Slip Op. 04-11

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS

________________________________________

:

NTN CORPORATION, NTN BEARING :

CORPORATION OF AMERICA, AMERICAN :

NTN BEARING MANUFACTURING :

CORPORATION, NTN DRIVESHAFT, INC., :

NTN-BOWER CORPORATION and NTN-BCA :

CORPORATION, :

:

Plaintiffs, :

:

v. : Court No. 

: 00-09-00443

UNITED STATES, :

:

Defendant, :

:

and :

:

TIMKEN U.S. CORPORATION, :

:

Defendant-Intervenor. :

________________________________________:

Plaintiffs, NTN Corporation, NTN Bearing Corporation of

America, American NTN Bearing Manufacturing Corporation, NTN

Driveshaft, Inc., NTN-Bower Corporation and NTN-BCA Corporation

(collectively “NTN”), move pursuant to USCIT R. 56.2 for judgment

upon the agency record challenging the United States Department of

Commerce, International Trade Administration’s (“Commerce”) final

determination entitled Final Results of Antidumping Duty

Administrative Reviews and Revocation of Orders in Part on

Antifriction Bearings (Other Than Tapered Roller Bearings) and

Parts Thereof From France, Germany, Italy, Japan, Romania,

Singapore, Sweden and the United Kingdom (“Final Results”), 65 Fed.

Reg. 49,219 (August 11, 2000).

Specifically, NTN contends that Commerce erred in: (1)

restating NTN’s home-market and United States inland freight

expenses and unjustifiably applied facts available; (2) using

adverse facts available margins for United States sales of NTN

models compared to sales to home-market affiliates; (3) including

export price (“EP”) sales in its calculation of the constructed
Court No. 00-09-00443 Page 2

export price (“CEP”) profit adjustment; (4) not calculating CEP

profit on a level-of-trade (“LOT”) basis; (5) recalculating NTN’s

home-market inventory carrying costs and refusing to adjust normal

value (“NV) for all home-market commissions; (6) reallocating NTN’s

United States and home-market selling expenses without regard to

LOT; (7) including NTN’S sample sales and sales with allegedly

abnormally high profits in the calculation of NV and constructed

value (“CV”) profit; (8) making adjustments to NTN’s cost of

production (“COP”) and CV; and, (9) failing to use CV after

disregarding below-cost sales from the calculation of NV.

Held: NTN’s motion for judgment on the agency record is

granted in part and denied in part. Case remanded to Commerce to:

(1) apply it arm’s length test, in accordance with 19 C.F.R. §

351.403(c) (1999), to the sales prices of the two affiliated

resellers; (2) explain how the record supports its decision to

recalculate NTN’s home-market indirect selling expenses without

regard to LOT; and (3) clarify the reasoning for Commerce’s

treatment of inputs, and (a) apply the major input rule where

appropriate, and (b) open the record for additional information, if

necessary.

[NTN’s 56.2 motion is granted in part and denied in part. Case

remanded.]

Date: February 3, 2004

Barnes, Richadson & Colburn (Donald J. Unger, Kazumune V.

Kano, Carolyn D. Amadon and Shannon N. Rickard) for NTN

Corporation, NTN Bearing Corporation of America, American NTN

Bearing Manufacturing Corporation, NTN Driveshaft, Inc., NTN-Bower

Corporation and NTN-BCA Corporation, plaintiffs.

Peter D. Keisler, Assistant Attorney General; David M. Cohen,

Director, Commercial Litigation Branch, Civil Division, United

States Department of Justice (Claudia Burke); of counsel, David R.

Mason and Arthur D. Sidney, Office of the Chief Counsel for Import

Administration, United States Department of Commerce, for the

United States, defendant.

Stewart and Stewart (Terence P. Stewart, Geert De Prest and

Lane S. Hurewitz) for The Timken U.S. Corporation, defendantintervenor.
Court No. 00-09-00443 Page 3

1 This action was brought by The Torrington Company which

was acquired by The Timken Company on February 18, 2003, and is

known as Timken U.S. Corporation. The Court refers to defendantintervenor as Timken U.S. Corporation in the caption and as Timken

throughout this opinion.

OPINION

TSOUCALAS, Senior Judge: Plaintiffs, NTN Corporation, NTN

Bearing Corporation of America, American NTN Bearing Manufacturing

Corporation, NTN Driveshaft, Inc., NTN-Bower Corporation and NTNBCA Corporation (collectively “NTN”), move pursuant to USCIT R.

56.2 for judgment upon the agency record challenging the United

States Department of Commerce, International Trade Administration’s

(“Commerce”) final determination entitled Final Results of

Antidumping Duty Administrative Reviews and Revocation of Orders in

Part on Antifriction Bearings (Other Than Tapered Roller Bearings)

and Parts Thereof From France, Germany, Italy, Japan, Romania,

Singapore, Sweden and the United Kingdom (“Final Results”), 65 Fed.

Reg. 49,219 (August 11, 2000). The Torrington Company (“Timken”),

as defendant-intervenor, supports Commerce’s arguments that the

Final Results are supported by substantial evidence and in

accordance with law.1

Specifically, NTN contends that Commerce erred in: (1)

restating NTN’s home-market and United States inland freight

expenses and unjustifiably applied facts available; (2) using

adverse facts available margins for United States sales of NTN
Court No. 00-09-00443 Page 4

models compared to sales to home-market affiliates; (3) including

export price (“EP”) sales in its calculation of the constructed

export price (“CEP”) profit adjustment; (4) not calculating CEP

profit on a level-of-trade (“LOT”) basis; (5) recalculating NTN’s

home-market inventory carrying costs and refusing to adjust normal

value (“NV) for all home-market commissions; (6) reallocating NTN’s

United States and home-market selling expenses without regard to

LOT; (7) including NTN’S sample sales and sales with allegedly

abnormally high profits in the calculation of NV and constructed

value (“CV”) profit; (8) making adjustments to NTN’s cost of

production (“COP”) and CV; and, (9) failing to use CV after

disregarding below-cost sales from the calculation of NV.

BACKGROUND

The administrative determination at issue concerns the

antidumping duty order on antifriction bearings (other than tapered

roller bearings) and parts thereof from Japan for the period of

review covering May 1, 1998, through April 30, 1999. See Final

Results, 65 Fed. Reg. at 49,219. On April 6, 2000, Commerce

published the preliminary results of the subject review. See

Preliminary Results of Antidumping Duty Administrative Reviews,

Partial Rescission of Administrative Reviews, and Notice of Intent

to Revoke Orders in Part on Antifriction Bearings (Other Than

Tapered Roller Bearings) and Parts Thereof From France, Germany,
Court No. 00-09-00443 Page 5

Italy, Japan, Romania, Sweden, Singapore and the United Kingdom,

(“Preliminary Results”) 65 Fed. Reg. 18,033.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 19

U.S.C. § 1516a(a) (2000) and 28 U.S.C. § 1581(c) (2000).

STANDARD OF REVIEW

The Court will uphold Commerce’s final determination in an

antidumping administrative review 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).

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 prevent an

administrative agency’s finding from being supported by substantial

evidence.” Consolo v. Federal Maritime Comm’n, 383 U.S. 607, 620

(1966) (citations omitted). Moreover, “[t]he court may not
Court No. 00-09-00443 Page 6

substitute its judgment for that of the [agency] when the choice is

‘between two fairly conflicting views, even though the court would

justifiably have 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. Chevron Two-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. National Resources Defense Council, 467 U.S. 837,(1984).

Under the first step, the Court reviews Commerce’s construction of

a statutory provision to determine whether “Congress has directly

spoken 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’s final

expression of its intent, if the text answers the question, that is

the end of the matter.” Id. (citations omitted). Beyond the
Court No. 00-09-00443 Page 7

statute’s text, the tools of statutory construction “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 the

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

v. United States, 88 F.3d 1034, 1038 (Fed. Cir. 1996). Provided

Commerce has acted rationally, the Court may not substitute its

judgment for the agency’s. See Koyo Seiko Co. v. United States, 36

F.3d 1565, 1570 (Fed. Cir. 1994) (holding that “a court must defer

to an agency’s reasonable interpretation of a statute even if the

court might have preferred another”); see also IPSCO, Inc. v.

United States, 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
Court No. 00-09-00443 Page 8

2 Generally, normal value is the price at which the subject

merchandise is first sold in the exporting country. See 19 U.S.C.

§ 1677b(a) (1994). Furthermore, “export price” is the price at

which the subject merchandise is first sold by the producer or

exporter outside the United States to an unaffiliated purchaser in

States Dep’t of Commerce, 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 factors: the express terms of the provisions

at issue, the objectives of those provisions and the objectives of

the antidumping scheme as a whole. See Mitsubishi Heavy Indus. v.

Unites States, 22 CIT 541, 545, 15 F. Supp. 2d 807, 813 (1998).

DISCUSSION

I. Commerce Properly Restated NTN’s Home-Market and United States

Inland Freight Expenses and Justifiably Applied Facts

Available

A. Statutory Background

Under the antidumping duty statute, Commerce may determine

that imported merchandise is sold in the United States “at less

than its fair value,” and that such practice causes material injury

to a domestic industry. See 19 U.S.C. § 1673 (1994). Once such a

determination is made, Commerce may levy an antidumping duty upon

such merchandise. See id. The antidumping duty is “in an amount

equal to the amount by which the normal value exceeds the export

price . . . for the merchandise.” Id.2 Section 1677a(c) of Title
Court No. 00-09-00443 Page 9

the United States for exportation to the United States. See 19

U.S.C. § 1677a(a) (1994). “Constructed export price” is the price

at which the subject merchandise is first sold in the United States

to a purchaser unaffiliated with the producer or exporter. See 19

U.S.C. § 1677a(b).

19 of the United States Code specifies increases and reductions to

the price used to establish export price (“EP”) and constructed

export price (“CEP”). See 19 U.S.C. §1677a(c) (1994).

Specifically, the statute states that the price used to establish

EP and CEP is increased “when not included in such price, the cost

of all containers and coverings and all other costs, charges, and

expenses incident to placing the subject merchandise in condition

packed ready for shipment to the United States.” 19 U.S.C. §

1677a(c)(1). The EP and CEP is decreased by “the amount, if any,

included in such price, attributable to any additional costs,

charges, or expenses, and United States import duties, which are

incident to bringing the subject merchandise from the original

place of shipment in the exporting country to the place of delivery

in the United States.” 19 U.S.C. § 1677a(c)(2). 

In calculating normal value (“NV”), section 1677b(a)(6) (1994)

of Title 19 of the United States Code specifies increases and

decreases that are to be made to the price used for NV. The

statute directs that the price be “increased by the costs of all

containers and coverings and all other costs, charges, and expenses

incident to placing the subject merchandise in condition packed
Court No. 00-09-00443 Page 10

ready for shipment to the United States.” 19 U.S.C. §

1677b(a)(6)(A). The price is to be decreased by, “when included in

the price described in paragraph (1)(B), the cost of all containers

and coverings and all other costs, charges, and expenses incident

to placing the foreign like product in condition packed ready for

shipment to the place of delivery to the purchaser.” 19 U.S.C. §

1677b(a)(6)(B)(i). Additionally, the price is to be decreased by

“the amount, if any, included in the price described in paragraph

(1)(B), attributable to any additional costs, charges, and expenses

incident to bringing the foreign like product from the original

place of shipment to the place of delivery to the purchaser.” 19

U.S.C. § 1677b(a)(6)(B)(ii).

Commerce’s regulations state that “the interested party that

is in possession of the relevant information has the burden of

establishing to the satisfaction of [Commerce] the amount and

nature of a particular adjustment.” 19 C.F.R. § 351.401(b)(1)

(1999). Commerce’s regulations also address the allocation of

expenses and price adjustments, stating that 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 inaccuracies or

distortions.” 19 C.F.R. § 351.401(g)(1). In addition, the

regulations state that “any party seeking to report an expense or
Court No. 00-09-00443 Page 11

a price adjustment on an allocated basis must demonstrate to

[Commerce’s] satisfaction that the allocation is calculated on as

specific a basis as is feasible, and must explain why the

allocation methodology used does not cause inaccuracies or

distortions.” 19 C.F.R. § 351.401(g)(2). Under the regulations,

an allocation method is not to be rejected solely because it

“includes expenses incurred, or price adjustments made, with

respect to sales of merchandise that does not constitute subject

merchandise or a foreign like product.” 19 C.F.R. § 351.401(g)(4).

Under section 1677e(a)(2) of Title 19 of the United States

Code, Commerce shall use “facts otherwise available” when “(1)

necessary information is not available on the record, or (2) an

interested party or any other person-- (A) withholds information

that has been requested . . . or (D) provides such information but

the information cannot be verified . . . in reaching the applicable

determination under this subtitle.” 19 U.S.C. § 1677e(a) (1994).

Furthermore, if Commerce determines that “an interested party has

failed to cooperate by not acting to the best of its ability to

comply with a request for information . . . [then Commerce] may use

an inference that is adverse to the interests of that party in

selecting from among the facts otherwise available.” 19 U.S.C. §

1677e(b).
Court No. 00-09-00443 Page 12

B. Contentions of the Parties

1. NTN’s Contentions

NTN contends that Commerce erred in: (a) rejecting NTN’s

allocation of home-market and United States inland freight

expenses, and (b) using adverse facts available in calculating

NTN’s margin rate. See Pl.’s Mot. and Mem. Supp. J. Agency R.

(“NTN’s Mem.”) at 9. NTN asserts that it adequately responded to

Commerce’s request for an allocation of both home-market and United

States inland freight expenses. See id. at 9-12. NTN contends

that it cannot use weight in its allocation of freight expenses

because home-market and United States inland freight expenses are

based on multiple factors and NTN, as it explained in its response

to Commerce, does not keep records based on weight. See id. at 10.

Consequently, NTN allocated the freight expenses “based on value,

logically choosing a factor which was common to all shipments.”

Id.

Furthermore, NTN elaborated that “freight in both [home-market

and United States inland] is usually incurred based on factors that

cannot be allocated, such as distance, bulk and mode of

transportation . . . .” Id. Commerce checked NTN’s allocation of

the home-market and United States inland freight expenses and

examined NTN’s contracts with freight companies. In the Issues and
Court No. 00-09-00443 Page 13

3 The full title of this document is Issues and Decision

Memorandum for the Administrative Reviews of Antifriction Bearings

(other than tapered roller bearings) and parts thereof from France,

Germany, Italy, Japan, Romania, Singapore, Sweden, and the United

Kingdom - May 1, 1998, through April 30, 1999, compiled as an

appendix to the Final Results, 65 Fed. Reg. at 49,219 (generally

accessible on the internet at http://ia.ita.doc.gov/frn/summary/

multiple/00-20441-1.txt. The Court, in the interest of clarity,

will refer to this document as Issues & Decision Mem. and match

pagination to the printed documents provided by defendant. See

e.g., Def.’s Mem. at App. 1, Ex. 1. 

Decision Memorandum,

3 however, Commerce rejected NTN’s allocation

because “NTN did not explain why its allocation of freight expenses

was not distortive.” NTN’s Mem. at 11. 

NTN argues that it fully and accurately responded to

Commerce’s inquiry about its allocation by “demonstrat[ing] how the

expenses are actually incurred and [that Commerce] accepted NTN’s

methodology and resulting data at verification.” Id. at 11-12.

NTN further asserts that Commerce, on prior occasions, accepted

NTN’s explanation and approved of NTN’s methodology. See id. at

12. NTN contends that Commerce’s application of facts available is

unwarranted because Commerce verified NTN’s methods and there is no

evidence indicating that any distortion occurred as a result of

NTN’s allocation. See id.

2. Commerce’s Contentions

Commerce responds that NTN did not adequately report homemarket and United States inland freight expenses on the basis on
Court No. 00-09-00443 Page 14

which NTN incurred them. See Def.’s Mem. Part. Opp’n NTN’s Mot. J.

Agency R. (“Def.’s Mem.”) at 9-15. Rather, Commerce contends that

NTN reported allocated expenses incurred on both in-scope and outof-scope merchandise. See id. at 11. In a supplemental

questionnaire dated October 21, 1999, Commerce asked NTN to revise

its response, if necessary, “to reflect the basis on which the

expenses are incurred or, if [] not possible, explain why such a

recalculation is impossible and demonstrate that [NTN’s] allocation

methodology is not distortive.” Id. at 12 (quoting from

supplemental questionnaire). While NTN responded that it does not

incur freight expenses on a single basis, thereby making it

impossible to report freight expenses on the basis they were

incurred, Commerce contends that NTN “did not demonstrate that its

allocation methodology was not distortive. Rather, it merely

stated that Commerce had accepted its methodology in prior

reviews.” Id. 

Commerce asserts that it properly resorted to facts available

because of NTN’s failure to show that its allocation methodology

was not distortive. See id. at 12-13. Commerce rejects NTN’s

argument that it had previously accepted NTN’s allocation in prior

reviews. See id. at 13. Rather, Commerce maintains that the

acceptance of NTN’s allocation in prior reviews “does not relieve

[NTN] of the responsibility to demonstrate that its claimed
Court No. 00-09-00443 Page 15

adjustment to normal value is not distortive.” Def.’s Mem. at 13

(quoting Issues & Decision Mem. at 65-66). In the Issues &

Decision Mem., Commerce determined that it “can not regard the

reported expenses as a reliable or reasonable indicator of what

those expenses would be had NTN Japan reported them on a

transaction-specific basis.” Issues & Decision Mem. at 65.

Commerce reasoned that it was unable to determined that NTN acted

to the best of its ability in selecting the allocation methodology

it used. Id.

3. Timken’s Contentions 

Timken generally agrees with Commerce’s decision to apply

facts available for home-market and United States inland freight

expenses incurred because NTN failed “to fully cooperate with

Commerce’s instructions . . . .” Resp. Timken, Def.-Intervenor, R.

56.2 Mot. NTN (“Timken’s Resp.”) at 15. Timken contends that

“Commerce properly determined that NTN has the burden of proving

entitlement to any favorable adjustment, and Commerce’s

supplemental question went to what NTN had to show.” Id.

Accordingly, Commerce appropriately required NTN to demonstrate

non-distortion because NTN does not incur freight on the basis of

sales value. See id. Timken argues that NTN “was evasive and

offered no assurance to Commerce that the prior methodology would

not result in distortions.” Id. at 16. 
Court No. 00-09-00443 Page 16

Timken further contends that Commerce reasonably selected

facts available for NTN’s home-market freight expenses and did not

deny the entire adjustment. See id. Rather, Commerce selected the

lowest reported rates. See id. For NTN’s United States inland

freight expenses, Timken contends that denial of the adjustment

would have benefitted NTN. See id. Consequently, “Commerce

substituted an adverse rate based on reported NTN data.” Id.

Timken argues that Commerce’s treatment of the allocations for

home-market and United States inland freight expenses recognized

the effects of denying the adjustment and provided an incentive for

NTN to provide the requested data. See id.

C. Analysis

1. Commerce Properly Rejected NTN’s Allocation

The relevant statute, directs Commerce to increase or reduce

EP and CEP when certain criteria are met. See 19 U.S.C. §

1677a(c). Furthermore, under Commerce’s regulations, the

interested party has the burden of demonstrating to Commerce the

amount and nature of a specific adjustment to be made to EP, CEP or

NV. See 19 C.F.R. § 351.401(b)(1). The regulations allow Commerce

to consider allocated expenses and adjustments when “transactionspecific reporting is not feasible.” 19 C.F.R. § 351.401(g)(1).

However, Commerce’s acceptance of allocated expenses and

adjustments is contingent. Before any allocations are accepted,
Court No. 00-09-00443 Page 17

4 NTN argues that it fully and accurately responded to

Commerce’s inquiry about its allocation, and that Commerce had

accepted NTN’s explanation and approved of NTN’s methodology in

prior reviews. See NTN’s Mem. at 11-12. 

Commerce must first be “satisfied that the allocation method used

does not cause inaccuracies or distortions.” Id. If Commerce is

not satisfied, then it has the discretion to reject the allocations

and adjustments sought by the interested party. See id.

The Court rejects NTN’s contention that Commerce erred in

rejecting NTN’s allocation of home-market and United States inland

freight expenses. NTN argues that Commerce changed its methodology

by requesting NTN to demonstrate that its allocation was not

distortive.4 Commerce, however, has the discretion to change its

methodology, so long as its decision is reasonably supported by the

record. 

Agency statements provide guidance to regulated industries.

“‘An [agency] announcement stating a change in the method . . . is

not a general statement of policy.’” American Trucking Ass’ns,

Inc. v. ICC, 659 F.2d 452, 464 n.49 (5th Cir. 1981) (quoting Brown

Express, Inc. v. United States, 607 F.2d 695, 701 (5th Cir. 1979)

(internal quotations omitted)). While a policy denotes “the

general principles by which a government is guided” by laws, BLACK’S

LAW DICTIONARY 1178 (7th ed. 1999) (emphasis added), methodology

refers only to the “mode of organizing, operating or performing
Court No. 00-09-00443 Page 18

something, especially to achieve [the goal of a statute].” Id. at

1005 (defining mode) (emphasis added). Accord Avoyelles

Sportsmen’s League, Inc. v. Marsh, 715 F.2d 897 (5th Cir. 1983);

Interstate Natural Gas Ass’n of Am. v. Federal Energy Regulatory

Comm’n, 716 F.2d 1 (D.C. Cir. 1983); Hooker Chems. & Plastics Corp.

v. Train, 537 F.2d 620 (2d Cir. 1976). Consequently, the courts

are even less in the position to question an agency action if the

action at issue is a choice of methodology, rather than policy.

See, e.g., Maier, P.E. v. United States Envtl. Prot. Agency, 114

F.3d 1032, 1043 (10th Cir.) (citing Professional Drivers Council v.

Bureau of Motor Carrier Safety, 706 F.2d 1216, 1221 (D.C. Cir.

1983)). Similarly, an agency decision to change its methodology,

that is, to take an act of statutory implementation while pursuing

the same policy, should be examined under the Chevron test and

sustained if the new methodology is reasonable. See, e.g., Koyo

Seiko Co. v. United States, 24 CIT 364, 373-74, 110 F. Supp. 2d

934, 942 (2000) (stating that “‘the use of different methods [of]

calculati[on] . . . does not [mean there is a] conflict with the

statute,’”) (quoting Torrington Co. v. United States, 44 F.3d 1572,

1578 (Fed. Cir. 1995)). 

The Court finds that, in the case at bar, Commerce’s refusal

to accept NTN’s allocation was a justifiable change of methodology

reasonably supported by the record. Accordingly, Commerce’s
Court No. 00-09-00443 Page 19

rejection of NTN’s allocation of home-market and United States

inland freight expenses is affirmed.

2. Commerce Properly Applied Facts Available to NTN’s

Home-Market and United States Inland Freight

Expenses

The Court finds NTN’s argument that Commerce unjustifiably

applied adverse facts available to NTN’s home-market and United

States inland freight expense allocation has no merit. The

antidumping duty statute mandates that Commerce use “facts

otherwise available” (commonly referred to as “facts available”) if

“necessary information is not available on the record” of an

antidumping proceeding. See 19 U.S.C. § 1677e(a)(1) (1994).

Commerce may apply facts available when it determines that an

interested party withholds requested information or fails to

cooperate with a request for information. See 19 U.S.C. § 1677e(a)

& (b). The legislative goal behind Commerce’s right to use facts

available is to "induce respondents to provide Commerce with

requested information in a timely, complete, and accurate manner .

. . .” National Steel Corp. v. United States, 18 CIT 1126, 1129,

870 F. Supp. 1130, 1134 (1994). Consequently, Commerce enjoys

broad, although not unlimited, discretion with regard to the

propriety of its use of facts available. See generally, Olympic

Adhesives Inc. v. United States, 899 F.2d 1565 (Fed. Cir. 1990)

(acknowledging Commerce’s broad discretion to use facts available,
Court No. 00-09-00443 Page 20

but pointing out that Commerce's resort to facts available is an

abuse of discretion where the information Commerce requests does

not and could not exist). 

During the subject review, Commerce requested that NTN show

that its allocation methodology was not distortive. See Issues &

Decision Mem. at 65. NTN responded by stating that Commerce had

previously found its methodology not to be distortive. See id.

Commerce’s acceptance of NTN’s allocation methodology and finding

the method to not be distortive in a previous review does not

relieve NTN from showing non-distortion in the current review. 

See NTN Bearing Corp. of Am. v. United States (“NTN 2003"), 27 CIT

___, ___, 248 F. Supp. 2d 1256, 1268 (2003)(stating that “Commerce

has the discretion to alter its policy, so long as Commerce

presents a reasonable rationale for its departure from the previous

practice”). 

Commerce requested NTN demonstrate that its allocation

methodology was not distortive in order “to alleviate [Commerce’s]

concern that NTN Japan’s allocation methodology might shift

expenses incurred on non-subject merchandise to sales of subject

merchandise.” Def.’s Mem. at 12 (quoting Issues & Decision Mem. at

65). The Court finds Commerce’s rationale for reconsidering its

past position convincing and reasonable. Commerce properly

determined that NTN had not cooperated with its request to provide
Court No. 00-09-00443 Page 21

information regarding the allocation method used by NTN. Moreover,

Commerce justifiably applied facts available to state NTN’s homemarket and United States inland freight expenses. 

II. Commerce Properly Used Adverse Facts Available Margins for

United States Sales of NTN Models Compared to Sales to HomeMarket Affiliates

A. Statutory Background

Section 1677b(a)(5) (1994) of Title 19 of the United States

Code provides that for determining NV, “if the foreign like product

is sold or . . . offered for sale through an affiliated party, the

prices at which the foreign like product is sold (or offered for

sale) by such affiliated party may be used . . . .” The statute,

however, does not provide Commerce with guidance as to when the

prices at which the foreign like product sold by an affiliated

party should be used. Rather, Commerce’s regulations address when

sales and offers for sales to an affiliated party and through an

affiliated party may be used. See 19 C.F.R. § 351.403 (1999).

For sales to an affiliated party by an exporter or producer,

the regulations state that Commerce “may calculate normal value

based on that sale only if satisfied that the price is comparable

to the price at which the exporter or producer sold the foreign

like product to a person who is not affiliated with the seller.” 

19 C.F.R. § 351.403(c). For sales by an exporter or producer
Court No. 00-09-00443 Page 22

through an affiliated party (i.e., downstream sales), Commerce “may

calculate normal value based on the sale by such affiliated party.”

19 C.F.R. § 351.403(d). Commerce, however, will normally not

calculate NV using such prices, if the sales by an exporter or

producer to affiliated parties “account for less than five percent

of the total value (or quantity) of the exporter’s or producer’s

sales of the foreign like product in the market in question or if

sales to the affiliated party are comparable . . . .” Id.

Section 1677e(b) of Title 19 of the United States Code,

provides that if Commerce determines that “an interested party has

failed to cooperate by not acting to the best of its ability to

comply with a request for information . . . [then Commerce] may use

an inference that is adverse to the interests of that party in

selecting from among the facts otherwise available.”

B. Contentions of the Parties

1. NTN’s Contentions

NTN complains that Commerce erred in applying adverse facts

available to determine the margin for United States sales of NTN

models compared to sales to home-market affiliates. See NTN’s Mem.

at 14-18. NTN argues that its response to Commerce’s request for

total value of sales by home-market affiliates was adequate for the

calculation of NTN’s margin. See id. Moreover, NTN asserts that
Court No. 00-09-00443 Page 23

“there is no evidence whatsoever that NTN’s actions meet any of the

statutory minimums which would warrant adverse ‘facts available.’”

Id. at 15-16. NTN states that for Commerce to apply an adverse

inference to facts available “an interested party must have failed

to cooperate by not acting to the best of its ability to comply

with a request for information.” Id. at 15. The statutory

provisions, according to NTN, are intended to prevent the use of

adverse facts available when a party makes its best effort to

cooperate with Commerce. See id. 

NTN states that it responded to Commerce’s questions regarding

downstream sales to affiliated parties as it had in previous

reviews: “this data could not be provided because NTN was unable to

obtain this information from its affiliated resellers.” Id. at 16.

NTN submitted to Commerce letters from affiliated resellers that

explained why they could not provide NTN with certain information.

See id. In addition, NTN explained at verification that the

resellers do not have access to NTN’s computer program and database

that allows NTN to respond to Commerce’s questions. See id. NTN

maintains that its computer program was created to allow NTN to

categorize data in ways that allow it to respond to Commerce. The

program is proprietary in nature, and NTN contends that it should

not be required to share the program with affiliated or

unaffiliated companies. See id. NTN further asserts that it
Court No. 00-09-00443 Page 24

provided Commerce with documentation from each reseller from whom

it could not obtain resale information explaining why such

information was unobtainable. See id. at 18.

2. Commerce’s Contentions

Commerce responds that its determination to apply adverse

facts available was supported by substantial record evidence and in

accordance with law. Def.’s Mem. at 15-23. Specifically, Commerce

contends that its regulations prevent the use of “home-market

affiliated party sale[s] unless the exporter or producer or

reseller demonstrates that the transaction was made at arm’s

length.” Id. at 17. Accordingly, Commerce maintains that “the

respondent has to present evidence establishing to Commerce’s

satisfaction that the related party prices were comparable to

unrelated party prices.” Id. To determine price comparability,

Commerce states that its established practice is to examine whether

related party prices are equal to or greater than unrelated party

prices. See id. Furthermore, Commerce argues that “when a

respondent fails to submit pertinent information, Commerce is

authorized to resort to facts available.” Id. (citing 19 U.S.C. §

1677e(a)).

Here, Commerce contends that NTN failed to report resale

information by its home-market affiliates. In its supplemental

questionnaire, Commerce requested that NTN document the steps taken
Court No. 00-09-00443 Page 25

to obtain downstream sales data for each affiliate from which NTN

could not obtain such information. See id. at 19. NTN’s response

was that it requested, but was unable to obtain, the information

for the same reasons it provided in past reviews. See id.

Commerce requested that NTN provide the total downstream value of

sales by affiliates in which NTN owns a majority interest. See id.

at 20 (citing Issues & Decision Mem. at 7). While NTN provided

information for three such affiliate resellers, it was unable to

provide such information for two other affiliated resellers. See

id. Thus, Commerce “resorted to adverse facts available for those

[United States] sales of bearing models which were sold to those

affiliates in which NTN Japan holds a majority interest . . . .”

Id.

Commerce concedes that it did not apply its arm’s length test,

pursuant to 19 C.F.R. § 351.403(c), to the sales price of two of

NTN’s affiliated resellers prior to seeking downstream sales

information. See id. at 23. Consequently, Commerce requests that

the issue be remanded for Commerce to conduct the test and, if

necessary, to open the record for additional information. See id.

3. Timken’s Contentions

Timken generally agrees with Commerce that NTN failed to

provide Commerce with the requested information. Timken’s Resp. at

18-24. Timken maintains that NTN “failed to either: (a) report
Court No. 00-09-00443 Page 26

downstream sales by these affiliates as instructed by the initial

questionnaire, or (b) revise its data to at least provide the total

downstream value of the sales by each affiliate as instructed by

the supplemental questionnaire.” Id. at 22 (emphasis in original).

Timken states that “Commerce’s rules on affiliated companies assume

that companies ‘control’ their affiliates sufficiently to guarantee

cooperation in answering questionnaires.” Id. (emphasis in

original). Since NTN did not provide the requested information,

Timken maintains that Commerce properly applied adverse facts

available. See id. at 23.

Timken disagrees with Commerce that the issue should be

remanded. See id. at 23-24. Rather, Timken argues that the record

evidence supports Commerce’s determination that the arm’s length

test could not be reliably applied because NTN did not act to the

best of its ability in reporting sales by home-market affiliates.

See id.

C. Analysis

The Court finds that Commerce properly applied adverse facts

available to sales by resellers in which NTN owns a majority

interest. Under section 1677e(b) of Title 19 of the United States

Code, if Commerce determines that a party has not acted to the best

of its ability to provide requested information, then Commerce may

use adverse facts available. See 19 U.S.C. § 1677e(b). Here,
Court No. 00-09-00443 Page 27

Commerce reasonably determined that NTN had not acted to the best

of its ability in responding to its requests for information on

sales by affiliated resellers. The Court is not convinced that NTN

fully complied with Commerce’s requests for information regarding

downstream sales. While NTN did not obtain the requested

information from its affiliated resellers for the same reasons NTN

gave Commerce in previous reviews, NTN failed to document the steps

it took to obtain the downstream sales data, as Commerce requested.

See Issues & Decision Mem. at 7. Furthermore, for Commerce to use

the sale price to an affiliated party, NTN must present evidence

that “the price is comparable to the price at which the exporter or

producer sold the foreign like product to a person who is not

affiliated with the seller.” 19 C.F.R. § 351.403(c). NTN failed

to demonstrate that the sales to and through NTN’s affiliates were

made at arm’s length. See NTN Bearing Corp. of Am. v. United

States (“NTN 1999"), 23 CIT 486, 498, 83 F. Supp. 2d 1281, 1292

(1999) (stating that “there is a strong presumption that Commerce

will not use a related-party price in the calculation of [fair

market value] ‘unless the manufacturer demonstrates to Commerce’s

satisfaction that the prices are at arm’s length’” (quoting SSAB

Svenskt Stal AB v. United States, 21 CIT 1007, 1009, 976 F. Supp.

1027, 1030 (1997)). Based on NTN’s inadequate responses, the Court

finds that Commerce justifiably applied adverse facts available and

was in accordance with law. 
Court No. 00-09-00443 Page 28

In NTN Bearing Corp. of Am. v. United States (“NTN 2002"), 26

CIT ___, ___, 186 F. Supp. 2d 1257, 1287-88 (2002), this Court

upheld Commerce’s application of the arm’s length test to exclude

certain home-market sales to affiliated parties from the NV

calculation. The Court noted that, under 19 U.S.C. § 1677b(a)(5),

Commerce is allowed considerable discretion in deciding whether to

include affiliated party sales when calculating NV. See NTN 2002,

26 CIT at ___, 186 F. Supp. 2d at 1287 (citing Usinor Sacilor v.

United States, 18 CIT 1155, 1158, 872 F. Supp. 1000, 1004 (1994)).

The Court further noted that it has repeatedly upheld Commerce’s

arm’s length test on the basis that respondents have failed to

present “‘record evidence tending to show that . . . Commerce’s

test was unreasonable.’” NTN 2002, 26 CIT at ___, 186 F. Supp. 2d

at 1287 (quoting NTN Bearing Corp. of Am. v. United States (“NTN

1995”), 19 CIT 1221, 1241, 905 F. Supp. 1083, 1100 (1995), and

citing Torrington Co. v. United States, 21 CIT 251, 261, 960 F.

Supp. 339, 348 (1997), NSK Ltd. v. Koyo Seiko Co., 190 F.3d 1321,

1328 (Fed. Cir. 1999)). 

Here, NTN has failed to provide evidence that Commerce’s

application of the arm’s length test was unreasonable. However, in

light of Commerce’s failure to apply the arm’s length test to the

sales prices of the two affiliated resellers, the Court remands

this issue to Commerce to conduct the arm’s length test, in
Court No. 00-09-00443 Page 29

accordance with 19 C.F.R. § 351.403(c), to determine whether the

sales prices were comparable to the price at which NTN sold the

subject merchandise to unaffiliated parties.

III. Commerce Properly Included EP Sales in its Calculation of CEP

Profit

A. Statutory Background

In calculating CEP, Commerce is required to deduct“the profit

allocated to the expenses described in [19 U.S.C. § 1677a(d)(l) and

(2)],” from the price charged to the first unaffiliated purchaser

in the United States. U.S.C. § 1677a(d)(3). “Profit” is defined

as “an amount determined by multiplying the total actual profit by

the applicable percentage.” 19 U.S.C. § 1677a(f)(1). Under 19

U.S.C. § 1677a(f)(2)(D), “actual profit” is defined as the “total

profit earned . . . with respect to the sale of the same

merchandise for which total expenses are determined . . . .” The

term “total expenses” means “all expenses in the first of [three]

categories which applies and which are incurred by or on behalf of

the foreign producer and foreign exporter of the subject

merchandise and by or on behalf of the United States seller

affiliated with the producer or exporter with respect to the

production and sale of such merchandise . . . .” 19 U.S.C. §

1677a(f)(2)(C). The first category covers “expenses incurred with

respect to the subject merchandise sold in the United States and
Court No. 00-09-00443 Page 30

the foreign like product sold in the exporting country . . . .” 19

U.S.C. § 1677a(f)(2)(C)(i). “Subject merchandise,” in turn, is

defined as “the class or kind of merchandise that is within the

scope of . . . a review . . . .” 19 U.S.C. § 1677(25) (1994).

B. Contentions of the Parties 

1. NTN’s Contentions

NTN contends that Commerce erred by including EP sales in the

calculation of CEP profit. See NTN’s Mem. at 18. Specifically,

NTN argues that there is no provision in the statute for the

inclusion of EP expenses or profit in this calculation. See id. at

18-22. NTN asserts that the statute clearly states that the

adjustment of profit to the CEP is to be based on expenses incurred

in the United States as a percentage of total expenses. See id.

NTN argues that under the canon of statutory construction of

expressio unius est exclusio the specific reference to CEP in the

definition of “total expenses” precludes Commerce from including EP

expenses in the calculation of CEP profit. See id. at 19. NTN

asserts that “just as EP expenses cannot be considered for the CEP

profit adjustment, it follows logically that sales revenue for EP

sales also cannot be included [in the calculation of CEP profit.]”

Id. at 20 (emphasis in original). NTN points out that the

statutory definition of “total actual expenses” directly makes

reference to the definition of total expenses. See id. NTN
Court No. 00-09-00443 Page 31

consequently deduces that Commerce must calculate total profit

using the same transactions to calculate CEP total expenses. See

id.

2. Commerce’s Contentions

Commerce contends that the inclusion of revenues and expenses

resulting from NTN’s EP sales in the calculation of CEP profit was

a reasonable interpretation of the statutory scheme. See Def.’s

Mem. at 23-28. Commerce points out that the term “subject

merchandise” is defined as “‘the class or kind of merchandise that

is within the scope of . . . a review. . . .’” See id. at 24

(quoting 19 U.S.C. § 1677(25)). Commerce notes that the term

“subject merchandise” is referred to in the statute that defines

“total expenses,” see 19 U.S.C. § 1677a(f)(2)(C)(i), and therefore

“total expenses” includes NTN’s EP and CEP sales. See Def.’s Mem.

at 24-27. Commerce further asserts that its September 4, 1997,

Policy Bulletin states:

The calculation of total actual profit under section

[1677a(f)(2)(D)] includes all revenues and expenses

resulting from the respondent’s [EP] sales as well as

from its [CEP] and home market sales . . . The basis for

total actual profit is the same as the basis for total

expenses under [19 U.S.C. § 1677a(f)(2)(C)]. The first

alternative under [19 U.S.C. § 1677a(f)(2)(C)] states

that, for purposes of determining profit, the term “total

expenses” refers to all expenses incurred with respect to

the subject merchandise sold in the United States (as

well as in the home market). Thus, where the respondent

makes both EP and CEP, sales of the subject merchandise

would necessarily encompass all such transactions. 
Court No. 00-09-00443 Page 32

5 The SAA represents “an authoritative expression by the

Administration concerning its views regarding the interpretation

and application of the Uruguay Round agreements.” H.R. Doc. No.

103-316, at 656 (1994), reprinted in 1994 U.S.C.C.A.N. 4040. “It

is the expectation of the Congress that future Administrations will

observe and apply the interpretations and commitments set out in

this Statement.” Id.; see also 19 U.S.C. § 3512(d) (1994) (“The

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.”)

See id. at 24-25 (citing Def.’s Mem. at Ex. 3). 

Commerce also asserts that the Statement of Administrative

Action (“SAA”)5 clarifies the point by explaining that the total

expenses are all expenses incurred by or on behalf of the foreign

producer and exporter and the affiliated seller in the United

States with respect to the production and sale of three

alternatives. See id. at 26. The first category referred to in

the SAA is “the subject merchandise sold in the United States.”

Id. Commerce contends that this “by definition, means the class or

kind of merchandise which is within the scope of a review and, in

this review, includes both CEP and EP sales.” Id. Consequently,

Commerce maintains that it properly included these sales when it

calculated CEP profit. See id. at 28.
Court No. 00-09-00443 Page 33

3. Timken’s Contentions

Timken agrees with Commerce that it is a reasonable

interpretation of the statute and consistent with agency practice

to calculate CEP profit on the basis of all United States sales.

See Timken’s Resp. at 26-28. 

C. Analysis 

Based upon its interpretation of the statutory language and

upon the SAA’s reference to CEP, NTN claims that there are only two

categories of expenses that Commerce could use in calculating CEP

profit: those used to calculate NV and those used to calculate CEP.

See NTN’s Mem. at 18-21. Additionally, NTN states that just as EP

expenses cannot be used in calculating CEP profit, neither can

sales revenue be used for EP sales. See id. at 20. NTN, however,

ignores two issues. To start, the first category of total expenses

under 19 U.S.C. § 1677a(f)(2)(C) is not limited to expenses

incurred with respect to CEP sales made in the United States and

the foreign like product sold in the exporting country. It also

covers expenses incurred with respect to EP sales because the

statute refers to “expenses incurred with respect to the subject

merchandise sold in the United States.” 19 U.S.C. §

1677a(f)(2)(C). The term “subject merchandise” is defined in 19

U.S.C. § 1677(25) as the class or kind of merchandise that is

within the scope of a review. The class or kind of merchandise in
Court No. 00-09-00443 Page 34

this review includes both CEP and EP sales. Second, as the SAA

explains, the total expenses are all expenses incurred with respect

to the production and sale of the first of the three alternatives.

See H.R. Doc. No. 103-465, at 824, reprinted in 1994 U.S.C.C.A.N.

at 4164.

The Court agrees that the SAA’s reference to “the subject

merchandise sold in the United States,” means the class or kind of

merchandise which is within the scope of a review. See id.

Accordingly, the Court is not convinced that Commerce’s

interpretation of the statutory scheme is unreasonable and sustains

Commerce’s inclusion of EP sales in the calculation of CEP profit.

IV. Commerce Properly Calculated CEP Without Regard to LOT

A. Statutory Background

In calculating CEP, Commerce must deduct “the profit allocated

to the expenses described” in pertinent subparts of 19 U.S.C. §

1677a(d) from the price at which the merchandise is sold to the

first unaffiliated purchaser in the United States. See 19 U.S.C.

§ 1677a(d)(3). The term “profit” is defined as “an amount

determined by multiplying the total actual profit by the applicable

percentage.” 19 U.S.C. § 1677a(f)(1). The term “actual profit”

is, in turn, defined as the “total profit earned . . . with respect

to the sale of the same merchandise for which total expenses are
Court No. 00-09-00443 Page 35

determined under such subparagraph.” 19 U.S.C. § 1677a(f)(2)(D).

The term “total expenses” is defined as:

all expenses in the first of the following categories

which applies and which are incurred by or on behalf of

the foreign producer and foreign exporter of the subject

merchandise and by or on behalf of the United States

seller affiliated with the producer or exporter with

respect to the production and sale of such merchandise:

(i) The expenses incurred with respect to the

subject merchandise sold in the United States and the

foreign[-]like product sold in the exporting country if

such expenses were requested by the administering

authority for the purpose of establishing normal value

and constructed export price.

(ii) The expenses incurred with respect to the

narrowest category of merchandise sold in the United

States and the exporting country which includes the

subject merchandise.

(iii) The expenses incurred with respect to the

narrowest category of merchandise sold in all countries

which includes the subject merchandise. 

19 U.S.C. § 1677a(f)(2)(C).

B. Contentions of the Parties 

NTN complains that Commerce should calculate CEP profit on an

LOT basis. See NTN’s Mem. at 21-22. NTN concedes that the Court

has agreed with Commerce’s methodology in NTN 2000, 24 CIT at 411-

14, 104 F. Supp. 2d at 133-35, but maintains that under the

preference expressed by the language of 19 U.S.C. § 1677a(f), NTN’s

profit should have been calculated on the narrowest possible basis.

See NTN’s Mem. at 21-22. Consequently, NTN asserts that “since

[CV] profit [is] calculated by level of trade, CEP profit should be
Court No. 00-09-00443 Page 36

calculated to account for level of trade differences.” Id. at 22.

Commerce maintains that its calculation of NTN's CEP profit is

proper because the statute does not expressly refer to LOT. See

Def.’s Mem. at 28-31. Commerce asserts that neither the statute

nor the SAA require the calculation of CEP profit to be based upon

a more specific category than the class or kind of merchandise.

See id. at 30 (citing Issues & Decision Mem. at 18). Furthermore,

Commerce argues that NTN’s interpretation of the statute is

“misplaced.” See id. The statute refers to “narrowest category”

in its description of the second and third alternative methods,

which are based upon financial reports and not the first

alternative. See id. Commerce maintains that it applied the first

alternative because NTN provided the necessary data. See id.

Finally, Commerce asserts that in NTN 2000, 24 CIT at 411-14, 104

F. Supp. 2d at 133-35, the Court found Commerce’s calculation of

CEP without regard to LOT to be a reasonable interpretation of 19

U.S.C. § 1677a(f). See Def.’s Mem. at 30. 

Timken supports Commerce’s position and asserts that the Court

has affirmed Commerce’s calculation of CEP without regard to LOT

for previous reviews. See Timken’s Resp. at 28-29. 
Court No. 00-09-00443 Page 37

C. Analysis

Section 1677a(f) of Title 19 of the United States Code does

not reference LOT. Accordingly, the Court’s duty under Chevron is

to review the reasonableness of Commerce’s statutory

interpretation. See IPSCO, 965 F.2d at 1061 (quoting Chevron, 467

U.S. at 844). This Court upheld Commerce’s refusal to calculate

CEP on an LOT-specific basis in NTN 2000, 24 CIT at 411-14, 104 F.

Supp. 2d at 133-35, finding it to be reasonable and in accordance

with law. The Court examined the language of the statute and

concluded that the statute clearly contemplates that, in general,

the “narrowest category” will include the class or kind of

merchandise that is within the scope of an investigation or review.

See id. The Court based its conclusion on its examination of the

definition of “total expenses” contained in subsections (ii) and

(iii) of 19 U.S.C. § 1677a(f)(2)(C). See id. Both subsections

refer to “expenses incurred with respect to the narrowest category

of merchandise . . . which includes the subject merchandise.” 19

U.S.C. § 1677a(f)(2)(C). The term “subject merchandise” is defined

as “the class or kind of merchandise that is within the scope of an

investigation . . . .” 19 U.S.C. § 1677(25).

The statute envisions that the “narrowest category” will be

the class or kind of merchandise that is within the scope of a

particular review at issue. Commerce did not read the statutory
Court No. 00-09-00443 Page 38

scheme as contemplating that it would have to consider a much

narrower subcategory of merchandise, such as one based upon an LOT.

See Issues & Decision Mem. at 18 (relying on H.R. DOC. 103-316 at

824-25, reprinted in 1994 U.S.C.C.A.N. at 4164, and 19 U.S.C. §

1677a(f)(2)(C)(i)).

While NTN contends that Commerce should calculate CEP profit

to account for differences because “[t]here is no reason [for

Commerce] to use a less specific, less accurate mode of

calculation,” NTN’s Mem. at 22, a CEP profit calculation based upon

a broader profit line than the subject merchandise will not

necessarily produce a distorted result. 

No distortion in the profit allocable to [United States]

sales is created if total profit is determined on the

basis of a broader product-line than the subject

merchandise, because the total expenses are also

determined on the basis of the same expanded product

line. Thus, the larger profit pool is multiplied by a

commensurately smaller percentage. 

H.R. Doc. No. 103-465, at 825, reprinted in 1994 U.S.C.C.A.N. at

4164-65. Accordingly, as in NTN 2000, 24 CIT at 411-14, 104 F.

Supp. 2d at 133-35, the Court finds that Commerce reasonably

interpreted 19 U.S.C. § 1677a(f) in refusing to apply a narrower

subcategory of merchandise such as one based on LOT. Based on the

foregoing, the Court upholds Commerce’s refusal to calculate CEP

profit for NTN on an LOT basis.
Court No. 00-09-00443 Page 39

V. Commerce Properly Recalculated NTN’s Home-Market Inventory

Carrying Costs and Refused to Adjust NV for all Home-Market

Commissions

A. Statutory Background

Section 1677b(a)(6) of Title 19 of the Unites States Code

directs Commerce to increase or decrease the price used for NV “by

the amount of any difference (or lack thereof) between the [EP] or

[CEP] and the price described in paragraph (1)(B) . . . that is

established to the satisfaction of [Commerce] to be wholly or

partly due to . . . other differences in the circumstances of

sale.” 19 U.S.C. 1677b(a)(6)(C) (1994). Furthermore, Commerce’s

regulations provide guidance for the calculation of NV and the

making of adjustments “to account for certain differences in the

circumstances of sales in the United States and foreign markets.”

19 C.F.R. § 351.410(a). The regulations state that “with the

exception of the allowance described in paragraph (e) of this

section . . . [Commerce] will make circumstances of sale

adjustments under [19 U.S.C. 1677b(a)(6)(C)(iii)] only for direct

selling expenses and assumed expenses.” 19 C.F.R. § 351.410(b).

“Direct selling expenses” is defined as expenses “such as,

commissions, credit expenses, guarantees, and warranties, that

result from, and bear a direct relationship to, the particular sale

in question.” 19 C.F.R. § 351.410(c). “Assumed expenses” is

defined as the selling expenses “assumed by the seller on behalf of
Court No. 00-09-00443 Page 40

the buyer.” 19 C.F.R. § 351.410(d).

Pursuant to Commerce’s regulations, in making adjustments to

NV, CV, or CEP, “the interested party that is in possession of the

relevant information has the burden of establishing to the

satisfaction of [Commerce] the amount and nature of a particular

adjustment . . . .” 19 C.F.R. § 351.401(b)(1) (1999).

B. Commerce’s Recalculation of NTN’s Home-Market Inventory

Carrying Costs

1. Contentions of the Parties

NTN contends that Commerce erred in recalculating NTN’s homemarket inventory carrying costs. See NTN’s Mem. at 22-23.

Specifically, NTN argues that, at verification, Commerce “reviewed

and accepted both NTN’s beginning and ending inventory values, the

cost of goods sold, and the short term borrowing rate.” Id. at 23.

NTN states that Commerce has created a facts available situation

even though there is adequate verified data on the record. See id.

NTN additionally asserts that Commerce accepted NTN’s methodology

in the previous reviews, “and has not presented any reasons for a

change in its methodology in the ninth and tenth review.” Id.

Commerce responds that it has been granted discretion to

devise its own methodology to calculate credit expenses because the

statute does not specify any method that Commerce should use. See
Court No. 00-09-00443 Page 41

Def.’s Mem. at 32. Commerce points out that it has been its

practice “to impute [United States] and home-market inventory

carrying costs for the period of time that the merchandise remains

in inventory.” Id. at 32-33. Here, Commerce determined that NTN’s

calculation of inventory carrying costs did not reflect costs

accurately because it did not account for the time the subject

merchandise remained in inventory. See Def.’s Mem. at 33 (citing

Issues & Decision Mem. at 30-31). Commerce, therefore,

recalculated the inventory carrying costs using its own standard

formula. See Issues & Decision Mem. at 31. Commerce finally

argues that the verification of NTN’s inventory carrying costs does

not mean that Commerce accepted NTN’s methodology for calculating

the expense. See id. Rather, Commerce asserts that it simply

verified the expense reported and not the actual method used to

calculate the expense. See id.

Timken agrees with Commerce that it was proper to recalculate

NTN’s inventory carrying costs because NTN’s methodology was not

consistent with Commerce’s methodology. Timken’s Resp. at 31-32.

2. Analysis

The Court agrees with Commerce that 19 U.S.C. § 1677b(a)(6)

does not specify a method that Commerce should use in calculating

credit expenses. See 19 U.S.C. § 1677b(a)(6). Consequently,

Commerce has discretion to create its own reasonable method to
Court No. 00-09-00443 Page 42

6 The Court has approved of Commerce’s practice of imputing

United States and home-market inventory carrying costs for the

period of time that the subject merchandise remains in inventory.

See Timken Co. v. United States, 18 CIT 619, 625-26, 858 F. Supp.

206, 212-13 (1994).

7 The Court agrees with Commerce that its verification of

an expense does not mean that Commerce accepted the method used by

NTN to report the expense. Commerce may reject a respondent’s

calculation methodology in its final results even though it has

verified the expense reported for the preliminary results. 

calculate credit expenses.6 NTN argues that Commerce accepted

NTN’s methodology for calculating the inventory carrying costs at

verification and therefore should have accepted NTN’s methodology

for the Final Results. See NTN’s Mem. at 22-23. The Court finds

this argument unpersuasive. Commerce is directed under the

antidumping duty statute to determine the antidumping duty “as

accurately as possible.” See Rhone Poulenc, Inc. v. United States,

899 F.2d 1185, 1191 (Fed. Cir. 1990). Accordingly, Commerce may

reasonably determine that the method used to report an expense may

prevent it from fulfilling a statutory duty.7

Furthermore, NTN argues that Commerce changed its methodology

by refusing to accept NTN’s calculation methodology for the current

review although Commerce had accepted it in previous reviews. See

NTN’s Mem. at 23. This Court has repeatedly found, however, that

Commerce may change its methodology as long as such change is

reasonable. See NTN 2003, 27 CIT ___, ___, 248 F. Supp. 2d at

1267-69; Peer Bearing Co. v. United States, 25 CIT ___, ___, 182 F.
Court No. 00-09-00443 Page 43

Supp. 2d 1285, 1300-01 (2001); Timken Co. v. United States, 25 CIT

___, ___, 166 F. Supp. 2d 608, 620-21 (2001). In the case at bar,

Commerce reasonably rejected NTN’s calculation methodology because

Commerce determined that NTN’s calculation failed to account for

the number of inventory days and, therefore, did not reflect the

costs accurately. Accordingly, the Court sustains Commerce’s

recalculation of NTN’s home-market inventory carrying costs.

C. Commerce Improperly Refused to Adjust NV for all HomeMarket Commissions

1. Contentions of the Parties

NTN complains that Commerce’s methodology for determining the

arm’s length nature of commissions paid is unreasonable. See NTN’s

Mem. at 24-26. Specifically, NTN contends that Commerce’s

methodology is flawed because it does not account for actual

services rendered in exchange for commissions. See id. at 24. NTN

asserts that it negotiates its commission rates individually with

each selling agent, each of which “deals with a myriad of different

product mixes and customers, making their jobs more or less

intensive depending upon the totality of the circumstances.” Id.

at 25. During the review at issue, NTN responded to Commerce’s

supplemental questionnaire regarding the activities of each

commissionaire, and provided detailed contractual information

regarding volume of sales and transactions. See id.
Court No. 00-09-00443 Page 44

NTN contends that it provided Commerce with all the

information needed to adjust NV for all home-market commissions but

that Commerce “reduce[d] its analysis to a bare comparison of

average rates and nominal selling functions [which] ignores

commercial reality.” Id. at 26. Consequently, NTN complains that

Commerce “should not have adjusted the normal value for commission

rates if their percentage for unaffiliated parties [is] less than

the percentage for affiliated parties.” Id. Rather, NTN argues

that Commerce should have determined that the home-market

commission rates were made at arm’s length and treated the rates as

a direct expense in determining the NV calculation. See id.

Commerce responds that it acted properly in not adjusting NV

for all home-market commissions paid to commissionaires affiliated

with NTN. See Def.’s Mem. at 34-39. Commerce asserts that it

followed its standard practice-– comparing the commissions paid to

affiliated selling agents with those paid to unaffiliated selling

agents-– to determine whether to make an adjustment to NV based

upon the commissions paid. See id. at 36. If Commerce determines

that the commissions were not at arm’s length, then it disregards

the commissions and treats them as intra-company transfers. See

id. Based on information submitted by NTN and the application of

its arm’s length test, Commerce “determined that commissions paid

by NTN to certain affiliates were not at arm’s length because the
Court No. 00-09-00443 Page 45

affiliates were paid a higher commission rate than unaffiliated

agents for performing the same or similar functions.” Id. at 37.

Commerce asserts that “in order to make a determination that

the commissions the respondent paid were at arm’s length . . . some

kind of comparison of the rates paid to affiliates to the rates

paid to unaffiliated commissionaires” must be completed or

conducted. See Issues & Decision Mem. at 34. Commerce contends

that NTN did not provide suggestions or data that it could use to

refine its analysis. See id. Citing 19 C.F.R. § 351.401(b),

Commerce maintains that NTN has the burden to prove that the

commissions paid were at arm’s length and that NTN failed to meet

this burden. See Def.’s Mem. at 36. Accordingly, Commerce asserts

that it properly did not adjust NV for all home-market commissions

paid to affiliated commissionaires. See id.

Timken agrees with Commerce that it was appropriate not to

adjust NV for all home-market commissions. See Timken’s Resp. at

32-36. Furthermore, Timken points out that the statute does not

prescribe a specific test for Commerce to use to determine whether

the commission rates are at arm’s length. See id. at 34.

Consequently, Timken asserts that “this matter is committed to

agency discretion, and the Court reviews Commerce’s methodology in

accordance with the Chevron standard.” Id. Timken argues that the

Court in Torrington Co. v. United States, 25 CIT ___, ___, 146 F.
Court No. 00-09-00443 Page 46

Supp. 2d 845 (2001), rejected similar arguments made by NTN and

that the same reasoning and conclusions apply in the case at bar.

See Timken’s Resp. at 35. Timken also contends that “it is

reasonable [for Commerce] to presume that commissions paid to

affiliate[s] which are higher than those paid to unaffiliated

parties are not at arm’s length.” Id. at 36.

2. Analysis

“Commerce is given considerable deference in its decision to

grant a circumstances-of-sale adjustment.” Outokumpu Copper Rolled

Products AB v. United States, 18 CIT 204, 211, 850 F. Supp. 16, 22

(1994) (citing Smith-Corona Group, Consumer Products Div., SCM

Corp. v. United States, 713 F.2d 1568, 1575 (Fed. Cir. 1983), cert.

denied, 465 U.S. 1022 (1984)). “As long as Commerce’s ‘decision is

reasonable, then Commerce has acted within its authority even if

another alternative is more reasonable.’” Id. (quoting Koyo Seiko

Co. v. United States, 16 CIT 366, 372, 796 F. Supp. 517, 523

(1992), rev’d and remanded on other grounds, 36 F.3d 1565 (Fed.

Cir. 1994)). The SAA additionally clarifies that “[C]ommerce’s .

. . practice with respect to this adjustment [is] to remain

unchanged.” H.R. Doc. No. 103-465, at 828, reprinted in 1994

U.S.C.C.A.N. at 4167.

Under 19 C.F.R. § 351.410(b), Commerce makes the

“circumstances of sale” adjustments pursuant to 19 U.S.C. §
Court No. 00-09-00443 Page 47

8 NTN states that “there are many important factors besides

‘function’ and rate, which determine the commission paid to each

commissionaire.” NTN’s Mem. at 24. Certain agents, for example,

may provide services for a large number of customers and large

volume transactions, while others may only handle smaller volume

transactions for a limited number of customers. See NTN’s Mem. at

1677b(a)(6)(C)(iii) only for direct selling expenses and assumed

expenses. Direct selling expenses include commissions “that result

from, and bear a direct relationship to, the particular sale in

question.” 19 C.F.R. § 351.410(c). Pursuant to its practice,

Commerce has denied adjustments for commissions where it was not

provided with sufficient evidence that commissions paid to

affiliated commissionaires were made at arm’s length. See, e.g.,

Final Results of Antidumping Duty Administrative Review of

Industrial Phosphoric Acid From Belgium, 64 Fed. Reg. 49,771,

49,772 (Sept. 14, 1999); Final Results of Antidumping Duty

Administrative Reviews on Antifriction Bearings (Other Than Tapered

Roller Bearings) and Parts Thereof From France, Germany, Italy,

Japan, Singapore, and the United Kingdom, 62 Fed. Reg. 2081, 2098-

99 (Jan. 15, 1997); Final Results of Antidumping Duty

Administrative Reviews and Revocation in Part of an Antidumping

Finding on 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, 61

Fed. Reg. 57,629, 57,638 (Nov. 7, 1996). In this case, Commerce

followed the same practice.8 See Issues & Decision Mem. at 34-35.
Court No. 00-09-00443 Page 48

25. NTN, however, failed to present Commerce with evidence to

support its contention that the rates were made at arm’s length.

NTN did not give Commerce a reason to depart from its usual

reasonable methodology, which compares the weighted-average

commission rate paid to affiliated parties to the weighted-average

rate paid to unaffiliated parties. 

Under the relevant regulations, NTN has “the burden of

establishing to the satisfaction of [Commerce] the amount and

nature of a particular adjustment . . . .” 19 C.F.R. §

351.401(b)(1). NTN failed to point out specific evidence in the

record that Commerce could have considered to be sufficient to

change its assessment methodology. Cf. Zenith Elecs. Corp. v.

United States, 17 CIT 51, 57, 812 F. Supp. 228, 233 (1993)

(pointing out that the more Commerce rejects specific evidence in

the record, the more likely that its rejection of such specific

evidence is unreasonable). Consequently, Commerce’s determination

that the commissions paid were not at arm’s length was reasonable

and, therefore, is affirmed.

VI. Commerce Properly Reallocated NTN’s United States and HomeMarket Indirect Selling Expenses Without Regard to LOT

A. Background

In the review at issue, Commerce calculated NTN’s home-market

and Unites States expenses without regard to LOT. See Issues &

Decision Mem. at 38-39. NTN argued that Commerce should have

relied on NTN’s reported United States and home-market selling
Court No. 00-09-00443 Page 49

expenses based on LOT instead of reallocating these selling

expenses without regard to LOT. See id. at 38. NTN maintained

that the record provided sufficient evidence that selling expenses

varied across LOT, and that Commerce’s allocation should reflect

the different LOT. See id. NTN additionally argued that Commerce,

in a previous review, found its allocation of expenses across LOT

acceptable and necessary to prevent distortion. See id. at 38-39.

Timken, in turn, contended that Commerce had rejected NTN’s

arguments in previous reviews. See id. at 39. Additionally,

Timken asserted that NTN “did not provide evidence that it incurred

its selling expenses in the manner in which it allocated the

expenses.” Id. Consequently, Timken concluded that Commerce

should not alter its methodology of reallocating NTN’s home-market

and United States selling expenses without regard to LOT. See id.

Commerce responded by stating that it did not dispute that selling

expenses differed between NTN’s LOT. See id. For the Preliminary

Results, 65 Fed. Reg. at 18,033, Commerce reallocated NTN’s packing

expenses to calculate expenses that more accurately reflected NTN’s

commercial situation. See id. Commerce, however, found that NTN’s

methodology for allocating expenses to each LOT did not bear a

relationship to the manner in which NTN incurred these United

States and home-market selling expenses and its methodology led to

distorted allocations. See id. Commerce stated that NTN did not
Court No. 00-09-00443 Page 50

change its methodology, which it had rejected in prior reviews, and

did not present “any evidence that it incurred the selling expenses

in the manner in which it allocated the expenses.” Id.

B. Contentions of the Parties

NTN contends that Commerce erred in reallocating NTN’s

reported United States selling expenses without regard to LOT. 

See NTN’s Mem. at 26-30. Specifically, NTN argues that the

reallocation of such expenses voids Commerce’s determination that

there were varying LOT in the United States and Japanese markets.

See id. at 27. NTN asserts that Commerce’s methodology, which does

not take into account LOT, is more distortive than NTN’s

methodology. See id. at 28. NTN concludes that Commerce’s

reallocation of NTN’s United States selling expenses violates

Commerce’s mandate to administer the antidumping duty laws. See

id. NTN asserts that Commerce did not provide an explanation for

its decision and “should explain what it did and why it decided on

a certain rationale.” Id. at 29. NTN maintains that Commerce’s

reallocation distorts NTN’s dumping margin and is inconsistent with

record evidence. See id.

Commerce responds that it properly reallocated NTN’s United

States and home-market selling expenses without regard to LOT. 

See Def.’s Mem. at 39-42. Commerce maintains that it previously

explained, in Final Results of Antidumping Duty Administrative
Court No. 00-09-00443 Page 51

Reviews, Partial Termination of Administrative Reviews, and

Revocation in Part of Antidumping Duty Orders of Antifriction

Bearings (Other Than Tapered Roller Bearings) and Parts Thereof

From France, et al., 60 Fed. Reg. 10,900 (Feb. 28, 1995), that

“indirect selling expenses are fixed period costs that typically

relate to all sales and do not vary according to sales value of the

number of employees who allegedly sell each type of merchandise.”

Def.’s Mem. at 39. Commerce asserts that NTN allocated its

indirect selling expenses based on the number of employees at

certain regions without showing that it incurred any specific

expenses unique to a particular LOT. See id. at 39-40. Citing FAG

Kugelfischer Georg Schafer AG v. United States, 25 CIT ___, ___,

131 F. Supp. 2d 104, 115-20 (2001), NTN 2000, 24 CIT at 409-11, 104

F. Supp. 2d at 133, NTN 1999, 23 CIT at 496-97, 83 F. Supp. 2d at

1290-91, and NTN 1995, 19 CIT at 1231-35, 905 F. Supp. at 1093-95,

Commerce asserts that the Court has upheld Commerce’s reallocation

of NTN’s United States and home-market indirect selling expenses

without regard to LOT. See Def.’s Mem. at 40-41.

Timken generally supports Commerce’s arguments and maintains

that record evidence supports Commerce’s decision to reject NTN’s

United States and home-market allocations. See Timken’s Resp. at

38-41. Timken asserts that the Court has consistently affirmed

Commerce’s repeated rejection of NTN’s methodology for reporting
Court No. 00-09-00443 Page 52

indirect selling expenses on the basis of LOT. See id. at 38.

Timken maintains that “NTN says nothing new here to call Commerce’s

position into question . . . [n]or does NTN demonstrate that its

allocation methodology does not result in ‘distorted allocations.’”

Id. at 39. 

C. Analysis

The Court disagrees with NTN that it adequately supported its

LOT adjustment claim for its reported United States indirect

selling expenses. Although NTN purports to show that it incurred

different selling expenses at different LOT, a careful review of

the record demonstrates that NTN’s allocation methodology does not

reasonably quantify the United States indirect selling expenses

incurred at each LOT to support such an adjustment. See NTN 1999,

23 CIT at 497, 83 F. Supp. 2d at 1290-91; NTN 1995, 19 CIT at 1234,

905 F. Supp. at 1095. Given that NTN had the burden before

Commerce to establish its entitlement to an LOT adjustment, its

failure to provide the requisite evidence compels the Court to

conclude that it has not met its burden. NTN has failed to

demonstrate that Commerce’s denial of the LOT adjustment was

unsupported by substantial evidence and not in accordance with law.

See NSK, 190 F.3d at 1330. Consequently, the Court sustains

Commerce’s reallocation of NTN’s United States indirect selling

expenses without regard to LOT. 
Court No. 00-09-00443 Page 53

With respect to Commerce’s reallocation of NTN’s home-market

indirect selling expenses, the Court remands this matter to

Commerce. Commerce is instructed to articulate how the record

supports Commerce’s decision in the Final Results, Fed. Reg.

49,219, to recalculate NTN’s home-market indirect selling expenses

without regard to LOT.

VII. Commerce Properly Included NTN’s Sample Sales and Sales with

High Profits in the Calculation of NV

A. Statutory Background

Section 1677b(a)(1)(B)(i) of Title 19 of the United States

Code states that NV is to be based upon “the price at which the

foreign like product is first sold . . . in the ordinary course of

trade.” “Ordinary course of trade” is defined as “the conditions

and practices which, for a reasonable time prior to the exportation

of the subject merchandise, have been normal in the trade under

consideration with respect to merchandise of the same class or

kind.” 19 U.S.C. § 1677(15). Furthermore, the statute states that

Commerce “shall consider the following sales and transactions,

among others, to be outside the ordinary course of trade: (A) Sales

disregarded under section 1677b(b)(1) of this title. (B)

Transactions disregarded under section 1677(b)(f)(2) of this
Court No. 00-09-00443 Page 54

9 Section 1677b(b)(1) deals with below-cost sales. See 19

U.S.C. § 1677b(b)(1) (1994). Section 1677b(f)(2) addresses how

transactions between directly or indirectly affiliated persons are

to be treated. See 19 U.S.C. § 1677b(f)(2).

title.”9 Id. 

The statute does not define what “among others” means nor does

it indicate the criteria Commerce is to use in deciding what sales

are outside the ordinary course of trade. See id. The SAA,

however, states that, “Commerce may consider other types of sales

or transactions to be outside the ordinary course of trade when

such sales or transactions have characteristics that are not

ordinary as compared to sales or transactions generally made in the

same market.” H.R. Doc. No. 103-465, at 834, reprinted in 1994

U.S.C.C.A.N. at 4171. The SAA proceeds to give several examples of

such sales and transactions, including “merchandise produced

according to unusual product specification, [and] merchandise sold

at aberrational prices.” Id. The SAA also states that the

statute does not provide an exhaustive list, yet “the

Administration intends that Commerce will interpret [19 U.S.C. §

1677(15)] in a manner which will avoid basing normal value on sales

which are extraordinary for the market in question, particularly

when the use of such sales would lead to irrational or

unrepresentative results.” Id.
Court No. 00-09-00443 Page 55

Commerce’s regulations also provide examples of sales outside

the ordinary course of trade. See 19 C.F.R. § 351.102(b) (1999).

The regulations state that Commerce may consider “sales or

transactions involving off-quality merchandise or merchandise

produced according to unusual product specifications, merchandise

sold at aberrational prices or with abnormally high profits” to be

outside the ordinary course of trade. See id.. 

Section 1677b(e)(2)(A) of Title 19 of the United States Code

states that CV “shall be an amount equal to the sum of . . . the

actual amounts incurred and realized by the specific exporter or

producer being examined . . . 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 . . . .” 

B. Background

During the review, NTN argued that its home-market sample

sales and sales with high profits were outside the ordinary course

of trade. Consequently, it was NTN’s position that these sales

should have been excluded in Commerce’s calculation of NV. See

Issues & Decision Mem. at 46-47. NTN asserted that the provision

regarding “ordinary course of trade” is meant to prevent sales that

do not represent home-market practices from being used to calculate

dumping margins. See id. NTN argued that its customer had

specifically requested the samples to be used only for testing
Court No. 00-09-00443 Page 56

purposes. See id. at 46. Additionally, NTN claimed that it

provided Commerce with evidence that its high-profit sales were not

representative of other sales in the market and, therefore, outside

the course of ordinary trade. See id. at 47.

Timken maintained that the data submitted by NTN comparing the

price and quantity of sample sales versus normal sales did not

provide enough contrast to support NTN’s claim. See id. at 46.

Furthermore, Timken asserted that NTN did not provide evidence,

other than profit levels, demonstrating that its high-profit sales

were an aberration. See id. at 47. Consequently, Timken argued

that Commerce should not exclude NTN’s sample and high-profit sales

from its NV calculation. See id. at 46-47.

Commerce rejected NTN’s claim and stated that NTN failed to

meet its burden of demonstrating that the sample sales were outside

the ordinary course of trade. See id. at 46. Commerce reasoned

that “the fact that these sales are used for testing purposes does

not, in and of itself, demonstrate that the sales are outside the

ordinary course of trade.” Id. Commerce determined that “in this

case, NTN Japan has not shown that its sample sales are in any way

unrepresentative of its other sales.” Id. Commerce stated that

“in order to determine that a sale is outside the ordinary course

of trade due to abnormally high profits, there must be unique and

unusual characteristics related to the sales in question which make
Court No. 00-09-00443 Page 57

10 NTN adds that these sales were frequently made for higher

prices and lower quantities than their normal sales to customers.

NTN’s Mem. at 31.

them unrepresentative of the home market.” Id. at 47. 

C. Contentions of the Parties

1. NTN’s contention

NTN complains that its sample sales were outside the course of

ordinary trade and that Commerce should have excluded such sales in

its calculation of NV. See NTN’s Mem. at 30-37. NTN maintains

that its sample sales “were specifically requested as samples from

the customers and are used only for testing purposes as opposed to

the normal use of bearings.”10 Id. at 30-31. NTN complains that

Commerce acknowledged that these sales were relatively few in

number, but then found that NTN’s sample sales were not rare or

uncommon. See id. at 31. NTN argues that “the defining factor for

determining whether something is rare or unusual should not be the

total number of sample sales, but rather the relative number of

sample sales as compared to overall sales.” Id. (emphasis in

original). NTN contends that following Commerce’s logic would lead

to the inaccurate conclusion “that samples for small companies are

few in total number and are therefore, ‘rare or unusual,’ even if

the ratio of samples to total sales was the same as NTN’s ratio.”

Id. 
Court No. 00-09-00443 Page 58

NTN asserts that “the ordinary course of trade inquiry is

strictly a question of fact,” and that NTN’s home-market sample

sales are not representative of its market sales or ordinary sales

profit level. Id. at 32. NTN also argues that the inclusion of

NTN’s high-profit sales “destroys the utility of the ordinary

course of trade provisions,” because they are not representative of

home-market sales. Id. at 35. Consequently, NTN concludes that

Commerce’s decision to include NTN’s high-profit sales in its NV

calculation is contrary to law. See id. at 30-36. Moreover, based

on this contention, NTN complains that Commerce erred in including

such sales in calculating CV profit. See id. at 36-37. NTN argues

that the sales with high profits are ineligible under 19 U.S.C. §

1677b(e)(2)(A) and should have been excluded from Commerce’s CV

profit calculation. See id.

2. Commerce’s contentions

Commerce responds that it properly included NTN’s sample sales

and sales with high profits in calculating NV. See Def.’s Mem. at

42-51. Commerce asserts that the labeling of sales as sample sales

that are “in small quantities does not require Commerce to treat

them as sales made outside the ordinary course of trade absent a

demonstration that the sales possessed some unique and unusual

characteristics which made them unrepresentative of the home

market.” Id. at 49. Commerce maintains that NTN failed to meet
Court No. 00-09-00443 Page 59

its burden of demonstrating that the sample sales were

unrepresentative of its other sales and therefore outside the

ordinary course of trade. See id. The fact that the samples were

used for testing by the customers that bought them does not, by

itself, establish that Commerce is required to treat the sales as

sales made outside the ordinary course of trade. See id. 

Commerce also asserts that 19 U.S.C. § 1677b(e)(2)(A)

“requires that Commerce use amounts incurred for profits in

connection with the production and sale of a foreign like product,

in the ordinary course of trade.” See id. at 50. Commerce,

however, claims that it has discretion in determining which sales

are outside the ordinary course of trade and that it properly

exercised such discretion in the case at bar. See id. at 50-51.

For Commerce to determine that sales are outside the ordinary

course of trade, there must have been unique and unusual

characteristics related to the sales that make them

unrepresentative. See id. at 51 (citing Issues & Decision Mem. at

46-47). Commerce maintains that, as it has stated in previous

reviews, high profits alone are not sufficient evidence for

Commerce to determine that sales are outside the ordinary course of

trade. See id. (citing Issues & Decision Mem. at 47). Based on

the evidence NTN submitted, Commerce determined that the sales were

not aberrational and, therefore, included them in its calculation
Court No. 00-09-00443 Page 60

of NV and CV profit. See id.

3. Timken’s contentions

Timken agrees with Commerce and argues that NTN did not

sufficiently support its claim that its sample sales were not in

the ordinary course of trade. See Timken’s Resp. at 43-44.

Additionally, Timken supports Commerce’s decision to include NTN’s

high-profit sales in the calculation of NV and CV profit. See id.

at 45-46.

D. Analysis

Commerce is required to consider below-cost sales and

affiliated party transactions as outside the ordinary course of

trade. See 19 U.S.C. § 1677(15). The “among others” language of

19 U.S.C. § 1677(15), however, indicates that subsection (A) and

(B) are not inclusive. Commerce has been given the discretion to

interpret § 1677(15) to determine which sales are outside the

ordinary course of trade. See Mitsubishi Heavy Indus., Ltd. v.

United States, 22 CIT 541, 568, 15 F. Supp. 2d 807, 830 (1998)

(noting that “Congress granted Commerce discretion to decide under

what circumstances highly profitable sales would be considered to

be outside of the ordinary course of trade.”); cf. Koenig & BauerAlbert AG v. United States, 22 CIT 574, 589 n.8, 15 F. Supp. 2d

834, 850 n.8 (1998) (stating that Commerce has discretion to decide
Court No. 00-09-00443 Page 61

when highly profitable sales are outside the ordinary course of

trade, but also noting that Commerce cannot impose this requirement

arbitrarily, nor impose impossible burdens of proof on claimants)

(citing NEC Home Elecs. v. United States, 54 F. 3d 736, 745 (Fed.

Cir. 1995) (holding that the burden imposed to prove a LOT

adjustment was unreasonable because claimant could, under no

practical circumstances, meet the burden)).

In resolving questions of statutory interpretation, the

Chevron test requires this Court first to determine whether the

statute is clear on its face. See Chevron, 467 U.S. at 842-43.

If the language of the statute is clear, then this Court must defer

to Congressional intent. See id. When the statute is unclear,

however, the Court must decide whether the agency’s answer is based

on a permissible construction of the statute. See id. at 843; see

also Corning Glass Works v. United States Int’l Trade Comm’n, 799

F. 2d 1559, 1565 (Fed. Cir. 1986) (finding that the agency’s

definitions must be “reasonable in light of the language, policies

and legislative history of the statute”). The statutory provision

defining what is considered outside the ordinary course of trade is

unclear. The statute specifically defines “ordinary course of

trade,” yet the statute provides little assistance in determining

what is outside the scope of that definition. The statute merely

identifies a non-exhaustive list of situations in which sales or
Court No. 00-09-00443 Page 62

transactions are to be considered outside the “ordinary course of

trade.”

Accordingly, the Court finds the statute to be ambiguous as to

what constitutes a sale outside the ordinary course of trade. What

Congress intended to exclude from the “ordinary course of trade” is

also not immediately clear from the statute’s legislative history.

The SAA states that in addition to the specific types of

transactions to be considered outside the ordinary course of trade,

“Commerce may consider other types of sales or transactions to be

outside the ordinary course of trade when such sales or

transactions have characteristics that are not ordinary as compared

to sales or transactions generally made in the same market.” H.R.

DOC. 103-465, at 834, reprinted in 1994 U.S.C.C.A.N. 4171. The SAA

also states that “the Administration intends that Commerce will

interpret [19 U.S.C. § 1677(15)] in a manner which will avoid

basing normal value on sales which are extraordinary for the market

in question, particularly when the use of such sales would lead to

irrational or unrepresentative results.” Id. Consequently, the

Court finds the legislative history ambiguous as to what

constitutes a sale outside the ordinary course of trade.

The lack of guidance of both the statutory language and the

legislative history regarding what is considered to be outside the

“ordinary course of trade” requires the Court to assess the
Court No. 00-09-00443 Page 63

agency’s interpretation of the provision, as codified by the

regulation, to determine whether the agency’s interpretation is

reasonable and in accordance with the legislative purpose. See

Chevron, 467 U.S. at 843. “In determining whether Commerce’s

interpretation is reasonable, the Court considers, among other

factors, the express terms of the provisions at issue, the

objectives of those provisions and the objectives of the

antidumping scheme as a whole.” Mitsubishi, 22 CIT at 545, 15 F.

Supp. 2d at 813. The purpose of the ordinary course of trade

provision is “to prevent dumping margins from being based on sales

which are not representative” of the home market. Monsanto Co. v.

United States, 12 CIT 937, 940, 698 F. Supp. 275, 278 (1988). In

determining whether sales are outside the “ordinary course of

trade,” Commerce has examined the totality of the circumstances

surrounding the sale or transaction in question. Commerce’s

regulation states that, “sales or transactions [may be considered]

outside the ordinary course of trade if . . . based on an

evaluation of all of the circumstances particular to the sales in

question, [] such sales or transactions have characteristics that

are extraordinary for the market in question.” 19 C.F.R. §

351.102(b).

Commerce’s methodology allows it, on a case-by-case basis, to

examine all conditions and practices which may be considered
Court No. 00-09-00443 Page 64

ordinary and determine which sales or transactions are, therefore,

outside the ordinary course of trade. In light of the statute’s

legislative purpose and Commerce’s interpretation of the statute,

the Court finds that Commerce reasonably exercised its discretion

in requiring NTN to provide evidence that its sample and highprofit level sales were outside the ordinary course of trade. The

Court finds that the labeling of the relevant sales as sample sales

do not support NTN’s claim that the sales were outside the ordinary

course of trade. Cf. Bergerac, N.C. v. United States, 24 CIT 525,

537-39, 102 F. Supp. 2d 497, 509-10 (2000). Furthermore, NTN did

not provide sufficient evidence to support its claim that the highprofit sales were not representative of the home market. 

Determining whether a sale or transaction is outside the

ordinary course of trade is a question of fact in which Commerce

considers the totality of the circumstances and not simply one

factor. See CEMEX, S.A. v. United States, 133 F.3d 897, 901 (Fed.

Cir. 1998); Bergerac, 24 CIT at 538, 102 F. Supp. 2d at 509. Here,

NTN relies on only one factor, profit levels, to support its

contention that Commerce should have excluded certain sales from

its NV and CV profit calculations. NTN’s failure to demonstrate

that certain sales possessed some unique and unusual characteristic

making them unrepresentative of the home market allowed Commerce to

reasonably determine that these sales were not outside the ordinary
Court No. 00-09-00443 Page 65

course of trade. See NSK Ltd. v. United States (“NSK 2003"), 27

CIT ___, ___, 245 F. Supp. 2d 1335, 1360-61 (2003); NTN 2000, 24

CIT at 427-29, 104 F. Supp. 2d at 145-47. Accordingly, Commerce’s

decision to include sample sales and sales with high profits in its

calculation of NV and CV profit is affirmed.

VIII. Commerce’s Treatment of Inputs Obtained from Affiliated

Parties in Calculating Cost of Production and CV

A. Statutory Background

Whenever Commerce has “reasonable grounds to believe or

suspect that sales of the foreign like product under consideration

for the determination of [NV] have been made at prices which

represent less than the cost of production of that product,

[Commerce] shall determine whether, in fact, such sales were made

at less than the cost of production.” 19 U.S.C. § 1677b(b)(1). A

“reasonable ground” exists if Commerce disregarded below-cost sales

of a particular exporter or producer from the determination of NV

in the most recently completed administrative review. See 19

U.S.C. § 1677b(b)(2)(A)(ii). If Commerce determines that there are

sales below the cost of production (“COP”) and certain conditions

are present under § 1677b(b)(1)(A)-(B), it may disregard such

below-cost sales in the determination of NV. See 19 U.S.C. §

1677b(b)(1).
Court No. 00-09-00443 Page 66

Additionally, the special rules for the calculation of COP or

CV provide that, in a transaction between affiliated parties, as

defined in 19 U.S.C. § 1677(33), Commerce may disregard either the

transaction or the value of a major input. See 19 U.S.C. §

1677b(f)(2)-(3) (1994). Section 1677b(f)(2) provides that Commerce

may disregard a transaction with an affiliated party when “the

amount representing [the transaction or transfer price] does not

fairly reflect the amount usually reflected in sales of merchandise

under consideration in the market under consideration.” If such “a

transaction is disregarded . . . and no other transactions are

available for consideration,” Commerce shall value the cost of an

affiliated-party input “based on the information available as to

what the amount would have been if the transaction had occurred

between [unaffiliated persons].” Id.

Section 1677b(f)(3) provides that Commerce may calculate the

value of the major input on the basis of the data available

regarding COP, if such COP exceeds the market value of the input

calculated under § 1677b(f)(2). One of the elements of value to be

considered in the calculation of COP, which is referred to in

section 1677b(f)(2), is the cost of manufacturing and of

fabrication. See 19 U.S.C. § 1677b(b)(3)(A). Commerce, however,

may rely on the data available only if: (1) a transaction between

affiliated parties involves the production by one of such parties
Court No. 00-09-00443 Page 67

of a “major input” to the merchandise produced by the other and, in

addition, (2) Commerce has “reasonable grounds to believe or

suspect” that the amount reported as the value of such input is

below the COP. See 19 U.S.C. § 1677b(f)(3). For purposes of

section 1677b(f)(3), Commerce’s regulation provides that Commerce

will value a major input supplied by an affiliated party based on

the highest of (1) the actual transfer price for the input; (2) the

market value of the input; or (3) the COP of the input. See 19

C.F.R. § 351.407(b) (1999).

B. Background 

During the review at issue, Commerce used the higher of the

transfer price or the actual cost in calculating COP and CV in

situations involving inputs that NTN had obtained from affiliated

producers. See Issues & Decision Mem. at 54. NTN argued that

Commerce should have used the transfer prices of the affiliatedparty inputs NTN reported because there was no evidence that such

prices “did not fairly reflect the amount usually reflected in the

sales of merchandise under consideration.” Id. NTN further

asserted that Commerce did not have reasonable grounds to believe

that the inputs were sold at less than the COP. See id. Timken

replied that Commerce had rejected NTN’s argument in previous

reviews and that NTN had not adequately explained how the evidence

in the current review differed. See id.
Court No. 00-09-00443 Page 68

Commerce responded that pursuant to section 1677b(f)(3) it

“may consider whether the amount represented as the value of the

major input is less than its COP.” Id. Commerce further

maintained that it “considers the initiation of a cost

investigation concerning home-market sales a specific and objective

reason to believe or suspect that the transfer price from a related

party for any element of value may be below the related supplier’s

COP.” Id. Consequently, Commerce found it “appropriate to

consider the cost data available on the record in determining how

to value major inputs.” Id.

C. Contentions of the Parties

NTN complains that Commerce’s adjustments to NTN’s COP and CV

are erroneous. NTN asserts that there are only two grounds on

which Commerce could have made its decision, but that neither is

applicable to NTN’s situation. See NTN’s Mem. at 37. NTN argues

that 19 U.S.C. § 1677b(f)(2) does not apply because “there is no

evidence that the affiliated party inputs did not ‘fairly reflect

the amount usually reflected in the sales of merchandise under

consideration.’” Id. (quoting 19 U.S.C. § 1677b(f)(2)). NTN

maintains that the statute does not reference costs. Accordingly,

an input sold at less than its COP may reflect the input’s fair

market price. See id. at 37-38. NTN further contends that the

application of 19 U.S.C. § 1677b(f)(3) is only permitted for “major
Court No. 00-09-00443 Page 69

inputs.” See id. at 38. NTN states that in the preliminary

results Commerce did not discriminate between major and minor

inputs but rather applied its methodology to both types of inputs

from an affiliated party. See id. Additionally, NTN complains

that Commerce improperly applied the “major input rule” to the

production processes performed by NTN’s affiliated producers. See

id. at 37.

Commerce responded that it properly disregarded transfer price

for inputs that NTN purchased from affiliates in its calculation of

CV and COP. See Def.’s Mem. at 52-57. Commerce states that the

Court has upheld Commerce’s rejection of transfer price for inputs

purchased from related suppliers, “if the transfer price or any

element of value does not reflect its normal value.” Id. at 53-54

(citing Timken Co. v. United States, 21 CIT 1313, 1327-28, 989 F.

Supp. 234, 246-47 (1997)). Commerce points out that in NSK Ltd. v.

United States (“NSK 1995"), 19 CIT 1319, 1323-26, 910 F. Supp. 663,

668-70 (1995), aff’d, 119 F.3d 16 (Fed. Cir. 1997), the Court

“upheld Commerce’s authority to request cost data concerning parts

purchased from related suppliers without a specific and objective

basis for suspecting that the transfer prices were below cost . .

. .” Def.’s Mem. at 54. 

In determining whether transaction prices between affiliated

parties are at arm’s length and fairly reflect the market prices,
Court No. 00-09-00443 Page 70

Commerce’s practice is to compare the transaction prices with the

prices charged by unrelated parties. See id. To value a major

input purchased from an affiliated supplier, Commerce uses the

highest of the transfer price between the affiliated parties, the

market price between unaffiliated parties, or the affiliated

supplier’s COP for the major input. See id. at 55. Commerce

argues that it has reasonably interpreted 19 U.S.C. § 1677b(f)(3)

as allowing “it to analyze COP data for major inputs purchased by

a producer from its affiliated suppliers when it initiates a COP

investigation pursuant to 19 U.S.C. § 1677b(1) without a separate

below-COP allegation with respect to inputs.” Id. at 55-56; see,

e.g., Final Results of Antidumping Duty Administrative Review on

Silicomanganese From Brazil (“Final Results Brazil”), 62 Fed. Reg.

37,869, 37,871-72 (July 15, 1997). 

Commerce deduces that the affiliation between the respondent

and its suppliers “creates the potential for companies to act in a

manner other than at arm’s length” and gives Commerce reason to

analyze the transfer prices for major inputs. Final Results

Brazil, 62 Fed. Reg. at 37,871; see also Mannesmannrohren-Werke AG

v. United States, 23 CIT 826, 836-37, 77 F. Supp. 2d 1302, 1312

(1999) (holding that 19 U.S.C. § 1677b(f)(2) and (3), as well as

the legislative history of the major input rule, support Commerce’s

decision to use the highest of transfer price, cost of production,
Court No. 00-09-00443 Page 71

or market value to value the major inputs that the producer

purchased from the affiliated supplier). Commerce further argues

that the Court in Torrington Co., 25 CIT at ___, 146 F. Supp. 2d at

869, upheld Commerce’s application of the major input rule to

production processes. See Def.’s Mem. at 57. Commerce maintains

that the Court should affirm its application of the major input

rule for the calculation of NTN’s CV and COP. See id. at 52-57.

Commerce, however, concedes that it did not distinguish between

“major” and “minor” inputs. See id. at 57. Consequently, Commerce

requests the Court remand this issue for Commerce to explain the

reasons for its treatment of certain inputs, apply the major input

rule where appropriate and open the record for additional

information if necessary. See id.

Timken generally agrees with Commerce that it was proper for

Commerce to apply the major input rule in the calculation of CV and

COP. Timken’s Resp. at 49-51. Timken contends that “Commerce

properly made an adjustment to NTN’s COP and CV data only in the

instances where the affiliated supplier’s COP for inputs used to

manufacture the merchandise under review was higher than the

transfer price.” Id. at 50. Timken requests that Commerce’s

action be affirmed without further remand. See id.
Court No. 00-09-00443 Page 72

11 The Court sustained Commerce’s explanation that 19 U.S.C.

§ 1677b(f)(3) “directs [Commerce] to examine the costs incurred for

transactions between affiliated [parties]. These transactions may

involve either the purchase of materials, subcontracted labor, or

other services. Thus, [Commerce] applied the major-input rule

properly to the production processes performed by [NTN’s]

affiliates.” Final Results of Antidumping Duty Administrative

Reviews on Antifriction Bearings (Other Than Tapered Roller

Bearings) and Parts Thereof From France, Germany, Italy, Japan,

Romania, Sweden, and the United Kingdom (“Final Results 1999"), 64

Fed. Reg. 35,590, 35,612 (July 1, 1999)(citation omitted). 

D. Analysis 

NTN complains that Commerce “offered no persuasive explanation

or statutory support for not using NTN’s reported actual costs,”

and used the major input rule with respect to processes that were

performed by NTN’s affiliated producers. See NTN’s Mem. at 37.

NTN, however, does not adequately substantiate its assertion that

it is unreasonable for Commerce to apply the major input rule to

affiliated party transactions involving production processes.

Furthermore, in Torrington Co., 25 CIT at ___, 146 F. Supp. 2d at

869, the Court upheld Commerce’s application of the major input

rule to processes performed by NTN’s affiliated producers.11

Accordingly, the Court sustains Commerce’s application of the major

input rule to production processes as reasonable. See Chevron, 467

U.S. at 837. 

Pursuant to section 1677b(f)(2) and (3) of Title 19 of the

United States Code, in calculating COP and CV, Commerce is
Court No. 00-09-00443 Page 73

12 In NSK 1995, 19 CIT at 1323-26, 910 F. Supp. at 668-70,

this Court upheld Commerce’s authority to request cost data

concerning parts purchased from related suppliers without a

specific and objective basis for suspecting that the transfer

prices were below-cost because section 1677b(e)(2) grants Commerce

authority to request information concerning “any element of value

required to be considered” and section 1677b(e)(3) does not limit

Commerce’s authority to request COP data pursuant to section

1677b(e)(2). See id.

authorized to: (1) disregard a transaction between affiliated

parties if, in the case of any element of value that is required to

be considered, the amount representing that element does not fairly

reflect the amount usually reflected in sales of merchandise under

consideration in the market under consideration; and (2) determine

the value of the major input on the basis of the information

available regarding COP, if Commerce has reasonable grounds to

believe or suspect that an amount represented as the value of the

input is less than its COP. See Timken Co., 21 CIT at 1327-28, 989

F. Supp. at 246 (holding that Commerce may disregard transfer price

for inputs purchased from related suppliers pursuant to 19 U.S.C.

§ 1677b(e)(2), the predecessor to 19 U.S.C. § 1677b(f)(2), if the

transfer price or any element of value does not reflect its NV)

(citing NSK 1995, 19 CIT at 1323-26, 910 F. Supp. at 668-70).12 The

Court has recently held that if Commerce was provided with

sufficient evidence to differentiate between “major” and “minor”

inputs, then “it was Commerce's obligation to either: (1) exclude

‘minor’ inputs from the reach of Commerce's methodology reserved
Court No. 00-09-00443 Page 74

for ‘major’ inputs; or (2) articulate why Commerce’s ‘major input’

methodology is equally applicable to ‘minor’ or any inputs." NSK

Ltd. v. United States, 26 CIT __, __, 217 F. Supp. 2d 1291, 1322

(2002).

Commerce concedes that it failed to discriminate between major

and minor inputs. Consequently, the Court remands this issue to

Commerce to clarify the reasons for its treatment of inputs, to

apply the major input rule were appropriate, and to open the record

for additional information if necessary.

IX. Commerce Properly Based NV Upon CV After Disregarding BelowCost Identical and Similar Merchandise

A. Statutory Background

Normal Value means “the price at which the foreign like

product is first sold . . . for consumption in the exporting

country, in the usual commercial quantities and in the ordinary

course of trade” at a time reasonably corresponding to the time of

the sale used to determine the EP or CEP under 19 U.S.C. §

1677a(a). See 19 U.S.C. § 1677b(a)(1)(B)(i). The term “foreign

like product” is defined as:

merchandise in the first of the following categories in

respect of which a determination . . . can be

satisfactorily made: 

(A) The subject merchandise and other merchandise which

is identical in physical characteristics with, and
Court No. 00-09-00443 Page 75

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 commercial 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 authority determines

may reasonably be compared with that merchandise. 

19 U.S.C. § 1677(16).

“Ordinary course of trade” means “the conditions and practices

which, for a reasonable time prior to the exportation of the

subject merchandise, have been normal in the trade under

consideration with respect to merchandise of the same class or

kind.” 19 U.S.C. § 1677(15). Commerce shall consider sales and

transactions, among others, to be outside the ordinary course of

trade if: (1) the sales are disregarded under 19 U.S.C.

1677b(b)(1), or (2) transactions are disregarded under section

1677b(f)(2). See id.
Court No. 00-09-00443 Page 76

B. Contentions of the Parties

NTN complains that Commerce, based on its reading of CEMEX,

133 F.3d at 903-04, improperly calculated NV based on CV after

determining that both identical and similar merchandise were

disregarded as below cost. See NTN’s Mem. at 38. Specifically,

NTN contends that Commerce’s methodology is inconsistent with the

current statutory scheme and that Commerce should have followed

“its pre-CEMEX methodology of using CV in situations where the

‘like product’ is disregarded as below cost.” Id. Concentrating

upon 19 U.S.C. § 1677b(a)(1)(B), NTN argues that in defining the

foreign like product, Commerce “must first determine whether there

is identical merchandise. If there is identical merchandise,

‘foreign like product’ has been identified, and that analysis

ends.” Id. at 39. NTN asserts that Commerce is required to use

sales of this merchandise in the calculation of NV, “provided they

are in the ‘usual commercial quantities and in the ordinary course

of trade.’” Id.

NTN argues that when sales of the foreign like product are

less than the COP, Commerce must, pursuant to 19 U.S.C. §

1677b(b)(1), disregard such sales from its calculation of NV. See

id. NTN asserts that “if no sales made in the ordinary course of

trade remain, the normal value shall be based on constructed value

of the merchandise.” NTN’s Mem. at 38 (quoting 19 U.S.C. §
Court No. 00-09-00443 Page 77

1677b(b)(1)). NTN complains that Commerce identified the foreign

like product and disregarded certain below cost sales, and that

Commerce then “attempted to label another type of merchandise as

the ‘foreign like product.’” Id. at 40. NTN contends that

Commerce, “by redefining the foreign like product rather than using

the statutory requirement of CV has acted contrary to the statute

in its NV calculation.” Id. 

Commerce responds that it properly did not resort to CV when

sales of identical merchandise were disregarded as below-cost

sales. See Def.’s Mem. at 57-64. Commerce asserts that 19 U.S.C.

§ 1677b(b)(1) authorizes Commerce to disregard below-cost sales

because they are not in the ordinary course of trade. See id. at

59-60. Under the pre-URAA law, when sales of identical merchandise

have been found to be outside the ordinary course of trade, the

plain language of 19 U.S.C. § 1677(16) (1988) requires Commerce to

base foreign market value (currently referred to as NV under the

post-URAA law) on non-identical but similar merchandise, rather

than upon CV. See Def.’s Mem. at 59-60 (citing CEMEX, 133 F.3d at

904). Commerce argues that 19 U.S.C. § 1677(15) mandates that

Commerce consider below-cost sales which it has disregarded as

outside the ordinary course of trade pursuant to 19 U.S.C.

1677b(b)(1). See id. at 61. 
Court No. 00-09-00443 Page 78

13 Foreign like product is defined in 19 U.S.C. § 1677(16)

as identical or like merchandise.

Commerce has interpreted the statutory scheme as requiring the

consideration of similar foreign like product sales if such sales

are disregarded as below-cost sales. See id. (citing Final Results

1999, 64 Fed. Reg at 35,614-15). Furthermore, Commerce uses CV for

determining NV only if it also disregards sales of the similar like

product because they are below cost. See id. (citing Final Results

1999, 64 Fed. Reg at 35,614-15). 

Commerce’s position is shared by Timken. Timken asserts that

Commerce properly calculated NV based on sales of identical or

similar merchandise before resorting to CV in instances where

below-cost sales were disregarded. See Timken’s Resp. at 51-53.

C. Analysis

The Court disagrees with NTN and finds that the statutory

scheme supports Commerce’s determination. The pertinent part of 19

U.S.C. § 1677b(a)(1)(B)(i) requires Commerce to base NV upon the

price at which the foreign like product is sold for consumption in

the exporting country in the ordinary course of trade.13 The

pertinent part of 19 U.S.C. § 1677(15) requires Commerce to

consider below-cost sales that Commerce has disregarded pursuant to

19 U.S.C. § 1677b(b)(1) to be outside the ordinary course of trade.

In accordance with CEMEX, 133 F.3d at 903-04, Commerce has
Court No. 00-09-00443 Page 79

interpreted the statutory scheme as requiring it to consider sales

of similar foreign like product if it has disregarded sales of

identical foreign like product as below-cost sales. See Issues &

Decision Mem. at 59. Furthermore, Commerce recognizes that it is

to use CV for determining NV only if Commerce also disregards sales

of similar like product because they are below-cost. See id.

NTN ignores the fact that 19 U.S.C. § 1677b(b)(1) does not

define the terms “ordinary course of trade” or “foreign like

product.” The definitions are provided by 19 U.S.C. § 1677(15)

and (16). As the Court has previously stated, “the changes made to

the antidumping law by the URAA did not render the CEMEX decision

inapplicable.” See Torrington Co., 25 CIT at ___, 146 F. Supp. 2d

at 873. Under post-URAA law, pursuant to 19 U.S.C. §§ 1677b(a)(l)

and 1677(16), Commerce must first look to identical merchandise in

matching the United States model to the comparable home-market

model. If a determination cannot be satisfactorily made using

identical merchandise, Commerce must look to like merchandise —

initially under the second category and, if that is not available,

under the third category. See Torrington Co., 25 CIT at __, 146 F.

Supp. 2d at 873-74; accord CEMEX, 133 F.3d at 903-04. 

NTN failed to show why Commerce’s interpretation of the

aforesaid post-URAA provisions is unreasonable. The mere fact that

under post-URAA law Commerce reached a decision analogous to that
Court No. 00-09-00443 Page 80

reached by the CAFC under pre-URAA law in CEMEX does not render

Commerce’s determination irrational. See Chevron, 467 U.S. at 842-

43. For these reasons, the Court upholds Commerce’s decision to

resort to CV only if below-cost sales for both identical and

similar foreign like product have been disregarded.

CONCLUSION

This case is remanded to Commerce to: (1) apply the arm’s

length test, in accordance with 19 C.F.R. § 351.403(c), to the

sales prices of the two affiliated resellers to determine whether

the sales prices were comparable to the price at which NTN sold the

subject merchandise to unaffiliated parties; (2) explain how the

record supports its decision to recalculate NTN’s home-market

indirect selling expenses without regard to LOT; and (3) clarify

the reasoning for Commerce’s treatment of inputs, and (a) apply the

major input rule where appropriate, and (b) open the record for

additional information, if found necessary. Commerce is affirmed

in all other aspects.

 /s/ Nicholas Tsoucalas

NICHOLAS TSOUCALAS

 SENIOR JUDGE

Dated: February 3, 2004

New York, New York