Opinion ID: 210161
Heading Depth: 2
Heading Rank: 3

Heading: Koyo's Billing Adjustment Allocations

Text: Koyo also appeals Commerce's determination that Koyo's allocation of certain home market billing adjustments was unreasonably distortive. As it has in previous reviews of the antidumping order, Koyo reported a number of billing adjustments to its home market prices in its initial questionnaire responses, including a number of customer-specific, lump-sum billing adjustments for which Koyo claimed to lack more specific information. Consistent with its long-standing practice of accepting adjustments that are not reported on a transaction-specific basis when it was not feasible for the party to report the adjustment on a more specific basis, provided the allocation method the party used does not cause unreasonable inaccuracies or distortions, see 19 C.F.R. § 351.401(g), Commerce accepted these allocations in its Preliminary Results. After reviewing a sample of the sales over which Koyo allocated lump-sum billing adjustments, however, Commerce noted that the samples included billing adjustments that were incurred over time periods that did not correspond to the [period of review] and that actually occurred on specific models. On the basis of this report, Timken U.S. Corp. (Timken) challenged Koyo's lump-sum billing adjustment allocations. After further analyzing Koyo's billing adjustment allocation, Commerce ultimately rejected Koyo's allocation in its Final Results, finding that the allocation methodology Koyo used causes unreasonable inaccuracies and distortions. Nonetheless, Commerce initially continued to use the allegedly distortive allocation for positive billing adjustments, i.e., those likely to increase the weighted-average dumping margin, but not negative billing adjustments, i.e., those likely to decrease the weighted-average dumping margin. According to Commerce, this would act as an incentive for Koyo to report its billing adjustments on Commerce's preferred transaction-specific basis. The Court of International Trade, however, rejected this differential treatment of positive and negative billing adjustments as punitive and not in accordance with law. NSK I, 416 F.Supp.2d at 1342. In response, Commerce denied all of Koyo's lump-sum billing adjustments as unreasonably distortive, and the Court of International Trade affirmed. NSK II, 462 F.Supp.2d at 1259. On appeal, Koyo argues that (1) Commerce's determination that Koyo's allocation of its lump-sum billing adjustments is unreasonably distortive is contrary to Commerce's established criteria for making such a determination, (2) it was not given a meaningful opportunity to demonstrate that its allocation of its lump-sum billing adjustments is not distortive, and (3) Commerce's decision to deny Koyo's billing adjustments is not supported by substantial evidence. We disagree. Regarding Koyo's argument that Commerce's determination that Koyo's allocation is unreasonably distortive is contrary to its established criteria for making such a determination, Commerce's acceptance of an allocation methodology in a previous review does not relieve a party of its burden of demonstrating the methodology is non-distortive in the current review. See NTN Corp. v. United States, 306 F.Supp.2d 1319, 1329 (Ct. Int'l Trade 2004), aff'd 125 Fed.Appx. 1011 (Fed.Cir. 2005). That said, [w]hen an agency deviates from a longstanding practice, it must explain why it has done so. Nucor Corp. v. United States, 414 F.3d 1331, 1340 (Fed. Cir.2005). In this case, Commerce explained that, although it accepted Koyo's allocation methodology in previous reviews, in this review it directly observed clear evidence of a substantial distortion caused by the methodology. We construe that as a sufficient basis for Commerce to abandon its long-standing acceptance of Koyo's allocation methodology. Despite this, Koyo contends that Commerce's determination that Koyo's billing adjustment allocation is unreasonably distortive is not supported by substantial evidence. In this case, Koyo totaled all billing adjustments on a customer-specific basis and allocated the total adjustment over all sales to that customer. By allocating billing adjustments to all sales to a customer, Koyo's methodology potentially shifts billing adjustments from sales that are not used in calculating normal value to ones that are and vice versa. This could allow Koyo to spread positive billing adjustments on models imported to the United States across those not imported to the United States. Similarly, Koyo could spread negative billing adjustments on models not imported to the United States across those that are imported to the United States. Both of these would artificially deflate normal value for the imported goods and reduce the dumping margin calculated for the item. Allocating billing adjustments between sales that occurred outside of the period of review with those that occurred during the period of review is equally prone to abuse, as it would allow Koyo to offset dumping during the period of review with non-dumped sales outside of the period of review. This would defeat the whole purpose of having set periods of review for the administration of the antidumping order. Nonetheless, this court has previously approved of Commerce's adoption of Koyo's billing adjustment allocation methodology, based on Commerce's determination, from the information available to it at the time, that Koyo's allocation methodology did not unreasonably distort the final adjustments by improperly including out of scope sales or transactions outside the period of review. NTN Bearing Corp. of Am. v. United States, 295 F.3d 1263, 1268 (Fed. Cir.2002). However, in this case, Commerce analyzed a sampling of Koyo's lump-sum billing adjustments and found that Koyo allocated lump-sum billing adjustments from sales not used in calculating normal value to sales that are used in calculating normal value. In other words, when Commerce examined a sample of the paper records underlying Koyo's billing adjustments, it found that some of the adjustments reviewed related entirely to transactions outside either the scope of the antidumping order or the period of review, yet were allocated in part to scope merchandise during the period of review. In light of this finding, Commerce could reasonably require Koyo to demonstrate that its allocation methodology was nondistortive overall (for example, by using a broader sample of its underlying transactions), and Commerce did not err in determining that Koyo had not made an adequate showing of nondistortion. More importantly, Commerce found the distortive effect of this allocation to be substantial. For example, Commerce found that Koyo allocated home-market billing adjustments from products that did not belong in the same product family as any of the products Koyo sold in the United States to products it did sell in the United States, significantly distorting the normal value for those products. In light of the potentially distortive effect of Koyo's billing adjustment allocation, and the fact that Commerce found actual distortion as a result of this allocation, we agree with the Court of International Trade that Commerce's determination that Koyo's allocation is unreasonably distortive is supported by substantial evidence. Moreover, the fact that Koyo may or may not have been able to allocate its billing adjustments in a more specific manner is irrelevant. Commerce is not required to accept billing adjustments on an allocated basis. See 19 C.F.R. § 351.401(g)(1) (The Secretary may consider allocated . . . price adjustments when transaction-specific reporting is not feasible. (emphasis added)). When Commerce does accept allocated billing adjustment, the party seeking a billing adjustment has the burden of establishing to the satisfaction of the Secretary the amount and nature of a particular adjustment, id. § 351.401(b)(1), and, if reporting on an allocated basis, that no more specific basis is feasible and that the allocation methodology does not cause inaccuracies or distortions, id. § 351.401(g)(2). Regardless of whether a more specific reporting basis is feasible, the simple fact is that Koyo failed to demonstrate that its allocation methodology does not cause inaccuracies or distortion. Accordingly, Commerce was within its rights to reject Koyo's billing adjustment allocation. Furthermore, Commerce's previous acceptance of Koyo's allocation methodology does not give Koyo a vested interest in continuing to use a system once it has been found to be distortive. See NTN Corp., 306 F.Supp.2d at 1329. As mentioned above, the use of a non-transaction-specific allocation methodology is not a right. See 19 C.F.R. § 351.401(b)(1). Regardless of the accounting problems Koyo may face or the fact that Commerce previously attempted to accommodate them, the simple fact is that, in this review, Koyo did not meet its burden of demonstrating that its allocation methodology is not distortive. And while Koyo may contend that it was not given a meaningful opportunity to attempt to do so, we disagree. After Timken challenged Koyo's lump-sum billing adjustments, Koyo had the opportunity to respond in its administrative rebuttal case brief. However, rather than substantively addressing Timken's arguments, Koyo merely argued that its adjustments had been accepted in prior reviews. The fact that Koyo did not take full advantage of the opportunity to respond does not mean that Koyo was not given a meaningful one. Accordingly, for the reasons discussed above, Commerce's determination that Koyo's allocation of lump-sum billing adjustments is unreasonably distortive is affirmed. [1]