Federal-Mogul Corp. v. US

• Decision Date: 04 February 1993
• Docket Number: Court No. 91-07-00530.
• Citation: 813 F. Supp. 856,17 CIT 88
• Parties: FEDERAL-MOGUL CORPORATION, Plaintiff, The Torrington Company, Plaintiff-Intervenor, v. UNITED STATES, Defendant, NTN Bearing Corporation of America, American NTN Bearing Manufacturing Corporation and NTN Corporation; Koyo Seiko Co., Ltd. and Koyo Corporation of U.S.A.; Peer Bearing Company; NSK Ltd. and NSK Corporation, Defendants-Intervenors.
• Court: U.S. Court of International Trade

813 F. Supp. 856

17 CIT 88

FEDERAL-MOGUL CORPORATION, Plaintiff, The Torrington Company, Plaintiff-Intervenor, v. UNITED STATES, Defendant, NTN Bearing Corporation of America, American NTN Bearing Manufacturing Corporation and NTN Corporation; Koyo Seiko Co., Ltd. and Koyo Corporation of U.S.A.; Peer Bearing Company; NSK Ltd. and NSK Corporation, Defendants-Intervenors.

Court No. 91-07-00530.

United States Court of International Trade.

February 4, 1993.

Frederick L. Ikenson, P.C., Frederick L. Ikenson, J. Eric Nissley, Joseph A. Perna, V and Larry Hampel, for plaintiff Federal-Mogul Corp.

Stewart and Stewart, Eugene L. Stewart, Terence P. Stewart, James R. Cannon, Jr., Wesley K. Caine, Christopher J. Callahan, John M. Breen and Amy S. Dwyer, for plaintiff-intervenor The Torrington Co.

Stuart M. Gerson, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice, Velta A. Melnbrencis, of counsel: John D. McInerny, Acting Deputy Chief Counsel for Import Admin., Dean A. Pinkert, Stephen J. Claeys and Craig R. Giesze, Attorney-Advisors, Office of the Chief Counsel for Import Admin., U.S. Dept. of Commerce, for defendant.

Powell, Goldstein, Frazer & Murphy, Peter O. Suchman, Neil R. Ellis, Susan E. Silver and Niall P. Meagher, for defendants-intervenors Koyo Seiko Co., Ltd. and Koyo Corporation of U.S.A.

Barnes, Richardson & Colburn, Robert E. Burke, Donald J. Unger, Kazumune V. Kano and Diane A. MacDonald, for defendants-intervenors NTN Bearing Corp. of America, American NTN Bearing Mfg. Corp. and NTN Corp.

Coudert Brothers, Robert A. Lipstein, Matthew P. Jaffe and Nathan V. Holt, for defendants-intervenors NSK Ltd. and NSK Corp.

Venable, Baetjer, Howard & Civiletti, John M. Gurley, John C. Dibble and Lindsay B. Meyer, for defendant-intervenor Peer Bearing Co.

OPINION

TSOUCALAS, Judge:

Plaintiff, Federal-Mogul Corporation ("Federal-Mogul"), 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 from Japan. Anti-friction 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).

Defendant-intervenors, Koyo Seiko Co., Ltd. and Koyo Corporation of U.S.A. ("Koyo"), now move pursuant to Rule 56.1 of the Rules of this Court for partial judgment on the agency record in regard to certain claims which may affect Koyo raised by Federal-Mogul in its challenge to certain aspects of the ITA's Final Results.

Background

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).

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 calculated that Koyo's margin for ball bearings was 0.49% and Koyo's margin for cylindrical roller bearings was 0.02%. Koyo had no sales of spherical plain bearings during the period of 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 calculated margins of 9.82% for Koyo's ball bearings and 1.45% for Koyo's cylindrical roller bearings. Id. at 31,756.

Federal-Mogul has challenged the following actions by the ITA which may impact Koyo's dumping margin alleging that these actions were unsupported by substantial evidence on the administrative record and not in accordance with law: (1) the ITA's use of a methodology for adjusting United States price ("USP")¹ and Foreign Market Value ("FMV")² for the Japanese value added tax ("VAT") that failed to measure the tax incidence or "pass through" of the tax to the consumer in the home market, that granted a circumstance of sale ("COS") adjustment to FMV to achieve tax neutrality, the incorrect calculation of the tax base for U.S. sales and the failure to impose a cap on the VAT adjustment to USP; (2) the ITA's method of calculating cash deposit rates for estimated duties; (3) the ITA's failure to adjust home market selling expenses for delayed payment of the expenses; (4) the ITA's adjustment of constructed value for differences in COS; (5) the ITA's treatment of U.S. sales commissions; (6) the ITA's failure to deduct antidumping duty related legal expenses from the exporter's sales price ("ESP"); and (7) the ITA's failure to deduct estimated antidumping duties from USP. Federal-Mogul Corporation's Opposition to the Motion for Judgment on the Agency Record ("Federal-Mogul's Opposition") at 6-80.

Discussion

The Court's jurisdiction over this matter is derived from 19 U.S.C. § 1516a(a)(2) (1988) and 28 U.S.C. § 1581(c) (1988).

A final determination by the ITA in an administrative proceeding will be sustained unless that determination is "unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1)(B) (1988). Substantial evidence is "relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 216, 83 L.Ed. 126 (1938); Alhambra Foundry Co. v. United States, 12 CIT 343, 345, 685 F.Supp. 1252, 1255 (1988).

1. Treatment of Value Added Tax

At issue here is the ITA's treatment of the Japanese VAT pursuant to 19 U.S.C. § 1677a(d)(1)(C) (1988) which states:

(d) Adjustments to purchase price and exporter's sales price

The purchase price and the exporter's sales price shall be adjusted by being—

(1) increased by—

. . . . .

(C) the amount of any taxes imposed in the country of exportation directly upon the exported merchandise or components thereof, which have been rebated, or which have not been collected, by reason of the exportation of the merchandise to the United States, but only to the extent that such taxes are added to or included in the price of such or similar merchandise when sold in the country of exportation; ....

In the Final Results, the ITA explained its treatment of VATs as follows:

We calculated the addition to USP by applying the home market tax rate to the net U.S. price after all other adjustments were made. This imputed tax amount is BIA, because HM sales were reported net of VAT, and we are thus unable to determine what the home market tax base was.

We imposed no limitation on the imputed tax added to USP on the basis of the incidence of the HM tax, because the statute requires no such limitation....

Because all HM sales were reported net of VAT, we added the same VAT amount to FMV as that calculated for USP. This is equivalent to calculating the actual HM tax, and then performing a circumstance-of-sale adjustment to FMV to eliminate the absolute difference between the amount of tax in each market.

Issues Appendix, 56 Fed.Reg. at 31,729.

NSK Ltd. and NSK Corporation ("NSK") argues that the statute does not require that FMV contain home market excise taxes and that in situations, as here, where FMV is reported net tax, the provisions of 19 U.S.C. § 1677a(d)(1)(C) do not apply and no adjustment need be made to USP. NSK's Response in Support of Koyo's Motion for Judgment on the Agency Record ("NSK's Response") at 11-18.

This Court does not agree. The plain language of 19 U.S.C. § 1677a(d)(1)(C) requires that USP be increased by the amount of any indirect tax imposed on sales of the subject merchandise in the home market, regardless of whether FMV is reported net tax or not. Zenith Elecs. Corp. v. United States ("Zenith I"), 10 CIT 268, 275-82, 633 F.Supp. 1382, 1388-94 (1986), appeal dismissed, 875 F.2d 291 (Fed.Cir.1989).

A. Tax Incidence

Federal-Mogul argues that the ITA is required to measure the amount of the VAT which the manufacturer in the home market passes on to the consumer.³ Federal-Mogul's Opposition at 41-46.

Federal-Mogul argues that the phrase "but only to the extent that such taxes are added to or included in the price of such or similar merchandise when sold in the country of exportation" in 19 U.S.C. § 1677a(d)(1)(C) requires the ITA to make these measurements. Id. Federal-Mogul primarily relies on this court's decision in Zenith I, 10 CIT at 282-91, 633 F.Supp. at 1394-401. Federal-Mogul also relies on portions of the legislative history of the Trade Act of 1974, which added this provision. See Pub.L. No. 93-618, Title III, Ch. 2, Sec. 321, 88 Stat.1978, 2045 (1975); H.R.Rep. No. 571, 93d Cong., 1st Sess. 69 (1973).

The court in Zenith I found that the phrase "but only to the extent that such taxes are added to or included in the price of such or similar merchandise when sold in the country of exportation" in 19 U.S.C. § 1677a(d)(1)(C) requires the ITA "to measure tax absorption in home market sales so as to limit the adjustment by the amount of tax passed through to home market purchasers." 10 CIT at 291, 633 F.Supp. at 1402. The Zenith I co...