Inland Steel Industries, Inc. v. U.S.

Decision Date02 June 1997
Docket NumberCourt No. 93-09-00567-CVD.,Slip Op. 97-71.
Citation967 F.Supp. 1338
PartiesINLAND STEEL INDUSTRIES, INC., et al., Plaintiffs, v. UNITED STATES, Defendant, and Usinor Sacilor, et al., Defendants-Intervenors.
CourtU.S. Court of International Trade

Frank W. Hunger, Assistant Attorney General of the United States; David M. Cohen, Director, Commercial Litigation Branch, Civil Division, United States Department of Justice (A. David Lafer); Terrence J McCartin, Washington, DC, Office of Chief Counsel for Import Administration, United States Department of Commerce, of Counsel, for defendant.

Weil, Gotshal & Manges (Stuart M. Rosen, New York City, Mark F. Friedman and Jonathan Bloom), for defendants-intervenors Usinor Sacilor, Sollac and GTS.

Skadden, Arps, Slate, Meagher & Flom (John J. Mangan, Washington, DC), for defendants-intervenors U.S. Steel Group et al.

OPINION

CARMAN, Chief Judge.

This case is before the Court on plaintiffs' Motion for Judgment on the Agency Record, pursuant to U.S. CIT R. 56.2. Both plaintiffs and defendant-intervenors challenge certain aspects of the Department of Commerce's ("Department" or "Commerce") Final Affirmative Countervailing Duty Determinations: Certain Steel Products from France, 58 Fed.Reg. 37,304 (Dep't Comm.1993) (final determ.) ("Final Determination"), and relevant portions of the General Issues Appendix to Final Affirmative Countervailing Duty Determination: Certain Steel Products from Austria, 58 Fed.Reg. 37,217, 37,225-73 (Dep't Comm.1993) ("General Issues Appendix"). Defendant asserts this Court should affirm Commerce's Final Determination, with the exception that it requests the Court remand to Commerce the issue of whether certain Crédit National export loans discovered at verification are countervailable.

The Court has jurisdiction pursuant to 28 U.S.C. § 1581(c) (1988), and for the reasons set forth below, sustains the Final Determination with the exception that the Court remands to Commerce the issue of whether certain Crédit National export loans discovered for the first time at verification conferred a countervailable benefit on Usinor Sacilor.

BACKGROUND

In accordance with a February 18, 1994 scheduling order, and after extensive consultation with the parties and upon their consent the parties were directed to brief five general issues arising out of determinations by the International Trade Administration addressing steel products from various countries, as well as country-specific issues raised by those determinations. In prior opinions, this Court has disposed of all challenges to the general issues. See British Steel plc v. United States, 936 F.Supp. 1053 (CIT 1996) ("British Steel IV"); British Steel plc v. United States, 929 F.Supp. 426 (CIT 1996) ("British Steel III"); British Steel plc v. United States, 924 F.Supp. 139 (CIT 1996) ("British Steel II"), appeals docketed, Nos. 96-1401 to -06 (Fed. Cir. June 21, 1996); British Steel plc v. United States, 879 F.Supp. 1254 (CIT 1995) ("British Steel I"), appeals docketed, Nos. 96-1401 to -06 (Fed. Cir. June 21, 1996). What remains before the Court are the parties' country-specific challenges to Commerce's steel determinations. This opinion addresses the French country-specific issues raised by the parties with respect to Commerce's Final Determination that remain following the issuance of this Court's opinions addressing the general issues. While the Court believes this opinion is in no way inconsistent with its prior opinions addressing the general issues, to the extent any perceived inconsistencies arise, this Court's findings in the general issues opinions prevail.

In this consolidated action, Inland Steel Industries, Incorporated, Bethlehem Steel Corporation, LTV Steel Company, Incorporated, National Steel Corporation, Armco Steel Company, L.P., Geneva Steel, U.S. Steel Group a Unit of USX Corporation, Gulf States Steel Incorporated of Alabama, Sharon Steel Corporation, WCI Steel, Incorporated, Laclede Steel Company, and Lukens Steel Company (collectively "plaintiffs" or "Inland Steel"), and Usinor Sacilor and two of its subsidiaries, Sollac and GTS (collectively "defendant-intervenors" or "Usinor Sacilor"), challenge certain aspects of the Final Determination and relevant portions of the General Issues Appendix.

The Final Determination addresses subject merchandise manufactured and exported by Usinor Sacilor during the period of investigation ("POI") of calendar year 1991. The Final Determination found a subsidy rate of 15.49% ad valorem, although this rate was later revised downward to 15.12% ad valorem when certain clerical errors in the Final Determination were corrected. See Countervailing Duty Order and Amendment to Final Affirmative Countervailing Duty Determination: Certain Steel Products from France, 58 Fed.Reg. 43,759 (Dep't Comm. 1993) ("Amended Final Determination").

A. Subsidies Examined in the Final Determination

During the course of its investigation, Commerce examined subsidies provided by the Government of France ("GOF") to the French steel industry, particularly to Usinor Sacilor and its predecessors.1 Commerce's investigation revealed Usinor Sacilor and its predecessors received substantial subsidies, including various forms of grants, equity infusions and loans, from the GOF during the fifteen years preceding the POI, as the GOF tried to restructure and revitalize the French steel industry.

1. PACS

A principal component of the GOF's 1978 plan to assist French steel companies in restructuring their debts was the creation and issuance of prêts à caractéristiques spéciales ("PACS"), or loans with special characteristics, a new type of debt instrument. The principal terms of the PACS required the debtor company to: (1) make interest payments of 0.1 percent for the first five years following the loan; (2) make interest payments of 1.0 percent and make principal and supplementary interest payments, with the amount to be set by the Minister of Economy, beginning in the sixth year after receipt of the loan; (3) make the principal and supplementary interest payments from its profits; (4) pay the face amount of the PACS plus interest; and (5) subordinate the PACS to all other forms of debt, although PACS were superior to common stock.

Commerce concluded the PACS constituted debt instruments upon their issuance, based on its observation the PACS' repayment obligation and interest payment provisions were characteristics of a debt instrument.2 See General Issues Appendix, 58 Fed.Reg. at 37,255. In reaching its determination, Commerce focused on the first criteria, noting "these instruments carry an obligation for repayment, even though there is no predetermined maturity date." Id. Additionally, with respect to the second criteria, Commerce observed "these instruments have guaranteed interest payments." Id.

In the course of subsequent restructuring of the French steel industry, the GOF and French steel companies periodically agreed to convert PACS into the debtor company's common stock in order to ease the steel companies' debt burdens. In 1981, French steel companies converted FF 13.8 billion worth of PACS into common stock, while the companies converted FF 12.6 billion and FF 2.8 billion worth of PACS into common stock in 1986 and 1991, respectively. With respect to the PACS conversions that occurred in 1981 and 1986, Commerce determined Usinor and Sacilor were not equity worthy in those years. As a result, Commerce determined the transactions were equity infusions3 made on terms inconsistent with commercial considerations, and therefore countervailable.4 As for the 1991 conversions, Commerce determined Usinor Sacilor was equity worthy in 1991 and the equity infusion was not inconsistent with commercial considerations, and thus was not countervailable.

2. FIS Bonds

In 1983, the GOF created the Fonds d'Intervention Sidérurgique ("FIS"), or Steel Intervention Fund, to facilitate Usinor and Sacilor's exercise of their authority to issue convertible bonds.5 Usinor and Sacilor issued convertible bonds to the FIS in 1983, 1984, and 1985. The FIS in turn issued bonds, guaranteed by the GOF, to the public. In 1986 and 1988, these bonds were converted to the companies' common stock as a means of easing their debt burden.

As with its analysis of the PACS, Commerce first determined the FIS bonds constituted debt upon issuance, noting the FIS bonds satisfied the first set of hierarchical criteria used to classify hybrid instruments as debt because "these instruments have fixed amortization schedules."6 General Issues Appendix, 58 Fed.Reg. at 37,255. Additionally, Commerce determined the conversion of FIS bonds into common stock constituted a debt-to-equity conversion, or equity infusion, which was countervailable because Usinor and Sacilor were unequity worthy in 1986 and 1988 when the conversions were made.

3. Shareholders' Advances

Beginning in 1982, the GOF supplied Usinor and Sacilor with grants which were accounted for as shareholders' advances. The advances, which carried no interest or other precondition, were intended to finance revenue shortfalls experienced by Usinor and Sacilor. The advances were distributed on an ad hoc basis, without any legislative mandate or specific agreement, although they did have to be authorized by the Ministry of Treasury. While Usinor and...

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