Peer Bearing Co. v. United States

Citation884 F.Supp.2d 1313
PartiesPEER BEARING COMPANY–CHANGSHAN, Plaintiff, v. UNITED STATES, Defendant, and The Timken Company, Defendant-intervenor.
Decision Date21 December 2012
CourtU.S. Court of International Trade

OPINION TEXT STARTS HERE

John M. Gurley, Diana Dimitriuc Quaia, and Matthew L. Kanna, Arent Fox LLP, of Washington, DC, for plaintiff and defendant-intervenor Peer Bearing Company–Changshan.

L. Misha Preheim, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for defendant. With him on the brief were Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, and Claudia Burke, Assistant Director. Of counsel on the brief was Joanna V. Theiss, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of Washington, DC.

Herbert C. Shelley and Christopher G. Falcone, Steptoe & Johnson LLP, of Washington, DC, for defendant-intervenors Changshan Peer Bearing Co. Ltd. and Peer Bearing Company.

William A. Fennell, Terence P. Stewart, and Stephanie R. Manaker, Stewart and Stewart, of Washington, DC, for plaintiff and defendant-intervenor The Timken Company.

OPINION AND ORDER

STANCEU, Judge:

This consolidated case arose from the final determination (“Final Results”) that the International Trade Administration, U.S. Department of Commerce (“Commerce”or the “Department”) issued to conclude the twenty-second administrative review of an antidumping duty order (the Order”) on tapered roller bearings (“TRBs”) and parts thereof, finished and unfinished, from the People's Republic of China (“China” or “PRC”). Tapered Roller Bearings & Parts Thereof, Finished & Unfinished, From the People's Republic of China: Final Results of the 2008–2009 Antidumping Duty Admin. Review, 76 Fed. Reg. 3,086 (Jan. 19, 2011) (“ Final Results ”). The twenty-second administrative review pertained to entries of TRBs and parts thereof from China (the “subject merchandise”) that were made during the period of June 1, 2008 through May 31, 2009 (the “period of review” or “POR”). Id. at 3,086.

As discussed herein, the court determines that a remand is appropriate with respect to certain aspects of the Final Results that are contested in this litigation.

I. Background

Background is provided in a prior opinion and order and is supplemented herein. Peer Bearing Co.-Changshan v. United States, 35 CIT ––––, ––––, Slip Op. 11–125, at 2, 2011 WL 4852207 (Oct. 13, 2011) (denying a motion to dismiss one of the claims brought in this consolidated action).

Peer Bearing Company–Changshan (CPZ), a Chinese manufacturer of TRBs that was a respondent in the twenty-second review, brought an action to contest the Final Results. See Compl. (Feb. 2, 2011), ECF No. 6. The Timken Company (Timken), a U.S. TRB manufacturer and a defendant-intervenor in Court No. 11–00022, also contested the Final Results. See Compl. (Mar. 10, 2010), ECF No. 9 (Court No. 11–00039). The two cases are now consolidated. Order (June 13, 2011), ECF No. 27.

On September 11, 2008, approximately three months into the POR, various companies controlled by a Swedish conglomerate, AB SKF, acquired CPZ from its majority shareholders, the Spungen family. See Tapered Roller Bearings & Parts Thereof, Finished or Unfinished, From the People's Republic of China: Prelim. Results of the 20082009 Admin. Review of the Antidumping Duty Order, 75 Fed. Reg. 41,148, 41,148–51 (July 15, 2010) (“ Prelim. Results ”); Final Results, 76 Fed. Reg. at 3,087. At the same time, AB SKF also acquired Peer Bearing Company, an Illinois-based and Spungen-owned U.S. sales affiliate of CPZ. Prelim. Results, 75 Fed. Reg. at 41,448;Final Results, 76 Fed. Reg. at 3,087. During the acquisition process, CPZ and Peer Bearing Company transferred to a separate company, PBCD, their responsibilities for participation in dumping reviews and litigation and for payment of dumping duties assessed on entries of subject merchandise made prior to the acquisition. Letter from SKF to the Sec'y of Commerce, at App. 2 (Mar. 19, 2010) (Admin. R. Doc. No. 5731). In this opinion, the pre-acquisition Chinese producer is identified as “CPZ,” and the pre-acquisition U.S. sales affiliate is identified as “PBCD/Peer.”

After the acquisition, CPZ underwent a reorganization to become a new Chinese company, Changshan Peer Bearing Co. Ltd. (referred to herein as “CPZ/SKF” or “SKF”). Prelim. Results, 75 Fed. Reg. at 41,152. CPZ/SKF and the acquired Peer Bearing Company (SKF/Peer) are defendant-intervenors in this case. Commerce determined that CPZ/SKF was not the successor in interest to CPZ and, therefore, treated the two companies as separate respondents in the review. Final Results, 76 Fed. Reg. at 3,087. In the Final Results, Commerce assigned weighted-average dumping margins of 38.39% to CPZ (identified in the Final Results as “PBCD”) and 14.13% to SKF. Id. at 3,088.

The court held oral argument on March 22, 2012. Oral Tr. 1 (May 17, 2012), ECF No. 90.

II. Discussion

Before the court are the motions of CPZ and Timken for judgment on the agency record, made under USCIT Rule 56.2, to contest the Final Results. [CPZ's] R. 56.2 Mot. for J. upon the Agency R. (Aug. 19, 2011), ECF No. 38; [Timken's] R. 56.2 Mot. for J. on the Agency R. (Aug. 19, 2011), ECF No. 36.

The court exercises jurisdiction according to section 201 of the Customs Courts Act of 1980 (“Customs Courts Act”), 28 U.S.C. § 1581(c) (2006). Under this provision, the court reviews actions commenced under section 516A of the Tariff Act of 1930 (“Tariff Act),119 U.S.C. § 1516a(a)(2)(B)(iii), including an action contesting the Department's issuance, under section 751 of the Tariff Act, 19 U.S.C. § 1675(a), of the final results of an administrative review of an antidumping duty order. In reviewing the final results, the court must hold unlawful any finding, conclusion or determination that is not support by substantial evidence on the record or that is otherwise not in accordance with law. See19 U.S.C. § 1516a(b)(1)(B)(i).

CPZ brings four claims in its Rule 56.2 motion. First, it claims that Commerce unlawfully determined that certain bearings that resulted from processing in Thailand consisting of grinding and honing of cups and cones, and final assembly, and that were exported from Thailand to the United States as finished products, were of Chinese origin and therefore subject to the Order. Pl.'s Mem. of P & A in Supp. of its Mot. for J. on the Agency R. 4 (Aug. 19, 2011), ECF No. 39 (“CPZ's Mem.”). Second, CPZ claims that Commerce calculated an unlawful assessment rate for subject merchandise imported by Peer Bearing Company. Id. at 2–3. Third, CPZ claims that Commerce used an unlawful surrogate value for the steel bar input to the TRB production process. Id. at 3. Finally, CPZ claims that Commerce used an unlawful surrogate value for the steel wire rod input. Id. at 3–4.

Timken asserts two claims in its USCIT Rule 56.2 motion. First, Timken claims that Commerce erred in deciding not to treat SKF's acquisition of Peer Bearing Company, which included an acquisition of inventory consisting of subject merchandise, as the first U.S. sale of that inventory to an unaffiliated purchaser for purposes of the antidumping statute. The Timken Co.'s Mem. of P & A in Supp. of its Mot. for J. on the Agency R. 2, 5 (Aug. 19, 2011), ECF No. 36 (“Timken's Mem.”). Second, Timken claims that Commerce erred in using factor-of-production (“FOP”) data pertaining to the post-acquisition producer ( i.e., SKF) rather than FOP data pertaining to the pre-acquisition producer ( i.e., CPZ) when determining the normal value of subject merchandise imported into the United States prior to the acquisition. Id. at 2, 12–13.

The court decides: (1) to direct Commerce to reconsider the Department's determination that CPZ's bearings processed in Thailand are of Chinese origin and therefore are subject merchandise; (2) to deny relief on CPZ's claim challenging the assessment rate; (3) to direct Commerce to redetermine a surrogate value for CPZ's use of steel bar; (4) to deny relief on CPZ's claim challenging the Department'ssurrogate value for steel wire rod; (5) to deny relief on Timken's claim that, for antidumping purposes, a sale of the U.S. inventory occurred upon SKF's acquisition of Peer Bearing Company; and (6) to direct Commerce to reconsider and explain the Department's decision to use SKF's data on factors of production in determining the normal value of subject merchandise that was imported prior to the acquisition and, therefore, had been produced by CPZ. The court addresses below each of these six claims.

A. Commerce Must Reconsider its Decision that Certain Bearings on which Grinding and Honing, and Assembly Operations, Were Conducted in Thailand Are Subject Merchandise

Some of the imported bearings subject to the review were exported to the United States from Thailand after having undergone processing by a CPZ affiliate in Thailand,2 which performed grinding and honing operations on unfinished cups and cones made in China and also performed the assembly operations, which involved the cups and cones processed in Thailand and cages and rollers produced in China. Issues & Decision Mem., A–570–601, at 10–11 (Jan. 11, 2011) (Admin. R. Doc. No. 6041) (“ Decision Mem.”). Commerce determined that China was the country of origin of these bearings and that, accordingly, these bearings were merchandise subject to the Order. Id. 11–17; Final Results, 76 Fed. Reg. at 3,086. CPZ claims that a substantial transformation occurred in Thailand resulting in finished bearings that should have been determined to have Thai origin, not Chinese origin, for antidumping purposes. CPZ's Mem. 32–40. CPZ argues, inter alia, that substantial evidence does not support the Department's origin determination and that the determination is inconsistent with rulings by U.S. Customs and Border Protection concluding on the same facts that the country of...

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