Acciali Speciali Terni S.P.A. v. U.S.

• Decision Date: 04 June 2002
• Docket Number: SLIP OP. 02-51. Court No. 01-00051.
• Citation: 206 F.Supp.2d 1344
• Parties: ACCIALI SPECIAL TERNI S.P.A., et al., Plaintiffs, v. UNITED STATES of America, Defendant, and Allegheny Ludlum Corp., et al., Defendant-Intervenors.
• Court: U.S. Court of International Trade

206 F.Supp.2d 1344

ACCIALI SPECIAL TERNI S.P.A., et al., Plaintiffs, v. UNITED STATES of America, Defendant, and Allegheny Ludlum Corp., et al., Defendant-Intervenors.

SLIP OP. 02-51. Court No. 01-00051.

United States Court of International Trade.

June 4, 2002.

COPYRIGHT MATERIAL OMITTED

Hogan & Hartson L.L.P., Washington, DC (Lewis E. Leibowitz, Lynn G. Kamarck, H. Deen Kaplan) for Plaintiff.

Robert D. McCallum, Jr., Assistant Attorney General; David M. Cohen, Director, Commercial Litigation Branch, Civil Division, United States Department of Justice; Lucius B. Lau, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice; Brent M. McBurney, Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, Michele D. Lynch, Attorney, Office of the Chief Counsel for Import Administration, United States Department of Commerce, for Defendant, of counsel.

Collier Shannon Scott, PLLC, Washington, DC (Eric R. McClafferty, Michael J. Coursey, Kathleen W. Cannon, David A. Hartquist) for Defendant-Intervenors.

Dewey Ballantine L.L.P., Washington, DC (John A. Ragosta, John R. Magnus, Hui Yu) for Amici Curiae.

OPINION

CARMAN, Chief Judge.

Plaintiffs contest certain aspects of the United States Department of Commerce's (the Department, or Commerce) determination in Grain-Oriented Electrical Steel From Italy; Final Results of Countervailing Duty Administrative Review, 66 Fed. Reg. 2,885 (Jan. 12, 2001) (Final Results). The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(c).

The principal dispute revolves around whether the manufacturer/exporter of the subject merchandise continued to receive countervailable subsidies after it was privatized by the Government of Italy.

BACKGROUND

I. CORPORATE HISTORY OF AST

The complex corporate history of AST begins with Instituto per la Ricostruzione Industriale (IRI), a holding company of the Government of Italy. IRI wholly owned Finsider S.p.A. (Finsider), another holding company that controlled all state-owned steel companies in Italy. Finsider's main operating subsidiary was Terni Societa' per l'Industria e l'Elettricita' S.p.A. (Terni). In 1987, as part of a restructuring, Terni transferred its assets, including those for electrical steel production, to a new company called Terni Acciai Speciali S.p.A. (TAS). Issues and Decision Memorandum: Final Results of Countervailing Duty Administrative Review: Grain-Oriented Electrical Steel from Italy from Holly A. Kuga to Troy H. Cribb (Decision Memorandum) at 2, Pl. Pub.App. Ex. 2 at 2.¹ In 1988, as part of another restructuring, Finsider and its main operating companies, including TAS, entered into liquidation and ILVA, S.p.A. (ILVA) was formed. On January 1, 1989, the day ILVA became operational, part of TAS's liabilities and most of its assets were transferred to ILVA. See Final Affirmative Countervailing Duty Determination: Grain-Oriented Electrical Steel From Italy, 59 Fed.Reg. 18,357, 18,358 (Apr. 18, 1994) (Electrical Steel). These included all assets associated with the production of electrical steel. On April 1, 1990, TAS's remaining assets and liabilities were transferred to ILVA. Only certain non-operating assets remained with TAS. Id.

From 1989 through 1993, ILVA consisted of several operating divisions, including the Specialty Steels Division located in Terni. ILVA was also majority owner of many separately incorporated subsidiaries, together with which it constituted the ILVA Group. IRI continued to own the ILVA Group. Id. In September 1993, IRI endorsed a plan to reorganize and privatize the ILVA Group by forming two new companies. Accordingly, on December 31, 1993, the Specialty Steels Division in Terni was separately incorporated by a demerger into Acciai Speciali Terni S.r.l (AST S.r.l.) (producer of specialty steel) and ILVA Laminati Piani S.r.l. (ILP) (producer of carbon steel flat products). The remainder of ILVA Group's assets, its existing liabilities, and much of the redundant workforce were transferred to ILVA Residua. Decision Memorandum at 2.

Initially, IRI owned all shares of AST S.r.l. Around the same time that IRI established AST S.r.l. as a separate corporation, IRI made a public offering for its sale. To prepare for this sale, IRI converted AST S.r.l. from a limited liability company (S.r.l.) to a stock company (S.p.A.) on February 11, 1994. Id.

KAI, a privately-held holding company jointly owned by German steelmaker Krupp AG Hoesch-Krupp and a consortium of private Italian companies called FAR Acciai S.r.l., agreed to purchase AST S.p.A. It signed a purchase agreement with IRI on July 14, 1994. Id. The European Commission approved the purchase agreement on December 21, 1994, and the shares formally changed hands effective December 23, 1994. Id.

Between 1995 and 1998, AST S.p.A. and its parent companies underwent several restructurings and changes in ownership. At the end of the period of review, Krupp Thyssen Stainless GmbH (part of the Krupp AG Hoesch-Krupp group) owned 90 percent of AST, and Fintad Securities S.A., a private Italian company, owned 10 percent of AST S.p.A. Id.

Throughout much of this opinion, the Court will refer to AST in all its forms as AST. For convenience, however, this Court will occasionally refer to AST either as Pre-Sale AST, referring to AST in its preprivatized forms, or as Post-Sale AST, referring to AST in its privatized state.

II. PROCEDURAL HISTORY

On July 7, 2000, the Department published the preliminary results of its administrative review of the countervailing duty order on grain-oriented electrical steel for the period of review January 1, 1998 through December 31, 1998, covering the manufacturer/exporter AST. See Grain-Oriented Electrical Steel From Italy; Preliminary Results of Countervailing Duty Administrative Review and Extension of Time Limit for Final Results of Countervailing Duty Administrative Review, 65 Fed.Reg. 41,950 (July 7, 2000) (Preliminary Results). In the Preliminary Results, the Department invited interested parties to comment upon the impact that Delverde, SrL v. United States, 202 F.3d 1360 (Fed.Cir.2000) (Delverde III), issued by the United States Court of Appeals for the Federal Circuit on February 2, 2000, could have upon the Department's privatization methodology. Preliminary Results, 65 Fed.Reg. at 41,951. The Department received comments from petitioners and AST in their case and rebuttal briefs. The Department also sent questionnaires soliciting further information from AST, the Government of Italy, and the European Commission on September 28, 2000 and October 27, 2000. Final Results, 66 Fed. Reg. at 2,885.

Concurrent to the above proceedings, AST challenged in this Court a separate final determination by Commerce, Final Affirmative Countervailing Duty Determination; Stainless Steel Plate in Coils From Italy, 64 Fed.Reg. 15,508 (Mar. 31, 1999) (Stainless Steel Plate in Coils). See Acciai Speciali Terni S.p.A. and Acciai Speciali Terni USA v. United States and Allegheny Ludlum Corp., et al., No. 99-06-00364, 2002 WL 342659 (CIT Feb. 1, 2002). On August 14, 2000, the Honorable Evan J. Wallach remanded Stainless Steel Plate in Coils to the Department to issue a determination consistent with Delverde III. On November 21, 2000, the Department issued its interpretation of Delverde III and its revised change in ownership methodology in Draft Results of Redetermination Pursuant to Court Remand, Acciai Speciali Terni S.p.A. v. United States (Draft Redetermination).

The next day, the Department placed the public version of the Draft Redetermination on the record of the administrative review being challenged in this action and gave the parties an opportunity to comment upon the change in ownership approach. In addition to submitting comments on December 6, 2000, petitioners and AST participated in a public hearing held by the Department on December 15, 2000. Final Results, 66 Fed.Reg. at 2,885.

On December 19, 2000, the Department issued the Final Results of Redetermination Pursuant to Court Remand, Acciai Speciali Terni S.p.A. v. United States (Final Redetermination). See Acciai Speciali Terni S.p.A. v. United States and Allegheny Ludlum Corp., et al., 2002 WL 342659 at *3. Afterwards, it placed the Final Redetermination on the record of the administrative review being challenged in this action.

On January 12, 2001, the Department issued the Final Results that Plaintiffs are challenging in this action, calculating a net subsidy rate of 14.25 percent for the period of review. 66 Fed.Reg. at 2,886.

III. DELVERDE III

As stated above, the United States Court of Appeals for the Federal Circuit issued Delverde III on February 2, 2000. Its central role in both the Department's proceedings below and the parties' contentions before this Court necessitates a brief summary of the decision.

In Delverde III, Commerce conducted a countervailing duty investigation of the company Delverde for the period of review 1994. In the course of the investigation, Commerce learned that Delverde had paid fair market value (FMV) for corporate assets from a private company that had received nonrecurring countervailable subsidies from the Government of Italy from 1983-1991. See Delverde III, 202 F.3d at 1362. Commerce determined the concerned assets had a 12-year average useful life. It divided the subsidy by the average useful life to reach an allocation of the subsidy for each of the twelve years. Because Commerce assumed a portion of the subsidies passed through to Delverde when Delverde purchased the concerned assets, Commerce, after making adjustments based on the purchase price, allocated a subsidy amount to Delverde for its 1994 period of review. Delverde argued before this Court that Commerce's assumption that a pro rata portion of the former owner's nonrecurring subsidies "passed through" to Delverde was erroneous and not in accordance with the ...