PEER BEARING COMPANY-CHANGSHAN, Plaintiff, v. UNITED STATES, Defendant, and The Timken Company, Defendant-intervenor.
Court No. 11-00022
United States Court of International Trade
Dec. 21, 2012
Slip Op. 12-159 | 1313
STANCEU, Judge
CONCLUSION
For all of the foregoing reasons, Commerce‘s Final Determination, 75 Fed.Reg. 20,335, is sustained. Judgment will be entered accordingly.
John M. Gurley, Diana Dimitriuc Quaia, and Matthew L. Kanna, Arent Fox LLP, of Washington, DC, for plaintiff and defendant-intervenor Peer Bearing Company-Changshan.
L. Misha Preheim, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for defendant. With him on the brief were Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, and Claudia Burke, Assistant Director. Of counsel on the brief was Joanna V. Theiss, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of Washington, DC.
Herbert C. Shelley and Christopher G. Falcone, Steptoe & Johnson LLP, of Washington, DC, for defendant-intervenors Changshan Peer Bearing Co. Ltd. and Peer Bearing Company.
William A. Fennell, Terence P. Stewart, and Stephanie R. Manaker, Stewart and Stewart, of Washington, DC, for plaintiff and defendant-intervenor The Timken Company.
STANCEU, Judge:
This consolidated case arose from the final determination (“Final Results“) that the International Trade Administration, U.S. Department of Commerce (“Com-
As discussed herein, the court determines that a remand is appropriate with respect to certain aspects of the Final Results that are contested in this litigation.
I. BACKGROUND
Background is provided in a prior opinion and order and is supplemented herein. Peer Bearing Co.-Changshan v. United States, 35 CIT __, __, Slip Op. 11-125, at 2, 2011 WL 4852207 (Oct. 13, 2011) (denying a motion to dismiss one of the claims brought in this consolidated action).
Peer Bearing Company-Changshan (“CPZ“), a Chinese manufacturer of TRBs that was a respondent in the twenty-second review, brought an action to contest the Final Results. See Compl. (Feb. 2, 2011), ECF No. 6. The Timken Company (“Timken“), a U.S. TRB manufacturer and a defendant-intervenor in Court No. 11-00022, also contested the Final Results. See Compl. (Mar. 10, 2010), ECF No. 9 (Court No. 11-00039). The two cases are now consolidated. Order (June 13, 2011), ECF No. 27.
On September 11, 2008, approximately three months into the POR, various companies controlled by a Swedish conglomerate, AB SKF, acquired CPZ from its majority shareholders, the Spungen family. See Tapered Roller Bearings & Parts Thereof, Finished or Unfinished, From the People‘s Republic of China: Prelim. Results of the 2008–2009 Admin. Review of the Antidumping Duty Order, 75 Fed. Reg. 41,148, 41,148-51 (July 15, 2010) (“Prelim. Results“); Final Results, 76 Fed. Reg. at 3,087. At the same time, AB SKF also acquired Peer Bearing Company, an Illinois-based and Spungen-owned U.S. sales affiliate of CPZ. Prelim. Results, 75 Fed. Reg. at 41,148; Final Results, 76 Fed. Reg. at 3,087. During the acquisition process, CPZ and Peer Bearing Company transferred to a separate company, PBCD, their responsibilities for participation in dumping reviews and litigation and for payment of dumping duties assessed on entries of subject merchandise made prior to the acquisition. Letter from SKF to the Sec‘y of Commerce, at App. 2 (Mar. 19, 2010) (Admin. R. Doc. No. 5731). In this opinion, the pre-acquisition Chinese producer is identified as “CPZ,” and the pre-acquisition U.S. sales affiliate is identified as “PBCD/Peer.”
After the acquisition, CPZ underwent a reorganization to become a new Chinese company, Changshan Peer Bearing Co. Ltd. (referred to herein as “CPZ/SKF” or “SKF“). Prelim. Results, 75 Fed. Reg. at 41,152. CPZ/SKF and the acquired Peer Bearing Company (“SKF/Peer“) are defendant-intervenors in this case. Commerce determined that CPZ/SKF was not the successor in interest to CPZ and, therefore, treated the two companies as separate respondents in the review. Final Results, 76 Fed. Reg. at 3,087. In the Final Results, Commerce assigned weighted-average dumping margins of 38.39% to CPZ
The court held oral argument on March 22, 2012. Oral Tr. 1 (May 17, 2012), ECF No. 90.
II. DISCUSSION
Before the court are the motions of CPZ and Timken for judgment on the agency record, made under USCIT Rule 56.2, to contest the Final Results. [CPZ‘s] R. 56.2 Mot. for J. upon the Agency R. (Aug. 19, 2011), ECF No. 38; [Timken‘s] R. 56.2 Mot. for J. upon the Agency R. (Aug. 19, 2011), ECF No. 36.
The court exercises jurisdiction according to section 201 of the Customs Courts Act of 1980 (“Customs Courts Act“),
CPZ brings four claims in its Rule 56.2 motion. First, it claims that Commerce unlawfully determined that certain bearings that resulted from processing in Thailand consisting of grinding and honing of cups and cones, and final assembly, and that were exported from Thailand to the United States as finished products, were of Chinese origin and therefore subject to the Order. Pl.‘s Mem. of P & A in Supp. of its Mot. for J. on the Agency R. 4 (Aug. 19, 2011), ECF No. 39 (“CPZ‘s Mem.“). Second, CPZ claims that Commerce calculated an unlawful assessment rate for subject merchandise imported by Peer Bearing Company. Id. at 2-3. Third, CPZ claims that Commerce used an unlawful surrogate value for the steel bar input to the TRB production process. Id. at 3. Finally, CPZ claims that Commerce used an unlawful surrogate value for the steel wire rod input. Id. at 3-4.
Timken asserts two claims in its USCIT Rule 56.2 motion. First, Timken claims that Commerce erred in deciding not to treat SKF‘s acquisition of Peer Bearing Company, which included an acquisition of inventory consisting of subject merchandise, as the first U.S. sale of that inventory to an unaffiliated purchaser for purposes of the antidumping statute. The Timken Co.‘s Mem. of P & A in Supp. of its Mot. for J. on the Agency R. 2, 5 (Aug. 19, 2011), ECF No. 36 (“Timken‘s Mem.“). Second, Timken claims that Commerce erred in using factor-of-production (“FOP“) data pertaining to the post-acquisition producer (i.e., SKF) rather than FOP data pertaining to the pre-acquisition producer (i.e., CPZ) when determining the normal value of subject merchandise imported into the United States prior to the acquisition. Id. at 2, 12-13.
The court decides: (1) to direct Commerce to reconsider the Department‘s determination that CPZ‘s bearings processed in Thailand are of Chinese origin and therefore are subject merchandise; (2) to deny relief on CPZ‘s claim challenging the assessment rate; (3) to direct Commerce to redetermine a surrogate value for CPZ‘s use of steel bar; (4) to deny relief on CPZ‘s claim challenging the Depart-
A. Commerce Must Reconsider its Decision that Certain Bearings on which Grinding and Honing, and Assembly Operations, Were Conducted in Thailand Are Subject Merchandise
Some of the imported bearings subject to the review were exported to the United States from Thailand after having undergone processing by a CPZ affiliate in Thailand,2 which performed grinding and honing operations on unfinished cups and cones made in China and also performed the assembly operations, which involved the cups and cones processed in Thailand and cages and rollers produced in China. Issues & Decision Mem., A-570-601, at 10-11 (Jan. 11, 2011) (Admin. R. Doc. No. 6041) (“Decision Mem.“). Commerce determined that China was the country of origin of these bearings and that, accordingly, these bearings were merchandise subject to the Order. Id. 11-17; Final Results, 76 Fed. Reg. at 3,086. CPZ claims that a substantial transformation occurred in Thailand resulting in finished bearings that should have been determined to have Thai origin, not Chinese origin, for antidumping purposes. CPZ‘s Mem. 32-40. CPZ argues, inter alia, that substantial evidence does not support the Depart-2ment‘s origin determination and that the determination is inconsistent with rulings by U.S. Customs and Border Protection concluding on the same facts that the country of origin of the TRBs is Thailand. Id. at 37-38.
In making its country of origin determination, Commerce applied what it termed its “established substantial transformation criteria,” Decision Mem. 12, based upon the “totality of the circumstances,” id. at 11. In doing so, the Department discussed six criteria: (1) the class or kind of merchandise within the scope of the Order, (2) the nature and sophistication of the upstream processing (i.e., the processing conducted in China) and the third-country processing (i.e., the processing conducted in Thailand), id. at 13; (3) the identification of the processing that imparts the essential physical or chemical properties of a TRB, id. at 14-15; (4) the cost of production and value added by the third-country processing, id. at 15-16; (5) the level of investment in the third country and the potential for circumvention, id. at 16-17; and (6) whether “unfinished and finished bearings are both intended for the same ultimate end-use,” id.
In summarizing its country of origin decision, Commerce stated that “the Department recognizes that the grinding and finishing processes are important and necessary processes for the products in question to become finished TRBs, and we do not dispute the fact that a considerable investment was made in the third country.” Id. at 17. The Department then stated that “however, we do not find the investment (even though considerable) in a process (even though important) that, as explained above, does not change the class or kind of merchandise, does not
As discussed below, the court identifies three flaws in the Department‘s analysis of the country of origin issue in this case. First, in applying its totality of the circumstances test, Commerce gave weight to its initial criterion, the inclusion of finished and unfinished parts of TRBs within the class or kind of merchandise defined by the scope of the Order, but it failed to supply a reason why this criterion was relevant, on the record of this case, to the country of origin determination Commerce was making. Second, with respect to the fourth criterion, the Department made a finding that the processing performed in Thailand did not represent a significant value added to the finished product, a finding that is not supported by substantial evidence on the record. The third flaw pertains to the sixth criterion the Department identified, the ultimate use of the bearings. Commerce found significant to its decision its finding that an unfinished TRB is intended for the same ultimate end use as a finished TRB, but that finding has no apparent relevance to the country of origin question posed by this case, which did not involve third-country processing conducted on unfinished TRBs.
1. Commerce Failed to Provide Reasons Why Inclusion of Parts within the “Class or Kind” of Merchandise within the Scope of the Order Was Relevant to its Country of Origin Determination
Commerce described the first criterion in its “totality of the circumstances” test as “Class or Kind/Scope.” Decision Mem. 12. In the Decision Memorandum, Commerce found “the merchandise ground and finished in the third country to be of the same class or kind of merchandise covered by the scope of the order, since the language of the scope explicitly includes both finished and unfinished components of TRBs and no party has challenged this ‘class or kind’ determination.” Id. Although explaining that “we did not find that this ‘class or kind’ determination was dispositive in determining the TRBs’ country of origin” and “instead examined the totality of circumstances,” the Decision Memorandum nevertheless clarifies that Commerce considered integral to its country of origin determination that the Order contained within its scope both TRBs and parts of TRBs, finished or unfinished. See id.
On the facts of this case, Commerce‘s determination that the processing conducted in Thailand did not change the class or kind of merchandise would seem irrelevant to the precise question Commerce was called on to decide. That question was whether the Chinese-origin parts, finished and unfinished, which were converted into completed TRBs by the processing in Thailand, were “substantially transformed” by that processing. In analyzing the record before it, Commerce failed to identify any logical relationship between the Department‘s answer to that question and the fact that the Order includes parts of TRBs. Were parts of bearings not included within the scope of the Order, any issue as to the country of origin of the TRBs that emerged from Thailand necessarily would involve that same inquiry. Although the parts sent to Thailand, in the Department‘s view, would have been subject merchandise had they been exported from China to the United States, the fact remains that these parts instead were sent to Thailand to be subjected to further manufacturing operations from which emerged finished TRBs.
or kind as merchandise produced in the foreign country named in the order and that, prior to such importation, is completed or assembled in a third country from merchandise subject to the order.
Having found no potential for evasion and having avoided any reliance on its anticircumvention authority, the Department grounded its country of origin determination solely on the narrow question of whether the TRBs processed in Thailand should be placed within the scope of the order because they are products of China and not products of Thailand.4 But the
fact that the order encompasses parts, finished or unfinished, has no apparent relevance to that question absent affirmative determinations of whether the third-country processing is minor or insignificant and the appropriateness of the remedy, such as those Congress described in
The only rationale stated in the Decision Memorandum for the Department‘s basing the country of origin determination, in part, on the inclusion of finished and unfinished parts within the class or kind of merchandise covered by the Order is that the Department has done so in past proceedings, including the prior review. Decision Mem. 24 (citing Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the People‘s Republic of China: Final Results of the 2007-2008 Administrative Review of the Antidumping Duty Order, 75 Fed. Reg. 844, 845; Issues & Decision Mem., A-570-601, at 6-8 (December 28, 2009)). Mere reliance on a practice developed over past administrative decisions is not reasoning justifying use of a criterion that has no apparent relevance to the circumstances of this case.
2. The Record Lacks Substantial Evidence to Support the Finding that the Processing Performed in Thailand Does Not Represent a Significant Value Added to the Finished Product
Applying its fourth criterion, “Cost of Production/Value Added,” Commerce found as a fact that the processing performed in Thailand added no significant value to the finished bearings. Decision Mem. 15-17. In Peer Bearing Company-Changshan v. United States, 35 CIT __, __, 804 F.Supp.2d 1337, 1342 (2011) (“Peer Bearing I“), this Court remanded the final results of the previous administrative review and required Commerce to reconsider the Department‘s determination of Chinese origin for TRBs that underwent processing in Thailand that was highly similar, if not nearly identical, to the Thai processing involved in this case. In the previous review as well as the instant review, the processing in Thailand consisted of grinding and honing of cups and cones, and assembly operations. Id.; Decision Mem. 13. In Peer Bearing I, this Court concluded that the record in the previous review lacked substantial evidence for the Department‘s finding that the value added in Thailand was insignificant. 35 CIT at __, 804 F.Supp.2d at 1342. The court reaches the same conclusion in this case.
In the instant review, Commerce, applying the same methodology as it had in the previous review, “found that the average unit cost of manufacturing in the PRC represents a significant percent of normal value relative to the third-country processor‘s costs.” Decision Mem. 15 (citation omitted). Such a finding, however, does not logically compel the conclusion that no significant value was added in Thailand. The Department‘s framing of the issue would imply that only a single country can impart significant value to the subject merchandise, even though the word “significant” implies no such limitation. Although the record might support a finding that the value added in China exceeded the value added in Thailand, neither that finding nor the record as a whole
The Department found that “the costs involved in third country processing do not represent a significant percent of normal value.” Id. In support of this finding, the Department cited evidence submitted by Timken consisting of calculations of the percentage of manufacturing costs and normal value attributable to Thai processing for various of CPZ‘s bearing models. Citing this evidence, the Department concluded that “third-country processing costs do not represent a significant amount, let alone the majority, of either the reported manufacturing costs or calculated normal value costs when compared to the costs incurred for the processing performed on the merchandise in the PRC.” Id. at 15-16 (citing Rebuttal Br. of the Timken Co., Petitioner[,] Regarding PBCD, at 47-48 (Oct. 12, 2010) (Admin. R. Doc. No. 5934) (“Timken‘s Rebuttal“)). In the Decision Memorandum, Commerce did not explain how Timken‘s calculations were derived. But even were the court to presume, arguendo, that the results of Timken‘s calculations are valid, the court still could not agree with the Department‘s generalized characterization that the costs incurred in Thailand were an insignificant percentage of normal value.5
The record in this review contains qualitative evidence submitted by CPZ that is relevant to the question of value added in Thailand. See Sections C and D Joint Resp. of SKF and CPZ, Ex. E-1 (May 28, 2010) (Admin. R. Doc. No. 5760). CPZ‘s submission includes a “work process” chart for the grinding center in Thailand and a “working chart” for the Thailand assembly shop. Id. Ex. E-1, at 4-5. The work process chart describes multiple machining processes performed on cones, specifically, raceway grinding, followed sequentially by rib grinding, inner-diameter grinding, and super-finishing of ribs and raceways, and it also describes grinding and super-finishing processes performed on cups. Id. Ex. E-1, at 4. Commerce appears to have given little if any probative weight to this qualitative evidence, which detracts from the Department‘s country of origin determination.6
In summary, Department‘s finding, made under the “Cost of Production/Value Added” criterion, that no significant value had been added to the finished TRBs as a result of the processing conducted in Thailand is not supported by substantial evidence on the record.
3. Commerce Has Not Shown the Relevance of its Finding that an Unfinished TRB Is Intended for the Same Ultimate End Use as a Finished TRB
Applying the sixth criterion in its “totality of the circumstances” test, “ultimate use,” Commerce made a finding that
4. On Remand, Commerce Must Reconsider its Country of Origin Determination in the Entirety
As revealed by the discussion in the Decision Memorandum, which describes a “totality of the circumstances” test, Commerce did not intend for the analysis it performed under any of its three remaining criteria to be sufficient to support its entire country of origin determination. As Commerce implicitly acknowledged, and as the court previously discussed, the analysis Commerce conducted under the fifth criterion, level of investment/potential for circumvention, did not lend support to the final determination. As to the second criterion, which Commerce termed “Nature/Sophistication of Processing,” Commerce reiterated its finding from the previous review that “the finishing process [i.e., grinding and honing of cups and cones] is an important and necessary part to becoming a finished TRB because it reduces friction and enables the TRB to carry a load,” Decision Mem. 13, but again concluded, nevertheless, that “the finishing process in and of itself is not significant enough to be considered a process that substantially transforms the subject merchandise for antidumping purposes, because there is no substantial change to the primary properties of the subject merchandise other than slight alterations to the shape of the TRB through the finish grinding processes and a smoothing of the TRB‘s cup and cone raceways through the honing process,” id. (citation omitted). This conclusion, limited in scope, does not address the overall question to be decided. That question, as
Under its third criterion, “Physical/Chemical Properties and Essential Component,” Commerce concluded, as it had in the previous review, that forging, turning, and heat treatment of cups and cones, “along with roller and cage operations,” ... “imparted the essential physical and chemical properties of the TRB.” Id. at 14. Here also, the Decision Memorandum does not state or imply that this conclusion, standing alone, should be seen as sufficient to support the Department‘s entire, ultimate determination of country of origin. This conclusion was made independently of other evidence on the record. For example, it is uncontested that the cups and cones left China in an unfinished state. Although they had been forged, turned, and heat treated, the cups and cones as exported were not yet capable of performing the functions of cups and cones because they had not been ground and finished to the required dimensions. As Commerce itself impliedly recognized, cups and cones must be machined to a smooth finish and within close tolerances in order to permit assembly into a finished article that will carry the load and reduce friction. Moreover, the Department‘s reference to “roller and cage operations” also must be read in the context of the record as a whole, which contained uncontested evidence that the roller and cage operations, like the machining operations done on the cups and cones, occurred partly in China and partly in Thailand: all assembly operations involving rollers and cages (as well as those involving cups and cones) were conducted in Thailand, not China. With respect to any “essential component,” Commerce did not find, and lacked evidence from which to find, that any single component imparted the essential character to the finished TRB.
In summary, the court concludes that the Department‘s determination that the finished bearings resulting from the operations in Thailand were of Chinese origin is flawed because Commerce failed to show the relevance, on the record of this case, of the first and sixth criteria it applied and because the Department‘s finding, made upon applying the fourth criterion, that the Thai processing “does not represent a significant value added to the final product,” id. at 17, is not supported by substantial evidence on the record viewed as a whole. Because of the various flaws the court has identified in the Department‘s “substantial transformation” analysis, Commerce must reconsider the Department‘s country of origin determination in the entirety. Any determination Commerce reaches on remand must rely solely on criteria relevant to whether the parts exported to Thailand were substantially transformed and must be based on findings supported by substantial record evidence. Moreover, the decision must be supported by an adequate explanation of the Department‘s reasoning.
B. No Relief is Available on the Challenge to the Assessment Rate for PBCD/Peer
Commerce calculated separate assessment rates for the POR entries of subject
CPZ objects to the Department‘s method. Referring to subject merchandise that was entered by PBCD/Peer prior to the acquisition and sold by SKF/Peer from inventory after the acquisition, CPZ argues that “Commerce should have calculated a weighted-average assessment rate for PBCD/Peer based on the assessment rate calculated for this importer both in the RPOR [the “reduced POR,” i.e., the portion of the POR ending September 11, 2008] and the portion of the POR after
September 11, 2008.” CPZ‘s Mem. 15. For the reasons discussed below, the court rejects the claim that Commerce acted unlawfully in determining PBCD/Peer‘s assessment rate.
The antidumping statute provides that Commerce will determine the normal value, export price or constructed export price, and the dumping margin, for each entry of subject merchandise,
CPZ argues, first, that the method Commerce used to calculate the assessment rate for PBCD/Peer is inconsistent with
The court does not agree that the assessment rate Commerce calculated for PBCD/Peer is not “importer specific.” Commerce determined a separate assessment rate for each of the two importers, PBCD/Peer and SKF/Peer, thus adhering to its normal practice as reflected in the first sentence of
According to the second sentence of
In the review, Commerce found that CPZ/SKF was not the successor in interest to CPZ and that SKF/Peer was not the successor in interest to PBCD/Peer. Final Results, 76 Fed. Reg. at 3,087. On the basis of these two findings, neither of which CPZ contests, Commerce split the POR into two segments based on the September 11, 2008 date of the acquisition, after which date Commerce considered PBCD/Peer to no longer exist and considered SKF/Peer to have made both the sales and the entries. Because the constructed export price method of determining U.S. price was used in this review, the sales examined appear to have occurred, in many if not all cases, after the entry was made, resulting in what CPZ describes as “post-acquisition sales” by SKF/Peer “corresponding to entries by PBCD/Peer.” CPZ‘s Mem. 14. Commerce calculated “importer-specific” assessment rates for PBCD/Peer and for SKF/Peer based on the respective sales made by each—and directed Customs to apply those separate assessment rates to the respective entries made by each—during the separate portions of the POR. Decision Mem. 21 & n. 52.
The second sentence of
Plaintiff errs in construing
CPZ also alludes to an inconsistency with the Department‘s “practice,” citing various of the Department‘s past administrative determinations for the proposition that it “is not aware of a similar case where Commerce has exercised its discretion to calculate importer specific assessment rates in a manner so plainly inconsistent with its regulations.” CPZ‘s Mem. 14 (citations omitted). Specifically, CPZ argues that Commerce, rather than calculate what plaintiff characterizes as “seller-specific” assessment rates, should have followed the method CPZ suggested, i.e., calculation of a weighted-average assessment rate for PBCD/Peer based on both portions of the POR, because that method would have been consistent with the approach Commerce took in a past review, Notice of Final Results of Antidumping Duty Administrative Review: Certain Softwood Lumber Products from Canada, 70 Fed. Reg. 73,437 (Dec. 12, 2005). Id. at 14-15. CPZ characterizes the review at issue in this case as similar to the Softwood Lumber Products review, “where, as a result of multiple acquisitions of producers (and exporters) of subject merchandise, Commerce calculated multiple cash deposit rates and assessment rates for various portions of the POR.” Id. at 14 (footnote omitted). CPZ argues that Commerce‘s rationale for not following the Softwood Lumber approach in this review “is inconsistent with Commerce‘s claim that it has calculated importer-specific assessment rates,” id. at 16, and that “Commerce has failed to explain how this methodology is consistent with
The court does not find merit in the argument that Commerce impermissibly departed from a practice. Commerce distinguished its past administrative determi-
Commerce provided reasons for exercising its discretion in the way that it did. In the Decision Memorandum, Commerce identified an objective “to prevent one importer from becoming liable for another importer‘s [antidumping] duties,” and it considered its method of determining the assessment rates “particularly appropriate in consideration of the Department‘s longstanding practice to calculate assessment rates based on the entered value corre-
sponding to the sales examined for each importer during the POR, and not the entered value of all products actually entered during the POR.” Id. at 21 (footnote omitted). CPZ argues that these two stated reasons, as offered in support of the Department‘s determination, “are either incorrect or fail to consider the unique facts of this case.” CPZ‘s Mem. 17.
Specifically, CPZ points to the statement by the Department in the Decision Memorandum that “we agree with SKF that because it was the downstream sales by SKF/Peer which gave rise to the [antidumping] duties on the products in question and, because SKF/Peer had some control over the terms of these sales, it is not improper for SKF/Peer to be liable for the resulting duties.” Decision Mem. 21. CPZ argues, in turn, that the Department‘s logic “is flawed because it focuses only [on] the numerator ... of the assessment rate calculation.” CPZ‘s Mem. 19. According to CPZ, “the denominator of the assessment rate formula (entered value) was determined by PBCD/Peer alone,” who, CPZ alleges, was “just as involved in the resulting antidumping duties and assessments for these entries as is SKF/Peer who made the U.S. sales.” Id. CPZ sub-
The court explained previously why the calculation method cannot be said to be contrary to the regulation or to the Department‘s practice. A valid claim that a determination is not supported by substantial evidence must be grounded in a disputed finding of fact, and plaintiff, while theorizing as to the significance of the denominator of the Department‘s formula and taking issue with the associated explanation, fails to identify a discrete finding of fact that it wishes to contest.
The remainder of CPZ‘s lengthy argument is, in essence, a contention that the method Commerce chose made PBCD/Peer liable for antidumping duties that should have been assessed to SKF/Peer. The court finds this contention unpersuasive. For each of the two separate assessment rate calculations, the denominator of the Department‘s formula was the aggregate entered value of the merchandise on the examined sales of the particular importer; Commerce used these same sales to determine the aggregate margin comprising the numerator of the formula. Thus, the aggregate margin used to determine PBCD/Peer‘s assessment rate was determined according to PBCD/Peer‘s own sales during the POR; Commerce followed the parallel procedure in determining the assessment rate for SKF/Peer. The normal method set forth in
C. A Remand is Required on CPZ‘s Claim Challenging the Surrogate Value of Steel Bar
In determining the normal value of subject merchandise from a nonmarket economy country such as China, Commerce, under section 773(c)(1) of the Tariff Act, ordinarily values “the factors of production utilized in producing the merchandise.”
Commerce valued CPZ‘s bearing-quality steel bar inputs by using publicly-available information on the average unit value (“AUV“) of Indian imports made during the POR, as reported by Global Trade Atlas (“GTA“). Decision Mem. 31; Prelim. Results, 75 Fed. Reg. at 41,150, 41,155. From the GTA import data pertaining to Indian Harmonized Tariff Schedule (“HTS“) subheading 7228.30.29,9 Commerce calculated an AUV of $1,956 per metric ton (“MT“).10 Mem. to the File from Int‘l Trade Compliance Analyst, at 4 n. 7 (Jan. 11, 2011) (Admin. R. Doc. No. 6039) (“Final Analysis Mem.—PBCD“). Observing that this subheading is not specific to bearing-quality steel goods, Commerce used only the GTA import data thereunder that pertained to Indian imports from the United States, Japan, and Singapore, determining from record evidence that the other countries of origin shown in the GTA data (Austria, Canada, France, Germany, Slovenia, Turkey, and Taiwan) “could not be shown definitively to have exported bearing quality steel to India during the POR.” Decision Mem. 34 (footnote omitted). That record evidence consisted of Indian import data compiled
by Infodrive India (“Infodrive“), which CPZ placed on the administrative record during the review.11 Id. at 33-34.
Although relying on the Infodrive data for its finding that, among the imports under Indian HTS subheading 7228.30.29, bearing-quality steel was included only among the imports from the United States, Japan, and Singapore, Commerce did not base its surrogate value on Infodrive data pertaining to bearing-quality steel imports. Id. Arguing that “[i]f Commerce were to use a surrogate value price derived solely from bearing-quality steel from the Infodrive data, the resulting surrogate value is only $1,596/MT,” CPZ claims that the determination to use the surrogate value of $1,956 per metric ton derived from the GTA import data is “distortive as it reflects high-priced imports of non-bearing quality steel from the U.S., Japan, and Singapore,” and, therefore, “cannot be supported by substantial record evidence.” CPZ‘s Mem. 28–30 & Attach. 2.
CPZ placed on the administrative record an analysis of the GTA and Infodrive data sets that, according to CPZ, “demonstrated that Indian HTS 7228.30.29 contained large amounts of high-priced steel that was clearly not bearing quality steel.” Id. 22-23 (citing Letter from PBCD to Sec‘y of Commerce, at Ex. 1 (Aug. 19, 2010) (Admin. R. Doc. No. 5887); Letter from PBCD to the Sec‘y of Commerce, at Ex. 3 (Oct. 4, 2010) (Admin. R. Doc. No. 5917) (“CPZ‘s Case Br.“)). Commerce made no finding
Defendant raises several arguments in support of the Department‘s surrogate value. Defendant argues, first, that “Commerce‘s use of Infodrive India data to evaluate the import data and exclude countries that did not export bearing quality steel to India rendered the Indian data the most specific on the record, and yielded a surrogate value that reasonably reflects the cost of bearing quality steel bar for the POR.” Def.‘s Opp‘n to Pls.’ Mots. for J. upon the Agency R. 28 (Oct. 28, 2011), ECF No. 53 (“Def.‘s Mem.“). This argument mischaracterizes the record evidence. The GTA data the Department used were not the record data most specific to the input being valued, as those data contained substantial quantities of non-bearing-quality steel. The Infodrive AUV data, on the other hand, are specific to goods made of bearing-quality steel.
Second, defendant argues that “[a]lthough PBCD/Peer contends that Commerce should have excluded all entries that were not listed as ‘bearing quality steel’ according to Infodrive India, Commerce‘s determination to include exports from the countries that exported bearing quality steel to India during the POR was consistent with its practice of using broad market averages that are representative of a significant quantity of imports.” Id. at 28-29. Referring to the Department‘s established criteria, defendant makes the related argument that Commerce found that the GTA data under Indian HTS subheading 7228.30.90 “are publicly available, broad market averages, contemporaneous with the POR, tax exclusive, and representative of significant quantities of imports.” Id. at 30 (citing Final Results, 76 Fed. Reg. at 3,088 and Decision Mem. 31) (internal quotation marks omitted). There are two flaws in these arguments. First, Commerce did not state expressly in the Decision Memorandum that it considered the Infodrive data on bearing-quality steel imports to constitute an unrepresentative quantity. Decision Mem. 31-34. Second, the argument is illogical. As the court noted above, the Decision Memorandum itself characterizes non-bearing-quality steel imports as “entries not specific to the input in question.” Id. at 34. If, as defendant‘s argument would hold, the Infodrive data on bearing-quality steel represent too small a quantity to support a surrogate value, and if, as Commerce itself stated, non-bearing-quality steel is not specific to the input being valued, then diluting the specific data by combining those data with non-specific data cannot improve, and can
Nor did Commerce find the Infodrive data to be unreliable. To the contrary, Commerce expressly found that the Infodrive data were credible evidence of the quantity and value of imports into India during the POR, stating that “we find that the Infodrive data ... demonstrates significant coverage of the GTA data, and can be used as a probative tool to corroborate the surrogate value in question,” Decision Mem. 31 (stating that “over 93 percent of both the total GTA quantity and value from all countries that the Department includes in its SV calculations is accounted for in the total quantifiable12 weight and
value figures from the corresponding Infodrive data” (footnote omitted)); and that “there is remarkable correlation between the values reported in each dataset (i.e., nearly 100 percent for most countries),” id. at 33 n. 102. Commerce also determined that the Infodrive data were a credible basis for discerning which entries were bearing-quality steel bar, stating that “no interested party to this proceeding has objected to PBCD‘s overall separation of the Infodrive line items as ‘included as bearing quality steel’ or not, nor has any interested party questioned the term ‘bearing-quality’ as it exists in the Infodrive data.” Id. at 34.
In summary, substantial evidence does not support a finding that the subset of GTA data chosen by Commerce was the best available information for use in valuing the bearing-quality steel bar that CPZ used to produce its subject merchandise. On remand, Commerce must reconsider this finding, consider what alternatives are feasible based on the record before it, including in particular the use of the Infodrive data to determine a surrogate value, and reach a surrogate value shown by substantial evidence to be based on the best available record information.
D. No Relief is Appropriate on CPZ‘s Claim Challenging the Surrogate Value of Roller-Quality Steel Wire Rod of Circular Cross Section
Commerce valued another of CPZ‘s factors of production, roller-quality steel wire rod of circular cross section, using GTA data pertaining to imports from Thailand made during the POR under Thai HTS subheading 7228.50.10. Decision Mem. 34-35; CPZ‘s Mem. 31 (citing Final Analysis Mem.—PBCD Attach. 1). These data yielded an AUV of $2,530 per metric
Commerce chose to use the Thai data over several other sources. The record contains data pertaining to imports from Indonesia classified under Indonesian HTS subheading 7228.50, which shows an AUV of $1,633 per metric ton, and Philippine import data showing an AUV of $1,799 per metric ton. CPZ‘s Mem. 31 (citing Letter from PBCD to Sec‘y of Commerce, at Ex. 5 (Jun. 16, 2010) (Admin. R. Doc. No. 5770)). The article description for HTS subheading 7228.50 differs from the article description of Thai HTS subheading 7228.50.10 in that it is not specific to articles “[o]f circular cross-section.” Commerce also declined to use data pertaining to imports into the United States under subheading 7228.50.10.10, HTSUS, which reflected an AUV of $1,881 per metric ton. Id. The article description for subheading 7228.50.10.10, HTSUS, does not specify circular cross-section but includes the descriptive words “[o]f tool steel (other than high-speed steel): of ball-bearing steel.” Finally, Commerce rejected an Indian company‘s financial data, which showed a value of $1,564 per metric ton. Id. This publicly available data, placed on the record by Timken, is taken from the company‘s 2008-2009 annual report, which covered the fiscal year April 1, 2008 through March 31, 2009. Letter from Timken to Sec‘y of Commerce, at Ex. 13, p. 33 (Dec. 17, 2009) (Admin. R. Doc. No. 5692). The company, ABC Bearings Limited (“ABC“), is a producer of TRBs, cylindrical roller bearings, and slewing bearings. Id. The data presented in the annual report, which the Department used for purposes of calculating financial ratios, includes the value and quantity for steel consumed by ABC for the fiscal year, which CPZ converted to U.S. dollars/metric ton. Id.; CPZ‘s Mem. 31; CPZ‘s Case Br. 29. The annual report does not specify whether the input relied upon is roller-quality steel wire rod of circular cross section, which is the input used by respondents in the production of subject TRBs.
CPZ claims that Commerce failed to use the best available information to value the roller-quality steel wire rod. CPZ‘s Mem. 31-32. The statute defines “best available information” as information from “one or more market economy countries that are ... at a level of economic development comparable to that of the nonmarket economy country, and ... significant producers of comparable merchandise.”
The Department‘s explanation does not directly address the issue of whether the Thai HTS data are the “best available information” as required by
Nevertheless, the court concludes that the record contains adequate evidentiary support for the Department‘s determination that the Thai HTS data should be used to value the steel wire rod input. The record shows that, consistent with the Department‘s finding, the Thai HTS data pertained to steel wire rod of circular cross-section, unlike any of the alternative data sources. The record also supports the Department‘s conclusion that the Thai HTS data were superior to the U.S. data based on the statutory requirement that Commerce use, to the extent possible, information from countries “at a level of economic development comparable to that of the nonmarket economy country.”
E. No Relief is Appropriate on Timken‘s Claim Challenging the Department‘s Determination of the Appropriate U.S. Sale
Timken claims that SKF‘s acquisition of Peer Bearing Company on September 11, 2009 constituted a sale in the United States of the latter‘s then-unsold inventory of subject merchandise from CPZ to SKF and that Commerce should have used this sale, rather than subsequent downstream sales to individual customers, when determining the U.S. price of this subject merchandise for purposes of calculating margins for CPZ and SKF. Timken‘s Mem. 16-22. In support of its claim, Timken argues that “[w]hile there are often a series of sales before the ultimate purchase for consumption, the statute specifies that the first sale to an unaffiliated U.S. customer at arm‘s length is the proper measure of the United States price.” Id. at 17 (citing
Commerce found that the Master Purchase Agreement (“MPA“) “specifies the details of the share transfer between ownership parties upon finalization of the acquisition agreement, which resulted in the transfer of ownership of various Spungen-owned companies, including PBCD/Peer and PBCD/CPZ, to various AB SKF-owned affiliates.” Decision Mem. 23 (quoting Prelim. Results, 75 Fed. Reg. at 41,152-53). Commerce concluded from the MPA that “there was no sale value specifically associated with just the TRB inventory as part of the MPA or any other document submitted to the record.” Id. at 22 (quoting Prelim. Results, 75 Fed. Reg. at 41,153). Commerce observed that “while the transfer of stock ownership of Peer Bearing Company from one entity to another would necessarily result in the new ownership acquiring the company, along with all assets of said company (including inventory assets), at no point in the MPA document (or in any other document on the record) is there any explicit or implicit reference to the valuation of inventory assets as part of the actual purchase agreement....” Id. at 23-24. From its own examination of the MPA, the text of which is proprietary, the court concludes that the Department‘s findings are supported by substantial evidence.
Timken does not identify record evidence that is sufficient to refute the Department‘s finding that no agreed-upon sale price specific to the TRB inventory is set forth in the MPA or any other document submitted to the record. Identifying MPA provisions and associated record documents describing the valuation of the inventory, Timken argues that “[v]arious representations and covenants in the MPA and Assignment agreement, in particular, establish the terms governing PBCD‘s inventory sale.” Timken‘s Mem. 19 (citations omitted). Timken concludes from the record documents that “[t]hese provisions make clear that the parties contemplated that the MPA was to constitute a binding agreement for the sale of PBCD‘s business and the goods it held in inventory to SKF.” Id. at 20 (citations omitted). Timken references a general warranty regarding “Inventory,” a covenant regarding continued ordinary business operations, and a promise made with respect to the tax treatment of the acquisition, according to which the parties would make certain tax elections consistent with an asset sale as opposed to a share sale. Id. at 19-20 (citing Letter from SKF to Sec‘y of Commerce, at 4, 8-10 (Jun. 9, 2010) (Admin. R. Doc. No. 5769)); The Timken Co.‘s Reply Br. in Supp. of its Mot. for J. on the Agency R. 4-5 (Dec. 12, 2011), ECF No. 78 (“Timken‘s Reply“).
Timken‘s argument, based on what Timken considers to be terms of the sale of inventory, is not convincing. There is no dispute that the inventory at issue was transferred as part of the share acquisition. As Commerce found, the record does not contain evidence showing that the parties agreed or intended to agree upon a
Finally, Timken argues that the Department‘s decision that the SKF acquisition did not constitute a sale to an unaffiliated party was invalid because it was based on a reason not found in the statute: that the acquisition was not a sale “for consumption.” Timken‘s Mem. 16-17. Timken bases this argument on a sentence in the Decision Memorandum in which Commerce rejected the need to request additional information regarding the SKF acquisition by stating that “[b]ecause we do not find that this transfer of inventory constitutes a sale of subject merchandise for consumption to the first unaffiliated customer ..., we do not agree with Peti-
tioner that there is no viable sales price on the record.” Decision Mem. 24 (emphasis added). This argument fails for two reasons. First, as discussed above, Commerce determined from substantial record evidence that the SKF acquisition did not constitute a sale of the TRBs in inventory because no specific price was negotiated for that inventory. The Decision Memorandum‘s reference to a sale for consumption was not necessary to the Department‘s determination. Second, the reason why Commerce chose not to request additional information would be pertinent were Timken claiming here that Commerce acted unlawfully in failing to request additional information on the transfer of the inventory. Timken made a related argument before Commerce during the review but is not arguing that point before the court.
F. Relief is Appropriate on Timken‘s Claim Challenging the Department‘s Using SKF‘s Factors of Production to Value Merchandise Produced by Pre-Acquisition CPZ
In determining normal value according to the nonmarket economy country procedure of
Timken admits it failed to exhaust administrative remedies on its claim, having made no objection to the Department‘s use of post-acquisition factors of production in the case brief it submitted to Commerce during the review. Timken‘s Reply 7. Instead, Timken raised the issue for the first time in its rebuttal brief before Commerce (in a footnote) and then raised the issue again in a ministerial error allegation after the publication of the Final Results. Def.‘s Mem. 27-28 (citing Timken‘s Rebuttal at 7 n. 1); Letter from Timken to the Sec‘y of Commerce (Jan. 19, 2011) (Admin. R. Doc. No. 6034). Timken requests that the court waive the failure to exhaust because this claim presents a purely legal question and “a serious error of law.” Timken‘s Reply 7-8. Defendant argues that failure to exhaust administrative remedies should bar relief on Timken‘s claim, relying on Dorbest Ltd. v. United States, 604 F.3d 1363, 1375 (Fed.Cir.2010) and
As provided by statute, “the Court of International Trade shall, where appropriate, require the exhaustion of administrative remedies.” Customs Courts Act, § 301,
Defendant-Intervenor SKF addresses Timken‘s claim on the merits, arguing that “the statute does not require that the FOPs correspond to the factors used to produce the merchandise sold during the POR” and that the term “factors of production utilized in producing the merchandise” is ambiguous and was interpreted reasonably by Commerce in this case. Def.-Ints.’ Resp. to Pl.‘s R. 56.2 Mot. for J. upon the Agency R. 14 (Oct. 28, 2011), ECF No. 55. Defendant, however, does
III. CONCLUSION AND ORDER
For the reasons explained above, the court concludes that: (1) Commerce must reconsider its decision to treat the TRBs exported to the United States from Thailand as products of China and redetermine the country of origin of these TRBs; (2) no relief is appropriate on CPZ‘s claim challenging the assessment rate applied to pre-acquisition entries; (3) Commerce must reconsider and redetermine its surrogate value for bearing-quality steel bar; (4) no relief is appropriate on the claim challenging the surrogate value of roller-quality steel wire rod; (5) no relief is appropriate on Timken‘s claim challenging the Department‘s determination of the appropriate sale for antidumping duty purposes; and (6) Commerce must reconsider and explain the Department‘s decision to use SKF‘s data on factors of production for subject merchandise imported prior to the acquisition.
Therefore, upon consideration of all proceedings in this case and upon due deliberation, it is hereby
ORDERED that the final determination of the International Trade Administration, U.S. Department of Commerce (“Commerce” or the “Department“) in Tapered Roller Bearings & Parts Thereof, Finished & Unfinished, From the People‘s Republic of China: Final Results of the 2008-2009 Antidumping Duty Admin. Review, 76 Fed. Reg. 3,086 (Jan. 19, 2011) (“Final Results“) be, and hereby is, remanded for reconsideration and redetermination in accordance with this Opinion and Order; it is further
ORDERED that, on remand, Commerce shall issue a Remand Redetermination that recalculates the weighted-average dumping margin of Peer Bearing Company-Changshan (“CPZ“) as required to fulfill the directives of this Opinion and Order, is supported by substantial evidence on the record, and is in all respects in accordance with law; it is further
ORDERED that Commerce must reconsider the challenged country of origin determination and redetermine the country of origin of the tapered roller bearings (“TRBs“) that were exported to the United States from Thailand and, on remand, must base its country of origin determination solely on criteria and factors that are shown to be relevant to the issue of whether the parts exported from China to Thailand were substantially transformed by the processing, including assembly, that occurred in Thailand; it is further
ORDERED that Commerce must redetermine the surrogate value that it applied to CPZ‘s input of bearing-quality steel bar using the best available record information; it is further
ORDERED that Commerce must reconsider its decision to value pre-acquisition-produced subject merchandise using factors of production pertaining to the post-acquisition producer and show that its de-
ORDERED that Commerce must file the Remand Redetermination with the court within ninety (90) days of the date of this Opinion and Order, that each plaintiff and defendant-intervenor shall have thirty (30) days from the filing of the Remand Redetermination in which to file with the court comments on the Remand Redetermination, and that defendant shall have thirty (30) days from the last filing of such comments in which to file with the court any responses to the comments of other parties.
TIMOTHY C. STANCEU
JUDGE