Slip Op. 03-97
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: RICHARD W. GOLDBERG, SENIOR JUDGE
ILVA LAMIERE E TUBI S.R.L.
and ILVA S.P.A.,
Plaintiffs,
v.
Court No. 00-00127
UNITED STATES,
Defendant,
and
BETHLEHEM STEEL CORPORATION and
UNITED STATES STEEL CORPORATION,
Defendant-Intervenors.
[The U.S. Department of Commerce's countervailing duty
determination is sustained in part, and remanded for further
calculations in accordance with this Opinion.]
Dated: July 29, 2003
Hunton & Williams (William Silverman and Richard P. Ferrin) for
plaintiffs ILVA Lamiere e Tubi S.r.l. and ILVA S.p.A.
Peter D. Keisler, Assistant Attorney General, David M. Cohen,
Director, Michael S. Dufault, Trial Attorney, Commercial
Litigation Branch, Civil Division, U.S. Department of Justice;
Office of the Chief Counsel for Import Administration, United
States Department of Commerce (John F. Koeppen), of counsel, for
defendant United States.
Dewey Ballantine LLP (John A. Ragosta, John R. Magnus, and Hui
Yu) for defendant-intervenors Bethlehem Steel Corporation and
United States Steel Corporation.
Collier Shannon Scott, PLLC (Paul C. Rosenthal, Kathleen W.
Cannon, Lynn D. Maloney, and Eric R. McClafferty) for amici
curiae Allegheny Ludlum Corporation, AK Steel Corporation, J&L
Court No. 00-00127 Page 2
Specialty Steel, Inc., Lukens, Inc., North American Stainless,
Butler Armco Independent Union, Zanesville Armco Independent
Union, and the United Steelworkers of America, AFL-CIO/CLC.
OPINION
GOLDBERG, Senior Judge: At issue in this case is the method
employed by the U.S. Department of Commerce (the “Department”) to
calculate subsidies in countervailing duty investigations of
newly privatized companies. Plaintiffs ILVA Lamiere e Tubi
S.p.A. (“ILT”) and ILVA S.p.A. (“New ILVA”) also challenge the
Department’s decision to impose countervailing duties on early
retirement benefits provided by the Government of Italy.
I. Facts
The following facts are taken from the Department’s original
determination in this case. Final Affirmative Countervailing
Duty Determination: Certain Cut-to-Length Carbon-Quality Steel
Plate From Italy, 64 Fed. Reg. 73,244 (Dec. 29, 1999)
(“Determination”). Before describing the history of the
Plaintiffs, New ILVA and ILT, in greater detail, it is helpful to
have a general understanding of the key predecessors to the New
ILVA and ILT. In the 1980s and early 1990s, several Italian
producers of carbon steel plate were owned by the Italian
government’s holding company, Istituto per la Ricostruzione
Industriale (“IRI”). In 1988, ILVA S.p.A. (“Old ILVA”) was
formed to replace prior producers of carbon steel plate. In
1993, a subsidiary of Old ILVA was created to produce the carbon
Court No. 00-00127 Page 3
steel plate, named ILVA Lamiere e Tubi (“ILT”). Later in 1993,
ILVA Laminati Piani (“ILP”) was formed to replace Old ILVA. On
April 28, 1995, IRI sold ILP, and consequently its subsidiary
ILT, to a group of private investors led by Riva Acciaio S.p.A.
(“RIVA”). The RIVA consortium reinstated the name ILVA S.p.A.
(“New ILVA”) in place of “ILP” in 1997.
The following is a more detailed history of New ILVA and
ILT. Prior to 1981, Finsider S.p.A. (“Finsider”) was a
subsidiary wholly owned by the Italian government’s holding
company, IRI. Finsider’s subsidiary Italsider produced the
subject merchandise, carbon steel plate. Determination at
73,245.
In 1981, Italy sought and gained approval from the European
Commission for a plan to restructure Finsider. Id. Finsider was
restructured, and most of Italsider’s assets were transferred to
Nuova Italsider. Italsider became a holding company, with Nuova
Italsider’s stock as its primary asset. Nuova Italsider became
the producer of the subject merchandise. In 1987, due to
restructuring by Finsider, Nuova Italsider spun-off its assets to
Italsider. Id. Italsider reclaimed its position as the producer
of the subject merchandise. Nuovo Italsider ceased to exist.
In 1988, Finsider was reorganized again, with the approval
of the European Commission. Determination at 73,245. The 1988
reorganization resulted in the closure of many of Finsider’s
Court No. 00-00127 Page 4
facilities and the placement of some assets and liabilities in
the newly formed company, Old ILVA. The remaining liabilities
and assets remained with Finsider. When Finsider’s assets were
sold, the excess debt was assumed by IRI. Determination at
73,250. Production of the subject merchandise was transferred
from Italsider to Old ILVA.
In 1992, a wholly-owned subsidiary of Old ILVA was created,
ILT, to produce carbon steel plate. Old ILVA, together with all
of its subsidiaries, was wholly-owned by IRI. After becoming
insolvent in 1993, Old ILVA entered into liquidation. Also in
1993, the Government of Italy sought the European Commission’s
approval for restructuring and privatizing Old ILVA.
Determination at 73,251. The Government of Italy planned to
absorb the bulk of Old ILVA’s debt. As a condition of approval,
the European Commission required Italy to reduce steel
production. Since a decrease in production would necessarily
lead to workforce reductions, the European Commission authorized
Italy to implement early retirement benefits under Law 451/94.
Id. at 73,253. Under Law 451/94, up to 17,100 Italian steel
workers from 1994 to January of 1997 were allowed to take early
retirement. The benefits would continue to each employee until
that employee reached his or her natural retirement age.
Court No. 00-00127 Page 5
Benefits could not be received for more than ten years.1 Id. at
73,253.
Pursuant to the reorganization and privatization plan, on
December 31, 1993, ILP and Acciai Speciali Terni were formed from
the main productive assets and some of the liabilities of Old
ILVA. ILT was transferred to ILP as its wholly-owned subsidiary.
“The remainder of [Old ILVA’s] assets and existing liabilities,
along with much of the redundant workforce, was placed in ILVA
Residua (a.k.a., ILVA in Liquidation).” Id. at 73,245.
A competitive public tender by IRI in 1995 resulted in the
sale of 100 percent of ILP to a consortium of investors led by
RIVA. All shares of ILP were transferred to the consortium on
April 28, 1995. After that date, the Government of Italy no
longer had any ownership interest in ILP or any of ILP’s owners.
On January 1, 1997, RIVA changed the name of ILP to “ILVA
S.p.A.” (“New ILVA”). New ILVA then owned ILT. The subject
merchandise is produced at ILT’s Taranto Works facility. In
1998, RIVA owned 82 percent of New ILVA, and two foreign
investment companies owned the remaining 18 percent.
II. Procedural Background
In 1999, the Department issued its original determination.
Determination. The Department found that countervailable
1
The Department considered the benefits under Law 451/94
as "recurring grants expensed in the year of receipt."
Determination at 73,254.
Court No. 00-00127 Page 6
subsidies continued to flow to New ILVA during the 1998 calendar
year, the period of review for the investigation. The
countervailable subsidies included debt forgiveness and equity
infusions given to New ILVA’s predecessors prior to the
privatization sale to RIVA. Additionally, the Department
determined that the Government of Italy’s pre-privatization early
retirement benefits were countervailable subsidies.
While the Determination was on appeal to the Court of
International Trade, the Federal Circuit issued Delverde SrL v.
United States, 202 F.3d 1360 (Fed. Cir. 2000) (Delverde III).
The Federal Circuit in Delverde III determined that Congress’s
intent under 19 U.S.C. § 1677(5)(F)2 was for the Department to
“examin[e] the particular facts and circumstances of the sale and
determin[e] whether [the purchaser] directly or indirectly
received both a financial contribution and benefit from the
government.” 202 F.3d at 1364. In light of the Federal
2
The statute to determine whether a prior subsidy
continues to be countervailable to the new owner of a company
reads as follows:
A change in ownership of all or part of a foreign
enterprise or the productive assets of a foreign
enterprise does not by itself require a determination
by an administering authority that a past
countervailable subsidy received by the enterprise no
longer continues to be countervailable, even if the
change of ownership is accomplished through an arm’s
length transaction.
19 U.S.C. § 1677(5)(F).
Court No. 00-00127 Page 7
Circuit’s decision in Delverde III, the Court remanded the
Determination to the Department. See Order of Aug. 30, 2000
(granting the Department’s motion for voluntary remand) (ILVA I).
The result of ILVA I was the Department’s Final Results of
Redetermination Pursuant to Court Remand: ILVA Lamiere e Tubi
S.p.A. v. United States, Court No. 00-03-00127 (Dec. 28, 2000)
(“First Redetermination”). The Department concluded that the
pre-sale and post-sale ILVA’s were the same “person,” and thus
the post-sale ILVA received a financial contribution and benefit
from subsidies given to pre-sale ILVA.3
During the Court’s review of the First Redetermination,
Plaintiffs moved for summary judgment, asking the Court to remand
the First Redetermination to the Department. The Court concluded
that the Department’s “same-person” test failed to take into
account the facts and circumstances of the sale, as directed in
Delverde III.4 Accordingly, the Court granted Plaintiffs'
3
For ease of reference, “pre-sale ILVA” refers to ILP
prior to its sale to RIVA. “Post-sale ILVA” includes both New
ILVA and ILP after its sale to RIVA.
4
The Department has recently published its modified
change-in-ownership methodology. The Department has abandoned
its "same-person" methodology found in the First Redetermination.
Instead, the Department has adopted the following analysis:
The methodology is based on certain rebuttable
presumptions . . . [t]he 'baseline presumption' is that
non-recurring subsidies can benefit the recipient over
a period of time . . . normally corresponding to the
average useful life of the recipient's assets.
However, an interested party may rebut this baseline
Court No. 00-00127 Page 8
motion, and remanded the First Redetermination to the Department.
ILVA Lamiere e Tubi S.p.A. v. United States, 196 F. Supp. 2d 1347
(CIT 2002) (“ILVA II”). The Court instructed the Department to
examine the facts and circumstances of the sale to determine
whether the post-sale ILVA received a financial contribution and
a benefit from the Government of Italy. ILVA II at 1351; see
also Delverde III at 1364. The Department reluctantly complied,
and issued the Results of Redetermination Pursuant to Court
Remand: ILVA Lamiere e Tubi S.r.L. and ILVA S.p.A. v. United
States, Court No. 00-03-00127, Remand Order (CIT March 29, 2002)
(July 2, 2002)(“Second Redetermination”).
There are two remaining issues for the Court to decide.
First, the Court must decide whether the Department followed the
Court’s instructions in the Second Redetermination. Plaintiffs
and the Department ask the Court to sustain the Second
Redetermination. Defendant-Intervenors Bethlehem Steel
Corporation and United States Steel Corporation (collectively,
“Domestic Producers”) have moved for summary judgment to remand
presumption by demonstrating that, during the
allocation period, a privatization occurred in which
the government sold its ownership of all or
substantially all of a company or its assets, retaining
no control of the company or its assets, and that the
sale was an arm's-length transaction for fair market
value.
Notice of Final Modification of Agency Practice Under Section 123
of the Uruguay Round Agreements Act, 68 Fed. Reg. 37,125 (June
23, 2003).
Court No. 00-00127 Page 9
the Second Redetermination. The Domestic Producers argue that
the Court should remand again to the Department, with revised
instructions on Delverde III’s application to the present case.
Second, Plaintiffs had previously moved for summary judgment on
the Department’s decision to impose countervailing duties on pre-
privatization early retirement benefits provided by the
Government of Italy under Law 451/94. The Court did not resolve
that issue in ILVA II, and will do so now.
The Court exercises jurisdiction pursuant to 28 U.S.C. §
1581(c) (1994).
III. Standard of Review
The Court reviews the Second Redetermination to determine if
it is supported by substantial evidence on the record or
otherwise in accordance with law. See 19 U.S.C. § 1516a(b)(1)(B)
(1994). To determine if the Department’s interpretation of the
statute is in accordance with law this Court “must determine
whether Congress’s purpose and intent on the question at issue is
judicially ascertainable.” Timex V.I. v. United States, 157 F.3d
879, 881 (Fed. Cir. 1998). The expressed will or intent of
Congress on a specific issue is dispositive. See Japan Whaling
Ass’n v. Am. Cetacean Soc’y, 478 U.S. 221, 233-237 (1986).
Substantial evidence “means such relevant evidence as a
reasonable mind might accept as adequate to support a
conclusion.” Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229
Court No. 00-00127 Page 10
(1938); accord Matsushita Elec. Indus. Co., Ltd. v. United
States, 3 Fed. Cir. (T) 44, 51, 750 F.2d 927, 933 (1984). “[T]he
possibility of drawing two inconsistent conclusions from the
evidence does not prevent an administrative agency’s finding from
being supported by substantial evidence.” Consolo v. Federal
Maritime Comm’n, 383 U.S. 607, 620 (1966) (citations omitted).
IV. Discussion
A. The Department Followed the Court’s Instructions Regarding
Application of Delverde III in the Second Redetermination
The Court remanded the Department’s First Redetermination,
and directed the Department to “‘examin[e] the particular facts
and circumstances of the sale and determin[e] whether
[plaintiffs] directly or indirectly received both a financial
contribution and benefit from the government.’” ILVA II at 1351
(quoting Delverde III, 202 F.3d at 1364). In the Department’s
Second Redetermination, the Department reluctantly followed the
Court’s instructions.
The Department analyzed the following facts and
circumstances in its analysis:
We believe that the existence of an open selling
process resulting in numerous expressions of interest
and multiple bidders submitting offers for the company
provided a good indication that full value had been
paid. The information on the record of this proceeding
shows that IRI sought at the outset of the
privatization process to bring in many bidders for ILP.
The announcement of its intent to sell ILP and its
solicitation of expressions of interest in the company
were widely publicized. There were no restrictions
placed on foreign ownership of ILP and IRI set no
Court No. 00-00127 Page 11
minimum bid price. Further, no level of investment in
ILP was stipulated by the [Government of Italy]. . . .
[C]omparison of the price actually paid for ILP to
market valuations of the company show that full and
fair market value was paid for ILP.
Second Redetermination at 8-9. The Department concluded, after
analyzing the facts and circumstances of the sale and
privatization of pre-sale ILVA, that post-sale ILVA did not
receive a financial contribution or benefit from the Government
of Italy. Id. at 10.
The Domestic Producers argue that the Court should remand
the Second Redetermination to the Department, with new
instructions regarding Delverde III’s application to the
investigation of New ILVA. The Domestic Producers do not raise
any legal arguments in their motion for summary judgment that
were not already addressed in ILVA II. Additionally, the
Domestic Producers do not challenge any of the facts relied upon
by the Department in its Second Redetermination. Therefore, the
Domestic Producers motion for summary judgment is denied.
Because the Department followed the Court’s instructions in ILVA
II, the Court sustains the Department’s Second Redetermination on
the issue of calculating subsidies in countervailing duty
investigations of newly privatized companies. See generally,
Allegheny Ludlum Corp. v. United States, 26 CIT __, 246 F. Supp.
2d 1304 (2002) (“Allegheny”), and GTS Industries S.A. v. United
States, 26 CIT __, 246 F. Supp. 2d 1311 (2002) (“GTS”) (the
Court No. 00-00127 Page 12
Department’s determinations were sustained after the Department
analyzed the facts and circumstances of the privatization sales).
B. The Department’s Determination to Countervail Early
Retirement Benefits was in Accordance with Law
Under 19 C.F.R. § 351.513 (2000), New ILVA received a
benefit to the extent that the early retirement benefits relieved
ILVA of an obligation it normally would incur.5 Plaintiffs argue
that the early retirement benefits are not an obligation that
ILVA would normally incur. Absent the European Commission’s
mandated production cutback in the steel industry, the Italian
government would not have needed to provide early retirement
benefits under Law 451/94. Plaintiffs also point out that the
Department has previously expressed unwillingness to countervail
benefits given to foreign producers that are provided to offset
5
The applicable regulation, "Worker-related subsidies",
reads as follows:
(a) Benefit. In the case of a program that provides
assistance to workers, a benefit exists to the extent
that the assistance relieves a firm of an obligation
that it normally would incur.
(b) Time of receipt of benefit. In the case of
assistance provided to workers, the Secretary normally
will consider the benefit as having been received by
the firm on the date on which the payment is made that
relieves the firm of the relevant obligation.
(c) Allocation of benefit to a particular time period.
Normally, the Secretary will allocate (expense) the
benefit from assistance provided to workers to the
yearin which the benefit is considered to have been
received under paragraph (b) of this section.
19 C.F.R. § 351.512.
Court No. 00-00127 Page 13
any industry-specific, increased legal requirements imposed by
the foreign government.
The Department denies that Plaintiffs' characterization of
the Department's view is accurate: the Department does not view
benefits provided to offset increased legal requirements as not
countervailable. See Determination at 73,273. Regardless of
which view the Department has taken, it is clear that the
Department’s determination is in accordance with law and
supported by substantial evidence. The evidence shows that the
capacity reductions and resulting layoffs were merely conditions
placed upon pre-sale ILVA by the European Commission.
Determination at 73,253. Pre-sale ILVA had to satisfy the
conditions to receive the European Commission’s approval for its
1993-94 reorganization plan. See Determination at 73,253-54,
73,272-73. Plaintiffs offer no evidence that the reorganization
plan approved by the European Commission was imposed upon pre-
sale ILVA outside of the Italian Government’s request to further
subsidize pre-sale ILVA in preparation for its privatization.
Therefore, because the Department’s determination is supported by
substantial evidence and is in accordance with law, the
Department’s determination that Law 451/94 is countervailable is
sustained.
Although the Department was correct that Law 451/94 is a
countervailable subsidy, the Department's current antidumping
Court No. 00-00127 Page 14
subsidy rate of 2.06 percent ad valorem under Law 451/94 cannot
stand. In its Second Redetermination, the Department failed to
recalculate the Law 451/94 countervailable subsidy. Since the
Second Redetermination concluded that subsidies to pre-sale ILVA
are not countervailable, and because many of the payments under
Law 451/94 were made to employees that retired prior to new
ILVA's privatization, a reassessment of the countervailable
subsidy is required. The following payments under Law 451/94 may
not be countervailed:
(1) Payments under Law 451/94 to employees that were
transferred to ILVA Residua in 1993 and 1994 are not
countervailable.6 When pre-sale ILVA was reorganized in
1993 and 1994, redundant employees were placed in ILVA
Residua. Determination at 73,254. The redundant employees
were not part of pre-sale ILVA when purchased by RIVA.
Therefore, since the Department has determined that
subsidies to pre-sale ILVA did not benefit post-sale ILVA,
no payments to retired employees of ILVA Residua are
countervailable subsidies to the New ILVA.
(2) Payments made to employees who retired prior to the
share transfer on April 28, 1995, under Law 451/94, are not
countervailable subsidies. Because the Department has
6
In its Determination, the Department had calculated new
ILVA's countervailable subsidy to be 0.66 percent ad valorem for
employees transferred to ILVA Residua. Determination at 73,254.
Court No. 00-00127 Page 15
determined that subsidies to pre-sale ILVA do not benefit
New ILVA, no payments to employees who retired prior to the
privatization of pre-sale ILVA are countervailable.
Therefore, the Determination is remanded to the Department to
calculate the countervailable subsidies under Law 451/94. The
countervailable payments under Law 451/94 are payments to those
employees who retired from post-sale ILVA after April 28, 1995.
V. Conclusion
Thus, the Department’s Second Redetermination is in
accordance with law and supported by substantial evidence on the
issue of calculating subsidies in countervailing duty
investigations of newly privatized companies. The Domestic
Producers motion for summary judgment is accordingly denied. The
finding in the Determination that Law 451/94 is a countervailable
subsidy is in accordance with law and supported by substantial
evidence. However, this matter is remanded to the Department to
calculate the countervailable subsidy rate under Law 451/94 in
accordance with this Opinion. Therefore, the Department’s
Determination and Remand Determination are sustained in part and
remanded in part.
Senior Judge Richard W. Goldberg
Date: July 29, 2003
New York, New York