British Steel Plc v. U.S., Slip Op. 98-144.

• Decision Date: 14 October 1998
• Docket Number: Court No. 93-09-00558-CVD.,Slip Op. 98-144.,Court No. 93-09-00570-CVD.,Court No. 93-09-00550-CVD.
• Citation: 27 F.Supp.2d 209
• Parties: BRITISH STEEL PLC, Plaintiff, v. UNITED STATES, Defendant. Usinas Siderurgicas de Minas Gerais, S.A., et al., Plaintiffs, v. United States, Defendant. Lukens Steel Co., Inc., et al., Plaintiffs, v. United States, Defendant.
• Court: U.S. Court of International Trade

27 F.Supp.2d 209

BRITISH STEEL PLC, Plaintiff, v. UNITED STATES, Defendant.

Usinas Siderurgicas de Minas Gerais, S.A., et al., Plaintiffs, v. United States, Defendant.

Lukens Steel Co., Inc., et al., Plaintiffs, v. United States, Defendant.

Slip Op. 98-144.

Court No. 93-09-00550-CVD.

Court No. 93-09-00558-CVD.

Court No. 93-09-00570-CVD.

United States Court of International Trade.

October 14, 1998.

Steptoe & Johnson, LLP (Richard O. Cunningham, Sheldon E. Hochberg, William L. Martin, II, Peter Lichtenbaum), Washington, D.C., for plaintiff British Steel PLC; Willkie, Farr & Gallagher (William H. Barringer, Christopher S. Stokes), Washington, D.C., for plaintiff Usinas Siderugicas de Minas Gerais S.A.; O'Melveny & Myers LLP (Kermit W. Almstedt), Washington, D.C., for plaintiff Altos Hornos de Mexico, S.A. de C.V.; LeBoeuf, Lamb, Greene & MacRae, LLP (Pierre F. de Ravel d'Esclapon, Mary Patricia Michel), New York, N.Y., for plaintiff A.G. der Dillinger Huttenwerke, (Melvin S. Schwechter), Washington, D.C., for plaintiff S.A. Forgess de Clabecq.

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, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, United States Department of Justice, (Jeffrey M. Telep, Marc E. Montalbine) Stephen J. Powell, Chief Counsel (John D. McInerney, Elizabeth C. Seastrum, Robert E. Nielsen, Terrence J. McCartin, David W. Richardson, Marguerite Trossevin, David J. Ross), Office of the Chief Counsel for Import Administration, United States Department of Commerce, of Counsel, Washington, D.C., for defendant.

Skadden, Arps, Slate, Meagher & Flom LLP (John J. Mangan, Stephen Narkin, Robert E. Lighthizer, D. Scott Nance, Barry J. Gilman), Washington, D.C., for defendant-intervenors Domestic Producers; Dewey Ballantine, LLP (Alan Wm. Wolff, Michael H. Stein, John A. Ragosta, Martha J. Talley, Jeffrey D. Neuchterlein, John R. Magnus, Philip Karter, O. Julia Weller, Scott L. Forseth, Dominic L. Bianchi, Guy C. Smith, Michael R. Geroe), Washington, D.C., for defendant-intervenors Domestic Producers.

OPINION

CARMAN, Chief Judge:

This case comes before the Court on remand from the United States Court of Appeals for the Federal Circuit (Federal Circuit). See British Steel PLC v. United States, 127 F.3d 1471 (Fed.Cir.1997) (British Steel III). The Federal Circuit requests this Court to determine whether the United States Department of Commerce (Commerce) accurately applied its repayment methodology in the final determinations published in 1993 concerning certain steel products from various countries, including Brazil, Mexico, and the United Kingdom. See id. at 1475. This Court has jurisdiction pursuant to 28 U.S.C. § 1581(c)(1988).

BACKGROUND

In 1993, the Department of Commerce published its final determination in the countervailing duty investigations of certain steel products from a variety of countries, including Brazil, Mexico, and the United Kingdom. See Final Affirmative Countervailing Duty Determinations: Certain Steel Products from Brazil, 58 Fed.Reg. 37,295 (Dep't Comm.1993) (final determ.); Final Affirmative Countervailing Duty Determinations: Certain Steel Products from Mexico, 58 Fed. Reg. 37,352 (Dep't Comm.1993) (final determ.); Final Affirmative Countervailing Duty Determination: Certain Steel Products from the United Kingdom, 58 Fed.Reg. 37,393 (Dep't Comm.1993) (final determ.) (collectively General Determinations). Commerce determined, among other things, that before Usinas Siderurgicas de Minas Gerais, S.A. (USIMINAS), Altos Hornos de Mexico, S.A. de C.V. (AHMSA), and British Steel (BS) were privatized, each company received past non-recurring subsidies from the governments of Brazil, Mexico, and the United Kingdom, respectively. In each case, Commerce examined whether it could continue to consider the privatized company a recipient of a subsidy under the countervailing duty statute, 19 U.S.C. § 1671(a) (1988), or whether the privatization effectively repaid the subsidies.

Commerce determined the "privatization of a government-owned company, per se, does not and cannot eliminate [the] countervailability" of a subsidy provided before privatization, except to the extent the sales price included the subsidy repayment. See General Issues Appendix appended to Final Affirmative Countervailing Duty Determination: Certain Steel Products from Austria, 58 Fed. Reg. 37,225, 37,263 (Dep't Comm.1993) (final determ.) (General Issues Appendix). Commerce also developed an approach to determine the amount of past nonrecurring subsidies each privatization transaction repaid. See id. at 37,263. The repayment approach requires Commerce to determine what percentage of the company's net worth is attributable to a past non-recurring subsidy and allocates a portion of the company's purchase price to the repayment of the subsidy. See id.

In February 1995, this Court rejected Commerce's determination that subsequent to any privatization transaction Commerce may countervail a privatized company for pre-privatization subsidies regardless of how privatization occurs. See British Steel plc v. United States, 879 F.Supp. 1254, 1276 (CIT 1995) (British Steel I). The Court reasoned the focus should be whether the entity that received the subsidy survived the privatization. See id. at 1271-74. The Court remanded the case, instructing Commerce to determine, among other things, whether each transaction was an asset or stock sale, whether each privatization was conducted at arm's length for fair market value and based on commercial considerations, and whether the privatized entity continued to be, for all intents and purposes, the same entity that received subsidies prior to the privatization. See id. at 1276-77, 1329.

Applying this new standard, Commerce determined on remand it could properly countervail the full amount of subsidies received by BS, AHMSA, and USIMINAS prior to privatization. See British Steel plc v. United States, 924 F.Supp. 139, 149 (CIT 1996) (British Steel II). This Court sustained the remand determinations, finding them to be supported by substantial evidence and otherwise in accordance with law. See id. at 190-91.

On appeal, the Federal Circuit reversed this Court's sustaining of Commerce's remand determinations based upon this Court's standard for calculating past non-recurring subsidies as identified in British Steel I. See British Steel III, 127 F.3d at 1475. In remanding the case to this Court, the Federal Circuit stated, "[i]n British Steel I, the Court of International Trade did not give proper deference to Commerce's repayment methodology. Instead ..., the court impermissibly imposed its own interpretation of the statute by formulating an alternative test. The Court erred in British Steel II, therefore, in sustaining Commerce's application of this alternative test." British Steel III, 127 F.3d at 1475. The Federal Circuit then instructed this Court on remand to "determine whether Commerce accurately applied its repayment methodology to the privatizations." Id. (emphasis added).

CONTENTIONS OF THE PARTIES

A. Plaintiffs

Plaintiffs, Foreign Producers, argue the specific methodology¹ adopted and applied to the privatization of certain foreign steel companies is arbitrary and capricious, bearing no rational relationship to the stated purpose of determining the portion of the purchase price paid for the privatized company that reasonably reflects the value of the company that is attributable to past subsidies. Plaintiffs argue Commerce's flawed methodology is due in part to Commerce's failure to provide the parties an opportunity to comment on the equations prior to implementation in alleged violation of Commerce's duty under the Administrative Procedure Act, 5 U.S.C. §§ 551-570 (1994).

Specifically, plaintiffs question the merit of using ratios for years dating back to 1977 to determine the value at the time of privatization of subsidies received by a company. Plaintiffs also argue treating subsidies received in one year as being relevant to a company only in that year is at odds with Commerce's view that the effects of nonrecurring subsidies last for fifteen years. Further, plaintiffs argue using a simple average of the annual subsidy ratios to produce an estimate of the subsidy portion of the privatized company's net worth produces a downwardly-biased figure for the amount of repayment credit provided for those subsidies. Instead, plaintiffs suggest, Commerce's amortization approach would have been preferable.

B. Defendant

Defendant, the United States, argues, among other things, Commerce reasonably determined a portion of the sale price that private parties paid to the respective governments for the subsidized companies constituted repayment of some of those past subsidies. Defendant further argues Commerce's subsidy to net worth ratio approach reasonably reflects the value of prior subsidies allocated to the privatized companies upon their sale to private parties.

Specifically, defendant contends the subsidy to net worth ratio used for the fifteen year period was necessary to avoid anomalous results which would have occurred were Commerce to base its repayment methodology on data for a single year. Defendant additionally argues Commerce used the subsidy to net worth ratio to provide it with a tangible estimate of the contribution subsides have made to the value of the company, and the use of allocated amounts advocated by respondents would not necessarily provide a better estimate. Further, defendant argues, Commerce used the simple average not to produce a downwardly-biased effect but rather to avoid tracing the use of subsidies. Thus, defendant asserts, Commerce's repayment approach should be sustained.

C. Defendant-Intervenors

Defendant-Intervenors, Domestic Producers, argue the approach developed by Commerce to...