                        Slip Op. 00-105

          UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
____________________________________
                                     :
SKF USA INC., SKF FRANCE S.A.        :
and SARMA,                           :
                                     :
          Plaintiffs,                :
                                     :
          v.                         :    Court No. 99-08-00475
                                     :
UNITED STATES,                       :
                                     :
          Defendant,                 :
                                     :
THE TORRINGTON COMPANY,              :
                                     :
          Defendant-Intervenor.      :
____________________________________:

     Plaintiffs, SKF USA Inc., SKF France S.A. and Sarma
(collectively “SKF”), move pursuant to USCIT R. 56.2 for
judgment upon the agency record challenging various aspects of
the United States Department of Commerce, International Trade
Administration’s (“Commerce”) final determination, entitled
Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, Germany, Italy, Japan, Romania,
Sweden, and the United Kingdom; Final Results of Antidumping
Duty Administrative Reviews, 64 Fed. Reg. 35,590 (July 1, 1999).
Specifically, SKF contends that Commerce unlawfully: (1)
conducted a duty absorption inquiry under 19 U.S.C. § 1675(a)(4)
(1994) for the subject reviews of the applicable antidumping
duty orders; (2) determined that it applied a reasonable duty
absorption methodology and that duty absorption had occurred;
(3) excluded below-cost sales from the profit calculation for
constructed value under 19 U.S.C. § 1677b(e)(2) (1994); and (4)
valued SKF’s major inputs under 19 U.S.C. §§ 1677b(f)(2)-(3),
1677e(a), 1677m(d) (1994).

     Held:  SKF’s USCIT R. 56.2 motion is denied in part and
granted in part. The case is remanded to Commerce to annul all
findings and conclusions made pursuant to the duty absorption
inquiry conducted for the subject reviews.
Court No. 99-08-00475                                               Page 2


[SKF’s motion is denied in part and granted in part. Case
remanded.]

                                              Dated: August 23, 2000

     Steptoe & Johnson LLP (Herbert C. Shelley and              Alice A.
Kipel) for plaintiffs.

     David W. Ogden, Assistant Attorney General; David M. Cohen,
Director, Commercial Litigation Branch, Civil Division, United
States Department of Justice (Velta A. Melnbrencis, Assistant
Director); of counsel: Patrick V. Gallagher and David R. Mason,
Office of the Chief Counsel for Import Administration, United
States Department of Commerce, for defendant.

     Stewart and Stewart (Terence P. Stewart, Wesley K. Caine,
Geert De Prest and Lane S. Hurewitz) for defendant-intervenor.



                                 OPINION

    TSOUCALAS, Senior Judge:          Plaintiffs, SKF USA Inc., SKF

France S.A. and Sarma (collectively “SKF”), move pursuant to

USCIT R. 56.2 for judgment upon the agency record challenging

various aspects of the United States Department of Commerce,

International     Trade      Administration’s     (“Commerce”)      final

determination,    entitled     Antifriction     Bearings   (Other    Than

Tapered Roller Bearings) and Parts Thereof From France, Germany,

Italy, Japan, Romania, Sweden, and the United Kingdom; Final

Results   of   Antidumping    Duty   Administrative   Reviews    (“Final

Results”), 64 Fed. Reg. 35,590 (July 1, 1999).
Court No. 99-08-00475                                              Page 3


                             BACKGROUND

    This case concerns the ninth administrative review of the

outstanding   1989    antidumping    duty   orders      on   antifriction

bearings (other than tapered roller bearings) and parts thereof

(“AFBs”) imported from France for the period of review (“POR”)

covering May 1, 1997 through April 30, 1998.         See Final Results,

64 Fed. Reg. at 35,590; Antidumping Duty Orders: Ball Bearings,

Cylindrical Roller Bearings, Spherical Plain Bearings, and Parts

Thereof From France, 54 Fed. Reg. 20,902 (May 15, 1989).               In

accordance with 19 C.F.R. § 351.213 (1998), Commerce initiated

the administrative reviews of these orders on June 29, 1998, see

Initiation of Antidumping and Countervailing Duty Administrative

Reviews and Request for Revocation in Part, 63 Fed. Reg. 35,188,

and published the preliminary results of the subject reviews on

February 23, 1999, see Antifriction Bearings (Other Than Tapered

Roller Bearings) and Parts Thereof From France, Germany, Italy,

Japan,   Romania,    Singapore,   Sweden,   and   the   United   Kingdom;

Preliminary Results of Antidumping Duty Administrative Reviews

and Partial Rescission of Administrative Reviews (“Preliminary

Results”), 64 Fed. Reg. 8790.         Commerce published the        Final

Results on July 1, 1999.     See 64 Fed. Reg. at 35,590.
Court No. 99-08-00475                                                   Page 4


      Since the administrative reviews at issue were initiated

after December 31, 1994, the applicable law in this case is the

antidumping statute as amended by the Uruguay Round Agreements

Act   (“URAA”),   Pub.   L.    No.    103-465,     108   Stat.   4809   (1994)

(effective Jan. 1, 1995).



                               JURISDICTION

      The Court has jurisdiction over this matter pursuant to 19

U.S.C. § 1516a(a) (1994) and 28 U.S.C. § 1581(c) (1994).



                          STANDARD OF REVIEW

      In reviewing a challenge to Commerce’s final determination

in an antidumping administrative review, the Court will uphold

Commerce’s    determination          unless   it    is    “unsupported        by

substantial   evidence    on    the     record,     or   otherwise      not   in

accordance with law.”     19 U.S.C. § 1516a(b)(1)(B)(i) (1994); see

NTN Bearing Corp. of America v. United States, 24 CIT ___, ___,

104 F. Supp. 2d 110, 115-16 (2000) (detailing Court’s standard

of review for antidumping proceedings).
Court No. 99-08-00475                                                    Page 5


                                   DISCUSSION

I.   Duty Absorption Inquiry

     A. Background

     Title 19, United States Code, § 1675(a)(4) (1994) provides

that during an administrative review initiated two or four years

after the “publication” of an antidumping duty order, Commerce,

if requested by a domestic interested party, “shall determine

whether antidumping duties have been absorbed by a foreign

producer   or   exporter     subject    to   the    order    if   the   subject

merchandise is sold in the United States through an importer who

is affiliated with such foreign producer or exporter.”                  Section

1675(a)(4)   further       provides   that   Commerce    shall     notify   the

International Trade Commission (“ITC”) of its findings regarding

such duty absorption for the ITC to consider in conducting a

five-year (“sunset”) review under 19 U.S.C. § 1675(c), and the

ITC will take such findings into account in determining whether

material injury is likely to continue or recur if an order were

revoked under § 1675(c).       See 19 U.S.C. § 1675a(a)(1)(D) (1994).


     On May 29, 1998 and July 29, 1998, Torrington requested that

Commerce   conduct     a    duty    absorption     inquiry   pursuant     to   §

1675(a)(4) with respect to various respondents, including SKF,

to ascertain whether antidumping duties had been absorbed during
Court No. 99-08-00475                                                 Page 6


the ninth POR.      See Final Results, 64 Fed. Reg. at 35,600.


      In    the   Final   Results,     Commerce   determined     that   duty

absorption had in fact occurred for the ninth review.                See id.

at 35,591, 35,600-02.        In asserting authority to conduct a duty

absorption inquiry under § 1675(a)(4), Commerce first explained

that for “transition orders” as defined in § 1675(c)(6)(C) (that

is,   antidumping    duty    orders,   inter   alia,    deemed     issued   on

January 1, 1995), regulation 19 C.F.R. § 351.213(j) provides

that Commerce will make a duty absorption inquiry, if requested,

for any antidumping administrative review initiated in 1996 or

1998.      Commerce concluded that (1) because the antidumping duty

orders on the AFBs in this case have been in effect since 1989,

the orders are transition orders pursuant to § 1675(c)(6)(C),

and (2) since this review was initiated in 1998 and a request

was made, it had the authority to make a duty absorption inquiry

for the ninth POR.        See id.



      B.     Contentions of the Parties

      SKF    contends     that   Commerce   lacked     authority    under    §

1675(a)(4) to conduct a duty absorption inquiry for the ninth

POR of the outstanding 1989 antidumping duty orders.               See SKF’s

Br. Supp. Mot. J. Agency R. at 2, 16-23 (“SKF’s Br.”); SKF’s
Court No. 99-08-00475                                              Page 7


Reply Br. at 2-30.    In the alternative, SKF asserts that even if

Commerce possessed the authority to conduct such an inquiry,

Commerce’s     methodology   for   determining    duty   absorption    was

contrary to law and, accordingly, the case should be remanded to

Commerce to reconsider its methodology.          See SKF’s Br. at 3, 23-

44; SKF’s Reply Br. at 30-42.


    Commerce argues that it: (1) properly construed subsections

(a)(4) and (c) of § 1675 as authorizing it to make a duty

absorption inquiry for antidumping duty orders that were issued

and published prior to January 1, 1995; and (2) devised and

applied    a    reasonable    methodology    for     determining      duty

absorption.     See Def.’s Mem. in Opp’n to Pls.’ Mot. J. Agency R.

at 2, 5-28 (“Def’s Br.”).          Also, Commerce asserts that no

statutory provision or legislative history specifically provides

that Commerce is “precluded” from conducting a duty absorption

inquiry with respect to merchandise covered by a transition

order.    See id. at 2, 16.


    The Torrington Company (“Torrington”) generally agrees with

Commerce’s contentions.      See Torrington’s Resp. to Pls.’ Mot. J.

Agency R. at 2-4, 8-43 (“Torrington’s Resp.”).             In addition,

Torrington asserts that Commerce has the “inherent” authority,
Court No. 99-08-00475                                                Page 8


aside from § 1675(a)(4), to conduct a duty absorption inquiry in

any administrative review.         See id. at 3, 32-40.



       C.    Analysis

       In SKF USA Inc. v. United States, 24 CIT __, 94 F. Supp. 2d

1351     (2000),   this    Court   determined    that     Commerce   lacked

statutory      authority   under   §   1675(a)(4)    to   conduct    a    duty

absorption inquiry for antidumping duty orders issued prior to

the January 1, 1995 effective date of the URAA.             See id. at __,

94 F. Supp. 2d at 1357-59.             The Court noted that Congress

expressly prescribed in the URAA that § 1675(a)(4) “must be

applied prospectively on or after January 1, 1995 for 19 U.S.C.

§ 1675 reviews.”        Id. at 1359 (citing URAA’s § 291).


       Because Commerce’s duty absorption inquiry, its methodology

and the parties’ arguments at issue in this case are practically

identical to those presented in SKF USA, the Court adheres to

its reasoning in SKF USA.          Moreover, contrary to Torrington’s

assertion, the Court finds that Commerce does not have the

“inherent” authority to conduct a duty absorption inquiry in any

administrative review.       Rather,   the statutory scheme, as noted,

clearly provides that the inquiry must occur in the second or

fourth      administrative   review    after   the   publication     of   the
Court No. 99-08-00475                                                Page 9


antidumping duty order, not in any other review, and upon the

request of a domestic interested party.            Accordingly, the Court

finds that Commerce did not have statutory or inherent authority

to undertake a duty absorption investigation for the outstanding

1989 antidumping duty orders in dispute here.



II.   Profit Calculation for Constructed Value

      A.    Background

      For this POR, Commerce used constructed value (“CV”) as the

basis for normal value (“NV”) “when there were no usable sales

of    the   foreign   like   product   in    the    comparison     market.”

Preliminary Results, 64 Fed. Reg. at 8795.           Commerce calculated

the profit component of CV using the statutorily preferred

methodology of 19 U.S.C. § 1677b(e)(2)(A) (1994).                See Final

Results, 64 Fed. Reg. at 35,611.        Specifically, in calculating

CV, the statutorily preferred method is to calculate an amount

for profit based on “the actual amounts incurred and realized by

the   specific   exporter    or   producer    being     examined    in   the

investigation or review . . . in connection with the production

and sale of a foreign like product [made] in the ordinary course

of trade, for consumption in the foreign country.”            19 U.S.C. §

1677b(e)(2)(A).
Court No. 99-08-00475                                               Page 10



    In applying the preferred methodology for calculating CV

profit, Commerce determined that “an aggregate calculation that

encompasses all foreign like products under consideration for

normal    value   represents    a    reasonable   interpretation      of   [§

1677b(e)(2)(A)]” and “the use of [such] aggregate data results

in a reasonable and practical measure of profit that [Commerce]

can apply consistently where there are sales of the foreign like

product in the ordinary course of trade.”                 Id.   Also, in

calculating CV profit under § 1677b(e)(2)(A), Commerce excluded

below-cost sales from the calculation which it disregarded in

the determination of NV pursuant to 19 U.S.C. § 1677b(b)(1)

(1994).    See id. at 35,612.



    B.     Contentions of the Parties

    SKF     contends   that     Commerce’s    use    of   aggregate    data

encompassing all foreign like products under consideration for

NV in calculating CV profit is contrary to § 1677b(e)(2)(A).

See SKF’s Br. at 44-67.             Instead, SKF claims that Commerce

should    have    relied   on   the    alternative    methodology     of    §

1677b(e)(2)(B)(i), which provides a CV profit calculation that

is similar to the one Commerce used, but does not limit the

calculation to sales made in the ordinary course of trade, that
Court No. 99-08-00475                                                   Page 11


is, below-cost sales are not excluded from the calculation.                 See

id. at 3, 44-63.       SKF also asserts that if Commerce’s exclusion

of   below-cost   sales    from    the      numerator   of   the   CV   profit

calculation is lawful, Commerce should nonetheless include such

sales in the denominator of the calculation to temper bias which

is inherent in the agency’s dumping margin calculations.                    See

id. at 4, 63-67.


     Commerce responds that it properly calculated CV profit

pursuant to § 1677b(e)(2)(A) based on aggregate profit data of

all foreign like products under consideration for NV.                       See

Def.’s Br. at 2-3, 28-51.        Consequently, Commerce maintains that

since it properly calculated CV profit under subparagraph (A)

rather than (B) of § 1677b(e)(2), it correctly excluded below-

cost sales from the CV profit calculation.              See id.    Torrington

agrees with Commerce’s methodology for calculating CV profit.

See Torrington’s Resp. at 4-5, 44-50.



     C.     Analysis

     In RHP Bearings Ltd. v. United States, 23 CIT __, 83 F.

Supp. 2d 1322 (1999), this Court upheld Commerce’s CV profit

methodology of using aggregate data of all foreign like products

under     consideration    for    NV   as    being   consistent     with    the
Court No. 99-08-00475                                                     Page 12


antidumping statute.          See id. at ___, 83 F. Supp. 2d at 1336.

Since Commerce’s CV profit methodology and SKF’s arguments at

issue in this case are practically identical to those presented

in RHP Bearings, the Court adheres to its reasoning in RHP

Bearings.      The Court, therefore, finds that Commerce’s CV profit

methodology is in accordance with law.


       Moreover, since (1) § 1677b(e)(2)(A) requires Commerce to

use    the    actual    amount       for   profit    in    connection   with    the

production and sale of a foreign like product in the ordinary

course of trade, and (2) 19 U.S.C. § 1677(15) (1994) provides

that   below-cost       sales    disregarded        under    §   1677b(b)(1)    are

considered to be outside the ordinary course of trade, the Court

finds that Commerce properly excluded below-cost sales from the

CV profit calculation.



III. Valuation of Major Inputs from Affiliated Persons

       A.     Statutory Background

       In    general,   the     NV   of    the   subject    merchandise   is,    in

pertinent part, “the price at which the foreign like product is

first sold . . . for consumption in the exporting country.”                      19

U.S.C. § 1677b(a)(1)(B)(i) (1994).                  However, whenever Commerce

has “reasonable grounds to believe or suspect” that sales of the
Court No. 99-08-00475                                              Page 13


foreign like product under consideration for the determination

of NV have been made at prices which represent less than the

cost of production (“COP”) of that product, Commerce shall

determine whether, in fact, such sales were made at less than

the COP.     See § 1677b(b)(1).        A “reasonable ground” exists if

Commerce disregarded below-cost sales of a particular exporter

or producer from the determination of NV in the most recently

completed administrative review.         See § 1677b(b)(2)(A)(ii).      If

Commerce determines that there are sales below the COP and

certain conditions are present under § 1677b(b)(1)(A)-(B), it

may disregard such below-cost sales in the determination of NV.

See id.


    Additionally, the special rules for the calculation of COP

or CV contained in 19 U.S.C. § 1677b(f)(2)-(3) (1994), provide

that, in a transaction between affiliated persons as defined in

19 U.S.C. § 1677(33) (1994), Commerce may disregard either the

transaction or the value of a major input.


    Section 1677b(f)(2) provides that Commerce may disregard an

affiliated-party transaction when “the amount representing [the

transaction or transfer price] does not fairly reflect the

amount     usually   reflected    in    sales   of   merchandise     under
Court No. 99-08-00475                                                       Page 14


consideration in the market under consideration [that is, an

arms-length      or    market    price].”          If   such   “a    transaction    is

disregarded . . . and no other transactions are available for

consideration,” Commerce shall value the cost of an affiliated-

party input “based on the information available as to what the

amount would have been if the transaction had occurred between

persons who are not affiliated [that is, based on an arms-length

or    market    value].”        19    U.S.C.   §    1677b(f)(2)       (“fair-value”

provision).


       Section 1677b(f)(3)’s “major input rule” directs that if (1)

a     transaction      between        affiliated        companies     involves     the

production by one of such companies of a “major input” to the

merchandise      produced       by     the   other,      and   (2)    Commerce     has

“reasonable grounds to believe or suspect” that the amount

reported as the value of such input is below the COP, then

Commerce may calculate the value of the major input on the basis

of the data available regarding such COP, if such COP exceeds

the    market    value     of        the   input,       as   determined    under     §

1677b(f)(2).          For purposes of § 1677b(f)(3), regulation 19

C.F.R. § 351.407(b) (1998) provides that Commerce will value a

major input supplied by an affiliated party based on the highest

of (1) the actual transfer price for the input, (2) the market
Court No. 99-08-00475                                                Page 15


value of the input, or (3) the COP of the input.



      B.     Factual Background

      Because Commerce disregarded sales that failed the below-

cost sales test pursuant to § 1677b(b)(1) in the prior review

with respect to SKF’s AFBs from France, Commerce determined

pursuant to § 1677b(b)(2)(A)(ii) that it had “reasonable grounds

to believe or suspect” that sales of SKF’s foreign like product

under consideration for the determination of NV in this ninth

review might have been made at prices below the COP.                     See

Preliminary     Results,   64   Fed.   Reg.     at   8794.     Consequently,

pursuant to § 1677b(b)(1), Commerce initiated COP investigations

of   SKF’s   sales   in   the   home   market   and,   thereby,    requested

information relating to the COP and CV.              See id.


      In its questionnaire for this POR, Commerce requested, inter

alia, that SKF provide certain data regarding the valuation of

major inputs received from affiliated suppliers and used to

produce the merchandise under review during the cost calculation

period.      See SKF’s Br. App., Ex. 6, Commerce’s Request for

Information at D-3 and D-4.        In particular, Commerce instructed
Court No. 99-08-00475                                  Page 16


SKF as follows:

    List the major inputs received from affiliated parties
    and used to produce the merchandise under review
    during the cost calculation period. . . . For each
    major   input   identified,  provide   the   following
    information:

    a.   the total volume and value of the input purchased
         from all sources by your company during the cost
         calculation period, and the total volume and
         value purchased from each affiliated party during
         the same period;

    b.   the per-unit transfer price charged for the input
         by the affiliated party (if the affiliated party
         sells the identical input to other, unaffiliated
         purchasers, provide documentation showing the
         price paid for the input by the unaffiliated
         purchaser;   if  your   company   purchases   the
         identical input from unaffiliated suppliers,
         provide documentation showing the unaffiliated
         party’s sales price for the input); and

    c.   If you are responding to this section of the
         questionnaire in connection with an investigation
         of sales below cost, provide the per-unit cost of
         production incurred by the affiliated party in
         producing the major input.

    . . . .

    With respect to I.D., when valuing the cost of major
    inputs purchased from affiliates, use the highest
    of[:] a) the transfer price from the affiliate[;] b)
    the affiliate’s cost of production of the input; or c)
    the market price of the input (the weighted-average
    price other unaffiliated suppliers charged for the
    identical input). . . . In addition, in order to
    facilitate verification, please report, for each model
    which    includes   affiliated-party    inputs,    the
    affiliate’s cost of production, transfer price, and
    market price of all affiliated-party inputs used in
    the manufacture of the product on your computer tape.
Court No. 99-08-00475                                                   Page 17



Id. at D-3, D-4, V-12.


      In its response to Commerce’s questionnaire, SKF reported

that it valued major inputs purchased from affiliated suppliers

based on the higher of the actual component (that is, input)

costs or transfer prices, but it did not take into consideration

the market prices for some components which it purchased from

both affiliated and unaffiliated suppliers.            See SKF’s Br. App.,

Ex. 7, SKF’s Sect. D Response to Commerce’s Questionnaire at D-

14 (Aug. 28, 1998) (noting that “SKF sources requirements from

unaffiliated suppliers for only a small group of components [and

that] SKF rarely buys the same components from both affiliated

and unaffiliated suppliers”).            With respect to market prices,

SKF explained that “whether [components are] sourced from within

the   [SKF]   Group    or   from   an   unaffiliated      supplier,     all   SKF

components    are     custom-made    items,   each   conforming       to    SKF’s

proprietary    designs      and    specifications    in    order   to      insure

compatibility in assembly and quality.”              Id.    As a consequence

of its unique product specifications, SKF stated that “referent

market prices” do not exist for components purchased by SKF from

its affiliated companies.          SKF thereby used the higher of cost

or transfer price in computing COP and CV.             See id. at D-17.
Court No. 99-08-00475                                         Page 18



      Given that SKF stated in its response that it purchased

major inputs from its affiliated suppliers as well as in rare

cases   from     unaffiliated    suppliers,    Commerce    issued   a

supplemental questionnaire on October 26, 1998 requesting that

SKF provide further information to better evaluate the market

values of SKF’s major inputs.         See SKF’s Br. App., Ex. 8,

Commerce’s     Supplemental   Questionnaire   at   9.   Specifically,

Commerce asked SKF the following:

      At Appendix D-4, you provide ratios of cost to
      transfer prices for major inputs purchased by SKF
      France from affiliated parties.     However, in your
      supplemental response, we request that you provide a
      chart listing, for each major input, the per-unit
      transfer price charged by the affiliated party and the
      per-unit cost of production incurred by the affiliated
      party.   Furthermore, on page D-16, you state that
      there were rare cases in which SKF France purchased
      identical or similar products from an unaffiliated
      supplier. For these inputs, include in your chart the
      unaffiliated   party’s   sales   price   and   provide
      documentation to support these prices.

Id.


      On November 16, 1998, SKF responded by submitting: (1) two

charts listing the total cost, total sales and the transfer

price index (that is, the ratio of total cost divided by total

sales) for each type of major input, but without any model or

part designations; and (2) a chart showing the average unit
Court No. 99-08-00475                                                      Page 19


price for major input purchased from unaffiliated suppliers and

identified by model number.             See SKF’s Br. App., Ex. 9, SKF’s

Response to Commerce’s Supplemental Questionnaire at D-13 and D-

14.    With respect to the unaffiliated-party chart, SKF only

provided documentation for one particular model input.                     See id.

at D-14.      SKF explained that it included documentation for only

one   input    because    “[d]ocumentation         for   each   of   the   listed

designations      would    be    voluminous    and       require     significant

expenditure of resources just prior to verification. . . .

Should [Commerce] request similar documentation for additional

designations at verification, SKF would gather and provide the

relevant information at that time.”            Id. at 51.


      Subsequently, on February 16, 1999, Commerce verified SKF’s

COP and transfer price responses regarding the inputs, but did

not verify the market value of the materials.                   See SKF’s Br.

App., Ex. 10, Commerce’s Verification Report at 11.                        A week

later, Commerce issued the Preliminary Results and stated that

it would use “partial facts available” under 19 U.S.C. § 1677e

(1994) “in cases in which [it was] unable to use some portion of

a response in calculating the dumping margin,” but made no

specific   reference      to    SKF’s    partial    response    regarding      the

market value of its major inputs.             64 Fed. Reg. at 8793 (Feb.
Court No. 99-08-00475                                                 Page 20


23, 1999).


      For the Final Results, Commerce found that the market-price

data SKF provided for components purchased from unaffiliated

parties was not in a comparable form in which it reported the

COP and transfer price data, “that is, the COP and transfer

price values were reported as ratios (which represented the

difference between COP and transfer price for each component)

and   the   market   values   were   not.”   SKF’s   Br.   App.,     Ex.   11,

Commerce’s Final Analysis Mem. at 2 (June 16, 1999); see Final

Results, 64 Fed. Reg. at 35,600 (July 1, 1999).                 Consequently,

Commerce noted that it could not determine whether the market

price was higher than the reported COP or transfer price for

each major input.       See id.      Commerce stated that since SKF

failed “to provide the requested information in the form and

manner requested,” it used partial facts available under §

1677e(a)(2)(B) to fill in the gaps and ensure that the market

prices were taken into consideration.             Id.      In particular,

Commerce applied partial facts available (that is, market price

information     SKF     provided     in      response      to     Commerce’s

questionnaires) to make an adjustment to: (1) SKF’s reported

total cost of manufacturing for each transaction in the COP and

CV databases; and (2) the variable cost of manufacturing in the
Court No. 99-08-00475                                                 Page 21


home market and United States sales databases.               See id.; SKF’s

Br. App., Ex. 11, Commerce’s Final Analysis Mem. at 2.



      C.    Contentions of the Parties

      SKF contends that Commerce erred in concluding in the Final

Results it was “required” to use market prices for valuing

certain     inputs     the     French     SKF   companies   purchased      from

affiliated parties.          See SKF’s Br. at 69 (citing 64 Fed. Reg. at

35,599).     Quoting      AK Steel Corp. v. United States, 203 F.3d

1330, 1343 (Fed. Cir. 2000) (holding that “the plain language of

the statute . . . provides that Commerce ‘may’ determine the

values in a manner other than the use of the transfer price”)

and   regulation     19      C.F.R.   §   351.407(b)    (stating    that   “the

Secretary normally will determine the value of a major input

purchased from an affiliated person based on the higher of

[transfer price, market price or COP]”), SKF notes that the

fair-value and major-input provisions (that is, 19 U.S.C. §

1677b(f)(2)-(3))       are     “permissive”      and,   therefore,    do    not

“mandate” that Commerce use the highest of transfer price,

market price or COP in valuing SKF’s reported affiliated-party

inputs.     See id. at 67-69.


      SKF   also     asserts     that     Commerce’s    “reliance    on    non-
Court No. 99-08-00475                                             Page 22


affiliated-party    prices   was   contrary   to   substantial     record

evidence.”    Id. at 4.      SKF notes that because the overlap

between identical inputs which were purchased from affiliated

and unaffiliated suppliers was minimal, and since all of SKF’s

components   are   custom-made     and   conform   to   its   proprietary

designs and specifications, “there is no readily observable

market for the unique inputs by [SKF].”        Id. at 72.      SKF argues

that since there were no valid referent market prices for the

major inputs at issue, its valuation of these inputs based on

the higher of COP or transfer price was in accordance with §

1677b(f)(2)-(3).    See id. at 67.


    Additionally, SKF contends that Commerce’s rejection of

SKF’s reporting of the higher of COP or transfer price of inputs

purchased from affiliated and unaffiliated suppliers, in the

absence of readily observable market prices, was contrary to

Commerce’s practice in prior AFB reviews.           See id. at 67, 85.

SKF maintains that since Commerce failed to provide “a reasoned

explanation for [its] departure from prior practice,” Commerce’s

resort to partial facts available was unwarranted.            Id. at 88.


    SKF further argues that Commerce unlawfully used partial

facts available in its cost calculations for the French SKF
Court No. 99-08-00475                                                Page 23


Group companies because the statutory criteria Commerce relied

on for such use were not present. See id. at 5, 67, 74.                   In

particular, SKF notes that Commerce resorted to partial facts

available because SKF failed to provide requested information in

the form and manner requested as required by § 1677e(a)(2)(B),

that is, Commerce asserted in its final analysis memorandum that

SKF did not provide “‘the market price data in the form which we

requested (on a chart and in a comparable form as its transfer

price and COP data).’”       Id. at 74 (quoting SKF’s Br. App., Ex.

11, Commerce’s Final Analysis Mem. at 2).                 SKF argues that,

contrary   to    Commerce’s      assertion    in    the    final    analysis

memorandum,     nothing     in       the   supplemental        questionnaire

specifically instructed or “identified that the reporting of

unaffiliated-party purchases was to be provided in a manner to

permit   Commerce   to    draw   a   comparison    with   affiliated-party

purchases.”     SKF’s Reply Br. at 66.       SKF notes that “[t]he sole

format specified in the response was that the [unaffiliated-

party sales price] data be in chart form” and, in fact, SKF did

“provide such ‘prices’ in chart form.”            Id. at 65.    With respect

to Commerce’s request for per-unit transfer price and COP data,

SKF notes that in its supplemental response it explained that it

does not use such per-unit data from affiliated parties; rather,
Court No. 99-08-00475                                              Page 24


it reported that it applies a transfer price index in its cost

calculations, to ensure that the higher of cost or transfer

price is reflected in its actual cost of manufacturing figures

reported to Commerce.         See id.; SKF’s Br. at 82-83, Br. App.,

Ex. 9 at 49.          Also, SKF notes this reporting methodology of

transfer price indices had been utilized by SKF and accepted

and/or verified by Commerce in prior reviews.          See SKF’s Reply

Br. at 65 n.53.         SKF, therefore, maintains that it fully and

reasonably answered Commerce’s questions as asked and Commerce

thus erred in resorting to partial facts available.           See id. at

64-69.


    Furthermore, SKF contends that, contrary to the requirements

of 19 U.S.C. § 1677m(d) (1994), Commerce did not provide notice

to SKF that its market price data had deficiencies and, “to the

extent practicable,” allow SKF to remedy such deficiencies.             Id.

at 79 (quoting § 1677m(d)).            Given the seventh month period

between    (1)    SKF’s      responses   to   Commerce’s    supplemental

questionnaire (that is, November 16, 1998) and (2) Commerce’s

adverse findings in the         Final Results regarding SKF’s major

inputs (that is, July 1, 1999), SKF argues that there was ample

time for Commerce to issue a second supplemental questionnaire,

inform    SKF    of    its   alleged   deficiencies   and   give   it   an
Court No. 99-08-00475                                       Page 25


opportunity to remedy them.      See id. at 79.    SKF asserts that

since Commerce failed to direct another request for information,

the agency improperly resorted to facts otherwise available

under § 1677m(d).   See id.    Alternatively, SKF argues that even

if Commerce’s use of partial facts available was justified, it

erred in its methodology for determining market prices for

affiliated-party inputs.      See SKF’s Br. at 88-89.


    SKF, therefore, requests that the Court remand the matter

and instruct Commerce to recalculate costs for SKF based on data

submitted by SKF and without resort to partial facts available

or, alternatively, if Commerce’s use of partial facts available

is warranted, to correct the methodology it used for calculating

market prices for affiliated party-inputs.        See id. at 94-95;

SKF’s Reply Br. at 82-83.


    Commerce argues, inter alia, that it reasonably interpreted

§ 1677b(f)(2) and (f)(3) as requiring it to value a major input

purchased from an affiliated person at the highest of the COP,

transfer price or market price.       See Def.’s Br. at 3, 51-61.

Consequently, Commerce asserts that it “properly requested SKF

to submit such information for its major inputs.”       Id. at 62.


    Commerce also maintains that even if the fair-value and
Court No. 99-08-00475                                                        Page 26


major    input    provisions      are    permissive,      it     is   within      its

discretion to apply the provisions.              See id. at 62.             Commerce

contends “that since, by SKF’s own admission, some inputs were

manufactured by affiliated and unaffiliated suppliers, Commerce

properly exercised its discretion in applying the statutory

provisions in question.”          Id. at 63.      Commerce also notes that

the fact it may not have applied the provisions in prior AFB

reviews, does not make Commerce’s decision to apply them in this

review unreasonable.        See id. at 62.        Moreover, Commerce notes

that no change of practice from its prior reviews occurred

during     this   review    because      Commerce       simply    followed        its

regulations.      See id.


    Commerce also argues that irrespective of SKF’s assertion

that there was no readily observable market for the unique

inputs purchased by SKF, § 1677b(f)(2) authorizes Commerce to

value a transaction between affiliated persons based on the

amount   that     unaffiliated     persons     charged.        See    id.    at   63.

Commerce    thereby    maintains        that   “[t]he    application         of   the

statute does not depend upon the existence of any ‘readily

observable market.’”        Id.


    Commerce further notes that, contrary to SKF’s assertion,
Court No. 99-08-00475                                                         Page 27


its request for information in the supplemental questionnaire

contemplated        that    SKF     would    provide     the    market-price       data

relating     to     major      inputs     it   purchased        from     unaffiliated

suppliers on a chart and in a form readily comparable to SKF’s

COP and transfer price data.                   See id. at 64-66.            Commerce,

therefore,        argues     that    since     SKF     failed       to   submit    such

information         in   the      form      requested     in    the      supplemental

questionnaire, Commerce properly resorted to facts otherwise

available under §§ 1677e(a) and 1677m(d) in valuing SKF’s major

inputs.      See id. at 65-67.            Moreover, Commerce maintains that

its methodology for calculating the value of these inputs was

reasonable.       See id. at 67-69.


      Torrington agrees with Commerce,                   noting that Commerce’s

instructions set forth in the supplemental questionnaire are

entirely consistent with its finding in the Final Results that

SKF did not provide the market-price data of the major inputs in

the form in which Commerce requested.                See Torrington’s Resp. at

58.     Torrington         also   notes     that   the   questionnaire       did    not

instruct or allow SKF to provide comparison data as a percentage

ratio   of    COP    only    and,     thus,    there     is    no   merit   to    SKF’s

contention that Commerce’s questionnaire did not request SKF’s

cost data in the form in which Commerce now claims it was
Court No. 99-08-00475                                                          Page 28


requested.      See id. at 57-58.              Moreover, contrary to SKF’s

assertion that the market-price data provided was in a usable

form,    Torrington      asserts      the     data    clearly    did    not       permit

Commerce to make an appropriate comparison to the relevant COP

and transfer price of each major input.                     See id.


      Torrington      also   asserts        that     Commerce’s       use    of       facts

available was not inconsistent with § 1677m(d) because Commerce

provided notice to SKF in the supplemental questionnaire that

its initial response to Commerce’s questionnaire was deficient

and requested specific additional information. See id. at 59.

Torrington asserts that § 1677m(d) “does not impose on Commerce

a further requirement to provide additional notice,                           i.e., a

second supplemental questionnaire, as SKF contends.”                         Id.


      Moreover,      Torrington        argues        that    SKF’s     reliance            on

Commerce’s acceptance of SKF’s reporting methodology for major

inputs   in   prior     reviews    is    misplaced          because   “each       .    .    .

administrative        review      is     an     independent           and     distinct

proceeding.”      Id.    Torrington maintains that the fact that the

same aspects of SKF’s reporting methodology of major inputs were

not   pursued   in      other   AFB     reviews       cannot    excuse       SKF      from

responding to Commerce’s inquiries in this review.                          See id. at
Court No. 99-08-00475                                                          Page 29


60.    Similarly, Torrington contends that Commerce’s methodology

for valuing the major inputs “was reasonable in light of SKF’s

extensive reporting failures.”             Id.



       D.    Analysis

       The Court disagrees with SKF that Commerce erred in valuing

each major input based on the highest of the input’s transfer

price, market price or COP.            In Mannesmannrohren-Werke AG v.

United States, 23 CIT __, __, 77 F. Supp. 2d 1302, 1310-12

(1999), the Court clearly articulated that the plain language of

§ 1677b(f)(2) and (f)(3), as well as the legislative history of

§   1677b(f)(3),        supports   Commerce’s      use    of   the    highest       of

transfer price, market price or COP in valuing a major input

supplied by an affiliated party.


       Further, although the Court agrees with SKF that use of the

word    “may”      in   the   fair-value     and    major-input           provisions

indicates        that   the   provisions    and    regulation        19    C.F.R.    §

351.407(b) are “permissive” and, thus, do not mandate the use of

highest     of    transfer    price,   market     price   or   COP        in   valuing

affiliated-party inputs, see § 1677b(f)(2)-(3) (both provisions

using word “may” instead of “shall”), the Court notes that

“[t]he word ‘may,’ when used in a statute, usually implies some
Court No. 99-08-00475                                                  Page 30


degree of discretion.”       United States v. Rodgers, 461 U.S. 677,

706 (1983) (footnote omitted).        Certainly, “[t]his common-sense

principle of statutory construction . . . can be defeated by

indications of legislative intent to the contrary or by obvious

inferences from the structure and purpose of the statute.”                 Id.

(citations omitted).         Here, the Court finds no such contrary

indications or inferences with respect to § 1677b(f)(2)-(3) and,

therefore, concludes that Commerce properly determined that it

had discretionary authority to use the highest of transfer

price, market price or COP in valuing SKF’s reported major

inputs.    Indeed, in AK Steel, the appellate court opined that

the antidumping “statute leaves possible application of the

fair-value and major-input provisions to the discretion [of] the

agency.”    Moreover, the fact that Commerce may not have applied

the provisions in prior AFB reviews, does not make Commerce’s

exercise    of    discretion     to   apply    them      in     this   review

unreasonable.     203 F.3d at 1343.


    Also, the Court finds that Commerce properly resorted to

“facts otherwise available” in valuing SKF’s major inputs.                 The

antidumping statute mandates, inter alia, that Commerce use

“facts     otherwise available” if an interested party fails to

provide    the   requested    information     in   the   form    and    manner
Court No. 99-08-00475                                               Page 31


requested, subject to 19 U.S.C. § 1677m(c)(1), (d), (e).               See 19

U.S.C. § 1677e(a)(2).         Here, upon review of the record, the

Court finds that Commerce did in fact request that SKF provide

market price information on major inputs it purchased from

unaffiliated suppliers on a chart and in a form comparable to

its COP and transfer price data.         As noted earlier, Commerce’s

initial questionnaire specifically requested that SKF provide

(1) the per-unit transfer price, market price and COP data for

each major input identified and (2) the use of the highest of

the transfer price, COP or market price when valuing the cost of

major inputs purchased from affiliates.          See SKF’s Br. App., Ex.

6,    Commerce’s   Request    for   Information    at   D-3,    D-4,   V-12.

Commerce’s supplemental questionnaire also requested, as noted

earlier, that SKF provide a chart listing, for each major input,

(1) the per-unit COP incurred by the affiliated party, (2) the

per-unit transfer price charged by the affiliated party, and (3)

for rare     cases in which SKF purchase identical or similar

products    form   an   unaffiliated     supplier,      the    unaffiliated

party’s sales price.         See SKF’s Br. App., Ex. 8, Commerce’s

Supplemental Questionnaire at 9.        Although Commerce’s framing of

its    questions   regarding    major   inputs    in    the    supplemental

questionnaire are less than a model of clarity, Commerce’s
Court No. 99-08-00475                                                 Page 32


questions in both questionnaires when read together indicate

that Commerce was asking SKF to provide market-price information

for major inputs purchased from its unaffiliated suppliers on a

chart in a comparable form in which it reported the COP and

transfer price information.        The Court, therefore, finds that

Commerce correctly determined under § 1677e(a)(2)(B) that SKF

failed to provide the requested information in the form and

manner requested.


     To    the   extent   that   SKF   argues    that     Commerce    had   an

obligation under § 1677m(d) to provide a second supplemental

questionnaire to inform SKF of its deficient response and give

it an opportunity to remedy it, SKF’s argument must also fail.

Section 1677m(d) provides that if Commerce finds that a response

to a request for information does not comply with the request,

Commerce    shall   promptly     inform   the    person      submitting     the

response of the deficiency and permit that person an opportunity

to remedy or explain the deficiency.            If the remedial response

or   explanation     provided     by   the   party      is    found   to    be

unsatisfactory or untimely, Commerce may, subject to § 1677m(e),

disregard “all or part of the original and subsequent responses”

in favor of facts otherwise available.          Id. § 1677m(d).       In this

case, Commerce provided SKF with notice and an opportunity in
Court No. 99-08-00475                                            Page 33


the   supplemental   questionnaire   to   clarify    its    market-price

information relating to its major inputs purchased from its

unaffiliated suppliers.    Thus, to the extent that Commerce was

statutorily obligated to provide SKF an opportunity to remedy or

explain the alleged deficiencies, the Court finds that Commerce

fulfilled its obligation under § 1677m(d) as well as § 1677m(e).

In other words, as Torrington correctly asserts, § 1677m(d) does

not impose on Commerce a requirement that it must provide an

additional notice and opportunity to remedy a deficiency, that

is, issue a second supplemental questionnaire.


      The Court has considered SKF’s other contentions and finds

them to be entirely without merit.        Also, the Court finds that

Commerce’s   methodology   for   valuing     the    major    inputs   was

reasonable in light of SKF’s shortcomings in its responses to

Commerce’s requests for information.         Accordingly, the Court

finds that Commerce properly resorted to partial facts available

in calculating the value of SKF’s major inputs.
Court No. 99-08-00475                                               Page 34


                             CONCLUSION

    For the foregoing reasons, the case is remanded to Commerce

to annul all findings and conclusions made pursuant to the duty

absorption    inquiries   conducted    for    the   subject     reviews.

Commerce’s    final   determination   is     affirmed   in    all    other

respects.



                                      ____________________________
                                           NICHOLAS TSOUCALAS
                                              SENIOR JUDGE



Dated:      August 23, 2000
            New York, New York
