Surrogate Statement Unusable Due to Mass of Affiliate Transactions, Exporter Tells CAFC
Tapered roller bearing exporter Shanghai Tainai Bearing and importer C&U Americas filed a reply brief at the U.S. Court of Appeals for the Federal Circuit on Oct. 14, arguing, among other things, that the U.S. failed to adequately defend the Commerce Department's selection of Romanian firm Timken Romania as part of the surrogate value calculations. Tainai added that Commerce illegally decided to deduct the cost of Section 301 duties from the company's U.S. price in the 2019-20 review of the antidumping duty order on tapered roller bearings from China (Shanghai Tainai Bearing Co. v. United States, Fed. Cir. # 25-1405).
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In the review, Commerce only used Timken Romania's financial statement to calculate Tainai's surrogate values, rejecting the statements from two other Romanian companies, Sibu and Rulmenti, since Rulmenti "failed to make a profit" and Sibu "manufactured automotive components that were not similar" to tapered roller bearings. At the Federal Circuit, the U.S. said the Court of International Trade correctly saw that Tainai was partly responsible for the shoddy selection of surrogate statements and approved the agency's decision as reasonable that the Timken Romania statement was the "least bad one" (see 2509100043).
In response, Tainai said the Timken Romania statement is "badly distorted" due to the "very high percentage of related party transactions." While Commerce said the statement is reliable because it was audited, the respondent argued that "all the audit does is establish the accuracy of the financial statement," adding that it doesn't "establish that the financial statement is not distorted." Record evidence shows that only less than 5% of Timken Romania's sales were to unaffiliated parties, the brief said.
The government argued that Tainai also engaged in transactions with both affiliated and unaffiliated entities. In response, the respondent said this "ignores the fact that Tainai's sales" in the AD review were based on the sales to unaffiliated parties, and, "critically, the relationship between Timken Romania and its related entities."
The U.S. also said that there's no evidence Timken Romania inflated its profits, though Tainai said this claim ignores the comparison of Timken Romania's data with "data of other members of the industry in the same country," namely Rulmenti. Timken Romania is profitable, while Rulmania is losing money, Tainai said, arguing that this "difference is critical," since the "primary difference appears to be that Timken Romania, the purportedly profitable entity, has a significant number of related party transactions which may have artificially inflated its profits and potentially deflated its raw material costs." Meanwhile, Rulmenti doesn't have these transactions, the brief said.
Acknowledging that Rulmenti's lack of profits "is a flaw," Tainai said this flaw "is no more significant than the flaws in the Timken Romania financial statement, and at a minimum, this [financial statement] could be used for two of the portions of the financial ratios that are not related to the profitability of a company."
In its brief, the government also argued that Commerce properly declined to deduct Section 301 duties from Tainai's U.S. price, pointing to CAFC's decision in Borusan Mannesmann v. U.S. for this claim. In Borusan, the Federal Circuit upheld the agency's decision not to deduct Section 232 duties from a respondent's U.S. price. Tainai highlighted this difference in its argument, claiming that "Borusan is inapplicable as it relates to the issue as to the deduction of Section 232 duties, not duties imposed under section 301."
The respondent said "Such 301 duties are temporary in nature as such duties will be lifted as soon as compliance with the demands which triggered the imposition of 301 duties are satisfied. Unlike 232 duties, the elimination of the conduct being remedied will result in elimination of the duties."