Timken Co. v. United States

Slip Op. 99-73

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
___________________________________
:
THE TIMKEN COMPANY, :
:
Plaintiff, :
:
v. : Court No. 97-03-00394
:
UNITED STATES, :
:
Defendant, :
:
L & S BEARING COMPANY; PEER :
BEARING COMPANY; and SHANGHAI :
GENERAL BEARING COMPANY, LTD., :
:
Defendant-Intervenors. :
___________________________________:

Plaintiff, The Timken Company (“Timken”), moves pursuant to
Rule 56.2 of the Rules of this Court for judgment on the agency
record challenging the Department of Commerce, International Trade
Administration’s (“Commerce”) final determination, entitled Tapered
Roller Bearings and Parts Thereof, Finished and Unfinished, From
the People’s Republic of China; Final Results and Partial
Termination of Antidumping Duty Administrative Review, 62 Fed. Reg.
6,173 (Feb. 11, 1997).

Timken claims that Commerce erred in: (1) selecting
Indonesian, rather than Indian, import statistics for valuing the
steel used by Chinese producers to manufacture cups and cones for
tapered roller bearings (“TRBs”); (2) failing to adjust overhead,
selling, general and administrative expenses (“SG&A”), and profit
rates to account for differences in material and labor values of
other surrogate sources used in determining foreign market value
(“FMV”); (3) failing to deduct import duties paid by an Indian
steel producer on raw-material imports which were included in the
denominator of the overhead, SG&A, and profit ratios; (4) using
Indian public labor data rather than an Indian steel producer’s
data as surrogate values for the direct-labor factor of production
used to determine FMV of the TRBs; (5) selecting a certain Indian
Court No. 97-03-00394 Page 2

tariff classification to value cold-rolled steel sheet used by
Chinese producers to manufacture cages for TRBs; (6) including
“purchases of traded goods” in an Indian steel producer’s cost of
manufacturing (“COM”) when calculating the overhead, SG&A and
profit rates; (7) failing to adjust United States price (“USP”) for
marine insurance costs based on value rather than weight; and (8)
terminating the antidumping duty order for this administrative
review with respect to defendant-intervenor Shanghai General
Bearing Company, Ltd.

Held: Timken’s motion for judgment on the agency record is
granted in part and denied in part. Case is remanded to Commerce
to: (1) further investigate and determine the appropriate
measurement for valuing cold-rolled steel sheet used by Chinese
producers to manufacture cages for TRBs; (2) exclude the “purchases
of traded goods” from the COM used in the overhead, SG&A and
profit-rate calculations; and (3) adjust USP by recalculating
marine insurance pursuant to a value-based methodology. Commerce’s
final determination is affirmed in all other respects.

[Timken’s motion is granted in part and denied in part. Case
remanded.]

Dated: July 30, 1999

Stewart and Stewart (Terence P. Stewart, Mara M. Burr, James
R. Cannon, Jr., Charles A. St. Charles and Amy S. Dwyer) for The
Timken Company.

David W. Odgen, Acting Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Henry R. Felix); of counsel:
Rina Goldenberg, Office of the Chief Counsel, for Import
Administration, United States Department of Justice, for Defendant.

Cohen Darnell & Cohen, PLLC (Mark A. Cohen) for L & S Bearing
Company.

Arent Fox Kintner Plotkin & Kahn, PLLC (John M. Gurley and
Matthew J. McConkey) for Peer Bearing Company.

Reed Smith Shaw & McClay (James K. Kearney) for Shanghai
General Bearing Company, Ltd.
Court No. 97-03-00394 Page 3

OPINION

TSOUCALAS, Senior Judge: Plaintiff, The Timken Company

(“Timken”), moves pursuant to Rule 56.2 of the Rules of this Court

for judgment on the agency record challenging the Department of

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

determination, entitled Tapered Roller Bearings and Parts Thereof,

Finished and Unfinished, From the People’s Republic of China; Final

Results and Partial Termination of Antidumping Duty Administrative

Review (“Final Results”), 62 Fed. Reg. 6,173 (Feb. 11, 1997).

Background

The administrative review at issue concerns tapered roller

bearings (“TRBs”) and parts thereof, finished and unfinished,

imported from the People’s Republic of China (“PRC”) during the

eighth period of review covering June 1, 1994 through May 31,

1995.1 Commerce published the preliminary results of the subject

review on August 5, 1996. See Tapered Roller Bearings and Parts

Thereof, Finished and Unfinished, From the People’s Republic of

China; Preliminary Results of Antidumping Administrative Review and

1
Since the administrative review at issue was initiated prior
to January 1, 1995, the applicable law is the antidumping statute
as it existed prior to the amendments made by the Uruguay Round
Agreements Act, Pub.L. No. 103-465, 108 Stat. 4809 (1994). See
Torrington Co. v. United States, 68 F.3d 1347, 1352 (Fed. Cir.
1995).
Court No. 97-03-00394 Page 4

Intent to Revoke Antidumping Duty Order in Part (“Preliminary

Results”), 61 Fed. Reg. 40,610. On February 11, 1997, Commerce

published the Final Results at issue. See 62 Fed. Reg. 6,173. The

Court granted L & S Bearing Company’s Motion to Intervene on May

20, 1997, after which the company did not file any additional

papers.

Discussion

The Court has jurisdiction in this case pursuant to 19 U.S.C.

§ 1516a(a)(2) (1994) and 28 U.S.C. § 1581(c) (1994).

The Court must uphold Commerce’s final antidumping

determination 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). Substantial evidence is “more than a mere

scintilla. It means such relevant evidence as a reasonable mind

might accept as adequate to support a conclusion.” Universal

Camera Corp. v. NLRB, 340 U.S. 474, 477 (1951) (quoting

Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)). “It is

not within the Court’s domain either to weigh the adequate quality

or quantity of the evidence for sufficiency or to reject a finding

on grounds of a differing interpretation of the record.” Timken

Co. v. United States, 12 CIT 955, 962, 699 F. Supp. 300, 306
Court No. 97-03-00394 Page 5

(1988), aff’d, 894 F.2d 385 (Fed. Cir. 1990).

A. Commerce’s Selection of Indonesian Import Statistics as a
Surrogate Value for Raw-Material Costs of Steel Used by
Chinese Producers to Manufacture TRB Cups and Cones

In this case, Commerce determined that the TRBs from the PRC

were being sold in the United States at a price less than what the

foreign merchandise sells for in the home market, that is, being

sold at less than its fair value (“LTFV”). Further, the

International Trade Commission determined that these LFTV sales

threatened the United States domestic industry producing the same

merchandise with material injury. Because Commerce determined that

the PRC is a non-market economy (“NME”) country, Commerce

calculated the foreign market value (“FMV”) of the TRBs using the

factors of production (“FOPs”) based on values from surrogate

countries pursuant to 19 U.S.C. § 1677b(c) (1988).

In the Preliminary Results, Commerce used data from a 1994-95

annual report (“Report”) of SKF Bearings India, Ltd. (“SKF India”),

a producer of similar merchandise in India, to determine the values

of the following FOPs for calculating FMV: (1) overhead; (2)

selling, general and administrative expenses (“SG&A”); and (3)

profit. See 61 Fed. Reg. at 40,613. For the direct-labor factor,

Commerce used surrogate values derived, with adjustments, from
Court No. 97-03-00394 Page 6

Indian public labor data, Investing, Licensing & Trading Conditions

Abroad, India (“IL&T”), published in November 1994 by the Economist

Intelligence Unit. See id. For the raw-materials factor, Commerce

used, with adjustments, Indian import statistics as the best

information available (“BIA”) for valuing the steel used by Chinese

producers to manufacture the TRBs.2 See id. (citing Monthly

Statistics of the Foreign Trade of India, Volume II--Imports).

In the Final Results, Commerce determined that, contrary to

its preliminary determination, the Indian import statistics were

not reliable for valuing bearing-quality steel used to produce TRB

cups and cones because (1) Commerce was unable to isolate an Indian

import value for bearing-quality steel, and (2) Commerce found that

the value of the Indian import data was significantly higher than

(a) bearing-quality steel imported into the United States, and (b)

similar European Union steel-import data.3 See 62 Fed. Reg. at

2
See Tapered Roller Bearings and Certain Components Thereof
From Japan; Clarification of Scope of Antidumping Finding, 46 Fed.
Reg. 40,550, 40,551 (Aug. 10, 1981) (“A complete [TRB] consists of
a cone or inner race, cage (roller retainer), and roller in one
assembled unit, and the cup or outer race, which is the outer ring
on which the rollers turn.”).
3
See Final Results, 62 Fed. Reg. at 6,180, n.1 (noting that
while the European Union import data do not have the same bearing
quality steel category as do the United States data, the European
Union import data do provide narrative descriptions that closely
match the chemical composition of the steel that the Chinese
producers used to manufacture TRB cups and cones).
Court No. 97-03-00394 Page 7

6,179-80. Commerce, therefore, selected India as a primary

surrogate country for valuing steel used to produce TRB rollers and

cages and Indonesia as a secondary surrogate country for valuing

steel used to produce TRB cups and cones. See id. at 6,177, 6,180.

Commerce further determined that these surrogates comprised the BIA

for valuing raw-material costs in its FOPs calculations. See id.

at 6,177.

In addition, in calculating the overhead, SG&A and profit-

ratios, Commerce used data from SKF India’s Report in both the

numerators (SKF India’s overhead, SG&A, and profit, respectively)

and the denominator (the sum of SKF India’s material and labor

costs, that is, the total cost of manufacturing (“COM”)). See id.

at 6,178. Commerce noted that this methodology allowed it to

derive internally consistent ratios of SKF India’s overhead and

SG&A expenses. See id. Commerce concluded that these ratios, when

multiplied by the Indonesian and Indian raw-material costs and the

IL&T labor data, constituted the BIA concerning overhead and SG&A

expenses that would be incurred by a Chinese TRB producer given

such FOPs. See id.

Timken’s arguments challenging Commerce's use of surrogate

values are multifaceted. First, Timken notes that Commerce’s

regulations and practices establish that surrogate values for FOPs
Court No. 97-03-00394 Page 8

should be obtained from the primary surrogate country unless those

values are unavailable or unreliable. See Pl.'s Mem. Supp. Mot. J.

Agency R. at 23-26. Timken, therefore, asserts that since the

Indian import statistics were reliable, Commerce erred in blending

Indonesian with Indian import data to value the raw-materials

factor. See id. at 26-29. In particular, Timken argues (1) that

there were not sufficient differences between United States,

Indonesian and Indian import prices to justify the use of

Indonesian, rather than Indian, import data to value TRB cups and

cones, see id., and (2) that Commerce’s use of United States and

European Union import data as benchmarks for assessing the

reliability of the Indian import data was unreasonable, see id. at

30-32. Second, Timken claims that Commerce’s selection of

Indonesian import statistics in the Final Results was without

notice to, or debate by, the parties, and thus, was arbitrary and

unreasonable. See id. at 37-39. Third, Timken contends that the

present case is distinguishable from the Federal Circuit’s decision

in Lasko Metal Prods., Inc. v. United States, 43 F.3d 1442 (Fed.

Cir. 1994), because Commerce has not articulated any legitimate

policy for using Indonesian, rather than Indian, import data. See

Pl.'s Mem. Supp. Mot. J. Agency R. at 39-40. Fourth, Timken argues

that Commerce should have adjusted the overhead, SG&A, and profit

rates, that is, reduced the COM denominator used in the calculation
Court No. 97-03-00394 Page 9

of these rates to reflect the use of lower raw-material and labor

values from separate sources (that is, Indonesian and Indian import

statistics and IL&T labor data, respectively). See id. at 44-46.

Fifth, Timken argues that Commerce should have made an adjustment

for import duties paid by SKF India on raw-material imports which

were included in the calculations of the overhead, SG&A, and profit

ratios. See id. In the alternative, Timken argues if the Court

determines that Commerce’s use of SKF India’s unadjusted overhead,

SG&A and profit rates was reasonable, then Commerce should be

required to use SKF India’s raw-material and labor costs when

calculating such rates because SKF India’s data provides an

internally consistent source and greater accuracy compared to using

the Indonesian and Indian raw-material statistics and the IL&T

labor data for calculating such rates. See id. at 47-50.

Peer Bearing Company (“Peer”) agrees with Commerce's position

that Indian import statistics were an unreliable surrogate for

valuing TRB cups and cones, necessitating the use of secondary

surrogate values from Indonesia. See Peer’s Resp. to Mot. J.

Agency R. at 9-13. Peer asserts that Timken was not prejudiced by

Commerce’s use of Indonesian import data in the Final Results

because Commerce released a memorandum to all parties in this

review that listed five surrogate countries, and included Indonesia
Court No. 97-03-00394 Page 10

as a surrogate country. See id. at 12. Peer also claims that no

adjustment of SKF India’s overhead, SG&A and profit rates was

necessary because Commerce’s entire methodology for determining FMV

in NME cases often is based on the application of ratios derived

from one source to values derived from another. See id. at 15.

Peer further argues that Commerce properly declined to deduct the

import duties paid by SKF India on raw-material imports, that are

included in the denominator of the overhead, SG&A and profit

ratios, because, as Commerce noted in the Final Results, see 62

Fed. Reg. at 6,178, there was no evidence that such duties were

paid. See Peer’s Resp. to Mot. J. Agency R. at 15-16. Last, Peer

argues that Commerce’s use of SKF India’s overhead, SG&A and profit

rates does not require that Commerce use SKF India’s material and

labor costs because for each factor Commerce correctly selected the

surrogate values which constituted the BIA. See id. at 16-17.

There is no question that the PRC is a NME. When the foreign

merchandise under investigation is exported from a NME, 19 U.S.C.

§ 1677b(c) applies. Section 1677b(c) provides that when dealing

with exports from NME countries, such as the PRC, the valuation of

the FOPs is based on the BIA regarding the values of such factors

in a market economy country or countries considered to be

appropriate by Commerce. See 19 U.S.C. § 1677b(c)(1). The FOPs
Court No. 97-03-00394 Page 11

“include, but are not limited to--(A) hours of labor required, (B)

quantities of raw materials employed, (C) amounts of energy and

other utilities consumed, and (D) representative capital cost,

including depreciation.” Id. § 1677b(c)(3). In valuing these

FOPs, the statute provides that Commerce “shall utilize, to the

extent possible, the prices or costs of factors of production in

one or more market economy countries that are--(A) at a level of

economic development comparable to that of the nonmarket economy

country, and (B) significant producers of comparable merchandise.”

Id. § 1677b(c)(4).

The Court finds that Commerce’s (1) selection of Indonesian,

rather than Indian, import data to value steel used to manufacture

TRB cups and cones, (2) use of SKF India’s overhead, SG&A and

profit rates without adjustment, (3) refusal to deduct alleged

import duties paid by SKF India on raw-material imports, and (4)

use of IL&T labor data to value the direct-labor factor, are

supported by substantial evidence and in accordance with law.

“Although Commerce expresses a strong preference for obtaining

all factors values from a single surrogate source, both case law

and Commerce’s determinations are filled with instances in which

Commerce used a blend of sources and surrogates to determine FMV.”

Peer Bearing Co. v. United States, 22 CIT __, __, 12 F. Supp. 2d
Court No. 97-03-00394 Page 12

445, 455 (1998) (citing Tianjin Mach. Import & Export Corp. v.

United States, 16 CIT 931, 940, 806 F. Supp. 1008, 1018 (1992)

(“Commerce’s ability to construct [FMV] from weighted alternatives

advantageously serves the antidumping statutes purpose of

‘determining current margins as accurately as possible.’”); Notice

of Final Determination of Sales at Less Than Fair Value: Certain

Partial-Extension Steel Drawer Slides with Rollers From the

People’s Republic of China, 60 Fed. Reg. 54,472, 54,474 (Oct. 24,

1995) (“Although India is the preferred surrogate country, we have

resorted to Indonesia for a certain surrogate value where an Indian

value was determined to be inappropriate.”)), remand results aff’d,

22 CIT __, Slip Op. 98-161 (Dec. 7, 1998), appeal docketed, Timken

Co. v. United States, No. 99-1204 (Fed. Cir. 1999). Nothing in the

antidumping statute or its legislative history mandates that

Commerce must derive FMV from surrogate-based values according to

a certain methodology. See Tianjin, 16 CIT at 940, 806 F. Supp.

at 1018. Rather, § 1677b(c)(1) “provides simply that ‘valuation of

the factors of production shall be based on the best available

information’ regarding values in a surrogate country.

Additionally, Commerce shall only utilize ‘to the extent possible’

the prices or costs in the surrogate country.” See id. (citation

omitted). “Commerce’s authority to select appropriate surrogate

values to determine FMV based on FOP includes the authority to do
Court No. 97-03-00394 Page 13

so without adjustment.” Peer Bearing, 22 CIT at __, 12 F. Supp. 2d

at 455. Indeed, “[t]he statute does not require Commerce to follow

any single approach in evaluating data.” Olympia Indus., Inc. v.

United States, 21 CIT __, __, Slip Op. 97-44, at 11 (Apr. 10, 1997)

(citing Lasko, 43 F.3d at 1446). It was, therefore, within

Commerce’s authority to use India as a primary surrogate in

conjunction with Indonesian values and IL&T labor data as the BIA

for other values, without making any adjustment to SKF India’s

overhead, SG&A and profit rates.

The Court rejects Timken’s assertion that Commerce erred in

using United States and European Union data as benchmarks to test

the reliability of the Indian import data for valuing TRB cups and

cones. The Court has found in prior cases that comparing surrogate

data to market economy data to determine the reliability of such

surrogate data is within “‘Commerce’s statutory authority and

consistent with past practice.’” Peer Bearing, 22 CIT at __, 12 F.

Supp. 2d at 455 (quoting Writing Instrument Mfrs. Ass’n v. United

States, 21 CIT __, __, 984 F. Supp. 629, 639 (1997) (upholding use

of United States benchmark as a point of comparison for two

possible surrogate values) (quoting, in turn, Olympia Indus., Inc.,

21 CIT at __, Slip Op. 97-44, at 12 (upholding Commerce’s use of

data from other market economies to test the reliability of
Court No. 97-03-00394 Page 14

surrogate country data))). Commerce, therefore, acted within its

statutory authority by utilizing United States and European Union

data to aid in its FOPs valuation. See id. (citing 19 U.S.C. §

1677b(c)(1), (4)). With respect to Timken’s challenge to

Commerce’s decision to use Indonesian over Indian values for TRB

cups and cones, the Court finds that Timken is assailing the

correctness of of Commerce’s result, not Commerce’s methodology,

which is outside the Court’s standard of review. See Writing

Instrument, 21 CIT at __, 984 F. Supp. at 639. The Court,

therefore, concludes that Commerce’s use of data from other market

economies as benchmarks to test the reliability of the Indian

import data was reasonable.

The Court also rejects Timken’s argument that Commerce’s use

of Indonesian surrogate values in the Final Results was without

notice to Timken and, therefore, was arbitrary and unreasonable.

“Commerce has the flexibility to change its position” from the

preliminary to the final results, as long as Commerce explains “the

basis for its change and providing that the explanation is in

accordance with law and supported by substantial evidence.”

Asociacion Colombiana de Exportadores de Flores v. United States,

22 CIT __, __, 6 F. Supp. 2d 865, 879-80 (1998). Moreover,

“[p]reliminary results, by their very nature, are preliminary and
Court No. 97-03-00394 Page 15

subject to change. Commerce has no obligation to inform the

parties that a different surrogate will be used in the final

determination than in the preliminary.” Peer Bearing, 22 CIT at

__, 12 F. Supp. 2d at 456 (citing Tehnoimportexport v. United

States, 15 CIT 250, 254-55, 766 F. Supp. 1169, 1174-75 (1991)

(affirming final determination where Commerce chose one country as

surrogate in the preliminary results and then used another

surrogate for the final determination)).

The Court also rejects Timken’s argument that Commerce’s use

of Indonesian import statistics is distinguishable from the Federal

Circuit’s decision in Lasko. See Pl.'s Mem. Supp. Mot. J. Agency

R. at 39-40. In Lasko, the court considered whether or not § 1677b

of the antidumping statute permits Commerce to determine FOPs using

both surrogate country values and actual cost values and concluded

that there was no error in Commerce’s methodology of using both

values. See 43 F.3d at 1445-46. The court opined that “[w]here we

can determine that a NME producer’s input prices are market

determined, accuracy, fairness, and predictability are enhanced by

using those prices,” and, “[t]herefore, using surrogate values when

market-based values are available would, in fact, be contrary to

the intent of the [antidumping statute]” of determining dumping

margins “as accurately as possible.” Id. at 1446 (internal
Court No. 97-03-00394 Page 16

quotation marks and citations omitted). But the court noted that

“[i]n situations in which a statute does not compel a single

understanding, . . . our duty is not to weigh the wisdom of, or to

resolve any struggle between, competing views of the public

interest, but rather to respect legitimate policy choices made by

the agency in interpreting and applying the statute.” Id.

(internal quotation marks and citation omitted).

Timken asserts that, unlike Lasko, Commerce has not explained

any “legitimate policy” served in this case by using Indonesian

import data or rejecting Indian information. See Pl.'s Mem. Supp.

Mot. J. Agency R. at 40. Specifically, Timken asserts that (1) the

Indian, rather Indonesian, import data was more reliable as an

indicator of bearing steel prices, and (2) Commerce’s use of the

Indonesian import data, because it was closer to United States

import values than Indian data, was not a policy choice; rather, it

was based on a faulty premise that Indian steel costs should

approximate United States steel costs. See id.

Because the Court rejected these arguments above, the Court

finds that Timken has otherwise failed to demonstrate how this case

is distinguishable from Lasko. Moreover, the Court notes that

Lasko supports Commerce’s methodology of using both Indian and

Indonesian import data to value the raw-materials factor. See
Court No. 97-03-00394 Page 17

Lasko, 43 F.3d at 1445-46.

In the absence of a statutory mandate to the contrary,

Commerce’s actions must be upheld as long as they are reasonable.

The Court concludes that Commerce acted reasonably in applying

surrogate values without adjustment in an attempt to capture the

FMV of the PRC TRBs under review. Commerce also acted reasonably

by not deducting import duties paid by SKF India on raw-material

imports from the calculations of overhead, SG&A and profit rates

because Commerce had no evidence as to the amount of duties, if

any, that were included in SKF India’s raw-material costs.

B. Commerce’s Selection of Tariff Classification 7209.42.00 to
Value Cold-Rolled Steel Used to Produce TRB Cages

In both the Preliminary and Final Results, Commerce used

Indian tariff classification 7209.42.00 to value cold-rolled steel

sheet used by Chinese producers to manufacture cages for TRBs. See

Final Results, 62 Fed. Reg. at 6,180. Timken objected to

Commerce’s use of this tariff subheading because it does not

specify “carbon content,” an essential characteristic that Chinese

producers detailed in their descriptions of the cold-rolled steel

sheet they used to manufacture TRB cages. See id. Timken,

therefore, suggested Indian tariff classification 7211.41.00

because it more closely resembled the carbon content of the cold-
Court No. 97-03-00394 Page 18

rolled steel sheet. See id. In response, Chinese producers argued

that although tariff subheading 7211.41.00 lists carbon content, it

was not an appropriate subheading for valuing cold-rolled steel

sheet used for TRB cages because the subheading does not separate

out ranges of thickness for such steel. See id. Rather,

subheading 7211.41.00 covers all such steel that is greater than

600 mm, while subheading 7209.42.00 has more defined boundaries for

the thickness of such steel, that is, between 0 and 600 mm. See

id. Commerce rejected Timken’s suggestion based on the grounds

that subheading 7211.41.00 covered “hot-rolled” steel sheet and,

therefore, was not an appropriate category for valuing “cold-

rolled” steel sheet used to produce TRB cages. See id.

Timken requests that if the Court affirms Commerce’s use of

Indian import statistics rather than SKF India’s Report to value

steel, then the Court should instruct Commerce to use Indian tariff

subheading 7211.41.00. See Pl.’s Mem. Supp. Mot. J. Agency R. at

42. This subheading describes the specific carbon content of steel

used to manufacture TRB cages in the PRC, compared to subheading

7209.42.00, which does not distinguish among the carbon content

levels. See id.

Peer asserts that although Indian tariff subheading 7211.41.00

specifies carbon content, Timken’s argument is flawed because
Court No. 97-03-00394 Page 19

subheading 7209.42.00 is more specific in other respects. See

Peer's Resp. to Mot. J. Agency R. at 17. In particular, Peer notes

that subheading 7209.42.00 more accurately describes the thickness

of the steel used to produce TRB cages. See id. Peer, therefore,

contends that Commerce’s selection of subheading 7209.42.00 to

value steel used to produce TRB cages was reasonable. See id.

Commerce agrees that Timken’s suggested Indian tariff

subheading 7211.41.00 does cover cold-rolled steel sheet and the

appropriate carbon content. See Def.’s Mem. Opp’n to Mot. J.

Agency R. at 25. Nevertheless, Commerce contends, as the Chinese

producers indicated in the Final Results, see 62 Fed. Reg. at

6,180, that this subheading does not separate out ranges of

thickness for such steel; rather, the category covers all cold-

rolled steel sheet (with an appropriate carbon content) that is

thicker than 600 mm. See Def.’s Mem. Opp’n to Mot. J. Agency R. at

25. Thus, Commerce asserts that the available cold-rolled steel

sheet categories are divided into very thin sheets or very thick

sheets with the appropriate carbon content. See id. Based on the

current record, Commerce claims that it cannot determine what the

average thickness is for the cold-rolled steel sheet that the

Chinese producers used to produce TRB cages. See id. Commerce

further contends that if subheading 7211.41.00 does not include the
Court No. 97-03-00394 Page 20

appropriate thickness, it cannot determine which of the two

factors--thickness or carbon content of steel sheet--would be a

more appropriate measurement for this particular raw material. See

id. Commerce, therefore, requests that the issue be remanded for

further investigation and a determination based on additional

facts. See id.

The Court agrees with Timken that Indian tariff subheading

7211.41.00 does cover cold-rolled steel sheet and the appropriate

carbon content. The Court, however, remands this issue to Commerce

to further investigate and determine the appropriate measurement

for valuing cold-rolled steel sheet that Chinese producers used to

manufacture TRB cages.

C. Commerce’s Inclusion of “Purchases of Traded Goods” in SKF
India’s Costs of Materials

In the Final Results, Commerce designated the line item

“purchases of traded goods” in SKF India’s Report as a material

cost to be included in the COM that was used as the denominator of

the overhead, SG&A, and profit-rate calculations. See 62 Fed. Reg.

at 6,182. Timken noted that SKF India’s Report identified these

“traded goods” as “ball and roller bearings, bearing accessories

and maintenance products, and textile machinery components.” Id.

(internal quotation marks omitted).
Court No. 97-03-00394 Page 21

Timken asserts that the “purchases of traded goods” should be

excluded from the COM denominator used in the overhead, SG&A and

profit-rate calculations. See Pl.’s Mem. Supp. Mot. J. Agency R.

at 50-51. Timken notes, as it did for the Final Results, see 62

Fed. Reg. at 6,182, that SKF India’s Report separated “purchases of

traded goods” from raw materials and bought out components consumed

and, in another section of the Report, segregated them from goods

SKF India manufactured and sold during the year. See Pl.’s Mem.

Supp. Mot. J. Agency R. at 51. Timken further notes that in

previous reviews Commerce included only steel costs in the cost of

materials, but not finished products. See id. at 51. Since the

“traded goods” are products that are purchased and sold by SKF

India, and since they are already manufactured and do not affect

production, Timken contends that the “traded goods” are not

overhead or SG&A and are not material costs used in producing the

subject merchandise. See id. at 50-51; see also Pl.’s Reply Mem.

Supp. Mot. J. Agency R. at 20. Timken, therefore, requests that

the Court remand the issue to Commerce to exclude the “purchases of

traded goods” from the overhead, SG&A and profit-rate calculations.

See Pl.’s Mem. Supp. Mot. J. Agency R. at 51.

Commerce responds, as it did in the Final Results, see 62 Fed.

Reg. at 6,183, that in past reviews it did not include a line item
Court No. 97-03-00394 Page 22

for “purchases of traded goods” in the COM denominator because in

previous reviews the SKF India reports, unlike the Report in this

review, did not include a separate line item for such goods, see

Def.’s Mem. Opp’n to Mot. J. Agency R. at 34. Commerce contends

that it included the line item for “trade goods” because it

concluded they were not overhead and SG&A expenses, but instead

reflected the costs associated with the production of merchandise.

See id. at 33. Commerce asserts that it made this determination

based on the description of the “purchases of traded goods” in SKF

India’s Report as the purchase of finished and semi-finished goods

required to meet SKF India’s clients’ demands. See id. Commerce

notes that SKF India did not incur direct materials or direct labor

expenses for such “trade goods”; rather, it incurred the expense of

purchasing them. See id. Because the “purchases of traded goods”

are included in the calculation of the costs of goods sold,

Commerce claims that they are ordinary business expenses. See id.

Commerce, therefore, argues it acted reasonably and in accordance

with law by including the “purchases of traded goods” as part of

the COM denominator it used in the overhead, SG&A, and profit-rate

calculations. See id. at 34.

Peer agrees with the position taken by Commerce, arguing that

since the “purchases of traded goods” are semi-finished or finished
Court No. 97-03-00394 Page 23

goods, that is, the type of items which are routinely purchased by

bearing manufacturers, they are material costs and, therefore,

should not be excluded from SKF India’s costs of materials. See

Peer's Resp. to Mot. J. Agency R. at 16.

The Court disagrees with Commerce’s determination. Although

SKF India’s Report stated that the “purchases of traded goods” were

required to meet SKF India’s clients’ demands, Commerce failed to

demonstrate how these already manufactured goods constitute a

material cost incurred in manufacturing the subject merchandise.

The Court, therefore, remands this issue to Commerce to exclude the

“purchases of traded goods” from the COM used in the denominator of

the overhead, SG&A, and profit-rate calculations.

D. Commerce’s Adjustment to USP for Marine Insurance

In the Final Results, Commerce made an adjustment to USP for

marine-insurance expense, that was incurred for shipping the

Chinese producers’ TRBs to the United States, by selecting a

surrogate marine-insurance rate based on weight (that is, per ton)

applicable to sulfur dyes shipped from India. See 62 Fed. Reg. at

6,185. Commerce decided to use this insurance rate based on weight

because it was the only publicly available information and it had

used the same rate repeatedly for other PRC analyses. See id.
Court No. 97-03-00394 Page 24

Timken contends that Commerce unreasonably understated the

marine-insurance expense by applying a surrogate marine-insurance

rate on a per ton basis applicable to sulfur dyes from India. See

Pl.'s Mem. Supp. Mot. J. Agency R. at 52. Timken argues that the

rate should be based upon value rather than upon weight of the

merchandise insured, reasoning that if a container of TRBs were

lost at sea, there is no basis for the conclusion that an insurance

payment for the loss of one ton of sulfur dye would have any

relationship to the value of the loss of one ton of TRBs. See id.

Thus, Timken suggests, as it did in the Final Results, see 62 Fed.

Reg. at 6,185, that Commerce calculate a marine-insurance rate

based upon the ratio of the insurance charged per ton of sulphur

dye divided by the value of the sulfur dye per ton (based on United

States Customs, rather than sales, value) and apply this factor to

the price of TRBs sold in the United States, see Pl.'s Mem. Supp.

Mot. J. Agency R. at 52.

Peer argues that the Final Results should be affirmed because

Commerce did not have publicly available information in the record

which would allow it to calculate surrogate values for marine

insurance any more accurately than it did. See Peer’s Resp. to

Mot. J. Agency R. at 18. Peer also emphasizes that value is not

the only basis for setting an insurance rate. See id.
Court No. 97-03-00394 Page 25

To justify its weight-based marine-insurance rate, Commerce

argues that Timken failed to provide evidence of any other

insurance premiums that are available in Asia based upon value.

See Def.’s Mem. Opp’n to Mot. J. Agency R. at 35. “This, however,

is not a sufficient reason to ignore the essence of insurance and

the costs of insurance premiums paid by the insured. Insurance by

definition is based upon pecuniary valuation, not on the weight of

the product to be insured.” Peer Bearing, 22 CIT at __, 12 F.

Supp. 2d at 458-59 (citing J. Kenneth Goodacre, Marine Insurance

Claims 81-83 (2d ed. 1981) (discussing the importance of valuation

and identification of subject matter in marine insurance policies

to indemnify the insured); William R. Vance, Handbook on the Law of

Insurance 156 (3d ed. 1951) (insurance provides indemnification for

possible loss of a legal interest susceptible to pecuniary

valuation)).

The Court finds that both the value of TRBs and the risks

involved in transporting them are considerably different from the

value and risks involved in shipping sulfur dyes. The Court,

therefore, remands this issue to Commerce to adjust USP by

recalculating the marine-insurance expense using a methodology

reasonably related to the value and risks of transporting TRBs.
Court No. 97-03-00394 Page 26

E. Revocation of Shanghai’s Antidumping Order

In two actions, Timken is challenging the final results of the

four administrative reviews that preceded this eighth review. See

Peer Bearing, 22 CIT at __, 12 F. Supp. 2d at 449 (covering the

fourth, fifth and sixth reviews from June 1, 1990 through May 31,

1993); Timken Co. v. United States, Consol. Ct. No. 97-03-00419

(covering the seventh review from June 1, 1993 through May 31,

1994). In the final results of the seventh review, see Tapered

Roller Bearings and Parts Thereof, Finished and Unfinished, From

the People’s Republic of China; Final Results of Antidumping Duty

Administrative Review and Revocation in Part of Antidumping Duty

Order 62 Fed. Reg. 6,189 (Feb. 11, 1997), Commerce revoked the

antidumping duty order as to Shanghai General Bearing Company, Ltd.

(“Shanghai”), a Chinese TRB producer, see id. at 6,214, and based

on that revocation, Commerce terminated the order for this review

as to Shanghai, see Final Results, 62 Fed. Reg. at 6,173.

Timken asserts that the results of those two prior actions are

expected to increase the antidumping margins for Shanghai, and this

will thus require that the antidumping duty order be reinstated as

to Shanghai. See Pl.’s Mem. Supp. Mot. J. Agency R. at 55.

Timken, therefore, requests that the Court order Commerce to resume

the antidumping review of Shanghai for this review. See id.; Pl.’s
Court No. 97-03-00394 Page 27

Reply Mem. Supp. Mot. J. Agency R. at 23.

Commerce argues that its revocation of the antidumping duty

order in the seventh review was proper and should be sustained.

See Def.’s Mem. Opp’n to Mot. J. Agency R. at 35. Shanghai agrees

with the position taken by Commerce. See Shanghai’s Mem. Opp’n to

Mot. J. Agency R. at 4. All parties’ arguments regarding the

revocation are set forth in the briefs for the second action

covering the seventh review. See Timken, Consol. Ct. No. 97-03-

00419.

Since the parties’ arguments regarding Commerce’s revocation

of the antidumping duty order as to Shanghai are only presented in

the action concerning the seventh review, see id., and since the

merits of that action have not been reviewed by this Court nor have

the merits of the first action on appeal been adjudicated, we

decline to address Commerce’s revocation decision. Accordingly, we

find no basis for reinstating the order as to Shanghai for this

review.

Conclusion

In accordance with the foregoing opinion, this case is

remanded to Commerce to: (1) further investigate and determine the

appropriate measurement for valuing cold-rolled steel sheet that
Court No. 97-03-00394 Page 28

Chinese producers used to manufacture TRB cages; (2) exclude the

“purchases of traded goods” from the COM used in the denominator of

the overhead, SG&A and profit-rate calculations; and (3) adjust USP

by recalculating marine insurance pursuant to a value-based

methodology. Commerce’s final determination is affirmed in all

other respects.

______________________________
NICHOLAS TSOUCALAS
SENIOR JUDGE

Dated: July 30, 1999
New York, New York