Koyo Seiko Co., Ltd. v. US, Slip Op. 96-101. Court No. 93-12-00795.

• Decision Date: 19 June 1996
• Docket Number: Slip Op. 96-101. Court No. 93-12-00795.
• Citation: 932 F. Supp. 1488
• Parties: KOYO SEIKO CO., LTD. and Koyo Corporation of U.S.A., Plaintiffs, v. UNITED STATES, The United States Department of Commerce, Defendants, The Timken Company, Defendant-Intervenor.
• Court: U.S. Court of International Trade

932 F. Supp. 1488

KOYO SEIKO CO., LTD. and Koyo Corporation of U.S.A., Plaintiffs, v. UNITED STATES, The United States Department of Commerce, Defendants The Timken Company, Defendant-Intervenor.

Slip Op. 96-101. Court No. 93-12-00795.

United States Court of International Trade.

June 19, 1996.

COPYRIGHT MATERIAL OMITTED

Powell, Goldstein, Frazer & Murphy (Peter O. Suchman, Susan P. Strommer and Elizabeth C. Hafner), Washington, D.C., for plaintiffs.

Frank W. Hunger, Assistant Attorney General; David M. Cohen, Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (Michael S. Kane); of counsel: Linda Chang, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, for defendant.

Stewart and Stewart (Terence P. Stewart, James R. Cannon, Jr., William A. Fennell, Lane S. Hurewitz and Olufemi A. Areola), Washington, D.C., for defendant-intervenor.

OPINION

TSOUCALAS, Judge:

At issue in this action are certain aspects of the final determinations of the United States Department of Commerce, International Trade Administration ("Commerce"), entitled Final Results of Antidumping Duty Administrative Reviews; Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan ("Final Results"), 58 Fed.Reg. 64,720 (Dec. 9, 1993). The Final Results are the culmination of four administrative reviews which were conducted simultaneously and cover the 1990-91 and 1991-92 periods of review ("POR"). Plaintiffs, Koyo Seiko Co., Ltd. and Koyo Corporation of U.S.A. (collectively "Koyo"), challenge Commerce's final dumping margin determinations, alleging that Commerce improperly (1) rejected Koyo's proposed ten percent cap on the permissible deviations in its model matches; (2) denied Koyo a price-based level-of-trade adjustment to sales; (3) calculated adjustments for United States discounts and sales allowances using best information available ("BIA") instead of Koyo's reported customer-specific data; (4) refused to add direct selling expenses to foreign market value ("FMV"); (5) applied BIA to Koyo's cost of manufacturing ("COM"), adjusting reported related-party transfer prices in calculating constructed value ("CV"); (6) used individual cups and cones as comparison models notwithstanding that these tapered roller bearing ("TRB") components were sold only as sets; and (7) used sales of sample and obsolete products for comparison purposes. Koyo moves for judgment on the administrative record pursuant to Rule 56.2 of the Rules of the Court, alleging that the Final Results are unsupported by substantial evidence on the administrative record and not in accordance with law. Mem. Pls.' Supp. Mot. J. Agency R.

Background

The preliminary determinations in the four administrative reviews at issue here were published in Preliminary Results of Antidumping Duty Administrative Reviews; Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan, 58 Fed.Reg. 51,058 (Sept. 30, 1993).

The Final Results for the four reviews are published in 58 Fed.Reg. at 64,720.¹

Discussion

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) (1988). 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, 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. Model-Match Methodology

In order to compare the United States price ("USP") and FMV of the merchandise in question, Commerce must determine what merchandise is "such or similar" to that sold in the United States. See 19 U.S.C. § 1677(16) (1988). In conjunction with a twenty percent cost cap that prevents matching of United States and home market models whose variable cost of manufacturing differs by more than twenty percent, Commerce here utilized the five-criteria model-match methodology, also referred to as the "sum of the deviations" methodology. Commerce rejected the use of an additional ten percent cap upon the deviations of any one criteria when selecting the home market TRB model most similar to the United States model. Final Results, 58 Fed.Reg. at 64,721.

Koyo challenges Commerce's approach. According to Koyo, use of the ten percent limit on the permissible deviation of the individual criteria is imperative because "TRB models may be very similar in four of the five physical criteria and yet still be commercially very dissimilar products if they differ significantly (i.e., by more than ten percent) in the remaining criterion." Mem. Supp. Pls.' Mot. J. Agency R. at 18.

In the Final Results, Commerce expressed that Koyo's proposed ten percent cap in conjunction with its sum of the deviations model-match methodology would "eliminate matches of essentially comparable merchandise" because "the best overall match could be eliminated simply because a single physical criterion deviated by more than 10 percent" in one or more physical criteria.² Final Results, 58 Fed.Reg. at 64,721. Adhering to this position, Commerce submits that its rejection of the ten percent cap in these reviews was a reasonable exercise of its statutory mandate. Def.'s Opp. Pls.' Mot. J. Agency R. at 11-13.

In Koyo Seiko Co. v. United States, 66 F.3d 1204 (Fed.Cir.1995), Commerce had used the sum of the deviations methodology for matching U.S. TRBs with home market TRBs, without the ten percent cap on the deviation of any one criteria. Commerce had also "eliminated from its analysis any potential comparisons for which the difference in the variable costs between the home-market model and the target U.S. model exceeded twenty percent." Koyo Seiko, 66 F.3d at 1210. The United States Court of Appeals for the Federal Circuit ("CAFC") upheld Commerce's use of the sum of the deviations model-match methodology without a ten percent cap, finding it a permissible and reasonable construction of the statute. Id. at 1208-11. See 19 U.S.C. § 1677b (1988); 19 U.S.C. § 1677(16). Therefore, the Court rejects Koyo's argument and defers to Commerce's choice of model-match methodology without the ten percent cap to yield "such or similar" merchandise. See NSK Ltd. v. United States, 19 CIT ___, ___, Slip Op. 95-204 at 6-7, 1995 WL 761314 at *2-3 (Dec. 18, 1995); NSK Ltd. v. United States, 19 CIT ___, ___, 919 F.Supp. 442, 445 (Mar. 13, 1996).

2. Comparison of Sales Across Different Levels of Trade

In the United States and in Japan, Koyo's TRB sales to original equipment manufacturers ("OEM") customers and aftermarket ("AM") customers constitute sales at two different levels of trade. Commerce compared products sold at the different levels of trade but denied Koyo a level-of-trade adjustment. Although Commerce determined that Koyo demonstrated that net prices vary between levels of trade, it found that Koyo "did not provide evidence that this variation in price was the result of different costs incurred at different levels of trade." Final Results, 58 Fed.Reg. at 64,731.

Koyo submits that its dumping margins were artificially inflated because it was denied a level-of-trade adjustment to foreign market prices. Mem. Supp. Pls.' Mot. J. Agency R. at 9-10. In particular, Koyo asserts that Commerce's refusal to grant it a level-of-trade adjustment on any basis other than differences in selling costs ignores economic reality because "a product can have a higher value in the marketplace depending on the level of trade at which it is sold, completely apart from the difference in actual selling expenses." Id. at 21. Among other record evidence, Koyo relies heavily for support on a study by Dr. Robert E. Litan entitled Level of Trade Adjustments: An Economic Analysis 1990-91 Administrative Review of Koyo Seiko Co., Ltd. Tapered Roller Bearings From Japan ("Litan Study") contained in Koyo's Supplemental Questionnaire Response, June 10, 1993 submission, Confidential R. Doc. No. 71, Exhibit 1 at 4.³ Id. at 22-24. Koyo represents that its price differentials were calculated based on prices at each trade level net of all charges and adjustments, including circumstances of sale adjustments. Thus, Koyo claims the price differentials are attributable solely to differences in levels of trade as opposed to other factors. Id. at 23-24. Koyo argues that 19 C.F.R. § 353.58 requires that Commerce make appropriate adjustments for differences affecting price, not cost, comparability. Id. at 24-25. Koyo seeks a price-based level-of-trade adjustment, or at a minimum, an explanation of why its calculation of the price differential is unacceptable. Id. at 27.

Commerce refutes Koyo's arguments, asserting that Koyo has simply adduced evidence of its price structure, but failed to satisfy its burden of demonstrating entitlement to a level-of-trade adjustment. Def.'s Opp. Pls.' Mot. J. Agency R. at 14-18. Conceding only that the Litan Study establishes the existence of price differences at the two trade levels at issue, Commerce points out that the study fails to establish that the price differentials are attributable solely to differences in levels of trade. Id. at 17-18.

Koyo bears the burden of demonstrating entitlement to the claimed adjustment. See NTN Bearing Corp. of Am. v. United States, 19...