# NTN Bearing Corp. of America v. United States

> United States Court of International Trade · January 24, 2003 · 248 F. Supp. 2d 1256

URL: https://www.frixlaw.com/law-library/cases/818989

## Case

- **Full name:** NTN BEARING CORPORATION OF AMERICA, American NTN Bearing Manufacturing Corporation, NTN Bower, Inc. and NTN Corporation, Plaintiffs, v. UNITED STATES, Defendant, and THE Timken Company, Defendant-Intervenor
- **Court:** United States Court of International Trade
- **Decided:** January 24, 2003
- **Citations:** 248 F. Supp. 2d 1256; 27 Ct. Int'l Trade 129; 27 C.I.T. 129; 25 I.T.R.D. (BNA) 1133; 2003 Ct. Intl. Trade LEXIS 8
- **Precedential status:** Published
- **Opinion:** Opinion by Tsoucalas
- **Judges:** Senior Judge Nicholas Tsoucalas
- **Cited by:** 8 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/818989

## How later opinions describe it (automated extraction)

- finding that Commerce’s inclusion of respondent’s sample sales and sales with high profits in the normal value calculation was properly within Commerce’s discretion because the mere existence of an extraordinary factor does not negate the totality of the circumstances test for…
- stating that “Commerce has the discretion to alter its policy, so long as Commerce presents a reasonable rationale for its departure from the previous practice”

## Opinion text

Slip Op. 03-08

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS

________________________________________
:
NTN BEARING CORPORATION OF AMERICA, :
AMERICAN NTN BEARING MANUFACTURING :
CORPORATION, NTN BOWER, INC. and :
NTN CORPORATION, :
:
Plaintiffs, :
:
v. : Court No.
: 98-12-03232
UNITED STATES, :
:
Defendant, :
:
and :
:
THE TIMKEN COMPANY, :
:
Defendant-Intervenor. :
________________________________________:

Plaintiffs, NTN Bearing Corporation of America, American NTN
Bearing Manufacturing Corporation, NTN Bower, Inc. and NTN
Corporation (collectively “NTN”), move pursuant to USCIT R. 56.2
for judgment upon the agency record challenging the Department of
Commerce, International Trade Administration’s (“Commerce”) final
determination, entitled Final Results of Antidumping Duty
Administrative Reviews of Tapered Roller Bearings and Parts
Thereof, Finished and Unfinished, From Japan, and Tapered Roller
Bearings, Four Inches or Less in Outside Diameter, and Components
Thereof, From Japan (“Final Results”), 63 Fed. Reg. 63,860 (Nov.
17, 1998).

Specifically, NTN contends that Commerce erred in: (1)
adjusting NTN’s reported home market billing adjustment; (2)
denying an adjustment to United States indirect selling expenses
for interest allegedly incurred in financing cash deposits for
antidumping duties; (3) calculating constructed export price profit
without regard to levels of trade; (4) including profits from
export price sales in the calculation of constructed export price
profit; (5) using the affiliated supplier’s cost of production for
Court No. 98-12-03232 Page 2

inputs in those cases when the cost was higher than the transfer
price in Commerce’s calculation of cost of production and
constructed value; (6) recalculating home market and United States
indirect selling expenses without regard to level of trade; (7)
denying a price-based level of trade adjustment for constructed
export price sales; (8) applying a 99.5% test to determine whether
sales to NTN’s affiliated parties were made at arm’s length; (9)
including sample transactions that were allegedly made for no
consideration; (10) including certain NTN sales allegedly outside
the ordinary course of trade in Commerce’s margin calculations and
in Commerce’s constructed value profit calculations; (11) relying
upon the sum-of-deviations methodology for Commerce’s model match
analysis; (12) using its level of trade sales match program; and
(13) using an incorrect level of trade adjustment factor for
certain export price sales.

Held: NTN’s 56.2 motion is granted in part and denied in part.
This case is remanded to Commerce to correct the clerical error
resulting from Commerce’s use of an incorrect level of trade
adjustment factor for NTN’s export price sales and to recalculate
NTN’s margin rates accordingly.

[NTN’s 56.2 motion is granted in part and denied in part. Case
remanded.]

Dated: January 24, 2003

Barnes, Richardson & Colburn (Donald J. Unger, Kazumune V.
Kano, David G. Forgue and Kristen S. Smith) for NTN, plaintiffs.

Robert D. McCallum, Jr., Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Michele D. Lynch, Kenneth J.
Guido and Richard P. Schroeder); of counsel: John F. Koeppen,
Office of the Chief Counsel for Import Administration, United
States Department of Commerce, for the United States, defendant.

Stewart and Stewart (Terence P. Stewart, William A. Fennell
and Patrick J. McDonough) for Timken, defendant-intervenor.
Court No. 98-12-03232 Page 3

OPINION

TSOUCALAS, Senior Judge: Plaintiffs, NTN Bearing Corporation

of America, American NTN Bearing Manufacturing Corporation, NTN

Bower, Inc. and NTN Corporation (collectively “NTN”), move pursuant

to USCIT R. 56.2 for judgment upon the agency record challenging

the Department of Commerce, International Trade Administration’s

(“Commerce”) final determination, entitled Final Results of

Antidumping Duty Administrative Reviews of Tapered Roller Bearings

and Parts Thereof, Finished and Unfinished, From Japan, and Tapered

Roller Bearings, Four Inches or Less in Outside Diameter, and

Components Thereof, From Japan (“Final Results”), 63 Fed. Reg.

63,860 (Nov. 17, 1998).

Specifically, NTN contends that Commerce erred in: (1)

adjusting NTN’s reported home market billing adjustment; (2)

denying an adjustment to United States indirect selling expenses

for interest allegedly incurred in financing cash deposits for

antidumping duties; (3) calculating constructed export price profit

without regard to levels of trade; (4) including profits from

export price sales in the calculation of constructed export price

profit; (5) using the affiliated supplier’s cost of production for

inputs in those cases when the cost was higher than the transfer

price in Commerce’s calculation of cost of production and

constructed value; (6) recalculating home market and United States
Court No. 98-12-03232 Page 4

indirect selling expenses without regard to level of trade; (7)

denying a price-based level of trade adjustment for constructed

export price sales; (8) applying a 99.5% test to determine whether

sales to NTN’s affiliated parties were made at arm’s length; (9)

including sample transactions that were allegedly made for no

consideration; (10) including certain NTN sales allegedly outside

the ordinary course of trade in Commerce’s margin calculations and

in Commerce’s constructed value profit calculations; (11) relying

upon the sum-of-deviations methodology for Commerce’s model match

analysis; (12) using its level of trade sales match program; and

(13) using an incorrect level of trade adjustment factor for

certain export price sales.

BACKGROUND

The administrative determination at issue concerns the

antidumping duty order on tapered roller bearings (“TRBs”) and

parts thereof, finished and unfinished, from Japan (A-588-604), for

the period of review (“POR”) covering October 1, 1996, through

September 30, 1997.1 See Final Results, 63 Fed. Reg. at 63,860-61.

On July 10, 1998, Commerce published the preliminary results. See

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). See Torrington Co. v. United States, 68
F.3d 1347, 1352 (Fed. Cir. 1995).
Court No. 98-12-03232 Page 5

Preliminary Results of Antidumping Duty Administrative Reviews of

Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,

From Japan, and Tapered Roller Bearings, Four Inches or Less in

Outside Diameter, and Components Thereof, From Japan (“Preliminary

Results”), 63 Fed. Reg. 37,344. Commerce published the Final

Results on November 17, 1998. See 63 Fed. Reg. 63,860.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 19

U.S.C. § 1516a(a) (2000) and 28 U.S.C. § 1581(c) (2000).

STANDARD OF REVIEW

In reviewing a challenge to Commerce’s final determination in

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
Court No. 98-12-03232 Page 6

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)).

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., 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
Court No. 98-12-03232 Page 7

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’ 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 20,

22 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).

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
Court No. 98-12-03232 Page 8

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, 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 541, 545, 15 F. Supp. 2d 807, 813 (1998).

DISCUSSION

I. Commerce’s Adjustment to NTN’s Reported Home Market Billing
Adjustment

A. Background

During the POR, NTN provided Commerce with “its [home market]

sales data via computer tape.” Mem. Opp’n Pls.’ Mot. J. Agency R.

(“Def.’s Mem.”) at 9-10. Commerce used the home market sales data

from the computer tape and calculated both a positive and negative

home market billing adjustment for NTN. See id. at 10 (citing App.

NTN’s Mot. and Mem. Supp. J. Agency R. (“NTN’s App. Mem.”) Attach.

3 at 2-3 n.1) (proprietary version). NTN also provided Commerce
Court No. 98-12-03232 Page 9

with “its [home market] sales volume and value reconciliation

worksheet” which contained a total positive home market billing

adjustment. Def.’s Mem. at 10 (citing App. Def.’s Mem. Opp’n Pls.’

Mot. J. Agency R. (“Def.’s App. Mem.”) Ex. 1 (proprietary version);

NTN’s App. Mem. Attach. 2 at A2-a (proprietary version)). In the

Final Results, Commerce stated:

[Commerce] agrees with [Timken]. In [Final Results of
Antidumping Duty Administrative Reviews of Tapered Roller
Bearings and Parts Thereof, Finished and Unfinished, From
Japan, and Tapered Roller Bearings, Four Inches or Less
in Outside Diameter, and Components Thereof, From Japan]
(“95/96 TRB Final”), [63 Fed. Reg. 2558, 2563 (Jan. 15,
1998)], Timken argued that because there were certain
inconsistencies between NTN’s computer tape home market
billing adjustment total and the billing adjustment
figure reported in NTN’s volume and value worksheet,
[Commerce] should modify accordingly the reported
adjustments to be consistent with those appearing on the
volume and value reconciliation worksheets . . . . For
the current review, as Timken has indicated, these same
inconsistencies exist between NTN’s reported data and its
volume and value reconciliation worksheets (provided [in
NTN’s App. Mem. Attach. 2 at] A2-a through A2-c
[(proprietary version)]. . .). NTN attempts to explain
such inconsistencies in its supplemental response at
[Def.’s App. Mem. Ex. 1 at] 4 [(proprietary version)] and
at [NTN’s App. Mem. Attach. 2 at] A2-c [(proprietary
version)], using a hypothetical example which purportedly
demonstrates why it claims the totals reported on the
sales tape and the totals reported on the volume and
value worksheet are not necessarily equal. However,
NTN’s attempt to reconcile these totals does not
sufficiently explain the significant discrepancies
between them. Therefore, for these final results,
[Commerce] ha[s] adjusted NTN’s reported home market
billing adjustment total to be consistent with that on
its volume and value worksheet. . . .

Final Results, 63 Fed. Reg. at 63,861.
Court No. 98-12-03232 Page 10

Commerce explained its methodology stating that

[because the] billing adjustment reconciliation chart
provided by NTN did not clearly demonstrate why there was
such a significant difference between the billing
adjustment totals [that is, between NTN’s volume and
value worksheet and the total billing adjustment derived
from NTN’s home market database] . . . [Commerce]
adjusted NTN’s reported transaction-specific billing
adjustments to reflect the total from its volume and
value worksheet.

. . . . In order to calculate a billing adjustment
amount representative of the volume and value worksheet
[amount], [Commerce] systematically sorted through NTN’s
home market database until [Commerce] arrived at a
[certain value], that, when added to the existing
positive billing adjustment value . . . equaled the total
reported billing adjustment from the worksheet. The
remaining negative billing adjustments were then set
equal to zero.

NTN’s App. Mem. Attach. 3 at 3.

B. Contentions of the Parties

NTN argues that Commerce erred when it used facts available to

“adjust NTN’s total billing adjustment in the home market.” NTN’s

Mot. and Mem. Supp. J. Agency R. (“NTN’s Mem.”) at 12; see NTN’s

Reply Def. and Def.-Int.’s Mem. Opposing Pls.’ Mot. J. Agency R.

(“NTN’s Reply”) at 2-3. In particular, NTN maintains that there is

no basis under 19 U.S.C. § 1677e (1994) for Commerce to use facts

available. See NTN’s Mem. at 13; see also NTN’s Mem. at 13-14

(relying on Olympic Adhesives v. United States, 899 F.2d 1565 (Fed.

Cir. 1990)). Therefore, NTN requests that this Court remand to

Commerce to use NTN’s originally submitted data for the total
Court No. 98-12-03232 Page 11

billing adjustment in the home market. See NTN’s Mem. at 14; NTN’s

Reply at 2-3.

In the alternative, NTN argues that even if Commerce was

correct in adjusting NTN’s reported home market billing

adjustments, Commerce’s “methodology is flawed in that it only

accounts for billing and quantity adjustments during the period of

review” (that is, Commerce ignored billing adjustments made before

and after the period of review). NTN’s Mem. at 14-15.

Commerce responds that its treatment of NTN’s home market

billing adjustments is supported by substantial evidence and is in

accordance with law. See Def.’s Mem. at 9-16. Commerce maintains

that “‘[n]either the pre-URAA nor the amended law imposes standards

establishing the circumstances under which Commerce is to grant or

deny [billing] adjustments to normal value [(“NV”)].’” Def.’s Mem.

at 14 (quoting Timken Co. v. United States, 22 CIT 621, 628, 16 F.

Supp. 2d 1102, 1108 (1998)). Moreover, Commerce argues that

“[t]his Court has previously upheld disparate treatment by Commerce

of upward and downward [home market] billing adjustments.” Def.’s

Mem. at 13; see also Def.’s Mem. at 13-14 (relying on SKF USA Inc.

v. United States, 23 CIT 402 (1999)).2

2
In its reply brief, NTN argues that Commerce’s reliance on
SKF USA Inc., 23 CIT 402, is inapposite because in the case at bar,
“NTN fully responded to [Commerce’s] requests in the requested
(continued...)
Court No. 98-12-03232 Page 12

Additionally, responding to NTN’s argument that Commerce

erroneously ignored billing adjustments made before and after the

period of review, Commerce asserts that “Commerce considered all

the billing adjustment information submitted by NTN[] . . . [and]

chose to accept the positive billing adjustment total from NTN’s

volume and value worksheet because NTN failed to meet its burden to

reconcile that billing adjustment total with the different totals

drawn from NTN’s computer tape sales data.” Def.’s Mem. at 15

(citing Final Results, 63 Fed. Reg. at 63,861). Commerce further

maintains that it requested that NTN clarify its claimed billing

adjustments, and NTN failed to do so. See Def.’s Mem. at 16

(citing Def.’s App. Mem. Ex. 1 at 4 (proprietary version)).

Timken agrees with Commerce and contends that NTN’s argument

that Commerce erroneously used “facts available” to adjust NTN’s

home market billing adjustment is misplaced because “Commerce’s

adjustment to NTN’s billing adjustments was simply an action to

reconcile conflicting data which NTN had submitted on the same

issue.” Resp. Timken Pls.’ Mot. J. Agency R. (“Timken’s Resp.”) at

8; see also Timken’s Resp. at 7-12.

2
(...continued)
format[,]” whereas in SKF USA Inc., 23 CIT 402, Commerce “decided
that a punitive decision to accept only the properly reported part
of the adjustments was in order, so as to deny SKF the benefit of
improper reporting.” NTN’s Reply at 2.
Court No. 98-12-03232 Page 13

C. Analysis

The Court finds that NTN’s argument that Commerce erroneously

used “facts available” under 19 U.S.C. § 1677e when Commerce

adjusted NTN’s billing adjustment in the home market has no merit

since NTN clearly misreads the clear language of that statute. The

antidumping statute mandates that Commerce use “facts otherwise

available” (commonly referred to as “facts available”) if

“necessary information is not available on the record” of an

antidumping proceeding. 19 U.S.C. § 1677e(a)(1). In addition,

Commerce may use facts available where an interested party or any

other person: (1) withholds information that has been requested by

Commerce; (2) fails to provide the requested information by the

requested date or in the form and manner requested, subject to 19

U.S.C. § 1677m(c)(1), (e)3 (1994); (3) significantly impedes an

3
Section 1677m(e) states that:

[i]n reaching a determination under [19 U.S.C.] section
1671b, 1671d, 1673b, 1673d, 1675, or 1675b[,] . . .
[Commerce] shall not decline to consider information that
is submitted by an interested party and is necessary to
the determination but does not meet all the applicable
requirements established by [Commerce], if—-

(1) the information is submitted by the deadline
established for its submission,
(2) the information can be verified,
(3) the information is not so incomplete that it
cannot serve as a reliable basis for reaching the
applicable determination,
(4) the interested party has demonstrated that
it acted to the best of its ability in providing the
(continued...)
Court No. 98-12-03232 Page 14

antidumping proceeding; and (4) provides information that cannot be

verified as provided in 19 U.S.C. § 1677m(i) (1994). See 19 U.S.C.

§ 1677e(a)(2)(A)-(D). Section 1677e(a) provides, however, that the

use of facts available shall be subject to the limitations set

forth in 19 U.S.C. § 1677m(d)(1994).

The legislative goal behind Commerce’s right to use facts

available is to "induce respondents to provide Commerce with

requested information in a timely, complete, and accurate manner .

. . .” National Steel Corp. v. United States, 18 CIT 1126, 1129,

870 F. Supp. 1130, 1134 (1994). Consequently, Commerce enjoys very

broad, although not unlimited, discretion with regard to the

propriety of its use of facts available. See generally, Olympic

Adhesives, 899 F.2d 1565 (acknowledging Commerce’s broad discretion

with regard to the use of facts available but pointing out that

Commerce's resort to facts available is an abuse of discretion

where the information Commerce requests does not and could not

exist).

3
(...continued)
information and meeting the requirements established
by [Commerce] with respect to the information, and
(5) the information can be used without undue
difficulties.

19 U.S.C. § 1677m(e).
Court No. 98-12-03232 Page 15

During the review at issue, NTN reported home market billing

adjustments via its computer tape. See Def.’s Mem. at 9-10; NTN’s

App. Mem. Attach. 3 at 2. Pursuant to Commerce’s supplemental

questionnaire, NTN also provided Commerce with a sales volume and

value reconciliation worksheet. See Def.’s Mem. at 10; NTN’s App.

Mem. Attach. 3 at 2-3 (proprietary version); NTN’s App. Mem.

Attach. 2 at A2-a (proprietary version). In the Final Results,

Commerce stated that

inconsistencies exist between NTN’s reported data and its
volume and value reconciliation worksheets (provided [in
NTN’s App. Mem. Attach. 2 at] A2-a through A2-c
[(proprietary version)]. . .). NTN attempts to explain
such inconsistencies in its supplemental response at
[Def.’s App. Mem. Ex. 1 at] . . . 4 [(proprietary
version)] and at [NTN’s App. Mem. Attach. 2 at] A2-c
[(proprietary version)], using a hypothetical example
which purportedly demonstrates why it claims the totals
reported on the sales tape and the totals reported on the
volume and value worksheet are not necessarily equal.
However, NTN’s attempt to reconcile these totals does not
sufficiently explain the significant discrepancies
between them.

Final Results, 63 Fed. Reg. at 63,861. Faced with the situation

where the “billing adjustment reconciliation chart provided by NTN

did not clearly demonstrate why there was such a significant

difference between the billing adjustment totals” that is, between

NTN’s volume and value worksheet and the total billing adjustment

derived from NTN’s home market database, “[Commerce] adjusted NTN’s

reported transaction-specific billing adjustments to reflect the
Court No. 98-12-03232 Page 16

total from its volume and value worksheet.4” NTN’s App. Mem.

Attach. 3 at 3. Since Commerce did not resort to any data other

than that reported by NTN, Commerce’s adjustment to NTN’s reported

billing adjustment did not constitute the “erroneous” use of “facts

available” under 19 U.S.C. § 1677e.

The Court also finds that Commerce’s methodology of adjusting

NTN’s reported home market billing adjustments is reasonable, is

supported by substantial evidence and is in accordance with law.

See NTN Bearing Corp. of Am. v. United States (“NTN 2002”), 26 CIT

___, ___, 186 F. Supp. 2d 1257, 1295-97 (2002); 95/96 TRB Final, 63

Fed. Reg. at 2563; see also Timken Co., 22 CIT at 628, 16 F. Supp.

2d at 1108 (“Neither the pre-URAA nor the . . . amended [law]

imposes standards establishing the circumstances under which

Commerce is to grant or deny adjustments to NV for [post-sale price

adjustments, that is, billing adjustments]”). Moreover, the Court

4
Commerce explained its methodology of adjusting NTN’s
reported transaction-specific billing adjustments to reflect the
total from NTN’s volume and value worksheet as follows:

. . . . In order to calculate a billing adjustment
amount representative of the volume and value worksheet
[amount], [Commerce] systematically sorted through NTN’s
home market database until [Commerce] arrived at a
[certain value], that, when added to the existing
positive billing adjustment value . . . equaled the total
reported billing adjustment from the worksheet. The
remaining negative billing adjustments were then set
equal to zero.

NTN’s App. Mem. Attach. 3 at 3.
Court No. 98-12-03232 Page 17

is not persuaded by NTN’s argument that Commerce’s methodology is

flawed because NTN fails to point to any record evidence

demonstrating error in Commerce’s adjustment methodology.

Accordingly, the Court sustains Commerce’s adjustment to NTN’s

reported home market billing adjustments.

II. Denial of an Adjustment to United States Indirect Selling
Expenses for Interest Allegedly Incurred in Financing Cash
Deposits for Antidumping Duties

A. Background

During the review at issue, NTN requested Commerce to make an

adjustment to NTN’s United States indirect selling expenses for

interest allegedly incurred by NTN in financing cash deposits for

antidumping duties. See Final Results, 63 Fed. Reg. at 63,865.

“Commerce denied the adjustment and deducted the entire amount of

[NTN’s] indirect selling expenses, including all interest, from the

[constructed export price] (“CEP”).” Def.’s Mem. at 17. Commerce

explained:

Antidumping duties, cash deposits of antidumping duties,
and other expenses such as legal fees associated with
participation in an antidumping case are not expenses
that [Commerce] should deduct from [United States] price.
To do so would involve a circular logic that could result
in an unending spiral of deductions for an amount that is
intended to represent the actual offset for the dumping
. . . . Underlying [Commerce’s] logic in all of these
instances is an attempt to distinguish between business
expenses that arise from economic activities in the
United States and business expenses that are direct,
inevitable consequences of an antidumping duty order.
Court No. 98-12-03232 Page 18

Financial expenses allegedly associated with cash
deposits are not a direct, inevitable consequence of an
antidumping duty order. As [Commerce] stated previously
. . . : money is fungible. If an importer acquires a
loan to cover one operating cost, that may simply mean
that it will not be necessary to borrow money to cover a
different operating cost. . . . There is nothing
inevitable about a company having to finance cash
deposits and there is no way for [Commerce] to trace the
motivation or use of such funds even if it were.

Even if [NTN] has a loan amount that equals its cash
deposits or can demonstrate a “paper trail” connecting
the loan amount to cash deposits, [Commerce] do[es] not
consider the loan amount to be related to the cash
deposits and will not remove it from the [indirect
selling expenses]. Moreover, the result should not be
different where an actual expense can not be associated
in any way with the cash deposits. [Commerce] reject[s]
imputation of an adjustment because there is no real
opportunity cost associated with cash deposits when the
paying of such deposits is a precondition for doing
business in the United States. As a result, [Commerce]
ha[s] not accepted NTN’s reduction in [indirect selling
expenses] based on actual borrowings to finance cash
deposits nor will [Commerce] accept such a reduction
based on imputed borrowings. [Commerce] consider[s] all
financial expenses the affiliated importer incurred with
respect to sales of subject merchandise in the United
States to be [indirect selling expenses]. . . .

. . . . Although in past reviews [Commerce] ha[s]
removed expenses for financing cash deposits, [Commerce]
ha[s] reexamined this issue and [Commerce’s] current
policy is to deny the adjustment. [Commerce] has
concluded that [Commerce’s] new policy is reasonable and
best reflects commercial reality with respect to
affiliated-importer situations. . . .

Final Results, 63 Fed. Reg. at 63,865-66 (internal quotation and

citations omitted).
Court No. 98-12-03232 Page 19

B. Contentions of the Parties

NTN asserts that Commerce wrongly denied an adjustment to

NTN’s United States indirect selling expenses for interest that NTN

allegedly incurred in financing cash deposits for antidumping

duties. See NTN’s Mem. at 4, 15-18. NTN claims that Commerce’s

rationale for denying NTN’s adjustment for interest expenses is

flawed because irrespective of how a company opts to finance the

cash deposits for antidumping duties, the amount of cash deposited

will have to be made up by financing something else, a result that

is a direct inevitable consequence of the antidumping duty order.

See id. at 16.

Further, NTN notes that Commerce has previously taken the

position that interest expenses incurred in financing cash deposits

of antidumping duties cannot be properly treated as indirect

selling expenses and, therefore, has allowed for an interest-

expense adjustment on antidumping duty cash deposits. See id.

(citing Final Results of Antidumping Duty Administrative Reviews of

Antifriction Bearings (Other Than Tapered Roller Bearings) and

Parts Thereof From France, Germany, Italy, Japan, Singapore, and

the United Kingdom (“Previous Ruling”), 62 Fed Reg. 2087,5 2104

(Jan. 15, 1997)).

5
The Court presumes that NTN, while citing to 62 Fed. Reg.
2087, intended to cite to 62 Fed. Reg. 2081.
Court No. 98-12-03232 Page 20

NTN also asserts that this Court has repeatedly held that the

costs incurred solely in financing antidumping duty cash deposits

cannot be categorized as selling expenses. See NTN’s Mem. at 16-

17. In particular, NTN argues that Federal-Mogul Corp. v. United

States, 20 CIT 1438, 1440-41, 950 F. Supp. 1179, 1182-83 (1996),

clearly refutes Commerce’s decision to deny NTN’s interest-expense

adjustment. See NTN’s Mem. at 18. NTN notes that the court in

Federal-Mogul found that there was no support for a domestic

party’s “assertion that any expense related to antidumping

proceedings is automatically a selling expense related to the sale

of the subject merchandise. Indeed, pursuant to the rationale of

(Daewoo Elecs. Co. v. United States, 13 CIT 253, 270, 712 F. Supp.

931, 947 (1989)), such expenses are not necessarily selling

expenses.” Id. at 17 (quoting Federal-Mogul, 20 CIT at 1440-41,

950 F. Supp. at 1183). NTN points out that the court in Federal-

Mogul found that, similar to the Daewoo court’s holding that legal

expenses related to antidumping proceedings are not selling

expenses, the interest expenses at issue did not qualify as selling

expenses because they were not related to the sale of merchandise,

but to NTN’s participation in the antidumping proceeding. See

NTN’s Mem. at 18. NTN further points out that the court in

Federal-Mogul “rejected the domestic party’s argument that NTN’s

interest adjustment is duplicative of that allowed under the

statute” and found “the adjustment for expenses for interest
Court No. 98-12-03232 Page 21

expenses on cash deposits is an actual expense, although not a

selling expense, for which the statute does not compensate NTN.”

Id. NTN also notes that in NSK Ltd. v. United States, 21 CIT 617,

638, 969 F. Supp. 34, 55 (1997), the Court reaffirmed its decision

in Federal-Mogul to allow NTN’s adjustment for interest expenses on

antidumping duty cash deposits. See id. NTN requests that the

Court remand this issue to Commerce to grant NTN’s indirect selling

expense adjustment for interest NTN allegedly incurred in financing

cash deposits for antidumping duties. See id.; NTN’s Reply at 6.

Commerce maintains that Commerce’s denial of an adjustment to

NTN’s United States indirect selling expenses for interest

allegedly incurred in financing antidumping duty cash deposits

reflected Commerce’s reasonable reading and application of 19

U.S.C. § 1677a(d)(1) (1994). See Def.’s Mem. at 18-20. Commerce

further maintains that it “has set forth a . . . reasonable

rationale for its departure from the previous practice.”6 Id. at

6
In its brief, NTN states:

NTN has not argued that [Commerce] may not reasonably
change its methodologies. Instead, NTN argued in its
memorandum in support of its motion for judgment on the
agency record, and argues here, that the rationale
provided at Final Results, 63 Fed. Reg. at 63,866 does
not comport with economic reality, is not reasonable, and
defies logic. In addition, [Commerce’s] decision
conflicts with judicial precedent, and its own well
reasoned statements supporting an adjustment for this
expense in the past. Therefore, NTN respectfully
(continued...)
Court No. 98-12-03232 Page 22

20.

Timken supports Commerce’s contentions and points out that:

(1) “the purpose of the statutory provision for interest on over

and under deposits of duties would be defeated by allowing an

expense reduction for interest on cash deposits,” Timken’s Resp. at

14; and (2) “NTN failed to demonstrate that it actually incurred

interest expenses due to financing antidumping duty cash deposits,”

6
(...continued)
requests that this Court ignore the United States’
argument regarding the legality of [Commerce] ever
changing its methodology, and find this change by
[Commerce] unreasonable and contrary to law for the
reasons stated in [NTN’s] memorandum in support of
[NTN’s] motion for judgment on the agency record.

NTN’s Reply at 3-4 (emphasis omitted).

As a preliminary matter, the Court does not agree with NTN
that Commerce’s denial of an adjustment to NTN’s United States
indirect selling expenses for interest allegedly incurred by NTN in
financing NTN’s cash deposits for antidumping duties is a change in
methodology. Rather, it is a change of policy. While a
methodology refers to the “performing [of] several operations[] in
the most convenient order,” BLACK ’S LAW DICTIONARY 991 (6th ed. 1990),
policy “denotes . . . [the] general purpose . . . [of the statute]
considered as directed to the welfare or prosperity of the state,”
id. at 1157; 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 Corp. v. Train, 537 F.2d 620 (2d Cir.
1976).

Moreover, the Court does not agree with NTN that the Court
should “ignore the United States’ argument regarding the legality
of” Commerce’s change in policy. NTN’s Reply at 4. The legality
of Commerce’s change in policy is a precondition that the Court
must address in order to subsequently determine whether Commerce’s
decision at issue was in accordance with law and reasonable.
Court No. 98-12-03232 Page 23

id. at 15.7

C. Analysis

1. Commerce’s Changes of Policy

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,’”

7
The Court disagrees with Timken’s contentions that these two
points could be dispositive of the issue. Timken asserts that

allow[ing] respondents to reduce their selling expenses
by amounts of imputed interest allegedly incurred in
financing antidumping duty deposits (with consequent
increase in [United States] prices and reduction of
margins of dumping), Commerce would provide an incentive
to respondents to prolong litigation over entries so as
to avoid actual payment of duties.

Timken’s Resp. at 15.

The Court is not convinced by Timken’s argument. A defeat in
litigation implies the necessity of eventual payment of the duties
due, and the mere possibility of “opportunity use,” possibly
resulting in collection of interest on the funds available calls
for an argument seeking collection of duties together with a
prevailing interest rate rather than for the “anti-incentive”
argument fostered by Timken.

Next, not only does the record contain NTN’s claim for the
amount of imputed interest attributable to NTN’s antidumping duty
deposits (the claim that, under the administrative scheme, is
subject to verification by Commerce rather than Timken), but also
the factual inquiry of whether NTN actually incurred interest
expenses attributable to financing payment is secondary to the
threshold legal inquiry if an adjustment should be allowed for such
expenses.
Court No. 98-12-03232 Page 24

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 Co. v. United

States, 226 F.3d 1349, 1357 (Fed. Cir. 2000). “‘The power of an

administrative agency to administer a congressionally created . .

. program necessarily requires the formulation of policy . . . .’”

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.’” Chevron, 467 U.S. at 845

(quoting United States 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 Chevron, 467

U.S. at 843. Any assumption that Congress intended to freeze an
Court No. 98-12-03232 Page 25

administrative interpretation of a statute would be entirely

contrary to the concept of Chevron which assumes and approves 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.

2. Commerce’s Determination at Bar

Certain expenses incurred by the affiliated seller during the

process of selling the subject merchandise in the United States are

subject to deduction from the CEP of the seller. See 19 U.S.C. §

1677a(d)(1). However, Section 1677a(d)(1) of Title 19 does not

provide a closed and exhaustive list of such expenses. See id.

Consequently, Commerce considers certain ancillary expenses as part

of the incurred indirect expenses subject to deduction under

Section 1677a(d)(1). For example, while antidumping duties and

cash deposits have never been considered by Commerce as expenses

deductible from United States price, see Final Results of

Antidumping Duty Administrative Reviews of Antifriction Bearings

(Other Than Tapered Roller Bearings) and Parts Thereof From France,
Court No. 98-12-03232 Page 26

Germany, Italy, Japan, Romania, Singapore, Sweden and the United

Kingdom (“Later Ruling”), 62 Fed. Reg. 54,043, 54,079 (Oct. 17,

1997), interest expenses incurred in connection with selling

activities in the United States were deemed deductible from United

States price. See Final Results, 63 Fed. Reg. at 63,865-66.

Therefore, for those expenses that Commerce deemed to be non-

selling expenses, Commerce allowed an adjustment to indirect

selling expenses. See id.

For some period of time, Commerce’s practice was to deem

financing interest of cash deposits as not a selling expense and,

therefore, Commerce did allow respondents that incurred financing

interest of cash deposits to deduct such interest from indirect

selling expenses prior to the deduction of such indirect selling

expenses from the CEP. See Previous Ruling, 62 Fed. Reg. at 2104.

However, at a later point, Commerce reexamined this practice and

the policies underlying it. Specifically, Commerce observed that

[t]he statute does not contain a precise definition of
what constitutes a selling expense. Instead, Congress
gave [Commerce] discretion in this area. It is a matter
of policy whether [Commerce] consider[s] there to be any
financing expenses associated with cash deposits.
[Commerce] recognize[s] that [Commerce] ha[s], to a
limited extent, removed such expenses from indirect
selling expenses for such financing expenses in past
reviews . . . . However, [Commerce] ha[s] reconsidered
[Commerce’s] position on this matter and ha[s] now
concluded that this practice is inappropriate.

Later Ruling, 62 Fed. Reg. at 54,079.
Court No. 98-12-03232 Page 27

Commerce has the discretion to alter its policy, so long as

Commerce presents a reasonable rationale for its departure from the

previous practice. See Chevron, 467 U.S. at 843; Timken Co., 22

CIT at 628, 16 F. Supp. 2d at 1106. Commerce explained its

rationale for the reconsideration as follows:

Underlying [Commerce’s] logic . . . is an attempt to
distinguish between business expenses that arise from
economic activities in the United States and business
expenses that are direct, inevitable consequences of the
dumping order.

Financial expenses allegedly associated with cash
deposits are not a direct, inevitable consequence of an
antidumping order. . . . Companies may choose to meet
obligations for cash deposits in a variety of ways that
rely on existing capital resources or that require
raising new resources through debt or equity. . . . In
fact, companies face these choices every day regarding
all their expenses and financial obligations. There is
nothing inevitable about a company having to finance cash
deposits and there is no way for [Commerce] to trace the
motivation or use of such funds even if it were.

. . . .

So, while under the statute [Commerce] may allow a
limited exemption from deductions from [United States]
price for cash deposits themselves and legal fees
associated with participation in dumping cases,
[Commerce] do[es] not see a sound basis for extending
this exemption to financing expenses allegedly associated
with financing cash deposits. . . .

[Commerce] see[s] no merit to the argument that,
since [Commerce] do[es] not deduct cash deposits from
[United States] price, [Commerce] should also not deduct
financing expenses that are arbitrarily associated with
cash deposits. To draw an analogy as to why this logic
is flawed, [Commerce] also do[es] not deduct corporate
taxes from [United States] price; however, [Commerce]
would not consider a reduction in selling expenses to
reflect financing alleged to be associated with payment
Court No. 98-12-03232 Page 28

of such taxes.

Later Ruling, 62 Fed. Reg. at 54,079; see also Final Results, 63

Fed. Reg. at 63,865-66 and Final Results of Antidumping Duty

Administrative Reviews of Antifriction Bearings (Other Than Tapered

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

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

Reg. 33,320, 33,348 (June 18, 1998).

The Court finds Commerce’s rationale for reconsideration

convincing. Cf. Timken Co., 22 CIT at 628, 16 F. Supp. 2d at 1106

(upholding Commerce’s reconsideration and noting that, while the

Court could be concerned with Commerce’s sudden change in practice,

Commerce is afforded significant deference in its statutory

interpretation). Moreover, the Court holds that Commerce’s current

interpretation of Section 1677a(d)(1) is reasonable. See Chevron,

467 U.S. at 845; Koyo Seiko Co. v. United States, 26 CIT ___, ___,

186 F. Supp. 2d 1332, 1337 (2002); NTN 2002, 26 CIT at___, 186 F.

Supp. 2d at 1278; NTN Bearing Corp. of Am. v. United States (“NTN

2000”), 24 CIT ___, ___, 104 F. Supp. 2d 110, 138 (2000), aff’d,

295 F.3d 1263 (2002). Therefore, the Court affirms Commerce’s

decision to deny an adjustment to NTN’s United States indirect

selling expenses for interest allegedly incurred by NTN in

financing NTN’s cash deposits for antidumping duties.
Court No. 98-12-03232 Page 29

III. Commerce’s Decision to Calculate Constructed Export Price
Profit Without Regard to Levels of Trade

A. Background

1. Statutory Background

In calculating CEP, Commerce must reduce the starting price

used to establish CEP by “the profit allocated to the expenses

described in paragraphs (1) and (2)” of 19 U.S.C. § 1677a(d)

(1994). 19 U.S.C. § 1677a(d)(3). Under 19 U.S.C. § 1677a(f)

(1994), the “profit” that is deducted from this starting price is

“determined by multiplying the total actual profit by [a]

percentage” calculated “by dividing the total United States

expenses by the total expenses.” 19 U.S.C. §§ 1677a(f)(1) and

(2)(A). Section 1677a(f)(2)(B) defines “total United States

expenses” as the total expenses deducted under 19 U.S.C. §

1677a(d)(1) and (2), that is, commissions, direct and indirect

selling expenses, assumptions, and the cost of any further

manufacture or assembly in the United States. Section

1677a(f)(2)(C) establishes a tripartite hierarchy of methods for

calculating “total expenses.” “Total expenses” could be the

“expenses incurred with respect to the subject merchandise sold in

the United States and the foreign like product sold in the

exporting country” if Commerce requested such expenses for the

purpose of determining NV and CEP. Id. 19 U.S.C. §

1677a(f)(2)(C)(i). If Commerce did not request these expenses,
Court No. 98-12-03232 Page 30

then “total expenses” are the “expenses incurred with respect to

the narrowest category of merchandise sold in the United States and

the exporting country which includes the subject merchandise.” 19

U.S.C. § 1677a(f)(2)(C)(ii). If the data necessary to determine

“total expenses” under either of these methods is not available,

then “total expenses” are the “expenses incurred with respect to

the narrowest category of merchandise sold in all countries which

includes the subject merchandise.” 19 U.S.C. §

1677a(f)(2)(C)(iii). “Total actual profit” is based on whichever

category of merchandise is used to calculate “total expenses” under

19 U.S.C. § 1677a(f)(2)(C). See 19 U.S.C. § 1677a(f)(2)(D).

2. Factual Background

During this POR, NTN argued that profit levels differed by

level of trade (“LOT”) and had an effect on prices and CEP profit

and, therefore, Commerce should calculate CEP profit on an LOT-

specific basis rather than for each class or kind of merchandise.

See Final Results, 63 Fed. Reg. at 63,866. NTN reasoned that 19

U.S.C. § 1677a(f)(2)(C) “expresses a preference for the [CEP]

profit calculations to be performed as specifically as possible and

on as narrow a basis as possible.” Id.

Commerce rejected NTN’s argument, concluding that: (1)

“[n]either the statute nor the [Statement of Administrative Action]
Court No. 98-12-03232 Page 31

(“SAA”)8 requires [Commerce] to calculate CEP profit on a basis

more specific than the subject merchandise as a whole”; (2) basing

the CEP profit calculation on an LOT specific basis would “add a

layer of complexity to an already complicated exercise with no

increase in accuracy”; and (3) a “subdivision [of] the CEP profit

calculation would be more susceptible to manipulation.” Id.

(Commerce also relied on its detailed explanation made in the sixth

review of the antifriction bearings (“AFBs”)).9

8
The SAA represents “an authoritative expression by the
Administration concerning its views regarding the interpretation
and application of the Uruguay Round agreements.” H.R. Doc. 103-
316, at 656 (1994), reprinted in 1994 U.S.C.C.A.N. 4040. “[I]t is
the expectation of the Congress that future Administrations will
observe and apply the interpretations and commitments set out in
this Statement.” Id.; see also 19 U.S.C. § 3512(d) (1994) (“The
statement of administrative action approved by the Congress . . .
shall be regarded as an authoritative expression by the United
States concerning the interpretation and application of the Uruguay
Round Agreements and this Act in any judicial proceeding in which
a question arises concerning such interpretation or application”).
9
In the sixth AFB review, Commerce reasoned as follows:

Neither the statute nor the SAA require[s] [Commerce] to
calculate CEP profit on bases more specific than the
subject merchandise as a whole. Indeed, while [Commerce]
cannot at this time rule out the possibility that the
facts of a particular case may require division of CEP
profit, the statute and SAA, by referring to “the”
profit, “total actual profit,” and “total expenses” imply
that [Commerce] should prefer calculating a single profit
figure. NTN’s suggested approach would also add a layer
of complexity to an already complicated exercise with no
guarantee that the result will provide any increase in
accuracy. [Commerce] need not undertake such a
calculation (see Daewoo Electronics v. International
Union, 6 F.3d 1511, 1518-19 (CAFC 1993)). Finally,
(continued...)
Court No. 98-12-03232 Page 32

B. Contentions of the Parties

NTN contends that Commerce erred by refusing to calculate CEP

profit on an LOT specific basis. See NTN’s Mem. at 18. NTN argues

that 19 U.S.C. § 1677a(f) expresses a preference for the CEP profit

calculation to be performed as specifically as possible. See id.

at 19. Moreover, NTN claims that since constructed value (“CV”)

profit is calculated by LOT and matching is by LOT, CEP profit

should be calculated to account for differences in LOT. See id. at

20. NTN asserts that “[t]here is no reason to use a less specific,

less accurate mode of calculation.” Id. NTN further asserts that

Commerce’s speculation that an adjustment is susceptible to

manipulation provides no grounds for rejecting an adjustment. See

id. at 19.

Commerce responds that it properly determined CEP profit

without regard to LOT. See Def.’s Mem. at 22. Commerce notes that

19 U.S.C. § 1677a(f) does not refer to LOT, that is, the statute

does not require that CEP profit be calculated on an LOT specific

basis. See id. at 23. Moreover, Commerce asserts that even

9
(...continued)
subdivision of the CEP-profit calculation would be more
susceptible to manipulation. Congress has specifically
warned [Commerce] to be wary of such manipulation of the
profit allocation (see S. Rep. 103-412, 103d Cong., 2d
Sess at 66-67).

Previous Ruling, 62 Fed. Reg. at 2125; see also 95/96 TRB Final, 63
Fed. Reg. at 2570.
Court No. 98-12-03232 Page 33

assuming that a narrower basis for the CEP profit calculation is

warranted in some circumstances, NTN has not provided any factual

support for such a deviation from Commerce’s standard methodology

for calculating CEP profit. See id. at 24. Timken generally

agrees with Commerce’s CEP profit calculation. See Timken’s Resp.

at 16-18. In addition, Timken argues that the Court lacks

jurisdiction over the issue of Commerce’s calculation of CEP profit

without regard to LOT because Commerce did not ultimately make an

adjustment to NTN’s United States sales for CEP profit.10 Timken’s

Resp. at 17 (proprietary version).

C. Analysis

Section 1677a(f), as Commerce correctly notes, does not make

any reference to LOT. Accordingly, the Court’s duty under Chevron,

10
The Court is bewildered by Timken’s argument that the Court
would be rendering an opinion on a moot issue had the Court decided
to rule on the calculation of NTN’s CEP profit without regard to
LOT. See Timken’s Resp. at 17 (proprietary version). Timken’s
reliance on Rose Bearings Ltd. v. United States, 14 CIT 801, 751 F.
Supp. 1545 (1990), is misplaced since in that case, the Court held
that it lacked jurisdiction after determining that the plaintiff
did not have standing, that is, that the plaintiff was not a party
to a “live case or controversy” since the plaintiff “was not
subject to the antidumping duty order that it ha[d] appealed . . .
.” Rose Bearings, 14 CIT at 802, 751 F. Supp. at 1546. Unlike the
plaintiff in Rose Bearings, NTN could be affected by the challenge
to Commerce’s calculation of CEP profit without regard to LOT. See
Final Results, 63 Fed. Reg. at 63,866. Therefore, this Court is
correct in rendering a decision on the issue of Commerce’s
calculation of NTN’s CEP profit without regard to LOT since NTN is
a party to a “live case or controversy.”
Court No. 98-12-03232 Page 34

467 U.S. 837, is to review the reasonableness of Commerce’s

statutory interpretation. See IPSCO, 965 F.2d at 1061 (citing

Chevron, 467 U.S. at 844).

Commerce’s refusal to calculate CEP profit on an LOT specific

basis is reasonable and in accordance with law. See NTN 2000, 24

CIT at ___, 104 F. Supp. 2d at 133-35. The language of the statute

clearly contemplates that, in general, the “narrowest category”

will include the class or kind of merchandise that is within the

scope of an investigation or review. See id., 24 CIT at __, 104 F.

Supp. 2d at 133-35. Subsections (ii) and (iii) of 19 U.S.C. §

1677a(f)(C)’s “total expense” definition lead to such a conclusion

because both subsections refer to “expenses incurred with respect

to the narrowest category of merchandise . . . which includes the

subject merchandise.” See id., 24 CIT at ___, 104 F. Supp. 2d at

135. The term “subject merchandise” is defined as “the class or

kind of merchandise that is within the scope of an investigation,

a review, a suspension agreement, an order under this subtitle or

section 1303 of this title, or a finding under the Antidumping Act,

1921.” 19 U.S.C. § 1677(25) (1994). Accordingly, the Court finds

that Commerce reasonably interpreted 19 U.S.C. § 1677a(f) in

refusing to apply a narrower subcategory of merchandise such as one

based on LOT. The Court, moreover, agrees with Commerce’s

conclusion that a subdivision of the “CEP profit calculation would
Court No. 98-12-03232 Page 35

be more susceptible to manipulation,” a result that Congress

specifically warned Commerce to prevent. Final Results, 63 Fed.

Reg. at 63,866. Finally, the Court agrees with Commerce that NTN

failed to provide adequate factual support of how the CEP profit

calculation was distorted by Commerce’s standard methodology.

IV. Commerce’s Decision to Include Profits From Export Price Sales
in the Calculation of CEP Profit

A. Background

Under 19 U.S.C. § 1677a(d)(3), Commerce must, in order to

calculate CEP, deduct “the profit allocated to the expenses

described in” 19 U.S.C. §§ 1677a(d)(l) and (2) from the price

charged to the first unaffiliated purchaser in the United States.

“Profit” is defined as “an amount determined by multiplying the

total actual profit by the applicable percentage,” 19 U.S.C. §

1677a(f)(1), and “actual profit” is defined as the “total profit

earned . . . with respect to the sale of the same merchandise for

which total expenses are determined . . . .” 19 U.S.C. §

1677a(f)(2)(D). The term “total expenses” means “all expenses in

the first of [three] categories which applies and which are

incurred by or on behalf of the foreign producer and foreign

exporter of the subject merchandise and by or on behalf of the

United States seller affiliated with the producer or exporter with

respect to the production and sale of such merchandise . . . .” 19
Court No. 98-12-03232 Page 36

U.S.C. § 1677a(f)(2)(C). The first category covers “expenses

incurred with respect to the subject merchandise sold in the United

States and the foreign like product sold in the exporting country

. . . .” 19 U.S.C. § 1677a(f)(2)(C)(i). “Subject merchandise,” in

turn, is defined as “the class or kind of merchandise that is

within the scope of . . . a review . . . .” 19 U.S.C. § 1677(25).

In the Final Results, Commerce included export price (“EP”)

sales in the calculation of CEP profit. See generally, 63 Fed.

Reg. at 63,866.

B. Contentions of the Parties

NTN contends that the statute clearly states that the

adjustment of profit to the CEP is to be based on expenses incurred

in the United States as a percentage of total expenses and that

there is no provision in the statute for the inclusion of EP

expenses or profit in this calculation. See NTN’s Mem. at 20-22.

NTN deduces, therefore, that Commerce erred by including EP sales

in the calculation of CEP profit. See id. at 20.

Specifically, NTN relies on the definition of the term “total

expenses.” See 19 U.S.C. § 1677a(f)(2)(C). NTN maintains that the

specific reference to CEP within the definition precludes Commerce

from the inclusion of EP expenses in the calculation of CEP profit.

See generally NTN’s Mem. at 20-21. NTN further states that “just
Court No. 98-12-03232 Page 37

as EP expenses cannot be considered, it follows logically that

sales revenue for EP sales also cannot be included” in the

calculation of CEP profit since the definition of “total actual

profit,” 19 U.S.C. § 1677a(f)(2)(D), “directly references the

definition of total expenses.” Id. at 21-22. NTN, therefore,

requests that EP sales be removed from NTN’s CEP profit adjustment

calculation. See id. at 22.

Commerce contends that the inclusion of revenues and expenses

resulting from NTN’s EP sales in the calculation of CEP profit was

in accordance with law because it was a reasonable interpretation

of the statutory mandates of sections 1677a(f)(2)(C) and (D) and

1677(25) of Title 19. See Def.’s Mem. at 25-27. Specifically,

Commerce points out that the term “subject merchandise” is defined

as “‘the class or kind of merchandise that is within the scope of

. . . a review. . . .’” Id. at 26-27 (quoting 19 U.S.C. §

1677(25)). Commerce notes that the term “subject merchandise” is

referred to in the statute that defines “total expenses,” see 19

U.S.C. § 1677a(f)(2)(C)(i), and therefore “total expenses”

encompasses NTN’s EP and CEP sales. See Def.’s Mem. at 28.

Commerce further articulates that:

[Commerce’s September 4, 1997] Policy Bulletin . . .
indicates that section [1677a(f)(2)(D)] . . . clearly
states that the calculation of total actual profit is to
include all revenues and expenses resulting from the
respondent’s EP sales as well as from its CEP and home
market sales. The basis for total actual profit is the
Court No. 98-12-03232 Page 38

same as the basis for total expenses under [19 U.S.C. §
1677a(f)(2)(C)]. The first alternative under [19 U.S.C.
§ 1677a(f)(2)(C)] states that, for purposes of
determining profit, the term “total expenses” refers to
all expenses incurred with respect to the subject
merchandise sold in the United States (as well as in the
home market). Thus, where the respondent makes both EP
and CEP sales to the United States, sales of the subject
merchandise would necessarily encompass all such
transactions. Therefore, as in the 95/96 TRB Final, [63
Fed. Reg. 2558], because NTN had EP sales, [Commerce] .
. . included these sales in the calculation of CEP
profit.

Final Results, 63 Fed. Reg. at 63,866.

Timken agrees with Commerce and contends that Commerce

reasonably calculated CEP profit on the basis of all United States

sales, including EP sales. See Timken’s Resp. at 18-19.

C. Analysis

Based upon the above-defined statutory scheme, Commerce

concluded that where a respondent made both EP and CEP sales,

“sales of the subject merchandise” encompassed all such

transactions and, therefore, Commerce could “reasonably interpret[]

the statutory scheme as providing that the calculation of total

actual profit is to include all revenues and expenses resulting

from the respondent’s EP sales as well as from its CEP and home

market sales.” Def.’s Mem. at 27. Commerce’s September 4, 1997

Policy Bulletin provides:

The calculation of total actual profit under [19 U.S.C.
§ 1677a(f)(2)(D)] includes all revenues and expenses
Court No. 98-12-03232 Page 39

resulting from the respondent’s [EP] sales as well as
from its constructed export price and home market sales
. . . . The basis for total actual profit is the same as
the basis for total expenses under [19 U.S.C. §
1677a(f)(2)(C)]. The first alternative under this
section . . . states that, for purposes of determining
profit, the term “total expenses” refers to all expenses
incurred with respect to the subject merchandise sold in
the United States (as well as home market expenses).
Thus, where the respondent makes both EP and CEP [sales],
sales of the subject merchandise would encompass all such
transactions.

Def.’s Mem. at 27.

The SAA further clarifies the point and states the following:

The total expenses are all expenses incurred by or on
behalf of the foreign producer and exporter and the
affiliated seller in the United States with respect to
the production and sale of the first of the following
alternatives which applies: (1) the subject merchandise
sold in the United States and the foreign like product
sold in the exporting country (if Commerce requested this
information in order to determine the normal value and
the constructed export price) . . . .

H.R. DOC. 103-316 at 824.

Based upon its interpretation of the statutory language and

upon the SAA’s reference to CEP, NTN claims that there are only two

categories of expenses that Commerce could use in calculating CEP

profit: those used to calculate NV and those used to calculate CEP.

See NTN’s Mem. at 21. Additionally, NTN states that just as EP

expenses cannot be used in calculating CEP profit, neither can

sales revenue be used for EP sales since the definition of “total

actual profit” under 19 U.S.C. § 1677a(f)(2)(D) refers to the
Court No. 98-12-03232 Page 40

definition of “total expenses” in 19 U.S.C. § 1677a(f)(2)(C). See

id. at 21-22.

NTN, however, ignores two issues. To start, the first

category of total expenses under 19 U.S.C. § 1677a(f)(2)(C) is not

limited to expenses incurred with respect to CEP sales made in the

United States and the foreign like product sold in the exporting

country. It also covers expenses incurred with respect to EP sales

because it refers to “expenses incurred with respect to the subject

merchandise sold in the United States.” The term “subject

merchandise” is defined in 19 U.S.C. § 1677(25) as the class or

kind of merchandise that is within the scope of a review; and the

class or kind of merchandise in this review includes both CEP and

EP sales.

Second, as the SAA explains, the total expenses are all

expenses incurred with respect to the production and sale of the

first of the three alternatives. In referring to the first

category of expenses, the SAA specifically refers to “the subject

merchandise sold in the United States,” which by definition means

the class or kind of merchandise which is within the scope of a

review and, in this review, includes both CEP and EP sales. H.R.

DOC. 103-316 at 824.
Court No. 98-12-03232 Page 41

For these reasons the Court is not convinced by NTN’s argument

that Commerce’s interpretation of the statutory scheme is

unreasonable and sustains Commerce’s inclusion of EP sales in the

calculation of CEP profit. See Chevron, 467 U.S. 837.

V. Commerce’s Use of Affiliated Supplier’s Cost
of Production for Inputs When the Cost Was
Higher Than the Transfer Price

A. Background

During the review at issue, Commerce used the higher of the

transfer price or the actual cost in calculating cost of production

(“COP”) and CV in situations involving inputs that NTN had obtained

from affiliated producers. See Final Results, 63 Fed. Reg. at

63,868. In the Final Results, Commerce stated that

[Commerce] disagree[s] with NTN’s contention that it is
not appropriate for [Commerce] to rely on section [19
U.S.C. § 1677b(f)(2) (1994) and 19 U.S.C. § 1677b(f)(3)
(1994)] in [the case at bar]. [Commerce] note[s] that
section 351.407 (a) and (b) [(1998)] of [Commerce’s]
regulations sets forth certain rules that are common to
the calculation of CV and COP. This section states that
for the purpose of section [19 U.S.C. § 1677b(f)(3)] . .
. [Commerce] will determine the value of a major input
purchased from an affiliated person based on the higher
of: (1) the price paid by the exporter or producer to the
affiliated person for the major input; (2) the amount
usually reflected in sales of the major input in the
market under consideration; or (3) the cost to the
affiliated person of producing the major input.

Furthermore, [Commerce] ha[s] relied on this
methodology in [previous determinations] . . . . In
each of these determinations [Commerce] concluded that in
the case of a transaction between affiliated persons
Court No. 98-12-03232 Page 42

involving a major input, [Commerce] will use the highest
of the transfer price between the affiliated party, the
market price between unaffiliated persons involving the
major input, or the affiliated supplier’s cost of
producing this input.

Accordingly, for the Final Results, [Commerce] ha[s]
continued to rely on the higher of transfer price or
actual cost for NTN’s affiliated-party inputs when
calculating COP and CV.

Id. (citations omitted).

B. Contentions of the Parties

NTN contends that Commerce “erroneously adjusted NTN’s COP and

CV for affiliated party inputs.” NTN’s Mem. at 22; see NTN’s Mem.

at 4-5, 22-24; NTN’s Reply at 7-8. In particular, NTN maintains

that: (1) there is no record evidence that the affiliated party

inputs did “not reflect the amount usually reflected in sales of

this merchandise in the market under consideration,” NTN’s Mem. at

24, see also, NTN’s Mem. at 22-23 (relying on 19 U.S.C. §

1677b(f)(2)); and (2) the Final Results, 63 Fed. Reg. at 63,868,

“make no reference to any record evidence which would give

[Commerce] reasonable grounds to believe that the reported [COP] of

the affiliated party inputs in question was less than the actual

[COP].” NTN’s Mem. at 23. Moreover, according to NTN, a plain

language reading of 19 U.S.C. § 1677b(f) (1994) makes clear that

“the automatic recalculation of reported COP and CV data

contemplated in 19 C.F.R. § 351.407 [(1998)] is not contemplated in
Court No. 98-12-03232 Page 43

the statute itself.” Id. NTN, therefore, requests that this Court

“hold 19 C.F.R. [§] 351.407 invalid as a matter of law . . . and

remand this case to [Commerce] to restore NTN’s reported affiliated

party input data in calculating COP and CV.” NTN’s Reply at 8.

Commerce argues that its “use of the affiliated supplier’s COP

for major inputs rather than the transfer prices is supported by

substantial record evidence and otherwise in accordance with law.”

Def.’s Mem. at 30; see Def.’s Mem. at 29-40. Commerce further

argues that NTN’s contentions are without merit. See id. at 37-40.

Specifically, Commerce maintains inter alia that: (1) Commerce did

provide its reasons for conducting a below-cost sales test, see id.

at 38 (citing Preliminary Results, 63 Fed. Reg. at 37,347; Def.’s

App. Mem. Ex. 2 at 5; and (2) “Commerce has properly exercised the

discretion granted to [Commerce] in 19 U.S.C. § 1677b(f)(3) to

analyze the cost of major inputs purchased by a producer from its

affiliated suppliers when [Commerce] initiates a COP investigation

pursuant to 19 U.S.C. § 1677b(b)(1) without a separate below-COP

allegation with respect to inputs.” Def.’s Mem. at 39.

Timken supports Commerce’s position and adds that “the statute

provides Commerce the authority to request cost data for inputs.”11

11
In its reply brief, NTN maintains that “Timken has
misapprehended NTN’s argument” because “NTN does not argue that
[Commerce] may not request such data . . . [but] [i]nstead, NTN
(continued...)
Court No. 98-12-03232 Page 44

Timken’s Resp. at 22; see id. at 20-24.

C. Analysis

The special rules for the calculation of COP and CV contained

in the pertinent provision state that, in a transaction between

affiliated persons, either the transaction or the value of a major

input may be disregarded. See 19 U.S.C. § 1677b(f). The part of

the statutory provision addressing transactions that may be

disregarded reads as follows:

A transaction directly or indirectly between affiliated
persons may be disregarded if, in the case of any element
of value required to be considered, the amount
representing that element does not fairly reflect the
amount usually reflected in sales of merchandise under
consideration in the market under consideration. If a
transaction is disregarded under the preceding sentence
and no other transactions are available for
consideration, the determination of the amount shall be
based on the information available as to what the amount
would have been if the transaction had occurred between
persons who are not affiliated.

19 U.S.C. § 1677b(f)(2).

The so-called “major input rule,” or the part of the statutory

provision addressing the value of a major input that may be

disregarded, states, in turn, that,

11
(...continued)
argues that what [Commerce] did with the information was
unsupported by the statute and unreasonable.” NTN’s Reply at 8.
Therefore, the Court will not address Timken’s argument regarding
whether Commerce may request cost data for inputs.
Court No. 98-12-03232 Page 45

[i]f, in the case of a transaction between affiliated
persons involving the production by one of such persons
of a major input to the merchandise, [Commerce] has
reasonable grounds to believe or suspect that an amount
represented as the value of such input is less than the
cost of production of such input, then [Commerce] may
determine the value of the major input on the basis of
the information available regarding such cost of
production, if such cost is greater than the amount that
would be determined for such input under paragraph [19
U.S.C. § 1677b(f)(2)].

19 U.S.C. § 1677b(f)(3).

One of the elements of value to be considered in the

calculation of COP, which is referred to in Section 1677b(f)(2), is

the cost of manufacturing and fabrication. See 19 U.S.C. §

1677b(b)(3)(A) (1994). Section 1677b(b)(3)(A) shall be read in

conjunction with 19 U.S.C. §§ 1677b(f)(2) and 1677b(f)(3) that

authorize Commerce, in calculating COP and CV, to: (1) disregard a

transaction between affiliated persons if the amount representing

an element does not fairly reflect the amount usually reflected in

sales of merchandise under consideration in the market under

consideration; and (2) determine the value of the major input on

the basis of the information available regarding COP if Commerce

has reasonable grounds to believe or suspect that an amount

represented as the value of the input is less than the COP of the

input.

In determining whether transaction prices between affiliated

persons fairly reflect the market, Commerce’s practice has been to
Court No. 98-12-03232 Page 46

compare the transaction prices with market prices charged by

unrelated parties. Commerce’s practice was later reduced to

writing in 19 C.F.R. § 351.407, a regulation which implements 19

U.S.C. § 1677b(f). Commenting on the regulation, Commerce stated

that it

believes that the appropriate standard for determining
whether input prices are at arm’s length is its normal
practice of comparing actual affiliated party prices to
or from unaffiliated parties. This practice is the most
reasonable and objective basis for testing the arm’s
length nature of input sales between affiliated parties,
and is consistent with [19 U.S.C. § 1677b(f)(2)].

Def.’s Mem. at 33 n.3 (citation omitted).

Pursuant to the major input rule contained in 19 U.S.C. §

1677b(f)(3), in calculating COP or CV, Commerce values a major

input purchased from an affiliated supplier using the highest of

the following: (1) the transfer price between the affiliated

parties; (2) the market price between unaffiliated parties; and (3)

the affiliated supplier’s COP for the major input, since, in

Commerce’s view, the affiliation between the respondent and its

suppliers “‘creates the potential for the companies to act in a

manner that is other than arm’s length’ and gives Commerce reason

to analyze the transfer prices for major inputs.” Def.’s Mem. at

33-34 (quoting Final Results of Antidumping Duty Administrative

Review of Silicomanganese From Brazil, 62 Fed. Reg. 37,869, 37,871-

72 (July 15, 1997)). In addition, if Commerce disregards sales
Court No. 98-12-03232 Page 47

that failed the below-cost sales test pursuant to 19 U.S.C. §

1677b(b)(1) in the prior review with respect to merchandise of the

respondent being reviewed, Commerce has “reasonable grounds to

believe or suspect” that sales under consideration might have been

made at prices below the COP. See 19 U.S.C. § 1677b(b)(2)(A)(ii)

(1994).

Commerce disregarded sales that failed its below-cost sales

test pursuant to 19 U.S.C. § 1677b(b)(1) (1994) during the previous

review with respect to NTN’s merchandise. See Preliminary Results,

63 Fed. Reg. at 37,347; Def.’s App. Mem. Ex. 2 at 5. For this

reason, Commerce concluded that it had reasonable grounds to

believe or suspect that sales of the foreign like product under

consideration may have been made at prices below the COP. Accord

19 U.S.C. § 1677b(b)(2)(A)(ii). Therefore, pursuant to 19 U.S.C.

§ 1677b(b)(1), Commerce initiated a COP investigation of sales by

NTN in the home market. See Preliminary Results, 63 Fed. Reg. at

37,347. As part of its investigation, Commerce distributed a

questionnaire, which, in pertinent part, requested NTN to provide

COP and CV information. See Def.’s Mem. at 36. Specifically,

Commerce requested NTN to: (1) “list all inputs used to produce the

merchandise” under review; (2) “identify those inputs that NTN

received from affiliated” persons; (3) “provide the per-unit

transfer price charged for the input by the affiliated” producer;
Court No. 98-12-03232 Page 48

(4) provide “the per-unit [COP] incurred by the affiliated [person]

in producing the major input[;]” (5) “provide documentation showing

the price paid for the input by the unaffiliated purchaser” “[i]f

the affiliated party sells the identical input to other,

unaffiliated purchasers[;]” (6) “provide documentation showing the

unaffiliated party’s sales price for the input[,]” “[i]f NTN

purchases the identical input from unaffiliated suppliers[;]” and

(7) “specify the basis used by NTN to value each major input for

purposes of computing the submitted COP and CV amounts.” Id. In

response, NTN referred Commerce to a number of NTN’s exhibits and

stated, among other things, that transfer price was used in

computing COP and CV. See Def.’s Supplemental App. at D-1 to D-5.

NTN also indicated that, for submission purposes, NTN used the

transfer price for computing COP and CV. See Def.’s Mem. at 36.

Therefore, consistent with its interpretation of 19 U.S.C. §§

1677f(2) and 1677f(3), Commerce used the higher of the transfer

price or the actual cost in calculating COP and CV in the

situations where NTN used parts purchased from affiliated persons.

See id. at 36-37 (citing Def.’s App. Mem. Ex. 2 (proprietary

version)).

While NTN argues that there is no record evidence that the

affiliated party inputs did “not reflect the amount usually

reflected in sales of this merchandise in the market under
Court No. 98-12-03232 Page 49

consideration,” NTN’s Mem. at 24; see also NTN’s Mem. at 22-23

(relying on 19 U.S.C. § 1677b(f)(2)), the Court holds that Commerce

acted reasonably and in accord with 19 U.S.C. § 1677b(f)(3) when it

recalculated NTN’s COP and CV using the affiliated supplier’s COP

for inputs when it was higher than the reported transfer price.12

See Final Results, 63 Fed. Reg. at 63,868; see NSK Ltd. v. United

States, 26 CIT ___, ___, 217 F. Supp. 2d. 1291 (2002); NTN 2002, 26

CIT ___, 186 F. Supp. 2d 1257; SKF USA Inc. v. United States, 24

CIT ___, 116 F. Supp. 2d 1257 (2000).

VI. Commerce’s Recalculation of NTN’s Home Market and United
States Indirect Selling Expenses Without Regard to Level of
Trade

A. Background

In its preliminary calculations, Commerce had calculated NTN’s

United States indirect selling expenses without regard to LOT.

See Final Results, 63 Fed. Reg. at 63,869-70. NTN argued that

Commerce should have relied on NTN’s reported United States and

12
The Court does not reach NTN’s argument that 19 C.F.R. §
351.407 should be held invalid because it is “inconsistent with [19
U.S.C. § 1677b(f)] insofar as the regulation[] do[es] not require
any reasonable grounds to believe that the reported COP is less
than the actual COP.” NTN’s Mem. at 23-24. As Commerce correctly
points out, “[w]hile the regulation on its face does not require
reasonable grounds to believe or suspect that the reported COP is
less than the actual COP, in this case, Commerce had, in fact, such
reasonable grounds to believe or suspect.” Def.’s Mem. at 39
(emphasis supplied); see also Preliminary Results, 63 Fed. Reg. at
37,347; Def.’s App. Mem. Ex. 2 at 5.
Court No. 98-12-03232 Page 50

home market selling expenses based on LOT instead of recalculating

these selling expenses without regard to LOT. See id. at 63,869.

Timken, in turn, contended that Commerce should reject NTN’s

selling expense allocations based on LOT because such allocations

bear no relationship to the way in which NTN incurs the expenses.

See id. at 63,870; see also Timken’s Resp. at 25-27.

Commerce responded that for a majority of the expenses under

this POR, it determined that NTN’s methodology for allocating its

selling expenses based on LOTs did not bear any relationship to the

manner in which NTN incurred these United States and home market

selling expenses. See Final Results, 63 Fed. Reg. at 63,870.

Commerce asserts that in Timken Co. v. United States (“Timken I”),

20 CIT 645, 930 F. Supp. 621 (1996), Commerce was to accept “NTN’s

LOT-specific allocations and per-unit LOT expense adjustment

amounts only if NTN’s expenses demonstrably varied according to

LOT.” Id. (citing Timken I, 20 CIT at 653, 930 F. Supp. at 628).

Acting in accordance with Timken I, Commerce in its remand results

did not allow NTN’s LOT specific allocations “due to the lack of

quantitative and narrative evidence on the record demonstrating

that the expenses in question demonstrably varied according to

LOT.” Final Resutls, 63 Fed. Reg. at 63,870. During this POR,

since Commerce found that NTN did not provide “quantitative and

narrative evidence” that its selling expenses are attributable to
Court No. 98-12-03232 Page 51

levels of trade, except for certain United States and home market

packing material and packing labor expenses, Commerce recalculated

NTN’s United States and home market selling expenses without regard

to LOT.13 See id. at 63,870-71.

B. Contentions of the Parties

NTN alleges that in the Final Results, 63 Fed. Reg. at 63,869-

71, Commerce erroneously recalculated NTN’s United States and home

market indirect selling expenses without regard to LOT. See NTN’s

Mem. at 5, 24-27. NTN contends that Commerce’s decision to

reallocate NTN’s selling expenses violates Commerce’s mandate to

administer the antidumping laws. See id. at 26-27. In particular,

13
In support of its methodology, Commerce points out that the
Court in NTN Bearing Corp. of Am. v. United States, 19 CIT 1221,
905 F. Supp. 1083 (1995), stated that “‘[a]lthough NTN purports to
show that it incurred different selling expenses at different trade
levels, the record demonstrates that NTN’s allocation methodology
does not reasonably quantify the expenses incurred at each level of
trade.’” See Def.’s Mem. at 42 (quoting NTN, 19 CIT at 1234, 905
F. Supp. at 1094-95); see also Def.’s Mem. at 42-43.

In the Final Results, Commerce also clarified that:

[Commerce] note[s] NTN’s comment that [Commerce]
disallowed NTN’s allocations of certain home market
expenses solely due to the allegedly complex nature of
NTN’s LOT-specific methodology. It is not [Commerce’s]
current practice to reject such allocations on the basis
of complexity; however, [Commerce] inadvertently
indicated in [Commerce’s] Preliminary Analysis Memo at 7
that it is [Commerce’s] policy to do so.

Final Results, 63 Fed. Reg. at 63,870-71 (emphasis supplied).
Court No. 98-12-03232 Page 52

NTN notes that: (1) “[t]here is ample evidence on the record for

[Commerce] to determine that indirect selling expenses, in fact,

varied across levels of trade,” id. at 25 (relying on NTN’s App.

Mem. Attach. 6 at Exs. B-3, B-4 and C-7) (proprietary version); and

(2) Commerce has accepted NTN’s methodology of allocating its

selling expenses based on LOT in previous reviews. NTN’s Mem. at

26 (citing Final Results of Antidumping Duty Administrative Reviews

and Revocation in Part of an Antidumping Finding on Tapered Roller

Bearings and Parts Thereof, Finished and Unfinished, From Japan and

Tapered Roller Bearings, Four Inches or Less in Outside Diameter,

and Components Thereof, From Japan, 61 Fed. Reg. 57,629, 57,636

(Nov. 7, 1996)). Moreover, NTN contends that such reallocation has

the effect of voiding Commerce’s LOT determination that different

LOTs exist in the United States and Japan. See NTN’s Mem. at 26.

Commerce responds that except for certain United States and

home market packing material and packing labor expenses,

“‘[Commerce] denied NTN’s allocations because the record lacked

quantitative and narrative evidence that the expenses in question

varied demonstrably according to LOT.’” Def.’s Mem. at 41 (quoting

Final Results, 63 Fed. Reg. at 63,871). Commerce asserts that NTN

only quantified the allocation itself and, therefore, the Court

should sustain Commerce’s recalculation of NTN’s United States and

home market selling expenses. See Def.’s Mem. at 43.
Court No. 98-12-03232 Page 53

Timken supports Commerce and argues that Commerce was correct

in rejecting NTN’s allocation of United States and home market

selling expenses on an LOT specific basis because “there was no

evidence demonstrating that NTN’s expenses varied according to

level of trade.” Timken’s Resp. at 25; see also Timken’s Resp. at

25-27.

C. Analysis

The Court disagrees with NTN that it adequately supported its

LOT adjustment claim for its reported United States and home market

selling expenses. Although NTN purports to show that it incurred

different selling expenses at different trade levels, the evidence

to which it points does not show that its allocation methodology

reasonably quantifies the United States and home market selling

expenses incurred at different LOTs. See NSK Ltd., 26 CIT at ___,

217 F. Supp. 2d. at 1323; NTN 2002, 26 CIT at ___, 186 F. Supp. 2d

at 1267-68; NTN 2000, 24 CIT at ___, 104 F. Supp. 2d at 131-33;

NTN, 19 CIT at 1234, 905 F. Supp. at 1094-95. Given that NTN had

the burden before Commerce to establish its entitlement to an LOT

adjustment, its failure to provide the requisite evidence compels

the Court to conclude that it has not met its burden of

demonstrating that Commerce’s denial of the LOT adjustment was not

supported by substantial evidence and was not in accordance with

law. See NSK Ltd. v. United States, 21 CIT 617, 635-36, 969 F.
Court No. 98-12-03232 Page 54

Supp. 34, 53-54 (1997), aff’d, NSK Ltd. v. Koyo Seiko Co., Ltd.,

190 F.3d 1321, 1330 (Fed. Cir. 1999).

Accordingly, the Court sustains Commerce’s recalculation of

NTN’s United States and home market selling expenses without regard

to level of trade.

VII. Commerce’s Denial of Price-Based LOT Adjustment for CEP Sales

NTN contends that Commerce improperly denied a price-based LOT

adjustment for CEP sales made in the United States market at an LOT

different from the home market sales.14 See NTN’s Mem. at 5, 27-29;

NTN’s Reply at 11-12. In particular, NTN argues, inter alia, that

Commerce incorrectly determined NTN’s CEP LOT because Commerce

failed to use the sale to the first unaffiliated purchaser in the

United States to determine NTN’s CEP LOT. See NTN’s Mem. at 28.

In other words, according to NTN, if Commerce had used the CEP

starting price, that is, without any 19 U.S.C. § 1677a(d)

adjustment, to determine CEP LOT, NTN would have satisfied the

statutory requirements for an LOT adjustment for its CEP sales.

See NTN’s Reply at 11-12. Relying on Borden, Inc. v. United

States, 22 CIT 233, 4 F. Supp. 2d 1221 (1998), rev’d, 2001 WL

14
For a complete discussion of background information and the
statutory provisions at issue, the reader is referred to this
Court’s decision in NTN 2000, 24 CIT at ___, 104 F. Supp. 2d at
125-28.
Court No. 98-12-03232 Page 55

312232 (Fed. Cir. Mar. 12, 2001), NTN argues that Commerce erred by

determining the CEP level of trade after deducting expenses and

profit pursuant to 19 U.S.C. § 1677a(d). See NTN’s Mem. at 28-29;

NTN’s Reply at 9-11. NTN, therefore, requests that the Court

remand the LOT issue to Commerce to determine NTN’s CEP LOTs prior

to any 19 U.S.C. § 1677a(d) deductions and, afterwards, to grant

NTN a price-based LOT adjustment for its CEP sales. See NTN’s Mem.

at 29; NTN’s Reply at 10-12.

Commerce, in turn, argues that it properly determined the LOT

for NTN’s CEP sales after deducting expenses and profit from the

price to the first unaffiliated purchaser in the United States

pursuant to 19 U.S.C. § 1677a(d) because 19 U.S.C. §

1677b(a)(7)(A), which provides for an LOT adjustment, requires

Commerce to compare CEP, not the “unadjusted” starting price of

CEP, with NV. See Def.’s Mem. at 43, 45-60; Final Results, 63 Fed.

Reg. at 63,871. Commerce points out that CEP is defined in 19

U.S.C. § 1677a(b) (1994) as the price to the unaffiliated purchaser

in the United States as adjusted under 19 U.S.C. § 1677a(d). See

Def.’s Mem. at 46-47. According to Commerce, the adjusted CEP

price is to be compared to prices in the home market based on the

same LOT whenever it is practicable; when it is not practicable and

the LOT difference affects price comparability, Commerce makes an

LOT adjustment. See id. at 49-50. Commerce makes a CEP offset
Court No. 98-12-03232 Page 56

when Commerce “is not able to quantify price differences between

the CEP [LOT] and the [LOT] of the comparison sales, and if NV is

established at a more advanced stage of distribution than the CEP

[LOT].” Id. at 50. If the CEP price is not adjusted before it is

compared under the approach advocated by NTN, “there will always be

substantial deductions from the resale prices in the United States

(because they are mandatory),” but they “will be compared to resale

prices in the home market from which there will virtually never be

any equivalent deductions,” thus creating a substantial imbalance

and a skewed comparison between NV and CEP. Id. at 54 (emphasis in

original).

Therefore, Commerce claims that it properly denied an LOT

adjustment for NTN’s CEP sales because NTN did not have a home

market LOT equivalent to the CEP LOT, making it impossible for

Commerce to quantify the difference in price between the CEP LOT

and the home market LOT. See id. at 43-44 (citing Def.’s App. Mem.

Ex. 2 at 6-7) (proprietary version); see also Final Results, 63

Fed. Reg. at 63,871. Because the home market LOT was at a more

advanced stage of distribution than the CEP LOT, Commerce made a

CEP offset pursuant to 19 U.S.C. § 1677b(a)(7)(B). See Def.’s Mem.

at 44, 61 (citing Def.’s App. Mem. Ex. 2 at 6-7) (proprietary

version).
Court No. 98-12-03232 Page 57

Timken generally agrees with Commerce’s positions. See

Timken’s Resp. at 28-30.

In Micron Tech., Inc. v. United States, 243 F.3d 1301 (Fed.

Cir. 2001), the Court of Appeals for the Federal Circuit (“CAFC”)

held that the plain text of the antidumping statute and the SAA

require Commerce to deduct the expenses enumerated under 19 U.S.C.

§ 1677a(d) before making the LOT comparison.15 The court examined

19 U.S.C. § 1677b(a)(1)(B)(i) (1994), which provides that Commerce

must establish NV “to the extent practicable, at the same level of

trade as the export price or [CEP],” and 19 U.S.C. § 1677a(b),

which defines CEP as “the price at which the subject merchandise is

first sold (or agreed to be sold) in the United States . . .as

adjusted under subsections (c) and (d) of this section.” (Emphasis

supplied). The court concluded that, “[as] [r]ead together, these

two provisions show that Commerce is required to deduct the

subsection (d) expenses from the starting price in the United

States before making the level of trade comparison.” Micron, 243

F.3d at 1315. The court further stated that this conclusion is

mandated by the SAA, which states that “‘to the extent practicable,

[Commerce should] establish normal value based on home market (or

15
The CAFC’s decision effectively overturned the Court of
International Trade’s determination with respect to this issue in
Borden, 22 CIT 233, 4 F. Supp. 2d 1221, a case discussed by the
parties in the instant matter.
Court No. 98-12-03232 Page 58

third country) sales at the same level of trade as the constructed

export price or the starting price for the export price.’” Id.

(citing SAA at 829) (emphasis omitted).

Thus, the Court finds that Commerce properly made 19 U.S.C. §

1677a(d) adjustments to NTN’s starting price in order to arrive at

CEP and make its LOT determination. The Court also finds that

Commerce’s decision to deny NTN an LOT adjustment is supported by

substantial evidence. Section 1677b(a)(7)(A) permits Commerce to

make an LOT adjustment “if the difference in level of trade . . .

involves the performance of different selling activities[] and . .

. is demonstrated to affect price comparability, based on a pattern

of consistent price differences between sales at different levels

of trade in the country in which normal value is determined.” With

respect to CEP sales, Commerce, examined the record and found that

“NTN had no home market level of trade equivalent to the CEP level

of trade because there were significant differences between the

selling activities associated with the CEP and those associated

with each of the home market levels of trade.” Def.’s Mem. at 43

(citing Def.’s App. Mem. Ex. 2 at 6-7) (proprietary version). “As

a result, because [Commerce] lacked the information necessary to

determine whether there is a pattern of consistent price

differences between the relevant LOTs, [Commerce] did not make a

LOT adjustment for NTN when [Commerce] matched a CEP sale to a sale
Court No. 98-12-03232 Page 59

of the foreign like product at a different LOT.” Final Results, 63

Fed. Reg. at 63,871. Moreover, “Commerce had no other information

that provided an appropriate basis for determining a level-of-trade

adjustment.” Def.’s Mem. at 60-61; see also SAA at 830. Con-

sequently, with respect to the CEP sales where Commerce was unable

to quantify an LOT adjustment, Commerce, in accordance with 19

U.S.C. § 1677b(a)(7)(B), granted a CEP offset to NTN because the

home market sales were at a more advanced LOT than the sales to the

United States. See id. at 44, 61; see also Def.’s App. Mem. Ex. 2

at 7. Based on the foregoing, the Court finds that Commerce acted

within the directive of the statute in denying the LOT adjustment

and granting a CEP offset instead. See 19 U.S.C. § 1677b(a)(7).

VIII. Commerce’s Exclusion of Certain Home Market Sales
to Affiliated Parties From the Normal Value Calculation

A. Background

During the POR, Commerce conducted its standard arm’s length

test in order to determine whether NTN’s affiliated party sales

could be used for purposes of calculating NV. See Final Results,

63 Fed. Reg. at 63,872; see also Preliminary Results, 63 Fed. Reg.

at 37,346-47 (setting forth Commerce’s 99.5% arm’s length test).

Commerce, in accordance with 19 U.S.C. § 1677b(a)(5)(1994) and 19

C.F.R. § 351.403(c) (1998), disregarded those NTN sales made to

affiliated customers in its computation of NV which were not at
Court No. 98-12-03232 Page 60

arm’s length. See Preliminary Results, 63 Fed. Reg. at 37,346; see

also Final Results, 63 Fed. Reg. at 63,871-72; Def.’s Mem. at 5,

61-65.

B. Contentions of the Parties

NTN contends that Commerce erred in applying the arm’s length

test when it “compare[d] the weighted average price for unrelated

sales to the price for individual related sales.” NTN’s Mem. at

29. To illustrate its contention, NTN provides a hypothetical

example attempting to demonstrate that Commerce’s arm’s length test

is distortive. See id. at 30. Alternatively, NTN asserts that,

should Commerce choose to retain its methodology of comparing

individual sales to a weighted average margin, Commerce should

lower the percentage of the arm’s length test to “95% to reflect

the true range of arm’s length prices in these transactions and

compensate for the distortive nature of the test.” Id.

NTN also argues that Commerce’s arm’s length test was

unreasonable since Commerce should have examined factors other than

price in determining whether to include affiliated party sales when

calculating NV. See NTN’s Mem. at 30-31. Specifically, NTN

contends that Commerce failed to examine: (1) “quantity of goods”;

and (2) “payment terms.” Id.; see also NTN’s Reply at 18-19.
Court No. 98-12-03232 Page 61

Commerce responds that 19 U.S.C. § 1677b(a)(5) provides that:

[i]f the foreign like product is sold or, in the absence
of sales, offered for sale through an affiliated party,
the prices at which the foreign like product is sold (or
offered for sale) by such affiliated party may be used in
determining normal value.

Def.’s Mem. at 63 (quoting 19 U.S.C. § 1677b(a)(5) (emphasis in

original)).

Relying on the language of 19 U.S.C. § 1677b(a)(5), Commerce

argues that it has “broad discretion in devising its own

methodology for determining when to use affiliated-party prices in

determining NV.”16 Def.’s Mem. at 63. Moreover, in the Final

Results, Commerce states that

[Commerce’s] 99.5 percent arm’s-length test is a
reasonable method for establishing a fair basis of
comparison between affiliated- and unaffiliated-party
sales. . . . Furthermore, the CIT has upheld the
validity of [Commerce’s] arm’s-length test on numerous
occasions. . . .

NTN has not provided any information on the record
to support its assertion that [Commerce’s] arm’s-length
test is distortive or unreasonable. Therefore, because

16
In addition, Commerce points out the regulation provides
the following:

If an exporter or producer sold the foreign like product
to an affiliated party, [Commerce] may calculate normal
value based on that sale only if satisfied that the price
is comparable to the price at which the exporter or
producer sold the foreign like product to a person who is
not affiliated with the seller.

Def.’s Mem. at 63 (quoting 19 C.F.R. § 351.403(c)).
Court No. 98-12-03232 Page 62

NTN has failed to demonstrate that the 99.5 percent
threshold produces distortive results or that
[Commerce’s] methodology is unreasonable, in accordance
with the CIT decisions . . . and the 95/96 TRB Final, [63
Fed. Reg. 2558], [Commerce] ha[s] not altered
[Commerce’s] 99.5 percent arm’s-length test for these
final results.

Id. at 61-62 (quoting Final Results, 63 Fed. Reg. at 63,872, citing

in turn Micron Tech., Inc. v. United States, 19 CIT 829, 846-47,

893 F. Supp. 21, 38 (1995), NTN, 19 CIT at 1241, 905 F. Supp. at

1100, Usinor Sacilor v. United States, 18 CIT 1155, 1159, 872 F.

Supp. 1000, 1004 (1994)); see also Def.’s Mem. at 65 (citing NTN

Bearing Corp. of Am. v. United States, 23 CIT 486, 497-99, 83 F.

Supp. 2d 1281, 1291-92 (1999), and NSK Ltd., 21 CIT at 636-37, 969

F. Supp. at 54-55). Timken supports Commerce’s contentions. See

Timken’s Resp. at 31-34.

C. Analysis

The Court disagrees with NTN that Commerce’s arm’s length test

is unreasonable. In NTN 2002, 26 CIT at ___, 186 F. Supp. 2d at

1288, this Court upheld Commerce’s application of the arm’s length

test to exclude certain home market sales to affiliated parties

from the NV calculation. The Court noted that under the applicable

statute, 19 U.S.C. § 1677b(a)(5), Commerce is allowed considerable

discretion in deciding whether to include affiliated party sales

when calculating NV. See NTN 2002, 26 CIT at ___, 186 F. Supp. 2d

at 1287 (citing Usinor, 18 CIT at 1158, 872 F. Supp. at 1004). The
Court No. 98-12-03232 Page 63

Court further noted that it has repeatedly upheld Commerce’s arm’s

length test on the basis that respondents have failed to present

“‘record evidence tending to show that . . . Commerce’s test was

unreasonable.’” Id., 26 CIT at ___, 186 F. Supp. 2d at 1287

(quoting NTN, 19 CIT at 1241, 905 F. Supp. at 1100, and citing

Torrington Co. v. United States, 21 CIT 251, 261, 960 F. Supp. 339,

348 (1997), NSK Ltd., 190 F.3d at 1328).

Because Commerce’s application of the arm’s length test to

exclude certain home market sales to affiliated parties from the NV

calculation and the parties’ arguments are practically identical to

those presented in NTN 2002, 26 CIT at ___, 186 F. Supp. 2d at

1287-88, the Court adheres to its reasoning in NTN 2002.

Accordingly, the Court finds that Commerce’s application of the

arm’s length test to exclude certain home market sales to

affiliated parties from the NV calculation is reasonable, is in

accordance with law and is supported by substantial evidence.

IX. Commerce’s Decision to Include in United States Sales Database
Sample Transactions That Were Allegedly Made for No
Consideration

A. Background

In order to calculate a respondent’s margin of dumping,

Commerce compares NV with export price (“EP”) or CEP. EP and CEP

are defined in 19 U.S.C. § 1677a(a) and (b) (1994), respectively.
Court No. 98-12-03232 Page 64

Each definition refers to the price at which the subject

merchandise “is first sold . . . .” 19 U.S.C. § 1677a(a) and (b)

(emphasis supplied). In NSK Ltd. v. United States, 115 F.3d 965

(Fed. Cir. 1997), the CAFC held that the usage of the term “sale”

in 19 U.S.C. § 1677a(a) and (b) indicates a reference to a

transaction involving a material consideration. Specifically, the

CAFC clarified that, in order to be considered a sale within the

meaning of the antidumping law, a transaction must involve “both a

transfer of ownership to an unrelated party and consideration.”

NSK, 115 F.3d at 975.

In accordance with NSK, 115 F.3d at 975, Commerce revised its

policy with respect to sales of sample products. In the Final

Results, Commerce explained:

In light of the CAFC’s opinion, [Commerce] ha[s]
revised [its] policy with respect to [sales of] samples.
[Commerce] will now exclude from its dumping calculations
sample transactions for which a respondent has
established that there is either no transfer of ownership
or no consideration.

This new policy does not mean that [Commerce]
automatically will exclude from its analysis any
transaction to which a respondent applies the label
“sample.” In fact, for these reviews, [Commerce]
determined that there were instances where it [was]
appropriate not to exclude such alleged samples from
[Commerce’s] dumping analysis. It is well-established
that the burden of proof rests with the party making a
claim and in possession of the needed information.

Final Results, 63 Fed. Reg. at 63,872 (citations omitted); see,

e.g., Later Ruling, 62 Fed. Reg. at 54,070.
Court No. 98-12-03232 Page 65

During the review at issue, NTN responded to Commerce’s

questionnaire regarding NTN’s sample sales by stating that the

“[s]amples [were] provided to customers for the purpose of allowing

the customer to determine whether a particular product is suited to

the customer’s needs,” NTN’s App. Mem. Attach. 6 at B-14

(proprietary version), and described NTN’s process of furnishing

samples as follows: (1) “customers request [s]ample [s]ales,” id.;

(2) “[s]ample [s]ales . . . have the letters ‘SS’ in the prefix to

the” recorded order number, id. at B-15; (3) although “[t]he

customers may have purchased the same model previously, . . . this

does not affect the status of subsequent sales as samples, since

the purpose of the sample purchase would not be the same as those

purchased in the normal course of trade [because], [f]or example,

a sample would be requested for use in a new application,” id.; and

(4) “NTN does not keep records of the relative prices of sample

sales and normal sales [and] is the manufacturer of all products

sent as samples.” Id. NTN also provided Commerce with a

supplemental questionnaire response which it now cites to “as

documentation of several zero-priced sample sales.” NTN’s Mem. at

32 (citing NTN’s App. Mem. Attach. 2 at B1) (proprietary version).

In the Final Results,

[Commerce] examined the record to determine whether NTN’s
[United States] samples lacked consideration and were
unable to find any information whatsoever in either NTN’s
narrative or sales database regarding sample
Court No. 98-12-03232 Page 66

transactions. . . . Because NTN did not provide any
information in its response or elsewhere that would have
aided [Commerce] in determining whether NTN received
anything of value from its [United States] customers for
the transactions in question, [Commerce] cannot conclude
that NTN received no consideration for these alleged
samples. While NTN’s database does include sales which
are zero-priced, [Commerce] [is] unable to determine from
the record if these transactions represent the sales
which NTN apparently argues should be excluded from the
[United States] database in accordance with the NSK[,115
F.3d 965] decision. Furthermore, the mere fact that a
sale has a reported unit price of zero does not establish
that a transaction lacked exchange of consideration. . .
. As is evident in [Commerce’s] September 15, 1997
redetermination pursuant to [NSK Ltd., 21 CIT 617, 969 F.
Supp. 34] decision, NSK in that case established that its
zero-priced transactions were free samples or promotional
expenses, and not sales. By contrast, in this review NTN
has not provided any detailed information on the record
demonstrating that its alleged zero-priced transactions
were in fact samples and lacked an exchange of
consideration.

[Commerce] ha[s] also evaluated whether NTN’s
alleged home market sample sales qualify for exclusion
from the home market database in light of the CAFC’s
NSK[,115 F.3d 965] decision. . . . [Commerce] exclude[s]
sample transactions from dumping calculations only if a
respondent has demonstrated either that there is no
transfer of ownership or no consideration. Because
evidence on the record clearly indicates that NTN
received consideration for all home market sales it
claims are samples, none of its home market sample sales
meet either criteria for exclusion established by
NSK[,115 F.3d 965]. . . .

Therefore, because NTN’s alleged [United States] and
home market sample sales do not qualify for exclusion
under NSK[,115 F.3d 965], [Commerce] ha[s] included these
sales in [Commerce’s United States] and home market
databases for these final results.

Final Results, 63 Fed. Reg. at 63,872-73 (citations omitted).
Court No. 98-12-03232 Page 67

B. Contentions of the Parties

NTN contends that Commerce acted contrary to NSK, 115 F.3d

965, when it included NTN’s zero-priced sample sales in NTN’s

United States sales database. See NTN’s Mem. at 6, 33; NTN’s Reply

at 12. NTN argues that Commerce’s “refusal to accept NTN’s

submitted sample sales documentation and explanation of these sales

because NTN cannot prove that consideration was not present is

unreasonable and an abuse of discretion.” NTN’s Mem. at 32;

see id. (citing NTN’s App. Mem. Attachs. 2 and 6 (proprietary

version)). Moreover, NTN asserts that: (1) “NTN provided complete

sales data for all [United States] transactions in its [United

States] database, including zero-priced-sample transactions[;] .

. . [2] NTN provided a complete narrative for Section C of

[Commerce’s] questionnaire which detailed its selling practices in

the United States[;] . . . [and] [3] NTN fully addressed all [of

Commerce’s] requests for information regarding its [United States]

transactions.” NTN’s Reply at 13 (citing NTN’s Reply Attach. 2)

(proprietary version).

Commerce responds that “Commerce properly included in NTN’s

[United States] and home market sales databases sample sales for

which NTN alleged that it received no consideration.” Def.’s Mem.

at 65. Specifically, Commerce maintains that: (1) with regards to

Commerce’s inclusion of NTN’s zero-priced sample sales in NTN’s
Court No. 98-12-03232 Page 68

United States sales database, “Commerce was unable to find any

information that would have aided it in determining whether NTN

received anything of value from its [United States] customers[,]”

and (2) with regards to Commerce’s inclusion of NTN’s sample sales

in NTN’s home market sales database, “the evidence on the record

indicated that NTN received consideration for all home market sales

it claims were samples.” Def.’s Mem. at 65 (citing Final Results,

63 Fed. Reg. at 63,872-73); see also Def.’s Mem. at 65-69. Timken

supports Commerce’s position and asserts that

NTN[] [had] the burden to come forward with information
showing that it made zero-priced sample sales without
receiving any consideration. NTN, however, provided no
relevant information and thus NTN failed to carry its
burden. In its brief, NTN cites to its questionnaire
response and supplemental response in claiming that it
described and documented zero-price sales, but those
references are not relevant as they concern home market
sales, not [United States] sales.

Timken’s Resp. at 36 (citing NTN’s Mem. at 32, citing in turn NTN’s

App. Mem. Attachs. 2 and 6 (proprietary version)); see also

Timken’s Resp. at 35-37.

C. Analysis

Commerce is correct in its reading of the language of NSK, 115

F.3d at 975, as stating that Commerce is not obligated to exclude

any transaction from the United States sales database merely

because such transaction is labeled as a sample sale. See Def.’s

Mem. at 66, 67. Similarly, Commerce is correct in its conclusion
Court No. 98-12-03232 Page 69

that nothing in the statutory mandate or in the holding of NSK, 115

F.3d at 975, “preclude[s] Commerce from requiring a party to

demonstrate that it received no consideration in return for the

samples.” Id. at 67.

During the review at issue, Commerce included NTN’s sample

sales in NTN’s home market sales database because it determined

that “the evidence on the record indicated that NTN received

consideration for all home market sales [NTN] claims were samples.”

Def.’s Mem. at 65; see also Final Results, 63 Fed. Reg. at 63,873.

Moreover, in the Final Results, Commerce explained that it included

NTN’s zero-priced sample sales in NTN’s United States sales

database by stating that

[Commerce] examined the record to determine whether NTN’s
[United States] samples lacked consideration and were
unable to find any information whatsoever in either NTN’s
narrative or sales database regarding sample
transactions. . . . Because NTN did not provide any
information in its response or elsewhere that would have
aided [Commerce] in determining whether NTN received
anything of value from its [United States] customers for
the transactions in question, [Commerce] cannot conclude
that NTN received no consideration for these alleged
samples. While NTN’s database does include sales which
are zero-priced, [Commerce] [is] unable to determine from
the record if these transactions represent the sales
which NTN apparently argues should be excluded from the
[United States] database . . . . [I]n this review NTN
has not provided any detailed information on the record
demonstrating that its alleged zero-priced transactions
were in fact samples and lacked an exchange of
consideration.

Final Results, 63 Fed. Reg. at 63,872-73 (citations omitted); see
Court No. 98-12-03232 Page 70

also Def.’s Mem. at 65, 67-69. Commerce included NTN’s claimed

sample sales in NTN’s United States sales database because Commerce

expected NTN, the party in possession of the pertinent information,

to carry the burden of producing that information, particularly

when NTN was seeking a favorable adjustment or exclusion.

See Final Results, 63 Fed. Reg. at 63,872; Def.’s Mem. at 68-69.

The Court finds that Commerce’s decision to include the

samples designated by NTN as sample ones in NTN’s United States and

home market sales databases is reasonable. Commerce is correct in

its observation that “[i]t is well settled that the party in

possession of information has the burden of producing that

information in order to obtain a favorable adjustment or

exclusion.” Def.’s Mem. at 69 (relying on NTN Bearing, 23 CIT 486,

83 F. Supp. 2d 1281, and Zenith Elecs. Corp. v. United States, 988

F.2d 1573, 1583 (Fed. Cir. 1993)). In the case at bar, NTN was the

party either in possession of the information regarding the

purchase history of its alleged samples, including the price and

quantity for any prior or subsequent purchases of these products by

the same or other customers, or the party obligated to create and

preserve such information in order to obtain a more favorable

margin. NTN’s failure to either trace or supply such information

to Commerce does not impose an obligation on Commerce to interpret

the gaps of information in NTN’s favor. Indeed, the statutory
Court No. 98-12-03232 Page 71

mandate and the language of NSK, 115 F.3d at 975, apply only to

those situations when a respondent can show that the transaction at

issue was a sample sale for no consideration. Neither the statute

nor NSK, 115 F.3d at 975, encompasses the infinite variety of

situations where Commerce could hypothesize that the transactions

under review could have been sample sales for no consideration.

Therefore, since the record does not contain necessary

information, Commerce could reasonably conclude that the

information missing would indicate that the transactions at issue

were not sample sales for no consideration within the meaning of 19

U.S.C. § 1677a(a) and (b) and NSK, 115 F.3d 965. See NSK Ltd., 26

CIT at ___, 217 F. Supp. 2d. at 1311-12. For these reasons, the

Court affirms Commerce’s decision to include NTN’s alleged samples

in Commerce’s final dumping margin calculation.

X. Commerce’s Inclusion of Certain NTN Sales Allegedly Outside
the Ordinary Course of Trade

A. Background

The pertinent section of the United States Code states that NV

be based on “the price at which the foreign like product is first

sold . . . in the ordinary course of trade . . . .” 19 U.S.C. §

1677b(a)(1)(B)(i). Section 1677b(e)(2)(A) of Title 19 provides

that CV be calculated in part, by using “amounts incurred and

realized by the . . . producer [under] . . . review . . . in
Court No. 98-12-03232 Page 72

connection with the production and sale of a foreign like product,

in the ordinary course of trade, for consumption in the foreign

country . . . .” 19 U.S.C. § 1677b(e)(2)(A) (1994). The term

“ordinary course of trade” is defined as

conditions and practices which, for a reasonable time
prior to the exportation of the subject merchandise, have
been normal in the trade under consideration with respect
to merchandise of the same class or kind. [Commerce]
shall consider the following sales and transactions,
among others, to be outside the ordinary course of trade:
(A) Sales disregarded under [19 U.S.C. §]
1677b(b)(1)[;]
(B) Transactions disregarded under [19 U.S.C. §]
1677b(f)(2).

19 U.S.C. § 1677(15) (1994) (emphasis supplied).

Section 1677b(b)(1), in turn, addresses the issue of below-

cost sales. Section 1677b(f)(2) deals with the issue of affiliated

parties. While both 19 U.S.C. § 1677b(b)(1) and 19 U.S.C. §

1677b(f)(2) are irrelevant to the part of the determination being

reviewed since neither below-cost sales nor transactions between

affiliated parties were involved, there is a question as to what

other transactions Commerce could consider to fall outside the

“ordinary course of trade.” Examining the statutory language,

Commerce concluded that the term “among others” indicated that

sales or transactions other than those involving below-cost sales

or transactions between affiliated parties could be considered

outside the “ordinary course of trade.” See Def.’s Mem. at 70.
Court No. 98-12-03232 Page 73

Moreover, Commerce concluded that the usage of the term “among

others” without particular definition of such “other” transactions

indicated that Congress intended to grant Commerce broad discretion

on the issue and enabled Commerce to devise an appropriate

methodology for determining when sales are to be considered as

outside the ordinary course of trade. See id. at 71. Commerce’s

interpretation of the statutory mandate relied on an explanation

contained in the SAA which provides that aside from 19 U.S.C. §§

1677b(b)(1) and f(2):

Commerce may consider other types of sales or
transactions to be outside the ordinary course of trade
when such sales or transactions have characteristics that
are not ordinary as compared to sales or transactions
generally made in the same market. Examples of such
sales or transactions include merchandise produced
according to unusual product specifications [or]
merchandise sold at aberrational prices . . . . [Section
1677(15)] does not establish an exhaustive list, but [the
statutory scheme] intends that Commerce will interpret
[19 U.S.C. § 1677(15)] in a manner which will avoid
basing normal value on sales which are extraordinary for
the market in question, particularly when the use of such
sales would lead to irrational or unrepresentative
results.

H.R. Doc. 103-316 at 834 (emphasis supplied).

Therefore, in the case at bar, “Commerce exercised its

discretion and determined that NTN’s highly profitable sales and

sample sales for which NTN received consideration were not

demonstrated to be outside the ordinary course of trade.” Def.’s

Mem. at 71-72.
Court No. 98-12-03232 Page 74

B. Contentions of the Parties

NTN contends that Commerce erred when it failed to exclude

NTN’s home market sales with unusually high profit levels and home

market sample sales from Commerce’s margin calculations and CV

profit calculation, despite what NTN considers to be sufficient

evidence on record indicating that these transactions were outside

the ordinary course of trade. See NTN’s Mem. at 6-7, 34-37; NTN’s

Reply at 14-17. In particular, NTN asserts that the evidence on

the record includes: (1) an NTN submitted exhibit which provides a

profit chart and identifies sample sales with unusual profits that

NTN considers outside of the ordinary course of trade, see NTN’s

Mem. at 34 (citing NTN’s App. Mem. Attach. 6 (proprietary

version)); NTN’s Reply at 15 (citing NTN’s Reply Attach. 3

(proprietary version)); (2) NTN’s questionnaire response explaining

that “samples sales are only provided for one reason--to help a

customer determine whether a particular bearing suits a particular

application[,]” NTN’s Reply at 16 (citing NTN’s Reply Attach. 5

(proprietary version)); (3) NTN’s “sample sales [that] are

specifically recorded in NTN system’s when they are made using [a

certain] prefix,” NTN’s Reply at 16; and (4) an exhibit provided

to Commerce by NTN depicting “a price comparison by part number of

non-zero-priced sample sales and sales in the ordinary course of

trade.” NTN’s Mem. at 35.
Court No. 98-12-03232 Page 75

Commerce asserts that Commerce’s determination was a

reasonable application of the statutory mandate and supported by

substantial evidence. See Def.’s Mem. at 69-79. Commerce argues

that the evidence provided by NTN fails to demonstrate that such

sales were, in fact, outside the ordinary course of trade. See id.

at 74-79. In particular, Commerce contends that: (1) “the presence

of profits higher than those of other sales does not necessarily

place the sales outside the ordinary course of trade[,]” id. at 76;

and (2) “the mere fact that particular sales are labeled as sample

sales and are made in small quantities does not require Commerce to

treat them as sales made outside the ordinary course of trade . .

. .” Id. at 77; see also id. at 78-79.

Timken supports Commerce’s position and states that NTN “bears

the burden of proving that . . . sales are not in the ordinary

course of trade . . . [and that] NTN [has] failed to show that home

market sample sales and high-profit sales were outside the ordinary

course of trade.” Timken’s Resp. at 38; see also id. at 38-42.

C. Analysis

In determining whether a sale is outside the ordinary course

of trade, Commerce must consider not just “one factor taken in

isolation but rather . . . all the circumstances particular to the

sales in question.” Murata Mfg. Co. v. United States, 17 CIT 259,
Court No. 98-12-03232 Page 76

264, 820 F. Supp. 603, 607 (1993). Commerce’s methodology for

making this determination is codified in section 351.102(b) of

Commerce’s regulations. See 19 C.F.R. § 351.102(b) (1998); see

also Torrington Co. v. United States, 25 CIT ___, ___, 146 F. Supp.

2d 845, 860-63 (2001) (detailing Commerce’s methodology for

deciding when sales are outside the “ordinary course of trade” and

finding both Commerce’s interpretation of 19 U.S.C. § 1677(15) and

Commerce’s methodology reasonable). Moreover, the court in Koenig

& Bauer-Albert AG v. United States, 22 CIT 574, 589, 15 F. Supp. 2d

834, 850 (1998), vacated on other grounds, 259 F.3d 1341 (Fed. Cir.

2001), articulated that “Commerce has the discretion to decide

under what circumstances highly profitable sales would be

considered to be outside the ordinary course of trade,” but also

recognized that Commerce cannot “impose this requirement

arbitrarily.” Koenig, 22 CIT at 589 n.8, 15 F. Supp. 2d at 850

n.8. Additionally, the plaintiff has the burden of proving whether

the sales used in Commerce’s calculations are outside the ordinary

course of trade. See, e.g., Nachi-Fujikoshi Corp. v. United

States, 16 CIT 606, 608, 798 F. Supp. 716, 718 (1992) (citations

omitted).
Court No. 98-12-03232 Page 77

1. Commerce’s Inclusion of Certain NTN Sales
Allegedly Outside the Ordinary Course of
Trade in Commerce’s Margin Calculations

The first issue is whether Commerce reasonably included sample

sales and sales with high profit levels in the margin calculation

of NTN’s home market sales, instead of determining that such sales

were outside the ordinary course of trade, and accordingly

excluding them. During the POR, in its questionnaire to NTN,

Commerce stated:

If [NTN] consider[s] a sale to be outside the
ordinary course of trade, report “YES” in this field. If
the sale was in the ordinary course of trade, report a
“NO.” If [NTN] claim[s] that any of [its] home market
sales are outside the ordinary course of trade [NTN] must
provide a detailed explanation why. Please note that the
burden of proof is on [NTN] to demonstrate, through
narrative explanati

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/818989. Public record. Not legal advice.