Al Tech Specialty Steel Corp. v. US

• Decision Date: 22 May 1987
• Docket Number: No. 83-1-00107.,83-1-00107.
• Citation: 661 F. Supp. 1206,11 CIT 372
• Parties: AL TECH SPECIALTY STEEL CORPORATION; ARMCO Stainless Steel Division, ARMCO, Inc.; Carpenter Technology Corporation; Colt Industries, Inc., Crucible Materials Group; Guterl Special Steel Corporation; Joslyn Stainless Steel; Republic Steel Corporation; Universal-Cyclops Specialty Steel Division, Cyclops Corporation, Plaintiffs, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

661 F. Supp. 1206

11 CIT 372

AL TECH SPECIALTY STEEL CORPORATION; ARMCO Stainless Steel Division, ARMCO, Inc.; Carpenter Technology Corporation; Colt Industries, Inc., Crucible Materials Group; Guterl Special Steel Corporation; Joslyn Stainless Steel; Republic Steel Corporation; Universal-Cyclops Specialty Steel Division, Cyclops Corporation, Plaintiffs, v. UNITED STATES, Defendant.

No. 83-1-00107.

United States Court of International Trade.

May 22, 1987.

Collier, Shannon, Rill & Scott (David A. Hartquist and Laurence J. Lasoff) Washington, D.C., for plaintiffs.

Richard K. Willard, Asst. Atty. Gen., Washington, D.C., David M. Cohen, Director, Commercial Litigation Branch, Civil Division, U.S. Dept. of Justice (Sheila N. Ziff), for defendant; Linda Concannon, Office of Deputy Chief Counsel for Import Administration, Dept. of Commerce, of counsel.

OPINION AND ORDER

TSOUCALAS, Judge:

Plaintiffs, domestic stainless steel bar producers, have filed an appeal contesting the final affirmative countervailing duty determinations of the International Trade Administration of the Department of Commerce (ITA or Commerce) in Certain Stainless Steel Products from Spain, 47 Fed.Reg. 51,453 (1982). This action is presently before the Court on plaintiffs' motion for judgment on the agency record pursuant to USCIT R. 56.1.¹

Background

The ITA began a countervailing duty investigation in response to a petition filed on behalf of domestic manufacturers concerning hot-rolled stainless steel bars, coldformed stainless steel bars and stainless steel wire rod imported from Spain. 47 Fed.Reg. 10,268 (1982). On August 31, 1982, the ITA published a preliminary determination that, with respect to various Spanish steel producers, short-, medium-, and long-term loan programs conferred benefits which constituted subsidies within the meaning of 19 U.S.C. § 1677(5) (1982). 47 Fed.Reg. 38,375 (1982). After verification, the ITA published, on November 15, 1982, its final affirmative countervailing duty determination. 47 Fed.Reg. 51,453 (1982). The ad valorem estimated net subsidy for Olarra, S.A. (Olarra), a Spanish steel producer subject to investigation, was zero percent. Id. at 51,459.

Olarra received short-term working capital loans in 1979 pursuant to the Privileged Circuit Exporter Credit Program. This Spanish Government program mandates that commercial banks make available funds to exporters under preferential terms. On July 5, 1979, Olarra declared voluntary bankruptcy, and in June, 1981, a Spanish court approved a receivership plan for the firm. This plan provided for the aggregation of all pre-bankruptcy debt including various short- and long-term commercial credits as well as the privileged circuit working capital loans. The ITA had preliminarily determined that the ad valorem subsidy for medium- and long-term loans to Olarra was zero percent. 47 Fed. Reg. at 38,377. At that time, the ITA noted that before issuing a final determination, it would seek further details concerning Olarra's pre-bankruptcy loans. Id. In verifying the data supplied by Olarra, the ITA uncovered new information concerning the details of Olarra's bankruptcy, purchases of Olarra's stock by the Bank of Spain, and the terms of repayment of Olarra's loans. Administrative Record at 1272-77 (hereinafter "A.R. at ___"). The ITA learned that the pre-receivership debt was payable, unless extended to 1989, in monthly installments for the seven years following Olarra's declaration of bankruptcy, without further accrual of interest. A.R. at 1273. In accordance with Spanish law, no payments were made on Olarra's debt between the declaration of bankruptcy and the formal approval of the receivership plan. In its final determination, the ITA concluded that while Olarra had received benefits from the working capital loans, these benefits ceased to exist when the loans were incorporated in the receivership plan. 47 Fed.Reg. at 51,455. Moreover, these loans were of short duration — no longer than one year — and would have been repaid but for Olarra's bankruptcy. Id. Despite these conclusions, the ITA did not exclude Olarra from the final determination since Olarra had "received benefits in the past and may qualify for and obtain preferential loans under the Privileged Circuit Program in the future." Id. at 51,458.

The Parties' Claims

Plaintiffs contest both the substance of, and the adequacy of the explanation for, the ITA's determination that certain benefits conferred on Olarra do not constitute countervailable subsidies. In particular, plaintiffs object to the ITA's treatment of information concerning (a) short-term working capital loans made to Olarra in 1979 (b) the terms of the receivership plan allowing repayment of Olarra's debt without interest and (c) the Bank of Spain's purchases of an equity interest in Olarra. See Plaintiffs' Motion for Judgment Upon the Agency Record at 6 (hereinafter "Plaintiffs' Motion").

Plaintiffs view the benefits associated with the operating capital loans as extending beyond the year of receipt into the year of the ITA's investigation, 1981, since the loans were not repaid as originally scheduled. Plaintiffs' Reply to Defendant's Response to Motion for Judgment Upon the Agency Record at 5-6 (hereinafter "Plaintiffs' Reply"). They also dispute, Plaintiffs' Reply at 9-11, Commerce's contentions that the relief afforded Olarra under the bankruptcy law is a "generally available" benefit that is noncountervailable and which terminates any benefit flowing from the preferential loans made prior to Olarra's voluntary declaration of bankruptcy. Defendant's Memorandum in Opposition to Plaintiffs' Motion for Judgment Upon the Agency Record at 17 (hereinafter "Defendant's Opposition"). Finally, plaintiffs reject, Plaintiffs' Motion at 18-20, defendant's argument that Commerce considered, and properly discounted, information discovered at verification that the Bank of Spain's equity investment in Olarra may have provided a subsidy to the firm. Defendant's Opposition at 20. Defendant contends that this Court is barred from reviewing plaintiffs' objections, and in any case, those objections are legally irrelevant since government stock purchases from private shareholders on the open market cannot amount to a countervailable subsidy. Defendant's Opposition at 20, 37.

Discussion

Judicial review in the instant action, commenced pursuant to 19 U.S.C. § 1516a(a)(3) (1982 & Supp. II 1984), is governed by the standard contained in 19 U.S.C. § 1516a(b)(1)(B) (1982) which directs the Court to hold unlawful any determination, finding, or conclusion "unsupported by substantial evidence on the record, or otherwise not in accordance with law." Substantial evidence "means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Matsushita Elec. Indus. Co. v. United States, 750 F.2d 927, 933 (Fed.Cir.1984) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed.2d 126 (1938)). As explained in numerous decisions, and as correctly noted by defendant:

An agency's interpretation of a statute which it is authorized to administer is "to be sustained unless unreasonable and plainly inconsistent with the statute, and is to be held valid unless weighty reasons require otherwise." An agency's "interpretation of the statute need not be the only reasonable interpretation or the one which the court views as the most reasonable."

ICC Indus. v. United States, 812 F.2d 694, 699 (Fed.Cir.1987) (citations omitted). With that established, the Court turns to a consideration of the questions presented.

A. Exhaustion of Remedies

As a threshold matter, defendant insists that the Court may not properly consider plaintiffs' objections to the ITA's treatment of information, first revealed at verification, concerning (a) the repayment terms of preferential loans to Olarra and (b) the Bank of Spain's stock purchases. Plaintiffs' alleged failure to raise these objections "in a timely manner, or even in time to allow Commerce to address their untimeliness in the final determination, constitutes a failure to exhaust their administrative remedies, and an effective waiver of the right to contest these issues on appeal." Defendant's Opposition at 21-22. Plaintiffs counter that their claims were timely raised before the administrative agency by virtue of a letter to Mr. Gary Horlick, then the ITA's Deputy Assistant Secretary for Import Administration. More fundamentally, plaintiffs allege that the exhaustion requirement is not applicable since no new issues were raised by the comments, which "solely concern the agency's failure to give sufficient consideration to issues the agency itself uncovered." Plaintiffs' Reply at 1.

The chronology of events relevant to this issue can be summarized as follows. At the hearing concerning the ITA's preliminary determination held on September 30, 1982, the hearing examiner set October 14, 1982 as the deadline for the submission of post-hearing briefs. A.R. at 1087. Plaintiffs' counsel expressed concern at the hearing, A.R. at 1044-45, that there might be insufficient time to comment on the forthcoming report of Commerce's verification team. These concerns were reiterated, in more detailed fashion, both in a letter dated October 12, 1982 to Mr. Horlick, A.R. at 1101-03, and in the post-hearing brief submitted on October 14, 1982. A.R. at 1150-52. In the letter to Mr. Horlick, plaintiffs' counsel requested that the deadline for the submission of post-hearing briefs be extended by approximately ten days after release of the verification report. A.R. at 1102. The Court is not aware of any response to this request but notes, as stated above, that the brief was filed on October 14, 1982, which was the date of the original deadline. By telephone call on October 21, 1982, A.R. at 1312, the ITA notified several parties, including plaintiffs' counsel, that the public version of the...