Acciai Speciali Terni S.p.A v. United States - FINAL RESULTS OF REDETERMINATION PURSUANT TO COURT REMAND

FINAL RESULTS OF REDETERMINATION PURSUANT TO COURT REMAND

Acciai Speciali Terni S.p.A v. United States

Court No. 99-06-00364, Remand Order (CIT August 14, 2000)

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 Acciai Speciali Terni S.p.A v. United States, Court No. 99-06-00364, dated August 14, 2000.

II. Background

In the Final Affirmative Countervailing Duty Determination: Stainless Steel Plate in Coils from Italy, 64 FR 15508 (March 31, 1999) (Italian Stainless Plate), the Department determined that countervailable subsidies are being provided to producers and exporters of stainless steel plate in coils from Italy. Italian stainless steel plate producer Acciai Speciali Terni S.p.A (AST) challenged this determination and argued in its December 17, 1999 brief to the CIT that the 1994 sale of AST 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, SrL 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 Stainless 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 14, 2000, the CIT issued its remand order in the Italian Stainless 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, SrL v. United States, 202 F.3d 1360 (Fed. Cir. 2000)."

On August 15, 2000, the Department solicited comments from the petitioners and AST regarding potential revisions to our change-in-ownership methodology in light of Delverde III. The petitioners submitted arguments regarding the methodology on September 11, 2000, and rebuttal arguments on September 29, 2000. AST submitted arguments regarding the methodology on September 11, 2000, and rebuttal arguments on September 15, 2000. Also, the European Communities (EC) submitted its own arguments on September 8, 2000.

On September 14, 2000, we sent a questionnaire soliciting information from AST, the Government of Italy (GOI) and the EC regarding the change-in-ownership issue, followed by supplemental questionnaires on October 16, 2000, and October 20, 2000. On October 5, 2000, AST submitted its response (AST Remand Questionnaire Response) to the Department's initial remand questionnaire, followed by its supplemental remand questionnaire response on October 25, 2000 (AST Remand Supplemental Response). The GOI submitted its first remand supplemental response on October 25, 2000 (GOI First Remand Supplemental Response), a second on October 30, 2000 (GOI Second Remand Supplemental Response), and a third on November 13, 2000 (GOI Third Remand Supplemental Response). On October 12, 2000, the petitioners submitted comments on the AST Remand Questionnaire Response, followed on November 7, 2000, with additional comments on the AST Remand Supplemental Responses and the GOI Remand Supplemental Response. On November 14, 2000, AST submitted comments in response to the petitioners' November 7, 2000 submission.

On November 14, 2000, the Court granted the Department's motion for an extension of time until December 19, 2000, to file these final remand results. The Department circulated a draft remand determination to the interested parties on November 21, 2000 (Draft Redetermination). Timely comments were filed on December 4, 2000, by the petitioners (Petitioners' Draft Comments), AST (AST's Draft Comments), and the European Communities (EC's Draft Comments).

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. з 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. з 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 зз 1677(5)(B)(ii) and (iii)) and a benefit." 202 F.3d at 1365 (footnote omitted).⁽¹⁾

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 (з 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,⁽²⁾ 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.⁽³⁾

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" have 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⁽⁴⁾ as of the period of investigation, the Department would then continue to countervail the remaining benefits of that subsidy.⁽⁵⁾

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.⁽⁶⁾

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⁽⁷⁾ 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.⁽⁸⁾

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, we have also considered the petitioners' arguments regarding precedent specifically in the countervailing duty context.⁽⁹⁾ In this regard, the petitioners have suggested that we adopt 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 AST 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, AST. We, therefore, do not reach the question of whether a subsidy has been provided to AST as a result of the change-in-ownership transaction.

AST 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 AST privatization. 202 F.3d at 1369-1370. 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 (KAI-owned AST) 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 AST, 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 1987, Italian government-owned specialty steel production was concentrated in a company named Terni S.p.A. (Terni), a separately incorporated subsidiary of 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). As part of a restructuring in 1987, the operations at Terni were reincorporated under a different name, Terni Acciai Speciali (TAS).

In 1989, TAS and various other Finsider subsidiaries were then merged, as separate operating divisions, into a single incorporated company, ILVA S.p.A.. In this process, part of the liabilities of TAS and the majority of its viable assets, including all the assets associated with the production of subject merchandise, transferred to ILVA S.p.A. Part of TAS's remaining assets and liabilities were transferred to ILVA S.p.A. on April 1, 1990. After that date, TAS no longer possessed any operating assets, only certain non-operating assets.

From 1989 to 1993, ILVA S.p.A. consisted of four operating divisions, including the specialty steels division with operations located mostly in Terni that produced subject merchandise. ILVA S.p.A. was part of the ILVA Group (which also included various service centers), which was wholly-owned by IRI.

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 specialty steels business was reincorporated, this time as AST, and the carbon steel flat products business was incorporated as Laminati Piani (ILP). In December 1994, AST was sold to KAI, a privately-held holding company jointly owned by German steelmakers Hoesch-Krupp and a consortium of private Italian companies. Subsequently, between 1995 and the POI, there were several restructurings/changes in ownership of AST and its parent companies. As a result, at the end of the POI, AST was owned 75 percent by Krupp Thyssen Stainless GmbH and 25 percent by Fintad Securities S.A.

As is clear from the overview of the company history above, the business operations that eventually comprised AST basically existed intact as a discrete business entity since at least the 1980s (the period when the company was known as Terni or Terni Acciai Speciali, rather than the current name Acciai Speciali Terni). Moreover, in December 1993--roughly one year prior to its sale to new private owners--AST became a legally separate, incorporated entity although the corporation was still owned by the GOI through IRI. The respondent confirmed the continuity of ILVA's specialty steel operations in the reincorporated form of AST, among other places, in its original questionnaire response where it states that,

prior to their privatization in 1994, the manufacturing facilities that comprise the AST Group existed as an operational division (Specialty Steel Division) within ILVA S.p.A. . . . on December 21, 1993, ILVA in Liquidation was formally demerged into two new corporations: Acciai Speciali Terni S.r.l. (former specialty steel division) and ILVA Laminati Piani S.r.l. (former carbon steel division). . . . At the demerger, ILVA's assets and liabilities associated with the specialty steel operations were transferred to AST S.r.l. effective January 1, 1994.

Original Questionnaire Response (Appendix 8) at 134. In other words, from the early 1980s through the 1993 demerger and up to its privatization, the business operations that became AST 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 AST'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 1994 privatization of AST. Rather, the specialty steel business itself, as well as the ultimate ownership of this business, remained essentially unchanged from the early 1980s through December 1994.⁽¹³⁾ All of the subsidies that were bestowed on the predecessor operations of AST continued to benefit the business that was separately incorporated as AST as part of the 1993 ILVA demerger.⁽¹⁴⁾

Consequently, we disagree with AST that the proper comparison for purposes of the "person" determination is between ILVA and KAI-owned AST. Rather, the appropriate comparison for this determination is between the GOI-owned AST (post-demerger) and the KAI-owned AST (post-privatization).

As we explain below, from our review of the record, it appears that in purchasing AST, KAI intended to perpetuate the operations of AST 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 following examination of the case facts and, in particular, the factors discussed under the Interpreting Delverde III section above.

Continuity of General Business Operations

The record information indicates that the speciality steel operations of ILVA essentially continued on in the form of AST through the privatization process. As AST states, "{n}o ILVA facilities used to produce specialty steel subject to this investigation were closed as a result of the sale." AST Remand Questionnaire Response at 34. In other words, AST's production base and the products AST 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 of the IMI Report commissioned by the GOI to determine the value of AST. See IMI Report at 14.⁽¹⁵⁾ [ * * * ].⁽¹⁶⁾ This continuity is also reflected in KAI's explicit obligations under the sales contract, wherein KAI agreed [ * * * ] Original Questionnaire Response, Attachment A8-8 at 5.

Similarly, the AST Remand Questionnaire Response at 6 notes that "{b}y selling AST as an operating entity, rather than merely auctioning its individual assets, IRI expected to obtain a higher sale price and thereby to maximize the revenue from the sale to IRI." The AST Remand Questionnaire Response further notes at 23 that

[ * * * ]

An additional relevant area of inquiry is whether a successor company after a sale holds itself out as the continuation of the previous enterprise. We find that, in purchasing AST, the KAI 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, AST. More generally, however, KAI believed that AST's existing market presence was an important part of what KAI would be purchasing. In its Proprietary Planning Document, submitted as part of its bid, KAI noted that among AST's "strong points" were

[ * * * ]

Proprietary Planning Document at 6.

In conclusion, KAI's perception of the entity it was purchasing is summed up in the following statement by the respondent:

[ * * * ]

Letter to BZW at 2, submitted as attachment A8-5 of AST's Original Questionnaire Response.

Other indicators of AST's ongoing business operations include its stable supplier and customer bases. With regard to AST's suppliers, the respondent has stated that "{t}he Terni and Torino plans formerly owned by ILVA have largely continued to use a similar supplier base. This is unremarkable, as the plants produced specialty steels before and after their fair market value privatization." AST Remand Questionnaire Response at 34. Information in the AST Information Memo at 15 further supports the conclusion that AST had several [ * * * ] that continued despite the company's privatization. We can identify no information on the record that would suggest AST's supplier relationships in general changed substantially during the privatization process. Likewise, the purchasers evidently viewed AST's existing customer relationships as desirable. The respondent states,

The company was attractive because of its portfolio of productive assets, manufacturing expertise and products. In addition, the company had access to desirable markets and customers for its production.

AST Remand Questionnaire Response at 39.

Continuity of Production Facilities

Following the 1994 privatization, AST's principal specialty steel production facilities continued to be located in Terni in Torino. In fact, KAI's explicit view of the location of the GOI-owned AST was that AST

[ * * * ]

AST's Proprietary Planning Document at 4.

Continuity of Assets and Liabilities

The GOI sold AST to the German-Italian consortium KAI Italia S.r.l. (KAI) in 1994 through a transfer of shares.⁽¹⁷⁾ As the terms and conditions of this transaction reveal, virtually all of AST's corporate assets were taken over by KAI. See, e.g., Acciai Speciali Terni Information Memorandum (AST Information Memo) submitted as Attachment A8-4 to AST's Original Questionnaire Response.⁽¹⁸⁾ Likewise, the record is clear that the liabilities of the pre-privatized AST transferred through the privatization intact. This fact is confirmed by the financial statements as well as by the GOI in the GOI First Remand Supplemental Response at 3, where it states that "KAI assumed the whole of AST indebtedness at the time the sale took place."⁽¹⁹⁾

Retention of Personnel

The continuity in AST's general business operations and production facilities is also reflected in the continuity of AST's personnel through the privatization process. It is clear from information on the record that KAI was committed to maintaining the existing AST workforce largely in place after the privatization. Continuity in AST's personnel, for example, was highlighted in the IMI Report, commissioned by the GOI to determine the value of AST. See "Company Appraisal of AST: IMI," included as Attachment 1 of the AST Remand Questionnaire Response at 15. 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 and redundancy of certain employees based on GOI programs and labor negotiations already in place at the time of the privatization.⁽²⁰⁾ Moreover, KAI was [ * * * ] in the workforce. At section 6.1 of the AST sales contract, KAI explicitly agreed to

[ * * * ]

Original Questionnaire Response, Attachment A8-8 at 5. The respondent has confirmed that "{t}he buyers of AST complied with the terms of the purchase agreement." AST Remand Questionnaire Response at 48. In sum, we find no information on the record indicating that the AST workforce changed substantially as a result of the privatization.

Based on the above analysis, we determine that all important aspects of AST's business remained essentially unchanged before and after the sale to KAI. Before and after the 1994 privatization, inter alia, AST 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 AST 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.

Use of Facts Otherwise Available

Section 776(a)(2) of the Act provides that if an interested party (1) withholds information that has been requested by the Department, (2) fails to provide such information in a timely manner or in the form requested, (3) significantly impedes a proceeding under the antidumping statute, or (4) provides information that cannot be verified, the Department shall use, subject to section 782(d), facts available in reaching the applicable determination.

With regard to the pre-privatization asset spin-offs as well as the post-privatization sales of shares, we note that neither AST nor the GOI responded to the change-in-ownership questions as they relate to these transactions, despite our requests to do so in both the remand questionnaire (e.g., in the cover page) and remand supplemental questionnaire to the GOI (at 3). Thus, AST and the GOI have been notified of this deficiency and given an opportunity to correct it under section 782(d) of the Act, but have failed to do so. Although there is some information regarding these transactions on the record from the investigation, we find that this information does not provide an adequate basis on which to determine whether these sales represented new entities that were sold from ILVA (the pre-1993 asset spin-offs) or AST (the post-privatization sales of shares). Consequently, we conclude that the information on the record is too incomplete to serve as a reliable basis for the determination with respect to these transactions. Moreover, as discussed below, we have concluded that these parties have not acted to the best of their abilities with respect to this issue. As a result we conclude that section 782(e) of the Act does not apply. Therefore, we determine that, in accordance with sections 776(a)(2)(A) and (C) of the Act, the use of facts otherwise available is appropriate for the respondent because neither the respondent nor the GOI provided a complete response to the questions in the Remand Questionnaire or Supplemental Remand Questionnaires regarding these other transactions.

In selecting from among the facts available, section 776(b) of the Act authorizes the Department to use an adverse inference if the Department finds that a party has failed to cooperate by not acting to the best of its ability to comply with requests for information. See Statement of Administrative Action (SAA), H.R. Doc. 103-316 at 870 (1994). To examine whether the respondent "cooperated" by "acting to the best of its ability" under section 776(b) of the Act, the Department considers, inter alia, the accuracy and completeness of submitted information and whether the respondent has hindered the calculation of accurate subsidy rates.

As discussed above, AST and the GOI failed to adequately respond to the Department's remand questions regarding these transactions. AST explained its disregard for the Department's instructions by arguing that

these transactions are not relevant to the terms of AST's privatization, the Department's treatment of which is the subject of this remand . . . If the Department believes it needs additional information regarding any of these transactions, AST, the GOI and the EC respectfully request that the Department explain how such information is pertinent to the proper scope of this remand.

AST Remand Questionnaire Response at 28. In our remand supplemental questionnaire to the GOI, we stated (at question 15) that

{t}he purpose of this remand is to re-examine our change-in-ownership methodology in light of, inter alia, Delverde. We therefore reiterate our request for complete remand questionnaire responses with regard to all of the changes in ownership. If we determine that this information is necessary to our remand determination and it is not been provided, we may resort to facts otherwise available, including assumptions that are adverse to the respondent's interests.

Thus, we have determined that the responding parties withheld information that we requested and significantly impeded this remand proceeding. Without this information, the Department is unable to determine whether these transactions represent the sale of an entity and whether that entity is the same as the one which benefitted from the subsidies prior to the sale. We therefore find that the responding parties have not acted to the best of their ability to comply with our requests for information.

Accordingly, consistent with section 776(b) of the Act, we have applied adverse facts available to AST. As adverse facts available for the pre-1993 asset spin-offs of ILVA, we find that, once sold, the assets did not constitute the same entity as ILVA (the seller of those assets); therefore, the subsidy benefits remained with the divisions of ILVA. Likewise, we have applied to the post-privatization sales of shares the adverse inference that these did not affect the subsidy benefits to AST. This is consistent with our practice in Italian Stainless Plate, where we found that these transactions at no impact on AST's subsidy benefits (64 FR at 15510).

IV. Comments

Comment 1

AST argues that Delverde III clearly and unambiguously requires a finding in every case that the purchaser of a formerly subsidized company benefits from a financial contribution during the period of investigation, and that such a benefit determination is to be made by determining whether full value was paid for the company. However, AST maintains, the Department has ignored these requirements in this case, on the justification that the Delverde III court's reasoning was premised on erroneous impression that the Delverde transaction involved a sale of assets rather than a sale of shares. AST counters that, contrary to the Department's position, the court's determination in Delverde III is based on the clear language of the statute and a clear understanding of the case facts.

AST continues by arguing that there is nothing in the statute or in Delverde III that "even remotely suggests or supports" the Department's methodology in the Draft Redetermination. Specifically, according to the respondent the statute uses the unambiguous term "person," meaning "entity." The Department, however, posits the concept of "distinct person" which, AST interprets to mean something totally different from the statutory term and which is used to imply some "vague concept of successorship." Moreover, AST continues, the Department's reliance on corporate law in defining person is irrelevant in this context because the issue is not successorship, but benefit.

Furthermore, according to AST, the Delverde III Court's understanding of the form of the Delverde privatization is not relevant to the Court's finding given that the transactions analyzed in UK Lead Bar examined by the WTO involved both sales of assets and sales of shares, and the result was the same in both instances. Given that the Court found its decision to be "not inconsistent" with the WTO's findings, there is no basis for finding that the Court's decision was contingent on the form of the transaction.

The petitioners argue that the Department's interpretation of Delverde III is sound and accurate. The petitioners agree that, as the first step in its analysis, the Department must focus on the question of whether the original subsidy recipient and the current producer/exporter can be considered the same person. The petitioners further agree that the Department's approach for conducting this person analysis is sound, well-reasoned and rigorous as well as appropriately flexible.

The Department's Position

We disagree with AST's argument that the Department failed to follow the Federal Circuit's decision in Delverde III to determine whether KAI-owned AST (i.e., "post-sale AST") received a financial contribution and a benefit as a result of its purchase of GOI-owned AST (i.e., "pre-sale AST"). 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. It 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 reached 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 AST, the firm under investigation, was the same person as the original subsidy recipient, pre-sale AST. 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 AST and its analysis of the transaction necessarily ended.

Essentially, AST is arguing that the Department should have skipped this first step in its analysis of the change-in-ownership transaction and should have examined only whether a subsidy could be considered provided to post-sale AST on the basis that the full value was not paid (e.g., less than adequate remuneration). We do not believe that Delverde III stands for such a limited proposition. Although the Federal Circuit did not seem to view the application of the "person" requirement as in dispute under the facts before it, it is still clear from the Federal Circuit's opinion that it was the first inquiry that must be made by the Department when confronting a change in ownership.

We also disagree with AST that the Department has unlawfully developed a "person" inquiry. As AST concedes, the applicable statute requires the Department to determine whether a financial contribution and a benefit are provided "to a person." 19 U.S.C. з 1677(5)(B). In this instance, there is no dispute that pre-sale AST received subsidies. The Department's person inquiry does nothing more than determine whether, as result of a change in ownership, the person in the form of pre-sale AST is the same as (or different from) the person in the form of post-sale AST. The essence of AST's argument appears to be that such an inquiry is not permitted under Delverde III, and that a change in ownership automatically gives rise to a different person such that a "benefit" analysis is the only inquiry permitted. As explained above, we find nothing in the Federal Circuit's holding in Delverde III that requires the approach AST posits. There is nothing in the Federal Circuit's decision that indicates how the Department is to decide whether the producer or exporter under investigation is or is not the same person as the original subsidy recipient. The Federal Circuit did not hold that a mere change in owners is the dispositive criterion, as AST argues.

In the absence of any definitive criteria for making the "person" determination, the Department has developed its own criteria. That does not mean, however, that the Department has simply followed corporate successorship law. There are some basic similarities between the corporate successorship context and the countervailing duty context being addressed by the Department. As we explain above, 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.

Further, we disagree with AST's argument that the Department's reference to how "person" is defined under 1 U.S.C. з 1 or in corporate law is irrelevant. We have referenced the definition of "person" only as a starting point. There is nothing in 1 U.S.C. з 1 or the corporate law concept of person which refers to a predecessor company or connotes successorship, and the Department has made no intimation that it has interpreted or relied upon the definition of person for such purpose. The Department based its analysis with respect to whether the "person" that initially received subsidies is the same (or different) "person" as a result of the change in ownership of AST on the criteria that it developed during the course of this remand proceeding, not as AST contends, on the presumption that the term "person" encompasses some notion of a successor company.

Comment 2

AST argues that, consistent with the Charming Betsy doctrine,⁽²¹⁾ the Department must construe U.S. law to comport with the United States' international obligations unless U.S. law admits of no other interpretation. The methodology of the Draft Redetermination, AST contends, violates U.S. obligations under the WTO SCM Agreement, as interpreted in the WTO Panel and Appellate Body decisions in U.K. Lead Bar. Because it is clearly possible to construe the countervailing duty statute (as interpreted in Delverde III) in a manner consistent with U.K. Lead Bar, AST reasons, the Department violates U.S. law as well.

In particular, AST contends, the Draft Redetermination violates U.K. Lead Bar (and the statute) because the Department cannot lawfully impose countervailing duties on a private company based on pre-privatization subsidies without first demonstrating that the privatized company received a benefit during the period of investigation. In the Draft Redetermination, the Department failed to make this finding of benefit.

Moreover, AST continues, the Department's approach in the Draft Redetermination was essentially the same as the U.S. arguments in U.K. Lead Bar regarding successorship, arguments which the Panel and Appellate Body considered and rejected. In rejecting these arguments, according to AST, the Panel held that the relevant issue is not whether a company is a successor entity to a previously state-owned company but, rather, whether the successor actually received a market benefit during the period of review.⁽²²⁾ Likewise, the Appellate Body found the Department must determine whether there is any benefit during the period of investigation to the producers of the merchandise at issue by means of pre-privatization government financial contributions.⁽²³⁾

The E.C. agrees with AST that the Draft Redetermination is inconsistent with U.K. Lead Bar. Stating that the SCM Agreement requires a finding that the producer of the imported goods received a benefit during the period of investigation, the E.C. further argues that the Department cannot ignore the possibility that when a producer pays for the productive assets of a previously state-owned, subsidized company, the original benefit determination is no longer valid. In particular, according to the E.C., U.K. Lead Bar found that where fair market value is paid for the productive assets, the private producer no longer benefits from the prior subsidies.

According to the E.C., the Department's entity test completely ignores this determination and views the payment of fair market value as completely irrelevant to the issue of benefit. Instead, the Department's methodology presumes that a state-owned firm and a privatized firm are the same based on some "ad-hoc list of factors." As a result, the E.C. concludes, the new "entity" approach put forth in the Draft Redetermination is even more extreme than the Department's previous change-in-ownership methodology, resulting in even higher CVD rates.

The Department's Position

We disagree with AST and the E.C. that the Department's Draft Redetermination is inconsistent with the WTO Appellate Body's decision in U.K. Lead Bar and that it has consequently failed to construe U.S. law to comport to its international obligations consistent with the Charming Betsy doctrine. 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 AST'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.

We also disagree with the E.C. that the Department's methodology is based on an "ad hoc list of factors" which results in a presumption that a state-owned firm and a privatized firm are the same. The criteria were carefully selected 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. Accordingly, the Department selected those factors which it believed would provide it with a meaningful basis for distinguishing or not between a pre-sale entity and a post-sale entity in the countervailing duty context. 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. As we have explained, no one of these factors will necessarily provide a dispositive indication of any change in the legal person under analysis; the totality of the factors will be considered. Other factors may also be considered as circumstances warrant, but it was felt that these particular factors are generally common to the types of business configurations the Department normally encounters. Consequently, no single factor, nor all of the factors taken together, presages any particular outcome as the E.C. contends. Whatever the outcome, it is entirely case-specific, depending solely upon the facts and circumstances surrounding the specific change-in-ownership transaction under investigation.

While the E.C. 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, 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 case of AST, the Department applied its "legal person" factors to the facts and circumstances of the change in ownership of AST and determined that the legal person in the form of pre-sale AST was the same legal person in the form of post-sale AST. Because AST 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 AST 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 AST was not a different legal person from pre-sale AST, 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.

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 Charming Betsy, 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, AST's reliance on this doctrine is to no avail.

Comment 3

AST argues that the crux of the Department's analysis-that the proper basis of comparison for its distinct person determination is between the GOI-owned AST and the KAI-owned AST-is based on "invalid and absurd factual premises." In fact, AST alleges, the Department supplies no explanation whatsoever for this comparison because it lacks any rational basis. The Department's comparison is irrational, according to AST, because under that approach the spin-off of a division into a wholly-owned subsidiary of the same corporation is enough of a change to confer distinct personhood, but the privatization of a subsidiary corporation is not enough to confer distinct personhood. AST argues that, instead, the only appropriate comparison is between ILVA and KAI-owned AST.

The Department's Position

We disagree with AST. The respondent has not supported its contention that the Department's comparison of GOI-owned AST and KAI-owned AST is based on invalid and absurd factual premises, nor has it provided any concrete reasons why its proposed alternative comparison (ILVA and KAI-owned AST) is more reasonable. Moreover, AST's inference from the Department's comparison, i.e., that the spin-off of a division into a wholly-owned subsidiary of the same corporation is enough of a change to confer distinct personhood, is wrong. Nowhere have we stated or implied that the 1993 incorporation of ILVA's specialty steel operations "conferred distinct personhood" on AST. To the contrary, consistent with our past practice, we have found the 1993 incorporation of AST to be, essentially, a non-event. For example, in the Draft Redetermination (and as restated above in this final redetermination), we stated

Draft Redetermination at 18. Therefore, we find AST's arguments in this regard to be without merit and, accordingly, have not changed our basis for comparison of the pre- and post-sale entities in this final redetermination.

Comment 4

AST argues that the Department's use of facts otherwise available with regard to the pre-privatization asset spin-offs as well as the post-privatization sales of shares is illegal and unwarranted. There is extensive verified data pertaining to these transactions already on the record, AST contends, and any additional information "would hardly have allowed the Department to analyze these transactions further." More importantly, AST continues, these transactions are not relevant to AST's privatization, the subject of this remand, nor has the Department ever articulated how such information is pertinent to this proceeding. Given that it has already provided a considerable amount of information in response to the other questions in the Department's remand questionnaires, AST requests that the Department reverse its preliminary decision regarding facts available.

The Department's Position

We disagree with AST and have continued to use facts available in this final redetermination with regard to the pre-privatization asset spin-offs as well as the post-privatization sales of shares. As explained in our October 16, 2000, remand supplemental questionnaire to the GOI (at 3),

We recognize the efforts of the responding parties in providing the requested information in response to other questions in our remand questionnaire, but those efforts are not at issue here. Neither AST nor the GOI provided a substantive explanation why its could not provide the requested additional information (i.e., not already on the record) regarding these asset spinoffs and sales of shares. Their responses were, instead, largely to question the relevance of the Department's questions.⁽²⁴⁾

Moreover, contrary to the assertions of AST and the GOI, we do not find there to be sufficient information regarding these asset spinoffs and sales of shares on the record to determine whether the entity sold in the transaction can be considered a continuous business entity because it was operated in substantially the same manner before and after the change in ownership. For example, there is not sufficient information to determine what effect, if any, these transactions had on the entities' workforce or production facilities. Therefore, in lieu of the necessary information we have resorted to facts available.

Comment 5

AST argues that in the Draft Redetermination, the Department continued to repeat its mistake from Italian Stainless Plate of overstating the amount of liabilities assigned to AST as debt forgiveness. Specifically, AST contends that the Department has acknowledged in a later case⁽²⁵⁾ based on the same facts that the total comparable indebtedness reported in the E.C. Monitoring Reports more accurately reflects the residual assets that were sold in liquidation than the amount the Department used in Italian Stainless Plate. Therefore, according to AST, the Department should revise its debt forgiveness calculation to make it consistent with this other case.

The Department's Position

The calculation of AST's debt forgiveness is not relevant to the Department's change-in-ownership methodology, the focus of this remand. Therefore, we have not considered any change to the debt forgiveness calculation in this final redetermination.

V. Conclusion

We have recalculated the net subsidy rate applicable to AST as shown in a separate memorandum to the file. The new, recalculated ad valorem subsidy rate for AST is 17.25 percent.

___________________

Richard W. Moreland

Acting Assistant Secretary for

Import Administration

___________________

Date

1. 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.

2. 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 AST.

3. 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.

4. 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) (зз 351.524 and 525).

5. 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.

6. 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.

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

8. 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).

9. See Letter to the Secretary of Commerce from Collier Shannon Scott regarding Remand Proceeding in Acciai Speciali Terni S.p.A. v. United States, Ct. No. 99-06-00364 (Stainless Steel Plate in Coils from Italy), dated September 11, 2000.

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 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 6 for a comprehensive history of AST and its predecessors. See also Italian Stainless Plate, 64 FR at 15508.

13. Statements by company officials at verification support this finding. For instance, officials stated that, "{s}tarting in 1989, all of the separate publicly-held steel companies under Finsider were merged into ILVA. At this point, officials explained, Terni lost its administrative independence but retained its operational independence." Memorandum to Case File, Results of Verification of AST (February 3, 1999) at 2.

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

15. This is further confirmed in the EC's report on the progress of AST's privatization, where the EC noted that any investments made by AST in 1994 "did not modify the production capacity of the company." See ECSC Steel Monitoring Report No. 3 at 4 (attached to Department Memorandum Regarding ECSC Reports on ILVA Liquidation (November 4, 1998)).

16. See [ * * * ] (Proprietary Planning Document) at 4, submitted as Attachment 2 to the AST Remand Questionnaire Response, which states that "[ * * * ]."

17. See AST June 25, 1998 Questionnaire Response at pp. 134-135 (Original Questionnaire Response).

18. See also the Morgan Grenfell Valuation Study commissioned by KAI (Attachment 6 of the AST Remand Questionnaire Response), and subsequently updated (Attachment A8-10 of the June 25, 1998 Questionnaire Response).

19. An extensive discussion of the debts that were ultimately transferred to the privatized AST is included in Italian Stainless Plate, 64 FR at 15512.

20. This reduction is confirmed in the EC's semi-annual report on the progress of AST's privatization, where the EC noted that "{w}orkforce reductions foreseen by the restructuring plan have been achieved at the end of 1996 . . ." See ECSC Steel Monitoring Report No. 9 at 27 (attached to Department Memorandum Regarding ECSC Reports on ILVA Liquidation (November 4, 1998)).

21. Alexander Murray v. Schooner Charming Betsy, 6 U.S.(2 Cranch) 64, 2 L. Ed. 208 (1804) (Charming Betsy).

22. Panel Report at 6.70.

23. Appellate Body Report at 6.69 and 6.70.

24. See, e.g., GOI First Remand Supplemental Response at 10, and AST Remand Questionnaire Response at 28-29.

25. AST cites to Stainless Steel Sheet and Strip from Italy, 64 FR 30624, 30634 (June 8, 1999).