Fabrique De Fer De Charleroi, SA v. United States

Slip-Op. 01-68

UNITED STATES COURT OF INTERNATIONAL TRADE

____________________________________
:
FABRIQUE DE FER :
DE CHARLEROI, SA, :
:
Plaintiff, :
:
v. : Court No. 99-04-00219
: BEFORE: CARMAN, CHIEF JUDGE
UNITED STATES OF AMERICA, :
:
Defendant, :
:
and :
:
U.S. STEEL GROUP, A UNIT OF USX :
CORPORATION AND BETHLEHEM :
STEEL CORPORATION, :
:
Defendant- :
Intervenors. :
____________________________________:

[Plaintiff’s motion for judgment upon the agency record is denied.]

Date: June 6, 2001

Barnes, Richardson & Colburn (Gunter von Conrad and Michael J. Chessler),
Washington, D.C., for plaintiff.

Stuart E. Schiffer, Acting Assistant Attorney General of the United States; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division, United States Department of
Justice; Michele D. Lynch, Attorney, Commercial Litigation Branch, Civil Division, United
States Department of Justice; Myles S. Getlan, Office of the Chief Counsel for Import
Administration, U.S. Department of Commerce, of Counsel, for defendant.

Dewey Ballantine LLP (John A. Ragosta, Jennifer Danner Riccardi, and Hui Yu),
Washington, D.C., for defendant-intervenors.
Court No. 99-04-00219 Page 2

OPINION

CARMAN, CHIEF JUDGE: Plaintiff, Fabrique de Fer de Charleroi, S.A. (Fafer), a Belgian

manufacturer/exporter of cut-to-length carbon steel plate, moves for judgment upon the agency

record challenging the United States Department of Commerce’s (Commerce) final results and

amended final results of the 1996 countervailing duty administrative review of cut-to-length

carbon steel plate from Belgium. See Certain Cut-to-Length Carbon Steel Plate From Belgium;

Final Results of Countervailing Duty Administrative Review, 64 Fed. Reg. 12,982 (March 16,

1999) (Final Results); Cut-to-Length Carbon Steel Plate From Belgium; Amended Final Results

of Countervailing Duty Administrative Review, 64 Fed. Reg. 18,001 (April 13, 1999) (Amended

Final Results). In the Final Results, Commerce found a de minimis countervailing duty margin

of 0.35% based on Fafer’s subsidies as well as subsidies of two affiliated companies, S.A.

Charleroi Deroulage (CD) and Parachevement at Finitions de Metaux (PFM). The subsidies

derived from Belgium’s Economic Expansion Law of December 30, 1970, a program found

countervailable in the original countervailing duty investigation. See Final Results, 64 Fed. Reg.

at 12,991, 12,993. In the Amended Final Results, Commerce claimed it made a ministerial error

in the Final Results by failing to apply the 0.5% test1 to subsidies received by PFM. Applying

the test, Commerce found the grants were less than 0.5% of the total sales and expensed the

grant. Commerce then amended Fafer’s CVD margin to 0.69% ad valorem, subjecting Fafer to

countervailing duties. Amended Final Results, 64 Fed. Reg. at 18,002-003. Plaintiff asks this

1
Under the regulation, all grants which are less than 0.5% of the relevant sales of the firm
(e.g., total sales, export sales) for the year in which the subsidies are approved are considered
nominal grants that will normally be expensed in the year in which the benefit was received
rather than amortized. See 19 C.F.R. § 351.524(b) (1999).
Court No. 99-04-00219 Page 3

Court (1) to vacate the Amended Final Results; (2) to instruct Commerce to recalculate Fafer’s

countervailing duty margin to exclude any alleged subsidies made to affiliated companies or,

alternatively, to instruct Commerce to reinstate the allocation methodology used in the Final

Results (amortization); and (3) to instruct Commerce to have Customs apply a zero

countervailing duty rate to the subject merchandise.

Defendant, United States, and Defendant-Intervenors, U.S. Steel Group, a Unit of USX

Corporation and Bethlehem Steel Corporation, (collectively “Defendants”), oppose Plaintiff’s

motion arguing Commerce’s decision to include subsidies received by two of Fafer’s subsidiaries

in its calculation of the countervailing duty margin is supported by substantial evidence and is

otherwise in accordance with law. Defendants also argue that Commerce’s decision to amend

the countervailing duty margin based on ministerial error is supported by substantial evidence

and is otherwise in accordance with law. The Court has jurisdiction pursuant to 28 U.S.C. §

1581(c) (1994).

I. BACKGROUND

On August 17, 1993, Commerce issued a countervailing duty order on cut-to-length

carbon steel plate from Belgium to which Plaintiff was subject. See Countervailing Duty Order

and Amendment to Final Affirmative Countervailing Duty Determination: Certain Steel

Products From Belgium, 58 Fed. Reg. 43,749 (Aug. 17, 1993) (CVD Order). On September 25,

1997, Commerce initiated an administrative review of the CVD Order pursuant to requests by

Plaintiff and Petitioners.2 This review covered imports of subject merchandise entered into the

2
Petitioners and Defendant-Intervenors are the same parties in this case.
Court No. 99-04-00219 Page 4

United States during the period of January 1, 1996 through December 31, 1996.

Commerce asked Plaintiff to submit information regarding any subsidies it may have

received during the period of review. In response to a supplemental questionnaire issued by

Commerce, Plaintiff indicated that two of its subsidiaries, S.A. Charleroi Deroulage (CD) and

Parachevement et Finitions de Metaux (PFM), had received grants subsequent to the publication

of the CVD Order. (Defendant’s Exhibit 1 (Def.’s Exh.) at S-8.) Specifically, Plaintiff indicated

(1) CD received a grant in March 1993 for investment in an uncoiling machine, and (2) PFM

received a grant in May 1996 for investment in a painting machine and an uncoiling machine.

(Id.) On September 9, 1998, Commerce published the preliminary results of the countervailing

duty administrative review. See Cut-to-Length Carbon Steel Plate From Belgium; Preliminary

Results of Countervailing Duty Review, 63 Fed. Reg. 48,188 (Sep. 9, 1998) (Preliminary

Results). Commerce found a de minimis CVD margin of 0.37 percent ad valorem based on

subsidies received by Fafer under Belgium’s Economic Expansion Law of December 30, 1970.

Id. at 48,191. Commerce did not countervail the cash grants received by CD or PFM and did not

provide an explanation for this decision. Id.

Subsequent to the issuance of the Preliminary Results, interested parties were authorized

to submit written comments pursuant to 19 C.F.R. § 351.309 (1998). Petitioners submitted

comments arguing that Commerce must countervail the cash grants to CD and PFM if the

equipment purchased with the grants could be used to process subject merchandise, even if the

equipment was not used to process subject merchandise imported during period of review.

(Petitioners’ October 8, 1998 Administrative Brief, Def.’s Exh. 6 at 28.) (emphasis in original).
Court No. 99-04-00219 Page 5

Plaintiff responded by arguing that Commerce could only countervail the grants to CD and PFM

if the “subject merchandise exported to the United States, and imported into the United States

underwent or benefitted from uncoiling, painting, or sandblasting operations.” (Plaintiff’s

February 12, 1999 Rebuttal Comments, Def.’s Exh. 7 at 3.) (emphasis in original). In November

1998, Commerce conducted verification at Fafer’s facilities in Belgium. See Final Results, 64

Fed. Reg. at 12,983.

Based on comments received from interested parties, and upon request by Petitioners,

Commerce held a public hearing on February 19, 1999 on the issue of whether CD’s and PFM’s

facilities could be used to process the subject merchandise. Id. During the hearing Plaintiff

suggested that CD and PFM are capable of producing merchandise subject to the scope of the

order, albeit “[a] different and downstream cut-to-length plate in a much thinner format.” (Def.’s

Exh. 8, at 56, Public Hearing Transcript dated February 19, 1999.) Additionally, when asked if

the merchandise that goes through PFM’s process of unrolling, cutting and slitting coil produced

by Fafer “would fit within the scope of this review,” Fafer stated, “[w]ell, yes, well actually as

the verification report correctly states, I think they’re doing these things for Fafer . . .” (Id. at 63.)

On March 16, 1999 Commerce issued the Final Results of the countervailing duty

administrative review, making two determinations relevant to the instant case. See Final Results,

64 Fed. Reg. at 12,982. First, Commerce determined that “[o]n the basis of the fact that CD and

PFM can, in their down-stream processing, produce merchandise which is covered by the scope

of the [countervailing duty] order, . . . the cash grants under the Law of 1970, a program

previously found countervailable by the Department, are attributable to the total sales of Fafer,

including its subsidiaries and thus benefitted the subject merchandise during the [period of
Court No. 99-04-00219 Page 6

review].” Id. at 12,984. Second, Commerce calculated the benefit for the CD and PFM grants by

“employ[ing] the standard grant methodology outlined in the allocation section of the GIA (FR

37227). [Commerce] allocated the benefit from each grant received by CD and PFM over 26

years, Fafer’s AUL [i.e., average useful life of fixed assets].” Id. Commerce calculated a de

minimis net subsidy rate of 0.35 percent ad valorem. Id.

Subsequent to the issuance of the Final Results, Petitioners submitted a letter to

Commerce alleging that Commerce had made a ministerial error in the calculation of the

countervailing duty margin. (Def.’s Exh. 9, at 4, Petitioners’ March 16, 1999 Ministerial Errors

Letter.) Petitioners argued that while Commerce indicated its intent to utilize the standard grant

methodology outlined in the General Issues Appendix (GIA) to calculate the CVD margin, it

failed to follow the GIA’s rules regarding when a grant is amortized and when a grant is

expensed in the year of receipt. (Id. at 2-4.) Specifically, Petitioners asserted Commerce should

have used the so-called “0.5 percent test”. Petitioners contended the test mandates the

expensing of non-recurring grants3 if the sum of grants provided under a particular program in a

given year is less than 0.5 percent of a firm’s total or export sales in the year in which the grant

was received. (Id. at 3-4.)

Plaintiff then rebutted Petitioners’ allegations, claiming Commerce had discretion over

3
Grants are considered “non-recurring” when the benefits are exceptional, the recipient
cannot expect to receive benefits on an ongoing basis from review period to review period and/or
the provision of funds by the government must be approved every year. See General Issues
Appendix, 58 Fed. Reg. 37,217, 37,226 (July 9, 1993) (GIA), appended to Certain Steel Products
from Austria, 58 Fed. Reg. 37,217 (July 9, 1993). By contrast, “recurring” benefits are those
which a firm receives, or is likely to receive, on an ongoing basis from review period to review
period. Id. “Expensing” may be defined as assigning the entire value of the grant to the year of
receipt.
Court No. 99-04-00219 Page 7

whether to apply the “0.5 percent test”. Because of this discretion, Plaintiff argued, the alleged

error was methodological, not ministerial pursuant to 19 C.F.R. § 351.224 (1998).4 Plaintiff

urged Commerce to reject Petitioners allegation and retain the original countervailing duty

margin. (Def.’s Exh. 10, at 2, Fafer March 22, 1999 Response to Ministerial Errors Letter.)

After reviewing the comments submitted by the parties, Commerce issued its Amended

Final Results on April 13, 1999. See Amended Final Results, 64 Fed. Reg. at 18,001.

Commerce agreed with Petitioners that it made a ministerial error by not applying the 0.5 percent

test to the grants. Id. at 18,002. Accordingly, Commerce applied the test, thus changing the net

subsidy rate to 0.69 percent ad valorem, a rate above de minimis. Id. at 18,002-03.

Plaintiff then timely commenced this action on April 15, 1999.

II. STANDARD OF REVIEW

This Court must sustain an administrative countervailing duty determination unless it is

“unsupported by substantial evidence on the record, or otherwise not in accordance with law.”

19 U.S.C. § 1516a(b)(1)(B) (1994). Substantial evidence is “such relevant evidence as a

reasonable mind might accept as adequate to support a conclusion.” Matsushita Elec. Indus. Co.,

Ltd. v. United States, 750 F.2d 927, 933 (Fed. Cir. 1984) (quoting Consolidated Edison Co. v.

NLRB, 305 U.S. 197, 229 (1938)). In determining whether Commerce’s interpretation and

application of the countervailing duty statute is in accordance with law, the Court must consider

4
19 C.F.R. § 351.224 defines ministerial error as “an error in addition, subtraction, or
other arithmetic function, clerical error resulting from inaccurate copying, duplication, or the
like, and any other similar type of unintentional error which the Secretary considers ministerial.”
Court No. 99-04-00219 Page 8

whether the statute addresses the specific question at issue, and if not, whether the agency’s

interpretation of the statute is reasonable. See Chevron U.S.A. Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 837, 842-43 (1984). This Court must accord considerable weight to

Commerce’s construction of the countervailing duty statute. See E.I. Du Pont De Nemours &

Co. v. United States, 8 F. Supp.2d 854, 858 (Ct. Int’l Trade 1998).

III. DISCUSSION

Plaintiff’s challenge to Commerce’s Final and Amended Final Results raises three issues:

(1) whether Commerce’s determination that grants to Plaintiff’s subsidiaries, PFM and CD, were

countervailable, is supported by substantial evidence on the record and otherwise in accordance

with law; (2) whether Commerce’s decision to apply its 0.50 percent test and expense the grants

to CD and PFM in the year of receipt in the Amended Final Results was supported by substantial

evidence on the record and otherwise in accordance with law; and (3) whether Commerce’s

characterization of its error in not applying the 0.50 percent test in the Final Results as

ministerial is supported by substantial evidence and otherwise in accordance with law.

A. Commerce’s Determination That Grants to Plaintiff’s Subsidiaries, PFM and CD,
Were Countervailable, is Supported by Substantial Evidence on the Record and
Otherwise in Accordance With Law

1. Contentions of the Parties

(a) Plaintiff

Plaintiff makes three arguments. First, Plaintiff argues Commerce’s inclusion of

subsidies to affiliated companies in Plaintiff’s countervailing duty margin is not supported by
Court No. 99-04-00219 Page 9

substantial evidence on the record or otherwise in accordance with law where the affiliated

companies were not involved in the manufacture, production, exportation, or sale of the

merchandise subject to the administrative review at issue. Second, Plaintiff argues that the

countervailing duty statute precludes the imposition of countervailing duties on the subsidies

given to CD and PFM. The statute states countervailing duties will be imposed if Commerce

“determines that the government of a country or any public entity . . . is providing, directly or

indirectly, a countervailable subsidy with respect to the manufacture, production, or export of a

class or kind of merchandise imported, or sold (or likely to be sold) for importation into the

United States,” 19 U.S.C. § 1671(a)(1) (1999). Plaintiff urges this language should be construed

to require that duties be imposed only when the company receiving the subsidies “manufactures,

produces, or exports” subject merchandise that was actually imported into the United States.

(Brief in Support of Plaintiff’s Motion for Summary Judgment (Pl.’s Br.) at 9.)

Plaintiff maintains that neither CD nor PFM have ever or will ever produce the subject

merchandise. (Id. at 8.) Therefore, since the merchandise under review was not “manufactured,

produced, or exported” by either subsidiary, no countervailing duty can be imposed based on the

subsidies to those companies. (Id. at 9.)

Third, Plaintiff rejects Commerce’s argument that Plaintiff’s approach would require

Commerce to “examine specific sales from subsidized subsidiaries that are capable of producing

subject merchandise, to determine, on a sale by sale basis, whether the merchandise exported to

the U.S. ‘passed through’ the subsidiary.” Final Results, 64 Fed. Reg. at 12,990. Plaintiff claims

to understand the administrative burden that would be imposed on Commerce if it was required

to track production of these export sales, but argues that in this case no such burden exists
Court No. 99-04-00219 Page 10

because there was only one sale of subject merchandise to the United States during the period of

review. (Pl.’s Br. at 12.) Plaintiff argues Commerce should be required to examine the facts of

the individual case when the administrative burden is low. (Id.) Plaintiff concludes Commerce

cannot attribute the alleged subsidies to CD and PFM in its countervailing duty margin when the

subsidiaries are not involved in the “manufacture, production, or exportation” of the merchandise

imported into the United States which is subject to the administrative review. (Id.)

(b) Defendant

Defendant maintains Commerce’s decision to countervail the grants given to CD and

PFM is supported by substantial evidence and is otherwise in accordance with law.

Defendant argues it is Commerce’s practice to attribute subsidies received by one

company to the sales of another related company that also produces the subject merchandise.

(Memorandum of the United States in Opposition to the Plaintiff’s Motion for Judgment Upon

the Administrative Record (Def.’s Br.) at 11.) Defendant contends CD and PFM, as Plaintiff’s

subsidiaries and, thus, related companies, received grants under the Law of 1970 that aid in the

production of the subject merchandise. Therefore, Commerce’s decision to countervail those

subsidies in Plaintiff’s countervailing duty margin was consistent with that practice.

Defendant points out Plaintiff does not dispute that its subsidiaries, CD and PFM,

received subsidies. Nor does Fafer dispute that the subsidiaries are able to produce subject

merchandise. Defendant claims Commerce carefully examined this issue during the

administrative review and properly found that the subsidiaries are capable of producing

merchandise that is subject to the scope of the countervailing duty order. (Id. at 13.) Based on
Court No. 99-04-00219 Page 11

this record evidence, Defendant contends Commerce properly determined that Plaintiff received

subsidies with respect to the manufacture, production, or export of subject merchandise. (Id. at

14.)

Defendant claims Plaintiff does not refute any of the factual findings made by Commerce

during the course of the administrative review. According to Defendant, Plaintiff instead argues

that the statute “precludes Commerce from countervailing subsidies when the specific

merchandise exported to the United States during the period of review did not benefit from those

subsidies.” (Id. at 15.) Defendant interprets this argument to mean Commerce must examine the

use or effects of the subsidy once bestowed. (Id.)

Defendant argues that the governing statute, 19 U.S.C. § 1671(a)(1) (1995), does not

require Commerce “to consider the use to which the subsidies are put or their effect on the

recipient’s subsequent performance . . . .” Final Results at 12,991, quoting GIA, 58 Fed. Reg. at

37,260. Rather, so long as a subsidy is provided with respect to the manufacture, production or

sale of subject merchandise, Commerce may impose countervailing duties. (Def.’s Br. at 16.)

Defendant argues there are important policy reasons supporting Commerce’s practice of

not examining the “use” or “effects” of the subsidies once bestowed. Defendant contends it is

administratively impractical for Commerce to examine whether the subject merchandise “passed

through” the subsidiary for every particular sale. Furthermore, Plaintiff has provided no

compelling reasons for Commerce to abandon their practice of not examining the use or effects

of a subsidy. (Def.’s Br. at 17.)

(c) Defendant-Intervenors
Court No. 99-04-00219 Page 12

Because the Court finds Defendant-Intervenors’ arguments in this matter substantially

similar to those presented by the Defendant, the Court will not recount them in this opinion,

although they have been duly considered.

2. Analysis

In an administrative review of a countervailing duty order, Commerce is required to

“review and determine the amount of any net countervailable subsidy.” 19 U.S.C. §

1675(a)(1)(A) (1994). During the administrative review at issue in this case, Commerce had to

determine whether subsidies conferred upon Fafer’s subsidiaries, CD and PFM, under Belgium’s

Economic Expansion Law of December 30, 1970, should be included in Fafer’s net

countervailable subsidy. In order to make that determination, Commerce looked to its attribution

principles. Commerce’s practice during the period of review was to attribute subsidies received

by one company to the total sales of a related company.5 See Final Results, 64 Fed. Reg. at

12,984.

Commerce explains, in its final rule on countervailing duties, that “[t]he underlying

rationale for attributing subsidies between two separate corporations [with cross-ownership] is

that the interests of those two corporations have merged to such a degree that one corporation can

5
This practice was subsequently codified in Commerce’s regulation, 19 C.F.R. §
351.525(b)(6)(ii) (1999), which reads, in pertinent part:

If two (or more) corporations with cross-ownership produce the subject merchandise, the
Secretary will attribute the subsidies received by either or both corporations to the
products produced by both corporations.

This regulation was not in effect during the administrative review at issue.
Court No. 99-04-00219 Page 13

use or direct the individual assets (or subsidy benefits) of the other corporation in essentially the

same ways it can use its own assets (or subsidy benefits).” Countervailing Duties; Final Rule, 63

Fed. Reg. 65,348, 65,401 (Nov. 25, 1998). Commerce chose to focus on cross-ownership in

attribution decisions because it believed it is reasonable to presume that subsidies granted to one

corporation may also benefit the related corporation. See Countervailing Duties; Proposed Rule,

62 Fed. Reg. 8,818, 8,845 (Feb. 26, 1997). The Court finds Commerce’s decision to attribute

the subsidies received by CD and PFM to the total sales of the Plaintiff in accordance with the

purpose and rationale of this stated practice. As the Court demonstrates below, the Plaintiff was

in a position to use or direct the subsidy benefits received by its subsidiaries in essentially the

same way it could use or direct the subsidy benefits had it directly received the subsidies.

The primary consideration in attributing subsidies between two corporations is the level

of control, or cross-ownership, existing between the corporations. Cross-ownership, as defined

by Commerce, “will exist where there is a majority voting ownership interest between two

corporations or through common ownership of two (or more) corporations.” Countervailing

Duties; Final Rule, 63 Fed. Reg. at 65,401. Cross-ownership clearly exists here. CD and PFM

are almost wholly-owned by the Plaintiff, with Plaintiff holding 99.99% of the rights in PFM and

93.75% of the rights in CD. (Appendix to Domestic Producers’ Brief in Opposition to Plaintiff’s

Rule 56.2 Motion (Def.-Intvr.’s App.) at Att. 1, Letter from Barnes, Richardson, & Colburn to

the U.S. Department of Commerce, App. 5B, at C10/01-02 (Jan. 26, 1998)) CD and PFM are

also fully consolidated on Plaintiff’s financial statement. (Def.-Intvrs.’ App. at Att. 2, Letter

from Barnes, Richardson, & Colburn to the U.S. Department of Commerce, App. S-5, at 4-5

(May 20, 1998)) Additionally, CD and PFM are physically located within Plaintiff’s production
Court No. 99-04-00219 Page 14

facilities. See Fafer Verification Report at 6.

The next consideration for the purpose of determining if attribution is applicable is

whether CD and PFM have the ability to manufacture the subject merchandise. The term

“‘subject merchandise’ means the class or kind of merchandise that is within the scope of an . . .

order under this subtitle [IV – Countervailing and Antidumping Duties].” 19 U.S.C. § 1677(25)

(1998). The subject merchandise at issue here is “cut-to-length carbon steel plates” including (1)

hot-rolled carbon steel universal mill plates (i.e., of a width “exceeding 150 millimeters but not

exceeding 1,250 millimeters” and a thickness of “not less than 4 millimeters”) of a rectangular

shape, “whether or not painted, varnished, or coated with plastics or other nonmetallic

substances”; and (2) hot-rolled carbon steel flat-rolled products in straight lengths, of rectangular

shape, hot rolled, “whether or not painted, varnished, or coated with plastics or other nonmetallic

substances, 4.75 millimeters or more in thickness and of a width which exceeds 150 millimeters

and measures at least twice the thickness.” CVD Order, 58 Fed. Reg. 43,749-50.

The Plaintiff claims CD and PFM do not produce subject merchandise. It is immaterial

whether CD and PFM actually produce the subject merchandise. The benefits received by CD

and PFM were tied to the subject merchandise, so actual production is not required. In the GIA,

Commerce stated its position that “[i]n conducting its traditional ‘tied’ analysis when a domestic

subsidy allegedly is tied to a particular product, the Department will examine what the likely

effect of the subsidy would be. The Department will not try to determine the actual effect of the

subsidy, either in the period of investigation or at any time after the subsidy’s bestowal.” 58 Fed.

Reg. at 37232. “Whenever we allocate a benefit tied to a product under investigation only to that

product, there is an implicit assumption that the benefit is intended to affect only that product.”
Court No. 99-04-00219 Page 15

Id. Under the traditional tying analysis conducted by Commerce, if “the Secretary determines

that a countervailable benefit is tied to the production or sale of a particular product or products,

the Secretary will allocate the benefit solely to that product or products.” Countervailing

Duties;Proposed Regulations, 54 Fed. Reg. 23,365, 23,383 (May 31, 1989); see also Usinor

Sacilor v. United States, 893 F. Supp. 1112, 1138 (Ct. Int’l Trade 1995). On the other hand,

“[i]f the Secretary determines that a countervailable benefit is tied to a product other than the

merchandise, the Secretary will not find a countervailable subsidy on the merchandise.” 54 Fed.

Reg. at 23,383.

Here, Commerce verified that PFM received grants for “sheet metal finishing and

painting” and “sand blasting and painting of flat, steel or non-ferrous products, prior to their

production.” (Def.’s Exh. 11 at 11, Verification of Fafer’s Responses.) Commerce also verified

that CD received a cash grant for an uncoiling machine. (Id.) Had record evidence indicated that

PFM and CD could not produce or process subject merchandise, Commerce could have

concluded that the grants provided to these subsidies were tied to non-subject merchandise and,

thus, not countervailable. Substantial evidence supports Commerce’s conclusion that the grants

were tied to subject merchandise. Plaintiff has provided no evidence suggesting the grants were

tied to non-subject merchandise. Therefore, irrespective of actual production, the Court finds

PFM and CD do have the ability to manufacture the “class or kind of merchandise” subject to the

CVD Order.

Fafer manufactures, among other products, coiled steel on a Steckel mill. Steel produced

on a Steckel mill which is sold in coils would ordinarily be outside the scope of the CVD Order.

If, however, the coils were decoiled and slit, and they met the thickness requirements, then the
Court No. 99-04-00219 Page 16

resulting product would be within the scope of the order. At verification, Commerce confirmed

that the Steckel mill in Fafer’s facilities was producing coils “less than 10mm thick and

maximum 3,000mm wide.” Fafer Verification Report at 5. Plate as thin as 4.75 mm is included

within the scope of the order, so the product manufactured on the Steckel mill is not “too thin to

be a cut-to-length carbon steel plate,” as one Fafer official claimed at verification. Id. A leading

industry treatise confirms that “plates up to 3,000mm wide produced via the Steckel route have

been available since 1994" from Fafer. (Def.-Intvrs.’ App. at Att. 7, Iron and Steel Works of the

World 25 (12th ed. 1997), appended to Domestic Producers’ February 8 Letter at Exh. 2.) As

noted earlier, CD received a grant for investment in an uncoiling machine. See Final Results, 64

Fed. Reg. at 12,990. At verification, a Fafer official admitted that “the steel sheet and strip in

coils which was produced by the Steckel mill was the type of steel that PFM and CD worked

with.” Fafer Verification Report at 5. The official went on to say that CD and PFM “decoil coils

made by Fafer or by other suppliers.” Id.

The CVD Order also covers plate products “whether or not painted, varnished, or coated

with plastics or other nonmetallic substances.” 58 Fed. Reg. at 43,749 (emphasis added). PFM

received two grants in 1996, one of which was used to purchase sheet metal finishing and

painting equipment, and the other of which was used to purchase sand blasting and painting

equipment. Final Results, 64 Fed. Reg. at 12,990. At verification a Fafer official “explained that

PFM was involved in processing steel products that required some type of finishing done to them

such as painting or sandblasting” but that “the subject merchandise did not have any of these

finishings.” Fafer Verification Report at 6. This qualification is irrelevant, though, because as

stated, subject merchandise is countervailable regardless of whether these finishings are applied.
Court No. 99-04-00219 Page 17

Additionally, Plaintiff’s product brochure indicates that subject merchandise is produced using

machinery identical to that purchased with the grants. (Def.-Intvrs.’ App. at Att. 10, Fafer

Product Brochure at 27-28, appended to Oct. 8, 1999 Letter from Dewey Ballantine LLP to the

U.S. Department of Commerce, Case No. C-423-806.) Moreover, at a public hearing on this

issue, when asked if the merchandise that goes through PFM’s process of unrolling, cutting and

slitting coil produced by Fafer “would fit within the scope of this review,” Fafer stated, “[w]ell,

yes, well actually as the verification report correctly states, I think they’re doing these things for

Fafer . . . .” (Id. at 63.) The Court finds this is substantial evidence demonstrating the

subsidiaries’ ability to manufacture subject merchandise. The fact that Fafer owns between 93

and 99 percent of the two subsidiaries, coupled with the fact that subject merchandise could be

produced on the subsidized equipment, warrants a finding that Commerce’s determination was

supported by substantial evidence and otherwise in accordance with law when it attributed the

subsidies to Fafer. It was reasonable to presume that Fafer could use or direct the subsidy

benefits of CD and PFM in essentially the same ways it could use its own subsidy benefits.

In an alternate argument, that the Court rejects, Plaintiff contends Commerce can only

attribute the subsidies received by CD and PFM to Plaintiff’s total sales if the specific plates

imported into the United States were produced by CD and PFM. There is nothing in the statute

or in case law to suggest that those specific items actually imported into the United States must

have benefitted from the subsidies. The countervailing duty statute provides that Commerce

must impose countervailing duties if it “determines that the government of a country or any

public entity . . . is providing, directly or indirectly, a countervailable subsidy with respect to the
Court No. 99-04-00219 Page 18

manufacture, production, or export of a class or kind of merchandise imported, or sold (or likely

to be sold) for importation into the United States,” 19 U.S.C. § 1671(a)(1) (1999). The Court

finds this language simply means “a class or kind of merchandise” (i.e. goods covered by the

scope of the CVD order) must be “imported, or sold (or likely to be sold) for importation into the

United States.” There is no ambiguity in this language. There is no indication in the statute or in

the legislative history that the legislature intended Commerce to look at the specific items and

determine whether they actually benefitted from the subsidy.

It is well settled law that Commerce is not required to examine the ultimate use of the

subsidy. So long as a subsidy is provided with respect to the manufacture, production or sale of

subject merchandise, Commerce may impose countervailing duties. The Court of Appeals for

the Federal Circuit has upheld this policy:

Congress has expressed the . . . view that an effects test for subsidies has never been
mandated by the law and is inconsistent with effective enforcement of the countervailing
duty law. It would be burdensome and unproductive for the Department of Commerce to
attempt to trace the use and effect of a subsidy demonstrated to have been provided to
producers of the subject merchandise.

Saarstahl A.G. v. United States, 78 F.2d 1539, 1543 (Fed. Cir. 1996) (quoting North American

Free Trade Agreement Implementation Act, S. Rep. No. 189, 103d Cong., 1st Sess. 42-43 (1993)

(internal quotations omitted).6 The Court in Saarstahl also held that the countervailing duty

6
Echoing the Court of Appeals, this Court has held that “tracing” a subsidy is not
required:

“Tracing” as it is commonly understood means to track the subsidy to a particular end-use
or allocation in order to determine its actual effect. “Tracing” is impracticable because it
would require Commerce to follow the expenditure of the subsidy within the foreign
subsidiary after it is transferred . . . . A “tracing” requirement would be burdensome and
contrary to legislative intent because it would undermine the effective enforcement of the
Court No. 99-04-00219 Page 19

statute “does not limit Commerce to countervailing only subsidies that confer a competitive

advantage on merchandise exported to the United States.” Id. Plaintiff argues that the fact

“[t]hat Commerce does not have to calculate what competitive advantage a subsidy may confer

once the subject merchandise is imported into the United States, does not negate the statutory

requirement that the subsidy has to attach to merchandise imported into the United States to be

countervailable.” (Pl.’s Reply Br. at 7-8.) However, Plaintiff provides no support for this

proposition, never demonstrating what “statutory requirement” mandates that “the subsidy has to

attach to merchandise imported into the United States to be countervailable.” The Court finds it

is enough that Fafer imported subject merchandise into the United States during the period of

review, regardless of what machinery was actually used to produce the subject merchandise.

Additionally, there are certain policy considerations that counsel against instituting the

requirement Plaintiff seeks to read into the countervailing duty law. Commerce succinctly

outlined Plaintiff’s approach in its Final Results:

Under FAFER’s approach . . . the Department would be required to examine specific
sales from subsidized subsidiaries that are capable of producing subject merchandise to
determine, on a sale by sale basis, whether the merchandise exported to the U.S. “passed-
through” the subsidiary. Then, and only then, under [Plaintiff]’s approach, would a
subsidiary’s countervailable subsidies be attributable to the subject merchandise.

Final Results, 64 Fed. Reg. at 12,990. The Court agrees that this would be an administrative

burden not required under the law. The burden on Commerce to track each piece of merchandise

to see if it was affected by the subsidy would be enormous. Plaintiff counters that the approach

countervailing duty law.

Usinor Sacilor v. United States, 955 F. Supp. 1481, 1489 (Ct. Int’l Trade 1997).
Court No. 99-04-00219 Page 20

should be case specific. Plaintiff argues that in this case there was only one sale of subject

merchandise to the United States during the period of review, therefore it would have been a

fairly simple task for Commerce to verify its origin. While true in this case, the policy exists to

deal with all of the investigations and reviews Commerce is required to conduct each year. If the

Court were to require the Department of Commerce to make an exception here, it would set a

precedent subject to challenge by every importer. How many sales would the Department of

Commerce be required to examine - under ten, under twenty? The Court will not require

Commerce to trace the use of a subsidy once bestowed. It is enough that the subsidy was

provided, the company used the subsidy to manufacture, produce, or export goods covered by the

scope of the order, and that the company actually imported merchandise covered by the scope of

the order into the United States.

The Court finds Commerce’s decision to attribute the grants to PFM and CD to the total

sales of the Plaintiff is supported by substantial evidence and otherwise in accordance with law.

B. Commerce’s Decision to Expense the PFM Grant in the Year it was Received is
Supported by Substantial Evidence on the Record and Otherwise in Accordance
With Law

A. Parties’ Contentions:

a. Plaintiff

Plaintiff argues Commerce’s decision to expense the PFM grant in the year in which it

was received was not supported by substantial evidence and otherwise in accordance with law.

According to Plaintiff, the general rule with respect to non-recurring grants is to allocate them
Court No. 99-04-00219 Page 21

over the AUL of the grant. Thus, Commerce’s “0.5%” test is an exception to the rule. Plaintiff

argues, however, that this exception should not be applied where, as here, its application yields a

significantly different substantive result – e.g., moving the rate from a de minimis level found in

the Final Results to an above de minimis countervailable duty. Rather, the test should be applied

where its application would meet the purpose of the test, namely to relieve administrative burden

in the cases where the impact is minuscule. As there was no administrative burden here, the test

should not be applied.

b. Defendant and Defendant-Intervenors

Defendant and Defendant-Intervenors (collectively “defendants”) argue Commerce’s

decision to expense the PFM grant in the year in which it was received is supported by

substantial evidence on the record and is otherwise in accordance with law. According to

Defendants, the reason for the “0.5%” test is to alleviate the administrative burden when

considering all investigations and administrative reviews cumulatively.7 As Plaintiff does not

contest PFM’s grants are less than 0.5% of Fafer’s sales value in the year of receipt, Defendants

argue Commerce’s application of the 0.5% test was based on substantial evidence on the record

and otherwise in accordance with law.

7
The Final Rule to the 1998 Regulations specifically states:

If considered only in the context of a single case, the burdens imposed by this
activity may not appear to be particularly onerous. However, when considered
across all investigations and administrative reviews, the cumulative burden
becomes considerable.

Countervailing Duties; Final Rule, 63 Fed. Reg. 65,348, 65,394 (Nov. 25, 1998).
Court No. 99-04-00219 Page 22

B. Analysis:

The Court need not engage in an extended analysis to reject Plaintiff’s argument with

respect to this issue. Commerce’s policy at the time of this administrative review was outlined in

the General Issues Appendix (GIA):

Our policy with respect to grants is (1) to expense recurring grants in the year of receipt,
and (2) to allocate non-recurring grants over the average useful life of assets in the
industry, unless the sum of grants provided under a particular program is less than 0.50
percent of a firm’s total or export sales (depending on whether the program is a domestic
or export subsidy) in the year in which the grant was received.

58 Fed. Reg. at 37,226. This longstanding policy was subsequently codified at 19 C.F.R. §

351.524 (1999). The GIA and subsequent regulation make clear that Commerce will expense

grants that are less than 0.50 percent of the firm’s total sales. In its Amended Final Results,

Commerce determined that “the 1993 and 1996 grants were less than 0.50 percent of total

domestic sales in the year that they were given.” 64 Fed. Reg. at 18,003. Plaintiff does not

dispute Commerce’s finding that the grants were less than 0.50 percent of its total domestic sales

in the year given, and provides no support for its proposition that Commerce cannot apply a

“policy” such as the 0.5% test when doing so “would yield a significantly different substantive

result, namely moving the rate from the ‘de minimis’ level . . . to an above ‘de minimis’

countervailable duty.” (Pl.’s Br. at 17.) (emphasis omitted)

The Court also rejects Plaintiff’s argument that the purpose of the 0.5% test is to ease the

administrative burden of amortizing small grants, and that no such burden exists here since the

grants in question were already amortized. The Court agrees that on a case-by-case basis the

administrative burden may not appear overwhelming, but the test was designed to reduce the
Court No. 99-04-00219 Page 23

burden over the entire spectrum of agency investigations and reviews. In the preamble to 19

C.F.R. § 351.524 (1999), Commerce explained that the 0.50 percent rule avoids the need for

Commerce to: “(1) Collect, analyze, and verify the data needed to allocate such benefits over

time; and (2) keep track of the allocation calculations for minuscule subsidies from year to year.”

63 Fed. Reg. at 65,394. The reason this is important is that “[i]f considered only in the context of

a single case, the burdens imposed by this activity may not appear to be particularly onerous.

However, when considered across all investigations and administrative reviews, the cumulative

burden becomes considerable.” Id.

The Court finds Commerce’s application of the 0.5% test was supported by substantial

evidence and otherwise in accordance with the applicable law.

C. Commerce Made a “Ministerial Error” in Initially Amortizing The Subsidies Over
The Average Useful Life Of The Subsidy Rather Than Applying Its “0.5% Test”
That Was Properly Corrected Pursuant To 19 U.S.C. § 1675(h)

1. Parties’ Contentions:

a. Plaintiff

Plaintiff argues if the Court allows the inclusion of subsidies to CD and PFM in the

calculation of Fafer’s countervailing duty margin, the Court should not accept petitioners’

assertion that Commerce’s error in amortizing the subsidies over the average useful life of the

subsidy instead of expensing it under Commerce’s “0.5%” test was ministerial. (Pl.’s Br. at 13-

14.) Plaintiff argues the error here does not fall within the statutory definition of “ministerial

error” as it was an error related to the Department’s calculation methodology rather than a
Court No. 99-04-00219 Page 24

problem with addition or subtraction. (Id. at 13, citing 19 U.S.C. § 1675(h)) Further, Plaintiff

argues Commerce’s “0.5%” test is discretionary and thus once Commerce has exercised its

discretion any subsequent changes would no longer be ministerial. (Id. at 16.)

b. Defendant and Defendant-Intervenors

Defendants argue the error was ministerial. Defendant-Intervenors reason that the error

was ministerial because while Commerce announced its intention to “employ the standard grant

methodology” outlined in the General Issues Appendix (GIA), which includes the application of

a grant less than 0.5% of the firm’s total or export sales to the year within which the grant was

received, it inadvertently failed to do so here with respect to CD and PFM. Commerce also

states, in the Amended Final Results, that it intended to employ the standard grant allocation

methodology as explained in the GIA with respect to the CD and PFM grants but “inadvertently

failed to apply the 0.50 percent test to the CD and PFM grants.” 64 Fed. Reg. at 18,002.

Defendant and Defendant-Intervenors maintain the Court must defer to Commerce’s

interpretation and application of the law.

2. Analysis:

“Ministerial error” is defined as including “errors in addition, subtraction, or other

arithmetic function, clerical errors resulting from inaccurate copying, duplication, or the like, and

any other type of unintentional error which the administering authority considers ministerial.”

19 U.S.C. § 1675(h) (West Supp. 1999) (emphasis added). The administering authority, in this

case Commerce, has adopted the statutory definition of “ministerial error” in its regulation. See
Court No. 99-04-00219 Page 25

19 C.F.R. § 351.224(f) (2000). This Court has frequently granted Commerce broad discretion in

determining what constitutes a ministerial error. See, e.g., Cemex, S.A. v. United States, 19 CIT

587, 593 (1995) (“Commerce is given fairly broad discretion to determine which types of

unintentional error to regard as ministerial.”). Moreover, the Court has recognized where

Commerce identifies its error as “inadvertent,” the Court may uphold the correction as a

ministerial error. See, e.g., Geneva Steel v. United States, 914 F. Supp. 563, 607 (Ct. Int’l Trade

1996) (basing, in part, its conclusion that Commerce’s failure to aggregate the grants received

was an error of addition and therefore a ministerial error on Commerce’s characterization of the

error as “inadvertent”).

Here, Commerce characterized its error in not applying the 0.5% test as “inadvertent.”

Commerce determined it was inadvertent because, in part, the Final Results indicated that

Commerce intended to employ “the standard grant methodology outlined in the allocation section

of the GIA.” 64 Fed. Reg. at 12,984. The GIA states it is Commerce’s policy to allocate non-

recurring grants over the average useful life (AUL) of the grant “unless the sum of grants

provided under a particular program in a given year is less than 0.50 percent of a firm’s total or

export sales . . . in the year in which the grant was received.” 58 Fed. Reg. at 37,226; see also

Proposed Regulations, 54 Fed. Reg. at 23,384 (which was subsequently codified at 19 C.F.R. §

351.524(b)(2) (1999)). However, Commerce failed to apply its standard grant methodology. The

Court finds it relevant that Commerce applied the 0.5% test with respect to other grants in this

investigation.8 Obviously, Commerce understood the standard grant methodology to include the

8
Due to the proprietary nature of this information the Court declines to provide additional
detail on these grants.
Court No. 99-04-00219 Page 26

0.5% test under those circumstances described in the GIA. The Court finds Commerce’s failure

to apply the 0.5% test to the PFM and CD grants was due to inadvertence, and falls within the

definition of a ministerial error. Additionally, because there is substantial evidence to support

Commerce’s decision to expense the grant to PFM in the year it was received, the Court finds

Commerce’s error in failing to apply the 0.5% test in the Final Results was a ministerial error

properly corrected in the Amended Final Results.

Fafer argues the nature of the error was methodological rather than ministerial and

Commerce’s original allocation in the Final Results was proper. The Court notes this issue has

been addressed in Geneva Steel, 914 F. Supp. 563 (Ct. Int’l Trade 1996). There, this Court held

that since substantial evidence supported Commerce’s decision to aggregate grants received by

the subject company, Commerce’s error in failing to aggregate the grants was a ministerial error

properly corrected in the amended determination. Id. at 607. This Court also noted that its

findings did not accord Commerce “unbridled discretion” to determine when an act in

ministerial. The Court finds Commerce simply “made an error, not resulting from ill-considered

judgment or wayward discretion, but from oversight.” Id. at 608 (quoting Companhia Brasileira

Carbureto de Calcio v. United States, 18 CIT 215, 218 (1994)) (internal quotations omitted).

This decision merely “reflects the deference courts afford agency interpretations of statutes and

the regulations implementing such statutes.” Geneva Steel, 914 F. Supp. at 607-08 (citing

Daewoo Elecs. Co., Ltd. v. Int’l Union of Elec. Workers, AFL-CIO, 6 F.3d 1511, 1522 (Fed. Cir.

1993). Similarly, in the present case, the facts warrant the grant of an equal amount of discretion.

Accordingly, the Court finds Commerce’s decision to treat the error as ministerial is supported

by substantial evidence, otherwise in accordance with law, and sustains Commerce’s Amended
Court No. 99-04-00219 Page 27

Final Results.

CONCLUSION

For the reasons stated above, the Court finds Commerce’s Final Results and Amended

Final Results are supported by substantial evidence and otherwise in accordance with law.

Plaintiff’s motion is denied.

______________________________
Gregory W. Carman,
Chief Judge

Dated: June 6, 2001
New York, New York