RHP Bearings Ltd. v. United States

Slip Op. 00-94

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
___________________________________
:
RHP BEARINGS LTD., NSK BEARINGS :
EUROPE LTD. and NSK CORPORATION; :
THE BARDEN CORPORATION (U.K.) LTD.,:
THE BARDEN CORPORATION, :
FAG BEARINGS CORPORATION, :
:
Plaintiffs, :
:
v. : Consol. Court No.
: 97-11-01983
UNITED STATES, :
:
Defendant, :
:
THE TORRINGTON COMPANY, :
:
Defendant-Intervenor. :
___________________________________:

Plaintiffs, RHP Bearings Ltd., NSK Bearings Europe Ltd. and
NSK Corporation (collectively “RHP-NSK”), The Barden Corporation
(U.K.) Ltd., The Barden Corporation and FAG Bearings Corporation
(collectively “Barden-FAG”) 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, Sweden
and the United Kingdom; Final Results of Antidumping Duty
Administrative Reviews, 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).

Specifically, RHP-NSK claims that Commerce erred in: (1)
deducting United States repacking expenses as direct selling
expenses; (2) calculating profit for constructed value (“CV”); (3)
denying a partial, price-based level of trade adjustment to normal
value; and (4) conducting a duty absorption inquiry for the subject
review.
Consol. Court No. 97-11-01983 Page 2

Barden-FAG claims that Commerce erred in: (1) calculating
profit for CV; (2) 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; (3)
conducting a duty absorption inquiry for the subject review; and
(4) conducting a below-cost sales test and disregarding certain
home market sales pursuant to the results of this test.

Held: RHP-NSK’s USCIT 56.2 motion is granted in part and
denied in part. Barden-FAG’s USCIT R. 56.2 motion is granted in
part and denied in part. This case is remanded to Commerce to: (1)
annul all findings and conclusions made pursuant to the duty
absorption inquiries conducted for this review; (2) match Barden-
FAG’s United States sales to similar home market sales before
resorting to CV; and (3) recalculate Barden-FAG’s dumping margin
without regard to the results of the below-cost test. Commerce is
affirmed in all other respects.

[RHP-NSK’s motion is granted in part and denied in part. Barden-
FAG’s motion is granted in part and denied in part. Case
remanded.]

Dated: August 3, 2000

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

Grunfeld, Desiderio, Lebowitz & Silverman LLP (Max F.
Schutzman, Andrew B. Schroth and Mark E. Pardo) for Barden-FAG.

David W. Ogden, Acting Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Velta A. Melnbrencis,
Assistant Director); of counsel: Mark A. Barnett, Stacy J.
Ettinger, 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 The Torrington Company.
Consol. Court No. 97-11-01983 Page 3

OPINION

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

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

The Barden Corporation (U.K.) Ltd., The Barden Corporation and FAG

Bearings Corporation (collectively “Barden-FAG”) move pursuant to

USCIT R. 56.2 for judgment upon the agency record challenging

various aspects of the United States Department of Commerce,

International Trade Administration’s (“Commerce”) final

determination, entitled Antifriction Bearings (Other Than Tapered

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

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

Results of Antidumping Duty Administrative Reviews (“Final

Results”), 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).

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

deducting United States repacking expenses as direct selling

expenses; (2) calculating profit for constructed value (“CV”); (3)

denying a partial, price-based level of trade (“LOT”) adjustment to

normal value (“NV”); and (4) conducting a duty absorption inquiry
Consol. Court No. 97-11-01983 Page 4

for the subject review.

Barden-FAG claims that Commerce erred in: (1) calculating

profit for CV; (2) 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; (3)

conducting a duty absorption inquiry for the subject review; and

(4) conducting a below-cost sales test and disregarding certain

home market sales pursuant to the results of this test.

BACKGROUND

This case concerns the seventh review of the antidumping duty

order on antifriction bearings (other than tapered roller bearings)

and parts thereof (“AFBs”) imported to the United States from the

United Kingdom during the review period of May 1, 1995 through

April 30, 1996.1 Commerce published the preliminary results of the

subject review on June 10, 1997. 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

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. 97-11-01983 Page 5

Reviews and Partial Termination of Administrative Reviews

(“Preliminary Results”), 62 Fed. Reg. 31,566. Commerce issued the

Final Results on October 17, 1997, see Final Results, 62 Fed. Reg.

at 54,043, and amended them on November 20, 1997, see Amended Final

Results, 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

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 ___, ___, Slip Op. 00-64,

at 8-10 (June 5, 2000) (detailing Court’s standard of review in

antidumping proceedings).

DISCUSSION

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

A. Background

An antidumping duty is imposed upon imported merchandise when
Consol. Court No. 97-11-01983 Page 6

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

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

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

an industry in the United States is materially injured or is

threatened with material injury. See 19 U.S.C. § 1673 (1994); 19

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

administrative review whether there is dumping, Commerce compares

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

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

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

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

export price (“CEP”). See 19 U.S.C. § 1677a(a), (b) (1994).

The Statement of Administrative Action2 (“SAA”) accompanying

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

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

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

2
The Statement of Administrative Action represents “an
authoritative expression by the Administration concerning its views
regarding the interpretation and application of the Uruguay Round
agreements.” H.R. Doc. No. 103-316, at 656 (1994). “[I]t is the
expectation of the Congress that future Administrations will
observe and apply the interpretations and commitments set out in
this Statement.” Id.; see 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. 97-11-01983 Page 7

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

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

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

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

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

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

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

then Commerce will classify the price of a United States sales

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

Commerce then makes adjustments to the starting price used to

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

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

duties which have been rebated or not collected due to exportation

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

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

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

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

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

and other expenses, including warehousing expenses, incurred in

bringing the subject merchandise from the original place of

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

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

by the exporting country.” SAA at 823; see 19 U.S.C. §
Consol. Court No. 97-11-01983 Page 8

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

Moreover, Commerce must reduce the price used to establish CEP

by any of the following amounts associated with economic activities

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

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

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

relationship to, the sale, such as credit expenses, guarantees and

warranties”; (3) “any selling expenses that the seller pays on

behalf of the purchaser” (assumptions); (4) indirect selling

expenses, that is, any selling expenses not deducted under any of

the first three categories of deductions; (5) certain expenses

resulting from further manufacture or assembly (including

additional material and labor) performed on the merchandise after

its importation into the United States; and (6) profit allocated to

the expenses described in categories (1) through (5). 19 U.S.C. §

1677a(d)(1)-(3); see SAA at 823-24.

In this case, RHP-NSK delivered the subject merchandise to

unaffiliated customers in the United States from warehouses owned

and operated by NSK Corporation. See RHP-NSK’s Resp. to Sect. C

Questionnaire, Investigation No. A-412-801, Admin. Rev. 5/1/95-

4/30/96, at 49 (Sept. 10, 1996). RHP-NSK normally ships

merchandise in its original containers from its United States

warehouse, however, in some instances, it repacked the merchandise
Consol. Court No. 97-11-01983 Page 9

to accommodate orders for smaller distributors. See id.

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

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

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

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

exportation to, the United States.” Preliminary Results, 62 Fed.

Reg. at 31,569. Commerce also made deductions for: (1) discounts

and rebates; and (2) any movement expenses in accordance with 19

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

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

by: (1) “deducting selling expenses associated with economic

activities occurring in the United States, including commissions,

direct selling expenses, indirect selling expenses, and repacking

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

further manufacture or assembly,” where appropriate; and (3)

“adjust[ing] for profit allocated to these expenses.” Id. In

particular, in adjusting CEP, Commerce deducted RHP-NSK’s United

States repacking expenses as direct selling expenses under §

1677a(d)(1)(B), rather than as moving expenses under §

1677a(c)(2)(A), because it determined that repacking “was performed

on individual products in order to sell the merchandise to the

unaffiliated customer in the United States. Presumably, if a

respondent could have sold the merchandise without repacking it,
Consol. Court No. 97-11-01983 Page 10

the respondent would have done so. Thus, it is an expense

associated with selling the merchandise.” Final Results, 62 Fed.

Reg. at 54,067.

B. Contentions of the Parties

RHP-NSK argues, as it did in the Final Results, see id., that

Commerce erred in deducting RHP-NSK’s United States repacking

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

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

12-14. According to RHP-NSK, the United States repacking

constitutes an expense incident to bringing the subject merchandise

from the original place of shipment in the United Kingdom to the

place of delivery in the United States and, therefore, should have

been (1) classified and deducted as an expense under §

1677a(c)(2)(A), and (2) excluded from the pool of selling expenses

Commerce uses to determine CEP profit. See id.; 19 U.S.C. §

1677a(d)(3), (f)(2)(B) (calculating CEP profit based on the profit

allocated to expenses described in § 1677a(d)(1)-(2)).

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

limited to moving expenses, but includes expenses required for

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

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

RHP-NSK’s Reply Mem. Supp. Mot. J. Agency R. (“RHP-NSK’s Reply”) at
Consol. Court No. 97-11-01983 Page 11

2. RHP-NSK asserts that the cost of United States repacking is

such a § 1677a(c)(2)(A) expense because the goods cannot be

transported unless RHP-NSK first breaks open the transpacific

shipping packages, selects the specific items ordered and then

repacks those items for shipment to the customer’s United States

location. See id. at 3-4. RHP-NSK clarifies that this result does

not change simply because the United States repacking may be

directly related to particular sales. See id. at 3. RHP-NSK notes

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

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

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

indirect, incident to bringing the subject merchandise from Japan

to the United States customer. See id. (quoting §

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

inland freight from its United States warehouse to United States

unaffiliated customers, even though directly related to particular

sales to such customers, nevertheless constitutes a §

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

States repacking expense should similarly be treated as §

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

particular sales. See id.

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

otherwise meet the definitional criteria of § 1677a(d)(1)(B) direct
Consol. Court No. 97-11-01983 Page 12

selling expenses such as credit expenses, guarantees and

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

selling products, but do not involve transporting goods from the

United Kingdom to the United States unaffiliated customer as do

United States repacking expenses. See id.; RHP-NSK’s Mem. at 13.

Although agreeing with RHP-NSK’s contention that United States

inland freight (warehouse to customer) charges are clearly

transportation expenses and thus deductible pursuant to §

1677a(c)(2)(A), Commerce responds, as it did in the Final Results,

that RHP-NSK’s United States repacking expenses bear no

relationship to “moving the merchandise from one point to another,”

as established by the fact that the merchandise was moved from the

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

Mem. in Partial Opp’n to Pls.’ Mots. J. Agency R. (“Def.’s Mem.”)

at 39 (quoting Final Results, 62 Fed. Reg. at 54,067). Commerce

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

expenses deducted from CEP to credit expenses, guarantees or

warranties; rather, the statute reduces CEP by the amount of any

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

selling expenses in the United States. See id. at 39. Since RHP-

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

sell the merchandise to the unaffiliated customer in the United

States,’” Commerce asserts that it properly treated the repacking
Consol. Court No. 97-11-01983 Page 13

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

Id. (quoting Final Results, 62 Fed. Reg. at 54,067).

The Torrington Company (“Torrington”) generally agrees with

Commerce’s arguments. See Torrington’s Resp. to Pls.’ Mots. J.

Agency R. (“Torrington’s Resp.”) at 21-23. Torrington notes, as it

did in the Final Results, that RHP-NSK reported that it normally

does not require repacking for its United States sales, but

performed repacking “in order to sell the merchandise to the

unaffiliated customer in the United States.” Id. at 22.

Torrington asserts that since RHP-NSK’s response is consistent with

Commerce’s treatment of RHP-NSK’s repacking expenses as selling

rather than movement expenses, Commerce properly included RHP-NSK’s

repacking expenses in its calculation of CEP profit. See id.

C. Analysis

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

expenses were not incident to bringing the subject merchandise from

the original place of shipment in the United Kingdom to the place

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

clearly direct selling expenses.

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

to credit expenses, guarantees and warranties, but include

“expenses which result from and bear a direct relationship to the
Consol. Court No. 97-11-01983 Page 14

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

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

concerned orders for smaller distributors. Although RHP-NSK

reported that it normally does not perform repacking for United

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

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

that it did some repacking to accommodate orders for smaller

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

Investigation No. A-412-801, Admin. Rev. 5/1/95-4/30/96, at 49

(Sept. 10, 1996). The Court finds, therefore, as Commerce did in

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

associated with selling the merchandise.” 62 Fed. Reg. at 54,067.

Accordingly, the Court concludes that Commerce properly

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

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

transportation or other expenses pursuant to § 1677a(c)(2)(A).

II. Commerce’s CV Profit Calculation

Commerce applied the preferred method in 19 U.S.C. §

1677b(e)(2)(A) to calculate CV profit. Specifically, Commerce

calculated an actual profit ratio for Barden-FAG and RHP-NSK.

First, Commerce subtracted costs and expenses from the home market

price in order to calculate the profit for each sale of the foreign
Consol. Court No. 97-11-01983 Page 15

like product in the ordinary course of trade. Commerce then

aggregated the profit for all sales at the same LOT and divided

this profit by the exporter’s or producer’s aggregate cost totals

for the same sales. See Def.’s Mem. at 12-13 (citing Preliminary

Results, 62 Fed. Reg. at 31,571). In calculating CV profit,

Commerce excluded below-cost sales. See Final Results, 62 Fed.

Reg. at 54,063.

A. Contentions of the Parties

Barden-FAG and RHP-NSK contend that Commerce acted contrary to

the plain meaning of 19 U.S.C. § 1677b(e)(2)(A) in calculating CV

profit on an aggregated “class or kind” basis while disregarding

sales outside the ordinary course of trade. See Barden-FAG’s Mem.

Supp. Mot. J. Agency R. (“Barden-FAG’s Mem.”) at 5-11; RHP-NSK Mem.

at 15-24. Plaintiffs maintain that the statute permits Commerce to

use an aggregated CV profit calculation only if no below-cost sales

are disregarded in the calculation. See id.

Commerce maintains that it applied a reasonable interpretation

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

profit data of all foreign like products under consideration for NV

while disregarding below-cost sales. See Def.’s Mem. at 11-22.

Torrington generally agrees with Commerce’s contentions. See

Torrington’s Resp. at 12-14.
Consol. Court No. 97-11-01983 Page 16

B. Analysis

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

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

profit methodology, which consists of using the aggregate data of

all foreign like products under consideration for NV, is consistent

with the antidumping statute. Since Barden-FAG’s and RHP-NSK’s

arguments and the methodology at issue in this case are practically

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

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

profit methodology to be in accordance with law. Furthermore,

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

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

calculation, and below-cost sales that were disregarded in

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

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

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

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

A. Background

During this review, Commerce applied a CEP offset under 19

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

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

(NSK/RHP) Preliminary Results Analysis Mem. Seventh Administrative
Consol. Court No. 97-11-01983 Page 17

Review 5/1/95-4/30/96 (Mar. 28, 1997) (Case No. A-412-801) at 3.

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

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

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

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

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

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

determine a level-of-trade adjustment based on NSK-RHP’s home

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

other information that provides an appropriate basis for

determining a level-of-trade adjustment.” Id. For RHP-NSK’s CEP

sales, therefore, Commerce “determined NV at the same level of

trade as the [United States] sale to the unaffiliated customer and

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

Id. Moreover, contrary to RHP-NSK’s contentions, Commerce

concluded that no provision of the antidumping statute provides for

a “partial” LOT adjustment “between two home market [LOTs] where

neither level is equivalent to the level of the [United States]

sale.” Final Results, 62 Fed. Reg. at 54,056-57.

B. Contentions of the Parties

RHP-NSK agrees with the manner in which Commerce determined

the LOT of its CEP for NV transactions. See RHP-NSK’s Mem. at 25.

In particular, RHP-NSK agrees that Commerce properly used the CEP
Consol. Court No. 97-11-01983 Page 18

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

RHP-NSK, however, argues that Commerce should have granted it a

“partial,” price-based LOT adjustment. See id. at 27.

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

market, one corresponding to original equipment manufacturers

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

at 27. RHP-NSK also agrees that when Commerce matched CEP sales to

home market OEM sales, Commerce correctly applied a CEP offset

because there was no basis for quantifying a price-based LOT

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

agrees that “Commerce correctly concluded that there was no record

information that would allow Commerce to quantify the downward

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

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

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

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

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

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

price differences between OEM and AM LOTs. See id. at 27-28.

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

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

a difference in LOT between CEP and NV. Id. at 27 (quoting §

1677b(a)(7)(A)). RHP-NSK also notes that § 1677b(a)(7)(B)
Consol. Court No. 97-11-01983 Page 19

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

price-based LOT adjustments. See id. at 27-28. Accordingly, RHP-

NSK claims that since there was evidence for quantifying price

differences between OEM and AM LOTs, Commerce’s failure to

calculate a price-based LOT adjustment that partly accounted for

such LOT differences violated the plain language of §

1677b(a)(7)(A). See RHP-NSK’s Reply at 11-12.

Commerce argues that it properly denied a partial LOT

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

transactions. See id. at 40-46. Contrary to RHP-NSK’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

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

differences can be quantified. See id. at 43. Commerce claims

that the statute does not authorize a LOT price-based adjustment

based upon different LOTs in the home market when the price

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

cannot be quantified. See id.; see also Final Results, 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
Consol. Court No. 97-11-01983 Page 20

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

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

CEP transactions. See Def.’s Mem. at 46.

Torrington generally agrees with Commerce’s positions,

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

as not providing for a “partial” LOT adjustment as contended by

RHP-NSK. See Torrington’s Resp. at 23-24. Torrington further

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

adjustment, RHP-NSK nevertheless failed to submit record evidence

to show entitlement to such an adjustment. See id. at 25-26.

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 26.

C. Analysis

The Court notes that this issue has already been decided in

NTN Bearing, 24 CIT at ___, Slip Op. 00-64, at 44. As this Court

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

partial, price-based LOT adjustment measured by price difference

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

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

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

LOT in the home market, justifies a LOT adjustment. Rather,
Consol. Court No. 97-11-01983 Page 21

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 at issue here.

IV. Commerce’s Duty Absorption Inquiry

A. Background

Title 19, United States Code, § 1675(a)(4) (1994) 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.”3 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 § 1675(c), and the ITC will take such findings into account

in determining whether material injury is likely to continue or

3
Subsection (a)(4) of 19 U.S.C. § 1675 was added to the
antidumping law by the URAA in 1994. See Pub. L. No. 103-465, §
220, 108 Stat. 4809, 4860.
Consol. Court No. 97-11-01983 Page 22

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 19 U.S.C. §

1675(a)(4) with respect to various respondents, including Barden-

FAG and RHP-NSK, to determine whether antidumping duties had been

absorbed during the seventh review. See Final Results, 62 Fed.

Reg. at 54,075.

Accordingly, Commerce conducted an inquiry and found that

duty absorption had occurred for the subject review. 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 § 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)(2) (1997)4 provides that

4
The full text of 19 C.F.R. § 351.213(j) (1997) provides:

(j) Absorption of antidumping duties.

(1) During any administrative review covering all or
part of a period falling between the first and second or
third and fourth anniversary of the publication of an
antidumping order under § 351.211, or a determination
under § 351.218(d) (sunset review), the Secretary, if
requested by a domestic interested party within 30 days
of the date of publication of the notice of initiation of
the review, will determine whether antidumping duties
have been absorbed by an exporter or producer subject to
the review if the subject merchandise is sold in the
Consol. Court No. 97-11-01983 Page 23

Commerce “will make a duty absorption determination, if requested,

for any administrative review initiated in 1996 or 1998.” Id. at

54,074. Commerce also noted that although the regulation did not

bind it for this seventh AFB review, it constitutes a public

statement of how Commerce construes § 1675(a)(4).5 See id.

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

review. See id. at 54,075.

United States through an importer that is affiliated with
such exporter or producer. The request must include the
name(s) of the exporter or producer for which the inquiry
is requested.

(2) For transition orders defined in section 751(c)(6)
of the Act, the Secretary will apply paragraph (j)(1) of
this section to any administrative review initiated in
1996 or 1998.

Id.
5
Although 19 C.F.R. § 351.213(j) is indicative of Commerce’s
interpretation of the URAA, the regulation does not apply here
because the administrative review in this case was initiated on
June 20, 1996 pursuant to a request dated May 31, 1996. Commerce’s
regulations that were issued pursuant to the URAA apply only to
“administrative reviews initiated on the basis of requests made on
or after the first day of July, 1997.” 19 CFR Parts 351 et al.,
Antidumping Duties; Countervailing Duties; Final [R]ule, 62 Fed.
Reg. 27,296, 27,416-17 (May 19, 1997).
Consol. Court No. 97-11-01983 Page 24

B. Contentions of the Parties

Barden-FAG and RHP-NSK argue that Commerce lacked authority

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

seventh review of the 1989 antidumping duty orders. See Barden-

FAG’s Mem. at 12-15; RHP-NSK’s Mem. at 31-35. Barden-FAG also

argues 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 Barden-

FAG’s Mem. at 15-18.

Commerce argues it properly construed subsections (a) 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. See Def.’s Mem. at 22-30. Commerce also asserts

that it devised and applied a reasonable methodology for

determining duty absorption. See id. at 30-36. Torrington

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

Resp. at 7-12.

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 19 U.S.C. § 1675(a)(4) to conduct a duty absorption
Consol. Court No. 97-11-01983 Page 25

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

1995 effective date of the URAA, Pub. L. No. 103-465, 108 Stat.

4809 (1994). 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 the duty absorption inquiry, the 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 Court, therefore, finds that Commerce did not have

the statutory authority under § 1675(a)(4) to undertake a duty

absorption inquiry for the applicable pre-URAA antidumping duty

order in dispute here.

V. Commerce’s Matching United States Sales to “Similar” Home
Market Sales Prior to Resorting to CV

Barden-FAG maintains that Commerce erred in resorting to CV

without first attempting to match United States sales, that is, EP

or CEP sales, to “similar” home market sales in instances where all

home market sales of identical merchandise have been disregarded

because they were out of the ordinary course of trade. See Barden-

FAG’s Mem. at 11-12. Barden-FAG maintains that a remand is

necessary to bring Commerce’s practice in line with the United
Consol. Court No. 97-11-01983 Page 26

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 Barden-FAG. See Def.’s Mem. at 22.

The Court agrees with Barden-FAG 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 “[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 post-URAA law)] . . . 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.

VI. Commerce’s Below-Cost Sales Test for Barden-FAG

A. Background and Contentions of the Parties

Commerce conducted a below-cost test for Barden-FAG and

disregarded some home market sales. See Final Results, 62 Fed.

Reg. at 54,073. Barden-FAG contends that there was no allegation

of below-cost sales, and under this Court’s decision in FAG (U.K.)

Ltd. v. United States (“FAG U.K.”), 22 CIT ___, 24 F. Supp. 2d 297

(1998), the absence of such an allegation renders Commerce’s use of
Consol. Court No. 97-11-01983 Page 27

below-cost data unlawful. See Barden-FAG’s Mem. at 19. Barden-FAG

contends that this Court must instruct Commerce to disregard below-

cost sales to conform with FAG U.K. See Barden-FAG’s Mem. at 19.

In the Final Results, Commerce stated that it could not

disregard the fact that it found that Barden-FAG was selling its

products below cost. See 62 Fed. Reg. at 54,073. In its brief to

this Court, however, Commerce changed its position and agrees with

Barden-FAG that its actions were unlawful and asks that the Court

remand the issue with instructions to recalculate Barden-FAG’s

margin without regard to the results of the below-cost sales test

in order to comply with FAG U.K. See Def.’s Mem. at 36-37.

Torrington contends that because data is available regarding

Barden-FAG’s below-cost sales, it should be used regardless of how

Commerce discovered the sales. See Torrington’s Resp. at 17-18.

Torrington believes it is irrelevant that Commerce discovered these

sales because Barden-FAG provided the information rather than

because of an inquiry designed to find such sales. See id. at 19-

20.

B. Analysis

Section 1677b(b)(1) provides that Commerce is empowered to

disregard sales in the determination of NV if several preconditions

are met. First, Commerce must have “reasonable grounds to believe
Consol. Court No. 97-11-01983 Page 28

or suspect that sales of the foreign like product under

consideration for the determination of normal value have been made

at prices which represent less than the cost of production of that

product.” 19 U.S.C. § 1677b(b)(1). “Reasonable grounds to believe

or suspect” exist in two circumstances described in §

1677b(b)(2)(A):

There are reasonable grounds to believe or suspect
that sales of the foreign like product were made at
prices that are less than the cost of production of the
product, if–

(i) in an investigation initiated under
section 1673a of this title or a review
conducted under section 1675 of this title, an
interested party . . . provides information,
based upon observed prices or constructed
prices or costs, that sales of the foreign
like product under consideration for the
determination of normal value have been made
at prices which represent less than the cost
of production of the product; or

(ii) in a review conducted under section 1675
of this title involving a specific exporter,
the administering authority disregarded some
or all of the exporter’s sales pursuant to
paragraph (1) in the investigation or if a
review has been completed, in the most
recently completed review.

Id.

If Commerce has the requisite reasonable grounds for

suspicion, it must then determine whether “in fact, such sales were

made at less than the cost of production.” 19 U.S.C. §

1677b(b)(1). In order to disregard sales made at less than the
Consol. Court No. 97-11-01983 Page 29

cost of production, Commerce must also find that they “have been

made within an extended period of time in substantial quantities,

and . . . were not at prices which permit recovery of all costs

within a reasonable period of time.” Id.

In the Final Results, Commerce did not clearly articulate its

rationale for conducting the below-cost test. See 62 Fed. Reg. at

54,073. Commerce merely stated that it was required to disregard

below-cost sales because “pursuant to [its] determination [in the

fifth review] of below-cost sales by Barden in the [home market],

in accordance with section 773(b)(2)(A)(i) [1677b(b)(2)(A)(i)] of

the Tariff Act,” Commerce had the authority in the instant review

to request cost information and apply the cost test.6 Id.

Commerce did not point to the “reasonable grounds,” if any, it had

6
In the fifth review, Commerce had conceded that it did not
have the requisite reasonable grounds to suspect that Barden-FAG
made sales below cost, but had conducted the test because of
information it received when it improperly collapsed the data of
FAG and Barden-FAG. See Antifriction Bearings (Other Than Tapered
Roller Bearings) and Parts Thereof From France, Germany, Italy,
Japan, Singapore, Sweden, and the United Kingdom; Final Results of
Antidumping Duty Administrative Reviews and Partial Termination of
Administrative Reviews (“AFBV”), 61 Fed. Reg. 66,472, 66,490 (Dec.
17, 1996). In FAG (U.K.) Ltd. v. United States (“FAG U.K.”), 22
CIT ___, 24 F. Supp. 2d 297 (1998), this Court invalidated the
results in AFBV of Commerce’s below-cost test with respect to
Barden-FAG because this Court found that it was unlawful for
Commerce to conduct such a test without “reasonable grounds to
believe or suspect” that Barden-FAG made below-cost sales. See FAG
U.K., 22 CIT at ___, 24 F. Supp. 2d at 300. FAG U.K. was decided
under the law as it existed prior to the URAA amendments. See id.
at 298 n.1.
Consol. Court No. 97-11-01983 Page 30

to suspect that Barden-FAG was making below-cost sales in the

instant review, and the Court will not guess why Commerce decided

to conduct the below-cost test.7 Moreover, subsection (i) and (ii)

of § 1677b(b)(2)(A) define what constitutes sufficient evidence

with which to form reasonable suspicion, and there is no evidence

in the Final Results that Commerce relied on the type of

information required to form the “reasonable grounds to believe or

suspect” that below-cost sales existed before it initiated the

investigation.

Because Commerce’s determination is unsupported by substantial

evidence on the record, the Court remands this issue to Commerce

and instructs it to recalculate Barden-FAG’s dumping margin without

regard to the results of the below-cost test.

7
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 (1935)).
Consol. Court No. 97-11-01983 Page 31

CONCLUSION

This case is remanded to Commerce to: (1) annul all findings

and conclusions made pursuant to the duty absorption inquiry

conducted for this review; (2) match Barden-FAG’s United States

sales to similar home market sales before resorting to CV; and (3)

recalculate Barden-FAG’s dumping margin without regard to the

results of the below-cost test. Commerce’s final determination is

affirmed in all other respects.

_____________________________
NICHOLAS TSOUCALAS
SENIOR JUDGE

Dated: August 3, 2000
New York, New York