115 F.3d 965 (Fed. Cir. 1997), 96-1359, NSK Ltd. v. United States

Docket Nº:96-1359.
Citation:115 F.3d 965
Party Name:NSK LTD. and NSK Corporation, Plaintiffs-Appellants, v. The UNITED STATES, Defendant-Appellee, and Federal-Mogul Corporation, Defendant, and The Torrington Company, Defendant-Appellee.
Case Date:June 10, 1997
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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Page 965

115 F.3d 965 (Fed. Cir. 1997)

NSK LTD. and NSK Corporation, Plaintiffs-Appellants,

v.

The UNITED STATES, Defendant-Appellee,

and

Federal-Mogul Corporation, Defendant,

and

The Torrington Company, Defendant-Appellee.

No. 96-1359.

United States Court of Appeals, Federal Circuit

June 10, 1997

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[Copyrighted Material Omitted]

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Robert A. Lipstein, Lipstein, Jaffe & Lawson, L.L.P., Washington, DC, argued for the plaintiffs-appellants. With him on the brief were Matthew P. Jaffe and Grace W. Lawson.

Velta A. Melnbrencis, Assistant Director, Commercial Litigation Branch, Civil Division, Department of Justice, Washington, DC, argued for defendant-appellee The United States. With her on the brief were Frank W. Hunger, Assistant Attorney General, and David M. Cohen, Director. Of counsel on the brief were Stephen J. Powell, Chief Counsel, Berniece A. Browne, Senior Counsel, Mark A. Barnett, Attorney, Thomas H. Fine, Attorney, and Dean A. Pinkert, Attorney, Office of the Chief Counsel for Import Administration, Department of Commerce, Washington, DC.

James R. Cannon, Jr., Stewart & Stewart, Washington, DC, argued for defendant-appellee The Torrington Company. With him on the brief were Terence P. Stewart and Patrick J. McDonough. Of counsel was William A. Fennell.

Before PLAGER, RADER, and SCHALL, Circuit Judges.

SCHALL, Circuit Judge.

This is an antidumping case. Plaintiff-Appellant NSK Ltd., a Japanese corporation, is a manufacturer and exporter of antifriction bearings. Plaintiff-Appellant NSK Corporation, a United States corporation and a wholly-owned subsidiary of NSK Ltd., is an importer and manufacturer of antifriction bearings. Defendant-Appellee The Torrington Company ("Torrington") is a United States producer of antifriction bearings. 1

NSK Ltd. and NSK Corporation (collectively "NSK") appeal portions of the final decisions of the United States Court of International Trade in NSK Ltd. v. United States, 896 F.Supp. 1263 (CIT 1995), and NSK Ltd. v. United States, No. 92-07-00470, 1996 WL

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109429 (CIT Mar. 7, 1996). In these decisions, the court decided the lawfulness of various aspects of the final results issued by the International Trade Administration, United States Department of Commerce ("Commerce"), in its review of the antidumping duty order in effect for antifriction bearings. Those final results are set forth in Antifriction Bearings (Other than Tapered Roller Bearings) and Parts Thereof From France; et al.; Final Results of Antidumping Duty Administrative Reviews, 57 Fed.Reg. 28,360 (1992). 2

Of relevance to this appeal, the court sustained the following decisions by Commerce: (i) samples that NSK gave free of charge to potential customers constituted "sales" under the antidumping laws; (ii) dumping margins for imported antifriction bearing parts that were used in the manufacture of complete antifriction bearings in the United States were computed by subtracting from the price of the complete antifriction bearings the value added by the United States manufacturer; (iii) home market credit expenses incurred by NSK Ltd. were not circumstances of sale expenses, for which an adjustment would be made to the foreign market value of NSK's merchandise; and (iv) early payment discounts and distributor incentive rebates extended by NSK Ltd. in the home market were not to be included in calculating NSK Ltd.'s cost of production for purposes of performing a cost test to determine whether merchandise was being sold by NSK Ltd. in the home market at prices below the cost of production. We affirm-in-part, reverse-in-part, and remand.

BACKGROUND

I.

The antidumping laws impose additional duties on imported products that are being sold, or are likely to be sold, at less than their fair value to the detriment of a domestic industry. 19 U.S.C. § 1673 (1988). 3 The quantum of the additional duties is known as the "dumping margin," and is equal to the amount by which the foreign market value exceeds the United States price for the merchandise. 19 U.S.C. § 1673; 19 C.F.R. § 353.2(f)(1) (1996). 4 Thus, the additional duties are designed to correct the dumping margin. See Zenith Electronics Corp. v. United States, 988 F.2d 1573, 1576 (Fed.Cir.1993).

Foreign market value is computed based on one of three methods: (i) home market sales; (ii) third country sales; and (iii) constructed value. See 19 U.S.C. § 1677b(a)(1)-(2) (1988); Smith-Corona Group v. United States, 713 F.2d 1568, 1572-73 (Fed.Cir.1983). Computation of foreign market value based on home market sales is preferred. See Smith-Corona, 713 F.2d at 1573. United States price is measured by either the purchase price or the exporter's sales price, depending on the nature of the relationship, if any, between the importer and the exporter. Koyo Seiko Co., Ltd. v. United States, 36 F.3d 1565, 1567 (Fed.Cir.1994); see 19 U.S.C. § 1677a(a) (1988). The United States price will be the purchase price if the domestic importer is unrelated to, and independent of, the foreign producer. Koyo Seiko, 36 F.3d at 1567. On the other hand, the United States price will be the exporter's sales price if the importer and exporter are related, such as in this case, where the importer (NSK Corporation) is a subsidiary of the exporter (NSK Ltd.). See id. Purchase price is defined as "the price at which merchandise is purchased, or agreed

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to be purchased, ... from a reseller or the manufacturer or producer of the merchandise for exportation to the United States." 19 U.S.C. § 1677a(b) (1988). Exporter's sales price is defined as the "price at which merchandise is sold or agreed to be sold in the United States ... by or for the account of the exporter...." Id. § 1677a(c) (1988).

To ensure that dumping duties are calculated in a fair manner, foreign market value and United States price are subject to various adjustments to achieve a common basis for comparing prices. Koyo Seiko, 36 F.3d at 1568. Examples of such adjustments are found in 19 U.S.C. §§ 1677a(d)-(e) and 1677b(a)(1), (a)(4) (1988). Such adjustments may result from costs, charges, and expenses incurred as a result of exporting the goods from the home country to the United States. See id. For example, section 1677a(e)(3) provides that exporter's sales price is to be reduced by "any increased value, including additional material and labor, resulting from a process of manufacture or assembly performed on the imported merchandise after the importation of the merchandise and before its sale to a person who is not the exporter of the merchandise." At the same time, section 1677b(a)(4)(B) provides that foreign market value is to be adjusted for differences in "circumstances of sale." Such circumstances of sale include costs for " 'advertising, warranty and after sales services, packing costs, and after sales rebates.' " Koyo Seiko, 36 F.3d at 1568 (quoting Smith-Corona Group, 713 F.2d at 1573 n. 12).

Finally, in its calculation of foreign market value, Commerce disregards sales of merchandise at below-cost, if certain conditions are met. 5 19 U.S.C. § 1677b(b) (1988). In order to determine whether merchandise is being sold at below-cost, section 1677b(b) provides that upon reasonable grounds for belief or suspicion, Commerce performs a cost test in which it determines whether merchandise has been sold "in the home market of the country of exportation" at prices lower than the "cost of producing the merchandise in question." To ensure that a fair comparison is made, Commerce includes selling and other expenses in both the home market price and the cost of production ("COP"). See, e.g., Federal-Mogul Corp. v. United States, 862 F.Supp. 384, 401 (CIT 1994) (remanding case to Commerce to take into account certain expenses to ensure that fair comparison of home market price and COP was made); Nachi-Fujikoshi Corp. v. United States, 798 F.Supp. 716, 721 (CIT 1992) (noting that to ensure fair comparison of home market price and COP, Commerce has often made allowances for rebates). Whenever Commerce disregards sales on the ground that they were made at less than the cost of production, and the remaining sales, which were not made at less than the cost of production, are deemed to be inadequate as a basis for the determination of foreign market value, Commerce uses the constructed value of the merchandise to determine foreign market value. Id.

This appeal involves two questions of law: (i) whether free samples of NSK merchandise imported into the United States should be included in the calculation of exporter's sales price for purposes of determining United States price; and (ii) whether Commerce's calculation of dumping margins for imported antifriction bearing parts was inconsistent with 19 U.S.C. § 1677a(e)(3) noted above. The appeal also involves two fact issues. The first is whether, in determining foreign market value for NSK merchandise, Commerce should have made allowance for certain home market credit expenses under 19 U.S.C. § 1677b(a)(4)(B), on the ground that the difference between the foreign market value of NSK's merchandise and its United States price was the result of the home market credit expenses creating a difference in the circumstances of sale. The second is whether, when Commerce conducted a cost test under 19 U.S.C. § 1677b(b) for NSK's merchandise, it should have included in COP as selling, general, and administrative ("SG & A") expenses certain discounts and rebates extended by NSK Ltd. in the home market.

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II.

Unless otherwise noted, the facts are not in dispute. On May 3, 1989, Commerce issued final determinations in its less-than-fair-value ("LTFV") investigation relating to sales of antifriction bearings (other than tapered roller bearings) and bearing parts in various countries, including Japan. On May 15, 1989, as a result of the investigation, Commerce published antidumping duty...

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