SKF USA Inc. v. United States

Slip Op. 99-56

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS

:
SKF USA INC., SKF FRANCE S.A. :
and SARMA, :
:
Plaintiffs, :
:
: Consolidated Court No.
v. : 97-01-00054
:
THE UNITED STATES, :
:
Defendant, :
:
THE TORRINGTON COMPANY, :
:
Defendant-Intervenor. :
:

Plaintiffs, SKF USA Inc., SKF France S.A. and Sarma
(collectively “SKF”), move pursuant to Rule 56.2 of the Rules of
this Court for judgment on the agency record challenging certain
aspects of the Department of Commerce, International Trade
Administration’s (“Commerce”) final results of the administrative
review, 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 and Partial Termination of
Administrative Reviews (“Final Results”), 61 Fed. Reg. 66,472
(Dec. 17, 1996). Specifically, SKF claims Commerce erred in: (1)
disregarding SKF’s negative home market billing adjustment in the
calculation of foreign market value (“FMV”) while retaining
positive billing adjustment values; and (2) including in SKF’s U.S.
sales database sample transactions for which SKF received no
consideration.

Held: SKF’s motion for judgment on the agency record is
granted in part and denied in part. Commerce’s treatment of SKF’s
home market billing adjustments is affirmed. The Court remands
this case to Commerce to exclude from SKF’s U.S. sales database any
samples for which SKF received no consideration.
Consolidated Court No. 97-01-00054 Page 2

[SKF’s motion for judgment on the agency record granted in part and
denied in part.]

Dated: June 29, 1999

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

David W. Ogden, Acting Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice (Velta A. Melnbrencis, Assistant Director);
of counsel: Mark A Barnett, Attorney-Advisor, Office of Chief
Counsel for Import Administration, U.S. Department of Commerce, for
defendant.

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

OPINION

TSOUCALAS, Senior Judge: Plaintiffs,1 SKF USA Inc., SKF

France S.A. and Sarma (collectively “SKF”), move pursuant to Rule

56.2 of the Rules of this Court for judgment on the agency record

challenging certain aspects of the Department of Commerce,

International Trade Administration’s (“Commerce”) final results of

the administrative review, entitled Antifriction Bearings (Other

1
This consolidated case previously involved a separate Rule
56.2 motion (Court No. 97-01-00094) filed by The Torrington Company
(“Torrington”), in which SNR Roulements intervened as defendant-
intervenor. Torrington’s motion was consolidated with SKF’s
motion. See SKF USA Inc. v. United States, Court No. 97-01-00054,
(CIT docketed Apr. 25, 1997) (order consolidating, inter alia,
SKF’s motion (Court No. 97-01-00054) with Torrington’s motion under
lead case number 97-01-00054). Thereafter, upon Torrington’s
consent motion, Torrington’s cause of action was severed and
dismissed. See SKF USA Inc. v. United States, Court No. 97-01-
00054, (CIT docketed Mar. 30, 1998) (order severing and dismissing
Torrington’s case, Ct. No. 97-01-00094).
Consolidated Court No. 97-01-00054 Page 3

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 (“Final Results”), 61

Fed. Reg. 66,472 (Dec. 17, 1996).

Background

The administrative review at issue2 encompasses antifriction

bearings (“AFBs”) (other than tapered roller bearings) and parts

thereof, imported from France during the review period covering May

1, 1993 through April 30, 1994. Commerce published the preliminary

results of the subject review on December 7, 1995. See

Antifriction Bearings (Other Than Tapered Roller Bearings) and

Parts Thereof From France, Germany, Japan, Singapore, Sweden,

Thailand, and the United Kingdom; Preliminary Results of

Antidumping Duty Administrative Reviews, Partial Termination of

Administrative Reviews, and Notice of Intent to Revoke Order, 60

Fed. Reg. 62,817. On December 17, 1996, Commerce published the

Final Results at issue. See 61 Fed. Reg. 66,472.

2
Because this administrative review was initiated prior to
January 1, 1995, the applicable law is the antidumping statute as
it existed prior to the amendments made pursuant to 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).
Consolidated Court No. 97-01-00054 Page 4

SKF claims Commerce erred in the Final Results by: (1) using

SKF’s positive home market billing adjustment in the calculation of

foreign market value (“FMV”), while disregarding SKF’s

corresponding negative home market billing adjustment in the FMV

calculations; and (2) including sample transactions for which SKF

received no consideration in SKF’s U.S. sales database when

calculating United States Price (“USP”).

Discussion

This 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 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
Consolidated Court No. 97-01-00054 Page 5

CIT 955, 962, 699 F. Supp. 300, 306 (1988), aff’d, 894 F.2d 385

(Fed. Cir. 1990).

1. Disparate Treatment of Upward and Downward Home Market Billing
Adjustments

The amount of an antidumping duty, imposed to correct the

effects of dumping, is determined by comparing FMV3 to USP. See 19

U.S.C. § 1677b (1988). In making this comparison, various

adjustments are made to both sides of the calculation for certain

costs, expenses and duties, pursuant to statute. The “absolute

dumping margin” is the amount by which FMV exceeds USP after the

appropriate upward and downward adjustments are made, pursuant to

statutory provisions and Commerce’s regulations. See Zenith Elecs.

Corp. v. United States, 14 CIT 831, 834, 755 F. Supp. 397, 403

(1990), aff’d, 988 F.2d 1573 (Fed. Cir. 1993). These adjustments

to FMV include post-sale price adjustments or “billing adjustments”

made to home market sales which directly affect the accuracy of

reported prices and, hence, of the dumping analysis. See, e.g.,

Sugiyama Chain Co. v. United States, 19 CIT 328, 335, 880 F. Supp.

869, 874 (1995).

3
In this case, Commerce calculated FMV for SKF based on home
market sales.
Consolidated Court No. 97-01-00054 Page 6

In this case, in the French home market, SKF reported two

types of billing adjustments in its questionnaire response:

billing adjustment number one and billing adjustment number two.

Billing adjustment number one represented credits or debits

attributable to specific sales that were reported on a transaction-

specific and product-specific basis.4 See SKF’s Mem. Supp. Mot.

J. Agency R. at 5. Billing adjustment number two represented

debits and credits related to multiple invoices, multiple invoice

lines, or multiple products, and applied only to certain French

home market sales.5

SKF did not report billing adjustment number two on a

transaction-specific basis, or on a fixed and constant percentage

of sales for all transactions as Commerce requires. See Final

Results, 61 Fed. Reg. at 66,499. Instead, SKF calculated and

reported the adjustment using customer-specific allocations. SKF

asserts that the adjustments in question cannot be tied to a

specific transaction because an affiliate may issue a credit or

debit note related to multiple invoices, products or invoice lines.

See SKF’s Mem. Supp. J. Agency R. at 20.

4
Billing adjustment one is not at issue in this case.
5
The home market sales were made by Steyr Wälzlager (“Steyr”)
during the period of review. Steyr is an Australian sales company
that is related to the French SKF companies through a common
parent, AB SKF. See Final Results, 61 Fed. Reg. at 66,487.
Consolidated Court No. 97-01-00054 Page 7

In the Final Results, Commerce rejected SKF’s methodology for

reporting billing adjustment number two as a direct adjustment to

the price of SKF’s home market sales. See 61 Fed. Reg. at 66,498.

However, rather than rejecting SKF’s billing adjustment number two

in its entirety, Commerce retained SKF’s positive billing

adjustment values (increasing dumping margins) while rejecting the

negative billing adjustment values (which would have reduced the

dumping margins). Id. at 66,499.

SKF’s contentions objecting to Commerce’s treatment of billing

adjustment number two are two-fold. First, SKF argues that

Commerce should have accepted all of SKF’s billing adjustments,

both positive and negative, as reported by SKF. Second, SKF

contends that Commerce erred by engaging in disparate treatment of

positive and negative values reported under billing adjustment

number two. In the Final Results, Commerce determined the

following:

[W]e have not treated improperly allocated HM [home
market] price adjustments as [indirect selling expenses],
but have instead disallowed negative (downward)
adjustments in their entirety. We have included positive
(upward) HM price adjustments (e.g., positive billing
adjustments that increase the final sales price) in our
analysis. The treatment of positive billing adjustments
as direct adjustments is appropriate because disallowing
such adjustments would provide an incentive to report
positive billing adjustments on an allocated (e.g.,
customer-specific) basis in order to minimize their
effect on the margin calculations. That is, if we were
Consolidated Court No. 97-01-00054 Page 8

to disregard positive billing adjustments, which would be
upward adjustments to FMV, respondents would have no
incentive to report these adjustments on a transaction-
specific basis, as requested.

Id. at 66,498.

Commerce explained that it established a general policy of

making direct adjustments to FMV for discounts, rebates and price

adjustments. Pursuant to this policy, Commerce makes direct

adjustments to FMV if the discounts, rebates, or price adjustments

are reported only on (1) a transaction-specific basis, or (2) if

they were granted as a fixed and constant percentage of sales

price. If the price adjustments are otherwise allocated or

reported, Commerce generally disallows claims for those price

adjustments. Id.

Commerce claims that it applied this policy to SKF and,

therefore, denied any negative price adjustments decreasing FMV.

However, Commerce included SKF’s positive adjustments asserting

that this was consistent with the principle that a party should not

benefit from its improper reporting. Def.’s Partial Opp’n to Mot.

J. Agency R. at 5.

Torrington supports Commerce’s selective response to the

billing adjustments and asserts that Commerce’s action conforms

with its general practice regarding reporting failures. Citing INA
Consolidated Court No. 97-01-00054 Page 9

Walzlager Schaeffler KG v. United States, 21 CIT , ___, 957 F.

Supp. 251, 265-68 (1997), Torrington further contends that

Commerce’s action is consistent with this Court’s decision

affirming a similarly selective response in connection with billing

adjustments in a prior review. Torrington’s Opp’n to Mot. J.

Agency R. at 13.

In its reply, SKF argues that, contrary to the positions of

Torrington and Commerce, there is no “positive billing adjustment”

and no “negative billing adjustment.” Rather, SKF contends that

billing adjustment number two is a single adjustment that may, in

any given period and for any given customer, be either a negative

value or a positive value. Hence, SKF states that it treats

negative and positive billing adjustments in a like fashion and

argues that Commerce should use the adjustments in the same manner

in its margin calculations. SKF’s Reply Mem. Supp. Mot. J. Agency

R. at 2-3. Further, SKF contends that Commerce incorrectly assumes

that billing adjustment number two can be linked to a particular

transaction or a fixed constant percentage of all transactions

reported. According to SKF, the inability to report on a

transaction-specific basis is due to the nature of the adjustment

and not to SKF’s reporting failure. Id. Therefore, SKF urges that

the selective use of positive values and rejection of negative
Consolidated Court No. 97-01-00054 Page 10

values was done in a punitive and result-oriented manner. See

SKF’s Mem. Supp. Mot. J. Agency R. at 2.

Commerce adjusts FMV and USP for discounts, rebates, and other

billing adjustments pursuant to 19 U.S.C. §§ 1677a, 1677b (1988),

which require Commerce to determine what price was actually charged

for subject merchandise. FMV can be adjusted for direct or

indirect expenses. Direct selling expenses vary with the quantity

sold, see Zenith Elecs. Corp. v. United States, 77 F.3d 426, 431

(Fed. Cir. 1996), or are specifically “related to a particular

sale.” Torrington, 68 F.3d at 1353. In the instant case, none of

the parties disputes the direct nature of the adjustments to FMV.

It is well-established that Commerce’s decision to deny a

direct adjustment to FMV is reasonable and proper if the adjustment

sought is not reported in either a transaction-specific basis or as

a fixed and constant percentage of the sales price of all

transactions for which it was reported. See SKF USA Inc. v.

United States, 19 CIT 625, 633, 888 F. Supp. 152, 159 (1995); SKF

USA Inc. v. United States, 19 CIT 79, 875 F. Supp. 847, 86, 853

(1995); SKF USA Inc. v. United States, 19 CIT 54, 65, 874 F. Supp.

1395, 1405 (1995). “The party seeking a direct price adjustment

bears the burden of proving entitlement to such an adjustment.”

SKF USA Inc., __F.3d at __, 1999 U.S. App. LEXIS 11991, at *18-19,
Consolidated Court No. 97-01-00054 Page 11

1999 WL 378537, at *6 (Fed. Cir. June 10, 1999) (citing Fujitsu

General Ltd. v. United States, 88 F.3d 1034, 1040 (Fed. Cir.

1996)). Because the improper reporting made it impossible for

Commerce to determine if the claimed adjustment pertained to

subject merchandise, Commerce determined that SKF had not met its

burden. Commerce, therefore, properly declined to make the

downward adjustments because of SKF’s failure to tie the expenses

to specific transactions or products. See Torrington, 82 F.3d at

1050-51.

The gravamen of this dispute is therefore whether Commerce

properly applied the upward billing adjustments to FMV, while

rejecting the downward billing adjustments. Under 19 U.S.C.

§ 1677e(b), if Commerce is unable to verify the accuracy of the

information submitted in a review, it has the authority to apply

best information available (“BIA”) to prevent a respondent from

benefitting from its own reporting failure. In particular,

Commerce has the discretion to resort to BIA when it believes that

the respondent, through refusal or inability, is not complying with

the investigators. See 19 U.S.C. 1677e(c) (“[W]henever a party or

any other person refuses or is unable to produce information

requested in a timely manner and in the form required, or otherwise

significantly impedes an investigation, [Commerce shall] use the
Consolidated Court No. 97-01-00054 Page 12

best information available.”); see also Ad Hoc Comm. of AZ-NM-TX-

FL Producers of Gray Portland Cement v. United States, 18 CIT 906,

912, 865 F. Supp. 857, 863 (1994) (“Commerce lacks subpoena power,

but the BIA provision is a means of obtaining compliance with

Commerce's requests for information.”) (citing Rhone Poulenc, Inc.

v. United States, 899 F.2d 1185, 1191 (Fed. Cir. 1990). Although

Commerce did not make its determination regarding the billing

adjustments in the Final Results in the context of a BIA analysis,

Commerce’s treatment of SKF’s billing adjustments is consistent

with the BIA laws and the spirit behind them.

In essence, SKF’s main argument is that, because Commerce

chose to accept SKF’s upward adjustments to FMV, it must

accordingly accept SKF’s downward adjustments. In the alternative,

SKF argues that Commerce should have rejected the positive

adjustments since it rejected the negative adjustments. These

propositions, however, are not reflected in the law. There is no

requirement that Commerce treat modifications that increase

respondent’s dumping margin and adjustments that decrease the

margin in the same manner. Rather, the law supports the opposite

conclusion. See SSAB Svenskt Stal AB v. United States, 21 CIT ___,

___, 976 F. Supp. 1027, 1032 (1997) (upholding Commerce’s selection

of the highest packing costs reported by respondent for U.S. sales
Consolidated Court No. 97-01-00054 Page 13

with no accompanying deduction of packing expenses for FMV); see

also INA Walzlager Schaeffler KG v. United States, 21 CIT , ___,

957 F. Supp. 251, 265-68 (1997) (remanding to Commerce to deny

negative billing adjustments with no corresponding instructions

regarding positive adjustments), opinion after remand, 1997 Ct.

Intl. Trade LEXIS 147, 1997 WL 614300, Slip Op. 97-141 (Sept. 29,

1997), aff’d sub nom, SKF USA Inc. v. INA Walzlager Schaeffler KG,

__F.3d__, 1999 U.S. App. LEXIS 11991, 1999 WL 378537 (Fed. Cir.

June 10, 1999). This is particularly true when Commerce is given

data that is not responsive to its request for information, or when

the respondent submits information in an improper form.

In INA, for example, Commerce treated certain home market

expenses, including negative billing adjustments reported by a

respondent on a customer-specific basis, as indirect billing

expenses. Commerce treated positive billing adjustments as direct

expenses to be deducted from FMV. Id. at 265. The Court held that

negative home market adjustments could not be treated as indirect

expenses, because by their very nature, the adjustments constituted

direct expenses. Id. at 267. The Court therefore remanded to

Commerce to deny any adjustment to FMV for the respondent’s

negative billing adjustment because the adjustment was improperly

reported. Id. at 268.
Consolidated Court No. 97-01-00054 Page 14

INA held that both positive and negative adjustments have the

same nature, i.e., both types of adjustments are direct adjustments

to FMV and must be reported in a particular manner. Although INA

did not expressly address the issue of disparate treatment of

positive and negative billing adjustments, the Court’s order in INA

remanding to Commerce to deny adjustment’s to FMV for respondent’s

negative billing adjustments only, clearly indicates the Court’s

position that the law does not require either a blanket denial or

a uniform acceptance of upward and downward billing adjustments to

FMV.

SKF mistakenly relies on U.H.F.C. Co. v. United States, 916

F.2d 689 (Fed. Cir. 1990), to support its assertion that a

respondent’s inability to provide information in the form requested

precludes the application of a BIA approach. See SKF’s Mem. Supp.

J. Agency R. at 22-23. In U.H.F.C., the court found that Commerce

incorrectly resorted to BIA when applying price adjustments to a

respondent that did not supply the requested cost of production

(“COP”) information. However, in U.H.F.C., the court determined

that Commerce was requesting, and was in fact penalizing respondent

for not providing, information that was irrelevant to its

calculations. See U.H.F.C., 916 F.2d at 701 (holding that Commerce

erroneously used BIA based on respondent’s failure to submit the
Consolidated Court No. 97-01-00054 Page 15

product’s COP data, when that data was not relevant in the

adjustment calculations).

Similarly, SKF misreads Koyo Seiko Co. v. United States, 92

F.3d 1162 (Fed. Cir. 1996). SKF asserts that Koyo prohibits the

disparate treatment of billing adjustments in FMV calculations.

SKF’s Mem. Supp. Mot. J. Agency R. at 19. However, in Koyo, unlike

the present case, Commerce’s authority to use BIA was not

implicated since Commerce did not dispute that the deduction

sought3 was properly reported and supported in the record. Koyo,

92 F.3d at 1167.

Finally, SKF itself indicated that there were positive billing

adjustments which increased the dumping margin. Commerce exercised

its discretion to grant the adjustment as reported. Prohibiting

Commerce from granting the upward adjustment in this case,

especially when the adjustment was reported by the respondent,

would limit Commerce’s ability to obtain the information it

requires in the appropriate form. The Court finds Commerce’s

application of billing adjustments to be a proper exercise of its

authority to grant or deny adjustments.

3
Specifically, in Koyo, the respondent sought an adjustment
to USP to correspond to a deduction of indirect selling expenses
from FMV.
Consolidated Court No. 97-01-00054 Page 16

2. Inclusion of Sample Transactions Unsupported by Consideration
in SKF’s U.S. Sales Database

During this review, Commerce included in SKF’s U.S. sales

database zero-priced sample transactions. SKF argues that this

case should be remanded to Commerce with instructions, pursuant to

NSK Ltd. v. United States, 115 F.3d 965 (Fed. Cir. 1997), to

exclude SKF’s zero-value U.S. transactions from the dumping margin

calculations. SKF’s Mem. Supp. Mot. J. Agency R. at 37.

Commerce agrees that a remand under NSK is proper and that, on

remand, it should exclude sample transactions for which no

consideration was given in its computation of SKF’s U.S. sales.

Def.’s Partial Opp’n to Mot. J. Agency R. at 3.

Although Torrington concedes that a remand may be appropriate

in light of NSK, Torrington argues that SKF failed to demonstrate

that the transactions in question lacked “consideration” as defined

by NSK, and that further factual inquiry is necessary.

Torrington’s Opp’n to Mot. J. Agency R. at 14. Torrington asserts

that there is a distinction between “zero-price samples” given to

the United States customer and transactions unsupported by

consideration, which may come in different forms. In the

alternative, Torrington argues SKF failed to provide sufficient

record evidence to demonstrate that the “sample” transactions were
Consolidated Court No. 97-01-00054 Page 17

in fact made outside the “ordinary course of trade,” as required by

statute. Id. at 15. Therefore, Torrington argues that Commerce

should be affirmed, or that the matter should be remanded to

Commerce to obtain additional data regarding the U.S. sample

transactions. Id. at 16.

Commerce is required to impose antidumping duties upon

merchandise that “is being, or is likely to be, sold in the United

States at less than its fair value.” 19 U.S.C. § 1673(1) (1988)

(emphasis added). A sale requires both a transfer of ownership to

an unrelated party and consideration. NSK, 115 F.3d at 975. In

other words, a transaction that involves no consideration is not a

sale. Therefore, the distribution of AFBs for no consideration

falls outside the purview of 19 U.S.C. § 1673. Consequently, the

Court remands to Commerce to exclude from SKF’s U.S. sales database

any transactions that were not supported by consideration, and to

adjust the dumping margins accordingly.

Conclusion

The Court affirms Commerce’s determination to apply SKF’s

positive billing adjustment in its FMV calculations while declining

to apply the negative adjustment to FMV. The Court remands for
Consolidated Court No. 97-01-00054 Page 18

Commerce to exclude from SKF’s U.S. sales database any transactions

unsupported by consideration.

NICHOLAS TSOUCALAS
SENIOR JUDGE

Dated: June 29, 1999
New York, New York
Consolidated Court No. 97-01-00054 Page 19