NTN Bearing Corp. of America v. United States

Slip Op. 02-07

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS

________________________________________

:

NTN BEARING CORPORATION OF AMERICA, :

AMERICAN NTN BEARING MANUFACTURING :

CORPORATION and NTN CORPORATION; :

NSK LTD. and NSK CORPORATION; :

KOYO SEIKO CO., LTD. and KOYO :

CORPORATION OF U.S.A., :

:

Plaintiffs and :

Defendant-Intervenors, :

:

v. : Consol. Court No.

: 98-01-00146

UNITED STATES, :

:

Defendant, :

:

and :

:

THE TIMKEN COMPANY, :

:

Defendant-Intervenor :

and Plaintiff. :

_______________________________________ :

Plaintiffs and defendant-intervenors, NTN Bearing Corporation

of America, American NTN Bearing Manufacturing Corporation and NTN

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

(collectively “NSK”), 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

Department of Commerce, International Trade Administration’s

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

Antidumping Duty Administrative Reviews of Tapered Roller Bearings

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

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

Components Thereof, From Japan (“Final Results”), 63 Fed. Reg. 2558

(Jan. 15, 1998), as amended, Amended 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 (“Amended Final Results”), 63 Fed. Reg. 13,391

(Mar. 19, 1998). Defendant-intervenor and plaintiff, The Timken

Consol. Court No. 98-01-00146 Page 2

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, NTN contends that Commerce unlawfully: (1)

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

(1994) for the 1976 antidumping duty order; (2) denied a price-

based level of trade (“LOT”) adjustment for NTN’s constructed

export price (“CEP”) sales; (3) rejected NTN’s allocation of United

States and home market selling expenses on an LOT-specific basis;

(4) refused to calculate CEP profit on an LOT-specific basis; (5)

included export price (“EP”) sales in the calculation of CEP

profit; (6) recalculated NTN’s credit expenses on a transaction-

specific basis; (7) denied a downward adjustment to NTN’s reported

United States indirect selling expenses for imputed interests

incurred in financing cash deposits for antidumping duties; (8)

adjusted NTN’s cost of production (“COP”) and constructed value

(“CV”) for affiliated party inputs; (9) applied a 99.5% test to

determine whether sales to NTN’s affiliated parties were made at

arm’s length; (10) double-counted NTN’s depreciation of idle

equipment; (11) included NTN’s zero-priced United States

transactions in the margin calculations and failed to exclude NTN’s

sample sales and other sales from its margin calculation; and (12)

used facts available to adjust NTN’s reported billing adjustment.

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

absorption inquiry under 19 U.S.C. § 1675(a)(4) for the 1976 and

1987 antidumping duty orders; (2) used NSK’s affiliated supplier

cost data to run its model match methodology under 19 U.S.C. §

1677(16) (1994), to calculate the difmer adjustment under 19 U.S.C.

§ 1677b(a)(6) (1994) and to recalculate NSK’s reported U.S.

inventory carrying costs (“ICC”) prior to deducting this expense

from CEP pursuant to 19 U.S.C. § 1677a(d) (1994); and (3) denied a

partial LOT adjustment.

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

absorption inquiry under 19 U.S.C. § 1675(a)(4) for the 1976 and

1987 antidumping duty orders; (2) applied adverse facts available

to Koyo’s sales of further manufactured tapered roller bearings

(“TRBs”); (3) used entered value to calculate the assessment rate

under 19 C.F.R. § 351.212(b) (1998); and (4) treated Koyo’s

imported forged rings as in-scope merchandise subject to the TRB

antidumping duty order.

Timken contends that Commerce unlawfully: (1) applied adverse

facts available to Koyo’s entered value; (2) failed to adjust CEP

for indirect selling expenses reported by NTN, NSK and Koyo; (3)

Consol. Court No. 98-01-00146 Page 3

permitted NTN to exclude certain warehousing expenses attributable

to non-scope merchandise from its reported United States indirect

selling expenses; (4) accepted Koyo’s home market support rebates;

(5) accepted Koyo’s home market “billing adjustment two”; (6)

accepted NSK’s home market lump-sum rebates; and (7)accepted Koyo’s

home market average short-term interest rate.

Held: NTN’s 56.2 motion is granted in part and denied in

part. NSK’s 56.2 motion is granted in part and denied in part.

Koyo’s 56.2 motion is granted in part and denied in part. Timken’s

56.2 motion is denied. This case is remanded to Commerce to: (1)

annul all findings and conclusions made pursuant to the duty-

absorption inquiry conducted for the subject review in accordance

with this opinion; and (2) exclude any transactions that were not

supported by consideration from NTN’s United States sales database

and to adjust the dumping margins accordingly.

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

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

Dated: January 24, 2002

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

Kano, David G. Forgue and Clarice K. M. McCauley) for NTN.

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

P. Jaffe and Grace W. Lawson) for NSK.

Powell, Goldstein, Frazer & Murphy LLP (Peter O. Suchman, Neil

R. Ellis, Elizabeth C. Hafner and Ronald E. Minsk) 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, and Michele D. Lynch); of counsel: Joan L.

Mackenzie and Barbara Campbell Potter, 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

and Patrick J. McDonough) for Timken.

Consol. Court No. 98-01-00146 Page 4

OPINION

TSOUCALAS, Senior Judge: Plaintiffs and defendant-

intervenors, NTN Bearing Corporation of America, American NTN

Bearing Manufacturing Corporation and NTN Corporation (collectively

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

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

determination, entitled Final Results of Antidumping Duty

Administrative Reviews of Tapered Roller Bearings and Parts

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

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

Thereof, From Japan (“Final Results”), 63 Fed. Reg. 2558 (Jan. 15,

1998), as amended, Amended 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 (“Amended Final Results”), 63 Fed. Reg. 13,391

(Mar. 19, 1998). 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. 98-01-00146 Page 5

Specifically, NTN contends that Commerce unlawfully: (1)

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

(1994) for the 1976 antidumping duty order; (2) denied a price-

based level of trade (“LOT”) adjustment for NTN’s constructed

export price (“CEP”) sales; (3) rejected NTN’s allocation of United

States and home market selling expenses on an LOT-specific basis;

(4) refused to calculate CEP profit on an LOT-specific basis; (5)

included export price (“EP”) sales in the calculation of CEP

profit; (6) recalculated NTN’s credit expenses on a transaction-

specific basis; (7) denied a downward adjustment to NTN’s reported

United States indirect selling expenses for imputed interests

incurred in financing cash deposits for antidumping duties; (8)

adjusted NTN’s cost of production (“COP”) and constructed value

(“CV”) for affiliated party inputs; (9) applied a 99.5% test to

determine whether sales to NTN’s affiliated parties were made at

arm’s length; (10) double-counted NTN’s depreciation of idle

equipment; (11) included its zero-priced United States transactions

in the margin calculations and failed to exclude NTN’s sample sales

and other sales from its margin calculation; and (12) used facts

available to adjust NTN’s reported billing adjustment.

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

absorption inquiry under 19 U.S.C. § 1675(a)(4) for the 1976 and

1987 antidumping duty orders; (2) used NSK’s affiliated supplier

Consol. Court No. 98-01-00146 Page 6

cost data to run its model match methodology under 19 U.S.C. §

1677(16) (1994), to calculate the difmer adjustment under 19 U.S.C.

§ 1677b(a)(6) (1994) and to recalculate NSK’s reported U.S.

inventory carrying costs (“ICC”) prior to deducting this expense

from CEP pursuant to 19 U.S.C. § 1677a(d) (1994); and (3) denied a

partial LOT adjustment.

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

absorption inquiry under 19 U.S.C. § 1675(a)(4) for the 1976 and

1987 antidumping duty orders; (2) applied adverse facts available

to Koyo’s sales of further manufactured tapered roller bearings

(“TRBs”); (3) used entered value to calculate the assessment rate

under 19 C.F.R. § 351.212(b) (1998); and (4) treated Koyo’s

imported forged rings as in-scope merchandise subject to the TRB

antidumping duty order.

Timken contends that Commerce unlawfully: (1) applied adverse

facts available to Koyo’s entered value; (2) failed to adjust CEP

for indirect selling expenses reported by NTN, NSK and Koyo; (3)

permitted NTN to exclude certain warehousing expenses attributable

to non-scope merchandise from its reported United States indirect

selling expenses; (4) accepted Koyo’s home market support rebates;

(5) accepted Koyo’s home market “billing adjustment two”; (6)

accepted NSK’s home market lump-sum rebates; and (7)accepted Koyo’s

home market average short-term interest rate.

Consol. Court No. 98-01-00146 Page 7

BACKGROUND

This case concerns the 1976 and 1987 antidumping duty orders

on TRBs from Japan for the period of review (“POR”) covering

October 1, 1995, through September 30, 1996. On September 9, 1997,

Commerce published the preliminary results of administrative

reviews of the 1976 and 1987 antidumping duty orders. See

Preliminary Results of Antidumping Duty Administrative Reviews of

Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,

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

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

Results”) 62 Fed. Reg. 47,452. Commerce published the Final

Results on January 15, 1998, see 63 Fed. Reg. at 2558, and the

Amended Final Results on March 19, 1998, see 63 Fed. Reg. 13,391.1

JURISDICTION

The Court has jurisdiction over this matter pursuant to 19

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

1

Since the administrative reviews at issue were 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. 98-01-00146 Page 8

STANDARD OF REVIEW

The Court will uphold Commerce’s final determination in an

antidumping administrative review 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); see NTN Bearing

Corp. of Am. v. United States (“NTN Bearing”), 24 CIT ___, ___, 104

F. Supp. 2d 110, 115-16 (2000) (detailing Court’s standard of

review for antidumping proceedings).

DISCUSSION

I. Commerce’s Duty Absorption Inquiry

A. Background

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

during an administrative review initiated two or four years after

the publication of an antidumping duty order, Commerce, if

requested by 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 in conducting a five-year (“sunset”) review under 19

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

Consol. Court No. 98-01-00146 Page 9

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 11, 1996, Timken requested Commerce to conduct a

duty absorption inquiry pursuant to § 1675(a)(4) with respect to

various respondents, including NTN, NSK and Koyo, to ascertain

whether antidumping duties had been absorbed during the

administrative reviews of the 1976 and 1987 antidumping duty

orders. See Final Results, 63 Fed. Reg. at 2558.

In the Final Results, Commerce found that duty absorption had

occurred for the POR. See id. at 2559. 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.” Final Results, 63 Fed. Reg. at

2558. Commerce concluded that: (1) because the antidumping duty

orders on TRBs in this case have been in effect since 1976 and

1987, respectively, the orders are transition orders pursuant to §

1675(c)(6)(C); and (2) since these reviews were initiated in 1996

and a request was made, Commerce had the authority to make duty

Consol. Court No. 98-01-00146 Page 10

absorption inquiries for the administrative reviews of the 1976 and

1987 antidumping duty orders. See id. at 2558-59.

B. Contentions of the Parties

NTN, NSK and Koyo contend that Commerce lacked authority under

§ 1675(a)(4) to conduct a duty absorption inquiry for the POR of

the outstanding 1976 and 1987 antidumping duty orders.2 See NTN’s

Mem. Supp. Mot. J. Agency R. (“NTN’s Mem.”) at 27-32; NTN’s Reply

Br. Jan. 22, 1999 Resp. Brs. United States and Timken (“NTN’s

Reply”) at 2; NSK’s Mem. P. & A. Supp. Mot. J. Agency R. (“NSK’s

Mem.”) at 12-16; NSK’s Reply Mem. Supp. Mot. J. Agency R. (“NSK’s

Reply”) at 6-8; Koyo’s Mem. P. & A. Supp. Mot. J. Agency R.

(“Koyo’s Mem.”) at 9-14; Koyo’s Reply Br. Supp. Mot. J. Agency R.

(“Koyo’s Reply”) at 2-18. In the alternative, the parties assert

that even if Commerce possessed the authority to conduct such an

inquiry, Commerce’s methodology for determining duty absorption was

contrary to law and, accordingly, the case should be remanded to

Commerce to annul its duty absorption findings and conclusions.

See NTN’s Mem. at 32-36; NSK’s Mem. at 12-16; Koyo’s Mem. at 15-16;

Koyo’s Reply at 16-18.

2

The Court assumes that NTN only contests the POR of the 1976

antidumping duty order because that is the only POR that is

mentioned in its brief and for which Commerce determined that duty

absorption had occurred. See Final Results, 63 Fed. Reg. 2559;

NTN’s Mem. Supp. Mot. J. Agency R. (“NTN’s Mem.) at 27-28.

Consol. Court No. 98-01-00146 Page 11

Commerce argues that it: (1) properly construed § 1675

subsections (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. Opp’n Pls.’ Mots. J. Agency R. (“Def.’s Mem.”) at 13-31.

Timken supports Commerce’s contentions. See Timken’s Resp. Pls.’

Mots. J. Agency R. (“Timken’s Resp.”) at 34-47.

C. Analysis

In SKF USA Inc. v. United States (“SKF USA Inc.”), 24 CIT ___,

94 F. Supp. 2d 1351 (2000), this Court determined that Commerce

lacked statutory authority under § 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. 24 CIT at ___,

94 F. Supp. 2d at 1357-59. 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.” Id. 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

Consol. Court No. 98-01-00146 Page 12

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

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.

II. Denial of Price-Based LOT Adjustment for CEP Sales

NTN contends that Commerce improperly denied a price-based LOT

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

different from the home market sales.3 See NTN’s Mem. at 37-39;

NTN’s Reply at 3. In particular, NTN argues, inter alia, that

Commerce incorrectly determined NTN’s CEP LOT because Commerce

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

United States to determine NTN’s CEP LOT. See NTN’s Mem. at 38;

NTN’s Reply at 4. NTN requests that the Court remand the LOT issue

to Commerce to grant NTN a price-based LOT adjustment for its CEP

3

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, 24 CIT at ___, 104 F. Supp. 2d at

125-128.

Consol. Court No. 98-01-00146 Page 13

sales. See NTN’s Mem. at 39; NTN’s Reply at 4.

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

for NTN’s CEP sales based upon the CEP. See Def.’s Mem. at 37.

Commerce deducted expenses and profit from the price to the first

unaffiliated purchaser in the United States pursuant to § 1677a(d)

since § 1677b(a)(7)(A) (1994) provides for an LOT adjustment and

requires Commerce to compare normal value (“NV”) to CEP rather than

to the unadjusted starting price of CEP. See id. (citing Final

Results, 63 Fed. Reg. at 2577). Commerce points out that CEP is

defined in § 1677a(b) (1994) as the price to the “unaffiliated

purchaser in the United States as adjusted” under § 1677a(d).

Def.’s Mem. at 40. According to Commerce, the adjusted CEP price

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

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

LOT difference affects price comparability, Commerce makes an LOT

adjustment. See id. at 34, 36. 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 36.

Therefore, Commerce claims that it properly denied an LOT

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

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

Consol. Court No. 98-01-00146 Page 14

Commerce to quantify the difference in price between the CEP LOT

and the home market LOT. See id. Because the home market LOT was

at a more advanced stage of distribution than the CEP LOT, Commerce

made a CEP offset pursuant to 19 U.S.C. § 1677b(a)(7)(B). See id.

Timken generally agrees with Commerce’s positions. See

Timken’s Resp. at 67-69.

In Micron Tech., Inc. v. United States (“Micron”), 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”)4 require Commerce to

deduct the expenses enumerated under § 1677a(d) before making the

LOT comparison.5 The court examined § 1677b(a)(1)(B)(i) (1994),

which provides that Commerce must establish NV “to the extent

4

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

Round Agreements and this Act in any judicial proceeding in which

a question arises concerning such interpretation or application”).

5

The CAFC’s decision effectively overturned the Court of

International Trade’s determination with respect to this issue in

Borden, Inc. v. United States (“Borden”), 22 CIT 233, 4 F. Supp. 2d

1221 (1998), rev’d 2001 WL 312232 (Fed. Cir. Mar. 12, 2001), a case

discussed by the parties in the instant matter.

Consol. Court No. 98-01-00146 Page 15

practicable, at the same level of trade as the export price or

[CEP],” and § 1677a(b), which defines CEP as “the price at which

the subject merchandise is first sold (or agreed to be sold) in the

United States . . . as adjusted under subsections (c) and (d) of

this section.” (Emphasis supplied). The court concluded that,

“[as] [r]ead together, these two provisions show that Commerce is

required to deduct the subsection (d) expenses from the starting

price in the United States before making the level of trade

comparison.” Micron, 243 F.3d at 1315. The court further stated

that this conclusion is mandated by the SAA, which states that “‘to

the extent practicable, [Commerce should] establish normal value

based on home market (or 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).

Thus, the Court 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 an LOT adjustment is supported by substantial

evidence. Section 1677b(a)(7)(A) permits Commerce to make an LOT

adjustment “if the difference in level of trade . . . involves the

performance of different selling activities[] and . . . is

demonstrated to affect price comparability, based on a pattern of

consistent price differences between sales at different levels of

Consol. Court No. 98-01-00146 Page 16

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

respect to CEP sales, Commerce found that the same LOT as that of

the CEP for merchandise under review did not exist for any

respondent in the home market; therefore, Commerce was unable to

“determine whether there was a pattern of consistent price

differences between the LOTs based upon the respondent’s home

market sales of merchandise under review.” See Def.’s Mem. at 36.

Commerce recognized that the SAA provides alternative methods

for calculating LOT adjustments, but it determined “that it would

have been inappropriate to apply a LOT adjustment to any

respondent.” See id. Consequently, with respect to the CEP sales

where Commerce was unable to quantify an LOT adjustment, Commerce,

in accordance with § 1677b(a)(7)(B) granted a CEP offset to

respondents, including NTN, because the home market sales were at

a more advanced LOT than the sales to the United States. See id.

The Court finds that Commerce acted within the directive of the

statute in denying the LOT adjustment and granting a CEP offset

instead. See 19 U.S.C. § 1677b(a)(7).

III. Commerce’s Reallocation of NTN’s Home Market and United

States Selling Expenses Without Regard to LOT

A. Background

In its preliminary calculations, Commerce calculated NTN’s

United States and home market selling expenses without regard to

Consol. Court No. 98-01-00146 Page 17

LOT. See Final Results, 63 Fed. Reg. at 2579. NTN argued that

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

home market selling expenses based on LOT instead of recalculating

these selling expenses without regard to LOT. See id. Timken, in

turn, contended that Commerce should reject NTN’s selling expense

allocations based on LOT because such allocations bear no

relationship to the way in which NTN incurs the expenses. See id.

Commerce responded that for a majority of the expenses under

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

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

manner in which NTN incurred these United States and home- market

selling expenses and its methodology led to distorted allocations.

See id. Commerce asserts that in Timken Co. v. United States

(“Timken I”), 20 CIT 645, 930 F. Supp. 621 (1996), Commerce was to

accept “NTN’s LOT-specific allocations and per-unit LOT expense

adjustment amounts only if NTN’s expenses demonstrably varied

according to LOT.” Id. (citing Timken I, 20 CIT at 653, 930 F.

Supp. at 629). Acting in accordance with Timken I, Commerce in its

remand results did not allow NTN’s LOT-specific allocations “due to

the lack of quantitative and narrative evidence on the record

demonstrating that the expenses in question demonstrably varied

according to LOT.” Final Resutls, 63 Fed. Reg. at 2579. Since

Commerce found during this POR that except for certain United

Consol. Court No. 98-01-00146 Page 18

States and home market packing material and packing labor expenses

NTN did not provide “quantitative and narrative evidence” that its

selling expenses are attributable to levels of trade, Commerce

recalculated NTN’s United States and home market selling expenses

without regard to LOT.6 See id. at 2579-80.

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 40. NTN notes that Commerce:

(1) has accepted NTN’s methodology of allocating its selling

expenses based on LOT in previous reviews; and (2) even stated that

NTN’s “detailed and often complex U.S. expense reporting

methodologies result in reasonable allocations.” Id. at 40-41

(quoting Final Results of Antidumping Duty Administrative Reviews

and Revocation in Part of an Antidumping Finding on Tapered Roller

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

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

6

In support of its methodology, Commerce points out that the

Court in NTN Bearing Corp. of Am. v. United States (“NTN”), 19 CIT

1221, 905 F. Supp. 1083 (1995), stated that “‘[a]lthough NTN

purports to show that it incurred different selling expenses at

different trade levels, the record demonstrates that NTN’s

allocation methodology does not reasonably quantify the expenses

incurred at each level of trade.’” See Def.’s Mem. at 46 (quoting

NTN, 19 CIT at 1234, 905 F. Supp. at 1094-95).

Consol. Court No. 98-01-00146 Page 19

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

(Nov. 7, 1996)). Moreover, NTN argues that Commerce’s rejection of

NTN’s reporting methodology on the basis of complexity is not a

reasonable rationale for reallocating NTN’s selling expenses.7

NTN’s Mem. at 39, 40. NTN contends that such reallocation has the

effect of voiding Commerce’s LOT determination that different LOTs

exist in the United States and Japan. See id. at 41.

Commerce responds that there is no evidence of narrative or

quantitative analysis tying the allocation method to the expenses.

See Def.’s Mem. at 45. Commerce asserts that NTN only quantified

the allocation itself and, therefore, the Court should sustain the

agency’s recalculation of NTN’s United States and home market

selling expenses. See id. at 46.

Timken supports Commerce and argues that Commerce was correct

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

selling expenses on an LOT-specific basis because “the record did

not contain ‘quantitative and narrative evidence demonstrating’

that sales at different levels incurred different amounts of the

expenses.” See Timken’s Resp. at 69 (quoting Final Results, 63

Fed. Reg. at 2580).

7

The Court does not entertain NTN’s argument regarding

Commerce’s rejection of NTN’s reporting methodology on the basis of

complexity. Commerce corrected this statement in a memorandum to

the file. See Def.’s Mem. at 46 (citing Def.’s Mem. Ex. 2).

Consol. Court No. 98-01-00146 Page 20

C. Analysis

The Court disagrees with NTN that it adequately supported its

LOT adjustment claim for its reported United States and home-

market selling expenses. Although NTN purports to show that it

incurred different selling expenses at different trade levels, the

evidence to which it points does not show that its allocation

methodology reasonably quantifies the United States and home-

market selling expenses incurred at different LOTs. See NTN

Bearing, 24 CIT at ___, 104 F. Supp. 2d at 131-33; NTN, 19 CIT at

1234, 905 F. Supp. at 1095. Given that NTN had the burden before

Commerce to establish its entitlement to an LOT adjustment, its

failure to provide the requisite evidence compels the Court to

conclude that it has not met its burden of demonstrating that

Commerce’s denial of the LOT adjustment was not supported by

substantial evidence and was not in accordance with law. See NSK

Ltd. v. United States (“NSK Ltd.”), 21 CIT 617, 635-36, 969 F.

Supp. 34, 55 (1997), aff’d, NSK Ltd. v. Koyo Seiko Co.,

Ltd. (“NSK”), 190 F.3d 1321, 1330 (Fed. Cir. 1999).

Accordingly, the Court sustains Commerce’s recalculation of

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

to levels of trade.

Consol. Court No. 98-01-00146 Page 21

IV. NTN’s Constructed Export Price Calculation

A. NTN’s Constructed Export Price Calculation Without

Regard to LOT

1. Background

In calculating CEP, Commerce must reduce the starting price

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

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

1677a(d)(3). Under 19 U.S.C. § 1677a(f) (1994), the “profit” that

is deducted from this starting price is “determined by multiplying

the total actual profit by [a] percentage” calculated “by dividing

the total United States expenses by the total expenses.” 19 U.S.C.

§ 1677a(f)(1) and (2)(A). Section 1677a(f)(2)(B) defines “total

United States expenses” as the total expenses deducted under §

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

selling expenses, assumptions, and the cost of any further

manufacture or assembly in the United States. Section

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

calculating “total expenses.” First, “total expenses” could be the

“expenses incurred with respect to the subject merchandise sold in

the United States and the foreign like product sold in the

exporting country” if Commerce requested such expenses for the

purpose of determining NV and CEP. Id. § 1677a(f)(2)(C)(i). If

Commerce did not request these expenses, then “total expenses” are

the “expenses incurred with respect to the narrowest category of

Consol. Court No. 98-01-00146 Page 22

merchandise sold in the United States and the exporting country

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

1677a(f)(2)(C)(ii). If the data necessary to determine “total

expenses” under either of these methods is not available, then

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

narrowest category of merchandise sold in all countries which

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

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

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

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

During this POR, NTN argued that profit levels differed by LOT

and had an effect on prices and CEP profit and, therefore, Commerce

should calculate CEP profit on an LOT-specific basis rather than

for each class or kind of merchandise. See Final Results, 63 Fed.

Reg. at 2570. NTN reasoned that § 1677a(f)(2)(C) “expresses a

preference for the [CEP] profit calculations to be performed as

specifically as possible and on the narrowest basis as possible.”

Id.

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

“[n]either the statute nor the SAA require[s] [Commerce] to

calculate CEP profit on a basis more specific than the subject

merchandise as a whole”; (2) basing the CEP-profit calculation on

an LOT-specific basis would “add a layer of complexity to an

Consol. Court No. 98-01-00146 Page 23

already complicated exercise with no increase in accuracy”; and (3)

a subdivision “of the CEP-profit calculation would be more

susceptible to manipulation.” Id. (Commerce also relied on its

detailed explanation made in the sixth review of the antifriction

bearings (“AFBs”).8

2. Contention of the Parties

NTN contends that Commerce erred by refusing to calculate CEP

profit on an LOT-specific basis. See NTN’s Mem. at 16.

Highlighting the “narrowest category of merchandise” language of §

8

In the sixth AFB review, Commerce reasoned as follows:

Neither the statute nor the SAA require[s] [Commerce] to

calculate CEP profit on bases more specific than the

subject merchandise as a whole. Indeed, while [Commerce]

cannot at this time rule out the possibility that the

facts of a particular case may require division of CEP

profit, the statute and SAA, by referring to “the”

profit, “total actual profit,” and “total expenses” imply

that [Commerce] should prefer calculating a single profit

figure. NTN’s suggested approach would also add a layer

of complexity to an already complicated exercise with no

guarantee that the result will provide any increase in

accuracy. [Commerce] need not undertake such a

calculation[.] [S]ee Daewoo Elecs. Co. v. International

Union, 6 F.3d 1511, 1518-19 (Fed. Cir. 1993)[]. Finally,

subdivision of the CEP-profit calculation would be more

susceptible to manipulation. Congress has specifically

warned us to be wary of such manipulation of the profit

allocation[.] [S]ee S. Rep. 103-412, 103d Cong., 2d Sess

at 66-67).

Final Results of Antidumping Duty Administrative Reviews of

Antifriction Bearings (Other Than Tapered Roller Bearings) and

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

the United Kingdom, 62 Fed. Reg. 2081, 2125 (Jan. 15, 1997).

Consol. Court No. 98-01-00146 Page 24

1677a(f)(2)(C)(ii) and (iii), NTN argues that there is a clear

statutory preference that profit be calculated on the narrowest

possible basis. See id. at 17. Moreover, NTN claims that since CV

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

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

NTN asserts that the mere fact that a calculation is difficult is

not a valid reason to sacrifice accuracy. See id. NTN further

asserts that Commerce’s speculation that an adjustment is

susceptible to manipulation provides no grounds for rejecting an

adjustment. See id. at 16.

Commerce responds that it properly determined CEP profit

without regard to LOT. See Def.’s Mem. at 50. Commerce notes that

§ 1677a(f) does not refer to LOT, that is, the statute does not

require that CEP profit be calculated on an LOT-specific basis.

See id. at 51. In addition, Commerce asserts that even assuming

that a narrower basis for the CEP-profit calculation is warranted

in some circumstances, NTN has not provided any factual support for

such a deviation from Commerce’s standard methodology for

calculating CEP profit. See id. at 52. Timken generally agrees

with Commerce’s CEP-profit calculation. See Timken’s Resp. at 59-

60.

Consol. Court No. 98-01-00146 Page 25

3. Analysis

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

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

U.S.A. Inc. v. Natural Resources Defense Council, Inc. (“Chevron”),

467 U.S. 837 (1984), is to review the reasonableness of Commerce’s

statutory interpretation. See IPSCO, Inc. v. United States

(“IPSCO”), 965 F.2d 1056, 1061 (Fed. Cir. 1992) (citing Chevron,

467 U.S. at 844).

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

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

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

statute clearly contemplates that, in general, the “narrowest

category” will include the class or kind of merchandise that is

within the scope of an investigation or review. See id.

Subsections (ii) and (iii) of § 1677a(f)(C)’s “total expense”

definition lead to such conclusion because both subsections refer

to “expenses incurred with respect to the narrowest category of

merchandise . . . which includes the subject merchandise.” See id.

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

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

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

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

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

Consol. Court No. 98-01-00146 Page 26

that Commerce reasonably interpreted § 1677a(f) in refusing to

apply a narrower subcategory of merchandise such as one based on

LOT. The Court, moreover, agrees with Commerce’s conclusion that

a subdivision of the “CEP-profit calculation would be more

susceptible to manipulation,” a result that Congress specifically

warned Commerce to prevent. Final Results, 63 Fed. Reg. at 2570.

Finally, the Court agrees with Commerce that NTN failed to provide

adequate factual support of how the CEP-profit calculation was

distorted by Commerce’s standard methodology.

B. Inclusion of EP Sales in Calculation of NTN’s

Constructed Export Price Profit

1. Background

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

calculate CEP, deduct “the profit allocated to the expenses

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

charged to the first unaffiliated purchaser in the United States.

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

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

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

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

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

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

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

Consol. Court No. 98-01-00146 Page 27

incurred by or on behalf of the foreign producer and foreign

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

United States seller affiliated with the producer or exporter with

respect to the production and sale of such merchandise . . . .” 19

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

incurred with respect to the subject merchandise sold in the United

States and the foreign like product sold in the exporting country

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

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

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

In the Final Results, Commerce included EP sales in the

calculation of CEP profit. See generally, 63 Fed. Reg. at 2570.

2. Contentions of the Parties

NTN contends that the statute clearly states that the

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

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

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

expenses or profit in this calculation. See NTN’s Mem. at 17-19.

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

in the calculation of CEP profit. Id. at 19.

Specifically, NTN relies on the definition of the

term “total expenses.” See 19 U.S.C. § 1677a(f)(2)(C). NTN

Consol. Court No. 98-01-00146 Page 28

maintains that the specific reference to CEP within the definition

precludes Commerce from the inclusion of EP expenses in the

calculation of CEP profit. See NTN’s Mem. at 17-18. NTN further

states that “just as EP expenses cannot be considered, it follows

logically that sales revenue for EP sales also cannot be included

[in the calculation of CEP profit]” since the definition of “total

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

the definition of ‘total expenses.’” Id. at 19. NTN, therefore,

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

calculation. See id.

Commerce contends that the inclusion of revenues and expenses

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

in accordance with the law because it was a reasonable

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

and (D) and 1677(25) of Title 19. See Def.’s Mem. at 49.

Specifically, Commerce points out that the term “subject

merchandise” is defined as “‘the class or kind of merchandise that

is within the scope of . . . a review . . . .’” Id. (quoting 19

U.S.C. § 1677(25)). Commerce notes that the term “subject

merchandise” is referred to in the statute that defines “total

expenses,” see 19 U.S.C. § 1677a(f)(2)(C)(i), and therefore, “total

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

49. Commerce further articulates that:

Consol. Court No. 98-01-00146 Page 29

[t]he basis for total actual profit is the same as the

basis for total expenses . . . [see 19 U.S.C. §

1677a(f)(2)(C)(1994)]. The first alternative under [19

U.S.C. § 1677a(f)(2)(C)] states that, for purposes of

determining profit, the term “total expenses” refers to

all expenses incurred with respect to the subject

merchandise sold in the United States (as well as home

market expenses). Thus, where the respondent makes both

EP and CEP sales to the United States, sales of the

subject merchandise would encompass all such

transactions. Therefore, because NTN had EP sales,

[Commerce] . . . included these sales in the calculation

of CEP profit.

Final Results, 63 Fed. Reg. at 2570.

Commerce also points out that its September 4, 1997 policy

bulletin explains that 19 U.S.C. § 1677a(f)(2)(D) “provides that

the calculation of ‘total actual profit’ is to include all revenues

and expenses resulting from the respondent’s EP sales as well as

from its CEP and home market sales.” Def.’s Mem. at 49 (citing

Commerce’s Policy Bulletin 97.1 of September 4, 1997).

Timken agrees with Commerce and contends that Commerce

reasonably calculated CEP profit on the basis of all United States

sales, including EP sales. See Timken’s Resp. at 60-61. In

addition, Timken argues that the Court lacks jurisdiction over the

issue of the inclusion of EP sales in the calculation of NTN’s CEP

profit because Commerce did not ultimately make a CEP profit

adjustment.9 See Timken’s Resp. at 59 (proprietary version).

9

The Court is bewildered by Timken’s argument that the Court

would be rendering an opinion on a moot issue had the Court decided

Consol. Court No. 98-01-00146 Page 30

3. Analysis

Based upon the above-defined statutory scheme, Commerce

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

“sales of the subject merchandise” encompassed all such

transactions and, therefore, Commerce could reasonably interpret

the statutory scheme as providing that the calculation of total

actual profit is to include all revenues and expenses resulting

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

market sales. See Def.’s Mem. at 49. Commerce’s September 4, 1997

policy bulletin provides:

The calculation of total actual profit under [19 U.S.C.

§ 1677a(f)(2)(D)] includes all revenues and expenses

resulting from the respondent’s [EP] sales as well as

from its constructed export price and home market sales

. . . . The basis for total actual profit is the same as

the basis for total expenses under [19 U.S.C. §

1677a(f)(2)(C)]. The first alternative under this

section . . . states that, for purposes of determining

profit, the term “total expenses” refers to all expenses

to rule on the inclusion of EP sales in the calculation of NTN’s

CEP profit. See Timken’s Resp. at 59 (proprietary version).

Timken’s reliance on Rose Bearings Ltd. v. United States (“Rose

Bearings”), 14 CIT 801, 751 F. Supp. 1545 (1990), is misplaced

since in that case, the Court held that it lacked jurisdiction

after determining that the plaintiff did not have standing, that

is, that the plaintiff was not a party to a “live case or

controversy” since the plaintiff “was not subject to the

antidumping duty order that it ha[d] appealed . . . .” Rose

Bearings, 14 CIT at 802, 751 F. Supp. at 1546. Unlike the

plaintiff in Rose Bearings, NTN could be affected by the challenge

to Commerce’s inclusion of EP sales in Commerce’s calculation of

CEP profit. See Final Results, 63 Fed. Reg. 2570. Therefore, this

Court is correct in rendering a decision over the issue of

Commerce’s inclusion of EP sales in the calculation of NTN’s CEP

profit since NTN is a party to a live case or controversy.

Consol. Court No. 98-01-00146 Page 31

incurred with respect to the subject merchandise sold in

the United States (as well as home market expenses).

Thus, where the respondent makes both EP and CEP [sales],

sales of the subject merchandise would encompass all such

transactions.

Def.’s Mem. at 49.

The SAA further clarifies the point and states the following:

The total expenses are all expenses incurred by or on

behalf of the foreign producer and exporter and the

affiliated seller in the United States with respect to

the production and sale of the first of the following

alternatives which applies: (1) the subject merchandise

sold in the United States and the foreign like product

sold in the exporting country (if Commerce requested this

information in order to determine the normal value and

the constructed export price) . . . .

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

Based upon its interpretation of the statutory language and

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

categories of expenses that Commerce could use in calculating CEP

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

See NTN’s Mem. at 18. Additionally, NTN states that just as EP

expenses cannot be used in calculating CEP profit, neither can

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

actual profit” under 19 U.S.C. § 1677a(f)(2)(D) refers to the

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

id.

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

Consol. Court No. 98-01-00146 Page 32

category of total expenses under § 1677a(f)(2)(C) is not limited to

expenses incurred with respect to CEP sales made in the United

States and the foreign like product sold in the exporting country.

It also covers expenses incurred with respect to EP sales because

it refers to “expenses incurred with respect to the subject

merchandise sold in the United States”; the term “subject

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

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

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

EP sales.

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

expenses incurred with respect to the production and sale of the

first of the three alternatives. In referring to the first

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

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

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

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

DOC. 103-316 at 824.

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

that Commerce’s interpretation of the statutory scheme is

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

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

Consol. Court No. 98-01-00146 Page 33

V. Commerce’s Recalculation of Credit Expenses for Constructed

Export Price Sales

A. Background

During the POR, NTN calculated its United States credit

expense for CEP sales on a customer-specific basis. See NTN’s Mem.

at 23-24 and Ex. “U.S. Verification Report.” “NTN calculated the

average days of payment for each customer, and multiplied the

average number of days by the interest rate to arrive at a credit

expense.” Def.’s Mem. at 53.

During the review, Timken contended that Commerce “should

recalculate NTN’s U.S. credit expense because NTN reported a

customer-specific average credit expense rather than a transaction-

specific credit expense” thereby producing distortive results.

Final Results, 63 Fed. Reg. at 2571. Timken noted that NTN

“provided the necessary information on record to recalculate a

credit expense on a transaction-specific” basis. Id.

NTN responded that its credit expense should not be

recalculated because Commerce had accepted NTN’s methodology of

reporting a customer-specific credit expense in previous AFB

reviews and “verified the accuracy of NTN’s data” for this and

other reviews.10 See id. at 2572; see also NTN’s Mem. at 23 (citing

10

NTN cites to a past administrative review for NTN’s

proposition that Commerce has previously accepted NTN’s

methodology of reporting a customer-specific credit expense. See

Consol. Court No. 98-01-00146 Page 34

1997 Final Results, 62 Fed. Reg. 54,043, 54,066-54,067 [sic].11

Commerce agreed with Timken with regards to CEP sales,

finding:

We have data on the record which allows us to calculate

a transaction-specific credit expense for CEP sales.

Therefore, we have recalculated NTN’s credit expense

using the dates of payment which NTN reported.

Final Results, 63 Fed. Reg. at 2572.

B. Contentions of the Parties

NTN notes that Commerce has accepted NTN’s calculation of

credit expenses on a customer-specific basis for previous

antidumping duty orders on AFBs from Japan. See NTN’s Mem. at 23.

NTN contends that since “NTN has not modified its reporting

NTN’s Mem. at 23 (citing 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 (“1997

Final Results”), 62 Fed. Reg. 54,043, 54,066-54,067 [sic] (October

17, 1997). In that review, Commerce allowed NTN to calculate its

United States credit expense for EP sales on a customer-specific

basis since NTN could not report its credit expenses on a

transaction basis. See 1997 Final Results at 54,053. However,

with regards to CEP sales, Commerce recalculated NTN’s credit

expense on a transaction-specific basis since NTN provided

transaction-specific information to Commerce. See id. Therefore,

the Court holds that Commerce’s prior methodology does not require

Commerce to use NTN’s customer-specific reported and verified data

when NTN provides transaction-specific information allowing for the

calculation of credit expense on a transaction-specific basis.

11

The Court assumes that the correct citation is 1997 Final

Results, 62 Fed. Reg. 54,043, 54,053.

Consol. Court No. 98-01-00146 Page 35

methodology, and [Commerce] verified NTN’s reported expenses, it is

inappropriate and contrary to law for [Commerce] to modify NTN’s

reported data.” Id. Moreover, NTN asserts that Commerce’s

recalculation of NTN’s credit expense on a transaction-specific

basis, rather than the use of NTN’s reported customer-specific

credit expense, constitutes unlawful use of facts available under

19 U.S.C. § 1677e (1994). See id. at 23-25.

Commerce asserts that its “questionnaire instructed [NTN] as

to the proper method for calculating and reporting credit

expenses.” Def.’s Mem. at 52 and Ex. 3. In particular, Commerce’s

preference for the reporting of credit expenses is that they be

reported on a transaction-specific basis rather than on an average

or allocated basis. See Def.’s Mem. at 52-53. However, Commerce

claims that when a company’s records do not permit transaction-

specific reporting, Commerce has permitted use of average or

allocated expenses, that is, customer-specific reporting. See id.

at 53. Commerce argues that since NTN provided the necessary

information on record which permitted a transaction-specific

calculation of NTN’s United States credit expenses for CEP sales,

Commerce properly exercised its preference and recalculated the

expenses on such a basis. See id. at 53-54. Additionally,

Commerce contends that NTN’s argument declaring Commerce’s

recalculation of credit expense on a transaction-specific basis as

Consol. Court No. 98-01-00146 Page 36

“impermissible use of facts available” under 19 U.S.C. § 1677e has

no merit since Commerce did not resort to any data other than that

reported by NTN. See id. at 54.

Timken agrees with Commerce, noting that, consistent with the

antidumping statute, Commerce has a preference for transaction-

specific reporting of credit expenses since actual costs allow

Commerce to determine “the most accurate dumping margins possible.”

Timken’s Resp. at 65. Timken notes that Commerce’s questionnaire

requesting information indicated a strong preference for reporting

credit expenses on a transaction-specific basis. See id. Since

the record contained information reported by NTN that permitted

more precise credit expense calculations, that is, transaction-

specific payment dates for NTN’s CEP sales, Timken contends that

Commerce properly recalculated NTN’s United States credit expenses

on a transaction-specific basis. See id. Also, Timken asserts

that Commerce’s use of NTN’s reported verified sale and payment

dates to recalculate NTN’s credit expense on a transaction-specific

basis does not constitute the unlawful “use of facts available.”

See id.

C. Analysis

The Court disagrees with NTN that Commerce is now prohibited

from using transaction-specific reporting of NTN’s United States

Consol. Court No. 98-01-00146 Page 37

credit expense merely because Commerce had accepted NTN’s customer-

specific reporting of such expenses in previous AFB reviews and

verified the accuracy of NTN’s data for this and other reviews.

Commerce does not have to adhere to its customer-specific reporting

methodology for calculating credit expenses when a respondent

provides the necessary information on record for calculating such

expenses on a more accurate and preferred basis, that is, a

transaction-specific basis. See generally NSK Ltd. v. United

States (“NSK 1995"), 19 CIT 1013, 1027, 896 F. Supp. 1263, 1275

(1995), rev’d on other grounds, 115 F.3d 965 (Fed. Cir. 1997),

(noting that Commerce does not have to “adhere to its prior

reporting methodology, especially where Commerce is striving for

more accuracy” and explaining that “[d]irect selling expenses are

incurred with respect to specific transactions. Credit, for

example, is a selling expense which is only incurred when credit is

extended under the terms of sale. Because credit expense is a

direct expense, it should be tied to the transaction for which it

was incurred”).

The Court also finds that NTN’s argument that Commerce’s

recalculation of NTN’S United States credit expense on a

transaction-specific basis constitutes the unlawful “use of facts

available” under 19 U.S.C. § 1677e has no merit since NTN clearly

misreads the clear language of that statute. The antidumping

Consol. Court No. 98-01-00146 Page 38

statute mandates that Commerce use “facts otherwise available”

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

information is not available on the record” of an antidumping

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

use facts available where an interested party or any other person:

(1) withholds information that has been requested by Commerce; (2)

fails to provide the requested information by the requested date or

in the form and manner requested, subject to 19 U.S.C. §

1677m(c)(1), (e) (1994); (3) significantly impedes an antidumping

proceeding; and (4) provides information that cannot be verified as

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

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

use of facts available shall be subject to the limitations set

forth in 19 U.S.C. § 1677m(d)(1994).

The legislative goal behind Commerce’s right to use facts

available is to "induce respondents to provide Commerce with

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

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

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

broad, although not unlimited, discretion with regard to the

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

Adhesives, Inc. v. United States, 899 F.2d 1565 (Fed. Cir. 1990)

(acknowledging Commerce’s broad discretion with regard to the use

Consol. Court No. 98-01-00146 Page 39

of facts available but pointing out that Commerce's resort to facts

available is an abuse of discretion where the information Commerce

requests does not and could not exist).

During the review at issue, NTN complied with Commerce’s

request for data by providing the necessary information on record

which permitted a transaction-specific calculation of NTN’s United

States credit expenses for CEP sales. See Final Results at 2572.

Since Commerce did not resort to any data other than that reported

by NTN, Commerce’s recalculation of NTN’s United States credit

expense on a transaction-specific basis did not constitute the

unlawful use of “facts available” under 19 U.S.C. § 1677e.

Accordingly, the Court finds that Commerce’s recalculation of

NTN’s United States credit expense on a transaction-specific basis

was supported by substantial evidence and in accordance with law.

VI. Denial of an Adjustment to United States Indirect Selling

Expenses for Interest Allegedly Incurred in Financing Cash

Deposits for Antidumping Duties

A. Background

During the review, NTN claimed a downward adjustment to its

reported United States indirect selling expenses for imputed

interest expenses allegedly incurred in financing cash deposits for

antidumping duties. See Final Results, 63 Fed. Reg. at 2570-71.

Commerce denied the adjustment and determined that such an interest

Consol. Court No. 98-01-00146 Page 40

offset to NTN’s indirect selling expenses is inappropriate, whether

based on actual interest expenses or an imputed amount allegedly

associated with financing cash deposits. See id. at 2571.

Commerce thereby deducted the entire amount of NTN’s reported

indirect selling expenses, including all interest, from the CEP.

See Def.’s Mem. at 55-56.

Commerce noted that 19 U.S.C. § 1677a(d)(1), which provides

for the deduction of certain selling expenses from CEP that were

“incurred by or for the account of the producer or exporter, or the

affiliated seller in the United States, in selling the subject

merchandise,” does not precisely define what constitutes a selling

expense; instead, Congress has given Commerce discretionary

authority to determine what such an expense encompasses. See Final

Results, 63 Fed. Reg. at 2571. Commerce acknowledged that in past

reviews of the applicable antidumping duty orders, it determined

that interest expenses incurred in financing antidumping duty cash

deposits were not considered selling expenses and thereby allowed

an offsetting, financing-cost adjustment to United States indirect

selling expenses. See id. For this review, however, Commerce

reconsidered its position and concluded that this offsetting

financing-cost adjustment is inappropriate. See id.

Commerce found that while under the statute it may allow a

limited exemption from deductions from United States price for

Consol. Court No. 98-01-00146 Page 41

antidumping duty cash deposits and legal fees associated with

participation in an antidumping case, it found no basis for

extending this exemption to interest expenses allegedly incurred in

financing the cash deposits. See id. The agency reasoned that

there is a distinction “between business expenses that arise from

economic activities in the United States and business expenses that

are direct, inevitable consequences of an antidumping duty order.”

Id. Commerce determined that while cash deposits and legal fees

are incurred solely as a result of the existence of an antidumping

order, “[f]inancial expenses allegedly associated with cash

deposits are not a direct, inevitable consequence of an antidumping

duty order.” Id. In particular, Commerce explained that although

it may be true that some importers sometimes incur a cost if they

borrow money in order to pay for cash deposits of antidumping

duties, it is a fundamental principle that:

“[m]oney is fungible. If an importer acquires a loan to

cover one operating cost, that may simply mean that it

will not be necessary to borrow money to cover a

different operating cost.” Companies may choose to meet

obligations for cash deposits in a variety of ways that

rely on existing capital resources or that require

raising new resources through debt or equity. For

example, companies may choose to pay deposits by using

cash on hand, obtaining loans, increasing sales revenues,

or raising capital through the sale of equity shares. In

fact, companies face these choices every day regarding

all their expenses and financial obligations. There is

nothing inevitable about a company having to finance cash

deposits and there is no way for [Commerce] to trace the

motivation or use of such funds even if it were.

Id. (quoting Preliminary Results, 62 Fed. Reg. at 47,455). Commerce

Consol. Court No. 98-01-00146 Page 42

also noted that “the calculation of the dumping margins should not

vary depending on whether a party has funds available to pay cash

deposits or requires additional funds in the form of loans.”

Preliminary Results, 62 Fed. Reg. at 47,455.

Moreover, Commerce determined that it should not impute an

amount for any interest costs that would theoretically be

associated with financing actual cash deposits of antidumping

duties. Final Results, 63 Fed. Reg. at 2571. Commerce reasoned

that

[t]here is no real opportunity cost associated with cash

deposits when the paying of such deposits is a

precondition for doing business in the United States. .

. . Companies cannot choose not to pay cash deposits if

they want to import nor can they dictate the terms,

conditions, or timing of such payments.

Id.

B. Contentions of the Parties

NTN claims that Commerce’s rationale for denying NTN’s

adjustment for interest expenses is flawed because irrespective of

how a company opts to finance the cash deposits for antidumping

duties, the amount of cash deposited will have to be made up by

financing something else, a result that is a direct inevitable

consequence of the antidumping duty order. See NTN’s Mem. at 20.

NTN also asserts that if Commerce were to allow the interest

expenses from cash deposits from prior reviews to affect the

Consol. Court No. 98-01-00146 Page 43

dumping margin calculations of present reviews, a never-ending

cycle would follow that would prevent Commerce from ever revoking

the antidumping duty order. See id. at 21.

Further, NTN notes that Commerce has repeatedly taken the

position that interest expenses incurred in financing cash deposits

of antidumping duties cannot be properly treated as indirect

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

expense adjustment on antidumping duty cash deposits. See id. at

20-22 (citations omitted). NTN asserts that Commerce’s decision to

alter its prior methodology is “unreasonable and internally-

contradictory.” NTN’s Reply at 7.

NTN also asserts that this Court has consistently upheld the

interest-expense adjustment to indirect selling expenses when

Commerce has granted it and has remanded to Commerce to allow the

adjustment when the agency has denied it. See NTN’s Mem. at 22-23

(citations omitted). In particular, NTN argues that Federal-Mogul

Corp. v. United States (“Federal-Mogul”), 20 CIT 1438, 1440-41, 950

F. Supp. 1179, 1182-83 (1996), clearly refutes Commerce’s decision

to deny NTN’s interest-expense adjustment. See id. at 22. In

particular, NTN notes the court in Federal-Mogul found that there

was no support for a domestic party’s “assertion that any expense

related to antidumping proceedings is automatically a selling

expense related to the sale of the subject merchandise. Indeed,

Consol. Court No. 98-01-00146 Page 44

pursuant to the rationale of [Daewoo Elecs. Co. v. United States

(“Daewoo”), 13 CIT 253, 270, 712 F. Supp. 931, 947 (1989)], such

expenses are not necessarily selling expenses.” Id. at 22 (quoting

Federal-Mogul, 20 CIT at 1440-41, 950 F. Supp. at 1183). NTN

points out that the court in Federal-Mogul found that, similar to

the Daewoo court’s holding that legal expenses related to

antidumping proceedings are not selling expenses, the interest

expenses at issue did not qualify as selling expenses because they

were not related to the sale of merchandise, but to NTN’s

participation in the antidumping proceeding. See id. NTN also

notes that in NSK Ltd., 21 CIT at 637, 969 F. Supp. at 55, the

Court reaffirmed its decision in Federal-Mogul to allow NTN’s

adjustment for interest expenses on antidumping duty cash deposits.

See id. at 23. NTN contends that Commerce’s decision to alter its

policy is unreasonable and there is no danger that an interest-

expense adjustment to indirect selling expenses would be used to

“mask dumping.” See id.; NTN’s Reply at 7.

Commerce argues that its decision to deny the offset was

within its discretion. See Def.’s Mem. at 57. Commerce also

argues that it may change its methodology if it presents a

reasonable basis for departing from its previous practice. See id.

at 57-59. Further, Commerce contends that the interest expenses

allegedly incurred with financing antidumping duty cash deposits

Consol. Court No. 98-01-00146 Page 45

are ordinary interest expenses and, therefore, not deductible from

United States indirect selling expenses. See id. at 59.

Timken asserts that Commerce reasonably denied the offset,

because allowing United States selling expenses to be reduced in

the manner claimed by NTN encourages dumping. See Timken’s Resp.

at 63. Specifically, Timken argues that an adjustment for NTN’s

interest expenses on antidumping duty cash deposits would “allow

NTN to mask present dumping through alleged interest used to

finance past cash deposits.” Id. Timken contends for example

that:

the interest might be equal to five percent of the value

of U.S. sales in the present review. Under NTN’s

approach, the Commerce Department would be required to

offset expenses attributable to sales made during the

present administrative review with interest imputed to

past cash deposits. Thus, the importer may sell at

prices five percent less than fair value without being

found to have dumped. The Commerce Department would

offset reductions amounting to five percent of U.S. sales

prices with the five percent imputed interest. The

offset would mask the importer’s dumping, and the

importer would escape the coverage of the antidumping

duty law.

Id. Timken also argues that other than NTN’s reported “amount of

imputed interest attributable to its cash antidumping duty

deposits,” there is no evidence that NTN actually obtained loans

for the purpose of posting cash deposits. Id. at 64. Therefore,

there is no factual basis for the adjustment. See id.

Consol. Court No. 98-01-00146 Page 46

C. Analysis

Although NTN correctly points out that interest expenses

incurred on financing antidumping cash deposits are not “selling

expenses,” see Federal-Mogul, 20 CIT at 1441, 950 F. Supp. at 1183,

the Court disagrees that Commerce in this review is prevented from

altering its methodology of making adjustments to United States

indirect selling expenses. This Court has noted that “Commerce

may, in certain circumstances, reasonably change its methodology

from review to review.” Timken Co. v. United States (“Timken”), 21

CIT 1313, 1332, 989 F. Supp. 234, 250 (1997), vacated in part on

other grounds, 1 F. Supp. 2d 1390, 1393 (1998) (allowing Commerce

to alter its methodology with respect to interest expenses incurred

for financing cash deposits).

Consequently, since 19 U.S.C. § 1677a(d) does not provide

clear guidance with respect to the adjustment, the issue for the

Court is whether Commerce’s interpretation of the statute was

reasonable. The Court finds that Commerce reasonably interpreted

the statute by concluding that financing expenses incurred on

antidumping duty cash deposits are not an inevitable consequence of

the antidumping duty order and that, with respect to imputed

interest costs, there is no real opportunity cost associated with

cash deposits when the paying of such deposits is a precondition

for doing business in the United States. Further, the Court finds

Consol. Court No. 98-01-00146 Page 47

that NTN failed to provide any evidence on record that supports the

fact that NTN actually or approximately incurred the alleged

interest expenses on antidumping duty cash deposits. Commerce

acted rationally in denying NTN’s claimed interest-expense

adjustment and, therefore, Commerce’s determination is sustained.

VII. Valuation of Major Inputs From Affiliated Suppliers

A. Statutory Background

The NV of the subject merchandise is, in pertinent part, “the

price at which the foreign like product is first sold . . . for

consumption in the exporting country.” 19 U.S.C. § 1677b(a)(1)(B)

(i). However, whenever Commerce has “reasonable grounds to believe

or suspect” that sales of the foreign like product under

consideration for the determination of NV have been made at prices

which represent less than the COP of that product, Commerce shall

determine whether, in fact, such sales were made at less than the

COP. See 19 U.S.C. § 1677b(b)(1) (1994). A “reasonable ground”

exists if Commerce disregarded below-cost sales of a particular

exporter or producer from the determination of NV in the most

recently completed administrative review. See 19 U.S.C. §

1677b(b)(2)(A)(ii). If Commerce determines that there are sales

below the COP and certain conditions are present under §

1677b(b)(1)(A)-(B), it may disregard such below-cost sales in the

determination of NV. See id.

Consol. Court No. 98-01-00146 Page 48

Additionally, the special rules for the calculation of COP or

CV contained in 19 U.S.C. § 1677b(f)(2)-(3) (1994), provide that,

in a transaction between affiliated persons as defined in 19 U.S.C.

§ 1677(33) (1994), Commerce may disregard either the transaction or

the value of a major input.

Section 1677b(f)(2) provides that Commerce may disregard an

affiliated-party transaction when “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].” 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 an arms-length or market value. 19 U.S.C. § 1677b(f)(2)

(“fair-value” provision).

Section 1677b(f)(3)’s “major input rule” directs that if (1)

a transaction between affiliated companies involves the production

by one of such companies of a “major input” to the merchandise

produced by the other, and (2) Commerce has “reasonable grounds to

believe or suspect” that the amount reported as the value of such

Consol. Court No. 98-01-00146 Page 49

input is below the COP, then Commerce may calculate the value of

the major input on the basis of the data available regarding such

COP, if such COP exceeds the market value of the input, as

determined under § 1677b(f)(2). 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 (1) the actual transfer price for the input, (2) the

market value of the input, or (3) the COP of the input.

B. Factual Background

Because Commerce disregarded sales that failed the below-cost

sales test pursuant to § 1677b(b)(1) in the prior review with

respect to NTN’s TRBs from Japan, Commerce determined pursuant to

§ 1677b(b)(2)(A)(ii) that it had “reasonable grounds to believe or

suspect” that sales of NTN’s foreign like product under

consideration for the determination of NV in this POR might have

been made at prices below the COP. See Preliminary Results, 62

Fed. Reg. at 47,457. Consequently, pursuant to § 1677b(b)(1),

Commerce initiated COP investigations of NTN’s sales in the home

market and, thereby, requested information relating to the COP and

CV. See id.

In its questionnaire for this POR, Commerce requested that NTN

provide certain data regarding the valuation of major inputs

Consol. Court No. 98-01-00146 Page 50

received from affiliated suppliers and used to produce the

merchandise under review during the cost calculation period. See

Def.’s Mem. at 60; see also Def.’s Ex. 4. In particular, Commerce

instructed NTN as follows:

List the major inputs received from affiliated parties

and used to produce the merchandise under review during

the cost calculation period. . . . For each major input

identified, provide the following information:

a. the total volume and value of the input purchased

from all sources by your company during the cost

calculation period, and the total volume and value

purchased from each affiliated party during the

same period;

b. the per-unit transfer price charged for the input

by the affiliated party (if the affiliated party

sells the identical input to other, unaffiliated

purchasers, provide documentation showing the price

paid for the input by the unaffiliated purchaser;

if your company purchases the identical input from

unaffiliated suppliers, provide documentation

showing the unaffiliated party’s sales price for

the input); and

c. if you are responding to this section of the

questionnaire in connection with an investigation

of sales below cost, provide the per-unit cost of

production incurred by the affiliated party in

producing the major input. . . .

Def.’s Ex. 4.

In addition, Commerce requested that NTN “specify the basis

used by [NTN] to value each major input for purposes of computing

the submitted COP and CV amounts (e.g., transfer price, cost of

production).” Id.

Consol. Court No. 98-01-00146 Page 51

In its response to Commerce’s questionnaire, NTN: (1)

identified NTN’s major inputs; (2) “submitted tables that

identified its affiliated and unaffiliated suppliers for a sample

of the different major inputs used to produce TRBs” and compared

transfer prices to the unaffiliated supplier’s prices which

demonstrated that certain “transfer prices were lower than [what]

NTN’s unaffiliated supplier charged for the same model”; (3)

submitted tables containing COP data for a sample of certain major

inputs used to produce TRBs that NTN purchased from an affiliated

supplier; and (4) “specified that [NTN] calculated COP and CV using

transfer prices to value the identified major inputs” and “created

a variable in its COP and CV database, ‘RELPTY,’ that identified

for each control number, the total percentage of affiliated party

inputs used in producing a particular TRB model.” Def.’s Mem. at

60-61 (citing Def.’s Confidential Ex. 5).

Subsequently, NTN “submitted revised exhibits that compared

the weighted average transfer price, the weighted average COP, and,

in limited instances, the market value for major inputs purchased

from affiliated suppliers.” Def.’s Mem. at 61; Def.’s Confidential

Ex. 6. Commerce verified NTN’s COP and transfer price responses

regarding the inputs but did not verify the market values for most

of the major inputs because, except for one affiliated supplier’s

inputs, “there were no unaffiliated suppliers of the identical

Consol. Court No. 98-01-00146 Page 52

components or services” that would allow NTN to provide market

values for most major inputs. Def.’s Mem. at 62; Def.’s

Confidential Ex. 7 at 24. Commerce also verified that for the

affiliated supplier’s inputs, that is, the one affiliated supplier

for whom there were unaffiliated suppliers of identical components

or services, “the market value was greater than the reported

transfer price and . . . COP.” Def.’s Mem. at 62. In the

Preliminary Results, Commerce determined that the appropriate value

for the affiliated supplier’s major inputs was market value since

it was higher in amount than NTN’s transfer price or the affiliated

supplier’s COP. See id.; Def.’s Confidential Ex. 8 at 1. However,

“Commerce was unable to identify the particular TRB models that

contained [the major inputs at issue] because NTN’s ‘RELPTY’

variables did not isolate these items.” Def.’s Mem. at 62.

Commerce, therefore, used “available information on the record” to

increase the transfer prices, that is, the prices of affiliated

supplier’s inputs that NTN used to calculate COP and CV, in order

to reflect market value. Id. at 62-63.

Commerce articulated its methodology of increasing the

transfer prices of major inputs as reported by NTN in order to

reflect market value:

To account for the difference between the fair value and

the reported transfer price, we have increased NTN’s

reported COP and CV by first calculating a weighted

average percentage difference between the fair value

Consol. Court No. 98-01-00146 Page 53

and the transfer price. We calculated this weighted

average percentage difference . . . [by:]

[1] determin[ing] the percentage of affiliated party

purchases represented by [the affiliated supplier]

. . .[;]

[2] appl[ying] . . . this difference between fair value

and transfer price for sampled purchases from [the

affiliated supplier] . . .[;]

[3] appl[ying] this difference to each control number’s

Relpty variable that NTN provided in its cost

files[] (NTN’s Relpty variable provides the

percentage of the value of the affiliated party

transfer price to the total cost of production or

constructed value for each model).

-- The resulting value was then included in each model’s

COP or CV.

NTN’s Ex. “COP/CV Memorandum”; see also Final Results, 63 Fed. Reg.

at 2573 and NTN’s Mem. at 25.

C. Contentions of the Parties

NTN contends that Commerce’s “adjustment to COP and CV for

affiliated-party inputs is distortive and should be eliminated.”

Final Results, 63 Fed. Reg. at 2572. Specifically, NTN asserts

that Commerce erred when it used the results that it obtained from

testing affiliated-party inputs on a sample basis to adjust COP and

CV by using the highest of transfer price, market price or the COP

of the input for “all of NTN’s affiliated party inputs regardless

of the fact that not all of these inputs contained [the particular

affiliated supplier’s] retainers” at issue. NTN’s Reply at 8;

see NTN’s Mem. at 25. NTN notes that Commerce’s application of the

adjustment to all of NTN’s affiliated party inputs resulted in

Consol. Court No. 98-01-00146 Page 54

double-counting of profit because--even if the price of a TRB’s

input from the particular affiliated supplier at issue was above

COP--an adjustment would still be made to the same input thereby

adding “profit to the input that already includes a profit.” NTN’s

Mem. at 27; NTN’s Reply at 9.

Additionally, NTN contends that 19 U.S.C. §§ 1677b(f)(2) and

(3) neither mandate nor imply Commerce’s methodology of valuing a

major input purchased from an affiliated party at the highest of

the COP, transfer price or market price. See NTN’s Mem. at 26.

NTN alternatively asserts that if Commerce’s adjustment was

correct, Commerce could have used a more reasonable method by

calculating “the weighted average difference between COP and

transfer price for all [the major inputs at issue] sold to NTN.”

Id.

NTN also argues that Commerce’s single adjustment constituted

an unwarranted use of adverse facts available because Commerce

“used the sales of [a few major inputs at issue] which were sold

[below] COP, while disregarding those sales [of major inputs at

12

issue which were sold above COP], to make a single adjustment.”

12

The Court is unconvinced that Commerce used adverse facts

available in making its single adjustment to NTN’s COP and CV.

Rather, Commerce, in order to value major inputs on a market value

basis, only resorted to facts available since it used information

on the record to increase the affiliated supplier’s transfer prices

that NTN used to calculate COP and CV. See Def.’s Mem. at 62-63;

Consol. Court No. 98-01-00146 Page 55

NTN’s Reply at 9; see NTN’s Mem. at 26. Additionally, NTN

maintains that “NTN fully responded to [Commerce’s] request for

information on related party inputs, including information such as

COP data, pricing data for affiliated inputs and pricing data for

non-affiliated inputs . . . [;] . . . NTN’s variable ‘RELPTY,’

identified for each control number, the total percentage of

affiliated party inputs used in producing a particular TRB model.”

NTN’s Reply at 7-8.

NTN, therefore, requests that the Court remand the matter and

instruct Commerce “to accept NTN’s reported COP and CV for

affiliated party inputs.” NTN’s Mem. at 27.

Commerce argues that it reasonably interpreted §§ 1677b(f)(2)

and (f)(3) as requiring it to value a major input purchased from an

affiliated person at the highest of the COP, transfer price or

market price. See Def.’s Mem. at 63-70. Consequently, Commerce

asserts that based on its reasonable interpretation of 19 U.S.C. §§

Final Results, 63 Fed. Reg. 2572; cf. Ferro Union, Inc. v. United

States (“Ferro”), 23 CIT ___, ___, 44 F. Supp. 2d 1310, 1329 (1999)

(stating that “[o]nce 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”) and (setting forth that 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, 23

CIT at ___, 44 F. Supp. 2d at 1331.

Consol. Court No. 98-01-00146 Page 56

1677b(f)(2) and (f)(3) and “upon the record evidence . . . [,]

Commerce determined that [the affiliated supplier’s inputs at

issue] should be valued using market prices . . . [given that]

NTN’s submitted information revealed that ‘the market price of a

retainer generally exceeded [the affiliated supplier’s] COP and

NTN’s submitted transfer price.’” Id. at 66 (citing Def.’s

Confidential Ex. 7 at 24). Commerce further maintains that since

“‘NTN could not explain the difference between the transfer price

and the market price[,]’ . . . Commerce properly rejected NTN’s

submitted transfer price for [the affiliated supplier’s inputs] as

the appropriate valuation for calculating COP and CV.” Def.’s Mem.

at 66-67 (quoting Final Results, 63 Fed. Reg. at 2573).

Commerce also argues that it properly used information on the

record to increase the transfer prices of the affiliated supplier’s

inputs that NTN used to calculate COP and CV in order to reflect

market value since “from the record evidence, Commerce was unable

to identify the particular TRB models that contained [the major

inputs at issue].” Def.’s Mem. at 62. Commerce further contends

that its method of applying sample results to all of NTN’s

affiliated party transactions was reasonable because (1) NTN “did

not identify by control numbers the TRB models that contained” the

affiliated supplier’s major inputs in its COP and CV database; and

(2) “Commerce’s adjustment factor was based upon only the portion

Consol. Court No. 98-01-00146 Page 57

of affiliated party inputs represented by [the affiliated supplier

at issue and therefore] . . . had a limited impact on NTN’s overall

COP and CV calculations.” Id. at 68.

Commerce further notes that NTN’s assertion that Commerce’s

application of the adjustment to all of NTN’s affiliated party

inputs resulted in “double-counted profit . . . is irrelevant.”

Id. at 69. In particular, Commerce asserts that “[f]air market

value and not the affiliated supplier’s profit is the only

pertinent issue for valuation purposes under 19 U.S.C. §§

1677b(b)(f)(2) and (3) . . . [;] [p]rofitable sales do not

determine whether prices charged between affiliated parties reflect

fair market value.” Id. Commerce also notes that even if profit

were relevant, NTN does not provide record evidence that (1) the

affiliated supplier’s inputs made profits on sales to NTN; and (2)

Commerce double-counted profits in Commerce’s adjustment. See

Def.’s Mem. at 69.

Commerce also argues that, contrary to NTN’s assertion that

Commerce could have used a more reasonable method if Commerce’s

adjustment was correct, Commerce used NTN’s reported information

during the administrative review to adjust NTN’s COP and CV. See

id. at 70. Relying on PPG Indus., Inc. v. United States (“PPG”),

14 CIT 522, 532, 746 F. Supp. 119, 129 (1990), Commerce maintains

that “there is no basis for reversing Commerce’s” chosen

Consol. Court No. 98-01-00146 Page 58

methodology in this instance. Id. (citing PPG, 14 CIT at 532, 746

F. Supp. at 129). Moreover, Commerce asserts that NTN’s argument

that Commerce distorted NTN’s dumping margin is not supported by

record evidence. See id.

Timken agrees with Commerce, noting that Commerce’s adjustment

to NTN’s COP and CV was reasonable and, contrary to NTN’s

assertions, did not result in a distorted antidumping margin. See

Timken’s Resp. at 66. Timken asserts that Commerce’s use of

information available was authorized pursuant to §§ 1677b(f)(2) and

(3) and was within the agency’s discretion since “the statute does

not specify any specific method for selecting information

available.” Id. Moreover, Timken maintains that Commerce’s

application of information available to all sales with related

party inputs . . . [was] reasonably determined . . . [because] the

problem [Commerce] had identified was likely to affect all models

with related party inputs.” Id. at 67.

Timken also asserts that, contrary to NTN’s assertions that §

1677b(f)(3) does not support Commerce’s methodology because many of

NTN’s inputs were not sold below cost and Commerce should have used

an alternative methodology, the language of the statute requires

“Commerce to act when ‘it has reasonable grounds to believe or

suspect that an amount represented as the value of such input is

less than the cost of such input.’” Id. (quoting 19 U.S.C. §

Consol. Court No. 98-01-00146 Page 59

1677b(f)(3)).

D. Analysis

The Court disagrees with NTN that Commerce erred in valuing

each major input based on the highest of the input’s transfer

price, market price or COP. This Court has consistently

articulated that the plain language of § 1677b(f)(2) and (f)(3), as

well as the legislative history of § 1677b(f)(3), supports

Commerce’s use of the highest of transfer price, market price or

COP in valuing a major input supplied by an affiliated party. See

Viraj Group, Ltd. v. United States, 25 CIT __, 162 F. Supp. 2d 656

(2001); SKF USA, Inc. v. United States, 24 CIT __, __, 116 F. Supp.

2d 1257, 1267 (2000); Mannesmannrohren-Werke AG v. United States

(“Mannesmannrohren-Werke”), 23 CIT __, __, 77 F. Supp. 2d 1302,

1310-12 (1999).

Further, the Court finds that Commerce’s decision to resort to

“facts otherwise available” in valuing NTN’s major inputs was in

accordance with law. The antidumping statute 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: (A)

witholds information that has been requested by [Commerce;] (B)

Consol. Court No. 98-01-00146 Page 60

fails to provide such information by the deadlines for submission

of the information or in the form and manner requested, subject to

[19 U.S.C. §§ 1677m(c)(1), (e);] (C) significantly impedes a

proceeding . . . [; and] (D) provides such information . . . [that]

cannot be verified as provided in section 1677m(i) . . . .” Id. §

1677e(a)(2)(A)-(D).13 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).

Section 1677m (1994), which was enacted as part of the URAA,

is “designed to prevent the unrestrained use of facts available as

to a firm which makes its best effort to cooperate with

[Commerce].” Borden, 22 CIT at 262, 4 F. Supp. 2d at 1245, rev’d

on other grounds, 2001 WL 312232 (Mar. 12, 2001). Section

1677m(d), entitled “deficient submissions,” provides that if

Commerce “determines that a response to a request for information

. . . does not comply with the request, the [agency] . . . shall

promptly inform the person submitting the response of . . . the

deficiency and . . . [provide] that person with an opportunity to

remedy or explain the deficiency.” If the remedial response or

explanation provided by the party is found to be not satisfactory

13

Commerce does not indicate whether it relies on subsection

(1) or (2) of § 1677e(a), the facts available provision. Based on

the parties’ submitted papers, the Court assumes that Commerce used

facts available since “necessary information [was] not available on

the record.” 19 U.S.C. § 1677e(a)(1).

Consol. Court No. 98-01-00146 Page 61

or is untimely, Commerce may, subject to § 1677m(e), disregard “all

or part of the original and subsequent responses” in favor of facts

available. 19 U.S.C. § 1677m(d).

As noted earlier, Commerce’s initial questionnaire, among

other things, specifically requested that NTN provide (1) “the per-

unit transfer price charged for the input by the affiliated party

(if the affiliated party sells the identical input to other,

unaffiliated purchasers, provide documentation showing the price

paid for the input by the unaffiliated purchaser; if [NTN]

purchases the identical input from unaffiliated suppliers, provide

documentation showing the unaffiliated party’s sales price for the

input)”; and (2) “the basis used by [NTN] to value each major input

for purposes of computing the submitted COP and CV amounts (e.g.,

transfer price, cost of production).” Def.’s Ex. 4.

In response to Commerce’s questionnaire, NTN did: (1)

“submit[] tables that identified its affiliated and unaffiliated

suppliers for a sample of the different major inputs used to

produce TRBs[]” and compared transfer prices to the unaffiliated

supplier’s prices which demonstrated that certain “transfer prices

were lower than [what] NTN’s unaffiliated supplier [charged] for

the same model”; and (2) “specified that [NTN] calculated COP and

CV using transfer prices to value the identified major inputs” and

“created a variable in its COP and CV database, ‘RELPTY,’ that

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identified for each control number, the total percentage of

affiliated party inputs used in producing a particular TRB model.”

Def.’s Mem. at 60-61. According to NTN, “there were no

unaffiliated suppliers of the identical components or services”

that would allow NTN to provide market values for most major

inputs. Id. at 62. However, in its supplemental response, NTN

revised its exhibits and compared “the weighted average transfer

price, the weighted average COP, and, in limited instances, the

market value for major inputs purchased from affiliated suppliers.”

Id. at 61.

Commerce verified NTN’s COP and transfer price responses

regarding the major inputs and for one affiliated supplier’s

inputs, that is, the one affiliated supplier for whom there were

unaffiliated suppliers of identical components or service, Commerce

verified that “the market value was greater than the reported

transfer price and . . . COP.” Id. at 62. Therefore, in the

Preliminary Results, Commerce determined that the appropriate value

for the affiliated supplier’s major inputs was market value since

it was higher in amount than NTN’s transfer price or the affiliated

supplier’s COP. “As noted on page 24 of the June 13, 1997 [C]ost

[V]erification [R]eport, NTN could not explain the difference

between the transfer price and the market price.” Final Results,

63 Fed. Reg. at 2573. Because Commerce was unable to identify from

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the record evidence the particular TRB models that contained the

major inputs at issue, and NTN argues that it fully responded to

Commerce’s request for information on related party inputs,

Commerce’s resort to facts available in order to increase the

transfer prices of the affiliated supplier’s inputs to reflect

market value was appropriate.

NTN’s argument that Commerce could have used a more reasonable

method by calculating “the weighted-average difference between COP

and transfer price for all [the major inputs at issue] sold to NTN”

is without merit. Id. “[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 chosen methodology distorted

NTN’s dumping margin, the Court determines that Commerce’s

Consol. Court No. 98-01-00146 Page 64

methodology of adjusting NTN’s COP and CV was in accordance with

law. Accordingly, the Court finds that Commerce properly resorted

to facts available in adjusting NTN’s COP and CV.

VIII. Commerce’s Exclusion of Certain Home Market Sales

to Affiliated Parties From the Normal Value Calculation

A. Background

During the POR, NTN made home market sales to affiliated and

unaffiliated parties. In order to determine whether NTN’s

affiliated-party sales could be used for purposes of calculating

NV, Commerce conducted its standard arm’s-length test. See Final

Results, 63 Fed. Reg. at 2580-81. 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] calculated, for each model, the percentage

difference between the weighted-average prices to the

affiliated customer and all unaffiliated customers and

then calculated, for each affiliated customer, the

overall weighted-average percentage difference in prices

for all models purchased by the customer. If the overall

weighted-average price ratio for the affiliated customer

was equal to or greater than 99.5 percent, [Commerce]

determined that all sales to this affiliated customer

were at arm’s-length. Conversely, if the ratio for a

customer was less than 99.5percent, [Commerce] determined

that all sales to the affiliated customer were not at

arm’s-length because, on average, the affiliated customer

paid less than unaffiliated customers for the same

merchandise.

Preliminary Results, 62 Fed. Reg. at 47,457. Commerce, in

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accordance with 19 U.S.C. § 1677b(a)(5)(1994) and 19 C.F.R. §

353.45(a) (1996), disregarded all of NTN’s sales to affiliated

parties in its computation of NV because Commerce found that sales

to NTN’s affiliated customers, on average, were lower than NTN’s

prices to unaffiliated customers, that is, sales made to affiliated

parties were not at arm’s length. See id.; see also Final Results,

63 Fed. Reg. at 2580-81.

B. Contentions of the Parties

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

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

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

42. To illustrate its contention, NTN provides a hypothetical

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

is distortive since it does not compare average price for

affiliated sales to average price for unaffiliated sales or

individual price for affiliated sales to individual price for

unaffiliated sales.14 See id. Alternatively, NTN asserts that,

14

Relying on its hypothetical example, NTN asserts that “NTN

need not use evidence on the record to illustrate that [Commerce’s]

methodology is flawed.” See NTN’s Reply at 11. The Court finds

this argument to be without merit since it is well settled that

record evidence is required to prove distortion of Commerce’s

methodology. See Usinor Sacilor v. United States (“Usinor”), 18

CIT 1155, 1159, 872 F. Supp. 1000, 1004 (1994)(upholding Commerce’s

arm’s-length test as reasonable given the lack of evidence showing

a distortion of price comparability); Torrington Co. v. United

States (“Torrington Co.”), 21 CIT 251, 261, 960 F. Supp. 339, 348

Consol. Court No. 98-01-00146 Page 66

should Commerce choose to retain its methodology of comparing

individual sales to a weighted average margin, Commerce should

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

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

compensate for the distortive nature of the test.” NTN’s Reply at

11.

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

unreasonable since Commerce should have examined factors other than

price in determining whether to include affiliated party sales when

calculating NV. See NTN’s Mem. at 43. Specifically, NTN contends

that Commerce erred in failing to examine: (1) “quantity of goods”;

and (2) “payment terms of specific sales.” Id. According to NTN,

all of these factors influence the price of an affiliated party

transaction and Commerce cannot make meaningful price comparisons

without examining them. See id.

Commerce responds that 19 U.S.C. § 1677b (1994) provides that:

(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); NTN, 19 CIT at 1241, 905 F. Supp. at 1100

(upholding Commerce’s arm’s-length test as reasonable given the

lack of “record evidence tending to show that, in application,

Commerce’s test was unreasonable”); NSK, 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).

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[i]f the foreign like product is sold or, in the absence

of sales, offered for sale through an affiliated party,

the prices at which the foreign like product is sold (or

offered for sale) by such affiliated party may be used in

determining normal value.

Def.’s Mem. at 71 (quoting 19 U.S.C. § 1677b(a)(3) [sic] (emphasis

supplied).15

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

argues that it has broad discretion to determine whether sales to

affiliated parties could be used in the calculation of NV since the

language of the statute indicates that Commerce “may, but need not,

base NV upon the price paid by an affiliated party.”16 Def.’s Mem.

at 71. In addition, Commerce points out that the regulation

provides the following:

If a producer or reseller sold such or similar

merchandise to [an affiliated party], [Commerce]

ordinarily will calculate foreign market value based on

that sale only if satisfied that the price is comparable

to the price at which the producer or reseller sold such

or similar merchandise to [an affiliated] person not

related to the seller.

19 C.F.R. § 353.45(a).

15

The Court assumes that Commerce is relying on the language

of 19 U.S.C. § 1677b(a)(5) and not § 1677b(a)(3).

16

Commerce also relies on this Court’s decisions in Usinor, 18

CIT at 1159, 872 F. Supp. at 1004; NTN, 19 CIT at 1241, 905 F.

Supp. at 1100; and NSK Ltd., 21 CIT at 637, 969 F. Supp. at 54, for

the proposition that 19 U.S.C. § 1677b(a)(3) [sic] (1994) “granted

to Commerce broad discretion to determine whether home market sales

to related parties could be used to determine foreign market

value.” See Def.’s Mem. at 71.

Consol. Court No. 98-01-00146 Page 68

Relying on both the statute and regulation, Commerce used its

price-based arm’s-length test to examine the price comparability of

NTN’s home market sales of affiliated and unaffiliated parties.

Def.’s Mem. at 72. Commerce argues that, since: (1) NTN has

“failed to provide record evidence demonstrating that Commerce’s

arm’s-length test distorted the price comparability analysis”; and

(2) NTN failed to prove that Commerce’s arm’s-length test was

unreasonable, Commerce’s use of it’s arm’s-length test was in

accordance with law. Id. at 73-74. Timken supports Commerce’s

contentions. See Timken’s Resp. at 70-71.

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 allowed considerable discretion in

deciding whether to include affiliated party sales when calculating

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, 19 CIT at

1241, 905 F. Supp. at 1100; See Torrington Co., 21 CIT at 261, 960

F. Supp. at 348 (stating that the respondent “must do more than

indicate a possible correlation between price and quantity” to

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support its argument that Commerce should consider quantity in

Commerce’s arm’s-length test); NSK, 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). Commerce’s arm’s-length method is reasonable. In

addition, in this case, NTN’s hypothetical example supporting its

assertion that Commerce’s arm’s-length method is distortive and

Commerce should lower the percentage of the arm’s-length test to

95% in determining comparability fails to prove that Commerce’s

test is unreasonable, since it does not constitute record evidence

demonstrating that NTN’s affiliated party prices were comparable to

NTN’s unaffiliated party prices.

The Court has also repeatedly rejected the argument that

Commerce should consider additional factors, that is, factors other

than price, when determining whether sales prices to affiliated and

unaffiliated parties are comparable. The Court finds no basis

under the circumstances of this case to depart from its prior

holdings in NTN Bearing, 24 CIT at ___, 104 F. Supp. 2d at 148, and

NTN, 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

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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.

IX. Depreciation of Idle Equipment and Write-Off of Production

Equipment

NTN contends that on line 29717 [sic] of Commerce’s margin

program, Commerce “created a calculation for the depreciation of

idle equipment . . . [that] was previously accounted for in

[Commerce’s] calculation of GNA [sic]”18 expense ratio. NTN’s Mem.

at 46 (citing Ex. “Preliminary Analysis Memorandum”). NTN asserts

that Commerce double-counted NTN’s depreciation of idle equipment

and, thus, distorted NTN’s margin. See id.; see NTN’s Reply at 12.

Therefore, NTN requests to remove the depreciation of idle

equipment calculation from line 297 [sic] of Commerce’s margin

program. See NTN’s Mem. at 46 (citing Ex. “NTN Margin Program”).

Commerce, in turn, argues that it did not double-count NTN’s

depreciation of idle equipment. See Def.’s Mem. at 74. In

particular, Commerce maintains that the depreciation of idle

17

The Court assumes that NTN is disputing line 298 of NTN’s

margin program and not line 297, since line 297 does not contain

any information regarding depreciation of idle equipment. See

NTN’s Mem. at 46 (citing Ex. “NTN Margin Program”).

18

The Court assumes that NTN means the calculation of G&A and

not the calculation of GNA.

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equipment and the write-off of production equipment and fixed

property are not the same. See id. at 75. According to Commerce,

although NTN properly included the depreciation of idle equipment

in its G&A ratio, NTN excluded the write-off of production

equipment and fixed property from its calculation of COP and CV.

See id. at 74-75 (citing Confidential Ex. 7 at 26); see also Def.’s

Confidential Ex. 5. Therefore, Commerce argues that its adjustment

to COP and CV to include the write-off of production equipment and

fixed property did not result in double-counting that would distort

NTN’s margin. See Def.’s Mem. at 75.

Timken supports Commerce’s conclusion that NTN’s claim is

without merit. See Timken’s Resp. at 72.19

The Court disagrees with NTN that Commerce double-counted when

it made an adjustment to COP and CV to include the write-off of

production equipment and fixed property. Although NTN included the

depreciation of idle equipment in its G&A expense ratio, it failed

to include the write-off of production equipment and fixed property

19

Timken’s version of NTN’s argument is somewhat different

from Commerce’s. Timken reads NTN’s argument as asserting that

Commerce double-counted when it “adjusted for the depreciation in

its preliminary results analysis memorandum and in the computer

program used to calculate NTN’s margins.” Timken’s Resp. at 72.

Timken misreads NTN’s argument because NTN contends that, on line

297 [sic] of Commerce’s margin program, Commerce “created a

calculation for the depreciation of idle equipment . . . [that] was

previously accounted for in [Commerce’s] calculation of GNA [sic].”

NTN’s Mem. at 46.

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in its calculation of COP and CV. Depreciation of idle equipment

and write-off, that is, loss on disposal, of production equipment

and fixed property are not the same. See OXFORD ENGLISH DICTIONARY

ONLINE (2nd ed. 1989) (stating that depreciation means to “lower in

value, lessen the value of” whereas write-off means “worthless

asset”); see also NTN Bearing Corp. v. United States, 74 F.3d 1204,

1206 (Fed. Cir. 1995) (holding that Commerce’s “inclu[sion] [of]

depreciation expenses and disposal losses [that is, write-offs] in

calculating cost of production and constructed value . . . is

supported by substantial evidence and in accordance with law”).

Therefore, this Court sustains Commerce’s adjustment to COP and CV

to include the write-off of production equipment and fixed assets.

X. NTN’s Zero-Priced United States Transactions and NTN’s Home-

Market Sample Sales in NTN’s Margin Calculation

A. NTN’s Zero-Priced United States Transactions

NTN argues that in light of NSK Ltd. v. United States (“NSK

1997"), 115 F.3d 965 (Fed. Cir. 1997), the Court should remand the

matter to Commerce to exclude NTN’s zero-priced samples from its

margin calculations. See NTN’s Mem. at 44; NTN’s Reply at 12. NTN

maintains that United States transactions at zero value, such as

“samples . . . provided for testing, evaluating, and to determine

whether or not to buy a particular product[,]” do not constitute

true sales and, therefore, should be excluded from the margin

Consol. Court No. 98-01-00146 Page 73

calculations pursuant to NSK 1997. NTN’s Reply at 12.

Commerce and Timken assert that Commerce properly included

NTN’s zero-priced United States sales when calculating NTN’s

dumping margin because NTN failed to demonstrate that the

transactions in question lacked “consideration” as defined by NSK

1997, and that further factual inquiry was necessary. See Def.’s

Mem. at 75-81; Timken’s Resp. at 71. Therefore, Commerce and

Timken assert that, since NTN did not meet its burden of providing

information necessary to prove that “sales were outside of the

ordinary course of trade,” the Court should affirm Commerce’s

inclusion of NTN’s zero-priced sales in NTN’s dumping margin.

Def.’s Mem. at 81; see Timken’s Resp. at 71.

Pursuant to 19 U.S.C. § 1673(1) (1994), Commerce is required

to impose antidumping duties upon merchandise that “is being, or is

likely to be, sold in the United States at less than its fair

value.” A zero-priced transaction does not qualify as a “sale”

and, therefore, by definition cannot be included in Commerce’s NV

calculation. See NSK 1997, 115 F.3d at 975 (holding “that the term

‘sold’ . . . requires both a transfer of ownership to an unrelated

party and consideration”). Thus, the distribution of TRBs for no

consideration falls outside the purview of 19 U.S.C. § 1673 (1994).

Consequently, the Court remands to Commerce to exclude any

transactions that were not supported by consideration from NTN’s

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United States sales database and to adjust the dumping margins

accordingly.

B. NTN’s Home Market Sample Sales

1. Background

Commerce is required to base its NV calculation upon “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).

In NSK 1997, 115 F.3d 965, the CAFC concluded that “the term ‘sold’

. . . requires both a transfer of ownership to an unrelated party

and consideration.” NSK 1997, 115 F.3d at 975. The CAFC

specifically determined that the samples NSK had given to potential

customers at no charge and with no obligation lacked consideration.

See id. Moreover, the CAFC found that “[b]ecause NSK’s [free]

samples did not constitute ‘sales,’ they should not have been

included in calculating United States price.” Id.

During this review, Commerce sent a questionnaire “requir[ing]

all respondents to identify any transactions . . . which they

claimed involved sample or prototype sales” and further requested,

that respondents:

[d]escribe [their] agreement(s) for sales in the United

States and the foreign market (e.g., long-term purchase

contract, short-term purchase contract, purchase order,

order confirmation). Provide a copy of each type of

agreement and all sales-related documentation generated

in the sales process (including the purchase order,

internal and external order confirmation, invoice, and

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shipping and export documentation) for a sample sale in

the foreign market and U.S. market during the POR.

Def.’s Mem. at 77 (quoting Section A of NTN’s Questionnaire at 5-

6).

Commerce further provided NTN with a questionnaire “relating

to reporting data on sales outside the ordinary course of trade,”

and explained that:

[i]f [NTN] consider[s] a sale to be outside the ordinary

course of trade, report “YES” in this field. If the sale

was in the ordinary course of trade, report a “NO.” If

[NTN] claim[s] that any of its home market sales are

outside the ordinary course of trade [NTN] must provide

a detailed explanation why. Please note that the burden

of proof is on respondents 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. at 77-78 (quoting Section B of NTN’s Questionnaire at

B-14).

NTN responded to Commerce’s questionnaires by marking sample

sale transactions with an “S” and providing a chart of profit

levels to demonstrate that sales were outside of the ordinary

course of trade. See Def.’s Mem. at 78. In turn, Commerce sent a

supplemental questionnaire to NTN requesting clarification as to

NTN’s original response, that is, “what [NTN] was attempting to

Consol. Court No. 98-01-00146 Page 76

establish in [a particular NTN exhibit], and to provide a detailed

explanation of . . . [the] exhibit.” Id. NTN responded to

Commerce’s supplemental questionnaire by explaining the profit

charts it provided in its original response. Commerce stated that

“NTN’s response relying upon profit levels to demonstrate that

sales were outside of the ordinary course of trade does not address

the factors considered important in NSK 1997, i.e., whether there

was any transfer of ownership or consideration given for the

samples.” Id. at 81. Moreover, Commerce determined that NTN

failed to provide “information demonstrating that [NTN’s] alleged

home market sample sales were outside the ordinary course of

trade.” Final Results, 63 Fed. Reg. at 2582. Therefore, for the

final results, Commerce included NTN’s home market sample sales in

NTN’s final dumping margin calculation. See Def.’s Mem. at 82.

2. Contentions of the Parties

NTN argues that Commerce erred when it failed to exclude NTN’s

sample sales and other sales from Commerce’s margin calculations,

despite what NTN considers to be sufficient evidence on record

indicating that these transactions were outside of the ordinary

course of trade. See NTN’s Mem. at 44-46; NTN’s Reply at 13-14.

In particular, NTN asserts that the evidence on the record

includes: (1) NTN’s questionnaire response stating that “‘[s]amples

are provided to customers for the purpose of allowing the customer

Consol. Court No. 98-01-00146 Page 77

to determine whether a particular product is suited to the

customer’s needs[;]’” (2) NTN’s sample sales tracking system in

which sample sales are identified by placing “SS” “in the prefix to

the order number[;]” and (3) an NTN submitted exhibit which

provides a profit chart and identifies sample sales with unusual

profits that NTN considers outside of the ordinary course of trade.

NTN’s Reply at 13-14. Therefore, NTN claims that it provided

Commerce with “‘the greatest profit level in the range of profits

at which the most quantity of the subject merchandise [was] sold’”

(hereinafter “X”) and requested that Commerce “treat any sale with

a profit level greater than [X] as not being in the ordinary course

of trade.” NTN’s Reply at 14. Moreover, NTN maintains that 19

U.S.C. § 1677b(a)(1)(B), the SAA, regulation 19 C.F.R. § 351.102(b)

(1998) and NSK 1997, 115 F.3d 965, clearly instruct Commerce to

exclude NTN’s sample sales or other sales from the margin

calculations. See NTN’s Mem. at 45-46; NTN’s Reply at 13-14.

Commerce alleges that it properly exercised its discretion in

rejecting NTN’s argument that Commerce must exclude NTN’s home

market sample sales or other sales because NTN failed to adequately

show that home market sample sales and other sales lacked

consideration or were otherwise outside of the ordinary course of

trade. See Final Results, 63 Fed. Reg. at 2582. Commerce asserts

that “only NTN possessed the information regarding the purchase

Consol. Court No. 98-01-00146 Page 78

history of its alleged samples, including the price and quantity

for any prior or subsequent purchases of these products by the same

or other customers” and since NTN withheld that information, NTN

failed to meet its burden to show that it received no consideration

for the alleged sample sales at issue. Def.’s Mem. at 81.

Further, Commerce contends that NTN cannot be excused from

responding to the agency’s questions because NTN considers certain

information irrelevant. See id. Commerce claims that it, not NTN,

determines the relevancy of Commerce’s questions. See id.

Therefore, Commerce argues that its decision to include NTN’s

alleged sample sales in calculating NTN’s dumping margin is based

upon substantial evidence and in accordance with law. See id. at

81-82.

Timken supports Commerce’s decision to include NTN’s sample

sales in calculating NTN’s dumping margin because Commerce found

that: (1) “there [was] no record evidence demonstrating that any of

NTN’s home market sales, samples, or otherwise [were] outside the

ordinary course of trade[;] and (2) consideration was paid for all

of [NTN’s] sample sales.” Timken Resp. at 72.

3. Analysis

An NV calculation has to be based upon “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). The term “ordinary

Consol. Court No. 98-01-00146 Page 79

course of trade” is defined 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 the following sales and transactions,

among others, to be outside the ordinary course of trade:

(A) Sales disregarded under section 1677b(b)(1) of

this title.

(B) Transactions disregarded under section

1677b(f)(2) of this title.

19 U.S.C. § 1677(15) (1994) (emphasis supplied).

Section 1677b(b)(1) deals with sales below cost of production.

Section 1677b(f)(2) deals with sales to affiliated parties.

Therefore, Commerce must consider below cost sales and sales

between related parties as sales outside the ordinary course of

trade. Although § 1677b(b)(1)’s sales below cost of production 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.20 Commerce “may consider sales or transactions to be outside

20

The SAA, accompanying the URAA provides that aside from §§

1677b(b)(1) and (f)(2) transactions:

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

Consol. Court No. 98-01-00146 Page 80

the ordinary course of trade if [Commerce] determines, based on an

evaluation of all of the circumstances particular to the sales in

question, that such sales or transactions have characteristics that

are extraordinary for the market in question.” 19 C.F.R. §

351.102(b) (emphasis supplied). Examples of what could be

considered outside the ordinary course of trade include: (1) off-

quality merchandise; (2) merchandise produced according to unusual

product specifications; (3) merchandise sold at aberrational prices

or with abnormally high profits; (4) merchandise sold pursuant to

unusual terms of sale; or (5) merchandise sold to an affiliated

party not at an arm’s-length transaction. See 19 C.F.R. §

351.102(b).

In determining whether a sale is outside the ordinary course

of such sales or transactions include merchandise

produced according to unusual product specifications,

merchandise sold at aberrational prices, or merchandise

sold pursuant to unusual terms of sale. As under

existing law, amended section 771(15) does not establish

an exhaustive list, but the Administration intends that

Commerce will interpret section 771(15) in a manner which

will avoid basing normal value on sales which are

extraordinary for the market in question, particularly

when the use of such sales would lead to irrational or

unrepresentative results.

H.R. Doc. 103-316, at 834 (emphasis supplied).

The SAA also provides that “[o]ther examples of sales that

Commerce could consider to be outside the ordinary course of trade

include sales of off-quality merchandise, sales to related parties

at non-arm’s length prices, and sales with abnormally high

profits.” Id. at 839-40.

Consol. Court No. 98-01-00146 Page 81

of trade, Commerce must consider not just “one factor taken in

isolation but rather . . . all the circumstances particular to the

sales in question.” Murata Mfg. Co. v. United States, 17 CIT 259,

264, 820 F. Supp. 603, 607 (1993). Commerce’s methodology for

making this determination is codified in section 351.102(b) of

Commerce’s regulations. See 19 C.F.R. § 351.102(b); see

also Torrington Co. v. United States (“Torrington”), 25 CIT ___,

___, 146 F. Supp. 2d 845, 861-64 (2001) (detailing Commerce’s

methodology for deciding when sales are outside the “ordinary

course of trade” and finding both Commerce’s interpretation of 19

U.S.C. § 1677(15) and Commerce’s methodology reasonable). In

addition, plaintiff has the burden of proving whether the sales

used in Commerce’s calculations are outside the ordinary course of

trade. See, e.g., Nachi-Fujikoshi Corp. v. United States, 16 CIT

606, 608, 798 F. Supp. 716, 718 (1992) (citing Koyo Seiko Co. v.

United States (“Koyo”), 16 CIT 539, 543, 796 F. Supp. 1526, 1530

(1992), vacated in part on other grounds, (“Koyo 1992"), 806 F.

Supp. 1008 (1992).

Adhering to the explanation provided by this Court in

Torrington, 25 CIT __, 146 F. Supp. 2d 845, the Court finds that in

light of 19 U.S.C. § 1677(15)’s legislative purpose, Commerce’s

interpretation of 19 U.S.C. § 1677(15) and exercise of its

discretion by requiring additional evidence besides NTN’s response

Consol. Court No. 98-01-00146 Page 82

relying upon profit levels to demonstrate that sales were outside

of the ordinary course of trade, that is, whether there was any

transfer of ownership or consideration given for the samples, was

reasonable. NTN was or should have been aware of such a

requirement. See NTN Bearing, 24 CIT ___, 104 F. Supp. 2d 110

(holding that Commerce’s request to NTN for additional evidence

demonstrating that sales were outside of the ordinary course of

trade was not an unreasonable exercise of Commerce’s discretion);

see also NTN, 19 CIT at 1229, 905 F. Supp. at 1091 (finding that

“[w]ithout a complete explanation of the facts which establish the

extraordinary circumstances rendering particular sales outside the

ordinary course of trade, Commerce cannot exclude those sales from

[NV]”).

In the case at bar, NTN failed to meet its burden of providing

Commerce with requested additional detailed information regarding

sales that NTN claimed were outside the ordinary course of trade.

NTN merely relied on: (1) its questionnaire response in which NTN

stated that “‘[s]amples are provided to customers for the purpose

of allowing the customer to determine whether a particular product

is suited to the customer’s needs[;]21’” and (2) its submitted

exhibit in which NTN provides a profit chart and identifies sample

21

NTN identified its sample sales by placing “SS” “in the

prefix to the order number.” NTN’s Reply at 13.

Consol. Court No. 98-01-00146 Page 83

sales with unusual profits that it considers are outside of the

ordinary course of trade in order to support NTN’s argument that

its sample sales should be excluded from Commerce’s margin

calculation. NTN’s Reply at 13-14. NTN’s identification of its

sales as samples does not necessarily render those sales as being

outside of the ordinary course of trade. See NTN, 19 CIT at 1229,

905 F. Supp. at 1091. In addition, “[t]he presence of profits

higher than those of other sales[,] [that is, sales with unusual

profits,] is, however, merely an element which does not necessarily

place the sales outside the ordinary course of trade under

Commerce’s requirement for additional evidence.” Torrington, 25

CIT at __, 146 F. Supp. 2d at 863. Therefore, because Commerce’s

interpretation and application of the statute was reasonable and

the record reflects that NTN did not provide sufficient additional

evidence requested by Commerce to support NTN’s claim that the

disputed sales were outside the ordinary course of trade, Commerce

was justified in its decision to include NTN’s sample and other

sales in Commerce’s margin calculation.

XI. Commerce’s Adjustment to NTN’s Total Billing Adjustment in

the Home Market

A. Background

For the POR at issue, NTN reported home market billing

adjustments in its questionnaire response submitted to Commerce.

Consol. Court No. 98-01-00146 Page 84

See Def.’s Mem. at 82. In the final results, Commerce stated:

[Commerce] thoroughly verified NTN’s reported home market

volume and value for the POR. As [Commerce’s]

verification report indicates, it was necessary for

[Commerce] to reconcile the volume and value NTN reported

in its response to its Ministry of Finance (MOF) reports.

As part of this reconciliation [Commerce] examined an

adjustment NTN made for its total HM billing adjustments

for the POR (see Department’s Home Market Verification

Report for NTN, July 9, 1997, exhibit [3])(NTN HM

Report).22 Not only did [Commerce] successfully trace

this total to the computer program NTN used to calculate

it, but [Commerce] also traced NTN’s reported volume and

value for the POR for its home market sales directly to

the MOF report with no discrepancies (see NTN HM Report

at 6). [Commerce] also verified NTN’s reported,

transaction-specific home market billing adjustments by

examining a variety of sales documentation in the sales

trace portion of [Commerce’s] verification (see NTN HM

Report at 17). Again [Commerce] found no discrepancies.

As a result of both verification exercises, one would

assume that NTN’s reported home market billing

adjustments were accurate and that the total of its

transaction-specific billing adjustments for the POR

would equal the total reported on exhibit [3] of

[Commerce’s] [V]erification [R]eport.

Final Results, 63 Fed. Reg. at 2563.

After verification, however, “Timken identified a discrepancy

between the billing adjustment NTN reported in its questionnaire

response and the amount Commerce determined through verification.”

Def.’s Mem. at 82. Commerce, therefore, in its review of NTN’s

questionnaire responses, calculated the overall total of NTN’s

22

NTN’s Home Market Verification Report is partially in

Commerce’s Confidential Exhibit 10. Although Commerce indicates in

that exhibit that it will supplement the Home Market Verification

Report, no such supplement has been made.

Consol. Court No. 98-01-00146 Page 85

reported home market billing adjustment and found that it was

significantly different from the total billing adjustment Commerce

determined at verification in exhibit 3 of NTN’s HM Report.

See Final Results, 63 Fed. Reg. at 2563; Def.’s Mem. at 82.

Commerce then proceeded to determine a more accurate total billing

adjustment and discovered that “the total billing adjustment amount

that [Commerce] had verified as part of the reconciliation for

quantity and value reflected the accurate total adjustment” because

exhibit 3’s total was more traceable to NTN’s Ministry of Finance

(“MOF”) reports. Def.’s Mem. at 83; see Final Results, 63 Fed.

Reg. 2563. While Commerce had verified NTN’s reported transaction-

specific billing adjustment, Commerce considered the verification

to be merely a “spot check,” that is, Commerce’s examination of

selected billing adjustments that left a possibility that many of

NTN’s other transaction-specific billing adjustments were

inaccurate. See Final Results, 63 Fed. Reg. 2563. Commerce,

therefore, explained its methodology stating:

having determined that the exhibit [3] total billing

adjustment amount is the accurate figure, [Commerce]

ha[s] adjusted NTN’s reported transaction-specific

billing adjustments to reflect this total. . . .

[B]ecause the record provides no information as to which

transaction-specific billing adjustments are accurate,

and because NTN has neither explained this discrepancy

nor provided [Commerce] with any information with respect

to the correction of this discrepancy in its reported

data, [Commerce] ha[s] relied on facts available to

correct NTN’s reported home market billing adjustments.

Because [Commerce] [is] unable to identify which billing

adjustments are inaccurate, as facts available,

Consol. Court No. 98-01-00146 Page 86

[Commerce] systematically sorted through NTN’s raw home

market database and totaled the reported per-sale billing

adjustments until [Commerce] arrived at a total equal to

[Commerce’s] calculated adjustment. [Commerce] then

adjusted these sales’ billing adjustments such that they

reflected the total in exhibit [3] and disallowed the

rest of NTN’s reported billing adjustments.

Id.

B. Contentions of the Parties

NTN argues that Commerce erred when it used facts available

to: (1) correct NTN’s reported billing adjustment data; and (2)

“substitut[e] [Commerce’s] adjusted figures for verified, accurate

data presented by [NTN].” NTN’s Reply at 15; see NTN’s Mem. at 13-

14. In particular, NTN maintains that since Commerce verified

NTN’s reported transaction-specific billing adjustments and found

no discrepancies, there is no basis under 19 U.S.C. § 1677e for

Commerce to use facts available. See NTN’s Mem. at 14. NTN also

contends that “substituting [Commerce’s] adjusted figures for

verified, accurate data presented by a party is [not only] contrary

to . . . 19 U.S.C. § 1677e, [but also contrary] to 19 C.F.R. §

351.308 [1998] [and] . . . the express language of the SAA.” NTN’s

Reply at 15. Therefore, NTN requests that this Court remand to

Commerce to use NTN’s reported and verified data for the total

billing adjustment in the home market. See id.; NTN’s Mem. at 15.

Commerce responds that although it verified NTN’s reported

transaction-specific home market billing adjustments and found no

Consol. Court No. 98-01-00146 Page 87

discrepancies, Commerce only “spot-checked,” that is, examined a

sample of NTN’s reported billing adjustments, and it is therefore

possible that many of NTN’s other transaction-specific billing

adjustments that Commerce did not select during verification are

inaccurate. See Def.’s Mem. at 83. Commerce maintains that this

is particularly true considering that the total of all of NTN’s

billing adjustments do not match the total from exhibit 3, that is,

the total billing adjustment Commerce determined at verification.

See id.

Commerce also asserts that, despite the errors contained in

NTN’s questionnaire response, Commerce had to use questionnaire

response data, that is, “[Commerce] had to make adjustments in the

data so that the data from the questionnaire response would not

exceed the total billing adjustment determined at verification,” to

calculate NTN’s dumping margin. Id. at 83-84. In particular,

Commerce argues, that since it could not identify the inaccurate

billing adjustments, “as facts available, Commerce systematically

sorted through NTN’s raw home market data base and totaled the

reported per-sale billing adjustments until Commerce arrived at a

total equal to the verified total adjustment[] . . . [and] then

adjusted the billing adjustments for the examined sales to reflect

the total determined at verification and disallowed the rest of

NTN’s reported billing adjustments.” Id. at 84. Therefore,

Consol. Court No. 98-01-00146 Page 88

Commerce requests that since it relied upon verified figures, that

is, Commerce relied upon its verified total billing expense in

exhibit 3, the Court should sustain its adjustment to NTN’s

reported billing adjustment as supported by the record and in

accordance with law.

Timken agrees with Commerce and argues that since Commerce

determined that NTN’s transaction-specific billing adjustments were

inaccurate, NTN’s assertion that Commerce wrongfully rejected

verified data is without merit. See Timken Resp. at 58. Timken

also asserts that Commerce acted in accordance with 19 U.S.C. §

1677e(a)(2)(D) when it used facts available in place of

unverifiable data to make an adjustment to NTN’s reported billing

adjustment. See id.

C. Analysis

The antidumping statute mandates that Commerce use facts

available if “an interested party or any other person . . .

provides . . . information but the information cannot be verified

as provided in section 1677m(i) . . . .” 19 U.S.C. §

1677e(a)(2)(D)(1998).23 Section 1677e(a) provides that the use of

23

Section 1677m(i) provides that:

[Commerce] shall verify all information relied upon in

making--

(1) a final determination in an investigation,

(2) a revocation under section 1675(d) of this title,

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facts available shall be subject to the limitations set forth in 19

U.S.C. § 1677m(d).

Commerce’s decision to use facts available to adjust NTN’s

reported billing adjustments to reflect the total billing

adjustment determined by Commerce at verification was supported by

substantial evidence and in accordance with law. According to

Micron Tech., Inc. v. United States (“Micron Tech.”), 117 F.3d

1386, 1395 (Fed. Cir. 1997) (citing Antifriction Bearings (Other

than Tapered Roller Bearings) and Parts Thereof from the Federal

Republic of Germany, 56 Fed. Reg. 31,692, 31,707 (July 11, 1991)),

[v]erification depends precisely on tying amounts

reported in questionnaire responses to the company’s

internal accounting records and financial statements.

Failure to demonstrate such a relationship results in a

failed verification.

“‘[A] verification is a spot check and is not intended to be an

exhaustive examination of the respondent's business. [Commerce]

has considerable latitude in picking and choosing which items it

will examine in detail.’” PMC Specialties Group, Inc. v. United

and

(3) a final determination in a review under section

1675(a) of this title, if--

(A) verification is timely requested by an

interested party as defined in section 1677(9)(C), (D),

(E), (F), or (G) of this title, and

(B) no verification was made under this subparagraph

during the 2 immediately preceding reviews and

determinations under section 1675(a) of this title of the

same order, finding, or notice, except that this clause

shall not apply if good cause for verification is shown.

Consol. Court No. 98-01-00146 Page 90

States (“PMC”), 20 CIT 1130, 1134 (1996) (quoting Monsanto Co. v.

United States (“Monsanto”), 12 CIT 937, 944, 698 F. Supp. 275, 281

(1988)). In fact, “Commerce enjoys 'wide latitude' in its

verification procedures.” Pohang Iron and Steel Co. v. United

States (“Pohang”), 1999 Ct. Intl. Trade LEXIS 105, *1, Slip. Op.

99-112 (October 20, 1999); see also American Alloys, Inc. v. United

States (“American Alloys”), 30 F.3d 1469, 1475 (Fed. Cir. 1994);

Carlisle Tire and Rubber Co. v. United States (“Carlisle”), 9 CIT

520, 532, 622 F. Supp. 1071, 1082 (1985) (“It is within the

discretion of Commerce to determine how to verify” and “due

deference will be given to the expertise of the agency”). NTN may

not usurp Commerce's role as fact finder and substitute their

analysis of the data for the result reached by Commerce. The Court

“will not supersede Commerce's conclusions so long as it ‘applies

a reasonable standard to verify material submitted and the

verification is supported by such relevant evidence as a reasonable

mind might accept.’” Pohang, 1999 Ct. Intl. Trade LEXIS 105, *55,

Slip. Op. 99-112 (quoting AK Steel Corp. v. United States, 22 CIT

1070, 1091, 34 F. Supp. 2d 756, 772-73 (1998)).

In this case, NTN reported home market billing adjustments in

its questionnaire response submitted to Commerce. Commerce, in

turn, acting within the “wide latitude” of discretion allowed to

Commerce, performed two verifications: (1) “reconcil[ing] the

Consol. Court No. 98-01-00146 Page 91

volume and value NTN reported in its response to [NTN’s] MOF

reports” to arrive at a total billing adjustment which Commerce

refers to as exhibit 3 of NTN’s HM Report; and (2) “verified NTN’s

reported, transaction-specific home market billing adjustments by

examining a variety of sales documentation,” that is, Commerce

“spot checked” a select few of NTN’s reported transaction-specific

billing adjustments. Final Results, 63 Fed. Reg. 2563. After the

verifications, Commerce, acting upon Timken’s identification of a

discrepancy, reviewed NTN’s questionnaire response by taking the

overall total of NTN’s reported home market billing adjustment and

compared it to the total billing adjustment Commerce determined at

verification in exhibit 3 of NTN’s HM Report. See id. Commerce

found that NTN’s total reported home market billing adjustment was

significantly different from Commerce’s verified total billing

adjustment in exhibit 3 of NTN’s HM Report. See id. Since

Commerce determined that its verified total billing adjustment in

exhibit 3 was more traceable to NTN’s MOF reports than NTN’s

reported transfer-specific total billing adjustment, Commerce

concluded that NTN’s other transaction-specific billing adjustments

that Commerce did not select during verification were inaccurate.

See id. In addition, the record did not provide any information as

to which transaction-specific billing adjustments were inaccurate

and NTN never explained the discrepancy nor provided Commerce with

information as to the correction of this discrepancy at issue.

Consol. Court No. 98-01-00146 Page 92

Therefore, since: (1) NTN’s transaction-specific billing

adjustments (that were not selected during Commerce’s verification)

were inaccurate; and (2) Commerce cannot identify which

transaction-specific billing adjustments are inaccurate, this Court

finds that Commerce’s use of facts available is in accordance with

19 U.S.C. § 1677e(a)(2)(D).24

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

reported billing adjustment as reasonable, in accordance with law

and supported by substantial evidence.

XII. Use of Affiliated Supplier Cost Data for Inputs Obtained From

the Affiliated Supplier for All Purposes

A. Statutory Background

Normal value of the subject merchandise is defined, in

24

The Court does not agree with NTN’s assertion that the

substitution of Commerce’s adjustment to NTN’s billing adjustment

“for verified, accurate data presented by [NTN] . . . is contrary

to . . . 19 U.S.C. § 1677e, . . . 19 C.F.R. § 351.308 . . . [and]

the express language of the SAA.” NTN’s Reply at 15. Commerce

verified: (1) a few samples of NTN’s reported transaction-specific

billing adjustments; and (2) a total billing adjustment that

Commerce arrived at while reconciling the volume and value NTN

reported in its response to its MOF, that is, what Commerce refers

to as the total in exhibit 3 of NTN’s HM Report. After

verification, Commerce found that the other transaction-specific

billing adjustments that Commerce did not select during

verification were inaccurate. Moreover, Commerce could not

identify which of these transaction-specific billing adjustments

were inaccurate. Therefore, Commerce properly resorted to facts

available since NTN provided information, that is, NTN’s reported

transaction-specific billing adjustments, that could not be

verified.

Consol. Court No. 98-01-00146 Page 93

pertinent part, as “the price at which the foreign like product is

first sold . . . for consumption in the exporting country . . . .”

19 U.S.C. § 1677b(a)(1)(B)(i). However, whenever Commerce has

“reasonable grounds to believe or suspect” that sales of the

foreign like product under consideration for the determination of

NV have been made at prices which represent less than the COP of

that product, Commerce shall determine whether such sales were made

at less than the COP. See 19 U.S.C. § 1677b(b)(1). If Commerce

determines that there are sales below the COP and certain

conditions are present under § 1677b(b)(1)(A)-(B), it may disregard

such below-cost sales in the determination of NV. See 19 U.S.C. §

1677b(b)(1).

Additionally, the special rules for the calculation of COP or

CV contained in 19 U.S.C. § 1677b(f)(2)-(3) provide that, in a

transaction between affiliated parties, as defined in 19 U.S.C. §

1677(33), Commerce may disregard either the transaction or the

value of a major input.

Section 1677b(f)(2) provides that Commerce may disregard an

affiliated party transaction when “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) (“fair-value” provision). If such

Consol. Court No. 98-01-00146 Page 94

“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.

One of the elements of value to be considered in the

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

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

167

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