Timken Co. v. U.S.

• Decision Date: 05 September 2002
• Docket Number: Court No. 01-00127.,SLIP OP. 02-106.
• Citation: 240 F.Supp.2d 1228
• Parties: THE TIMKEN COMPANY, Plaintiff, v. UNITED STATES, Defendant, and Koyo Seiko, Co., Ltd. and Koyo Corporation of U.S.A.; NTN Bearing Corporation of America, American NTN Bearing Manufacturing Corporation, NTN Bower Corporation and NTN Corporation; NSK Ltd., and NSK Corp. Defendant-Intervenors.
• Court: U.S. Court of International Trade

240 F.Supp.2d 1228

THE TIMKEN COMPANY, Plaintiff, v. UNITED STATES, Defendant, and Koyo Seiko, Co., Ltd. and Koyo Corporation of U.S.A.; NTN Bearing Corporation of America, American NTN Bearing Manufacturing Corporation, NTN Bower Corporation and NTN Corporation; NSK Ltd., and NSK Corp. Defendant-Intervenors.

SLIP OP. 02-106.

Court No. 01-00127.

United States Court of International Trade.

September 5, 2002.

COPYRIGHT MATERIAL OMITTED

Stewart and Stewart, Washington, DC (Terence P. Stewart, William A. Fennell) for Plaintiffs.

Robert D. McCallum, Jr., Assistant Attorney General; David M. Cohen, Director; Lucius B. Lau, Assistant Director; Claudia Burke, Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, for Defendant; John F. Koeppen, Attorney, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of counsel.

Sidley Austin Brown & Wood LLP, (Neil R. Ellis) for Defendant-Intervenor Koyo Seiko, Co., Ltd. and Koyo Corporation of U.S.A.

Barnes, Richardson & Colburn, Chicago, IL (Donald J. Unger, Kazumune V. Kano, David G. Forgue, Beata Kolosa) for Defenant-Intervenor

NTN Bearing Corporation of America, American NTN Bearing Manufacturing Corporation, NTN Bower Corporation and NTN Corporation.

Lipstein, Jaffe & Lawson L.L.P., Washington, DC (Robert A. Lipstein, Matthew P. Jaffe, Grace W. Lawson, Joseph A. Konizeski) for Defendant-Intervenor NSK Ltd. and NSK Corporation.

OPINION

POGUE, Judge.

This consolidated action is before the Court on cross-motions for judgment on the agency record, pursuant to USCIT Rule 56.2. The parties challenge aspects of the Department of Commerce's ("Commerce" or "the Department") final results regarding sales at less than fair value ("LTFV") of Tapered Roller Bearings ("TRBs") from Japan covering the period of October 1, 1998 through September 30, 1999. See 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, 66 Fed.Reg. 15,078 (Dep't Commerce Mar. 15, 2001) ("Final Results") and the accompanying Issues and Decision Memorandum, P.R. Doc. No. 141 (Mar. 7, 2001) ("Decision Mem."). The parties include several foreign and domestic producers of TRBs. The Court has jurisdiction over this matter pursuant to 19 U.S.C. § 1516a(a)(2)(B) and 28 U.S.C. § 1581(c).

Foreign TRB producers Koyo Seiko Ltd. and Koyo Corp. of America (collectively "Koyo") claim (1) Commerce violated its international obligations by applying the "arm's-length" test to exclude certain home market sales to affiliated customers; (2) Commerce violated its international obligations by "zeroing" the margins on negative-margin transactions when calculating Koyo's weighted average dumping margins; and (3) Commerce erred in its treatment of imputed expenses in the calculation of profit for Koyo's CEP sales.¹

Domestic producer The Timken Company ("Timken") argues that (1) Commerce improperly calculated Koyo's constructed export price ("CEP") by applying adverse facts to Koyo's entered value, rather than Koyo's sales value; and (2) for purposes of a level of trade ("LOT") adjustment to NTN's normal values, Commerce erred in its decision to weight percentage differences in sales prices observed at different levels of trade by the sum of the quantities of sales at both levels of trade, rather than the lesser of the sales quantities of the two LOTs being compared.²

Court of International Trade at 1 (July 31, 2002).

In response to Timken's second claim, NTN argues that Timken's LOT adjustment claim presents no case or controversy, and therefore cannot be considered by this Court. See U.S. Const. Art. 3, § 2 (prohibiting issuance of advisory opinions).

Standard of review

The Court will uphold a final determination by Commerce in an antidumping investigation 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).

Discussion

I. Commerce's Application of Adverse Facts Available to Determine Koyo's Dumping Margin

A. Background

An antidumping duty is imposed upon imported merchandise if that merchandise is sold or likely to be sold in the United States at less than fair value, and an industry in the United States is materially injured or is threatened with material injury. See 19 U.S.C. § 1673. To determine whether merchandise is being sold at less than fair value, Commerce compares the price of the imported merchandise in the United States to the normal value ("NV")³ for the same or similar merchandise in the home market. See 19 U.S.C. § 1677b. The United States price is calculated using either the export price ("EP") or constructed export price ("CEP"). See 19 U.S.C. § 1677a(a), (b). Commerce uses a CEP if, "before or after the time of importation, the first sale to an unaffiliated person is made by (or for the account of) the producer or exporter or by a seller in the United States who is affiliated with the producer or exporter." Uruguay Round Agreements Act, Statement of Administrative Action, H.R. Doc. No. 103-826 (1994), reprinted in 1994 U.S.C.C.A.A.N. 4040, at 822 ("SAA").⁴ Various adjustments may be made to CEP, including reduction by "the cost of any further manufacture or assembly" in the U.S. See 19 U.S.C. § 1677a(d)(2).

Here, Commerce chose to use CEP.⁵ As there was value added to the subject merchandise in the United States after importation, Commerce required a Section E response from Koyo.⁶ Koyo, however, chose not to file Section E of the questionnaire. See Letter from Koyo Seiko Co. to the Department of Commerce, P.R. Doc. No. 59 at 6 (May 2, 2000) ("Koyo's Refusal Letter"). As a result of Koyo's deliberate noncompliance, Commerce calculated Koyo's CEP using adverse facts available. Commerce chose as adverse facts available the rate of 41.04 percent. Decision Mem. at 8. This was the cash deposit rate established in the 1993-94 administrative review, see 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, 63 Fed.Reg. 20,585, 20,611 (Dep't Commerce 1998), and the highest rate ever calculated for Koyo in any segment of the A-588-604 case. Decision Mem. at 8. Commerce applied this rate to the entered value of Koyo's further-manufactured merchandise in order to calculate Koyo's CEP.

While Commerce's decision to use adverse facts is undisputed, Timken believes that Commerce's application of adverse facts to Koyo's entered value did not create a fully adverse inference. Timken's Mem. Supp. Mot. J. Agency R. at 12 ("Timken's Mem."). Timken points out that Commerce used the same methodology here as in previous administrative reviews in which Koyo also refused to supply further-manufactured information. See id. at 8-12; see also 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, 65 Fed.Reg. 11,767 (Dep't Commerce March 6, 2000) (1997-98 review period); 63 Fed.Reg. 2,558 (Dep't Commerce Jan. 15, 1998) (1995-96 review period). Timken argues that Koyo's earlier noncompliance with this methodology suggests that Commerce should alter the methodology in order to obtain Koyo's compliance. Timken's Mem. at 12. Timken suggests that Commerce should apply the percentage rate to Koyo's U.S. sales values, which would result in a higher dumping margin. Id. at 10. In essence, Timken argues that Commerce should have applied "a more adverse `facts available'" to calculate Koyo's dumping margin. Id. at 12-13.

Commerce rejected Timken's approach, explaining that the application of the 41.04 rate to Koyo's sales value would be unduly punitive. Decision Mem. at 8. Commerce also points out that "Timken has failed to offer arguments or provide record evidence demonstrating that the rate selected is not reasonably adverse." Id.

B. Analysis

Commerce's application of the adverse facts available rate to the entered value rather than the sales value is consistent with Commerce's regulation for determining assessment rates, which states that Commerce "normally will calculate the assessment rate by dividing the dumping margin found on the subject merchandise examined by the entered value of such merchandise for normal customs duty purposes." 19 CFR § 351.212(b)(1) (emphasis added). Additionally, this Court has previously decided that CEP can be calculated by applying adverse facts available to a party's entered value when there is further manufacturing.⁷ See NTN Bearing Corp. of Am. v. United States, 26 CIT ___, ___, 186 F.Supp.2d 1257, 1315 (2002) (sustaining Commerce's application of adverse facts available rate to Koyo's entered value to determine the CEP of Koyo's further manufactured merchandise).⁸ We find no reason to change our position on this matter.

Even though the issue and parties are identical, Timken argues that this Court's ruling in NTN Bearing II does not preclude application of adverse facts available to Koyo's sales value. Timken's Reply Br. Supp. Mot. J. Agency R. at 15. Timken suggests that the difference is in Commerce's knowledge: before NTN Bearing II, Commerce could not have known Koyo would repeatedly decline to comply with Commerce's requests for Section E data, whereas after NTN Bearing II, Commerce should have known that Koyo's noncompliance would continue. Id. at 16. In other words, Timken argues, Commerce should alter its methodology (i.e. apply the percentage rate to sales values instead of entered values) in order to effectively induce Koyo's compliance. Id.

This argument is flawed for several reasons. First, Commerce has increased Koyo's rate since NTN Bearing II, from 36.21 percent, see Tapered Roller Bearings, 63 Fed.Reg. at 2,562, to the rate of 41.04 percent used...