Geneva Steel v. US

• Citation: 914 F. Supp. 563
• Decision Date: 03 January 1996
• Docket Number: Slip Op. 96-7. Court No. 93-09-00566-CVD.
• Parties: GENEVA STEEL, AK Steel Corporation, Bethlehem Steel Corporation, Gulf States Steel Incorporated of Alabama, Inland Steel Industries, Inc., LTV Steel Company, Inc., Laclede Steel Company, National Steel Corporation, Sharon Steel Corporation, U.S. Steel Group, a Unit of USX Corporation, and WCI Steel, Incorporated, Plaintiffs, v. UNITED STATES, Defendant, Fabrique de Fer de Charleroi, S.A., S.A. Forges de Clabecq, Sidmar N.V., and TradeARBED, Incorporated, Defendant-Intervenors.
• Court: U.S. Court of International Trade

914 F. Supp. 563

GENEVA STEEL, AK Steel Corporation, Bethlehem Steel Corporation, Gulf States Steel Incorporated of Alabama, Inland Steel Industries, Inc., LTV Steel Company, Inc., Laclede Steel Company, National Steel Corporation, Sharon Steel Corporation, U.S. Steel Group, a Unit of USX Corporation, and WCI Steel, Incorporated, Plaintiffs, v. UNITED STATES, Defendant Fabrique de Fer de Charleroi, S.A., S.A. Forges de Clabecq, Sidmar N.V., and TradeARBED, Incorporated, Defendant-Intervenors.

Slip Op. 96-7. Court No. 93-09-00566-CVD.

United States Court of International Trade.

January 3, 1996.

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Dewey Ballantine (Alan W. Wolff, Michael H. Stein, Martha J. Talley, John A. Ragosta, Michael R. Geroe), on brief, (Martha J. Talley, Michael R. Geroe), on oral argument, Washington, DC, for Geneva Steel, et al.

Barnes, Richardson & Colburn (Gunter von Conrad, Peter A. Martin), on brief, (Peter A. Martin), on oral argument, Washington, DC, for Fabrique de Fer Charleroi, S.A.

LeBoeuf, Lamb, Greene & MacRae (Melvin S. Schwechter, Barbara R. Newell), Washington, DC, for S.A. Forges de Clabecq.

O'Melveny & Myers (Gary N. Horlick, Peggy A. Clarke, Teresa E. Dawson), Washington, DC, for Sidmar N.V. and TradeARBED, Incorporated.

Frank W. Hunger, Assistant Attorney General of United States; David M. Cohen, Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, (A. David Lafer), Duane W. Layton, Office of Chief Counsel for Import Administration, United States Department of Commerce, of counsel, for defendant.

OPINION

CARMAN, Judge.

Plaintiffs in this consolidated action, Geneva Steel, AK Steel Corporation,¹ Bethlehem Steel Corporation, Geneva Steel, Gulf States Steel Incorporated of Alabama, Inland Steel Industries, Incorporated, LTV Steel Company, Incorporated, Laclede Steel Company, National Steel Corporation, Sharon Steel Corporation, U.S. Steel Group a Unit of USX Corporation, and WCI Steel, Incorporated (collectively "Domestic Producers"), and Fabrique de Fer de Charleroi, S.A. (Fabfer), move for judgment upon the agency record pursuant to U.S.CIT R. 56.2 contesting the determination by the International Trade Administration of the U.S. Department of Commerce (Commerce or Department) in Certain Steel Products From Belgium, 58 Fed.Reg. 37,273 (Dep't Comm.1993) (final determ.) (Final Determination) and Certain Steel Products From Belgium, 58 Fed.Reg. 43,749 (Dep't Comm.1993) (order and am. to final determ.) (Amended Determination). Defendant-Intervenors Sidmar N.V. and TradeARBED, Incorporated, Sidmar N.V.'s domestic importer, (collectively "Sidmar"), and S.A. Forges de Clabecq (Clabecq) have filed response briefs in opposition to Domestic Producers' motion for judgment on the agency record. The United States Court of International Trade (CIT or Court) has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(c) (1988).

BACKGROUND

In July 1992, Commerce gave notice of its investigation of several Belgian steel companies regarding three separate classes or kinds of merchandise: certain hot-rolled carbon steel flat products, certain cold-rolled carbon steel flat products, and certain cut-to-length carbon steel plate. The Belgian steel firms investigated were Fabfer, Clabecq, Sidmar, and S.A. Cockerill Sambre (Cockerill).² The period of investigation (POI) for Fabfer and Clabecq was July 1990 through June 1991, and the POI for Sidmar and Cockerill was calendar year 1991. Final Determination, 58 Fed.Reg. at 37,274-75.

The parties challenge numerous aspects of the Final Determination as amended. For purposes of clarity, this opinion will discuss the lead case, Geneva Steel, et al. v. United States, Court No. 93-09-00566-CVD, in section one, and the consolidated case, Fabrique de Fer de Charleroi, S.A. v. United States, Court No. 93-09-00599-CVD, in section two.³

STANDARD OF REVIEW

The appropriate standard for the Court's review of a final determination by Commerce is whether the agency's determination is "unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1)(B)(i) (1994). Substantial evidence is that which "`a reasonable mind might accept as adequate to support a conclusion.'" Universal Camera Corp. v. NLRB, 340 U.S. 474, 477, 71 S.Ct. 456, 459, 95 L.Ed. 456 (1951) (citation omitted), quoted in Matsushita Elec. Indus. Co. v. United States, 3 Fed.Cir. (T) 44, 51, 750 F.2d 927, 933 (1984).

The Court must accord substantial weight to the agency's interpretation of the statute it administers. American Lamb Co. v. United States, 4 Fed.Cir. (T) 47, 54, 785 F.2d 994, 1001 (1986) (citations omitted). While Commerce has discretion in choosing one interpretation over another, "the traditional deference courts pay to agency interpretation is not to be applied to alter the clearly expressed intent of Congress." Board of Governors of the Fed. Reserve Sys. v. Dimension Fin. Corp., 474 U.S. 361, 368, 106 S.Ct. 681, 686, 88 L.Ed.2d 691 (1986), cited in Ceramica Regiomontana, S.A. v. United States, 10 CIT 399, 405, 636 F.Supp. 961, 966 (1986) ("This Court will not allow an agency, under the guise of lawful discretion, to contravene or ignore the intent of the legislature or the guiding purpose of the statute.") (further citation omitted), aff'd, 5 Fed.Cir. (T) 77, 810 F.2d 1137 (1987).

DISCUSSION

SECTION ONE:

GENEVA STEEL, ET AL. V. UNITED STATES

I. The Classification of Hybrid Securities and the Countervailing of Debt-to-Equity Conversions

A. Classifying OCPCs and Parts Bénéficiaries

In November 1978 and February 1979 the Belgian Council of Ministers decided that the government of Belgium (GOB) would assume the interest costs on all medium- and long-term loans held by certain steel companies agreed to before January 1, 1979. Final Determination, 58 Fed.Reg. at 37,277. Pursuant to this decision and upon agreements with the steel companies, the GOB agreed to assume the interest costs in exchange for the companies' promises of conditional future issuances to the GOB of "obligations convertibles participantes et conditionnelles" (OCPCs), or "conditional and convertible participating bonds." In this way, the GOB assumed the interest costs of Cockerill, Sidmar, and Clabecq for the five-year period from 1979 through 1983. Id.

OCPCs are called conditional because "certain conditions had to be met before the bonds could be issued." (Conf.R. 39 at 11.)⁴ Additionally, the instruments are named convertible because the bonds contained "a provision allowing for their eventual conversion to ordinary shares." (Id.)⁵

In 1985, Cockerill and Clabecq agreed, and Sidmar conditionally agreed to convert the OCPCs into securities known as parts bénéficiaries. Final Determination, 58 Fed.Reg. at 37,277. Parts bénéficiaries, or "benefactor shares," generally describe shares "given in remuneration of persons who made contributions or did consulting for a company prior to its establishment." (Confid.R. 39 at 13.)

Commerce considered OCPCs and parts bénéficiaries to be "hybrid securities" because they are "securities/instruments which appear to be neither debt nor equity (nor grants, since the funds are not given outright)." General Issues Appendix, 58 Fed. Reg. at 37,254. After reviewing several techniques to classify such hybrid financial instruments, Commerce decided upon the following approach:

We have distinguished grants from both debt and equity by defining grants as funds provided without expectation of a:

(1) Repayment of the grant amount, (2) payment of any kind stemming directly from the receipt of the grant (including interest or claims on profits of the firm (i.e., dividends) with the exception of offsets as defined in the Proposed Regulations § 355.46), or (3) claim on any funds in case of company liquidation.

. . . To classify a hybrid instrument as either debt or equity, we have applied the following hierarchy which in the Department's view establishes whether an instrument has the qualities of debt or equity: (1) Expiration/Maturity Date/Repayment Obligation, (2) Guaranteed Interest or Dividends, (3) Ownership Rights, and (4) Seniority. For each hybrid instrument, we considered the four sets of criteria in order. Once a characteristic is clearly indicative of debt or equity, we will stop our analysis and categorize the hybrid as debt or equity.

Id. In the Final Determination, Commerce applied its new methodology and determined the OCPCs constituted debt. Final Determination, 58 Fed.Reg. at 37,277 (citing General Issues Appendix, 58 Fed.Reg. at 37,254-55).

Commerce also applied its methodology to the parts bénéficiaries issued by Cockerill, Sidmar, and Clabecq, and determined the instruments constituted equity. General Issues Appendix, 58 Fed.Reg. at 37,255. Because Commerce reached this conclusion using business proprietary information, the agency referred to a memorandum on file for an explanation of its reasoning. In that document, Commerce first distinguished parts bénéficiaries from grants and found parts bénéficiaries should not be classified as grants because "Redacted."^* (Confid.R. 52 at 1.) Turning to the debt-equity classification and its first criterion, the "expiration/maturity date/repayment obligation," Commerce concluded "Clabecq's and Sidmar's parts bénéficiaries . . . constitute equity" as they "Redacted" (Id. at 2.) Although it was unnecessary under its new methodology, Commerce also considered the second criterion, "guaranteed interest or dividends," and determined the parts bénéficiaries "Redacted" thus supporting its determination that parts bénéficiaries constituted equity. (Id.)

After determining OCPCs constituted debt and parts bénéficiaries comprised equity, Commerce found the conversion of OCPCs into parts bénéficiaries amounted to a conversion of debt to equity. Final Determination, 58...