Koyo Seiko Co., Ltd. v. U.S., 94-1363

Decision Date20 September 1995
Docket NumberNo. 94-1363,94-1363
Citation66 F.3d 1204
PartiesKOYO SEIKO CO., LTD. and Koyo Corporation of U.S.A., Plaintiffs-Appellees, v. The UNITED STATES, Defendant-Appellant, and The Timken Company, Defendant.
CourtU.S. Court of Appeals — Federal Circuit

D. Christine Wood, Powell, Goldstein, Frazer & Murphy, Washington, DC, argued, for plaintiffs-appellees. On the brief were Peter O. Suchman and Susan P. Strommer.

Frank W. Hunger, Assistant Attorney General, David M. Cohen, Director, U.S. Department of Justice, Commercial Litigation Branch, Civil Division. Velta A. Melnbrencis, Assistant Director, Civil Litigation Branch, Civil Division, Washington, DC, argued, for defendant-appellant. Of counsel were Stephen J. Powell, Chief Counsel, Berniece A. Browne, Senior Counsel, and Linda S. Chang, Attorney-Advisor, Office of Chief Counsel for Import Administration, U.S. Department of Commerce, Washington, DC.

Before ARCHER, Chief Judge, SKELTON, Senior Circuit Judge, and SCHALL, Circuit Judge.

SCHALL, Circuit Judge.

The United States appeals the September 21, 1993 decision of the United States Court of International Trade in Koyo Seiko Co. v. United States, 834 F.Supp. 431 (Ct.Int'l Trade 1993). In its decision, the court held that the International Trade Administration ("ITA") of the Department of Commerce ("Commerce") erred in one aspect of its calculation of final dumping margins for certain entries by Koyo Seiko Co., Ltd. and Koyo Corp. of U.S.A., Inc. (collectively "Koyo"). 1 Because the court erred by failing to defer to Commerce's reasonable interpretation of the statutory provisions at issue, we affirm in part, reverse in part, and remand.

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 (1988). 2

                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).  Commerce imposes a duty, otherwise known as the "dumping margin," equal to the "amount by which the foreign market value exceeds the United States price for the merchandise."  19 U.S.C. Sec. 1673 (1988). 3  Foreign market value, or "FMV," is the "price ... at which such or similar merchandise is sold ... in the principal markets of the country from which exported."  19 U.S.C. Sec. 1677b(a)(1) (1988).  If Commerce cannot determine FMV on the basis of market prices, then FMV may be the constructed value ("CV") of the merchandise.  See 19 U.S.C. Sec. 1677b(a)(2) (1988) ("If ... the foreign market value of imported merchandise cannot be determined ... then ... the foreign market value of the merchandise may be the constructed value of that merchandise."). 4  Before Commerce can compare the United States price, or "USP," to the FMV of the imported merchandise, it first must determine what merchandise is "such or similar" to that sold in the United States. 5  In short, Commerce must "match" the U.S. product to a similar home-market product.  The central issue in this case is whether the Court of International Trade erred in failing to defer to Commerce's chosen methodology for determining, and its determination of, what is "such or similar" merchandise under 19 U.S.C. Sec. 1677b
                
II. Facts of the Case

In 1986, Commerce initiated an antidumping investigation of certain tapered roller bearings (TRBs) from various countries. Tapered Roller Bearings and Parts Thereof, and Certain Housings Incorporating Tapered Rollers From Hungary, Italy, Japan, The People's Republic of China, Romania, and Yugoslavia, 51 Fed.Reg. 31732 (Dep't Comm.1986). The investigation covered TRBs with a wide range of uses. Koyo Seiko Co., Ltd. manufactures TRBs in Japan and exports them to the United States, and its affiliate Koyo Corp. of U.S.A. sells them in the United States. During the less-than-fair-value investigation of TRBs from Japan, Commerce considered comments regarding the factors that should be considered in determining which TRBs sold in the home market should be matched with the TRBs sold in the United States.

In due course, Commerce selected six criteria that it used to match U.S. TRBs with home-market TRBs:

1) the outside diameter ("OD") of the bearing;

2) the inside diameter ("ID") of the bearing;

3) the width ("W") of the bearing;

4) the type of bearing in terms of its physical

characteristics, including the number of rows of rollers, flanges, seals, configurations of multiple rows of rollers, and whether the bearing is heat treated;

5) the dynamic, or basic load rating ("BLR"),

which is the constant stationary load that the bearing can endure for one million revolutions of the inner ring; and

6) the Y factor, which measures the effect of

thrust loads on the expected life of a bearing.

Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan, 52 Fed.Reg. 30700, 30701-02 (Dep't Comm.1987) (final determination). The fourth factor is not quantified by a single number for purposes of statistical analysis, and thus the remaining five factors are referred to as the "five criteria."

In the less-than-fair-value investigation, Commerce compared each U.S. TRB model to all TRB models in the home market for which the deviation for each of the five criteria was ten percent or less. Id. at 30702. (That is, if any home-market TRB differed from the U.S. model by more than ten percent in any of the five criteria, that home-market TRB was not considered to be "such or similar" merchandise for purposes of calculating the antidumping duty.) From that group of similar home-market TRBs, Commerce then selected, as the most similar TRB, the home-market TRB model with the criterion whose greatest degree of deviation from the same criterion in the U.S. model was nevertheless smaller than the greatest degree of deviation in any of the other similar TRBs. 6 Id. Where there was a deviation in only one factor, Commerce compared TRBs for which the deviation was slightly over ten percent. Id. This method of matching U.S. TRBs with home-market TRBs is referred to as the "greatest-single-deviation" methodology. Eventually, Commerce made a final determination on the dumping of TRBs. 7 Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan, 52 Fed.Reg. 30700, 30701-02 (Dep't Comm.1987) (final determination).

In March of 1989, Commerce initiated the first administrative review of TRBs from Japan covering the period from March 27, 1987, through September 30, 1988. Initiation of Antidumping and Countervailing Duty Administrative Reviews, 54 Fed.Reg. 9868 (Dep't Comm.1989). 8 After initially using the greatest-single-deviation methodology previously described, Commerce changed to a "sum-of-the-deviations" methodology for matching U.S. TRBs with home-market TRBs. See Tapered Roller Bearings, Finished and Unfinished, and Parts Thereof, From Japan, 56 Fed.Reg. 41508, 41509 (Dep't Comm.1991) (final admin. review). This methodology compared the matched TRBs in each of the five criteria without using any limitation or "cap" on the deviation of any one criteria, and chose as the best match the TRB model for which the sum of the deviations was the lowest. Id.

Koyo contended during the administrative review that without a ten percent cap on deviations for each of the five criteria, certain matches resulted in the comparison of products that look very different, have dissimilar components, construction, and capabilities, and are used by different customers for different Koyo commenced suit in the Court of International Trade contesting the final results of the 1987-1988 administrative review. Among other things, Koyo argued that Commerce should have continued to use the greatest-single-deviation methodology it had used in the less-than-fair-value investigation that resulted in the final dumping determination. Koyo further contended that, with that methodology, Commerce should have used a ten percent cap. On September 21, 1993, the court ruled on Koyo's motion for judgment on the agency record. The court stated:

purposes. Id. at 41510-11. Koyo contended that models used for different purposes are priced for sale in different markets, and therefore are not approximately equal in commercial value. Id. at 41511. Koyo also contended that TRB models with more than an insignificant deviation in any one or more of the critical criteria will not normally be considered commercially similar. Id. In short, Koyo argued that Commerce could only be assured of matching "such or similar" TRBs if it used the ten percent cap on each of the five criteria used in the sum-of-the-deviations methodology. Commerce rejected Koyo's contentions, and used the sum-of-the-deviations methodology, without a ten percent cap, to match TRBs. Id. Commerce found a dumping margin for Koyo TRBs of 36.2 percent ad valorem.

Koyo concedes that both methodologies are capable of generating comparisons of such or similar merchandise; however, it further states that there is a limit on the permissible deviation of the criteria used to match TRB models and, therefore, Commerce should use the ten percent cap.

Commerce claims that the ten percent cap is not necessary as it would eliminate from use as comparison models home market sales which overall are most similar to the United States TRBs.

This Court affirms Commerce's switch in methodologies; nevertheless, the Court feels that the new methodology must be used in conjunction with the ten percent cap to limit the permissible deviation of the criteria used to [match] TRB models. Commerce used the cap in its original less than fair value determination and its use avoids comparisons between products which differ so dramatically that t...

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