Inland Steel Bar Co. v. U.S., Slip Op. 97-18.

• Decision Date: 10 February 1997
• Docket Number: Slip Op. 97-18.,Court No. 93-04-00234.
• Citation: 960 F.Supp. 307
• Parties: INLAND STEEL BAR CO., Plaintiff, v. UNITED STATES, Defendant, and United Engineering Steels, Ltd., Defendant-Intervenor.
• Court: U.S. Court of International Trade

960 F.Supp. 307

INLAND STEEL BAR CO., Plaintiff, v. UNITED STATES, Defendant and United Engineering Steels, Ltd., Defendant-Intervenor.

Slip Op. 97-18.

Court No. 93-04-00234.

United States Court of International Trade.

February 10, 1997.

Wiley, Rein & Fielding (Charles Owen Verrill, Jr., Alan H. Price, and Willis S. Martyn, III), Washington, DC, for plaintiff Inland Steel Bar Company.

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, Jeffrey M. Telep, Washington, DC); Robert E. Nielsen, Office of Chief Counsel for Import Administration, United States Department of Commerce, Valparaiso, IN, of counsel, for defendant.

Steptoe & Johnson, L.L.P. (Richard O. Cunningham, Sheldon E. Hochberg, William L. Martin, II, and Peter Lichtenbaum), Washington, DC, for defendant-intervenor United Engineering Steels Limited.

Skadden, Arps, Slate, Meagher & Flom (Robert E. Lighthizer and John Mangan) and Dewey Ballantine (John A. Ragosta and Michael R. Geroe) Washington, DC, for amici curiae Domestic Flat Rolled Steel Producers.

OPINION

CARMAN, Chief Judge:

This case is before the Court following remand to the Department of Commerce ("Commerce" or "Department"), pursuant to this Court's order. See Inland Steel Bar Co. v. United States, United Engineering Steels, Ltd., 936 F.Supp. 1052 (CIT 1996) (order remanding case to the Department of Commerce). Plaintiff challenges Commerce's Remand Determination: Certain Hot Rolled Lead and Bismuth Carbon Steel Products From the United Kingdom Pursuant to Inland Steel Bar Co. v. United States, Slip Op. 96-134, (CIT Aug. 13, 1996) (date stamped September 13, 1996) (Remand Determination) and urges this Court to remand this matter to Commerce for further consideration and redetermination. Defendant and defendant-intervenor assert Commerce's Remand Determination conforms to this Court's remand order and should be affirmed by this Court. The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(c) (1988), and for the reasons set forth below affirms the Department's Remand Determination finding it supported by substantial evidence on the record and otherwise in accordance with law.

BACKGROUND

Between 1978 and 1986, the government of the United Kingdom provided subsidies to the state-owned British Steel Corporation ("BSC"). In 1986, BSC and Guest, Keen & Nettlefolds ("GKN"), a privately owned company, formed a joint venture company, United Engineering Steels Limited ("UES"). In return for shares in UES, BSC and GKN each contributed productive units to the joint venture. BSC contributed its Specialty Steels Business ("SSB") and GKN contributed its Brymbo Steel Works, accounts receivable, cash and inventories.

On May 8, 1992, the Department of Commerce initiated a countervailing duty investigation of "hot-rolled bars and rods of nonalloy or other alloy steel, whether or not descaled, containing by weight 0.03 percent or more of lead or 0.05 percent or more of bismuth, in coils or cut lengths, and in numerous shapes and sizes" manufactured in the United Kingdom. See Initiation of Countervailing Duty Investigations: Certain Hot Rolled Lead and Bismuth Carbon Steel Products From Brazil, France, Germany, and the United Kingdom, 57 Fed. Reg. 19,884, 19,885 (Dep't Comm.1992) (initiation notice). Commerce's Final Determination stated "a company's sale of a `business' or `productive unit' does not alter the effect of previously bestowed subsidies" and concluded "a portion of the pre-1986 subsidies provided to BSC passed through to the Special Steels Business at its new `home,' UES." Final Affirmative Countervailing Duty Determination: Certain Hot Rolled Lead and Bismuth Carbon Steel Products From the United Kingdom, 58 Fed.Reg. 6,237, 6,240 (Dep't Comm.1993) (final determination) (Final Determination).

Prior to initial briefing, Commerce requested, and this Court granted, a remand to reconsider the Final Determination in light of the privatization analysis developed by the Department in the investigation Final Affirmative Countervailing Duty Determination; Certain Steel Products from the United Kingdom, 58 Fed.Reg. 37,393 (Dep't Comm. 1993) (final determination) (Certain Steel). Based on Certain Steel and the General Issues Appendix, 58 Fed.Reg. 37,225 (Dep't Comm.1993), Commerce determined "it [would] no longer assume[] that the entire amount of subsidies allocated to the productive unit follows it when sold." Remand Determination: Certain Hot Rolled Lead and Bismuth Carbon Steel Products From the United Kingdom at 1 (dated Oct. 12, 1993) (Remand Determination I).

In reviewing Remand Determination I, this Court held "Commerce ... erred as a matter of law and the Final Determination as modified by [Remand Determination I] is vacated to the extent Commerce determined previously bestowed subsidies are passed through to a successor company in an arm's length transaction." Inland Steel Bar Co. v. United States, 858 F.Supp. 179, 186 (CIT 1994) ("Inland I"). This Court's opinion in Inland I was reversed and remanded by the United States Court of Appeals for the Federal Circuit in an opinion not citeable as precedent. See Inland Steel Bar Co. v. United States, 86 F.3d 1174 (Fed.Cir.1996) ("Inland II"). In Inland II, the Federal Circuit adopted the reasoning it developed in Saarstahl AG v. United States, 78 F.3d 1539, 1544 (Fed.Cir.1996) ("Saarstahl AG"), in concluding this Court "erred in holding that as a matter of law a subsidy cannot be passed through during an arm's length transaction." Following the Federal Circuit's reversing and remanding the matter, this Court remanded the case to Commerce.

CONTENTIONS OF THE PARTIES

A. Plaintiff

Plaintiff's comments on Commerce's Remand Determination raise two arguments in support of its request that this Court again remand this matter to the Department of Commerce for further deliberation. Plaintiff's first argument challenging the Remand Determination asserts the Federal Circuit's opinion in Saarstahl AG "specifically upheld Commerce's original determination which held that the subsidies bestowed on British Steel Corp., and allocated to the Special Steels Business, `travelled' [sic] with that productive unit when it was sold to United Engineering Steels, Ltd." (Pl.'s Comm. on Remand Determ. ("Pl.'s Comm.") at 1-2.) Plaintiff argues the Inland II opinion adopted the Federal Circuit's reasoning in Saarstahl AG, which states "Commerce determined that the subsidy survives unless there is evidence that it went elsewhere or was repaid." Saarstahl AG, 78 F.3d at 1544. Plaintiff contends that because Commerce's Remand Determination "reach[es] a decision contrary to the determination that the Federal Circuit specifically upheld" this Court should decline to affirm the Remand Determination and should order Commerce issue a remand determination consistent with Remand Determination I. (Pl.'s Comm. at 2-3.)

Plaintiff's second challenge asserts this Court should decline to affirm the Remand Determination because it elevates the form of the transaction at issue over the substance. Plaintiff asserts "[t]he Special Steels Division's production continued as it did before the sale to UES using the same equipment, making the same products, with the same workers, etc." (Pl.'s Comm. at 3-4.) Plaintiff's comments state Commerce's determination that BSC's Special Steels Division was a productive unit, and not a corporate person, "is clearly not what this Court intended when it instructed Commerce in the strongest possible terms not to place form over substance." (Pl.'s Comm. at 4.) Plaintiff asserts UES' products are countervailable because a subsidiary is a recipient of subsidies provided to the parent corporation, and when the subsidiary is privatized "`the privatized entity continues to be, for all intents and purposes, the same entity that received subsidies prior to the privatization.'" (Pl.'s Comm. at 5 (quoting British Steel plc v. United States, 924 F.Supp. 139, 157-58 n. 25 (CIT 1996) ("British Steel II"), appeals docketed, Nos. 96-1401 to -06 (Fed. Cir. June 21, 1996)).)

B. Defendant

In response to plaintiff's challenge, defendant offers two arguments in support of its position that this Court should sustain Commerce's Remand Determination. First, defendant argues Commerce properly followed this Court's remand order, noting "Commerce simply may not ignore the lawful orders of a court which has jurisdiction over the instant case and take it upon itself to submit a remand results [sic] not in conformance with the court's directions." (Def.'s Rebuttal to Interested Party Comm. ("Def.'s Comm.") at 2.) Defendant asserts this Court's remand order specifically required Commerce to "make certain determinations regarding productive units in the context of privatization pursuant to the Court's opinions in British Steel I and British Steel II" and "that is exactly what Commerce did." (Def.'s Comm. at 2.)

Second, defendant asserts Commerce's Remand Determination is in conformity with this Court's determination in British Steel I and British Steel II that the recipient of a subsidy must be a person or artificial person capable of holding a property interest. See British Steel II, 924 F.Supp. at 156; British Steel plc v. United States, 879 F.Supp. 1254, 1271-72 (CIT 1995) ("British Steel I"), appeals docketed, Nos. 96-1401 to -06 (Fed. Cir. June 21, 1996). Defendant states it considers the Court's artificial person requirement "as the critical threshold that first must be crossed before any subsequent analysis takes place" and not "simply a question of `form' that may be summarily ignored regardless of whether the productive unit in question may appear to have some of the attributes of an artificial person." (Def.'s Comm. at 3-4.) Defendant asserts that because "the record in this case is clear that the Special Steels...