Inland Steel Bar Co. v. US

• Decision Date: 07 June 1994
• Docket Number: Court No. 93-04-00234. Slip Op. 94-93.
• Citation: 858 F. Supp. 179
• Parties: INLAND STEEL BAR CO., Plaintiff, v. UNITED STATES, Defendant, and United Engineering Steels, Ltd., Defendant-Intervenor.
• Court: U.S. Court of International Trade

858 F. Supp. 179

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

Court No. 93-04-00234 Slip Op. 94-93.

United States Court of International Trade.

June 7, 1994.

COPYRIGHT MATERIAL OMITTED

Wiley, Rein & Fielding, Charles Owen Verrill, Jr., Alan H. Price, Beth A. Kurowski, and Brian E. Rosen, Washington, DC, for plaintiff.

Frank W. Hunger, Asst. Atty. Gen., David M. Cohen, Director, Civil Div., Commercial Litigation Branch, U.S. Dept. of Justice, Jeffrey M. Telep, Elizabeth Seastrum, and Robert E. Nielsen, Sr. Atty., Office of Chief Counsel, Washington, DC, for Import Admin., U.S. Dept. of Commerce, of counsel, for defendant.

Steptoe & Johnson, Richard O. Cunningham, Sheldon E. Hochberg, William L. Martin, II, Elizabeth B. Echols, Peter Rafter and Peter Lichtenbaum, Washington, DC, for defendant-intervenor.

Morgan, Lewis & Bockius, Mark R. Joelson and Marcela B. Stras, Washington, DC, for amicus curiae the Government of the United Kingdom.

OPINION

CARMAN, Judge:

Plaintiff and defendant-intervenor contest the U.S. Department of Commerce's (Commerce) determination in Certain Hot Rolled Lead and Bismuth Carbon Steel Products From the United Kingdom, 58 Fed.Reg. 6237 (Dep't Comm.1993) (final determination) (Final Determination), as modified by Remand Determination: Certain Hot Rolled Lead and Bismuth Carbon Steel Products From the United Kingdom (1993) (Remand Determination). The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(c) (1988).

BACKGROUND

Commerce's period of investigation for United Engineering Steels, Ltd. (UES) is calendar year 1991. Final Determination, 58 Fed.Reg. at 6238. The products covered by Commerce's investigation are "hot-rolled bars and rods of non-alloy 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." Id.

The government of the United Kingdom (U.K.) provided subsidies to the state-owned British Steel Corporation (BSC) from 1978 until 1986. In 1986, BSC and Guest, Keen & Nettlefolds (GKN), a privately-owned company, formed a joint venture company, United Engineering Steel Corporation (UES). Id. In return for shares in UES, BSC and GKN each contributed productive units — BSC's Special Steels Business and GKN's Brymbo Steel Works, accounts receivable, cash and inventories to the joint venture. Id. At the time UES was formed, BSC was wholly owned by the U.K. In 1988, however, BSC was privatized and is now known as British Steel plc. Id.

Pursuant to a petition filed by Inland Steel Corporation and Bethlehem Steel Corporation, Commerce initiated an investigation on May 8, 1992, and issued its preliminary determination on September 17, 1992. Certain Hot Rolled Lead and Bismuth Carbon Steel Products From Brazil, France, Germany, and the United Kingdom, 57 Fed.Reg. 19,884 (Dep't Comm.1992) (initiation notice); Certain Hot Rolled Lead and Bismuth Carbon Steel Products From the United Kingdom, 57 Fed.Reg. 42,974 (Dep't Comm.1992) (prelim. determination). In its Final Determination, published on January 27, 1993, Commerce determined "a company's sale of a `business' or `productive unit' does not alter the effect of previously bestowed subsidies." 58 Fed.Reg. at 6240. Commerce concluded, therefore, "a portion of the pre-1986 subsidies provided to BSC passed through to the Special Steels Business at its new `home,' UES." Id. Commerce reached this conclusion despite its finding that UES is "an independent joint venture company, managed as a separate corporate entity from its parent companies BSC ... and GKN," and was "created after several years of difficult, arm's length negotiations between BSC and GKN." Id.

Although BSC and GKN each hold a 50% interest in UES, Commerce found nothing in the minutes of UES' board meetings indicating BSC dominated the board meetings. Id. Commerce further noted BSC had fewer representatives on UES' board and committee than did GKN and that in 1988 BSC did not exercise its right to appoint the chairman of the board. Id. Based on this information and the fact UES paid BSC market prices for raw materials, Commerce concluded "UES is a separate corporate entity and not controlled by BSC." Id. With respect to subsidies received by BSC after the formation of UES, Commerce stated unequivocally "any benefits received by BSC after formation of the joint venture do not pass through to UES." Id. at 6241. Subsequent to the International Trade Commission's affirmative injury determination, Commerce issued a countervailing duty (CVD) order for the relevant products. Certain Hot Rolled Lead and Bismuth Carbon Steel Products From the United Kingdom, 58 Fed.Reg. 15,327 (Dep't Comm.1993) (CVD order).

Prior to briefing, Commerce requested and was granted a remand to reconsider its original determination. On remand, Commerce adopted its reasoning from Certain Steel Products from the United Kingdom, 58 Fed. Reg. 37,393 (Dep't Comm.1993) (final determination) (Certain Steel). Commerce "reanalyzed the spin-off of BSC's Special Steels Business and applied the methodology articulated in the Restructuring section of the General Issues Appendix, 58 Fed.Reg. 37,225, 37,259 (Dep't Comm.1993)." Remand Determination at 2. Based on Certain Steel and the General Issues Appendix, Commerce concluded "the purchase price for all or part of a government-owned company can, at least in part, constitute repayment of prior subsidies." Remand Determination at 1-2. In the original final determination Commerce found CVD margins of 12.69%, and in the subsequent remand determination Commerce found CVD margins of 4.59%. Final Determination, 58 Fed.Reg. at 6246; Remand Determination at 4.

Subsequent to remand, UES sought an order requiring Commerce to correct the cash deposit rates and refund excess cash deposits. The Court denied UES' motion holding that "although Commerce has determined on remand the cash deposit rate on UES' merchandise should be 4.59%, the correct deposit rate is still at issue in the underlying action." Inland Steel Bar Co. v. United States, 18 CIT ___, ___, 843 F.Supp. 1477, 1479 (1994). The Court further stated because it had "not issued its final judgment in this case with respect to the cash deposit rate, it would be contrary to law for this Court to grant UES motion." Id. at ___, 843 F.Supp. at 1479.

CONTENTIONS OF THE PARTIES

UES argues Commerce unlawfully determined subsidies received by BSC should be attributed in part to UES. According to UES, Commerce failed to provide a rational basis for its decision to impose countervailing duties on UES' production. The Amicus curiae, the U.K., supports UES' position. The U.K. argues Commerce's travelling subsidy methodology is contrary to U.S. CVD law, GATT and the Subsidies Code. If the Court holds Commerce properly attributed subsidies to UES, then UES contends Commerce properly allocated the subsidies based on relative assets but erred in amortizing those subsidies over a period of fifteen years.

Commerce contends it properly determined subsidies received by BSC travelled with the Specialty Steels Business to UES. With respect to the amortization period, Commerce claims it properly relied on the average useful life of assets in the steel industry, a figure which is based on the class life depreciation tables in the U.S. tax code. Moreover, Commerce maintains it properly allocated the subsidies based on relative assets. According to Commerce, nothing in the CVD law directs it how to allocate subsidies when a subsidized, state-owned company privatizes one of its productive units. Commerce argues, therefore, its use of relative assets for this allocation was a reasonable exercise of its authority.

Inland supports Commerce's determination imposing countervailing duties on UES' production for subsidies received by BSC. Inland also agrees with Commerce's use of the fifteen-year amortization period and maintains it is a reasonable and rationale method. Contrary to Commerce's determination, however, Inland argues Commerce should not have reallocated subsidies back to BSC from UES on remand. Additionally, Inland disagrees with Commerce's allocation of subsidies based on relative assets rather than relative sales.

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) (1988). "Substantial evidence is something more than a `mere scintilla,' and must be enough reasonably to support a conclusion." Ceramica Regiomontana S.A. v. United States, 10 CIT 399, 405, 636 F.Supp. 961, 966 (1986), aff'd, 5 Fed.Cir. (T) 77, 810 F.2d 1137 (1987) (citations omitted).

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 methodology over another, however, "the traditional deference courts pay to agency interpretations 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 British Steel Corp. v. United States, 10 CIT 224, 235, 632 F.Supp. 59, 68 (1986); see also Ceramica Regiomontana, 10 CIT at 405, 636 F.Supp. at 966 (The agency must not "contravene or ignore the intent of the legislature or the guiding purpose of the statute.") (citations omitted).

DISCUSSION

A. Sale of the Special Steels Business

Contrary to Commerce's findings, Inland maintains the transfer of the Special Steels Business was not a transaction between unrelated parties, was not an...