The Department of Commerce ("the Department" and "Commerce") has prepared these final results of redetermination pursuant to the remand order from the U.S. Court of International Trade ("CIT") in Allegheny Ludlum Corp., et al. v. United States, Court No. 99-06-00362 (CIT June 7, 2000). In accordance with the CIT's instructions and based upon our reconsideration, we determine: (1) our decision to treat Plaintiffs' allegation regarding the 1984 equity infusions into Sidmar as untimely was consistent with Department practice; (2) there is no basis for the Department to investigate these same equity infusions under 19 U.S.C. §1677d (1994) and 19 C.F.R. §351.311 (2000); (3) upon reconsideration, the statement made by Sidmar in its 1994 Financial Statement relating to Sidfin does not affect our determination regarding the countervailability of the creation of Sidfin; (4) having found that Sidmar does not control Sidfin, the Department did not consider what role control would play in an analysis of whether a countervailable subsidy exists in situations such as that presented by the creation of Sidfin; and (5) since we have found that Sidmar has not received a financial contribution through the creation of Sidfin, no further analysis of this transaction is necessary.
On June 7, 2000, the Court of International Trade remanded to the Department of Commerce ("Commerce") the final countervailing duty determination on stainless steel plate in coils from Belgium. Final Affirmative Countervailing Duty Determination; Stainless Steel Plate in Coils from Belgium, 64 FR 15567 (March 31, 1999) ("Final Determination"). In its remand order, the CIT directed Commerce to:
On August 10, 2000, the Department provided the Draft Redetermination on Remand to Plaintiffs, Allegheny Ludlum, and respondent, ALZ, N.V., for comment. After correcting certain mis-designations of proprietary information in the Draft Redetermination on Remand, the Department issued a Revised Draft Redetermination on Remand to these parties on August 15. We received comments from Plaintiffs and respondents on August 17, 2000.
DRAFT RESULTS OF REDETERMINATION ISSUED TO PARTIES FOR COMMENT
In the Revised Draft Redetermination on Remand, we determined that: (1) our decision to treat Plaintiffs' allegation regarding the 1984 equity infusions into Sidmar as untimely was consistent with Department practice; (2) there is no basis for the Department to investigate these same equity infusions under 19 U.S.C. §1677d (1994) and 19 CFR. §351.311 (2000); (3) upon reconsideration, the statement made by Sidmar in its 1994 Financial Statement relating to Sidfin does not affect our determination regarding the countervailability of the creation of Sidfin; (4) having found that Sidmar does not control Sidfin, the Department did not consider what role control would play in an analysis of whether a countervailable subsidy exists in situations such as that presented by the creation of Sidfin; and (5) since we have found that Sidmar has not received a financial contribution through the creation of Sidfin, no further analysis of this transaction is necessary. A copy of the Revised Draft Redetermination on Remand is attached.
FINAL RESULTS OF REDETERMINATION
Our results have not changed from the Revised Draft Redetermination on Remand. One change was made to the "Information on the Record" section to reflect the correct status of the Department's finding regarding the countervailability of the conversion of Sidmar's OCPCs to PBs in Belgian Certain Steel (see comment entitled "Significance of Belgian Certain Steel - Amended Final Determination").
The issues remanded to the Department and our responses to the Court follow.
(1) Commerce's Treatment of Untimely Subsidy Allegations
The Department continues to take the position that Plaintiffs' allegation regarding the 1984 equity investments in Sidmar was untimely. As demonstrated below, this position is consistent with the Department's treatment of Plaintiffs' allegations regarding the 1987 and 1993 sales of ALZ's shares to Sidmar in this proceeding and with Department practice generally.
Consistency with the Department's Treatment of Plaintiffs' Allegations Regarding the 1987 and 1993 Sales of ALZ's Shares to Sidmar
We recognize that in our Final Determination, the Department did not sufficiently distinguish the 1984 Sidmar equity allegations from the late allegations regarding the 1987 and 1993 sales of ALZ's shares to Sidmar in this proceeding. We appreciate the opportunity the Court has provided for us, on remand, to explain our reasoning on the record.
In the Department's view, there are several reasons for having treated the 1984 Sidmar equity allegation as untimely. First, as discussed in our brief ("Memorandum of the United States in Opposition to Plaintiffs' Motion for Judgment Upon the Administrative Record," January 21, 2000), the 1984 Sidmar equity allegation was not made until the Plaintiffs filed their case brief. (1) In contrast, the allegations regarding the 1987 and 1993 sales of ALZ's shares to Sidmar were received prior to the preliminary determination. (2) Thus, the timing of the allegations differed, with the 1984 Sidmar equity allegation being made much later in the proceeding.
Second, as the Department also noted in its brief, the respondents did not file objections to the inclusion of the 1987 and 1993 sales of ALZ's shares to Sidmar in the investigation, whereas they did object that the 1984 Sidmar equity allegation was untimely. (3) By objecting to the allegation, respondents prompted the Department to take a harder look at the allegation, the timing thereof and its conformity with section 351.301(d)(4) of the Department's regulations.
In its ruling, the Court noted that the timing of the allegation and the opposition to it by respondents might provide adequate bases for treating the 1984 Sidmar equity allegation differently from the allegations regarding the 1987 and 1993 sales of ALZ's shares to Sidmar. Although these bases were first articulated in our brief and, therefore, constituted post hoc rationalizations, we submit them now, on the record, as support for our determination not to include the 1984 Sidmar equity allegation in our investigation.
Moreover, we believe there is an additional basis for distinguishing between the 1984 Sidmar equity allegation and the allegations regarding the 1987 and 1993 sales of ALZ's shares to Sidmar. Specifically, much of the information relied upon by Plaintiffs in making their allegation regarding the 1984 investments in Sidmar was available before the petition was even filed. For example, the Government of Belgium's ("GOB's") 1984 purchases of Sidmar's ordinary and preference shares under Royal Decree 245 were discussed in the Department's Final Affirmative Countervailing Duty Determinations: Certain Steel Products from Belgium, 58 FR 37273 (July 9, 1993) ("Belgian Certain Steel"), as were the GOB's efforts to assist its ailing steel industry under the Claes and Gandois Plans. (4) The 1984 study valuing Sidmar's shares was discussed in Geneva Steel v. United States, 937 F. Supp. 946, 948 (CIT 1996) ("Geneva Steel") and in the Amended Final Affirmative Countervailing Duty Determinations: Certain Carbon Steel Products from Belgium, 62 FR 37880, 37881 (July 15, 1997) ("Belgian Certain Steel - Amended Final Determination").
In contrast to the situation with the 1984 investments in Sidmar, neither ALZ nor the sales of ALZ's shares to Sidmar were included in Belgian Certain Steel (or Belgian Certain Steel - Amended Final Determination). Thus, Plaintiffs and the Department were seeing and analyzing ALZ and these transactions for the first time in the course of the instant proceeding. Indeed, a review of Plaintiffs' allegations with regard to these transactions shows that Plaintiffs relied heavily on information in the course of the investigation, ALZ's Supplemental Questionnaire Response in particular, to frame their allegations. (5)
As discussed more fully below, where companies and/or transactions are being investigated for the first time, the Department tries to be as inclusive as possible in its investigation. This is because both petitioners and the Department are receiving new information in the course of the proceeding and this new information may indicate that subsidies beyond those alleged in the petition possibly have been received. However, where the facts about a possible subsidy are known before the petition is even filed, it is reasonable for the Department to expect timeliness.
In summary, the Department believes that the 1984 Sidmar equity allegation can be distinguished from the allegations regarding the 1987 and 1993 sales of ALZ's shares to Sidmar in three ways. First, although both sets of allegations were filed after the deadline specified in 19 CFR 351.301(d)(4)(i)(A), the timing of the allegations differed substantially. Second, respondents objected to the 1984 Sidmar equity allegation on the grounds that it was untimely, but did not oppose including the other allegations in the investigation. Finally, much of the information relied upon by Plaintiffs in making their 1984 Sidmar equity allegation was known prior to the filing of their petition, and little (if any) new evidence was discovered in the course of this proceeding to warrant the lateness of the allegation.
Consistency With Other Determinations by the Department Regarding Timeliness
The Court has further directed the Department to explain how its treatment of the late allegations in Belgian Stainless Steel Plate in Coils ("Belgian SSPC") comports with other instances in which the Department has used its discretion to accept or reject late allegations. The Court specifically named two cases where the Department addressed late allegations, Final Negative Countervailing Duty Determination: Certain Granite Products from Italy, 53 FR 27107 (July 19, 1988) ("Italian Granite") and Final Negative Countervailing Duty Determination; Silicon Metal from Brazil, 56 FR 26988, 26993 (June 12, 1991) ("Silicon Metal from Brazil"), but asked that the Department not limit its discussion to those two instances.
As illustrated below, the Department generally tries, when possible, to investigate allegations that are made after the deadline specified in 19 CFR 351.301(d)(4)(i)(A). (6) This is because information regarding possible subsidies is gathered not only through the initial questionnaire process, but also through supplemental questionnaires and verification, i.e., after the deadline established in section 351.301(d)(4)(i)(A) of the Department's regulations has passed. For example, in reviewing a company's loan ledgers to verify the terms of a particular set of loans that is being investigated, the Department might come across other loans which appear to confer a subsidy. Whether these new loans are included in the investigation by virtue of a late allegation from petitioners, or through the Department's authority to include subsidies discovered in the course of the investigation, the new subsidies typically will be addressed. The Department's attempt to be as inclusive as possible is consistent with Congress's intent, as stated in connection with 19 U.S.C. §1677d (1994), that Commerce should include subsidy practices in its investigation so as to avoid unnecessary separate investigations and to reduce the burden on parties. (7)
At the same time, the Department's desire to be as inclusive as possible must be weighed against its need to develop a full and complete record before applying (or not) countervailing duties. In addition, because the Department has set a deadline for filing new subsidy allegations, the Department has to be careful in using its discretion to accept a late allegation where respondents object. Where there is an objection, it is incumbent upon the Department to spell out its reasons before setting aside its deadline for the particular allegation. Furthermore, if respondents have objected during the course of the proceeding, then they can challenge in court a decision by the Department to include an untimely allegation. Thus, although the Department generally will attempt to include late subsidy allegations in its investigations, there are exceptions to this general practice.
The Department can point to several cases which support the general rule and the exceptions. First, the countervailing duty investigation of stainless steel sheet and strip in coils from France (8) provides an example of a case where respondents did not oppose an untimely subsidy allegation and the allegation was accepted. (9) In that case, although the respondent, Usinor, had been investigated by the Department in a prior case, (10) the specific transaction at issue (a 1995 capitalization of the company) was new to the Department because it occurred after the period of investigation for the earlier proceeding. Moreover, petitioners first raised this possible subsidy before the preliminary determination in that case, based on their "careful review of the questionnaire responses submitted by the Government of France and Usinor..." (11) Thus, the situation in French SSSSC is analogous to the allegations regarding the 1987 and 1993 sales of ALZ's shares to Sidmar.
Second, the countervailing duty investigations of silicon metal from Brazil, (12) salmon from Chile, (13) and cattle from Canada (14) provide examples of cases where late submissions of information regarding alleged subsidies were opposed by the respondents, but nevertheless the information was accepted and analyzed by the Department. Because the consideration of the information was opposed by respondents, the Department was very careful to explain the bases upon which it accepted the information. (15) These situations can be distinguished from the 1984 Sidmar equity allegation on the grounds that the companies and programs at issue were being investigated for the first time, and the relevant information pertinent to these companies and programs was being developed through the investigatory process.
Finally, there are the cases in which the Department rejected subsidy allegations on the grounds that the allegations were untimely. Three of these cases involved late allegations regarding the respondents' "creditworthiness." (16) In all three of these cases, the Department pointed out that the information needed to make the uncreditworthiness allegations was available to the petitioners for a considerable time before they actually made the allegations and the Department referred to the lateness of the filing of the allegations in making its decision not to investigate the subsidy allegations at issue. In Italian Granite, the allegation was received two days before verification, and in Mexican Lime and SSHP from Sweden, one month prior to the final determinations.
In all three of these cases, the Department also referred to the complexity of performing a creditworthy analysis. Under the 1989 Proposed Countervailing Duty Regulations, (17) which described the Department's practice at the time, both creditworthiness and equityworthiness analyses were recognized by the Department as being difficult. As a consequence, the Department set higher initiation thresholds for such allegations. (18)
The situation in Belgian SSPC can be likened to the above precedent. The information used by Plaintiffs was available long before the allegation was made; the allegation was made late in the proceeding (approximately five weeks before the final determination was signed); and, the allegation involved an equity infusion, a practice long recognized by the Department as requiring complex analysis. In addition, as discussed above, the inclusion of the allegation regarding the GOB's 1984 investments in the investigation was opposed by respondents.
In our review, we found two other instances where the Department rejected subsidy allegations on the grounds of untimeliness, which we include here for the sake of completeness. The first occurred in the countervailing duty investigation of cut-to-length plate from Korea. (19) While Korean Cut-to-Length Plate does not fit squarely with the cases described above, it is noteworthy because although the Department dismissed the allegation as untimely, the Department went on to address the merits of the allegation, concluding that petitioners had failed to demonstrate how the alleged subsidy conferred a benefit. (20) The second instance arose in the countervailing duty investigation of Canadian lumber. (21) Again, although the Department dismissed the allegation as untimely, it also explained that the alleged benefit would have virtually no impact on the amount of the overall subsidy. (22)
In summary, the Department believes that its treatment of Plaintiffs' allegation regarding the GOB's 1984 investments in Sidmar was entirely consistent with its past practice in accepting and rejecting subsidy allegations filed after the deadline specified in the Department's regulations. As explained above, the Department frequently includes late allegations, as it did with respect to the 1987 and 1993 sales of ALZ's shares to Sidmar, because the investigatory process can turn up new information which raises questions. However, where respondents object to the inclusion of the allegation, petitioners have the information but wait until late in the proceeding to make their allegation, or the alleged subsidy involves complex analyses such as creditworthiness or equity infusions, the Department is less likely to accept an untimely allegation. With respect to the GOB's 1984 investment in Sidmar, respondents objected that the allegation was untimely, despite the fact that much of the information used by Plaintiffs to support their allegation was available long before the allegation was filed, the allegation was filed late in the proceeding, and the allegation involved an equity investment. Hence, the instant situation was analogous to those faced by the Department in Italian Granite, Mexican Lime and SSHP from Sweden, and the Department responded in the same manner as it had in those earlier cases by rejecting the new subsidy allegation as untimely.
(2) Whether Commerce Should Have Investigated the 1984 Equity Infusion into Sidmar as a "Countervailable Subsidy Practice Discovered During Investigation or Review"
At the Court's direction, we have examined the information on the record of Belgian SSPC to determine whether Commerce had an obligation to investigate this transaction under the statutory and regulatory provisions relating to subsidies discovered in the course of an investigation (see 19 U.S.C. 1677d (2000) and 19 CFR 351.311 (2000), respectively).
Before reviewing the specific evidence, we would like to reiterate that the Department attempts to be as inclusive as possible regarding potential subsidy practices which we learn about during the course of an investigation. Whether this is accomplished by accepting late allegations or by pursuing them under the statutory authority provided by 19 U.S.C. 1677d, most precedents reveal that the Department attempts to resolve these issues in the investigation. However, this does not mean that the Department goes on "fishing expeditions," investigating any and all government practices that might affect the respondents. Instead, the Department pursues those practices where the basic initiation threshold is met, i.e., there must be evidence on the record indicating that the elements necessary for the imposition of countervailing duties are present. (23) The threshold for investigating equity infusions and creditworthiness is higher, as discussed above, because of the complexity of the analysis that is required.
A brief review of cases where the Department has included (or not) subsidies discovered in the course of the investigation follows.
Under section 351.311 of our regulations, if the Department discovers "a practice that appears to provide a countervailable subsidy," the Department will include the practice in its investigation (or defer examination of the practice to an administrative review). Based on our review of past cases, we believe that, in general, the subsidy practices that have been included (or deferred) pursuant to this regulation have been rather obvious ones. For example, in Belgian Certain Steel, we included grants that Sidmar received for water treatment. As explained in that final determination: "At the Sidmar verification, we came across an item for 'water purification subsidies' in the company's grant account detail." (24) In French Certain Steel, we discovered at verification a group of loans described as "other participative loans." (25) We had already preliminarily determined that "participative loans" administered by Caisse Francaise de Developpement Industriel were countervailable, (26) so it would be natural for "other participative loans" to catch the verifier's eye and, therefore, to be examined by the Department in the subsidy investigation. In another set of cases, we deferred consideration of certain practices to the first administrative review. Those same practices had just been included in separate CVD investigations of the same companies. (27)
In our review of past cases, we found one investigation involving a possible equity subsidy discovered by the Department in the course of its investigation. (28) In that case, the Department was investigating investments by the Government of Mexico in the Mexican steel producer, AHMSA, between the years 1977 and 1987. (29) In response to the Department's questionnaire, AHMSA reported that it also received equity investments in 1990 and 1991, and AHMSA submitted its financial results for those years showing that the company had suffered losses. The Department concluded that since AHMSA was experiencing financial difficulties at the time of the investments, the equity infusions might constitute countervailable subsidies and the investments were included in the investigation. (30)
Although the Department's decision memorandum only mentions AHMSA's poor results in 1990 and 1991, there was other evidence on the record suggesting that these investments should be investigated. In particular, consistent with the Department's practice of looking at the recipient company's performance for the three years prior to the investment, (31) petitioners had supplied the Department with all the relevant financial indicators which, according to the petitioners, "clearly indicate that AHMSA was unequityworthy and uncreditworthy during 1990 and 1991." (32) Thus, the Department had before it all the information needed to meet the higher initiation standard for investigating equity infusions.
We also found two cases where the Department did not include a possible subsidy practice, despite petitioners' urgings to do so. In the Final Negative Countervailing Duty Determination: Disposable Pocket Lighters from Thailand, 60 FR 13961 (March 15, 1995) ("Lighters from Thailand"), the Department declined to pursue a possible subsidy on the grounds that information petitioner pointed to was in the record of the companion antidumping duty investigation. (33) In Ferrochrome from South Africa; Final Results of Countervailing Duty Administrative Review, 56 FR 33254 (July 19, 1991) ("Ferrochrome from South Africa"), petitioners asked the Department to investigate possible tax subsidies allegedly referred to by respondents in their case brief. The Department declined to use its authority under section 355.39 of its regulations, calling petitioners' claim "speculative," and stating that, "We have no evidence properly on the record supporting petitioners' (untimely) allegations or requiring the Department to investigate those practices in this review." (34)
In Belgian SSPC, Commerce did not include the 1984 equity purchase on its own initiative or in response to Plaintiffs' urging. Although no formal analysis was performed during the investigation of whether or not to include this investment, we describe below the information and argumentation that were on the record and now explain to the court why this evidence would not have triggered inclusion of this potential subsidy in our investigation.
At the time of Belgian SSPC, the Department's practice for investigating equity investments had evolved from that described in the 1989 Proposed Regulations. According to those regulations, when the company's shares were not publicly traded and, hence, there was no market-determined benchmark price for the shares, the Department would make an equityworthy analysis to determine whether the government's equity purchase was consistent with commercial considerations. If the company was found to be equityworthy, the government's investment was not treated as a countervailable subsidy. An investment in an unequityworthy company, on the other hand, was countervailable. (53)
As a result of the Court of International Trade's rulings in AIMCOR v. United States, 871 F.Supp. 447 (CIT 1994) ("Aimcor I") and Alabama Silicon, Inc. v. United States, 912 F.Supp. 549 (CIT 1995) ("Aimcor II"), the Department could no longer assume that purchases of shares in equityworthy companies were consistent with commercial considerations. In particular, where special conditions were imposed on the shares, the Department would look further at the shares and conditions to determine whether the government had acted in a commercially sound manner. Thus, a finding of equityworthiness was sufficient to say that purchases of common shares did not confer a subsidy. (54) However, the equityworthiness finding was not sufficient to say that purchases of other types of shares was commercially sound. (55)
As noted above, the petitioners in the Belgian Certain Steel alleged that Sidmar was unequityworthy in 1984. After consideration, the Department found that Sidmar's financial data did not support this allegation. Hence, from the Department's perspective, Sidmar was equityworthy in 1984 and the purchase of common shares was reasonable from a commercial standpoint. Plaintiffs did not challenge or even question the Department's earlier conclusion regarding Sidmar's equityworthiness. Thus, the Department had no basis to include this "practice" in its investigation.
In their case brief, Plaintiffs advanced two lines of argument in urging the Department to investigate the GOB's 1984 investments in Sidmar. First, they made much of the fact that the GOB's decision to invest in Sidmar was made without the benefit of an objective analysis of Sidmar. In particular, Plaintiffs pointed to the timing of the Commissaire-Reviseur report claiming that it was prepared after the GOB's decision to invest. Plaintiffs further objected that the study was not the kind of study that would be undertaken by a private investor. Hence, consistent with the CVD Regulations promulgated by the Department on November 25, 1998, (56) ("1998 Regulations"), the GOB's actions were not consistent with those of a reasonable private investor.
Without taking a position on whether the GOB's 1984 investments in Sidmar would be considered a countervailable subsidy under the 1998 Regulations, we note that the regulation cited by Plaintiffs did not apply to this investigation. Specifically, 19 CFR 351.702(a)(1) makes clear that the 1998 Regulations would apply to CVD investigations initiated on the basis of petitions filed after December 28, 1998. Since the petition in this case was filed on March 31, 1998, the 1998 Regulations did not apply. (57)
Moreover, regarding the contents of the study, Plaintiffs claimed that the study did not contain the type of information required by the 1998 Regulations. Again, without addressing the merits of this claim, we note that the 1998 Regulations did not apply to this investigation. Instead, the Department's practice in this regard was set out in the General Issues Appendix ("GIA") to the Final Affirmative Countervailing Duty Determination: Certain Steel Products from Austria, 58 FR 37217, 37225 (July 9,1993): "we tend to place greater reliance on past indicators (rather than projections of the company's future prospects) as they are known with certainty and provide a clear track record of the company's performance, unlike studies of future expected performance which necessarily involve assumptions and speculation." (58) The Department's consideration of Sidmar's equityworthiness in Belgian Certain Steel focused on past indicators of Sidmar's performance. Moreover, the Commissaire-Reviseur reports cited by Plaintiffs do not in any way contradict the conclusions the Department reached in 1993 based on past indicators. Hence, the contents of the study do not a provide a basis for the Department to include the GOB's 1984 investments in Sidmar in this investigation.
Instead, under the Department's practice regarding government equity purchases, the undisturbed conclusion from Belgian Certain Steel that Sidmar was equityworthy in 1984 meant that the Department had no basis to investigate the GOB's 1984 purchase of Sidmar's common shares.
Regarding the GOB's purchase of preference shares, the Aimcor I, Aimcor II, and Geneva Steel precedents required a more extensive analysis, as explained above. In particular, the Department would look at special conditions on the shares to determine whether, despite a finding of equityworthiness, the price paid by the government exceeded the value of the stock.
The information before the Department regarding the relative values of Sidmar's common shares and the preference shares was:
(1) The price for common shares in the equityworthy Sidmar was [ ] This price was used, without objection, as the starting point for determining whether the GOB's 1985 conversion of Sidmar's OCPCs into PBs conferred a countervailable subsidy on remand in Geneva Steel and Belgian SSPC.
(2) The preference shares purchased by GOB in 1984 were less valuable than common shares in Sidmar because they [ ]. Moreover, the dividends were capped at two percent, while other preferred and common shares might receive more.
(3) On the other hand, the preference shares were more valuable than the common shares because they had the right to a priority dividend. Thus, if any profits were distributed they would first go to the holders of the preference shares.
(4) Also, [ ]
(5) On remand in Geneva Steel and in Belgian SSPC, the Department discounted the price of Sidmar's common shares to reflect the lack of voting rights by adjusting the price downward 3 percent. [ ]
Hence, under the Department's practice regarding equity investments in equityworthy firms, there is no basis to include the GOB's 1984 purchase of Sidmar's preference shares in this investigation.
As noted above, Plaintiffs advanced two lines of argument in their case brief regarding the countervailability of the 1984 investments in Sidmar. The second line of argument related solely to the GOB's purchase of preference shares, and Plaintiffs urged the Department to find that a premium had been paid for those shares. In making their arguments, Plaintiffs relied on the methodology of adjusting Sidmar's common share price (as described above), but they made additional adjustments reflecting dividend rights. Information on these dividend rights was taken from a [ ] We note that it is the Department's practice to consider information available at the time of the equity infusion. (59) Moreover, Plaintiffs' analysis takes no account of the priority nature of the dividends to be paid to the [ ] preference shares and of the fact that the preference shares purchased by the GOB were to be reimbursed at no less than the GOB paid for them. As noted above, both of these aspects made the preference shares relatively more valuable than the common shares.
In summary, as the above review of the record in this case and the Department's practice regarding equity investments demonstrates, there is no basis to have included the GOB's 1984 investments in Sidmar in the countervailing duty investigation of Belgian SSPC. Moreover, this conclusion is fully consistent with the Department's precedents regarding inclusion of subsidies discovered in the course of an investigation.
(3) Sidmar's 1994 Financial Statement and the Administration of Sidfin International ("Sidfin")
As we understand the instructions for this redetermination on remand, the Court is chiefly concerned that the Department may not have considered a particular piece of information in determining whether Sidmar received a countervailable benefit from the creation of the Sidfin. This piece of information was a statement in Sidmar's 1994 Annual Report that Sidfin is a joint venture "which is administered by our group only." We agree with the Court that this statement was not discussed in either the decision memorandum prepared on this subject for the final determination (60) or in the Final Determination. We appreciate the opportunity the Court has provided to address this matter.
The statement in question was taken from the section of Sidmar's 1994 financial statement entitled "Consolidation Criteria," which describes the methods used by Sidmar for reporting the results of companies in which it has an ownership interest. For example, when Sidmar owns more than 50 percent of the shares, or has more than 50 percent of the voting rights of a company, that company's results will be fully consolidated with Sidmar's results. For "joint subsidiaries that are administered by a joint management," Sidmar uses proportional consolidation. The consolidation rule for Sidfin is an exception to these general rules:
Moreover, N.V. SIDFIN INTERNATIONAL, of which the (Sidmar) group possesses exactly 50% of the shares, is also fully consolidated as this company is a joint venture which is administered by our (Sidmar) group only. (61)
Despite this statement, the Department found no countervailable benefit to Sidmar arising from the creation of Sidfin because, inter alia, Sidmar did not control the ALZ preference shares that the Government of Flanders ("GOF") contributed towards the capitalization of Sidfin.
Assuming that "administered" can be equated with "controlled," this statement provides one piece of evidence that Sidmar controlled Sidfin (and the ALZ preference shares that the GOF contributed to capitalize the joint venture.) However, this piece of evidence must be examined in the context of the full record. As the Court has already acknowledged, the GOF (through its agency, Gimvindus) retained ownership of the ALZ shares, (62) and "the complete right to all revenues that were to be derived from the ALZ preferred stock after the formation of Sidfin." (63)
There are two pieces of direct evidence, in addition to the statement in Sidmar's 1994 Annual Report, which the Department believes squarely address the issue of control. First, the management structure of Sidfin is set up so that neither Gimvindus nor Sidmar controls the company. Specifically, under the [ ] (64)
Second, when questioned directly about the statement in Sidmar's 1994 Annual Report at verification, Sidmar officials explained that it was [ ] (65) This explanation is consistent with other statements by Sidmar officials ("the [ ]), (66) a GOF official ([ ]), (67) and a Belgian private bank official ("Belgian banks place an emphasis on the value of a company's asset base in determining the creditworthiness of the firm"). (68)
Thus, despite Sidmar's claim in its 1994 Annual Report, the formal agreement governing the creation of Sidmar accords [ ] Consequently, neither Sidmar nor Gimvindus individually controls Sidfin. This conclusion is reinforced by the Sidmar officials' statement that the company may have [ ] in it 1994 Annual Report. (69)
There is also indirect evidence that Sidmar did not control the ALZ's preference shares. First, although Sidmar's 1994 Annual Report includes the claim of administration, the 1993 Annual Report, which describes the capitalization of Sidfin, makes no such claim. (70) There is no evidence that the Department is aware of in the record of this proceeding indicating that Sidmar's position vis-a-vis Sidfin changed from 1993 to 1994. Because there is no information regarding a change, equal consideration should be given to both of the Annual Reports. Second, it should be noted that the ALZ preference shares, which Plaintiffs claim are controlled by Sidmar, are non-voting shares. Hence, it is not clear what control of those shares would even mean, especially given that the shares continued to be owned by the GOF and all revenues from the shares would flow to the GOF. This point is discussed further below.
In summary, the Department has analyzed the impact of the statement in Sidmar's 1994 Annual Report regarding Sidmar's administration/control of Sidfin. When viewed in the context of the other information on the record, especially the management roles of the two partners and the statement at verification by Sidmar officials, we determine that Sidmar did not control Sidfin. (4) Commerce's Methodology for Determining Whether Sidmar Received a Benefit from the Creation of Sidfin.
In its remand, the Court is seeking clarification from the Department regarding the methodology employed in determining whether Sidmar received a subsidy by virtue of the creation of Sidfin. As discussed above, in capitalizing Sidfin, the GOF contributed its ALZ preference shares. However, the GOF retained ownership of those shares and the rights to all revenue from the shares (whether through dividends or through repurchase/reconversion of the shares in 2005) and, as the Department has affirmed, Sidmar did not control the shares. Thus, under the reasoning described in the Final Determination, Sidmar did not receive a subsidy from the creation of Sidfin. We elaborate on this reasoning below.
Under 19 U.S.C. §1677(5)(B), a subsidy exists when "an authority ... provides a financial contribution ... to a person and a benefit is thereby conferred." Different types of financial contributions are described in 19 U.S.C. §1677(5)(D), and include: "the direct transfer of funds, such as grants, loans and equity infusions ..." and "foregoing or not collecting revenue that is otherwise due..."
The situation potentially presented by the GOF's contribution of ALZ's preference shares for the capitalization of Sidfin would fall under one or both of these definitions. Had the GOF transferred ownership of the preference shares to Sidmar, presumably Sidmar would be able to sell the shares. Hence, transferring ownership of the preference shares could be considered equivalent to transferring the amount of cash Sidmar could earn from selling the shares, i.e., a grant, and the benefit would be the amount of the grant. (71) Alternatively, had the GOF retained ownership of the preference shares, but transferred to Sidmar the right to dividends paid on the shares, this could be viewed as conferring on Sidmar the right to future cash payments (i.e., grants) or as revenue foregone by the GOF. The benefit, again, would be the amount of the grants or, alternatively, the revenue foregone. (72)
Transfer of control, without transfer of ownership or dividend rights is more difficult to assess, because control is typically synonymous with ownership. In other words, it is difficult to alienate the concept of control from the concept of ownership. Moreover, since the Department did not find that Sidmar controlled ALZ's preference shares, we are forced to discuss this in the abstract. Theoretically, it is possible that one party might transfer control of shares it owns to another party without transferring ownership or rights to revenues from the shares. This transfer of control, in the case of shares, might, for example, give the recipient the right to vote the shares. Perhaps this could be viewed as a financial contribution which gives rise to a benefit, but such a conclusion would depend on the facts presented. As noted above, this was not the case with ALZ's preferred shares, because these were non-voting shares.
In the case of Sidmar and the GOF's preference shares in ALZ, the Department did not have to grapple with whether and how a transfer of control would have given rise to a subsidy to Sidmar because Sidmar did not control the ALZ shares nor did it control Sidfin. While the Department clearly listed Sidmar's lack of control as one of the considerations underlying our decision, the Department followed the simplest course in addressing this issue: Plaintiffs had framed their allegation in terms of Sidmar's control of the preference shares (73) and instead of critically analyzing what role control should play in an analysis of whether a subsidy existed, the Department simply found that control did not exist.
In its opinion, the Court referred to Aimcor I, where the CIT held: "That (a Venezuelan Government-owned holding company) exercised some control over (a Venezuelan producer of ferrosilicon) does not necessarily indicate that the benefit to the (holding company) passed through to (the producer)." (74) We note that the issue being addressed in Aimcor I was whether subsidies allegedly granted to the holding company should also be attributed to the subsidiary producer because the holding company exercised some control over the producer. (75) While the Department's views on control and attribution have evolved over time, (76) we wish to point out that the issue we are addressing in Belgian SSPC is not an attribution issue, i.e., we are not seeking to determine whether subsidies given to Sidmar should also be attributed to Sidfin because of Sidmar's alleged control of Sidfin.
In summary, in reaching its conclusion that Sidmar did not receive a subsidy through the creation of Sidfin, the Department found that the GOF did not transfer ownership or its rights to future revenues from the ALZ preference shares. The Department further found that Sidmar did not control the ALZ preference shares (or Sidfin). Consequently, the Department was not required to consider whether a transfer of control (in the absence of a transfers of ownership or rights to future revenue) could result in a countervailable subsidy. Instead, as a matter of administrative economy, the Department simply rested on its finding of no control without taking on the more difficult analysis.
(5) Methodology for Valuing the Subsidy Conferred Through the Creation of Sidfin
Since the Department continues to find that the creation of Sidfin does not confer a countervailable subsidy on Sidmar, this issue does not need to be addressed.
INTERESTED PARTY COMMENTS ON DRAFT RESULTS
Sufficiency of Information to Treat 1984 Equity Infusions as Possible Subsidies
Plaintiffs contend that the Department should revise its draft remand to answer clearly and concisely the question of whether the Department had a statutory obligation to investigate the 1984 equity infusion in Sidmar pursuant to 19 U.S.C. 1677d. In order to do so, the Department must answer the threshold question of whether the record it had before it contained the information necessary to warrant an investigation of the 1984 equity infusion. Plaintiffs argue that similar to the Final Determination, the draft remand contains no analysis on this issue and makes no assertion that the factual information on the record was insufficient to conduct an investigation of the 1984 infusion.
Moreover, Plaintiffs assert that if the Department's policy is as it claims (i.e., to include potential subsidy practices in its investigation when possible), then the Department acted contrary to that policy when it rejected Plaintiffs' allegation as untimely. In fact, the Department has essentially conceded that untimeliness was not the primary reason the allegation was rejected.
DOC Position: We disagree that the Department's redetermination fails to address the question of whether the GOB's 1984 investments in Sidmar should be included as possible subsidies in this investigation. The Department described the available information relating to these investments and laid out its analysis of that information. As our analysis makes clear, while there was evidence of a financial contribution there was no evidence that Sidmar received a benefit from that financial contribution. Without a benefit, the practice cannot be considered a subsidy. Hence, there was no basis for the Department to include these investments in its investigation. However, to eliminate any possible confusion on this point, we will restate our conclusion: after examining the facts surrounding this transaction, the Department finds that on the basis of the information before it, and given the regulations in place at the time of the investigation, the 1984 equity infusion in Sidmar is not "a practice that appears to be a countervailable subsidy" within the meaning of 19 U.S.C. 1677d.
Regarding the untimeliness of the allegation, we disagree that we have acted contrary to our policy. In accordance with the Court's instructions, we distinguished the 1984 equity allegation from other untimely allegations which the Department did investigate on the grounds that the 1984 allegation was filed significantly later in the proceeding than the other allegations, its inclusion was opposed by respondents, and much of the information relied upon in making the allegation was available at the time the petition was filed, and was not information that only became available through the investigatory process. While these reasons serve to distinguish Plaintiffs' allegation regarding the 1984 investments in Sidmar from the other allegations, we continue to take the positions that: (1) the 1984 equity allegation was untimely, and (2) it was correctly dismissed by the Department on that basis. Nothing in this redetermination should be interpreted as changing the basis for our rejection of Plaintiffs' allegation.
Mandatory Nature of 19 U.S.C. 1677d
Plaintiffs state that the language used in the redetermination implies that the Department believes it has discretion to include possible subsidies discovered in the course of the investigation. In doing so, the Department misconstrues the statute which mandates that the Department will include possible subsidies discovered in the course of an investigation.
Plaintiffs further contend that the Department has incorrectly created a distinction between "rather obvious" subsidies (that would be included in an investigation) and other subsidies. This indicates that Commerce has a predisposition to investigate only those practices that have some relation to subsidy programs the Department is familiar with or already investigating. In Plaintiffs' view, however, the statute contains no such distinction and, indeed, requires the Department to investigate thoroughly all possible subsidies discovered in the proceeding. Finally, even if the Department has correctly described its practice regarding inclusion of possible subsidies in its investigations, the GOB's 1984 equity purchases in Sidmar were an obvious subsidy.
DOC Position: We disagree with the Plaintiffs that the language of our redetermination suggests that 19 U.S.C. 1677d is discretionary. When the Department stated that "Commerce did not include the 1984 equity purchase on its own initiative or in response to Plaintiffs' urging," (Plaintiffs' emphasis), we were merely making a shorthand distinction between subsidies which the Department investigates under the authority provided by 19 U.S.C. 1677d, and subsidies that are pursued in response to petitioners' allegations. We agree with Plaintiffs that where the Department discovers a possible subsidy in the course of its investigation, the statute is not discretionary and the practice must be included (or carried over to an administrative review of the order).
We further disagree that the Department has drawn a line between "rather obvious" and less obvious subsidies, pursuing only the former under 19 U.S.C. 1677d. Instead, we reviewed past instances where the Department had included subsidies discovered in the course of the investigation, and concluded that in most instances the subsidies were "rather obvious." This was not intended as a statement of the Department's policy. We agree that possible subsidy practices must be included in a proceeding, regardless of whether the subsidy is obvious or not. However, where the information does not indicate that the practice is a subsidy, as in this case, the Department is under no obligation to pursue the practice.
Basis for Decision Not to Investigate the 1984 Equity Infusion
Plaintiffs charge that the Department has justified its decision not to investigate the 1984 equity infusions on the grounds that the information necessary to allege this subsidy was known to Plaintiffs beforehand as a result of Belgian Certain Steel. Moreover, Plaintiffs claim, the Department prejudged their allegation based on findings from the 1993 case without addressing the record evidence.
DOC Position: We disagree with Plaintiffs' characterization of the Department's findings in the redetermination. Our decision not to investigate Plaintiffs' allegation regarding the 1984 equity infusion was based on the fact that the allegation was untimely, not on the fact that information related to the allegation was known from Belgian Certain Steel. As directed by the Court, we explained in the redetermination how our rejection of this untimely allegation was consistent with our treatment of other untimely allegations in this proceeding and in other cases. While we did discuss the fact that the allegation relied on information available prior to the filing of the petition, this was only one of the three distinctions we noted between this allegation and the other untimely allegations filed by Plaintiffs (which we did investigate). Second, as directed by the Court, we further explained that we did not investigate the 1984 investments in Sidmar under the authority provided in 19 U.S.C. 1677d because the information before the Department did not suggest that the investments were a possible subsidy practice. The Department cannot investigate a subsidy it did not discover.
Further, we wish to clarify that the Department did not say that the information necessary to make the subsidy allegation was available prior to the filing of the petition. If available information indicated that a subsidy was possibly being received, we would have investigated the 1984 investments. Instead, we stated that "information relied upon by Plaintiffs in making their allegation" was known prior to the filing of the petition (see redetermination, at 4 and 6).
We also disagree with Plaintiffs' claim that the Department "prejudged" their allegation based on Belgian Certain Steel, rather than evaluating the record evidence. First, we note that the Department was not required to consider Plaintiffs' allegation because it was untimely. Instead, the Department considered the finding regarding Sidmar's equityworthiness from Belgian Certain Steel as part of its analysis of whether this investment should have been included in the investigation as a possible subsidy practice under 19 U.S.C. 1677d. Given the Department's practice at the time of Belgian SSPC, we believe that the 1993 finding was a sufficient basis for the Department not to look further at the GOB's purchase of Sidmar's common shares in 1984.
Second, in the course of analyzing the information related to the 1984 investments, we noted that Plaintiffs' allegation was based in part on the 1998 Regulations which did not apply to this investigation. Thus, Plaintiffs err when they state their allegation was dismissed because of the equityworthiness finding in Belgian Certain Steel.
Knowledge Required of Petitioners
Plaintiffs claim that the redetermination presumes that they had perfect knowledge of the record in Belgian Certain Steel. However, the statute does not require perfect knowledge, only that the allegation be supported by information reasonably available to petitioners.
DOC Position: It is not clear to us where or how the Department "presumed" that Plaintiffs had perfect knowledge of the Belgian Certain Steel record, but we agree that petitioners are only required to support their allegations with information that is reasonably available to them (see section 702(b)(1) of the Act). In this case, a great deal of information was reasonably available regarding Sidmar in the final and amended final determinations in Belgian Certain Steel, and in Geneva Steel. However, as we stated above, even after considering that information, there was no basis to view the 1984 equity infusion as a possible subsidy practice.
Evidence Needed to Investigate
According to Plaintiffs, the redetermination suggests the evidence on the record was inadequate to establish a subsidy. However, the Department has not indicated what evidence it lacked. Indeed, in its redetermination, the Department describes extensive evidence from this record, drawn almost exclusively from ALZ's responses, that is relevant to the 1984 investment. In light of this, the Department's assertion that Plaintiffs should have been able to rely on public information from Belgian Certain Steel is irrelevant. Moreover, the Department never precisely identified what information from the earlier proceeding Plaintiffs could have relied upon.
DOC Position: As discussed in the Department's analysis of whether the 1984 investments should have been investigated under 19 U.S.C. 1677d as possible subsidies discovered in the course of this investigation, we found no evidence that a benefit was conferred on Sidmar, given the Department's practice at the time of this proceeding. If Plaintiffs are asking the Department to speculate about the types of evidence that would have led the Department to investigate the 1984 investments, we believe it would be inappropriate to do so. In our view, we have met the Court's directions by analyzing the information that existed.
Again, as a matter of clarification, the Department did not state that Plaintiffs should have been able to rely on public information. Instead, the Department stated that much of the information Plaintiffs did rely upon in making their allegation was derived from Belgian Certain Steel.
Standard for Investigating Equity Infusions
Plaintiffs take objection to the Department's discussion of its practice for initiating and examining equity investments, claiming that the discussion demonstrates Commerce's real reason for not investigating the 1984 transaction - the finding in Belgian Certain Steel that Sidmar was equityworthy. Plaintiffs concede that Sidmar was found equityworthy in that case, and point out that this was why they could not allege that the 1984 infusion was a subsidy in their petition. Instead, Plaintiffs had to await the proprietary information submitted in the instant case to overcome the prior finding.
DOC Position: As explained in our analysis of the information regarding the 1984 investments, the Department does not believe that the GOB's purchase of common shares in Sidmar merited inclusion in our investigation because under the Department's practice at the time of this proceeding, a finding of equityworthiness meant that such an investment would have been undertaken by a reasonable private investor and, hence, would not be countervailable. Thus, unless evidence indicated that the earlier finding regarding Sidmar's equityworthiness was in error, the Department had no basis to investigate the GOB's purchase of common shares.
The "proprietary" information that Plaintiffs had to await to overcome that finding chiefly dealt with the timing of the study relied upon by the GOB in making its investment, and the lack of certain information in that study. However, as discussed above, the allegations framed by Plaintiffs relied on the 1998 Regulations which did not apply to this case. We note, moreover, that with respect to the timing of the study and the decision to invest, the fact that the investment was authorized in December 1983 was discussed in Belgian Certain Steel at 37278. The timing of the study was discussed in Geneva Steel at 948.
Regarding the GOB's purchase of preferred shares, the Department expressly recognizes in the redetermination that the 1993 finding regarding Sidmar's equityworthiness did not answer the question of whether this investment was a possible subsidy. Thus, it is inaccurate to say that the Department relied upon the 1993 equityworthy finding as its basis for not investigating the GOB's purchase of preferred shares. The proprietary information that Plaintiffs awaited and relied upon with respect to the preferred shares, as noted in the redetermination at 24, post dated the investment and, as such, did not support a conclusion that this investment conferred a subsidy. As discussed in the redetermination, the Department's analysis of the information on the record of this investigation about the terms of these shares (which information was also available in the public record of Belgian Certain Steel) provided no basis for the Department to consider the GOB's 1984 purchase of preferred shares as a possible subsidy.
Implications of Geneva Steel
Plaintiffs allege that while the Department acknowledges its practice regarding equity infusions has evolved, including in its response to Geneva Steel, the redetermination fails to reflect the significance of those changes for this case. Specifically, Geneva Steel stands for the principle that equity infusions need not always be assessed using the same approach. In this case, Plaintiffs claim, they followed exactly the same approach mandated by the Court in Geneva Steel, in making their allegation. While the court did not rule on the 1984 equity purchase because the Department's treatment of those investments in Belgian Certain Steel was not challenged, Geneva Steel did not preclude the Department from investigating the 1984 investment. Indeed, in Plaintiffs' view, it heightened the agency's obligation to do so.
In a related argument, Plaintiffs object to the Department's analysis of the characteristics of the preferred shares purchased by the GOB. In particular, they point to the Department's treatment of the dividends and repurchase options for these shares and state that while these characteristics may be relevant to assessing countervailability, they are not controlling as regards investigating the subsidy.
DOC Position: While Plaintiffs present one possible reading of Geneva Steel, the Department has taken a narrower reading. In the Belgian Certain Steel - Amended Final Determination , which reflected the results of the CIT's rulings in Geneva Steel, the Department recognized that conditions on or special characteristics of equity purchased by a government require the Department to look beyond a finding of equityworthiness to determine whether the share purchase conferred a subsidy. The Department's interpretation and analysis were affirmed by the court. Hence, the Department's reading of Geneva Steel must be considered permissible.
Further, we take exception to Plaintiffs' claim that they followed "exactly" the approach mandated by the court in Geneva Steel. In Belgian Certain Steel - Amended Final Determination, the benchmark price computed by the Department reflected the differences between the two types of shares being compared, common shares and PBs. Plaintiffs appear to have made the same adjustments to the benchmark price despite the fact that the two types of shares to be compared in this case were common shares and preferred shares, and the terms of the preferred shares were different from those of the PBs.
With respect to Plaintiffs' final point, we believe that information relevant to assessing countervailability is also relevant to the question of whether a possible subsidy should be investigated. This is consistent with the standard in the statute for initiating an investigation, i.e., whether petitioners have alleged the elements necessary for the imposition of countervailing duties (see section 702(b)(1) of the Act).
Differences in Equityworthy Standard Under the 1998 Regulations
Plaintiffs point to the Department's discussion of the distinction between the equityworthiness standards in place at the time of the investigation and the standard under the 1998 Regulations, stating that this is merely a technical distinction. In Plaintiffs' view, the two practices had the same focus on whether the investment was commercially sound.
DOC Position: We disagree that this is a technical distinction. The Department's practice for determining a company's equityworthiness at the time of this investigation was reflected in the 1989 Proposed Regulations. Those regulations stated that the Department would consider "market studies, economic forecasts, and project or loan appraisals," as one of several pieces of information relevant to an equityworthy determination (see section 355.44(e)(2)). Moreover, as discussed in the redetermination at 22, while the Department considered such studies, it placed greater emphasis on historical indicators of a firm's performance.
In contrast, under section 351.507(a)(4)(ii) of the 1998 Regulations, if the government has not undertaken a study of the proposed investment which includes an assessment of the potential risk and expected return, then the Department will "normally determine that the equity infusion received provides a countervailable benefit..." Thus, while the 1989 Proposed Regulations and the 1998 Regulations both address the issue of whether the government is acting in a commercial manner, the emphasis placed on studies evaluating the investment is markedly different.
Differences Between the 1984 Investments in Sidmar and Mexican Certain Steel
Despite the Department's claim to the contrary, Plaintiffs see little distinction between the situation in the instant proceeding and the equity investment in Mexican Certain Steel, where the Department did include the Government of Mexico's investments in its investigation. In both cases, the Department was investigating a series of equity purchases and learned of a potentially countervailable investment late in the investigation. While the nature of the evidence differed in the two cases, according to Plaintiffs, the investments were similarly problematic.
DOC Position: As explained in the redetermination, we believe that the situations in these two cases can be distinguished. In Mexican Certain Steel, the Department had before it the type of information described in section 351.507(a)(4) of the 1989 Proposed Regulations indicating that the respondent was unequityworthy. In this case, the Department had a prior finding that Sidmar was in a healthy financial position prior to the 1984 investments and, hence, should be viewed as equityworthy.
Significance of Belgian Certain Steel - Amended Final Determination
Sidmar seeks to clarify that the Department did not find Sidmar's substitution of PBs for OCPCs to be countervailable as the Department stated in the redetermination. Sidmar points out that the Court's order in Geneva Steel was vacated as to Sidmar.
DOC Position: We agree with Sidmar that the Department mischaracterized the status of its finding on the OCPC-to-PB Conversion and have amended the redetermination accordingly.
Weight Assigned to Respondents' Objections
Plaintiffs argue that the Department places inappropriate weight on the objections of respondents in determining whether to investigate a subsidy allegation. First, they claim, allowing respondents to control the outcome of the case creates a loophole and contravenes the spirit of the law. Second, respondents' objections should not be accorded special treatment and it is incumbent upon the agency to spell out its reasons any time it makes a decision affecting the outcome of a proceeding, not just in response to objections. Finally, relying on the presence or absence of objections from respondents is potentially dangerous because it creates a presumption that an objection would lead to an outcome favorable to the objector.
DOC Position: We disagree that the Department attached too much importance to the presence of objections from respondents. In the redetermination, we cited several cases where the Department has pursued a petitioner's claim over respondents objections. Consequently, we do not believe there is a loophole in our practice. Moreover, given that Department's demonstrated willingness to dismiss respondents' objections when warranted, there can be no presumption that objections will succeed. Finally, Plaintiffs should not read the redetermination to suggest that respondents' claims are given special treatment. Respondent objections are discussed extensively in the redetermination because only respondents are likely to object to untimely subsidy allegations. Petitioners have ample opportunity to refute those objections, and to bring their own objections to other aspects of the proceeding.
Weight Assigned to Statement in Sidmar's Financial Report Regarding Sidfin
Plaintiffs allege that the Department's reevaluation of information relating to the creation of Sidfin failed to respond to the problems identified by the Court. In particular, the Department has not explained why the statements made in Sidmar's audited financial reports are not controlling. Moreover, in Plaintiffs' view, some of the statements cited by the Department in support of its conclusion are self serving to Sidmar and are the type of evidence that the Court found troubling.
Plaintiffs continue to disagree with he Department's conclusion that Sidmar did not benefit from this transaction. To the extent that the Department's analysis of the benefit to the company relies on its factual finding regarding control, Plaintiffs disagree with the results of the redetermination.
DOC Position: We believe that we have adequately explained our reasoning as to the relative importance of the statement in Sidmar's 1994 Annual Report. Based on our review, that is the only piece of evidence supporting the claim that Sidmar controls Sidfin. Neither the management structure of Sidfin nor statements by those familiar with the transaction are consistent with the claim. Nor is Sidmar's 1993 Annual Report. While we agree that statements by Sidmar officials may have been self-serving, they were consistent with the statements of others, including a Belgian bank official. On balance, we see no reason to view the single piece of evidence cited by Plaintiffs as dispositive when nothing else in the record supports that conclusion.
FINAL RESULTS OF REDETERMINATION
As a result of this Final Redetermination on Remand, we have not changed the countervailing duty deposit rate established in the Final Determination.
Acting Assistant Secretary
for Import Administration
1. Although Plaintiffs had raised this investment prior to their case brief, e.g., in their pre-verification comments submitted to the Department on November 6, 1998, at 9 - 10, the Department did not view Plaintiffs' claim as a bona fide allegation until it was formulated in the case brief. The Court has upheld the Department on this matter (see e.g., Allegheny Ludlum Corp. v. United States, Court No. 99-06-00362, Slip Op. 00-66, ("Allegheny Ludlum"), at 8. ("In light of these requirements, it is clear that Plaintiffs did not properly allege, until submission of their case brief, that the 1984 investments in Sidmar constituted countervailable subsidies that should be investigated.")
2. Plaintiffs' allegations regarding the 1987 and 1993 sales of ALZ's shares to Sidmar were contained in their August 14, 1998 submission, at 11 - 15. This was two weeks before the scheduled date of the Department's preliminary determination, August 28, 1998.
3. Respondents' position is summarized in the Final Determination, at 15575.
4. See Belgian Certain Steel, at 37278:
In 1984, the GOB made two share subscriptions in Sidmar pursuant to Royal Decree 245 of December 31, 1983. This Royal Decree allowed the GOB to make preference share subscriptions in the steel industry as long as the subscriptions did not go over one-half of the social capital of the company. The SNSN, the government agency purchasing the shares, paid cash for the first subscription, which consisted of ordinary shares in the company. The second subscription, also by SNSN, consisted of preference shares issued in return for the cancellation of certain debt claims held by SNSN against Sidmar.
As stated previously, we did not initiate an equityworthiness investigation with respect to Sidmar. Therefore, we are not investigating SNSN's purchases of Sidmar's ordinary shares.
The Claes and Gandois Plans are discussed in Belgian Certain Steel, at 37277, 37278, 37279, and 37280.
5. August 14, 1998 letter from Collier, Shannon, Rill & Scott to the Department regarding Stainless Steel Plate in Coils from Belgium, at 11 - 15.
6. Several of the countervailing duty cases discussed below were carried out under an earlier version of the Department regulations, 19 CFR Part 355 (1988). The deadlines for filing subsidy allegations were laid out in 19 CFR 355.31(c)(1)(i) (1988). As in the Department's current regulations, subsidy allegations in investigations were due 40 days prior to the scheduled date of a preliminary determination.
7. Sen. Rep. No. 96-249, at 98 (1979), reprinted in 1979 U.S.C.C.A.N. 381,484.
8. Final Affirmative Countervailing Duty Determination: Stainless Steel Sheet and Strip in Coils from France, 64 FR 30774, 30787 (June 8, 1999) ("French SSSSC").
9. The Department acknowledges, as Plaintiffs have pointed out in their Reply Brief ("Reply Brief in Support of Plaintiffs' Motion for Judgment on the Agency Record," February 15, 2000, at 3), that French SSSSC was decided after the Final Determination. We offer the citation as a statement of agency practice close in time to the Final Determination, and not as Departmental precedent. It is not surprising that the Department is unable to find additional Federal Register notices that discuss the untimeliness of an allegation and the lack of an objection from respondents. This is because there would seldom be any reason for the Department to point out the lateness of an allegation unless there is an objection from the respondents that the Department must address.
10. Final Affirmative Countervailing Duty Determinations: Certain Steel Products from France, 58 FR 37304 (July 1993) ("French Certain Steel").
11. October 29, 1998 letter from Collier, Shannon, Rill & Scott regarding "'Pre-Preliminary' Comments in Stainless Steel Sheet and Strip in Coils from France."
12. Silicon Metal from Brazil, 56 FR at 26993.
13. Final Negative Countervailing Duty Determination: Fresh Atlantic Salmon from Chile, 63 FR 31437 (June 9, 1998) ("Chilean Salmon").
14. Final Negative Countervailing Duty Determination: Live Cattle from Canada, 64 FR 57040 (October 22, 1999) ("Canadian Cattle").
15. In Silicon Metal from Brazil, the Department defended including the late allegation because it was based on a tax form collected at verification (Silicon Metal from Brazil, 56 FR at 26993). In Chilean Salmon, the Department had declined to include a subsidy program alleged by petitioner because information in the petition indicated that the program no longer existed. However, when petitioner brought forward additional information (after the preliminary determination, but prior to verification) showing that the program was in place during the period of investigation, the Department ruled that "because the program was included in the petition, the petitioners' (late) request constituted a timely submission of factual information rather than a new subsidy allegation" (Chilean Salmon, 63 FR at 31437). Finally, in Canadian Cattle, the petitioner submitted information on a bill that was passed after the period of investigation, but which related to a potential subsidy being investigated. Although the information was submitted after the deadline for submission of factual information (19 CFR 351.301(b)(1)), the Department ruled that the "bill was highly relevant to the information sought in our questionnaire" and, therefore, used the authority granted by 19 CFR 351.301(c)(2)(i) to request that the petitioner submit the information for the record (Canadian Cattle, 64 FR at 57062).
16. The three cases were Italian Granite, Final Affirmative Countervailing Duty Determination and Countervailing Duty Order; Lime from Mexico, 49 FR 35672 (September 11, 1984) ("Mexican Lime"), and Final Affirmative Countervailing Duty Determination; Certain Stainless Steel Hollow Products from Sweden, 52 FR 5794 (February 26, 1987) ("SSHP from Sweden").
17. See Countervailing Duties; Notice of Proposed Rulemaking and Request for Public Comments, 54 FR 23366 (1989) ("1989 Proposed Regulations") . While a final version of these regulations was never promulgated, the Department relied on the 1989 Proposed Regulations as a statement of it practice in many areas until adoption of its current regulations in November 1998.
18. The Department's reasoning was discussed in the preamble to the 1989 Proposed Regulations, wherein the Department stated: "The reason for this requirement is that investigations of equity infusions, like investigations of creditworthiness, add substantially to the work involved in a CVD investigation or review." See 1989 Proposed Regulations, at 54 FR 23371.
19. Final Affirmative Countervailing Duty Determination: Certain Cut-to-Length Carbon-Quality Steel Plate from the Republic of Korea, 64 FR 73176 (December 29, 1999) ("Korean Cut-to-Length Plate").
20. Korean Cut-to-Length Plate, 64 FR at 73194-95.
21. Final Affirmative Countervailing Duty Determination: Certain Softwood Lumber Products from Canada, 57 FR 22570 (May 28, 1992) ("Canadian Lumber").
22. Canadian Lumber, 57 FR at 22623.
23. See section 702 of the Tariff Act of 1930, as amended ("the Act") reprinted at 19 U.S.C. 1671a.
24. Belgian Certain Steel, 58 FR at 37284.
25. French Certain Steel, 58 FR at 37310.
26. French Certain Steel, 58 FR at 37308. See also, Preliminary Affirmative Countervailing Duty Determinations: Certain Steel Products from France and Alignment of Final Countervailing Duty Determinations With Final Antidumping Duty Determinations: Certain Steel Products from France, 57 FR 57785, 57789 (December 7, 1992).
27. See Final Affirmative Countervailing Duty Determination: Certain Hot Rolled Lead and Bismuth Carbon Steel Products from the United Kingdom, 58 FR 6237, 6238 (January 27, 1993) ("UK Lead Bar"). See also, Final Affirmative Countervailing Duty Determination: Certain Hot Rolled Lead and Bismuth Carbon Steel Products from France, 58 FR 6221, 6222 (January 27, 1993) ("France Lead Bar"). As the Department stated in UK Lead Bar, for example: "As a result of the ongoing Countervailing Duty Investigation of Certain Steel Products from the United Kingdom, we have been made aware of certain programs, not originally investigated in this case, which appear to provide subsidies, e.g., European Investment Bank Loans. Nevertheless, we did not have sufficient time to obtain and verify information with respect to the programs. Accordingly, we will address them during the first administrative review of the CVD order in this case, as is contemplated by §355.39 of the Department's Proposed (sic) Regulations ..." The final determination in French Lead Bar contained virtually identical language.
28. The fact that such instances are so rare is consistent with the higher initiation standard for investigating equity infusions discussed above.
29. Final Affirmative Countervailing Duty Determinations: Certain Steel Products from Mexico, 58 FR 37352, 37354-5 (July 9, 1993).
30. See Memorandum from Barbara E. Tillman and Team to Joseph A. Spetrini, entitled "Countervailing Duty Investigations Concerning Certain Steel Products from Mexico," dated February 8, 1993.
31. Section 355.44(e)(2)(iii) of the 1989 Proposed Regulations.
32. December 18, 1992 letter from Dewey Ballantine to the Department regarding Countervailing Duty Investigations of Carbon Steel Flat Products from Mexico.
33. See Lighters from Thailand, 60 FR at 13962. ("In the context of the companion AD investigation, the Department verified that Thai Merry subcontracts certain of its assembly operations. The Department then verified the location and function of these plants, and the fact that Thai Merry did not own these plants. However, in the context of this (CVD) proceeding, we did not discover 'a practice which appears to provide a subsidy.' Therefore, the Department would not have been obligated to conduct an examination of the situation, even had there been 'sufficient time' to do so.")
34. Ferrochrome from South Africa, 56 FR at 33256
35. Much of the information concerning the terms of the 1984 share transactions is drawn from two reports (discussed below) which were accorded proprietary treatment in the underlying proceeding. Hence, the Department has generally bracketed the information in this redetermination on remand. We note, however, that certain details of these transactions are public, see footnote 47, and where we have quoted the public sources, we have not bracketed the data.
36. Contrary to Plaintiffs' claim in their case brief, it does not appear that these share purchases were made under the so-called "Gandois Plan." See Petitioners' Case Brief, dated February 11, 1999, at 18. The GOB, in its June 6, 1998 QR stated that the Gandois plan was formulated to help Cockerill Sambre (another Belgian steel producer). The GOB's response goes on to state: "The Gandois Plan and the latest government decisions with regard to other Belgian steel companies were notified to the EC Commission ..." (emphasis added). The measures authorized by Royal Decree 245 appear to have been among the "decisions with regard to other steel companies." Hence, prior findings by the Department regarding the countervailable nature of benefits under the Gandois Plan have limited (if any) relevance to the issue of whether the 1984 investments in Sidmar were a countervailable subsidy.
37. ALZ August 3, 1998 Supplemental Questionnaire Response ("SQR"), at 15- 16.
38. Id., at Ex. 4, p.2.
39. Id., at Ex. 4, p.2.
40. Id., at 16.
41. Id., at Ex. 4, p. 7.
42. Id., at Ex. 4, p. 5.
43. Id., at Ex. 5, p. 7.
44. Id., at Ex. 5, pp. 7-8.
45. Id., at Ex. 5, p. 11.
46. Id., at Ex. 5, p. 8.
47. These conditions are specified in Royal Decree No. 245 (see ALZ June 19, 1998 QR at Ex. 4). According public information in the record of Belgian Certain Steel, these terms were reflected in a December 31, 1984 agreement between Sidmar and the GOB: "On 31 December 1984, Sidmar, the GOB, and N.M.N.S. (a GOB agency) signed a modification of the 27 April agreement. (Proprietary information redacted) Thus, N.M.N.S. paid BEF13,500 per share for 839,467 type B shares, which were non-voting, carried a 2 percent priority dividend, and were either to be redeemed by Sidmar at fair value or issue price, whichever was greater, or to be converted to ordinary shares in 2004." Sidmar October 6, 1992 QR (public version), p. 27.
48. The price used was the [BF21,579] amount established in the April 1984 Commissaire-Reviseur Report.
49. Although Geneva Steel was vacated as to Sidmar, a similar methodology was applied and upheld with respect to other Belgian companies at 948-949.
50. Countervailing Duty Petition: Stainless Steel Plate in Coils from Belgium, Italy, South Korea and South Africa, March 31, 1988, at 40 - 41.
51. See March 19, 1999 Memorandum from the Team to the File, entitled "Calculations for Final Determination," at "OCPC to PB Conversion."
52. See July 16, 1992 Memorandum from Michael Martin to Marie E. Parker, Director, Office of Accounting, entitled, " Certain Carbon Steel Flat Products from Belgium - Creditworthy Analysis of Forges de Clabecq and Cockerill-Sambre and the Equityworthy and Creditworthy Analysis of Sidmar" appended to the July 20, 1992 Memorandum from Francis J. Sailer to Alan M. Dunn, Assistant Secretary for Import Administration, entitled "Initiation of Countervailing Duty Investigations: Certain Carbon Steel Products from Belgium."
53. Section 355.44(e)(1)(ii) of the 1989 Proposed Regulations.
54. See , e.g., Belgian SSPC 64 FR at 15570 (regarding the Department's determination regarding the GOB's 1985 purchase of common shares in ALZ).
55. With the enactment of the Uruguay Round Agreements Act ("URAA"), the statutory language regarding countervailable equity infusions changed. Prior to 1995, the Department examined whether equity infusions were "inconsistent with commercial considerations." Section 771(5)(A)(ii)(I) of the Act (1994) reprinted at 19 U.S.C. 1677(5)(A)(ii)(I) (1995). Post URAA, the standard changed to "inconsistent with the usual investment practice of private investors ..." (section 771(5)(E)(i) of the Act (2000) reprinted at 19 U.S.C. 1677(5)(E)(i)). Although the wording changed, there is no indication that the new language was intended to change Commerce's practice regarding equity infusions. See, e.g., The Statement of Administrative Action ("SAA"), H.R. Doc. No. 316 at 927 (1994), where the change in the statutory language regarding government provision of goods and services is described. In contrast, no mention is made of equity infusions.
That the Department's practice with respect to equity infusions was not changed by the URAA is further evidenced by two uncontested findings in Belgian SSPC. As noted above, ALZ's equityworthiness in 1985 meant that the GOB's purchase of the company's common stock in that year was not countervailable. Similarly, the post-Aimcor practice of looking beyond a company's equityworthiness when there are special restrictions on the shares being purchased was applied with respect to the GOB's 1985 acquisition of Sidmar's PBs.
56. 19 CFR 351.507 (1998).
57. Plaintiffs have, in fact, requested the Department to include the GOB's 1984 investments in Sidmar in the first administrative review of the countervailing duty order on Belgian SSPC, a review which will be carried out under the 1998 Regulations. (See July 26, 2000 letter from Collier, Shannon, Scott to the Department regarding Stainless Steel Plate in Coil from Belgium: Questionnaire Modifications and New Subsidy Allegations, at 3.)
58. GIA, 58 FR at 37244.
59. See section 355.44(e)(2) of the 1989 Proposed Regulations: " A firm is equityworthy ... if the Secretary determines that, from the perspective of a reasonable private investor examining the firm at the time the government equity infusion was made..." (emphasis added).
60. Memorandum to Richard Moreland, entitled "ALZ Preference Shares," dated March 19, 1999 ("ALZ Preference Shares Decision Memorandum").
61. Various pages from Sidmar's 1994 Annual Report are included in Attachment 4 of Plaintiffs' August 14, 1998 submission to the Department.
62. Allegheny Ludlum, Slip Op. 00-66 at 42.
63. Id., at 45.
64. See Verification Report for Sidmar N.V. in the Countervailing Duty Investigation of of Stainless Steel Plate in Coils from Belgium, dated January 20, 1999, ("Sidmar Verification Report"), at 6.
65. Id., at 6.
66. Id., at 6.
67. See Verification Report for the Government of Flanders in the Countervailing Duty Investigation of Stainless Steel Plate in Coils from Belgium, dated January 27, 1999, at 11. The Court has ruled that that this statement by the Gimvindus official is "silent as to the control of Sidfin." See Allegheny Ludlum, Slip Op. 00-66 at 52. However, we believe this statement serves to corroborate Sidmar's expressed desire to strengthen its balance sheet and, hence, its motivation [ ]
68. Cited in ALZ Preference Shares Decision Memorandum, at 2.
69. See Sidmar Verification Report, at 6.
70. In listing "Movements of Participation" of Sidmar's financial assets, the 1993 Report characterizes the Sidfin transaction as follows: "Subscription to capital increase by acquisition of 67,515 shares with a value of BEF 814 million. Our participating interest is 50 percent." See Plaintiffs' August 14, 1998 submission to the Department, at Ex. 3.
71. See section 355.44(a) of the 1989 Proposed Regulations.
72. Tax and duty exemption programs are two examples of subsidies where the government foregoes revenue. As set out in section 355.44(i)(1) of the 1989 Proposed Regulations, the subsidy is the difference between what the company would have paid (what the government would have received) absent the program, less what the company actually paid (what the government actually received).
73. See Plaintiffs' August 14, 1998 submission to the Department, at 14.
74. See Allegheny Ludlum, Slip Op. 00-66 at 50.
75. See, Aimcor I: "Plaintiffs argue that Commerce's critical error was in failing to treat (the producer) and the (holding company) as a single entity, and that such treatment would reveal a benefit to the (producer). The court agrees that, if Commerce was incorrect in treating the two companies separately, any benefit to the (holding company) may be attributable to (the producer). On the other hand, if Commerce properly treated the two companies separately, then, due to the lack of evidence to the contrary, the court must find that no 'bounty or grant' resulted from the transfer." (Aimcor I, at 451).
76. See e.g. section 351.525 of the 1998 Regulations.