202 F.3d 1360 (Fed. Cir. 2000), 99-1186, Delverde v. US

Docket Nº:99-1186
Citation:202 F.3d 1360
Party Name:DELVERDE, SRL AND DELVERDE USA, INC., PLAINTIFFS-APPELLANTS, v. UNITED STATES, DEFENDANT-APPELLEE, v. BORDEN, INC., HERSHEY FOODS CORP. AND GOOCH FOODS, INC., DEFENDANTS-APPELLEES.
Case Date:February 02, 2000
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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Page 1360

202 F.3d 1360 (Fed. Cir. 2000)

DELVERDE, SRL AND DELVERDE USA, INC., PLAINTIFFS-APPELLANTS,

v.

UNITED STATES, DEFENDANT-APPELLEE,

v.

BORDEN, INC., HERSHEY FOODS CORP. AND GOOCH FOODS, INC.,

DEFENDANTS-APPELLEES.

No. 99-1186

United States Court of Appeals, Federal Circuit

February 2, 2000

As amended June 20, 2000. Petitions for rehearing granted.

Appealed from: United States Court of International Trade, Judge Jane A. Restani

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Lawrence J. Bogard, Neville, Peterson & Williams, of Washington, Dc, argued for plaintiffs-appellants. Of counsel on the brief was Constantino P. Suriano, Mound, Cotton & Wollan, of New York, New York.

A. David Lafer, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, Dc, argued for defendant-appellee, United States. With him on the brief were David W. Ogden, Acting Assistant Attorney General, and David M. Cohen, Director. Of counsel on the brief were Stephen J. Powell, Chief Counsel; Elizabeth C. Seastrum, Senior Counsel, and Terrence J. McCartin, Senior Counsel, Office of Chief Counsel for

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Import Administration, Department of Commerce, of Washington, Dc.

Lynn Duffy Maloney, Collier, Shannon, Rill & Scott, Pllc, of Washington, Dc, argued for defendants-appellees, Borden, Inc., et al. On the brief were Paul C. Rosenthal, Kathleen Weaver Cannon, and John M. Herrmann.

John A. Ragosta, Dewey Ballantine Llp, of Washington, Dc, for amici curiae Bethlehem Steel Corp., et al. With him on the brief were John R. Magnus, and Dominic L. Bianchi. Of counsel on the brief were John J. Mangan, and Stephen Narkin, Skadden, Arps, Slate, Meagher & Flom Llp, of Washington, Dc.

Sheldon E. Hochberg, Steptoe & Johnson Llp, of Washington, Dc, for amicus curiae, British Steel Engineering Steels Limited. With him on the brief were Richard O. Cunningham and Peter Lichtenbaum.

Before Lourie, Clevenger, and Gajarsa, Circuit Judges.

Lourie, Circuit Judge.

Delverde, SrL ("Delverde") and Delverde USA, Inc. appeal from the September 25, 1998 decision of the United States Court of International Trade affirming the Department of Commerce's ("Commerce's") countervailing duty determination. See Delverde, SrL v. United States, 24 F.Supp.2d 314 (Ct. Int'l Trade 1998) ("Delverde II"). Because Commerce's methodology for determining whether Delverde indirectly received countervailable subsidies from the Italian government is inconsistent with § 771(5) of the Tariff Act of 1930, 19 U.S.C. § 1677(5) (1994) ("Tariff Act"), as amended by the Uruguay Round Agreements Act, Pub. L. No. 103-465, § 251(a), 1994 U.S.C.C.A.N. (108 Stat.) 4809, 4902-03 ("URAA"), we vacate and remand.

BACKGROUND

In 1995, Commerce launched a countervailing duty investigation of certain non-egg dry pasta in packages of five pounds or less imported in 1994 from Italy. See Notice of Initiation of Countervailing Duty Investigations: Certain Pasta From Italy and Turk., 60 Fed. Reg. 30,280 (1995). Upon investigation of 17 Italian manufacturer-importers, Commerce discovered that, in 1991, Delverde purchased certain corporate assets, namely, a pasta factory and related production assets, name, and trademark, from a private company that had previously received several nonrecurring countervailable subsidies from the Italian government from 1983 to 1991. See Final Affirmative Countervailing Duty Determination: Certain Pasta From Italy, 61 Fed. Reg. 30,288, 30,289 (1996) ("Pasta From Italy"); Delverde, SrL v. United States, 989 F.Supp. 218, 226 (Ct. Int'l Trade 1997) ("Delverde I"). 1 Despite evidence that an independent accountant determined that Delverde paid fair market value for those assets in an arm's length transaction, see Delverde I, 989 F.Supp. at 227, Commerce applied the spin-off methodology described in the Restructuring section of the General Issues Appendix to Final Affirmative Countervailing Duty Determination: Certain Steel Prods. From Aus., 58 Fed. Reg. 37,217, 37,268-69 (1993) ("Steel From Aus."), and levied countervailing duties against Delverde for the 1994 year. See id.; Pasta From Italy, 61 Fed. Reg. at 30,292-94.

The methodology employed by Commerce is explained in detail in Inland Steel Bar Co. v. United States, 155 F.3d 1370 (Fed. Cir. 1998), and is summarized as follows: First, when Commerce determines that a company has received a nonrecurring subsidy, Commerce divides the amount of that subsidy by the number of years equal to "the average useful life of renewable physical assets in the industry

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concerned" and allocates an amount to each year accordingly. See 19 C.F.R. § 351.524 (1999). Second, Commerce assumes that when a company sells "productive assets" during "the average useful life," a pro rata portion of that subsidy "passes through" to the purchaser at the time of the sale. See Steel From Aus., 58 Fed. Reg. at 37,268-69. Commerce then quantifies the assumed "pass through" amount, makes adjustments based on the purchase price, allocates an amount to the year of investigation, and calculates the ad valorum subsidy rate. See id. at 37,268-69. In Delverde's case, Commerce determined that the average useful life of renewable physical assets in the food processing industry was 12 years. See Pasta From Italy, 61 Fed. Reg. at 30,289. Commerce thus held Delverde responsible for a pro rata portion of the nonrecurring subsidies that were granted to the former owner between 1983 and 1991 because they fell within that 12-year period. See id. at 30,288.

Delverde and Delverde USA, Inc. sued in the Court of International Trade, arguing that the Commerce's methodology, viz, its assumption that a pro rata portion of the former owner's nonrecurring subsidies "passed through" to Delverde as a consequence of the sale, was erroneous and inconsistent with the Tariff Act as mended by the URAA. Initially, the court agreed with the appellants and remanded the case, instructing Commerce to look at the terms of the sale to determine whether Delverde can be considered to have indirectly received the former owner's subsidies. See Delverde I, 989 F.Supp. at 234. After Commerce explained its methodology in more detail and further argued its reasonableness on remand, the court affirmed. See Delverde II, 24 F.Supp.2d at 315.

Delverde timely appealed to this court. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5) (1994).

DISCUSSION

We review the Court of International Trade's decision to affirm Commerce's final determination by applying anew that court's statutorily mandated standard of review. See LTV Co. v. United States, 174 F.3d 1359, 1362 (Fed. Cir. 1999). Therefore, we may hold unlawful Commerce's final determination if 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).

In reviewing the validity of an agency's interpretation of a statute that it is charged with administering, "we must first carefully investigate the matter to determine whether Congress's purpose and intent on the question at issue is judicially ascertainable." Timex v. I., Inc. v. United States, 157 F.3d 879, 881 (Fed. Cir. 1998); see also Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 842-43 & n.9. (1984). We do so by employing the traditional tools of statutory construction; we examine the statute's text, structure, and legislative history, and apply the relevant canons of interpretation. See Timex, 157 F.3d at 882. If we "ascertain[ ] that Congress had an intention on the precise question at issue, that intention is the law and must be given effect," Chevron, 467 U.S. at 843 n.9, and the only issue is whether the agency acted in accordance with that intent, see id. at 842; Timex, 157 F.3d at 882. If, however, we conclude that Congress either had no intent on the matter, or that Congress's purpose and intent is unclear, we defer to the agency's interpretation of the statute if it falls within the range of permissible construction. See Chevron, 467 U.S. at 843; LTV, 174 F.3d at 1363.

Appellants argue that Commerce's assumption that the nonrecurring subsidies...

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