Slip Op. 01-96
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
___________________________________
:
THE TIMKEN COMPANY, :
:
Plaintiff, :
:
v. : Court No. 97-12-02156
:
UNITED STATES, :
:
Defendant, :
:
PEER BEARING COMPANY, :
L & S BEARING COMPANY, :
:
Defendant-Intervenors. :
___________________________________:
Plaintiff, The Timken Company (“Timken”), moves pursuant to
Rule 56.2 of the Rules of this Court for judgment on the agency
record challenging the Department of Commerce, International Trade
Administration’s (“Commerce”) final determination, entitled Final
Results of Antidumping Administrative Review of Tapered Roller
Bearings and Parts Thereof, Finished and Unfinished, From the
People’s Republic of China, 62 Fed. Reg. 61,276 (Nov. 17, 1997).
Timken claims that Commerce erred in: (1) selecting
Indonesian, rather than Indian, import statistics for valuing the
steel inputs and scrap for hot-rolled alloy steel bars used by
Chinese producers to manufacture cups and cones, cold-rolled steel
rods used in the production of rollers, cold-rolled sheet used in
the production of cages and steel scrap; (2) 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 foreign
market value (“FMV”); (3) assuming that Indian direct labor costs
data is equivalent to indirect labor costs data for the calculation
of direct labor factor of production (“FOP”)used to determine FMV;
(4) refusing to use certain Chinese suppliers sales as export price
sales; (5) failing to adjust United States price for marine
insurance costs based on value rather than weight; and (6)
committing a clerical error in the calculation of the weight of the
scrap from one of the Chinese producers.
Court No. 97-12-02156 Page 2
Held: Timken’s motion for judgment on the agency record is
granted in part and denied in part. Case is remanded to Commerce
to: (1) determine direct labor costs without relying on labor hours
and to open the record, if necessary; (2) exclude the “purchases of
traded goods” from its calculation of COM; (3) adjust United States
price by recalculating marine insurance pursuant to a value-based
methodology; and (4) correct clerical errors in the calculation of
the weight of scrap from one of the Chinese producers. Commerce's
final determination is affirmed in all other respects.
[Timken’s motion is granted in part and denied in part. Case
remanded.]
Dated: August 9, 2001
Stewart and Stewart (Terence P. Stewart, James R. Cannon, Jr.
and Amy S. Dwyer) for plaintiff.
Stuart E. Schiffer, Acting Assistant Attorney General; David
M. Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Michele D. Lynch); of counsel:
Rina Goldenberg, Office of the Chief Counsel for Import
Administration, United States Department of Commerce, for
defendant.
Arent Fox Kintner Plotkin & Kahn, PLLC (John M. Gurley and
Jinhee K. Wilde) for Peer Bearing Company, defendant-intervenor.
Cohen Darnell & Cohen, P.L.L.C. (Mark A. Cohen) for L & S
Bearing Company, defendant-intervenor.
OPINION
TSOUCALAS, Senior Judge: Plaintiff, The Timken Company
(“Timken”), moves pursuant to Rule 56.2 of the Rules of this Court
for judgment on the agency record challenging the Department of
Commerce, International Trade Administration’s (“Commerce”) final
determination, entitled Final Results of Antidumping Administrative
Court No. 97-12-02156 Page 3
Review of Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished, From the People’s Republic of China, 62 Fed. Reg.
61,276 (Nov. 17, 1997).
Timken claims that Commerce erred in: (1) selecting
Indonesian, rather than Indian, import statistics for valuing the
steel inputs and scrap for hot-rolled alloy steel bars used by
Chinese producers to manufacture cups and cones, cold-rolled steel
rods used in the production of rollers, cold-rolled sheet used in
the production of cages and steel scrap; (2) 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 foreign
market value (“FMV”); (3) assuming that Indian direct labor costs
data is equivalent to indirect labor costs data for the calculation
of direct labor factor of production (“FOP”); (4) refusing to use
certain Chinese suppliers’ sales as export price sales; (5) failing
to adjust United States price for marine insurance costs based on
value rather than weight; and (6) committing a clerical error in
the calculation of the weight of the scrap from one of the Chinese
producers.
BACKGROUND
The administrative review at issue concerns steel inputs and
Court No. 97-12-02156 Page 4
scrap for hot-rolled alloy steel bars used by Chinese producers to
manufacture cups and cones, cold-rolled steel rods used in the
production of rollers, cold-rolled sheet used in the production of
cages and steel scrap imported from the People’s Republic of China
(“PRC”) during the period of review covering June 1, 1995 through
May 31, 1996.1 Commerce published the preliminary results of the
subject review on July 9, 1997. See Preliminary Results of
Antidumping Administrative Review and Partial Termination of
Administrative Review of Tapered Roller Bearings and Parts Thereof,
Finished and Unfinished, From the People’s Republic of China
(“Preliminary Results”), 62 Fed. Reg. 36,764. On November 17,
1997, Commerce published the Final Results at issue. See 62 Fed.
Reg. 61,276.
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
1
Since the administrative review at issue was initiated after
January 1, 1995, the applicable law is the antidumping statute as
amended by the Uruguay Round Agreements Act, Pub.L. No. 103-465,
108 Stat. 4809 (1994). Compare Torrington Co. v. United States, 68
F.3d 1347, 1352 (Fed. Cir. 1995).
Court No. 97-12-02156 Page 5
an antidumping administrative review, the Court will uphold
Commerce’s determination unless it is “unsupported by substantial
evidence on the record, or otherwise not in accordance with law .
. . .” 19 U.S.C. § 1516a(b)(1)(B)(i) (1994).
I. Substantial Evidence Test
Substantial evidence is “more than a mere scintilla. It means
such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.” Universal Camera Corp. v. NLRB,
340 U.S. 474, 477 (1951) (quoting Consolidated Edison Co. v. NLRB,
305 U.S. 197, 229 (1938)). Substantial evidence “is something less
than the weight of the evidence, and the possibility of drawing two
inconsistent conclusions from the evidence does not prevent an
administrative agency’s finding from being supported by substantial
evidence.” Consolo v. Federal Maritime Comm’n, 383 U.S. 607, 620
(1966) (citations omitted). Moreover, “[t]he court may not
substitute its judgment for that of the [agency] when the choice is
‘between two fairly conflicting views, even though the court would
justifiably have made a different choice had the matter been before
it de novo.’” American Spring Wire Corp. v. United States, 8 CIT
20, 22, 590 F. Supp. 1273, 1276 (1984) (quoting Penntech Papers,
Inc. v. NLRB, 706 F.2d 18, 22-23 (1st Cir. 1983) (quoting, in turn,
Universal Camera, 340 U.S. at 488)).
Court No. 97-12-02156 Page 6
II. Chevron Two-Step Analysis
To determine whether Commerce’s interpretation and application
of the antidumping statute is “in accordance with law,” the Court
must undertake the two-step analysis prescribed by Chevron U.S.A.
Inc. v. Natural Resources Defense Council, Inc. (“Chevron”), 467
U.S. 837 (1984). Under the first step, the Court reviews
Commerce’s construction of a statutory provision to determine
whether “Congress has directly spoken to the precise question at
issue.” Id. at 842. “To ascertain whether Congress had an
intention on the precise question at issue, [the Court] employ[s]
the ‘traditional tools of statutory construction.’” Timex V.I.,
Inc. v. United States, 157 F.3d 879, 882 (Fed. Cir. 1998) (citing
Chevron, 467 U.S. at 843 n.9). “The first and foremost ‘tool’ to
be used is the statute’s text, giving it its plain meaning.
Because a statute’s text is Congress’s final expression of its
intent, if the text answers the question, that is the end of the
matter.” Id. (citations omitted). Beyond the statute’s text, the
tools of statutory construction “include the statute’s structure,
canons of statutory construction, and legislative history.” Id.
(citations omitted); but see Floral Trade Council v. United States,
23 CIT ___,___ 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).
Court No. 97-12-02156 Page 7
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 Dep’t of Commerce, 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 ___, ___, 15 F. Supp. 2d 807, 813 (1998).
Court No. 97-12-02156 Page 8
III. Mead-Christensen-Skidmore Test
“[A]dministrative implementation of a particular statutory
provision qualifies for Chevron deference when it appears that
Congress delegated authority to the agency generally to make rules
carrying the force of law, and that the agency interpretation
claiming deference was promulgated in the exercise of that
authority.” United States v. Mead Corp., 121 S. Ct. 2164, 2171
(2001). “Delegation of such authority may be shown in a variety of
ways, as by an agency’s power to engage in adjudication or notice-
and-comment rulemaking, or by some other indication of a comparable
congressional intent.” Id. If the
agency’s generally conferred authority and other
statutory circumstances [imply] that Congress would
expect the agency to be able to speak with the force of
law when it addresses ambiguity in the statute or fills
a space in the enacted law, even one about which
“Congress did not actually have an intent” as to a
particular result[,] . . . a reviewing court has no
business rejecting an agency’s exercise of its generally
conferred authority to resolve a particular statutory
ambiguity simply because the agency’s chosen resolution
seems unwise . . . .
Id. at 2172 (citing Chevron, 467 U.S. at 845-46).
“It is fair to assume generally that Congress contemplates
administrative action with the effect of law when it provides for
a relatively formal administrative procedure tending to foster the
fairness and deliberation that should underlie a pronouncement of
such force.” Id. (citations omitted). The want of notice-and-
Court No. 97-12-02156 Page 9
comment rulemaking or formal adjudication, however, “does not alone
. . . bar the application of Chevron.” Id. at 2173. Courts “have
sometimes found reasons for Chevron deference even when no such
administrative formality was required and none was afforded.”2 Id.
(citations omitted).
Absent congressional intent to delegate general authority to
make rules with the force of law, agency “rulings are treated . .
. like ‘interpretations contained in policy statements, agency
manuals, and enforcement guidelines’” that do not warrant the
Chevron deference. Id. at 2175 (quoting Christensen, 529 U.S. at
587). A reference to such agency statements neither creates
precedential value nor does it create Chevron entitlement; while
such statements may sometimes function as precedents, “they enjoy
no Chevron status as a class.” Id. at 2174.
Even placed outside of the Chevron realm, “an agency’s
2
Similarly, “an agency’s interpretation of its own
regulation[s] is entitled to deference” when the language of the
regulation is ambiguous or the regulation is silent about the issue
at hand. Christensen v. Harris County, 529 U.S. 576, 588 (2000)
(citing Auer v. Robbins, 519 U.S. 452, 461 (1997)); Southern Cal.
Edison Co. v. United States, 226 F.3d 1349, 1356 (Fed. Cir. 2000)
(detailing the test and quoting Martin v. Occupational Safety and
Health Review Comm’n, 499 U.S. 144, 151 (1991)). When the
regulation is not ambiguous, however, to defer to a different
agency’s position would be to permit the agency, under the guise of
interpreting a regulation, to create de facto a new regulation.
See id.
Court No. 97-12-02156 Page 10
interpretation [of a statutory provision] may merit some deference
. . . given the ‘specialized experience and broader investigations
and information’ available to the agency . . . and given the value
of uniformity in its administrative and judicial understandings of
what a national law requires.” Id. at 2175 (quoting Skidmore v.
Swift & Co., 323 U.S. 134, 139-40 (1944)). “Where the regulatory
scheme is highly detailed, and [an agency] can bring the benefit of
specialized experience to bear on the subtle questions,” such
interpretations are entitled to respect “proportional to [their]
‘power to persuade’”. Id. at 2175-76 (quoting Skidmore, 323 U.S.
at 140). “The fair measure of [judicial] deference to an agency
administering its own statute has been understood to vary with
circumstances, and courts have looked to the degree of the
agency’s care, its consistency, formality, and relative expertness,
and to the persuasiveness of the agency’s position.” Id. at 2171
(citing Skidmore, 323 U.S. at 139-40). Well-reasoned views of the
agencies implementing a statute “‘constitute a body of experience
and informed judgment to which courts and litigants may properly
resort for guidance . . . .’” Id. (quoting Bragdon v. Abbott, 524
U.S. 624, 642 (1998) (internal quotation omitted)).
“‘[C]onsiderable weight should be accorded to an [agency’s]
construction of a statutory scheme it is entrusted to administer .
. . .’” Id. (quoting Chevron, 467 U.S. at 844). “‘The weight
Court No. 97-12-02156 Page 11
[accorded to an administrative] judgment in a particular case will
depend upon the thoroughness evident in its consideration, the
validity of its reasoning, its consistency with earlier and later
pronouncements, and all those factors which give it power to
persuade, if lacking power to control.’” Id. at 2172 (quoting
Skidmore, 323 U.S. at 140, brackets in original).
DISCUSSION
A. Commerce’s Selection of Indonesian Import Statistics as a
Surrogate Value for Raw-Material Costs of Steel Used by
Chinese Producers
1. Background
Antidumping margins are the difference between normal value
("NV") and United States price of the merchandise. When the
merchandise is produced in a nonmarket 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).
Court No. 97-12-02156 Page 12
The statute does not define the phrase "best available
information,” it only provides that
[Commerce], in valuing factors of production[,] . . . shall
utilize, to the extent possible, the prices or costs of
factors of production in one or more market economy countries
that are[:] (A) at a level of economic development comparable
to that of the nonmarket economy country, and (B) significant
producers of comparable merchandise.
19 U.S.C. § 1677b(c)(4) (1994) (emphasis supplied).
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, 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 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
Court No. 97-12-02156 Page 13
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., Final Results of
Antidumping Duty Administrative Review and Revocation in Part of
Antidumping Duty Order on Tapered Roller Bearings and Parts
Thereof, Finished and Unfinished, From the People’s Republic of
China, 62 Fed. Reg. 6189, 6193 (Feb. 11, 1997); Final Results of
Antidumping Duty Administrative Reviews of Tapered Roller Bearings
and Parts Thereof, Finished and Unfinished, From the People’s
Republic of China, 61 Fed. Reg. 65,527, 65,532-33 (Dec. 13, 1996);
Notice of Final Determination of Sales at Less Than Fair Value:
Certain Partial-Extension Steel Drawer Slides with Rollers From the
People’s Republic of China, 60 Fed. Reg. 54,472, 54,476 (Oct. 24,
1995); 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 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
Court No. 97-12-02156 Page 14
country, Indonesia. See Preliminary Results, 62 Fed. Reg. at
36,769. Commerce explained that it decided to use secondary
surrogate data for two reasons: (1) Commerce determined that steel
values contained in the Indian import data were not reliable, see
Def.’s Mem. Opp. Pl.’s Mot. J. Agency R. (“Def.’s Mem.”), Ex. 4;
and (2) Commerce was unable to isolate Indian import value for
bearing-quality steel used to manufacture the merchandise at issue.
See Final Results, 62 Fed. Reg. at 61,283.
Commerce reached the determination that steel values contained
in Indian import data were not reliable after comparing Indian
statistics with other information on the record, the information
specifically isolating bearing-quality steel used to manufacture
the intended merchandise, that is, United States import data under
tariff categories 7228.30.20.00, 7228.50.10.10, and 7209.42.00.00.
See Def.’s Mem., Ex. 4. Because the comparison revealed that the
average values of steel included in the corresponding Indian import
categories were significantly higher than the average values of
bearing-quality steel imported into the United States, Commerce
concluded that steel values contained in the Indian import data
were not reliable. See id.
Court No. 97-12-02156 Page 15
Commerce concluded that it was unable to isolate Indian import
value for bearing-quality steel used to manufacture cups and cones
because Commerce believed that while bearing-quality steel used to
manufacture cups and cones was most likely to be contained in
Indian broader category 7228.30, Commerce found no eight-digit
Indian sub-category specific to this particular type of steel. See
id. Commerce also determined that data from a more specific Indian
category, that is, sub-category 7228.30.19, was similarly
unreliable because the steel in the sub-category was valued too
highly to be considered a reliable indicator of the price of
bearing-quality steel. See id. Additionally, Commerce concluded
that it had no information concerning what sub-category 7228.30.19
contained and that none of the parties in the proceeding suggested
that the sub-category specifically isolated bearing-quality steel.
See id.
After reaching these conclusions, Commerce decided to use some
import data from a secondary surrogate country. See Final Results,
62 Fed. Reg. at 61,283. Of the five potential surrogate countries
that Commerce identified as being at a comparable level of economic
development to the PRC, Commerce found that only India and
Indonesia exported bearings during the pertinent period of time.
See Def.’s Mem., Ex. 4. Commerce conducted further research and
Court No. 97-12-02156 Page 16
identified two Indonesian bearings producers operating in 1995.
See id. Consequently, Commerce concluded that Indonesia was a
significant producer of merchandise comparable to that at issue for
purposes of the surrogate country selection. See id. Commerce
also noted that when compared to United States bearing-quality
steel import data, Indonesian values closely approximated those of
the United States. See id. In light of the above findings,
Commerce decided to
use[] import data from another surrogate country,
Indonesia, a producer of merchandise comparable to [that
at issue], to value steel used to produce these
components. As with the Indian data, [Commerce was]
unable to isolate the value of bearing-quality steel or
identify an eight-digit category containing such steel
imported into Indonesia; however, unlike the Indian data,
the Indonesian six-digit category is consistent with the
value of [United States] imports of bearing-quality steel
under the comparable six-digit category in the United
States, which specifically includes bearing-quality
steel.
Final Results, 62 Fed. Reg. at 61,283.
2. Contentions of the Parties
Commerce maintains that its determination and the underlying
analyses were reasonable and in accord with the mandate of 19
U.S.C. § 1677b(c) and the level of discretion afforded to Commerce
by Chevron, 467 U.S. 837. Specifically, Commerce points out that:
Court No. 97-12-02156 Page 17
(1) Commerce properly relied on FOPs from two different surrogate
sources; (2) Commerce reasonably concluded that Indonesia could
serve as a surrogate country for the purposes of import valuation
of the merchandise at issue; (3) Commerce’s decision to reject
Indian import values was supported by substantial evidence, see
Def.’s Mem. at 14-21; (4) Commerce’s comparison of Indian import
values to those of United States was not a sole factor for
Commerce’s determination, see id. at 17 n.4; and (5) Commerce
properly conducted the comparison in view of the interpretation of
19 U.S.C. § 1677b(c) offered by Peer Bearing Co. v. United States,
22 CIT 472, 12 F. Supp. 2d 445 (1998). See Def.’s Mem. at 18.
Timken reads Commerce’s determination as a statement that
Commerce relied on Indonesian data solely because Commerce asserted
that: “(1) Indonesian steel import values approximated [United
States] values[;] (2) Indonesian and [United States] values were
below Indian values[; and, (3) in view of the foregoing,] it was
reasonable to conclude that Indian values were unreliable.” Pl.’s
Reply Br. at 2. Timken consequently maintains that Commerce’s
determination based on the argument was arbitrary because nowhere
did Commerce “establish a basis for concluding that United States
import prices for any category of steel should be considered a
benchmark against which to measure the reliability of Indian
Court No. 97-12-02156 Page 18
statistics.” Id. at 2 (emphasis omitted), see also id. at 5.
Moreover, Timken asserts that the fact that Indian import values
were on average higher that United States or Indonesian import
values established nothing of relevance to the review at issue.
Id. at 3-7.
Next, Timken claims that Commerce’s resort to Indonesian data
was not warranted because the record shows “the lack of evidence
demonstrating that Indonesia was a significant producer of bearings
during the period of review.” Mem. P.& A. Supp. Pl.’s Mot. J.
Agency R. (“Pl.s Mem.”) at 35 n.9.
Additionally, Timken points out that Commerce violated its own
“strong preference to calculate [] normal value in NME cases based
on factor values from a single surrogate source.” Id. at 32-35
(emphasis in original, citing to Peer Bearing, 22 CIT 472, 12 F.
Supp. 2d 445; Tianjin, 16 CIT at 940, 806 F. Supp. at 1017-18;
Final Results of Antidumping Duty Administrative Review of
Industrial Nitrocellulose from the People’s Republic of China, 62
Fed. Reg. 65,667, 66,668 (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 ANTIDUMPING MANUAL 65-66 (Dept. Of Commerce, July
Court No. 97-12-02156 Page 19
1994)). Timken further asserts that the holding of Peer Bearing,
22 CIT 472, 12 F. Supp. 2d 445, cannot serve as a precedent for
the determination at issue because: (1) the factual record before
the Court in Peer Bearing did not include the evidence analogous to
that on the record at the review at issue; and (2) the holding of
Peer Bearing does not support Commerce’s decision to reject Indian
import values as unreliable. See Pl.’s Reply Br. at 7-10.
Peer Bearing Company (“Peer Bearing”), the defendant-
intervenor in this action,3 supports Commerce’s position and
alleges that Commerce’s determination was reasonable because: (1)
Commerce specifically found that Indonesia was a significant
producer of the merchandise at issue; and (2) Commerce’s resort to
the data from a secondary surrogate was in accordance with law.
See Resp. Def.-Intervenor Pl.’s Mot. J. Agency R. (“Peer Bearing’s
Resp.”) at 3, 5, 6-9. Peer Bearing asserts that Timken overstated
the strength of Indian data and downplayed the extent to which the
Indian data was unreliable. See id. at 6-9. In addition, Peer
Bearing maintains that Peer Bearing, 22 CIT 472, 12 F. Supp. 2d
445, is a controlling precedent for the determination at issue.
3
L & S Bearing Company has intervened in this action but did
not file a motion for judgment upon the agency record and
supporting brief.
Court No. 97-12-02156 Page 20
3. Analysis
a. Court Deference
i. Chronologically Consecutive
Pronunciations by Commerce
Between two incompatible agency statements, as with
conflicting statutory authorities, the later one is controlling
over the earlier one. Cf. FDA v. Brown & Williamson Tobacco Corp.,
529 U.S. 120, 143 (2000). This rule of construction was a part of
our legal system from the time immemorial.
If two inconsistent acts be passed at different times,
the last . . . is to be obeyed, and if obedience cannot
be observed without derogating from the first, it is the
first which must give way. Every act of [government]
must be considered with reference to the state of the law
subsisting when it came into operation, and when it is to
be applied; it cannot otherwise be rationally construed.
Every act is made, either for the purpose of making a
change in the law, or for the purpose of better declaring
the law, and its operation is not to be impeded by the
mere fact that it is inconsistent with some previous
enactment.
Becker Prods. Co. v. State Tax Comm’n, 58 P.2d 36, 38-39 (Utah
1936) (quoting POTTER'S DWARRIS ON STATUTES AND CONSTITUTIONS 155).
The same mode is applicable to agency pronunciations and the
ensuing court reviews under the test posed by Chevron. Because the
Court is obligated to sustain an agency interpretation and
implementation of a statutory mandate if such agency action is
Court No. 97-12-02156 Page 21
reasonable and supported by substantial evidence, see IPSCO, 965
F.2d at 1061; Koyo Seiko, 36 F.3d at 1570; Negev Phosphates, 12 CIT
at 1077, 699 F. Supp. at 942, it follows that this level of
deference is due to each action by the agency and irrelevant to
whether the Court upheld a prior conflicting agency action under
the very same test. See generally, Chevron, 467 U.S. at 844-45.
Consequently, between two reasonable yet conflicting agency
determinations, each taken with compatible levels of formality, the
later one controls and the Court is obligated to sustain it.
Accord Mead, 121 S. Ct. at 2173.
It makes no difference if the prior pronunciation by the
agency was reduced to a manual, a form of agency action afforded no
judicial deference and serving as no precedent. See id., 121 U.S.
at 2174, Skidmore, 323 U.S. at 139-40. The mere fact that an
agency pronunciation was reduced to some written form, that is, a
form which is afforded no court deference under Skidmore, 323 U.S.
at 139-40, can neither disturb nor outweigh the deference owed by
the Court to a subsequent reasonable agency pronunciation under
Chevron test, even if the subsequent pronunciation conflicts with
the previous one. The foregoing, however, does not mean that the
Court should not examine the validity of the policy causing the
change or the soundness of the newly-employed methodology.
Court No. 97-12-02156 Page 22
ii. 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, 226 F.3d at
1357. “‘The power of an administrative agency to administer a
congressionally created . . . program necessarily requires the
formulation of policy . . . .’” See 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
Court No. 97-12-02156 Page 23
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.
Moreover, “‘[a]n [agency] announcement stating a change in the
method . . . is not a general statement of policy.’” American
Trucking Ass’ns, Inc. v. ICC, 659 F.2d 452, 464 n.49 (5th Cir. 1981)
(quoting Brown Express, Inc. v. United States, 607 F.2d 695, 701
(5th Cir. 1979) (internal quotations omitted)). While a policy
“denotes . . . [the] general purpose [of the statute] considered as
directed to the welfare or prosperity of the state,” BLACK’S LAW
DICTIONARY 1157 (6th ed. 1990), methodology refers only to the
Court No. 97-12-02156 Page 24
“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 Co. v. Train, 537 F.2d 620 (2d Cir.
1976). Consequently, 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, 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 the
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)).
b. Commerce’s Determination at Bar
The statute permits Commerce to draw surrogate value
Court No. 97-12-02156 Page 25
information from more than one market economy country. See 19
U.S.C. § 1677b(c)(1) (stating that Commerce may derive FOPs from
“countries considered to be appropriate,” emphasis supplied).
While Timken stresses the reference in 19 C.F.R. § 353.52(c) (1997)
to “a” market economy country, see Def.’s Mem. at 33, the mere use
of the singular article cannot mean that all factors be valued on
the basis of the data from a single surrogate country.4 See
Chemical Prods. Corp. v. United States, 10 CIT 700, 706, 650 F.
Supp. 178, 182 (1986) (“The regulation is silent concerning whether
Commerce may use data from a country other than its designated
surrogate when Commerce finds that a comparison of one element of
foreign market value in the surrogate would yield an unrealistic
result.”)
Commerce's Antidumping Manual, which Timken cites in support
of its assertion that there is a strong preference for using a
single surrogate country, in fact implies that Commerce could
utilize data from more than one surrogate country where it is
necessary to obtain reliable information. Specifically, Commerce's
Antidumping Manual provides that to the extent it is possible,
Commerce should endeavor to rely on the information from: (1) the
4
See supra note 2 and accompanying text for discussion of the
level of deference given to an agency’s interpretation of its own
regulation.
Court No. 97-12-02156 Page 26
first choice surrogate country; or (2) a single surrogate country.
See Peer Bearing’s Resp. at 7. This language parallels that of the
statute which provides that Commerce “shall utilize, to the extent
possible, the prices or costs of factors of production in one or
more market economy countries . . . .” 19 U.S.C. § 1677(c)(4)
(emphasis supplied).
Because the statute and the manual both suggest that Commerce
should rely on data from the “first choice surrogate country” only
to the extent possible, it is logical to conclude that, where it is
not possible, Commerce is entitled to rely on data from other
surrogate countries. The manual further explains that:
[I]f there is [however,] no reliable information from the
first choice surrogate country for particular factor,
[Commerce] will attempt to use [reliable information]
from the second choice surrogate country, and so on. In
this way, [Commerce] will maintain the dual hierarchy of
valuing factors of production following the preferred
order of surrogate countries as recommended by
[Commerce’s] Office of Policy . . . .
Peer Bearing’s Resp. at 8 (quoting ANTIDUMPING MANUAL 65, emphasis in
quotation); accord Timken Co. v. United States, 23 CIT ___, ___, 59
F. Supp. 2d 1371, 1376 (1999) (stating that “‘[t]he statute does
not require Commerce to follow any single approach in evaluating
data’” and quoting Olympia Indus., Inc. v. United States, 21 CIT
364, 368 (1997) (quoting, in turn, Lasko Metal Prods., 43 F.3d at
Court No. 97-12-02156 Page 27
1446)).
Commerce’s decision to incorporate Indonesian data did not
conflict with Commerce’s methodology as announced in Commerce’s
manual. Moreover, the change of the mode from the use of a single
surrogate datum to the use of multiple surrogate data cannot be
found unreasonable simply on the basis that the prior methodology,
advocating the preference for a single surrogate datum, was reduced
to writing in Commerce’s manual. See Chevron, 467 U.S. at 844;
compare Skidmore, 323 U.S. at 140. Considering that the goal of
Commerce’s policy has not changed, see Air Prods. and Chems., Inc.
v. United States, 22 CIT 433, 435, 14 F. Supp. 2d 737, 741 (1998)
(stating that the goal of Commerce’s FOPs methodologies should be
“to construct the product's price . . . using the best information
available regarding surrogate values,” emphasis suppled, citation
omitted); Olympia Indus., Inc. v. United States, 22 CIT 387, 390,
7 F. Supp. 2d 997, 1000 (1998) (pointing out that “accuracy is the
touchstone of the antidumping statute” and citing Rhone Poulenc,
Inc. v. United States, 899 F.2d 1185, 1191 (Fed. Cir. 1990)), the
remaining issue is only whether Commerce’s current methodology is
reasonable. See Chevron, 467 U.S. at 844-45; Koyo Seiko, 36 F.3d
at 1570.
Because there is “[n]othing in the antidumping statute or its
Court No. 97-12-02156 Page 28
legislative history mandat[ing] that Commerce must derive [the
information] from surrogate-based values according to a certain
methodology,” Timken, 23 CIT at ___, 59 F. Supp. 2d at 1376
(citation omitted), and in view of Commerce’s discretion to draw
surrogate value information from more than one market economy
country, see 19 U.S.C. § 1677b(c)(1), it was “within Commerce’s
authority to use India as a primary surrogate in conjunction with
Indonesian values . . . .” Timken, 23 CIT at ___, 59 F. Supp. 2d
at 1367.
With respect to Timken’s challenge to Commerce’s decision to
use Indonesian values, the Court finds that Timken is assailing not
Commerce’s methodology but rather the result reached by Commerce,
which is outside the Court’s standard of review. See Writing
Instrument Mfrs. Ass’n, Pencil Section v. United States, 21 CIT
1185, 1195, 984 F. Supp. 629, 639 (1997). Commerce conducted
research and identified two substantial Indonesian bearings
producers operating in 1995, on the basis of which Commerce
concluded that Indonesia was a significant producer of merchandise
comparable to that at issue for purposes of the surrogate country
selection. See Def.’s Mem., Ex. 4. The Court is not in the
position to declare such a conclusion unreasonable. See Chevron,
467 U.S. at 845.
Court No. 97-12-02156 Page 29
Next, 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 for valuing the merchandise at issue.
The Court has found in prior cases that comparing surrogate data to
that of market economy to determine the reliability of such
surrogate data is within “‘Commerce’s statutory authority and
consistent with past practice.’” Peer Bearing, 22 CIT at 481, 12
F. Supp. 2d at 455 (quoting Writing Instrument Mfrs. Ass’n, 21 CIT
at 1195, 984 F. Supp. at 639 (upholding use of United States
benchmark as a point of comparison for two possible surrogate
values and quoting, in turn, Olympia Indus., Inc., 21 CIT at 369
(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 id.
(citing 19 U.S.C. § 1677b(c)(1), (4)).
Finally, Commerce could reasonably find Indian data unreliable
because Commerce has never adopted a numerical standard for
identifying aberrational or questionable data and has properly
exercised its statutory discretion by determining what information
to use for valuing FOPs on a case-by-case basis. Moreover,
Commerce has in other cases rejected as unsuitable surrogate data
Court No. 97-12-02156 Page 30
which varied from a benchmark to a much lesser extent than in this
particular case. See, e.g., Final Determination of Sales at Less
Than Fair Value: Circular Welded Non-Alloy Steel Pipe From Romania,
57 Fed. Reg. 42,957, 42,958 (Sept. 17, 1992).
B. Commerce’s Reliance on SKF India’s Data in
Commerce’s Determination of General Expenses and Profit
1. Background
While Commerce prefers to base FOPs information on industry-
wide public information, Commerce found that information regarding
overhead and SG&A rates for producers of subject merchandise during
the period of review was not available. See Final Results, 62 Fed.
Reg. at 61,287.
Section 1677b(c)(1) of Title 19 requires Commerce to
“determine [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.” 19 U.S.C.
§ 1677b(c)(1). 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
Court No. 97-12-02156 Page 31
regarding the values of such factors in a market economy country or
countries considered to be appropriate by [Commerce].” Id.
Section 1677b(c)(4) of Title 19 provides that, in valuing FOPs
under paragraph (1) of section 1677b(c), Commerce “shall utilize,
to the extent possible, the prices or costs of [FOPs] in one or
more market economy countries . . . .” 19 U.S.C. § 1677b(c)(4)
(1).
Commerce has interpreted the “best available information” and
“the extent possible” language contained in 19 U.S.C. §§
1677b(c)(1) and (4) as applicable to the calculation of the amount
for general expenses and profit that is to be added to the FOPs
referenced in paragraph (1) of section 1677b(c). See Def.’s Mem.
at 22 (pointing out that Congress did not specify the exact
methodology of how the amount for the general expenses and profit
are to be calculated in the case of an NME country and citing
Springfield Indus. Corp. v. United States, 842 F.2d 1284, 1285
(Fed. Cir. 1988) (citing, in turn, Chevron, 467 U.S. at 843-44,
865-66)).
Applying this interpretation during the review at issue,
Commerce concluded that an appropriate surrogate for determining
general expenses and profit was SKF India, an Indian producer of
merchandise similar to the imported merchandise at issue.
Court No. 97-12-02156 Page 32
Consequently, Commerce determined overhead, SG&A, and profit rates
from the information contained in SKF India’s financial report.
See Def.’s Mem., Ex. 3; Final Results, 62 Fed. Reg. at 61,287.
Specifically, Commerce calculated the ratio of SKF India's overhead
costs to its cost of manufacturing (“COM”), that is, the cost of
materials plus labor, and explained that
[i]n deriving these rates, [Commerce] used the SKF data
both with respect to the numerators (total overhead and
SG&A expenses, respectively) and denominator (total cost
of manufacturing). This methodology allowed [Commerce]
to derive internally consistent ratios of SKF India's
overhead and SG&A expenses. These ratios, when
multiplied by the factors of production [Commerce] used
in [Commerce’s] analysis, constitute[d] the best
available information concerning the overhead and SG&A
expenses that would be incurred by a PRC bearings
producer given such factors of production.
Final Results, 62 Fed. Reg. at 61,287.
Commerce applied these ratios to the surrogate values
consisting of Indonesian and Indian import data. See Peer
Bearing’s Resp. at 4.
2. Contentions of the Parties
Timken argues that, since SKF India’s operation involves the
purchasing from subcontractors, SKF India's cost of materials is
higher and overhead costs are lower than those of a producer that
Court No. 97-12-02156 Page 33
itself manufactures the merchandise. See Pl.’s Mem. at 43-45.
Because the PRC producers subject to the review manufacture the
merchandise themselves, Timken concluded that their materials and
overhead costs are not similar to those of SKF India. See id.
Timken maintains that since Commerce did not use SKF India’s report
to value all FOPs, it should adjust overhead and SG&A rates to
reflect the use of lower-value materials and higher overhead costs
of the Chinese producers. See id. Timken asserts that the
inclusion of SKF India's full materials and labor costs in the COM
denominator creates a distortive result unless this data is also
the basis for valuing the materials and direct labor factors in the
constructed value calculation. See id.; Final Results, 62 Fed.
Reg. at 61,287.
Commerce maintains that the methodology used allowed Commerce
to derive internally consistent ratios of SKF India's overhead and
SG&A expenses. See Final Results, 62 Fed. Reg. at 61,287.
Commerce contends that doing otherwise, that is, adjusting the
underlying values of SKF India, would create a result no longer
representative of SKF India's costs. See id. Specifically,
Commerce pointed out that
Timken's recommended adjustment would reduce the
denominator but would leave the overhead and SG&A
expenses in the numerator unchanged. As such, [Commerce]
find[s] that this adjustment would itself distort the
Court No. 97-12-02156 Page 34
resulting ratio, rather than cure the alleged distortion
in [Commerce’s] calculations.
Id.
Peer Bearing supports Commerce’s conclusion and states that
“Timken's assertion that the application of the
overhead/SG&A/profit ratios (derived from SKF India) to the
material and labor costs (derived from other sources) ‘mixes apples
and oranges’ and is incorrect.’” Peer Bearing’s Resp. at 13. Peer
Bearing maintains that Commerce's application of ratios for
overhead, SG&A and profit derived from one source to COM values
derived from another one is consistent with Commerce’s practice in
other NME cases, see id. at 12 (citing Final Results and Rescission
in Part of Antidumping Duty Administrative Review of Tapered Roller
Bearings and Parts Thereof, Finished or Unfinished, From the
Republic of Romania, 61 Fed. Reg. 51,427, 51,429 (Oct. 2, 1996);
Preliminary Determination of Sales at Less Than Fair Value:
Coumarin From the People's Republic of China, 59 Fed. Reg. 39,727,
39,729 (August 4, 1994), and points out that the adjustment
suggested by Timken was never performed by Commerce.
Court No. 97-12-02156 Page 35
3. Analysis
“In the absence of a statutory mandate to the contrary,
Commerce’s actions must be upheld as long as they are reasonable.”
Timken, 23 CIT at ___, 59 F. Supp. 2d at 1377; see also Chevron,
467 U.S. at 844-45. Specifically, 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 id.; see also Peer Bearing, 22 CIT at 481-82, 12
F. Supp. 2d at 456.
While Timken states that it finds Commerce’s mode of
calculation imperfect, see Pl.’s Mem. at 44, Timken provides this
Court with neither an explanation of why this mode is unreasonable
nor offers a viable methodology for: (1) detecting the difference
between Chinese and SKF India’s overhead and material costs; or (2)
adjusting SKF India’s overhead and SG&A ratios. See id. at 43-45.
Indeed, it is not enough to state that “the agency[] [is operating
under] statutory mandate to ‘reach the most accurate result,’” in
order to label an agency determination unreasonable. Id. at 45,
compare Olympia Indus., 22 CIT at 390, 7 F. Supp. 2d at 1001
(finding Commerce’s determination unreasonable where “Commerce[,]
[under] an obligation to review all data and then determine what
constitutes the best information available or, alternatively, to
Court No. 97-12-02156 Page 36
explain why a particular data set is not methodologically
reliable,” failed to do so).
“Commerce attempted to capture in its rate calculation the
surrogate company’s experience in incurring overhead and SG&A
expenses,” Def.’s Mem. at 24, and created a reasonable internally
consistent ratio that does not violate the boundaries set by 19
U.S.C. § 1677b(c) (1994). The fact that one of the actual
parameters is likely to be higher while the other one is likely to
be lower than the corresponding data derived from the records of
SKF India means that neither Commerce’s methodology shall be
deprived of this Court’s deference, nor does it constitute
sufficient grounds for 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 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 488)).
Court No. 97-12-02156 Page 37
C. Commerce’s Use of Direct and Indirect Labor Rates
1. Commerce’s Refusal to Isolate Direct Labor Component of
SKF India’s Costs in Commerce’s Calculation of SKF
India’s Overhead, SG&A and Profit.
a. Background
In order to calculate overhead, SG&A and profit ratios based
on SKF India’s data, Commerce relied on SKF’s COM designated in SKF
India’s 1995-96 financial statement based on both direct and
indirect labor expenses. See Final Results, 62 Fed. Reg. at
61,288. Commerce proceeded with the calculation of overhead that
incorporated both direct and indirect labor costs. Commerce
explained that Commerce
calculate[d] an overhead-to-COM ratio by dividing SKF's
total overhead expense by the sum of SKF's total
materials, direct labor, indirect labor, and overhead
expenses from its annual report. [Commerce] calculate[d]
the COM component of constructed value for subject
merchandise by summing direct material expense, direct
labor expense, indirect labor expense, and overhead
expense. However, while [Commerce knew] the direct
material expense, direct labor expense, and indirect
labor expense of the subject merchandise, [Commerce did]
not know the overhead expense of the subject merchandise.
Therefore, in order to calculate the COM component of
constructed value for subject merchandise, [Commerce had
to] substitute a surrogate for overhead expense.
[Commerce] calculate[d] this surrogate overhead expense
by multiplying COM by the overhead-to-COM ratio
[Commerce] calculated using SKF India's data. This
substitution le[ft] COM as the sole unknown factor.
Therefore, [Commerce] solve[d] for COM using the direct
material expense, direct labor expense, indirect labor
expense, and the overhead-to-COM ratio. Because both
direct and indirect labor figures [we]re part of this
Court No. 97-12-02156 Page 38
calculation, [Commerce did] not need to adjust for the
fact that both direct and indirect labor [we]re included
in SKF India's labor expense in [Commerce’s] calculation
of the overhead-to-COM ratio. Therefore, there [wa]s no
need to segregate the direct-labor component from SKF's
financial statements in order to calculate the percentage
because [Commerce did] not use only direct labor expense
in our calculations.
Id. (emphasis supplied).
b. Contentions of the Parties
Timken contends that Commerce should have isolated and used
SKF India’s direct labor costs only in Commerce’s calculation
because the inclusion of indirect labor costs in the denominator of
the formula resulted in an understatement of SKF India’s rates.
See Pl.’s Mem. at 46-47. Timken points out that Commerce failed to
collect any information enabling Commerce to determine direct labor
costs, see Pl.’s Reply at 18-19, effectively rewarding respondents
for failing to provide such data, see id. at 17-18, and abrogating
Commerce’s “duty to calculate dumping margins as accurately as
possible.” Pl.’s Mem. at 47 (citing Olympia Indus. 22 CIT at 390,
7 F. Supp. 2d at 1000).
Commerce maintains that it “did not need to isolate indirect
labor cost from SKF India’s data,” Def.’s Mem at 28, because “‘both
direct and indirect labor figures are part of th[e] calculation .
Court No. 97-12-02156 Page 39
. . .’” Id. at 27-28 (quoting Final Results, 62 Fed. Reg. at
61,288).
c. Analysis
Timken is correct in pointing out that Commerce is under a
“duty to calculate dumping margins as accurately as possible.”
Def.’s Mem. at 47 (citing to Olympia Indus. 22 CIT at 390, 7 F.
Supp. 2d at 1000). While this statement implied that Commerce is
under the obligation to seek and use the best information
available, it does not mean that Commerce is bound to any
particular mode of collecting such information. See, e.g., Floral
Trade Council v. United States, 17 CIT 1417, 1418-19 (1993)
(explaining that “the burdens on the requester are those caused by
the mechanics of triggering the review that is actually desired.
In practical terms, these burdens should be minimal”).
In the case at hand, Commerce, faced with a multitude of
unclear and questionable data, see Pl.’s Reply at 18-19, determined
a ratio that minimized the error (that ensued from the use of
imperfect statistics) by including “both direct and indirect labor
figures [as] part of th[e] calculation . . . .” Def.’s Mem. at 28
(quoting Final Results, 62 Fed. Reg. at 61,288).
Court No. 97-12-02156 Page 40
Timken seems to be under the impression that Commerce is bound
to Commerce’s practice of “bas[ing] its cost calculations on the
[COM] which includes . . . direct [but not indirect] labor.” Pl.’s
Mem. at 46 (citing CHRISTIAN MARSH, USE AND MEASUREMENT OF PRODUCTION COSTS
UNDER U.S. ANTIDUMPING LAW 21 (1995)). This assumption is incorrect.
While Commerce might strive for a calculation based solely on
direct labor costs, an internally consistent formula that minimizes
the error by the usage of the same imperfect data in the formula’s
numerators and denominator presents a reasonable alternative. See
generally, Chevron, 467 U.S. at 844-45. Consequently, Commerce
could choose one reasonable mode of calculating or collecting the
best information available over another mode. See id.; see also
supra discussion in Part A(3)(a)(ii) (addressing agency’s
prerogative to choose a reasonable method or alter its policies and
goals). Based on the foregoing, the Court finds Commerce’s
decision to calculate COM on the basis of both direct and indirect
labor costs in accordance with law.
2. Commerce’s Calculation of SKF India’s COM by Applying
Percentages Reported in Labor Hours to SKF India’s Labor
Costs.
a. Background
During the review at issue, Commerce collected the information
by distributing a questionnaire which, among other things, sought
Court No. 97-12-02156 Page 41
data about labor hours but not labor costs. See Pl.’s Mem., App.
Pub. Doc. 8. Consequently, Commerce calculated SKF India’s
ratios, e.g., overhead cost to the cost of total material and
labor, on the basis of relative hours, not costs. See Final
Results, 62 Fed. Reg. at 61,288. Commerce then applied these
ratios to Chinese surrogate cost representing total materials and
total direct and indirect labor costs. Id.
b. Exhaustion of Remedies
i. Contentions of the Parties
As a preliminary matter, Commerce contends that the issue of
whether Commerce properly calculated SKF India’s COM by applying
percentages reported in labor hours to labor costs should not be
examined by this Court because Timken failed to question this issue
before Commerce and, therefore, forfeited its right to judicial
review. See Def.’s Mem. at 28.
Timken alleges that the issue was sufficiently presented for
Commerce’s consideration when Timken discussed it during the course
of administrative review. See Pl.’s Reply at 21 n.13 (citing to
Timken’s Case Brief (Aug. 8, 1997), Pl.’s Mem., App. B.
Court No. 97-12-02156 Page 42
ii. Analysis
The exhaustion doctrine requires a party to present its claims
to the relevant administrative agency for the agency’s
consideration before raising these claims to the Court. See
Unemployment Compensation Comm’n of Alaska v. Aragon, 329 U.S. 143,
155 (1946) (“A reviewing court usurps the agency’s function when it
sets aside the administrative determination upon a ground not
theretofore presented and deprives the [agency] of an opportunity
to consider the matter, make its ruling, and state the reasons for
its action”).5
5
There is, however, no absolute requirement of exhaustion
in the Court of International Trade in non-classification cases.
See Alhambra Foundry Co. v. United States, 12 CIT 343, 346-47, 685
F. Supp. 1252, 1255-56 (1988). Section 2637(d) of Title 28 directs
that “the Court of International Trade shall, where appropriate,
require the exhaustion of administrative remedies.” By its use of
the phrase “where appropriate,” Congress vested discretion in the
Court to determine the circumstances under which it shall require
the exhaustion of administrative remedies. See Cemex, S.A. v.
United States, 133 F.3d 897, 905 (Fed. Cir. 1998). Therefore,
because “each exercise of judicial discretion [does] not requir[e]
litigants to exhaust administrative remedies,” the Court is
authorized to determine proper exceptions to the doctrine of
exhaustion. Alhambra 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)).
In the past, the Court has exercised its discretion to obviate
exhaustion where: (1) requiring it would be futile, see Rhone
Poulenc, S.A. v. United States, 7 CIT 133, 135, 583 F. Supp. 607,
610 (1984) (“it appears that it would have been futile for
plaintiffs to argue that the agency should not apply its own
regulation”), or would be “inequitable and an insistence of a
Court No. 97-12-02156 Page 43
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 decision making; [(3)] it aids
judicial review by permitting factual development [of issues
relevant to the dispute]; and [(4)] it serves judicial economy by
avoiding [repetitious] administrative and judicial fact finding and
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. 97-12-02156 Page 44
by . . . resolving sole claims without judicial intervention,”
citation omitted).
While a plaintiff cannot circumvent the requirements of the
doctrine of exhaustion by merely mentioning a broad issue without
raising a particular argument, plaintiff’s brief statement of the
argument is sufficient if it alerts the agency to the argument with
reasonable clarity and avails the agency with an opportunity to
address it. See generally, Hormel v. Helvering, 312 U.S. 552, 557
(1941); see also Rhone Poulenc, 899 F.2d at 1191. An agency’s
failure to address plaintiff’s challenge, however, does not invoke
the exhaustion doctrine and shall not result in forfeiture of
plaintiff’s judicial remedies. See generally, B-West Imports, Inc.
v. United States, 19 CIT 303, 306, 880 F. Supp. 853, 858 (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).
During the review, Timken addressed the issue of percentage
derivative from the labor hours information and contrasted it with
the terms of labor costs, supplying emphasis and providing tables
that highlighted the distinction between the terms. See Pl.’s
Mem., App. B at 43-44. While Timken did not spell out its claim
Court No. 97-12-02156 Page 45
that Commerce “erred in calculating SKF [India’s] COM by applying
. . . percentages reported in labor hours to SKF [India’s] total
labor costs,” Pl.’s Mem. at 46 (emphasis in original), this Court
finds that Timken’s submission during the review sufficiently
availed Commerce with an opportunity to address the issue. The
Court, therefore, concludes that Timken properly exhausted its
administrative remedies and is in right to raise this issue to the
Court.
c. Commerce’s Application of Labor Hours
to Labor Costs
i. Contentions of the Parties
Timken contends that Commerce could not “allocate[] labor
costs using the quantity of . . . labor hours [spent] without
taking into account the fact that indirect labor hours are more
expensive” and, thus, the ratio could not be the same. Pl.’s Reply
at 21.
ii. Analysis
Commerce’s administrative duties include Commerce’s
responsibility to undertake reasonable investigatory functions.
See Freeport Minerals Co. v. United States, 776 F.2d 1029, 1034
Court No. 97-12-02156 Page 46
(Fed. Cir. 1985) (stating that Commerce errs if it refuses to
require respondents to submit pertinent information); Wieland-Werke
AG v. United States, 22 CIT 129, 135, 4 F. Supp. 2d 1207, 1212
(1998) (“Commerce has an obligation to investigate by gathering
information either on its own initiative or through submissions to
it,” citation omitted); Rhone-Poulenc, Inc. v. United States, 20
CIT 573, 578, 927 F. Supp. 451, 456 (1996) (“Commerce's failure to
perform an independent investigation of the facts related to this
issue falls short of its statutory duty to investigate antidumping
cases and assign fair antidumping margins.”)
During the review at issue, Commerce collected the information
by distributing a questionnaire which, among other things, sought
the data about labor hours but not labor costs and used the data to
calculate SKF India’s ratios. See Pl.’s Mem., App. Pub. Doc. 8;
see also Final Results, 62 Fed. Reg. at 61,288. The percentage of
direct labor hours within total labor hours does not, however,
necessarily correspond with the percentage of direct labor cost
within total labor costs. Conversely, under a traditional business
scheme, indirect workers, that is, usually a few skilled laborers,
earn higher salaries (and, thus, cost more) while work en masse
less man-hours than direct workers, that is, more numerous yet less
skilled employees, earning lower salaries while putting in en masse
more man-hours. Indeed, there is evidence on record that Indian
Court No. 97-12-02156 Page 47
indirect labor rates are considerably higher than direct ones and
create a ratio different from that between indirect and direct
labor hours. See Pl.’s Mem., App. B, C.
While Commerce was entitled to choose a reasonable mode of
gathering information, see, e.g., Floral Trade Council, 17 CIT at
1418-19, Commerce could not unreasonably forfeit its duty to
collect significantly important data.6 Accord Freeport Minerals,
776 F.2d at 1034; Wieland-Werke, 22 CIT at 135, 4 F. Supp. 2d at
1212; Rhone-Poulenc, 20 CIT at 578, 927 F. Supp. at 456. Commerce
has presented no explanation for its failure to collect data on
labor costs. See generally, Def.’s Mem. at 28. This error in data
collection significantly affected Commerce’s determination and
violated Commerce’s “duty to calculate dumping margins as
accurately as possible.” Olympia Indus., 22 CIT at 390, 7 F. Supp.
2d at 1000. Therefore, this Court finds that Commerce’s “failure
to collect pertinent data or to consider a relevant aspect of the
issue, constitute[d] an abuse of discretion,” Timken Co. v. United
States, 10 CIT at 97, 630 F. Supp. at 1337-38, remands this issue
6
While Commerce was justified in utilizing a reasonable
formula that involved direct and indirect labor costs, see supra
the discussion in Part C(1)(c), Commerce was not entitled to
determine direct labor costs on the basis of the obviously
divergent ratio of direct to indirect labor hours.
Court No. 97-12-02156 Page 48
to Commerce to determine direct labor costs without relying on
labor hours and open the record, if necessary.
D. Commerce’s Inclusion of “Purchases of Traded Goods”
in SKF India’s COM
1. Background
In the Final Results, Commerce designated the line item
“purchases of traded goods” in SKF India’s 1995-96 Financial
Statement as a material cost to be included in the COM that was
used as the denominator of the overhead, SG&A, and profit-rate
calculations. See 62 Fed. Reg. at 61,288. These “traded goods”
included purchased finished and semi-finished goods. Id.
2. Contentions of the Parties
Timken asserts that the “purchases of traded goods” should be
excluded from the COM denominator used in the overhead, SG&A and
profit-rate calculations. See Pl.’s Mem. at 47. Timken notes that
since the “traded goods” are products that are purchased and sold
by SKF India, and since they are already manufactured and do not
affect production, “traded goods” are not overhead or SG&A and are
not material costs used in producing the subject merchandise. See
id.; see also Pl.’s Reply at 22.
Court No. 97-12-02156 Page 49
Commerce responds that while SKF India did not incur direct
raw-material or direct labor expenses for such “traded goods,” SKF
India incurred the expense of purchasing them. See Def.’s Mem. at
29. Because the “purchases of traded goods” are included in the
calculation of the costs of goods sold, Commerce claims that they
are “ordinary business expenses” and a reflection of
“manufacturers’ common practice of purchasing.” Id. Commerce,
therefore, argues it acted reasonably and in accordance with law by
including the “purchases of traded goods” as part of the COM
calculation. See id.
Peer Bearing agrees with the position taken by Commerce,
arguing that since the “purchases of traded goods” are semi-
finished or finished goods, that is, the type of items which are
routinely purchased, stored and maintained by manufacturers, they
are material costs and, therefore, should not be excluded from SKF
India’s costs of materials. See Peer Bearing's Resp. at 14.
3. Analysis
The statute specifically instructs Commerce to determine “the
normal value of the subject merchandise on the basis of the value
of the factors of production utilized in producing the merchandise
Court No. 97-12-02156 Page 50
and to which shall be added an amount for general expenses and
profit . . . .” 19 U.S.C. § 1677b(c)(1) (emphasis supplied).
Therefore, the Court disagrees with Commerce’s determination.
Although SKF India’s Financial Statement stated that the “purchases
of traded goods” were required to meet SKF India’s clients’
demands, see Def.’s Mem. at 29, Commerce “failed to demonstrate how
these already manufactured goods constitute a material cost
incurred in [the process of] manufacturing the subject
merchandise.” Timken, 23 CIT at ___, 59 F. Supp. 2d at 1379
(emphasis supplied). The Court, therefore, remands this issue to
Commerce to exclude the “purchases of traded goods” from its
calculation of COM.
E. Commerce’s Calculation of Marine Insurance
In its final determination, Commerce calculated marine
insurance using a publicly available rate for sulphur dyes and
multiplying this rate by the packed weight of the merchandise at
issue, specifically, bearings. See Final Results, 62 Fed. Reg. at
61,288. As this Court pointed out in Peer Bearing Co., 22 CIT at
485-86, 12 F. Supp. 2d at 458-59, and Timken, 23 CIT at ___, 59 F.
Supp. 2d at 1380, Commerce’s reliance on a weight-based methodology
was flawed.
Court No. 97-12-02156 Page 51
Insurers agreeing to pay the value of merchandise lost or
destroyed in transit base their premium rates on what it would cost
to replace the merchandise or compensate the losses rather than
upon the weight of the merchandise being shipped. See Peer
Bearing, 22 CIT at 486, 12 F. Supp. 2d at 458-59 (“Insurance by
definition is based upon pecuniary valuation, not on the weight of
the product to be insured”). The Court, therefore, remands this
issue to Commerce to determine marine insurance in a manner related
to the value and the risk of transporting tapered roller bearings.
F. Commerce’s Determination that Certain Chinese Suppliers Sales
Were Made Without Knowledge of the Ultimate Destination
1. Statutory background
Section 1677a(a) of Title 19 defines the term “export price”
as “the price at which the subject merchandise is first sold . . .
before the date of importation by the producer or exporter of the
subject merchandise outside of the United States to an unaffiliated
purchaser in the United States or to an unaffiliated purchaser for
exportation to the United States . . . .” 19 U.S.C. § 1677a(a)
(1994). In determining at which point such first sale for
exportation to the United States occurs, Commerce applies the
“knowledge” test that requires a supplier to have knowledge that
Court No. 97-12-02156 Page 52
the ultimate destination of its goods is the United States before
the supplier’s prices are considered export prices.7 See, e.g.,
NSK Ltd. v. United States, 21 CIT 617, 645-46, 969 F. Supp. 34,
60-61 (1997). Specifically, Commerce determines whether suppliers
actually knew rather than suspected that particular sales at issue
were destined for import into the United States. See id., 21 CIT
at 644-46, 969 F. Supp. at 59-61. Thus, it is not enough for
foreign suppliers to have merely a general belief that the
7
Section 1677a(b) of Title 19 states that constructed price is
“the price at which the subject merchandise is first sold (or
agreed to be sold) in the United States . . . .” 19 U.S.C. §
1677a(b) (1994). The legislative history to this section clearly
demonstrates that Commerce's knowledge test was anticipated by
Congress and is a reasonable interpretation of the statute.
In enacting a new antidumping law as part of the Trade
Agreements Act of 1979, Congress modified the definition of
purchase price, hence establishing the basis for Commerce's
administrative practice of looking to a producer's knowledge in
determining whether to use the producer's sales price as the
purchase price. Congress stated the following:
If a producer knew that the merchandise was intended for sale
to an unrelated purchaser in the United States under terms of
sale fixed on or before the date of importation, the
producer's sale price to an unrelated middleman will be used
as the purchase price.
S. REP. NO. 96-249, at 94 (1979), reprinted in U.S.C.A.A.N. 381,
480; see also H. DOC. 96-153, at 411 (1979) (“The definition makes
clear that if the producer knew or had reason to know the goods
were for sale to an unrelated U.S. buyer, . . . the producer's
sales price will be used as 'purchase price' . . . .”)
Furthermore, in 1984 Congress explicitly amended Section 1677a(b)
to recognize that a reseller's price may be used as purchase price.
See H.R. CONF. REP. NO. 98-1156, at 185 (1984), reprinted in
U.S.C.A.A.N. 5220, 5302.
Court No. 97-12-02156 Page 53
merchandise may eventually make its way to the United States.
Moreover, the fact that the merchandise was at least offered for
sale in a market other than the United States is interpreted as
suggesting against suppliers having the requisite knowledge. See
id., 21 CIT at 646, 969 F. Supp. at 61.
While Commerce's application of such a high standard is
exploitable by the “perfect” scenario, where a reseller could
conceal the ultimate destination of its purchases from its foreign
suppliers, it is recognized that the “knowledge” test is necessary
to fulfill the statutory intent that purchase price be based on
sales of goods sold abroad with the intent of being exported to the
United States. Id.
2. Factual Background
The record of the review at issue indicated that Peer Bearing,
a United States company, purchased the merchandise, all identified
with the word “Peer” at the request of Peer Bearing, from a few
Chinese suppliers through Chin Jun, a Hong Kong reseller used by
Peer Bearing.8 See Final Results, 62 Fed. Reg. at 61,291; Pl.’s
8
Timken also argues that Commerce should have treated all
sales made by Chinese suppliers to another exporter, Premier, as
export price sales because Premier's suppliers made some shipments
directly from China to the United States. Timken asserts that such
Court No. 97-12-02156 Page 54
Mem., App. Pub. Doc. 54. Peer Bearing had notified the Chinese
suppliers that the merchandise was intended to be sold around the
world. See id., App. Pub. Doc. 205.
After examining these facts, Commerce concluded that the
record indicated a mere possibility of Chinese suppliers assuming
the ultimate destination of the merchandise, and that such
possibility did not amount to sufficient evidence of the suppliers’
knowledge that Chin Jun would sell the merchandise to the United
States. See Final Results, 62 Fed. Reg. at 61,292. Consequently,
for the purpose of determining the dumping margin, Commerce decided
to use, as export price sales, the sales of the merchandise by Chin
Jun to Peer Bearing rather than the sales by Chinese suppliers to
Chin Jun. See id. Commerce pointed out that the suppliers
themselves did not export the merchandise, but rather the
merchandise was shipped to “freight forwarders who were responsible
for arranging shipment[s] to the United States and were the only
parties [(]other than [United States importers) that] knew the
ultimate destination” of the merchandise. Id. at 61,292.
few shipments establishes the suppliers' knowledge of the export
destination. See Final Results, 62 Fed. Reg. at 61,291-92. The
Court’s analysis with regard to those sales parallels the Court’s
analysis of the sales made by Chinese suppliers to Chin Jun.
Court No. 97-12-02156 Page 55
3. Contentions of the Parties
Timken argues that Commerce’s determination was erroneous, and
the price paid between Chin Jun and its suppliers should be used to
calculate United States price. See Pl.’s Mem. at 52-53. Timken
also alleges that because the fact that the merchandise was marked
“Peer” indicates that the Chinese suppliers had sufficient
knowledge about the ultimate destination of the merchandise. See
id. at 52 (comparing the case at bar and NSK Ltd., 21 CIT 617, 969
F. Supp. 34). Alternatively, Timken suggests that the suppliers'
lack of knowledge about the destination shall be disregarded
because it emanated from Chin Jun and Peer Bearing’s effort to
mislead the suppliers into believing that the merchandise was to be
sold worldwide. See id.; see also Pl.’s Reply at 23 (citing
Cliquot’s Champagne, 70 U.S. 114, 140 (1866), and pointing out that
Commerce should have imputed knowledge upon a freight forwarder
operating for the benefit of its principal.)
Commerce maintains that: (1) Commerce’s application of the
knowledge test was proper; and (2) Commerce’s determination was
supported by substantial evidence. See Def.’s Mem. at 30-32.
Peer Bearing supports Commerce’s argument. See generally,
Peer Bearing’s Resp. at 14-19. Peer Bearing notes that the
Court No. 97-12-02156 Page 56
Chinese suppliers had only knowledge of the destination of their
sales to Chin Jun but not to Peer Bearing, see id. at 15-16, and
alleges that the fact that the merchandise was marked “Peer” is
not dispositive because “Peer [Bearing] sells its [merchandise] in
numerous countries around the world[, and it] is not uncommon for
companies such as Peer [Bearing] and [even] Timken [itself] to use
their brand names for sales made throughout the world.” Id. at 16
(emphasis omitted).
4. Analysis
The crux of Timken’s argument is that “special markings” on
the merchandise meant that the Chinese suppliers knew that the
merchandise was destined for the United States. See Pl.’s Mem. at
53. The Court disagrees. Just because a factory produces a piece
of merchandise with the mark “Peer,” it does not necessarily mean,
unless there is additional evidence, that such merchandise is
destined for the United States. Moreover, even if the merchandise
is destined for the United States, it does not necessarily mean,
unless there is additional evidence, that the manufacturer made the
connection between the marking and the final purchaser who sells
its stock in the United States as well as in third countries.9
9
This is precisely the scenario of the case at bar. Part of
the merchandise went to Hong Kong and was re-shipped therefrom; the
Court No. 97-12-02156 Page 57
Finally, even if such mental connection was made by the
manufacturer, it does not necessarily mean, unless there is
additional evidence, that such connection created the requisite
level of “knowledge.”10 The test employed by Commerce is not
other part was shipped from the PRC through a freight forwarder (as
in the case of Premier), and only some of those shipments made
their way into the United States.
10
Timken asserts that Commerce “has consistently included
among [United States] sales those ‘in which a manufacturer . . .
has reason to know of the ultimate destination of the merchandise
at the time of sale, through special markings . . . .’” See Pl.’s
Mem. at 53 (quoting Final Results of Antidumping Duty
Administrative Review of Titanium Sponge From Russia (“Titanium
Sponge”), 61 Fed. Reg. 9676, 9677 (Mar. 11, 1996), emphasis
omitted, and citing Final Results of Antidumping Duty
Administrative Review and Partial Termination of Administrative
Review of Fresh Garlic From the People's Republic of China (“Fresh
Garlic I”), 62 Fed. Reg. 23,758, 23,759 (May 1, 1997); Preliminary
Results of Antidumping Duty Administrative Review and Partial
Termination of Administrative Review of Fresh Garlic From the
People's Republic of China (“Fresh Garlic II”), 61 Fed. Reg.
68,229, 68,230 (Dec. 27, 1996)).
The Court is bewildered by the choice of Commerce’s
determinations relied upon by Timken. In Titanium Sponge, Commerce
rejected a respondent’s contention that the respondent had reached
the requisite knowledge because a manufacturer was neither
“informed in advance that the merchandise [was] destined for the
United States,” nor had “reason to know of the ultimate destination
of the merchandise at the time of sale, through special markings,
market-specific specifications, or shipping instructions.” 61 Fed.
Reg. at 9677 (citations omitted). In Fresh Garlic I and II,
Commerce provided that only the use of a very precise procedure by
the manufacturer would create the requisite level of knowledge.
See 62 Fed. Reg. at 23,759 and 61 Fed. Reg. at 68,230 (stating that
the merchandise had to be “mechanically harvested and primarily,
but not exclusively, destined for non-fresh use, or specially
prepared and cultivated prior to planting and then harvested and
otherwise prepared,” emphasis supplied).
Court No. 97-12-02156 Page 58
whether, in theory, the merchandise could have arrived in the
United States, but rather whether the Chinese suppliers knew or
should have known where the merchandise was destined. See Final
Results, 62 Fed. Reg. at 61,292; accord NSK, Ltd., 21 CIT at 644-
46, 969 F. Supp. at 59-61.
Therefore, Commerce could reasonably find that there was no
evidence that the Chinese suppliers had knowledge11 that the
In fact, more often than not, Commerce finds presence of
neither markings nor specifications, or instructions special enough
to create the requisite level of knowledge. See, e.g., Notice of
Final Determination of Sales at Less Than Fair Value: Ferrovanadium
and Nitrided Vanadium From the Russian Federation, 60 Fed. Reg.
27,957 (May 26, 1995); Notice of Final Determinations of Sales at
Less Than Fair Value: Pure Magnesium and Alloy Magnesium From the
Russian Federation, 60 Fed. Reg. 16,440 (Mar. 30, 1995); Final
Results of Antidumping Duty Administrative Review of Television
Receivers, Monochrome and Color, From Japan, 58 Fed. Reg. 11,211
(Feb. 24, 1993); Final Results of Antidumping Duty Administrative
Reviews of Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From France; et al., 57 Fed. Reg.
28,360, 28,423 (June 24, 1992); Final Results of Antidumping Duty
Administrative Reviews [of] Oil Country Tubular Goods From Canada,
55 Fed. Reg. 50,739 (Dec. 10, 1990); Final Results of Antidumping
Duty Administrative Review of Natural Bristle Paint Brushes and
Brush Heads From the People's Republic of China, 55 Fed. Reg.
42,599 (Oct. 22, 1990); Final Determination of Sales at Less Than
Fair Value of Urea From the Union of Soviet Socialist Republics, 52
Fed. Reg. 19,557 (May 26, 1987).
11
Timken also argues that Commerce should have imputed
knowledge upon the Chinese manufacturers under the precedent of
Cliquot’s Champagne, 70 U.S. at 140. See Pl.’s Reply at 23. The
Court in Cliquot’s Champagne, however, never addressed the issue of
“imputed knowledge,” rather it examined the issue of whether a mens
rea of “knowingly” under a statute envisioning criminal prosecution
could be asserted against an agent of a principal that committed a
Court No. 97-12-02156 Page 59
ultimate destination of the merchandise was the United States, and
disregard the sale prices from the Chinese suppliers to Chin Jun in
Commerce’s determination of the starting price. Accord Final
Results, 62 Fed. Reg. at 61,291-92.
G. Commerce’s Clerical Error
In its final determination, Commerce, while calculating the
weight of scrap from one of the Chinese producers, committed a
clerical error. See Def. Mem. at 32. The Court remands the issue
to Commerce to correct the error.
wrongful act. See 70 U.S. at 114, 140. Considering that: (1)
Timken itself reads Cliquot’s Champagne as a case discussing an
agency-based relationship between a freight forwarder and the
freight forwarder’s principal, see Pl.’s Reply at 23; and (2) under
international trade practices, a shipper, an importer, or an
exporter are the only parties that may serve as a principal to a
freight forwarder-agent, see e.g., Pearson v. Leif Hoegh, 1992 U.S.
App. LEXIS 450 (4th Cir. Jan. 16, 1992); Gilmore v. Waterman S.S.
Corp., 790 F.2d 1244 (5th Cir. 1986); Zanelli v. FMC, 524 F.2d 1000
(5th Cir. 1975); Orient Mid-East Lines v. Albert E. Bowen, Inc., 458
F.2d 572 (2nd Cir. 1972); Thiti Lert Watana Co. v. Minagratex Corp.,
105 F. Supp. 2d 1077 (N.D. Ca. 2000), this Court fails to
understand how the holding of Cliquot’s Champagne could serve as a
precedent creating a connection between a freight forwarder and a
manufacturer, that is, a third-party who is neither a shipper, nor
an importer or an exporter and, thus, cannot be the freight
forwarder’s principal.
Court No. 97-12-02156 Page 60
CONCLUSION
The case is remanded to Commerce to: (1) determine direct
labor costs without relying on labor hours and to open the record,
if necessary; (2) exclude the “purchases of traded goods” from its
calculation of COM; (3) adjust United States price by recalculating
marine insurance pursuant to a value-based methodology; and (4)
correct clerical errors in the calculation of the weight of scrap
from one of the Chinese producers. Commerce's final determination
is affirmed in all other respects.
_________________________
NICHOLAS TSOUCALAS
SENIOR JUDGE
Dated: August 9, 2001
New York, New York