36 F.3d 1565 (Fed. Cir. 1994), 93-1525, Koyo Seiko Co., Ltd. v. United States

Docket Nº:93-1525, 93-1534.
Citation:36 F.3d 1565
Party Name:KOYO SEIKO CO., LTD. and Koyo Corporation of U.S.A., Plaintiffs-Appellees, and Isuzu Motors, Ltd. and American Isuzu Motors, Inc., Plaintiffs, v. UNITED STATES, Defendant, and The Timken Company, Defendant-Appellant. KOYO SEIKO CO., LTD. and Koyo Corporation of U.S.A., Inc., Plaintiffs-Appellees, and Isuzu Motors, Ltd. and American Isuzu Motors, In
Case Date:September 30, 1994
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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Page 1565

36 F.3d 1565 (Fed. Cir. 1994)

KOYO SEIKO CO., LTD. and Koyo Corporation of U.S.A.,

Plaintiffs-Appellees,

and

Isuzu Motors, Ltd. and American Isuzu Motors, Inc., Plaintiffs,

v.

UNITED STATES, Defendant,

and

The Timken Company, Defendant-Appellant.

KOYO SEIKO CO., LTD. and Koyo Corporation of U.S.A., Inc.,

Plaintiffs-Appellees,

and

Isuzu Motors, Ltd. and American Isuzu Motors, Inc., Plaintiffs,

v.

UNITED STATES, Defendant-Appellant,

and

The Timken Company, Defendant.

Nos. 93-1525, 93-1534.

United States Court of Appeals, Federal Circuit

September 30, 1994

Page 1566

Susan P. Strommer, Powell, Goldstein, Frazer & Murphy, Washington, DC, argued, for plaintiffs-appellees. With her on the brief was Peter O. Suchman. Of counsel were T. George Davis and Elizabeth C. Hafner.

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George Kleinfeld, Paul, Weiss, Rifkind, Wharton & Garrison, Washington, DC, for plaintiffs.

Velta A. Melnbrencis, Dept. of Justice, Washington, DC, argued, for defendant. Of counsel were David M. Cohen, Dept. of Justice, Stephan J. Powell, Joan McKenzie, Berniece Browne and Linda S. Chang, Dept. of Commerce.

Geert DePriest, Stewart & Stewart, Washington, DC, argued, for defendant-appellant. Terence P. Stewart, James R. Cannon, Jr. and Margaret E.O. Edozien, Stewart & Stewart, of Washington, DC, were on the brief, for defendant-appellant. Of counsel was John M. Breen.

Frederick L. Ikenson, Frederick L. Ikenson, P.C., Washington, DC, was on the brief, for amicus curiae, Federal-Mogul Corp.

Before ARCHER, Chief Judge, [*] LOURIE and SCHALL, Circuit Judges.

SCHALL, Circuit Judge.

The government and The Timken Company (Timken) each appeal the January 8, 1993 decision of the U.S. Court of International Trade (Court), Koyo Seiko Co. v. United States, 810 F.Supp. 1287 (Ct.Int'l Trade 1993), holding, inter alia, that the International Trade Administration of the Department of Commerce (Commerce) erred in calculating final dumping margins for certain entries by Koyo Seiko Company and Koyo Corporation of U.S.A. (collectively, Koyo). 1 Because the Court erred by failing to defer to Commerce's reasonable interpretation of the statutory provisions at issue, we reverse and remand with instructions.

BACKGROUND

I. The Calculation of Antidumping Duties

Under the statutory provision governing the imposition of antidumping duties, Commerce is required to impose additional duties on imported merchandise that is being sold, or is likely to be sold, in the United States at less than fair value to the detriment of a domestic industry. 19 U.S.C. Sec. 1673 (Supp.1993). See Smith-Corona Group v. United States, 713 F.2d 1568, 1571, 1 Fed.Cir. (T) 130, 132 (1983), cert. denied, 465 U.S. 1022, 104 S.Ct. 1274, 79 L.Ed.2d 679 (1984). The amount of the duty to be imposed, otherwise known as the "dumping margin," equals "the amount by which the foreign market value exceeds the United States price for the merchandise." 19 U.S.C. Sec. 1673 (Supp.1994). Foreign market value is typically computed on the basis of home market sales or third country sales, as appropriate. See 19 U.S.C. Sec. 1677b (Supp.1993). United States price is measured by one of two methods--purchase price or exporter's sales price--depending upon the nature of the relationship, if any, between the importer and the exporter. 19 U.S.C. Sec. 1677a (1988 & Supp.1993). Where the domestic importer is unrelated to, and independent of, the foreign producer, purchase price is used. Purchase price is "the actual or agreed-to price between the foreign producer and the independent importer, prior to the time of importation." Smith-Corona, 713 F.2d at 1572, 1 Fed.Cir. (T) at 133. On the other hand, where the importer and exporter are related (e.g., the importing corporation is a subsidiary of the exporting corporation), the United States price is measured by the exporter's sales price, which is "the price at which the foreign manufacturer or its agent sells or agrees to sell the merchandise in the United States." The Ad Hoc Comm. of AZ-NM-TX-FL Producers of Gray Portland Cement v. United States, 13 F.3d 398, 399 n. 2 (Fed.Cir.1994) (citing Zenith Elecs. Corp. v. United States, 988 F.2d 1573, 1577 (Fed.Cir.1993)); 19 U.S.C. Sec. 1677a(c) (1988). The purpose of distinguishing between purchase price and exporter's sales price is to arrive at a United States price that reflects the price that the merchandise would command in "an arm's length transaction, whether from the importer to an independent retailer or directly to the public." See Smith-Corona, 713 F.2d at 1572, 1 Fed.Cir. (T) at 133.

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To ensure that the quantum of antidumping duties is calculated in a fair manner, both foreign market value and United States price are subject to certain adjustments in order to achieve a common point at which to perform the price comparison. We have explained:

Foreign market value and United States price represent prices in different markets affected by a variety of differences in the chain of commerce by which the merchandise reached the export or domestic market. Both values are subject to adjustment in an attempt to reconstruct the price at a specific, "common" point in the chain of commerce, so that value can be fairly compared on an equivalent basis. While the statute does not specify where in the chain of commerce price is constructed, the specific statutory adjustments appear to indicate an "f.o.b. foreign port" price.

Id. at 1571-72, 1 Fed.Cir. (T) at 132 (emphasis in original).

Foreign market value is subject to several adjustments, including a "circumstances of sale" adjustment as provided in 19 U.S.C. Sec. 1677b(a)(4). Circumstances of sale that have served as the basis for an adjustment to foreign market value include costs such as "advertising, warranty and after sales service, packing costs, and after sales rebates." Smith-Corona, 713 F.2d at 1573 n. 12, 1 Fed.Cir. (T) at 134 n. 12. United States price is adjusted according to which measure--purchase price or exporter's sales price--is used. In both purchase price and exporter's sales price transactions, the adjustment bases provided in section 1677a(d) are available (e.g., certain packaging expenses, shipping costs, duties, and taxes). The additional adjustment bases set forth in section 1677a(e), however, are applicable only to exporter's sales price transactions (e.g., commissions and selling expenses "generally incurred" in the United States).

After Commerce has appropriately adjusted the foreign market value and the United States price for each entry of merchandise subject to the antidumping duty order at issue, the dumping margin--i.e., the amount of the antidumping duty--is calculated by subtracting United States price from foreign market value. 19 U.S.C. Sec. 1675(a)(2) (Supp.1994).

As discussed in more detail below, the present dispute centers on whether certain selling expenses incurred on sales of the merchandise at issue in the United States are properly accounted for by a "circumstances of sales" adjustment to foreign market value pursuant to section 1677b(a)(4), or by an adjustment to exporter's sales price pursuant to section 1677a(e)(2). 2

II. Facts of the Case

The present appeals arise from the final results of an antidumping duty administrative review conducted by Commerce determining that certain of Koyo's tapered roller bearings (TRBs)--i.e., those that entered the United States during the period August 1, 1986, through July 31, 1987--were subject to

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a dumping margin of 52.17% ad valorem. 3 The administrative review was conducted upon request of the parties, pursuant to 19 U.S.C. Sec. 1675(a), to definitively determine the amount of antidumping duties owed by Koyo on the subject merchandise.

Because Koyo Seiko Company and Koyo Corporation of U.S.A. represent a related exporter-importer pair, Commerce utilized the exporter's sales price of the merchandise in calculating the dumping margin. After calculating an initial exporter's sales price, Commerce adjusted that value, inter alia, pursuant to section 1677a(e)(2) by deducting therefrom all selling expenses (both "direct" and "indirect" 4) incurred in making U.S. sales. 5 After calculating a foreign market value, and performing other adjustments and calculations not at issue in this appeal, Commerce calculated the dumping margin, pursuant to 19 U.S.C. 1675(a)(2), by subtracting exporter's sales price from foreign market value.

Pursuant to 19 U.S.C. Sec. 1516a(a)(2)(B)(iii), Koyo filed suit in the Court of International Trade to challenge the methodology used by Commerce in calculating the dumping margin for the TRB entries at issue. In particular, Koyo asserted that Commerce abused its discretion in deducting Koyo's direct selling expenses from exporter's sales price. Instead, Koyo argued, Commerce should have added the direct selling expenses to foreign market value as a "circumstances of sale" adjustment pursuant to 19 U.S.C. Sec. 1677b(a)(4). The Court agreed. Relying on a line of its cases that had "interpreted section 1677a(e) to refer to indirect rather than direct selling expenses," 6 the Court held that reductive adjustments of exporter's sales price under 19 U.S.C. Sec. 1677a(e)(2) were limited to indirect selling expenses. Koyo Seiko, 810 F.Supp. at 1292. Further, the Court noted that its precedent "repeatedly held that 'direct selling expenses are properly characterized as differences in circumstances of sale' which may adjust foreign market value." Id. Concluding that Commerce's calculation methodology was improper as being contrary to established law, the Court remanded the case to Commerce "for recalculation of exporter's sales price, without an adjustment for direct selling expenses[, and for recalculation of] foreign market value to reflect an adjustment for direct selling expenses." Id. Timken and the government...

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