## United States Court of Appeals for the Federal Circuit

2007-1502

SKF USA, INC., SKF FRANCE S.A., SKF AEROSPACE FRANCE, SKF GMBH, and SKF INDUSTRIE S.P.A., Plaintiffs-Appellants,

v. UNITED STATES, Defendant-Appellee, and TIMKEN U.S. CORPORATION, Defendant-Appellee.
Herbert C. Shelley , Steptoe & Johnson LLP, of Wa shington, DC, argued for plaintiffs-appellants. Wi th him on the brief were Alice A. Kipel and Susan R. Gihring

. Claudia Burke , Attorney, Commercial Litigati on Branch, Civil Division, United States Department of Just ice, of Washington, DC, ar gued for defendant-appellee United States. With her on the brief were Jeffrey S. Bucholtz , Acting Assistant Attorney General, Jeanne E. Davidson , Director, and Patricia M. McCarthy , Assistant Director. Of counsel on the brief were Mykhaylo A. Gryzlov and Deborah R. King , AttorneyAdvisors, Office of the Chief Counsel fo r Import Administration, United States Department of Commerce , of Washington, DC. Geert De Prest , Stewart and Stewart, of Washin gton, DC, argued for defendantappellee Timken U.S. Cor poration. With him on the brief were Terence P. Stewart and Lane S. Hurewitz . Of counsel was William A. Fennell

. Appealed from: United States Court of International Trade Judge Evan J. Wallach

## United States Court of Appeals for the Federal Circuit

2007-1502 SKF USA, INC., SKF FRANCE S.A., SKF AEROSPACE FRANCE, SKF GMBH, and SKF INDUSTRIE S.P.A., Plaintiffs-Appellants,

v. UNITED STATES, Defendant-Appellee, and TIMKEN U.S. CORPORATION, Defendant-Appellee. Appeal from the United States Court of International Trade in case no. 05-00569, Judge Evan J. Wallach.

______ ____________________ DECIDED: August 25, 2008

______ ____________________ Before MAYER, SCHALL, and LINN, Circuit Judges

. LINN, Circuit Judge

. SKF USA, Inc., SKF France S.A., SKF Aerospace France S.A.S., SKF GmbH, and SKF Industrie S.p.A. (collectively “SKF”) appeal from the final j udgment of the Court of International Trade affirming the U.S. Department of Commerce’s (“Commerce’s”) revision of its model-match methodology and its ongoing zeroing methodology in calculating antidumping margin s for ball bearings and relat ed parts. SKF USA Inc., v. United States , 491 F. Supp. 2d 1354 (Ct. Int’l Tr ade 2007). Because the Court of International Trade correctly determined that Commerce’s zeroing practice and therevision of its model-match methodology were supported by subs tantial evidence and were in accordance with law, we affirm. I. BACKGROUND SKF imports ball bear ings and related parts into the United States, which have been the subject of an antidumping investi gation and subsequent annual reviews by Commerce. In performing these reviews, Commerce compares the imported products with “foreign like produc t” as required by 19 U.S.C. § 1677b(a)(1)(B ). “Foreign like product” is defined as either identical merchandise, § 1677(16)(A), or similar merchandise, § 1677(16)(B) and (C ). Determinations of si milar (i.e., non-identical) merchandise are made using a model-ma tch methodology developed by Commerce. Beginning with the first administrative re view, Commerce utilized a “family modelmatch methodology,” whereby it grouped ball bearings into “families” based on exact matches of eight characteristics: 1) bearing des ign, 2) load direction, 3) number of rows of rolling elements, 4) precisi on rating, 5) dynamic load ra ting, 6) outside diameter, 7) inside diameter, and 8) width/height. Bear ing models within a family were treated as equally similar to all other models sharing t hese eight characteristics, regardless of other product variations. When Commerc e formulated the family model-match methodology in 1990, it grouped specific models of bearings into fa milies “[t]o minimize the necessity for comparisons among an exceptionally large number of bearing models,” and “to limit the need for adjustments for physical differences in merchandise and the need for model matchi ng.” J.A. at 129. During the fourteenth administrative review, however, in a memorandum dated December 3, 2003, Commerce indicated that it was considering modifications to the

2007-1502 2model-match methodology. It explained that “[t]he family-based approach . . . deviates from [Commerce’s] normal practice in that [Commerce] ha[d] c onsidered all models within a family to be equally similar,” and t hat this methodology “was developed at a time . . . when it was impossi ble for [Commerce] to identif y the single most similar foreign like product” because “the technologi cal resources available . . . were far less powerful than they are now.” Id. at 359. Thus, “a more complex model-match methodology . . . would have been prohibitive ly expensive and time -consuming.” Id. Commerce suggested changing the model-matc h methodology “in order to determine the single most similar comparison-market model, taking advantage of intervening technological developments,” id. at 361, but explained that it would not attempt to implement any changes to the metho dology in the ongoin g 2002-2003 reviews, choosing instead to “solic it comments and invite r ebuttal comments” before implementing the new methodology in the 2003-2004 reviews. Id. at 364. On July 7, 2004, Commerce issued a memorandum outlining the revised modelmatch methodology and indicating that al though it intended to use the new methodology, it reserved the right to ma ke further modifications based on comments received or data collected during the cour se of the 2003-2004 reviews. Commerce summarized its proposed methodology as follows: We recommend that we select the si ngle most similar comparison-market model among only those models that are in the same family, as redefined above (i.e. , bearing design, load direction, number of rows, and, if we determine it appropriate, prec ision grade), on the basis of that model that is closest in terms of inner diameter, outer diameter, width, load rating, and, if appropriate, precision grade. We recommend further that we resolve ties by selecting the single home-market model whose variable cost of manufacturing is closes t to that of the U.S. model.

2007-1502 3Id. at 439. Thus, under the new methodology, Co mmerce would identify models in the comparison market and the U.S. market that share four of the physical characteristics of the old methodology. After finding an ident ical match of these characteristics, Commerce would then identify a “most simila r” model based upon a comparison of the remaining characteristics. On May 13, 2005, Commerce issued its preliminary results for the fifteenth administrative review using the new methodology. Antifr iction Bearings and Parts Thereof from France, Germany, Italy, Japan, Singapore, and the United Kingdom: Preliminary Results and Partial Rescission of Antidumping Duty Administrative Reviews , 70 Fed. Reg. 25,538 (Dep’t of Commerce May 13, 2005). Commerce also released a memorandum providing the revised model-match methodology and addressing comments received. In this memorandum, Co mmerce explained that “[b]ecause there is a statutory preference fo r using price-to-price comparisons and the technological constraints that led us to adopt the simplified family methodology are no longer operative, we find compe lling reasons to change the model-matching methodology . . . .” J.A. at 482. Under the revised methodology, Co mmerce “identif[ies] the single most similar model within the [redefined] family of bearings using a sum-of-thedeviations model-matching methodology with a 40-percent cap on the sum of the deviations, resolving ties among bearings with the same sum of the deviations using the smallest [difference-in-mer chandise] adjustment.” Id. at 492. Commerce indicated that it would “consider all arguments presented in case and rebuttal briefs and, if appropriate, revise this methodology fo r the final results of reviews.” Id. at 478.

2007-1502 4On September 16, 2005, Comme rce published the final results of its fifteenth antidumping administrative review of bal l bearings and parts thereof from various countries imported from May 1, 2003 to April 30, 2004. Ball Bearings and Parts Thereof From France, Germany, Italy, Japan, Singapor e and the United Ki ngdom: Final Results of Antidumping Duty Ad ministrative Reviews , 70 Fed. Reg. 54,71 1 (Dep’t of Commerce Sep. 16, 2005) (“Final Results ”). In a related memorandum , Commerce indicated that “[t]his new model-matching methodology is much closer to [its] normal matching practice than is the family-matching methodology in that it allows [Commerce] to select the single most-similar model and allows [C ommerce] to avoid rejecting reasonable price-to-price comparisons between m odels with slightly different physical characteristics.” Memorandum from Barbar a E. Tillman, Acting Deputy Assistant Sec’y for Import Admin., U.S. Dep’t of Commerce, to Ronald K. Lorentzen, Acting Assistant Sec’y for Import Admin., U.S. Dep’t of Commerce, Issues and Decision Memorandum for the Antidumping Duty Administrative Reviews of Ball Bearings and Parts Thereof from France, Germany etc. fo r the Period of Review May 1, 2003, through April 30, 2004 , at 19 (Sept. 12, 2005) (‘‘Issues & Decision Memo ’’). Commerce explained that it had “solicted extensive comments” and “i ncorporated numerous suggestions” before adopting the new methodology. Id. It concluded that “com pelling reasons exist to change the model-match methodology,” that it now possessed “the technological capacity to use a more accurate methodol ogy,” and that “[t]he new methodology is substantially more accurate than t he family-matching methodology.” Id. at 20. In calculating SKF’s weighted-average dumping margins, Commerce also employed its usual methodology in which dum ped sales are not offset by non-dumped

2007-1502 5sales—a practice known as zeroing. SKF c hallenged these results before the Court of International Trade, which sustained Commerce’s Final Results . SKF timely appealed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5). II. DISCUSSION A. Standard of Review We review the Court of International Trade’s decisions regarding Commerce’s antidumping determinations de novo , applying the same standard of review to Commerce’s determinations as did that cour t. Carpenter Tech. Corp. v. United States , 510 F.3d 1370, 1372 (F ed. Cir. 2007) (citations om itted). Thus, Commerce’s antidumping determinations must be su stained unless they are “unsupported by substantial evidence on the record, or ot herwise not in accord ance with law.” Id. at 1373 (quoting 19 U.S.C. § 1516a(b)(1)(B)(i)). SKF argues that the Court of International Trade err ed in reviewing Commerce’s decision to change its model-match methodol ogy for “reasonableness” rather than determining whether the c hange was supported by substant ial evidence and otherwise in accordance with law. See 19 U.S.C. § 1516a(b)(1)(B)(i). SKF further argues that because Commerce’s own policy permits c hanges to model-match methodologies only when supported by “compelling reasons,” e.g. , Final Results of Antidumping Duty Administrative Reviews and Revocation in Part of an Antidumping Duty Order , 58 Fed. Reg. 39,729, 39,765 (Dep’t of Commerce July 26, 1993), we must use a similar standard to review Commerce’s actions. We di sagree. The standard articulated by the Court of International Tr ade, “whether Commerce reasonab ly determined that there were compelling reasons to revise the model match methodology,” SKF USA , 491 F.

2007-1502 6Supp. 2d at 1361 (citing Hangzhou Sp ring Washer Co. v. United States , 387 F. Supp. 2d 1236, 1246 (Ct. Int’l Trade 2005)), does not conflict with our “s ubstantial evidence” standard of review, which requires only “suc h relevant evidence as a reasonable mind might accept as adequate to su pport a conclusion.” Consol . Edison Co. v. Nat’l Labor Relations Bd. , 305 U.S. 197, 229 (1938). B. Analysis 1. Commerce’s Revised Model-Match Methodology SKF disputes the legitimacy of Co mmerce’s new model-match methodology, the appropriateness of Commerce’s decision to di sturb the prior family-match methodology, and the retroactive application of the new methodology to products covered by the fifteenth review. We address each of these arguments in turn. With respect to the new methodology, t he parties disagree about the purpose of a model-match methodology itself. SKF f undamentally argues t hat the model-match methodology should be designed solely to compare “the most physically and commercially similar products,” regardless of whether such matching consists of priceto-price comparisons or constructed values. Domestic Producer Timken U.S. Corporation (“Timken”) and the government maintain that the new methodology more accurately reflects the intent of 19 U.S.C. § 1677(16)(B) to identify a single most similar model, see Timken Co. v. United States , 630 F. Supp. 1327, 1337 (Ct. Int’l Trade 1986) (holding that “[t]he spirit if not the letter of [the statute] obligat es the agency to also ascertain what constitutes the most simila r merchandise,” and that “if values can be found only for items of ‘similar’ merc handise, the value of the item most similar to that under appraisement should be a dopted”), and that the family-match methodology runs

2007-1502 7counter to Commerce’s norma l practice. SKF responds that the statute does not require the selection of a single most si milar model and that the statute does not preclude the appropriate use of constructive value. The statute provides: The term “foreign like product” means merchandise in the first of the following categories in respect of wh ich a determination for the purposes of part II of this subtitle can be satisfactorily made: (A) The subject merchandise and other merchandise which is identical in physical characteristics with, and was produced in the same country by the same person as, that merchandise. (B) Merchandise-- (i) produced in the same country and by the same person as the subject merchandise, (ii) like that merchandise in component material or materials and in the purposes for which used, and (iii) approximately equal in commerc ial value to that merchandise. (C) Merchandise-- (i) produced in the same country and by the same person and of the same general class or kind as the subject merchandise, (ii) like that merchandise in the purposes for which used, and (iii) which the administering aut hority determines may reasonably be compared with that merchandise. 19 U.S.C. § 1677(16). SKF mainta ins that the hierarchy set fo rth in the statute does not require Commerce to select a single most si milar model and points to prior affirmance of the family-match methodology as evidence of the correctness of its statutory interpretation. See SKF USA Inc. v. United States , 876 F. Supp. 275, 279 (Ct. Int’l Trade 1995) (noting that “the statute does not require Commerce to use a methodology that identifies the greatest number of ma tches of similar merchandise,” and that the family-match methodology “was within the br oad discretion [Commerce] is granted to determine ‘similar merchandise’”). The relev ant question, however, is not whether the

2007-1502 8statute requires such an appr oach, but rather whether Commerce’s interpretation is permissible. We have previously observed that this statute “is silent with respect to the methodology that Commerce must use to ma tch a U.S. product with a suitable homemarket product.” Koyo Seiko Co. v. United States , 66 F.3d 1204, 1209 (Fed. Cir. 1995). Under Chevron, U.S.A., Inc. v. Na tural Resources Defense Council, Inc. , 467 U.S. 837 (1984), if a statute is silent or ambiguous with respect to a s pecific issue, we “must defer to an agency’s reasonable interpretation of a st atute even if [we] might have preferred another.” Koyo Seiko Co. v. United States , 36 F.3d 1565, 1570 (Fed. Cir. 1994). Furthermore, “[d]eference to an agency's statut ory interpretation is at its peak in the case of a court's review of Commerce's inte rpretation of the antidumping laws.” Id. Accordingly, we have previously held that Congress has granted Commerce considerable discretion to fashion the meth odology used to determine what constitutes “foreign like product” under the statute. Pesquera Mares Au strales Ltda. v. United States , 266 F.3d 1372, 1384 (Fed. Cir. 2001) (citing Koyo Seiko , 66 F.3d 1209). Commerce’s interpretation of the statute merits deference in this case. SKF alleges that the increased number of price comparisons achieved under the new methodology corresponds with a decrease in th e accuracy of the matches themselves. But as noted by the government, SKF fails to identify a single instance of an unreasonable match resulting from the new methodology. Cf. Koyo Seiko Co. v. United States , 516 F. Supp. 2d 1323, 1335 (C t. Int’l Trade 2007) (noting that “[p]laintiffs . . . each argue through specific ex amples that the Department’s new methodology led to the comparison of dissimilar bearing products”). And as Timken argues, it is reasonable

2007-1502 9that although the new method ology allows up to a 40 pe rcent total deviation in dimensions and load rating, the methodology yields more accurate results because it matches the most similar product rather than merely pooling several models that matched as to eight characteristics but could vary significantly in price or cost, due to differences in materials for cert ain components or added features. The new model-match methodology not onl y reflects a reasonable interpretation of the statute but also com ports with our precedent. In Ce mex, S.A. v. United States , we observed that: Section 1677(16) sets up a hierarchy for identifying “such or similar merchandise.” Commerce examines each category in order, and once merchandise is presented that meets t he criteria stated by a category, the price of this merchandise in the home country becomes the foreign market value. See 19 U.S.C. §§ 1677(16), 1677b(a)(1). The first class of merchandise is identical merchandise, the next class is nonidentical merchandise that is made by the same producer in the same country and is similar in value to the merchandi se under investigation, and the third class is merchandise made by the same producer in the same country and used for the same purposes as the me rchandise under inve stigation. See 19 U.S.C. § 1677(16). 133 F.3d 897, 902-03 (Fed. Cir. 1998) (internal footnote omitte d). In light of this statutory structure, we c oncluded that “[t]he plain l anguage of the st atute requires Commerce to base foreign market value on nonidentical but similar merchandise . . . rather than constructed val ue when sales of identical me rchandise have been found to be outside the ordinary c ourse of trade.” Id. at 904. Thus, Commerce’s decision to seek out product matches based on the most similar products rather than constructed values does not cont ravene the statute. With respect to Commerce’s decision to revise the model-match methodology after 14 annual reviews utilizing the family -match methodology, we have specifically

2007-1502 10affirmed changes to model-match methodologie s by Commerce where reasonable. See Koyo , 66 F.3d at 1211. In Koyo , Commerce had changed from a “greatest-singledeviation methodology . . . to a ‘sum-of-the-deviations’ me thodology for matching U.S. [tapered roller bearings (“TRBs”)] with home market TRBs . . . without using any limitation or ‘cap’ on the devia tion of any one criteria.” Id. at 1207. The Court of International Trade affirmed Commerce’s swit ch in methodologies, but imposed a ten percent cap to limit the permissible deviation. Id. at 1208. We stated that “our inquiry [was] limited to determining whether Comme rce’s model-matching methodology, without the ten percent cap later requi red by the court, is reasonable,” and we concl uded that it was. Id. at 1210. In this case, Commerce provided ad equate explanation of the reasonable “compelling reasons” motivating its determination, as detailed supra . Although SKF argues that in implementing the previous model-match methodology, Commerce did not specifically suggest that it was cons trained by technolo gical limitations, contemporaneous documentation fr om Commerce indicates that motivating factors in adopting the family-match methodology includ ed “minimiz[ing] the necessity for comparisons among an exceptionally large number of bearing model s,” and “limit[ing] the need for adjustments for physical differences in merchandise and the need for model matching.” J.A. at 129. These concerns were obviated by the availability of “all new margin-calculation programs on personal computers that are several orders of magnitude faster, vastly mo re sophisticated, yet far easier to use than the offsite mainframe computer [Commerce] used in the 1988-90 administrative reviews.” Id. at 360. Based on Commerce’s increased technolog ical capacity, combined with its desire

2007-1502 11to fashion a model match methodology more in keeping with its or dinary practice of selecting a single most similar model rather than pooling values of product families, we affirm its decision to revise the model-match methodology. Even assuming that Commerce was justified in modifying the model-match methodology, however, SKF analogizes to Sh ikoku Chemicals Corp. v. United States , 795 F. Supp. 417 (Ct. Int’l Trade 1992), to ar gue that we should not permit Commerce to apply the modified model-match met hodology retroactively. In Shikoku , the Court of International Trade found that reliance in terests precluded a “late stage” change in model-match methodology. Id. at 422. Appellees co unter that in Shikoku , “[t]here [was] no serious challenge to plaintiffs’ contention t hat they actually reli ed on the old pricing method,” id. at 420, and that SKF ignores the i nherently retrospective nature of the antidumping duty statutory scheme. See 19 C.F.R. § 351.212(a) (“Unlike the systems of some other countries, the United States uses a ‘retrospective’ assessment system under which final liability fo r antidumping and countervai ling duties is determined after merchandise is imported.”); Abitibi-Consol. Inc. v. United States , 437 F. Supp. 2d 1352, 1361 (Ct. Int’l Trade 2006) (“The absence of certainty regarding the dumping margins and final assessment of antidum ping duties is a characteristic of the retrospective system of administrative reviews design ed by Congress.”). We agree. While Commerce must comply with the notice prov isions of the stat ute, “[c]hanges in methodology, like all other antidumping re view determinations, permissibly involve retroactive effect.” Koyo Seiko , 516 F. Supp. 2d at 1334 (citing 19 U.S.C. § 1675(a)(2)). Appellees also argue that Commerce provi ded even greater notice and opportunity to

2007-1502 12comment than provided by statute, see 19 U.S.C. § 1677m(g), thus undermining any reasonable reliance on the family-match methodology by SKF. SKF alleges that it relied upon the old me thodology, but provides no evidence to support that assertion and argues only that it “could have adjusted its practices” had it known sufficient details about the new met hodology. However, SKF does not dispute that Commerce has consistently found that SKF continues to sell at dumped prices. Thus, SKF cannot properly analogize its situati on to that in Shikoku , where “[t]he record contain[ed] evidence that plaint iffs adjusted their prices in accordance with methodology consistently applied by Commerce in an attempt to comply with United States antidumping law.” Shikoku , 795 F. Supp. at 420. Having failed to establish detrimental reliance on the old methodology, and given the inherently retroac tive nature of the antidumping statutory scheme, see 19 U.S.C. § 1675(a)(2), we reject SKF’s argument that it was entitled to greater notice t han that provided by Commerce in accordance with—and exceeding the r equirements of—19 U.S. C. § 1677m(g). See NSK Ltd. v. United States , 510 F.3d 1375, 1385 (Fed. Cir. 2007) (noting that “Commerce . . . publicly stated that it w[ ould] change its methodology onl y after parties have had a meaningful opportunity to co mment on the proposed change”). Finally, SKF challenges Commerce’s decis ion to consider lubricant types in assessing identical products. Yet SKF fails to explain why we should disregard the Court of International Trade’s observation that SKF “failed to raise this issue during the open comment period prior to publication of the final determination.” SKF USA , 491 F. Supp. 2d at 1363. Nor does SKF’s brief ar gument on this point undermine Commerce’s justifications for its incl usion of lubrication type in making this determination. See Issues

2007-1502 13and Decision Memo at 37 (explaining the decision not to ignore differences in lubrication and cautioning that, for example, “a com parison of a U.S. m odel with a highperformance grease to a home-market model with a standard grease could mask dumping”); see also Pesquera Mares , 266 F.3d at 1384 (holdi ng that “Commerce has considerable discretion in def ining ‘identical in physical c haracteristics’”). Thus, we reject SKF’s arguments related to lubricant type. 2. Commerce’s “Zeroing” Methodology SKF also challenges Commerce’s ongoing “z eroing” practice as a distortive misapplication of the anti-dumpi ng laws. We have addressed the practice of “zeroing” numerous times, however, and hav e unequivocally upheld this practice. For example, in one recent opinion we explained: Occasionally, the price charged for t he subject merchandise in the United States is greater than the price charged for the same merchandise in the home market. This results in a negative dumping margin for that merchandise. In these situations, Commerce sets the negative dumping margins to zero when calculating the weighted average dumping margin. By doing so, the sum of the dumping ma rgins calculated on the individual transactions is not reduced by the negative amount of the dumping margins. This practice is referred to as “zeroing” and has been repeatedly upheld by this court

. NSK , 510 F.3d at 1379 (emphasis added). We have reviewed SKF’s arguments regarding zeroing and find them unpersuasive. SKF fails to raise any argument not fully resolved by our established precedent. See Corus Staal BV v. United States , 502 F.3d 1370, 1374 (Fed. Cir. 2007) (holding that Commerce’s “policy has not changed with respect to the retrospective application of the zeroing methodology and that a remand to Commerce . . . would therefore serve no useful purpose”); Co rus Staal BV v. Dep’t of Commerce , 395 F.3d

2007-1502 142007-1502 15 1343, 1349 (Fed. Cir. 2005) (“We will not attemp t to perform duties that fall within the exclusive province of the political branche s, and we therefore refuse to overturn Commerce's zeroing practice based on any ru ling by the WTO or other international body unless and until such ruling has been adopted pursuant to the s pecified statutory scheme.”); Timken Co . v. United States , 354 F.3d 1334, 1342 (Fed. Cir. 2004) (finding that “the statute does not directly speak to the iss ue of negative-value dumping margins,” and holding that “Commerce ba sed its zeroing practice on a reasonable interpretation of the statute”). Accordi ngly, we need not revisit this issue today. III. CONCLUSION For the foregoing reasons, we conclude that the Court of International Trade correctly determined that Commerce’s m odification of the model-match methodology and its application of the zeroing policy in this case are supported by substantial evidence on the record and are otherwise in accordance with law. Accordingly, the decision of the Court of International Trade is
AFFIRMED

.