Skf USA Inc. v. United States

Slip Op. 00-128

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS

______________________________________

:

SKF USA INC., SKF FRANCE S.A. :

and SARMA, :

:

Plaintiffs and :

Defendant-Intervenors, :

:

v. : Consol. Court No.

: 97-02-00269-S1

UNITED STATES, :

:

Defendant, :

:

and :

:

THE TORRINGTON COMPANY and :

SNR ROULEMENTS, :

:

Defendant-Intervenors :

and Plaintiffs. :

______________________________________:

Plaintiffs and defendant-intervenors, SKF USA Inc., SKF

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

USCIT R. 56.2 for judgment upon the agency record challenging

various aspects of the United States Department of Commerce,

International Trade Administration’s (“Commerce”) final

determination, entitled Antifriction Bearings (Other Than

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

Italy, Japan, Singapore, and the United Kingdom; Final Results

of Antidumping Duty Administrative Reviews (“Final Results”), 62

Fed. Reg. 2081 (Jan. 15, 1997), as amended, Antifriction

Bearings (Other Than Tapered Roller Bearings) and Parts Thereof

From France, Germany, Italy, Japan, and Singapore; Amended Final

Results of Antidumping Duty Administrative Reviews, 62 Fed. Reg.

14,391 (Mar. 26, 1997). Defendant-intervenors and plaintiffs,

The Torrington Company (“Torrington”) and SNR Roulements (“SNR”)

also move pursuant to USCIT R. 56.2 for judgment upon the agency

record challenging certain aspects of Commerce’s Final Results.

Specifically, SKF argues that Commerce erred in:

Consol. Court No. 97-02-00269-S1 Page 2

(1)calculating constructed value (“CV”) profit; (2) calculating

the CV home market credit expense rate based on home market

gross unit price while applying that rate to the per unit cost

of production; (3) including SKF’s zero-value United States

transactions in its margin calculations; (4) failing to match

United States sales to similar home market sales prior to

resorting to CV when all home market sales of identical

merchandise have been disregarded; and (5) committing a computer

error that resulted in the assignment of an incorrect level of

trade (“LOT”) code to certain United States sales.

Torrington contends that Commerce erred in accepting SKF’s

home-market billing adjustments because: (1) they were reported

on a customer-specific rather than on a transaction-specific

basis; and (2) the data is incomplete.

SNR argues that Commerce erred in: (1) calculating CV

profit; and (2) deducting home market depreciation expenses as

United States indirect selling expenses when calculating

constructed export price (“CEP”).

Held: SKF’s USCIT R. 56.2 motion is denied in part and

granted in part. Torrington’s USCIT R. 56.2 motion is denied in

part and granted in part. SNR’s USCIT R. 56.2 motion is denied

in part and granted in part. The case is remanded to Commerce

to: (1) reconsider its decision to calculate SKF’s home market

credit expense based upon price and then apply that rate to

cost; (2) exclude any transactions that were not supported by

consideration from SKF’s United States sales database and to

adjust the dumping margins accordingly; (3) first attempt to

match SKF’s United States sales to similar home market sales

before resorting to CV; (4) assign the correct LOT code for

SKF’s export price sales in the margin calculation program; (5)

determine whether SKF-France’s billing adjustment two is

insignificant within the meaning of 19 U.S.C. § 1677f-1(a)

(1994); and (6) reconsider the treatment of depreciation

expenses incurred in France in calculating CEP for SNR.

Commerce is affirmed in all other respects.

[SKF’s motion is denied in part and granted in part.

Torrington’s motion is denied in part and granted in part.

SNR’s motion is denied in part and granted in part. Case

remanded.]

Dated: October 11, 2000

Consol. Court No. 97-02-00269-S1 Page 3

Steptoe & Johnson LLP (Herbert C. Shelley and Alice A.

Kipel) for SKF.

David W. Ogden, Assistant Attorney General; David M. Cohen,

Director, Commercial Litigation Branch, Civil Division, United

States Department of Justice (Velta A. Melnbrencis, Assistant

Director); of counsel: Mark A. Barnett, Thomas H. Fine, Patrick

V. Gallagher and David R. Mason, Office of the Chief Counsel for

Import Administration, United States Department of Commerce, for

defendant.

Stewart and Stewart (Terence P. Stewart, Wesley K. Caine,

Geert De Prest and Lane S. Hurewitz) for Torrington.

Grunfeld, Desiderio, Lebowitz & Silverman LLP (Bruce M.

Mitchell and Jeffrey S. Grimson) for SNR.

OPINION

TSOUCALAS, Senior Judge: Plaintiffs and defendant-

intervenors, SKF USA Inc., SKF France S.A. and Sarma

(collectively “SKF”) move pursuant to USCIT R. 56.2 for judgment

upon the agency record challenging various aspects of the United

States Department of Commerce, International Trade

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

Antifriction Bearings (Other Than Tapered Roller Bearings) and

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

the United Kingdom; Final Results of Antidumping Duty

Administrative Reviews (“Final Results”), 62 Fed. Reg. 2081

(Jan. 15, 1997), as amended, Antifriction Bearings (Other Than

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

Consol. Court No. 97-02-00269-S1 Page 4

Italy, Japan, and Singapore; Amended Final Results of

Antidumping Duty Administrative Reviews (“Amended Final

Results”), 62 Fed. Reg. 14,391 (Mar. 26, 1997). Defendant-

intervenors and plaintiffs, The Torrington Company

(“Torrington”) and SNR Roulements (“SNR”) also move pursuant to

USCIT R. 56.2 for judgment upon the agency record challenging

certain aspects of Commerce’s Final Results.

Specifically, SKF argues that Commerce erred in:

(1)calculating constructed value (“CV”) profit; (2) calculating

the CV home market credit expense rate based on home market

gross unit price while applying that rate to the per unit cost

of production (“COP”); (3) including SKF’s zero-value United

States transactions in its margin calculations; (4) failing to

match United States sales to similar home market sales prior to

resorting to CV when all home market sales of identical

merchandise have been disregarded; and (5) committing a computer

error that resulted in the assignment of an incorrect level of

trade (“LOT”) code to certain United States sales.

Torrington contends that Commerce erred in accepting SKF’s

home-market billing adjustments because: (1) they were reported

on a customer-specific rather than on a transaction-specific

basis; and (2) the data is incomplete.

Consol. Court No. 97-02-00269-S1 Page 5

SNR argues that Commerce erred in: (1) calculating CV

profit; and (2) deducting home market depreciation expenses as

United States indirect selling expenses when calculating

constructed export price (“CEP”).

BACKGROUND

This case concerns the sixth review of the antidumping duty

order on antifriction bearings (other than tapered roller

bearings) and parts thereof (“AFBs”) imported to the United

States from France during the review period of May 1, 1994

through April 30, 1995.1 On July 8, 1996, Commerce published the

preliminary results of the subject review. See Antifriction

Bearings (Other Than Tapered Roller Bearings) and Parts Thereof

From France, Germany, Italy, Japan, Romania, Singapore, Thailand

and the United Kingdom; Preliminary Results of Antidumping Duty

Administrative Reviews, Termination of Administrative Reviews,

and Partial Termination of Administrative Reviews (“Preliminary

Results”), 61 Fed. Reg. 35,713. Commerce issued the Final

1

Since the administrative review at issue was initiated

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

statute as amended by the Uruguay Round Agreements Act

(“URAA”), Pub. L. No. 103-465, 108 Stat. 4809 (1994) (effective

January 1, 1995). See Torrington Co. v. United States, 68 F.3d

1347, 1352 (Fed. Cir. 1995) (citing URAA § 291(a)(2), (b)

(noting effective date of URAA amendments)).

Consol. Court No. 97-02-00269-S1 Page 6

Results on January 15, 1997, see 62 Fed. Reg. 2081, and the

Amended Final Results on March 26, 1997, see 62 Fed. Reg.

14,391.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 19

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

STANDARD OF REVIEW

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 America v. United States, 24 CIT ___, ___,

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

of review in antidumping proceedings).

DISCUSSION

I. Commerce’s CV Profit Calculation

A. Background

For this POR, Commerce used CV as the basis for normal value

(“NV”) “when there were no usable sales of the foreign like

product in the comparison market.” Preliminary Results, 61 Fed.

Consol. Court No. 97-02-00269-S1 Page 7

Reg. at 35,718. Commerce calculated the profit component of CV

using the statutorily preferred methodology of 19 U.S.C. §

1677b(e)(2)(A) (1994). See Final Results, 62 Fed. Reg. at 2113.

Specifically, in calculating CV, the statutorily preferred

method is to calculate an amount for profit based on “the actual

amounts incurred and realized by the specific exporter or

producer being examined in the investigation or review . . . in

connection with the production and sale of a foreign like

product [made] in the ordinary course of trade, for consumption

in the foreign country.” 19 U.S.C. § 1677b(e)(2)(A).

In applying the preferred methodology for calculating CV

profit, Commerce determined that “the use of aggregate data that

encompasses all foreign like products under consideration for NV

represents a reasonable interpretation of [§ 1677b(e)(2)(A)] and

results in a practical measure of profit that [Commerce] can

apply consistently in each case.” Final Results, 62 Fed. Reg at

2113. Also, in calculating CV profit under § 1677b(e)(2)(A),

Commerce excluded below-cost sales from the calculation which it

disregarded in the determination of NV pursuant to § 1677b(b)(1)

(1994). See id. at 2114.

Consol. Court No. 97-02-00269-S1 Page 8

B. Contentions of the Parties

SKF and SNR contend that Commerce’s use of aggregate data

encompassing all foreign like products under consideration for

NV in calculating CV profit is contrary to § 1677b(e)(2)(A).

See SKF’s Br. Supp. Mot. J. Agency R. (“SKF’s Br.”) at 11-26;

SNR’s Br. Supp. Mot. J. Agency R. (“SNR’s Br.”) at 7-12.

Instead, SKF and SNR claim that Commerce should have relied on

the alternative methodology of § 1677b(e)(2)(B)(i), which

provides a CV profit calculation that is similar to the one

Commerce used, but does not limit the calculation to sales made

in the ordinary course of trade, that is, below-cost sales are

not excluded from the calculation. See SKF’s Br. at 11-26;

SNR’s Br. at 12-13. SKF also asserts that if Commerce’s

exclusion of below-cost sales from the numerator of the CV

profit calculation is lawful, Commerce should nonetheless

include such sales in the denominator of the calculation to

temper bias which is inherent in the agency’s dumping margin

calculations. See SKF’s Br. at 26-30.

Commerce responds that it properly calculated CV profit

pursuant to § 1677b(e)(2)(A) based on aggregate profit data of

all foreign like products under consideration for NV. See

Def.’s Mem. in Partial Opp’n to Pls.’ Mots. J. Agency R.

Consol. Court No. 97-02-00269-S1 Page 9

(“Def.’s Mem.”) at 8-11. Consequently, Commerce maintains that

since it properly calculated CV profit under subparagraph (A)

rather than (B) of § 1677b(e)(2), it correctly excluded below-

cost sales from the CV profit calculation. See id. at 12-19.

Torrington generally agrees with Commerce’s contentions. See

Torrington’s Resp. to Pls.’ Mots. J. Agency R. (“Torrington’s

Resp.”) at 6-15.

C. Analysis

In RHP Bearings Ltd. v. United States, 23 CIT ___, 83 F.

Supp. 2d 1322 (1999), this Court upheld Commerce’s CV profit

methodology of using aggregate data of all foreign like products

under consideration for NV as being consistent with the

antidumping statute. See id. at ___, 83 F. Supp. 2d at 1336.

Since Commerce’s CV profit methodology and SKF and SNR’s

arguments at issue in this case are practically identical to

those presented in RHP Bearings, the Court adheres to its

reasoning in RHP Bearings. The Court, therefore, finds that

Commerce’s CV profit methodology is in accordance with law.

Moreover, since (1) § 1677b(e)(2)(A) requires Commerce to

use the actual amount for profit in connection with the

production and sale of a foreign like product in the ordinary

Consol. Court No. 97-02-00269-S1 Page 10

course of trade, and (2) 19 U.S.C. § 1677(15) (1994) provides

that below-cost sales disregarded under § 1677b(b)(1) are

considered to be outside the ordinary course of trade, the Court

finds that Commerce properly excluded below-cost sales from the

CV profit calculation.

II. CV Home Market Credit Expense Rate

A. Contentions of the Parties

SKF contends that Commerce erred in “calculating a home

market credit expense rate based on price, but applying that

rate to cost.” See SKF’s Br. at 30. Specifically, Commerce

“computed a credit expense rate based on the ratio of home

market credit expense to home market gross unit price” when

“calculating an average home market credit expense to be

deducted from CV.” Id. Commerce applied the home market credit

expense rate to the COP, rather than price, of each model to

derive a per unit amount for home market credit expense. See

id. Commerce then deducted the per unit expense amount in the

CV calculation. See id. SKF maintains that applying a home

market credit expense rate based upon price to cost is contrary

to the “fundamental principle inherent in all antidumping rate

and factor calculations, that the calculation of the rate and

its application must be consistent.” SKF’s Reply Supp. Mot. J.

Consol. Court No. 97-02-00269-S1 Page 11

Agency R. (“SKF’s Reply”) at 21.

Commerce agrees that it erred “by calculating a home market

credit expense based upon price but applying that rate to cost,”

and asks the Court to remand the matter for recalculation of

SKF’s home market credit cost. Def.’s Mem. at 26. Torrington,

however, maintains that Commerce’s methodology is reasonable and

should be affirmed. See Torrington’s Resp. at 26.

In light of the foregoing, the Court remands this issue to

Commerce to reconsider its decision to calculate home market

credit expense based upon price and then apply that rate to

cost.

III. Zero-Value United States Transactions

A. Contentions of the Parties

SKF argues that in light of NSK Ltd. v. United States, 115

F.3d 965, 975 (Fed. Cir. 1997), the Court should remand the

matter to Commerce to exclude SKF’s zero-value transactions from

its margin calculations. See SKF’s Br. at 35-36. SKF maintains

that United States transactions at zero value, such as

prototypes and samples, do not constitute true sales and,

therefore, should be excluded from the margin calculations

Consol. Court No. 97-02-00269-S1 Page 12

pursuant to NSK. See id. at 36. The identical issue was

decided by this Court in SKF USA Inc. v. United States, 23 CIT

___, Slip Op. 99-56, 1999 WL 486537 (June 29, 1999).

Torrington concedes that a remand may be necessary in light

of NSK, but argues that further factual inquiry by Commerce is

necessary to determine whether the zero-price transactions were

truly without consideration. See Torrington’s Resp. at 28.

Torrington argues that only if the transactions are truly

without consideration can they fall within NSK’s exclusion. See

id. at 12.

Commerce concedes that the case should be remanded to it to

exclude the sample transactions for which SKF received no

consideration from SKF’s United States sales database. See

Def.’s Mem. at 26.

Commerce is required to impose antidumping duties upon

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

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

(1994). A zero-priced transaction does not qualify as a “sale”

and, therefore, by definition cannot be included in Commerce’s

[foreign market value] calculation. See NSK, 115 F.3d at 975

(holding “that the term sold . . . requires both a transfer of

ownership to an unrelated party and consideration”). Thus, the

Consol. Court No. 97-02-00269-S1 Page 13

distribution of AFBs for no consideration falls outside the

purview of 19 U.S.C. § 1673. Consequently, the Court remands

to Commerce to exclude any transactions that were not

supported by consideration from SKF’s United States sales

database and to adjust the dumping margins accordingly.

IV. Commerce’s Matching United States Sales to Similar Home

Market Sales Prior to Resorting to CV

SKF maintains that Commerce erred in resorting to CV without

first attempting to match United States sales, that is, export

price (“EP”) or CEP sales, to similar home market sales in

instances where home market sales of identical merchandise have

been disregarded because they were out of the ordinary course of

trade. See SKF’s Br. at 38-39. SKF maintains that a remand is

necessary to bring Commerce’s practice in line with the United

States Court of Appeals for the Federal Circuit’s (“CAFC”)

decision in Cemex, S.A. v. United States, 133 F.3d 897, 904

(Fed. Cir. 1998). Commerce agrees with SKF. See Def.’s Mem. at

27.

The Court agrees with SKF and Commerce. In Cemex, the CAFC

reversed Commerce’s practice of matching a United States sale to

CV when the identical or most similar home market model failed

the cost test. See 133 F.3d at 904. The CAFC stated that

Consol. Court No. 97-02-00269-S1 Page 14

“[t]he plain language of the statute requires Commerce to base

foreign market value [(now NV)] on nonidentical but similar

merchandise [(foreign like product under the amendments to the

Uruguay Round Agreements Act)] . . . rather than [CV] when sales

of identical merchandise have been found to be outside the

ordinary course of trade.” Id. In light of Cemex, this matter

is remanded so that Commerce can first attempt to match United

States sales to similar home market sales before resorting to

CV.

V. Commerce’s Computer Error

A. Contentions of the Parties

SKF argues that Commerce assigned sales to large industrial

users an LOT code “2,” but then incorrectly coded the EP sales

made by SKF France under an LOT code “3" in the Final Results

and Amended Final Results. See SKF’s Br. at 40.

Commerce reviewed SKF’s allegation and agrees that certain

EP sales were erroneously coded as to their LOT. See Def.’s

Mem. at 28. Commerce asks the Court to remand the case so that

Commerce can assign the correct LOT code for SKF’s EP sales in

the margin calculation program. See id. Torrington takes no

position on this issue. See Torrington’s Resp. at 4.

Consol. Court No. 97-02-00269-S1 Page 15

Upon review of the record, the Court agrees with SKF and

Commerce that the EP sales made by SKF France were incorrectly

coded. The Court, therefore, remands this issue to Commerce to

assign the correct LOT code for SKF’s EP sales in the margin

calculation program.

VI. Commerce’s Treatment of SKF’s Home Market Billing

Adjustments as Direct Price Adjustments to NV

A. Background

SKF reported home market billing adjustment two (“BILLAD2")

for sales made by its Austrian affiliate, Steyr Walzlager, in

the home market of France. See SKF’s Resp. Sec. B Questionnaire

(Sept. 26, 1995) (Case No. A-427-801) at B-2. BILLAD2

represents billing adjustments not associated with a specific

transaction. See id. at B-25 to B-26. SKF explained that

BILLAD2 included multiple invoices, multiple products or

multiple product lines and could not be properly tied to a

single transaction. See id. SKF, therefore, used customer-

specific allocations to report these adjustments. In reporting

BILLAD2, SKF took the sum of all the adjustments for a

particular customer number, divided the totals by total gross

sales to that customer number and applied the resulting factor

“to each reported sale made to that customer number by

Consol. Court No. 97-02-00269-S1 Page 16

multiplying the per unit invoice price by the customer-specific

billing adjustment factor for the relevant period.” Id.

Commerce accepted SKF’s BILLAD2 as a direct adjustment to

price after determining that SKF acted to the best of its

ability in reporting the adjustment on a sale-specific basis and

that its reporting methodology was “not unreasonably

distortive.” Final Results, 62 Fed. Reg. at 2090. Commerce

found that SKF’s billing adjustments could not be tied to a

single specific transaction because they “relate to multiple

invoices or multiple invoice lines.” Id. at 2095. Although it

prefers transaction-specific reporting, Commerce realizes that

such reporting is not always feasible, particularly given the

“non-transaction-specific nature of the expense, the volume of

[home market] transactions reported by SKF, and the time

constraints imposed by the statutory deadlines.” Id.

Furthermore, Commerce determined that even though SKF

included out-of-scope merchandise in the allocation of the

adjustment, the methodology was “not unreasonably distortive”

since there existed “no reason to believe that such adjustments

were not granted in proportionate amounts with respect to sales

of out-of-scope and in-scope merchandise.” Id.

Consol. Court No. 97-02-00269-S1 Page 17

B. Contentions of the Parties

Torrington argues that SFK failed to show that all reported

BILLAD2 values directly relate to the relevant sales. See

Torrington’s Br. at 5. Torrington maintains that the CAFC has

clearly defined “direct” adjustments to price as those that

“vary with the quantity sold, or that are related to a

particular sale,” and Commerce cannot treat adjustments that do

not meet this definition as direct. Id. at 11 (citing

Torrington Co. v. United States (“Torrington CAFC”), 82 F.3d

1039, 1050 (Fed. Cir. 1996) (citations omitted)). Torrington

contends that here Commerce “redefined ‘direct’ to achieve what

Torrington CAFC had previously disallowed” by allowing SKF to

report allocated post-sale price adjustments (“PSPAs”) if it

acted to the best of its abilities in light of its record-

keeping systems and the results were not unreasonably

distortive. Id. at 13.

Furthermore, Torrington maintains that the amendments to the

Uruguay Round Agreements Act (“URAA”) did not modify the

distinction between direct and indirect adjustments established

under pre-URAA law such as Torrington CAFC. See id. at 14

(citing 19 U.S.C. § 1677a(d)(1)(B), (D) (1994) and §

1677b(a)(7)(B) (1994)). Torrington is not convinced that the

Consol. Court No. 97-02-00269-S1 Page 18

Statement of Administrative Action2 (“SAA”) accompanying the URAA

contradicts its contentions. See id. at 15 (citing SAA at 823-

24). Additionally, Torrington acknowledges that the antidumping

regulations that came into effect on July 1, 1997 do not apply

to this review but maintains that they support its position.

See id. at 15-16 (citing Antidumping Duties; Countervailing

Duties; Final Rule, 62 Fed. Reg. 27,296, 27,416-17 (May 19,

1997)).

Torrington acknowledges that this Court has already approved

of Commerce’s practice as applied under post-URAA law in Timken

Co. v. United States (“Timken”), 22 CIT ___, 16 F. Supp. 2d 1102

(1998), but asks the Court to reconsider its approval. See

Torrington’s Reply in Supp. Mot. J. Agency R. (“Torrington’s

Reply”) at 6-7. Torrington complains that Timken erroneously

2

The Statement of Administrative Action (“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.”).

Consol. Court No. 97-02-00269-S1 Page 19

held that 19 U.S.C. § 1677m(e) (1994) shifts the burden of proof

away from the party who stands to benefit from the claim made,

here, SKF. See id.

Torrington also contends that even under its new

methodology, Commerce’s determination was not supported by

substantial evidence inasmuch as SKF failed to show that (1) its

reporting method did not result in distortion; and (2) it put

forth its best efforts to report the information on a more

precise basis. See Torrington’s Br. at 21. Torrington

emphasizes that SKF has the burden of showing non-distortion and

best efforts, and having failed to do so, must not benefit from

the adjustment. See id. at 21-22. Torrington, therefore,

requests that this Court reverse Commerce’s determination with

respect to BILLAD2 and remand the case to Commerce with

instructions to disallow SKF’s downward home market billing

adjustments, but allow all upward home market billing

adjustments in calculating NV. See id. at 27.

Commerce responds that Torrington erred in relying on

Torrington CAFC because the case does not stand for the

proposition that direct price adjustments may only be accepted

when they are reported on a transaction-specific basis. See

Def.’s Mem. at 42. Rather, the Torrington CAFC court “merely

Consol. Court No. 97-02-00269-S1 Page 20

overturned a prior Commerce practice . . . of treat[ing] certain

allocated price adjustments as indirect expenses,” id. at 42-43

(citing Torrington CAFC, 82 F.3d at 1047-51), and does “not

address the propriety of the allocation methods” used in

reporting the price adjustments in question, id. at 43 (quoting

Final Results, 62 Fed. Reg. at 2091). Also, contrary to

Torrington’s assertion, Commerce did not consider Torrington

CAFC as addressing proper allocation methodologies; rather,

Commerce, only viewed Torrington CAFC as holding that “Commerce

could not treat as indirect selling expenses ‘improperly’

allocated price adjustments.” Id. at 44. Commerce notes that

pursuant to its new methodology, it does not consider price

adjustments to be any type of selling expense, either direct or

indirect, and, therefore, Torrington’s argument is not only

without support, but also inapposite to Torrington CAFC. See

id. at 45. Moreover, Commerce asserts that this Court in Timken

approved of Commerce’s modified methodology of accepting

respondents’ claims for discounts, rebates and other billing

adjustments as direct price adjustments, where this Court found

the methodology to be consistent with requisites of 19 U.S.C. §

1677m(e). See id. at 45-46 (citing Timken, 16 F. Supp. 2d at

1108).

Consol. Court No. 97-02-00269-S1 Page 21

Commerce also argues that its treatment of SKF’s reported

home market billing adjustments was supported by substantial

record evidence and otherwise in accordance with law because it

is consistent with Timken, that is, Commerce: (1) “used its

acquired knowledge of the respondents’ computer systems and

databases to conclude that information . . . could not be

provided in the preferred form”; and (2) “scrutinized the

respondents’ data before concluding that the data were

reliable”; and (3) found “that the adjustments on scope and non-

scope merchandise did not result in unreasonable distortions.”

Id. at 48.

Additionally, Commerce argues that its findings are

supported by substantial evidence. See id. at 47.

Specifically, Commerce maintains that SKF “had reported the

adjustment on the most specific basis possible and, thus, had

cooperated to the best of its ability.” Id. at 48. Commerce

noted that “given the similarity between the value, physical

characteristics and manner of sales between SKF’s in-scope and

out-of-scope merchandise, Commerce found no evidence which would

lead it to suspect” that the allocation methodology was

unreasonably distortive, that is, SKF did not favor out-of-scope

merchandise over in-scope merchandise. Id. at 48-49.

Consol. Court No. 97-02-00269-S1 Page 22

Commerce maintains that Torrington is mistaken in its

contention that SKF failed to substantiate that it acted to the

best of its ability to report the adjustment on a transaction-

specific basis. See id. at 50-51. Commerce noted that the

adjustment related to an “extremely small volume of merchandise

and to very few customers.” Id. at 49 (citing SKF’s Resp. Sec.

B Questionnaire (Sept. 26, 1995) (Case No. A-427-801)). For

example, in 1994, SKF’s total reported BILLAD2 totaled

approximately $1,133.00, and in 1995, it amounted to $69.00,

while the total sales of subject merchandise for the period of

review was approximately $65,000,000.00. See id. at 49-50

(citing SKF’s Resp. Sec. A Questionnaire (Sept. 26, 1995) (Case

No. A-427-801)). Commerce argues that “[g]iven the

insignificance of this adjustment in light of the enormous size

of SKF’s home market database, Commerce was more than reasonable

in concluding that SKF acted to the best of its ability in

allocating this adjustment” on a customer-specific basis “rather

than seeking to trace specific invoices or groups of invoices.”

Id. at 50.

SKF concurs with Commerce’s position. SKF contends that in

Timken this Court properly stated that “‘[n]either the pre-URAA

nor the newly-amended statutory language imposes standards

Consol. Court No. 97-02-00269-S1 Page 23

establishing the circumstances under which Commerce is to grant

or deny adjustments to NV for PSPAs.’” SKF’s Resp. Torrington’s

Mot. J. Agency R. (“SKF’s Resp.”) at 17. SKF contends that the

holding of Torrington CAFC does not answer the issue in the

instant case and, moreover, that case was decided under pre-URAA

law. See id. at 6. Furthermore, SKF argues that subsequent

changes in the law, that is, § 1677m(e) and the SAA, support its

position and cannot be ignored. See id. at 14-16.

SKF also contends that substantial record evidence supports

Commerce’s conclusions. See id. at 19. SKF maintains that the

record demonstrates that Commerce had extensive knowledge and

experience with BILLAD2 and properly drew on its knowledge in

accepting SKF’s methodology. See id. at 20. With respect to

Torrington’s argument that SKF failed to demonstrate that it

acted to the best of its ability in providing the information in

the preferred form, SKF responds by arguing that Commerce “has

determined that, by their nature, these adjustments cannot be

reported more specifically.” Id. at 20-21.

SKF contends that its inability to report the adjustments

on a more specific basis results from the nature of the

adjustment and, moreover, it would be unreasonable to expect SKF

Consol. Court No. 97-02-00269-S1 Page 24

to alter its dealings with its customers to fit Torrington’s

conception of the antidumping reporting requirements. See id.

at 21. Finally, SKF argues that the same methodology used in

the subject review was used in other reviews where no distortion

was found and, furthermore, there is no evidence of distortion

in the subject review. See id. at 22-23.

C. Analysis

The Court notes that this issue has been decided in

Torrington Co. v. United States (“Torrington CIT”), 24 CIT ___,

100 F. Supp. 2d 1102 (2000), Timken and, most recently, NTN

Bearing, 24 CIT at ___, 104 F. Supp. 2d at 149-57. The Court

adheres to its previous decisions, applying the analysis in NTN

Bearing to the instant case.

The Court disagrees with Torrington that Torrington CAFC

dictates that direct price adjustments may only be accepted when

they are reported on a transaction-specific basis. Rather, as

Commerce correctly stated, the Court notes that Torrington CAFC

does “not address the propriety of allocation methods” but

rather holds that Commerce may not treat direct price

adjustments as if they were indirect selling expenses. Final

Results, 62 Fed. Reg. 2091. The Court further notes that

Consol. Court No. 97-02-00269-S1 Page 25

Torrington CAFC was decided under pre-URAA law, that is, it did

not take into consideration the new statutory guidelines of 19

U.S.C. § 1677m(e). Moreover, the Court acknowledged in Timken

that although (1) “Commerce treated rebates and billing

adjustments as selling expenses in preceding reviews under pre-

URAA law,” and (2) “previously decided that such adjustments are

selling expenses and, therefore, should not be treated as

adjustments to price,” the Court nevertheless determined that

this did not “preclude Commerce’s change in policy or this

Court’s reconsideration of its stance in light of the newly-

amended antidumping statute [(that is, 19 U.S.C. § 1677m(e))].”

16 F. Supp. 2d at 1107.

Indeed, the Court approved in Timken Commerce’s modified

methodology of accepting claims for discounts, rebates and other

billing adjustments as direct price adjustments to NV, see id.

at 1107-08, and reaffirmed its decision in Torrington CIT.

Specifically, in Timken, the Court reasoned that “[n]either the

pre-URAA nor the newly-amended statutory language imposes

standards establishing the circumstances under which Commerce is

to grant or deny adjustments to NV for PSPAs.” 16 F. Supp. 2d

at 1108 (citing Torrington CAFC, 82 F.3d at 1048). The Court,

however, noted that 19 U.S.C. § 1677m(e) “specifically directs

Consol. Court No. 97-02-00269-S1 Page 26

that Commerce shall not decline to consider an interested

party’s submitted information if that information is necessary

to the determination but does not meet all of Commerce’s

established requirements, if the [statute’s] criteria are met.”

Id. The Court, therefore, approved of Commerce’s change in

methodology, “as it substitutes a rigid rule with a more

reasonable method that nonetheless ensures that a respondent’s

information is reliable and verifiable. This is especially true

in light of the more lenient statutory instructions of

subsection 1677m(e).” Id.

Accordingly, the Court in Timken upheld Commerce’s decision

to accept Koyo's billing adjustments and rebates, “even though

they were not reported on a transaction-specific basis and even

though the allocations Koyo used included rebates on non-scope

merchandise.” See id. at 1106. Similarly, in Torrington CIT,

the Court followed the rationale of Timken and upheld Commerce’s

determination to accept respondents’ rebates even though they

were reported on a customer-specific rather than transaction-

specific basis and even though the allocation methodology used

included rebates on non-scope merchandise. See 24 CIT at __,

100 F. Supp. 2d at 1107-08.

Consol. Court No. 97-02-00269-S1 Page 27

The Court finds that Commerce’s decision to accept SKF’s

reported home market billing adjustments was supported by

substantial evidence and was fully in accordance with the post-

URAA statutory language and the SAA’s statements. The record

indicates that Commerce properly used its acquired knowledge of

SKF’s billing practices to conclude that it could not provide

the information in the preferred form and, moreover, properly

scrutinized SKF’s reported billing adjustments before concluding

that the adjustments were reliable. See Final Results, 62 Fed.

Reg. at 2095. Commerce also properly accepted SKF’s allocation

methodology even though the adjustments related to multiple

invoices, products or product lines since there was no evidence

“that such adjustments were not granted in proportionate amounts

with respect to sales of out-of-scope and in-scope merchandise,”

indicating that the allocations were not unreasonably

distortive. Id.

Moreover, the record and the Final Results demonstrate that

the requirements of 19 U.S.C. § 1677m(e), as noted earlier, were

satisfied by the respondents. First, SKF’s reported adjustments

were submitted in a timely fashion. See § 1677m(e)(1). Second,

the information SKF submitted was verifiable, as shown in other

reviews that utilized the identical treatment of BILLAD2. See

Consol. Court No. 97-02-00269-S1 Page 28

§ 1677m(e)(2). Third, SKF’s information was not so incomplete

that it could not serve as a basis for reaching a determination.

See § 1677m(e)(3). Fourth, SKF demonstrated that it acted to

the best of its abilities in providing the information and

meeting Commerce’s new reporting requirements. See §

1677m(e)(4). Finally, the Court finds that there was no

indication that the information was incapable of being used

without undue difficulties. See § 1677m(e)(5).

Commerce’s determination with respect to SKF was also

consistent with the SAA. The Court agrees with Commerce’s

finding in the Final Results that given the non-transaction-

specific nature of BILLAD2, the extremely large volume of

transactions and the time constraints imposed by the statute,

SKF’s reporting and allocation methodologies were reasonable.

This is consistent with the SAA directive under § 1677m(e),

which provides that Commerce “may take into account the

circumstances of the party, including (but not limited to) the

party’s size, its accounting systems, and computer

capabilities.” SAA at 865. Thus, the Court finds that Commerce

properly considered the ability of SKF to report BILLAD2 on a

more specific basis.

Accordingly, the Court concludes that Commerce’s acceptance

Consol. Court No. 97-02-00269-S1 Page 29

of SKF’s reported billing adjustments as direct adjustments to

NV is supported by substantial evidence and fully in accordance

with law.

VII. Commerce’s Treatment of Home Market Billing Adjustments

With Respect to Sales Made by SKF-France

A. Background and contentions of the parties

SKF designated as billing adjustment one those billing

adjustments “greater than five percent of the gross unit price

of the sale on which they were granted” or those “greater than

[1,000 French Francs (“FF”)] (about $167.00), whichever was

less. Def.’s Mem. at 51 (citing SKF’s Resp. Sec. B

Questionnaire (Sept. 26, 1995) (Case No. A-427-801) at B-23, B-

24). These adjustments were reported on a transaction-specific

basis and, therefore, are not challenged by Torrington.

SKF designated as billing adjustment two those billing

adjustments that were “less than FF 1,000 and were less than

five percent of the value of the sale on which they were

granted.” Id. Because SKF found these adjustments comprised a

very small part of its overall home market sales of subject

merchandise, SKF simply reported them as zero. See SKF’s

Supplemental Resp. (Feb. 16, 1996) (Case No. A-427-801) at 36-

37. SKF further maintained that its failure to report the

Consol. Court No. 97-02-00269-S1 Page 30

actual amounts of the billing adjustment was detrimental to its

own interest, as the total value of the adjustments would have

increased NV and its dumping margin as well. See id.

In the Final Results, Commerce accepted SKF’s practice of

disregarding insignificant billing adjustment values. See 62

Fed. Reg. at 2095. Specifically, Commerce determined that

“[t]here is nothing on the record to suggest that SKF’s

information is inaccurate” and, furthermore, “[t]his policy of

disregarding insignificant adjustments is consistent with

[Commerce’s] policy in prior reviews.” Id.

Commerce notes that although it had previously disapproved

of SKF taking upon itself the determination of whether billing

adjustments are insignificant, it permitted the practice in the

fourth review “because independent information gathered at

verification confirmed that the overall adjustments lowered

[foreign market value] and their omission was against SKF-

France’s interests.” See Def.’s Mem. at 52 (citing Antifriction

Bearings (Other Than Tapered Roller Bearings) and Parts Thereof

From France, et al; Final Results of Antidumping Duty

Administrative Reviews, Partial Termination of Administrative

Reviews, and Revocation in Part of Antidumping Duty Orders

(“fourth review”), 60 Fed. Reg. 10,900 (Feb. 28, 1995)). In its

Consol. Court No. 97-02-00269-S1 Page 31

memorandum to the Court, however, Commerce argued contrary to

its position in the Final Results, maintaining that the issue

should be remanded for re-evaluation of its treatment of SKF’s

billing adjustment two. See id. at 51. Specifically, Commerce

maintains that in the instant review, “SKF did not provide the

necessary information to support its calculation of the relative

size of the adjustments at issue and to permit Commerce to

determine whether the insignificant adjustment provision, 19

C.F.R. § 353.59 (a), which authorizes Commerce to disregard

insignificant adjustments, was applicable.” Id. at 53.

Commerce asks the issue to be remanded for SKF to support its

calculation of the relative size of billing adjustment two so

that Commerce may determine whether it is insignificant within

the meaning of the applicable regulation, 19 C.F.R. § 353.59 (a)

or for SKF to support its contention that the effect of billing

adjustment two was a reduction of NV. See id.

Torrington concurs with Commerce’s position. Torrington

maintains SKF failed to substantiate its claim that the value of

billing adjustment two was insignificant. See Torrington’s Br.

at 20. Additionally, Torrington maintains that the total net

value of the adjustment is irrelevant as billing adjustments are

invoice-specific and, therefore, can either increase or decrease

Consol. Court No. 97-02-00269-S1 Page 32

the reported price of any home market price and affect nominal

value. See id. Torrington claims “Commerce erred by relying on

SKF’s representations rather than basing its determination on

record evidence” and, therefore, Commerce’s determination was

not supported by substantial evidence. Id. at 25.

SKF maintains that Commerce’s decision in the Final Results

is supported by substantial evidence. SKF notes that the

identical methodology employed in the instant review was

accepted in the fourth review where Commerce had specifically

stated that it did not merely allow SKF to determine what

constituted an insignificant adjustment, but had verified the

adjustment. See SKF’s Resp. at 34-35. SKF argues that in the

instant review, it did not merely assert that certain billing

adjustments were insignificant, but provided Commerce with

specific calculations. See SKF’s Resp. at 35 (citing SKF’s

Supplemental Resp. (Feb. 16, 1996) (Case No. A-427-801) at 36-

37).

C. Analysis

In determining the EP (or CEP) under 19 U.S.C. § 1677a or

NV under § 1677b, Commerce has the discretion to “decline to

take into account adjustments which are insignificant in

Consol. Court No. 97-02-00269-S1 Page 33

relation to the price or value of the merchandise.” 19 U.S.C.

§ 1677f-1(a)(2) (1994). Thus, the statute plainly provides not

only that Commerce is the appropriate authority to determine

whether an adjustment is insignificant, but also that Commerce

has the discretion to decide whether to disregard an

insignificant adjustment.

SKF maintains Commerce properly determined that its

calculation of the billing adjustment was supported by

substantial evidence by accepting SKF’s conclusion that such

values were insignificant or would have resulted in a net

reduction of NV. The Court, however, disagrees with SKF that

Commerce’s decision is supported by substantial evidence since

the only data that SKF had provided to Commerce in the

administrative proceedings is the following:

Specifically, in this review, . . . [SKF France’s

billing adjustment 2] represented only [ ] in 1994

and [ ] in January-April 1995 of the total gross

sales value for SKF France. Furthermore, not reporting

these billing adjustments was detrimental to SKF

France, as the total net value of billing adjustments

would have decreased foreign market value. Under its

regulations, [Commerce] may disregard as insignificant

an adjustment which would have an ad valorem effect of

less than 0.33%. 19 C.F.R. § 353.59(a). Thus, SKF

France’s unreported billing adjustments may properly

be considered insignificant, and in fact de minimis

under [Commerce’s] regulations.

SKF’s Supplemental Resp. (Feb. 16, 1996) (Case No. A-427-801) at

Consol. Court No. 97-02-00269-S1 Page 34

36. Thus, SKF merely concluded that billing adjustment two

comprised a certain percentage of total gross sales value, but

did not provide the underlying information to Commerce for it to

determine whether the adjustment was indeed insignificant.

Alternatively, SKF provided no information to support its

contention that the total effect of the billing adjustment was

a reduction of NV. SKF’s failure to provide this information,

therefore, renders Commerce’s determination in the Final Results

unsupported by substantial evidence.

SKF offers to this Court a worksheet entitled “SKF France

Billing Adjustments Not Processed Analysis” that it claims to

have prepared concurrently with its supplemental response to

Commerce’s questionnaire and maintains this information supports

its conclusions. SKF’s Reply at 28, Ex. 9. SKF concedes,

however, that this information was never submitted to Commerce.

See id. Commerce did not have this information before it when

it made its determination and, therefore, could not have relied

on it when it concluded that SKF’s calculations were proper.

This Court cannot uphold Commerce’s January 15th, 1997

determination on the basis of information upon which Commerce

did not rely, since it is well-settled case law that “[t]he

scope of the record for purposes of judicial review is based

Consol. Court No. 97-02-00269-S1 Page 35

upon information which was ‘before the relevant decision-maker’

and was presented and considered ‘at the time the decision was

rendered.’” Beker Indus. Corp. v. United States, 7 CIT 313,

315, 1984 WL 3727 (1984) (citing S. Rep. No. 96-249, 96th Cong.,

1st Sess. 247-48 (1979), reprinted in 1979 U.S.C.C.A.N. 381, 633-

34); Daido Corp. v. United States, 18 CIT 1053, 1059-60, 869 F.

Supp. 967, 973 (1994); Neuweg Fertigung GmbH v. United States,

16 CIT 724, 726-27, 797 F. Supp. 1020, 1022 (1992). Commerce

did not have the opportunity to evaluate the information to

determine whether it provided adequate support for SKF’s

calculations, and the Court will not usurp Commerce’s function

in this regard.

Accordingly, the Court remands this issue to Commerce to

determine whether billing adjustment two is insignificant within

the meaning of 19 U.S.C. § 1677f-1(a). Commerce is directed to

consider whether the use of facts available pursuant to 19

U.S.C. § 1677e (1994) is warranted and must also consider its

responsibilities under § 1677m(e).

VIII. Deducting Home Market Depreciation Expenses as United

States Indirect Selling Expenses When Calculating CEP

A. Contentions of the Parties

SNR contends that during verification, Commerce erred in

Consol. Court No. 97-02-00269-S1 Page 36

deducting from CEP home market depreciation expenses as United

States indirect selling expenses after determining that “‘SNR

had allocated depreciation expenses to all sales but, in fact,

[SNR] did not include them in the [indirect selling expense

variable].’” SNR’s Br. at 15 (quoting Final Results, 62 Fed.

Reg. at 2105). SNR claims that there is “no basis for deducting

the depreciation expense for office equipment” associated with

the commercial department in France responsible for sales to

subsidiaries since those expenses are not “‘associated with

economic activities in the United States.’” See SNR’s Br. at

15-16.

SNR maintains that “the record shows that the depreciation

expense attributable to subsidiary sales would have been an

[indirect] export selling expense” and should have been

disregarded as were the other indirect selling expenses. Id. at

17. SNR admits that the portion of the depreciation expenses

allocated to its United States sales to its United States

affiliate should have been reported in the variable designating

indirect selling expenses primarily composed of “personnel costs

and commission paid on sales made to all SNR subsidiaries.” See

SNR’s Br. at 13-15 (quoting SNR’s Resp. Sec. C Questionnaire

(Sept. 26, 1995) (Case No. A-427-801) at 34-35).

Consol. Court No. 97-02-00269-S1 Page 37

Torrington maintains that Commerce reasonably added an

amount for depreciation to the United States indirect selling

expenses reported by SNR. See Torrington’s Resp. at 15.

Torrington argues that in the Final Results, Commerce properly

deducted depreciation expenses incurred in France from CEP

pursuant to 19 U.S.C. § 1677a(d)(1). See id. at 16. Torrington

claims that under the statutory provision and proposed

regulation, Commerce is required to deduct all expenses

associated with economic activities in the United States, no

matter where the expense was incurred. See id. Thus,

Torrington argues that although the expense was incurred in

France, it was properly deducted from CEP since some portion was

allocable to SNR’s United States sales. See id. at 17.

Commerce contends that the record is unclear on this issue

and, therefore, “the case should be remanded to Commerce for

reconsideration of the treatment of depreciation expenses

incurred in France in calculating CEP for SNR.” Def.’s Mem. at

54. In its reply to Commerce, SNR agreed that the Court should

“remand the issue to allow Commerce to determine if it was

appropriate to deduct from CEP depreciation expenses related to

activities in the home market.” SNR’s Reply Br. Supp. Mot. J.

Agency R. at 10.

Consol. Court No. 97-02-00269-S1 Page 38

B. Analysis

In the Final Results, Commerce simply stated the following:

We agree with Torrington that SNR’s depreciation

expenses allocated to its [United States] sales should

be part of [indirect selling expenses] we deduct from

CEP. We verified SNR’s response and, based on our

findings at verification, we have made this deduction

for our final results.

62 Fed. Reg. at 2105. Commerce did not state the basis for its

conclusion that it was appropriate to deduct from CEP

depreciation expenses related to activities in France. The

Court cannot uphold Commerce’s determination when the basis for

the decision is entirely unclear.3 The Court, therefore,

remands this matter to Commerce to reconsider the treatment of

depreciation expenses incurred in France in calculating CEP for

3

Indeed, the Supreme Court has opined:

If the administrative action is to be tested by the

basis upon which it purports to rest, that basis must

be set forth with such clarity as to be

understandable. It will not do for a court to be

compelled to guess at the theory underlying the

agency’s action; nor can a court be expected to chisel

that which must be precise from what the agency has

left vague and indecisive. In other words, ‘We must

know what a decision means before the duty becomes

ours to say whether it is right or wrong.’

SEC v. Chenery Corp., 332 U.S. 194, 196-97 (1947) (quoting

United States v. Chicago, M., St. P. & P.R. Co., 294 U.S. 499,

511 (1935)).

SNR.

CONCLUSION

The Court remands this case to Commerce to: (1) reconsider

its decision to calculate SKF’s home market credit expense based

upon price and then apply that rate to cost; (2) exclude any

transactions that were not supported by consideration from SKF’s

United States sales database and to adjust the dumping margins

accordingly; (3) first attempt to match SKF’s United States

sales to similar home market sales before resorting to CV; (4)

assign the correct LOT code for SKF’s EP sales in the margin

calculation program; (5) determine whether SKF-France’s billing

adjustment two is insignificant within the meaning of 19 U.S.C.

§ 1677f-1(a); and (6) reconsider the treatment of depreciation

expenses incurred in France in calculating CEP for SNR.

Commerce is affirmed in all other respects.

___________________________

NICHOLAS TSOUCALAS

SENIOR JUDGE

Dated: October 11, 2000

New York, New York