RHP Bearings Ltd. v. United States

Slip Op. 00-142

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
___________________________________
:
RHP BEARINGS LTD., NSK BEARINGS :
EUROPE LTD. and NSK CORPORATION, :
:
Plaintiffs, :
:
v. : Court No. 98-07-02526
:
UNITED STATES, :
:
Defendant, :
:
THE TORRINGTON COMPANY, :
:
Defendant-Intervenor. :
___________________________________:

Plaintiffs, RHP Bearings Ltd., NSK Bearings Europe Ltd. and
NSK Corporation (collectively “RHP-NSK”), move pursuant to USCIT R.
56.2 for judgment upon the agency record challenging various
aspects of the United States Department of Commerce, International
Trade Administration’s (“Commerce”) final 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, 63 Fed. Reg. 33,320 (June
18, 1998).

Specifically, RHP-NSK claims that Commerce erred in: (1)
failing to apply the special rule for merchandise with value added
after importation under 19 U.S.C. § 1677a (1994); (2) calculating
profit for constructed value; (3) denying a partial, price-based
level of trade adjustment to normal value; and (4) deducting United
States repacking expenses as direct selling expenses.

Held: RHP-NSK’s USCIT 56.2 motion is denied. Commerce’s
determination is affirmed.

[RHP-NSK’s motion is denied. Case dismissed.]

Dated: November 2, 2000
Court No. 98-07-02526 Page 2

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

David W. Ogden, Assistant Attorney General; David M. Cohen,
Director, Commercial Litigation Branch, Civil Division, United
States Department of Justice (Velta A. Melnbrencis, Assistant
Director); of counsel: Thomas H. Fine, Patrick V. Gallagher, Myles
S. Getlan, William Isasi 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, Geert De Prest, Lane
S. Hurewitz and Wesley K. Caine) for The Torrington Company.

OPINION

TSOUCALAS, Senior Judge: Plaintiffs, RHP Bearings Ltd., NSK

Bearings Europe Ltd. and NSK Corporation (collectively “RHP-NSK”),

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

challenging various aspects of the United States Department of

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

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”), 63 Fed. Reg. 33,320 (June 18, 1998).

Specifically, RHP-NSK claims that Commerce erred in: (1)

failing to apply the special rule for merchandise with value added

after importation under 19 U.S.C. § 1677a (1994); (2) calculating
Court No. 98-07-02526 Page 3

profit for constructed value (“CV”); (3) denying a partial, price-

based level of trade (“LOT”) adjustment to normal value (“NV”); and

(4) deducting United States repacking expenses as direct selling

expenses.

BACKGROUND

This case concerns the eighth review of the antidumping duty

order on antifriction bearings (other than tapered roller bearings)

and parts thereof imported to the United States during the review

period of May 1, 1996 through April 30, 1997.1 Commerce published

the preliminary results of the subject review on February 9, 1998.

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”),

63 Fed. Reg. 6512. Commerce published the Final Results on June

18, 1998. See 63 Fed. Reg. at 33,320. Oral argument was heard on

October 8, 1999.

1
Since the administrative review at issue was initiated
after December 31, 1994, the applicable law is the antidumping
statute as amended by the Uruguay Round Agreements Act, Pub. L. No.
103-465, 108 Stat. 4809 (1994) (effective January 1, 1995)
(“URAA”). See Torrington Co. v. United States, 68 F.3d 1347, 1352
(Fed. Cir. 1995) (citing URAA § 291(a)(2), (b) (noting effective
date of URAA amendments)).
Court No. 98-07-02526 Page 4

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

The Court will uphold Commerce’s final determination in an

antidumping administrative review 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 America v. United States, 24 CIT ___, ___, 104 F. Supp. 2d

110, 115-16 (2000) (detailing Court’s standard of review for

antidumping proceedings).

DISCUSSION

I. Commerce’s Refusal to Apply the Special Rule for Further
Manufacturing to RHP-NSK’s Constructed Export Price Sales

A. Background

An antidumping duty is imposed upon imported merchandise when

(1) Commerce determines such merchandise is being dumped, that is,

sold or likely to be sold in the United States at less than fair

value, and (2) the International Trade Commission determines that

an industry in the United States is materially injured or is

threatened with material injury. See 19 U.S.C. § 1673 (1994); 19
Court No. 98-07-02526 Page 5

U.S.C. § 1677(34) (1994). To determine in an investigation or an

administrative review whether there is dumping, Commerce compares

the price of the imported merchandise in the United States to the

NV for the same or similar merchandise in the home market. See 19

U.S.C. § 1677b (1994). The price in the United States is

calculated using either an export price (“EP”) or constructed

export price (“CEP”). See 19 U.S.C. § 1677a(a), (b).

The Statement of Administrative Action2 (“SAA”) accompanying

the Uruguay Round Agreements Act (“URAA”) clarifies that Commerce

will classify the price of a United States sales transaction as an

EP if “the first sale to an unaffiliated purchaser in the United

States, or to an unaffiliated purchaser for export to the United

States, is made by the producer or exporter in the home market

prior to the date of importation.” H.R. Doc. No. 103-316, at 822

(1994). On the other hand, “[i]f, before or after the time of

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. No. 103-316, at 656 (1994). “[I]t is
the expectation of the Congress that future Administrations will
observe and apply the interpretations and commitments set out in
this Statement.” Id.; see 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.”).
Court No. 98-07-02526 Page 6

importation, the first sale to an unaffiliated person is made by

(or for the account of) the producer or exporter or by a seller in

the United States who is affiliated with the producer or exporter,”

then Commerce will classify the price of a United States sales

transaction as a CEP. Id.; see 19 U.S.C. § 1677a(b); Koenig &

Bauer-Albert AG v. United States, 22 CIT ___, ___, 15 F. Supp. 2d

834, 850-52 (1998) (discussing when to apply EP or CEP

methodology).

Commerce then makes adjustments to the starting price used to

establish EP or CEP by adding: (1) packing costs for shipment to

the United States, if not already included in the price; (2) import

duties which have been rebated or not collected due to exportation

of the subject merchandise to the United States; and (3) certain

countervailing duties if applicable. See 19 U.S.C. §

1677a(c)(1)(A)-(C); SAA at 823. Also, for both EP and CEP,

Commerce will reduce the starting price by the amount, if any,

included in such price that is attributable to: “(1) transportation

and other expenses, including warehousing expenses, incurred in

bringing the subject merchandise from the original place of

shipment in the exporting country to the place of delivery in the

United States; and (2) . . . export taxes or other charges imposed

by the exporting country.” See SAA at 823; see 19 U.S.C. §
Court No. 98-07-02526 Page 7

1677a(c)(2)(A), (B).

Commerce must reduce the price used to establish CEP by any of

the following amounts associated with economic activities occurring

in the United States: (1) commissions paid in “selling the subject

merchandise in the United States”; (2) direct selling expenses,

that is, “expenses that result from, and bear a direct relationship

to, the sale, such as credit expenses, guarantees and warranties”;

(3) “any selling expenses that the seller pays on behalf of the

purchaser” (assumptions); (4) indirect selling expenses, that is,

any selling expenses not deducted under any of the first three

categories of deductions; (5) certain expenses resulting from

further manufacture or assembly (including additional material and

labor) performed on the merchandise after its importation into the

United States; and (6) profit allocated to the expenses described

in categories (1) through (5). 19 U.S.C. § 1677a(d)(1)-(3); see

SAA at 823-24.

Commerce calculates the expenses resulting from further

manufacture or assembly using one of two statutory methods. See 19

U.S.C. § 1677a(d), (e). The first method provides that Commerce

shall reduce “the price used to establish constructed export price

by . . . the cost of any further manufacture or assembly (including
Court No. 98-07-02526 Page 8

additional material and labor), except in [certain] circumstances.”

19 U.S.C. § 1677a(d)(2). When the first method does not apply,

Commerce applies a “special rule for merchandise with value added

after importation” (“special rule”). 19 U.S.C. § 1677a(e). The

special rule provides the following:

Where the subject merchandise is imported by a
person affiliated with the exporter or producer, and the
value added in the United States by the affiliated person
is likely to exceed substantially the value of the
subject merchandise, the administering authority shall
determine the constructed export price for such
merchandise by using one of the following prices if there
is a sufficient quantity of sales to provide a reasonable
basis for comparison and the administering authority
determines that the use of such sales is appropriate:
(1) The price of identical subject merchandise sold
by the exporter or producer to an unaffiliated person.
(2) The price of other subject merchandise sold by
the exporter or producer to an unaffiliated person.

If there is not a sufficient quantity of sales to provide
a reasonable basis for comparison under paragraph (1) or
(2), or the administering authority determines that
neither of the prices described in such paragraphs is
appropriate, then the constructed export price may be
determined on any other reasonable basis.

19 U.S.C. § 1677a(e).

In prior reviews, Commerce applied the special rule to RHP-

NSK’s data after estimating that value added in the United States

substantially exceeded the value of the subject merchandise and

“used sales of other subject merchandise as the basis for margins

for these sales.” Antifriction Bearings from United Kingdom:
Court No. 98-07-02526 Page 9

NSK/RHP Bearings Ltd. (NSK/RHP) Preliminary Results Analysis Mem.

Sixth Administrative Review 5/1/94-4/30/95 (July 2, 1996) (Case No.

A-412-801) at 3; see Antifriction Bearings from United Kingdom:

NSK/RHP Bearings Ltd. (NSK/RHP) Preliminary Results Analysis Mem.

Seventh Administrative Review 5/1/95-4/30/96 (Mar. 28, 1997) (Case

No. A-412-801) at 3-4.

In this review, Commerce transmitted a letter to interested

parties and appended a questionnaire divided into five sections.

The letter explained that the recipient was required to complete

section E, Cost of Further Manufacture or Assembly Performed in the

United States, if the subject merchandise was further processed in

the United States. Accordingly, RHP-NSK submitted complete further

manufacturing data in response to Section E of Commerce’s

questionnaire. See Antifriction Bearings from United Kingdom:

NSK/RHP Bearings Ltd. (NSK/RHP) Preliminary Results Analysis Mem.

Eighth Administrative Review 5/1/96-4/30/97 (Jan. 29, 1998) (Case

No. A-412-801) at 4. The letter also stated that if the party

“believe[s] the value added in the United States exceeds

substantially the value of the merchandise imported into the United

States, [the party should] contact the official in charge

immediately.” Letter from Commerce Transmitting Questionnaire

(June 20, 1997), Def.’s Public App. Ex. 1 at 2. Commerce asserts
Court No. 98-07-02526 Page 10

that “the record contains no evidence that [RHP-NSK] requested

Commerce to excuse it from responding to Section E of the

questionnaire upon the grounds that the value added in the United

States to [RHP-NSK] imports substantially exceeded the value of the

imports.” Def.’s Mem. Opp’n Pls.’ Mot. J. Agency R. (“Def.’s

Mem.”) at 16-17. RHP-NSK does not dispute this assertion. See

RHP-NSK’s Mem. P. & A. Supp. Mot. J. Agency R. (“RHP-NSK’s Mem.”);

RHP-NSK’s Reply Mem. Supp. Mot. J. Agency R. (“RHP-NSK’s Reply”).

Additionally, question 8 of Section A of the questionnaire

asked the respondent to report the weighted-average net price to

the affiliated importer for each further-manufactured product and

the weighted-average net price for each further manufactured final

product in a manner which would permit Commerce to compare the

transfer prices of the imported products to the final product sold

in the United States. See Def.’s Public App. Ex. 1 at A-8.

Question 8 explained that its purpose was “to provide [Commerce]

with the information necessary to determine whether the value-added

in the United States exceeds substantially the value of the subject

merchandise that has been further processed.” Id. at A-9 n.6.

Question 8 also provided that if the party did “not believe that

the value-added in the United States exceeds substantially the

value of the subject merchandise that has been further processed,
Court No. 98-07-02526 Page 11

[the party] need not provide this information.” Id. RHP-NSK did

not respond to question 8 of Section A of the questionnaire. See

Def.’s Public App. Ex. 2 at 32-33.

Commerce evaluated RHP-NSK’s data and analyzed sales of

bearings and parts that were further manufactured in the United

States in the “same manner as non-further manufactured products but

adjusted for the cost of further manufacturing.” Antifriction

Bearings from United Kingdom: NSK/RHP Bearings Ltd. (NSK/RHP)

Preliminary Results Analysis Mem. Eighth Administrative Review

5/1/96-4/30/97 (Jan. 29, 1998) (Case No. A-412-801) at 4. In the

Preliminary Results, Commerce determined “that the estimated value

added in the United States by all firms, with the exception of

NSK/RHP and NPBS, accounted for at least 65 percent of the price

charged to the first unaffiliated customer for the merchandise as

sold in the United States.” 63 Fed. Reg. at 6515. Thus, for RHP-

NSK’s further-manufactured imports, Commerce reduced the sales

price to the first unaffiliated customer by the cost of further

manufacturing to calculate CEP. See Antifriction Bearings from

United Kingdom: NSK/RHP Bearings Ltd. (NSK/RHP) Preliminary Results

Analysis Mem. Eighth Administrative Review 5/1/96-4/30/97 (Jan. 29,

1998) (Case No. A-412-801) at 4.
Court No. 98-07-02526 Page 12

Following the Preliminary Results, RHP-NSK used data on the

record to perform its own calculation of the value added in the

United States and informed Commerce that it qualified for the

special rule. See App. Supp. RHP-NSK’s Mem., Ex. 6, U.K. Issues

Br. (Mar. 16, 1998). RHP-NSK asked Commerce to apply the special

rule as it had done in prior reviews. See id.

In the Final Results, Commerce declined to apply the special

rule for further manufacturing set forth in 19 U.S.C. § 1677a(e).

63 Fed. Reg. 33,338. Commerce explained its rationale as follows:

As we stated in our new regulations, the special rule for
further manufacturing exists in order to reduce
[Commerce’s] administrative burden. 62 [Fed. Reg.] at
27,353. See, also, section 772(e) of the Act, which
provides that [Commerce] need only apply the special rule
where it determines that the use of such alternative
calculation methodologies is appropriate. We retain the
authority to refrain from applying the special rule in
those situations where the value added, while large, is
simple to calculate. Id. Respondents submitted Section
E data in its questionnaire and supplemental responses.
We acted within our discretion by employing this data to
calculate the U.S. value added, as the calculation
involves little more than the subtraction of the value-
added figures which [RHP-NSK] provided. Thus, this case
does not present the complex data-gathering and
calculation burdens contemplated by the special rule.

Final Results, 63 Fed. Reg. at 33,338.

B. Contentions of the Parties

RHP-NSK contends that Commerce erred in refusing to apply the
Court No. 98-07-02526 Page 13

special rule to its further-manufactured imports. RHP-NSK’s Mem.

at 3. RHP-NSK maintains that the special rule provides that if

certain requirements were met, Commerce was required “to determine

CEP for subject merchandise further manufactured in the United

States by using either the price of identical subject merchandise,

or the price of other subject merchandise, sold by the exporter or

producer to an unaffiliated person,” as provided by 19 U.S.C. §

1677a(e). Id. Thus, RHP-NSK believes that once Commerce

determines that the value added in the United States is at least

65% of the price charged to the first unaffiliated purchasers,

Commerce has no choice but to apply the special rule as provided in

§ 1677a(e). See id. at 13.

RHP-NSK argues that in the Preliminary Results, Commerce

erroneously determined that RHP-NSK failed to qualify for the

special rule and refused to correct its error after RHP-NSK showed

it to Commerce. See id. at 5. RHP-NSK contends that instead of

correcting the error, Commerce “made up a new reason for why it had

decided not to apply the [s]pecial [r]ule to [RHP-NSK],” namely,

that RHP-NSK’s “value-added figures had been simple to calculate.”

Id. at 5-6. RHP-NSK argues that the “facts do not support

Commerce’s post-hoc assertion that it rejected use of the [s]pecial

[r]ule with respect to [RHP-NSK] pursuant to so-called
Court No. 98-07-02526 Page 14

discretionary authority.” Id. at 15.

RHP-NSK further contends that although it is unnecessary to

examine legislative history because the statute is clear, the

legislative history confirms that Commerce must apply the special

rule whenever the facts meet the terms of § 1677a(e). See id. at

16. Specifically, RHP-NSK maintains that the SAA “says nothing

about Commerce having discretionary authority to jettison [§

1677a(e)] and revert to [§ 1677a(d)(2)] (even when the burdens

imposed by that provision are less than enormous).” Id.

Finally, RHP-NSK maintains that the Court should reject

Commerce’s determination because it offends “principles of

procedural fairness found in the statute.” Id. at 17. RHP-NSK

points to Shikoku Chems. Corp. v. United States, 16 CIT 382, 795 F.

Supp. 417 (1992) for the proposition that Commerce abuses its

discretion and acts unreasonably when it consistently applies a

certain methodology in a series of reviews then alters the

methodology without warning, to the detriment of the plaintiff.

See id. According to RHP-NSK, the facts of the instant case are

analogous to those in Shikoku, where the court recognized that the

new method might have been an improvement but held that Commerce

had abused its discretion and acted unreasonably. See id.
Court No. 98-07-02526 Page 15

Commerce contends that since “Congress has not specified the

criteria that Commerce must utilize in determining whether the use

of the alternative methodologies is appropriate[,] Congress has

granted to Commerce broad discretion in determining when the use of

the alternative methodologies is appropriate.” Def.’s Mem. at 13.

Commerce maintains that its refusal to use the special rule was

appropriate because it possessed the authority to “refrain from

applying the special rule in situations in which the value added,

though large, is simple to calculate.” Id. Commerce believes that

“the special rule requires not only that the value added in the

United States by the affiliated person is likely to exceed

substantially the value of the subject merchandise, but also that

Commerce ‘determines that the use of’ the specified sales prices

(or alternative methodologies for calculating CEP) is appropriate.”

Id. at 20. In this circumstance, Commerce maintains that the use

of the special rule was not appropriate since the value added was

simple to calculate under § 1677a(d)(2). See id. at 21.

Commerce also contends “[t]he fact that, in the Preliminary

Results, Commerce may have calculated [RHP-NSK’s] CEP using the

traditional value-added calculation methodology because of the

erroneous conclusion that [RHP-NSK] did not meet the 65 percent

standard does not preclude Commerce from using the same CEP for the
Court No. 98-07-02526 Page 16

final results for different reasons.” Id. at 22. Commerce

distinguishes Shikoku on the grounds that: (1) Commerce had made

determinations on this issue in only two prior reviews and,

therefore, had not formulated a policy yet; (2) there is no

evidence that RHP-NSK relied on Commerce’s use of the special rule;

(3) this case does not involve the possible revocation of a dumping

order and, therefore, does not present the same issue of unfairness

as did Shikoku. See id. at 25. Finally, Commerce argues that it

did not unfairly single out RHP-NSK because the other respondents,

unlike RHP-NSK, had “demonstrated with their initial Section A

questionnaire response that the value added in the United States

substantially exceeded the value of the imported merchandise.” Id.

at 25-26.

The Torrington Company (“Torrington”) argues that Congress

enacted § 1677a(d)(2) and (e) in order to ensure that all

merchandise subject to further manufacturing is captured in the CEP

calculation. See Torrington’s Resp. RHP-NSK’s Mot. J. Agency R.

(“Torrington’s Resp.”) at 3. Torrington maintains that RHP-NSK

misinterprets the word “shall” in § 1677a(e) as a requirement that

Commerce apply the special rule, and that the correct

interpretation is that Congress used the word “shall” as an

indication that Commerce should calculate CEP for all merchandise
Court No. 98-07-02526 Page 17

subject to further manufacturing. See id. Torrington argues that

Commerce has broad discretion as to when to apply the special rule,

and having found that its use was inappropriate here, correctly

applied the traditional rule. See id. at 12. Torrington contends

that the statute’s legislative history supports Commerce’s

determination. See id. at 15-16.

C. Analysis

First, the Court addresses RHP-NSK’s contention that

Commerce’s use of the special rule in two prior reviews under

similar circumstances constitutes a “past practice” from which

Commerce cannot deviate without providing adequate justification.

See RHP-NSK’s Mem. at 17-18 (citing Shikoku in support). “It is ‘a

general rule that an agency must either conform itself to its prior

decisions or explain the reasons for its departure . . . .’” Hussey

Cooper, Ltd. v. United States, 17 CIT 993, 997, 834 F. Supp. 413,

418 (1993) (quoting Citrosuco Paulista, S.A. v. United States, 12

CIT 1196, 1209, 704 F. Supp. 1075, 1088 (1988)). Commerce must

explain the reason for its departure to allow the court to

“‘understand the basis of the agency’s action and . . . judge the

consistency of that action with the agency’s mandate.’” Id. at

998, 834 F. Supp. at 419 (quoting Atchinson, Topeka & Santa Fe Ry.
Court No. 98-07-02526 Page 18

Co. v. Wichita Bd. Of Trade, 412 U.S. 800, 808 (1973)).

Commerce is not required to follow its prior practice if new

facts or arguments support a different conclusion. See id. at 997,

834 F. Supp. at 418. But “[w]hen the Court finds that an agency

has departed from past practice without an adequate explanation for

the basis of the departure, the agency’s determination must be

rejected.” American Silicon Techs. v. United States, 22 CIT ___,

___, 19 F. Supp. 2d 1121, 1123 (1998).

Although the application of the special rule in only two prior

reviews does not form a long-established practice under the

circumstances presented here, Commerce is under an obligation to

explain the apparent inconsistency of its approach in this review

and the two preceding reviews. The Court finds that Commerce

provided adequate justification for its refusal to apply the

special rule in this review. Commerce justified its refusal to

apply the rule on the ground of administrative convenience and,

more specifically, on its belief that “the special rule for further

manufacturing exists in order to reduce [Commerce’s] administrative

burden.” Final Results, 63 Fed. Reg. at 33,338. Thus, Commerce

retained “the authority to refrain from applying the special rule

in those situations where the value added, while large, is simple
Court No. 98-07-02526 Page 19

to calculate.” Id. Administrative convenience is certainly a

valid ground upon which Commerce may base its refusal to apply the

special rule in this review. See SAA at 826 (purpose of special

rule is to save “Commerce the considerable effort of measuring

precisely the U.S. value added.”); Inland Steel Indus. v. United

States, 21 CIT 553, 567-68, 967 F. Supp. 1338, 1354 (1997)

(upholding methodology that Commerce developed for administrative

convenience).

Additionally, RHP-NSK’s reliance on Shikoku, which it cites

for the proposition that Commerce must adhere to its prior

decisions, is misplaced. Shikoku dealt with an attempt by Commerce

to adopt a slightly improved allocation methodology of calculating

the home market price packing adjustment after years of acceptance

of another methodology. See Shikoku, 16 CIT at 387, 795 F. Supp.

at 420-21. At issue were the fifth and sixth administrative

reviews of certain merchandise imported from Japan. See id. at

383, 795 F. Supp. at 417-18. The plaintiffs’ dumping margins for

the previous three consecutive reviews of sales of the contested

merchandise were found to be either de minimis or had a margin of

zero. See id. at 383, 795 F. Supp. at 418. In the fifth and sixth

administrative reviews, Commerce altered its allocation methodology

for calculating home market packing expenses, resulting in barely
Court No. 98-07-02526 Page 20

above de minimis margins and, thereby, Commerce refused plaintiffs’

request to revoke the outstanding antidumping duty order covering

the merchandise. See id. at 383-84, 795 F. Supp. at 418.

Commerce’s new calculation was based on information requested for

the first time at verification. See id. at 387, 795 F. Supp. at

421.

The court in Shikoku found that: (1) “Commerce [had] employed

a new process and approach (both synonyms for ‘methodology’)” in

calculating the home market packing expenses and did not merely

apply its standard practice of preferring actual expenses over

allocated expenses; (2) Commerce could not demonstrate that the new

allocation methodology was an improvement; and (3) the evidence on

record established that plaintiffs had relied on Commerce’s old

methodology for calculating the home market price packing

adjustment by adjusting their prices in accordance with the

methodology that Commerce had consistently applied in prior

reviews. Id. at 386-87, 795 F. Supp. at 420. Under these

circumstances, the court, noting that “[t]he margin resulting from

the new approach . . . is barely above de minimis,” determined that

it was “simply too late to mandate another three years of

administrative reviews because of a last minute ‘improvement’ in

Commerce's methodology” and concluded that “Commerce did not have
Court No. 98-07-02526 Page 21

adequate reasons for its last minute change in methodology.” Id.

at 388, 795 F. Supp. at 422.

By contrast, Commerce has no long-established practice of

disregarding administrative considerations and rigidly adhering to

the special rule whenever value added in the United States exceeds

65 percent. This case does not present the situation in which,

relying upon an old methodology, RHP-NSK had actually adjusted its

prices and, except for the change in methodology, it would be

entitled to a revocation of the outstanding antidumping duty order;

therefore, the principles of fairness that prevented Commerce from

changing its methodology in Shikoku are not present here.

The question that remains is whether Commerce’s determination

was “unsupported by substantial evidence on the record, or

otherwise not in accordance with law.” 19 U.S.C. §

1516a(b)(1)(B)(i). To determine whether Commerce’s interpretation

and application of the antidumping statute is “in accordance with

law,” the Court must undertake the two-step analysis prescribed by

Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467

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

Commerce’s construction of a statutory provision to determine

whether “Congress has directly spoken to the precise question at
Court No. 98-07-02526 Page 22

issue.” Chevron, 467 U.S. 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. (citation omitted).

On its face, 19 U.S.C. § 1677a(e) clearly provides Commerce

with a great deal of discretion in adjusting CEP for the cost of

further manufacture and assembly. When the value added to subject

merchandise in the United States is likely to substantially exceed

the value of the merchandise, Commerce must use specified surrogate

prices if two conditions are met. See 19 U.S.C. § 1677a(e)(1),

(2). The first condition, that there be “a sufficient quantity of

sales to provide a reasonable basis for comparison,” is not at

issue here. Id. The second condition requires Commerce to

“determine[] that the use of such sales is appropriate.” Id.

Thus, the second condition provides that Commerce is not forced to

use the surrogate prices if it determines that their use is not

“appropriate.” See id. In such a circumstance, Commerce is
Court No. 98-07-02526 Page 23

permitted to determine CEP “on any other reasonable basis.” Id.

Commerce, therefore, may determine whether the use of the

surrogate prices is appropriate, and it may also determine the

method by which to calculate CEP, when it finds that the use of the

surrogate prices is not appropriate. This holds true even if

Commerce finds that the value added in the United States “is likely

to exceed substantially the value of the subject merchandise.” 19

U.S.C. § 1677a(e). Thus, even if Commerce was to find that RHP-

NSK’s added value substantially exceeds the value of the

merchandise, Commerce would still have the discretion to refuse to

apply the special rule.3

To calculate value added, Commerce simply subtracted value-

added figures using RHP-NSK’s Section E data. See Final Results,

63 Fed. Reg. 33,338. Commerce determined that it would not employ

a more complicated calculation using the special rule since such a

calculation would be inappropriate “in those situations where the

value added, while large, is simple to calculate.” Id. The Court

finds that Commerce acted within the discretion afforded to it by

3
In fact, neither Commerce nor Torrington dispute that the
value added to RHP-NSK’s merchandise substantially exceeded the
value of the merchandise. See Def.’s Mem. Opp’n Pls.’ Mot. J.
Agency R. at 22; Torrington’s Resp. RHP-NSK’s Mot. J. Agency R. at
18-20.
Court No. 98-07-02526 Page 24

§ 1677a(e) in refusing to apply the special rule to RHP-NSK in this

review. The Court will not require Commerce to use the special

rule when it finds the use inappropriate, since the imposition of

such a requirement would be contrary to § 1677a(e). This is

especially true in light of the fact that there is no evidence that

Commerce’s calculation resulted in distortion or inaccuracy.

Commerce’s determination, therefore, is affirmed.

II. Commerce’s CV Profit Calculation

A. Background

During this review, Commerce used CV as the basis for NV “when

there were no usable sales of the foreign like product in the

comparison market.” Preliminary Results, 63 Fed. Reg. at 6516.

Commerce calculated the profit component of CV using the

statutorily preferred methodology contained in 19 U.S.C. §

1677b(e)(2)(A). See Final Results, 63 Fed. Reg. at 33,333. The

statutorily preferred method requires calculating an amount for

profit based on “the actual amounts incurred and realized by the

specific exporter or producer being examined in the investigation

or review . . . in connection with the production and sale of a

foreign like product [made] in the ordinary course of trade, for

consumption in the foreign country.” 19 U.S.C. § 1677b(e)(2)(A).
Court No. 98-07-02526 Page 25

In applying the preferred methodology for calculating CV

profit, Commerce determined that: (1) “an aggregate calculation

that encompasses all foreign like products under consideration for

normal value represents a reasonable interpretation of [19 U.S.C.

§ 1677b(e)(2)(A)]”; and (2) “the use of [such] aggregate data

results in a reasonable and practical measure of profit that [it]

can apply consistently in each case.” Final Results, 63 Fed. Reg.

at 33,333. In addition, Commerce used all sales “in the ordinary

course of trade as the basis for calculating CV profit[,]” that is,

it disregarded below-cost sales that were considered to be outside

the ordinary course of trade. Id. at 33,334.

B. Contentions of the Parties

RHP-NSK argues that Commerce’s use of aggregate data

encompassing all foreign like products under consideration for NV

in calculating CV profit is contrary to 19 U.S.C. § 1677b(e)(2)(A)

and to the explicit hierarchy established by 19 U.S.C. § 1677(16)

for selecting “foreign like product” for the CV profit calculation.

See RHP-NSK’s Mem. at 19-22. RHP-NSK maintains that if Commerce

intends to calculate CV profit on such an aggregate basis, it must

do so under the alternative methodology of 19 U.S.C. §

1677b(e)(2)(B)(i). See RHP-NSK’s Reply at 17.
Court No. 98-07-02526 Page 26

Commerce responds that it properly calculated CV profit

pursuant to 19 U.S.C. § 1677b(e)(2)(A) based on aggregate profit

data of all foreign like products under consideration for NV. See

Def.’s Mem. at 28-42. Torrington agrees with Commerce’s CV profit

calculation under 19 U.S.C. § 1677b(e)(2)(A) and, therefore,

maintains it is not necessary to use an alternative methodology

under 19 U.S.C. § 1677b(e)(2)(B). See Torrington’s Resp. at 21-25.

C. Analysis

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

2d 1322 (1999), this Court upheld Commerce’s CV profit methodology

of using aggregate data of all foreign like products under

consideration for NV as being consistent with the antidumping

statute. See id. at ___, 83 F. Supp. 2d at 1336. Since RHP-NSK’s

arguments and the methodology used for calculating CV profit in

this case are practically identical to those presented in RHP

Bearings, the Court adheres to its reasoning in RHP Bearings and,

therefore, finds that Commerce’s CV profit calculation methodology

is in accordance with law. Moreover, since (1) 19 U.S.C. §

1677b(e)(2)(A) requires Commerce to use the “actual amount” for

profit in connection with the production and sale of a foreign like

product in the ordinary course of trade, and (2) 19 U.S.C. §
Court No. 98-07-02526 Page 27

1677(15) provides that below-cost sales disregarded under 19 U.S.C.

§ 1677b(b)(1) are considered to be outside the ordinary course of

trade, the Court finds that Commerce properly excluded below-cost

sales from the CV profit calculation.

III. Commerce’s Denial of a Partial, Price-based LOT Adjustment to
NV for RHP-NSK’s CEP Sales

A. Background

During this review, Commerce applied a CEP offset under 19

U.S.C. § 1677b(a)(7)(B) to NV for all of RHP-NSK’s CEP sales. See

Antifriction Bearings from United Kingdom: NSK/RHP Bearings Ltd.

(NSK/RHP) Preliminary Results Analysis Mem. Eighth Administrative

Review 5/1/96-4/30/97 (Jan. 29, 1998) (Case No. A-412-801) at 2-3.

In reaching this result, Commerce first determined for RHP-NSK that

there was one CEP LOT and two home market LOTs, and that the CEP

LOT was not the same as either home market LOT. See id. Commerce

found that “[b]ecause the [home market] levels of trade were

different from the CEP level of trade, [it] could not match to

sales at the same level of trade in the [home market] nor could

[it] determine a level-of-trade adjustment based on NSK/RHP’s [home

market] sales.” Id. Commerce also determined that there was “no

other information that provides an appropriate basis for

determining a level-of-trade adjustment.” Id. For RHP-NSK’s CEP
Court No. 98-07-02526 Page 28

sales, Commerce “determined NV at the same level of trade as the

[United States] sale to the unaffiliated customer and made a CEP

offset adjustment in accordance with” § 1677b(a)(7)(B). Id.

Contrary to RHP-NSK’s contentions, Commerce concluded that no

provision of the antidumping statute provides for a “partial” LOT

adjustment “between two home-market [LOTs] where neither level is

equivalent to the level of the [United States] sale.” Final

Results, 63 Fed. Reg. at 33,331.

B. Contentions of the Parties

RHP-NSK agrees with the manner in which Commerce determined

the LOT of its CEP for NV transactions. See RHP-NSK’s Mem. at 28.

In particular, RHP-NSK agrees that Commerce properly used the CEP

as adjusted for § 1677a(d) expenses prior to its LOT analysis.

RHP-NSK also argues that Commerce should have granted it a

“partial,” price-based LOT adjustment. See id. at 30.

RHP-NSK first notes that Commerce found two LOTs in the home

market, one corresponding to original equipment manufacturers

(“OEM”) sales and the other to after market (“AM”) sales. See id.

at 29. RHP-NSK also agrees that when Commerce matched CEP sales to

home market OEM sales, Commerce correctly applied a CEP offset

because there was no basis for quantifying a price-based LOT
Court No. 98-07-02526 Page 29

adjustment for CEP to OEM NV matches. See id. Further, RHP-NSK

notes that “Commerce correctly concluded that there was no record

information that would allow Commerce to quantify the downward

price adjustment to adjust fully the AM NV [LOT] to the CEP [LOT].”

Id. Nevertheless, RHP-NSK disagrees with Commerce’s decision to

apply a CEP offset when Commerce matched CEP sales to home market

AM sales. In these situations, RHP-NSK argues that §

1677b(a)(7)(A) and the SAA direct Commerce to calculate a partial,

price-based LOT adjustment to NV for CEP sales measured by the

price differences between OEM and AM LOTs. See id. at 30.

RHP-NSK notes that the statute directs Commerce to adjust NV

for any difference between CEP and NV “‘wholly or partly’” due to

a difference in LOT between CEP and NV. Id. (quoting §

1677b(a)(7)(A)). RHP-NSK also notes that § 1677b(a)(7)(B)

indicates a CEP offset should only be used in the total absence of

price-based LOT adjustments. See id. Accordingly, RHP-NSK claims

that since there was evidence for quantifying price differences

between OEM and AM LOTs, Commerce’s failure to calculate a price-

based LOT adjustment that partly accounted for such LOT differences

violated the plain language of § 1677b(a)(7)(A). See RHP-NSK’s

Reply at 17.
Court No. 98-07-02526 Page 30

Commerce argues that it properly denied a partial LOT

adjustment and applied a CEP offset to NV for all of RHP-NSK’s CEP

transactions. See Def.’s Mem. at 42-49. Contrary to RHP-NSK’s

reading of § 1677b(a)(7)(A), Commerce asserts that the statute only

provides for an LOT price-based adjustment to NV based upon price

differences in the home market between the CEP LOT and NV LOT when

the differences can be quantified. See id. at 44-45. Commerce

claims that the statute does not authorize an LOT price-based

adjustment based upon different LOTs in the home market when the

price difference between the CEP LOT sales and the home market LOT

sales cannot be quantified. See id.; see also Final Results, 63

Fed. Reg. at 33,331 (explaining that Commerce does not read into §

1677b(a)(7)(A)’s “wholly or partly” language the authority to make

an LOT adjustment based on differences between two home market LOTs

where neither level is equivalent to the level of the United States

sale). Commerce, therefore, asserts that since it reasonably

interpreted § 1677b(a)(7)(A), the Court should sustain its denial

of an LOT adjustment and grant of a CEP offset for all of RHP-NSK’s

CEP transactions. See Def.’s Mem. at 48-49.

Torrington generally agrees with Commerce’s positions,

emphasizing that Commerce reasonably interpreted § 1677b(a)(7)(A)

as not providing for a “partial” LOT adjustment as contended by
Court No. 98-07-02526 Page 31

RHP-NSK. See Torrington’s Resp. at 27. Torrington further argues

that even if § 1677b(a)(7)(A) permits a partial LOT adjustment,

RHP-NSK nevertheless failed to submit record evidence to show

entitlement to such an adjustment. See id. at 30. Accordingly,

Torrington contends that this Court should not disturb Commerce’s

reasonable interpretation of the statute as applied to the record

evidence. See id. at 31.

C. Analysis

The Court notes that this issue has already been decided in

NTN Bearing, 24 CIT at ___, 104 F. Supp. 2d at 127-31. As this

Court decided in NTN Bearing, Commerce’s decision to deny RHP-NSK

a partial, price-based LOT adjustment measured by price difference

between home market OEM and AM sales was in accordance with law.

There is no indication in § 1677b(a)(7)(A) that the pattern of

price differences between two LOTs in the home market, absent a CEP

LOT in the home market, justifies an LOT adjustment. Rather,

Commerce’s interpretation of § 1677b(a)(7)(A) as only providing an

LOT adjustment based upon price differences in the home market

between the CEP LOT and the NV LOT was reasonable, especially in

light of the existence of the CEP offset to cover situations such

as those at issue here.
Court No. 98-07-02526 Page 32

IV. Commerce’s Treatment of RHP-NSK’s United States Repacking
Expenses as Direct Selling Expenses

A. Background4

RHP-NSK delivered the subject merchandise to unaffiliated

customers in the United States from warehouses owned and operated

by NSK Corporation. See RHP-NSK’s Resp. to Sect. C Questionnaire,

Investigation No. A-412-801, Admin. Rev. 5/1/96-4/30/97, at 39

(Sept. 8, 1997). RHP-NSK normally ships merchandise in its

original containers from its United States warehouse, but in some

instances, it repacked the merchandise to accommodate orders for

smaller distributors. See id.

For the price of the subject merchandise in the United States,

Commerce used EP or CEP, as appropriate, and calculated such prices

“based on the packed [free on board], [cost, insurance, and

freight], or delivered price to unaffiliated purchasers in, or for

exportation to, the United States.” Preliminary Results, 63 Fed.

Reg. at 6515. Commerce also made deductions for: (1) discounts and

rebates; and (2) any movement expenses in accordance with 19 U.S.C.

§ 1677a(c)(2)(A). See id. In calculating CEP, Commerce made

additional adjustments in accordance with § 1677a(d)(1)-(3) by: (1)

4
The Court notes that this issue was decided in NTN
Bearing Corp. of America v. United States, 24 CIT at ___, ___, 104
F. Supp. 2d 110, 117-21 (2000). The reader is referred to NTN
Bearing for additional background information.
Court No. 98-07-02526 Page 33

“deducting selling expenses associated with economic activities

occurring in the United States, including commissions, direct

selling expenses, indirect selling expenses, and repacking expenses

in the United States”; (2) “deduct[ing] the cost of any further

manufacture or assembly,” where appropriate; and (3) “adjust[ing]

for profit allocated to these expenses.” Id. In particular, in

adjusting CEP, Commerce deducted RHP-NSK’s United States repacking

expenses as direct selling expenses under § 1677a(d)(1)(B), rather

than as moving expenses under § 1677a(c)(2)(A), because it

determined that repacking “was performed on individual products in

order to sell the merchandise to the unaffiliated customer in the

United States.” Final Results, 63 Fed. Reg. at 33,339.

B. Contentions of the Parties

RHP-NSK argues, as it did in the Final Results, that Commerce

erred in deducting RHP-NSK’s United States repacking expenses as

direct selling expenses pursuant to § 1677a(d)(1)(B). See RHP-

NSK’s Mem. at 34-37. According to RHP-NSK, the United States

repacking constitutes an expense incident to bringing the subject

merchandise from the original place of shipment in the United

Kingdom to the place of delivery in the United States and,

therefore, should have been (1) classified and deducted as an
Court No. 98-07-02526 Page 34

expense under § 1677a(c)(2)(A), and (2) excluded from the pool of

selling expenses Commerce uses to determine CEP profit. See id.

Specifically, RHP-NSK claims that § 1677a(c)(2)(A) is not

limited to moving expenses, but includes expenses required for

transporting the goods from RHP-NSK’s United States warehouses into

the hands of carriers for delivery to United States customers. See

RHP-NSK’s Reply at 20. RHP-NSK asserts that the cost of United

States repacking is such a § 1677a(c)(2)(A) expense because the

goods cannot be transported unless RHP-NSK first breaks open the

transpacific shipping packages, selects the specific items ordered

and then repacks those items for shipment to the customer’s United

States location. See id. at 22. RHP-NSK clarifies that this

result does not change simply because the United States repacking

may be directly related to particular sales. See id. at 21. RHP-

NSK notes that § 1677a(c)(2)(A) does not preclude the deduction of

expenses directly related to a particular sale; rather, the statute

includes “any additional costs, charges, or expenses,” either

direct or indirect, incident to bringing the subject merchandise

from Japan to the United States customer. Id. (quoting §

1677a(c)(2)(A)). RHP-NSK contends, for instance, that United

States inland freight from its United States warehouse to United

States unaffiliated customers, even though directly related to
Court No. 98-07-02526 Page 35

particular sales to such customers, nevertheless constitutes a §

1677a(c)(2)(A) expense. See id. Thus, RHP-NSK asserts that United

States repacking expense should similarly be treated as §

1677a(c)(2)(A) expenses even though it may be directly related to

particular sales. See id.

Finally, RHP-NSK claims that United States repacking does not

otherwise meet the definitional criteria of § 1677a(d)(1)(B) direct

selling expenses such as credit expenses, guarantees and

warranties. See id. RHP-NSK notes that such expenses assist in

selling products, but do not involve transporting goods from the

United Kingdom to the United States unaffiliated customer as do

United States repacking expenses. See id. at 21-22.

Commerce responds, as it did in the Final Results, that RHP-

NSK’s United States repacking expenses bear no relationship to

“moving the merchandise from one point to another,” as established

by the fact that the “merchandise was moved from the exporting

country to the United States prior to repacking.” Def.’s Mem. at

49 (quoting Final Results, 63 Fed. Reg. at 33,339). Commerce also

contends that § 1677a(d)(1)(B) does not limit direct selling

expenses deducted from CEP to credit expenses, guarantees or

warranties; rather, the statute reduces CEP by the amount of any
Court No. 98-07-02526 Page 36

selling expenses which result, and bear a direct relationship to,

selling expenses in the United States. See id. at 50. Since RHP-

NSK’s repacking “‘was performed on individual products in order to

sell the merchandise to the unaffiliated customer in the United

States,’” Commerce asserts that it properly treated the repacking

expenses as direct selling expenses pursuant to § 1677a(d)(1)(B).

Id. (quoting Final Results, 63 Fed. Reg. at 33,339).

Torrington generally agrees with Commerce’s arguments. See

Torrington’s Resp. at 31-34. Torrington notes, as it did in the

Final Results, that RHP-NSK reported that it normally does not

require repacking for its United States sales, but performed

repacking “in order to sell the merchandise to the unaffiliated

customer in the United States.” Id. at 33. Torrington asserts

that since RHP-NSK’s response is consistent with Commerce’s

treatment of RHP-NSK’s repacking expenses as selling rather than

movement expenses, Commerce properly included RHP-NSK’s repacking

expenses in its calculation of CEP profit. See id. at 33-34.

C. Analysis

The Court finds that RHP-NSK’s United States repacking

expenses were not incident to bringing the subject merchandise from

the original place of shipment in the United Kingdom to the place
Court No. 98-07-02526 Page 37

of delivery in the United States. Rather, such expenses were

clearly direct selling expenses.

Direct selling expenses under § 1677a(d)(1)(B) are not limited

to credit expenses, guarantees and warranties, but include

“expenses which result from and bear a direct relationship to the

particular sale in question.” SAA at 823 (defining direct selling

expenses). In this case, the particular sales in question

concerned orders for smaller distributors. Although RHP-NSK

reported that it normally does not perform repacking for United

States sales (that is, it usually ships merchandise from its United

States warehouse in its original containers), RHP-NSK acknowledged

that it did some repacking to accommodate orders for smaller

distributors. See RHP-NSK’s Resp. to Sect. C Questionnaire,

Investigation No. A-412-801, Admin. Rev. 5/1/96-4/30/97, at 39

(Sept. 8, 1997). The Court finds, therefore, as Commerce did in

the Final Results, that RHP-NSK’s repacking is an “expense

associated with selling the merchandise.” 63 Fed. Reg. at 33,339.

Accordingly, the Court concludes that Commerce properly

treated and deducted RHP-NSK’s United States repacking expenses as

direct selling expenses pursuant to § 1677a(d)(1)(B) rather than as

transportation or other expenses pursuant to § 1677a(c)(2)(A).
Court No. 98-07-02526 Page 38

CONCLUSION

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

to apply the special rule for merchandise with value added after

importation under 19 U.S.C. § 1677a; (2) calculating profit for CV;

(3) denying a partial, price-based LOT adjustment to NV; and (4)

deducting United States repacking expenses as direct selling

expenses. Commerce’s determination is affirmed.

_____________________________

NICHOLAS TSOUCALAS

SENIOR JUDGE

Dated: November 2, 2000

New York, New York