699 F.Supp. 300 (CIT. 1988), 87-06-00738, Timken Co. v. United States

Docket Nº:Court No. 87-06-00738.
Citation:699 F.Supp. 300
Party Name:The TIMKEN COMPANY, Plaintiff, v. UNITED STATES, Defendant, China National Machinery & Equipment Import and Export Corporation (CMEC), Defendant-Intervenor.
Case Date:October 18, 1988
Court:Court of International Trade

Page 300

699 F.Supp. 300 (CIT. 1988)

The TIMKEN COMPANY, Plaintiff,



China National Machinery & Equipment Import and Export Corporation (CMEC), Defendant-Intervenor.

Court No. 87-06-00738.

United States Court of International Trade.

Oct. 18, 1988

Page 301

Stewart and Stewart (Eugene L. Stewart and Terence P. Stewart), Washington, D.C., for plaintiff.

John R. Bolton, Asst. Atty. Gen., David M. Cohen, Director, Civil Div., Commercial Litigation Branch, U.S. Dept. of Justice (Platte B. Moring, III), Washington, D.C., for defendant.

Graham & James (Lawrence R. Walders and Brian E. McGill), Washington, D.C., for defendant-intervenor.



Plaintiff, a domestic manufacturer of tapered roller bearings (TRBs), challenges the final affirmative determination of the United States Department of Commerce, International Trade Administration (Commerce) in Tapered Roller Bearings from the People's Republic of China; Final Determination of Sales at Less Than Fair Value, 52 Fed.Reg. 19,748 (May 27, 1987), which resulted in an exclusion of a foreign exporter's TRBs from the scope of the antidumping finding. Plaintiff disputes this determination on several grounds: (1) Commerce improperly applied the constructed value over the price methodology and the "best information available rule"; (2) Commerce erroneously appraised several components of production costs from India, the comparable surrogate country, which led to significant understatement of foreign market value; and (3) Commerce violated procedural due process by using data on which plaintiff did not have an opportunity to comment. The matter is before the Court on plaintiff's motion for judgment on the administrative record. 1


Commerce instituted an antidumping investigation which targeted two TRB exporters from the People's Republic of China (PRC): Premier Bearing & Equipment, Limited, and CMEC. Since the PRC is a state-controlled, non-market economy country, 19 U.S.C. § 1677b(c) (1982) requires Commerce to designate a nonstate-controlled surrogate country in which the foreign market value of Chinese TRBs will be determined. In accordance with 19 C.F.R. § 353.8(b), Commerce initially considered Egypt, India, Indonesia, Morocco, Pakistan, Thailand, and the Philippines as possible comparable economic conduits. Of these, only India and Indonesia were found to manufacture TRBs. Administrative Record Document No. 21 [hereinafter A.R. Doc. ____]. Finding Indonesia unsuitable as a comparable economy, Commerce designated India as the comparable surrogate country to the PRC. 2

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Commerce then dispatched surrogate questionnaires to six Indian TRB producers. Only one company, which was negotiating a joint venture with plaintiff, responded. Commerce rejected that company's price information upon being informed that the Indian government would not verify the report. Commerce reasoned that in the absence of verification, the figures lacked the requisite indicia of reliability.

Plaintiff offered cost data from Argentina, Mexico, and Spain, urging Commerce to utilize the price methodology. Commerce rejected these submissions on the grounds that the countries have advanced economies which preclude corresponding comparison with the PRC. The production statistics plaintiff's Brazilian subsidiary voluntarily supplied were likewise rejected on the incommensurability of economies rationale and also because they were untimely.

Pursuant to 19 C.F.R. § 353.8(b)(1), Commerce adopted the constructed value methodology which calls for a calculation of the foreign market value of TRBs on the basis of assigning the designated surrogate country's costs to Chinese factors of production. In constructing value, Commerce utilized cost information acquired from both the Indian Steel Authority's publication Statistics for Iron and Steel Industry in India and the U.S. Consulate in Bombay, India. To ascertain the Chinese factors of production, Commerce verified the PRC's manufacturing process through on-site inspections. A.R.Doc. 113. The Consulate's data, which Commerce relied on as the "best information otherwise available," were unverifiable due to the Indian government's lack of participation. On May 27, 1987, Commerce made a final affirmative determination that tapered roller bearings from the PRC were being sold in the United States at less than fair value, but found no dumping margin for CMEC. 52 Fed.Reg. 19,748.

Plaintiff claims that the statutory and the regulatory foreign market value provisions involved advance prices over constructed value, compelling Commerce to first use the price information from India, Brazil, Argentina, Mexico, and Spain. Plaintiff further contends that statutory verification provision 19 U.S.C. § 1677e (1982 & Supp. IV 1986), requires an exhaustion of verifiable data in the petition before utilizing the designated comparable surrogate's unverified figures as the "best information otherwise available."

Plaintiff also alleges that substantial evidence in the record does not support Commerce's calculation of the net raw material cost and the factory overhead. Lastly, it is plaintiff's position that it was denied due process because it was not provided with an opportunity to comment on one telex Commerce received from the U.S. Consulate eight days before publication of the final determination.


A. Foreign Market Value

The governing statutory provision for determining foreign market value states in pertinent part:

(c) State-controlled economies

[T]he administering authority shall determine the foreign market value of the merchandise on the basis of the normal costs, expenses, and profits as reflected by either --

(1) the prices ... at which such or similar merchandise of a non-State-controlled-economy country or countries is sold ...

(A) for consumption in the home market of that country or countries, or

(B) to other countries, including the United States; or

(2) the constructed value of such or similar merchandise in a non-State-controlled-economy country or countries ...

19 U.S.C. § 1677b(c) (emphasis added). It is obvious from the use of the disjunctive that Commerce has the discretion to use either prices or constructed value when computing foreign market value for state-controlled economies. Plaintiff's claim that Commerce is statutorily mandated to employ prices from India, Brazil, Argentina,

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Mexico, and Spain is patently contrary to the clear language of the statute. "[F]ailure to use a discretionary alternative method does not constitute error when the agency uses a lawful second method." Carlisle Tire & Rubber Co. v. United States, 9 CIT 520, 525, 622 F.Supp. 1071, 1076 (1985) (citing Zenith Radio Corp. v. United States, 9 CIT 110, 113, 606 F.Supp. 695, 698 (1985), aff'd, 783 F.2d 184 (Fed.Cir. 1986)). The Court therefore finds Commerce acted in accordance with the statute in adopting the constructed value methodology based on the Indian data.

Plaintiff argues that Commerce was otherwise required by its own regulations to utilize prices over the constructed value, citing subsection (a) of 19 C.F.R. § 353.8:

(a) In general ... foreign market value shall be determined on the basis of the normal costs, expenses, and profits as reflected in order of preference by either:

(1) The prices ...; or

(2) The constructed value of such or similar merchandise in a non-state-controlled-economy country, ... (emphasis added).

While section 353.8(a) states an order of preference for prices, it is nevertheless subordinate to the hierarchical order contained in subsection (b) on the comparability of economies:

(b) Comparability of economies. (1) The prices as determined under paragraph (a)(1), or the constructed value as determined under paragraph (a)(2), shall be determined, to the extent possible, from the prices or costs in a non-state-controlled-economy country or countries at a stage of economic development comparable to the state-controlled-economy country ...

(2) If no non-state-controlled economy country of comparable economic development can be identified, then the prices or constructed value as determined from another non-state-controlled-economy country or countries other than the United States shall be used ... (emphasis added).

Subsection (b)(1) provides that the "prices ... or the contructed value ... shall be determined" from a comparable non-state-controlled economy. Subsection (b)(2) likewise directs Commerce to utilize "prices or constructed value" from a non-comparable economy "[i]f no non-state-controlled economy country of comparable economic...

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