Timken Co. v. United States

Slip Op. 01-96

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
___________________________________
:
THE TIMKEN COMPANY, :
:
Plaintiff, :
:
v. : Court No. 97-12-02156
:
UNITED STATES, :
:
Defendant, :
:
PEER BEARING COMPANY, :
L & S BEARING COMPANY, :
:
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 Final
Results of Antidumping Administrative Review of Tapered Roller
Bearings and Parts Thereof, Finished and Unfinished, From the
People’s Republic of China, 62 Fed. Reg. 61,276 (Nov. 17, 1997).

Timken claims that Commerce erred in: (1) selecting
Indonesian, rather than Indian, import statistics for valuing the
steel inputs and scrap for hot-rolled alloy steel bars used by
Chinese producers to manufacture cups and cones, cold-rolled steel
rods used in the production of rollers, cold-rolled sheet used in
the production of cages and steel scrap; (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) assuming that Indian direct labor costs
data is equivalent to indirect labor costs data for the calculation
of direct labor factor of production (“FOP”)used to determine FMV;
(4) refusing to use certain Chinese suppliers sales as export price
sales; (5) failing to adjust United States price for marine
insurance costs based on value rather than weight; and (6)
committing a clerical error in the calculation of the weight of the
scrap from one of the Chinese producers.
Court No. 97-12-02156 Page 2

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) determine direct labor costs without relying on labor hours
and to open the record, if necessary; (2) exclude the “purchases of
traded goods” from its calculation of COM; (3) adjust United States
price by recalculating marine insurance pursuant to a value-based
methodology; and (4) correct clerical errors in the calculation of
the weight of scrap from one of the Chinese producers. Commerce's
final determination is affirmed in all other respects.

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

Dated: August 9, 2001

Stewart and Stewart (Terence P. Stewart, James R. Cannon, Jr.
and Amy S. Dwyer) for plaintiff.

Stuart E. Schiffer, Acting Assistant Attorney General; David
M. Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Michele D. Lynch); of counsel:
Rina Goldenberg, Office of the Chief Counsel for Import
Administration, United States Department of Commerce, for
defendant.

Arent Fox Kintner Plotkin & Kahn, PLLC (John M. Gurley and
Jinhee K. Wilde) for Peer Bearing Company, defendant-intervenor.

Cohen Darnell & Cohen, P.L.L.C. (Mark A. Cohen) for L & S
Bearing Company, defendant-intervenor.

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 Final Results of Antidumping Administrative
Court No. 97-12-02156 Page 3

Review of Tapered Roller Bearings and Parts Thereof, Finished and

Unfinished, From the People’s Republic of China, 62 Fed. Reg.

61,276 (Nov. 17, 1997).

Timken claims that Commerce erred in: (1) selecting

Indonesian, rather than Indian, import statistics for valuing the

steel inputs and scrap for hot-rolled alloy steel bars used by

Chinese producers to manufacture cups and cones, cold-rolled steel

rods used in the production of rollers, cold-rolled sheet used in

the production of cages and steel scrap; (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) assuming that Indian direct labor costs

data is equivalent to indirect labor costs data for the calculation

of direct labor factor of production (“FOP”); (4) refusing to use

certain Chinese suppliers’ sales as export price sales; (5) failing

to adjust United States price for marine insurance costs based on

value rather than weight; and (6) committing a clerical error in

the calculation of the weight of the scrap from one of the Chinese

producers.

BACKGROUND

The administrative review at issue concerns steel inputs and
Court No. 97-12-02156 Page 4

scrap for hot-rolled alloy steel bars used by Chinese producers to

manufacture cups and cones, cold-rolled steel rods used in the

production of rollers, cold-rolled sheet used in the production of

cages and steel scrap imported from the People’s Republic of China

(“PRC”) during the period of review covering June 1, 1995 through

May 31, 1996.1 Commerce published the preliminary results of the

subject review on July 9, 1997. See Preliminary Results of

Antidumping Administrative Review and Partial Termination of

Administrative Review of Tapered Roller Bearings and Parts Thereof,

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

(“Preliminary Results”), 62 Fed. Reg. 36,764. On November 17,

1997, Commerce published the Final Results at issue. See 62 Fed.

Reg. 61,276.

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

In reviewing a challenge to Commerce’s final determination in

1
Since the administrative review at issue was initiated after
January 1, 1995, the applicable law is the antidumping statute as
amended by the Uruguay Round Agreements Act, Pub.L. No. 103-465,
108 Stat. 4809 (1994). Compare Torrington Co. v. United States, 68
F.3d 1347, 1352 (Fed. Cir. 1995).
Court No. 97-12-02156 Page 5

an antidumping administrative review, the Court will uphold

Commerce’s 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)(i) (1994).

I. Substantial Evidence Test

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)). Substantial evidence “is something less

than the weight of the evidence, and the possibility of drawing two

inconsistent conclusions from the evidence does not prevent an

administrative agency’s finding from being supported by substantial

evidence.” Consolo v. Federal Maritime Comm’n, 383 U.S. 607, 620

(1966) (citations omitted). Moreover, “[t]he court may not

substitute its judgment for that of the [agency] when the choice is

‘between two fairly conflicting views, even though the court would

justifiably have made a different choice had the matter been before

it de novo.’” American Spring Wire Corp. v. United States, 8 CIT

20, 22, 590 F. Supp. 1273, 1276 (1984) (quoting Penntech Papers,

Inc. v. NLRB, 706 F.2d 18, 22-23 (1st Cir. 1983) (quoting, in turn,

Universal Camera, 340 U.S. at 488)).
Court No. 97-12-02156 Page 6

II. Chevron Two-Step Analysis

To determine whether Commerce’s interpretation and application

of the antidumping statute is “in accordance with law,” the Court

must undertake the two-step analysis prescribed by Chevron U.S.A.

Inc. v. Natural Resources Defense Council, Inc. (“Chevron”), 467

U.S. 837 (1984). Under the first step, the Court reviews

Commerce’s construction of a statutory provision to determine

whether “Congress has directly spoken to the precise question at

issue.” Id. at 842. “To ascertain whether Congress had an

intention on the precise question at issue, [the Court] employ[s]

the ‘traditional tools of statutory construction.’” Timex V.I.,

Inc. v. United States, 157 F.3d 879, 882 (Fed. Cir. 1998) (citing

Chevron, 467 U.S. at 843 n.9). “The first and foremost ‘tool’ to

be used is the statute’s text, giving it its plain meaning.

Because a statute’s text is Congress’s final expression of its

intent, if the text answers the question, that is the end of the

matter.” Id. (citations omitted). Beyond the statute’s text, the

tools of statutory construction “include the statute’s structure,

canons of statutory construction, and legislative history.” Id.

(citations omitted); but see Floral Trade Council v. United States,

23 CIT ___,___ n.6, 41 F. Supp. 2d 319, 323 n.6 (1999) (noting that

“[n]ot all rules of statutory construction rise to the level of a

canon, however”) (citation omitted).
Court No. 97-12-02156 Page 7

If, after employing the first prong of Chevron, the Court

determines that the statute is silent or ambiguous with respect to

the specific issue, the question for the Court becomes whether

Commerce’s construction of the statute is permissible. See

Chevron, 467 U.S. at 843. Essentially, this is an inquiry into the

reasonableness of Commerce’s interpretation. See Fujitsu Gen. Ltd.

v. United States, 88 F.3d 1034, 1038 (Fed. Cir. 1996). Provided

Commerce has acted rationally, the Court may not substitute its

judgment for the agency’s. See Koyo Seiko Co. v. United States,

36 F.3d 1565, 1570 (Fed. Cir. 1994) (holding that “a court must

defer to an agency’s reasonable interpretation of a statute even if

the court might have preferred another”); see also IPSCO, Inc. v.

United States, 965 F.2d 1056, 1061 (Fed. Cir. 1992). The “[C]ourt

will sustain the determination if it is reasonable and supported by

the record as a whole, including whatever fairly detracts from the

substantiality of the evidence.” Negev Phosphates, Ltd. v. United

States Dep’t of Commerce, 12 CIT 1074, 1077, 699 F. Supp. 938, 942

(1988) (citations omitted). In determining whether Commerce’s

interpretation is reasonable, the Court considers the following

non-exclusive list of factors: the express terms of the provisions

at issue, the objectives of those provisions and the objectives of

the antidumping scheme as a whole. See Mitsubishi Heavy Indus. v.

United States, 22 CIT ___, ___, 15 F. Supp. 2d 807, 813 (1998).
Court No. 97-12-02156 Page 8

III. Mead-Christensen-Skidmore Test

“[A]dministrative implementation of a particular statutory

provision qualifies for Chevron deference when it appears that

Congress delegated authority to the agency generally to make rules

carrying the force of law, and that the agency interpretation

claiming deference was promulgated in the exercise of that

authority.” United States v. Mead Corp., 121 S. Ct. 2164, 2171

(2001). “Delegation of such authority may be shown in a variety of

ways, as by an agency’s power to engage in adjudication or notice-

and-comment rulemaking, or by some other indication of a comparable

congressional intent.” Id. If the

agency’s generally conferred authority and other
statutory circumstances [imply] that Congress would
expect the agency to be able to speak with the force of
law when it addresses ambiguity in the statute or fills
a space in the enacted law, even one about which
“Congress did not actually have an intent” as to a
particular result[,] . . . a reviewing court has no
business rejecting an agency’s exercise of its generally
conferred authority to resolve a particular statutory
ambiguity simply because the agency’s chosen resolution
seems unwise . . . .

Id. at 2172 (citing Chevron, 467 U.S. at 845-46).

“It is fair to assume generally that Congress contemplates

administrative action with the effect of law when it provides for

a relatively formal administrative procedure tending to foster the

fairness and deliberation that should underlie a pronouncement of

such force.” Id. (citations omitted). The want of notice-and-
Court No. 97-12-02156 Page 9

comment rulemaking or formal adjudication, however, “does not alone

. . . bar the application of Chevron.” Id. at 2173. Courts “have

sometimes found reasons for Chevron deference even when no such

administrative formality was required and none was afforded.”2 Id.

(citations omitted).

Absent congressional intent to delegate general authority to

make rules with the force of law, agency “rulings are treated . .

. like ‘interpretations contained in policy statements, agency

manuals, and enforcement guidelines’” that do not warrant the

Chevron deference. Id. at 2175 (quoting Christensen, 529 U.S. at

587). A reference to such agency statements neither creates

precedential value nor does it create Chevron entitlement; while

such statements may sometimes function as precedents, “they enjoy

no Chevron status as a class.” Id. at 2174.

Even placed outside of the Chevron realm, “an agency’s

2
Similarly, “an agency’s interpretation of its own
regulation[s] is entitled to deference” when the language of the
regulation is ambiguous or the regulation is silent about the issue
at hand. Christensen v. Harris County, 529 U.S. 576, 588 (2000)
(citing Auer v. Robbins, 519 U.S. 452, 461 (1997)); Southern Cal.
Edison Co. v. United States, 226 F.3d 1349, 1356 (Fed. Cir. 2000)
(detailing the test and quoting Martin v. Occupational Safety and
Health Review Comm’n, 499 U.S. 144, 151 (1991)). When the
regulation is not ambiguous, however, to defer to a different
agency’s position would be to permit the agency, under the guise of
interpreting a regulation, to create de facto a new regulation.
See id.
Court No. 97-12-02156 Page 10

interpretation [of a statutory provision] may merit some deference

. . . given the ‘specialized experience and broader investigations

and information’ available to the agency . . . and given the value

of uniformity in its administrative and judicial understandings of

what a national law requires.” Id. at 2175 (quoting Skidmore v.

Swift & Co., 323 U.S. 134, 139-40 (1944)). “Where the regulatory

scheme is highly detailed, and [an agency] can bring the benefit of

specialized experience to bear on the subtle questions,” such

interpretations are entitled to respect “proportional to [their]

‘power to persuade’”. Id. at 2175-76 (quoting Skidmore, 323 U.S.

at 140). “The fair measure of [judicial] deference to an agency

administering its own statute has been understood to vary with

circumstances, and courts have looked to the degree of the

agency’s care, its consistency, formality, and relative expertness,

and to the persuasiveness of the agency’s position.” Id. at 2171

(citing Skidmore, 323 U.S. at 139-40). Well-reasoned views of the

agencies implementing a statute “‘constitute a body of experience

and informed judgment to which courts and litigants may properly

resort for guidance . . . .’” Id. (quoting Bragdon v. Abbott, 524

U.S. 624, 642 (1998) (internal quotation omitted)).

“‘[C]onsiderable weight should be accorded to an [agency’s]

construction of a statutory scheme it is entrusted to administer .

. . .’” Id. (quoting Chevron, 467 U.S. at 844). “‘The weight
Court No. 97-12-02156 Page 11

[accorded to an administrative] judgment in a particular case will

depend upon the thoroughness evident in its consideration, the

validity of its reasoning, its consistency with earlier and later

pronouncements, and all those factors which give it power to

persuade, if lacking power to control.’” Id. at 2172 (quoting

Skidmore, 323 U.S. at 140, brackets in original).

DISCUSSION

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

1. Background

Antidumping margins are the difference between normal value

("NV") and United States price of the merchandise. When the

merchandise is produced in a nonmarket economy country (“NME”),

such as the PRC, Commerce constructs NV pursuant to section

1677b(c), which provides that

the valuation of the factors of production shall be based
on the best available information regarding the values of
such factors in a market economy country or countries
considered to be appropriate by [Commerce].

19 U.S.C. § 1677b(c)(1) (1994) (emphasis supplied).
Court No. 97-12-02156 Page 12

The statute does not define the phrase "best available

information,” it only provides that

[Commerce], in valuing factors of production[,] . . . 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.

19 U.S.C. § 1677b(c)(4) (1994) (emphasis supplied).

Thus, the statute grants to Commerce broad discretion to

determine the “best available information” in a reasonable manner

on a case-by-case basis. See Lasko Metal Prods., Inc. v. United

States, 43 F.3d 1442, 1446 (Fed. Cir. 1994) (noting that the

statute “simply does not say--anywhere--that the factors of

production must be ascertained in a single fashion.”)

Consequently, Commerce values as many FOPs as possible using

information obtained from the “primary” surrogate country, that is,

the country that Commerce considers to be most comparable in

economic terms to the NME country being investigated, and that also

produces merchandise comparable to the subject merchandise. See,

e.g., Tianjin Mach. Import & Export Corp. v. United States

(“Tianjin”), 16 CIT 931, 940-41, 806 F. Supp. 1008, 1018 (1992);

Timken Co. v. United States, 16 CIT 142, 145-46, 788 F. Supp. 1216,

1218 (1992). Additionally, if Commerce determines that suitable
Court No. 97-12-02156 Page 13

values cannot be obtained from the data of the primary surrogate

country, Commerce resorts to the data from the second, and

sometimes the third, surrogate. See, e.g., Final Results of

Antidumping Duty Administrative Review and Revocation in Part of

Antidumping Duty Order on Tapered Roller Bearings and Parts

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

China, 62 Fed. Reg. 6189, 6193 (Feb. 11, 1997); Final Results of

Antidumping Duty Administrative Reviews of Tapered Roller Bearings

and Parts Thereof, Finished and Unfinished, From the People’s

Republic of China, 61 Fed. Reg. 65,527, 65,532-33 (Dec. 13, 1996);

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, 54,476 (Oct. 24,

1995); Notice of Final Determination of Sales at Less Than Eair

Value: Certain Cased Pencils From the People’s Republic of China,

59 Fed. Reg. 55,625, 55,629 (Nov. 8, 1994); Final Determination of

Sales at Less Than Fair Value: Certain Helical Spring Lock Washers

From the People’s Republic of China, 58 Fed. Reg. 48,833, 48,835

(Sept. 20, 1993).

During this review, Commerce chose India as the primary

surrogate country to value all FOPs except steel inputs and scrap,

which were valued using the data from the secondary surrogate
Court No. 97-12-02156 Page 14

country, Indonesia. See Preliminary Results, 62 Fed. Reg. at

36,769. Commerce explained that it decided to use secondary

surrogate data for two reasons: (1) Commerce determined that steel

values contained in the Indian import data were not reliable, see

Def.’s Mem. Opp. Pl.’s Mot. J. Agency R. (“Def.’s Mem.”), Ex. 4;

and (2) Commerce was unable to isolate Indian import value for

bearing-quality steel used to manufacture the merchandise at issue.

See Final Results, 62 Fed. Reg. at 61,283.

Commerce reached the determination that steel values contained

in Indian import data were not reliable after comparing Indian

statistics with other information on the record, the information

specifically isolating bearing-quality steel used to manufacture

the intended merchandise, that is, United States import data under

tariff categories 7228.30.20.00, 7228.50.10.10, and 7209.42.00.00.

See Def.’s Mem., Ex. 4. Because the comparison revealed that the

average values of steel included in the corresponding Indian import

categories were significantly higher than the average values of

bearing-quality steel imported into the United States, Commerce

concluded that steel values contained in the Indian import data

were not reliable. See id.
Court No. 97-12-02156 Page 15

Commerce concluded that it was unable to isolate Indian import

value for bearing-quality steel used to manufacture cups and cones

because Commerce believed that while bearing-quality steel used to

manufacture cups and cones was most likely to be contained in

Indian broader category 7228.30, Commerce found no eight-digit

Indian sub-category specific to this particular type of steel. See

id. Commerce also determined that data from a more specific Indian

category, that is, sub-category 7228.30.19, was similarly

unreliable because the steel in the sub-category was valued too

highly to be considered a reliable indicator of the price of

bearing-quality steel. See id. Additionally, Commerce concluded

that it had no information concerning what sub-category 7228.30.19

contained and that none of the parties in the proceeding suggested

that the sub-category specifically isolated bearing-quality steel.

See id.

After reaching these conclusions, Commerce decided to use some

import data from a secondary surrogate country. See Final Results,

62 Fed. Reg. at 61,283. Of the five potential surrogate countries

that Commerce identified as being at a comparable level of economic

development to the PRC, Commerce found that only India and

Indonesia exported bearings during the pertinent period of time.

See Def.’s Mem., Ex. 4. Commerce conducted further research and
Court No. 97-12-02156 Page 16

identified two Indonesian bearings producers operating in 1995.

See id. Consequently, Commerce concluded that Indonesia was a

significant producer of merchandise comparable to that at issue for

purposes of the surrogate country selection. See id. Commerce

also noted that when compared to United States bearing-quality

steel import data, Indonesian values closely approximated those of

the United States. See id. In light of the above findings,

Commerce decided to

use[] import data from another surrogate country,
Indonesia, a producer of merchandise comparable to [that
at issue], to value steel used to produce these
components. As with the Indian data, [Commerce was]
unable to isolate the value of bearing-quality steel or
identify an eight-digit category containing such steel
imported into Indonesia; however, unlike the Indian data,
the Indonesian six-digit category is consistent with the
value of [United States] imports of bearing-quality steel
under the comparable six-digit category in the United
States, which specifically includes bearing-quality
steel.

Final Results, 62 Fed. Reg. at 61,283.

2. Contentions of the Parties

Commerce maintains that its determination and the underlying

analyses were reasonable and in accord with the mandate of 19

U.S.C. § 1677b(c) and the level of discretion afforded to Commerce

by Chevron, 467 U.S. 837. Specifically, Commerce points out that:
Court No. 97-12-02156 Page 17

(1) Commerce properly relied on FOPs from two different surrogate

sources; (2) Commerce reasonably concluded that Indonesia could

serve as a surrogate country for the purposes of import valuation

of the merchandise at issue; (3) Commerce’s decision to reject

Indian import values was supported by substantial evidence, see

Def.’s Mem. at 14-21; (4) Commerce’s comparison of Indian import

values to those of United States was not a sole factor for

Commerce’s determination, see id. at 17 n.4; and (5) Commerce

properly conducted the comparison in view of the interpretation of

19 U.S.C. § 1677b(c) offered by Peer Bearing Co. v. United States,

22 CIT 472, 12 F. Supp. 2d 445 (1998). See Def.’s Mem. at 18.

Timken reads Commerce’s determination as a statement that

Commerce relied on Indonesian data solely because Commerce asserted

that: “(1) Indonesian steel import values approximated [United

States] values[;] (2) Indonesian and [United States] values were

below Indian values[; and, (3) in view of the foregoing,] it was

reasonable to conclude that Indian values were unreliable.” Pl.’s

Reply Br. at 2. Timken consequently maintains that Commerce’s

determination based on the argument was arbitrary because nowhere

did Commerce “establish a basis for concluding that United States

import prices for any category of steel should be considered a

benchmark against which to measure the reliability of Indian
Court No. 97-12-02156 Page 18

statistics.” Id. at 2 (emphasis omitted), see also id. at 5.

Moreover, Timken asserts that the fact that Indian import values

were on average higher that United States or Indonesian import

values established nothing of relevance to the review at issue.

Id. at 3-7.

Next, Timken claims that Commerce’s resort to Indonesian data

was not warranted because the record shows “the lack of evidence

demonstrating that Indonesia was a significant producer of bearings

during the period of review.” Mem. P.& A. Supp. Pl.’s Mot. J.

Agency R. (“Pl.s Mem.”) at 35 n.9.

Additionally, Timken points out that Commerce violated its own

“strong preference to calculate [] normal value in NME cases based

on factor values from a single surrogate source.” Id. at 32-35

(emphasis in original, citing to Peer Bearing, 22 CIT 472, 12 F.

Supp. 2d 445; Tianjin, 16 CIT at 940, 806 F. Supp. at 1017-18;

Final Results of Antidumping Duty Administrative Review of

Industrial Nitrocellulose from the People’s Republic of China, 62

Fed. Reg. 65,667, 66,668 (Dec. 15, 1997); Notice of Final

Determination of Sales at Less Than Fair Value: Certain Cut-to-

Length Carbon Steel Plate From Ukraine, 62 Fed. Reg. 61,754, 61,762

(Nov. 19, 1997); and ANTIDUMPING MANUAL 65-66 (Dept. Of Commerce, July
Court No. 97-12-02156 Page 19

1994)). Timken further asserts that the holding of Peer Bearing,

22 CIT 472, 12 F. Supp. 2d 445, cannot serve as a precedent for

the determination at issue because: (1) the factual record before

the Court in Peer Bearing did not include the evidence analogous to

that on the record at the review at issue; and (2) the holding of

Peer Bearing does not support Commerce’s decision to reject Indian

import values as unreliable. See Pl.’s Reply Br. at 7-10.

Peer Bearing Company (“Peer Bearing”), the defendant-

intervenor in this action,3 supports Commerce’s position and

alleges that Commerce’s determination was reasonable because: (1)

Commerce specifically found that Indonesia was a significant

producer of the merchandise at issue; and (2) Commerce’s resort to

the data from a secondary surrogate was in accordance with law.

See Resp. Def.-Intervenor Pl.’s Mot. J. Agency R. (“Peer Bearing’s

Resp.”) at 3, 5, 6-9. Peer Bearing asserts that Timken overstated

the strength of Indian data and downplayed the extent to which the

Indian data was unreliable. See id. at 6-9. In addition, Peer

Bearing maintains that Peer Bearing, 22 CIT 472, 12 F. Supp. 2d

445, is a controlling precedent for the determination at issue.

3
L & S Bearing Company has intervened in this action but did
not file a motion for judgment upon the agency record and
supporting brief.
Court No. 97-12-02156 Page 20

3. Analysis

a. Court Deference

i. Chronologically Consecutive
Pronunciations by Commerce
Between two incompatible agency statements, as with

conflicting statutory authorities, the later one is controlling

over the earlier one. Cf. FDA v. Brown & Williamson Tobacco Corp.,

529 U.S. 120, 143 (2000). This rule of construction was a part of

our legal system from the time immemorial.

If two inconsistent acts be passed at different times,
the last . . . is to be obeyed, and if obedience cannot
be observed without derogating from the first, it is the
first which must give way. Every act of [government]
must be considered with reference to the state of the law
subsisting when it came into operation, and when it is to
be applied; it cannot otherwise be rationally construed.
Every act is made, either for the purpose of making a
change in the law, or for the purpose of better declaring
the law, and its operation is not to be impeded by the
mere fact that it is inconsistent with some previous
enactment.

Becker Prods. Co. v. State Tax Comm’n, 58 P.2d 36, 38-39 (Utah

1936) (quoting POTTER'S DWARRIS ON STATUTES AND CONSTITUTIONS 155).

The same mode is applicable to agency pronunciations and the

ensuing court reviews under the test posed by Chevron. Because the

Court is obligated to sustain an agency interpretation and

implementation of a statutory mandate if such agency action is
Court No. 97-12-02156 Page 21

reasonable and supported by substantial evidence, see IPSCO, 965

F.2d at 1061; Koyo Seiko, 36 F.3d at 1570; Negev Phosphates, 12 CIT

at 1077, 699 F. Supp. at 942, it follows that this level of

deference is due to each action by the agency and irrelevant to

whether the Court upheld a prior conflicting agency action under

the very same test. See generally, Chevron, 467 U.S. at 844-45.

Consequently, between two reasonable yet conflicting agency

determinations, each taken with compatible levels of formality, the

later one controls and the Court is obligated to sustain it.

Accord Mead, 121 S. Ct. at 2173.

It makes no difference if the prior pronunciation by the

agency was reduced to a manual, a form of agency action afforded no

judicial deference and serving as no precedent. See id., 121 U.S.

at 2174, Skidmore, 323 U.S. at 139-40. The mere fact that an

agency pronunciation was reduced to some written form, that is, a

form which is afforded no court deference under Skidmore, 323 U.S.

at 139-40, can neither disturb nor outweigh the deference owed by

the Court to a subsequent reasonable agency pronunciation under

Chevron test, even if the subsequent pronunciation conflicts with

the previous one. The foregoing, however, does not mean that the

Court should not examine the validity of the policy causing the

change or the soundness of the newly-employed methodology.
Court No. 97-12-02156 Page 22

ii. Commerce’s Changes of Policy or Methodology

Agency statements provide guidance to regulated industries.

While “‘an agency does not act rationally when it chooses and

implements one policy and decides to consider the merits of a

potentially inconsistent policy in the very near future,’”

Transcom, Inc. v. United States, 24 CIT ___, ___, 123 F. Supp. 2d

1372, 1381 (2000) (quoting ITT World Communications, Inc. v. FCC,

725 F.2d 732, 754 (D.C. Cir. 1984)), Commerce, in view of the

rapidly-changing world of global trade and Commerce’s limited

resources, should be able to rely on its “unique expertise and

policy-making prerogatives.” Southern Cal. Edison, 226 F.3d at

1357. “‘The power of an administrative agency to administer a

congressionally created . . . program necessarily requires the

formulation of policy . . . .’” See Chevron 467 U.S. at 843

(quoting Morton v. Ruiz, 415 U.S. 199, 231 (1974)).

An agency decision involving the meaning or reach of a statute

that reconciles conflicting policies “‘represents a reasonable

accommodation of conflicting policies that were committed to the

agency's care by the statute, [and a reviewing court] should not

disturb [the agency decision] unless it appears from the statute or

its legislative history that the accommodation is not one that

Congress would have sanctioned.’” Id. at 845 (quoting United States
Court No. 97-12-02156 Page 23

v. Shimer, 367 U.S. 374, 382-83 (1961)). Furthermore, an agency

must be allowed to assess the wisdom of its policy on a continuing

basis. Under the Chevron regime, agency discretion to reconsider

policies is inalienable. See id. at 843. Any assumption that

Congress intended to freeze an administrative interpretation of a

statute would be entirely contrary to the concept of Chevron which

assumes and approves of the ability of administrative agencies to

change their interpretations. See, e.g., Maier, P.E. v. United

States EPA, 114 F.3d 1032, 1043 (10th Cir. 1997), J.L. v. Social

Sec. Admin., 971 F.2d 260, 265 (9th Cir. 1992), Saco Defense Sys.

Div., Maremont Corp. v. Weinberger, 606 F. Supp. 446, 450-51 (D.

Me. 1985). In sum, underlying agency interpretative policies “are

given controlling weight unless they are arbitrary, capricious, or

manifestly contrary to the statute.” Chevron 467 U.S. at 844.

Moreover, “‘[a]n [agency] announcement stating a change in the

method . . . is not a general statement of policy.’” American

Trucking Ass’ns, Inc. v. ICC, 659 F.2d 452, 464 n.49 (5th Cir. 1981)

(quoting Brown Express, Inc. v. United States, 607 F.2d 695, 701

(5th Cir. 1979) (internal quotations omitted)). While a policy

“denotes . . . [the] general purpose [of the statute] considered as

directed to the welfare or prosperity of the state,” BLACK’S LAW

DICTIONARY 1157 (6th ed. 1990), methodology refers only to the
Court No. 97-12-02156 Page 24

“performing [of] several operations[] in the most convenient

order,” id. at 991; accord Avoyelles Sportsmen’s League, Inc. v.

Marsh, 715 F.2d 897 (5th Cir. 1983); Interstate Natural Gas Ass’n

of Am. v. Federal Energy Regulatory Comm’n, 716 F.2d 1 (D.C. Cir.

1983); Hooker Chems. & Plastics Co. v. Train, 537 F.2d 620 (2d Cir.

1976). Consequently, courts are even less in the position to

question an agency action if the action at issue is a choice of

methodology, rather than policy. See, e.g., Maier, 114 F.3d at

1043 (citing Professional Drivers Council v. Bureau of Motor

Carrier Safety, 706 F.2d 1216, 1221 (D.C. Cir. 1983)). Similarly,

an agency decision to change its methodology, that is, to take the

act of statutory implementation while pursuing the same policy,

should be examined under the Chevron test and sustained if the new

methodology is reasonable. See, e.g., Koyo Seiko Co v. United

States, 24 CIT ___, ___, 110 F. Supp. 2d 934, 942 (2000) (stating

that “‘the use of different methods [of] calculati[on] . . . does

not [mean there is a] conflict with the statute,’” quoting

Torrington Co. v. United States, 44 F.3d 1572, 1578 (Fed. Cir.

1995)).

b. Commerce’s Determination at Bar

The statute permits Commerce to draw surrogate value
Court No. 97-12-02156 Page 25

information from more than one market economy country. See 19

U.S.C. § 1677b(c)(1) (stating that Commerce may derive FOPs from

“countries considered to be appropriate,” emphasis supplied).

While Timken stresses the reference in 19 C.F.R. § 353.52(c) (1997)

to “a” market economy country, see Def.’s Mem. at 33, the mere use

of the singular article cannot mean that all factors be valued on

the basis of the data from a single surrogate country.4 See

Chemical Prods. Corp. v. United States, 10 CIT 700, 706, 650 F.

Supp. 178, 182 (1986) (“The regulation is silent concerning whether

Commerce may use data from a country other than its designated

surrogate when Commerce finds that a comparison of one element of

foreign market value in the surrogate would yield an unrealistic

result.”)

Commerce's Antidumping Manual, which Timken cites in support

of its assertion that there is a strong preference for using a

single surrogate country, in fact implies that Commerce could

utilize data from more than one surrogate country where it is

necessary to obtain reliable information. Specifically, Commerce's

Antidumping Manual provides that to the extent it is possible,

Commerce should endeavor to rely on the information from: (1) the

4
See supra note 2 and accompanying text for discussion of the
level of deference given to an agency’s interpretation of its own
regulation.
Court No. 97-12-02156 Page 26

first choice surrogate country; or (2) a single surrogate country.

See Peer Bearing’s Resp. at 7. This language parallels that of the

statute which provides that Commerce “shall utilize, to the extent

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

more market economy countries . . . .” 19 U.S.C. § 1677(c)(4)

(emphasis supplied).

Because the statute and the manual both suggest that Commerce

should rely on data from the “first choice surrogate country” only

to the extent possible, it is logical to conclude that, where it is

not possible, Commerce is entitled to rely on data from other

surrogate countries. The manual further explains that:

[I]f there is [however,] no reliable information from the
first choice surrogate country for particular factor,
[Commerce] will attempt to use [reliable information]
from the second choice surrogate country, and so on. In
this way, [Commerce] will maintain the dual hierarchy of
valuing factors of production following the preferred
order of surrogate countries as recommended by
[Commerce’s] Office of Policy . . . .

Peer Bearing’s Resp. at 8 (quoting ANTIDUMPING MANUAL 65, emphasis in

quotation); accord Timken Co. v. United States, 23 CIT ___, ___, 59

F. Supp. 2d 1371, 1376 (1999) (stating that “‘[t]he statute does

not require Commerce to follow any single approach in evaluating

data’” and quoting Olympia Indus., Inc. v. United States, 21 CIT

364, 368 (1997) (quoting, in turn, Lasko Metal Prods., 43 F.3d at
Court No. 97-12-02156 Page 27

1446)).

Commerce’s decision to incorporate Indonesian data did not

conflict with Commerce’s methodology as announced in Commerce’s

manual. Moreover, the change of the mode from the use of a single

surrogate datum to the use of multiple surrogate data cannot be

found unreasonable simply on the basis that the prior methodology,

advocating the preference for a single surrogate datum, was reduced

to writing in Commerce’s manual. See Chevron, 467 U.S. at 844;

compare Skidmore, 323 U.S. at 140. Considering that the goal of

Commerce’s policy has not changed, see Air Prods. and Chems., Inc.

v. United States, 22 CIT 433, 435, 14 F. Supp. 2d 737, 741 (1998)

(stating that the goal of Commerce’s FOPs methodologies should be

“to construct the product's price . . . using the best information

available regarding surrogate values,” emphasis suppled, citation

omitted); Olympia Indus., Inc. v. United States, 22 CIT 387, 390,

7 F. Supp. 2d 997, 1000 (1998) (pointing out that “accuracy is the

touchstone of the antidumping statute” and citing Rhone Poulenc,

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

remaining issue is only whether Commerce’s current methodology is

reasonable. See Chevron, 467 U.S. at 844-45; Koyo Seiko, 36 F.3d

at 1570.

Because there is “[n]othing in the antidumping statute or its
Court No. 97-12-02156 Page 28

legislative history mandat[ing] that Commerce must derive [the

information] from surrogate-based values according to a certain

methodology,” Timken, 23 CIT at ___, 59 F. Supp. 2d at 1376

(citation omitted), and in view of Commerce’s discretion to draw

surrogate value information from more than one market economy

country, see 19 U.S.C. § 1677b(c)(1), it was “within Commerce’s

authority to use India as a primary surrogate in conjunction with

Indonesian values . . . .” Timken, 23 CIT at ___, 59 F. Supp. 2d

at 1367.

With respect to Timken’s challenge to Commerce’s decision to

use Indonesian values, the Court finds that Timken is assailing not

Commerce’s methodology but rather the result reached by Commerce,

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

Instrument Mfrs. Ass’n, Pencil Section v. United States, 21 CIT

1185, 1195, 984 F. Supp. 629, 639 (1997). Commerce conducted

research and identified two substantial Indonesian bearings

producers operating in 1995, on the basis of which Commerce

concluded that Indonesia was a significant producer of merchandise

comparable to that at issue for purposes of the surrogate country

selection. See Def.’s Mem., Ex. 4. The Court is not in the

position to declare such a conclusion unreasonable. See Chevron,

467 U.S. at 845.
Court No. 97-12-02156 Page 29

Next, the Court rejects Timken’s assertion that Commerce erred

in using United States data as benchmarks to test the reliability

of the Indian import data for valuing the merchandise at issue.

The Court has found in prior cases that comparing surrogate data to

that of market economy to determine the reliability of such

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

consistent with past practice.’” Peer Bearing, 22 CIT at 481, 12

F. Supp. 2d at 455 (quoting Writing Instrument Mfrs. Ass’n, 21 CIT

at 1195, 984 F. Supp. at 639 (upholding use of United States

benchmark as a point of comparison for two possible surrogate

values and quoting, in turn, Olympia Indus., Inc., 21 CIT at 369

(approving Commerce’s use of data from other market economies

to test the reliability of surrogate country data))).

Commerce, therefore, acted within its statutory authority by

utilizing United States data to aid in its FOPs valuation. See id.

(citing 19 U.S.C. § 1677b(c)(1), (4)).

Finally, Commerce could reasonably find Indian data unreliable

because Commerce has never adopted a numerical standard for

identifying aberrational or questionable data and has properly

exercised its statutory discretion by determining what information

to use for valuing FOPs on a case-by-case basis. Moreover,

Commerce has in other cases rejected as unsuitable surrogate data
Court No. 97-12-02156 Page 30

which varied from a benchmark to a much lesser extent than in this

particular case. See, e.g., Final Determination of Sales at Less

Than Fair Value: Circular Welded Non-Alloy Steel Pipe From Romania,

57 Fed. Reg. 42,957, 42,958 (Sept. 17, 1992).

B. Commerce’s Reliance on SKF India’s Data in
Commerce’s Determination of General Expenses and Profit

1. Background

While Commerce prefers to base FOPs information on industry-

wide public information, Commerce found that information regarding

overhead and SG&A rates for producers of subject merchandise during

the period of review was not available. See Final Results, 62 Fed.

Reg. at 61,287.

Section 1677b(c)(1) of Title 19 requires Commerce to

“determine [NV] of the subject merchandise on the basis of the

value of the [FOPs] utilized in producing the merchandise and to

which shall be added an amount for general expenses and profit plus

the cost of containers, coverings, and other expenses.” 19 U.S.C.

§ 1677b(c)(1). General expenses are the expenses that do not bear

a direct relationship to the production of the merchandise at

issue, such as SG&A expenses. The subsection also states that the

valuation of FOPs “shall be based on the best available information
Court No. 97-12-02156 Page 31

regarding the values of such factors in a market economy country or

countries considered to be appropriate by [Commerce].” Id.

Section 1677b(c)(4) of Title 19 provides that, in valuing FOPs

under paragraph (1) of section 1677b(c), Commerce “shall utilize,

to the extent possible, the prices or costs of [FOPs] in one or

more market economy countries . . . .” 19 U.S.C. § 1677b(c)(4)

(1).

Commerce has interpreted the “best available information” and

“the extent possible” language contained in 19 U.S.C. §§

1677b(c)(1) and (4) as applicable to the calculation of the amount

for general expenses and profit that is to be added to the FOPs

referenced in paragraph (1) of section 1677b(c). See Def.’s Mem.

at 22 (pointing out that Congress did not specify the exact

methodology of how the amount for the general expenses and profit

are to be calculated in the case of an NME country and citing

Springfield Indus. Corp. v. United States, 842 F.2d 1284, 1285

(Fed. Cir. 1988) (citing, in turn, Chevron, 467 U.S. at 843-44,

865-66)).

Applying this interpretation during the review at issue,

Commerce concluded that an appropriate surrogate for determining

general expenses and profit was SKF India, an Indian producer of

merchandise similar to the imported merchandise at issue.
Court No. 97-12-02156 Page 32

Consequently, Commerce determined overhead, SG&A, and profit rates

from the information contained in SKF India’s financial report.

See Def.’s Mem., Ex. 3; Final Results, 62 Fed. Reg. at 61,287.

Specifically, Commerce calculated the ratio of SKF India's overhead

costs to its cost of manufacturing (“COM”), that is, the cost of

materials plus labor, and explained that

[i]n deriving these rates, [Commerce] used the SKF data
both with respect to the numerators (total overhead and
SG&A expenses, respectively) and denominator (total cost
of manufacturing). This methodology allowed [Commerce]
to derive internally consistent ratios of SKF India's
overhead and SG&A expenses. These ratios, when
multiplied by the factors of production [Commerce] used
in [Commerce’s] analysis, constitute[d] the best
available information concerning the overhead and SG&A
expenses that would be incurred by a PRC bearings
producer given such factors of production.

Final Results, 62 Fed. Reg. at 61,287.

Commerce applied these ratios to the surrogate values

consisting of Indonesian and Indian import data. See Peer

Bearing’s Resp. at 4.

2. Contentions of the Parties

Timken argues that, since SKF India’s operation involves the

purchasing from subcontractors, SKF India's cost of materials is

higher and overhead costs are lower than those of a producer that
Court No. 97-12-02156 Page 33

itself manufactures the merchandise. See Pl.’s Mem. at 43-45.

Because the PRC producers subject to the review manufacture the

merchandise themselves, Timken concluded that their materials and

overhead costs are not similar to those of SKF India. See id.

Timken maintains that since Commerce did not use SKF India’s report

to value all FOPs, it should adjust overhead and SG&A rates to

reflect the use of lower-value materials and higher overhead costs

of the Chinese producers. See id. Timken asserts that the

inclusion of SKF India's full materials and labor costs in the COM

denominator creates a distortive result unless this data is also

the basis for valuing the materials and direct labor factors in the

constructed value calculation. See id.; Final Results, 62 Fed.

Reg. at 61,287.

Commerce maintains that the methodology used allowed Commerce

to derive internally consistent ratios of SKF India's overhead and

SG&A expenses. See Final Results, 62 Fed. Reg. at 61,287.

Commerce contends that doing otherwise, that is, adjusting the

underlying values of SKF India, would create a result no longer

representative of SKF India's costs. See id. Specifically,

Commerce pointed out that

Timken's recommended adjustment would reduce the
denominator but would leave the overhead and SG&A
expenses in the numerator unchanged. As such, [Commerce]
find[s] that this adjustment would itself distort the
Court No. 97-12-02156 Page 34

resulting ratio, rather than cure the alleged distortion
in [Commerce’s] calculations.

Id.

Peer Bearing supports Commerce’s conclusion and states that

“Timken's assertion that the application of the

overhead/SG&A/profit ratios (derived from SKF India) to the

material and labor costs (derived from other sources) ‘mixes apples

and oranges’ and is incorrect.’” Peer Bearing’s Resp. at 13. Peer

Bearing maintains that Commerce's application of ratios for

overhead, SG&A and profit derived from one source to COM values

derived from another one is consistent with Commerce’s practice in

other NME cases, see id. at 12 (citing Final Results and Rescission

in Part of Antidumping Duty Administrative Review of Tapered Roller

Bearings and Parts Thereof, Finished or Unfinished, From the

Republic of Romania, 61 Fed. Reg. 51,427, 51,429 (Oct. 2, 1996);

Preliminary Determination of Sales at Less Than Fair Value:

Coumarin From the People's Republic of China, 59 Fed. Reg. 39,727,

39,729 (August 4, 1994), and points out that the adjustment

suggested by Timken was never performed by Commerce.
Court No. 97-12-02156 Page 35

3. Analysis

“In the absence of a statutory mandate to the contrary,

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

Timken, 23 CIT at ___, 59 F. Supp. 2d at 1377; see also Chevron,

467 U.S. at 844-45. Specifically, Commerce's authority to select

appropriate surrogate data includes the authority to base a

calculation on these data without adjustment, if such method is

reasonable. See id.; see also Peer Bearing, 22 CIT at 481-82, 12

F. Supp. 2d at 456.

While Timken states that it finds Commerce’s mode of

calculation imperfect, see Pl.’s Mem. at 44, Timken provides this

Court with neither an explanation of why this mode is unreasonable

nor offers a viable methodology for: (1) detecting the difference

between Chinese and SKF India’s overhead and material costs; or (2)

adjusting SKF India’s overhead and SG&A ratios. See id. at 43-45.

Indeed, it is not enough to state that “the agency[] [is operating

under] statutory mandate to ‘reach the most accurate result,’” in

order to label an agency determination unreasonable. Id. at 45,

compare Olympia Indus., 22 CIT at 390, 7 F. Supp. 2d at 1001

(finding Commerce’s determination unreasonable where “Commerce[,]

[under] an obligation to review all data and then determine what

constitutes the best information available or, alternatively, to
Court No. 97-12-02156 Page 36

explain why a particular data set is not methodologically

reliable,” failed to do so).

“Commerce attempted to capture in its rate calculation the

surrogate company’s experience in incurring overhead and SG&A

expenses,” Def.’s Mem. at 24, and created a reasonable internally

consistent ratio that does not violate the boundaries set by 19

U.S.C. § 1677b(c) (1994). The fact that one of the actual

parameters is likely to be higher while the other one is likely to

be lower than the corresponding data derived from the records of

SKF India means that neither Commerce’s methodology shall be

deprived of this Court’s deference, nor does it constitute

sufficient grounds for the Court to uphold Timken’s suggestion as

a more palatable alternative. See American Spring Wire, 8 CIT at

22, 590 F. Supp. at 1276 (stating that “[t]he court may not

substitute its judgment for that of the [agency] when the choice is

‘between two fairly conflicting views, even though the court would

justifiably have made a different choice had the matter been before

it de novo’” and quoting Penntech Papers, 706 F.2d at 22-23

(quoting, in turn, Universal Camera, 340 U.S. at 488)).
Court No. 97-12-02156 Page 37

C. Commerce’s Use of Direct and Indirect Labor Rates

1. Commerce’s Refusal to Isolate Direct Labor Component of
SKF India’s Costs in Commerce’s Calculation of SKF
India’s Overhead, SG&A and Profit.

a. Background

In order to calculate overhead, SG&A and profit ratios based

on SKF India’s data, Commerce relied on SKF’s COM designated in SKF

India’s 1995-96 financial statement based on both direct and

indirect labor expenses. See Final Results, 62 Fed. Reg. at

61,288. Commerce proceeded with the calculation of overhead that

incorporated both direct and indirect labor costs. Commerce

explained that Commerce

calculate[d] an overhead-to-COM ratio by dividing SKF's
total overhead expense by the sum of SKF's total
materials, direct labor, indirect labor, and overhead
expenses from its annual report. [Commerce] calculate[d]
the COM component of constructed value for subject
merchandise by summing direct material expense, direct
labor expense, indirect labor expense, and overhead
expense. However, while [Commerce knew] the direct
material expense, direct labor expense, and indirect
labor expense of the subject merchandise, [Commerce did]
not know the overhead expense of the subject merchandise.
Therefore, in order to calculate the COM component of
constructed value for subject merchandise, [Commerce had
to] substitute a surrogate for overhead expense.
[Commerce] calculate[d] this surrogate overhead expense
by multiplying COM by the overhead-to-COM ratio
[Commerce] calculated using SKF India's data. This
substitution le[ft] COM as the sole unknown factor.
Therefore, [Commerce] solve[d] for COM using the direct
material expense, direct labor expense, indirect labor
expense, and the overhead-to-COM ratio. Because both
direct and indirect labor figures [we]re part of this
Court No. 97-12-02156 Page 38

calculation, [Commerce did] not need to adjust for the
fact that both direct and indirect labor [we]re included
in SKF India's labor expense in [Commerce’s] calculation
of the overhead-to-COM ratio. Therefore, there [wa]s no
need to segregate the direct-labor component from SKF's
financial statements in order to calculate the percentage
because [Commerce did] not use only direct labor expense
in our calculations.

Id. (emphasis supplied).

b. Contentions of the Parties

Timken contends that Commerce should have isolated and used

SKF India’s direct labor costs only in Commerce’s calculation

because the inclusion of indirect labor costs in the denominator of

the formula resulted in an understatement of SKF India’s rates.

See Pl.’s Mem. at 46-47. Timken points out that Commerce failed to

collect any information enabling Commerce to determine direct labor

costs, see Pl.’s Reply at 18-19, effectively rewarding respondents

for failing to provide such data, see id. at 17-18, and abrogating

Commerce’s “duty to calculate dumping margins as accurately as

possible.” Pl.’s Mem. at 47 (citing Olympia Indus. 22 CIT at 390,

7 F. Supp. 2d at 1000).

Commerce maintains that it “did not need to isolate indirect

labor cost from SKF India’s data,” Def.’s Mem at 28, because “‘both

direct and indirect labor figures are part of th[e] calculation .
Court No. 97-12-02156 Page 39

. . .’” Id. at 27-28 (quoting Final Results, 62 Fed. Reg. at

61,288).

c. Analysis

Timken is correct in pointing out that Commerce is under a

“duty to calculate dumping margins as accurately as possible.”

Def.’s Mem. at 47 (citing to Olympia Indus. 22 CIT at 390, 7 F.

Supp. 2d at 1000). While this statement implied that Commerce is

under the obligation to seek and use the best information

available, it does not mean that Commerce is bound to any

particular mode of collecting such information. See, e.g., Floral

Trade Council v. United States, 17 CIT 1417, 1418-19 (1993)

(explaining that “the burdens on the requester are those caused by

the mechanics of triggering the review that is actually desired.

In practical terms, these burdens should be minimal”).

In the case at hand, Commerce, faced with a multitude of

unclear and questionable data, see Pl.’s Reply at 18-19, determined

a ratio that minimized the error (that ensued from the use of

imperfect statistics) by including “both direct and indirect labor

figures [as] part of th[e] calculation . . . .” Def.’s Mem. at 28

(quoting Final Results, 62 Fed. Reg. at 61,288).
Court No. 97-12-02156 Page 40

Timken seems to be under the impression that Commerce is bound

to Commerce’s practice of “bas[ing] its cost calculations on the

[COM] which includes . . . direct [but not indirect] labor.” Pl.’s

Mem. at 46 (citing CHRISTIAN MARSH, USE AND MEASUREMENT OF PRODUCTION COSTS

UNDER U.S. ANTIDUMPING LAW 21 (1995)). This assumption is incorrect.

While Commerce might strive for a calculation based solely on

direct labor costs, an internally consistent formula that minimizes

the error by the usage of the same imperfect data in the formula’s

numerators and denominator presents a reasonable alternative. See

generally, Chevron, 467 U.S. at 844-45. Consequently, Commerce

could choose one reasonable mode of calculating or collecting the

best information available over another mode. See id.; see also

supra discussion in Part A(3)(a)(ii) (addressing agency’s

prerogative to choose a reasonable method or alter its policies and

goals). Based on the foregoing, the Court finds Commerce’s

decision to calculate COM on the basis of both direct and indirect

labor costs in accordance with law.

2. Commerce’s Calculation of SKF India’s COM by Applying
Percentages Reported in Labor Hours to SKF India’s Labor
Costs.

a. Background

During the review at issue, Commerce collected the information

by distributing a questionnaire which, among other things, sought
Court No. 97-12-02156 Page 41

data about labor hours but not labor costs. See Pl.’s Mem., App.

Pub. Doc. 8. Consequently, Commerce calculated SKF India’s

ratios, e.g., overhead cost to the cost of total material and

labor, on the basis of relative hours, not costs. See Final

Results, 62 Fed. Reg. at 61,288. Commerce then applied these

ratios to Chinese surrogate cost representing total materials and

total direct and indirect labor costs. Id.

b. Exhaustion of Remedies

i. Contentions of the Parties

As a preliminary matter, Commerce contends that the issue of

whether Commerce properly calculated SKF India’s COM by applying

percentages reported in labor hours to labor costs should not be

examined by this Court because Timken failed to question this issue

before Commerce and, therefore, forfeited its right to judicial

review. See Def.’s Mem. at 28.

Timken alleges that the issue was sufficiently presented for

Commerce’s consideration when Timken discussed it during the course

of administrative review. See Pl.’s Reply at 21 n.13 (citing to

Timken’s Case Brief (Aug. 8, 1997), Pl.’s Mem., App. B.
Court No. 97-12-02156 Page 42

ii. Analysis

The exhaustion doctrine requires a party to present its claims

to the relevant administrative agency for the agency’s

consideration before raising these claims to the Court. See

Unemployment Compensation Comm’n of Alaska v. Aragon, 329 U.S. 143,

155 (1946) (“A reviewing court usurps the agency’s function when it

sets aside the administrative determination upon a ground not

theretofore presented and deprives the [agency] of an opportunity

to consider the matter, make its ruling, and state the reasons for

its action”).5

5
There is, however, no absolute requirement of exhaustion
in the Court of International Trade in non-classification cases.
See Alhambra Foundry Co. v. United States, 12 CIT 343, 346-47, 685
F. Supp. 1252, 1255-56 (1988). Section 2637(d) of Title 28 directs
that “the Court of International Trade shall, where appropriate,
require the exhaustion of administrative remedies.” By its use of
the phrase “where appropriate,” Congress vested discretion in the
Court to determine the circumstances under which it shall require
the exhaustion of administrative remedies. See Cemex, S.A. v.
United States, 133 F.3d 897, 905 (Fed. Cir. 1998). Therefore,
because “each exercise of judicial discretion [does] not requir[e]
litigants to exhaust administrative remedies,” the Court is
authorized to determine proper exceptions to the doctrine of
exhaustion. Alhambra Foundry, 12 CIT at 347, 685 F. Supp. at 1256
(citing Timken Co. v. United States, 10 CIT 86, 93, 630 F. Supp.
1327, 1334 (1986) rev’d in part on other grounds Koyo Seiko Co. v.
United States, 20 F.3d 1156 (Fed. Cir. 1994)).

In the past, the Court has exercised its discretion to obviate
exhaustion where: (1) requiring it would be futile, see Rhone
Poulenc, S.A. v. United States, 7 CIT 133, 135, 583 F. Supp. 607,
610 (1984) (“it appears that it would have been futile for
plaintiffs to argue that the agency should not apply its own
regulation”), or would be “inequitable and an insistence of a
Court No. 97-12-02156 Page 43

The purpose behind the doctrine of exhaustion is to prevent

courts from premature involvement in administrative proceedings,

and to protect agencies “from judicial interference until an

administrative decision has been formalized and its effects felt in

a concrete way by the challenging parties.” Abbott Labs. v.

Gardner, 387 U.S. 136, 148-49 (1967); see also Public Citizen

Health Research Group v. Comm’r, FDA, 740 F.2d 21, 29 (D.C. Cir.

1984) (pointing out that the “exhaustion doctrine . . . serv[es]

four primary purposes: [(1)] it ensures that persons do not flout

[legally] established administrative processes . . . ; [(2)] it

protects the autonomy of agency decision making; [(3)] it aids

judicial review by permitting factual development [of issues

relevant to the dispute]; and [(4)] it serves judicial economy by

avoiding [repetitious] administrative and judicial fact finding and

useless formality” as in the case where “there is no relief which
plaintiff may be granted at the administrative level,” United
States Cane Sugar Refiners’ Ass’n v. Block, 3 CIT 196, 201, 544 F.
Supp. 883, 887 (1982); (2) a subsequent court decision has
interpreted existing law after the administrative determination at
issue was published, and the new decision might have materially
affected the agency’s actions, see Timken, 10 CIT at 93, 630 F.
Supp. at 1334; (3) the question is one of law and does not require
further factual development and, therefore, the court does not
invade the province of the agency by considering the question, see
id.; R.R. Yardmasters of Am. v. Harris, 721 F.2d 1332, 1337-39
(D.C. Cir. 1983); and (4) plaintiffs had no reason to suspect that
the agency would refuse to adhere to clearly applicable precedent.
See Philipp Bros., Inc. v. United States, 10 CIT 76, 80, 630 F.
Supp. 1317, 1321 (1986).
Court No. 97-12-02156 Page 44

by . . . resolving sole claims without judicial intervention,”

citation omitted).

While a plaintiff cannot circumvent the requirements of the

doctrine of exhaustion by merely mentioning a broad issue without

raising a particular argument, plaintiff’s brief statement of the

argument is sufficient if it alerts the agency to the argument with

reasonable clarity and avails the agency with an opportunity to

address it. See generally, Hormel v. Helvering, 312 U.S. 552, 557

(1941); see also Rhone Poulenc, 899 F.2d at 1191. An agency’s

failure to address plaintiff’s challenge, however, does not invoke

the exhaustion doctrine and shall not result in forfeiture of

plaintiff’s judicial remedies. See generally, B-West Imports, Inc.

v. United States, 19 CIT 303, 306, 880 F. Supp. 853, 858 (1995).

An administrative decision not to address the issue cannot be

dispositive of the question whether or not the issue was properly

brought to the agency’s attention. See, e.g., Allnutt v. United

States DOJ, 2000 U.S. Dist. LEXIS 4060 (D. Md., 2000).

During the review, Timken addressed the issue of percentage

derivative from the labor hours information and contrasted it with

the terms of labor costs, supplying emphasis and providing tables

that highlighted the distinction between the terms. See Pl.’s

Mem., App. B at 43-44. While Timken did not spell out its claim
Court No. 97-12-02156 Page 45

that Commerce “erred in calculating SKF [India’s] COM by applying

. . . percentages reported in labor hours to SKF [India’s] total

labor costs,” Pl.’s Mem. at 46 (emphasis in original), this Court

finds that Timken’s submission during the review sufficiently

availed Commerce with an opportunity to address the issue. The

Court, therefore, concludes that Timken properly exhausted its

administrative remedies and is in right to raise this issue to the

Court.

c. Commerce’s Application of Labor Hours
to Labor Costs

i. Contentions of the Parties

Timken contends that Commerce could not “allocate[] labor

costs using the quantity of . . . labor hours [spent] without

taking into account the fact that indirect labor hours are more

expensive” and, thus, the ratio could not be the same. Pl.’s Reply

at 21.

ii. Analysis

Commerce’s administrative duties include Commerce’s

responsibility to undertake reasonable investigatory functions.

See Freeport Minerals Co. v. United States, 776 F.2d 1029, 1034
Court No. 97-12-02156 Page 46

(Fed. Cir. 1985) (stating that Commerce errs if it refuses to

require respondents to submit pertinent information); Wieland-Werke

AG v. United States, 22 CIT 129, 135, 4 F. Supp. 2d 1207, 1212

(1998) (“Commerce has an obligation to investigate by gathering

information either on its own initiative or through submissions to

it,” citation omitted); Rhone-Poulenc, Inc. v. United States, 20

CIT 573, 578, 927 F. Supp. 451, 456 (1996) (“Commerce's failure to

perform an independent investigation of the facts related to this

issue falls short of its statutory duty to investigate antidumping

cases and assign fair antidumping margins.”)

During the review at issue, Commerce collected the information

by distributing a questionnaire which, among other things, sought

the data about labor hours but not labor costs and used the data to

calculate SKF India’s ratios. See Pl.’s Mem., App. Pub. Doc. 8;

see also Final Results, 62 Fed. Reg. at 61,288. The percentage of

direct labor hours within total labor hours does not, however,

necessarily correspond with the percentage of direct labor cost

within total labor costs. Conversely, under a traditional business

scheme, indirect workers, that is, usually a few skilled laborers,

earn higher salaries (and, thus, cost more) while work en masse

less man-hours than direct workers, that is, more numerous yet less

skilled employees, earning lower salaries while putting in en masse

more man-hours. Indeed, there is evidence on record that Indian
Court No. 97-12-02156 Page 47

indirect labor rates are considerably higher than direct ones and

create a ratio different from that between indirect and direct

labor hours. See Pl.’s Mem., App. B, C.

While Commerce was entitled to choose a reasonable mode of

gathering information, see, e.g., Floral Trade Council, 17 CIT at

1418-19, Commerce could not unreasonably forfeit its duty to

collect significantly important data.6 Accord Freeport Minerals,

776 F.2d at 1034; Wieland-Werke, 22 CIT at 135, 4 F. Supp. 2d at

1212; Rhone-Poulenc, 20 CIT at 578, 927 F. Supp. at 456. Commerce

has presented no explanation for its failure to collect data on

labor costs. See generally, Def.’s Mem. at 28. This error in data

collection significantly affected Commerce’s determination and

violated Commerce’s “duty to calculate dumping margins as

accurately as possible.” Olympia Indus., 22 CIT at 390, 7 F. Supp.

2d at 1000. Therefore, this Court finds that Commerce’s “failure

to collect pertinent data or to consider a relevant aspect of the

issue, constitute[d] an abuse of discretion,” Timken Co. v. United

States, 10 CIT at 97, 630 F. Supp. at 1337-38, remands this issue

6
While Commerce was justified in utilizing a reasonable
formula that involved direct and indirect labor costs, see supra
the discussion in Part C(1)(c), Commerce was not entitled to
determine direct labor costs on the basis of the obviously
divergent ratio of direct to indirect labor hours.
Court No. 97-12-02156 Page 48

to Commerce to determine direct labor costs without relying on

labor hours and open the record, if necessary.

D. Commerce’s Inclusion of “Purchases of Traded Goods”
in SKF India’s COM

1. Background

In the Final Results, Commerce designated the line item

“purchases of traded goods” in SKF India’s 1995-96 Financial

Statement 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 61,288. These “traded goods”

included purchased finished and semi-finished goods. Id.

2. Contentions of the Parties

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. at 47. Timken notes that

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, “traded goods” are not overhead or SG&A and are

not material costs used in producing the subject merchandise. See

id.; see also Pl.’s Reply at 22.
Court No. 97-12-02156 Page 49

Commerce responds that while SKF India did not incur direct

raw-material or direct labor expenses for such “traded goods,” SKF

India incurred the expense of purchasing them. See Def.’s Mem. at

29. 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” and a reflection of

“manufacturers’ common practice of purchasing.” Id. Commerce,

therefore, argues it acted reasonably and in accordance with law by

including the “purchases of traded goods” as part of the COM

calculation. See id.

Peer Bearing agrees with the position taken by Commerce,

arguing that since the “purchases of traded goods” are semi-

finished or finished goods, that is, the type of items which are

routinely purchased, stored and maintained by manufacturers, they

are material costs and, therefore, should not be excluded from SKF

India’s costs of materials. See Peer Bearing's Resp. at 14.

3. Analysis
The statute specifically instructs Commerce to determine “the

normal value of the subject merchandise on the basis of the value

of the factors of production utilized in producing the merchandise
Court No. 97-12-02156 Page 50

and to which shall be added an amount for general expenses and

profit . . . .” 19 U.S.C. § 1677b(c)(1) (emphasis supplied).

Therefore, the Court disagrees with Commerce’s determination.

Although SKF India’s Financial Statement stated that the “purchases

of traded goods” were required to meet SKF India’s clients’

demands, see Def.’s Mem. at 29, Commerce “failed to demonstrate how

these already manufactured goods constitute a material cost

incurred in [the process of] manufacturing the subject

merchandise.” Timken, 23 CIT at ___, 59 F. Supp. 2d at 1379

(emphasis supplied). The Court, therefore, remands this issue to

Commerce to exclude the “purchases of traded goods” from its

calculation of COM.

E. Commerce’s Calculation of Marine Insurance

In its final determination, Commerce calculated marine

insurance using a publicly available rate for sulphur dyes and

multiplying this rate by the packed weight of the merchandise at

issue, specifically, bearings. See Final Results, 62 Fed. Reg. at

61,288. As this Court pointed out in Peer Bearing Co., 22 CIT at

485-86, 12 F. Supp. 2d at 458-59, and Timken, 23 CIT at ___, 59 F.

Supp. 2d at 1380, Commerce’s reliance on a weight-based methodology

was flawed.
Court No. 97-12-02156 Page 51

Insurers agreeing to pay the value of merchandise lost or

destroyed in transit base their premium rates on what it would cost

to replace the merchandise or compensate the losses rather than

upon the weight of the merchandise being shipped. See Peer

Bearing, 22 CIT at 486, 12 F. Supp. 2d at 458-59 (“Insurance by

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

the product to be insured”). The Court, therefore, remands this

issue to Commerce to determine marine insurance in a manner related

to the value and the risk of transporting tapered roller bearings.

F. Commerce’s Determination that Certain Chinese Suppliers Sales
Were Made Without Knowledge of the Ultimate Destination

1. Statutory background

Section 1677a(a) of Title 19 defines the term “export price”

as “the price at which the subject merchandise is first sold . . .

before the date of importation by the producer or exporter of the

subject merchandise outside of the United States to an unaffiliated

purchaser in the United States or to an unaffiliated purchaser for

exportation to the United States . . . .” 19 U.S.C. § 1677a(a)

(1994). In determining at which point such first sale for

exportation to the United States occurs, Commerce applies the

“knowledge” test that requires a supplier to have knowledge that
Court No. 97-12-02156 Page 52

the ultimate destination of its goods is the United States before

the supplier’s prices are considered export prices.7 See, e.g.,

NSK Ltd. v. United States, 21 CIT 617, 645-46, 969 F. Supp. 34,

60-61 (1997). Specifically, Commerce determines whether suppliers

actually knew rather than suspected that particular sales at issue

were destined for import into the United States. See id., 21 CIT

at 644-46, 969 F. Supp. at 59-61. Thus, it is not enough for

foreign suppliers to have merely a general belief that the

7
Section 1677a(b) of Title 19 states that constructed price is
“the price at which the subject merchandise is first sold (or
agreed to be sold) in the United States . . . .” 19 U.S.C. §
1677a(b) (1994). The legislative history to this section clearly
demonstrates that Commerce's knowledge test was anticipated by
Congress and is a reasonable interpretation of the statute.

In enacting a new antidumping law as part of the Trade
Agreements Act of 1979, Congress modified the definition of
purchase price, hence establishing the basis for Commerce's
administrative practice of looking to a producer's knowledge in
determining whether to use the producer's sales price as the
purchase price. Congress stated the following:

If a producer knew that the merchandise was intended for sale
to an unrelated purchaser in the United States under terms of
sale fixed on or before the date of importation, the
producer's sale price to an unrelated middleman will be used
as the purchase price.
S. REP. NO. 96-249, at 94 (1979), reprinted in U.S.C.A.A.N. 381,
480; see also H. DOC. 96-153, at 411 (1979) (“The definition makes
clear that if the producer knew or had reason to know the goods
were for sale to an unrelated U.S. buyer, . . . the producer's
sales price will be used as 'purchase price' . . . .”)
Furthermore, in 1984 Congress explicitly amended Section 1677a(b)
to recognize that a reseller's price may be used as purchase price.
See H.R. CONF. REP. NO. 98-1156, at 185 (1984), reprinted in
U.S.C.A.A.N. 5220, 5302.
Court No. 97-12-02156 Page 53

merchandise may eventually make its way to the United States.

Moreover, the fact that the merchandise was at least offered for

sale in a market other than the United States is interpreted as

suggesting against suppliers having the requisite knowledge. See

id., 21 CIT at 646, 969 F. Supp. at 61.

While Commerce's application of such a high standard is

exploitable by the “perfect” scenario, where a reseller could

conceal the ultimate destination of its purchases from its foreign

suppliers, it is recognized that the “knowledge” test is necessary

to fulfill the statutory intent that purchase price be based on

sales of goods sold abroad with the intent of being exported to the

United States. Id.

2. Factual Background

The record of the review at issue indicated that Peer Bearing,

a United States company, purchased the merchandise, all identified

with the word “Peer” at the request of Peer Bearing, from a few

Chinese suppliers through Chin Jun, a Hong Kong reseller used by

Peer Bearing.8 See Final Results, 62 Fed. Reg. at 61,291; Pl.’s

8
Timken also argues that Commerce should have treated all
sales made by Chinese suppliers to another exporter, Premier, as
export price sales because Premier's suppliers made some shipments
directly from China to the United States. Timken asserts that such
Court No. 97-12-02156 Page 54

Mem., App. Pub. Doc. 54. Peer Bearing had notified the Chinese

suppliers that the merchandise was intended to be sold around the

world. See id., App. Pub. Doc. 205.

After examining these facts, Commerce concluded that the

record indicated a mere possibility of Chinese suppliers assuming

the ultimate destination of the merchandise, and that such

possibility did not amount to sufficient evidence of the suppliers’

knowledge that Chin Jun would sell the merchandise to the United

States. See Final Results, 62 Fed. Reg. at 61,292. Consequently,

for the purpose of determining the dumping margin, Commerce decided

to use, as export price sales, the sales of the merchandise by Chin

Jun to Peer Bearing rather than the sales by Chinese suppliers to

Chin Jun. See id. Commerce pointed out that the suppliers

themselves did not export the merchandise, but rather the

merchandise was shipped to “freight forwarders who were responsible

for arranging shipment[s] to the United States and were the only

parties [(]other than [United States importers) that] knew the

ultimate destination” of the merchandise. Id. at 61,292.

few shipments establishes the suppliers' knowledge of the export
destination. See Final Results, 62 Fed. Reg. at 61,291-92. The
Court’s analysis with regard to those sales parallels the Court’s
analysis of the sales made by Chinese suppliers to Chin Jun.
Court No. 97-12-02156 Page 55

3. Contentions of the Parties

Timken argues that Commerce’s determination was erroneous, and

the price paid between Chin Jun and its suppliers should be used to

calculate United States price. See Pl.’s Mem. at 52-53. Timken

also alleges that because the fact that the merchandise was marked

“Peer” indicates that the Chinese suppliers had sufficient

knowledge about the ultimate destination of the merchandise. See

id. at 52 (comparing the case at bar and NSK Ltd., 21 CIT 617, 969

F. Supp. 34). Alternatively, Timken suggests that the suppliers'

lack of knowledge about the destination shall be disregarded

because it emanated from Chin Jun and Peer Bearing’s effort to

mislead the suppliers into believing that the merchandise was to be

sold worldwide. See id.; see also Pl.’s Reply at 23 (citing

Cliquot’s Champagne, 70 U.S. 114, 140 (1866), and pointing out that

Commerce should have imputed knowledge upon a freight forwarder

operating for the benefit of its principal.)

Commerce maintains that: (1) Commerce’s application of the

knowledge test was proper; and (2) Commerce’s determination was

supported by substantial evidence. See Def.’s Mem. at 30-32.

Peer Bearing supports Commerce’s argument. See generally,

Peer Bearing’s Resp. at 14-19. Peer Bearing notes that the
Court No. 97-12-02156 Page 56

Chinese suppliers had only knowledge of the destination of their

sales to Chin Jun but not to Peer Bearing, see id. at 15-16, and

alleges that the fact that the merchandise was marked “Peer” is

not dispositive because “Peer [Bearing] sells its [merchandise] in

numerous countries around the world[, and it] is not uncommon for

companies such as Peer [Bearing] and [even] Timken [itself] to use

their brand names for sales made throughout the world.” Id. at 16

(emphasis omitted).

4. Analysis

The crux of Timken’s argument is that “special markings” on

the merchandise meant that the Chinese suppliers knew that the

merchandise was destined for the United States. See Pl.’s Mem. at

53. The Court disagrees. Just because a factory produces a piece

of merchandise with the mark “Peer,” it does not necessarily mean,

unless there is additional evidence, that such merchandise is

destined for the United States. Moreover, even if the merchandise

is destined for the United States, it does not necessarily mean,

unless there is additional evidence, that the manufacturer made the

connection between the marking and the final purchaser who sells

its stock in the United States as well as in third countries.9

9
This is precisely the scenario of the case at bar. Part of
the merchandise went to Hong Kong and was re-shipped therefrom; the
Court No. 97-12-02156 Page 57

Finally, even if such mental connection was made by the

manufacturer, it does not necessarily mean, unless there is

additional evidence, that such connection created the requisite

level of “knowledge.”10 The test employed by Commerce is not

other part was shipped from the PRC through a freight forwarder (as
in the case of Premier), and only some of those shipments made
their way into the United States.
10
Timken asserts that Commerce “has consistently included
among [United States] sales those ‘in which a manufacturer . . .
has reason to know of the ultimate destination of the merchandise
at the time of sale, through special markings . . . .’” See Pl.’s
Mem. at 53 (quoting Final Results of Antidumping Duty
Administrative Review of Titanium Sponge From Russia (“Titanium
Sponge”), 61 Fed. Reg. 9676, 9677 (Mar. 11, 1996), emphasis
omitted, and citing Final Results of Antidumping Duty
Administrative Review and Partial Termination of Administrative
Review of Fresh Garlic From the People's Republic of China (“Fresh
Garlic I”), 62 Fed. Reg. 23,758, 23,759 (May 1, 1997); Preliminary
Results of Antidumping Duty Administrative Review and Partial
Termination of Administrative Review of Fresh Garlic From the
People's Republic of China (“Fresh Garlic II”), 61 Fed. Reg.
68,229, 68,230 (Dec. 27, 1996)).

The Court is bewildered by the choice of Commerce’s
determinations relied upon by Timken. In Titanium Sponge, Commerce
rejected a respondent’s contention that the respondent had reached
the requisite knowledge because a manufacturer was neither
“informed in advance that the merchandise [was] destined for the
United States,” nor had “reason to know of the ultimate destination
of the merchandise at the time of sale, through special markings,
market-specific specifications, or shipping instructions.” 61 Fed.
Reg. at 9677 (citations omitted). In Fresh Garlic I and II,
Commerce provided that only the use of a very precise procedure by
the manufacturer would create the requisite level of knowledge.
See 62 Fed. Reg. at 23,759 and 61 Fed. Reg. at 68,230 (stating that
the merchandise had to be “mechanically harvested and primarily,
but not exclusively, destined for non-fresh use, or specially
prepared and cultivated prior to planting and then harvested and
otherwise prepared,” emphasis supplied).
Court No. 97-12-02156 Page 58

whether, in theory, the merchandise could have arrived in the

United States, but rather whether the Chinese suppliers knew or

should have known where the merchandise was destined. See Final

Results, 62 Fed. Reg. at 61,292; accord NSK, Ltd., 21 CIT at 644-

46, 969 F. Supp. at 59-61.

Therefore, Commerce could reasonably find that there was no

evidence that the Chinese suppliers had knowledge11 that the

In fact, more often than not, Commerce finds presence of
neither markings nor specifications, or instructions special enough
to create the requisite level of knowledge. See, e.g., Notice of
Final Determination of Sales at Less Than Fair Value: Ferrovanadium
and Nitrided Vanadium From the Russian Federation, 60 Fed. Reg.
27,957 (May 26, 1995); Notice of Final Determinations of Sales at
Less Than Fair Value: Pure Magnesium and Alloy Magnesium From the
Russian Federation, 60 Fed. Reg. 16,440 (Mar. 30, 1995); Final
Results of Antidumping Duty Administrative Review of Television
Receivers, Monochrome and Color, From Japan, 58 Fed. Reg. 11,211
(Feb. 24, 1993); Final Results of Antidumping Duty Administrative
Reviews of Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From France; et al., 57 Fed. Reg.
28,360, 28,423 (June 24, 1992); Final Results of Antidumping Duty
Administrative Reviews [of] Oil Country Tubular Goods From Canada,
55 Fed. Reg. 50,739 (Dec. 10, 1990); Final Results of Antidumping
Duty Administrative Review of Natural Bristle Paint Brushes and
Brush Heads From the People's Republic of China, 55 Fed. Reg.
42,599 (Oct. 22, 1990); Final Determination of Sales at Less Than
Fair Value of Urea From the Union of Soviet Socialist Republics, 52
Fed. Reg. 19,557 (May 26, 1987).
11
Timken also argues that Commerce should have imputed
knowledge upon the Chinese manufacturers under the precedent of
Cliquot’s Champagne, 70 U.S. at 140. See Pl.’s Reply at 23. The
Court in Cliquot’s Champagne, however, never addressed the issue of
“imputed knowledge,” rather it examined the issue of whether a mens
rea of “knowingly” under a statute envisioning criminal prosecution
could be asserted against an agent of a principal that committed a
Court No. 97-12-02156 Page 59

ultimate destination of the merchandise was the United States, and

disregard the sale prices from the Chinese suppliers to Chin Jun in

Commerce’s determination of the starting price. Accord Final

Results, 62 Fed. Reg. at 61,291-92.

G. Commerce’s Clerical Error

In its final determination, Commerce, while calculating the

weight of scrap from one of the Chinese producers, committed a

clerical error. See Def. Mem. at 32. The Court remands the issue

to Commerce to correct the error.

wrongful act. See 70 U.S. at 114, 140. Considering that: (1)
Timken itself reads Cliquot’s Champagne as a case discussing an
agency-based relationship between a freight forwarder and the
freight forwarder’s principal, see Pl.’s Reply at 23; and (2) under
international trade practices, a shipper, an importer, or an
exporter are the only parties that may serve as a principal to a
freight forwarder-agent, see e.g., Pearson v. Leif Hoegh, 1992 U.S.
App. LEXIS 450 (4th Cir. Jan. 16, 1992); Gilmore v. Waterman S.S.
Corp., 790 F.2d 1244 (5th Cir. 1986); Zanelli v. FMC, 524 F.2d 1000
(5th Cir. 1975); Orient Mid-East Lines v. Albert E. Bowen, Inc., 458
F.2d 572 (2nd Cir. 1972); Thiti Lert Watana Co. v. Minagratex Corp.,
105 F. Supp. 2d 1077 (N.D. Ca. 2000), this Court fails to
understand how the holding of Cliquot’s Champagne could serve as a
precedent creating a connection between a freight forwarder and a
manufacturer, that is, a third-party who is neither a shipper, nor
an importer or an exporter and, thus, cannot be the freight
forwarder’s principal.
Court No. 97-12-02156 Page 60

CONCLUSION

The case is remanded to Commerce to: (1) determine direct

labor costs without relying on labor hours and to open the record,

if necessary; (2) exclude the “purchases of traded goods” from its

calculation of COM; (3) adjust United States price by recalculating

marine insurance pursuant to a value-based methodology; and (4)

correct clerical errors in the calculation of the weight of scrap

from one of the Chinese producers. Commerce's final determination

is affirmed in all other respects.

_________________________
NICHOLAS TSOUCALAS
SENIOR JUDGE

Dated: August 9, 2001
New York, New York