Gts Industries S.A. v. U.S., SLIP OP. 02-115.

• Decision Date: 24 September 2002
• Docket Number: Court No. 00-03-00118.,SLIP OP. 02-115.
• Citation: 246 F.Supp.2d 1311
• Parties: GTS INDUSTRIES S.A., Plaintiff, v. UNITED STATES, Defendant, and U.S. Steel Group, a Unit of USX Corporation, et al., Defendant-Intervenors.
• Court: U.S. Court of International Trade

246 F.Supp.2d 1311

GTS INDUSTRIES S.A., Plaintiff, v. UNITED STATES, Defendant, and U.S. Steel Group, a Unit of USX Corporation, et al., Defendant-Intervenors.

SLIP OP. 02-115.

Court No. 00-03-00118.

United States Court of International Trade.

September 24, 2002.

deKieffer & Horgan, Washington, DC (Donald E. deKieffer, J Kevin Horgan, Marc E. Montalbine), for Plaintiff.

Robert D. McCallum, Jr., Assistant Attorney General, United States Department of Justice; David M. Cohen, Director, (Lucius B. Lau), Assistant Director, Commercial Litigation Branch, Civil Division United States Department of Justice, (David D'Allessandris); David W. Richardson, Office of the Chief Counsel for Import Administration, United States Department of Commerce, of Counsel, for Defendant.

Dewey Ballantine LLP, Washington, DC (John A. Ragosta, John R. Magnus), Hui Yu, for Defendant-Intervenors.

MEMORANDUM AND ORDER

BARZILAY, Judge.

I. INTRODUCTION

This opinion constitutes the latest writing in a continuing effort of this court to clarify the statutory and case law concerning when non-recurring subsidies can continue to be countervailable after a formerly subsidized business entity is privati The court now reviews the Department of Commerce's ("Commerce" or "Department") Results of Redetermination Pursuant to Court Remand, GTS Industries S.A. v. United States, Court No. 00-03-00118 (CIT Jan. 4, 2002) (June 3, 2002) ("Remand Determination II"). This case originated pursuant to Plaintiffs and Defendant-Intervenors' USCIT R. 56.2 Motions for Judgment Upon an Agency Record. Defendant-Intervenors challenged certain aspects of the final determination of the Department of Commerce International Trade Administration's countervailing duty investigation of carbon-quality steel plate from France. See Final Affirmative Countervailing Duty Determination: Certain Cut-to-length Carbon-Quality Steel Plate from France, 64 Fed. Ref. 73,277 (Dec 29, 1999) ("Final Determination"). While Commerce's Final Determination was pending before the court, the Federal Circuit issued its opinion in Delverde SrL v. United States, 202 F.3d 1360 (Fed.Cir.2000), reh'g denied, Court No. 99-1186 (June 20, 2000) ("Delverde III"). Delverde III required Commerce to examine the facts and circumstances of the privatization transaction itself to determine whether previously bestowed subsidies "passed through" to the new owners.

On July 31, 2000, Defendant United States, requested a remand to Commerce to consider the impact of the Federal Circuit's holding in Delverde III to the facts of this case. The subsequent remand order instructed Commerce "(1) to determine the applicability, if any, of the decision by the Court of Appeals for the Federal Circuit in Delverde SrL v. United States 202 F.3d 1360 (Fed.Cir.2000) reh'g denied (June 20, 2000) to this proceeding, and (2) embark upon further fact finding if appropriate ...." Remand Order (August 9, 2000). The court reviewed Commerce's Final Results of Redetermination Pursuant to Court Remand in GTS Industries S.A. v. United States, Court No. 00-03-00118 (December 22, 2000) ("Remand Determination I") in GTS Industries S.A v. United States, 26 CIT ___, 182 F.Supp.2d 1369 (2002) ("GTS I"),¹ The court found that Commerce had developed a methodology that circumvents its statutorily mandated duty, under 19 U.S.C. § 1677(5)(F), to determine if a benefit was conferred on the privatized corporation. Therefore, the court remanded the case to Commerce and ordered that Commerce look at the facts and circumstances of the transaction as Delverde III required to determine if the purchaser received a subsidy, directly or indirectly, for which it did not pay adequate compensation. See GTS I, 182 F.Supp.2d at 1378. The court now reviews Commerce's actions taken pursuant to its instructions. The court exercises jurisdiction pursuant to 28 U.S.C. § 1581(c) (1994), which provides for judicial review of a final determination by the Department of Commerce in accordance with the provisions of 19 U.S.C. § 1516a(a)(2)(B)(i) (1994).

II. BACKGROUND

Familiarity with the facts presented in GTS I is presumed; however, a brief summary of the facts is necessary to delineate the pending issues in Commerce's Remand Determination II. On March 16, 1999, Commerce sought to investigate whether subsidies were given by the French Government to certain elements of the French steel industry. See Initiation of Countervailing Duty Investigations: Certain Cutrto-Length Carbon-Quality Steel Plate From France, Indonesia, Italy, and the Republic of Korea, 64 Fed.Ref. 12,996 (March 16, 1999). The period of investigation was calendar year 1998. In its final affirmative determination, Commerce determined that GTS' total estimated CVD rate was 6.86%. Final Determination, 64 Fed.Ref. at 73,298. Beginning in the summer of 1995 and continuing through 1996 and 1997, the French Government privatized Usinor through a public stock offering. See Final Affirmative Countervailing Duty Determination: Stainless Steel Sheet and Strip in Coils from France, 64 Fed.Ref. 30,774, 30,776 (1999). By the end of 1997, the vast majority of Usinor's shares were owned by private shareholders, with the remaining shares owned by employees and "stable shareholders."² Id. Prior to 1992, Usinor owned approximately 90% of GTS. Final Determination, 64 Fed.Ref. at 73,278. From 1992 to 1995, Usinor reduced its holding in GTS. Id. Through two separate transactions, one occurring in 1992 and the other in 1996, Usinor transferred a majority of interest in GTS to AG der Dillinger Huttenwerks ("Dillinger"). Id. However, Usinor retained a 48.75% interest in the holding company Dillinger which in turn owned 99% of GTS. Id. Despite the public stock offering that privatized Usinor, Commerce concluded in Remand Determination I that Usinor was the "same person" and thus, the previously determined subsidies automatically passed through after privatization. Remand Determination I at 14.³

In its original determination, Commerce formulated a new two-step inquiry to determine if prior subsidies passed through to the new privatized entity.

Consistent with the Federal Circuit's analysis in Delverde III, Commerce announced a two-step inquiry. Commerce first analyzes whether the pre-sale and post-sale entities are for all intents and purposes the same person. If they are, Commerce's analysis stops, as all of the elements of a subsidy will have been established with regard to the producer under investigation, i.e., the post-sale entity. However, if the two entities are not the same person, Commerce will proceed to the second step in its inquiry and will examine whether a subsidy has been provided to the post-sale entity through the change-in-ownership transaction itself.

GTS I, 182 F.Supp.2d at 1375 (quoting Def.'s Mem. In Opp'n to PL's and Def-Intervenors' Mot. for J. Upon Agency R. ("Def.'s Br") at 15). After applying the two-step analysis to Usinor, Commerce concluded it did not have a duty to analyze whether the subsidies passed to Usinor because Usinor was the "same person" before and after the privatization. Id. at 1375-76 (citing Def's Br. at 16).

After a lengthy review and analysis of the remand record, Commerce determined that government-owned Usinor and privatized Usinor were for all intents and purposes the same person. As a result, the prior subsidies remained attributable to privatized Usinor, as all of the elements of a subsidy were established with regard to privatized Usinor. Thus, it was unnecessary for Commerce to proceed to the second step in its privatization analysis, which would have involved an inquiry into whether a subsidy had nevertheless been provided to the privatized entity through the privatization transaction itself.

Id at 1376 (quoting Def.'s Br. at 16) (emphasis added). Thus, since Commerce had previously determined that Usinor was the recipient of subsidies, it imputed the subsidies to Usinor and, therefore, GTS after the privatization.

Then Commerce used a 14-year average useful life to allocate the benefits bestowed by the nonrecurring subsidies.⁴ Similarly, Commerce determined that GTS, since it had been a majority-owned subsidiary of Usinor, had also received countervailable subsidies that had not been extinguished by the privatization transaction. Remand Determination I at 16. Based upon its findings, Commerce recalculated GTS' CVD rate to be 6.10% ad valorem. Id, at 43.

In GTS I, this court found that Commerce's change in ownership methodology for determining if subsidies passed through to the newly privatized Usinor violated § 1677(5)(F). In accordance with the Federal Circuit's interpretation of 19 U.S.C. § 1677(5) in Delverde III, this court held that

[t]he Federal Circuit in Delverde laid out certain criteria that at a minimum any new methodology must include. First, Commerce cannot rely on any per se rule. Second, it must look at the facts and circumstances of the TRANSACTION, to determine if the PURCHASER, received a subsidy, directly or indirectly, for which it did not PAY ADEQUATE COMPENSATION. In this instance, Commerce avoids examining the terms of the sale by arguing that under the four-part test it developed, if the pre- and post-corporation is the same person, it is not required to determine if the subsidy it found to exist preprivatization continues post-privatization. This argument contravenes the Federal Circuit's holding in Delverde III.

From Delverde III, it is evident that the court interpreted section 1677(5)(F) as requiring Commerce to determine if the subsidy continued to benefit the post-privatized corporation. In this instance, Commerce has developed a methodology that circumvents its statutorily mandated duty to determine if a benefit was conferred on the privatized corporation.

GTS I, 182 F.Supp.2d at 1378 (emphasis in original).

In Remand Determination II, Commerce begrudgingly attempted to comply with this court's order. "[W]hile [Commerce does]...