Slip Op. 02-38
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
________________________________________
:
THE TIMKEN COMPANY, :
:
Plaintiff, :
:
v. : Court No.
: 98-12-03235
UNITED STATES, :
:
Defendant, :
:
and :
:
PEER BEARING COMPANY, :
:
:
:
Defendant-Intervenor. :
________________________________________:
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 1996-
1997 Antidumping Duty Administrative Review and New Shipper Review
and Determination Not To Revoke Order in Part of Tapered Roller
Bearings and Parts Thereof, Finished and Unfinished, From the
People’s Republic of China (“Final Results”), 63 Fed. Reg. 63,842
(Nov. 17, 1998), as amended, Amended Final Results of 1996-1997
Antidumping Duty Administrative Review of Tapered Roller Bearings
and Parts Thereof, Finished and Unfinished, From the People’s
Republic of China (“Amended Final Results”), 63 Fed. Reg. 71,447
(Dec. 28, 1998).
Specifically, Timken contends that Commerce erred in: (1)
selecting, for valuing the hot-rolled steel bar used to manufacture
tapered roller bearings (“TRBs”) cups and cones, export data from
Japan to Indonesia, rather than the annual report data from eight
Indian bearing producers or Indian import statistics or export
statistics from Japan to India; (2) valuing material costs for
Court No. 98-12-03235 Page 2
steel inputs by using the prices paid by a People’s Republic of
China (“PRC”) bearing producer and a PRC trading company to market-
economy suppliers; (3) valuing scrap generated from the production
of cups, cones and rollers using unadjusted Indonesian import
statistics; and (4) failing to adjust overhead, selling, general
and administrative expenses (“SG&A”) and profit rates to account
for differences in material and labor values of other surrogate
sources used in determining normal value (“NV”).
Held: Timken’s 56.2 motion is granted in part and denied in
part. This case is remanded to Commerce to: (1) provide the Court
with an explanation as to why export statistics from Japan to India
are not the “best available information” for the purpose of
choosing a surrogate to value hot-rolled steel bar used to produce
TRB cups and cones; and (2) explain whether or not the American
Metal Market prices can serve as an alternative surrogate to value
scrap and, if Commerce concludes that the American Metal Market
prices present the “best available information” for the purpose of
such surrogate evaluation, to recalculate Commerce’s determination
accordingly.
[Timken’s 56.2 motion is granted in part and denied in part. Case
remanded.]
Dated: April 22, 2002
Stewart and Stewart (Terence P. Stewart, James R. Cannon, Jr.
and Amy S. Dwyer) for Timken.
Robert D. McCallum, Jr., Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Lucius B. Lau); of counsel:
Rina Goldenberg, Office of the Chief Counsel for Import
Administration, United States Department of Commerce, for the
United States.
Arent Fox Kintner Plotkin & Kahn, PLLC (John M. Gurley and
Matthew J. McConkey) for Peer Bearing.1
1
Peer Bearing Company has intervened in this action but has
not filed a motion for judgment upon the agency record.
Court No. 98-12-03235 Page 3
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 1996-1997 Antidumping Duty Administrative Review
and New Shipper Review and Determination Not To Revoke Order in
Part of Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, From the People’s Republic of China (“Final Results”),
63 Fed. Reg. 63,842 (Nov. 17, 1998), as amended, Amended Final
Results of 1996-1997 Antidumping Duty Administrative Review of
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,
From the People’s Republic of China (“Amended Final Results”), 63
Fed. Reg. 71,447 (Dec. 28, 1998).
Specifically, Timken contends that Commerce erred in: (1)
selecting, for valuing the hot-rolled steel bar used to manufacture
tapered roller bearings (“TRBs”) cups and cones, export data from
Japan to Indonesia, rather than the annual report data from eight
Indian bearing producers or Indian import statistics or export
statistics from Japan to India; (2) valuing material costs for
steel inputs by using the prices paid by a People’s Republic of
China (“PRC”) bearing producer and a PRC trading company to market-
economy suppliers; (3) valuing scrap generated from the production
Court No. 98-12-03235 Page 4
of cups, cones and rollers using unadjusted Indonesian import
statistics; and (4) failing to adjust overhead, selling, general
and administrative expenses (“SG&A”) and profit rates to account
for differences in material and labor values of other surrogate
sources used in determining normal value (“NV”).
BACKGROUND
This case concerns the 1987 antidumping duty order on TRBs
from the PRC for the period of review (“POR”) covering June 1,
1996, through May 31, 1997.2 See Antidumping Duty Order; Tapered
Roller Bearings and Parts Thereof, Finished or Unfinished, From the
People’s Republic of China (“Antidumping Duty Order”), 52 Fed. Reg.
22,667 (June 15, 1987). On July 10, 1998, Commerce published the
preliminary results of the subject review. See Preliminary Results
of 1996-1997 Antidumping Duty Administrative Review and New Shipper
Review of Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, From the People’s Republic of China (“Preliminary
Results”), 63 Fed. Reg. 37,339. Commerce published the Final Re-
sults on November 17, 1998. See 63 Fed. Reg. at 63,842.
2
Since the administrative review at issue was initiated after
December 31, 1994, the applicable law is the antidumping statute as
amended by the Uruguay Round Agreements Act (“URAA”), Pub. L. No.
103-465, 108 Stat. 4809 (1994) (effective January 1, 1995). See
Torrington Co. v. United States, 68 F.3d 1347, 1352 (Fed. Cir.
1995) (citing URAA § 291(a)(2), (b) (noting effective date of URAA
amendments)).
Court No. 98-12-03235 Page 5
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).
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
(“Universal Camera”), 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
Court No. 98-12-03235 Page 6
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 (“American
Spring Wire”), 8 CIT 20, 22, 590 F. Supp. 1273, 1276 (1984)
(quoting Penntech Papers, Inc. v. NLRB (“Penntech Papers”), 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. (“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
Court No. 98-12-03235 Page 7
matter.” Id. (citations omitted). Beyond the statute’s text, the
tools of statutory construction “include the statute’s structure,
canons of statutory construction, and legislative history.” Id.
(citations omitted); but see Floral Trade Council v. United States,
23 CIT 20, 22 n.6, 41 F. Supp. 2d 319, 323 n.6 (1999) (noting that
“[n]ot all rules of statutory construction rise to the level of a
canon, however”) (citation omitted).
If, after employing the first prong of Chevron, the Court
determines that the statute is silent or ambiguous with respect to
the specific issue, the question for the Court becomes whether
Commerce’s construction of the statute is permissible. See
Chevron, 467 U.S. at 843. Essentially, this is an inquiry into the
reasonableness of Commerce’s interpretation. See Fujitsu Gen. Ltd.
v. United States, 88 F.3d 1034, 1038 (Fed. Cir. 1996). Provided
Commerce has acted rationally, the Court may not substitute its
judgment for the agency’s. See Koyo Seiko Co. v. United States,
36 F.3d 1565, 1570 (Fed. Cir. 1994) (holding that “a court must
defer to an agency’s reasonable interpretation of a statute even if
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
Court No. 98-12-03235 Page 8
States, 12 CIT 1074, 1077, 699 F. Supp. 938, 942 (1988) (citations
omitted). In determining whether Commerce’s interpretation is
reasonable, the Court considers the following non-exclusive list of
factors: the express terms of the provisions at issue, the
objectives of those provisions and the objectives of the
antidumping scheme as a whole. See Mitsubishi Heavy Indus. v.
United States, 22 CIT 541, 545, 15 F. Supp. 2d 807, 813 (1998).
DISCUSSION
I. Commerce’s Selection of Export Data From Japan to Indonesia as
a Surrogate Value for Bearing Quality Steel Bar Used by PRC
Producers to Manufacture TRB Cups and Cones
A. Background
Antidumping margins are the difference between NV and United
States price of the merchandise. When the merchandise is produced
in a non-market economy country (“NME”) such as the PRC, Commerce
constructs NV pursuant to section 1677b(c), which provides that
the valuation of the factors of production shall be based
on the best available information regarding the values of
such factors in a market economy country or countries
considered to be appropriate by [Commerce].
19 U.S.C. § 1677b(c)(1) (1994) (emphasis supplied).
The statute does not define the phrase "best available
information,” it only provides that
[Commerce], in valuing factors of production . . . ,
shall utilize, to the extent possible, the prices or
Court No. 98-12-03235 Page 9
costs of factors of production in one or more market
economy countries that are[:]
(A) at a level of economic development comparable to
that of the nonmarket economy country, and
(B) significant producers of comparable merchandise.
19 U.S.C. § 1677b(c)(4) (1994) (emphasis supplied).
Thus, the statute grants to Commerce broad discretion to
determine the “best available information” in a reasonable manner
on a case-by-case basis. See Lasko Metal Prods., Inc. v. United
States (“Lasko”), 43 F.3d 1442, 1446 (Fed. Cir. 1994) (noting that
the statute “simply does not say--anywhere--that the factors of
production must be ascertained in a single fashion.”)
Consequently, Commerce values as many factors of production
(“FOPs”) as possible using information obtained from the “primary”
surrogate country, that is, the country that Commerce considers to
be most comparable in economic terms to the NME country being
investigated, and that also produces merchandise comparable to the
subject merchandise. See, e.g., Tianjin Mach. Import & Export
Corp. v. United States (“Tianjin”), 16 CIT 931, 940-41, 806 F.
Supp. 1008, 1018 (1992); Timken Co. v. United States, 16 CIT 142,
145-46, 788 F. Supp. 1216, 1218 (1992). Additionally, if Commerce
determines that suitable values cannot be obtained from the data of
the primary surrogate country, Commerce resorts to the data from
the second, and sometimes the third, surrogate. See, e.g., Timken
Co. v. United States (“Timken 2001"), 25 CIT __, __, 166 F. Supp.
Court No. 98-12-03235 Page 10
2d 608, 621-23 (2001); Notice of Final Determination of Sales at
Less Than Eair Value: Certain Cased Pencils From the People’s
Republic of China, 59 Fed. Reg. 55,625, 55,629 (Nov. 8, 1994);
Final Determination of Sales at Less Than Fair Value: Certain
Helical Spring Lock Washers From the People’s Republic of China, 58
Fed. Reg. 48,833, 48,835 (Sept. 20, 1993).
During this review, Commerce initially chose India as the
primary surrogate country to value all FOPs except steel inputs and
scrap, which were valued using the data from the secondary
surrogate country, Indonesia. See Preliminary Results, 63 Fed.
Reg. at 37,342-43. Commerce explained that in order to value the
steel inputs used by PRC producers to manufacture TRB cups and
cones, Commerce “reviewed several data sources, including: U.S.,
Indian, and Indonesian import statistics, and [export data from
Japan] . . . to determine the most accurate value for steel
inputs.” Final Results, 63 Fed. Reg. at 63,845. Commerce reasoned
that it decided to use secondary surrogate data (that is,
Indonesian import statistics) over import data from India because
Commerce determined that steel values contained in the Indian
import data were not reliable for two reasons: (1) Commerce was
unable to isolate Indian import value for bearing quality steel
used to manufacture the merchandise at issue, see Def.’s Mem. Opp.
Pl.’s Mot. J. Agency R. (“Def.’s Mem.”), App. Ex. 8 at 3; and (2)
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“when compared with the U.S. import statistics for the HTS category
which only includes bearing quality steel bars and rods, the Indian
values are unreliably high.” Final Results, 63 Fed. Reg. at
63,845. Commerce, however, re-examined the matter after
considering comments that questioned the use of Indonesian import
statistics to value bearing quality steel bar used by Chinese
manufacturers in the production of cups and cones. See id.
Upon examining the Indonesian import statistics, Commerce
found that Indonesian tariff category 7228.30 “include[d] several
types of hot-rolled bars and rods of alloy steel, in addition to
the bearing quality steel bars and rods used in cup and cone
production.” Id. at 63,845. Although the Indonesian import
statistics were consistent with the United States benchmark,
Commerce was persuaded by “Timken’s arguments that the volume of
steel imported into Indonesia exceeded the volume of bearing
quality steel that could actually be consumed in that country.”
Def.’s Mem. at 14. Commerce, therefore, decided to further examine
the Indonesian import values. See Final Results, 63 Fed. Reg. at
63,845.
Examining the data further, Commerce observed that the export
data from Japan to Indonesia “provid[ed] a breakdown of the broad
six-digit 7228.30 category into several more narrowly defined . .
. categories.” Id. In particular, during the period of review,
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2,974 metric tons (“MTs”) of the merchandise were exported to
Indonesia under Japanese HS Code 7228.30.900 (that is, a category
that most likely includes the bearing quality steel bar used to
produce the merchandise at issue). See id. at 63,846.
Consequently, Commerce concluded that export data from Japan to
Indonesia under category 7228.30.900 would constitute the best
information available to value steel used to produce the
merchandise at issue. See id. Commerce stated that
[b]ecause this Japanese tariff category is the narrowest
category which could contain bearing quality steel and
because it is consistent with [the United States]
benchmark, [Commerce] believe[s] it is the best
alternative for valuing steel used in the production of
cups and cones. Moreover, [Commerce] view[s] the data on
[exports from Japan] to Indonesia as an Indonesian value,
i.e., it is a value from a country comparable to the PRC.
Although the data are from Japanese statistics,
[Commerce] ha[s] used those statistics to “refine” the
Indonesian data in an attempt to make the import category
conform better to the input used by the PRC TRB
producers.
Id.
Moreover, Commerce examined and rejected the annual report
data of eight Indian bearing manufacturers suggested by Timken as
an alternative for valuing the bearing quality steel used in the
production of the subject merchandise at issue. See 63 Fed. Reg.
at 63,843-44. Commerce found that the annual report data of the
eight Indian bearing manufacturers were unsuitable to value the
steel inputs because “only three [of these manufacturers] break out
Court No. 98-12-03235 Page 13
steel costs according to the type of steel used in the production
of bearings.” Id. at 63,843. Commerce further pointed out that
[f]or the three companies that do break out their steel
costs by broad types of steel, only Asian Bearing
separately identifie[d] “steel bars,” the steel input
used by the Chinese respondents to produce certain TRB
components (cups, cones, & rollers). However, because
Asian Bearing provides an average cost for steel bar and
does not provide specific costs according to the type of
bar used (i.e., hot-rolled versus cold-rolled),
[Commerce] is unable to accurately value the two types of
steel bar used in the production of cups and cones versus
that used in the production of rollers. Furthermore, the
annual report does not specify whether the steel bar is
only used by Asian Bearing in the production of tapered
roller bearings or whether it is used to produce other
products manufactured by the company. To the extent that
Asian Bearing uses hot-rolled and cold-rolled steel bars
in different proportions than the PRC TRB producers,
Asian Bearing’s average cost of steel bars is not an
accurate value to apply to the PRC producers’ factors.
Id.
Commerce also stated that it was rejecting Asian Bearing’s
data because of Commerce’s “longstanding practice of relying, to
the extent possible, on public statistics on surrogate countries to
value any factors for which such information is available over
company-specific data.” Id. at 63,844.
Finally, Commerce in its brief explained the basis for its
rejection of the export statistics from Japan to India as an
alternative for valuing the bearing quality steel used in the
production of the subject merchandise at issue. See Def.’s Mem. at
31-33. Commerce reasoned that:
Court No. 98-12-03235 Page 14
Because (1) Commerce found that the Indian import data
were significantly higher than the U.S. benchmark; and
(2) Timken supplied the [export data from Japan] to India
in support of its argument that the Indian import data
were reasonable, it is apparent that Commerce rejected
the [export data from Japan] to India for the same
reasons that it rejected the Indian import data (i.e.,
both sources of data were unreliable when compared to the
U.S. benchmark).
Id. at 32.
B. Contentions of the Parties
1. Timken’s Contentions
Timken contends that Commerce abused its discretion when it
used export data from Japan to Indonesia to value “the hot-rolled
steel bar used to produce tapered roller bearing cups and cones
over: (1) the annual report data from eight Indian producers; (2)
Indian import statistics; or (3) [export statistics from Japan] to
India.” Timken’s Mem. P. & A. Supp. Mot. J. Agency R. (“Timken’s
Mem.”) at 24.
With regards to the annual report data from eight Indian
producers, Timken asserts that the average material costs of the
eight Indian producers was a superior surrogate source to value
hot-rolled steel bar used to produce TRB cups and cones than
Commerce’s use of the export data from Japan to Indonesia.3 See
3
Timken notes that Commerce’s practice of selecting “best
available information” to determine the surrogate value pursuant to
(continued...)
Court No. 98-12-03235 Page 15
id. at 25-32. In particular, Timken maintains that: (1) “the eight
annual reports for the Indian bearing producers are publicly
available average data from the primary surrogate country,” id. at
28; (2) “unlike Japanese export statistics, the average steel costs
contained in the eight annual reports reflect non-export prices,”
id.; (3) “the eight annual reports for the 1996-97 fiscal year are
3
(...continued)
19 U.S.C. § 1677b(c)(1)
“is to select, where possible, publicly
available information, which is (1) an average
non-export value; (2) representative of a
range of prices within the POR if submitted by
an interested party, or most contemporaneous
within the POR; (3) product-specific; and (4)
tax-exclusive. . . . [Commerce] has also
articulated a preference for a surrogate
country’s domestic prices over import values.”
Timken’s Mem. at 27 (quoting Ferrovanadium and Nitrided Vanadium
From the Russian Federation: Notice of Final Results of Antidumping
Duty Administrative Review, 62 Fed. Reg. 65,656, 65,661 (Dec. 15,
1997)).
Timken also maintains that based on the aforementioned
practice of selecting the “best available information,” Commerce
has previously used the annual reports or actual price lists of
producers in the surrogate country rather than import statistics.
See Timken’s Mem. at 27 (citing Coalition for the Preservation of
American Brake Drum and Rotor Aftermarket Mfrs. v. United States,
23 CIT 88, 115-17, 44 F. Supp. 2d 229, 255-57 (1999); Notice of
Final Determination of Sales at Less Than Fair Value: Certain
Preserved Mushrooms from the People’s Republic of China, 63 Fed.
Reg. 72,255, 72,263-64 (Dec. 31, 1998); Notice of Final
Determination of Sales at Less Than Fair Value: Circular Welded
Non-Alloy Steel Pipe From Romania, 61 Fed. Reg. 24,274, 24,279 (May
14, 1996); and Notice of Preliminary Determinations of Sales at
Less Than Fair Value and Postponement of Final Determinations:
Brake Drums and Brake Rotors From The People’s Republic of China,
61 Fed. Reg. 53,190, 53,195 (Oct. 10, 1996).
Court No. 98-12-03235 Page 16
representative of a range of material prices contemporaneous with
the period of review,” id.; (4) unlike “the Japanese export
statistics which also cover non-bearing quality steel, seven of the
eight annual reports primarily reflect material costs for bearing
quality steel in India,” id. at 28-29; and (5) “unlike the Japanese
export statistics, the material costs included in the annual
reports also reflect domestic prices.” Id. at 29. Moreover,
Timken points out that Commerce departed from its own “strong
preference [to] calculate[] normal value in NME cases based on
factor values from a single, primary surrogate source” by rejecting
the annual report data from eight Indian producers. Timken’s Mem.
at 26-27 (citing Peer Bearing Co. v. United States (“Peer Bearing
1998"), 22 CIT 472, 481, 12 F. Supp. 2d 445, 455 (1998); Tianjin,
16 CIT at 940, 806 F. Supp. at 1017-18; Industrial Nitrocellulose
From the People’s Republic of China: Final Results of Antidumping
Duty Administrative Review, 62 Fed. Reg. 65,667, 65,668 (Dec. 15,
1997); Notice of Final Determination of Sales at Less Than Fair
Value: Certain Cut-to-Length Carbon Steel Plate From Ukraine, 62
Fed. Reg. 61,754, 61,762 (Nov. 19, 1997); and Final Determination
of Sales at Less Than Fair Value: Certain Carbon Steel Butt-Weld
Pipe Fittings From the People’s Republic of China, 57 Fed. Reg.
21,058, 21,062 (May 18, 1992)).
Court No. 98-12-03235 Page 17
Additionally, Timken argues that Commerce “failed to compare
the merits of [Indian annual report data] with . . . export
statistics [from Japan] to Indonesia.” Timken’s Mem. at 30; see
also Timken’s Reply Br. (“Timken’s Reply”) at 4-5. In particular,
Timken asserts that: (1) the export data from Japan to Indonesia
does not “separately identify material costs for hot-rolled bar for
the production of cups and cones,” Timken’s Mem. at 30; (2) the
export data from Japan to Indonesia “include[s] non-bearing quality
steel,” id., and; (3) “Japanese exports of steel to Indonesia were
not likely to have been used for the production [of the] subject
merchandise.” Id. Timken also asserts that the annual reports of
the eight Indian producers were publicly available and were used by
Commerce to value overhead, SG&A and profit. Timken’s Mem. at 31.
Finally, Timken maintains that the “fact that the average
material[] costs” of the eight Indian producers were on average
“higher than Japanese export prices to Indonesia . . . is
insufficient to support use of . . . [Japanese exports to
Indonesia] as the ‘best available information’ to value material
costs [at issue].” Id. at 32. Timken, therefore, argues that
Commerce’s decision to use export data from Japan to Indonesia to
value the subject merchandise at issue is arbitrary and unsupported
by substantial evidence. See Timken’s Reply at 5.
Court No. 98-12-03235 Page 18
As an alternative to the prior argument, Timken suggests that
Commerce should have used Indian import statistics to value the
steel inputs at issue.4 Id. In particular, Timken argues that:
(1) Commerce’s use of United States import data as a benchmark for
assessing the reliability of the Indian import data was unreliable
and unreasonable, see Timken’s Reply at 6-7; Timken’s Mem. at 24
n.3; (2) “import[] statistics from the primary surrogate country
are superior to . . . export statistics [from Japan] to the
secondary surrogate,” Timken’s Mem. at 24-25 n.3; and (3) Commerce
arbitrarily selected export statistics from Japan to Indonesia as
a surrogate to value the subject merchandise at issue despite the
fact that Indonesia is not a “‘significant’ bearing producer” and
“Indian import statistics were remarkably consistent with the raw
material costs reported in the annual reports of eight Indian
bearing[] producers.” Id. at 25 n.3; see also, Timken’s Reply at
7.
4
In its brief, Timken directs the Court to review the
arguments Timken made regarding the use of Indian import statistics
as a surrogate value in Peer Bearing Co. v. United States (“Peer
Bearing 2001"), 25 CIT __, 182 F. Supp. 2d 1285 (2001); Timken
2001, 25 CIT __, 166 F. Supp. 2d 608; Timken Co. v. United States
(“Timken 1999"), 23 CIT 509, 59 F. Supp. 2d 1371 (1999); Peer
Bearing 1998, 22 CIT at 479-82, 12 F. Supp. 2d at 453-56. See
Timken’s Mem. at 24. The Court, however, does not entertain
arguments “incorporated by reference,” that is, those arguments in
Timken’s prior briefs, and shall only address the arguments
currently before the Court.
Court No. 98-12-03235 Page 19
Finally, Timken alternatively argues that Commerce failed to
explain Commerce’s rejection of export data from Japan to India as
a surrogate value. See Timken’s Mem. at 32-35; Timken’s Reply at
8-9. Timken asserts that “[w]ithout an articulation of reasons as
to why [Commerce] considered . . . export statistics [from Japan]
to India inadequate, the Court cannot determine whether
[Commerce’s] decision was arbitrary, capricious, or otherwise not
in accordance with law.”5 Timken’s Mem. at 35 (citing SEC v.
Chenery Corp., 332 U.S. 194, 196 (1947)). Moreover, Timken
contends that Commerce should have used the export data from Japan
to India over export data from Japan to Indonesia as a surrogate to
value the subject merchandise at issue because (1) if Commerce was
persuaded by the fact that the export statistics from Japan to
Indonesia provide more product-specific data for bearing quality
steel bar to value TRB cups and cones, then the very same fact with
regards to export statistics for Japanese exports to India should
be equally considered by Commerce, see Timken’s Mem. at 33; (2)
“Japanese steel exported to Indonesia was less likely to be used in
the production of identical or comparable merchandise than Japanese
5
Timken also argues that Commerce’s failure to consider
export data from Japan to India as a surrogate to value the subject
merchandise and Commerce’s post-hoc explanation that Commerce
“rejected the . . . export statistics [from Japan] to India because
they were higher than the U.S. import values . . . requires a
remand so that [Commerce] may explain its decision on the record.”
Timken’s Reply at 8; see also id. at 9.
Court No. 98-12-03235 Page 20
exports to India,” id. at 34; (3) Commerce’s reliance on United
States import data as a benchmark was unreasonable, see id.; and
(4) “[i]f Japanese export statistics under HTS 7228.30.90 contained
more product-specific information than Indian or Indonesian import
statistics, then [Commerce] should have used . . . export
statistics [from Japan] to India.” Id.
2. Commerce’s Contentions
Commerce responds that its decision to value steel inputs used
by PRC producers to manufacture TRB cups and cones by using export
data from Japan to Indonesia rather than either the annual report
data for eight Indian producers, or export statistics from Japan to
India, or Indian import statistics was reasonable and in accord
with the mandate of 19 U.S.C. § 1677b(c). See Def.’s Mem. at 23-
33. Specifically, Commerce points out that, contrary to Timken’s
argument, “‘[t]he court’s role is not to determine whether the
information chosen by Commerce is the “best” actually available,
but whether the choice is supported by substantial evidence and is
in accordance with law.’” Id. at 25 (quoting Novachem, Inc. v.
United States, 16 CIT 782, 786, 797 F. Supp. 1033, 1037 (1992)).
Commerce, therefore, maintains that its selection of the export
data from Japan to Indonesia as the “best available” surrogate
value should be sustained because that data “represented ‘the
narrowest category most likely containing bearing quality steel
Court No. 98-12-03235 Page 21
bar’; and . . . ‘it is consistent with [the United States]
benchmark.’” Def.’s Mem. at 25 (quoting Final Results, 63 Fed.
Reg. at 63,846).
Commerce argues that its decision to reject the annual report
data of eight Indian bearing manufacturers as an alternative for
valuing the bearing quality steel used in the production of the
subject merchandise at issue was supported by substantial evidence.
See Def.’s Mem. at 26-29. Commerce asserts that it examined the
annual report data of the eight Indian producers and found that
only three of the eight reports “identified steel costs by the type
of steel used in the production of bearings.” Id. at 27.
Moreover, Commerce points out that
“[f]or the three companies that do break out their steel
costs by broad types of steel, only Asian Bearing
separately identifie[d] ‘steel bars,’ the steel input
used by the Chinese respondents to produce certain TRB
components (cups, cones, & rollers).”
Id. (quoting Final Results, 63 Fed. Reg. at 63,843).
Commerce further reasoned that it rejected the Asian Bearing
annual report for three reasons:
(1) “Asian Bearing provides an average cost for steel bar
and does not provide specific costs according to the type
of bar used (i.e., hot-rolled versus cold-rolled)”; (2)
“the annual report does not specify whether the steel bar
is only used by Asian Bearing in the production of
tapered roller bearings or whether it is used to produce
other products manufactured by the company”; and (3)
“public statistics provide a more representative value
Court No. 98-12-03235 Page 22
for these material inputs than a single company’s
information.”
Def.’s Mem. at 27 (quoting Final Results, 63 Fed. Reg. at 63,843-
44).
Additionally, Commerce maintains that “[n]either the Indian
annual reports nor the Japanese export data . . . satisfied all of
Commerce’s preferences.” Def.’s Mem. at 29. Commerce, therefore,
selected the “policy preference (i.e., non-export value or product-
specificity) [that] would lead to a more accurate dumping margin.”
Id.
Commerce also argues that its decision to reject Indian import
statistics as an alternative for valuing the bearing quality steel
used in the production of the subject merchandise at issue was
supported by substantial evidence. Id. at 29-31. Commerce points
out that
“[i]n comparing [Indian import statistics] data to other
market values, including U.S. imports from category
7228.30.20 (the only import category on the record which
explicitly contains only bearing quality steel),
[Commerce] found the Indian values to be unreliable
because the values for these imports were significantly
higher.”
Id. at 30 (quoting App. Ex. 8).
Additionally, Commerce was unable to isolate Indian import
value for bearing quality steel used to manufacture the subject
merchandise at issue. See Def.’s Mem., App. Ex. 8 at 3. Commerce
Court No. 98-12-03235 Page 23
also points out that the United States benchmark used by Commerce
in assessing the reliability of the Indian import data was
reasonable and reliable. See Def.’s Mem. at 31; see also Final
Results, 63 Fed. Reg. at 63,844-45.
Finally, Commerce contends that its decision to reject
export data from Japan to India as an alternative for valuing the
bearing quality steel used in the production of the subject
merchandise at issue was supported by substantial evidence. See
Def.’s Mem. at 31-33. Commerce agrees with Timken that Commerce
“did not formally explain the basis for its rejection of . . .
export statistics [from Japan] to India as a surrogate value.” Id.
at 31. Nevertheless, Commerce maintains that the Court may discern
Commerce’s rejection of export data from Japan to India as a
surrogate value because Commerce’s reasoning “is apparent from the
administrative record.” Id. In particular, Commerce reasoned that
[b]ecause [:] (1) Commerce found that the Indian import
data were significantly higher than the U.S. benchmark;
and (2) Timken supplied the . . . export data [from
Japan] to India in support of its argument that the
Indian import data were reasonable, it is apparent that
Commerce rejected the . . . export data [from Japan] to
India for the same reasons that it rejected the Indian
import data (i.e., both sources of data were unreliable
when compared to the U.S. benchmark).
Id. at 32.
Court No. 98-12-03235 Page 24
C. Analysis
1. Commerce’s Changes of Policy or Methodology
Agency statements provide guidance to regulated industries.
While “‘an agency does not act rationally when it chooses and
implements one policy and decides to consider the merits of a
potentially inconsistent policy in the very near future,’”
Transcom, Inc. v. United States, 24 CIT ___, ___, 123 F. Supp. 2d
1372, 1381 (2000) (quoting ITT World Communications, Inc. v. FCC,
725 F.2d 732, 754 (D.C. Cir. 1984)), Commerce, in view of the
rapidly-changing world of global trade and Commerce’s limited
resources, should be able to rely on its “unique expertise and
policy-making prerogatives.” Southern Cal. Edison Co. v. United
States, 226 F.3d 1349, 1357 (Fed. Cir. 2000). “‘The power of an
administrative agency to administer a congressionally created . .
. program necessarily requires the formulation of policy . . . .’”
Chevron, 467 U.S. at 843 (quoting Morton v. Ruiz, 415 U.S. 199, 231
(1974)).
An agency decision involving the meaning or reach of a statute
that reconciles conflicting policies “‘represents a reasonable
accommodation of conflicting policies that were committed to the
agency’s care by the statute, [and a reviewing court] should not
disturb [the agency decision] unless it appears from the statute or
its legislative history that the accommodation is not one that
Court No. 98-12-03235 Page 25
Congress would have sanctioned.’” Chevron, 467 U.S. at 845 (quoting
United States v. Shimer, 367 U.S. 374, 382-83 (1961)).
Furthermore, an agency must be allowed to assess the wisdom of its
policy on a continuing basis. Under the Chevron regime, agency
discretion to reconsider policies is inalienable. See Chevron, 467
U.S. at 843. Any assumption that Congress intended to freeze an
administrative interpretation of a statute would be entirely
contrary to the concept of Chevron which assumes and approves the
ability of administrative agencies to change their interpretations.
See, e.g., Maier, P.E. v. United States EPA, 114 F.3d 1032, 1043
(10th Cir. 1997), J.L. v. Social Sec. Admin., 971 F.2d 260, 265 (9th
Cir. 1992), Saco Defense Sys. Div., Maremont Corp. v. Weinberger,
606 F. Supp. 446, 450-51 (D. Me. 1985). In sum, underlying agency
interpretative policies “are given controlling weight unless they
are arbitrary, capricious, or manifestly contrary to the statute.”
Chevron, 467 U.S. at 844.
Moreover, “‘[a]n [agency] announcement stating a change in the
method . . . is not a general statement of policy.’” American
Trucking Ass’ns, Inc. v. ICC, 659 F.2d 452, 464 n.49 (5th Cir. 1981)
(quoting Brown Express, Inc. v. United States, 607 F.2d 695, 701
(5th Cir. 1979) (internal quotations omitted)). While a policy
“denotes . . . [the] general purpose . . . [of the statute]
considered as directed to the welfare or prosperity of the state,”
Court No. 98-12-03235 Page 26
BLACK’S LAW DICTIONARY 1157 (6th ed. 1990), methodology refers only to
the “performing [of] several operations[] in the most convenient
order,” id. at 991; accord Avoyelles Sportsmen’s League, Inc. v.
Marsh, 715 F.2d 897 (5th Cir. 1983); Interstate Natural Gas Ass’n
of Am. v. Federal Energy Regulatory Comm’n, 716 F.2d 1 (D.C. Cir.
1983); Hooker Chems. & Plastics Corp. v. Train, 537 F.2d 620 (2d
Cir. 1976). Consequently, the courts are even less in the position
to question an agency action if the action at issue is a choice of
methodology, rather than policy. See, e.g., Maier, P.E., 114 F.3d
at 1043 (citing Professional Drivers Council v. Bureau of Motor
Carrier Safety, 706 F.2d 1216, 1221 (D.C. Cir. 1983)). Similarly,
an agency decision to change its methodology, that is, to take an
act of statutory implementation while pursuing the same policy,
should be examined under the Chevron test and sustained if the new
methodology is reasonable. See, e.g., Koyo Seiko Co., v. United
States, 24 CIT ___, ___, 110 F. Supp. 2d 934, 942 (2000) (stating
that “‘the use of different methods [of] calculati[on] . . . does
not [mean there is a] conflict with the statute,’”) (quoting
Torrington Co. v. United States, 44 F.3d 1572, 1578 (Fed. Cir.
1995)).
Therefore, Commerce’s decision to reject the annual report
data of eight Indian producers and Commerce’s consequential use of
alternative data as a surrogate value for bearing quality steel bar
Court No. 98-12-03235 Page 27
used by PRC producers to manufacture TRB cups and cones was a
justifiable change of methodology as long as such change in
position was reasonably supported by the record.
2. Commerce’s Decision to Use Export Data from Japan
to Indonesia
As a preliminary matter, the Court rejects Timken’s assertion
that Commerce erred in using United States data as benchmarks to
test the reliability of the Indian import data and export data from
Japan to India. A comparison of surrogate data to that of market
economy in order to determine the reliability of such surrogate
data is within “‘Commerce’s statutory authority and consistent with
past practice.’” Peer Bearing 1998, 22 CIT at 481, 12 F. Supp. 2d
at 455 (quoting Writing Instrument Mfrs. Ass’n v. United States
(“Writing Instrument”), 21 CIT 1185, 1195, 984 F. Supp. 629, 639
(1997)) (upholding use of United States benchmark as a point of
comparison for two possible surrogate values and quoting, in turn,
Olympia Indus., Inc. v. United States (“Olympia 1997"), 21 CIT 364,
369 (1997) (approving Commerce’s use of data from other market
economies to test the reliability of surrogate country data)).
Commerce, therefore, acted within its statutory authority by
utilizing United States data to aid in its FOPs valuation. See 19
U.S.C. §§ 1677b(c)(1) and (4); Peer Bearing 1998, 22 CIT at 481, 12
F. Supp. 2d at 455.
Court No. 98-12-03235 Page 28
Next, with respect to Timken’s challenge to Commerce’s
decision to use export data from Japan to Indonesia to value the
hot-rolled steel bar used by PRC producers to manufacture TRB cups
and cones, the Court finds that Commerce’s decision was
unreasonable.
In this case, during the review at issue, Commerce examined
the Indonesian import statistics and found that: (1) Indonesian
import statistics were consistent with the United States benchmark;
and (2) “the volume of steel imported into Indonesia exceeded the
volume of bearing quality steel that could actually be consumed in
that country.” Def.’s Mem. at 14. Upon further examination of
Indonesian import statistics, Commerce observed that export data
from Japan to Indonesia under category 7228.30.900 would constitute
the best information available to value steel used to produce the
merchandise at issue. Commerce reasoned that because
this Japanese tariff category is the narrowest category
which could contain bearing quality steel and . . . it is
consistent with [the United States] benchmark.
Final Results, 63 Fed. Reg. at 63,846.
Commerce went on to state that
[Commerce] view[s] the data on Japanese exports to
Indonesia as an Indonesian value, i.e., it is a value
from a country comparable to the PRC. Although the data
are from Japanese statistics, [Commerce] ha[s] used those
statistics to “refine” the Indonesian data in an attempt
to make the import category conform better to the input
used by the PRC TRB producers.
Court No. 98-12-03235 Page 29
Id.
With respect to export statistics from Japan to India,
Commerce, however, admittedly failed to explain its rejection of
the export statistics from Japan to India as a surrogate value.
See Def.’s Mem. at 31. While Commerce maintains that the Court may
discern Commerce’s reasoning for rejecting the export data from
Japan to India from the record, the Court finds that Commerce’s
reasoning for rejecting the export data from Japan to India as a
surrogate value was not sufficiently explained. To the contrary,
on the basis of the explanation supplied by Commerce one may
conclude that it was illogical for Commerce to utilize export data
from Japan to Indonesia in order to “refine” the Indonesian data
and then to subsequently reject analogously structured export data
from Japan to India.
Accordingly, the Court remands this issue to Commerce with
instructions to provide the Court with an explanation as to why
export statistics from Japan to India are not the “best available
information” for the purpose of choosing a surrogate to value hot-
rolled steel bar used to produce TRB cups and cones.
Court No. 98-12-03235 Page 30
II. Commerce’s Use of Luoyang Bearing Factory’s and China
National Machinery Import and Export Corporation’s Market
Economy Import Data
A. Background
During the POR, Luoyang Bearing Factory (“Luoyang”), China
National Machinery Import and Export Corporation (“CMC”), Zhejiang
Changshan Bearing (Group) Co., Ltd. (“ZX”), and Zhejiang Machinery
Import and Export Corporation (“Zhejiang”) “submitted [to Commerce]
market economy input prices for steel they imported, directly or
indirectly, and used in the production of” TRBs. Def.’s Mem., App.
Ex. 6 at 1. In the Preliminary Results, Commerce stated that
[Luoyang and CMC] . . . purchased steel from market
economy suppliers and paid for the steel with market
economy currencies. In these instances [Commerce] valued
the steel input using the actual prices reported for
imported inputs from a market economy . . . . Where . .
. [ZX and Zhejiang] purchased the steel from a PRC
trading company [CMC] and paid for the steel in . . .
[non-market economy currency], [Commerce] did not use the
market economy price to the trading company and instead
used surrogate data [to value the steel input].
63 Fed. Reg. at 37,343 (citing Def.’s Mem., App. Ex. 6).
However, in the Final Results, Commerce partially departed
from the conclusion reached in its Preliminary Results and “us[ed]
. . . [CMC’s] import steel price as surrogate data for those
companies that actually used the imported steel [that is, ZX and
Zhejiang].” Final Results, 63 Fed. Reg. at 63,854; accord Def.’s
Mem. at 33 n.35. For the purpose of assessing the alternative
surrogate data, Commerce determined the reliability of CMC’s import
Court No. 98-12-03235 Page 31
prices by examining the following: “(1) the value and volume of
steel imports, (2) the type and quality of the imported steel, and
(3) consumption of imported steel by the NME producer.” Final
Results, 63 Fed. Reg. at 63,854; see also, Olympia Indus., Inc. v.
United States (“Olympia 1999"), 23 CIT 80, 82, 36 F. Supp. 2d 414,
416 (1999). Upon examining these factors, Commerce concluded that:
[t]he record evidence demonstrates that . . . [CMC]
purchased steel from a market-economy country, in a
convertible currency. This company used a portion of the
steel in its own production of TRBs but also sold a
portion of the steel to an unrelated manufacturer. Based
on the invoices for the imported steel, and the
specifications of the steel sourced by the factories
domestically, [Commerce] conclude[d] that the imported
steel is of the same grade and has the same range of
sizes as steel that the NME manufacturers used to produce
the subject merchandise.
Regarding the value of the steel imported by . . .
[CMC], [Commerce] found that the price paid by the
trading company is within the range of prices created by
the actual steel prices paid by PRC producers and
[Commerce’s] surrogate value. Consequently, the price
paid by . . . [CMC] is not aberrational. With respect to
volume and consumption of steel by the NME producer,
[Commerce] note[s] that the amount of steel imported by
the trading company was significant and that the NME
producer in question consumed a significant amount of
imported steel to produce the subject merchandise.
Final Results, 63 Fed. Reg. at 63,854.
B. Contentions of the Parties
1. Timken’s Contentions
Timken contends that Commerce’s decision to value material
costs for certain steel inputs by using the prices paid by CMC to
Court No. 98-12-03235 Page 32
market-economy suppliers was not supported by substantial evidence
and contrary to law. See Timken’s Mem. at 36-38. In particular,
Timken argues that Commerce’s reliance on CMC’s import prices as an
alternative surrogate value violates “[t]he plain language of the
statute and regulations [which] require, . . . ‘to the extent
possible,’ that [Commerce] value factors of production based on
prices or costs ‘in’ another market economy country at a comparable
level of development.” Id. at 36 (quoting 19 U.S.C. § 1677b(c)(4)
and 19 C.F.R. § 353.52(c)(1997)); see also Timken’s Reply at 9.
Relying on Olympia 1999, 23 CIT 80, 36 F. Supp. 2d 414, Timken
maintains that “trading company import prices are not actual prices
but surrogate values subject to the requirements of 19 U.S.C. §
1677b(c)(4).”6 Timken’s Reply at 10; see also Timken’s Mem. at 37.
6
Timken, in its Reply Brief states that:
Although the Court in Olympia [1999] did address the use
of trading company import prices, the Court reviewed
[Commerce’s] reliance on traditional surrogate values
over trading company prices in that case. Therefore, the
Court in Olympia [1999] did not reach the issue of
whether § 1677b(c)(4) requires [Commerce] to value
factors of production ‘to the extent possible’ based on
values in one or more market economy countries that are
at a level of economic development comparable to that of
the nonmarket economy country, and significant producers
of the subject merchandise before resort to ‘alternative
surrogate’ trading company import prices.
Timken’s Reply at 13.
Moreover, contrary to Commerce’s argument that the Court of
Appeals for the Federal Circuit (“CAFC”) in Lasko, 43 F.3d 1442,
(continued...)
Court No. 98-12-03235 Page 33
Based on the foregoing, Timken further maintains that “[n]owhere in
its final determination does [Commerce] explain that it was not
‘possible’ to use Indian or other surrogate values according to the
expressed statutory requirements.”7 Timken’s Mem. at 38; see
Timken’s Reply at 13. Timken, therefore, asserts that a remand is
necessary so that Commerce can explain its interpretation of 19
U.S.C. § 1677b(c)(4) as it “applie[s] to the facts of this case.”
Timken’s Reply at 13.
Additionally, Timken argues that Commerce’s three-pronged test
only examines whether trading company import prices are
aberrational or insignificant and does not “determine whether
[trading company import] prices reflect market forces and are more
6
(...continued)
supports Commerce’s treatment of trading company import prices,
Timken argues that Lasko “addressed the issue of whether or not
[Commerce] could mix-and-match surrogate market values and market-
based values to value factors of production.” Timken’s Reply at
10. Timken, therefore, maintains that Lasko did not address “the
issue of the proper interpretation of 19 U.S.C. § 1677b(c)(4) or
the use of Chinese trading company purchases as surrogates.” Id.
Additionally, contrary to Commerce’s contention that “Lasko
rejected the argument that [§ 1677b(c)(4)] set forth a hierarchy
requiring [Commerce] to base foreign market value solely on
surrogate factors of production[,]” Timken argues that “Lasko did
not involve the selection between competing surrogate values
pursuant to § 1677b(c)(4).” Id. at 12-13.
7
For instance, Timken asserts that Commerce could have used
the eight annual reports of Indian bearing producers as a possible
surrogate to value the steel inputs at issue. See Timken’s Mem. at
38.
Court No. 98-12-03235 Page 34
reliable than surrogate values from a comparable market economy.”
Timken’s Mem. at 42-43; Timken’s Reply at 15-16. Timken contends
that in order for Commerce to assess the reliability of trading
company import prices pursuant to § 1677b(c)(1), Commerce should
have considered: (1) “whether the trading company importer
sufficiently covered its costs in reselling the imported
materials;” (2) “any countertrade arrangements between the trading
company and its market-economy supplier;” (3) “any commissions or
other consideration paid by the purchaser or supplier to the
trading company, or lack thereof;” and (4) “any affiliation between
the trading company, the market-economy supplier and/or the Chinese
manufacturer.” Timken’s Mem. at 43. Moreover, Timken maintains
that contrary to Commerce’s assertion that Olympia 1999, 23 CIT 80,
36 F. Supp. 2d 414, approved Commerce’s three-pronged test, “[t]he
issue [in Olympia 1999] was not whether [Commerce] could rely on
the test to support acceptance of trading company import prices.”
Timken’s Reply at 16.
Next, Timken argues that Commerce’s determination that a PRC
bearing producer’s (that is, Luoyang’s) import prices constituted
the “best available information” under § 1677b(c)(1) to value
material costs for certain steel inputs was contrary to §
1677b(c)(1) and unsupported by substantial evidence because
Commerce failed to determine whether the prices paid by the PRC
Court No. 98-12-03235 Page 35
bearing producer to the market-economy suppliers were “market-
driven.” See Timken’s Mem. at 39-41. In particular, Timken
maintains that “[i]mports from a market-economy country are not
necessarily priced at market-economy rates when sold in a non-
market economy country.” Timken’s Mem. at 40. Timken states:
[i]ndeed, with the increasing number of countries
applying antidumping rules, it can be expected that
exports to China could be dumped with impunity or sold at
price levels that are atypical of prices in the country
of exportation. . . . Producers in highly-developed
countries, concerned with unused capacity might export to
China at below-market prices in order to better spread
their fixed costs. Or, the domestic Chinese competition
may require potential exporters to price at levels not
found ‘in’ their own market economies in order to
establish channels of distribution and market share. In
either case, dumped import prices would not reflect
prices in the exporting country, whether or not it was at
a comparable level of development.
Id.8
Moreover, relying on Final Determinations of Sales at Less
Than Fair Value: Oscillating Fans and Ceiling Fans From the
8
In support of its assertions, Timken aruges that
“legislative history is instructive” and provides
[i]n valuing . . . factors {of production}, Commerce
shall avoid using any prices which it has reason to
believe or suspect may be dumped or subsidized prices.
However, the conferees [do] not intend for Commerce to
conduct a formal investigation to ensure such prices are
not dumped or subsidized, but rather intend that Commerce
base its decision on information generally available to
it at that time.
Timken’s Mem. at 40 (quoting 1988 U.S.C.C.A.N. 1547, 1623).
Court No. 98-12-03235 Page 36
People’s Republic of China (“Oscillating Fans”), 56 Fed. Reg.
55,271, 55,275 (Oct. 25, 1991), Timken maintains that “as
[Commerce] evaluates market-economy prices to determine whether
they are reliable in a market-economy case, [Commerce] should
evaluate those prices to determine whether they are reliable in
[an] NME case.”9 Timken’s Mem. at 41.
Timken also contends that Commerce “should have considered the
volume and frequency of” Luoyang’s market-economy purchases10 and
“should have rejected all prices that were not at arm’s length,
that did not reflect commercial quantities, or that otherwise did
not reasonably reflect the actual cost of production in a
9
Timken contends that contrary to Commerce’s argument that
Lasko Metal Prods., Inc. v. United States (“Lasko Metal”), 16 CIT
1079, 1081, 810 F. Supp. 314, 317 (1992), aff’d, Lasko, 43 F.3d
1442, allows Commerce to “presume that the prices paid by PRC
producers are ‘market driven’ and otherwise reliable[,] . . . this
Court did not address the issue presented in this case of whether
[Commerce] had an obligation to determine whether the prices were,
in fact, ‘market driven’ or otherwise reliable as required in an
non-NME case pursuant to 19 U.S.C. §§ 1677b(a), (b).” Timken’s
Reply at 14-15.
10
Timken refers to 19 C.F.R. § 351.408(c)(1)(1998) and the
comments of this regulation to support its argument that Commerce
“has recognized that use of prices paid by an NME producer to a
market-economy supplier must be assessed for reliability.”
Timken’s Mem. at 41 n.6. As Timken and Commerce correctly note, 19
C.F.R. § 351.408(c )(1) does not apply to the subject review. See
id.; Def.’s Mem. at 35 n.36. Nevertheless, “[f]or segments of
proceedings initiated on the basis of petitions filed or requests
made after January 1, 1995, but before part 351 applies, part 351
. . . serve[s] as a restatement of [Commerce’s] interpretation of
the requirements of the Act as amended by the URAA.” 19 C.F.R. §
351.701 (1998).
Court No. 98-12-03235 Page 37
comparable market economy.” Id. at 41-42; see Timken’s Reply at
15.
2. Commerce’s Contentions
Commerce responds that its determination to value material
costs for steel inputs using the prices paid by: (1) a PRC bearing
producer (Luoyang) and (2) a PRC trading company (CMC) to market-
economy suppliers was supported by substantial evidence and in
accordance with law. See Def.’s Mem. at 33-39.
First, with respect to Commerce’s decision to value material
costs for certain steel inputs by using the prices paid by a PRC
trading company to market-economy suppliers, Commerce, relying on
Lasko argues that the Court “reject[ed] [the] argument that [§
1677b(c)(4)] set forth a hierarchy that requires Commerce to
‘determine [NV] in a[n] NME solely on the basis of surrogate
factors of production.’” Def.’s Mem. at 35 (quoting Lasko, 43 F. 3d
at 1445). Commerce further argues that since § 1677b(c)(4)
does not distinguish between producers and trading
companies for purposes of determining NV in a case
involving an NME country, it is apparent that Commerce’s
authority to use the actual market-economy prices paid
for by producers also extends to actual market-economy
prices paid for by trading companies.
Def.’s Mem. at 35.
Moreover, Commerce contends that its three-pronged test is
presumptively correct and has been approved by Olympia Indus. Inc.
Court No. 98-12-03235 Page 38
v. United States, 36 F.3d 414 (CIT 1999) [sic].11 Id. at 38.
Commerce further maintains that § 1677b(c)(1) is silent as to the
methodology Commerce is to use in “determin[ing] whether to use the
market prices paid by trading companies as an alternative surrogate
value.” Def.’s Mem. at 38-39. Commerce, therefore, argues that
since the statute is silent “‘the Supreme Court . . . ha[s] held
that our duty is not to weigh the wisdom of, or to resolve any
struggle between, competing views of the public interest, but
rather to respect legitimate policy choices made by the agency
interpreting and applying the statute.’” Id. at 39 (quoting Lasko,
43 F.3d at 1446 and Suramerica de Aleaciones Laminadas, C.A. v.
United States (“Suramerica”), 966 F.2d 660, 665 (Fed. Cir. 1992),
and citing Timken 1999, 23 CIT at 516, 59 F. Supp. 2d at 1377)).
Second, with respect to Commerce’s determination to value
material costs for certain steel inputs by using the prices paid by
a PRC bearing producer to market-economy suppliers, Commerce argues
that this practice was sustained by the CAFC in Lasko. See Def.’s
Mem. at 33. In particular, Commerce points out that § 1677b(c)(1)
“requires Commerce to value factors of production using the ‘best
available information’” and that Lasko found that “‘the best
available information on what the supplies used by the Chinese
11
The Court assumes that the correct citation is Olympia
1999, 23 CIT 80, 36 F. Supp. 2d 414.
Court No. 98-12-03235 Page 39
manufactures would cost in a market economy country was the price
charged by those supplies on the international market.’” Id. at
33-34 (quoting Lasko, 43 F.3d at 1446). Commerce also points out
that contrary to Timken’s argument, the prices paid by the PRC
bearing producer constituted the best available information because
the PRC bearing producer had a contract priced in United States
dollars between itself and a market-economy supplier and “‘[t]he
cost for raw materials from a market economy supplier, paid in
convertible currencies, provides Commerce with the closest
approximation of the cost of producing the goods in a market
economy country.’” Def.’s Mem. at 35-36 (quoting Lasko Metal, 16
CIT at 1081, 810 F. Supp. at 317).
Additionally, Commerce asserts that since Timken’s argument
(that is, the prices paid by the PRC bearing producer, Luoyang,
might not reflect market-economy prices) is based on hypothetical
assertions, Commerce’s decision to accept the PRC producer’s prices
are not in conflict with legislative history. See Def.’s Mem. at
36 (citing to 1988 U.S.C.C.A.N. 1547, 1623-24). Commerce also
asserts that Timken’s argument (that is, Commerce should have
considered the volume and frequency of Luoyang’s market-economy
purchases) is unpersuasive because “[t]he authorities relied upon
by Timken reveal that it is [Commerce’s] practice to consider the
volume of market-economy purchases for purposes of determining
Court No. 98-12-03235 Page 40
whether to value domestically-purchased inputs based upon the value
of imports from a market-economy country.” Id. at 37 (citing Final
Results of Antidumping Duty Administrative Review of Certain
Helical Spring Lock Washers From the People’s Republic of China
(“Certain Helical Spring Lock Washers”), 62 Fed. Reg. 61,794,
61,796 (Nov. 19, 1997). Commerce, therefore, points out that
“[w]here Commerce uses the prices of a respondent’s market-economy
purchases to value those purchases, it does not consider the volume
or frequency of those purchases.” Id. at 38 (citing Lasko, 43 F.3d
at 1446).
C. Analysis
The applicable statute provides that, when dealing with
imports from an NME country such as the PRC, Commerce shall
determine the NV of the subject merchandise based on FOPs utilized
in producing the merchandise. See 19 U.S.C. § 1677b(c)(1). The
statute further provides that Commerce shall value the reported
FOPs based on the best available information regarding the values
of FOPs in an appropriate market economy. See id. While
conducting NME investigations, Commerce “shall utilize, to the
extent possible, the prices or costs of [FOPs] in one or more
market economy countries that are[:] (A) at a level of economic
development comparable to that of the nonmarket economy country,
and (B) significant producers of comparable merchandise.” See 19
Court No. 98-12-03235 Page 41
U.S.C. § 1677b(c)(4).
The CAFC, however, reasoned that “the purpose of the statutory
provisions [that is, §§ 1677b(c)(1) and (4)] is to determine
antidumping margins ‘as accurately as possible.’” Shakeproof
Assembly Components, Div. of Illinois Tool Works, Inc. v. United
States (“Shakeproof”), 268 F.3d 1376, 1382 (Fed. Cir. 2001)
(quoting Lasko, 43 F.3d at 1446); see also Olympia Indus., Inc. v.
United States (“Olympia 1998"), 22 CIT 387, 390, 7 F. Supp. 2d 997,
1000-01 (1998) (noting that “accuracy is the touchstone of the
antidumping statute” and citing Rhone Poulenc, Inc. v United States
(“Rhone Poulenc”), 899 F.2d 1185, 1191 (Fed. Cir. 1990)).
Additionally, Commerce’s “task in [an NME] investigation is to
calculate what . . . [the] costs or prices would be [in the NME] if
such prices or costs were determined by market forces.” Tianjin,
16 CIT at 940, 806 F. Supp. at 1018.
1. Commerce’s Decision to Value Material Costs for
Certain Steel Inputs by Using the Prices Paid by a
PRC Trading Company
The Court disagrees with Timken that Commerce is required to
value FOPs pursuant to § 1677b(c )(4) prior to resorting to a PRC
trading company’s import prices paid to a market-economy supplier
to value material costs for certain steel inputs. Specifically,
the Court disagrees with Timken’s narrow reading of Lasko, 43 F.3d
Court No. 98-12-03235 Page 42
1442. The Court in Lasko Metal, 16 CIT at 1081, 810 F. Supp. at
317, reasoned that “[t]he cost for raw materials from a market
economy supplier, paid in convertible currencies, provides Commerce
with the closest approximation of the cost of producing the goods
in a market economy country.” Additionally, the CAFC observed
“[w]here we can determine that a [non-market economy]
producer’s input prices are market determined, accuracy,
fairness, and predictability are enhanced by using those
prices. Therefore, using surrogate values when market-
based values are available would, in fact, be contrary to
the intent of the law.”
Shakeproof, 268 F.3d at 1382 (emphasis in original) (quoting Lasko,
43 F.3d at 1446); accord Oscillating Fans, 56 Fed. Reg. at 55,275;
see also Olympia 1998, 22 CIT at 392, 7 F. Supp. 2d at 1002
(stating that “[t]he same holds true here with respect to the
trading company data”).
Moreover, the relevant regulation provides:
[Commerce] normally will use publicly available
information to value factors. However, where a factor is
purchased from a market economy supplier and paid for in
a market economy currency, [Commerce] normally will use
the price paid to the market economy supplier. In those
instances where a portion of the factor is purchased from
a market economy supplier and the remainder from a
nonmarket economy supplier, [Commerce] normally will
value the factor using the price paid to the market
economy supplier.
19 C.F.R. § 351.408(c)(1).
In the case at bar, “[t]he record evidence demonstrates that
the Chinese trading company [that is, CMC,] purchased steel from a
Court No. 98-12-03235 Page 43
market-economy country, in a convertible currency.” Final Results,
63 Fed. Reg. at 63,854. Moreover, “[t]his company used a portion
of the steel in its own production of TRBs but also sold a portion
of the steel” to ZX and Zhejiang, the PRC producers that purchased
the steel from the trading company and paid for the steel in non-
market economy currency. Id.; see also Preliminary Results, 63
Fed. Reg. at 37,343; see also Def.’s Mem., App. Ex. 6. Based on
the foregoing, the Court finds that Commerce’s decision to use the
PRC trading company’s import steel price as surrogate data for ZX
and Zhejiang is reasonable, is in accordance with law and is in
accord with the purpose of the statutory provisions to determine
antidumping margins as accurately as possible.
Next, observing that § 1677b(c)(1) does not specify what
constitutes “best available information,” the Court concludes that
“‘[t]he statute [,therefore, does not] . . . require Commerce to
follow any single approach in evaluating data.’” Timken 1999, 23
CIT at 515, 59 F. Supp. 2d at 1376 (quoting Olympia 1997, 21 CIT at
368, and citing Lasko, 43 F.3d at 1446); see also Shakeproof
Assembly Components, Div. of Illinois Tool Works, Inc. v. United
States, 23 CIT 479, 481, 59 F. Supp. 2d 1354, 1357 (1999), aff’d,
Shakeproof, 268 F.3d 1376 (stating that “[t]he statute requires
Commerce to use the best available information, but does not define
that term” and pointing out that “‘[t]he relevant statute does not
Court No. 98-12-03235 Page 44
clearly delineate how Commerce should determine what constitute the
[best available information,]’” (quoting Olympia 1998, 22 CIT at
389, 7 F. Supp. 2d at 1000)).
During the POR, Commerce utilized a three-pronged test in
assessing the reliability of the PRC trading company’s import
prices. See Final Results, 63 Fed. Reg. at 63,854. Specifically,
Commerce examined: “(1) the value and volume of steel imports, (2)
the type and quality of the imported steel, and (3) consumption of
imported steel by the NME producer.” Id. Applying the three-
pronged test to the case at bar, Commerce stated:
Based on the invoices for the imported steel, and the
specifications of the steel sourced by the factories
domestically, [Commerce] conclude[d] that the imported
steel is of the same grade and has the same range of
sizes as steel that the NME manufacturers used to produce
the subject merchandise.
Regarding the value of the steel imported by the
trading company, [Commerce] found that the price paid by
the trading company is within the range of prices created
by the actual steel prices paid by [the] PRC producers
and [Commerce’s] surrogate value. Consequently, the
price paid by the PRC trading company is not
aberrational. With respect to volume and consumption of
steel by the NME producer, [Commerce] note[s] that the
amount of steel imported by the trading company was
significant and that the NME producer in question
consumed a significant amount of imported steel to
produce the subject merchandise.
Id.
While it is possible that Timken’s proposed factors could
indeed have better assessed the reliability of trading company
Court No. 98-12-03235 Page 45
import prices, the Court’s “duty is not to weigh the wisdom of, or
to resolve any struggle between, competing views of the public
interest, but rather to respect legitimate policy choices made by
the agency in interpreting and applying the statute.” Suramerica,
966 F.2d at 665. The Court, therefore, affirms Commerce’s use of
its three-pronged test in assessing the reliability of trading
company import prices as reasonable and in accordance with law.
2. Commerce’s Decision to Value Material Costs for
Certain Steel Inputs by Using the Prices Paid by a
PRC Bearing Producer
The Court disagrees with Timken’s argument that since Commerce
did not use the mode of examination offered by Timken on the issue,
that is, whether prices paid by a PRC bearing manufacturer,
Luoyang, to market-economy suppliers were market driven, Commerce’s
determination to value certain steel inputs by using the prices
paid by Luoyang was contrary to § 1677b(c)(1) and unsupported by
substantial evidence.
The Court is not persuaded by Timken’s argument that “as
[Commerce] evaluates market-economy prices to determine whether
they are reliable in a market-economy case, [Commerce] should [use
the same mode to] evaluate those prices to determine whether they
Court No. 98-12-03235 Page 46
are reliable in [an] NME case.”12 Timken’s Mem. at 41. As Lasko
Metal stated, “[t]he cost for raw materials from a market economy
supplier, paid in convertible currencies, provides Commerce with
the closest approximation of the cost of producing the goods in a
market economy country.” 16 CIT at 1081, 810 F. Supp. at 317
(emphasis supplied); see also Shakeproof, 268 F.3d at 1382,
“[w]here we can determine that a [non-market economy]
producer’s input prices are market determined, accuracy,
fairness, and predictability are enhanced by using those
prices. Therefore, using surrogate values when market-
based values are available would, in fact, be contrary to
the intent of the law.”
(emphasis in original) (quoting Lasko, 43 F.3d at 1446); accord
Oscillating Fans, 56 Fed. Reg. at 55,275. Therefore, the cost for
raw materials from a market-economy supplier, paid in convertible
currency, constitutes an alternative market-driven price for the
purpose of valuation.
During the POR, Commerce determined that the import prices
paid in hard currency by Luoyang (that is, a PRC bearing producer)
12
Market-economy cases and non-market economy cases are
distinct. See, e.g., Shakeproof, 268 F.3d at 1379 n.1. (“The [NV]
of goods in ‘market economy’ cases is generally the price at which
the foreign product is first sold in the exporting country. . . .
[T]he normal value of goods in [NME] may be instead determined by
looking at the ‘factors of production’ used to manufacture the
goods,” citations omitted); see also Lasko, 43 F.3d at 1445 (“[I]f
[Commerce] cannot determine [NV] pursuant to the general provisions
of § 1677b(a), then [Commerce] must use the [FOP] methodology to
estimate [NV] for the merchandise in question”) (emphasis in
original).
Court No. 98-12-03235 Page 47
to a market-economy supplier represented the “best available
information” to value material costs for certain steel inputs.
Commerce indicates that Luoyang’s “November 12, 1997, submission
included a contract between Luoyang and a market economy supplier
for the purchase of steel used in the production of bearing cages.
The contract showed a price in U.S. dollars.” Def.’s Mem., App.
Ex. 6 at 1; see also Def.’s Proprietary Ex. 1 (providing a copy of
the November 12, 1997 contract). Based on the foregoing, the Court
finds that Commerce’s determination to value certain steel inputs
by using the prices paid by Luoyang to market-economy suppliers is
reasonable, is in accordance with § 1677b(c)(1) and is supported by
substantial evidence. See Peer Bearing 2001, 25 CIT at __, 182 F.
Supp. 2d at 1305 (“‘[i]n the absence of a statutory mandate to the
contrary, Commerce’s actions must be upheld as long as they are
reasonable’” (quoting Timken 1999, 23 CIT at 516, 59 F. Supp. 2d at
1377); see also Chevron, 467 U.S. at 844-45.
Similarly, the Court is not persuaded by Timken’s argument
that Commerce was obligated to examine the volume and frequency of
Luoyang’s market-economy purchases. As Commerce correctly notes,
“[t]he authorities relied upon by Timken reveal [conversely,] that
it is [Commerce’s] practice to consider the volume of market-
economy purchases for purposes of determining whether to value
domestically-purchased inputs based upon the value of imports from
Court No. 98-12-03235 Page 48
a market-economy country.” Def.’s Mem. at 37 (citing Certain Hel-
ical Spring Lock Washers, 62 Fed. Reg. at 61,796, and Antidumping
Duties; Countervailing Duties, 62 Fed. Reg. 27,296, 27,366 (May 19,
1997)).
Accordingly, the Court affirms Commerce’s decision to value
material costs for steel inputs by using the prices paid by a PRC
producer and a PRC trading company to market-economy suppliers.
III. Commerce’s Valuation of Scrap Generated From the Production of
Cups, Cones and Rollers
A. Background
During the period of review, Commerce
valued scrap recovered from the production of cups and
cones using Indonesian import statistics from HTS
category 7204.2900. Scrap recovered from the production
of rollers and cages was valued using import data from
the Indian tariff subheading 7204.29 and 7204.4100
respectively.
Preliminary Results, 63 Fed. Reg. at 37,343.
In the Final Results, Commerce did “not adjust[] the values
for scrap from the Preliminary Results, with the exception of the
change . . . relating to roller scrap.” Final Results, 63 Fed.
Reg. at 63,847. Specifically, Commerce explained that
category 7204.29.09 best captures the type of scrap
generated from the production of rollers and [Commerce]
ha[s] recalculated the surrogate value for this scrap
excluding data from subcategory 7204.29.01. However,
[Commerce] notes that [Commerce] continue[s] to use the
Court No. 98-12-03235 Page 49
broad category 7204.29 to value scrap from the production
of cups and cones because the Indonesian import data do
not provide a further breakdown of this category into
subheadings. Therefore, for scrap generated from cups
and cone production, [Commerce] used data under
Indonesian import category 7204.29, “other waste and
scrap of alloy steel.”
Id. at 63,846.
B. Contentions of the Parties
1. Timken’s Contentions
Timken argues that Commerce “erred in selecting scrap values
that reflected the prices of high quality scrap in the face of
record evidence that the scrap of Chinese bearing producers
consisted of low quality turnings, shavings, and low-grade scrap.”
Timken’s Mem. at 44. In particular, Timken maintains that “[t]he
surrogate values . . . were significantly higher in value than the
benchmark U.S. imports of high and low quality scrap under HTS No.
7204.29.00, 7204.41.00.20, 7204.41.00.60 or American Metal Market
prices for shop turnings.” Id. (citing Timken’s Mem. at 19, Table
2).13 Moreover, Timken maintains that Commerce failed to explain
13
Besides these four benchmarks supplied by Timken to support
its argument that Commerce’s surrogate values are higher in value
than Timken’s benchmarks, Timken mentions Russian scrap prices as
a fifth possible benchmark. See Timken’s Reply at 17 (citing
Timken’s Mem. at 19, Table 2). Nevertheless, with respect to the
Russian scrap price, Timken maintains “[Commerce] was unlikely to
rely on another NME country’s prices.” Timken’s Reply at 20
(citing 19 U.S.C. § 1677b(c)(2) and 19 C.F.R. § 353.52(b)(1997)).
Court No. 98-12-03235 Page 50
why the American Metal Market prices could not serve as an
alternative surrogate to value scrap. See Timken’s Mem. at 46;
Timken’s Reply at 20-21. Timken further maintains that Commerce’s
approach was inconsistent because “Indian domestic, import or
export steel values were not ‘reliable’ by [Commerce’s] standard
because they were higher than U.S. import values, yet scrap values
[chosen by Commerce that were] higher than U.S. import values were
[deemed by Commerce] somehow reliable.”14 Timken’s Reply at 17.
14
Timken also contends that Commerce departed from its
previous methodology of “valuing scrap using the same surrogate
source as the raw materials.” Timken’s Mem. at 46 (citing Final
Results and Partial Termination of Antidumping Duty Administrative
Review of Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, From the People’s Republic of China, 62 Fed. Reg. 6173,
6180 (Feb. 11, 1997), and Final Results of Antidumping Duty
Administrative Review and Revocation in Part of Antidumping Duty
Order of Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, From the People’s Republic of China, 62 Fed. Reg. 6189,
6196 (Feb. 11, 1997)); see also Timken’s Reply at 21-22.
Specifically, Timken points out that Commerce, in this review,
“valued raw materials for cups and cones based on Japanese export
statistics but valued scrap from the production of cups and cones
based on Indonesian import statistics.” Timken’s Mem. at 46;
accord Timken’s Reply at 21-22.
Commerce asserts that Timken’s argument is incorrect because
Commerce does not have a practice of valuing scrap using the same
surrogate source as raw materials. See Def.’s Mem. at 42-43. The
Court finds that Commerce is not required to provide an explanation
for not using the same surrogate to value steel and scrap in this
case. See Allied-Signal Aerospace Co. v. United States, 28 F. 3d
1188, 1191 (Fed. Cir. 1994) (“[i]n view of the discretionary, case-
by-case nature of [Commerce’s] BIA [that is, best available
information] determinations, [Commerce] is obligated only to use a
methodology consistent with its statutory authority, and it is not
required to supply a ‘reasoned analysis’ justifying its
adoption.”), cert. denied, 513 U.S. 1077 (1995); see also National
(continued...)
Court No. 98-12-03235 Page 51
2. Commerce’s Contentions
Commerce maintains that its valuation of scrap generated from
the production of cups, cones and rollers is supported by
substantial evidence and is in accordance with law. See Def.’s
Mem. at 40.
Commerce argues that it “recognized that, notwithstanding the
fact that the PRC production process might result in lower quality
scrap, ‘it remains bearing quality scrap.’” Id. (quoting Final
Results, 63 Fed. Reg. at 63,847). Additionally, Commerce maintains
that “‘[s]ince steel used in the production of cups and cones is
bearing quality steel, the scrap resulting from the production
thereof must be of a corresponding grade.’” Id. Commerce further
maintains that it acted within its discretion in not adjusting the
surrogate values of scrap to account “for the potentially low
quality of the PRC scrap.” Def.’s Mem. at 40 (quoting Shieldalloy
Metallurgical Corp. v. United States (“Shieldalloy”), 20 CIT 1362,
1368, 947 F. Supp. 525, 532 (1996), pointing out that “‘[t]he
statute does not specify what constitutes best available
information, nor does it prescribe a specific method for adjusting
raw material prices to account for differences in grade or
14
(...continued)
Steel Corp. v. United States, 18 CIT 1126, 1130, 870 F. Supp. 1130,
1135 (1994) (“it appears the Federal Circuit has given Commerce
broad discretion to change its methodology without explanation”).
Court No. 98-12-03235 Page 52
quality’” and Peer Bearing 1998, 22 CIT at 481, 12 F. Supp. 2d at
455, explaining that “Commerce’s authority to select appropriate
surrogate values to determine [NV] based on FOP includes the
authority to do so without adjustment”)).
Furthermore, Commerce, relying on Peer Bearing 1998, 22 CIT at
481, 12 F. Supp. 2d at 455, contends that it acted within its
discretion in not using Timken’s proffered United States benchmarks
to test Commerce’s surrogate values of scrap because those
proffered United States benchmarks did not contain the bearing
quality steel used by PRC bearing producers. See Def.’s Mem. at
40-41. In particular, Commerce points out that
“[t]he HTS category which Timken uses for its comparison
(7204.41.0060 ‘borings, shovelings, and turnings’) does
not include scrap generated from bearing quality steel.
. . . [Additionally,] [o]f the information contained on
the record, only the broad U.S. HTS categories 7204.41
and 7204.49 provide for a break–down of scrap into sub-
categories based on the size and quality of scrap.
However, these categories do not include bearing quality
steel.”
Id. (quoting Final Results, 63 Fed. Reg. at 63,847).
Finally, with respect to Timken’s argument that Commerce
failed to explain why it declined American Metal Market prices as
an alternative surrogate to value scrap, Commerce argues that
“Timken never presented this argument to Commerce in its case
brief, as required by 19 C.F.R. § 353.38(c)(2).” Def.’s Mem. at
41. Commerce alleges that, Timken, therefore, “failed to exhaust
Court No. 98-12-03235 Page 53
its administrative remedies concerning this issue.”15 Id. at 42.
C. Analysis
As a preliminary matter, the Court addresses Commerce’s
argument that Timken failed to exhaust its administrative remedies.
The exhaustion doctrine requires a party to present its claims to
the relevant administrative agency for the agency’s consideration
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
15
In its reply brief, Timken first points out that “in its
preliminary determination comments, Timken submitted the American
Metal Market prices pointing out that they . . . were
representative of world market prices.” Timken’s Reply at 18
(citing Timken’s Mem. Pub. Doc. 129). Next, Timken states that
[i]n its case brief, Timken argued that it was
unreasonable to use any surrogate value for
undifferentiated scrap imports that did not account for
the low quality of PRC scrap. In doing so, Timken
compared the scrap values used in the preliminary
determination to the American Metal Market prices, . . .
and U.S. import statistics.
Timken’s Reply at 18 (citing Timken’s Mem. Pub. Doc. 280).
Finally, Timken argues that “during the hearing [that is, the
September 9, 1998 hearing], counsel for Timken specifically pointed
out that evidence from the American Metal Market [prices] for shop
turning prices provides [Commerce] with a world market benchmark of
$82/MT. . . .” Timken’s Reply at 19 (citing Timken’s Mem. Pub.
Doc. 294 at 33-35).
Court No. 98-12-03235 Page 54
the matter, make its ruling, and state the reasons for its
action”).16
16
There is however, no absolute requirement of exhaustion in
the Court of International Trade in non-classification cases. See
Alhambra Foundry Co. v. United States (“Alhambra”), 12 CIT 343,
346-47, 685 F. Supp. 1252, 1255-56 (1988). Section 2637(d) of
Title 28 directs that “the Court of International Trade shall,
where appropriate, require the exhaustion of administrative
remedies.” By its use of the phrase “where appropriate,” Congress
vested discretion in the Court to determine the circumstances under
which it shall require the exhaustion of administrative remedies.
See Cemex, S.A. v. United States, 133 F.3d 897, 905 (Fed. Cir.
1998). Therefore, because “each exercise of judicial discretion
[does] not requir[e] litigants to exhaust administrative remedies,”
the court is authorized to determine proper exceptions to the
doctrine of exhaustion. Alhambra, 12 CIT at 347, 685 F. Supp. at
1256 (citing Timken Co. v. United States, 10 CIT 86, 93, 630 F.
Supp. 1327, 1334 (1986), rev’d in part on other grounds, Koyo Seiko
Co. v. United States, 20 F.3d 1156 (Fed. Cir. 1994)).
In the past, the court has exercised its discretion to obviate
exhaustion where: (1) requiring it would be futile, see Rhone
Poulenc, S.A. v. United States (“Poulenc”), 7 CIT 133, 135, 583 F.
Supp. 607, 610 (1984) (“it appears that it would have been futile
for plaintiffs to argue that the agency should not apply its own
regulation”), or would be “inequitable and an insistence of a
useless formality” as in the case where “there is no relief which
plaintiff may be granted at the administrative level,” United
States Cane Sugar Refiners’ Ass’n v. Block, 3 CIT 196, 201, 544 F.
Supp. 883, 887 (1982); (2) a subsequent court decision has
interpreted existing law after the administrative determination at
issue was published, and the new decision might have materially
affected the agency’s actions, see Timken, 10 CIT at 93, 630 F.
Supp. at 1334; (3) the question is one of law and does not require
further factual development and, therefore, the court does not
invade the province of the agency by considering the question, see
id.; R.R. Yardmasters of Am. v. Harris, 721 F.2d 1332, 1337-39
(D.C. Cir. 1983); and (4) plaintiffs had no reason to suspect that
the agency would refuse to adhere to clearly applicable precedent.
See Philipp Bros., Inc. v. United States, 10 CIT 76, 80, 630 F.
Supp. 1317, 1321 (1986).
Court No. 98-12-03235 Page 55
The purpose behind the doctrine of exhaustion is to prevent
courts from premature involvement in administrative proceedings,
and to protect agencies “from judicial interference until an
administrative decision has been formalized and its effects felt in
a concrete way by the challenging parties.” Abbott Labs. v.
Gardner, 387 U.S. 136, 148-49, (1967); see also Public Citizen
Health Research Group v. Comm’r, FDA, 740 F.2d 21, 29 (D.C. Cir.
1984) (pointing out that the “exhaustion doctrine . . . serv[es]
four primary purposes: [(1)] it ensures that persons do not flout
[legally] established administrative processes . . .; [(2)] it
protects the autonomy of agency decisionmaking; [(3)] it aids
judicial review by permitting factual development [of issues
relevant to the dispute]; and [(4)] it serves judicial economy by
avoiding [repetitious] administrative and judicial factfinding and
by” resolving sole claims without judicial intervention).
While a plaintiff cannot circumvent the requirements of the
doctrine of exhaustion by merely mentioning a broad issue without
raising a particular argument, plaintiff’s brief statement of the
argument is sufficient if it alerts the agency to the argument with
reasonable clarity and avails the agency with an opportunity to
address it. See generally, Hormel v. Helvering, 312 U.S. 552
(1941); see also Rhone Poulenc, 899 F.2d at 1191. The sole fact of
an agency’s failure to address plaintiff’s challenge does not
Court No. 98-12-03235 Page 56
invoke the exhaustion doctrine and shall not result in forfeiture
of plaintiff’s judicial remedies. See generally, B-West Imports,
Inc. v. United States, 19 CIT 303, 880 F. Supp. 853 (1995). An
administrative decision not to address the issue cannot be
dispositive of the question whether or not the issue was properly
brought to the agency’s attention. See, e.g., Allnutt v. United
States DOJ, 2000 U.S. Dist. LEXIS 4060 (D. Md. 2000).
In the case at bar, Timken sufficiently provided Commerce with
an opportunity to address the issue of American Metal Market prices
as a surrogate to value scrap when Timken: (1) “submitted the
American Metal Market prices pointing out that they . . . were
representative of world market prices,” Timken’s Reply at 18
(citing Timken’s Mem. Pub. Doc. 129); (2) compared in its case
brief to Commerce “the scrap values used [by Commerce] in the
preliminary determination to the American Metal Market prices, . .
. and U.S. import statistics,” Timken’s Reply at 18 (citing
Timken’s Mem. Pub. Doc. 280); and (3) during the September 9, 1998
hearing with Commerce, “pointed out that evidence from the American
Metal Market [prices] for shop turning prices provides [Commerce]
with a world market benchmark of $82/MT. . . .” Timken’s Reply at
19 (citing Timken’s Mem. Pub. Doc. 294 at 33-35). Moreover,
Commerce concedes that
Timken argue[d] that the values used by [Commerce] for
scrap in the Preliminary Results are too high when
Court No. 98-12-03235 Page 57
compared with world market prices for scrap. . . .
Timken state[d] that the scrap values selected by
[Commerce] reflect prices of high-quality scrap, not the
residue from bearing production. Timken supports its
argument by noting that scrap prices reported in the
American Metal Market for ‘shop turnings,’ a low quality
scrap, averaged only $82 per MT delivered, whereas the
value [Commerce] selected cup and cone scrap was $150 per
MT.
63 Fed. Reg. at 63,846 (emphasis supplied).
The Court, therefore, concludes that Timken properly exhausted
its administrative remedies and has the right to raise this issue
to the Court.
The Court holds that Commerce’s authority to select appropri-
ate surrogate data includes the authority to base a calculation on
these data without adjustment, if such method is reasonable. See
Peer Bearing 2001, 25 CIT at __, 182 F. Supp. 2d at 1305; Timken
2001, 25 CIT at __, 166 F. Supp. 2d at 625; Peer Bearing 1998, 22
CIT at 481-82, 12 F. Supp. 2d at 456; Timken 1999, 23 CIT at 516,
59 F. Supp. 2d at 1377; see also Chevron, 467 U.S. at 844-45;
Shieldalloy, 20 CIT at 1368, 947 F. Supp. at 532 (“The statute
[that is, 19 U.S.C. § 1677b(c)] does not specify what constitutes
best available information, nor does it prescribe a specific method
for adjusting raw material prices to account for differences in
grade or quality”). Nevertheless, Commerce’s authority to select
unadjusted data does not dispose of Commerce’s obligation to
address each comment properly brought before Commerce on the
Court No. 98-12-03235 Page 58
merits. Commerce’s failure to address the merits of American Metal
Market prices prevents the Court from reviewing the issue
intelligibly. Therefore, the Court remands this issue to Commerce
with instructions to explain whether or not the American Metal
Market prices can serve as an alternative surrogate to value scrap
and, if Commerce concludes that the American Metal prices present
the “best available information” for the purpose of such surrogate
evaluation, to recalculate Commerce’s determination accordingly.17
IV. Commerce’s Reliance on Six Indian Producers’ Reported Data in
Commerce’s Determination of Overhead, Selling, General and
Administrative Expenses and Profit Rate
A. Background
While Commerce prefers to base FOPs information on industry-
wide public information, Commerce found that information regarding
17
The Court notes that the other four benchmarks proffered by
Timken are not at issue because Timken conceded that
[(1)] the first benchmark [that is, United States import
statistics, HTS No. 7204.29.00] valued at $128/MT
consisted of high quality waste which was not comparable
to the low-quality waste generated by PRC producers;
[(2)] [t]he second [that is, United States import
statistics, HTS No. 7204.41.00.20] and third [that is,
United States import statistics HTS No. 7204.41.0060]
benchmarks, as [Commerce] noted, of $126 and $104 [per MT
respectively], were for non-bearing quality steel scrap
from the production of cages; . . . [(3)] the only
logical surrogate value for low quality scrap based on
the concerns articulated for the first time in its final
determination was the American Metal Market prices.
Timken’s Reply at 20-21 (citing Timken’s Mem. Table 2 at 19).
Court No. 98-12-03235 Page 59
overhead and SG&A rates for producers of subject merchandise during
the period of review was not available. See Final Results, 63 Fed.
Reg. at 63,850.
Section 1677b(c)(1) of Title 19 requires Commerce to “deter-
mine the [NV] of the subject merchandise on the basis of the value
of the [FOPs] utilized in producing the merchandise and to which
shall be added an amount for general expenses and profit plus the
cost of containers, coverings, and other expenses.” General
expenses are the expenses that do not bear a direct relationship to
the production of the merchandise at issue, such as SG&A expenses.
The subsection also states that the valuation of FOPs “shall be
based on the best available information regarding the values of
such factors in a market economy country or countries considered to
be appropriate by [Commerce].” Id. Section 1677b(c)(4) provides
that, in valuing FOPs under paragraph (1) of § 1677b(c), Commerce
“shall utilize, to the extent possible, the prices or costs of
[FOPs] in one or more market economy countries. . . .”
In the Preliminary Results, Commerce used “information
obtained from the fiscal year 1996-97 annual reports of eight
Indian bearing producers” as surrogate values for factory overhead,
SG&A and profit. 63 Fed. Reg. at 37,343; see Def.’s Mem., App.
Ex. 7, 9.
Court No. 98-12-03235 Page 60
Specifically, Commerce
calculated factory overhead and SG&A expenses (exclusive
of labor and electricity) as percentages of direct inputs
(also exclusive of labor) and applied it to each
producer’s direct input costs. For profit, [Commerce]
totaled the reported profit before taxes for the eight
Indian bearing producers and divided it by the total
calculated cost of production (“COP”) of goods sold.
This percentage was applied to each respondent’s total
COP to derive a company-specific profit value.
Preliminary Results, 63 Fed. Reg. at 37,343 (citing Def.’s Mem.,
App. Ex. 9).
In the Final Results, during the review at issue, Commerce
concluded that an appropriate surrogate for determining overhead,
SG&A (excluding labor), and profit rates was the average annual
report data of six Indian producers of like or similar merchandise
at issue. See 63 Fed. Reg. at 63,850. Commerce explained that,
[i]n deriving these ratios, [Commerce] used the average
of the Indian producers’ reported data with respect to
the numerator (reported overhead and SG&A expenses) and
the denominator (direct input costs excluding labor),
thus yielding internally consistent ratios. These
ratios, when multiplied by [Commerce’s] calculated FOP
values, constitute the best available information
concerning overhead and SG&A expenses that would be
incurred by a PRC bearings producer[] given such FOP
data.
Id.
Commerce also explained its determination to use data from
only six of the Indian bearing producers and exclude data from
Court No. 98-12-03235 Page 61
Asian Bearing Company (“Asian”) and National Engineering Company
(“NEI”) by stating:
[Commerce] agree[s] with respondents that data for Asian
and NEI should be excluded from the average of reported
costs for Indian bearings producers. In the Final Re-
sults of Antidumping Duty Administrative Review: Tapered
Roller Bearings and Parts Thereof From the People’s
Republic of China, 56 FR 67,590, 67,594 (Dec. 31, 1991),
[Commerce] stated that, “[Commerce] believe[s] that Asian
is not an appropriate surrogate primarily because the
Auditor’s Report notes that the financial statements are
not presented in accordance with the generally accepted
accounting principles (“GAAP”) of India.” In this review,
the Auditor’s Report included with Asian’s 1996-97
financial statements expresses a clear reservation about
how certain interest expenses (with their corresponding
effects on depreciation and other expenses) have been
reported, noting that the methodology is not in
accordance with accounting principles recommended by the
Institute of Chartered Accountants of India. The
Auditor’s Report also notes that Asian continues to be a
“sick” company as defined by India’s Sick Industrial
Companies Act. Likewise, the auditors’ endorsement of
NEI’s 1996-97 Financial Statements, as contained in the
Auditor’s Report, includes qualifications regarding,
inter alia, the company’s treatment of various overhead
and SG&A expenses.
With regard to Timken’s arguments concerning Asian
and NEI, although [Commerce] recognize[s], as respondents
argue, that the overhead and SG&A ratios for Asian and
NEI generally are higher than those of the other six
producers, this apparent difference is not [Commerce’s]
primary reason for excluding the Asian and NEI data.
Rather, [Commerce] ha[s] excluded the data for Asian and
NEI in calculating surrogate overhead, SG&A and profit
ratios primarily because, according to the Auditor’s
Reports, the methodology used in recording and reporting
the financial condition of these two companies appears,
in certain instances, to be inconsistent with the
methodology (i.e., Indian GAAP) used by the remaining six
companies. Given these significant differences, it would
Court No. 98-12-03235 Page 62
be incongruous to combine the reported data of all eight
companies.
Id. at 63,851.
B. Contentions of the Parties
1. Timken’s Contentions
Timken argues that, since the material and labor costs18 of the
Indian bearing producers are higher than the surrogate material
values, Commerce should “adjust the denominator for purposes of
calculating ratios [that is, overhead and SG&A ratios] by the ratio
of surrogate raw materials and labor values [that is, Indonesian
steel and labor values] to the Indian producers’ average materials
and labor costs [that is, the eight Indian producers’ average
materials and labor costs].” Timken’s Mem. at 47; see Final
Results, 63 Fed. Reg. at 63,849. Timken further maintains that
Peer Bearing 1998, 22 CIT 472, 12 F. Supp. 2d 445, and Timken 1999,
18
Commerce argues that “Timken [is] incorrect in its
statement that [Commerce] calculated overhead and SG&A costs as a
percentage of materials and labor costs [because] ‘neither direct
or indirect labor was included in either the numerator or
denominator of the surrogate ratios.’” Def.’s Mem. at 43-44
(quoting Final Results, 63 Fed. Reg. at 63,849). Timken, in turn,
alleges that “[t]he record shows, however, that [Commerce]
calculated the profit ratio from the annual reports based on a
percentage of cost of production (including materials, overhead,
SG&A, and labor).” Timken’s Reply at 22-23 n.6 (citing Timken’s
Mem. Pub. Doc. 304, Attachment 3). The Court, however, is not
presented with any evidence that the fact that Commerce derived the
profit ratio from the annual reports automatically means that
labor costs were included or excluded.
Court No. 98-12-03235 Page 63
23 CIT 509, 59 F. Supp. 2d 1371, are distinguishable from the case
at bar because in those cases, Commerce “relied on the annual
report data of one Indian bearings producer to calculate ratios for
overhead, SG&A and profit.” Timken’s Reply at 23; see also
Timken’s Mem. at 48 (stating that “there is a significant disparity
between the Indian material and labor costs and the surrogate
statistics is supported by the annual reports of eight Indian
bearing producers”). Alternatively, Timken proposes that rather
than use the eight Indian producers’ average materials and labor
costs, Commerce should have used the reported costs of Asian since
it “only produces antifriction bearings and identified raw material
input products in its annual report.” Timken’s Mem. at 21.
Timken also contends that Commerce should have made an
adjustment for import duties incurred by the Indian bearing
producers because “material costs in the annual reports included
high import duties.” Timken’s Reply at 22; see Timken’s Mem. at
47, 49. In particular, Timken argues that, despite Commerce’s
argument that the record does not contain the information necessary
regarding the amount of import duties included in Commerce’s
calculation, Commerce could have calculated the import duties of
three companies (SKF, ABC and NRB) because the record shows “the
amount and percentage of raw materials imported” and the “cost,
Court No. 98-12-03235 Page 64
insurance, and freight, excluding import duties” of imported
materials. Timken’s Reply at 24.
Finally, Timken alleges that Commerce’s exclusion of Asian and
NEI from the calculation of overhead, SG&A, and profit ratios “was
an arbitrary departure from agency practice and should be
rejected.” Timken’s Mem. at 50. In particular, Timken maintains
that “the aggregate annual report data of all eight Indian bearing
producers would have been more descriptive of the variety of
companies in China than the data of only six producers . . . [,and]
annual reports [of, Asian and NEI] included the figures necessary
to adjust those annual reports to be GAAP-compliant.” Id. at 51-52
(citing Timken’s Mem. Pub. Doc. 290 and 129); see also Timken’s
Reply at 25 (Commerce “decided to reject otherwise desirable annual
reports based on easily curable grounds without explanation”).
Moreover, relying on Notice of Final Determination of Sales at Less
Than Fair Value: Bicycles From the People’s Republic of China
(“Bicycles From the PRC”), 61 Fed. Reg. 19,026, 19,039 (Apr. 30,
1996), Timken argues that Commerce’s refusal to use Asian in
Commerce’s calculation because of Asian’s “sick” financial status
“was an unexplained departure from agency practice” because
Commerce “has previously made it clear that ‘[w]hether or not a
company is profitable . . . is not necessarily a reason for
rejecting that company’s data for purposes of surrogate valuations
Court No. 98-12-03235 Page 65
for factory overhead and SG&A expenses.’” Timken’s Mem. at 52
(quoting Bicycles From the PRC, 61 Fed. Reg. at 19,039).
2. Commerce’s Contentions
Relying on Peer Bearing 1998, 22 CIT at 481, 12 F. Supp. 2d at
455, and Timken 1999, 23 CIT 509, 59 F. Supp. 2d 1371, Commerce
maintains that “Commerce[] [has an] authority to select . . .
surrogate values . . . without adjustment.”19 Def.’s Mem. at 44.
Commerce further maintains that the methodology used in the case at
bar allowed Commerce to derive internally consistent ratios of the
Indian producers’ overhead and SG&A expenses. See Def.’s Mem. at
44; see also Final Results, 63 Fed. Reg. at 63,850. Commerce
points out that doing otherwise, that is, adjusting the underlying
values of the Indian producers
including the proposed alternative adjustment based
solely on Asian Bearing’s reported costs[,] would itself
distort the ratios rather than correct the alleged
distortions in [Commerce’s] calculations.
Final Results, 63 Fed. Reg. at 63,850.
Commerce also argues that it properly declined to deduct the
import duties “from the reported material costs [of] the Indian
producers when calculating the overhead and SG&A ratios” because
19
Commerce argues that “Timken’s attempt to distinguish this
case from Peer [Bearing 1998] is unavailing. . . . Contrary to
[Timken’s] position, there is no meaningful difference between the
one producer at issue in Peer [Bearing 1998] . . . and the eight
producers involved here.” Def.’s Mem. at 44-45.
Court No. 98-12-03235 Page 66
there was “no evidence as to the amount of duties, if any, included
in the Indian producers’ reported costs.” Id.; see Def.’s Mem. at
45. Commerce points out that “‘Timken has not provided any
information regarding the amount of import duties that are
included, nor has Timken provided a means of identifying and
eliminating such duties from [Commerce’s] calculations.’” Def.’s
Mem. at 45 (quoting Final Results, 63 Fed. Reg. at 63,850).
Commerce further contends that it properly used data from only
six of the Indian bearing producers and excluded the annual report
data contained in Asian and NEI when calculating the ratios for
overhead, SG&A and profit. See Def’s Mem. at 46-48. Commerce
explained that it rejected Asian and NEI annual report data because
Commerce
relied upon statements made by the companies’ independent
auditors that indicated that “the methodology used in
recording and reporting the financial condition of these
two companies appears, in certain instances, to be
inconsistent with the methodology (i.e., Indian GAAP)
used by the remaining six companies.”
Id. at 46 (quoting Final Results, 63 Fed. Reg. at 63,851); see also
Def.’s Mem. at 46-48.
Moreover, relying on Writing Instrument, 21 CIT at 1195, 984
F. Supp. at 639, Commerce argues that “in determining whether a
surrogate value represents the best available information, Commerce
is authorized to determine the reliability of that value and, if it
Court No. 98-12-03235 Page 67
is established that the value is unreliable, decline to use that
data for purposes of factor valuation.” Def.’s Mem. at 47-48.
C. Analysis
“In the absence of a statutory mandate to the contrary,
Commerce’s actions must be upheld as long as they are reasonable.”
Timken 1999, 23 CIT at 516, 59 F. Supp. 2d at 1377; see also
Chevron, 467 U.S. at 844-45. This Court has consistently
articulated that Commerce’s authority to select appropriate
surrogate data includes the authority to base a calculation on
these data without adjustment, if such method is reasonable. See
Peer Bearing 2001, 25 CIT at __, 182 F. Supp. 2d at 1305; Timken
2001, 25 CIT at __ , 166 F. Supp. 2d at 625; Timken 1999, 23 CIT at
516, 59 F. Supp. 2d at 1377; Peer Bearing 1998, 22 CIT at 482, 12
F. Supp. 2d at 456; see also Chevron, 467 U.S. at 844-45.20
In the case at bar, Commerce derived overhead, SG&A, and
profit rates from the average annual report data of six Indian
producers of like or similar merchandise. Commerce explained that
the adjustment suggested by Timken would distort the experience of
20
The Court is not persuaded by Timken’s argument that Peer
Bearing 1998, 22 CIT 472, 12 F. Supp. 2d 445, and Timken 1999, 23
CIT 509, 59 F. Supp. 2d 1371, are distinguishable from the case at
bar because in this case Commerce relied on more than one Indian
bearings producer to calculate ratios for overhead, SG&A and
profit.
Court No. 98-12-03235 Page 68
the Indian producers rather than cure any distortion in Commerce’s
calculation. See Final Results, 63 Fed. Reg. at 63,850. Moreover,
although the Court could certainly question the perfection of
Commerce’s approach, the Court holds that, under the circumstances,
Commerce acted reasonably in not subtracting import duties from the
Indian producers’ data.21
The Court finds that Commerce attempted to capture in its rate
calculation the surrogates’ (that is, the six Indian producers’)
experience in incurring overhead and SG&A expenses, and created a
reasonable internally consistent ratio that, as imperfect as it
might be, does not violate the boundaries set by 19 U.S.C. §
1677b(c). The mere fact that one of the actual factors is likely
to be higher while the other one is likely to be lower than the
corresponding data derived from the records of the Indian producers
does not empower the Court to uphold Timken’s suggestion as a more
palatable alternative. See American Spring Wire, 8 CIT at 22, 590
F. Supp. at 1276 (stating that “[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
21
The Court disagrees with Timken’s argument that Commerce
could have calculated import duties of SKF, ABC and NRB because the
record shows “the amount and percentage of raw materials imported”
and the “cost, insurance, and freight, excluding import duties” of
imported materials. Timken’s Reply at 24. The Court finds that it
does not follow from this argument that Commerce knows how much of
these import costs are attributable to import duties.
Court No. 98-12-03235 Page 69
have made a different choice had the matter been before it de
novo’” and quoting Penntech Papers, 706 F.2d at 22-23 (quoting, in
turn, Universal Camera, 340 U.S. at 487-88)).
Finally, the Court finds that Commerce acted reasonably within
its discretion in excluding the annual report data contained in
Asian and NEI when calculating the ratios for overhead, SG&A and
profit. In particular, Commerce pointed out that it
relied upon statements made by the companies’ [that is,
Asian’s and NEI’s] independent auditors that indicated
that “the methodology used in recording and reporting the
financial condition of these two companies appears, in
certain instances, to be inconsistent with the
methodology (i.e., Indian GAAP) used by the remaining six
companies.”
Def.’s Mem. at 46 (quoting Final Results, 63 Fed. Reg. at 63,851).
Timken may not usurp Commerce’s role as fact finder and
substitute their analysis for the result reached by Commerce.
Accordingly, the Court sustains Commerce’s determination to
use the average annual report data of six Indian bearing producers
as a surrogate for determining overhead, SG&A and profit rates as
reasonable, in accordance with law and supported by substantial
evidence.
CONCLUSION
This case is remanded to Commerce to: (1) provide the Court
with an explanation as to why export statistics from Japan to India
Court No. 98-12-03235 Page 70
are not the “best available information” for the purpose of
choosing a surrogate to value hot-rolled steel bar used to produce
TRB cups and cones; and (2) explain whether or not the American
Metal Market prices can serve as an alternative surrogate to value
scrap and, if Commerce concludes that the American Metal Market
prices present the “best available information” for the purpose of
such surrogate evaluation, to recalculate Commerce’s determination
accordingly. All other issues are affirmed.
______________________________
NICHOLAS TSOUCALAS
SENIOR JUDGE
Dated: April 22, 2002
New York, New York