Opinion ID: 766090
Heading Depth: 3
Heading Rank: 4

Heading: The Comparison of Sales Across Different Levels of Trade

Text: 25 As set forth more fully above, under 19 U.S.C. § 1677b(a)(1)(A) (1988), FMV is the price at which such or similar merchandise is sold or offered for sale in the country of exportation for home consumption. The term such or similar merchandise is defined in 19 U.S.C. § 1677(16) (1988), which sets forth a tripartite hierarchy for Commerce's selection of such or similar merchandise. Under part (A) of that provision the most preferable category of merchandise is merchandise identical to that subject to the investigation in physical characteristics and origin. Under part (B) of section 1677(16), the next most preferable category of merchandise is merchandise produced by the same person in the same country as the merchandise under investigation, but merely like that merchandise in terms of components and purpose and approximately equal in commercial value to that merchandise. Finally, under part (C) of section 1677(16), the least preferable category of such or similar merchandise is merchandise produced by the same person in the same country as the merchandise under investigation, like that merchandise in terms of purpose, and which Commerce determines may reasonably be compared with that merchandise. 26 None of these statutory provisions make reference to the term levels of trade at which the merchandise is sold. However, this term is used in Commerce's implementing regulation, which provides: 27 The Secretary normally will calculate foreign market value and United States price based on sales at the same commercial level of trade. If sales at the same commercial level of trade are insufficient in number to permit an adequate comparison, the Secretary will calculate foreign market value based on sales of such or similar merchandise at the most comparable commercial level of trade as sales of the merchandise and make appropriate adjustments for differences affecting price comparability. 28 19 C.F.R. § 353.58 (1993). Under this regulation, Commerce provide[s] adjustments to account for the difference between wholesale and retail market prices. Zenith Elecs. Corp. v. United States, 988 F.2d 1573, 1584, 11 Fed. Cir. (T) 57, 68 (Fed. Cir. 1993). 29 Here, Commerce was unable to compare NTN's United States sales to home market sales at the same level of trade and thus attempted to find matches at the next most similar level of trade. Final Results, 60 Fed. Reg. at 10,940. To accomplish this goal, Commerce compared the variable cost of manufacturing of the proposed home market model with that of the variable cost of manufacturing the United States model. Commerce determined that if the difference between these variable manufacturing costs was greater than twenty percent, then the two models were not of approximately equal commercial value and would not be used for price comparison purposes. Ultimately, Commerce denied NTN's claim for a level of trade adjustment. Commerce rejected NTN's claim for a level of trade adjustment to account for price differences, explaining that: 30 In order for the Department to make a level-of-trade adjustment, respondents must quantify any price differences that are attributable to differences in levels of trade. NTN has failed to demonstrate what portion, if any, of those price differences is attributable to differences in levels of trade. 31 Id. Commerce also rejected NTN's claim for a level of trade adjustment based upon differences in indirect selling expenses. Commerce reasoned that NTN's allocation of a common pool of expenses to all sales, irrespective of levels of trade, using relative sales values demonstrated that such expenses were not unique to, nor disproportionally attributable to, any level of trade. Id. The Court of International Trade subsequently affirmed Commerce's denial of NTN's claimed level of trade adjustment. See NSK I, 969 F. Supp at 53-54. 32 Like the Court of International Trade, we are unpersuaded by NTN that Commerce's denial of a level of trade adjustment was unsupported by substantial evidence. Although NTN submitted evidence that merchandise at different levels of trade had different prices and selling expenses, NTN did not provide evidence to prove that those differences were not caused by other factors, such as volume sold or arbitrary pricing practices. In other words, NTN did not present evidence to establish that the difference in the level of trade caused the differences in price and selling expenses. Moreover, with respect to indirect selling costs, substantial evidence also supports Commerce's denial of a level of trade adjustment due to NTN's flawed expense allocation methodology. This methodology was based on several unproven presumptions, including direct correlations between the volume of sales at a particular level of trade and the number of employees at that level and between the number of employees at each level and the quantum of selling expenses at each level. Given that NTN bore the burden before Commerce of establishing its entitlement to a level of trade adjustment, its failure to provide Commerce with the requisite causal evidence compels us to conclude that it has not met its burden on appeal of persuading this court that Commerce's denial was not supported by substantial evidence.