute and SAA, by referring to “the”
profit, “total actual profit,” and “total expenses” imply
that [Commerce] should prefer calculating a single profit
figure. NTN’s suggested approach would also add a layer
of complexity to an already complicated exercise with no
guarantee that the result will provide any increase in
accuracy. [Commerce] need not undertake such a
calculation (see Daewoo Electronics v. International
Union, 6 F.3d 1511, 1518-19 (CAFC 1993)). Finally,
(continued...)
Court No. 98-12-03232 Page 32
B. Contentions of the Parties
NTN contends that Commerce erred by refusing to calculate CEP
profit on an LOT specific basis. See NTN’s Mem. at 18. NTN argues
that 19 U.S.C. § 1677a(f) expresses a preference for the CEP profit
calculation to be performed as specifically as possible. See id.
at 19. Moreover, NTN claims that since constructed value (“CV”)
profit is calculated by LOT and matching is by LOT, CEP profit
should be calculated to account for differences in LOT. See id. at
20. NTN asserts that “[t]here is no reason to use a less specific,
less accurate mode of calculation.” Id. NTN further asserts that
Commerce’s speculation that an adjustment is susceptible to
manipulation provides no grounds for rejecting an adjustment. See
id. at 19.
Commerce responds that it properly determined CEP profit
without regard to LOT. See Def.’s Mem. at 22. Commerce notes that
19 U.S.C. § 1677a(f) does not refer to LOT, that is, the statute
does not require that CEP profit be calculated on an LOT specific
basis. See id. at 23. Moreover, Commerce asserts that even
9
(...continued)
subdivision of the CEP-profit calculation would be more
susceptible to manipulation. Congress has specifically
warned [Commerce] to be wary of such manipulation of the
profit allocation (see S. Rep. 103-412, 103d Cong., 2d
Sess at 66-67).
Previous Ruling, 62 Fed. Reg. at 2125; see also 95/96 TRB Final, 63
Fed. Reg. at 2570.
Court No. 98-12-03232 Page 33
assuming that a narrower basis for the CEP profit calculation is
warranted in some circumstances, NTN has not provided any factual
support for such a deviation from Commerce’s standard methodology
for calculating CEP profit. See id. at 24. Timken generally
agrees with Commerce’s CEP profit calculation. See Timken’s Resp.
at 16-18. In addition, Timken argues that the Court lacks
jurisdiction over the issue of Commerce’s calculation of CEP profit
without regard to LOT because Commerce did not ultimately make an
adjustment to NTN’s United States sales for CEP profit.10 Timken’s
Resp. at 17 (proprietary version).
C. Analysis
Section 1677a(f), as Commerce correctly notes, does not make
any reference to LOT. Accordingly, the Court’s duty under Chevron,
10
The Court is bewildered by Timken’s argument that the Court
would be rendering an opinion on a moot issue had the Court decided
to rule on the calculation of NTN’s CEP profit without regard to
LOT. See Timken’s Resp. at 17 (proprietary version). Timken’s
reliance on Rose Bearings Ltd. v. United States, 14 CIT 801, 751 F.
Supp. 1545 (1990), is misplaced since in that case, the Court held
that it lacked jurisdiction after determining that the plaintiff
did not have standing, that is, that the plaintiff was not a party
to a “live case or controversy” since the plaintiff “was not
subject to the antidumping duty order that it ha[d] appealed . . .
.” Rose Bearings, 14 CIT at 802, 751 F. Supp. at 1546. Unlike the
plaintiff in Rose Bearings, NTN could be affected by the challenge
to Commerce’s calculation of CEP profit without regard to LOT. See
Final Results, 63 Fed. Reg. at 63,866. Therefore, this Court is
correct in rendering a decision on the issue of Commerce’s
calculation of NTN’s CEP profit without regard to LOT since NTN is
a party to a “live case or controversy.”
Court No. 98-12-03232 Page 34
467 U.S. 837, is to review the reasonableness of Commerce’s
statutory interpretation. See IPSCO, 965 F.2d at 1061 (citing
Chevron, 467 U.S. at 844).
Commerce’s refusal to calculate CEP profit on an LOT specific
basis is reasonable and in accordance with law. See NTN 2000, 24
CIT at ___, 104 F. Supp. 2d at 133-35. The language of the statute
clearly contemplates that, in general, the “narrowest category”
will include the class or kind of merchandise that is within the
scope of an investigation or review. See id., 24 CIT at __, 104 F.
Supp. 2d at 133-35. Subsections (ii) and (iii) of 19 U.S.C. §
1677a(f)(C)’s “total expense” definition lead to such a conclusion
because both subsections refer to “expenses incurred with respect
to the narrowest category of merchandise . . . which includes the
subject merchandise.” See id., 24 CIT at ___, 104 F. Supp. 2d at
135. The term “subject merchandise” is defined as “the class or
kind of merchandise that is within the scope of an investigation,
a review, a suspension agreement, an order under this subtitle or
section 1303 of this title, or a finding under the Antidumping Act,
1921.” 19 U.S.C. § 1677(25) (1994). Accordingly, the Court finds
that Commerce reasonably interpreted 19 U.S.C. § 1677a(f) in
refusing to apply a narrower subcategory of merchandise such as one
based on LOT. The Court, moreover, agrees with Commerce’s
conclusion that a subdivision of the “CEP profit calculation would
Court No. 98-12-03232 Page 35
be more susceptible to manipulation,” a result that Congress
specifically warned Commerce to prevent. Final Results, 63 Fed.
Reg. at 63,866. Finally, the Court agrees with Commerce that NTN
failed to provide adequate factual support of how the CEP profit
calculation was distorted by Commerce’s standard methodology.
IV. Commerce’s Decision to Include Profits From Export Price Sales
in the Calculation of CEP Profit
A. Background
Under 19 U.S.C. § 1677a(d)(3), Commerce must, in order to
calculate CEP, deduct “the profit allocated to the expenses
described in” 19 U.S.C. §§ 1677a(d)(l) and (2) from the price
charged to the first unaffiliated purchaser in the United States.
“Profit” is defined as “an amount determined by multiplying the
total actual profit by the applicable percentage,” 19 U.S.C. §
1677a(f)(1), and “actual profit” is defined as the “total profit
earned . . . with respect to the sale of the same merchandise for
which total expenses are determined . . . .” 19 U.S.C. §
1677a(f)(2)(D). The term “total expenses” means “all expenses in
the first of [three] categories which applies and which are
incurred by or on behalf of the foreign producer and foreign
exporter of the subject merchandise and by or on behalf of the
United States seller affiliated with the producer or exporter with
respect to the production and sale of such merchandise . . . .” 19
Court No. 98-12-03232 Page 36
U.S.C. § 1677a(f)(2)(C). The first category covers “expenses
incurred with respect to the subject merchandise sold in the United
States and the foreign like product sold in the exporting country
. . . .” 19 U.S.C. § 1677a(f)(2)(C)(i). “Subject merchandise,” in
turn, is defined as “the class or kind of merchandise that is
within the scope of . . . a review . . . .” 19 U.S.C. § 1677(25).
In the Final Results, Commerce included export price (“EP”)
sales in the calculation of CEP profit. See generally, 63 Fed.
Reg. at 63,866.
B. Contentions of the Parties
NTN contends that the statute clearly states that the
adjustment of profit to the CEP is to be based on expenses incurred
in the United States as a percentage of total expenses and that
there is no provision in the statute for the inclusion of EP
expenses or profit in this calculation. See NTN’s Mem. at 20-22.
NTN deduces, therefore, that Commerce erred by including EP sales
in the calculation of CEP profit. See id. at 20.
Specifically, NTN relies on the definition of the term “total
expenses.” See 19 U.S.C. § 1677a(f)(2)(C). NTN maintains that the
specific reference to CEP within the definition precludes Commerce
from the inclusion of EP expenses in the calculation of CEP profit.
See generally NTN’s Mem. at 20-21. NTN further states that “just
Court No. 98-12-03232 Page 37
as EP expenses cannot be considered, it follows logically that
sales revenue for EP sales also cannot be included” in the
calculation of CEP profit since the definition of “total actual
profit,” 19 U.S.C. § 1677a(f)(2)(D), “directly references the
definition of total expenses.” Id. at 21-22. NTN, therefore,
requests that EP sales be removed from NTN’s CEP profit adjustment
calculation. See id. at 22.
Commerce contends that the inclusion of revenues and expenses
resulting from NTN’s EP sales in the calculation of CEP profit was
in accordance with law because it was a reasonable interpretation
of the statutory mandates of sections 1677a(f)(2)(C) and (D) and
1677(25) of Title 19. See Def.’s Mem. at 25-27. Specifically,
Commerce points out that the term “subject merchandise” is defined
as “‘the class or kind of merchandise that is within the scope of
. . . a review. . . .’” Id. at 26-27 (quoting 19 U.S.C. §
1677(25)). Commerce notes that the term “subject merchandise” is
referred to in the statute that defines “total expenses,” see 19
U.S.C. § 1677a(f)(2)(C)(i), and therefore “total expenses”
encompasses NTN’s EP and CEP sales. See Def.’s Mem. at 28.
Commerce further articulates that:
[Commerce’s September 4, 1997] Policy Bulletin . . .
indicates that section [1677a(f)(2)(D)] . . . clearly
states that the calculation of total actual profit is to
include all revenues and expenses resulting from the
respondent’s EP sales as well as from its CEP and home
market sales. The basis for total actual profit is the
Court No. 98-12-03232 Page 38
same as the basis for total expenses under [19 U.S.C. §
1677a(f)(2)(C)]. The first alternative under [19 U.S.C.
§ 1677a(f)(2)(C)] states that, for purposes of
determining profit, the term “total expenses” refers to
all expenses incurred with respect to the subject
merchandise sold in the United States (as well as in the
home market). Thus, where the respondent makes both EP
and CEP sales to the United States, sales of the subject
merchandise would necessarily encompass all such
transactions. Therefore, as in the 95/96 TRB Final, [63
Fed. Reg. 2558], because NTN had EP sales, [Commerce] .
. . included these sales in the calculation of CEP
profit.
Final Results, 63 Fed. Reg. at 63,866.
Timken agrees with Commerce and contends that Commerce
reasonably calculated CEP profit on the basis of all United States
sales, including EP sales. See Timken’s Resp. at 18-19.
C. Analysis
Based upon the above-defined statutory scheme, Commerce
concluded that where a respondent made both EP and CEP sales,
“sales of the subject merchandise” encompassed all such
transactions and, therefore, Commerce could “reasonably interpret[]
the statutory scheme as providing that the calculation of total
actual profit is to include all revenues and expenses resulting
from the respondent’s EP sales as well as from its CEP and home
market sales.” Def.’s Mem. at 27. Commerce’s September 4, 1997
Policy Bulletin provides:
The calculation of total actual profit under [19 U.S.C.
§ 1677a(f)(2)(D)] includes all revenues and expenses
Court No. 98-12-03232 Page 39
resulting from the respondent’s [EP] sales as well as
from its constructed export price and home market sales
. . . . The basis for total actual profit is the same as
the basis for total expenses under [19 U.S.C. §
1677a(f)(2)(C)]. The first alternative under this
section . . . states that, for purposes of determining
profit, the term “total expenses” refers to all expenses
incurred with respect to the subject merchandise sold in
the United States (as well as home market expenses).
Thus, where the respondent makes both EP and CEP [sales],
sales of the subject merchandise would encompass all such
transactions.
Def.’s Mem. at 27.
The SAA further clarifies the point and states the following:
The total expenses are all expenses incurred by or on
behalf of the foreign producer and exporter and the
affiliated seller in the United States with respect to
the production and sale of the first of the following
alternatives which applies: (1) the subject merchandise
sold in the United States and the foreign like product
sold in the exporting country (if Commerce requested this
information in order to determine the normal value and
the constructed export price) . . . .
H.R. DOC. 103-316 at 824.
Based upon its interpretation of the statutory language and
upon the SAA’s reference to CEP, NTN claims that there are only two
categories of expenses that Commerce could use in calculating CEP
profit: those used to calculate NV and those used to calculate CEP.
See NTN’s Mem. at 21. Additionally, NTN states that just as EP
expenses cannot be used in calculating CEP profit, neither can
sales revenue be used for EP sales since the definition of “total
actual profit” under 19 U.S.C. § 1677a(f)(2)(D) refers to the
Court No. 98-12-03232 Page 40
definition of “total expenses” in 19 U.S.C. § 1677a(f)(2)(C). See
id. at 21-22.
NTN, however, ignores two issues. To start, the first
category of total expenses under 19 U.S.C. § 1677a(f)(2)(C) is not
limited to expenses incurred with respect to CEP sales made in the
United States and the foreign like product sold in the exporting
country. It also covers expenses incurred with respect to EP sales
because it refers to “expenses incurred with respect to the subject
merchandise sold in the United States.” The term “subject
merchandise” is defined in 19 U.S.C. § 1677(25) as the class or
kind of merchandise that is within the scope of a review; and the
class or kind of merchandise in this review includes both CEP and
EP sales.
Second, as the SAA explains, the total expenses are all
expenses incurred with respect to the production and sale of the
first of the three alternatives. In referring to the first
category of expenses, the SAA specifically refers to “the subject
merchandise sold in the United States,” which by definition means
the class or kind of merchandise which is within the scope of a
review and, in this review, includes both CEP and EP sales. H.R.
DOC. 103-316 at 824.
Court No. 98-12-03232 Page 41
For these reasons the Court is not convinced by NTN’s argument
that Commerce’s interpretation of the statutory scheme is
unreasonable and sustains Commerce’s inclusion of EP sales in the
calculation of CEP profit. See Chevron, 467 U.S. 837.
V. Commerce’s Use of Affiliated Supplier’s Cost
of Production for Inputs When the Cost Was
Higher Than the Transfer Price
A. Background
During the review at issue, Commerce used the higher of the
transfer price or the actual cost in calculating cost of production
(“COP”) and CV in situations involving inputs that NTN had obtained
from affiliated producers. See Final Results, 63 Fed. Reg. at
63,868. In the Final Results, Commerce stated that
[Commerce] disagree[s] with NTN’s contention that it is
not appropriate for [Commerce] to rely on section [19
U.S.C. § 1677b(f)(2) (1994) and 19 U.S.C. § 1677b(f)(3)
(1994)] in [the case at bar]. [Commerce] note[s] that
section 351.407 (a) and (b) [(1998)] of [Commerce’s]
regulations sets forth certain rules that are common to
the calculation of CV and COP. This section states that
for the purpose of section [19 U.S.C. § 1677b(f)(3)] . .
. [Commerce] will determine the value of a major input
purchased from an affiliated person based on the higher
of: (1) the price paid by the exporter or producer to the
affiliated person for the major input; (2) the amount
usually reflected in sales of the major input in the
market under consideration; or (3) the cost to the
affiliated person of producing the major input.
Furthermore, [Commerce] ha[s] relied on this
methodology in [previous determinations] . . . . In
each of these determinations [Commerce] concluded that in
the case of a transaction between affiliated persons
Court No. 98-12-03232 Page 42
involving a major input, [Commerce] will use the highest
of the transfer price between the affiliated party, the
market price between unaffiliated persons involving the
major input, or the affiliated supplier’s cost of
producing this input.
Accordingly, for the Final Results, [Commerce] ha[s]
continued to rely on the higher of transfer price or
actual cost for NTN’s affiliated-party inputs when
calculating COP and CV.
Id. (citations omitted).
B. Contentions of the Parties
NTN contends that Commerce “erroneously adjusted NTN’s COP and
CV for affiliated party inputs.” NTN’s Mem. at 22; see NTN’s Mem.
at 4-5, 22-24; NTN’s Reply at 7-8. In particular, NTN maintains
that: (1) there is no record evidence that the affiliated party
inputs did “not reflect the amount usually reflected in sales of
this merchandise in the market under consideration,” NTN’s Mem. at
24, see also, NTN’s Mem. at 22-23 (relying on 19 U.S.C. §
1677b(f)(2)); and (2) the Final Results, 63 Fed. Reg. at 63,868,
“make no reference to any record evidence which would give
[Commerce] reasonable grounds to believe that the reported [COP] of
the affiliated party inputs in question was less than the actual
[COP].” NTN’s Mem. at 23. Moreover, according to NTN, a plain
language reading of 19 U.S.C. § 1677b(f) (1994) makes clear that
“the automatic recalculation of reported COP and CV data
contemplated in 19 C.F.R. § 351.407 [(1998)] is not contemplated in
Court No. 98-12-03232 Page 43
the statute itself.” Id. NTN, therefore, requests that this Court
“hold 19 C.F.R. [§] 351.407 invalid as a matter of law . . . and
remand this case to [Commerce] to restore NTN’s reported affiliated
party input data in calculating COP and CV.” NTN’s Reply at 8.
Commerce argues that its “use of the affiliated supplier’s COP
for major inputs rather than the transfer prices is supported by
substantial record evidence and otherwise in accordance with law.”
Def.’s Mem. at 30; see Def.’s Mem. at 29-40. Commerce further
argues that NTN’s contentions are without merit. See id. at 37-40.
Specifically, Commerce maintains inter alia that: (1) Commerce did
provide its reasons for conducting a below-cost sales test, see id.
at 38 (citing Preliminary Results, 63 Fed. Reg. at 37,347; Def.’s
App. Mem. Ex. 2 at 5; and (2) “Commerce has properly exercised the
discretion granted to [Commerce] in 19 U.S.C. § 1677b(f)(3) to
analyze the cost of major inputs purchased by a producer from its
affiliated suppliers when [Commerce] initiates a COP investigation
pursuant to 19 U.S.C. § 1677b(b)(1) without a separate below-COP
allegation with respect to inputs.” Def.’s Mem. at 39.
Timken supports Commerce’s position and adds that “the statute
provides Commerce the authority to request cost data for inputs.”11
11
In its reply brief, NTN maintains that “Timken has
misapprehended NTN’s argument” because “NTN does not argue that
[Commerce] may not request such data . . . [but] [i]nstead, NTN
(continued...)
Court No. 98-12-03232 Page 44
Timken’s Resp. at 22; see id. at 20-24.
C. Analysis
The special rules for the calculation of COP and CV contained
in the pertinent provision state that, in a transaction between
affiliated persons, either the transaction or the value of a major
input may be disregarded. See 19 U.S.C. § 1677b(f). The part of
the statutory provision addressing transactions that may be
disregarded reads as follows:
A transaction directly or indirectly between affiliated
persons may be disregarded if, in the case of any element
of value required to be considered, the amount
representing that element does not fairly reflect the
amount usually reflected in sales of merchandise under
consideration in the market under consideration. If a
transaction is disregarded under the preceding sentence
and no other transactions are available for
consideration, the determination of the amount shall be
based on the information available as to what the amount
would have been if the transaction had occurred between
persons who are not affiliated.
19 U.S.C. § 1677b(f)(2).
The so-called “major input rule,” or the part of the statutory
provision addressing the value of a major input that may be
disregarded, states, in turn, that,
11
(...continued)
argues that what [Commerce] did with the information was
unsupported by the statute and unreasonable.” NTN’s Reply at 8.
Therefore, the Court will not address Timken’s argument regarding
whether Commerce may request cost data for inputs.
Court No. 98-12-03232 Page 45
[i]f, in the case of a transaction between affiliated
persons involving the production by one of such persons
of a major input to the merchandise, [Commerce] has
reasonable grounds to believe or suspect that an amount
represented as the value of such input is less than the
cost of production of such input, then [Commerce] may
determine the value of the major input on the basis of
the information available regarding such cost of
production, if such cost is greater than the amount that
would be determined for such input under paragraph [19
U.S.C. § 1677b(f)(2)].
19 U.S.C. § 1677b(f)(3).
One of the elements of value to be considered in the
calculation of COP, which is referred to in Section 1677b(f)(2), is
the cost of manufacturing and fabrication. See 19 U.S.C. §
1677b(b)(3)(A) (1994). Section 1677b(b)(3)(A) shall be read in
conjunction with 19 U.S.C. §§ 1677b(f)(2) and 1677b(f)(3) that
authorize Commerce, in calculating COP and CV, to: (1) disregard a
transaction between affiliated persons if the amount representing
an element does not fairly reflect the amount usually reflected in
sales of merchandise under consideration in the market under
consideration; and (2) determine the value of the major input on
the basis of the information available regarding COP if Commerce
has reasonable grounds to believe or suspect that an amount
represented as the value of the input is less than the COP of the
input.
In determining whether transaction prices between affiliated
persons fairly reflect the market, Commerce’s practice has been to
Court No. 98-12-03232 Page 46
compare the transaction prices with market prices charged by
unrelated parties. Commerce’s practice was later reduced to
writing in 19 C.F.R. § 351.407, a regulation which implements 19
U.S.C. § 1677b(f). Commenting on the regulation, Commerce stated
that it
believes that the appropriate standard for determining
whether input prices are at arm’s length is its normal
practice of comparing actual affiliated party prices to
or from unaffiliated parties. This practice is the most
reasonable and objective basis for testing the arm’s
length nature of input sales between affiliated parties,
and is consistent with [19 U.S.C. § 1677b(f)(2)].
Def.’s Mem. at 33 n.3 (citation omitted).
Pursuant to the major input rule contained in 19 U.S.C. §
1677b(f)(3), in calculating COP or CV, Commerce values a major
input purchased from an affiliated supplier using the highest of
the following: (1) the transfer price between the affiliated
parties; (2) the market price between unaffiliated parties; and (3)
the affiliated supplier’s COP for the major input, since, in
Commerce’s view, the affiliation between the respondent and its
suppliers “‘creates the potential for the companies to act in a
manner that is other than arm’s length’ and gives Commerce reason
to analyze the transfer prices for major inputs.” Def.’s Mem. at
33-34 (quoting Final Results of Antidumping Duty Administrative
Review of Silicomanganese From Brazil, 62 Fed. Reg. 37,869, 37,871-
72 (July 15, 1997)). In addition, if Commerce disregards sales
Court No. 98-12-03232 Page 47
that failed the below-cost sales test pursuant to 19 U.S.C. §
1677b(b)(1) in the prior review with respect to merchandise of the
respondent being reviewed, Commerce has “reasonable grounds to
believe or suspect” that sales under consideration might have been
made at prices below the COP. See 19 U.S.C. § 1677b(b)(2)(A)(ii)
(1994).
Commerce disregarded sales that failed its below-cost sales
test pursuant to 19 U.S.C. § 1677b(b)(1) (1994) during the previous
review with respect to NTN’s merchandise. See Preliminary Results,
63 Fed. Reg. at 37,347; Def.’s App. Mem. Ex. 2 at 5. For this
reason, Commerce concluded that it had reasonable grounds to
believe or suspect that sales of the foreign like product under
consideration may have been made at prices below the COP. Accord
19 U.S.C. § 1677b(b)(2)(A)(ii). Therefore, pursuant to 19 U.S.C.
§ 1677b(b)(1), Commerce initiated a COP investigation of sales by
NTN in the home market. See Preliminary Results, 63 Fed. Reg. at
37,347. As part of its investigation, Commerce distributed a
questionnaire, which, in pertinent part, requested NTN to provide
COP and CV information. See Def.’s Mem. at 36. Specifically,
Commerce requested NTN to: (1) “list all inputs used to produce the
merchandise” under review; (2) “identify those inputs that NTN
received from affiliated” persons; (3) “provide the per-unit
transfer price charged for the input by the affiliated” producer;
Court No. 98-12-03232 Page 48
(4) provide “the per-unit [COP] incurred by the affiliated [person]
in producing the major input[;]” (5) “provide documentation showing
the price paid for the input by the unaffiliated purchaser” “[i]f
the affiliated party sells the identical input to other,
unaffiliated purchasers[;]” (6) “provide documentation showing the
unaffiliated party’s sales price for the input[,]” “[i]f NTN
purchases the identical input from unaffiliated suppliers[;]” and
(7) “specify the basis used by NTN to value each major input for
purposes of computing the submitted COP and CV amounts.” Id. In
response, NTN referred Commerce to a number of NTN’s exhibits and
stated, among other things, that transfer price was used in
computing COP and CV. See Def.’s Supplemental App. at D-1 to D-5.
NTN also indicated that, for submission purposes, NTN used the
transfer price for computing COP and CV. See Def.’s Mem. at 36.
Therefore, consistent with its interpretation of 19 U.S.C. §§
1677f(2) and 1677f(3), Commerce used the higher of the transfer
price or the actual cost in calculating COP and CV in the
situations where NTN used parts purchased from affiliated persons.
See id. at 36-37 (citing Def.’s App. Mem. Ex. 2 (proprietary
version)).
While NTN argues that there is no record evidence that the
affiliated party inputs did “not reflect the amount usually
reflected in sales of this merchandise in the market under
Court No. 98-12-03232 Page 49
consideration,” NTN’s Mem. at 24; see also NTN’s Mem. at 22-23
(relying on 19 U.S.C. § 1677b(f)(2)), the Court holds that Commerce
acted reasonably and in accord with 19 U.S.C. § 1677b(f)(3) when it
recalculated NTN’s COP and CV using the affiliated supplier’s COP
for inputs when it was higher than the reported transfer price.12
See Final Results, 63 Fed. Reg. at 63,868; see NSK Ltd. v. United
States, 26 CIT ___, ___, 217 F. Supp. 2d. 1291 (2002); NTN 2002, 26
CIT ___, 186 F. Supp. 2d 1257; SKF USA Inc. v. United States, 24
CIT ___, 116 F. Supp. 2d 1257 (2000).
VI. Commerce’s Recalculation of NTN’s Home Market and United
States Indirect Selling Expenses Without Regard to Level of
Trade
A. Background
In its preliminary calculations, Commerce had calculated NTN’s
United States indirect selling expenses without regard to LOT.
See Final Results, 63 Fed. Reg. at 63,869-70. NTN argued that
Commerce should have relied on NTN’s reported United States and
12
The Court does not reach NTN’s argument that 19 C.F.R. §
351.407 should be held invalid because it is “inconsistent with [19
U.S.C. § 1677b(f)] insofar as the regulation[] do[es] not require
any reasonable grounds to believe that the reported COP is less
than the actual COP.” NTN’s Mem. at 23-24. As Commerce correctly
points out, “[w]hile the regulation on its face does not require
reasonable grounds to believe or suspect that the reported COP is
less than the actual COP, in this case, Commerce had, in fact, such
reasonable grounds to believe or suspect.” Def.’s Mem. at 39
(emphasis supplied); see also Preliminary Results, 63 Fed. Reg. at
37,347; Def.’s App. Mem. Ex. 2 at 5.
Court No. 98-12-03232 Page 50
home market selling expenses based on LOT instead of recalculating
these selling expenses without regard to LOT. See id. at 63,869.
Timken, in turn, contended that Commerce should reject NTN’s
selling expense allocations based on LOT because such allocations
bear no relationship to the way in which NTN incurs the expenses.
See id. at 63,870; see also Timken’s Resp. at 25-27.
Commerce responded that for a majority of the expenses under
this POR, it determined that NTN’s methodology for allocating its
selling expenses based on LOTs did not bear any relationship to the
manner in which NTN incurred these United States and home market
selling expenses. See Final Results, 63 Fed. Reg. at 63,870.
Commerce asserts that in Timken Co. v. United States (“Timken I”),
20 CIT 645, 930 F. Supp. 621 (1996), Commerce was to accept “NTN’s
LOT-specific allocations and per-unit LOT expense adjustment
amounts only if NTN’s expenses demonstrably varied according to
LOT.” Id. (citing Timken I, 20 CIT at 653, 930 F. Supp. at 628).
Acting in accordance with Timken I, Commerce in its remand results
did not allow NTN’s LOT specific allocations “due to the lack of
quantitative and narrative evidence on the record demonstrating
that the expenses in question demonstrably varied according to
LOT.” Final Resutls, 63 Fed. Reg. at 63,870. During this POR,
since Commerce found that NTN did not provide “quantitative and
narrative evidence” that its selling expenses are attributable to
Court No. 98-12-03232 Page 51
levels of trade, except for certain United States and home market
packing material and packing labor expenses, Commerce recalculated
NTN’s United States and home market selling expenses without regard
to LOT.13 See id. at 63,870-71.
B. Contentions of the Parties
NTN alleges that in the Final Results, 63 Fed. Reg. at 63,869-
71, Commerce erroneously recalculated NTN’s United States and home
market indirect selling expenses without regard to LOT. See NTN’s
Mem. at 5, 24-27. NTN contends that Commerce’s decision to
reallocate NTN’s selling expenses violates Commerce’s mandate to
administer the antidumping laws. See id. at 26-27. In particular,
13
In support of its methodology, Commerce points out that the
Court in NTN Bearing Corp. of Am. v. United States, 19 CIT 1221,
905 F. Supp. 1083 (1995), stated that “‘[a]lthough NTN purports to
show that it incurred different selling expenses at different trade
levels, the record demonstrates that NTN’s allocation methodology
does not reasonably quantify the expenses incurred at each level of
trade.’” See Def.’s Mem. at 42 (quoting NTN, 19 CIT at 1234, 905
F. Supp. at 1094-95); see also Def.’s Mem. at 42-43.
In the Final Results, Commerce also clarified that:
[Commerce] note[s] NTN’s comment that [Commerce]
disallowed NTN’s allocations of certain home market
expenses solely due to the allegedly complex nature of
NTN’s LOT-specific methodology. It is not [Commerce’s]
current practice to reject such allocations on the basis
of complexity; however, [Commerce] inadvertently
indicated in [Commerce’s] Preliminary Analysis Memo at 7
that it is [Commerce’s] policy to do so.
Final Results, 63 Fed. Reg. at 63,870-71 (emphasis supplied).
Court No. 98-12-03232 Page 52
NTN notes that: (1) “[t]here is ample evidence on the record for
[Commerce] to determine that indirect selling expenses, in fact,
varied across levels of trade,” id. at 25 (relying on NTN’s App.
Mem. Attach. 6 at Exs. B-3, B-4 and C-7) (proprietary version); and
(2) Commerce has accepted NTN’s methodology of allocating its
selling expenses based on LOT in previous reviews. NTN’s Mem. at
26 (citing Final Results of Antidumping Duty Administrative Reviews
and Revocation in Part of an Antidumping Finding on Tapered Roller
Bearings and Parts Thereof, Finished and Unfinished, From Japan and
Tapered Roller Bearings, Four Inches or Less in Outside Diameter,
and Components Thereof, From Japan, 61 Fed. Reg. 57,629, 57,636
(Nov. 7, 1996)). Moreover, NTN contends that such reallocation has
the effect of voiding Commerce’s LOT determination that different
LOTs exist in the United States and Japan. See NTN’s Mem. at 26.
Commerce responds that except for certain United States and
home market packing material and packing labor expenses,
“‘[Commerce] denied NTN’s allocations because the record lacked
quantitative and narrative evidence that the expenses in question
varied demonstrably according to LOT.’” Def.’s Mem. at 41 (quoting
Final Results, 63 Fed. Reg. at 63,871). Commerce asserts that NTN
only quantified the allocation itself and, therefore, the Court
should sustain Commerce’s recalculation of NTN’s United States and
home market selling expenses. See Def.’s Mem. at 43.
Court No. 98-12-03232 Page 53
Timken supports Commerce and argues that Commerce was correct
in rejecting NTN’s allocation of United States and home market
selling expenses on an LOT specific basis because “there was no
evidence demonstrating that NTN’s expenses varied according to
level of trade.” Timken’s Resp. at 25; see also Timken’s Resp. at
25-27.
C. Analysis
The Court disagrees with NTN that it adequately supported its
LOT adjustment claim for its reported United States and home market
selling expenses. Although NTN purports to show that it incurred
different selling expenses at different trade levels, the evidence
to which it points does not show that its allocation methodology
reasonably quantifies the United States and home market selling
expenses incurred at different LOTs. See NSK Ltd., 26 CIT at ___,
217 F. Supp. 2d. at 1323; NTN 2002, 26 CIT at ___, 186 F. Supp. 2d
at 1267-68; NTN 2000, 24 CIT at ___, 104 F. Supp. 2d at 131-33;
NTN, 19 CIT at 1234, 905 F. Supp. at 1094-95. Given that NTN had
the burden before Commerce to establish its entitlement to an LOT
adjustment, its failure to provide the requisite evidence compels
the Court to conclude that it has not met its burden of
demonstrating that Commerce’s denial of the LOT adjustment was not
supported by substantial evidence and was not in accordance with
law. See NSK Ltd. v. United States, 21 CIT 617, 635-36, 969 F.
Court No. 98-12-03232 Page 54
Supp. 34, 53-54 (1997), aff’d, NSK Ltd. v. Koyo Seiko Co., Ltd.,
190 F.3d 1321, 1330 (Fed. Cir. 1999).
Accordingly, the Court sustains Commerce’s recalculation of
NTN’s United States and home market selling expenses without regard
to level of trade.
VII. Commerce’s Denial of Price-Based LOT Adjustment for CEP Sales
NTN contends that Commerce improperly denied a price-based LOT
adjustment for CEP sales made in the United States market at an LOT
different from the home market sales.14 See NTN’s Mem. at 5, 27-29;
NTN’s Reply at 11-12. In particular, NTN argues, inter alia, that
Commerce incorrectly determined NTN’s CEP LOT because Commerce
failed to use the sale to the first unaffiliated purchaser in the
United States to determine NTN’s CEP LOT. See NTN’s Mem. at 28.
In other words, according to NTN, if Commerce had used the CEP
starting price, that is, without any 19 U.S.C. § 1677a(d)
adjustment, to determine CEP LOT, NTN would have satisfied the
statutory requirements for an LOT adjustment for its CEP sales.
See NTN’s Reply at 11-12. Relying on Borden, Inc. v. United
States, 22 CIT 233, 4 F. Supp. 2d 1221 (1998), rev’d, 2001 WL
14
For a complete discussion of background information and the
statutory provisions at issue, the reader is referred to this
Court’s decision in NTN 2000, 24 CIT at ___, 104 F. Supp. 2d at
125-28.
Court No. 98-12-03232 Page 55
312232 (Fed. Cir. Mar. 12, 2001), NTN argues that Commerce erred by
determining the CEP level of trade after deducting expenses and
profit pursuant to 19 U.S.C. § 1677a(d). See NTN’s Mem. at 28-29;
NTN’s Reply at 9-11. NTN, therefore, requests that the Court
remand the LOT issue to Commerce to determine NTN’s CEP LOTs prior
to any 19 U.S.C. § 1677a(d) deductions and, afterwards, to grant
NTN a price-based LOT adjustment for its CEP sales. See NTN’s Mem.
at 29; NTN’s Reply at 10-12.
Commerce, in turn, argues that it properly determined the LOT
for NTN’s CEP sales after deducting expenses and profit from the
price to the first unaffiliated purchaser in the United States
pursuant to 19 U.S.C. § 1677a(d) because 19 U.S.C. §
1677b(a)(7)(A), which provides for an LOT adjustment, requires
Commerce to compare CEP, not the “unadjusted” starting price of
CEP, with NV. See Def.’s Mem. at 43, 45-60; Final Results, 63 Fed.
Reg. at 63,871. Commerce points out that CEP is defined in 19
U.S.C. § 1677a(b) (1994) as the price to the unaffiliated purchaser
in the United States as adjusted under 19 U.S.C. § 1677a(d). See
Def.’s Mem. at 46-47. According to Commerce, the adjusted CEP
price is to be compared to prices in the home market based on the
same LOT whenever it is practicable; when it is not practicable and
the LOT difference affects price comparability, Commerce makes an
LOT adjustment. See id. at 49-50. Commerce makes a CEP offset
Court No. 98-12-03232 Page 56
when Commerce “is not able to quantify price differences between
the CEP [LOT] and the [LOT] of the comparison sales, and if NV is
established at a more advanced stage of distribution than the CEP
[LOT].” Id. at 50. If the CEP price is not adjusted before it is
compared under the approach advocated by NTN, “there will always be
substantial deductions from the resale prices in the United States
(because they are mandatory),” but they “will be compared to resale
prices in the home market from which there will virtually never be
any equivalent deductions,” thus creating a substantial imbalance
and a skewed comparison between NV and CEP. Id. at 54 (emphasis in
original).
Therefore, Commerce claims that it properly denied an LOT
adjustment for NTN’s CEP sales because NTN did not have a home
market LOT equivalent to the CEP LOT, making it impossible for
Commerce to quantify the difference in price between the CEP LOT
and the home market LOT. See id. at 43-44 (citing Def.’s App. Mem.
Ex. 2 at 6-7) (proprietary version); see also Final Results, 63
Fed. Reg. at 63,871. Because the home market LOT was at a more
advanced stage of distribution than the CEP LOT, Commerce made a
CEP offset pursuant to 19 U.S.C. § 1677b(a)(7)(B). See Def.’s Mem.
at 44, 61 (citing Def.’s App. Mem. Ex. 2 at 6-7) (proprietary
version).
Court No. 98-12-03232 Page 57
Timken generally agrees with Commerce’s positions. See
Timken’s Resp. at 28-30.
In Micron Tech., Inc. v. United States, 243 F.3d 1301 (Fed.
Cir. 2001), the Court of Appeals for the Federal Circuit (“CAFC”)
held that the plain text of the antidumping statute and the SAA
require Commerce to deduct the expenses enumerated under 19 U.S.C.
§ 1677a(d) before making the LOT comparison.15 The court examined
19 U.S.C. § 1677b(a)(1)(B)(i) (1994), which provides that Commerce
must establish NV “to the extent practicable, at the same level of
trade as the export price or [CEP],” and 19 U.S.C. § 1677a(b),
which defines CEP as “the price at which the subject merchandise is
first sold (or agreed to be sold) in the United States . . .as
adjusted under subsections (c) and (d) of this section.” (Emphasis
supplied). The court concluded that, “[as] [r]ead together, these
two provisions show that Commerce is required to deduct the
subsection (d) expenses from the starting price in the United
States before making the level of trade comparison.” Micron, 243
F.3d at 1315. The court further stated that this conclusion is
mandated by the SAA, which states that “‘to the extent practicable,
[Commerce should] establish normal value based on home market (or
15
The CAFC’s decision effectively overturned the Court of
International Trade’s determination with respect to this issue in
Borden, 22 CIT 233, 4 F. Supp. 2d 1221, a case discussed by the
parties in the instant matter.
Court No. 98-12-03232 Page 58
third country) sales at the same level of trade as the constructed
export price or the starting price for the export price.’” Id.
(citing SAA at 829) (emphasis omitted).
Thus, the Court finds that Commerce properly made 19 U.S.C. §
1677a(d) adjustments to NTN’s starting price in order to arrive at
CEP and make its LOT determination. The Court also finds that
Commerce’s decision to deny NTN an LOT adjustment is supported by
substantial evidence. Section 1677b(a)(7)(A) permits Commerce to
make an LOT adjustment “if the difference in level of trade . . .
involves the performance of different selling activities[] and . .
. is demonstrated to affect price comparability, based on a pattern
of consistent price differences between sales at different levels
of trade in the country in which normal value is determined.” With
respect to CEP sales, Commerce, examined the record and found that
“NTN had no home market level of trade equivalent to the CEP level
of trade because there were significant differences between the
selling activities associated with the CEP and those associated
with each of the home market levels of trade.” Def.’s Mem. at 43
(citing Def.’s App. Mem. Ex. 2 at 6-7) (proprietary version). “As
a result, because [Commerce] lacked the information necessary to
determine whether there is a pattern of consistent price
differences between the relevant LOTs, [Commerce] did not make a
LOT adjustment for NTN when [Commerce] matched a CEP sale to a sale
Court No. 98-12-03232 Page 59
of the foreign like product at a different LOT.” Final Results, 63
Fed. Reg. at 63,871. Moreover, “Commerce had no other information
that provided an appropriate basis for determining a level-of-trade
adjustment.” Def.’s Mem. at 60-61; see also SAA at 830. Con-
sequently, with respect to the CEP sales where Commerce was unable
to quantify an LOT adjustment, Commerce, in accordance with 19
U.S.C. § 1677b(a)(7)(B), granted a CEP offset to NTN because the
home market sales were at a more advanced LOT than the sales to the
United States. See id. at 44, 61; see also Def.’s App. Mem. Ex. 2
at 7. Based on the foregoing, the Court finds that Commerce acted
within the directive of the statute in denying the LOT adjustment
and granting a CEP offset instead. See 19 U.S.C. § 1677b(a)(7).
VIII. Commerce’s Exclusion of Certain Home Market Sales
to Affiliated Parties From the Normal Value Calculation
A. Background
During the POR, Commerce conducted its standard arm’s length
test in order to determine whether NTN’s affiliated party sales
could be used for purposes of calculating NV. See Final Results,
63 Fed. Reg. at 63,872; see also Preliminary Results, 63 Fed. Reg.
at 37,346-47 (setting forth Commerce’s 99.5% arm’s length test).
Commerce, in accordance with 19 U.S.C. § 1677b(a)(5)(1994) and 19
C.F.R. § 351.403(c) (1998), disregarded those NTN sales made to
affiliated customers in its computation of NV which were not at
Court No. 98-12-03232 Page 60
arm’s length. See Preliminary Results, 63 Fed. Reg. at 37,346; see
also Final Results, 63 Fed. Reg. at 63,871-72; Def.’s Mem. at 5,
61-65.
B. Contentions of the Parties
NTN contends that Commerce erred in applying the arm’s length
test when it “compare[d] the weighted average price for unrelated
sales to the price for individual related sales.” NTN’s Mem. at
29. To illustrate its contention, NTN provides a hypothetical
example attempting to demonstrate that Commerce’s arm’s length test
is distortive. See id. at 30. Alternatively, NTN asserts that,
should Commerce choose to retain its methodology of comparing
individual sales to a weighted average margin, Commerce should
lower the percentage of the arm’s length test to “95% to reflect
the true range of arm’s length prices in these transactions and
compensate for the distortive nature of the test.” Id.
NTN also argues that Commerce’s arm’s length test was
unreasonable since Commerce should have examined factors other than
price in determining whether to include affiliated party sales when
calculating NV. See NTN’s Mem. at 30-31. Specifically, NTN
contends that Commerce failed to examine: (1) “quantity of goods”;
and (2) “payment terms.” Id.; see also NTN’s Reply at 18-19.
Court No. 98-12-03232 Page 61
Commerce responds that 19 U.S.C. § 1677b(a)(5) provides that:
[i]f the foreign like product is sold or, in the absence
of sales, offered for sale through an affiliated party,
the prices at which the foreign like product is sold (or
offered for sale) by such affiliated party may be used in
determining normal value.
Def.’s Mem. at 63 (quoting 19 U.S.C. § 1677b(a)(5) (emphasis in
original)).
Relying on the language of 19 U.S.C. § 1677b(a)(5), Commerce
argues that it has “broad discretion in devising its own
methodology for determining when to use affiliated-party prices in
determining NV.”16 Def.’s Mem. at 63. Moreover, in the Final
Results, Commerce states that
[Commerce’s] 99.5 percent arm’s-length test is a
reasonable method for establishing a fair basis of
comparison between affiliated- and unaffiliated-party
sales. . . . Furthermore, the CIT has upheld the
validity of [Commerce’s] arm’s-length test on numerous
occasions. . . .
NTN has not provided any information on the record
to support its assertion that [Commerce’s] arm’s-length
test is distortive or unreasonable. Therefore, because
16
In addition, Commerce points out the regulation provides
the following:
If an exporter or producer sold the foreign like product
to an affiliated party, [Commerce] may calculate normal
value based on that sale only if satisfied that the price
is comparable to the price at which the exporter or
producer sold the foreign like product to a person who is
not affiliated with the seller.
Def.’s Mem. at 63 (quoting 19 C.F.R. § 351.403(c)).
Court No. 98-12-03232 Page 62
NTN has failed to demonstrate that the 99.5 percent
threshold produces distortive results or that
[Commerce’s] methodology is unreasonable, in accordance
with the CIT decisions . . . and the 95/96 TRB Final, [63
Fed. Reg. 2558], [Commerce] ha[s] not altered
[Commerce’s] 99.5 percent arm’s-length test for these
final results.
Id. at 61-62 (quoting Final Results, 63 Fed. Reg. at 63,872, citing
in turn Micron Tech., Inc. v. United States, 19 CIT 829, 846-47,
893 F. Supp. 21, 38 (1995), NTN, 19 CIT at 1241, 905 F. Supp. at
1100, Usinor Sacilor v. United States, 18 CIT 1155, 1159, 872 F.
Supp. 1000, 1004 (1994)); see also Def.’s Mem. at 65 (citing NTN
Bearing Corp. of Am. v. United States, 23 CIT 486, 497-99, 83 F.
Supp. 2d 1281, 1291-92 (1999), and NSK Ltd., 21 CIT at 636-37, 969
F. Supp. at 54-55). Timken supports Commerce’s contentions. See
Timken’s Resp. at 31-34.
C. Analysis
The Court disagrees with NTN that Commerce’s arm’s length test
is unreasonable. In NTN 2002, 26 CIT at ___, 186 F. Supp. 2d at
1288, this Court upheld Commerce’s application of the arm’s length
test to exclude certain home market sales to affiliated parties
from the NV calculation. The Court noted that under the applicable
statute, 19 U.S.C. § 1677b(a)(5), Commerce is allowed considerable
discretion in deciding whether to include affiliated party sales
when calculating NV. See NTN 2002, 26 CIT at ___, 186 F. Supp. 2d
at 1287 (citing Usinor, 18 CIT at 1158, 872 F. Supp. at 1004). The
Court No. 98-12-03232 Page 63
Court further noted that it has repeatedly upheld Commerce’s arm’s
length test on the basis that respondents have failed to present
“‘record evidence tending to show that . . . Commerce’s test was
unreasonable.’” Id., 26 CIT at ___, 186 F. Supp. 2d at 1287
(quoting NTN, 19 CIT at 1241, 905 F. Supp. at 1100, and citing
Torrington Co. v. United States, 21 CIT 251, 261, 960 F. Supp. 339,
348 (1997), NSK Ltd., 190 F.3d at 1328).
Because Commerce’s application of the arm’s length test to
exclude certain home market sales to affiliated parties from the NV
calculation and the parties’ arguments are practically identical to
those presented in NTN 2002, 26 CIT at ___, 186 F. Supp. 2d at
1287-88, the Court adheres to its reasoning in NTN 2002.
Accordingly, the Court finds that Commerce’s application of the
arm’s length test to exclude certain home market sales to
affiliated parties from the NV calculation is reasonable, is in
accordance with law and is supported by substantial evidence.
IX. Commerce’s Decision to Include in United States Sales Database
Sample Transactions That Were Allegedly Made for No
Consideration
A. Background
In order to calculate a respondent’s margin of dumping,
Commerce compares NV with export price (“EP”) or CEP. EP and CEP
are defined in 19 U.S.C. § 1677a(a) and (b) (1994), respectively.
Court No. 98-12-03232 Page 64
Each definition refers to the price at which the subject
merchandise “is first sold . . . .” 19 U.S.C. § 1677a(a) and (b)
(emphasis supplied). In NSK Ltd. v. United States, 115 F.3d 965
(Fed. Cir. 1997), the CAFC held that the usage of the term “sale”
in 19 U.S.C. § 1677a(a) and (b) indicates a reference to a
transaction involving a material consideration. Specifically, the
CAFC clarified that, in order to be considered a sale within the
meaning of the antidumping law, a transaction must involve “both a
transfer of ownership to an unrelated party and consideration.”
NSK, 115 F.3d at 975.
In accordance with NSK, 115 F.3d at 975, Commerce revised its
policy with respect to sales of sample products. In the Final
Results, Commerce explained:
In light of the CAFC’s opinion, [Commerce] ha[s]
revised [its] policy with respect to [sales of] samples.
[Commerce] will now exclude from its dumping calculations
sample transactions for which a respondent has
established that there is either no transfer of ownership
or no consideration.
This new policy does not mean that [Commerce]
automatically will exclude from its analysis any
transaction to which a respondent applies the label
“sample.” In fact, for these reviews, [Commerce]
determined that there were instances where it [was]
appropriate not to exclude such alleged samples from
[Commerce’s] dumping analysis. It is well-established
that the burden of proof rests with the party making a
claim and in possession of the needed information.
Final Results, 63 Fed. Reg. at 63,872 (citations omitted); see,
e.g., Later Ruling, 62 Fed. Reg. at 54,070.
Court No. 98-12-03232 Page 65
During the review at issue, NTN responded to Commerce’s
questionnaire regarding NTN’s sample sales by stating that the
“[s]amples [were] provided to customers for the purpose of allowing
the customer to determine whether a particular product is suited to
the customer’s needs,” NTN’s App. Mem. Attach. 6 at B-14
(proprietary version), and described NTN’s process of furnishing
samples as follows: (1) “customers request [s]ample [s]ales,” id.;
(2) “[s]ample [s]ales . . . have the letters ‘SS’ in the prefix to
the” recorded order number, id. at B-15; (3) although “[t]he
customers may have purchased the same model previously, . . . this
does not affect the status of subsequent sales as samples, since
the purpose of the sample purchase would not be the same as those
purchased in the normal course of trade [because], [f]or example,
a sample would be requested for use in a new application,” id.; and
(4) “NTN does not keep records of the relative prices of sample
sales and normal sales [and] is the manufacturer of all products
sent as samples.” Id. NTN also provided Commerce with a
supplemental questionnaire response which it now cites to “as
documentation of several zero-priced sample sales.” NTN’s Mem. at
32 (citing NTN’s App. Mem. Attach. 2 at B1) (proprietary version).
In the Final Results,
[Commerce] examined the record to determine whether NTN’s
[United States] samples lacked consideration and were
unable to find any information whatsoever in either NTN’s
narrative or sales database regarding sample
Court No. 98-12-03232 Page 66
transactions. . . . Because NTN did not provide any
information in its response or elsewhere that would have
aided [Commerce] in determining whether NTN received
anything of value from its [United States] customers for
the transactions in question, [Commerce] cannot conclude
that NTN received no consideration for these alleged
samples. While NTN’s database does include sales which
are zero-priced, [Commerce] [is] unable to determine from
the record if these transactions represent the sales
which NTN apparently argues should be excluded from the
[United States] database in accordance with the NSK[,115
F.3d 965] decision. Furthermore, the mere fact that a
sale has a reported unit price of zero does not establish
that a transaction lacked exchange of consideration. . .
. As is evident in [Commerce’s] September 15, 1997
redetermination pursuant to [NSK Ltd., 21 CIT 617, 969 F.
Supp. 34] decision, NSK in that case established that its
zero-priced transactions were free samples or promotional
expenses, and not sales. By contrast, in this review NTN
has not provided any detailed information on the record
demonstrating that its alleged zero-priced transactions
were in fact samples and lacked an exchange of
consideration.
[Commerce] ha[s] also evaluated whether NTN’s
alleged home market sample sales qualify for exclusion
from the home market database in light of the CAFC’s
NSK[,115 F.3d 965] decision. . . . [Commerce] exclude[s]
sample transactions from dumping calculations only if a
respondent has demonstrated either that there is no
transfer of ownership or no consideration. Because
evidence on the record clearly indicates that NTN
received consideration for all home market sales it
claims are samples, none of its home market sample sales
meet either criteria for exclusion established by
NSK[,115 F.3d 965]. . . .
Therefore, because NTN’s alleged [United States] and
home market sample sales do not qualify for exclusion
under NSK[,115 F.3d 965], [Commerce] ha[s] included these
sales in [Commerce’s United States] and home market
databases for these final results.
Final Results, 63 Fed. Reg. at 63,872-73 (citations omitted).
Court No. 98-12-03232 Page 67
B. Contentions of the Parties
NTN contends that Commerce acted contrary to NSK, 115 F.3d
965, when it included NTN’s zero-priced sample sales in NTN’s
United States sales database. See NTN’s Mem. at 6, 33; NTN’s Reply
at 12. NTN argues that Commerce’s “refusal to accept NTN’s
submitted sample sales documentation and explanation of these sales
because NTN cannot prove that consideration was not present is
unreasonable and an abuse of discretion.” NTN’s Mem. at 32;
see id. (citing NTN’s App. Mem. Attachs. 2 and 6 (proprietary
version)). Moreover, NTN asserts that: (1) “NTN provided complete
sales data for all [United States] transactions in its [United
States] database, including zero-priced-sample transactions[;] .
. . [2] NTN provided a complete narrative for Section C of
[Commerce’s] questionnaire which detailed its selling practices in
the United States[;] . . . [and] [3] NTN fully addressed all [of
Commerce’s] requests for information regarding its [United States]
transactions.” NTN’s Reply at 13 (citing NTN’s Reply Attach. 2)
(proprietary version).
Commerce responds that “Commerce properly included in NTN’s
[United States] and home market sales databases sample sales for
which NTN alleged that it received no consideration.” Def.’s Mem.
at 65. Specifically, Commerce maintains that: (1) with regards to
Commerce’s inclusion of NTN’s zero-priced sample sales in NTN’s
Court No. 98-12-03232 Page 68
United States sales database, “Commerce was unable to find any
information that would have aided it in determining whether NTN
received anything of value from its [United States] customers[,]”
and (2) with regards to Commerce’s inclusion of NTN’s sample sales
in NTN’s home market sales database, “the evidence on the record
indicated that NTN received consideration for all home market sales
it claims were samples.” Def.’s Mem. at 65 (citing Final Results,
63 Fed. Reg. at 63,872-73); see also Def.’s Mem. at 65-69. Timken
supports Commerce’s position and asserts that
NTN[] [had] the burden to come forward with information
showing that it made zero-priced sample sales without
receiving any consideration. NTN, however, provided no
relevant information and thus NTN failed to carry its
burden. In its brief, NTN cites to its questionnaire
response and supplemental response in claiming that it
described and documented zero-price sales, but those
references are not relevant as they concern home market
sales, not [United States] sales.
Timken’s Resp. at 36 (citing NTN’s Mem. at 32, citing in turn NTN’s
App. Mem. Attachs. 2 and 6 (proprietary version)); see also
Timken’s Resp. at 35-37.
C. Analysis
Commerce is correct in its reading of the language of NSK, 115
F.3d at 975, as stating that Commerce is not obligated to exclude
any transaction from the United States sales database merely
because such transaction is labeled as a sample sale. See Def.’s
Mem. at 66, 67. Similarly, Commerce is correct in its conclusion
Court No. 98-12-03232 Page 69
that nothing in the statutory mandate or in the holding of NSK, 115
F.3d at 975, “preclude[s] Commerce from requiring a party to
demonstrate that it received no consideration in return for the
samples.” Id. at 67.
During the review at issue, Commerce included NTN’s sample
sales in NTN’s home market sales database because it determined
that “the evidence on the record indicated that NTN received
consideration for all home market sales [NTN] claims were samples.”
Def.’s Mem. at 65; see also Final Results, 63 Fed. Reg. at 63,873.
Moreover, in the Final Results, Commerce explained that it included
NTN’s zero-priced sample sales in NTN’s United States sales
database by stating that
[Commerce] examined the record to determine whether NTN’s
[United States] samples lacked consideration and were
unable to find any information whatsoever in either NTN’s
narrative or sales database regarding sample
transactions. . . . Because NTN did not provide any
information in its response or elsewhere that would have
aided [Commerce] in determining whether NTN received
anything of value from its [United States] customers for
the transactions in question, [Commerce] cannot conclude
that NTN received no consideration for these alleged
samples. While NTN’s database does include sales which
are zero-priced, [Commerce] [is] unable to determine from
the record if these transactions represent the sales
which NTN apparently argues should be excluded from the
[United States] database . . . . [I]n this review NTN
has not provided any detailed information on the record
demonstrating that its alleged zero-priced transactions
were in fact samples and lacked an exchange of
consideration.
Final Results, 63 Fed. Reg. at 63,872-73 (citations omitted); see
Court No. 98-12-03232 Page 70
also Def.’s Mem. at 65, 67-69. Commerce included NTN’s claimed
sample sales in NTN’s United States sales database because Commerce
expected NTN, the party in possession of the pertinent information,
to carry the burden of producing that information, particularly
when NTN was seeking a favorable adjustment or exclusion.
See Final Results, 63 Fed. Reg. at 63,872; Def.’s Mem. at 68-69.
The Court finds that Commerce’s decision to include the
samples designated by NTN as sample ones in NTN’s United States and
home market sales databases is reasonable. Commerce is correct in
its observation that “[i]t is well settled that the party in
possession of information has the burden of producing that
information in order to obtain a favorable adjustment or
exclusion.” Def.’s Mem. at 69 (relying on NTN Bearing, 23 CIT 486,
83 F. Supp. 2d 1281, and Zenith Elecs. Corp. v. United States, 988
F.2d 1573, 1583 (Fed. Cir. 1993)). In the case at bar, NTN was the
party either in possession of the information regarding the
purchase history of its alleged samples, including the price and
quantity for any prior or subsequent purchases of these products by
the same or other customers, or the party obligated to create and
preserve such information in order to obtain a more favorable
margin. NTN’s failure to either trace or supply such information
to Commerce does not impose an obligation on Commerce to interpret
the gaps of information in NTN’s favor. Indeed, the statutory
Court No. 98-12-03232 Page 71
mandate and the language of NSK, 115 F.3d at 975, apply only to
those situations when a respondent can show that the transaction at
issue was a sample sale for no consideration. Neither the statute
nor NSK, 115 F.3d at 975, encompasses the infinite variety of
situations where Commerce could hypothesize that the transactions
under review could have been sample sales for no consideration.
Therefore, since the record does not contain necessary
information, Commerce could reasonably conclude that the
information missing would indicate that the transactions at issue
were not sample sales for no consideration within the meaning of 19
U.S.C. § 1677a(a) and (b) and NSK, 115 F.3d 965. See NSK Ltd., 26
CIT at ___, 217 F. Supp. 2d. at 1311-12. For these reasons, the
Court affirms Commerce’s decision to include NTN’s alleged samples
in Commerce’s final dumping margin calculation.
X. Commerce’s Inclusion of Certain NTN Sales Allegedly Outside
the Ordinary Course of Trade
A. Background
The pertinent section of the United States Code states that NV
be based on “the price at which the foreign like product is first
sold . . . in the ordinary course of trade . . . .” 19 U.S.C. §
1677b(a)(1)(B)(i). Section 1677b(e)(2)(A) of Title 19 provides
that CV be calculated in part, by using “amounts incurred and
realized by the . . . producer [under] . . . review . . . in
Court No. 98-12-03232 Page 72
connection with the production and sale of a foreign like product,
in the ordinary course of trade, for consumption in the foreign
country . . . .” 19 U.S.C. § 1677b(e)(2)(A) (1994). The term
“ordinary course of trade” is defined as
conditions and practices which, for a reasonable time
prior to the exportation of the subject merchandise, have
been normal in the trade under consideration with respect
to merchandise of the same class or kind. [Commerce]
shall consider the following sales and transactions,
among others, to be outside the ordinary course of trade:
(A) Sales disregarded under [19 U.S.C. §]
1677b(b)(1)[;]
(B) Transactions disregarded under [19 U.S.C. §]
1677b(f)(2).
19 U.S.C. § 1677(15) (1994) (emphasis supplied).
Section 1677b(b)(1), in turn, addresses the issue of below-
cost sales. Section 1677b(f)(2) deals with the issue of affiliated
parties. While both 19 U.S.C. § 1677b(b)(1) and 19 U.S.C. §
1677b(f)(2) are irrelevant to the part of the determination being
reviewed since neither below-cost sales nor transactions between
affiliated parties were involved, there is a question as to what
other transactions Commerce could consider to fall outside the
“ordinary course of trade.” Examining the statutory language,
Commerce concluded that the term “among others” indicated that
sales or transactions other than those involving below-cost sales
or transactions between affiliated parties could be considered
outside the “ordinary course of trade.” See Def.’s Mem. at 70.
Court No. 98-12-03232 Page 73
Moreover, Commerce concluded that the usage of the term “among
others” without particular definition of such “other” transactions
indicated that Congress intended to grant Commerce broad discretion
on the issue and enabled Commerce to devise an appropriate
methodology for determining when sales are to be considered as
outside the ordinary course of trade. See id. at 71. Commerce’s
interpretation of the statutory mandate relied on an explanation
contained in the SAA which provides that aside from 19 U.S.C. §§
1677b(b)(1) and f(2):
Commerce may consider other types of sales or
transactions to be outside the ordinary course of trade
when such sales or transactions have characteristics that
are not ordinary as compared to sales or transactions
generally made in the same market. Examples of such
sales or transactions include merchandise produced
according to unusual product specifications [or]
merchandise sold at aberrational prices . . . . [Section
1677(15)] does not establish an exhaustive list, but [the
statutory scheme] intends that Commerce will interpret
[19 U.S.C. § 1677(15)] in a manner which will avoid
basing normal value on sales which are extraordinary for
the market in question, particularly when the use of such
sales would lead to irrational or unrepresentative
results.
H.R. Doc. 103-316 at 834 (emphasis supplied).
Therefore, in the case at bar, “Commerce exercised its
discretion and determined that NTN’s highly profitable sales and
sample sales for which NTN received consideration were not
demonstrated to be outside the ordinary course of trade.” Def.’s
Mem. at 71-72.
Court No. 98-12-03232 Page 74
B. Contentions of the Parties
NTN contends that Commerce erred when it failed to exclude
NTN’s home market sales with unusually high profit levels and home
market sample sales from Commerce’s margin calculations and CV
profit calculation, despite what NTN considers to be sufficient
evidence on record indicating that these transactions were outside
the ordinary course of trade. See NTN’s Mem. at 6-7, 34-37; NTN’s
Reply at 14-17. In particular, NTN asserts that the evidence on
the record includes: (1) an NTN submitted exhibit which provides a
profit chart and identifies sample sales with unusual profits that
NTN considers outside of the ordinary course of trade, see NTN’s
Mem. at 34 (citing NTN’s App. Mem. Attach. 6 (proprietary
version)); NTN’s Reply at 15 (citing NTN’s Reply Attach. 3
(proprietary version)); (2) NTN’s questionnaire response explaining
that “samples sales are only provided for one reason--to help a
customer determine whether a particular bearing suits a particular
application[,]” NTN’s Reply at 16 (citing NTN’s Reply Attach. 5
(proprietary version)); (3) NTN’s “sample sales [that] are
specifically recorded in NTN system’s when they are made using [a
certain] prefix,” NTN’s Reply at 16; and (4) an exhibit provided
to Commerce by NTN depicting “a price comparison by part number of
non-zero-priced sample sales and sales in the ordinary course of
trade.” NTN’s Mem. at 35.
Court No. 98-12-03232 Page 75
Commerce asserts that Commerce’s determination was a
reasonable application of the statutory mandate and supported by
substantial evidence. See Def.’s Mem. at 69-79. Commerce argues
that the evidence provided by NTN fails to demonstrate that such
sales were, in fact, outside the ordinary course of trade. See id.
at 74-79. In particular, Commerce contends that: (1) “the presence
of profits higher than those of other sales does not necessarily
place the sales outside the ordinary course of trade[,]” id. at 76;
and (2) “the mere fact that particular sales are labeled as sample
sales and are made in small quantities does not require Commerce to
treat them as sales made outside the ordinary course of trade . .
. .” Id. at 77; see also id. at 78-79.
Timken supports Commerce’s position and states that NTN “bears
the burden of proving that . . . sales are not in the ordinary
course of trade . . . [and that] NTN [has] failed to show that home
market sample sales and high-profit sales were outside the ordinary
course of trade.” Timken’s Resp. at 38; see also id. at 38-42.
C. Analysis
In determining whether a sale is outside the ordinary course
of trade, Commerce must consider not just “one factor taken in
isolation but rather . . . all the circumstances particular to the
sales in question.” Murata Mfg. Co. v. United States, 17 CIT 259,
Court No. 98-12-03232 Page 76
264, 820 F. Supp. 603, 607 (1993). Commerce’s methodology for
making this determination is codified in section 351.102(b) of
Commerce’s regulations. See 19 C.F.R. § 351.102(b) (1998); see
also Torrington Co. v. United States, 25 CIT ___, ___, 146 F. Supp.
2d 845, 860-63 (2001) (detailing Commerce’s methodology for
deciding when sales are outside the “ordinary course of trade” and
finding both Commerce’s interpretation of 19 U.S.C. § 1677(15) and
Commerce’s methodology reasonable). Moreover, the court in Koenig
& Bauer-Albert AG v. United States, 22 CIT 574, 589, 15 F. Supp. 2d
834, 850 (1998), vacated on other grounds, 259 F.3d 1341 (Fed. Cir.
2001), articulated that “Commerce has the discretion to decide
under what circumstances highly profitable sales would be
considered to be outside the ordinary course of trade,” but also
recognized that Commerce cannot “impose this requirement
arbitrarily.” Koenig, 22 CIT at 589 n.8, 15 F. Supp. 2d at 850
n.8. Additionally, the plaintiff has the burden of proving whether
the sales used in Commerce’s calculations are outside the ordinary
course of trade. See, e.g., Nachi-Fujikoshi Corp. v. United
States, 16 CIT 606, 608, 798 F. Supp. 716, 718 (1992) (citations
omitted).
Court No. 98-12-03232 Page 77
1. Commerce’s Inclusion of Certain NTN Sales
Allegedly Outside the Ordinary Course of
Trade in Commerce’s Margin Calculations
The first issue is whether Commerce reasonably included sample
sales and sales with high profit levels in the margin calculation
of NTN’s home market sales, instead of determining that such sales
were outside the ordinary course of trade, and accordingly
excluding them. During the POR, in its questionnaire to NTN,
Commerce stated:
If [NTN] consider[s] a sale to be outside the
ordinary course of trade, report “YES” in this field. If
the sale was in the ordinary course of trade, report a
“NO.” If [NTN] claim[s] that any of [its] home market
sales are outside the ordinary course of trade [NTN] must
provide a detailed explanation why. Please note that the
burden of proof is on [NTN] to demonstrate, through
narrative explanation of the circumstances surrounding
such sales and supporting documentation or other
evidence, that sales claimed to be outside the ordinary
course of trade are in fact outside the ordinary course
of trade. [Commerce] will not consider only one factor in
isolation (i.e., the fact that certain sales are labeled
as samples, or that a transaction involved small
quantities or high prices) as sufficient proof that a
sale is not in the ordinary course of trade.
Def.’s Mem. at 75 (emphasis supplied) (quoting NTN’s App. Mem.
Attach. 6 (proprietary version)). In response, NTN in support of
its claim that samples and sales with high profit levels were not
in the ordinary course of trade, asserted that: (1) any sale with
a profit level greater than a certain percentage would be
automatically deemed being outside the ordinary course of trade
because that percentage was the greatest profit level in the range
Court No. 98-12-03232 Page 78
of profits at which most of the quantity of subject merchandise was
sold; or (2) all sales with a profit level exceeding a certain
percentage be treated as sales not in the ordinary course of trade
because the majority of pieces sold above cost did not exceed this
profit level. See NTN’s App. Mem. Attach. 6 (proprietary version).
Moreover, NTN asserted that it provided Commerce with sufficient
record evidence and points to a number of exhibits in its
memorandum referring to zero-priced and non-zero priced sample
data. See NTN’s Mem. at 34-35; NTN’s Reply at 16 (citing NTN’s
Reply Attach. 5 (proprietary version)). NTN also cites CEMEX, S.A.
v. United States, 133 F.3d 897 (Fed. Cir. 1998), in support of its
argument that Commerce should exclude sales with abnormally high
profit levels. See NTN’s Mem. at 36; NTN’s Reply at 14-15.
In the Final Results, 63 Fed. Reg. at 63,873-74, Commerce laid
out its practice concerning the exclusion of sample sales from the
margin calculation when such sales, in fact, fall outside the
ordinary course of trade. Commerce stated that it
examined the record with respect to NTN’s alleged home
market sample sales to determine if these sales qualify
for such an exclusion. In its original questionnaire
response, NTN only states that “samples are provided to
customers for the purpose of allowing the customer to
determine whether a particular product is suited to the
customer’s needs” and that “the purpose . . . would not
be the same as those purchased in the normal course of
trade.” . . . Furthermore, NTN did not provide
additional information in its supplemental response
clearly demonstrating that its alleged sample sales were
outside the ordinary course of trade. . . . However,
Court No. 98-12-03232 Page 79
the mere fact that a respondent identified sales as
samples does not necessarily render such sales outside
the ordinary course of trade. . . . For these reasons,
[Commerce] disagree[s] with NTN that its home market
sample sales should be excluded from [the] margin
calculations.
Final Results, 63 Fed. Reg. at 63,873 (citations omitted) (emphasis
supplied).
Commerce also stated that NTN failed to provide any further
evidence illustrating that any of NTN’s “high profit” sales were
actually outside the ordinary course of trade. See id. at 63,873-
74. According to Commerce, “[t]he mere existence of high profits
by itself is not evidence that these same profits were abnormally
high, and is not sufficient to find sales to be outside the
ordinary course of trade.” Id. at 63,874.
The Court finds that Commerce properly included NTN’s sample
sales and sales with high profit in the margin calculation of NTN’s
home market sales. Although the CAFC in CEMEX, 133 F.3d at 901,
sustained Commerce’s determination that certain home market sales
were outside the ordinary course of trade, the court noted that for
that review, Commerce had examined factors additional to profit.
In the case at bar, however, NTN supports its contentions with
evidence regarding only one factor, namely profit. See Final
Results, 63 Fed. Reg. at 63,874; CEMEX, 133 F.3d at 900 (stating
that Commerce must evaluate not just “one factor taken in isolation
Court No. 98-12-03232 Page 80
but rather . . . all the circumstances particular to the sales in
question”). Furthermore, this Court has held that a lack of
showing that the transactions at issue possessed some unique and
unusual characteristic that make them unrepresentative of the home
market allot Commerce the discretion to include such transactions
in NTN’s home market database. See NSK Ltd., 26 CIT at ___, 217 F.
Supp. 2d at 1315 (citing NTN, 19 CIT at 1229, 905 F. Supp. at
1091).
Accordingly, the Court sustains Commerce’s decision to include
NTN’s sample sales and sales with high profit in the margin
calculation of NTN’s home market sales.
2. Commerce’s Inclusion of Certain NTN Sales
Allegedly Outside the Ordinary Course of Trade
in Commerce’s CV Profit Calculations
NTN raises the related argument that since NTN’s sample sales
and sales with abnormally high profits are outside the ordinary
course of trade, they should also be excluded from Commerce’s CV
calculation. See NTN’s Mem. at 36-37. In response, Commerce
stated that “Commerce rejected [NTN’s] argument because the mere
fact that NTN identified sales as samples did not necessarily
render such sales outside the ordinary course of trade and the mere
existence of high profits by itself was not evidence that these
profits were abnormally high and was not sufficient to find sales
Court No. 98-12-03232 Page 81
to be outside the ordinary course of trade.” Def.’s Mem. at 78-79
(citing Final Results, 63 Fed. Reg. at 63,873-74); see also
Timken’s Resp. at 42.
The Court finds that Commerce properly included NTN’s sample
sales and sales with high profit in the calculation of CV profit.
See supra Discussion Part X, C1 (Analysis); see also Koenig, 22 CIT
at 589, 15 F. Supp. 2d at 850.
XI. Commerce’s Reliance Upon the Sum-of-Deviations Methodology for
its Model Match Analysis
A. Background
During this review, Commerce relied upon the “sum-of-
deviations” (“SUMDEV”) methodology to determine NTN’s similar home
market models of the merchandise under review as potential matches
to the United States models. See Final Results, 63 Fed. Reg. at
63,874. In the Final Results, Commerce explained:
Pursuant to [19 U.S.C. § 1677(16) (1994)],17
17
Section 1677(16) of Title 19 of the United States Code
defines the term “foreign like product” as:
merchandise in the first of the following categories in
respect of which a determination . . . can be
satisfactorily made:
(A) The subject merchandise and other merchandise which
is identical in physical characteristics with, and was
produced in the same country by the same person as, that
merchandise.
(B) Merchandise-
(continued...)
Court No. 98-12-03232 Page 82
[Commerce] must first search for home market merchandise
which is identical in physical characteristics to that
sold in the United States. When products sold to the
United States do not have identical matches in the
foreign market, the statute directs [Commerce] to use
similar merchandise which meets the requirements set
forth under [19 U.S.C. § 1677(16)(B)].
For purposes of the current and previous TRBs
administrative reviews, when determining appropriate
product comparisons for [United States] sales [Commerce]
first attempt[s] to match [United States] TRB models to
identical models sold in the home market. If an
identical model is unavailable, [Commerce] appl[ies]
[its] “sum-of-the-deviations” methodology to determine
those models most similar to the [United States] models,
using five physical criteria of TRBs: inside diameter,
outside diameter, width, load rating, and Y2 factor.
Because each of these criteria is quantitatively
measured, [Commerce] derive[s] the overall sum-of-the-
deviations for all five characteristics and use[s] this
absolute value to rank models. . . . In order to satisfy
the statutory requirement set forth in [19 U.S.C. §
1677(16)(B)(iii)] . . . that similar merchandise be
“approximately equal in commercial value”, prior to
assigning sum-of-the-deviations values for ranking
purposes [Commerce] eliminates as possible matches those
models for which the variable cost of manufacturing
17
(...continued)
(i) produced in the same country and by the
same person as the subject merchandise,
(ii) like that merchandise in component material or
materials and in the purposes for which used, and
(iii) approximately equal in commercial value to that
merchandise.
(C) Merchandise-
(i) produced in the same country and by the
same person and of the same general class or kind as the
merchandise which is the subject of the investigation,
(ii) like that merchandise in the purposes for
which used, and
(iii) which the administering authority determines may
reasonably be compared with that merchandise.
19 U.S.C. § 1677(16) (1994).
Court No. 98-12-03232 Page 83
(VCOM) differences exceed 20 percent of the total costs
of manufacturing (TCOM) of the [United States] model.
Final Results, 63 Fed. Reg. at 63,874 (citations omitted); see also
Koyo Seiko Co. v. United States, 66 F.3d 1204, 1209 (Fed. Cir.
1995) (holding that “Congress has implicitly delegated authority
to Commerce to determine and apply a model-match methodology
necessary to yield ‘such or similar’ merchandise under [19 U.S.C.
§ 1677(16)]. This Congressional delegation of authority empowers
Commerce to choose the manner in which ‘such or similar’
merchandise shall be selected. Chevron applies. . . .”).
B. Contentions of the Parties
NTN argues that Commerce’s practice of exclusively “ranking”
similar merchandise on the basis of the SUMDEV methodology does not
allow Commerce to yield the most similar matches because the test
fails to account for the cost deviation among the TRB models.
See NTN’s Mem. at 7, 37-38; NTN’s Reply at 18. Specifically, NTN
contends that “[t]he exclusive use of the [SUMDEV] methodology to
rank similar models creates the possibility that [United States]
sales will be matched to sales with a relatively low [SUMDEV]
total, but a very high difmer total, while another sale may have a
very similar, but higher, [SUMDEV] total, but a much lower difmer
total.” NTN’s Mem. at 38. NTN uses a hypothetical example to
attempt to show that Commerce’s SUMDEV methodology is prima facie
Court No. 98-12-03232 Page 84
distortive. See id. In addition, NTN cites to Bowe-Passat v.
United States, 17 CIT 335, 340 (1993), as support for its
contention that Commerce should be ordered to modify the SUMDEV
methodology “to account for cost deviation among models [in order
for Commerce] to fulfill [its] statutory mandate . . . .” NTN’s
Mem. at 38; see also id. at 39.
Commerce responds that “Commerce properly based its model
match analysis upon the [SUMDEV] methodology.” Def.’s Mem. at 79.
Commerce asserts that 19 U.S.C. § 1677(16) “‘does not require
[Commerce] to follow NTN’s suggested methodology’” and provides
general guidance in selecting the products sold in the foreign
market to be compared to United States merchandise. See
id. (quoting Final Results, 63 Fed. Reg. at 63,874); see also
Def.’s Mem. at 79-80 (citing Final Results, 63 Fed. Reg. at
63,874). The statute first directs Commerce to find home market
merchandise which is, preferably, physically identical with
merchandise sold in the United States and, if unavailable, to
search for merchandise that would satisfy 19 U.S.C. § 1677(16)(B).
See Def.’s Mem. at 80-82. To satisfy such statutory requirements,
Commerce, “[w]hen identical merchandise was not available, . . .
used its [SUMDEV] methodology, coupled with the 20 percent difmer
test, to identify the most similar home market TRBs for comparison
with the [United States] TRBs.” Id. at 82.
Court No. 98-12-03232 Page 85
Additionally, Commerce maintains that “NTN has not
demonstrated that Commerce’s use of its established methodology
was, in fact, distortive.” Id. at 82; see also Final Results, 63
Fed. Reg. at 63,875. Therefore, Commerce contends that Commerce’s
SUMDEV methodology is: (1) a reasonable application of its
discretion to determine what constitutes similar merchandise for
the purpose of calculating NV; (2) supported by substantial record
evidence; and (3) in accordance with law. See Def.’s Mem. at 79-
81.
Timken agrees with Commerce and states that “Commerce’s model
match analysis is reasonable, . . . in accordance with law, and has
been upheld by the [CAFC]” in Koyo, 66 F.3d 1204. Timken’s Resp.
at 43; see also id. at 43-46.
C. Analysis
In Koyo, 66 F.3d at 1209, the CAFC held that “Congress has
implicitly delegated authority to Commerce to determine and apply
a model-match methodology necessary to yield ‘such or similar’
merchandise under [19 U.S.C. § 1677(16)]. This Congressional
delegation of authority empowers Commerce to choose the manner in
which ‘such or similar’ merchandise shall be selected. Chevron
applies in such a situation.” (Citations omitted).
Court No. 98-12-03232 Page 86
In the case at bar, Commerce explained:
[19 U.S.C. § 1677(16)] does not require [Commerce]
to follow NTN’s suggested methodology. . . .
[19 U.S.C. § 1677(16)] directs [Commerce] to select
home market comparison merchandise which is, preferably,
physically identical to merchandise sold in the United
States. If identical comparison merchandise is
unavailable, [Commerce] may then select merchandise which
is physically similar, after adjusting for any
differences in the physical characteristics of the
comparison merchandise (the so-called difmer adjustment).
The statute is silent, however, as to the precise manner
in which similar merchandise is to be identified. . . .
[Commerce’s] TRBs product-comparison methodology conforms
with the express language of [19 U.S.C. § 1677(16)] . .
. ; if the preferred (i.e., identical) match is
unavailable, our margin program then searches for
commercially comparable merchandise which is physically
the most similar to the [United States] merchandise as
determined using the . . . five physical criteria of
TRBs. While NTN suggests that cost deviation values be
added as a matching criteria, [Commerce] note[s] that the
selection of similar merchandise is based on a product’s
physical characteristics and not differences in costs.
Furthermore, [Commerce’s] matching methodology satisfies
NTN’s apparent concerns that dissimilar merchandise may
be compared because it precludes the pairing of models
whose cost deviation exceeds 20 percent and provides for
a difmer adjustment to NV if non-identical TRB models are
matched.
Final Results, 63 Fed. Reg. at 63,874-75.
The Court agrees that Commerce is not required to adopt the
particular matching methodology advanced by NTN, see Koyo, 66 F. 3d
1209; NTN Bearing Corp. of Am. v. United States, 18 CIT 555, 559
(1994); Timken Co. v. United States, 10 CIT 86, 98, 630 F. Supp.
1327, 1338 (1986), and finds that Commerce’s decision to apply its
SUMDEV methodology is reasonable and in accordance with law. See
Court No. 98-12-03232 Page 87
Peer Bearing Co. v. United States, 25 CIT ___, ___, 182 F. Supp. 2d
1285, 1305 (2001) (pointing out that “‘[i]n the absence of a
statutory mandate to the contrary, Commerce’s actions must be
upheld as long as they are reasonable’” (quoting Timken Co. v.
United States, 23 CIT 509, 516, 59 F. Supp. 2d 1371, 1377 (1999));
see also Chevron, 467 U.S. at 844-45.
The Court also agrees with Commerce that NTN has failed to
demonstrate that Commerce’s use of its SUMDEV methodology is, in
any way, distortive. NTN merely supplies the Court with a
hypothetical example suggesting that Commerce’s “exclusive use of
the [SUMDEV] methodology to rank similar models creates the
possibility that [United States] sales will be matched to sales
with a relatively low [SUMDEV] total, but a very high difmer total,
while another sale may have a very similar, but higher, [SUMDEV]
total, but a much lower difmer total.” NTN’s Mem. at 38. Such a
suggestion is not sufficient evidence to prove that Commerce’s
methodology is in any way distortive or an unreasonable
interpretation of Commerce’s discretion to “determine and apply a
model-match methodology necessary to yield ‘such or similar’
merchandise under [19 U.S.C. § 1677(16)].” Koyo, 66 F.3d at 1209.
Court No. 98-12-03232 Page 88
XII. Commerce’s Level of Trade Sales Match Program
A. Background
During the POR, Commerce explained its matching program
stating that
[Commerce’s] sales match programming contains a series of
instructions which [are] designed to first search for a
match at the same LOT before looking for a match at a
different level. For each of the ten passes in
[Commerce’s] multi-level array sales match, with each
“pass” representing the next-most-similar merchandise,
the variable “CAT” is set to the LOT of the [United
States] sale to be matched. [Commerce’s] program uses
this index variable to search for corresponding same-LOT
NVs (which have been organized according to LOT) within
the contemporaneity window. If, after searching each of
the six window months, a same-LOT match is not found, the
program will begin searching for a match at a different
LOT by setting the “CAT” variable to a different LOT than
that of the [United States] sale, and only then begin
searching at that different LOT in each of the window
months.
While the “IF” statement at lines 1388-1389 of the
computer program to which NTN refers appears to elevate
time period over LOT in [Commerce’s] matching hierarchy,
the program is instead assigning a “flag” variable
depending on which interation of the loop is in progress
(i.e., the first loop searches for same-level matches,
the second searches for matches at the next closest LOT,
and so on). As Timken notes, [Commerce’s] program
correctly operates by exhausting all possible same-LOT
matches within the contemporaneity window before
searching for a different LOT match; therefore,
[Commerce] ha[s] made no changes for these final results.
Final Results, 63 Fed. Reg. at 63,875.
Court No. 98-12-03232 Page 89
B. Contentions of the Parties
NTN contends that Commerce’s matching program is contrary to
19 U.S.C. § 1677b(a)(1)(B)(i) because Commerce’s “sales matching
program erroneously failed to give priority to LOT over time when
matching sales.” NTN’s Mem. at 39. In particular, NTN maintains
that Commerce’s “program is set to match sales in the same month
and at the same LOT . . . [and] [w]here there are no sales at the
same LOT for that period, the program is directed to look for sales
at different LOTs during the same month.”18 NTN’s Reply at 20
(citing NTN’s Reply Attach. 6 (proprietary version)). NTN argues
that Commerce’s matching methodology results in distorted margins.
See NTN’s Mem. at 39-40. NTN, therefore, proposes a modified
methodology “[i]n order to account for the consistent price
difference between levels of trade.”19 Id. at 40.
18
NTN in its reply brief points to certain language in
Commerce’s computer program and maintains that “[t]he effect of
this programing language, we believe, is that sales are compared to
merchandise at different levels of trade, rather than being
compared to contemporaneous month sales as defined by 19 C.F.R. §
351.414(e)(2) [1998], and at the same level of trade.” NTN’s Reply
at 20 (citing NTN’s Reply Attach. 6 (proprietary version)).
19
Although NTN proposes a modified methodology, the Court’s
“duty is not to weigh the wisdom of, or to resolve any struggle
between, competing views of the public interest, but rather to
respect legitimate policy choices made by the agency in
interpreting and applying the statute.” Suramerica de Aleaciones
Laminadas, C.A. v. United States, 966 F.2d 660, 665 (Fed. Cir.
1992). Moreover, the Court is not persuaded by NTN’s argument that
Commerce’s matching methodology results in distorted margins
because NTN fails to point to record evidence to support its view.
Court No. 98-12-03232 Page 90
Commerce argues that its LOT matching program is consistent
with 19 U.S.C. § 1677b(a)(1)(B)(i) because “it . . . operates
properly by exhausting all possible contemporaneous month LOT
matches before searching for a match at a different LOT.” Def.’s
Mem. at 84; see also id. at 84-85.
Timken generally agrees with Commerce that Commerce’s LOT
matching program “looks for a match at the same level of trade at
any time within the window of time for matching before it looks for
a match at a different level of trade.” Timken’s Resp. at 47.
Timken argues that NTN’s contention that Commerce’s LOT matching
program failed to give priority to LOT over time is misplaced and
that “the error that NTN complains of does not exist.” Id.
C. Analysis
The applicable statute provides that NV is “the price at which
the foreign like product is first sold (or, in the absence of a
sale, offered for sale) for consumption in the exporting country .
. . to the extent practicable, at the same level of trade.” 19
U.S.C. § 1677b(a)(1)(B)(i). Moreover, the relevant regulation
provides:
Normally, [Commerce] will select as the contemporaneous
month the first of the following which applies:
(i) The month during which the particular [United
States] sale under consideration was made;
(ii) If there are no sales of the foreign like product
Court No. 98-12-03232 Page 91
during this month, the most recent of the three months
prior to the month of the [United States] sale in which
there was a sale of the foreign like product[;]
(iii) If there are no sales of the foreign like
product during any of these months, the earlier of the
two months following the month of the [United States]
sale in which there was a sale of the foreign like
product.
19 C.F.R. § 351.414(e)(2) (1998).
In the case at bar, Commerce explained:
Commerce’s program runs the same LOT through the
contemporaneous month loops before changing the LOT. The
program first assigns the variable “CAT” equal to a LOT.
. . . The program then runs that LOT (“CAT”) through the
contemporaneous month, searching for a match. . . . In
this part of the program, “CAT” stays constant while the
contemporaneous month periods are searched. Only after
the same “CAT” has searched through the contemporaneous
month, does the program allow the CAT variable to change.
. . . With the newly assigned CAT variable, e.g., a
different LOT, the program again is ready to go through
the contemporaneous month loop at the new LOT.
Def.’s Mem. at 84-85 (citations omitted); see also Final Results,
63 Fed. Reg. at 63,875. In addition, in the Final Results,
Commerce stated that “[w]hile the ‘IF’ statement at lines 1388-1389
of the computer program to which NTN refers appears to elevate time
period over LOT in [Commerce’s] matching hierarchy, the program is
instead assigning a “flag” variable depending on which iteration of
the loop is in progress.” 63 Fed. Reg. at 63,875 (emphasis
supplied).
Based on the foregoing, the Court finds that Commerce’s LOT
matching program is in accordance with law (that is, 19 U.S.C. §
Court No. 98-12-03232 Page 92
1677b(a)(1)(B)(i) and 19 C.F.R. 351.414(e)(2)). See Peer Bearing,
25 CIT at ___, 182 F. Supp. 2d at 1305 (pointing out that “‘[i]n
the absence of a statutory mandate to the contrary, Commerce’s
actions must be upheld as long as they are reasonable’” (quoting
Timken Co., 23 CIT at 516, 59 F. Supp. 2d at 1377)); see also
Chevron, 467 U.S. at 844-45, Skidmore v. Swift & Co., 323 U.S. 134,
139-40 (1944).
XIII. Commerce’s Error in Using an Incorrect LOT Adjustment
Factor for Certain EP Sales
NTN argues that Commerce “utilized the wrong adjustment factor
in its computer program when making the level of trade adjustment
for certain EP sales.” NTN’s Mem. at 41 (citing NTN’s App. Mem.
Attach. 5 “Clerical Error Letter” (proprietary version)).
Commerce “concur[s] with NTN that Commerce committed clerical
error and used an incorrect LOT adjustment for certain EP
transactions . . . [and] that the LOT adjustment factors proposed
by NTN are correct.” Def.’s Mem. at 85 (citing NTN’s App. Mem.
Attach. 5 “Clerical Error Letter” (proprietary version)).
In light of the foregoing, the Court remands this issue to
Commerce to correct the clerical error in accordance with NTN’s
App. Mem. Attach. 5 “Clerical Error Letter” (proprietary version)
and to recalculate NTN’s margin rates.
Court No. 98-12-03232 Page 93
CONCLUSION
This case is remanded to Commerce to correct the clerical
error resulting from Commerce’s use of an incorrect LOT adjustment
factor for NTN’s EP sales and to recalculate NTN’s margin rates
accordingly. All other issues are affirmed.
______________________________
NICHOLAS TSOUCALAS
SENIOR JUDGE
Dated: January 24, 2003
New York, New York