NSK Ltd. v. United States

Slip Op. 02-61

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS

________________________________________
:
NSK LTD. and NSK CORPORATION; :
NTN CORPORATION, :
NTN BEARING CORPORATION OF AMERICA, :
AMERICAN NTN BEARING :
MANUFACTURING CORPORATION, :
NTN DRIVESHAFT, INC. and :
NTN-BOWER CORPORATION; and :
THE TORRINGTON COMPANY, :
:
Plaintiffs and : Consol. Court No.
Defendant-Intervenors, : 98-07-02527
:
v. :
:
UNITED STATES, :
:
Defendant, :
:
KOYO SEIKO CO., LTD. and :
KOYO CORPORATIONS OF U.S.A.; and :
NACHI-FUJIKOSHI CORP., :
NACHI AMERICA, INC. and :
NACHI TECHNOLOGY, INC., :
:
Defendant-Intervenors. :
________________________________________:

Plaintiffs and defendant-intervenors, NSK Ltd. and NSK
Corporation (collectively “NSK”), NTN Corporation, NTN Bearing
Corporation of America, American NTN Bearing Manufacturing
Corporation, NTN Driveshaft, Inc. and NTN-Bower Corporation
(collectively “NTN”), and The Torrington Company (“Torrington”),
move pursuant to USCIT R. 56.2 for judgment upon the agency record
challenging various aspects of the Department of Commerce,
International Trade Administration’s (“Commerce”) final
determination, entitled Final Results of Antidumping Duty
Administrative Reviews of Antifriction Bearings (Other Than Tapered
Roller Bearings) and Parts Thereof From France, Germany, Italy,
Japan, Romania, Singapore, Sweden, and the United Kingdom (“Final
Results”), 63 Fed. Reg. 33,320 (June 18, 1998), for the period of
Consol. Court No. 98-07-02527 Page 2

review (“POR”) from May 1, 1996, through April 30, 1997.

Specifically, NSK argues that Commerce erred in: (1)
calculating the constructed value profit by (a) excluding below-
cost sales, and (b) applying Commerce’s methodology; (2) denying
partial level-of-trade adjustment; and (3) treating repacking
expenses in the United States as direct selling expenses.

NTN maintains that Commerce erred in: (1) denying an
adjustment to indirect selling expenses for interest incurred in
financing cash deposits for antidumping duties; (2) including
sample transactions for which no compensation was received; (3)
refusing to exclude home market sales with high profits and home
market sample sales from the dumping margin calculation; (4)
disregarding sales to affiliated customers in Commerce’s
calculation of normal value; (5) using the affiliated supplier’s
cost of production for inputs in those cases when the cost was
higher than the transfer price in Commerce’s calculation of cost of
production and constructed value; (6) recalculating indirect
selling expenses incurred in the United States without regard to
levels of trade; (7) recalculating normal value based on sales of
identical or similar merchandise before resorting to constructed
value in instances where below-cost sales were disregarded; (8)
disallowing a claim for level-of-trade adjustment; (9) calculating
constructed export price profit without regard to levels of trade;
(10) including profits from export price sales in Commerce’s
calculation of constructed export price profit; and (11)
recalculating home market indirect selling expenses without regard
to levels of trade.

Finally, Torrington asserts that Commerce erred in: (1)
accepting, as a direct adjustment to price, Koyo Seiko Co. and Koyo
Corporations of U.S.A.’s (collectively “Koyo”) (a) home market lump
sum billing adjustment, and (b) rebates; (2) accepting, as a direct
adjustment to price, NSK’s home market billing adjustment; and (3)
accepting, as a direct adjustment to price, NTN’s home market
discounts.

Held: NSK’s motion for judgment on the agency record is
granted in part and denied in part. NTN’s motion for judgment on
the agency record is granted in part and denied in part.
Torrington’s motion for judgment on the agency record is denied.
Case is remanded to Commerce: (1) to determine whether NSK’s
cylindrical roller bearings at issue are (a) complex merchandise
that encompasses characteristics so numerous that the process of
valuation shall be entrusted to Commerce’s discretion, or (b)
merchandise that can be matched in accordance with the statutorily
Consol. Court No. 98-07-02527 Page 3

provided hierarchy; and (c) if Commerce concludes that NSK’s
cylindrical roller bearings are merchandise that could be matched
in accordance with the statutorily provided hierarchy, change Final
Results, 63 Fed. Reg. 33,320, accordingly; and (2) with regard to
NTN’s minor inputs, to (a) either provide the Court with a
sufficient and reasonable explanation of Commerce’s methodology; or
(b) if Commerce is unable to do so, amend Final Results, 63 Fed.
Reg. 33,320, accordingly.

[NSK’s motion for judgment on the agency record is granted in part
and denied in part. NTN’s motion for judgment on the agency record
is granted in part and denied in part. Torrington’s motion for
judgment on the agency record is denied. Case remanded.]

Dated: July 8, 2002

Lipstein, Jaffe & Lawson, L.L.P. (Robert A. Lipstein, Matthew
P. Jaffe and Grace W. Lawson) for NSK, plaintiff and defendant-
intervenor.

Barnes, Richardson & Colburn (Donald J. Unger, Kazumune V.
Kano, Christine H. T. Yang and Clarice K. M. McCauley) for NTN,
plaintiff and defendant-intervenor.

Stewart and Stewart (Terence P. Stewart, Geert De Prest and
Lane S. Hurewitz) for Torrington, plaintiff and defendant-
intervenor.

Robert D. McCallum, Jr., Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Velta A. Melnbrencis,
Assistant Director); of counsel: Patrick V. Gallagher, Myles S.
Getlan, John F. Koeppen and David R. Mason, Office of the Chief
Counsel for Import Administration, United States Department of
Commerce, for the United States, defendant.

Powell, Goldstein, Frazer & Murphy LLP (Neil R. Ellis and
Elizabeth C. Hafner) for Koyo, defendant-intervenor.

O’Melveny & Myers LLP, (Greyson L. Bryan and Michael A. Meyer)
for Nachi, defendant-intervenor.
Consol. Court No. 98-07-02527 Page 4

OPINION

TSOUCALAS, Senior Judge: Plaintiffs and defendant-

intervenors, NSK Ltd. and NSK Corporation (collectively “NSK”),

NTN Corporation, NTN Bearing Corporation of America, American NTN

Bearing Manufacturing Corporation, NTN Driveshaft, Inc. and NTN-

Bower Corporation (collectively “NTN”), and The Torrington Company

(“Torrington”), move pursuant to USCIT R. 56.2 for judgment upon

the agency record challenging various aspects of the Department of

Commerce, International Trade Administration’s (“Commerce”) final

determination, entitled Final Results of Antidumping Duty

Administrative Reviews of Antifriction Bearings (Other Than Tapered

Roller Bearings) and Parts Thereof From France, Germany, Italy,

Japan, Romania, Singapore, Sweden, and the United Kingdom (“Final

Results”), 63 Fed. Reg. 33,320 (June 18, 1998), for the period of

review (“POR”) from May 1, 1996, through April 30, 1997.

Specifically, NSK argues that Commerce erred in: (1)

calculating the constructed value profit by (a) excluding below-

cost sales, and (b) applying Commerce’s methodology; (2) denying

partial level-of-trade adjustment; and (3) treating repacking

expenses in the United States as direct selling expenses.

NTN maintains that Commerce erred in: (1) denying an

adjustment to indirect selling expenses for interest incurred in

financing cash deposits for antidumping duties; (2) including
Consol. Court No. 98-07-02527 Page 5

sample transactions for which no compensation was received; (3)

refusing to exclude home market sales with high profits and home

market sample sales from the dumping margin calculation; (4)

disregarding sales to affiliated customers in Commerce’s

calculation of normal value; (5) using the affiliated supplier’s

cost of production for inputs in those cases when the cost was

higher than the transfer price in Commerce’s calculation of cost of

production and constructed value; (6) recalculating indirect

selling expenses incurred in the United States without regard to

levels of trade; (7) recalculating normal value based on sales of

identical or similar merchandise before resorting to constructed

value in instances where below-cost sales were disregarded; (8)

disallowing a claim for level-of-trade adjustment; (9) calculating

constructed export price profit without regard to levels of trade;

(10) including profits from export price sales in Commerce’s

calculation of constructed export price profit; and (11)

recalculating home market indirect selling expenses without regard

to levels of trade.

Finally, Torrington asserts that Commerce erred in: (1)

accepting, as a direct adjustment to price, Koyo Seiko Co. and Koyo

Corporations of U.S.A.’s (collectively “Koyo”) (a) home market lump

sum billing adjustment, and (b) rebates; (2) accepting, as a direct

adjustment to price, NSK’s home market billing adjustment; and (3)
Consol. Court No. 98-07-02527 Page 6

accepting, as a direct adjustment to price, NTN’s home market

discounts.

BACKGROUND

The administrative review at issue covers the period of review

from May 1, 1996, through April 30, 1997.1 Commerce published the

preliminary results of the subject review on February 9, 1998. See

Notice of preliminary results of antidumping duty administrative

reviews and partial termination of administrative reviews of

Antifriction Bearings (Other Than Tapered Roller Bearings) And

Parts Thereof From France, Germany, Italy, Japan, Romania,

Singapore, Sweden, and The United Kingdom (“Preliminary Results”),

63 Fed. Reg. 6512. On June 18, 1998, Commerce published the Final

Results at issue. See 63 Fed. Reg. 33,320.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 19

U.S.C. § 1516a(a) (1994) and 28 U.S.C. § 1581(c) (1994).

1
Since the administrative review at issue was initiated after
January 1, 1995, the applicable law is the antidumping statute as
amended by the Uruguay Round Agreements Act, Pub. L. No. 103-465,
108 Stat. 4809 (1994). See Torrington Co. v. United States, 68
F.3d 1347, 1352 (Fed. Cir. 1995).
Consol. Court No. 98-07-02527 Page 7

STANDARD OF REVIEW

In reviewing a challenge to Commerce’s final determination in

an antidumping administrative review, the Court will uphold

Commerce’s determination unless it is “unsupported by substantial

evidence on the record, or otherwise not in accordance with law .

. . .” 19 U.S.C. § 1516a(b)(1)(B)(i) (1994).

I. SUBSTANTIAL EVIDENCE TEST

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

such relevant evidence as a reasonable mind might accept as

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

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

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

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

inconsistent conclusions from the evidence does not prevent an

administrative agency’s finding from being supported by substantial

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

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

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

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

justifiably have made a different choice had the matter been before

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

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

Inc. v. NLRB, 706 F.2d 18, 22-23 (1st Cir. 1983) (quoting, in turn,
Consol. Court No. 98-07-02527 Page 8

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

II. CHEVRON TWO-STEP ANALYSIS

To determine whether Commerce’s interpretation and application

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

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

Inc. v. Natural Resources Defense Council, Inc. (“Chevron”), 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’s 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
Consol. Court No. 98-07-02527 Page 9

canon, however.” Citation omitted).

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

determines that the statute is silent or ambiguous with respect to

the specific issue, the question for the Court becomes whether

Commerce’s construction of the statute is permissible. See

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

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

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

Commerce has acted rationally, the Court may not substitute its

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

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

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

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

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

will sustain the determination if it is reasonable and supported by

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

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

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

omitted). In determining whether Commerce’s interpretation is

reasonable, the Court considers the following non-exclusive list of

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

objectives of those provisions and the objectives of the

antidumping scheme as a whole. See Mitsubishi Heavy Indus. v.
Consol. Court No. 98-07-02527 Page 10

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

DISCUSSION

I. Commerce’s Calculation of Profit for Constructed Value

A. BACKGROUND

The enactment of the URAA, which governs the case at bar,

introduced a number of changes in the antidumping law.

Specifically, the constructed value (“CV”) provisions relating to

profit determination were altered to provide for: (1) a preferable

method based upon the actual amounts incurred and realized by the

particular party being reviewed, see 19 U.S.C. § 1677b(e)(2)(A)

(1994); and (2) alternative methods that are to be used when actual

data are not available. See 19 U.S.C. § 1677b(e)(2)(B) (1994).

Specifically, Commerce is to rely in its calculations on

the actual amounts incurred and realized by the specific
exporter or producer being examined in the . . . review
for . . . profits, in connection with the production and
sale of a foreign like product, in the ordinary course of
trade, for consumption in the foreign country, [unless,]
if the actual data are not available with respect to
the[se] amounts . . . , then [Commerce is to rely in its
calculations on: (1)] . . . the actual amounts incurred
and realized by the specific exporter or producer being
examined in the . . . review for . . . profits, in
connection with the production and sale [of a foreign
like product], for consumption in the foreign country, of
merchandise that is in the same general category of
products as the subject merchandise[; (2)] the weighted
average of the actual amounts incurred and realized by
exporters or producers that are subject to the . . .
review (other than the exporter or producer described in
clause [(1)]) for . . . profits, in connection with the
production and sale of a foreign like product, in the
Consol. Court No. 98-07-02527 Page 11

ordinary course of trade, for consumption in the foreign
country[;] or [(3)] the amounts incurred and realized for
. . . profits, based on any other reasonable method,
except that the amount allowed for profit may not exceed
the amount normally realized by exporters or producers
(other than the exporter or producer described in clause
[(1)] in connection with the sale, for consumption in the
foreign country, of merchandise that is in the same
general category of products as the subject merchandise
. . . .

19 U.S.C. § 1677b(e) (1994).

The URAA also amended the definition of the term “ordinary

course of trade” to provide that below-cost sales that Commerce

disregards in the determination of normal value (“NV”) under 19

U.S.C. § 1677b(a) (1994) fall outside the “ordinary course of

trade.” Generally,

[t]he term “ordinary course of trade” means the
conditions and practices which, for a reasonable time
prior to the exportation of the subject merchandise, have
been normal in the trade under consideration with respect
to merchandise of the same class or kind. [Commerce]
shall consider the following sales and transactions,
among others, to be outside the ordinary course of trade:
. . . [s]ales disregarded under [19 U.S.C. §] 1677b(b)(1)
[(1994)] . . . .

19 U.S.C. § 1677(15) (1994).

Section 1677b(b)(1) provides, in turn, that certain below-cost

sales are to be disregarded in the determination of NV.

Specifically, it provides that

[if Commerce] determines that sales made at less than the
cost of production[] . . . have been made within an
extended period of time in substantial quantities, and
[such sales] were not at prices which permit recovery of
Consol. Court No. 98-07-02527 Page 12

all costs within a reasonable period of time, such sales
may be disregarded in the determination of [NV].
Whenever such sales are disregarded, [NV] shall be based
on the remaining sales of the foreign[-]like product in
the ordinary course of trade. If no sales made in the
ordinary course of trade remain, [NV] shall be based on
[CV] of the merchandise.

19 U.S.C. § 1677b(b)(1) (1994).

Moreover, the Statement of Administrative Action (“SAA”), a

document that represents an authoritative expression regarding the

interpretation and application of the URAA for purposes of United

States domestic law, provides that 19 U.S.C. § 1677b(e)(2)(A)

establishes as a general rule that Commerce will base
amounts for . . . profit only on amounts incurred and
realized in connection with sales in the ordinary course
of trade of the particular merchandise in question
(foreign[-]like product). Commerce may ignore sales that
it disregards as a basis for [NV], such as those
disregarded because they are made at below-cost prices.

H.R. DOC. 103-316 at 839 (1994), reprinted in 1994 U.S.C.C.A.N.

4040, 4175-76.

During the review at issue, Commerce, pursuant to 19 U.S.C. §

1677b(e)(2)(A): (1) excluded below-cost sales for the purposes of

calculating CV profit; and (2) applied the “preferred method” for

calculation of CV profit. See Final Results, 63 Fed. Reg. at

33,333-34.
Consol. Court No. 98-07-02527 Page 13

B. CONTENTIONS OF THE PARTIES

Commerce maintains that it “properly excluded the below-cost

sales that [were] disregarded in [the] determin[ation of] NV”

because

[i]t is clear from the statutory language that the use of
all sales, including below-cost sales, would have been
appropriate only if Commerce had, in fact, determined CV
profit under the alternative methods provided in 19
U.S.C. § 1677b(e)(2)(B). This is so because the
preferred method [under 19 U.S.C. §] 1677b(e)(2)(A)
requires that the determination be based upon the
production and sale of a foreign[-]like product in the
“ordinary course of trade” and the term “ordinary course
of trade” excludes below-cost sales that have been
disregarded in determining NV.

Def.’s Mem. Opp’n Pls.’ Mot. J. Agency R. (“Def.’s Mem.”) at 14-15

(relying on 19 U.S.C. §§ 1677(15) and 1677b(b)(1) and pointing out

that only the alternative methods, unlike the preferred method,

allow the determination of profit to be based on data other than

the production and sale of a product in the “ordinary course of

trade”).

Responding to this statement by Commerce, NSK “abandon[ed] its

claim that Commerce violated the antidumping law by calculating CV

profit for ball bearings based on the entire database for above[-]

cost sales,” see [NSK’s] Reply Mem. Supp. Mot. J. Agency R. (“NSK’s

Reply”) at 1 (emphasis supplied), but asserts that Commerce must

calculate CV profit for cylindrical roller bearings on a model or

family basis when using the statutory preferred methodology. See
Consol. Court No. 98-07-02527 Page 14

id. Pointing to Commerce’s statement that “‘Section 1677(16) . .

. establishes a descending hierarchy,’” NSK asserts that this

proposition dispenses with Commerce’s discretion and invalidates

Commerce’s assertion that “‘[w]here[] . . . the subject merchandise

is complex, . . . the foreign[-]like product typically embraces

more than one of the categories established in [S]ection 1677(16),

and Commerce’s selection of a particular category will depend upon

the particular circumstances.’” Id. at 2 (quoting Def.’s Mem. at

17). NSK maintains that Commerce

must examine each . . . category in order [of statutorily
provided preference] and, once merchandise is presented
that meets the criteria stated by a category, use the
profit of that merchandise to calculate CV profit.

Id.

Torrington supports Commerce’s position and points out that

Commerce’s methodology was reasonable in view of the statutory

mandate of the provisions involved. See Resp. Torrington, Def.-

Intervenor, Rule 56.2 Mots. NSK and NTN, Pls. (“Torrington’s

Resp.”) at 9-12.

C. ANALYSIS

During the review at issue, Commerce applied the “preferred”

method for calculating CV profit contained in 19 U.S.C. §

1677b(e)(2)(A). See Final Results, 63 Fed. Reg. at 33,333.

Specifically, Commerce determined an actual profit ratio for each
Consol. Court No. 98-07-02527 Page 15

respondent by: (1) first calculating for each respondent the profit

for each sale of the foreign-like product in the ordinary course of

trade by subtracting all costs and expenses from the home market

price; and then (2) aggregating the profit for all the respondent’s

sales at the same level of trade (“LOT”) and dividing this profit

by the respondent’s aggregate total cost for the same sales. See

Preliminary Results, 63 Fed. Reg. at 6516. In doing so, Commerce

relied on the fact that “foreign[-]like product” is defined in 19

U.S.C. § 1677(16) as

merchandise in the first of the following categories in
respect of which a determination . . . can be
satisfactorily made: (A) [t]he subject merchandise and
other merchandise which is identical in physical
characteristics with, and was produced in the same
country by the same person as, that merchandise[;] (B)
[m]erchandise[] (i) produced in the same country and by
the same person as the subject merchandise, (ii) like
that merchandise in component material or materials and
in the purposes for which used, and (iii) approximately
equal in commercial value to that merchandise[;] (C)
[m]erchandise[] (i) produced in the same country and by
the same person and of the same general class or kind as
the merchandise which is the subject of the
investigation, (ii) like that merchandise in the purposes
for which used, and (iii) which the administering
authority determines may reasonably be compared with that
merchandise.

19 U.S.C. § 1677(16) (emphasis supplied).

Section 1677(16), same as a corresponding pre-URAA Section 19

U.S.C. § 1677(16) (1988), establishes the approach for model

matching. Specifically, Section 1677(16) first instructs Commerce

to conduct a comparison using merchandise that is identical in
Consol. Court No. 98-07-02527 Page 16

physical characteristics. If such comparison is not feasible,

Commerce must look for merchandise that is like that merchandise in

component materials and in the purposes for which used. Finally,

if neither identical nor like merchandise is available, Commerce

must look for merchandise that is either: (1) produced in the same

country and by the same person and of the same general class or

kind as the merchandise which is the subject of the investigation;

or (2) like that merchandise in the purposes for which it is used;

or (3) which Commerce determines may reasonably be compared with

that merchandise. See 19 U.S.C. § 1677(16)(C). Therefore, Section

1677(16) establishes a descending hierarchy of preferential modes

that Commerce must select for matching purposes. As Commerce

correctly points out, the use of the term “determination” that “can

be satisfactorily made” in the language of 19 U.S.C. § 1677(16)(C)

indicates, however, that Commerce enjoys discretion in determining

when to select a particular category of the foreign-like product.

See Def.’s Mem. at 17.

Consequently, Commerce operated under an assumption that in

the cases where

the subject merchandise is complex, encompassing numerous
characteristics [suitable] for matching [in accordance
with different subcategories], the foreign[-]like product
typically embraces more than one of the categories
established in [S]ection 1677(16), [and, therefore]
Commerce’s selection of a particular category [should]
depend upon the particular circumstances.
Consol. Court No. 98-07-02527 Page 17

Id.

Thus, if either identical or similar merchandise is not

available, merchandise of the “same general class or kind” as the

subject merchandise could qualify as a foreign-like product.2

Consequently, Commerce aggregated each respondent’s profits for the

foreign-like products sold in the ordinary course of trade,

explaining that

an aggregate calculation that encompasses all foreign
like products under consideration for normal value
represents a reasonable interpretation of [the pertinent]
section . . . . Moreover, [Commerce] believe[s] that, in
applying the preferred method for computing CV profit .
. . , the use of aggregate data results in a reasonable
and practical measure of profit that [Commerce] can apply
consistently in each case. By contrast, a method based
on varied groupings of foreign[-]like products, each
defined by a minimum set of matching criteria shared with
a particular model of the subject merchandise, would add
an additional layer of complexity and uncertainty to

2
Commerce is correct in its observation that the reference to
a “foreign-like” product in Section 1677b(e)(2)(A) does not amount
to a manifestation of congressional intent that profit be
calculated upon the basis of merchandise that is identical to the
subject merchandise. See Def.’s Mem. at 18. By its nature, CV
becomes available for determining NV only when identical or similar
home market merchandise is not available for comparison with United
States sales because there are no such home market sales or they
were below-cost and, therefore, are disregarded. Thus, Congress
could not have intended that Commerce limit the profit calculation
under Section 1677b(e)(2)(A) to profit incurred in the production
or sale of merchandise identical to the subject merchandise
because, in that event, the “preferred” method provided in Section
1677b(e)(2)(A) would be applicable rarely, if ever. Therefore,
Commerce could reasonably conclude that Section 1677b(e)(2)(A)
provides for use of the actual amounts incurred and realized for
profit in connection with the production and sale of a foreign-like
product. See id.
Consol. Court No. 98-07-02527 Page 18

antidumping duty proceedings without necessarily
generating more accurate results. It would also make the
statutorily preferred CV-profit method inapplicable to
most cases involving CV.

Final Results, 63 Fed. Reg. at 33,333.

The SAA sets out the two situations in which the preferred CV

profit method would be inapplicable:

[19 U.S.C. § 1677b(e)(2)(B)] establishes alternative
methods for calculating amounts for . . . profit in those
instances where the method described in section
[1677b(e)(2)(A)] cannot be used, either because there are
no home market sales of the foreign[-]like product or
because all such sales are at below-cost prices.

H.R. Doc. 103-316 at 840, 1994 U.S.C.C.A.N. at 4176.

In the case at bar, because the actual amounts for profit

realized by NSK were available, Commerce applied the preferred

method, as mandated by Section 1677b(e)(2)(A), by aggregating those

profits. The application, however, was justified only with respect

to merchandise that “is complex [and] encompassing numerous

characteristics,” accord Def.’s Mem. at 17, that is, merchandise

that has no matching counterpart present in the review at issue.

The arguments by Commerce, however, cannot be warranted with regard

to merchandise that can actually be matched in accordance with the

statutorily provided hierarchy. The sole fact that grouping of

merchandise into numerous categories for the purpose of valuation,

specifically: (1) a category of merchandise that is sufficiently

complex and encompassing numerous characteristics; and (2) one or
Consol. Court No. 98-07-02527 Page 19

more categories of merchandise that could be matched in accordance

with the statutorily provided hierarchy, “would add an additional

layer of complexity,” Final Results, 63 Fed. Reg. at 33,333, cannot

justify blatant disregard of a clear statutory requirement. See

Timex V.I., Inc., 157 F.3d at 882 (pointing out that “[b]ecause a

statute’s text is Congress’[] final expression of its intent, if

the text answers the question, that is the end of the matter”).

NSK asserts that Commerce must calculate CV profit for

cylindrical roller bearings on a model or family basis when using

the statutory preferred methodology. See NSK’s Reply at 2-8. The

Court is provided with no sufficient explanation whether

cylindrical roller bearings at issue are: (1) complex merchandise

that encompasses characteristics so numerous that the process of

valuation shall be entrusted to Commerce’s discretion; or (2)

merchandise that can be matched in accordance with the statutorily

provided hierarchy. If this Court is “to play [its] statutorily

required role[] in reviewing Commerce’s determination[], it is

important that [the Court] ha[s] clear guidance from Commerce as to

what [are the] actual[]” characteristics of the merchandise at

issue. SKF USA Inc. v. United States, 263 F.3d 1369, 1383 (Fed.

Cir. 2001).

Therefore, the issue is remanded to Commerce to: (1) determine

whether NSK’s cylindrical roller bearings at issue are (a) complex
Consol. Court No. 98-07-02527 Page 20

merchandise that encompasses characteristics so numerous that the

process of valuation shall be entrusted to Commerce’s discretion,

or (b) merchandise that can be matched in accordance with the

statutorily provided hierarchy; and (2) if Commerce concludes that

NSK’s cylindrical roller bearings are merchandise that could be

matched in accordance with the statutorily provided hierarchy,

change Final Results, 63 Fed. Reg. 33,320, accordingly.

II. Commerce’s Refusal of a Partial Level-of-Trade Adjustment

A. BACKGROUND

During the review at issue, Commerce identified two distinct

commercial levels of trade (“LOTs”) for NSK: (1) original equipment

manufacturers (“OEMs”) in the home market; and (2) aftermarket

(“AM”) customers. See Final Results, 63 Fed. Reg. at 33,330.

Commerce further determined that: (1) there was one constructed

export price (“CEP”) LOT for NSK and two home market LOTs; (2) the

CEP LOT was not the same as either one of the two home market LOTs;

(3) there was no information on the record that would enable

Commerce to quantify the price differences in the home market

between the CEP LOT and either one of the two normal value (“NV”)

LOTs, and make an LOT adjustment. See id. Instead, because the

home market LOTs were at a more advanced stage of distribution than

the CEP LOT, Commerce made a CEP offset for all such sales. See

id. Therefore, in comparing CEP LOT sales with NSK’s home market
Consol. Court No. 98-07-02527 Page 21

LOTs, Commerce applied a CEP offset to NV for all of NSK’s CEP

transactions. See id. The CEP offset applied by Commerce was the

sum of indirect selling expenses incurred on the home market sale

up to the amount of indirect selling expenses incurred on the

United States sale. See id.

B. CONTENTIONS OF THE PARTIES

While not contesting the manner in which Commerce determined

the LOT of CEP or NV transactions, and agreeing with: (1) the LOT

methodology used for home market OEM sales; and (2) Commerce’s

conclusion that “there was no record information that would allow

Commerce to quantify the downward price adjustment to adjust fully

the AM NV [LOT] to the CEP [LOT],” NSK maintains that Commerce

erred in “Commerce’s conclusion not to calculate a partial LOT

adjustment . . . for CEP sales matched to AM NV sales based on the

price differences between OEM NV and AM NV sales.” Mem. P. & A.

Supp. NSK’s Mot. J. Agency R. (“NSK’s Mem.”) at 22 (emphasis

omitted). Specifically, NSK claims that the pertinent statute and

legislative history require Commerce to make such a partial LOT

adjustment. See id. at 22-23. Moreover, examining the language of

Koyo Seiko Co. v. United States, 22 CIT 424, 427-28, 8 F. Supp. 2d.

862, 865-66 (1998), NSK asserts that the distinctions between Koyo

Seiko Co., 22 CIT at 427-28, 8 F. Supp.2d at 865-66, and the case

at bar support NSK’s conclusion that a partial LOT adjustment is
Consol. Court No. 98-07-02527 Page 22

warranted in the given circumstances. See NSK’s Mem. at 25.

Commerce maintains that Commerce properly denied NSK a partial

LOT adjustment, operating under the mandates of 19 U.S.C. §§

1677b(a)(7)(A) and 1677b(a)(7)(B) (1994) and in accordance with

Commerce’s practice. See Def.’s Mem. at 26-32. Torrington

supports Commerce’s position and asserts that Commerce’s reading

and application of the pertinent statutory provisions was

reasonable. See Torrington’s Resp. at 12-16.

C. ANALYSIS

The relevant statute provides that LOT shall be calculated in

the following manner:

The price described in [19 U.S.C. § 1677](1)(B) shall .
. . be increased or decreased to make due allowance for
any difference (or lack thereof) between the export price
or constructed export price and the price described in
[19 U.S.C. § 1677](1)(B) (other than a difference for
which allowance is otherwise made under this section)
that is shown to be wholly or partly due to a difference
in level of trade between the export price or constructed
export price and normal value, if the difference in level
of trade[:] (i) involves the performance of different
selling activities; and (ii) is demonstrated to affect
price comparability, based on a pattern of consistent
price differences between sales at different levels of
trade in the country in which normal value is determined.

In a case described in the preceding sentence, the
amount of the adjustment shall be based on the price
differences between the two levels of trade in the
country in which normal value is determined.

19 U.S.C. § 1677b(a)(7)(A).
Consol. Court No. 98-07-02527 Page 23

Therefore, an LOT adjustment is to be made to price-based NV

only for a difference that is shown to be wholly or partly due to

a difference in LOT between the CEP (or export price) and NV.

Conversely, the statute provides that

[w]hen normal value is established at a level of trade
which constitutes a more advanced stage of distribution
than the level of trade of the constructed export price,
but the data available do not provide an appropriate
basis to determine under subparagraph . . . (ii) [of 19
U.S.C. § 1677b(a)(7)(A)] a level of trade adjustment,
normal value shall be reduced by the amount of indirect
selling expenses incurred in the country in which normal
value is determined on sales of the foreign[-]like
product but not more than the amount of such expenses for
which a deduction is made under Section 1677a(d)(1)(D) of
this title.

19 U.S.C. § 1677b(a)(7)(B).

In other words, 19 U.S.C. § 1677b(a)(7)(B) provides for a CEP

offset. Accordingly, Commerce’s practice at the time of the review

was to refuse to calculate an LOT adjustment in those cases where

the home market data does not demonstrate that a CEP LOT exists

with respect to any transactions. Commerce later on reduced this

principle to writing, and the pertinent regulation provides that

[Commerce] will determine that a difference in level of
trade has an effect on price comparability only if it is
established to the satisfaction of [Commerce] that there
is a pattern of consistent price differences between
sales in the market in which normal value is determined:
(i) [a]t the level of trade of the export price or
constructed export price (whichever is appropriate); and
(ii) [a]t the level of trade at which normal value is
determined.
Consol. Court No. 98-07-02527 Page 24

19 C.F.R. § 351.412(d) (1998) (emphasis supplied).

The Court holds that Commerce’s conclusion that 19 U.S.C. §

1677b(a)(7)(A) does not provide for LOT adjustments other than

those based upon price differences in the home market between CEP

LOT and NV LOT is reasonable. See, e.g., NSK Ltd. v. United

States, 25 CIT ___, 170 F. Supp. 2d 1280 (2001); Torrington Co. v.

United States, 25 CIT ___, 146 F. Supp. 2d 845 (2001); SNR

Roulements v. United States, 24 CIT ___, 118 F. Supp. 2d 1333

(2000); NTN Bearing Corp. of Am. v. United States, 24 CIT ___, 104

F. Supp. 2d 110 (2000); Koyo Seiko Co., 22 CIT 424, 8 F. Supp. 2d

862.

As Commerce correctly observes, the mere fact that the

language of Section 1677b(a)(7)(A) of Title 19 employs the term

“partly” could be reasonably interpreted as providing that

where there is a home market pattern of price differences
between the level of trade of the CEP and the [LOT] of
the NV, Commerce must adjust only for that portion of the
price differences which is associated with the difference
in [LOT]. However, there is no indication [in the
statutory language or in the legislative history of the
statute] that the pattern of price differences between
two [LOTs] in the home market, absent a CEP [LOT] in the
home market, [warrants an LOT] adjustment[, whether it
is] “whole” or “partial.”

Def.’s Mem. at 30 (emphasis supplied)

Commerce explained that

[Commerce] may make [LOT] adjustments when there is “any
Consol. Court No. 98-07-02527 Page 25

difference . . . between the export price or constructed
export price and the normal value that is shown to be
wholly or partly due to a difference in the level of
trade between the export price or the constructed export
price and normal value.” [Commerce, however,] find[s] no
explicit authority to make [an LOT] adjustment between
two home-market [LOTs] where neither level is equivalent
to the level of the [United States] sale.

Final Results, 63 Fed. Reg. at 33,331 (citing 19 U.S.C. §

1677b(a)(7)(A)).

The Court agrees. Indeed, 19 U.S.C. § 1677b(a)(7)(A) is

particularly deferential to Commerce in circumstances in which

Commerce calculates a CEP offset in lieu of an LOT adjustment.

Section 1677b(a)(7)(A) explicitly provides that the LOT adjustment

need not be made where an “allowance is otherwise made” under the

statute, and this statement encompasses all alternative scenarios

in which such allowance could be made. Therefore, the Court

disagrees with NSK that Koyo Seiko Co., 22 CIT at 427, 8 F. Supp.

2d at 865, is distinguishable from the case at bar solely upon the

basis that the plaintiff in Koyo Seiko Co., 22 CIT at 427, 8 F.

Supp. 2d at 865, sought a full LOT adjustment based upon a

constructed NV, whereas in the case at bar “actual price-based NVs

exist by which Commerce can calculate a partial LOT adjustment.”

NSK’s Mem. at 25. Section 1677b(a)(7)(A) only provides for LOT

adjustments based upon price differences in the home market between

the CEP level of trade and the NV level of trade. While the Court

appreciates the point advanced by NSK, “Commerce’s interpretation
Consol. Court No. 98-07-02527 Page 26

. . . is reasonable, in light of the existence of the CEP offset to

cover situations such as those at issue.” Koyo Seiko Co., 22 CIT

at 429, 8 F. Supp. 2d at 866.

Based on the foregoing, the Court holds that Commerce

reasonably: (1) interpreted 19 U.S.C. § 1677b(a)(7)(A) as a mandate

precluding a partial LOT adjustment in those cases where the home

market sales are not at the same LOT as the CEP LOT; and (2) denied

NSK a partial LOT adjustment.

III. Commerce’s Treatment of United States Repacking
Expenses as Direct Selling Expenses

A. BACKGROUND

NSK delivered the subject merchandise to unaffiliated

customers in the United States from warehouses owned and operated

by NSK. See NSK’s Mem. at 6. During the process of bringing the

merchandise through NSK’s warehouses, NSK incurred a number of

expenses. See id. at 6-7. Consequently, NSK provided Commerce

with a list of those expenses and included, among other items, the

expenses incurred during United States repacking of the

merchandise. See id. at 7. While reducing the United States price

of the merchandise for all other expenses listed by NSK in

accordance with 19 U.S.C. §§ 1677a(c)(2)(A) and 1677a(d)(1)-(3)

(1994), Commerce denied NSK an allowance for the repacking expenses

under 19 U.S.C. § 1677a(c)(2)(A) and, instead, treated NSK’s United
Consol. Court No. 98-07-02527 Page 27

States repacking expenses as direct selling expenses pursuant to 19

U.S.C. § 1677a(d)(1)(B). See Preliminary Results, 63 Fed. Reg. at

6515; Final Results, 63 Fed. Reg. at 33,339.

B. CONTENTIONS OF THE PARTIES

NSK asserts that Commerce erred in treating NSK’s United

States repacking expenses as direct selling expenses pursuant to 19

U.S.C. § 1677a(d)(1)(B). NSK maintains that United States

repacking expenses: (1) constitute expenses incidental to bringing

the subject merchandise from the original place of shipment in a

foreign country to the place of delivery within the United States;

and (2) differ from direct selling expenses associated with, for

example, credit, guarantees, and warranties, that is, expenses that

are entirely unrelated to the process of bringing the merchandise

from the place of shipment to NSK’s unaffiliated customers in the

United States. See NSK’s Mem. at 26-29. Therefore, NSK concludes

that its United States repacking expenses should have been deducted

pursuant to 19 U.S.C. § 1677a(c)(2)(A). See id.

Commerce reads 19 U.S.C. § 1677a(c)(2)(A) as a provision that

applies to “transportation and other expenses, including

warehousing expenses, incurred in bringing the subject merchandise

from the original place of shipment in the exporting country to the

place of delivery in the United States,” SAA, H.R. DOC . 103-316,
Consol. Court No. 98-07-02527 Page 28

at 823, reprinted in 1994 U.S.C.C.A.N. at 4163, and thus, allows

Commerce’s treatment of NSK’s repacking expenses as direct selling

expenses. See Def.’s Mem. at 33-34. Commerce further explains

that Commerce does not

disagree with NSK[‘s] . . . charaterization [sic.] of
repacking expense as a warehousing expense. [Rather,
Commerce] regard[s] repacking expense as a direct selling
expense because it was performed on individual products
in order to sell the merchandise to the unaffiliated
customer in the United States. Warehousing expense, on
the other hand, is merely an expense associated with
storing the merchandise in a location before or during
the movement process. . . . [R]epacking does not have to
be performed in order for merchandise to be moved while
warehousing may be required in the movement process.
Thus, [Commerce] conclude[s] that [the United States]
repacking expense is an expense associated with selling
the merchandise.

Id. at 33 (quoting Final Results, 63 Fed. Reg. at 33,339, emphasis

omitted).

Torrington generally agrees with Commerce’s arguments. See

Torrington’s Resp. at 16-19. Torrington notes that Commerce’s

treatment of NSK’s repacking expenses as selling rather than

movement expenses is consistent with the statutory mandates of 19

U.S.C. §§ 1677a(c)(2)(A) and 1677a(d)(1)(B). See id. at 17-19.

C. ANALYSIS

The Court is not convinced by NSK’s argument. First, Section

1677(d)(1)(B) of Title 19 does not provide an exhaustive list of

direct selling expenses and, thus, its application cannot be
Consol. Court No. 98-07-02527 Page 29

limited only to the expenses associated with, for example,

guarantees or warranties. See 19 U.S.C. § 1677a(d)(1)(B); accord

SAA, H.R. DOC . 103-316 at 823, reprinted in 1994 U.S.C.C.A.N. at

4163 (stating that direct selling expenses under § 1677a(d)(1)(B)

are not limited to credit expenses, guarantees and warranties, but

include “expenses which result from and bear a direct relationship

to the particular sale in question”). Therefore, it was reasonable

for Commerce to treat repacking expenses as direct selling expenses

deductible pursuant to Section 1677(d)(1)(B) because the repacking

“was performed on individual products in order to sell the

merchandise to the unaffiliated customer in the United States.”

Def.’s Mem. at 34 (quoting Final Results, 63 Fed. Reg. at 33,339).

Second, the Court finds that NSK’s United States repacking

expenses were not incidental to bringing the subject merchandise

from the original place of shipment to the place of delivery in the

United States. Conversely, the Court holds that Commerce acted

reasonably in its refusal to

view repacking expenses as movement expenses. The
repacking of subject merchandise in the United States
bears no relationship to moving the merchandise from one
point to another. The fact that repacking is not
necessary to move merchandise is borne out by the fact
that the merchandise was moved from the exporting country
to the United States prior to repacking. Rather,
[Commerce] view[s] repacking expenses as direct selling
expenses respondents incur on behalf of certain sales
which [Commerce] deduct[s] pursuant to . . . [Section
1677a(d)(1)(B)] . . . , which directs [that CEP shall be
reduced] by “expenses that result from, and bear a direct
Consol. Court No. 98-07-02527 Page 30

relationship to, the sale, such as credit expenses,
guarantees, and warranties.”

Final Results, 63 Fed. Reg. at 33,339; accord RHP Bearings, Ltd. v.

United States, 24 CIT ___, 120 F. Supp. 2d 1116 (2000).

Therefore, the Court affirms Commerce’s decision to treat

NSK’s repacking expenses as direct selling expenses. See RHP

Bearings, Ltd. v. United States, 24 CIT ___, 110 F. Supp. 2d 1043

(2000), vacated on other grounds, RHP Bearings, Ltd. v. United

States, 288 F.3d 1334 (Fed. Cir. 2002); NTN Bearing Corp. of Am. v.

United States, 24 CIT ___, 104 F. Supp. 2d 110 (2000).

IV. Denial of an Adjustment to United States Indirect Selling
Expenses for Interest Allegedly Incurred in Financing
Cash Deposits for Antidumping Duties

A. BACKGROUND

During the review at issue, NTN requested Commerce to make an

adjustment to NTN’s United States indirect selling expenses for

interest allegedly incurred by NTN in financing cash deposits for

antidumping duties. See Final Results, 63 Fed. Reg. at 33,347-48.

Commerce denied the adjustment and deducted the entire amount of

indirect selling expenses, including all interest, from NTN’s CEP.

See id. at 33,348. Commerce explained that

[Commerce] should not remove such financial expenses from
reported indirect selling expenses under any
circumstances because they do not bear directly on an
expense that parties incur solely as a result of the
antidumping duty order; this holds regardless of whether
Consol. Court No. 98-07-02527 Page 31

the party claims any link to antidumping duty deposits or
other expenses, such as legal fees. As [Commerce] ha[s]
stated previously: money is fungible. If an importer
acquires a loan to cover one operating cost, that may
simply mean that it will not be necessary to borrow money
to cover a different operating cost.

Even if [NTN] has a loan amount that equals its cash
deposits or can demonstrate a “paper trail” connecting
the loan amount to cash deposits, [Commerce] do[es] not
consider the loan amount to be related to the cash
deposits and will not remove it from the indirect selling
expenses. Moreover, the result should not be different
where an actual expense can not be associated in any way
with the cash deposits. [Commerce] reject[s] imputation
of an adjustment both for this reason [as well as another
reason]: there is no real opportunity cost associated
with cash deposits when the paying of such deposits is a
precondition for doing business in the United States. As
a result, [Commerce] ha[s] not accepted NTN’s reduction
in indirect selling expenses based on actual borrowings
to finance cash deposits nor will [Commerce] accept such
a reduction based on imputed borrowings. [Commerce]
consider[s] all financial expenses the affiliated
importer incurred with respect to sales of subject
merchandise in the United States to be indirect selling
expenses . . . .

Although [Commerce] ha[s] allowed removal of
expenses for financing cash deposits in [one previous
case, Commerce] reexamined this issue . . . and concluded
that the new policy best reflects commercial reality with
respect to affiliated importer situations.

Id. (internal quotation and citations omitted).

B. CONTENTIONS OF THE PARTIES

NTN asserts that Commerce wrongly denied an adjustment to

NTN’s United States indirect selling expenses for interest that NTN

allegedly incurred in financing cash deposits for antidumping

duties. See Rule 56.2 Mot. and Mem. J. Agency R. Submitted Behalf
Consol. Court No. 98-07-02527 Page 32

Pls. and Def.-Intervenors, NTN (“NTN’s Mem.”) at 7, 11-13. NTN

contends that the denial is inconsistent with Commerce’s previous

position that the costs incurred solely in financing antidumping

duty cash deposits cannot be categorized as selling expenses. See

id. at 11 (citing Federal-Mogul Corp. v. United States, 20 CIT

1438, 1440-41, 950 F. Supp. 1179, 1182-83 (1996), and Final Results

of Antidumping Duty Administrative Reviews of Antifriction Bearings

(Other than Tapered Roller Bearings) and Parts Thereof From France,

Germany, Italy, Japan, Singapore, and the United Kingdom (“Previous

Ruling”), 62 Fed. Reg. 2087,3 2104 (Jan. 15, 1997)).

Commerce maintains that Commerce’s denial of an adjustment to

NTN’s United States indirect selling expenses for the expenses

related to the financing of antidumping duty cash deposits

reflected Commerce’s reasonable reading and application of the

statutory mandate. See Def.’s Mem. at 34-39. Torrington supports

Commerce’s contention and points out that: (1) “allowing [United

States] selling expenses to be reduced in the manner claimed by NTN

runs counter to the purpose of the antidumping law, which is to

discourage the unfair practice of dumping,” Torrington’s Resp. at

20; and (2) NTN failed to demonstrate that it actually incurred

interest expenses attributable to financing payment of antidumping

3
The Court presumes that NTN, while citing to 62 Fed. Reg.
2087, intended to cite to 62 Fed. Reg. 2081.
Consol. Court No. 98-07-02527 Page 33

duty cash deposits. See id. at 21.

C. ANALYSIS

1. COMMERCE ’S CHANGES OF POLICY

Agency statements provide guidance to regulated industries.

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

implements one policy and decides to consider the merits of a

potentially inconsistent policy in the very near future,’”

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

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

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

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

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

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

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

administrative agency to administer a congressionally created . .

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

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

(1974)).

An agency decision involving the meaning or reach of a statute

that reconciles conflicting policies “‘represents a reasonable

accommodation of conflicting policies that were committed to the

agency’s care by the statute, [and a reviewing court] should not
Consol. Court No. 98-07-02527 Page 34

disturb [an agency’s decision] unless it appears from the statute

or its legislative history that the accommodation is not one that

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

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

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

continuing basis. Under the Chevron regime, agency discretion to

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

assumption that Congress intended to freeze an administrative

interpretation of a statute would be entirely contrary to the

concept of Chevron which assumes and approves of an administrative

agency’s ability to change their interpretations. See, e.g.,

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

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

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

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

interpretative policies “are given controlling weight unless they

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

Chevron 467 U.S. at 844.

2. COMMERCE ’S DETERMINATION AT BAR

Certain expenses incurred by the affiliated seller during the

process of selling the subject merchandise in the United States are

subject to deduction from the CEP of the seller. See 19 U.S.C. §

1677a(d)(1). However, Section 1677a(d)(1) of Title 19 does not
Consol. Court No. 98-07-02527 Page 35

provide a closed and exhaustive list of such expenses. See id.

Consequently, Commerce considers certain ancillary expenses as part

of the incurred indirect expenses subject to deduction under

Section 1677a(d)(1). For example, while antidumping duties and

cash deposits have never been considered by Commerce as expenses

deductible from United States price, see Final Results of

Antidumping Duty Administrative Reviews of Antifriction Bearings

(Other Than Tapered Roller Bearings) and Parts Thereof From France,

Germany, Italy, Japan, Romania, Singapore, Sweden and the United

Kingdom (“Later Ruling”), 62 Fed. Reg. 54,043, 54,079 (Oct. 17,

1997), interest expenses incurred in connection with selling

activities in the United States were deemed deductible from United

States price. See Final Results, 63 Fed. Reg. at 33,348.

Therefore, for those expenses that Commerce deemed to be non-

selling expenses, Commerce allowed an adjustment to indirect

selling expenses. See id.

For some period of time, Commerce’s practice was to deem

financing interest of cash deposits as not a selling expense and,

therefore, Commerce did allow respondents that incurred financing

interest of cash deposits to deduct such interest from indirect

selling expenses prior to the deduction of such indirect selling

expenses from the CEP. See Previous Ruling, 62 Fed. Reg. at 2104.

However, at a later point, Commerce reexamined this practice and
Consol. Court No. 98-07-02527 Page 36

the policies underlying it. Specifically, Commerce observed that

[t]he statute does not contain a precise definition of
what constitutes a selling expense. Instead, Congress
gave [Commerce] discretion in this area. It is a matter
of policy whether [Commerce] consider[s] there to be any
financing expenses associated with cash deposits.
[Commerce] recognize[s] that [Commerce] ha[s], to a
limited extent, removed such expenses from indirect
selling expenses for such financing expenses in past
reviews . . . . However, [Commerce] ha[s] reconsidered
[Commerce’s] position on this matter and ha[s] now
concluded that this practice is inappropriate.

Later Ruling, 62 Fed. Reg. at 54,079.

Commerce has the discretion to alter its policy, so long as

Commerce presents a reasonable rationale for its departure from the

previous practice. See Chevron, 467 U.S. at 843, Timken Co. v.

United States, 22 CIT 621, 628, 16 F. Supp. 2d 1102, 1106 (1998).

Commerce explained its rationale for the reconsideration as

follows:

Underlying [Commerce’s] logic . . . is an attempt to
distinguish between business expenses that arise from
economic activities in the United States and business
expenses that are direct, inevitable consequences of the
dumping order.

Financial expenses allegedly associated with cash
deposits are not a direct, inevitable consequence of an
antidumping order. . . . Companies may choose to meet
obligations for cash deposits in a variety of ways that
rely on existing capital resources or that require
raising new resources through debt or equity. . . . In
fact, companies face these choices every day regarding
all their expenses and financial obligations. There is
nothing inevitable about a company having to finance cash
deposits and there is no way for [Commerce] to trace the
motivation or use of such funds even if it were.
Consol. Court No. 98-07-02527 Page 37

. . . .

So, while under the statute [Commerce] may allow a
limited exemption from deductions from [United States]
price for cash deposits themselves and legal fees
associated with participation in dumping cases,
[Commerce] do[es] not see a sound basis for extending
this exemption to financing expenses allegedly associated
with financing cash deposits. . . .

[Commerce] see[s] no merit to the argument that,
since [Commerce] do[es] not deduct cash deposits from
[United States] price, [Commerce] should also not deduct
financing expenses that are arbitrarily associated with
cash deposits. To draw an analogy as to why this logic is
flawed, [Commerce] also do[es] not deduct corporate taxes
from [United States] price; however, [Commerce] would not
consider a reduction in selling expenses to reflect
financing alleged to be associated with payment of such
taxes.

Later Ruling, 62 Fed. Reg. at 54,079.

The Court finds Commerce’s rationale for reconsideration

convincing. Cf. Timken Co., 22 CIT at 628, 16 F. Supp. 2d at 1106

(upholding Commerce’s reconsideration and noting that, while the

Court could be concerned with Commerce’s sudden change in practice,

Commerce is afforded significant deference in its statutory

interpretation). Moreover, the Court holds that Commerce’s current

interpretation of Section 1677a(d)(1) is reasonable. Accord

Chevron, 467 U.S. at 845; Koyo Seiko Co. v. United States, 26 CIT

___, ___, 186 F. Supp. 2d 1332, 1337 (2002); NTN Bearing Corp. of

Am. v. United States, ___ CIT ___, ___, 186 F. Supp. 2d 1257, 1322

(2002). Therefore, the Court affirms Commerce’s decision to deny

an adjustment to NTN’s United States indirect selling expenses for
Consol. Court No. 98-07-02527 Page 38

interest allegedly incurred by NTN in financing NTN’s cash deposits

for antidumping duties.

V. Commerce’s Decision to Include in United States
Sales Database Sample Transactions that
Were Allegedly Made for No Consideration

A. BACKGROUND

In order to calculate a respondent’s margin of dumping,

Commerce compares NV with export price (“EP”) or CEP. EP and CEP

are defined in 19 U.S.C. § 1677a(a) and (b) (1994), respectively.

Each definition refers to the price at which the subject

merchandise “is first sold . . . .” 19 U.S.C. § 1677a(a) and (b)

(emphasis supplied). In NSK Ltd. v. United States, 115 F.3d 965

(Fed. Cir. 1997), the Court of Appeals for the Federal Circuit

(“CAFC”) held that the usage of the term “sale” in 19 U.S.C. §

1677a(a) and (b) indicates a reference to a transaction involving

a material consideration. Specifically, the CAFC clarified that,

in order to be considered a sale within the meaning of the

antidumping law, a transaction must involve “both a transfer of

ownership to an unrelated party and consideration.” NSK, 115 F.3d

at 975; accord SKF USA Inc. v. United States, 23 CIT 299; 53 F.

Supp. 2d 1330 (1999).

In accordance with NSK, 115 F.3d at 975, Commerce revised its

policy with respect to sales of sample products. As a result of
Consol. Court No. 98-07-02527 Page 39

its revised policy, Commerce excludes from the margin calculation

sample transactions for which a respondent has established that

there is either no transfer of ownership or no receipts of a

consideration. See, e.g., Later Ruling, 62 Fed. Reg. at 54,070;

Final Results, 63 Fed. Reg. at 33,342. Commerce, however, noticed

that Commerce would not automatically exclude from its dumping

analysis any transaction merely because the transaction is labeled

by a respondent as a “sample sale.” Commerce explained that

[i]n light of the CAFC’s opinion, [Commerce] ha[s] re-
evaluated and revised [its] policy with respect to sales
of sample products. Therefore, pursuant to the CAFC’s
opinion, [Commerce] now excludes from the margin
calculation sample transactions for which a respondent
has established that there is [either] no transfer of
ownership [or] no consideration.

This new policy does not mean that [Commerce]
automatically excludes from analysis any transaction to
which a respondent applies the label “sample.” In fact,
in these reviews, [Commerce] determined that there were
instances where [Commerce] should not exclude such
alleged samples from [Commerce’s] dumping analysis. It
is well-established that the burden of proof rests with
the party in possession of the needed information. . .
. In several cases . . . respondents failed to
demonstrate or to submit documentation to show that their
claimed sample sales lacked consideration. When
respondents failed to support their sample claim,
[Commerce] did not exclude the alleged samples from
[Commerce’s] margin analysis. Because the inclusion of
zero-priced transactions in the home-market database
would benefit respondents by lowering average normal
value, however, [Commerce] excluded zero-priced items
from the home-market database when such unsupported
transactions occurred in the home market.

Final Results, 63 Fed. Reg. at 33,342.
Consol. Court No. 98-07-02527 Page 40

B. CONTENTIONS OF THE PARTIES

NTN contends that Commerce acted contrary to NSK, 115 F.3d

965, and SKF, 23 CIT 299, 53 F. Supp. 2d 1330, when it included

NTN’s sample sales in NTN’s United States sales database. See NTN’s

Mem. at 13.

Commerce maintains that Commerce properly included NTN’s zero-

priced United States sales in NTN’s United States sales database

and NTN’s dumping margin calculation as “facts available.” See

Def.’s Mem. at 40-45. Specifically, Commerce maintains that this

action was warranted since “NTN withheld information requested by

Commerce which would have permitted Commerce to evaluate whether

NTN received consideration for these transactions.” Id. at 39-40.

Torrington supports Commerce’s position and asserts that NTN’s

zero-price transactions could be not free of broader forms of

consideration as a part of some broad contractual agreement. See

Torrington’s Resp. at 22-24. In addition, Torrington suggests that

NTN could have been offering free samples to its clients as a part

of a paid-for package, for example “ten [paid-for] units plus a

[free] sample.”4 See id. at 23 (internal quotation omitted).

4
The Court will not entertain Torrington’s arguments since
they are based on speculations rather than facts. As NTN correctly
points out, “Torrington’s argument amounts to nothing more than
conjecture [without] support from the factual evidence on the
record.” Reply Pls. NTN Gov’t’s and Torrington’s Aug. 6, 1999,
Opp’n Mem. and Resp. Br. (NTN’s Reply) at 5.
Consol. Court No. 98-07-02527 Page 41

C. ANALYSIS

Commerce is correct in its reading of the language of NSK, 115

F.3d at 975, as stating that Commerce is not obligated to exclude

any transaction from the United States sales database merely

because such transaction is labeled as a sample sale. Cf. Def.’s

Mem. at 41. Similarly, Commerce is correct in its conclusion that

nothing in the statutory mandate or in the holding of NSK, 115 F.3d

at 975, precludes Commerce from requiring a party to demonstrate

that it received no consideration in return for the samples. See

id.

During the review at issue, Commerce distributed its

questionnaire that requested respondents to identify reported

sample transactions by a pertinent code and, in addition: (1)

define transactions placed in a sample sale category; (2) describe

how the orders for these sales were communicated; (3) list

documents available to demonstrate that these sales were samples;

and (4) state whether the customer in question purchased these

particular items before the date of the claimed sample sale and, if

so, the amount of items previously purchased. See NTN’s Mem. Ex.

2. In response, NTN stated that the samples were provided to

customers for the purpose of allowing the customer to determine

whether a particular product is suited to the customer’s needs and

described NTN’s process of furnishing samples as follows: (1) a
Consol. Court No. 98-07-02527 Page 42

customer requests a sample; (2) the sample is being coded and the

order number is recorded; and (3) there are no references made to

the issue of whether the customer may have purchased the particular

items previously. See id. NTN also clarified that a sample could

be requested for any new application, regardless of previous

furnishments of the same sample or purchases of the product

identical to the sample. See id. Examining these responses,

Commerce concluded that NTN failed to respond adequately to

Commerce’s questions. See Def.’s Mem. at 43. Therefore, Commerce

determined that it was appropriate to resort to facts available and

to draw an adverse inference. See id. Commerce concluded that the

information provided by NTN left Commerce in the dark on the issue

of whether the items were provided as samples or as a discount in

conjunction with other sales. See id. at 43-44. Consequently,

Commerce included NTN’s claimed sample sales in NTN’s United States

sales database because Commerce expected NTN, the party in

possession of the pertinent information, to carry the burden of

producing that information, particularly when NTN was seeking a

favorable adjustment or exclusion. See id., see also Final

Results, 63 Fed. Reg. at 33,343. Specifically, Commerce concluded

that it was reasonable for Commerce to resort to “facts available”

under 19 U.S.C. § 1677e(a)(2)(A) (1994) since Commerce’s

determination was handicapped by NTN’s failure to clarify the

history of parties receiving samples. See Def.’s Mem. at 43-44.
Consol. Court No. 98-07-02527 Page 43

While the Court disagrees with Commerce on the applicability

of 19 U.S.C. § 1677e(a)(2)(A) and the reference to the usage of

“facts available,”5 the Court holds that Commerce’s decision to

include the sales designated by NTN as sample ones in NTN’s United

States sales is reasonable. Indeed, the Court sees little reason

in supplying and re-supplying and yet re-supplying the very same

sample to the very same customer in order to persuade the customer

to purchase the item, if such supplies are made within reasonably

short periods of time. It would be even less logical to supply a

sample to a client that has made a recent bulk purchase of the very

item being sampled to the client. Therefore, Commerce’s interest

in the history of the samples furnished to particular clients was

entirely legitimate.

Commerce is correct in its observation that “[i]t is well

settled that the party in possession of information has the burden

of producing that information in order to obtain a favorable

adjustment or exclusion.” Def.’s Mem. at 44 (relying on Zenith

Elecs. Corp. v. United States, 988 F.2d 1573, 1583 (Fed. Cir.

1993); Timken Co. v. United States, 11 CIT 786, 804, 673 F. Supp.

5
The statute provides that “[i]f . . . an interested party .
. . withholds information that has been requested by [Commerce] .
. . , [Commerce] shall . . . use the facts otherwise available in
reaching the applicable determination . . . .” 19 U.S.C. §
1677e(a)(2)(A) (emphasis supplied). Indeed, the process of
including sample sales cannot be qualified as usage of facts
otherwise available.
Consol. Court No. 98-07-02527 Page 44

495, 513 (1987)).

In the case at bar, NTN was the party either in possession of

the information regarding the purchase history of its alleged

samples, including the price and quantity for any prior or

subsequent purchases of these products by the same or other

customers, or the party obligated to create and preserve such

information in order to obtain a more favorable margin. NTN’s

failure to either trace or supply such information to Commerce does

not impose an obligation on Commerce to interpret the gaps of

information in NTN’s favor. Indeed, the statutory mandate and the

language of NSK, 115 F.3d at 975, applies only to those situations

when a respondent can show that the transaction at issue was a

sample sale for no consideration. Neither the statute nor NSK, 115

F.3d at 975, encompass the infinite variety of situations where

Commerce could hypothesize that the transactions under review could

have been sample sales for no consideration. As Commerce correctly

observes, “NTN cannot be excused from responding to Commerce’s

questions because, in [NTN’s] view, the history of prior purchases

of samples ‘does not affect the status of subsequent sales.’”

Def.’s Mem. at 44 (quoting NTN’s Mem. Ex. 2). Indeed, it is for

Commerce and not for the respondents to determine the relevancy of

Commerce’s questions.
Consol. Court No. 98-07-02527 Page 45

Therefore, since the record does not contain necessary

information, Commerce could reasonably conclude that the

information missing would indicate that the transactions at issue

were not sample sales for no consideration within the meaning of 19

U.S.C. § 1677a(a) and (b) and NSK, 115 F.3d 965. For these reason,

the Court affirms Commerce’s decision to include NTN’s alleged

samples in Commerce’s final dumping margin calculation.

VI. Commerce’s Decision to Exclude from the Margin
Calculation the Home Market Sales with High
Profits and Home Market Sample Sales

A. BACKGROUND

According to a pertinent provision, NV shall be based upon

“the price at which the foreign[-]like product is first sold . . .

in the ordinary course of trade . . . .” 19 U.S.C. §

1677b(a)(1)(B)(i). The term “ordinary course of trade” is defined

as

conditions and practices which, for a reasonable time
prior to the exportation of the subject merchandise, have
been normal in the trade under consideration with respect
to merchandise of the same class or kind. [Commerce]
shall consider the following sales and transactions,
among others, to be outside the ordinary course of trade:
(A) [s]ales disregarded under[19 U.S.C §] 1677b(b)(1)
[(1994);] (B) [t]ransactions disregarded under [19 U.S.C
§] 1677b(f)(2).

19 U.S.C. § 1677(15).

Section 1677b(b)(1), in turn, addresses the issue of below-
Consol. Court No. 98-07-02527 Page 46

cost sales. Section 1677b(f)(2), respectively, deals with the

issue of transactions between affiliated parties. While both

issues are irrelevant to the part of the determination being

reviewed since neither below-cost sales nor transactions between

affiliated parties were involved, there is a question as to what

other transactions Commerce could consider to fall outside the

“ordinary course of trade.” Examining the statutory language,

Commerce concluded that the term “among others” indicated that

sales or transactions other than those involving below-cost sales

or transactions between affiliated parties could be considered

outside the “ordinary course of trade.” See Def.’s Mem. at 46-49.

Moreover, Commerce concluded that the usage of the term “among

others” without particular definition of such “other” transactions

indicated that Congress intended to grant Commerce broad discretion

on the issue and enabled Commerce to devise an appropriate

methodology for determining when sales are to be considered as

outside the ordinary course of trade. See id. Commerce’s

interpretation of the statutory mandate relied on an explanation

contained in the SAA which provides that

Commerce may consider other types of sales or
transactions to be outside the ordinary course of trade
when such sales or transactions have characteristics that
are not ordinary as compared to sales or transactions
generally made in the same market. Examples of such sales
or transactions include merchandise produced according to
unusual product specifications[] [or] merchandise sold at
aberrational prices.
Consol. Court No. 98-07-02527 Page 47

. . . .

[Section 1677(15)] does not establish an exhaustive list,
but [the statutory scheme] intends that Commerce will
interpret [19 U.S.C. § 1677(15)] in a manner which will
avoid basing normal value on sales which are
extraordinary for the market in question, particularly
when the use of such sales would lead to irrational or
unrepresentative results.

H.R. DOC. 103-316 at 834, reprinted in 1994 U.S.C.C.A.N. at 4171.

Therefore, in the case at bar, Commerce exercised its

discretion and determined that NTN’s highly profitable sales and

sample sales for which NTN received consideration were not

demonstrated to be outside the ordinary course of trade.

B. CONTENTIONS OF THE PARTIES

NTN contends that Commerce erred in not excluding NTN’s home

market sales with unusually high profit levels and home market

sample sales from the margin calculation because they were outside

the ordinary course of trade. See NTN’s Mem at 3-4, 7, 14-17.

Commerce asserts that Commerce’s determination was a

reasonable application of the statutory mandate and supported by

substantial evidence. See Def.’s Mem. at 46-49. Torrington

supports Commerce’s position and states that Commerce correctly

included NTN’s sales alleged to be made outside the ordinary course

of business in the NV calculation. See Torrington’s Resp. at 24.
Consol. Court No. 98-07-02527 Page 48

C. ANALYSIS

“Commerce has the discretion to decide under what

circumstances highly profitable sales would be considered to be

outside of the ordinary course of trade.” Koenig & Bauer-Albert AG

v. United States, 22 CIT 574, 589, 15 F. Supp. 2d 834, 850 (1998),

vacated on other grounds, Koenig & Bauer-Albert AG v. United

States, 259 F.3d 1341 (Fed. Cir. 2001); Mitsubishi Heavy Indus. v.

United States, 22 CIT 541, 568, 15 F. Supp. 2d 807, 830 (1998);

Notice of Final Determination of Sales at Less Than Fair Value:

Large Newspaper Printing Presses and Components Thereof, Whether

Assembled or Unassembled, From Germany, 61 Fed. Reg. 38,166, 38,178

(July 23, 1996); Notice of Final Determination of Sales at Less

Than Fair Value: Large Newspaper Printing Presses and Components

Thereof, Whether Assembled or Unassembled, From Japan, 61 Fed. Reg.

38139 (July 23, 1996).

Commerce explains that it refuses to exclude certain highly

profitable sales from its calculation of profit for CV: (1) solely

on the basis of a mere fact of certain sales having profits higher

than those of numerous other sales; (2) because Commerce needs a

showing of certain unique or unusual characteristics related to the

sales in question in order to consider the transactions outside the

ordinary course of trade; and (3) in those situations where the

respondent fails to provide credible information other than the
Consol. Court No. 98-07-02527 Page 49

numerical profit amounts to support the respondent’s contention

that certain home market sales (a) have abnormally high profits,

and (b) are outside ordinary course of trade, and such transactions

may be considered by Commerce as made in ordinary course of trade.

See Def.’s Mem. at 49 (relying on Zenith Elecs., 988 F.2d at 1583;

Koenig & Bauer-Albert, 22 CIT 574, 15 F. Supp. 2d 834; Mitsubishi

Heavy Indus., 22 CIT 541, 568, 15 F. Supp. 2d 807, 830).

Consequently, Commerce’s determination whether the profits earned

by a respondent in specific sales are abnormal rests upon a number

of factors. See Final Rule on Antidumping Duties; Countervailing

Duties (“Final Rule”), 62 Fed. Reg. 27,296, 27,299 ( May 19, 1997).

During the review at issue, Commerce rejected NTN’s argument

that Commerce should exclude home market sample sales and sales

with abnormally high profits as outside the ordinary course of

trade and stated that,

[w]ith regard to home-market “sample” sales . . . claimed
[to be] outside the ordinary course of trade,
[Commerce’s] practice is to exclude home-market sales
transactions from the margin calculation as outside the
ordinary course of trade based on all the circumstances
particular to the sales in question. See Murata Mfg. Co.
v. United States, [17 CIT 259, 264,] 820 F. Supp. 603,
607 (. . . 1993). With regard to NTN’s abnormally high-
profit sales, the presence of profits higher than those
of numerous other sales does not necessarily place the
sales outside the ordinary course of trade. In order to
determine that a sale is outside the ordinary course of
trade due to abnormally high profits, there must be
unique and unusual characteristics related to the sale in
question which make it unrepresentative of the home
market. See CEMEX, S.A. v. United States, 133 F.3d
Consol. Court No. 98-07-02527 Page 50

[897,] 900 ([1998]). However, [NTN] has provided no
information other than the numerical profit amounts to
support its contention that these home-market sales had
abnormally high profits. The simple fact of high
profits, standing alone, is not sufficient to find sales
to be outside the ordinary course of trade. Accordingly,
[Commerce] ha[s] not excluded NTN’s “sample” sales with
allegedly high profits in calculating normal value.

Final Results, 63 Fed. Reg. at 33,344 (emphasis omitted).

During the review, NTN, in support of its claim that samples

and sales “with abnormally high profit levels” were not in the

ordinary course of trade, asserted that: (1) any sale with a profit

level greater than a certain percentage would be automatically

deemed being outside the ordinary course of trade because that

percentage was the greatest profit level in the range of profits at

which most of the quantity of subject merchandise was sold; or (2)

all sales with a profit level exceeding a certain percentage be

treated as sales not in the ordinary course of trade because the

majority of pieces sold above cost did not exceed this profit

level. See NTN’s Mem. Ex. 2. However, the presence of profits

higher than those of numerous other sales does not necessarily

place the sales outside the ordinary course of trade. Accord Final

Results, 63 Fed. Reg. at 33,344. Lack of showing that the

transactions at issue possessed some unique and unusual

characteristics that made them unrepresentative of the home market

made it reasonable for Commerce to include these transactions in
Consol. Court No. 98-07-02527 Page 51

NTN’s home market database.6 Cf. NTN Bearing Corp. of Am. v.

United States, 19 CIT 1221, 1229, 905 F. Supp. 1083, 1091 (1995)

(stating that “[w]ithout a complete explanation of the facts which

establish the extraordinary circumstances rendering particular

sales outside the ordinary course of trade, Commerce cannot exclude

those sales from [NV]”). Therefore, the Court upholds Commerce’s

decision to include NTN’s sample sales and sales with high profit

in the margin calculation of NTN’s home market sales.

VII. Commerce’s Decision to Disregard Sales to Affiliated
Customers in the Calculation of Normal Value

A. BACKGROUND

Under the relevant statute, Commerce may base NV on the price

paid by a related party. See 19 U.S.C. § 1677b(a)(3) (1994).

Commerce, however, may exclude related party sales in certain

situations. Specifically, Commerce’s regulation provides that,

[i]f a producer or reseller sold such or similar
merchandise to a person related as described [19 U.S.C.
§ 1677(13)), [Commerce] ordinarily will calculate [NV]
based on that sale only if satisfied that the price is
comparable to the price at which the producer or reseller
sold such or similar merchandise to a person not related

6
NTN’s alternative argument, namely, that the sample sales
fall outside the ordinary course of trade because they are provided
to customers for the sole purpose of allowing the customers to
determine whether a particular product is suited for their needs,
see NTN’s Mem. at 16, is equally unpersuasive for the same reason.
See NTN Bearing Corp. of Am. v. United States, 25 CIT ___, 155 F.
Supp. 2d 715 (2001); NSK Ltd., 25 CIT ___, 170 F. Supp. 2d 1280;
Torrington Co., 25 CIT ___, 146 F. Supp. 2d 845.
Consol. Court No. 98-07-02527 Page 52

to the seller.

19 C.F.R. § 353.45(a) (1996).

Pursuant to the regulation, Commerce does not utilize the home

market affiliated party sale unless the producer or reseller is

able to demonstrate that the transaction was made at arm’s length.

See NEC Home Elecs., Ltd. v. United States, 54 F.3d 736, 739 (Fed.

Cir. 1995) (citing Mitsubishi Heavy Indus. v. United States, 17 CIT

1024, 1028-29, 833 F. Supp. 919, 923 (1993)). To make the

requisite showing, the respondent has to present evidence

establishing to Commerce’s satisfaction that the prices charged to

a related party were comparable to those charged to an unrelated

party. See 19 C.F.R. § 353.45(a). Commerce also established a

practice to determine comparability by examining whether, on

average, related party prices were equal to or greater than

unrelated party prices. See, e.g., Final Results of Antidumping

Duty Administrative Review of Gray Portland Cement and Clinker From

Japan, 58 Fed. Reg. 48,826, 48,829 (Sept. 20, 1993); Final

Determination of Sales at Less Than Fair Value, Gray Portland

Cement and Clinker From Mexico, 55 Fed. Reg. 29,244, 29,250 (July

18, 1990).
Consol. Court No. 98-07-02527 Page 53

B. CONTENTIONS OF THE PARTIES

NTN asserts that, in refusing to use affiliated party sales in

its calculation of NV, Commerce: (1) erroneously applied its arm’s-

length test; and (2) relied upon a methodology that was unlawful

and not supported by substantial evidence. See NTN Mem. at 8, 17-

19; NTN’s Reply at 13-14. Specifically, NTN maintains that, since

price is only one factor that affects comparability, Commerce, in

its process of determining whether prices are comparable, should

have examined other factors than price. See id. In addition, NTN

points out that it is “inconsistent for [Commerce] to consider

[other] factors [than price] in [Commerce’s] ordinary course of

trade determination, while ignoring [other factors] when conducting

[Commerce’s] arm’s[-]length test.”7 NTN’s Reply at 13.

Commerce argues that the issue should not be entertained by

the Court since Commerce believes that NTN failed to exhausts NTN’s

administrative remedies with regard to this issue. See Def.’s Mem.

at 53-59. Alternatively, Commerce maintains that Commerce’s

7
The Court is not convinced by the analogy drawn by NTN.
There is a distinction between “ordinary course of trade” per se
and “ordinary course of trade” among affiliated parties. While the
former stands for a party’s average practice of dealing with the
world at large, the latter means a combination of actual and
implied agreements between affiliates. Indeed, it is not hard to
fancy a situation where a party that trades widgets to the world on
a set of conditions and at the price of a dollar per widget, sells
the same merchandise to the party’s affiliates on the very same
conditions but at a penny a widget.
Consol. Court No. 98-07-02527 Page 54

methodology is reasonable and in accordance with the broader

mandate of 19 U.S.C. § 1677b(a)(3). See id. at 55-57. Torrington

supports Commerce’s assertion and points out that, in any event,

NTN failed to propose “how these other factors should have affected

Commerce’s determination.” Torrington’s Resp. at 26.

C. ANALYSIS

1. EXHAUSTION OF ADMINISTRATIVE REMEDIES

As a preliminary matter, Commerce asserts that the issue of

whether Commerce erred in its decision to disregard NTN’s sales to

affiliated customers in Commerce’s calculation of NV should not be

entertained by this Court since, according to Commerce, NTN failed

to exhaust NTN’s administrative remedies.

The exhaustion doctrine requires a party to present its claims

to the relevant administrative agency for the agency’s

consideration before raising these claims to the Court. See

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

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

sets aside the administrative determination upon a ground not

theretofore presented and deprives the [agency] of an opportunity

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

its action”). There is, however, no absolute requirement of

exhaustion in the Court of International Trade in
Consol. Court No. 98-07-02527 Page 55

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., 133 F.3d

at 905. Therefore, because of “judicial discretion in not

requiring litigants to exhaust administrative remedies,” the Court

is authorized to determine proper exceptions to the doctrine of

exhaustion. Alhambra Foundry, 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)).

The Court exercises 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) (in

those cases when “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
Consol. Court No. 98-07-02527 Page 56

States Cane Sugar Refiners’ Ass’n v. Block, 3 CIT 196, 201, 544 F.

Supp. 883, 887 (1982); (2) a subsequent court decision has

interpreted existing law after the administrative determination at

issue was published, and the new decision might have materially

affected the agency’s actions, see Timken, 10 CIT at 93, 630 F.

Supp. at 1334; (3) the question is one of law and does not require

further factual development and, therefore, the court does not

invade the province of the agency by considering the question, see

id.; R.R. Yardmasters of Am. v. Harris, 721 F.2d 1332, 1337-39

(D.C. Cir. 1983); and (4) the plaintiff 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,

79-80, 630 F. Supp. 1317, 1321 (1986).

During the relevant period of time, Commerce’s regulations

provided for the filing of “case briefs” by interested parties

after the publication of the preliminary results. See 19 C.F.R. §§

353.38(c)(1)(ii) and (c)(2)(1996). The regulations specified that

the “case briefs” had to contain all the arguments that, in the

submitter’s view, continued to be relevant to the final results.

See id. In the Preliminary Results, Commerce stated that it “used

sales to affiliated customers only where [Commerce] determined such

sales were made at arm’s-length prices, i.e., at prices comparable

to prices at which the firm sold identical merchandise to
Consol. Court No. 98-07-02527 Page 57

unaffiliated customers.” 63 Fed. Reg. at 6515. Thus, NTN was on

notice that if Commerce disregarded NTN’s sales to affiliated

customers, it would mean that Commerce had determined that such

sales were not made at arm’s length because they were made at

prices that were not comparable to prices at which the firm sold

identical merchandise to unrelated customers. See Def.’s Mem. at

54. Pursuant to Commerce’s regulations, NTN was obligated to raise

that issue in NTN’s case brief. According to Commerce, “NTN’s case

brief, however, did not raise the affiliated party issue.” Def.’s

Mem. at 54 (citing NTN’s Mem. Ex. 1). Commerce, therefore, asserts

that: (1) “[i]t would[] . . . be unjust to Commerce to require the

agency to waste public resources [by] addressing an issue which NTN

had the opportunity to call to Commerce’s attention, but failed to

do so,” Def.’s Mem. at 54 (citing Rhone Poulenc Inc. v. United

States, 899 F.2d 1185, 1191 (Fed. Cir. 1990)); and (2) “NTN should

be barred from arguing, for the first time before this Court, that

Commerce applied its arm’s[-]length test erroneously.” See id.

The Court disagrees. First of all, while NTN did not offer a

lengthy discussion of the issue, see NTN’s Reply at 11; NTN’s Mem.

Ex. 5, NTN provided Commerce with sufficient notice that the issue:

(1) needs to be considered by Commerce; and (2) may be re-litigated

at the Court. The purpose behind the doctrine of exhaustion is to

prevent courts from premature involvement in administrative
Consol. Court No. 98-07-02527 Page 58

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 decision-making; [(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 fact-finding .

. .” and by resolving sole claims without judicial intervention.”

Citation omitted).

While a plaintiff cannot circumvent the requirements of the

doctrine of exhaustion by merely mentioning a broad issue without

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

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

reasonable clarity and avails the agency with an opportunity to

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

(1941); see also Rhone Poulenc, 899 F.2d at 1191. An agency’s

failure to address plaintiff’s challenge, however, does not invoke

the exhaustion doctrine and shall not result in forfeiture of
Consol. Court No. 98-07-02527 Page 59

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 of 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).

Moreover, NTN is correct in its assertion that the issue

squarely falls within futility exception. See Von Hoffburg v.

Alexander, 615 F.2d 633, 638 (1980) (stating that the exhaustion is

futile if an agency: (1) consistently applies the challenged policy

or methodology; (2) issues rules, regulations or bulletins

promulgating such policy or methodology; and (3) rejects similar

challenges); see also Rhone Poulenc, S.A., 7 CIT at 135, 583 F.

Supp. at 610; United States Cane Sugar Refiners’ Ass’n, 3 CIT at

201, 544 F. Supp. at 887. NTN brought the very same issue to

Commerce’s attention twice before the review at issue was conducted

and, in each of those situations, Commerce refused to look at

factors other than price when determining price compatibility. See

Final Results of Antidumping Duty Administrative Reviews of

Antifriction Bearings (Other Than Tapered Roller Bearings) and

Parts Thereof From France, Germany, Italy, Japan, Singapore, and

the United Kingdom, 62 Fed. Reg. 2081, 2122 (Jan. 15, 1997); Final

Results of Antidumping Duty Administrative Reviews and Partial
Consol. Court No. 98-07-02527 Page 60

Termination of Administrative Reviews of Antifriction Bearings

(Other Than Tapered Roller Bearings) and Parts Thereof From France,

Germany, Italy, Japan, Singapore, Sweden, and the United Kingdom,

61 Fed. Reg. 66,472, 66,511 (Dec. 17, 1996). Therefore, the Court

holds that not only did NTN sufficiently preserve the issue for

consideration by this Court, but the exhaustion doctrine is

inapplicable to the question of whether Commerce erred in its

decision to disregard NTN’s sales to affiliated customers in the

calculation of NV.

2. COMMERCE ’S DETERMINATION AT BAR

NTN argues that, in determining whether the prices were

comparable, Commerce should not only have relied on whether or not

the prices of the sales to affiliated parties were higher or lower

than those of unrelated parties, but also should have examined

other factors as well. See NTN’s Mem. at 18. While the Court does

not state that NTN’s contention is entirely without merit, the

Court cannot render Commerce’s methodology or the reasoning

underlying it unreasonable.8 See NSK Ltd. v. United States, 21 CIT

8
NTN cites to NEC Home Elecs. Ltd. v. United States, 22 CIT
167, 171, 3 F. Supp. 2d 1451, 1455 (1998), for the proposition that
“a standard which did not take into account factors other than
price was ‘unreasonable and constitutes an abuse of discretion.’”
NTN’s Mem. at 19. NTN’s reliance on NEC Home Elecs., 22 CIT at
171, 3 F. Supp. 2d at 1455, is, however, misplaced. The case
applies to a scenario where the party being reviewed made no
unrelated party sales, and, thus, the only price information it
Consol. Court No. 98-07-02527 Page 61

617, 969 F. Supp. 34 (1997), rev’d on other grounds, NSK Ltd. v.

Koyo Seiko Co., 190 F.3d 1321 (Fed. Cir. 1999); NTN Bearing Corp.

of Am. v. United States, 19 CIT 1221, 1241, 905 F. Supp. 1083, 1100

(1995); Micron Tech., Inc. v. United States, 19 CIT 829, 846, 893

F. Supp. 21, 38 (1995); Usinor Sacilor v. United States, 18 CIT

1155, 1158, 872 F. Supp. 1000, 1004 (1994); accord Koyo Seiko, 36

F.3d at 1570 (“[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., 965 F.2d at 1061.

VIII. Commerce’s Use of Affiliated Supplier’s
Cost of Production for Inputs When the
Cost Was Higher than the Transfer Price

A. BACKGROUND

During the review at issue, Commerce used the higher of the

transfer price or the actual cost in calculating cost of production

(“COP”) and CV in situations involving inputs that NTN had obtained

from affiliated producers. See Final Results, 63 Fed. Reg. at

... cont.

could produce was that of its sales to the related parties. See
NEC Home Elecs., 22 CIT at 171, 3 F. Supp. 2d at 1455. Thus, in
NEC Home Elecs. The Court recognized that where there were no
sales to unaffiliated parties during the administrative review, it
would be impossible to make a comparison of prices charged to
unaffiliated parties with those charged to affiliated parties. In
this case, no such situation exists because NTN made sales to both
affiliated and unaffiliated parties during the administrative
review, and Commerce determined that the prices were not comparable
by comparing prices to affiliated and unaffiliated parties.
Consol. Court No. 98-07-02527 Page 62

33,337. Commerce explained its decision as follows:

[Commerce] disagree[s] with NTN that [Commerce] should
accept in all instances its reported transfer prices for
transactions between affiliates. Pursuant to [19 U.S.C.
§ 1677b(f)(3) (1994)], in the case of a transaction
between affiliated persons involving the production of a
major input, [Commerce] may consider whether the amount
represented as the value of the major input is less than
its cost of production. In addition, [19 C.F.R. §
351.407 (1998) provides that] the value of a major input
purchased from an affiliated person will be based on the
higher of: (1) the price paid by the exporter or producer
to the affiliated person for the major input; (2) the
amount usually reflected in sales of the major input in
the market under consideration; or (3) the cost to the
affiliated person of producing the major input. We have
relied upon this methodology in past AFB reviews as well
as in other cases. . . .

In this case, in [Commerce’s] COP questionnaire
[Commerce] asked NTN to provide a list of the major
inputs it received from affiliated parties which it used
to produce the merchandise under review. NTN responded
to the question by directing [Commerce] to several
exhibits. These exhibits listed the inputs NTN
considered to be major inputs and provided the respective
transfer prices and cost information for the inputs.
[Commerce] examined this information and determined that
in some instances the company’s reported transfer prices
were less than their respective COP. As there were no
other market prices available in most instances,
[Commerce] restated NTN’s COP and CV in the instances
where the affiliated supplier’s COP for inputs used to
manufacture the merchandise under review was higher than
the transfer price.

Id., 63 Fed. Reg. at 33,337 (assumed to be relying on Final Results

of Antidumping Administrative Reviews of Certain Corrosion-

Resistant Carbon Steel Flat Products and Certain Cut-to-Length

Carbon Steel Plate From Canada, 62 Fed. Reg. 18,448 (Apr. 15,

1997)).
Consol. Court No. 98-07-02527 Page 63

B. CONTENTIONS OF THE PARTIES

NTN alleges that Commerce erroneously used the affiliated

supplier’s COP for inputs when it was higher than the transfer

price. See NTN’s Mem. at 8, 20-21; NTN’s Reply at 16-18.

Specifically, NTN maintains that Commerce misapplied 19 U.S.C. §

1677b(f)(3). See id.

Commerce contends that Commerce acted in accordance with the

statutory mandate and applied the provision reasonably under the

circumstances. See Def.’s Mem. at 63-68. Torrington supports

Commerce’s position and asserts that Commerce properly restated

NTN’s COP and CV in the instances where the affiliated supplier’s

COP for inputs used to manufacture the merchandise was higher than

the transfer price. See Torrington’s Resp. at 27-29.

C. ANALYSIS

The special rules for the calculation of COP and CV contained

in the pertinent provision state that, in a transaction between

affiliated persons, either the transaction or the value of a major

input may be disregarded. See 19 U.S.C. § 1677b(f). The part of

the statutory provision addressing transactions that may be

disregarded reads as follows:

A transaction directly or indirectly between affiliated
persons may be disregarded if, in the case of any element
of value required to be considered, the amount
representing that element does not fairly reflect the
Consol. Court No. 98-07-02527 Page 64

amount usually reflected in sales of merchandise under
consideration in the market under consideration. If a
transaction is disregarded under the preceding sentence
and no other transactions are available for
consideration, the determination of the amount shall be
based on the information available as to what the amount
would have been if the transaction had occurred between
persons who are not affiliated.

19 U.S.C. § 1677b(f)(2).

The so-called “major input rule,” or the part of the statutory

provision addressing the value of a major input that may be

disregarded, states, in turn, that,

[i]f, in the case of a transaction between affiliated
persons involving the production by one of such persons
of a major input to the merchandise, [Commerce] has
reasonable grounds to believe or suspect that an amount
represented as the value of such input is less than the
cost of production of such input, then [Commerce] may
determine the value of the major input on the basis of
the information available regarding such cost of
production, if such cost is greater than the amount that
would be determined for such input under paragraph [19
U.S.C. § 1677b(f)(2)].

19 U.S.C. § 1677b(f)(3).

One of the elements of value to be considered in the

calculation of COP, which is referred to in Section 1677b(f)(2), is

the cost of manufacturing and fabrication. See 19 U.S.C. §

1677b(b)(3)(A) (1994). Section 1677b(b)(3)(A) shall be read in

conjunction with 19 U.S.C. §§ 1677b(f)(2) and 1677b(f)(3) that

authorize Commerce, in calculating COP and CV, to: (1) disregard a

transaction between affiliated persons if the amount representing
Consol. Court No. 98-07-02527 Page 65

an element does not fairly reflect the amount usually reflected in

sales of merchandise under consideration in the market under

consideration; and (2) determine the value of the major input on

the basis of the information available regarding COP if Commerce

has reasonable grounds to believe or suspect that an amount

represented as the value of the input is less than the COP of the

input.

In determining whether transaction prices between affiliated

persons fairly reflect the market, Commerce’s practice has been to

compare the transaction prices with market prices charged by

unrelated parties. Commerce’s practice was later reduced to

writing in 19 C.F.R. § 351.407 (1998), a regulation which

implements 19 U.S.C. § 1677b(f). Commenting on the regulation,

Commerce stated that it

believes that the appropriate standard for determining
whether input prices are at arm’s length is its normal
practice of comparing actual affiliated party prices to
or from unaffiliated parties. This practice is the most
reasonable and objective basis for testing the arm’s
length nature of input sales between affiliated parties,
and is consistent with [19 U.S.C. § 1677b(f)(2].

Def.’s Mem. at 61 n. 16.

Pursuant to the major input rule contained in 19 U.S.C. §

1677b(f)(3), in calculating COP or CV, Commerce values a major

input purchased from an affiliated supplier using the highest of

the following: (1) the transfer price between the affiliated
Consol. Court No. 98-07-02527 Page 66

parties; (2) the market price between unaffiliated parties; (3) and

the affiliated supplier’s COP for the major input, see, e.g., Final

Results of Antidumping Duty Administrative Review of

Silicomanganese From Brazil, 62 Fed. Reg. 37,869, 37,871-72 (July

15, 1997); Notice of Final Determination of Sales at Less Than Fair

Value: Certain Steel Concrete Reinforcing Bars From Turkey, 62 Fed.

Reg. 9737, 9746 (Mar. 4, 1997); Previous ruling, 62 Fed. Reg. at

2115, since, in Commerce’s view, the affiliation between the

respondent and its suppliers “creates the potential for the

companies to act in a manner that is other than arm’s length” and

gives Commerce reason to analyze the transfer prices for major

inputs. Def.’s Mem. at 62-63. In addition, if Commerce disregards

sales that failed the below-cost sales test pursuant to 19 U.S.C.

§ 1677b(b)(1) in the prior review with respect to merchandise of

the respondent being reviewed, Commerce, has “reasonable grounds to

believe or suspect” that sales under consideration might have been

made at prices below the COP. See 19 U.S.C. § 1677b(b)(2)(A)(ii)

(1994).

Commerce disregarded sales that failed its cost test under 19

U.S.C. § 1677b(b) (1994) during the previous review with respect to

NTN’s merchandise. For this reason, Commerce concluded that it had

reasonable grounds to believe or suspect that sales of the foreign

like product under consideration may have been made at prices below
Consol. Court No. 98-07-02527 Page 67

the COP. Accord 19 U.S.C. § 1677b(b)(2)(A)(ii). Therefore,

Commerce initiated a COP investigation of sales by NTN in the home

market. See Preliminary Results, 63 Fed. Reg. at 6515. As part of

its investigation, Commerce distributed a questionnaire, which, in

pertinent part, requested NTN to provide COP and CV information.

See Def.’s Mem. at 63. Specifically, Commerce requested NTN to:

(1) list all inputs used to produce the merchandise under review;

(2) identify those inputs that NTN received from affiliated

persons; (3) provide the name of the affiliated persons from whom

each input was received; (4) list the major inputs received from

affiliated persons and used to produce the merchandise under

review; and (5) provide the per unit cost of production incurred

by the affiliated person in producing the major input and to

specify the basis used by NTN to value each major input for

purposes of computing the submitted COP and CV amounts. See id.

In response, NTN referred Commerce to a number of NTN’s exhibits

and stated, among other things, that transfer price was used in

computing COP and CV. See Def.’s Mem. Ex. 1 (proprietary version).

NTN also indicated that, for submission purposes, NTN used the

transfer price for transactions with affiliated persons regardless

of whether the transfer price was above or below the suppliers

actual COP or above or below market prices. See Def.’s Mem. at 64.

Therefore, consistent with its interpretation of 19 U.S.C. §§

1677f(2) and 1677f(3), Commerce used the higher of the transfer
Consol. Court No. 98-07-02527 Page 68

price or the actual cost in calculating COP and CV in the

situations where NTN used parts purchased from affiliated persons.

See Final Results, 63 Fed. Reg. at 33,337.

While NTN argues that there is no record evidence that the

affiliated party inputs did not “fairly reflect the amount usually

reflected in the sales of merchandise under consideration” and that

the statute makes no reference to cost, see NTN’s Mem. at 20

(relying on 19 U.S.C. § 1677b(f)(2)), the Court holds that Commerce

acted reasonably and in accord with 19 U.S.C. § 1677b(f)(3) when it

chose to determine the value of a major input on the basis of the

information available regarding COP. See Final Results, 63 Fed.

Reg. at 33,337; accord NTN Bearing Corp. of Am., 26 CIT ___, 186 F.

Supp. 2d 1257; SKF USA Inc. v. United States, 24 CIT ___, 116 F.

Supp. 2d 1257 (2000); Timken Co. v. United States, 21 CIT 1313; 989

F. Supp. 234 (1997).

Alternatively, NTN argues that 19 U.S.C. § 1677b(f)(3) does

not support Commerce’s methodology because the use of 19 U.S.C. §

1677b(f)(3) is only permitted for “major inputs” and Commerce

applied the major input rule to any input from an affiliated

person, thus failing to discriminate between major and minor

inputs. See NTN’s Mem. at 20-21. The Court agrees. Commerce’s

methodology lacks any stated reasoning as to why the “major input

rule” should apply to minor inputs. See Torrington Co. v. United
Consol. Court No. 98-07-02527 Page 69

States, 25 CIT ___, 146 F. Supp. 2d 845 (2001). While the Court is

unaware as to what extent these particular shortcomings of

Commerce’s methodology affected the determination at bar, the Court

disagrees with Commerce’s conclusion that the determination at

issue was not erroneous simply because NTN’s brief filed with this

Court has failed to point to a specific “minor” input for which

Commerce actually used COP rather than transfer value. If NTN

provided Commerce with sufficient record evidence to discriminate

between “major” and “minor” inputs, it was Commerce’s obligation to

either: (1) exclude “minor” inputs from the reach of Commerce’s

methodology reserved for “major” inputs; or (2) articulate why

Commerce’s “major input” methodology is equally applicable to

“minor” or any inputs. Therefore, the Court: (1) affirms

Commerce’s decision to use NTN’s affiliated supplier’s COP for

major inputs when COP was higher than the transfer price; and (2)

remands the issue to Commerce with regard to NTN’s minor inputs so

Commerce would: (a) either provide the Court with a sufficient and

reasonable explanation of Commerce’s methodology; or (b) if

Commerce is unable to do so, amend Final Results, 63 Fed. Reg.

33,320, accordingly.
Consol. Court No. 98-07-02527 Page 70

IX. COMMERCE ’S RECALCULATION OF NTN’S UNITED STATES INDIRECT
SELLING EXPENSES WITHOUT REGARD TO LEVELS OF TRADE

During the review, Commerce used NTN’s United States indirect

selling expenses as reported by NTN. See Preliminary Results, 63

Fed. Reg. at 6515. Consequently, Torrington asserted that Commerce

should not use NTN’s United States selling expenses based on LOTs

because, according to Torrington, NTN’s reporting rationale was not

supported by the record. See Def.’s Mem. at 66. Commerce agreed

with Torrington and observed that

due to a ministerial error, [Commerce] did not revise
NTN’s reporting of U.S. indirect selling expenses for
[Preliminary Results, 63 Fed. Reg. at 6515]. [Commerce]
ha[s] corrected the problem for [Final Results, 63 Fed.
Reg. at 33,320].

Id. at 66-67 (citing Mem. from Greg Thompson, May 20, 1999).

NTN alleges that in the Final Results, 63 Fed. Reg. at 33,329,

Commerce erroneously recalculated NTN’s United States indirect

selling expenses without regard to LOTs. See NTN’s Mem. at 5, 21-

22. Commerce maintains that the amendment by Commerce entered in

accordance with Memorandum by Greg Thompson was supported by

substantial evidence on the record. See Def.’s Mem. at 67.

Torrington supports Commerce’s position. See Torrington’s Resp. at

29-31 (citing NTN Bearing Corp. of Am., 19 CIT at 1233-35, 905 F.

Supp. at 1094-95).

The Court agrees with NTN’s observation that it would be
Consol. Court No. 98-07-02527 Page 71

anomalous for Commerce to determine that there were different LOTs

in the United States and Japanese markets for NTN’s sales of

subject merchandise while, at the same time, allocate NTN’s

indirect selling expenses without regard to LOTs if, and only if,

Commerce could actually match and compare the LOTs at issue. NTN,

purports to show this Court its entitlement to the adjustment

through a hypothesis, but NTN does not show that its allocation

methodology actually quantifies the United States indirect selling

expenses incurred at different LOTs. Cf. NSK Ltd., 25 CIT ___, 170

F. Supp. 2d 1280; NTN Bearing Corp. of Am., 24 CIT at ___, 104 F.

Supp. 2d at 131-33; NTN Bearing Corp. of Am., 19 CIT at 1233-34,

905 F. Supp. at 1094-95; NSK Ltd., 21 CIT at 635, 969 F. Supp. at

54. In the case at bar, the only quantification of the expenses

offered by NTN is the allocation itself. Therefore, Commerce’s

decision to recalculate NTN’s United States indirect selling

expenses without regard to LOTs is affirmed.

X. Commerce’s Calculation of Normal Value Based on
Sales of Identical or Similar Merchandise Before
Resorting to Constructed Value in Instances
Where Below-Cost Sales Were Disregarded

A. BACKGROUND

Based upon the pre-URAA version of the antidumping law, the

CAFC held in CEMEX, S.A., 133 F.3d at 904, that the plain language

of 19 U.S.C. § 1677(16) (1988) requires Commerce to base foreign
Consol. Court No. 98-07-02527 Page 72

market value (“FMV”), a factor analogous to NV, on nonidentical but

similar merchandise, rather than CV, when sales of identical

merchandise have been found to be outside the ordinary course of

trade. After the enactment of the URAA, Pub. L. No. 103-465, 108

Stat. 4809, Commerce continued its policy of using CV when it

disregarded below-cost sales from the calculation of NV. However,

Commerce invited interested parties to comment upon the

applicability of CEMEX, S.A., 133 F.3d 897, to the review. See

Preliminary Results, 63 Fed. Reg. at 6515. After consideration of

the parties’ comments, Commerce stated its position:

[Commerce] has reconsidered its practice as a result of
the CEMEX decision and has determined that it would be
inappropriate to resort directly to CV as the basis for
normal value if [Commerce] finds sales of the most
similar merchandise to be outside the “ordinary course of
trade.” Instead, [Commerce] will use sales of other
similar merchandise, if such sales exist. [Commerce] will
use CV as the basis for normal value only when there are
no above-cost sales of a foreign[-]like product that are
otherwise suitable for comparison.

. . . [The CAFC] stated in CEMEX[, 133 F.3d at 904]
that “[t]he language of the statute requires Commerce to
base foreign market value on nonidentical but similar
merchandise . . . , rather than constructed value when
sales of identical merchandise have been found to be
outside the ordinary course of trade.” . . . There was
no cost test in CEMEX and CEMEX was under the pre-URAA
statute. However, under the URAA, below-cost sales in
substantial quantities and within an extended period of
time are outside the ordinary course of trade and
[Commerce] disregard[s] them from consideration.
Therefore, in order to be consistent with CEMEX for these
final results, when making comparisons in accordance with
section [19 U.S.C. § 1677(16)], [Commerce] considered all
products sold in the home market that were comparable to
merchandise within the scope of each order and which were
Consol. Court No. 98-07-02527 Page 73

sold in the ordinary course of trade for purposes of
determining appropriate product comparisons to U.S.
sales. Where there were no sales of identical
merchandise in the home market made in the ordinary
course of trade to compare to U.S. sales, [Commerce]
compared U.S. sales to sales of the most similar
foreign[-]like product made in the ordinary course of
trade. Only where there where no sales of foreign[-]like
product in the ordinary course of trade did [Commerce]
resort to CV.

Final Results, 63 Fed. Reg. at 33,332.

B. CONTENTIONS OF THE PARTIES

NTN contends that the change of Commerce’s model-matching

methodology was based upon an erroneous reading of CEMEX, S.A., 133

F.3d at 904, and that Commerce’s changed methodology is

inconsistent with the current statutory scheme. See NTN’s Mem. at

22-24. Therefore, NTN concludes that Commerce erroneously failed

to base NV on CV after disregarding below-cost sales from the

calculation of NV. See id. at 22-24.

Commerce maintains that CEMEX, S.A., 133 F.3d at 904, lends

support to Commerce’s changed position taken in the Final Results,

63 Fed. Reg. at 33,332. See Def.’s Mem. at 70. Commerce further

asserts that, although the URAA made changes to the antidumping

law, the changes made to the relevant statutory provisions did not

render CEMEX, S.A., 133 F.3d at 904, inapplicable. See id.

Torrington supports Commerce’s position and observes that

Commerce’s recalculation was in accordance with the post-URAA law.
Consol. Court No. 98-07-02527 Page 74

See Torrington’s Resp. at 32.

C. ANALYSIS

The pre-URAA antidumping law provided that FMV of imported

merchandise shall be the price at which such or similar merchandise

is sold in the usual commercial quantities and in the ordinary

course of trade for home consumption. See 19 U.S.C. § 1677b(a)(1)

(1988). The term “such or similar merchandise” was defined as

merchandise in the first of three specifically provided categories

in respect to which a determination could be satisfactorily made.

See 19 U.S.C. § 1677(16) (1988). While the first of these

categories applied to “such” or identical merchandise, the second

and third ones covered “similar” or like merchandise. See 19

U.S.C. §§ 1677(16)(A), (B), and (C). The term “ordinary course of

trade” was, in turn, defined as “the conditions and practices

which, for a reasonable time prior to the exportation of the

subject merchandise, have been normal in the trade under

consideration with respect to merchandise of the same class or

kind.” 19 U.S.C. § 1677(15) (1988). The definition of “ordinary

course of trade,” however, was not held to exclude below-cost

sales. See Torrington Co. v. United States, 127 F.3d 1077, 1081

(Fed. Cir. 1997) (“Under this definition, an enterprise may indeed

make some sales below cost ‘in the ordinary course of trade.’ For

instance, a commodity might be sold below cost as part of a
Consol. Court No. 98-07-02527 Page 75

customer incentives program or as part of a volume discount or

package deal”).

The post-URAA antidumping law introduced a number of changes.

Specifically, it provided that NV shall be the price at which the

foreign-like product was first sold for consumption in the

exporting country, in the usual quantities and in the ordinary

course of trade. See 19 U.S.C. § 1677b(a)(1)(B)(i) (1994). The

term “foreign[-]like product” was, in turn, defined as merchandise

in the first of three specified categories in respect to which a

determination can be satisfactorily made. See in 19 U.S.C. §

1677(16) (1994). In a way analogous to the pre-URAA law, the first

of these categories applied to identical merchandise, that is,

“subject merchandise and other merchandise which is identical in

physical characteristics with, and was produced in the same country

by the same person as, that merchandise,” id., and the second and

third categories covered “like” merchandise. The term “ordinary

course of trade” was defined as “the conditions and practices

which, for a reasonable time prior to the exportation of the

subject merchandise, have been normal in the trade under

consideration with respect to merchandise of the same class or

kind.” 19 U.S.C. § 1677(15) (1994).

Thus, the only essential difference between the pre-URAA

definition was a new provision that reads as follows: “[Commerce]
Consol. Court No. 98-07-02527 Page 76

shall consider the following sales and transactions, among others,

to be outside the ordinary course of trade: (A) Sales disregarded

under [19 U.S.C. § 1677b(b)(1); and] (B) Transactions disregarded

under [19 U.S.C. § 1677b(f)(2)].” 19 U.S.C. § 1677(15) (1994). In

other words, under the post-URAA law, Commerce must, much in the

fashion of the pre-URAA law, first look to identical merchandise

when Commerce is matching the United States model to the comparable

home market model. See 19 U.S.C. §§ 1677b(a)(1) and 1677(16)

(1994). If a determination cannot be satisfactorily made using

identical merchandise, then Commerce must look to “like”

merchandise first under category 19 U.S.C. § 1677(16)(B) and, if

that is not available, under the category designated in 19 U.S.C.

§ 1677(16)(C). Accord CEMEX, S.A., 133 F.3d at 904. The

additional new distinction, the one providing that Commerce must

now exclude below-cost sales or transactions disregarded under 19

U.S.C. §§ 1677b(b)(1) or 1677b(f)(2) if Commerce is involved in the

process of selecting home market model matches, does not affect the

statutory hierarchy for selecting the “foreign[-]like product”

articulated in 19 U.S.C. § 1677(16). See 19 U.S.C. § 1677(15)

(1994). Thus, there is nothing in the post-URAA law or in CEMEX,

S.A., 133 F.3d at 904, that would preclude the applicability of

CEMEX, S.A., 133 F.3d at 904, to the post-URAA legal format.

Consequently, the Court holds that Commerce properly changed its

methodology to conform to CEMEX, S.A., 133 F.3d at 904, after the
Consol. Court No. 98-07-02527 Page 77

adoption of the post-URAA law.

Under the post-URAA law, when below-cost sales are

disregarded, “normal value shall be based on the remaining sales of

the foreign[-]like product in the ordinary course of trade. If no

sales made in the ordinary course of trade remain, the normal value

shall be based on the constructed value of the merchandise.” 19

U.S.C. § 1677b(b)(1) (1994). NTN derives from this statement that

Commerce must base NV upon CV of the merchandise if the identical

merchandise is not sold in the ordinary course of trade because

such merchandise is below-cost and disregarded in accordance with

19 U.S.C. § 1677b(b)(1). See NTN’s Mem. at 23. The Court is not

convinced. NTN ignores the definition of the “foreign-like

product” contained in 19 U.S.C. § 1677(16), which requires Commerce

to look for “like” merchandise if the identical merchandise is not

available (for example, if the merchandise is not sold in the

ordinary course of trade).9 Pursuant to 19 U.S.C. § 1677(16), if

9
NTN’s reliance upon the SAA is similarly misplaced. See
NTN’s Mem. at 24. The SAA merely provides that Commerce shall
resort to CV if there are no above-cost sales in the ordinary
course of trade in the foreign market under consideration. See
H.R. DOC. 103-316 at 833, reprinted in 1994 U.S.C.C.A.N. at 4170-
71. The absence of sales of the identical or similar merchandise
in the ordinary course of trade in the foreign market under
consideration does not necessarily mean absence of above-cost sales
in the ordinary course of trade in the foreign market. As Commerce
correctly observes, there still may be above-cost sales of other
“like” merchandise in the ordinary course of trade. See Def.’s
Mem. at 73-74.
Consol. Court No. 98-07-02527 Page 78

“like” merchandise meets the ordinary course of trade definition,

it must be used as a comparison model before resorting to CV.

Therefore, the Court upholds Commerce’s decision to calculate NV

based on sales of identical or similar merchandise before resorting

to CV in instances where below-cost sales were disregarded.

XI. Commerce’s Decision to Disallow a Claim
for a Level-of-Trade Adjustment

A. BACKGROUND

1. FACTUAL BACKGROUND

In investigating whether the various respondents were entitled

to an LOT adjustment, Commerce relied on the CEP price, that is,

the price to the first unaffiliated purchaser in the United States,

adjusted for expenses associated with economic activities in the

United States, for the purposes of determining the LOT of CEP

sales. See Final Results, 63 Fed. Reg. at 33,331. Based upon the

selling functions reported by the respondents, Commerce found that,

with the exception of one particular respondent, no respondent had

a home market LOT equivalent to the CEP LOT. See Def.’s Mem. at

74. Because the CEP LOT was different from the LOTs in the home

market, Commerce concluded that there was no appropriate basis for

Commerce to determine an LOT adjustment. See id. Subsequently,

upon its determination that the home market was at a more advanced

stage of distribution than the CEP LOT, Commerce made a CEP offset
Consol. Court No. 98-07-02527 Page 79

pursuant to 19 U.S.C. § 1677b(a)(7)(B). See Final Results, 63 Fed.

Reg. at 33,330.

2. STATUTORY BACKGROUND

The URAA amended the antidumping law to include specific LOT

provisions. Instead of FMV under 19 U.S.C. § 1677b (1988), the

statute now provides for NV, which is defined as “the price at

which the foreign[-]like product is first sold (or, in the absence

of a sale, offered for sale) for consumption in the exporting

country, in the usual commercial quantities and in the ordinary

course of trade and, to the extent practicable, at the same level

of trade as the export price or constructed export price . . . .”

19 U.S.C. § 1677b(a)(1)(B)(i) (1994). The statute also provides

for an LOT adjustment to NV if certain conditions are met.

Specifically, the provision states that

[t]he price described in paragraph (1)(B) shall also be
increased or decreased to make due allowance for any
difference (or lack thereof) between the export price or
constructed export price and the price described in
paragraph (1)(B) (other than a difference for which
allowance is otherwise made under this section) that is
shown to be wholly or partly due to a difference in level
of trade between the export price or constructed export
price and normal value, if the difference in level of
trade--

(i) involves the performance of different
selling activities; and

(ii) is demonstrated to affect price
comparability, based on a pattern of
consistent price differences between sales at
Consol. Court No. 98-07-02527 Page 80

different levels of trade in the country in
which normal value is determined.

19 U.S.C. § 1677b(a)(7)(A) (1994).

Additionally, the statute provides for an adjustment known as

the CEP offset, which is allowed in the following situations:

When normal value is established at a level of trade
which constitutes a more advanced stage of distribution
than the level of trade of the constructed export price,
but the data available do not provide an appropriate
basis to determine under subparagraph (A)(ii) a level of
trade adjustment, normal value shall be reduced by the
amount of indirect selling expenses incurred in the
country in which normal value is determined on sales of
the foreign[-]like product but not more than the amount
of such expenses for which a deduction is made under [19
U.S.C. § 1677a(d)(1)(D)].

19 U.S.C. § 1677b(a)(7)(B) (1994).

Thus, the statutory scheme provides that the first step in the

LOT methodology is to determine CEP. CEP, in turn, is defined as

the price at which the subject merchandise is first sold
(or agreed to be sold) in the United States . . . by or
for the account of the producer or exporter of such
merchandise or by a seller affiliated with the producer
or exporter, to a purchaser not affiliated with the
producer or exporter, as adjusted under subsections (c)
and (d) . . . .

19 U.S.C. § 1677a(b).

Subsection (c), in turn, covers various expenses that are to

be deducted from both EP and CEP, while subsection (d) applies to

expenses that are incurred between importation and resale as well

as to profit allocated to the expenses that shall be deducted from
Consol. Court No. 98-07-02527 Page 81

CEP only. See 19 U.S.C. § 1677a(c) and (d). In determining the

CEP level of trade, Commerce begins with the starting price to the

first unaffiliated purchaser and then deducts from it the expenses

incurred between importation and resale, that is, the expenses

provided for in subsection (d) of 19 U.S.C. § 1677a.10 The next

10

Furthermore, the SAA provides that

under [19 U.S.C. § 1677a(d)], constructed export price
will be calculated by reducing the price of the first
sale to an unaffiliated customer in the United States by
the amount of the following expenses (and profit)
associated with economic activities occurring in the
United States: (1) any commissions paid in selling the
subject merchandise; (2) any expenses which result from,
and bear a direct relationship to, selling activities in
the United States; (3) any selling expenses which the
seller pays on behalf of the purchaser . . . ; (4) any
“indirect selling expenses” (defined as selling expenses
not deducted under any of the first three categories of
deductions); (5) any expenses resulting from a
manufacturing process or assembly performed on the
merchandise after its importation into the United States
. . . ; and (6) an allowance . . . for profit allocable
to the selling, distribution, and further manufacturing
expenses incurred in the United States. The deduction of
profit is a new adjustment in U.S. law, . . . which
reflects that constructed export price is now calculated
to be, as closely as possible, a price corresponding to
an export price between non-affiliated exporters and
importers.

H.R. DOC. 103-316 at 823, reprinted in 1994 U.S.C.C.A.N. at 4163.

The items listed in (1) through (6) are the same expenses and
profit that are deductible from the starting price or the price to
the first unaffiliated purchaser in the United States. The
deduction from the CEP starting price of those expenses associated
with economic activities in the United States, that is, subsection
(d) deductions, results in the construction of a hypothetical
transaction price that would likely have been charged to the first
purchaser in the United States had that purchaser been unaffiliated
Consol. Court No. 98-07-02527 Page 82

step in the LOT determination process is to determine whether there

are sales in the home market at the same LOT as the adjusted CEP

sales. The statute does not indicate how to find matching LOTs.

However, the SAA indicates that in order to find that two LOTs are

different, one requisite factor is “a difference between the actual

functions performed by the sellers at the different levels of trade

in the two markets.” H.R. DOC . 103-316 at 829, reprinted in 1994

U.S.C.C.A.N. at 4168.

In determining whether such a difference exists, Commerce

reviews the selling functions remaining in the CEP transaction data

after the deduction of subsection (d) expenses and examines NV data

for evidence of similar selling functions. See 19 U.S.C. §

1677b(a)(1)(B) (1994), 19 C.F.R. § 351.412(c)(1)(ii) (1998).

If it is not possible to find sales in the home market at the

same LOT as the adjusted CEP sales, the next step for Commerce is

to consider whether an LOT adjustment is appropriate. In

determining whether to make the adjustment, Commerce must make

certain that the different LOTs involve different selling functions

and that the different LOTs are associated with a consistent

pattern of price differences. See 19 U.S.C. § 1677b(a)(7)(A). If

... cont.

to the exporter.
Consol. Court No. 98-07-02527 Page 83

the LOTs in the home market do not evidence a consistent pattern of

price differences, no adjustment for LOT is permitted. Conversely,

when the LOT adjustment is applicable and quantifiable, Commerce

must make an adjustment for the entire price effect of the

difference in LOTs. If, in reviewing price information in the home

market, Commerce is not able to quantify price differences between

the CEP LOT and the LOT of the comparison sales, and if NV is

established at a more advanced stage of distribution than the CEP

LOT, then Commerce must make a CEP offset. See 19 U.S.C. §

1677b(a)(7)(B).

B. CONTENTIONS OF THE PARTIES

NTN argues that Commerce’s methodology for conducting the LOT

analysis was not in accordance with law. See NTN’s Mem. at 5, 24-

29. Specifically, NTN: (1) argues that Commerce erred by

determining the CEP LOT after deducting expenses and profit

pursuant to 19 U.S.C. § 1677b(d); and (2) offers an alternative

methodology. See NTN’s Mem. at 24-27 (citing Micron Tech., Inc. v.

United States, 23 CIT 208, 40 F. Supp. 2d 481 (1999), and Borden,

Inc. v. United States, 22 CIT 233, 4 F. Supp. 2d 1221 (1998)).

C. ANALYSIS

Pursuant to Commerce’s LOT methodology, which reflects

Commerce’s interpretation of the statutory LOT provisions, as
Consol. Court No. 98-07-02527 Page 84

defined by the SAA, Commerce determined the CEP LOT for NTN’s CEP

transactions by using the starting price to the first unaffiliated

purchaser in the United States, adjusted for the expenses and

profit in accordance with 19 U.S.C. § 1677a(d). See Final Results,

63 Fed. Reg. 33,331. Commerce explained its action as follows:

The statutory definition of “constructed export price”
contained [in 19 U.S.C. § 1677a(d)] indicates clearly
that [Commerce is] to base CEP on the U.S. resale price
adjusted for U.S. selling expenses and profit. As such,
the CEP reflects a price exclusive of all selling
expenses and profit associated with economic activities
occurring in the United States. These adjustments are
necessary in order to arrive at, as the term CEP makes
clear, a “constructed” export price. The adjustments
[Commerce] make[s] to the starting price, specifically
those made pursuant to [19 U.S.C. § 1677a] (“Additional
Adjustments for Constructed Export Price”), normally
change the level of trade. Accordingly, [Commerce] must
determine the level of trade of CEP sales exclusive of
the expenses (and concomitant selling functions) that
[Commerce] deduct[s] pursuant to this subsection.

Final Results, 63 Fed. Reg. at 33,331-32 (internal citation

omitted).

The Court finds Commerce’s course of action reasonable in view

of the statutory scheme and the existing alternatives.

First, the pertinent statute requires a comparison between the

NV and the EP or CEP when Commerce makes allowances for differences

in LOTs. See 19 U.S.C. § 1677b(a)(7)(A). Accordingly, Section

1677a(b) refers to CEP as the price to the unaffiliated purchaser

“as adjusted.” Reading these provisions together, Commerce

reasonably concluded that the statute implies an obligation on the
Consol. Court No. 98-07-02527 Page 85

part of Commerce to determine NV at the LOT of the adjusted price

to the first unaffiliated purchaser in the United States, creating

a coherent pattern of actions.

Second, 19 U.S.C. § 1677a(d)(1) requires deductions to be made

to the resale prices charged by the distributors (that are related

to foreign exporters) to the unaffiliated purchasers in the United

States. As the SAA explains, the purpose of these deductions is to

convert the price charged by the related reseller “[into] a price

corresponding to an export price between [a] non-affiliated

exporter[] and importer[]” with the utmost possible precision. See

H.R. DOC. 103-316 at 823, reprinted in 1994 U.S.C.C.A.N. at 4163.

Thus, the intended effect of these deductions is to change the LOT

of the sales in the United States, tying them to a particular stage

in the chain of distribution.

Addressing the issue as to why this approach in determining

the basis for the LOT analysis is preferable to an approach that

relies on the starting price for all transactions, that is, CEP,

EP, and NV, Commerce explained that,

[i]f the starting price is used for all U.S. sales,
[Commerce’s] ability to make meaningful comparisons at
the same level of trade (or appropriate adjustments for
differences in levels of trade) would be severely
undermined in cases involving CEP sales. [Usage of] the
starting price to determine the level of trade of both
types of U.S. sales would result in a finding of
different levels of trade for an EP sale and a CEP sale
adjusted to a price that reflected the same selling
functions. Accordingly, [Commerce adopted] the
Consol. Court No. 98-07-02527 Page 86

regulations [that] specify that the level of trade
analyzed for EP sales is that of the starting price, and
for CEP sales it is the constructed level of trade of the
price after the deduction of U.S. selling expenses and
profit.

Notice of proposed rulemaking and request for Public Comments on

Antidumping Duties; Countervailing Duties, 61 Fed. Reg. 7308, 7347

(Feb. 27, 1996).

In other words, the adjustments Commerce makes to the CEP

starting price pursuant to subsection (d) of Section 1677a normally

changes the LOT. By deducting subsection (d) expenses prior to

performing the LOT analysis, Commerce is making it possible to

identify the same LOT for comparable EP and CEP transactions.

Since the post-URAA envisions no “automatic EP offset,” but

rather a statutory scheme that frequently balances the deductions

from the resale price in the United States, the CEP prices, as

adjusted, are also envisioned to be compared, to the extent

practicable, to prices in the home market based upon the same LOT.

When that is not practicable, and the difference in LOT affects

price comparability, an LOT adjustment is provided. Consequently,

the CEP offset is available as a default alternative when the home

market sales are at a different LOT but there is not sufficient

data to determine whether the difference in LOTs affects price

comparability. Accord Def.’s Mem. at 83-84.

The approach suggested by NTN bypasses the above-described
Consol. Court No. 98-07-02527 Page 87

steps of the post-URAA statutory scheme by failing to take into

account the effect ensuing from the difference in LOT which, in

turn, affects the CEP deductions. Under NTN’s suggested

methodology, these deductions, however great, cannot create a

difference in LOT between the adjusted CEP sales and those sales in

the home market that have the same selling expenses as the United

States sales (that is, home market sales through related resellers)

because, under NTN’s scheme, the LOT of the sales in the United

States would be determined before the CEP deductions. Therefore,

NTN’s approach would: (1) require Commerce to choose home market

sales at the same LOT as that of the unadjusted price in the United

States; and (2) prevent any significant adjustments to NV (whether

by means of LOT adjustment or CEP offset) since both types of

adjustments are limited to situations in which there is difference

in LOT, and, under NTN’s scheme, the home market sales would be at

the same LOT as the sales in the United States (that is, home

market sales through related resellers).

Furthermore, if Commerce is to accept NTN’s approach, while

there will always be substantial deductions from the resale prices

in the United States (because they are mandatory), these prices

will be compared to resale prices in the home market from which

there will virtually never be any equivalent deductions.

Consequently, a substantial imbalance would be created, and the CEP

deductions often will convert the resale price in the United States
Consol. Court No. 98-07-02527 Page 88

into an original manufacturer’s price with virtually no selling

expenses. In other words, the resale price would then be compared

to the unadjusted price charged in the home market, violating the

gist of the statutory scheme.

The post-URAA statute is designed to replace the automatic

offset with one that is corrected for differences in LOT, when

these differences could be shown to have affected price

comparability. As the SAA explains,

[the statutory scheme] provides that, where authorities
use a constructed export price and the use of such a
price results in the comparison of sales at different
levels of trade, authorities shall either (1) establish
the normal value at a level of trade equivalent to the
level of trade of the constructed export price; or (2)
make due allowance as warranted. The statutory scheme .
. . is designed to ensure that a proper comparison is
made.

H.R. DOC. 103-316 at 829, reprinted in 1994 U.S.C.C.A.N. at 4167.

Since the statute requires Commerce to establish normal value

“to the extent practicable, at the same level of trade as the

export price or constructed export price,” 19 U.S.C. §

1677b(a)(1)(B)(i), and the term “the same level of trade” is taken

to mean comparable marketing stages in the home and United States

markets, see Micron Tech., Inc. v. United States, 243 F.3d 1301,

1305 (Fed. Cir. 2001) (citing to 19 C.F.R. § 351.412(c)(2)), the

Court finds that it was reasonable for Commerce to determine the

CEP LOT for NTN’s CEP transactions by using the starting price to
Consol. Court No. 98-07-02527 Page 89

the first unaffiliated purchaser in the United States, adjusted for

expenses and profit in accordance with 19 U.S.C. § 1677a(d). See

Micron Tech., 243 F.3d 1301; Borden, Inc. v. United States, 2001

U.S. App. LEXIS 4170 (Fed. Cir. 2001).

XII. Commerce’s Decision to Calculate Constructed Export
Price Profit Without Regard to Levels of Trade

A. STATUTORY BACKGROUND

According to 19 U.S.C. 1677a(d)(3) (1994), in calculating CEP,

Commerce must deduct “the profit allocated to the expenses

described” in pertinent subparts of 19 U.S.C. § 1677a(d) from the

price at which the merchandise is sold to the first unaffiliated

purchaser in the United States. The term “profit” is defined as

“an amount determined by multiplying the total actual profit by the

applicable percentage.” 19 U.S.C. § 1677a(f)(1) (1994). The term

“actual profit” is, in turn, defined as the “total profit earned .

. . with respect to the sale of the same merchandise for which

total expenses are determined under such subparagraph.” 19 U.S.C.

§ 1677a(f)(2)(D) (1994). Finally, the term “total expenses” is

defined as

all expenses in the first of the following categories
which applies and which are incurred by or on behalf of
the foreign producer and foreign exporter of the subject
merchandise and by or on behalf of the United States
seller affiliated with the producer or exporter with
respect to the production and sale of such merchandise:

(i) The expenses incurred with respect to the
Consol. Court No. 98-07-02527 Page 90

subject merchandise sold in the United States
and the foreign[-]like product sold in the
exporting country if such expenses were
requested by the administering authority for
the purpose of establishing normal value and
constructed export price.

(ii) The expenses incurred with respect to the
narrowest category of merchandise sold in the
United States and the exporting country which
includes the subject merchandise.

(iii) The expenses incurred with respect to
the narrowest category of merchandise sold in
all countries which includes the subject
merchandise.

19 U.S.C. § 1677a(f)(2)(C).

B. FACTUAL BACKGROUND

In the preliminary results, Commerce calculated CEP profit

without regard to LOTs. See NTN’s Mem. at 29. Consequently, NTN

contended that Commerce should calculate CEP profit on an LOT basis

because, under the preference expressed by the language of 19

U.S.C. § 1677b(f), NTN profit should have been calculated on the

narrowest possible basis. Torrington, in turn, contended that

Commerce should follow the determination made in Preliminary

Results, 63 Fed. Reg. at 6512 because the statute refers to the

“‘narrowest’ group of products only when the groups are broader

than the subject merchandise involved.” Final Results, 63 Fed.

Reg. at 33,345. Commerce agreed with Torrington and stated that

NTN's reliance on the “narrowest” language [of 19 U.S.C.
§ 1677b(f)(2)(C)(ii)] is misplaced . . . . That language
Consol. Court No. 98-07-02527 Page 91

addresses only the second alternative basis for the
profit calculation, whereas here [Commerce] rel[ies] on
the first alternative. Moreover, neither the statute nor
the SAA requires [Commerce] to calculate CEP profit using
any of the alternatives on a basis more specific than
subject merchandise and foreign[-]like product . . . .
Thus, [Commerce] ha[s] not adopted NTN's suggestion.

Final Results, 63 Fed. Reg. at 33,345-46.

Addressing the issue, Commerce specifically pointed out that:

(1) neither the statute nor the SAA requires that the CEP profit be

based upon a more specific category than the class or kind of

merchandise; and (2) basing the profit calculation on an LOT basis

would “add a layer of complexity to an already complicated exercise

with no increase in accuracy.” Final Results of Antidumping Duty

Administrative Reviews of Antifriction Bearings (Other Than Tapered

Roller Bearings) and Parts Thereof From France, Germany, Italy,

Japan, Romania, Singapore, Sweden and the United Kingdom, 62 Fed.

Reg. 54,043, 54,072 (Oct. 17, 1997). Commerce further explained

its position by stating that

neither the statute nor the SAA requires [Commerce] to
calculate CEP profit on bases more specific than the
subject merchandise as a whole. . . . [NTN's]
suggest[ed] [approach] would add a layer of complexity to
an already complicated exercise with no [guarantee that
the result will provide an] increase in accuracy.
Furthermore, a subdivision of the CEP-profit calculation
would be more susceptible to manipulation.

Id. at 54,072.
Consol. Court No. 98-07-02527 Page 92

C. CONTENTIONS OF THE PARTIES

NTN asserts that Commerce's calculation of CEP profit without

regard to LOTs was not in accordance with law. See NTN’s Mem. at

9, 29-30. NTN argues that the statute expresses a preference for

the CEP profit calculation to be performed as specifically as

possible. See NTN’s Mem. at 29.

Commerce maintains that the calculation of NTN's CEP profit is

in accordance with law since the statute does not expressly refer

to levels of trade. See Def.’s Mem. at 93-96. Torrington supports

Commerce’s position. See Torrington’s Resp. at 35.

D. ANALYSIS

While subsection 1677a(f) does not expressly refer to levels

of trade, the statute does refer to the “narrowest category of

merchandise . . . which includes the subject merchandise.” See 19

U.S.C. §§ 1677a(f)(2)(C)(ii) and (iii). The term “subject

merchandise” is defined as “the class or kind of merchandise that

is within the scope of an investigation . . . .” 19 U.S.C. §

1677(25) (1994). Since the statute envisions that the “narrowest

category” will be the class or kind of merchandise that is within

the scope of a particular review at issue, Commerce did not read

the statutory scheme as contemplating that Commerce would have to

consider a much narrower subcategory of merchandise, such as one
Consol. Court No. 98-07-02527 Page 93

based upon an LOT.11 See Def.’s Mem. at 95 (relying on SAA, H.R.

DOC. 103-316 at 824-25, reprinted in 1994 U.S.C.C.A.N. at 4164, and

19 U.S.C. § 1677a(f)(2)(C)(i)).

While NTN contends that Commerce should calculate CEP profit

to account for level-of-trade differences because “[t]here is no

reason [for Commerce] to use a less specific, less accurate mode of

calculation,” NTN’s Mem. at 30, a CEP profit calculation based upon

a broader profit line than the subject merchandise will not

necessarily produce a distorted result.12

No distortion in the profit allocable to U.S. sales is
created if total profit is determined on the basis of a
broader product-line than the subject merchandise,
because the total expenses are also determined on the
basis of the same expanded product line. Thus, the
larger profit pool is multiplied by a commensurately
smaller percentage.

SAA, H.R. DOC. 103-316 at 825, reprinted in 1994 U.S.C.C.A.N. at

4164-65.

Based on the foregoing, the Court upholds Commerce’s refusal

to calculate CEP profit for NTN on an LOT basis as reasonable.

11
Commerce made it clear that the subdivision of the CEP-
profit calculation should be the exception rather than the rule
because of additional complexity and susceptibility to
manipulation. See Final Rule, 62 Fed. Reg. at 27,354.
12
Moreover, NTN failed to show the Court that: (1) Commerce
actually found multiple LOTs for NTN in the United States market;
and (2) the profit calculation was actually distorted by Commerce’s
methodology.
Consol. Court No. 98-07-02527 Page 94

XIII. Commerce’s Decision to Include Profits from
EP Sales in the Calculation of CEP Profit

A. BACKGROUND

The current antidumping law provides that, in calculating CEP,

Commerce must deduct from the price to the first unaffiliated

purchaser in the United States “the profit allocated to the

expenses described in” 19 U.S.C. §§ 1677a(d)(1) and 1677a(d)(2).

19 U.S.C. § 1677a(d)(3). The term "profit" is defined as “an

amount determined by multiplying the total actual profit by the

applicable percentage,” 19 U.S.C. § 1677a(f)(1), while the term

“actual profit” is defined as the “total profit earned . . . with

respect to the sale of the same merchandise for which total

expenses are determined.” 19 U.S.C. § 1677a(f)(2)(D). Finally,

the term “total expenses” is defined as “all expenses in the first

of [three] categories which applies and which are incurred by or on

behalf of the foreign producer and foreign exporter of the subject

merchandise and by or on behalf of the United States seller

affiliated with the producer or exporter with respect to the

production and sale of such merchandise . . . .” 19 U.S.C. §

1677a(f)(2)(C).

During the review, Commerce, basing its decision on Commerce’s

reading of the foregoing provisions, included profit on EP sales in

Commerce’s calculation of CEP profit. See Preliminary Results, 63

Fed. Reg. at 6515.
Consol. Court No. 98-07-02527 Page 95

B. CONTENTIONS OF THE PARTIES

NTN contends that the statute expressly provides that the

adjustment of profit to the CEP is to be based on expenses incurred

in the United States as a percentage of total expenses and that

there is no provision in the statute for the inclusion of EP

expenses or profit in this calculation. See NTN’s Mem. at 30-31.

Commerce, however, asserts that Commerce’s action was in accordance

with the pertinent provisions since

[t]he basis for total actual profit is the same as the
basis for total expenses under [19 U.S.C. §
1677a(f)(2)(c) (1994)]. The first alternative under this
section states that, for purposes of determining profit,
the term "total expenses" refers to all expenses incurred
with respect to the subject merchandise sold in the
United States (as well as home-market expenses). Thus,
where the respondent makes both EP and CEP sales to the
United States, sales of the subject merchandise would
encompass all such transactions. Therefore, because NTN
had EP sales, [Commerce] ha[s] included these sales in
the calculation of CEP profit.

Final Results, 63 Fed. Reg. at 33,345; see also Def.’s Mem. at 98-

99.

Torrington supports Commerce’s position and points out that

Commerce’s approach to include EP sales in the calculation of CEP

profit was consistent with Commerce’s practice. See Torrington’s

Mem. at 35-37.
Consol. Court No. 98-07-02527 Page 96

C. ANALYSIS

Commerce’s September 4, 1997, policy bulletin provides that

[t]he calculation of total actual profit under [19 U.S.C.
§ 1677a(f)(2)(D)] includes all revenues and expenses
resulting from the respondent's [EP] sales as well as
from its constructed export price and home market sales
. . . . The basis for total actual profit is the same as
the basis for total expenses under [19 U.S.C. §
1677a(f)(2)(C)]. The first alternative under this
section . . . states that, for purposes of determining
profit, the term "total expenses" refers to all expenses
incurred with respect to the subject merchandise sold in
the United States (as well as home market expenses).
Thus, where the respondent makes both EP and CEP [sales],
sales of the subject merchandise would encompass all such
transactions.

NTN Bearing Corp. of Am., 26 CIT at ___, 186 F. Supp. 2d at 1272.

Moreover, the SAA addresses the point and states that

[t]he total expenses are all expenses incurred by or on
behalf of the foreign producer and exporter and the
affiliated seller in the United States with respect to
the production and sale of the first of the following
alternatives which applies: (1) the subject merchandise
sold in the United States and the foreign[-]like product
sold in the exporting country (if Commerce requested this
information in order to determine the normal value and
the constructed export price) . . . .

H.R. DOC. 103-316 at 824, reprinted in 1994 U.S.C.C.A.N. at 4164.

The first category, which Commerce used and upon which NTN

relies, see NTN’s Mem. at 30, covers "expenses incurred with

respect to the subject merchandise sold in the United States and

the foreign[-]like product sold in the exporting country . . . .”

19 U.S.C. § 1677a(f)(2)(C)(i). The term "subject merchandise" is
Consol. Court No. 98-07-02527 Page 97

defined in pertinent part as "the class or kind of merchandise that

is within the scope of . . . a review . . . . 19 U.S.C. § 1677(25).

Thus, where a respondent makes both EP and CEP sales, “sales of the

subject merchandise” could be reasonably interpreted to encompass

all such transactions. Consequently, Commerce has interpreted the

statutory scheme as providing that the calculation of total actual

profit is to include all revenues and expenses resulting from NTN’s

EP sales as well as from NTN’s CEP and home market sales.

Commerce’s conclusion was based on the SAA’s explanation that

the total expenses are all expenses incurred with respect to the

production and sale of the first of the three alternatives. See

H.R. DOC. 103-316 at 824, reprinted in 1994 U.S.C.C.A.N. at 4164.

In referring to the first category of expenses, the SAA

specifically refers to “the subject merchandise sold in the United

States,” which by definition means the class or kind of merchandise

which is within the scope of a review and, in this review, included

both CEP and EP sales.

NTN asserts that the SAA's reference to constructed export

price supports its statutory interpretation that there are only two

categories of expenses that Commerce can use in calculating CEP

profit: those used to calculate NV and those used to calculate CEP.

See NTN’s Mem. at 31. NTN, however, fails to observe that the

first category of total expenses is not limited to expenses
Consol. Court No. 98-07-02527 Page 98

incurred with respect to CEP sales made in the United States and

the foreign-like product sold in the exporting country. Instead,

it also covers expenses incurred with respect to EP sales because

it refers to “expenses incurred with respect to the subject

merchandise sold in the United States,” and the term “subject

merchandise” is defined in 19 U.S.C. § 1677(25) as the class or

kind of merchandise that is within the scope of a review (in the

case at bar, both CEP and EP sales). NTN similarly fails to take

note of the fact that, in referring to the first category of

expenses, the SAA specifically refers to “the subject merchandise

sold in the United States,” which, by definition, means the class

or kind of merchandise which is within the scope of a review (in

this review, includes both CEP and EP sales).

For these reasons the Court is not convinced by NTN's argument

that Commerce's interpretation of the statutory scheme is

unreasonable and sustains Commerce's inclusion of EP sales in the

calculation of CEP profit. See Chevron, 467 U.S. 837.

XIV. Commerce’s Decision to Recalculate Home Market Indirect
Selling Expenses Without Regard to Levels of Trade

A. BACKGROUND

During the review, Torrington asserted that NTN had the burden

of proving the relationship between home market LOTs and home

market indirect selling expenses. Since during the POR at issue,
Consol. Court No. 98-07-02527 Page 99

NTN has continued to allocate its indirect selling expenses on the

basis of number of employees at certain regions (but omitted to

demonstrate that NTN incurred any specific types of expenses that

were unique to a particular LOT during the POR at issue) Commerce

agreed with Torrington and, upon evaluation of the record,

concluded that NTN failed to prove such a relationship. See Def.’s

Mem. at 100. Specifically, Commerce observed that

[t]he method that NTN used to allocate its indirect
selling expenses does not bear any relationship to the
manner in which NTN incurs the expenses in question,
thereby leading to distorted allocations . . . .
Therefore, [Commerce] ha[s] allocated NTN’s home-market
indirect selling expenses over the total sales values,
without regard to levels of trade.

Final Results, 63 Fed. Reg. at 33,329.

Explaining its decision, Commerce pointed out that indirect

selling expenses are fixed period costs that typically relate to

all sales and do not vary according to sales value or the number of

employees who allegedly sell each type of merchandise. See id.

(citing Final Results of Antidumping Duty Administrative Reviews,

Partial Termination of Administrative Reviews, and Revocation in

Part of Antidumping Duty Orders of Antifriction Bearings (Other

Than Tapered Roller Bearings) and Parts Thereof From France, et

al., 60 Fed. Reg. 10,900, 10,940 (Feb. 28, 1995)).
Consol. Court No. 98-07-02527 Page 100

B. CONTENTION OF THE PARTIES

NTN asserts that the record demonstrates that NTN’s reporting

of indirect selling expenses was in accordance with Commerce’s

requirements because Commerce: (1) verified that NTN’s reported

indirect selling expenses are directly traceable to individual cost

centers; and (2) tied several of the reported indirect selling

expenses to the account total in NTN’s financial records. See

NTN’s Mem. at 32. Commerce, however, maintains that, since

Commerce’s verification merely established that the indirect

selling expenses were incurred, Commerce's reallocation of the

expenses without regard to LOTs was reasonable. See Def.’s Mem. at

101. Torrington supports Commerce’s position and argues that

Commerce reasonably allocated NTN’s indirect selling expenses over

total home market sales without regard to LOTs. See Torrington’s

Mem. at 38.

C. ANALYSIS

The Court agrees with Commerce. The fact that Commerce found

different LOTs in the United States and in the home market, and

granted NTN an LOT adjustment in the situations where Commerce

found such adjustment proper, does not necessarily lead to a

conclusion that Commerce’s reallocation of the expenses without

regard to LOTs was entirely unreasonable. It is undisputed that

NTN had the burden of demonstrating that there was a relationship
Consol. Court No. 98-07-02527 Page 101

between NTN's allocation of the expenses and the manner in which

they were incurred, and NTN’s reference to Commerce’s other actions

that availed NTN to an LOT adjustment cannot per se satisfy this

burden. Accord NTN Bearing Corp. of Am., 24 CIT at ___, 104 F.

Supp. 2d at 133; NTN Bearing Corp. of Am. v. United States, 23 CIT

486, 496, 83 F. Supp. 2d 1281, 1290 (1999); NTN Bearing Corp. of

Am., 19 CIT at 1233-35, 905 F. Supp. at 1094-95. Therefore,

Commerce’s decision to recalculate NTN’s home market indirect

selling expenses without regard to LOTs is affirmed.

XV. Commerce’s Decision to Accept Koyo’s Home Market
Lump Sum Billing Adjustments and Rebates, NSK’s
Home Market Billing Adjustments, and NTN's Home
Market Discounts as Direct Adjustments to Price

A. BACKGROUND

This issue largely turns on the interpretation of the CAFC’s

decision in Torrington Co. v. United States (“Torrington”), 82 F.3d

1039 (Fed. Cir. 1996). Specifically, the question is whether

Torrington, 82 F.3d 1039, can be interpreted as being for or

against the proposition that “direct” price adjustments may only be

accepted when they are reported on a transaction-specific basis.

While the court in Torrington, 82 F.3d at 1047-51, overturned

Commerce’s particular practice of treating certain allocated

price adjustments as indirect expenses pursuant to the export sale

price offset under 19 C.F.R. § 353.56(b)(2) (which authorized
Consol. Court No. 98-07-02527 Page 102

Commerce to make a reasonable deduction from FMV for all expenses

incurred in selling such or similar merchandise other than those

described in the pertinent parts of 19 C.F.R. § 353.56), the CAFC

did not address the issue of whether “direct” price adjustments may

only be accepted when they are reported on a transaction-specific

basis. The CAFC further explained that “the question to be

determined is whether Commerce’s treatment” of the adjustments at

issue “as expenses that are not ‘those described in [pertinent

parts of the regulation’ are] plainly erroneous or inconsistent

with 19 C.F.R. § 353.56.” Torrington, 82 F.3d at 1050. “The

expenses ‘described in [pertinent parts of the regulation]’ are

direct selling expenses.” Id. (quoting Sharp Corp. v. United

States, 63 F.3d 1092, 1096 (Fed. Cir. 1995)). “Thus, under the

regulation, direct selling expenses are not eligible for ESP offset

treatment.” Id. (citing 19 C.F.R. § 353.56). Because the

adjustments at issue represented expenses related to a particular

sale, or sales, and varied with the quantity of the particular

item, they constituted direct selling expenses, as defined in

Zenith Elecs. Corp, v. United States, 77 F.3d 426, 431 (Fed. Cir.

1996), and Torrington Co., 68 F.3d at 1353. See Torrington, 82

F.3d at 1050. Accordingly, Commerce read Torrington, 82 F.3d at

1050, to mean that the CAFC

held that [Commerce] could not make an adjustment for
post-sale price adjustments ([“]PSPAs[”]) as indirect
selling expenses (under the exporter’s sale price-offset
regulation) when the PSPAs were related directly to the
Consol. Court No. 98-07-02527 Page 103

transactions in question. While the [CAFC] held that the
method of allocating or reporting an expense does not
alter the relationship between the expense and the
related sales . . . , the Court did not indicate that
allocations of direct expenses were impermissible.

Final Results, 63 Fed. Reg. at 33,325.

Subsequently, Commerce addressed the issue in Final Rule, 62

Fed. Reg. at 27,347, stating that,

[i]n . . . regard [with the issue], [Commerce] received
several comments that addressed the relevance of
Torrington v. United States, 82 F.3d 1039 . . . , to the
allocation of price adjustments. In that case, although
the [CAFC] appeared to question whether price adjustments
constituted expenses at all, . . . , it held that
assuming that the price adjustments in question were
expenses, they had to be treated as direct selling
expenses rather than indirect selling expenses.
According to the [CAFC], “[t]he allocation of expenses .
. . does not alter the relationship between the expenses
and the sales under consideration.” [Torrington, 82 F.3d]
at 1051.

In [Commerce’s] view, [Torrington, 82 F.3d 1039] is
of limited relevance to the instant issue, because the
[CAFC] did not address the propriety of the allocation
methods used in reporting the price adjustments in
question. Instead, it simply stated that regardless of
the allocation methods used, [Commerce] could not treat
the price adjustments as indirect selling expenses.
Moreover, these regulations are consistent with the
holding of the case, because, by distinguishing price
adjustments from expenses, [Commerce] ha[s] ensured that
[Commerce] will not treat price adjustments as any
selling expenses, including indirect selling expenses.

In sum, Commerce views Torrington, 82 F.3d 1039, to stand

solely for the proposition that Commerce cannot treat “improperly”

allocated price adjustments (that is, price adjustments that,

because of the manner in which they were allocated, did not qualify
Consol. Court No. 98-07-02527 Page 104

for direct selling expenses adjustment) as indirect selling

expenses.

In accordance with the CAFC’s decision in [Torrington, 82
F.3d 1039], [Commerce] ha[s] not treated improperly
allocated [home market] price adjustments as [indirect
selling expenses], but instead ha[s] disallowed negative
(downward) adjustments in their entirety. [Commerce]
ha[s] included positive (upward) [home market] price
adjustments (e.g., positive billing adjustments that
increase the final sales price) in [Commerce’s] analysis.

Final Results of Antidumping Duty Administrative Reviews and

Partial Termination of Administrative Reviews of Antifriction

Bearings (Other Than Tapered Roller Bearings) and Parts Thereof

From France, Germany, Italy, Japan, Singapore, Sweden, and the

United Kingdom, 61 Fed. Reg. 66,472, 66,498 (Dec. 17, 1996); accord

NSK Ltd., 21 CIT at 622, 969 F. Supp. at 43.

Moreover, neither the pre-URAA nor the post-URAA statutory

scheme imposes standards establishing the circumstances under which

Commerce is to grant or deny adjustments to NV for PSPAs, or to be

bound by a particular methodology. See Torrington Co., 82 F.3d at

1048; Koyo Seiko Co. v. United States, 16 CIT 539, 542, 796 F.

Supp. 1526, 1530 (1992). Consequently, Commerce does not decline

to consider information submitted by an interested party if that

information is necessary to the determination but does not meet all

of Commerce’s established requirements, as long as the following

criteria are met: (1) the information is submitted by the

established deadline; (2) the information can be verified; (3) the
Consol. Court No. 98-07-02527 Page 105

information is sufficiently complete to serve as a reliable basis

for reaching the applicable determination; (4) the interested party

has demonstrated that it acted to the best of its ability in

providing the information and meeting the requirements established

by Commerce; and (5) the information can be used without undue

difficulties. See 19 U.S.C. § 1677m(e) (1994); Timken Co. v.

United States, 22 CIT 621, 628, 16 F. Supp. 2d 1102, 1108 (1998)

(stating that Commerce is delegated with the authority to tailor

the methodology in accordance with the particular needs and

abilities of the regulated industry).

B. CONTENTIONS OF THE PARTIES

Torrington recognizes that Commerce’s new practice allowed a

more flexible response, reflecting the more lenient statutory

instructions of subsection 1677m(e). See generally, Torrington’s

Mem. Rule 56.2 Mot. J. Agency R. (“Torrington’s Rule 56.2 Mem.”) at

16-23. Torrington, however, asserts that since: (1) Section

1677m(e) does not affect Commerce's fundamental policy of putting

the burden of proof with the party who intends to benefit from the

claim made; and (2) the new law did not alter the definition of

direct adjustments, Commerce erred in its decision to accept

certain Koyo, NSK and NTN’s billing adjustments and rebates. See

id. at 16-34.
Consol. Court No. 98-07-02527 Page 106

Commerce maintains that Commerce’s actions were: (1) in

accordance with the mandate of 19 U.S.C. § 1677m(e); (2) Commerce’s

authority to tailor the necessary methodology; and (3) inapposite

to the holding of Torrington, 82 F.3d 1039. See Def.’s Mem. at

109-19. Koyo, NTN and NSK support Commerce’s position. See

generally, Mem. Def.-Intervenor[] Koyo[’s] Resp. Torrington’s Mot.

J. Agency R.; Resp. NTN[’s] Torrington’s June 10, 1999, 56.2 Mot.

J. Agency R.; Mem. NSK[’s] Opp’n Torrington’s Rule 56.2 Mot. J.

Agency R.

C. ANALYSIS

1. COMMERCE ’S TREATMENT OF KOYO ’S
LUMP SUM BILLING ADJUSTMENTS

In accordance with its stated policy for analyzing price

adjustments under the new provisions of the antidumping statute,

Commerce reviewed Koyo’s reported home market lump sum billing

adjustments, the so-called billing adjustment number two. See

Final Results, 63 Fed. Reg. at 33,328. Following its previous

practice, Commerce concluded that Koyo: (1) had reported the

adjustments on the most specific basis possible to Koyo and, thus,

had cooperated with Commerce to the best of Koyo’s ability;13 and

13
In response to Commerce's questionnaire, Koyo reported
that these adjustments included both, the adjustments that were
granted to customers on a model-specific basis as well as the
adjustments that were the result of negotiations between Koyo and
its customers. These adjustments were not granted on a model-
Consol. Court No. 98-07-02527 Page 107

(2) did not use the allocation method that was distortive.14 See

... cont.

specific basis, but, rather, as a single lump sum. Because these
adjustments were maintained in Koyo’s computer system on a
customer-specific basis, for purposes of the response, Koyo
calculated customer-specific lump sum factors by multiplying the
total amount of credit notes (if any) issued to a customer during
the POR (excluding notes issued for rebate) by the ratio of Koyo’s
sales to the customer to Koyo’s total sales to the customer during
the POR. The resulting subject product credit note amount was then
divided by the amount of sales of the pertinent items to the
customer during the POR, to arrive at a price-per-unit amount.

Koyo provided detailed worksheets of this calculation which
showed the total amount of POR sales of all items to each customer,
the total amount of sales of particular type of items to each
customer and the total amount of the lump sum adjustment granted to
the customer during the POR. Koyo explained that it had no means
to identify by computer the specific transactions to which the
billing adjustments applied. The only means by which Koyo could tie
the adjustments to specific transactions would be to go through the
paperwork for each of the billing adjustments manually, to identify
the details of the underlying negotiations. Due to the enormous
size of Koyo’s sales database (involving hundreds of thousands of
transactions) and the large number of billing adjustments
(involving thousands of adjustments), the search and pooling
process is done by electronic means, using the same customer codes.

14
Commerce concluded that

[w]ith respect to the second billing adjustment,
[Commerce] ha[s] determined that Koyo has reported it to
the best of its ability. [Commerce] ha[s] based our
determination on the fact that this PSPA is comprised of
two types of adjustments, including both lump-sum
adjustments negotiated with customers without reference
to model-specific prices and also adjustments granted on
a model-specific basis, but which Koyo records in its
computer system on a customer-specific basis only. Given
the large number of sales involved, it is not feasible to
report this on a more specific basis. . . . Moreover,
there is no information on the record which indicates
that the bearings included in Koyo’s . . . allocation
Consol. Court No. 98-07-02527 Page 108

id.; accord Timken, 22 CIT at 626, 16 F. Supp. 2d at 1008.

Torrington notes that, since Koyo was able to report its

adjustment number one on a transaction-specific basis, see

Torrington’s Rule 56.2 Mem. at 6-8, Koyo had sufficient time to

modify its accounting system to generate the appropriate

information with respect to number two adjustments. However,

Commerce is not required to disallow the adjustment merely because

Torrington offers a speculation about Koyo’s processing abilities.

Indeed, it is Commerce and not Torrington that is charged with the

authority to draw on its experience and evaluate the processing

abilities of a respondent.

Alternatively, Torrington argues that the adjustments should

not have been accepted because the size of the adjustments affected

the dumping margins. See id. at 8. However, the very reason why

such adjustments were taken into account by Commerce altogether is

that dumping margins had to be calculated by Commerce as accurately

as possible in view of the particular circumstances of the case.

... cont.

vary significantly in terms of value, physical
characteristics or the manner in which they are sold such
that Koyo’s allocations would result in unreasonably
inaccurate or distortive allocations. Therefore,
[Commerce] ha[s] allowed Koyo’s lump sum-adjustments as
direct adjustments to normal value.

Final Results 63 Fed. Reg. at 33,328.
Consol. Court No. 98-07-02527 Page 109

See Def.’s Mem. at 113-14.

Furthermore, Torrington argues that Commerce “unlawfully

imposed on [Torrington] an affirmative burden of showing

distortion.” Torrington’s Rule 56.2 Mem. at 8. However, in fact,

Commerce expressly required Koyo to demonstrate that Koyo’s

allocation methodology for all non-subject merchandise for which

Koyo made billing adjustments was not unreasonably distortive.

Moreover, Commerce did not impose any burden upon Torrington when

Commerce stated that it “found no support for the proposition that

the bearings included in Koyo’s allocation vary significantly in

terms of value, physical characteristics, or the manner in which

they are sold such that Koyo’s allocation would result in an

unreasonably inaccurate or distortive allocation.” Final Results,

63 Fed. Reg. at 33,327. Therefore, the Court is not convinced by

Torrington’s argument and affirms Commerce’s decision.

2. COMMERCE ’S TREATMENT OF NSK’S
LUMP SUM BILLING ADJUSTMENTS

During the POR at issue, NSK: (1) granted home market lump sum

billing adjustments on a customer-specific basis and not on

transaction-specific or part-number-specific basis; and, therefore,

(2) created accounting records that (a) merely recorded a lump sum

adjustment to a particular customer’s account; and (b) did not

allow NSK to link the adjustment to specific sales or products, or
Consol. Court No. 98-07-02527 Page 110

to report the adjustment more precisely than on a customer-specific

basis. See Torrington’s Rule 56.2 Mem. at 8-11. During the

process of verification, Commerce verified the adjustment by

examining debit and credit memoranda from NSK to its customers and

found that the amount of the increase or decrease was recorded as

an offset in NSK's accounts receivable ledger. See Def.’s Mem. at

115. Torrington, however, asserts that NSK could have reported at

least some of the adjustments more precisely. See Torrington’s

Rule 56.2 Mem. at 8-11. However, it is Commerce and not Torrington

that is charged with the authority to use its expertise and

knowledge of the reporting systems of a particular respondent. In

other words, the fact that NSK's accounting records merely recorded

a lump sum adjustment to the customer's account receivable does not

make Commerce’s conclusion that NSK could not link the adjustment

to specific sales or products, or to report the adjustment more

precisely than on a customer-specific basis unreasonable. Commerce

could rightfully conclude that

[a]lthough NSK allocated lump-sum price adjustments on a
customer-specific basis, [Commerce] determined that NSK
acted to the best of it ability in reporting this
information when it used customer-specific allocations.

[Commerce’s] review of the information which NSK
submitted indicates that, given the lump-sum nature of
this adjustment, the fact that NSK's records do not
readily identify a discrete group of sales to which each
rebate pertains, and the extremely large number of sales
NSK made during the POR, it is not feasible for NSK to
Consol. Court No. 98-07-02527 Page 111

report this adjustment on a more specific basis.15

Final Results, 63 Fed. Reg. at 33,327.

3. COMMERCE ’S TREATMENT OF NTN'S HOME MARKET DISCOUNTS

During the review at issue, Commerce verified that NTN granted

lump-sum discounts that were calculated on a customer-specific

category as well as product-specific category basis. See Def.’s

Mem. at 117. Commerce determined that NTN maintained a discount

table for the purpose of detecting the product category of the

merchandise. See id. Using this discount table, NTN could isolate

the discount granted with respect to subject merchandise. See id.

Commerce verified that, to determine the discount granted and

reported in NTN’s home market sales listing, NTN calculated a

discount ratio that was based upon the total amount of discounts

granted to a customer during the POR divided by the value of sales

made to that customer during the POR. See id. This discount

ratio was then multiplied by the gross unit price which yielded the

discount amount reported in NTN's home market sales listing. See

id. Because the discounts were not granted on a transaction-

specific basis, Commerce concluded that NTN reported the discounts

15
Torrington also argues that: (1) the adjustments should not
have been accepted because the size of the adjustments affected the
dumping margins; and (2) Commerce unlawfully shifted the burden of
proof to Torrington. These arguments are addressed by the Court
with respect to Koyo’s lump sum adjustments, supra, and the Court
adheres to its prior reasoning.
Consol. Court No. 98-07-02527 Page 112

in the most feasible manner possible. See Final Results, 63 Fed.

Reg. at 33,325.

Torrington argues that NTN did not demonstrate that NTN’s

allocation methodology was non-distortive. See Torrington’s Rule

56.2 Mem. at 11-12. However, after examining the record, Commerce

found that, because NTN’s allocation was order-specific, and the

merchandise did not vary significantly in terms of value, physical

characteristics, or the manner in which it was sold, the results of

the allocation were not unreasonably inaccurate or distortive.16

See Final Results, 63 Fed. Reg. at 33,325. As this Court pointed

out supra, the agency and not Torrington is charged with the

authority to determine whether reported data leads to a distortive

result. Therefore, Commerce’s decision with respect to NTN’s home

market discounts is affirmed.

4. COMMERCE ’S TREATMENT OF KOYO ’S HOME MARKET REBATES

During the review, Koyo: (1) reported that it granted home

market rebates to a certain distributor; but (2) could not identify

from its records the individual models on which the rebate was

16
Torrington also argues that: (1) the adjustments should not
have been accepted because the size of the adjustments affected the
dumping margins; and (2) Commerce unlawfully shifted the burden of
proof to Torrington. These arguments are addressed by the Court
with respect to Koyo’s lump sum adjustments, supra, and the Court
adheres to its prior reasoning.
Consol. Court No. 98-07-02527 Page 113

granted without reviewing manually hundreds of individual invoices.

See Def.’s Mem. at 118. Since Koyo was unable to perform the

latter function, Koyo reported rebates to this distributor on the

basis of the distributor’s account as a whole.17 See id. Commerce

concluded that, since Koyo did not have the capability in its

computerized record-keeping system to distinguish between sales to

the distributor for a specific application covered by the rebate

and sales to the same distributor sold for different applications

that were not covered by the rebate, Koyo had reported this rebate

on as a specific basis as possible. See Final Results, 63 Fed.

Reg. at 33,327.

Torrington asserts that Koyo should have been able to obtain

more precise data, and that Koyo has had ample time to modify its

record-keeping system. See Torrington’s Rule 56.2 at 13-14.

However, Torrington’s speculations do not provide neither a factual

nor a legal basis to the statement that Commerce’s determination

was unreasonable. Therefore, the Court upholds Commerce’s

treatment of Koyo’s home market rebates.

17
Specifically, the reported rebate amounts in the home market
sales to that distributor were based on a factor calculated by
dividing the total rebate payments made to that distributor during
the POR by the total sales made to that distributor during the POR.
See Def.’s Mem. at 118.
Consol. Court No. 98-07-02527 Page 114

CONCLUSION

In accordance with the foregoing opinion, this case is

remanded to Commerce: (1) to determine whether NSK’s cylindrical

roller bearings at issue are (a) complex merchandise that

encompasses characteristics so numerous that the process of

valuation shall be entrusted to Commerce’s discretion, or (b)

merchandise that can be matched in accordance with the statutorily

provided hierarchy; and (c) if Commerce concludes that NSK’s

cylindrical roller bearings are merchandise that could be matched

in accordance with the statutorily provided hierarchy, change Final

Results, 63 Fed. Reg. 33,320, accordingly; and (2) with regard to

NTN’s minor inputs, to (a) either provide the Court with a

sufficient and reasonable explanation of Commerce’s methodology; or

(b) if Commerce is unable to do so, amend Final Results, 63 Fed.

Reg. 33,320, accordingly. Commerce’s final determination is

affirmed in all other respects.

______________________________
NICHOLAS TSOUCALAS
SENIOR JUDGE

Dated: July 8, 2002
New York, New York