Opinion ID: 209670
Heading Depth: 3
Heading Rank: 1

Heading: Commerce's Revised Model-Match Methodology

Text: SKF disputes the legitimacy of Commerce's new model-match methodology, the appropriateness of Commerce's decision to disturb the prior family-match methodology, and the retroactive application of the new methodology to products covered by the fifteenth review. We address each of these arguments in turn. With respect to the new methodology, the parties disagree about the purpose of a model-match methodology itself. SKF fundamentally argues that the model-match methodology should be designed solely to compare the most physically and commercially similar products, regardless of whether such matching consists of price-to-price comparisons or constructed values. Domestic Producer Timken U.S. Corporation (Timken) and the government maintain that the new methodology more accurately reflects the intent of 19 U.S.C. § 1677(16)(B) to identify a single most similar model, see Timken Co. v. United States, 630 F.Supp. 1327, 1337 (Ct. Int'l Trade 1986) (holding that [t]he spirit if not the letter of [the statute] obligates the agency to also ascertain what constitutes the most similar merchandise, and that if values can be found only for items of `similar' merchandise, the value of the item most similar to that under appraisement should be adopted), and that the family-match methodology runs counter to Commerce's normal practice. SKF responds that the statute does not require the selection of a single most similar model and that the statute does not preclude the appropriate use of constructive value. The statute provides: The term foreign like product means merchandise in the first of the following categories in respect of which a determination for the purposes of part II of this subtitle can be satisfactorily made: (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. (C) Merchandise (i) produced in the same country and by the same person and of the same general class or kind as the subject merchandise, (ii) like that merchandise in the purposes for which used, and (iii) which the administering authority determines may reasonably be compared with that merchandise. 19 U.S.C. § 1677(16). SKF maintains that the hierarchy set forth in the statute does not require Commerce to select a single most similar model and points to prior affirmance of the family-match methodology as evidence of the correctness of its statutory interpretation. See SKF USA Inc. v. United States, 876 F.Supp. 275, 279 (Ct. Int'l Trade 1995) (noting that the statute does not require Commerce to use a methodology that identifies the greatest number of matches of similar merchandise, and that the family-match methodology was within the broad discretion [Commerce] is granted to determine `similar merchandise'). The relevant question, however, is not whether the statute requires such an approach, but rather whether Commerce's interpretation is permissible. We have previously observed that this statute is silent with respect to the methodology that Commerce must use to match a U.S. product with a suitable home-market product. Koyo Seiko Co. v. United States, 66 F.3d 1204, 1209 (Fed.Cir. 1995). Under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), if a statute is silent or ambiguous with respect to a specific issue, we must defer to an agency's reasonable interpretation of a statute even if [we] might have preferred another. Koyo Seiko Co. v. United States, 36 F.3d 1565, 1570 (Fed. Cir.1994). Furthermore, [d]eference to an agency's statutory interpretation is at its peak in the case of a court's review of Commerce's interpretation of the antidumping laws. Id. Accordingly, we have previously held that Congress has granted Commerce considerable discretion to fashion the methodology used to determine what constitutes foreign like product under the statute. Pesquera Mares Australes Ltda. v. United States, 266 F.3d 1372, 1384 (Fed.Cir.2001) (citing Koyo Seiko, 66 F.3d at 1209). Commerce's interpretation of the statute merits deference in this case. SKF alleges that the increased number of price comparisons achieved under the new methodology corresponds with a decrease in the accuracy of the matches themselves. But as noted by the government, SKF fails to identify a single instance of an unreasonable match resulting from the new methodology. Cf. Koyo Seiko Co. v. United States, 516 F.Supp.2d 1323, 1335 (Ct. Int'l Trade 2007) (noting that [p]laintiffs ... each argue through specific examples that the Department's new methodology led to the comparison of dissimilar bearing products). And as Timken argues, it is reasonable that although the new methodology allows up to a 40 percent total deviation in dimensions and load rating, the methodology yields more accurate results because it matches the most similar product rather than merely pooling several models that matched as to eight characteristics but could vary significantly in price or cost, due to differences in materials for certain components or added features. The new model-match methodology not only reflects a reasonable interpretation of the statute but also comports with our precedent. In CEMEX, S.A. v. United States, we observed that: Section 1677(16) sets up a hierarchy for identifying such or similar merchandise. Commerce examines each category in order, and once merchandise is presented that meets the criteria stated by a category, the price of this merchandise in the home country becomes the foreign market value. See 19 U.S.C. §§ 1677(16), 1677b(a)(1). The first class of merchandise is identical merchandise, the next class is nonidentical merchandise that is made by the same producer in the same country and is similar in value to the merchandise under investigation, and the third class is merchandise made by the same producer in the same country and used for the same purposes as the merchandise under investigation. See 19 U.S.C. § 1677(16). 133 F.3d 897, 902-03 (Fed.Cir.1998) (internal footnote omitted). In light of this statutory structure, we concluded that [t]he plain language of the statute requires Commerce to base foreign market value on nonidentical but similar merchandise ... rather than constructed value when sales of identical merchandise have been found to be outside the ordinary course of trade. Id. at 904. Thus, Commerce's decision to seek out product matches based on the most similar products rather than constructed values does not contravene the statute. With respect to Commerce's decision to revise the model-match methodology after 14 annual reviews utilizing the family-match methodology, we have specifically affirmed changes to model-match methodologies by Commerce where reasonable. See Koyo, 66 F.3d at 1211. In Koyo, Commerce had changed from a greatest-single-deviation methodology ... to a `sum-of-the-deviations' methodology for matching U.S. [tapered roller bearings (`TRBs')] with home market TRBs ... without using any limitation or `cap' on the deviation of any one criteria. Id. at 1207. The Court of International Trade affirmed Commerce's switch in methodologies, but imposed a ten percent cap to limit the permissible deviation. Id. at 1208. We stated that our inquiry [was] limited to determining whether Commerce's model-matching methodology, without the ten percent cap later required by the court, is reasonable, and we concluded that it was. Id. at 1210. In this case, Commerce provided adequate explanation of the reasonable compelling reasons motivating its determination, as detailed supra. Although SKF argues that in implementing the previous model-match methodology, Commerce did not specifically suggest that it was constrained by technological limitations, contemporaneous documentation from Commerce indicates that motivating factors in adopting the family-match methodology included minimiz[ing] the necessity for comparisons among an exceptionally large number of bearing models, and limit[ing] the need for adjustments for physical differences in merchandise and the need for model matching. J.A. at 129. These concerns were obviated by the availability of all new margin-calculation programs on personal computers that are several orders of magnitude faster, vastly more sophisticated, yet far easier to use than the offsite mainframe computer [Commerce] used in the 1988-90 administrative reviews. Id. at 360. Based on Commerce's increased technological capacity, combined with its desire to fashion a model match methodology more in keeping with its ordinary practice of selecting a single most similar model rather than pooling values of product families, we affirm its decision to revise the model-match methodology. Even assuming that Commerce was justified in modifying the model-match methodology, however, SKF analogizes to Shikoku Chemicals Corp. v. United States, 795 F.Supp. 417 (Ct. Int'l Trade 1992), to argue that we should not permit Commerce to apply the modified model-match methodology retroactively. In Shikoku, the Court of International Trade found that reliance interests precluded a late stage change in model-match methodology. Id. at 422. Appellees counter that in Shikoku, [t]here [was] no serious challenge to plaintiffs' contention that they actually relied on the old pricing method, id. at 420, and that SKF ignores the inherently retrospective nature of the antidumping duty statutory scheme. See 19 C.F.R. § 351.212(a) (Unlike the systems of some other countries, the United States uses a `retrospective' assessment system under which final liability for antidumping and countervailing duties is determined after merchandise is imported.); Abitibi-Consol. Inc. v. United States, 437 F.Supp.2d 1352, 1361 (Ct. Int'l Trade 2006) (The absence of certainty regarding the dumping margins and final assessment of antidumping duties is a characteristic of the retrospective system of administrative reviews designed by Congress.). We agree. While Commerce must comply with the notice provisions of the statute, [c]hanges in methodology, like all other antidumping review determinations, permissibly involve retroactive effect. Koyo Seiko, 516 F.Supp.2d at 1334 (citing 19 U.S.C. § 1675(a)(2)). Appellees also argue that Commerce provided even greater notice and opportunity to comment than provided by statute, see 19 U.S.C. § 1677m(g), thus undermining any reasonable reliance on the family-match methodology by SKF. SKF alleges that it relied upon the old methodology, but provides no evidence to support that assertion and argues only that it could have adjusted its practices had it known sufficient details about the new methodology. However, SKF does not dispute that Commerce has consistently found that SKF continues to sell at dumped prices. Thus, SKF cannot properly analogize its situation to that in Shikoku, where [t]he record contain[ed] evidence that plaintiffs adjusted their prices in accordance with methodology consistently applied by Commerce in an attempt to comply with United States antidumping law. Shikoku, 795 F.Supp. at 420. Having failed to establish detrimental reliance on the old methodology, and given the inherently retroactive nature of the antidumping statutory scheme, see 19 U.S.C. § 1675(a)(2), we reject SKF's argument that it was entitled to greater notice than that provided by Commerce in accordance withand exceeding the requirements of19 U.S.C. § 1677m(g). See NSK Ltd. v. United States, 510 F.3d 1375, 1385 (Fed. Cir.2007) (noting that Commerce ... publicly stated that it w[ould] change its methodology only after parties have had a meaningful opportunity to comment on the proposed change). Finally, SKF challenges Commerce's decision to consider lubricant types in assessing identical products. Yet SKF fails to explain why we should disregard the Court of International Trade's observation that SKF failed to raise this issue during the open comment period prior to publication of the final determination. SKF USA, 491 F.Supp.2d at 1363. Nor does SKF's brief argument on this point undermine Commerce's justifications for its inclusion of lubrication type in making this determination. See Issues and Decision Memo at 37 (explaining the decision not to ignore differences in lubrication and cautioning that, for example, a comparison of a U.S. model with a high-performance grease to a home-market model with a standard grease could mask dumping); see also Pesquera Mares, 266 F.3d at 1384 (holding that Commerce has considerable discretion in defining `identical in physical characteristics'). Thus, we reject SKF's arguments related to lubricant type.