SKF USA v. U.S., Nos. 00-1423

• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit
• Writing for the Court: Before MICHEL, SCHALL, and DYK; DYK
• Citation: 263 F.3d 1369
• Parties: (Fed. Cir. 2001) SKF USA INC., SKF FRANCE S.A., SARMA, SKF GmbH, SKF INDUSTRIE S.p.A., and SKF SVERIGE AB, Plaintiffs-Appellants, v. UNITED STATES, Defendant-Appellee, and THE TORRINGTON COMPANY, Defendant-Appellee. FAG KUGELFISCHER GEORG SCHAFER AG, FAG ITALIA S.p.A., BARDEN CORPORATION (U.K.) LTD., FAG BEARINGS CORPORATION, and THE BARDEN CORPORATION, Plaintiffs-Appellants, v. UNITED STATES Defendant-Appellee, and THE TORRINGTON COMPANY, Defendant-Appellee
• Decision Date: 24 August 2001
• Docket Number: Nos. 00-1423,00-1465

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263 F.3d 1369 (Fed. Cir. 2001) SKF USA INC., SKF FRANCE S.A., SARMA, SKF GmbH, SKF INDUSTRIE S.p.A., and SKF SVERIGE AB, Plaintiffs-Appellants,
v.
UNITED STATES, Defendant-Appellee, and THE TORRINGTON COMPANY, Defendant-Appellee. FAG KUGELFISCHER GEORG SCHAFER AG, FAG ITALIA S.p.A., BARDEN CORPORATION (U.K.) LTD., FAG BEARINGS CORPORATION, and THE BARDEN CORPORATION, Plaintiffs-Appellants,
v.
UNITED STATES Defendant-Appellee, and THE TORRINGTON COMPANY, Defendant-Appellee. Nos. 00-1423, 00-1465 United States Court of Appeals for the Federal Circuit AUGUST 24, 2001

Appealed from: United States Court of International Trade

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Copyrighted Material Omitted

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Herbert C. Shelley, Steptoe & Johnson LLP, of Washington, DC, argued for plaintiffs-appellants in 00-1423, SKF USA Inc., et al. Of counsel was Alice A. Kipel.

Max F. Schutzman, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of New York, New York, argued for plaintiffs-appellants in 00-1465, the Barden Corporation, et al. With him on the brief were Andrew B. Schroth, and Mark E. Pardo. Of counsel was Adam M. Dambrov. Also of counsel was Jeffrey S. Grimson , of Washington, DC.

Velta A. Melnbrencis, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for defendant-appellee in 00-1423 and 00-1465, United States. With her on the brief was David

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M. Cohen, Director. Of counsel on the brief were John D. McInerney, Acting Chief Counsel for Import Administration, U.S. Department of Commerce, Berniece A. Browne, Senior Counsel, and David R. Mason.

Geert De Prest, Stewart and Stewart, of Washington, DC, argued for defendant-appellee in 00-1423 and 00-1465, the Torrington Company. With him on the brief was Terence P. Stewart. Of counsel were Wesley K. Caine, and Lane S. Hurewitz.

Before MICHEL, SCHALL, and DYK, Circuit Judges.

DYK, Circuit Judge.

These consolidated cases present the question whether the Department of Commerce ("Commerce") properly calculated the profit component of a constructed value determination under 19 U.S.C. 1677b(e)(2)(A). In each of these two cases, the Court of International Trade sustained Commerce's methodology. We hold that Commerce has failed to adequately explain why it has interpreted the phrase "foreign like product" differently in 19 U.S.C. 1677b(a)(1) and 1677(e). We accordingly vacate the decisions of the Court of International Trade in FAG Kugelfischer v. United States, No. 99-08-00465 (Ct. Int'l Trade July 7, 2000), and SKF USA Inc. v. United States, No. 98-07-02540 (Ct. Int'l Trade June 1, 2000) and remand for further proceedings.

STATUTORY BACKGROUND

The antidumping statute, as amended by the Uruguay Round Agreements Act, Pub. L. No. 103-465, 108 Stat. 4809 (1994) ("URAA"), governs this appeal. Torrington Co. v. United States, 68 F.3d 1347, 1352 (Fed. Cir. 1995).

Under the antidumping statute, Commerce is required to impose antidumping duties on "subject merchandise"¹ that "is being, or is likely to be, sold in the United States at less than its fair value" to the detriment of a domestic industry. 19 U.S.C. 1673. To determine whether antidumping duties should be imposed, Commerce must make a "fair comparison," 19 U.S.C. 1677b(a), between the price charged for the subject merchandise in the United States (the "United States price")² and the price charged for the corresponding foreign like product in the home market (the "normal value"). 19 U.S.C. 1677b(a) (emphasis added). In order to make the comparison, Commerce must identify the "foreign like product."

The Determination of "Normal Value"

In determining normal value, Commerce must use an actual exporting country "price" for the foreign like product, if a satisfactory price is available. The antidumping

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statute defines that price in pertinent part as:

[T]he price at which the foreign like product is first sold (or, in the absence of a sale, offered for sale) for consumption in the exporting country, in the usual commercial quantities and in the ordinary course of trade and, to the extent practicable, at the same level of trade as [the United States price].

19 U.S.C. 1677b(a)(1)(B)(i). That price must be in effect "at a time reasonably corresponding to the time of the sale used to determine" the United States price. 19 U.S.C. 1677b(a)(1)(A).

If, however, no satisfactory exporting country price is available, Commerce may base normal value (subject to certain requirements not at issue) on sales "price" in a third-country market, that is, "the price at which the foreign like product is so sold (or offered for sale) for consumption in a country other than the exporting country or the United States . . . ." 19 U.S.C. 1677b(a)(1)(B)(ii).

Alternatively, if no satisfactory exporting country price is available, and "notwithstanding" the existence of sales in a third-country market, "the normal value of the subject merchandise may be the constructed value of that merchandise . . . ." 19 U.S.C. 1677b(a)(4). In other words, Commerce may elect to use "constructed value" if no satisfactory exporting country price is available. This constructed value is not an actual price at which the merchandise is offered for sale. Rather, as the Statement of Administrative Action ("SAA") accompanying the URAA makes clear, this "constructed value serves as a proxy for a sales price" of the subject merchandise in the home market. H.R. Doc. 103-316, at 839 (1994), reprinted in 1994 U.S.C.C.A.N. 3773, 4175.³ The antidumping statute provides in pertinent part that "the constructed value of imported merchandise shall be an amount equal to the sum of" the following three amounts: (1) the "the cost of materials and fabrication" of the merchandise. 19 U.S.C. 1677b(e)(1); (2) the "cost of all containers and coverings . . . and all other expenses incidental" to packaging the merchandise for shipment to the United States. 19 U.S.C. 1677b(e)(3); and (3) the "actual amounts incurred and realized . . . for selling, general, and administrative expenses, and for profits," (hereinafter "profit"). 19 U.S.C. 1677b(e)(2)(A)-(B) (emphasis added). In accordance with the statute, Commerce computes this constructed value for the imported merchandise "based on the cost of manufacture, selling general and administrative expenses, and profit" of that merchandise. 19 C.F.R. 351.405(a).

It is Commerce's methodology for the calculation of the profit component of constructed value that is at issue. This calculation

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is particularly complex, as Congress has provided four separate calculational methodologies.

The first methodology refers to profit realized "in connection with the production and sale of a foreign like product, in the ordinary course of trade, for consumption in the foreign country . . . ." 19 U.S.C. 1677b(e)(2)(A). This is the preferred methodology for the constructed value calculation. If, however, "actual data are not available with respect to the amounts" prescribed in subsection (2)(A),⁴ Congress has authorized Commerce to use any one of three other methodologies. The SAA provides in pertinent part that section 1677b(e)(2)(B) "does not establish a hierarchy or preference among these alternative methods." SAA at 840, reprinted in 1994 U.S.C.C.A.N. at 4176. The three methodologies are set forth in section 1677b(e)(2)(B), which provides in pertinent part that constructed value shall be equal to the sum of:

(i) the actual amounts incurred and realized by the specific exporter or producer . . . for selling, general, and administrative expenses, and for profits, in connection with the production and sale, for consumption in the foreign country, of merchandise that is in the same general category of products as the subject merchandise, [or]

(ii) the weighted average of the actual amounts incurred and realized by exporters or producers . . . for selling, general, and administrative expenses, and for profits, in connection with the production and sale of a foreign like product, in the ordinary course of trade, for consumption in the foreign country, or

(iii) the amounts incurred and realized for selling, general, and administrative expenses, and for profits, based on any other reasonable method, except that the amount allowed for profit may not exceed the amount normally realized by exporters or producers . . . in connection with the sale, for consumption in the foreign country, of merchandise that is in the same general category of products as the subject merchandise.

19 U.S.C. 1677b(e)(2)(B).

It will be noted that the methodologies set forth in subsections (2)(A) and (2)(B)(ii) of section 1677b(e) refer to profit realized "in connection with the production and sale of a foreign like product," the same terminology used in the price provisions. (Emphasis added). As we discuss below, the statute in turn specifically defines "foreign like product" in 19 U.S.C. 1677(16). It is the definition of "foreign like product" used by Commerce for purposes of these calculational methodologies that is challenged here.

FACTUAL BACKGROUND

The two proceedings at issue involve the determination of antidumping duties for imports of anti-friction bearings ("AFBs")⁵ from a number of countries, including France, Germany, Italy, Sweden, and the United Kingdom. Appellants SKF USA

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Inc., SKF France S.A., Sarma, SKF GmbH, SKF Industrie S.p.A., and SKF Sverige AB (collectively, "SKF") challenge the final results of Commerce's administrative review of antidumping duty orders on AFBs covering the period from May 1, 1996, through April 30, 1997. Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, et al.; Final Results of Antidumping Duty Administrative Reviews, 63 Fed. Reg. 33,320 (June 18, 1999) ("SKF Final Results"). Appellants FAG Kugelfischer Georg Schafer AG, FAG Italia S.p.A., Barden Corporation (U.K.) Ltd., FAG Bearings Corporation and...