Appeal from the United States Court of International Trade in case no. 07-CV-0393, Judge Timothy C. Stanceu.
The opinion of the court was delivered by: Dyk, Circuit Judge.
Before GAJARSA, LINN, and DYK, Circuit Judges.
Opinion for the court filed by Circuit Judge DYK.
Opinion Concurring in Part and Dissenting in Part filed by Circuit Judge LINN.
Plaintiffs SKF USA Inc., SKF France S.A., SKF Aerospace France S.A.S., SKF GMBH, and SKF Industrie S.p.A. (collectively "SKF" or "plaintiffs") appeal a decision of the Court of International Trade ("Trade Court"). That decision affirmed the final determination of the United States Department of Commerce ("Commerce") in its seventeenth administrative review of antidumping duty orders on ball bearings and parts thereof from France, Germany, Italy, Japan, Singapore, and the United Kingdom. We conclude that Commerce had the statutory authority to use an unaffiliated supplier's actual costs of production in calculating constructed value ("CV"), but we hold that Commerce failed to adequately explain its decision to change its methodology for calculating SKF's CV. We also hold that Commerce had the statutory authority to utilize zeroing. Accordingly, we affirm in part and vacate and remand in part.
SKF GmbH, an SKF company located in Germany, produces and sells ball bearings and also purchases some finished bearings from an unaffiliated German competitor to complement its product line. SKF exports some of these products to the United States. SKF, along with other bearing exporters, is subject to an antidumping duty order issued by Commerce with respect to sales of ball bearings from Germany, among other countries. The original antidumping order was entered in 1989. Thereafter, Commerce has conducted administrative reviews. "Recognizing that prices and costs change over the course of time, Congress provided that Commerce shall conduct an annual administrative review 'if a request for such a review [is] received.'" Dofasco Inc. v. United States, 390 F.3d 1370, 1372 (Fed. Cir. 2004). During an administrative review, Commerce determines a new dumping margin. See 19 U.S.C. 1675(a)(2)(A).
Dumping occurs when the price at which imported merchandise is sold in the United States is less than the merchandise's "normal value"-i.e. fair value in the home market. See 19 U.S.C. §§1673, 1677b(a). When Commerce cannot determine "normal value" based on actual sales of the subject merchandise in its home market, the statute provides for calculation of CV as a proxy for the sale price in the home market. Id. § 1677b(a)(4). One component used in calculating CV is "the cost of materials and fabrication or other processing of any kind employed in producing the merchandise." Id. § 1677b(e)(1).
During its original investigation and the next sixteen administrative reviews of ball bearing antidumping orders, Commerce used SKF's acquisition costs in calculating the CV of subject ball bearings SKF sold in the United States but obtained from its unaffiliated supplier. During the fifteenth administrative review, the petitioner, Timken US Corporation ("Timken"), apprised Commerce that some respondents had acquired finished bearings from unaffiliated suppliers and resold them in the United States. Commerce noted that "[g]iven the statutory emphasis on the use of actual costs of production in calculating COP and CV, it may be appropriate" to require actual cost data. J.A. 2003. However, Commerce deferred implementation of this change, reasoning that the review was at too late a stage to require acquisition of cost data from unaffiliated suppliers. Id. at 2004--05. In the future, Commerce suggested that it might "require the respondents to report COP and CV information for purchases from their unaffiliated suppliers where facts . . . reflect the facts in other proceedings . . . in which we have required the COP and CV information from unaffiliated suppliers." Id. at 2005.
During the seventeenth review, Commerce for the first time required respondents to produce actual COP and CV data from their unaffiliated suppliers when a "substantial proportion" of the respondent's sales were "sales of merchandise produced by unaffiliated suppliers." J.A. 5002--03. SKF and four other respondents fell into this category.*fn1 SKF's unaffiliated supplier was also an exporter and, therefore, a competitor that was also subject to the antidumping order. When SKF was unable to obtain the data, Commerce acquired the data directly from the unaffiliated supplier. Commerce did not require other respondents to report actual cost data because "the relative insignificance of sales of merchandise purchased from unaffiliated suppliers" meant it was unlikely that using the suppliers' actual data "will have a significant impact on [the] margin calculations." J.A. 5002.
Commerce proposed to use these cost data in calculating CV. SKF and other respondents objected to Commerce's proposed use of this actual cost data in calculating CV. Presumably, SKF objected because it worried that using the unaffiliated supplier's actual cost data would yield a higher COP and CV than its acquisition costs, leading to a higher dumping margin. SKF argued, inter alia, that: 1) the statute did not permit Commerce to use the actual cost data from unaffiliated suppliers; 2) Commerce did not adequately explain its change in methodology; and 3) use of unaffiliated supplier data violated due process because SKF could not compel its supplier to cooperate and because SKF could not have access to the data for use in the proceedings. Also, SKF could not "knowingly price" in the United States to avoid dumping because it would not know its supplier's actual costs.
Commerce issued its final determination using the unaffiliated supplier's actual production costs to calculate CV. In the Issues and Decision Memorandum, Commerce responded to some of SKF's arguments. It explained that the statutory scheme provided for calculating COP and CV "on the basis of actual production costs." Issues and Decision Memorandum for the Antidumping Duty Administrative Reviews of Ball Bearings and Parts Thereof from France, Germany, Italy, Japan, Singapore, and the United Kingdom for the Period of Review May 1, 2005, through April 30, 2006, at 47 (October 1, 2007) ("Decision Mem."), available at http://ia.ita.doc.gov/frn/summary/multiple/e7-20151-1.pdf. It also warned that "[i]f acquisition costs do not capture all of the actual costs of the manufacturer supplying the bearings to the reseller, they are not an appropriate basis for the calculation of CV and . . . the use of such acquisition costs would distort the reseller's dumping margin due to the missing elements of cost." Id. at 48. Moreover, it claimed Commerce "has had a longstanding practice of using the actual production costs of unaffiliated suppliers in lieu of the exporter's acquisition costs to calculate COP and CV" and is "moving towards consistency throughout its cases." Id. at 48--49 (citing Honey from Argentina, 66 Fed. Reg. 50611 (Dep't of Commerce Oct. 4, 2001) (final determination); Elemental Sulphur from Canada, 61 Fed. Reg. 8239, 8251 (Dep't of Commerce Mar. 4, 1996) (final administrative review); Fresh and Chilled Atlantic Salmon from Norway, 56 Fed. Reg. 7661, 7665 (Dep't of Commerce Feb. 25, 1991) (final determination)).
Responding to SKF's contention that it could not access the unaffiliated supplier data, Commerce explained that SKF's counsel could have access to the data under an Administrative Protective Order ("APO"). Commerce did not, however, respond to SKF's concern that it could not "knowingly price" its products to avoid dumping. Nor did it address SKF's concern that it could not compel its unaffiliated supplier to provide the data. In fact, Commerce stated that it might apply an adverse inference if the producer did not provide the data (though in this instance the supplier had provided the data). Decision Mem. at 48.
In the final decision, Commerce also continued to utilize zeroing to calculate dumping margins. Zeroing refers to a practice under which, when the export price is higher than the normal value of the subject merchandise, Commerce assigns it a value of zero rather than a negative value in calculating the average dumping margin. See SKF USA Inc. v. United States, 659 F. Supp. 2d 1338, 1346 (Ct. Int'l Trade 2009).
SKF sought review in the Trade Court, and that court affirmed.*fn2 The Trade Court agreed that the statute allowed Commerce to use unaffiliated supplier cost information. The Trade Court also found Commerce provided a reasonable explanation for methodology change. It dismissed SKF's due process concerns because SKF's counsel could review the unaffiliated supplier's data. It did not, however, address SKF's concerns about adverse inferences and its inability to price its products to avoid dumping. Finally, the Trade Court held ...