Timken Company v. United States

Slip Op. 02-54

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS

________________________________________
:
THE TIMKEN COMPANY, :
:
Plaintiff, :
:
v. : Court No.
: 98-12-03237
UNITED STATES, :
:
Defendant, :
:
and :
:
KOYO SEIKO CO., LTD. and KOYO :
CORPORATION OF U.S.A.; NTN BEARING :
CORPORATION OF AMERICA, AMERICAN NTN :
BEARING MANUFACTURING CORPORATION, :
NTN BOWER, INC. and NTN CORPORATION, :
:
Defendant-Intervenors. :
________________________________________:

Plaintiff, The Timken Company (“Timken”), moves pursuant to
USCIT R. 56.2 for judgment upon the agency record challenging the
Department of Commerce, International Trade Administration’s
(“Commerce”) final determination, entitled Final Results of
Antidumping Duty Administrative Reviews of Tapered Roller Bearings
and Parts Thereof, Finished and Unfinished, From Japan, and Tapered
Roller Bearings, Four Inches or Less in Outside Diameter, and
Components Thereof, From Japan (“Final Results”), 63 Fed. Reg.
63,860 (Nov. 17, 1998).

Specifically, Timken contends that Commerce unlawfully: (1)
refused to adjust constructed export price (“CEP”) for indirect
selling expenses reported by Koyo Seiko Co., Ltd. and Koyo
Corporation of U.S.A. (collectively “Koyo”), and NTN Bearing
Corporation of America, American NTN Bearing Manufacturing
Corporation, NTN Bower, Inc. and NTN Corporation (collectively
“NTN”); (2) permitted NTN to exclude certain expenses attributable
to non-scope merchandise from its reported United States indirect
Court No. 98-12-03237 Page 2

selling expenses; and (3) granted NTN a level of trade (“LOT”)
adjustment for export price (“EP”) sales.

Held: Timken’s 56.2 motion is denied.

[Timken’s 56.2 motion is denied; case is dismissed.]

Dated: June 5, 2002

Stewart and Stewart (Terence P. Stewart, William A.
Fennell and Patrick J. McDonough) for Timken.

Robert D. McCallum, Jr., Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Michele D. Lynch and Richard
P. Schroeder); of counsel: John F. Koeppen, Office of the Chief
Counsel for Import Administration, United States Department of
Commerce, for the United States.

Barnes, Richardson & Colburn (Donald J. Unger, Kazumune V.
Kano, David G. Forgue and Kristen S. Smith) for NTN.

Powell, Goldstein, Frazer & Murphy LLP (Peter O. Suchman, Neil
R. Ellis and Elizabeth C. Hafner) for Koyo.

OPINION

TSOUCALAS, Senior Judge: Plaintiff, The Timken Company

(“Timken”), moves pursuant to USCIT R. 56.2 for judgment upon the

agency record challenging the Department of Commerce, International

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

Final Results of Antidumping Duty Administrative Reviews of Tapered

Roller Bearings and Parts Thereof, Finished and Unfinished, From

Japan, and Tapered Roller Bearings, Four Inches or Less in Outside

Diameter, and Components Thereof, From Japan (“Final Results”), 63
Court No. 98-12-03237 Page 3

Fed. Reg. 63,860 (Nov. 17, 1998).

Specifically, Timken contends that Commerce unlawfully: (1)

refused to adjust constructed export price (“CEP”) for indirect

selling expenses reported by Koyo Seiko Co., Ltd. and Koyo

Corporation of U.S.A. (collectively “Koyo”), and NTN Bearing

Corporation of America, American NTN Bearing Manufacturing

Corporation, NTN Bower, Inc. and NTN Corporation (collectively

“NTN”); (2) permitted NTN to exclude certain expenses attributable

to non-scope merchandise from its reported United States indirect

selling expenses; and (3) granted NTN a level of trade(“LOT”)

adjustment for export price (“EP”) sales.

BACKGROUND

This case concerns: (1) the antidumping finding regarding

tapered roller bearings (“TRBs”), four inches or less in outside

diameter, and components thereof, from Japan, and (2) the 1987

antidumping duty order on TRBs and parts thereof, finished and

unfinished, from Japan for the period of review (“POR”) covering

October 1, 1996, through September 30, 1997.1 See Final Results,

1
Since the administrative review at issue was initiated after
December 31, 1994, the applicable law is the antidumping statute as
amended by the Uruguay Round Agreements Act (“URAA”), Pub. L. No.
103-465, 108 Stat. 4809 (1994) (effective January 1, 1995). See
Torrington Co. v. United States, 68 F.3d 1347, 1352 (Fed. Cir.
1995) (citing URAA § 291(a)(2), (b) (noting effective date of URAA
(continued...)
Court No. 98-12-03237 Page 4

63 Fed. Reg. at 63,860. On July 10, 1998, Commerce published the

preliminary results of the subject reviews. See Preliminary

Results of Antidumping Duty Administrative Reviews of Tapered

Roller Bearings and Parts Thereof, Finished and Unfinished, From

Japan, and Tapered Roller Bearings, Four Inches or Less in Outside

Diameter, and Components Thereof, From Japan (“Preliminary

Results”), 63 Fed. Reg. 37,344. Commerce published the Final

Results on November 17, 1998. See 63 Fed. Reg. at 63,860.

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).

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).

1
(...continued)
amendments)).
Court No. 98-12-03237 Page 5

I. Substantial Evidence Test

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

such relevant evidence as a reasonable mind might accept as

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

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

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

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

inconsistent conclusions from the evidence does not prevent an

administrative agency’s finding from being supported by substantial

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

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

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

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

justifiably have made a different choice had the matter been before

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

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

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

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

II. Chevron Two-Step Analysis

To determine whether Commerce’s interpretation and application

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

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

Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837
Court No. 98-12-03237 Page 6

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

construction of a statutory provision to determine whether

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

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

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

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

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

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

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

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

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

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

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

statutory construction, and legislative history.” Id. (citations

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

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

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

however”) (citation omitted).

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
Court No. 98-12-03237 Page 7

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

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

Commerce has acted rationally, the Court may not substitute its

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

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

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

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

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

will sustain the determination if it is reasonable and supported by

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

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

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

omitted). In determining whether Commerce’s interpretation is

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

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

objectives of those provisions and the objectives of the

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

United States, 22 CIT 541, 545, 15 F. Supp. 2d 807, 813 (1998).
Court No. 98-12-03237 Page 8

DISCUSSION

I. Commerce’s Decision to Limit United States Indirect Selling
Expenses to Those Expenses Specifically Associated With
Commercial Activity in the United States

A. Background

The pre-URAA statute provided the reduction of exporter’s

sales price (“ESP”) by the amount of “expenses generally incurred

by or for the account of the exporter in the United States in

selling identical or substantially identical merchandise.” 19

U.S.C. § 1677a(e)(2)(1988). Although the statute was silent as to

whether indirect selling expenses incurred outside the United

States should be categorized as United States indirect selling

expenses, Commerce chose to adjust United States price for such

expenses. See 19 C.F.R. § 353.41(e)(2)(1994); ITA ANTIDUMPING MANUAL ,

§ 7, at 11 (rev. ed. 1993).

As revised by the URAA, the statute states that CEP, the post-

URAA equivalent to ESP, is to be reduced by the amount of any

“expenses generally incurred by or for the account of the producer

or exporter, or the affiliated seller in the United States[:]”

including “any selling expenses not deducted under subparagraph (A)

[commissions], (B) [direct selling expenses], or (C) [selling

expenses assumed by the seller on behalf of the purchaser].” 19

U.S.C. § 1677a(d)(1) and (d)(1)(D) (1994). In the Final Results,

Commerce determined that
Court No. 98-12-03237 Page 9

[a]s [Commerce] stated in [Final Results of Antidumping
Duty Administrative Reviews and Termination in Part of
Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, From Japan, and Tapered Roller Bearings, Four
Inches or Less in Outside Diameter, and Components
Thereof, From Japan, 62 Fed. Reg. 11,825, 11,834] (Mar.
13, 1997), [Final Results of Antidumping Duty
Administrative Reviews of Tapered Roller Bearings and
Parts Thereof, Finished and Unfinished, From Japan, and
Tapered Roller Bearings, Four Inches or Less in Outside
Diameter, and Components Thereof, From Japan, 63 Fed Reg.
2558, 2575 (Jan. 15, 1998), 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, 62 Fed. Reg. 2081, 2124 (Jan. 15,
1997)], [Commerce] will deduct from CEP only those
expenses associated with economic activities in the
United States which occurred with respect to sales to the
unaffiliated U.S. customer. [Commerce] found no
information on the record for this review period to
indicate that the export selling expenses for the
respondents that were incurred in their respective home
markets were associated with activities occurring in the
United States.

63 Fed. Reg. at 63,868.

Therefore, since Koyo’s and NTN’s “selling expenses were not

associated with economic activity in the United States[,] . . .

[Commerce did not] adjust[] Koyo’s or NTN’s U.S. prices [for these

indirect selling expenses].” Id.

B. Contentions of the Parties

Timken asserts that the URAA “made no substantive change in

the statutory requirement that constructed export prices . . . be

adjusted for indirect selling expenses.” Timken’s Mem. Supp. Rule
Court No. 98-12-03237 Page 10

56.2 Mot. J. Agency R. (“Timken’s Mem.”) at 10; see also Timken’s

Reply Br. (“Timken’s Reply”) at 2. In particular, Timken claims

that the statutory language of the new 19 U.S.C. § 1677a(d)(1) and

the Statement of Administrative Action (“SAA”)2, H.R. Doc. 103-316,

at 823, indicate that Congress intended for Commerce to continue

the practice of including in United States indirect selling

expenses the home market selling expenses attributable to export

sales.3 See Timken’s Mem. at 10-12; see also Timken’s Mem. at 11

2
The SAA represents “an authoritative expression by the
Administration concerning its views regarding the interpretation
and application of the Uruguay Round agreements.” H.R. Doc. 103-
316, at 656 (1994), reprinted in 1994 U.S.C.C.A.N. 4040. “[I]t is
the expectation of the Congress that future Administrations will
observe and apply the interpretations and commitments set out in
this Statement.” Id.; see also 19 U.S.C. § 3512(d) (1994) (“The
statement of administrative action approved by the Congress . . .
shall be regarded as an authoritative expression by the United
States concerning the interpretation and application of the Uruguay
Round Agreements and this Act in any judicial proceeding in which
a question arises concerning such interpretation or application”).
3
Timken states that

[t]he URAA did not intend to change Commerce’s approach
to export selling expenses. Indeed, the SAA states that
Section 772(d)(1)(C) [that is, § 1677a(d)(1)(C)] provides
for the deduction of selling expenses which are assumed
by the seller on behalf of the buyer. In practice,
Commerce has treated these expenses in the same manner as
the direct selling expenses in section 772(d)(1)(B) [that
is, § 1677a(d)(1)(B)]. Their separate treatment in the
statute is intended merely to provide a more precise
definition, and not to change the calculation of export
price or constructed export price. . . .

. . . .

(continued...)
Court No. 98-12-03237 Page 11

(citing Sen. Rep. No. 412, 103d Cong., 2d Sess. 65 (1994)),

Timken’s Reply at 3-4. Timken further argues that the “old law,

i.e., pre-URAA, referred only to expenses ‘incurred by or for the

account of the exporter in the United States,’ but the URAA

broadened this language to include adjustment for expenses

‘incurred by or for the account of the producer or exporter, or the

affiliated seller in the United States.’” Timken’s Reply at 4

(emphasis omitted); see also Timken’s Mem. at 12. Therefore,

Timken maintains that Congress, by referring to expenses incurred

by “producers or exporters,” codified Commerce’s prior practice

under pre-URAA. See Timken’s Reply at 4. Accordingly, Timken

requests that the Court reexamine its decision in Timken Co. v.

United States (“Timken 1998"), 22 CIT 621, 16 F. Supp. 2d 1102

(1998), and remand this issue to Commerce so that it may adjust CEP

for indirect selling expenses incurred in the home market on

account of United States sales (that is, export selling expenses

reported by Koyo and NTN). See id. at 2, 4.

3
(...continued)
[D]irect expenses and assumptions of expenses incurred in
the foreign country on sales to the affiliated importer
will form a part of the circumstances of sale adjustment.
Moreover, Commerce’s practice with respect to assumptions
by the seller of the buyer’s selling expenses and
commissions will remain the same.

Timken’s Reply at 2-3 (emphasis in original) (quoting H.R. Doc.
103-316, at 824, 828).
Court No. 98-12-03237 Page 12

Relying on this Court’s decision in Timken 1998, 22 CIT 621,

16 F. Supp. 2d 1102, Commerce responds that it properly did not

adjust CEP for indirect selling expenses reported by Koyo and NTN

because the new statutory language (that is, 19 U.S.C. §

1677a(d)(1)), does not define the types of expenses to be included

as United States indirect selling expenses. See Def.’s Mem. Opp’n

Pl.’s Mot. J. Agency R. (“Def.’s Mem.”) at 2, 8-10. Moreover,

Commerce states that “‘it is clear from the SAA that under the new

statute [Commerce] should deduct from CEP only those expenses

associated with economic activities in the United States.’” Def.’s

Mem. at 8 (quoting Final Results, 63 Fed. Reg. at 63,868); see also

Def.’s Mem. at 7 (citing 19 C.F.R. § 351.402(b)(1998)).

Koyo and NTN generally agree with Commerce and argue that: (1)

the new statutory language of § 1677a(d)(1) and the rules of

statutory construction make it clear that no adjustment should be

made for indirect selling expenses incurred in Japan; and (2)

Commerce’s practice of limiting indirect selling expenses to those

specifically associated with commercial activity in the United

States is in accordance with the SAA and Timken 1998, 22 CIT 621,

16 F. Supp. 2d 1102.4 See Koyo’s Resp. Timken’s Mot. J. Agency R.

4
The Court notes that, in this case, Koyo is concerned with
the antidumping finding regarding TRBs, four inches or less in
outside diameter, and components thereof, from Japan. See Koyo’s
Resp. Timken’s Mot. J. Agency R. at 2 n.1.
Court No. 98-12-03237 Page 13

(“Koyo’s Resp.”) at 3-6; NTN’s Resp. Mem. Timken’s July 1, 1999,

Mem. Supp. Rule 56.2 Mot. J. Agency R. (“NTN’s Resp.”) at 2-5.

C. Analysis

Timken 1998, 22 CIT at 625-26, 16 F. Supp. 2d at 1106, and

Micron Tech., Inc. v. United States, 23 CIT 208, 210-12, 40 F.

Supp. 2d 481, 483-85 (1999), aff’d, 243 F.3d 1301, 1314 (Fed. Cir.

2001), explain the validity of Commerce’s practice of limiting

United States indirect selling expenses to those expenses incurred

in the United States. See NTN Bearing Corp. of Am. v. United

States, 26 CIT __, __, 186 F. Supp. 2d 1257, 1320-22 (2002).

Neither the pre-URAA statute nor the newly-amended statute address

whether United States indirect selling expenses incurred outside

the United States should be categorized as United States indirect

selling expenses. See Timken 1998, 22 CIT at 625-26, 16 F. Supp.

2d at 1106; Micron Tech., 23 CIT at 212, 40 F. Supp. 2d at 485.

Because Commerce’s practice of limiting United States indirect

selling expenses to those expenses incurred in the United States

and the parties’ arguments are practically identical to those

presented in Timken 1998 and Micron Tech., the Court adheres to its

reasoning in Timken 1998 and Micron Tech. Accordingly, the Court

finds that Commerce’s decision to limit United States indirect

selling expenses to those expenses incurred in the United States is
Court No. 98-12-03237 Page 14

supported by substantial evidence and is in accordance with law.

II. NTN’s Exclusion of Certain Expenses for Non-Scope
Merchandise From United States Selling Expenses

A. Background

In the underlying review, NTN excluded certain expenses

attributable to non-scope merchandise from its reported United

States indirect selling expenses. See NTN’s Resp. at 5. In

particular,

[b]ecause certain of NTN’s U.S. expenses were incurred
solely for non-scope merchandise, in order to ensure an
accurate allocation of its U.S. expenses, NTN first
removed all such expenses from the pool of U.S. [indirect
selling expenses]. . . . The remaining U.S. [indirect
selling expenses] which were incurred for either scope or
non-scope merchandise, but which could not be
specifically tied to either scope or non-scope products,
were then allocated to scope and non-scope merchandise.

Final Results, 63 Fed. Reg. at 63,867.

In accepting NTN’s methodology of reporting its United States

indirect selling expenses, Commerce: (1) stated that in past TRB

and antifriction bearing (“AFB”) cases, it has verified NTN’s

methodology and has found it to be reasonable; and (2) determined

that

NTN’s approach for adjusting its U.S. [indirect selling
expenses] remains unchanged for the current review, and
there is no information on the record of this review
which should call into question [Commerce’s] practice of
accepting NTN’s approach . . . .

Id.
Court No. 98-12-03237 Page 15

Commerce also explained how it eliminated the possibility of

distortion in NTN’s methodology when

Commerce calculated a ratio of sales of scope merchandise
to all sales. . . . Commerce . . . adjusted NTN’s
reported final indirect selling expense by adding or
subtracting various expenses to arrive at a final
indirect selling expense. Next, Commerce multiplied that
total expense by the ratio of scope-to-total products.

Def.’s Mem. at 13 (citing Def.’s Proprietary Ex. 2).

B. Contentions of the Parties

Timken argues that Commerce improperly permitted NTN to

exclude certain expenses attributable to non-scope merchandise from

NTN’s reported United States indirect selling expenses.5

5
Timken asserts that the record does not support Commerce’s
conclusion that “‘certain of NTN’s U.S. expenses were incurred
solely for non-scope merchandise.’” Timken’s Mem. at 13 (quoting
Final Results, 63 Fed. Reg. at 63,867); see also Timken’s Mem. at
6-7, 13 (proprietary version); Timken’s Reply at 4-5, 8
(proprietary version). In particular, Timken argues that a
pertinent financial statement indicates that a relevant company was
reimbursed by other companies for the certain expenses at issue.
See Timken’s Mem. at 13 (proprietary version). NTN maintains that
“this conclusion simply does not follow from the [weight of the]
stated facts.” NTN’s Resp. at 6. The Court will not entertain
this argument because the Court’s “role is limited to deciding
whether [Commerce’s] decision is unsupported by substantial
evidence on the record, or otherwise not in accordance with law.”
Matsushita Elec. Indus. Co. v. United States, 750 F.2d 927, 936
(Fed. Cir. 1984) (emphasis supplied); see also American Spring
Wire, 8 CIT at 22, 590 F. Supp. at 1276 (“[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’”) (quoting Penntech Papers, 706 F.2d at 22-23
(quoting, in turn, Universal Camera, 340 U.S. at 488)).
Court No. 98-12-03237 Page 16

See Timken’s Mem. at 6-7, 13-15 (proprietary version); Timken’s

Reply at 4-8 (proprietary version); Final Results, 63 Fed. Reg. at

63,867. In particular, Timken asserts that NTN’s adjustment of its

allocated pool of indirect United States selling expenses “was

unreasonable, resulted in distorted allocations, and was not

supported by substantial evidence” because NTN excluded certain

expenses attributable to the non-scope merchandise for one of its

subsidiaries and then allocated the remaining expenses to all of

NTN’s scope and non-scope United States sales. Timken’s Reply at

8; see Timken’s Mem. at 13-14 (proprietary version). Timken also

maintains its assertion that one of NTN’s subsidiaries’ certain

“expenses attributed to non-scope merchandise is disproportionate

to the amount of non-scope sales . . . is not mere conjecture” as

Commerce maintains.6 Timken’s Reply at 7 (proprietary version).

Commerce responds that 19 U.S.C. § 1677a(d)(1994), “as amended

by the URAA, continues to be silent on the question of allocation

methods[,]” thus granting Commerce a substantial right of

interpretation. Def.’s Mem. at 11. Commerce also points out that

it “has verified the method used by NTN . . . on several occasions

without [observing any] discrepancy.” Id. at 12 (citing Final

6
Commerce asserts that the “record does not show what non-
scope merchandise was stored in the warehouse at issue.” Def.’s
Mem. at 13. Therefore, the Court agrees with Commerce that it is
“impossible to say whether the storage charges are disproportionate
to the sales of the non-scope merchandise.” Id.
Court No. 98-12-03237 Page 17

Results of Antidumping Duty Administrative Reviews and Termination

in Part of Tapered Roller Bearings and Parts Thereof, Finished and

Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or

Less in Outside Diameter, and Components Thereof, From Japan, 63

Fed. Reg. 20,585, 20,595 (Apr. 27, 1998); Final Results of

Antidumping Duty Administrative Reviews of Tapered Roller Bearings

and Parts Thereof, Finished and Unfinished, From Japan, and Tapered

Roller Bearings, Four Inches or Less in Outside Diameter, and

Components Thereof, From Japan, 63 Fed. Reg. 2558, 2572 (Jan. 15,

1998); and Final Results of Antidumping Duty Administrative

Reviews of Tapered Roller Bearings and Parts Thereof, Finished and

Unfinished, From Japan and Tapered Roller Bearings, Four Inches or

Less in Outside Diameter, and Components Thereof, From Japan, 58

Fed. Reg. 64,720, 64,726 (Dec. 9, 1993)). Commerce further states

that it eliminated the possibility of distortion in NTN’s

methodology when Commerce: (1) calculated a pertinent ratio; (2)

“adjusted NTN’s reported final indirect selling expense”; and (3)

“multiplied that total expense by the ratio of scope-to-total

products.” Def.’s Mem. at 13.

NTN supports Commerce’s conclusion. Replying to Timken’s

claim that “Commerce accepted a reporting methodology for certain

U.S. indirect selling expenses which caused a distortion in NTN’s

reported expenses[,]” NTN’s Resp. at 5 (citing Timken’s Mem. at 6-
Court No. 98-12-03237 Page 18

7, 13-15), NTN contends that “[t]he sole basis for [Timken’s] . .

. claim is a hypothetical concocted by Timken which is not

factually similar to the case before the Court.”7 NTN’s Resp. at

6. NTN maintains that its allocation methodology is not distortive

and “Commerce’s decision to accept NTN’s reported pool of allocated

expenses for U.S. indirect selling expenses is reasonable, and in

accordance with law. . . .” Id. at 5.

C. Analysis

The Court upholds Commerce’s decision to allow NTN to exclude

certain expenses attributable to non-scope merchandise from its

United States selling expenses since it is in accordance with law.

The Court notes that 19 U.S.C. § 1677a(d) is silent on the question

of allocation methods and thus grants Commerce considerable

discretion. Under 19 C.F.R. § 351.401(g)(1998),

[Commerce] may consider allocated expenses and price
adjustments when transaction-specific reporting is not
feasible, provided [Commerce] is satisfied that the
allocation method used does not cause inaccuracies or
distortions.

In addition, pursuant to 19 C.F.R. § 351.401(g)(4),

7
To illustrate its contention that NTN’s exclusion of certain
expenses attributable to non-scope merchandise from NTN’s United
States selling expenses is distortive, Timken provides hypothetical
examples. See Timken’s Mem. at 14 (proprietary version); Timken’s
Reply at 6-7 (proprietary version). The Court is not persuaded by
Timken’s hypotheticals since Timken fails to use evidence on the
record to illustrate that NTN’s allocation methodology was
distortive.
Court No. 98-12-03237 Page 19

[Commerce] will not reject an allocation method solely
because the method includes expenses incurred, or price
adjustments made, with respect to sales of merchandise
that does not constitute subject merchandise or a foreign
like product (whichever is applicable).

Based on a careful examination of the record and on the

regulatory language of 19 C.F.R. § 351.401(g) and (g)(4) that

grants Commerce considerable discretion in choosing allocation

methods, the Court sustains Commerce’s decision to accept NTN’s

United States selling expenses as reasonable, supported by

substantial evidence and in accordance with law. See Skidmore v.

Swift & Co., 323 U.S. 134, 139-40 (1944).

III. Commerce’s Granting of a Level of Trade
Adjustment for EP Sales

A. Background

1. Statutory Background

The URAA contains a specific provision regarding adjustments

to normal value (“NV”) for differences in levels of trade. The

statute provides for NV to be based on:

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) (emphasis supplied). The

statute also provides for an LOT adjustment to NV under the
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following conditions:

The price described in [§ 1677b(a)(1)(B)(1994),
i.e., NV,] 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 [§ 1677b(a)(1)(B)] (other than a
difference for which allowance is otherwise made under [§
1677b(a)(1994)]) 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).

In sum, to qualify for an LOT adjustment to NV, a party has

the burden to show that the following two conditions have been

satisfied: (1) the difference in LOT involves the performance of

different selling activities; and (2) the difference affects price

comparability. See SAA, H.R. Doc. 103-316, at 829 (stating that

“if a respondent claims [an LOT] adjustment to decrease normal

value, as with all adjustments which benefit a responding firm, the

respondent must demonstrate the appropriateness of such

adjustment”); see also NSK Ltd. v. United States, 190 F.3d 1321,

1330 (Fed. Cir. 1999) (noting that a respondent bears the burden of
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establishing entitlement to an LOT adjustment).

2. Factual Background

During this review, Commerce applied the following LOT

methodology. See Final Results, 63 Fed. Reg. at 63,868-69;

Preliminary Results, 63 Fed. Reg. at 37,347-48. In accordance with

19 U.S.C. § 1677b(a)(1)(B)(i), Commerce first calculates NV based

on exporting-country (or third-country) sales, to the extent

practicable, at the same LOT as the United States (EP and CEP)

sales. See Final Results, 63 Fed. Reg. at 63,868. “When [Commerce

is] unable to find comparison sales at the same LOT as the EP or

CEP sales, [it] compare[s] the [United States] sales to sales at a

different LOT in the comparison [home or third-country] market.

Id.

With respect to the LOT methodology for EP sales, Commerce

first calculates EP “on the basis of the starting prices of sales

to the United States.” Id. “Where home market prices serve[] as

the basis of NV, [Commerce] determine[s] the NV LOT based on

starting prices in the NV market.” Id.

Commerce then proceeds to determine whether sales in the home

market exist that are at the same LOT as the EP sales. In making

such a determination, Commerce examines whether the home market

sales are at different stages in the marketing process than EP or
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CEP, that is, Commerce “review[s] and compare[s] distribution

systems, including selling functions, classes of customer, and the

extent and level of selling expenses for each claimed LOT.” Final

Results, 63 Fed. Reg. at 63,868. If the EP sales and the NV sales

are at a different LOT, and the differences in LOT affect price

comparability, as manifested in a pattern of consistent price

differences between the sales on which NV is based and comparison-

market sales at the equivalent LOT of the export transaction,

Commerce will make an LOT adjustment pursuant to 19 U.S.C. §

1677b(a)(7)(A). See id. at 63,869. If there is no pattern of

consistent price differences, no adjustment is made. See id.

Applying this methodology, Commerce determined that for NTN

there were three home market LOTs and two (one EP and one
CEP) LOTs in the United States. Because there were no
home market LOTs equivalent to NTN’s CEP LOT, and because
NV for NTN represented a price more remote from the
factory than the CEP, [Commerce] made a CEP offset
adjustment to NV in [Commerce’s] CEP comparisons.
[Commerce] also determined that NTN’s EP LOT was
equivalent to one of its LOTs in the home market.
Because [Commerce] determined that there was a pattern of
consistent price differences due to differences in LOTs,
[Commerce] made a LOT adjustment to NV for NTN in
[Commerce’s] EP comparisons where the [United States] EP
sale matched to a home market sale at a different LOT.

Id. at 63,869.

Moreover, in the Final Results, Commerce observed that,

[a]s stated in [Final Results of Antidumping Duty
Administrative Reviews of Antifriction Bearings (Other
Than Tapered Roller Bearings) and Parts Thereof From
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France, Germany, Italy, Japan, Romania, Singapore,
Sweden, and the United Kingdom, 63 Fed. Reg. 33,320,
33,331 (June 18, 1998)], differences in selling
functions, even substantial ones, are not alone
sufficient to establish a difference in LOTs. While
there are a few individual selling functions that vary,
[Commerce] determine[s] that these functions, by
themselves, do not offset the many similarities of the
selling functions performed by the respondent at the EP
and home market LOTs. Although [Commerce] ha[s]
determined that there is a qualitatively minimal
difference in selling functions between one of the home
market LOTs and the EP Lot, the two LOTs are similar
enough to be considered the same LOT, such that that
home market LOT can be used in determining whether there
is a pattern of consistent price differences between that
LOT and the LOT at which certain EP sales are made.

Id.

B. Contentions of the Parties

Timken contends that Commerce improperly granted NTN an LOT

adjustment under § 1677b(a)(7)(A) for EP sales. See Timken’s Mem.

at 7-8, 15-16. In particular, Timken maintains that the LOT

adjustment under § 1677b(a)(7)(A) “presumes . . . that there exists

a home market level of trade that is comparable to a U.S. level of

trade.” Timken’s Reply at 9. Timken argues that since: (1)

“[t]he record does not demonstrate that price differences between

NTN’s home market sales at different levels of trade affect their

comparability to NTN’s U.S. EP sales,” Timken’s Mem. at 16; and (2)

“[t]here is no demonstration that the EP sales are at a level of

trade that is comparable to sales at any level of trade in the home

market,” id., “there is no basis in the record for Commerce to
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calculate a LOT adjustment for NTN’s EP sales.” Timken’s Reply at

11.

Commerce responds that it properly granted an LOT adjustment

for NTN’s EP sales. See Def.’s Mem. at 14-16. Commerce notes that

pursuant to § 1677b(a)(7)(A) Commerce

determines that sales are made at different LOTs if they
are made at different marketing stages (or the
equivalent). Substantial differences in selling
activities are a necessary, but not sufficient, condition
for determining that there is a difference in the stage
of marketing. Some overlap in selling activities will
not preclude a determination that two sales are at
different stages of marketing.

Id. at 15-16 (quoting 19 C.F.R. § 551.412(c)(2) [sic]).8

Commerce maintains that it acted in accordance with 19 U.S.C.

§ 1677b(a)(7)(A) and 19 C.F.R. § 351.412(c)(2) when Commerce

determined that: (1) “the differences in selling activities

(‘functions,’) . . . between the equivalent [home market] LOT and

EP LOT were minimal”; and (2) “Commerce used the [home market] LOT

to determine whether there was a pattern of consistent price

differences between that LOT and the LOT at which certain sales

[were] made.” Def.’s Mem. at 16.

NTN generally agrees with Commerce and maintains that

“[b]ecause the law and the record support matching these levels of

8
The Court assumes that the correct citation is 19 C.F.R. §
351.412 (c)(2)(1998).
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trade [that is, NTN’s home market LOT and NTN’S United States EP

LOT] for comparison purposes,” Commerce’s granting of the LOT

adjustment is not unreasonable because there are “sales functions

[that] are performed for United States EP sales which are not

performed in the home market.” NTN’s Resp. at 7-8.

C. Analysis

The Court disagrees with Timken that Commerce improperly

granted NTN an LOT adjustment under § 1677b(a)(7)(A) for EP sales.

“In the absence of a statutory mandate to the contrary, Commerce’s

actions must be upheld as long as they are reasonable.” Timken Co.

v. United States, 23 CIT 509, 516, 59 F. Supp. 2d 1371, 1377

(1999); see also Chevron, 467 U.S. at 844-45.

During the review at issue, Commerce determined that NTN’s EP

LOT was equivalent to NTN’s home market LOT. See Final Results, 63

Fed. Reg. at 63,869. In granting NTN an LOT adjustment pursuant to

§ 1677b(a)(7)(A), Commerce determined that the equivalent home

market LOT and EP LOT had minimal differences in selling activities

and “determined that there was a pattern of consistent price

differences due to differences in LOTs.” Id.

Although “zero” differences in selling functions (that is, a

perfect comparison) between the home market LOT and EP LOT would

make the two LOTs perfectly comparable, the Court finds that §
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1677b(a)(7)(A) grants Commerce discretion to find the necessary

degree of comparability in situations where differences are de

minimus.

Accordingly, the Court sustains Commerce’s decision to grant

NTN an LOT adjustment for EP as reasonable, in accordance with law

and supported by substantial evidence.

CONCLUSION

The Court finds that Commerce acted properly in: (1) refusing

to adjust CEP for indirect selling expenses reported by Koyo and

NTN; (2) permitting NTN to exclude certain expenses attributable to

non-scope merchandise from NTN’s reported United States indirect

selling expenses; and (3) granting NTN an LOT adjustment for EP

sales. Commerce’s determination is affirmed.

______________________________
NICHOLAS TSOUCALAS
SENIOR JUDGE

Dated: June 5, 2002
New York, New York