Slip Op. 03-05
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
________________________________________
:
NSK LTD. and NSK CORPORATION; :
NTN BEARING CORPORATION OF AMERICA, :
AMERICAN NTN BEARING MANUFACTURING :
CORPORATION, NTN BOWER CORPORATION and :
NTN CORPORATION; KOYO SEIKO CO., LTD. :
and KOYO CORPORATION OF U.S.A., :
:
Plaintiffs and :
Defendant-Intervenors, :
: Consol. Court No.
v. : 00-04-00141
:
UNITED STATES, :
:
Defendant, :
:
and :
:
THE TIMKEN COMPANY, :
:
Defendant-Intervenor :
and Plaintiff. :
________________________________________:
Plaintiffs and defendant intervenors, NSK Ltd. and NSK
Corporation (collectively “NSK”), NTN Bearing Corporation of
America, American NTN Bearing Manufacturing Corporation, NTN Bower
Corporation and NTN Corporation, collectively (“NTN”), and Koyo
Seiko Co., Ltd. and Koyo Corporation of U.S.A. (collectively
“Koyo”), move pursuant to USCIT R. 56.2 for judgment upon the
agency record challenging various aspects of the United States
Department of Commerce, International Trade Administration’s
(“Commerce”) final determination, entitled Final Results of
Antidumping Duty Administrative Reviews and Revocation in Part 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”), 65 Fed. Reg. 11,767 (Mar. 6, 2000). Defendant-
intervenor and plaintiff, The Timken Company (“Timken”), also moves
pursuant to USCIT R. 56.2 for judgment upon the agency record
challenging certain determinations of Commerce’s Final Results.
Consol. Court No. 00-04-00141 Page 2
Specifically, NSK contends that Commerce unlawfully: (1) used
affiliated cost data for purposes other than calculating cost of
production and constructed value to (a) run its model-match
methodology under 19 U.S.C. § 1677(16), (b) calculate the difmer
adjustment under 19 U.S.C. § 1677b(a)(6), and (c) calculate NSK’s
reported United States inventory carrying costs; and (2) conducted
a duty absorption inquiry under 19 U.S.C. § 1675(a)(4) for
outstanding 1976 and 1987 antidumping duty orders.
NTN contends that Commerce unlawfully: (1) conducted a duty
absorption inquiry under 19 U.S.C. § 1675(a)(4) for outstanding
1976 and 1987 antidumping duty orders; (2) used affiliated
supplier’s cost of production for inputs when it was higher than
the transfer price; (3) denied a price-based level of trade
adjustment when matching constructed export price sales to sales of
the foreign like product; (4) rejected NTN’s reported level of
trade selling expenses and reallocated NTN’s United States indirect
selling expenses without regard to level of trade; (5) used
Commerce’s 99.5% arm’s length test to compare NTN’s home market
selling prices to those of NTN’s affiliated and unaffiliated
parties; (6) included certain NTN sales that were allegedly outside
the ordinary course of trade in the dumping margin and constructed
value profit calculations; (7) strictly relied upon the sum-of-
deviations methodology for the model match analysis; and (8) added
an amount to NTN’s selling expenses that was allegedly incurred in
financing cash deposits for antidumping duties.
Koyo contends that Commerce unlawfully: (1) conducted a duty
absorption inquiry under 19 U.S.C. § 1675(a)(4) for outstanding
1976 and 1987 antidumping duty orders; (2) applied adverse facts
available to Koyo’s further manufactured tapered roller bearings;
and (3) used Koyo’s entered value to establish the assessment rate
under 19 C.F.R. § 351.212(b) (1998).
Timken contends that Commerce unlawfully: (1) applied adverse
facts available to Koyo’s entered values; and (2) permitted NTN to
exclude certain expenses attributable to non-scope merchandise from
its reported United States selling expenses.
Held: NSK’s motion for judgment on the agency record is
granted in part and denied in part. NTN’s motion for judgment on
the agency record is granted in part and denied in part. Koyo’s
motion for judgment on the agency record is granted in part and
denied in part. Timken’s motion for judgment on the agency record
is denied. Case remanded to annul all findings and conclusions
made pursuant to the duty absorption inquiry conducted for the
subject review in accordance with this opinion.
Consol. Court No. 00-04-00141 Page 3
[NSK, NTN and Koyo’s 56.2 motions are granted in part and denied in
part. Timken’s 56.2 motion is denied. Case remanded.]
January 9, 2003
Lipstein, Jaffe & Lawson, L.L.P. (Robert A. Lipstein, Matthew
P. Jaffe, Grace W. Lawson and Joseph A. Konizeski) for NSK.1
Barnes, Richardson & Colburn (Donald J. Unger, Kazumune V.
Kano, David G. Forgue and Beata Kolosa) for NTN.
Sidley Austin Brown & Wood LLP (Neil R. Ellis, Niall P.
Meagher, Lawrence R. Walders, Neil C. Pratt, Leigh Fraiser and
Jennifer Haworth McCandless) for Koyo.
Robert D. McCallum, Jr., Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Velta A. Melnbrencis,
Assistant Director, 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.
Stewart and Stewart (Terence P. Stewart, William A. Fennell,
Geert De Prest, Patrick J. McDonough, Marta M. Prado and David S.
Johanson) for Timken.
OPINION
TSOUCALAS, Senior Judge: Plaintiffs and defendant
intervenors, NSK Ltd. and NSK Corporation (collectively “NSK”), NTN
Bearing Corporation of America, American NTN Bearing Manufacturing
Corporation, NTN Bower Corporation and NTN Corporation
1
On June 5, 2000, this Court granted NSK’s Consent Motion
for Intervention but NSK has not filed any briefs in its capacity
as a defendant-intervenor in this action.
Consol. Court No. 00-04-00141 Page 4
(collectively “NTN”), and Koyo Seiko Co., Ltd. and Koyo Corporation
of U.S.A. (collectively “Koyo”), move pursuant to USCIT R. 56.2 for
judgment upon the agency record challenging various aspects of the
United States Department of Commerce, International Trade
Administration’s (“Commerce”) final determination, entitled Final
Results of Antidumping Duty Administrative Reviews and Revocation
in Part 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”), 65 Fed. Reg. 11,767 (Mar. 6, 2000). Defendant-
intervenor and plaintiff, The Timken Company (“Timken”), also moves
pursuant to USCIT R. 56.2 for judgment upon the agency record
challenging certain determinations of Commerce’s Final Results.
Specifically, NSK contends that Commerce unlawfully: (1) used
affiliated cost data for purposes other than calculating cost of
production and constructed value to (a) run its model-match
methodology under 19 U.S.C. § 1677(16), (b) calculate the difmer
adjustment under 19 U.S.C. § 1677b(a)(6), and (c) calculate NSK’s
reported United States inventory carrying costs; and (2) conducted
a duty absorption inquiry under 19 U.S.C. § 1675(a)(4) for
outstanding 1976 and 1987 antidumping duty orders.
NTN contends that Commerce unlawfully: (1) conducted a duty
absorption inquiry under 19 U.S.C. § 1675(a)(4) for outstanding
Consol. Court No. 00-04-00141 Page 5
1976 and 1987 antidumping duty orders; (2) used affiliated
supplier’s cost of production for inputs when it was higher than
the transfer price; (3) denied a price-based level of trade
adjustment when matching constructed export price sales to sales of
the foreign like product; (4) rejected NTN’s reported level of
trade selling expenses and reallocated NTN’s United States indirect
selling expenses without regard to level of trade; (5) used
Commerce’s 99.5% arm’s length test to compare NTN’s home market
selling prices to those of NTN’s affiliated and unaffiliated
parties; (6) included certain NTN sales that were allegedly outside
the ordinary course of trade in the dumping margin and constructed
value profit calculations; (7) strictly relied upon the sum-of-
deviations methodology for the model match analysis; and (8) added
an amount to NTN’s selling expenses that was allegedly incurred in
financing cash deposits for antidumping duties.
Koyo contends that Commerce unlawfully: (1) conducted a duty
absorption inquiry under 19 U.S.C. § 1675(a)(4) for outstanding
1976 and 1987 antidumping duty orders; (2) applied adverse facts
available to Koyo’s further manufactured tapered roller bearings;
and (3) used Koyo’s entered value to establish the assessment rate
under 19 C.F.R. § 351.212(b) (1998).
Timken contends that Commerce unlawfully: (1) applied adverse
facts available to Koyo’s entered values; and (2) permitted NTN to
Consol. Court No. 00-04-00141 Page 6
exclude certain expenses attributable to non-scope merchandise from
its reported United States selling expenses.
BACKGROUND
The administrative review at issue involves the period of
review (“POR”) covering October 1, 1997, through September 30,
1998.2 Commerce published the preliminary results of the subject
reviews on October 1, 1999. See Preliminary Results of Antidumping
Duty Administrative Reviews and Intent to Revoke in-Part 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”) 64 Fed. Reg. 53,323. Commerce published the Final
Results at issue on March 6, 2000. See 65 Fed. Reg. 11,767.
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).
2
Since the administrative review at issue was initiated
after December 31, 1994, the applicable law is the antidumping
statute as amended by the Uruguay Round Agreements Act (“URAA”),
Pub. L. No. 103-465, 108 Stat. 4809 (1994) (effective January 1,
1995). See Torrington Co. v. United States, 68 F.3d 1347, 1352
(Fed. Cir. 1995) (citing URAA § 291(a)(2), (b) (noting effective
date of URAA amendments)).
Consol. Court No. 00-04-00141 Page 7
STANDARD OF REVIEW
In reviewing a challenge to Commerce’s final determination in
an antidumping administrative review, the Court will uphold
Commerce’s determination unless it is “unsupported by substantial
evidence on the record, or otherwise not in accordance with law .
. . .” 19 U.S.C. § 1516a(b)(1)(B)(i) (1994).
I. Substantial Evidence Test
Substantial evidence is “more than a mere scintilla. It means
such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.” Universal Camera Corp. v. NLRB,
340 U.S. 474, 477 (1951) (quoting Consolidated Edison Co. v. NLRB,
305 U.S. 197, 229 (1938)). Substantial evidence “is something less
than the weight of the evidence, and the possibility of drawing two
inconsistent conclusions from the evidence does not prevent an
administrative agency’s finding from being supported by substantial
evidence.” Consolo v. Federal Maritime Comm’n, 383 U.S. 607, 620
(1966) (citations omitted). Moreover, “[t]he court may not
substitute its judgment for that of the [agency] when the choice is
‘between two fairly conflicting views, even though the court would
justifiably have made a different choice had the matter been before
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,
Consol. Court No. 00-04-00141 Page 8
Universal Camera, 340 U.S. at 488)).
II. Chevron Two-Step Analysis
To determine whether Commerce’s interpretation and application
of the antidumping statute is “in accordance with law,” the Court
must undertake the two-step analysis prescribed by Chevron U.S.A.
Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837
(1984). Under the first step, the Court reviews Commerce’s
construction of a statutory provision to determine whether
“Congress has directly spoken to the precise question at issue.”
Id. at 842. “To ascertain whether Congress had an intention on the
precise question at issue, [the Court] employ[s] the ‘traditional
tools of statutory construction.’” Timex V.I., Inc. v. United
States, 157 F.3d 879, 882 (Fed. Cir. 1998) (citing Chevron, 467
U.S. at 843 n.9). “The first and foremost ‘tool’ to be used is the
statute’s text, giving it its plain meaning. Because a statute’s
text is Congress’ final expression of its intent, if the text
answers the question, that is the end of the matter.” Id.
(citations omitted). Beyond the statute’s text, the tools of
statutory construction “include the statute’s structure, canons of
statutory construction, and legislative history.” Id. (citations
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,
Consol. Court No. 00-04-00141 Page 9
however”) (citation omitted).
If, after employing the first prong of Chevron, the Court
determines that the statute is silent or ambiguous with respect to
the specific issue, the question for the Court becomes whether
Commerce’s construction of the statute is permissible. See
Chevron, 467 U.S. at 843. Essentially, this is an inquiry into the
reasonableness of Commerce’s interpretation. See Fujitsu Gen. Ltd.
v. United States, 88 F.3d 1034, 1038 (Fed. Cir. 1996). Provided
Commerce has acted rationally, the Court may not substitute its
judgment for the agency’s. See Koyo Seiko Co. v. United States,
36 F.3d 1565, 1570 (Fed. Cir. 1994) (holding that “a court must
defer to an agency’s reasonable interpretation of a statute even if
the court might have preferred another”); see also IPSCO, Inc. v.
United States, 965 F.2d 1056, 1061 (Fed. Cir. 1992). The “[C]ourt
will sustain the determination if it is reasonable and supported by
the record as a whole, including whatever fairly detracts from the
substantiality of the evidence.” Negev Phosphates, Ltd. v. United
States, 12 CIT 1074, 1077, 699 F. Supp. 938, 942 (1988) (citations
omitted). In determining whether Commerce’s interpretation is
reasonable, the Court considers the following non-exclusive list of
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.
Consol. Court No. 00-04-00141 Page 10
United States, 22 CIT 541, 545, 15 F. Supp. 2d 807, 813 (1998).
DISCUSSION
I. Commerce’s All Purpose Use of Affiliated Supplier Costs for
Inputs Obtained from NSK’s Affiliated Supplier
A. Statutory Background
Normal value (“NV”) of subject merchandise is defined as “the
price at which the foreign like product is [] sold . . . for
consumption in the exporting country . . . .” 19 U.S.C. §
1677b(B)(i)(1994). If Commerce determines that the foreign like
product is sold at a price less than the foreign like product’s
cost of production (“COP”), and that the conditions listed in 19
U.S.C. § 1677b(b)(1)(A)-(B) are present, Commerce may disregard
such below-cost sales in its calculation of NV. See 19 U.S.C. §
1677b(b)(1) (1994).
Commerce calculates the COP of the foreign like product by
adding “the cost of materials and of fabrication or other
processing . . . employed in producing the foreign like product .
. . [with] an amount for selling, general, and administrative
expenses . . . [and] all other expenses incidental to placing the
foreign like product in . . . shipment.” 19 U.S.C. §
1677b(b)(3)(A)-(C) (1994). Section 1677b(f) articulates “special
rules” for the calculation of COP and constructed value (“CV”) and
permits Commerce to disregard an affiliated party transaction when
Consol. Court No. 00-04-00141 Page 11
“the amount representing [the transaction or transfer price] does
not fairly reflect the amount usually reflected in sales of
merchandise under consideration in the market under consideration,”
that is, an arms-length or market price. 19 U.S.C. § 1677b(f)(2)
(1994). If such “a transaction is disregarded . . . and no other
transactions are available for consideration,” Commerce shall value
the cost of an affiliated party input “based on the information
available as to what the amount would have been if the transaction
had occurred between persons who are not affiliated,” that is,
based on arm’s-length or market value. Id.
Section 1677b(f)(3)’s “major input rule” states that Commerce
may calculate the value of the major input on the basis of the data
available regarding COP, if such COP exceeds the market value of
the input calculated under § 1677b(f)(2). See 19 U.S.C. §
1677b(f)(3) (1994). Commerce, however, may rely on the data
available only if: (1) a transaction between affiliated parties
involves the production by one of such parties of a “major input”
to the merchandise produced by the other and, in addition, (2)
Commerce has “reasonable grounds to believe or suspect” that the
amount reported as the value of such input is below the COP. See
19 U.S.C. § 1677b(f)(3). For purposes of § 1677b(f)(3), regulation
19 C.F.R. § 351.407(b) (1998) provides that Commerce will value a
major input supplied by an affiliated party based on the highest of
Consol. Court No. 00-04-00141 Page 12
(1) the actual transfer price for the input; (2) the market value
of the input; or (3) the COP of the input. See also
Mannesmannrohren-Werke AG v. United States, 23 CIT 826, 837, 77 F.
Supp. 2d 1302, 1312 (1999) (holding that 19 U.S.C. §§ 1677b(f)(2)
and (3), as well as the legislative history of the major input
rule, support Commerce’s decision to use the highest of transfer
price, COP, or market value to value the major inputs that the
producer purchased from the affiliated supplier). Accordingly,
paragraphs (2) and (3) of 19 U.S.C. § 1677b(f) authorize Commerce,
in calculating COP and CV, to: (1) disregard a transaction between
affiliated parties if, in the case of any element of value that is
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;
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 its COP. See Timken Co. v. United
States, 21 CIT 1313, 1327-28, 989 F. Supp. 234, 246 (1997) (holding
that Commerce may disregard transfer price for inputs purchased
from related suppliers pursuant to 19 U.S.C. § 1677b(e)(2) (1988),
the predecessor to 19 U.S.C. § 1677b(f)(2), if the transfer price
or any element of value does not reflect its normal value) (citing
NSK Ltd. v. United States, 19 CIT 1319, 1323-26, 910 F. Supp. 663,
Consol. Court No. 00-04-00141 Page 13
668-70 (1995), aff’d, 119 F.3d 16 (Fed. Cir. 1997)).
B. Factual Background
During the POR at issue, Commerce, “pursuant to 19 U.S.C. §
1677b(f), . . . requested NSK to submit affiliated supplier cost
data for inputs [NSK] obtained from [NSK’s] affiliated supplier.”
Mem. U.S. Opp. Pls.’ Mots. J. Agency R. (“Def.’s Mem.”) at 72.
Commerce used the affiliated supplier cost data to calculate NSK’s
COP and CV, and to recalculate NSK’s model-match methodology,
difmer adjustment and inventory carrying costs. See id.
Explaining its methodology, Commerce stated in its Issues and
Decision Memorandum3 (“Issues & Decision Mem.”) compiled as an
appendix to the Final Results, that:
in accordance with [19 U.S.C. § 1677b(f), Commerce]
recalculated NSK’s reported TRB-specific COP and CV to
reflect the COP of an affiliated party input if the
transfer price NSK reported for that input was less than
the COP for that input. [Commerce notes that] COP and CV
3
The full title of this document is Final Results of
Antidumping Duty Administrative Reviews and Revocation in Part of
Issues and Decision Memorandum for the 1997-1998 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
(generally accessible on the internet at
http://ia.ita.doc.gov/frn/summary/japan/00-5367- 1.txt). Although
the parties have included excerpts from this document as
attachments to their memoranda to support their claims, the Court,
in the interest of clarity, will refer to this document as Issues
& Decision Mem. and match pagination to the printed documents
provided by each party.
Consol. Court No. 00-04-00141 Page 14
[are composed] of several components. . . . The
adjustment [Commerce] made for NSK’s affiliated party
inputs is actually an adjustment to its reported material
costs. Because material costs are a component of the
cost of manufacture (COM) and COM is a component of COP
and CV, when [Commerce] adjusted NSK’s reported material
costs, [Commerce] not only recalculated its COP and CV,
but [Commerce] . . . recalculated variable [VCOM] and
total [TCOM] components of COP and CV as well.
Issues & Decision Mem. at 31.
Therefore, as a result, Commerce resorted to using affiliated
supplier cost data for purposes other than calculating COP and CV
and explained:
[Commerce] does not rely on a [NSK’s] reported costs
solely for the calculation of COP and CV. Rather,
[Commerce] employ[s] cost information in a variety of
other aspects of [Commerce’s] margin calculations. For
example, when determining the commercial comparability of
the foreign like product in accordance with section
[1677(16)] . . ., it has been [Commerce’s] long-standing
practice to rely on the product-specific VCOMs and TCOMs
. . . for [United States] and home[]market merchandise.
Likewise, when calculating a difmer adjustment to NV in
accordance with section [1677b(a)(6)] . . ., it has been
[Commerce’s] consistent policy to calculate the
adjustment as the difference between the product-specific
VCOMs . . . for the [United States] and home[]market
merchandise compared . . . . Furthermore, [Commerce]
ha[s] permitted [NSK] to calculate [its] reported
[inventory carrying costs] on the basis of TCOM.
Id.
C. Contentions of the Parties
NSK asserts that the plain language and legislative history of
19 U.S.C. § 1677b(f) restricts Commerce’s use of affiliated
Consol. Court No. 00-04-00141 Page 15
supplier cost data in that “Commerce may substitute . . .
affiliated supplier cost data[] for affiliated supplier price
data,” that is, transfer prices between affiliates, only “for
purposes of subsections (b) and (e)” of § 1677b(f). Mem. P. & A.
Supp. Mot. J. Agency R. (“NSK’s Mem.”) at 6 (quoting 19 U.S.C. §
1677b(f)). In particular, NSK argues that Commerce violated the
law when it used NSK’s affiliated supplier cost data to: (1) run
its model-match methodology under 19 U.S.C. § 1677(16); (2)
calculate the difmer adjustment under 19 U.S.C. § 1677b(a)(6); and
(3) calculate NSK’s reported United States inventory carrying
costs. See NSK’s Mem. at 3, 6-12; Reply Mem. NSK Supp. NSK’s Mot.
J. Agency R. (“NSK’s Reply”) at 2-5.
NSK also argues that, pursuant to Ad Hoc Comm. of AZ-NM-TX-FL
Producers of Gray Portland Cement v. United States, 13 F.3d 398,
401 (Fed. Cir. 1994),
the Court must presume [that 19 U.S.C. § 1677b(f)] means
that Commerce may use data gathered pursuant to
subsection [§ 1677b(f)] for calculations involving
subsections [§§ 1677b(b) and (e)] only. . . . That other
sections of the statute - specifically subsections
[1677(16), 1677b(a)(6), 1677a(d)] - are silent about
[whether] the use of affiliated supplier cost data does
not nullify the precise language of subsection
[1677b(f)].
NSK’s Mem. at 7 (emphasis added) (citations omitted). According to
NSK, a “statute is passed as a whole . . . and is animated by one
general purpose and intent. . . . [E]ach part or section should be
Consol. Court No. 00-04-00141 Page 16
construed in connection with every other part or section so as to
produce a harmonious whole.” Id. at 7-8 (citation and
parenthetical omitted). Consequently, the 19 U.S.C. § 1677b(f)
restriction on the use of affiliated supplier cost data applies to
all of the provisions of the antidumping law that is, especially,
19 U.S.C. §§ 1677(16), 1677b(a)(6) and 1677a(d). See id. at 8. In
a footnote, NSK further states that by naming 19 U.S.C. § 1677b(f)
“[s]pecial rules for calculation of cost of production and for
calculation of constructed value,” Congress expressed its intent
that affiliated supplier cost data only be used to calculate COP
and CV. See id. at 7 n.2. NSK also makes reference to Commerce’s
prior methodology of restricting its use of affiliated supplier
data to the calculation of CV. See id. at 9. Therefore, NSK
requests that Commerce “rerun the model-match methodology, and
recalculate the difmer adjustment and [United States] inventory
carrying costs, without regard to affiliated supplier cost data
collected pursuant to subsections” 19 U.S.C. § 1677b(f)(2) and §
1677b(f)(3). Id. at 10.
Commerce alleges that 19 U.S.C. § 1677b(f) does not restrict
the use of affiliated supplier cost data to calculating COP and CV
since Commerce requires cost data for other purposes.4 See Def.’s
4
In Commerce’s Issues & Decision Mem., Commerce explains how
material costs are a component of VCOM and TCOM which in turn, are
(continued...)
Consol. Court No. 00-04-00141 Page 17
Mem. at 69-75. Commerce argues that 19 U.S.C. §§ 1677(16),
1677b(a)(6)5 and 1677a(d) do not prohibit Commerce from using
affiliated supplier cost data. See id. at 73. Moreover, Commerce
alleges that §§ 1677(16), 1677b(a)(6) and 1677a(d) grant Commerce
discretion. See id. at 69-75. In particular, Commerce points out
that
[section 1677(16)] does not specify a particular
methodology for determining appropriate matches. Rather,
the statute implicitly delegates the selection of an
appropriate methodology to [Commerce].
Likewise, section [1677b(a)(6)] grants [Commerce]
the same discretion to determine a suitable method to
calculate a difmer adjustment and does not restrict our
selection of an appropriate methodology to any particular
approach. In addition, with respect to [Commerce’s]
recalculation of NSK’s [United States inventory carrying
costs], section [1677a(d)] only specifies what
adjustments are to be made to determine [constructed
export price] and does not provide details regarding the
precise calculations for each particular adjustment.
Issues & Decision Mem. at 32.
[I]f [Commerce] determine[s] a component of a
respondent’s COP and CV to be distortive for one aspect
of [Commerce’s] analysis, it would be illogical and
4
(...continued)
both components of COP and CV. See Issues & Decision Mem. at 31.
Therefore, when Commerce adjusted NSK’s reported material costs, it
not only calculated COP and CV, but also recalculated VCOM and
TCOM. See id. In turn, since Commerce relies upon VCOM and/or
TCOM in running its model-match methodology, calculating the difmer
adjustment and inventory carrying costs, Commerce asserts that its
use of affiliated supplier cost data for purposes other than the
calculation of COP and CV was reasonable and in accordance with
law. See id. at 31-32.
5
The Court assumes that Commerce is referring to 19 U.S.C.
§ 1677b(a)(6) (1994) and not 19 U.S.C. § 1677a(a)(6) (1994).
Consol. Court No. 00-04-00141 Page 18
unreasonable not to make the same determination with
respect to those other aspects of [Commerce’s] margin
calculations where [Commerce] relied on the identical
cost data. To do so would not only produce distortive
results, but would be contrary to [Commerce’s] mandate to
administer the dumping law as accurately as possible.
Id. at 31.
Commerce further argues that the plain language of § 1677b(f)
does not prohibit the use of affiliated supplier cost data for
purposes other than the calculation of COP and CV. See Def.’s Mem.
at 73. In sum, Commerce maintains that the use of affiliated
supplier cost data is not restricted only to the calculation of COP
and CV. Rather, Commerce asserts that Commerce has been afforded
discretion to use cost data for other purposes. See id. at 73-75.
Timken generally agrees with Commerce’s arguments and states
that Congressional intent directs Commerce to use the most
“accurate cost data” to determine CV and COP. See The Timken Co.’s
Resp. R. 56.2 Mots. J. Agency R. of NTN, Koyo, & NSK (“Timken’s
Resp.”) at 7. Accordingly, Timken maintains that it is not against
such intent to use the same information to implement other
statutory provisions. See id. Timken asserts that Commerce “must
administer the dumping laws as accurately as possible . . . [and
the] use [of] inaccurate data (unadjusted to account for
inaccuracies attributable to related-party transfers)” clearly
counters Congressional intent. Id. (emphasis added).
Consol. Court No. 00-04-00141 Page 19
D. Analysis
The issue presented by NSK is whether Commerce can use
affiliated supplier cost data obtained pursuant to 19 U.S.C. §
1677b(f) for purposes other than the calculation of COP and CV. In
particular, the Court must determine whether Commerce’s use of
affiliated supplier cost data to: (1) run its model-match
methodology under 19 U.S.C. § 1677(16); (2) calculate the difmer
adjustment under 19 U.S.C. § 1677b(a)(6); and (3) calculate NSK’s
reported United States inventory carrying costs was in accordance
with law.
In NTN Bearing Corp. of Am. v. United States, 26 CIT ___, ___,
186 F. Supp. 2d 1257, 1302-04 (2002) (“NTN 2002"), this Court
upheld Commerce’s use of affiliated supplier cost data for purposes
other than the calculation of COP and CV. Specifically, the Court
held that the “statute, read as a whole, does not show
Congressional intent to restrict the use of affiliated supplier
cost data solely to COP and CV calculations and in effect, tie the
hands of Commerce while parties could distort dumping margins with
impunity.” NTN 2002, 26 CIT at ___, 186 F. Supp. 2d at 1303.
Since Commerce’s methodology to use NSK’s affiliated supplier
cost data for purposes other than the calculation of COP and CV and
the parties arguments are practically identical to those presented
in NTN 2002, the Court adheres to its reasoning in its prior
Consol. Court No. 00-04-00141 Page 20
holding. The plain language of 19 U.S.C. § 1677b(f) neither
restricts Commerce from using affiliated supplier cost data for
purposes other than the calculation of COP or CV, nor does it
indicate Congress’s intent that Commerce be prohibited from using
such data to calculate accurate dumping margins. See id. at ___,
186 F. Supp. 2d at 1303. Accordingly, this Court finds that
Commerce’s use of NSK’s affiliated cost data for purposes other
than the calculation of COP and CV was reasonable and in accordance
with law.
II. Commerce’s Duty Absorption Inquiry for a Transition Order
A. Background
Title 19, United States Code, § 1675(a)(4) (1994) provides
that during an administrative review initiated two or four years
after the publication of an antidumping duty order, Commerce, at
the request of a domestic interested party, “shall determine
whether antidumping duties have been absorbed by a foreign producer
or exporter subject to the order if the subject merchandise is sold
in the United States through an importer who is affiliated with
such foreign producer or exporter.” Section 1675(a)(4) further
provides that Commerce shall notify the International Trade
Commission (“ITC”) of its findings regarding such duty absorption
for the ITC to consider conducting a five-year (“sunset”) review
under 19 U.S.C. § 1675(c) (1994), and the ITC will take such
Consol. Court No. 00-04-00141 Page 21
findings into account in determining whether material injury is
likely to continue or recur if an order were revoked under §
1675(c). See 19 U.S.C. § 1675a(a)(1)(D) (1994).
On December 15, 1998, Timken requested Commerce to conduct a
duty absorption inquiry pursuant to 19 U.S.C. § 1675(a)(4) with
respect to NSK, NTN and Koyo to ascertain whether antidumping
duties had been absorbed during the POR at issue. See Issues &
Decision Mem. at 2. In the Final Results, Commerce determined that
duty absorption had occurred for the POR. See Final Results, 65
Fed. Reg. at 11,768.
In asserting authority to conduct a duty absorption inquiry
under § 1675(a)(4), Commerce first explained that for “transition
orders,” as defined in 19 U.S.C. § 1675(c)(6)(C) (antidumping duty
orders, inter alia, orders issued on or after January 1, 1995),
regulation 19 C.F.R. § 351.213(j) (1998) provides that Commerce
“will make a duty-absorption determination, if requested, for any
administrative review initiated in 1996 or 1998.” Issues &
Decision Mem. at 2. Commerce concluded that: (1) because the
antidumping duty orders on tapered roller bearings (“TRBs”) in this
case have been in effect since 1976 and 1987, the orders are
transitional pursuant to 19 U.S.C. § 1675(c)(6)(C); and (2) since
these reviews were initiated in 1998, Commerce had the authority to
make duty absorption inquiries for the administrative reviews of
Consol. Court No. 00-04-00141 Page 22
the 1976 and 1987 antidumping duty orders. See id. at 4.
B. Contentions of the Parties
NSK, NTN and Koyo contend that Commerce lacked statutory
authority under 19 U.S.C. § 1675(a)(4) to conduct a duty absorption
inquiry for the POR of the outstanding 1976 and 1987 antidumping
duty orders. See NSK’s Mem. at 4, 10-15; NSK’s Reply at 5-8; Pl.
NTN’s Mot. & Mem. Supp. J. Agency R. (“NTN’s Mem.”) at 13-14; Mem.
P. & A. Supp. Mot. Pls. Koyo J. Agency R. (“Koyo’s Mem.”) at 8-14;
Reply Br. Pls. Koyo Supp. Mot. J. Agency R. (“Koyo’s Reply”) at 2-
7.
Commerce argues that these reviews fall within its statutory
authority because they involve transition orders. See Issues &
Decision Mem. at 2; Def.’s Mem. at 10-14; NSK’s Mem. at 4; NTN’s
Mem. at 13; Koyo’s Mem. at 8. Specifically, Commerce argues that
it: (1) properly construed 19 U.S.C. §§ 1675(a)(4) and (c) as
authorizing it to make a duty absorption inquiry for antidumping
duty orders that were issued and published prior to January 1,
1995; and (2) devised and applied a reasonable methodology for
determining duty absorption. See Def.’s Mem. at 19-22. Commerce
also urges the Court to reconsider its holding in SKF USA Inc. v.
United States, 24 CIT ___, 94 F. Supp. 2d 1351 (2000). See id. at
14-19. Timken supports Commerce’s contentions but offers no
Consol. Court No. 00-04-00141 Page 23
substantive explanation of its position and instead refers to its
arguments raised in SKF USA Inc., 24 CIT ___, 94 F. Supp. 2d 1351.
See Timken’s Resp. at 5-6; see also Koyo’s Reply at 6 n.6.
C. Analysis
In SKF USA Inc., 24 CIT ___, 94 F. Supp. 2d 1351, this Court
determined that Commerce lacked statutory authority under 19 U.S.C.
§ 1675(a)(4) to conduct a duty absorption inquiry for antidumping
duty orders issued prior to the January 1, 1995 effective date of
the URAA. See id. at ___, 94 F. Supp. 2d at 1357-59; see also NTN
Bearing Corp. v. United States, 295 F.3d 1263 (Fed. Cir. 2002).
The Court noted that Congress expressly prescribed in the URAA that
§ 1675(a)(4) “must be applied prospectively on or after January 1,
1995 for 19 U.S.C. § 1675 reviews.” SKF USA Inc., 24 CIT at ___,
94 F.Supp. 2d at 1359 (citing § 291 of the URAA).
Because Commerce’s duty absorption inquiry, its methodology
and the parties’ arguments are practically identical to those
presented in SKF USA Inc., the Court adheres to its reasoning in
SKF USA Inc. The statutory scheme clearly provides that the
inquiry must occur in the second or fourth administrative review
after the publication of the antidumping duty order, not in any
other review, and upon the request of a domestic interested party.
Accordingly, the Court finds that Commerce did not have statutory
Consol. Court No. 00-04-00141 Page 24
authority to undertake a duty absorption investigation for the
antidumping duty orders in dispute here. The Court remands this
case to Commerce with instructions to annul all findings and
conclusions made pursuant to the duty absorption inquiry conducted
for the subject review in accordance with this opinion.
III. Commerce’s Use of Affiliated Supplier’s Cost of Production
for Inputs When the Cost Was Higher than the Transfer Price
for NTN
A. Background
During the POR at issue, Commerce used the higher of the
transfer price or actual cost in calculating COP and CV in
situations involving inputs that NTN had obtained from affiliated
producers. See Issues & Decision Mem. at 28-29; see also NTN’s
Mem. at 15; Pl. NTN’s Reply Def. & Def.-Intervenor’s Feb. 16, 2001
Mem. Opposing Pls.’ Mot. J. Agency R. (“NTN’s Reply”) at 7.
Commerce explained its decision as follows:
Section [1677b(f)(2) of title 19 U.S.C.] directs
[Commerce] to disregard transactions between affiliated
parties if such transactions do not fairly reflect
amounts usually reflected in sales of merchandise under
consideration in the market under consideration.
Further, . . . [C.F.R. §§] 351.407(a) and (b) of
[Commerce’s] regulations set[] forth certain rules that
are common to the calculation of CV and COP. This
section states that for the purpose of [§ 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
Consol. Court No. 00-04-00141 Page 25
affiliated person of producing the major input. [Commerce
adds that it has] relied on this methodology in [other
reviews6 and that the] . . . methodology has been upheld
by the Court in Mannesmannrohren-Werke [AG] v. United
States, [23 CIT 826, 77 F. Supp. 2d 1302].
Issues & Decision Mem. at 29.
In the case at bar, Commerce requested that NTN provide a list
of inputs used to produce the subject merchandise and to identify
those inputs that were provided to NTN by its affiliated suppliers.
See Def.’s Mem. at 30. NTN provided Commerce with exhibits and
indicated that it used transfer price in computing COP and CV. See
id. at 30-31. In calculating COP and CV, Commerce adhered to its
past methodology and used the higher of transfer price or the
actual cost for NTN’s affiliated party inputs. See Issues &
Decision Mem. at 29.
6
In particular, Commerce refers to its methodology in
Final Results of Antidumping Duty Administrative Reviews of
Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, Germany, Italy, Japan, Romania, Sweden,
and the United Kingdom, 64 Fed. Reg. 35,590, 35,612 (July 1, 1999),
Notice of Final Determination of Sales at Less Than Fair Value of
Stainless Steel Round Wire from Taiwan, 64 Fed. Reg. 17,336 (Apr.
9, 1999), 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, 63
Fed. Reg. 63,860, 63,868 (Nov. 17, 1998), and 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, 63 Fed. Reg. 2558, 2573 (Jan. 15,
1998).
Consol. Court No. 00-04-00141 Page 26
B. Contentions of the Parties
NTN alleges that Commerce erroneously used the affiliated
supplier’s COP for inputs when it was higher than the transfer
price. See NTN’s Mem. at 3, 15-16; NTN’s Reply at 16-18.
Specifically, NTN maintains that Commerce misapplied the major
input rule described in 19 U.S.C. § 1677b(f)(3) (1994), and that
Commerce failed to point to any reasonable grounds on which
Commerce based its belief that NTN’s reported COP of affiliated
parties was below the actual COP. See NTN’s Mem. at 15-16.
According to NTN, a plain language reading of 19 U.S.C. § 1677b(f)
makes clear that “the automatic recalculation of reported COP and
CV data contemplated in 19 C.F.R. § 351.407 is not contemplated in
the statute itself.” Id. at 16 (distinguishing Mannesmannrohren-
Werke AG, 23 CIT 826, 77 F. Supp. 2d 1382). NTN requests that if
this Court should sustain Commerce’s methodology as reasonable and
in accordance with law, the Court then remands this issue to
Commerce to rectify the ministerial error committed in calculating
“a variable . . . to account for the difference between transfer
price and actual cost.” Issues & Decision Mem. at 28; see NTN’s
Mem. at 17-18; NTN’s Reply at 9.
Commerce contends that it acted in accordance with the
statutory mandate and applied the provision reasonably under the
circumstances. See Def.’s Mem. at 29-31. Timken supports
Consol. Court No. 00-04-00141 Page 27
Commerce’s position and adds that “commercial reality” dictates
that sales below cost are usually not at market prices. See
Timken’s Resp. at 17. According to Timken, “home market sales of
merchandise used to determine normal values which are below cost
are by statute ‘outside the ordinary course of trade.’” Id.
(citation omitted).
C. Analysis
The issue presented by NTN is whether Commerce has statutory
authority to use the higher of the transfer price or actual cost in
calculating COP and CV in situations involving inputs that NTN had
obtained from affiliated producers. In NSK Ltd. v. United States,
26 CIT ___, 217 F. Supp. 2d 1291 (2002) (“NSK 2002"), this Court
affirmed Commerce’s decision to use NTN’s affiliated supplier’s COP
for major inputs when COP was higher than the transfer price. The
Court reasoned that 19 U.S.C. § 1677b(b)(3)(A)7 is to be read in
conjunction with the Special Rules cited in §§ 1677b(f)(2) and (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 depict the amount usually
7
Section 1677b(b)(3)(A) sets out that Commerce shall
calculate COP by adding: (1) the cost of materials and of
fabrication; and (2) an amount for selling, general, and
administrative expenses; and (3) the cost of all expenses
incidental to placing a foreign like product in condition ready for
transit.
Consol. Court No. 00-04-00141 Page 28
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, this Court acknowledged that
Commerce’s practice has been to 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 (1998), 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 27 n.6 (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)
Consol. Court No. 00-04-00141 Page 29
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 28
(citing Final Results of Antidumping Duty and Administrative Review
of Silicomanganese From Brazil, 62 Fed. Reg. 37,869, 37,871-72
(July 15, 1997)). In addition, if Commerce disregards sales 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 cost test under 19
U.S.C. § 1677b(b) during the previous review with respect to NTN’s
merchandise. See Def.’s Mem. at 29. 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. See 19 U.S.C. § 1677b(b)(2)(A)(ii).
Therefore, Commerce initiated a COP investigation of sales by NTN
in the home market. See Preliminary Results, 64 Fed. Reg. at
53,327; see also Def.’s Mem. at 30. As part of its investigation,
Consol. Court No. 00-04-00141 Page 30
Commerce distributed a questionnaire, which, in pertinent part,
requested NTN to provide COP and CV information. See Def.’s Mem.
at 30. 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; (4) provide the COP incurred by the affiliated person in
producing the major input; and (5) specify the basis used by NTN to
value each major input for purposes of computing the submitted COP
and CV amounts. See 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 Mem.
Ex. 1 (proprietary version). NTN also indicated that it used the
transfer price for computing COP and CV. See id. at 31.
Therefore, consistent with its interpretation of 19 U.S.C. §§
1677f(2) and (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.
While NTN argues that there is no record evidence that the
affiliated party inputs did not “reflect the amount usually
reflected in [the] sales of . . . merchandise . . . under
consideration” and that the statute makes no reference to cost,
NTN’s Mem. at 16 (relying on 19 U.S.C. § 1677b(f)(2)), the Court
Consol. Court No. 00-04-00141 Page 31
holds that Commerce acted reasonably and in accordance with 19
U.S.C. § 1677b(f)(3) when it chose to determine the value of a
major input on the basis of the information available regarding
COP. See NSK 2002, 26 CIT at ___, 217 F. Supp. 2d at 1320-22; see
also SKF USA Inc. v. United States, 24 CIT ___, ___ 116 F. Supp. 2d
1257, 1261-68 (2000).
NTN argues that even if Commerce was correct in adjusting
NTN’s COP and CV for affiliated party inputs, Commerce committed a
ministerial error in the calculation of this adjustment in that
Commerce’s methodology failed to capture NTN’s actual cost
accurately. See NTN’s Mem. at 17. According to NTN, Commerce’s
methodology erred by making an adjustment for the difference
between transfer price and supplier’s actual cost, rather than
between supplier’s actual cost and NTN’s actual cost. See Issues
& Decision Mem. at 28; NTN’s Mem. at 17; Def.’s Mem at 34; see also
NTN’s Reply at 9. Commerce notes that
NTN calculated variances by comparing its standard costs
to its actual costs which are, for all inputs it
purchased from all suppliers, based on the transfer
prices from each supplier. As a result, the affiliate’s
costs . . . are based on transfer prices. Therefore,
NTN’s reported actual costs are not an accurate basis on
which to calculate COP and CV. Thus, it was appropriate
to use the supplier’s actual cost, and also to make an
adjustment for the difference between the supplier’s
actual cost and the transfer price when the supplier’s
actual cost was higher than the transfer price.
Issues & Decision Mem. at 29-30 (emphasis added). Commerce further
Consol. Court No. 00-04-00141 Page 32
asserts that the “variances” to which NTN refers are based upon the
transfer price of affiliated suppliers, and not the actual cost of
the input to affiliated suppliers. Accordingly, the Court agrees
that NTN’s reported actual costs cannot be an accurate basis upon
which to calculate COP and CV. It is not the role of this Court to
determine what methodology Commerce should or should not use in its
determination, but instead to decide whether Commerce’s chosen
methodology is reasonable. “[Commerce] is given discretion in its
choice of methodology as long as the chosen methodology is
reasonable and [Commerce’s] conclusions are supported by
substantial evidence in the record.” Federal-Mogul Corp. v. United
States, 18 CIT 785, 807-08, 862 F. Supp. 384, 405 (1994) (citing
Ceramica Regiomontana, S.A. v. United States, 10 CIT 399, 404-05,
636 F. Supp. 961, 966 (1986), aff'd, 810 F.2d 1137 (Fed. Cir.
1987)); see also Matsushita Elec. Indus. Co. v. United States, 750
F.2d 927, 936 (Fed. Cir. 1984) (stating that “[the Court’s] role is
limited to deciding whether [Commerce’s] decision is ‘unsupported
by substantial evidence on the record, or otherwise not in
accordance with law’”). After careful examination of the record of
this case and NTN’s assertion that Commerce’s methodology is
distortive, this Court sustains Commerce’s methodology in using
NTN’s supplier’s actual cost.
Consol. Court No. 00-04-00141 Page 33
IV. Commerce’s Denial of a Price-Based Level of Trade Adjustment
A. Contentions of the Parties
NTN contends that Commerce improperly denied a price-based
level of trade (“LOT”) adjustment when matching constructed export
price (“CEP”) sales to sales of the foreign like product,8 citing
Borden Inc. v. United States, 22 CIT 233, 4 F. Supp. 2d 1221
(1998), as support. See NTN’s Mem. at 18-21. See generally
Borden, 22 CIT 233, 4 F. Supp. 2d 1221, rev’d, 2001 WL 312232 (Fed.
Cir. Mar. 12, 2001). 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 Issues & Decision
Mem. at 35; NTN’s Mem. at 19-21. NTN requests that the Court
remand the LOT issue to Commerce to grant NTN a price-based LOT
adjustment when its CEP LOT is different from the LOT of the
comparison foreign like product. See NTN’s Mem. at 21.
Commerce, in turn, argues that it properly determined the LOT
for NTN’s CEP sales based upon the CEP. See Def.’s Mem. at 35-36.
Commerce used the CEP price to determine the LOT of CEP sales, and
found that NTN had “no home market level of trade equivalent to the
8
For a complete discussion of background information and the
statutory provisions at issue, the reader is referred to this
Court’s decision in NTN Bearing Corp. of Am. v. United States, 24
CIT___, ___, 104 F. Supp. 2d 110, 125-128 (2000).
Consol. Court No. 00-04-00141 Page 34
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 [LOTs].” Id. at 35; see
also NTN’s Mem. App. 5 at 6-7. Commerce points out that CEP is
defined in 19 U.S.C. § 1677a(b) (1994) as the price at which the
subject merchandise is first sold in the United States by a seller
affiliated with the producer to an unaffiliated purchaser, as
adjusted under §§ 1677a(c) and (d). See Def.’s Mem. at 39.
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 considers making a LOT
adjustment. See id. at 39-40. Commerce makes a CEP offset 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 state of distribution than the CEP LOT. See id.
at 41.
Commerce claims that it applied its usual methodology to
determine CEP LOT and determined that NTN’s LOT and home market LOT
were not equivalent. See id. at 43. According to Commerce, “in
order to calculate a [LOT] adjustment, the CEP [LOT] must exist in
the home market.” Id. Since there was a difference between NTN’s
LOT and home market CEP LOT, Commerce “could not determine a [LOT]
adjustment based upon NTN’s home market sales of merchandise under
Consol. Court No. 00-04-00141 Page 35
review.” Id.; Issues & Decision Mem. at 36. Alternatively,
Commerce calculated “NV at the same [LOT] as the [United States]
sale] to the unaffiliated customer and, when comparisons were to
sales at a different [LOT], made a CEP offset . . . .” Def.’s Mem.
at 43 (citing NTN’s Mem. App. 5 at 6-7). Commerce contends that
NTN provided no further information to establish a basis for
calculating a LOT adjustment. See id. Timken generally agrees
with Commerce’s positions and adds that the Court should uphold
Commerce’s methodology since NTN admits that “transfer price was
used in computing COP and CV” in its answer to Commerce’s
questionnaire. Timken’s Resp. at 17 (referring to Def.’s Mem. Ex.
1 at 64).
B. Analysis
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
Statement of Administrative Action (“SAA”)9 require Commerce to
9
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. “It 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
(continued...)
Consol. Court No. 00-04-00141 Page 36
deduct the expenses enumerated under 19 U.S.C. § 1677a(d) before
making the LOT comparison.10 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 added).
The court concluded that “[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 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 in original).
9
(...continued)
Round Agreements and this Act in any judicial proceeding in which
a question arises concerning such interpretation or application”).
10
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.
Consol. Court No. 00-04-00141 Page 37
In its reply brief, NTN acknowledges the Micron decision but
asserts that the CAFC’s interpretation of the relevant subsections
under 19 U.S.C. § 1677b (1994) conflicts with the URAA, “which
requires [Commerce] to make a LOT adjustment if the difference in
the level of trade affects price comparability, based on a pattern
of consistent price differences.” NTN’s Reply at 7 (citations
omitted). Despite this opposition, this Court adheres to its
reasoning in NTN 2002, 26 CIT at ___, 186 F. Supp. 2d at 1265-66,
and finds that Commerce properly made § 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 a LOT adjustment is supported by substantial evidence.
Section 1677b(a)(7)(A) permits Commerce to make a 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.” 19 U.S.C. §
1677b(a)(7)(A). Yet, Commerce does not make a LOT adjustment when
the record at issue does not provide adequate evidence to support
such an adjustment. See Issues & Decision Mem. at 35. For this
POR, Commerce examined the record and concluded that NTN’s home
market LOT was not equivalent to its CEP LOT. See id.
Furthermore, “Commerce had no other information that provided an
Consol. Court No. 00-04-00141 Page 38
appropriate basis for determining a [LOT] adjustment.” Def.’s Mem.
at 43. See generally SAA at 830. “As a result, because the record
[failed] to establish that there [wa]s any 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 of the foreign like product at a different LOT.” Issues &
Decision Mem. at 35. Accordingly, the Court finds that Commerce
acted within the directive of the statute in denying NTN the LOT
adjustment and instead, granting a CEP offset. See 19 U.S.C. §
1677b(a)(7).
V. Commerce’s Reallocation of NTN’s United States Indirect
Selling Expenses Without Regard to Levels of Trade
A. Background
In the Final Results, 65 Fed. Reg. at 11,767, Commerce
calculated NTN’s United States and home market selling expenses
without regard to LOT. See Issues & Decision Mem. at 36-38. NTN
argued that Commerce should have relied on NTN’s reported United
States and home market selling expenses based on LOT instead of
reallocating these selling expenses without regard to LOT. See id.
at 36. Furthermore, NTN claims that Commerce’s rejection of NTN’s
reported LOT selling expenses “contradicts the evidence on the
record in this review [since Commerce concluded] in the
[P]reliminary [R]esults . . . that different LOTs existed in both
Consol. Court No. 00-04-00141 Page 39
the [United States] and home markets for sales of subject
merchandise.” Id. at 36-37. NTN also points to data11 it supplied
Commerce in response to Commerce’s questionnaire illustrating that
United States original equipment manufacturer (“OEM”) sales
incurred higher selling expenses than both past market and
distributor sales, and that distributor sales incurred higher
selling expenses than post market sales. See id. at 37. “NTN
states that home market expenses also can be identified by LOT and
argues that [Commerce’s] reallocation [of NTN’s United States
indirect selling expenses] without regard to LOT is distortive.”
Id. Timken, in turn, contends that the evidence on the record
supports Commerce’s reallocation of NTN’s home market and United
States indirect selling expenses without regard to LOT. See id.
Timken asserts that NTN has not adequately shown that its
allocations accurately reflect the manner in which NTN incurs
expenses for its sales, and thus Commerce should not alter its
methodology of reallocating NTN’s home market and United States
selling expenses without regard to LOT. See id.
Commerce generally agrees with Timken. See Issues & Decision
Mem. at 37-38. Commerce responded that for a majority of the
expenses under this POR, it determined that NTN’s methodology for
11
Specifically, NTN refers to Exhibit C-7 of its February
11, 1999 response to Commerce’s questionnaire. See Issues &
Decision Mem. at 37.
Consol. Court No. 00-04-00141 Page 40
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 and its methodology led to
distorted allocations. See id. at 37. Commerce asserts that in
Timken Co. v. United States, 20 CIT 645, 653, 930 F. Supp. 621,
628-29 (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. Acting
in accordance with Timken Co., 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
. . . .” Issues & Decision Mem. at 38. Commerce argues that after
careful review of the administrative record for this POR, it finds
that “in most instances no evidence exists demonstrating that NTN’s
home market and [United States] expenses allocated by LOT actually
varied according to LOT.” Id. Commerce further concluded that the
data provided by NTN in its response to Commerce’s questionnaire
indicates that NTN incurred certain United States packing material
and packing labor expenses when selling to only one United States’s
LOT. See id.; see also Def.’s Mem. at 45 n.12. After reviewing
NTN’s response to its questionnaire, Commerce found that NTN
clearly indicates that “certain of NTN’s packing expenses
individually differed by LOT.” Issues & Decision Mem. at 38.
Consol. Court No. 00-04-00141 Page 41
Because these expenses were unique to a single LOT, NTN
1) allocated each total expense amount solely to this
LOT[;] 2) calculated a single allocation ratio for this
LOT[;] and 3) applied this ratio only to [United States]
sales at this LOT . . . . Therefore, for [the Preliminary
Results, 64 Fed. Reg. 53,323, Commerce] applied
[Commerce’s] recalculated ratios for certain of NTN’s
[United States] packing and [United States] labor
expenses only for sales to the one LOT for which these
expenses were incurred.
Id. After further review, Commerce also concluded that NTN’s
United States packing labor and material expenses varied with
regard to LOT. See id. According to specific data12 provided by
NTN, Commerce points out that NTN’s different methods of packing
depend upon LOT. See id. Commerce states that since NTN has
provided no further record evidence that home market expenses were
incurred differently depending on LOT, Commerce properly accepted
only NTN’s allocation of home market packing expenses according to
LOT. See id.
B. Contentions of the Parties
NTN contends that Commerce’s decision to reallocate NTN’s
selling expenses violates Commerce’s mandate to administer the
antidumping laws. See NTN’s Mem. at 24-27. NTN states that
Commerce is in error primarily because: (1) “the expenses in
question varied across [LOTs] in keeping with the requirements of
12
Specifically, Commerce refers to exhibits B-6 and pages
A-9 and A-15 of NTN’s February 9, 1999 response to Commerce’s
questionnaire. See Issues & Decision Mem. at 38.
Consol. Court No. 00-04-00141 Page 42
[Timken Co., 20 CIT 645, 930 F. Supp. 621; (2)] NTN’s methodology
was previously accepted by [Commerce] and has not changed[; and
(3)] the effect of reallocating these expenses is to void
[Commerce’s] LOT determination . . . .” Id. at 24 (citations
omitted). Moreover, NTN argues that Commerce erred in basing its
decision to reallocate NTN’s reported expenses on the conclusion
that the expense methodology NTN employed “bore no relationship to
the manner in which the expense[s were] incurred.” Id. According
to NTN, sufficient record evidence exists for Commerce to find that
NTN’s indirect and home market selling expenses varied with regard
to LOT.13 See id. at 24-25. Citing to Böwe-Passat v. United
States, 17 CIT 335, 340 (1993), NTN argues that Commerce’s
reallocation of NTN’s United States indirect selling expenses
without regard to LOT is contrary to Commerce’s statutory role of
administering the antidumping law to the most accurate extent
possible. See id. at 27.
Commerce responds that no sufficient record evidence exists
illustrating that all of NTN’s United States selling expenses and
home market selling expenses varied demonstrably with regard to
LOT. See Def.’s Mem. at 45-46. Commerce refers to the holdings in
NTN Bearing Corp. of Am. v. United States, 23 CIT 486, 83 F. Supp.
13
NTN points to various exhibits provided to Commerce in
response to Commerce’s questionnaire regarding NTN’s selling
expenses among varied LOTs. See NTN’s Mem. at 25 (proprietary
version).
Consol. Court No. 00-04-00141 Page 43
2d 1281 (1999) and NTN Bearing Corp. of Am. v. United States, 19
CIT 1221, 905 F. Supp. 1083 (1995) and asserts that this Court
uphold Commerce’s reallocation of NTN’s United States and home
market indirect selling expenses without regard to LOTs. See id.
at 46.
Timken generally supports Commerce’s arguments and argues that
the record evidence supports Commerce’s decision to reject NTN’s
allocation of United States and home market indirect selling
expenses. See Timken’s Resp. at 18 (citing Issues & Decision Mem.
at 37-38). Furthermore, Timken contends that it has been
Commerce’s practice to reject NTN’s methodology for reporting
selling expenses in various reviews. See id. (citing 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, 63 Fed. Reg. 63,860
(Nov. 17, 1998), and 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, 63 Fed. Reg. 2558 (Jan. 15, 1998).
NTN replies to Commerce and Timken’s assertions by stating
that neither has brought forth any substantial legal argument that
Consol. Court No. 00-04-00141 Page 44
supports Commerce’s decision to adjust NTN’s sales for selling
expenses without regard to LOT. See NTN’s Reply at 9-10. NTN also
proposes that Commerce failed to address the record in this POR,
and asserts that precedent makes clear that “the record for each
administrative review is separate from, and independent of, each
previous administrative review.” Id. at 10 (citing NSK Ltd. v.
United States, 16 CIT 275, 277, 788 F. Supp. 1228, 1229 (1992), in
turn citing Beker Indus. Corp. v. United States, 7 CIT 199, 585 F.
Supp. 663 (1984)).14
C. Analysis
The Court agrees with Commerce that NTN failed to provide
adequate evidence illustrating that all of NTN’s United States
selling expenses and home market selling expenses varied
demonstrably with regard to LOT. In making its final
determination, Commerce followed the standard set by this Court in
Timken Co., 20 CIT at 651-53, 930 F. Supp. at 627-29 that Commerce
is to deny a LOT adjustment if Commerce finds that expenses did not
vary according to LOT.
14
The Court disagrees with NTN’s assertion that Commerce
failed to articulate any legal argument that supports Commerce’s
methodology in the POR at issue, and refers NTN to Commerce’s
comments in the Issues & Decision Mem. and Prelim. Analysis Mem.,
see infra note 15, which adequately explain why Commerce
reallocated all of NTN’s selling expenses with exception to NTN’s
home market packing expenses. See Issues & Decision Mem. at 37-38.
Consol. Court No. 00-04-00141 Page 45
In the case at bar, NTN purports to show that it incurred
different selling expenses at different trade levels by pointing to
specific exhibits included in its proprietary memorandum. See
NTN’s Mem. at 25 (proprietary version). After a review of the
record, Commerce concluded that the questionnaire responses that
NTN provided for some of its United States packing and material
expenses indicate that such expenses were incurred in connection
with only one United States LOT. See Issues & Decision Mem. at 38.
In the Preliminary Results, 64 Fed. Reg. 53,323,15 Commerce
accordingly “recalculated ratios for certain of NTN’s [United
States] packing and . . . labor expenses only for sales to the one
LOT for which these expenses were incurred.” Issues & Decision
Mem. at 38 (emphasis added); see Prelim. Analysis Mem. at 7-8.
Commerce further determined that although NTN’s exhibits “clearly
demonstrate that different methods of packing are required
depending upon LOT,” NTN provides no evidence that illustrates that
all of NTN’s selling expenses were incurred differently with regard
to LOT. Issues & Decision Mem. at 38; see Prelim. Analysis Mem. at
7-8. Accordingly, in the Final Results, 65 Fed. Reg. 11,767,
Commerce only accepted NTN’s allocation of home market packing
expenses according to LOT. See Issues & Decision Mem. at 38.
15
Commerce explained its preliminary methodology for the
POR at issue in Analysis Memorandum for Preliminary Results of the
1997-98 Review-NTN Corporation of Antidumping Duty Order on Tapered
Roller Bearings and Parts Thereof From Japan (“Prelim. Analysis
Mem.”). See NTN’s Mem. App. 5 (proprietary version).
Consol. Court No. 00-04-00141 Page 46
In NTN 2002, 26 CIT at ___, 186 F. Supp. 2d at 1268, this
Court made clear that NTN has the burden before Commerce to
establish its entitlement to a LOT adjustment. NTN’s failure to
provide the requisite evidence with regard to selling expenses,
other than NTN’s home market packing expenses, 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. Supp. 34, 55
(1997), aff’d, NSK Ltd. v. Koyo Seiko Co., Ltd., 190 F.3d 1321,
1330 (Fed. Cir. 1999). For the reasons stated above, the Court
sustains Commerce’s methodology.
VI. Commerce’s Exclusion of Certain Home Market Sales
to Affiliated Parties From the Normal Value Calculation
A. Background
During the POR, Commerce determined whether NTN’s affiliated
party sales should be used for purposes of calculating NV by
employing its standard arm’s-length test. See Def.’s Mem. at 47.
Specifically, Commerce compared NTN’s home market selling prices to
NTN’s affiliated and unaffiliated parties by using Commerce’s 99.5%
arm’s-length test in which Commerce computes
the weighted average price of all sales to each
affiliated party by part number and the weighted average
price of all sales of each part number to unaffiliated
parties. . . . [F]or every part number sold to both
Consol. Court No. 00-04-00141 Page 47
unaffiliated and affiliated parties, the program
calculates, for each related party, ratios of the
affiliated and unaffiliated weighted average prices;
these ratios are then weight-averaged to obtain the
average of all part numbers sold to each related party.
. . [Commerce] only eliminates sales to a particular
affiliated party from the calculation of NV when the
average of all of these comparisons for that affiliate is
less than 99.5 percent.
Issues & Decision Mem. at 39.
B. Contentions of the Parties
NTN contends that Commerce erred in applying the arm’s-length
test because Commerce “compare[d] the weighted average price for
unrelated sales [to the price] for individual related sales, and
[failed to] consider other important factors such as quantity or
payment terms of specific sales.” NTN’s Mem. at 28. NTN further
argues that no statutory precedent establishes Commerce’s ability
to measure arms-length transactions by such a test. See id. To
illustrate its contention, NTN provides a hypothetical example
attempting to demonstrate that Commerce’s arm’s-length test is
distortive. See id. at 28-29. Alternatively, NTN suggests that
Commerce lower the threshold from 99.5 to 95 percent to ensure that
the results “truly reflect the range of prices in [NTN’s]
transactions.” Id. at 29. NTN further asserts that Commerce
incorporate additional factors, such as quantity or payment terms
of specific sales, in the application of its test. See id. at 29-
30; NTN’s Reply at 12.
Consol. Court No. 00-04-00141 Page 48
In response, Commerce cites to 19 U.S.C. § 1677b(a)(5) (1994)
highlighting the following:
If 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 48 (emphasis in original). Relying on this
statutory language, Commerce then argues that it has been granted
broad discretion to devise and follow “its own methodology for
determining when to use affiliated-party prices in determining NV
as was [allotted for] under the prior law.” Id. at 48-49 (citing
19 U.S.C. § 1677b(a)(3) (1988) and 19 C.F.R. § 353.45(a) (1996)).
Commerce also cites to several decisions that have upheld
Commerce’s test as reasonable, including NTN Bearing Corp., 23 CIT
at 486, 83 F. Supp. 2d at 1281, NSK Ltd., 21 CIT at 635-36, 969 F.
Supp. at 54, NTN Bearing Corp., 19 CIT at 1240-41, 905 F. Supp. at
1099-1100, and Usinor Sacilor v. United States, 18 CIT 1155, 1157-
58, 872 F. Supp. 1000, 1004 (1994). Timken supports Commerce’s
contentions. See Timken’s Resp. at 19-20.
C. Analysis
The Court disagrees with NTN that Commerce’s arm’s-length test
is unreasonable. Under the applicable statute, 19 U.S.C. §
1677b(a)(5), Commerce is granted considerable discretion in
deciding whether to include affiliated party sales when calculating
Consol. Court No. 00-04-00141 Page 49
NV. See Usinor, 18 CIT at 1158, 872 F. Supp. at 1004. This Court
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.” NTN Bearing
Corp., 19 CIT at 1241, 905 F. Supp. at 1100; see Torrington Co. v.
United States, 21 CIT 251, 261, 960 F. Supp. 339, 348 (1997)
(stating that the respondent “must do more than indicate a possible
correlation between price and quantity” to support its argument
that Commerce should consider quantity in Commerce’s arm’s-length
test); NSK Ltd., 190 F.3d at 1328 (affirming the judgment of the
CIT that Commerce’s arm’s-length methodology was reasonable given
respondent’s mere reference to a hypothetical and lack of record
evidence that Commerce’s methodology was unreasonable).
Additionally, NTN’s argument that Commerce reduce its arm’s-length
test threshold to 95% in order to yield a more accurate range of
NTN’s transaction prices fails to prove that Commerce’s current
test is in fact unreasonable.
This Court has also repeatedly rejected NTN’s argument that
Commerce consider additional factors, such as quantity and payment
terms of specific sales in its determination of whether sales
prices to affiliated and unaffiliated parties are comparable. NTN
has failed to point to sufficient record evidence that would
persuade the Court to depart from its prior holdings in NTN 2002,
26 CIT at ___, 186 F. Supp. 2d at 1287-88, NTN Bearing Corp. v.
Consol. Court No. 00-04-00141 Page 50
United States, 24 CIT at ___, 104 F. Supp. 2d at 148, and NTN
Bearing Corp., 19 CIT at 1241, 905 F. Supp. at 1099 (disagreeing
“with NTN that Commerce’s arm[’]s-length test is flawed because
Commerce did not take into account certain factors proposed by
NTN”). Accordingly, the Court upholds Commerce’s application of
the arm’s-length test to exclude certain home market sales to
affiliated parties from the NV calculation as reasonable, in
accordance with law and supported by substantial evidence.
VII. 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) provides that CV be
calculated in part, by using “amounts incurred and realized by the
. . . producer [under] review . . . in 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 by 19 U.S.C. § 1677(15) as
the 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 [sales disregarded under § 1677b(b)(1) and
Consol. Court No. 00-04-00141 Page 51
transactions disregarded under § 1677b(f)(2)], among
others, to be outside the ordinary course of trade. . .
.
19 U.S.C. § 1677(15) (1994) (emphasis added). Sections 1677b(b)(1)
and 1677b(f)(2) respectively deal with below-cost sales and
affiliated parties and were not involved in the determination at
issue. Although § 1677b(b)(1)’s sales below COP and §
1677b(f)(2)’s affiliated party transactions are specifically
designated as outside the ordinary course of trade, the “among
others” language of § 1677(15) clearly indicates that other types
of sales could be excluded as being outside the ordinary course of
trade.
In particular, the SAA states 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 [Commerce is given discretion to] interpret section
1677(15) in a manner which will avoid basing [NV] on
sales which are extraordinary for the market in question,
particularly when the use of such sales would lead to
irrational or unrepresentative results.
SAA at 834 (emphasis added). The court in Koenig & Bauer-Albert AG
Consol. Court No. 00-04-00141 Page 52
v. United States (“Koenig”), 22 CIT 574, 589, 15 F. Supp. 2d 834,
850 (1998), vacated on other grounds, Koenig & Bauer-Albert AG v.
United States, 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 can
not “impose this requirement arbitrarily.”
B. Contentions of the Parties
NTN claims that Commerce improperly included certain NTN sales
that were allegedly outside the ordinary course of trade in
Commerce’s dumping margin and CV profit calculations. See NTN’s
Mem. at 30-33. In NTN’s attempt to show that Commerce erred in
including certain sales in its calculations, NTN provided Commerce
with what it claims to be specific record evidence indicating that
NTN’s high profit sales were in fact outside the ordinary course of
trade. See id. at 31-32; see also NTN’s Mem. Apps. 7 & 8. But
see Issues & Decision Mem. at 44.
Commerce, in turn, argues that the evidence provided by NTN
fails to demonstrate that such sales were, in fact, outside the
ordinary course of trade. See Def.’s Mem. at 57. Accordingly,
Commerce contends that it properly included such sales in its
calculations and that its decision is supported by record evidence
Consol. Court No. 00-04-00141 Page 53
and in tune with its statutory requirements. See id. at 55-61.
Timken adds that NTN “bears the burden of proving that home market
sales are not in the ordinary course of trade . . . [and that] NTN
has failed to make such a demonstration regarding either its
‘sample’ sales or its alleged ‘high profit’ sales.” Timken’s Resp.
at 20-21.
C. Analysis
1. Commerce’s Inclusion of Certain NTN Sales
Allegedly Outside the Ordinary Course of Trade
In Commerce’s Margin Calculation
The issue before the Court is whether Commerce reasonably
included certain sample sales and sales with high profit levels in
NTN’s home market sales database in its dumping margin, instead of
determining that such sales were outside the ordinary course of
trade, and accordingly excluding them. In the Issues & Decision
Mem., Commerce laid out its practice concerning the exclusion of
certain sales from the margin calculation when such sales, in fact,
fall outside the ordinary course of trade. Commerce states that it
has
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. . . .” In its . . . supplemental response, NTN
Consol. Court No. 00-04-00141 Page 54
did not provide additional information to demonstrate
clearly that its alleged sample sales are outside the
ordinary course of trade. 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. . . .
Issues & Decision Mem. at 44 (emphasis added).
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. According
to Commerce, just because NTN has instances of high profits is not
dispositive of the fact that the sales relating to such were
actually outside the ordinary course of trade. See id. In its
questionnaire to NTN, Commerce stated 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. Ex. 2 (proprietary version); Def.’s Mem. at 57-58; see
also Nachi-Fujikoshi Corp. v. United States, 16 CIT 606, 608, 798
F. Supp 716, 718 (1992). Nevertheless, NTN argues that it has
provided Commerce with sufficient record evidence and points to a
number of exhibits in its memorandum referring to zero-priced
Consol. Court No. 00-04-00141 Page 55
sample data16 and explanations of NTN’s instances of high profit
sales. See NTN’s Mem. at 31. 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 id. at 32.
The Court disagrees with NTN that Commerce should exclude such
sales from its margin calculation. Although the CAFC sustained
Commerce’s determination that certain home market sales were
outside the ordinary course of trade, CEMEX, 133 F.3d at 901, the
court noted that for that review, Commerce had examined factors
additional to profit. In the case at bar, NTN supports its
contentions with evidence regarding only one factor, namely profit.
See NTN’s Mem. at 31 (listing NTN’s exhibits referring to profit).
According to the court in CEMEX, 133 F.3d at 900, Commerce must
evaluate not just “one factor taken in isolation but rather . . .
all the circumstances particular to the sales in question.”
Furthermore, this Court previously 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 2002, 26 CIT at ___, 217 F. Supp. 2d
16
Commerce has excluded NTN’s home market zero-price sample
sales from its determination, and therefore the Court refuses to
consider any argument or evidence pertaining to such. See Issues
& Decision Mem. at 44 n.9l. See generally NTN’s Mem. at 31.
Consol. Court No. 00-04-00141 Page 56
at 1315 (analogizing NTN Bearing Corp., 19 CIT at 1229, 905 F.
Supp. at 1091).
In both its Issues & Decision Mem. and Def.’s Mem., Commerce
makes clear that NTN failed to meet its burden of proof regarding
evidence of NTN’s sample sales and sales with high profit that NTN
claims were outside the ordinary course of trade. Therefore, this
Court sustains Commerce’s decision to include such sales in its
margin calculation.
2. Commerce’s Inclusion of Certain NTN Sales
Allegedly Outside the Ordinary Course of Trade
In Commerce’s CV Profit Calculation
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 32-33. In response, Commerce
states that
NTN provided no evidence which demonstrated that the
profit amounts realized on the sales [] claimed to be
outside the ordinary course of trade are particularly,
much less abnormally, high. NTN has selected an
arbitrary profit margin which it defines as “high,” but
it provides no evidence or analysis which suggests that
the profit margin it chose is in any way unusual. To the
contrary, there are enough of these claimed “high profit”
sales in NTN’s home[]market database that it is apparent
that these sales are not unusual but, rather, occur
typically within NTN’s normal course of trade.
Issues & Decision Mem. at 44.
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As acknowledged in Koenig, 22 CIT at 589, 15 F. Supp. 2d at
850, Commerce is granted discretion to consider under what
circumstances high profit sales are actually outside the ordinary
course of trade. See Mitsubishi Heavy Indus. v. United States, 22
CIT 541, 568, 15 F. Supp. 2d 807, 830 (1998); see also Notice of
Final Determination of Sales Less Than Fair Value: Large Newspaper
Printing Presses and Components Thereof, Whether Assembled or
Unassembled From Germany, 61 Fed. Reg. 38,166, 38,178 (July 23,
1996); Notice of Final Determination of Sales at Less Than Fair
Value: Large Newspaper Printing Presses and Components Thereof,
Whether Assembled or Unassembled, From Japan, 61 Fed. Reg. 38,139
(July 23, 1996). In the review at issue, Commerce refused to
exclude certain NTN sample and high profit sales from its CV
calculation because NTN failed to show that such sales were outside
the ordinary course of trade due to “unique and unusual
characteristics related to the sale[s] in question which make
[them] unrepresentative of the home market.” Issues & Decision
Mem. at 44. Commerce acknowledged that such sales should be
excluded only if circumstances existed that would lead Commerce to
the conclusion that such sales, were in fact, made outside the
ordinary course of trade. See id. A lack of evidence provided by
NTN that would enable Commere to reach such a conclusion makes it
reasonable for Commerce to include such sales in the CV profit
calculation. See NTN Bearing Corp., 19 CIT at 1229, 905 F. Supp.
Consol. Court No. 00-04-00141 Page 58
at 1091. Accordingly, this Court upholds Commerce’s decision to
include such sales in its CV profit calculation.
VIII. Commerce’s Strict 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 Def.’s Mem. at 61-62; NTN’s Mem.
at 33-34; NTN’s Reply at 15. The SUMDEV methodology uses five
physical criteria, namely, inside diameter, outside diameter,
width, load rating and Y2 factor, along with a twenty percent
difmer test when determining which TRB models are most similar to
the United States model. See Issues & Decision Mem. at 46; Def.’s
Mem. at 61-62 & n.19; see also Koyo Seiko Co. v. United States, 66
F.3d 1204, 1207 (Fed. Cir. 1995) (explaining the different
criteria).
When determining appropriate product comparisons for United
States sales, Commerce first tries to match United States TRB
models to identical models sold in NTN’s home market. See Issues
& Decision Mem. at 46. When an identical model was not available,
Commerce applied the SUMDEV methodology. See id.
Consol. Court No. 00-04-00141 Page 59
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–-
(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). The CAFC stated in Koyo Seiko Co., 66
F.3d at 1209, 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’
Consol. Court No. 00-04-00141 Page 60
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 determine the most similar matches because the
test fails to account for the cost deviation among the TRB models
themselves. See Issues & Decision Mem. at 45; NTN’s Mem. at 34.
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 34; see also Issues
& Decision Mem. at 45. NTN uses a hypothetical example to attempt
to show that Commerce’s SUMDEV methodology is prima facie
distortive. See NTN’s Mem. at 34-35. NTN concludes by citing to
Böwe-Passat, 17 CIT at 340, as support of 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 34. NTN
suggests that Commerce be ordered to alter its methodology by using
the “cost variances not only to determine commercial comparability
for purposes of [19 U.S.C. § 1677(16)(B),] but also to select most
similar home market TRB models.” Issues & Decision Mem. at 47.
Consol. Court No. 00-04-00141 Page 61
Commerce asserts that 19 U.S.C. § 1677(16) provides general
guidance in selecting the products sold in the foreign market to be
compared to United States merchandise. See Issues & Decision Mem.
at 46. The statute first directs Commerce to find home market
merchandise with identical qualities to those sold in the United
States and, if unavailable, to search for merchandise that would
satisfy §§ 1677(16)(B) and (C). See id. at 47. To satisfy such
statutory requirements, Commerce eliminates, as possible matches,
those models for which the variable cost of manufacturing
differences exceed 20 percent of the total cost of manufacturing of
the United States model. See id. Therefore, Commerce contends
that Commerce’s SUMDEV methodology is both a reasonable application
of its discretion to determine what constitutes similar merchandise
for the purpose of calculating NV, and is supported by the law.
See id.
C. Analysis
In Koyo Seiko Co., 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
Consol. Court No. 00-04-00141 Page 62
omitted).
In the case at bar, Commerce explained that
the selection of similar merchandise is based on a
product’s physical characteristics and not differences in
cost. 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. . . .
Regarding NTN’s suggestion that [Commerce] place a
cap on the [SUMDEV] model-match methodology, [Commerce
explains] that the [CAFC] has considered [Commerce’s]
[SUMDEV] methodology to be reasonable . . . .
Issues & Decision Mem. at 47.
The Court agrees that Commerce is not required to adopt the
particular matching methodology advanced by NTN, see Koyo Seiko
Co., 66 F.3d at 1209; Timken Co. v. United States, 10 CIT 86, 98,
630 F. Supp. 1327, 1338 (1986); NTN Bearing Corp. of Am. v. United
States, 18 CIT 555, 559 (1994), and finds that Commerce’s decision
to apply its SUMDEV methodology is reasonable and in accordance
with law. See Peer Bearing Co. v. United Sates, 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.
Consol. Court No. 00-04-00141 Page 63
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 34. 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 Seiko Co., 66 F.3d
at 1209.
IX. Commerce’s Treatment of Indirect Selling Expenses for
Interest Alleged to Have Been Incurred by NTN in
Financing Cash Deposits for Antidumping Duties
A. Background
During the review at issue, Commerce added an amount that it
classified as interest on cash deposits to NTN’s United States
indirect selling expenses calculation. See NTN’s Mem. App. 5 at 17
(proprietary version). Commerce states that
[w]ith respect to the proper handling of the amount for
interest on cash deposits, . . . NTN has [previously]
Consol. Court No. 00-04-00141 Page 64
indicated that the amount in question represents interest
payments on the financing of cash deposits for
antidumping duties. Thus, for these [Final Results, 65
Fed. Reg. 11,767, Commerce] ha[s] made no changes to the
manner in which [it] recalculated NTN’s [United States
indirect selling expenses].”
Issues & Decision Mem. at 50.
B. Contentions of the Parties
NTN contends that Commerce improperly added a certain amount
to Commerce’s calculations of NTN’s selling expenses that was
allegedly incurred in financing cash deposits for antidumping
duties. See NTN’s Mem. at 34-35. NTN claims that since that
amount did not equal the figure reported to Commerce by NTN,
compare NTN’s Mem. App 7 at 1 (illustrating worksheet 3 of NTN’s
questionnaire response to Commerce) (proprietary version) with id.
App. 5 at 17 (illustrating attachment II of Commerce’s calculation
of NTN’s United States selling expenses) (proprietary version),
Commerce should remove the added amount from its calculation since
it “effectively penalizes NTN in this amount. . . .” NTN’s Mem. at
35. NTN adds that this particular adjustment is unlike those in
previous reviews and, therefore, considers Commerce’s response to
NTN’s contentions unresponsive. See NTN’s Reply at 16. Commerce
responds that its decision is reasonable and in accordance with
law. “While antidumping duties and cash deposits have never been
considered expenses deductible from [United States] price,”
Commerce asserts that “interest expenses incurred in connection
Consol. Court No. 00-04-00141 Page 65
with selling activities in the [United States] are deductible from
[the United States] price.” Def.’s Mem. at 67. Accordingly,
Commerce allowed an adjustment to indirect selling expenses with
regard to those expenses that Commerce determined to be non-selling
expenses. See id. Timken supports Commerce’s contentions and
charges NTN with improperly calculating its expense figures. See
Timken Resp. at 22 (proprietary version).
C. Analysis
Section 1677a(d)(1) of Title 19 provides for a CEP adjustment
of certain expenses incurred by affiliated sellers in selling the
subject merchandise in the United States. The statute, however,
does not precisely identify what such expenses are. See generally
19 U.S.C. § 1677a(d)(1) (1994); Koyo Seiko Co. v. United States, 26
CIT ___, ___, 186 F. Supp. 2d 1332, 1349-50 (2002) (highlighting
previous reviews that Commerce has dealt with such expenses).
For some period of time, Commerce’s practice was to deem
financing interest of cash deposits as a selling expense and,
therefore, Commerce allowed respondents that incurred such expenses
to deduct the interest from indirect selling expenses prior to the
deduction of such indirect selling expenses from the CEP. See
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
Consol. Court No. 00-04-00141 Page 66
the United Kingdom, 62 Fed. Reg. 2081, 2104-05 (Jan. 15, 1997).
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.
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, 62 Fed. Reg. 54,043,
54,079 (Oct. 17, 1997).
This Court has held that Commerce has the discretion to alter
its policy, so long as Commerce presents a reasonable rationale for
its departure from the previous practice, see NSK 2002, 26 CIT at
___, 217 F. Supp. 2d at 1307-09 (relying on Chevron, 467 U.S. at
843, Timken Co. v. United States, 22 CIT 621, 628, 16 F. Supp. 2d
1102, 1106 (1998)), and accordingly has upheld Commerce’s decision
to deny an adjustment to NTN’s United States indirect selling
expenses for interest allegedly incurred by NTN in financing cash
deposits for antidumping duties. See NSK 2002, 26 CIT at ___, 217
Consol. Court No. 00-04-00141 Page 67
F. Supp. 2d at 1309.
In the case at bar, NTN claims that, unlike Commerce’s
practice in past reviews, Commerce added an amount for interest
incurred financing cash deposits to its selling expense calculation
that did not coincide with the figure provided by NTN to Commerce
in its questionnaire response. See NTN’s Reply at 16. The crux of
NTN’s complaint is that Commerce failed to address this issue in
its response and that Timken misunderstood the data provided by
NTN. See id. at 16-17. The Court, however, does not find these
arguments persuasive. Commerce states that
NTN has indicated [in its case brief] that the amount in
question represents interest payments on the financing of
cash deposits for antidumping duties. Thus, for these
[Final Results, 65 Fed. Reg. 11,767, Commerce] ha[s] made
no changes to the manner in which [Commerce] recalculated
NTN[ United States indirect selling expenses].
Issues & Decision Mem. at 50 (emphasis added). Accordingly, the
Court will adhere to its reasoning in NSK 2002, 26 CIT at ___, 217
F. Supp. 2d at 1309, and sustain Commerce’s decision to deny an
adjustment to NTN’s United States indirect selling expenses for
interest allegedly incurred by NTN in financing cash deposits for
antidumping duties.
Consol. Court No. 00-04-00141 Page 68
X. Commerce’s Application of Adverse Facts Available to Koyo’s
Sales of Further-Manufactured Merchandise and Entered Values
(Koyo and Timken)
A. Statutory Background
An antidumping duty is imposed upon imported merchandise when:
(1) Commerce determines such merchandise is being dumped, that is,
sold or likely to be sold in the United States at less than fair
value; and (2) the International Trade Commission determines that
an industry in the United States is materially injured or is
threatened with material injury. See 19 U.S.C. §§ 1673, 1677(34)
(1994). To determine whether there is dumping, Commerce compares
the price of the imported merchandise in the United States to the
NV for the same or similar merchandise in the home market. See 19
U.S.C. § 1677b (1994). The price in the United States is
calculated using either an EP or CEP. See 19 U.S.C. §§ 1677a(a),
(b); see also, SAA at 822 (1994) (Commerce will classify the price
of a United States sales transaction as a CEP “[i]f, before or
after the time of importation, the first sale to an unaffiliated
person is made by (or for the account of) the producer or exporter
or by a seller in the United States who is affiliated with the
producer or exporter”); Koenig & Bauer-Albert AG v. United States,
22 CIT at 589-593, 15 F. Supp. 2d at 850-852 (discussing when to
apply EP or CEP methodology).
Consol. Court No. 00-04-00141 Page 69
Commerce must reduce the price used to establish CEP by any of
the following amounts associated with economic activities occurring
in the United States: (1) commissions paid in “selling the subject
merchandise in the United States”; (2) direct selling expenses,
that is, “expenses that result from, and bear a direct relationship
to, the sale, such as credit expenses, guarantees and warranties”;
(3) “any selling expenses that the seller pays on behalf of the
purchaser” (assumptions); (4) indirect selling expenses, that is,
any selling expenses not deducted under any of the first three
categories of deductions; (5) certain expenses resulting from
further manufacture or assembly (including additional material and
labor) performed on the merchandise after its importation into the
United States; and (6) profit allocated to the expenses described
in categories (1) through (5). 19 U.S.C. § 1677a(d)(1)-(3); see
SAA at 823-24.
Commerce calculates the expenses resulting from further
manufacture or assembly using one of two statutory methods. See 19
U.S.C. §§ 1677a(d), (e). The first method provides that Commerce
shall reduce “the price used to establish [CEP by] . . . the cost
of any further manufacture or assembly (including additional
material and labor), except in [certain] circumstances.” 19 U.S.C.
§ 1677a(d)(2). When the first method does not apply, Commerce
applies a special rule for merchandise with value added after
importation (“Special Rule”). See 19 U.S.C. § 1677a(e) (1994).
Consol. Court No. 00-04-00141 Page 70
The Special Rule provides that:
[w]here the subject merchandise is imported by a person
affiliated with the exporter or producer, and the value
added in the United States by the affiliated person is
likely to exceed substantially the value of the subject
merchandise, [Commerce] shall determine the [CEP] for
such merchandise by using one of the following prices if
there is a sufficient quantity of sales to provide a
reasonable basis for comparison and [Commerce] determines
that the use of such sales is appropriate:
(1) The price of identical subject merchandise sold
by the exporter or producer to an unaffiliated person.
(2) The price of other subject merchandise sold by
the exporter or producer to an unaffiliated person.
If there is not a sufficient quantity of sales to provide
a reasonable basis for comparison under paragraph (1) or
(2), or [Commerce] determines that neither of the prices
described in such paragraphs is appropriate, then the
[CEP] may be determined on any other reasonable basis.
19 U.S.C. § 1677a(e).
B. Factual Background
On February 18, 1999, Koyo requested that Commerce apply the
Special Rule pursuant to 19 U.S.C. § 1677a(e) for certain of Koyo’s
imported bearings and bearing parts further manufactured in the
United States prior to being sold to an unaffiliated customer. See
Koyo’s Mem. Ex. A. Moreover, Koyo requested that Commerce exempt
it from completing Section E of Commerce’s questionnaire that
required Koyo to report sales and cost data information for its
further manufactured sales. See id. Ex. A at 2. Commerce notified
Koyo on March 11, 1999, that based on certain information provided
Consol. Court No. 00-04-00141 Page 71
by Koyo, Commerce determined that Koyo is required to provide
additional information regarding its sales of further manufactured
bearings, and mandated that Koyo respond to Section E of Commerce’s
questionnaire. See id. Ex. B. Koyo declined to provide this
additional information. See id. Ex. F. Commerce explained that
the record does not lead [Commerce] to conclude that the
use of either of the two alternative methods described in
[1677a(e)(1) and (2)] with respect to Koyo’s further-
manufactured [subject] merchandise is appropriate. As
noted in [the Preliminary Results, 64 Fed. Reg. 53,323,]
the finished merchandise sold by Koyo to the first
unrelated [United States] customer was still in the same
class or kind as merchandise within the scope of the TRB
order and finding (i.e., imported TRB components were
processed into TRBs). As a result, the calculation of
the precise amount of value added for Koyo’s further-
manufactured sales would not be nearly as burdensome as
it would be for . . . []other respondent[s] who imported
TRBs for incorporation in automobiles and transmission
assemblies. Furthermore, in prior reviews [Commerce]
ha[s] calculated margins for Koyo’s further-processed
sales and has extensive experience with and knowledge of
Koyo’s further-manufactured sales and the calculation of
the value added in the United States with respect to
these sales. In addition, the record clearly indicates
that Koyo’s further-manufactured [United States] sales
represented a large portion of its total [United States]
sales during the POR. Furthermore, A-588-604 margins
[Commerce] ha[s] calculated for Koyo for determinations
in past reviews in which further- manufactured sales were
included in [Commerce’s] databases have been
significantly higher than margins [Commerce] ha[s]
calculated in past reviews of Koyo in the A-588-604 case
in which there were no further-manufactured sales in
[Commerce’s] analysis. This indicates that, in this
particular case, the margins on further-manufactured
sales are not necessarily equivalent to the margins on
non-further-manufactured sales. Thus, the standard
methodology would likely yield more accurate results in
this case. Consideration of this difference in past Koyo
margins in which further-manufactured sales were included
in [Commerce’s] analysis cannot be overlooked in
[Commerce’s] evaluation of the additional accuracy
Consol. Court No. 00-04-00141 Page 72
[Commerce] would likely gain by using the standard
methodology in this case. Therefore, for all of the
above reasons, in this case [Commerce] ha[s] determined
that the relatively small reduction of burden on
[Commerce] that would result from resorting to either of
the two proxy methods under the [S]pecial [R]ule would be
outweighed by the potential distortion and losses in
accuracy as a consequence of their use. Accordingly, for
this case [Commerce] ha[s] rejected the use of either of
the two proxies as inappropriate and ha[s] sought to
calculate the CEP for Koyo's further manufactured sales
using another reasonable basis.
Issues & Decision Mem. at 12.
As another reasonable method, Commerce chose its standard
methodology under 19 U.S.C. § 1677a(d)(2) to calculate the CEP of
Koyo’s further-manufactured merchandise and found that this
methodology was not burdensome and “presented a higher probability
of accurate results than using margins calculated for non-further
manufactured sales.” Def.’s Mem. at 78 (citing Issues & Decision
Mem. at 13-14). Koyo objected to the use of Comerce’s standard
methodology for calculating the CEP of its further-manufactured TRB
merchandise and suggests that
instead of evaluating whether the margins for finished
over-4-inch A-588-604 bearings were an appropriate
surrogate for A-588-604 further-manufactured merchandise,
[Commerce] could have used the margins it calculated for
finished A-588-054 bearings as a proxy for that A-588-604
merchandise which was further processed into under-4-inch
bearings, and the margins calculated for the finished A-
588-604 bearings as a proxy for that A-588-604
merchandise which was further processed into over-4-inch
bearings.
Issues & Decision Mem. at 13.
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Commerce responded that
[w]hile Koyo’s proposal would be less burdensome than the
use of the standard methodology, the record clearly
indicates that the use of the standard methodology for
Koyo would yield more accurate results: [Commerce]
believe[s] that the gains in accuracy [Commerce] would
achieve would outweigh any burden resulting from the use
of the standard calculation. Koyo suggests an
alternative method for grouping its non-further-
manufactured sales such that the division of merchandise
subject to the TRB order and finding would be breached.
Not only has [Commerce] never before breached the
division between orders in any aspect of [Commerce’s]
analysis or calculations, but Koyo has provided no
evidence that its alternative would yield results more
accurate than [Commerce’s] standard methodology. The
record contains no compelling reasons for [Commerce] to
abandon [Commerce’s] long-standing policy of treating
orders as separate proceedings. Rather, the record
supports [Commerce’s] continued use of the standard
methodology as a reasonable basis for calculating the CEP
for Koyo's further-manufactured merchandise.
Id. at 13-14. Since Koyo failed to comply with Commerce’s request
that Koyo complete Section E of Commerce’s questionnaire, Commerce
applied, as adverse facts available, “the highest rate ever
calculated for Koyo in any previous review of the TRBs at issue[,
. . . and applied this] rate . . . to the total entered value of
Koyo’s further-manufactured sales” to calculate the CEP of Koyo’s
further-manufactured merchandise. Def.’s Mem. at 82-83.
C. Contentions of the Parties
1. Koyo’s Contentions
Koyo contends that it submitted certain information to
Commerce illustrating that the “value added in the United States to
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imported TRB parts exceeded substantially the value of those parts,
and that [such information] satisfied the prerequisites for the
application of the statutory ‘special rule,’ 19 U.S.C. § 1677a(e)
. . . .” Koyo’s Mem. at 14. Accordingly, Commerce should have
calculated Koyo’s CEP of further processed merchandise sales by
implementing a methodology other than what Commerce uses in its
standard analysis. See id. at 15, 19. Koyo asserts that
“Congress’ use of the word ‘shall’ in the first paragraph of
section 1677a(e)17 demonstrates that [Commerce] is not given
discretion [regarding its] use [of] the ‘special rule,’ but is
directed to do so whenever [Commerce] finds that the value added in
the United States is likely to exceed substantially the value of
the imported components.” Id. at 19. Koyo also argues that
Commerce’s mandate that Koyo submit a full Section E response to
Commerce’s questionnaire “ignored the clear language” of 19 U.S.C.
§ 1677a(e) directing Commerce to calculate CEP of further processed
17
The pertinent section reads that Commerce
. . . shall determine the constructed export price for
[subject merchandise that is imported by an affiliated
exporter and the value added in the United States is
likely to substantially exceed the subject merchandise’s
value] by using one of the following prices[:] . . .
(1) [t]he price of identical subject merchandise
sold by the exporter . . . to an unaffiliated person[;
or]
(2) [t]he price of other subject merchandise sold by
the exporter . . . to an unaffiliated person.
19 U.S.C. § 1677a(e).
Consol. Court No. 00-04-00141 Page 75
merchandise sales on a “more reasonable” and “less burdensome”
manner. See id. 19-20.
According to Koyo, the case at bar concerns the issue of
whether Commerce acted reasonably and within its statutory limits
by applying the Special Rule, as provided for in 19 U.S.C. §
1677a(e), in addition to relying on its standard further-
manufacturing methodology, provided for in 19 U.S.C. § 1677a(d)(2)
(1994), and requesting from Koyo a Section E response. See id. at
20-22. Koyo asserts that 19 U.S.C. §§ 1677a(d) and 1677a(e) are
mutually exclusive and, as such, Commerce may not employ its
standard analysis as an “other reasonable basis” under § 1677a(e).
See id. at 22. In other words, when the Special Rule applies,
Commerce “is foreclosed from deducting the cost of further
manufacture[d TRBs] . . . and must rely on an alternative basis to
calculate the margins on further processed merchandise.” Koyo’s
Resp. at 15. Koyo further argues that the facts in the record fail
to support Commerce’s justifications for applying the standard
analysis under the Special Rule, but rather that Commerce’s
conclusion is based on a “false premise . . . that the differences
between the margins of further processed and non-further processed
merchandise in past reviews are indicative of the results in the
current review.” Koyo’s Mem. at 23. Although Koyo recognizes that
Commerce may use knowledge it has developed from prior reviews
regarding some aspects of Koyo’s participation in the antidumping
Consol. Court No. 00-04-00141 Page 76
process, there has been no administrative review for Koyo in which
the record reflects data on Koyo’s further processed TRBs since
1993/94. Id. at 23.
Koyo proposed to Commerce an alternative methodology on which
to calculate the dumping margins in this POR, which Koyo claims
Commerce “erroneously rejected.” See id. at 24-27. Koyo also
raises issue with Commerce’s “confusion” regarding the formula
Commerce is to apply in determining the relative accuracy of the
standard methodology. Koyo cites to various pages of the Issues &
Decision Mem. claiming that Commerce fails to consistently apply
the appropriate test measuring the relative “accuracy” of
Commerce’s standard methodology versus the implementation of an
alternative methodology. See id. at 27-28.
2. Commerce’s Contentions
Commerce contends that Congress has granted to Commerce broad
discretion in determining when the use of “any other reasonable
basis” under 19 U.S.C. § 1677a(e) is appropriate. Def.’s Mem. at
79-82. Commerce maintains that “[n]either the statute nor the SAA
prohibits Commerce from using the more burdensome standard [19
U.S.C. § 1677a](d)(2) methodology as an alternative reasonable
method where the agency finds that neither alternative under [§§
1677a](e)(1) or (e)(2) is appropriate.” Id. at 81. In this case,
Commerce determined that
Consol. Court No. 00-04-00141 Page 77
the record does not lead [Commerce] to conclude that the
use of either of the two alternative methods described in
[§§ 1677a(e)(1) and (2)] with respect to Koyo’s further-
manufactured merchandise is appropriate. As noted in
[Commerce’s Preliminary Results, 64 Fed. Reg. 53,323,]
the finished merchandise sold by Koyo to the first
unrelated [United States] customer was still in the same
class or kind as merchandise within the scope of the TRB
order and finding (i.e., imported TRB components were
processed into TRBs). As a result, the calculation of
the precise amount of value added for Koyo’s further-
manufactured sales would not be nearly as burdensome as
it would be for . . . another respondent who imported
TRBs for incorporation in automobiles and transmission
assemblies. Furthermore, in prior reviews Commerce ha[s]
calculated margins for Koyo’s further-processed sales and
ha[s] extensive experience with and knowledge of Koyo’s
further-manufactured sales and the calculation of the
value added in the United States with respect to these
sales. In addition, the record clearly indicates that
Koyo's further-manufactured [United States] sales
represented a large portion of its total [United States]
sales during the POR. Furthermore, A-588-604 margins
[Commerce] ha[s] calculated for Koyo for determinations
in past reviews in which further-manufactured sales were
included in [Commerce’s] databases have been
significantly higher than margins [Commerce] ha[s]
calculated in past reviews of Koyo in the A-588-604 case
in which there were no further-manufactured sales in our
analysis. This indicates that, in this particular case,
the margins on further-manufactured sales are not
necessarily equivalent to the margins on non-further-
manufactured sales. Thus, the standard methodology would
likely yield more accurate results in this case.
Consideration of this difference in past Koyo margins in
which further-manufactured sales were included in
[Commerce’s] analysis cannot be overlooked in
[Commerce’s] evaluation of the additional accuracy
[Commerce] would likely gain by using the standard
methodology in this case. Therefore, for all of the
above reasons, in this case [Commerce] ha[s] determined
that the relatively small reduction of burden on
[Commerce] that would result from resorting to either of
the two proxy methods under the special rule would be
outweighed by the potential distortion and losses in
accuracy as a consequence of their use. Accordingly, for
this case [Commerce has] rejected the use of either of
the two proxies as inappropriate and ha[s] sought to
Consol. Court No. 00-04-00141 Page 78
calculate the CEP for Koyo's further manufactured sales
using another reasonable basis.
Issues & Decision Mem. at 12.
Although Commerce agrees that Koyo’s proposed methodology
would be less burdensome than Commerce’s standard methodology under
§ 1677a(d)(2), Commerce contends that “. . . the record clearly
indicates that the use of the standard methodology for Koyo would
yield more accurate results. . . .” Issues & Decision Mem. at 13-
14; Def.’s Mem. at 80. Commerce cites the CAFC’s decision in Rhone
Poulenc, Inc. v. United States, 899 F.2d 1185, 1191 (Fed. Cir.
1990), recognizing that the purpose behind the antidumping statute
is to ensure that Commerce calculates the dumping margins as
accurately as possible. See Def.’s Mem. at 80-81. Although
Commerce does not dispute that the underlying purposes of the
Special Rule is to ensure that Commerce avoid certain complexities
involved in implementing the standard methodology set forth in 19
U.S.C. § 1677a(d)(2), Commerce has determined that in the case at
bar, achieving accuracy is to outweigh the goal of reducing the
burden associated with implementing the standard analysis. See id.
at 82. According to Commerce, it acted within its statutory
authority and the Court can not “weigh the wisdom of Commerce’s
legitimate policy choices.” Id.
Commerce also contends that it acted in accordance with 19
U.S.C. § 1677e when it used the adverse facts available margin rate
Consol. Court No. 00-04-00141 Page 79
to calculate the CEP of Koyo’s further-manufactured merchandise.
See id. In particular, Commerce argues that, since Koyo failed to
act to the best of its ability by refusing to respond to the
particular section of Commerce’s questionnaire, Commerce properly
selected the adverse facts available margin rate and applied it to
the total entered value of Koyo’s further-manufactured merchandise.
See id. 82-83. Contrary to Timken’s argument that Commerce should
have applied facts available to Koyo’s total sales value of the
further-manufactured sales rather than to the entered value of
Koyo’s sales, Commerce maintains that it “is not required by the
statute to select a method that is ‘the most’ or ‘more’ reasonably
adverse.” Id. at 83. In sum, Commerce argues that it has adhered
to the statutory language in “choosing the highest margin ever
calculated for Koyo in the reviews . . . at issues.” Id. Commerce
contends that it had the discretion to choose the sources and facts
upon which Commerce will depend upon to support an adverse interest
“when a respondent has been determined to be uncooperative.” Id.
at 84.
According to Commerce, “[t]he adverse facts available rate
selected . . . in this case represents an increase over past
practice; yet, the application of that rate to entered value is
consistent with past practice [as well].” Id. at 86; see also id.
at 87. Commerce maintains that its application of the adverse
facts available rate to the entered value rather than Koyo’s sales
Consol. Court No. 00-04-00141 Page 80
values of further-manufactured TRBs is consistent with Commerce’s
practice in determining assessment rates. See id. at 87
(explaining Commerce’s calculation of assessment rates under 19
C.F.R. § 351.212(b)). Finally, Commerce argues that adherence to
Timken’s suggestion that Commerce apply an adverse facts available
rate to the total sales value would result in punitive results for
Koyo. See id.
3. Timken’s Contentions
Timken agrees with Commerce’s resort to its standard
methodology under 19 U.S.C. § 1677a(d)(2) as an alternative
reasonable method and argues that Commerce has broad discretion as
when to use “any other reasonable basis” under § 1677a(e). See
Timken’s Resp. at 8-12. Moreover, Timken maintains that the reason
Commerce has not conducted a recent determination on Koyo’s further
manufactured merchandise is because Koyo has consistently refused
to supply Commerce with the necessary information to conduct such
a review. See id. at 10. According to Timken, Commerce correctly
relied on adverse facts available and reasonably determined that
Koyo’s further-manufactured TRBs were likely dumped at greater
rates than its “fully manufactured” merchandise. See id. Timken
further argues that since the United States Customs Service does
not maintain CEPs for merchandise imported by related parties, but
rather has only entered values, Koyo’s proposed methodology would
Consol. Court No. 00-04-00141 Page 81
lead to irrational results. See id. at 12.
Timken, however, disagrees with Commerce’s application of the
adverse facts available margin to Koyo’s entered value and argues
that Commerce should have applied its facts available rate to
Koyo’s sales value rather than Koyo’s entered value. See Timken’s
Mem. Supp. Mot. J. Agency R. Pursuant R. 56.2 (“Timken’s Mem.”) at
8-14. Timken contends that Commerce’s application of the adverse
facts available margin to Koyo’s entered value was unlawful
because: (1) transfer prices are not reliable, see id. at 11, 15-
18; and (2) Commerce “rewarded Koyo’s refusal to supply requested
information by applying the ‘facts available’ rate to Koyo’s
entered value, rather than to its sales value, for further-
processed merchandise, which resulted in a lower dumping margin for
Koyo.” Id. at 14.
D. Analysis
The first issue before the Court is whether Commerce’s use of
its standard methodology pursuant to § 1677a(d)(2) constitutes
another “reasonable basis” under § 1677a(e). 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, 467 U.S. 837. Under the
first step, the Court reviews Commerce’s construction of a
statutory provision to determine whether “Congress has directly
Consol. Court No. 00-04-00141 Page 82
spoken to the precise question at issue.” Chevron, 467 U.S. 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., 157 F.3d at 882
(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’s final
expression of its intent, if the text answers the question, that is
the end of the matter.” Id. (citations omitted).
The end clause of 19 U.S.C. § 1677a(e) clearly provides
Commerce with a great deal of discretion in adjusting CEP for the
cost of further manufacture and assembly. See 19 U.S.C. §
1677a(e). Under § 1677a(e), when the value added to subject
merchandise in the United States is likely to substantially exceed
the value of the merchandise, Commerce must use specified surrogate
prices if two conditions are met. See id. The first condition in
the preamble of § 1677a(e) that there be “a sufficient quantity of
sales to provide a reasonable basis for comparison,” is not at
issue here. Id. The second condition in the preamble of §
1677a(e) requires Commerce to “determine[] that the use of such
sales is appropriate.” Id. Thus, Commerce is not forced to use
the surrogate prices if it determines that their use is not
“appropriate.” See id. According to the end clause of § 1677a(e),
Commerce is permitted to determine CEP “on any other reasonable
Consol. Court No. 00-04-00141 Page 83
basis.” Id.
Commerce, therefore, may determine the method by which to
calculate CEP, when it finds that the use of the surrogate prices
is not appropriate. This holds true even if Commerce finds that
the value added in the United States “is likely to exceed
substantially the value of the subject merchandise . . . .” 19
U.S.C. § 1677a(e). Thus, even if Commerce finds that Koyo’s added
value substantially exceeds the value of the merchandise, Commerce
still has the discretion to refuse to apply the Special Rule.
In the case at bar, Commerce determined that
the record does not lead [Commerce] to conclude that the
use of either of the two alternative methods described in
[§§ 1677a(e)(1) and (2)] with respect to Koyo’s further-
manufactured merchandise is appropriate. As noted in
[Commerce’s Preliminary Results, 64 Fed. Reg. 53,323,]
the finished merchandise sold by Koyo to the first
unrelated [United States] customer was still in the same
class or kind as merchandise within the scope of the TRB
order and finding (i.e., imported TRB components were
processed into TRBs). As a result, the calculation of
the precise amount of value added for Koyo’s further-
manufactured sales would not be nearly as burdensome as
it would be for . . . another respondent who imported
TRBs for incorporation in automobiles and transmission
assemblies. Furthermore, in prior reviews Commerce ha[s]
calculated margins for Koyo’s further-processed sales and
ha[s] extensive experience with and knowledge of Koyo’s
further-manufactured sales and the calculation of the
value added in the United States with respect to these
sales. In addition, the record clearly indicates that
Koyo's further-manufactured [United States] sales
represented a large portion of its total [United States]
sales during the POR. Furthermore, A-588-604 margins
[Commerce] ha[s] calculated for Koyo for determinations
in past reviews in which further-manufactured sales were
included in [Commerce’s] databases have been
Consol. Court No. 00-04-00141 Page 84
significantly higher than margins [Commerce] ha[s]
calculated in past reviews of Koyo in the A-588-604 case
in which there were no further-manufactured sales in our
analysis. This indicates that, in this particular case,
the margins on further-manufactured sales are not
necessarily equivalent to the margins on non-further-
manufactured sales. Thus, the standard methodology would
likely yield more accurate results in this case.
Issues & Decision Mem. at 12.
The Court finds that Commerce acted within the discretion
afforded to it by § 1677a(e) in refusing to apply the Special Rule
to Koyo in this review. The Court will not require Commerce to use
the Special Rule when it finds the use of the Special Rule
inappropriate, since the imposition of such a requirement would be
contrary to § 1677a(e). Therefore, since Commerce found that
neither alternative under §§ 1677a(e)(1) or (e)(2) were
appropriate, Commerce’s resort to its standard methodology under §
1677a(d)(2) as an alternative reasonable method is affirmed.18
Next, the Court must determine whether Commerce’s application
of the adverse facts available margin rate to Koyo’s entered value
in order to calculate the CEP of Koyo’s further-manufactured
merchandise was in accordance with law. The antidumping statute
18
Although Koyo proposes alternative methodologies, 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).
Consol. Court No. 00-04-00141 Page 85
mandates that Commerce use “facts otherwise 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) (1994); (3) significantly impedes an
antidumping proceeding; and (4) provides information that cannot be
verified as provided in 19 U.S.C. § 1677m(i). See id. §
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).
Once Commerce determines that use of facts available is
warranted, § 1677e(b) permits Commerce to apply an “adverse
inference” if it can find that “an interested party has failed to
cooperate by not acting to the best of its ability to comply with
a request for information.” Such an inference may permit Commerce
to rely on information derived from the petition, the final
determination, a previous review or any other information placed on
the record. See 19 U.S.C. § 1677e(c) (1994). When Commerce relies
on information other than “information obtained in the course of
[the] investigation or review, [Commerce] shall, to the extent
practicable, corroborate that information from independent sources
Consol. Court No. 00-04-00141 Page 86
that are reasonably at [its] disposal.” Id.
In order to find that a party “has failed to cooperate by not
acting to the best of its ability,” it is not sufficient for
Commerce to merely assert this legal standard as its conclusion or
repeat its finding concerning the need for facts available. See
Ferro Union, Inc. v. United States, 23 CIT 178, 197, 44 F. Supp. 2d
1310, 1329 (1999) (“Once Commerce has determined under 19 U.S.C. §
1677e(a) that it may resort to facts available, it must make
additional findings prior to applying 19 U.S.C. § 1677e(b) and
drawing an adverse inference.”). Rather, Commerce must clearly
articulate: (1) “why it concluded that a party failed to comply to
the best of its ability prior to applying adverse facts,” and (2)
“why the absence of this information is of significance to the
progress of [its] investigation.” Ferro Union, 23 CIT at 200, 44
F. Supp. 2d at 1331.
The Court finds that Commerce’s decision to apply adverse
facts available was in accordance with law. When Commerce chose to
use its standard methodology under § 1677a(d)(2) to calculate the
CEP of Koyo’s further-manufactured merchandise, Commerce requested
that Koyo provide Commerce with responses to the particular section
of the questionnaire. In particular, on March 11, 1999, Commerce
requested that Koyo provide a response to the specific section of
the questionnaire by April 5, 1999. See Koyo’s Mem. Ex. B. On
Consol. Court No. 00-04-00141 Page 87
April 5, 1999, Koyo responded by letter to Commerce stating that
“[b]ecause Koyo believes that it qualifies for application of the
‘special’ rule in 19 U.S.C. § 1677a(e), and has little confidence
that it will receive even-handed treatment from [Commerce] in the
calculation of the fair value of TRBs further-processed from
imported forgings,” Koyo declines to submit the Section E response.
Koyo’s Mem. Ex. F.
As a result of Koyo’s refusal to provide responses to the
particular section and thereby, failure to act to the best of its
ability, Commerce selected “as adverse facts available to Koyo's
further-manufactured merchandise the highest rate ever calculated
for Koyo in any segment of the A-588-604 proceeding (41.04
percent).” Issues & Decision Mem. at 14. Consequently, Commerce’s
decision to apply the adverse facts available rate to Koyo’s
entered value to calculate the CEP of Koyo’s further-manufactured
merchandise was also in accordance with law.
The Court also finds that Timken’s argument that Commerce
should have applied the adverse facts available rate to Koyo’s
sales value is without merit. As Commerce correctly argues, “[i]n
choosing among the facts available, [Commerce] is not required by
the statute to select a method that is ‘the most’ or ‘more
reasonably adverse.” Issues & Decision Mem. at 17. Rather, this
Court affirms Commerce’s application of the adverse facts available
Consol. Court No. 00-04-00141 Page 88
rate to Koyo’s entered value since Commerce’s methodology was
reasonable.
Accordingly, the Court sustains Commerce’s resort to its
standard methodology under § 1677a(d)(2) and its application of the
adverse facts available rate to Koyo’s entered value to determine
the CEP of Koyo’s further-manufactured merchandise.
XI. Commerce’s Methodology for Calculating Koyo’s Assessment Rate
for Antidumping Duties
A. Background
In the subject review, Commerce, following its usual practice
in ascertaining cash deposit rates and assessment rates, stated
that “[t]he cash deposit rate has been determined on the basis of
the selling price to the first unaffiliated [United States]
customer. For appraisement purposes, where information is
available, [Commerce] will use the entered value of the merchandise
to determine the assessment rate.” Final Results, 65 Fed. Reg. at
11,769.
Any of Commerce’s findings concerning assessment rates and
cash deposit rates are subject to 19 U.S.C. § 1675(a)(1)(B) (1994)
which provides that Commerce shall “review, and determine (in
accordance with [§ 1675(a)](2)), the amount of any antidumping duty
. . . .” Section 1675(a)(2) further states that the dumping margin
Consol. Court No. 00-04-00141 Page 89
“shall be the basis for the assessment of . . . antidumping duties
on entries of merchandise . . . .” 19 U.S.C. § 1675(a)(2)(C).
The dumping margin (equal to the amount of antidumping duty
owed) is the amount by which NV exceeds the EP or CEP on the
subject merchandise sold during the POR.19 See 19 U.S.C. § 1677(35)
(1994).
Normal value is the comparable price for a product like the
imported merchandise when first sold (generally, to unaffiliated
parties) “for consumption in the exporting country, in the usual
commercial quantities and in the ordinary course of trade and, to
the extent practicable, at the same level of trade as the export
price or constructed export price.” 19 U.S.C. § 1677b(a)(1)(B)(i)
(1994).
The export price means the “price at which the subject
merchandise is first sold . . . by the producer or exporter of the
subject merchandise outside of the United States to an unaffiliated
purchaser,” while the constructed export price is the “price at
which the subject merchandise is first sold . . . in the United
States . . . [by] producer or exporter . . . to a purchaser not
19
Because Koyo had only CEP sales during the POR, Koyo’s
arguments address only the calculation of the assessment rate for
CEP sales. See Koyo’s Reply at 22 n.10. However, for the purpose
of our analysis, the outcome would be identical if Koyo had both EP
and CEP or only EP sales during the POR.
Consol. Court No. 00-04-00141 Page 90
affiliated with the producer or exporter . . . .” 19 U.S.C. §
1677a(a),(b) (1994).
Cash deposit is a provisional remedy. When Commerce directs
Customs to suspend liquidation upon a preliminary determination of
dumping, the importer must make a cash deposit of estimated
antidumping duties with Customs or post a bond or other security.
See 19 U.S.C. § 1675(a)(2)(B)(iii). Commerce orders the posting of
a cash deposit in an amount equal to the estimated average amount
by which the foreign market value exceeds the United States price,
that is, the dumping margin. See 19 U.S.C. § 1673b(d)(1)(B)
(1994); see also 19 U.S.C. § 1673e(b) (applying similar calculation
for Commerce’s final determination). Commerce then calculates the
cash deposit rate by dividing “‘the aggregate dumping margins by
the aggregated United States prices.’” National Steel Corp. v.
United States, 20 CIT 743, 746, 929 F. Supp. 1577, 1581 (1996)
(citing 19 C.F.R. § 353.2(f)(2) (1993)); accord 19 U.S.C. §
1677(35)(B) (stating that “‘weighted average dumping margin’ is the
percentage determined by dividing the aggregate dumping margins .
. . by the aggregate export prices . . .”). Commerce interprets
the term “United States price” as the sale price after Commerce has
made all adjustments as provided for by law. See National Steel,
20 CIT at 746, 929 F. Supp. at 1581 (citing 19 C.F.R. §
353.41(d)(iii) (1993)).
Consol. Court No. 00-04-00141 Page 91
When an antidumping duty is imposed upon imported merchandise,
Commerce calculates an assessment rate for each importer by
dividing the dumping margin for the subject merchandise by the
entered value of such merchandise for normal Customs purposes. See
19 C.F.R. § 351.212(b) (1998).
In promulgating 19 C.F.R. § 351.212(b), Commerce reasoned as
follows:
[Section] 351.212(b)(1) deal[s] with the method that
[Commerce] will use to assess antidumping duties upon
completion of a review. . . . [Commerce] provided that
it normally will calculate an “assessment rate” for each
importer by dividing the absolute dumping margin found .
. . by the entered value . . . . [The rule] merely
codified an assessment method that [Commerce] has come to
use more and more frequently in recent years.
Historically, [Commerce] (and, before it, the
Department of the Treasury) used the so-called “master
list” (entry-by-entry) assessment method. Under the
master list method, [Commerce] would list the appropriate
amount of duties to assess for each entry of subject
merchandise separately in its instructions to the Customs
Service. However, in recent years, the master list
method has fallen into disuse for two principal reasons.
First, in most cases, respondents have not been able to
link specific entries to specific sales, particularly in
CEP situations in which there is a delay between the
importation of merchandise and its resale to an
unaffiliated customer[]. Absent an ability to link
entries to sales, [Commerce] cannot apply the master list
method. Second, even when respondents are able to link
entries to sales, there are practical difficulties in
creating and using a master list if the number of entries
covered by a review is large. Preparing a master list
that covers hundreds or thousands of entries is a time-
consuming process, and one that is prone to errors by
[Commerce] and/or Customs Service staff. . . .
Antidumping Duties; Countervailing Duties, 62 Fed. Reg. 27,296,
Consol. Court No. 00-04-00141 Page 92
27,314 (May 19, 1997).
B. Contentions of the Parties
1. Koyo’s Contentions
Koyo asserts that Commerce unlawfully calculated the
antidumping duty assessment rate under 19 C.F.R. § 351.212(b)
because Commerce used the entered value for the subject merchandise
as the denominator in the formula. See Koyo’s Mem. at 34-38. Koyo
alleges that because 19 U.S.C. § 1675(a)(2) requires that the
dumping margin be calculated as the difference between NV and CEP,
and since NV and CEP are both price-based concepts, the logic of
the statute necessitates that the denominator used in the formula
must also be a price-based concept, specifically, sales value. See
id. at 36. Koyo, therefore, concludes that Commerce’s use of
entered value instead of sales value as the denominator is
unreasonable. See id. at 37-38.
Koyo recognizes this Court’s earlier decision in Koyo Seiko
Co. v. United States (“Koyo 2001"), 110 F. Supp. 2d 934 (2000),
aff’d, 258 F.3d 1340 (Fed. Cir. 2001), sustaining Commerce’s
methodology for calculating the assessment rate, but argues that
Koyo’s arguments in the case at bar differ since in Koyo’s CEP
transactions, the entered value is based on transactions between
the foreign exporter and its single United State’s affiliate. Koyo
Consol. Court No. 00-04-00141 Page 93
adds that “[t]he antidumping statute generally does not focus on
transactions between affiliated parties . . . which is why, in a
CEP situation, the statute provides that the [United States] price
is to be based on the transaction between the [United States] . .
. affiliate and the first unaffiliated purchaser . . . .” Koyo’s
Mem. at 37.
According to Koyo, Commerce’s stated reason for using the
entered value would apply only if Koyo’s subject merchandise were
imported by multiple parties, and if Commerce had included the
entered value from those multiple partes in the denominator of its
assessment rate. See id. Koyo claims that, in the case at bar,
all of Koyo’s merchandise was imported by one United States
affiliate, and the entered value used to calculate the assessment
rate consisted solely of the entered value of the subject
merchandise reported by the single United States affiliate. See
id.
2. Commerce’s Contentions
Commerce contends that the calculation of the assessment rate
pursuant to 19 C.F.R. § 351.212(b) by dividing the dumping margin
by the entered value of the subject merchandise was reasonable and
in accordance with law. See Def.’s Mem. at 88-93.
In response to Koyo’s contention that the court in Koyo 2001
fails to properly address the issue that the denominator in
Consol. Court No. 00-04-00141 Page 94
Commerce’s formula must parallel the numerator, Commerce cites to
Torrington Co. v. United States, 44 F.3d 1572, 1578 (Fed. Cir.
1995). The court in Torrington Co., 44 F.3d at 1578, held that 19
U.S.C. § 1675(a) does not “specify a particular divisor when
calculating either assessment rates or cash deposit rates.”
According to Commerce, the “dumping margin or the amount by which
the normal value exceeded the export price or [CEP], serves as the
basis for the assessment of antidumping duties.” Def’s Mem. at 90.
Commerce further argues CEP is “calculated to be, as closely as
possible, a price corresponding to an export price between non-
affiliated exporters and importers.” Id. (citing SAA at 812).
Commerce also addresses the argument regarding the importation
of Koyo’s merchandise by only one United States affiliate.
According to Commerce, “it ha[s] other valid motives for adopting
entered values as the denominator, for example, administrative
ease, accuracy, promptness and efficiency.” Id. at 91 (citation
omitted). Furthermore, Commerce argues that “it would be
unreasonable, if not anomalous, for Commerce to devise an
assessment rate formula for importers enjoying exclusivity with
manufacturers different from the formula applied to all other
importers . . . .” Id.
Timken generally supports Commerce and points out that,
contrary to Koyo’s claim, there is binding precedent by the CAFC
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recognizing Commerce’s discretion to use different calculations to
determine a duty deposit and assessment rate. Timken’s Resp. at 11
(citing Torrington Co., 44 F.3d at 1576, 1581).
C. Analysis
In Koyo 2001, 110 F. Supp. 2d at 934, this Court determined
and the CAFC affirmed Commerce’s methodology for calculating the
assessment rate, that is, using the entered value of Koyo’s
imported merchandise in the assessment rate formula rather than
sales value. The Court noted that neither 19 U.S.C. §§
1675(a)(1)(B) and (a)(2) “nor its legislative history provide[d] an
‘unambiguously express intent’ with regards to the” issue of
whether Commerce could use entered value rather than sales value in
its calculation of the assessment rate. Koyo 2001, 110 F. Supp. 2d
at 940.
The Court is unpersuaded by Koyo’s argument that its
contentions in the case at bar differ from those presented in Koyo
2001, 110 F. Supp. 2d at 939. Accordingly, the Court adheres to
its reasoning in Koyo 2001 and, therefore, affirms Commerce’s
methodology of calculating the assessment rate as reasonable and in
accordance with law.
Consol. Court No. 00-04-00141 Page 96
XII. Commerce’s Allowance of NTN to Exclude Non-Scope Merchandise
From NTN’s United States Selling Expenses (Timken)
A. Background
In the underlying review, NTN excluded certain expenses
attributable to non-scope merchandise from its reported United
States indirect selling expenses. See Issues & Decision Mem. at
23-24; Def.’s Mem. at 93. In particular,
[b]ecause certain of NTN’s [United States] expenses were
incurred solely for non-scope merchandise, NTN first
removed all such expenses from its pool of [United
States] expenses . . . . The remaining expenses, which
NTN could not specifically link to either scope or non-
scope merchandise, were then allocated to scope and non-
scope merchandise.
Def’s Mem. at 95; see Issues & Decision Mem. at 23.
In accepting NTN’s methodology of reporting its United States
indirect selling expenses, Commerce: (1) verified NTN’s United
States expenses finding no discrepancies; and (2) stated that it
has found NTN’s methodology to be reasonable in past TRB and
antifriction bearings cases. See Def’s Mem. at 95. Commerce also
explained how it eliminated the possibility of distortion in NTN’s
methodology when
[Commerce] calculated a ratio of sales of scope
merchandise to all sales. . . . Commerce then adjusted
NTN’s reported final indirect selling expense by adding
or subtracting various expenses to arrive at a final
indirect selling expense. Next, Commerce multiplied that
total expense by the ratio of scope-to-total products.
Def.’s Mem. at 96 (referencing Def.’s Mem. Ex. 3 (proprietary
version) and Prelim. Analysis Mem.).
Consol. Court No. 00-04-00141 Page 97
B. Contentions of the Parties
Timken argues that Commerce improperly permitted NTN to
exclude certain expenses attributable to non-scope merchandise from
its reported United States indirect selling expenses. See Timken’s
Mem. at 19; Reply Br. Timken (“Timken’s Reply”) at 6-8; Issues &
Decision Mem. at 23-24. In particular, Timken asserts that NTN
failed to meet its burden by not providing Commerce with full and
affirmative documentation that would lead Commerce to reasonably
conclude that NTN was entitled to an adjustment to its United
States selling expenses. See Timken’s Mem. at 24. According to
Timken, the record is filled with “confused, contradictory, and
apparently illogical statements” regarding certain NTN United
States expenses and, therefore, Commerce’s decision to allow an
adjustment was unsupported by substantial record evidence. See id.
at 24-28. Timken claims that Commerce erred by accepting NTN’s
unproven claim and requests that the Court “reject Commerce’s
summary acceptance of NTN’s unjustified claim and order that . . .
Commerce include [the expenses in question] in the pool of [NTN’s]
indirect selling expenses . . . .” Id. at 28.
Timken also contends that even if the Court finds that NTN had
demonstrated that such excluded expenses were incurred for out-of-
scope merchandise, NTN’s methodology “double-allocates expenses to
non-scope merchandise” and, therefore, should be rejected. Id.
Consol. Court No. 00-04-00141 Page 98
Commerce responds that 19 U.S.C. § 1677a(d), “as amended by
the URAA, continues to be silent on the question of allocation
methods.” Def.’s Mem. at 93-94. Commerce maintains that it found
no discrepancies during its verification of NTN’s United States
expenses and eliminated the possibility of distortion in NTN’s
methodology when
[Commerce] calculated a ratio of sales of scope
merchandise to all sales. . . . Commerce then adjusted
NTN’s reported final indirect selling expense by adding
or subtracting various expenses to arrive at a final
indirect selling expense. Next, Commerce multiplied that
total expense by the ratio of scope-to-total products.
Def.’s Mem. at 96 (referencing Def.’s Mem. Ex. 3 (proprietary
version and Prelim. Analysis Mem.) Pointing out that NTN’s
allocation methodology was reasonable and not distortive, Commerce
asserts that the Court should uphold NTN’s reported allocation for
United States indirect selling expenses. See id. at 96-97.
NTN generally agrees with Commerce and argues that Timken has
fundamentally misunderstood NTN’s reported data regarding NTN’s
United States indirect selling expenses. See NTN’s Resp. Mem.
Timken’s Nov. 20, 2000 Mem. Supp. R. 56.2 Mot. J. Agency R. (“NTN’s
Resp.”) at 2. According to NTN, Commerce’s decision to accept
NTN’s “reported pool of allocated expenses for [United States]
indirect selling expenses is reasonable, and in accordance with
law, and Timken’s arguments are misguided and confused.” Id. NTN
claims that the record clearly shows that the expenses excluded
Consol. Court No. 00-04-00141 Page 99
from NTN’s pool of allocated expenses were for merchandise outside
the scope of Commerce’s order. See id. NTN also asserts that its
methodology ensures accuracy and avoids double allocation of
expenses. See id. at 2-4
C. Analysis
The Court upholds Commerce’s decision to allow NTN to exclude
from its United States selling expenses certain expenses
attributable to non-scope merchandise since it is in accordance
with law. The Court notes that 19 U.S.C. § 1677a(d) is silent on
the question of allocation methods and, thus, grants Commerce
considerable discretion. Under 19 C.F.R. § 351.401(g)(1998),
Commerce “may consider allocated expenses and price adjustments
when transaction-specific reporting is not feasible, provided
[Commerce] is satisfied that the allocation method used does not
cause inaccuracies or distortions.” In addition, pursuant to 19
C.F.R. § 351.401(g)(4), Commerce “will not reject an allocation
method solely because the method includes expenses incurred, or
price adjustments made, with respect to sales of merchandise that
does not constitute subject merchandise or a foreign like product
(whichever is applicable.)”
Based on a careful examination of the record and on the
regulatory language of 19 C.F.R. §§ 351.401(g) and (g)(4) that
Consol. Court No. 00-04-00141 Page 100
grants Commerce considerable discretion in choosing allocation
methods, the Court sustains Commerce’s decision to accept NTN’s
United States selling expenses as reasonable, supported by
substantial evidence and in accordance with law. See Skidmore v.
Swift & Co., 323 U.S. 134, 139-40 (1944).
CONCLUSION
This case is remanded to Commerce to annul all findings and
conclusions made pursuant to the duty absorption inquiry conducted
for the subject review in accordance with this opinion. All other
issues are affirmed.
___________________________
NICHOLAS TSOUCALAS
SENIOR JUDGE
Dated: January 9, 2003
New York, New York