Saudi Iron and Steel Co.(Hadeed) v. US

• Citation: 675 F. Supp. 1362
• Decision Date: 27 November 1987
• Docket Number: Court No. 86-03-00283.
• Parties: SAUDI IRON AND STEEL COMPANY (HADEED), Plaintiff, v. UNITED STATES, Defendant, Georgetown Steel Corp., et al., Defendant-Intervenors. GEORGETOWN STEEL CORP., et al., Plaintiffs, v. UNITED STATES, Defendant, Saudi Iron and Steel Company (Hadeed), Defendant-Intervenor.
• Court: U.S. Court of International Trade

675 F. Supp. 1362

SAUDI IRON AND STEEL COMPANY (HADEED), Plaintiff, v. UNITED STATES, Defendant, Georgetown Steel Corp., et al., Defendant-Intervenors.

GEORGETOWN STEEL CORP., et al., Plaintiffs, v. UNITED STATES, Defendant, Saudi Iron and Steel Company (Hadeed), Defendant-Intervenor.

Court No. 86-03-00283.

United States Court of International Trade.

November 27, 1987.

COPYRIGHT MATERIAL OMITTED

Miller & Chevalier, Chartered, Homer E. Moyer, Jr., Joanne Thomas Asbill and Christopher C. Gould, Washington, D.C., for Saudi Iron and Steel Co.

Fried, Frank, Harris Shriver, & Jacobson, David E. Birenbaum and Alan Kashdan, Washington, D.C., for Atlantic Steel Co.

Wiley, Rein & Fielding, Charles Owen Verrill, Jr. and Robert C. Weissler, Washington, D.C., for Georgetown Steel Corp., North Star Steel Texas, Inc., and Raritan River Steel Co.

Richard K. Willard, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation

Branch, Civil Div., Dept. of Justice, Elizabeth C. Seastrum, U.S. Dept. of Commerce, Mary White, Washington, D.C., for defendant.

DiCARLO, Judge:

Georgetown Steel Corporation, North Star Steel Texas, Inc., Raritan River Steel Company and Atlantic Steel Company (domestic producers) and Saudi Iron and Steel Company (Hadeed) filed actions under section 516A(a) of the Tariff Act of 1930 (Act), as amended, 19 U.S.C. §§ 1516a(a)(2)(A)(i) (II) and (B)(i) (Supp. III 1985), to contest the final affirmative countervailing duty determination and order issued by the United States Department of Commerce, International Trade Administration (Commerce) which found that carbon steel wire rod from Saudi Arabia receives countervailable bounties or grants within the meaning of section 303 of the Act, as amended, 19 U.S.C. § 1303 (1982). Final Affirmative Countervailing Duty Determination and Countervailing Duty Order; Carbon Steel Wire Rod From Saudi Arabia, 51 Fed.Reg. 4206 (Feb. 3, 1986). The actions were consolidated. Jurisdiction is provided under 28 U.S.C. §§ 1581(c) and 2631(c) (1982). Commerce's determination is sustained in part and remanded in part.

Plaintiffs move pursuant to Rule 56.1 of the Rules of this Court for judgment on the agency record. They raise four questions: (1) whether the Saudi government provides loans from the Public Investment Fund (PIF) to a specific group of enterprises within the meaning of 19 U.S.C. § 1677(5)(B) (1982); (2) whether Commerce used a reasonable methodology to determine the countervailable benefit of a PIF loan to Hadeed; (3) whether Commerce correctly characterized Hadeed's lease/purchase of a bulk material handling system as the provision of "goods or services at preferential rates" within the meaning of 19 U.S.C. § 1677(5)(B)(ii) rather than as the "provision of ... loans ... on terms inconsistent with commercial considerations" under 19 U.S.C. § 1677(5)(B)(i); and (4) whether a transfer of the Jeddah Steel Rolling Company to Hadeed constitutes a "provision of capital ... on terms inconsistent with commercial considerations" within the meaning of section 1677(5)(B)(i).

In reviewing final Commerce determinations in countervailing duty investigations, the Court is directed by Congress to hold unlawful those determinations found "to be unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1)(B) (1982). Under the substantial evidence standard for review of agency determinations, the Court will uphold an agency's findings if they are supported in the record by such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Federal Trade Comm'n v. Indiana Fed'n of Dentists, 476 U.S. 447, 106 S.Ct. 2009, 2014, 90 L.Ed.2d 445 (1986); Atlantic Sugar, Ltd. v. United States, 2 Fed.Cir. (T) 130, 136, 744 F.2d 1556, 1562 (1984). The Court "must accord substantial weight to an agency's interpretation of a statute it administers." American Lamb Co. v. United States, 785 F.2d 994, 1001 (Fed.Cir.1986) (citing Zenith Radio Corp. v. United States, 437 U.S. 443, 450-51, 98 S.Ct. 2441, 2445 57 L.Ed.2d 337 (1978); Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1964)). However, "the traditional deference courts pay to agency interpretation is not to be applied to alter the clearly expressed intent of Congress." Board of Governors of the Federal Reserve System v. Dimension Financial Corp., 474 U.S. 361, 106 S.Ct. 681, 686, 88 L.Ed.2d 691 (1986).

1. Whether the Saudi government provides loans from the Public Investment Fund to a specific group of enterprises.

Commerce found that "Saudi commercial banks are limited in their ability and willingness to make long-term loans," in part because Islamic law prohibits collection of interest. 51 Fed.Reg. at 4208. Commerce found that "since interest obligations on loans cannot be enforced in Saudi courts, and because the Saudi government limits the amount of funds which Saudi commercial banks can loan to any one individual or legal entity, Saudi commercial banks cannot lend large amounts of funds over a long period of time for large scale industrial construction projects." Id. Commerce concluded that the only sources of long-term financing in Saudi Arabia are the PIF, the Saudi Industrial Development Fund (SIDF), and three other specialized credit institutions, but that "only the PIF and SIDF provide funding to industrial or manufacturing projects." Id. The Saudi government provides PIF loans "to commercially productive projects in which the Saudi government has some equity participation." Id.

Hadeed, the only producer in Saudi Arabia exporting carbon steel wire rod to the United States during the review period January 1 to December 31, 1984, received a PIF loan comprising 60% of its total capitalization as part of its initial investment package to construct a direct reduction plant, steelmaking plant, and rolling mill. Id. Hadeed is partly owned by the Saudi Basic Industries Corporation (SABIC). R. 598, 614. SABIC, in turn, was wholly-owned by the Saudi government from 1976 through early 1984 when it issued new stock and became 70% government owned and 30% privately owned. R. 83, 2042.

To determine whether the Saudi government provides PIF loans to "a specific enterprise or industry or group of enterprises or industries" within the meaning of section 1677(5)(B), Commerce reviewed all PIF lending, beginning with the first loans made in 1973. Commerce found that "despite the number of products which have received PIF financing, these loans are given predominantly to finance projects undertaken by PETROMIN, Saudia Airlines, and SABIC," and that "since 1978, PIF loans have gone exclusively to these three companies' projects." 51 Fed.Reg. at 4208 (emphasis added). Commerce determined, therefore, that the Saudi government provides PIF loans to a "specific group of enterprises" within the meaning of the section.

Hadeed contends Commerce's determination is "premised on an erroneous factual assumption ... that PIF loans have been made to only three companies." Brief in Support of Hadeed's Motion for Judgment on the Agency Record, at 14, 21. Hadeed claims that 24 different companies received PIF loans and that 24 companies are not a "specific group of enterprises" within the meaning of the section.

The record discloses that all PIF loans were not made directly to Saudia Airlines, SABIC or PETROMIN as the named recipients. Conf.R. 1936-38. In the final determination, Commerce determined that PIF loans were provided to finance "projects undertaken by three specific enterprises. While the Public Investment Fund may be open to investment in any project in which there is some public ownership, the loans, in fact, have been provided only to three companies." 51 Fed.Reg. at 4215. (emphasis added). Commerce thus determined that the Saudi government provides PIF loans "to projects undertaken by a specific group of enterprises, PETROMIN, Saudia Airlines and SABIC," 51 Fed.Reg. at 4213, based on its finding that these three companies directly or through their projects received all PIF loans since 1978 and most loans since 1973.

Hadeed asserts that the operations of separate companies named as PIF loan recipients are not "projects" of Saudia Airlines, PETROMIN, and SABIC. Hadeed claims the other operations were found to be projects of these three companies merely because the three companies are equity-holders in the companies named as PIF loan recipients for the different operations and argues that this test based on commonality of shareholders has never been used to define a specific group of enterprises.

The record reveals Saudia Airlines is the named recipient of the PIF loans for the "projects" in which it is involved, and the record reveals that SABIC and PETROMIN, when not the 100% owner had a 50% or more interest in the company named as the recipient for the PIF loan. Conf.R. 1936-38. (Confidentiality waived). The record also reveals that SABIC kept records referring to the operations of the named PIF loan recipients in which it had an equity interest as its "projects". Conf. R. 1631-87. Records of the Saudi government list under the headings SABIC, PETROMIN and Saudia Airlines these other operations in which they were involved, indicating they are projects of these three companies. See Conf.R. 2015-18. The record thus contains substantial evidence to support Commerce's determination that the operations of other named recipients of PIF loans were projects of Saudia Airlines, SABIC or PETROMIN.

Hadeed asserts Commerce's determination is not in accordance with law because there is no evidence that the Saudi government "targeted" the three companies to receive PIF loans. Hadeed claims that Commerce has found a benefit bestowed upon a specific group of enterprises only where there was clear evidence of some form of selection or targeting by the foreign government. Hadeed cites Final Affirmative Countervailing Duty Order: Fabricated...