GGB Bearing Tech. (Suzhou) Co. v. United States , 2017 CIT 164 ( 2017 )

Slip Op. 17-164
UNITED STATES COURT OF INTERNATIONAL TRADE
GGB BEARING TECHNOLOGY
(SUZHOU) CO., LTD. and STEMCO
LP,
Plaintiffs,
v.
Before: Timothy C. Stanceu, Chief Judge
UNITED STATES,
Court No. 12-00386
Defendant,
and
THE TIMKEN COMPANY,
Defendant-Intervenor.
OPINION AND ORDER
[Sustaining in part, and remanding in part, a final determination in a new shipper review
conducted under an antidumping duty order on tapered roller bearings, and parts thereof, from
the People’s Republic of China]
Dated: December 12, 2017
Ned H. Marshak, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of New
York, N.Y., argued for plaintiffs GGB Bearing Technology (Suzhou) Co., Ltd. and Stemco LP.
With him on the brief were Bruce M. Mitchell and Dharmendra N. Choudhary.
Tara K. Hogan, Senior Trial Counsel, Civil Division, U.S. Department of Justice, of
Washington, D.C, for defendant United States. With her on the brief were Stuart F. Delery,
Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Jr.,
Assistant Director.
William A. Fennell, Stewart and Stewart, of Washington, D.C., for defendant-intervenor
The Timken Company. With him on the brief was Terence P. Stewart.
Court No. 12-00386 Page 2
Stanceu, Chief Judge: This action arose from a “new shipper” review that the
International Trade Administration, U.S. Department of Commerce (“Commerce” or the
“Department”) conducted under an antidumping duty order on tapered roller bearings (“TRBs”)
and parts thereof (collectively, the “subject merchandise”), from the People’s Republic of China
(“China” or the “PRC”). Plaintiff GGB Bearing Technology (Suzhou) Co., Ltd. (“GGB”) is a
Chinese TRB producer and exporter, and plaintiff Stemco LP is its affiliated U.S. importer. In
the review, Commerce assigned GGB’s merchandise a 12.64% weighted average antidumping
duty margin.
Before the court is plaintiffs’ motion for judgment on the agency record, in which
plaintiffs raise challenges to two decisions Commerce made in the administrative determination
by which it concluded the new shipper review. Defendant United States and
defendant-intervenor The Timken Company (“Timken”), the petitioner in the antidumping duty
investigation culminating in the antidumping duty order, oppose plaintiffs’ motion.
The court sustains one of the challenged decisions Commerce made, which was the
choice of record information with which to calculate “surrogate” values for manufacturing
(“factory”) overhead, for selling, general, and administrative (“SG&A”) expenses, and for profit.
The court does not sustain the other challenged decision, which was the Department’s choice of a
surrogate value for labor hours used in producing the subject merchandise.
I. BACKGROUND
Commerce published the antidumping duty order on TRBs from China in 1987.
Antidumping Duty Order; Tapered Roller Bearings and Parts Thereof, Finished or Unfinished,
From the People’s Republic of China, 52 Fed. Reg. 22,667 (Int’l Trade Admin. June 15, 1987).
In response to GGB’s request, Commerce initiated a new shipper review of GGB on
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August 1, 2011 and designated the period of June 1, 2010 to May 31, 2011 as the period of
review (“POR”). Tapered Roller Bearings and Parts Thereof, Finished and Unfinished From the
People’s Republic of China: Initiation of Antidumping Duty New Shipper Review, 76 Fed.
Reg. 45,777 (Int’l Trade Admin. Aug. 1, 2011).
On June 1, 2012, Commerce preliminarily determined that GGB’s sales during the POR
had not been made at less than normal value and preliminarily assigned GGB a weighted average
antidumping duty margin of zero. Tapered Roller Bearings and Parts Thereof, Finished and
Unfinished From the People’s Republic of China: Preliminary Results of Antidumping Duty New
Shipper Review, 77 Fed. Reg. 32,522, 32,526 (Int’l Trade Admin. June 1, 2012) (“Prelim.
Results”). On October 30, 2012, Commerce published the Final Results, in which it determined
the final 12.64% margin. Tapered Roller Bearings and Parts Thereof, Finished and Unfinished
From the People’s Republic of China: Final Results of Antidumping Duty New Shipper Review,
77 Fed. Reg. 65,668 (Int’l Trade Admin. Oct. 30, 2012) (“Final Results”). This action followed.
Summons (Nov. 29, 2012), ECF No. 1; Compl. (Nov. 29, 2012), ECF No. 6.
On May 22, 2013, plaintiffs filed their motion for judgment on the agency record. Br. in
Supp. of Pls.’ Rule 56.2 Mot. for J. upon the Agency R. (May 22, 2013), ECF No. 26
(“Pls.’ Br.”). Defendant and defendant-intervenor filed their oppositions on July 22, 2013.
Def.’s Opp. to Pls.’ Mot. for J. upon the Admin. R. (July 22, 2013), ECF No. 28 (“Def.’s Br.”);
Def.-Int. The Timken Co.’s Opp. to the Mot. for J. on the Agency R. of Pls. GGB Bearing Tech.
(Suzhou) Co., Ltd. and Stemco LP (July 22, 2013), ECF No. 29 (“Def.-Int.’s Br.”). Plaintiffs
replied on September 10, 2013. Reply Br. in Resp. to Def. and Def.-Int.’s Opp. to Pls.’
Rule 56.2 Mot. for J. upon the Agency R. (Sept. 10, 2013), ECF No. 35 (“Pls.’ Reply”). On
April 14, 2014, this Court ordered the parties to provide supplemental briefing addressing
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defendant’s argument regarding the doctrine of exhaustion of administrative remedies as it
pertains to one of plaintiffs’ arguments. Order (Apr. 14, 2014), ECF No. 48. On May 29, 2014
both defendant, Def.’s Supp. Br. (May 29, 2014), ECF No. 50, and plaintiffs, Pls.’ Comments in
Resp. to Ct.’s Order of Apr. 14, 2014 (May 29, 2014), ECF No. 51, responded to this order.
II. DISCUSSION
A. Jurisdiction and Standard of Review
The court exercises jurisdiction pursuant to section 201 of the Customs Courts Act
of 1980, 28 U.S.C. § 1581(c), under which the court reviews actions commenced under
section 516A of the Tariff Act of 1930 as amended, 19 U.S.C. § 1516a, (the “Tariff Act”). See
19 U.S.C. § 1516a(a)(2)(B)(iii).1 In reviewing a final determination, the court “shall hold
unlawful any determination, finding, or conclusion found . . . to be unsupported by substantial
evidence on the record, or otherwise not in accordance with law.” 19 U.S.C.
§ 1516a(b)(1)(B)(i).
B. “New Shipper” Reviews under an Antidumping Duty Order
Under section 751(a)(2)(B) of the Tariff Act, an exporter or producer of merchandise
subject to an antidumping duty order may request a new shipper review to obtain an
individually-determined weighted average dumping margin, i.e., a margin based on its own U.S.
sales of merchandise subject to the order, provided the exporter or producer did not export
merchandise subject to the order during the antidumping duty investigation and is not affiliated
with a party who did. 19 U.S.C. § 1675(a)(2)(B). Commerce determined that GGB qualified as
1
All citations to the United States Code and to the Code of Federal Regulations herein
are to the 2012 editions.
Court No. 12-00386 Page 5
a new shipper and calculated its margin based on sales of GGB’s exported TRBs occurring
during the POR.
C. Determination of the Normal Value of Merchandise Subject to an Antidumping Duty Order
that is Produced in a Non-market Economy Country
Because GGB’s merchandise is produced in the PRC, a country Commerce considers to
be a non-market economy (“NME”) country, Commerce determined GGB’s margin by
comparing the U.S. prices of merchandise produced and exported by GGB with what it
determined to be the “normal value” of that merchandise, which it calculated according to the
special procedures of section 773(c) of the Tariff Act, 19 U.S.C. § 1677b(c). Under these NME
country procedures, which as a general matter avoid reliance on prices or costs within the non-
market exporting country, Commerce ordinarily determines normal value “on the basis of the
value of the factors of production utilized in producing the merchandise and to which shall be
added an amount for general expenses and profit plus the cost of containers, coverings, and other
expenses.” 19 U.S.C. § 1677b(c)(1)(B). Commerce is to base the valuation of factors of
production “on the best available information regarding the values of such factors in a market
economy country or countries” Commerce considers appropriate. Id. In valuing the factors of
production (which include, inter alia, labor hours, quantities of raw materials, and amounts of
energy and other utilities used in producing the merchandise as well as representative capital
cost, including depreciation), id. § 1677b(c)(3), Commerce is directed to “utilize, to the extent
possible, the prices or costs of factors of production in one or more market economy countries
that are -- (A) at a level of economic development comparable to that of the nonmarket economy
country, and (B) significant producers of comparable merchandise.” Id. § 1677b(c)(4).
Court No. 12-00386 Page 6
D. Plaintiffs’ Claims before the Court
Plaintiffs challenge the choice of record information Commerce used in valuing two
general categories of costs that are components of the normal value calculation: (1) GGB’s
manufacturing overhead, selling, general, and administrative expenses, and profit; and (2) labor
hours. For each cost category, Commerce used data pertaining to its chosen substitute
(“surrogate”) market economy country, Thailand, which Commerce determined to be
economically comparable to China and a significant producer of merchandise comparable to the
merchandise subject to the antidumping duty order, i.e., TRBs. Final Results, 77 Fed. Reg.
at 65,668-69.
For factory overhead, SG&A expenses, and profit, plaintiffs do not challenge the choice
of Thailand as the surrogate country. Instead, plaintiffs take issue with the particular data
pertaining to Thailand Commerce used to value these cost elements, which Commerce obtained
from the financial statements of two Thai bearing producers, NSK Bearing Manufacturing
(Thailand) Co., Ltd. (“NSK”) and JTEKT (Thailand) Co. Ltd. (“JTEKT”). Plaintiffs claim that
the Department’s decision to use the NSK financial data was unlawful because the record does
not support a finding that these data were the best available information on the record. Pls.’
Br. 2, 11-24. Specifically, they point to record evidence that they believe shows the NSK
financial data to have been distorted by NSK’s receiving countervailable government subsidies
in Thailand. Id. at 11, 16-24. Plaintiffs argue that in its place, Commerce should have used the
financial information for a different Thai company, NMB-Minebea Thai Company Limited
(“Minebea”). Id. at 24-27. Plaintiffs maintain that Commerce impermissibly rejected the use of
Minebea’s statement on an invalid finding that this statement lacks sufficient detail to allow
Commerce to calculate manufacturing overhead costs. Id.
Court No. 12-00386 Page 7
For the valuation of hours of labor, plaintiffs argue that Commerce erred in its choice of
certain labor rate data from Thailand and instead should have used available record data on labor
costs pertaining to the Philippines or Ukraine that it argues are contemporaneous with the period
of review and more specific to the production of the subject merchandise than are the Thai data.
Id. at 8, 28-40.
E. Commerce Permissibly Chose to Base its Financial Ratios, in Part, on the NSK Financial
Statement
To determine surrogate values for factory overhead, SG&A expenses, and profit,
Commerce calculates “financial ratios,” using cost of goods sold as the denominator, based on
data contained in financial statements of one or more producers in a market economy country or
countries. At issue is whether Commerce, in choosing the NSK financial statement as one of the
sources of information for this purpose, reached one or more findings challenged by plaintiffs
that are unsupported by substantial evidence or reached a decision that otherwise was contrary to
law.
According to the Department’s regulations, when calculating surrogate values “[f]or
manufacturing overhead, general expenses, and profit, the Secretary normally will use
non-proprietary information gathered from producers of identical or comparable merchandise in
the surrogate country.” 19 C.F.R. § 351.408(c)(4). “In choosing the best available information
to value factory overhead, SG&A expenses, and profit, the Department prefers to use
non-proprietary financial statements from producers of identical or comparable merchandise in
the selected surrogate country which are complete, free of evidence of receipt of countervailable
subsidies, and contemporaneous with the period under consideration.” Issues and Decision
Memorandum for the Final Results of the New Shipper Review of the Antidumping Duty Order
on Tapered Roller Bearings and Parts Thereof, Finished and Unfinished from the People’s
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Republic of China at 5 (Oct. 19, 2012) (Admin.R.Doc. No. 115) (“Final I&D Mem.”) (footnotes
omitted).
In the new shipper review, Commerce considered the financial statements of four
manufacturing companies in Thailand: JTEKT, NSK, Minebea, and Koyo Joint (Thailand) Co.
Ltd. (“Koyo”). Commerce found that “[a]ll four of the financial statements are publicly
available, contemporaneous with the POR, and from the Department’s primary surrogate
country, Thailand.” Id. Commerce decided against using Koyo’s financial statement,
concluding that it did not establish that Koyo produced bearings. Id. at 7 (“Koyo’s financial
statements do not indicate that it produced merchandise that is identical or comparable to the
subject merchandise.”). Plaintiffs do not challenge this decision. The Department found,
further, that “there is no evidence that any of the four companies have received countervailable
subsidies during the period in question.” Id. at 8. Plaintiffs challenge this finding as it pertains
to NSK.
1. Plaintiffs’ Arguments in Support of their Claim that Commerce Erred in Finding that the NSK
Statement Was Not Distorted by a Countervailable Subsidy
Plaintiffs make, essentially, four arguments in support of their claim that Commerce erred
in determining that the NSK statement was not distorted by NSK’s receipt of a countervailable
subsidy. They argue, first, that in using the NSK statement Commerce departed from its
“standard practice,” under which it rejects a financial statement as surrogate information when
there is reason to believe or suspect distortion of the statement by a countervailable subsidy
occurred. Pls.’ Br. 11-15. According to plaintiffs, in the new shipper review Commerce applied
a standard (which they characterize as a “beyond a reasonable doubt” standard) more stringent
than the “reason to believe or suspect” standard that Commerce has followed in its practice and
that has support in the legislative history of the statute. Id. at 11-15, 23. Second, they argue that
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Commerce previously has determined that subsidies under Thailand’s “Investment Promotion
Act” (“IPA”) program administered by the Thai Board of Investments (“BOI”), in which NSK
participated, are countervailable. Pls.’ Br. 16-20. Third, they argue that Commerce disregarded
the record evidence showing that NSK realized revenue from export sales that were promoted
under two provisions of the IPA program, specifically, “section 28” and “section 36(1).”
Pls.’ Br. 20-22. Finally, they argue that Commerce erred in choosing the NSK statement over
the Minebea statement. Pls.’ Br. 22-24.
2. The Department’s General Method of Determining whether an IPA Benefit Is a
Countervailable Subsidy
In support of its finding that the NSK financial statement was not distorted by a
countervailable subsidy in the new shipper review, Commerce explained that “the Department’s
determination of whether to use the financial statements of a producer that potentially received a
countervailable subsidy cannot be, nor is it intended to be, a full investigation of the subsidy
program in question.” Final I&D Mem. at 7 (citing H.R. Rep. No. 100-576, at 590-91 (1988)
(Conf. Rep.), as reprinted in 1988 U.S.C.C.A.N. 1547, 1623-24).2 Commerce further explained
that “[i]nstead, the Department’s practice is to review the financial statements to determine
2
The cited report provides as follows:
In valuing such factors [of production], Commerce shall avoid using any prices
which it has reason to believe or suspect may be dumped or subsidized prices.
However, the conferees do not intend for Commerce to conduct a formal
investigation to ensure that such prices are not dumped or subsidized, but rather
intend that Commerce base its decision on information generally available to it at
that time.
H.R. Rep. No. 100-576, at 590-91 (1988) (Conf. Rep.), as reprinted in 1988
U.S.C.C.A.N. 1547, 1623-24.
Court No. 12-00386 Page 10
whether the evidence indicates that the company received a countervailable subsidy during the
relevant period from a program previously investigated by the Department.” Id.
3. The IPA Benefits as Shown in the NSK Financial Statement
The IPA (formally, the Thai Investment Promotion Act, B.E. 2520) was enacted in 1977
and amended in 2001. GGB Bearing Tech. Post-Prelim. Surrogate Value Submission: Tapered
Roller Bearings from the People’s Republic of China (New Shipper Review: 6/1/2010-5/31/2011)
Ex. 2 (June 21, 2012) (Admin.R.Doc. Nos. 92-95) (“GGB Post-Prelim. SV Submission”) (placing
onto the record the Investment Promotion Act). Both sections of the IPA relied upon by
plaintiffs, i.e., sections 28 and 36(1), provide for exemptions from import duties. Section 28
grants an exemption to a “promoted person” from “payment of import duties on machinery as be
approved by the Board, providing that such machinery comparable in quality is not being
produced or assembled within the Kingdom in sufficient quantity to be acquired for use in such
activity.” Id. Ex. 2 at 9. Section 36(1) grants an “exemption of import duties on the raw and
essential materials imported for use specifically in producing, mixing, or assembling products or
commodities for export” for qualified recipients. Id. Ex. 2 at 11.
Plaintiffs point to four IPA benefits as stated in the NSK financial statement, several of
which it identifies as section 28 benefits and one of which it identifies as a section 36(1) benefit.
Pls.’ Br. 16-17. The benefits plaintiffs specifically identify as section 28 benefits, as set forth in
the financial statement, are the following:
(1) 50% reduction in import duties on machines produced in or after 1991 and
approved by the BOI, except those subject to import duties below 10%, for
Promotion Certificate No. 1730(1)/2544;
...
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(4) 50% reduction in import duties on machines approved by the BOI, except
those subject to import duties below 10%, for Promotion Certificate No.
1223(2)/2547;
(5) exemption from import duties on machines approved by the BOI, for
Promotion Certificates Nos. 1597(2)/2548, 1914(2)/2548, and
1079(2)/2550; . . . .
New Shipper Review: Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,
from the People’s Republic of China (06/01/10-05/31/11): The Timken Co.’s Corrected
Surrogate Value Information Attach. 10 at 13-14 (Dec. 15, 2011) (Admin.R.Doc. No. 65)
(“Timken’s Corrected SV Info.”) (submitting onto the record NSK’s income statement for years
ended March 31, 2011 and 2010). Plaintiffs identify the following reference from the NSK
financial statement as a benefit under IPA section 36(1):
(7) 1-year exemption from import duties on raw or essential materials
imported for use in production for export, from the first day of import.
Id.
Plaintiffs do not challenge the Department’s following a practice under which Commerce
declines to conduct “a full investigation of the subsidy program in question” and instead will
“review the financial statements to determine whether the evidence indicates that the company
received a countervailable subsidy during the relevant period from a program previously
investigated by the Department.” Final I&D Mem. at 7. Their argument instead is that “record
evidence reveals that the benefits availed by NSK pursuant to IPA subsidy programs were
specific to and contingent upon the company’s exports, as required under the statute,” Pls.’
Br. 16 (citing 19 U.S.C. § 1677(5), (5A)), and that Commerce, in countervailing duty
proceedings, previously has found programs under IPA sections 28 and 36(1) to be
countervailable export subsidies, Pls.’ Br. 18. The court considers plaintiffs’ arguments as they
apply separately to section 28 and to section 36(1).
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4. IPA Section 28
As provided in 19 U.S.C. § 1677(5A)(B), “[a]n export subsidy is a subsidy that is, in law
or in fact, contingent upon export performance, alone or as 1 of 2 or more conditions.” On its
face, IPA section 28 does not state that the benefits are specific to or contingent upon exports:
Section 28. The promoted person shall be granted exemption from
payment of import duties on machinery as be approved by the Board, providing
that such machinery comparable in quality is not being produced or assembled
within the Kingdom in sufficient quantity to be acquired for use in such activity.
GGB Post-Prelim. SV Submission Ex. 2 at 9. In maintaining that “record evidence reveals that
the benefits availed by NSK” under section 28 were “specific to and contingent upon the
company’s exports,” plaintiffs fail to direct the court’s attention to record evidence that NSK
made an export commitment in order to obtain thereunder an exemption from, or a reduction in,
import duties on machinery. Pls.’ Br. 16. While it is possible that one or more of the five
Promotion Certificates identified in the NSK financial statement that appear to relate to
section 28 could constitute such evidence, the NSK Promotion Certificates are not in the
administrative record of the new shipper review. Plaintiffs challenge the Department’s finding
that the record lacked evidence showing that approval of NSK’s promotional privileges was
based on an export commitment, but the finding as stated by Commerce is supported by the
record. That is not to suggest Commerce permissibly could have found on this record that
NSK’s use of the section 28 program was not based on an export commitment. But under the
Department’s practice, under which Commerce does not conduct a full investigation to
determine whether a financial statement is distorted by a countervailable subsidy and instead
relies in part on its past countervailing duty (“CVD”) determinations and record information
(here, the NSK financial statement), such a finding was not necessary to support the ultimate
determination to use that statement. Under the Department’s practice and on this record, it was
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reasonable, and sufficient, for Commerce to conclude that the NSK financial statement did not
give it “reason to believe or suspect” that NSK received a countervailable subsidy under IPA
section 28.
The court is also unconvinced by plaintiffs’ argument that Commerce has found
programs under IPA section 28 to be countervailable export subsidies. Commerce explained that
it “has found that the IPA is not per se countervailable; instead the program has been found
countervailable when the approval of promotional privileges was determined to be based on an
export commitment or the company’s location in a regional investment zone.” Final I&D Mem.
at 7-8 (footnote omitted). In support of this point, Commerce cited its prior decision in Final
Negative Countervailing Duty Determination: Bottle-Grade Polyethylene Terephthalate (PET)
Resin From Thailand, 70 Fed. Reg. 13,462 (Int’l Trade Admin. Mar. 21, 2005) (“Bottle Grade
PET Resin”) and accompanying Issues and Decision Memorandum at II.D, Comment 3. Id. at 8.
Plaintiffs cite this same decision in support of their contention that Commerce previously has
found countervailable the import duty relief on imported machinery under IPA section 28. Pls.’
Br. 18. The Issues and Decision Memorandum for Bottle Grade PET Resin confirms that
Commerce required a finding that the promoted status under the IPA was contingent upon export
performance before concluding that a benefit thereunder was countervailable. See Bottle-Grade
Polyethylene Terephthalate (PET) Resin from Thailand: Issues and Decision Memorandum in
the Final Negative Countervailing Duty Determination at 5 (Int’l Trade Admin. Mar. 14, 2005),
available at https://enforcement.trade.gov/frn/summary/thailand/E5-1221-1.pdf (last visited
Dec. 7, 2017) (“Bottle Grade PET Resin I&D Mem.”).
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5. IPA Section 36(1)
IPA section 36(1) states:
Section 36. For the purpose of promoting exports, the Board may grant
the promoted person one or more of the special rights and benefits as follows:
(1) exemption from import duties on the raw and essential materials
imported for use specifically in producing, mixing, or assembling
products or commodities for export; . . . .
GGB Post-Prelim. SV Submission Ex. 2 at 11. Commerce has analyzed section 36(1) in past
countervailing duty cases by applying 19 C.F.R. § 351.519 of its regulations, which embodies
the general principle under which duty refunds under ordinary duty drawback programs, and,
similarly, remissions or exemptions of duty on imports used as inputs in the production of
exported goods, are not countervailable. Thus, the Department’s regulations treat as
countervailable only those benefits that it considers to extend beyond those available under
ordinary drawback programs and those providing for import duty exemptions and remissions
limited to production for export. Subsection (a)(1)(ii) of the regulations provides as follows:
(ii) Exemption of import charges. In the case of an exemption of import charges
upon export, a benefit exists to the extent that the exemption extends to inputs that
are not consumed in the production of the exported product, making normal
allowances for waste, or if the exemption covers charges other than import
charges that are imposed on the input.
19 C.F.R. § 351.519(a)(1)(ii). When analyzing whether a program for remission or exemption of
import charges upon export results in a countervailable benefit, Commerce has considered
whether the government of the exporting country maintains controls adequate to ensure that any
remission or exemption of import duties does not extend to duties on inputs not consumed in
production for export. See, e.g., 19 C.F.R. § 351.519(a)(4) (requiring a reasonable and effective
system or procedure based on generally accepted commercial practices in the exporting country).
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Plaintiffs argue that “record evidence demonstrates that section 36(1) of the IPA is a
statutory provision specially tailored for promoting exports of goods[] and grants special benefits
in the form of exemption of import duties on imported raw materials, contingent upon their
utilization specifically in producing goods for exports.” Pls.’ Br. 17. They continue, “[i]n view
of this, Commerce’s findings that NSK’s financial statement did not show that the company was
provided any IPA promotional privileges by the BOI which were specific to its exports, i.e.,
contingent upon its export performance, is clearly contradicted by substantial record evidence.”
Id. Plaintiffs add that “[m]oreover, the Department’s countervailable subsidy database provides
citations and references to several CVD proceedings” in which Commerce concluded that
Thailand’s IPA section 36(1) program was countervailable. Id. at 18.
The court does not find merit in plaintiffs’ argument that Commerce should have rejected
the NSK financial statement on the basis of IPA section 36(1) promotional benefits. On its face,
section 36(1) limits the exemption to “import duties,” GGB Post-Prelim. SV Submission Ex. 2
at 11, and it limits the exemption to those import duties that are paid on inputs “imported for use
specifically” in the production of the exported product, id. (referring to “raw and essential
materials imported for use specifically in producing, mixing, or assembling products or
commodities for export”). In the past, the Department’s concern as to IPA section 36(1) in
individual countervailing duty determinations has been whether the government of Thailand
maintains adequate controls to ensure that the duty exemption is confined to production for
export and, to that end, that any allowance for waste be a permissible (“normal”) allowance, as
required under the Department’s regulations. In Final Affirmative Countervailing Duty
Determination: Certain Hot-Rolled Carbon Steel Flat Products From Thailand, 66 Fed.
Reg. 50,410 (Int’l Trade Admin. Oct. 3, 2001) (“Hot-Rolled Carbon Steel Flat Products From
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Thailand”), Commerce found inadequate the controls the Thai government maintained to
determine a normal allowance for waste, and, in accordance with 19 C.F.R. § 351.519(a)(4),
considered the entire import duty exemption allowed under IPA section 36(1) in that
investigation to be countervailable. See Issues and Decision Memorandum in the Final
Affirmative Countervailing Duty Determination: Certain Hot-Rolled Carbon Steel Flat Products
From Thailand (Int’l Trade Admin. Sept. 21, 2001), available at
http://enforcement.trade.gov/frn/summary/thailand/01-24753-1.txt, (last visited Dec. 7, 2017).
Subsequently, in Bottle Grade PET Resin, after again examining the controls maintained by the
Thai government and finding them adequate after considering information it did not have in the
Hot-Rolled Carbon Steel Flat Products From Thailand investigation, Commerce “determine[d]
that import duty exemptions on imports of raw and essential materials under IPA Section 36 are
not countervailable.” Bottle Grade PET Resin I&D Mem. at 9.
6. The Department’s Adherence to its “Standard Practice”
In summary, Commerce did not err when stating in the Issues and Decision
Memorandum for the new shipper review that in past CVD proceedings it has not found
promotional privileges under the Thai IPA sections 28 and 36(1) programs to be countervailable
per se. As to the IPA section 28 benefits in particular, no evidence was present on the record to
compel Commerce to find that NSK had provided an export commitment to the Thai
government. Similarly, with respect to IPA section 36(1), which on its face confines the
available import duty exemption to production of goods for export, Commerce had no record
evidence compelling it to conclude that NSK received a countervailable benefit under the Thai
program administering that provision. The court, therefore, cannot agree with plaintiffs that in
the new shipper review Commerce departed from its established practice when evaluating
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whether or not the NSK financial statement was distorted by countervailable subsidies. The
record evidence, as reviewed by the court and addressed above, did not require Commerce to
conclude that it had a reason to “believe or suspect” the financial statement was distorted by
countervailable subsidies. Nor does the record support plaintiffs’ contention that Commerce
impermissibly applied a more rigid standard, such as a “beyond a reasonable doubt” standard.
7. Realization of Revenue from IPA-Promoted Business Activities
Plaintiffs argue that “NSK’s financial statement not only demonstrated the company’s
stated policy of accounting for the benefits availed under BOI promoted IPA subsidy programs,
but the statement also evidenced receipt of countervailable subsidies gained pursuant to such
subsidy programs.” Pls.’ Br. 22. They argue that Commerce “ignored the facts that NSK
actually received benefits under those IPA promotional programs through and based upon its
export performance.” Id. at 24. These arguments fail to convince the court that Commerce erred
in using the NSK financial statement. Part 12 of the statement addresses investment promotion
as approved by the BOI and breaks down sales revenue between domestic sales and export sales,
and it also breaks down sales revenue between “Promoted Activities” and “Non-promoted
Activities.” Timken’s Corrected SV Info. Attach. 10 at 14. There is record evidence to support a
finding that NSK received sales revenue from export activities promoted by the BOI, including
those qualifying NSK for benefits under IPA sections 28 and 36(1). But for the reasons the court
has outlined, and contrary to plaintiffs’ contention, such a finding is not equivalent to a finding
that NSK received countervailable benefits under the IPA.
8. The Department’s Decision Not to Use the Minebea Statement
GGB placed the Minebea financial statement on the record in its post-preliminary
surrogate value submission, GGB Post-Prelim. SV Submission Ex. 5 (placing onto the record
Court No. 12-00386 Page 18
Minebea’s financial statement for the year ending 2011). Commerce decided against using the
Minebea statement for its financial ratio calculations because “the financial statements do not
break out raw material costs[,] which results in a large gap of unknown costs (i.e., the financial
statements do not contain the total cost of goods sold from the financial statements less total
expenses broken out by nature in the notes to the financial statements).” Final I&D Mem. at 5.
Commerce considered the absence of this cost information from the statement significant
because the absence prevented Commerce from reasonably segregating “the manufacturing
overhead costs from the total costs in order to calculate the surrogate overhead ratio.” Id.
Plaintiffs admit that Minebea’s financial statement is “less detailed” than NSK’s and
“less than ideal” but still argue that the Minebea data are superior because NSK’s financial
statement is distorted by countervailable subsidies. Pls.’ Br. 25-26. Plaintiffs do not challenge
the finding by Commerce that the Minebea statement, in lacking the cost information Commerce
considered significant, was inferior in that respect to the NSK statement. That finding was the
basis upon which Commerce determined that the NSK statement was preferable to the Minebea
statement for use in calculating the financial ratios. According to plaintiffs’ argument, the
Department’s “decision to reject an undistorted, albeit less than ideal, Minebea financial
statement constituted a reversible error, given the uncontroverted fact that the alternative NSK’s
financial statement was distorted by countervailable subsidy benefits.” Pls.’ Reply 9 (citing Pls.’
Br. 24-27). But as the court has explained, plaintiffs have not demonstrated that Commerce was
compelled on this record to reject the NSK statement on the basis of distortion by a
countervailable subsidy. Therefore, the court is unable to agree with plaintiffs that the distortion
plaintiffs allege to have affected the NSK statement is an “uncontroverted fact.” Accordingly,
the court must reject plaintiffs’ argument in favor of the financial statement of Minebea.
Court No. 12-00386 Page 19
F. Commerce Must Reconsider its Use of Thai ILO Data for Valuing the Labor Input
Plaintiffs claim that Commerce erred by relying upon manufacturing wage data from
Thailand in valuing the labor cost factor of production, as opposed to using record data from the
Philippines or Ukraine (or, alternatively, an average from those two countries). Plaintiffs
characterize the Department’s decision to use the Thai labor rate data as “not supported by . . .
substantial record evidence” and “contrary to law,” contending that the Philippine and Ukrainian
labor cost data, being more specific to the type of labor used, represent the “best available
information.” Pls.’ Br. 29. For the reasons that follow, the court rules that Commerce must
reconsider its use of the Thai data for valuing the labor input.
1. Commerce Relied upon ILO Chapter 6A“Total Manufacturing” Labor Cost Data for Thailand
to Value GGB’s Labor Cost Factor of Production in the New Shipper Review
Commerce announced in a 2011 “Statement of Policy” that, in non-market economy
country antidumping proceedings, it “will base labor cost on [International Labor Organization
(“ILO”)] Chapter 6A data applicable to the primary surrogate country.” Antidumping
Methodologies in Proceedings Involving Non-Market Economies: Valuing the Factor of
Production: Labor, 76 Fed. Reg. 36,092, 36,093 (Int’l Trade Admin. June 21, 2011) (“Labor
Methodologies”). In the Preliminary Results, Commerce valued the labor GGB used to produce
the subject merchandise according to Chapter 6A “total manufacturing wage data” that Thailand
reported to the ILO in 2005. Prelim. Results, 77 Fed. Reg. at 32,526; see also Final I&D Mem.
at 8-9. The labor rate Commerce obtained from the ILO data on the record was 116.78 baht per
hour for 2005, which Commerce adjusted from 2005 to the time of the POR (June 1, 2010 to
May 31, 2011) using a Thai Consumer Price Index inflator of 1.17 to produce a calculated labor
rate of 136.85 baht per hour for the POR. New Shipper Review of the Antidumping Duty Order
on Tapered Roller Bearings and Parts Thereof, Finished and Unfinished from the People’s
Court No. 12-00386 Page 20
Republic of China: Surrogate Value Memorandum at 4-5 (May 22, 2012) (Admin.R.Doc.
No. 86).
In the Preliminary Results, Commerce, citing Labor Methodologies, noted its policy of
using labor cost data specific to the industry being examined. See Prelim. Results at 32,525 (“In
Labor Methodologies, the Department determined that the best methodology to value the labor
input is to use industry-specific labor rates from the primary surrogate country.”). Commerce
also noted in the Preliminary Results that recent, industry-specific labor cost data from Thailand
were not available for the new shipper review:
To value the respondent’s labor input, the Department relied on data
reported by Thailand to the ILO in Chapter 6A of the [ILO] Yearbook.
Although the Department further finds the two-digit description under
ISIC [International Standard Industrial Classification of all Economic
Activities]-Revision 3.1 (‘‘Manufacture of Machinery and Equipment
NEC’’)3 to be the best available information on the record because it is
specific to the industry being examined, and is therefore derived from
industries that produce comparable merchandise, Thailand has not
reported data specific to the two-digit description since 2000. However,
Thailand did report total manufacturing wage data in 2005. Accordingly,
relying on Chapter 6A of the Yearbook, the Department calculated the
labor input using total labor data reported by Thailand to the ILO in 2005,
in accordance with section 773(c)(4) of the Act.
Prelim. Results at 32,526.
After publication of the Preliminary Results, GGB placed on the record ILO labor cost
data from Ukraine, for 2006, and from the Philippines, for 2008. GGB Post-Prelim. SV
Submission Ex. 4 (placing onto the record ILO labor cost data from Ukraine and from the
Philippines). GGB argued that for the Final Results Commerce “should value labor using the
industry-specific ILO data available from the Ukraine or, alternatively, the Philippines for
3
Commerce does not define this ILO abbreviation, which from the context appears to
refer to “not elsewhere classified.”
Court No. 12-00386 Page 21
category 29, ‘Manufacture of Machinery and Equipment NEC,’ which the Department
determined as the industrial classification most specific to TRBs.” GGB Bearing Technology’s
Case Brief: Tapered Roller Bearings from the People’s Republic of China (New Shipper Review:
6/1/2010-5/31/2011) at 1 (July 10, 2012) (Admin.R.Doc. No. 103) (“GGB’s Case Br.”) (footnote
omitted). GGB argued that in Labor Methodologies Commerce “unequivocally established that
industry-specific data is the single most important determining factor.” Id. at 5. Referring to the
Ukrainian and Philippine data, GGB argued to Commerce that “[f]or the Final Results, the
Department may consider applying either one of the two data sources or, in the alternative, an
average of the two.” Id. at 6.
In the Final Results, Commerce continued to find that the ILO Chapter 6A data on total
manufacturing wages in Thailand was the best available source of information for valuing
GGB’s labor cost. Final I&D Mem. at 9. In brief summary, the Department’s reasons for its
decision were that: (1) Commerce chose Thailand as the primary surrogate country; (2) the only
ILO Chapter 6A data for Thailand that Commerce considered sufficiently contemporaneous were
national labor cost data, not industry-specific data;4 and (3) the Department’s practice, as stated
in Labor Methodologies, is to use ILO Chapter 6A national labor cost data in a situation in which
ILO Chapter 6A industry-specific labor cost data from the primary surrogate country is not
available.
Specifically, Commerce stated in the Final Issues and Decision Memorandum that “[i]n
this review, we selected Thailand as the primary surrogate country” and reiterated its finding
4
The Thailand ILO labor rated data for general manufacturing, which were for 2005,
were more contemporaneous with the POR (June 1, 2010 to May 31, 2011) than were 2000 Thai
ILO labor rate data specific to manufacturing of machinery and equipment, but they nevertheless
were five to six years out of date (albeit adjusted by Commerce for inflation).
Court No. 12-00386 Page 22
from the Preliminary Results that “since Thailand has not reported data specific to the two-digit
description since 2000 we relied instead on its reported total manufacturing wage data from
2005.” Id. (footnotes omitted). Responding to GGB’s argument that Commerce instead should
use data from another potential surrogate country, Commerce relied upon Labor Methodologies
for its use of national labor cost data for the chosen surrogate country in the absence of industry-
specific data: “With respect to GGB’s argument that the Department should look to another
country or countries listed in the Department’s Surrogate Country Memo, as noted by Petitioner,
in Labor Methodologies, we explained that, ‘if there is no industry-specific data available for the
surrogate country within the primary data source, i.e., ILO Chapter 6A data, we will then look to
national data for the surrogate country for calculating the wage rate.’” Id. (footnotes omitted).
In further response to GGB’s argument concerning other potential surrogate countries,
Commerce stated that “in accordance with section 773(c)(4) of the Act, the Department will
value FOP using ‘to the extent possible, the prices or costs of factors of production in one or
more market economy countries that are – (A) at a level of economic development comparable to
that of the NME country, and (B) significant producers of comparable merchandise.’” Id.
Commerce explained that “[w]hile the Philippines and Ukraine are noted on the record to be at a
comparable level of economic development to the PRC, we have not selected either of these
countries as the primary surrogate country, nor have we determined that they are significant
producers of comparable merchandise.” Id.
2. Plaintiffs’ Arguments before the Court
Plaintiffs argue that “the Department’s decision to value labor based on an admittedly
inferior data source[], i.e., Thai manufacturing sector wage data, due to the Department’s
self-imposed limitation of its choices within Thailand merely because it was the primary
Court No. 12-00386 Page 23
surrogate country, was contrary to law.” Pls.’ Br. 34-35. Plaintiffs specifically take issue with
the Department’s applying its “policy of limiting its selection of surrogate values to data from
the primary surrogate country,” which they argue “has already been rejected by the Court of
International Trade in prior cases, and also should be rejected in the instant case.” Id. at 32.
They submit that “the record is clear that labor cost rates for Ukraine and the Philippines were
industry specific, and that labor cost rates for Thailand were not.” Id. at 31. They conclude that
the Department’s decision to use the Thai labor cost data was contrary to the statutory mandate
to use the best available information, judicial precedent, and the evidence of record. Id. at 29.
Plaintiffs address a separate argument to the Department’s statement in the Issues and
Decision Memorandum that Commerce had not determined that the Philippines and Ukraine
were significant producers of comparable merchandise. Id. at 35 (citing Final I&D Mem. at 9).
Citing 19 U.S.C. § 1677b(c)(4), the Department made this statement in partial support of its
decision to use the Thai data. See Final I&D Mem. at 9. According to plaintiffs, “[t]he record,
therefore, reveals that both the Philippines and Ukraine exported significant amounts of
comparable merchandise and absent any contrary information in the record, should have been
determined to be significant producers of comparable merchandise.” Pls.’ Br. 36. They add that
“[s]ignificantly, the Department did not conclude that Philippines and Ukraine were not
significant producers; rather, the Department merely noted that it had not decided that they
were.” Id.
Plaintiffs’ final argument is that “by limiting its data choices to ILO data available from
within the primary surrogate country, the Department not only did not select the best available
information available on the record but also discouraged the interested parties from submitting
more specific non-ILO data.” Id. at 40. Citing certain decisions of this Court, plaintiffs argue
Court No. 12-00386 Page 24
that the court should direct Commerce “to reopen the record for the limited purpose of admitting
new product-specific information for valuing labor cost in Thailand.” Id.
3. Response of Defendant and Defendant-Intervenor
Defendant advocates affirmance of the Department’s surrogate labor cost on the grounds
that the Department’s practice, as outlined in Labor Methodologies, has been approved by this
Court and that this application of Labor Methodologies is supported by substantial record
evidence. Def.’s Br. 24. Defendant also argues, inter alia, that the data sets from the Philippines
and Ukraine are “unusable” because “neither the Philippines nor Ukraine are significant
producers of comparable merchandise as required by the statute.” Def.’s Br. 25 (citing 19 U.S.C.
§ 1677b(c)(4)). Defendant-intervenor advances similar arguments, including an argument that
Commerce did not find either of these two countries to be significant producers of comparable
merchandise, Def.-Int.’s Br. 17-18, and an assertion that while the record established Thailand as
a significant producer of comparable merchandise, “[t]here is no comparable information in the
record” as to the Philippines or Ukraine, id. at 18. Pointing out that “Commerce did not find that
either country was a significant producer of comparable merchandise,” Defendant argues,
further, that plaintiffs’ attempt to argue that substantial record evidence contradicts the
Department’s finding that the record did not establish that either the Philippines or Ukraine were
significant producers of subject merchandise is impermissible because plaintiffs failed to exhaust
their administrative remedies, having failed to argue before Commerce that either the Philippines
or Ukraine were significant producers of subject merchandise. Def.’s Br. 26-28 (citing, inter
alia, Pls.’ Br. 35-36). Defendant argues, additionally, that the court should not order reopening
of the record at plaintiffs’ behest because “[a]t no point was GGB discouraged from putting
Court No. 12-00386 Page 25
information upon the record that it deemed relevant to the proceeding.” Id. at 29. Defendant-
intervenor makes this argument as well. Def.-Int.’s Br. 19.
4. Plaintiffs Did Not Argue Below that Commerce Should Have Found the Philippines and
Ukraine to Be “Significant Producers of Comparable Merchandise” and therefore Did Not
Exhaust their Administrative Remedies as to this Argument
“[T]he Court of International Trade shall, where appropriate, require the exhaustion of
administrative remedies.” 28 U.S.C. § 2637(d). Commerce has provided by regulation that an
interested party’s “case brief,” which is filed following publication of a preliminary antidumping
duty determination or the preliminary results of an antidumping duty administrative review
(including a new shipper review) “must present all arguments that continue in the submitter’s
view to be relevant to the Secretary’s final determination or final results, including any
arguments presented before the date of publication of the preliminary determination or
preliminary results.” 19 C.F.R. § 351.309(c)(2). As the Court of Appeals has stated,
“Commerce regulations require the presentation of all issues and arguments in a party’s case
brief, and . . . a party’s failure to raise an argument before Commerce constitutes a failure to
exhaust its administrative remedies.” Qingdao Sea–Line Trading Co. v. United States,
766 F.3d 1378, 1388 (Fed. Cir. 2014) (footnote omitted). The requirement to exhaust
administrative remedies ensures that the administrative agency will have had the opportunity to
hear and act upon an objection to a proposed agency decision prior to the court’s adjudication of
a claim based on that same objection. “[S]imple fairness to those who are engaged in the tasks
of administration, and to litigants, requires as a general rule that courts should not topple over
administrative decisions unless the administrative body not only has erred but has erred against
objection made at the time appropriate under its practice.” Dorbest Ltd. v. United States,
Court No. 12-00386 Page 26
604 F.3d 1363, 1375 (Fed. Cir. 2010) (quoting United States v. L.A. Tucker Truck Lines,
344 U.S. 33, 37 (1952)).
The exhaustion of administrative remedies issue, about which the parties have engaged in
an additional round of briefing, concerns plaintiffs’ argument before the court that “[t]he
record . . . reveals that both the Philippines and Ukraine exported significant amounts of
comparable merchandise and absent any contrary information in the record, should have been
determined to be significant producers of comparable merchandise.” Pls.’ Br. 36. In summary,
defendant and defendant-intervenor maintain that because this argument was not made in GGB’s
case brief before Commerce during the review, plaintiffs should not be permitted to raise it here.
The court agrees, but with a caveat.
Because plaintiffs did not argue at the agency level, in their case brief, that Commerce
should have found, pursuant to substantial record evidence, the Philippines and Ukraine to be
“significant producers” of merchandise comparable to the subject merchandise, i.e., TRBs, the
court will not entertain that argument here. Therefore, the court will not decide whether
substantial evidence does or does not support the finding plaintiffs advocate.5
Nevertheless, plaintiffs argued in their case brief, as they do here, that Commerce should
have considered the labor cost data on the record that pertained to the Philippines and to Ukraine
for use in valuing the labor input and should have chosen the data from one or both of these
5
Defendant and defendant-intervenor make the opposite argument, contending that the
record evidence establishes that the Philippines and Ukraine are not significant producers of
subject merchandise. Def.’s Br. 25; Def.-Int.’s Br. 18. Further, defendant erroneously argues
that Commerce reached a “finding that the record did not establish that either the Philippines or
Ukraine were substantial producers of subject merchandise.” Def.’s Br. 26. The court is not in a
position to rule on these arguments because Commerce never made the finding to which they are
directed.
Court No. 12-00386 Page 27
countries over the ILO labor cost data from Thailand. GGB’s Case Br. at 6 (arguing that
Philippine and Ukrainian industry-specific data are the best choices for the Final Results).
Commerce rejected this argument during the new shipper review on various grounds. As noted
previously, those grounds, as stated in the Final Issues and Decision Memorandum, were that
Thailand was its chosen primary surrogate country, that the only ILO Chapter 6A data for
Thailand that were timely were national labor cost data, not industry-specific data, that the
Department’s practice, as stated in Labor Methodologies, is to use ILO Chapter 6A national
labor cost data in a situation in which ILO Chapter 6A industry-specific labor cost data from the
primary surrogate country is not available, and that while it had found Thailand to be a
significant producer of comparable merchandise, it had not made the same determination with
respect to the Philippines or Ukraine. As to the last ground, plaintiffs point out that
“[s]ignificantly, the Department did not conclude that [the] Philippines and Ukraine were not
significant producers; rather, the Department merely noted that it had not decided that they
were.” Pls.’ Br. 36. They object that Commerce “fail[ed] to engage in a multi-country analysis
of labor cost data.” Id. In effect, their argument is that Commerce should have found the
Philippines and Ukraine to be significant producers rather than avoid any finding on the issue.
The argument that Commerce should have found both countries to be significant producers,
which plaintiffs failed to raise in their case brief, has subsumed within it an argument that
Commerce erred in the Final Results when it declined to reach a finding on the “significant
producer” question as to either the Philippines or Ukraine. The question presented is whether the
court should consider this narrower, subsumed argument or instead should conclude that it, too,
is precluded by a failure to exhaust administrative remedies. The court concludes that it should
consider this narrower argument because plaintiffs raised in their case brief the argument that
Court No. 12-00386 Page 28
Commerce should have evaluated the labor cost data from the Philippines and Ukraine. Under
the methodology the statute directed Commerce to follow, plaintiffs’ raising that argument
required Commerce to determine whether the Philippines and Ukraine were “significant
producers of comparable merchandise” within the meaning of 19 U.S.C. § 1677b(c)(4)(B). The
court discusses this issue below.
5. Commerce Erred in Failing to Make a Finding as to Whether the Philippines or Ukraine,
or Both, Were “Significant Producers of Comparable Merchandise”
According to the nonmarket economy country procedures of 19 U.S.C. § 1677b(c) for
determining normal value, the “factors of production utilized in producing merchandise
include . . . hours of labor required.” 19 U.S.C. § 1677b(c)(3). Two related statutory provisions
govern how Commerce is to value the factors of production. The first, 19 U.S.C. § 1677b(c)(1),
requires Commerce to base its valuation of the factors, including labor cost, on the “best
available information regarding the values of such factors in a market economy country or
countries” that Commerce “considered to be appropriate.” The second, 19 U.S.C. § 1677b(c)(4),
directs that Commerce “shall utilize, to the extent possible, the prices or costs of factors of
production in one or more market economy countries that are -- (A) at a level of economic
development comparable to that of the nonmarket economy country, and (B) significant
producers of comparable merchandise.” The first provision gives Commerce broad discretion in
evaluating what is the “best available information regarding the values of such factors in a
market economy country or countries” Commerce “considered to be appropriate,” i.e., it grants
Commerce wide discretion in selecting potential surrogate countries and the information
available in those countries. The second provision directs Commerce to give priority, “to the
extent possible,” to the “prices or costs of factors of production,” including labor hours, that are
obtained in countries that meet the two specified criteria, i.e., economic comparability to the non-
Court No. 12-00386 Page 29
market economy country and status as a significant producer of merchandise comparable to the
subject merchandise. Under the plain meaning of the second provision, which uses the words
“to the extent possible,” Commerce may not compare data from two or more potential surrogate
countries unless it considers the status of each country under the two criteria the statute specifies.
In this case, Commerce had broad discretion in the selection of a surrogate country or
countries, but it was required to use, to the extent possible, labor cost data from countries that
met both of the criteria in § 1677b(c)(4). 19 U.S.C. § 1677b(c)(4). Overall, Commerce was
required to value labor cost according to the “best available information.” Id. § 1677b(c)(1). It
had on the record before it information relevant to the question of whether Thailand, the
Philippines, or Ukraine were significant producers of subject merchandise as well as labor cost
information from the Philippines and Ukraine that was, at least arguably, more specific to the
type of labor used by GGB than were the data from Thailand. During the new shipper review,
Commerce rejected the use of the Philippine and Ukraine data over the objection of GGB.
Under the statutory scheme, it was not permissible for Commerce to make a “best available
information” decision, as required by § 1677b(c)(1), without specifically considering the two
criteria of § 1677b(c)(4) that are, according to the statute, essential to any such decision. While
concluding that the Philippines and Ukraine met the economic comparability criterion of
§ 1677b(c)(4)(A), it declined to reach any determination on whether these countries met the
“significant producer” criterion of § 1677b(c)(4)(B). It nevertheless rejected the Philippine and
Ukraine labor cost data. In so doing, it departed from the methodology the statute directs.
It could be contended that plaintiffs were required by the exhaustion doctrine to have
argued in their case brief that Commerce, as it prepares the Final Results, must reach some
finding on the issue of whether the Philippines, or Ukraine, or both, were “significant
Court No. 12-00386 Page 30
producers.” At first glance, this contention appears plausible, and GGB’s including such an
argument might well have been prudent for the sake of completeness. Nevertheless, in
advocating that Commerce should consider the Philippine and Ukraine labor cost data as an
alternative to the Thai data, GGB reasonably was entitled to presume that Commerce would
follow the required statutory methodology in doing so. Moreover, even if the court were to
conclude that the exhaustion doctrine required GGB to remind Commerce of its responsibility to
determine the status of the Philippines and Ukraine under the two § 1677b(c)(4) criteria, it also
would note that a recognized exception to the exhaustion requirement applies when the argument
involves a “pure legal question.” See Agro Dutch Indus. Ltd. v. United States,
508 F.3d 1024, 1028-29 (Fed. Cir. 2007). Such is the case here. The statute requires Commerce
to consider whether a country is a significant producer of comparable merchandise in any
situation in which it evaluates data from potential surrogate countries for possible use in valuing
labor cost. That Commerce must do so is the answer to a pure legal question, not a question of
substantial evidence that depends upon the particular data involved.
In summary, Commerce, on the record before it, was required by the statute to decide
whether the Philippines and Ukraine were, or were not, “significant producers of comparable
merchandise” within the meaning of 19 U.S.C. § 1677b(c)(4). This it failed to do. See Final
I&D Mem. at 9 (“While the Philippines and Ukraine are noted on the record to be at a
comparable level of economic development to the PRC, we have not selected either of these
countries as the primary surrogate country, nor have we determined that they are significant
producers of comparable merchandise.” (emphasis added)).
The Department’s practice as outlined in Labor Methodologies does not alter the court’s
conclusion. In the Final Issues & Decision Memorandum, Commerce cited the Labor
Court No. 12-00386 Page 31
Methodologies announcement for its practice of using labor cost data from its single surrogate
country and, when no industry-specific labor cost data is available in that country, of looking to
national data. Final I&D Mem. at 9 (“[I]n Labor Methodologies, we explained that, ‘if there is
no industry-specific data available for the surrogate country within the primary data source, i.e.,
ILO Chapter 6A data, we will then look to national data for the surrogate country for calculating
the wage rate.’” (citations omitted)). Because Labor Methodologies is not a regulation, it is not
binding on Commerce. It does not preclude Commerce from adopting a modified methodology
were it to conclude that circumstances make it appropriate to do so. Commerce was not free to
apply Labor Methodologies in a way that is inconsistent with the statutory methodology.
Without opining on the merits of Labor Methodologies, the court concludes that the
Department’s reliance on this policy statement for the Final Results does not justify the
Department’s failure to state any finding on the issue of whether the Philippines or Ukraine was
a “significant producer.”
6. Because it Did Not Follow the Statutory Methodology, Commerce Must Make a New
Determination of What Constitutes the “Best Available Information” to Value the Labor Input
after Making a “Significant Producer” Determination as to the Philippines and Ukraine
In preparing a redetermination in response to this Opinion and Order, Commerce must
now make the finding it failed to make in the Final Results. The reason Commerce must do so is
not because plaintiffs are arguing now that Commerce should find both countries to be
“significant producers” (an argument that was not exhausted below) but because the statute
required Commerce to consider whether these countries were significant producers when
evaluating the Philippine and Ukraine labor cost data in response to GGB’s case brief argument
in favor of these data.
Court No. 12-00386 Page 32
In summary, Commerce now must decide whether the Philippines or Ukraine, or both,
were “significant” producers of merchandise comparable to TRBs and parts thereof, as required
by § 1677b(c)(4)(B). Only after making a finding as to the status of the Philippines and Ukraine
under the “significant producer” criterion will Commerce be in a position to compare the labor
cost data from all three countries according to the methodology the statute directs.
7. The Court Rejects Plaintiffs’ Argument that Commerce Must Reopen the Record
Plaintiffs argue that Commerce should be required to reopen the record and admit new
information to allow interested parties to submit non-ILO data that is more specific to the labor
input than the data from Thailand. Pls.’ Br. 36-40. Specifically, plaintiffs assert that, “by
limiting its data choices to ILO data available from within the primary surrogate country, the
Department not only did not select the best available information available on the record but also
discouraged the interested parties from submitting more specific non-ILO data.” Id. at 40. The
court rejects this argument.
The decision whether to reopen the record ordinarily is one for the agency to make, and
the court sees no compelling circumstance that would cause it to conclude otherwise. GGB had
ample opportunity to submit non-ILO labor information for the record (as well as data on
potential surrogate countries). Moreover, the record already contains data relevant to the
question of whether the Philippines or Ukraine, or both, met the “significant producer” criterion.
Because Commerce must reach a determination on that question according to substantial
evidence, the court reviews those record data below.
Certain export data for Thailand, the Philippines, and Ukraine, for 2010, 2009, and 2008,
placed on the record by Timken, are relevant to the question of whether the Philippines or
Ukraine, or both, are significant producers of merchandise comparable to TRBs. See New
Court No. 12-00386 Page 33
Shipper Review: Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from the
People’s Republic of China (06/01/10-05/31/11): The Timken Company’s Surrogate Country
Comments at Attach. 1 (Nov. 28, 2011) (Admin.R.Docs. 46-47). The relevant data, which
Timken described as United Nations “Comtrade” data, pertain only to exports, not domestic
production. Id. The data Timken submitted are in value only, not quantities, and they are
provided for exports under Harmonized System (“HS”) tariff headings 84.82 and 84.83 and for
HS subheading 8708.99. Id. These tariff classifications coincide roughly with those Commerce
mentioned in the scope language for the Order, although they are broader in comparison.6
Timken argued before Commerce that Thailand was a significant producer of comparable
merchandise, supporting its argument by combining the Comtrade data under all three tariff
6
The scope language for the antidumping duty order is as follows:
Imports covered by the order are shipments of tapered roller bearings and
parts thereof, finished and unfinished, from the PRC; flange, take up cartridge,
and hanger units incorporating tapered roller bearings; and tapered roller housings
(except pillow blocks) incorporating tapered rollers, with or without spindles,
whether or not for automotive use. These products are currently classifiable
under Harmonized Tariff Schedule of the United States (“HTSUS”) item numbers
8482.20.00, 8482.91.00.50, 8482.99.15, 8482.99.45, 8483.20.40 [Housed
bearings, incorporating ball or roller bearings: flange, take-up, cartridge and
hanger units], 8483.20.80 [Other housed bearings, incorporating ball or roller
bearings], 8483.30.80 [Bearing housings, plain shaft bearings: Other than flange,
take-up, cartridge and hanger units], 8483.90.20 [Parts of flange, take-up,
cartridge and hanger units], 8483.90.30 [Parts of bearing housings and plain shaft
bearings, other than parts of flange, take-up, cartridge and hanger units],
8483.90.80, 8708.99.80.15 [now 8708.99.81.15, Double flanged wheel hub units
not incorporating ball bearings], and 8708.99.80.80 [now 8708.99.81.80, parts
and accessories of motor vehicles, other]. Although the HTSUS item numbers are
provided for convenience and customs purposes, the written description of the
scope of the order is dispositive.
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished from the People’s
Republic of China: Final Results of Antidumping Duty New Shipper Review, 77 Fed. Reg. 65,668
(Int’l Trade Admin. Oct. 30, 2012) (footnotes omitted).
Court No. 12-00386 Page 34
headings. Id. at 3. However, the three tariff classifications under which the export data are
presented are not equally probative on the issue of whether Commerce was required to identify
the Philippines or Ukraine as a significant producer of comparable merchandise. HS heading
84.82 carries the article description “Ball or roller bearings.” TRBs and parts thereof are, as a
general matter, classified under this heading, whether or not suitable for automotive applications;
machinery parts incorporating TRBs, although they may fall within the scope of the Order, are
classified in other headings. See World Customs Org., Harmonized Commodity Description and
Coding Sys. Explanatory Notes, Explanatory Note 84.82 (“The heading covers all ball, roller or
needle roller type bearings.”; “The heading does not cover machinery parts incorporating ball,
roller or needle roller bearings; . . . .”). For this reason, and because roller bearings other than
TRBs, and arguably ball bearings as well, reasonably might be regarded as “comparable” to
TRBs, the export value data for heading 84.82 have a high degree of probative value on the issue
presented. The export value data presented for heading 84.83 arguably are less probative, as
much of the merchandise the heading includes would not appear to be comparable to
merchandise within the scope of the Order, but the court reaches no conclusion as to the
usefulness of these data.7 HS heading 87.08 applies to “parts and accessories of the motor
vehicles of headings 87.01 to 87.05,” and subheading 8708.99 thereunder is a basket subheading
(“Other”) for articles classified as “motor vehicle parts” that are not specified in other, previous
subheadings of the heading. The scope of this subheading is so broad that the export data
7
The internationally-harmonized article description for heading 84.83 is “Transmission
shafts (including cam shafts and crank shafts) and cranks; bearing housings and plain shaft
bearings; gears and gearing; ball or roller screws; gear boxes and other speed changers, including
torque converters; flywheels and pulleys, including pulley blocks; clutches and shaft couplings
(including universal joints)”; the heading also includes certain parts.
Court No. 12-00386 Page 35
thereunder could have little if any probative value for the question presented here. In responding
to this Opinion and Order, Commerce should consider the data under heading 84.82 and, if it
considers it appropriate to do so, the data under heading 84.83. If Commerce decides to rely also
upon data under HS subheading 8708.99, it will need to present a rational explanation of why
such data are probative on the issue presented.
III. CONCLUSION AND ORDER
For the reasons discussed in the foregoing, the court remands the Final Results to
Commerce for reconsideration. It is hereby:
ORDERED that plaintiffs’ motion for judgment on the agency record be, and hereby is,
granted in part and denied in part; it is further
ORDERED that Commerce shall submit to the court a redetermination upon remand (the
“Remand Redetermination”) in which it makes a “significant producer” determination as to the
Philippines and Ukraine and, after doing so, makes a new determination on the selection of the
“best available information” with which to value GGB’s labor input; it is further
ORDERED that Commerce shall submit the Remand Redetermination within 90 days of
the date of this Opinion and Order; it is further
ORDERED that plaintiffs and defendant-intervenor shall have 30 days from the date the
Remand Redetermination is submitted to submit to the court comments thereon; and it is further
ORDERED that defendant may submit to the court a response to such comments within
15 days of the date the last comment is submitted.
/s/ Timothy C. Stanceu
Timothy C. Stanceu
Chief Judge
Dated: December 12, 2017
New York, New York