Slip Op. 00-131
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
________________________________________
:
SNR ROULEMENTS; SKF USA INC., :
SKF FRANCE S.A. and SARMA, :
:
Plaintiffs, :
:
v. : Consol. Court No.
: 97-10-01825
UNITED STATES, :
:
Defendant, :
:
and :
:
THE TORRINGTON COMPANY, :
:
Defendant-Intervenor. :
________________________________________:
Plaintiffs SNR Roulements (“SNR”), SKF USA Inc., SKF France
S.A. and SARMA (collectively “SKF”) 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
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, The Torrington Company
(“Torrington”), filed a response to SNR and SKF’s USCIT R. 56.2
motions for judgment upon the agency record challenging certain
determinations of Commerce’s Final Results.
Specifically, SNR and SKF contend that Commerce unlawfully:
(1) 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 from France;
Consol. Court No. 97-10-01825 Page 2
(2) determined that it applied a reasonable duty absorption
methodology and that duty absorption had in fact occurred; and (3)
excluded below-cost sales from the profit calculation for
constructed value under 19 U.S.C. § 1677b(e)(2) (1994).
SNR further contends that Commerce unlawfully: (1) excluded
amounts for imputed credit and inventory carrying expenses in its
calculation of total expenses for the constructed export price
(“CEP”) profit ratio; and (2) denied a partial, price-based level
of trade adjustment to normal value for CEP sales.
Held: SKF’s USCIT R. 56.2 motion is denied in part and granted
in part. SNR’s USCIT R. 56.2 motion is denied in part and granted
in part. Torrington’s USCIT R. 56.2 motion is denied in part and
granted in part. This case is remanded to Commerce to (1) annul
all findings and conclusions made pursuant to the duty absorption
inquiry conducted for this review; and (2) include all expenses
included in “total United States expenses” in the calculation of
“total expenses.”
[SKF’s, SNR’s and Torrington’s USCIT R. 56.2 motions are denied in
part and granted in part. Case remanded.]
Dated: October 13, 2000
Grunfeld, Desiderio, Lebowitz & Silverman LLP (Bruce M.
Mitchell and Mark E. Pardo) for SNR.
Steptoe & Johnson LLP (Herbert C. Shelley and Alice A. Kipel)
for SKF.
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: Mark A. Barnett, Patrick V. Gallagher, Myles
S. Getlan 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 defendant-intervenor.
Consol. Court No. 97-10-01825 Page 3
OPINION
TSOUCALAS, Senior Judge: Plaintiffs SNR Roulements (“SNR”),
SKF USA Inc., SKF France S.A. and SARMA (collectively “SKF”) 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
Parts Thereof From France, Germany, Italy, Japan, Romania,
Singapore[,] Sweden and the United Kingdom; Amended Final Results
of Antidumping Duty Administrative Reviews (“Amended Final
Results”), 62 Fed. Reg. 61,963 (Nov. 20, 1997). Defendant-
intervenor, The Torrington Company (“Torrington”), filed a response
to SNR and SKF’s USCIT R. 56.2 motions for judgment upon the agency
record challenging certain determinations of Commerce’s Final
Results.
Specifically, SNR and SKF contend that Commerce unlawfully:
(1) conducted a duty absorption inquiry under 19 U.S.C. §
Consol. Court No. 97-10-01825 Page 4
1675(a)(4) (1994) for the subject reviews of the applicable
antidumping duty orders covering antifriction bearings from France;
(2) determined that it applied a reasonable duty absorption
methodology and that duty absorption had in fact occurred; and (3)
excluded below-cost sales from the profit calculation for
constructed value (“CV”) under 19 U.S.C. § 1677b(e)(2) (1994).
SNR further contends that Commerce unlawfully: (1) excluded
amounts for imputed credit and inventory carrying expenses in its
calculation of total expenses for the constructed export price
(“CEP”) profit ratio; and (2) denied a partial, price-based level
of trade (“LOT”) adjustment to normal value (“NV”) for CEP sales.
BACKGROUND
On May 15, 1989, Commerce published antidumping duty orders on
antifriction bearings (other than tapered roller bearings) and
parts thereof (“AFBs”) imported from several countries, including
France. See Antidumping Duty Orders: Ball Bearings, Cylindrical
Roller Bearings, and Spherical Plain Bearings, and Parts Thereof
From Japan, 54 Fed. Reg. 20,904. This case concerns the seventh
administrative review of the antidumping duty order on AFBs from
France for the period of review (“POR”) covering May 1, 1995
Consol. Court No. 97-10-01825 Page 5
through April 30, 1996.1 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.
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
1
Since the administrative review at issue was initiated after
December 31, 1994, the applicable law in this case is the
antidumping statute as amended by the Uruguay Round Agreements Act,
Pub. L. No. 103-465, 108 Stat. 4809 (1994) (effective Jan. 1,
1995).
Consol. Court No. 97-10-01825 Page 6
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. Duty Absorption Inquiry
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) (1994), and the ITC will take such findings into
account in determining whether material injury is likely to
Consol. Court No. 97-10-01825 Page 7
continue or recur if an order were revoked under § 1675(c). See 19
U.S.C. § 1675a(a)(1)(D) (1994).
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 SNR and SKF, 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.
Consol. Court No. 97-10-01825 Page 8
See id. at 54,075.
B. Contentions of the Parties
SNR and SKF contend that Commerce lacked authority under §
1675(a)(4) to conduct a duty absorption inquiry for the seventh POR
of the outstanding 1989 antidumping duty orders. See SNR’s Br.
Supp. Mot. J. Agency R. (“SNR’s Br.”) at 16-19; SKF’s Br. Supp.
Mot. J. Agency R. (“SKF’s Br.”) at 9-16. In the alternative, SNR
and SKF 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
SNR’s Br. at 19-22; SKF’s Br. at 16-36.
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. Opp’n Pls.’ Mot. J. Agency R. (“Def.’s Mem.”) at 22-38.
Torrington generally agrees with Commerce’s contentions. See
Torrington’s Resp. Pls.’ Mot. J. Agency R. (“Torrington’s Resp.”)
at 6-12.
Consol. Court No. 97-10-01825 Page 9
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
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 at issue in this case are practically
identical to those presented in SKF USA, the Court adheres to its
reasoning in SKF USA. 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 outstanding 1989 antidumping duty orders in dispute here.
Consol. Court No. 97-10-01825 Page 10
II. Profit Calculation for CV
A. Background
For this POR, 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, 62 Fed. Reg. at 31,571. Commerce
calculated the profit component of CV using the statutorily
preferred methodology of 19 U.S.C. § 1677b(e)(2)(A) (1994). See
Final Results, 62 Fed. Reg. at 54,062. Specifically, in
calculating CV, the statutorily preferred method is to calculate 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).
In applying the “preferred” method for calculating CV profit
under § 1677b(e)(2)(A), Commerce determined that “the use of
aggregate data that encompasses all foreign like products under
consideration for NV results in a practical measure of profit that
we can apply consistently in each case.” Final Results, 62 Fed.
Reg. at 54,062. Also, in calculating CV profit under §
1677b(e)(2)(A), Commerce excluded below-cost sales from the
Consol. Court No. 97-10-01825 Page 11
calculation which it disregarded in the determination of NV
pursuant to 19 U.S.C. § 1677b(b)(1). See id. at 54,063.
B. Contentions of the Parties
SNR and SKF contend that Commerce’s use of aggregate data
encompassing all foreign like products under consideration for NV
in calculating CV profit is contrary to § 1677b(e)(2)(A). See
SNR’s Br. at 5-10; SKF’s Br. at 37-40. Instead, SNR and SKF claim
that Commerce should have relied on the alternative methodology of
§ 1677b(e)(2)(B)(i), which provides a CV profit calculation that is
similar to the one Commerce used, but does not limit the
calculation to sales made in the ordinary course of trade, that is,
below-cost sales are not excluded from the calculation. See SNR’s
Br. at 10-11; SKF’s Br. at 40-52. SKF also asserts that if
Commerce’s exclusion of below-cost sales from the numerator of the
CV profit calculation is lawful, Commerce should nonetheless
include such sales in the denominator of the calculation to temper
bias which is inherent in Commerce’s dumping margin calculations.
See SKF’s Br. at 53-55.
Commerce responds that it properly calculated CV profit
pursuant to § 1677b(e)(2)(A) based on aggregate profit data of all
foreign like products under consideration for NV. See Def.’s Mem.
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at 7-22. Consequently, Commerce maintains that since it properly
calculated CV profit under subparagraph (A) rather than (B) of §
1677b(e)(2), it correctly excluded below-cost sales from the CV
profit calculation. See id. at 10-11. Torrington agrees with
Commerce’s methodology for calculating CV profit. See Torrington’s
Resp. at 13-15.
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 Commerce’s
CV profit methodology and SKF’s arguments at issue in this case are
practically identical to those presented in RHP Bearings, the Court
adheres to its reasoning in RHP Bearings. The Court, therefore,
finds that Commerce’s CV profit methodology is in accordance with
law.
Moreover, since (1) § 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. § 1677(15) (1994) provides that below-cost sales
Consol. Court No. 97-10-01825 Page 13
disregarded under § 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 Treatment of SNR’s Imputed Credit and Inventory
Carrying Costs in the Calculation of CEP Profit
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
methods for calculating “total expenses.” First, “total expenses”
Consol. Court No. 97-10-01825 Page 14
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).
SNR 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
Consol. Court No. 97-10-01825 Page 15
in § 1677a(f)(2)(C), but included them in the “total United States
expenses” calculation, defined in § 1677a(f)(2)(B). SNR 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 772(f)(1) and 772(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” calculation since
we have already accounted for actual interest in
computing this amount under section 772(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 772(f)(1) of the statute, which defines “total
United States expense” as the total expenses described
under section 772(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
SNR complains that in calculating “total United States
expenses” pursuant to 19 U.S.C. § 1677a(f)(2)(B), Commerce included
Consol. Court No. 97-10-01825 Page 16
amounts for imputed credit and inventory carrying expenses, but
failed to include these amounts in its calculation of “total
expenses,” as defined by 19 U.S.C. § 1677a(f)(2)(C). See SNR’s Br.
at 12. SNR argues that the plain language of the statute
demonstrates that “total United States expenses” is a subset of
“total expenses” and, therefore, any expense constituting “‘total
United States expenses’ ([that is], expenses incurred in selling
the subject merchandise in the United States)” must also be
included in “‘total expenses’ ([that is], all expenses incurred in
selling the subject merchandise in the United States and the
foreign like product in the home market).” Id. at 12-13. SNR
argues that Commerce should not be permitted to ignore the plain
language of the statute. See id.
Commerce maintains that the statute does not address the use
of imputed expenses in the calculation of “total expenses” or
“total actual profit.” See Def.’s Mem. at 40. Commerce considers
imputed selling expenses, including imputed credit and inventory
carrying costs, to be selling expenses encompassed by § 1677a
(d)(1) and (2) and, as such, includes them in the calculation of
“total United States expenses.” See id. at 42-43. Commerce,
however, did not include the imputed expenses in “total actual
profit” because “normal accounting principles permit the deduction
Consol. Court No. 97-10-01825 Page 17
of only actual booked expenses not imputed expenses in calculating
profit.” Id. at 43 (citation omitted). Additionally, Commerce
did not include imputed expenses in total actual profit because
“its calculation of profit already includes net interest expenses,
and, as [a] result, there is no need to include imputed interest
expenses in determining total profit” and because the statute
specifically directs that actual profit be used. 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” pursuant to 19 U.S.C. § 1677a(f)(2)(D). See id. at 42.
Commerce argues that while the statute clearly provides that “total
actual profit” is to be based upon the total profit earned “‘with
respect to the same merchandise for which total expenses are
determined,’” 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.’” Def.’s Mem. at 40
(quoting 19 U.S.C. § 1677a(f)(2)(C) and (D)).
Finally, Commerce contends that if “Congress intended that
Commerce utilize the same types of expenses for both ‘total United
Consol. Court No. 97-10-01825 Page 18
States expenses’ and ‘total expenses,’ it would have made that
intent clear,” and would not have assigned disparate definitions
for each term. Id. at 44. Torrington generally agrees with
Commerce. See Torrington’s Br. at 16-17.
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 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 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).
Consol. Court No. 97-10-01825 Page 19
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
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
Consol. Court No. 97-10-01825 Page 20
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 . . . .
See § 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 France, to produce and sell the
subject merchandise in the United States. SNR, therefore, is
correct in contending that “total United States expenses” is a
subset of “total expenses.” Thus, since Commerce 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.2
Because the text of the statute resolves the issue, it is
unnecessary to proceed any further. Accordingly, the Court remands
2
None of the parties dispute that imputed credit and
inventory carrying costs are properly considered United States
selling expenses under § 1677a(d) (1994) and, therefore, are a part
of “total United States expenses” under 19 U.S.C. § 1677a(f)(2)(B)
(1994).
Consol. Court No. 97-10-01825 Page 21
this issue to Commerce. Commerce is directed to include all
expenses included in “total United States expenses” in the
calculation of “total expenses.”
IV. Commerce’s Denial of a Partial, Price-based LOT Adjustment to
NV for SNR’s CEP Sales
A. Background
1. Statutory Provisions
The URAA provides for a specific provision regarding
adjustments to NV for differences in LOTs. The statute provides
for NV to be based on:
the price at which the foreign like product is first sold
(or, in the absence of a sale, offered for sale) for
consumption in the exporting country, in the usual
commercial quantities and in the ordinary course of trade
and, to the extent practicable, at the same level of
trade as the export price or constructed export price.
19 U.S.C. § 1677b(a)(1)(B)(i) (emphasis added). The statute also
provides for a LOT adjustment to NV under the following conditions:
The price described in [§ 1677b(a)(1)(B), i.e., NV,]
shall also be increased or decreased to make due
allowance for any difference (or lack thereof) between
the export price and constructed export price and the
price described in [§ 1677b(a)(1)(B)] (other than a
difference for which allowance is otherwise made under [§
1677b(a)]) that is shown to be wholly or partly due to a
difference in level of trade between the export price or
constructed export price and normal value, if the
difference in level of trade--
(i) involves the performance of different selling
activities; and
Consol. Court No. 97-10-01825 Page 22
(ii) 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.
In a case described in the preceding sentence, the amount
of the adjustment shall be based on the price differences
between the two levels of trade in the country in which
normal value is determined.
19 U.S.C. § 1677b(a)(7)(A). In sum, to qualify for a LOT
adjustment to NV, a party has the burden to show that the following
two conditions have been satisfied: (1) the difference in LOT
involves the performance of different selling activities; and (2)
the difference affects price comparability. See Statement of
Administrative Action3 (“SAA”) at 829 (stating that “if a
respondent claims [a LOT] adjustment to decrease normal value, as
with all adjustments which benefit a responding firm, the
respondent must demonstrate the appropriateness of such
adjustment”); see also NSK Ltd. v. United States, 190 F.3d 1321,
3
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. 97-10-01825 Page 23
1330 (Fed. Cir. 1999) (noting that a respondent bears the burden of
establishing entitlement to a LOT adjustment).
When the available data does not provide an appropriate basis
to grant a LOT adjustment, but NV is established at a LOT
constituting a more advanced stage of distribution than the LOT of
the CEP, the statute ensures a fair comparison by providing for an
additional adjustment to NV known as the “CEP offset.” See 19
U.S.C. § 1677b(a)(7)(B). Specifically, the CEP offset provides
that NV “shall be reduced by the amount of indirect selling
expenses incurred in the country in which normal value is
determined on the sales of the foreign like product but not more
than the amount of such expenses for which a deduction is made
under [19 U.S.C. § 1677a(d)(1)(D)].” 19 U.S.C. § 1677b(a)(7)(B).
2. Commerce’s LOT Methodology
During this review, and in several prior reviews, Commerce
applied the following LOT methodology. See Final Results, 62 Fed.
Reg. at 54,055; Preliminary Results, 62 Fed. Reg. at 31,571-72. In
accordance with § 1677b(a)(1)(B)(i), Commerce first calculates NV
based on exporting-country (or third-country) sales, to the extent
practicable, at the same LOT as the United States (EP and CEP)
sales. See Preliminary Results, 62 Fed. Reg. at 31,571. When
Consol. Court No. 97-10-01825 Page 24
Commerce is unable to find comparison sales at the same LOT as the
EP or CEP sales, it compares such United States sales to sales at
a different LOT in the comparison (home or third-country) market.
See id.
Where the LOT comparison is between NV sales and EP sales
(that is, where the first sale in the United States is to an
unaffiliated buyer), Commerce compares the unadjusted, NV starting
price with the starting EP, without making any adjustments to EP as
provided for under 19 U.S.C. § 1677a(c). See id. at 31,571.
With respect to the LOT methodology for CEP sales, Commerce
first calculates CEP by making adjustments to its starting price
under 19 U.S.C. § 1677a(d), but before making any adjustments under
§ 1677a(c). See id. Commerce reasoned that the § 1677a(d)
“adjustments are necessary in order to arrive at, as the term CEP
makes clear, a ‘constructed’ EP,” that is, it is intended to
reflect as closely as possible a price corresponding to an EP
between non-affiliated exporters and importers. Final Results, 62
Fed. Reg. at 54,058. Commerce then determines the LOT for the
“adjusted” CEP sales. See Preliminary Results, 62 Fed. Reg. at
31,571.
The next step in its LOT analysis is to determine whether home
Consol. Court No. 97-10-01825 Page 25
market sales are at a different LOT than United States (EP or CEP)
sales. See id. In making such a determination, Commerce examines
whether the “home market sales are at different stages in the
marketing process than the U.S. [(EP or CEP)] sales,” that is,
Commerce “review[s] and compare[s] the distribution systems in the
home market and U.S. export markets, including selling functions,
class of customer, and the extent and [LOT] of selling expenses for
each claimed [LOT].” Id. If the EP or CEP sales and the NV sales
are at a different LOT, and the differences in LOT affects price
comparability, as manifested in a pattern of consistent price
differences between the sales on which NV is based and comparison-
market sales at the equivalent LOT of the export transaction,
Commerce will make a LOT adjustment under § 1677b(a)(7)(A). See
id. If there is no pattern of consistent price differences, no
adjustment is permitted. See id. at 31,572. Finally, for CEP
sales, if NV is established at a LOT which constitutes a more
advanced stage of distribution than the LOT of the CEP, and if
there is no basis for determining whether differences in the LOT
between NV and CEP affects comparability of their prices, Commerce
must make a CEP offset to NV under § 1677b(a)(7)(B). See id.
Consol. Court No. 97-10-01825 Page 26
3. Denial of LOT Adjustment for CEP Sales
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 except for certain home market sales
of respondent NMB/Pelmac. See Final Results, 62 Fed. Reg. at
54,056. Commerce was unable to “determine whether there was a
pattern of consistent price differences between the [LOTs] based on
respondents’ [home market] sales of merchandise under review.” Id.
In such cases, 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 level-of-trade 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). Nevertheless, Commerce determined that
it would have been inappropriate to apply the LOT adjustment
calculated for NMB/Pelmac to any other respondent, reasoning that
“[b]ecause no respondent reported sales in the same market as
NMB/Pelmac (i.e., Singapore), we have not used NMB/Pelmac’s data as
the basis of a level-of-trade adjustment for any other
Consol. Court No. 97-10-01825 Page 27
respondents.” Id. Consequently, with respect to CEP sales which
Commerce was unable to quantify a LOT adjustment, it granted a CEP
offset to respondents, including SNR, 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). See id.
With respect to SNR, Commerce applied a CEP offset to NV for
all of SNR’s CEP sales. In reaching this result, Commerce first
determined for SNR 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. Commerce could not grant a LOT adjustment because it had no
other information to provide an appropriate basis for such an
adjustment. Commerce determined that a CEP offset adjustment was
appropriate for NV transactions matched to CEP, since these
transactions were at a more advanced stage of distribution than
CEP. Moreover, contrary to SNR’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, 62 Fed. Reg. at 54,057.
B. Contentions of the Parties
SNR contends that Commerce improperly denied a price-based LOT
Consol. Court No. 97-10-01825 Page 28
adjustment under § 1677b(a)(7)(A) for CEP sales made in the United
States market at a LOT different from the home market sales. See
SNR’s Br. at 14. SNR notes that Commerce found two LOTs in the
home market, one corresponding to original equipment manufacturers
(“OEM”) sales and the other to sales to distributors. See id. SNR
argues that Commerce should have granted it a partial LOT
adjustment based on the price differences between the two levels of
trade in the home market. See id.
SNR notes that the statute directs Commerce to adjust NV for
any difference between CEP and NV “‘wholly or partly due to a
difference in level of trade’” between CEP and NV. Id. at 15
(quoting § 1677b(a)(7)(A)). Thus, SNR claims that a LOT adjustment
is appropriate even if the difference between United States price
and NV is only partly due to a difference in LOT. See id. SNR
contends that if it has demonstrated that
(1) distributor sales are at a more advanced level of
trade than OEM sales; (2) both OEM and distributor sales
are at a more advanced level of trade than CEP sales; and
(3) there is a pattern of consistent price difference
between sales of the same products to OEM and distributor
customers in the home market
then it is logical to conclude that “the price difference between
OEM and distributor sales in the home market at least approximates
the level of trade adjustment between CEP sales and home market
Consol. Court No. 97-10-01825 Page 29
distributor sales.” Id. In short, SNR claims that the statute
permits “the level-of-trade adjustment [to] be calculated using a
reliable approximation of the difference between the prices at the
two levels of trade,” that is, “by using the price difference
between OEM and distributor sales to approximate the difference
between CEP and distributor sales.” Id. at 16.
Commerce claims that it properly denied a LOT adjustment for
SNR’s CEP sales because SNR failed to establish its entitlement to
a LOT adjustment. See Def.’s Mem. at 45. Contrary to SNR’s
reading of § 1677b(a)(7)(A), Commerce asserts that the statute only
provides for a LOT price-based adjustment to NV based upon price
differences between CEP and NV and does not authorize a LOT price-
based adjustment based upon different LOTs in the home market. See
id. at 47; see also Final Results, 62 Fed. Reg. at 54,057
(explaining that Commerce does not read into § 1677b(a)(7)(A)’s
“wholly or partly” language the authority to make a 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 a LOT
adjustment and grant of a CEP offset for all of SNR’s CEP
transactions. See id. at 50.
Consol. Court No. 97-10-01825 Page 30
Torrington generally agrees with Commerce’s positions,
emphasizing that Commerce: (1) properly denied a LOT adjustment for
SNR’s CEP sales; and (2) reasonably interpreted § 1677b(a)(7)(A) as
not providing for a “partial” LOT adjustment as contended by SNR.
See Torrington’s Resp. at 17-20. 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 20.
C. Analysis
The Court notes that this issue has already been decided in
NTN Bearing, 24 CIT at ___, 104 F. Supp. 2d at 125-31. As this
Court decided in NTN Bearing, Commerce’s decision to deny SNR a
partial, price-based LOT adjustment measured by price difference
between home market LOTs 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 a LOT adjustment. Rather, Commerce’s
interpretation of § 1677b(a)(7)(A) as only providing a 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
Consol. Court No. 97-10-01825 Page 31
at issue here.
CONCLUSION
For the foregoing reasons, the case is remanded to Commerce
to: (1) annul all findings and conclusions made pursuant to the
duty absorption inquiries conducted for the subject review; and (2)
include all expenses included in “total United States expenses” in
the calculation of “total expenses” for SNR Roulements. Commerce’s
final determination is affirmed in all other respects.
____________________________
NICHOLAS TSOUCALAS
SENIOR JUDGE
Dated: October 13, 2000
New York, New York