Torrington Co. v. United States

Slip Op. 00-44

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
___________________________________
:
THE TORRINGTON COMPANY, :
:
Plaintiff, :
:
v. : Court No. 98-07-02530
:
UNITED STATES, :
:
Defendant, :
:
SKF USA INC. and SKF GmbH, :
:
Defendant-Intervenors. :
___________________________________:

Plaintiff, The Torrington Company (“Torrington”), moves
pursuant to USCIT R. 56.2 for judgment upon the agency record
challenging one aspect of the Department of Commerce, International
Trade Administration’s (“Commerce”) final determination, entitled
Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, Germany, Italy, Japan, Romania,
Singapore, Sweden, and the United Kingdom; Final Results of
Antidumping Duty Administrative Reviews (“Final Results”), 63 Fed.
Reg. 33,320 (June 18, 1998). Defendant-intervenors, SKF USA Inc.
and SKF GmbH (collectively “SKF”), oppose Torrington’s motion.

Specifically, Torrington claims that Commerce erred in
accepting SKF’s home market support rebates because they were not
tied to specific transactions. SKF contends that Commerce acted
lawfully in accepting its rebates.

Held: Torrington’s motion is denied. Case dismissed.

Dated: April 19, 2000

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

David W. Ogden, Acting Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
Court No. 98-07-02530 Page 2

United States Department of Justice (Velta A. Melnbrencis,
Assistant Director); of counsel: Thomas H. Fine, Office of the
Chief Counsel for Import Administration, United States Department
of Commerce, for the United States.

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

OPINION

TSOUCALAS, Senior Judge: Plaintiff, The Torrington Company

(“Torrington”), moves pursuant to USCIT R. 56.2 for judgment upon

the agency record challenging one aspect of the Department of

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

determination, entitled Antifriction Bearings (Other Than Tapered

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

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

Results of Antidumping Duty Administrative Reviews (“Final

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

intervenors, SKF USA Inc. and SKF GmbH (collectively “SKF”), oppose

Torrington’s motion.

Specifically, Torrington claims that Commerce erred in

accepting SKF’s home market support rebates because they were not

tied to specific transactions. SKF contends that Commerce acted

lawfully in accepting its rebates.
Court No. 98-07-02530 Page 3

BACKGROUND

This case concerns the eighth review of the antidumping duty

order on antifriction bearings (other than tapered roller bearings)

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

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

published the preliminary results of the subject review on February

9, 1998. See Antifriction Bearings (Other Than Tapered Roller

Bearings) And Parts Thereof From France, Germany, Italy, Japan,

Romania, Singapore, Sweden, and the United Kingdom, 63 Fed. Reg.

6512. Commerce published the Final Results on June 18, 1998. See

63 Fed. Reg. at 33,320.

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

1
Since the administrative review at issue was initiated after
December 31, 1994, the applicable law is the antidumping statute as
amended by the Uruguay Round Agreements Act, Pub. L. No. 103-465,
108 Stat. 4809 (1994) (effective January 1, 1995) (“URAA”). See
Torrington Co. v. United States, 68 F.3d 1347, 1352 (Fed. Cir.
1995) (citing URAA § 291(a)(2), (b) (noting effective date of URAA
amendments)).
Court No. 98-07-02530 Page 4

substantial evidence on the record, or otherwise not in accordance

with law.” 19 U.S.C. § 1516a(b)(1)(B)(i) (1994).

DISCUSSION

I. SKF’s Home Market Support Rebates

SKF made home market support rebate payments (“rebates” or

“rebate 2”) to certain of its distributors/dealers “‘to ensure that

the distributor/dealer obtains a minimum profit level on sales to

selected customers.’” Pl.’s Mem. Supp. Mot. J. Agency R. at 3

(quoting SKF Sec. B QR (Sept. 5, 1996), AR Doc. 42 (GER) at 33).

Rebate 2 is an after-market support rebate, granted on a customer-

specific basis to SKF’s customers, that is, the

distributors/dealers, which guarantees the distributors/dealers a

certain return on sales of SKF products to the

distributors/dealers’ customers. See SKF’s Resp. to Pl.’s Mem.

Supp. Mot. J. Agency R. at 28 (quoting Commerce SKF Home Market

Verification Report (Dec. 12, 1997), AR Doc. 60 (GER) at 8). The

distributors/dealers’ minimum profit level is agreed to in advance

by SKF GmbH and the distributors/dealers submit the “‘invoices that

they had presented to their customers as support for rebate 2

payments.’” Id. The quarterly produced rebate 2 payments are then

calculated by taking “‘the difference between the guaranteed return

and the actual return on the sale by the distributor/[dealer].’”

Id. “‘To arrive at the factor to be applied against each sale, SKF
Court No. 98-07-02530 Page 5

divided the total amount of rebate 2 payments on a customer-

specific basis by total sales on a customer-specific basis.’”

Pl.’s Mem. Supp. Mot. J. Agency R. at 5 (quoting Commerce SKF Home

Market Verification Report (Dec. 12, 1997), AR Doc. 60 (GER) at 8).

II. Contentions of the Parties

A. Torrington’s Contentions

Torrington contends that Commerce’s acceptance of SKF’s rebate

2 as a direct price adjustment was unlawful and/or unsupported by

substantial evidence because it was “not tied to specific

transactions.” Pl.’s Mem. Supp. Mot. J. Agency R. at 2. In

particular, Torrington asserts that reported rebate 2 was diluted

because it was allocated evenly over all sales to the

distributors/dealers, not only to the sales that were related to

the rebate. See id. at 15.

Torrington further contends that SKF’s allocation method runs

afoul of the United States Court of Appeals for the Federal

Circuit’s (“CAFC”) rationale in Torrington Co. v. United States

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

“failed to show that all reported rebate amounts directly related

to the particular products to which the payments actually related.”

Id. at 2. Torrington argues that Torrington CAFC followed prior

CAFC cases to define “direct adjustments to price [as] . . .
Court No. 98-07-02530 Page 6

expenses which vary with the quantity sold . . . or that are

related to a particular sale.” Id. at 7 (citations omitted).

Torrington asserts that Commerce had properly followed the CAFC’s

approach in the fifth administrative review, stating that the

proper approach is to accept claims for rebates “‘as direct

adjustments to price if actual amounts are reported for each

transaction [and] . . . [accept] adjustments based on allocations

[only if] . . . they are based on a fixed and constant percentage

of sales price.’” Pl.’s Mem. Supp. Mot. J. Agency R. at 8 (quoting

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 (“fifth administrative review”), 61 Fed. Reg. 66,472,

66,498 (Dec. 17, 1996)).

Torrington claims that in the Final Results, however, Commerce

“abandoned” its prior approach and the approach taken by the CAFC.

See id. at 9. As a result, Commerce unlawfully redefined what it

considered “direct” by adopting a new methodology. See id.

According to Torrington, Commerce’s new methodology allowed SKF to

report allocated post-sale price adjustments (“PSPAs”) if SKF acted

to the best of its ability in view of its record keeping system and

the results were not unreasonably distortive. See id. Relying on
Court No. 98-07-02530 Page 7

Lechmere, Inc. v. Nat’l Labor Relations Bd., 502 U.S. 527 (1992),

Torrington asserts that Commerce’s new methodology is unlawful

since it ignores the well-settled definition of “direct”

adjustments to price enunciated by the CAFC. See id. at 9-10.

Torrington further contends that although the fifth administrative

review and Torrington CAFC pre-date the Uruguay Round Agreements

Act (“URAA”) amendments, “[t]he new statute retains the distinction

between ‘direct’ and ‘indirect’ expenses and Congress gave no

indication that changes in meaning were ever intended.” Id. at 11.

Therefore, Torrington argues that since Commerce’s new methodology

must conform with precedent, this Court should review the rebate 2

adjustments by applying the rationale of Torrington CAFC. See

Pl.’s Mem. Supp. Mot. J. Agency R. at 12.

Torrington also asserts that although this Court approved of

the methodology used by Commerce in Timken Co. v. United States

(“Timken”), 22 CIT __, 16 F. Supp. 2d 1102 (1998), it should

reconsider that position because Congress did not intend to change

Commerce’s policy “of putting the burden of proof with the party

who intends to benefit from the claim made.” Id. at 13. As such,

Torrington maintains that even if Commerce’s new methodology was

applied to the instant case, SKF did not carry its burden of proof.

See id. at 17. Specifically, SKF did not prove that their

allocation was not distortive and that they reported the adjustment
Court No. 98-07-02530 Page 8

“‘on as specific a basis as possible.’” Id. at 18. Torrington

asserts that SKF’s allocation of rebate 2 over a large body of

sales when it only applied to sales for specified customers was “a

priori distortive.” Id. at 19.

Torrington also asserts that SKF did not provide substantial

evidence to prove that it used its best efforts to make adjustments

“‘on as specific a basis as possible.’” Pl.’s Mem. Supp. Mot. J.

Agency R. at 19. Rather, Commerce excused specific reporting by

SKF on the grounds that rebate 2 could not be reported on a

“‘transaction-specific basis.’” Id. at 20. Torrington also

maintains that SKF’s argument of infeasibility in undertaking

specific reporting is invalid because SKF could have modified its

accounting system in order to arrive at more precise data. See id.

at 20. Therefore, Torrington requests that this Court reverse

Commerce’s determination under the Final Results and remand the

case to Commerce to deny SKF’s adjustment for rebate 2. See id.

B. Commerce’s Contentions

Commerce asserts that its acceptance of allocated rebate 2 is

supported by substantial record evidence and is in accordance with

the law because it is consistent with the URAA, specifically, with

19 U.S.C. § 1677m(e) (1994). See Def.’s Mem. Opp’n to Mot. J.

Agency R. at 2. Commerce maintains that its modified policy of
Court No. 98-07-02530 Page 9

accepting SKF’s allocated rebates as direct price adjustments is

consistent with this Court’s decision in Timken. See id. at 5.

Commerce argues that Torrington CAFC is inapposite to the instant

case because it “only held that Commerce is not authorized to

grant indirect selling expense treatment to adjustments that are

direct selling expenses” and did not “address the question whether

Commerce may adjust the home market price by allocated

adjustments.” Id. at 3.

Commerce argues that in Timken, this Court laid the premise

applicable here, namely, 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 [normal value (“NV”)] for PSPAs.’” Id. at 10 (quoting

Torrington CAFC, 82 F.3d at 1048). Commerce argues that the Timken

court properly “accepted Koyo’s PSPAs, even though they were not

reported on a transaction-specific basis and even though the

allocations Koyo used included rebates on non-scope merchandise.”

Def.’s Mem. Opp’n to Mot. J. Agency R. at 5.

Commerce argues that its acceptance of rebate 2 was supported

by substantial evidence because SKF could not provide information

in the preferred form and that such a determination is consistent

with 19 U.S.C. § 1677m(e) and the rationale in Timken. Id. at 11-

12. Commerce reviewed SKF’s data to ensure that it was not
Court No. 98-07-02530 Page 10

unreasonably distortive, and it concluded that SKF reported rebate

2 to the best of its ability. Final Results, 63 Fed. Reg. at

33,326. Specifically, Commerce maintains that “[b]ecause SKF

Germany grants [rebate 2] to distributors/dealers on the basis of

their overall sales to the particular distributors/dealer, SKF

Germany can not report this rebate on a transaction-specific

basis.” Final Results, 63 Fed. Reg. at 33,326.

Commerce maintains that SKF’s reporting the rebate on a

customer-specific basis was reasonable. Commerce verified: (1)

that rebate 2 was granted on a customer-specific basis; (2) that

the rebate 2 allocation was not distorted by out-of-scope

merchandise; (3) that no variation existed in the “rebate when it

was granted on in-scope or out-of-scope merchandise”; and (4) that

“SKF’s allocation in this review effectively removed any rebates

paid on out-of-scope merchandise from the amount of the actual

customer-specific adjustment.” Def.’s Mem. Opp’n to Mot. J. Agency

R. at 14-15. Arguing against the necessity of requiring

transaction-specific reporting, Commerce states that when Congress

adopted 19 U.S.C. § 1677m(e), it “cautioned Commerce against an

obsession with perfection which results in rejection of reasonable

reporting methodologies.” Id. at 15.
Court No. 98-07-02530 Page 11

C. SKF’s Contentions

SKF supports Commerce’s position, asserting that its

acceptance of rebate 2 was lawful and supported by substantial

evidence. SKF contends that rejecting rebate 2 would be contrary

to 19 U.S.C. § 1677m(e) because even if SKF’s information does not

meet all of Commerce’s requirements, the rebate was “timely,

verifiable, reliable, [SKF] acted to the best of its ability, and

the data can be used without undue difficulties.” SKF’s Resp. to

Pl.’s Mem. Supp. Mot. J. Agency R. at 5-6. Moreover, SKF asserts

that in recent decisions involving post-URAA law, “this Court has

upheld [Commerce’s] treatment of allocated rebates . . . as direct

adjustments to price.” Id. at 5.

SKF maintains that the treatment of allocated rebate 2 as a

direct adjustment to price is consistent with Timken, which held

that 19 U.S.C. § 1677m(e) clearly permits allocated price

adjustments. See id. at 7. SKF argues that this Court “‘approves

of Commerce’s change in policy, as it substitutes a rigid rule with

a more reasonable method that nonetheless ensures that a

respondent’s information is reliable and verifiable.’” Id. at 8

(quoting Timken, 16 F. Supp. 2d at 1108).

Furthermore, SKF maintains that it fulfills the requirements

of the applicable statute. Specifically, SKF argues that it

complied with 19 U.S.C. § 1677m(e) since it submitted rebate 2 data
Court No. 98-07-02530 Page 12

on a timely basis, the information was verified, responses to

Commerce’s questionnaire were complete and Commerce used the

information without difficulty. Id. at 11-12.

SKF also maintains that Torrington CAFC is inapposite to the

present matter because it “neither addresses nor precludes the

approach to rebate 2 taken by” Commerce. SKF’s Resp. to Pl.’s Mem.

Supp. Mot. J. Agency R. at 15. SKF further contends that “the

current law, which is different from that which was before the

Federal Circuit in Torrington CAFC, addresses the issue of

allocations and is highly relevant to assessing the lawfulness of

[Commerce’s] actions in the subject review.” Id. at 18. Contrary

to Torrington’s contentions, SKF maintains that its allocations

were not distortive and that Commerce’s finding that SKF reported

the data on as specific a basis as possible was correct. See id.

at 26 (quoting Final Results, 63 Fed. Reg. at 33,326).

SKF also contends that “‘[t]o verify the accuracy of the claim

of payments, [Commerce] examined the customer-specific quarterly

summary of rebate 2 entitlements and actual rebate amounts paid.’”

Id. at 28 (citation omitted). Commerce “verified that rebate 2 is

granted on a customer-specific basis, . . . calculated on a

customer-specific basis, and that it is paid on a customer-specific

basis.” Id.
Court No. 98-07-02530 Page 13

III. Analysis

As a preliminary matter, the Court notes that Timken is

directly applicable here.2 In Timken, this Court upheld Commerce’s

decision to accept Koyo Seiko Co.’s (“Koyo”) 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.” Timken, 16 F. Supp. 2d at 1106.

Similarly, the Court is faced with the decision whether to uphold

Commerce’s acceptance of rebate 2, even though it was not reported

on a transaction-specific basis and even though the allocations SKF

used included rebates on non-scope merchandise.

The Court notes here, as it did in Timken, 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 such as rebate 2. See id. at

1108. Section 1677m(e), however, directs as follows:

2
The Court further notes that Torrington Co. v. United
States, 82 F.3d 1039 (Fed. Cir. 1996) (“Torrington CAFC”) is
inapposite. Commerce correctly noted that Torrington CAFC merely
held that Commerce could not treat direct selling adjustments as
indirect selling expenses and that it did not address the issue
presently before the Court, that is, whether Commerce could use
allocated adjustments to adjust the home market price. See
Torrington CAFC, 82 F.3d at 1051. Additionally, Torrington CAFC
was decided under pre-URAA law.
Court No. 98-07-02530 Page 14

[Commerce] shall not decline to consider information that
is submitted by an interested party and is necessary to
the determination but does not meet all the applicable
requirements . . . if--
(1) the information is submitted by the
deadline established for its submission,
(2) the information can be verified,
(3) the information is not so incomplete that
it cannot serve as a reliable basis for reaching
the applicable determination,
(4) the interested party has demonstrated that
it acted to the best of its ability in providing
the information and meeting the requirements
established by [Commerce] . . . and
(5) the information can be used without undue
difficulties.

19 U.S.C. § 1677m(e).

The Court finds that Commerce’s decision to accept rebate 2

was supported by substantial evidence and otherwise in accordance

with law. First, the Final Results demonstrate that the elements

of § 1677m(e) were satisfied. There is no evidence that the

information was untimely. Commerce verified the information. See

Final Results, 63 Fed. Reg. at 33,326. There is no evidence that

the information was so incomplete that it could not serve as a

basis for reaching a determination. The Court agrees with

Commerce’s conclusion that SKF demonstrated that it acted to the

best of its ability in providing the information and meeting the

applicable requirements. SKF was not able to report rebate 2 on a

transaction-specific basis because it grants the rebates to its

distributors/dealers on the basis of total sales to the

distributors/dealers. See id. Thus, SKF had acted to the best of
Court No. 98-07-02530 Page 15

its ability. Finally, the last element of § 1677m(e) is satisfied

since there is no indication that the information was incapable of

being used without undue difficulties.

Second, at verification, Commerce found that SKF’s allocation

methodologies were not unreasonably distortive. See id.

Specifically, Commerce determined that there was “no information on

the record which indicates that the bearings included in SKF

Germany’s allocation vary significantly in terms of value, physical

characteristics, or the manner in which they are sold such that SKF

Germany’s allocation would result in unreasonably inaccurate or

distortive allocations.” Id.

Third, Commerce’s actions were also consistent with the

Statement of Administrative Action (“SAA”) accompanying the URAA.3

The Court agrees with Commerce’s argument that “given the large

number of sales, and the manner in which the rebate is granted,

3
The Statement of Administrative Action (“SAA”) represents
“an authoritative expression by the Administration concerning its
views regarding the interpretation and application of the Uruguay
Round agreements.” H.R. Doc. 103-316, at 656 (1994), reprinted in
1994 U.S.C.C.A.N. 4040. “It is the expectation of the Congress
that future Administrations will observe and apply the
interpretations and commitments set out in this Statement.” Id.;
see also 19 U.S.C. § 3512(d) (1994) (“The statement of
administrative action approved by the Congress ... shall be
regarded as an authoritative expression by the United States
concerning the interpretation and application of the Uruguay Round
Agreements and this Act in any judicial proceeding in which a
question arises concerning such interpretation or application.”).
Court No. 98-07-02530 Page 16

annual customer-specific allocations were reasonable.” Def.’s Mem.

Opp’n to Mot. J. Agency R. at 15. 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.” H.R. Doc. No. 103-316, at 865 (1994), reprinted in

1994 U.S.C.C.A.N. 4040, 4195. Thus, Commerce properly took into

account the ability of SKF to report rebate 2 on a basis more

specific than customer-specific.

In sum, the Court concludes that Commerce’s decision to accept

rebate 2 is reasonable and in accordance with law, specifically,

with the post-URAA statutory language and the SAA. Although

Commerce’s decision represents a change from pre-URAA policy, the

Court reiterates its approval of this change, “as it substitutes a

rigid rule with a more reasonable method that nonetheless ensures

that a respondent’s information is reliable and verifiable.”

Timken, 16 F. Supp. 2d at 1108. Furthermore, Torrington presents

no compelling reason why the Court should depart from its decision

in Timken.
Court No. 98-07-02530 Page 17

CONCLUSION

Commerce’s treatment of rebate 2 is supported by substantial

evidence and otherwise in accordance with law. Commerce’s

determination is affirmed.

______________________________
NICHOLAS TSOUCALAS
SENIOR JUDGE

Dated: April 19, 2000
New York, New York