Slip Op. 00-128
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
______________________________________
:
SKF USA INC., SKF FRANCE S.A. :
and SARMA, :
:
Plaintiffs and :
Defendant-Intervenors, :
:
v. : Consol. Court No.
: 97-02-00269-S1
UNITED STATES, :
:
Defendant, :
:
and :
:
THE TORRINGTON COMPANY and :
SNR ROULEMENTS, :
:
Defendant-Intervenors :
and Plaintiffs. :
______________________________________:
Plaintiffs and defendant-intervenors, 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 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, Singapore, and the United Kingdom; Final Results
of Antidumping Duty Administrative Reviews (“Final Results”), 62
Fed. Reg. 2081 (Jan. 15, 1997), as amended, Antifriction
Bearings (Other Than Tapered Roller Bearings) and Parts Thereof
From France, Germany, Italy, Japan, and Singapore; Amended Final
Results of Antidumping Duty Administrative Reviews, 62 Fed. Reg.
14,391 (Mar. 26, 1997). Defendant-intervenors and plaintiffs,
The Torrington Company (“Torrington”) and SNR Roulements (“SNR”)
also move pursuant to USCIT R. 56.2 for judgment upon the agency
record challenging certain aspects of Commerce’s Final Results.
Specifically, SKF argues that Commerce erred in:
Consol. Court No. 97-02-00269-S1 Page 2
(1)calculating constructed value (“CV”) profit; (2) calculating
the CV home market credit expense rate based on home market
gross unit price while applying that rate to the per unit cost
of production; (3) including SKF’s zero-value United States
transactions in its margin calculations; (4) failing to match
United States sales to similar home market sales prior to
resorting to CV when all home market sales of identical
merchandise have been disregarded; and (5) committing a computer
error that resulted in the assignment of an incorrect level of
trade (“LOT”) code to certain United States sales.
Torrington contends that Commerce erred in accepting SKF’s
home-market billing adjustments because: (1) they were reported
on a customer-specific rather than on a transaction-specific
basis; and (2) the data is incomplete.
SNR argues that Commerce erred in: (1) calculating CV
profit; and (2) deducting home market depreciation expenses as
United States indirect selling expenses when calculating
constructed export price (“CEP”).
Held: SKF’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. SNR’s USCIT R. 56.2 motion is denied
in part and granted in part. The case is remanded to Commerce
to: (1) reconsider its decision to calculate SKF’s home market
credit expense based upon price and then apply that rate to
cost; (2) exclude any transactions that were not supported by
consideration from SKF’s United States sales database and to
adjust the dumping margins accordingly; (3) first attempt to
match SKF’s United States sales to similar home market sales
before resorting to CV; (4) assign the correct LOT code for
SKF’s export price sales in the margin calculation program; (5)
determine whether SKF-France’s billing adjustment two is
insignificant within the meaning of 19 U.S.C. § 1677f-1(a)
(1994); and (6) reconsider the treatment of depreciation
expenses incurred in France in calculating CEP for SNR.
Commerce is affirmed in all other respects.
[SKF’s motion is denied in part and granted in part.
Torrington’s motion is denied in part and granted in part.
SNR’s motion is denied in part and granted in part. Case
remanded.]
Dated: October 11, 2000
Consol. Court No. 97-02-00269-S1 Page 3
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, Thomas H. Fine, Patrick
V. Gallagher and David R. Mason, Office of the Chief Counsel for
Import Administration, United States Department of Commerce, for
defendant.
Stewart and Stewart (Terence P. Stewart, Wesley K. Caine,
Geert De Prest and Lane S. Hurewitz) for Torrington.
Grunfeld, Desiderio, Lebowitz & Silverman LLP (Bruce M.
Mitchell and Jeffrey S. Grimson) for SNR.
OPINION
TSOUCALAS, Senior Judge: Plaintiffs and defendant-
intervenors, 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 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, Singapore, and
the United Kingdom; Final Results of Antidumping Duty
Administrative Reviews (“Final Results”), 62 Fed. Reg. 2081
(Jan. 15, 1997), as amended, Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof From France, Germany,
Consol. Court No. 97-02-00269-S1 Page 4
Italy, Japan, and Singapore; Amended Final Results of
Antidumping Duty Administrative Reviews (“Amended Final
Results”), 62 Fed. Reg. 14,391 (Mar. 26, 1997). Defendant-
intervenors and plaintiffs, The Torrington Company
(“Torrington”) and SNR Roulements (“SNR”) also move pursuant to
USCIT R. 56.2 for judgment upon the agency record challenging
certain aspects of Commerce’s Final Results.
Specifically, SKF argues that Commerce erred in:
(1)calculating constructed value (“CV”) profit; (2) calculating
the CV home market credit expense rate based on home market
gross unit price while applying that rate to the per unit cost
of production (“COP”); (3) including SKF’s zero-value United
States transactions in its margin calculations; (4) failing to
match United States sales to similar home market sales prior to
resorting to CV when all home market sales of identical
merchandise have been disregarded; and (5) committing a computer
error that resulted in the assignment of an incorrect level of
trade (“LOT”) code to certain United States sales.
Torrington contends that Commerce erred in accepting SKF’s
home-market billing adjustments because: (1) they were reported
on a customer-specific rather than on a transaction-specific
basis; and (2) the data is incomplete.
Consol. Court No. 97-02-00269-S1 Page 5
SNR argues that Commerce erred in: (1) calculating CV
profit; and (2) deducting home market depreciation expenses as
United States indirect selling expenses when calculating
constructed export price (“CEP”).
BACKGROUND
This case concerns the sixth review of the antidumping duty
order on antifriction bearings (other than tapered roller
bearings) and parts thereof (“AFBs”) imported to the United
States from France during the review period of May 1, 1994
through April 30, 1995.1 On July 8, 1996, Commerce published the
preliminary results of the subject review. See Antifriction
Bearings (Other Than Tapered Roller Bearings) and Parts Thereof
From France, Germany, Italy, Japan, Romania, Singapore, Thailand
and the United Kingdom; Preliminary Results of Antidumping Duty
Administrative Reviews, Termination of Administrative Reviews,
and Partial Termination of Administrative Reviews (“Preliminary
Results”), 61 Fed. Reg. 35,713. Commerce issued the Final
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
(“URAA”), Pub. L. No. 103-465, 108 Stat. 4809 (1994) (effective
January 1, 1995). See Torrington Co. v. United States, 68 F.3d
1347, 1352 (Fed. Cir. 1995) (citing URAA § 291(a)(2), (b)
(noting effective date of URAA amendments)).
Consol. Court No. 97-02-00269-S1 Page 6
Results on January 15, 1997, see 62 Fed. Reg. 2081, and the
Amended Final Results on March 26, 1997, see 62 Fed. Reg.
14,391.
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 in antidumping proceedings).
DISCUSSION
I. Commerce’s CV Profit Calculation
A. Background
For this POR, Commerce used CV as the basis for normal value
(“NV”) “when there were no usable sales of the foreign like
product in the comparison market.” Preliminary Results, 61 Fed.
Consol. Court No. 97-02-00269-S1 Page 7
Reg. at 35,718. 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 2113.
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 methodology for calculating CV
profit, Commerce determined that “the use of aggregate data that
encompasses all foreign like products under consideration for NV
represents a reasonable interpretation of [§ 1677b(e)(2)(A)] and
results in a practical measure of profit that [Commerce] can
apply consistently in each case.” Final Results, 62 Fed. Reg at
2113. Also, in calculating CV profit under § 1677b(e)(2)(A),
Commerce excluded below-cost sales from the calculation which it
disregarded in the determination of NV pursuant to § 1677b(b)(1)
(1994). See id. at 2114.
Consol. Court No. 97-02-00269-S1 Page 8
B. Contentions of the Parties
SKF and SNR 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 SKF’s Br. Supp. Mot. J. Agency R. (“SKF’s Br.”) at 11-26;
SNR’s Br. Supp. Mot. J. Agency R. (“SNR’s Br.”) at 7-12.
Instead, SKF and SNR 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 SKF’s Br. at 11-26;
SNR’s Br. at 12-13. 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 the agency’s dumping margin
calculations. See SKF’s Br. at 26-30.
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. in Partial Opp’n to Pls.’ Mots. J. Agency R.
Consol. Court No. 97-02-00269-S1 Page 9
(“Def.’s Mem.”) at 8-11. 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 12-19.
Torrington generally agrees with Commerce’s contentions. See
Torrington’s Resp. to Pls.’ Mots. J. Agency R. (“Torrington’s
Resp.”) at 6-15.
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 and SNR’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
Consol. Court No. 97-02-00269-S1 Page 10
course of trade, and (2) 19 U.S.C. § 1677(15) (1994) provides
that below-cost sales 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.
II. CV Home Market Credit Expense Rate
A. Contentions of the Parties
SKF contends that Commerce erred in “calculating a home
market credit expense rate based on price, but applying that
rate to cost.” See SKF’s Br. at 30. Specifically, Commerce
“computed a credit expense rate based on the ratio of home
market credit expense to home market gross unit price” when
“calculating an average home market credit expense to be
deducted from CV.” Id. Commerce applied the home market credit
expense rate to the COP, rather than price, of each model to
derive a per unit amount for home market credit expense. See
id. Commerce then deducted the per unit expense amount in the
CV calculation. See id. SKF maintains that applying a home
market credit expense rate based upon price to cost is contrary
to the “fundamental principle inherent in all antidumping rate
and factor calculations, that the calculation of the rate and
its application must be consistent.” SKF’s Reply Supp. Mot. J.
Consol. Court No. 97-02-00269-S1 Page 11
Agency R. (“SKF’s Reply”) at 21.
Commerce agrees that it erred “by calculating a home market
credit expense based upon price but applying that rate to cost,”
and asks the Court to remand the matter for recalculation of
SKF’s home market credit cost. Def.’s Mem. at 26. Torrington,
however, maintains that Commerce’s methodology is reasonable and
should be affirmed. See Torrington’s Resp. at 26.
In light of the foregoing, the Court remands this issue to
Commerce to reconsider its decision to calculate home market
credit expense based upon price and then apply that rate to
cost.
III. Zero-Value United States Transactions
A. Contentions of the Parties
SKF argues that in light of NSK Ltd. v. United States, 115
F.3d 965, 975 (Fed. Cir. 1997), the Court should remand the
matter to Commerce to exclude SKF’s zero-value transactions from
its margin calculations. See SKF’s Br. at 35-36. SKF maintains
that United States transactions at zero value, such as
prototypes and samples, do not constitute true sales and,
therefore, should be excluded from the margin calculations
Consol. Court No. 97-02-00269-S1 Page 12
pursuant to NSK. See id. at 36. The identical issue was
decided by this Court in SKF USA Inc. v. United States, 23 CIT
___, Slip Op. 99-56, 1999 WL 486537 (June 29, 1999).
Torrington concedes that a remand may be necessary in light
of NSK, but argues that further factual inquiry by Commerce is
necessary to determine whether the zero-price transactions were
truly without consideration. See Torrington’s Resp. at 28.
Torrington argues that only if the transactions are truly
without consideration can they fall within NSK’s exclusion. See
id. at 12.
Commerce concedes that the case should be remanded to it to
exclude the sample transactions for which SKF received no
consideration from SKF’s United States sales database. See
Def.’s Mem. at 26.
Commerce is required to impose antidumping duties upon
merchandise that “is being, or is likely to be, sold in the
United States at less than its fair value.” 19 U.S.C. § 1673(1)
(1994). A zero-priced transaction does not qualify as a “sale”
and, therefore, by definition cannot be included in Commerce’s
[foreign market value] calculation. See NSK, 115 F.3d at 975
(holding “that the term sold . . . requires both a transfer of
ownership to an unrelated party and consideration”). Thus, the
Consol. Court No. 97-02-00269-S1 Page 13
distribution of AFBs for no consideration falls outside the
purview of 19 U.S.C. § 1673. Consequently, the Court remands
to Commerce to exclude any transactions that were not
supported by consideration from SKF’s United States sales
database and to adjust the dumping margins accordingly.
IV. Commerce’s Matching United States Sales to Similar Home
Market Sales Prior to Resorting to CV
SKF maintains that Commerce erred in resorting to CV without
first attempting to match United States sales, that is, export
price (“EP”) or CEP sales, to similar home market sales in
instances where home market sales of identical merchandise have
been disregarded because they were out of the ordinary course of
trade. See SKF’s Br. at 38-39. SKF maintains that a remand is
necessary to bring Commerce’s practice in line with the United
States Court of Appeals for the Federal Circuit’s (“CAFC”)
decision in Cemex, S.A. v. United States, 133 F.3d 897, 904
(Fed. Cir. 1998). Commerce agrees with SKF. See Def.’s Mem. at
27.
The Court agrees with SKF and Commerce. In Cemex, the CAFC
reversed Commerce’s practice of matching a United States sale to
CV when the identical or most similar home market model failed
the cost test. See 133 F.3d at 904. The CAFC stated that
Consol. Court No. 97-02-00269-S1 Page 14
“[t]he plain language of the statute requires Commerce to base
foreign market value [(now NV)] on nonidentical but similar
merchandise [(foreign like product under the amendments to the
Uruguay Round Agreements Act)] . . . rather than [CV] when sales
of identical merchandise have been found to be outside the
ordinary course of trade.” Id. In light of Cemex, this matter
is remanded so that Commerce can first attempt to match United
States sales to similar home market sales before resorting to
CV.
V. Commerce’s Computer Error
A. Contentions of the Parties
SKF argues that Commerce assigned sales to large industrial
users an LOT code “2,” but then incorrectly coded the EP sales
made by SKF France under an LOT code “3" in the Final Results
and Amended Final Results. See SKF’s Br. at 40.
Commerce reviewed SKF’s allegation and agrees that certain
EP sales were erroneously coded as to their LOT. See Def.’s
Mem. at 28. Commerce asks the Court to remand the case so that
Commerce can assign the correct LOT code for SKF’s EP sales in
the margin calculation program. See id. Torrington takes no
position on this issue. See Torrington’s Resp. at 4.
Consol. Court No. 97-02-00269-S1 Page 15
Upon review of the record, the Court agrees with SKF and
Commerce that the EP sales made by SKF France were incorrectly
coded. The Court, therefore, remands this issue to Commerce to
assign the correct LOT code for SKF’s EP sales in the margin
calculation program.
VI. Commerce’s Treatment of SKF’s Home Market Billing
Adjustments as Direct Price Adjustments to NV
A. Background
SKF reported home market billing adjustment two (“BILLAD2")
for sales made by its Austrian affiliate, Steyr Walzlager, in
the home market of France. See SKF’s Resp. Sec. B Questionnaire
(Sept. 26, 1995) (Case No. A-427-801) at B-2. BILLAD2
represents billing adjustments not associated with a specific
transaction. See id. at B-25 to B-26. SKF explained that
BILLAD2 included multiple invoices, multiple products or
multiple product lines and could not be properly tied to a
single transaction. See id. SKF, therefore, used customer-
specific allocations to report these adjustments. In reporting
BILLAD2, SKF took the sum of all the adjustments for a
particular customer number, divided the totals by total gross
sales to that customer number and applied the resulting factor
“to each reported sale made to that customer number by
Consol. Court No. 97-02-00269-S1 Page 16
multiplying the per unit invoice price by the customer-specific
billing adjustment factor for the relevant period.” Id.
Commerce accepted SKF’s BILLAD2 as a direct adjustment to
price after determining that SKF acted to the best of its
ability in reporting the adjustment on a sale-specific basis and
that its reporting methodology was “not unreasonably
distortive.” Final Results, 62 Fed. Reg. at 2090. Commerce
found that SKF’s billing adjustments could not be tied to a
single specific transaction because they “relate to multiple
invoices or multiple invoice lines.” Id. at 2095. Although it
prefers transaction-specific reporting, Commerce realizes that
such reporting is not always feasible, particularly given the
“non-transaction-specific nature of the expense, the volume of
[home market] transactions reported by SKF, and the time
constraints imposed by the statutory deadlines.” Id.
Furthermore, Commerce determined that even though SKF
included out-of-scope merchandise in the allocation of the
adjustment, the methodology was “not unreasonably distortive”
since there existed “no reason to believe that such adjustments
were not granted in proportionate amounts with respect to sales
of out-of-scope and in-scope merchandise.” Id.
Consol. Court No. 97-02-00269-S1 Page 17
B. Contentions of the Parties
Torrington argues that SFK failed to show that all reported
BILLAD2 values directly relate to the relevant sales. See
Torrington’s Br. at 5. Torrington maintains that the CAFC has
clearly defined “direct” adjustments to price as those that
“vary with the quantity sold, or that are related to a
particular sale,” and Commerce cannot treat adjustments that do
not meet this definition as direct. Id. at 11 (citing
Torrington Co. v. United States (“Torrington CAFC”), 82 F.3d
1039, 1050 (Fed. Cir. 1996) (citations omitted)). Torrington
contends that here Commerce “redefined ‘direct’ to achieve what
Torrington CAFC had previously disallowed” by allowing SKF to
report allocated post-sale price adjustments (“PSPAs”) if it
acted to the best of its abilities in light of its record-
keeping systems and the results were not unreasonably
distortive. Id. at 13.
Furthermore, Torrington maintains that the amendments to the
Uruguay Round Agreements Act (“URAA”) did not modify the
distinction between direct and indirect adjustments established
under pre-URAA law such as Torrington CAFC. See id. at 14
(citing 19 U.S.C. § 1677a(d)(1)(B), (D) (1994) and §
1677b(a)(7)(B) (1994)). Torrington is not convinced that the
Consol. Court No. 97-02-00269-S1 Page 18
Statement of Administrative Action2 (“SAA”) accompanying the URAA
contradicts its contentions. See id. at 15 (citing SAA at 823-
24). Additionally, Torrington acknowledges that the antidumping
regulations that came into effect on July 1, 1997 do not apply
to this review but maintains that they support its position.
See id. at 15-16 (citing Antidumping Duties; Countervailing
Duties; Final Rule, 62 Fed. Reg. 27,296, 27,416-17 (May 19,
1997)).
Torrington acknowledges that this Court has already approved
of Commerce’s practice as applied under post-URAA law in Timken
Co. v. United States (“Timken”), 22 CIT ___, 16 F. Supp. 2d 1102
(1998), but asks the Court to reconsider its approval. See
Torrington’s Reply in Supp. Mot. J. Agency R. (“Torrington’s
Reply”) at 6-7. Torrington complains that Timken erroneously
2
The Statement of Administrative Action (“SAA”) represents
“an authoritative expression by the Administration concerning
its views regarding the interpretation and application of the
Uruguay Round agreements.” H.R. Doc. 103-316, at 656 (1994),
reprinted in 1994 U.S.C.C.A.N. 4040. “It is the expectation of
the Congress that future Administrations will observe and apply
the interpretations and commitments set out in this Statement.”
Id.; see also 19 U.S.C. § 3512(d) (1994) (“The statement of
administrative action approved by the Congress . . . shall be
regarded as an authoritative expression by the United States
concerning the interpretation and application of the Uruguay
Round Agreements and this Act in any judicial proceeding in
which a question arises concerning such interpretation or
application.”).
Consol. Court No. 97-02-00269-S1 Page 19
held that 19 U.S.C. § 1677m(e) (1994) shifts the burden of proof
away from the party who stands to benefit from the claim made,
here, SKF. See id.
Torrington also contends that even under its new
methodology, Commerce’s determination was not supported by
substantial evidence inasmuch as SKF failed to show that (1) its
reporting method did not result in distortion; and (2) it put
forth its best efforts to report the information on a more
precise basis. See Torrington’s Br. at 21. Torrington
emphasizes that SKF has the burden of showing non-distortion and
best efforts, and having failed to do so, must not benefit from
the adjustment. See id. at 21-22. Torrington, therefore,
requests that this Court reverse Commerce’s determination with
respect to BILLAD2 and remand the case to Commerce with
instructions to disallow SKF’s downward home market billing
adjustments, but allow all upward home market billing
adjustments in calculating NV. See id. at 27.
Commerce responds that Torrington erred in relying on
Torrington CAFC because the case does not stand for the
proposition that direct price adjustments may only be accepted
when they are reported on a transaction-specific basis. See
Def.’s Mem. at 42. Rather, the Torrington CAFC court “merely
Consol. Court No. 97-02-00269-S1 Page 20
overturned a prior Commerce practice . . . of treat[ing] certain
allocated price adjustments as indirect expenses,” id. at 42-43
(citing Torrington CAFC, 82 F.3d at 1047-51), and does “not
address the propriety of the allocation methods” used in
reporting the price adjustments in question, id. at 43 (quoting
Final Results, 62 Fed. Reg. at 2091). Also, contrary to
Torrington’s assertion, Commerce did not consider Torrington
CAFC as addressing proper allocation methodologies; rather,
Commerce, only viewed Torrington CAFC as holding that “Commerce
could not treat as indirect selling expenses ‘improperly’
allocated price adjustments.” Id. at 44. Commerce notes that
pursuant to its new methodology, it does not consider price
adjustments to be any type of selling expense, either direct or
indirect, and, therefore, Torrington’s argument is not only
without support, but also inapposite to Torrington CAFC. See
id. at 45. Moreover, Commerce asserts that this Court in Timken
approved of Commerce’s modified methodology of accepting
respondents’ claims for discounts, rebates and other billing
adjustments as direct price adjustments, where this Court found
the methodology to be consistent with requisites of 19 U.S.C. §
1677m(e). See id. at 45-46 (citing Timken, 16 F. Supp. 2d at
1108).
Consol. Court No. 97-02-00269-S1 Page 21
Commerce also argues that its treatment of SKF’s reported
home market billing adjustments was supported by substantial
record evidence and otherwise in accordance with law because it
is consistent with Timken, that is, Commerce: (1) “used its
acquired knowledge of the respondents’ computer systems and
databases to conclude that information . . . could not be
provided in the preferred form”; and (2) “scrutinized the
respondents’ data before concluding that the data were
reliable”; and (3) found “that the adjustments on scope and non-
scope merchandise did not result in unreasonable distortions.”
Id. at 48.
Additionally, Commerce argues that its findings are
supported by substantial evidence. See id. at 47.
Specifically, Commerce maintains that SKF “had reported the
adjustment on the most specific basis possible and, thus, had
cooperated to the best of its ability.” Id. at 48. Commerce
noted that “given the similarity between the value, physical
characteristics and manner of sales between SKF’s in-scope and
out-of-scope merchandise, Commerce found no evidence which would
lead it to suspect” that the allocation methodology was
unreasonably distortive, that is, SKF did not favor out-of-scope
merchandise over in-scope merchandise. Id. at 48-49.
Consol. Court No. 97-02-00269-S1 Page 22
Commerce maintains that Torrington is mistaken in its
contention that SKF failed to substantiate that it acted to the
best of its ability to report the adjustment on a transaction-
specific basis. See id. at 50-51. Commerce noted that the
adjustment related to an “extremely small volume of merchandise
and to very few customers.” Id. at 49 (citing SKF’s Resp. Sec.
B Questionnaire (Sept. 26, 1995) (Case No. A-427-801)). For
example, in 1994, SKF’s total reported BILLAD2 totaled
approximately $1,133.00, and in 1995, it amounted to $69.00,
while the total sales of subject merchandise for the period of
review was approximately $65,000,000.00. See id. at 49-50
(citing SKF’s Resp. Sec. A Questionnaire (Sept. 26, 1995) (Case
No. A-427-801)). Commerce argues that “[g]iven the
insignificance of this adjustment in light of the enormous size
of SKF’s home market database, Commerce was more than reasonable
in concluding that SKF acted to the best of its ability in
allocating this adjustment” on a customer-specific basis “rather
than seeking to trace specific invoices or groups of invoices.”
Id. at 50.
SKF concurs with Commerce’s position. SKF contends that in
Timken this Court properly stated that “‘[n]either the pre-URAA
nor the newly-amended statutory language imposes standards
Consol. Court No. 97-02-00269-S1 Page 23
establishing the circumstances under which Commerce is to grant
or deny adjustments to NV for PSPAs.’” SKF’s Resp. Torrington’s
Mot. J. Agency R. (“SKF’s Resp.”) at 17. SKF contends that the
holding of Torrington CAFC does not answer the issue in the
instant case and, moreover, that case was decided under pre-URAA
law. See id. at 6. Furthermore, SKF argues that subsequent
changes in the law, that is, § 1677m(e) and the SAA, support its
position and cannot be ignored. See id. at 14-16.
SKF also contends that substantial record evidence supports
Commerce’s conclusions. See id. at 19. SKF maintains that the
record demonstrates that Commerce had extensive knowledge and
experience with BILLAD2 and properly drew on its knowledge in
accepting SKF’s methodology. See id. at 20. With respect to
Torrington’s argument that SKF failed to demonstrate that it
acted to the best of its ability in providing the information in
the preferred form, SKF responds by arguing that Commerce “has
determined that, by their nature, these adjustments cannot be
reported more specifically.” Id. at 20-21.
SKF contends that its inability to report the adjustments
on a more specific basis results from the nature of the
adjustment and, moreover, it would be unreasonable to expect SKF
Consol. Court No. 97-02-00269-S1 Page 24
to alter its dealings with its customers to fit Torrington’s
conception of the antidumping reporting requirements. See id.
at 21. Finally, SKF argues that the same methodology used in
the subject review was used in other reviews where no distortion
was found and, furthermore, there is no evidence of distortion
in the subject review. See id. at 22-23.
C. Analysis
The Court notes that this issue has been decided in
Torrington Co. v. United States (“Torrington CIT”), 24 CIT ___,
100 F. Supp. 2d 1102 (2000), Timken and, most recently, NTN
Bearing, 24 CIT at ___, 104 F. Supp. 2d at 149-57. The Court
adheres to its previous decisions, applying the analysis in NTN
Bearing to the instant case.
The Court disagrees with Torrington that Torrington CAFC
dictates that direct price adjustments may only be accepted when
they are reported on a transaction-specific basis. Rather, as
Commerce correctly stated, the Court notes that Torrington CAFC
does “not address the propriety of allocation methods” but
rather holds that Commerce may not treat direct price
adjustments as if they were indirect selling expenses. Final
Results, 62 Fed. Reg. 2091. The Court further notes that
Consol. Court No. 97-02-00269-S1 Page 25
Torrington CAFC was decided under pre-URAA law, that is, it did
not take into consideration the new statutory guidelines of 19
U.S.C. § 1677m(e). Moreover, the Court acknowledged in Timken
that although (1) “Commerce treated rebates and billing
adjustments as selling expenses in preceding reviews under pre-
URAA law,” and (2) “previously decided that such adjustments are
selling expenses and, therefore, should not be treated as
adjustments to price,” the Court nevertheless determined that
this did not “preclude Commerce’s change in policy or this
Court’s reconsideration of its stance in light of the newly-
amended antidumping statute [(that is, 19 U.S.C. § 1677m(e))].”
16 F. Supp. 2d at 1107.
Indeed, the Court approved in Timken Commerce’s modified
methodology of accepting claims for discounts, rebates and other
billing adjustments as direct price adjustments to NV, see id.
at 1107-08, and reaffirmed its decision in Torrington CIT.
Specifically, in Timken, the Court reasoned that “[n]either the
pre-URAA nor the newly-amended statutory language imposes
standards establishing the circumstances under which Commerce is
to grant or deny adjustments to NV for PSPAs.” 16 F. Supp. 2d
at 1108 (citing Torrington CAFC, 82 F.3d at 1048). The Court,
however, noted that 19 U.S.C. § 1677m(e) “specifically directs
Consol. Court No. 97-02-00269-S1 Page 26
that Commerce shall not decline to consider an interested
party’s submitted information if that information is necessary
to the determination but does not meet all of Commerce’s
established requirements, if the [statute’s] criteria are met.”
Id. The Court, therefore, approved of Commerce’s change in
methodology, “as it substitutes a rigid rule with a more
reasonable method that nonetheless ensures that a respondent’s
information is reliable and verifiable. This is especially true
in light of the more lenient statutory instructions of
subsection 1677m(e).” Id.
Accordingly, the Court in Timken upheld Commerce’s decision
to accept Koyo's billing adjustments and rebates, “even though
they were not reported on a transaction-specific basis and even
though the allocations Koyo used included rebates on non-scope
merchandise.” See id. at 1106. Similarly, in Torrington CIT,
the Court followed the rationale of Timken and upheld Commerce’s
determination to accept respondents’ rebates even though they
were reported on a customer-specific rather than transaction-
specific basis and even though the allocation methodology used
included rebates on non-scope merchandise. See 24 CIT at __,
100 F. Supp. 2d at 1107-08.
Consol. Court No. 97-02-00269-S1 Page 27
The Court finds that Commerce’s decision to accept SKF’s
reported home market billing adjustments was supported by
substantial evidence and was fully in accordance with the post-
URAA statutory language and the SAA’s statements. The record
indicates that Commerce properly used its acquired knowledge of
SKF’s billing practices to conclude that it could not provide
the information in the preferred form and, moreover, properly
scrutinized SKF’s reported billing adjustments before concluding
that the adjustments were reliable. See Final Results, 62 Fed.
Reg. at 2095. Commerce also properly accepted SKF’s allocation
methodology even though the adjustments related to multiple
invoices, products or product lines since there was no evidence
“that such adjustments were not granted in proportionate amounts
with respect to sales of out-of-scope and in-scope merchandise,”
indicating that the allocations were not unreasonably
distortive. Id.
Moreover, the record and the Final Results demonstrate that
the requirements of 19 U.S.C. § 1677m(e), as noted earlier, were
satisfied by the respondents. First, SKF’s reported adjustments
were submitted in a timely fashion. See § 1677m(e)(1). Second,
the information SKF submitted was verifiable, as shown in other
reviews that utilized the identical treatment of BILLAD2. See
Consol. Court No. 97-02-00269-S1 Page 28
§ 1677m(e)(2). Third, SKF’s information was not so incomplete
that it could not serve as a basis for reaching a determination.
See § 1677m(e)(3). Fourth, SKF demonstrated that it acted to
the best of its abilities in providing the information and
meeting Commerce’s new reporting requirements. See §
1677m(e)(4). Finally, the Court finds that there was no
indication that the information was incapable of being used
without undue difficulties. See § 1677m(e)(5).
Commerce’s determination with respect to SKF was also
consistent with the SAA. The Court agrees with Commerce’s
finding in the Final Results that given the non-transaction-
specific nature of BILLAD2, the extremely large volume of
transactions and the time constraints imposed by the statute,
SKF’s reporting and allocation methodologies were reasonable.
This is consistent with the SAA directive under § 1677m(e),
which provides that Commerce “may take into account the
circumstances of the party, including (but not limited to) the
party’s size, its accounting systems, and computer
capabilities.” SAA at 865. Thus, the Court finds that Commerce
properly considered the ability of SKF to report BILLAD2 on a
more specific basis.
Accordingly, the Court concludes that Commerce’s acceptance
Consol. Court No. 97-02-00269-S1 Page 29
of SKF’s reported billing adjustments as direct adjustments to
NV is supported by substantial evidence and fully in accordance
with law.
VII. Commerce’s Treatment of Home Market Billing Adjustments
With Respect to Sales Made by SKF-France
A. Background and contentions of the parties
SKF designated as billing adjustment one those billing
adjustments “greater than five percent of the gross unit price
of the sale on which they were granted” or those “greater than
[1,000 French Francs (“FF”)] (about $167.00), whichever was
less. Def.’s Mem. at 51 (citing SKF’s Resp. Sec. B
Questionnaire (Sept. 26, 1995) (Case No. A-427-801) at B-23, B-
24). These adjustments were reported on a transaction-specific
basis and, therefore, are not challenged by Torrington.
SKF designated as billing adjustment two those billing
adjustments that were “less than FF 1,000 and were less than
five percent of the value of the sale on which they were
granted.” Id. Because SKF found these adjustments comprised a
very small part of its overall home market sales of subject
merchandise, SKF simply reported them as zero. See SKF’s
Supplemental Resp. (Feb. 16, 1996) (Case No. A-427-801) at 36-
37. SKF further maintained that its failure to report the
Consol. Court No. 97-02-00269-S1 Page 30
actual amounts of the billing adjustment was detrimental to its
own interest, as the total value of the adjustments would have
increased NV and its dumping margin as well. See id.
In the Final Results, Commerce accepted SKF’s practice of
disregarding insignificant billing adjustment values. See 62
Fed. Reg. at 2095. Specifically, Commerce determined that
“[t]here is nothing on the record to suggest that SKF’s
information is inaccurate” and, furthermore, “[t]his policy of
disregarding insignificant adjustments is consistent with
[Commerce’s] policy in prior reviews.” Id.
Commerce notes that although it had previously disapproved
of SKF taking upon itself the determination of whether billing
adjustments are insignificant, it permitted the practice in the
fourth review “because independent information gathered at
verification confirmed that the overall adjustments lowered
[foreign market value] and their omission was against SKF-
France’s interests.” See Def.’s Mem. at 52 (citing Antifriction
Bearings (Other Than Tapered Roller Bearings) and Parts Thereof
From France, et al; Final Results of Antidumping Duty
Administrative Reviews, Partial Termination of Administrative
Reviews, and Revocation in Part of Antidumping Duty Orders
(“fourth review”), 60 Fed. Reg. 10,900 (Feb. 28, 1995)). In its
Consol. Court No. 97-02-00269-S1 Page 31
memorandum to the Court, however, Commerce argued contrary to
its position in the Final Results, maintaining that the issue
should be remanded for re-evaluation of its treatment of SKF’s
billing adjustment two. See id. at 51. Specifically, Commerce
maintains that in the instant review, “SKF did not provide the
necessary information to support its calculation of the relative
size of the adjustments at issue and to permit Commerce to
determine whether the insignificant adjustment provision, 19
C.F.R. § 353.59 (a), which authorizes Commerce to disregard
insignificant adjustments, was applicable.” Id. at 53.
Commerce asks the issue to be remanded for SKF to support its
calculation of the relative size of billing adjustment two so
that Commerce may determine whether it is insignificant within
the meaning of the applicable regulation, 19 C.F.R. § 353.59 (a)
or for SKF to support its contention that the effect of billing
adjustment two was a reduction of NV. See id.
Torrington concurs with Commerce’s position. Torrington
maintains SKF failed to substantiate its claim that the value of
billing adjustment two was insignificant. See Torrington’s Br.
at 20. Additionally, Torrington maintains that the total net
value of the adjustment is irrelevant as billing adjustments are
invoice-specific and, therefore, can either increase or decrease
Consol. Court No. 97-02-00269-S1 Page 32
the reported price of any home market price and affect nominal
value. See id. Torrington claims “Commerce erred by relying on
SKF’s representations rather than basing its determination on
record evidence” and, therefore, Commerce’s determination was
not supported by substantial evidence. Id. at 25.
SKF maintains that Commerce’s decision in the Final Results
is supported by substantial evidence. SKF notes that the
identical methodology employed in the instant review was
accepted in the fourth review where Commerce had specifically
stated that it did not merely allow SKF to determine what
constituted an insignificant adjustment, but had verified the
adjustment. See SKF’s Resp. at 34-35. SKF argues that in the
instant review, it did not merely assert that certain billing
adjustments were insignificant, but provided Commerce with
specific calculations. See SKF’s Resp. at 35 (citing SKF’s
Supplemental Resp. (Feb. 16, 1996) (Case No. A-427-801) at 36-
37).
C. Analysis
In determining the EP (or CEP) under 19 U.S.C. § 1677a or
NV under § 1677b, Commerce has the discretion to “decline to
take into account adjustments which are insignificant in
Consol. Court No. 97-02-00269-S1 Page 33
relation to the price or value of the merchandise.” 19 U.S.C.
§ 1677f-1(a)(2) (1994). Thus, the statute plainly provides not
only that Commerce is the appropriate authority to determine
whether an adjustment is insignificant, but also that Commerce
has the discretion to decide whether to disregard an
insignificant adjustment.
SKF maintains Commerce properly determined that its
calculation of the billing adjustment was supported by
substantial evidence by accepting SKF’s conclusion that such
values were insignificant or would have resulted in a net
reduction of NV. The Court, however, disagrees with SKF that
Commerce’s decision is supported by substantial evidence since
the only data that SKF had provided to Commerce in the
administrative proceedings is the following:
Specifically, in this review, . . . [SKF France’s
billing adjustment 2] represented only [ ] in 1994
and [ ] in January-April 1995 of the total gross
sales value for SKF France. Furthermore, not reporting
these billing adjustments was detrimental to SKF
France, as the total net value of billing adjustments
would have decreased foreign market value. Under its
regulations, [Commerce] may disregard as insignificant
an adjustment which would have an ad valorem effect of
less than 0.33%. 19 C.F.R. § 353.59(a). Thus, SKF
France’s unreported billing adjustments may properly
be considered insignificant, and in fact de minimis
under [Commerce’s] regulations.
SKF’s Supplemental Resp. (Feb. 16, 1996) (Case No. A-427-801) at
Consol. Court No. 97-02-00269-S1 Page 34
36. Thus, SKF merely concluded that billing adjustment two
comprised a certain percentage of total gross sales value, but
did not provide the underlying information to Commerce for it to
determine whether the adjustment was indeed insignificant.
Alternatively, SKF provided no information to support its
contention that the total effect of the billing adjustment was
a reduction of NV. SKF’s failure to provide this information,
therefore, renders Commerce’s determination in the Final Results
unsupported by substantial evidence.
SKF offers to this Court a worksheet entitled “SKF France
Billing Adjustments Not Processed Analysis” that it claims to
have prepared concurrently with its supplemental response to
Commerce’s questionnaire and maintains this information supports
its conclusions. SKF’s Reply at 28, Ex. 9. SKF concedes,
however, that this information was never submitted to Commerce.
See id. Commerce did not have this information before it when
it made its determination and, therefore, could not have relied
on it when it concluded that SKF’s calculations were proper.
This Court cannot uphold Commerce’s January 15th, 1997
determination on the basis of information upon which Commerce
did not rely, since it is well-settled case law that “[t]he
scope of the record for purposes of judicial review is based
Consol. Court No. 97-02-00269-S1 Page 35
upon information which was ‘before the relevant decision-maker’
and was presented and considered ‘at the time the decision was
rendered.’” Beker Indus. Corp. v. United States, 7 CIT 313,
315, 1984 WL 3727 (1984) (citing S. Rep. No. 96-249, 96th Cong.,
1st Sess. 247-48 (1979), reprinted in 1979 U.S.C.C.A.N. 381, 633-
34); Daido Corp. v. United States, 18 CIT 1053, 1059-60, 869 F.
Supp. 967, 973 (1994); Neuweg Fertigung GmbH v. United States,
16 CIT 724, 726-27, 797 F. Supp. 1020, 1022 (1992). Commerce
did not have the opportunity to evaluate the information to
determine whether it provided adequate support for SKF’s
calculations, and the Court will not usurp Commerce’s function
in this regard.
Accordingly, the Court remands this issue to Commerce to
determine whether billing adjustment two is insignificant within
the meaning of 19 U.S.C. § 1677f-1(a). Commerce is directed to
consider whether the use of facts available pursuant to 19
U.S.C. § 1677e (1994) is warranted and must also consider its
responsibilities under § 1677m(e).
VIII. Deducting Home Market Depreciation Expenses as United
States Indirect Selling Expenses When Calculating CEP
A. Contentions of the Parties
SNR contends that during verification, Commerce erred in
Consol. Court No. 97-02-00269-S1 Page 36
deducting from CEP home market depreciation expenses as United
States indirect selling expenses after determining that “‘SNR
had allocated depreciation expenses to all sales but, in fact,
[SNR] did not include them in the [indirect selling expense
variable].’” SNR’s Br. at 15 (quoting Final Results, 62 Fed.
Reg. at 2105). SNR claims that there is “no basis for deducting
the depreciation expense for office equipment” associated with
the commercial department in France responsible for sales to
subsidiaries since those expenses are not “‘associated with
economic activities in the United States.’” See SNR’s Br. at
15-16.
SNR maintains that “the record shows that the depreciation
expense attributable to subsidiary sales would have been an
[indirect] export selling expense” and should have been
disregarded as were the other indirect selling expenses. Id. at
17. SNR admits that the portion of the depreciation expenses
allocated to its United States sales to its United States
affiliate should have been reported in the variable designating
indirect selling expenses primarily composed of “personnel costs
and commission paid on sales made to all SNR subsidiaries.” See
SNR’s Br. at 13-15 (quoting SNR’s Resp. Sec. C Questionnaire
(Sept. 26, 1995) (Case No. A-427-801) at 34-35).
Consol. Court No. 97-02-00269-S1 Page 37
Torrington maintains that Commerce reasonably added an
amount for depreciation to the United States indirect selling
expenses reported by SNR. See Torrington’s Resp. at 15.
Torrington argues that in the Final Results, Commerce properly
deducted depreciation expenses incurred in France from CEP
pursuant to 19 U.S.C. § 1677a(d)(1). See id. at 16. Torrington
claims that under the statutory provision and proposed
regulation, Commerce is required to deduct all expenses
associated with economic activities in the United States, no
matter where the expense was incurred. See id. Thus,
Torrington argues that although the expense was incurred in
France, it was properly deducted from CEP since some portion was
allocable to SNR’s United States sales. See id. at 17.
Commerce contends that the record is unclear on this issue
and, therefore, “the case should be remanded to Commerce for
reconsideration of the treatment of depreciation expenses
incurred in France in calculating CEP for SNR.” Def.’s Mem. at
54. In its reply to Commerce, SNR agreed that the Court should
“remand the issue to allow Commerce to determine if it was
appropriate to deduct from CEP depreciation expenses related to
activities in the home market.” SNR’s Reply Br. Supp. Mot. J.
Agency R. at 10.
Consol. Court No. 97-02-00269-S1 Page 38
B. Analysis
In the Final Results, Commerce simply stated the following:
We agree with Torrington that SNR’s depreciation
expenses allocated to its [United States] sales should
be part of [indirect selling expenses] we deduct from
CEP. We verified SNR’s response and, based on our
findings at verification, we have made this deduction
for our final results.
62 Fed. Reg. at 2105. Commerce did not state the basis for its
conclusion that it was appropriate to deduct from CEP
depreciation expenses related to activities in France. The
Court cannot uphold Commerce’s determination when the basis for
the decision is entirely unclear.3 The Court, therefore,
remands this matter to Commerce to reconsider the treatment of
depreciation expenses incurred in France in calculating CEP for
3
Indeed, the Supreme Court has opined:
If the administrative action is to be tested by the
basis upon which it purports to rest, that basis must
be set forth with such clarity as to be
understandable. It will not do for a court to be
compelled to guess at the theory underlying the
agency’s action; nor can a court be expected to chisel
that which must be precise from what the agency has
left vague and indecisive. In other words, ‘We must
know what a decision means before the duty becomes
ours to say whether it is right or wrong.’
SEC v. Chenery Corp., 332 U.S. 194, 196-97 (1947) (quoting
United States v. Chicago, M., St. P. & P.R. Co., 294 U.S. 499,
511 (1935)).
SNR.
CONCLUSION
The Court remands this case to Commerce to: (1) reconsider
its decision to calculate SKF’s home market credit expense based
upon price and then apply that rate to cost; (2) exclude any
transactions that were not supported by consideration from SKF’s
United States sales database and to adjust the dumping margins
accordingly; (3) first attempt to match SKF’s United States
sales to similar home market sales before resorting to CV; (4)
assign the correct LOT code for SKF’s EP sales in the margin
calculation program; (5) determine whether SKF-France’s billing
adjustment two is insignificant within the meaning of 19 U.S.C.
§ 1677f-1(a); and (6) reconsider the treatment of depreciation
expenses incurred in France in calculating CEP for SNR.
Commerce is affirmed in all other respects.
___________________________
NICHOLAS TSOUCALAS
SENIOR JUDGE
Dated: October 11, 2000
New York, New York