FINAL RESULTS OF REDETERMINATION PURSUANT TO COURT REMAND



ILVA Lamiere e Tubi S.p.A. v. United States



Court No. 00-03-00127, Remand Order (CIT August 30, 2000)





I. Introduction

The Department of Commerce (Department) has prepared these final remand results pursuant to an order from the U.S. Court of International Trade (CIT) in ILVA Lamiere e Tubi S.p.A. v. United States, Court No. 00-03-00127 (CIT August 30, 2000) (ILVA/ILT).

II. Background

In the Final Affirmative Countervailing Duty Determination: Certain Cut-to-Length Carbon-Quality Steel Plate from Italy, 64 FR 73244 (December 29, 1999) (Italian CTL Plate), the Department determined that countervailable subsidies are being provided to producers and exporters of certain cut-to-length carbon-quality steel plate from Italy. Italian plate producer ILVA/ILT challenged this determination and argued in its April 4, 2000 complaint to the CIT, that the 1995 sale of ILVA Laminati Piani S.p.A. (ILP), the parent company of ILVA Lamiere e Tubi S.p.A. (ILT),(1) to new, private owners extinguished all pre-privatization subsidies and that, by finding that the privatized company continued to benefit from these subsidies, the Department acted contrary to law.

On February 2, 2000, the Court of Appeals for the Federal Circuit ruled in Delverde S.r.l. v. United States, 202 F.3d 1360 (Fed. Cir. Feb. 2, 2000), reh'g denied (June 20, 2000) (Delverde III), in which the Department applied a change-in-ownership methodology similar to that in Italian CTL Plate, that "the Tariff Act as amended does not allow Commerce to presume conclusively that the subsidies granted to the former owner of Delverde's corporate assets automatically 'passed through' to Delverde following the sale. Rather, the Tariff Act requires that Commerce make such a determination by examining the particular facts and circumstances of the sale and determining whether Delverde directly or indirectly received both a financial contribution and benefit from the government." 202 F.3d at 1364.

On August 30, 2000, the CIT issued its remand order in the Italian CTL Plate litigation to the Department with instructions to "issue a determination consistent with United States law, interpreted pursuant to all relevant authority, including the decision of the Court of Appeals for the Federal Circuit in Delverde, S.r.l. v. United States, 202 F.3d 1360 (Fed. Cir. 2000)."

On September 18, 2000, the Department solicited comments from the petitioners and ILVA/ILT regarding potential revisions to our change-in-ownership methodology in light of Delverde III. The petitioners submitted arguments regarding methodology on October 2, 2000, and October 16, 2000. ILVA/ILT submitted arguments regarding methodology on October 2, 2000.

On September 18, 2000, we sent a questionnaire to ILVA/ILT soliciting information from ILVA/ILT, the Government of Italy (GOI) and the European Community (EC) regarding "old" ILVA's and ILP's changes in ownership, followed by a supplemental questionnaire on October 20, 2000. ILVA/ILT coordinated the questionnaire responses for all parties. On October 10, 2000, ILVA/ILT submitted the majority of its response (Remand Questionnaire Response) to the Department's initial remand questionnaire. ILVA/ILT submitted the remainder of its questionnaire response on October 17, 2000 (Remand Questionnaire Response Follow-Up). ILVA/ILT submitted the majority of its supplemental remand questionnaire response on November 3, 2000 (Remand Supplemental Response), and submitted its response to the remaining questions on November 6, 2000 (Remand Supplemental Response Follow-Up). On October 16, 2000, the petitioners submitted comments on the Remand Questionnaire Response.

The Department circulated a draft remand determination to the interested parties on November 21, 2000. Timely comments were filed on December 5, 2000, by the petitioners, ILVA/ILT (respondent) and the European Communities.

III. Analysis

Interpreting Delverde III

In Delverde III, the Federal Circuit first observed that, in order to find a countervailable subsidy on merchandise imported into the United States, the Department must determine that a government "provid{ed}, directly or indirectly, a countervailable subsidy with respect to the manufacture, production, or export of that merchandise." 202 F.3d at 1365, citing 19 U.S.C. § 1671(a)(1). In order to find that a countervailable subsidy had been provided to the "manufacture, production, or export" of the imported merchandise, the Delverde III court found that the person who produced or exported that merchandise must have received a financial contribution and enjoyed a benefit from that financial contribution. Id. at 1365, 1366. In the Delverde III court's words, a subsidy exists when "an authority provides a financial contribution, . . . to a person and a benefit is thereby conferred." Id., quoting 19 U.S.C. § 1677(5)(B) (emphasis in original). The Delverde III court stated that this meant that "{i}n order to conclude that a 'person' received a subsidy, Commerce must determine that a government provided that person with both a 'financial contribution' (or equivalent as described in §§ 1677(5)(B)(ii) and (iii)) and a benefit." 202 F.3d at 1365 (footnote omitted).(2)

The Delverde III court next turned to the question of whether, once these conditions had been satisfied, a change in the ownership of the subsidy recipient would affect the countervailability of those subsidies. The Delverde III court noted that the statute's change-in-ownership provision (§ 771(5)(F)) states that "a subsidy cannot be concluded to have been extinguished solely by an arm's length change of ownership." 202 F.3d at 1366. On the other hand, the Delverde III court pointed out that "Congress did not intend the opposite, that a change in ownership always requires a determination that a past countervailable subsidy continues to be countervailable, regardless whether the change in ownership is accomplished by an arm's length transaction or not." Id. (emphasis in original). Instead, the Delverde III court stated that the change in ownership provision "simply prohibits a per se rule either way." Id.

The Delverde III court then considered the change-in-ownership provision in the context of the provisions for determining the existence of a subsidy and concluded that "the statute does not contemplate any exception" to those requirements (of a financial contribution and a benefit) in situations where the person who is the producer/exporter acquired corporate assets from a distinct person who had been subsidized. Id. The Delverde III court emphasized that the change-in-ownership provision "does not change the meaning of 'subsidy,'" and therefore "{a} subsidy can only be determined by finding that a person," meaning the producer or exporter of the imports in question, "received a 'financial contribution' and a 'benefit' . . . ." Id.

The Delverde III court then held that the methodology Commerce employed to determine whether previously bestowed subsidies continued to be countervailable following a change in ownership was not in accordance with the statute. Id. at 1367. In particular, under the impression that Delverde was a different person from the original subsidy recipient,(3) the Delverde III court noted that

{n}owhere following its methodology did Commerce determine whether Delverde directly or indirectly received a financial contribution and benefit from one of the acts enumerated. Rather, Commerce's methodology conclusively presumed that Delverde received a subsidy from the Italian government -- i.e., a financial contribution and a benefit, simply because it bought assets from another person who earlier received subsidies.



Id. In the process of conducting the Delverde remand, however, the Department came to realize that the Delverde transaction did not, in fact, constitute a sale of assets, but was, in essence, a sale of shares.

For purposes of understanding the Delverde III court's holding, however, we must proceed on the basis of the facts as they were understood by the Delverde III court. Based on the parties' presentations, the Delverde III court understood the facts to be that certain assets of one company had been sold to another company. With this premise, the Delverde III court held that the new producer/exporter could not be presumed to have received any part of the original subsidy as a result of this change in ownership. The Delverde III court held that, for the new producer/exporter to be liable for countervailing duties following the change in ownership, it must be demonstrated that the new producer/exporter received a financial contribution and a benefit in its own right as a result of the change in ownership (for example, by demonstrating that the purchaser paid the seller less than adequate remuneration). Because the Delverde III court understood the original subsidy recipient and the post-change-in-ownership producer/exporter under the Delverde facts to have been distinct persons, it directed the Department to demonstrate that the new producer/exporter had received a financial contribution and a benefit.

In our view, the Delverde III court's holding focused not on the nature of the Delverde transaction, but on the Department's methodological approach to analyzing the transaction. The Delverde III court faulted the Department's failure to make specific findings regarding the existence of a subsidy benefitting Delverde, as required by the countervailing duty statute:

Having determined that the meaning of the statute is clear, we need not give Chevron deference to Commerce's interpretation; we need only determine whether Commerce's methodology is in accordance with the statute. We have concluded that it is not. Nowhere following its methodology did Commerce determine whether Delverde directly or indirectly received a financial contribution and benefit from one of the acts enumerated.



Id. at 1367. In other words, the Delverde III court was concerned because the Department had not undertaken a review of all of the facts and circumstances of the Delverde transaction. Without prejudging what the outcome would be, the Delverde III court indicated that such a review was required before the Department could properly make a determination regarding the existence of a subsidy. In accordance with the Delverde III court's pronouncements, that is what we have attempted to do in this remand determination.

In order to determine how the Delverde III court's holding applies to the facts before us, the first requirement is to determine whether the person to which the subsidies were given is, in fact, distinct from the person that produced the subject merchandise exported to the United States. If the two persons are distinct, the original subsidies may not be attributed to the new producer/exporter. The Department would, however, consider whether any subsidy had been bestowed upon that producer/exporter as a result of the change-in-ownership transaction.(4)

On the other hand, if the original subsidy recipient and the current producer/exporter are considered to be the same person, that person benefits from the original subsidies, and its exports are subject to countervailing duties to offset those subsidies. In other words, if the firm under investigation is the same person as the one that received the subsidies, nothing material has changed since the original bestowal of the subsidy, so that the statutory requirements for finding a subsidy are satisfied with regard to that person. In the change-in-ownership context, the existence of a "financial contribution" and a "benefit" (conferred prior to the change in ownership) depends on the "person" requirement and, specifically, whether the firm under investigation is the same person as the original, pre-change-in-ownership subsidy recipient. Where it is demonstrated that those two entities are the same "person," we will determine that all of the elements of a subsidy are established, i.e., we will determine that a "financial contribution" and a "benefit" has been received by the "person" that is the firm under investigation. Assuming that the original subsidy had not been fully amortized under the Department's normal allocation methodology(5) as of the period of investigation, the Department would then continue to countervail the remaining benefits of that subsidy.(6)

Although it is not directly relevant here, see Delverde III, 202 F.3d at 1369, we note that the decision of the WTO's Appellate Body in U.K. Lead Bar is consistent with the analysis set forth by the Delverde III Court, as it sets forth essentially the same two-step analysis as the Delverde III Court. Addressing a privatization rather than a purely private transaction, the Appellate Body's first inquiry addressed the identity of the firm under investigation and specifically whether it was the person that had originally received certain pre-privatization subsidies. Then, having found that the two entities were distinct, the Appellate Body inquired into whether a subsidy had been provided through the privatization transaction.(7)

In any event, for purposes of this remand proceeding, the Delverde III Court did not explain how the Department should determine whether the firm under investigation is or is not the same "person" as the one that received the original subsidies. Presumably, it had understood the issue to be settled that the case before it involved two distinct entities.

In addressing this issue, the Department has sought guidance, in part, from how this type of issue has been handled under U.S. law in the general corporate context. There, a set of principles has been developed regarding whether a legal person(8) is the same or different for the purpose of determining whether it is appropriate to attribute prior liabilities (or assets) to a company once it has undergone a change in ownership.

Under these principles of corporate successorship, a mere change in a company's name does not automatically create a new legal person, nor does a mere change in the owners of a company, without more. Rather, the change in name or the change in the owners may or may not result in a change in the legal person, depending on a number of factors.

It is generally accepted that if a change in ownership is accomplished through a simple sale of shares, the purchaser steps into the shoes of the company being sold and becomes legally responsible for all existing and potential liabilities of that company, absent contractual agreement to the contrary. The most obvious example of a change in ownership accomplished through a simple sale of shares would be where a company's shares turn over through public trading on a stock market. In other situations, it is a factual question as to whether the purchaser becomes legally responsible for all existing and potential liabilities of the company or assets being sold. Specifically, it is a question of whether the company carries on substantially the same business after the change in ownership. Here, the factors examined include whether there is a continuation of assets, general business operations, locality, management, personnel, whether the seller exits the business after the transaction, and whether the company after the change in ownership holds itself out to be the effective continuation of the original enterprise. If an examination of these factors shows that the company is carrying on substantially the same business after the change in ownership, it is legally responsible for all existing and potential liabilities.(9)

The Department notes that, in its experience, particularly when dealing with privatizations, it often does not encounter straightforward changes in ownership where the status of the firm under investigation is readily apparent. For example, it is not common for the Department to be confronted with a change in ownership accomplished through a simple sale of shares, which is the type of case that would most readily reveal no change in the legal person. Similarly infrequent are cases where the firm under investigation has simply purchased some but not all of another firm's subsidized assets outright, which, conversely, would normally mean that the firm under investigation was a different legal person from the original subsidy recipient. Rather, in the cases that the Department more usually sees, the transactions are complex and do not lend themselves to such straightforward analysis.

In any event, although the Department is not adopting the test used in the area of corporate successorship, it does consider the principles developed in that area to provide useful guidance to it in its development of an approach for determining whether, in the countervailing duty context, the firm under investigation is the same "person" as the one that received the original subsidies. For one thing, the basic purpose in both contexts is to determine whether there has been any meaningful change in an entity. In addition, although the particular focus in the countervailing duty context is on the attribution of previously bestowed subsidy benefits rather than previously incurred liabilities as in the corporate successorship context, the ultimate question in the countervailing duty context is whether any liability for countervailing duties can be attributed to an entity based on subsidy benefits bestowed prior to a change in ownership. Furthermore, essentially the same principles that govern corporate successor liability also govern how previously obtained rights accrue to the corporate successor, and the nature of those rights is not unlike that of subsidy benefits.

In developing our approach, the Department has considered adopting an analysis similar to the successor-in-interest test that the Department uses to assign antidumping duty or countervailing duty cash deposit rates following changes in a company's ownership or structure. Under that test, the Department uses a fact-based approach and attempts to determine whether the successor remains essentially the same entity as the predecessor following a sale or merger so that it is appropriate to impose the existing antidumping or countervailing duty cash deposit rate of the predecessor on the successor. In making this determination, the Department examines a number of factors including, but not limited to, changes in management, production facilities, supplier relationships, and customer base in an attempt to determine how the successor will likely act subsequent to its sale or merger.(10)

We note that the inquiry that we are attempting to follow in the change-in-ownership context is somewhat different from this inquiry. We are not attempting to determine how the entity in question will act subsequent to its change in ownership. Rather, our determination focuses more fundamentally on whether the post-sale entity is the same "person" as the subsidized pre-sale entity. For this reason, in making the "person" determination contemplated by Delverde III, we believe that only limited guidance can be obtained from the Department's successor-in-interest test.

With these various considerations in mind, the Department has developed its own approach for assessing changes in the entity under consideration that relies on a variety of factors, while regarding no single factor or group of factors as dispositive. We have not established an all-inclusive list of factors to be applied in every such analysis to be conducted by the Department. Rather, we recognize that the specific facts and circumstances surrounding each change in ownership will be unique and therefore will require a flexible approach. We do anticipate, however, that certain factors will generally be found to be relevant to many or most transactions examined by the Department.

Thus, as part of this approach, where appropriate and applicable, we would analyze factors such as (1) continuity of general business operations, including whether the successor holds itself out as the continuation of the previous enterprise, as may be indicated, for example, by use of the same name, (2) continuity of production facilities, (3) continuity of assets and liabilities, and (4) retention of personnel. No single factor will necessarily provide a dispositive indication of any change in the entity under analysis. Instead, the Department will generally consider the post-sale entity to be the same person as the pre-sale entity if, based on the totality of the factors considered, we determine that the entity sold in the change-in-ownership transaction can be considered a continuous business entity because it was operated in substantially the same manner before and after the change in ownership.

We note that, by taking this more comprehensive approach to analyzing the facts and circumstances surrounding a change-in-ownership transaction, we have attempted to address the concerns previously raised by the Department and the courts regarding restructuring changes, namely, that such changes not permit respondent firms to avoid prior liabilities while retaining the benefits underlying those liabilities. For example, the CIT has noted that while a producer may be incorporated under a different name from the person that was previously identified as the subsidy recipient, the "new" company may be the successor-in-interest of the original subsidy recipient and, thus, constitute "for all intents and purposes the same entity." British Steel plc v. United States, 879 F. Supp. 1254, 1276, 1279, 1283, 1287 (CIT 1995) (British Steel I), rev'd, 127 F.3d 1471 (Fed. Cir. 1997).(11)

As is evident below, when we apply this approach to the facts and circumstances of the ILP privatization, we find that the pre-sale and post-sale entities are not distinct persons. On that basis, we have attributed the subsidies provided prior to the privatization to the post-sale entity, ILP (or "new" ILVA)//ILT. We, therefore, do not reach the question of whether a subsidy has been provided to ILP (or "new" ILVA)/ILT as a result of the change-in-ownership transaction.



ILP Privatization

In Delverde III, the Federal Circuit directed that the Department should specifically consider "the facts and circumstances, including the terms of the transaction" when addressing a change in ownership like the ILP privatization. 202 F.3d at 1369-70. In this remand proceeding, the Department has carefully considered the Court's Delverde III opinion and, in particular, its admonition that the Department's inquiry seek to determine whether "an authority provides a financial contribution, . . . to a person and a benefit is thereby conferred." Id., at 1365 (emphasis in original) (citation omitted). To this end, the Department has begun its analysis here by analyzing the transaction at issue here for the purpose of addressing the one subsidy element that it initially places in issue, i.e., the "person" determination. In other words, we are seeking to determine whether the entity under investigation (Riva-owned ILP) itself received a government-provided financial contribution and a benefit.

Concurrently, the Department has undertaken a review of all of the evidence on the record from the underlying investigation concerning the nature of the transaction in question. In addition, for this remand, the Department has sought more specific information as to the nature of the sale by sending a questionnaire to ILVA/ILT, the GOI and the EC. As a result of this more focused inquiry, the Department has found that the transaction at issue was structured as follows.

Prior to 1981, Italian government-owned carbon steel plate production was concentrated in a company named Italsider S.p.A. (Italsider), a separately incorporated subsidiary of Finsider S.p.A. (Finsider), the holding company that controlled all state-owned steel companies in Italy.(12) Finsider, in turn, was wholly-owned by a government holding company, Istituto per la Ricostruzione Industriale (IRI). In 1981, Finsider was restructured and carbon steel plate production was placed under a company named Nuova Italsider.

In 1987, Finsider was placed in liquidation, and another restructuring in 1988 led to the creation of ILVA S.p.A. (ILVA or "original" ILVA) on January 1, 1989. ILVA incorporated several former operating divisions of Finsider into one company. In this process, part of the liabilities of Nuova Italsider and the majority of its viable assets, including all the assets associated with the production of subject merchandise, transferred to ILVA.

From 1989 to 1993, ILVA consisted of four operating divisions, including the carbon steel flat products division that produced subject merchandise. ILVA was part of the ILVA Group (which also included various service centers), which was wholly-owned by IRI. ILT was created in 1992 as a wholly-owned subsidiary of ILVA. ILT produced subject merchandise that was exported to the United States during the period of investigation (POI).

In October 1993, ILVA entered into liquidation and on December 31, 1993, two of ILVA's major divisions were demerged and separately incorporated: ILVA's carbon steel flat products division was incorporated as ILVA Laminati Piani (ILP), and its specialty steels division was reincorporated as Acciai Speciali Terni S.p.A. (AST). ILT was transferred to ILP as its wholly-owned subsidiary. On March 16, 1995, ILP, including its subsidiary ILT, was sold to the consortium led by Riva Acciaio S.p.A. (Riva). One hundred percent of the shares of ILP were transferred to the Riva consortium, with Riva itself purchasing approximately 52 percent of ILP, on April 28, 1995. Subsequently, between the privatization date in 1995 and the POI, Riva itself consolidated its ownership of ILP (and ultimately "new" ILVA) through the acquisition of shares held by other owners. As a result, during the POI, RIVA owned and/or controlled 82 percent of ILVA, with the remainder being held by other investors in the consortium.

As is clear from the overview of the company history above, the productive assets and operations that eventually comprised ILP basically existed intact as a discrete operating entity since at least the 1980s (the period when the company was known as Italsider). Moreover, in December 1993 - more than a year prior to its sale to new private owners - ILP became a legally separate, incorporated entity though the corporation was still owned by the GOI through IRI. In other words, from the early 1980s through the 1993 demerger and up to its privatization, the business operations that became ILP remained one continuous business entity, ultimately owned by the same owner - the GOI.

In the 1993 steel cases, when analyzing the same history of the Italian public steel sector



(as well as that of other countries), the Department noted:



One type of restructuring activity is the corporate reorganization in which, most typically, assets are shifted amongst and between various related corporate entities. New corporate structures and relationships are established through the liquidation of corporate entities, the creation of new corporate entities, and the "sale" or transfer of assets between such related entities. No truly "outside"parties enter the corporate organization; rather, a new "web" of corporate relationships is created between old and new corporate entities. However, regardless of what changes occur in the corporate structure, the ultimate shareholder remains unchanged.



General Issues Appendix to the Final Affirmative Countervailing Duty Determination: Certain

Steel Products from Austria, 58 FR 37217, 37266 (July 9, 1993). Upon analyzing these public steel sector restructurings in Italy and other countries, the Department stated that, in this context, it would not consider "internal corporate restructurings that transfer or shuffle assets among related parties to constitute a 'sale' . . . . Legitimate 'sales' . . . must involve unrelated parties, one of which must be privately owned." Id.

Therefore, although the GOI on several occasions reconfigured the overall corporate environment within which ILP's predecessors operated, there was no sale or ultimate change in ownership that would necessitate a reconsideration of who the subsidy recipient was prior to the 1995 privatization of ILP. Rather, the carbon steel plate business itself, as well as the ultimate ownership of this business, remained essentially unchanged from the early 1980s through April 1995. All of the subsidies that were bestowed on the predecessor operations of ILP continued to benefit the business that was separately incorporated as ILP as part of the 1993 ILVA demerger.(13) Accordingly, the appropriate comparison for purposes of the "person" determination is between the GOI-owned ILP (post-demerger) and the Riva-owned ILP (post-privatization).

As we explain below, from our review of the record, it appears that in purchasing ILP, Riva intended to perpetuate the operations of ILP in their current basic form and, thus, to perpetuate the business entity benefitting from subsidies bestowed prior to the privatization. This conclusion is further supported by the examination of the case facts, below, and, in particular, the factors discussed under the Interpreting Delverde III section, above.

Continuity of General Business Operations

The record information indicates that the carbon steel plate operations of "former" ILVA essentially continued on in the form of ILP through the privatization process. For instance, the ILP Remand Questionnaire Response at 5 notes that "{b}y selling ILP as an operating entity, rather than auctioning its individual assets, IRI expected that it would obtain a higher sale price and maximize the revenue from the sale for IRI." The respondent further confirmed, unambiguously, the continuity of ILVA's carbon steel plate operations after the sale of ILP, in its Remand Questionnaire Response, at 18, where it stated, in response to a question asking to describe the structure of the company before and after its sale:

{t}here was no change in the legal or business structure of ILP after its purchase by Riva, other than the change in ownership. Riva purchased ILP as an operating entity and continued to operate it as such..... It produced and continues to produce (under its new name of ILVA) carbon steel flat products and pipe and tube in facilities owned and operated by it and its subsidiaries, with occasional additions or changes of business operations and lines of business within its general areas of concentration.



The Remand Questionnaire Response further noted, at 20, that "{t}here were no closures or other such changes in the product lines or production facilities of ILP as a result of the sale." In other words, ILP's production base and the products it produced remained virtually the same after the privatization.

This is consistent with the apparent expectations of parties involved in the process leading up to the privatization. For example, continuity of output was a significant assumption throughout the Information Memorandum prepared by Istituto Mobiliare Italiano S.p.A. (IMI).(14) IMI was commissioned by the GOI to prepare the report to value ILP prior to sale. ILP's existing productive assets were also viewed by Riva, when considering a purchase of ILP, to be

[*****](15)

Another relevant area of inquiry is whether a successor company after a sale holds itself out as the continuation of the previous entity. We find that, in purchasing ILP, the Riva consortium clearly intended to benefit from and build upon the existing market exposure, distribution network and reputation of the company. For instance, the privatized entity continued to operate under the same name, ILP, until it changed the name to ILVA S.p.A. on January 1, 1997 for marketing purposes.(16) It is clear from the record that Riva believed ILP's existing market presence was an important part of what the consortium would be purchasing. In its Industrial Plan for ILP, at Attachment 2 of the Remand Questionnaire Response, Riva noted the following points:



[*****]



Continuity is reflected in Riva's Industrial Plan, which the GOI required of bidders at the time they made non-binding offers as a way to determine "whether the bidder had serious interest in running the company and did not intend to engage in anti-competitive practices and to assess whether that {sic} the new owner would satisfy the requirements imposed under the EU restructuring directive on competition."(17) The continuity is also outlined explicitly in the obligations under the sales contract, wherein the purchaser agreed to

[*****](18)

Other indicators of ILP's ongoing business operations include its stable supplier and customer bases. With regard to ILP's suppliers, the respondent unambiguously stated that "{t}here was no change in ILP's suppliers as a result of the sale."(19) Likewise, with regard to the impact of the sale on ILP's customer base, the respondent clearly stated that "{t}here was no change in ILP's customer base as a result of the sale."(20) We can identify no information on the record that would suggest ILP's supplier or customer relationships changed substantially, if at all, during the privatization process.

Continuity of Production Facilities

Following the 1995 privatization, ILP's principal carbon steel production facilities continued to be based primarily in the same locations, including Taranto, as when ILP was owned by the GOI. This was seen by the Riva consortium as a [*****] of ILP, as is highlighted in Riva's Industrial Plan submitted to the GOI.(21)

Continuity of Assets and Liabilities

The GOI sold ILP to the Italian consortium led by Riva in 1995 through a transfer of shares.(22) As the terms and conditions of this transaction reveal, virtually all of ILP's corporate assets were taken over by the Riva consortium. Also, a comparison of the ILP Group's subsidiaries and corporate structure shows that they were virtually the same before and after the privatization.(23) The assets of ILP, therefore, remained intact through the privatization process.

Likewise, the record is clear that the liabilities of the pre-privatized ILP transferred through the privatization intact. This fact is confirmed by the financial statements as well as by the contract of sale, where it stated that the price

[*****](24)

Retention of Personnel

The continuity in ILP's general business operations and production facilities is also reflected in the continuity of ILP's personnel through the privatization process. It is clear from information on the record that Riva was not only committed to maintaining the existing ILP workforce largely in place after the privatization, but was [*****] to do so. [*****] was highlighted in the contract for the sale of shares to the Riva consortium, at Article 6.1 of Exhibit 30 of the Original Questionnaire Response. In the contract, Riva agrees to:



[*****]



Any significant decline in the workforce in the years subsequent to the privatization was expected to be, in large part, due to the early retirement of certain employees based on GOI programs and labor negotiations already in place at the time of the privatization (i.e., reductions were not a result of the privatization).(25)

The respondent has confirmed that "{R}iva accepted the terms and conditions set forth by IRI." Remand Questionnaire Response at 25. In sum, we find no information on the record indicating that the ILP workforce changed substantially as a result of the privatization.



Based on the above analysis, we determine that all important aspects of ILP's business remained essentially unchanged before and after the sale to the Riva consortium. Before and after the 1995 privatization, inter alia, ILP used the same name, held itself out as the same company, maintained its plants and headquarters in the same locations, used the same production facilities to manufacture and sell the same products, employed largely the same personnel, and sold to basically the same customer base. Therefore, we find that the privatized ILP is for all intents and purposes the same person as that which existed prior to the privatization as a separately-incorporated, GOI-owned specialty steel producer of the same name.

With regard to the pre-privatization asset spin-offs, we note that neither ILVA/ILT nor the GOI specifically responded to our point-by-point questionnaire on this matter with respect to all individually recorded spin-offs prior to the privatization of ILP. Therefore, we determine that once sold, the assets did not constitute the same entity as ILVA (the seller of those assets) and, therefore, the subsidy benefits remained with the divisions of ILVA.

IV. Comments

Comment 1

Petitioners maintain that, as stated by the Department, the thinking of the CIT in British Steel I is consistent with the focus on "person" and the approach adopted by the CAFC in Delverde III, and the Department in this redetermination. Petitioners argue that the Department should be clear with respect to consideration of the "person," and its consistency with British Steel I.

Respondent argues that the Department attempts to distinguish Delverde III on the basis of the form of the transaction, even though there is nothing significant in the Court's opinion to infer it based its decision on whether the sale was an asset sale or a sale of shares. Mostly, respondent points out, the Delverde III opinion attempts to reconcile the following two statutory provisions: 1) the clear requirement under the law that the Department must tie the benefit received to the company under investigation and producing subject merchandise, and 2) that a change in ownership does not necessarily extinguish the subsidy, even if the change is accomplished through an arm's length transaction. Respondent states the Department attempts to reconcile these provisions by distinguishing between a sale of assets and a sale of the subsidized corporation itself. However, respondent points out that the Court took a different path than the Department in reconciling the two parts of the law by suggesting the Department could find an "indirect" subsidy if the purchaser received goods for less than "adequate remuneration" or if the purchaser received subsidies in some other manner during the course of privatization, regardless of whether the sale was a sale of assets or shares.

Respondent notes that the Court left open the possibility of finding countervailable subsidies in a government privatization transaction, as opposed to the private-to-private transaction under Delverde III. However, respondent argues this cannot be interpreted as supporting the Department's theory of a distinction between an asset sale and a sale of the subsidized corporation itself. Instead, this is simply another example of a possible "indirect" subsidy.

The Department's Position:

As we explained above, in Delverde III, when it discussed how the Department should handle changes in ownership, the Federal Circuit emphasized the "person" requirement that appeared in the countervailing duty statute for the first time following enactment of the URAA. In Delverde III itself, however, the Federal Circuit did not treat this matter as in dispute, given its understanding of the facts. In particular, it understood the facts to be that the Delverde change in ownership transaction involved nothing more than a sale of certain subsidized assets of one company to another company, and it was in that situation that it considered the pre-sale entity to be a person distinct from the post-sale entity. Nevertheless, the Federal Circuit did not explain what criteria it used to reach this conclusion, and it is for that reason that the Department has developed criteria for deciding whether or not the firm under investigation is the same person as the original subsidy recipient.

Consistent with Delverde III, we first examined the facts and circumstances, including the terms of the transaction, to determine whether post-sale ILP was the same person as the original subsidy recipient, pre-sale ILP. Because the Department found it to be the same person, the Department was then able to determine that all of the elements of a subsidy were established with regard to post-sale ILP, and its analysis of the transaction necessarily ended.

The specific distinction between a sale of shares and a sale of assets is not one of the factors that we examined. The distinction can be relevant in the sense that it helps to clarify the Department's analysis of the continuity of assets and liabilities.

As for petitioners comments with regard to British Steel I, as explained in footnote 11, above, the British Steel I decision addressed the pre-URAA statute. The Delverde III court has indicated that the post-URAA statute is materially different.

Comment 2



Petitioners contend that ILVA's urging of the Department to consider the U.K. Lead Bar Appellate Body decision under the rule of Schooner Charming Betsy indicates that ILVA believes the Department would be violating the international obligations of the United States unless the Department reaches the same results of U.K. Lead Bar. Petitioners argue that the Administration is responsible to define the international obligations of the U.S., and that WTO panel decisions do not purport to set binding precedents.

Further, petitioners claim that the Department's proposed legal analysis is consistent with that of U.K. Lead Bar. As the CAFC decided in Delverde III, the Appellate Body in U.K. Lead Bar found that the firm under investigation and the subsidy recipient were distinct. Then, contrary to ILVA's claims that the Body did not require a benefit to the producer itself, petitioners argue that the Body instead did not require a benefit to the purchaser of a producer. As with Delverde III, U.K. Lead Bar involved only a situation in which a different company produced the subject merchandise than received the subsidy.

Respondent argues that the Department's "same corporate identity" approach espoused in the draft redetermination is inconsistent with U.K. Lead Bar. If the Department's approach had been endorsed by the WTO in U.K. Lead Bar, respondent claims the WTO would have upheld the subsidies to the pre-privatization government-owned predecessor company BSC, as countervailable to the privatized successor to BSC, BSplc. Similar to the situation with ILP, the privatization of BSC did not fundamentally alter the corporate structure, so the Department's new approach would conclude the company to be the same "person." However, the WTO Appellate Body explained that the central issue was whether the spun-off venture of BSC, known as UES, and BSplc itself, paid fair market value for the assets in the privatization. Since the United States conceded that fair market value was paid, there was no beneficial financial contribution.

Additionally, the Appellate Body endorsed the WTO Panel, which considered and rejected the argument by the United States that the subsidy remains countervailable because UES and BSplc are the same company as state-owned BSC. Therefore, respondent argues the WTO has rejected the Department's theory that pass through of subsidies continues to the privatized company because the corporate form of the company has not changed. Respondent cites not only U.K. Lead Bar, but other WTO decisions, to support its conclusions. Respondent notes that it is meaningless to draw a distinction between the Riva consortium and ILT itself. The consortium repaid the government the present value of any subsidies received by pre-privatized ILT, and thus the subsidies were repaid in full just as effectively as if ILP/ILT had repaid them in full itself.

Similarly, the EC considers the "same entity" approach used in the draft redetermination to be in flagrant contradiction with the WTO Panel and Appellate Body determinations in U.K. Lead Bar. In U.K. Lead Bar, it had to be determined that there was a benefit to the producer of the imported goods during the investigation period. Further, it was determined that since fair market value was paid, no benefit from the prior subsidies was conferred upon the privatized successor company. The EC argues that the Department ignores this logic completely with regard to the case at hand, in which fair market value was paid, and is therefore in violation of Article 10 of the SCM Agreement (by imposing duties without demonstrating that subsidies confer a benefit to the privatized firms which produce the imported goods).

The EC urges the Department to abandon this "same entity" approach and to adopt a methodology which is in conformity with the findings in the U.K. Lead Bar case. Additionally, with regard to U.K. Lead Bar, the EC expresses surprise at the Department's invocation of the Appellate Body report which, the EC argues, renders irrelevant the issue of change in "person." The EC further argues that the Department erred in claiming that the Appellate Body concluded that a countervailing duty is only valid if imposed on the same person that received the original subsidy. The EC states that the panel report found that a clear "distinction" should be drawn between BSC (the pre-privatized state-owned entity) on the one hand, and UES (the spun-off venture) and BSplc (the privatized successor to BSC), on the other hand, because of the payment of consideration, explicitly rejecting the "same entity" argument now brought by the Department.

The Department's Position:

We disagree with respondent and the EC that the Department's draft redetermination is inconsistent with the WTO Appellate Body's decision in U.K. Lead Bar. The Department's draft redetermination is consistent with the U.K. Lead Bar decision, just as it is consistent with the analysis set forth by the Delverde III court.

In U.K. Lead Bar, in construing the Agreement on Subsidies and Countervailing Measures, the Appellate Body first asked whether the firm under investigation (the privatized company) was the "natural or legal person" that had received the subsidies investigated by the Department (grants and equity infusions provided by the U.K. government years prior to the privatization). U.K. Lead Bar, para. 58. Finding that the firm under investigation was not the same legal person as the one that had received those subsidies, the Appellate Body ruled that the Department could only have imposed countervailing duties on the entity under investigation if the Department had found that that legal person had itself received a subsidy. Id., paras. 58, 62. The Appellate Body then examined the privatization transaction in question in order to determine if the entity under investigation had received a subsidy. The Appellate Body determined that the entity under investigation had received no benefit and therefore no subsidy through this transaction because a fair market value purchase price had been paid. Id., paras. 67-68.

As can be seen, the Appellate Body set forth essentially the same two-step analysis as the Delverde III Court. The first inquiry addressed the identity of the firm under investigation and specifically whether it was the "natural or legal person" that had originally received certain pre-privatization subsidies. Then, having found that the two entities were distinct, the Appellate Body inquired into whether a subsidy had been provided through the privatization transaction. Thus, the initial "person" inquiry the Department has undertaken in this remand is the same type of initial inquiry contemplated by the Appellate Body in its U.K. Lead Bar decision.

There is no indication or guidance in the Appellate Body's decision as to how the "natural or legal person" determinations were made. Thus, contrary to respondent's assertions, the Appellate Body did not rule specifically on the United States' argument regarding the criteria that could be used to determine legal successorship.

Given that the methodology the Department developed for this remand is not inconsistent with the Appellate Body's decision, the Department's remand also is not inconsistent with the Charming Betsy doctrine. In Alexander Murray v. Schooner Charming Betsy, 6 U.S.(2 Cranch) 64, 2 L. Ed. 208 (1804), the Supreme Court made the following observation:

It has also been observed that an act of Congress ought never to be construed to violate the law of nations if any other possible construction remains, and consequently can never be construed to violate neutral rights, or to affect neutral commerce, further than is warranted by the law of nations as understood in this country.

These principles are believed to be correct, and they ought to be kept in view in construing the act now under consideration.

Id. at (118) 226. Consequently, any reliance ILVA/ILT had on this doctrine is to no avail.



Comment 3

Petitioners maintain that the CVD law is a remedial statute, which must be construed broadly to effect its purpose. Petitioners argue that a subsidy distorts the market in an affected industry, and a privatization does not offset the subsidy in any way. Thus, petitioners state, in Inland Steel Bar Co. v. United States, the CAFC pointed out that allowing a subsidized company to be sold free of countervailing duties would "frustrate the countervailing duty laws." Petitioners state Delverde III never challenged this, and should not be interpreted to "frustrate" the law.

Petitioners further argue that the new methodology is the only one consistent, within U.S. obligations under the SCM Agreement, with the purpose of ensuring that anti-subsidy measures offset market distortions. Petitioners also state that the Department's methodology is the only method which can reasonably be administered.

Respondent argues first that the Department cannot point to any precedent that shows that corporate successorship law is applicable in determining whether an old subsidy to a state-owned company passes through to a newly privatized company. In fact, the law requires the application of considerations under federal law that are absent from this record. Respondent points to a patent infringement case in which the Federal Circuit reasoned that a new parent company should not be held liable since there was no evidence it could have stopped the infringing actions of a subsidiary. Along these lines, respondent reasons that the Riva Group acquired ILP long before a countervailing duty case against ILP's production/exportation arose, and that the pre-privatization subsidies to ILP could not have been prevented by Riva.

Second, respondent argues that the four-part test in helping to determine whether the "person" is the same before and after a change in ownership is contrary to law and illogical. Respondent concludes that the test is an inflexible, retroactively applied new regulation, given without notice or opportunity to comment in accordance with the Administrative Procedures Act. Further, the Department does not cite to a statute or regulation, only its successor-in-interest test used in antidumping proceedings, which is used in those proceedings to determine how the entity will act after its change in ownership. The Department notes the test offers very little guidance in the case at hand because the Department wants to avoid the conclusion in evaluating a privatization that the way the entity will act "fundamentally changes," according to respondent. Respondent, therefore, argues that without considering how the entity will act, there is no justification to use the successor-in-interest test at all.

Respondent further argues, as it has above, that the Department relied heavily on the dubious argument that the CAFC decision in Delverde turned on the mistaken assumption that Delverde was an asset sale, rather than a sale of shares. Therefore, the Department is wrong to look, as a primary factor, at shares versus assets, which would lead, hypothetically, to full pass through of previous subsidies in a share sale in which the purchaser pays well above market price, as opposed to all subsidies being extinguished when a purchaser pays one dollar in a strict asset sale. Respondent argues that the significance of a purchase by a private party is that a market value, which captures the present value of all subsidies at the time of the transaction, is assigned to what is being purchased.

Respondent points out that the Court explains that the Department should make sure that the circumstances surrounding the sale reflect transparent competition and thereby a market valuation. The Department, therefore, must examine the purchase which, in this case, was a fair market transaction. The focus on whether ILP changed "identity" misses the point, according to respondent, since ILP is not the real beneficiary of subsidies. Respondent argues that based on this new approach, the Department would be elevating form over substance since the entire point of the CVD law is to get foreign governments out of the business of providing unfair competitive advantages to owners of enterprises exporting to the United States.

The EC points out that the methodology proposed by the Department in the draft redetermination "remarkably" deems whether a firm has been privatized at fair market value to be irrelevant. Instead, the EC argues, the Department has presumed that the state-owned entity and the privatized entity are the same "person" based on an ad-hoc list of factors.

The EC argues that even in the unlikely event that the pre- and post-change in ownership entities are found to be different, the Department would then revert to an examination of whether any subsidy had been bestowed upon the privatized firm during the change in ownership using a methodology that is never explained.

The Department's Position:

While the Department did examine how a person is defined in certain commercial law settings, that does not mean that the Department has simply followed the definition of person in corporate successorship law. There are some basic similarities between the corporate successorship context and the countervailing duty context being addressed by the Department. In both contexts, the basic purpose is to determine whether there has been any meaningful change in an entity. Nevertheless, the Department has not adopted the corporate successorship approach, but rather has adopted its own approach bearing in mind the remedial goals of the countervailing duty statute, namely, to level the "playing field" and to offset the benefit conferred by a subsidy.

We also disagree with respondents and the EC's comments with regard to the factors the Department takes into consideration. In the absence of any definitive criteria identified by the Delverde III court for making the "person" determination, the Department has developed its own fact-based approach for assessing changes in the entity under consideration. With this goal in mind, the Department identified four basic factors which it believed would be flexible enough to be applicable to a wide variety of business configurations. The criteria were carefully selected so as to enable the Department to make as meaningful a comparison as possible between the nature of the pre-sale entity, upon which the subsidies were originally bestowed, and the post sale entity, the current producer or exporter of the subject merchandise.

This inquiry does not lend itself to a bright-line test because of the multi-faceted makeup of a legal person (as opposed to a natural person). Thus, no single factor will necessarily provide a dispositive indication of any change in the entity under analysis. Accordingly, other factors may also be considered as circumstances warrant. However, we believe that these particular factors are generally common to the types of business configurations the Department normally encounters.

It does not follow that, merely because we have not established an all-inclusive, set list of factors in this redetermination to be used to analyze every transaction we encounter, we have not established clearly defined criteria for analyzing these transactions. Contrary to the EC's contention, our approach is not ad hoc. Rather, our express intent is to analyze all relevant and available information in determining whether a change in ownership involves a continuous business entity that was operated in substantially the same manner before and after a change in ownership. We have adopted this approach because we recognize that the specific facts and circumstances surrounding each change in ownership will be unique and, therefore, will require a flexible approach. Thus, this flexible approach is fully consistent with the statute, which directs the Department to examine the particular facts and circumstances of a transaction.

The EC hypothesizes that a new entity would have to undergo a total make-over in order for the Department to consider it to be a new person. Until the Department is confronted with a specific fact pattern, we cannot speculate as to what the result might be. Nevertheless, it is our general view that the more an analysis of the identified factors points to continuity in a particular case (as in this case), the more likely it will be that the Department will find no change in the person. Conversely, the more an analysis of the identified factors does not point to continuity, the more likely it will be that the Department will find a change in the person. For example, if assets but no liabilities were passed on to the post-sale entity, or the pre-sale entity remained in the same line of business, or the post-sale entity did not use the pre-sale entity's production facilities, these types of circumstances would evidence a lack of continuity, and they therefore would weigh in support of a finding of a change in the person.

In the instant case, the Department applied its "legal person" factors to the facts and circumstances of the change in ownership of ILP and determined that the legal person in the form of pre-sale ILP was the same legal person in the form of post-sale ILP. Because ILP was found to be one and the same before and after the privatization transaction, all of the criteria for finding a subsidy were met. That is, post-sale ILP is the same legal person upon which the original financial contributions were bestowed and therefore enjoys the benefit from those financial contributions. Consequently, because the Department's person inquiry, the first step contemplated by both Delverde III and U.K. Lead Bar, led to a finding that post-sale ILP was not a different legal person from pre-sale ILP, there was no need to conduct an analysis of the fair market value nature of the privatization transaction. Only when it is determined that the post-sale firm is different from the pre-sale firm is that type of analysis warranted. Additionally, as should be clear from our analysis of the ILP change in ownership above, the distinction between a sale of shares and a sale of assets is not crucial to the "person" determination, despite respondent's focus on it in its comments. It is not one of the factors that we examine. Rather, it can be relevant to the extent that it helps to clarify the analysis of one of those factors, namely, the continuity of assets and liabilities.

Finally, with regard to petitioners' assertions that the methodology outlined in the draft redetermination is the only one consistent with the purpose of ensuring that anti-subsidy measures offset market distortions, we view the approach we have taken to be consistent with the remedial goals of the countervailing duty statute - to "level the playing field" by offsetting the benefit conferred by a subsidy.

Comment 4

Petitioners note that while the draft redetermination briefly addresses what would happen if a change in ownership occurred at less than fair market value - that a new subsidy could be provided such that even if the current producer is a "new person" it might be the recipient of a new subsidy - it does not address the problem of how a less than fair market value transaction affects prior subsidies. Petitioners note that while this case is properly resolved without reaching that issue, the Department should explain its methodology in that regard and state that in this case, ILP was sold to the Riva consortium at less than fair market value.

Respondent notes that the Department claims to have adopted a two-step procedure, first to examine the "person," pre- and post-change in ownership, and second to look at whether any subsidy has been bestowed on the producer/exporter as a result of a change in ownership. Respondent states that the Department does not, however, address the second step in the case at hand - whether ILP (or "new" ILVA)//ILT received any subsidy in the course of the privatization itself.

Respondent argues that all of the record evidence, which includes numerous responses to specific questions about the privatization process, independent valuation studies, and a thorough verification, shows that the Riva consortium paid fair market value for ILP and the government received adequate remuneration, contrary to petitioners' arguments. Therefore, no benefit and no subsidy exists as a result of the privatization of ILP. Respondent specifically rebuts petitioners' assertions that respondent provided insufficient evidence to support its claim that no subsidy programs were involved in the privatization of ILP, as well as petitioners' arguments regarding retention of personnel and the "going concern" requirement. Respondent states Riva's strategy all along was to increase employment, not decrease it, and that the "going concern" requirement involves antitrust concerns which can easily appear in any private-to-private transaction. Most importantly, respondent states, even if the government's conditions were of some detriment to the Riva consortium, those conditions would have been reflected in the fair market value price paid, since all bidders, including Riva, were made aware of the government's concerns.

Respondent concludes that the Department's failure to adjust the CVD rate to reflect any subsidies provided in the course of privatization means that no such subsidies were conveyed. Further, respondent argues that by not commenting on this issue despite the enormous effort put forth by respondent and the GOI to comply with the Department's detailed requests, the Department admits that neither the new data submitted during the remand proceeding, nor the data that existed as a result of the initial investigation, provides support for petitioners' arguments that any subsidies were received in the course of ILP's privatization.

The Department's Position:

During the investigation, the Department did not find any subsidies that arose from the privatization of ILP. Only one subsidy was alleged by petitioners - debt forgiveness in the course of privatization, but the Department determined in its final results that such a program did not exist. We have made our determination in this instance without reaching the issue of whether ILP was sold to the Riva consortium at a "fair market" price. Only when it is determined that the post-sale firm is different from the pre-sale firm is that type of analysis warranted. As discussed above, we find in this case that post-sale ILP is the same "person" as ILP prior to its privatization.

In its comments, respondent mentions the vast amount of information requested by the Department, which was gathered and submitted at a significant expense to both respondent and the GOI. It is important to note that the Department strives to compile a full and complete record in all proceedings in order to make determinations based on evaluations of all the facts involved. In this case, as in all cases, the Department did not pre-judge its determination before all information was requested and obtained.

Comment 5

Petitioners contend that the Department should add a section explaining that the history of Saarstahl I and the Delverde III Court's treatment of Saarstahl mandate the adoption of the Department's analysis and counter respondent's contention that subsidies cannot be countervailed after a fair market value, arm's length sale.

Petitioners state that Congress overturned the CIT's ruling in Saarstahl I, noting that a change in ownership does not, as the CIT ruled, necessarily determine that a countervailable subsidy ceases to exist after an arm's length, fair market value transaction. Petitioners further point out that the Delverde III Court reiterated the ruling of Congress. Consequently, petitioners argue that the Department should expressly state in this redetermination that its interpretation of Delverde is the only correct interpretation in light of the history of Saarstahl I.

The Department's Position:

The change in the statute and Delverde III establish that there is no per se rule that an arm's length transaction automatically eliminates prior subsidies or that the subsidies are automatically passed through. Our approach in the draft redetermination, and in this final redetermination, avoids such a rule. The two-step analysis is a fact-specific inquiry that can lead to an ultimate finding that the producer under investigation does or does not receive a benefit.

Comment 6



Petitioners argue that while the Department has not applied the repayment methodology in calculating ILVA's rate, it should expressly state that it does not apply that methodology when the post change in ownership entity is the same person as the original subsidy recipient. Petitioners contend that based on Delverde III, the repayment methodology clearly cannot hold.

The Department's Position:

As explained above, because the pre- and post-sale entities were determined to be the same "person," repayment is not an issue.



V. Conclusion

We have recalculated the net subsidy rate applicable to ILVA/ILT as shown in a separate memorandum to the file. The new, recalculated ad valorem subsidy rate for ILVA/ILT is 28.80 percent.



___________________

Richard W. Moreland
Acting Assistant Secretary for
  Import Administration

___________________
Date



footnotes:

1. On January 1, 1997, ILP's name was changed to ILVA S.p.A. (referred herein as "new" ILVA, so as to distinguish it from the former ILVA S.p.A., the company from which ILP was demerged). ILT remains a 100% owned subsidiary of "new" ILVA.

2. The term "person" appeared in the countervailing duty statute for the first time following the amendments made by the Uruguay Round Agreements Act ("URAA") effective January 1, 1995. In its decision, the Delverde III court distinguished earlier Federal Circuit decisions addressing the Department's privatization methodology on the basis that "we were interpreting Commerce's methodology under the earlier statute, which we had already held was ambiguous." 202 F.3d at 1369. The language in the new statute was described by the Delverde III court as clear. Id. at 1366.

3. The Delverde III court was under this impression because the parties' presentations seemed to characterize the Delverde change-in-ownership transaction as simply one firm selling some of its assets to another firm, which would indicate that the assets now belonged to a different "person." However, the nature of this transaction, and in particular whether or not it was a simple sale of some of one firm's assets to another firm, was not relevant to the methodology that the Department had applied. Consequently, the Department had never made any finding regarding the precise nature of the transaction, nor was it ever brought into issue before the Delverde III court. The same situation exists here as the Department has never made a finding regarding the precise nature of the change in ownership involving ILP.

4. We note that, like the Delverde III court, see 202 F.3d at 1369, we would expect to see "significant differences" between privatizations of government-owned firms, on the one hand, and changes in ownership involving only private parties, on the other hand, when undertaking this second step in our inquiry, i.e., when inquiring whether a subsidy has been provided through the change-in-ownership transaction in question. At a minimum, in our experience, it would be highly unlikely to find a subsidy resulting from a purely private transaction, particularly where the parties are unrelated. In this situation, there is no reason to believe that the private seller would not be seeking the highest price that it could obtain. Meanwhile, "{t}he government has different concerns from those of a private seller. . . . {T}he government may have other goals, such as employment, national defense, and political concerns, which may affect the terms of a privatization transaction." Id.

5. Normally, in the absence of any changes in ownership, the Department allocates the measured subsidy benefit over time to the subsidy recipient's future production pursuant to a standard declining balance formula that generates a net present value equal to the amount of the subsidy. The period of time selected for this allocation is based on the subsidy recipient's average useful life of assets. See Countervailing Duties; Final Rule, 63 FR 65348, 65415-17 (Nov. 25, 1998) (§§ 351.524 and 525).

6. Delverde III does not directly address this point because the Federal Circuit understood that the Delverde change in ownership involved a simple sale of some of one firm's subsidized assets to another firm, with the result that those subsidized assets became part of a person that was not the original subsidy recipient. The Department notes that the WTO Appellate Body's recent decision in United States - Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, WT/DS138/AB/R (May 10, 2000) (U.K. Lead Bar), in which the Department's methodology was under review in the privatization context, does address this point. It indicates that, where there has been no change in the person that received the original subsidy, the investigating authorities may continue to apply a presumption that the subsidy benefit continues. See id. at para. 62.

7. In U.K. Lead Bar, the Department's methodology was under review in the privatization context. In construing the Agreement on Subsidies and Countervailing Measures, the Appellate Body first asked whether the firm under investigation (the privatized company) was the "legal or natural person" that had received the subsidies investigated by the Department (grants and equity infusions provided by the U.K. government years prior to the privatization). U.K. Lead Bar, para. 58. Finding that the firm under investigation was not the same person as the one that had received those subsidies, the Appellate Body ruled that the Department could only have imposed countervailing duties on the entity under investigation if the Department had found that that person had itself received a subsidy. Id., paras. 58, 62. The Appellate Body then examined the privatization transaction in question in order to determine if the entity under investigation had received a subsidy. The Appellate Body determined that the entity under investigation had received no benefit and, therefore, no subsidy through this transaction because a fair market value purchase price had been paid. Id., paras. 67-68.

8. The term "legal person" refers to an entity such as a corporation rather than an individual.

9. See, e.g., Corporation Practice Guide, para. 2710 (Aspen Law & Business 1997). In other countries, similar factors govern the determination of whether the new owner is legally responsible for the liabilities of the company. In the European Union, for example, the factors include whether the company under the new owner "continued to manufacture the same product at the same place with the same staff." It is not enough that the company "merely changed its name." SCA Holding Ltd. v. Commission of the European Communities, Case T-327/94, 1998 ECJ CELEX LEXIS 1139 (Ct. First Instance 1998).

10. See, e.g., Certain Welded Stainless Steel Pipe from Korea; Final Results of Antidumping Duty Changed Circumstances Review, 63 FR 16979 (April 7, 1998); Certain Welded Stainless Steel Pipe from Taiwan; Final Results of Changed Circumstances Antidumping Duty Administrative Review, 63 FR 34147 (June 23, 1998); Certain Welded Stainless Steel Pipe from Taiwan; Preliminary Results of Changed Circumstances Antidumping Duty Administrative Review, 63 FR 16982, 16983-84 (April 7, 1998); Brass Sheet and Strip from Canada; Final Results of Antidumping Duty Administrative Review, 57 FR 20460 (May 13, 1992).

11. Although the Department in the past has disagreed with the CIT's British Steel I decision, the Federal Circuit in Delverde III has made clear that the countervailing duty statute was subsequently amended in a material way by the URAA, and it has emphasized the new language regarding receipt of a subsidy by a "person." This new language provides a firmer statutory basis for an approach similar to the one suggested by British Steel I. While the Department was also concerned that the British Steel I approach would permit countries to structure privatizations in such a way as to circumvent the countervailing duty law, we now believe that we have developed a sufficiently flexible approach to address that concern.

12. See Original Questionnaire Response at 4 for a comprehensive history of "new" ILVA and its predecessors.

13. We further note that a substantial portion of the unallocated benefit that continues with ILP through privatization is attributable to subsidies bestowed on the carbon steel operations during years in which these operations were separately incorporated (i.e., before or after they were divisions within ILVA).

14. See Original Questionnaire Response at Exhibit 15.

15. See Remand Questionnaire Response at Appendix 2.

16. See Original Questionnaire Response at 6.

17. See Remand Questionnaire Response at 10-11.

18. See Original Questionnaire Response, Exhibit 30 at Article 6.1.

19. See Remand Questionnaire Response at 21.

20. Id. at 21.

21. Id. at Attachment 2.

22. See Original Questionnaire Response at 83.

23. See IMI Information Memorandum, Exhibit 15, at 10, of Original Questionnaire Response, and Riva's 1996 Annual Report, Exhibit 7 of Original Questionnaire Response for charts of corporate structure, pre- and post-privatization of ILP.

24. See Original Questionnaire Response, Exhibit 30 at Article 3.

25. This reduction is confirmed in the EC's 10th Steel Monitoring Report, where the EC noted that "{w}orkforce reductions foreseen by the restructuring plan were achieved by the end of 1996 . . ." See ECSC Steel Monitoring Report No. 10 at Exhibit 19 of the Original Questionnaire Response.