Opinion ID: 219947
Heading Depth: 2
Heading Rank: 4

Heading: Commerce's Tie-Breaker Methodology

Text: As discussed above, Commerce's method for determining like merchandise can result in more than one model match. Because Commerce's goal is to compare individual products or models, it must break these ties. To break ties, Commerce first looks to the level of trade and contemporaneity of the sales. If this does not break the tie, then Commerce will select the product with the lowest DIFMER. NTN argues that this process is flawed and that Commerce must elevate DIFMER above level of trade and contemporaneity in its tie-breaking determinations. NTN posits that DIFMER, as a measure of the cost of manufacturing a good, relates to the good's physical characteristics. NTN then notes that level of trade and contemporaneity are characteristics of a particular sale, rather than the physical characteristics of the good itself. NTN argues that we should require that Commerce elevate DIFMER ahead of any characteristics of a particular sale because the physical characteristics of the product are more important than any commercial considerations in determining similar merchandise. NTN argues that the relevant statutes require this result. It notes that under 19 U.S.C. § 1677b(a), a fair comparison shall be made between the export price or constructed export price and normal value. NTN then points to the statute that defines normal value as the price at which the foreign like product is first sold ... to the extent practicable at the same level of trade as the export price or constructed export price, citing § 1677b(a)(1)(B). NTN argues that this shows that considerations like level of trade can only come into play once Commerce has already determined the foreign like product. Thus, NTN contends that it is contrary to the statute to use level of trade to determine the foreign like product. NTN also points to the statute that defines foreign like product which states: A) The subject merchandise and other merchandise which is identical in physical characteristics with, and was produced in the same country by the same person as, that merchandise. B) Merchandise i. Produced in the same country and by the same person as the subject merchandise, ii. Like that merchandise in component material or materials and in the purposes for which used, and iii. Approximately equal in commercial value to that merchandise. Under the statute, if a product falls under category A (i.e., is identical in physical characteristics), then there is no need to resort to category B. Thus, NTN argues that the statutory scheme requires Commerce to place DIFMER above level of trade and contemporaneity of sale because DIFMER relates to physical characteristics. Appellees respond that the Court of International Trade was correct and that Commerce has significant discretion in breaking ties between equally similar products. Appellees argue that NTN's statutory arguments are misguided because the fact that two products are equally similar means that they both qualify as foreign like product, thus, the statute that defines foreign like product cannot dictate the tie breaker. Further, the government argues that, before applying the tie breaker, Commerce has already considered DIFMER because only products with a DIFMER of 20% or less can be considered like merchandise. We agree with the government that Commerce is within its discretion to break ties between equally similar products using level of trade and contemporaneity and only using DIFMER if ties still remain. The statute is silent as to any tie breaking methodology. We have already determined that Commerce's sum of the deviations approach is proper. Thus, if two products are equally similar under the sum of the deviations method, they both qualify as foreign like product. There is no statutory mandate to tell Commerce how to break the tie. Thus, Commerce may, in its discretion, determine a reasonable tie breaking methodology. We agree with the Court of International Trade that the level of trade and contemporaneity of sales are both relevant to the determination of the most appropriate merchandise, and thus are reasonable to use as a tie-breaker before resorting to the DIFMER. Further, NTN overstates the nature of DIFMER as a physical characteristic similar to an inner diameter of a bearing. As the Court of International Trade stated, [t]he DIFMER adjustment, although related to differences in physical characteristics ... is not itself a physical characteristic. JTEKT, 717 F.Supp.2d at 1340. We agree with the Court of International Trade that Commerce did not err in its use of level of trade and contemporaneity to break ties before resorting to the DIFMER.