Opinion ID: 766090
Heading Depth: 2
Heading Rank: 2

Heading: NTN's Appeal

Text: 9 Under 19 U.S.C. § 1677b(a)(1)(A) (1988), FMV is the price at which such or similar merchandise is sold or, in the absence of sales, offered for sale in the principal markets of the country from which exported, . . . in the ordinary course of trade for home consumption (emphasis added). As defined by statute: 10 The term ordinary course of trade means the conditions and practices which, for a reasonable time prior to the exportation of the merchandise which is the subject of an investigation, have been normal in the trade under consideration with respect to merchandise of the same class or kind. 11 19 U.S.C. § 1677(15) (1988). 12 In the Final Results, Commerce included as home market sales in the ordinary course of trade certain sales identified by NTN as sample sales and sales with sporadic sales histories. Commerce reasoned that NTN's mere designation of certain sales as sample sales did not satisfy its burden of proving that the sales were made outside of the ordinary course of trade. See Final Results, 60 Fed. Reg. at 10,947. Similarly, Commerce rejected NTN's claim that certain sales of small quantities of products with sporadic sales histories were outside of the ordinary course of trade, explaining that such sales histories are typical of certain types of products. Id. 13 In NSK I, the Court of International Trade remanded to Commerce for a redetermination in light of this court's ruling in NSK, Ltd. v. United States, 115 F.3d 965, 973-75 (Fed. Cir. 1997), that samples given without consideration do not constitute sales under the antidumping statute. In its Remand Results, Commerce explained that certain of the transactions labeled by NTN as sample and other similar transfers were, in fact, transfers in which monetary consideration was paid for the bearings. Consequently, the Court of International Trade amended its prior ruling in NSK I to order Commerce only to exclude those transactions for which NTN received no consideration. Commerce complied with this instruction on remand and its determinations were sustained by NSK II. 14 We are not persuaded that substantial evidence does not support Commerce's determination that NTN failed to meet its burden to prove that the alleged sample and sporadic sales were sales outside of the ordinary course of trade. The evidence submitted by NTN consisted of its records indicating sales of samples under the term SAMPLEH and sporadic sales under the term NORDCH. The sales designated by NTN as sporadic were simply those in which there were seven or less transactions in the total review period with three or less units per transaction. No evidence was submitted that the process of ordering or shipping these alleged sample or sporadic sales differed from ordinary sales. Nor was evidence submitted that any of these sales required, for example, unique engineering specifications. Moreover, no evidence was submitted that the alleged sample sales for which monetary consideration was paid, differed in any material respect, other than by their designation as SAMPLEH, from ordinary sales of the same merchandise for monetary consideration. Thus, given our deferential standard of review, we cannot say that Commerce's finding of a failure of proof was unsupported by substantial evidence.
15 Under 19 U.S.C. § 1677b(a)(3) (1988), Commerce may base FMV on related party transactions. To implement this statute, Commerce promulgated a regulation requiring importers to demonstrate that their sales to related parties are comparable in price to unrelated party transactions. Specifically, the regulation provides: 16 If a producer or reseller sold such or similar merchandise to a person related as described in section 771(13) of the Act, the Secretary ordinarily will calculate foreign market value based on that sale only if satisfied that the price is comparable to the price at which the producer or reseller sold such or similar merchandise to a person not related to the seller. 17 19 C.F.R. § 353.45(a) (1993). 18 In the fourth annual administrative review, NTN responded to Section C of Commerce's questionnaire by listing its sales and annotating them with a 1 or a 2 to indicate whether they were, respectively, related or unrelated party sales. After conducting an arm's-length test using weighted average prices for each class of merchandise to determine whether the prices that NTN charged related parties were representative of market prices, Commerce excluded the reported related party sales of ball and cylindrical roller bearings due to the related party prices being lower than the corresponding unrelated party prices. See Final Results, 60 Fed. Reg. at 10,946-47. However, Commerce included the reported related party sales of spherical roller bearings due to the reported prices not being less than the corresponding prices to unrelated parties. See id. In NSK I, the Court of International Trade affirmed, reasoning that NTN had presented no evidence that Commerce's test was unreasonable. See NSK I, 969 F. Supp. at 54-55. 19 On appeal, NTN argues that Commerce's use of weighted averages to compare related and unrelated party sales unreasonably distorted the comparison. To illustrate, NTN provides a hypothetical example in which the actual per unit price to both the related and unrelated parties is the same but, because different quantities are sold to the related and unrelated parties, the weighted average price for the goods sold to the unrelated party is higher. 20 In light of the substantial discretion accorded Commerce when interpreting and applying its own regulations, Torrington Co. v. United States, 156 F.3d 1361, 1363 (Fed. Cir. 1998), we are unpersuaded that Commerce's use of weighted averages was unreasonable. See also Smith-Corona Group v. United States, 713 F.2d 1568, 1571, 1 Fed. Cir. (T) 130, 132 (Fed. Cir. 1983) (discussing Commerce's broad discretion in executing the law). Commerce's methodology was reasonable because, without the use of weighting, small sales that might be outliers could be given undue weight in the calculation. Without employing such a weighting, Commerce's approach would be susceptible to the perceived danger that a foreign manufacturer will sell to related companies in the home market at artificially low prices, thereby camouflaging true FMV and achieving a lower antidumping duty margin. NEC Home Elecs., Inc. v. United States, 54 F.3d 736, 739 (Fed. Cir. 1995). Moreover, although NTN's hypothetical suggests a potential anomaly of using a weighted average test, NTN has not provided evidence, nor even suggested, that such an anomalous result occurred here. Thus, NTN's hypothetical does not demonstrate that Commerce's test was unreasonable as applied to NTN's actual situation, only, at the very most, to circumstances not here present.
21 In the Final Results, Commerce determined that NTN's reported home market discounts would be treated as indirect selling expenses, not direct adjustments to price, because they were not reported on a sale-specific basis. See Final Results, 60 Fed. Reg. at 10,934. In NSK I, the Court of International Trade held that Commerce erroneously treated the home market discounts as indirect selling expenses. See NSK I, 969 F. Supp. at 46. The court reasoned that they are direct selling expenses because they represent expenses related to particular sales of in-scope merchandise. Id. However, the court concluded that they are not entitled to a direct adjustment because of [NTN's] failure to tie them to specific transactions . . . . Id. Consequently, Commerce denied NTN a direct adjustment to FMV in its Remand Results and this denial was subsequently affirmed by the Court of International Trade in NSK II. 22 NTN argues on appeal that its home market discounts can be traced directly to specific transactions through its internal accounting system of product classification and recording of discounts. Accordingly, NTN maintains that its reported home market discounts were not pooled or distortive and thus should have qualified for a direct adjustment to FMV. 23 We hold that there was no legal or factual error in Commerce's determination that NTN's reported home market discounts do not qualify for a direct adjustment to FMV. NTN's home market discounts were reported on an allocable, not transaction specific, basis. However, as Commerce explained, [a]llocated price adjustments have the effect of distorting individual prices by diluting the discounts or rebates received on some sales, inflating them on other sales, and attributing them to still other sales that did not actually receive any at all. Final Results, 60 Fed. Reg. at 10,929. As demonstrated by NTN's responses to Commerce, substantial evidence supports not only Commerce's finding that NTN's reported home market discounts were reported on a product and customer specific basis, but also Commerce's implicit finding that NTN's reporting method was not equivalent to transaction specific reporting. 24
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.