Nsk Ltd. v. United States

Slip Op. 03-05

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS

________________________________________

:

NSK LTD. and NSK CORPORATION; :

NTN BEARING CORPORATION OF AMERICA, :

AMERICAN NTN BEARING MANUFACTURING :

CORPORATION, NTN BOWER CORPORATION and :

NTN CORPORATION; KOYO SEIKO CO., LTD. :

and KOYO CORPORATION OF U.S.A., :

:

Plaintiffs and :

Defendant-Intervenors, :

: Consol. Court No.

v. : 00-04-00141

:

UNITED STATES, :

:

Defendant, :

:

and :

:

THE TIMKEN COMPANY, :

:

Defendant-Intervenor :

and Plaintiff. :

________________________________________:

Plaintiffs and defendant intervenors, NSK Ltd. and NSK

Corporation (collectively “NSK”), NTN Bearing Corporation of

America, American NTN Bearing Manufacturing Corporation, NTN Bower

Corporation and NTN Corporation, collectively (“NTN”), and Koyo

Seiko Co., Ltd. and Koyo Corporation of U.S.A. (collectively

“Koyo”), move pursuant to USCIT R. 56.2 for judgment upon the

agency record challenging various aspects of the United States

Department of Commerce, International Trade Administration’s

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

Antidumping Duty Administrative Reviews and Revocation in Part 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”), 65 Fed. Reg. 11,767 (Mar. 6, 2000). Defendant-

intervenor and plaintiff, The Timken Company (“Timken”), also moves

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

challenging certain determinations of Commerce’s Final Results.

Consol. Court No. 00-04-00141 Page 2

Specifically, NSK contends that Commerce unlawfully: (1) used

affiliated cost data for purposes other than calculating cost of

production and constructed value to (a) run its model-match

methodology under 19 U.S.C. § 1677(16), (b) calculate the difmer

adjustment under 19 U.S.C. § 1677b(a)(6), and (c) calculate NSK’s

reported United States inventory carrying costs; and (2) conducted

a duty absorption inquiry under 19 U.S.C. § 1675(a)(4) for

outstanding 1976 and 1987 antidumping duty orders.

NTN contends that Commerce unlawfully: (1) conducted a duty

absorption inquiry under 19 U.S.C. § 1675(a)(4) for outstanding

1976 and 1987 antidumping duty orders; (2) used affiliated

supplier’s cost of production for inputs when it was higher than

the transfer price; (3) denied a price-based level of trade

adjustment when matching constructed export price sales to sales of

the foreign like product; (4) rejected NTN’s reported level of

trade selling expenses and reallocated NTN’s United States indirect

selling expenses without regard to level of trade; (5) used

Commerce’s 99.5% arm’s length test to compare NTN’s home market

selling prices to those of NTN’s affiliated and unaffiliated

parties; (6) included certain NTN sales that were allegedly outside

the ordinary course of trade in the dumping margin and constructed

value profit calculations; (7) strictly relied upon the sum-of-

deviations methodology for the model match analysis; and (8) added

an amount to NTN’s selling expenses that was allegedly incurred in

financing cash deposits for antidumping duties.

Koyo contends that Commerce unlawfully: (1) conducted a duty

absorption inquiry under 19 U.S.C. § 1675(a)(4) for outstanding

1976 and 1987 antidumping duty orders; (2) applied adverse facts

available to Koyo’s further manufactured tapered roller bearings;

and (3) used Koyo’s entered value to establish the assessment rate

under 19 C.F.R. § 351.212(b) (1998).

Timken contends that Commerce unlawfully: (1) applied adverse

facts available to Koyo’s entered values; and (2) permitted NTN to

exclude certain expenses attributable to non-scope merchandise from

its reported United States selling expenses.

Held: NSK’s motion for judgment on the agency record is

granted in part and denied in part. NTN’s motion for judgment on

the agency record is granted in part and denied in part. Koyo’s

motion for judgment on the agency record is granted in part and

denied in part. Timken’s motion for judgment on the agency record

is denied. Case remanded to annul all findings and conclusions

made pursuant to the duty absorption inquiry conducted for the

subject review in accordance with this opinion.

Consol. Court No. 00-04-00141 Page 3

[NSK, NTN and Koyo’s 56.2 motions are granted in part and denied in

part. Timken’s 56.2 motion is denied. Case remanded.]

January 9, 2003

Lipstein, Jaffe & Lawson, L.L.P. (Robert A. Lipstein, Matthew

P. Jaffe, Grace W. Lawson and Joseph A. Konizeski) for NSK.1

Barnes, Richardson & Colburn (Donald J. Unger, Kazumune V.

Kano, David G. Forgue and Beata Kolosa) for NTN.

Sidley Austin Brown & Wood LLP (Neil R. Ellis, Niall P.

Meagher, Lawrence R. Walders, Neil C. Pratt, Leigh Fraiser and

Jennifer Haworth McCandless) for Koyo.

Robert D. McCallum, Jr., Assistant Attorney General; David M.

Cohen, Director, Commercial Litigation Branch, Civil Division,

United States Department of Justice (Velta A. Melnbrencis,

Assistant Director, 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.

Stewart and Stewart (Terence P. Stewart, William A. Fennell,

Geert De Prest, Patrick J. McDonough, Marta M. Prado and David S.

Johanson) for Timken.

OPINION

TSOUCALAS, Senior Judge: Plaintiffs and defendant

intervenors, NSK Ltd. and NSK Corporation (collectively “NSK”), NTN

Bearing Corporation of America, American NTN Bearing Manufacturing

Corporation, NTN Bower Corporation and NTN Corporation

1

On June 5, 2000, this Court granted NSK’s Consent Motion

for Intervention but NSK has not filed any briefs in its capacity

as a defendant-intervenor in this action.

Consol. Court No. 00-04-00141 Page 4

(collectively “NTN”), and Koyo Seiko Co., Ltd. and Koyo Corporation

of U.S.A. (collectively “Koyo”), move pursuant to USCIT R. 56.2 for

judgment upon the agency record challenging various aspects of the

United States Department of Commerce, International Trade

Administration’s (“Commerce”) final determination, entitled Final

Results of Antidumping Duty Administrative Reviews and Revocation

in Part 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”), 65 Fed. Reg. 11,767 (Mar. 6, 2000). Defendant-

intervenor and plaintiff, The Timken Company (“Timken”), also moves

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

challenging certain determinations of Commerce’s Final Results.

Specifically, NSK contends that Commerce unlawfully: (1) used

affiliated cost data for purposes other than calculating cost of

production and constructed value to (a) run its model-match

methodology under 19 U.S.C. § 1677(16), (b) calculate the difmer

adjustment under 19 U.S.C. § 1677b(a)(6), and (c) calculate NSK’s

reported United States inventory carrying costs; and (2) conducted

a duty absorption inquiry under 19 U.S.C. § 1675(a)(4) for

outstanding 1976 and 1987 antidumping duty orders.

NTN contends that Commerce unlawfully: (1) conducted a duty

absorption inquiry under 19 U.S.C. § 1675(a)(4) for outstanding

Consol. Court No. 00-04-00141 Page 5

1976 and 1987 antidumping duty orders; (2) used affiliated

supplier’s cost of production for inputs when it was higher than

the transfer price; (3) denied a price-based level of trade

adjustment when matching constructed export price sales to sales of

the foreign like product; (4) rejected NTN’s reported level of

trade selling expenses and reallocated NTN’s United States indirect

selling expenses without regard to level of trade; (5) used

Commerce’s 99.5% arm’s length test to compare NTN’s home market

selling prices to those of NTN’s affiliated and unaffiliated

parties; (6) included certain NTN sales that were allegedly outside

the ordinary course of trade in the dumping margin and constructed

value profit calculations; (7) strictly relied upon the sum-of-

deviations methodology for the model match analysis; and (8) added

an amount to NTN’s selling expenses that was allegedly incurred in

financing cash deposits for antidumping duties.

Koyo contends that Commerce unlawfully: (1) conducted a duty

absorption inquiry under 19 U.S.C. § 1675(a)(4) for outstanding

1976 and 1987 antidumping duty orders; (2) applied adverse facts

available to Koyo’s further manufactured tapered roller bearings;

and (3) used Koyo’s entered value to establish the assessment rate

under 19 C.F.R. § 351.212(b) (1998).

Timken contends that Commerce unlawfully: (1) applied adverse

facts available to Koyo’s entered values; and (2) permitted NTN to

Consol. Court No. 00-04-00141 Page 6

exclude certain expenses attributable to non-scope merchandise from

its reported United States selling expenses.

BACKGROUND

The administrative review at issue involves the period of

review (“POR”) covering October 1, 1997, through September 30,

1998.2 Commerce published the preliminary results of the subject

reviews on October 1, 1999. See Preliminary Results of Antidumping

Duty Administrative Reviews and Intent to Revoke in-Part 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”) 64 Fed. Reg. 53,323. Commerce published the Final

Results at issue on March 6, 2000. See 65 Fed. Reg. 11,767.

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).

2

Since the administrative review at issue was initiated

after December 31, 1994, the applicable law is the antidumping

statute as amended by the Uruguay Round Agreements Act (“URAA”),

Pub. L. No. 103-465, 108 Stat. 4809 (1994) (effective January 1,

1995). See Torrington Co. v. United States, 68 F.3d 1347, 1352

(Fed. Cir. 1995) (citing URAA § 291(a)(2), (b) (noting effective

date of URAA amendments)).

Consol. Court No. 00-04-00141 Page 7

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

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,

Consol. Court No. 00-04-00141 Page 8

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

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,

Consol. Court No. 00-04-00141 Page 9

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

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.

Consol. Court No. 00-04-00141 Page 10

United States, 22 CIT 541, 545, 15 F. Supp. 2d 807, 813 (1998).

DISCUSSION

I. Commerce’s All Purpose Use of Affiliated Supplier Costs for

Inputs Obtained from NSK’s Affiliated Supplier

A. Statutory Background

Normal value (“NV”) of subject merchandise is defined as “the

price at which the foreign like product is [] sold . . . for

consumption in the exporting country . . . .” 19 U.S.C. §

1677b(B)(i)(1994). If Commerce determines that the foreign like

product is sold at a price less than the foreign like product’s

cost of production (“COP”), and that the conditions listed in 19

U.S.C. § 1677b(b)(1)(A)-(B) are present, Commerce may disregard

such below-cost sales in its calculation of NV. See 19 U.S.C. §

1677b(b)(1) (1994).

Commerce calculates the COP of the foreign like product by

adding “the cost of materials and of fabrication or other

processing . . . employed in producing the foreign like product .

. . [with] an amount for selling, general, and administrative

expenses . . . [and] all other expenses incidental to placing the

foreign like product in . . . shipment.” 19 U.S.C. §

1677b(b)(3)(A)-(C) (1994). Section 1677b(f) articulates “special

rules” for the calculation of COP and constructed value (“CV”) and

permits Commerce to disregard an affiliated party transaction when

Consol. Court No. 00-04-00141 Page 11

“the amount representing [the transaction or transfer price] does

not fairly reflect the amount usually reflected in sales of

merchandise under consideration in the market under consideration,”

that is, an arms-length or market price. 19 U.S.C. § 1677b(f)(2)

(1994). If such “a transaction is disregarded . . . and no other

transactions are available for consideration,” Commerce shall value

the cost of an affiliated party input “based on the information

available as to what the amount would have been if the transaction

had occurred between persons who are not affiliated,” that is,

based on arm’s-length or market value. Id.

Section 1677b(f)(3)’s “major input rule” states that Commerce

may calculate the value of the major input on the basis of the data

available regarding COP, if such COP exceeds the market value of

the input calculated under § 1677b(f)(2). See 19 U.S.C. §

1677b(f)(3) (1994). Commerce, however, may rely on the data

available only if: (1) a transaction between affiliated parties

involves the production by one of such parties of a “major input”

to the merchandise produced by the other and, in addition, (2)

Commerce has “reasonable grounds to believe or suspect” that the

amount reported as the value of such input is below the COP. See

19 U.S.C. § 1677b(f)(3). For purposes of § 1677b(f)(3), regulation

19 C.F.R. § 351.407(b) (1998) provides that Commerce will value a

major input supplied by an affiliated party based on the highest of

Consol. Court No. 00-04-00141 Page 12

(1) the actual transfer price for the input; (2) the market value

of the input; or (3) the COP of the input. See also

Mannesmannrohren-Werke AG v. United States, 23 CIT 826, 837, 77 F.

Supp. 2d 1302, 1312 (1999) (holding that 19 U.S.C. §§ 1677b(f)(2)

and (3), as well as the legislative history of the major input

rule, support Commerce’s decision to use the highest of transfer

price, COP, or market value to value the major inputs that the

producer purchased from the affiliated supplier). Accordingly,

paragraphs (2) and (3) of 19 U.S.C. § 1677b(f) authorize Commerce,

in calculating COP and CV, to: (1) disregard a transaction between

affiliated parties if, in the case of any element of value that is

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;

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 its COP. See Timken Co. v. United

States, 21 CIT 1313, 1327-28, 989 F. Supp. 234, 246 (1997) (holding

that Commerce may disregard transfer price for inputs purchased

from related suppliers pursuant to 19 U.S.C. § 1677b(e)(2) (1988),

the predecessor to 19 U.S.C. § 1677b(f)(2), if the transfer price

or any element of value does not reflect its normal value) (citing

NSK Ltd. v. United States, 19 CIT 1319, 1323-26, 910 F. Supp. 663,

Consol. Court No. 00-04-00141 Page 13

668-70 (1995), aff’d, 119 F.3d 16 (Fed. Cir. 1997)).

B. Factual Background

During the POR at issue, Commerce, “pursuant to 19 U.S.C. §

1677b(f), . . . requested NSK to submit affiliated supplier cost

data for inputs [NSK] obtained from [NSK’s] affiliated supplier.”

Mem. U.S. Opp. Pls.’ Mots. J. Agency R. (“Def.’s Mem.”) at 72.

Commerce used the affiliated supplier cost data to calculate NSK’s

COP and CV, and to recalculate NSK’s model-match methodology,

difmer adjustment and inventory carrying costs. See id.

Explaining its methodology, Commerce stated in its Issues and

Decision Memorandum3 (“Issues & Decision Mem.”) compiled as an

appendix to the Final Results, that:

in accordance with [19 U.S.C. § 1677b(f), Commerce]

recalculated NSK’s reported TRB-specific COP and CV to

reflect the COP of an affiliated party input if the

transfer price NSK reported for that input was less than

the COP for that input. [Commerce notes that] COP and CV

3

The full title of this document is Final Results of

Antidumping Duty Administrative Reviews and Revocation in Part of

Issues and Decision Memorandum for the 1997-1998 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

(generally accessible on the internet at

http://ia.ita.doc.gov/frn/summary/japan/00-5367- 1.txt). Although

the parties have included excerpts from this document as

attachments to their memoranda to support their claims, the Court,

in the interest of clarity, will refer to this document as Issues

& Decision Mem. and match pagination to the printed documents

provided by each party.

Consol. Court No. 00-04-00141 Page 14

[are composed] of several components. . . . The

adjustment [Commerce] made for NSK’s affiliated party

inputs is actually an adjustment to its reported material

costs. Because material costs are a component of the

cost of manufacture (COM) and COM is a component of COP

and CV, when [Commerce] adjusted NSK’s reported material

costs, [Commerce] not only recalculated its COP and CV,

but [Commerce] . . . recalculated variable [VCOM] and

total [TCOM] components of COP and CV as well.

Issues & Decision Mem. at 31.

Therefore, as a result, Commerce resorted to using affiliated

supplier cost data for purposes other than calculating COP and CV

and explained:

[Commerce] does not rely on a [NSK’s] reported costs

solely for the calculation of COP and CV. Rather,

[Commerce] employ[s] cost information in a variety of

other aspects of [Commerce’s] margin calculations. For

example, when determining the commercial comparability of

the foreign like product in accordance with section

[1677(16)] . . ., it has been [Commerce’s] long-standing

practice to rely on the product-specific VCOMs and TCOMs

. . . for [United States] and home[]market merchandise.

Likewise, when calculating a difmer adjustment to NV in

accordance with section [1677b(a)(6)] . . ., it has been

[Commerce’s] consistent policy to calculate the

adjustment as the difference between the product-specific

VCOMs . . . for the [United States] and home[]market

merchandise compared . . . . Furthermore, [Commerce]

ha[s] permitted [NSK] to calculate [its] reported

[inventory carrying costs] on the basis of TCOM.

Id.

C. Contentions of the Parties

NSK asserts that the plain language and legislative history of

19 U.S.C. § 1677b(f) restricts Commerce’s use of affiliated

Consol. Court No. 00-04-00141 Page 15

supplier cost data in that “Commerce may substitute . . .

affiliated supplier cost data[] for affiliated supplier price

data,” that is, transfer prices between affiliates, only “for

purposes of subsections (b) and (e)” of § 1677b(f). Mem. P. & A.

Supp. Mot. J. Agency R. (“NSK’s Mem.”) at 6 (quoting 19 U.S.C. §

1677b(f)). In particular, NSK argues that Commerce violated the

law when it used NSK’s affiliated supplier cost data to: (1) run

its model-match methodology under 19 U.S.C. § 1677(16); (2)

calculate the difmer adjustment under 19 U.S.C. § 1677b(a)(6); and

(3) calculate NSK’s reported United States inventory carrying

costs. See NSK’s Mem. at 3, 6-12; Reply Mem. NSK Supp. NSK’s Mot.

J. Agency R. (“NSK’s Reply”) at 2-5.

NSK also argues that, pursuant to Ad Hoc Comm. of AZ-NM-TX-FL

Producers of Gray Portland Cement v. United States, 13 F.3d 398,

401 (Fed. Cir. 1994),

the Court must presume [that 19 U.S.C. § 1677b(f)] means

that Commerce may use data gathered pursuant to

subsection [§ 1677b(f)] for calculations involving

subsections [§§ 1677b(b) and (e)] only. . . . That other

sections of the statute - specifically subsections

[1677(16), 1677b(a)(6), 1677a(d)] - are silent about

[whether] the use of affiliated supplier cost data does

not nullify the precise language of subsection

[1677b(f)].

NSK’s Mem. at 7 (emphasis added) (citations omitted). According to

NSK, a “statute is passed as a whole . . . and is animated by one

general purpose and intent. . . . [E]ach part or section should be

Consol. Court No. 00-04-00141 Page 16

construed in connection with every other part or section so as to

produce a harmonious whole.” Id. at 7-8 (citation and

parenthetical omitted). Consequently, the 19 U.S.C. § 1677b(f)

restriction on the use of affiliated supplier cost data applies to

all of the provisions of the antidumping law that is, especially,

19 U.S.C. §§ 1677(16), 1677b(a)(6) and 1677a(d). See id. at 8. In

a footnote, NSK further states that by naming 19 U.S.C. § 1677b(f)

“[s]pecial rules for calculation of cost of production and for

calculation of constructed value,” Congress expressed its intent

that affiliated supplier cost data only be used to calculate COP

and CV. See id. at 7 n.2. NSK also makes reference to Commerce’s

prior methodology of restricting its use of affiliated supplier

data to the calculation of CV. See id. at 9. Therefore, NSK

requests that Commerce “rerun the model-match methodology, and

recalculate the difmer adjustment and [United States] inventory

carrying costs, without regard to affiliated supplier cost data

collected pursuant to subsections” 19 U.S.C. § 1677b(f)(2) and §

1677b(f)(3). Id. at 10.

Commerce alleges that 19 U.S.C. § 1677b(f) does not restrict

the use of affiliated supplier cost data to calculating COP and CV

since Commerce requires cost data for other purposes.4 See Def.’s

4

In Commerce’s Issues & Decision Mem., Commerce explains how

material costs are a component of VCOM and TCOM which in turn, are

(continued...)

Consol. Court No. 00-04-00141 Page 17

Mem. at 69-75. Commerce argues that 19 U.S.C. §§ 1677(16),

1677b(a)(6)5 and 1677a(d) do not prohibit Commerce from using

affiliated supplier cost data. See id. at 73. Moreover, Commerce

alleges that §§ 1677(16), 1677b(a)(6) and 1677a(d) grant Commerce

discretion. See id. at 69-75. In particular, Commerce points out

that

[section 1677(16)] does not specify a particular

methodology for determining appropriate matches. Rather,

the statute implicitly delegates the selection of an

appropriate methodology to [Commerce].

Likewise, section [1677b(a)(6)] grants [Commerce]

the same discretion to determine a suitable method to

calculate a difmer adjustment and does not restrict our

selection of an appropriate methodology to any particular

approach. In addition, with respect to [Commerce’s]

recalculation of NSK’s [United States inventory carrying

costs], section [1677a(d)] only specifies what

adjustments are to be made to determine [constructed

export price] and does not provide details regarding the

precise calculations for each particular adjustment.

Issues & Decision Mem. at 32.

[I]f [Commerce] determine[s] a component of a

respondent’s COP and CV to be distortive for one aspect

of [Commerce’s] analysis, it would be illogical and

4

(...continued)

both components of COP and CV. See Issues & Decision Mem. at 31.

Therefore, when Commerce adjusted NSK’s reported material costs, it

not only calculated COP and CV, but also recalculated VCOM and

TCOM. See id. In turn, since Commerce relies upon VCOM and/or

TCOM in running its model-match methodology, calculating the difmer

adjustment and inventory carrying costs, Commerce asserts that its

use of affiliated supplier cost data for purposes other than the

calculation of COP and CV was reasonable and in accordance with

law. See id. at 31-32.

5

The Court assumes that Commerce is referring to 19 U.S.C.

§ 1677b(a)(6) (1994) and not 19 U.S.C. § 1677a(a)(6) (1994).

Consol. Court No. 00-04-00141 Page 18

unreasonable not to make the same determination with

respect to those other aspects of [Commerce’s] margin

calculations where [Commerce] relied on the identical

cost data. To do so would not only produce distortive

results, but would be contrary to [Commerce’s] mandate to

administer the dumping law as accurately as possible.

Id. at 31.

Commerce further argues that the plain language of § 1677b(f)

does not prohibit the use of affiliated supplier cost data for

purposes other than the calculation of COP and CV. See Def.’s Mem.

at 73. In sum, Commerce maintains that the use of affiliated

supplier cost data is not restricted only to the calculation of COP

and CV. Rather, Commerce asserts that Commerce has been afforded

discretion to use cost data for other purposes. See id. at 73-75.

Timken generally agrees with Commerce’s arguments and states

that Congressional intent directs Commerce to use the most

“accurate cost data” to determine CV and COP. See The Timken Co.’s

Resp. R. 56.2 Mots. J. Agency R. of NTN, Koyo, & NSK (“Timken’s

Resp.”) at 7. Accordingly, Timken maintains that it is not against

such intent to use the same information to implement other

statutory provisions. See id. Timken asserts that Commerce “must

administer the dumping laws as accurately as possible . . . [and

the] use [of] inaccurate data (unadjusted to account for

inaccuracies attributable to related-party transfers)” clearly

counters Congressional intent. Id. (emphasis added).

Consol. Court No. 00-04-00141 Page 19

D. Analysis

The issue presented by NSK is whether Commerce can use

affiliated supplier cost data obtained pursuant to 19 U.S.C. §

1677b(f) for purposes other than the calculation of COP and CV. In

particular, the Court must determine whether Commerce’s use of

affiliated supplier cost data to: (1) run its model-match

methodology under 19 U.S.C. § 1677(16); (2) calculate the difmer

adjustment under 19 U.S.C. § 1677b(a)(6); and (3) calculate NSK’s

reported United States inventory carrying costs was in accordance

with law.

In NTN Bearing Corp. of Am. v. United States, 26 CIT ___, ___,

186 F. Supp. 2d 1257, 1302-04 (2002) (“NTN 2002"), this Court

upheld Commerce’s use of affiliated supplier cost data for purposes

other than the calculation of COP and CV. Specifically, the Court

held that the “statute, read as a whole, does not show

Congressional intent to restrict the use of affiliated supplier

cost data solely to COP and CV calculations and in effect, tie the

hands of Commerce while parties could distort dumping margins with

impunity.” NTN 2002, 26 CIT at ___, 186 F. Supp. 2d at 1303.

Since Commerce’s methodology to use NSK’s affiliated supplier

cost data for purposes other than the calculation of COP and CV and

the parties arguments are practically identical to those presented

in NTN 2002, the Court adheres to its reasoning in its prior

Consol. Court No. 00-04-00141 Page 20

holding. The plain language of 19 U.S.C. § 1677b(f) neither

restricts Commerce from using affiliated supplier cost data for

purposes other than the calculation of COP or CV, nor does it

indicate Congress’s intent that Commerce be prohibited from using

such data to calculate accurate dumping margins. See id. at ___,

186 F. Supp. 2d at 1303. Accordingly, this Court finds that

Commerce’s use of NSK’s affiliated cost data for purposes other

than the calculation of COP and CV was reasonable and in accordance

with law.

II. Commerce’s Duty Absorption Inquiry for a Transition Order

A. Background

Title 19, United States Code, § 1675(a)(4) (1994) provides

that during an administrative review initiated two or four years

after the publication of an antidumping duty order, Commerce, at

the request of a domestic interested party, “shall determine

whether antidumping duties have been absorbed by a foreign producer

or exporter subject to the order if the subject merchandise is sold

in the United States through an importer who is affiliated with

such foreign producer or exporter.” Section 1675(a)(4) further

provides that Commerce shall notify the International Trade

Commission (“ITC”) of its findings regarding such duty absorption

for the ITC to consider conducting a five-year (“sunset”) review

under 19 U.S.C. § 1675(c) (1994), and the ITC will take such

Consol. Court No. 00-04-00141 Page 21

findings into account in determining whether material injury is

likely to continue or recur if an order were revoked under §

1675(c). See 19 U.S.C. § 1675a(a)(1)(D) (1994).

On December 15, 1998, Timken requested Commerce to conduct a

duty absorption inquiry pursuant to 19 U.S.C. § 1675(a)(4) with

respect to NSK, NTN and Koyo to ascertain whether antidumping

duties had been absorbed during the POR at issue. See Issues &

Decision Mem. at 2. In the Final Results, Commerce determined that

duty absorption had occurred for the POR. See Final Results, 65

Fed. Reg. at 11,768.

In asserting authority to conduct a duty absorption inquiry

under § 1675(a)(4), Commerce first explained that for “transition

orders,” as defined in 19 U.S.C. § 1675(c)(6)(C) (antidumping duty

orders, inter alia, orders issued on or after January 1, 1995),

regulation 19 C.F.R. § 351.213(j) (1998) provides that Commerce

“will make a duty-absorption determination, if requested, for any

administrative review initiated in 1996 or 1998.” Issues &

Decision Mem. at 2. Commerce concluded that: (1) because the

antidumping duty orders on tapered roller bearings (“TRBs”) in this

case have been in effect since 1976 and 1987, the orders are

transitional pursuant to 19 U.S.C. § 1675(c)(6)(C); and (2) since

these reviews were initiated in 1998, Commerce had the authority to

make duty absorption inquiries for the administrative reviews of

Consol. Court No. 00-04-00141 Page 22

the 1976 and 1987 antidumping duty orders. See id. at 4.

B. Contentions of the Parties

NSK, NTN and Koyo contend that Commerce lacked statutory

authority under 19 U.S.C. § 1675(a)(4) to conduct a duty absorption

inquiry for the POR of the outstanding 1976 and 1987 antidumping

duty orders. See NSK’s Mem. at 4, 10-15; NSK’s Reply at 5-8; Pl.

NTN’s Mot. & Mem. Supp. J. Agency R. (“NTN’s Mem.”) at 13-14; Mem.

P. & A. Supp. Mot. Pls. Koyo J. Agency R. (“Koyo’s Mem.”) at 8-14;

Reply Br. Pls. Koyo Supp. Mot. J. Agency R. (“Koyo’s Reply”) at 2-

7.

Commerce argues that these reviews fall within its statutory

authority because they involve transition orders. See Issues &

Decision Mem. at 2; Def.’s Mem. at 10-14; NSK’s Mem. at 4; NTN’s

Mem. at 13; Koyo’s Mem. at 8. Specifically, Commerce argues that

it: (1) properly construed 19 U.S.C. §§ 1675(a)(4) and (c) as

authorizing it to make a duty absorption inquiry for antidumping

duty orders that were issued and published prior to January 1,

1995; and (2) devised and applied a reasonable methodology for

determining duty absorption. See Def.’s Mem. at 19-22. Commerce

also urges the Court to reconsider its holding in SKF USA Inc. v.

United States, 24 CIT ___, 94 F. Supp. 2d 1351 (2000). See id. at

14-19. Timken supports Commerce’s contentions but offers no

Consol. Court No. 00-04-00141 Page 23

substantive explanation of its position and instead refers to its

arguments raised in SKF USA Inc., 24 CIT ___, 94 F. Supp. 2d 1351.

See Timken’s Resp. at 5-6; see also Koyo’s Reply at 6 n.6.

C. Analysis

In SKF USA Inc., 24 CIT ___, 94 F. Supp. 2d 1351, this Court

determined that Commerce lacked statutory authority under 19 U.S.C.

§ 1675(a)(4) to conduct a duty absorption inquiry for antidumping

duty orders issued prior to the January 1, 1995 effective date of

the URAA. See id. at ___, 94 F. Supp. 2d at 1357-59; see also NTN

Bearing Corp. v. United States, 295 F.3d 1263 (Fed. Cir. 2002).

The Court noted that Congress expressly prescribed in the URAA that

§ 1675(a)(4) “must be applied prospectively on or after January 1,

1995 for 19 U.S.C. § 1675 reviews.” SKF USA Inc., 24 CIT at ___,

94 F.Supp. 2d at 1359 (citing § 291 of the URAA).

Because Commerce’s duty absorption inquiry, its methodology

and the parties’ arguments are practically identical to those

presented in SKF USA Inc., the Court adheres to its reasoning in

SKF USA Inc. The statutory scheme clearly provides that the

inquiry must occur in the second or fourth administrative review

after the publication of the antidumping duty order, not in any

other review, and upon the request of a domestic interested party.

Accordingly, the Court finds that Commerce did not have statutory

Consol. Court No. 00-04-00141 Page 24

authority to undertake a duty absorption investigation for the

antidumping duty orders in dispute here. The Court remands this

case to Commerce with instructions to annul all findings and

conclusions made pursuant to the duty absorption inquiry conducted

for the subject review in accordance with this opinion.

III. Commerce’s Use of Affiliated Supplier’s Cost of Production

for Inputs When the Cost Was Higher than the Transfer Price

for NTN

A. Background

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

transfer price or actual cost in calculating COP and CV in

situations involving inputs that NTN had obtained from affiliated

producers. See Issues & Decision Mem. at 28-29; see also NTN’s

Mem. at 15; Pl. NTN’s Reply Def. & Def.-Intervenor’s Feb. 16, 2001

Mem. Opposing Pls.’ Mot. J. Agency R. (“NTN’s Reply”) at 7.

Commerce explained its decision as follows:

Section [1677b(f)(2) of title 19 U.S.C.] directs

[Commerce] to disregard transactions between affiliated

parties if such transactions do not fairly reflect

amounts usually reflected in sales of merchandise under

consideration in the market under consideration.

Further, . . . [C.F.R. §§] 351.407(a) and (b) of

[Commerce’s] regulations set[] forth certain rules that

are common to the calculation of CV and COP. This

section states that for the purpose of [§ 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

Consol. Court No. 00-04-00141 Page 25

affiliated person of producing the major input. [Commerce

adds that it has] relied on this methodology in [other

reviews6 and that the] . . . methodology has been upheld

by the Court in Mannesmannrohren-Werke [AG] v. United

States, [23 CIT 826, 77 F. Supp. 2d 1302].

Issues & Decision Mem. at 29.

In the case at bar, Commerce requested that NTN provide a list

of inputs used to produce the subject merchandise and to identify

those inputs that were provided to NTN by its affiliated suppliers.

See Def.’s Mem. at 30. NTN provided Commerce with exhibits and

indicated that it used transfer price in computing COP and CV. See

id. at 30-31. In calculating COP and CV, Commerce adhered to its

past methodology and used the higher of transfer price or the

actual cost for NTN’s affiliated party inputs. See Issues &

Decision Mem. at 29.

6

In particular, Commerce refers to its methodology in

Final Results of Antidumping Duty Administrative Reviews of

Antifriction Bearings (Other Than Tapered Roller Bearings) and

Parts Thereof From France, Germany, Italy, Japan, Romania, Sweden,

and the United Kingdom, 64 Fed. Reg. 35,590, 35,612 (July 1, 1999),

Notice of Final Determination of Sales at Less Than Fair Value of

Stainless Steel Round Wire from Taiwan, 64 Fed. Reg. 17,336 (Apr.

9, 1999), 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, 63

Fed. Reg. 63,860, 63,868 (Nov. 17, 1998), and 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, 63 Fed. Reg. 2558, 2573 (Jan. 15,

1998).

Consol. Court No. 00-04-00141 Page 26

B. Contentions of the Parties

NTN alleges that Commerce erroneously used the affiliated

supplier’s COP for inputs when it was higher than the transfer

price. See NTN’s Mem. at 3, 15-16; NTN’s Reply at 16-18.

Specifically, NTN maintains that Commerce misapplied the major

input rule described in 19 U.S.C. § 1677b(f)(3) (1994), and that

Commerce failed to point to any reasonable grounds on which

Commerce based its belief that NTN’s reported COP of affiliated

parties was below the actual COP. See NTN’s Mem. at 15-16.

According to NTN, a plain language reading of 19 U.S.C. § 1677b(f)

makes clear that “the automatic recalculation of reported COP and

CV data contemplated in 19 C.F.R. § 351.407 is not contemplated in

the statute itself.” Id. at 16 (distinguishing Mannesmannrohren-

Werke AG, 23 CIT 826, 77 F. Supp. 2d 1382). NTN requests that if

this Court should sustain Commerce’s methodology as reasonable and

in accordance with law, the Court then remands this issue to

Commerce to rectify the ministerial error committed in calculating

“a variable . . . to account for the difference between transfer

price and actual cost.” Issues & Decision Mem. at 28; see NTN’s

Mem. at 17-18; NTN’s Reply at 9.

Commerce contends that it acted in accordance with the

statutory mandate and applied the provision reasonably under the

circumstances. See Def.’s Mem. at 29-31. Timken supports

Consol. Court No. 00-04-00141 Page 27

Commerce’s position and adds that “commercial reality” dictates

that sales below cost are usually not at market prices. See

Timken’s Resp. at 17. According to Timken, “home market sales of

merchandise used to determine normal values which are below cost

are by statute ‘outside the ordinary course of trade.’” Id.

(citation omitted).

C. Analysis

The issue presented by NTN is whether Commerce has statutory

authority to use the higher of the transfer price or actual cost in

calculating COP and CV in situations involving inputs that NTN had

obtained from affiliated producers. In NSK Ltd. v. United States,

26 CIT ___, 217 F. Supp. 2d 1291 (2002) (“NSK 2002"), this Court

affirmed Commerce’s decision to use NTN’s affiliated supplier’s COP

for major inputs when COP was higher than the transfer price. The

Court reasoned that 19 U.S.C. § 1677b(b)(3)(A)7 is to be read in

conjunction with the Special Rules cited in §§ 1677b(f)(2) and (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 depict the amount usually

7

Section 1677b(b)(3)(A) sets out that Commerce shall

calculate COP by adding: (1) the cost of materials and of

fabrication; and (2) an amount for selling, general, and

administrative expenses; and (3) the cost of all expenses

incidental to placing a foreign like product in condition ready for

transit.

Consol. Court No. 00-04-00141 Page 28

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, this Court acknowledged that

Commerce’s practice has been to 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 (1998), 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 27 n.6 (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)

Consol. Court No. 00-04-00141 Page 29

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 28

(citing Final Results of Antidumping Duty and Administrative Review

of Silicomanganese From Brazil, 62 Fed. Reg. 37,869, 37,871-72

(July 15, 1997)). In addition, if Commerce disregards sales 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 cost test under 19

U.S.C. § 1677b(b) during the previous review with respect to NTN’s

merchandise. See Def.’s Mem. at 29. 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. See 19 U.S.C. § 1677b(b)(2)(A)(ii).

Therefore, Commerce initiated a COP investigation of sales by NTN

in the home market. See Preliminary Results, 64 Fed. Reg. at

53,327; see also Def.’s Mem. at 30. As part of its investigation,

Consol. Court No. 00-04-00141 Page 30

Commerce distributed a questionnaire, which, in pertinent part,

requested NTN to provide COP and CV information. See Def.’s Mem.

at 30. 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; (4) provide the COP incurred by the affiliated person in

producing the major input; and (5) specify the basis used by NTN to

value each major input for purposes of computing the submitted COP

and CV amounts. See 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 Mem.

Ex. 1 (proprietary version). NTN also indicated that it used the

transfer price for computing COP and CV. See id. at 31.

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

1677f(2) and (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.

While NTN argues that there is no record evidence that the

affiliated party inputs did not “reflect the amount usually

reflected in [the] sales of . . . merchandise . . . under

consideration” and that the statute makes no reference to cost,

NTN’s Mem. at 16 (relying on 19 U.S.C. § 1677b(f)(2)), the Court

Consol. Court No. 00-04-00141 Page 31

holds that Commerce acted reasonably and in accordance with 19

U.S.C. § 1677b(f)(3) when it chose to determine the value of a

major input on the basis of the information available regarding

COP. See NSK 2002, 26 CIT at ___, 217 F. Supp. 2d at 1320-22; see

also SKF USA Inc. v. United States, 24 CIT ___, ___ 116 F. Supp. 2d

1257, 1261-68 (2000).

NTN argues that even if Commerce was correct in adjusting

NTN’s COP and CV for affiliated party inputs, Commerce committed a

ministerial error in the calculation of this adjustment in that

Commerce’s methodology failed to capture NTN’s actual cost

accurately. See NTN’s Mem. at 17. According to NTN, Commerce’s

methodology erred by making an adjustment for the difference

between transfer price and supplier’s actual cost, rather than

between supplier’s actual cost and NTN’s actual cost. See Issues

& Decision Mem. at 28; NTN’s Mem. at 17; Def.’s Mem at 34; see also

NTN’s Reply at 9. Commerce notes that

NTN calculated variances by comparing its standard costs

to its actual costs which are, for all inputs it

purchased from all suppliers, based on the transfer

prices from each supplier. As a result, the affiliate’s

costs . . . are based on transfer prices. Therefore,

NTN’s reported actual costs are not an accurate basis on

which to calculate COP and CV. Thus, it was appropriate

to use the supplier’s actual cost, and also to make an

adjustment for the difference between the supplier’s

actual cost and the transfer price when the supplier’s

actual cost was higher than the transfer price.

Issues & Decision Mem. at 29-30 (emphasis added). Commerce further

Consol. Court No. 00-04-00141 Page 32

asserts that the “variances” to which NTN refers are based upon the

transfer price of affiliated suppliers, and not the actual cost of

the input to affiliated suppliers. Accordingly, the Court agrees

that NTN’s reported actual costs cannot be an accurate basis upon

which to calculate COP and CV. It is not the role of this Court to

determine what methodology Commerce should or should not use in its

determination, but instead to decide whether Commerce’s chosen

methodology is reasonable. “[Commerce] is given discretion in its

choice of methodology as long as the chosen methodology is

reasonable and [Commerce’s] conclusions are supported by

substantial evidence in the record.” Federal-Mogul Corp. v. United

States, 18 CIT 785, 807-08, 862 F. Supp. 384, 405 (1994) (citing

Ceramica Regiomontana, S.A. v. United States, 10 CIT 399, 404-05,

636 F. Supp. 961, 966 (1986), aff'd, 810 F.2d 1137 (Fed. Cir.

1987)); see also Matsushita Elec. Indus. Co. v. United States, 750

F.2d 927, 936 (Fed. Cir. 1984) (stating that “[the Court’s] role is

limited to deciding whether [Commerce’s] decision is ‘unsupported

by substantial evidence on the record, or otherwise not in

accordance with law’”). After careful examination of the record of

this case and NTN’s assertion that Commerce’s methodology is

distortive, this Court sustains Commerce’s methodology in using

NTN’s supplier’s actual cost.

Consol. Court No. 00-04-00141 Page 33

IV. Commerce’s Denial of a Price-Based Level of Trade Adjustment

A. Contentions of the Parties

NTN contends that Commerce improperly denied a price-based

level of trade (“LOT”) adjustment when matching constructed export

price (“CEP”) sales to sales of the foreign like product,8 citing

Borden Inc. v. United States, 22 CIT 233, 4 F. Supp. 2d 1221

(1998), as support. See NTN’s Mem. at 18-21. See generally

Borden, 22 CIT 233, 4 F. Supp. 2d 1221, rev’d, 2001 WL 312232 (Fed.

Cir. Mar. 12, 2001). 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 Issues & Decision

Mem. at 35; NTN’s Mem. at 19-21. NTN requests that the Court

remand the LOT issue to Commerce to grant NTN a price-based LOT

adjustment when its CEP LOT is different from the LOT of the

comparison foreign like product. See NTN’s Mem. at 21.

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

for NTN’s CEP sales based upon the CEP. See Def.’s Mem. at 35-36.

Commerce used the CEP price to determine the LOT of CEP sales, and

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

8

For a complete discussion of background information and the

statutory provisions at issue, the reader is referred to this

Court’s decision in NTN Bearing Corp. of Am. v. United States, 24

CIT___, ___, 104 F. Supp. 2d 110, 125-128 (2000).

Consol. Court No. 00-04-00141 Page 34

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 [LOTs].” Id. at 35; see

also NTN’s Mem. App. 5 at 6-7. Commerce points out that CEP is

defined in 19 U.S.C. § 1677a(b) (1994) as the price at which the

subject merchandise is first sold in the United States by a seller

affiliated with the producer to an unaffiliated purchaser, as

adjusted under §§ 1677a(c) and (d). See Def.’s Mem. at 39.

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 considers making a LOT

adjustment. See id. at 39-40. Commerce makes a CEP offset 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 state of distribution than the CEP LOT. See id.

at 41.

Commerce claims that it applied its usual methodology to

determine CEP LOT and determined that NTN’s LOT and home market LOT

were not equivalent. See id. at 43. According to Commerce, “in

order to calculate a [LOT] adjustment, the CEP [LOT] must exist in

the home market.” Id. Since there was a difference between NTN’s

LOT and home market CEP LOT, Commerce “could not determine a [LOT]

adjustment based upon NTN’s home market sales of merchandise under

Consol. Court No. 00-04-00141 Page 35

review.” Id.; Issues & Decision Mem. at 36. Alternatively,

Commerce calculated “NV at the same [LOT] as the [United States]

sale] to the unaffiliated customer and, when comparisons were to

sales at a different [LOT], made a CEP offset . . . .” Def.’s Mem.

at 43 (citing NTN’s Mem. App. 5 at 6-7). Commerce contends that

NTN provided no further information to establish a basis for

calculating a LOT adjustment. See id. Timken generally agrees

with Commerce’s positions and adds that the Court should uphold

Commerce’s methodology since NTN admits that “transfer price was

used in computing COP and CV” in its answer to Commerce’s

questionnaire. Timken’s Resp. at 17 (referring to Def.’s Mem. Ex.

1 at 64).

B. Analysis

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

Statement of Administrative Action (“SAA”)9 require Commerce to

9

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. “It is

the expectation of the Congress that future Administrations will

observe and apply the interpretations and commitments set out in

this Statement.” Id.; see also 19 U.S.C. § 3512(d) (1994) (“The

statement of administrative action approved by the Congress . . .

shall be regarded as an authoritative expression by the United

States concerning the interpretation and application of the Uruguay

(continued...)

Consol. Court No. 00-04-00141 Page 36

deduct the expenses enumerated under 19 U.S.C. § 1677a(d) before

making the LOT comparison.10 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 added).

The court concluded that “[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 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 in original).

9

(...continued)

Round Agreements and this Act in any judicial proceeding in which

a question arises concerning such interpretation or application”).

10

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.

Consol. Court No. 00-04-00141 Page 37

In its reply brief, NTN acknowledges the Micron decision but

asserts that the CAFC’s interpretation of the relevant subsections

under 19 U.S.C. § 1677b (1994) conflicts with the URAA, “which

requires [Commerce] to make a LOT adjustment if the difference in

the level of trade affects price comparability, based on a pattern

of consistent price differences.” NTN’s Reply at 7 (citations

omitted). Despite this opposition, this Court adheres to its

reasoning in NTN 2002, 26 CIT at ___, 186 F. Supp. 2d at 1265-66,

and finds that Commerce properly made § 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 a LOT adjustment is supported by substantial evidence.

Section 1677b(a)(7)(A) permits Commerce to make a 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.” 19 U.S.C. §

1677b(a)(7)(A). Yet, Commerce does not make a LOT adjustment when

the record at issue does not provide adequate evidence to support

such an adjustment. See Issues & Decision Mem. at 35. For this

POR, Commerce examined the record and concluded that NTN’s home

market LOT was not equivalent to its CEP LOT. See id.

Furthermore, “Commerce had no other information that provided an

Consol. Court No. 00-04-00141 Page 38

appropriate basis for determining a [LOT] adjustment.” Def.’s Mem.

at 43. See generally SAA at 830. “As a result, because the record

[failed] to establish that there [wa]s any 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 of the foreign like product at a different LOT.” Issues &

Decision Mem. at 35. Accordingly, the Court finds that Commerce

acted within the directive of the statute in denying NTN the LOT

adjustment and instead, granting a CEP offset. See 19 U.S.C. §

1677b(a)(7).

V. Commerce’s Reallocation of NTN’s United States Indirect

Selling Expenses Without Regard to Levels of Trade

A. Background

In the Final Results, 65 Fed. Reg. at 11,767, Commerce

calculated NTN’s United States and home market selling expenses

without regard to LOT. See Issues & Decision Mem. at 36-38. NTN

argued that Commerce should have relied on NTN’s reported United

States and home market selling expenses based on LOT instead of

reallocating these selling expenses without regard to LOT. See id.

at 36. Furthermore, NTN claims that Commerce’s rejection of NTN’s

reported LOT selling expenses “contradicts the evidence on the

record in this review [since Commerce concluded] in the

[P]reliminary [R]esults . . . that different LOTs existed in both

Consol. Court No. 00-04-00141 Page 39

the [United States] and home markets for sales of subject

merchandise.” Id. at 36-37. NTN also points to data11 it supplied

Commerce in response to Commerce’s questionnaire illustrating that

United States original equipment manufacturer (“OEM”) sales

incurred higher selling expenses than both past market and

distributor sales, and that distributor sales incurred higher

selling expenses than post market sales. See id. at 37. “NTN

states that home market expenses also can be identified by LOT and

argues that [Commerce’s] reallocation [of NTN’s United States

indirect selling expenses] without regard to LOT is distortive.”

Id. Timken, in turn, contends that the evidence on the record

supports Commerce’s reallocation of NTN’s home market and United

States indirect selling expenses without regard to LOT. See id.

Timken asserts that NTN has not adequately shown that its

allocations accurately reflect the manner in which NTN incurs

expenses for its sales, and thus Commerce should not alter its

methodology of reallocating NTN’s home market and United States

selling expenses without regard to LOT. See id.

Commerce generally agrees with Timken. See Issues & Decision

Mem. at 37-38. Commerce responded that for a majority of the

expenses under this POR, it determined that NTN’s methodology for

11

Specifically, NTN refers to Exhibit C-7 of its February

11, 1999 response to Commerce’s questionnaire. See Issues &

Decision Mem. at 37.

Consol. Court No. 00-04-00141 Page 40

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 and its methodology led to

distorted allocations. See id. at 37. Commerce asserts that in

Timken Co. v. United States, 20 CIT 645, 653, 930 F. Supp. 621,

628-29 (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. Acting

in accordance with Timken Co., 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

. . . .” Issues & Decision Mem. at 38. Commerce argues that after

careful review of the administrative record for this POR, it finds

that “in most instances no evidence exists demonstrating that NTN’s

home market and [United States] expenses allocated by LOT actually

varied according to LOT.” Id. Commerce further concluded that the

data provided by NTN in its response to Commerce’s questionnaire

indicates that NTN incurred certain United States packing material

and packing labor expenses when selling to only one United States’s

LOT. See id.; see also Def.’s Mem. at 45 n.12. After reviewing

NTN’s response to its questionnaire, Commerce found that NTN

clearly indicates that “certain of NTN’s packing expenses

individually differed by LOT.” Issues & Decision Mem. at 38.

Consol. Court No. 00-04-00141 Page 41

Because these expenses were unique to a single LOT, NTN

1) allocated each total expense amount solely to this

LOT[;] 2) calculated a single allocation ratio for this

LOT[;] and 3) applied this ratio only to [United States]

sales at this LOT . . . . Therefore, for [the Preliminary

Results, 64 Fed. Reg. 53,323, Commerce] applied

[Commerce’s] recalculated ratios for certain of NTN’s

[United States] packing and [United States] labor

expenses only for sales to the one LOT for which these

expenses were incurred.

Id. After further review, Commerce also concluded that NTN’s

United States packing labor and material expenses varied with

regard to LOT. See id. According to specific data12 provided by

NTN, Commerce points out that NTN’s different methods of packing

depend upon LOT. See id. Commerce states that since NTN has

provided no further record evidence that home market expenses were

incurred differently depending on LOT, Commerce properly accepted

only NTN’s allocation of home market packing expenses according to

LOT. See id.

B. Contentions of the Parties

NTN contends that Commerce’s decision to reallocate NTN’s

selling expenses violates Commerce’s mandate to administer the

antidumping laws. See NTN’s Mem. at 24-27. NTN states that

Commerce is in error primarily because: (1) “the expenses in

question varied across [LOTs] in keeping with the requirements of

12

Specifically, Commerce refers to exhibits B-6 and pages

A-9 and A-15 of NTN’s February 9, 1999 response to Commerce’s

questionnaire. See Issues & Decision Mem. at 38.

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[Timken Co., 20 CIT 645, 930 F. Supp. 621; (2)] NTN’s methodology

was previously accepted by [Commerce] and has not changed[; and

(3)] the effect of reallocating these expenses is to void

[Commerce’s] LOT determination . . . .” Id. at 24 (citations

omitted). Moreover, NTN argues that Commerce erred in basing its

decision to reallocate NTN’s reported expenses on the conclusion

that the expense methodology NTN employed “bore no relationship to

the manner in which the expense[s were] incurred.” Id. According

to NTN, sufficient record evidence exists for Commerce to find that

NTN’s indirect and home market selling expenses varied with regard

to LOT.13 See id. at 24-25. Citing to Böwe-Passat v. United

States, 17 CIT 335, 340 (1993), NTN argues that Commerce’s

reallocation of NTN’s United States indirect selling expenses

without regard to LOT is contrary to Commerce’s statutory role of

administering the antidumping law to the most accurate extent

possible. See id. at 27.

Commerce responds that no sufficient record evidence exists

illustrating that all of NTN’s United States selling expenses and

home market selling expenses varied demonstrably with regard to

LOT. See Def.’s Mem. at 45-46. Commerce refers to the holdings in

NTN Bearing Corp. of Am. v. United States, 23 CIT 486, 83 F. Supp.

13

NTN points to various exhibits provided to Commerce in

response to Commerce’s questionnaire regarding NTN’s selling

expenses among varied LOTs. See NTN’s Mem. at 25 (proprietary

version).

Consol. Court No. 00-04-00141 Page 43

2d 1281 (1999) and NTN Bearing Corp. of Am. v. United States, 19

CIT 1221, 905 F. Supp. 1083 (1995) and asserts that this Court

uphold Commerce’s reallocation of NTN’s United States and home

market indirect selling expenses without regard to LOTs. See id.

at 46.

Timken generally supports Commerce’s arguments and argues that

the record evidence supports Commerce’s decision to reject NTN’s

allocation of United States and home market indirect selling

expenses. See Timken’s Resp. at 18 (citing Issues & Decision Mem.

at 37-38). Furthermore, Timken contends that it has been

Commerce’s practice to reject NTN’s methodology for reporting

selling expenses in various reviews. See id. (citing 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, 63 Fed. Reg. 63,860

(Nov. 17, 1998), and 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, 63 Fed. Reg. 2558 (Jan. 15, 1998).

NTN replies to Commerce and Timken’s assertions by stating

that neither has brought forth any substantial legal argument that

Consol. Court No. 00-04-00141 Page 44

supports Commerce’s decision to adjust NTN’s sales for selling

expenses without regard to LOT. See NTN’s Reply at 9-10. NTN also

proposes that Commerce failed to address the record in this POR,

and asserts that precedent makes clear that “the record for each

administrative review is separate from, and independent of, each

previous administrative review.” Id. at 10 (citing NSK Ltd. v.

United States, 16 CIT 275, 277, 788 F. Supp. 1228, 1229 (1992), in

turn citing Beker Indus. Corp. v. United States, 7 CIT 199, 585 F.

Supp. 663 (1984)).14

C. Analysis

The Court agrees with Commerce that NTN failed to provide

adequate evidence illustrating that all of NTN’s United States

selling expenses and home market selling expenses varied

demonstrably with regard to LOT. In making its final

determination, Commerce followed the standard set by this Court in

Timken Co., 20 CIT at 651-53, 930 F. Supp. at 627-29 that Commerce

is to deny a LOT adjustment if Commerce finds that expenses did not

vary according to LOT.

14

The Court disagrees with NTN’s assertion that Commerce

failed to articulate any legal argument that supports Commerce’s

methodology in the POR at issue, and refers NTN to Commerce’s

comments in the Issues & Decision Mem. and Prelim. Analysis Mem.,

see infra note 15, which adequately explain why Commerce

reallocated all of NTN’s selling expenses with exception to NTN’s

home market packing expenses. See Issues & Decision Mem. at 37-38.

Consol. Court No. 00-04-00141 Page 45

In the case at bar, NTN purports to show that it incurred

different selling expenses at different trade levels by pointing to

specific exhibits included in its proprietary memorandum. See

NTN’s Mem. at 25 (proprietary version). After a review of the

record, Commerce concluded that the questionnaire responses that

NTN provided for some of its United States packing and material

expenses indicate that such expenses were incurred in connection

with only one United States LOT. See Issues & Decision Mem. at 38.

In the Preliminary Results, 64 Fed. Reg. 53,323,15 Commerce

accordingly “recalculated ratios for certain of NTN’s [United

States] packing and . . . labor expenses only for sales to the one

LOT for which these expenses were incurred.” Issues & Decision

Mem. at 38 (emphasis added); see Prelim. Analysis Mem. at 7-8.

Commerce further determined that although NTN’s exhibits “clearly

demonstrate that different methods of packing are required

depending upon LOT,” NTN provides no evidence that illustrates that

all of NTN’s selling expenses were incurred differently with regard

to LOT. Issues & Decision Mem. at 38; see Prelim. Analysis Mem. at

7-8. Accordingly, in the Final Results, 65 Fed. Reg. 11,767,

Commerce only accepted NTN’s allocation of home market packing

expenses according to LOT. See Issues & Decision Mem. at 38.

15

Commerce explained its preliminary methodology for the

POR at issue in Analysis Memorandum for Preliminary Results of the

1997-98 Review-NTN Corporation of Antidumping Duty Order on Tapered

Roller Bearings and Parts Thereof From Japan (“Prelim. Analysis

Mem.”). See NTN’s Mem. App. 5 (proprietary version).

Consol. Court No. 00-04-00141 Page 46

In NTN 2002, 26 CIT at ___, 186 F. Supp. 2d at 1268, this

Court made clear that NTN has the burden before Commerce to

establish its entitlement to a LOT adjustment. NTN’s failure to

provide the requisite evidence with regard to selling expenses,

other than NTN’s home market packing expenses, 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. Supp. 34, 55

(1997), aff’d, NSK Ltd. v. Koyo Seiko Co., Ltd., 190 F.3d 1321,

1330 (Fed. Cir. 1999). For the reasons stated above, the Court

sustains Commerce’s methodology.

VI. Commerce’s Exclusion of Certain Home Market Sales

to Affiliated Parties From the Normal Value Calculation

A. Background

During the POR, Commerce determined whether NTN’s affiliated

party sales should be used for purposes of calculating NV by

employing its standard arm’s-length test. See Def.’s Mem. at 47.

Specifically, Commerce compared NTN’s home market selling prices to

NTN’s affiliated and unaffiliated parties by using Commerce’s 99.5%

arm’s-length test in which Commerce computes

the weighted average price of all sales to each

affiliated party by part number and the weighted average

price of all sales of each part number to unaffiliated

parties. . . . [F]or every part number sold to both

Consol. Court No. 00-04-00141 Page 47

unaffiliated and affiliated parties, the program

calculates, for each related party, ratios of the

affiliated and unaffiliated weighted average prices;

these ratios are then weight-averaged to obtain the

average of all part numbers sold to each related party.

. . [Commerce] only eliminates sales to a particular

affiliated party from the calculation of NV when the

average of all of these comparisons for that affiliate is

less than 99.5 percent.

Issues & Decision Mem. at 39.

B. Contentions of the Parties

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

test because Commerce “compare[d] the weighted average price for

unrelated sales [to the price] for individual related sales, and

[failed to] consider other important factors such as quantity or

payment terms of specific sales.” NTN’s Mem. at 28. NTN further

argues that no statutory precedent establishes Commerce’s ability

to measure arms-length transactions by such a test. See id. To

illustrate its contention, NTN provides a hypothetical example

attempting to demonstrate that Commerce’s arm’s-length test is

distortive. See id. at 28-29. Alternatively, NTN suggests that

Commerce lower the threshold from 99.5 to 95 percent to ensure that

the results “truly reflect the range of prices in [NTN’s]

transactions.” Id. at 29. NTN further asserts that Commerce

incorporate additional factors, such as quantity or payment terms

of specific sales, in the application of its test. See id. at 29-

30; NTN’s Reply at 12.

Consol. Court No. 00-04-00141 Page 48

In response, Commerce cites to 19 U.S.C. § 1677b(a)(5) (1994)

highlighting the following:

If 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 48 (emphasis in original). Relying on this

statutory language, Commerce then argues that it has been granted

broad discretion to devise and follow “its own methodology for

determining when to use affiliated-party prices in determining NV

as was [allotted for] under the prior law.” Id. at 48-49 (citing

19 U.S.C. § 1677b(a)(3) (1988) and 19 C.F.R. § 353.45(a) (1996)).

Commerce also cites to several decisions that have upheld

Commerce’s test as reasonable, including NTN Bearing Corp., 23 CIT

at 486, 83 F. Supp. 2d at 1281, NSK Ltd., 21 CIT at 635-36, 969 F.

Supp. at 54, NTN Bearing Corp., 19 CIT at 1240-41, 905 F. Supp. at

1099-1100, and Usinor Sacilor v. United States, 18 CIT 1155, 1157-

58, 872 F. Supp. 1000, 1004 (1994). Timken supports Commerce’s

contentions. See Timken’s Resp. at 19-20.

C. Analysis

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

is unreasonable. Under the applicable statute, 19 U.S.C. §

1677b(a)(5), Commerce is granted considerable discretion in

deciding whether to include affiliated party sales when calculating

Consol. Court No. 00-04-00141 Page 49

NV. See Usinor, 18 CIT at 1158, 872 F. Supp. at 1004. This Court

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.” NTN Bearing

Corp., 19 CIT at 1241, 905 F. Supp. at 1100; see Torrington Co. v.

United States, 21 CIT 251, 261, 960 F. Supp. 339, 348 (1997)

(stating that the respondent “must do more than indicate a possible

correlation between price and quantity” to support its argument

that Commerce should consider quantity in Commerce’s arm’s-length

test); NSK Ltd., 190 F.3d at 1328 (affirming the judgment of the

CIT that Commerce’s arm’s-length methodology was reasonable given

respondent’s mere reference to a hypothetical and lack of record

evidence that Commerce’s methodology was unreasonable).

Additionally, NTN’s argument that Commerce reduce its arm’s-length

test threshold to 95% in order to yield a more accurate range of

NTN’s transaction prices fails to prove that Commerce’s current

test is in fact unreasonable.

This Court has also repeatedly rejected NTN’s argument that

Commerce consider additional factors, such as quantity and payment

terms of specific sales in its determination of whether sales

prices to affiliated and unaffiliated parties are comparable. NTN

has failed to point to sufficient record evidence that would

persuade the Court to depart from its prior holdings in NTN 2002,

26 CIT at ___, 186 F. Supp. 2d at 1287-88, NTN Bearing Corp. v.

Consol. Court No. 00-04-00141 Page 50

United States, 24 CIT at ___, 104 F. Supp. 2d at 148, and NTN

Bearing Corp., 19 CIT at 1241, 905 F. Supp. at 1099 (disagreeing

“with NTN that Commerce’s arm[’]s-length test is flawed because

Commerce did not take into account certain factors proposed by

NTN”). Accordingly, the Court upholds Commerce’s application of

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

affiliated parties from the NV calculation as reasonable, in

accordance with law and supported by substantial evidence.

VII. 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) provides that CV be

calculated in part, by using “amounts incurred and realized by the

. . . producer [under] review . . . in 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 by 19 U.S.C. § 1677(15) as

the 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 [sales disregarded under § 1677b(b)(1) and

Consol. Court No. 00-04-00141 Page 51

transactions disregarded under § 1677b(f)(2)], among

others, to be outside the ordinary course of trade. . .

.

19 U.S.C. § 1677(15) (1994) (emphasis added). Sections 1677b(b)(1)

and 1677b(f)(2) respectively deal with below-cost sales and

affiliated parties and were not involved in the determination at

issue. Although § 1677b(b)(1)’s sales below COP and §

1677b(f)(2)’s affiliated party transactions are specifically

designated as outside the ordinary course of trade, the “among

others” language of § 1677(15) clearly indicates that other types

of sales could be excluded as being outside the ordinary course of

trade.

In particular, the SAA states 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 [Commerce is given discretion to] interpret section

1677(15) in a manner which will avoid basing [NV] on

sales which are extraordinary for the market in question,

particularly when the use of such sales would lead to

irrational or unrepresentative results.

SAA at 834 (emphasis added). The court in Koenig & Bauer-Albert AG

Consol. Court No. 00-04-00141 Page 52

v. United States (“Koenig”), 22 CIT 574, 589, 15 F. Supp. 2d 834,

850 (1998), vacated on other grounds, Koenig & Bauer-Albert AG v.

United States, 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 can

not “impose this requirement arbitrarily.”

B. Contentions of the Parties

NTN claims that Commerce improperly included certain NTN sales

that were allegedly outside the ordinary course of trade in

Commerce’s dumping margin and CV profit calculations. See NTN’s

Mem. at 30-33. In NTN’s attempt to show that Commerce erred in

including certain sales in its calculations, NTN provided Commerce

with what it claims to be specific record evidence indicating that

NTN’s high profit sales were in fact outside the ordinary course of

trade. See id. at 31-32; see also NTN’s Mem. Apps. 7 & 8. But

see Issues & Decision Mem. at 44.

Commerce, in turn, argues that the evidence provided by NTN

fails to demonstrate that such sales were, in fact, outside the

ordinary course of trade. See Def.’s Mem. at 57. Accordingly,

Commerce contends that it properly included such sales in its

calculations and that its decision is supported by record evidence

Consol. Court No. 00-04-00141 Page 53

and in tune with its statutory requirements. See id. at 55-61.

Timken adds that NTN “bears the burden of proving that home market

sales are not in the ordinary course of trade . . . [and that] NTN

has failed to make such a demonstration regarding either its

‘sample’ sales or its alleged ‘high profit’ sales.” Timken’s Resp.

at 20-21.

C. Analysis

1. Commerce’s Inclusion of Certain NTN Sales

Allegedly Outside the Ordinary Course of Trade

In Commerce’s Margin Calculation

The issue before the Court is whether Commerce reasonably

included certain sample sales and sales with high profit levels in

NTN’s home market sales database in its dumping margin, instead of

determining that such sales were outside the ordinary course of

trade, and accordingly excluding them. In the Issues & Decision

Mem., Commerce laid out its practice concerning the exclusion of

certain sales from the margin calculation when such sales, in fact,

fall outside the ordinary course of trade. Commerce states that it

has

examined the record with respect to NTN’s alleged home

market sample sales to determine if these sales qualify

for such an exclusion. In its original questionnaire

response, NTN only states that “samples are provided to

customers for the purpose of allowing the customer to

determine whether a particular product is suited to the

customer’s needs” and that “the purpose . . . would not

be the same as those purchased in the normal course of

trade. . . .” In its . . . supplemental response, NTN

Consol. Court No. 00-04-00141 Page 54

did not provide additional information to demonstrate

clearly that its alleged sample sales are outside the

ordinary course of trade. The mere fact that a

respondent identified sales as samples does not

necessarily render such sales outside the ordinary course

of trade[.] . . . For these reasons, [Commerce]

disagree[s] with NTN that its home market sample sales

should be excluded from [the] margin calculations. . . .

Issues & Decision Mem. at 44 (emphasis added).

Commerce also stated that NTN failed to provide any further

evidence illustrating that any of NTN’s “high profit” sales were

actually outside the ordinary course of trade. See id. According

to Commerce, just because NTN has instances of high profits is not

dispositive of the fact that the sales relating to such were

actually outside the ordinary course of trade. See id. In its

questionnaire to NTN, Commerce stated that

the burden of proof is on [NTN] to demonstrate, through

narrative explanation of the circumstances surrounding

such sales and supporting documentation or other

evidence, that sales claimed to be outside the ordinary

course of trade are in fact outside the ordinary course

of trade. [Commerce] will not consider only one factor in

isolation (i.e., the fact that certain sales are labeled

as samples, or that a transaction involved small

quantities or high prices) as sufficient proof that a

sale is not in the ordinary course of trade.

Def.’s Mem. Ex. 2 (proprietary version); Def.’s Mem. at 57-58; see

also Nachi-Fujikoshi Corp. v. United States, 16 CIT 606, 608, 798

F. Supp 716, 718 (1992). Nevertheless, NTN argues that it has

provided Commerce with sufficient record evidence and points to a

number of exhibits in its memorandum referring to zero-priced

Consol. Court No. 00-04-00141 Page 55

sample data16 and explanations of NTN’s instances of high profit

sales. See NTN’s Mem. at 31. NTN also cites CEMEX, S.A. v. United

States, 133 F.3d 897 (Fed. Cir. 1998) in support of its argument

that Commerce should exclude sales with abnormally high profit

levels. See id. at 32.

The Court disagrees with NTN that Commerce should exclude such

sales from its margin calculation. Although the CAFC sustained

Commerce’s determination that certain home market sales were

outside the ordinary course of trade, CEMEX, 133 F.3d at 901, the

court noted that for that review, Commerce had examined factors

additional to profit. In the case at bar, NTN supports its

contentions with evidence regarding only one factor, namely profit.

See NTN’s Mem. at 31 (listing NTN’s exhibits referring to profit).

According to the court in CEMEX, 133 F.3d at 900, Commerce must

evaluate not just “one factor taken in isolation but rather . . .

all the circumstances particular to the sales in question.”

Furthermore, this Court previously held that a lack of showing that

the transactions at issue possessed some unique and unusual

characteristic that make them unrepresentative of the home market

allot Commerce the discretion to include such transactions in NTN’s

home market database. See NSK 2002, 26 CIT at ___, 217 F. Supp. 2d

16

Commerce has excluded NTN’s home market zero-price sample

sales from its determination, and therefore the Court refuses to

consider any argument or evidence pertaining to such. See Issues

& Decision Mem. at 44 n.9l. See generally NTN’s Mem. at 31.

Consol. Court No. 00-04-00141 Page 56

at 1315 (analogizing NTN Bearing Corp., 19 CIT at 1229, 905 F.

Supp. at 1091).

In both its Issues & Decision Mem. and Def.’s Mem., Commerce

makes clear that NTN failed to meet its burden of proof regarding

evidence of NTN’s sample sales and sales with high profit that NTN

claims were outside the ordinary course of trade. Therefore, this

Court sustains Commerce’s decision to include such sales in its

margin calculation.

2. Commerce’s Inclusion of Certain NTN Sales

Allegedly Outside the Ordinary Course of Trade

In Commerce’s CV Profit Calculation

NTN raises the related argument that since NTN’s sample sales

and sales with abnormally high profits are outside the ordinary

course of trade, they should also be excluded from Commerce’s CV

calculation. See NTN’s Mem. at 32-33. In response, Commerce

states that

NTN provided no evidence which demonstrated that the

profit amounts realized on the sales [] claimed to be

outside the ordinary course of trade are particularly,

much less abnormally, high. NTN has selected an

arbitrary profit margin which it defines as “high,” but

it provides no evidence or analysis which suggests that

the profit margin it chose is in any way unusual. To the

contrary, there are enough of these claimed “high profit”

sales in NTN’s home[]market database that it is apparent

that these sales are not unusual but, rather, occur

typically within NTN’s normal course of trade.

Issues & Decision Mem. at 44.

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As acknowledged in Koenig, 22 CIT at 589, 15 F. Supp. 2d at

850, Commerce is granted discretion to consider under what

circumstances high profit sales are actually outside the ordinary

course of trade. See Mitsubishi Heavy Indus. v. United States, 22

CIT 541, 568, 15 F. Supp. 2d 807, 830 (1998); see also Notice of

Final Determination of Sales Less Than Fair Value: Large Newspaper

Printing Presses and Components Thereof, Whether Assembled or

Unassembled From Germany, 61 Fed. Reg. 38,166, 38,178 (July 23,

1996); Notice of Final Determination of Sales at Less Than Fair

Value: Large Newspaper Printing Presses and Components Thereof,

Whether Assembled or Unassembled, From Japan, 61 Fed. Reg. 38,139

(July 23, 1996). In the review at issue, Commerce refused to

exclude certain NTN sample and high profit sales from its CV

calculation because NTN failed to show that such sales were outside

the ordinary course of trade due to “unique and unusual

characteristics related to the sale[s] in question which make

[them] unrepresentative of the home market.” Issues & Decision

Mem. at 44. Commerce acknowledged that such sales should be

excluded only if circumstances existed that would lead Commerce to

the conclusion that such sales, were in fact, made outside the

ordinary course of trade. See id. A lack of evidence provided by

NTN that would enable Commere to reach such a conclusion makes it

reasonable for Commerce to include such sales in the CV profit

calculation. See NTN Bearing Corp., 19 CIT at 1229, 905 F. Supp.

Consol. Court No. 00-04-00141 Page 58

at 1091. Accordingly, this Court upholds Commerce’s decision to

include such sales in its CV profit calculation.

VIII. Commerce’s Strict Reliance Upon the

Sum-of-Deviations Methodology for its

Model Match Analysis

A. Background

During this review, Commerce relied upon the “sum-of-

deviations” (“SUMDEV”) methodology to determine NTN’s similar home

market models of the merchandise under review as potential matches

to the United States models. See Def.’s Mem. at 61-62; NTN’s Mem.

at 33-34; NTN’s Reply at 15. The SUMDEV methodology uses five

physical criteria, namely, inside diameter, outside diameter,

width, load rating and Y2 factor, along with a twenty percent

difmer test when determining which TRB models are most similar to

the United States model. See Issues & Decision Mem. at 46; Def.’s

Mem. at 61-62 & n.19; see also Koyo Seiko Co. v. United States, 66

F.3d 1204, 1207 (Fed. Cir. 1995) (explaining the different

criteria).

When determining appropriate product comparisons for United

States sales, Commerce first tries to match United States TRB

models to identical models sold in NTN’s home market. See Issues

& Decision Mem. at 46. When an identical model was not available,

Commerce applied the SUMDEV methodology. See id.

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Section 1677(16) of Title 19 of the United States Code defines

the term “foreign like product” as

merchandise in the first of the following categories in

respect of which a determination . . . can be

satisfactorily made:

(A) The subject merchandise and other merchandise

which is identical in physical characteristics with, and

was produced in the same country by the same person as,

that merchandise.

(B) Merchandise–-

(i) produced in the same country and by the same

person as the subject merchandise,

(ii) like that merchandise in component material or

materials and in the purposes for which used, and

(iii) approximately equal in commercial value to

that merchandise.

(C) Merchandise–-

(i) produced in the same country and by the same

person and of the same general class or kind as the

merchandise which is the subject of the investigation,

(ii) like that merchandise in the purposes for

which used, and

(iii) which the administering authority determines

may reasonably be compared with that merchandise.

19 U.S.C. § 1677(16) (1994). The CAFC stated in Koyo Seiko Co., 66

F.3d at 1209, that “Congress has implicitly delegated authority to

Commerce to determine and apply a model-match methodology necessary

to yield ‘such or similar’ merchandise under [19 U.S.C. §

1677(16)]. This Congressional delegation of authority empowers

Commerce to choose the manner in which ‘such or similar’

Consol. Court No. 00-04-00141 Page 60

merchandise shall be selected. Chevron applies . . . .”

B. Contentions of the Parties

NTN argues that Commerce’s practice of exclusively “ranking”

similar merchandise on the basis of the SUMDEV methodology does not

allow Commerce to determine the most similar matches because the

test fails to account for the cost deviation among the TRB models

themselves. See Issues & Decision Mem. at 45; NTN’s Mem. at 34.

Specifically, NTN contends that “[t]he exclusive use of the

[SUMDEV] methodology to rank similar models creates the possibility

that [United States] sales will be matched to sales with a

relatively low [SUMDEV] total, but a very high difmer total, while

another sale may have a very similar, but higher, [SUMDEV] total,

but a much lower difmer total.” NTN’s Mem. at 34; see also Issues

& Decision Mem. at 45. NTN uses a hypothetical example to attempt

to show that Commerce’s SUMDEV methodology is prima facie

distortive. See NTN’s Mem. at 34-35. NTN concludes by citing to

Böwe-Passat, 17 CIT at 340, as support of its contention that

Commerce should be ordered to modify the SUMDEV methodology “to

account for cost deviation among models [in order for Commerce] to

fulfill [its] statutory mandate . . . .” NTN’s Mem. at 34. NTN

suggests that Commerce be ordered to alter its methodology by using

the “cost variances not only to determine commercial comparability

for purposes of [19 U.S.C. § 1677(16)(B),] but also to select most

similar home market TRB models.” Issues & Decision Mem. at 47.

Consol. Court No. 00-04-00141 Page 61

Commerce asserts that 19 U.S.C. § 1677(16) provides general

guidance in selecting the products sold in the foreign market to be

compared to United States merchandise. See Issues & Decision Mem.

at 46. The statute first directs Commerce to find home market

merchandise with identical qualities to those sold in the United

States and, if unavailable, to search for merchandise that would

satisfy §§ 1677(16)(B) and (C). See id. at 47. To satisfy such

statutory requirements, Commerce eliminates, as possible matches,

those models for which the variable cost of manufacturing

differences exceed 20 percent of the total cost of manufacturing of

the United States model. See id. Therefore, Commerce contends

that Commerce’s SUMDEV methodology is both a reasonable application

of its discretion to determine what constitutes similar merchandise

for the purpose of calculating NV, and is supported by the law.

See id.

C. Analysis

In Koyo Seiko Co., 66 F.3d at 1209, the CAFC held that

“Congress has implicitly delegated authority to Commerce to

determine and apply a model-match methodology necessary to yield

‘such or similar’ merchandise under [19 U.S.C. § 1677(16)]. This

Congressional delegation of authority empowers Commerce to choose

the manner in which ‘such or similar’ merchandise shall be

selected. Chevron applies in such a situation.” (Citations

Consol. Court No. 00-04-00141 Page 62

omitted).

In the case at bar, Commerce explained that

the selection of similar merchandise is based on a

product’s physical characteristics and not differences in

cost. Furthermore, [Commerce’s] matching methodology

satisfies NTN’s apparent concerns that dissimilar

merchandise may be compared because it precludes the

pairing of models whose cost deviation exceeds 20 percent

and provides for a difmer adjustment to NV if non-

identical TRB models are matched. . . .

Regarding NTN’s suggestion that [Commerce] place a

cap on the [SUMDEV] model-match methodology, [Commerce

explains] that the [CAFC] has considered [Commerce’s]

[SUMDEV] methodology to be reasonable . . . .

Issues & Decision Mem. at 47.

The Court agrees that Commerce is not required to adopt the

particular matching methodology advanced by NTN, see Koyo Seiko

Co., 66 F.3d at 1209; Timken Co. v. United States, 10 CIT 86, 98,

630 F. Supp. 1327, 1338 (1986); NTN Bearing Corp. of Am. v. United

States, 18 CIT 555, 559 (1994), and finds that Commerce’s decision

to apply its SUMDEV methodology is reasonable and in accordance

with law. See Peer Bearing Co. v. United Sates, 25 CIT ___, ___,

182 F. Supp. 2d 1285, 1305 (2001) (pointing out that “[i]n the

absence of a statutory mandate to the contrary, Commerce’s actions

must be upheld as long as they are reasonable’” (quoting Timken Co.

v. United States, 23 CIT 509, 516, 59 F. Supp. 2d 1371, 1377

(1999)); see also Chevron, 467 U.S. at 844-45.

Consol. Court No. 00-04-00141 Page 63

The Court also agrees with Commerce that NTN has failed to

demonstrate that Commerce’s use of its SUMDEV methodology is, in

any way, distortive. NTN merely supplies the Court with a

hypothetical example suggesting that Commerce’s “exclusive use of

the [SUMDEV] methodology to rank similar models creates the

possibility that [United States] sales will be matched to sales

with a relatively low [SUMDEV] total, but a very high difmer total,

while another sale may have a very similar, but higher, [SUMDEV]

total, but a much lower difmer total.” NTN’s Mem. at 34. Such a

suggestion is not sufficient evidence to prove that Commerce’s

methodology is in any way distortive or an unreasonable

interpretation of Commerce’s discretion to “determine and apply a

model-match methodology necessary to yield ‘such or similar’

merchandise under [19 U.S.C. § 1677(16)].” Koyo Seiko Co., 66 F.3d

at 1209.

IX. Commerce’s Treatment of Indirect Selling Expenses for

Interest Alleged to Have Been Incurred by NTN in

Financing Cash Deposits for Antidumping Duties

A. Background

During the review at issue, Commerce added an amount that it

classified as interest on cash deposits to NTN’s United States

indirect selling expenses calculation. See NTN’s Mem. App. 5 at 17

(proprietary version). Commerce states that

[w]ith respect to the proper handling of the amount for

interest on cash deposits, . . . NTN has [previously]

Consol. Court No. 00-04-00141 Page 64

indicated that the amount in question represents interest

payments on the financing of cash deposits for

antidumping duties. Thus, for these [Final Results, 65

Fed. Reg. 11,767, Commerce] ha[s] made no changes to the

manner in which [it] recalculated NTN’s [United States

indirect selling expenses].”

Issues & Decision Mem. at 50.

B. Contentions of the Parties

NTN contends that Commerce improperly added a certain amount

to Commerce’s calculations of NTN’s selling expenses that was

allegedly incurred in financing cash deposits for antidumping

duties. See NTN’s Mem. at 34-35. NTN claims that since that

amount did not equal the figure reported to Commerce by NTN,

compare NTN’s Mem. App 7 at 1 (illustrating worksheet 3 of NTN’s

questionnaire response to Commerce) (proprietary version) with id.

App. 5 at 17 (illustrating attachment II of Commerce’s calculation

of NTN’s United States selling expenses) (proprietary version),

Commerce should remove the added amount from its calculation since

it “effectively penalizes NTN in this amount. . . .” NTN’s Mem. at

35. NTN adds that this particular adjustment is unlike those in

previous reviews and, therefore, considers Commerce’s response to

NTN’s contentions unresponsive. See NTN’s Reply at 16. Commerce

responds that its decision is reasonable and in accordance with

law. “While antidumping duties and cash deposits have never been

considered expenses deductible from [United States] price,”

Commerce asserts that “interest expenses incurred in connection

Consol. Court No. 00-04-00141 Page 65

with selling activities in the [United States] are deductible from

[the United States] price.” Def.’s Mem. at 67. Accordingly,

Commerce allowed an adjustment to indirect selling expenses with

regard to those expenses that Commerce determined to be non-selling

expenses. See id. Timken supports Commerce’s contentions and

charges NTN with improperly calculating its expense figures. See

Timken Resp. at 22 (proprietary version).

C. Analysis

Section 1677a(d)(1) of Title 19 provides for a CEP adjustment

of certain expenses incurred by affiliated sellers in selling the

subject merchandise in the United States. The statute, however,

does not precisely identify what such expenses are. See generally

19 U.S.C. § 1677a(d)(1) (1994); Koyo Seiko Co. v. United States, 26

CIT ___, ___, 186 F. Supp. 2d 1332, 1349-50 (2002) (highlighting

previous reviews that Commerce has dealt with such expenses).

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

financing interest of cash deposits as a selling expense and,

therefore, Commerce allowed respondents that incurred such expenses

to deduct the interest from indirect selling expenses prior to the

deduction of such indirect selling expenses from the CEP. See

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

Consol. Court No. 00-04-00141 Page 66

the United Kingdom, 62 Fed. Reg. 2081, 2104-05 (Jan. 15, 1997).

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.

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, 62 Fed. Reg. 54,043,

54,079 (Oct. 17, 1997).

This Court has held that Commerce has the discretion to alter

its policy, so long as Commerce presents a reasonable rationale for

its departure from the previous practice, see NSK 2002, 26 CIT at

___, 217 F. Supp. 2d at 1307-09 (relying on Chevron, 467 U.S. at

843, Timken Co. v. United States, 22 CIT 621, 628, 16 F. Supp. 2d

1102, 1106 (1998)), and accordingly has upheld Commerce’s decision

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

expenses for interest allegedly incurred by NTN in financing cash

deposits for antidumping duties. See NSK 2002, 26 CIT at ___, 217

Consol. Court No. 00-04-00141 Page 67

F. Supp. 2d at 1309.

In the case at bar, NTN claims that, unlike Commerce’s

practice in past reviews, Commerce added an amount for interest

incurred financing cash deposits to its selling expense calculation

that did not coincide with the figure provided by NTN to Commerce

in its questionnaire response. See NTN’s Reply at 16. The crux of

NTN’s complaint is that Commerce failed to address this issue in

its response and that Timken misunderstood the data provided by

NTN. See id. at 16-17. The Court, however, does not find these

arguments persuasive. Commerce states that

NTN has indicated [in its case brief] that the amount in

question represents interest payments on the financing of

cash deposits for antidumping duties. Thus, for these

[Final Results, 65 Fed. Reg. 11,767, Commerce] ha[s] made

no changes to the manner in which [Commerce] recalculated

NTN[ United States indirect selling expenses].

Issues & Decision Mem. at 50 (emphasis added). Accordingly, the

Court will adhere to its reasoning in NSK 2002, 26 CIT at ___, 217

F. Supp. 2d at 1309, and sustain Commerce’s decision to deny an

adjustment to NTN’s United States indirect selling expenses for

interest allegedly incurred by NTN in financing cash deposits for

antidumping duties.

Consol. Court No. 00-04-00141 Page 68

X. Commerce’s Application of Adverse Facts Available to Koyo’s

Sales of Further-Manufactured Merchandise and Entered Values

(Koyo and Timken)

A. Statutory Background

An antidumping duty is imposed upon imported merchandise when:

(1) Commerce determines such merchandise is being dumped, that is,

sold or likely to be sold in the United States at less than fair

value; and (2) the International Trade Commission determines that

an industry in the United States is materially injured or is

threatened with material injury. See 19 U.S.C. §§ 1673, 1677(34)

(1994). To determine whether there is dumping, Commerce compares

the price of the imported merchandise in the United States to the

NV for the same or similar merchandise in the home market. See 19

U.S.C. § 1677b (1994). The price in the United States is

calculated using either an EP or CEP. See 19 U.S.C. §§ 1677a(a),

(b); see also, SAA at 822 (1994) (Commerce will classify the price

of a United States sales transaction as a CEP “[i]f, before or

after the time of importation, the first sale to an unaffiliated

person is made by (or for the account of) the producer or exporter

or by a seller in the United States who is affiliated with the

producer or exporter”); Koenig & Bauer-Albert AG v. United States,

22 CIT at 589-593, 15 F. Supp. 2d at 850-852 (discussing when to

apply EP or CEP methodology).

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Commerce must reduce the price used to establish CEP by any of

the following amounts associated with economic activities occurring

in the United States: (1) commissions paid in “selling the subject

merchandise in the United States”; (2) direct selling expenses,

that is, “expenses that result from, and bear a direct relationship

to, the sale, such as credit expenses, guarantees and warranties”;

(3) “any selling expenses that the seller pays on behalf of the

purchaser” (assumptions); (4) indirect selling expenses, that is,

any selling expenses not deducted under any of the first three

categories of deductions; (5) certain expenses resulting from

further manufacture or assembly (including additional material and

labor) performed on the merchandise after its importation into the

United States; and (6) profit allocated to the expenses described

in categories (1) through (5). 19 U.S.C. § 1677a(d)(1)-(3); see

SAA at 823-24.

Commerce calculates the expenses resulting from further

manufacture or assembly using one of two statutory methods. See 19

U.S.C. §§ 1677a(d), (e). The first method provides that Commerce

shall reduce “the price used to establish [CEP by] . . . the cost

of any further manufacture or assembly (including additional

material and labor), except in [certain] circumstances.” 19 U.S.C.

§ 1677a(d)(2). When the first method does not apply, Commerce

applies a special rule for merchandise with value added after

importation (“Special Rule”). See 19 U.S.C. § 1677a(e) (1994).

Consol. Court No. 00-04-00141 Page 70

The Special Rule provides that:

[w]here the subject merchandise is imported by a person

affiliated with the exporter or producer, and the value

added in the United States by the affiliated person is

likely to exceed substantially the value of the subject

merchandise, [Commerce] shall determine the [CEP] for

such merchandise by using one of the following prices if

there is a sufficient quantity of sales to provide a

reasonable basis for comparison and [Commerce] determines

that the use of such sales is appropriate:

(1) The price of identical subject merchandise sold

by the exporter or producer to an unaffiliated person.

(2) The price of other subject merchandise sold by

the exporter or producer to an unaffiliated person.

If there is not a sufficient quantity of sales to provide

a reasonable basis for comparison under paragraph (1) or

(2), or [Commerce] determines that neither of the prices

described in such paragraphs is appropriate, then the

[CEP] may be determined on any other reasonable basis.

19 U.S.C. § 1677a(e).

B. Factual Background

On February 18, 1999, Koyo requested that Commerce apply the

Special Rule pursuant to 19 U.S.C. § 1677a(e) for certain of Koyo’s

imported bearings and bearing parts further manufactured in the

United States prior to being sold to an unaffiliated customer. See

Koyo’s Mem. Ex. A. Moreover, Koyo requested that Commerce exempt

it from completing Section E of Commerce’s questionnaire that

required Koyo to report sales and cost data information for its

further manufactured sales. See id. Ex. A at 2. Commerce notified

Koyo on March 11, 1999, that based on certain information provided

Consol. Court No. 00-04-00141 Page 71

by Koyo, Commerce determined that Koyo is required to provide

additional information regarding its sales of further manufactured

bearings, and mandated that Koyo respond to Section E of Commerce’s

questionnaire. See id. Ex. B. Koyo declined to provide this

additional information. See id. Ex. F. Commerce explained that

the record does not lead [Commerce] to conclude that the

use of either of the two alternative methods described in

[1677a(e)(1) and (2)] with respect to Koyo’s further-

manufactured [subject] merchandise is appropriate. As

noted in [the Preliminary Results, 64 Fed. Reg. 53,323,]

the finished merchandise sold by Koyo to the first

unrelated [United States] customer was still in the same

class or kind as merchandise within the scope of the TRB

order and finding (i.e., imported TRB components were

processed into TRBs). As a result, the calculation of

the precise amount of value added for Koyo’s further-

manufactured sales would not be nearly as burdensome as

it would be for . . . []other respondent[s] who imported

TRBs for incorporation in automobiles and transmission

assemblies. Furthermore, in prior reviews [Commerce]

ha[s] calculated margins for Koyo’s further-processed

sales and has extensive experience with and knowledge of

Koyo’s further-manufactured sales and the calculation of

the value added in the United States with respect to

these sales. In addition, the record clearly indicates

that Koyo’s further-manufactured [United States] sales

represented a large portion of its total [United States]

sales during the POR. Furthermore, A-588-604 margins

[Commerce] ha[s] calculated for Koyo for determinations

in past reviews in which further- manufactured sales were

included in [Commerce’s] databases have been

significantly higher than margins [Commerce] ha[s]

calculated in past reviews of Koyo in the A-588-604 case

in which there were no further-manufactured sales in

[Commerce’s] analysis. This indicates that, in this

particular case, the margins on further-manufactured

sales are not necessarily equivalent to the margins on

non-further-manufactured sales. Thus, the standard

methodology would likely yield more accurate results in

this case. Consideration of this difference in past Koyo

margins in which further-manufactured sales were included

in [Commerce’s] analysis cannot be overlooked in

[Commerce’s] evaluation of the additional accuracy

Consol. Court No. 00-04-00141 Page 72

[Commerce] would likely gain by using the standard

methodology in this case. Therefore, for all of the

above reasons, in this case [Commerce] ha[s] determined

that the relatively small reduction of burden on

[Commerce] that would result from resorting to either of

the two proxy methods under the [S]pecial [R]ule would be

outweighed by the potential distortion and losses in

accuracy as a consequence of their use. Accordingly, for

this case [Commerce] ha[s] rejected the use of either of

the two proxies as inappropriate and ha[s] sought to

calculate the CEP for Koyo's further manufactured sales

using another reasonable basis.

Issues & Decision Mem. at 12.

As another reasonable method, Commerce chose its standard

methodology under 19 U.S.C. § 1677a(d)(2) to calculate the CEP of

Koyo’s further-manufactured merchandise and found that this

methodology was not burdensome and “presented a higher probability

of accurate results than using margins calculated for non-further

manufactured sales.” Def.’s Mem. at 78 (citing Issues & Decision

Mem. at 13-14). Koyo objected to the use of Comerce’s standard

methodology for calculating the CEP of its further-manufactured TRB

merchandise and suggests that

instead of evaluating whether the margins for finished

over-4-inch A-588-604 bearings were an appropriate

surrogate for A-588-604 further-manufactured merchandise,

[Commerce] could have used the margins it calculated for

finished A-588-054 bearings as a proxy for that A-588-604

merchandise which was further processed into under-4-inch

bearings, and the margins calculated for the finished A-

588-604 bearings as a proxy for that A-588-604

merchandise which was further processed into over-4-inch

bearings.

Issues & Decision Mem. at 13.

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Commerce responded that

[w]hile Koyo’s proposal would be less burdensome than the

use of the standard methodology, the record clearly

indicates that the use of the standard methodology for

Koyo would yield more accurate results: [Commerce]

believe[s] that the gains in accuracy [Commerce] would

achieve would outweigh any burden resulting from the use

of the standard calculation. Koyo suggests an

alternative method for grouping its non-further-

manufactured sales such that the division of merchandise

subject to the TRB order and finding would be breached.

Not only has [Commerce] never before breached the

division between orders in any aspect of [Commerce’s]

analysis or calculations, but Koyo has provided no

evidence that its alternative would yield results more

accurate than [Commerce’s] standard methodology. The

record contains no compelling reasons for [Commerce] to

abandon [Commerce’s] long-standing policy of treating

orders as separate proceedings. Rather, the record

supports [Commerce’s] continued use of the standard

methodology as a reasonable basis for calculating the CEP

for Koyo's further-manufactured merchandise.

Id. at 13-14. Since Koyo failed to comply with Commerce’s request

that Koyo complete Section E of Commerce’s questionnaire, Commerce

applied, as adverse facts available, “the highest rate ever

calculated for Koyo in any previous review of the TRBs at issue[,

. . . and applied this] rate . . . to the total entered value of

Koyo’s further-manufactured sales” to calculate the CEP of Koyo’s

further-manufactured merchandise. Def.’s Mem. at 82-83.

C. Contentions of the Parties

1. Koyo’s Contentions

Koyo contends that it submitted certain information to

Commerce illustrating that the “value added in the United States to

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imported TRB parts exceeded substantially the value of those parts,

and that [such information] satisfied the prerequisites for the

application of the statutory ‘special rule,’ 19 U.S.C. § 1677a(e)

. . . .” Koyo’s Mem. at 14. Accordingly, Commerce should have

calculated Koyo’s CEP of further processed merchandise sales by

implementing a methodology other than what Commerce uses in its

standard analysis. See id. at 15, 19. Koyo asserts that

“Congress’ use of the word ‘shall’ in the first paragraph of

section 1677a(e)17 demonstrates that [Commerce] is not given

discretion [regarding its] use [of] the ‘special rule,’ but is

directed to do so whenever [Commerce] finds that the value added in

the United States is likely to exceed substantially the value of

the imported components.” Id. at 19. Koyo also argues that

Commerce’s mandate that Koyo submit a full Section E response to

Commerce’s questionnaire “ignored the clear language” of 19 U.S.C.

§ 1677a(e) directing Commerce to calculate CEP of further processed

17

The pertinent section reads that Commerce

. . . shall determine the constructed export price for

[subject merchandise that is imported by an affiliated

exporter and the value added in the United States is

likely to substantially exceed the subject merchandise’s

value] by using one of the following prices[:] . . .

(1) [t]he price of identical subject merchandise

sold by the exporter . . . to an unaffiliated person[;

or]

(2) [t]he price of other subject merchandise sold by

the exporter . . . to an unaffiliated person.

19 U.S.C. § 1677a(e).

Consol. Court No. 00-04-00141 Page 75

merchandise sales on a “more reasonable” and “less burdensome”

manner. See id. 19-20.

According to Koyo, the case at bar concerns the issue of

whether Commerce acted reasonably and within its statutory limits

by applying the Special Rule, as provided for in 19 U.S.C. §

1677a(e), in addition to relying on its standard further-

manufacturing methodology, provided for in 19 U.S.C. § 1677a(d)(2)

(1994), and requesting from Koyo a Section E response. See id. at

20-22. Koyo asserts that 19 U.S.C. §§ 1677a(d) and 1677a(e) are

mutually exclusive and, as such, Commerce may not employ its

standard analysis as an “other reasonable basis” under § 1677a(e).

See id. at 22. In other words, when the Special Rule applies,

Commerce “is foreclosed from deducting the cost of further

manufacture[d TRBs] . . . and must rely on an alternative basis to

calculate the margins on further processed merchandise.” Koyo’s

Resp. at 15. Koyo further argues that the facts in the record fail

to support Commerce’s justifications for applying the standard

analysis under the Special Rule, but rather that Commerce’s

conclusion is based on a “false premise . . . that the differences

between the margins of further processed and non-further processed

merchandise in past reviews are indicative of the results in the

current review.” Koyo’s Mem. at 23. Although Koyo recognizes that

Commerce may use knowledge it has developed from prior reviews

regarding some aspects of Koyo’s participation in the antidumping

Consol. Court No. 00-04-00141 Page 76

process, there has been no administrative review for Koyo in which

the record reflects data on Koyo’s further processed TRBs since

1993/94. Id. at 23.

Koyo proposed to Commerce an alternative methodology on which

to calculate the dumping margins in this POR, which Koyo claims

Commerce “erroneously rejected.” See id. at 24-27. Koyo also

raises issue with Commerce’s “confusion” regarding the formula

Commerce is to apply in determining the relative accuracy of the

standard methodology. Koyo cites to various pages of the Issues &

Decision Mem. claiming that Commerce fails to consistently apply

the appropriate test measuring the relative “accuracy” of

Commerce’s standard methodology versus the implementation of an

alternative methodology. See id. at 27-28.

2. Commerce’s Contentions

Commerce contends that Congress has granted to Commerce broad

discretion in determining when the use of “any other reasonable

basis” under 19 U.S.C. § 1677a(e) is appropriate. Def.’s Mem. at

79-82. Commerce maintains that “[n]either the statute nor the SAA

prohibits Commerce from using the more burdensome standard [19

U.S.C. § 1677a](d)(2) methodology as an alternative reasonable

method where the agency finds that neither alternative under [§§

1677a](e)(1) or (e)(2) is appropriate.” Id. at 81. In this case,

Commerce determined that

Consol. Court No. 00-04-00141 Page 77

the record does not lead [Commerce] to conclude that the

use of either of the two alternative methods described in

[§§ 1677a(e)(1) and (2)] with respect to Koyo’s further-

manufactured merchandise is appropriate. As noted in

[Commerce’s Preliminary Results, 64 Fed. Reg. 53,323,]

the finished merchandise sold by Koyo to the first

unrelated [United States] customer was still in the same

class or kind as merchandise within the scope of the TRB

order and finding (i.e., imported TRB components were

processed into TRBs). As a result, the calculation of

the precise amount of value added for Koyo’s further-

manufactured sales would not be nearly as burdensome as

it would be for . . . another respondent who imported

TRBs for incorporation in automobiles and transmission

assemblies. Furthermore, in prior reviews Commerce ha[s]

calculated margins for Koyo’s further-processed sales and

ha[s] extensive experience with and knowledge of Koyo’s

further-manufactured sales and the calculation of the

value added in the United States with respect to these

sales. In addition, the record clearly indicates that

Koyo's further-manufactured [United States] sales

represented a large portion of its total [United States]

sales during the POR. Furthermore, A-588-604 margins

[Commerce] ha[s] calculated for Koyo for determinations

in past reviews in which further-manufactured sales were

included in [Commerce’s] databases have been

significantly higher than margins [Commerce] ha[s]

calculated in past reviews of Koyo in the A-588-604 case

in which there were no further-manufactured sales in our

analysis. This indicates that, in this particular case,

the margins on further-manufactured sales are not

necessarily equivalent to the margins on non-further-

manufactured sales. Thus, the standard methodology would

likely yield more accurate results in this case.

Consideration of this difference in past Koyo margins in

which further-manufactured sales were included in

[Commerce’s] analysis cannot be overlooked in

[Commerce’s] evaluation of the additional accuracy

[Commerce] would likely gain by using the standard

methodology in this case. Therefore, for all of the

above reasons, in this case [Commerce] ha[s] determined

that the relatively small reduction of burden on

[Commerce] that would result from resorting to either of

the two proxy methods under the special rule would be

outweighed by the potential distortion and losses in

accuracy as a consequence of their use. Accordingly, for

this case [Commerce has] rejected the use of either of

the two proxies as inappropriate and ha[s] sought to

Consol. Court No. 00-04-00141 Page 78

calculate the CEP for Koyo's further manufactured sales

using another reasonable basis.

Issues & Decision Mem. at 12.

Although Commerce agrees that Koyo’s proposed methodology

would be less burdensome than Commerce’s standard methodology under

§ 1677a(d)(2), Commerce contends that “. . . the record clearly

indicates that the use of the standard methodology for Koyo would

yield more accurate results. . . .” Issues & Decision Mem. at 13-

14; Def.’s Mem. at 80. Commerce cites the CAFC’s decision in Rhone

Poulenc, Inc. v. United States, 899 F.2d 1185, 1191 (Fed. Cir.

1990), recognizing that the purpose behind the antidumping statute

is to ensure that Commerce calculates the dumping margins as

accurately as possible. See Def.’s Mem. at 80-81. Although

Commerce does not dispute that the underlying purposes of the

Special Rule is to ensure that Commerce avoid certain complexities

involved in implementing the standard methodology set forth in 19

U.S.C. § 1677a(d)(2), Commerce has determined that in the case at

bar, achieving accuracy is to outweigh the goal of reducing the

burden associated with implementing the standard analysis. See id.

at 82. According to Commerce, it acted within its statutory

authority and the Court can not “weigh the wisdom of Commerce’s

legitimate policy choices.” Id.

Commerce also contends that it acted in accordance with 19

U.S.C. § 1677e when it used the adverse facts available margin rate

Consol. Court No. 00-04-00141 Page 79

to calculate the CEP of Koyo’s further-manufactured merchandise.

See id. In particular, Commerce argues that, since Koyo failed to

act to the best of its ability by refusing to respond to the

particular section of Commerce’s questionnaire, Commerce properly

selected the adverse facts available margin rate and applied it to

the total entered value of Koyo’s further-manufactured merchandise.

See id. 82-83. Contrary to Timken’s argument that Commerce should

have applied facts available to Koyo’s total sales value of the

further-manufactured sales rather than to the entered value of

Koyo’s sales, Commerce maintains that it “is not required by the

statute to select a method that is ‘the most’ or ‘more’ reasonably

adverse.” Id. at 83. In sum, Commerce argues that it has adhered

to the statutory language in “choosing the highest margin ever

calculated for Koyo in the reviews . . . at issues.” Id. Commerce

contends that it had the discretion to choose the sources and facts

upon which Commerce will depend upon to support an adverse interest

“when a respondent has been determined to be uncooperative.” Id.

at 84.

According to Commerce, “[t]he adverse facts available rate

selected . . . in this case represents an increase over past

practice; yet, the application of that rate to entered value is

consistent with past practice [as well].” Id. at 86; see also id.

at 87. Commerce maintains that its application of the adverse

facts available rate to the entered value rather than Koyo’s sales

Consol. Court No. 00-04-00141 Page 80

values of further-manufactured TRBs is consistent with Commerce’s

practice in determining assessment rates. See id. at 87

(explaining Commerce’s calculation of assessment rates under 19

C.F.R. § 351.212(b)). Finally, Commerce argues that adherence to

Timken’s suggestion that Commerce apply an adverse facts available

rate to the total sales value would result in punitive results for

Koyo. See id.

3. Timken’s Contentions

Timken agrees with Commerce’s resort to its standard

methodology under 19 U.S.C. § 1677a(d)(2) as an alternative

reasonable method and argues that Commerce has broad discretion as

when to use “any other reasonable basis” under § 1677a(e). See

Timken’s Resp. at 8-12. Moreover, Timken maintains that the reason

Commerce has not conducted a recent determination on Koyo’s further

manufactured merchandise is because Koyo has consistently refused

to supply Commerce with the necessary information to conduct such

a review. See id. at 10. According to Timken, Commerce correctly

relied on adverse facts available and reasonably determined that

Koyo’s further-manufactured TRBs were likely dumped at greater

rates than its “fully manufactured” merchandise. See id. Timken

further argues that since the United States Customs Service does

not maintain CEPs for merchandise imported by related parties, but

rather has only entered values, Koyo’s proposed methodology would

Consol. Court No. 00-04-00141 Page 81

lead to irrational results. See id. at 12.

Timken, however, disagrees with Commerce’s application of the

adverse facts available margin to Koyo’s entered value and argues

that Commerce should have applied its facts available rate to

Koyo’s sales value rather than Koyo’s entered value. See Timken’s

Mem. Supp. Mot. J. Agency R. Pursuant R. 56.2 (“Timken’s Mem.”) at

8-14. Timken contends that Commerce’s application of the adverse

facts available margin to Koyo’s entered value was unlawful

because: (1) transfer prices are not reliable, see id. at 11, 15-

18; and (2) Commerce “rewarded Koyo’s refusal to supply requested

information by applying the ‘facts available’ rate to Koyo’s

entered value, rather than to its sales value, for further-

processed merchandise, which resulted in a lower dumping margin for

Koyo.” Id. at 14.

D. Analysis

The first issue before the Court is whether Commerce’s use of

its standard methodology pursuant to § 1677a(d)(2) constitutes

another “reasonable basis” under § 1677a(e). 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, 467 U.S. 837. Under the

first step, the Court reviews Commerce’s construction of a

statutory provision to determine whether “Congress has directly

Consol. Court No. 00-04-00141 Page 82

spoken to the precise question at issue.” Chevron, 467 U.S. 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., 157 F.3d at 882

(citing Chevron, 467 U.S. at 843 n.9). “The first and foremost

‘tool’ to be used is the statute’s text, giving it its plain

meaning. . . . Because a statute’s text is Congress’s final

expression of its intent, if the text answers the question, that is

the end of the matter.” Id. (citations omitted).

The end clause of 19 U.S.C. § 1677a(e) clearly provides

Commerce with a great deal of discretion in adjusting CEP for the

cost of further manufacture and assembly. See 19 U.S.C. §

1677a(e). Under § 1677a(e), when the value added to subject

merchandise in the United States is likely to substantially exceed

the value of the merchandise, Commerce must use specified surrogate

prices if two conditions are met. See id. The first condition in

the preamble of § 1677a(e) that there be “a sufficient quantity of

sales to provide a reasonable basis for comparison,” is not at

issue here. Id. The second condition in the preamble of §

1677a(e) requires Commerce to “determine[] that the use of such

sales is appropriate.” Id. Thus, Commerce is not forced to use

the surrogate prices if it determines that their use is not

“appropriate.” See id. According to the end clause of § 1677a(e),

Commerce is permitted to determine CEP “on any other reasonable

Consol. Court No. 00-04-00141 Page 83

basis.” Id.

Commerce, therefore, may determine the method by which to

calculate CEP, when it finds that the use of the surrogate prices

is not appropriate. This holds true even if Commerce finds that

the value added in the United States “is likely to exceed

substantially the value of the subject merchandise . . . .” 19

U.S.C. § 1677a(e). Thus, even if Commerce finds that Koyo’s added

value substantially exceeds the value of the merchandise, Commerce

still has the discretion to refuse to apply the Special Rule.

In the case at bar, Commerce determined that

the record does not lead [Commerce] to conclude that the

use of either of the two alternative methods described in

[§§ 1677a(e)(1) and (2)] with respect to Koyo’s further-

manufactured merchandise is appropriate. As noted in

[Commerce’s Preliminary Results, 64 Fed. Reg. 53,323,]

the finished merchandise sold by Koyo to the first

unrelated [United States] customer was still in the same

class or kind as merchandise within the scope of the TRB

order and finding (i.e., imported TRB components were

processed into TRBs). As a result, the calculation of

the precise amount of value added for Koyo’s further-

manufactured sales would not be nearly as burdensome as

it would be for . . . another respondent who imported

TRBs for incorporation in automobiles and transmission

assemblies. Furthermore, in prior reviews Commerce ha[s]

calculated margins for Koyo’s further-processed sales and

ha[s] extensive experience with and knowledge of Koyo’s

further-manufactured sales and the calculation of the

value added in the United States with respect to these

sales. In addition, the record clearly indicates that

Koyo's further-manufactured [United States] sales

represented a large portion of its total [United States]

sales during the POR. Furthermore, A-588-604 margins

[Commerce] ha[s] calculated for Koyo for determinations

in past reviews in which further-manufactured sales were

included in [Commerce’s] databases have been

Consol. Court No. 00-04-00141 Page 84

significantly higher than margins [Commerce] ha[s]

calculated in past reviews of Koyo in the A-588-604 case

in which there were no further-manufactured sales in our

analysis. This indicates that, in this particular case,

the margins on further-manufactured sales are not

necessarily equivalent to the margins on non-further-

manufactured sales. Thus, the standard methodology would

likely yield more accurate results in this case.

Issues & Decision Mem. at 12.

The Court finds that Commerce acted within the discretion

afforded to it by § 1677a(e) in refusing to apply the Special Rule

to Koyo in this review. The Court will not require Commerce to use

the Special Rule when it finds the use of the Special Rule

inappropriate, since the imposition of such a requirement would be

contrary to § 1677a(e). Therefore, since Commerce found that

neither alternative under §§ 1677a(e)(1) or (e)(2) were

appropriate, Commerce’s resort to its standard methodology under §

1677a(d)(2) as an alternative reasonable method is affirmed.18

Next, the Court must determine whether Commerce’s application

of the adverse facts available margin rate to Koyo’s entered value

in order to calculate the CEP of Koyo’s further-manufactured

merchandise was in accordance with law. The antidumping statute

18

Although Koyo proposes alternative methodologies, the

Court’s “duty is not to weigh the wisdom of, or to resolve any

struggle between, competing views of the public interest, but

rather to respect legitimate policy choices made by the agency in

interpreting and applying the statute.” Suramerica de Aleaciones

Laminadas, C.A. v. United States, 966 F.2d 660, 665 (Fed. Cir.

1992).

Consol. Court No. 00-04-00141 Page 85

mandates that Commerce use “facts otherwise 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) (1994); (3) significantly impedes an

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

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

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).

Once Commerce determines that use of facts available is

warranted, § 1677e(b) permits Commerce to apply an “adverse

inference” if it can find that “an interested party has failed to

cooperate by not acting to the best of its ability to comply with

a request for information.” Such an inference may permit Commerce

to rely on information derived from the petition, the final

determination, a previous review or any other information placed on

the record. See 19 U.S.C. § 1677e(c) (1994). When Commerce relies

on information other than “information obtained in the course of

[the] investigation or review, [Commerce] shall, to the extent

practicable, corroborate that information from independent sources

Consol. Court No. 00-04-00141 Page 86

that are reasonably at [its] disposal.” Id.

In order to find that a party “has failed to cooperate by not

acting to the best of its ability,” it is not sufficient for

Commerce to merely assert this legal standard as its conclusion or

repeat its finding concerning the need for facts available. See

Ferro Union, Inc. v. United States, 23 CIT 178, 197, 44 F. Supp. 2d

1310, 1329 (1999) (“Once Commerce has determined under 19 U.S.C. §

1677e(a) that it may resort to facts available, it must make

additional findings prior to applying 19 U.S.C. § 1677e(b) and

drawing an adverse inference.”). Rather, Commerce must clearly

articulate: (1) “why it concluded that a party failed to comply to

the best of its ability prior to applying adverse facts,” and (2)

“why the absence of this information is of significance to the

progress of [its] investigation.” Ferro Union, 23 CIT at 200, 44

F. Supp. 2d at 1331.

The Court finds that Commerce’s decision to apply adverse

facts available was in accordance with law. When Commerce chose to

use its standard methodology under § 1677a(d)(2) to calculate the

CEP of Koyo’s further-manufactured merchandise, Commerce requested

that Koyo provide Commerce with responses to the particular section

of the questionnaire. In particular, on March 11, 1999, Commerce

requested that Koyo provide a response to the specific section of

the questionnaire by April 5, 1999. See Koyo’s Mem. Ex. B. On

Consol. Court No. 00-04-00141 Page 87

April 5, 1999, Koyo responded by letter to Commerce stating that

“[b]ecause Koyo believes that it qualifies for application of the

‘special’ rule in 19 U.S.C. § 1677a(e), and has little confidence

that it will receive even-handed treatment from [Commerce] in the

calculation of the fair value of TRBs further-processed from

imported forgings,” Koyo declines to submit the Section E response.

Koyo’s Mem. Ex. F.

As a result of Koyo’s refusal to provide responses to the

particular section and thereby, failure to act to the best of its

ability, Commerce selected “as adverse facts available to Koyo's

further-manufactured merchandise the highest rate ever calculated

for Koyo in any segment of the A-588-604 proceeding (41.04

percent).” Issues & Decision Mem. at 14. Consequently, Commerce’s

decision to apply the adverse facts available rate to Koyo’s

entered value to calculate the CEP of Koyo’s further-manufactured

merchandise was also in accordance with law.

The Court also finds that Timken’s argument that Commerce

should have applied the adverse facts available rate to Koyo’s

sales value is without merit. As Commerce correctly argues, “[i]n

choosing among the facts available, [Commerce] is not required by

the statute to select a method that is ‘the most’ or ‘more

reasonably adverse.” Issues & Decision Mem. at 17. Rather, this

Court affirms Commerce’s application of the adverse facts available

Consol. Court No. 00-04-00141 Page 88

rate to Koyo’s entered value since Commerce’s methodology was

reasonable.

Accordingly, the Court sustains Commerce’s resort to its

standard methodology under § 1677a(d)(2) and its application of the

adverse facts available rate to Koyo’s entered value to determine

the CEP of Koyo’s further-manufactured merchandise.

XI. Commerce’s Methodology for Calculating Koyo’s Assessment Rate

for Antidumping Duties

A. Background

In the subject review, Commerce, following its usual practice

in ascertaining cash deposit rates and assessment rates, stated

that “[t]he cash deposit rate has been determined on the basis of

the selling price to the first unaffiliated [United States]

customer. For appraisement purposes, where information is

available, [Commerce] will use the entered value of the merchandise

to determine the assessment rate.” Final Results, 65 Fed. Reg. at

11,769.

Any of Commerce’s findings concerning assessment rates and

cash deposit rates are subject to 19 U.S.C. § 1675(a)(1)(B) (1994)

which provides that Commerce shall “review, and determine (in

accordance with [§ 1675(a)](2)), the amount of any antidumping duty

. . . .” Section 1675(a)(2) further states that the dumping margin

Consol. Court No. 00-04-00141 Page 89

“shall be the basis for the assessment of . . . antidumping duties

on entries of merchandise . . . .” 19 U.S.C. § 1675(a)(2)(C).

The dumping margin (equal to the amount of antidumping duty

owed) is the amount by which NV exceeds the EP or CEP on the

subject merchandise sold during the POR.19 See 19 U.S.C. § 1677(35)

(1994).

Normal value is the comparable price for a product like the

imported merchandise when first sold (generally, to unaffiliated

parties) “for consumption in the exporting country, in the usual

commercial quantities and in the ordinary course of trade and, to

the extent practicable, at the same level of trade as the export

price or constructed export price.” 19 U.S.C. § 1677b(a)(1)(B)(i)

(1994).

The export price means the “price at which the subject

merchandise is first sold . . . by the producer or exporter of the

subject merchandise outside of the United States to an unaffiliated

purchaser,” while the constructed export price is the “price at

which the subject merchandise is first sold . . . in the United

States . . . [by] producer or exporter . . . to a purchaser not

19

Because Koyo had only CEP sales during the POR, Koyo’s

arguments address only the calculation of the assessment rate for

CEP sales. See Koyo’s Reply at 22 n.10. However, for the purpose

of our analysis, the outcome would be identical if Koyo had both EP

and CEP or only EP sales during the POR.

Consol. Court No. 00-04-00141 Page 90

affiliated with the producer or exporter . . . .” 19 U.S.C. §

1677a(a),(b) (1994).

Cash deposit is a provisional remedy. When Commerce directs

Customs to suspend liquidation upon a preliminary determination of

dumping, the importer must make a cash deposit of estimated

antidumping duties with Customs or post a bond or other security.

See 19 U.S.C. § 1675(a)(2)(B)(iii). Commerce orders the posting of

a cash deposit in an amount equal to the estimated average amount

by which the foreign market value exceeds the United States price,

that is, the dumping margin. See 19 U.S.C. § 1673b(d)(1)(B)

(1994); see also 19 U.S.C. § 1673e(b) (applying similar calculation

for Commerce’s final determination). Commerce then calculates the

cash deposit rate by dividing “‘the aggregate dumping margins by

the aggregated United States prices.’” National Steel Corp. v.

United States, 20 CIT 743, 746, 929 F. Supp. 1577, 1581 (1996)

(citing 19 C.F.R. § 353.2(f)(2) (1993)); accord 19 U.S.C. §

1677(35)(B) (stating that “‘weighted average dumping margin’ is the

percentage determined by dividing the aggregate dumping margins .

. . by the aggregate export prices . . .”). Commerce interprets

the term “United States price” as the sale price after Commerce has

made all adjustments as provided for by law. See National Steel,

20 CIT at 746, 929 F. Supp. at 1581 (citing 19 C.F.R. §

353.41(d)(iii) (1993)).

Consol. Court No. 00-04-00141 Page 91

When an antidumping duty is imposed upon imported merchandise,

Commerce calculates an assessment rate for each importer by

dividing the dumping margin for the subject merchandise by the

entered value of such merchandise for normal Customs purposes. See

19 C.F.R. § 351.212(b) (1998).

In promulgating 19 C.F.R. § 351.212(b), Commerce reasoned as

follows:

[Section] 351.212(b)(1) deal[s] with the method that

[Commerce] will use to assess antidumping duties upon

completion of a review. . . . [Commerce] provided that

it normally will calculate an “assessment rate” for each

importer by dividing the absolute dumping margin found .

. . by the entered value . . . . [The rule] merely

codified an assessment method that [Commerce] has come to

use more and more frequently in recent years.

Historically, [Commerce] (and, before it, the

Department of the Treasury) used the so-called “master

list” (entry-by-entry) assessment method. Under the

master list method, [Commerce] would list the appropriate

amount of duties to assess for each entry of subject

merchandise separately in its instructions to the Customs

Service. However, in recent years, the master list

method has fallen into disuse for two principal reasons.

First, in most cases, respondents have not been able to

link specific entries to specific sales, particularly in

CEP situations in which there is a delay between the

importation of merchandise and its resale to an

unaffiliated customer[]. Absent an ability to link

entries to sales, [Commerce] cannot apply the master list

method. Second, even when respondents are able to link

entries to sales, there are practical difficulties in

creating and using a master list if the number of entries

covered by a review is large. Preparing a master list

that covers hundreds or thousands of entries is a time-

consuming process, and one that is prone to errors by

[Commerce] and/or Customs Service staff. . . .

Antidumping Duties; Countervailing Duties, 62 Fed. Reg. 27,296,

Consol. Court No. 00-04-00141 Page 92

27,314 (May 19, 1997).

B. Contentions of the Parties

1. Koyo’s Contentions

Koyo asserts that

This text is long and has been trimmed here. Open the source document for the complete record.