SKF USA Inc. v. United States , 24 Ct. Int'l Trade 822 ( 2000 )

Slip Op. 00-105
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
____________________________________
:
SKF USA INC., SKF FRANCE S.A. :
and SARMA, :
:
Plaintiffs, :
:
v. : Court No. 99-08-00475
:
UNITED STATES, :
:
Defendant, :
:
THE TORRINGTON COMPANY, :
:
Defendant-Intervenor. :
____________________________________:
Plaintiffs, SKF USA Inc., SKF France S.A. and Sarma
(collectively “SKF”), move pursuant to USCIT R. 56.2 for
judgment upon the agency record challenging various aspects of
the United States Department of Commerce, International Trade
Administration’s (“Commerce”) final determination, entitled
Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, Germany, Italy, Japan, Romania,
Sweden, and the United Kingdom; Final Results of Antidumping
Duty Administrative Reviews, 64 Fed. Reg. 35,590 (July 1, 1999).
Specifically, SKF contends that Commerce unlawfully: (1)
conducted a duty absorption inquiry under 19 U.S.C. § 1675(a)(4)
(1994) for the subject reviews of the applicable antidumping
duty orders; (2) determined that it applied a reasonable duty
absorption methodology and that duty absorption had occurred;
(3) excluded below-cost sales from the profit calculation for
constructed value under 19 U.S.C. § 1677b(e)(2) (1994); and (4)
valued SKF’s major inputs under 19 U.S.C. §§ 1677b(f)(2)-(3),
1677e(a), 1677m(d) (1994).
Held: SKF’s USCIT R. 56.2 motion is denied in part and
granted in part. The case is remanded to Commerce to annul all
findings and conclusions made pursuant to the duty absorption
inquiry conducted for the subject reviews.
Court No. 99-08-00475 Page 2
[SKF’s motion is denied in part and granted in part. Case
remanded.]
Dated: August 23, 2000
Steptoe & Johnson LLP (Herbert C. Shelley and Alice A.
Kipel) for plaintiffs.
David W. Ogden, Assistant Attorney General; David M. Cohen,
Director, Commercial Litigation Branch, Civil Division, United
States Department of Justice (Velta A. Melnbrencis, Assistant
Director); of counsel: Patrick V. Gallagher and David R. Mason,
Office of the Chief Counsel for Import Administration, United
States Department of Commerce, for defendant.
Stewart and Stewart (Terence P. Stewart, Wesley K. Caine,
Geert De Prest and Lane S. Hurewitz) for defendant-intervenor.
OPINION
TSOUCALAS, Senior Judge: Plaintiffs, SKF USA Inc., SKF
France S.A. and Sarma (collectively “SKF”), move pursuant to
USCIT R. 56.2 for judgment upon the agency record challenging
various aspects of the United States Department of Commerce,
International Trade Administration’s (“Commerce”) final
determination, entitled Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof From France, Germany,
Italy, Japan, Romania, Sweden, and the United Kingdom; Final
Results of Antidumping Duty Administrative Reviews (“Final
Results”), 64 Fed. Reg. 35,590 (July 1, 1999).
Court No. 99-08-00475 Page 3
BACKGROUND
This case concerns the ninth administrative review of the
outstanding 1989 antidumping duty orders on antifriction
bearings (other than tapered roller bearings) and parts thereof
(“AFBs”) imported from France for the period of review (“POR”)
covering May 1, 1997 through April 30, 1998. See Final Results,
64 Fed. Reg. at 35,590; Antidumping Duty Orders: Ball Bearings,
Cylindrical Roller Bearings, Spherical Plain Bearings, and Parts
Thereof From France, 54 Fed. Reg. 20,902 (May 15, 1989). In
accordance with 19 C.F.R. § 351.213 (1998), Commerce initiated
the administrative reviews of these orders on June 29, 1998, see
Initiation of Antidumping and Countervailing Duty Administrative
Reviews and Request for Revocation in Part, 63 Fed. Reg. 35,188,
and published the preliminary results of the subject reviews on
February 23, 1999, see Antifriction Bearings (Other Than Tapered
Roller Bearings) and Parts Thereof From France, Germany, Italy,
Japan, Romania, Singapore, Sweden, and the United Kingdom;
Preliminary Results of Antidumping Duty Administrative Reviews
and Partial Rescission of Administrative Reviews (“Preliminary
Results”), 64 Fed. Reg. 8790. Commerce published the Final
Results on July 1, 1999. See 64 Fed. Reg. at 35,590.
Court No. 99-08-00475 Page 4
Since the administrative reviews at issue were initiated
after December 31, 1994, the applicable law in this case is the
antidumping statute as amended by the Uruguay Round Agreements
Act (“URAA”), Pub. L. No. 103-465, 108 Stat. 4809 (1994)
(effective Jan. 1, 1995).
JURISDICTION
The Court has jurisdiction over this matter pursuant to 19
U.S.C. § 1516a(a) (1994) and 28 U.S.C. § 1581(c) (1994).
STANDARD OF REVIEW
In reviewing a challenge to Commerce’s final determination
in an antidumping administrative review, the Court will uphold
Commerce’s determination unless it is “unsupported by
substantial evidence on the record, or otherwise not in
accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i) (1994); see
NTN Bearing Corp. of America v. United States, 24 CIT ___, ___,
104 F. Supp. 2d 110, 115-16 (2000) (detailing Court’s standard
of review for antidumping proceedings).
Court No. 99-08-00475 Page 5
DISCUSSION
I. Duty Absorption Inquiry
A. Background
Title 19, United States Code, § 1675(a)(4) (1994) provides
that during an administrative review initiated two or four years
after the “publication” of an antidumping duty order, Commerce,
if requested by a domestic interested party, “shall determine
whether antidumping duties have been absorbed by a foreign
producer or exporter subject to the order if the subject
merchandise is sold in the United States through an importer who
is affiliated with such foreign producer or exporter.” Section
1675(a)(4) further provides that Commerce shall notify the
International Trade Commission (“ITC”) of its findings regarding
such duty absorption for the ITC to consider in conducting a
five-year (“sunset”) review under 19 U.S.C. § 1675(c), and the
ITC will take such findings into account in determining whether
material injury is likely to continue or recur if an order were
revoked under § 1675(c). See 19 U.S.C. § 1675a(a)(1)(D) (1994).
On May 29, 1998 and July 29, 1998, Torrington requested that
Commerce conduct a duty absorption inquiry pursuant to §
1675(a)(4) with respect to various respondents, including SKF,
to ascertain whether antidumping duties had been absorbed during
Court No. 99-08-00475 Page 6
the ninth POR. See Final Results, 64 Fed. Reg. at 35,600.
In the Final Results, Commerce determined that duty
absorption had in fact occurred for the ninth review. See id.
at 35,591, 35,600-02. In asserting authority to conduct a duty
absorption inquiry under § 1675(a)(4), Commerce first explained
that for “transition orders” as defined in § 1675(c)(6)(C) (that
is, antidumping duty orders, inter alia, deemed issued on
January 1, 1995), regulation 19 C.F.R. § 351.213(j) provides
that Commerce will make a duty absorption inquiry, if requested,
for any antidumping administrative review initiated in 1996 or
1998. Commerce concluded that (1) because the antidumping duty
orders on the AFBs in this case have been in effect since 1989,
the orders are transition orders pursuant to § 1675(c)(6)(C),
and (2) since this review was initiated in 1998 and a request
was made, it had the authority to make a duty absorption inquiry
for the ninth POR. See id.
B. Contentions of the Parties
SKF contends that Commerce lacked authority under §
1675(a)(4) to conduct a duty absorption inquiry for the ninth
POR of the outstanding 1989 antidumping duty orders. See SKF’s
Br. Supp. Mot. J. Agency R. at 2, 16-23 (“SKF’s Br.”); SKF’s
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Reply Br. at 2-30. In the alternative, SKF asserts that even if
Commerce possessed the authority to conduct such an inquiry,
Commerce’s methodology for determining duty absorption was
contrary to law and, accordingly, the case should be remanded to
Commerce to reconsider its methodology. See SKF’s Br. at 3, 23-
44; SKF’s Reply Br. at 30-42.
Commerce argues that it: (1) properly construed subsections
(a)(4) and (c) of § 1675 as authorizing it to make a duty
absorption inquiry for antidumping duty orders that were issued
and published prior to January 1, 1995; and (2) devised and
applied a reasonable methodology for determining duty
absorption. See Def.’s Mem. in Opp’n to Pls.’ Mot. J. Agency R.
at 2, 5-28 (“Def’s Br.”). Also, Commerce asserts that no
statutory provision or legislative history specifically provides
that Commerce is “precluded” from conducting a duty absorption
inquiry with respect to merchandise covered by a transition
order. See id. at 2, 16.
The Torrington Company (“Torrington”) generally agrees with
Commerce’s contentions. See Torrington’s Resp. to Pls.’ Mot. J.
Agency R. at 2-4, 8-43 (“Torrington’s Resp.”). In addition,
Torrington asserts that Commerce has the “inherent” authority,
Court No. 99-08-00475 Page 8
aside from § 1675(a)(4), to conduct a duty absorption inquiry in
any administrative review. See id. at 3, 32-40.
C. Analysis
In SKF USA Inc. v. United States, 24 CIT __, 94 F. Supp. 2d
1351 (2000), this Court determined that Commerce lacked
statutory authority under § 1675(a)(4) to conduct a duty
absorption inquiry for antidumping duty orders issued prior to
the January 1, 1995 effective date of the URAA. See id. at __,
94 F. Supp. 2d at 1357-59. The Court noted that Congress
expressly prescribed in the URAA that § 1675(a)(4) “must be
applied prospectively on or after January 1, 1995 for 19 U.S.C.
§ 1675 reviews.” Id. at 1359 (citing URAA’s § 291).
Because Commerce’s duty absorption inquiry, its methodology
and the parties’ arguments at issue in this case are practically
identical to those presented in SKF USA, the Court adheres to
its reasoning in SKF USA. Moreover, contrary to Torrington’s
assertion, the Court finds that Commerce does not have the
“inherent” authority to conduct a duty absorption inquiry in any
administrative review. Rather, the statutory scheme, as noted,
clearly provides that the inquiry must occur in the second or
fourth administrative review after the publication of the
Court No. 99-08-00475 Page 9
antidumping duty order, not in any other review, and upon the
request of a domestic interested party. Accordingly, the Court
finds that Commerce did not have statutory or inherent authority
to undertake a duty absorption investigation for the outstanding
1989 antidumping duty orders in dispute here.
II. Profit Calculation for Constructed Value
A. Background
For this POR, Commerce used constructed value (“CV”) as the
basis for normal value (“NV”) “when there were no usable sales
of the foreign like product in the comparison market.”
Preliminary Results, 64 Fed. Reg. at 8795. Commerce calculated
the profit component of CV using the statutorily preferred
methodology of 19 U.S.C. § 1677b(e)(2)(A) (1994). See Final
Results, 64 Fed. Reg. at 35,611. Specifically, in calculating
CV, the statutorily preferred method is to calculate an amount
for profit based on “the actual amounts incurred and realized by
the specific exporter or producer being examined in the
investigation or review . . . in connection with the production
and sale of a foreign like product [made] in the ordinary course
of trade, for consumption in the foreign country.” 19 U.S.C. §
1677b(e)(2)(A).
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In applying the preferred methodology for calculating CV
profit, Commerce determined that “an aggregate calculation that
encompasses all foreign like products under consideration for
normal value represents a reasonable interpretation of [§
1677b(e)(2)(A)]” and “the use of [such] aggregate data results
in a reasonable and practical measure of profit that [Commerce]
can apply consistently where there are sales of the foreign like
product in the ordinary course of trade.” Id. Also, in
calculating CV profit under § 1677b(e)(2)(A), Commerce excluded
below-cost sales from the calculation which it disregarded in
the determination of NV pursuant to 19 U.S.C. § 1677b(b)(1)
(1994). See id. at 35,612.
B. Contentions of the Parties
SKF contends that Commerce’s use of aggregate data
encompassing all foreign like products under consideration for
NV in calculating CV profit is contrary to § 1677b(e)(2)(A).
See SKF’s Br. at 44-67. Instead, SKF claims that Commerce
should have relied on the alternative methodology of §
1677b(e)(2)(B)(i), which provides a CV profit calculation that
is similar to the one Commerce used, but does not limit the
calculation to sales made in the ordinary course of trade, that
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is, below-cost sales are not excluded from the calculation. See
id. at 3, 44-63. SKF also asserts that if Commerce’s exclusion
of below-cost sales from the numerator of the CV profit
calculation is lawful, Commerce should nonetheless include such
sales in the denominator of the calculation to temper bias which
is inherent in the agency’s dumping margin calculations. See
id. at 4, 63-67.
Commerce responds that it properly calculated CV profit
pursuant to § 1677b(e)(2)(A) based on aggregate profit data of
all foreign like products under consideration for NV. See
Def.’s Br. at 2-3, 28-51. Consequently, Commerce maintains that
since it properly calculated CV profit under subparagraph (A)
rather than (B) of § 1677b(e)(2), it correctly excluded below-
cost sales from the CV profit calculation. See id. Torrington
agrees with Commerce’s methodology for calculating CV profit.
See Torrington’s Resp. at 4-5, 44-50.
C. Analysis
In RHP Bearings Ltd. v. United States, 23 CIT __, 83 F.
Supp. 2d 1322 (1999), this Court upheld Commerce’s CV profit
methodology of using aggregate data of all foreign like products
under consideration for NV as being consistent with the
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antidumping statute. See id. at ___, 83 F. Supp. 2d at 1336.
Since Commerce’s CV profit methodology and SKF’s arguments at
issue in this case are practically identical to those presented
in RHP Bearings, the Court adheres to its reasoning in RHP
Bearings. The Court, therefore, finds that Commerce’s CV profit
methodology is in accordance with law.
Moreover, since (1) § 1677b(e)(2)(A) requires Commerce to
use the actual amount for profit in connection with the
production and sale of a foreign like product in the ordinary
course of trade, and (2) 19 U.S.C. § 1677(15) (1994) provides
that below-cost sales disregarded under § 1677b(b)(1) are
considered to be outside the ordinary course of trade, the Court
finds that Commerce properly excluded below-cost sales from the
CV profit calculation.
III. Valuation of Major Inputs from Affiliated Persons
A. Statutory Background
In general, the NV of the subject merchandise is, in
pertinent part, “the price at which the foreign like product is
first sold . . . for consumption in the exporting country.” 19
U.S.C. § 1677b(a)(1)(B)(i) (1994). However, whenever Commerce
has “reasonable grounds to believe or suspect” that sales of the
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foreign like product under consideration for the determination
of NV have been made at prices which represent less than the
cost of production (“COP”) of that product, Commerce shall
determine whether, in fact, such sales were made at less than
the COP. See § 1677b(b)(1). A “reasonable ground” exists if
Commerce disregarded below-cost sales of a particular exporter
or producer from the determination of NV in the most recently
completed administrative review. See § 1677b(b)(2)(A)(ii). If
Commerce determines that there are sales below the COP and
certain conditions are present under § 1677b(b)(1)(A)-(B), it
may disregard such below-cost sales in the determination of NV.
See id.
Additionally, the special rules for the calculation of COP
or CV contained in 19 U.S.C. § 1677b(f)(2)-(3) (1994), provide
that, in a transaction between affiliated persons as defined in
19 U.S.C. § 1677(33) (1994), Commerce may disregard either the
transaction or the value of a major input.
Section 1677b(f)(2) provides that Commerce may disregard an
affiliated-party transaction when “the amount representing [the
transaction or transfer price] does not fairly reflect the
amount usually reflected in sales of merchandise under
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consideration in the market under consideration [that is, an
arms-length or market price].” If such “a transaction is
disregarded . . . and no other transactions are available for
consideration,” Commerce shall value the cost of an affiliated-
party input “based on the information available as to what the
amount would have been if the transaction had occurred between
persons who are not affiliated [that is, based on an arms-length
or market value].” 19 U.S.C. § 1677b(f)(2) (“fair-value”
provision).
Section 1677b(f)(3)’s “major input rule” directs that if (1)
a transaction between affiliated companies involves the
production by one of such companies of a “major input” to the
merchandise produced by the other, and (2) Commerce has
“reasonable grounds to believe or suspect” that the amount
reported as the value of such input is below the COP, then
Commerce may calculate the value of the major input on the basis
of the data available regarding such COP, if such COP exceeds
the market value of the input, as determined under §
1677b(f)(2). For purposes of § 1677b(f)(3), regulation 19
C.F.R. § 351.407(b) (1998) provides that Commerce will value a
major input supplied by an affiliated party based on the highest
of (1) the actual transfer price for the input, (2) the market
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value of the input, or (3) the COP of the input.
B. Factual Background
Because Commerce disregarded sales that failed the below-
cost sales test pursuant to § 1677b(b)(1) in the prior review
with respect to SKF’s AFBs from France, Commerce determined
pursuant to § 1677b(b)(2)(A)(ii) that it had “reasonable grounds
to believe or suspect” that sales of SKF’s foreign like product
under consideration for the determination of NV in this ninth
review might have been made at prices below the COP. See
Preliminary Results, 64 Fed. Reg. at 8794. Consequently,
pursuant to § 1677b(b)(1), Commerce initiated COP investigations
of SKF’s sales in the home market and, thereby, requested
information relating to the COP and CV. See id.
In its questionnaire for this POR, Commerce requested, inter
alia, that SKF provide certain data regarding the valuation of
major inputs received from affiliated suppliers and used to
produce the merchandise under review during the cost calculation
period. See SKF’s Br. App., Ex. 6, Commerce’s Request for
Information at D-3 and D-4. In particular, Commerce instructed
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SKF as follows:
List the major inputs received from affiliated parties
and used to produce the merchandise under review
during the cost calculation period. . . . For each
major input identified, provide the following
information:
a. the total volume and value of the input purchased
from all sources by your company during the cost
calculation period, and the total volume and
value purchased from each affiliated party during
the same period;
b. the per-unit transfer price charged for the input
by the affiliated party (if the affiliated party
sells the identical input to other, unaffiliated
purchasers, provide documentation showing the
price paid for the input by the unaffiliated
purchaser; if your company purchases the
identical input from unaffiliated suppliers,
provide documentation showing the unaffiliated
party’s sales price for the input); and
c. If you are responding to this section of the
questionnaire in connection with an investigation
of sales below cost, provide the per-unit cost of
production incurred by the affiliated party in
producing the major input.
. . . .
With respect to I.D., when valuing the cost of major
inputs purchased from affiliates, use the highest
of[:] a) the transfer price from the affiliate[;] b)
the affiliate’s cost of production of the input; or c)
the market price of the input (the weighted-average
price other unaffiliated suppliers charged for the
identical input). . . . In addition, in order to
facilitate verification, please report, for each model
which includes affiliated-party inputs, the
affiliate’s cost of production, transfer price, and
market price of all affiliated-party inputs used in
the manufacture of the product on your computer tape.
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Id. at D-3, D-4, V-12.
In its response to Commerce’s questionnaire, SKF reported
that it valued major inputs purchased from affiliated suppliers
based on the higher of the actual component (that is, input)
costs or transfer prices, but it did not take into consideration
the market prices for some components which it purchased from
both affiliated and unaffiliated suppliers. See SKF’s Br. App.,
Ex. 7, SKF’s Sect. D Response to Commerce’s Questionnaire at D-
14 (Aug. 28, 1998) (noting that “SKF sources requirements from
unaffiliated suppliers for only a small group of components [and
that] SKF rarely buys the same components from both affiliated
and unaffiliated suppliers”). With respect to market prices,
SKF explained that “whether [components are] sourced from within
the [SKF] Group or from an unaffiliated supplier, all SKF
components are custom-made items, each conforming to SKF’s
proprietary designs and specifications in order to insure
compatibility in assembly and quality.” Id. As a consequence
of its unique product specifications, SKF stated that “referent
market prices” do not exist for components purchased by SKF from
its affiliated companies. SKF thereby used the higher of cost
or transfer price in computing COP and CV. See id. at D-17.
Court No. 99-08-00475 Page 18
Given that SKF stated in its response that it purchased
major inputs from its affiliated suppliers as well as in rare
cases from unaffiliated suppliers, Commerce issued a
supplemental questionnaire on October 26, 1998 requesting that
SKF provide further information to better evaluate the market
values of SKF’s major inputs. See SKF’s Br. App., Ex. 8,
Commerce’s Supplemental Questionnaire at 9. Specifically,
Commerce asked SKF the following:
At Appendix D-4, you provide ratios of cost to
transfer prices for major inputs purchased by SKF
France from affiliated parties. However, in your
supplemental response, we request that you provide a
chart listing, for each major input, the per-unit
transfer price charged by the affiliated party and the
per-unit cost of production incurred by the affiliated
party. Furthermore, on page D-16, you state that
there were rare cases in which SKF France purchased
identical or similar products from an unaffiliated
supplier. For these inputs, include in your chart the
unaffiliated party’s sales price and provide
documentation to support these prices.
Id.
On November 16, 1998, SKF responded by submitting: (1) two
charts listing the total cost, total sales and the transfer
price index (that is, the ratio of total cost divided by total
sales) for each type of major input, but without any model or
part designations; and (2) a chart showing the average unit
Court No. 99-08-00475 Page 19
price for major input purchased from unaffiliated suppliers and
identified by model number. See SKF’s Br. App., Ex. 9, SKF’s
Response to Commerce’s Supplemental Questionnaire at D-13 and D-
14. With respect to the unaffiliated-party chart, SKF only
provided documentation for one particular model input. See id.
at D-14. SKF explained that it included documentation for only
one input because “[d]ocumentation for each of the listed
designations would be voluminous and require significant
expenditure of resources just prior to verification. . . .
Should [Commerce] request similar documentation for additional
designations at verification, SKF would gather and provide the
relevant information at that time.” Id. at 51.
Subsequently, on February 16, 1999, Commerce verified SKF’s
COP and transfer price responses regarding the inputs, but did
not verify the market value of the materials. See SKF’s Br.
App., Ex. 10, Commerce’s Verification Report at 11. A week
later, Commerce issued the Preliminary Results and stated that
it would use “partial facts available” under 19 U.S.C. § 1677e
(1994) “in cases in which [it was] unable to use some portion of
a response in calculating the dumping margin,” but made no
specific reference to SKF’s partial response regarding the
market value of its major inputs. 64 Fed. Reg. at 8793 (Feb.
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23, 1999).
For the Final Results, Commerce found that the market-price
data SKF provided for components purchased from unaffiliated
parties was not in a comparable form in which it reported the
COP and transfer price data, “that is, the COP and transfer
price values were reported as ratios (which represented the
difference between COP and transfer price for each component)
and the market values were not.” SKF’s Br. App., Ex. 11,
Commerce’s Final Analysis Mem. at 2 (June 16, 1999); see Final
Results, 64 Fed. Reg. at 35,600 (July 1, 1999). Consequently,
Commerce noted that it could not determine whether the market
price was higher than the reported COP or transfer price for
each major input. See id. Commerce stated that since SKF
failed “to provide the requested information in the form and
manner requested,” it used partial facts available under §
1677e(a)(2)(B) to fill in the gaps and ensure that the market
prices were taken into consideration. Id. In particular,
Commerce applied partial facts available (that is, market price
information SKF provided in response to Commerce’s
questionnaires) to make an adjustment to: (1) SKF’s reported
total cost of manufacturing for each transaction in the COP and
CV databases; and (2) the variable cost of manufacturing in the
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home market and United States sales databases. See id.; SKF’s
Br. App., Ex. 11, Commerce’s Final Analysis Mem. at 2.
C. Contentions of the Parties
SKF contends that Commerce erred in concluding in the Final
Results it was “required” to use market prices for valuing
certain inputs the French SKF companies purchased from
affiliated parties. See SKF’s Br. at 69 (citing 64 Fed. Reg. at
35,599). Quoting AK Steel Corp. v. United States, 203 F.3d
1330, 1343 (Fed. Cir. 2000) (holding that “the plain language of
the statute . . . provides that Commerce ‘may’ determine the
values in a manner other than the use of the transfer price”)
and regulation 19 C.F.R. § 351.407(b) (stating that “the
Secretary normally will determine the value of a major input
purchased from an affiliated person based on the higher of
[transfer price, market price or COP]”), SKF notes that the
fair-value and major-input provisions (that is, 19 U.S.C. §
1677b(f)(2)-(3)) are “permissive” and, therefore, do not
“mandate” that Commerce use the highest of transfer price,
market price or COP in valuing SKF’s reported affiliated-party
inputs. See id. at 67-69.
SKF also asserts that Commerce’s “reliance on non-
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affiliated-party prices was contrary to substantial record
evidence.” Id. at 4. SKF notes that because the overlap
between identical inputs which were purchased from affiliated
and unaffiliated suppliers was minimal, and since all of SKF’s
components are custom-made and conform to its proprietary
designs and specifications, “there is no readily observable
market for the unique inputs by [SKF].” Id. at 72. SKF argues
that since there were no valid referent market prices for the
major inputs at issue, its valuation of these inputs based on
the higher of COP or transfer price was in accordance with §
1677b(f)(2)-(3). See id. at 67.
Additionally, SKF contends that Commerce’s rejection of
SKF’s reporting of the higher of COP or transfer price of inputs
purchased from affiliated and unaffiliated suppliers, in the
absence of readily observable market prices, was contrary to
Commerce’s practice in prior AFB reviews. See id. at 67, 85.
SKF maintains that since Commerce failed to provide “a reasoned
explanation for [its] departure from prior practice,” Commerce’s
resort to partial facts available was unwarranted. Id. at 88.
SKF further argues that Commerce unlawfully used partial
facts available in its cost calculations for the French SKF
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Group companies because the statutory criteria Commerce relied
on for such use were not present. See id. at 5, 67, 74. In
particular, SKF notes that Commerce resorted to partial facts
available because SKF failed to provide requested information in
the form and manner requested as required by § 1677e(a)(2)(B),
that is, Commerce asserted in its final analysis memorandum that
SKF did not provide “‘the market price data in the form which we
requested (on a chart and in a comparable form as its transfer
price and COP data).’” Id. at 74 (quoting SKF’s Br. App., Ex.
11, Commerce’s Final Analysis Mem. at 2). SKF argues that,
contrary to Commerce’s assertion in the final analysis
memorandum, nothing in the supplemental questionnaire
specifically instructed or “identified that the reporting of
unaffiliated-party purchases was to be provided in a manner to
permit Commerce to draw a comparison with affiliated-party
purchases.” SKF’s Reply Br. at 66. SKF notes that “[t]he sole
format specified in the response was that the [unaffiliated-
party sales price] data be in chart form” and, in fact, SKF did
“provide such ‘prices’ in chart form.” Id. at 65. With respect
to Commerce’s request for per-unit transfer price and COP data,
SKF notes that in its supplemental response it explained that it
does not use such per-unit data from affiliated parties; rather,
Court No. 99-08-00475 Page 24
it reported that it applies a transfer price index in its cost
calculations, to ensure that the higher of cost or transfer
price is reflected in its actual cost of manufacturing figures
reported to Commerce. See id.; SKF’s Br. at 82-83, Br. App.,
Ex. 9 at 49. Also, SKF notes this reporting methodology of
transfer price indices had been utilized by SKF and accepted
and/or verified by Commerce in prior reviews. See SKF’s Reply
Br. at 65 n.53. SKF, therefore, maintains that it fully and
reasonably answered Commerce’s questions as asked and Commerce
thus erred in resorting to partial facts available. See id. at
64-69.
Furthermore, SKF contends that, contrary to the requirements
of 19 U.S.C. § 1677m(d) (1994), Commerce did not provide notice
to SKF that its market price data had deficiencies and, “to the
extent practicable,” allow SKF to remedy such deficiencies. Id.
at 79 (quoting § 1677m(d)). Given the seventh month period
between (1) SKF’s responses to Commerce’s supplemental
questionnaire (that is, November 16, 1998) and (2) Commerce’s
adverse findings in the Final Results regarding SKF’s major
inputs (that is, July 1, 1999), SKF argues that there was ample
time for Commerce to issue a second supplemental questionnaire,
inform SKF of its alleged deficiencies and give it an
Court No. 99-08-00475 Page 25
opportunity to remedy them. See id. at 79. SKF asserts that
since Commerce failed to direct another request for information,
the agency improperly resorted to facts otherwise available
under § 1677m(d). See id. Alternatively, SKF argues that even
if Commerce’s use of partial facts available was justified, it
erred in its methodology for determining market prices for
affiliated-party inputs. See SKF’s Br. at 88-89.
SKF, therefore, requests that the Court remand the matter
and instruct Commerce to recalculate costs for SKF based on data
submitted by SKF and without resort to partial facts available
or, alternatively, if Commerce’s use of partial facts available
is warranted, to correct the methodology it used for calculating
market prices for affiliated party-inputs. See id. at 94-95;
SKF’s Reply Br. at 82-83.
Commerce argues, inter alia, that it reasonably interpreted
§ 1677b(f)(2) and (f)(3) as requiring it to value a major input
purchased from an affiliated person at the highest of the COP,
transfer price or market price. See Def.’s Br. at 3, 51-61.
Consequently, Commerce asserts that it “properly requested SKF
to submit such information for its major inputs.” Id. at 62.
Commerce also maintains that even if the fair-value and
Court No. 99-08-00475 Page 26
major input provisions are permissive, it is within its
discretion to apply the provisions. See id. at 62. Commerce
contends “that since, by SKF’s own admission, some inputs were
manufactured by affiliated and unaffiliated suppliers, Commerce
properly exercised its discretion in applying the statutory
provisions in question.” Id. at 63. Commerce also notes that
the fact it may not have applied the provisions in prior AFB
reviews, does not make Commerce’s decision to apply them in this
review unreasonable. See id. at 62. Moreover, Commerce notes
that no change of practice from its prior reviews occurred
during this review because Commerce simply followed its
regulations. See id.
Commerce also argues that irrespective of SKF’s assertion
that there was no readily observable market for the unique
inputs purchased by SKF, § 1677b(f)(2) authorizes Commerce to
value a transaction between affiliated persons based on the
amount that unaffiliated persons charged. See id. at 63.
Commerce thereby maintains that “[t]he application of the
statute does not depend upon the existence of any ‘readily
observable market.’” Id.
Commerce further notes that, contrary to SKF’s assertion,
Court No. 99-08-00475 Page 27
its request for information in the supplemental questionnaire
contemplated that SKF would provide the market-price data
relating to major inputs it purchased from unaffiliated
suppliers on a chart and in a form readily comparable to SKF’s
COP and transfer price data. See id. at 64-66. Commerce,
therefore, argues that since SKF failed to submit such
information in the form requested in the supplemental
questionnaire, Commerce properly resorted to facts otherwise
available under §§ 1677e(a) and 1677m(d) in valuing SKF’s major
inputs. See id. at 65-67. Moreover, Commerce maintains that
its methodology for calculating the value of these inputs was
reasonable. See id. at 67-69.
Torrington agrees with Commerce, noting that Commerce’s
instructions set forth in the supplemental questionnaire are
entirely consistent with its finding in the Final Results that
SKF did not provide the market-price data of the major inputs in
the form in which Commerce requested. See Torrington’s Resp. at
58. Torrington also notes that the questionnaire did not
instruct or allow SKF to provide comparison data as a percentage
ratio of COP only and, thus, there is no merit to SKF’s
contention that Commerce’s questionnaire did not request SKF’s
cost data in the form in which Commerce now claims it was
Court No. 99-08-00475 Page 28
requested. See id. at 57-58. Moreover, contrary to SKF’s
assertion that the market-price data provided was in a usable
form, Torrington asserts the data clearly did not permit
Commerce to make an appropriate comparison to the relevant COP
and transfer price of each major input. See id.
Torrington also asserts that Commerce’s use of facts
available was not inconsistent with § 1677m(d) because Commerce
provided notice to SKF in the supplemental questionnaire that
its initial response to Commerce’s questionnaire was deficient
and requested specific additional information. See id. at 59.
Torrington asserts that § 1677m(d) “does not impose on Commerce
a further requirement to provide additional notice, i.e., a
second supplemental questionnaire, as SKF contends.” Id.
Moreover, Torrington argues that SKF’s reliance on
Commerce’s acceptance of SKF’s reporting methodology for major
inputs in prior reviews is misplaced because “each . . .
administrative review is an independent and distinct
proceeding.” Id. Torrington maintains that the fact that the
same aspects of SKF’s reporting methodology of major inputs were
not pursued in other AFB reviews cannot excuse SKF from
responding to Commerce’s inquiries in this review. See id. at
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60. Similarly, Torrington contends that Commerce’s methodology
for valuing the major inputs “was reasonable in light of SKF’s
extensive reporting failures.” Id.
D. Analysis
The Court disagrees with SKF that Commerce erred in valuing
each major input based on the highest of the input’s transfer
price, market price or COP. In Mannesmannrohren-Werke AG v.
United States, 23 CIT __, __, 77 F. Supp. 2d 1302, 1310-12
(1999), the Court clearly articulated that the plain language of
§ 1677b(f)(2) and (f)(3), as well as the legislative history of
§ 1677b(f)(3), supports Commerce’s use of the highest of
transfer price, market price or COP in valuing a major input
supplied by an affiliated party.
Further, although the Court agrees with SKF that use of the
word “may” in the fair-value and major-input provisions
indicates that the provisions and regulation 19 C.F.R. §
351.407(b) are “permissive” and, thus, do not mandate the use of
highest of transfer price, market price or COP in valuing
affiliated-party inputs, see § 1677b(f)(2)-(3) (both provisions
using word “may” instead of “shall”), the Court notes that
“[t]he word ‘may,’ when used in a statute, usually implies some
Court No. 99-08-00475 Page 30
degree of discretion.” United States v. Rodgers, 461 U.S. 677,
706 (1983) (footnote omitted). Certainly, “[t]his common-sense
principle of statutory construction . . . can be defeated by
indications of legislative intent to the contrary or by obvious
inferences from the structure and purpose of the statute.” Id.(citations omitted). Here, the Court finds no such contrary
indications or inferences with respect to § 1677b(f)(2)-(3) and,
therefore, concludes that Commerce properly determined that it
had discretionary authority to use the highest of transfer
price, market price or COP in valuing SKF’s reported major
inputs. Indeed, in AK Steel, the appellate court opined that
the antidumping “statute leaves possible application of the
fair-value and major-input provisions to the discretion [of] the
agency.” Moreover, the fact that Commerce may not have applied
the provisions in prior AFB reviews, does not make Commerce’s
exercise of discretion to apply them in this review
unreasonable. 203 F.3d at 1343.
Also, the Court finds that Commerce properly resorted to
“facts otherwise available” in valuing SKF’s major inputs. The
antidumping statute mandates, inter alia, that Commerce use
“facts otherwise available” if an interested party fails to
provide the requested information in the form and manner
Court No. 99-08-00475 Page 31
requested, subject to 19 U.S.C. § 1677m(c)(1), (d), (e). See 19
U.S.C. § 1677e(a)(2). Here, upon review of the record, the
Court finds that Commerce did in fact request that SKF provide
market price information on major inputs it purchased from
unaffiliated suppliers on a chart and in a form comparable to
its COP and transfer price data. As noted earlier, Commerce’s
initial questionnaire specifically requested that SKF provide
(1) the per-unit transfer price, market price and COP data for
each major input identified and (2) the use of the highest of
the transfer price, COP or market price when valuing the cost of
major inputs purchased from affiliates. See SKF’s Br. App., Ex.
6, Commerce’s Request for Information at D-3, D-4, V-12.
Commerce’s supplemental questionnaire also requested, as noted
earlier, that SKF provide a chart listing, for each major input,
(1) the per-unit COP incurred by the affiliated party, (2) the
per-unit transfer price charged by the affiliated party, and (3)
for rare cases in which SKF purchase identical or similar
products form an unaffiliated supplier, the unaffiliated
party’s sales price. See SKF’s Br. App., Ex. 8, Commerce’s
Supplemental Questionnaire at 9. Although Commerce’s framing of
its questions regarding major inputs in the supplemental
questionnaire are less than a model of clarity, Commerce’s
Court No. 99-08-00475 Page 32
questions in both questionnaires when read together indicate
that Commerce was asking SKF to provide market-price information
for major inputs purchased from its unaffiliated suppliers on a
chart in a comparable form in which it reported the COP and
transfer price information. The Court, therefore, finds that
Commerce correctly determined under § 1677e(a)(2)(B) that SKF
failed to provide the requested information in the form and
manner requested.
To the extent that SKF argues that Commerce had an
obligation under § 1677m(d) to provide a second supplemental
questionnaire to inform SKF of its deficient response and give
it an opportunity to remedy it, SKF’s argument must also fail.
Section 1677m(d) provides that if Commerce finds that a response
to a request for information does not comply with the request,
Commerce shall promptly inform the person submitting the
response of the deficiency and permit that person an opportunity
to remedy or explain the deficiency. If the remedial response
or explanation provided by the party is found to be
unsatisfactory or untimely, Commerce may, subject to § 1677m(e),
disregard “all or part of the original and subsequent responses”
in favor of facts otherwise available. Id. § 1677m(d). In this
case, Commerce provided SKF with notice and an opportunity in
Court No. 99-08-00475 Page 33
the supplemental questionnaire to clarify its market-price
information relating to its major inputs purchased from its
unaffiliated suppliers. Thus, to the extent that Commerce was
statutorily obligated to provide SKF an opportunity to remedy or
explain the alleged deficiencies, the Court finds that Commerce
fulfilled its obligation under § 1677m(d) as well as § 1677m(e).
In other words, as Torrington correctly asserts, § 1677m(d) does
not impose on Commerce a requirement that it must provide an
additional notice and opportunity to remedy a deficiency, that
is, issue a second supplemental questionnaire.
The Court has considered SKF’s other contentions and finds
them to be entirely without merit. Also, the Court finds that
Commerce’s methodology for valuing the major inputs was
reasonable in light of SKF’s shortcomings in its responses to
Commerce’s requests for information. Accordingly, the Court
finds that Commerce properly resorted to partial facts available
in calculating the value of SKF’s major inputs.
Court No. 99-08-00475 Page 34
CONCLUSION
For the foregoing reasons, the case is remanded to Commerce
to annul all findings and conclusions made pursuant to the duty
absorption inquiries conducted for the subject reviews.
Commerce’s final determination is affirmed in all other
respects.
____________________________
NICHOLAS TSOUCALAS
SENIOR JUDGE
Dated: August 23, 2000
New York, New York