893 F.Supp. 1112 (CIT. 1995), 93-04-00230, Usinor Sacilor v. United States
|Citation:||893 F.Supp. 1112|
|Party Name:||USINOR SACILOR, Unimetal, and Ascometal, Plaintiffs, v. UNITED STATES, Defendant, and Inland Steel Bar Company, Defendant-Intervenor. Slip Op. 95-94.|
|Case Date:||May 19, 1995|
|Court:||Court of International Trade|
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Weil, Gotshal & Manges, Washington, DC (M. Jean Anderson, Jeffrey P. Bialos, Stuart M. Rosen, A. Paul Victor, Mark B. Friedman, Diane M. McDevitt, Jonathan Bloom, and Scott Maberry), for Usinor Sacilor, Unimetal, and Ascometal, plaintiffs.
Frank W. Hunger, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice (Jeffrey M. Telep); Office of Chief Counsel for Import Admin., U.S. Dept. of Commerce (Terrence J. McCartin), Washington, DC, of counsel, for defendant.
Wiley, Rein & Fielding, Washington, DC (Charles Owen Verrill, Jr., Alan H. Price, Peter S. Jordan, and Jacqueline A. Jones), for Inland Steel Bar Co., defendant-intervenor.
MEMORANDUM and OPINION
Usinor Sacilor, Unimetal and Ascometal ("Usinor Sacilor" or "Usinor"), and Inland Steel Bar Company ("Inland Steel"), bring this consolidated action pursuant to 19 U.S.C. § 1516a(a)(2)(B)(iii) (1988) to contest the final determination by the International Trade Administration, U.S. Department of Commerce ("ITA" or "Commerce"), in Certain Hot Rolled Lead and Bismuth Carbon Steel Products From France, 58 Fed.Reg. 6221 (Jan. 27, 1993) (" Final Determination "). In this consolidated action, Usinor Sacilor and Inland Steel each seek judgment upon the agency record pursuant to USCIT Rule 56.2. The court exercises its jurisdiction under 28 U.S.C. § 1581(c) (1988).
A. Subject Matter of Commerce's Investigation.
In general terms, Commerce's investigation in this case addressed various facets of a restructuring program undertaken by the government of France ("GOF") beginning in the late 1970s to bolster France's steel industry and, specifically, Usinor Sacilor and its predecessors, Usinor and Sacilor. 1 The period of investigation ("POI") is calendar year 1991. Final Determination, 58 Fed.Reg. at 6222.
Seven components of the restructuring program are at issue in this case. These components are as follows: (1) "prets à caractéristiques spéciales" ("PACS") or "loans with special characteristics" received by Usinor and Sacilor; (2) "Fonds d'Intervention Sidérurgique" ("FIS") or the "Steel Intervention
Fund" through which Usinor and Sacilor were able to issue bonds guaranteed by the GOF to the public; (3) the GOF's practice between 1982 and 1986 of making shareholder advances to Usinor and Sacilor to finance revenue shortfalls; (4) the conversion of Usinor's and Sacilor's PACS and FIS instruments and shareholder advances to common stock; (5) the 1990 consolidation of loans that Usinor and Sacilor received through the GOF's "Fonds de Développment Economique et Social" ("FDES"); (6) the 1991 consolidation of loans that Usinor and Sacilor received through the GOF's "Caisse Francaise de Développement Industriel" ("CFDI"); and (7) the 1991 consolidation by Crédit National, a financial institution controlled by the GOF, of outstanding loans held by Usinor Sacilor. See id. at 6224-27. After investigating these aspects of the GOF's restructuring program and others not pertinent to this action, Commerce determined that Usinor Sacilor received countervailable benefits totalling 23.11 percent ad valorem. 2 For purposes of clarity, the court will set forth the relevant details of each facet of the GOF's program under review in this case.
B. Components of the GOF's Restructuring Program.
1. PACS Instruments:
The first aspect of the GOF's plan relevant to this case is the PACS instrument system. This system allowed Usinor and Sacilor "to reconstitute equity through the conversion of debt into PACS." Public Record Document Number (" Pub. Doc.") 107, Confidential Record Document Number (" Confid. Doc. ") 19 at 5. Such conversion enabled the companies to exchange their former obligations on loans and bonds for new obligations based on the PACS. See Final Determination, 58 Fed.Reg. at 6224. The responses that Commerce received during the investigation indicated that the PACS instruments were "akin to redeemable subordinated nonvoting preferred stock." Id. The responses also showed that the PACS instruments
had the following characteristics: (1) a 0.10 percent remuneration for the first five years and 1.0 percent thereafter, (2) no schedule of reimbursement but in the event the steel companies became profitable, the PACS holders could elect to redeem their PACS or share in profits according to a predetermined formula, and (3) PACS were subordinated to all but the common stock.
Final Determination, 58 Fed.Reg. at 6224. The responses further revealed that Usinor and Sacilor accounted for the PACS instruments as shareholders' equity on their balance sheets. Id.
Between 1978 and 1991, Usinor Sacilor and its predecessors used the PACS program to refinance debt on several occasions. Specifically, "[i]n 1978, Usinor and Sacilor converted 21.1 billion French francs (FF) of debt into PACS. From 1980 to 1981, Usinor and Sacilor issued FF8.1 billion of new PACS." Id. The companies subsequently converted "PACS in the amount of FF13.8 billion, FF12.6 billion and FF2.8 billion ... into common stock in 1981, 1986 and 1991, respectively." Id.
Commerce's treatment of the PACS conversions depended upon Usinor Sacilor's equity worthiness at the time of the conversions. The rationale for this treatment stems from the ITA's conclusion that "any benefits to Usinor Sacilor occurred at the point when these instruments were converted to common stock." Id. Commerce found Usinor Sacilor to be unequityworthy from 1981 through 1988 and therefore "consider[ed] the conversion of PACS to common stock in 1981 and 1986 to constitute equity infusions on terms inconsistent with commercial considerations." Id. In contrast to the 1981 and 1986 conversions, Commerce determined that "the PACS to equity conversion in 1991 was consistent with commercial considerations" because Usinor Sacilor was equity worthy by that time. Id.
2. FIS Instruments:
The second GOF program at issue is the "Fonds d'Intervention Sidérurgique" ("FIS"), or Steel Intervention Fund, created by the GOF in 1983. The FIS, in conjunction with the 1981 Corrected Finance Law, allowed Usinor and Sacilor to issue convertible bonds. The companies "issued convertible bonds to the FIS, which, in turn, with the GOF guarantee, floated bonds to the public and to institutional investors." Final Determination, 58 Fed.Reg. at 6224.
Similar to the PACS, the FIS instruments carried "a nominal 0.1% rate of return and a profit-sharing component." Plaintiffs' Brief at 3. The bonds also "established a fixed schedule of fifteen annual principal repayments, with the GOF agreeing to make the first one or two of the ... repayments and the issuing company being obligated to make the remaining ... repayments." Defendant's Brief at 10 (footnote omitted). "In 1983, 1984, and 1985, Usinor and Sacilor issued convertible bonds to the FIS. These FIS bonds were converted to common stock in 1986 and 1988." Final Determination, 58 Fed.Reg. at 6224. Based upon its unequityworthiness findings for the years 1981 through 1988, Commerce "consider[ed] the conversion of FIS bonds to common stock in 1986 and 1988 to constitute equity infusions on terms inconsistent with commercial considerations." Id.
3. Shareholder Advances:
The third pertinent component of the GOF's restructuring plan is the GOF's practice of making shareholder advances to Usinor and Sacilor to finance revenue shortfalls. This practice, which began in 1982, enabled the companies to receive interest free cash infusions upon request. Final Determination, 58 Fed.Reg. at 6224; see also Plaintiffs' Brief at 3. "These shareholders' advances carried no interest and there was no precondition for receipt of these funds." Final Determination, 58 Fed.Reg. at 6224. The GOF ended the practice in 1986 at which time the companies converted the amount of funds received through the advances to common stock. Id. In its Final Determination, Commerce determined that "shareholders' advances constitute countervailable grants at the time they were received as no shares were distributed in return for these advances when they were made to Usinor and Sacilor." Id. at 6225.
4. FDES and CFDI Loans:
The fourth element of the GOF's plan relevant to this action is the loan program established by the Law of July 13, 1978. Final Determination, 58 Fed.Reg. at 6225. This law "created participative loans ... which were by law available to all French companies. Under these loans, which were issued by the FDES and the [CFDI], the borrower paid a lower-than-market interest rate plus a share of future profits according to an agreed upon formula." Id. According to Commerce, "[t]hese loans were obtained by either Usinor, Sacilor, or their subsidiaries." Id. In 1990 and 1991, Usinor Sacilor consolidated the outstanding principal on its predecessors' FDES and CFDI loans, respectively. Id. Commerce determined that both the FDES and CFDI consolidated loans were new loans. Id.
With respect to the FDES consolidated loans, Commerce determined that they are de facto limited because the GOF provided insufficient information regarding the loans' specificity. Id. Consequently, Commerce that concluded the FDES loans "are countervailable to the extent that they were provided on terms more favorable than the...
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