Essar Steel Ltd. v. United States

• Citation: 721 F.Supp.2d 1285
• Decision Date: 19 August 2010
• Docket Number: Slip Op. 10-95.,Court No. 09-00197.
• Parties: ESSAR STEEL LIMITED, Plaintiff, v. UNITED STATES, Defendant, and United States Steel Corporation, Defendant-Intervenor.
• Court: U.S. Court of International Trade

721 F.Supp.2d 1285

ESSAR STEEL LIMITED, Plaintiff,

v. UNITED STATES, Defendant,andUnited States Steel Corporation, Defendant-Intervenor.

Slip Op. 10-95.

Court No. 09-00197.

United States Court of International Trade.

Aug. 19, 2010.

COPYRIGHT MATERIAL OMITTED.

Arent Fox LLP (Mark P. Lunn, Kay C. Georgi and Diana Dimitriuc Quaia) for Plaintiff Essar Steel Limited.

Tony West, Assistant Attorney General; Jeanne E. Davidson, Director; Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice (David D'Alessandris) for Defendant United States; Deborah R. King, Office of the Chief Counsel for Import Administration, United States Department of Commerce, Of Counsel, for Defendant.

Skadden Arps Slate Meagher & Flom, LLP, Washington, DC (Robert E. Lighthizer, Jeffrey D. Gerrish and Nathaniel B. Bolin) for Defendant-Intervenor United States Steel Corporation.

OPINION

BARZILAY, Judge.

Plaintiff Essar Steel Limited (“Essar”) contests the final results of the sixth administrative review of the countervailing duty order on certain hot-rolled carbon steel flat products from India. Certain Hot-Rolled Carbon Steel Flat Products from India: Final Results and Partial Rescission of Countervailing Duty Administrative Review, 74 Fed.Reg. 20,923 (Dep't Commerce May 6, 2009) (“ Final Results ”). Specifically, Essar alleges that in calculating the net countervailable subsidy rate for the period of review, the U.S. Department of Commerce (the “Department” or “Commerce”) erred by: (1) using incorrect benchmarks when determining the adequacy of remuneration received by the government-owned National Mineral Development Corporation (“NMDC”) for Essar's purchases of iron ore lumps and fines; ¹ (2) improperly finding that the 2005 Special Economic Zone Act (“2005 SEZ Act”) administered by the Government of India constituted a countervailable subsidy received during the period of review; (3) resorting to adverse facts available (“AFA”) when calculating the benefit conferred to Essar under the Export Promotion Capital Goods Scheme (“EPCGS”), the Captive Port Facilities Program of the State Government of Gujarat (“Gujarat Captive Port Facilities Program”), and the Industrial Policy of the Government of Chhattisgarh (“Chhattisgarh Industrial Policy”); and (4) applying uncorroborated and punitive AFA rates in its benefit calculation under the Chhattisgarh Industrial Policy. Essar Br. 6-7. For the reasons explained below, the court affirms the Department's findings on the first three issues and remands the fourth issue to the agency for further proceedings.

I. Background

On January 28, 2008, the Department initiated an administrative review of the countervailing duty order on certain hot-rolled carbon steel flat products from India for the period of review spanning January 1, 2007 to December 31, 2007. Initiation of Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in Part, 73 Fed.Reg. 4829, 4830 (Dep't Commerce Jan. 28, 2008). The Department subsequently issued initial questionnaires to Essar and to the Government of India, requesting information regarding possible subsidies provided to Essar during the period of review. J.A. 149-304. Essar responded to the initial questionnaire on May 12, 2008 and continued to respond to all supplemental questionnaires through November 2008. J.A. 317-546, 557-766, 774-800, 938-1020, 1027-1284, 1293-1323. Following several extensions, the Government of India also responded to the initial and supplemental questionnaires, but ultimately failed to provide usable information regarding several subsidy programs, including the 2005 SEZ Act, Chhattisgarh's Industrial Policy, and Gujarat's Captive Port Facilities Program. J.A. 305-16.

Commerce published the preliminary results of its administrative review on December 30, 2008, finding a net countervailable subsidy rate of 21.95% ad valorem. Certain Hot-Rolled Carbon Steel Flat Products from India: Notice of Preliminary Results and Partial Rescission of Countervailing Duty Administrative Review, 73 Fed.Reg. 79,791, 79,802 (Dep't Commerce Dec. 30, 2008). Commerce found that during the period of review Essar benefitted from the NMDC's provision of iron ore lumps and fines at less than adequate remuneration, from subsidies received under the 2005 SEZ Act, and from the EPCGS. Id. at 79,797-98. Commerce also found that, among other subsidy programs, Essar did not benefit during the period of review from Chattisgarh's Industrial Policy or from Gujarat's Captive Port Facilities Program. Id. at 79,801.

Following a notice and comment period, Commerce published the final results of its administrative review, wherein it calculated a net countervailable subsidy rate of 76.88% ad valorem. Final Results, 74 Fed.Reg. at 20,924. The increased subsidy rate reflected calculation changes made between the preliminary and final results, as well as the addition of previously unaccounted for countervailable benefits that Commerce found Essar received under Chhattisgarh's Industrial Policy and Gujarat's Captive Port Facilities Program. See generally Issues and Decision Memorandum: Final Results and Partial Rescission of Countervailing Duty Administrative Review, C-533-821 (Dep't Commerce Apr. 29, 2009), Pub. Doc. 105 (“ Issues and Decision Memorandum ”).

In measuring the adequacy of the remuneration received by NMDC, Commerce applied the three-tiered benchmark hierarchy set forth in its regulations and determined that Essar received a countervailable benefit of 16.14% ad valorem from NMDC's sales of iron ore lumps and fines. Id. at 16; see 19 C.F.R. § 351.511(a)(2)(i)-(iii). ² With respect to Essar's purchases of iron ore lumps, Commerce compared the NMDC price to a market-determined price that Essar paid when purchasing the same product from a Brazilian supplier during the period of review. Id. at 15. In accordance with § 351.11(a)(2)(iv), Commerce adjusted the benchmark to reflect the ocean and inland freight, import duties, and other import fees payable that would apply if Essar imported the product. Id. at 15-16. With respect to Essar's purchases of iron ore fines, Commerce did not find any appropriate actual home market transactions. Id. at 15. Therefore, it resorted to the second benchmark and compared the NMDC to an adjusted world market price inclusive of ocean freight, import duties, and other import fees payable. Id. at 15-16. For purposes of the review, Commerce set the world market price at the 2007 fines price of iron ore from Hamersley, Australia, as listed in the Tex Report. ³ Id. at 15.

With regard to the purported subsidies that Essar received under the 2005 SEZ Act, Commerce found that the Government of India failed to act to the best of its ability in providing the requested program information and resorted to AFA. Id. at 16-17. Accordingly, Commerce determined that the Government of India provided a financial contribution contingent on export performance to Essar within the meaning of 19 U.S.C. §§ 1677(5)(D) ⁴ and 1677(5A)(B). ⁵ Issues and Decision Memorandum at 12. Commerce further found that during the period of review, Essar benefitted from the subsidy program because the company's Steel-Mod V SEZ unit became eligible for duty free import of goods and for exemptions from excise duties and the National Service Tax. Id. at 17-19. In calculating the countervailable benefit conferred, the Department divided Essar's total benefit amounts by Essar's total export sales and arrived at a subsidy rate of 4.3% ad valorem. Id.

The Department also resorted to partial AFA when evaluating the benefit conferred on Essar by the EPCGS. Id. at 12-14. Under the EPCGS, eligible producers import capital equipment at a reduced duty provided that they meet an export obligation equal to eight times the Court No. 09-00197 Page 7 duty saved within an eight year period. Id. at 12. When the producer fails to meet its export obligation, it must repay all or part of the duty reduction. Id. Commerce found that Essar received two types of benefits from the program. First, with respect to Essar's outstanding export obligations, Commerce treated the unpaid duties as an interest-free loan and calculated a benefit in the amount of the interest Essar would have paid had it borrowed the amount of the duty reduction at the time of importation. Id. at 12-13. Second, Commerce treated the import duty savings on fulfilled export obligations as grants received in the year that the Government of India waived the outstanding duty obligation. Id. at 13.

To calculate the amount of both benefits conferred, Commerce requested information from Essar regarding EPCGS licenses for which it had yet to fulfill its export obligations, as well as those for which it already had fulfilled its export obligations. Id. at 7-8. In Essar's initial questionnaire response, the company provided information about its outstanding obligations, but failed to provide the same information for certain fulfilled licenses. Id. Commerce sought the missing information in its First and Fourth Supplemental Questionnaires, but determined that Essar did not respond to the best of its ability and applied AFA when calculating the second countervailable benefit. Id. at 8. The Department then added both benefit calculations together and reached a net countervailable subsidy rate of 1.22% ad valorem. Id. at 14.

Commerce also determined that Essar received a countervailable benefit under Gujarat's Captive Port Facilities Program in the form of subsidized wharfage fees. Id. at 21-22. Because the Government of India did not produce usable information regarding the program, Commerce determined that the Government of India failed to act to the best of its ability and resorted to AFA. Id. at 6-8, 21-22. On that basis, Commerce found that the port facilities program provided a specific financial contribution to Essar pursuant to §§ 1677(5)(D)(i...