NTN Bearing Corp. of America v. United States

Slip Op. 01-76

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
________________________________________
:
NTN BEARING CORPORATION OF AMERICA and :
NTN KUGELLAGERFABRIK (DEUTSCHLAND) GmbH;:
SKF USA INC. and SKF GmbH; :
FAG KUGELFISCHER GEORG SCHAFER AG and :
FAG BEARINGS CORPORATION, :
:
Plaintiffs and :
Defendant-Intervenors, :
:
and :
:
INA WALZLAGER SCHAEFFLER oHG and :
INA BEARING COMPANY, INC., :
:
Plaintiffs, :
:
v. : Consol. Court No.
: 97-10-01800
UNITED STATES, :
:
Defendant, :
:
and :
:
THE TORRINGTON COMPANY, :
:
Defendant-Intervenor :
and Plaintiff. :
________________________________________:

Plaintiffs and defendant-intervenors NTN Bearing Corporation
of America, NTN Kugellagerfabrik (Deutschland) GmbH (collectively
“NTN”), SKF USA Inc., SKF GmbH (collectively “SKF”), FAG
Kugelfischer Georg Schafer AG, FAG Bearings Corporation
(collectively “FAG”), and plaintiffs INA Walzlager Schaeffler oHG
and INA Bearing Company, Inc. (collectively “INA”) move pursuant to
USCIT R. 56.2 for judgment upon the agency record challenging
various aspects of the Department of Commerce, International Trade
Administration’s (“Commerce”) final determination, entitled
Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, Germany, Italy, Japan, Romania,
Singapore, Sweden and the United Kingdom; Final Results of
Antidumping Duty Administrative Reviews (“Final Results”), 62 Fed.
Consol. Court No. 97-10-01800 Page 2

Reg. 54,043 (Oct. 17, 1997), as amended, Antifriction Bearings
(Other Than Tapered Roller Bearings) and Parts Thereof From France,
Germany, Italy, Japan, Romania, Singapore[,] Sweden and the United
Kingdom; Amended Final Results of Antidumping Duty Administrative
Reviews, 62 Fed. Reg. 61,963 (Nov. 20, 1997). Defendant-intervenor
and plaintiff, The Torrington Company (“Torrington”), also moves
pursuant to USCIT R. 56.2 for judgment upon the agency record
challenging certain determinations of Commerce’s Final Results.

Specifically, NTN contends that Commerce unlawfully: (1)
denied a price-based level of trade (“LOT”) adjustment to normal
value (“NV”) for its constructed export price (“CEP”) sales; (2)
refused to calculate CEP profit on an LOT-specific basis; (3)
conducted a duty-absorption inquiry under 19 U.S.C. § 1675(a)(4)
(1994) for the subject reviews of the applicable antidumping duty
orders covering antifriction bearings (“AFBs”) from Germany; (4)
determined that it applied a reasonable duty-absorption methodology
and that duty absorption had in fact occurred; and (5) denied a
downward adjustment to NTN’s reported United States indirect
selling expenses for imputed interests incurred in financing cash
deposits for antidumping duties.

SKF contends that Commerce unlawfully: (1) conducted a duty-
absorption inquiry under 19 U.S.C. § 1675(a)(4) for the subject
reviews of the applicable antidumping duty orders covering AFBs
from Germany; (2) determined that it applied a reasonable duty-
absorption methodology and that duty-absorption had in fact
occurred; and (3) calculated constructed value (“CV”) profit.

FAG contends that Commerce unlawfully: (1) calculated CV
profit; (2) failed to match United States sales to “similar” home-
market sales prior to resorting to CV when all home-market sales of
identical merchandise have been disregarded; (3) conducted a duty-
absorption inquiry under 19 U.S.C. § 1675(a)(4) for the subject
reviews of the applicable antidumping duty orders covering AFBs
from Germany; (4) determined that it applied a reasonable duty-
absorption methodology and that duty absorption had in fact
occurred; and (5) treated certain direct selling expenses as
indirect selling expenses.

INA contends that Commerce unlawfully: (1) refused to deduct
downward billing adjustments on INA’s home-market sales; (2)
failed to match United States sales to “similar” home-market sales
prior to resorting to CV when all home-market sales of identical
merchandise have been disregarded; (3) calculated CV profit; (4)
failed to exclude sales made out of the ordinary course of trade
Consol. Court No. 97-10-01800 Page 3

from the home-market database; (5) included its zero-priced United
States transactions in the margin calculations; (6) excluded zero-
priced home-market sample transactions but not home-market sample
sales; (7) calculated a single weighted-average CEP profit rate for
each class or kind of merchandise; (8) excluded amounts for imputed
credit and inventory carrying expenses in its calculation of total
expenses for the CEP profit ratio; and (9) conducted a duty-
absorption inquiry under 19 U.S.C. § 1675(a)(4) for the subject
reviews of the applicable antidumping duty orders covering AFBs
from Germany.

Torrington contends that Commerce unlawfully: (1) accepted
SKF’s home-market support rebates; (2) accepted SKF’s home-market
billing adjustments; and (3) accepted FAG’s home-market rebates.

Held: NTN’s, SKF’s, FAG’s and INA’s USCIT R. 56.2 motions are
granted in part and denied in part. Torrington’s USCIT R. 56.2
motion is denied. This case is remanded to Commerce to: (1) annul
all findings and conclusions made pursuant to the duty-absorption
inquiry conducted for the subject review in accordance with this
opinion; (2) attempt to match United States sales to similar home-
market sales before resorting to CV; (3) reconsider its
determination to deny a downward billing adjustment to INA on its
home-market sales; (4) clarify how it complied with the statutory
framework of 19 U.S.C. §§ 1677e, 1677m (1994) for using facts
available and applying an adverse inference and if it determines it
did not adhere to all of the statutory prerequisite conditions, to
give INA the opportunity to remedy or explain any deficiency
regarding its alleged sample sales; and (5) include all expenses
included in “total United States expenses” in the calculation of
“total expenses” for INA.

[NTN’s, SKF’s, FAG’s and INA’s USCIT R. 56.2 motions are granted in
part and denied in part. Torrington’s USCIT R. 56.2 motion is
denied. Case remanded.]

Dated: June 22, 2001

Barnes, Richardson & Colburn (Donald J. Unger, Kazumune V.
Kano and Christine H.T. Yang) for NTN.

Steptoe & Johnson LLP (Herbert C. Shelley and Alice A. Kipel)
for SKF.

Grunfeld, Desiderio, Lebowitz & Silverman LLP (Max F.
Schutzman, Andrew B. Schroth and Mark E. Pardo) for FAG.
Consol. Court No. 97-10-01800 Page 4

Arent Fox Kintner Plotkin & Kahn, PLLC (Stephen L. Gibson)for
INA.

Stuart E. Schiffer, Acting Assistant Attorney General; David
M. Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Velta A. Melnbrencis,
Assistant Director); of counsel: Mark A. Barnett, Patrick V.
Gallagher, Rina Goldenberg and David R. Mason, Office of the Chief
Counsel for Import Administration, United States Department of
Commerce, for defendant.

Stewart and Stewart (Terence P. Stewart, Wesley K. Caine,
Geert De Prest and Lane S. Hurewitz) for Torrington.

OPINION

TSOUCALAS, Senior Judge: Plaintiffs and defendant-

intervenors NTN Bearing Corporation of America, NTN

Kugellagerfabrik (Deutschland) GmbH (collectively “NTN”), SKF USA

Inc., SKF GmbH (collectively “SKF”), FAG Kugelfischer Georg Schafer

AG, FAG Bearings Corporation (collectively “FAG”), and plaintiffs

INA Walzlager Schaeffler oHG and INA Bearing Company, Inc.

(collectively “INA”) move pursuant to USCIT R. 56.2 for judgment

upon the agency record challenging various aspects of the

Department of Commerce, International Trade Administration’s

(“Commerce”) final determination, entitled Antifriction Bearings

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

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

Kingdom; Final Results of Antidumping Duty Administrative Reviews

(“Final Results”), 62 Fed. Reg. 54,043 (Oct. 17, 1997), as amended,

Antifriction Bearings (Other Than Tapered Roller Bearings) and
Consol. Court No. 97-10-01800 Page 5

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

Singapore[,] Sweden and the United Kingdom; Amended Final Results

of Antidumping Duty Administrative Reviews, 62 Fed. Reg. 61,963

(Nov. 20, 1997). Defendant-intervenor and plaintiff, The

Torrington Company (“Torrington”), also moves pursuant to USCIT R.

56.2 for judgment upon the agency record challenging certain

determinations of Commerce’s Final Results.

Specifically, NTN contends that Commerce unlawfully: (1)

denied a price-based level of trade (“LOT”) adjustment to normal

value (“NV”) for its constructed export price (“CEP”) sales; (2)

refused to calculate CEP profit on an LOT-specific basis; (3)

conducted a duty-absorption inquiry under 19 U.S.C. § 1675(a)(4)

(1994) for the subject reviews of the applicable antidumping duty

orders covering antifriction bearings (“AFBs”) from Germany; (4)

determined that it applied a reasonable duty-absorption methodology

and that duty absorption had in fact occurred; and (5) denied a

downward adjustment to NTN’s reported United States indirect

selling expenses for imputed interests incurred in financing cash

deposits for antidumping duties.

SKF contends that Commerce unlawfully: (1) conducted a duty-

absorption inquiry under 19 U.S.C. § 1675(a)(4) for the subject

reviews of the applicable antidumping duty orders covering AFBs

from Germany; (2) determined that it applied a reasonable duty-
Consol. Court No. 97-10-01800 Page 6

absorption methodology and that duty absorption had in fact

occurred; and (3) calculated constructed value (“CV”) profit.

FAG contends that Commerce unlawfully: (1) calculated CV

profit; (2) failed to match United States sales to “similar” home-

market sales prior to resorting to CV when all home-market sales of

identical merchandise have been disregarded; (3) conducted a duty-

absorption inquiry under 19 U.S.C. § 1675(a)(4) for the subject

reviews of the applicable antidumping duty orders covering AFBs

from Germany; (4) determined that it applied a reasonable duty-

absorption methodology and that duty absorption had in fact

occurred; and (5) treated certain direct selling expenses as

indirect selling expenses.

INA contends that Commerce unlawfully: (1) refused to deduct

downward billing adjustments on INA’s home-market sales; (2)

failed to match United States sales to “similar” home-market sales

prior to resorting to CV when all home-market sales of identical

merchandise have been disregarded; (3) calculated CV profit; (4)

failed to exclude sales made out of the ordinary course of trade

from the home-market database; (5) included its zero-priced United

States transactions in the margin calculations; (6) excluded zero-

priced home-market sample transactions but not home-market sample

sales; (7) calculated a single weighted-average CEP profit rate for

each class or kind of merchandise; (8) excluded amounts for imputed
Consol. Court No. 97-10-01800 Page 7

credit and inventory carrying expenses in its calculation of total

expenses for the CEP profit ratio; and (9) conducted a duty-

absorption inquiry under 19 U.S.C. § 1675(a)(4) for the subject

reviews of the applicable antidumping duty orders covering AFBs

from Germany.

Torrington contends that Commerce unlawfully: (1) accepted

SKF’s home-market support rebates; (2) accepted SKF’s home-market

billing adjustments; and (3) accepted FAG’s home-market rebates.

BACKGROUND

This case concerns the seventh administrative review of the

antidumping duty order on AFBs from Germany for the period of

review (“POR”) covering May 1, 1995 through April 30, 1996. On

June 10, 1997, Commerce published the preliminary results of the

seventh review. See Antifriction Bearings (Other Than Tapered

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

Japan, Romania, Singapore, Sweden and the United Kingdom;

Preliminary Results of Antidumping Duty Administrative Reviews and

Partial Termination of Administrative Reviews (“Preliminary

Results”), 62 Fed. Reg. 31,566. Commerce published the Final

Results on October 17, 1997, see 62 Fed. Reg. at 54,043, and the

Amended Final Results on November 20, 1997, see 62 Fed. Reg. at

61,963.
Consol. Court No. 97-10-01800 Page 8

Since the administrative review at issue was initiated after

December 31, 1994, the applicable law is the antidumping statute as

amended by the Uruguay Round Agreements Act (“URAA”), Pub. L. No.

103-465, 108 Stat. 4809 (1994) (effective January 1, 1995). See

Torrington Co. v. United States, 68 F.3d 1347, 1352 (Fed. Cir.

1995) (citing URAA § 291(a)(2), (b) (noting effective date of URAA

amendments)).

JURISDICTION

The Court has jurisdiction over this matter pursuant to 19

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

STANDARD OF REVIEW

In reviewing a challenge to Commerce’s final determination in

an antidumping administrative review, the Court will uphold

Commerce’s determination unless it is “unsupported by substantial

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

19 U.S.C. § 1516a(b)(1)(B)(i) (1994); see NTN Bearing Corp. of Am.

v. United States, 24 CIT ___, ___, 104 F. Supp. 2d 110, 115-16

(2000) (detailing Court’s standard of review for antidumping

proceedings).
Consol. Court No. 97-10-01800 Page 9

DISCUSSION

I. Denial of a Price-based LOT Adjustment to NV (NTN)

NTN contends that Commerce improperly denied a price-based LOT

adjustment for CEP sales made in the United States market at an LOT

different from the home-market sales.1 See NTN’s Mem. Supp. Mot.

J. Agency R. (“NTN’s Mem.”) at 7. In particular, NTN argues, inter

alia, that Commerce incorrectly determined NTN’s CEP LOT because

the agency failed to use the sale to the first unaffiliated

purchaser in the United States to determine NTN’s CEP LOT. See id.

NTN requests that the Court remand the LOT issue to Commerce to

grant NTN a price-based LOT adjustment for its CEP sales. See id.

at 9.

Commerce, in turn, argues that it properly determined the LOT

for NTN’s CEP sales after deducting expenses and profit from the

price to the first unaffiliated purchaser in the United States

pursuant to § 1677a(d) because § 1677b(a)(7)(A), which provides for

an LOT adjustment, requires Commerce to compare CEP, not the

“unadjusted” starting price of CEP, with NV. See Def.’s Mem. in

Partial Opp’n to Pls.’ Mots. J. Agency R. (“Def.’s Mem.”) at 92-93.

Commerce notes CEP is defined in § 1677a(b) as the price at which

1
For a complete discussion of background information and the
statutory provisions at issue, the reader is referred to this
Court’s decision in NTN Bearing Corp. of Am., 24 CIT at ___, 104
F. Supp. 2d at 125-128.
Consol. Court No. 97-10-01800 Page 10

the subject merchandise is first sold (or agreed to be sold) in the

United States as “adjusted” under § 1677a(d). See id. at 93.

According to Commerce, the adjusted CEP price is to be compared to

prices in the home market based on the same LOT whenever it is

practicable; when it is not practicable and the LOT difference

affects price comparability, Commerce makes an LOT adjustment. See

id. at 94. Commerce makes a CEP offset when Commerce is not able

to quantify price differences between the CEP LOT and the LOT of

the comparison sales, and if NV is established at a more advanced

state of distribution than the CEP LOT. See id. If the CEP price

is not adjusted before it is compared under the approach advocated

by NTN, “there will always be substantial deductions from the

resale prices in the United States (because they are mandatory),”

but they “will be compared to resale prices in the home market from

which virtually [there will] never be any equivalent deductions,”

thus creating a substantial imbalance and a skewed comparison

between NV and CEP. Id. at 95 (emphasis in the original).

Commerce claims that it properly denied an LOT adjustment for

NTN’s CEP sales because NTN failed to establish its entitlement to

an LOT adjustment. Commerce was unable to calculate an LOT

adjustment because “NTN did not have a level of trade equivalent to

the CEP level of trade in the home market,” making it impossible to

quantify the difference in price between the CEP LOT and the home-
Consol. Court No. 97-10-01800 Page 11

market LOT. Id. at 104-05. Commerce maintains that the Court

should uphold its refusal to grant to NTN an LOT adjustment. See

id. at 105.

Torrington generally agrees with Commerce’s positions,

emphasizing that: (1) Commerce correctly made § 1677a(d)

adjustments to the starting price of CEP prior to determining an

LOT for NTN’s CEP sales; and (2) properly denied an LOT adjustment

for NTN’s CEP sales. See Torrington’s Resp. to Pls.’ Mots. J.

Agency R. (“Torrington’s Resp.”) at 32. Accordingly, Torrington

contends that this Court should not disturb Commerce’s reasonable

interpretation of the statute as applied to the record evidence.

In Micron Tech., Inc. v. United States, 243 F.3d 1301 (Fed.

Cir. 2001), the Court of Appeals for the Federal Circuit (“CAFC”)

held that the plain text of the antidumping statute and the

Statement of Administrative Action (“SAA”)2 require Commerce to

2
The Statement of Administrative Action (“SAA”) represents
“an authoritative expression by the Administration concerning its
views regarding the interpretation and application of the Uruguay
Round agreements.” H.R. Doc. 103-316, at 656 (1994), reprinted in
1994 U.S.C.C.A.N. 4040. “It is the expectation of the Congress
that future Administrations will observe and apply the
interpretations and commitments set out in this Statement.” Id.;
see also 19 U.S.C. § 3512(d) (1994) (“The statement of
administrative action approved by the Congress . . . shall be
regarded as an authoritative expression by the United States
concerning the interpretation and application of the Uruguay Round
Agreements and this Act in any judicial proceeding in which a
question arises concerning such interpretation or application.”).
Consol. Court No. 97-10-01800 Page 12

deduct the expenses enumerated under § 1677a(d) before making the

LOT comparison.3 The court examined §1677b(a)(1)(B)(i), which

provides that Commerce must establish NV “to the extent

practicable, at the same level of trade as the export price or

[CEP],” and § 1677a(b), which defines CEP as “the price at which

the subject merchandise is first sold (or agreed to be sold) in the

United States . . . as adjusted under subsections (c) and (d) of

this section.” (Emphasis supplied). The court concluded that

“[r]ead together, these two provisions show that Commerce is

required to deduct the subsection (d) expenses from the starting

price in the United States before making the level of trade

comparison.” Micron Tech., Inc., 243 F.3d at 1315. The court

further stated that this conclusion is mandated by the SAA, which

states that “‘to the extent practicable, [Commerce should]

establish [NV] based on home[-]market (or third[-]country) sales at

the same level of trade as the constructed export price or the

starting price for the export price.’” Id. (citing SAA at 829).

Thus, the Court finds that Commerce properly made § 1677a(d)

adjustments to NTN’s starting price in order to arrive at CEP and

make its LOT determination. The Court also finds that Commerce’s

3
The CAFC’s decision effectively overturned the Court of
International Trade’s determination with respect to this issue in
Borden, Inc. v. United States, 22 CIT 233, 4 F. Supp. 2d 1221
(1998), rev’d 2001 WL 312232 (Fed. Cir. Mar. 12, 2001), a case
discussed by the parties in the instant matter.
Consol. Court No. 97-10-01800 Page 13

decision to deny NTN an LOT adjustment is supported by substantial

evidence. Section 1677b(a)(7)(A) permits Commerce to make an LOT

adjustment “if the difference in level of trade . . . involves the

performance of different selling activities[] and . . . is

demonstrated to affect price comparability, based on a pattern of

consistent price differences between sales at different levels of

trade in the country in which normal value is determined.” With

respect to CEP sales, Commerce found that the same LOT as that of

the CEP for merchandise under review did not exist for any

respondent in the home market; therefore, Commerce was unable to

“determine whether there was a pattern of consistent price

differences between the [LOTs] based on respondent’s [home-market]

sales of merchandise under review.” See Final Results, 62 Fed.

Reg. at 54,056.

Commerce looked to alternative methods for calculating LOT

adjustments in accordance with the SAA. See id. In particular,

Commerce noted that the SAA states:

“if information on the same product and company is not
available, the [LOT] adjustment may also be based on
sales of other products by the same company. In the
absence of any sales, including those in recent time
periods, to different levels of trade by the exporter or
producer under investigation, Commerce may further
consider the selling expenses of other producers in the
foreign market for the same product or other products.”

Id. (quoting SAA at 830). Commerce did not have the information

that would have supported the use of these alternative methods. See
Consol. Court No. 97-10-01800 Page 14

id. Consequently, with respect to CEP sales which Commerce was

unable to quantify an LOT adjustment, it granted a CEP offset to

respondents, including NTN, where the home-market sales were at a

more advanced LOT than the sales to the United States, in

accordance with 19 U.S.C. § 1677b(a)(7)(B) (1994). See id. In

sum, Commerce acted well within the directive of the statute in

denying the LOT adjustment and granting a CEP offset instead. See

19 U.S.C. § 1677b(a)(7).

II. Constructed Export Price Calculation Without Regard to LOT
(NTN)

NTN contends that Commerce erred by refusing to calculate CEP

profit on LOT-specific basis.4 See NTN’s Mem. at 9. Highlighting

the “narrowest category of merchandise” language of §

1677a(f)(2)(C)(ii) and (iii), NTN again argues that there is a

clear statutory preference that profit be calculated on the

narrowest possible basis. See id. at 10. Moreover, NTN claims

that since CV profit is calculated by LOT and matching is by LOT,

CEP profit should be calculated to account for differences in LOT.

See id. NTN asserts that the mere fact that a calculation is

difficult is not a valid reason to sacrifice accuracy. See id. at

11. NTN further asserts that Commerce’s speculation that an

4
For a discussion of background and the relevant statutory
provisions, the reader is referred to this Court’s decision in NTN
Bearing Corp. of Am., 24 CIT at ___, 104 F. Supp. 2d at 133-34.
Consol. Court No. 97-10-01800 Page 15

adjustment is susceptible to manipulation provides no grounds for

rejecting an adjustment. See id. at 12. NTN, therefore, requests

that the Court remand the issue to Commerce to calculate CEP profit

on an LOT-specific basis.

Commerce responds that it properly determined CEP profit

without regard to LOT. See Def.’s Mem. at 105. Commerce notes,

inter alia, that § 1677a(f) does not refer to LOT, that is, the

statute does not require that CEP profit be calculated on an LOT-

specific basis. See id. at 107. In addition, Commerce asserts

that even assuming that a narrower basis for the CEP-profit

calculation is warranted in some circumstances, NTN has not

provided any factual support for such a deviation from Commerce’s

standard methodology for calculating CEP profit. See id. at 109.

Torrington generally agrees with Commerce’s CEP-profit calculation.

See Torrington’s Resp. at 32.

Section 1677a(f), as Commerce correctly notes, does not make

any reference to LOT. Accordingly, the Court’s duty under Chevron

U.S.A. Inc. v. Natural Res. Def. Council, Inc. (“Chevron”), 467

U.S. 837 (1984) is to review the reasonableness of Commerce’s

statutory interpretation. See IPSCO, Inc. v. United States, 965

F.2d 1056, 1061 (Fed. Cir. 1992) (quoting Chevron, 467 U.S. at

844).
Consol. Court No. 97-10-01800 Page 16

This Court upheld Commerce’s refusal to calculate CEP on an

LOT-specific basis in NTN Bearing Corp. of Am., 24 CIT at ___, 104

F. Supp. 2d at 133-35, finding it to be reasonable and in

accordance with law. The Court examined the language of the

statute and concluded that the statute clearly contemplates that,

in general, the “narrowest category” will include the class or kind

of merchandise that is within the scope of an investigation or

review. The Court based its conclusion on its examination of

subsections (ii) and (iii) of § 1677a(f)(C)’s “total expense”

definition. Both subsections refer to “expenses incurred with

respect to the narrowest category of merchandise . . . which

includes the subject merchandise.” The term “subject merchandise”

is defined as “the class or kind of merchandise that is within the

scope of an investigation, a review, a suspension agreement, an

order under this subtitle or section 1303 of this title, or a

finding under the Antidumping Act, 1921.” 19 U.S.C. § 1677(25)

(1994).

Accordingly, as in NTN Bearing Corp. of Am., the Court finds

that Commerce reasonably interpreted § 1677a(f) in refusing to

apply a narrower subcategory of merchandise such as one based on

LOT. The Court, moreover, agrees with Commerce’s conclusion that

a “subdivision of the CEP-profit calculation would be more

susceptible to manipulation,” a result that Congress specifically
Consol. Court No. 97-10-01800 Page 17

warned Commerce to prevent. Final Results, 62 Fed. Reg. at 54,072.

Finally, even if the Court were to assume that a narrower basis for

calculating CEP profit would be justified under some circumstances,

the Court agrees with Commerce that NTN failed to provide adequate

factual support of how the CEP-profit calculation was distorted by

Commerce’s standard methodology.

III. Duty-absorption Inquiry (NTN, SKF, FAG, INA)

A. Background

Title 19, United States Code, § 1675(a)(4) provides that

during an administrative review initiated two or four years after

the “publication” of an antidumping duty order, Commerce, if

requested by a domestic interested party, “shall determine whether

antidumping duties have been absorbed by a foreign producer or

exporter subject to the order if the subject merchandise is sold in

the United States through an importer who is affiliated with such

foreign producer or exporter.” Section 1675(a)(4) further provides

that Commerce shall notify the International Trade Commission

(“ITC”) of its findings regarding such duty absorption for the ITC

to consider in conducting a five-year (“sunset”) review under 19

U.S.C. § 1675(c), and the ITC will take such findings into account

in determining whether material injury is likely to continue or

recur if an order were revoked under § 1675(c). See 19 U.S.C. §

1675a(a)(1)(D) (1994).
Consol. Court No. 97-10-01800 Page 18

On May 31, 1996 and July 9, 1996, Torrington requested that

Commerce conduct a duty-absorption inquiry pursuant to § 1675(a)(4)

with respect to various respondents, including NTN, SKF, FAG and

INA, to ascertain whether antidumping duties had been absorbed

during the seventh POR. See Final Results, 62 Fed. Reg. at 54,075.

In the Final Results, Commerce found that duty absorption had

occurred for the POR. See id. at 54,044. In asserting authority

to conduct a duty-absorption inquiry under § 1675(a)(4), Commerce

first explained that for “transition orders,” as defined in 19

U.S.C. § 1675(c)(6)(C) (that is, antidumping duty orders, inter

alia, deemed issued on January 1, 1995), regulation 19 C.F.R. §

351.213(j) provides that Commerce “will make a duty-absorption

determination, if requested, for any administrative review

initiated in 1996 or 1998.” Id. at 54,074. Commerce concluded

that: (1) because the antidumping duty order on the AFBs in this

case has been in effect since 1989, the order is a transition order

pursuant to § 1675(c)(6)(C); and (2) since this review was

initiated in 1996 and a request was made, Commerce had the

authority to make a duty-absorption inquiry for the seventh POR.

See id. at 54,075.

B. Contentions of the Parties

NTN, SKF, FAG and INA contend that Commerce lacked authority
Consol. Court No. 97-10-01800 Page 19

under § 1675(a)(4) to conduct a duty-absorption inquiry for the

seventh POR of the outstanding 1989 antidumping duty orders. See

NTN’s Mem. at 12; SKF’s Br. Supp. Mot. J. Agency R. (“SKF’s Br.”)

at 9; FAG’s Br. Supp. Mot. J. Agency R. (“FAG’s Br.”) at 12; INA’s

Br. Supp. Mot. J. Agency R. (“INA’s Br.”) at 46. In the

alternative, the parties assert that even if Commerce possessed the

authority to conduct such an inquiry, Commerce’s methodology for

determining duty absorption was contrary to law and, accordingly,

the case should be remanded to Commerce to reconsider its

methodology. See NTN’s Mem. at 17; SKF’s Br. at 16; FAG’s Br. at

15.

Commerce argues that it: (1) properly construed subsections

(a)(4) and (c) of § 1675 as authorizing it to make a duty-

absorption inquiry for antidumping duty orders that were issued and

published prior to January 1, 1995; and (2) devised and applied a

reasonable methodology for determining duty absorption. See Def.’s

Mem. at 31-47. Torrington generally agrees with Commerce’s

contentions. See Torrington’s Resp. at 8-14.

C. Analysis

In SKF USA Inc. v. United States, 24 CIT ___, 94 F. Supp. 2d

1351 (2000), this Court determined that Commerce lacked statutory

authority under § 1675(a)(4) to conduct a duty-absorption inquiry
Consol. Court No. 97-10-01800 Page 20

for antidumping duty orders issued prior to the January 1, 1995

effective date of the URAA. See id. at ___, 94 F. Supp. 2d at

1357-59. The Court noted that Congress expressly prescribed in the

URAA that § 1675(a)(4) “must be applied prospectively on or after

January 1, 1995 for 19 U.S.C. § 1675 reviews.” Id. at ___, 94 F.

Supp. 2d at 1359 (citing § 291 of the URAA).

Because Commerce’s duty-absorption inquiry, its methodology

and the parties’ arguments are practically identical to those

presented in SKF USA Inc., the Court adheres to its reasoning in

SKF USA Inc. The statutory scheme clearly provides that the

inquiry must occur in the second or fourth administrative review

after the publication of the antidumping duty order, not in any

other review, and upon the request of a domestic interested party.

Accordingly, the Court finds that Commerce did not have statutory

authority to undertake a duty-absorption investigation for the

antidumping duty orders in dispute here. The Court remands this

case to Commerce with instructions to annul all findings and

conclusions made pursuant to the duty-absorption inquiry conducted

for the subject review in accordance with this opinion.
Consol. Court No. 97-10-01800 Page 21

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

A. Background

During the review, NTN claimed a downward adjustment to its

reported United States indirect selling expenses for imputed

interest expenses allegedly incurred in financing cash deposits for

antidumping duties. See Final Results, 62 Fed. Reg. at 54,078.

Commerce denied the adjustment and determined that such an interest

offset to NTN’s indirect selling expenses is inappropriate, whether

based on actual interest expenses or an imputed amount allegedly

associated with financing cash deposits. See id. at 54,079.

Commerce thereby deducted the entire amount of NTN’s reported

indirect selling expenses, including all interest, from the CEP.

See id.

Commerce noted that 19 U.S.C. § 1677a(d)(1), which provides

for the deduction of certain selling expenses from CEP that were

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

affiliated seller in the United States, in selling the subject

merchandise,” does not precisely define what constitutes a selling

expense; instead, Congress has given Commerce discretionary

authority to determine what such an expense encompasses. Commerce

acknowledged that in past reviews of the applicable antidumping

duty orders, it determined that interest expenses incurred in
Consol. Court No. 97-10-01800 Page 22

financing antidumping duty cash deposits were not considered

selling expenses and thereby allowed an offsetting, financing-cost

adjustment to United States indirect selling expenses, “mainly to

account for the opportunity cost associated with making a deposit

(i.e., the cost of having money unavailable for a period of time).”

Preliminary Results, 62 Fed. Reg. at 31,569; see Final Results, 62

Fed. Reg. at 54,079. For this review, however, Commerce

reconsidered its position and concluded that this offsetting

financing-cost adjustment is inappropriate. See Final Results, 62

Fed. Reg. at 54,079.

Commerce found that while under the statute it may allow a

limited exemption from deductions from United States price for

antidumping duty cash deposits and legal fees associated with

participation in an antidumping case, it found no basis for

extending this exemption to interest expenses allegedly incurred in

financing the cash deposits. See id. The agency reasoned that

there is a distinction “between business expenses that arise from

economic activities in the United States and business expenses that

are direct, inevitable consequences of the dumping order.” Id.

Commerce determined that while cash deposits and legal fees are

incurred solely as a result of the existence of an antidumping

order, “[f]inancial expenses allegedly associated with cash

deposits are not a direct, inevitable consequence of an antidumping
Consol. Court No. 97-10-01800 Page 23

order.” Id. In particular, Commerce explained that although it

may be true that some importers sometimes incur a cost if they

borrow money in order to pay for cash deposits of antidumping

duties, it is a fundamental principle that:

‘money is fungible. If an importer acquires a loan to
cover one operating cost, that may simply mean that it
will not be necessary to borrow money to cover a
different operating cost.’ Companies may choose to meet
obligations for cash deposits in a variety of ways that
rely on existing capital resources or that require
raising new resources through debt or equity. For
example, companies may choose to pay deposits by using
cash on hand, obtaining loans, increasing sales revenues,
or raising capital through the sale of equity shares. In
fact, companies face these choices every day regarding
all their expenses and financial obligations. There is
nothing inevitable about a company having to finance cash
deposits and there is no way for [Commerce] to trace the
motivation or use of such funds even if it were.

Id. (quoting Preliminary Results, 62 Fed. Reg. at 31,569).

Commerce also noted that “the calculation of the dumping margins

should not vary depending on whether a party has funds available to

pay cash deposits or requires additional funds in the form of

loans.” Preliminary Results, 62 Fed. Reg. at 31,569.

Moreover, Commerce determined that it should not impute an

amount for any interest costs that would theoretically be

associated with financing actual cash deposits of antidumping

duties. See Final Results, 62 Fed. Reg. at 54,079. Commerce

reasoned that “there is no real opportunity cost associated with

paying cash deposits when the paying of such deposits is a
Consol. Court No. 97-10-01800 Page 24

precondition for doing business in the United States. . . .

Companies cannot choose not to pay cash deposits if they want to

import nor can they dictate the terms, conditions, or timing of

such payments.” Id.

B. Contentions of the Parties

NTN claims that Commerce’s rationale for denying NTN’s

adjustment for interest expenses is flawed because irrespective of

how a company opts to finance the cash deposits for antidumping

duties, the amount of cash deposited will have to be made up by

financing something else, a result that is a direct inevitable

consequence of the antidumping duty order. See NTN’s Mem. at 22.

NTN also asserts that if Commerce were to allow the interest

expenses from cash deposits from prior reviews to affect the

dumping margin calculations of present reviews, a never-ending

cycle would follow that would prevent Commerce from ever revoking

the antidumping duty order. See id. at 23.

NTN also asserts that Federal-Mogul Corp. v. United States, 20

CIT 1438, 1440-41, 950 F. Supp. 1179, 1182-83 (1996), clearly

refutes Commerce’s decision to deny NTN’s interest-expense

adjustment. See id. at 24. In particular, NTN notes the court in

Federal-Mogul found that there was no support for a domestic

party’s “‘assertion that any expense related to antidumping
Consol. Court No. 97-10-01800 Page 25

proceedings is automatically a selling expense related to the sale

of the subject merchandise.’” Id. (quoting Federal-Mogul Corp., 20

CIT at 1440-41, 950 F. Supp. at 1183).

Commerce argues that its decision to deny the offset was

within its discretion. See Def.’s Mem. at 112. Commerce also

argues that it may change its methodology if it presents a

reasonable basis for departing from its previous practice. See id.

Further, Commerce contends that the interest expenses allegedly

incurred with financing antidumping duty cash deposits are ordinary

interest expenses and, therefore, not deductible from United States

indirect selling expenses. See id. at 113-14.

Torrington asserts that Commerce reasonably denied the offset,

because allowing United States selling expenses to be reduced in

the manner claimed by NTN encourages dumping. See Torrington’s

Resp. at 19. Specifically, Torrington argues that the more a

company dumps its merchandise in the United States, the alleged

interest expenses on antidumping duty cash deposits will become

greater. See id. at 19. Torrington contends that as the interest

expense becomes greater, so does the offset to its reported United

States indirect selling expenses and, indeed, if the offset becomes

sufficiently large, dumping margins could disappear over time. See

id. Torrington also argues that there is no evidence that NTN

actually obtained loans for the purpose of posting cash deposits
Consol. Court No. 97-10-01800 Page 26

and, therefore, there is no factual basis for the adjustment. See

id.

C. Analysis

Although NTN correctly points out that interest expenses

incurred on financing antidumping cash deposits are not “selling

expenses,” see Federal-Mogul Corp., 20 CIT at 1140-41, 950 F. Supp.

at 1183, the Court disagrees that Commerce is prohibited from

altering its methodology of making adjustments to United States

indirect selling expenses. This Court has noted that “Commerce

may, in certain circumstances, reasonably change its methodology

from review to review.” Timken Co. v. United States, 21 CIT 1313,

1332, 989 F. Supp. 234, 250 (1997), vacated in part on other

grounds, 1 F. Supp. 2d 1390, 1393 (1998) (allowing Commerce to

alter its methodology with respect to interest expenses incurred

for financing cash deposits).

Consequently, since 19 U.S.C. § 1677a(d) does not provide

clear guidance with respect to the adjustment, the issue for the

Court is whether Commerce’s interpretation of the statute was

reasonable. The Court finds that Commerce reasonably interpreted

the statute by concluding that financing expenses incurred on

antidumping duty cash deposits are not an inevitable consequence of

the antidumping duty order and that, with respect to imputed
Consol. Court No. 97-10-01800 Page 27

interest costs, there is no real opportunity cost associated with

cash deposits when the paying of such deposits is a precondition

for doing business in the United States. Further, the Court finds

that NTN failed to provide any evidence on record that supported

its claim that it actually or approximately incurred the alleged

interest expenses on antidumping duty cash deposits. Commerce

acted rationally in denying NTN’s claimed interest-expense

adjustment and, therefore, Commerce’s determination is sustained.

V. Profit Calculation for CV (SKF, FAG, INA)

Commerce applied the “preferred” method for calculating CV

cost pursuant to 19 U.S.C. § 1677b(e)(2)(A), calculating an actual

profit ratio for FAG, SKF and INA. See Def.’s Mem. at 17 (citing

Final Results, 62 Fed. Reg. at 54,063. First, Commerce subtracted

costs and expenses from the home-market price in order to calculate

the profit for each sale of the foreign like product in the

ordinary course of trade. Commerce then aggregated the profit for

all sales at the same LOT and divided this profit by the exporter’s

or producer’s aggregate cost totals for the same sales. See Def.’s

Mem. at 17-18 (citing Preliminary Results, 62 Fed. Reg. at 31,571).

A. Contentions of the Parties

FAG contends that Commerce acted contrary to the plain meaning

of 19 U.S.C. § 1677b(e)(2)(A) in calculating CV profit on an
Consol. Court No. 97-10-01800 Page 28

aggregated “class or kind” basis while disregarding sales outside

the ordinary course of trade. See FAG’s Br. at 5-10. FAG

maintains that the statute permits Commerce to use an aggregated

CV-profit calculation only if no below-cost sales are disregarded

in the calculation. See id. at 10-11. SKF and INA make similar

arguments. See SKF’s Br. at 38-57; INA’s Br. at 15-28.

Commerce maintains that it applied a reasonable interpretation

of § 1677b(e)(2)(A) and properly based CV profit on aggregate

profit data of all foreign like products under consideration for NV

while disregarding below-cost sales. See Def.’s Mem. at 12-29.

Torrington generally agrees with Commerce. See Torrington’s Resp.

at 23-25.

B. Analysis

In RHP Bearings Ltd. v. United States, 23 CIT ___, 83 F. Supp.

2d 1322 (1999), this Court held, inter alia, that Commerce’s CV-

profit methodology, which consists of using the aggregate data of

all foreign like products under consideration for NV, is consistent

with the antidumping statute. Since FAG’s, SKF’s and INA’s

arguments and the methodology at issue in this case are practically

identical to those presented in RHP Bearings, the Court adheres to

its reasoning in RHP Bearings and, therefore, finds Commerce’s CV-

profit methodology to be in accordance with law. Furthermore,
Consol. Court No. 97-10-01800 Page 29

since the methodology in § 1677b(e)(2)(A) explicitly requires that

only sales “in the ordinary course of trade” be included in the

calculation, and below-cost sales that were disregarded in

determining NV are not part of the “ordinary course of trade,” the

exclusion of below-cost sales was appropriate. See 19 U.S.C. §§

1677(15), 1677b(b)(1).

VI. Matching United States Sales to “Similar” Home-Market Sales
Prior to Resorting to CV (FAG, INA)

FAG and INA maintain that Commerce erred in resorting to CV

without first attempting to match United States sales-–export price

(“EP”) or CEP sales--to “similar” home-market sales in instances

where all home-market sales of identical merchandise have been

disregarded because they were out of the ordinary course of trade.

See FAG’s Br. at 12; INA’s Br. at 13-15. FAG and INA maintain that

a remand is necessary to bring Commerce’s practice in line with the

CAFC’s decision in Cemex, S.A. v. United States, 133 F.3d 897, 904

(Fed. Cir. 1998). Commerce agrees with FAG and INA. See Def.’s

Mem. at 30.

The Court agrees with the parties. In Cemex, S.A., the CAFC

reversed Commerce’s practice of matching a United States sale to CV

when the identical or most similar home-market model failed the

cost test. See 133 F.3d at 904. The CAFC stated that “[t]he plain

language of the statute requires Commerce to base foreign market
Consol. Court No. 97-10-01800 Page 30

value [(now NV)] on nonidentical but similar merchandise [(foreign

like product under post-URAA law)] . . . rather than [CV] when

sales of identical merchandise have been found to be outside the

ordinary course of trade.” Cemex, S.A., 133 F.3d at 904. In light

of the CAFC’s decision in Cemex, S.A., this matter is remanded so

that Commerce can first attempt to match United States sales to

similar home-market sales before resorting to CV.

VII. Treatment of Certain Selling Expenses as Indirect Selling
Expenses (FAG)

A. Background

FAG reported certain credits that it has issued to unrelated

distributors as compensation for instances when FAG did not have

the requested bearing in stock and was able to buy it from the

distributor at a preferential price. See FAG’s Br. at 19.

Commerce treated the credits as indirect selling expenses.

Commerce explained that it treated them as indirect because “FAG

did not demonstrate that there is a direct tie between its sales to

the distributor and the distributor’s sale that generates the

payment.” Final Results, 62 Fed. Reg. at 54,055.

B. Contentions of the Parties

FAG argues that the credit would not have been granted had FAG
Consol. Court No. 97-10-01800 Page 31

not requested the distributor make a transaction. See FAG’s Br. at

19. FAG maintains that the link between the credit and the

distributor’s sale establishes the direct nature of the expense.

See id. FAG claims that “the distributor would not have received

the granted credit but for its original purchase of the bearing

from FAG” and, therefore, the expenses can be properly classified

as direct and allocated on a customer-specific basis. Id. at 19-20

(citing SAA at 823-24).

Commerce replies that because the “expenses related to the

sales of distributors to a third party” rather than “to FAG’s

direct sales to the distributors,” Commerce classified them as

indirect selling expenses. Def.’s Mem. at 49. Commerce argues that

the credit expenses “are completely unrelated to FAG’s sales to its

distributor” and that “FAG is essentially rewarding its distributor

for providing a service because the credits are issued only when

FAG cannot meet a certain request.” Id. at 50. Commerce maintains

that because the credit bears no direct relationship to the sales

under review, that is, to the sales by FAG to its distributors, the

expense was properly treated as indirect. See id. Torrington

supports Commerce’s treatment of the expense. See Torrington’s

Resp. at 16-17.

C. Analysis
Consol. Court No. 97-10-01800 Page 32

Commerce is required to grant an adjustment to NV for the

differences in circumstances of sale (“COS”). See 19 U.S.C. §

1677b(a)(6)(C)(iii). The COS adjustment encompasses direct selling

expenses, which are defined as expenses that “result from, and bear

a direct relationship to, the particular sale in question.” 19

C.F.R. § 351.410(b) and (c). FAG reported the credit expenses at

issue as part of the COS adjustment.

Commerce issued a supplemental questionnaire to FAG, asking it

to provide evidence of the direct relationship between the sales

for which the expense occurred and the sales of the distributors to

the distributors’ customers. See Final Results, 62 Fed. Reg. at

54,054. FAG replied that “[t]here is no direct tie between FAG”s

reported sales to the distributor and the sales of the distributor

that generate the payment or credit.” FAG KGS Supplemental

Questionnaire Resp. for 1995-96 Admin. Review Secs. A-D (12/10/96)

(Case No. A-428-801) at 30. Additionally, in its case brief, FAG

confirmed that the claimed expense was produced by the

distributor’s sales to the unrelated party and not by FAG’s sales.

See FAG Case Brief for 1995-96 Admin. Review (7/1/97) (Case No. A-

428-801) at 18-19.

As FAG plainly acknowledges, the credit expense cannot

properly be classified as direct because it does not bear a direct

relationship to the sales under review, that is, to the sales made
Consol. Court No. 97-10-01800 Page 33

by FAG to the distributor. Because Commerce properly refused to

treat the credit expenses at issue as direct, Commerce’s

determination is sustained.

VIII.Deduction of Downward Billing Adjustments on Home-Market Sales
(INA)

INA argues that Commerce erred in not allowing downward

billing adjustments on home-market sales. See INA’s Br. at 9. INA

maintains that Commerce’s rejection of its adjustments “is based on

an erroneous and unwarranted assumption that INA determined such

adjustments by allocation” when, in fact, “INA determined billing

adjustments on an invoice and product specific basis, not by

allocation.” Id. at 12.

In the Final Results, Commerce stated that it did not view the

omission of downward home-market billing adjustments as a clerical

error and refused to allow the adjustment. See Final Results, 62

Fed. Reg. at 54,042. In preparing its arguments to this Court,

however, Commerce reviewed the record and concluded “that it erred

in denying INA’s downward billing adjustments.” Def.’s Mem. at 51.

Commerce agrees that the case should be remanded so that it can

grant a downward billing adjustment to INA on its home-market

sales. See id. In light of the foregoing, this case is remanded

to Commerce to reconsider its determination to deny a downward

billing adjustment to INA on its home-market sales.
Consol. Court No. 97-10-01800 Page 34

IX. Exclusion of Sales Made Out of the Ordinary Course of Trade
from the Home-Market Database (INA)

A. Background

Commerce is required to base its NV calculation upon “the

price at which the foreign like product is first sold . . . in the

ordinary course of trade.” 19 U.S.C. § 1677b(a)(1)(B)(i).

Analogously, CV must be calculated using “amounts incurred . . .

for profits, in connection with the production and sale of a

foreign like product, in the ordinary course of trade, for

consumption in the foreign country . . . .” 19 U.S.C. §

1677b(e)(2)(A). INA contended during the review that Commerce

should have excluded one specific sale “that by any measure was

made at an aberrational price with an abnormally high profit” as

being outside of the ordinary course of trade. Final Results, 62

Fed. Reg. at 54,066. Commerce rejected INA’s contention,

explaining as follows:

The presence of profits higher than those of numerous
other sales does not necessarily place the sale outside
the ordinary course of trade for purposes of computing CV
profit. In order to determine that a sale is outside the
ordinary course of trade due to abnormally high profits,
there must be certain unique and unusual characteristics
related to the sale in question. However, the
respondents have provided no information other than the
numerical profit amounts to support their contention that
certain HM sales had abnormally high profits.
Accordingly, we have not excluded INA’s specific sale
from the CV-profit calculation.

Id.
Consol. Court No. 97-10-01800 Page 35

B. Contentions of the Parties

INA argues that Commerce’s failure to exclude one of its sales

with an unusually high price and profit level from the final

results calculation was inconsistent with 19 U.S.C. §

1677b(a)(1)(B) and the SAA, both of which clearly instruct Commerce

to make such an exclusion. See INA’s Br. at 29. INA argues that

“the SAA makes clear that aberrational price and abnormally high

profits are per se characteristics of sales outside the ordinary

course of trade and, accordingly, that no other ‘unique and unusual

characteristics’ need be shown.” Id. at 30. INA also contends

that Commerce’s position is contrary to 19 C.F.R. § 351.102(d).

See id. at 30-31.

Commerce alleges that it properly exercised its discretion in

rejecting INA’s argument that Commerce must disregard sales with

high profit levels as sales not in the ordinary course of trade

because “INA failed to provide the necessary additional evidence

to support its claim” and, therefore, Commerce’s decision to treat

the sale as within the ordinary course of trade was proper. Def.’s

Mem. at 57. Commerce contends that INA’s refusal to provide

requested information prevented Commerce from evaluating all of the

relevant circumstances particular to the sales in question. See

id. at 58.
Consol. Court No. 97-10-01800 Page 36

Torrington claims that Commerce properly rejected INA’s

request to exclude high-price and high-profit sales from the NV and

CV calculation because: (1) a higher price or profit on a

particular sale does not establish that a sale is outside the

ordinary course of trade; and (2) INA failed to show that the

contested sales were not in the ordinary course of trade. See

Torrington’s Resp. at 21-22.

C. Analysis

The term “ordinary course of trade” is defined as:

the conditions and practices which, for a reasonable
time prior to the exportation of the subject merchandise,
have been normal in the trade under consideration with
respect to merchandise of the same class or kind.
[Commerce] shall consider the following sales and
transactions, among others, to be outside the ordinary
course of trade:
(A) Sales disregarded under section
1677b(b)(1) of this title.
(B) Transactions disregarded under section
1677b(f)(2) of this title.

19 U.S.C. § 1677(15) (emphasis supplied). Section 1677b(b)(1)

deals with below-cost sales. Section 1677b(f)(2) deals with sales

to affiliated persons. Therefore, Commerce must consider below-

cost sales and sales between related parties as sales outside the

ordinary course of trade. Although § 1677b(b)(1)’s below-cost

sales and § 1677b(f)(2)’s affiliated-party transactions are

specifically designated as outside the ordinary course of trade,

the “among others” language of § 1677(15) clearly indicates that
Consol. Court No. 97-10-01800 Page 37

other types of sales could be excluded as being outside the

ordinary course of trade.5

Determining whether a sale or transaction is outside the

ordinary course of trade is a question of fact. 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). Thus,

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

5
The SAA accompanying the URAA provides that aside from §§
1677b(b)(1), (f)(2) 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, amended section 771(15) does not establish
an exhaustive list, but the Administration intends that
Commerce will interpret section 771(15) in a manner which
will avoid basing normal value on sales which are
extraordinary for the market in question, particularly
when the use of such sales would lead to irrational or
unrepresentative results.

H.R. DOC. No. 103-316, vol. 1, at 834 (emphasis supplied). The SAA
also provides that “[o]ther examples of sales that Commerce could
consider to be outside the ordinary course of trade include sales
of off-quality merchandise, sales to related parties at non-arm’s-
length prices, and sales with abnormally high profits.” Id. at
839-40.
Consol. Court No. 97-10-01800 Page 38

which sales are outside the ordinary course of trade, such as sales

involving aberrational prices and abnormally high profit levels.

In resolving questions of statutory interpretation, the

Chevron test requires this Court first to determine whether the

statute is clear on its face. If the language of the statute is

clear, then this Court must defer to Congressional intent. See

Chevron, 467 U.S. at 842-43. If the statute is unclear, however,

then the question for the Court is whether the agency’s answer is

based on a permissible construction of the statute. See id. at

843; see also Corning Glass Works v. United States Int’l Trade

Comm’n, 799 F.2d 1559, 1565 (Fed. Cir. 1986) (finding the agency’s

definitions must be “reasonable in light of the language, policies

and legislative history of the statute”).

Here, the statutory provision defining what is considered

outside the ordinary course of trade is unclear. While the statute

specifically defines “ordinary course of trade,” it provides little

assistance in determining what is outside the scope of that

definition. The statute merely identifies a non-exhaustive list of

situations in which sales or transactions are to be considered

outside the “ordinary course of trade.” This Court finds the

statute is ambiguous as to what constitutes a sale outside the

ordinary course of trade. What Congress intended to exclude from

the “ordinary course of trade” is also not immediately clear from
Consol. Court No. 97-10-01800 Page 39

the statute’s legislative history. In the SAA, Congress stated

that in addition to the specific types of transactions to be

considered outside the ordinary course of trade, “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.” SAA at 834.

Congress also stated that as the statute does not provide an

exhaustive list of situations which qualify as being outside the

ordinary course of trade, “the Administration intends that Commerce

will interpret section 771(15) [19 U.S.C. § 1677(15)] in a manner

which will avoid basing normal value on sales which are

extraordinary for the market in question.” Id. This Court finds

the legislative history is also ambiguous as to what constitutes a

sale outside the ordinary course of trade.

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 the agency’s

interpretation of the provision to determine whether the agency’s

interpretation is reasonable and in accordance with the legislative

purpose. 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
Consol. Court No. 97-10-01800 Page 40

objectives of those provisions, and the objective of the

antidumping scheme as a whole. The purpose of the ordinary course

of trade provision is “to prevent dumping margins from being based

on sales which are not representative” of the home market. See

Monsanto Co. v. United States, 12 CIT 937, 940, 698 F. Supp. 275,

278 (1988). Commerce’s methodology for deciding when sales are

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

totality of the circumstances surrounding the sale or transaction

in question to determine whether the sale or transaction is

extraordinary. Commerce’s methodology allows it, on a case-by-case

basis, to examine all conditions and practices which may be

considered ordinary in the trade under consideration and to

determine which sales or transactions are, therefore, outside the

ordinary course of trade. Because such a methodology gives

Commerce wide discretion in deciding under what circumstances sales

or transactions are outside the ordinary course of trade and

circumstances differ in each case, this Court finds that, in light

of the statute’s legislative purpose, Commerce’s interpretation of

the statute and exercise of its discretion by requiring additional

evidence demonstrating that sales with high profit levels were

outside of the ordinary course of trade before excluding such sales

from the NV and CV calculations was reasonable.

INA provided Commerce with insufficient evidence to show that
Consol. Court No. 97-10-01800 Page 41

Commerce should have excluded sales with abnormally high prices or

profits. The mere fact of abnormally high prices or profits is not

enough to put these sales outside of the ordinary course of trade.

The presence of prices or profits higher than those of other sales

is merely an element for Commerce to take into consideration and

does not necessarily place the sales outside of the ordinary course

of trade; nor does it strip Commerce of the right to exercise its

discretion and conclude that sales with abnormally high prices or

profits lack the characteristics necessary to place them outside

the ordinary course of trade.

Thus, because Commerce’s interpretation and application of the

statute was reasonable and the record reflects that INA did not

provide sufficient additional evidence that supports its claim that

the disputed sales were extraordinary for the market in question,

Commerce was justified in its decision to include INA’s sales in

the NV and CV calculations.

X. Inclusion of Zero-Priced United States Transactions in the
Margin Calculations (INA)

A. Background

Commerce had requested certain information in its

questionnaire to INA regarding transactions that INA claimed to

involve sample or prototype sales. Commerce required respondents

to identify such transactions, and also requested the following
Consol. Court No. 97-10-01800 Page 42

information:

1) Describe how the orders for these sales were
communicated.
2) What documents are available to demonstrate that these
sales are samples or prototypes?
3)Did the customer in question purchase these particular
items before the date of the claimed sample sale? If so,
how many were purchased?
4) Contrast the prices and quantities involved in these
purchases with normal sales of these items, if any, to
other customers and subsequent sales to the same
customer.
5) What was the ultimate disposition of these bearings?
Did title pass to the recipient of the merchandise? Were
the bearings tested and destroyed during trial
application?

INA Questionnaire Resp. for 1995-96 Admin. Review Sec. B (9/10/96)

(Case No. A-428-801) at C-53. INA deemed the information

irrelevant and did not provide it, stating the following:

Since INA-USA cannot systematically identify all
transactions that might be considered to involve samples,
it has omitted this field. It is the understanding of
INA-USA that the Department does not distinguish between
sample transactions and other transactions in analyzing
U.S. sales, in any event. Transactions involving
bearings that were provided to the customer at no charge
can be identified in the U.S. sales files by gross unit
price of zero in field 16.0.

Id. at C-54.

Subsequently, the CAFC promulgated its decision in NSK Ltd. v.

United States (“NSK”), 115 F.3d 965, 975 (Fed. Cir. 1997). In NSK,

the CAFC held “that the term ‘sold’ . . . requires both a transfer

of ownership to an unrelated party and consideration.” 115 F.3d at

975. Thus, a zero-priced transaction does not qualify as a “sale”
Consol. Court No. 97-10-01800 Page 43

and, therefore, by definition cannot be included in Commerce’s NV

calculation. The distribution of AFBs for no consideration falls

outside the purview of 19 U.S.C. § 1673 (1994).

In the final results, Commerce reviewed the record information

for each respondent who reported zero-priced samples to ascertain

whether each respondent appeared to have received consideration for

the samples. See Def.’s Mem. at 60. Commerce reviewed the

questionnaire responses and “when the respondent had responded

fully and the response provided no indication that the respondent

had received consideration for the sample,” Commerce excluded the

transaction from the margin calculation. Id. With respect to INA,

Commerce found, as facts available, that INA received consideration

for the sample. See id. In the Final Results, Commerce stated the

following:

[T]he party in possession of the information has the
burden of producing that information, particularly when
seeking a favorable adjustment or exclusion. INA did not
answer our questions regarding the purchase history of
parties receiving samples. INA also did not answer our
questions regarding the prices and quantities involved in
sample transactions. The answers to these questions
would have aided us in determining whether INA received
a bargained-for exchange from its U.S. customers.
Lacking knowledge of the details of these transactions,
we cannot conclude that INA received no consideration for
these alleged samples. In other words, because INA
impeded our investigation of these transactions, we
determined that an adverse inference is appropriate.
Therefore, for these final results, we have included
INA’s sample sales in its U.S. sales database.
Consol. Court No. 97-10-01800 Page 44

62 Fed. Reg. at 54,071.

B. Contentions of the Parties

INA argues that in light of NSK, the Court should remand the

matter to Commerce to exclude its zero-value transactions from the

margin calculations. See INA’s Br. at 32-37. INA points to its

questionnaire response to show that bearings provided at no charge

could be identified by their zero price in the sales listing. See

id. at 35. INA argues that at the time it responded to Commerce’s

questionnaire, the issue of whether INA received consideration was

irrelevant, since Commerce considered the transaction to be a

covered sale irrespective of any consideration involved. See id.

INA notes that in its questionnaire, Commerce never directly asked

whether INA received consideration. See id. 35-36.

INA also argues that Commerce did not provide INA an

opportunity to remedy any deficiencies of information regarding

United States sample transactions prior to applying facts

available, as mandated by 19 U.S.C. § 1677m(d). See id. at 36.

INA argues “Commerce did not ask any question concerning whether or

not INA received consideration for any reported transactions,

Commerce did not notify INA of any deficiency in its response . .

. and the issue of consideration did not become relevant until

after the factual record in the review was closed” and, therefore,
Consol. Court No. 97-10-01800 Page 45

Commerce should not have resorted to adverse fact available. Id.

INA also contends that there is no indication that INA received any

consideration for the merchandise. See id.

Commerce does not dispute INA’s reading of NSK, but maintains

that INA’s zero-priced United States sales were properly included

in its dumping margin as facts available because INA refused to

provide information that would have helped Commerce determine

whether INA received consideration for the transactions. See

Def.’s Mem. at 58. Commerce maintains that “[b]y declining to

respond to the questions regarding U.S. samples, INA chose to take

its chances as to whether such information would be relevant to

Commerce’s final results.” Id. at 62. Commerce believes that its

resort to adverse facts available was proper because the record was

missing necessary information and INA failed to act to the best of

its ability to provide the information. See id.

Torrington argues that money is not the only form of

consideration cognizable under the antidumping law and, therefore,

INA’s declaration that the sales were at zero price does not mean

they should automatically be excluded. See Torrington’s Resp. at

27-28. Torrington points out that other forms of consideration

could be exchanged, such as the situation where “a producer gives

‘free’ prototypes in the context of a broader understanding

whereunder it develops and provides prototypes before supplying
Consol. Court No. 97-10-01800 Page 46

production quantities,” or where a producer offers ten units plus

a “sample” at a certain price and the price actually covers eleven

units. Id. at 28. Torrington argues that the prototype units or

the sample in these situations could be considered to have been

“sold” for purposes of NSK. See id. Thus, Torrington believes

that Commerce was correct in rejecting INA’s claim since Commerce

did not have the information necessary to make its determination.

See id. at 29.

C. Analysis

The antidumping statute mandates that Commerce use “facts

otherwise available” (commonly referred to as “facts available”) if

“necessary information is not available on the record” of an

antidumping proceeding. 19 U.S.C. § 1677e(a)(1). In addition,

Commerce may use facts available where an interested party or any

other person: (1) withholds information that has been requested by

Commerce; (2) fails to provide the requested information by the

requested date or in the form and manner requested, subject to 19

U.S.C. § 1677m(c)(1), (e); (3) significantly impedes an antidumping

proceeding; and (4) provides information that cannot be verified as

provided in section 19 U.S.C. § 1677m(i). See id. §

1677e(a)(2)(A)-(D). Section 1677e(a) provides, however, that the

use of facts available shall be subject to the limitations set

forth in 19 U.S.C. § 1677m(d).
Consol. Court No. 97-10-01800 Page 47

Section 1677m(d), entitled “deficient submissions,” provides

that if Commerce determines that a response to a request for

information does not comply with the request, the agency shall

promptly inform the person submitting the response of the

deficiency and permit that person an opportunity to remedy or

explain the deficiency. If the remedial response or explanation

provided by the party is found to be “not satisfactory” or

untimely, Commerce may, subject to § 1677m(e), disregard “all or

part of the original and subsequent responses” in favor of facts

available. Id. § 1677m(d).

Once Commerce determines that use of facts available is

warranted, § 1677e(b) permits Commerce to apply an “adverse

inference” if it can find that “an interested party has failed to

cooperate by not acting to the best of its ability to comply with

a request for information.” Such an inference may permit Commerce

to rely on information derived from the petition, the final

determination, a previous review or any other information placed on

the record. See 19 U.S.C. § 1677e(c) (1994). When Commerce relies

on information other than “information obtained in the course of

the investigation or review, [Commerce] shall, to the extent

practicable, corroborate that information from independent sources

that are reasonably at [its] disposal.” Id.
Consol. Court No. 97-10-01800 Page 48

In order to find that a party “has failed to cooperate by not

acting to the best of its ability,” it is not sufficient for

Commerce to merely assert this legal standard as its conclusion or

repeat its finding concerning the need for facts available. See

Ferro Union, Inc. v. United States, 23 CIT ___, ___, 44 F. Supp. 2d

1310, 1329 (1999) (“Once Commerce has determined under 19 U.S.C. §

1677e(a) that it may resort to facts available, it must make

additional findings prior to applying 19 U.S.C. § 1677e(b) and

drawing an adverse inference.”). Rather, to be supported by

substantial evidence, Commerce must clearly articulate: (1) “why it

concluded that a party failed to comply to the best of its ability

prior to applying adverse facts,” and (2) “why the absence of this

information is of significance to the progress of [its]

investigation.” Ferro Union, Inc., 23 CIT at ___, 44 F. Supp. 2d

at 1331.

The Final Results do not clarify (1) whether INA was given

prompt notice of the deficiency regarding the sample sales data and

given the opportunity to remedy the deficiency, or (2) that even if

INA provided a remedial response, whether Commerce determined that

such a response was not satisfactory or untimely, as required by 19

U.S.C. § 1677m(d). Although Commerce asserted in its brief that

INA met the requirements of 19 U.S.C. § 1677e(a), (b), see Def.’s

Mem. at 62-63, the Court cannot defer to this post hoc
Consol. Court No. 97-10-01800 Page 49

rationalization as a basis to uphold Commerce’s decision to use

facts available because such a decision must be sustained, if at

all, on the same basis as the reasoning articulated in the final

determination itself, see Hoogovens Staal BV v. United States, 24

CIT __, __, 86 F. Supp. 2d 1317, 1331 (2000) (holding that “a

reviewing court must evaluate the validity of an agency’s decision

on the basis of the reasoning presented in the decision itself. An

agency determination ‘cannot be upheld merely because findings

might have been made and considerations disclosed which would

justify its order . . . .’”) (quoting SEC v. Chenery Corp., 318

U.S. 80, 94 (1943)); see also Burlington Truck Lines, Inc. v.

United States, 371 U.S. 156, 168-69 (1962) (“The courts may not

accept . . . counsel’s post hoc rationalizations for agency action;

. . . an agency’s discretionary order [must] be upheld, if at all,

on the same basis articulated in the order by the agency

itself.”).6 Further, even if the Court were to assume that

6
Indeed, the Supreme Court has opined:

If the administrative action is to be tested by the basis
upon which it purports to rest, that basis must be set
forth with such clarity as to be understandable. It will
not do for a court to be compelled to guess at the theory
underlying the agency’s action; nor can a court be
expected to chisel that which must be precise from what
the agency has left vague and indecisive. In other words,
‘We must know what a decision means before the duty
becomes ours to say whether it is right or wrong.’

SEC v. Chenery Corp., 332 U.S. 194, 196-97 (1947) (quoting United
States v. Chicago, M., St. P. & P.R. Co., 294 U.S. 499, 511
Consol. Court No. 97-10-01800 Page 50

Commerce met § 1677e(a)’s criteria for using facts available, the

Court notes that Commerce did not articulate in the Final Results

whether it made any “additional findings” that INA had failed to

act to the best of its ability before applying an adverse inference

under § 1677e(b).

The Court, however, agrees with Commerce’s finding that it

should not automatically exclude from its dumping margin analysis

“any transaction to which a respondent applies the label ‘sample.’”

Final Results, 62 Fed. Reg. at 54,069. In determining whether to

exclude samples from the sales database, as Commerce correctly

noted, it must “examine the information on the record to determine

whether the recipients of the samples have undertaken actual

obligations to purchase AFBs from the provider of the free bearings

or whether the recipients remained free to purchase bearings of

their own accord.” Id. This approach is clearly consistent with

the CAFC’s decision in NSK, where the appellate court determined

that a foreign manufacturer’s AFB “samples given to potential

customers at no charge lacked consideration [because] . . . there

is no evidence that potential customers had any obligation

regarding samples received from [the manufacturer]. These

potential customers were free to transact with [the manufacturer]

based solely on their whim.” 115 F.3d at 975 (noting that “[w]hen

(1935)).
Consol. Court No. 97-10-01800 Page 51

the promisor may choose to perform based solely on whim, then the

promise will not serve as consideration”) (citing 3 Williston on

Contracts, § 7:7 at 89 (4th ed. 1992))). The CAFC explained that

“[c]onsideration generally requires a bargain-for exchange,” id.

(citing 3 Williston on Contracts, § 7:2 at 18-19), and also noted

that a “sale” is defined as “‘the act of selling: a contract

transferring the absolute or general ownership of property from one

person . . . to another for a price (as a sum of money or any other

consideration).’” Id. at 974 (quoting Webster’s Third New

International Dictionary 2003 (1986)). In others words, as

Commerce accurately noted in the Final Results, consideration, or

“price,” is not necessarily limited to a “sum of money.” See 62

Fed. Reg. at 54,069 (stating that Commerce would not limit its

“review of consideration to the payment of a monetary price for the

sample products”).

The Court also notes that a respondent still maintains the

burden of showing that there is either no consideration or no

transfer of ownership to an unrelated party in order to exclude the

sample sales from the dumping margin analysis. See generally

Timken Co. v. United States, 11 CIT 786, 804, 673 F. Supp. 495, 513

(1987) (stating that Commerce “acts reasonably in placing the

burden of establishing adjustments on a respondent that seeks the

adjustments and that has access to the necessary information”).
Consol. Court No. 97-10-01800 Page 52

In light of the considerable uncertainty left by the Final

Results, the Court cannot conclude that Commerce’s use of adverse

facts available was warranted under 19 U.S.C. § 1677e(a). The

Court, therefore, remands the issue to Commerce to clarify how it

complied with the statutory framework of 19 U.S.C. §§ 1677e, 1677m

for using facts available and applying an adverse inference. If in

the remand results Commerce determines it did not adhere to all of

the statutory prerequisite conditions, Commerce must give INA the

opportunity to remedy or explain any deficiency regarding its

alleged sample sales.

XI. Commerce’s Refusal to Exclude Home-Market Sample Sales
–Exhaustion of Administrative Remedies (INA)

INA argues that Commerce erred in refusing to exclude home-

market sales that INA alleges are outside the ordinary course of

trade. See INA’s Br. at 37. INA alleges that Commerce properly

excluded zero-priced transactions, but erroneously refused to find

that “other sample transactions” were outside the ordinary course

of trade. See id. at 38. INA believes that Commerce requested

information on sample sales for the sole purpose of determining

whether they were made in the ordinary course of trade and,

therefore, Commerce was compelled to determine whether such sales

were made in the ordinary course of trade regardless of whether INA

raised the issue. See id.
Consol. Court No. 97-10-01800 Page 53

Commerce contends that the Court should not consider the issue

because INA failed to exhaust its administrative remedies. See

Def.’s Mem. at 63. In the alternative, Commerce argues that should

the Court find that INA was not obligated to exhaust its

administrative remedies, then the Court should sustain Commerce’s

determination because INA failed to show that its home-market

sample sales were not in the ordinary course of trade. See id.

Torrington generally supports Commerce’s position. See

Torrington’s Resp. at 30.

INA flatly concedes that it “did not raise any issue with

respect to home market sample sales in its case brief.” INA’s Br.

at 37. INA appears to be arguing that this Court should consider

the issue despite INA’s failure to raise it at the administrative

level because “Commerce determined in its final results notice to

exclude INA’s zero-priced home market sample transactions but at

the same time failed,” on its own initiative, “to consider whether

INA’s other home market sample transactions should be excluded.”

Id.

The exhaustion doctrine requires a party to present its claims

to the relevant administrative agency for consideration before

raising them to the Court. See Unemployment Compensation Comm’n of

Alaska v. Aragon, 329 U.S. 143, 155 (1946) (“A reviewing court
Consol. Court No. 97-10-01800 Page 54

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.”). In this case,

however, there is no absolute requirement of exhaustion in the

Court of International Trade. 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 of the United States code directs that

“the Court of International Trade shall, where appropriate, require

the exhaustion of administrative remedies.” By its use of the

phrase “where appropriate,” Congress vested discretion in the Court

to determine the circumstances under which it shall require the

exhaustion of administrative remedies. See Cemex, S.A., 133 F.3d

at 905. “[E]ach exercise of judicial discretion in not requiring

litigants to exhaust administrative remedies” has been

characterized as “‘an exception to the doctrine of exhaustion.’”

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

Timken Co. v. United States, 10 CIT 86, 93, 630 F. Supp. 1327, 1334

(1986)).

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
Consol. Court No. 97-10-01800 Page 55

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 Co., 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, see id.; R.R. Yardmasters of

America 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,” Philipp Bros.,

Inc. v. United States, 10 CIT 76, 79-80, 630 F. Supp. 1317, 1320-21

(1986).

As INA readily admits, it has failed to exhaust its

administrative remedies. Additionally, there are no reasons or

special circumstances here compelling the Court to decline to

require exhaustion. INA had the opportunity to bring the issue

before Commerce at the administrative level but failed. The only

argument INA makes in its defense is that Commerce, on its own
Consol. Court No. 97-10-01800 Page 56

initiative, should have determined whether the sales were made

outside the ordinary course of trade. The burden is on INA to

raise the issue at the administrative level and demonstrate that

the home-market sample sales were outside the ordinary course of

trade; it is not Commerce’s responsibility to shoulder this burden.

Commerce’s determination is affirmed.

XII. Commerce’s Calculation of a Single Weighted-Average CEP-Profit
Rate for Each Class or Kind of Merchandise (INA)

A. Background

In calculating CEP, Commerce must reduce the starting price

used to establish CEP by “the profit allocated to the expenses

described in paragraphs (1) and (2)” of § 1677a(d) (1994). 19

U.S.C. § 1677a(d)(3). Under 19 U.S.C. § 1677a(f), the “profit”

that will be deducted from this starting price will be “determined

by multiplying the total actual profit by [a] percentage”

calculated “by dividing the total United States expenses by the

total expenses.” Id. § 1677a(f)(1), (2)(A). Section

1677a(f)(2)(B) defines “total United States expenses” as the total

expenses deducted under § 1677a(d)(1) and (2), that is,

commissions, direct and indirect selling expenses, assumptions and

the cost of any further manufacture or assembly in the United

States.

Section 1677a(f)(2)(C) establishes a tripartite hierarchy of
Consol. Court No. 97-10-01800 Page 57

methods for calculating “total expenses.” First, “total expenses”

will be “[t]he expenses incurred with respect to the subject

merchandise sold in the United States and the foreign like product

sold in the exporting country” if Commerce requested such expenses

for the purpose of determining NV and CEP. Id. §

1677a(f)(2)(C)(i). If category (i) does not apply, then “total

expenses” will be “[t]he expenses incurred with respect to the

narrowest category of merchandise sold in the United States and the

exporting country which includes the subject merchandise.” Id. §

1677a(f)(2)(C)(ii). If neither category (i) or (ii) applies, then

“total expenses” will be “[t]he expenses incurred with respect to

the narrowest category of merchandise sold in all countries which

includes the subject merchandise.” Id. § 1677a(f)(2)(C)(iii).

“Total actual profit” is based on whichever category of merchandise

is used to calculate “total expenses” under § 1677a(f)(2)(C). See

id. § 1677a(f)(2)(D).

Commerce calculated the CEP-profit rate on a weighted-average

class or kind basis, rejecting INA’s request to perform the

calculation on a product-specific basis. See Final Results, 62

Fed. Reg. at 54,072. In rejecting INA’s arguments, Commerce stated

the following:

[N]either the statute nor the SAA requires us to
calculate CEP profit on bases more specific than the
subject merchandise as a whole. Respondent’s suggestion
Consol. Court No. 97-10-01800 Page 58

would add a layer of complexity to an already complicated
exercise with no increase in accuracy. Furthermore, a
subdivision of the CEP-profit calculation would be more
susceptible to manipulation.

Id. (citation omitted).

B. Contentions of the Parties

INA contends that Commerce erred in calculating CEP-profit

rate on a class or kind basis. See INA’s Br. at 38. INA maintains

that Commerce should have calculated CEP-profit rate on a product-

specific basis. See id. at 39. INA argues that the purposes of

the antidumping statute are fulfilled only when “CEP profit for

each transaction [is] based only on the actual profit on the U.S.

transaction,” and Commerce’s methodology distorts the CEP

calculation by imposing a uniform profit rate on all transactions

without regard to differences in actual profit between products.

Id. at 43.

Commerce argues because the statute does not dispose of the

particular issue, the Court must accept Commerce’s interpretation

of the law if the interpretation is permissible. See Def.’s Mem.

at 74. Additionally, Commerce argues that INA’s argument is not

persuasive, and that this Court should follow the court’s decision

in Toyota Motor Sales v. United States, 22 CIT 643, 15 F. Supp. 2d

872 (1998), which addressed a similar issue. See id. at 73-75.

Torrington agrees with Commerce’s position. See Torrington’s Resp.
Consol. Court No. 97-10-01800 Page 59

at 32.

C. Analysis

In resolving questions of statutory interpretation, the

Chevron test requires this Court first to determine whether the

statute is clear on its face. If the language of the statute is

clear, then this Court must defer to Congressional intent. See

Chevron, 467 U.S. at 842-43. If the statute is unclear, however,

then the question for the Court is whether the agency’s answer is

based on a permissible construction of the statute. See id. at

843; see also Corning Glass Works, 799 F.2d at 1565 (finding the

agency’s definitions must be “reasonable in light of the language,

policies and legislative history of the statute”).

Section 1677a(f), as Commerce correctly notes, does not direct

nor prohibit Commerce from calculating CEP profit on a class or

kind basis. Accordingly, the Court’s duty under Chevron is to

review the reasonableness of Commerce’s statutory interpretation.

See IPSCO, Inc., 965 F.2d at 1061 (quoting Chevron, 467 U.S. at

844).

This Court upheld Commerce’s refusal to calculate CEP on an

LOT-specific basis in NTN Bearing Corp. of Am., 24 CIT at ___, 104

F. Supp. 2d at 133-35, finding it to be reasonable and in

accordance with law. The Court examined the language of the
Consol. Court No. 97-10-01800 Page 60

statute and concluded that the statute clearly contemplates that,

in general, the “narrowest category” will include the class or kind

of merchandise that is within the scope of an investigation or

review. The Court based its conclusion on its examination of

subsections (ii) and (iii) of § 1677a(f)(C)’s “total expense”

definition. Both subsections refer to “expenses incurred with

respect to the narrowest category of merchandise . . . which

includes the subject merchandise.” The term “subject merchandise”

is defined as “the class or kind of merchandise that is within the

scope of an investigation, a review, a suspension agreement, an

order under this subtitle or section 1303 of this title, or a

finding under the Antidumping Act, 1921.” 19 U.S.C. § 1677(25).

Similarly, the Court finds that Commerce reasonably

interpreted § 1677a(f) in refusing to apply a narrower subcategory

of merchandise such as one based on product. The Court, moreover,

agrees with Commerce’s conclusion that a “subdivision of the CEP-

profit calculation would be more susceptible to manipulation,” a

result that Congress specifically warned Commerce to prevent.

Final Results, 62 Fed. Reg. at 54,072. Finally, even if the Court

were to assume that a narrower basis for calculating CEP profit

would be justified under some circumstances, INA failed to provide

adequate factual support of how the CEP-profit calculation was

distorted by Commerce’s standard methodology.
Consol. Court No. 97-10-01800 Page 61

XIII.Treatment of Imputed Credit and Inventory Carrying Costs in
the Calculation of CEP Profit (INA)

A. Background

INA reported United States sales that Commerce treated as CEP

sales pursuant to 19 U.S.C. § 1677a(b), and Commerce deducted an

amount for profit allocated to the expenses enumerated by 19 U.S.C.

§ 1677a(d)(1) and (2). See 19 U.S.C. § 1677a(d)(3). In the profit

calculation, Commerce excluded imputed expenses and carrying costs

from the “total actual profit” calculation, defined in §

1677a(f)(2)(D), and from the “total expenses” calculation, defined

in § 1677a(f)(2)(C), but included them in the “total United States

expenses” calculation, defined in § 1677a(f)(2)(B). INA objected

to the omission of imputed expenses and carrying costs from “total

actual profit” and “total expenses,” and Commerce responded with

the following:

[S]ections [1677(f)(1) and 1677(f)(2)(D)] of the Tariff
Act state that the per-unit profit amount shall be an
amount determined by multiplying the total actual profit
by the applicable percentage (ratio of total U.S.
expenses to total expenses) and that the total actual
profit means the total profit earned by the foreign
producer, exporter, and affiliated parties. In
accordance with the statute, we base the calculation of
the total actual profit used in calculating the per-unit
profit amount for CEP sales on actual revenues and
expenses recognized by the company. In calculating the
per-unit cost of the U.S. sales, we have included net
interest expense. Therefore, we do not need to include
imputed interest expenses in the “total actual profit”
Consol. Court No. 97-10-01800 Page 62

calculation since we have already accounted for actual
interest in computing this amount under section
[1677(f)(1)]. When we allocated a portion of the actual
profit to each CEP sale, we have included imputed credit
and inventory carrying costs as part of the total U.S.
expense allocation factor. This methodology is
consistent with section [1677(f)(1)] of the statute,
which defines “total United States expense” as the total
expenses described under section [1677(d)(1) and (2)].
Such expenses include both imputed credit and inventory
carrying costs.

Final Results, 62 Fed. Reg. at 54,072.

B. Contentions of the parties

INA complains that “[i]mputed interest either is or is not an

expense for purposes of CEP profit calculation,” and that

“[i]gnoring imputed interest expense in calculating the profit rate

and then applying that profit rate to imputed interest expense in

calculating a profit amount results in deduction of imputed expense

twice in determining CEP, once as expense and once as a component

of profit.” INA’s Br. at 45. INA maintains that Commerce should

include United States credit expense and inventory carrying costs

in total expenses. See id.

Commerce maintains that the statute does not define “total

expenses” in the same manner as “total United States expenses.”

See Def.’s Mem. at 81. Commerce argues that it has always deducted

imputed expenses from the starting price in CEP transactions and,

“[f]or this reason, in determining ‘total United States
Consol. Court No. 97-10-01800 Page 63

expenses,[’] Commerce includes imputed selling expenses, such as

imputed credit and inventory carrying costs.” Id. at 82. Contrary

to INA’s contention, Commerce argues that it does not deduct

imputed expenses twice. See id. at 80.

Commerce contends that the provision for “total expenses”

merely encompasses “all expenses . . . ‘which are incurred by or on

behalf of the foreign producer and foreign exporter . . . with

respect to the production and sale of such merchandise.’” Id. at 82

(quoting 19 U.S.C. § 1677a(f)(2)(C)). Commerce argues that if

“Congress intended that Commerce utilize the same types of expenses

for both ‘total United States expenses’ and ‘total expenses,’ it

would have made that intent clear,” and would not have assigned

different definitions for each term. Id.

Commerce also maintains that it did not include imputed

expenses in “total expenses” since Commerce is required to

calculate “total actual profit” on the same basis as “total

expenses.” See id. at 83. Torrington generally agrees with

Commerce. See Torrington’s Resp. at 34.

C. 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. Under
Consol. Court No. 97-10-01800 Page 64

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).

The Court finds that Commerce improperly excluded imputed

inventory and carrying costs from “total expenses” when it had

included these expenses in “total United States expenses.” The

plain text of 19 U.S.C. § 1677a provides that Commerce must include

imputed credit and inventory carrying costs in “total expenses”

when they are included in “total United States expenses.” Section

1677a(f)(2)(B) defines “total United States expenses” as the total

expenses deducted under § 1677a(d)(1) and (2), that is,

commissions, direct and indirect selling expenses, assumptions, and

the cost of any further manufacture or assembly in the United

States. Section 1677a(f)(2)(C) specifies that:

[t]he term “total expenses” means all expenses in the
first of the following categories which applies and which
Consol. Court No. 97-10-01800 Page 65

are incurred by or on behalf of the foreign producer and
foreign exporter of the subject merchandise and by or on
behalf of the United States seller affiliated with the
producer or exporter with respect to the production and
sale of such merchandise . . . .

(emphasis added). Commerce determined that the applicable category

of expenses to be used for calculating “total expenses” is §

1677a(f)(2)(C)(i), and it consists of all of “[t]he expenses

incurred with respect to the subject merchandise sold in the United

States and the foreign like product sold in the exporting country.”

19 U.S.C. § 1677a(f)(2)(C)(i)).

Thus, “total United States expenses” are certain enumerated

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

exporter, or the affiliated seller in the United States,” see §

1677a(d)(1),(2), while “total expenses,” in this instance, include

all expenses . . . incurred by or on behalf of the
foreign producer and foreign exporter of the subject
merchandise and by or on behalf of the United States
seller affiliated with the producer or exporter . . .
with respect to the subject merchandise sold in the
United States and the foreign like product sold in the
exporting country . . . .

§ 1677a(f)(2)(C)(i). Reading §§ 1677a(d) and (f) together makes it

apparent that “total expenses” equals “total United States

expenses,” that is, those expenses incurred in the United States,

plus those expenses incurred in Germany, to produce and sell the

subject merchandise in the United States. “Total United States

expenses” is a subset of “total expenses.” Thus, since Commerce
Consol. Court No. 97-10-01800 Page 66

determined that imputed inventory and carrying costs were to be

included in “total United States expenses,” they must be included

in “total expenses” as well.

Because the text of the statute resolves the issue, it is

unnecessary to proceed any further. Accordingly, the Court remands

this issue to Commerce. Commerce is directed to include all

expenses included in “total United States expenses” in the

calculation of “total expenses.”

XIV. Treatment of Certain Rebates and Billing Adjustments Reported
by SKF and FAG

A. Background

SKF’s Home-market Support Rebates

SKF reported certain home-market support rebates on a

customer-specific basis. SKF granted this rebate to its customers,

that is, its distributor/dealers, based on invoices from the

distributor/dealer to the distributor/dealer’s customer. See

SKF’s Mem. Resp. to Torrington’s Mot. J. Agency R. Mem. (“SKF’s

Resp.”) at 36. In accepting SKF’s reporting of home-market support

rebates on a customer-specific basis, Commerce stated the

following:

We find that SKF Germany’s allocation methodologies are
not unreasonably distortive. Due to the nature of the
support rebates, transaction-specific reporting is not
appropriate. SKF Germany grants these rebates to
distributors/dealers to ensure that they obtain a minimum
Consol. Court No. 97-10-01800 Page 67

profit level on sales to select customers. Hence,
because SKF Germany does not issue these rebates based on
specific sales to the distributor/dealers but rather on
the sales of the distributors/dealers, SKF Germany cannot
report transaction-specific rebate amounts. Rather, SKF
Germany has allocated the rebates it granted to a
specific customer over all sales to that customer. SKF
Germany’s allocation methodology is not unreasonably
distortive, as we are satisfied that each adjustment was
granted in proportionate amounts with respect to the
value of sales of in-scope and out-of-scope merchandise.

Final Results, 62 Fed. Reg. at 54,051-52.

SKF’s Home-market Billing Adjustment Two

SKF reported home-market billing adjustment two on a customer-

specific basis. Billing adjustment two was related to mulitple

invoices, products or invoice lines and was allocated by customer

number by “totaling the credits and debits issues to a customer

number and dividing this total by total sales to that customer

number.” SKF’s Resp. at 40.

In accepting SKF’s methodology, Commerce stated the following:

SKF Germany could not tie these adjustments to a specific
transaction because the billing adjustments it reported
in this field were part of credit or debit notes, issued
to the customer, that related to multiple invoices,
products, or invoice lines. In these cases, the most
feasible reporting methodology that SKF Germany could use
was a customer-specific allocation, given the large
volume of transaction involved in these AFB reviews and
the time constraints imposed by the statutory deadlines.
Furthermore, we found that the products which received
the adjustment were similar in terms of value, physical
characteristics, and the manner in which they were sold.
For these reasons, we find that this methodology is not
unreasonably distortive.
Consol. Court No. 97-10-01800 Page 68

Final Results, 62 Fed. Reg. at 54,052.

FAG’s Home-market Rebate

FAG reported some rebates granted in the home market were

“payable in connection with purchases of certain types of products,

or for purchases made during certain select periods.”

Questionnaire Resp. for 1995-96 Admin. Review Sec. B (9/9/96) (Case

No. A-428-801) at 22. To calculate the rebate for each eligible

customer, “the rebate amount actually paid in 1995 or for 1995

sales was divided by total sales to that customer in 1995 that

generated the rebate,” and the “resulting factor was then applied

to the unit price of sales reported for that customer to derive a

rebate amount in DM/unit.” Id.

In accepting FAG’s rebates, Commerce stated the following:

FAG allocated its rebates on a customer-specific basis
over sales only of those products that actually received
rebates. Therefore, we determine that FAG’s methodology
for reporting rebates is reasonable and not distortive,
and, in accordance with our policy, we have accepted
FAG’s [home-market] rebates as reported.

Final Results, 62 Fed. Reg. at 54,051.

B. Contentions of the Parties

Torrington alleges that Commerce improperly accepted SKF’s and

FAG’s home-market support rebates and home-market billing

adjustments. Torrington maintains that the CAFC has clearly
Consol. Court No. 97-10-01800 Page 69

defined “direct” adjustments to price as those that “vary with the

quantity sold, or that are related to a particular sale,” and

Commerce cannot treat adjustments that do not meet this definition

as direct. Torrington’s Mem. Supp. Mot. J. Agency R.

(“Torrington’s Mem.”) at 10 (citing Torrington Co. v. United States

(“Torrington CAFC”), 82 F.3d 1039, 1050 (Fed. Cir. 1996)

(quotations omitted)). Torrington contends that here Commerce

“redefined ‘direct’ to achieve what Torrington CAFC had previously

disallowed” by allowing respondents to report allocated post-sale

price adjustments (“PSPAs”) if they acted to the best of their

abilities in light of their record-keeping systems and the results

were not unreasonably distortive. Id. at 12. Torrington

acknowledges that this Court has already approved of Commerce’s

practice as applied under post-URAA law in Timken Co. v. United

States (“Timken”), 22 CIT 621, 16 F. Supp. 2d 1102 (1998), but asks

the Court to reconsider its approval. See id. at 16.

Furthermore, Torrington maintains that the amendments to the

URAA did not modify the distinction between direct and indirect

adjustments established under pre-URAA law such as Torrington CAFC.

See Torrington’s Mem. at 14 (citing 19 U.S.C. § 1677a(d)(1)(B), (D)

(1994) and § 1677b(a)(7)(B) (1994)). Torrington is not convinced

that the SAA contradicts its contentions. See id. at 14-15 (citing

SAA at 823-24).
Consol. Court No. 97-10-01800 Page 70

Torrington also contends that even under its new methodology,

Commerce’s determination was not supported by substantial evidence

inasmuch as respondents failed to show that: (1) their reporting

methods did not result in distortion; and (2) they put forth their

best efforts to report the information on a more precise basis.

See id. at 21. Torrington emphasizes that respondents have the

burden of showing non-distortion and best efforts, and having

failed to carry the burden, they must not benefit from the

adjustment. See id. at 22. Torrington, therefore, requests that

this Court reverse Commerce’s determination with respect to the

various PSPAs and remand the case to Commerce with instructions to

disallow all of the claims. See id. at 27.

Commerce responds that its treatment of the adjustments is

consistent with current law. Even though the adjustments were not

reported in a transaction-specific manner, Commerce accepted them

as part of its new policy to accept allocated adjustments where it

is not feasible for the respondent to report them on a transaction-

specific basis and the respondent has acted to the best of its

ability. Additionally, Commerce examines whether the allocation

method used is not unreasonably distortive pursuant to 19 U.S.C. §

1677m(e).

Commerce argues that Torrington erred in relying on Torrington
Consol. Court No. 97-10-01800 Page 71

CAFC because the case does not stand for the proposition that

direct price adjustments may only be accepted when they are

reported on a transaction-specific basis. See Def.’s Mem. at 115.

Rather, the Torrington CAFC court “merely overturned a prior

Commerce practice . . . of treating certain allocated price

adjustments as indirect expenses,” id. (citing Torrington CAFC, 82

F.3d at 1047-51), and does “not address the propriety of the

allocation methods” used in reporting the price adjustments in

question, id. at 115-17 (quoting Final Results, 62 Fed. Reg. at

54,050). Also contrary to Torrington’s assertion, Commerce did not

consider Torrington CAFC as addressing proper allocation

methodologies; rather, Commerce only viewed Torrington CAFC as

holding that “Commerce could not treat as indirect selling expenses

‘improperly’ allocated price adjustments.” Id. at 117-18.

Commerce notes that pursuant to its new methodology, it does not

consider price adjustments to be any type of selling expense,

either direct or indirect and, therefore, Torrington’s argument is

not only without support, but also inapposite to Torrington CAFC.

See id. at 119.

Additionally, Commerce argues that its findings are supported

by substantial evidence. See id. at 139. With respect to SKF’s

rebates and billing adjustment two, Commerce maintains that: “(1)

SKF had reported the adjustments on the most specific basis
Consol. Court No. 97-10-01800 Page 72

possible and, thus, had cooperated to the best of its ability; and

(2) the allocation method was not distortive.” Id. at 121-22.

Although Commerce did not verify the data underlying this review,

Commerce verified the treatment of SKF’s rebates in the sixth

review of AFBs and, moreover, found no evidence of distortion in

this review. See id. at 122.

Commerce also argues that it properly accepted FAG’s home-

market rebates. See id. at 127. Commerce found no evidence that

FAG’s adjustments were distortive. See id. at 129. Commerce

determined that “FAG appropriately attributed the rebates to the

sales by customer per the type of merchandise that received rebates

and did not seek to shift the rebate allocation to other sales.”

Id.

SKF and FAG generally concur with Commerce’s position. See

SKF’s Resp.; FAG’s Mem. Resp. to Torrington’s Mot. J. Agency R.

C. Analysis

Commerce's decision to accept SKF’s and FAG’s billing

adjustments and rebates was supported by substantial evidence and

was fully in accordance with the post-URAA statutory language, as

well as with the SAA that accompanied the enactment of the URAA

because: (1) Commerce reasonably determined that the adjustments

were reliable and could not be reported more specifically; (2)
Consol. Court No. 97-10-01800 Page 73

Commerce properly determined that respondents acted to the best of

their abilities in reporting the adjustments; and (3) Commerce

properly accepted the allocation methodologies of the respondents

after carefully reviewing the differences between such merchandise

and ensuring that the allocations were not unreasonably distortive.

See Final Results, 62 Fed. Reg. at 54,051-52.

After the enactment of the URAA, Commerce reevaluated its

treatment of PSPAs, and since that time it treats them as

adjustments to price and not as selling expenses. Indeed,

Commerce's treatment of the home-market support rebates, early-

payment discounts and billing adjustments as adjustments to price

instead of selling expenses is the issue left unanswered by the

pre-URAA cases upon which Torrington relies, namely, Torrington

CAFC; Koyo Seiko Co. v. United States (“Koyo”), 36 F.3d 1565 (Fed.

Cir. 1994); and Consumer Prods. Div., SCM Corp. v. Silver Reed Am.,

Inc.(“Consumer Products”), 753 F.2d 1033 (Fed. Cir. 1985).7

7
In Torrington CAFC, the Court of Appeals did not hold that
billing adjustments must be treated as selling expenses. The
Torrington CAFC court specifically noted that it was treating
billing adjustments as selling expenses only because there was no
argument offered suggesting otherwise, and the issue whether such
treatment was appropriate remained open. Torrington CAFC, 82 F.3d
at 1050 n.l5. Torrington's reliance on Koyo and Consumer Products
is equally unjustified. The Koyo court, citing Consumer Products,
noted that “[d]irect selling expenses are ‘expenses which vary with
the quantity sold, such as commissions’” and did not address the
issue of billing adjustments. Koyo, 36 F.3d at 1569 n.4 (quoting
Consumer Products, 753 F.2d at 1035). Because these cases address
Commerce's treatment of selling expenses, and Commerce did not
Consol. Court No. 97-10-01800 Page 74

The Court disagrees with Torrington that Torrington CAFC

mandates that direct price adjustments may only be accepted when

they are reported on a transaction-specific basis. Rather,

Torrington CAFC merely overturned a prior Commerce practice of

treating certain allocated price adjustments as indirect selling

expenses and did not address the propriety of the allocation

methods that respondents used in reporting the price adjustments in

question. Although (1) “Commerce treated rebates and billing

adjustments as selling expenses in preceding reviews under pre-URAA

law,” and (2) “previously decided that such adjustments are selling

expenses and, therefore, should not be treated as adjustments to

price,” this did not “preclude Commerce’s change in policy or this

Court’s reconsideration of its stance in light of the newly-amended

antidumping statute [(that is, 19 U.S.C. § 1677m(e) (1994))].”

Timken, 16 F. Supp. 2d at 1107. “Neither the pre-URAA nor the

newly-amended statutory language imposes standards establishing the

circumstances under which Commerce is to grant or deny adjustments

to NV for PSPAs.” Id. at 1108 (citing Torrington CAFC, 82 F.3d at

1048). Moreover, 19 U.S.C. § 1677m(e) “specifically directs that

Commerce shall not decline to consider an interested party’s

submitted information if that information is necessary to the

treat the adjustments at issue as selling expenses, these cases are
irrelevant to the issue at hand.
Consol. Court No. 97-10-01800 Page 75

determination but does not meet all of Commerce’s established

requirements, if the [statute’s] criteria are met.” Id.

Commerce applied its post-URAA methodology to analyze

adjustments to price, explaining that Commerce accepted PSPAs as

direct adjustments to price if Commerce determined that a

respondent, in reporting these adjustments, acted to the best of

its ability to associate the adjustment with the sale on which the

adjustment was made, rendering its reporting methodology not

unreasonably distortive. See Final Results, 62 Fed. Reg. at

54,049. In evaluating the degree to which an allocation over scope

and non-scope merchandise may be distortive, Commerce examines “the

extent to which the out-of-scope merchandise included in the

allocation pool is different from the in-scope merchandise in terms

of value, physical characteristics, and the manner in which it is

sold.” Id. Torrington argues that Commerce's methodology is

unlawful. Torrington is incorrect. Although the URAA does not

compel Commerce's new policy on price adjustments, the statute does

not prohibit Commerce's new practice.

Commerce's “change in policy . . . substitutes a rigid rule

with a more reasonable method that nonetheless ensures that a

respondent's information is reliable and verifiable.” Timken, 16

F. Supp. 2d at 1108. Commerce's decision to accept SKF’s and NTN’s

allocated adjustments to price is acceptable, “especially . . . in
Consol. Court No. 97-10-01800 Page 76

light of the more lenient statutory instructions of [19 U.S.C. § ]

1677m(e).” Id. Accordingly, “Commerce's decision to accept

the PSPAs . . . is fully in accordance with the post-URAA statutory

language and directions of the SAA,” and the decision to accept

SKF’s and FAG’s adjustments was reasonable even though the

adjustments were not reported on a transaction-specific basis and

even though the allocations included rebates on non-scope

merchandise. Id.

Torrington argues that the post-URAA statute retains the

distinction between “direct” and “indirect” expenses and,

therefore, does not permit Commerce to alter its treatment of

adjustments to price. See Torrington’s Mem. at 14. Torrington

trivializes the statutory changes that prompted Commerce to

reevaluate its treatment of adjustments and consequently revise its

regulations. Because Commerce now treats PSPAs as adjustments to

price rather than selling expenses, the distinction between direct

versus indirect selling expenses is no longer relevant for the

purpose of determining the validity of allocated price adjustments.

One of the goals of Congress in passing the URAA was to liberalize

certain reporting requirements imposed on respondents in

antidumping reviews. Such intent is evident both in the amendments

enacted by the URAA and in the SAA. The URAA amended the

antidumping law to include a new subsection, 19 U.S.C. § 1677m(e).
Consol. Court No. 97-10-01800 Page 77

The provision states that:

In reaching a determination under [19 U.S.C.] section
1671b, 1671d, 1673b, 1673d, 1675, or 1675b . . . the
administering authority and the Commission shall not decline
to consider information that is submitted by an interested
party and is necessary to the determination but does not meet
all the applicable requirements established by the
administering authority or the Commission, if—-
(1) the information is submitted by the deadline
established for its submission,
(2) the information can be verified,
(3) the information is not so incomplete that it cannot
serve as a reliable basis for reaching the applicable
determination,
(4) the interested party has demonstrated that it
acted to the best of its ability in providing the
information and meeting the requirements
established by the administering authority or the
Commission with respect to the information, and
(5) the information can be used without undue
difficulties.

19 U.S.C. § 1677m(e). This section of the statute liberalized

Commerce's general acceptance of data submitted by respondents in

antidumping proceedings by directing Commerce not to reject data

submissions once Commerce concludes that the specified criteria are

satisfied.8

8
Consistent with § 1677m(e), the SAA states that “[t]he
Administration does not intend to change Commerce's current
practice, sustained by the courts, of allowing companies to
allocate these expenses when transaction-specific reporting is not
feasible, provided that the allocation method used does not cause
inaccuracies or distortions.” SAA at 823-24. Therefore, the
statute and the accompanying SAA both support Commerce's use of
allocations in circumstances such as those present here.
Consol. Court No. 97-10-01800 Page 78

Next, Torrington suggests that Commerce has accepted the

adjustments without requiring respondents to carry the burden of

proving that the adjustments are non-distortive. See Torrington’s

Mem. at 22. This argument is without merit. As a routine part of

its antidumping practice, Commerce accepts a range of reporting

methodologies and allocations adopted by respondents. The mere

acceptance of an adjustment as reported cannot be a sufficient

ground for rejecting Commerce's decision. It would be anomalous

indeed to expect a respondent to provide Commerce, in addition to

the information on the basis of which Commerce could conclude that

the respondent’s reporting methods are not distortive, with proof

of the validity of Commerce’s determination of that sort. Such a

scheme would effectively allow the respondent to bind Commerce,

restricting Commerce’s inherent power to investigate, examine and

render a decision.

In determining whether SKF’s and FAG’s allocation over scope

and non-scope merchandise was unreasonably distortive, Commerce

reasonably has not required respondents to demonstrate the non-

distortive nature of the allocation directly, for example, by

compelling them to identify separately the adjustments on scope

merchandise and compare them to the results of allocations over

both scope and non-scope merchandise. Such a burdensome exercise

would defeat the entire purpose underlying the more flexible
Consol. Court No. 97-10-01800 Page 79

reporting rules, by compelling the respondent to go through the

enormous effort that the new rules were intended to obviate.

Rather, Commerce has adopted criteria by which Commerce itself

could determine whether an allocation over scope and non-scope

merchandise was likely to cause unreasonable distortions.

In the case at hand, Commerce’s determination with respect to

SKF’s rebates and billing adjustments was reasonable. Commerce

premised its conclusion on its finding that transaction-specific

reporting is not appropriate for the rebates due to their nature,

that is, because they are granted on the basis of sales by the

distributor/dealer rather than on sales to the distributor/dealer.

Final Results, 62 Fed. Reg. at 54,041. Commerce also found that

transaction-specific reporting was not feasible for the billing

adjustment since it related to multiple invoices, products, or

invoice lines. See id. at 54,042. For both adjustments, Commerce

found that the allocation methodologies used were not distortive,

and that SKF acted to the best of its ability in reporting the

information inasmuch as more specific reporting was not feasible.

See id. at 54,051-52.

Commerce also properly accepted FAG’s home-market rebates.

FAG’s home-market rebates were granted on a customer-specific

basis, and only on sales of the products that actually received
Consol. Court No. 97-10-01800 Page 80

rebates. See id. at 54,041. Commerce also found that the method

was not unreasonably distortive. See id.

Torrington asserts that Commerce improperly determined that

SKF and FAG acted to the best of their ability in reporting

adjustments. See Torrington’s Mem. at 23-26. Torrington's

assertion is without merit. When respondents’ adjustments were

granted over both scope and non-scope merchandise without reference

to any particular model or transaction, Commerce could not have

reasonably expected them to be recorded or reported to Commerce in

a manner more specific than that which was used. It was equally

appropriate for Commerce to consider, as a part of its decision

whether respondents acted to the best of their ability in reporting

the adjustments, the volume of adjustments when deciding whether it

is feasible to report these adjustments on a more specific basis.

In light of the considerable size of their databases, Commerce

reasonably found that “given the extremely large volume of

transactions involved in these AFBs reviews[,] [i]t is

inappropriate to reject allocations that are not unreasonably

distortive in favor of facts otherwise available where a fully

cooperating respondent is unable to report the information in a

more specific manner.” Final Results, 62 Fed. Reg. at 54,049. The

large volume of data is precisely one of the factors that one would
Consol. Court No. 97-10-01800 Page 81

expect Commerce to consider in deciding whether a respondent has

acted to the best of its ability in reporting a given adjustment.

In sum, the Court finds that Commerce’s decision to accept

SKF’s and FAG’s reported home-market adjustments was supported by

substantial evidence and was fully in accordance with the post-URAA

statutory language and the SAA. The record demonstrates that the

requirements of 19 U.S.C. § 1677m(e) were satisfied by the

respondents in that: (1) the reported adjustments were submitted in

a timely fashion, see 19 U.S.C. § 1677m(e)(1); (2) the information

submitted can be verified by Commerce, see 19 U.S.C. § 1677m(e)(2);

(3) the respondents’ information was not so incomplete that it

could not serve as a basis for reaching a determination, see 19

U.S.C. § 1677m(e)(3); (4) respondents demonstrated that they acted

to the best of their abilities in providing the information and

meeting Commerce’s new reporting requirements, see § 1677m(e)(4);

and (5) there was no indication that the information was incapable

of being used without undue difficulties. See § 1677m(e)(5).

Commerce’s determinations with respect to SKF and FAG were

also consistent with the SAA. The Court agrees with Commerce’s

finding in the Final Results that given the extremely large volume

of transactions, the level of detail contained in normal accounting

records, and time constraints imposed by the statute, the

reporting and allocation methodologies were reasonable. This is
Consol. Court No. 97-10-01800 Page 82

consistent with the SAA directive under § 1677m(e), which provides

that Commerce “may take into account the circumstances of the

party, including (but not limited to) the party’s size, its

accounting systems, and computer capabilities.” SAA at 865. Thus,

the Court finds that Commerce properly considered the ability of

SKF and FAG to report its billing adjustments on a more specific

basis. Accordingly, the Court concludes that Commerce’s acceptance

of SKF’s and FAG’s reported adjustments was supported by

substantial evidence and fully in accordance with law.
Consol. Court No. 97-10-01800 Page 83

CONCLUSION

This case is remanded to Commerce to: (1) annul all findings

and conclusions made pursuant to the duty-absorption inquiry

conducted for the subject review in accordance with this opinion;

(2) attempt to match United States sales to similar home-market

sales before resorting to CV; (3) reconsider its determination to

deny a downward billing adjustment to INA on its home-market sales;

(4) clarify how it complied with the statutory framework of 19

U.S.C. §§ 1677e, 1677m for using facts available and applying an

adverse inference and if it determines it did not adhere to all of

the statutory prerequisite conditions, to give INA the opportunity

to remedy or explain any deficiency regarding its alleged sample

sales; and (5) include all expenses included in “total United

States expenses” in the calculation of “total expenses” for INA.

______________________________
NICHOLAS TSOUCALAS
SENIOR JUDGE

Dated: June 22, 2001
New York, New York