Can-Am Corp. v. US

• Decision Date: 04 June 1987
• Docket Number: Court No. 84-10-01411.
• Citation: 664 F. Supp. 1444
• Parties: CAN-AM CORP., et al., Plaintiffs, v. UNITED STATES, Defendant, and Industrias Quimicas De Yucatan, S.A., Defendant-Intervenor.
• Court: U.S. Court of International Trade

664 F. Supp. 1444

CAN-AM CORP., et al., Plaintiffs, v. UNITED STATES, Defendant, and Industrias Quimicas De Yucatan, S.A., Defendant-Intervenor.

Court No. 84-10-01411.

United States Court of International Trade.

June 4, 1987.

COPYRIGHT MATERIAL OMITTED

Squire, Sanders & Dempsey, Ritchie T. Thomas and William D. Kramer, Washington, D.C., for plaintiffs.

Richard K. Willard, Acting Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Platte B. Moring, III, Washington, D.C., for defendant.

Brownstein, Zeidman and Schomer, Irwin P. Altschuler and David R. Amerine, Washington, D.C., for defendant-intervenor.

MEMORANDUM OPINION AND ORDER

DiCARLO, Judge:

Plaintiffs, three southwestern United States lime producers (Can-Am Corp., Paul Lime Division; Chemical Lime, Inc.; Genstar Lime Co.) and two unions (United Cement, Lime, Gypsum and Allied Workers Division of the International Brotherhood of Boilermakers, AFL-CIO/CLC; United Steelworkers of America, AFL-CIO/CLC), challenge a final affirmative countervailing duty determination and order by the United States Department of Commerce, International Trade Administration (Commerce) respecting lime from Mexico. Final Affirmative Countervailing Duty Determination and Countervailing Duty Order; Lime From Mexico, 49 Fed.Reg. 35,672 (1984). The Court denied a motion by defendant-intervenor to sever and dismiss part of plaintiffs' action. See Can-Am Corp. v. United States, 9 CIT ___, 613 F.Supp. 1246 (1985).

Plaintiffs now move pursuant to Rule 56.1 of the rules of this Court for judgment upon the agency record. The Court has jurisdiction pursuant to 19 U.S.C. § 1516a(a)(2)(A)(i)(II) (1982 & Supp. III 1985). The action is dismissed.

I. Background

Plaintiffs filed a petition with Commerce alleging that the government of Mexico bestows bounties or grants within the meaning of section 303 of the Tariff Act of 1930 (the Act), as amended, 19 U.S.C. § 1303 (1982), upon the manufacture and export of lime produced in Mexico. Alleged in the petition, among others, were claims that the Mexican government engages in a "first-level" fuel pricing practice whereby it sells heavy and light fuel oil through its wholly-owned petroleum monopoly Petroleos Mexicanos (PEMEX) to Mexican industries at prices far below the world market prices paid by United States industries and that this practice is countervailable because it allows the highly energy intensive lime industry to obtain cheaper fuel which in turn allows the lime produced to be sold at reduced prices upon export to the United States; that Mexican lime producers also received a 30% reduction from the already underpriced fuel and this "second-level" discount on fuel oil prices and certain special purchase arrangements from PEMEX are countervailable; and that Certificates of Fiscal Promotion (CEPROFI certificates) given as credits against federal taxes to Mexican companies for locating in specific regions, investing in small and medium sized firms, generating jobs, acquiring new plants and equipment, and purchasing Mexican capital goods are countervailable.

After reviewing these and other claims made in the petition, Commerce initiated a countervailing duty investigation with respect to lime from Mexico. Lime from Mexico; Initiation of Countervailing Duty Investigation, 49 Fed.Reg. 15,011 (1984). Commerce stated that it would not investigate plaintiffs' "first-level" fuel pricing claim:

Petitioners allege that the difference between the price PEMEX sells fuel oil in the world market and the price it sells to industries within Mexico confers a bounty or grant to the lime industry. We have determined that the differences in these rates are not countervailable (see Final Affirmative Countervailing Duty Determination: Portland Hydraulic Cement and Cement Clinker from Mexico (48 FR 43063)).

49 Fed.Reg. at 15,012.

Commerce then issued its preliminary affirmative countervailing duty determination. See Preliminary Affirmative Countervailing Duty Determination; Lime from Mexico, 49 Fed.Reg. 25,656 (1984). Before verification and issuance of the final determination, plaintiffs requested Commerce not to limit its investigation of CEPROFI certificates received for the acquisition of plants or capital equipment to only those given during the designated investigation period but also to investigate those given in relation to the construction of Mexican lime plants prior to investigation.

In its final affirmative countervailing duty determination, Commerce again addressed plaintiffs' claim that PEMEX's sale of fuel oil to Mexican lime producers at below international market value confers a countervailable bounty or grant, reasoning: "As stated in the `Notice of Initiation' of this case, we did not investigate this allegation because it had previously been found not to confer a bounty or grant, and petitioners did not allege new facts to justify a review of this finding." 49 Fed.Reg. at 35,677. Commerce also made a final determination that the Mexican lime industry did not receive a "second-level" price discount in the form of a 30% reduction in the price for fuel below the published prices available to other industries in Mexico. Id. Commerce found one company did receive a countervailable benefit by being allowed to delay payments on fuel it received from PEMEX. Id. at 35,675.

Commerce determined that CEPROFI certificates are countervailable as tax benefits and are to be allocated to the year of receipt. Commerce investigated and countervailed against such certificates received during the investigation period for the construction of plants and the purchase of capital equipment but refused to investigate or countervail those received before the investigation period. In response to plaintiffs' argument that plant and capital equipment CEPROFI certificates received in the years prior to the investigation period should be countervailed, Commerce stated: "CEPROFIs constitute a tax deduction to recipient companies. It is the Department's consistent practice to recognize tax benefits as one-time benefits pertaining to the year in which they were realized." Id. at 35,677.

Plaintiffs contend that Commerce erred in its determinations not to investigate or countervail against the "first-level" fuel pricing practice and the CEPROFI certificates given by the Mexican government for the acquisition of plants and capital equipment prior to the investigation period. The Court holds that Commerce did not err in these determinations.

II. Opinion

Since the jurisdiction of the Court is provided by section 1516a(a)(2)(A)(i)(II), the standard of review is that set forth by Congress for actions brought under paragraph (2) of subsection (a) of 19 U.S.C. § 1516a. Under that standard, 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)(B) (1982).

A. "First-level" Fuel Pricing Practice

(1) Domestic bounty or grant

Relying upon Cabot Corp. v. United States, 9 CIT ___, 620 F.Supp. 722 (1985), appeal dismissed, 788 F.2d 1539 (Fed.Cir. 1986), plaintiffs claim that a domestic bounty or grant under section 1303 exists whenever the benefit of a government program is bestowed upon a specific class and such bestowal confers an additional benefit or competitive advantage upon the recipients. Plaintiffs argue that the "first-level" fuel pricing practice is a domestic bounty or grant because the fuel oil is provided at prices below world market value only to industrial purchasers who will use the fuel in Mexico and not to exporters of such fuel oil (a specific class). They say that the purchase of fuel oil at concessionary prices enables the Mexican producers, including lime producers, to sell their products in the United States at reduced prices (an additional benefit or competitive advantage to the recipients). Plaintiffs contend that Commerce improperly failed to investigate and to countervail against the "first-level" fuel pricing practice.

The Court finds that plaintiffs' interpretation of the test prescribed in Cabot for determining a domestic bounty or grant under section 1303 is in error. In PPG Industries v. United States, 11 CIT ___, 662 F.Supp. 258 (1987), Judge Carman who decided Cabot confronted a similar claim involving the provision of natural gas to the Mexican float glass industry. The plaintiffs in PPG Industries argued that the provision of natural gas at far below world market prices conferred a countervailable benefit because such price differential resulted in an enormous cost advantage to Mexican float glass producers and exporters vis-a-vis producers and exporters in other countries. PPG Industries, 11 CIT at ___, 662 F.Supp. at 258.

The PPG Industries Court first explained that section 1303 which employs the phrase "bounty or grant" provides the substantive law where, as in this case, the country involved in the investigation is not a "country under the Agreement" within the meaning of section 701(b) of the Act, as amended, 19 U.S.C. § 1671(b) (1982). The court concluded, however, that Commerce, as it did in this case, may rely upon the general countervailing duty provisions of section 701 of the Act, as amended, 19 U.S.C. § 1671, governing investigations of countries under the Agreement within the meaning of section 1671(b), which employs the term "subsidy" defined in section 771(5) of the Act, as amended, 19 U.S.C. § 1677(5) (1982) because the two provisions are legally interchangeable. PPG Industries, at ___-___, 662 F.Supp. at 263-264.

The PPG Industries Court accepted Commerce's finding that "the existence of a price differential between export and domestic sales of natural gas, or between domestic and `world market' prices does not, in and of itself, confer a bounty or grant," stating that "it is well established that the mere existence of a price differential between...