Timken Co. v. U.S.

• Citation: 894 F.2d 385
• Decision Date: 19 January 1990
• Docket Number: No. 89-1490,89-1490
• Parties: The TIMKEN COMPANY, Plaintiff-Appellee, v. The UNITED STATES, Defendant, and China National Machinery and Equipment Import and Export Corporation, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

Page 385

894 F.2d 385

11 ITRD 2073

The TIMKEN COMPANY, Plaintiff-Appellee, v. The UNITED STATES, Defendant and China National Machinery and Equipment Import and Export Corporation, Defendant-Appellant.

No. 89-1490.

United States Court of Appeals Federal Circuit.

Jan. 19, 1990.

Terence P. Stewart, Stewart and Stewart, Washington, D.C., argued for plaintiff-appellee. With him on the brief were Eugene L. Stewart, James R. Cannon, Jr., and Charles A. St. Charles, Washington, D.C. Of counsel was Scott A. Scherff, Canton, Ohio, of The Timken Co.

Lawrence R. Walders, Graham & James, Washington, D.C., argued for defendant-appellant. With him on the brief were Samuel X. Zhang, Eileen S. Carlson, and Brian E. McGill, Washington, D.C.

Before MARKEY, Chief Judge, RICH, Circuit Judge, and DUMBAULD, Senior District Judge ^*.

RICH, Circuit Judge.

Defendant-Appellant China National Machinery and Equipment Import and Export Corp. (CMEC) appeals from the March 22, 1989 final judgment of the Court of International Trade (CIT), Timken Co. v. United States, 714 F.Supp. 535 (CIT 1989), affirming the U.S. Department of Commerce's (Commerce's) recalculation after remand of an affirmative dumping margin. We affirm.

BACKGROUND

August 25, 1986, Plaintiff-Appellee The Timken Company (Timken) filed an antidumping duty petition with Commerce, alleging that two companies were selling in the United States tapered roller bearings (TRBs) from the People's Republic of China (PRC) at less than fair value. October 2, 1986, Commerce determined that there was a reasonable indication that TRBs from the PRC were being sold at less than fair value and so on November 4, 1986, issued an antidumping questionnaire to CMEC, who is the only direct exporter of TRBs from the PRC.

After reviewing CMEC's response to the questionnaire, Commerce concluded that the PRC is a state-controlled economy for the purposes of investigation. Pursuant to statute and regulation, Commerce chose a comparable non-state-controlled, market economy in which to determine foreign market value of the TRBs. Commerce chose India as the comparable "surrogate" country. Commerce sent questionnaires to a number of Indian companies, but did not obtain any information which was considered adequate or reliable. Therefore, under 19 CFR 353.8(c), Commerce chose the "constructed value methodology" to calculate the foreign market value of the TRBs.

Under this methodology, Commerce tries to value the Chinese factors of production for TRBs in India, using the best information available for costs in India. Among the factors which must be calculated is the cost of steel, which is the primary material out of which TRBs are made. During the manufacturing process, a certain amount of the raw steel is left over, which can then be resold as scrap. Therefore, the cost of In particular, Commerce asked the U.S. Consulate in Bombay to obtain information on raw and scrap steel prices in India. The U.S. Consulate responded via telex as follows:

steel is equal to the raw material cost minus the value of scrap. This appeal centers around the methodology and information used by Commerce to calculate the value of raw steel and scrap.

2. Indian manufacturers of tapered roller bearings are using steel tubes and

forged rings or roll rings as a substitute for round steel bars. Indian

ex-factory prices of material used in manufacturing bearings on March 10,

1987, are:

A. Steel tube (hot rolled) rupees 25.00 per Kg.

B. Steel tubes (cold rolled) rupees 32 to 40.00 per Kg.

C. Forged and rolled rings rupees 35 to 40.00 per Kg.

D. Strip material for cage rupees 13 per Kg.

E. Rolled Coils rupees 30.00 per Kg.

3. Ex mill price of steel scrap is rupees 8 to 10 per Kg.

In response to further inquiries from Commerce concerning scrap value, the U.S. Consulate sent a second telex, including the following:

Prices of scrap are generally twenty percent of material cost. The Antifriction Bearing Corporation is selling its steel scrap between rupees 8 to 10.

Finally, Commerce obtained a publication called Statistics for Iron & Steel Industry in India, which contained prices for various grades of steel in India.

In calculating the net cost of steel used for manufacturing TRBs, Commerce chose the prices contained in the Statistics publication (adjusted to account for the higher grade steel used by CMEC) to determine the cost of raw steel, and chose the 8-10 rupee value recited in the second telex to determine scrap value. The particular choice of these two values led to the scrap steel being valued very high relative to the raw steel, resulting in a low estimation of the cost of steel used in the manufacture of TRBs. At least in part because of this low estimation, Commerce found that CMEC was not selling TRBs in the U.S. at less than fair value, and so issued a final negative determination on May 27, 1987.

Timken appealed Commerce's final determination to the CIT. The CIT found error with Commerce's determination of the dumping margin with respect to CMEC and so remanded to Commerce for a redetermination of the dumping margin. See Timken Co. v. United States, 699 F.Supp. 300 (CIT 1988). In particular, the CIT noted that by using the value for raw steel from the Statistics publication and the value for scrap from the second telex, the scrap steel was valued at 75.2% of the value of the raw steel. The CIT found that it was error for Commerce to fail to explain the inconsistency between the 75.2% ratio and the 20% ratio also cited in the second telex, and to choose one of the two values from the second telex for scrap while failing to explain the reasons for its choice. Timken, 699 F.Supp. at 307. In view of these errors, the CIT concluded that Commerce's final determination was unsupported by substantial evidence.

Upon remand, Commerce asked the U.S. Consulate to further explain the information in the telexes. The Consulate replied that the 8-10 rupee quote for scrap was obtained from the same TRB manufacturer which supplied the values for raw steel, whereas the 20% quote for scrap was supplied by scrap dealers in India. Therefore, upon remand, Commerce used the 8-10 rupee value for calculating the scrap value of the bearing-grade steel used in manufacturing TRBs, and used the 20% value for calculating the scrap value of the remaining steel. In addition, Commerce abandoned use of the Statistics publication, and instead used the values for raw steel quoted in the first telex.

Commerce recalculated a dumping margin by CMEC of 4.69%. This recalculation was affirmed by the CIT in its March 22, 1989 decision.

On this appeal, CMEC...