Opinion ID: 212201
Heading Depth: 2
Heading Rank: 3

Heading: Partial Level of Trade Adjustment

Text: Commerce is directed by statute to base normal value upon home market sales at the same level of trade as the export price or the constructed export price. 19 U.S.C. 04-1223 11 § 1677b(a)(1)(B) (2000); see also Micron Tech., Inc. v. United States, 243 F.3d 1301, 1303-04 (Fed. Cir. 2001). The same level of trade means comparable marketing stages in the foreign market and in the U.S. market. Micron Tech., 243 F.3d at 1305. If Commerce cannot find sales in the foreign market at the same level of trade as in the U.S. market, then it will compare sales in the U.S. and foreign markets at different levels of trade. Id. When comparing sales at different levels of trade, Commerce may make a level of trade adjustment (“LOT adjustment”) based on the price differences between the two levels of trade: The [normal value] shall also be increased or decreased to make due allowance for any difference (or lack thereof) between the export price or constructed export price . . . that is shown to be wholly or partly due to a difference in level of trade between the export price or constructed export price and normal value . . . . 19 U.S.C. § 1677b(a)(7)(A) (2000); see also Micron Tech., 243 F.3d at 1305. In some instances Commerce will lack sufficient data regarding sales in the two markets to make a LOT adjustment. In those instances, the statutes provide for the application of a constructed export price offset (“CEP offset”), instead of a LOT adjustment. 19 U.S.C. § 1677b(a)(7)(B) (2000) (“When normal value is established at a level of trade which constitutes a more advanced stage of distribution than the level of trade of the constructed export price, but the data available do not provide an appropriate basis to determine under subparagraph (A)(ii) a level of trade adjustment, normal value shall be reduced by the amount of indirect selling expenses incurred in the country in which normal value is determined on sales of the foreign like product . . . .”); Micron Tech., 243 F.3d at 1305. 04-1223 12 Commerce determined that there were two distinct levels of trade for NSK in the Japanese home market—aftermarket sales and original equipment manufacturer sales—and that these home market levels of trade were at a more advanced stage of distribution than the single constructed export price level of trade in the U.S. market. Final Results, 63 Fed. Reg. at 33,330. Commerce found that there was no record evidence to quantify the price difference between the two home market levels of trade and the single U.S. constructed export price level of trade. Id. Thus, Commerce made a CEP offset to the normal value for all of NSK’s CEP transactions. Id. Contrary to NSK’s arguments, Commerce concluded that it lacked “explicit authority to make a level-of-trade adjustment between two home-market levels of trade where neither level is equivalent to the level of the U.S. sale.” Id. at 33,331. On appeal, the Court of International Trade affirmed Commerce’s use of a CEP offset. NSK, 217 F. Supp. 2d at 1304. The Court of International Trade interpreted 19 U.S.C. § 1677b(a)(7)(A) and concluded that a LOT adjustment was to be made to a price-based normal value only for a difference that is shown to be wholly or partly due to a difference in level of trade between the constructed export price or export price and the normal value. Id. at 1302. Under 19 U.S.C. § 1677b(a)(7)(B), a CEP offset was required when there was no sufficient data to determine a LOT adjustment under § 1677b(a)(7)(A). Id. at 1302-03. The Court of International Trade concluded that Commerce’s practice at the time, as provided in 19 C.F.R. § 351.412(d) (1998), was to refuse to calculate a LOT adjustment in those cases where the home market data does not demonstrate that a constructed export price level of trade exists with respect to any transactions. Id. at 1303. The Court of International Trade concluded that Commerce’s 04-1223 13 conclusion that § 1677b(a)(7)(A) did not provide for a LOT adjustment, other than that based upon price differences in the home market between constructed export price and normal value market levels of trade, was reasonable. Id.
On appeal, NSK does not dispute the manner by which Commerce determined the levels of trade of its constructed export price or normal value transactions. NSK objects to Commerce’s decision not to calculate what it terms a “partial” LOT adjustment for constructed export price sales matched to aftermarket normal value sales, based on the price differences between original equipment manufacturer normal value sales and aftermarket normal value sales. NSK relies on language in 19 U.S.C. § 1677b(a)(7)(A) that normal value must be adjusted to reflect any difference “that is shown to be wholly or partly due to a difference in level of trade between the export price or constructed export price and normal value.” (emphasis added). NSK argues that because the language requires a LOT adjustment if it “partly” adjusts for differences in the levels of trade, a “partial” LOT adjustment is mandated in this case. Commerce responds that it properly rejected NSK’s proffered “partial” LOT adjustment. Commerce argues that it correctly interpreted 19 U.S.C. § 1677b(a)(7) and properly concluded that it lacked statutory authority to make a LOT adjustment using two home market levels of trade where neither level is equivalent to the CEP level of trade. 04-1223 14
We agree that Commerce correctly interpreted 19 U.S.C. § 1677b(a)(7) and properly denied NSK’s request for a “partial” LOT adjustment. NSK’s statutory interpretation is predicated on the presence of the word “partly” in § 1677b(a)(7)(A). Section 1677b(a)(7)(A) provides: (A) Level of trade The price described in paragraph (1)(B) shall also be increased or decreased to make due allowance for any difference (or lack thereof) between the export price or constructed export price and the price described in paragraph (1)(B) (other than a difference for which allowance is otherwise made under this section) that is shown to be wholly or partly due to a difference in level of trade between the export price or constructed export price and normal value, if the difference in level of trade— (i) involves the performance of different selling activities; and (ii) is demonstrated to affect price comparability, based on a pattern of consistent price differences between sales at different levels of trade in the country in which normal value is determined. In a case described in the preceding sentence, the amount of the adjustment shall be based on the price differences between the two levels of trade in the country in which normal value is determined. 19 U.S.C. § 1677b(a)(7)(A) (2000) (emphasis added). The word “partly” indicates that a LOT adjustment should be made even when pricing differences between home market levels of trade are only partly attributable to the difference in the level of trade. The partial adjustment must still be between normal value at one level of trade and normal value at the same level of trade as the U.S. sale. Thus, the use of the term “partly” does not mandate a partial LOT adjustment when there are no comparable levels of trade in the home and U.S. markets, and Commerce determines there was insufficient data to make a LOT adjustment. In those instances, 19 U.S.C. § 1677b(a)(7)(B) 04-1223 15 mandates the use of an alternate adjustment, known as a “CEP offset”: (B) Constructed export price offset When normal value is established at a level of trade which constitutes a more advanced stage of distribution than the level of trade of the constructed export price, but the data available do not provide an appropriate basis to determine under subparagraph (A)(ii) a level of trade adjustment, normal value shall be reduced by the amount of indirect selling expenses incurred in the country in which normal value is determined on sales of the foreign like product but not more than the amount of such expenses for which a deduction is made under section 1766a(d)(1)(D) of this title. 19 U.S.C. § 1677b(a)(7)(B) (2000) (emphases added). This court noted in Micron Technologies: In some instances, the level of trade in the home market will constitute a more advanced stage of distribution than the level of trade in the United States, yet Commerce will lack sufficient data regarding the sales in the two markets to make a level of trade adjustment, that is, it will be unable to determine how much to reduce the foreign sale price to arrive at a price comparable to the U.S. price. In those cases, the statute provides for the award of a ‘constructed export price offset’ [(“CEP offset”)]. 243 F.3d at 1305. A CEP offset is designed to cover situations such as these for which the normal value is at a more advanced stage than the constructed export price level of trade, and for which Commerce determines there is insufficient data to make a LOT adjustment. See 19 U.S.C. § 1677b(a)(7)(B) (2000); see also Koyo Seiko Co. v. United States, 8 F. Supp. 2d 862, 866 (Ct. Int’l Trade 1998) (“Commerce’s interpretation . . . is reasonable, in light of the existence of the CEP offset to cover situations such as those at issue.”). Thus, we conclude that Commerce did not err in applying a CEP offset and denying NSK’s request for a “partial” LOT adjustment. 04-1223 16