NTN Bearing Corp. of America v. United StatesNTN Bearing Corp. of America v. United States
OPINION
Plaintiffs and defendant-intervenors, NTN Bearing Corporation of America, American NTN Bearing Manufacturing Corporation and NTN Corporation (collectively “NTN”), NSK Ltd. and NSK Corporation (collectively “NSK”), and Koyo Seiko Co., Ltd. and Koyo Corporation of U.S.A. (collectively “Koyo”), move pursuant to USCIT R. 56.2 for judgment upon the agency record challenging various aspects of the Department of Commerce, International Trade Administration’s (“Commerce”) final determination, entitled Final Results of Antidumping Duty Administrative Reviews of Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan (“Final Results”), 63 Fed.Reg. 2558 (Jan. 15, 1998), as amended, Amended Final Results of Anti-dumping Duty Administrative Reviews of Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan (“Amended Final Results ”), 63 Fed.Reg. 13,391 (Mar. 19, 1998). Defendant-intervenor and plaintiff, The Timken Company (“Timken”), also moves pursuant to USCIT R. 56.2 for judgment upon the agency record challenging certain determinations of Commerce’s Final Results.
Specifically, NTN contends that Commerce unlawfully: (1) conducted a duty absorption inquiry under
NSK contends that Commerce unlawfully; (1) conducted a duty absorption inquiry under
Koyo contends that Commerce unlawfully: (1) conducted a duty absorption inquiry under
Timken contends that Commerce unlawfully: (1) applied adverse facts available to Koyo’s entered value; (2) failed to adjust CEP for indirect selling expenses reported by NTN, NSK and Koyo; (3) permitted NTN to exclude certain warehousing expenses attributable to non-scope merchandise from its reported United States indirect selling expenses; (4) accepted Koyo’s home market support rebates; (5) accepted Koyo’s home market “billing adjustment two”; (6) accepted NSK’s home market lump-sum rebates; and (7)accepted Koyo’s home market average short-term interest rate.
BACKGROUND
This case concerns the 1976 and 1987 antidumping duty orders on TRBs from Japan for the period of review (“POR”) covering October 1, 1995, through September 30,1996. On September 9, 1997, Commerce published the preliminary results of administrative reviews of the 1976 and 1987 antidumping duty orders. See Preliminary Results of Antidumping Duty Administrative Reviews of Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan, (“Preliminary Results ”) 62 Fed.Reg. 47,452. Commerce published the Final Results on January 15, 1998, see 63 Fed.Reg. at 2558, and the Amended Final Results on March 19, 1998, see 63 Fed.Reg. 13,391. 1
The Court has jurisdiction over this matter pursuant to
STANDARD OF REVIEW
The Court will uphold Commerce’s final determination in an antidumping administrative review unless it is “unsupported by substantial evidence on the record, or otherwise not in accordance with law.”
DISCUSSION
1. Commerce’s Duty Absorption Inquiry
A. Background
Title
On December 11, 1996, Timken requested Commerce to conduct a duty absorption inquiry pursuant to
In the
Final Results,
Commerce found that duty absorption had occurred for the POR.
See id.
at 2559. In asserting authority to conduct a duty absorption inquiry under
B. Contentions of the Parties
NTN, NSK and Koyo contend that Commerce lacked authority under
Commerce argues that it: (1) properly construed
C. Analysis
In
SKF USA Inc. v. United States (“SKF USA Inc.”),
24 CIT -,
Because Commerce’s duty absorption inquiry, its methodology and the parties’ arguments are practically identical to those presented in SKF USA Inc., the Court adheres to its reasoning in SKF USA Inc. The statutory scheme clearly provides that the inquiry must occur in the second or fourth administrative review after the publication of the antidumping duty order, not in any other review, and upon the request of a domestic interested party. Accordingly, the Court finds that Commerce did not have statutory authority to undertake a duty absorption investigation for the anti-dumping duty orders in dispute here. The Court remands this case to Commerce with instructions to annul all findings and conclusions made pursuant to the duty absorption inquiry conducted for the subject review in accordance with this opinion.
II. Denial of Price-Based LOT Adjustment for CEP Sales
NTN contends that Commerce improperly denied a price-based LOT adjustment for CEP sales made in the United States market at an LOT different from the home market sales.
3
See
NTN’s Mem. at 37-39; NTN’s Reply at 3. In particular, NTN argues,
inter alia,
that Commerce incorrectly determined NTN’s CEP LOT because Commerce failed to use the sale to the first unaffiliated purchaser in the Unit
Commerce, in turn, argues that it properly determined the LOT for NTN’s CEP sales based upon the CEP.
See
Def.’s Mem. at 37. Commerce deducted expenses and profit from the price to the first unaffiliated purchaser in the United States pursuant to
Therefore, Commerce claims that it properly denied an LOT adjustment for NTN’s CEP sales because NTN did not have a home-market LOT equivalent to the CEP LOT, making it impossible for Commerce to quantify the difference in price between the CEP LOT and the home market LOT.
See id.
Because the home market LOT was at a more advanced stage of distribution than the CEP LOT, Commerce made a CEP offset pursuant to
Timken generally agrees with Commerce’s positions. See Timken’s Resp. at 67-69.
In
Micron Tech., Inc. v. United States (“Micron”),
Thus, the Court finds that Commerce properly made
Commerce recognized that the SAA provides alternative methods for calculating LOT adjustments, but it determined “that it would have been inappropriate to apply a LOT adjustment to any respondent.”
See id.
Consequently, with respect to the CEP sales where Commerce was unable to quantify an LOT adjustment, Commerce, in accordance with
III. Commerce’s Reallocation of NTN’s Home Market and United States Selling Expenses Without Regard to LOT
A. Background
In its preliminary calculations, Commerce calculated NTN’s United States and home market selling expenses without regard to LOT.
See Final Results,
Commerce responded that for a majority of the expenses under this POR, it determined that NTN’s methodology for allocating its selling expenses based on LOTs did not bear any relationship to the manner in which NTN incurred these United States and homemarket selling expenses and its methodology led to distorted allocations.
See id.
Commerce asserts that in
Timken Co. v. United States (“Timken I”),
B. Contentions of the Parties
NTN contends that Commerce’s decision to reallocate NTN’s selling expenses violates Commerce’s mandate to administer the antidumping laws. See NTN’s Mem. at 40. NTN notes that Commerce: (1) has accepted NTN’s methodology of allocating its selling expenses based on LOT in previous reviews; and (2) even stated that NTN’s “detailed and often complex U.S. expense reporting methodologies result in reasonable allocations.” Id. at 40-41 (quoting Final Results of Anti-dumping Duty Administrative Reviews and Revocation in Part of an Antidump-ing Finding on Tapered Roller Bearings and Parts Thereof Finished and XJnfin-ished, From Japan and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan, 61 Fed.Reg. 57,629, 57,636 (Nov. 7, 1996)). Moreover, NTN argues that Commerce’s rejection of NTN’s reporting methodology on the basis of complexity is not a reasonable rationale for reallocating NTN’s selling expenses. 7 NTN’s Mem. at 39, 40. NTN contends that such reallocation has the effect of voiding Commerce’s LOT determination that different LOTs exist in the United States and Japan. See id. at 41.
Commerce responds that there is no evidence of narrative or quantitative analysis tying the allocation method to the expenses. See Def.’s Mem. at 45. Commerce asserts that NTN only quantified the allocation itself and, therefore, the Court should sustain the agency’s recalculation of NTN’s United States and home market selling expenses. See id. at 46.
Timken supports Commerce and argues that Commerce was correct in rejecting NTN’s allocation of United States and homemarket selling expenses on an LOT- ■ specific basis because “the record did not contain ‘quantitative and narrative evidence demonstrating’ that sales at different levels incurred different amounts of the expenses.” See Timken’s Resp. at 69 (quoting Final Results, 63 Fed.Reg. at 2580).
C. Analysis
The Court disagrees with NTN that it adequately supported its LOT ad
Accordingly, the Court sustains Commerce’s recalculation of NTN’s United States and home market selling expenses without regard to levels of trade.
IV. NTN’s Constructed Export Price Calculation
A. NTN’s Constructed Export Price Calculation Without Regard to LOT
1. Background
In calculating CEP, Commerce must reduce the starting price used to establish CEP by “the profit allocated to the expenses described in paragraphs (1) and (2)” of
During this POR, NTN argued that profit levels differed by LOT and had an effect on prices and CEP profit and, therefore, Commerce should calculate CEP profit on an LOT-specific basis rather than for each class or kind of merchandise.
See Final Results,
63 Fed.Reg. at 2570. NTN reasoned that
Commerce rejected NTN’s argument, concluding that: (1) “[njeither the statute nor the SAA require[s] [Commerce] to calculate CEP profit on a basis more specific than the subject merchandise as a whole”; (2) basing the CEP-profit calculation on an LOT-specific basis would “add a layer of complexity to an already complicated exercise with no increase in accuracy”; and (3) a subdivision “of the CEP-profit calculation would be more susceptible to manipulation.” Id. (Commerce also relied on its detailed explanation made in the sixth review of the antifriction bearings (“AFBs”)). 8
2. Contention of the Parties
NTN contends that Commerce erred by refusing to calculate CEP profit on an LOT-specific basis.
See
NTN’s Mem. at 16. Highlighting the “narrowest category of merchandise” language of
Commerce responds that it properly determined CEP profit without regard to LOT.
See
Def.’s Mem. at 50. Commerce notes that
3. Analysis
Commerce’s refusal to calculate CEP profit on an LOT-specific basis is reasonable and in accordance with law.
See NTN Bearing,
24 CIT at -,
B. Inclusion of EP Sales in Calculation of NTN’s Constructed Export Price Profit
1. Background
Under
In the Final Results, Commerce included EP sales in the calculation of CEP profit. See generally, 63 Fed.Reg. at 2570.
2. Contentions of the Parties
NTN contends that the statute clearly states that the adjustment of profit to the CEP is to be based on expenses incurred in the United States as a percentage of total expenses and that there is no provision in the statute for the inclusion of EP expenses or profit in this calculation. See NTN’s Mem. at 17-19. NTN deduces, therefore, that Commerce erred by including EP sales in the calculation of CEP profit. Id. at 19.
Commerce contends that the inclusion
of
revenues and expenses resulting from NTN’s EP sales in the calculation of CEP profit was in accordance with the law because it was a reasonable interpretation of the statutory mandates of
[t]he basis for total actual profit is the same as the basis for total expenses ... [see19 U.S.C. § 1677a(f)(2)(C) (1994) ]. The first alternative under [19 U.S.C. § 1677a(f)(2)(C) ] states that, for purposes of determining profit, the term “total expenses” refers to all expenses incurred with respect to the subject merchandise sold in the United States (as well as home market expenses). Thus, where the respondent makes both EP and CEP sales to the United States, sales of the subject merchandise would encompass all such transactions. Therefore, because NTN had EP sales, [Commerce] ... included these sales in the calculation of CEP profit.
Final Results, 63 Fed.Reg. at 2570.
Commerce also points out that its September 4, 1997 policy bulletin explains that
Timken agrees with Commerce and contends that Commerce reasonably calculated CEP profit -on the basis of all United States sales, including EP sales. See Timken’s Resp. at 60-61. In addition, Timken argues that the Court lacks jurisdiction over the issue of the inclusion of EP' sales in the calculation of NTN’s CEP profit because Commerce did not ultimately make a CEP profit adjustment. 9 See Timken’s Resp. at 59 (proprietary version).
Based upon the above-defined statutory scheme, Commerce concluded that where a respondent made both EP and CEP sales, “sales of the subject merchandise” encompassed all such transactions and, therefore, Commerce could reasonably interpret the statutory scheme as providing that the calculation of total actual profit is to include all revenues and expenses resulting from the respondent’s EP sales as well as from its CEP and home-market sales. See Def.’s Mem. at 49. Commerce’s September 4, 1997 policy bulletin provides:
The calculation of total actual profit under [19 U.S.C. § 1677a(f)(2)(D) ] includes all revenues and expenses resulting from the respondent’s [EP] sales as well as from its constructed export price and home market sales .... The basis for total actual profit is the same as the basis for total expenses under [19 U.S.C. § 1677a(f)(2)(C) ]. The first alternative under this section ... states that, for purposes of determining profit, the term “total expenses” refers to all expenses incurred with respect to the subject merchandise sold in the United States (as well as home market expenses). Thus, where the respondent makes both EP and CEP [sales], sales of the subject merchandise would encompass all such transactions.
Def.’s Mem. at 49.
The SAA further clarifies the point and states the following:
The total expenses are all expenses incurred by or on behalf of the foreign producer and exporter and the affiliated seller in the United States with respect, to the production and sale of the first of the following alternatives which applies:
(1) the subject merchandise sold in the United States and the foreign like product sold in the exporting country (if Commerce requested this information in order to determine the normal value and the constructed export price) ....
H.R. Doc. 103-316 at 824.
Based upon its interpretation of the statutory language and upon the SAA’s reference to CEP, NTN claims that there are only two categories of expenses that Commerce could use in calculating CEP profit: those used to calculate NV and those used to calculate CEP.
See
NTN’s Mem. at 18. Additionally, NTN states that just as EP expenses cannot be used in calculating CEP profit, neither can sales revenue be used for EP sales since the definition of “total actual profit” under
NTN, however, ignores two issues. To start, the first category of total expenses under
Second, as the SAA explains, the total expenses are all expenses incurred with respect to the production and sale of the first of the three alternatives. In refer
For these reasons the Court is not convinced by NTN’s argument that Commerce’s interpretation of the statutory scheme is unreasonable and sustains Commerce’s inclusion of EP sales in the calculation of CEP profit.
See Chevron,
V. Commerce’s Recalculation of Credit Expenses for Constructed Export Price Sales
A. Background
During the POR, NTN calculated its United States credit expense for CEP sales on a customer-specific basis. See NTN’s Mem. at 23-24 and Ex. “U.S. Verification Report.” “NTN calculated the average days of payment for each customer, and multiplied the average number of days by the interest rate to arrive at a credit expense.” Def.’s Mem. at 53.
During the review, Timken contended that Commerce “should recalculate NTN’s U.S. credit expense because NTN reported a customer-specific average credit expense rather than a transaction-specific credit expense” thereby producing distortive results. Final Results, 63 Fed.Reg. at 2571. Timken noted that NTN “provided the necessary information on record to recalculate a credit expense on a transaction-specific” basis. Id.
NTN responded that its credit expense should not be recalculated because Commerce had accepted NTN’s methodology of reporting a customer-specific credit expense in previous AFB reviews and “verified the accuracy of NTN’s data” for this and other reviews. 10 See id. at 2572; see also NTN’s Mem. at 23 (citing 1997 Final Results, 62 Fed.Reg. 54,043, 54,066-54,067 [sic]. 11
Commerce agreed with Timken with regards to CEP sales, finding:
We have data on the record which allows us to calculate a transaction-specific credit expense for CEP sales. Therefore, we have recalculated NTN’s credit expense using the dates of payment which NTN reported.
Final Results, 63 Fed.Reg. at 2572.
B. Contentions of the Parties
NTN notes that Commerce has accepted NTN’s calculation of credit expenses on a customer-specific basis for previous anti-dumping duty orders on AFBs from Ja
Commerce asserts that its “question-name instructed [NTN] as to the proper method for calculating and reporting credit expenses.” Def.’s Mem. at 52 and Ex. 3. In particular, Commerce’s preference for the reporting of credit expenses is that they be reported on a transaction-specific basis rather than on an average or allocated basis.
See
Def.’s Mem. at 52-53. However, Commerce claims that when a company’s records do not permit transaction-specific reporting, Commerce has permitted use of average or allocated expenses, that is, customer-specific reporting.
See id.
at 53. Commerce argues that since NTN provided the necessary information on record which permitted a transaction-specific calculation of NTN’s United States credit expenses for CEP sales, Commerce properly exercised its preference and recalculated the expenses on such a basis.
See id.
at 53-54. Additionally, Commerce contends that NTN’s argument declaring Commerce’s recalculation of credit expense on a transaction-specific basis as “impermissible use of facts available” under
Timken agrees with Commerce, noting that, consistent with the antidumping statute, Commerce has a preference for transaction-specific reporting of credit expenses since actual costs allow Commerce to determine “the most accurate dumping margins possible.” Timken’s Resp. at 65. Timken notes that Commerce’s questionnaire requesting information indicated a strong preference for reporting credit expenses on a transaction-specific basis. See id. Since the record contained information reported by NTN that permitted more precise credit expense calculations, that is, transaction-specific payment dates for NTN’s CEP sales, Timken contends that Commerce properly recalculated NTN’s United States credit expenses on a transaction-specific basis. See id. Also, Timken asserts that Commerce’s use of NTN’s reported verified sale and payment dates to recalculate NTN’s credit expense on a transaction-specific basis does not constitute the unlawful “use of facts available.” See id.
C. Analysis
The Court disagrees with NTN that Commerce is now prohibited from using transaction-specific reporting of NTN’s United States credit expense merely because Commerce had accepted NTN’s customer-specific reporting of such expenses in previous AFB reviews and verified the accuracy of NTN’s data for this and other reviews. Commerce does not have to adhere to its customer-specific reporting methodology for calculating credit expenses when a respondent provides the necessary information on record for calculating such expenses on a more accurate and preferred basis, that is, a transaction-specific basis.
See generally NSK Ltd. v. United States (“NSK 1995
”),
The Court also finds that NTN’s argument that Commerce’s recalculation of NTN’S United States credit expense on a transaction-specific basis constitutes the unlawful “use of facts available” under
The legislative goal behind Commerce’s right to use facts available is to “induce respondents to provide Commerce with requested information in a timely, complete, and accurate manner .... ”
National Steel Corp. v. United States,
During the review at issue, NTN complied with Commerce’s request for data by providing the necessary information on record which permitted a transaction-specific calculation of NTN’s United States credit expenses for CEP sales.
See Final Results
at 2572. Since Commerce did not resort to any data other than that reported by NTN, Commerce’s recalculation of NTN’s United States credit expense on a transaction-specific basis did not constitute the unlawful use of “facts available” under
Accordingly, the Court finds that Commerce’s recalculation of NTN’s United States credit expense on a transaction-specific basis was supported by substantial evidence and in accordance with law.
VI. Denial of an Adjustment to United States Indirect Selling Expenses for Interest Allegedly Incurred in Financing Cash Deposits for Anti-dumping 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 anti-dumping duties.
See Final Results,
63 Fed.Reg. at 2570-71. 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 2571. Com
Commerce noted that
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 an antidumping duty order.” Id. Commerce determined that while cash deposits and legal fees are incurred solely as a result of the existence of an antidumping order, “[financial expenses allegedly associated with cash deposits are not a direct, inevitable consequence of an antidumping duty order.” Id. In particular, Commerce explained that although it may be true that some importers sometimes incur a cost if they borrow money in order to pay for cash deposits of antidumping duties, it is a fundamental principle that:
“[mjoney 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,
Moreover, Commerce determined that it should not impute an amount for any interest costs that would theoretically be associated with financing actual cash deposits of antidumping duties. Final Results, 63 Fed.Reg. at 2571. Commerce reasoned that
[t]here is no real opportunity cost associated with cash deposits when the payingof such deposits is a precondition for doing business in the United States.... Companies cannot choose not to pay-cash deposits if they want to import nor can they dictate the terms, conditions, or timing of such payments.
Id.
B. Contentions of the Parties
NTN claims that Commerce’s rationale for denying NTN’s adjustment for interest expenses is flawed because irrespective of how a company opts to finance the cash deposits for antidumping duties, the amount of cash deposited will have to be made up by financing something else, a result that is a direct inevitable consequence of the antidumping duty order. See NTN’s Mem. at 20. NTN also asserts that if Commerce were to allow the interest expenses from cash deposits from prior reviews to affect the dumping margin calculations of present reviews, a never-ending cycle would follow that would prevent Commerce from ever revoking the anti-dumping duty order. See id. at 21.
Further, NTN notes that Commerce has repeatedly taken the position that interest expenses incurred in financing cash deposits of antidumping duties cannot be properly treated as indirect selling expenses and, therefore, has allowed for an interest-expense adjustment on antidumping duty cash deposits. See id. at 20-22 (citations omitted). NTN asserts that Commerce’s decision to alter its prior methodology is “unreasonable and internally-contradictory.” NTN’s Reply at 7.
NTN also asserts that this Court has consistently upheld the interest-expense adjustment to indirect selling expenses when Commerce has granted it and has remanded to Commerce to allow the adjustment when the agency has denied it.
See
NTN’s Mem. at 22-23 (citations omitted). In particular, NTN argues that
Federal-Mogul Corp. v. United States (“Federal-Mogul”),
Commerce argues that its decision to deny the offset was within its discretion.
See
Def.’s Mem. at 57. Commerce also argues that it may change its methodology if it presents a reasonable basis for departing from its previous practice.
See id.
at 57-59. Further,
Commerce
contends that the interest expenses allegedly incurred with financing antidumping duty cash deposits are ordinary interest expenses and, therefore, not deductible from United
Timken asserts that Commerce reasonably denied the offset, because allowing United States selling expenses to be reduced in the manner claimed by NTN encourages dumping. See Timken’s Resp. at 63. Specifically, Timken argues that an adjustment for NTN’s interest expenses on antidumping duty cash deposits would “allow NTN to mask present dumping through alleged interest used to finance past cash deposits.” Id. Timken contends for example that:
the interest might be equal to five percent of the value of U.S. sales in the present review. Under NTN’s approach, the Commerce Department would be required to offset expenses attributable to sales made during the present administrative review with interest imputed to past cash deposits. Thus, the importer may sell at prices five percent less than fair value without being found to have dumped. The Commerce Department would offset reductions amounting to five percent of U.S. sales prices with the five percent imputed interest. The offset would mask the importer’s dumping, and the importer would escape the coverage of the anti-dumping duty law.
Id. Timken also argues that other than NTN’s reported “amount of imputed interest attributable to its cash antidumping duty deposits,” there is no evidence that NTN actually obtained loans for the purpose of posting cash deposits. Id. at 64. Therefore, there is no factual basis for the adjustment. See id.
C. Analysis
Although NTN correctly points out that interest expenses incurred on financing antidumping cash deposits are not “selling expenses,”
see Federal-Mogul,
Consequently, since
VII. Valuation of Major Inputs From Affiliated Suppliers
A. Statutory Background
The NV of the subject merchandise is, in pertinent part, “the price at which the foreign like product is first sold ... for consumption in the exporting country.”
Additionally, the special rules for the calculation of COP or CV contained in
B. Factual Background
Because Commerce disregarded sales that failed the below-cost sales test pursuant to
In its questionnaire for this POR, Commerce requested that NTN provide certain data regarding the valuation of major inputs received from affiliated suppliers and used to produce the merchandise under review during the cost calculation period.
List the major inputs received from affiliated parties and used to produce the merchandise under review during the cost calculation period.... For each major input identified, provide the following information:
a. the total volume and value of the input purchased from all sources by your company during the cost calculation period, and the total volume and value purchased from each affiliated party during the same period;
b. the per-unit transfer price charged for the input by the affiliated party (if the affiliated party sells the identical input to other, unaffiliated purchasers, provide documentation showing the price paid for the input by the unaffiliated purchaser; if your company purchases the identical input from unaffiliated suppliers, provide documentation showing the unaffiliated party’s sales price for the input); and
c. if you are responding to this section of the questionnaire in connection with an investigation of sales below cost, provide the per-unit cost of production incurred by the affiliated party in producing the major input....
Def.’s Ex. 4.
In addition, Commerce requested that NTN “specify the basis used by [NTN] to value each major input for purposes of computing the submitted COP and CV amounts (e.g., transfer price, cost of production).” Id.
In its response to Commerce’s questionnaire, NTN: (1) identified NTN’s major inputs; (2) “submitted tables that identified its affiliated and unaffiliated suppliers for a sample of the different major inputs used to produce TRBs” and compared transfer prices to the unaffiliated supplier’s prices which demonstrated that certain “transfer prices were lower than [what] NTN’s unaffiliated supplier charged for the same model”; (3) submitted tables containing COP data for a sample of certain major inputs used to produce TRBs that NTN purchased from an affiliated supplier; and (4) “specified that [NTN] calculated COP and CV using transfer prices to value the identified major inputs” and “created a variable in its COP and CV database, ‘RELPTY,’ that identified for each control number, the total percentage of affiliated party inputs used in producing a particular TRB model.” Def.’s Mem. at 60-61 (citing Def.’s Confidential Ex. 5).
Subsequently, NTN “submitted revised exhibits that compared the weighted average transfer price, the weighted average COP, and, in limited instances, the market value for major inputs purchased from affiliated suppliers.” Def.’s Mem. at 61; Def.’s Confidential Ex. 6. Commerce verified NTN’s COP and transfer price responses regarding the inputs but did not verify the market values for most of the major inputs because, except for one affiliated supplier’s inputs, “there were no unaffiliated suppliers of the identical components or services” that would allow NTN to provide market values for most major inputs. Def.’s Mem. at 62; Def.’s Confidential Ex. 7 at 24. Commerce also verified that for the affiliated supplier’s inputs, that is, the one affiliated supplier for whom there were unaffiliated suppliers of identical components or services, “the market value was greater than the reported transfer price and ... COP.” Def.’s Mem. at 62. In the
Preliminary Results,
Commerce determined that the appropriate value for the affiliated supplier’s major inputs was market value since it was higher in amount than NTN’s transfer price or the affiliated supplier’s COP.
See id.;
Def.’s Confidential Ex. 8 at 1. However, “Commerce was unable to identify the particular TRB models that contained [the major inputs at issue] because NTN’s ‘RELPTY’ variables
Commerce articulated its methodology of increasing the transfer prices of major inputs as reported by NTN in order to reflect market value:
To account for the difference between the fair value and the reported transfer price, we have increased NTN’s reported COP and CV by first calculating a weighted average percentage difference between the fair value and the transfer price. We calculated this weighted average percentage difference ... [by:]
determining] the percentage of affiliated party purchases represented by [the affiliated supplier] ...[;]
applying] ... this difference between fair value and transfer price for sampled purchases from [the affiliated supplier] ...[;]
applying] this difference to each control number’s Relpty variable that NTN provided in its cost files[ ] (NTN’s Relpty variable provides the percentage of the value of the affiliated party transfer price to the total cost of production or constructed value for each model).
— The resulting value was then included in each model’s COP or CV.
NTN’s Ex. “COP/CV Memorandum”; see also Final Results, 63 Fed.Reg. at 2573 and NTN’s Mem. at 25.
C. Contentions of the Parties
NTN contends that Commerce’s “adjustment to COP and CV for affiliated-party inputs is distortive and should be eliminated.” Final Results, 63 Fed.Reg. at 2572. Specifically, NTN asserts that Commerce erred when it used the results that it obtained from testing affiliated-party inputs on a sample basis to adjust COP and CV by using the highest of transfer price, market price or the COP of the input for “all of NTN’s affiliated party inputs regardless of the fact that not all of these inputs contained [the particular affiliated supplier’s] retainers” at issue. NTN’s Reply at 8; see NTN’s Mem. at 25. NTN notes that Commerce’s application of the adjustment to all of NTN’s affiliated party inputs resulted in double-counting of profit because — even if the price of a TRB’s input from the particular affiliated supplier at issue was above COP — an adjustment would still be made to the same input thereby adding “profit to the input that already includes a profit.” NTN’s Mem. at 27; NTN’s Reply at 9.
Additionally, NTN contends that
NTN also argues that Commerce’s single adjustment constituted an unwarranted use of adverse facts available because Commerce “used the sales of [a few major inputs at issue] which were sold [below] COP, while disregarding those sales [of major inputs at issue which were sold above COP], to make a single adjustment.”
12
NTN’s Reply at 9;
see
NTN’s
NTN, therefore, requests that the Court remand the matter and instruct Commerce “to accept NTN’s reported COP and CV for affiliated party inputs.” NTN’s Mem. at 27.
Commerce argues that it reasonably interpreted
Commerce also argues that it properly used information on the record to increase the transfer prices of the affiliated supplier’s inputs that NTN used to calculate COP and CV in order to reflect market value since “from the record evidence, Commerce was unable to identify the particular TRB models that contained [the major inputs at issue].” Def.’s Mem. at 62. Commerce further contends that its method of applying sample results to all of NTN’s affiliated party transactions was reasonable because (1) NTN “did not identify by control numbers the TRB models that contained” the affiliated supplier’s major inputs in its COP and CV database; and (2) “Commerce’s adjustment factor was based upon only the portion of affiliated party inputs represented by [the affiliated supplier at issue and therefore] ... had a limited impact on NTN’s overall COP and CV calculations.” Id. at 68.
Commerce further notes that NTN’s assertion that Commerce’s application of the adjustment to all of NTN’s affiliated party inputs resulted in “double-counted profit ... is irrelevant.”
Id.
at 69. In particular, Commerce asserts that “[flair market value and not the affiliated supplier’s profit is the only pertinent issue for valuation purposes under
Commerce also argues that, contrary to NTN’s assertion that Commerce could have used a more reasonable method if Commerce’s adjustment was correct, Commerce used NTN’s reported information during the administrative review to adjust NTN’s COP and CV.
See id.
at 70. Relying on
PPG Indus., Inc. v. United States (“PPG”),
Timken agrees with Commerce, noting that Commerce’s adjustment to NTN’s COP and CV was reasonable and, contrary to NTN’s assertions, did not result in a distorted antidumping margin.
See
Timken’s Resp. at 66. Timken asserts that Commerce’s use of information available was authorized pursuant to
Timken also asserts that, contrary to NTN’s assertions that
D. Analysis
The Court disagrees with NTN that Commerce erred in valuing each major input based on the highest of the input’s transfer price, market price or COP. This Court has consistently articulated that the plain language of
Further, the Court finds that Commerce’s decision to resort to “facts otherwise available” in valuing NTN’s major inputs was in accordance with law. The antidumping statute mandates that Commerce use “facts otherwise available” if “necessary information is not available on the record” of an antidumping proceeding.
As noted earlier, Commerce’s initial questionnaire, among other things, specifically requested that NTN provide (1) “the per-unit transfer price charged for the input by the affiliated party (if the affiliated party sells the identical input to other, unaffiliated purchasers, provide documentation showing the price paid for the input by the unaffiliated purchaser; if [NTN] purchases the identical input from unaffiliated suppliers, provide documentation showing the unaffiliated party’s sales price for the input)”; and (2) “the basis used by [NTN] to value each major input for purposes of computing the submitted COP and CV amounts (e.g., transfer price, cost of production).” Def.’s Ex. 4.
In response to Commerce’s questionnaire, NTN did: (1) “submit[ ] tables that identified its affiliated and unaffiliated suppliers for a sample of the different major inputs used to produce TRBs[]” and compared transfer prices to the unaffiliated supplier’s prices which demonstrated that certain “transfer prices were lower than [what] NTN’s unaffiliated supplier [charged] for the same model”; and (2) “specified that [NTN] calculated COP and CV using transfer prices to value the identified major inputs” and “created a variable in its COP and CV database, ‘RELPTY,’ that identified for each control number, the total percentage of affiliated party inputs used in producing a particular TRB model.” Def.’s Mem. at 60-61. According to NTN, “there were no unaffiliated suppliers of the identical components or services” that would allow NTN to provide market values for most major inputs. Id. at 62. However, in its supplemental response, NTN revised its exhibits and compared “the weighted average transfer price, the weighted average COP, and, in limited instances, the market value for major inputs purchased from affiliated suppliers.” Id. at 61.
Commerce verified NTN’s COP and transfer price responses regarding the major inputs and for one affiliated supplier’s inputs, that is, the one affiliated supplier for whom there were unaffiliated suppliers of identical components or service, Com
NTN’s argument that Commerce could have used a more reasonable method by calculating “the weighted-average difference between COP and transfer price for all [the major inputs at issue] sold to NTN” is without merit.
Id.
“[Commerce] is given discretion in its choice of methodology as long as the chosen methodology is reasonable and [Commerce’s] conclusions are supported by substantial evidence in the record.”
Federal-Mogul Corp. v. United States,
VIII. Commerce’s Exclusion of Certain Home Market Sales to Affiliated Parties From the Normal Value Calculation
A. Background
During the POR, NTN made home market sales to affiliated and unaffiliated parties. In order to determine whether NTN’s affiliated-party sales could be used for purposes of calculating NV, Commerce conducted its standard arm’s-length test. See Final Results, 63 Fed.Reg. at 2580-81. Specifically, Commerce compared NTN’s home market selling prices to NTN’s affiliated and unaffiliated parties by using Commerce’s 99.5% arm’s-length test in which:
[Commerce] calculated, for each model, the percentage difference between the weighted-average prices to the affiliated customer and all unaffiliated customers and then calculated, for each affiliated customer, the overall weighted-average percentage difference in prices for all models purchased by the customer. If the overall weighted-average price ratio for the affiliated customer was equal to or greater than 99.5 percent, [Commerce] determined that all sales to this affiliated customer were at arm’s-length. Conversely, if the ratio for a customer was less than 99.5 percent, [Commerce] determined that all sales to the affiliated customer were not at arm’s-length because, on average, the affiliated customer paid less than unaffiliated customers for the same merchandise.
B. Contentions of the Parties
NTN contends that Commerce erred in applying the arm’s-length test when it “compare[d] the weighted average price for unrelated sales to the price for individual related sales.” NTN’s Mem. at 42. To illustrate its contention, NTN provides a hypothetical example attempting to demonstrate that Commerce’s arm’s-length test is distortive since it does not compare average price for affiliated sales to average price for unaffiliated sales or individual price for affiliated sales to individual price for unaffiliated sales. 14 See id. Alternatively, NTN asserts that, should Commerce choose to retain its methodology of comparing individual sales to a weighted average margin, Commerce should lower the percentage of the arm’s-length test to “95% to reflect the true range of arm’s-length prices in these transactions and compensate for the distortive nature of the test.” NTN’s Reply at 11.
NTN also argues that Commerce’s arm’s-length test was unreasonable since Commerce should have examined factors other than price in determining whether to include affiliated party sales when calculating NV. See NTN’s Mem. at 43. Specifically, NTN contends that Commerce erred in failing to examine: (1) “quantity of goods”; and (2) “payment terms of specific sales.” Id. According to NTN, all of these factors influence the price of an affiliated party transaction and Commerce cannot make meaningful price comparisons without examining them. See id.
Commerce responds that
[i]f the foreign like product is sold or, in the absence of sales, offered for sale through an affiliated party, the prices at which the foreign like product is sold (or offered for sale) by such affiliated party may be used in determining normal value.
Def.’s Mem. at 71 (quoting
Relying on the language of
If a producer or reseller sold such or similar merchandise to [an affiliated party], [Commerce] ordinarily will calculate foreign market value based on that sale only if satisfied that the price is comparable to the price at which the producer or reseller sold such or similar merchandise to [an affiliated] person not related to the seller.
Relying on both the statute and regulation, Commerce used its price-based arm’s-length test to examine the price comparability of NTN’s home market sales of affiliated and unaffiliated parties. Def.’s Mem. at 72. Commerce argues that, since: (1) NTN has “failed to provide record evidence demonstrating that Commerce’s arm’s-length test distorted the price comparability analysis”; and (2) NTN failed to prove that Commerce’s arm’s-length test was unreasonable, Commerce’s use of it’s arm’s-length test was in accordance with law. Id. at 73-74. Timken supports Commerce’s contentions. See Timken’s Resp. at 70-71.
C. Analysis
The Court disagrees with NTN that Commerce’s arm’s-length test is unreasonable. Under the applicable statute,
The Court has also repeatedly rejected the argument that Commerce should consider additional factors, that is, factors other than price, when determining whether sales prices to affiliated and unaffiliated parties are comparable. The Court finds no basis under the circumstances of this case to depart from its prior holdings in
NTN Bearing,
24 CIT at -,
Accordingly, the Court upholds Commerce’s application of the arm’s-length test to exclude certain home market sales to affiliated parties from the NV calculation as reasonable, in accordance with law and supported by substantial evidence.
IX. Depreciation of Idle Equipment and Write-Off of Production Equipment,
NTN contends that on line 297 17 [sic] of Commerce’s margin program, Commerce “created a calculation for the depreciation of idle equipment ... [that] was previously accounted for in [Commerce’s] calculation of GNA [sic]” 18 expense ratio. NTN’s Mem. at 46 (citing Ex. “Preliminary Analysis Memorandum”). NTN asserts that Commerce double-counted NTN’s depreciation of idle equipment and, thus, distorted NTN’s margin. See id.; see NTN’s Reply at 12. Therefore, NTN requests to remove the depreciation of idle equipment calculation from line 297[sic] of Commerce’s margin program. See NTN’s Mem. at 46 (citing Ex. “NTN Margin Program”).
Commerce, in turn, argues that it did not double-count NTN’s depreciation of idle equipment. See Def.’s Mem. at 74. In particular, Commerce maintains that the depreciation of idle equipment and the write-off of production equipment and fixed property are not the same. See id. at 75. According to Commerce, although NTN properly included the depreciation of idle equipment in its G & A ratio, NTN excluded the write-off of production equipment and fixed property from its calculation of COP and CV. See id. at 74-75 (citing Confidential Ex. 7 at 26); see also Def.’s Confidential Ex. 5. Therefore, Commerce argues that its adjustment to COP and CV to include the write-off of production equipment and fixed property did not result in double-counting that would distort NTN’s margin. See Def.’s Mem. at 75.
Timken supports Commerce’s conclusion that NTN’s claim is without merit. See Timken’s Resp. at 72. 19
The Court disagrees with NTN that Commerce double-counted when it made an adjustment to COP and CV to include the write-off of production equipment and fixed property. Although NTN included the depreciation of idle equipment in its G & A expense ratio, it failed to include the write-off of production equipment and fixed property in its calculation of COP and CV. Depreciation of idle equipment and write-off, that is, loss on disposal, of production equipment and fixed property are not the same.
See
OXFORD ENGLISH DICTIONARY ONLINE (2nd ed.1989) (stating that depreciation means to “lower in value, lessen the value of’
X. NTN’s Zero-Priced United States Transactions and NTN’s Home-Market Sample Sales in NTN’s Margin Calculation
A. NTN’s Zero-Priced United States Transactions
NTN argues that in light of
NSK Ltd. v. United States (“NSK 1997”),
Commerce and Timken assert that Commerce properly included NTN’s zero-priced United States sales when calculating NTN’s dumping margin because NTN failed to demonstrate that the transactions in question lacked “consideration” as defined by NSK 1997, and that further factual inquiry was necessary. See Def.’s Mem. at 75-81; Timken’s Resp. at 71. Therefore, Commerce and Timken assert that, since NTN did not meet its burden of providing information necessary to prove that “sales were outside of the ordinary course of trade,” the Court should affirm Commerce’s inclusion of NTN’s zero-priced sales in NTN’s dumping margin. Def.’s Mem. at 81; see Timken’s Resp. at 71.
Pursuant to
B. NTN’s Home Market Sample Sales
1. Background
Commerce is required to base its NV calculation upon “the price at which the foreign like product is first sold ... in the ordinary course of trade .... ”
During this review, Commerce sent a questionnaire “requiring] all respondents to identify any transactions ... which they claimed involved sample or prototype sales” and further requested, that respondents:
[describe [their] agreement(s) for sales in the United States and the foreign market (e.g., long-term purchase contract, short-term purchase contract, purchase order, order confirmation). Provide a copy of each type of agreement and all sales-related documentation generated in the sales process (including the purchase order, internal and external order confirmation, invoice, and shipping and export documentation) for a sample sale in the foreign market and U.S. market during the POR.
Def.’s Mem. at 77 (quoting Section A of NTN’s Questionnaire at 5-6).
Commerce further provided NTN with a questionnaire “relating to reporting data on sales outside the ordinary course of trade,” and explained that:
[i]f [NTN] considers] a sale to be outside the ordinary course of trade, report “YES” in this field. If the sale was in the ordinary course of trade, report a “NO.” If [NTN] claim[s] that any of its home market sales are outside the ordinary course of trade [NTN] must provide a detailed explanation why. Please note that the burden of proof is on respondents to demonstrate, through narrative explanation of the circumstances surrounding such sales and supporting documentation or other evidence, that sales claimed to be outside the ordinary course of trade are in fact outside the ordinary course of trade. [Commerce] will not consider only one factor in isolation (ie., the fact that certain sales are labeled as samples, or that a transaction involved small quantities or high prices) as sufficient proof that a sale is not in the ordinary course of trade.
Def.’s Mem. at 77-78 (quoting Section B of NTN’s Questionnaire at B-14).
NTN responded to Commerce’s questionnaires by marking sample sale transactions with an “S” and providing a chart of profit levels to demonstrate that sales were outside of the ordinary course of trade. See Def.’s Mem. at 78. In turn, Commerce sent a supplemental questionnaire to NTN requesting clarification as to NTN’s original response, that is, “what [NTN] was attempting to establish in [a particular NTN exhibit], and to provide a detailed explanation of ... [the] exhibit.” Id. NTN responded to Commerce’s supplemental questionnaire by explaining the profit charts it provided in its original response. Commerce stated that “NTN’s response relying upon profit levels to demonstrate that sales were outside of the ordinary course of trade does not address the factors considered important in NSK 1997, i.e., whether there was any transfer of ownership or consideration given for the samples.” Id. at 81. Moreover, Commerce determined that NTN failed to provide “information demonstrating that [NTN’s] alleged home market sample sales were outside the ordinary course of trade.” Final Results, 63 Fed.Reg. at 2582. Therefore, for the final results, Commerce included NTN’s home market sample sales in NTN’s final dumping margin calculation. See Def.’s Mem. at 82.
2. Contentions of the Parties
NTN argues that Commerce erred when it failed to exclude NTN’s sample sales and other sales from Commerce’s margin calculations, despite what NTN considers to be sufficient evidence on record indicating that these transactions were outside of the ordinary course of trade.
See
NTN’s Mem. at 44-46; NTN’s Reply at 13-14.
Commerce alleges that it properly exercised its discretion in rejecting NTN’s argument that Commerce must exclude NTN’s home market sample sales or other sales because NTN failed to adequately show that home market sample sales and other sales lacked consideration or were otherwise outside of the ordinary course of trade. See Final Results, 63 Fed.Reg. at 2582. Commerce asserts that “only NTN possessed the information regarding the purchase history of its alleged samples, including the price and quantity for any prior or subsequent purchases of these products by the same or other customers” and since NTN withheld that information, NTN failed to meet its burden to show that it received no consideration for the alleged sample sales at issue. Def.’s Mem. at 81. Further, Commerce contends that NTN cannot be excused from responding to the agency’s questions because NTN considers certain information irrelevant. See id. Commerce claims that it, not NTN, determines the relevancy of Commerce’s questions. See id. Therefore, Commerce argues that its decision to include NTN’s alleged sample sales in calculating NTN’s dumping margin is based upon substantial evidence and in accordance with law. See id. at 81-82.
Timken supports Commerce’s decision to include NTN’s sample sales in calculating NTN’s dumping margin because Commerce found that: (1) “there [was] no record evidence demonstrating that any of NTN’s home market sales, samples, or otherwise [were] outside the ordinary course of trade[;] and (2) consideration was paid for all of [NTN’s] sample sales.” Timken Resp. at 72.
3. Analysis
An NV calculation has to be based upon “the price at which the foreign like product is first sold ... in the ordinary course of trade .... ”
the conditions and practices which, for a reasonable time prior to the exportation of the subject merchandise, have been normal in the trade under consideration with respect to merchandise of the same class or kind. [Commerce] shall consider the following sales and transactions, among others, to be outside the ordinary course of trade:
(A) Sales disregarded undersection 1677b(b)(l) of this title.
(B) Transactions disregarded undersection 1677b(f)(2) of this title.
In determining whether a sale is outside the ordinary course of trade, Commerce must consider not just “one factor taken in isolation but rather ... all the circumstances particular to the sales in question.”
Murata Mfg. Co. v. United States,
In the case at bar, NTN failed to meet its burden of providing Commerce with requested additional detailed information regarding sales that NTN claimed were outside the ordinary course of trade. NTN merely relied on: (1) its questionnaire response in which NTN stated that “ ‘[s]amples are provided to customers for the purpose of allowing the customer to determine whether a particular product is suited to the customer’s needs[;]
21
’ ” and (2) its submitted exhibit in which NTN provides a profit chart and identifies sample sales with unusual profits that it considers are outside of the ordinary course of trade in order to support NTN’s argument that its sample sales should be excluded from Commerce’s margin calculation. NTN’s Reply at 13-14. NTN’s identification of its sales as samples does not necessarily render those sales as being outside of the ordinary course of trade.
See NTN,
XI. Commerce’s Adjustment to NTN’s Total Billing Adjustment in the Home Market
A. Background
For the POR at issue, NTN reported home market billing adjustments in its questionnaire response submitted to Commerce. See Def.’s Mem. at 82. In the final results, Commerce stated:
[Commerce] thoroughly verified NTN’s reported home market volume and value for the POR. As [Commerce’s] verification report indicates, it was necessary for [Commerce] to reconcile the volume and value NTN reported in its response to its Ministry of Finance (MOF) reports. As part of this reconciliation[Commerce] examined an adjustment NTN made for its total HM billing adjustments for the POR (see Department’s Home Market Verification Report for NTN, July 9, 1997, exhibit [3] )(NTN HM Report). 22 Not only did [Commerce] successfully trace this total to the computer program NTN used to calculate it, but [Commerce] also traced NTN’s reported volume and value for the POR for its home market sales directly to the MOF report with no discrepancies (see NTN HM Report at 6). [Commerce] also verified NTN’s reported, transaction-specific home market billing adjustments by examining a variety of sales documentation in the sales trace portion of [Commerce’s] verification (see NTN HM Report at 17). Again [Commerce] found no discrepancies. As a result of both verification exercises, one would assume that NTN’s reported home market billing adjustments were accurate and that the total of its transaction-specific billing adjustments for the POR would equal the total reported on exhibit [3] of [Commerce’s] [Vjerification [R]eport.
Final Results, 63 Fed.Reg. at 2563.
After verification, however, “Timken identified a discrepancy between the billing adjustment NTN reported in its questionnaire response and the amount Commerce determined through verification.” Def.’s Mem. at 82. Commerce, therefore, in its review of NTN’s questionnaire responses, calculated the overall total of NTN’s reported home market billing adjustment and found that it was significantly different from the total billing adjustment Commerce determined at verification in exhibit 3 of NTN’s HM Report. See Final Results, 63 Fed.Reg. at 2563; Def.’s Mem. at 82. Commerce then proceeded to determine a more accurate total billing adjustment and discovered that “the total billing adjustment amount that [Commerce] had verified as part of the reconciliation for quantity and value reflected the accurate total adjustment” because exhibit 3’s total was more traceable to NTN’s Ministry of Finance (“MOF”) reports. Def.’s Mem. at 83; see Final Results, 63 Fed.Reg. 2563. While Commerce had verified NTN’s reported transaction-specific billing adjustment, Commerce considered the verification to be merely a “spot check,” that is, Commerce’s examination of selected billing adjustments that left a possibility that many of NTN’s other transaction-specific billing adjustments were inaccurate. See Final Results, 63 Fed.Reg. 2563. Commerce, therefore, explained its methodology stating:
having determined that the exhibit [3] total billing adjustment amount is the accurate figure, [Commerce] ha[s] adjusted NTN’s reported transaction-specific billing adjustments to reflect this total.... [Bjecause the record provides no information as to which transaction-specific billing adjustments are accurate, and because NTN has neither explained this discrepancy nor provided [Commerce] with any information with respect to the correction of this discrepancy in its reported data, [Commerce] ha[s] relied on facts available to correct NTN’s reported home market billing adjustments. Because [Commerce] [is] unable to identify which billing adjustments are inaccurate, as facts available, [Commerce] systematically sorted through NTN’s raw home market database and totaled the reported per-sale billing adjustments until [Commerce] arrived at a total equal to [Commerce’s]calculated adjustment. [Commerce] then adjusted these sales’ billing adjustments such that they reflected the total in exhibit [3] and disallowed the rest of NTN’s reported billing adjustments.
Id.
B. Contentions of the Parties
NTN argues that Commerce erred when it used facts available to: (1) correct NTN’s reported billing adjustment data; and (2) “substitute] [Commerce’s] adjusted figures for verified, accurate data presented by [NTN].” NTN’s Reply at 15;
see
NTN’s Mem. at 13-14. In particular, NTN maintains that since Commerce verified NTN’s reported transaction-specific billing adjustments and found no discrepancies, there is no basis under
Commerce responds that although it verified NTN’s reported transaction-specific home market billing adjustments and found no discrepancies, Commerce only “spot-checked,” that is, examined a sample of NTN’s reported billing adjustments, and it is therefore possible that many of NTN’s other transaction-specific billing adjustments that Commerce did not select during verification are inaccurate. See Def.’s Mem. at 83. Commerce maintains that this is particularly true considering that the total of all of NTN’s billing adjustments do not match the total from exhibit 3, that is, the total billing adjustment Commerce determined at verification. See id.
Commerce also asserts that, despite the errors contained in NTN’s questionnaire response, Commerce had to use questionnaire response data, that is, “[Commerce] had to make adjustments in the data so that the data from the questionnaire response would not exceed the total billing adjustment determined at verification,” to calculate NTN’s dumping margin. Id. at 83-84. In particular, Commerce argues, that since it could not identify the inaccurate billing adjustments, “as facts available, Commerce systematically sorted through NTN’s raw home market data base and totaled the reported per-sale billing adjustments until Commerce arrived at a total equal to the verified total adjustment ] ... [and] then adjusted the billing adjustments for the examined sales to reflect the total determined at verification and disallowed the rest of NTN’s reported billing adjustments.” Id. at 84. Therefore, Commerce requests that since it relied upon verified figures, that is, Commerce relied upon its verified total billing expense in exhibit 3, the Court should sustain its adjustment to NTN’s reported billing adjustment as supported by the record and in accordance with law.
Timken agrees with Commerce and argues that since Commerce determined that NTN’s transaction-specific billing adjustments were inaccurate, NTN’s assertion that Commerce wrongfully rejected verified data is without merit.
See
Timken Resp. at 58. Timken also asserts that Commerce acted in accordance with
C. Analysis
The antidumping statute mandates that Commerce use facts available if
Commerce’s decision to use facts available to adjust NTN’s reported billing adjustments to reflect the total billing adjustment determined by Commerce at verification was supported by substantial evidence and in accordance with law. According to
Micron Tech., Inc. v. United States (“Micron Tech.”),
Verification depends precisely on tying amounts reported in questionnaire responses to the company’s internal accounting records and financial statements. Failure to demonstrate such a relationship results in a failed verification.
“ ‘[A] verification is a spot check and is not intended to be an exhaustive examination of the respondent’s business. [Commerce] has considerable latitude in picking and choosing which items it will examine in detail.’ ”
PMC Specialties Group, Inc. v. United States (“PMC”),
In this case, NTN reported home market billing adjustments in its questionnaire response submitted to Commerce. Commerce, in turn, acting within the “wide latitude” of discretion allowed to Commerce, performed two verifications: (1) “reconciling] the volume and value NTN reported in its response to [NTN’s] MOF reports” to arrive at a total billing adjust
Accordingly, the Court sustains Commerce’s adjustment to NTN’s reported billing adjustment as reasonable, in accordance with law and supported by substantial evidence.
XII. Use of Affiliated Supplier Cost Data for Inputs Obtained From the Affiliated Supplier for All Purposes
A. Statutory Background
Normal value of the subject merchandise is defined, in pertinent part, as “the price at which the foreign like product is first sold ... for consumption in the exporting country .... ”
Additionally, the special rules for the calculation of COP or CV contained in
One of the elements of value to be considered in the calculation of COP, which is referred to in
Thus, paragraphs (2) and (3) of
B. Factual Background
During the POR at issue, Commerce, “pursuant to
substituted affiliated-party cost data [for NTN’s reported transfer prices] when it determined whether the foreign like product was commercially comparable to each U.S. model, when it calculated a difference-in merchandise (difmer) adjustment for non-identical U.S. and home market matches, and when it recalculated NSK’s reported U.S. inventory carrying costs prior to deducting this expense from CEP.
Final Results, 63 Fed.Reg. 2573.
Explaining its methodology, Commerce stated that:
in accordance with section [1677b(f) ] of the Act, [Commerce] recalculated NSK’s reported TRB-specific COP and CV to include the COP of an affiliated-party input if the transfer price NSK reported for that input was less than the COP for that input. [Commerce] note[s] that COP and CV are composed of several components. The adjustment [Commerce] made for NSK’s affiliated-party inputs is actually an adjustment to its reported material costs. Because material costs are a component of the variable cost of manufacture (VCOM) and the total cost of manufacture (TCOM), and these in turn are components of COP and CV, when [Commerce] adjusted NSK’s reported material costs [Commerce] not only recalculated its COP and CV, but [Commerce] effectively recalculated VCOM and TCOM components of COP and CV as well.
Id. at 2574.
Therefore, as a result, Commerce resorted to using affiliated supplier cost data for purposes other than calculating COP and CV and explained:
[Commerce] does not rely on a respondent’s reported costs solely for the calculation of COP and CV. [Commerce] also use[s] cost information in a variety of other aspects of [Commerce’s] margin calculations. For example, when determining the commercial comparability of the foreign like product in accordance with section [1677(16) ] of the Act, it has been [Commerce’s] long-standing practice to rely on the product-specific VCOMs and TCOMs for U.S. and home market merchandise. Likewise, when calculating a difmer adjustment to NV in accordance with section [1677b(a)(6) ] of the Act, it has been [Commerce’s] consistent policy to calculate the adjustment as the difference between the product-specific VCOMs for the U.S. and home market merchandise compared .... Furthermore, [Commerce] has permitted respondents to calculate their reported [inventory carrying costs] on the basis of TCOM.
Id.
C. Contentions of the Parties
NSK asserts that the plain language of
NSK also argues that, pursuant to
Ad Hoe Comm, of AZ-NM-TX-FL Producers of Gray Portland Cement v. United States,
the Court must presume [that19 U.S.C. § 1677b(f) ] means that Commerce may use data gathered pursuant to subsection [§ 1677b(f) ] for calculations involving subsections [§§ 1677b(b) and (e) ] only. That other sections of the statute — specifically subsections [1677(16), 1677b(a)(6), 1677a(d) ] — are silent about the use of affiliated supplier cost data does not nullify the precise language of subsection [1677b(f) ].
NSK’s Mem. at 8-9.
NSK further asserts that
Commerce alleges that
Section [1677(16) ] does not specify a particular methodology for determining appropriate matches. Rather, the statute implicitly delegates the selection of an appropriate methodology to [Commerce].
... Likewise, section [1677b(a)(6) ] grants [Commerce] the same discretion to determine a suitable method to calculate a difmer adjustment and does not restrict [Commerce’s] selection of an appropriate methodology to any particular approach. In addition, with respect to [Commerce’s] recalculation of NSK’s U.S. [inventory carrying costs], section [1677a(d) ] only specifies what adjustments are to be made to determine CEP and does not provide details regardingthe precise calculations for each particular adjustment.
Final Results, 63 Fed.Reg. at 2574-75.
[I]f [Commerce] determine[s] a component of a respondent’s COP and CV is distortive for one aspect of [Commerce’s] analysis, it is reasonable to make the same determination with respect to those other aspects of [Commerce’s] margin calculations where [Commerce] relied on identical cost data. To do otherwise would not only produce distortive results but would be contrary to [Commerce’s] mandate to administer the dumping laws as accurately as possible.
Id. at 2574.
Commerce further argues that the plain language of
Commerce, in response to NSK argues that its use of affiliated supplier cost data for purposes other than the calculation of COP and CV not only produced a harmonious whole but also indicated Commerce’s observing and understanding of the statute as a whole. Therefore, Commerce requests that the Court sustain its use of affiliated supplier cost data for purposes other than calculating COP and CV as in accordance with law.
Timken agrees with Commerce and asserts that NSK’s arguments are not supported by the statute.
See
Timken’s Resp. at 53. In particular, Timken argues that the term: (1) “for purposes of this part” in
D. Analysis
In resolving questions of statutory interpretation, the
Chevron
test requires this Court first to determine whether “Congress has directly spoken to the precise
In the case at bar, the issue before the Court is whether Commerce can use affiliated supplier cost data obtained pursuant to
Congress has: (1) implicitly delegated authority to Commerce to select an appropriate methodology for determining appropriate matches under
In the
Final Results,
Commerce explained its use of affiliated supplier cost data for running its model match method
[t]he adjustment [Commerce] made for NSK’s affiliated-party inputs is actually an adjustment to its reported material costs. Because material costs are a component of ... VCOM and ... TCOM, and these in turn are components of COP and CV, when [Commerce] adjusted NSK’s reported material costs [Commerce] not only recalculated [NSK’s] COP and CV, but [Commerce] effectively recalculated VCOM and TCOM components of COP and CV as well.
... [Commerce] does not rely on a respondent’s reported costs solely for the calculation of COP and CV. [Commerce] also use[s] cost information in a variety of other aspects of [Commerce’s] margin calculations. For example, when determining the commercial comparability of the foreign like product in accordance with section [1677(16) ] ..., it has been our long-standing practice to rely on the product-specific VCOMs and TCOMs for U.S. and home market merchandise. Likewise, when calculating a difmer adjustment to NV in accordance with section [1677b(a)(6) ] ..., it has been [Commerce’s] consistent policy to calculate the adjustment as the difference between the product-specific VCOMs for the U.S. and home market merchandise compared .... Furthermore, [Commerce] ha[s] permitted respondents to calculate their reported [inventory carrying costs] on the basis of TCOM.
Final Results, 63 Fed.Reg. at 2574.
Commerce further states:
[I]f [Commerce] determine[s] a component of a respondent’s COP and CV is distortive for one aspect of [Commerce’s] analysis, it is reasonable to make the same determination with respect to those other aspects of [Commerce’s] margin calculations where [Commerce] relied on the identical cost data. To do otherwise would not only produce distortive results but would be contrary to [Commerce’s] mandate to administer the dumping laws as accurately as possible.
Id.
The Court also holds that
XIII. Commerce’s Denial of a Partial Price-Based LOT Adjustment to NV for CEP Sales
A. Background
During this review, Commerce applied a CEP offset under
B. Contentions of the Parties
NSK agrees with the manner in which Commerce determined the LOT of its CEP for NV transactions.
See
NSK’s Mem. at 18. In particular, NSK agrees that Commerce properly used the CEP as adjusted for
NSK first notes that Commerce found two LOTs in the home market, one corresponding to OEM sales and the other to AM sales.
See id.
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.
Further, NSK notes that “Commerce correctly concluded that 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.
NSK however disagrees with Commerce’s decision to apply a CEP offset when Commerce matched CEP sales to home market AM sales.
See id.
In these situations, NSK argues,
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 LOT between CEP and NV.
Id.
at 19 (citing
Commerce argues that it properly denied a partial LOT adjustment and applied a CEP offset to NV for all of NSK’s CEP transactions.
See
Def.’s Mem. at 91-101. Contrary to NSK’s reading of
Timken agrees with Commerce’s positions, emphasizing that Commerce: (1) properly denied an LOT adjustment for NSK’s CEP sales; and (2) reasonably interpreted
C. Analysis
This issue has already been decided in
NTN Bearing,
24 CIT at -,
XIV. Commerce’s Calculation of CEP for Further-Manufactured Merchandise and Its Application of Facts Available
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; and (2) the International Trade Commission determines that an industry in the United States is materially injured or is threatened with material injury.
See
Commerce must reduce the price used to establish CEP by any of the following amounts associated with economic activities occurring in the United States: (1) commissions paid in “selling the subject merchandise in the United States”; (2) direct selling expenses, that is, “expenses that result from, and bear a direct relationship to, the sale, such as credit expenses, guarantees and warranties”; (3) “any selling expenses that the seller pays on behalf of the purchaser” (assumptions); (4) indirect selling expenses, that is, any selling expenses not deducted under any of the first three categories of deductions; (5) certain expenses resulting from further manufacture or assembly (including additional material and labor) performed on the merchandise after its importation into the United States; and (6) profit allocated to the expenses described in categories (1) through (5).
Commerce calculates the expenses resulting from further manufacture or assembly using one of two statutory methods.
See
[w]here the subject merchandise is imported by a person affiliated with the exporter or producer, and the value added in the United States by the affiliated person is likely to exceed substantially the value of the subject merchandise, [Commerce] shall determine the constructed export price for such merchandise by using one of the following prices if there is a sufficient quantity of sales to provide a reasonable basis for comparison and [Commerce] determines that the use of such sales is appropriate:
(1) The price of identical subject merchandise sold by the exporter or producer to an unaffiliated person.
(2) The price of other subject merchandise sold by the exporter or producer to an unaffiliated person.
If there is not a sufficient quantity of sales to provide a reasonable basis for comparison under paragraph (1) or (2), or [Commerce] determines that neither of the prices described in such paragraphs is appropriate, then the constructed export price may be determined on any other reasonable basis.
On January 29, 1997, Koyo requested that Commerce apply the Special Rule pursuant to
the record does not lead [Commerce] to conclude that the use of either of the two alternative methods described in section [1677a(e)(l) and (2) ] with respect to Koyo’s further-manufactured subject merchandise is appropriate. The record indicates that Koyo’s U.S. sales of further-manufactured subject merchandise represented a large portion of its total U.S. sales of subject merchandise during the POR. Therefore, the use of either of the proxy methods in this case — where the proportion of further-manufactured sales is relatively high — would have a relatively high potential for inaccuracy. In addition, as noted in [Commerce’s] preliminary results, the finished merchandise sold by Koyo to the first unrelated U.S. customer was still in the same class or kind as merchandise within the scope of the TRB order and finding (i.e., imported TRB components were processed into TRBs). As a result, the calculation of the precise amount of cost of further manufacturing would not be nearly as burdensome as it would be for ... another respondent who imported TRBs for incorporation in automobiles. Furthermore, in prior reviews [Commerce has] calculated margins for Koyo’s further-processed sales and ha[s] extensive experience with and knowledge of Koyo’s further-manufactured sales and the calculation of the cost of further manufacturing in the United States with respect to these sales. Therefore, in this case Commerce ha[s] determined that for Koyo the relatively small reduction of burden on Commerce that would result from resorting to either of the two statutory proxy methods under the [S]pecial [R]ule is outweighed by the potential distortion and losses in accuracy as a consequence of their use. Accordingly, Commerce ha[s] rejected the use of either of the two proxies as inappropriate and ha[s] sought to calculate the CEP for Koyo’s further manufactured sales using another reasonable basis.
Final Results, 63 Fed.Reg. at 2561.
As another reasonable method, Commerce chose its standard methodology under
that [Commerce] instead of evaluating whether the margins for finished over 4 [inch] A-588-604 bearings were an appropriate surrogate for A-588-604 further-manufactured merchandise, could have used the margins it calculated for under 4 [inch] A-588-054 bearings as aproxy for that A-588-604 merchandise which was further processed into under 4 [inch] bearings, and the margins calculated for over 4 [inch] bearings as a proxy for that A-588-604 merchandise which was further processed into over 4 [inch] bearings.
Final Results, 63 Fed.Reg. at 2562.
Koyo alternatively proposed that Commerce could have “comparefd] the value of all finished bearings [0-4 inch A-588-604 TRBs and over 4 inch A-588-604 TRBs] to the value of all further-processed components [that is, 0-4 inch A-588-054 further-manufactured TRBs and over 4 inch A-588-604 further-manufactured TRBs].” Koyo’s Mem. at 26-27. Commerce responded that:
[w]hile Koyo’s proposal would be less burdensome than the use of the standard methodology, [Commerce] believe[s] that the standard methodology is not unduly burdensome and presents a higher probability of accurate results than using margins calculated for non-further-manufaetured sales. Among other things, Koyo’s proposal relies on information concerning a different class or kind of merchandise and therefore in this case does not sufficiently allay concerns about potential inaccuracy. The record indicates that the use of these proxy methods would have a relatively high potential for distortion; [Commerce] believe[s] that the gains in accuracy that [Commerce] would achieve using the standard methodology would outweigh the additional burden resulting from the use of the standard calculation. The record supports [Commerce’s] continued use of the standard methodology as a reasonable basis for calculating the CEP for Koyo’s further-manufactured merchandise.
Final Results, 63 Fed.Reg. at 2562.
Therefore, since Koyo refused to respond to the particular section, Commerce, pursuant to
B. Contentions of the Parties
1. Koyo’s Contentions
Koyo and Commerce both agree that “Koyo met the ‘substantially exceeds’ qualification
29
for implementation of the [Special [R]ule” under
instead of evaluating whether the margins calculated on the finished over 4 [inch A-588-604] TRBs were an appropriate proxy for the margins on imported bearing parts destined to become both 0-4 [inch A-588-604] TRBs and over 4 [inch A-588-604] TRBs, [Commerce] should have looked to the margins on finished 0-4 [inch A-588-054] TRBs as a proxy for parts further manufactured into 0-4 [inch A-588-604] TRBs, and the margins on finished over 4 [inch A-588-604] as a proxy for parts further manufactured into over 4 [inch A-588-604] TRBs.
Id.
at 22. Koyo maintains that “[s]uch a comparison conforms closely with the statutory preference for relying on ‘identical subject merchandise,’
Koyo also proposed an alternative methodology to its proposed methodology.
See id.
at 26. In particular, Koyo alleges that Commerce could have “eompare[d] the value of all finished bearings [0-4 inch A-588-604 TRBs and over 4 inch A-588-604 TRBs] to the value of all further-processed components [that is, OAt inch A-588-054 further-manufactured TRBs and over 4 inch A-588-604 further-manufactured TRBs].”
Id.
Koyo maintains that this proposed methodology would qualify as “another reasonable basis” pursuant to
Koyo also contends that Commerce unlawfully applied adverse facts available to Koyo’s further-manufactured merchandise.
See
Koyo’s Reply at 18-22. Koyo asserts that because the statutory language under
Koyo alternatively argues that “if the statute did accord [Commerce] the discretion to resort to the traditional further processing analysis despite the fact that the criteria for the ‘[S]pecial [R]ule’ are satisfied ..., [Commerce’s] justification for doing so in this case is without support on the record.”
Id.
at 20. In particular, Koyo argues that Commerce did not provide any record evidence or support for its proposition that Koyo’s proposed alternative methodologies for calculating the CEP of Koyo’s further-manufactured merchandise would be distortive.
See id.
at 20-22.
Finally, Koyo maintains if the Court finds that Commerce had the authority to apply adverse facts available to Koyo’s further-manufactured merchandise, then the Court should sustain Commerce’s application of adverse facts available to entered value rather than sales value of the finished TRBs as Timken argues Commerce should have used.
See
Koyo’s Mem. Resp. Timken’s Mot. J. Agency R. (“Koyo’s Resp.”) at 16-22. In particular, Koyo asserts that Commerce acted within
Timken’s approach would result in the application of the dumping margin to manufacturing that took place in the United States, that is, to U.S. value-added. It would violate the premise of the antidumping law to apply duties to the value of U.S. manufacturing rather than the value of imported merchandise. The entire purpose of [Commerce’s] further-manufacturing exercise is to “back out” the value added in the United States to find the “value” of the imported subject merchandise. Because the subject merchandise in this case was forgings, and because the statute does not contemplate imposing antidumping duties on manufacturing done in the United States, [Commerce’s] reliance on the entered value of forgings rather than the sales value of finished bearings incorporating significant U.S. value-added, was reasonable and rationally related to the task at hand.
Koyo’s Resp. at 19-20.
Koyo further contends that Timken’s arguments that Commerce erred in not calculating the highest potential uncollected dumping duties possible and the unreliability of transfer prices (that is, Koyo’s entered value of imported forgings) are without merit. Id. at 20-22. Therefore, Koyo maintains that “to the extent that any application of adverse facts available was appropriate in this case,” the Court should affirm Commerce’s methodology as reasonable and in accordance with law. Id. at 22.
2. Commerce’s Contentions
Commerce contends that Congress has granted to Commerce broad discretion in determining when the use of “any other reasonable basis” under
the record does not lead [Commerce] to conclude that the use of either of the two alternative methods described in section [1677a(e)(l) and (2)] with respect to Koyo’s further-manufactured merchandise is appropriate. The record indicates that Koyo’s U.S. sales of further-manufactured subject merchandise represented a large portion of its total U.S. sales of subject merchandise during the POR. Therefore, the use of either of the proxy methods in this case — where the proportion of further-manufactured sales is relatively high — would have a relatively high potential for inaccuracy. In addition, as noted in [Commerce’s] preliminary results, the finished merchandise sold by Koyo to the first unrelated U.S. customer was still in the same class or kind as merchandise within the scope of the TRB order and finding (i.e., imported TRB components were processed into TRBs). As a result, the calculation of the precise amount of cost of further manufacturing would not be nearly as burdensome as it would be for ... another respondent who imported TRBs for incorporation in automobiles. Furthermore, in prior reviews [Commerce has] calculated margins for Koyo’s further processed sales and ha[s] extensive experience with and knowledge of Koyo’s further-manufactured sales and the calculation of the cost of further manufacturing in the United States with respect to these sales. Therefore, in this case [Commerce has] determined that for Koyo the relatively small reduction of burden on [Commerce] that would result from resorting to either of the two statutory proxy methods under the [S]pecial [R]ule is outweighed by the potential distortion and losses in accuracy as a consequence of their use. Accordingly, [Commerce has] rejected the use of either of the two proxies as inappropriate and ha[s] sought to calculate the CEP for Koyo’s further manufactured sales using another reasonable basis.
Final Results, 63 Fed.Reg. at 2561.
Commerce does agree that: (1) Koyo’s proposed methodology would be less burdensome than Commerce’s standard methodology under
the standard methodology [pursuant to§ 1677a(d)(2) ] is not unduly burdensome and presents a higher probability of accurate results than using margins calculated for non-further-manufactured sales.... Koyo’s proposal relies on information concerning a different class or kind of merchandise and therefore in this case does not sufficiently allay concerns about potential inaccuracy [that is, Koyo relied on information from two different dumping orders when it proposed that Commerce should have looked to the margins on finished 0-4 inch A-588-054 TRBs as a proxy for parts further manufactured into 0-4 inch A-588-604 TRBs].
Final Results, 63 Fed.Reg. at 2562.
Commerce argues that its determination, pursuant to
Commerce also contends that it acted in accordance with
Commerce further contends that Timken does not provide “any evidence demonstrating that the transfer prices that Koyo reported as entered values are unreliable.” Id. Finally, Commerce argues that the record indicates that Koyo’s transfer prices were maintained within the ordinary course of business and for purposes besides antidumping proceedings (i.e., for United States tax purposes and United States Customs’ reviews). See id.
3. Timken’s Contentions
Timken agrees with Commerce’s resorting to its standard methodology under
C. Analysis
The first issue is whether Commerce’s use of its standard methodology pursuant to
The end clause of
Commerce, therefore, may determine the method by which to calculate CEP, when it finds that the use of the surrogate prices is not appropriate. This holds true even if Commerce finds that the value added in the United States “is likely to exceed substantially the value of the subject merchandise.”
In the case at bar, Commerce determined that
the record does not lead [Commerce] to conclude that the use of either of the two alternative methods described in section [1677a(e)(l) and (2) ] with respect to Koyo’s further-manufactured merchandise is appropriate. The record indicates that Koyo’s U.S. sales of further-manufactured subject merchandise represented a large portion of its total U.S. sales of subject merchandise during the POR. Therefore, the use of either of the proxy methods in this case — where the proportion of further-manufactured sales is relatively high — would have a relatively high potential for inaccuracy. In addition, as noted in [Commerce’s] [Preliminary [R]esults, the finished merchandise sold by Koyo to the first unrelated U.S. customer was still in the same class or kind as merchandise within the scope of the TRB order and finding (i.e., imported TRB components were processed into TRBs)....
Final Results, 63 Fed.Reg. at 2561.
The Court finds that Commerce acted within the discretion afforded to it by
Next, the Court must determine whether Commerce’s application of the adverse facts available margin rate to Koyo’s entered value in order to calculate the CEP of Koyo’s further-manufactured merchandise was in accordance with law. The antidumping statute mandates that Commerce use “facts otherwise available” if “necessary information is not available on the record” of an antidumping proceeding.
Once Commerce determines that use of facts available is warranted,
In order to find that a party “has failed to cooperate by not acting to the best of its ability” pursuant to
The Court finds that Commerce’s decision to apply adverse facts available was in accordance with law. WRen Commerce
[b]ecause Koyo has no confidence that it will receive even-handed treatment from [Commerce] in the calculation of the fair value of TRBs further-processed from imported forgings, Koyo has chosen not to file a [particular] response in this review.
Koyo’s Mem. Ex. 6 at 2 (emphasis supplied).
As a result of Koyo’s refusal to provide responses to the particular section and, thereby, failing to act to the best of its ability, Commerce selected as “adverse facts available ... the highest rate [Commerce] ever calculated for Koyo in any previous review of the [TRBs at issue].” Final Results, 63 Fed.Reg. at 2562. Consequently, Commerce’s decision to apply the adverse facts available rate to Koyo’s entered value to calculate the CEP of Koyo’s further-manufactured merchandise was in accordance with law.
The Court also finds that Timken’s argument that Commerce should have applied the adverse facts available rate to Koyo’s sales value is without merit. As Commerce correctly argues, “[i]n choosing among the facts available, [Commerce is] not required by the statute to select a method that is ‘the most’ or ‘more’ reasonably adverse.” Final Results, 63 Fed.Reg. at 2562. Rather, this Court affirms Commerce’s application of the adverse facts available rate to Koyo’s entered value since Commerce’s methodology was reasonable.
Accordingly, the Court sustains Commerce’s resort to its standard methodology under
XV. Calculation of the Antidumping Duty Assessment Rate
A. Background
In the subject review, Commerce, following its usual practice in ascertaining cash deposit rates and assessment rates, stated that the “cash deposit rate has been determined on the basis of the selling price to the first unaffiliated U.S. customer. For appraisement purposes, where information is available, [Commerce] will use the entered value of the merchandise to determine the assessment rate.” Final Results, 63 Fed.Reg. at 2585.
Any of Commerce’s findings concerning assessment rates and cash deposit rates are subject to
The dumping margin (equal to the amount of antidumping duty owed) is the amount by which NV exceeds the EP or CEP on the subject merchandise sold dur
NV is the comparable price for a product like the imported merchandise when first sold (generally, to unaffiliated parties) “for consumption in the exporting country, in the usual commercial quantities and in the ordinary course of trade and, to the extent practicable, at the same level of trade as the export price or constructed export price.”
The export price means the “price at which the subject merchandise is first sold ... by the producer or exporter of the subject merchandise outside of the United States to an unaffiliated purchaser,” while the constructed export price is the “price at which the subject merchandise is first sold ... in the United States ... [by] the producer or exporter ... to a purchaser not affiliated with the producer or exporter ....”
Cash deposit is a provisional remedy. When Commerce directs Customs to suspend liquidation upon a preliminary determination of dumping, the importer must make a cash deposit of estimated anti-dumping duties with Customs or post a bond or other security.
See
When an antidumping duty is imposed upon imported merchandise, Commerce calculates an assessment rate for each importer by dividing the dumping margin for the subject merchandise by the entered value of such merchandise for normal Customs purposes.
See
In promulgating
[Section] 351.212(b)(1) [deals] with the method that [Commerce] will use to assess antidumping duties upon completion of a review.... [Commerce] provided that it normally will calculate an “assessment rate” for each importer by dividing the absolute dumping margin found ... by the entered value .... [The regulation] merely codified an assessment method that [Commerce] has come to use more and more frequently in recent years.
Historically, [Commerce] (and, before it, the Department of Treasury) used the so-called “master list” (entry-by-entry) assessment method. Under the master list method, [Commerce] would list the appropriate amount of duties to assess for each entry of subject merchandise separately in its instructions to the Customs Service. However, in recent years, the master list method has fallen into disuse for two principal reasons. First, in most cases, respondents have not been able to link specific entries to specific sales, particularly in CEP situations in which there is a delay between the importation of merchandise and its resale to an unaffiliated customer. Absent an ability to link entries to sales, [Commerce] cannot apply the master list method. Second, even when respondents are able to link entries to sales, there are practical difficulties in creating and using a master list if the number of entries covered by a review is large. Preparing a master list that covers hundreds or thousands of entries is a time-consuming process, and one that is prone to errors by [Commerce] and/or Customs Service staff.
Antidumping Duties; Countervailing Duties, 62 Fed.Reg. 27,296, 27,314 (May 19,1997).
B. Contentions of the Parties
1. Koyo’s Contentions
Koyo asserts that Commerce unlawfully calculated the antidumping duty assessment rate under
Furthermore, Koyo maintains that because Commerce always uses sales value as the denominator for calculating cash deposit rates, Commerce must apply the same calculation method to the assessment rates.
See
Koyo’s Mem. at 30. Koyo argues that Commerce’s use of different denominators for cash deposit rates and assessment rates creates a distinction between the two that conflicts with the mandate of
Koyo also notes that Commerce’s use of
Although Koyo concedes that this Court upheld Commerce’s methodology for calculating the assessment rates in
Koyo,
Finally, Koyo asserts that the exhaustion doctrine does not preclude Koyo from raising its claim because the futility exception applies. See Koyo’s Reply at 23. In particular, Koyo claims that since Commerce has used the same methodology to calculate the assessment rate in past reviews, “it simply would have been a waste of time and effort — futile—for Koyo to raise this issue ... before [Commerce].” Id.
In response, Commerce contends that the calculation of the assessment rate, pursuant to
According to Commerce, the requirement of
Commerce also argues that this Court should not consider the issue because Koyo failed to exhaust its administrative remedies.
See id.
at 110-11. In particular, Commerce contends that Koyo was aware of Commerce’s regulation concerning the filing of case briefs which are to be submitted by interested parties after the publication of the preliminary results and which must “contain all the arguments that, in the [respondent’s] view, continue to be relevant to the final results of administrative review ....”
Id.
at 111 (citing
3. Timken’s Contentions
Timken generally supports Commerce and contends that contrary to Koyo, the “price-based nature of the calculation of dumping margins provides no support for any position regarding assessment.” Timken’s Resp. at 51. Moreover, Timken asserts that if Commerce used sales value in the denominator as Koyo argues, rather than the entered value for the subject merchandise, an under-collection of anti-dumping duties would result.
See id.
at 50. Timken also points out that, contrary to Koyo’s claim, there is binding precedent by the CAFC upholding Commerce’s methodology for purposes of calculating cash deposit rates and assessment rates.
See id.
at 51-52 (citing
Torrington v. United States,
C. Analysis
The exhaustion doctrine requires a party to present its claims to the relevant administrative agency for the agency’s consideration before raising these claims to the Court.
See Unemployment Compensation Comm’n of Alaska v. Aragon,
In this case, based on precedent, Koyo knew Commerce’s position on this issue and deemed it futile for Koyo to raise this issue below. The Court, therefore, concludes that Koyo properly exhausted its administrative remedies and is correct to raise this issue to the Court.
See Asociacion Colombiana de Exportadores de Flores v. United States,
Turning to the merits of this is sue, in
Koyo Seiko Co. v. United States (“Koyo Seiko Co.”),
24 CIT --,
Because Commerce’s methodology of calculating the assessment rate and the parties’ arguments are practically identical to those presented in
Koyo Seiko Co.,
24 CIT -,
XVI. Commerce’s Treatment of Forgings as In-Scope Merchandise
Koyo argues that Commerce erred in treating Koyo’s imported forged rings as in-scope merchandise subject to the TRB antidumping duty order.
See
Koyo’s Mem. at 32. Koyo acknowledges that Commerce’s 1995 scope determination treating Koyo’s imported forged rings as in-scope merchandise subject to the TRB antidumping duty order was upheld by the CAFC in
Koyo Seiko Co. v. United States,
Commerce responds that “Commerce’s scope ruling determination [is in accordance with law and] Koyo’s rough forgings are within the scope of the antidumping duty order on TRBs from Japan.” Def.’s Mem. at 113-14 (citing
Koyo Seiko Co. v. United States (“Koyo 1997”),
Because Commerce’s scope ruling determination and the parties’ arguments are practically identical to those presented in
Koyo 1997,
XVII. Commerce’s Decision to Limit United States Indirect Selling Expenses to Those Expenses Specifically Associated With Commercial Activity in the United States
A. Background
The pre-URAA statute provided the reduction of exporter’s sales price (“ESP”) by the amount of “expenses generally incurred by or for the account of the exporter in the United States in selling identical or substantially identical merchandise.”
As revised by the URAA, the statute states that CEP, the post-URAA equivalent to ESP, is to be reduced by the amount of any “expenses generally incurred by or for the account of the producer or exporter, or the affiliated seller in the United States[:]” including “any selling expenses not deducted under subpara-graph (A) [commissions], (B) [direct selling expenses], or (C) [selling expenses assumed by the seller on behalf of the purchaser].”
[a]s [Commerce] stated in [Final Results of Antidumping Duty Administrative Reviews and Termination in Part of Tapered Roller Bearings and Parts Thereof Finished and Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan, 62 Fed.Reg. 11,825, 11,-834] and AFBs VI at 2124, [Commerce] will deduct from CEP only those expenses associated with economic activities in the United States which occurred with respect to sales to the unaffiliated U.S. customer. [Commerce] found no information on the record for this review period to indicate that the indirect selling expenses and ICC for the respondents that were incurred in their respective home markets were incurred on sales to the unaffiliated customer in the United States.
Final Results, 63 Fed.Reg. 2575.
Therefore, since NTN’s, NSK’s and Koyo’s “reported selling expenses at issue were not associated with commercial activity in the United States[,][but][r]ather, ... were incurred prior to the commercial activity in the United States[,] ... [Commerce] did not deduct these expenses from CEP for these final results.” Id.
B. Contentions of the Parties
Timken claims that the new
Relying on this Court’s decision in
Timken 1998,
Commerce responds that it properly did not adjust CEP for indirect selling expenses reported by Koyo, NTN and NSK because the new statutory language (that is,
Koyo, NTN and NSK generally agree with Commerce and argue that: (1) “the SAA fully supports [Commerce’s] decision not to adjust CEP to account for indirect selling expenses and ICC incurred in Japan,”
Final Results,
63 Fed.Reg. at 2575; (2) the statutory language of
C. Analysis
In
Timken 1998,
Because Commerce’s practice of limiting United States indirect selling expenses to those expenses incurred in the United States and the parties’ arguments are practically identical to those presented in Timken 1998 and Micron 1999, the Court adheres to its reasoning in Timken 1998 and Micron 1999. Accordingly, the Court finds that Commerce’s decision to limit United States indirect selling expenses to those expenses incurred in the United States is supported by substantial evidence and in accordance with law.
XVIII. NTN’s Exclusion of Warehousing Expenses for Non-Scope Merchandise From United States Selling Expenses
A. Background
In the underlying review, NTN excluded certain warehousing expenses attributable to non-scope merchandise from its reported United States indirect selling expenses. See NTN’s Resp. at 5. In particular,
because certain of its U.S. expenses were incurred solely for non-scope merchandise, in order to ensure an accurate allocation of its U.S. expenses, NTN first removed all such expenses from its pool of U.S. expenses. The remaining expenses which were incurred for either scope or non-scope merchandise, but cannot be specifically linked to either scope or non-scope merchandise by NTN, were then allocated to scope and non-scope merchandise.
Final Results, 63 Fed.Reg. at 2572.
In accepting NTN’s methodology of reporting its United States indirect selling expenses, Commerce: (1) verified NTN’s United States expenses finding no discrepancies; and (2) stated that it has found NTN’s methodology to be reasonable in past TRB and AFB cases.
Id.
Commerce also explained how it eliminated the possi
Commerce calculated a ratio of sales of scope merchandise to all sales. Commerce then adjusted NTN’s reported final indirect selling expense by adding or subtracting various expenses to arrive at a final indirect selling expense. Next, Commerce multiplied that total expense by the ratio of scope-to-total products.
Def.’s Mem. at 121 (citing Def.’s Ex. 1 at 18).
B. Contentions of the Parties
Timken argues that Commerce improperly permitted NTN to exclude certain warehousing expenses attributable to non-scope merchandise from its reported United States indirect selling expenses. See Timken’s Mem. at 21-22; Timken’s Reply at 5-8; Final Results, 63 Fed.Reg. at 2572. In particular, Timken asserts that “NTN’s adjustment of its allocated pool of indirect U.S. selling expenses was not reasonable and not supported by substantial evidence” because NTN excluded the warehousing expenses attributable to the non-scope merchandise for one of its subsidiaries and then allocated the remaining expenses to all of NTN’s scope and non-scope United States sales thereby creating distortion. Timken’s Reply at 5-6. Timken also maintains that one of NTN’s subsidiaries’ “warehousing expenses attributed to non-scope merchandise is disproportionate to the amount of non-scope sales . 36 Id. at 7.
Commerce responds that
Pointing out that NTN’s allocation methodology was reasonable, Commerce asserts that the Court should uphold NTN’s reported allocation for United States indirect selling expenses.
NTN supports Commerce’s conclusion. Replying to Timken’s claim that “ The basic premise underlying NTN’s allocation methodology for its U.S. indirect selling expenses is that the sum of those expenses may be evenly allocated to the sum of its sales[,]’ ” NTN contends that Timken misunderstands the methodology at issue. NTN’s Resp. at 5 (quoting Timken’s Mem. at 21). NTN asserts that it “differentiates expenses on the basis of whether they were incurred for merchandise within the scope of the case as the first step in its allocation methodology.” NTN’s Resp. at 6. NTN maintains that its “allocation methodology simply allocates expenses to the product which incurred the expenses, this allocation methodology is not distor-tive, and Commerce’s acceptance of it is reasonable and in accordance with law.” Id.
C. Analysis
The Court upholds Commerce’s decision to allow NTN to exclude warehousing expenses attributable to non-scope merchandise from its United States selling expenses since it is in accordance with law. The Court notes that
[Commerce] may consider allocated expenses and price adjustments when transaction-specific reporting is not feasible, provided [Commerce] is satisfied that the allocation method used does not cause inaccuracies or distortions.
In addition, pursuant to
[Commerce] will not reject an allocation method solely because the method includes expenses incurred, or price adjustments made, with respect to sales of merchandise that does not constitute subject merchandise or a foreign like product (whichever is applicable).
Based on a careful examination of the record and on the regulatory language of
XIX. Treatment of Certain Rebates and Billing Adjustments
A. Background
1. Koyo’s Home Market Support Rebates
Koyo reported certain home market support rebates on a customer-specific basis and the allocations used by Koyo included rebates on non-scope merchandise. See Koyo’s Resp. at 30-32. “Koyo calculated rebate factors by dividing the total rebates paid to a given customer by the total POR sales to that customer.” Final Results, 63 Fed.Reg. at 2567. In accepting Koyo’s reporting of home market support rebates on a customer-specific basis, Commerce stated the following:
Based on information Koyo provided, [Commerce] [is] satisfied that Koyo acted to the best of its ability in reporting home market rebates. However, because Koyo’s allocation methodology includes non-scope merchandise, [Commerce has] nevertheless examined Koyo’s allocation to determine if it is distortive. [Commerce’s] review of the record indicates that the non-scope merchandise included in Koyo’s allocation are sales of bearings other than TRBs.... [Commerce’s] review and analysis of the record give[s] [Commerce] no reason to believe that Koyo is more likely to grant rebates on sales of bearings other than TRBs than on sales of TRBs, [and Commerce] note[s] that Koyo is primarily in the business of selling bearings, some of which are within the scope of the TRB orders and others which are not. While [Commerce] recognize[s] that there are differences among bearings, [Commerce has] not found that the scope and non-scope bearings included in Koyo’s allocation vary significantly in terms of value, physical characteristics, nor the manner in which they were sold such that Koyo’s allocation would result in an unreasonably inaccurate or distortive allocation.
See id.
2. Koyo’s Home Market Billing Adjustment Two
Koyo reported home market “billing adjustment two” on a customer-specific basis and allocated these adjustments over scope and non-scope merchandise.
See
Koyo’s Resp. at 23. “Koyo ... calculated its lump-sum billing adjustments by multiplying the total adjustment amount paid to a customer by the ratio of its TRB sales to that customer to the total sales to that customer.”
Final Results,
63 Fed.Reg. at
While [Commerce’s] preference is for transaction-specific reporting, [Commerce] recognize[s] that this is not always possible. It is inappropriate to reject allocations that are not unreasonably distortive where a fully cooperating respondent is unable to report the information in a more specific manner.... Accordingly, [Commerce has] accepted these adjustments when it was not feasible for a respondent to report these adjustments on a more specific basis, provided that the allocation method used does not cause unreasonable inaccuracies or distortions.... [Commerce has] not rejected an allocation method solely because the allocation includes adjustments granted on non-scope merchandise. However, such allocations are not acceptable where [Commerce has] reason to believe that respondents did not grant such adjustments in proportionate amounts with respect to sales of out-of-scope and in-scope merchandise....
Based on [Commerce’s] examination of the record in this and in past reviews, [Commerce is] satisfied that Koyo’s records do not allow it to report these billing adjustments on a transaction-specific basis and that Koyo acted to the best of its ability in calculating the reported adjustment on as narrow a basis as its records allowed. Therefore, for these final results [Commerce has] made a direct adjustment to NV for Koyo’s lump-sum billing adjustments.
Final Results, 63 Fed.Reg. at 2566.
3. NSK’s Home Market Rebate
NSK reported lump-sum rebates to certain customers on a customer-specific basis and “applied the amount directly to the customer’s account receivable — the amount [was] not directly linked to any specific shipment(s), part number(s), or group of part numbers, but [was] just the lump-sum amount that resultfed] from the parties’ negotiations.” NSK’s Resp. at 9. Such rebates were paid on the basis of subject and non-subject merchandise. See Final Results, 63 Fed.Reg. at 2566. In accepting NSK’s rebates, Commerce stated that:
[Commerce has] accepted [NSK’s] claims for lump-sum rebates because [Commerce is] satisfied that NSK’s methodology, while it includes non-subject merchandise, does not shift rebates from non-scope to scope merchandise. In its response, NSK submitted information demonstrating that the ratio of scope to non-scope merchandise purchased by each customer who received this rebate was relatively constant throughout the POR. Furthermore, [Commerce has] determined based on [Commerce’s] review of the record that NSK acted to the best of its ability in reporting these price adjustments and that reporting on a more specific basis was not possible given the manner in which NSK maintains its records.
Id. at 2566-67.
B. Contentions of the Parties
Timken alleges that Commerce’s acceptance of Koyo’s home market support rebates and home market billing adjustments, as well as NSK’s lump sum rebates, are unlawful because such adjustments must always be reported on a transaction-specific basis. See Timken’s Mem. at 28-32, 34-36; Timken’s Reply at 9.
Timken contends that even under its new methodology, Commerce’s determination was not supported by substantial evidence inasmuch as respondents faded to show that: (1) their reporting methods did not result in distortion; and (2) they put forth their best efforts to report the information on a more precise basis.
See
Timken’s Mem. at 29-32; 34-36. Timken argues that respondents have the burden
Commerce responds that its treatment of the adjustments is consistent with current law.
See
Def.’s Mem. at 121-27. Even though Koyo’s and NSK’s billing adjustments and rebates were not reported in a transaction-specific manner, Commerce accepted them as part of its new policy to accept allocated adjustments where it is not feasible for the respondent to report them on a transaction-specific basis and the respondent has acted to the best of its ability.
See id.
at 123. Additionally, Commerce examines whether the allocation method used is not unreasonably distortive pursuant to
Commerce argues that its findings are supported by substantial evidence and in accordance with law because “Commerce used its acquired knowledge of Koyof’s] and NSK’s computer systems and databases to conclude that they could not provide the information in the preferred form.” Id. at 124 (citing Timken 1998). “Moreover, ... Commerce [states that it] scrutinized Koyo’s and NSK’s data before concluding that the data were reliable and that the adjustments on scope and non-scope merchandise did not result in unreasonable distortions.” Id. at 124.
With respect to Koyo’s rebates and “billing adjustment two,” Commerce maintains that: (1) Koyo had reported the adjustments on the most specific basis possible and, thus, had cooperated to the best of its ability; and (2) the allocation method was not distortive.
See Final Results,
Commerce also argues that it properly accepted NSK’s home market rebates. See Def.’s Mem. at 126.
Koyo and NSK concur with Commerce’s position. See Koyo’s Resp. at 22-32; NSK’s Resp. at 8-11.
C. Analysis
Commerce’s decision to accept Koyo’s and NSK’s billing adjustments and rebates was in accordance with the postURAA statutory language, as well as with the SAA that accompanied the enactment of the URAA because: (1) Commerce reasonably determined that the adjustments were reliable and could not be reported more specifically; (2) Commerce properly determined that respondents acted to the best of their abilities in reporting the adjustments; and (3) Commerce properly accepted the allocation methodologies of the respondents after carefully reviewing the differences between such merchandise and ensuring that the allocations were not unreasonably distortive. Accord Final Results, 63 Fed.Reg. at 2566-67; Def.’s Mem. at 122-27.
After the enactment of the URAA, Commerce reevaluated its treatment of post-sale price adjustments (“PSPAs”), and since that time it treats them as adjustments to price and not as selling expenses. Indeed, Commerce’s treatment of the home market support rebates, early-payment discounts and billing adjustments as adjustments to price instead of selling expenses is the issue left unanswered by the pre-URAA cases such as
Torrington Co. v. United States (“Torrington CAFC”),
Commerce applied its post-URAA methodology to analyze adjustments to price, explaining that Commerce accepted PSPAs as direct adjustments to price if Commerce determined that a respondent, in reporting these adjustments, acted to the best of its ability to associate the adjustment with the sale on which the adjustment was made, rendering its reporting methodology not unreasonably distortive. See Final Results, 63 Fed.Reg. at 2566. In evaluating the degree to which an allocation over scope and non-scope merchandise may be distortive, Commerce examines “the extent to which the out-of-scope merchandise included in the allocation pool is different from the in-scope merchandise in terms of value and physical characteristics, and the manner in which it is sold.” Id.
Timken argues that Commerce’s methodology is inadequate, unlawful and not supported by substantial evidence.
See
Timken’s Mem. at 29-32; 34-36. Timken is incorrect. Although the URAA does not compel Commerce’s new policy on price adjustments, the statute does not prohibit Commerce’s new practice. Commerce’s “change in policy ... substitutes a rigid rule with a more reasonable method that nonetheless ensures that a respondent’s information is reliable and verifiable.”
Timken 1998,
Moreover, one of the goals of Congress in passing the URAA was to liberalize certain reporting requirements imposed on respondents in antidumping reviews. Such intent is evident both in the amendments enacted by the URAA and in the SAA. The URAA amended the antidump-ing law to include a new subsection,
[i]n reaching a determination under [19 U.S.C.] section 1671b, 1671d, 1673b, 1673d, 1675, or 1675b[,] ... [Commerce] shall not decline to consider information that is submitted by an interested party and is necessary to the determination but does not meet all the applicablerequirements established by [Commerce], if—
(1) the information is submitted by the deadline established for its submission,
(2) the information can be verified,
(3) the information is not so incomplete that it cannot serve as a reliable basis for reaching the applicable determination,
(4) the interested party has demonstrated that it acted to the best of its ability in providing the information and meeting the requirements established by [Commerce] with respect to the information, and
(5) the information can be used without undue difficulties.
This section of the statute liberalized Commerce’s general acceptance of data submitted by respondents in antidumping proceedings by directing Commerce not to reject data submissions once Commerce concludes that the specified criteria are satisfied. 37
Next, Timken suggests that Commerce has accepted the adjustments without requiring respondents to carry the burden of proving that the adjustments are non-dis-tortive. See Timken’s Reply at 9-11. This argument is similarly without merit. As a routine part of its antidumping practice, Commerce accepts a range of reporting methodologies and allocations adopted by respondents. The mere acceptance of an adjustment as reported cannot be a sufficient ground for rejecting Commerce’s decision. It would be anomalous indeed to expect a respondent to provide Commerce, in addition to the information on the basis of which Commerce could conclude that the respondent’s reporting methods are not distortive, with proof of the validity of Commerce’s determination of that sort. Such a scheme would effectively allow the respondent to bind Commerce, restricting Commerce’s inherent power to investigate, examine and render a decision.
In determining whether Koyo’s and NSK’s allocation over scope and non-scope merchandise was unreasonably distortive, Commerce reasonably has not required respondents to demonstrate the non-distor-tive nature of the allocation directly, for example, by compelling them to identify separately the adjustments on scope merchandise and compare them to the results of allocations over both scope and non-scope merchandise. Such a burdensome exercise would defeat the entire purpose underlying the more flexible reporting rules, by compelling the respondent to go through the enormous effort that the new rules were intended to obviate. Rather, Commerce has adopted criteria by which Commerce determines whether an allocation over scope and non-scope merchandise was likely to cause unreasonable distortions on a ease-by-case basis, utilizing Commerce’s administratory expertise.
In the case at hand, Commerce’s determination with respect to Koyo’s rebates and “billing adjustment two” was reasonable. Commerce premised its conclusion on Koyo’s response to Commerce’s supplemental questionnaire in which “Koyo stated that more specific reporting for a certain customer who received rebates was not possible because its records did not allow it to isolate sales of those bearings for which rebates were granted.”
Final
Commerce also properly accepted NSK’s lump-sum home market rebates. NSK’s home market rebates were granted on a customer-specific basis, and “while it includes non-subject merchandise, [NSK] does not shift rebates from non-scope to scope merchandise.” See id. at 2566. Commerce also found that the method was not unreasonably distortive and that NSK acted to the best of its ability. See id. at 2566-67.
Timken asserts that Commerce improperly determined that Koyo and NSK acted to the best of their ability in reporting adjustments. See Timken Mem. at 31-32, 36. Timken’s assertion is without merit. When respondents’ adjustments were granted over both scope and non-scope merchandise without reference to any particular model or transaction, Commerce could not have reasonably expected them to be recorded or reported to Commerce in a manner more specific than that which was used. It was equally appropriate for Commerce to consider, as a part of its decision whether respondents acted to the best of their ability in reporting the adjustments, its acquired knowledge of Koyo’s and NSK’s computer systems and databases to conclude that they could not provide the information in the preferred form. See Def.’s Mem. at 124. 38
In sum, the Court finds that Commerce’s decision to accept Koyo’s and NSK’s reported home market adjustments was in accordance with the post-URAA statutory language and the SAA. The record demonstrates that the requirements of
Commerce’s determinations with respect to Koyo and NSK were also consistent with the SAA. The Court agrees with Commerce’s finding in the
Final Results
that given Koyo’s and NSK’s computer systems and databases and time constraints imposed by the statute, the reporting and allocation methodologies were reasonable. This is consistent with the SAA directive under
XX. Commerce’s Acceptance of Home Market Average Short-Term Interest Rate
Timken contends that Commerce’s acceptance of Koyo’s home market average short-term interest rate is not supported by substantial evidence because there are two loan entries whose “interest amounts ... are aberrational and unsupported by the record ... [since the two loan entries] do not list certain relevant information regarding the terms and details of these loans for which the reported interest was incurred.” 39 Final Results, 63 Fed.Reg. at 2569. In particular, Timken argues that “Koyo has calculated the home market interest rate which it has used for various adjustments by dividing the amount of interest it paid by the principal amount it has borrowed” and about half of the total interest used in Koyo’s calculation was composed of two loan entries that were a different type of loan arrangement than the other loan entries. Timken’s Mem. at 32-33. Timken maintains that Commerce’s verification of selected Koyo interest expenses should not serve as “a basis for finding that all of Koyo’s interest expenses were accurate.” Timken’s Reply at 12-13. Accordingly, Timken asserts that it is unreasonable for Commerce to verify one loan category and deduce from this that the other loan arrangement’s interest and loan amounts are accurate, that is, “Commerce is effectively claiming that verification of ‘apples’ ... suffices to find that ‘oranges’ ... are accurate.” Id. at 13. Timken, therefore, requests that this Court reverse Commerce’s acceptance of Koyo’s home market interest rate and remand with instructions that Commerce recalculate Koyo’s interest rate excluding the interest amounts of the two loan entries at issue.
Commerce, in turn argues that it properly accepted Koyo’s reported home market average short-term interest rate in its calculation of NV because
[d]uring verification [Commerce] carefully reviewed the manner in which Koyo calculated its short-term interest rate and its credit expense ratios. After reviewing supporting documentation for each of several loans [Commerce] selected from Koyo’s credit calculation worksheets, [Commerce was] ... satisfied that Koyo had accurately reported its credit expense.
In regards to the two interest amounts that are at issue, Commerce maintains that
[Commerce is] generally satisfied with Koyo’s explanation of and the reliability of those interest amounts which Timken claims should be removed from the interest rate calculation and can find no evidence on the record that indicates these interest amounts should be excluded from the calculation of credit; accordingly, [Commerce has] not done so for these final results.
Final Results, 63 Fed.Reg. at 2569.
Commerce also argues that although the two entries were not among the data selected for verification, a verification is intended to serve as a spot check and not an exhaustive review of a response.
See
Def.’s Mem. at 128 (citing
Bomont Indus, v. United States,
Koyo generally agrees with Commerce, emphasizing that
Timken’s assertions are misplaced because they are based on a misunderstanding of the credit verification exhibit. Koyo argues that the interest amounts Timken identified as aberrational do not constitute payments on specific loans, but rather reflected interest paid by Koyo Seiko under some other arrangement.
Final Results, 63 Fed.Reg. at 2569; see Koyo’s Resp. at 33-35.
Koyo maintains that “Timken points to nothing in the record to suggest that Koyo did not in fact incur or pay these costs[;] [g]iven that Koyo had to pay those amounts to the bank during the period of review, it legitimately included them in its interest calculation as part of the cost of borrowing money.” Koyo’s Resp. at 34. Relying on
Micron Tech.,
The Court disagrees with Timken that Commerce’s acceptance of Koyo’s home market average short-term interest rate is not in accordance with law. Timken fails to acknowledge the appropriate level of deference owed to Commerce’s verifications. A “ ‘[verification is a spot check and is not intended to be an exhaustive examination of the respondent’s business. [Commerce] has considerable latitude in picking and choosing which items it will examine in detail.’ ”
PMC,
Commerce’s verification of the data underlying Koyo’s home market interest rate falls within Commerce’s discretion. In this review, Commerce conducted the verification and concluded that Commerce was satisfied with Koyo’s reported home market interest rate. See Final Results, 63 Fed.Reg. at 2569. Since Commerce properly acted within its discretion when verifying Koyo’s reported home market interest rate, the Court concludes that Commerce’s acceptance of Koyo’s home market interest rate was in accordance with law.
CONCLUSION
This case is remanded to Commerce to: (1) annul all findings and conclusions made pursuant to the duty-absorption inquiry conducted for the subject review in accordance with this opinion; and (2) exclude any transactions that were not supported by consideration from NTN’s United States sales database and to adjust the dumping margins accordingly. All other issues are affirmed.
Notes
. Since the administrative reviews at issue were initiated after December 31, 1994, the applicable law is the antidumping statute as amended by the Uruguay Round Agreements Act ("URAA”), Pub.L. No. 103-465, 108 Stat. 4809 (1994) (effective January 1, 1995).
See Torrington Co. v. United States,
. The Court assumes that NTN only contests the POR of the 1976 antidumping duty order because that is the only POR that is mentioned in its brief and for which Commerce determined that duty absorption had occurred.
See Final Results,
63 Fed.Reg. 2559;
. For a complete discussion of background information and the statutory provisions at issue, the reader is referred to this Court's decision in
NTN Bearing,
24 CIT a t-,
. The SAA represents "an authoritative expression by the Administration concerning its views regarding the interpretation and application of the Uruguay Round agreements.” H.R. Doc. 103-316, at 656 (1994),
reprinted in
1994 U.S.C.C.A.N. 4040. "It is the expectation of the Congress that future Administrations will observe and apply the interpretations and commitments set out in this Statement.”
Id.; see also
. The CAFC’s decision effectively overturned the Court of International Trade’s determination with respect to this issue in
Borden, Inc. v. United States ("Borden
”),
. In support of its methodology, Commerce points out that the Court in
NTN Bearing Corp. of Am. v. United States (“NTN”),
. The Court does not entertain NTN's argument regarding Commerce’s rejection of NTN’s reporting methodology on the basis of complexity. Commerce corrected this statement in a memorandum to the file. See Def.'s Mem. at 46 (citing Def.’s Mem. Ex. 2).
. In the sixth AFB review, Commerce reasoned as follows:
Neither the statute nor the SAA require[s] [Commerce] to calculate CEP profit on bases more specific than the subject merchandise as a whole. Indeed, while [Commerce] cannot at this time rule out the possibility that the facts of a particular case may require division of CEP profit, the statute and SAA, by referring to "the” profit, "total actual profit,” and “total expenses” imply that [Commerce] should prefer calculating a single profit figure. NTN's suggested approach would also add a layer of complexity to an already complicated exercise with no guarantee that the result will provide any increase in accuracy. [Commerce] need not undertake such a calculation[.][S]ee Daewoo Elecs. Co. v. International Union,6 F.3d 1511 , 1518-19 (Fed.Cir.1993)[ ]. Finally, subdivision of the CEP-profit calculation would be more susceptible to manipulation. Congress has specifically warned us to be wary of such manipulation of the profit allocation!.][S]ee S. Rep. 103-412, 103d Cong., 2d Sess at 66-67).
Final Results of Antidumping Duty Administrative Reviews of Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, Singapore, and the United Kingdom, 62 Fed. Reg.2081, 2125 (Jan. 15, 1997).
. The Court is bewildered by Timken’s argument that the Court would be rendering an opinion on a moot issue had the Court decided to rule on the inclusion of EP sales in the calculation of NTN’s CEP profit.
See
Timken’s Resp. at 59 (proprietary version). Timken’s reliance on
Rose Bearings Ltd. v. United States ("Rose Bearings"),
. NTN cites to a past administrative review for NTN's proposition that Commerce has previously accepted NTN's methodology of reporting a customer-specific credit expense. See NTN’s Mem. at 23 (citing Final Results of Antidumping Duty Administrative Reviews of Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, Romania, Singapore, Sweden and the United Kingdom ("1997 Final Results "), 62 Fed.Reg. 54,043, 54,066-54,067 [sic] (October 17, 1997)). In that review, Commerce allowed NTN to calculate its United States credit expense for EP sales on a customer-specific basis since NTN could not report its credit expenses on a transaction basis. See 1997 Final Results at 54,053. However, with regards to CEP sales, Commerce recalculated NTN's credit expense on a transaction-specific basis since NTN provided transaction-specific information to Commerce. See id. Therefore, the Court holds that Commerce’s prior methodology does not require Commerce to use NTN’s customer-specific reported and verified data when NTN provides transaction-specific information allowing for the calculation of credit expense on a transaction-specific basis.
. The Court assumes that the correct citation is 1997 Final Results, 62 Fed.Reg. 54,043, 54,053.
. The Court is unconvinced that Commerce used adverse facts available in making its single adjustment to NTN’s COP and CV. Rather, Commerce, in order to value major inputs on a market value basis, only resorted to facts available since it used information on
. Commerce does not indicate whether it relies on subsection (1) or (2) of
. Relying on its hypothetical example, NTN asserts that “NTN need not use evidence on the record to illustrate that [Commerce’s] methodology is flawed.”
See
NTN’s Reply at 11. The Court finds this argument to be without merit since it is well settled that record evidence is required to prove distortion of Commerce's methodology.
See Usinor Saci-lor v. United States {"Usinor"),
. The Court assumes that Commerce is relying on the language of
. Commerce also relies on this Court's decisions in
Usinor,
. The Court assumes that NTN is disputing line 298 of NTN's margin program and not line 297, since line 297 does not contain any information regarding depreciation of idle equipment. See NTN's Mem. at 46 (citing Ex. "NTN Margin Program").
. The Court assumes that NTN means the calculation of G & A and not the calculation of GNA.
. Timken’s version of NTN’s argument is somewhat different from Commerce's. Timlcen reads NTN’s argument as asserting that Commerce double-counted when it "adjusted for the depreciation in its preliminary results analysis memorandum and in the computer program used to calculate NTN’s margins.” Timken’s Resp. at 72. Timken misreads NTN's argument because NTN contends that, on line 297[sic] of Commerce’s margin program, Commerce "created a calculation for the depreciation of idle equipment ... [that] was previously accounted for in [Commerce's] calculation of GNA [sic].” NTN’s Mem. at 46.
. The SAA, accompanying the URAA provides that aside from
Commerce may consider other types of sales or transactions to be outside the ordinary course of trade when such sales or transactions have characteristics that are not ordinary as compared to sales or transactions generally made in the same market. Examples of such sales or transactions include merchandise produced according to unusual product specifications, merchandise sold at aberrational prices, or merchandise sold pursuant to unusual terms of sale. As under existing law, amended section 771(15) does not establish an exhaustive list, but the Administration intends that Commerce will interpret section 771(15) in a manner which will avoid basing normal value on sales which are extraordinary for the market in question, particularly when the use of such sales would lead to irrational or unrepresentative results.
H.R. Doc. 103-316, at 834 (emphasis supplied).
The SAA also provides that "[o]ther examples of sales that Commerce could consider to be outside the ordinary course of trade include sales of off-quality merchandise, sales to related parties at non-arm’s length prices, and sales with abnormally high profits.” Id. at 839-40.
. NTN identified its sample sales by placing "SS” “in the prefix to the order number.” NTN's Reply at 13.
. NTN’s Home Market Verification Report is partially in Commerce’s Confidential Exhibit 10. Although Commerce indicates in that exhibit that it will supplement the Home Market Verification Report, no such supplement has been made.
.
[Commerce] shall verify all information relied upon in making—
(1) a final determination in an investigation,
(2) a revocation undersection 1675(d) of this title, and
(3) a final determination in a review undersection 1675(a) of this title, if—
(A) verification is timely requested by an interested party as defined insection 1677(9)(C) , (D), (E), (F), or (G) of this title, and
(B) no verification was made under this subparagraph during the 2 immediately preceding reviews and determinations undersection 1675(a) of this title of the same order, finding, or notice, except that this clause shall not apply if good cause for verification is shown.
. The Court does not agree with NTN's assertion that the substitution of Commerce's adjustment to NTN’s billing adjustment "for verified, accurate data presented by [NTN] ... is contrary to ...
. As stated above, in the Final Results, Commerce explains how material costs are a component of VCOM and TCOM which in turn, are both components of COP and CV. See Final Results, 63 Fed.Reg. at 2574. Therefore, when Commerce adjusted NSK’s reported material costs, it not only calculated COP and CV, but also recalculated VCOM and TCOM. See id. In turn, since Commerce relies upon VCOM and/or TCOM in running its model match, calculating the difmer adjustment and inventory carrying costs, Commerce asserts that its use of affiliated supplier cost data for purposes other than the calculation of COP and CV was reasonable and in accordance with law. See id.
. The Court assumes that Commerce is referring to
. NSK argues that "[w]hile the statute views affiliated supplier transactions with caution as regards COP and CV calculations, this does not mean these transactions should be replaced whenever Commerce uses cost to assist in the measurement of non-cost variables. For example, ... the difmer adjustment measures differences between merchandise, not differences in cost.” NSK's Reply at 4-5. NSK further argues that Congress knew " '[t]he question of affiliation is relevant to a number of price and cost issues in an anti-dumping investigation or review,' but nevertheless confined Commerce’s ability to collect and use affiliated supplier cost data just to COP and CV calculations.” Id. (quoting H.R. Doc. 103-316, at 838).
. According to Commerce, "[a] CEP offset is made only when the LOT of the home market sale is more advanced than the LOT of the CEP sale and there is not an appropriate basis for determining whether there is an effect on price comparability.” Final Results, 63 Fed.Reg. at 2577.
. The "substantially exceeds” qualification is met when "the value added in the United States by the affiliated person is likely to exceed substantially the value of the [imported] merchandise.”
. Koyo argues that "any other reasonable basis [under
. In fact, neither Commerce nor Koyo dispute that the value added to Koyo’s merchandise substantially exceeded the value of the merchandise. See Koyo’s Mem. at 19 (citing Final Results, 63 Fed.Reg. at 2561).
. Although Koyo proposes two alternative methodologies, the Court's "duty is not to weigh the wisdom of, or to resolve any strug.gle between, competing views of the public interest, but rather to respect legitimate policy choices made by the agency in interpreting and applying the statute.”
Suramerica de Aleaciones Laminadas, C.A. v. United States,
. Because Koyo had only CEP sales during the POR, Koyo’s arguments address only the calculation of the assessment rate for CEP sales. See Koyo's Reply at 22 n. 7. However, for the purpose of our analysis, the outcome would be identical if Koyo had both EP and CEP or only EP sales during the POR.
. There is however, no absolute requirement of exhaustion in the Court of International Trade in non-classification cases.
See Alhambra Foundry Co. v. United States ("Alhambra 12
CIT 343, 346-47, 685 F.Supp. J252, 1255-56 (1988). Section 2637(d) of Title 28 directs that "the Court of International Trade shall, where appropriate, require the exhaustion of administrative remedies.” By its use of
In the past, the Court has exercised its discretion to obviate exhaustion where: (1) requiring it would be futile,
see Rhone Pou-lenc, S.A. v. United States ("Poulenc
"),
. Koyo states that it "is also challenging the method by which [Commerce] calculated the margins on [merchandise further manufactured] .. .." Koyo’s Mem. at 32 n. 17. This Court affirmed Commerce's methodology regarding Koyo's further manufactured merchandise. See supra Part XIV.
. Commerce asserts that the "record does not show what non-scope merchandise was stored in the warehouse at issue....” Therefore, the Court agrees with Commerce that it is "impossible to say whether the storage charges are disproportionate to the sales of the non-scope merchandise.” Def.’s Mem. at 121.
. Consistent with
. The Court finds that Commerce reasonably determined that Koyo and NSK acted to the best of their ability in reporting billing adjustments and rebates. First, with regards to Koyo's “billing adjustment two,” some of Koyo’s adjustments reported in “billing adjustment two”
were “true lump-sum adjustments,” granted over both scope and non-scope merchandise[ ] ... without reference to any particular model or transaction.... The other type of adjustment included in billing adjustment 2 is an adjustment that may have been granted on a model-specific basis, but was recorded in Koyo’s computer database as a customer-specific amount without reference to specific models or transactions. To identify the models or transaction to which these adjustments applied, Koyo would have had to review manually thousands of paper receipts regarding individual original transactions in the hopes of finding explanatory notes by the salesmen.
Koyo’s Resp. at 29.
Second, with regards to Koyo’s rebates, "the record does not show that Koyo could alter its computer program to identify the sales on which the rebates were paid.” Id. at 31. Finally, with regards to NSK’s lump-sum rebates, “NSK’s lump-sum PSPAs did not relate to specific part numbers, but, ... constituted a single lump sum applied to a customer’s account receivable.” NSK’s Resp. at 11.
. Commerce points out that Timken's argument is misleading because on one of the pages “of its brief, Timken argues that the aberrations are in the hundreds ... [while] it is clear from Timken’s own calculations on [another page] of its brief that the alleged aberrations are one-hundreth of the amounts alleged.” Def.’s Mem. at 127-28.