Allegheny Ludlum Corp. v. U.S.

• Citation: 367 F.3d 1339
• Decision Date: 13 May 2004
• Docket Number: No. 03-1189.,No. 03-1248.,03-1189.,03-1248.
• Parties: ALLEGHENY LUDLUM CORP., Armco, Inc. (now known as AK Steel), The United Steel Workers of America, AFL CIO/CLC, Butler Armco Independent Union, and Zanesville Armco Independent Organization, Plaintiffs-Appellants, v. UNITED STATES, Defendant-Appellant, v. Usinor, Ugine S.A., and Uginox Sales Corporation, Defendants-Appellees, and Usinor Stainless USA, Inc., Defendant.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

367 F.3d 1339

ALLEGHENY LUDLUM CORP., Armco, Inc. (now known as AK Steel), The United Steel Workers of America, AFL CIO/CLC, Butler Armco Independent Union, and Zanesville Armco Independent Organization, Plaintiffs-Appellants, v. UNITED STATES, Defendant-Appellant, v. Usinor, Ugine S.A., and Uginox Sales Corporation, Defendants-Appellees, and Usinor Stainless USA, Inc., Defendant.

No. 03-1189.

No. 03-1248.

United States Court of Appeals, Federal Circuit.

May 13, 2004.

Kathleen W. Cannon, Collier Shannon Scott, PLLC, of Washington, DC, argued for plaintiffs-appellants. With her on the brief were David A. Hartquist and Eric R. McClafferty. Of counsel were John M. Herrmann and Lynn D. Maloney.

John McInerney, Chief Counsel for Import Administration, United States Department of Commerce, of Washington, DC, argued for defendant-appellant. With him on the brief were Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director, Jeanne E. Davidson, Deputy Director, and David D'Alessandris, Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC. Of counsel on the brief were Robert Nielsen and Dean A. Pinkert, Senior Attorneys, Import Administration, United States Department of Commerce, of Washington, DC.

Stephen J. Marzen, Shearman & Sterling LLP, of Washington, DC, argued for defendants-appellees. On the brief were Thomas B. Wilner and Quentin M. Baird. Of counsel were Robert S. LaRussa, Jeffrey M. Winton and Christopher M. Ryan.

Before MICHEL, RADER, and SCHALL, Circuit Judges.

RADER, Circuit Judge.

After remand, the United States Court of International Trade affirmed the Department of Commerce's (Commerce's) countervailing duty rate on Usinor's products. Allegheny Ludlum Corp. v. United States, 246 F.Supp.2d 1304 (Ct. Int'l Trade 2002) (Allegheny II); Allegheny Ludlum Corp. v. United States, 182 F.Supp.2d 1357 (Ct. Int'l Trade 2002) (Allegheny I). Because the Court of International Trade correctly determined that the same-person methodology for calculating a countervailing duty rate is not in accordance with law, this court affirms.

I.

In the 1980s, France became the sole owner of Usinor and Salicor, two French steel companies, and placed them under the ownership of a holding company, also called Usinor. In 1993, Commerce determined that certain nonrecurring, debt-relief subsidies to Usinor were countervailable. These subsidies included conversions of loans with special characteristics into equity, conversions of certain bonds into equity, and shareholders' advances. Two years later, France began privatizing Usinor through sales of stock to the French and international public, Usinor employees, and stable shareholders, including investors that were restricted from selling during the privatization process. The privatization was complete by 1998.

In mid-1998, Commerce initiated countervailing duty investigations to determine whether manufacturers of stainless steel sheet and strip were receiving countervailable subsidies in calendar year 1997. Approximately one year later, Commerce issued its final affirmative determination, finding a total estimated net countervailable duty (CVD) of 5.38 percent ad valorem for Usinor. See Final Affirmative Countervailing Duty Determination: Stainless Steel Sheet and Strip in Coils From France, 64 Fed.Reg. 30,774 (June 8, 1999). In calculating that countervailable subsidy rate, Commerce used its then-current gamma methodology.

Usinor challenged Commerce's determination before the Court of International Trade, but before that court could render a decision, Commerce requested a remand to examine its methodology in light of Delverde, SrL v. United States, 202 F.3d 1360 (Fed.Cir.2000) (Delverde III). Delverde III invalidated the gamma methodology in view of 19 U.S.C. § 1677(5)(F), enacted to overrule the Court of International Trade's decision in Saarstahl AG v. United States, 858 F.Supp. 187 (Ct. Int'l Trade 1994), rev'd, 78 F.3d 1539 (Fed.Cir.1996). In Saarstahl, the Court of International Trade held that an arm's-length sale extinguished any competitive benefit, thus eliminating any countervailable subsidies. 858 F.Supp. at 194. To the contrary, 19 U.S.C. § 1677(5)(F) provides:

A change in ownership of all or part of a foreign enterprise or the productive assets of a foreign enterprise does not by itself require a determination by the administering authority that a past countervailable subsidy received by the enterprise no longer continues to be countervailable, even if the change in ownership is accomplished through an arm's length transaction.

19 U.S.C. § 1677(5)(F) (2000). Under this section, this court in Delverde III examined the sale of the assets of a privately owned pasta producer to a different privately owned pasta producer. The pasta producer that sold its assets had received subsidies from the Italian government. Delverde III called upon this court to determine whether the asset sale extinguished the pre-sale subsidies. This court ruled that the statute proscribed a per se application of countervailing duties based on past countervailable subsidies. Instead this court required Commerce to examine the circumstances of the transaction to determine whether the countervailable subsidy survived the transfer. Delverde III, 202 F.3d at 1366.

Upon remand after Delverde III, Commerce applied a new methodology, designated the same-person methodology, to Usinor's privatization. Using four factors borrowed from general corporate law, the same-person methodology examined the pre- and post-privatization entities in light of: the continuity of general business operations; the continuity of production facilities; the continuity of assets and liabilities; and the retention of personnel. From these four factors, Commerce concluded that the only change to Usinor was the identity of the shareholders. In particular, Commerce determined that post-privatization Usinor was the same corporate person as pre-privatization Usinor and had retained the pre-privatization subsidies. On the basis of this finding, Commerce calculated Usinor's CVD rate to be 7.72 percent ad valorem. Usinor appealed to the Court of International Trade.

The Court of International Trade ruled that Commerce's same-person methodology did not comply with Delverde III and 19 U.S.C. § 1677(5)(F). Specifically, the trial court observed that Commerce may not create a per se rule. The trial court further found that the same-person methodology, in practice, amounts to such an automatic rule and circumvents the requirement to "look at the facts and circumstances of the TRANSACTION, to determine if the PURCHASER, received a subsidy, directly or indirectly, for which it did not PAY ADEQUATE COMPENSATION." Allegheny I, 182 F.Supp.2d at 1366 (capitalization original). The trial court further noted:

From Delverde III, it is evident that ... Commerce [must] determine if the subsidy continued to benefit the post-privatized corporation. In this instance, Commerce has developed a methodology that circumvents its statutorily mandated duty to determine if a benefit was conferred on the privatized corporation.

Id. Accordingly, the court remanded the case. Id. at 1369. In the second remand, Commerce examined the details of the transaction and determined no countervailable subsidies survived the privatization of Usinor. Specifically, Commerce found "the overwhelming majority of the purchasers of Usinor's shares paid full, fair market value (or more than full value) for those shares and, therefore, did not receive any countervailable subsidy." Results of Redetermination Pursuant to Court Remand, Allegheny Ludlum Corp. v. United States, CIT No. 99-09-00566, at 4 (June 3, 2002). Thus, Commerce's examination of the details of the Usinor transaction yielded a CVD rate of 0 percent. On further review, the Court of International Trade affirmed. Allegheny II, 246 F.Supp.2d 1304.

After this countervailing duty investigation was underway, Commerce, for reasons unrelated to this litigation, abandoned the same-person methodology in favor of a privatization methodology. The current privatization methodology examines the terms and conditions of a change in ownership, including whether the new owners paid fair market value for the privatized business. See Notice of Final Modification of Agency Practice Under Section 123 of the Uruguay Round Agreements Act, 68 Fed.Reg. 37,125 (June 23, 2003). Commerce changed its position because the World Trade Organization (WTO) issued an appellate report stating that the same-person methodology violates § 123 of the Uruguay Round Agreements Act (URAA). See United States — Countervailing Measures Concerning Certain Products from the European Communities, WT/DS212/AB/R (Dec. 9, 2002). Commerce's current practice, however, applies only prospectively to countervailing duty investigations initiated after June 30, 2003, or in some cases November 8, 2003. 68 Fed.Reg. at 37,138.

Commerce and the domestic producers (collectively, Allegheny Ludlum) now appeal, arguing that the same-person methodology does not violate either the statute or precedent.

II.

This court reviews antidumping judgments of the Court of International Trade by applying anew the same statutory standard as that court. Micron Tech., Inc. v. United States, 117 F.3d 1386, 1392-93 (Fed.Cir.1997). The relevant statute states that "the Court shall hold unlawful any determination, finding or conclusion found ... to be unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1) (2000). This court reviews statutory construction without deference. Saarstahl, AG v. United States, 78 F.3d 1539, 1542 (Fed.Cir.1996).

In particular, this court reviews the Court of International Trade's statutory construction under the two-fold procedure of Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81...