Opinion ID: 766090
Heading Depth: 3
Heading Rank: 2

Heading: The Related Party Sales

Text: 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.