Hercules, Inc. v. US

• Citation: 673 F. Supp. 454,11 CIT 710
• Decision Date: 20 October 1987
• Docket Number: Court No. 83-07-00951,83-09-01324 and 83-09-01325.,83-07-01075
• Parties: HERCULES, INC., Plaintiff, v. UNITED STATES, Defendant, Societe Nationale des Poudres et Explosifs, Defendant-Intervenor.
• Court: U.S. Court of International Trade

673 F. Supp. 454

11 CIT 710

HERCULES, INC., Plaintiff, v. UNITED STATES, Defendant Societe Nationale des Poudres et Explosifs, Defendant-Intervenor.

Court Nos. 83-07-00951, 83-07-01075, 83-09-01324 and 83-09-01325.

United States Court of International Trade.

October 20, 1987.

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Dow, Lohnes & Albertson (William Silverman, John C. Jost, Margaret B. Dardess, and James M. McElfish, Jr., Washington, D.C., on the motions), for plaintiff and defendant-intervenor Hercules, Inc.

Richard K. Willard, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civil Div., U.S. Dept. of Justice (J. Kevin Horgan, on the motions), Office of the Asst. Gen. Counsel, for Import Admin., U.S. Dept. of Commerce (Eileen P. Shannon, on the motions), and Office of the General Counsel, U.S. Intern. Trade Com'n (Randi S. Field, Washington, D.C., on the motions), for defendant.

Busby, Rehm & Leonard, P.C. (Will E. Leonard, James Taylor, Jr., Ruth Bale Lippincott and L. Daniel Mullaney, Washington, D.C., on the motions), for plaintiff and defendant-intervenor Societe Nationale des Poudres et Explosifs.

MEMORANDUM OPINION

CARMAN, Judge:

Before the Court are four related cases arising out of the importation of industrial nitrocellulose from France. These cases result from challenges by both the domestic producer and the importer of the antidumping and the countervailing duty determinations.

In Court No. 83-07-00951 (CV2D 951), the domestic producer of industrial nitrocellulose, Hercules, Inc. (Hercules), moves pursuant to Rule 56.1 of the Rules of this Court for judgment upon the agency record challenging a portion of the countervailing duty findings of the United States Department of Commerce, International Trade Administration (Commerce) in Final Affirmative Countervailing Duty Determination; Industrial Nitrocellulose From France, 48 Fed.Reg. 11,971 (1983), amended, Industrial Nitrocellulose From France; Amendment to Notice of Final Affirmative Countervailing Duty Determination, 48 Fed.Reg. 25,254 (1983) (Final CVD Determination). In its second action, Court No. 83-09-01324 (LTFV 1324), Hercules moves for judgment upon the agency record challenging a portion of the less than fair value findings of Commerce in Final Determination of Sales at Less Than Fair Value; Industrial Nitrocellulose from France, 48 Fed.Reg. 21,615 (1983) (Final LTFV Determination).

The foreign producer and exporter of industrial nitrocellulose from France, Societe Nationale des Poudres et Explosifs (SNPE) has filed with this Court its Rule 56.1 motion challenging, in Court No. 83-07-01075 (CVD 1075), the same countervailing duty determination challenged by Hercules, Final CVD Determination. In this action, SNPE also challenges the injury determination of the United States International Trade Commission (ITC). Similarly, in Court No. 83-09-01325 (LTFV 1325), SNPE moves for judgment upon the agency record challenging the same less than fair value dumping investigation, Final LTFV Determination, challenged by Hercules in LTFV 1324. In addition, SNPE challenges the ITC injury determination in LTFV 1325.

I. BACKGROUND

Industrial nitrocellulose (INC), the subject of the investigations, is a dry, white, amorphous, synthetic chemical which results from the action of nitric acid on cellulose and is extremely flammable. Industrial nitrocellulose contains between 10.8% and 12.2% nitrogen, differentiating it from explosive grades of nitrocellulose, which contain over 12.2% nitrogen. INC is stored and shipped wet with alcohol. Industrial nitrocellulose comes in several viscosities and is used in the production of lacquers, films, coatings, furniture finishes, and printing inks. The product has been classified as cellulosic plastic materials, other than cellulose ascetate, under item 445.2500 of the Tariff Schedules of the United States (TSUS). Explosive grade nitrocellulose has a different classification under the TSUS. At the time of the investigation, SNPE was the sole French producer and exporter of INC to the United States. Since 1978, Hercules was the sole United States producer of INC.

Prior to the creation of SNPE, the French Government had historically maintained a monopoly over trade in powders and explosives which extended to industrial nitrocellulose, a co-product of explosive grade nitrocellulose. The monopoly was operated by the Ministry of Defense through Service des Poudres (SP), one of the Ministry's divisions. Pursuant to the Treaty of Rome which established the European Economic Community (EEC) and in response to its treaty obligations, the French Government transferred, in exchange for stock, the commercial and industrial assets and operations of SP to SNPE, a newly formed public corporation. The French Government received over 99% of the outstanding stock of SNPE.

At the time of SNPE's incorporation, pursuant to French law, the employment of all military and civilian personnel of SNPE's predecessor, SP, was at the disposal of the president of SNPE. After a period of one year, these employees were permitted to be either placed again at the disposal of the Minister of Defense or recruited by SNPE in accordance with French labor laws. Employees with civil service status who remained with SNPE had the option of retaining that status and continuing to be subject to the conditions applicable to any facility under the jurisdiction of the Ministry of National Defense. Some employees continued to retain civil service status; however, all newly hired employees were not given this status.

II. THE COUNTERVAILING DUTY INVESTIGATION

A. Introduction

On September 14, 1982, Hercules filed a countervailing duty petition with Commerce and the ITC alleging subsidies were being provided to French producers of INC by the Government of France (GOF). Hercules also alleged the United States INC industry was materially injured, or was threatened with material injury, by reason of imports of INC from France. On September 17, 1982, upon notification from Commerce, the ITC instituted a preliminary countervailing duty investigation of INC from France.¹ On October 4, 1982, Commerce instituted a preliminary countervailing duty investigation. Initiation of Countervailing Duty Investigation; Industrial Nitrocellulose From France, 47 Fed.Reg. 44,807 (1982).

The ITC issued an affirmative preliminary determination, on October 29, 1982. Nitrocellulose From France; Determination, 47 Fed.Reg. 51,024 (1982). The ITC determined there was a reasonable indication imports of INC from France were materially injuring, or threatening to materially injure, a U.S. industry. The vote of the Commission making the determination was unanimous.

On December 8, 1982, Commerce, at Hercules' request, declared the investigation "extraordinarily complicated," as defined in section 703(c) of the Tariff Act of 1930 (the Act), as amended, 19 U.S.C. 1671b(c) (1981), and extended the deadline for the preliminary determination from December 8, 1982 to December 22, 1982. Commerce made a negative preliminary determination on December 22, 1982, stating the Government of France was providing SNPE with certain benefits constituting subsidies within the meaning of the Act. However, the estimated ad valorem amount of the net subsidies was found to be de minimis. Preliminary Negative Countervailing Duty Determination; Industrial Nitrocellulose From France, 47 Fed.Reg. 58,330 (1982).

Commerce made a final affirmative countervailing duty determination on March 14, 1983. Final CVD Determination. Commerce found "certain benefits which constitute subsidies within the meaning of the counterviling sic duty law were being provided to SNPE.... at the estimated net subsidy of 3.248 percent ad valorem." 48 Fed.Reg. at 11,971. The 3.248 figure, however, was amended to 3.604 on June 6, 1983. 48 Fed.Reg. 25,254.

Commerce, in its final determination, found the following benefits constituted countervailable subsidies:

(1) A grant from the Ministry of Defense to SNPE for plant modernization at Bergerac;

(2) Cross-subsidization of industrial nitrocellulose through military sales of nitrocellulose;

(3) Assumption of certain labor costs by the Government of France; and

(4) Tax and non-tax regional development incentives.

The ITA determined the following programs did not confer subsidies:

(1) The reorganization of the explosive powders and substances industry, pursuant to the Treaty of Rome, by creating SNPE;

(2) Equity infusions;

(3) Financing from Credit National;

(4) Research and development funding;

(5) Energy conservation grants;

(6) Labor assistance programs;

(7) Anti-pollution incentives;

(8) Local business tax reductions;

(9) Equipment subsidies; and

(10) Input discounts.

Finally, the ITA determined that certain other government programs were not used by the French nitrocellulose producer.²

In accordance with 19 U.S.C. ž 1671d, the ITC had 75 days after Commerce's affirmative final determination to determine whether or not the imports were materially injuring or threatening to materially injure a U.S. industry. On March 22, 1983, the ITC instituted a final countervailing duty investigation of INC from France. Nitrocellulose From France, 48 Fed.Reg. 15,018 (1983). On June 15, 1983, the Commission transmitted its affirmative final countervailing duty determination and report to Commerce finding a U.S. industry was materially injured by imports of INC. Nitrocellulose From France, 48 Fed.Reg. 27,453 (1983). The vote of the Commission was 2 to 1, with Commissioner Stern dissenting. Thereafter, on June 22, 1983, notification of Commerce's countervailing duty order was published in the Federal Register. Industrial Nitrocellulose From France; Countervailing Duty Order, 48 Fed.Reg. 28,521 (1983).

Hercules initiated an action seeking judicial review of Commerce's countervailing duty order, CVD 951, on June 29, 1983. SNPE followed...