[Federal Register Volume 67, Number 189 (Monday, September 30, 2002)]
[Notices]
[Pages 61350-61351]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-24675]


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INTERNATIONAL TRADE COMMISSION

[Inv. No. 337-TA-469]


In the Matter of Certain Bearing and Packaging Thereof; Order

    The Commission instituted this investigation on April 9, 2002, on 
the basis of a complaint filed by SKF USA, INC. (``SKF''). 67 FR 18632 
(April 16, 2002). The complaint alleged that certain respondents had 
violated section 337 of the Tariff Act of 1930 by the unlawful 
importation into the United States, sale for importation, and/or sale 
within the United States after importation of certain bearings and 
packaging thereof by reason of: (1) Infringement of U.S. Trademark 
Registration Nos. 502,839, 502,840, 1,944,843, and 2,053,722; (2) 
infringement of common law trademarks; (3) dilution of registered and 
common law trademarks; (4) false representation of source; (5) false 
advertising; (6) passing off; and (7) unfair pecuniary benefits. The 
last claim alleges that respondents derive unfair pecuniary benefits by 
availing themselves of SKF's antidumping duty deposit rates and by 
failing to request antidumping duty administrative reviews to obtain 
their own rates. Complainant SKF describes the unfairness as being 
twofold. First, gray market importers of SKF bearings do not need to 
adjust their U.S. prices upwards to obtain a lower rate; they can keep 
their U.S. prices low and still get a low duty rate. Second, the gray 
market importers do not expend any resources to keep rates low; they 
merely ``free ride'' on SKF's rates. SKF analogizes this situation to 
the free riding problem recognized under the antitrust laws. On May 16, 
2002, the Commission investigative attorney (``IA'') filed a motion for 
summary determination as to the ``unfair pecuniary benefits'' claim, 
arguing that the claim is not cognizable under section 337 because it 
does not allege an unfair method of competition or an unfair act. 
Certain respondents supported the IA's motion. SKF filed an opposition 
to the motion. On June 14, 2002, in Order No. 11, the presiding 
administrative law judge (``ALJ'') denied the IA's motion for summary 
determination. The ALJ explained that he was declining to decide 
whether the ``unfair pecuniary benefits'' claim alleges an ``unfair 
act'' cognizable under section 337 because the claim presents a novel 
issue not appropriate for summary determination. The ALJ found that the 
risk of prematurely dismissing the claim outweighed the potential 
burden of additional discovery. On June 21, 2002, the IA filed a motion 
with the ALJ for leave to seek interlocutory review of Order No. 11 by 
the Commission. Respondents Bearings Limited and McGuire Bearing 
Company filed similar motions. On July 10, 2002, in Order No. 16, the 
ALJ granted these motions for leave to seek interlocutory review. The 
ALJ found that the motions met the requirements of Commission rule 
210.24(b)(1), which provides that an ALJ may grant leave to seek 
interlocutory review of an order by the Commission if the order 
``involves a controlling question of law or policy as to which there is 
substantial ground for difference of opinion'' and ``subsequent review 
[of the order] will be an inadequate remedy.'' 19 CFR 210.24(b)(1). On 
July 18, 2002, the IA filed an application for interlocutory review, 
and on July 22, 2002, respondents Bearings Limited and McGuire Bearing 
Company did the same. The Commission has determined to grant the 
applications for interlocutory review of Order No. 16. Section 
337(a)(1)(A) proscribes ``unfair methods of competition and unfair 
acts'' in the importation of articles, and/or sale thereof within the 
United States after importation. In order for the Commission to find 
that conduct involves an unfair method of competition or unfair act, it 
must be able to identify some sort of legally cognizable ``unfairness'' 
in that conduct. SKF's unfair pecuniary benefits claim does not allege 
the requisite legally cognizable unfairness. SKF alleges that 
respondents are engaging in an unfair method of competition by 
``availing themselves of SKF USA's antidumping duty rates.'' SKF's 
Amended Complaint at ] 157. SKF also describes the unfairness in 
respondents' conduct as lying in ``[r]espondents'' affirmative choice 
not to participate in Commerce's antidumping duty review process, and 
their free riding off SKF's rates.'' SKF USA's Opposition to the 
Commission Investigative Staff's Motion for Partial Summary 
Determination at 21. Respondents' practices with respect to antidumping 
duties apparently conform to the relevant Department of Commerce 
(``Commerce'') regulations and Commerce's instruction to the U.S. 
Customs Service. SKF does not dispute this. Respondents enter their 
bearings at the antidumping duty deposit rate specified by Commerce. 
When the bearings are liquidated, again the appropriate antidumping 
duty assessment rate is specified by Commerce. The Commission fails to 
see how following Commerce's specific directions with regard to 
antidumping duty deposit and assessment rates can constitute an unfair 
method of competition or unfair act. There is of course no per se 
prohibition on the importation of merchandise subject to an antidumping 
duty order by resellers (i.e., entities other than the foreign 
manufacturer of the merchandise). SKF argues that respondents should 
request antidumping administrative reviews in order to obtain their own 
deposit rates. There is, however, no requirement that importers request 
an administrative review of their entries; such reviews are conducted 
only if ``a request for such a review has been received.'' 19 U.S.C. 
1675(a)(1). Having reviewed the arguments made by the IA, Bearings 
Limited, and McGuire Bearing Company on the one hand, and by SKF on the 
other, the Commission finds no basis to recognize SKF's unfair 
pecuniary benefits claim under section 337. SKF relies on antitrust 
cases addressing the ``free rider'' phenomenon. SKF's Amended Complaint 
at ] 169. However, those cases--to the extent that they discuss free 
riding at all--refer to it as a phenomenon that could excuse behavior 
that could otherwise violate the antitrust laws. The cases do not 
establish a cause of action based on free riding. Moreover, the courts 
have not extended the law of unfair competition to encompass free 
riding generally. SKF's attempt to liken respondents' conduct to 
misappropriation also is not persuasive. For there to be 
misappropriation, a property right or interest created by the skills, 
labor, and expenditure of another must be involved. SKF does not have 
such a right or interest in the antidumping duty rates that Commerce 
calculates for it. In essence, SKF's ``unfair pecuniary benefits'' 
claim has to do with the question of which antidumping duty deposit 
rates and assessment rates should be applied to resellers of 
merchandise subject to an antidumping duty order. This question is 
within Commerce's jurisdiction.
    Having examined the relevant ALJ orders, the submissions of the 
parties, and the authorities cited therein, it is hereby ordered that:
    1. Order No. 11 is reversed and the motion of the IA for summary 
determination as to the ``unfair pecuniary benefits'' claim is granted.

[[Page 61351]]

    2. This investigation is terminated with respect to the ``unfair 
pecuniary benefits'' claim.
    3. The Secretary shall serve copies of this Order on the parties of 
record and publish notice thereof in the Federal Register.

    Issued: September 23, 2002.

    By order of the Commission.
Marilyn R. Abbott,
Secretary to the Commission.
[FR Doc. 02-24675 Filed 9-27-02; 8:45 am]
BILLING CODE 7020-02-P