Saarstahl Ag v. U.S., Slip Op. 97-67.

• Citation: 967 F.Supp. 1311
• Decision Date: 29 May 1997
• Docket Number: Court No. 93-04-00219.,Slip Op. 97-67.
• Parties: SAARSTAHL AG, Plaintiff, v. UNITED STATES, Defendant, and Inland Steel Bar Co., Defendant-Intervenor.
• Court: U.S. Court of International Trade

967 F.Supp. 1311

SAARSTAHL AG, Plaintiff, v. UNITED STATES, Defendant and Inland Steel Bar Co., Defendant-Intervenor.

Slip Op. 97-67.

Court No. 93-04-00219.

United States Court of International Trade.

May 29, 1997.

LeBoeuf, Lamb, Leiby & MacRae (Mary Patricia Michel: on Saarstahl's Memorandum in Support of Plaintiff's Motion for Judgment on the Agency Record and Response of Saarstahl AG to the Motion for Judgment on the Agency Record of Inland Steel Bar Company), Washington, DC, Grunfeld, Desiderio, Lebowitz & Silverman (Max F. Schutzman, David L. Simon, Jeffrey S. Grimson: on Reply Brief of Saarstahl AG), New York City, deKieffer & Horgan (J. Kevin Horgan, Marc Montalbine: on Saarstahl's Comments on Remand Determination), Washington, DC, counsel, for plaintiff.

Frank W. Hunger, Assistant Attorney General of the United States; David M. Cohen, Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, (Jeffrey M. Telep); Marguerite Trossevin, Attorney-Advisor, Washington, DC, Office of Chief Counsel for Import Administration, United States Department of Commerce, counsel, for defendant.

Wiley, Rein & Fielding (Charles Owen Verrill, Jr., Alan H. Price, Willis S. Martin III, Brian E. Rosen), Washington, DC, counsel, for defendant-intervenor.

OPINION

CARMAN, Chief Judge.

Before the Court are motions for Judgment on the Agency Record made by plaintiff Saarstahl AG ("Saarstahl") and defendant-intervenor Inland Steel Bar Company ("Inland") pursuant to U.S. CIT R. 56.2. Plaintiff argues the Department of Commerce's ("Department" or "Commerce") decision in Final Affirmative Countervailing Duty Determination: Certain Hot Rolled Lead and Bismuth Carbon Steel Products From Germany, 58 Fed.Reg. 6,233 (Dep't Comm.1993) ("Final Affirmative Determination" or "Certain Hot Rolled Lead") as modified by Remand Determination: Certain Hot Rolled Lead and Bismuth Steel Products From Germany (dated Oct. 12, 1993) ("Remand Determination") is unsupported by substantial evidence on the record and is not otherwise in accordance with law.

Saarstahl also previously moved for oral argument on the non-privatization issues remaining undecided after the issuance of this Court's opinion in Saarstahl AG v. United States, 939 F.Supp. 898 (CIT 1996) ("Saarstahl II").¹ Saarstahl claimed oral argument is "vitally important because of the significant amount of time which has transpired since the issues in the case were last briefed" and because of the issuance of decisions relevant to this proceeding by this Court and the United States Court of Appeals for the Federal Circuit ("CAFC") during that time. (Pl.'s Mot. for Oral Arg. or Alt. for Supp. Brief. at 1.) In Saarstahl AG v. United States, 949 F.Supp. 863 (CIT 1996) ("Saarstahl III"), this Court reserved decision on plaintiff's Motion for Oral Argument as to issues remaining undecided after this Court's decision in Saarstahl II. In this opinion, therefore, this Court will review Commerce's Final Affirmative Determination as modified by the Remand Determination with respect to issues not pertaining to privatization or allocation, because, as explained below, this Court has addressed those issues in previous opinions.²

Plaintiff raises three challenges to the Final Affirmative Determination. Plaintiff argues: (1) the contingent repayment obligations at issue were not loans, (2) Commerce erred in calculating the value of the contingent repayment obligations, and (3) Commerce's determination that the private banks' debt forgiveness was a countervailable subsidy is not supported by substantial evidence on the record and is otherwise not in accordance with law.

Defendant-Intervenor also moves for Judgment on the Agency Record, arguing Commerce's Final Affirmative Determination and Remand Determination are not supported by substantial evidence on the record. Defendant-Intervenor argues Commerce erred when it allocated subsidies received by Saarstahl over the total sales of DHS. Defendant-Intervenor also seeks a remand for a redetermination (1) finding Saarstahl uncreditworthy in 1989, in accordance with Certain Hot Rolled Lead and Bismuth Carbon Products From Brazil, France, Germany and the United Kingdom, 57 Fed.Reg. 42,471 (Dep't Comm.1992) (prelim.determ.) ("Preliminary Determination"), and adding an uncreditworthiness premium to the discount rate used to calculate the countervailing duty margin.

Defendant argues Commerce's Final Affirmative and Remand Determinations are supported by substantial evidence on the record and are otherwise in accordance with law, and requests this Court sustain Commerce's determinations except with respect to calculation of the discount rate. Defendant requests this Court remand this issue to Commerce with instructions to reconsider the discount rate in light of Saarstahl SVK's creditworthiness.

The Court has jurisdiction over the matter pursuant to 28 U.S.C. § 1581(c) (1988).

BACKGROUND

A. Factual Background

From the mid-1970s through the mid-1980s, the European steel industries, in general, and the Saarland steel industries in particular, suffered tremendously as a result of the steel crisis caused by the decline in demand and reduced prices for steel. Between 1978 and 1985, Saarstahl Volklingen GmbH ("Saarstahl SVK"), a German steel company,³ received various subsidies and assistance from the German federal government ("GOG") and the Saarland state government ("GOS") stemming from a Restructuring Plan adopted by the federal and state governments in 1978 to restore competitiveness to Saarstahl SVK and to create a viable steel industry in the Saarland. The subsidies took the form of guaranteed loans, government funds, and the assumption of principal and interest payments. The federal and state governments also guaranteed loans made to Saarstahl by private banks which would not have made such loans without the government guarantees. Assistance provided to Saarstahl was used to modernize the company, make capital investments and cover operating and employee expenses pursuant to a number of Saarstahl restructuring plans. All of the assistance contained a repayment obligation known as "Rückzahlungsverpflich" or "RZV," which obligated Saarstahl SVK to repay the governments if the company returned to profitability. By 1989, Saarstahl SVK had accumulated DM 3.948 billion in repayment obligations to both governments.

Until 1986, Saarstahl SVK was wholly owned by Arbed Luxembourg ("Arbed"), a Luxembourg state-owned company. By 1985, Arbed was no longer able or willing to function as the owner of Saarstahl. Because of the importance of Saarstahl to the local economy, the GOS decided to search for a new owner to replace Arbed. In 1986, in order to facilitate finding a new investor for Saarstahl, Arbed transferred 76 percent of its ownership of Saarstahl SVK to the GOS for DM 1. Usinor-Sacilor, a French company which owned German steel producer AG der Dillinger Huttenwerke ("Dillinger"), also expressed interest in purchasing Saarstahl SVK, but only on the condition Saarstahl was relieved of its debt burden. At the time, Dillinger and Saarstahl SVK were already partners in a joint venture company which produced pig iron.

On April 20, 1989, the GOS reached an agreement with Usinor-Sacilor to merge Saarstahl SVK with Dillinger. On June 15, 1989, Saarstahl SVK's name was changed to DHS-Dillinger Hütte Saarstahl AG ("DHS") and all assets and liabilities of Saarstahl SVK were transferred to DHS. Saarstahl SVK's legal form also changed from "GmBH," a limited liability corporation, to "AG," a German stock company. In exchange for Saarstahl SVK's assets and a capital contribution of DM 145.1 million, the GOS received a 27.5 percent ownership interest in Saarstahl AG. Arbed received a 2.5 percent ownership interest in Saarstahl AG in exchange for a capital contribution of DM 8.9 million and its shares of Saarstahl. Usinor-Sacilor's in-kind contribution of all of its shares of Dillinger was valued at DM 417.3 million and resulted in a 70 percent ownership interest in the newly-formed DHS. Usinor-Sacilor conditioned this agreement upon the federal and Saarland state governments' forgiveness of all of Saarstahl SVK's RZVs.

On June 30, 1989, DHS transferred the former Saarstahl SVK's lead-bar assets and liabilities to a newly formed subsidiary, Saarstahl AG ("Saarstahl"). As a result of these events, DHS became a holding company with two operating subsidiaries, Saarstahl AG and Dillinger, and was owned 70 percent by Usinor Sacilor, 27.5 percent by the GOS and 2.5 percent by Arbed.⁴ The result of the combination for Saarstahl was that it had been privatized in an arm's-length market transaction which involved a change from ownership and control by the GOS to majority ownership by private interests. See Remand Determination at 2.

Pursuant to the merger agreement and as a condition for sale, the GOG and GOS entered into an agreement concerning the previous assistance received by Saarstahl SVK. Under this agreement, all outstanding repayment obligations for the funds provided to Saarstahl SVK, as well as the additional rights held by both governments for the repayment of the principal on the guaranteed loans, were forgiven and relinquished. At the request of the governments, private banks also forgave a portion of the debt owed to them by Saarstahl SVK.

B. Countervailing Duty Investigation

Commerce initiated a countervailing duty investigation of Saarstahl on May 8, 1992, based on a petition filed by Inland Steel Bar Company and Bethlehem Steel Corporation against imports of certain hot-rolled lead and bismuth carbon steel products from Germany. Commerce issued its Preliminary Determination on September 17, 1992. On January 27, 1993, in its Final Affirmative Determination, Commerce determined "benefits which constitute subsidies within the meaning of the countervailing duty (CVD) law⁵ are being provided to manufacturers, producers, or...