Bethlehem Steel Corp. v. United States, Court No. 82-10-01369.

• Decision Date: 08 June 1984
• Docket Number: Court No. 82-10-01369.
• Citation: 590 F. Supp. 1237
• Parties: BETHLEHEM STEEL CORP., Plaintiff, v. UNITED STATES, Defendant and Highveld Steel and Vandium Corp., Defendant-Intervenor.
• Court: U.S. Court of International Trade

590 F. Supp. 1237

BETHLEHEM STEEL CORP., Plaintiff, v. UNITED STATES, Defendant and Highveld Steel and Vandium Corp., Defendant-Intervenor.

Court No. 82-10-01369.

United States Court of International Trade.

June 8, 1984.

Richard K. Willard, Acting Asst. Atty. Gen., David M. Cohen, Director Commercial Litigation Branch, Washington, D.C. (Velta A. Melnbrencis, Asst. Director, New York City, Francis J. Sailer and A. David Lafer, Washington, D.C., attorneys), for defendant.

Law Offices of Eugene L. Stewart, Washington, D.C. (Eugene L. Stewart, Terence P. Stewart and Paul W. Jameson, Washington, D.C.) special counsel and Law Department Bethlehem Steel Corp. (Curtis H. Barnette, General Counsel, Meredith Hemphill, Jr., Asst. General Counsel, Bethlehem, Pa., Laird D. Patterson, General Atty., Washington, D.C., and Roger W. Robinson, General Atty., Bethlehem, Pa.), for plaintiff.

Busby, Rehm & Leonard, Washington, D.C. (David Busby, Washington, D.C., of counsel), for defendant-intervenor.

Busby, Rehm & Leonard, Washington, D.C. (John B. Rehm, Washington, D.C., of counsel), for amicus curiae Hoesch Werke AG.

Steptoe & Johnson, Washington, D.C. (Michael Sandler and Alice L. Mattice, Washington, D.C., of counsel), for amicus curiae British Steel Corp.

Windels, Marx, Davies & Ives, New York City (Pierre F. de Ravel d'Esclapon, New York City, of counsel), for amicus curiae AG der Dillinger Huttenwerke and SACILOR.

Sharrets, Paley, Carter & Blauvelt, Washington, D.C. (Peter O. Suchman, Washington, D.C., of counsel), for amicus curiae Hoogovens Groep BV.

Robert M. Gottschalk, New York City (Richard E. Hull, Baltimore, Md., of counsel), for amicus curiae Forges de Clabecq., S.A.

Arent, Fox, Kintner, Plotkin & Kahn, Washington, D.C. (Stephen L. Gibson, Washington, D.C., of counsel), for amicus curiae Stahlwerke Peine-Salzgitter AG.

Mudge, Rose, Guthrie & Alexander, New York City (William N. Walker, New York City, of counsel), for amicus curiae Usinor.

Arter, Hadden & Hemmendinger, Washington, D.C. (William H. Barringer, Christopher Dunn and Arthur J. Lafave, III, Washington, D.C., of counsel), for amici curiae Companhia Siderurgica Paulista and Usina Siderurgicas De Minas Gerais.

WATSON, Judge:

This action is a judicial review of the final determination made by the International Trade Administration of the Department of Commerce (ITA) in a countervailing duty investigation of certain steel products from South Africa. This opinion deals with the phase of the determination in which the ITA determined that an income tax deduction allowed for the expenses of employee training programs conducted by the South African Iron and Steel Industrial Corporation (ISCOR) and the Highveld Steel and Vanadium Corporation (Highveld) was not a bounty or grant. 47 Fed.Reg. 39379, 39381-82 (Sept. 7, 1982).

The practice at issue was one in which companies (whose employee training programs were certified by the South African Department of Manpower) were allowed to deduct 200 percent of the expenses of the training program from their taxable income. The ITA found that this practice was not a bounty or grant because of "the general availability of this tax benefit." 47 Fed.Reg. 39382. The ITA found that all qualified training programs were available to all companies and industries and they were not restricted to certain sectors of the economy or to exporters. It stated that "Our interpretation of the Act and past practice is that generally available benefits are not bounties or grants." 47 Fed.Reg. 39383.

The ITA explained the rationale of its decision in greater detail in Appendix 4 of its carbon steel products determinations (of which this determination was one) 47 Fed. Reg. at 39328. It read Section 771(5) of the Trade Agreements Act (19 U.S.C. § 1677(5)) as limiting domestic subsidies to those which are given to only one company or industry, or to a limited group of companies or industries, or to companies or industries in a limited region or regions of a country. It stated that Congress did not intend to require the assessment of countervailing duties for programs which benefitted all industries. It saw support for this conclusion in Congressional intent that the term "subsidy" be given the same meaning as "bounty or grant" and stated that generally available programs had never been considered to give rise to a bounty or grant. In this opinion, the Court affirms the ITA determination solely on the ground that the practice in question was a tax law, and tax laws are not subsidies to the taxpayer if their terms are generally available. The Court rejects the broader rationale that, as a rule, generally available benefits are not subsidies.

At the outset, a short discussion of the particular provisions in the law governing this action may serve to avoid confusion. South Africa is not a "country under the Agreement," within the meaning of section 701(b) of the Trade Agreements Act of 1979 (19 U.S.C. § 1671(b)).¹ The main consequence is that the assessment of countervailing duties on its products does not require an injury determination as a basis for the assessment of those duties. For this purpose, the law expressed in 19 U.S.C. § 1303 governs. That provision is a direct descendant of the original countervailing duty laws in that, aside from not requiring an injury determination, it continues to refer to the practice which warrants assessment of duty as "any bounty or grant."² The Trade Agreements Act of 1979 uses the term "subsidies" to describe the same practices. The primary purpose of the definition of subsidy in section 771(5) of the Act (19 U.S.C. § 1677(5)) is to make it plain that the term "subsidy" has the same meaning as the term "bounty or grant" and that there is a complete harmony and continuity between the two provisions. The Trade Agreements Act of 1979 then goes on to give, for the first time, specific examples of subsidies, the second group of which, consisting of certain specified domestic subsidies, is the focus of attention in this dispute. The entire provision reads as follows:

(5) Subsidy. The term "subsidy" has the same meaning as the term "bounty or grant" as that term is used in section 303 of this Act 19 U.S.C. § 1303, and includes, but is not limited to, the following:

(A) Any export subsidy described in Annex A to the Agreement (relating to illustrative list of export subsidies).

(B) The following domestic subsidies, if provided or required by government action to a specific enterprise or industry, or group of enterprises or industries, whether publicly or privately owned, and whether paid or bestowed directly or indirectly on the manufacture, production, or export of any class or kind of merchandise:

(i) The provision of capital, loans, or loan guarantees on terms inconsistent with commercial considerations.

(ii) The provision of goods or services at preferential rates.

(iii) The grant of funds or forgiveness of debt to cover operating losses sustained by a specific industry.

(iv) The assumption of any costs of expenses of manufacture, production, or distribution.

It should be clear that the structure of this provision indicates that it is not adding to the old terms by example, but merely illustrating by example. The old terms already include export subsidies. See, Downs v. United States, 187 U.S. 496, 23 S.Ct. 222, 47 L.Ed. 275 (1903); Nicholas & Co. v. United States, 249 U.S. 34, 39 S.Ct. 218, 63 L.Ed. 461 (1919). These are now illustrated by reference to the list contained in Annex A to the Agreement on Interpretation and Application of Articles VI, XVI, and XXIII of the General Agreement on Tariffs and Trade. The old terms already included domestic subsidies. See, ASG Industries Inc. v. United States, 82 Cust.Ct. 107, C.D. 4794, 467 F.Supp. 1200 (1979). Domestic subsidies are now illustrated by examples.

From a structural standpoint, the defendants are making use of the prefatory material to an expressly limited set of illustrative examples in the Trade Agreements Act. From this extremely narrow position, they are seeking to erect a monumental diversion of the course of the countervailing duty law. The structure of this provision, the context of the prefatory material, and the words of the crucial phrase do not support the defendants' position.

A broad exception for practices or benefits which are generally available is rejected for the following reasons: It is contrary to the fundamental purpose of the law. It is not expressed in the statute. It is not to be read into the law by virtue of legislative history. It has not entered the law through legislative recognition of past administrative practice or through present administrative interpretation. Finally, it is not needed in order to avoid absurd or ridiculous applications of the law in individual cases.

The result in this administrative determination is upheld strictly on the ground that laws of taxation are not subsidies to the taxpayer unless the laws are selective in their terms, or in their administration.

The fundamental purpose of the countervailing duty law is to provide a special duty to eliminate the advantage an imported product may obtain from forms of assistance termed "subsidies." The duty is assessed when a subsidy is found to exist and, in a step not applicable here, when the imported products are found to be causing material injury to an industry in the United States. The primary object of the law is the removal of the advantage of a subsidy or the elimination of injury caused by products possessing the advantage of a subsidy. From the point of view of the objective of the law and those whom it was meant to affect, the extent to which subsidization is practiced in the country of production is entirely immaterial.

The Trade Agreements Act of 1979, which governs this proceeding, used the term "subsidy" to characterize the conduct sought to be equalized.

With respect to domestic subsidies it made plain that certain...