RHP Bearing Ltd. v. United Stateserratum:

Slip Op. 99-134
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
__________________________________
:
RHP BEARINGS LTD., NSK BEARINGS :
EUROPE LTD. and NSK CORPORATION, :
:
Plaintiffs, :
:
v. : Consol. Court No.
: 97-02-00217
UNITED STATES, :
:
Defendant, :
:
THE TORRINGTON COMPANY, :
:
Defendant-Intervenor. :
_________________________________:
Plaintiffs, RHP Bearings Ltd., NSK Bearings Europe Ltd. and
NSK Corporation (collectively, “RHP-NSK”), move pursuant to
USCIT R. 56.2 for judgment upon the agency record challenging
various aspects of the 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,
Singapore, and the United Kingdom; Final Results of Antidumping
Duty Administrative Reviews (“Final Results”), 62 Fed. Reg. 2081(Jan. 15, 1997), as amended, Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof from Germany: Amended
Final Results of Antidumping Administrative Review, 62 Fed. Reg.
2130 (Jan. 15, 1997), and Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof From France, Germany,
Italy, Japan, and Singapore; Amended Final Results of
Antidumping Duty Administrative Reviews, 62 Fed. Reg. 14,391(Mar. 26, 1997).
Specifically, RHP-NSK claims that Commerce erred in: (1)
using aggregate data that encompasses all foreign like products
under consideration for normal value for calculating constructed
value (“CV”) profit under 19 U.S.C. § 1677b(e)(2)(A) (1994); (2)
including sample transactions that were not supported by
consideration in RHP-NSK’s United States sales database; and (3)
Consol. Court No. 97-02-00217 Page 2
excluding imputed inventory carrying costs in the constructed
export price (“CEP”) offset for RHP-NSK when Commerce matched
CEP sales to CV.
Torrington responds that: (1) Commerce reasonably calculated
profit for CV on the basis of the statutory preferred method of
19 U.S.C. § 1677b(e)(2)(A); (2) RHP-NSK failed to prove that the
sample transactions in question were without consideration or,
if a remand is ordered, Commerce should determine whether RHP-
NSK’s sample transactions are in fact without consideration; and
(3) Commerce should not include imputed inventory carrying costs
when comparing CEP sales to CV or, if a remand is ordered, any
deduction of such costs should be capped not to exceed actual
expenses.
Held: RHP-NSK’s motion is denied in part and granted in
part. The case is remanded to Commerce to: (1) exclude from
RHP-NSK’s United States sales database any sample transactions
that were not supported by consideration and to adjust the
dumping margins accordingly; and (2) include imputed inventory
carrying costs in the calculation of CEP offset for RHP-NSK when
matching CEP sales to CV.
[RHP-NSK’s motion is denied in part and granted in part. Case
remanded.]
Dated: December 16, 1999
Lipstein, Jaffe & Lawson, L.L.P. (Robert A. Lipstein,
Matthew P. Jaffe and Grace W. Lawson) for plaintiffs.
David W. Ogden, Acting Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Velta A. Melnbrencis,
Assistant Director); of counsel: Mark A. Barnett, 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, James R. Cannon,
Jr., Wesley K. Caine, Geert De Prest and Lane S. Hurewitz) for
defendant-intervenor.
Consol. Court No. 97-02-00217 Page 3
OPINION
TSOUCALAS, Senior Judge: Plaintiffs, RHP Bearings Ltd., NSK
Bearings Europe Ltd. and NSK Corporation (collectively, “RHP-
NSK”), move pursuant to USCIT R. 56.2 for judgment upon the
agency record challenging various aspects of the 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, Singapore, and the United Kingdom; Final Results
of Antidumping Duty Administrative Reviews (“Final Results”), 62
Fed. Reg. 2081 (Jan. 15, 1997), as amended, Antifriction
Bearings (Other Than Tapered Roller Bearings) and Parts Thereof
from Germany: Amended Final Results of Antidumping
Administrative Review, 62 Fed. Reg. 2130 (Jan. 15, 1997), and
Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, Germany, Italy, Japan, and Singapore;
Amended Final Results of Antidumping Duty Administrative
Reviews, 62 Fed. Reg. 14,391 (Mar. 26, 1997).
Specifically, RHP-NSK claims that Commerce erred in: (1)
using aggregate data that encompasses all foreign like products
under consideration for normal value (“NV”) for calculating
constructed value (“CV”) profit under 19 U.S.C. § 1677b(e)(2)(A)
Consol. Court No. 97-02-00217 Page 4
(1994); (2) including in RHP-NSK’s United States sales database
any sample transactions that were not supported by
consideration; and (3) excluding imputed inventory carrying
costs in the constructed export price (“CEP”) offset for RHP-NSK
when it matched CEP sales to CV.
Torrington responds that: (1) Commerce reasonably calculated
profit for CV on the basis of the statutory preferred method of
19 U.S.C. § 1677b(e)(2)(A); (2) RHP-NSK failed to prove that the
sample transactions in question were without consideration or,
if a remand is ordered, Commerce should determine whether RHP-
NSK’s sample transactions are in fact without consideration; and
(3) Commerce should not include imputed inventory carrying costs
when comparing CEP sales to CV or, if a remand is ordered, any
deduction of such costs should be capped not to exceed actual
expenses.
The Court will address each of these arguments in turn.
BACKGROUND
This case concerns the sixth administrative review of the
antidumping duty order on antifriction bearings (other than
tapered roller bearings) and parts thereof (“AFBs”) imported
Consol. Court No. 97-02-00217 Page 5
from the United Kingdom during the review period of May 1, 1994
through April 30, 1995.1 Commerce published the preliminary
results of the subject review on July 8, 1996. See Antifriction
Bearings (Other Than Tapered Roller Bearings) and Parts Thereof
from France, Germany, Italy, Japan, Romania, Singapore, Thailand
and the United Kingdom; Preliminary Results of Antidumping Duty
Administrative Reviews, Termination of Administrative Reviews,
and Partial Termination of Administrative Reviews (“Preliminary
Results”), 61 Fed. Reg. 35,713. On January 15, 1997, Commerce
published the Finals Results at issue here. See 62 Fed. Reg. at
2081.
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
The Court will uphold Commerce’s final determination in an
1 Since the administrative review at issue was initiated
after December 31, 1994, the applicable law in this case is the
antidumping statute as amended by the Uruguay Round Agreements
Act, Pub. L. No. 103-465, 108 Stat. 4809 (1994) (effective Jan.
1, 1995) (“URAA”). See Torrington Co. v. United States, 68 F.3d
1347, 1352 (Fed. Cir. 1995) (citing URAA § 291(a)(2), (b)
(noting effective date of URAA amendments)).
Consol. Court No. 97-02-00217 Page 6
administrative review 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).
I. Substantial Evidence Test
Substantial evidence is “more than a mere scintilla. It
means such relevant evidence as a reasonable mind might accept
as adequate to support a conclusion.” Universal Camera Corp. v.
NLRB, 340 U.S. 474, 477 (1951) (quoting Consolidated Edison Co.
v. NLRB, 305 U.S. 197, 229 (1938)). Substantial evidence “is
something less than the weight of the evidence, and 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.
Federal Maritime Comm’n, 383 U.S. 607, 620 (1966) (citations
omitted). Moreover, “[t]he court may not substitute its
judgment for that of the [agency] when the choice is ‘between
two fairly conflicting views, even though the court would
justifiably have made a different choice had the matter been
before it de novo.’” American Spring Wire Corp. v. United
States, 8 CIT 20, 22, 590 F. Supp. 1273, 1276 (1984) (quoting
Penntech Papers, Inc. v. NLRB, 706 F.2d 18, 22-23 (1st Cir.
Consol. Court No. 97-02-00217 Page 7
1983) (quoting, in turn, Universal Camera, 340 U.S. at 488)).
II. Chevron Two-Step Analysis
To determine whether Commerce’s interpretation and
application of the antidumping statute is “in accordance with
law,” the Court must undertake the two-step analysis prescribed
by Chevron U.S.A. Inc. v. Natural Resources Defense Council,
Inc., 467 U.S. 837 (1984). Under the first step, the Court
reviews Commerce’s construction of a statutory provision to
determine whether “Congress has directly spoken to the precise
question at issue.” Id. at 842. “ To ascertain whether Congress
had an intention on the precise question at issue, [the Court]
employ[s] the ‘traditional tools of statutory construction.’”
Timex V.I., Inc. v. United States, 157 F.3d 879, 882 (Fed. Cir.
1998) (citing Chevron, 467 U.S. at 843 n.9). “The first and
foremost ‘tool’ is the statute’s text, giving it its plain
meaning. Because a statute’s text is Congress’s final
expression of its intent, if the text answers the question, that
is the end of the matter.” Id. (citations omitted). Beyond the
statute’s text, the tools of statutory construction “include the
statute’s structure, canons of statutory construction, and
legislative history.” Id. (citations omitted); but see Flora
Consol. Court No. 97-02-00217 Page 8
Trade Council v. United States, 23 CIT __, 41 F. Supp. 2d 319,
323 n.6 (1999) (noting that “[n]ot all rules of statutory
construction rise to the level of a canon, however”) (citation
omitted).
If, after employing the first prong of Chevron, the Court
determines that the statute is silent or ambiguous with respect
to the specific issue, the question for the Court becomes
whether Commerce’s construction of the statute is permissible.
Chevron, 467 U.S. at 843. Essentially, this is an inquiry into
the reasonableness of Commerce’s interpretation. See Fujitsu
Gen. Ltd. v. United States, 88 F.3d 1034, 1038 (Fed. Cir. 1996).
Provided Commerce has acted rationally, the Court may not
substitute its judgment for the agency’s. See IPSCO, Inc. v.
United States, 965 F.2d 1056, 1061 (Fed. Cir. 1992); see also
Koyo Seiko Co. v. United States, 36 F.3d 1565, 1570 (Fed. Cir.
1994) (holding that “a court must defer to an agency’s
reasonable interpretation of a statute even if the court might
have preferred another”). The “[C]ourt will sustain the
determination if it is reasonable and supported by the record as
a whole, including whatever fairly detracts from the
substantiality of the evidence.” Negev Phosphates, Ltd. v.
United States Dep’t of Commerce, 12 CIT 1074, 1077, 699 F. Supp.
Consol. Court No. 97-02-00217 Page 9
938, 942 (1988) (citations omitted). “In determining whether
Commerce’s interpretation is reasonable, the Court considers,
among other factors, the express terms of the provisions at
issue, the objectives of those provisions and the objectives of
the antidumping scheme as a whole.” Mitsubishi Heavy Indus.,
Ltd. v. United States, 22 CIT __, __, 15 F. Supp. 2d 807, 813
(1998)).
DISCUSSION
I. Calculation of Profit for Constructed Value
A. Statutory and Factual Background
An antidumping duty is imposed upon imported merchandise
when (1) Commerce determines such merchandise is sold or likely
to be sold in the United States at less than fair value (“LTFV,”
i.e., at a price which is lower than the price at which the
merchandise is sold in the country of exportation or to a third
country), and (2) the International Trade Commission determines
that domestic industry is materially injured or threatened with
material injury, or the establishment of an industry in the
United States is materially retarded, by reason of imports of
the subject merchandise or by reason of the LTFV sales or
likelihood of LTFV sales of that merchandise for importation.
Consol. Court No. 97-02-00217 Page 10
See 19 U.S.C. § 1673 (1994). In calculating the antidumping
duty, Commerce compares the price of the imported merchandise in
the United States ( i.e., export price (“EP”) or CEP)2 to its NV.
See id. The dumping margin is “the amount by which the [NV]
exceeds the [EP] or [CEP] of the subject merchandise.” 19
U.S.C. § 1677(35) (1994).
NV is the comparable price for a product like the imported
merchandise when first sold (generally, to unaffiliated parties)
“for consumption in the exporting country, in the usual
commercial quantities and in the ordinary course of trade and,
to the extent practicable, at the same level of trade as the
export price or constructed export price.” 19 U.S.C. §
1677b(a)(1)(B)(i) (1994). Where home market sales of such
foreign like product are not available or usable as a basis for
determining NV, Commerce may measure dumping by comparing the EP
or CEP to NV based on either: (1) sales in a third-country
market, that is, sales of the foreign like product to a country
other than the home market or the United States, see 19 U.S.C.
§ 1677b(a)(1)(B), (C); or (2) CV of the imported merchandise,
2Typically, Commerce uses the export price when the
foreign exporter sells directly to an unrelated United States
purchaser. See 19 U.S.C. § 1677a(a) (1994). Commerce uses the
constructed export price when the foreign exporter sells through
a related party in the United States. See id. § 1677a(b).
Consol. Court No. 97-02-00217 Page 11
see 19 U.S.C. § 1677b(a)(4),3 which is calculated pursuant to 19
U.S.C. § 1677b(e) (1994).
Profit is a component in the calculation of CV. 4 See 19
U.S.C. § 1677b(e)(2)(A). Under current antidumping law, as
amended by the Uruguay Round Agreements Act (“URAA”), Pub. L.
No. 103-465, 108 Stat. 4809 (1994), the preferred method for
determining profit for CV is to add to CV “the actual amounts
incurred and realized by the specific exporter or producer being
examined in the investigation or review . . . for profits, in
connection with the production and sale of a foreign like
product, in the ordinary course of trade, for consumption in the
foreign country[.]” 19 U.S.C. § 1677b(e)(2)(A). The Statement
3 See Statement of Administrative Action (“SAA”)
accompanying the URAA, H.R. Doc. No. 103-316, at 839 (1994),
reprinted in 1994 U.S.C.C.A.N. 3773, 4175 (stating that
“[c]onstructed value is used . . . for normal value where home
market sales of the merchandise in question are either
nonexistent, in inadequate numbers, or inappropriate to serve as
a benchmark for a fair price, such as where sales are
disregarded because they are sold at below-cost prices”).
4 See SAA at 839 (“Because constructed value serves as a
proxy for a sales price, and because a fair sales price would
recover [selling, general and administrative (“SG&A”)] expenses
and would include an element of profit, constructed value must
include an amount for SG&A expenses and for profit.”).
Consol. Court No. 97-02-00217 Page 12
of Administrative Action5 (“SAA”) accompanying the URAA provides
that Commerce may disregard sales that it considers to be
outside the ordinary course of trade, that is, “Commerce may
ignore sales that it disregards as a basis for normal value,
such as those disregarded because they are made at below-cost
prices.” H.R. Doc. No. 103-316, at 839 (1994), reprinted in 1994
U.S.C.C.A.N. 3773, 4175-76; see 19 U.S.C. § 1677(15) (1994); 19
U.S.C. § 1677b(b)(1) (1994).
In promulgating its amended regulation 19 C.F.R. § 351.405to the URAA, which deals with calculating NV based on CV,
Commerce determined that it would use aggregate figures of
foreign like products to calculate CV profit under the preferred
methodology of 19 U.S.C. § 1677b(e)(2)(A). See Antidumping
Duties; Countervailing Duties; Proposed Rule, 61 Fed. Reg. 7308,
5 The SAA represents “an authoritative expression by the
Administration concerning its views regarding the interpretation
and application of the Uruguay Round agreements.” SAA at 656.
“It is the expectation of the Congress that future
Administrations will observe and apply the interpretations and
commitments set out in this Statement.” Id. (quoted in
Delverde, SrL v. United States, 21 CIT __, __, 989 F. Supp. 218,
229-30 n.18 (1997)); see also 19 U.S.C. § 3512(d) (1994) (“The
statement of administrative action approved by the Congress ...
shall be regarded as an authoritative expression by the United
States concerning the interpretation and application of the
Uruguay Round Agreements and this Act in any judicial proceeding
in which a question arises concerning such interpretation or
application.”).
Consol. Court No. 97-02-00217 Page 13
7335 (Feb. 27, 1996) (“Proposed Regulations”). Commerce
reasoned as follows:
The Department’s practice had been to use aggregate
figures [for selling, general and administrative
expenses (“SG&A”) and profit]. Notably, section
773(e)(1)(B) [i.e., 19 U.S.C. § 1677b(e)(1)(B)] of the
pre-URAA statute provided for calculation of an amount
for profit and SG&A “equal to that usually reflected
in sales of merchandise of the same general class or
kind as merchandise under consideration” (emphasis
added). In comparison, section 77[3](e)(2)(A) [i.e.,
19 U.S.C. § 1677b(e)(2)(A)] of the amended Act
provides for use of the actual amounts incurred and
realized for profit and SG&A “in connection with the
production and sale of a foreign like product.” The
use of “a” arguably could be interpreted to mean a
particular model. The SAA, on the other hand, refers
to actual amounts incurred, “in selling the particular
merchandise in question (foreign like product).” SAA,
at 839. This language supports a view that the use of
“a” was not intended to overturn our prior practice of
relying on aggregate figures for profit and SG&A.
Moreover, if “a” were to be interpreted literally, the
Department would have the discretion to pick and
choose the sale of the foreign like product from which
profit and SG&A would be taken. This clearly would
undermine the predictability of the statute. Given
these distinctions, the amended Act arguably provides
for a narrower basis for the calculation of profit and
SG&A than did the prior statute. Therefore, the
Department intends to calculate profit and SG&A based
on an average of the profits of foreign like products
sold in the ordinary course of trade.
Id.
If the statutory preferred method cannot be followed under
19 U.S.C. § 1677b(e)(2)(A), “either because there are no home
market sales of the foreign like product or because all such
Consol. Court No. 97-02-00217 Page 14
sales are at below-cost prices,” then Commerce may calculate CV
profit using one of three alternative methods in §
1677b(e)(2)(B). 6 SAA at 840. The SAA provides that §
1677b(e)(2)(B) “does not establish a hierarchy or preference
among these alternative methods.” Id.
In this case, Commerce matched United States models to NV
models according to the following methodology, in order of
preference: (1) it first looked for an identical home market
model; (2) if no identical match was found, it matched by family
designation (i.e., similar match); and (3) for those United
States models for which no identical or similar match was found,
the CV of the United States model was used as the basis for NV.
6 If actual data are not available with respect to the
amounts described in 19 U.S.C. § 1677b(e)(2)(A) (1994), then §
1677b(e)(2)(B) provides one of the following three alternative
methods for calculating amounts for (SG&A expenses and) profit
for purposes of constructed value:
(1) actual amounts incurred or realized by the same
producer on home market sales of the same general
category of products; (2) the weighted-average of
actual amounts incurred or realized by other
investigated companies on home market sales in the
ordinary course of trade (i.e., profitable sales) of
the foreign like product; or (3) any other reasonable
method, provided that the amount for profit does not
exceed the profit normally realized by other companies
on home market sales of the same general category of
products (the so-called profit cap).
SAA at 840.
Consol. Court No. 97-02-00217 Page 15
See NSK-RHP Bearings--Preliminary Results Analysis Memo--
Antifriction Bearings from the U.K.--Sixth Administrative
Review, 5/1/94-4/30/95, A-412-801, Proprietary Doc. No. 12
(Fiche 71), at 2 (July 2, 1996).
Commerce calculated profit for CV using the statutorily
preferred methodology of 19 U.S.C. § 1677b(e)(2)(A). See
Preliminary Results, 61 Fed. Reg. at 35,718. In particular,
Commerce calculated CV profit for each respondent by aggregating
each respondent’s profits for the foreign like products sold in
the ordinary course of trade.
In the Final Results, respondents, including RHP-NSK, 7
argued that Commerce erred in applying 19 U.S.C. §
1677b(e)(2)(A) because this section requires Commerce first try
to calculate CV profit for imported merchandise based on profit
amounts on the sales of the imported merchandise’s ‘foreign like
product,’ which did not exist here when NV was based on CV. See
62 Fed. Reg. at 2113.
7 Although the “Profit for Constructed Value” section of
the Final Results refer only to arguments of “NSK,” that is, NSK
Corporation, see 62 Fed. Reg. at 2113, as abbreviated at 62 Fed.
Reg. at 2085, the Court assumes that “NSK” collectively refers
to RHP Bearings Ltd., NSK Bearings Europe Ltd. and NSK
Corporation, as noted in plaintiffs’ “General Issues Rebuttal
Brief” at 1, received after the Preliminary Results by Commerce
on Aug. 12, 1996.
Consol. Court No. 97-02-00217 Page 16
Specifically, respondents requested that Commerce apply the
same definition of “foreign like product” used for home market
price calculations to determine CV profit. In other words,
respondents requested that if the foreign like product is an
identical bearing, CV profit should be based on profit amounts
for above-cost identical bearing matches, or alternatively, if
there is no identical model, CV profit should be based on the
profit amounts for above-cost bearing family matches. Where
there are no home market sales of identical or family bearings,
respondents asserted that under 19 U.S.C. § 1677b(e)(2)(A) there
can be no profits on sales of the foreign like product in the
home market in the ordinary course of trade. Respondents,
therefore, argued that since there were no usable sales of
“foreign like product” when Commerce used CV to calculate NV,
the only option for Commerce was to calculate CV profit on the
basis of one of the three alternatives in § 1677b(e)(2)(B). See
id. Although the three alternative methods are not listed in
order of preference, respondents claimed that there is a strong
preference for using the first alternative CV profit
calculation, that is, “the use of company-specific data
regarding the same general category of merchandise.” Id.
(citing 19 U.S.C. § 1677b(e)(2)(B)(i)).
Consol. Court No. 97-02-00217 Page 17
Commerce disagreed with respondents that it did “not have
any ‘foreign like products’ for use in calculating CV profit”
and, therefore, it rejected their suggested model-matching
methodology for calculating CV profit under 19 U.S.C. §
1677b(e)(2)(A). Id. Consistent with its statutory
interpretation and reasoning contained in the Proposed
Regulations regarding application of § 1677b(e)(2)(A), Commerce
found that:
Respondents’ definition of the term “foreign like
product” is overly narrow with respect to its use in
the CV-profit provisions. In applying the “preferred”
method for calculating profit (as well as SG&A) under
section 773(e)(2)(A) [i.e., 19 U.S.C. §
1677b(e)(2)(A)], the use of aggregate data that
encompasses all foreign like products under
consideration for NV represents a reasonable
interpretation of the statute and results in a
practical measure of profit that we can apply
consistently in each case. By contrast, an
interpretation of section 773(e)(2)(A) that would
result in a method based on varied groupings of
foreign like products, each defined by a minimum set
of matching criteria shared with a particular model of
the subject merchandise, would add an additional layer
of complexity and uncertainty to antidumping
proceedings without generating more accurate results.
It would also make the statutorily preferred CV-profit
methodology inapplicable to most cases involving CV.
Id.
Consol. Court No. 97-02-00217 Page 18
B. Contentions of the Parties
1. RHP-NSK’s Contentions
RHP-NSK contends that Commerce defined “foreign like
product” for purposes of the CV profit calculation in a manner
contrary to the statutory definition of the term and well-
established agency practice. See Pls.’ Mem. Supp. Mot. J.
Agency R. at 4. In particular, RHP-NSK asserts that 19 U.S.C.
§ 1677b(e)(2)(A) requires that Commerce first try to calculate
CV profit for imported merchandise based on actual profit
amounts incurred in the home market production and sale of
“foreign like product,” that is, model or family products, that
match each bearing model sold in the United States. See id. at
6, 15.
RHP-NSK notes that 19 U.S.C. § 1677(16) (1994) defines
“foreign like product” by establishing three distinct categories
of products for model-matching purposes. See id. at 8. The
first category of merchandise is identical merchandise, the next
category is nonidentical merchandise made by the same producer
in the same country and is similar in value to the merchandise
under investigation, and the third category is merchandise made
by the same producer in the same country and used for the same
purposes as the merchandise under investigation. See id. RHP-
Consol. Court No. 97-02-00217 Page 19
NSK asserts that once Commerce finds merchandise in one
category, merchandise in the subsequent categories can never be
considered foreign like product because § 1677(16) directs
Commerce to determine foreign like product in the first of the
listed categories. See id. § 1677(16); see also Federal-Mogul
Corp. v. United States, 20 CIT __, __, 918 F. Supp. 386, 396
(1996); Cemex, S.A. v. United States, 133 F.3d 897, 903 (Fed.
Cir. 1998) (noting same for pre-URAA § 1677(16)). RHP-NSK
argues, therefore, that since the plain language of § 1677(16)
clearly creates a descending hierarchy for selecting foreign
like product, Chevron dictates that the Court, as well as
Commerce, must give effect to the unambiguously expressed intent
of Congress and, thus, the reasonableness of Commerce’s
interpretation of 19 U.S.C. § 1677b(e)(2)(A) is irrelevant. See
id. at 8-10.
RHP-NSK also argues that Commerce erred in claiming that in
this review it followed its past practice of using aggregate
figures for calculating CV profit. See Pls.’ Reply Mem. Supp.
Mot. J. Agency R. at 4. RHP-NSK notes that prior to the URAA,
the antidumping law required Commerce to base CV profit on “an
amount for . . . profit equal to that usually reflected in sales
of merchandise of the same general class or kind as the
Consol. Court No. 97-02-00217 Page 20
merchandise under consideration.” Id. (quoting 19 U.S.C. §
1677b(e)(1)(B) (1988)). Citing several administrative reviews,
RHP-NSK asserts that after the enactment of the URAA, Commerce
continually rejected requests that it base CV profit on reported
home market sales because the agency “did not consider these
sales representative of the profit for the general class or kind
of merchandise.” Id. (citations omitted). RHP-NSK, therefore,
argues that contrary to Commerce’s claim, the agency in prior
reviews repudiated the type of CV profit calculation performed
in this review. See id.
RHP-NSK also maintains that the legislative history of the
URAA confirms that Commerce should calculate CV profit on a
model or family basis when using the preferred methodology under
19 U.S.C. § 1677b(e)(2)(A). See Pls.’ Mem. Supp. Mot. J. Agency
R. at 10. RHP-NSK notes that when Commerce revised its
regulations to conform to the URAA, in particular 19 C.F.R. §
351.405, the agency specified it would use “an aggregate
calculation that encompasses all foreign like products under
consideration for normal value.” Antidumping Duties;
Countervailing Duties; Final rule (“Final Regulations”), 62 Fed.
Reg. 27,296, 27,359 (May 19, 1997). RHP-NSK further notes that
Commerce found this method for calculating CV profit as
Consol. Court No. 97-02-00217 Page 21
“consistent with the Department’s method of computing SG&A and
profit under the pre-URAA version of the statute, and, while the
URAA revised certain aspects of the SG&A and profit calculation,
we do not believe that Congress intended to change this
particular aspect of our practice.” Id. Nevertheless, RHP-NSK
claims that contrary to Commerce’s finding, the URAA legislative
history makes clear that the current preferred methodology for
calculating CV profit is not consistent with Commerce’s pre-URAA
methodology. See Pls.’ Mem. Supp. Mot. J. Agency R. at 10. The
URAA legislative history, according to RHP-NSK, first recites
the pre-URAA law, 19 U.S.C. § 1677b(e)(1)(B) (1988), with
reference to profit amounts based on the same general class or
kind as the merchandise under investigation, then announces that
19 U.S.C. § 1677b(e)(2)(A) (1994) “establishes new methods of
calculating SG&A expenses and profits consistent with methods
provided for in the [URAA].” Id. (quoting SAA at 839) (emphasis
added). RHP-NSK specifically notes that the new §
1677b(e)(2)(A) “establishes as a general rule that Commerce will
base amounts of SG&A expenses and profits only on amounts
incurred and realized in connection with sales in the ordinary
course of trade of the particular merchandise in question
(foreign like product).” Id. at 10-11 (quoting SAA at 839)
Consol. Court No. 97-02-00217 Page 22
(emphasis added). RHP-NSK, therefore, argues that the URAA
legislative history directly contradicts Commerce’s position and
demonstrates Congress’ clear intent to alter the preferred basis
on which Commerce calculates CV profit. See id. at 11.
RHP-NSK further notes that after taking into account changes
in nomenclature of the URAA, the first alternative methodology
for CV profit, 19 U.S.C. § 1677b(e)(2)(B)(i), is nearly
identical to the pre-URAA CV profit methodology, 19 U.S.C. §
1677b(e)(1)(B), except that sales at issue do not have to be in
the ordinary course of trade. See id. at 11. RHP-NSK also
notes that the URAA legislative history provides that “[w]ith
respect to alternative (1), this methodology is consistent with
the existing practice of relying on a producer’s sales of
products in the same ‘general class or kind of merchandise.’”
See id. (quoting SAA at 840). RHP-NSK, therefore, maintains
that if § 1677b(e)(1)(B) is meant to be consistent with
Commerce’s pre-URAA practice, then necessarily § 1677b(e)(2)(A)
is meant to be different. See id.
In addition, contrary to Commerce’s suggestion in the
Proposed Regulations that “use of ‘a’ was not intended to
overturn [the agency’s] practice of relying on aggregate figures
Consol. Court No. 97-02-00217 Page 23
for profit and SG&A,” RHP-NSK claims that the use of word “a” in
the CV profit provision does not obliterate the explicit
hierarchy for identifying “foreign like product” as established
by 19 U.S.C. § 1677(16). See id. at 12. RHP-NSK argues that it
makes no difference if the word “a” means “any,” as in “any
foreign like product,” or “the,” as in “the foreign like
product,” because the CV profit calculation is the same, that
is, it must be based on a “foreign like product,” not on an
aggregate of products, some of which may qualify as foreign like
product, but most would not. See Pls.’ Reply Mem. Supp. Mot. J.
Agency R. at 5.
RHP-NSK also asserts that if Commerce is correct that the
term “foreign like product” permits it to use “an aggregate
calculation [for CV profit] that encompasses all foreign like
products under consideration for normal value,” then it must
also be the case that NV or cost of production (“COP”) may be
based on an aggregate price or cost, as appropriate, for all
products under consideration for NV. Pls.’ Mem. Supp. Mot. J.
Agency R. at 14 (quoting 62 Fed. Reg. at 27,359). RHP-NSK
appears to assert that such a conclusion is indisputably wrong
because extending Commerce’s definition of “foreign like
product” to other key antidumping provisions would upend the
Consol. Court No. 97-02-00217 Page 24
entire legal framework of the antidumping statute. See id. at
13-14. RHP-NSK claims that it is equally indisputable that 19
U.S.C. § 1677b(e)(2)(A) does not permit Commerce to calculate CV
profit based on the aggregate profit for all sales in the above-
cost foreign sales database. See id. at 14-15.
NSK–RHP requests that the Court remand the Final Results to
Commerce to calculate CV profit based on actual profit amounts
incurred in the home market production and sale of model or
family products that match each bearing model sold in the United
States or, in the absence of such profit data, to use one of the
alternative profit methodologies specified under 19 U.S.C. §
1677b(e)(2)(B). See id. at 15.
2. Commerce’s Contentions
In response, Commerce asserts that it applied a reasonable
interpretation of 19 U.S.C. § 1677b(e)(2)(A) and properly based
CV profit for each respondent, including RHP-NSK, upon the
actual profit data of that respondent. See Def.’s Partial Opp’n
to Mot. J. Agency R. at 17. Although Commerce recognizes that
19 U.S.C. § 1677(16) establishes a descending hierarchy that
articulates preferences for the type of foreign like product the
agency must select for matching purposes, it, nevertheless,
Consol. Court No. 97-02-00217 Page 25
claims, in essence, that where the subject merchandise is
complex, encompassing numerous characteristics for matching, the
foreign like product typically embraces more that one of the §
1677(16) categories. See id. at 10. Commerce contends that the
term “foreign like product” is not limited to the product which
is “identical” (i.e., “model-specific”) or “like” (i.e.,
“similar to”) the subject merchandise, because if neither is
available, merchandise of the same “general class or kind” as
the subject merchandise will qualify as the foreign like
product. See id. at 10-11.
Commerce additionally claims that there is no indication by
referencing to “a foreign like product” in 19 U.S.C. §
1677b(e)(2)(A), Congress intended that CV profit be calculated
based on merchandise that is identical or similar to the subject
merchandise. See id. at 11. Commerce also notes that CV becomes
available for NV only when identical or similar home market
merchandise is not available for comparison with United States
sales either because there are no such home market sales or they
are below-cost and, thereby, are disregarded. See id. Commerce
maintains that Congress could not have intended to limit the CV
profit calculation under § 1677b(e)(2)(A) to profit incurred in
the production or sale of merchandise identical or similar to
Consol. Court No. 97-02-00217 Page 26
the subject merchandise because, in that event, the preferred
method of § 1677b(e)(2)(A) would rarely be applicable. See id.
Commerce, therefore, argues that since there were sales of
foreign like products that were not disregarded and actual
profit amounts were realized by each respondent in connection
with these sales, Commerce properly applied the preferred method
by aggregating those profits. See id. at 13. To apply an
alternative methodology where there are sales of the foreign
like product, according to Commerce, would virtually eliminate
the statutory preference to calculate CV profit based upon §
1677b(e)(2)(A). See id.
Commerce further notes that in the Proposed Regulations, see
61 Fed. Reg. at 7335, it properly determined that (1) the
language of 19 U.S.C. § 1677b(e)(2)(A) is unclear; and (2) the
URAA legislative history does not show that the intent of
Congress was to require Commerce to make separate CV profit
calculations for identical bearings or bearing families, based
upon RHP-NSK’s narrow interpretation of the term “foreign like
product,” see id. at 11-15. Commerce, therefore, argues that
its statutory interpretation of calculating CV profit, as
reflected in its Proposed Regulations and the Final Results, was
reasonable. See id. at 12.
Consol. Court No. 97-02-00217 Page 27
Moreover, Commerce disagrees with RHP-NSK’s assertion that
Commerce ignored the explicit hierarchy of 19 U.S.C. § 1677(16)
by calculating CV profit based on profits for products from all
§ 1677(16) categories. See id. at 15. Citing U.H.F.C. Co. v.
United States, 916 F.2d 689 (Fed. Cir. 1990) (a pre-URAA case),
and Toyota Motor Sales, U.S.A., Inc. v. United States, 22 CIT
__, 15 F. Supp. 2d 872 (1998) (a post-URAA case), Commerce
argues that it is simply following its practice established
under pre- and post-URAA law of applying the categories set
forth under § 1677(16), which defines “such or similar”
merchandise (now “foreign like product”), depending upon the
particular context. See Def.’s Partial Opp’n to Mot. J. Agency
R. at 15-17.
Because it is following established practice, Commerce also
argues that there is no merit to RHP-NSK’s claim that if
Commerce’s interpretations of the term “foreign like product”
and 19 U.S.C. § 1677b(e)(2)(A) are correct, then Commerce must
also use an aggregate price in calculating NV or COP. See id.
at 17. Similarly, contrary to RHP-NSK’s claim that Commerce
expanded the meaning of the term “foreign like product” based
upon the fact § 1677b(e)(2)(A) uses the term “a foreign like
Consol. Court No. 97-02-00217 Page 28
product” rather than “the foreign like product” or simply
“foreign like product,” Commerce claims that it merely set forth
its statutory interpretation that the word “a” was not intended
to overturn its prior practice of aggregating figures for profit
and SG&A. See id.
Commerce, therefore, argues that the Court should sustain
its CV profit determination because it is supported by
substantial evidence and in accordance with law. See id. at 17-
18.
3. Torrington’s Contentions
In support of Commerce, Torrington first contends that 19
U.S.C. § 1677b(e)(2)(A) on its face permits a flexible
application of “foreign like product” in CV profit calculations.
See Torrington’s Resp. to Pls.’ Mem. Supp. Mot. J. Agency R. at
7. Torrington asserts that § 1677b(e)(2)(A)’s plural
expression, “profits,” and flexible expression, “in connection
with,” carries the clear meaning and intent that Commerce may
calculate CV profit from multiple sales of relevant merchandise
and by reference to more than one bearing “family,” so long as
the models in the calculation are reasonably “connected” to the
particular model for which CV is being determined. See id.
Consol. Court No. 97-02-00217 Page 29
Torrington, therefore, argues that § 1677b(e)(2)(A) does not
limit Commerce to any particular narrow product-group. See id.
Torrington also contends that rules of statutory
construction necessitates Commerce’s broad and flexible
interpretation of 19 U.S.C. § 1677b(e)(2)(A). See id. at 8.
Torrington first notes that § 1677b(e)(2)(A) is the general rule
and preferred basis for determining CV profit. See id.
Torrington also notes that in most cases, CV forms NV only when
a respondent reports insufficient sales of “foreign like
product,” as the term is narrowly understood, in the ordinary
course of trade. See id. Accordingly, Torrington claims that
if the Court construes § 1677b(e)(2)(A) narrowly in the CV
profit context, it will effectively negate the general rule and
preferred basis for CV profit calculations. See id. In support
of its claim, Torrington asserts that (1) “courts [must] strive
to give effect to all provisions in a statute, so as not to
render a provision inoperative,” id. (citing United States v.
Menasche, 348 U.S. 528, 538-39 (1955)); and (2) courts must also
“avoid giving statutes manifestly absurd interpretations which
literal readings would otherwise support,” id. (citing United
States v. Brown, 333 U.S. 18, 27 (1948)). Torrington argues if
the Court were to adopt RHP-NSK’s position for calculating CV
Consol. Court No. 97-02-00217 Page 30
profit, the Court would clearly violate both of these rules.
See id.Torrington further contends that the crux of RHP-NSK’s
argument is that the term “foreign like product” under 19
U.S.C. § 1677(16) must be applied with rigid consistency in two
different contexts, namely, those for (1) calculating price-
based NV from home market sales of comparable merchandise, and
(2) calculating CV profit. See id. at 10. Torrington disagrees
with RHP-NSK, arguing first that “a determination . . . can be
satisfactorily made” language of 19 U.S.C. § 1677(16) clearly
provides that Commerce has discretionary authority to select
among the categories of identical and similar merchandise to
reach a satisfactory determination. See id. In other words,
Commerce has the authority to make a satisfactory determination
of what is encompassed by “foreign like product” and, therefore,
it acted reasonably when it based CV profit on the sales of all
foreign like products. See id. at 10-11, 13.
Torrington also asserts that Commerce reasonably concluded
that “foreign like product” can differ by context, that is,
depending upon whether the dumping comparison is based on (1)
price-to-price, or (2) price-to-CV. See id. at 11. First,
Consol. Court No. 97-02-00217 Page 31
Torrington notes that when there are adequate home market sales
made at above-cost prices of identical or similar merchandise,
there is no need to determine profit, and the application of
“foreign like product” turns to model-matching issues. See id.
Under the model-matching methodology, Torrington notes that when
price-to-price comparison is not between identical merchandise,
a “satisfactory” determination of “foreign like product”
dictates finding the most nearly similar product in order to
minimize the need for adjusting NV for difference in cost
attributable to differences in physical characteristics of the
merchandise compared, pursuant to 19 U.S.C. § 1677b(a)(6)(C)(ii)
(1994). See id. at 11, 13. Otherwise, according to Torrington,
if Commerce determined that similar merchandise encompassed many
AFB families, it would then have a rather difficult task of
making numerous and highly complex adjustments, on a part-by-
part basis, and then aggregating those adjusted prices to
determine final NVs. See id. at 11-12. Torrington thereby
contends that, in the context of model-matching methodology,
Commerce might reasonably give the term “foreign like product”
a narrow and pragmatic application to minimize such complex
adjustments. See id. at 12.
On the other hand, Torrington notes that CV profit is
Consol. Court No. 97-02-00217 Page 32
invoked only when there are no available or usable home market
sales of identical or similar merchandise in the ordinary course
of trade. See id. Moreover, Torrington notes that Commerce
does not use an absolute price in a home-market sale for CV
profit; rather, it calculates an average profit rate (i.e.,
based on total profits earned by total costs of goods sold)
that, unlike a price for a particular bearing model, does not
have to be adjusted for differences in physical characteristics
between merchandise being compared. See id. Torrington claims
that Commerce reasonably assumes that the profit rate earned on
home market sales of all “foreign like products” is the rate
that would have been earned for sales of the identical product,
if sold at home in the ordinary course of trade. See id. at 12-
13. Thus, Torrington asserts that “less precision in
comparability is required to determine an appropriate CV profit
rate than to determine appropriate models to compare.” Id. at
13. Torrington, therefore, argues that, in the context of CV
profit calculations, Commerce must give the term “foreign like
product” a broader application so that “a determination . . .
[could] be satisfactorily made,” that is, a satisfactory
determination on the basis of sales of all foreign like
products. See id. at 12-13 (quoting 19 U.S.C. § 1677(16)).
Consol. Court No. 97-02-00217 Page 33
Torrington also argues, inter alia, that, contrary to RHP-
NSK’s suggestion that the Court interpret the term “a foreign
like product” of 19 U.S.C. § 1677b(e)(2)(A) in all contexts as
referring to a singular class of identical merchandise or to a
singular bearing family, the selection of the word “a” in the
statute commonly means “any,” and can be “applied to more than
one individual object; whereas ‘the’ is an article which
particularizes the subject spoken of.” Id. at 14 (quoting
Allstate Ins. Co. v. Foster, 693 F. Supp. 886, 889 (D.Nev. 1988)
(quoting, in turn, Black’s Law Dictionary, 1, 1324 (5th ed.
1979)). In addition, Torrington claims that judicial precedent
supports construing the word “a” in a broader manner. See id.
at 14-15 (citations omitted). Consistent with the common
meaning and judicial precedent, Torrington asserts that the
Court should sustain Commerce’s interpretation that “a foreign
like product” can mean “any” such product and all such products
combined for purposes of calculating CV profit under §
1677b(e)(2)(A). See id. at 15.
C. Analysis
The issue primarily presented by RHP-NSK is whether 19
U.S.C. § 1677b(e)(2)(A) requires Commerce to calculate CV profit
Consol. Court No. 97-02-00217 Page 34
based on actual profit amounts incurred in the home market
production and sale of model or family bearings that match each
bearing model sold in the United States or, in the absence of
such profit data, to use one of the alternative profit
methodologies in § 1677b(e)(2)(B).
Section 1677b(e)(2)(A) specifically provides that Commerce
must base CV profit on “actual amounts incurred and realized .
. . in connection with the production and sale of a foreign like
product.” Similarly, the legislative history of the statute
clarifies “that Commerce will base . . . profit only on amounts
incurred and realized in connection with sales in the ordinary
course of trade of the particular merchandise in question
(foreign like product).” SAA at 839. Accordingly, an analysis
of the statutory definition for the term “foreign like product”
is critical to settle the CV profit issue RHP-NSK raises.
Title 19, United States Code, § 1677(16) sets forth, like
its pre-URAA form,8 a tripartite hierarchy for ascertaining
8Title 19, United States Code, § 1677(16) (1994) revised
the pre-URAA precursor, 19 U.S.C. § 1677(16) (1988), inter alia,
by substituting the term “foreign like product” for “such or
similar merchandise,” and deleting the phrase “which is the
subject of an investigation” from § 1677(16). See SAA at 820;
see generally NSK Ltd. v. United States, 190 F.3d 1321, 1329
(Fed. Cir. 1999); Cemex, S.A. v. United States, 133 F.3d 897,
(continued...)
Consol. Court No. 97-02-00217 Page 35
“foreign like product.” Section 1677(16) provides:
The term "foreign like product" means merchandise in
the first of the following categories in respect of
which a determination for the purposes of part II of
this subtitle can be satisfactorily made:
(A) The subject merchandise and other merchandise
which is identical in physical characteristics with,
and was produced in the same country by the same
person as, that merchandise.
(B) Merchandise–
(i) produced in the same country and by the
same person as the subject merchandise,
(ii) like that merchandise in component
material or materials and in the purposes for
which used, and
(iii) approximately equal in commercial value
to that merchandise.
(C) Merchandise–
(i) produced in the same country and by the
same person and of the same general class or
kind as the subject merchandise,
(ii) like that merchandise in the purposes
for which used, and
(iii) which the administering authority
determines may reasonably be compared with that
merchandise.
19 U.S.C. § 1677(16) (1994).9 From this language, it is clear
8(...continued)
902-03 (Fed. Cir. 1998) (both cases discussing pre-URAA §
1677(16)’s hierarchy for determining “such or similar
merchandise”).
9 Although a “literal” reading of 19 U.S.C. § 1677(16)’s
definition of the term “foreign like product” is for “a
determination for the purposes of part II” of subtitle IV of the
Tariff Act of 1930, the Court nevertheless finds that general
rules of statutory construction dictate part IV’s § 1677(16) is
applicable in this case, that is, an administrative review of a
final determination pursuant to part III of subtitle IV. See
generally Freytag v. Comm’r, 501 U.S. 868, 877 (1991)
(continued...)
Consol. Court No. 97-02-00217 Page 36
that Commerce must first select merchandise that is identical
(i.e., model-specific) with the subject merchandise sold in, or
to, the United States. See 19 U.S.C. § 1677(16)(A). If such a
match is not possible, then Commerce must select merchandise
that is like (i.e., similar to) the subject merchandise. See
id. § 1677(16)(B). Finally, if neither identical nor like
merchandise is available, merchandise of the “same general class
or kind as the subject merchandise” will qualify as the “foreign
like product.” Id. § 1677(16)(C). In other words, as RHP-NSK
correctly notes, once Commerce finds merchandise that matches
the criteria stated by a § 1677(16) category, it need not
consider the remaining categories because the statute
specifically directs Commerce to determine “foreign like
product” on the “first of the following categories in respect of
which a determination . . . can be satisfactorily made.” Id. §
1677(16); see Federal-Mogul, 918 F. Supp. at 396, Cemex, S.A.,
133 F.3d at 903 (noting same for pre-URAA § 1677(16)).
Additionally, § 1677(16)’s “can be satisfactorily made”
language indicates, as Torrington imprecisely argues, that
9(...continued)
(expressing “a deep reluctance to interpret a statutory
provision so as to render superfluous other provisions in the
same enactment”) (citation and internal quotation marks
omitted).
Consol. Court No. 97-02-00217 Page 37
Commerce has the discretionary authority to select “foreign like
product” in the first of the enumerated categories in which a
satisfactory determination can be made. However, if a
determination cannot be “satisfactorily made” relying on one of
the three § 1677(16) categories, the Court notes that the
statute and its legislative history are ambiguous with regard to
the selection of “foreign like product” for use in calculating
CV profit. Therefore, under these circumstances, the Court
would have to proceed to the second step of Chevron to ascertain
if Commerce’s “foreign like product” selection for use in
calculating CV profit was a reasonable interpretation under 19
U.S.C. § 1677b(e)(2)(A).
In this case, as noted earlier, Commerce decided that “[f]or
those U.S. models which no identical or similar match was found,
the CV of the U.S. model was used as the basis for the NV.”
NSK-RHP Bearings--Preliminary Results Analysis Memo--
Antifriction Bearings from the U.K.--Sixth Administrative
Review, 5/1/94-4/30/95, A-412-801, Proprietary Doc. No. 12
(Fiche 71), at 2 (July 2, 1996); see Preliminary Results, 61
Fed. Reg. at 35,718 (Commerce “used CV as the basis for NV when
there were no usable sales of the foreign like product in the
comparison market”). In other words, Commerce did not find
Consol. Court No. 97-02-00217 Page 38
merchandise that matches the criteria of the “identical” or
“like” categories of “foreign like product” for purposes of
calculating CV profit. See 19 U.S.C. § 1677(16)(A), (B).
Rather, in calculating CV profit, Commerce used “aggregate data
that encompasses all foreign like products under consideration
for NV” to calculate profit for CV. Final Results, 62 Fed. Reg.
at 2113. The Court finds that use of such aggregate data
matches the criteria of § 1677(16)(C)’s “same general class or
kind” category and, therefore,10 Commerce’s determination under
19 U.S.C. § 1677b(e)(2)(A) was in accordance with law.
10 In its brief, Commerce advanced the position that
“[w]here . . . the subject merchandise is complex, encompassing
numerous characteristics for matching, the foreign like product
typically embraces more than one of the categories established
in section 1677(16).” Def.’s Partial Opp’n to Mot. J. Agency R.
at 10. The Court, however, cannot defer to this post hoc
rationalization as a basis to uphold or overturn Commerce’s
decision to rely on aggregate data for “foreign like product”
because Commerce’s final determination must be sustained, if at
all, on the same basis articulated in the determination by
Commerce itself. See Burlington Truck Lines, Inc. v. United
States, 371 U.S. 156, 168-69 (1962) (“The courts may not accept
. . . counsel’s post hoc rationalizations for agency action; .
. . an agency’s discretionary order [must] be upheld, if at all,
on the same basis articulated in the order by the agency
itself.”); see also Martin v. Occupational Safety and Health
Review Comm’n, 499 U.S. 144, 156 (1991) (“[A]gency ‘litigating
positions’ are not entitled to deference when they are merely .
. . counsel’s ‘post hoc rationalizations’ for agency action,
advance for the first time in the reviewing court.”); Bowen v.
Georgetown Univ. Hosp., 488 U.S. 204, 213 (1988) (“Deference to
what appears to be nothing more than an agency’s convenient
litigating position would be entirely inappropriate.”).
Consol. Court No. 97-02-00217 Page 39
Moreover, the Court notes that since Commerce found that there
were sales of foreign like products that were not disregarded
and actual profit amounts were realized by RHP-NSK in connection
with these sales for use in calculating CV profit under §
1677b(e)(2)(A), see id., the three alternative CV methodologies
in § 1677b(e)(2)(B) are in applicable, see 19 U.S.C. §
1677b(e)(2)(B) (stating that subparagraph (B) is applicable when
“actual data are not available with the respect to the amounts
described in subparagraph (A)”). Furthermore, in examining the
structure of § 1677b(e), the Court concludes, as Commerce
argued, that to apply one of § 1677b(e)(2)(B)’s alternative
methodologies where there are such sales of the foreign like
products would virtually eliminate the statutory preference to
calculate CV profit based upon § 1677b(e)(2)(A). The Court also
finds that the URAA legislative history supports the use of such
actual profit data under § 1677b(e)(2)(A) to compute CV profit
before resorting to § 1677b(e)(2)(B)’s alternative
methodologies. See SAA at 839-40. In addition, having reviewed
the record, the Court finds that Commerce's factual
determinations concerning CV profit calculations are supported
by substantial evidence. Accordingly, Commerce’s CV profit
methodology is affirmed.
Consol. Court No. 97-02-00217 Page 40
The Court declines to address RHP-NSK’s arguments concerning
19 C.F.R. § 351.405 conforming to the URAA because the revised
regulation became effective for all administrative reviews
initiated on the basis of requests made on or after July 1, 1997
and, therefore, is not applicable in this case. See 19 C.F.R.
§ 351.701 (1998) (clarifying applicability dates for regulations
under 19 C.F.R. § 351); see also Final Regulations, 62 Fed. Reg.
at 27,358-59 (discussing final amended regulation 19 C.F.R. §
351.405 and determination of product categories for calculating
SG&A and profit for CV under 19 U.S.C. § 1677b(e)(2)(A)).
II. Inclusion of Zero-Priced Samples Transactions
in RHP-NSK’s United States Sales Database
During this review, Commerce included in RHP-NSK’s United
States sales database free sample bearings given away at no
charge to potential United States customers. See Final Results,
62 Fed. Reg. at 2123. RHP-NSK argues that this case should be
remanded to Commerce with instructions, pursuant to NSK Ltd. v.
United States, 115 F.3d 965 (Fed. Cir. 1997), to exclude RHP-
NSK’s zero-priced sample transactions from the dumping margin
calculations. See Pls.’ Mem. Supp. Mot. J. Agency R. at 4-5,
15-16; Pls.’ Reply Mem. Supp. Mot. J. Agency R. at 9-10.
Consol. Court No. 97-02-00217 Page 41
Commerce agrees that a remand under NSK is proper and that,
on remand, it should exclude from RHP-NSK’s United States sales
database those sample transactions for which RHP-NSK received no
consideration. See Def.’s Partial Opp’n to Mot. J. Agency R. at
2-3, 18.
Although Torrington concedes that NSK holds that sales must
be for consideration to be cognizable under the antidumping law,
Torrington nevertheless argues that RHP-NSK failed to meet its
burden of proving that the transactions in question were free of
broader forms of consideration, that is, consideration other
than money and, therefore, no remand is necessary. See
Torrington’s Resp. to Pls.’ Mem. Supp. Mot. J. Agency R. at 16-
18. In the alternative, Torrington argues that if a remand is
ordered, the Court should not rule that RHP-NSK’s sample
transactions should be categorically excluded; rather, it should
instruct Commerce to reevaluate the record to determine whether
RHP-NSK’s sample transactions are in fact without consideration.
See id. at 16, 18.
Commerce is required to impose antidumping duties upon
merchandise that “is being, or is likely to be, sold in the
United States at less than its fair value.” 19 U.S.C. § 1673(1)
Consol. Court No. 97-02-00217 Page 42
(1994). A zero-priced transaction, however, does not qualify as
a “sale” and, therefore, cannot be included in Commerce’s
dumping margin calculations. See NSK, 115 F.3d at 975 (holding
“that the term ‘sold,’ as used in 19 U.S.C. §§ 1673 and
1677a(c), requires both a transfer of ownership to an unrelated
party and consideration”). Thus, the distribution of AFBs for
no consideration falls outside the purview of § 1673.
Consequently, the Court remands to Commerce to exclude from RHP-
NSK’s United States sales database any sample transactions that
were not supported by consideration and to adjust the dumping
margins accordingly.
III. Inclusion of Imputed Inventory Carrying Costs
in the CEP Offset When Comparing CEP Sales to CV
In the Final Results, Commerce “regard[ed] the inventory
carrying costs [RHP-NSK] incurred in the home market, which are
incurred prior to the sale, transfer, or shipment of the
merchandise to the U.S. affiliate, as an expense incurred on
behalf of the sale to the U.S. affiliate.” 62 Fed. Reg. at
2124. Commerce did not consider this to reflect a commercial
activity in the United States and, therefore, it did not deduct
domestic inventory carrying costs from CEP for the Final
Results. See id.
Consol. Court No. 97-02-00217 Page 43
RHP-NSK claims that Commerce correctly complied with the CEP
offset provision, 19 U.S.C. § 1677b(a)(7)(B) (1994), by
including inventory carrying costs in the CEP offset when it
matched CEP sales to home market price-based NVs, but it
violated the statute when it failed to include imputed inventory
carrying costs in the CEP offset when it matched CEP sales to
CV. See Pls.’ Mem. Supp. Mot. J. Agency R. at 5, 16-17. RHP-
NSK notes that Commerce corrected this clerical error in the
subsequent AFB review when it included inventory carrying costs
in the CEP offset for CEP sales matched to CV. See id. at 5
(citing Antifriction Bearings from Japan–NSK Ltd. (NSK)
Preliminary Results Analysis Memo Seventh Administrative Review
5/1/95-4/30/96, A-588-804, Proprietary Document, at 10-11 (Mar.
28, 1997)). RHP-NSK requests that the Court remand the issue
and instruct Commerce to include inventory carrying costs in the
CEP offset when matching CEP sales to CV. See id. at 17.
Commerce agrees with RHP-NSK’s remand request. See Def.’s
Partial Opp’n to Mot. J. Agency R. at 3, 18.
Torrington disagrees with RHP-NSK, noting that although
under Commerce’s prior practice “deductions from exporter’s sale
price (now called [CEP]) included imputed costs for carrying
Consol. Court No. 97-02-00217 Page 44
inventory from the time the merchandise left the home market
factory to the time of its shipment to the first unrelated
customer in the United States,” Commerce’s practice under the
new law, on the United States side, is not to deduct “the cost
of carrying inventory from the time the merchandise leaves the
factory to the time of the sale to the U.S. affiliate.”
Torrington’s Resp. to Pls.’ Mem. Supp. Mot. J. Agency R. at 19.
Thus, Torrington argues that the rationale for an offsetting
deduction has evaporated. See id. In the alternative,
Torrington contends that if a remand is ordered, the Court
should instruct Commerce to ensure that the sum of the average
imputed financial expenses (i.e., both imputed credit and
imputed inventory carrying costs) deducted from CV do not exceed
the per-unit actual interest expenses included in the CV-
buildup. See id. Torrington explains that since 19 U.S.C. §
1677b(e) requires that CV be “equal to” all actual costs of
materials and fabrication, SG&A and profit, deductions of
imputed financial expenses greater than the reported actual
amounts will result in the unlawful diminution of the reported
costs. See id. at 19-20. Torrington, therefore, asserts that
if a remand is ordered, Commerce’s margin calculation program
should be modified to include an appropriate cap on the
Consol. Court No. 97-02-00217 Page 45
deduction of average imputed expenses from CV. See id. at 20.
Title 19, United States Code, § 1677b(a)(1)(B) requires
Commerce to establish NV to the extent practicable, at the same
level of trade (“LOT”) as the EP or CEP. When Commerce is
unable to match United States sales with foreign market sales at
the same LOT, an adjustment to NV should be made to account for
the differences in price that result from the differences in
LOT. See 19 U.S.C. § 1677b(a)(7)(A). When the data available
does not provide an appropriate basis to grant a LOT adjustment
under § 1677b(a)(7)(A), but NV is established at a LOT
constituting a more advanced stage of distribution than the LOT
of the CEP, the statute ensures a fair comparison between United
States price and NV by reducing NV by what is known as the “CEP
offset.” See 19 U.S.C. § 1677b(a)(7)(B) (CEP offset is an
adjustment that is made to NV when NV is being compared to CEP
sales in the United States). Specifically, the CEP offset
adjustment is made by reducing NV “by the amount of indirect
selling expenses incurred in the country in which [NV] is
determined on sales of the foreign like product,” but this
deduction may not exceed (i.e., it is “capped” by) the amount of
the indirect selling expenses deducted in calculating CEP. See
id. Since the inventory carrying costs at issue constitute an
Consol. Court No. 97-02-00217 Page 46
indirect selling expense incurred in the home market on the
sales of the foreign like product, the Court, therefore, remands
to Commerce to include the imputed inventory carrying costs in
the calculation of CEP offset for RHP-NSK when matching CEP
sales to CV. See generally Notice of Final Determination of
Sales at Less Than Fair Value: Static Random Access Memory
Semiconductors From Taiwan, 63 Fed. Reg. 8909, 8915 (Feb. 23,
1998) (Commerce included inventory carrying costs in the CEP
offset for CEP sales matched to price-based NVs and CV).
CONCLUSION
For the foregoing reasons, the case is remanded to Commerce
to: (1) exclude from RHP-NSK’s United States sales database any
sample transactions that were not supported by consideration and
to adjust the dumping margins accordingly; and (2) include
imputed inventory carrying costs in the calculation of CEP
offset for RHP-NSK when matching CEP sales to CV. Commerce’s
final determination is affirmed in all other respects.
______________________________
NICHOLAS TSOUCALAS
SENIOR JUDGE
Dated: December 16, 1999
New York, New York
ERRATUM
Slip Op. 99-134
RHP BEARINGS LTD. v. UNITED STATES
Consol. Court No. 97-02-00217
On page 2, second full paragraph, the first sentence after Held: should
read as follows:
RHP-NSK’s motion is denied in part and granted in part.
December 16, 1999
ERRATUM
Slip Op. 99-134
RHP BEARINGS LTD. v. UNITED STATES
Consol. Court No. 97-02-00217
On page 24, line 2, which reads as “typically embraces more that one” should
read as follows:
“typically embraces more than one ”
April 19, 2000