NTN Bearing Corp. v. United States

Slip Op. 00-64

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS

__________________________________________

:

NTN BEARING CORPORATION OF :

AMERICA, NTN CORPORATION, :

AMERICAN NTN BEARING :

MANUFACTURING CORPORATION, NTN :

DRIVESHAFT, INC. and NTN-BOWER :

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. 97-10-01801

:

UNITED STATES, :

:

Defendant, :

:

and :

:

THE TORRINGTON COMPANY, :

:

Defendant-Intervenor and Plaintiff. :

__________________________________________:

Plaintiffs and defendant-intervenors, NTN Bearing Corporation of America, NTN

Corporation, American NTN Bearing Manufacturing Corporation, NTN Driveshaft, Inc. and

NTN-Bower 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 Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts

Thereof From France, Germany, Italy, Japan, Romania, Singapore, Sweden and the United

Kingdom; Final Results of Antidumping Duty Administrative Reviews (“Final Results”), 62 Fed.

Reg. 54,043 (Oct. 17, 1997), as amended, Antifriction Bearings (Other Than Tapered Roller

Bearings) and Parts Thereof From France, Germany, Italy, Japan, Romania, Singapore[,]

Consol. Court No. 97-10-01801 Page 2

Sweden and the United Kingdom; Amended Final Results of Antidumping Duty Administrative

Reviews, 62 Fed. Reg. 61,963 (Nov. 20, 1997). Defendant-intervenor and plaintiff, The

Torrington Company (“Torrington”), also moves pursuant to USCIT R. 56.2 for judgment upon

the agency record challenging certain determinations of Commerce’s Final Results.

Specifically, NTN, NSK and Koyo argue that Commerce erred in conducting a duty

absorption inquiry under 19 U.S.C. § 1675(a)(4) (1994) for the seventh administrative review of

a 1989 antidumping duty order.

NTN further contends that Commerce erred in: (1) recalculating NTN’s United States

credit expenses on a transaction-specific rather than on a customer-specific basis for constructed

export price (“CEP”) sales; (2) denying a price-based, level of trade (“LOT”) adjustment to

normal value (“NV”) under 19 U.S.C. § 1677b(a)(7)(A) for its CEP sales; (3) refusing to accept

NTN’s reported home market and United States indirect selling expenses based on different trade

levels; (4) refusing to calculate CEP profit on a LOT-specific basis; (5) denying a downward

adjustment to NTN’s reported United States indirect selling expenses for imputed interests

incurred in financing cash deposits for antidumping duties; (6) refusing to exclude NTN’s

reported zero-price sample sales from its United States sales database; (7) failing to adjust NTN’s

cost of production (“COP”) and constructed value (“CV”) data on a model-specific basis; (8)

including NTN’s sales with abnormally high profits and certain home market sample sales from

the NV calculation; and (9) excluding certain NTN home market sales to affiliated parties in the

NV calculation. NTN, however, claims that Commerce correctly accepted its reported home

market discounts as direct price adjustments to NV.

NSK also asserts that Commerce erred in: (1) deducting NSK’s United States repacking

expenses as direct selling expenses pursuant to 19 U.S.C. § 1677a(d)(1)(B); (2) calculating profit

for CV under 19 U.S.C. §§ 1677b(e)(2)(A), 1677(16); and (3) denying a partial, price-based LOT

adjustment to NV under 19 U.S.C. § 1677b(a)(7)(A) for CEP sales when matched to its after-

market sales in its home market.

Koyo additionally claims that Commerce properly accepted Koyo’s reported home market

billing adjustments as direct price adjustments to NV.

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

authorizing it to conduct a duty absorption inquiry for the subject review; (2) treated NSK’s

United States repacking expenses as direct selling expenses under 19 U.S.C. § 1677a(d)(1)(B);

(3) calculated CV profit; (4) recalculated NTN’s United States credit expenses on a transaction-

specific basis for CEP sales; (5) denied a LOT adjustment for NTN’s CEP sales; (6) interpreted

19 U.S.C. § 1677b(a)(7) as not providing for a partial LOT adjustment for NSK’s CEP sales; (7)

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

LOT, however, since it did not state in the Final Results its reasons for recalculating NTN’s

home market indirect selling expenses, requests that the issue be remanded so it may articulate its

reasons for such recalculation; (8) determined NTN’s CEP profit without regard to LOT; (9)

Consol. Court No. 97-10-01801 Page 3

denied an adjustment to NTN’s reported indirect selling expenses for imputed interests allegedly

incurred in financing antidumping duty cash deposits; (10) included NTN’s sample sales in its

United States sales database; (11) adjusted NTN’s COP and CV data; (12) included NTN’s sales

with abnormally high profits and home market sample sales in the NV calculation; (13)

disregarded NTN’s affiliated party sales from the NV calculation; and (14) treated Koyo’s

reported home market billing adjustments and NTN’s reported home market discounts as direct

price adjustments to NV.

Although Torrington generally agrees with Commerce, it maintains that Commerce erred

in accepting Koyo’s home market billing adjustments and NTN’s alleged home market discounts

as direct price adjustments in calculating NV.

Held: NTN’s, NSK’s and Koyo’s USCIT R. 56.2 motions are denied in part and granted

in part. Torrington’s USCIT R. 56.2 motion is denied. The case is remanded to Commerce to:

(1) annul all findings and conclusions made pursuant to the duty absorption inquiry conducted for

this review; (2) make adjustments pursuant to 19 U.S.C. § 1677a(c) to § 1677a(a)’s starting price

for determining EP; (3) make adjustments pursuant to § 1677a(c) and (d) to § 1677a(b)’s starting

price for determining CEP; (4) articulate how the record supports its decision in the Final Results

to recalculate NTN’s home market indirect selling expenses without regard to LOT; (5) clarify

how it complied with 19 U.S.C. §§ 1677e, 1677m by using facts available and applying an

adverse inference with respect to NTN’s alleged zero-price sample sales and, if Commerce

determines that it conformed with the statutory framework, to include NTN’s sample sales in its

United States sales database or, if Commerce determines it did not adhere to all of the statutory

prerequisite conditions, to give NTN the opportunity to remedy or explain any deficiency

regarding its sample sales; and (6) clarify whether NTN was provided with notice and

opportunity to respond pursuant to § 1677m(d) with regard to its COP and CV data.

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

Torrington’s USCIT R. 56.2 motion is denied. Case remanded.]

Dated: June 5, 2000

Barnes, Richardson & Colburn (Donald J. Unger, Kazumune V. Kano, David G. Forgue

and Christine H.T. Yang) for NTN.

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

Lawson) for NSK.

Consol. Court No. 97-10-01801 Page 4

Powell, Goldstein, Frazer & Murphy LLP (Peter O. Suchman, Neil R. Ellis, Elizabeth C.

Hafner, Ronald E. Minsk and Leigh Fraiser) for Koyo.

David W. Ogden, Acting Assistant Attorney General; David M. Cohen, Director, Velta A.

Melnbrencis, Assistant Director Commercial Litigation Branch, Civil Division, United States

Department of Justice; of counsel: Stacy J. Ettinger, Thomas H. Fine, Patrick V. Gallagher,

Myles S. Getlan, Rina Goldenberg 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, James R. Cannon, Jr., Geert De Prest and Lane

S. Hurewitz) for Torrington.

OPINION

TSOUCALAS, Senior Judge: Plaintiffs and defendant-intervenors, NTN Bearing

Corporation of America, NTN Corporation, American NTN Bearing Manufacturing Corporation,

NTN Driveshaft, Inc. and NTN-Bower 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 Antifriction Bearings (Other Than

Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, Romania,

Singapore, Sweden and the United Kingdom; Final Results of Antidumping Duty Administrative

Reviews (“Final Results”), 62 Fed. Reg. 54,043 (Oct. 17, 1997), as amended, Antifriction

Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany,

Italy, Japan, Romania, Singapore[,] Sweden and the United Kingdom; Amended Final Results of

Antidumping Duty Administrative Reviews (“Amended Final Results”), 62 Fed. Reg. 61,963

(Nov. 20, 1997). Defendant-intervenor and plaintiff, The Torrington Company (“Torrington”),

Consol. Court No. 97-10-01801 Page 5

also moves pursuant to USCIT R. 56.2 for judgment upon the agency record challenging certain

determinations of Commerce’s Final Results.

NTN, NSK and Koyo argue that Commerce erred in conducting a duty absorption inquiry

under 19 U.S.C. § 1675(a)(4) (1994) for this seventh administrative review of a 1989

antidumping duty order.

NTN also contends that Commerce erred in: (1) recalculating NTN’s United States credit

expenses on a transaction-specific rather than on a customer-specific basis for constructed export

price (“CEP”) sales; (2) denying a price-based, level of trade (“LOT” or “LOTs” for “levels of

trade”) adjustment to normal value (“NV”) under 19 U.S.C. § 1677b(a)(7)(A) for its CEP sales;

(3) refusing to accept NTN’s reported home market and United States indirect selling expenses

based on different trade levels; (4) refusing to calculate CEP profit on a LOT-specific basis; (5)

denying a downward adjustment to NTN’s reported United States indirect selling expenses for

imputed interests incurred in financing cash deposits for antidumping duties; (6) refusing to

exclude NTN’s reported zero-price sample sales from its United States sales database; (7) failing

to adjust NTN’s cost of production (“COP”) and constructed value (“CV”) data on a model-

specific basis; (8) including NTN’s sales with abnormally high profits and certain home market

sample sales from the NV calculation; and (9) excluding certain NTN home market sales to

affiliated parties in the NV calculation. NTN, however, claims that Commerce correctly

accepted its reported home market discounts as direct price adjustments to NV.

Further, NSK asserts that Commerce erred in: (1) deducting NSK’s United States

Consol. Court No. 97-10-01801 Page 6

repacking expenses as direct selling expenses pursuant to 19 U.S.C. § 1677a(d)(1)(B); (2)

calculating profit for CV under 19 U.S.C. §§ 1677b(e)(2)(A), 1677(16); and (3) denying a partial,

price-based LOT adjustment to NV under § 1677b(a)(7)(A) for CEP sales when matched to its

after-market sales in its home market.

Koyo also claims that Commerce properly accepted Koyo’s reported home market billing

adjustments as direct price adjustments to NV.

Commerce responds that it properly: (1) construed § 1675(a)(4) and (c) as authorizing it

to conduct a duty absorption inquiry for the subject review; (2) treated NSK’s United States

repacking expenses as direct selling expenses under § 1677a(d)(1)(B); (3) calculated CV profit;

(4) recalculated NTN’s United States credit expenses on a transaction-specific basis for CEP

sales; (5) denied a LOT adjustment for NTN’s CEP sales; (6) interpreted § 1677b(a)(7) as not

providing a partial LOT adjustment for NSK’s CEP sales; (7) recalculated NTN’s home market

and United States indirect selling expenses without regard to LOT, however, since it did not state

in the Final Results its reasons for recalculating NTN’s home market indirect selling expenses,

requests that the issue be remanded so it may articulate its reasons for such recalculation; (8)

determined NTN’s CEP profit without regard to LOT; (9) denied an adjustment to NTN’s

reported indirect selling expenses for imputed interests allegedly incurred in financing

antidumping duty cash deposits; (10) included NTN’s sample sales in its United States sales

database; (11) adjusted NTN’s COP and CV data; (12) included NTN’s sales with abnormally

high profits and home market sample sales in the NV calculation; (13) disregarded NTN’s

affiliated party sales from the NV calculation; and (14) treated Koyo’s reported home market

Consol. Court No. 97-10-01801 Page 7

billing adjustments and NTN’s reported home market discounts as direct price adjustments to

NV.

Although Torrington generally agrees with Commerce, it maintains that Commerce erred

in accepting Koyo’s home market billing adjustments and NTN’s alleged home market discounts

as direct price adjustments in calculating NV.

The Court will address each of these arguments in turn.

BACKGROUND

On May 15, 1989, Commerce published antidumping duty orders on antifriction bearings

(other than tapered roller bearings) and parts thereof (“AFBs”) imported from several countries,

including Japan. See Antidumping Duty Orders: Ball Bearings, Cylindrical Roller Bearings, and

Spherical Plain Bearings, and Parts Thereof From Japan, 54 Fed. Reg. 20,904. This case

concerns the seventh administrative review of the antidumping duty order on AFBs from Japan

for the period of review (“POR”) covering May 1, 1995 through April 30, 1996. In accordance

with 19 C.F.R. § 353.22(c) (1995), Commerce initiated the seventh review on June 20, 1996.1

See Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From

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

Kingdom; Initiation of Antidumping Duty Administrative Reviews and Notice of Request for

1

Since the administrative review at issue was initiated after December 31, 1994, the

applicable law in this case is the antidumping statute as amended by the Uruguay Round

Agreements Act (“URAA”), Pub. L. No. 103-465, 108 Stat. 4809 (1994) (effective Jan. 1, 1995).

Consol. Court No. 97-10-01801 Page 8

Revocation of an Order, 61 Fed. Reg. 31,506 (June 20, 1996). On June 10, 1997, Commerce

published the preliminary results of the seventh review. See Antifriction Bearings (Other Than

Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, Romania,

Singapore, Sweden and the United Kingdom; Preliminary Results of Antidumping Duty

Administrative Reviews and Partial Termination of Administrative Reviews (“Preliminary

Results”), 62 Fed. Reg. 31,566. Commerce published the Final Results on October 17, 1997, see

62 Fed. Reg. at 54,043, and the Amended Final Results on November 20, 1997, see 62 Fed. Reg.

at 61,963. Oral argument was held on March 8, 1999.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 19 U.S.C. § 1516a(a) (1994) and

28 U.S.C. § 1581(c) (1994).

STANDARD OF REVIEW

In reviewing a challenge to Commerce’s final determination in an antidumping

administrative review, the Court will uphold Commerce’s determination unless it is

“unsupported by substantial evidence on the record, or otherwise not in accordance with law.”

19 U.S.C. § 1516a(b)(1)(B)(i) (1994).

I. Substantial Evidence Test

“‘[S]ubstantial evidence is more than a mere scintilla. It means such relevant evidence as

a reasonable mind might accept as adequate to support a conclusion.’” Universal Camera Corp.

Consol. Court No. 97-10-01801 Page 9

v. NLRB, 340 U.S. 474, 477 (1951) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197,

229 (1938)). In reviewing the substantiality of evidence, the Court must take into account the

entire record, including “whatever in the record fairly detracts from its weight.” Universal

Camera, 340 U.S. at 488.

II. Chevron Two-Step Analysis

To determine whether Commerce’s interpretation and application of the antidumping

statute is “in accordance with law,” the Court must undertake the two-step analysis prescribed by

Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Under the

first step, the Court reviews Commerce’s construction of a statutory provision to determine

whether “Congress has directly spoken to the precise question at issue.” Id. at 842. “To

ascertain whether Congress had an intention on the precise question at issue, [the Court]

employ[s] the ‘traditional tools of statutory construction.’” Timex V.I., Inc. v. United States, 157

F.3d 879, 882 (Fed. Cir. 1998) (citing Chevron, 467 U.S. at 843 n.9). “The first and foremost

‘tool’ to be used is the statute’s text, giving it its plain meaning. Because a statute’s text is

Congress’s final expression of its intent, if the text answers the question, that is the end of the

matter.” Id. (citations omitted). “Beyond the statute’s text, the tools of statutory construction

“include the statute’s structure, canons of statutory construction, and legislative history.” Id.

(citations omitted); but see Flora Trade Council v. United States, 23 CIT __, __, 41 F. Supp. 2d

319, 323 n.6 (1999) (noting that “[n]ot all rules of statutory construction rise to the level of a

canon”) (citation omitted).

Consol. Court No. 97-10-01801 Page 10

If, after employing the first prong of Chevron, the Court determines that the statute is

silent or ambiguous with respect to the specific issue, the question for the Court becomes

whether Commerce’s construction of the statute is permissible. Chevron, 467 U.S. at 843.

Essentially, this is an inquiry into the reasonableness of Commerce’s interpretation. See Fujitsu

Gen. Ltd. v. United States, 88 F.3d 1034, 1038 (Fed. Cir. 1996). Provided that Commerce has

acted reasonably, the Court may not substitute its judgment for the agency’s. See IPSCO, Inc. v.

United States, 965 F.2d 1056, 1061 (Fed. Cir. 1992); see also Koyo Seiko Co. v. United States,

36 F.3d 1565, 1570 (Fed. Cir. 1994) (noting that “a court must defer to an agency’s reasonable

interpretation of a statute even if the court might have preferred another”). “In determining

whether Commerce’s interpretation is reasonable, the Court considers, among other factors, the

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

the antidumping scheme as a whole.” Mitsubishi Heavy Indus., Ltd. v. United States, 22 CIT __,

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

Consol. Court No. 97-10-01801 Page 11

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.”2 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), and the ITC will take

such findings into account in determining whether material injury is likely to continue or recur if

an order were revoked under § 1675(c). See 19 U.S.C. § 1675a(a)(1)(D).

On May 31, 1996 and July 9, 1996, Torrington requested that Commerce conduct a duty

absorption inquiry pursuant to § 1675(a)(4) with respect to various respondents, including Koyo,

NTN and NSK, to determine whether antidumping duties had been absorbed during the POR.

See Final Results, 62 Fed. Reg. at 54,075.

2

Subsection (a)(4) of 19 U.S.C. § 1675 was added to the antidumping law by the

Uruguay Round Agreements Act (“URAA”) in 1994. See Pub. L. No. 103-465, § 220, 108 Stat.

4809, 4860.

Consol. Court No. 97-10-01801 Page 12

In the Final Results, Commerce found that duty absorption had occurred for the POR.

See id. at 54,044. 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)

(1994) (that is, antidumping duty orders, inter alia, deemed issued on January 1, 1995),

regulation 19 C.F.R. § 351.213(j)(2)3 provides that Commerce “will make a duty-absorption

determination, if requested, for any administrative review initiated in 1996 or 1998.” See id. at

54,074 (citing 19 CFR Part 351 et al., Antidumping Duties; Countervailing Duties; Final [R]ule,

62 Fed. Reg. 27,296, 27,394 (May 19, 1997)). Commerce also noted that although the regulation

did not bind it for this seventh AFB review, it constitutes a public statement of how Commerce

3

The full text of 19 C.F.R. § 351.213(j) (1997) provides:

(j) Absorption of antidumping duties.

(1) During any administrative review covering all or part of a period falling

between the first and second or third and fourth anniversary of the publication of

an antidumping order under § 351.211, or a determination under § 351.218(d)

(sunset review), the Secretary, if requested by a domestic interested party within

30 days of the date of publication of the notice of initiation of the review, will

determine whether antidumping duties have been absorbed by an exporter or

producer subject to the review if the subject merchandise is sold in the United

States through an importer that is affiliated with such exporter or producer. The

request must include the name(s) of the exporter or producer for which the inquiry

is requested.

(2) For transition orders defined in section 751(c)(6) of the Act, the Secretary

will apply paragraph (j)(1) of this section to any administrative review initiated in

1996 or 1998.

Id.

Consol. Court No. 97-10-01801 Page 13

construes § 1675(a)(4).4 See id. Commerce concluded that (1) because the antidumping duty

order on the AFBs in this case has been in effect since 1989, the order is a transition order

pursuant to § 1675(c)(6)(C), and (2) since this review was initiated in 1996 and a request was

made, Commerce had the authority to make a duty absorption inquiry for the seventh POR. See

id. at 54,075.

B. Contentions of the Parties

Koyo, NSK and NTN argue that: (1) Commerce lacked authority under § 1675(a)(4) to

conduct a duty absorption inquiry for the seventh administrative review of the 1989 antidumping

duty order; and (2) 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 reconsider its methodology. See Koyo’s Mem.

Supp. Mot. J. Agency R. at 5-12; NSK’s Mem. Supp. Mot. J. Agency R. at 30-34; NTN’s Mem.

Supp. Mot. J. Agency R. at 28-37.

Commerce argues it properly construed subsections (a) and (c) of § 1675 as authorizing it

to make duty absorption inquiries for antidumping duty orders that were issued and published

prior to January 1, 1995. See Def.’s Mem. in Partial Opp’n to Pls.’ Mots. J. Agency R. at 12-20.

4

Although 19 C.F.R. § 351.213(j) is indicative of Commerce’s interpretation of the

URAA, the regulation does not apply here because the administrative review in this case was

initiated on June 20, 1996 pursuant to a request dated May 31, 1996. Commerce’s regulations

that were issued pursuant to the URAA apply only to “administrative reviews initiated on the

basis of requests made on or after the first day of July, 1997.” 19 CFR Part 351 et al.,

Antidumping Duties; Countervailing Duties; Final [R]ule, 62 Fed. Reg. 27,296, 27,416-17 (May

19, 1997).

Consol. Court No. 97-10-01801 Page 14

Commerce also asserts that it devised and applied a reasonable methodology for determining

duty absorption. See id. at 20-28. Torrington generally agrees with Commerce’s contentions.

See Torrington’s Resp. to Pls.’ Mots. J. Agency R. at 11-16.

C. Analysis

In SKF USA Inc. v. United States, 24 CIT __, Slip Op. 00-28 (Mar. 22, 2000), this Court

determined that Commerce lacked statutory authority under 19 U.S.C. § 1675(a)(4) to conduct a

duty absorption inquiry for antidumping duty orders issued prior to the January 1, 1995 effective

date of the URAA. SKF USA, 24 CIT at __, Slip Op. 00-28, at 15-22 (citations omitted). 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. at 21 (citing § 291

of the URAA).

Because the duty absorption inquiry, the methodology and the parties’ arguments at issue

in this case are practically identical to those presented in SKF USA, the Court adheres to its

reasoning in SKF USA. The Court, therefore, finds that Commerce did not have the statutory

authority under § 1675(a)(4) to undertake a duty absorption inquiry for the applicable pre-URAA

antidumping duty order in dispute here.

Consol. Court No. 97-10-01801 Page 15

II. Commerce’s Treatment of NSK’s United States

Repacking Expenses as Direct Selling Expenses

A. Background

An antidumping duty is imposed upon imported merchandise when (1) Commerce

determines such merchandise is being dumped, that is, sold or likely to be sold in the United

States at less than fair value (“LTFV”), and (2) the ITC determines that an industry in the United

States is materially injured or is threatened with material injury. See 19 U.S.C. § 1673 (1994); 19

U.S.C. § 1677(34) (1994). To determine in an investigation or an administrative review whether

there is dumping, Commerce compares the price of the imported merchandise in the United

States to the NV for the same or similar merchandise in the home market. See 19 U.S.C. § 1677b

(1994). The price in the United States is calculated using either an export price (“EP”) or CEP.

See 19 U.S.C. § 1677a(a), (b) (1994).

The Statement of Administrative Action5 (“SAA”) accompanying the URAA clarifies that

Commerce will classify the price of a United States sales transaction as an EP if “the first sale to

an unaffiliated purchaser in the United States, or to an unaffiliated purchaser for export to the

United States, is made by the producer or exporter in the home market prior to the date of

5

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. No. 103-316, at 656 (1994). “[I]t is

the expectation of the Congress that future Administrations will observe and apply the

interpretations and commitments set out in this Statement.” Id.; see also 19 U.S.C. § 3512(d)

(1994) (“The statement of administrative action approved by the Congress . . . shall be regarded

as an authoritative expression by the United States concerning the interpretation and application

of the Uruguay Round Agreements and this Act in any judicial proceeding in which a question

arises concerning such interpretation or application.”).

Consol. Court No. 97-10-01801 Page 16

importation.” H.R. Doc. No. 103-316, at 822 (1994). On the other hand, “[i]f, before or after the

time of importation, the first sale to an unaffiliated person is made by (or for the account of) the

producer or exporter or by a seller in the United States who is affiliated with the producer or

exporter,” then Commerce will classify the price of a United States sales transaction as a CEP.

See id.;19 U.S.C. § 1677a(b); Koenig & Bauer-Albert AG v. United States, 22 CIT __, __, 15 F.

Supp. 2d 834, 850-52 (1998) (discussing when to apply EP or CEP methodology).

Commerce then makes adjustments to the starting price used to establish EP or CEP by

adding: (1) packing costs for shipment to the United States, if not already included in the price;

(2) import duties which have been rebated or not collected due to exportation of the subject

merchandise to the United States; and (3) certain countervailing duties if applicable. See 19

U.S.C. § 1677a(c)(1)(A)-(C); SAA at 823. Also, for both EP and CEP, Commerce will reduce

the starting price by the amount, if any, included in such price that is attributable to: “(1)

transportation and other expenses, including warehouse expenses, incurred in bringing the

subject merchandise from the original place of shipment in the exporting country to the place of

delivery in the United States; and (2) . . . export taxes or other charges imposed by the exporting

country.” Id.; see 19 U.S.C. § 1677a(c)(2)(A), (B).

Moreover, Commerce must reduce the price used to establish CEP by any of the

following amounts associated with economic activities occurring in the United States: (1)

commissions paid in “selling the subject merchandise in the United States”; (2) direct selling

expenses, that is, “expenses that result from, and bear a direct relationship to, the sale, such as

credit expenses, guarantees and warranties”; (3) “any selling expenses that the seller pays on

Consol. Court No. 97-10-01801 Page 17

behalf of the purchaser” (assumptions); (4) indirect selling expenses, that is, any selling expenses

not deducted under any of the first three categories of deductions; (5) certain expenses resulting

from further manufacture or assembly (including additional material and labor) performed on the

merchandise after its importation into the United States; and (6) profit allocated to the expenses

described in categories (1) through (5). 19 U.S.C. § 1677a(d)(1)-(3); see SAA at 823-24.

In this case, NSK delivered the subject merchandise to unaffiliated customers in the

United States from warehouses owned and operated by NSK. See NSK’s Resp. to Sect. C

Questionnaire, Investigation No. A-588-804, Admin. Rev. 5/1/95-4/30/96, at 38 (Sept. 10, 1996)

(Q. 47.0, “U.S. Repacking Cost”). NSK normally ships merchandise in its original containers

from its United States warehouse, however, in some instances, it repacked the merchandise to

accommodate orders for smaller distributors. See id.

For the price of the subject merchandise in the United States, Commerce used EP or CEP,

as appropriate, and calculated such prices “based on the packed [free on board], [cost, insurance,

and freight], or delivered price to unaffiliated purchasers in, or for exportation to, the United

States.” Preliminary Results, 62 Fed. Reg. at 31,569. Commerce also made deductions for: (1)

discounts and rebates; and (2) any movement expenses in accordance with 19 U.S.C. §

1677a(c)(2)(A). See id. In calculating CEP, Commerce made additional adjustments in

accordance with § 1677a(d)(1)-(3) by: (1) “deducting selling expenses associated with economic

activities occurring in the United States, including commissions, direct selling expenses, indirect

selling expenses, and repacking expenses in the United States”; (2) “deduct[ing] the cost of any

further manufacturing and assembly[,]” where appropriate; and (3) “adjust[ing] for profit

Consol. Court No. 97-10-01801 Page 18

allocated to these expenses.” Id. In particular, in adjusting CEP, Commerce deducted NSK’s

United States repacking expenses as direct selling expenses under § 1677a(d)(1)(B), rather than

as moving expenses under § 1677a(c)(2)(A), because it determined that repacking “was

performed on individual products in order to sell the merchandise to the unaffiliated customer in

the United States. Presumably, if a respondent could have sold the merchandise without

repacking it, the respondent would have done so. Thus, it is an expense associated with selling

the merchandise.” Final Results, 62 Fed. Reg. at 54,067.

B. Contentions of the Parties

NSK argues, as it did in the Final Results, see id., that Commerce erred in deducting

NSK’s United States repacking expenses as direct selling expenses pursuant to § 1677a(d)(1)(B),

see NSK’s Mem. Supp. Mot. J. Agency R. at 11, 13. According to NSK, the United States

repacking constitutes an expense incident to bringing the subject merchandise from the original

place of shipment in Japan to the place of deliver in the United States and, therefore, should have

been (1) classified and deducted as expense under § 1677a(c)(2)(A), and (2) excluded from the

pool of selling expenses Commerce uses to determine CEP profit. See id.; 19 U.S.C. §

1677a(d)(3), (f)(1)(B) (calculating CEP profit based on the profit allocated to expenses described

in § 1677a(d)(1)-(2)).

Specifically, NSK claims that § 1677a(c)(2)(A) is not limited to moving expenses, but

includes expenses required for transporting the goods from NSK’s United States warehouses into

the hands of carriers for delivery to United States customers. See NSK’s Reply Mem. Supp. Mot.

Consol. Court No. 97-10-01801 Page 19

J. Agency R. at 2. NSK asserts that the cost of United States repacking is such a §

1677a(c)(2)(A) expense because the goods cannot be transported unless NSK first breaks open

the transpacific shipping packages, selects the specific items ordered and then repacks those

items for shipment to the customer’s United States location. See id. at 3-4. NSK clarifies that

this result does not change simply because the United States repacking may be directly related to

particular sales. See id. at 3. NSK notes that § 1677a(c)(2)(A) does not preclude the deduction

of expenses directly related to a particular sale; rather, the statute includes “any additional costs,

charges, or expenses,” either direct or indirect, incident to bringing the subject merchandise from

Japan to the United States customer. See id. (quoting § 1677a(c)(2)(A)). NSK contends, for

instance, United States inland freight from its United States warehouse to United States

unaffiliated customers, even though directly related to particular sales to such customers,

nevertheless constitutes a § 1677a(c)(2)(A) expense. See id. Thus, NSK asserts that United

States repacking expenses should similarly be treated as § 1677a(c)(2)(A) expenses even though

it may be directly related to particular sales. See id. Finally, NSK claims that United States

repacking does not otherwise meet the definitional criteria of § 1677a(d)(1)(B) direct selling

expenses such as credit expenses, guarantees and warranties. See id. NSK notes that such

expenses assist in selling products, but do not involve transporting goods from Japan to the

United States unaffiliated customer as do United States repacking expenses. See id.; NSK’s

Mem. Supp. Mot. J. Agency R. at 12.

Although agreeing with NSK’s contention that United States inland freight (warehouse to

customer) charges are clearly transportation expenses and thus deductible pursuant to

Consol. Court No. 97-10-01801 Page 20

§ 1677a(c)(2)(A), Commerce responds, as it did in the Final Results, that NSK’s United States

repacking expenses bear no relationship to “moving the merchandise from one point to another,”

as established by the fact that “the merchandise was moved from the exporting country to the

United States prior to repacking.” Def.’s Mem. in Partial Opp’n to Pls.’ Mots. J. Agency R. at

29-30 (quoting Final Results, 62 Fed. Reg. at 54,067). Commerce also contends that §

1677a(d)(1)(B) does not limit direct selling expenses deducted from CEP to credit expenses,

guarantees or warranties; rather, the statute reduces CEP by the amount of any selling expenses

which result, and bear a direct relationship to, selling expenses in the United States. Id. at 30.

Since NSK’s repacking was “performed on individual products in order to sell the merchandise

to the unaffiliated customer in the United States,” Commerce asserts that it properly treated the

repacking expenses as direct selling expenses pursuant to § 1677a(d)(1)(B). Id. (quoting Final

Results, 62 Fed. Reg. at 54,067).

Torrington generally agrees with Commerce’s arguments. See Torrington’s Resp. to Pls.

Mots. J. Agency R. at 8, 40-41. Torrington notes, as it did in the Final Results, that NSK

reported that it normally does not require repacking for its United States sales, but “some

repacking ‘occurred to accommodate smaller distributor orders.’” Id. at 41 (quoting NSK’s

Resp. to Sect. C Questionnaire, Investigation No. A-588-804, Admin. Rev. 5/1/95-4/30/96, at 38

(Sept. 10, 1996) (Q. 47.0, “U.S. Repacking Cost”)). Torrington asserts that since NSK’s

response is consistent with Commerce’s treatment of NSK’s repacking expenses as selling rather

than movement expenses, Commerce properly included NSK’s repacking expenses in its

calculation of CEP profit. See id.

Consol. Court No. 97-10-01801 Page 21

C. Analysis

The Court finds that NSK’s United States repacking expenses were not incident to

bringing the subject merchandise from the original place of shipment in Japan to the place of

delivery in the United States. Rather, such expenses were clearly direct selling expenses.

Direct selling expenses under § 1677a(d)(1)(B) are not limited to credit expenses,

guarantees and warranties, but include “expenses which result from and bear a direct relationship

to the particular sale in question.” SAA at 823 (defining direct selling expenses). In this case,

the particular sales in question concerned orders for smaller distributors. Although NSK reported

that it normally does not perform repacking for United States sales (that is, it usually ships

merchandise from its United States warehouse in its original containers), NSK acknowledged

that it did some repacking to accommodate orders for smaller distributors. See NSK’s Resp. to

Sect. C Questionnaire, Investigation No. A-588-804, Admin. Rev. 5/1/95-4/30/96, at 38 (Sept.

10, 1996) (Q. 47.0, “U.S. Repacking Cost”). The Court finds, therefore, as Commerce did in the

Final Results, that NSK’s repacking is “expense associated with selling the merchandise.” 62

Fed. Reg. at 54,067.

Accordingly, the Court concludes that Commerce properly treated and deducted NSK’s

United States repacking expenses as direct selling expenses pursuant to § 1677a(d)(1)(B) rather

than as transportation or other expenses pursuant to § 1677a(c)(2)(A).

Consol. Court No. 97-10-01801 Page 22

III. Commerce’s Calculation of Profit for Constructed Value

A. Background

For this POR, Commerce “used [constructed value] as the basis for NV when there were

no usable sales of foreign-like product in the comparison market.” Preliminary Results, 62 Fed.

Reg. at 31,571. Commerce calculated the profit component of CV using the statutorily preferred

methodology of 19 U.S.C. § 1677b(e)(2)(A) (1994).6 See Final Results, 62 Fed. Reg. at 54,062.

In applying the “preferred” method for calculating CV profit under § 1677b(e)(2)(A), Commerce

determined that “the use of aggregate data that encompasses all foreign like products under

consideration for NV represents a reasonable interpretation of the statute and results in a practical

measure of profit that we can apply consistently in each case.” Id.

B. Contentions of the Parties

NSK contends, inter alia, 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) and the explicit hierarchy established by 19 U.S.C. § 1677(16) (1994) for

selecting the “foreign like product” for the CV profit calculation. See NSK’s Mem. Supp. Mot.

J. Agency R. at 14-17.

6

In calculating constructed value, Commerce is required 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.” 19 U.S.C. § 1677b(e)(2)(A).

Consol. Court No. 97-10-01801 Page 23

Commerce responds, inter alia, that it applied a reasonable interpretation of §

1677b(e)(2)(A) and properly based CV profit for NSK on aggregate profit data of all foreign like

products under consideration for NV. See Def.’s Mem. in Partial Opp’n to Mot. J. Agency R. at

30-43. Torrington generally agrees with Commerce. See Torrington’s Resp. to Pls.’ Mots. J.

Agency R. at 20-22.

C. Analysis

NSK raised this issue in RHP Bearings Ltd. v. United States, 83 F. Supp. 2d 1322 (1999),

which concerned the sixth administrative review of an antidumping duty order on AFBs imported

from the UK. In RHP Bearings, this Court held that Commerce’s CV profit methodology, which

consists of using the aggregate data of all foreign like products under consideration for NV, is

consistent with the antidumping statute. See id. at ___, 83 F. Supp. 2d at 1336. Since NSK’s

arguments and the methodology at issue in this case are practically identical to those presented in

RHP Bearings, the Court adheres to its reasoning in RHP Bearings and, therefore, finds

Commerce’s CV profit methodology to be supported by substantial evidence and in accordance

with law.

IV. Commerce’s Recalculation of NTN’s United States

Credit Expenses for Constructed Export Price Sales

A. Background

In calculating NV, 19 U.S.C. § 1677b(a)(6)(C) directs Commerce to adjust NV to account

for “any differences (or the lack thereof) between the [EP or CEP] and [NV] . . . that is

Consol. Court No. 97-10-01801 Page 24

established to the satisfaction of [Commerce] to be wholly or partly due to . . . differences in the

circumstances of sale” (“COS”) between sales made in the United States and sales made in the

foreign market under consideration. See SAA at 828 (“Additional Adjustments to Normal

Value”). “Such COS adjustments are made when the seller incurs certain costs in its home

market sales that it does not incur when selling to the United States market.” Torrington Co. v.

United States, 156 F.3d 1361, 1363 (Fed. Cir. 1998).

The COS adjustments include adjustments for differences in direct selling expenses such

as credit expenses. See SAA at 828 (“Commerce will . . . employ the [COS] adjustment to adjust

for differences in direct expenses”); Asociacion Colombiana de Exportadores de Flores v.

United States, 22 CIT __, __, 6 F. Supp. 2d 865, 876 (1998) (discussing COS adjustment for

differences in credit costs). A COS adjustment for differences in credit expenses is made to

account for the “producer’s opportunity cost of extending credit to its customers. By allowing

the purchaser to make payment after the shipment date, the producer forgoes the opportunity to

earn interest on an immediate payment.” Mitsubishi Heavy Industries, Ltd. v. United States, 23

CIT __, __, 54 F. Supp. 2d 1183, 1188 (1999). Thus, Commerce uses an imputed credit expense

to reflect “the loss attributable to the time value of money.” Id.; see Asociacion, 22 CIT at __, 6

F. Supp. 2d at 876 (“As part of its calculation of selling expenses for U.S. sales, Commerce

imputes a credit expense on sales to represent the cost (based upon the time value of money) to

the seller of waiting for payment for its sales.”). Commerce’s normally calculates an imputed

credit expense “based only on the cost of financing receivables between shipment date and

payment date.” Mitsubishi, 22 CIT at __, 54 F. Supp. 2d at 1188 (quoting Mitsubishi Heavy

Consol. Court No. 97-10-01801 Page 25

Industries, Ltd. v. United States, 22 CIT __, __, 15 F. Supp. 2d 807, 820 (1998)).

In this case, NTN calculated its United States credit expense on a customer-specific basis.

See Verification Report for NTN Corporation (NTN) for the 1995-96 Administrative Review of

the Antidumping Duty Order on Antifriction Bearings (Other Than Tapered Roller Bearings)

and Parts Thereof From Japan, A-588-804, Proprietary Doc., at 7 (May 3, 1997) (“Credit

Expense”). NTN imputed the cost of credit for sales by determining monthly the average number

of days for which each customer’s payments were outstanding and the short-term interest rate

NTN paid, or would have paid, if it borrowed the same money to finance its accounts receivable.

See id.

During the review, Torrington contended that Commerce “should recalculate NTN’s

United States credit expense because . . . reporting credit expense on an average basis may be

distortive in cases where not all [United States] sales are dumped.” Final Results, Fed. Reg. at

54,053. Torrington noted that NTN provided the necessary information on record to recalculate a

credit expense on a “transaction-specific basis.” See id.

NTN responded that its credit expense should not be recalculated because Commerce had

accepted NTN’s methodology of reporting a customer-specific average credit expense in all

previous AFB reviews. See id.; see, e.g., Antifriction Bearings (Other Than Tapered Roller

Bearings) and Parts Thereof From the Federal Republic of Germany, et al.; Final Results of

Antidumping Duty Administrative Review, 56 Fed. Reg. 31,692, 31,724 (July 11, 1991) (cross-

referenced by Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof

Consol. Court No. 97-10-01801 Page 26

From Japan; Final Results of Antidumping Duty Administrative Reviews, 56 Fed. Reg. 31,754,

31,755 (July 11, 1991)) (Commerce using a customer-specific average credit expense for NTN-

Japan during the first review); 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 (“sixth administrative review”), 62 Fed.

Reg. 2081, 2101 (Jan. 15, 1997) (Commerce using a customer-specific average credit expense for

NTN during this review).

Commerce agreed with Torrington with regard to CEP sales, finding:

We have data on the record which allows us to calculate transaction-specific

credit expense for CEP sales. Therefore, we have recalculated NTN’s credit

expense using the dates of payment which NTN reported. However, Torrington is

incorrect in asserting that NTN reported transaction-specific payment dates for EP

sales. NTN does not maintain its payment records in a manner which allows it to

provide us with transaction-specific payment dates for EP sales to the United

States . . . . Therefore, in these reviews, as in past reviews, we are allowing NTN

to calculate its U.S. credit expense for EP sales for each customer on the basis of

the average number of days that receivables are outstanding.

Final Results, Fed. Reg. at 54,053.

B. Contentions of the Parties

NTN notes that Commerce accepted NTN’s calculation of credit expenses on a customer-

specific basis for the previous six reviews of the antidumping duty order on AFBs from Japan.

See NTN’s Mem. Supp. Mot. J. Agency R. at 14. NTN contends that since “[t]here have been no

changes in the facts or law which would compel a sudden shift” in Commerce’s practice of

accepting credit expenses reported on a customer-specific basis, Commerce’s “prior decisions

Consol. Court No. 97-10-01801 Page 27

must become law of the case.” Id. In support of this contention, NTN relies on Shikoku

Chemicals Corp. v. United States, 16 CIT 382, 795 F. Supp. 417 (1992), for the proposition that

“[p]rinciples of fairness prevent Commerce from changing its methodology at this late stage . . . .

Adherence to prior methodology is required in some circumstances.” NTN’s Mem. Supp. Mot. J.

Agency R. at 14 (quoting Shikoku, 16 CIT at 388, 795 F. Supp. at 421 (footnote and citations

omitted)). NTN, therefore, requests that the Court remand the issue to Commerce to accept

NTN’s customer-specific average credit expense. See id.

Commerce asserts that it did not apply any new process and approach in calculating

NTN’s United States credit expenses. Def.’s Mem. in Partial Opp’n to Mot. J. Agency R. at 45.

Rather, Commerce notes that it has expressed, and continues to maintain, a “preference that

expenses be reported on a transaction-specific basis rather than on an average or allocated basis.”

Id. at 44. However, Commerce claims that when a company’s records do not permit transaction-

specific reporting, it has permitted use of average or allocated expenses as it did with NTN’s

credit expenses for EP sales. Id. 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 45. Also, Commerce contends that the principles of fairness

that prevented Commerce from changing its methodology of calculating an expense at a late

stage in the antidumping proceeding in Shikoku are not present in this case. See id. at 46.

Consol. Court No. 97-10-01801 Page 28

Torrington agrees with Commerce, noting that, consistent with the antidumping statute

and regulations, Commerce has a well-established preference for transaction-specific reporting of

expenses. See Torrington’s Resp. to Pls.’ Mots. J. Agency R. at 34. Also, Torrington 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

that permitted more precise credit expense calculations, that is, transaction-specific payment

dates for NTN’s CEP sales, Torrington contends that Commerce properly recalculated NTN’s

United States credit expenses on a transaction-specific basis. See id. at 34-35.

C. Analysis

The Court disagrees with NTN that Commerce is now prohibited from using

transaction-specific reporting of NTN’s United States credit expense merely because in the past

six reviews it accepted customer-specific reporting of such expenses. 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, 19 CIT 1013, ____, 896 F. Supp. 1263, 1275 (1995) (noting that Commerce does

not have to “adhere to its prior reporting methodology, especially where Commerce is striving for

more accuracy”), rev’d on other grounds, 115 F.3d 965 (1997); see also id. 19 CIT at ____, 896

F. Supp. at 1275 (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

Consol. Court No. 97-10-01801 Page 29

the transaction for which it was incurred.”).

Further, NTN’s reliance on Shikoku, which it cites for the proposition that Commerce

must adhere to its prior decisions, is misplaced. Shikoku dealt with an attempt by Commerce to

adopt a slightly improved allocation methodology of calculating the home market price packing

adjustment after years of acceptance of another methodology. See Shikoku, 16 CIT at 387, 795 F.

Supp. at 420-21. At issue were the fifth and sixth administrative reviews of certain merchandise

imported from Japan. See id. at 383, 795 F. Supp. at 417-18. The plaintiffs’ dumping margins

for the previous three consecutive periods of review of sales of the contested merchandise were

found to be either de minimis or had a margin of zero. See id. at 383, 795 F. Supp. at 418. In the

fifth and sixth administrative reviews, Commerce altered its allocation methodology for

calculating home market packing expenses, resulting in barely above de minimis margins and,

thereby, Commerce refused a plaintiffs’ request to revoke the outstanding antidumping duty

order covering the merchandise. See id. at 383-84, 795 F. Supp. at 418. Commerce’s new

calculation was based on information which was requested for the first time at verification. See

id. at 387, 795 F. Supp. at 421.

The court in Shikoku found that: (1) “Commerce [had] employed a new process and

approach (both synonyms for ‘methodology’)” in calculating the home market packing expenses

and did not merely apply its standard practice of preferring actual expenses over allocated

expenses; (2) Commerce could not demonstrate that the new allocation methodology was an

improvement; and (3) the evidence on record established that plaintiffs had relied on

Commerce’s old methodology for calculating the home market price packing adjustment by

Consol. Court No. 97-10-01801 Page 30

adjusting their prices in accordance with the methodology that Commerce had consistently

applied in prior reviews. See id. at 386-87, 795 F. Supp. at 420. Under these circumstances, the

court, noting that “[t]he margin resulting from the new approach . . . is barely above de minimis,

determined that it was “simply too late to mandate another three years of administrative reviews

because of a last minute ‘improvement’ in Commerce's methodology” and concluded that

“Commerce did not have adequate reasons for its last minute change in methodology.” Id. at

388, 795 F. Supp. at 422.

In this case, however, the Court agrees with Commerce that it did not apply, or switch to,

any new methodology in calculating NTN’s credit expenses; instead, Commerce merely

exercised its consistent preference for transaction-specific rather than customer-specific reporting

given that NTN had supplied information which permitted a transaction-specific calculation of

credit expenses. Moreover, in distinct contrast to the facts in Shikoku, the Court notes that NTN

was afforded notice of Commerce’s preference for transaction-specific reporting. First,

Commerce explicitly gave notice to NTN in the first and second reviews that it prefers to have

the credit expense reported on a transaction-specific basis. See Antifriction Bearings (Other

Than Tapered Roller Bearings) and Parts Thereof From the Federal Republic of Germany, et

al.; Final Results of Antidumping Duty Administrative Review, 56 Fed. Reg. 31,692, 31,724 (July

11, 1991) (first administrative review) (“The Department prefers to have credit calculated on a

transaction-by-transaction basis. . . . In the future, in keeping with Department practice, credit

expenses should be reported, at a minimum, on a customer-specific basis. In fact, the

Department’s preference remains sales-specific reporting of this expense.”); Antifriction

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Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, et al.; Final

Results of Antidumping Duty Administrative Reviews, 57 Fed. Reg. 28,360, 28,405 (June 24,

1992) (second administrative review) (noting that “the Department will not accept credit

expenses not reported, at a minimum, on a customer-specific basis or some reasonable

equivalent. In fact, the Department’s preference remains for sales-specific reporting of this

expense.”). Also, as Torrington points out, Commerce’s questionnaire for this review

specifically reiterated the agency’s preferred methodology of using transaction-specific reporting

for credit expenses. See Request for Information, Antifriction Bearings (Other Than Roller

Bearings) and Parts Thereof From France, Germany, Italy, Japan, Romania, Singapore,

Sweden, Thailand, and the United Kingdom (“Commerce’s Questionnaire”), Sec. C, at C-20

(June 19, 1996) (Case No. A-100-001, Fiche 02-03, Frame 03, Pub. Doc. 2) (“This [credit]

expense should be calculated and reported on a transaction-by-transaction basis using the number

of days between date of shipment to the customer and date of payment.”). Finally, the Court

finds that this case does not present the situation in which, relying upon an old methodology,

NTN had actually adjusted its prices and, except for the change in methodology, it would be

entitled to a revocation of the outstanding antidumping duty order. Therefore, the principles of

fairness that prevented Commerce from changing its methodology in Shikoku are not present

here.

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.

Consol. Court No. 97-10-01801 Page 32

V. Commerce’s Denial of Level of Trade Adjustments to NSK and NTN

A. Background

1. Statutory Provisions

Under pre-URAA antidumping law, there were no specific provisions providing for an

adjustment to foreign market value (“FMV”) for any difference in LOT between United States

price (now EP or CEP) and FMV. Commerce, however, promulgated a regulation stating that:

(1) it normally would calculate FMV and United States price based on sales at the same

commercial LOT; and (2) if such sales were insufficient to permit an adequate comparison,

Commerce would calculate FMV based on such or similar sales at the most comparable LOT in

the United States market, making appropriate adjustments for differences affecting price

comparability. See 19 C.F.R. § 353.58 (1994); see generally NEC Home Elecs., Ltd. v. United

States, 54 F.3d 736, 739 (Fed. Cir. 1995) (discussing 19 C.F.R. § 353.58).

The URAA amended the antidumping statute to provide for a specific provision regarding

adjustments to NV for differences in LOTs. Instead of FMV, see 19 U.S.C. § 1677b (1988), the

statute now provides for NV, see URAA § 233(a)(1), 108 Stat. at 4898 (replacing term FMV

with NV), which shall be based on:

the price at which the foreign like product is first sold (or, in the absence of sale,

offered for sale) for consumption in the exporting country, in the usual

commercial quantities and in the ordinary course of trade and, to the extent

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

price.

19 U.S.C. § 1677b(a)(1)(B)(i) (emphasis added). The statute also provides for a LOT adjustment

to NV under the following conditions:

Consol. Court No. 97-10-01801 Page 33

The price described in [§ 1677b(a)(1)(B), i.e., NV,] shall also be increased or

decreased to make due allowance for any difference (or lack thereof) between the

export price and constructed export price and the price described in [§

1677b(a)(1)(B)] (other than a difference for which allowance is otherwise made

under [§ 1677b(a)]) that is shown to be wholly or partly due to a difference in

level of trade between the export price or constructed export price and normal

value, if the difference in level of trade--

(i) involves the performance of different selling activities; and

(ii) is demonstrated to affect price comparability, based on a pattern of

consistent price differences between sales at different levels of trade in the

country in which normal value is determined.

In a case described in the preceding sentence, the amount of the adjustment shall

be based on the price differences between the two levels of trade in the country in

which normal value is determined.

19 U.S.C. § 1677b(a)(7)(A). In sum, to qualify for a LOT adjustment to NV, a party has the

burden to show that the following two conditions have been satisfied: (1) the difference in LOT

involves the performance of different selling activities; and (2) the difference affects price

comparability. See SAA at 829 (stating that “if a respondent claims [a LOT] adjustment to

decrease normal value, as with all adjustments which benefit a responding firm, the respondent

must demonstrate the appropriateness of such adjustment”); see also NSK Ltd. v. United States,

190 F.3d 1321, 1330 (Fed. Cir. 1999) (noting that a respondent bears the burden of establishing

entitlement to a LOT adjustment).

When the available data does not provide an appropriate basis to grant a LOT adjustment,

but NV is established at a LOT constituting a more advanced stage of distribution than the LOT

of the CEP, the statute ensures a fair comparison by providing for an additional adjustment to NV

known as the “CEP offset.” See 19 U.S.C. § 1677b(a)(7)(B). Specifically, the CEP offset

provides that NV “shall be reduced by the amount of indirect selling expenses incurred in the

country in which normal value is determined on the sales of the foreign like product but not more

Consol. Court No. 97-10-01801 Page 34

than the amount of such expenses for which a deduction is made under [19 U.S.C. §

1766a(d)(1)(D)].” 19 U.S.C. § 1677b(a)(7)(B).

2. Commerce’s LOT Methodology

During this review, and in several prior reviews, Commerce applied the following LOT

methodology. See Final Results, 62 Fed. Reg. at 54,055; Preliminary Results, 62 Fed. Reg. at

31,571-72. In accordance with § 1677b(a)(1)(B)(i), Commerce first calculates NV based on

exporting-country (or third-country) sales, to the extent practicable, at the same LOT as the

United States (EP and CEP) sales. See id. at 31,571. When Commerce is unable to find

comparison sales at the same LOT as the EP or CEP sales, it compares such United States sales

to sales at a different LOT in the comparison (home or third-country) market. See id.

Where the LOT comparison is between NV sales and EP sales (that is, where the first sale

in the United States is to an unaffiliated buyer), Commerce compares the unadjusted, NV starting

price with the starting EP, without making any adjustments to EP as provided for under 19

U.S.C. § 1677a(c). See id. at 31,571.

With respect to the LOT methodology for CEP sales, Commerce first calculates CEP by

making adjustments to its starting price under 19 U.S.C. § 1677a(d), but before making any

adjustments under § 1677a(c). See id. Commerce reasoned that the § 1677a(d) “adjustments are

necessary to arrive at, as the term CEP makes clear, a ‘constructed’ EP,” that is, it is intended to

reflect as closely as possible a price corresponding to an EP between non-affiliated exporters and

Consol. Court No. 97-10-01801 Page 35

importers.7 Final Results, Fed. Reg. at 54,058. Commerce then determines the LOT for the

“adjusted” CEP sales. See Preliminary Results, 62 Fed. Reg. at 31,571.

The next step in its LOT analysis is to determine whether home market sales are at a

different LOT than United States (EP or CEP) sales. See id. In making such a determination,

Commerce examines whether the “home market sales are at different stages in the marketing

process than the U.S. [(EP or CEP)] sales,” that is, Commerce “review[s] and compare[s] the

distribution systems in the home market and U.S. export markets, including selling functions,

class of customer, and the extent and [LOT] of selling expenses for each claimed [LOT].” Id. If

the EP or CEP sales and the NV sales are at a different LOT, and the differences in LOT affects

price comparability, as manifested in a pattern of consistent price differences between the sales

7

In the preliminary results, Commerce explained it reasons for making § 1677a(d), but

not

§ 1677a(c), adjustments to the starting price of CEP as follows:

We calculate the CEP by removing from the first resale to an independent U.S.

customer the expenses under [19 U.S.C. § 1677a(d)] and the profit associated with

these expenses. These expenses represent activities undertaken by the affiliated

importer. As such, they occur after the transaction between the exporter and the

importer for which we construct CEP. Because the expenses deducted under

[§ 1677a(d)] represent selling activities in the United States, the deduction of

these expenses normally yields a different level of trade for the CEP than for the

later resale (which we use for the starting price). Movement charges, duties and

taxes deducted under [§ 1677a(c)] do not represent activities of the affiliated

importer, and we do not remove them to obtain the CEP level of trade.

Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France,

Germany, Italy, Japan, Romania, Singapore, Sweden and the United Kingdom; Preliminary

Results of Antidumping Duty Administrative Reviews and Partial Termination of Administrative

Reviews, 62 Fed. Reg. 31,566, 31,571 (June 10, 1997).

Consol. Court No. 97-10-01801 Page 36

on which NV is based and comparison-market sales at the equivalent LOT of the export

transaction, Commerce will make a LOT adjustment under § 1677b(a)(7)(A). See id. If there is

no pattern of consistent price differences, no adjustment is permitted. See id. at 31,572. Finally,

for CEP sales, if NV is established at a LOT which constitutes a more advanced stage of

distribution than the LOT of the CEP, and if there is no basis for determining whether differences

in the LOT between NV and CEP affects comparability of their prices, Commerce must make a

CEP offset to NV under § 1677b(a)(7)(B). See id.

3. Denial of LOT Adjustment for CEP Sales

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 except for certain

home market sales of respondent NMB/Pelmac. See Final Results, 62 Fed. Reg. at 54,056.

Commerce was unable to “determine whether there was a pattern of consistent price differences

between the [LOTs] based on respondents’ [home market] sales of merchandise under review.”

See id.

In such cases, Commerce looked to alternative methods for calculating LOT adjustments

in accordance with the SAA. See id. In particular, Commerce noted that the SAA states:

“if the information on the same product and company is not available, the

adjustment may also be based on sales of other products by the same company. In

the absence of any sales, including those in recent time periods, to different levels

of trade by the exporter or producer under investigation, Commerce may consider

the selling experience of other producers in the foreign market for the same

product or other products.”

Id. (quoting SAA at 830). Nevertheless, Commerce determined that it would have been

Consol. Court No. 97-10-01801 Page 37

inappropriate to apply the LOT adjustment calculated for NMB/Pelmac to any other respondent,

reasoning that “[b]ecause no respondent reported sales in the same market as NMB/Pelmac (i.e.,

Singapore), we have not used NMB/Pelmac’s data as the basis of a level-of-trade adjustment for

any other respondents.” Id. Consequently, with respect to CEP sales which Commerce was

unable to quantify a LOT adjustment, it granted a CEP offset to respondents, including NTN,

where the home market sales were at a more advanced LOT than the sales to the United States, in

accordance with 19 U.S.C. § 1677b(a)(7)(B). See id.

With respect to NSK, Commerce applied a CEP offset to NV for all of NSK’s CEP sales.

See Antifriction Bearings from Japan–NSK Ltd. (NSK) Preliminary Results Analysis Memo

Seventh Administrative Review 5/1/95-4/30/96 (Mar. 28, 1997) (Case No. A-588-804, Fiche 95,

Frame 57, Pub. Doc. 177, at 59). In reaching this result, Commerce first determined for NSK

that there was one CEP LOT and two home market LOTs, and that the CEP LOT was not the

same as either home market LOT. See id. Commerce could not match CEP sales at the same

LOT in the home market or make a LOT adjustment “because the differences in price between

the CEP [LOT] and the home market [LOTs were] not quantifiable due to the lack of an

equivalent CEP level of trade in the home market.” Id. Commerce concluded that “[b]ecause the

data available do not provide an appropriate basis to determine a [LOT] adjustment and the home

market [LOTs] are at a more advanced stage of distribution than the CEP, [it] made a CEP offset

for all such sales.” Id. Moreover, contrary to NSK’s contentions, Commerce concluded that no

provision of the antidumping statute provides for a “partial” LOT adjustment “between two home

market [LOTs] where neither level is equivalent to the level of the [United States] sale.” Final

Consol. Court No. 97-10-01801 Page 38

Results, 62 Fed. Reg. at 54,057.

B. Contentions of the Parties

NTN contends that Commerce improperly denied a price-based LOT adjustment under

§ 1677b(a)(7)(A) for CEP sales made in the United States market at a LOT different from the

home market sales. See NTN’s Mem. Supp. Mot. J. Agency R. at 17-18. In particular, NTN

argues, inter alia, that Commerce incorrectly determined NTN’s CEP LOT because the agency

failed to use the sale to the first unaffiliated purchaser in the United States to determine NTN’s

CEP LOT. See id. at 18-19. In other words, according to NTN, if Commerce had used the CEP

starting price, that is, without any § 1677a(d) adjustment, to determine CEP LOT, NTN would

have satisfied the statutory requirements for a LOT adjustment for its CEP sales. See id. at 18;

NTN’s Reply Br. at 25-31. In support of its position, NTN cites Borden Inc. v. United States, 22

CIT __, 4 F. Supp. 2d 1221 (1998), where the court determined that Commerce’s methodology of

making a § 1677a(d) adjustment to CEP prior to the LOT analysis contravened the purpose of §

1677b(a)(7)(A). See NTN’s Mem. Supp. Mot. J. Agency R. at 40-42; NTN’s Reply Br. at 28-30

(both citing Borden, 4 F. Supp. 2d at 1241). NTN requests that the Court adopt the holding of

Borden and remand the LOT issue to Commerce to determine NTN’s CEP LOTs prior to any §

1677a(d) deductions and, afterwards, to grant NTN a price-based LOT adjustment for its CEP

sales. See id. at 29-31.

NSK agrees with the manner in which Commerce determined LOT of its CEP for NV

transactions. See NSK’s Mem. Supp. Mot. J. Agency R. at 25. In particular, NSK agrees that

Consol. Court No. 97-10-01801 Page 39

Commerce properly used the CEP as adjusted for § 1677a(d) expenses prior to its LOT analysis.

See id. at 25 n.12 (stating the Borden court “incorrectly ignored the statutory definition of CEP,

which requires certain adjustments to starting price to reach CEP”). NSK, however, argues that

Commerce should have granted it a “partial” LOT adjustment. See id. at 24-29.

NSK first notes that Commerce found two LOTs in the home market, one corresponding

to original equipment manufacturers (“OEM”) sales and the other to after market (“AM”) sales.

See id. at 7. NSK also agrees that when Commerce matched CEP sales to home market OEM

sales, Commerce correctly applied a CEP offset because there was no basis for quantifying a

price-based LOT adjustment for CEP to OEM NV matches. See id. at 26. Further, NSK agrees

that “Commerce correctly concluded there was no record information that would allow

Commerce to quantify the downward price adjustment to adjust fully the AM NV [LOT] to the

CEP [LOT].” Id. Nevertheless, NSK disagrees with Commerce’s decision to apply a CEP offset

when Commerce matched CEP sales to home market AM sales. In these situations, NSK argues

that § 1677b(a)(7)(A) and the SAA direct Commerce to calculate a partial, price-based LOT

adjustment to NV for CEP sales measured by the price differences between OEM and AM LOTs.

See id. at 8, 26-27.

NSK notes that the statute directs Commerce to adjust NV for any difference between

CEP and NV “‘wholly or partly due to a difference in level of trade’” between CEP and NV. Id.

at 26 (quoting § 1677b(a)(7)(A)). NSK also notes that § 1677b(a)(7)(B) indicates a CEP offset

should only be used in the total absence of price-based LOT adjustments. See id. Accordingly,

NSK claims that since there was evidence for quantifying price differences between OEM and

Consol. Court No. 97-10-01801 Page 40

AM LOTs, Commerce’s failure to calculate a price-based LOT adjustment that partly accounted

for such LOT differences violated the plain language of § 1677b(a)(7)(A). See NSK’s Reply

Mem. Supp. Mot. J. Agency R. at 10-11.

Commerce, in turn, argues that it properly determined the LOT for NTN’s CEP sales after

deducting expenses and profit from the price to the first unaffiliated purchaser in the United

States pursuant to § 1677a(d) because § 1677b(a)(7)(A), which provides for a LOT adjustment,

requires Commerce to compare CEP, not the “unadjusted” starting price of CEP, with NV. See

Def.’s Mem. in Partial Opp’n to Mot. J. Agency R. at 57-61. Commerce notes CEP is defined in

§ 1677a(b) as the price at which the subject merchandise is first sold (or agreed to be sold) in the

United States as “adjusted” under § 1677a(d). See id. at 58. Commerce further asserts that the

Court should not follow Borden because it is not based upon persuasive statutory analysis. See

id. at 61-66. Commerce also claims that it properly denied a LOT adjustment for NTN’s CEP

sales because NTN failed to establish its entitlement to a LOT adjustment. See id. at 5, 66-70.

Commerce also argues that it properly denied a partial LOT adjustment and applied a

CEP offset to NV for all of NSK’s CEP transactions. See id. at 70-77. Contrary to NSK’s

reading of § 1677b(a)(7)(A), Commerce asserts that the statute only provides for a LOT price-

based adjustment to NV based upon price differences in the home market between the CEP LOT

and NV LOT when the differences can be quantified. See id. at 4, 74-76. Commerce claims that

the statute does not authorize a LOT price-based adjustment based upon different LOTs in the

home market when the price difference between the CEP LOT sales and the home market LOT

sales cannot be quantified, as NTN acknowledges in this case. See id.; see also Final Results, 62

Consol. Court No. 97-10-01801 Page 41

Fed. Reg. at 54,057 (explaining that Commerce does not read into § 1677b(a)(7)(A)’s “wholly or

partly” language the authority to make a LOT adjustment based on differences between two

home market LOTs where neither level is equivalent to the level of the United States sale).

Commerce, therefore, asserts that since it reasonably interpreted § 1677b(a)(7)(A), the Court

should sustain its denial of a LOT adjustment and grant of a CEP offset for all of NSK’s CEP

transactions. See Def.’s Mem. in Partial Opp’n to Mot. J. Agency R. at 76-77.

Torrington generally agrees with Commerce’s positions, emphasizing that Commerce:

(1) properly denied a LOT adjustment for NTN’s CEP sales; (2) correctly made § 1677a(d)

adjustments to the starting price of CEP prior to determining a LOT for NTN’s CEP sales; and

(3) reasonably interpreted § 1677b(a)(7)(A) as not providing for a “partial” LOT adjustment as

contended by NSK. See Torrington’s Resp. to Pls.’ Mots. J. Agency R. at 5, 27-29, 41-45.

Torrington further argues that even if § 1677b(a)(7)(A) permits a partial LOT adjustment, NSK

nevertheless failed to submit record evidence to show entitlement to such an adjustment. See id.

at 45. Accordingly, Torrington contends that this Court should not disturb Commerce’s

reasonable interpretation of the statute as applied to the record evidence. See id.

C. Analysis

Under the first step of Chevron, the Court must ascertain whether the antidumping

statute’s plain language speaks to the precise question at issue. Here, 19 U.S.C. § 1677b(a)(7)

specifically provides that to make a LOT adjustment to NV, Commerce must determine if there

is “a difference in level of trade between the export price or constructed export price and the

Consol. Court No. 97-10-01801 Page 42

normal value.” Id. In other words, Commerce must first calculate EP or CEP before performing

its LOT analysis. Title 19, United States Code, § 1677a provides the following guidance for

determining EP and CEP:

(a) Export price

The term “export price” means the price at which the subject merchandise is first

sold (or agreed to be sold) before the date of importation by the producer or

exporter of the subject merchandise outside of the United States to an unaffiliated

purchaser in the United States or to an unaffiliated purchaser for exportation to the

United States, as adjusted under subsection (c) of this section.

(b) Constructed export price

The term “constructed export price” means the price at which the subject

merchandise is first sold (or agreed to be sold) in the United States before or after

the date of importation by or for the account of the producer or exporter of such

merchandise or by a seller affiliated with the producer or exporter, to a purchaser

not affiliated with the producer or exporter, as adjusted under subsections (c) and

(d) of this section.

Id. (emphasis added).8

Thus, the starting price under § 1677a(a) must be “adjusted under subsection (c)” of §

1677a to determine EP. Indeed, § 1677a(c)’s language clearly provides that subsection (c)

adjustments must be made to the starting price used to “establish” EP. See 19 U.S.C. § 1677a(c)

(“The price used to establish export price and constructed export price shall be–(1) increased by .

. . and (2) reduced by”). Similarly, the starting price under § 1677a(b) must be “adjusted under

8

Although § 1677a does not specifically state that it applies to § 1677b(a)(7), the Court

finds that both sections of “Part IV–General Provisions” of “Subtitle IV–Countervailing and

Antidumping Duties” are to be read together. See generally Freytag v. Comm’r, 501 U.S. 868

(1991) (expressing “a deep reluctance to interpret a statutory provision so as to render

superfluous other provisions in the same enactment”) (citation and internal quotation marks

omitted).

Consol. Court No. 97-10-01801 Page 43

subsections (c) and (d)” of § 1677a to determine CEP. Also, the language of § 1677a(c) as well

as § 1677a(d) clearly provides that subsection (c) and (d) adjustments must be made to the

starting price used to “establish” CEP. See id.; 19 U.S.C. § 1677a(d) (“For purposes of this

section, the price used to establish constructed export price shall also be reduced by”); see also

AK Steel Corp. v. United States, 203 F.3d 1330, 1333 (Fed. Cir. 2000) (“If CEP methodology is

used, additional deductions are taken from the sales price to arrive at the U.S. Price.”). The

Court, therefore, finds that § 1677a unambiguously requires Commerce to make: (1) subsection

(c) adjustments to § 1677a(a)’s starting price to determine EP; and (2) subsection (c) and (d)

adjustments to § 1677a(b)’s starting price to determine CEP.

Accordingly, since the language of § 1677a is unambiguous in how to calculate EP and

CEP, the Court declines to follow the rationale of Borden. See generally Connecticut Nat’l Bank

v. Germain, 503 U.S. 249, 253-54 (1992) (“[C]ourts must presume that a legislature says in a

statute what it means and means in a statute what it says there. When the words of a statute are

unambiguous, then, this first canon is also the last: ‘judicial inquiry is complete’”) (quoting

Rubin v. United States, 449 U.S. 424, 430 (1981)); VE Holding Corp. v. Johnson Gas Appliance

Co., 917 F.2d 1574, 1579 (Fed. Cir. 1990) (“It is axiomatic that statutory interpretation begins

with the language of the statute. If . . . the language is clear and fits the case, the plain meaning

of the statute will be regarded as conclusive.”) (citations omitted). Any imbalance that §

1677a’s definitions of EP and CEP creates with respect to Commerce’s LOT analysis when

comparing NV with EP or CEP must be rectified by Congress because neither the Court nor

Consol. Court No. 97-10-01801 Page 44

Commerce may rewrite the statute.9

Further, Commerce’s decision to deny NSK a partial, price-based LOT adjustment

measured by price difference between home market OEM and AM sales was in accordance with

law. There is no indication in § 1677b(a)(7)(A) that the pattern of price differences between two

LOTs in the home market, absent a CEP LOT in the home market, justifies a LOT adjustment.

Rather, Commerce’s interpretation of § 1677b(a)(7)(A) as only providing a LOT adjustment

based upon price differences in the home market between the CEP LOT and the NV LOT was

reasonable, especially in light of the existence of the CEP offset to cover situations such as those

at issue here.

9

Indeed, in AK Steel Corp. v. United States, 203 F.3d 1330 (Fed. Cir. 2000), the United

States Court of Appeals for the Federal Circuit opined in a related matter:

Congress’s intent to fully define EP and CEP without any delegation to

Commerce is further evident when the sections are viewed in the context of the

rest of the anti-dumping statute. It is common in the anti-dumping statute for

Congress to leave decisions about how to make dumping calculations to

Commerce’s discretion because of its expertise. . . . Accordingly, if Congress had

intended for Commerce to use its discretion to determine whether the use of CEP

or EP was appropriate, it would have explicitly left that task to the agency as it did

with other calculations in the statute.

When Congress makes such a clear statement as to how categories are to

be defined, neither the agency nor the courts are permitted to substitute their own

definition for that of Congress, regardless of how close the substitute definition

comes to achieving the same result as the statutory definition. The job of revising

statutes is for Congress, not the agency or the courts.

Id. at 1340-41 (footnote omitted).

Consol. Court No. 97-10-01801 Page 45

VI. Commerce’s Recalculation of NTN’s Home Market and

United States Indirect Selling Expenses Without Regard to Level of Trade

A. Background

In its preliminary calculations, Commerce had calculated NTN’s United States indirect

selling expenses without regard to LOTs. See Final Results, 62 Fed. Reg. at 54,055. NTN

argued that Commerce should have recalculated NTN’s United States selling expenses to reflect

its reported indirect selling expense allocations based on LOT. See id. Torrington, in turn,

contended that Commerce should reject NTN’s indirect selling expense allocations based on

LOT because they were distortive and unsubstantiated. See id.

Commerce responded that in the prior four reviews it determined that NTN’s

methodology for allocating its indirect selling expenses based on LOTs did not bear any

relationship to the manner in which NTN incurred these United States selling expenses and its

methodology led to distorted allocations. See Final Results, 62 Fed. Reg. at 54,055. Because

Commerce found during this POR that NTN “did not provide record evidence to substantiate its

claim that its indirect selling expenses are attributable to and vary by its reported levels of trade,”

the agency recalculated NTN’s United States indirect selling expenses to represent such selling

expenses for all United States sales. Id.

Commerce also recalculated NTN’s home market indirect selling expenses without regard

to LOT, but did not state its reasons for such a recalculation. See Antifriction Bearings from

Japan – NTN Bearing Corporation (NTN), Final Results Analysis Mem. for the Seventh

Administrative Review (“Commerce’s Final Results Mem. for NTN”) (Sept. 22, 1997) (Case No.

Consol. Court No. 97-10-01801 Page 46

A-588-804, Fiche 254, Frame 1, Proprietary Doc. 88, at 5).

B. Contentions of the Parties

Although recognizing that in NTN, 19 CIT at __, 905 F. Supp. 1083, 1094-95 (1995), the

Court decided against a LOT adjustment for NTN’s indirect selling expenses because it failed to

quantify the expenses at each LOT, NTN argues that it submitted evidence that establishes it

incurred different selling expenses at different trade levels for this POR. See NTN’s Mem. Supp.

Mot. J. Agency R. at 14-16; NTN’s Reply Br. at 19, 22. NTN also notes that Commerce verified

and found no discrepancies with respect to NTN’s home market selling expenses. See NTN’s

Mem. Supp. Mot. J. Agency R. at 15. In particular, NTN notes that Commerce verified that

NTN undertakes different selling functions at each LOT depending upon the class of customer

involved. See id.

NTN also asserts that it is inconsistent for Commerce to find that there were different

LOTs in the United States and home markets for NTN’s subject merchandise while

simultaneously recalculating NTN’s United States indirect selling expenses without regard to

LOT. See id. at 16. NTN notes that Commerce has accepted NTN’s methodology of allocating

its United States indirect selling expenses based on LOT in previous reviews and even stated that

NTN’s “methodology prevents, rather than creates, certain distortions.” NTN’s Reply Br. at 21

(quoting Tapered Roller Bearings, Finished and Unfinished from Japan; Final Results of

Administrative Review, 61 Fed. Reg. 57,629, 57,636 (Nov. 7, 1996)).

Consol. Court No. 97-10-01801 Page 47

Accordingly, NTN argues that Commerce should have accepted its reported home market

and United States indirect selling expenses based on LOT. NTN’s Reply Br. at 19, 22. NTN

requests that the Court remand the matter to Commerce and instruct it to recalculate NTN’s

margins by using NTN’s reported indirect selling expense LOT allocations. See id.

Commerce responds that NTN’s allocation methodology failed to reasonably quantify its

United States indirect selling expenses at different trade levels. See Def.’s Mem. in Partial

Opp’n to Pls.’ Mot. J. Agency R. at 48. Commerce asserts that NTN only quantified the

allocation itself and, therefore, the Court should sustain the agency’s recalculation of NTN’s

United States indirect selling expenses. See id.

Commerce further argues that the mere fact that upon verification it found no

discrepancies with respect to NTN’s home market indirect selling expenses, does not mean that

NTN established that these expenses were incurred at each LOT. See id. Moreover, Commerce

argues that the fact it may have verified that NTN performed different selling functions

depending upon the class of customer involved is insufficient by itself to justify a LOT

adjustment for NTN’s home market indirect selling expenses because a class of customer does

not necessarily correspond to a LOT. See id. Commerce asserts, however, that since it did not

state on the record its reasons for recalculating NTN’s home market indirect selling expenses, the

Court should remand the issue so the agency may articulate its reasons for the recalculation. See

id.

Consol. Court No. 97-10-01801 Page 48

Torrington supports Commerce and argues that NTN has not distinguished the current

review from previous reviews in which the Court affirmed Commerce’s recalculation of NTN’s

indirect selling expenses without regard to LOT. See Torrington’s Resp. to Pls.’ Mots. J. Agency

R. at 6, 29-33.

C. Analysis

The Court disagrees with NTN that it adequately supported its LOT adjustment claim for

its reported United States indirect selling expenses. Although NTN purports to show that it

incurred different selling expenses at different trade levels, a careful review of the record

demonstrates that NTN’s allocation methodology does not reasonably quantify the United States

indirect selling expenses incurred at each LOT to support a LOT adjustment. See NTN, 19 CIT at

___, 905 F. Supp. at 1095; NTN Bearing Corp. of Am. v. United States, 23 CIT __, __, Slip. Op.

99-71, at __ (July 29, 1999). Given that NTN had the burden before Commerce to establish its

entitlement to a 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, 190 F.3d at 1330.

Accordingly, the Court denies NTN’s remand request for recalculation of its margins

using its reported United States indirect selling expense data. The Court, however, remands this

matter to Commerce to articulate how the record supports its decision in the Final Results to

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

Consol. Court No. 97-10-01801 Page 49

VII. Constructed Export Price Profit Calculation without Regard to Level of Trade

A. Background

In calculating CEP, Commerce must reduce the starting price used to establish CEP by

“the profit allocated to 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 will be deducted from this

starting price will be “determined by multiplying the total actual profit by [a] percentage”

calculated “by dividing the total United States expenses by the total expenses.” Id. § 1677a(f)(1),

(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” will be “[t]he 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” will be “[t]he expenses incurred

with respect to the narrowest category of merchandise sold in the United States and the exporting

country which includes the subject merchandise.” Id. § 1677a(f)(2)(C)(ii). If the data necessary

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

expenses” will be “[t]he expenses incurred with respect to the narrowest category of merchandise

sold in all countries which includes the subject merchandise.” Id. § 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 id. § 1677a(f)(2)(D).

Consol. Court No. 97-10-01801 Page 50

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 a LOT-specific

basis rather than for each class or kind of merchandise. See Final Results, 62 Fed. Reg. at

54,073. NTN reasoned that § 1677a(f)(2)(C) “expresses a preference for CEP profit to be

calculated on the narrowest possible basis which . . . ensures more accurate results.” Id.

Commerce rejected NTN’s argument, concluding that: (1) “neither the statute nor the

SAA requires [Commerce] to calculate CEP profit on bases more specific than the subject

merchandise as a whole”; (2) basing the CEP-profit calculation on a LOT-specific basis “would

add a layer of complexity to an already complicated exercise with no increase in accuracy”; and

(3) “a subdivision of the CEP-profit calculation would be more susceptible to manipulation.” Id.

at 54,072; see id. at 54,073 (Commerce also relied on its more expansive explanation made in the

sixth review of the AFBs at 62 Fed. Reg. 2081, 2125).10

10

In the sixth AFB review, Commerce reasoned as follows:

Neither the statute nor the SAA require us to calculate CEP profit on bases more

specific than the subject merchandise as a whole. Indeed, while we 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 we 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. We need not undertake such a calculation (see Daewoo

Electronics v. International Union, 6 F.3d 1511, 1518-19 (CAFC 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 (see S. Rep. 103-412, 103d Cong., 2d Sess at

66-67).

(continued...)

Consol. Court No. 97-10-01801 Page 51

B. Contentions of the Parties

NTN contends that Commerce erred by refusing to calculate CEP profit on LOT-specific

basis. See NTN’s Mem. Supp. Mot. J. Agency R. at 26. Highlighting the “narrowest category of

merchandise” language of § 1677a(f)(2)(C)(ii) and (iii), NTN again argues that there is a clear

statutory preference that profit be calculated on the narrowest possible basis. See id. at 26-27.

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. at 27. 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 28. NTN, therefore, requests that the

Court remand the issue to Commerce to calculate CEP profit on a LOT-specific basis. See id.

Commerce responds that it properly determined CEP profit without regard to LOT. See

Def.’s Mem. in Partial Opp’n to Mot. J. Agency R. at 93-98. Commerce notes, inter alia, that §

1677a(f) does not refer to LOT, that is, the statute does not require that CEP profit be calculated

on a LOT-specific basis. See id. at 96. Commerce thereby argues that it does not have to

consider a much narrower sub-category of merchandise such as one based on LOT. See id. 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

10

(...continued)

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

Consol. Court No. 97-10-01801 Page 52

such a deviation from Commerce’s standard methodology for calculating CEP profit. See id. at

97. Torrington generally agrees with Commerce’s CEP-profit calculation. See Torrington’s

Resp. to Pls.’ Mots. J. Agency R. at 27-29.

C. Analysis

Section 1677a(f), as Commerce correctly notes, does not make any reference to LOT.

Accordingly, the Court’s duty under Chevron is to review the reasonableness of Commerce’s

statutory interpretation. See IPSCO, 965 F.2d at 1061 (quoting Chevron, 467 U.S. at 844).

Subsections (ii) and (iii) of the § 1677a(f)(C)’s “total expense” definition both refer to

“expenses incurred with respect to the narrowest category of merchandise . . . which includes the

subject merchandise.” 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). The statute, therefore, 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.

Accordingly, the Court finds 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, 62 Fed. Reg. at 54,073 (citing 62 Fed. Reg. at 2125 (Jan.

Consol. Court No. 97-10-01801 Page 53

15, 1997) (citing, in turn, S. Rep. 103-412, 103d Cong., 2d Sess. at 66-67 (1994))). Finally, even

if the Court were to assume that a narrower basis for calculating CEP profit would be justified

under some circumstances, 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.

VIII. Commerce’s Denial of an Adjustment to NTN’s 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, 62 Fed. Reg. at 54,078. Commerce denied

the adjustment and determined that such an interest 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 54,079. Commerce thereby deducted the

entire amount of NTN’s reported indirect selling expenses, including all interest, from the CEP.

See id.

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

Consol. Court No. 97-10-01801 Page 54

discretionary authority to determine what such an expense encompasses. See id. 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, “mainly to account for the opportunity cost associated with making a

deposit (i.e., the cost of having money unavailable for a period of time).” Preliminary Results,

62 Fed. Reg. at 31,569; see Final Results, 62 Fed. Reg. at 54,079. 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 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 the dumping

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 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:

Consol. Court No. 97-10-01801 Page 55

‘money is fungible. If an importer acquires a loan to cover one operating cost,

that may simply mean that it will not be necessary to borrow money to cover a

different operating cost.’ 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 31,569). Commerce 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 31,569.

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, 62 Fed. Reg. at 54,079. Commerce reasoned that “there is no real

opportunity cost associated with paying 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.

Consol. Court No. 97-10-01801 Page 56

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. Supp. Mot. J. Agency R. at 37. NTN also asserts that if Commerce were to

allow the interest expenses from cash deposits from prior reviews to affect the 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 38.

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 38 (citations omitted). NTN asserts that since it has

relied on Commerce’s prior methodology for such interest expenses, the holding of Shikoku

dictates that Commerce would violate “principles of fairness” if it were allowed to change its

methodology for this POR. See NTN’s Reply Br. at 9.

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. Supp. Mot. J. Agency R.

at 38-39 (citations omitted). In particular, NTN argues that Federal-Mogul Corp. v. United

States, 20 CIT 1438, 1440-41, 950 F. Supp. 1179, 1182-83 (1996), clearly refutes Commerce’s

Consol. Court No. 97-10-01801 Page 57

decision to deny NTN’s interest-expense adjustment. See NTN’s Mem. Supp. Mot. J. Agency R.

at 39. 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, pursuant to the rationale

of [Daewoo Elecs. Co. v. United States, 13 CIT 253, 270, 712 F. Supp. 931, 947 (1989)], such

expenses are not necessarily selling expenses.” NTN’s Reply Br. at 8 (quoting Federal-Mogul,

20 CIT at __, 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 the court in Federal-Mogul held that “‘the interest NTN

paid for antidumping duty deposits is not a selling expense and, thus, should be excluded from

NTN’s U.S. indirect selling expenses.’” NTN’s Reply Br. at 8 (quoting Federal-Mogul, 20 CIT

at __, 950 F. Supp. at 1183). Moreover, NTN notes that in NSK Ltd. v. United States, 21 CIT __,

__, 969 F. Supp. 34, 55 (1997), the Court reaffirmed its decision in Federal-Mogul to allow

NTN’s adjustment for interest expenses on antidumping duty cash deposits. See NTN’s Mem.

Supp. Mot. J. Agency R. at 40. NTN contends that since there has been no change in law, the

issue should be remanded to Commerce to allow NTN to offset its United States indirect selling

expenses for imputed interest payments incurred in financing cash deposits. See id. at 12, 40;

NTN’s Reply Br. at 9.

Commerce argues that its decision to deny the offset was within its discretion. See Def.’s

Consol. Court No. 97-10-01801 Page 58

Mem. in Partial Opp’n to Mot. J. Agency R. at 100. Commerce also argues that it may change its

methodology if it presents a reasonable basis for departing from its previous practice. See id. at

100-01. Further, Commerce contends that the interest expenses allegedly incurred with financing

antidumping duty cash deposits are ordinary interest expenses and, therefore, not deductible from

United States indirect selling expenses. See id. at 101-02.

Torrington 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

Torrington’s Resp. to Pls.’ Mots. J. Agency R. at 18-19. Specifically, Torrington argues that the

more a company dumps its merchandise in the United States, the alleged interest expenses on

antidumping duty cash deposits will become greater. See id. at 19. Torrington contends that as

the interest expense becomes greater, so does the offset to its reported United States indirect

selling expenses and, indeed, if the offset becomes sufficiently large, dumping margins could

disappear over time. See id. Torrington also argues that there is no evidence that NTN actually

obtained loans for the purpose of posting cash deposits and, therefore, there is no factual basis for

the adjustment. See id.

Consol. Court No. 97-10-01801 Page 59

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 __, 950 F.

Supp. at 1183, the Court disagrees that Shikoku, 16 CIT at 386-87, 795 F. Supp. at 420, prevents

Commerce in this review 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, 21 CIT

__, __, 989 F. Supp. 234, 250 (1997) (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 that NTN failed to provide any

evidence on record that supported it 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.

Consol. Court No. 97-10-01801 Page 60

IX. Inclusion of Sample Transactions in NTN’s United States Sales Database

A. Background

In NSK Ltd. v. United States, 115 F.3d 965 (Fed. Cir. 1997), four months prior to

Commerce’s publication of the Final Results, the United States Court of Appeals for the Federal

Circuit (“CAFC”) concluded that “the term ‘sold’ . . . requires both a transfer of ownership to an

unrelated party and consideration.” Id. 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] sample sales did

not constitute ‘sales,’ they should not have been included in calculating United States price.” Id.

During this review, Commerce sent a questionnaire on June 19, 1996 requiring all

respondents to (1) identify any transactions which they claimed involved sample or prototype

sales, and (2) provide the following additional information:

(1) Describe how the order for these sales were communicated.

(2) What documents are available to demonstrate that these sales are samples

or prototypes?

(3) Did the customer in question purchase these particular items before the

date of the claimed sample sale? If so, how many were purchased?

(4) Contrast the prices and quantities involved in these purchases with normal

sales of these items, if any, to other customers and subsequent sales to the

same customers.

(5) What was the ultimate disposition of these bearings? Did title pass to the

recipient of the merchandise? Were the bearings tested and destroyed

during trial application?

Commerce’s Questionnaire, Sec. B (Field No. 49, home or third-country market), Sec. C (Field

No. 55, United States market): Samples and Prototypes, at V-8, V-9. Commerce warned NTN

that (1) if it failed to accurately provide the information requested within the time period,

Consol. Court No. 97-10-01801 Page 61

Commerce would proceed with an appraisement based on the facts available, and (2) if NTN

failed to cooperate with Commerce by not complying to the best of its ability with the request for

information, Commerce would use information adverse to NTN’s interest in conducting its

dumping analysis. Id. (General Instructions).

On September 9, 1996, NTN responded to Commerce’s Questionnaire regarding United

States market sample sales as follows: (1) customers requested sample sales; (2) sample sales

were reported with a code of “S” and other sales as “X”; (3) the sale was entered as a sample and

recorded as a sample on order forms and invoices; (4) due to the quantity of sample sales and

limited time to respond, NTN did not have time to review each model’s purchase history; and (5)

“NTN is the manufacturer of all the merchandise sold as samples.”11 NTN’s Questionnaire

Resp., Sec. C, at C-43 (Case No. A-588-804, Fiche 202, Frame 90, Proprietary Doc. 24). NTN

further responded that certain information concerning sample sales regarding Commerce’s

questions three and four was irrelevant. See id. at C-44.

Commerce sent a supplemental questionnaire to NTN requesting additional information,

however, none of the questions appear to have concerned NTN’s reported sample sales. See

Commerce’s Supplemental Questionnaire (Dec. 2, 1996) (Case No. A-588-804, Fiche 85, Frame

26, Pub. Doc. 136). Similarly, none of NTN’s responses to the supplemental questionnaire

addressed the samples. See NTN’s Supplemental Questionnaire Resp. (Dec. 19, 1996) (Case No.

11

Although NTN’s responses to Commerce’s request for information were bracketed as

proprietary information, the Court notes that the responses, as paraphrased in this opinion, do not

compromise proprietary information. Quoted response number five (5) was not bracketed as

proprietary information.

Consol. Court No. 97-10-01801 Page 62

A-588-804, Fiche 89, Frame 28, Pub. Doc. 149). Commerce later verified that NTN’s records

identified certain sales as samples and that the sale price for a sample was determined by a

salesperson. See Commerce’s Verification Report for NTN (May 8, 1997) (Case No. A-588-804,

Fiche 96, Frame 47, Pub. Doc. 180, at 5).

Subsequently, NTN requested that Commerce exclude its sample sales from its United

States sales database pursuant to NSK, 115 F.3d at 975. Commerce rejected NTN’s request,

noting that although it would follow NSK and “exclude sample transactions, [that is,]

transactions for which a respondent has established that there is either no transfer of ownership or

no consideration, from the dumping [margin] calculations,” it would not automatically exclude

from its dumping margin analysis “any transaction to which a respondent applies the label

‘sample.’” Final Results, 62 Fed. Reg. at 54,069. Rather, Commerce noted that the party in

possession of the needed information has the burden of producing that information for an

exclusion. See id. With respect to NTN’s samples-exclusion claim, Commerce determined as

follows:

[NTN] did not answer our questions regarding the purchase history of parties

receiving samples. [NTN] also did not answer our questions regarding the prices

and quantities involved in sample sales. Rather, [NTN] stated that the

information is irrelevant. The answers to these questions would have aided us in

determining whether [NTN] received a bargained-for exchange from [its United

States] customers. Lacking knowledge of the details of these transactions, we

cannot conclude that [NTN] received no consideration for these alleged samples.

In other words, because [NTN] impeded our investigation of these transactions,

we determined that an adverse inference is appropriate. Therefore, for these final

results, we have included [NTN’s] sample sales in [its United States] sales

database.

Id.

Consol. Court No. 97-10-01801 Page 63

B. Contentions of the Parties

NTN contends that Commerce acted contrary to NSK, 115 F.3d at 975, when it refused to

exclude NTN’s reported zero-price sample sales from its United States sales database. See

NTN’s Mem. Supp. Mot. J. Agency R. at 23. NTN asserts that sample sales, by their very nature,

lack consideration and it in fact received no consideration for such sales. See id. Moreover,

NTN argues that its response questionnaire and related correspondence (1) provided complete

sales data for all United States transactions in its United States sales database, including zero-

priced transactions, and (2) fully answered all of Commerce’s questions regarding its United

States sales. See NTN’s Reply Br. at 11-12. NTN also argues that none of the information

requested by these questions was mentioned by the CAFC in NSK. See id. at 12. NTN requests

that the issue be remanded to Commerce to exclude NTN’s zero-priced sample sales from its

United States sales database. See NTN’s Mem. Supp. Mot. J. Agency R. at 23.

Commerce’s notes that only NTN possesses the information concerning the purchase

history of its alleged samples, including the price and quantity of any prior or subsequent

purchases of these products by the same or other consumers. See Def.’s Mem. in Partial Opp’n

to Mot. J. Agency R. at 86. Commerce asserts that since NTN withheld that information, it failed

to meet its burden to show that it received no consideration for the alleged samples at issue. See

id. Further, Commerce contends that NTN cannot be excused from responding to the agency’s

questions because, in NTN’s view, certain information is irrelevant. See id. Rather, Commerce

claims that it, not NTN, must determine the relevancy of its questions. See id.

Commerce, therefore, contends that since NTN withheld the requested information, and

Consol. Court No. 97-10-01801 Page 64

the record did not contain information that Commerce could use to perform its dumping margin

calculation, Commerce properly relied on “facts otherwise available” to fill in the gaps for its

calculation. See id. (citing 19 U.S.C. § 1677e(a) (1994)). Also, Commerce contends that since

NTN failed to cooperate to its best of its ability with Commerce’s request for information,

Commerce properly determined to apply an adverse inference, that is, the information would

indicate that NTN did receive consideration for its alleged samples. See id. at 86-87 (citing 19

U.S.C. § 1677e(b)). Accordingly, Commerce argues that its decision to include NTN’s alleged

sample sales in NTN’s United States database is based upon substantial evidence and in

accordance with law. See id. at 87.

Torrington agrees with Commerce’s findings, contending that the mere absence of a

monetary price does not necessarily establish a lack of consideration. See Torrington’s Resp. to

Pls.’ Mots. J. Agency R. at 26. Moreover, Torrington asserts that since Commerce did not have

information that NTN’s sample sales were free of broader forms of consideration, Commerce

properly concluded that it did not have the data to accept NTN’s claim that such sales were in

fact without consideration. See id. Torrington additionally asserts that respondents, such as

NTN, who choose not to provide the requested information because they determine that the

requested data is not legally relevant do so at their own peril. See id.

C. Analysis

The antidumping statute mandates that Commerce use “facts otherwise available”

(commonly referred to as “facts available”) if “necessary information is not available on the

Consol. Court No. 97-10-01801 Page 65

record” of an antidumping proceeding. 19 U.S.C. § 1677e(a)(1) (1994). In addition, Commerce

may use facts available where an interested party or any other person: (1) withholds information

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

requested date or in the form and manner requested, subject to 19 U.S.C. § 1677m(c)(1), (e); (3)

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

verified as provided in section 19 U.S.C. § 1677m(i). Id. § 1677e(a)(2)(A)-(D). Section

1677e(a) provides, however, that the use of facts available shall be subject to the limitations set

forth in 19 U.S.C. § 1677m(d) (1994).

Section 1677m, 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 __, 4 F. Supp. 2d at 1245. Section 1677m(d), entitled

“[d]eficient 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 permit that person an opportunity to remedy or

explain the deficiency. If the remedial response or explanation provided by the party is found to

be “not satisfactory” or untimely, Commerce may, subject to § 1677m(e), disregard “all or part of

the original and subsequent responses” in favor of facts available. Id. § 1677m(d). Section

1677m(e) states that Commerce may not decline to consider information that is submitted by an

interested party and is necessary to the determination but does not meet all of Commerce’s

requirements if: (1) the information is submitted within the applicable deadlines; (2) “the

information can be verified”; (3) “the information is not so incomplete that it cannot serve as a

Consol. Court No. 97-10-01801 Page 66

reliable basis for reaching the applicable determination”; (4) the party establishes that it acted to

the best of its ability in providing the information and meeting the requirements established by

Commerce concerning the information; and (5) Commerce can use the information without

undue difficulties. See Borden, 22 CIT at __, 4 F. Supp. 2d at 1245 (“Subsection (e) may require

use of the respondent’s information notwithstanding that a remedy or explanation is

unsatisfactory.”). Also, § 1677m(c)(1) provides that if an interested party promptly informs

Commerce that it is having difficulties submitting the information in the requested form and

manner, Commerce may modify its request “to the extent necessary to avoid imposing any

unreasonable burden on that party” in providing such information.

Once Commerce determines that use of facts available is warranted, § 1677e(b) permits

Commerce to apply an “adverse inference” if it can find that “an interested party has failed to

cooperate by not acting to the best of its ability to comply with a request for information.” Such

an inference may permit Commerce to rely on information derived from the petition, the final

determination, a previous review or any other information placed on the record. See 19 U.S.C. §

1677e(c) (1994). When Commerce relies on information other than “information obtained in the

course of the investigation or review, [Commerce] shall, to the extent practicable, corroborate the

information from independent sources that are reasonably at [its] disposal.” Id.

However, in order to find that a party “has failed to cooperate by not acting to the best of

its ability,” it is not sufficient for Commerce to merely assert this legal standard as its conclusion

or repeat its finding concerning the need for facts available. See Borden, 22 CIT at __, 4 F. Supp.

2d at 1246 (“Here, the Department did not make the required additional finding that [respondent]

Consol. Court No. 97-10-01801 Page 67

had failed to act to the best of its ability. In essence, it simply repeated its 19 U.S.C. §

1677e(a)(2)(B) finding, using slightly different words . . . .”) (citation omitted); Ferro Union,

Inc. v. United States, 22 CIT __, __, 44 F. Supp. 2d 1310, 1329 (1999) (“Once Commerce has

determined under 19 U.S.C. § 1677e(a) that it may resort to facts available, it must make

additional findings prior to applying 19 U.S.C. § 1677e(b) and drawing an adverse inference.”).

Rather, to be supported by substantial evidence, Commerce must clearly articulate (1) “why it

concluded that a party failed to comply to the bests 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, 22 CIT at __, 44 F. Supp. 2d at 1331.

Although in the first request for information Commerce warned NTN that any lack of

response will result in use of facts available to fill in gaps in the record, the Final Results do not

clarify (1) whether NTN was given prompt notice of the deficiency regarding the sample sales

data and given the opportunity to remedy the deficiency, or (2) even if NTN provided a remedial

response, whether Commerce determined that such a response was not satisfactory or untimely,

as required by 19 U.S.C. § 1677m(d). A review of the record, as noted, indicates that

Commerce’s supplemental questionnaire did not request additional information regarding NTN’s

reported sample sales. See Commerce’s Supplemental Questionnaire (Dec. 2, 1996). Although

Commerce asserted in its brief that NTN met the requirements of 19 U.S.C. § 1677e(a)(2)(A)-

(C), see Def.’s Mem. in Partial Opp’n to Mot. J. Agency R. at 82-87, the Court cannot defer to

this post hoc rationalization as a basis to uphold Commerce’s decision to use facts available

because such a decision must be sustained, if at all, on the same basis as the reasoning articulated

Consol. Court No. 97-10-01801 Page 68

in the final determination itself, see Hoogovens Staal BV v. United States, 24 CIT __, __, 86 F.

Supp. 2d 1317, 1331 (Jan. 21, 2000) (holding that “a reviewing court must evaluate the validity

of an agency’s decision on the basis of the reasoning presented in the decision itself. An agency

determination ‘cannot be upheld merely because findings might have been made and

considerations disclosed which would justify its order . . . .’”) (quoting SEC v. Chenery Corp.,

318 U.S. 80, 94 (1943)); see also Burlington Truck Lines, Inc. v. United States, 371 U.S. 156,

168-69 (1962) (“The courts may not accept . . . counsel’s post hoc rationalizations for agency

action; . . . an agency’s discretionary order [must] be upheld, if at all, on the same basis

articulated in the order by the agency itself.”).12 Further, even if the Court were to assume that

Commerce met § 1677e(a)’s criteria for using facts available, the Court notes that Commerce did

not articulate in the Final Results whether it made any “additional findings” that NTN had failed

to act to the best of its ability before applying an adverse inference under § 1677e(b).

The Court, however, agrees with Commerce’s finding that it should not automatically

exclude from its dumping margin analysis “any transaction to which a respondent applies the

label ‘sample.’” Final Results, 62 Fed. Reg. at 54,069. In determining whether to exclude

12

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 (1935)).

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samples from the sales database, as Commerce correctly noted, it must “examine the information

on record to determine whether the recipients of the samples have undertaken actual obligations

to purchase AFBs from the provider of the free bearings or whether the recipients remained free

to purchase bearings of their own accord.” Id. This approach is clearly consistent with the

CAFC’s decision in NSK, 115 F.3d at 973-75, where the appellate court determined that a foreign

manufacturer’s AFB “samples given to potential customers at no charge lacked consideration

[because] . . . there is no evidence that potential customers had any obligation regarding samples

received from [the manufacturer]. These potential customers were free to transact with [the

manufacturer] based solely on their whim.” See id. at 975 (noting that “[w]hen the promisor may

choose to perform based solely on whim, then the promise will not serve as consideration”)

(citing 3 Williston on Contracts, § 7:7 at 18-19 (4th ed. 1992))). The CAFC explained that

“[c]onsideration generally requires a bargain-for exchange,” see id. (citing 3 Williston on

Contracts, § 7:2 at 89 (4th ed. 1992)), and also noted that a “sale” is defined as “ ‘the act of

selling: a contract transferring the absolute or general ownership of property from one person to

another for a price (as a sum of money or any other consideration).” See id. at 974 (quoting

Webster’s Third New International Dictionary 2003 (1986)). In others words, as Commerce

accurately noted in the Final Results, consideration, or “price,” is not necessarily limited to a

“sum of money.” See 62 Fed. Reg. at 54,069 (stating that Commerce would not limit its “review

of consideration to the payment of a monetary price for the sample products”).

Accordingly, although NTN argues that none of Commerce’s questions in its first request

for information were mentioned by the CAFC in NSK, 115 F.3d at 973-76, the Court finds that

Consol. Court No. 97-10-01801 Page 70

Commerce may formulate questions that reasonably ascertain whether there was a lack of

consideration or transfer of ownership. Also, the Court notes that a respondent still maintains the

burden of showing that there is either no consideration or no transfer of ownership to an

unrelated party in order to exclude the sample sales from the dumping margin analysis. See

generally Timken Co. v. United States, 11 CIT 786, 804, 673 F. Supp. 495, 513 (1997) (stating

that Commerce “acts reasonably in placing the burden of establishing adjustments on a

respondent that seeks the adjustments and that has access to the necessary information”).

Nevertheless, in light of the considerable uncertainty left by the Final Results, the Court

cannot conclude that Commerce’s use of adverse facts available was warranted under 19 U.S.C.

§ 1677e(a). The Court, therefore, remands the issue to Commerce to clarify how it complied

with the statutory framework of 19 U.S.C. §§ 1677e, 1677m for using facts available and

applying an adverse inference. If Commerce determines that it conformed with the statutory

framework, Commerce must include NTN sample sales in its United States sales database

because the Court notes that NTN specifically admitted it “sold” rather than gave away samples.

See NTN’s Questionnaire Resp., Sec. C, at C-43 (“NTN is the manufacturer of all the

merchandise sold as samples.”). If, however, in the remand results Commerce determines it did

not adhere to all of the statutory prerequisite conditions, Commerce must give NTN the

opportunity to remedy or explain any deficiency regarding its alleged sample sales.

X. Commerce’s Adjustments to NTN’s Cost of Production and Constructed Value

A. Background

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During the POR, NTN purchased certain components from an affiliated supplier that were

used in the manufacture of ball and cylindrical roller bearings. See Commerce’s Final Results

Mem. for NTN at 5. NTN’s affiliated producer submitted COP data for certain components sold

to NTN. See Affiliated Producer’s Letter to Commerce (Sept. 9, 1996) (Case No. A-588-804,

Fiche 208, Frame 1, Proprietary Doc. 25). Commerce found that “[s]ome of the components

NTN purchased from . . . [the] affiliated supplier . . . were transferred at prices below the cost of

production.” Commerce’s Final Results Mem. for NTN at 5. Because Commerce determined

that the record was unclear as to which bearing models NTN used the purchased components in,

Commerce was unable to adjust NTN’s COP and CV data on a model-specific basis. See id.

Therefore, using “facts otherwise available,” Commerce calculated the average percentage

difference between the transfer price and the cost for the components sold to NTN by its

affiliated supplier. See id. at 5-6. Commerce then adjusted NTN’s COP and CV upward by this

average percentage difference. See id. at 6; Final Results, 62 Fed. Reg. at 54,065.

Consol. Court No. 97-10-01801 Page 72

B. Contentions of the Parties

NTN argues Commerce’s adjustment to NTN’s COP and CV data was contrary to law

because Commerce resorted to facts available and made an adverse inference without giving

NTN the opportunity to provide the data Commerce determined was lacking from the record.

See NTN’s Mem. Supp. Mot. J. Agency R. at 19. Specifically, NTN asserts that Commerce

should not have resorted to facts available because: (1) NTN fully responded to Commerce’s

requests for information and that Commerce at no time indicated that NTN’s data was unclear or

insufficient, that is, Commerce never asked for clarification of the information NTN submitted,

see id. at 20; and (2) citing subsections (1) and (2) of 19 U.S.C. § 1677e(a), “NTN did not

withhold information, fail to provide information by the deadline or in the manner requested, or

impede the investigation in any manner,” id. at 21. NTN also notes that Commerce may only

make an adverse inference when a “party has failed to cooperate by not acting to the best of its

ability.” Id. at 22 (quoting § 1677e(b)). NTN, therefore, asserts that since Commerce never

asked for any additional information or clarification of the data which was submitted concerning

the affiliated supplier’s inputs, Commerce is prohibited from making an adverse inference and

applying it to all of NTN’s COP and CV data. See id. Accordingly, NTN requests that the Court

remand the issue and order Commerce to use NTN’s submitted COP and CV data. See NTN’s

Reply Br. at 25.

Commerce concedes in its brief that NTN did not meet any of the elements under

paragraph (2) of the facts available provision, § 1677e(a), that is, “NTN did not withhold

information, fail to provide information by the deadline specified or in the manner requested, or

Consol. Court No. 97-10-01801 Page 73

impede the investigation in any manner.” See Def.’s Mem. in Partial Opp’n to Mot. J. Agency R.

at 79. Nevertheless, Commerce notes that NTN “overlook[ed] paragraph ‘(1)’ of facts available

provision, which mandates the use of facts otherwise available “‘if the necessary information is

not available on the record.’” Id. (quoting § 1677e(a)(1)). Commerce argues that when it found

the necessary information was not available on the record, it decided to use other information on

the record to reflect the fact that NTN purchased certain components from an affiliated supplier

that were transferred at prices below the COP. See id. at 81. Commerce explained that “the

other information on record allowed [it] to adjust NTN’s COP and CV without having to reject

NTN’s reported information in its entirety.” See id.

Further, Commerce asserts that it did not “determine to make an adverse inference in

choosing what information to use as facts available.” Id. Rather, Commerce reasoned “given

that the necessary information was not available on record, [it] used other information to address

the problem with NTN’s supplier’s transfer prices.” Id. Commerce, therefore, maintains that

“[u]nder these circumstances, [its] use of facts available was reasonable.” Id.

Torrington argues that Commerce properly adjusted all of NTN’s COP and CV data for

ball and cylindrical roller bearings because “NTN failed to make the record clear at its own

peril.” Torrington’s Resp. to Pls.’ Mots. J. Agency R. at 37. Torrington notes that this Court

emphasized in Neuweg Fertigung GmbH v. United States, 16 CIT 724, 797 F. Supp. 1020

(1992), that “‘[u]ltimately it is the respondent’s responsibility to make sure that [Commerce]

understands, and correctly uses, any information provided by the respondent.” Id. at 36 (quoting

Neuweg, 16 CIT at 728, 797 F. Supp. at 1024). Torrington asserts that since NTN “knew what

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models reported incorporated the purchased components” from the affiliated supplier, and since

NTN “knew that Commerce would compare transfer prices and actual costs as to such

components, . . . the failure to identify those models incorporating the purchased components

must be charged to NTN, not to Commerce.” Id.

NTN replies that the facts of this case are distinguishable from Neuweg because

Commerce in that case gave the respondent notice of Commerce’s problems with the

respondent’s submitted information at a disclosure conference soon after the publication of the

preliminary results. See NTN’s Reply Br. at 23 (citing Neuweg, 16 CIT at 728, 797 F. Supp. at

1024). Here, NTN notes that Commerce did not provide any notice and, therefore, it is

inequitable to punish NTN for Commerce’s failure to request information. See id.

C. Analysis

Although Commerce relies on paragraph (1), not (2), of § 1677e(a) for using facts

available, the section requires that Commerce meet the requirements of § 1677m(d) before

resorting to facts available. Section 1677m(d), as noted earlier, states that if Commerce

determines that a response to a request for information does not comply with the request,

Commerce shall promptly inform the respondent submitting the response of the deficiency and

permit the respondent an opportunity to remedy or explain the deficiency.

Consol. Court No. 97-10-01801 Page 75

In this case, the Court finds that the Final Results do not clearly articulate whether NTN

was provided with such notice and the opportunity to provide a remedial response regarding

which ball and cylindrical roller bearing models the purchased components were used in by

NTN. Since there appears to be a lack of § 1677m(d) notice, the Court agrees with NTN that this

case is distinguishable from Neuweg. Accordingly, the Court remands the issue to Commerce to

clarify whether NTN was provided with notice and opportunity to respond pursuant to §

1677m(d).

XI. Commerce’s Inclusion of NTN’s Alleged Sample Sales and Sales

with Abnormally High Profits in the Normal Value Calculation

A. 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). NTN

contended during the review that Commerce, in calculating NV, should have excluded sales with

“abnormally high” profits because they were outside of the ordinary course of trade. See Final

Results, 62 Fed. Reg. at 54,065. Commerce rejected NTN’s contention, explaining as follows:

[N]o respondent has adequately shown that profits earned were aberrational or

abnormal or otherwise outside the ordinary course of trade. As in past reviews,

the fact that a respondent identified sales as having abnormally high profits does

not necessarily render such sales outside the ordinary course of trade. . . . [I]n

order to determine that profits are abnormally high, there must be certain unique

or unusual characteristics related to the sales in question. Verification of the

designation of certain sales as having abnormally high profits merely proves that

the respondent identified sales as having abnormally high profits in its own

records. This evidence does not

Consol. Court No. 97-10-01801 Page 76

indicate that such sales were made outside the ordinary course of trade for

purposes of calculating NV in these reviews.

See id. at 54,065-66.

B. Contentions of the Parties

In response, NTN argues that Commerce’s failure to exclude NTN’s sales with unusually

high profits from the NV calculation, despite NTN providing sufficient evidence on record

indicating that these sales were outside of the ordinary course of trade, was inconsistent with 19

U.S.C. § 1677b(a)(1)(B), the SAA and the proposed regulation 19 C.F.R. § 351.102(b) (61 Fed.

Reg. 7308, 7353 (Feb. 27, 1996)), all which clearly instruct Commerce to make such an

exclusion. See NTN’s Mem. Supp. Mot. J. Agency R. at 10-11, 23-26; NTN’s Reply Br. at 12-

17. NTN also argues, for the first time on appeal, that Commerce erred in including its home

market sample sales in the calculation of NV because facts on the record support that the sales

were made outside of the ordinary course of trade. See NTN’s Mem. Supp. Mot. J. Agency R. at

25-26. NTN, therefore, requests that its sales with abnormally high profits and samples sales be

disregarded in the calculation of NV. See id. at 26.

Commerce properly exercised its discretion in rejecting NTN’s argument that Commerce

must disregard sales with abnormally high profits as sales not in the ordinary course of trade

because “NTN failed to adequately show that profits earned were ‘aberrational or abnormal or

otherwise outside of the ordinary course of trade.’ ” Def.’s Mem. in Partial Opp’n to Mot. J.

Agency R. at 91 (quoting Final Results, 62 Fed. Reg. at 54,065). Commerce further asserts that

the Court should reject NTN’s request to exclude sample sales from the NV calculation because

Consol. Court No. 97-10-01801 Page 77

(1) NTN failed to raise the claim at the administrative level; or (2) in the alternative, if NTN is

not required to exhaust its administrative remedies, NTN failed to demonstrate that the samples

were not sold in the ordinary course of trade. See id. at 92-93.

Torrington claims that Commerce properly rejected NTN’s request to exclude alleged

highly profitable sales and sample sales from the NV calculation because (1) a higher profit on a

particular sale does not establish that a sale is outside the ordinary course of trade, and (2) NTN

failed to show that the contested sales were not in ordinary course of trade. See Torrington’s

Resp. to Pls.’ Mots. J. Agency R. at 27.

C. Analysis

The term “ordinary course of trade” is defined as:

the conditions and practices which, for a reasonable period of 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 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 added). Although § 1677b(b)(1)’s below-cost sales and

§ 1677b(f)(2)’s affiliated party transactions are clearly outside the ordinary course of trade, the

“among others” language of § 1677(15) clearly indicates that transactions in subsection (A) and

(B) are not inclusive. Indeed, the SAA provides that aside from §§ 1677b(b)(1), (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

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are not ordinary as compared to sales or transactions generally made in the same

market. Examples of such sales or transactions include merchandise produced

according to unusual product specifications, 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.

SAA at 834. 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. Thus, Commerce has the discretion to interpret § 1677(15) to determine which sales are

outside the ordinary course of trade, such as sales involving aberrational prices and abnormally

high profits. See Mitsubishi Heavy Indus., Ltd. v. United States, 22 CIT __, __, 15 F. Supp. 2d

807, 830 (1998) (“Congress granted Commerce discretion to decide under what circumstances

highly profitable sales would be considered to be outside of the ordinary course of trade.”); cf.

Koenig & Bauer-Albert AG v. United States, 22 CIT, __, __, 15 F. Supp. 2d 834, 850 n.8 (1998)

(noting that although Commerce has the discretion to decide under what circumstances highly

profitable sales are outside of the ordinary course of trade, “Commerce may not impose this

requirement arbitrarily, however, nor may Commerce impose impossible burdens of proof on

claimants.”) (citing NEC Home Elecs. v. United States, 54 F.3d 736, 745 (Fed. Cir. 1995)

(holding that burden imposed to prove a LOT adjustment was unreasonable because claimant

could, under no practical circumstances, meet the burden))).

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In this case, the Court finds Commerce’s decision to require additional evidence

demonstrating that sales with higher profits were outside of the ordinary course of trade before

excluding such sales from the NV calculation was a reasonable exercise of its discretion. The

record reflects that NTN did not provide any evidence that supports its claim that the disputed

sales had abnormally high profits, that is, they were extraordinary for the market in question.

With respect to excluding NTN’s home market sample sales from the NV calculation, although,

contrary to Commerce’s assertion, NTN raised the issue below, see NTN’s Case Br. at 2-3 (July

1, 1997) (Case No. A-588-804, Fiche 99, Frame 1, Pub. Doc. 204), the Court finds NTN

similarly failed to show that the sales were outside the ordinary course of trade.

XII. Commerce’s Exclusion of Certain NTN 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

its preliminary analysis, Commerce conducted an arm’s length-test to determine whether NTN’s

affiliated party sales could be used for purposes of calculating NV. See Commerce’s Preliminary

Results Analysis Mem. for NTN (June 2, 1997) (Case No. A-588-804, Fiche 97, Frame 48, Pub.

Doc. 184); see generally SAA at 827 (“Commerce will . . . ignore sales to affiliated parties which

cannot be demonstrated to be at arm’s length prices for purposes of calculating normal value.”).

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

unaffiliated parties for all classes and kinds of merchandise. See id. Commerce, in accordance

with 19 U.S.C. § 1677b(f)(2), “disregarded sales of bearings to certain affiliated parties for

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certain classes or kinds of merchandise because [it] found that the net price of these products,

when sold to these affiliated parties, was, on average, less than when these products were sold to

unaffiliated parties.” Id. Commerce stated that it “used sales to affiliated customers only where

[it] determined that such sales were at arm’s-length prices, i.e., at prices comparable to prices at

which the firm sold identical merchandise to unrelated customers.” Preliminary Results, 62 Fed.

Reg. at 31,570.

B. Contentions of the Parties

NTN argues that Commerce erred in applying the arm’s-length test when it refused to use

certain NTN sales to affiliated parties in the NV calculation. See NTN’s Mem. Supp. Mot. J.

Agency R. at 42. NTN asserts that Commerce should have examined factors other than price in

determining whether affiliated and unaffiliated sales were comparable before disregarding NTN’s

affiliated party sales from the NV calculation. See id. at 42-45; NTN’s Reply Br. at 33-35.

Commerce argues that pursuant to 19 C.F.R. § 353.38(c)(1)(ii), (c)(2) (1995), if NTN

disagreed with the agency’s use of prices in determining whether to use or disregard sales to

affiliated customers, NTN was obligated to raise the issue in its case brief to the Final Results.

See Def.’s Mem. in Partial Opp’n to Mot. J. Agency R. at 103. Commerce, therefore, asserts that

the Court must reject NTN’s untimely argument or, in the alternative, sustain Commerce’s arm’s-

length test because it is supported by substantial evidence and in accordance with law. See id. at

104. Torrington generally agrees with Commerce’s determination. See Torrington’s Resp. to

Pls.’ Mots. J. Agency R. at 37-39.

Consol. Court No. 97-10-01801 Page 81

In response, NTN asserts, inter alia, that it would have been futile to raise the issue of

looking at factors other than price when determining price comparability at the administrative

level because Commerce refused to look at additional factors in prior administrative reviews.

See NTN’s Reply Br. at 35-36.

C. Analysis

It is a cardinal principle of administrative law that a court may not consider a party’s

arguments that were not made before the agency. See United States v. L.A. Tucker Truck Line,

344 U.S. 33, 36-37 (1952) (“We have recognized ... that orderly procedure and good

administration require that objections to the proceedings of an administrative agency be made

while it has opportunity for correction in order to raise issues reviewable by the courts.”).

However, a well-recognized exception to the exhaustion of administrative remedies rule is that

exhaustion is not required where the efforts of the party would be futile. See Hormel v.

Helvering, 312 U.S. 552, 557 (1941); United Black Fund, Inc. v. Hampton, 352 F. Supp. 898,

902 (D.D.C. 1972) (“[I]t is well settled that an action should not be dismissed for failure to

exhaust administrative remedies when an attempt to gain the desired relief from the agency in

question would obviously be a futile act.”). Also, 28 U.S.C. § 2637(d) grants the Court

discretion in deciding when requiring exhaustion is appropriate. See United States v. Priority

Prods., Inc., 793 F.2d 296, 300 (Fed. Cir. 1986).

Consol. Court No. 97-10-01801 Page 82

Here, the Court declines to address NTN’s arm’s-length test issue. Even if it might have

been futile for NTN to raise the issue at the administrative level since Commerce refused in the

fifth administrative review to consider looking at factors other than price, see Antifriction

Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany,

Italy, Japan, Singapore, Sweden, and the United Kingdom; Final Results of Antidumping Duty

Administrative Reviews and Partial Termination of Administrative Reviews, 61 Fed. Reg. 66,472,

66,511 (Dec. 17, 1996) (stating that “regulations direct us to focus on price”), the Court has

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 were comparable. The Court also finds no basis under the circumstances of this case to

depart from its prior holdings in NSK Ltd. v. United States, 21 CIT __, __, 969 F. Supp. 34, 55

(1997) (rejecting “the contention that Commerce should consider other factors (i.e., factors other

than price) in determining comparability”), and NTN B

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