Ipsco, Inc. v. US, Court No. 86-07-00853.

• Decision Date: 23 November 1988
• Docket Number: Court No. 86-07-00853.
• Citation: 701 F. Supp. 236,12 CIT 1128
• Parties: IPSCO, INC. and Ipsco Steel, Inc., Plaintiffs, v. The UNITED STATES, Defendant, and Lone Star Steel Co., Defendant-Intervenor.
• Court: U.S. Court of International Trade

701 F. Supp. 236

12 CIT 1128

IPSCO, INC. and Ipsco Steel, Inc., Plaintiffs, v. The UNITED STATES, Defendant and Lone Star Steel Co., Defendant-Intervenor.

Court No. 86-07-00853.

United States Court of International Trade.

November 23, 1988.

Barnes, Richardson & Colburn, Rufus E. Jarman, Jr. and Matthew J. Clark, New York City, for plaintiffs.

John R. Bolton, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Platte B. Moring, III, Civ. Div., U.S. Dept. of Justice, Washington, D.C., for defendant.

Dewey, Ballantine, Bushby, Palmer & Wood, Michael H. Stein, Washington, D.C., for defendant-intervenor.

OPINION

RESTANI, Judge.

On April 22, 1986, the United States Department of Commerce, International Trade Administration (ITA) issued a final affirmative countervailing duty determination in Oil Country Tubular Goods from Canada, 51 Fed.Reg. 15,037 (Apr. 22, 1986). On May 4, 1988, this court remanded the action to ITA because ITA, in choosing a period over which to allocate the bounty or grant received by Ipsco, "failed to provide a non-arbitrary basis for its decision to use a 15 year period that was derived from standardized IRS data on the useful life of equipment in the U.S. Steel industry, rather than a period that could be derived from verified information pertaining to the country and company under investigation in this case." See Ipsco, Inc. v. United States, 12 CIT ___, ___, 687 F.Supp. 614, 616 (1988) (footnote omitted). As a result of the court's remand order, ITA issued a determination on remand, dated June 7, 1988, in which it reaffirmed its earlier decision that the 15 year depreciation schedule was appropriate in light of the facts and evidence of this particular case.

Plaintiffs, Ipsco Inc. and Ipsco Steel, Inc. now challenge this remand determination claiming that ITA "fails to identify any basis to support the use of the 15 year period which was not identified before." See Plaintiffs' Comments at 2. Plaintiffs also claim that "the remand determination fails ... to show how the 15 year period could be derived from verified information pertaining to the country and company under investigation in this case." Id.

Discussion

The Court remanded ITA's final affirmative countervailing duty determination because it found that ITA's decision to use a 15 year depreciation schedule to determine plaintiffs' subsidization rate was not supported by any reasoning based on facts of record. See Ipsco 687 F.Supp. at 625-26. In response to this order, ITA states that it has "re-examined" its application of the 15 year period and that it has found that the 15 year schedule is the most appropriate allocation period to apply in this case. As support for its decision, ITA argues that its determination is consistent with the intent of the Tariff Act of 1930 as amended, 19 U.S.C. § 1671 et seq. (1982 and Supp. IV, 1986) ("the Act"), which, while it does not define an allocation period for measuring nonrecurring grants and loans, does makes clear that benefits arising from nonrecurring grants or loans should be allocated over a period of time that coincides with the commercial and competitive benefits to the recipient. See S.Rep. No. 249, 96th Cong., 1st Sess. 85-86, U.S.Code Cong. & Admin.News 1979, p. 381. Based upon the language of the Act, ITA concluded that "there are no financial or accounting rules or economic arguments that mandate the choice of a particular allocation period," Remand Determination at 2. From this, ITA asserts that it can use an allocation "method" of its choice, so long as it is "reasonable." ITA claims that the 15 year period chosen in this case meets this requirement of reasonableness.

Use of IRS Tables

The court does not view the selection of a specific time period for allocation as a methodology, in the general sense of a relatively constant approach to a particular problem. Rather, the number of years in the allocation period is a variable to be determined based on particular facts of record. ITA did select a methodology in deciding to value grants utilized for capital asset purchases by allocating the proceeds over the useful life of the capital assets purchased. The court does not understand plaintiffs to challenge this methodology as a general proposition, but rather they challenge ITA's application of this methodology, namely, ITA's adoption of useful life periods derived from non-record evidence. In the remand opinion, the court agreed with plaintiffs and stated that ITA must reach its decision based on the facts of the case before it. See Ipsco 687 F.Supp. at 626.

ITA's primary claim in support of the 15 year allocation period is one of administrability. ITA claims that having a "set standard" provides for consistency, administrability, and predictability. A desire for consistency, administrability, and predictability is understandable, but it is not a substitute for evidence of record.¹

Even assuming arguendo that ITA may adopt any allocation period which it determines to be "reasonable," it is unclear from the record why ITA believes that the IRS depreciation schedule for replaceable physical assets² is a reasonably accurate indicator of economic reality in the light of plaintiffs' verified financial records.³ Although ITA states that it believes that the IRS tables are an accurate reflection of economic reality, ITA fails to explain in its remand determination why it believes this to be so. ITA only made a general statement that it would not expect industry specific information to differ from country to country. Remand Determination at 5.

If ITA wishes to apply information gleaned from public documents it may do so, as long as it relates such information to the facts of the case before it. ITA's "methodology" need not be the "most reasonable" in order to be upheld by this court, but it must nonetheless "reasonably and accurately reflect factual information in the administrative record." See British Steel Corp. v. United States, 10 CIT 224, 632 F.Supp. 59, 68 (1986) (finding arbitrary ITA's use of an allocation period for valuing equity infusions not utilized for capital asset purchases, based on the average useful life of capital assets in U.S. companies.) (quoting Alhambra Foundry v. United States, 9 CIT 632, 626 F.Supp. 402, 408 (1985)) (see British Steel Corp. v. United States, Slip Op 88-76 (June 13, 1988) available on WESTLAW, 1988 WL 64914 for further procedural history of case.)

In the present case, there is no evidence in the record demonstrating that the basis on which the IRS tables are calculated makes the data therein suitable for use with regard to this producer. For that matter, there is no information of record as to how the IRS figure was derived. There is also no evidence of record indicating that a statistical table for domestic industries contains data applicable to a producer such as Ipsco, which uses a different depreciation schedule and is located in another country. Without such evidence, there can be no reviewable or sustainable decision. ITA has made no attempt to explain the figure it obtained from the IRS tables in relation to the facts of this case, so that the result might be said to reflect the economic reality of these particular plaintiffs. Instead, ITA assumes that the standards upon which IRS based its depreciation schedule makes the IRS data suitable to the industry at issue, no matter where it is located, and no matter what schedule of depreciation the company uses.

ITA's most persuasive argument, assuming arguendo that the IRS data has a rational basis which can be related to this case, is that Ipsco did not present solid evidence to refute the fifteen year period. This would imply that ITA does not consider company specific accounting records adequate indicators of useful life for countervailing duty purposes.⁴ The court finds somewhat disingenuous ITA's position that there is flexibility in this area and that Ipsco had a useful opportunity to present evidence of actual useful life. The entire thrust of the remand determination indicates that this would have been a futile act. ITA wants a firm rule. In the past it has only applied this rule, and ITA states that it does not want to consider company specific or country specific allocation periods. Furthermore, ITA is the investigator. For all practical purposes, only it can define what constitutes satisfactory evidence of a proper allocation period. ITA, however, has given no guidance as to what the appropriate evidence might be. It would be inequitable under these conditions to rule in favor of ITA, merely because Ipsco has not satisfied some undefined burden.

When this court remanded this case with instructions that ITA reevaluate its selection of allocation periods, this court indicated that ITA was not directed to use the particular period claimed by plaintiffs, but that ITA must select a period which is appropriately based on the facts of this case. Essentially, ITA rearticulated its non-record related reasons for using the 15 year schedule. In doing so, it appears that ITA may have confused its rulemaking powers with its adjudicatory function.

Rulemaking versus adjudication under the "APA"

The Administrative Procedures Act ("APA") distinguishes between an agency's rulemaking powers and its adjudicatory functions. Under the APA, a rule is the "whole or part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency ..." 5 U.S.C. 551(4) (1982). ITA has the power to enact rules, but when doing so must meet the guidelines of the APA as set out in 5 U.S.C. 553 (1982). When engaging in rulemaking, ITA is required by section 553 to publish a general notice of proposed rulemaking in the federal register; to give interested persons an opportunity to participate in the rulemaking through...