Timken Co. v. United States , 968 F. Supp. 2d 1279 ( 2014 )

Slip Op. 14- 24
UNITED STATES COURT OF INTERNATIONAL TRADE
THE TIMKEN COMPANY,
Plaintiff,
v. Before: Jane A. Restani, Judge
UNITED STATES, Consol. Court No. 12-00415
Defendant,
NTN BEARING CORPORATION OF
AMERICA, NTN-SNR ROULEMENTS S.A.,
SNR BEARINGS USA, INC., MYONIC
GMBH, NEW HAMPSHIRE BALL
BEARINGS, INC., SCHAEFFLER ITALIA
S.R.L, SKF USA, INC., SKF INDUSTRIES
S.P.A., and SOMECAT S.P.A.,
Defendant-Intervenors.
OPINION
[Commerce’s final results in antidumping duty review declining to apply a targeted dumping
remedy sustained.]
Dated: February 27, 2014
Geert M. De Prest, Stewart and Stewart, of Washington, DC, argued for plaintiff.
With him on the brief were Terence P. Stewart and Lane S. Hurewitz.
Tara K. Hogan, Senior Trial Counsel, Commercial Litigation Branch, Civil
Division, U.S. Department of Justice, of Washington, DC, argued for defendant. With her on the
brief were Stuart F. Delery, Assistant Attorney General, Jeanne E. Davidson, Director, and
Reginald T. Blades, Jr., Assistant Director. Of counsel on the brief was Whitney M. Rolig,
Office of the Chief Counsel for Trade Enforcement & Compliance, U.S. Department of
Commerce, of Washington, DC.
Diane A. MacDonald, Baker & McKenzie, LLP, of Chicago, IL, argued for
defendant-intervenors NTN Bearing Corporation of America, NTN-SNR Roulements, S.A., and
Consol. Court No. 12-00415 Page 2
SNR Bearings USA, Inc. With her on the brief was Kevin M. O’Brien.
John M. Foote, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of
Washington, DC, argued for defendant-intervenor Schaeffler Italia S.r.l. With him on the brief
were Max F. Schutzman and Andrew T. Schutz.
Herbert C. Shelley, Steptoe & Johnson LLP, of Washington, DC, argued for
defendant-intervenors SKF USA Inc., SKF Industrie S.p.A., and Somecat S.p.A. With him on
the brief were Michael T. Gershberg, Laura R. Ardito, and Christopher G. Falcone.
Jay C. Campbell and Walter J. Spak, White & Case, LLP, of Washington, DC, for
defendant-intervenors myonic GmbH and New Hampshire Ball Bearings, Inc.
Restani, Judge: This matter is before the court on plaintiff The Timken
Company’s (“Timken”) motion for judgment on the agency record pursuant to USCIT Rule 56.2.
Timken challenges various aspects of the U.S. Department of Commerce’s (“Commerce”) final
results rendered in the 2010–2011 review of the antidumping duty orders on ball bearings and
parts thereof from France, Germany, and Italy. Ball Bearings and Parts Thereof from France,
Germany, and Italy: Final Results of Antidumping Duty Administrative Reviews; 2010–2011, 77
Fed. Reg. 73,415 (Dep’t Commerce Dec. 10, 2012) (“Final Results”). For the reasons stated
below, the court sustains the Final Results.
BACKGROUND
This case requires the court to resolve issues regarding Commerce’s analysis of
Timken’s “targeted dumping” allegations against NTN-SNR Roulements S.A. (“NTN-SNR”),
myonic GmbH (“myonic”), SKF Italy (“SKF”), and Schaeffler Italia S.r.l. (“Schaeffler”)
(collectively “the respondents”). Because the advent of “targeted dumping” allegations in
administrative reviews is a recent development, it is necessary to provide some background on
the statutory and regulatory framework regarding targeted dumping before addressing Timken’s
specific arguments in this case.
Consol. Court No. 12-00415 Page 3
Until 2012, Commerce’s default methodology for comparing home market and
export prices in administrative reviews had been the average-to-transaction (“A-T”)
methodology. See Antidumping Proceedings: Calculation of the Weighted-Average Dumping
Margin and Assessment Rate in Certain Antidumping Duty Proceedings; Final Modification, 77
Fed. Reg. 8101, 8101 (Dep’t Commerce Feb. 14, 2012) (“Final Modification”). When applying
this methodology, Commerce did not allow transactions with export prices above the home
market price to offset transactions with export prices below the home market price. Id. The
disallowance of offsets is commonly referred to as “zeroing.”1 On February 14, 2012,
Commerce announced that it was changing its default comparison methodology in administrative
reviews to the average-to-average (“A-A”) methodology with offsets in order to comply with
World Trade Organization (“WTO”) decisions finding the use of zeroing in administrative
reviews inconsistent with the United States’ WTO obligations. Id. According to Commerce, this
change meant that the default methodology in reviews essentially would mirror its WTO-
compliant methodology in antidumping investigations. Id. Commerce, however, stated that it
would consider the use of other comparison methodologies if the circumstances warranted and
that it would examine the same criteria it examines in investigations to determine if another
comparison methodology would be more appropriate. Id. at 8102. Commerce did not rule out
the possibility of using a zeroing methodology if it found such circumstances. See id. at 8104,
8106–07.
As explained above, the default comparison methodology in investigations is the
1
For a detailed explanation of the zeroing practice and its history, see Union Steel v.
United States, 823 F. Supp. 2d 1346 (CIT 2012).
Consol. Court No. 12-00415 Page 4
A-A methodology. See also 19 U.S.C. § 1677f-1(d)(1)(A) (2006).2 The antidumping statute
specifies that in an investigation, however, the A-T methodology may be used if there is
“targeted dumping.” Specifically, 19 U.S.C. § 1677f-1(d)(1)(B) provides:
The administering authority may determine whether the subject merchandise is being
sold in the United States at less than fair value by comparing the weighted average
of the normal values to the export prices (or constructed export prices) of individual
transactions for comparable merchandise, if—
(i) there is a pattern of export prices (or constructed export prices) for
comparable merchandise that differ significantly among purchasers, regions,
or periods of time, and
(ii) the administering authority explains why such differences cannot be
taken into account using [the A-A methodology or the T-T methodology].
The “pattern of export prices (or constructed export prices) for comparable merchandise that
differ significantly among purchasers, regions, or periods of time” is what is referred to as
“targeted dumping.” If Commerce finds targeted dumping and explains why the default A-A
methodology cannot take account of the pattern, Commerce may use the A-T methodology to
compare the home market and export prices. Commerce has used this statutory provision as
guidance in deciding when to apply the A-T methodology (likely with zeroing) instead of the
default A-A methodology in reviews. See, e.g., Issues and Decision Memorandum for the Final
Results of the Antidumping Duty Administrative Review: Circular Welded Carbon Steel Pipes
and Tubes from Turkey—May 1, 2010, through April 30, 2011, A-489-501, at 10 (Nov. 30,
2012), available at http://enforcement.trade.gov/frn/summary/turkey/2012-29529-1.pdf (last
visited Feb. 20, 2014); Issues and Decision Memorandum for the Antidumping Duty
2
Although the transaction-to-transaction (“T-T”) methodology also is listed as a
preferred methodology, Commerce, for practical reasons, rarely employs this methodology. See
19 C.F.R. § 351.414(c)(2) (2013) (“The Secretary will use the transaction-to-transaction method
only in unusual situations, such as when there are very few sales of subject merchandise and the
merchandise sold in each market is identical or very similar or is custom-made.”).
Consol. Court No. 12-00415 Page 5
Administrative Reviews of Ball Bearings and Parts Thereof from France, Germany, and Italy;
2010-2011, A-427-801, A-428-801, A-475-801, at 11–12 (Dec. 4, 2012) (“I&D Memo”),
available at http://enforcement.trade.gov/frn/summary/MULTIPLE/2012-29770-1.pdf (last
visited Feb. 20, 2014).
Relevant to this case, Commerce has applied the so-called Nails3 test to determine
whether targeted dumping has occurred. The Nails test proceeds in two stages, each done on a
product-specific basis (by control number or CONNUM). The first stage is referred to as the
“standard-deviation” test. I&D Memo at 13. If 33% or more of the alleged targeted group’s
(i.e., customer, region, or time period) sales of subject merchandise are at prices more than one
standard deviation below the weighted-average price of all sales under review, those sales pass
the standard deviation test and are considered in step two—the “gap” test. Id. In performing the
gap test, Commerce considers whether the “gap” between the weighted-average sales price to the
targeted group and the weighted-average sales price to the next-highest non-targeted group is
3
The Nails test derives its name from the cases in which it was first used. See Certain
Steel Nails from the People’s Republic of China: Final Determination of Sales at Less than Fair
Value and Partial Affirmative Determination of Critical Circumstances, 73 Fed. Reg. 33,977(Dep’t Commerce June 16, 2008); Certain Steel Nails from the United Arab Emirates: Notice of
Final Determination of Sales at Not Less than Fair Value, 73 Fed. Reg. 33,985 (Dep’t Commerce
June 16, 2008). Commerce may be applying an entirely different test in future reviews. See,
e.g., Certain Activated Carbon from the People’s Republic of China: Issues and Decision
Memorandum for the Final Results of the Fifth Antidumping Duty Administrative Review,
A-570-904, at 21–22 (Nov. 20, 2013), available at
http://enforcement.trade.gov/frn/summary/prc/2013-28359-1.pdf (last visited Feb. 20, 2014);
Issues and Decision Memorandum for the Final Results of the Antidumping Duty Administrative
Review: Welded Carbon Steel Standard Pipe and Tube Products from Turkey; 2011–2012, A-
489-501, at 38–39 (Dec. 23, 2012), available at
http://enforcement.trade.gov/frn/summary/turkey/2013-31344-1.pdf (last visited Feb. 20, 2014).
The court expresses no opinion on a test that was not employed in this case.
Consol. Court No. 12-00415 Page 6
greater than the average gap between the non-targeted groups. Id. If the gap between the
targeted group and the next-highest non-targeted group is greater than the average gap, those
sales pass the gap test. Id. If more than 5% of total sales of the subject merchandise to the
alleged target pass both tests, Commerce determines that targeting has occurred. Id.Turning to the facts of the case at bar, this case arises out of Commerce’s
2010–2011 review of antidumping duty orders on ball bearings and parts thereof from France,
Germany, and Italy. Final Results, 77 Fed. Reg. at 73,415. While the reviews were proceeding,
Commerce announced its change in default methodology for reviews. See Timken’s Targeted
Dumping Analysis for NTN-SNR at 1–2, A-427-801, PD 85 at bar code 3057972-01 (Feb. 21,
2012), ECF No. 47-2 (June 14, 2013). Timken, the petitioner before the agency, in anticipation
of the possible application of the modified methodology to the reviews at bar, filed allegations of
targeted dumping with Commerce against the respondents on February 21, 2012.4 See, e.g., id.
at 1–4.
Commerce’s preliminary results did not rule on the targeted dumping allegation
and applied the default A-A methodology, which resulted in zero dumping margins for each of
the respondents. Ball Bearings and Parts Thereof From France, Germany, and Italy: Preliminary
Results of Antidumping Duty Administrative Reviews and Rescission of Antidumping Duty
Administrative Reviews in Part, 77 Fed. Reg. 33,159, 33,161, 33,164 (Dep’t Commerce June 5,
2012). Commerce, however, invited the parties to comment on the targeted dumping allegations
4
Timken had filed similar allegations in November 2011, before Commerce’s change in
methodology was finalized. See I&D Memo at 5.
Consol. Court No. 12-00415 Page 7
and the use of the new default methodology. Id. at 33,161–62.
Commerce issued post-preliminary determinations addressing the targeted
dumping allegations on October 16, 2012. Post-Preliminary Analysis and Calculation
Memorandum, A-427-801, PD 109 at bar code 3101431-01 (Oct. 16, 2012), ECF No. 47-2 (June
14, 2013) (“Post-Preliminary Results”). In its analysis, Commerce applied the Nails test to
determine whether targeted dumping had occurred. See id. at 2–3. Commerce found sales that
passed both stages of the Nails test for each respondent. Id. at 3; Timken’s Comments on the
Post-Preliminary Targeted Dumping Analysis for NTN-SNR at 2, A-427-801, PD 120 at bar
code 3104304-01 (Nov. 5, 2012), ECF. No. 47-2 (June 14, 2013) (“Timken’s Post-Preliminary
Comments for NTN-SNR”). In these reviews, Commerce compared the number of sales that
passed the Nails test to all U.S. sales for each respondent. See Post-Preliminary Results Analysis
for NTN-SNR at 2, A-427-801, PD 110 at bar code 3101689-01 (Oct. 16, 2012), ECF No. 47-2
(June 14, 2013) (“Post-Preliminary Analysis for NTN-SNR”); Post-Preliminary Results Analysis
for myonic GmbH at 2, A-428-801, PD 89 at bar code 3101703-01 (Oct. 16, 2012), ECF No. 47-
3 (June 14, 2013) (“Post-Preliminary Analysis for myonic”); Post-Preliminary Results Analysis
for Schaeffler at 2, A-475-801, PD 151 at bar code 3101554-01 (Oct. 16, 2012), ECF No. 47-3
(June 14, 2013) (“Post-Preliminary Analysis for Schaeffler”); Post-Preliminary Results Analysis
for SKF at 2, A-475-801, PD 155 at bar code 3101698-01 (Oct. 16, 2012), ECF No. 47-3 (June
14, 2013) (“Post-Preliminary Analysis for SKF”). For each respondent, Commerce determined
that the volume and value of sales that passed the Nails test was insufficient as a percentage of
the volume and value of all U.S. sales to warrant the use of the alternative A-T methodology.
See Post-Preliminary Analysis for NTN-SNR at 2; Post-Preliminary Analysis for myonic at 2;
Consol. Court No. 12-00415 Page 8
Post-Preliminary Analysis for Schaeffler at 2; Post-Preliminary Analysis for SKF at 2.
Timken filed comments with Commerce challenging Commerce’s decision to
engage in this additional step beyond the two-part Nails test and Commerce’s use of only the
sales that passed the Nails test to determine the significance of the targeted dumping. See, e.g.,
Timken’s Post-Preliminary Comments for NTN-SNR. Following comments by the parties and a
hearing, Commerce issued its final results. Final Results, 77 Fed. Reg. at 73,415. Commerce
again determined that the volume and value of targeted sales for each respondent was
insufficient to consider using the A-T methodology. See I&D Memo at 10, 12–15. Commerce
therefore applied the default A-A methodology and again found dumping margins of zero for
each respondent. See I&D Memo at 10; Final Results, 77 Fed. Reg. at 73,416. Timken
challenges Commerce’s analysis of its targeted dumping allegations on several grounds, each of
which will be discussed below. Defendant-intervenors argue that Commerce’s determination
should be sustained.
JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction pursuant to 28 U.S.C. § 1581(c). “The court shall hold
unlawful any determination, finding, or conclusion found . . . to be unsupported by substantial
evidence on the record, or otherwise not in accordance with law . . . .” 19 U.S.C.
§ 1516a(b)(1)(B)(i).
DISCUSSION
I. Consistency with Past Practice
The bulk of Timken’s argument is that Commerce’s decision to compare the
results of the Nails test to total sales before considering the use of the A-T methodology is
Consol. Court No. 12-00415 Page 9
inconsistent with Commerce’s past practice in applying the Nails test. See Timken Co.’s Mem.
in Supp. of Its Rule 56.2 Mot. for J. on the Agency R., ECF No. 46, 16–33 (“Timken Br.”).
According to Timken, once Commerce had found sales that passed the Nails test, in prior cases it
automatically considered whether the use of the A-T methodology was appropriate by comparing
the dumping margins calculated using the A-A methodology to the margins calculated using the
A-T methodology. Id. at 17–19. Timken alleges that Commerce had explicitly declined in four
other cases to engage in a de minimis inquiry in determining whether a pattern exists for
purposes of 19 U.S.C. § 1677f-1(d)(1)(B).5 Id. at 18–22 (citing Issues and Decision
Memorandum for the Final Determination in the Antidumping Duty Investigation of
Multilayered Wood Flooring from the People’s Republic of China, A-570-970 (Oct. 11, 2011)
(“Wood Flooring from China”), available at
http://enforcement.trade.gov/frn/summary/prc/2011-26932-1.pdf (last visited Feb. 20, 2014);
Issues and Decision Memorandum for the Less than Fair Value Investigation of Certain Steel
Nails from the United Arab Emirates, A-520-804 (Mar. 19, 2012) (“Nails from the UAE II”),
available at http://enforcement.trade.gov/frn/summary/uae/2012-7067-1.pdf (last visited Feb. 20,
2014); High Pressure Steel Cylinders from the People’s Republic of China: Issues and Decision
Memorandum for the Final Determination, A-570-977 (Apr. 30, 2012) (“Steel Cylinders from
China”), available at http://enforcement.trade.gov/frn/summary/prc/2012-10952-1.pdf (last
5
Timken and several of the defendant-intervenors refer to Commerce’s sufficiency
determination as a de minimis test. See, e.g., Timken Br. 34–35; Resp. of NTN Bearing Corp. of
Am., et al., to the Rule 56.2 Mots. of the Timken Co., ECF No. 57, 13. The government denies
that Commerce created a de minimis test. Def.’s Resp. to Pl.’s Rule 56.2 Mot. for J. on the
Agency R., ECF No. 59, 12. Because of this disagreement regarding the use of the term “de
minimis,” the court will refer to Commerce’s determination as a sufficiency determination.
Consol. Court No. 12-00415 Page 10
visited Feb. 20, 2014); Issues and Decision Memorandum for the Antidumping Duty
Investigation of Large Residential Washers from the Republic of Korea, A-580-868 (Dec. 18,
2012) (“Washers from Korea”), available at
http://enforcement.trade.gov/frn/summary/korea-south/2012-31104-1.pdf (last visited Feb. 20,
2014)). Because Commerce allegedly failed to provide a proper explanation for this change in
practice, Timken argues that remand is necessary. Id. at 22–33.
The government argues that Commerce’s decision in this case is consistent with
its prior reasoning. See Def.’s Resp. to Pl.’s Rule 56.2 Mot. for J. on the Agency R., ECF No.
59, 12–16 (“Government Br.”). Commerce cited a prior case in which it engaged in a similar
sufficiency analysis even after some sales had passed the Nails test. I&D Memo at 13–14 (citing
Certain Stilbenic Optical Brightening Agents From Taiwan: Preliminary Determination of Sales
at Less than Fair Value and Postponement of Final Determination, 76 Fed. Reg. 68,154, 68,156
(Dep’t Commerce Nov. 3, 2011) (“OBAs from Taiwan”)). Commerce noted that it had
previously indicated that it would proceed on a case-by-case basis in determining when to use
the A-T methodology and explained that its prior cases did not preclude the analysis undertaken
here. See id. at 11, 13–15. Commerce further noted that 19 U.S.C. § 1677f-1(d)(1)(B) states
that Commerce “may” use the A-T methodology if it finds targeted dumping, but it is not
required to do so. Id. at 14. The government argues that Commerce’s determination was a
reasonable exercise of its discretion and otherwise in accordance with law. Government Br.
16–19.
SKF argues that Commerce had no duty to explain any departure from the cases
cited by Timken. See Resp. Br. of SKF USA Inc., SKF Industrie S.p.A., and Somecat S.p.A.
Consol. Court No. 12-00415 Page 11
Opposing the Rule 56.2 Mot. of the Timken Co., ECF No. 53, 9–15 (“SKF Br.”). SKF notes that
the cases cited by Timken were all investigations, whereas this case involves a review. Id. at
10–11. SKF argues that to the extent that Commerce’s practice in investigations might be
relevant, three prior decisions6 do not reflect a well-established practice from which a departure
must be explained. Id. at 12–14. SKF additionally argues that because Commerce’s practice
with regard to targeted dumping was in a state of flux and Commerce had stated that it intended
to proceed on a case-by-case basis in this area, there could be no presumption of continuity. Id.
at 14–15.
Schaeffler claims that Timken’s arguments based on past practice fail to
recognize Commerce’s ability to adapt and change its practices and argues that the alleged
change here was a relatively minor evolution from previous cases. Resp. of Def.-Intervenor
Schaeffler Italia S.r.l. to Pl.’s Mem. in Supp. of Its Rule 56.2 Mot., ECF No. 54, 12–14
(“Schaeffler Br.”). NTN-SNR, citing OBAs from Taiwan, argues that Commerce’s decision is in
line with past practice. Resp. of NTN Bearing Corp. of Am., et al., to the Rule 56.2 Mots. of the
Timken Co., ECF No. 57, 13 (“NTN-SNR Br.”).7
6
The final determination in one of the four cases cited by Timken, Washers from Korea,
was published in the Federal Register approximately two weeks after Commerce’s final
determination in the challenged reviews. Compare Final Results, 77 Fed. Reg. at 73,415 (dated
December 10, 2012), with Notice of Final Determination of Sales at Less than Fair Value: Large
Residential Washers From the Republic of Korea, 77 Fed. Reg. 75,988 (Dep’t Commerce Dec.
26, 2012).
7
NTN-SNR also argues that the results ultimately should be affirmed because Commerce
lacked the authority to engage in the targeted dumping analysis at all. See NTN-SNR Br. 3–11.
NTN-SNR first argues that 19 U.S.C. § 1677f-1(d) limits the targeted dumping analysis to
investigations. Id. at 3–9. NTN-SNR claims that because the targeted dumping inquiry is
described only in the subsection entitled “Investigations” and is absent in the subsection entitled
(continued...)
Consol. Court No. 12-00415 Page 12
The court notes that Commerce’s inconsistency in its explanations has generated
quite a bit of confusion that is reflected in the briefing of this case. Much of the briefing in this
7
(...continued)
“Reviews,” Congress clearly intended for the targeted dumping analysis to be limited to
investigations. Id. NTN-SNR also argues that Commerce’s targeted dumping analysis was
based on improperly submitted information, in that Timken first filed targeted dumping
allegations in November 2011, several months before Commerce’s February 2012 Final
Modification announcing the change in default methodology for reviews. Id. at 9–11.
NTN-SNR requests that the court reverse Commerce’s determination that it may conduct a
targeted dumping analysis in a review and order that Timken’s targeted dumping allegations be
removed from the record. Id. at 15.
Even assuming that NTN-SNR may succeed on an argument contrary to that advanced by
the agency to support the outcome reflected in the Final Results, see SEC v. Chenery Corp., 318
U.S. 80, 87 (1943) (“The grounds upon which an administrative order must be judged are those
upon which the record discloses that its action was based.”), the court finds these arguments
unpersuasive. Turning to NTN-SNR’s first argument, 19 U.S.C. § 1677f-1(d)(2), the subsection
entitled “Reviews,” does nothing more than clarify how Commerce should proceed when it
decides to use the A-T methodology (namely, that it should use monthly averages).
Section 1677f-1(d)(2) is otherwise completely silent as to how Commerce should conduct its
determination of less than fair value in reviews, leaving Commerce substantial discretion as to
the methodologies it wishes to employ. See Union Steel v. United States, 823 F. Supp. 2d 1346,
1359–60 (CIT 2012), aff’d, 713 F.3d 1101 (Fed. Cir. 2013). NTN-SNR’s reliance on FAG Italia
S.p.A. v. United States, 291 F.3d 806 (Fed. Cir. 2002), is misplaced. In that case, the Court of
Appeals for the Federal Circuit (“Federal Circuit”) determined that 19 U.S.C. § 1675(a)(4),
which authorizes Commerce to make a duty absorption inquiry in the second and fourth
administrative reviews of orders entered after the Uruguay Round Agreements Act (URAA)
came into effect, did not authorize Commerce to make a similar determination in other years or
in reviews of orders entered before the URAA came into effect. Id. at 818–19. The Federal
Circuit stressed, however, that Commerce lacked a general authority to act that would have
authorized Commerce to engage in the disputed inquiry despite the limited scope of 19 U.S.C.
§ 1675(a)(4). Id. at 818 n.18. Commerce certainly has a general authority to conduct an
administrative review, and NTN-SNR has failed to put forward any limitation on that authority
except for its reference to § 1677f-1(d). As explained above, that section does nothing more than
clarify that the averaging period in reviews should be monthly. It places no other limits on the
methodologies that Commerce may employ in reviews, leaving Commerce discretion as to the
choice of methodologies.
In the light of this broad discretion, Commerce acted reasonably and did not abuse its
discretion by basing its practice in reviews on its practice in investigations, which includes the
use of the targeted dumping analysis. The court rejects NTN-SNR’s second argument because
Commerce ultimately based its analysis on Timken’s renewed targeting allegations, which were
submitted after Commerce had published its Final Modification. See I&D Memo at 15.
Consol. Court No. 12-00415 Page 13
case treated Commerce’s sufficiency determination as part of finding the requisite pattern in 19
U.S.C. § 1677f-1(d)(1)(B). This is understandable because Commerce made statements in the
record indicating that this was the basis for continuing to use the A-A methodology. See, e.g.,
Post-Preliminary Analysis for NTN-SNR at 2; I&D Memo at 10 (“We continue to find, for each
respondent, that a pattern of export prices (or constructed export prices) for comparable
merchandise that differ significantly among purchasers, regions, or time periods does not
exist . . . .”). Other parts of the record, however, indicate that Commerce found a pattern of
significant differences, but did not find the pattern sufficient to invoke its discretionary authority.
See, e.g., Post-Preliminary Results at 3 (“The Department preliminarily finds, for each
respondent, that the pattern of export prices (or constructed export prices) for comparable
merchandise that differ significantly among purchasers, regions, or time periods is insufficient to
consider whether the standard comparison method can account for the alleged targeted
dumping.”); I&D Memo at 13 (stating that Commerce determines that targeting has occurred
once sales have passed both prongs of the Nails test); id. at 14 (noting that § 1677f-1(d)(1)(B)’s
inclusion of the word “may” indicates that Commerce is not required to use the A-T
methodology even if both prongs of the Nails test are satisfied). The government clarified at oral
argument and in its supplemental briefing that the Nails test finds the requisite pattern and that
Commerce’s sufficiency determination was made pursuant to its discretionary authority granted
by the word “may” in § 1677f-1(d)(1)(B). See Def.’s Supplemental Filing Responding to the
Ct.’s Questions Regarding Targeted Dumping, ECF No. 81, 7 (“Government Supplemental
Br.”). Because the government’s position is rooted in statements made by Commerce on the
record, the court will treat the sufficiency determination as part of Commerce’s exercise of its
Consol. Court No. 12-00415 Page 14
discretionary authority based on the word “may.” See Ceramica Regiomontana, S.A. v. United
States, 810 F.2d 1137, 1139 (Fed. Cir. 1987) (“A court may uphold an agency’s decision of less
than ideal clarity if the agency’s path may reasonably be discerned.” (internal quotation marks
and brackets omitted)).
Treating the sufficiency determination in this case as rooted in Commerce’s
discretionary authority, the court finds little, if any, inconsistency with the cases cited by
Timken. First, the language cited by Timken from Wood Flooring from China appears to be
directed at the issue of whether the A-T methodology should be applied to all sales or only
targeted sales. See Wood Flooring from China at 32–33. Commerce’s reasoning for applying
the A-T remedy to all sales is distinct from the issue of whether Commerce should consider the
use of the A-T methodology at all.
The language in Nails from the UAE II likewise is not instructive as to how
Commerce should exercise its discretion. In that case, Commerce explained:
In calculating margins, pursuant to section 777A(d)(1)(B)(i) of the Act the
Department may use the A-T comparison methodology if “there is a pattern of export
prices . . . for comparable merchandise that differ significantly among purchasers,
regions, or periods of time.” This statutory language does not establish how a pattern
of prices should be measured in terms of the prevalence of underlying sales in
relation to all sales. Instead, the statute states that there must be a variance in export
prices among purchasers, regions, or periods of time, and that the variance must
exhibit a pattern. Thus, the task of finding a pattern involves determining the
frequency of low prices in a given group of sales, and not whether the sales in that
group were frequent in relation to all sales. . . .
Dubai Wire and Precision did not demonstrate why the prices for products
corresponding to a small percentage of overall sales cannot be found to exhibit a
pattern under the statute. We find that the methodology underlying our targeted
dumping test in identifying a pattern of prices pursuant to section 777A(d)(1)(B)(i)
of the Act is reasonable. As indicated correctly by interested parties, this
methodology has also withstood judicial scrutiny. Lastly, the targeted sales are not
likely to account for a significant portion of sales because, by definition, targeting
Consol. Court No. 12-00415 Page 15
is an act of selectively pursuing a specific market segment or product.
Nails from the UAE II at 14–15 (emphases added) (citation omitted). This language clearly
deals with whether the statutory definition of “pattern” has been met. As explained above,
however, Commerce found a pattern using the Nails test, but Commerce exercised its discretion
because the pattern was not sufficient to warrant considering or applying the A-T methodology.
The language from Nails from the UAE II does not address Commerce’s use of that discretion.
Similarly, the language in Steel Cylinders from China addresses the definition of
“pattern” as that term is used in 19 U.S.C. § 1677f-1(d)(1)(B). Steel Cylinders from China at 31
(“This statutory language does not establish how a pattern of prices should be measured in terms
of the prevalence of underlying sales in relation to all sales. Instead, the statute states that there
must be a pattern of prices that differ among purchasers, regions, or periods of time, and that the
difference must be significant. Thus, the task of finding a pattern under the Nails test involves
determining the frequency of low prices in a given group of sales, and not whether the sales in
that group were frequent in relation to all sales.” (emphases added)).
The language cited by Timken in Washers from Korea, which was published after
the Final Results in this case, is even less helpful to Timken. Again the language focused on by
Timken deals with the pattern requirement. See Washers from Korea at 22–23 (“As we stated in
UAE Nails II, the statutory language of section 777A(d)(1)(B)(i) of the Act does not establish
how a pattern of prices should be measured in terms of the prevalence of underlying sales in
relation to all sales. Instead, the statute states that there must be a variance in export prices
among purchasers, regions, or periods of time, and that the variance must exhibit a pattern.”
(emphasis added)). But Commerce also stated: “If we determined that a sufficient volume of
Consol. Court No. 12-00415 Page 16
U.S. sales were found to have passed the Nails test, then the Department considered whether the
average-to-average method could take into account the observed price differences.” Id. at 20.
Commerce further explained:
With respect to the respondents’ contention that the Department should apply a de
minimis threshold before invoking the average-to-transaction method, we note that
the Department has also addressed this argument in previous cases. As we discussed
above, we considered the volume of U.S. sales that passed the Nails test. However,
the Department does not employ a de minimis threshold but rather makes its
determination on a case-by-case basis.
Id. at 22 (citation omitted). These latter statements are entirely consistent with Commerce’s
methodology and analysis in this case.
Commerce also cited OBAs from Taiwan as a prior case in which it conducted an
additional test beyond the Nails test before considering the use of the A-T methodology. I&D
Memo at 14. In that case, Commerce determined that the number of sales that passed the Nails
test “was insufficient to establish a pattern of export prices for comparable merchandise that
differ significantly among certain customers or regions.” OBAs from Taiwan, 77 Fed. Reg. at
17,028. Although this is framed as part of the pattern inquiry and Commerce justifies its actions
in this case on the word “may,” OBAs from Taiwan lends support to Commerce’s assertion that
it previously had considered the number of sales that passed the Nails test before considering
whether the A-T methodology was appropriate.
The cases supposedly supporting Timken’s argument (Wood Flooring From
China, Nails from the UAE II, and Steel Cylinders from China) thus are mostly, if not entirely,
irrelevant to the issue in this case because they address different aspects of the targeted dumping
analysis. One case cited by Timken (Washers from Korea) even contains the same analysis that
Commerce engaged in during this case, and Commerce pointed to a case (OBAs from Taiwan) in
Consol. Court No. 12-00415 Page 17
which Commerce engaged in a similar analysis as part of the pattern inquiry. Based on these
cases, the court is unable to agree with Timken that Commerce’s actions were precluded by its
prior cases.
To the extent that some of the reasoning in the discussed cases might be construed
as inconsistent with Commerce’s actions in this case, the court finds such minor inconsistency
insufficient to conclude that Commerce abused the discretion granted to it in selecting an
alternative methodology. The statute used by Commerce for guidance in conducting a targeted
dumping analysis in reviews states that Commerce “may” use the A-T methodology if the
statutory criteria are met. 19 U.S.C. § 1677f-1(d)(1)(B). And Commerce stated in the Final
Modification that it would “determine on a case-by-case basis whether it is appropriate to use an
alternative comparison methodology” in reviews. 77 Fed. Reg. at 8102. “When making a
discretionary determination, . . . Commerce can use a case-by-case analysis, so long as it is
consistent with its statutory authority.” Qingdao Taifa Grp. Co. v. United States, 780 F. Supp.
2d 1342, 1350 (CIT 2011) (internal quotation marks omitted). Even if Commerce’s analysis
conflicts with its prior cases, “Commerce is not required to justify its determination in terms of
past alternatives,” as long as it acts reasonably. Id. Timken’s allegations that Commerce’s
application of the test was unreasonable will be addressed below, but the court holds that
Commerce’s prior practice did not preclude it from engaging in a sufficiency determination as
part of its exercise of discretionary authority.
II. Commerce’s Alleged Failure to Explain Its Application of the Sufficiency Test
Timken next argues that Commerce failed to explain the purpose of its additional
sufficiency test and failed to state and justify the amount of targeted sales it considers
Consol. Court No. 12-00415 Page 18
“sufficient.” Timken Br. 34–35. Because Commerce failed to provide this reasoning, Timken
argues that remand is necessary. See id. at 35.
The government explains that Commerce has discretion in deciding whether to
apply the A-T methodology even if targeting is found, that Commerce engaged in the challenged
additional step to determine whether the pattern found by the Nails test was sufficient to exercise
that discretion, and that Commerce has not established a de minimis threshold, but rather is
proceeding on a case-by-case basis in deciding when to exercise its discretion. Government Br.
11–14. The government additionally argues that Commerce’s sufficiency determination in this
case was reasonable because Commerce is not obligated to justify relying on the default
comparison methodology (i.e., the A-A methodology) and Commerce’s experience in conducting
the Nails test informed its judgment in making that determination. Id. at 17–18.
Schaeffler argues that Commerce enjoys broad discretion in determining whether
to apply the A-T methodology and that “[a]ny reasonable mind would accept that the minimal
number and value of Schaeffler’s qualifying sales supports Commerce’s conclusion that
Schaeffler had not engaged in a pattern of targeted dumping.” Schaeffler Br. 10–11. Schaeffler
also argues that this additional step is necessary because Commerce could otherwise impose the
“draconian remedy” of applying the A-T methodology with zeroing to all sales even though very
few sales passed the Nails test. Id. at 15. NTN-SNR and SKF urge that an additional inquiry is
needed to determine whether the amount of sales that pass the Nails test truly can be considered
a pattern. NTN-SNR Br. 12–14; SKF Br. 23–24. SKF additionally argues that Commerce
should be given wide discretion in defining “pattern” on a case-by-case basis and should not be
required to set a specific threshold. SKF Br. 24–25
Consol. Court No. 12-00415 Page 19
As explained above, Commerce is relying on the word “may” in the statute. With
this established, Commerce’s sufficiency determination easily can be understood as a
methodology by which Commerce decides whether to exercise that discretion. If a relatively
insignificant number of sales are identified as targeted, Commerce exercises its discretion and
continues to apply the A-A methodology. See I&D Memo at 13–14; Government Supplemental
Br. 7.8 The sufficiency test thus serves as a tool to guide Commerce’s exercise of its discretion
in choosing whether to depart from its normal practice of using the A-A methodology.
Regarding Timken’s argument that Commerce has failed to provide any
explanation regarding what amount of targeted sales it considers to be “sufficient,” the court has
reviewed the record and has concluded that Timken did not present its arguments to Commerce
8
As Schaeffler notes, the reasonableness of making a sufficiency determination would
appear to be buttressed by Commerce’s practice of applying the A-T methodology with zeroing
to all of the respondent’s sales, not just those that passed the Nails test. See, e.g., Wood Flooring
from China at 31. Before applying this “remedy” to all of the respondent’s U.S. sales, it would
appear reasonable for Commerce to consider whether the amount of targeted sales forming the
justification for applying that remedy represents a significant portion of the respondent’s U.S.
sales.
The court notes that a recent opinion of the court held that Commerce’s withdrawal of the
so-called “Limiting Rule,” 19 C.F.R. § 351.414(f)(2) (2007), which limited the A-T remedy in
investigations to only targeted sales, violated the Administrative Procedure Act, 5 U.S.C. § 553.
Gold E. Paper (Jiangsu) Co. v. United States, 918 F. Supp. 2d 1317, 1327–28 (CIT 2013). Thus,
until the amended regulation is renoticed, the A-T remedy likely should be limited to only those
sales that pass the Nails test, at least in investigations. The court observes, however, that
Commerce has continued to apply the A-T methodology with zeroing to all sales in
administrative reviews even after Gold East Paper, relying in part on the fact that 19 C.F.R.
§ 351.414(f) referenced only investigations. See, e.g., Issues and Decision Memorandum for the
Final Results of the Antidumping Duty Administrative Review of Stainless Steel Plate in Coils
from Belgium; 2011–2012, A-423-808, at 3 (Dec. 23, 2013), available at
http://enforcement.trade.gov/frn/summary/belgium/2013-31345-1.pdf. Should the Limiting Rule
be applied to reviews, Schaeffler’s arguments regarding the “draconian remedy” of applying the
A-T methodology with zeroing to all sales would be rendered moot. In any case, the sufficiency
test is justified as a tool in guiding Commerce’s discretionary authority based on the record now
before the court.
Consol. Court No. 12-00415 Page 20
in a manner that compelled Commerce to define a level of sufficiency with specificity. In its
post-preliminary results, Commerce made specific findings regarding the percentage of sales by
value and by volume that passed the Nails test. See Post-Preliminary Analysis for NTN-SNR at
2; Post-Preliminary Analysis for myonic at 2; Post-Preliminary Analysis for Schaeffler at 2;
Post-Preliminary Analysis for SKF at 2. The court notes that by either measure, the percentages
of sales found to be targeted were very small. See Timken Co.’s Mem. in Supp. of its Rule 56.2
Mot. for J. on the Agency R., ECF No. 44, 33, 40 (confidential version). In its comments to
Commerce following the post-preliminary results, Timken challenged Commerce’s decision to
engage in this additional inquiry, but Timken did not argue that the percentages found should be
considered sufficient, nor did Timken argue that Commerce erred by failing to set and justify a
specific sufficiency threshold. See Timken’s Post-Preliminary Comments for NTN-SNR;
Timken’s Comments on Commerce’s Targeting Analysis for Schaeffler and SKF, A-475-801,
PD 162 at bar code 3104350-01 (Nov. 5, 2012), ECF No. 47-3 (June 14, 2013) (“Timken’s Post-
Preliminary Comments for Schaeffler and SKF”); Timken’s Comments on Commerce’s
Targeting Analysis for myonic GmbH, A-428-801, CD 39 at bar code 3104315-01 (Nov. 5,
2012), ECF No. 48 (June 14, 2013) (“Timken’s Post-Preliminary Comments for myonic”).
Because Commerce was never presented with (and consequently did not consider) arguments
asking it to specify and justify a sufficiency threshold, because Timken never argued that the
specific percentages found should be considered sufficient, and because the percentages were
small, this argument fails.
III. Comparison of Sales that Passed the Nails Test to All U.S. Sales
Finally, Timken argues that the use of the sales that passed the Nails test as the
Consol. Court No. 12-00415 Page 21
numerator and all U.S. sales as the denominator in the “ratio” Commerce used in its sufficiency
determination is illogical. Timken Br. 36–41. First, Timken argues that because the Nails test
considers only products sold to an alleged target that are identical to products sold to a non-
target, the numerator and denominator used in this case were inconsistent. Id. at 37–38. Timken
reasons that products that are sold to only the targeted customer cannot be considered in
Commerce’s application of the Nails test (because there are no non-targeted sales of the same
product to compare the prices with), and a numerator drawn from only identical sales is
inconsistent with a denominator that includes all sales. Id. Next, Timken argues that the Nails
test finds only evidence of targeted dumping but does not find all targeted sales. See id. at
38–40. According to Timken, because the Nails test does not identify all targeted sales, using
the results of the Nails test to determine the extent of targeted dumping is unreasonable. Id.Timken suggests that a more reasonable comparison would be to treat all sales to the targeted
groups identified by the Nails test as targeted sales, and compare that number to total U.S. sales.
Id. at 40.
The government recognizes that the Nails test is limited to comparing sales of
identical merchandise, but it argues that Timken has not explained how using comparable
merchandise when conducting the Nails test would be feasible or preferable to using identical
merchandise. Government Br. 20–21. The government counters Timken’s arguments that the
Nails test fails to find all targeted sales by noting that Timken has cited to nothing in the record
showing that the Nails test is ill-suited to evaluating the pricing patterns in this case. Id. at 21.
Commerce rejected Timken’s suggestion that all sales to the targeted groups be included in the
numerator by explaining that only those sales that passed the Nails test rightfully can be
Consol. Court No. 12-00415 Page 22
considered “targeted.” I&D Memo at 14. SKF characterizes and criticizes Timken’s argument
as an attack on the ability of the Nails test to identify all targeted sales. See SKF Br. 26–30.
The court rejects Timken’s claims of inconsistency between the numerator and
denominator based upon the Nails test’s use of only identical merchandise, because Timken has
failed to show that this inconsistency actually exists on this record to such an extent that
Commerce’s use of the ratio was unreasonable. The court notes that Timken’s arguments
regarding the ratio before Commerce never addressed the possibility that the use of only
identical sales in the numerator of the ratio while including all sales in the denominator could
create a material inconsistency affecting Commerce’s interpretation of the data. See Timken’s
Post-Preliminary Comments for NTN-SNR; Timken’s Post-Preliminary Comments for
Schaeffler and SKF; Timken’s Post-Preliminary Comments for myonic. Before the court,
Timken never referenced any record evidence suggesting that Commerce’s use of this ratio
would be unreasonable in these particular reviews because of this alleged discrepancy until its
response to the government’s and defendant-intervenors’ supplemental briefs following oral
argument. See Resp. to Def.’s and Def.-Intervenors’ Supplemental Brs., ECF No. 86, 4 n.8.
Even this late evidence was quite meager, as it was dropped in a footnote and discussed the
potential distortion for only one of the four respondents. See id. Thus, Timken has failed to
challenge Commerce’s determination with anything more than hypotheticals, and the court will
not disturb Commerce’s determination on that basis. See Borden, Inc. v. United States, 23 CIT
372, 379 (1999), rev’d on other grounds, 7 F. App’x 938 (Fed. Cir. 2001).
Timken’s argument that the Nails test fails to find all targeted sales and thus its
results should not be used to determine the extent of targeting, however, was presented to
Consol. Court No. 12-00415 Page 23
Commerce. The court nevertheless finds this argument unavailing.
Timken argues that the Nails test is useful only as a tool to identify whether
targeting occurred, not as a tool for identifying targeted sales. See Timken Br. 40. There is
nothing in the antidumping statute, however, defining a “targeted sale.” Commerce uses the
Nails test to find a “pattern of export prices (or constructed export prices) for comparable
merchandise that differ significantly among purchasers, regions, or periods of time” pursuant to
19 U.S.C. § 1677f-1(d)(1)(B)(i). See I&D Memo at 12–13. Commerce’s use of the Nails test to
define that pattern has been affirmed by the court as a reasonable interpretation of the statute.
Mid Continent Nail Corp. v. United States, 712 F. Supp. 2d 1370, 1378–79 (CIT 2010) (“Mid
Continent Nail”). Commerce treats only those sales that pass both prongs of the Nails test as
forming the “pattern of export prices (or constructed export prices) for comparable merchandise
that differ significantly among purchasers, regions, or periods of time,” and consequently
considers only those sales to be “targeted.” I&D Memo at 14. Thus, Timken’s arguments
regarding the ability of the Nails test to uncover all targeted sales ultimately amount to an attack
on the Nails test itself. The court previously upheld the Nails test as a reasonable interpretation
of the statute in Mid Continent Nail in the face of challenges similar to those advanced by
Timken and sees no reason to depart from that decision now. See 712 F. Supp. 2d at 1378–79
(rejecting claims that “Commerce’s use of thirty-three percent in its ‘pattern’ definition and five
percent in its ‘differ significantly’ definition are seemingly random values with no meaning” that
“cause the nails test to overlook obvious targeting”).
Because the Nails test defines what is a “targeted” sale, Commerce reasonably
rejected Timken’s suggestion that all sales to the targeted group(s) be included in the numerator.
Consol. Court No. 12-00415 Page 24
The sales that did not pass the Nails test are by definition not part of the pattern identified
pursuant to 19 U.S.C. § 1677f-1(d)(1)(B)(i). I&D Memo at 14. In determining whether the
identified pattern is sufficient to warrant consideration of the A-T methodology, it would make
little sense for Commerce to include sales that did not form part of that pattern in the numerator
of the ratio. Commerce’s decision to use only those sales that passed the Nails test as the
numerator thus was reasonable and in accordance with law.
CONCLUSION
For the foregoing reasons, Commerce’s Final Results are SUSTAINED.
Judgment will issue accordingly.
/s/ Jane A. Restani
Jane A. Restani
Judge
Dated: February 27, 2014
New York, New York