The Torrington Company v. United States, and Nmb Thai Ltd., Pelmec Thai Ltd., Nmb Hi-Tech Bearings Ltd., and Nmb Corporation , 156 F.3d 1361 ( 1998 )

Opinion for the court filed by Circuit Judge MICHEL. Dissenting opinion filed by Senior Circuit Judge ARCHER.

MICHEL, Circuit Judge.

This appeal continues the enduring saga of the efforts of this American ball bearing manufacturer to obtain relief from certain foreign competitors under the trade laws. Here, The Torrington Company (“Torring-ton”) appeals the judgment of the United States Court of International Trade upholding the final determination of the United States Department of Commerce (“Commerce”) in its fourth administrative review of the importation of antifriction bearings from various countries. See Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, et al.; Final Results of Antidumping Duty Administrative Reviews, and Revocation in Part of Anti-dumping Duty Orders, 60 Fed.Reg. 10,900 (1995) (the “antidumping review”), aff'd in part and remanded-in-patt, Torrington Co. v. United States, 969 F.Supp. 1332 (CIT 1997); see also Torrington Co. v. United States, No. 95-03-00353, slip op. 97-140 (Ct. Int’l Trade Sept. 26, 1997) (dismissing the lawsuit after holding that Commerce had complied with the remand order by performing the necessary recomputations of value and the correction of a clerical error). Defendants-Appellees NMB Thai Ltd., Pelmec Thai Ltd., NMB Hi-Tech Bearings Ltd., and NMB Corp. (collectively, “NMB Thai”) were interested party-respondents in the underlying antidumping administrative review and were defendants-intervenors at the Court of International Trade. In this appeal, Tor-rington contends only that the Court of International Trade erred by upholding the determination of Commerce to adjust the foreign (home) market value of the subject antifriction bearings to take account of certain international freight expenses. Because Commerce’s decision to allow an adjustment for such freight expenses was based upon a reasonable interpretation of its own regulations and thus was entitled to deference, we affirm.

BACKGROUND

NMB Thai is a producer of antifriction ball bearings in Thailand. These bearings are both sold in Thailand and exported to the United States. The antidumping review encompassed importations of such bearings entered between May 1, 1992, and April 30, 1993. During this period, NMB Thai sold its ball bearings in the Thai market through two distinct channels. “Route A” sales were shipped directly to the customer in Thailand via a domestic route. “Route B” sales, however, were first shipped abroad to a warehouse operated by a related company in Singapore and then back to Thailand. The purpose of this circuitous Route B was to obtain certain favorable tax and duty treatment from the Thai government and, in particular, to avoid government restrictions on sales to Thai customers who were certified by the Thailand Board of Investment but did not have a bonded warehouse.

On May 15, 1989, Commerce published antidumping duty orders on antifriction bearings from Thailand. See Antidumping Duty Order and Amendment to the Final Determination of Sales at Less Than Fair Value: Ball Bearings and Parts Thereof From Thailand, 54 Fed.Reg. 20,909 (1989) (the “anti-dumping duty order”). The Commerce decision at issue in the Court of International Trade was rendered in the fourth administrative review of the antidumping duty order.

In the antidumping review, Commerce determined the “United States price” and the “foreign market value” (“FMV”) of the subject merchandise and used this data to calculate antidumping margins in accordance with 19 U.S.C. § 1675. These margins were then used by Commerce to assess antidumping duties on the entries of merchandise covex-ed by the review as well as to calculate estimates of antidumping duties for future entries. See id.

In determining FMV, Commerce is permitted to make adjustments for certain “circumstances of sale” (“COS”) in accordance with 19 C.F.R. § 353.56.¹ Such COS adjust-merits are made when the seller incurs certain costs in its home market sales that it does not incur when selling to the United States market. Such adjustments may be made if “the amount of any price differential is wholly or partly due to such difference [in circumstances of sale]” and “those circumstances ... bear a direct relationship to the sales compared.” 19 C.F.R. § 353.56(a)(1). In addition, adjustments to FMV may also be made for indirect selling expenses “incurred in selling such or similar merchandise up to the amount of expenses ... incurred in selling the merchapdise.” 19 C.F.R. § 353.56(b)(2). In the antidumping review, Commerce deducted from FMV the pre-sale freight costs for shipping merchandise from Thailand to Singapore as indirect selling expenses pursuant to 19 C.F.R. § 353.56(b)(2). Commerce also deducted from FMV the post-sale freight expenses of shipping the merchandise from Singapore back to Thailand as direct selling costs pursuant to 19 C.F.R.'§ 353.56(a)(1).

Before the Court of International Trade, Torrington argued, inter alia, that NMB Thai’s Route B freight expenses were not “selling expenses” for purposes of 19 C.F.R. § 353.56, but rather were general costs incurred for the purpose of receiving government benefits. The Court of International Trade, however, rejected this contention, explaining that this court had previously held both that the “Route B sales were properly classified as home market sales” and that “Commerce may deduct indirect home market transportation expenses from FMV [subject] to the exporter’s sales price ... offset cap.” Torrington, 969 F.Supp. at 1336 (citing Torrington Co. v. United States, 82 F.3d 1039, 1047 (Fed.Cir.1996) and Torrington Co. v. United States, 68 F.3d 1347, 1356 (Fed.Cir.1995)).

On appeal to this court, Torrington argues that the plain meaning of the governing statute and regulation both indicate that the Route B freight expenses are not selling costs that may be accepted as downward COS adjustments to FMV and, moreover, that permitting such adjustments would defeat the purpose of the COS provisions because the freight costs were offset by savings in NMB Thai’s taxes and duties.

DISCUSSION

Our analysis must begin with the controlling statutory language. Under 19 U.S.C. § 1677b(a)(4), “due allowance shall be made” for “the amount of any difference between the United States price and the foreign market value ... wholly or partly due to ... other differences in circumstances of sale.” This court has previously explained that “the statute does not define the term ‘circumstances of sale’ nor does it prescribe any method for determining allowances. Congress has deferred to the Secretary’s expertise in this matter.” Smith-Corona Group v. United States, 713 F.2d 1568, 1575, 1 Fed. Cir. (T) 130, 137 (Fed.Cir.1983). Accordingly, under the authority of this statute, Commerce promulgated 19 C.F.R. § 353.56, which sets forth the criteria required for the allowance of COS adjustments to FMV. As described above, such adjustments are permitted to take account both of circumstances bearing “a direct relationship to the sales compared,” 19 C.F.R. § 353.56(a)(1), and indirect expenses “incurred in selling such or similar merchandise” (“selling expenses”), 19 C.F.R. § 353.56(b)(2).

In light of the substantial deference accorded to Commerce when interpreting and applying its own regulations, we find no error in the Court of International Trade upholding Commerce’s decision to make a COS adjustment to FMV to take account of NMB Thai’s Route B freight costs. The parties do not dispute that Commerce’s regulation, which permits adjustments for, inter alia, “selling expenses,” is an authorized and reasonable administrative interpretation of the governing statute. Moreover, there is no dispute that such selling expenses may properly include freight costs. See, e.g., Torring-ton Co. v. United States, 68 F.3d 1347, 1356 (Fed.Cir.1995); Sharp Corp. v. United States, 63 F.3d 1092, 1097 (Fed.Cir.1995). In determining that the two Route B freight costs at issue in this case were selling expenses properly the subject of a COS adjustment, Commerce was simply interpreting its own regulations. We give substantial deference to that interpretation. See Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994) (“We must give substantial deference to an agency’s interpretations of its own regulations .... [T]he agency’s interpretation must be given controlling weight unless it is plainly erroneous or inconsistent with the regulation.... This broad deference is all the more warranted when, as here, the regulation concerns a complex and highly technical regulatory program, in which the identification and classification of relevant criteria necessarily require significant expertise and entail the exercise of judgment grounded in policy concerns.” (citations and internal quotation marks omitted)); Oy v. United States, 61 F.3d 866, 873-75 (Fed.Cir.1995) (applying deference to Commerce’s reasonable interpretation of its antidumping investigation “sunset” regulation); Asociación Colombiana de Exportadores de Flores v. United States, 903 F.2d 1555, 1559, 8 Fed. Cir. (T) 126, 131 (Fed.Cir.1990) (attaching “substantial weight” to the Commerce Department, International Trade Administration’s interpretation of its own regulation and explaining that “[w]hen the construction of an administrative regulation rather than a statute is in issue, deference is even more clearly in order” (citations and internal quotation marks omitted)); Smith-Corona, 713 F.2d at 1571, 1 Fed. Cir. (T) at 131-32 (“The Secretary of Commerce ... has been entrusted with responsibility for implementing the antidump-ing law. The Secretary has broad discretion in executing the law.”).

Commerce’s interpretation of its regulation is not “plainly erroneous or inconsistent with the regulation.” Thomas Jefferson Univ., 512 U.S. at 512, 114 S.Ct. 2381. Rather, its interpretation is a reasonable one in a complex field in which it has special and unique expertise. To interpret the regulation, as Torrington apparently suggests, to require Commerce to parse all freight costs to determine the intent behind such costs would, moreover,-be administratively impracticable. Indeed, it is difficult to comprehend the method by which Commerce-could be expected to-divine the subjective intent behind the decision to transport merchandise by a particular method or along, a particular route. For example, a decision to transport certain goods within the country of manufacture by rail rather than road might be due to government rail subsidies, high gasoline taxes, delivery timing requirements, or a combination, of such factors. To expect Commerce to determine the specific business strategy be-, hind the decision to use rail transport under such a scenario would be to expect the unattainable. Thus, under circumstances akin to the instant case, where the freight expenses are found directly or indirectly to support the relevant sales,. it is appropriate for Commerce to avoid inquiring into the subjective intent behind the incurring of those expenses. Accordingly, we do not regard Commerce’s interpretation of its regulation to be unreasonable when the alternative interpretation proffered by Torrington is utterly unworkable.

We also do not agree with Tomngton’s assertion that allowing NMB Thai a COS adjustment from FMV for the Route B freight expenses somehow vitiates the statutory and regulatory scheme or, its policy goals. In support of this proposition, Tor-rington contends that by permitting NMB Thai this adjustment, Commerce is permitting an adjustment for an expenditure that does not affect price. However, Torrington does not point to any finding in.the record substantiating its factual claim that these Route B freight expenses do not affect price. Indeed, notwithstanding any tax, customs, or bonding benefits, Torrington has not brought forward any evidence suggesting that the Thai customers of NMB Thai do not ultimately pay for the circuitous Route B freight costs. Or, to put it differently, Torrington has not produced any evidence that the Route B shipping route provides a net cost saving to Thai customers, only that the Route B costs are incurred to avoid expending the presumably greater costs associated with the Thai tax penalty, customs, and bonding requirements. Accordingly, it is far from apparent that NMB Thai’s customers in Thailand do not bear the expense of the roundabout Route B shipping arrangement and we, therefore, do not regard allowing this adjustment to be inconsistent with the overall statutory and regulatory scheme or its policy goals.

Finally, we are not persuaded that the regulation as interpreted by Commerce was applied unreasonably to the facts here.

CONCLUSION

The decision of Commerce to permit NMB Thai a COS adjustment to FMV for its Route B freight expenses was based upon a reasonable interpretation and application of its own regulations. The judgment of the Court of International Trade upholding Commerce’s decision is therefore

AFFIRMED.

1 . The statutory authority for this regulation comes from 19 U.S.C. § 1677b(a)(4) which provides, in relevant part:

In determining foreign market value, if it is established to the satisfaction of the administering authority that the amount of any difference between the United States price and the foreign market value (or that the United States price is the same as the foreign market value) is wholly or pajlly due to:

(B) other differences in circumstances of sale; then due allowance shall be made therefor.

The statute was subsequently amended in 1994 by Pub.L. 103-465 1 224.