566 F.Supp. 1529 (CIT. 1983), 82-10-01361, United States Steel Corp. v. United States

Docket Nº:Court No. 82-10-01361.
Citation:566 F.Supp. 1529
Party Name:UNITED STATES STEEL CORP., Republic Steel Corp., et al., Plaintiffs, v. UNITED STATES, et al., Defendants, and Companhia Siderurgica Paulista (Cosipa) and Usinas Siderurgicas De Minas Gerais (Usiminas), Defendants-Intervenors.
Case Date:June 02, 1983
Court:Court of International Trade

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566 F.Supp. 1529 (CIT. 1983)

UNITED STATES STEEL CORP., Republic Steel Corp., et al., Plaintiffs,


UNITED STATES, et al., Defendants,


Companhia Siderurgica Paulista (Cosipa) and Usinas Siderurgicas De Minas Gerais (Usiminas), Defendants-Intervenors.

Court No. 82-10-01361.

United States Court of International Trade.

June 2, 1983

Law Dept. of U.S. Steel Corp. for plaintiff U.S. Steel Corp.

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Cravath, Swaine & Moore, New York City (Joseph R. Sahid, New York City, of counsel), for plaintiffs Republic Steel Corp., et al.

J. Paul McGrath, Asst. Atty. Gen., Washington, D.C. (David M. Cohen, Branch Director, Commercial Litigation Branch, Washington, D.C., Velta A. Melnbrencis and Francis J. Sailer, Attys., Commercial Litigation Branch), Washington D.C., for defendants.

WATSON, Judge:

On a motion for review under Rule 56.1, this opinion deals with one facet of the judicial review of a recently concluded countervailing duty investigation involving steel imports from South Africa and Brazil. This facet involves the final determination made with respect to an alleged railroad rate subsidy granted by South Africa. For exports from South Africa, the assessment of countervailing duties depends solely on whether a subsidy has been provided in the sense of the "bounty or grant" identified in 19 U.S.C. § 1303. 1

The International Trade Administration of the Department of Commerce (ITA) made a preliminary determination on June 10, 1982, that the South African Transport Services (SATS), a government-owned corporation, set a railroad rate for exported steel which resulted in a subsidy because it was lower than the rate for domestic steel shipped under the same conditions. 47 Fed.Reg. 26,34 0, 26,341 (1982).

In its final determination, on August 23, 1982, the ITA found that SATS had, after the preliminary determination, made the lower rate available to domestic steel shipments. The administrative record indicates that this was done in July, (AR 3863), 2 by means of telex messages to various port managers from the SATS general manager, and was later made retroactive to April 1, 1982, (AR 4265). The ITA then found that the rail rate was not a subsidy for shipments exported after April 1, 1982.


Plaintiffs, who were petitioners for the assessment of countervailing duties, first complain that this sequence of events required the use of the procedures of section 704 of the Trade Agreements Act of 1979 (19 U.S.C. § 1671c) and called for the suspension of the investigation and the emplacement of certain safeguards. The government argues that the plaintiffs waived their objections to the reaching of a final determination by not making a timely objection during the administrative proceedings.

The Court agrees with plaintiffs that these are not appropriate circumstances for applying the rule that courts will not hear procedural objections which could have been raised and corrected on the administrative level. The Court's examination of the record persuades it that plaintiffs did not have sufficient knowledge during the course of the investigation to place on them a duty to demand the use of section 704 procedures at that time. Doyle v. United States, 599 F.2d 984, 1001 (Ct.Cl.1979), cert. denied, 446 U.S. 982, 100 S.Ct. 2961, 64 L.Ed.2d 837 (1980).

As will be shortly explained, the obligation to follow the procedures of section 704, possibly leading to suspension of the investigation, first arises at the time when the ITA finds that the practice alleged to be, or preliminarily found to be, a subsidy, will either be ended by a proposed agreement or has already been ended during the investigation. That finding is not accessible to petitioners until it is reached and announced by the ITA. Only then can an obligation be fairly placed on petitioners to

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demand the use of the suspension procedures. If, as here, the finding mistakenly leads to a final determination, rather than being used as a starting point for the procedures of section 704, the final determination is the first event to which a procedural objection can be voiced and this judicial review is the first meaningful occasion for that objection to be expressed.


We now move to the substantive dispute about the nature and use of Section 704. Plaintiffs claim that representations made by officials of a foreign government that a practice, (earlier alleged or found to be a subsidy) has been eliminated, represents the agreement to eliminate the subsidy referred to in section 704(b) (19 U.S.C. § 1671c(b)) and requires the ITA to follow the procedures of that section.

The government's response has two prongs. First, it argues that section 704 comes into play only after negotiations have taken place and the ITA is presented with a proposed agreement to end a subsidy. Second, it argues that even in that event, the ITA has complete discretion to choose between suspending the investigation or continuing it to a final determination.

Both sides seek support for their views in the language of section 704 and in the legislative history. The government reads the law as creating a narrow and completely discretionary alternative to the continuation of the investigation. It reads the history as speaking of suspension with a cautionary tone bordering on disfavor. The plaintiffs read the law as mandating suspension for the protection of domestic petitioners in cases where an alleged subsidy is ended during the investigation.

The government takes the position that it has actually helped plaintiffs more by its final determination than by suspending the investigation. It points out that, even though it found that the subsidy was no longer in effect after April 1, 1982, it continued the suspension of liquidation of entries (which had begun after the preliminary determination). It did so by characterizing the result as an affirmative determination with a zero amount of subsidy after April 1, 1982. Thus, it assertedly left all entries subject to the retroactive assessment of countervailing duties if a later administrative review under section 751 (19 U.S.C. § 1675) should reveal the resumption of the subsidy.

The Court now proceeds with its analysis of the law, dealing at each appropriate point with the arguments of the parties. The analysis leads to the conclusion that the events of this investigation required the ITA to use the procedures of section 704, if it found that the subsidy had ended during the investigation.

Section 704 appears prominently between the provision for preliminary determinations in section 703 (19 U.S.C. § 1671b) and the provision for final determinations in section 705 (19 U.S.C. § 1671d).

In it, we see an initial grant of authority to the ITA to suspend the investigation, in subsection (b) (19 U.S.C. § 1671c(b)) 3 when the foreign interests 4 agree to eliminate the subsidy. The language "may suspend the investigation" is quickly seen to be, not the unlimited power to continue investigations, but simply the power to reject an

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agreement to eliminate a subsidy which does not meet the requirements that the resulting suspension of investigation leave the petitioners in a secure position. Thus, the initial grant of authority to suspend must be read in conjunction with subsection (d), (19 U.S.C. § 1671c(d)) 5 which forbids the acceptance by the ITA of an agreement by the foreign interests unless the resulting suspension of the investigation is "in the public interest" and the agreement can be effectively monitored. This already implies strongly that the elimination of a subsidy will normally result in suspension of the investigation. It is as if Congress had said that investigations shall be suspended, provided that certain conditions are met, but chose to express its desire in a more circuitous way. When we add to this relation between subsections (b) and (d) the elaborate notification, consultation, and comment provisions of subsection (e), 6 the painstaking provisions of subsection (f) 7 regarding the complex effects of suspension, the strong provisions in subsection (i) 8 for quick resumption of the investigation and

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the assessment of penalties in certain cases, the exercise of pure discretion by the ITA in this area is seen to be unreasonable on its face. 9

It is impossible to believe that Congress provided this prominent and exhaustively detailed provision for use as a matter of unfettered discretion. The very emphasis placed on careful limitations on the authority to suspend shows that there was an expectation that the authority had to be used to deal with the elimination of alleged subsidies. The major concern of Congress was that it not be used when those eliminations somehow still jeopardized the public interest or the interests of domestic petitioners. By stressing those factors which justify denying suspension and by showing a clear concern for maintaining strong safeguards even after suspension, Congress revealed an expectation that suspension would be the normal and proper response to the elimination of a practice alleged to be a subsidy.

In approaching the interpretation of this provision, it can be assumed that Congress wrote it with the general expectation that most eliminations of subsidies would come about by means of a conventional process of negotiation and agreement. However, the Court finds it unreasonable to read this provision as operating only in response to a proposal to eliminate a subsidy in the future and not in response to the purported actual elimination of a subsidy in the course of the investigation. What this would mean, in the Court's view, is that the very situation which most directly accomplishes the legislative purposes, results in an avoidance of the careful and...

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