NSK Ltd. (Japan) and JTEKT (Koyo; Japan) have won a significant victory in convincing the U.S. Court of International Trade to force the Department of Commerce to reconsider how it handles antidumping duty reviews.

The CIT's Slip Op is here: Slip Op. 08-95
[ 39 pages; PDF format ]
At issue are so-called Sunset Reviews, conducted by the U.S. Department of Commerce. At the 1995 Uruguay Round of tariff negotiations, countries agreed to "sunset" or allow their antidumping duties and tariffs to expire every five years, rather than the previous system which allowed duties to remain in place indefinitely. Commerce's International Trade Commission conducts the sunset review investigations.

Import duties remain in place when an ITC investigation shows that rescinding them will harm the domestic industry.

Since 1988, the U.S. has had antidumping duties on ball bearings from China, France, Germany, Italy, Japan, Singapore and the United Kingdom under 731-TA decisions. Duties on ball bearings from China have since been rescinded.

The latest sunset review decision occurred in 2006, and the ITC determined the need to continue antidumping duties on those bearings to prevent "material injury of the domestic industry."

Koyo and NSK, joined by several other bearing manufacturers, went to the Court of International Trade and challenged the ITC's methodology in reaching that decision. In particular, they challenged the depth and rationale of the ITC's analysis in light of recent developments and reinterpretation of its own data.

The key success point in their argument came from challenging the ITC's findings based on another recent decision, Bratsk Aluminum Smelter v. United States. In Bratsk, the Federal Circuit court held

[w]here commodity products are at issue and fairly traded, price competitive, non- subject imports are in the market, the Commission must explain why the elimination of subject imports would benefit the domestic industry instead of resulting in the non-subject imports’ replacement of the subject imports’ market share without any beneficial impact on domestic producers.

In other words, they asked the CIT to order the ITC to consider in its sunset reviews the impact of importing bearings from countries other than France, Germany, Italy, Japan, Singapore and the UK (called "non-subject" bearings because they are not subject to antidumping duties).

For example, if the U.S. market is simply importing more ball bearings from China -- not subject to antidumping duties -- to replace duty-laden ball bearings from France, Germany, Italy, Japan, Singapore and the UK, then the argument under Bratsk is that the ITC should evaluate whether removing the duties would have any net impact at all on the domestic industry.

And that is what the CIT found -- the proportion of imported ball bearings in the U.S. market not subject to duties has grown, while the proportion of U.S.-manufactured bearings fell and the proportion of ball bearings from France, Germany, Italy, Japan, Singapore and the UK has also fallen.

In order for the key direct-replacement sales argument under Bratsk to be valid, the companies had to prove that bearings from various countries were considered equal and interchangeable in the U.S. market (that is, a "commodity product") by the ITC. The ITC's own sunset review did that, finding "70 out of 77 responding purchasers and 81 out of 125 responding importers considered domestically produced [ball bearings] and the subject merchandise to be ‘always’ or ‘frequently’ interchangeable."

So the CIT ruled: "The criteria necessary to trigger Bratsk having been met, the court remands this issue to the ITC for a full review of the impact of non-subject imports on the domestic industry in conformity with this opinion."

NSK and Koyo also argued that the ITC's investigation was flawed in being too limited, reviewed too few products and too few sales, and that the results those sales analyses did not in fact convincingly show dumping has occurred.

The court generally declined to second guess the ITC's analyses of various competitive situations in the U.S. market, including glaringly inconsistent evaluations of import volume and market share portability. While it faulted the ITC's use of a "minuscule" number of data points, and mathematically inconclusive results, it generally agreed that the ITC's derivative findings were relatively accurate.

Remanding the sunset review back to the ITC, the court found:

In accordance with the issues raised in this opinion, the ITC must reconsider its impact analysis on remand. The court has held that the ITC must provide a more comprehensive discussion of supply conditions and must also evaluate the impact of non-subject imports in accordance with Bratsk. As these determinations may influence the ITC’s likely impact analysis, the court’s decision on the issue must await the ITC’s remand results.