Fag Italia S.p.A. v. U.S.

• Decision Date: 22 November 1996
• Docket Number: Slip Op. 96-187.,Court No. 95-03-O0335-S.
• Parties: FAG ITALIA S.p.A. and Fag Bearings Corporation; SKF USA Inc. and SKF Industrie S.p.A., Plaintiffs and Defendant-Intervenors, v. UNITED STATES, Defendant, and The Torrington Company, Defendant-Intervenor and Plaintiff.
• Court: U.S. Court of International Trade

Page 67

948 F.Supp. 67

FAG ITALIA S.p.A. and Fag Bearings Corporation; SKF USA Inc. and SKF Industrie S.p.A., Plaintiffs and Defendant-Intervenors, v. UNITED STATES, Defendant, and The Torrington Company, Defendant-Intervenor and Plaintiff.

Slip Op. 96-187.

Court No. 95-03-O0335-S.

United States Court of International Trade.

November 22, 1996.

Grunfeld, Desiderio, Lebowitz & Silverman LLP, New York City (Max F. Schutzman and Andrew B. Schroth), for plaintiff and defendant-intervenor FAG.

Howrey & Simon, Washington, DC (Herbert C. Shelley, Alice A. Kipel, Anne Talbot and Patricia M. Steele) for plaintiff and defendant-intervenor SKF.

Frank W. Hunger, Assistant Attorney General, David M. Cohen, Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (Velta A. Melnbrencis), of counsel: Mark A. Barnett, Michelle K. Behaylo, Stacy J. Ettinger, Thomas H. Fine, Dean A. Pinkert and David J. Ross, Attorney-Advisors, Office of Chief Counsel, for Import Administration, U.S. Department of Commerce, Washington, DC, for defendant.

Stewart and Stewart, Washington, DC (Terence P. Stewart, Wesley K. Caine, Geert De Prest and Lane S. Hurewitz), for defendant-intervenor and plaintiff Torrington.

OPINION

TSOUCALAS, Senior Judge:

Plaintiffs and defendant-intervenors, FAG Italia S.p.A. and FAG Bearings Corporation (collectively "FAG") and SKF USA Inc. and SKF Industrie S.p.A. (collectively "SKF"), challenge aspects of the final results of the fourth antidumping administrative review of the antidumping duty orders, entitled Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, et al.; Final Results of Antidumping Duty Administrative Reviews, Partial Termination of Administrative Reviews, and Revocation in Part of Antidumping Duty Orders ("Final Results"), 60 Fed.Reg. 10,900 (1995), as amended, Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France; Amendment to Final Results of Antidumping Duty Administrative Reviews and Recision of Partial Revocation of Antidumping Duty Order ("Amended Final Results"), 60 Fed.Reg. 16,608 (1995).¹ Defendant-intervenor and plaintiff, The Torrington Company ("Torrington"), also challenges aspects of the fourth review.

Background

The administrative review at issue was conducted by the Department of Commerce, International Trade Administration ("Commerce"), pursuant to section 751 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1675 (1992), and concerns antifriction bearing ("AFB") imports entered during the fourth review period, from May 1, 1992 through April 30, 1993. Final Results, 60 Fed.Reg. at 10,901.

On February 28, 1994, Commerce published the preliminary results of the fourth administrative review. See Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, Singapore, Sweden, Thailand, and the United Kingdom; Preliminary Results of Antidumping Duty Administrative Reviews, Partial Termination of Administrative Reviews, and Notice of Intent To Revoke Orders (in Part), 59 Fed.Reg. 9,463 (1994). On February 28, 1995, Commerce published the Final Results at issue. See Final Results, 60 Fed.Reg. 10,900. After correcting the calculation of U.S. price ("USP"), Commerce published its Amended Final Results on March 31, 1995. Amended Final Results, 60 Fed.Reg. 16,608.

On September 13, 1995, the Court consolidated FAG Italia S.p.A. and FAG Bearings Corp. v. United States, Court No. 95-03-00335-S, SKF USA Inc. and SKF Industrie S.p.A. v. United States, Court No. 95-04-00359, and Torrington Co. v. United States, Court No. 95-03-00352, into this action, Consolidated Court No. 95-03-00335-S. Pursuant to Rule 56.2 of the Rules of this Court, FAG, SKF and Torrington move for judgment on the agency record.

FAG alleges that Commerce erred in: (1) employing a rate-based, rather than amount-based, adjustment for value-added taxes ("VAT"); and (2) including sales of sample and prototype merchandise to U.S. customers in its margin calculation.

SKF alleges that Commerce erred in: (1) not utilizing a tax-neutral methodology for adjusting for VAT; (2) failing to exclude certain U.S. prototype transfers from the margin calculation; and (3) adopting an incorrect "all others" cash deposit rate for ball bearings from Italy.

Torrington claims that Commerce erred in: (1) failing to apply 19 C.F.R. § 353.26 (1994), known as the reimbursement regulation, in all instances where (a) transfer prices between related exporters and importers were less than cost of production plus profit, or, alternatively, cost of production, and (b) actual dumping margins were found; (2) taking below-cost sales into account in calculating profit for constructed value; (3) resorting to the use of constructed value where sales were made below cost without first determining whether there were other similar models which could serve as price-based comparisons; (4) adjusting foreign market value for pre-sale inland freight expenses; and (5) making clerical errors.

Discussion

The Court has jurisdiction over this matter under 19 U.S.C. § 1516a(a)(2) (1994) and 28 U.S.C. § 1581(c) (1994).

The Court must uphold Commerce's final determination unless it is "unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1)(B). Substantial evidence is "more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Universal Camera Corp. v. NLRB, 340 U.S. 474, 477, 71 S.Ct. 456, 459, 95 L.Ed. 456 (1951) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 216-17, 83 L.Ed. 126 (1938)). "It is not within the Court's domain either to weigh the adequate quality or quantity of the evidence for sufficiency or to reject a finding on grounds of a differing interpretation of the record." Timken Co. v. United States, 12 CIT 955, 962, 699 F.Supp. 300, 306 (1988), aff'd, 894 F.2d 385 (Fed.Cir.1990).

1. Commerce's VAT Adjustment Methodology

FAG and SKF challenge the VAT adjustment methodology that Commerce applied in the fourth review, arguing that Commerce should adopt a tax-neutral methodology and add to USP the absolute amount, as opposed to the ad valorem rate, of VAT collected on the relevant home market sale. FAG's Mem.Supp.Mot.J.Agency R. at 7-10; SKF's Mem.Supp.Mot.J.Agency R. at 13-27.

Torrington claims that, while a remand is appropriate for Commerce to review its methodology, the Court should not direct Commerce to employ a specific methodology. Torrington's Opp'n to Mots.J.Agency R. at 7-14.

Commerce has decided to return to the tax-neutral methodology that the United States Court of Appeals for the Federal Circuit ("CAFC") held was a reasonable statutory interpretation in Federal-Mogul v. United States, 63 F.3d 1572 (Fed.Cir.1995), and consents to a remand for this purpose. Def.'s Partial Opp'n to Mots.J.Agency R. at 11; see also FAG U.K. Ltd. v. United States, 20 CIT ___, ___, 945 F.Supp. 260, 264 (1996) (Commerce similarly consented to, and the Court granted, a remand for the same purpose); Torrington Co. v. United States, 20 CIT ___, ___, 944 F.Supp. 930, 936-37 (1996) (same). Hence, in accordance with Federal-Mogul, Commerce is required upon remand to implement the approved tax-neutral methodology in recalculating the adjustment to USP for FAG's and SKF's dumping margins.

2. Inclusion of Sales to U.S. Customers of Alleged Sample and Prototype Merchandise in Margin Calculations

FAG and SKF contend that Commerce improperly included zero-priced or de minimis U.S. sales of sample and prototype merchandise in its margin calculation of USP. FAG's Mem.Supp.Mot.J.Agency R. at 11-18; SKF's Mem.Supp.Mot.J.Agency R. at 28-41. FAG argues that such sales are atypical of those made in the ordinary course of business in the U.S. and, if included, unfairly distort the measure of actual dumping. FAG's Mem.Supp.Mot.J.Agency R. at 11-16. FAG adds that Commerce's inclusion of such distortive sales offends fundamental principles of fairness and improperly amounts to a punitive application of the dumping law. Id. at 17-18.

In the alternative, FAG claims that if sample and prototype sales are included in Commerce's margin calculations, a circumstance of the sale ("COS") adjustment should be made to foreign market value ("FMV") to account for the inclusion of the distortive sales. Id. at 16-17.

SKF claims that the alleged prototype AFBs it supplied to one United States customer should have been excluded from the USP margin calculation because the AFBs at issue were not used for commercial consumption and were destroyed during tests conducted by the U.S. customer. SKF's Mem.Supp.Mot.J.Agency R. at 31-33.

Commerce responds that, although in certain circumstances it may conclude that a U.S. sample is not a sale and thus exclude it from a margin analysis, Commerce is not required to exclude zero-priced or de minimis sales from its analysis. Def.'s Partial Opp'n to Mots.J.Agency R. at 11-28. Further, Commerce asserts that a COS adjustment is unnecessary where there is merely a difference in prices charged. Id. at 28-30. Torrington agrees generally with the positions taken by Commerce. Torrington's Opp'n to Mots.J.Agency R. at 8-23.

This Court recently addressed FAG's primary claim in FAG U.K. Ltd., 945 F.Supp. at 264-66, and concluded that it is without merit for the following reasons. First, Commerce is not required by statute or regulation to exclude zero-priced or de minimis sales from its analysis.²

Second, Commerce can only exclude sales from USP in an administrative review in exceptional circumstances when those sales are unrepresentative and extremely distortive.³ See Ipsco v. United States, 13 CIT 402, 408, 714 F.Supp. 1211, 1217 (1989) (a sale is excluded only when its inclusion would lead to an unrepresentative price comparison, thus frustrating the ...