820 F.Supp. 1444 (CIT. 1993), 91-08-00555, Nippon Pillow Block Sales Co., Ltd. v. United States
|Docket Nº:||Court No. 91-08-00555.|
|Citation:||820 F.Supp. 1444|
|Party Name:||NIPPON PILLOW BLOCK SALES CO., LTD. and FYH Bearing Units U.S.A., Inc., Plaintiff, v. UNITED STATES, Defendant, The Torrington Company; Federal-Mogul Corporation, Defendant-Intervenors.|
|Case Date:||April 23, 1993|
|Court:||Court of International Trade|
[Copyrighted Material Omitted]
Tanaka & O'Leary, H. William Tanaka, Michele N. Tanaka, Michael J. Brown and John J. Kenkel, Washington, DC, for plaintiff.
Baker & McKenzie, Kevin M. O'Brien, Richard G. King and Joseph E. Downey, Washington, DC, Emerson Power Transmission Corp., amicus curiae in support of plaintiff's motion.
Stuart E. Schiffer, Acting Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice (Velta A. Melnbrencis and Jane E. Meehan), of counsel; Stephen J. Claeys and Dean A. Pinkert, Attorney-Advisors, Office of the Chief Counsel for Import Admin., U.S. Dept. of Commerce, Washington, DC, for defendant.
Stewart and Stewart, Eugene L. Stewart, Terence P. Stewart, James R. Cannon, Jr., Geert De Prest, John M. Breen, Patrick J. McDonough, Margaret L.H. Png and Amy S. Dwyer, Washington, DC, for defendant-intervenor The Torrington Co.
Frederick L. Ikenson, P.C., Frederick L. Ikenson, J. Eric Nissley and Joseph A. Perna, V, Washington, DC, for defendant-intervenor Federal-Mogul Corp.
Plaintiff, Nippon Pillow Block Sales Co., Ltd. and FYH Bearing Units U.S.A., Inc. ("NPB"), commenced this action to challenge certain aspects of the Department of Commerce, International Trade Administration's ("ITA") final results in the first administrative review of imports of antifriction bearings ("AFBs") from Japan. Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From Japan; Final Results of Antidumping Duty Administrative Reviews (" Final Results "), 56 Fed.Reg. 31,754 (1991). Substantive issues raised by the parties in the underlying administrative proceeding were addressed by the ITA in the issues appendix to Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From the Federal Republic of Germany; Final Results of Antidumping Duty Administrative Review (" Issues Appendix "), 56 Fed.Reg. 31,692 (1991).
In this proceeding NPB challenges: (1) the ITA's determination that NPB failed the ITA's cost verification and (2) the ITA's use of best information otherwise available ("BIA") for NPB's dumping margin. In addition, if the Court remands this case back to the ITA, NPB requests the Court to instruct the ITA not to compare sales of dissimilar quantities of AFBs when comparing home market and U.S. sales. Memorandum in Support of Plaintiff's Motion for Judgment on the Agency Record Pursuant to USCIT Rule 56.1 (" NPB's Memorandum ") at 15-93.
On June 11, 1990, the ITA initiated an administrative review of imports of ball bearings, cylindrical roller bearings, spherical plain bearings and parts thereof from Japan. Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From the Federal Republic of Germany, France, Italy, Japan, Romania, Singapore, Sweden, Thailand and the United Kingdom Initiation of Antidumping Administrative Reviews, 55 Fed.Reg. 23,575 (1990). NPB participated in this review. Administrative Record Japan Public Document ("AR Japan Pub.Doc.") 9.
On March 15, 1991, the ITA published its preliminary determination in the administrative review. Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts thereof from Japan; Preliminary Results of Antidumping Duty Administrative Reviews and Partial Termination of Antidumping Duty Administrative Reviews (" Preliminary Results "), 56 Fed.Reg. 11,186 (1991). In the Preliminary Results, the ITA assigned NPB a 54.54% margin for ball bearings. NPB's sales of cylindrical roller bearings and spherical plain bearings were not subject to this review. Preliminary Results, 56 Fed.Reg. at 11,189.
On July 11, 1991, the ITA published its Final Results in this proceeding. Final Results, 56 Fed.Reg. 31,754. The ITA assigned NPB a margin of 45.83% for ball bearings. Id. at 31,756.
During the course of this administrative review, NPB submitted cost of production and constructed value data for the types of AFBs which it sold in the home market. 1 AR Japan Pub.Doc. 443. The ITA had requested that NPB provide this data on a model-specific basis. However, in the ordinary course of its business NPB did not record its expenses on a model-specific basis but rather on an aggregate basis. Therefore, NPB reported its costs on an aggregate basis and developed a methodology for allocating these costs on a model-specific basis. Id.
On October 30, 1990, the ITA notified NPB that reasonable grounds existed to believe that NPB sold AFBs in the home market at below cost of production prices. AR Japan Pub.Doc. 451.
From December 17 to December 20, 1990, the ITA conducted verification of NPB's cost of production and constructed value data. AR Japan Pub.Doc. 658. The ITA verified all of the underlying factual data submitted by NPB, including: aggregate in-house labor costs, aggregate overhead and model-specific subcontracting costs. Id.
At verification, the ITA discovered that NPB's method for allocating in-house labor costs and overhead on a model-specific basis was based on the ratio of each model's subcontracting costs for outer ring turning, one of the production steps which occur when making the outer ring of an AFB, to that model's total sub-contracting and material costs. Id. The ITA also discovered that some AFB production steps were being conducted by subcontractors for certain bearing models and that the same production steps
were being conducted in-house for other bearing models. Id. The ITA concluded that the use of subcontracting costs as the basis for allocating in-house labor and overhead could lead to over- or under-allocation of these costs and, therefore, rejected NPB's allocation methodology for model-specific in-house labor and overhead. Id. The ITA requested NPB to develop an alternative allocation methodology. Id.
The ITA also had a problem with NPB's reported selling, general, and administrative expenses ("SG & A"). NPB reported SG & A for each model based on that model's cost of manufacture. The cost of manufacture included NPB's model-specific in-house labor and overhead costs, which the ITA had already rejected. While the ITA verified the accuracy of NPB's allocation methodology for SG & A, the ITA rejected NPB's reported SG & A because the underlying data had been rejected. Id.
As a result of the ITA's inability to verify NPB's model specific in-house labor costs, overhead and SG & A expenses, the ITA determined in the Preliminary Results that NPB had failed verification and decided to apply a BIA rate as NPB's dumping margin. Preliminary Results, 56 Fed.Reg. at 11,186.
During the rest of the administrative review, NPB contended that its in-house labor costs, overhead and SG & A had been successfully verified by the ITA. If, however, the ITA continued to find that NPB had failed verification, NPB argued that the use of BIA in this situation was not warranted, offered alternative methods for allocating in-house labor costs and overhead which the ITA rejected, and suggested that the ITA develop an allocation methodology on its own or use BIA only for model-specific in-house labor and overhead. AR Japan Pub.Docs. 791, 843.
Defendant-intervenors, The Torrington Company ("Torrington") and the Federal-Mogul Corporation ("Federal-Mogul"), submitted comments supporting the ITA's use of a BIA rate as NPB's dumping margin. AR Japan Pub.Docs. 857, 866.
In the Final Results of this administrative review, the ITA explained its use of total BIA for firms which cooperated in the review as follows:
2. When a company substantially cooperated with our requests for information including, in some cases, verification, but failed to provide the information requested in a timely manner or in the form required, we have used as BIA the higher of: (1) The firm's LTFV rate for the subject merchandise (or the "all others" rate from the LTFV investigation, if the firm was not individually investigated), or (2) the highest calculated rate in this review for the class or kind of merchandise from the same country of origin.
Issues Appendix, 56 Fed.Reg. at 31,705.
The ITA's explanation of its use and choice of a BIA rate for NPB's dumping margin deserves to be quoted at length:
We disagree with NPB's contention that its basic labor, overhead, selling, general and administrative expense data were successfully verified. Although we were able to tie the aggregate labor, overhead and SG & A expenses from the monthly trial balance to the audited financial statements, we were not able to tie the reported model-specific amounts for these items to those internal accounting records and financial statements. Verification depends precisely on tying amounts reported in questionnaire responses to the company's internal accounting records and financial statements. Failure to demonstrate such a relationship results in a failed verification. In Valves [Certain Valves and Connectors of Brass for Use in Fire Protection Systems from Italy, 55 FR 50342 (1990) ] and Salmon [Final Determination of Sales at Less Than Fair Value; Fresh and Chilled Atlantic Salmon from Norway, 56 FR 7661 (1991) ] minor reallocations based on financial statement data were accepted because the respondents' questionnaire responses reconciled to the internal accounting records and financial statements. Unlike Valves and Salmon, and TRBs [Tapered Roller Bearings Four Inches or Less in Outside...
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