Slip Op. 02-54 UNITED STATES COURT OF INTERNATIONAL TRADE BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS

________________________________________ : THE TIMKEN COMPANY, : : Plaintiff, : : v. : Court No. : 98-12-03237 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, INC. and NTN CORPORATION, : : Defendant-Intervenors. : ________________________________________:

Plaintiff, The Timk en C ompany (“Timken”), moves pursuant to USCIT R. 56.2 for judgment upon the agency record challenging the Department of Commerce, International Trade Administration’s (“Commerce”) final determination, entitled Final Results of Antidumping DutyAdministrative Reviews of TaperedRoller Bearings andParts Thereof, Finishedand Unfinished, From Japan, and Tapered Roller Bearin gs, Fo ur Inches or Less in Outside Diameter, and Components Thereof, From Japan ( “ Fin al Results ”), 63 Fed. Reg. 63,860 (Nov. 17, 1998). Specifically, Timken contends that Commerce unlawfully: (1) refusedto adjust constructed export price (“CEP”) for indirect selling expenses reported by Koyo Seiko Co., Ltd. and K oyo Corporatio n of U .S.A. (collectively “Koyo”), and NTN Bearing Corporation of America, American NTN Bearing Manufacturing Corporation, NTN Bow er, I nc. and NTN Corporation (collectively “NTN”); (2) permitted NTN to exclude certain expenses attributable to non-scope merchandise from its reported United States indirectCourt No. 98-12-03237 Page 2

selling expenses ; and (3) granted NTN a level of trade (“LOT”) adjustment for export price (“EP”) sales. Held : Timken’s 56.2 motion is denied. [Timken’s 56.2 motion is denied; case is dismissed.]

Dated: June 5, 2002

Stewart and S t ewart ( Terence P. Stewart , William A. Fennell and Patrick J. McDonough ) for Timken. Robert D. McCallum, Jr. , Assistant Attorney General; David M. Cohen , Director, Commercial Litigation Branch, Civil Division, United States Department of Justice ( Michele D. Lynch and Richard P. Schroeder ); of counsel: John F. Koeppen , Office of the Chief Counsel for Import Adm inist ration, United States Department of Commerce, for the United States. Barnes, Richardson & Colburn ( Donald J. Unger , Kazumune V. Kano , David G. Forgue and Kristen S. Smith ) for NTN. Powell, Goldstein, Frazer & Murphy LLP ( Peter O. Suchman , Neil R. Ellis and Elizabeth C. Hafner ) for Koyo.

OPINION TSOUCALAS, Senior Judge: Plaintiff, The Timken Company (“Timken”), moves pursuant to USCIT R. 56.2 for judgment upon the agencyrecord challenging the Department of Commerce, International Trade Administration’s (“Commerce”) final determination, entitled Final Results of Antidumping Duty Administrative Reviews of Tapered Roller Bearings and Parts Thereof, Finish ed a nd Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, andComponents Thereof, From Japan (“ Final Results ”), 63Court No. 98-12-03237 Page 3

1 Since the administrative review at issue was initiated after December 31, 1994, the applicable law is the antidumping statute as amendedbythe Uruguay Round Agreements Act (“URAA”), Pub. L. No. 103-465, 108 Stat. 4809 (1994) (effective January 1, 1995). See Torrington Co. v. United States , 68 F.3d 1347, 1352 (Fed. Cir. 1995) (citing URAA § 291(a)(2), (b) (noting effective date of URAA (continued...) Fed. Reg. 63,860 (Nov. 17, 1998). Specifically, Timken contends that Commerce unlawfully: (1) refusedto adjust constructed export price (“CEP”) for indirect selling expe nses r eported by Koyo Seiko Co., Ltd. and Koyo Corporation of U.S.A. (col lectiv ely “Koyo”), and NTN Bearing Corporation of America, American NTN Bearing Manufacturing Corp oration, NTN Bower, Inc. and NTN Corporation (collective l y “NTN”); (2) permitted NTN to exclude certain expenses attributable to non-scope merchandise from its reported United States indirect selling expenses ; and ( 3) granted NTN a level of trade(“LOT”) adjustment for export price (“EP”) sales.

BACKGROUND This case concerns: (1) the antidumping findi ng regarding taperedroller bearings (“TR Bs”), four inches or less in outside diameter, and components thereof, from Japan, and (2) the 1987 antidumping duty order on TRBs and parts thereof, finished and unfinished, from Japan for the perio d of review (“POR”) covering October 1, 1996, through Septem ber 30, 1997. 1 See Final Results ,Court No. 98-12-03237 Page 4

1 (...continued) amendments)). 63 Fed. Reg. at 63,860. On July 10, 1998, Commerce published the pr eliminaryresults of the subject reviews. See Prelimin ar y R esults of Antidumping Duty Administrative Reviews of Taper e d Roller Bearings and Parts Thereof, Finished and U nfin ished, From Japan, and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, From Japan (“ Preliminary Result s ”), 63 Fed. Reg. 37,344. Commerce published the Final Results on November 17, 1998. See 63 Fed. Reg. at 63,860.

JURISDICTION The Court has jurisdictio n o ver this matter pursuant to 19 U.S.C. § 1516a(a) (1994) and 28 U.S.C. § 1581(c) (1994).

STANDARD OF REVIEW In reviewing a challenge to Commerce’s final determination in

an antidumping administrative review, the Cou rt will uphold Commerce’s 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)(i) (1994).Court No. 98-12-03237 Page 5

I. Substantial Evidence Test 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 (1951) (quoting Consolidated Edison Co. v. NLRB , 305 U.S. 197, 229 (1938)). Substantial evidence “is something less than the weight of the evidence, and the possibility of drawing two inconsistent conclusions from the evidence does not preve nt a n administrative agency’s finding from being supportedby substantial evidence.” Consolo v. Federal Maritime Comm’n , 383 U.S. 607, 620 (1966) (citations omitted). Moreover, “[t]he court may not substitute its judgment for that of the [agency] when the choice is ‘between two fairly conflicting views, even though the court would justifiablyhave made a different choice had the matter been before it de novo .’” American Spring Wire Corp. v. United States , 8 CIT 20, 22, 590 F. Supp. 1273, 1276 (1984) (quoting Penntech Papers, Inc. v. NLRB , 706 F.2d 18, 22-23 (1st Cir. 1983) (quoting, in turn, Universal Camera , 340 U.S. at 488)).

II. ChevronTwo-Step Analysis To determine whether Commerce’s interpretation and application of the antidumping statute is “in accordance with law,” the Court must undertake the two-step analysis prescribed by Chevron U.S.A. Inc. v . Natu ral Resources Defense Council, Inc. , 467 U.S. 837Court No. 98-12-03237 Page 6

(1984). Under the first step, the Court reviews Commerce’s construction of a statutory provision to determine whether “Congress has directly spo ken to the precise question at issue.” Id. at 842. “ To ascertain whether Congress had an intention on the precise question at issue, [the Court] employ[s] the ‘traditional tools of statutory construction.’” Timex V.I., Inc. v. United States , 157 F.3d 879, 882 (Fed. Cir. 1998) (citing Chevron , 467 U.S. at 843 n.9). “The first and foremost ‘tool’ to be used is the statute’s text, giving it its plain meaning. Because a statute’s text is Congress’ final expression of its intent, if the text

answers th e question, that is the end of the matter.” Id. (citations omitted). Beyond the statu te’s text, the tools of statutoryconstruction “include the statute’s structure, canons of statutory construction, and legislative history.” Id. (citations omitted); but see Floral Trade Council v. United States , 23 CIT 20, 22 n.6, 41 F. Supp. 2d 319, 323 n.6 (1999) (noting that “[n]ot all rules of statutory construction rise to the level of a canon, however”) (citation omitted). If, after employing the first prong of Chevron , the Court determines that the statute is silent or ambiguous with respect to the specific issue, the question for the Court becomes whether Commerce’s construction of the statute is permissible. See Chevron , 467 U.S. at 843 . Essentially, this is an inquiry into theCourt No. 98-12-03237 Page 7

reasonableness of Commerce’s interpretation. See Fujitsu Gen. Ltd.

v. U nitedStates , 88 F.3d 1034, 1038 (Fed. Cir. 1996). Provided Commerce has acted rationally, the Court may not substitu te its judgment for the agency’s. See Koyo Seiko Co. v. United States , 36 F.3d 1565, 1570 (Fed. Cir. 1994) (holding that “a c ourt must defer to an agency’s reasonable interpretation of a statute even if the court might have preferred another”); see also IPSCO, Inc. v. UnitedStates , 965 F.2d 1056, 1061 (Fed. Cir. 1992) . The “[C]ourt will sustain the determination if it is reasonable and supported by the record as a whole, including whatever fairly detracts from the substantiality of the evidence.” Negev Phosphates, Ltd. v. United States , 12 CIT 1074, 1077, 699 F. Supp. 938, 942 (1988) (citations omitted). In determining whether Commerce’s interpretation is reasonable, the Court considers the following non-exclusive list of fac tors: the express terms of the provisions at issue, th e objectives of those provisions a nd t he objectives of the antidumping scheme as a whole. See Mitsubishi Heavy Indus. v. United States , 22 CIT 541, 545, 15 F. Supp. 2d 807, 813 (1998).Court No. 98-12-03237 Page 8

DISCUSSION I. Commerce’s Decision to Limit United States Indirect Selling Expenses to Those Expenses Specifically Associated With Commercial Activity in the United States A. Background The pre-URAA statute provided the reduction of exporter’s sales price (“ESP”) by the amount of “expenses generally incurred by or for the account of the exporter in the United States in selling identical or substantially i denti cal merchandise.” 19 U.S.C. § 1677a(e)(2)(1988). Although the statute was silent as to whether indirect selling e xp enses incurred outside the United S tates should be categorized as United States indirect sel lin g expenses, Commerce chos e t o adjust United States price for such expenses. See 19 C.F.R. § 353.41(e)(2)(1994); ITA A NTIDUMPING MANUAL , § 7, at 11 (rev. ed. 1993).

As revised by the URAA, the statute states that CEP, the postURAAequivalent to ESP, is to be reduced by the amount of any “expenses generally incurred by or for the account of the producer

or exporter, or the affiliated seller in the United States[:]” including “any selling expenses not deducted under subparagraph (A) [commissions], ( B) [direct selling expenses], or (C) [selling expenses assum ed by the seller on behalf of the purchaser].” 19 U.S.C. § 1677a(d)(1) and (d)(1)(D) (1994). In the Final Results , Commerce determined thatCourt No. 98-12-03237 Page 9

[a]s [Commerce] stated in [ Final Results of Antidumping DutyAdministrative Reviews and Termination i n Pa rt of Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or Less i n Outside Diameter, and Components Thereof, From Japan , 62 Fed. Reg. 11,825, 11,834] (Mar. 13, 1997), [ Final Results of Antidumping Duty Administrative Reviews of 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. 2558, 2575 (Jan. 15, 1998), and Fin al R esults of Antidumping Duty Administrative Reviews of Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan, Singapore, andthe United Kingdom , 62 Fed. Reg. 2081, 2124 (Jan. 15, 1 997)], [Commerce] will deduct from CEP only thos e expenses associated with economic activities in the UnitedStates which occurred with respect to sales to the unaffiliatedU.S. customer. [Commerce] found no information on the record for this review period to indicate that th e export selling expenses for the respondents that were incurred in their respective home markets were associated with activities occurring in the United States. 63 Fed. Reg. at 63,868. Therefore, since Koyo’s and NTN’s “selling expenses were not associatedwith economic activity in the United States[,] . . . [Commerce did not] adjust[] Koyo’s or NTN’s U.S. prices [for these indirect selling expenses].” Id.

B. Contentions of the Parties Timken asserts that the URAA “made no substa ntive change in the statutory requirement that constructed export prices . . . be adjustedfor indirect selling expenses.” Timken’s Mem. Supp. RuleCourt No. 98-12-03237 Page 10

2 The SAA represents “an author ita tive expression by the Administration concerning its views regarding the interpretation and application of the Uruguay Round agreements.” H.R. Doc. 103- 316, at 656 (1994), reprinted in 1994 U.S.C.C.A.N. 4040. “[I]t is the expectation of the Congress that fut ure Administrations will observe and apply t he int erpretations and commitments set out in this Statement.” Id. ; see also 19 U.S.C. § 3512(d) (1994) (“T h e statement of administrative action approved by the Congress . . . shall be regarded as an authoritative expression by the United States concerning the interpretation and application of the Uruguay Round Agreements and this Act in any judicial proceeding in which a question arises concerning such interpretation or application”).

3 Timken states that [t]he URAA did not intend to change Commerce’s approach to export selling expenses. Indeed, the SAA states that Section 772(d)(1)(C) [that is, § 1677a(d)(1)(C)] provides for the deduction of selling expenses which are assumed by the seller on behalf of the buyer. In practice, Commerce has treatedthese expenses in the same manner as the direct selling expenses in section 772(d)(1)(B) [that is, § 1677a(d)(1)(B)]. Their separate treatment in the statute is intende d me rely to provide a more precise definition, and not to change the calculation of export price or constructed export price . . . .

. . . . (continued...) 56.2 Mot. J. Agency R. (“Timken’s Mem.”) at 10; see also Timken’s ReplyBr. (“Timken’s Reply”) at 2. In particular, Timken claims that the statutory language of the new 19 U.S.C. § 1677a(d)(1) and the Statement of Administrative Action (“SAA”) 2 , H.R. Doc. 103-316, at 8 23, in dicate that Congress intended for Commerce to continue the practice of including in United States indirect selling expenses the home market selling expenses attributable to export sales. 3 See Timken’s Mem. at 10-12; see also Timken’s Mem. at 11Court No. 98-12-03237 Page 11

3 (...continued) [D]irect expenses and assumptions of expenses incurredin the foreign country on sales to the affiliated importer will form a part of the circumstances of sale adjustment. Moreover, Commerce’s practice with respect to assumptions bythe seller of the buyer’s selling expenses and commissions will remain the same . Timken’s Reply at 2-3 (emphasis in origi nal ) (quoting H.R. Doc. 103-316, at 824, 828). (citing Sen. Rep. No. 412, 103d Cong., 2d Sess. 65 (1994)), Ti mken’ s Reply at 3-4. Timken further argues that the “old law, i.e. , pre-URAA, referred only to expenses ‘incurred by or for the account of the exporter in the United States,’ but the URAA broadenedthis language to include adjustment for expenses ‘incurredby or for the account of the producer or exporter, or the affiliatedseller in the United States.’” Timken’s Reply at 4 (emphasis omitted); see also Timke n’s Mem. at 12. Therefore, Timken maintains that Congress, by referring to expenses incurred by “producers or exporters,” codified Comm erce’s prior practice under pre-URAA. See Timken’s Reply at 4. Accordingly, Timken requests that the Court reexamine its decision in Timken Co. v. UnitedStates (“ Timken 1998 "), 22 CIT 621, 16 F. Supp. 2 d 11 02 (1998), and remand this issue to Commerce so that it may adjust CEP for indirect sel lin g expenses incurred in the home market on account of United States sales (that is, export sellin g expe nses reported by Koyo and NTN). See id. at 2, 4.Court No. 98-12-03237 Page 12

4 The Court notes that, in this case, Koyo is concernedwith the antidumping finding regarding TRBs, four inches or less in outside diameter, and components thereof, from Japan. See Koyo’s Resp. Timken’s Mot. J. Agency R. at 2 n.1. Relying on this Court’s decision in Timken 1998 , 22 CIT 621, 16 F. Supp. 2d 1102, Commerce responds t hat it properly did not adjust CEP for indirect selling expenses reported by Koyo and NTN because the new statutory language (that is, 19 U.S.C. § 1677a(d)(1)), does not define the types of expenses to be included

as United States indirect selling expenses. See Def.’s Mem. Opp’n Pl.’s Mot. J . Ag ency R. (“Def.’s Mem.”) at 2, 8-10. Moreover, Commerce states that “‘it is clear from the SAA that under the new statute [Commerce] should deduct from CEP only those expenses associatedwith economic activities in the United States.’” Def.’s Mem. at 8 (quoting Final Results , 63 Fed. Reg. at 63,868); see also Def.’s Mem. at 7 (citing 19 C.F.R. § 351.402(b)(1998)). Koyo and NTN generally agree with Commerce and argue that: (1) the new statutory language of § 1677a(d)(1) and the rules of statutory construction make it clear that no adjustment should be made for indirect selli ng expenses incurred in Japan; and (2) Commerce’s practice of limiting indirect selling expenses to those specificallyassociated with commercial activity in the Unit ed States is in accordance with the SAA and Timken 1998 , 22 CIT 621, 16 F. Supp. 2d 1102. 4 See Koyo’s Resp. Timken’s Mot. J. Agency R.Court No. 98-12-03237 Page 13

(“Koyo’s Resp.” ) at 3-6; NTN’s Resp. Mem. Timken’s July 1, 1999, Mem. Supp. Rule 56.2 Mot. J. Agency R. (“NTN’s Resp.”) at 2-5.

C. Analysis Timken 1998 , 22 CIT at 625-26, 16 F. Supp. 2d at 1106, and Mic ron Tech., Inc. v. United States , 23 CIT 208, 210-12, 40 F . Supp. 2d481, 483-85 (1999), aff’d , 243 F.3d1301, 1314 (Fed. Cir. 2001), explain the validity of Commerce’s practice of limi ting UnitedStates indirect selling expenses to those expenses incurred in the United States. See NTN Bearing Corp. of Am. v. United States , 26 CIT __ , __, 186 F. Supp. 2d 1257, 1320-22 (2002). Neither the pre-URAA statute nor the newly-amended statute address wh ethe r United States indirect selling expenses incurred outside the United States should be categorized as United States indirect selling expenses. See Timken 1998 , 22 CIT at 625-26, 16 F. Supp. 2d at 1106; Micron Tech. , 23 CIT at 212, 40 F. Supp. 2d at 485.

Because Commerce’s practice of limiting United States indirect selling expenses to those e xpense s incurred in the United States andthe parties’ arguments are practically identical to those presentedin Timken 1998 and Micron Tech. , the Court adheres to its reasoning in Timken 1998 and Micron Tech . Accordingly, the Court finds that Commerce’s decision to limit United States ind irec t selling expenses to those expenses incurred in the United States isCourt No. 98-12-03237 Page 14

supported by substantial evidence and is in accordance with law.

II. NTN’s Exclusion of Certain Expenses for Non-Scope Merchandise From United States Selling Expenses A. Background In the underlying review, NTN excluded certain e xpense s at tribu table to non-scope merchandise from its reported United States in direct selling expenses. See NTN’s Resp. at 5. In particular, [b]ecause certain of NTN’s U.S. expe nses were incurred solely for non-scope merchandise, in order to ensure an accurate allocation o f its U.S. expenses, NTN first removedall such expenses from the pool of U.S. [indirect sell ing ex penses]. . . . The remaining U.S. [indirect selling expenses] which were incurred for either scope or non-scope merchandise, but which could not be specificallytied to either scope or non-scope products, were then allocated to scope and non-scope merchandise. Final Results , 63 Fed. Reg. at 63,867.

In accepting NTN’s methodology of reporting its United States indirect selling expenses, Commerce: (1) statedthat in past TRB andantifriction bearing (“AFB”) cases, it has verified NTN’s methodology and has found it to be reasonable; and (2) determined that NTN’s approach for adjusting its U.S. [indirect selling expenses] remains unchanged for the current review, and there is no information on the record of this review which should call into question [Commerce’s] practice of accepting NTN’s approach . . . . Id.Court No. 98-12-03237 Page 15

5 Timken asserts that the record does not support Commerce’s conclusion that “‘certain of NT N’s U.S. expenses were incurred solely for non-scope merchandise.’” Timken’s Mem. at 13 (quoting Final Results , 63 Fed. Reg. at 63,867); see also Timken’s Mem. at 6-7, 13 (proprietary version); Timken’s Reply at 4-5, 8 (proprietaryversion). In particular, Timken argues that a pertinent financial statement indicates that a relevant company was reimbursedby other compa nies for the certain expenses at issue. See Timken’s Mem. at 13 (proprietary version). NTN maintains that “this conclusion simply does not follow from the [weight of the] statedfacts.” NTN’s Resp. at 6. The Court will not entertain this argument because the Court’s “role is limited to deciding whether [Commerce’s] decision is unsupportedby substantial evidence on the record, or otherwise not in accordance with law.” Matsushita Elec. Indus. Co. v. United States , 750 F.2d 927, 936 (Fed. Cir. 1984) (emphasis supplied); see als o American Spring Wire , 8 CIT at 22, 590 F. Supp. at 1276 (“[t]he court may no t substitute its judgment for that of the [agency] when the choice is ‘between two fairly conflicting views, even though the court would justifiablyhave made a different choice had the matter been before it de novo ’”) (quoting Pe nnt ech Papers , 706 F.2d at 22-23 (quoting, in turn, Universal Camera , 340 U.S. at 488)). Commerce also explained how it eliminated the possibility of distortion in NTN’s methodology when Commerce calculated a ratio of sales of scope merchandise to all sales. . . . Commerce . . . adjusted NTN’s reportedfinal indirect se lling expense by adding or subtracting various expenses to arr ive at a final indirect selling expense. Next, Commerce multipliedthat total expense by the ratio of scope-to-total products. Def.’s Mem. at 13 (citing Def.’s Proprietary Ex. 2).

B. Contentions of the Parties Timken argues that Comme rce im properly permitted NTN to exclude certain expenses attributable to non-scope merchandise from NTN’s reported United States indirect selling expenses. 5Court No. 98-12-03237 Page 16

6 Commerce asserts that the “rec ord does not show what nonscope merchandise was stored in the warehouse at issue.” Def.’s Mem. at 13. Therefore, the Court agrees with Commerce that it is “impossible to say whether the storage charges are disproportionate to the sales of the non-scope merchandise.” Id. See Timken’s Mem. at 6-7, 13-15 (proprietary version); Timken’s Replyat 4-8 (proprietary version); Final Results , 63 Fed. Reg. at 63,867. In particular, Timken asserts that NTN’s adjustment of its allocatedpool of indirect United States selling exp ense s “was unreasonable, resulted in distorted alloca tions, and was not supp o rtedby substantial evidence” because NTN excluded certain expenses attributable to the non-scope merchandise for one of its subsid iaries and then allocated the remaining expenses to all of NTN’s scope and non-scope United States sales. Timken’s Reply at 8; see Timken’s Mem. at 13-14 (proprietary version). Timken also maintains its assertion that one of NTN’s subsidiaries’ certain “expenses attributed to non-scope merchandise is disproportionate to the amount of non-scope sales . . . is not mere conjecture” as Commerce maintains. 6 Timken’s Reply at 7 (proprietary version).

Commerce responds that 19 U.S.C. § 1677a(d)(1994), “as amended by the URAA, continues to be silent on the question of allocation methods[,]” thus granting Commerce a s ubst antial right of interpretation. Def.’s Mem. at 11. Commerce also points out that it “has verified the method used by NTN . . . on several occasions without [observing any] discrepancy.” Id. at 12 (citing FinalCourt No. 98-12-03237 Page 17

Results of Antidumping Duty Administrative Reviews and Termination in Part of Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, FromJapan, and TaperedRoller Bearings, Four Inches or Less in Outside Diameter, and Components There of, Fr om Japan , 63 Fed. R eg. 20,585, 20,595 (Apr. 27, 1998); Final Results of Antidumping Duty Administrative Reviews of Tapered Roller Bearings andParts Thereof, Finished and Unfinished, From Japan, and Tapered Roller Bearings, Four Inches or Le ss in Outside Diameter, and Components Thereof, From Japan , 63 Fed. Reg. 2558, 2572 (Jan. 15, 1998); and Final Results of A ntidumping Duty Administrative Reviews of 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, Fr om Jap an , 58 Fed. Reg. 64,720, 64,726 (Dec. 9, 1993)). Commerce further states that it eliminated the possibility of distortion in NTN’s methodologywhen Commerce: (1) calculated a pertinent rati o; (2) “adjusted NTN’s reported final indirect selling expense”; and (3) “multipliedthat total expense by the ratio of scope-to-total products.” Def.’s Mem. at 13.

NT N supports Commerce’s conclusion. Replying to Timk en’ s claim that “Commerce accepted a reporting methodology for certain U.S. indirect selling expenses which caused a distortion in NTN’s reportedexpenses[,]” NTN’s Resp. at 5 (citing Timken’s Mem. at 6-Court No. 98-12-03237 Page 18

7 To illustrate its contention that NTN’s exclusion of certain expenses attributable to non-scope merchand ise from NTN’s United States selling expenses is distortive, Timken provides hypothetical examples. See Timken’s Mem. at 14 (proprietaryversion); Timken’s Replyat 6-7 (proprietary version). The Court is not persuaded by Timken’s hypotheticals since Timken fails to use evidence on the recordto illustrate that NTN’s allocation methodology was distortive. 7, 13-15), NTN contends that “[t]he sole basis for [Timken’s] . .

. claim is a hypothetical concocted by Timken which is not f actuallysimilar to the case before the Court.” 7 NTN’s Resp. a t 6. NTN maintains that its allocation methodology is not distortive and“Commerce’s decision to accept NTN’s reportedpool of allocated expenses for U.S. indirect selling expenses is reasonable, and in accordance with law. . . .” Id. at 5.

C. Analysis The Court upholds Commerce’s decision to allow NTN to exclude certain expenses attributable to non- s cope merchandise from its UnitedStates selling expenses since it is in accordance with law. The Court notes that 19 U.S.C. § 1677a(d) is silent on the question of allocation methods and thus gr ants Commerce considerable discretion. Under 19 C.F.R. § 351.401(g)(1998), [Commerce] may consider allocated expenses and price adjustments when transaction-specific reporting is not feasible, provided [Commerce] is satisfied that the allocation method used does not cause i n accuracies or distortions. In addition, pursuant to 19 C.F.R. § 351.401(g)(4),Court No. 98-12-03237 Page 19

[Commerce] will not reje ct an allocation method solely because the method includes expenses incurred, or price adjustments made, with respect to sales of merch andi se that does not constitute subject merchandise or a foreign like product (whichever is applicable).

Basedon a careful examination of the record and on the regulatorylanguage of 19 C.F.R. § 351.401(g) an d (g)( 4) that grants Commerce considerable discretion in choosing allocation methods, the Court sustains Commerce’s decision to accept NTN’s UnitedStates selling expenses as reasonable, supported by substantial evidence and in accordance with law. See Skidmore v. Swift & Co. , 323 U.S. 134, 139-40 (1944) .

III. Commerce’s Granting of a Level of Trade Adjustment for EP Sales A. Background 1. Statutory Background The URAA contains a specific provision regarding adjustments to normal value (“NV”) for differ ences in l evels of trade. The statute provides for NV to be based on: the price at which the foreign like product is first sold (or, in the absence of a sale, offered for sale) for consumption in the ex porting 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 export price or constructed export price . 19 U.S.C. § 1677b(a)(1)(B)(i )( 1994) (emphasis supplied). The statute also provides for an LOT adjustment to NV under theCourt No. 98-12-03237 Page 20

following conditions:

The price described in [§ 1677b(a)(1)(B)(1994), i.e. , NV,] shall also be increased or decreased to make due allowance for an y difference (or lack thereof) between the export price or constructedexport price and the price described in [§ 1677b(a)(1)(B)] (other than a difference for which allowance is otherwise made under [§ 1677b(a)(1994)]) that is shown to be wholly or partly due to a difference in level of trade between the export price or constructed export price and no rmal value, if the difference in level of trade-- ( i) involves the performan ce of different sellin g activities; and (ii) is demonstrat edto affect price comparability, ba sedon a pattern of consistent price differenc e s between sales at different levels o f trade in the country in which normal value is determined. In a case describedin the preceding sentence, the amount of the adjustment shall be basedon the price differences between the two levels of trade in the country in which normal value is determined. 19 U.S.C. § 1677b(a)(7)(A).

In sum, to qualify for an LOT adjustment to NV, a party has the burden to show that the following two conditions have been satisfied: (1) the diffe rence in LOT involves the performance of different selling activities; and (2) the difference affects price comparability. See SAA, H.R. Doc. 103-316, at 829 (stating that “if a respondent claims [an LOT] adjustment to decrease normal value, as with all adjustments which benefit a responding firm, the respondent must demonstrate the appropriateness of such adjustment”); see also NSK Ltd. v. United States , 190 F.3d 1321, 1330 (Fed. Cir. 1999) (noting that a respondent bears the burden ofCourt No. 98-12-03237 Page 21

establishing entitlement to an LOT adjustment).

2. Factual Background During this review, Commerce applied the f oll owing LOT methodology. See Final Results , 63 Fed. Reg. at 63,868-69; PreliminaryResults , 63 Fed. Reg. at 37,347-48. In accordance with 19 U.S.C. § 1677b(a)(1)(B)(i), Commerce first calculates NV based

on exporting-country (or third-country) sales, to th e exte nt practicable, at the same LOT as the Unit ed S tates (EP and CEP) sales. See Final Results , 63 Fed. Reg. at 63,868. “When [Commerce is] unable to find comparison sales at the same LO T as the EP or CEP sales, [it] compare[s] the [United States] sales to sales at a different LOT in the comparison [home or third-country] market. Id.

With respect to the LO T methodology for EP sales, Commerce first calculates EP “on the basis of the starting prices of sales to the United States.” Id. “Where home market prices serve[] as the basis of NV, [Commerce] determine[s] the NV LOT based on starting prices in the NV market.” Id.

Commerce then proceeds to determine whether sales in the home market exist that are at the same LOT as the EP sales. In making such a determination, Commerce examines whether the home market sales are at different stages in the marketing process than EP orCourt No. 98-12-03237 Page 22

CE P, that is, Commerce “review[s] and compare[s] distribution systems, including selling functions, classes of customer, and the extent andlevel of selling expenses for each claimed LOT.” Final Results , 63 Fed. Reg. at 63,868. If the EP sales and the NV sales

are at a different LOT, and the differences in L OT affect price comparability, as manifested in a pattern of consistent price differences between the sales on which NV is based and comparisonmarket sales at the equivalent LOT of th e export transaction, Commerce will make an LOT adjustment pursuant to 19 U.S.C. § 1677b(a)(7)(A). See id. at 63,869. If there is no pattern of consistent price differences, no adjustment is made. See id. Applying this methodology, Commerce determined that for NTN there were three home market LOTs and two (one EP andone CEP) LOTs in the United States. Because there were no home market LOTs equivalent to NTN’s CEP LOT, and because NVfor NTN represented a price more remote f rom th e f actorythan the CEP, [Commerce] made a CEP of fse t adjustment to NV in [Commerce’s] CEP comparisons. [Commerce] also determined that NTN’s EP LOT was equivalent to one of its LOTs in the home market. Because [Commerce] determined that there was a pattern of consistent price differences due to differences in LOTs, [Commerce] made a LOT adjustment to NV for NTN in [Commerce’s] EP comparisons where the [UnitedStates] EP sale matched to a home market sale at a different LOT. Id. at 63,869. Moreover, in the Final Results , Commerce observed that, [a]s stated in [ Final Results of Antidumping Duty Administrative Reviews of Antifriction Bearings (Other Tha n Tap ered Roller Bearings) and Parts Thereof FromCourt No. 98-12-03237 Page 23

France, Germany, Italy, Japan, Romania, Singapore, Sweden, and the U nite d Kingdom , 63 Fed. Reg. 33,320, 33,331 (June 18, 1998)], differences in selling functions, even substantial ones, are not alone sufficient to establish a diff erence in LOTs. While there are a few individual selling functions that vary, [Commerce] determine[s] that these functions, by themselves, do not offset the many similari ties of the selling functions performed by the respondent at the EP andhome market LOTs. Although [Commerce] ha[s] determinedthat there is a qualitatively minimal difference in selling functions between one of the home market LOTs and the EP Lot, the two LOTs are similar enough to be considered the same LOT, such that that home market LOT can be used in determining whether there is a pattern of consistent price differences between that LOT and the LOT at which certain EP sales are made. Id .

B. Contentions of the Parties Timken contends that Commerce improper ly g ranted NTN an LOT adjustment under § 1677b(a)(7)(A) for EP sales. See Timken’s Mem. at 7-8, 15-16. In particular, Timken maintains that the LOT adjustment under § 1677b(a)(7)(A) “presumes . . . that there exists

a home market level of trade that is comparable to a U.S. level of trade.” Timken’s Rep ly at 9. Timken argues that since: (1) “[t]he record does not demonstrate that price differences between NTN’s home market sales at different levels of trade affect their comparability to NTN’s U.S. EP sales,” Timken’s Mem. at 16; and (2) “[t]here is no demonstration that the EP sales are at a level of trade that is comparable to sales at any level of trade in the home market,” id. , “t here is no basis in the record for Commerce toCourt No. 98-12-03237 Page 24

8 The Court assumes that the correct citation is 19 C.F.R. § 351.412 (c)(2)(1998). calculate a LOT adjustment for NTN’s EP sales.” Timken’s Reply at 11. Commerce responds that it properly granted an LOT adjustment for NTN’s EP sales. See Def.’s Mem. at 14-16. Commerce notes that pursuant to § 1677b(a)(7)(A) Commerce determines that sales are made at different LOTs if they are made at different marketing stages (or the equivalent). Substantial differences in selling activities are a necessary, but not sufficient, condition for determining that there is a difference in the stage of marketing. Some overlap in sel ling activities will not p recl ude a determination that two sales are at different stages of marketing. Id. at 15-16 (quoting 19 C.F.R. § 551.412(c)(2) [sic]). 8

Commerce maintains that it acted in accordance with 19 U.S.C. § 167 7b(a)(7)(A) and 19 C.F.R. § 351.412(c)(2) when Commerce determinedthat: (1) “the differences in selling a cti vities (‘functions,’) . . . between the equivalent [home market] LOT and EP LOT were minimal”; and (2) “Commerce used the [home market] LOT to determine whet her there was a pattern of consistent price differences between that LOT and the LOT at which certain sales [were] made.” Def.’s Mem. at 16.

NTN generally agrees with Commerce and maintains that “[b]ecause the law and the record support matching these levels ofCourt No. 98-12-03237 Page 25

trade [that is, NTN’s home market LOT and NTN’S Un ited States EP LOT] for comparison purposes,” Commerce’s granting of the LOT adjustment is not unreasonable because there are “sales functions [that] are performed for United States EP sales which are not performed in the home market.” NTN’s Resp. at 7-8.

C. Analysis The Court disagree s with Timken that Commerce improperly grantedNTN an LOT adjustment under § 1677b(a)(7)(A) for EP sales. “In the absence of a statutory mandate to the contrary, Commerce’s actions must be upheld as long as they are reasonable.” Timken Co.

v. United States , 23 CIT 509, 516, 59 F. Supp. 2d 1371, 1377 (1999); see also Chevron , 467 U.S. at 844-45. During the review at issue, Commerce determined that NTN’s EP LOT was equivalent to NTN’s home market LOT. See Final Results , 63 Fed. Reg. at 63,869. In granting NTN an LOT adjustment pursuant to § 1677b(a)(7)(A), Commerce determined that the equiv alent home market LOT and EP LOT had minimal differences in selling activities and“determined that there was a patter n o f consistent price differences due to differences in LOTs.” Id. Although “zero” differences in selling functions (that is, a perfect comparison) between the home market LOT and EP LOT would make the two LOTs perfectly comparable, the Court finds that §Court No. 98-12-03237 Page 26

1677b(a)(7) ( A) grants Commerce discretion to find the necessary de gree of comparability in situations where differences are de minimus. Accordingly, the Court sustains Commerce’s decision to grant NTN an LOT adjustment for EP as reasonable, in accordance with law and supported by substantial evidence.

CONCLUSION The Court finds that Commerce acted properly in: (1) refusing to adjust CEP for indirect selling expenses reported by Koyo and NTN; (2) permitting NTN to exclude certain expenses attributable to non-scope merchandise from NTN’s reported U nite d States indirect selling expenses ; and (3) granting NTN an LOT adjustment for EP sales. Commerce’s determination is affirmed.

______________________________ NICHOLAS TSOUCALAS SENIOR JUDGE

Dated: June 5, 2002

New York, New York