Luoyang Bearing Factory v. United States

Slip Op. 02-118

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS

________________________________________
:
LUOYANG BEARING FACTORY, :
:
Plaintiff and :
Defendant-Intervenor, :
:
v. : Consol. Court No.
: 99-12-00743
UNITED STATES, :
:
Defendant, :
:
and :
:
THE TIMKEN COMPANY, :
:
Defendant-Intervenor :
and Plaintiff. :
________________________________________:

This consolidated action concerns the claims raised by
plaintiff and defendant-intervenor, Luoyang Bearing Factory
(“Luoyang”), and defendant-intervenor and plaintiff, The Timken
Company (“Timken”), who move pursuant to USCIT R. 56.2 for judgment
upon the agency record challenging the Department of Commerce,
International Trade Administration’s (“Commerce”) final
determination, entitled Final Results of 1997-1998 Antidumping Duty
Administrative Review and Final Results of New Shipper Review of
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,
From the People’s Republic of China (“Final Results”), 64 Fed. Reg.
61,837 (Nov. 15, 1999).

Specifically, Luoyang contends that Commerce erred in
selecting, for valuing the bearing quality steel bar used to
manufacture tapered roller bearings (“TRBs”) cups and cones, export
data from Japan to India, rather than reviewing and using People’s
Republic of China (“PRC”) trading company import data.

Timken contends that Commerce erred in: (1) including
“consumption of traded goods” in Indian bearing producers’ direct
input costs when calculating the overhead, selling, general and
Consol. Court No. 99-12-00743 Page 2

administrative expenses (“SG&A”) and profit rates; (2) selecting,
for valuing PRC labor costs, the wage rates in Chapter 5 of the
International Labor Office’s (“ILO”) 1998 Yearbook of Labor
Statistics (“1998 Yearbook”) rather than the labor costs reported
in Chapter 6A of the ILO’s 1998 Yearbook; (3) valuing certain steel
inputs by using the price paid by a PRC bearing producer to a
market-economy supplier; and (4) excluding the annual report data
of the National Engineering Company (“NEI”) in Commerce’s
determination of overhead, SG&A and profit rates.

Held: Luoyang’s 56.2 motion is granted. Timken’s 56.2 motion
is granted in part and denied in part. This case is remanded to
Commerce to: (1)(a) examine whether or not the PRC trading company
import prices constitute the “best available information” to value
either all of the subject merchandise at issue or a portion of the
subject merchandise purchased by Luoyang through the trading
company and used by Luoyang in the manufacture of TRB cups and
cones and, if Commerce concludes that the PRC trading company
import prices present the “best available information” for the
purpose of such surrogate evaluation, to recalculate Commerce’s
determination not inconsistent with this opinion; and (b) examine
if, and only if, Commerce finds that the PRC trading company import
prices do not constitute the “best available information,” whether
or not Indonesian data (that is, Indonesian import statistics and
export data from Japan to Indonesia) constitute the “best available
information” over export data from Japan to India to value the
bearing quality steel bar used in the production of TRB cups and
cones, and to explain, (if Commerce finds that export data from
Japan to India is the “best available information,”) how the entire
export data from Japan to India falls within the range of values in
the United States category benchmark range; (2) exclude
“consumption of traded goods” from Commerce’s overhead, SG&A and
profit rate calculations and to recalculate the dumping margins
accordingly; and (3) (a) explain, with reference to the record,
whether or not the PRC bearing producer’s import data at issue was
“meaningful”; and (b) provide the Court with an explanation as to
why the PRC trading company data is not the “best available
information” for the purpose of valuing either the entire factor of
production (“FOP”) (that is, both the directly imported FOP and the
non-market economy country (“NME”) sourced FOP) or the NME sourced
FOP. Commerce’s final determination is affirmed in all other
respects.

[Luoyang’s 56.2 motion is granted. Timken’s 56.2 motion is granted
in part and denied in part. Case remanded.]

Dated: October 1, 2002
Consol. Court No. 99-12-00743 Page 3

Hume & Associates, PC (Robert T. Hume and Stephen M. De Luca)
for Luoyang, plaintiff and defendant-intervenor.1

Robert D. McCallum, Jr., Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Lucius B. Lau); of counsel:
Rina Goldenberg, Office of the Chief Counsel for Import
Administration, United States Department of Commerce, for the
United States, defendant.

Stewart and Stewart (Terence P. Stewart, Geert De Prest,
Wesley K. Caine and Amy S. Dwyer) for Timken, defendant-intervenor
and plaintiff.

OPINION

TSOUCALAS, Senior Judge: This consolidated action concerns

the claims raised by plaintiff and defendant-intervenor, Luoyang

Bearing Factory (“Luoyang”), and defendant-intervenor and

plaintiff, The Timken Company (“Timken”), who move pursuant to

USCIT R. 56.2 for judgment upon the agency record challenging the

Department of Commerce, International Trade Administration’s

(“Commerce”) final determination, entitled Final Results of 1997-

1998 Antidumping Duty Administrative Review and Final Results of

New Shipper Review of Tapered Roller Bearings and Parts Thereof,

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

(“Final Results”), 64 Fed. Reg. 61,837 (Nov. 15, 1999).

1
On January 26, 2000, this Court granted Luoyang’s Consent
Motion For Intervention but Luoyang has not filed any briefs as a
defendant-intervenor in this action.
Consol. Court No. 99-12-00743 Page 4

Specifically, Luoyang contends that Commerce erred in

selecting, for valuing the bearing quality steel bar used to

manufacture tapered roller bearings (“TRBs”) cups and cones, export

data from Japan to India, rather than reviewing and using People’s

Republic of China (“PRC”) trading company import data.

Timken contends that Commerce erred in: (1) including

“consumption of traded goods” in Indian bearing producers’ direct

input costs when calculating the overhead, selling, general and

administrative expenses (“SG&A”), and profit rates; (2) selecting,

for valuing PRC labor costs, the wage rates in Chapter 5 of the

International Labor Office’s (“ILO”) 1998 Yearbook of Labor

Statistics (“1998 Yearbook”) rather than the labor costs reported

in Chapter 6A of the ILO’s 1998 Yearbook; (3) valuing certain steel

inputs by using the price paid by a PRC bearing producer to a

market-economy supplier; and (4) excluding the annual report data

of the National Engineering Company (“NEI”) in Commerce’s

determination of overhead, SG&A and profit rates.

BACKGROUND

This case concerns the antidumping duty order on TRBs and

parts thereof, finished and unfinished, from the PRC for the period
Consol. Court No. 99-12-00743 Page 5

of review (“POR”) covering June 1, 1997, through May 31, 1998.2

See Final Results, 64 Fed. Reg. at 61,837. On July 8, 1999,

Commerce published the preliminary results of the subject review.

See Preliminary Results of 1997-1998 Antidumping Duty

Administrative Review and Partial Recission of Antidumping Duty

Administrative Review of Tapered Roller Bearings and Parts Thereof,

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

(“Preliminary Results”), 64 Fed. Reg. 36,853. Commerce published

the Final Results on November 15, 1999. See Final Results, 64 Fed.

Reg. 61,837.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 19

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

STANDARD OF REVIEW

In reviewing a challenge to Commerce’s final determination in

an antidumping administrative review, the Court will uphold

Commerce’s determination unless it is “unsupported by substantial

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. 99-12-00743 Page 6

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,

Universal Camera, 340 U.S. at 488)).
Consol. Court No. 99-12-00743 Page 7

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,

however”) (citation omitted).
Consol. Court No. 99-12-00743 Page 8

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.

United States, 22 CIT 541, 545, 15 F. Supp. 2d 807, 813 (1998).
Consol. Court No. 99-12-00743 Page 9

DISCUSSION

I. Commerce’s Selection of Export Data from Japan to India as a
Surrogate Value for Bearing Quality Steel Bar Used by a PRC
Producer to Manufacture TRB Cups and Cones

A. Background

1. Statutory Background

An antidumping margin is the difference between normal value

(“NV”) and United States price of the merchandise. When the

merchandise is produced in a non-market economy country (“NME”)

such as the PRC, Commerce constructs NV pursuant to section

1677b(c), which provides that

the valuation of the factors of production shall be based
on the best available information regarding the values of
such factors in a market economy country or countries
considered to be appropriate by [Commerce].

19 U.S.C. § 1677b(c)(1) (1994) (emphasis supplied).

The statute does not define the phrase "best available

information,” it only provides that

[Commerce], in valuing factors of production . . . ,
shall utilize, to the extent possible, the prices or
costs of factors of production in one or more market
economy countries that are--

(A) at a level of economic development comparable to
that of the nonmarket economy country, and
(B) significant producers of comparable merchandise.

19 U.S.C. § 1677b(c)(4) (1994) (emphasis supplied).
Consol. Court No. 99-12-00743 Page 10

Thus, the statute grants to Commerce broad discretion to

determine the “best available information” in a reasonable manner

on a case-by-case basis. See Lasko Metal Prods., Inc. v. United

States (“Lasko”), 43 F.3d 1442, 1446 (Fed. Cir. 1994) (noting that

the statute “simply does not say--anywhere--that the factors of

production must be ascertained in a single fashion.”)

Consequently, Commerce values as many factors of production

(“FOPs”) as possible using information obtained from the “primary”

surrogate country, that is, the country that Commerce considers to

be most comparable in economic terms to the NME country being

investigated, and that also produces merchandise comparable to the

subject merchandise. See, e.g., Tianjin Mach. Import & Export

Corp. v. United States, 16 CIT 931, 940-41, 806 F. Supp. 1008, 1018

(1992); Timken Co. v. United States, 16 CIT 142, 143-44, 788 F.

Supp. 1216, 1218 (1992). Additionally, if Commerce determines that

suitable values cannot be obtained from the data of the primary

surrogate country, Commerce resorts to the data from the second,

and sometimes the third, surrogate. See, e.g., Timken Co. v.

United States (“Timken 2001"), 25 CIT __, __, 166 F. Supp. 2d 608,

621-23 (2001); Notice of Final Determination of Sales at Less Than

Fair Value: Certain Cased Pencils From the People’s Republic of

China, 59 Fed. Reg. 55,625, 55,629 (Nov. 8, 1994); Final

Determination of Sales at Less Than Fair Value: Certain Helical
Consol. Court No. 99-12-00743 Page 11

Spring Lock Washers From the People’s Republic of China, 58 Fed.

Reg. 48,833, 48,835 (Sept. 20, 1993).

2. Factual Background

During this review, Commerce initially chose secondary

surrogate data (that is, export data from Japan to Indonesia) over

data from the primary surrogate country (that is, India) to value

bearing quality steel bar used by Luoyang, a PRC producer, in the

manufacturing of TRB cups and cones.3 See Preliminary Results, 64

Fed. Reg. at 36,856; see also Def.’s Mem. Opp’n Luoyang’s Mot. J.

Agency R. (“Def.’s Mem. Opp’n Luoyang”), App. Ex. 4. In the

Preliminary Results, Commerce also determined that it would use

export data from Japan to Indonesia to value the steel bar

purchased by Luoyang from a PRC trading company rather than that

“trading company[’s] prices.” Preliminary Results, 64 Fed. Reg. at

36,856.

Commerce explained that in order to value the steel bar used

by Luoyang to manufacture TRB cups and cones, Commerce compared

3
“To make cups and cones, Luoyang used both domestic and
imported hot-rolled[,] [that is, bearing quality] steel bar. The
imported steel bar was imported from a market economy country for
Luoyang by a [PRC] trading company.” Pl.’s Mem. P. & A. Supp. Rule
56.2 Mot. J. Agency R. (“Luoyang’s Mem.”) at 5 (emphasis supplied);
see also Def.’s Mem. Opp’n Luoyang’s Mot. J. Agency R. (“Def.’s
Mem. Opp’n Luoyang”) at 3-5 (citing Def.’s Mem. Opp’n Luoyang,
Proprietary App. Exs. 1, 2, and 4).
Consol. Court No. 99-12-00743 Page 12

several data sources (including: (1) Indian import statistics; (2)

export data from Japan to India; (3) Indonesian import statistics;

and (4) export data from Japan to Indonesia) to the United States

import statistics for the Harmonized Tariff Schedule (“HTS”)

category which “isolates bearing quality steel used in the

production of cups and cones and has been used for comparison

purposes in past reviews.” Def.’s Mem. Opp’n Luoyang, App. Ex. 4

at 4 (citing Final Results of 1996-1997 Antidumping Duty

Administrative Review and New Shipper Review and Determination Not

To Revoke Order in Part of Tapered Roller Bearings and Parts

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

China (“10th Annual Review”), 63 Fed. Reg 63,842, 63,845 (Nov. 17,

1998)). Commerce reasoned that it decided to use export data from

Japan to Indonesia to value steel bar used in the production of TRB

cups and cones over import data from India because Commerce

determined that steel values contained in the Indian import data

were not reliable for two reasons: (1) Commerce was unable to

isolate Indian import value for bearing quality steel used to

manufacture the merchandise at issue; and (2) when compared with

the United States import statistics “the[] Indian values [were] too

high to be considered a reliable indicator of the value of bearing

quality steel used for the production of cups and cones.” Def.’s

Mem. Opp’n Luoyang, App. Ex. 4 at 4. Similarly, Commerce

determined that: (1) export data from Japan to India was unreliable
Consol. Court No. 99-12-00743 Page 13

because “the prices [were] too high, when compared to the U.S.

benchmark,” id.; and (2) “[a]lthough . . . Indonesian [import

statistics] [were] closer to the U.S. benchmark in terms of price

than the Indian values, like the Indian data, the Indonesian import

statistics d[id] not provide a further breakdown of the

aforementioned Indonesian basket category.” Id. at 4-5. Commerce,

however, re-examined the matter after considering comments made by

Timken, namely, that Commerce can use a “range of [United States

import] prices contained in HTS category 7228.30.20 . . . to gauge

the reliability of Indian import values.” Final Results, 64 Fed.

Reg. at 61,839.

Upon examining the United States import data from HTS category

7228.30.20, Commerce determined that during the POR, “the range of

prices from the countries with the most significant volumes of

sales [was] approximately $642 [per metric ton (“MT”)] to $834 [per

MT].” Id. In the Final Results, Commerce compared Indian import

data to the range of United States prices and found that: (1) as

“in the past, [Commerce] [was] unable to isolate bearing quality

steel in Indian import category 7228.30 because none of the eight-

digit sub-categories within 7228.30 specifically include bearing

quality steel bar,” id. at 61,839-40; and (2) although the

“‘Others’ category, 7228.3019, could contain the type of steel [at

issue,] . . . the Indian values continue to be unreliable because
Consol. Court No. 99-12-00743 Page 14

the values for these imports remain significantly higher than any

price in the U.S. import range.” Id. at 61,840.

Since the Indian import data was unreliable, Commerce then

proceeded to examine export data from Japan to India. Id.

Commerce observed that the export data from Japan to India “f[e]ll

within the range of the values in the U.S. [benchmark] category,”

7228.30.20, that is, the value of steel imported into the United

States during the POR which ranged from $642 per MT to $834 per MT.

Id. Consequently, Commerce concluded that export data from Japan

to India would constitute the best available information to value

steel used to produce the merchandise at issue. See id. Commerce

stated that

[b]ecause this Japanese tariff category is the narrowest
category which could contain bearing quality steel, and
because it is consistent with values contained in . . .
[the United States] benchmark category, [Commerce]
believe[s] that these data are the best alternative for
valuing steel used in the production of cups and cones.
It is [Commerce’s] stated preference to use information
from its primary surrogate to the extent possible. . .
. Because these data relate to [Commerce’s] primary
surrogate and are within the price range of the U.S.
benchmark category, [Commerce] ha[s] not analyzed data
from [Commerce’s] secondary surrogate, Indonesia, to find
a value for steel used to produce cups and cones.

Final Results, 64 Fed. Reg. at 61,840.

Commerce refused to use Luoyang’s PRC trading company import

prices to value the bearing quality steel bar used in the
Consol. Court No. 99-12-00743 Page 15

production of the subject merchandise at issue. See id. at 61,845.

Commerce pointed out:

[Commerce] recognize[s] that in [Olympia Indus.,
Inc. v. United States (“Olympia 1999”), 23 CIT 80, 36 F.
Supp. 2d 414 (1999)], the Court, in dicta, stated that
Commerce must test the reliability of the trading company
value in order to determine whether it comprises the best
available information for purposes of the FOP
calculation. However, Commerce respectfully disagrees
with the Court’s interpretation of the statute. As
[Commerce] stated in [Commerce’s] . . . Final Results of
Redetermination Pursuant to Court Remand of Olympia
Indus., Inc. v. United States [(“Olympia 1998”), 22 CIT
387, 7 F. Supp. 2d 997 (1998)] . . . , nothing in the
Lasko, [43 F.3d 1442,] decision alters the statutory
mechanism for selection of surrogate values. In Lasko,
the Court [of Appeals for the Federal Circuit (“CAFC”)]
merely recognized that, where the actual cost to the
producer was a market economy price (and paid in a market
economy currency), the actual cost to the producer was
better information than a surrogate value. See Lasko, 43
F.3d at 1446. The selection of surrogate values is
governed by section [1677b(c)(4)] . . . , which, as
discussed above, establishes a preference for values from
a comparable market economy that is a significant
producer of comparable merchandise. Had Congress
intended a preference for using import prices into the
NME as surrogate values, it could easily have stated this
preference.

Id. (emphasis in original).

B. Contentions of the Parties

1. Luoyang’s Contentions

Luoyang contends that Commerce’s decision to value bearing

quality steel bar by using export data from Japan to India was not

supported by substantial evidence and was contrary to law. See

Pl.’s Mem. P. & A. Supp. Rule 56.2 Mot. J. Agency R. (“Luoyang’s
Consol. Court No. 99-12-00743 Page 16

Mem.”) at 10-15, 17-31; Luoyang’s Reply Br. (“Luoyang’s Reply”) at

2-15. In particular, Luoyang argues that Commerce’s refusal to

review PRC trading company import prices “and to determine whether

that data constituted the best available information for purposes

of the FOP analysis,” Luoyang’s Mem. at 17, was (1) an

“[un]reasonable interpretation of [19 U.S.C. § 1677b(c)(1)],” id.

at 21 (citing Olympia 1998, 22 CIT at 392, 7 F. Supp. 2d at 1002);

(2) an “utter disregard” of Olympia 1999, 23 CIT 80, 36 F. Supp. 2d

414, Luoyang’s Mem. at 17; and (3) inconsistent with Commerce’s

prior administrative determination in the 10th Annual Review, 63

Fed. Reg. at 63,853-54.4 See Luoyang’s Mem. at 24-27. Luoyang

4
Luoyang points out that in past reviews, “Commerce has
determined that [NV] can most accurately be calculated by first
valuing the factors of production on the basis of prices paid by
the nonmarket economy country to market-economy suppliers
before resorting to surrogate values.” Luoyang’s Mem. at 24
(emphasis in original) (citing Final Determination of Sales at Less
Than Fair Value: Sparklers From the People’s Republic of China, 56
Fed. Reg. 20,588, 20,590 (May 6, 1991); Final Determinations of
Sales at Less Than Fair Value: Oscillating Fans and Ceiling Fans
From the People’s Republic of China (“Oscillating Fans”), 56 Fed.
Reg. 55,271 (Oct. 25, 1991); and Final Results of Antidumping Duty
Administrative Review: Tapered Roller Bearings and Parts Thereof,
Finished and Unfinished, from the Republic of Hungary, 55 Fed. Reg.
21,066, 21,067 (May 22, 1990)).

Moreover, Luoyang asserts that in the 10th Annual Review, 63
Fed. Reg. at 63,853-54, “Commerce addressed the question [of]
whether trading company import prices, as alternate surrogate data,
are preferable to surrogate data from a market-economy country that
is a significant producer and at a level of comparable economic
development.” Luoyang’s Mem. at 25. In that review, Commerce
stated:

(continued...)
Consol. Court No. 99-12-00743 Page 17

maintains that the PRC trading company import data constitutes the

“best available information” because “‘[t]he cost for raw materials

from a market economy supplier, paid in convertible currencies,

provides Commerce with the closest approximation of the cost of

producing the goods in a market economy country,’” Luoyang’s Mem.

4
(...continued)
“To assess the reliability of the Chinese trading
company’s steel prices, [Commerce] . . . examined the
[following] factors outlined in . . . Olympia [1999, 23
CIT at 82, 36 F. Supp. 2d at 416] . . . : (1) the value
and volume of steel imports, (2) the type and quality of
the imported steel, and (3) consumption of imported steel
by the NME producer.

. . . .

Regarding the value of the steel imported by the trading
company, [Commerce] found that the price paid by the
trading company is within the range of prices created by
the actual steel prices paid by PRC producers and
[Commerce’s] surrogate value. Consequently, the price
paid by the PRC trading company is not aberrational.
With respect to volume and consumption of steel by the
NME producer [Commerce] note[s] that the amount of steel
imported by the trading company was significant and that
the NME producer in question consumed a significant
amount of imported steel to produce the subject
merchandise.

Based on the above, [Commerce is] using the trading
company import steel price as surrogate data for those
companies that actually used the imported steel.”

Id. at 25 (emphasis in original) (quoting 10th Annual Review, 63
Fed. Reg. at 63,854).

Applying Commerce’s three-prong test, Luoyang maintains that
“[t]he PRC trading company prices [in the case at bar] are not
aberrational and satisfy each of the Olympia [1999, 23 CIT 80, 36
F. Supp. 2d 414] criteria.” Luoyang’s Mem. at 26.
Consol. Court No. 99-12-00743 Page 18

at 23 (quoting Lasko Metal Prods., Inc. v. United States (“Lasko

Metal”), 16 CIT 1079, 1081, 810 F. Supp. 314, 317 (1992), aff’d,

Lasko, 43 F.3d 1442), and “‘[t]he same holds true . . . with

respect to the trading company data.’”5 Luoyang’s Mem. at 23

(quoting Olympia 1998, 22 CIT at 392, 7 F. Supp. 2d at 1002).

Responding to Commerce’s argument that Commerce’s “policy [i]s

to evaluate inputs sourced from market-economy suppliers only when

those inputs are actually purchased by the NME [producer], and not

when purchased by NME trading companies,” Luoyang’s Mem. at 19,

Luoyang asserts that: (1) 19 C.F.R. § 351.408(c)(1) (1998) does not

“limit the use of NME import prices from market economy countries

to those paid by the producer,” Luoyang’s Reply at 4; (2) both

Olympia 1999, 23 CIT at 83, 36 F. Supp. 2d at 417, and Olympia

1998, 22 CIT at 390, 7 F. Supp. 2d at 1001, require Commerce,

pursuant to 19 U.S.C. § 1677b(c)(1), to review PRC trading company

import prices and to determine whether that data constitutes the

best available information for the FOP analysis, see Luoyang’s Mem.

at 20; (3) “Commerce used trading company prices to value factors

of production” in the 10th Annual Review, 63 Fed. Reg. at 63,854,

5
Luoyang further maintains that “[u]se of the PRC trading
company data would lead to the most accurate, fair and predictable
dumping margin calculations because this data shows what Luoyang’s
costs or prices would be if determined by market forces.” Luoyang
Mem. at 24 (citing Olympia 1998, 22 CIT at 392, 7 F. Supp. 2d at
1002).
Consol. Court No. 99-12-00743 Page 19

Luoyang’s Reply at 4; (4) although the language in “the commentary

accompanying the promulgation of [19 C.F.R. § 351.408(c)(1)] noted

that the NME buyer should be the ‘producer,’” id., “Commerce’s use

of the phrase ‘normally’” means that Commerce did not choose to

limit its evaluation of inputs sourced from market-economy

suppliers solely to those inputs actually purchased by an NME

producer, id. at 5;6 and (5) 19 U.S.C. §§ 1677b(c)(1) and (c)(4),

the legislative history of these provisions and Lasko, 43 F.3d

1442, do not prohibit the use of trading company import prices to

value steel bar used in the production of TRB cups and cones.

See Luoyang’s Reply at 5-7. Luoyang, therefore, argues that a

remand is necessary so that Commerce, by applying the three-pronged

test approved in Olympia 1999, 23 CIT 80, 36 F. Supp. 2d 414, would

review and assess the reliability of the PRC trading company import

6
In its reply brief, Luoyang cites to the commentary
accompanying the promulgation of 19 C.F.R. § 351.408(c)(1). See
Luoyang’s Reply at 4 n.1 (citing Final Rule on Antidumping Duties;
Countervailing Duties (“Final Rule”), 62 Fed. Reg. 27,296 (May 19,
1997). The Final Rule provides in pertinent part:

[Commerce] normally will use publicly available
information to value factors. However, where a factor is
purchased from a market economy supplier and paid for in
a market economy currency, [Commerce] normally will use
the price paid to the market economy supplier. In those
instances where a portion of the factor is purchased from
a market economy supplier and the remainder from a
nonmarket economy supplier, [Commerce] normally will
value the factor using the price paid to the market
economy supplier.

62 Fed. Reg. at 27,413; 19 C.F.R. § 351.408(c)(1).
Consol. Court No. 99-12-00743 Page 20

prices as a surrogate to value all the bearing quality steel bar

used by Luoyang to manufacture TRB cups and cones and, if Commerce

“finds that the data is not ‘aberrational’ and . . . me[ets] the

requirements of the Olympia [1999] reliability test,” to use the

PRC trading company data to value all of the subject merchandise at

issue. Luoyang’s Mem. at 31. In the alternative, Luoyang asserts

that the PRC trading company data should be used as a surrogate to

value “the steel Luoyang purchased through the trading company and

actually used in the manufacture of those subject cups and cones.”

Id.

Next, Luoyang argues that Commerce erred in selecting export

data from Japan to India under HTS category 7228.30.900 to value

the subject merchandise at issue because that data is not an

appropriate surrogate. See id. at 27-29; accord Luoyang’s Reply at

8-12. In particular, Luoyang maintains that: (1) “the surrogate

values based on . . . [export data from Japan] to India represent

values for steel in category 7228.30.900 which could include the

type of steel used to produce the cups and cones, but which in fact

also may not include the type of steel used,” Luoyang’s Mem. at 27

(emphasis in original) (citing Final Results, 64 Fed. Reg. at

61,840); and (2) the export data from Japan to India fell outside

the United States benchmark range of $642 per MT to $834 per MT.
Consol. Court No. 99-12-00743 Page 21

See Luoyang’s Reply at 8-9.7 Responding to Commerce’s statement

that “Commerce’s regulations give preference to the use of one

surrogate country” to value all factors of production, Luoyang

argues that there is no such restriction.8 Id. at 9; see also

Luoyang’s Reply at 10-11 (citing 10th Annual Review, 63 Fed. Reg.

at 63,846; Final Results of Antidumping Administrative Review of

Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,

7
In its reply brief, Luoyang points out that “for only three
months did the monthly Japanese export prices to India fall within
the [United States benchmark] range.” Luoyang’s Reply at 9 (citing
id., Pub. Doc. 141 at Att. 1). “For the other nine (9) months the
prices were either below (Apr-98 at $561 [per MT]) or above (the
other 8 months).” Luoyang’s Reply at 9. Additionally, Luoyang
asserts that

[t]he range of values for [export data from Japan] to
India in HTS category 7228.30.900 was $561 per metric ton
to $1,414 per metric ton and the average value was $871
per metric ton. . . . The average value of $871 per
metric ton is not between [the United States benchmark
range of] $642 per metric ton and $834 per metric ton.

Id. at 8-9 (emphasis in original) (citing Def.’s Mem. Opp’n Luoyang
at 9).
8
The Court shall not entertain Commerce’s statement since the
Court is not aware of any particular preference which trumps the
general requirement for precision that underlines the antidumping
law. See Timken 2001, 25 CIT at __, 166 F. Supp. 2d at 621
(stating that “[t]he statute permits Commerce to draw surrogate
value information from more than one market economy country,”
citing 19 U.S.C. § 1677b(c)(1); and quoting Chemical Prods. Corp.
v. United States, 10 CIT 700, 706, 650 F. Supp. 178, 182
(1986)(which provides that “‘[t]he regulation [relied upon by
Commerce] is silent concerning whether Commerce may use data from
a country other than its designated surrogate when Commerce finds
that a comparison of one element of foreign market value in the
surrogate would yield an unrealistic result.’”)
Consol. Court No. 99-12-00743 Page 22

From the People’s Republic of China, 62 Fed. Reg. 61,276, 61,282

(Nov. 17, 1997); and Timken Co. v. United States, 82 F. Supp. 2d

1371 (CIT 1999) [sic].9) Luoyang, therefore, asserts that if PRC

trading company import prices are not used as a surrogate, Commerce

should use export data from Japan to Indonesia over export data

from Japan to India as a surrogate to value the subject merchandise

at issue. See Luoyang’s Mem. at 32. Alternatively, Luoyang

contends that if the Court sustains Commerce’s use of export data

from Japan to India as a surrogate to value the subject merchandise

at issue, the values for January 1998 and March 1998 should be

excluded because they are aberrational. See id.

2. Commerce’s Contentions

Commerce responds that its decision to use export data from

Japan to India to value bearing quality steel bar used by Luoyang

to manufacture TRB cups and cones is supported by substantial

evidence and otherwise in accordance with law. See Def.’s Mem.

Opp’n Luoyang at 15-28. Specifically, Commerce maintains that its

selection of the export data from Japan to India as the “best

available” surrogate value should be sustained because that data

represents “‘a category which would include the type of bearing

9
The Court assumes that the correct citation is Timken Co.
v. United States (“Timken 1999”), 23 CIT 509, 59 F. Supp. 2d 1371
(1999).
Consol. Court No. 99-12-00743 Page 23

quality steel bar [used in the production of the subject

merchandise]’; and . . . ‘these Japanese export prices to India

fall within the range of the values in the [United States

benchmark].’” Def.’s Mem. Opp’n Luoyang at 18 (quoting Final

Results, 64 Fed. Reg. at 61,840). Responding to Luoyang’s argument

that “Commerce’s selection of [export data from Japan to India] is

erroneous because it ‘only theoretically includes bearing steel

prices,’” Commerce maintains that Luoyang’s argument is merely a

crafty restatement of “Commerce’s own statement” aiming to distort

the gist of Commerce’s conclusion.10 Def.’s Mem. Opp’n Luoyang at

18. With respect to Luoyang’s argument that the export data from

Japan to India is not a reliable surrogate, Commerce points out

that “‘[t]he court’s role is not to determine whether the

information chosen by Commerce is the ‘best’ actually available,

but whether the choice is supported by substantial evidence and is

in accordance with law.’” Id. at 19 (quoting Novachem, Inc. v.

United States, 16 CIT 782, 786, 797 F. Supp. 1033, 1037 (1992)).11

10
The Court agrees with Commerce and is not persuaded by
Luoyang’s assertion since Luoyang fails to use evidence on the
record to illustrate that export data from Japan to India does not
include the type of steel used to produce the TRB cups and cones at
issue.
11
Commerce contends that Luoyang “does not challenge
Commerce’s conclusion that the average [export data from Japan to
India] falls within the [United States] benchmark range.” Def.’s
Mem. Opp’n Luoyang at 19. Moreover, Commerce asserts that “by
suggesting the adoption of its own benchmark methodology while
(continued...)
Consol. Court No. 99-12-00743 Page 24

Additionally, Commerce argues that its decision to reject the

PRC trading company data as an alternative for valuing the bearing

quality steel bar used in the production of the subject merchandise

at issue was in accordance with law. See Def.’s Mem. Opp’n Luoyang

at 20-28. Relying on Lasko, 43 F.3d 1442, and 19 C.F.R. §

351.408(c)(1), Commerce asserts that the transaction involving the

PRC trading company’s purchase of the steel bar at issue from a

market-economy country does not “qualif[y] as a market economy

purchase.” Id. at 22. In particular, Commerce maintains that: (1)

“the commentary accompanying the promulgation of [19 C.F.R. §

351.408(c)(1)] makes clear that Commerce intended to use a market

economy price to value a factor of production only when the PRC

producer itself made the purchase,” id. (citing Final Rule, 62 Fed.

11
(...continued)
failing to find error with the methodology actually used by
Commerce, Luoyang is merely challenging the correctness of
Commerce’s result.” Id. at 20.

The Court disagrees with Commerce. Although Luoyang initially
stated in its brief that “the average figure [that is, the average
value of export data from Japan to India] is within the range of
the [United States] benchmark range,” Luoyang’s Mem. at 28, in its
reply brief Luoyang argues that

[t]he range of values for [export data from Japan] to
India in HTS category 7228.30.900 was $561 per metric ton
to $1,414 per metric ton and the average value was $871
per metric ton. . . . The average value of $871 per
metric ton is not between [the United States benchmark
range of] $642 per metric ton and $834 per metric ton.

Luoyang’s Reply at 8-9 (emphasis in original) (citing Def.’s Mem.
Opp’n Luoyang at 9).
Consol. Court No. 99-12-00743 Page 25

Reg. at 27,366); and (2) “the use of the price paid by Luoyang to

the trading company in question would be contrary to congressional

intent because that [NME] transaction is not reliable.” Def.’s

Mem. Opp’n Luoyang at 24 (citing S. Rep. No. 93-1298 (1974),

reprinted in 1974 U.S.C.C.A.N. 7186, 7311).

Contrary to Luoyang’s argument that both Olympia 1999, 23 CIT

at 83, 36 F. Supp. 2d at 417, and Olympia 1998, 22 CIT 387, 7 F.

Supp. 2d 997, require Commerce to review PRC trading company import

prices and to determine whether that data constitutes the best

available information for the FOP analysis pursuant to 19 U.S.C. §

1677b(c)(1), Commerce maintains that it disagrees with those

decisions and that Lasko, 43 F.3d at 1446, “‘merely recognized

that, where the actual cost to the producer was a market economy

price (and paid in a market economy currency), the actual cost to

the producer was better information than a surrogate value.’”

Def.’s Mem. Opp’n Luoyang at 25 (quoting Final Results, 64 Fed.

Reg. at 61,845, emphasis in original). Commerce further maintains

that it properly rejected PRC trading company import prices from

its FOP analysis because “[t]his ‘actual cost’ does not exist in

the trading company situation because the price paid by the trading

company to the market economy supplier does not reflect the price

paid by the PRC producer to the trading company.” Def.’s Mem.

Opp’n Luoyang at 25.
Consol. Court No. 99-12-00743 Page 26

Commerce concedes that during its prior determination (that

is, 10th Annual Review, 63 Fed. Reg. at 63,854), it adhered to

Olympia 1999, 23 CIT at 83, 36 F. Supp. 2d at 417, and Olympia

1998, 22 CIT 387, 7 F. Supp. 2d 997, by reviewing PRC trading

company import prices and determining whether that data constituted

the best available information for purposes of the FOP analysis,

see id. at 27. However, Commerce maintains that

[h]aving reconsidered the meaning of Lasko, [43 F.3d
1442,] and the statute’s NME provisions, Commerce now
views Lasko, [43 F.3d 1442] as limited to the situation
involving the actual cost to the producer (not the price
paid by the trading company). Commerce further views the
statute itself as expressing a preference for the use of
values from a comparable market economy that is a
significant producer of comparable merchandise.
th
Moreover, in [10 Annual Review, 63 Fed. Reg. 63,842],
Commerce conducted its review applying its prior
regulations. . . . The current regulations do not
permit the result advocated by Luoyang.

Id. at 27-28.

3. Timken’s Contentions

Timken generally agrees with Commerce and maintains that

Commerce’s decision to use export data from Japan to India to value

the bearing quality steel bar used by Luoyang in the production of

TRB cups and cones over PRC trading company import prices was

supported by substantial evidence and was in accordance with law.

See Timken’s Resp. Opp’n Pl.’s Mot. J. Agency R. (“Timken’s Resp.”)

at 8-33. In particular, Timken argues that by selecting export
Consol. Court No. 99-12-00743 Page 27

data from Japan to India to value the subject merchandise at issue,

Commerce “followed the statutory scheme [under 19 U.S.C. §

1677b(c)(4) and 19 C.F.R. § 351.408(c)(1)], since [Commerce]

clearly used, ‘to the extent possible,’ the ‘best available

information’ as judged by the surrogate selection.”12 Timken’s

Resp. at 9. Moreover, Timken asserts that the Court should sustain

Commerce’s selection of export data from Japan to India as the

“best available information” to value the subject merchandise at

issue because: (1) unlike export data from Japan to India which

meets the statutory preference of 19 U.S.C. § 1677b(c)(4) since it

constitutes a “surrogate value[] from a comparable market economy

that is a significant producer of comparable merchandise[,] . . .

there is no statutory preference, mandatory or otherwise, for the

use of PRC trading company import prices,” id. at 10; (2) export

12
In its response brief Timken points out that

[a]pplying . . . § 1677b(c)(4)[’s preference] in this
case, [Commerce] found that the use of values from its
primary-surrogate-country India was possible. [Commerce]
was, therefore, not required to assess the pros and cons
of using PRC trading company import prices.

Timken’s Resp. at 21; see also id. at 28-29.

Moreover, contrary to Luoyang’s argument that Commerce should
have used export data from Japan to Indonesia over export data from
Japan to India, Timken contends that export data from Japan to
India is the “best available information” to value the subject
merchandise at issue because: (1) “Indonesia has only two bearings
producers and neither produces [TRBs]” whereas “India’s bearing
industry has at least 17 producers and 7 producers of [TRBs].” Id.
at 30.
Consol. Court No. 99-12-00743 Page 28

data from Japan to India is “consistent with the objectives of §

1677b(c)(4) which favor the use of publicly available sources of

information to value factors of production,” id. at 11, whereas

“Luoyang’s PRC trading company import prices are not broad,

publicly-available information from a comparably reliable,

verifiable, and reusable source,” id. at 12; (3) Luoyang has failed

to assert that it purchased the subject merchandise at issue from

the PRC trading company in a convertible currency, see id.; and (4)

Commerce’s selection of export data from Japan to India to value

the bearing quality steel bar used by Luoyang to manufacture TRB

cups and cones was consistent with “[t]he purpose of the

antidumping statute[s] [that is, 19 U.S.C. §§ 1677b(c)(1) and (4)]

. . . to calculate dumping margins as accurately as possible.” Id.

(citing Lasko, 43 F.3d at 1446).

Additionally, Timken maintains that Luoyang’s reliance on

Lasko, 43 F.3d 1442, Olympia 1999, 23 CIT 80, 36 F. Supp. 2d 414,

Olympia 1998, 22 CIT 387, 7 F. Supp. 2d 997, and Olympia Indus.,

Inc. v. United States (“Olympia 1997”), 21 CIT 364 (1997), is

misplaced. See Timken’s Resp. at 14-26. First, referring to

Lasko, 43 F.3d at 1446, and Olympia 1998, 22 CIT at 390-91, 7 F.

Supp. 2d at 1001, Timken asserts that the PRC trading company

import prices are not actual prices but are merely surrogate

values. See Timken’s Resp. at 14 n.5. Second, Timken argues that
Consol. Court No. 99-12-00743 Page 29
the CAFC in Lasko, 43 F.3d at 1446, addressed “‘whether or not . .

. [Commerce was] permit[ted] to determine the factors of production

using both surrogate country values and actual cost values,’”

id. at 14-15 (quoting Lasko, 43 F.3d at 1445), and did not address

the issue of the proper interpretation of 19 U.S.C. § 1677b(c)(4)

or the use of Chinese trading company purchases as surrogates. See

id. at 15. Third, Timken contends that the Olympia cases (that is,

Olympia 1999, 23 CIT 80, 36 F. Supp. 2d 414, Olympia 1998, 22 CIT

387, 7 F. Supp. 2d 997, and Olympia 1997, 21 CIT 364) were “decided

on [the] facts [of those cases] and did not address the proper

interpretation of 19 U.S.C. § 1677b(c)(4).” Id. at 15-20. Fourth,

Timken maintains that since the Court in Olympia 1999, 23 CIT 80,

36 F. Supp. 2d 414, took an “additional step of disapproving

[Commerce’s] interpretation of 19 U.S.C. § 1677b(c)(4)” by stating

that Commerce must test the reliability of the trading company

value in order to determine whether it comprises the best available

information for purposes of the FOP calculation, this additional

step was merely dicta and “this Court remains free to sustain”

Commerce. Id. at 19-20. Finally, Timken asserts that Commerce is

not required to apply the three-pronged test approved in Olympia

1999, 23 CIT 80, 36 F. Supp. 2d 414, to review and assess the

reliability of the PRC trading company import prices because: (1)

“[t]here is no three-part . . . test in the statute or regulations

compelling a specific methodology to be used in selecting surrogate

values,” id. at 23 (citing Lasko, 43 F.3d at 1446); and (2)
Consol. Court No. 99-12-00743 Page 30

Commerce, despite Commerce’s application of the three-pronged test

in the 10th Annual Review, 63 Fed. Reg. 63,842, “provided a

reasonable explanation . . . for rejecting PRC trading company

import prices.” Timken’s Resp. at 24.

In the alternative, Timken argues that, if the Court remands

to Commerce to review and assess the reliability of the PRC trading

company import prices, Commerce should consider whether there was:

(1) “a significant difference between the resale price and the PRC

trading company import prices and whether that difference was

sufficient to cover the trading company’s costs”; (2) “any

countertrade or other arrangements between the trading company and

its market-economy supplier”; (3) “any commissions or other

consideration paid by the purchaser or supplier to the trading

company, or lack thereof”; and (4) “any affiliation between the

trading company, the market-economy supplier and/or the Chinese

manufacturer.” Id. at 25. Moreover, Timken maintains that “[i]f

the Court requires use of Luoyang’s PRC trading company import

prices, those prices should not be extended to value other

purchases of steel.” Id. at 26.

Next, contrary to Luoyang’s argument that certain values of

export data from Japan to India should be excluded because they are

aberrational (that is, values for January 1998 and March 1998),

Timken asserts that: (1) “the mere fact that some months were high
Consol. Court No. 99-12-00743 Page 31

is not a basis for exclusion,” id. at 31; (2) “in any average, some

values exceed the norm, while other values are below, id. at 32;

and (3) “Luoyang cannot ‘pick and choose’ and conveniently

eliminate only high values.” Id.

C. Analysis

1. Commerce’s Changes of Policy or Methodology

Agency statements provide guidance to regulated industries.

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

implements one policy and decides to consider the merits of a

potentially inconsistent policy in the very near future,’”

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

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

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

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

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

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

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

administrative agency to administer a congressionally created . .

. program necessarily requires the formulation of policy . . . .’”

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

(1974)).
Consol. Court No. 99-12-00743 Page 32

An agency decision involving the meaning or reach of a statute

that reconciles conflicting policies “‘represents a reasonable

accommodation of conflicting policies that were committed to the

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

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

its legislative history that the accommodation is not one that

Congress would have sanctioned.’” Chevron, 467 U.S. at 845

(quoting United States v. Shimer, 367 U.S. 374, 382-83 (1961)).

Furthermore, an agency must be allowed to assess the wisdom of its

policy on a continuing basis. Under the Chevron regime, agency

discretion to reconsider policies is inalienable. See Chevron, 467

U.S. at 843. Any assumption that Congress intended to freeze an

administrative interpretation of a statute would be entirely

contrary to the concept of Chevron which assumes and approves the

ability of administrative agencies to change their interpretations.

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

(10th Cir. 1997), J.L. v. Social Sec. Admin., 971 F.2d 260, 265 (9th

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

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

interpretative policies “are given controlling weight unless they

are arbitrary, capricious, or manifestly contrary to the statute.”

Chevron, 467 U.S. at 844.
Consol. Court No. 99-12-00743 Page 33

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

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

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

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

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

“denotes . . . [the] general purpose . . . [of the statute]

considered as directed to the welfare or prosperity of the state,”

BLACK’S LAW DICTIONARY 1157 (6th ed. 1990), methodology refers only to

the “performing [of] several operations[] in the most convenient

order,” id. at 991; accord Avoyelles Sportsmen’s League, Inc. v.

Marsh, 715 F.2d 897 (5th Cir. 1983); Interstate Natural Gas Ass’n

of Am. v. Federal Energy Regulatory Comm’n, 716 F.2d 1 (D.C. Cir.

1983); Hooker Chems. & Plastics Corp. v. Train, 537 F.2d 620 (2d

Cir. 1976). Consequently, the courts are even less in the position

to question an agency action if the action at issue is a choice of

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

at 1043 (citing Professional Drivers Council v. Bureau of Motor

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

an agency decision to change its methodology, that is, to take an

act of statutory implementation while pursuing the same policy,

should be examined under the Chevron test and sustained if the new

methodology is reasonable. See, e.g., Koyo Seiko Co., v. United

States, 24 CIT ___, ___, 110 F. Supp. 2d 934, 942 (2000) (stating

that “‘the use of different methods [of] calculati[on] . . . does
Consol. Court No. 99-12-00743 Page 34

not [mean there is a] conflict with the statute,’”) (quoting

Torrington Co. v. United States, 44 F.3d 1572, 1578 (Fed. Cir.

1995)).

Therefore, Commerce’s refusal to review and use PRC trading

company import data and Commerce’s consequential use of export data

from Japan to India as a surrogate value for bearing quality steel

bar used by Luoyang to manufacture TRB cups and cones was a

justifiable change of methodology as long as such change in

position was reasonably supported by the record.

2. Commerce’s Determination at Bar

The CAFC has reasoned that “the purpose of the statutory

provisions [that is, 19 U.S.C. §§ 1677b(c)(1) and (4)] is to

determine antidumping margins ‘as accurately as possible.’”

Shakeproof Assembly Components, Div. of Illinois Tool Works, Inc.

v. United States, 268 F.3d 1376, 1382 (Fed. Cir. 2001) (quoting

Lasko, 43 F.3d at 1446); see also Olympia 1998, 22 CIT at 390, 7 F.

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

antidumping statute” and citing Rhone Poulenc, Inc. v United

States, 899 F.2d 1185, 1191 (Fed. Cir. 1990)). Additionally,

Commerce’s “task in [an NME] investigation is to calculate what .

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

costs were determined by market forces.” Tianjin, 16 CIT at 940,
Consol. Court No. 99-12-00743 Page 35

806 F. Supp. at 1018.

a. Commerce’s Refusal to Review and
Use PRC Trading Company Import Prices

The Court finds that Commerce’s refusal to review PRC trading

company import prices and to determine whether that data

constituted the best available information for purposes of the FOP

analysis was unreasonable. Specifically, the Court disagrees with

Commerce’s and Timken’s narrow reading of Lasko, 43 F.3d 1442, and

19 C.F.R. § 351.408(c)(1).13 The Court in Lasko Metal, 16 CIT at

1081, 810 F. Supp. at 317, reasoned that “[t]he cost for raw

materials from a market economy supplier, paid in convertible

currencies, provides Commerce with the closest approximation of the

cost of producing the goods in a market economy country.”

Additionally, the CAFC observed:

“[w]here [it] can [be] determine[d] that a [non-market
economy] producer’s input prices are market determined,
accuracy, fairness, and predictability are enhanced by
using those prices. Therefore, using surrogate values
when market-based values are available would, in fact, be
contrary to the intent of the law.”

Shakeproof, 268 F.3d at 1382 (emphasis in original) (quoting Lasko,

13
The Court also disagrees with Timken that Commerce was not
required to assess the PRC trading company data since Commerce,
applied 19 U.S.C. § 1677b(c)(4)’s preference by valuing the subject
merchandise using values from its primary surrogate (that is,
India). The Court finds that there is no requirement that Commerce
value FOPs pursuant to 19 U.S.C. § 1677b(c)(4) prior to resorting
to a PRC trading company’s import prices paid to a market-economy
supplier to value material costs for certain steel inputs.
Consol. Court No. 99-12-00743 Page 36

43 F.3d at 1446); accord Oscillating Fans, 56 Fed. Reg. at 55,275;

see also Olympia 1998, 22 CIT at 392, 7 F. Supp. 2d at 1002

(stating that the “same holds true here with respect to the trading

company data”); Timken Co. v. United States, 26 CIT __, __, 201 F.

Supp. 2d 1316, 1335 (2002)(finding that “Commerce’s decision to use

[a] PRC trading company’s import steel price as surrogate data for

[certain PRC producers] is reasonable, is in accordance with law

and is in accord with the purpose of the statutory provisions [that

is, §§ 1677b(c)(1) and (c)(4)] to determine antidumping margins as

accurately as possible”).

Next, observing that 19 U.S.C. § 1677b(c)(1) does not specify

what constitutes “best available information,” the Court concludes

that “‘[t]he statute[,] [therefore,] does not require Commerce to

follow any single approach in evaluating data.’” Timken 1999, 23

CIT at 515, 59 F. Supp. 2d at 1376 (quoting Olympia 1997, 21 CIT at

368, and citing Lasko, 43 F.3d at 1446); see also Shakeproof

Assembly Components, Div. of Illinois Tool Works, Inc. v. United

States, 23 CIT 479, 481, 59 F. Supp. 2d 1354, 1357 (1999), aff’d,

Shakeproof, 268 F.3d 1376 (stating that the “statute requires

Commerce to use the best available information, but does not define

that term” and quoting Olympia 1998, 22 CIT at 389, 7 F. Supp. 2d

at 1000, that “‘[t]he relevant statute does not clearly delineate

how Commerce should determine what constitutes’” the best available
Consol. Court No. 99-12-00743 Page 37

information). While the Court finds that Commerce is not required

to apply the three-pronged test approved in Olympia 1999, 23 CIT

80, 36 F. Supp. 2d 414, to review and assess the reliability of the

PRC trading company import prices, the Court remands this issue to

Commerce with instructions to examine whether or not the PRC

trading company import prices constitute the “best available

information” to value either all of the subject merchandise at

issue or a portion of the subject merchandise purchased by Luoyang

through the trading company and used by Luoyang in the manufacture

of TRB cups and cones and, if Commerce concludes that the PRC

trading company import prices present the “best available

information” for the purpose of such surrogate evaluation, to

recalculate Commerce’s determination not inconsistent with this

opinion.

b. Commerce’s Decision to Value Bearing
Quality Steel Bar by Using Export Data
from Japan to India

The Court disagrees with Commerce and Timken that Luoyang is

assailing not the reasoning but rather the correctness of

Commerce’s result, which is outside the Court’s standard of review.

See Writing Instrument Mfrs. Ass’n, Pencil Section v. United

States, 21 CIT 1185, 1195, 984 F. Supp. 629, 639 (1997). During

the review at issue, Commerce observed:

In comparing [export data from Japan to India] to the
Consol. Court No. 99-12-00743 Page 38

range of values contained in the [United States]
benchmark [that is, the value of steel imported into the
United States during the POR under HTS category
7228.30.20 which ranged from $642 per MT to $834 per MT],
[Commerce] found that these Japanese export prices to
India fall within the range of the values in the [United
States] category.

Final Results, 64 Fed. Reg. at 61,840.

Nevertheless, as Luoyang points out:

The range of values for [export data from Japan] to India
in HTS category 7228.30.900 was $561 per metric ton to
$1,414 per metric ton and the average value was $871 per
metric ton. . . . The average value of $871 per
metric ton is not between [the United States benchmark
range of] $642 per metric ton and $834 per metric ton.

Luoyang’s Reply at 8-9 (emphasis in original) (citing Def.’s Mem.

Opp’n Luoyang at 9).

However, the Court disagrees with Luoyang that the Court

should order that Commerce exclude the values for January 1998 and

March 1998 from the export data from Japan to India. Luoyang may

not usurp Commerce’s role as fact-finder and substitute Luoyang’s

analysis for the result reached by Commerce.

Next, with respect to Luoyang’s argument that Commerce should

have used export data from Japan to Indonesia over export data from

Japan to India as a surrogate to value the subject merchandise at

issue, the Court notes that Commerce admittedly failed to review

export data from Japan to Indonesia as a surrogate value. See

Final Results, 64 Fed. Reg. at 61,840 (Commerce “ha[s] not analyzed
Consol. Court No. 99-12-00743 Page 39

data from [Commerce’s] secondary surrogate, Indonesia, to find a

value for steel used to produce cups and cones”). The Court finds

that Commerce’s reasoning for refusing to review the export data

from Japan to Indonesia as a surrogate value was not sufficiently

explained. To the contrary, it was illogical for Commerce to

utilize export data from Japan to India and then to subsequently

fail to review analogously structured export data from Japan to

Indonesia.

Based on the foregoing, the Court remands this issue to

Commerce to examine if, and only if, Commerce finds that the PRC

trading company import prices do not constitute the “best available

information,” whether or not Indonesian data (that is, Indonesian

import statistics and export data from Japan to Indonesia)

constitute the “best available information” over export data from

Japan to India to value the bearing quality steel bar used in the

production of TRB cups and cones, and to explain, (if Commerce

finds that export data from Japan to India is the “best available

information,”) how the entire export data from Japan to India falls

within the range of values in the United States category benchmark

range.
Consol. Court No. 99-12-00743 Page 40

II. Commerce’s Inclusion of “Consumption of Traded Goods”
in Indian Bearings Producers’ Direct Input Costs

A. Background

In the Final Results, Commerce designated the line item

“consumption of traded goods” in certain Indian bearings producers’

1997-98 annual reports as material costs to be included in direct

input costs that were used as the denominator of the overhead,

SG&A, and profit rate calculations. See 64 Fed. Reg. at 61,844;

see also Def.’s Mem. Partial Opp’n Timken’s Mot. J. Agency R.

(“Def.’s Mem. Partial Opp’n Timken), App. Ex. 5 at 3-4.

Specifically, Commerce explained that

[Commerce] disagree[s] that [Commerce] should exclude
“Consumption of Traded Goods” from the direct input costs
calculated for the Indian bearings producers. Although
the CIT did instruct [Commerce] to exclude the purchases
of traded goods from the cost of manufacture with respect
to the 1994-95 administrative review of TRBs in Timken v.
U.S., [23 CIT 509, 59 F. Supp. 2d 1371], that ruling is
not yet final. Thus, [Commerce is] not compelled to
apply the court-directed methodology in these reviews.

[Commerce] further note[s] that [Commerce] excluded
“Consumption of Traded Goods” from [Commerce’s] direct
input costs calculation in the preliminary results of the
new shipper review. Again, because Timken v. U.S., [23
CIT 509, 59 F. Supp. 2d 1371] is not yet final,
[Commerce] ha[s] revised [Commerce’s] preliminary
calculations to include the traded goods amount in direct
input costs.

Final Results, 64 Fed. Reg. at 61,844.
Consol. Court No. 99-12-00743 Page 41

B. Contentions of the Parties

Timken asserts that the “consumption of traded goods” should

be excluded from the direct input costs denominator used in the

overhead, SG&A and profit rate calculations. See Mem. P&A Supp.

Timken’s Mot. J. Agency R. (“Timken’s Mem.”) at 2, 22-23. Relying

on Timken 1999, 23 CIT at 518-19, 59 F. Supp. 2d at 1378-79, Timken

maintains that this Court: (1) “rejected [Commerce’s] inclusion of

the line item for ‘traded goods’ in material costs used to

calculate overhead, SG&A and profit ratios in its review of the

1994-95 period,” id. at 22; and (2) “agreed that [Commerce] had

failed to demonstrate how these already manufactured goods

constitute a material cost incurred in manufacturing the subject

merchandise.” Id. (internal quotations omitted). Moreover,

contrary to Commerce’s argument that this Court’s decision in

Timken 1999, 23 CIT 509, 59 F. Supp. 2d 1371, is not yet final,

Timken points out that “this Court’s decision in Timken [1999], did

become final and was not appealed.” Id. (citing Timken Co. v.

United States, 2000 Ct. Intl. Trade LEXIS 12, *1, Slip. Op. 00-13

(Feb. 8, 2000)). Timken, therefore, argues that this case should

be remanded to Commerce with instructions that Commerce exclude

“consumption of traded goods from the cost of materials used in the

denominator of the overhead, SG&A, and profit ratios” and

recalculate the dumping margins accordingly. Timken’s Mem. at 23.
Consol. Court No. 99-12-00743 Page 42

Commerce agrees that a remand is necessary to exclude the

“consumption of traded goods” from Commerce’s overhead, SG&A and

profit rate calculations since “consumption of traded goods

utilized by Commerce in the Final Results, [64 Fed. Reg. at

61,844,] are similar in nature to the ‘purchases of traded goods’

reviewed by the Court in Timken [1999].” Def.’s Mem. Partial Opp’n

Timken at 21.

C. Analysis

In Timken 1999, 23 CIT 509, 59 F. Supp. 2d 1371, this Court

determined that “Commerce failed to demonstrate how these already

manufactured goods [that is, purchases of traded goods] constitute

a material cost incurred in manufacturing the subject merchandise.”

Id., 23 CIT at 519, 59 F. Supp. 2d at 1379.

Because Commerce’s inclusion of the “consumption of traded

goods” in Commerce’s overhead, SG&A and profit rate calculations,

and the parties’ arguments are practically identical to those

presented in Timken 1999, 23 CIT 509, 59 F. Supp. 2d 1371, the

Court adheres to its reasoning in Timken 1999, and remands this

issue with instructions that Commerce exclude “consumption of

traded goods” from Commerce’s overhead, SG&A and profit rate

calculations and to recalculate the dumping margins accordingly.
Consol. Court No. 99-12-00743 Page 43

III. Commerce’s Use of Wage Rates from Chapter 5
of the International Labor Office’s 1998
Yearbook of Labor Statistics to Value Labor

A. Background

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

351.408(c)(3) (1998), used a regression-based wage rate to value

labor costs. See Preliminary Results, 64 Fed. Reg. at 36,856.

Commerce explained that

[b]ecause of the variability of wage rates in countries
with similar levels of per capita Gross Domestic Product
(GDP), section 351.408(c)(3) of [Commerce’s] regulations
(19 CFR Part 351, April 1998) requires the use of a
regression-based wage rate. Therefore, to value the
labor input, [Commerce] used the PRC regression-based
wage rate published by Import Administration on its
website, which was last revised on May 1999. The source
of the wage rate data on the Import Administration’s
website is the 1998 Yearbook of Labour Statistics,
published by the International Labour Office (ILO) . . .
Chapter 5: Wages in Manufacturing.

Def.’s Mem. Partial Opp’n Timken, App. Ex. 3 at 4.

In the Final Results, Commerce valued the PRC labor costs by

utilizing the wage rates reported in Chapter 5 of the 1998 Yearbook

instead of the labor costs reported in Chapter 6A of the 1998

Yearbook as proposed by Timken.14 Commerce determined that

14
Commerce and Timken point out that the differences between
Chapter 5 and Chapter 6A of the 1998 Yearbook are:

Chapter 6A of the 1998 Yearbook of Labour Statistics [is]
a category of “labour costs” that includes the
compensation of employees as well as additional costs
borne by the employer such as vocational training,
(continued...)
Consol. Court No. 99-12-00743 Page 44

[Commerce’s] regulations at section 351.408(c)(3) state
that “[Commerce] will use regression-based wage rates
reflective of the observed relationship between wages and
national income in market economy countries.” Therefore,
to value the labor inputs[,] . . . [Commerce] applied the
PRC regression-based wage rate published by the Import
Administration on its website, which was last revised in
May 1999.

With respect to [Timken’s] argument, [Commerce]
disagree[s]. The [1998 Yearbook] states that the wage
rates, used to calculate the regression analysis are
comprehensive wage rates which also includes overtime,
bonuses, holiday pay, incentive pay, pay for piecework,
and cost-of-living allowances. See Magnesium from the
People’s Republic of China, Final Results of Antidumping
Duty New Shipper Administrative Review, 63 Fed. Reg.
3085, 3091 (Jan. 21, 1998). Thus, for purposes of these
final results, [Commerce] ha[s] not adjusted the
regression-based wage rate used in the preliminary
results.

Final Results, 64 Fed. Reg. at 61,842.

B. Contentions of the Parties

Timken contends that Commerce’s decision to value PRC labor

costs by using the wage rates in Chapter 5 of the 1998 Yearbook

rather than the labor costs in Chapter 6A of the 1998 Yearbook was

14
(...continued)
welfare services, the cost of workers’ housing, the cost
of educational facilities, grants to credit unions, the
cost of recruitment, and taxes. . . . [Whereas,] Chapter
5 of the 1998 Yearbook of Labour Statistics [is] a
category of “wage rates” that reflects cash payments
received from employers, including overtime, bonuses,
holiday pay, incentive pay, pay for piecework, and cost-
of-living allowances.

Def.’s Mem. Partial Opp’n Timken at 26 (citing Timken’s Mem. at
11).
Consol. Court No. 99-12-00743 Page 45

not supported by substantial evidence and was contrary to law. See

Timken’s Mem. at 23-25. In particular, Timken argues that: (1)

Commerce’s use of Chapter 5 wage rates was a departure from

Commerce’s consistent practice of “interpret[ing] [19 U.S.C. §§

1677b(c)(1) and (3)] . . . as calling for the use of fully-loaded

costs, including all the costs and benefits in addition to basic

wage, of employing labor,” Timken’s Mem. at 23 (citing 10Th Annual

Review, 63 Fed. Reg. at 63,848, and Final Results and Partial

Recission of Antidumping Duty Administrative Review of Maganese

Metal From the People’s Republic of China, 63 Fed. Reg. 12,440,

12,446 (March 13, 1998)); see also, Reply Br. Timken Co. (“Timken

Reply”) at 2-4; (2) “the record is devoid of evidence that Chapter

5 wage rates [of the 1998 Yearbook] are comprehensive,” Timken’s

Mem. at 24, because “[f]or example, the wage rates in Chapter 5 did

not include additional costs for employers’ social security

expenditures or welfare services . . . [and these] costs [are not]

captured anywhere else in [Commerce’s] calculation,” Timken’s Reply

at 6-7; and (3) “[a] broad reading of ‘wage rates’ in §

351.408(c)(3), which calls for use of fully-loaded labor costs when

available, would save the regulation from running afoul of the

statutory scheme.” Timken’s Reply at 9 (emphasis omitted).

Timken, therefore, asserts that a remand is necessary so that

Commerce can value PRC labor costs using Chapter 6A of the 1998

Yearbook or, in the alternative, “explain why [Commerce’s]
Consol. Court No. 99-12-00743 Page 46

departure from established practice was lawful in the face of the

statute and statutory scheme.” Timken’s Reply at 8; see

also Timken’s Mem. at 25. In the alternative, Timken argues that,

if the Court sustains Commerce’s use of Chapter 5 wage rates, the

Court should “require [Commerce] to account for all labor costs not

included in Chapter 5 wage rates elsewhere in [Commerce’s]

calculation.” Timken’s Reply at 9.

Additionally, Timken maintains that Commerce’s “labor cost

methodology should be the same for calculating constructed value

and factors of production.” Id. at 5; see also id. at 9 (stating

that “the statutory scheme calls for costs included in constructed

value and factors of production to be the same”).15 Responding to

Commerce’s argument that 19 U.S.C. § 1677b(c)(1), 19 U.S.C. §

1677b(c)(3), and 19 C.F.R. § 351.408(c)(3) do not require Commerce

to use comprehensive costs in valuing labor, Timken maintains that

this argument “must be rejected as a post hoc rationalization

15
The Court disagrees with Timken’s argument that Commerce’s
labor cost methodology should be the same for calculating
constructed value and factors of production. Unless Commerce
interprets the very same terms differently for the purpose of
interrelated statutes during the same review, Commerce could
utilize the interpretations that Commerce could reasonably derive
from the gists of the respective statutes. The Court can envision
a distinction between 19 U.S.C. § 1677b(a) and 19 U.S.C. §
1677b(c)(1). Moreover, with respect to Timken’s argument that
“Generally Accepted Accounting Principles [“GAAP”]. . . call for
the use of fully absorbed costs of producing the subject
merchandise,” Timken’s Reply at 4, the Court observes that GAAP
serves as a guide and Commerce is not statutorily bound by GAAP
when valuing PRC labor costs.
Consol. Court No. 99-12-00743 Page 47

because [Commerce] did not take this position” in Final Results, 64

Fed. Reg. at 61,842.16 Id. at 7.

In response, Commerce asserts that its decision to use Chapter

5 wage rates to value PRC labor costs is supported by substantial

evidence and is in accordance with law. See Def.’s Mem. Partial

Opp’n Timken at 21-26. Commerce argues that 19 U.S.C. §

1677b(c)(3) does not require Commerce “to utilize comprehensive

costs for purposes of valuing labor [but] [r]ather, the statute

merely directs [Commerce] to value the ‘hours of labor required’ as

part of the [FOP] utilized in producing the merchandise.” Id. at

25. Commerce further argues that Commerce complied with 19 C.F.R.

§ 351.408(c)(3) in using Chapter 5 wage rates rather than Chapter

6A labor costs to value PRC labor costs because: (1) 19 C.F.R. §

351.408(c)(3) “does not provide that Commerce must utilize

comprehensive labor costs [but] [i]nstead, that . . . ‘[Commerce

16
The Court disagrees with Timken that Commerce’s argument
amounts to a post hoc rationalization. Commerce’s decision to
employ an easier and, in Commerce’s view, a more accurate
methodology to value PRC labor costs, falls within Commerce’s power
and the Court will uphold such methodology as long as it is
reasonable. See Final Results, 64 Fed. Reg. at 61,842 (stating
that the wage rates of Chapter 5 “are comprehensive wage rates”).
Moreover, a legal argument entered by Commerce in its capacity as
a defendant to a civil action with respect to the level of
discretion offered by the relevant statute and regulation does not
amount to a post hoc rationalization since Commerce argues its
position within the parameters of common law litigation. If
Timken’s argument is taken to its logical conclusion, every
argument by every party with respect to the legal boundaries of any
applicable provision should be deemed a form of post hoc
rationalization.
Consol. Court No. 99-12-00743 Page 48

shall] use regression-based wage rates,’” id. (quoting 19 C.F.R. §

351.408(c))(3)) (emphasis omitted); (2) 19 C.F.R. § 351.408(c)(3)

is silent as to the particular source Commerce is to use to value

wages, see Def.’s Mem. Partial Opp’n Timken at 26; and (3)

Commerce’s preference to use Chapter 5 wage rates over Timken’s

preference to use Chapter 6A labor costs to value PRC labor costs

should be sustained because “the Court should defer to Commerce’s

interpretation of [the] regulation, not Timken’s interpretation.”

Id.

C. Analysis

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

decision to use the wage rates of Chapter 5 of the 1998 Yearbook

over the labor costs of Chapter 6A of the 1998 Yearbook to value

the PRC labor costs was a justifiable change of methodology as long

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

See supra Discussion Part I, C1 (Analysis).

The applicable statute provides that, when dealing with

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

determine the NV of the subject merchandise based on FOPs utilized

in producing the merchandise and that Commerce shall value the

reported FOPs based on the best available information regarding the

values of FOPs in an appropriate market economy. See 19 U.S.C. §
Consol. Court No. 99-12-00743 Page 49

1677b(c)(1). According to section 1677b(c)(3), the FOPs to be

utilized in valuing merchandise from an NME include, but are not

limited to: “(A) hours of labor required, (B) quantities of raw

materials employed, (C) amounts of energy and other utilities

consumed, and (D) representative capital cost, including

depreciation.” The statute further provides that while conducting

NME investigations, Commerce “shall utilize, to the extent

possible, the prices or costs of [FOPs] in one or more market

economy countries that are[:] (A) at a level of economic

development comparable to that of the nonmarket economy country,

and (B) significant producers of comparable merchandise.” See 19

U.S.C. § 1677b(c)(4).

Moreover, the relevant regulation provides:

[f]or labor, [Commerce] will use regression-based wage
rates reflective of the observed relationship between
wages and national income in market economy countries.
[Commerce] will calculate the wage rate to be applied in
nonmarket economy proceedings each year. The calculation
will be based on current data, and will be made available
to the public.

19 C.F.R. § 351.408(c)(3).

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

Chapter 5 of the 1998 Yearbook, which were “made available to the

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

PRC labor costs. Def.’s Mem. Partial Opp’n Timken at 24. “The

[1998 Yearbook] states that the wage rates [that is, the wage rates
Consol. Court No. 99-12-00743 Page 50

of Chapter 5], used to calculate the regression analysis are

comprehensive wage rates which also includes overtime, bonuses,

holiday pay, incentive pay, pay for piecework, and cost-of-living

allowances.” Final Results, 64 Fed. Reg. at 61,842. Based on the

foregoing, the Court finds that Commerce’s decision to value PRC

labor costs by using wage rates reported in Chapter 5 of the 1998

Yearbook over the labor costs reported in Chapter 6A of the 1998

Yearbook was reasonable, in accordance with law (that is, Sections

1677b(c)(1), (c)(3), (c)(4) and 19 C.F.R. § 351.408(c)(3)),

supported by substantial evidence, and in accord with the purpose

of the statutory scheme of determining antidumping margins as

accurately as possible.17 See Peer Bearing Co. v. United States,

25 CIT __, __, 182 F. Supp. 2d 1285, 1305 (2001) (pointing out that

17
Timken, in support of its argument that the Court should
“require [Commerce] to account for all labor costs not included in
Chapter 5 wage rates elsewhere in [Commerce’s] calculation [that
is, for example in the SG&A expenses,]” Timken’s Reply at 9,
provided the Court with a letter dated January 8, 2001 indicating
among other things that the 12th Administrative Review’s Issues and
Decision Memo for the 1998-99 Administrative Review of Tapered
Roller Bearings and Parts Thereof, Finished and Unfinished, from
the People’s Republic of China; Final Results “is . . . relevant to
Timken’s position in the instant judicial review” with regard to
labor costs. Timken’s January 8, 2001, letter (citing Ex. 2 at 16-
17). The Court is not persuaded by Timken’s reference to the 12th
Administrative Review and finds that while it is possible that the
labor costs not included in Chapter 5 could have been included
elsewhere in Commerce’s calculation, 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. 99-12-00743 Page 51

“‘[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 1999, 23 CIT at 516, 59 F. Supp. 2d at 1377)); see

also Chevron, 467 U.S. at 844-45, Skidmore v. Swift & Co., 323 U.S.

134, 139-40 (1944).

IV. Commerce’s Use of a PRC Producer’s Market Economy Import Data

A. Background

In the Preliminary Results, Commerce stated that a PRC

producer purchased part of its steel sheet directly from a market-

economy supplier and paid for such steel with market-economy

currency. See 64 Fed. Reg. at 36,856. In the Final Results,

Commerce used the PRC producer’s import data, rather than surrogate

data, to value the entire FOP (that is, both the directly imported

FOP and the NME sourced FOP). See 64 Fed. Reg. at 61,844.

Commerce reasoned that,

[i]n accordance with [Commerce’s] established practice
and [Commerce’s] regulations, [Commerce is] continuing to
use the actual prices of directly imported steel to value
steel inputs because these prices represent the actual
market-based prices incurred in producing the subject
merchandise and, as such, are the most accurate and
appropriate values for this particular factor for the
purpose of calculating NV. As noted by the respondents,
this practice has been affirmed in court decisions, such
as Lasko, [43 F.3d 1442] and is codified in [Commerce’s]
regulations at section 351.408(c)(1).

As noted in [Commerce’s] Final Rule, [62 Fed. Reg.
at 27,366,] while [Commerce] do[es] not view the Lasko
decision as permitting [Commerce] to use distorted
Consol. Court No. 99-12-00743 Page 52

prices, [Commerce] believe[s] that the Court’s emphasis
on ‘accuracy, fairness and predictability’ provides
[Commerce] with the ability to rely on prices paid by NME
producers to market-economy suppliers in lieu of using
surrogate values. . . . [Commerce] disagree[s] with
[Timken] that imports into China are unreliable
indicators of market values because China’s domestic
market is distorted by government intervention. While
China’s NME status indicates that domestic prices in
China are unreliable, there is no evidence that domestic
distortions impact the price at which market-economy
suppliers would offer products for sale to Chinese
producers. [Commerce] ha[s] no reason to assume that,
when dealing with Chinese importers, market-economy
suppliers ignore rules of supply, demand, and profit-
seeking behavior within a competitive world market.

Id. at 61,844-45.

Moreover, Commerce observed:

Even if [Commerce] were to accept [Timken’s] argument
that excess steel supply in China leads foreign
competitors to ‘dump’ steel on the Chinese market,
[Timken] has not presented evidence that there is an
excess supply of the particular type of steel used in the
production of TRBs nor evidence that such excess supply
somehow renders the steel prices being offered to certain
Chinese TRB producers by market-economy suppliers
unreliable. There are a variety of reasons for setting
a particular price higher or lower than a world benchmark
in an arm’s length transaction. In examining actual
sales between private parties, [Commerce] would have to
be convinced by evidence on the record that the
particular sale in question was in some way
unrepresentative of market-economy forces. For example,
[Commerce] would be willing to disregard a price paid by
an NME producer to a market-economy supplier if the
quantity of the input purchased in a given transaction
is, for example, less than the volume that would normally
be traded. Where the transaction is not in commercial
quantities, the price may not be truly representative of
a market price.

Id. at 61,845.
Consol. Court No. 99-12-00743 Page 53

B. Contentions of the Parties

1. Timken’s Contentions

Timken argues that Commerce’s determination that a PRC bearing

producer’s import price18 constituted the “best available

information” under 19 U.S.C. § 1677b(c)(1) to value steel sheet was

contrary to 19 U.S.C. § 1677b(c)(1) and unsupported by substantial

evidence because Commerce failed to determine whether the price

paid by the PRC bearing producer to the market-economy supplier was

“market-driven” or representative of market prices. See Timken’s

Mem. at 25-34. In particular, Timken maintains that Commerce

“should not assume that Chinese bearing producers are paying world

market prices for imported inputs,” id. at 27 (emphasis omitted),

because: (1) “[l]egislative history . . . warns that the ‘best’

information cannot be prices believed or suspected to be dumped or

subsidized,” Timken’s Reply at 15; (2) “NME markets are ‘riddled

with distortions’ . . . [and] State-controlled economies control

the entities that engage in foreign trade, as well as their sales

prices,” Timken’s Mem. at 29 (quoting Georgetown Steel Corp. v.

United States, 801 F.2d 1308, 1315 (Fed. Cir. 1986)); (3) “third

countries do not necessarily trade with China on a market-economy

basis,” Timken’s Mem. at 30; and (4) “China was the world’s biggest

18
The Court notes that the PRC bearing producer’s import
price was the same for all of the imported steel sheet from the
market-economy supplier. See Def.’s Mem. Partial Opp’n Timken,
Proprietary App. Ex. 1.
Consol. Court No. 99-12-00743 Page 54

steel producer with excess capacity during the period of review .

. . [and, therefore,] Chinese bearing producers . . . could have

easily sourced their material inputs from domestic suppliers.”

Id.; see also Timken’s Reply at 21 n.11.

Timken further argues that Commerce’s presumption that the PRC

bearing producer’s import price constituted the “best available

information” to value the steel sheet used in the production of

cages “was tantamount to [a] conclusive presumption . . . and was

. . . inconsistent” with 19 U.S.C. § 1677b(c)(1) and 19 C.F.R. §

351.408(c)(1).19 Timken’s Reply at 17. Relying on the CAFC’s

decision in Delverde, SRL v. United States, 202 F.3d 1360 (Fed.

Cir. 2000), Timken maintains that just as the CAFC “found that

[Commerce] erred when [Commerce] failed to consider the ‘facts or

circumstances of the sale,’ to produce evidence to show a subsidy,

or to make the specific findings required by [19 U.S.C. §

1677(5),]” id. at 14 (quoting Delverde, 202 F.3d at 1367), the

Court in this case should disapprove Commerce’s determination that

the PRC bearing producer’s import price constituted the “best

19
In its reply brief, Timken asserts that Commerce’s use of
the word “normally” in 19 C.F.R. § 351.408(c)(1) “must be
understood as contemplating additional circumstances,” that is,
circumstances in addition to those indicated by Commerce in Final
Rule, 62 Fed. Reg. at 27,366, “wherein import prices would be
rejected.” Timken’s Reply at 12 n.8. The Court does not agree
with Timken’s reading of 19 C.F.R. § 351.408(c)(1). Although the
term “normally” refers to a predominate scenario, it does not
preclude the same process of analysis in other situations.
Consol. Court No. 99-12-00743 Page 55

available information” to value the steel sheet at issue because,

“[a]nalogously to what [Commerce] did in Delverde, [Commerce in the

case at bar] simply presumed that the import price[] w[as] the

‘best’ information without testing the facts in any way, much less

producing evidence to support [Commerce’s] finding of fact.”

Timken’s Reply at 16.

Additionally, Timken contends that Commerce has the burden to

establish the accuracy of the dumping margins and cannot assign the

burden to prove the contrary to interested parties. See id. at 17-

18. In particular, Timken maintains that Commerce’s allocation of

the burden of proof on Timken to show that the import price

Commerce used was unrepresentative of market-economy forces was

unreasonable because: (1) “[w]hile it may be reasonable for

[Commerce] to allocate the burden of proof to the party with

knowledge or having access to facts, it is unreasonable to allocate

such burden to a party that has neither and can only raise

questions,” id. at 18; and (2) “Timken has repeatedly challenged

the use of import prices in [various] reviews . . . [and Commerce]

has rejected [Timken’s] contentions without articulating what is

required for Timken to show that such prices are unreliable.”20

20
Timken points out that Commerce, in rejecting Timken’s
challenges to the use of import prices in various reviews, “has
merely suggested that it would reject prices that were not arm’s
length or for merchandise in quantities that were ‘insignificant’
or not ‘meaningful.’” Timken’s Reply at 20. Timken maintains that
(continued...)
Consol. Court No. 99-12-00743 Page 56

Id. at 20. Timken, therefore, argues that Commerce “must itself

test the import prices to determine whether they are market

driven.” Timken’s Mem. at 32 (emphasis omitted). Timken contends

that, “as [Commerce] evaluates market-economy prices to determine

whether they are reliable in a market-economy case, [Commerce]

should evaluate those prices to determine whether they are reliable

in an NME case.”21 Timken’s Mem. at 33-34. Timken also contends

that Commerce “did not compare the [import] price[] to other world

market prices or consider the volume and frequency of imports from

a market economy” and “did not consider whether the import price[]

w[as] at arm’s length, reflected commercial quantities, or

reasonably reflected the actual cost of production in a comparable

market economy.” Id. at 32.

Alternatively, Timken argues that “Timken amply rebutted

[Commerce’s] presumption” that the import data constituted the

“best available information” to value the steel sheet at issue.

Timken’s Reply at 21 (emphasis omitted); see id. at 21-24.

20
(...continued)
“this is insufficient to address the host of other potential
situations wherein import prices would clearly not be the best
available information on the facts.” Id.
21
Timken asserts that although Lasko, 43 F.3d at 1446, allows
Commerce to use import prices from market-economy sources to value
FOPs in appropriate situations, “the Court [in Lasko] did not
address the issue [presented in this case] of whether [Commerce]
had an obligation to determine whether the prices . . . were, in
fact, market-driven or otherwise reliable.” Timken’s Reply at 11
n.7.
Consol. Court No. 99-12-00743 Page 57

Specifically, Timken points out that: (1) the import price used by

Commerce to value the subject merchandise at issue was based on a

sale that predated the POR by over a year “and more information was

needed to determine whether that steel was actually used to

manufacture the merchandise under review,” id. at 21 n.12

(proprietary version); (2) a “single purchase was not sufficient to

meet [the PRC producer’s] steel requirements, and that further

inquiry was necessary to determine whether non-price factors

affected the sale,” id.; (3) the import price used by Commerce to

value the steel sheet at issue was lower than various benchmarks,

see Timken’s Mem. at 31-32 (proprietary version) (citing Timken’s

Mem. at 17, Table 3); (4) “[t]here was no evidence supporting

[Commerce’s] belief that the price the Chinese bearing producers

would pay for imported steel would be unaffected by non-market

considerations,” Timken’s Reply at 22; and (5) Commerce “had no

information concerning how [the PRC producer] identified the source

of its steel, traced the steel to production during the [POR], or

produced from this steel [TRBs] exported to the United States. Nor

did [Commerce] know whether the import price represented an

ordinary transaction.” Id. at 22-23 (proprietary version).

Timken, therefore, requests that this Court remand the issue to

Commerce with instructions “to determine whether or not the import

price[] paid to [a] market-economy supplier[] to value steel sheet

w[as] market driven . . . .” Timken’s Reply at 23.
Consol. Court No. 99-12-00743 Page 58

Next, relying on Shakeproof Assembly, 23 CIT 479, 59 F. Supp.

2d 1354, Timken contends that Commerce’s decision to use a PRC

producer’s import data to value other purchases (that is, the NME

sourced FOP) without “explain[ing] why [the] import [data was] more

accurate (or ‘meaningful’) than surrogate-country values” was

unsupported by substantial evidence and was contrary to law.22

Timken’s Reply at 28; see also id. at 24-28; Timken’s Mem. at 34-

37. Timken further contends that “[e]xtending the actual import

[data] to the additional relevant steel served to magnify the

original error.” Timken’s Reply at 26. Moreover, responding to

Commerce’s arguments that 19 C.F.R. § 351.408(c)(1) “(1) . . .

permits [Commerce] to determine [NV] based on the company’s own

market-based experience; (2) . . . leads to more accurate dumping

margins . . . ; and (3) . . . is consistent with the purpose of the

statute [that is, 19 U.S.C. § 1677b(c)(1)] . . .,” Timken asserts

22
In its reply brief, Timken maintains that “Timken does not
argue, as [Commerce] suggests, that [Commerce] incorrectly valued
domestically-purchased steel using import prices from a market
source, but instead that [Commerce] incorrectly valued the steel
imported through a PRC trading company (to be distinguished from a
market-[economy] country trading company).” Timken’s Reply at 24
n.13 (proprietary version). The Court assumes that Timken’s
aforementioned statement means that Timken is contesting Commerce’s
decision to use a PRC producer’s import data to value the FOP
purchased from a PRC trading company. The record indicates that a
PRC producer purchased various portions of the steel sheet at issue
(1) directly from a market-economy supplier and paid for such steel
with market-economy currency; and (2) from a certain PRC company
that imported steel sheet from a certain country to China.
See Preliminary Results, 64 Fed. Reg. at 36,856; Final Results, 64
Fed. Reg. at 61,844; Def.’s Mem. Partial Opp’n Timken, Proprietary
App. Exs. 1, 2, 4, 6; Timken’s Mem. Prop. Docs. 7, 15, 31, 34.
Consol. Court No. 99-12-00743 Page 59

that these arguments must be rejected as post hoc rationalizations

because Commerce did not articulate them in Final Results, 64 Fed.

Reg. 61,844-45.23 Timken’s Reply at 25.

2. Commerce’s Contentions

Commerce responds that its determination to value certain

steel inputs by using the price paid by a PRC bearing producer to

a market-economy supplier was supported by substantial evidence,

was in accordance with law and sustained by the CAFC in Lasko, 43

F.3d 1442. See Def.’s Mem. Partial Opp’n Timken at 26-40. In

particular, Commerce points out that the CAFC in Lasko, 43 F.3d

1442, recognized that 19 U.S.C. § 1677b(c)(1) “requires Commerce to

value factors of production using the ‘best available information’

and that,” the CAFC found that “‘the best available information on

what the supplies used by the Chinese manufacturers would cost in

a market economy country was the price charged by those supplies on

the international market.’” Id. (quoting Lasko, 43 F.3d at 1446).

Additionally, with respect to Timken’s argument that Commerce

erred in its decision to use a PRC bearing producer’s import data

to value the steel sheet at issue by failing to determine whether

the prices paid by the PRC bearing producer to the market-economy

23
The Court disagrees with Timken that Commerce’s arguments
amount to a post hoc rationalization. See supra Discussion Part
III, B (Contentions of the Parties) n.16.
Consol. Court No. 99-12-00743 Page 60

supplier were “market-driven” or representative of market prices,

Commerce argues that Timken’s argument should be rejected because

Timken never presented this argument to Commerce in its case brief.

See Def.’s Mem. Partial Opp’n Timken at 28-31. Commerce alleges

that Timken, therefore, “failed to exhaust its administrative

remedies with respect to this issue.”24 Id. at 28 (emphasis

24
In its reply brief, Timken first points out that “in its
case brief, Timken argued”:

[C]oncerning the price of imported steel used for one
Chinese producer’s cages in the 97-98 review . . . , the
unusual circumstances attending the importation indicate
that the price was not representative and was indeed
“aberrational” and unreliable. All surrogate values,
including those based on market economy imports into
China, must be reliable and reasonable values to be used
for purposes of calculating normal value. . . .

. . . .

. . . Commerce does not have any reason to relax the
require[ment]s of the statute and practice.

To the contrary, Commerce should assume that any imports
from market-economy countries are not valued at
“reliable” market values, absent evidence that such
values are otherwise consistent with world-market prices.
The current approach turns this policy on its head – in
effect ignoring the market distortions that NME
methodology is designed to address.

. . . The statute does not compel Commerce to use factor
values that are unreliable or unrepresentative of market
economy prices.

Timken’s Reply at 29-30 (quoting Timken’s Reply Pub. Doc. 132,
emphasis omitted).

Second, Timken argues that “[d]uring the hearing, counsel for
Timken again explained that [Commerce] was required to test every
(continued...)
Consol. Court No. 99-12-00743 Page 61

omitted).

In the alternative, Commerce argues that, “[e]ven if Timken

has exhausted its administrative remedies, Commerce acted within

its discretion by not testing the prices in question to determine

whether they were market-driven.” Id. at 31. In particular,

Commerce maintains that: (1) “Commerce properly assumes that, where

a factor is purchased from a market economy supplier and purchased

with a market economy currency, the price paid for that imported

merchandise is not distorted [and could be] appropriately used for

purposes of valuing the factor in question [in a manner] . . .

consistent with the purpose of the antidumping law,” id. at 31-32

(citing Lasko, 43 F.3d at 1446); (2) “Commerce[’s] require[ment

that] the party challenging the use of the market economy price

[should] present evidence that the price is somehow inappropriate

for determining NV” is consistent with Commerce’s “‘broad

discretion in allocating investigative and enforcement resources,’”

Def.’s Mem. Partial Opp’n Timken at 32 (quoting Torrington Co., 68

F.3d at 1350); and (3) since Timken fails to present “specific

evidence of distortion” with regards to Commerce’s use of the PRC

producer’s import data at issue, “Commerce does not err when it

requires [Timken] to substantiate [its] views with record evidence

24
(...continued)
factor value and repeatedly requested that [Commerce] rethink its
regulation.” Timken’s Reply at 30 (emphasis omitted).
Consol. Court No. 99-12-00743 Page 62

as opposed to mere speculation.” Def.’s Mem. Partial Opp’n Timken

at 33 (citing LMI La-Metalli Industriale, S.p.A. v. United States,

912 F.2d 455, 460 (Fed. Cir. 1990)).

Finally, with respect to Commerce’s determination to value the

entire FOP (that is, both the imported FOP and the NME sourced FOP)

by using a PRC producer’s import data, Commerce asserts that

Commerce acted within the plain meaning of 19 C.F.R. §

351.408(c)(1). See Def.’s Mem. Partial Opp’n Timken at 34-35.

Commerce further asserts that 19 C.F.R. § 351.408(c)(1) is a

reasonable interpretation of 19 U.S.C. § 1677b(c)(1) because: (1)

“Commerce’s interpretation is consistent with the fact that dumping

is an activity that is ‘defined in terms of the marketplace,’”

id. at 36 (quoting Lasko, 43 F.3d at 1446); (2) “Commerce’s use of

imported prices to value all purchases of the same factor of

production results in a more accurate dumping margin because these

imported prices reflect[] a market-driven decision by the company

in question,” Def.’s Mem. Partial Opp’n Timken at 37; and (3)

“Commerce’s interpretation is consistent with the underlying

purposes governing the non-market economy provisions of the

statute.” Id.

Moreover, Commerce argues that Timken’s contention regarding

Commerce’s use of a PRC bearing producer’s import data to value the

entire FOP at issue “do not demonstrate error in Commerce’s
Consol. Court No. 99-12-00743 Page 63

determination.” Id. at 38 (emphasis omitted). Commerce points out

that Timken’s reliance on Shakeproof Assembly, 23 CIT 479, 59 F.

Supp. 2d 1354, is mistaken because that “decision[] reviewed a

Commerce determination that pre-dated the effective date of 19

C.F.R. § 351.408(c)(1).” Id. at 39. Commerce also points out that

although “Commerce did not explain [in the Final Results, 64 Fed.

Reg. at 61,844-45,] why the imports in question were meaningful[,]

. . . Timken itself must accept responsibility for the absence of

such an explanation because Timken never raised that issue with

Commerce.” Id. Commerce, therefore, contends that Timken failed

to exhaust its administrative remedies with respect to this issue.25

See id. at 39-40.

C. Analysis

The applicable statute provides that, when dealing with

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

determine the NV of the subject merchandise based on FOPs utilized

in producing the merchandise. See 19 U.S.C. § 1677b(c)(1). The

statute further provides that Commerce shall value the reported

FOPs based on the best available information regarding the values

of FOPs in an appropriate market economy. See id. While

25
Commerce asserts that “[i]ndeed, the proprietary figures
referenced by Timken appear to indicate that the amount of imported
steel was, in fact, meaningful.” Def.’s Mem. Partial Opp’n Timken
at 40 n.30 (citing Timken’s Reply Prop. Doc. 35).
Consol. Court No. 99-12-00743 Page 64

conducting NME investigations, Commerce “shall utilize, to the

extent possible, the prices or costs of [FOPs] in one or more

market economy countries that are[:] (A) at a level of economic

development comparable to that of the nonmarket economy country,

and (B) significant producers of comparable merchandise.” See 19

U.S.C. § 1677b(c)(4).

The CAFC, however, reasoned that “the purpose of the statutory

provisions [that is, §§ 1677b(c)(1) and (4)] is to determine

antidumping margins ‘as accurately as possible.’” Shakeproof, 268

F.3d at 1382 (quoting Lasko, 43 F.3d at 1446); see also Olympia

1998, 22 CIT at 390, 7 F. Supp. 2d at 1000-01 (noting that

“accuracy is the touchstone of the antidumping statute” and citing

Rhone Poulenc, 899 F.2d at 1191. Additionally, Commerce’s “task in

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

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

determined by market forces.” Tianjin, 16 CIT at 940, 806 F. Supp.

at 1018.

1. Commerce’s Decision to Value Certain Steel Inputs
by Using the Price Paid by a PRC Bearing Producer

As a preliminary matter, the Court addresses Commerce’s

argument that Timken failed to exhaust its administrative remedies.

The exhaustion doctrine requires a party to present its claims to

the relevant administrative agency for the agency’s consideration
Consol. Court No. 99-12-00743 Page 65

before raising these claims to the Court. See Unemployment

Compensation Comm’n of Alaska v. Aragon, 329 U.S. 143, 155, (1946)

(“A reviewing court usurps the agency’s function when it sets aside

the administrative determination upon a ground not theretofore

presented and deprives the [agency] of an opportunity to consider

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

action”).26

26
There is however, no absolute requirement of exhaustion in
the Court of International Trade in non-classification cases. See
Alhambra Foundry Co. v. United States, 12 CIT 343, 346-47, 685 F.
Supp. 1252, 1255-56 (1988). Section 2637(d) of Title 28 directs
that “the Court of International Trade shall, where appropriate,
require the exhaustion of administrative remedies.” By its use of
the phrase “where appropriate,” Congress vested discretion in the
Court to determine the circumstances under which it shall require
the exhaustion of administrative remedies. See Cemex, S.A. v.
United States, 133 F.3d 897, 905 (Fed. Cir. 1998). Therefore,
because “each exercise of judicial discretion [does] not requir[e]
litigants to exhaust administrative remedies,” the court is
authorized to determine proper exceptions to the doctrine of
exhaustion. Alhambra, 12 CIT at 347, 685 F. Supp. at 1256 (citing
Timken Co. v. United States, 10 CIT 86, 93, 630 F. Supp. 1327, 1334
(1986), rev’d in part on other grounds, Koyo Seiko Co. v. United
States, 20 F.3d 1156 (Fed. Cir. 1994)).

In the past, the court has exercised its discretion to obviate
exhaustion where: (1) requiring it would be futile, see Rhone
Poulenc, S.A. v. United States, 7 CIT 133, 135, 583 F. Supp. 607,
610 (1984) (“it appears that it would have been futile for
plaintiffs to argue that the agency should not apply its own
regulation”), or would be “inequitable and an insistence of a
useless formality” as in the case where “there is no relief which
plaintiff may be granted at the administrative level,” United
States Cane Sugar Refiners’ Ass’n v. Block, 3 CIT 196, 201, 544 F.
Supp. 883, 887 (1982); (2) a subsequent court decision has
interpreted existing law after the administrative determination at
issue was published, and the new decision might have materially
affected the agency’s actions, see Timken, 10 CIT at 93, 630 F.
(continued...)
Consol. Court No. 99-12-00743 Page 66

The purpose behind the doctrine of exhaustion is to prevent

courts from premature involvement in administrative proceedings,

and to protect agencies “from judicial interference until an

administrative decision has been formalized and its effects felt in

a concrete way by the challenging parties.” Abbott Labs. v.

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

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

1984) (pointing out that the “exhaustion doctrine . . . serv[es]

four primary purposes: [(1)] it ensures that persons do not flout

[legally] established administrative processes . . .; [(2)] it

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

judicial review by permitting factual development [of issues

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

avoiding [repetitious] administrative and judicial factfinding and

by” resolving sole claims without judicial intervention).

While a plaintiff cannot circumvent the requirements of the

doctrine of exhaustion by merely mentioning a broad issue without

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

26
(...continued)
Supp. at 1334; (3) the question is one of law and does not require
further factual development and, therefore, the court does not
invade the province of the agency by considering the question, see
id.; R.R. Yardmasters of Am. v. Harris, 721 F.2d 1332, 1337-39
(D.C. Cir. 1983); and (4) plaintiffs had no reason to suspect that
the agency would refuse to adhere to clearly applicable precedent.
See Philipp Bros., Inc. v. United States, 10 CIT 76, 80, 630 F.
Supp. 1317, 1321 (1986).
Consol. Court No. 99-12-00743 Page 67

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

reasonable clarity and avails the agency with an opportunity to

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

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

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

invoke the exhaustion doctrine and shall not result in forfeiture

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

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

administrative decision not to address the issue cannot be

dispositive of the question whether or not the issue was properly

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

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

In the case at bar, Timken sufficiently provided Commerce with

an opportunity to address the issue of Commerce’s failure to

determine whether the price paid by the PRC bearing producer to the

market-economy supplier was “market-driven” or representative of

market prices when Timken in its case brief argued inter alia that:

(1) “‘the unusual circumstances attending the importation indicate

that the price was not representative and was indeed

‘abberrational’ and unreliable,’” Timken’s Reply at 29 (quoting

Timken’s Reply Pub. Doc. 132, emphasis omitted); (2) “‘Commerce

should assume that any imports from market-economy countries are

not valued at ‘reliable’ market values, absent evidence that such

values are otherwise consistent with world-market prices,’” id.;
Consol. Court No. 99-12-00743 Page 68

(3) “‘[Commerce’s] current approach . . . in effect ignor[es] the

market distortions that NME methodology is designed to address,’”

id. at 29-30 (quoting Timken’s Reply Pub. Doc. 132); and (4)

“‘[t]he statue does not compel Commerce to use factor values that

are unreliable or unrepresentative of market economy prices.’”

Id. at 30 (quoting Timken’s Reply Pub. Doc. 132, emphasis omitted).

Moreover, at the administrative level, counsel for Timken

“explained that [Commerce] was required to test every factor value

and repeatedly requested that [Commerce] rethink its regulation.”

Timken’s Reply at 30 (emphasis omitted).

The Court, therefore, concludes that Timken properly exhausted

its administrative remedies and has the right to raise this issue

to the Court.

The Court disagrees with Timken’s argument that since Commerce

did not use the mode of examination offered by Timken on the issue,

that is, whether the price paid by a PRC bearing manufacturer to a

market-economy supplier was market-driven or representative of

market-prices, Commerce’s determination to value certain steel

inputs by using the price paid by the PRC bearing producer was

contrary to 19 U.S.C. § 1677b(c)(1) and unsupported by substantial

evidence.

First, the Court is not persuaded by Timken’s reliance on the

CAFC’s decision in Delverde, 202 F.3d 1360, for the proposition
Consol. Court No. 99-12-00743 Page 69

that this Court should disapprove Commerce’s determination that the

PRC bearing producer’s import price constituted the “best available

information” to value the steel sheet at issue because,

“[a]nalogously to what [Commerce] did in Delverde, [Commerce in the

case at bar] simply presumed that the import price[] w[as] the

‘best’ information without testing the facts in any way, much less

producing evidence to support [Commerce’s] finding of fact.”

Timken’s Reply at 16. As the Court in Lasko Metal, 16 CIT at 1081,

810 F. Supp. at 317, stated: “[T]he cost for raw materials from a

market economy supplier, paid in convertible currencies, provides

Commerce with the closest approximation of the cost of producing

the goods in a market economy country.” 16 CIT at 1081, 810 F.

Supp. at 317 (emphasis supplied).

“[W]here we can determine that a [non-market economy]
producer’s input prices are market determined, accuracy,
fairness, and predictability are enhanced by using those
prices. Therefore, using surrogate values when market-
based values are available would, in fact, be contrary to
the intent of the law.”

Shakeproof, 268 F.3d at 1382 (emphasis in original) (quoting Lasko,

43 F.3d at 1446); accord Oscillating Fans, 56 Fed. Reg. at 55,275.

Therefore, the cost for raw materials from a market-economy

supplier, paid in convertible currency, constitutes an alternative

market-driven price for the purpose of valuation.

In the case at bar, Commerce determined that the import price

paid by a PRC bearing producer in market-economy currency to a
Consol. Court No. 99-12-00743 Page 70

market-economy supplier represented the “best available

information” to value the steel sheet at issue. Commerce reasoned:

In accordance with [Commerce’s] established practice and
[Commerce’s] regulations, [Commerce is] continuing to use
the actual prices of directly imported steel to value
steel inputs because these prices represent the actual
market-based prices incurred in producing the subject
merchandise and, as such, are the most accurate and
appropriate values for this particular factor for the
purpose of calculating NV. As noted by the respondents,
this practice has been affirmed in court decisions, such
as Lasko, [43 F.3d 1442] and is codified in [Commerce’s]
regulations at section 351.408(c)(1).

Final Results, 64 Fed. Reg. at 61,844-45.

The Court finds that Commerce’s determination to value certain

steel inputs by using the price paid by a PRC bearing producer to

a market-economy supplier is reasonable and is in accordance with

19 U.S.C. § 1677b(c)(1) and 19 C.F.R. § 351.408(c)(1). See Peer

Bearing, 25 CIT at __, 182 F. Supp. 2d at 1305 (“‘In the absence of

a statutory mandate to the contrary, Commerce’s actions must be

upheld as long as they are reasonable’” (quoting Timken 1999, 23

CIT at 516, 59 F. Supp. 2d at 1377)); see also Chevron, 467 U.S. at

844-45, and Skidmore, 323 U.S. at 139-40.

Second, the Court disagrees with Timken’s argument that

Commerce unreasonably allocated the burden of proof to Timken to

show that the import data Commerce used to value certain steel

inputs was unrepresentative of market-economy forces. As Commerce

correctly notes, “Commerce does not err when it requires parties to
Consol. Court No. 99-12-00743 Page 71

substantiate their views with record evidence as opposed to mere

speculation.” Def.’s Mem. Partial Opp’n Timken at 33 (citation

omitted).

During the POR, Commerce stated:

[Commerce] disagree[s] with [Timken] that imports into
China are unreliable indicators of market values because
China’s domestic market is distorted by government
intervention. While China’s NME status indicates that
domestic prices in China are unreliable, there is no
evidence that domestic distortions impact the price at
which market-economy suppliers would offer products for
sale to Chinese producers. [Commerce] ha[s] no reason to
assume that, when dealing with Chinese importers, market-
economy suppliers ignore rules of supply, demand, and
profit-seeking behavior within a competitive world
market.

Final Results, 64 Fed. Reg. at 61,845.

Commerce observed:

Even if [Commerce] were to accept [Timken’s] argument
that excess steel supply in China leads foreign
competitors to “dump” steel on the Chinese market,
[Timken] has not presented evidence that there is an
excess supply of the particular type of steel used in the
production of TRBs nor evidence that such excess supply
somehow renders the steel prices being offered to certain
Chinese TRB producers by market-economy suppliers
unreliable. There are a variety of reasons for setting
a particular price higher or lower than a world benchmark
in an arm’s length transaction. In examining actual
sales between private parties, [Commerce] would have to
be convinced by evidence on the record that the
particular sale in question was in some way
unrepresentative of market-economy forces. For example,
[Commerce] would be willing to disregard a price paid by
an NME producer to a market-economy supplier if the
quantity of the input purchased in a given transaction
is, for example, less than the volume that would normally
be traded. Where the transaction is not in commercial
quantities, the price may not be truly representative of
Consol. Court No. 99-12-00743 Page 72

a market price.

Id.

Moreover, with respect to Timken’s generalization that

“Chinese bearing producers are [not] paying world market prices for

imported inputs,” Timken’s Mem. at 27 (emphasis omitted), the Court

finds that Timken’s arguments amount to mere speculation.

Similarly, with regards to Timken’s contention that Timken “amply

rebutted [Commerce’s] presumption” that the import data constituted

the “best available information” to value the steel sheet at issue,

Timken’s Reply at 21, the Court is unconvinced. The Court holds

that Commerce did not unreasonably allocate the burden of proof to

Timken to show that the import data Commerce used to value certain

steel inputs was unrepresentative of market-economy forces.

Finally, the Court disagrees with Timken’s arguments that: (1)

“as [Commerce] evaluates market-economy prices to determine whether

they are reliable in a market-economy case, [Commerce] should [use

the same mode to] evaluate those prices to determine whether they

are reliable in [an] NME case,”27 Timken’s Mem. at 33-34; and (2)

27
Market-economy cases and non-market economy cases are
distinct. See, e.g., Shakeproof, 268 F.3d at 1379 n.1. (“The [NV]
of goods in ‘market economy’ cases is generally the price at which
the foreign product is first sold in the exporting country. . . .
[T]he normal value of goods in [NME] may be instead determined by
looking at the ‘factors of production’ used to manufacture the
goods,” (citations omitted)); see also Lasko, 43 F.3d at 1445
(“[I]f [Commerce] cannot determine [NV] pursuant to the general
(continued...)
Consol. Court No. 99-12-00743 Page 73

Commerce was obligated to examine the volume and frequency of

Luoyang’s market-economy purchases. See Timken Co., 26 CIT at __,

201 F. Supp. 2d at 1337 (citing Final Results of Antidumping Duty

Administrative Review of Certain Helical Spring Lock Washers From

the People’s Republic of China, 62 Fed. Reg. 61,794, 61,796 (Nov.

19, 1997), and Final Rule, 62 Fed. Reg. at 27,366, and stating that

“[a]s Commerce correctly notes, . . . it is [Commerce’s] practice

to consider the volume of market-economy purchases for purposes of

determining whether to value domestically-purchased inputs based

upon the value of imports from a market-economy country”).

Accordingly, the Court affirms Commerce’s decision to value

certain steel inputs by using the price paid by a PRC producer to

a market-economy supplier.28

27
(...continued)
provisions of [19 U.S.C.] § 1677b(a), then [Commerce] must use the
[FOP] methodology to estimate [NV] for the merchandise in question”
(emphasis in original)).
28
Timken provided the Court with a letter dated January 8,
2001, indicating, among other things, that the 12th Administrative
Review’s Issues and Decision Memo for the 1998-99 Administrative
Review of Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, from the People’s Republic of China; Final Results and
the Allegation of Unfair Steel Prices memorandum, “suggest[s] . .
. that [Commerce] ha[s] taken a new position respecting the use of
actual market-prices in calculating Chinese values.” Timken’s
January 8, 2001, letter (citing Exs. 2 at 3-8 and 3). The Court is
not persuaded by Timken’s argument. See generally, Hoogovens Staal
BV v. United States, 22 CIT 139, 144, 4 F. Supp. 2d 1213, 1218
(1998) (stating that “[w]hatever additional information that
persuaded Commerce that [the plaintiffs] had discontinued [their]
practice . . . during [the subsequent] period of review was not a
(continued...)
Consol. Court No. 99-12-00743 Page 74

2. Commerce’s Decision to Value the Entire FOP by
Using the Price Paid by a PRC Bearing Producer

In applying the FOP methodology to an NME, if Commerce finds

that actual costs represent the “best available information,”

Commerce has the discretion to take a combined approach and to

consider actual costs paid by the NME producer for each FOP.

See Lasko, 43 F.3d at 1445-46; Magnesium Corp. of Am. v. United

States, 20 CIT 1092, 1098, 938 F. Supp. 885, 892 (1996). The

statute does not specify what constitutes “best available

information,” nor does it prescribe a specific method for valuing

FOP when a portion of the factor to be valued represents a source

in the NME itself and a portion of the same FOP represents a source

obtained from a market-economy supplier and paid for in market-

economy currency.

Moreover, the relevant regulation provides:

[Commerce] normally will use publicly available
information to value factors. However, where a factor is
purchased from a market economy supplier and paid for in
a market economy currency, [Commerce] normally will use
the price paid to the market economy supplier. In those
instances where a portion of the factor is purchased from
a market economy supplier and the remainder from a
nonmarket economy supplier, [Commerce] normally will
value the factor using the price paid to the market
economy supplier.

19 C.F.R. § 351.408(c)(1).

28
(...continued)
part of the record for this review,” and “Commerce correctly based
its decision on the information in the record”).
Consol. Court No. 99-12-00743 Page 75

In the case at bar, Commerce used the PRC producer’s import

data, rather than surrogate data, to value the entire FOP (that is,

both the directly imported FOP and the NME sourced FOP). See Final

Results, 64 Fed. Reg. 61,844. Commerce, however, admittedly failed

to “explain [in the Final Results, 64 Fed. Reg. 61,844-45,] why the

imports in question were meaningful.” Def.’s Mem. Partial Opp’n

Timken at 39.

As a preliminary matter, the Court finds that Timken exhausted

its administrative remedies and has the right to raise the issue of

Commerce’s failure to determine whether the imports in question

were meaningful because Timken sufficiently provided Commerce with

an opportunity to address this issue when Timken in its case brief

argued that “Commerce should not assign the Chinese imported steel

values to a larger volume of steel inventory than such purchases

actually represent.” Def.’s Mem. Partial Opp’n Timken, App. Ex. 7

at 24 (proprietary version) (emphasis omitted); see also

supra Discussion Part IV, C1 (Analysis).

Commerce’s failure to address whether the import data at issue

was meaningful, however, prevents the Court from reviewing the

issue of Commerce’s decision to value the entire FOP (that is, both

the directly imported FOP and the NME sourced FOP) intelligibly.

In the commentary accompanying the promulgation of 19 C.F.R. §

351.408(c)(1) Commerce states that:
Consol. Court No. 99-12-00743 Page 76

[Commerce] would not rely on the price paid by an NME
producer to a market economy supplier if the quantity of
the input purchased was insignificant. . . . [T]he
amounts purchased from the market economy supplier must
be meaningful. . . .

Final Rule, 62 Fed. Reg. at 27,366 (emphasis supplied).

Similarly, with respect to Timken’s argument that Commerce’s

decision to use a PRC producer’s import data to value other

purchases (that is, the NME sourced FOP) without “explain[ing] why

[the] import [data was] more accurate (or ‘meaningful’) than

surrogate-country values,” Timken’s Reply at 28, the Court finds

that while 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,

966 F.2d at 665, it was illogical for Commerce to utilize a PRC

bearing producer’s import data to value the entire FOP (that is,

both the directly imported FOP and the NME sourced FOP) without

explaining why analogously structured PRC trading company data

could not be used as a surrogate value.

Based on the foregoing, the Court remands this issue to

Commerce with instructions to: (1) explain, with reference to the

record, whether or not the PRC bearing producer’s import data at

issue was “meaningful”; and (2) provide the Court with an

explanation as to why the PRC trading company data is not the “best
Consol. Court No. 99-12-00743 Page 77

available information” for the purpose of valuing either the entire

FOP (that is, both the directly imported FOP and the NME sourced

FOP) or the NME sourced FOP.

V. Commerce’s Reliance on Six Indian Producers’ Reported Data in
Commerce’s Determination of Overhead, Selling, General and
Administrative Expenses and Profit Rates

A. Background

Section 1677b(c)(1) of Title 19 requires Commerce to “deter-

mine the [NV] of the subject merchandise on the basis of the value

of the [FOPs] utilized in producing the merchandise and to which

shall be added an amount for general expenses and profit plus the

cost of containers, coverings, and other expenses.” General

expenses are the expenses that do not bear a direct relationship to

the production of the merchandise at issue, such as SG&A expenses.

The subsection also states that the valuation of FOPs “shall be

based on the best available information regarding the values of

such factors in a market economy country or countries considered to

be appropriate by [Commerce].” Id. Section 1677b(c)(4) provides

that, in valuing FOPs under paragraph (1) of § 1677b(c), Commerce

“shall utilize, to the extent possible, the prices or costs of

[FOPs] in one or more market economy countries. . . .”

Moreover, the relevant regulation provides

[f]or manufacturing overhead, general expenses, and
profit, [Commerce] normally will use non-proprietary
Consol. Court No. 99-12-00743 Page 78

information gathered from producers of identical or
comparable merchandise in the surrogate country.

19 C.F.R. § 351.408(c)(4) (1998).

In the Preliminary Results, Commerce used “information

obtained from the fiscal year 1997-98 annual reports of six Indian

bearing producers” as surrogate values for factory overhead, SG&A

and profit.29 64 Fed. Reg. at 36,856; see also Def.’s Mem. Partial

29
In Commerce’s June 30, 1999, decision memorandum discussing
the FOP values used for the Preliminary Results, 64 Fed. Reg. at
36,856, Commerce stated:

To calculate surrogate values for factory overhead and
SG&A, [Commerce] first categorized all of the non-direct
expenses (excluding labor) of six Indian bearings
producers, as reported in their 1997-98 annual reports,
as either overhead or SG&A, as appropriate. [Commerce]
ha[s] excluded the data for Asian Bearings [“Asian”] and
[National Engineering Company] [“]NEI[”] in calculating
surrogate overhead, SG&A and profit ratios primarily
because, according to the Auditor’s Reports, the
methodology used in recording and reporting the financial
condition of these two companies appears, in certain
instances, to be inconsistent with the methodology (i.e.,
Indian GAAP) used by the remaining five companies. Given
these significant differences, it would be incongruous to
combine the reported data of all seven companies.

Def.’s Mem. Partial Opp’n Timken, App. Ex. 3 at 4-5.

Additionally, Commerce in its brief states with respect to
NEI’s annual report that

Note 11 to the auditors’ report provided that “[n]o
provision has been made for Doubtful debts & advances
aggregating Rs 183.65 lacs (Previous year Rs 149.37
lacs).” Note 22 to the auditors’ report provided that
“[t]he Company has not made provision for the Leave
liability of employees (amount unascertained) and the
same as per consistent practice will be accounted for as
(continued...)
Consol. Court No. 99-12-00743 Page 79

Opp’n Timken, App. Ex. 3.

Specifically, Commerce

calculated factory overhead and [SG&A] expenses
(exclusive of labor and electricity) as percentages of
direct inputs (also exclusive of labor) and applied these
ratios to each producer’s direct input costs. For
profit, [Commerce] totaled the reported profit before
taxes for the six Indian bearing producers and divided it
by the total calculated cost of production (“COP”) of
goods sold. This percentage was applied to each
respondent’s total COP to derive a company-specific
profit value.

Preliminary Results, 64 Fed. Reg. at 36,856.

In the Final Results, during the review at issue, Commerce

continued to use data from only six of the Indian bearing producers

and excluded data from Asian and NEI by stating:

[Commerce] disagree[s] with [Timken] and has[s] excluded
the data for Asian Bearing and NEI in calculating
surrogate overhead, SG&A and profit ratios because,
according to the Auditor’s Reports, the methodology used
in recording and reporting the financial condition of
these two companies appears, in certain instances, to be
inconsistent with the methodology (i.e., Indian GAAP)
used by the remaining six companies.

29
(...continued)
and when paid.”

Def.’s Mem. Partial Opp’n Timken at 6 (quoting Def.’s Mem. Partial
Opp’n Timken, Proprietary App. Ex. 5 (NEI Annual Report) at 26 and
27)); see also Def.’s Mem. Partial Opp’n Timken, Proprietary App.
Ex. 5 (NEI Annual Report) at 11.
Consol. Court No. 99-12-00743 Page 80

In this review, the Auditor’s Report included with
Asian Bearing’s 1997-98 financial statements expresses a
clear reservation about how certain interest expenses
(with their corresponding effects on depreciation and
other expenses) have been reported, noting that the
methodology is not in accordance with accounting
principles recommended by the Institute of Chartered
Accountants of India. The Auditor’s Report also notes
that Asian Bearing continues to be a “sick” company as
defined by India’s Sick Industrial Companies Act.
Likewise, the auditors’ endorsement of NEI’s 1997-98
Financial Statements, as contained in the Auditor’s
Report, includes qualifications regarding the company’s
treatment of various overhead and SG&A expenses. As in
[the 10th Annual Review, 63 Fed. Reg 63,842], the
qualifications indicate that the treatment of these
expenses is not consistent with Indian GAAP.

Given these significant differences, it would be
incongruous to combine the reported data of all eight
companies.

Final Results, 64 Fed. Reg. at 61,842-43.

B. Contentions of the Parties

1. Timken’s Contentions

Timken alleges that Commerce’s exclusion of NEI from the

calculation of overhead, SG&A, and profit ratios “was arbitrary and

unreasonable.”30 Timken’s Mem. at 40. In particular, Timken argues

that Commerce “offered no reason and pointed to no facts that would

justify the exclusion of NEI data from the overhead, SG&A, and

30
The Court notes that, in this case, Timken is not
contesting Commerce’s exclusion of Asian from the calculation of
overhead, SG&A, and profit ratios but only the exclusion of NEI.
See Timken’s Mem. at 5 n.4; see also Timken’s Mem. at 37-40 and
Timken’s Reply at 32-35.
Consol. Court No. 99-12-00743 Page 81

profit ratios.” Id. at 38. Timken maintains that: (1) “a

comparison of NEI’s overhead, SG&A, and profit ratios with the

other six companies shows ratios that are well within the range of

other Indian bearing producers,” id. at 38 (citing Timken’s Mem. at

19, Table 4); (2) NEI’s annual report was audited and approved by

Chartered Accountants in India, see Timken’s Mem. at 19; and (3)

“the Auditor’s Report reveals only inconsequential omissions,” id.

at 20.

Timken further argues that “the aggregate annual report data

of all seven Indian bearing producers would have been more

descriptive of the variety of companies in China than the data of

only six producers . . . ,” id. at 40, and “the record included the

figures necessary to make NEI’s annual report data GAAP-compliant.”

Id. at 39. Timken contends, for example, that since NEI’s leave

data was not provided for in NEI’s annual report, Commerce could

have “based the profit ratio on an average labor cost of the other

six Indian bearing companies or relied on another company’s leave

data.” Timken’s Reply at 34.

Finally, Timken asserts that “[a]s there is no evidence that

NEI’s overhead or SG&A ratios were affected by its accounting

methodologies, [Commerce] should at least have used the NEI’s data

for those factors as the best available information for Indian
Consol. Court No. 99-12-00743 Page 82

bearing producers.” Timken’s Reply at 34 (citing 19 U.S.C. §

1677b(c)(1)).

2. Commerce’s Contentions

Commerce responds that it properly used data from only six of

the Indian bearing producers and excluded the annual report data

contained in NEI when calculating the ratios for overhead, SG&A and

profit. See Def’s Mem. Partial Opp’n Timken at 40-42. Commerce

explained that it rejected NEI’s annual report data because

“the auditors’ endorsement of NEI’s 1997-98 Financial
Statements, as contained in the Auditor’s Report,
includes qualifications regarding the company’s treatment
of various overhead and SG&A expenses.” These
qualifications reveal that NEI made no provision for
doubtful debts and advances or for the leave liability of
employees. . . . Commerce found these qualifications to
be significant because they were inconsistent with Indian
generally accepted accounting principles (“GAAP”)
utilized by the other six companies.

Id. at 41 (quoting Final Results, 64 Fed. Reg. at 61,842).

Moreover, relying on Writing Instrument, 21 CIT at 1195, 984

F. Supp. at 639, Commerce argues that “in determining whether a

surrogate value represents the best available information, Commerce

is authorized to determine the reliability of that value and, if it

is established that the value is unreliable, decline to use that

data for purposes of factor valuation.” Def.’s Mem. Partial Opp’n

Timken at 41.
Consol. Court No. 99-12-00743 Page 83

C. Analysis

The Court finds that Commerce acted reasonably within its

discretion in excluding the annual report data contained in NEI

when calculating the ratios for overhead, SG&A and profit. In

particular, Commerce pointed out that it rejected NEI’s annual

report data because

“the Auditor’s Report [of NEI’s Financial Statements]
includes qualifications regarding the company’s treatment
of various overhead and SG&A expenses.” These
qualifications reveal that NEI made no provision for
doubtful debts and advances or for the leave liability of
employees. . . . Commerce found these qualifications to
be significant because they were inconsistent with Indian
generally accepted accounting principles (“GAAP”)
utilized by the other six companies.

Id. at 41 (quoting Final Results, 64 Fed. Reg. at 61,842).

This Court is not in a position to declare such a conclusion

unreasonable. See Chevron, 467 U.S. at 844-45, and Skidmore, 323

U.S. at 139-40; see also Timken Co., 26 CIT at __, 201 F. Supp. 2d

at 1346 (finding that “Timken may not usurp Commerce’s role as fact

finder and substitute their analysis for the result reached by

Commerce”).

Accordingly, the Court sustains Commerce’s determination to

use the annual report data of six Indian bearing producers as a

surrogate for determining overhead, SG&A and profit rates as

reasonable, in accordance with law and supported by substantial

evidence.
Consol. Court No. 99-12-00743 Page 84

CONCLUSION

This case is remanded to Commerce to: (1)(a) examine whether

or not the PRC trading company import prices constitute the “best

available information” to value either all of the subject

merchandise at issue or a portion of the subject merchandise

purchased by Luoyang through the trading company and used by

Luoyang in the manufacture of TRB cups and cones and, if Commerce

concludes that the PRC trading company import prices present the

“best available information” for the purpose of such surrogate

evaluation, to recalculate Commerce’s determination not

inconsistent with this opinion; and (b) examine if, and only if,

Commerce finds that the PRC trading company import prices do not

constitute the “best available information,” whether or not

Indonesian data (that is, Indonesian import statistics and export

data from Japan to Indonesia) constitute the “best available

information” over export data from Japan to India to value the

bearing quality steel bar used in the production of TRB cups and

cones, and to explain, (if Commerce finds that export data from

Japan to India is the “best available information,”) how the entire

export data from Japan to India falls within the range of values in

the United States category benchmark range; (2) exclude

“consumption of traded goods” from Commerce’s overhead, SG&A and

profit rate calculations and to recalculate the dumping margins

accordingly; and (3) (a) explain, with reference to the record,
Consol. Court No. 99-12-00743 Page 85

whether or not the PRC bearing producer’s import data at issue was

“meaningful”; and (b) provide the Court with an explanation as to

why the PRC trading company data is not the “best available

information” for the purpose of valuing either the entire FOP (that

is, both the directly imported FOP and the NME sourced FOP) or the

NME sourced FOP. Commerce’s final determination is affirmed in all

other respects.

______________________________
NICHOLAS TSOUCALAS
SENIOR JUDGE

Dated: October 1, 2002
New York, New York