Timken U.S. Corp. v. United States

United States Court of Appeals for the Federal Circuit
05-1158
TIMKEN U.S. CORPORATION
and TIMKEN NADELLAGER, GMBH,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee.
Geert De Prest, Stewart and Stewart, of Washington, DC, argued for plaintiffs-
appellants. With him on the brief were Terence P. Stewart and Jordan Taylor. Of
counsel were Lane S. Hurewitz, William A. Fennell, and Wesley K. Caine.
Claudia Burke, Attorney, Commercial Litigation Branch, Civil Division, United
States Department of Justice, of Washington, DC, argued for defendant-appellee. With
her on the brief were Peter D. Keisler, Assistant Attorney General, David M. Cohen,
Director, and Patricia M. McCarthy, Assistant Director. Of counsel was Ada E. Bosque,
Attorney, Office of Chief Counsel for Import Administration, United States Department of
Commerce, of Washington, DC.
Appealed from: United States Court of International Trade
Senior Judge Nicholas Tsoucalas
United States Court of Appeals for the Federal Circuit
05-1158
TIMKEN U.S. CORPORATION
and TIMKEN NADELLAGER, GMBH,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee.
__________________________
DECIDED: January 10, 2006
__________________________
Before MICHEL, Chief Judge, CLEVENGER and SCHALL, Circuit Judges.
MICHEL, Chief Judge.
Timken U.S. Corporation and Timken Nadellager, GmbH (collectively “Timken”)
appeal the United States Court of International Trade’s decision upholding the United
States Department of Commerce’s antidumping duty determination and Commerce’s
refusal to correct certain alleged errors associated with Timken’s home market sales
that were relied upon by Commerce in computing the dumping margin for Timken’s
cylindrical roller bearings exported from Germany to the United States from May 1, 1998
to April 30, 1999. Timken v. United States, No. 00-09-00454 (Ct. Int’l Trade Oct. 29,
2004). Because the Court of International Trade did not err in remanding the case to
Commerce for investigation of Timken’s evidence supporting correction and because
Commerce’s antidumping duty determination and its refusal to correct the alleged errors
on remand were supported by substantial evidence and were in accordance with law,
we affirm.
I. BACKGROUND
Like many appeals from the Court of International Trade, this appeal has a
somewhat complex history. In 1999, pursuant to Section 751 of the Tariff Act of 1930,
Commerce conducted its tenth administrative review of the Antidumping Duty Orders on
cylindrical roller bearings (“bearings”) from, inter alia, Germany for the period of May 1,
1998 to April 30, 1999. Timken imported bearings made in Germany into the United
States during that period of time and thus its importations were subject to Commerce’s
review.
Commerce provided Timken with a questionnaire and requested Timken to
identify the channels of distribution for its home market sales. Timken identified five
channels: (1) sales of bearings produced by Timken and sold by Timken from its
factory to large original equipment manufacturers (“OEMs”); (2) sales of bearings
produced by Timken and sold by Timken from its factory to small OEMs;
(3) sales of bearings produced by Timken and sold by Timken from its factory to
distributors; (4) resales of bearings made by Timken’s affiliated marketing entity to
OEMs; and (5) resales of bearings made by Timken’s affiliated marketing entity to
distributors.1 Timken also described the selling and marketing processes for each of
1
Commerce and Timken interpret the definition of “large OEMs” under
channel 1 and “small OEMs” under channel 2 differently based upon whether the words
“large” and “small” refer to the size of the OEM or the size of the product produced by
the OEM. Commerce takes the former position, while Timken takes the latter. Indeed,
in Commerce’s own words:
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the five channels of distribution. After receiving Timken’s response, Commerce verified
Timken’s categorization of its sales.
Based upon the verification information, Commerce examined Timken’s selling
activities, the point in the channel of distribution at which the selling activities occurred,
and the types of customers that purchased the subject bearings and eventually
determined that three of the channels of distribution identified by Timken were for home
market sales by Timken itself and the remaining two were for “resales” by Timken’s
affiliated marketing entity. As a result, Commerce re-designated channel 1 as home
market 1 (“HM1”), grouped channels 4 and 5 together and re-designated them as home
market 2 (“HM2”), and grouped channels 2 and 3 and re-designated them as home
market 3 (“HM3”). In grouping channel 2 with 3 and channel 4 with 5, Commerce
essentially determined that the points in which selling activities occurred in these
channels were indistinguishable. Commerce then computed a dumping margin of 61.60
percent and published its preliminary results. See Preliminary Results of Administrative
Review, Antifriction Bearings (Other than Tapered Roller Bearings) and Parts Thereof
It is important to recognize that the term “large original equipment
manufacturer,” which connotes the level of trade in which such sales were
grouped in the final results of review, does not refer to producers of “large
original equipment.” Rather it refers to large producers of original
equipment. That is, the term “large” modifies the type of manufacturer, not
the type of product.
Final Results of Redetermination Pursuant to Court Remand, Timken U.S. Corporation
and Timken Nadellager, GmbH v. United States, No. 00-09-00454, slip op. at 7 (June 7,
2004) (“Remand Determination”). Timken does not so clearly explain its view.
However, we are able to infer its position based upon the arguments it made before
Commerce, the Court of International Trade, and this court on appeal.
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from France, Germany, Italy, Japan, Romania, Singapore, Sweden and the United
Kingdom, 65 Fed. Reg. 18033 (Apr. 6, 2000).
After reviewing Commerce’s results, Timken alleged that it had made certain
errors, which it characterized as “clerical,” in reporting its sales. Specifically, Timken
claimed that it “inadvertently and inaccurately” reported seventeen transactions in
channel 1 instead of channel 2 or 3. This mistake, Timken claimed, caused those
transactions to be categorized into HM1 instead of HM3, which in turn resulted in an
inaccurate dumping margin. Timken contends that the errors occurred because it relied
on the customer’s name alone in categorizing the sales, rather than on whether the
customer used the bearings in large-sized products or small-sized products. Timken
divided these errors into three groups: (1) sales of bearings shipped to several large
OEMs for use as replacement parts (“Replacement Parts Sales”); (2) sales of bearings
shipped to a division of a large OEM for use in small electric tools (“Small Electric Tools
Sales”); and (3) sales of bearings shipped to a prototype center of a large OEM for use
in prototypes (“Prototype Sales”).
Timken requested Commerce to correct these errors before issuing the final
results. In support of its request, Timken submitted a “case brief,” which included
exhibits consisting of invoices and corresponding purchaser orders for the seventeen
allegedly miscategorized sales. Commerce applied the test highlighted in Certain Fresh
Cut Flowers from Colombia; Final Results of Antidumping Duty Administrative Review,
61 Fed. Reg. 42833 (Aug. 19, 1996), in deciding whether to substitute Timken’s new
information and recalculate the applicable dumping margin. The first requirement of the
so-called “Colombian Flowers Test” is that the error be of a “clerical” nature, not a
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“methodological error, a substantive error, or an error in judgment.” Commerce found
that Timken’s errors were not “clerical” but instead were due to “error[s] in judgment.”
The second requirement of the “Colombia Flowers Test” is that Commerce must be
satisfied that the new evidence provided in support of the “clerical” error is reliable.
Commerce found that the new information that Timken submitted in its case brief
conflicted with information already of record and that the corrections were not offered at
the earliest opportunity, thus allegedly preventing Commerce from ascertaining their
reliability through the verification process. For these reasons, Commerce declined to
correct the asserted errors and issued its final results without any changes. See Final
Results of Administrative Review, Antifriction Bearings (Other than Tapered Roller
Bearings) and Parts Thereof from France, German, Italy, Japan, Romania, Singapore,
Sweden and the United Kingdom, 65 Fed. Reg. 49,219 (Aug. 11, 2000).
Timken appealed to the Court of International Trade. See Timken U.S. Corp. v.
United States, 318 F. Supp. 2d 1271 (Ct. Int’l Trade 2004) (“Timken I”). The Court of
International Trade rejected Commerce’s rigid application of the “Colombia Flowers
Test,” even though it agreed with Commerce that Timken’s error was not “clerical,”
because the Court of International Trade was concerned that Commerce’s application of
the test would render a grossly erroneous dumping margin in this case. Id. at 1277.
The Court of International Trade also noted that it was unclear what evidence of record
Commerce thought contradicted Timken’s new evidence and that any corrective
information would necessarily be in conflict with information originally submitted to
Commerce. Id. at 1279. Accordingly, the Court of International Trade remanded the
case to Commerce for further investigation.
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On remand, Commerce noted its disagreement with the Court of International
Trade’s order at the outset. Remand Determination, slip op. at 4. Because Commerce
posited that the errors in dispute were not “clerical,” as determined by the Court of
International Trade, these errors did not require correction and there was no need for
any further investigation. Despite this position, Commerce of course followed the Court
of International Trade’s order and reviewed Timken’s new evidence, ultimately
determining that corrections were not warranted because “the information [Timken]
submitted does not substantiate the existence of the alleged error, and, thus,
reclassifying [Timken’s] sales in a different level of trade would not result in a more
accurate dumping margin.” Id., slip op. at 8. In reaching that conclusion, Commerce
specifically evaluated the new information that Timken submitted for the three groups of
allegedly miscategorized sales.
Starting with the first group, Commerce found that Timken’s argument that the
Replacement Part Sales should have been categorized under channel 3 conflicted with
the information of record. Commerce noted that Timken described the bearings it sold
under channel 3 in its verified questionnaire as those listed in its “standard catalog,” not
replacement parts. Id., slip op. at 16. It consequently found that Timken failed to
provide a sufficient explanation of why replacement parts should be classified under
channel 3. Commerce also observed that the customers of the Replacement Part Sales
were large OEMs, not distributors—the customers Timken originally identified for
channel 3 sales. Id., slip op. at 16-17. Lastly, Commerce noted that Timken did not
provide evidence showing the bearings were, in fact, used as replacement parts. “The
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merchandise,” Commerce reasoned, “very well may have been used for the normal
production activities of the large OEMs.” Id., slip op. at 17.
Turning to the second group, Commerce found Timken did not provide factual
information to substantiate the claim that the customer of the Small Electric Tools Sales,
a division of a large OEM, should independently be considered a small OEM under
channel 2 instead of a large OEM under channel 1. Id., slip op. at 14-15.
As to the third group, Commerce found that Timken’s argument that the
Prototype Sales should have been categorized under either channel 2 or 3 conflicted
with the information of record. Significantly, it noted that when Timken described the
selling function of channel 1 in its verified questionnaire, it specifically mentioned
prototype sales, but did not do so for either channel 2 or 3. Id., slip op. at 12-13. Next,
Commerce noted that the customer of the Prototype Sales was a large OEM. “That fact
alone,” Commerce reasoned, “supports the original channel 1 classification.” Id., slip
op. at 13. It further noted that only two of the invoices submitted by Timken for the
Prototype Sales contained the word “Muster,” the German equivalent of “sample,” thus
suggesting that the remaining Prototype Sales did not actually involve prototypes and
were instead regular sales to a large OEM. Id. Finally, Commerce noted that Timken
did not provide any evidence showing that the alleged prototypes were not used in
producing original equipment. Id., slip op. at 14.
Timken again appealed to the Court of International Trade, which upheld
Commerce’s remand determination not to make the requested corrections on the
grounds that Timken’s corrective information was not sufficiently supported whereas
Commerce had verified Timken’s original information. Timken U.S. Corp. v. United
05-1158 7
States, No. 00-09-00454 (Ct. Int’l Trade Oct. 29, 2004) (“Timken II”). The Court of
International Trade observed that Commerce met its burden of reviewing the disputed
classifications and the corrective information submitted by Timken. It thus concluded
that Commerce provided a reasonable explanation for its determination that the
dumping margin applicable to Timken’s bearing imports was as accurate as possible
and that there was no need to make any corrections. Id., slip op. at 24.
Timken timely appeals the Court of International Trade’s decision upholding
Commerce’s remand determination. We have jurisdiction over this appeal pursuant to
28 U.S.C. § 1295(a)(5).
II. DISCUSSION
We review a decision of the Court of International Trade in an antidumping duty
case de novo, applying the same standard of review to Commerce’s determination as
the Court of International Trade applies. See Co-Steel Raritan, Inc. v. Int’l Trade
Comm’n, 357 F.3d 1294, 1309 (Fed. Cir. 2004). Under that standard, we are obligated
to affirm the Court of International Trade’s decision unless Commerce’s determination is
“unsupported by substantial evidence on the record, or otherwise not in accordance with
law.” 19 U.S.C. § 1516a(b)(1)(B)(i) (2000). “Substantial evidence” means “such
relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.” Consol. Edison v. Nat’l Labor Relations Bd., 305 U.S. 197, 229 (1938).
Notably, “the possibility of drawing two inconsistent conclusions from the evidence does
not prevent an administrative agency’s finding from being supported by substantial
evidence.” Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620 (Fed. Cir. 2001).
05-1158 8
Timken argues that Commerce’s decision not to reclassify its allegedly
miscategorized sales is not supported by substantial evidence. Timken asserts that the
new information it submitted in its case brief at the preliminary results stage adequately
supports the reclassification of its seventeen allegedly miscategorized sales from
channel 1 to either channel 2 or 3. More specifically, for its Replacement Part Sales,
that the customer was a large OEM, Timken contends, does not automatically mean
that all sales were for bearings that would be incorporated into other goods; a large
OEM may also purchase bearings to serve as replacement parts. In such case, Timken
points out that the nature of sales and the associated selling activities are by definition
different. It thus argues that the market in which its bearings were sold governs the
classification, not the identity of the customer, contrary to Commerce’s determination.
For its Small Electric Tools Sales, Timken claims that the proper classification is
ascertainable by resort to its descriptions of channel 1 and channel 2. Timken points
out that it described channel 1 as involving “sales to automotive and other large OEMs”
and channel 2 as involving “sales to smaller OEMs such as machinery and other
equipment producers.” Based upon these descriptions and the fact that the customer
sells small electric tools, Timken asserts that the Small Electric Tools Sales necessarily
fall under channel 2; that the customer is a division of a large OEM is irrelevant because
the only point of distinction between channel 1 and channel 2 is the size of the goods
sold.
For its Prototype Sales, Timken argues as it did for the Replacement Part Sales
that customer identity does not control classification; rather, the market in which the
product was sold dictates whether a particular sale should be categorized in channel 1,
05-1158 9
2, or 3. Hence, that the customer of the Prototype Sales was a large OEM is, Timken
claims, of no import in deciding whether the Prototype Sales were erroneously
categorized in channel 1. Further, it asserts the fact that some invoices contained the
word “Muster,” while others did not, is not decisive since all Prototype Sales were
shipped to the customer’s prototype center, as shown on all the invoices.
Finally, Timken contends that the quantity of bearings involved in the allegedly
miscategorized sales confirms that they were erroneously included in channel 1.
Timken points out that each sale consisted of several hundreds of bearings; sales
placed in channel 1, by contrast, involve several thousands of bearings. As such,
Timken claims quantity alone demonstrates that its bearing sales were erroneously
categorized in channel 1.
The government responds by arguing that Commerce’s decision not to reclassify
Timken’s allegedly miscategorized sales is supported by substantial evidence.
Beginning with the Replacement Parts Sales, the government asserts that Timken
neither mentioned replacement parts in its descriptions of its channels of distribution nor
offered an explanation for why such sales are correctly classified in channel 3 as
opposed to channel 1. Turning to Small Electric Tools Sales, the government points out
that Commerce correctly determined that Timken provided no evidence to substantiate
its claim that the division of a large OEM, which manufactures small electric tools,
should be considered a small OEM. Moreover, the government contends that
Commerce correctly noted that while sales to a single customer may be classified in
different channels of distribution, Timken failed to demonstrate facts sufficient to show
that such bifurcation is necessary for the Small Electric Tools Sales. Finally, the
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government argues that if Commerce were to reclassify all of the Prototype Sales on the
basis of only two invoices, it essentially would place unverified information over
conflicting, verified information. Even assuming Timken is correct that the sales were
truly for prototypes, the government claims that such sales were properly included in
channel 1 because Timken mentioned prototype sales only in its description of channel
1, not in its descriptions of channel 2 and 3.
As an alternative ground of affirmance, the government asserts that the Court of
International Trade erred in Timken I by remanding the case to Commerce for
investigation of Timken’s new information. Because the Court of International Trade
had agreed with Commerce that Timken’s alleged errors were not “clerical,” the
government contends that the Court of International Trade should have simply affirmed
Commerce’s original refusal pursuant to the “Colombia Flowers Test.” Accordingly, the
government argues that Commerce’s original antidumping duty determination and first
refusal to correct should stand.
Timken replies to the government’s alternative argument by disputing both
Commerce’s and the Court of International Trade’s characterization of its errors as
“errors in judgment.” Timken claims that its errors are “clerical” and thus subject to
correction under the “Colombia Flowers Test.”
A.
Before addressing Timken’s argument concerning its new evidence, we focus on
the government’s challenge to the Court of International Trade’s remand order in
Timken I since this issue potentially is dispositive of the appeal without requiring minute
examination of the old and new information on various sales. On the merits, we
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disagree with the government. Essentially, it contends that the Court of International
Trade erred in remanding the case for further investigation solely because it had
concurred with Commerce’s determination that Timken’s errors were not “clerical” in
nature. In making this argument, the government seems to advocate a bright-line rule
regarding what kinds of errors may be corrected in the context of antidumping duty
determinations. Specifically, it argues that once Commerce calculates a dumping
margin, an error in the underlying data supplied by an importer to Commerce may be
corrected only where it is “clerical” in nature. Surprisingly, counsel for Timken appeared
to agree with the government’s contention at oral argument. The government does not,
however, identify any statute or regulation on point. Instead, it relies solely on our
decision in Alloy Piping Products, Inc. v. United States, 334 F.3d 1284 (Fed. Cir. 2003),
and its own determination in Certain Fresh Cut Flowers from Colombia, 61 Fed. Reg. at
42834. Such reliance is, however, misplaced.
In Alloy Products, after receiving the final results of Commerce’s antidumping
duty determination, the importer sought correction of what it described as a “clerical”
error made when it provided its original sales information to Commerce. The importer
argued that Commerce was absolutely and expressly required to make the correction
pursuant to 19 U.S.C. § 1673d(e) and 19 C.F.R. § 351.224.2 Commerce declined, and
both the Court of International Trade and this court affirmed. We recognized that
2
Section 1673d(e) states in pertinent part: “The administering authority
shall establish procedures for the correction of ministerial errors in final determinations
within a reasonable time after the determinations are issued under this section.”
Section 351.224(e) provides in relevant part: “The Secretary will analyze any
comments received and, if appropriate, correct any significant ministerial error by
amending the preliminary determination, or correct any ministerial error by amending
the final determination or the final results of review (whichever is applicable).”
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Commerce was not required to correct the “clerical” errors made by the importer
because the statute and regulation cited by the importer apply only to “clerical” errors
committed by Commerce itself. 334 F.3d at 191. Contrary to the government’s
implication, however, we did not broadly bar Commerce from correcting “clerical” errors
or, for that matter, methodological errors, errors in judgment, or substantive errors made
by an importer. Instead, our decision in Alloy Products turned on the fact that the
importer sought correction of errors at the final result stage, not at the preliminary result
stage as in this case. For this reason, the facts in Alloy Products are readily
distinguishable from those implicated here.
Separately, a determination by Commerce, like Certain Fresh Cut Flowers from
Colombia, is not binding on this court. We also disagree with the restrictiveness of the
“Colombia Flowers Test.” That test, which Commerce states is based on our decision in
NTN Bearing Corp. v. United States, 74 F.3d 1204 (Fed. Cir. 1995), imposes six
conditions which must be met before Commerce will correct an error made by an
importer. The first condition is that the “error in question must be demonstrated to be a
clerical error, not a methodological error, an error in judgment, or a substantive error.”
Certain Fresh Cut Flowers from Colombia, 61 Fed. Reg. at 42834. It is perplexing how
Commerce could have derived this first condition from NTN Bearing when our holding in
that case, as in Alloy Products, was premised exclusively on timeliness. Indeed, upon
careful review, we do not even find any dicta suggesting a distinction between “clerical”
and other types of errors, and Commerce cited none.
More specifically, after receiving the International Trade Administration’s (“ITA”)
preliminary antidumping duty determination, NTN realized that it made two “clerical”
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errors caused by typographical mistakes. These clerical errors, NTN asserted, caused
a substantial increase in its dumping margins. NTN offered corrective information to the
ITA and sought to have corrections made before the ITA issued its final determination.
The ITA refused because NTN made its request after the deadline for submitting new
information had expired and because its new evidence did not adequately demonstrate
that errors had occurred. Notably, the ITA did not challenge NTN’s characterization of
its errors as “clerical.” The Court of International Trade affirmed that refusal. We
reversed, holding that the ITA abused its discretion in refusing to consider NTN’s
corrective information because of untimeliness. NTN Bearing, 74 F.3d at 1208. At no
point in our analysis did we distinguish “clerical” errors from other errors such as
methodological errors, substantive errors, or errors in judgment. We simply reasoned:
NTN responded in a timely manner to the preliminary determination,
pointing out ITA’s clerical errors, as well as its own. ITA corrected its own
but not NTN’s errors. Correction of NTN’s errors would neither have
required beginning anew nor have delayed making the final determination.
A straightforward mathematical adjustment was all that was required.
Failure to make it resulted in the imposition of many millions of dollars in
duties not justified under the statute.
Id. We also noted that while a tension between finality and correct result may arise in
some instances, such was not the case in NTN Bearing because NTN requested
corrections to be made at the preliminary results stage. Id. “[P]reliminary
determinations,” we observed, “are ‘preliminary’ precisely because they are subject to
change.” Id.To the extent that Commerce cites NTN Bearing for the source of its distinction
between “clerical” and other errors, we surmise that Commerce erroneously
extrapolated one where none was stated or intended. We emphasize that our ruling in
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NTN Bearing was based solely on timeliness, not on the type of error. Additionally, we
hold that Commerce is free to correct any type of importer error—clerical, methodology,
substantive, or one in judgment—in the context of making an antidumping duty
determination, provided that the importer seeks correction before Commerce issues its
final results and adequately proves the need for the requested corrections. In light of
this holding, we need not address Timken’s argument that its errors were “clerical”
rather than “errors in judgment” as found by Commerce and affirmed by the Court of
International Trade.
Finally, the convenience of the bright-line rule that Commerce advocates is
troubling. We suspect that it is not uncommon for an importer to make errors in
reporting its sales information to Commerce pursuant to an administrative review. We
also suspect that most such errors are methodological, substantive or, as in this case,
errors of judgment, rather than “clerical” errors. Oddly, it nevertheless appears that
Commerce has not issued any regulation addressing whether an importer can correct
errors in the information it has submitted, let alone restricted the types of importer errors
that are eligible for such correction. By urging this court to embrace Commerce’s
determination in Certain Fresh Cut Flowers from Colombia limiting correction to just
“clerical” errors, the government seemingly aims to save itself from having to evaluate
corrective information in most cases, regardless whether correction is sought at the
preliminary results stage or the final results stage. This court, however, has never
discouraged the correction of errors at the preliminary result stage; we have only
balanced the desire for accuracy in antidumping duty determinations with the need for
finality at the final results stage. We thus have no choice but to conclude that
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Commerce’s position here amounts to ipse dixit, which is a very weak basis for any rule.
Accordingly, because Timken sought correction of its errors after Commerce issued the
preliminary results, but before it issued the final results, we conclude that the Court of
International Trade in Timken I did not err in remanding the case to Commerce for an
analysis of Timken’s new evidence.
B.
Turning to the heart of Timken’s appeal, we disagree with Timken that the new
evidence it submitted in its case brief, which consisted of invoices and, in most
instances, corresponding purchase orders, is strong enough to require reclassification.
At the outset, we note that the government contends in general that Commerce would
be forced to prefer unverified information over conflicting, verified information if it were
to make Timken’s requested corrections. On appeal, the government particularly raises
this argument with respect to Timken’s Prototype Sales. We are struck by the fallacy of
such a position; Commerce declines to verify the new information and then rejects it
because it is unverified. If Commerce had reason to doubt Timken’s corrective
information, then it could have, and perhaps should have, performed a second
verification. Indeed, the government, we note, does not cite any statute or regulation
barring such a second verification.
We now focus on Timken’s allegedly miscategorized sales, beginning with the
Replacement Part Sales for which there were eight total sales and three different
customers, i.e., three sales to the first customer, one to the second customer, and four
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to the third customer.3 For sake of clarity, we consider the Replacement Part Sales for
each of the three customers separately. For the first customer, one of the purchase
orders contained a handwritten notation in German, which Timken contends translates
as: “The parts (from the purchase order) are exclusively destined for repair
purposes . . . The total annual demand for this purpose are 26 units.” Timken explained
that the notation applied to the other two purchase orders as well and was added by
Mrs. Kleiner, an employee of Timken. According to Timken, Mrs. Kleiner contacted the
customer in preparation for the case brief to confirm that the purchased bearings were
not used in producing original equipment. Timken does not, however, present any
evidence to substantiate her communication with the customer. Commerce was thus in
the position of having to accept her notation, knowing full well that it was produced
specifically for the purpose of proving the alleged miscategorization. Viewed in this
light, we hesitate to fault Commerce for rejecting this evidence over evidence for these
particular sales which it previously verified in conjunction with Timken’s original
submission.
For the second customer, the invoice contained a handwritten German word,
which was not easily readable, followed by an equal sign and the words “Replacement
Parts.” That invoice, along with the corresponding purchase order, also contained a
“649” code followed by the words “shipping point.” A code sheet provided with the two
documents listed “central location for replacement parts” for that code. It is,
nevertheless, entirely unclear who supplied the handwritten information or when it was
3
We note that the parties agreed to keep the identities of Timken’s
customers, among other things, confidential under the terms of a protective order. We
refer only to the customers generally, because of the protective order and because their
identities are not critical to the disposition of this appeal anyway.
05-1158 17
added to the invoice. As with the aforementioned Replacement Part Sales, the notation
quite possibly was added after Timken decided to argue that it erred in categorizing the
sale. Additionally, Timken did not present any evidence about the sale showing that the
bearings were, in fact, used as spare parts and were not incorporated into original
equipment produced by the customer. Consequently, we conclude that Commerce
reasonably rejected this evidence over previously submitted evidence for this customer.
For the third customer, the purchase orders all contained the typed word
“ersatzteile,” followed by an equal sign and the handwritten words “spare parts.” While
we do not doubt that German word “ersatzteile” correctly translates as “spare parts” or
the equivalent thereof, Timken again did not provide any evidence to substantiate its
claim that the bearings actually were used by the customer as spare parts. Commerce
particularly noted the absence of such evidence in its determination: “The merchandise
very well may have been used for the normal production activities of the large OEMs.”
Remand Determination, slip op. at 17.
As a final consideration applicable to the eight Replacement Part Sales in
general, Timken did not offer a persuasive explanation of why, if the sales were really
for spare parts, they should be categorized under channel 3 as opposed to channel 1.
Indeed, in defining its channels of distribution in response to Commerce’s original
questionnaire, Timken did not mention replacement part sales in either channel 1 or
channel 3. It consequently has no real basis for reclassifying the Replacement Part
Sales in channel 3 as opposed to channel 1 or, for that matter, channel 2. Small OEMs
under channel 2 are, after all, just as likely to purchase replacement parts as large
OEMs under channel 1 or distributors under channel 3. Therefore, since any customer
05-1158 18
may require and purchase replacement parts, we conclude that customer identity is not
a conclusive way for categorizing Timken’s sales, but serves as a sound starting point.
Here, the parties do not dispute that the three customers who purchased the
Replacement Part Sales were all “large OEMs” classified under channel 1. As a result,
we conclude that the evidence supporting Commerce’s original determination is
substantial and that it was justified in refusing to reclassify the Replacement Part Sales
from channel 1 to channel 3.
As to the Small Electric Tools Sales, there were four distinct sales, all to a single
customer. One of the four invoices contained a handwritten notation showing an
asterisk beside the customer name followed by the comment “product division electric
tools.” Because Timken’s argument as to these sales substantially depends on whether
the words “large” and “small” modify the size of the producer or the size of the products
sold, we are compelled to reach that distinction in this context. If we agree with Timken
that the words “large” and “small” modify the size of the goods produced, then Timken is
necessarily correct that its Small Electric Tools Sales were miscategorized under
channel 1 when they should have been categorized under channel 2. We do not,
however, accept Timken’s position. Although Timken is in a better position than
Commerce to understand and define its various channels of distribution and customers,
we nevertheless observe that Timken’s argument is not supported by its own
descriptions of its channels of distribution. If anything, Timken’s descriptions favor
Commerce’s position that the words “large” and “small” modify the size of the
producers. Throughout its descriptions for channel 1 and channel 2, Timken
consistently placed the adjectives “large” and “small,” respectively, before the noun
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“OEMs.” Moreover, Timken did not clearly describe the goods produced by the OEMs
under channel 1 or 2, let alone define those goods as being “large” or “small.”
Commerce’s analysts, like the average reader, would thus grammatically interpret the
adjectives “large” and “small” to modify the noun “OEMs.” It is entirely counterintuitive,
based solely upon the syntax, to read the adjectives as modifying the products
manufactured by the OEMs. We, consequently, must reject Timken’s contention that a
“large” or ”small” OEM means an OEM that produces “large” or “small” products. As
such, Timken’s argument falls apart. Hence, we conclude that Commerce’s refusal to
reclassify the Small Electric Tools Sales from channel 1 to channel 2 is supported by
substantial evidence.
With regard to the Prototype Sales, Timken made five separate sales to a single
customer. Two of the invoices associated with those sales contain the German word
“Muster.” The other three invoices, although missing the word “Muster,” were sent to
the same location as the other two sales, presumably the customer’s prototype testing
facility since the shipping address for each sale contained the word “Prototypen.”
Timken’s argument that these sales should be classified under channel 2 or 3 based
upon the “Muster” notation and/or shipping address, however, seems contradicted by
Timken’s own description of its channels of distribution. As Commerce noted, when
discussing sales under channel 1, Timken explained:
[Timken] will develop and supply prototypes (“Muster”) which are specially
produced for the customer to test, and if the customer approves these
units, the parties estimate the quantities to be bought and negotiate a
fixed selling price. Thereafter, [Timken] provides further sample units
(designated by the suffix “M41”), which are produced under normal
production conditions, and if the customer approves these samples,
[Timken] is fully approved to supply.
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Timken did not make a similar disclosure for either channel 2 or 3, thereby suggesting
that it consciously did not contemplate selling prototypes under channel 2 or 3. What is
more, the customer is an “automobile and other large OEMs,” the very customer defined
for channel 1 sales. Thus, this evidence, especially taken together, demonstrates that
Commerce was reasonable to refuse to reclassify the Prototype Sales from channel 1 to
channel 2 or 3.
Lastly, Timken’s argument that the small quantity of bearings involved in each of
the seventeen disputed transactions weighs in favor of reclassifying the sales under
either channel 2 or 3 is unavailing. None of the channels of distribution, as defined by
Timken, contain any numeric limitations. Despite this, Timken claims that the average
quantity for a channel 1 sale exceeds 14,000 units, but fails to substantiate its claim with
any evidence. Furthermore, we presume that the sale of prototypes likely would only
include a few units. The customer, after all, would want to confirm that the prototypes
function for their intended usage before buying commercial quantities. Thus, that the
seventeen allegedly miscategorized sales involved a small number of bearings
compared to the number typically involved in a commercial sale under channel 1 does
not alone require reclassifying the Prototype Sales from channel 1 to channel 2 or 3.
Nor does it when taken in view of Timken’s other new information.
In sum, we hold that Timken’s case before Commerce basically involves a failure
of proof; none of the new evidence that Timken submitted adequately supports its
position that it initially misclassified seventeen sales. Commerce calculated the
dumping margin applicable to the bearings Timken imported in the United States during
the review period based upon Timken’s original information, which it verified. Although
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this is a close case, we hold that Commerce’s original determination was, on the
balance of the old and new evidence, supported by substantial evidence and was not
contrary to law. The Court of International Trade, therefore, properly affirmed
Commerce’s antidumping duty determination based on the original information and its
refusal to accept Timken’s corrective information.
III. CONCLUSION
We conclude that the Court of International Trade in Timken I correctly remanded
the case to Commerce for investigation of Timken’s new evidence because Timken
sought correction after Commerce issued the preliminary results, but before it issued
the final results and such corrections are not limited to “clerical” errors only. Because
we conclude that Commerce had sufficient factual basis for refusing to make the
corrections on remand and because its original duty determination was supported by
substantial evidence and in accordance with law, we affirm the Court of International
Trade’s decision in Timken II upholding Commerce’s rejection of Timken’s corrective
information and its antidumping duty determination based on Timken’s original
evidence.
AFFIRMED
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