Court Opinion

ID: 212201
Source: CourtListenerOpinion
Date Created: 2011-03-13 08:43:11+00
Date Added: 2024-06-11T17:28:10.668881
License: Public Domain

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     United States Court of Appeals for the Federal Circuit

                                       04-1223

                        NSK LTD. and NSK CORPORATION,

                                                     Plaintiffs-Appellants,
                                         and

        NTN CORPORATION, NTN BEARING CORPORATION OF AMERICA,
          AMERICAN NTN BEARING MANUFACTURING CORPORATION,
           NTN DRIVESHAFT, INC., and NTN-BOWER CORPORATION,

                                                     Plaintiffs,

                                          v.

                                  UNITED STATES,

                                                     Defendant-Appellee,
                                          and

                            TIMKEN U.S. CORPORATION,

                                                     Defendant-Appellee,
                                          and

          KOYO SEIKO CO., LTD., KOYO CORPORATION OF U.S.A.,
NACHI-FUJIKOSHI CORP., NACHI AMERICA, INC., and NACHI TECHNOLOGY, INC.,

                                                     Defendants.

        Robert A. Lipstein, Crowell & Moring LLP, of Washington, DC, argued for
plaintiffs-appellants. With him on the brief were Matthew P. Jaffe and Alexander H.
Schaefer.

       Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil
Division, United States Department of Justice, of Washington, DC, argued for
defendant-appellee United States. With her on the brief were Peter D. Keisler,
Assistant Attorney General, and David M. Cohen, Director. Of counsel on the brief were
John D. McInerney, Chief Counsel; Berniece A. Browne, Senior Counsel; and Amanda
L. Blaurock, Jennifer D. Jones, and Peter J. Kaldes, Attorneys, Office of Chief Counsel
for Import Administration, United States Department of Commerce, of Washington, DC.
      William A. Fennell, Stewart and Stewart, of Washington, DC, argued for
defendant-appellee Timken U.S. Corporation. With him on the brief were Terence P.
Stewart, Geert M. De Prest, and Lane S. Hurewitz.

Appealed from:    United States Court of International Trade

Senior Judge Nicholas Tsoucalas
United States Court of Appeals for the Federal Circuit
                                04-1223

                    NSK LTD. and NSK CORPORATION,

                                             Plaintiffs-Appellants,

                                 and

      NTN CORPORATION, NTN BEARING CORPORATION OF AMERICA,
        AMERICAN NTN BEARING MANUFACTURING CORPORATION,
         NTN DRIVESHAFT, INC., and NTN-BOWER CORPORATION,

                                             Plaintiffs,

                                  v.

                            UNITED STATES,

                                             Defendant-Appellee,

                                 and

                      TIMKEN U.S. CORPORATION,

                                             Defendant-Appellee,

                                 and

          KOYO SEIKO CO., LTD., KOYO CORPORATION OF U.S.A.,
NACHI-FUJIKOSHI CORP., NACHI AMERICA, INC., and NACHI TECHNOLOGY, INC.,

                                             Defendants.

                     ___________________________

                      DECIDED: December 2, 2004
                     ___________________________
Before RADER, LINN, and DYK, Circuit Judges.

LINN, Circuit Judge.

      NSK Ltd. and NSK Corp. (collectively “NSK”) appeal from the judgment of the

Court of International Trade affirming the determinations of the Department of

Commerce (“Commerce”) holding that NSK’s repacking expenses were correctly

classified as a selling expense under 19 U.S.C. § 1677a(d)(1)(B) and refusing to grant

NSK a partial level of trade adjustment for certain sales comparisons to normal value.

NSK Ltd. v. United States, 217 F. Supp. 2d 1291, 1303-06 (Ct. Int’l Trade 2002).

Because Commerce’s classification of NSK’s repacking expenses as selling expenses,

and not movement expenses under 19 U.S.C. § 1677a(c)(2)(A), was arbitrary, we

vacate and remand that determination. Because Commerce correctly refused to grant

NSK a partial level of trade adjustment, we affirm that decision.

                                   I. BACKGROUND

      This is an antidumping appeal, pertaining to antidumping duty orders on ball

bearings and cylindrical roller bearings imported into the United States from May 1,

1996, through April 30, 1997.       Antifriction Bearings (Other Than Tapered Roller

Bearings) and Parts Thereof From France, Germany, Italy, Japan, Romania, Singapore,

Sweden, and the United Kingdom, 63 Fed. Reg. 33,320 (Dep’t Commerce June 18,

1998) (final admin. review) (“Final Results”).    NSK Ltd. manufactured and sold the

bearings in Japan during the review period; and NSK Corp., a related U.S. corporation,

imported them into the United States.

      NSK Corp. made deliveries to unaffiliated customers in the United States from

various U.S. warehouses it owned and operated. NSK submitted to Commerce a list of

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expenses incurred in bringing the bearings from Japan to its U.S. customers. These

expenses included costs for, inter alia, Japanese inland freight, Japanese warehousing,

international freight, marine insurance, U.S. inland freight (from port to warehouse, and

from warehouse to U.S. unaffiliated customers), U.S. customs duties, U.S. pre-sale

warehousing, and U.S. repacking. Commerce allowed deductions for all the expenses

as movement expenses under 19 U.S.C. § 1677a(c)(2)(A), except U.S. repacking

expenses, which it treated as direct selling expenses under 19 U.S.C. § 1677a(d)(1)(B).

According to NSK, its repacking expenses were incurred when it unpacked merchandise

in its warehouse from the international shipping packets into individual or small quantity

boxes prior to shipment to unaffiliated U.S. customers.

       NSK also submitted to Commerce data about its home market sales. Commerce

determined that there were two home market levels of trade:           original equipment

manufacturers and aftermarket customers.        Commerce also found that constructed

export price sales constituted a third, distinct level of trade.    NSK requested that

Commerce calculate a level of trade adjustment measured by price differences between

the level of trade found in the home market aftermarket and original equipment

manufacturers’ levels of trade. Commerce rejected the request, and instead used a

“constructed export price offset.”

       NSK appealed Commerce’s classification of repacking expenses and its

adjustment as to the level of trade. The Court of International Trade affirmed both of

Commerce’s determinations, NSK, 217 F. Supp. 2d at 1303-06, and subsequently

dismissed the case.

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        NSK appealed to this court.       We have jurisdiction pursuant to 28 U.S.C.

§ 1295(a)(5).

                                      II. DISCUSSION

                                  A. Standard of Review

        This court undertakes plenary review of a decision of the Court of International

Trade    affirming   or   reversing   Commerce’s       final   results   of   an   administrative

determination. NSK Ltd. v. United States, 115 F.3d 965, 972 (Fed. Cir. 1997). Our

review of questions of statutory interpretation is de novo, except to the extent deference

to an agency’s construction of a statute it administers is required under the two-step

analysis set forth in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc.,

467 U.S. 837 (1984). U.S. Steel Group v. United States, 225 F.3d 1284, 1286-87 (Fed.

Cir. 2000).     Where deference is due, “[t]he first question is whether Congress has

directly spoken to the precise question at issue. If so, this court and the agency must

give effect to the unambiguously expressed intent of Congress. If, however, Congress

has not spoken directly on the issue, this court addresses the second question of

whether the agency’s interpretation is based on a permissible construction of the

statute.” Id. at 1287 (citations and internal quotation marks omitted).

                                  B. Repacking Expenses

        Section 1677a(c)(2)(A) allows the constructed export price to be reduced by

movement expenses. It provides that “[t]he price used to establish export price and

constructed export price shall be . . . reduced by”:

        the amount, if any, included in such price, attributable to any additional
        costs, charges, or expenses, and United States import duties, which are
        incident to bringing the subject merchandise from the original place of

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      shipment in the exporting country to the place of delivery in the United
      States . . . .

19 U.S.C. § 1677a(c)(2)(A) (2000).

      A separate provision provides for different treatment of direct selling expenses,

which are also used in calculating the constructed export price: “For purposes of this

section, the price used to establish constructed export price shall also be reduced

by . . . expenses that result from, and bear a direct relationship to, the sale, such as

credit expenses, guarantees and warranties . . . .” Id. § 1677a(d)(1)(B).

      NSK submitted to Commerce a list of expenses, which included its U.S.

repacking expenses.     Commerce reduced the U.S. price of the merchandise for all

expenses that NSK listed except its repacking expenses. Commerce denied NSK an

allowance for the repacking expenses under § 1677a(c)(2)(A), instead treating NSK’s

repacking expenses as direct selling expenses under § 1677a(d)(1)(B). Final Results,

63 Fed. Reg. at 33,339. Commerce reasoned that:

      We do not view repacking expenses as movement expenses. The
      repacking of subject merchandise in the United States bears no
      relationship to moving the merchandise from one point to another. The
      fact that repacking is not necessary to move merchandise is borne out by
      the fact that the merchandise was moved from the exporting country to the
      United States prior to repacking. Rather, we view repacking expenses as
      direct selling expenses respondents incur on behalf of certain sales which
      we deduct pursuant to section 772(d)(1)(B) of the statute [19 U.S.C.
      § 1677a(d)(1)(B)] . . . .

Id.

      The Court of International Trade affirmed. NSK, 217 F. Supp. 2d at 1305-06.

The Court of International Trade reasoned that NSK’s repacking expenses were

properly classified as selling expenses because § 1677a(d)(1)(B) did not provide an

exhaustive list and was not limited simply to credit expenses, guarantees, and

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warranties.    Id. at 1305.   The Court of International Trade concluded that it was

reasonable to classify the repacking expenses as selling expenses because the

repacking was performed on individual products to facilitate their sale to unaffiliated

U.S. customers.     Id.   Moreover, the Court of International Trade found that NSK’s

repacking expenses were not incidental to bringing the subject merchandise from the

original place of shipment to the place of delivery in the United States, and that

Commerce thus acted reasonably in refusing to classify the repacking expenses as

movement expenses under § 1677a(c)(2)(A). Id.

                                1. The Parties’ Arguments

       NSK argues that Commerce erred in classifying its U.S. repacking expenses as

selling expenses rather than movement expenses.              First, NSK points out that

Commerce permitted the constructed export price to be reduced by several other types

of similar expenses that it concluded were movement expenses under § 1677a(c)(2)(A).

These included: Japanese inland freight (from plant to warehouse, and from warehouse

to exit port), international freight, U.S. inland freight (from entry port to warehouse, and

from warehouse to U.S. unaffiliated customers) (“U.S. shipping”), Japanese

warehousing, marine insurance, U.S. brokerage, U.S. customs duties, and U.S. pre-sale

warehousing.      NSK argues that if these categories of expenses were deemed

movement expenses under § 1677a(c)(2)(A), then U.S. repacking expenses, which are

indistinguishable from other pre-sale warehousing, handling, and insurance expenses,

should also be categorized as movement expenses.

       NSK next argues that Commerce’s rationale for treating repacking expenses as

transportation expenses cannot withstand scrutiny.          NSK contends that whether

04-1223                                      6
repacking was required to bring merchandise from Japan to NSK’s U.S. warehouse is

irrelevant. NSK also argues that the repacking expenses were movement expenses

because they were necessary to bring the merchandise to the place of delivery in the

United States, e.g., each customer’s place of business. NSK points out that repacking

was necessary to make the requested quantities of bearings deliverable to U.S.

customers.   Finally, NSK argues that Commerce’s contention that repacking was

needed to sell the merchandise to an unaffiliated U.S. customer is inconsistent with its

allowance of U.S. inland freight costs as movement expenses, which under

Commerce’s reasoning also would be “directly related” to specific sales.

      Commerce responds that the Court of International Trade properly affirmed its

decision that NSK’s U.S. repacking expenses were selling expenses. Commerce relies

on the following questionnaire response provided by NSK as evidence that its repacking

expenses were selling expenses:        “Merchandise normally is shipped from the U.S.

warehouse in its original containers. In some instances, different pallets were used for

shipment to U.S. customers and some repackaging may have occurred to

accommodate smaller distributor orders.” Joint Appx. at 205 (Response of NSK Ltd.

and NSK Corp. to Section C of the Questionnaire at 32).

      Commerce asserts that its rationale is correct that repacking bears no

relationship to movement of the merchandise because the merchandise was moved

from Japan to the United States prior to any repacking. Commerce further argues that

repackaging expenses are distinct from warehousing expenses, because warehousing

expenses are associated with storage before or during the movement process.

Commerce     finally   argues   that   its   statutory   construction   is   correct   because

04-1223                                        7
§ 1677a(d)(1)(B) did not limit direct selling expenses to the enumerated credit

expenses, guarantees, or warranties.

                                        2. Analysis

       Congress expected that Commerce “be able to speak with the force of law when

it addresses ambiguity,” United States v. Mead Corp., 533 U.S. 218, 229 (2001), in

administering the antidumping statute. SKF USA, Inc. v. United States, 263 F.3d 1369,

1381 & n.14 (Fed. Cir. 2001). Therefore, we review Commerce’s determination under

Chevron. SKF, 263 F.3d at 1381 & n.14. The first question is “whether Congress has

directly spoken to the precise question at issue.”       Chevron, 467 U.S. at 842.        We

conclude that as to NSK’s repacking expenses Congress has not spoken, because both

the movement and sale provisions of the statute may be reasonably interpreted to cover

those costs.

       Neither provision mentions repacking specifically. On the one hand, repacking

could be a movement expense because it could arise “incident to bringing the subject

merchandise from the original place of shipment . . . to the place of delivery in the

United States.” 19 U.S.C. § 1677a(c)(2)(A) (2000). Just as warehousing is considered

a movement expense, repacking, especially to enable warehousing, could be deemed a

movement expense. On the other hand, repacking could be a selling expense because

it could be an “expense[] that result[s] from, and bear[s] a direct relationship to, the sale”

to particular customers. Id. § 1677a(d)(1)(B). Having received an order, the importer

could repack the merchandise to accommodate the customer. Because the movement

and selling expense statutes do not unambiguously classify repacking expenses in one

04-1223                                       8
category or the other, we must consider Commerce’s interpretation under step two of

Chevron.

      “[I]f the statute is silent or ambiguous with respect to the specific issue, the

question for the court is whether the agency’s answer is based on a permissible

construction of the statute.” Chevron, 467 U.S. at 843. We conclude that Commerce’s

determination that NSK’s repacking expenses are properly classified as selling

expenses    under   19   U.S.C.   § 1677a(d)(1)(B)   is   impermissible.   Commerce’s

classification of repacking expenses as selling expenses is internally inconsistent with

its classification of U.S. warehousing expenses and U.S. warehouse-to-customer-

shipping expenses as movement expenses.

      Commerce’s first attempt to explain why repacking is not a movement expense is

that “[t]he repacking of subject merchandise in the United States bears no relationship

to moving the merchandise from one point to another.” Final Results, 63 Fed. Reg. at

33,339.    This point is unpersuasive because it is inconsistent with Commerce’s

treatment of warehousing.     If the test is “bear[ing a] relationship to moving the

merchandise,” then U.S. warehousing (i.e., storing goods while awaiting sale to a

customer) should not be a movement expense—goods do not move when they are

stored.

      Commerce next argues that NSK’s successful movement of merchandise from

Japan to the United States without repacking is evidence that “repacking is not

necessary to move merchandise.” Id. This rationale is unpersuasive because it too is

inconsistent with Commerce’s treatment of the U.S. warehousing expense.          Under

Commerce’s rationale, U.S. warehousing also should be excluded from the scope of

04-1223                                    9
§ 1677a(c)(2)(A) movement expenses because the merchandise, in theory, could be

moved from Japan to a U.S. customer without U.S. warehousing, simply by shipping the

merchandise directly from Japan to the U.S. customer. However, Commerce considers

U.S. warehousing to be a movement expense.

      Finally, Commerce implies that even though the statute might allow it to classify

repacking as a movement expense, because repacking occurs to enable a sale—

whether to satisfy a customer’s request for a different lot size or to accommodate

shipping—it is a sales expense under § 1677a(d)(1)(B).         See id.    Once again,

Commerce’s rationale is internally inconsistent. Treating repacking as a sales expense

is inconsistent with treating U.S. shipping as a movement expense. If enabling sales is

the test, then U.S. shipping should be a sales expense. Like repacking that enables

sales, U.S. shipping occurs after a customer places an order.      Indeed, the cost of

shipping the merchandise from the U.S. warehouse to the U.S. customer is incurred

only because of and in furtherance of the sale. Commerce treats U.S. shipping as a

movement expense, however, and fails to explain the inconsistency.

      Expenses incurred for U.S. repacking, U.S. warehousing, and U.S. shipping

(from the warehouse to particular customers) are analogous. To be consistent, it would

appear that Commerce should classify them as the same type of expenses, whether

that be as movement expenses or as sales expenses. If Commerce wants to treat

these expenses inconsistently, then under Chevron we still must defer, but only if

Commerce reasonably explains the inconsistency and does not act arbitrarily. See

SKF, 263 F.3d at 1381-82 (vacating Commerce’s decision to inconsistently define a

term in two provisions of the antidumping statute because Commerce acted arbitrarily

04-1223                                   10
by not providing a reasonable explanation for the inconsistency); Nat’l Org. of Veterans

v. Sec’y of Veterans Affairs, 260 F.3d 1365, 1379 (Fed. Cir. 2001) (remanding a

Department regulation to allow the agency to provide a reasonable explanation for its

decision to interpret virtually identical statutory language inconsistently).   Because

Commerce did not sufficiently explain the aforementioned inconsistencies, its

determination is arbitrary and impermissible.     Commerce’s classification of NSK’s

repacking expenses as selling expenses is vacated and remanded for reconsideration

consistent with this opinion.

       On remand, we caution Commerce to be mindful that repacking may have

occurred for a number of different reasons. NSK indicated in its questionnaire response

(the only evidence on which Commerce relied in making its decision) that NSK’s

practice is to bulk ship its merchandise from Japan to U.S. warehouses on pallets used

for international shipping.     NSK was required to unpack the merchandise from the

international shipping pallets, and “in some instances,” repack the merchandise into

individual or small quantity boxes prior to shipment to U.S. customers. Joint Appx. at

205 (emphasis added).         On this record, substantial evidence may not support a

determination that NSK’s repacking expenses were incurred as a direct result of or in

furtherance of sales to particular customers.    Indeed, NSK’s counsel noted at oral

argument that repacking is sometimes done for other reasons, e.g., to enable

warehousing.

                          C. Partial Level of Trade Adjustment

       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.

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       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.

                               1. The Parties’ Arguments

         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.

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                                       2. Analysis

      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.

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                                    III. CONCLUSION

       Because Commerce’s classification of NSK’s repacking expenses as a selling

expense was arbitrary, we vacate that determination and remand for further

proceedings. Because Commerce correctly refused to grant NSK a partial level of trade

adjustment, we affirm that portion of its decision.

             AFFIRMED-IN-PART, VACATED-IN-PART, AND REMANDED

                                        IV. COSTS

       No costs.

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