Koyo Seiko Company, Ltd., and Koyo Corporation of U.S.A v. The United States and Department of Commerce, and the Torrington Company and Federal-Mogul Corporation

Citations: 92 F.3d 1162; 18 I.T.R.D. (BNA) 1485; 1996 U.S. App. LEXIS 20199Docket: 96-1116

Court: Court of Appeals for the Federal Circuit; August 12, 1996; Federal Appellate Court

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Koyo Seiko Co. Ltd. and Koyo Corporation of U.S.A. appeal aspects of the Court of International Trade's judgment, which upheld the Department of Commerce's second administrative review of an antidumping duty order on certain antifriction roller bearings from Japan. The court affirmed Commerce's use of the "best information available" (BIA) rule for calculating the dumping margin for a specific class of bearings. However, it reversed the treatment of the doubtful debt reserve, indicating that it was improperly handled differently in calculating home market versus U.S. selling expenses.

Under antidumping law, when Commerce finds that foreign merchandise is sold at less than fair value in the U.S., and the International Trade Commission identifies material injury to a U.S. industry, an antidumping duty order is published, requiring duties equal to the price difference. The appeal concerns the administrative review of antidumping duties for certain antifriction roller bearings initiated in 1989 and the specific findings from the second review in 1992. The Court of International Trade is required to uphold Commerce's determinations unless they lack substantial evidence or are contrary to law.

'Substantial evidence' refers to relevant evidence that a reasonable mind could accept as adequate to support a conclusion, as established in case law. The Court of International Trade's decisions are reviewed under a statutory standard to determine if the Commerce Department's findings are supported by evidence and compliant with the law. Koyo claims that Commerce unlawfully applied its Best Information Available (BIA) rule when calculating the dumping margin for a specific model of antifriction bearings. The BIA rule, permitted under 19 U.S.C. 1677e(c), is applicable when a party fails to provide requested information in a timely manner. The burden of production lies with the importer, and secondary evidence can only be used if the relevant information was properly requested.

Koyo contends that Commerce did not request cost data for the bearings in question, citing conflicting instructions and extensive correspondence. However, it is indicated that Commerce did request cost data for all bearings subject to the antidumping duty order. Koyo acknowledged the complexity of its situation and the difficulty in obtaining necessary resale information. Despite Koyo's argument that it was not asked for specific data, substantial evidence supports Commerce's finding that the data was requested. When Koyo failed to provide the requested information, Commerce was obligated to use the best information available.

Koyo further argues that even if Commerce's request was valid, it improperly applied the BIA rule, particularly the 'Roller Chain rule,' which allows for a de minimis exception to antidumping duties. This rule asserts that such duties should only be assessed when significant amounts of imported merchandise are used in further manufacturing before sale. For antidumping duties to apply, the imported merchandise must represent a significant portion of the sales value of the finished products, aligning with congressional intent.

The Roller Chain rule pertains to imported goods that are incorporated into finished products in the U.S. and not resold in their original state. For these goods to be excluded from antidumping duties, their value must be insignificant—specifically, below a one percent threshold of the finished product's value when sold to unrelated customers. This threshold was established by Commerce in prior rulings, which showed deference to Commerce's interpretation of the statutory framework. The bearings in question exceed this one percent threshold, and Commerce did not abuse its discretion in its enforcement.

Koyo contends that Commerce misapplied the statutory definition of "exporter" by requiring cost data from a U.S. affiliate, arguing the relationship is too distant for Koyo to obtain such data. However, Commerce's definition encompasses entities with significant ownership or control, which Koyo's affiliate met. Koyo is deemed responsible for supplying the necessary data, as the manufacturer of the finished product is best positioned to provide it. When Koyo failed to provide this data, Commerce invoked the Best Information Available (BIA) rule, applying a 73.55% dumping margin based on the highest margin from related investigations.

Koyo argues that this margin was excessively punitive, especially since a lower margin was calculated during the review. Commerce’s two-tier methodology differentiates between uncooperative importers and those who cooperate but fail to provide required information. The highest margin is applied to uncooperative parties, while a lower margin is used for cooperating parties.

The second-tier rate for antidumping duties is defined as the greater of the LTFV rate or the highest calculated dumping margin for the same merchandise. In this case, Commerce set the second-tier rate at 73.55% for Koyo, as Koyo's LTFV rate surpassed the calculated dumping margin, despite its cooperation with the agency. This two-tier approach is recognized as a valid exercise of the ITA's authority to utilize the best available information when respondents do not provide requested data. The Court of International Trade upheld Commerce’s application of this rate.

Regarding Koyo's challenge to the exclusion of its doubtful debt reserve from home market indirect selling expenses, Commerce maintained that the reserve was not actual bad debt but merely an accounting reserve. Koyo argued that if the reserve was excluded from home market expenses, it should also be excluded from U.S. calculations to ensure a fair comparison of prices. The Court noted that Koyo raised these objections adequately during the administrative process. The government contended Koyo did not sufficiently present these arguments, but the records showed Koyo's objections were clearly articulated.

Commerce holds the responsibility to ensure fair value comparisons, and it improperly adjusted the accounting rules for home market expenses without making corresponding adjustments in U.S. calculations. The agency had previously acknowledged the need for consistent treatment of doubtful debt reserves across both markets. The Court reversed the disparate treatment of Koyo's doubtful debt reserve, emphasizing that both reserves should be treated equally in calculations. The decision was affirmed in part, reversed in part, and remanded for further proceedings. The document also notes that amendments to the antidumping law effective January 1, 1995, do not apply to reviews initiated prior to that date.