Koyo Seiko Co., Ltd. v. United States

Slip Op. 02-11

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
________________________________________
KOYO SEIKO CO., LTD. and :
KOYO CORPORATION OF USA; :
NSK LTD. and NSK CORPORATION; :
NTN BEARING CORPORATION OF AMERICA, :
AMERICAN NTN BEARING MANUFACTURING :
CORPORATION and NTN CORPORATION; and :
THE TIMKEN COMPANY, : Consolidated
: Court No.
Plaintiffs and : 98-06-02274
Defendant-Intervenors, :
:
v. :
:
UNITED STATES, :
:
Defendant. :
________________________________________

This consolidated action concerns the claims raised by: Koyo
Seiko Co., Ltd. and Koyo Corporation of USA (collectively “Koyo”);
NSK Ltd. and NSK Corporation (collectively “NSK”); NTN Bearing
Corporation of America, American NTN Bearing Manufacturing
Corporation and NTN Corporation (collectively “NTN”); and The
Timken Company (“Timken”), plaintiffs and defendant-intervenors,
that move pursuant to USCIT R. 56.2 for judgment upon the agency
record challenging various aspects of the United States Department
of Commerce, International Trade Administration’s (“Commerce”)
final results of administrative review of: (1) tapered roller
bearings and parts thereof, finished and unfinished, from Japan;
and (2) tapered roller bearings, four inches or less in outside
diameter, and components thereof, from Japan, entitled Final
Results of Antidumping Duty Administrative Reviews and Termination
in Part of Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or
Less in Outside Diameter, and Components Thereof, From Japan
(“Final Results”), 63 Fed. Reg. 20,585 (April 27, 1998).

Specifically, Koyo argues that Commerce: (1) failed to
calculate constructed value profit so that home market movement
expenses are excluded from the gross unit price; (2) erred in
Commerce’s decision to use the entered value of the subject
merchandise to determine assessment rates; (3) erred in Commerce’s
calculation of marine insurance charges; (4) erred in Commerce’s
Consol. Court No. 98-06-02274 Page 2

calculation of certain constructed value commissions and direct
selling expenses; and (5) wrongly used Koyo’s product nomenclature
in Commerce’s computer program. NSK asserts that: (1) Commerce’s
model matching program is not supported by substantial evidence;
and (2) Commerce erred in determining NSK’s general and
administrative expenses factor in the cost of production
calculation. NTN alleges that Commerce erred in: (1) determining
that NTN’s sample and small-quantity home market sales are within
the ordinary course of trade; (2) denying an adjustment to NTN’s
United States indirect selling expenses for expenses purportedly
related to the financing of antidumping duty cash deposits; (3)
disallowing an adjustment to foreign market value for NTN’s home
market discounts; and (4) reallocating NTN’s selling expenses
without regard to level of trade and denying a level of trade
adjustment. Timken contends that Commerce: (1) erred by failing to
adjust Koyo’s further-manufactured import prices to reflect
inventory carrying costs associated with further-manufacturing in
the United States; and (2) committed a clerical error in
calculating NTN’s indirect selling expenses for United States
constructed export price sales.

Held: Koyo’s motion for judgment on the agency record is
granted in part and denied in part. NSK’s motion for judgment on
the agency record is granted in part and denied in part. NTN’s
motion for judgment on the agency record is denied. Timken’s
motion for judgment on the agency record is granted. Case is
remanded to Commerce to: (1) recalculate Koyo’s constructed value
profit so that Koyo’s home market movement expenses are deducted
from Koyo’s net home market price; (2) recalculate Koyo’s marine
insurance charges using the correct factor indicated by Koyo; (3)
recalculate Koyo’s constructed value using commission factor
provided by Koyo; (4) recalculate constructed value direct selling
expenses relying on the factor indicated in Koyo’s questionnaire
response; (5) enter necessary corrections and recalculate pertinent
parts of Commerce’s determination with respect to Koyo’s imports;
(6) recalculate Koyo’s United States inventory carrying costs for
final product by applying the appropriate inventory carrying costs
factor reported by Koyo to the landed cost for the 1992/93 period
of review and to the cost of manufacturing for the 1993/94 period
of review; (7) apply the correct general and administrative
expenses factor in Commerce’s calculation of NSK’s cost of
production; and (8) correct the computer program error with respect
to NTN’s sales. Commerce's final determination is affirmed in all
other respects.

[Koyo’s motion for judgment on the agency record is granted in part
and denied in part. NSK’s motion for judgment on the agency record
Consol. Court No. 98-06-02274 Page 3

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

Dated: February 1, 2002

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

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

Barnes, Richardson & Colburn (Donald J. Unger, Kazumune V.
Kano, David G. Forgue and Clarice K. M. McCauley) for NTN,
plaintiff and defendant-intervenor.

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

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

OPINION

TSOUCALAS, Senior Judge: This consolidated action

concerns the claims raised by: Koyo Seiko Co., Ltd. and Koyo

Corporation of USA (collectively “Koyo”); NSK Ltd. and NSK

Corporation (collectively “NSK”); NTN Bearing Corporation of

America, American NTN Bearing Manufacturing Corporation and NTN

Corporation (collectively “NTN”); and The Timken Company

(“Timken”), plaintiffs and defendant-intervenors, that move
Consol. Court No. 98-06-02274 Page 4

pursuant to USCIT R. 56.2 for judgment upon the agency record

challenging various aspects of the United States Department of

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

results of administrative review of: (1) tapered roller bearings

and parts thereof, finished and unfinished, from Japan; and (2)

tapered roller bearings, four inches or less in outside diameter,

and components thereof, from Japan, entitled Final Results of

Antidumping Duty Administrative Reviews and Termination in Part of

Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,

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

Outside Diameter, and Components Thereof, From Japan (“Final

Results”), 63 Fed. Reg. 20,585 (April 27, 1998).

Specifically, Koyo argues that Commerce: (1) failed to

calculate constructed value profit so that home market movement

expenses are excluded from the gross unit price; (2) erred in

Commerce’s decision to use the entered value of the subject

merchandise to determine assessment rates; (3) erred in Commerce’s

calculation of marine insurance charges; (4) erred in Commerce’s

calculation of certain constructed value commissions and direct

selling expenses; and (5) wrongly used Koyo’s product nomenclature

in Commerce’s computer program. NSK asserts that: (1) Commerce’s

model matching program is not supported by substantial evidence;

and (2) Commerce erred in determining NSK’s general and
Consol. Court No. 98-06-02274 Page 5

administrative expenses factor in the cost of production

calculation. NTN alleges that Commerce erred in: (1) determining

that NTN’s sample and small-quantity home market sales are within

the ordinary course of trade; (2) denying an adjustment to NTN’s

United States indirect selling expenses for expenses purportedly

related to the financing of antidumping duty cash deposits; (3)

disallowing an adjustment to foreign market value for NTN’s home

market discounts; and (4) reallocating NTN’s selling expenses

without regard to level of trade and denying a level of trade

adjustment. Timken contends that Commerce: (1) erred by failing to

adjust Koyo’s further-manufactured import prices to reflect

inventory carrying costs associated with further-manufacturing in

the United States; and (2) committed a clerical error in

calculating NTN’s indirect selling expenses for United States

constructed export price sales.

BACKGROUND

The administrative review at issue arose from two antidumping

orders: Antidumping Duty Order on Tapered Roller Bearings, Four

Inches or Less in Outside Diameter, and Components Thereof, From

Japan, 41 Fed. Reg. 34,974 (Aug. 18, 1976),1 and Antidumping Duty

1
The name of the document is given in accordance with the name
provided by the parties in their briefs. The document is: (1)
omitted from the print in Vol. 41 of the Federal Register; and (2)
unavailable in electronic legal databases.
Consol. Court No. 98-06-02274 Page 6

Order on Tapered Roller Bearings and Parts Thereof, Finished and

Unfinished, From Japan, 52 Fed. Reg. 37,352 (Oct. 6, 1987). The

reviews for the period 1992-93 were initiated on November 17, 1993.

See Initiation of Antidumping and Countervailing Duty

Administrative Reviews, 58 Fed. Reg. 60,600 (Nov. 17, 1993). The

reviews for the period 1993-94 were initiated on November 14, 1994.

See Initiation of Antidumping and Countervailing Duty

Administrative Reviews, 59 Fed. Reg. 56,459 (Nov. 14, 1994).2 The

preliminary results of the reviews were published on May 20, 1996.

See Preliminary Results of Antidumping Duty Administrative Reviews

and Termination in Part of Tapered Roller Bearings and Parts

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

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

Thereof, From Japan (“Preliminary Results”), 61 Fed. Reg. 25,200.

The final results of the reviews were published on April 27, 1998.

See Final Results, 63 Fed. Reg. 20,585.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 19

2
Since the administrative reviews at issue were initiated
before January 1, 1995, the applicable law is the antidumping
statute as it existed prior to the amendments made by the Uruguay
Round Agreements Act, Pub. L. No. 103-465, 108 Stat. 4809 (1994).
See Torrington Co. v. United States, 68 F.3d 1347, 1352 (Fed. Cir.
1995).
Consol. Court No. 98-06-02274 Page 7

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,

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

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

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

inconsistent conclusions from the evidence does not prevent an

administrative agency’s finding from being supported by substantial

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

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

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

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

justifiably have made a different choice had the matter been before
Consol. Court No. 98-06-02274 Page 8

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

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

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

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

II. CHEVRON TWO-STEP ANALYSIS

To determine whether Commerce’s interpretation and application

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

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

Inc. v. Natural Resources Defense Council, Inc. (“Chevron”), 467

U.S. 837 (1984). Under the first step, the Court reviews

Commerce’s construction of a statutory provision to determine

whether “Congress has directly spoken to the precise question at

issue.” Id. at 842. “To ascertain whether Congress had an

intention on the precise question at issue, [the Court] employ[s]

the ‘traditional tools of statutory construction.’” Timex V.I.,

Inc. v. United States, 157 F.3d 879, 882 (Fed. Cir. 1998) (citing

Chevron, 467 U.S. at 843 n.9). “The first and foremost ‘tool’ to

be used is the statute’s text, giving it its plain meaning.

Because a statute’s text is Congress’s final expression of its

intent, if the text answers the question, that is the end of the

matter.” Id. (citations omitted). Beyond the statute’s text, the

tools of statutory construction “include the statute’s structure,
Consol. Court No. 98-06-02274 Page 9

canons of statutory construction, and legislative history.” Id.

(citations omitted); but see Floral Trade Council v. United States,

23 CIT ___,___ 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

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

omitted). In determining whether Commerce’s interpretation is
Consol. Court No. 98-06-02274 Page 10

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 DECISION TO USE ENTERED VALUE OF THE
SUBJECT MERCHANDISE TO DETERMINE ASSESSMENT RATES

As a preliminary matter, Commerce raises two affirmative

defenses to the particular claim. Specifically, Commerce asserts

that the plaintiff on the claim, Koyo: (1) has failed to exhaust

plaintiff’s administrative remedies, see Def.’s Resp. Partial Opp’n

Mem. P. & A. Supp. Mot. Pls. Koyo J. Agency R. (“Def.’s Resp.

Koyo”) at 11; and (2) is precluded from litigating the issue by the

Court’s ruling in Koyo Seiko Co. v. United States, 16 CIT 539, 796

F. Supp. 1526 (1992) under the doctrine of collateral estoppel.

See Def.’s Resp. Koyo at 11-12.

A. Exhaustion of Administrative Remedies

1. Background

The exhaustion doctrine requires a party to present its claims

to the relevant administrative agency for the agency’s
Consol. Court No. 98-06-02274 Page 11

consideration before raising these claims to the Court. See

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

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

sets aside the administrative determination upon a ground not

theretofore presented and deprives the [agency] of an opportunity

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

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

exhaustion in the Court of International Trade in non-

classification cases. See Alhambra Foundry Co. v. United States,

12 CIT 343, 346-47, 685 F. Supp. 1252, 1255-56 (1988). Section

2637(d) of Title 28 directs that “the Court of International Trade

shall, where appropriate, require the exhaustion of administrative

remedies.” By its use of the phrase “where appropriate,” Congress

vested discretion in the Court to determine the circumstances under

which it shall require the exhaustion of administrative remedies.

See Cemex, S.A. v. United States, 133 F.3d 897, 905 (Fed. Cir.

1998). Therefore, because of “judicial discretion in not requiring

litigants to exhaust administrative remedies,” the Court is

authorized to determine proper exceptions to the doctrine of

exhaustion. Alhambra Foundry, 12 CIT at 347, 685 F. Supp. at 1256

(citing Timken Co. v. United States, 10 CIT 86, 93, 630 F. Supp.

1327, 1334 (1986), rev’d in part on other grounds, Koyo Seiko Co.

v. United States, 20 F.3d 1156 (Fed. Cir. 1994)).
Consol. Court No. 98-06-02274 Page 12

In the past, the Court has exercised its discretion to obviate

exhaustion where: (1) requiring it would be futile, see Rhone

Poulenc, S.A. v. United States, 7 CIT 133, 135, 583 F. Supp. 607,

610 (1984) (in those cases when “it appears that it would have been

futile for plaintiffs to argue that the agency should not apply its

own regulation”), or would be “inequitable and an insistence of a

useless formality” as in the case where “there is no relief which

plaintiff may be granted at the administrative level,” United

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

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

interpreted existing law after the administrative determination at

issue was published, and the new decision might have materially

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

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

further factual development and, therefore, the court does not

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

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

(D.C. Cir. 1983); and (4) the plaintiff had no reason to suspect

that the agency would refuse to adhere to clearly applicable

precedent. See Philipp Bros., Inc. v. United States, 10 CIT 76,

79-80, 630 F. Supp. 1317, 1321 (1986).
Consol. Court No. 98-06-02274 Page 13

2. Contentions of the Parties

Commerce asserts that Koyo failed to exhaust its

administrative remedies. Pointing to the Preliminary Results, 61

Fed. Reg. at 25,205, that “set forth [Commerce’s] assessment rate

methodology” as well as Commerce’s “briefing and hearing schedule,”

Commerce contends that parties to the review had to “raise[]

[their] concerns about [Commerce’s] assessment rate methodology”

prior to Commerce’s issuance of the Final Results, 63 Fed. Reg.

20,585. Def.’s Resp. Koyo at 11 (citing Final Results, 63 Fed.

Reg. at 20,590-91 and relying on 28 U.S.C. § 2637(d) (“the Court .

. . shall, where appropriate, require the exhaustion of

administrative remedies”) and McCarthy v. Madigan, 503 U.S. 140,

145 (1992) (“Exhaustion concerns apply with particular force when

the action under review involves exercise of the agency’s

discretionary power or when the agency proceedings in question

allow the agency to apply its special expertise” (citations

omitted)).

Timken supports Commerce and points out that Commerce’s method

of calculating assessment rates was in accordance with law. See

Timken’s Resp. Mot. J. Agency R. Filed by Koyo, NTN and NSK

(“Timken’s Resp.”) at 6-7.

Koyo maintains that, under the “futility” exception, “[t]he
Consol. Court No. 98-06-02274 Page 14

exhaustion doctrine does not[] . . . preclude Koyo from raising

this issue.” Koyo’s Reply Br. Supp. Mot. J. Agency R. (“Koyo’s

Reply”) at 3-4 (citing Asociacion Colombiana de Exportadores de

Flores v. United States, 916 F.2d 1571, 1575 (Fed. Cir. 1990) (“A

party need not exhaust his administrative remedies where invoking

such remedies would be futile”) and Koyo Seiko Co., 16 CIT at 544,

796 F. Supp. at 1531). Specifically, Koyo alleges that it would be

futile for Koyo to raise the issue before Commerce because of: (1)

Commerce’s practice of using the methodology challenged by Koyo;

and (2) the Court’s ruling on the issue in Koyo Seiko Co., 16 CIT

539, 796 F. Supp. 1526.

3. Analysis

While Koyo errs in a part of its reasoning,3 Koyo is correct

in its conclusion. Indeed the very fact that Commerce had employed

the methodology at issue during the past reviews notwithstanding

analogous challenges to the methodology submitted during those

3
The Court’s ruling on the issue in Koyo Seiko Co., 16 CIT
539, 796 F. Supp. 1526, is irrelevant to the futility exception to
administrative exhaustion. “As a general rule, courts may ‘refuse
to require administrative exhaustion when resort to the
administrative remedy would be futile . . . .’” Koyo Seiko, Co.,
16 CIT at 544, 796 F. Supp. at 1531 (quoting Asociacion Colombiana
de Exportadores de Flores, 916 F.2d at 1575, quoting, in turn,
Bendure v. United States, 554 F.2d 427, 431 (Ct. Cl. 1977),
emphasis supplied); see also United States Cane Sugar Refiners’
Ass’n, 3 CIT at 201, 544 F. Supp. at 887.
Consol. Court No. 98-06-02274 Page 15

reviews, see, e.g., Final Results of Antidumping Duty Administrative

Reviews of Tapered Roller Hearings and Parts Thereof, Finished and

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

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

Fed. Reg. 64,720, 64,731 (Dec. 9, 1993), rendered a challenge by

Koyo during the review at issue futile. See Von Hoffburg v.

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

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

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

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

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

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

201, 544 F. Supp. at 887. Therefore, Koyo is not barred from

raising this issue before the Court.

B. Collateral Estoppel

1. Background

Collateral estoppel doctrine provides that “an issue of

ultimate fact . . . determined by a valid judgment, . . . cannot be

again litigated between the same parties [or their privies] in

future litigation.” BLACK ’S LAW DICTIONARY 261 (6th ed. 1990) (citing

City of St. Joseph v. Johnson, 539 S.W.2d 784, 785 (Mo. Ct. App.

1976)). In other words,
Consol. Court No. 98-06-02274 Page 16

Collateral estoppel scans the first action and takes note
of each issue decided. Then if the second action,
although based on a different cause of action, attempts
to reintroduce the same issue, collateral estoppel
intervenes to preclude its relitigation and to bind the
party, against whom the doctrine is being invoked, to the
way the issue was decided in the first action.

DAVID D. SIEGEL , NEW YORK PRACTICE 715-16 (3d ed. 1999).

For example, if a plaintiff enters a contract with several

defendants who, upon the plaintiff’s suit for one installment under

the contract, are deemed jointly liable to the plaintiff, such

defendants are collaterally estopped from claiming several

liability when the plaintiff sues them for the next installment

under the contract. See id. at 716 (referring to Schuylkill Fuel

Corp. v. B. & C. Nieberg Realty Corp., 250 N.Y. 304 (1929)).

In contrast, the doctrine of stare decisis, “which makes the

common law what it is,” id. at 724, provides that “[once the] court

has . . . laid down a principle of law as applicable to a certain

state of facts, it will adhere to that principle, and apply it to

all future cases, where facts are substantially the same;

regardless of whether the parties and property are the same.”

BLACK’S LAW DICTIONARY 1406 (6th ed. 1990) (citing Horne v. Moody, 146

S.W.2d 505, 509-10 (Tex. Civ. App. 1940)).
Consol. Court No. 98-06-02274 Page 17

2. Contentions of the Parties

Commerce asserts that the doctrine of collateral estoppel

applies to the issue because

“(i) the issue previously adjudicated [in Koyo Seiko Co.,
16 CIT 539, 796 F. Supp. 1526] is identical with that now
presented, (ii) that issue was ‘actually litigated’ in
the prior case, (iii) the previous determination of that
issue was necessary to the end-decision then made, and
(iv) the party precluded was fully represented in the
prior action.”

Def.’s Reply Koyo at 12 (quoting PPG Indus., Inc. v. United States,

978 F.2d 1232, 1239 (Fed. Cir. 1992), citation omitted, and relying

on RESTATEMENT (SECOND ) OF JUDGMENTS § 27 (1982)).

Koyo contends that Commerce’s reliance on the doctrine of

collateral estoppel is: (1) misplaced because “[p]arties . . .

frequently continue to contest issues previously ruled on by [a]

[c]ourt [of original jurisdiction] until the matter has been

ultimately resolved by [a] [c]ourt of [a]ppel[late jurisdiction],”

Koyo’s Reply at 4-5; and (2) “ironic [because Commerce] . . .

itself has made a regular practice of disregarding decisions of

[the] [c]ourt until the matter at issue is resolved by [t]he

[c]ourt of [a]ppeals.” Id. at 5.

3. Analysis

The Court is equally amused with the arguments offered by both

parties. Koyo’s innovative test effectively makes the doctrine of
Consol. Court No. 98-06-02274 Page 18

collateral estoppel: (1) dependent on an affirmation by an

appellate court (thus, automatically placing all original

jurisdiction cases out of the realm of the doctrine); and (2)

inapplicable under some concept of “validation of illegal acts

through vigilante violations” that is unknown to the Court.

A more conventional test offered by Commerce lists four

elements of collateral estoppel: “(i) the issue previously

adjudicated is identical with that presented[;] (ii) that issue was

‘actually litigated’ in the prior case[;] (iii) the previous

determination of that issue was necessary to the end-decision then

made[;] and (iv) the party precluded was fully represented in the

prior action.” Def.’s Reply Koyo at 12. The Court agrees with

Commerce that these elements are indeed indispensable to any

analysis of collateral estoppel doctrine. The list offered by

Commerce is, however, not exhaustive: There are two other elements

that must be satisfied to trigger the application of the doctrine.

One of these elements provides that the party to be estopped in the

second action must either be the same party that lost in the first

action or someone “in strict privity” with the losing party. In

the given case, this element is satisfied because Koyo’s motion

against Commerce was denied in Koyo Seiko Co., 16 CIT 539, 796 F.

Supp. 1526.
Consol. Court No. 98-06-02274 Page 19

The final element is best summarized by Judge Cardozo, who

stated that

[a] judgment in one action is conclusive in a later one
. . . when the two causes of action have such a measure
of identity that a different judgment in the second would
destroy or impair rights or interests established by the
first . . . .

Schuylkill Fuel Corp., 250 N.Y. at 306 (emphasis supplied).

This final element is not present in the case at bar. Indeed,

if, in this case, the Court holds differently from its decision in

Koyo Seiko Co., 16 CIT 539, 796 F. Supp. 1526, such holding would

not and could not destroy or impair any rights or interests

established in Koyo Seiko Co., 16 CIT 539, 796 F. Supp. 1526 (that

dealt with Commerce’s determination in Final Results of Antidumping

Duty Administrative Reviews of Antifriction Bearings (Other Than

Tapered Roller Bearings) and Parts Thereof From Japan, 56 Fed. Reg.

31,754 (July 11, 1991), a determination entirely different from

that made in the Final Results, 63 Fed. Reg. 20,585). While indeed

Koyo Seiko Co., 16 CIT 539, 796 F. Supp. 1526, created a precedent

on the issue under the doctrine of stare decisis, it clearly cannot

collaterally prevent Koyo’s challenge in this case under the

doctrine of collateral estoppel. Commerce simply fails to

appreciate the distinction between the doctrines.4

4
If Commerce’s circumcised test for collateral estoppel was
operable, the judicial docket would indeed be greatly relieved,
Consol. Court No. 98-06-02274 Page 20

C. Use of Entered Value in Order to
Determine Assessment Rates

Commerce’s use of entered value for the purpose of determining

assessment rate was approved by the Court in Koyo Seiko Co., 16 CIT

539, 796 F. Supp. 1526, and Koyo Seiko, Co. v. United States, 24

CIT ___, 110 F. Supp. 2d 934 (2000), aff’d, Koyo Seiko, Co. v.

United States, 258 F.3d 1340 (Fed. Cir. 2001). Because the

arguments at issue in this case (same as the parties) are

practically identical to those presented in Koyo Seiko Co., 16 CIT

539, 796 F. Supp. 1526, and Koyo Seiko, Co., 24 CIT ___, 110 F.

Supp. 2d 934, the Court adheres to its reasoning as it is stated in

these cases.

II. COMMERCE ’S INCLUSION OF HOME MARKET MOVEMENT EXPENSES
IN THE CALCULATION OF CONSTRUCTED VALUE PROFIT

A. Background

In the Final Results, 63 Fed. Reg. at 20,608, Commerce, while

recalculating Koyo’s reported constructed value (“CV”) profit,

included movement expenses in the per-unit profit amount. In order

to calculate the per-unit CV profit amount, Commerce defined the

term “profit” as a difference between adjusted gross unit price and

Koyo’s reported cost of production (“COP”). See id. Then, for

although to a detriment of parties stripped from their
constitutional right to a day in court.
Consol. Court No. 98-06-02274 Page 21

each model of the merchandise, Commerce multiplied the per-unit

profit amount and COP by the total quantity sold in order to

calculate model-specific profit and COP amounts. See id. The

ratio of total profit for all models to the total COP for all

models was used by Commerce as the profit ratio for the purpose of

calculating CV. See id.

As Koyo observes, see Koyo’s Mem. at 9-10, and Commerce

acknowledges, see Def.’s Resp. Koyo at 8, Commerce did not take

into account the fact that movement expenses were included in the

gross-unit price but were not included in the COP. Koyo’s reported

gross-unit price included various selling expenses (including

movement expenses, that is, both home market pre-sale inland

freight and home market post-sale inland freight), whereas Koyo’s

reported COP did not include movement expenses, even though it did

include the cost of manufacture (“COM”), selling, general and

administrative (“SG&A”) expenses, interest and packing. See id.

Therefore, Commerce omitted to consider the fact that all the

expenses (except for the movement expenses) included in Koyo’s

gross-unit price were mirrored in Koyo’s COP calculation.

Consequently, the amount reached by Commerce that represented the

difference between the gross-unit price and COP and intended by

Commerce to be Koyo’s CV profit was, in fact, the CV profit plus

Koyo’s movement expenses.
Consol. Court No. 98-06-02274 Page 22

Koyo contends that movement expenses should be deducted from

“the net home market price to ensure an accurate CV profit

calculation.” Koyo’s Mem. at 11. Commerce concurs with Koyo. See

Def.’s Resp. Koyo at 8. As both parties correctly observed, a

nearly identical issue was dealt by the Court in FAG Kugelfischer

Georg Schafer AG v. United States (“FAG Kugelfischer”), 19 CIT 634

(1995). Indeed, following FAG Kugelfischer, 19 CIT 634, Commerce’s

practice is to “deduct certain home market expenses (which are not

included in the total . . . COP) from net unit price” for the

purpose of calculating CV profit. Therefore, the issue is remanded

to Commerce to recalculate Koyo’s CV profit so that Koyo’s home

market movement expenses are deducted from Koyo’s net home market

price.

III. COMMERCE ERROR IN CALCULATION OF MARINE INSURANCE CHARGES

Koyo contends that Commerce relied upon an erroneous marine

insurance factor in the Final Results, 63 Fed. Reg. at 20,610-11.

See Koyo Mem. at 14. Specifically, Koyo argues that Commerce

calculated an amount for marine insurance charges for sales of

further-processed merchandise by doing the following: (1)

subtracting the custom duties from landed cost; and (2) multiplying

the result by a certain factor, the use of which was inappropriate

for the calculation. See id. Commerce agrees with Koyo’s
Consol. Court No. 98-06-02274 Page 23

observation. See Def.’s Resp. Koyo at 16. Therefore, the issue is

remanded to Commerce to recalculate Koyo’s marine insurance charges

using the correct factor indicated by Koyo. Accord Koyo’s Mem. at

14 (proprietary version).

IV. COMMERCE ’S CALCULATION OF CONSTRUCTED VALUE
RELYING UPON BEST INFORMATION AVAILABLE

During the administrative review, Commerce calculated CV for

a particular part of the merchandise imported by Koyo relying upon

best information available, operating under the impression that

Koyo did not provide Commerce with CV commission factor. Final

Results, 63 Fed. Reg. at 20,596-98. Koyo, however, reported CV

commission factor. See Koyo’s Mem. at 15-16; Def.’s Resp. Koyo at

16. It follows that Commerce erred in using an incorrect

commission expense factor in order to calculate CV for the

merchandise at issue. Therefore, the issue is remanded to Commerce

to recalculate Koyo’s CV using commission factor provided by Koyo.

V. COMMERCE ’S CALCULATION OF CONSTRUCTED VALUE DIRECT SELLING EXPENSES

During the administrative review, Commerce applied a certain

direct selling expense ratio in order to calculate the CV of

particular merchandise imported by Koyo. While the factor used by

Commerce should have been the sum of warranty and imputed credit

expenses that were indicated in Koyo’s questionnaire response,
Consol. Court No. 98-06-02274 Page 24

Commerce used a factor inappropriate for the calculation. See id.

Therefore, the issue is remanded to Commerce to recalculate CV

direct selling expenses relying on the factor indicated in Koyo’s

questionnaire response.

VI. COMMERCE ’S USE OF COMPUTER PROGRAM CONCERNING PRODUCT NOMENCLATURE

In the Final Results, Commerce corrected an input error that

Koyo made in Koyo’s reported data for the nomenclature of a

particular product. See Def.’s Resp. Koyo at 17. While making

this correction, however, Commerce did the following: (1)

improperly transcribed the product nomenclature for two types of

entries by erroneously entering a certain letter in place of a

certain number; and (2) entering a double slash symbol instead of

a single slash symbol between certain denominations that

transcribed the nomenclature of a particular product. See id.

Moreover, Commerce entered a certain correction language too early

in the computer program, consequently instructing the computer to

enter the correction for a certain model before a necessary

variable came to exist in the program. See id. at 17-18. As a

result of placing the correction language prior to the importation

of the necessary data, the program produced erroneous results. See

id. Therefore, this issue is remanded to Commerce to enter

necessary corrections and recalculate pertinent parts of Commerce’s
Consol. Court No. 98-06-02274 Page 25

determination with respect to Koyo’s imports.

VII. COMMERCE 'S CALCULATION OF INVENTORY CARRYING COSTS
FOR FURTHER -MANUFACTURED UNITED STATES SALES

A. Background

During the review at issue, Commerce calculated two separate

inventory carrying costs for Koyo’s further-manufactured United

States sales: (1) an inventory carrying cost that reflected the

amount of time unfinished product spent in inventory in Koyo’s home

market; and (2) an inventory carrying cost that reflected the

amount of time the finished product at issue spent in inventory in

the United States. See Final Results, 63 Fed. Reg. at 20,600.

Commerce did not calculate an inventory carrying cost from the time

that Koyo’s subsidiary purchased the unfinished product until the

time that the unfinished product was processed into the finished

product at issue See Def.’s Resp. Partial Opp’n Timken’s Mem.

Supp. Rule 56.2 Mot. J. Agency R. (“Def.’s Resp. Timken”) at 12-13.

B. Contentions of the Parties

Relying on 19 U.S.C. § 1677a(e)(2) (1988) and Koyo Seiko Co.

v. United States, 36 F.3d 1565 (Fed. Cir. 1994), and pointing out

that “[i]nventory carrying cost measures the imputed cost incurred

by a company for storing merchandise in inventory,” Commerce

asserts that it acted properly when Commerce calculated the
Consol. Court No. 98-06-02274 Page 26

inventory carrying costs in the above-stated manner. Id. at 12

(quoting Thai Pineapple Pub. Co. v. United States, 20 CIT 1312,

1329, 946 F. Supp. 11, 26 (1996), rev’d, Thai Pineapple Pub. Co. v.

United States, 187 F.3d 1362 (1999). Specifically, Commerce

maintains that because the product in question was

further-manufactured, separate inventory periods existed. See id.

at 14. Commerce further explains that its policy is "to make an

[inventory carrying costs] adjustment to [United States price] for

only finished goods in inventory because unfinished goods represent

production expenses rather than [United States] selling expenses.”

Id. (quoting Final Results, 63 Fed. Reg. at 20,600, and relying on

Final Results of Antidumping Duty Administrative Review of Dynamic

Random Access Memory Semiconductors of One Megabit or Above From

the Republic of Korea, 61 Fed. Reg. 20,216, 20,221 (May 6, 1996)).

Commerce notes that Timken’s assertion that Commerce “deducted only

the inventory carrying cost attributable to the imported portion of

the merchandise, not the [United States] portion" is only partially

correct and does not render Commerce’s calculations wrongful. Id.

at 14-15. In sum, Commerce: (1) reads Timken's challenge as a

statement that the whole of further-manufactured merchandise is

kept in inventory pending sale, not just the imported parts; and

(2) points out that the “inquiry, however, is not whether

[merchandise] physically remains in inventory. Rather, the
Consol. Court No. 98-06-02274 Page 27

pertinent question is whether time spent in inventory represents a

selling expense or a production expense.” Id. at 15.

Koyo supports Commerce’s assertions and points out that, while

“Timken’s argument . . . is brief and rather cryptic,” Koyo’s Mem.

Resp. Timken’s Mot. J. Agency R. (“Koyo Resp. Timken”) at 7, the

two readings of Timken’s argument that Koyo envisions, namely: (1)

the argument asserting that Koyo’s inventory carrying costs should

be calculated for the time period in which the unfinished product

was held by Koyo’s subsidiary as raw material inventory; or (2) the

argument that Koyo’s inventory carrying costs for the time period

during which the finished product was held in Koyo’s inventory

prior to sale should be included among the expenses deducted from

Koyo’s United States price, see id. at 8-9, are erroneous because:

(1) “[i]n the first case, the proposed calculation would double

count the expense[;] while [(2)] in the second case[,] [Commerce]

has already” included among the expenses deducted from Koyo’s

United States price the amount of Koyo’s inventory carrying costs

for the time period during which the finished product was held in

Koyo’s inventory. Id. at 10.

Timken, however, states that Timken “is not arguing that

Commerce erred in [the above discussed] respect.” Timken’s Reply

Resps. Timken’s Mot. J. Agency R. (“Timken’s Reply Commerce”) at 3
Consol. Court No. 98-06-02274 Page 28

n.1. “The crux of Timken’s argument . . . is . . . that the method

of calculation of the [United States inventory carrying costs]

identified by Koyo” itself was not consistently implemented in the

way corresponding to Koyo’s questionnaire response. Id. at 2

(proprietary version).

C. Analysis

The Court agrees with Timken’s argument. While Koyo’s

formulae satisfy the requirements of the statute, factual data

reveals that Koyo’s application of the formulae suffers of

inconsistency. See id. at 3-4 (proprietary version, 1992/93 and

1993/94 tables). Therefore, the issue is remanded to Commerce to

recalculate Koyo’s United States inventory carrying costs for final

product by applying the appropriate inventory carrying costs factor

reported by Koyo to the landed cost for the 1992/93 period of

review (“POR”) and to the COM for the 1993/94 POR.

VIII. COMMERCE 'S MODEL MATCHING PROGRAM

A. Background

During the review at issue, Commerce relied upon the

“sum-of-the-deviations” (“SUMDEV”) methodology to rank NSK’s

similar home market models of the merchandise as potential matches

to United States models of the merchandise. See Def.’s Resp.
Consol. Court No. 98-06-02274 Page 29

Partial Opp’n Mem. P. & A. Supp. NSK’s Mot. J. Agency R. (“Def.’s

Resp. NSK”) at 5; NSK’s Reply Mem. Supp. Mot. J. Agency R. (“NSK’s

Reply”) at 2-3. Using the SUMDEV methodology, the model with the

smallest SUMDEV is deemed the most similar. See Koyo Seiko Co. v.

United States, 66 F.3d 1204, 1207 (Fed. Cir. 1995). In cases where

the SUMDEV of two models is the same, the program determines the

most-similar model based upon a series of “tie breakers”: (1) level

of trade; then (2) the deviation in cost of production (“COSTDEV”);

and then (3) NSK’s alpha-numeric product nomenclature. See Def.’s

Resp. NSK at 5-6; NSK’s Reply at 3-4.

The review at issue presented Commerce with a model, the

matching process of which reached the last tier of the “tie

breaking” process, namely, the comparison of NSK’s alpha-numeric

product nomenclature. NSK’s designation of the model to be matched

is comprised of fourteen various symbols (the one like

ABCDEFGHIJKLMN), inclusive of but not limited to numeric and letter

symbols. See id.

In the process of matching, Commerce’s computer executed two

operations. See id. First, the computer created a list of models

to be matched with the model at issue. The list created included

two models, one having nine various symbols (the one like

ABCDEFGHI) and another having eleven symbols, with identical first
Consol. Court No. 98-06-02274 Page 30

nine symbols (the one like ABCDEFGHIJ*). See id. Commerce’s

computer, however, listed the eleven-symbols model prior to the

nine-symbols model, effectively creating a “backwards” list that:

(1) deviated from all other lists Commerce’s computer created for

all other NSK’s models; and (2) presented a list opposite to those

commonly used in listing compilations, e.g., dictionaries that list

such a word as “work” prior to the word “worker.” See id.

Second, Commerce’s computer matched the model at issue (the

one like ABCDEFGHIJKLMN) to the eleven-symbols model (the one like

ABCDEFGHIJ*) that was, as stated above, listed prior to the nine-

symbols model (the one like ABCDEFGHI). See id. The model at

issue had the same first ten symbols as the eleven-symbols model

(and, obviously, the very same first nine symbols as the nine-

symbols one).

B. Contentions of the Parties

NSK argues that Commerce’s computer program made an error by

matching the model at issue to the eleven-symbols one rather than

to the nine-symbols one. See NSK’s Reply at 3-4. Specifically,

NSK contends that, because the nine-symbols model (the one like

ABCDEFGHI) should have been listed prior to the eleven-symbols one

(the one like ABCDEFGHIJ*), the computer program should have

matched the model at issue (the one like ABCDEFGHIJKLMN) to the
Consol. Court No. 98-06-02274 Page 31

model that should have been the first on the list (the one like

ABCDEFGHI). See id. In support of its contention, NSK points to

all other lists created by Commerce’s computer program that

correctly listed the models with less symbols (the one like 12345)

prior to those models that were designated first with the symbols

identical to the less-symbols models and then, in addition, with a

number of following symbols (the ones like 12345ABC). See id. at

4.

Commerce asserts that Commerce’s matching program was not in

error. Commerce points out that the “program matched identical

nomenclature out to the tenth place . . ., rather than the ninth

place . . . [because the eleven-symbols] home market model [chosen

by the computer] is more similar to [the model at issue] based upon

model names.” Def.’s Resp. NSK at 6-7.

C. Analysis

The Court agrees with Commerce. While NSK is correct in its

contention that the nine-symbols model (the one like ABCDEFGHI)

should have been listed by the program prior to the eleven-symbols

model (the one like ABCDEFGHIJ*), this error is not dispositive

with regard to the outcome of the inquiry. The gist of the inquiry

is to find models that match to the highest degree. The model at

issue (the one like ABCDEFGHIJKLMN) is certainly more like the
Consol. Court No. 98-06-02274 Page 32

eleven-symbols model (the one like ABCDEFGHIJ*) than the nine-

symbols model (the one like ABCDEFGHI). The mere fact that the

initial comparative list was created in a “backwards” order does

not detract from the fact that the model at issue and the eleven-

symbols model have the first ten symbols identical, while the model

at issue and the nine-symbols model have only nine identical

symbols. Because NSK failed to demonstrate the error in the

conclusion reached by Commerce’s computer program, the Court holds

that Commerce’s conclusion was correct.

IX. COMMERCE ’S CALCULATION OF A REVISED COST OF PRODUCTION

In order to calculate NSK’s COP, Commerce revised NSK’s

general and administrative (“G&A”) expenses to account for certain

non-operating gains and losses. Following the revision, Commerce:

(1) decreased NSK’s G&A factor accordingly; and (2) implemented the

change in Commerce’s calculation of NSK’s COP. See NSK’s Mem. P.

& A. Supp. Mot. J. Agency R. (“NSK’s Mem.”) at 4. Commerce,

however, erred while implementing the latter changes. See id.; see

also Def.’s Resp. NSK at 7. The issue is, therefore, remanded to

Commerce to apply the correct G&A expenses factor in Commerce’s

calculation of NSK’s COP.
Consol. Court No. 98-06-02274 Page 33

X. COMMERCE ’S DETERMINATION THAT SAMPLE AND SMALL -QUANTITY HOME
MARKET SALES ARE WITHIN THE ORDINARY COURSE OF TRADE

A. Background

Under the pre-URAA law, fair market value (“FMV”) was defined

as “the price . . . at which such or similar merchandise is sold

or, in the absence of sales, offered for sale in the principal

markets of the country from which exported, in the usual commercial

quantities and in the ordinary course of trade for home consumption

. . . . 19 U.S.C. § 1677b(a)(1) (1988) (emphasis supplied). The

term “ordinary course of trade” was, in turn, defined as

the conditions and practices which, for a reasonable time
prior to the exportation of the merchandise . . . , have
been normal in the trade under consideration with respect
to merchandise of the same class or kind.

19 U.S.C. § 1677(15) (1988).

While the language of § 1677(15) indicates that various types

of sales could be considered outside the ordinary course of trade,5

5
A later clarification came in the Statement of
Administrative Action (“SAA”), accompanying the URAA. SAA provides
that, aside from §§ 1677b(b)(1) and (f)(2) (1994) transactions,

Commerce may consider other types of sales or
transactions to be outside the ordinary course of trade
when such sales or transactions have characteristics
that are not ordinary as compared to sales or
transactions generally made in the same market. Examples
of such sales or transactions include merchandise
produced according to unusual product specifications,
merchandise sold at aberrational prices, or merchandise
sold pursuant to unusual terms of sale. As under
existing law, [the pertinent] section . . . does not
Consol. Court No. 98-06-02274 Page 34

Commerce’s regulations (of the pertinent period of time) did not

provide any further clarification of the phrase “ordinary course of

trade.” See 19 C.F.R. § 353.46(b) (1994) (providing a definition

that mirrored the statutory one).

In the Final Results, 63 Fed. Reg. at 20,588, Commerce

determined that NTN’s sample and small-quantity home market sales

were within the ordinary course of trade. Consequently, Commerce

used these sales for purposes of determining FMV. Commerce’s

decision was based on Commerce’s determination that NTN failed to

provide Commerce with any information other than a general

description of those sales that, according to NTN, fell outside the

ordinary course of trade. See Final Results, 63 Fed. Reg. at

20,588. Specifically, Commerce concluded that there was “no

evidence supporting the notion that NTN’s sample sales were sold

only for the purpose of allowing the customer to make a decision to

buy” as well as “no evidence supporting NTN’s categorization of its

‘small-quantity’ sales as abnormal, other than the fact that they

establish an exhaustive list, but the Administration
intends that Commerce will interpret [this] section . .
. in a manner which will avoid basing normal value on
sales which are extraordinary for the market in question,
particularly when the use of such sales would lead to
irrational or unrepresentative results.

H.R. DOC. 103-316, at 834 (1994), reprinted in 1994 U.S.C.C.A.N.
4171 (emphasis supplied).
Consol. Court No. 98-06-02274 Page 35

were small-quantity . . . .” Id. at 20,588 (emphasis supplied).

B. Contentions of the Parties

NTN contends that Commerce erred in Commerce’s determination

that NTN’s sample and small-quantity home market sales were within

the ordinary course of trade. See NTN’s Mot. Mem. Supp. J. Agency

R. (“NTN’s Mem.”) at 5-7; NTN’s Reply Mem. Def.’s and Def.-

Intervenor’s May 28, 1999 Resp. Mem. Mot. J. Agency R. (“NTN’s

Reply”) at 2-4. Specifically, NTN asserts that: (1) “[t]here is

more than adequate information on the record to establish [that]

these . . . sales were outside the ordinary course of trade”; and

(2) Commerce erred in Commerce’s decision to assess “whether

[NTN’s] sale is ‘abnormal or aberrational.’” NTN’s Resp. at 2-4.

Commerce maintains that its determination that NTN’s sales at

issue were within the ordinary course of trade was supported by

substantial evidence since NTN provided Commerce with nothing but

a general description of the sales. See Def.’s Resp. Opp’n Pl.

NTN’s Mot. Mem. Supp. J. Agency R. (“Def.’s Resp. NTN”) at 21-26.

Timken supports Commerce’s assertion and states that NTN failed to

satisfy NTN’s burden to demonstrate that NTN’s sample sales and

small-quantity sales were outside the ordinary course of trade.

See Timken’s Resp. at 9-11.
Consol. Court No. 98-06-02274 Page 36

C. Analysis

The purpose of the ordinary course of trade provision “is to

prevent dumping margins from being based on sales which are not

representative . . . .” Monsanto Co. v. United States, 12 CIT 937,

940, 698 F. Supp. 275, 278 (1988). Accordingly, “Commerce must

evaluate not just one factor taken in isolation but rather . . .

all the circumstances particular to the sales in question,’”

CEMEX, S.A., 133 F.3d at 900 (citation omitted), and the burden

rests with the plaintiff to provide Commerce with sufficient

evidence showing that the sales used in Commerce’s calculations are

outside the ordinary course of trade. See Nachi-Fujikoshi Corp. v.

United States, 16 CIT 606, 608, 798 F. Supp. 716, 718 (1992). In

the absence of adequate evidence to the contrary, Commerce

considers sales within the ordinary course of trade. See

Torrington Co. v. United States, 127 F.3d 1077, 1081 (Fed. Cir.

1997). Thus, a determination of whether a sale or transaction is

outside the ordinary course of trade is a question of fact,6 and

6
Because neither the statutory language nor the legislative
history explicitly establishes what is considered to be outside the
“ordinary course of trade,” the Court assesses whether Commerce’s
interpretation or application is reasonable and in accordance with
the legislative purpose on a case-by-case basis. See Chevron, 467
U.S. at 843. “In determining whether Commerce’s interpretation is
reasonable, the Court considers, among other factors, the express
terms of the provisions at issue, the objectives of those
provisions and the objectives of the antidumping scheme as a
whole.” Mitsubishi, 22 CIT at 545, 15 F. Supp. 2d at 813. The
purpose of the ordinary course of trade provision is “to prevent
Consol. Court No. 98-06-02274 Page 37

Commerce has the discretion to interpret § 1677(15) and to

determine which sales are outside the ordinary course of trade.

See Mitsubishi Heavy Indus. v. United States (“Mitsubishi”), 22 CIT

541, 568, 15 F. Supp. 2d 807, 830 (1998) (“Congress granted

Commerce discretion to decide under what circumstances . . . sales

would be considered to be outside of the ordinary course of

trade.”); cf. Koenig & Bauer-Albert AG v. United States, 22 CIT

574, 589 n.8, 15 F. Supp. 2d 834, 850 n.8 (1998) (noting that

although Commerce has the discretion to decide under what

circumstances highly profitable sales are outside of the ordinary

course of trade, “Commerce may not impose this requirement

arbitrarily, . . . nor may Commerce impose impossible burdens of

proof on claimants” and citing NEC Home Elecs. v. United States, 54

F.3d 736, 745 (Fed. Cir. 1995) “(holding that burden imposed to

prove a level of trade adjustment was unreasonable because claimant

could, under no practical circumstances, meet the burden)”). In

making this determination, Commerce considers not just “one factor

taken in isolation but rather . . . all the circumstances

particular to the sales in question.” Murata Mfg. Co. v. United

States, 17 CIT 259, 264, 820 F. Supp. 603, 607 (1993) (citation

omitted). Commerce’s methodology for deciding when sales are

dumping margins from being based on sales which are not
representative” of the home market. Monsanto Co., 12 CIT at 940,
698 F. Supp. at 278.
Consol. Court No. 98-06-02274 Page 38

outside the “ordinary course of trade” has been to examine, on a

case-by-case basis, the totality of the circumstances surrounding

the sale or transaction in question to determine whether the sale

or transaction is extraordinary.

NTN alleges that “there is ample evidence establishing that

NTN’s sales were outside the ordinary course of trade.” NTN’s

Reply at 2-3. Citing to its questionnaire response, NTN states

that sample sales at issue were made to enable a customer to decide

whether or not to make a decision to buy. See id. at 3. NTN also

provided Commerce with information on NTN’s procedure to track

small sales. See id. NTN, however, provided Commerce with no

evidence of statements and representations made by NTN to the

entities obtaining samples or small-quantity purchases to enable

Commerce to establish that sample sales were “not a normal

condition or practice in the trade under consideration.” Def.’s

Resp. NTN at 23-24.

While NTN is correct in noting that “[t]he [statutory]

standard . . . is not [specifically testing] whether a sale is

‘abnormal or aberrational,’” see NTN’s Reply at 3, Commerce’s

choice of terms “abnormal” or “aberrational” with regard to

Commerce’s inquiry does not violate the gist of the statutory

mandate. Accord H.R. DOC . 103-316, at 834, reprinted in 1994
Consol. Court No. 98-06-02274 Page 39

U.S.C.C.A.N. 4171. The term “abnormal” means “[d]eviating from

normal condition,” while the term “aberrational” stands for an act

characterized by “deviation . . . from the natural state, or from

a normal type.” WEBSTER ’S DICTIONARY 4, 6 (New Int’l, 2d ed. 1948).

Thus, these terms are in accord with the definition provided by 19

U.S.C. § 1677(15), and Commerce was: (1) entitled to request

evidence supporting NTN’s assertion about the irregularity of the

sales at issue; and (2) refusing to accept NTN’s claim that sample

sales are “by their very nature” outside the ordinary course of

trade. Accord Koyo Seiko Co., 16 CIT at 543, 796 F. Supp. at 1530.

Commerce is correct in pointing out that “[s]ample sales may well

be a type of ‘condition or practice’ that is ‘normal in the trade

under consideration,’” especially if such sales are done on a

regular and continuous basis.7 Def.’s Resp. NTN. at 24-25 (relying

on Final Results of Antidumping Duty Administrative Reviews of

Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,

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

Outside Diameter, and Components Thereof, From Japan, 58 Fed. Reg.

7
Indeed, while the mere fact that NTN has made sample sales
to customers for a number of years does not, alone, prove that the
sales were in the ordinary course of trade, the Court finds the
fact relevant because a customer rarely needs to be familiarized
and re-familiarized and yet re-familiarized with the product,
especially if the customer has already made a purchase at least
once and found the product to be suitable for the customer’s needs.
Consol. Court No. 98-06-02274 Page 40

at 64,732, and Final Results of Antidumping Duty Administrative

Reviews and Revocation in Part of an Antidumping Finding on Tapered

Roller Bearings and Parts Thereof, Finished and Unfinished, From

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

Diameter, and Components Thereof, From Japan, 61 Fed. Reg. 57,629,

57,639 (Nov. 7, 1996)); see Torrington Co. v. United States, 25 CIT

___, 146 F. Supp. 2d 845 (2001); NTN Bearing Corp. of Am. v. United

States, 20 CIT 508, 924 F. Supp. 200 (1996); NSK Ltd. v. United

States, 17 CIT 590, 825 F. Supp. 315 (1993). Therefore, Commerce’s

decision to consider the sales at issue within the ordinary course

of trade is not unreasonable, provided Commerce did not receive any

specific evidence to the contrary. While NTN claims that “there is

ample evidence,” the actual evidence NTN refers to is nothing but

the very same NTN’s questionnaire response discussing NTN’s system

of order placement and NTN’s tracking procedures. See NTN’s Reply

at 2-3. The mere reference to procedures is, however, insufficient

to persuade the Court that Commerce’s conclusion was unreasonable.

Therefore, the Court finds Commerce’s determination that NTN’s

sample and small-quantity home market sales were within the

ordinary course of trade in accordance with law and supported by

substantial evidence.
Consol. Court No. 98-06-02274 Page 41

XI. DENIAL OF AN ADJUSTMENT TO UNITED STATES INDIRECT SELLING
EXPENSES FOR INTEREST ALLEGEDLY INCURRED IN FINANCING
CASH DEPOSITS FOR ANTIDUMPING DUTIES

A. Background

Following the review at issue, Commerce denied an adjustment

to NTN’s United States indirect selling expenses to exclude

expenses that NTN claimed were related to the financing of

antidumping duty cash deposits. See Final Results, 63 Fed. Reg. at

20,595-96.

Under the pre-URAA law, Commerce struggled with the issue

whether financing expenses for antidumping cash deposits were: (1)

selling expenses within the meaning of 19 U.S.C. § 1677a(e)(2) and,

thus, deductible from exporter’s sales price (“ESP”); or (2)

analogous, e.g., to legal fees that fall outside 19 U.S.C. §

1677a(e)(2) and should be subject to an offset against the selling

expenses deducted from ESP.

In one of the previous reviews, specifically, Final Results of

Antidumping Duty Administrative Reviews and Revocation in Part of

an Antidumping Duty Order, 58 Fed. Reg. 39,729, 39,749 (July 26,

1993), Commerce: (1) granted an offset to NTN’s United States

selling expenses to account for imputed interest expenses on

antidumping cash deposits; and (2) upon remand, explained

Commerce’s belief that the interest expenses were analogous to
Consol. Court No. 98-06-02274 Page 42

antidumping legal fees (because they were incurred solely as a

result of the antidumping duty order) that could not be categorized

as selling expenses. The Court sustained Commerce’s grant of the

offset. See Federal Mogul Corp. v. United States, 20 CIT 1438,

1440, 950 F. Supp. 1179, 1182 (1996); see also Timken Co. v. United

States, 22 CIT 621, 622-24, 16 F. Supp. 2d 1102, 1104-05 (1998)

(approving analogous offset for Final Results of Antidumping Duty

Administrative Reviews and Termination in Part of Tapered Roller

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

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

and Components Thereof, From Japan, 62 Fed. Reg. 11,825 (March 13,

1997)).

B. Contentions of the Parties

NTN asserts that Commerce erroneously rejected NTN’s

adjustment to NTN’s indirect selling expenses incurred in regard to

antidumping duty cash deposits. See NTN’s Mem. at 8-11.

Specifically, NTN points out that imputed interest expenses cannot

be (and previously were not) categorized as selling expenses. See

id. at 9-10 (relying on Federal Mogul Corp., 20 CIT at 1440, 950 F.

Supp. at 1182).

Commerce maintains that Commerce’s denial of an adjustment to

NTN’s United States indirect selling expenses for the expenses
Consol. Court No. 98-06-02274 Page 43

related to the financing of antidumping duty cash deposits

reflected Commerce’s reasonable reading and application of the

statutory mandate. See Def.’s Resp. NTN at 26-33. Timken supports

Commerce’s contention and points out that: (1) the purpose of the

statutory provision for interest on over and under deposits of

duties would be defeated by allowing an expense reduction for

interest on cash deposits, see Timken’s Resp. at 14-15; and (2) NTN

failed to demonstrate that it actually incurred interest expenses

attributable to financing payment of antidumping duty cash

deposits. Id. at 15.8

8
The Court disagrees with Timken’s contentions that these two
points could be dispositive of the issue. Timken asserts that

[a]llowing selling expenses to be reduced (with
consequent increase in [United States] prices and
reduction of margins of dumping) by amounts of alleged
interest on antidumping duty deposits would provide an
incentive to respondents to prolong litigation over
entries so as to avoid actual payment of duties.

Timken’s Resp. at 15.

The Court is not convinced by Timken’s argument. A defeat in
litigation implies the necessity of eventual payment of the duties
due, and the mere possibility of “opportunity use,” possibly
resulting in collection of interest on the funds available calls
for an argument seeking collection of duties together with a
prevailing interest rate rather than for the “anti-incentive”
argument fostered by Timken.

Next, not only the record contains NTN’s claim for the amount
of imputed interest attributable to NTN’s antidumping duty deposits
(the claim that, under the administrative scheme, is subject to
verification by Commerce rather than Timken), but also the factual
inquiry of whether NTN actually incurred interest expenses
Consol. Court No. 98-06-02274 Page 44

C. Analysis

Because financing expenses on antidumping duty cash deposits

do not fall squarely within the “selling expenses” category and do

not imitate perfectly the expenses that typically fall outside the

reach of Section 1677a(e)(2), Commerce is, effectively, obligated

to find the best default category to house these expenses. In the

Final Results at issue, Commerce: (1) reconsidered Commerce’s

previous position and concluded that expenses pertaining to the

financing of antidumping duty cash deposits would be more properly

treated as indirect selling expenses; and (2) based its decision on

the fact that the statute does not contain a precise definition of

what constitutes a “selling expense.” See 63 Fed. Reg. at 20,595;

accord Torrington Co. v. United States, 44 F.3d 1572, 1579-81 (Fed.

Cir. 1995) (holding that Commerce’s treatment of inventory carrying

costs as an indirect selling expense is a reasonable interpretation

of the statute).

In its efforts to identify a selling expense, Commerce

attempts to distinguish “between business expenses that arise from

economic activities in the United States and business expenses that

are direct, inevitable consequences of an antidumping duty order.”

attributable to financing payment is secondary to the threshold
legal inquiry if an adjustment should be allowed for such expenses.
Consol. Court No. 98-06-02274 Page 45

Final Results, 63 Fed. Reg. at 20,595-96. Antidumping duties, cash

deposits of antidumping duties, and legal fees associated with

participation in an antidumping case are all expenses that fall

within the category of “business expenses that are direct,

inevitable consequences of an antidumping duty order” because they

are incurred solely as a result of the existence of an antidumping

duty order. Def.’s Resp. NTN at 29 (quoting Final Results at

20,596). Therefore, Commerce does not consider such expenses to be

selling expenses deductible pursuant to 19 U.S.C. § 1677a(e)(2).

See Daewoo Elecs. Co. v. United States, 13 CIT 253, 269, 712 F.

Supp. 931, 947 (1989), rev’d on other grounds, Daewoo Elecs. Co. v.

Int’l Union of Elec., Tech., Salaried and Machine Workers, AFL-CIO,

6 F.3d 1511 (Fed. Cir. 1993), cert. denied, 512 U.S. 1204 (1994).

Following its change in statutory interpretation, Commerce

deems any financing expenses associated with antidumping duty cash

deposits to be a type of selling expense properly deductible

pursuant to 19 U.S.C. § 1677a(e)(2). In the Final Results, Commerce

explained that: (1) money is fungible because “[i]f an importer

acquires a loan to cover one operating cost, that may simply mean

that it will not be necessary to borrow money to cover a different

operating cost”; and (2) “[c]ompanies may choose to meet

obligations for cash deposits in a variety of ways that rely on

existing capital resources or that require raising new resources
Consol. Court No. 98-06-02274 Page 46

through debt or equity.” 63 Fed. Reg. at 20,596. Thus, Commerce

concluded that there is nothing inevitable about a company

incurring financing expenses to meet the company’s obligations for

cash deposits. Therefore, these particular expenses could: (1)

fall within the realm of selling expenses, direct and indirect; and

(2) be reasonably qualified as selling expenses for purposes of 19

U.S.C. § 1677a(e)(2).

NTN argues that Commerce’s statutory interpretation is in

error because, regardless of how a company posts cash deposits,

there is an “opportunity cost,” that is, that “money will cease to

be available for other company uses.” NTN Mem. at 8. Commerce,

however, is correct in noting that “it is within Commerce’s

authority to deduct opportunity costs as selling expenses.” Def.’s

Resp. NTN at 30; see also Torrington Co., 44 F.3d at 1580

(sustaining Commerce’s decision to treat inventory carrying costs

as indirect selling expenses). Conversely, NTN is incorrect in its

assertion that since “interest expenses for antidumping duty cash

deposits are not incurred in the course of selling merchandise in

the United States,” there is no basis for deducting these expenses

from United States price. NTN Mem. at 10. In the Final Results,

Commerce implicitly recognized that the selling expenses referred

to in 19 U.S.C. § 1677a(e)(2) is a broad category encompassing

numerous expenses whereas antidumping duties, cash deposits, and
Consol. Court No. 98-06-02274 Page 47

legal fees represent “a limited exemption.” 63 Fed. Reg. at

20,596. While the plain language of 19 U.S.C. § 1677a(e)(2) does

not provide the precise meaning of the term “expenses,” “[t]he

purpose of deducting selling expenses from exporter’s sales price

was to estimate the ‘net amount returned to the foreign exporter’.

. . of the merchandise by removing all of the expenses incurred

after importation by the related-party importer.” Koyo Seiko Co.

v. United States, 36 F.3d 1565, 1571-72 (Fed. Cir. 1994) (quoting

Emergency Tariff and Antidumping: Hearings on H.R. 2435 Before the

Senate Comm. on Finance, 67th Cong., 1st Sess. 10-12 (1921)); accord

19 U.S.C. § 1673g(b)(4) (1988); 19 C.F.R. § 353.26(a) (1994).

Accordingly, Commerce could reasonably deduct financial expenses

associated with cash deposits from United States price in order to

arrive at the ESP, that is, the net amount returned to the

exporter.

The fact that Commerce has changed its interpretation of 19

U.S.C. § 1677a(e)(2) over time does not detract from the

reasonableness of Commerce’s current statutory interpretation.9

9
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 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
Consol. Court No. 98-06-02274 Page 48

See Consolo, 383 U.S. at 620 (noting that “the possibility of

drawing two inconsistent conclusions from the evidence does not

prevent an administrative agency’s finding from being supported by

substantial evidence”); AK Steel Corp. v. United States, 22 CIT

1070, 1082, 34 F. Supp. 2d 756, 766 (1998) (stating that an

initial interpretation by an agency is not “carved in stone” and

citing Chevron, 467 U.S. at 863).

(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
Congress would have sanctioned.’” Id. at 845 (quoting United States
v. Shimer, 367 U.S. 374, 382-83 (1961)). Furthermore, an agency
must be allowed to assess the wisdom of its policy on a continuing
basis. Under the Chevron regime, agency discretion to reconsider
policies is inalienable. See id. at 843. Any assumption that
Congress intended to freeze an administrative interpretation of a
statute would be entirely contrary to the concept of Chevron which
assumes and approves of the ability of administrative agencies to
change their interpretations. See, e.g., Maier, P.E. v. United
States EPA, 114 F.3d 1032, 1043 (10th Cir. 1997), J.L. v. Social
Sec. Admin., 971 F.2d 260, 265 (9th Cir. 1992), Saco Defense Sys.
Div., Maremont Corp. v. Weinberger, 606 F. Supp. 446, 450-51 (D.
Me. 1985). In sum, underlying agency interpretative policies “are
given controlling weight unless they are arbitrary, capricious, or
manifestly contrary to the statute.” Chevron, 467 U.S. at 844.
Consol. Court No. 98-06-02274 Page 49

XII. DENIAL OF ADJUSTMENT TO FOREIGN MARKET
VALUE FOR HOME MARKET DISCOUNTS

A. Background

The pre-URAA statute defined FMV as “the price . . . at which

such or similar merchandise is sold or, in the absence of sales,

offered for sale in the principal markets of the country from which

exported, in the usual commercial quantities and in the ordinary

course of trade for home consumption . . . ." 19 U.S.C. §

1677b(a)(1)(A). Commerce interpreted the term "price" used in the

definition as the price for the foreign like product after any

adjustments for post-sale price adjustments (“PSPAs"), where PSAPs

were direct adjustments to price. See Final Results, 63 Fed. Reg.

at 20,602 (“As a general matter, . . . [Commerce] only accepts

claims for discounts, rebates, or other PSPAs as direct adjustments

to price if actual amounts are reported for each transaction").

Pursuant to Commerce’s statutory interpretation, a respondent may

demonstrate entitlement to a PSPA if the PSPA is: (1) “reported on

a transaction-specific basis"; or (2) “allocated . . . if the

respondent demonstrates that the PSPA was granted as a fixed and

constant percentage of the sales price of all transactions for

which it was reported and to which it was allocated." Id.

In the review at issue, Commerce disallowed an adjustment to

FMV for NTN’s home market discounts, see Final Results, 63 Fed.
Consol. Court No. 98-06-02274 Page 50

Reg. at 20,602-03, because NTN: (1) “did not report these discounts

on a transaction-specific basis, but, rather, reported the

adjustments on a product-[specific] or customer-specific basis”;

and (2) “did not grant and report these discounts as a fixed and

constant percentage of sales.” Id. at 20,603.

B. Contentions of the Parties

NTN asserts that Commerce erred in disallowing any adjustments

to FMV for NTN’s discounts. Specifically, NTN argues that: (1)

“[b]ecause the discounts at issue . . . did vary with the quantity

sold, and were related to particular sales, [Commerce] should have

treated them as direct selling expenses and granted NTN an

adjustment to FMV to account for the expenses”; and (2) because the

discounts at issue “constitute a discount which is a fixed and

constant percentage of sales,” Commerce should have allowed the

adjustments for these discounts. NTN Mem. at 12-13 (relying on

Torrington Co. v. United States (“Torrington”), 82 F.3d 1039 (Fed.

Cir. 1996)).

Commerce contends that its decision to disallow any

adjustments to FMV for NTN’s discounts was in accordance with law

and a reasonable interpretation of 19 U.S.C. § 1677b(a)(1)(A).

Def.’s Resp. NTN at 33-37. Timken supports Commerce’s assertion
Consol. Court No. 98-06-02274 Page 51

and points out that Commerce’s conclusion was reasonable in view of

the fact that NTN failed to report NTN’s home market discounts in

a manner required. See Timken’s Resp. at 17-20.

C. Analysis

NTN’s reading of the statutory mandate and case law is

incorrect. NTN errs in its reliance on Torrington, 82 F.3d 1039,

when it argues that the fact that discounts at issue did vary

obligates Commerce to treat these discounts as direct selling

expenses subject to an adjustment. See NTN Mem. at 12-13.

Torrington, 82 F.3d 1039, does not provide a set of two

propositions where from each one the other could be automatically

inferred. While Torrington recognized that “direct selling

expenses ‘are expenses which vary with the quantity sold,’” 82 F.3d

at 1050 (quoting Zenith Elecs. Corp. v. United States, 77 F.3d 426,

431 (Fed. Cir. 1996) (internal quotation omitted)), it does not

necessarily mandate that each expense that could vary with the

quantity sold should be deemed a direct selling expense. See id.

Conversely, Torrington recognized that “[t]he allocation of

expenses in a manner different from the calculation of the

expenses, however, does not alter the relationship between the

expenses and the sales under consideration.” 82 F.3d at 1051

(citing Smith-Corona Group, Consumer Prods. Div., SCM Corp. v.
Consol. Court No. 98-06-02274 Page 52

United States, 713 F.2d 1568 (Fed. Cir. 1983), cert. denied, 465

U.S. 1022 (1984)). The court in Torrington ruled that Commerce

erroneously granted a respondent an ESP offset pursuant to 19

C.F.R. § 353.56(b)(2) (1994) because that regulation limited the

offset to “all selling expenses except direct selling expenses,”

while, in fact, the respondent’s PSPAs were direct selling

expenses. 82 F.3d 1051 (emphasis omitted). Torrington, however,

does not stand for the proposition that Commerce must grant a PSPA

for all discounts or even each selling expense that might be

qualified as a direct selling expense.

While the underlying discounts reported by NTN may indeed vary

with the quantity sold, NTN did not report this information to

Commerce in the required form, namely, on a transaction-specific

basis and as a fixed and constant percentage of sales.

Consequently, Commerce reasonably could deny an adjustment if NTN

has failed to properly allocate or report expenses.

NTN’s second argument is equally unpersuasive. NTN states

that an adjustment should be allowed because the discounts at issue

“constitute a discount which is a fixed and constant percentage of

sales.” See NTN Mem. at 13. As Commerce correctly observes, every

discount granted

may be expressed as a “fixed and constant” percentage of
sales by mere mathematical operation (i.e., dividing the
Consol. Court No. 98-06-02274 Page 53

discount by the number of sales). In focusing upon the
“fixed and constant” percentage of sales, Commerce is not
inquiring whether a party has the ability to perform this
simple calculation, but, rather, whether the party is
granting the discount itself as a fixed and constant
percentage of the sales to which it pertains. As
explained by [Commerce], “[i]f a respondent grants and
reports a PSPA as a fixed percentage of the sales to
which it pertains, the fact that this pool of sales may
include non-scope merchandise does not distort the amount
of the expense the respondent granted and reported on
sales of subject merchandise because the same adjustment
percentage applied to both scope and non-scope
merchandise.”

Def.’s Resp. NTN at 36 (quoting Final Results, 63 Fed. Reg. at

20,603, and relying on Final Results of Antidumping Duty

Administrative Reviews and Revocation in Part of an Antidumping

Finding on Tapered Roller Bearings and Parts Thereof, Finished and

Unfinished, From Japan and Tapered Roller Bearings, Four Inches

or Less in Outside Diameter, and Components Thereof, From Japan, 61

Fed. Reg. at 57,642 (emphasis omitted).

Because NTN’s reporting method was not equivalent to

transaction-specific reporting, “allocated price adjustments [may]

have the effect of distorting individual prices by diluting the

discounts or rebates received on some sales, inflating them on

other sales, and attributing them to still other sales that did not

actually receive any at all.” NSK Ltd. v. Koyo Seiko Co., 190 F.3d

1321, 1329 (Fed. Cir. 1999) (internal quotation omitted).

Therefore, the Court holds that Commerce acted reasonably when it
Consol. Court No. 98-06-02274 Page 54

disallowed any adjustments to FMV for NTN’s discounts under the

mandate of 19 U.S.C. § 1677b(a)(1)(A).

XIII. COMMERCE ’S REALLOCATION OF SELLING EXPENSES WITHOUT REGARD
TO LEVEL OF TRADE AND DENIAL OF A LEVEL OF TRADE ADJUSTMENT

A. Background

The pre-URAA law did not contain a specific provision

concerning adjustments for differences in levels of trade (“LOTs”).

See, e.g., NEC Home Elecs., 54 F.3d at 739. Commerce, however,

provided that it would normally calculate FMV and United States

price at the same commercial LOT. See 19 C.F.R. § 353.58 (1994).

If such sales were insufficient in number to permit an adequate

comparison, Commerce would calculate FMV based upon such or similar

sales at the most comparable LOT to the LOT in the United States

market “and make appropriate adjustments for differences affecting

price comparability.” Id.

In the Preliminary Results, Commerce: (1) accepted NTN’s

proposed allocation of selling expenses by LOT; and (2) granted NTN

an LOT adjustment. See 61 Fed. Reg. at 25,204. However, in the

Final Results, 63 Fed. Reg. at 20,608-09, Commerce reexamined the

record, reallocated NTN’s selling expenses without regard to LOT,

and denied NTN an LOT adjustment, operating under the precedent set
Consol. Court No. 98-06-02274 Page 55

by Timken Co. v. United States (“Timken”), 20 CIT 645, 930 F. Supp.

621 (1996).

B. Contentions of the Parties

NTN contends that Commerce erroneously reallocated NTN’s

selling expenses without regard to LOT and eliminated the LOT

adjustment granted to NTN in the Preliminary Results, 61 Fed. Reg.

at 25,204. See NTN’s Mem. at 14-16. NTN maintains that it

provided “sufficient information to [Commerce] . . . to convince

[Commerce] that NTN’s LOT-specific reporting methodology was

accurate.” NTN’s Reply at 8.

Commerce asserts that it acted reasonably and properly when it

followed the precedent set by Timken, 20 CIT 645, 930 F. Supp. 621.

Timken supports Commerce’s assertion and points out that: (1)

Commerce properly disallowed a home market LOT adjustment because

NTN failed to demonstrate that NTN incurred different selling

expenses at the different LOTs in the home market due to the

differences in selling to the different LOTs, see Timken’s Resp. at

21-23; (2) Commerce properly rejected NTN’s LOT-based expense

allocation method and reasonably reallocated NTN’s home-market

selling expenses without regard to LOT, see id. at 23-25; and (3)

Commerce properly reallocated NTN’s United States selling expenses

without regard to LOT. See id. at 25-26.
Consol. Court No. 98-06-02274 Page 56

C. Analysis

In the Final Results, Commerce examined Timken, 20 CIT 645,

930 F. Supp. 621,10 and stated that the fact that a respondent

merely makes allocations according to LOT does not demonstrate that

the relevant expenses demonstrably varied based upon LOT. See 63

Fed. Reg. at 20,608. Commerce, therefore, concluded that “in order

to determine if a respondent’s expenses demonstrably varied

according to LOT, additional narrative and quantitative evidence

must exist which demonstrates that the respondent either performed

different activities/functions or performed activities/functions to

a different degree when selling to each LOT[,] such that the amount

of expenses incurred for the sale of the identical merchandise to

different LOTs would vary.” Final Results, 63 Fed. Reg. at 20,608.

Examining the record, Commerce determined that NTN did not

provide the necessary narrative and quantitative evidence. See id.

Commerce concluded that “NTN’s sole support for [NTN’s] LOT-

10
In Timken, after reviewing the pertinent statutory and
regulatory criteria governing LOT adjustments, the Court noted that
the statute conferred upon Commerce broad discretion in determining
whether an LOT adjustment is warranted, but that such discretion is
not without limits “as the statute requires a direct relationship
between the expenses and the relevant sales.” 20 CIT at 653, 930
F. Supp. at 628 (citing Smith-Corona Group, 713 F.2d at 1575, rev’d
on other grounds, Consumer Prods. Div., SCM Corp. v. United States,
753 F.2d 1033 (Fed. Cir. 1985)). “The issue, therefore, is whether
the reported expenses demonstrably vary according to levels of
trade.” Id. (emphasis supplied).
Consol. Court No. 98-06-02274 Page 57

specific allocations is the [very fact of the] allocations

themselves.” Id. Because the mere fact of these allocations did

not give Commerce sufficient evidence that NTN’s home market

selling expenses varied by LOT, Commerce reallocated these expenses

without regard to LOT. Id.

Commerce’s decision to re[]allocate NTN’s selling
expenses was not based upon inaccuracies discovered at
verification but, rather, upon Commerce’s determination
that mere allocation of expenses by level of trade does
not demonstrate that [NTN] actually performed different
selling functions at different levels of trade.11

Def.’s Resp. NTN at 40.

NTN’s failure to demonstrate that these different functions

existed provided reasonable grounds for Commerce to proceed with

the reallocation. The mere fact of Commerce’s reallocation of

expenses does not make Commerce’s decision in the Final Results, 63

Fed. Reg. at 20,608-09, invalid. See NSK Ltd. v. United States, 21

11
Commerce stated that it did “not consider NTN’s [relevant]
exhibit [on] home market indirect selling expense differentials as
a reliable basis for a[n] LOT adjustment.” Final Results, 63 Fed.
Reg. at 20,609. NTN points out that Commerce, however, “verified
NTN’s data, and had the opportunity to verify all of the
information on [the particular] exhibit.” NTN’s Reply at 8; see
also NTN’s Mem. at 14. NTN misses the point fostered by Commerce.
In the Final Results, 63 Fed. Reg. at 20,608-09, Commerce did not
assert that the verified information suddenly became wrongful,
rather Commerce deemed it to be insufficient for the lack of
“necessary narrative and quantitative evidence,” Def.’s Resp. NTN
at 39, that is, the exhibit was deemed unreliable because of
insufficiency of its content and not because of the invalidity of
data.
Consol. Court No. 98-06-02274 Page 58

CIT 617, 635-36, 969 F. Supp. 34, 54 (1997) (“The evidence on the

record does not establish differences in selling expenses at

[different LOTs] because NTN’s allocation methodology . . . does

not reasonably quantify the expenses incurred at each [LOT]”);

Timken, 20 CIT 645, 930 F. Supp. 621; NTN Bearing Corp. of Am. v.

United States, 19 CIT 1221, 1234, 905 F. Supp. 1083, 1094-95 (1995)

(“Although NTN purports to show that it incurred different selling

expenses for different trade levels, the record demonstrates that

NTN’s allocation methodology does not reasonably quantify the

expenses incurred at each level of trade” (citation omitted)).

After having determined that reallocation was necessary,

Commerce properly denied NTN an LOT adjustment. Commerce’s

preliminary decision to grant the adjustment was premised upon

Commerce’s preliminary acceptance of NTN’s allocations, see

Preliminary Result, 61 Fed. Reg. at 25,204. Once Commerce has

determined that NTN’s allocations were inapplicable, the basis for

an LOT adjustment was not present. See Final Results, 63 Fed. Reg.

at 20,609; accord 19 C.F.R. § 353.54 (1994) (“Any interested party

that claims an adjustment [under a particular federal regulation]

must establish the claim to the satisfaction of [Commerce]”).

Because NTN claimed an adjustment pursuant to the particular

regulation, namely, the provision authorizing LOT adjustments, NTN

was obligated to provide Commerce with sufficient information in
Consol. Court No. 98-06-02274 Page 59

support of NTN’s claim. The Court concludes that NTN’s inability

to do so provided Commerce with a reasonable basis to deny NTN an

LOT adjustment.

XIV. COMMERCE ’S APPLICATION OF REVISED INDIRECT SELLING
RATIO TO PURCHASE PRICE SALES

Timken argues that, notwithstanding Commerce's statement in

Commerce's NTN analysis that Commerce intended to apply the revised

indirect selling ratio only to NTN's purchase price sales,

Commerce’s computer program erroneously applied this change to all

of NTN’s sales in the United States sales database (purchase price

and ESP). See Timken’s Reply Commerce at 5. Commerce states that:

(1) while it was Commerce's intent to apply the revised indirect

selling expense ratio only to NTN's purchase sales, Commerce

incorrectly entered certain language outside the proper location;

and (2) the revised ratio was incorrectly applied to all of NTN's

sales. See Def.’s Resp. Timken at 17. Therefore, this issue is

remanded to Commerce to correct the computer program error with

respect to NTN’s sales.

CONCLUSION

The case is remanded to Commerce to: (1) recalculate Koyo’s CV

profit so that Koyo’s home market movement expenses are deducted
Consol. Court No. 98-06-02274 Page 60

from Koyo’s net home market price; (2) recalculate Koyo’s marine

insurance charges using the correct factor indicated by Koyo; (3)

recalculate Koyo’s CV using commission factor provided by Koyo; (4)

recalculate CV direct selling expenses relying on the factor

indicated in Koyo’s questionnaire response; (5) enter necessary

corrections and recalculate pertinent parts of Commerce’s

determination with respect to Koyo’s imports; (6) recalculate

Koyo’s United States inventory carrying costs for final product by

applying the appropriate inventory carrying costs factor reported

by Koyo to the landed cost for the 1992/93 POR and to the COM for

the 1993/94 POR; (7) apply the correct G&A expenses factor in

Commerce’s calculation of NSK’s COP; and (8) correct the computer

program error with respect to NTN’s sales. Commerce's final

determination is affirmed in all other respects.

_________________________
NICHOLAS TSOUCALAS
SENIOR JUDGE

Dated: February 1, 2002
New York, New York