FINAL RESULTS OF REDETERMINATION PURSUANT TO COURT REMAND

GTS Industries S.A. v. United States

• 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 GTS Industries S.A. v. United States, Court No. 00-03-00118 (CIT August 24, 2000) (GTS).

II. Background

In the Final Affirmative Countervailing Duty Determination: Certain Cut-to-Length Carbon-Quality Steel Plate from France, 64 FR 73277 (December 29, 1999) (French Carbon Plate), the Department determined that countervailable subsidies are being provided to producers and exporters of cut-to-length carbon-quality plate from France. GTS Industries S.A. (GTS) challenged this determination before the U.S. Court of International Trade (CIT) arguing that (1) the subsidies granted to Usinor prior to its sale of GTS were improperly allocated to GTS, (2) even if a portion of Usinor's subsidies could be allocated to GTS, the Department misapplied its change-in-ownership methodology, and (3) the Department's use of a 14-year average useful life to allocate non-recurring benefits is not supported by substantial evidence on the record. See Complaint (April 7, 2000).

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 GTS, 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 9, 2000, at the Department's request with the consent of the parties, the CIT remanded the French Carbon Plate proceeding to the Department with instructions to "determine the applicability, if any, of the decision of the Federal Circuit in Delverde, S.r.l. v. United States, 202 F.3d 1360 (Fed. Cir. 2000) reh'g denied (June 20, 2000) to this proceeding, and (2) embark upon further fact finding, if appropriate." GTS Order (August 9, 2000). On August 24, 2000, pursuant to the Department's request with the consent of the parties, the CIT extended the remand deadline to 120 days from August 24, 2000.

On August 22, 2000, the Department solicited comments from the petitioners and GTS regarding potential revisions to our change-in-ownership methodology in light of Delverde III. The petitioners submitted arguments regarding methodology on August 29, 2000; GTS submitted methodological arguments on September 11, 2000. The petitioners subsequently submitted rebuttal arguments on September 28, 2000.

On September 19, 2000, we sent a questionnaire to GTS (Remand Questionnaire) soliciting information from GTS, the Government of France (GOF) and the EC regarding Usinor's/GTS's changes in ownership, followed by supplemental questionnaires on October 17, 2000. On October 10, 2000, GTS submitted its response (GTS Remand Questionnaire Response) to the Department's initial remand questionnaire, followed by its supplemental remand questionnaire response on October 30, 2000 (GTS Remand Supplemental Response). The remand supplemental response from the GOF was submitted on October 30, 2000 (GOF Remand Supplemental Response). On October 13, 2000, the petitioners submitted comments on the GTS Remand Questionnaire Response.

The Department circulated a draft remand determination to the interested parties on November 28, 2000 (Draft Redetermination). Timely comments were filed on December 4, 2000, by the petitioners (Petitioners' Draft Comments), the European Commission (E.C.) (E.C.'s Draft Comments), and GTS (GTS'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. § 1671(a)(1). In order to find that a countervailable subsidy had been provided to the "manufacture, production, or export" of the imported merchandise, the Delverde III court found that the person who produced or exported that merchandise must have received a financial contribution and enjoyed a benefit from that financial contribution. Id. at 1365, 1366. In the Delverde III court's words, a subsidy exists when "an authority provides a financial contribution, . . . to a person and a benefit is thereby conferred." Id., quoting 19 U.S.C. § 1677(5)(B) (emphasis in original). The Delverde III court stated that this meant that "{i}n order to conclude that a 'person' received a subsidy, Commerce must determine that a government provided that person with both a 'financial contribution' (or equivalent as described in §§ 1677(5)(B)(ii) and (iii)) and a benefit." 202 F.3d at 1365 (footnote omitted). ⁽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 (§ 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 of 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 demonstrated 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 have 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 precedent in the countervailing duty context. In this regard, we examined whether it might be appropriate to 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. ⁽⁹⁾

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). ⁽¹⁰⁾

As is evident below, when we apply this approach to the facts and circumstances of the Usinor privatization, we find that the pre-sale and post-sale entities are not distinct persons. It is on that basis that we have attributed the subsidies provided prior to the change in ownership to the post-sale entity, Usinor, and we, therefore, do not reach the question of whether a subsidy has been provided to GTS as a result of the change-in-ownership transaction. ⁽¹¹⁾

Usinor Privatization

We start by clarifying that the Department has identified three producers of subject merchandise in this investigation: Sollac, CLI and GTS. During the POI, both Sollac and CLI were wholly-owned, consolidated subsidiaries of Usinor and, therefore, were assigned a common "Usinor" ad valorem subsidy rate. During the POI, GTS was a separate (though still partially Usinor-owned) producer that was assigned its own subsidy rate. ⁽¹²⁾ GTS' ad valorem rate is based entirely upon subsidies granted to Usinor prior to Usinor's 1995 privatization, and attributed to GTS in part when GTS was still a consolidated, majority-owned subsidiary of Usinor. Therefore, the main change in ownership transaction in this investigation is Usinor's 1995 privatization and, accordingly, we have analyzed this transaction, as detailed below. ⁽¹³⁾

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 Usinor 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 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 (post-privatization Usinor) 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 from GTS, the GOF, and the E.C. as to the nature of the sale. As a result of this more focused inquiry, the Department has found that the transaction at issue was structured as follows.

Up until the time of Usinor's privatization, Usinor was owned (directly or indirectly) by the GOF. Usinor was privatized beginning in July 1995, when the GOF and Clindus offered the vast majority of their shares in the company for sale. ⁽¹⁴⁾ Clindus was a subsidiary of Credit Lyonnais, which at that time was controlled by the GOF. After the privatization and, in particular, by the end of calendar year 1997, 82.28 percent of Usinor's shares were held by private shareholders who could trade them freely. Usinor's employees owned 5.16 percent of Usinor's shares; Clindus, 2.5 percent; and, the GOF, 0.93 percent. The remaining 14.29 percent of Usinor's shares were held by the so-called "Stable Shareholders."

In analyzing whether the producer of merchandise subject to this investigation is the same business entity as the pre-privatization Usinor, we have examined whether Usinor continued the same general business operations, and retained production facilities, assets and liabilities, and personnel of the pre-privatization Usinor. Based on our analysis, we have concluded that the privatized Usinor is for all intents and purposes the same "person" as the GOF-owned steel producer of the same name which existed prior to the privatization. Consequently, the subsidies bestowed on Usinor prior to its 1995 privatization are attributable in part to GTS, and continued to benefit GTS during the POI in the amount of GTS' pro rata share. ⁽¹⁵⁾

Continuity of General Business Operations

Based on our review of the record, Usinor has produced the same products and remained the same corporation at least since the late 1980s. ⁽¹⁶⁾ In 1987, Usinor became the holding company for the French steel groups, Usinor and Sacilor. (The GOF had majority ownership of both Usinor and Sacilor since 1981.) Usinor's principal businesses covered flat products, stainless steel and alloys, and specialty products. In 1994, these three product groups were produced by three subsidiaries: Sollac, Ugine and Aster (respectively). See International Offering Prospectus (Prospectus) at 6, attachment 8 to the GOF's May 11, 1999 questionnaire Response (GOF Original Questionnaire Response).

This same structure continued after Usinor's privatization in 1995. Usinor's organizational chart during the period of investigation shows the same three major products being produced by the same three subsidiaries. See Respondent's May 11, 1999 questionnaire response (Respondent's Original Questionnaire Response), Attachment 1. In 1994 (prior to the privatization), flat products contributed 55 percent of consolidated sales, while stainless and specialty products contributed 20 and 18 percent respectively. See Prospectus at 6. In the years following privatization (1995, 1996 and 1997), flat carbon steels continued to contribute 49 - 53 percent of Usinor's consolidated net sales, while stainless and alloy, and specialty steel accounted for 23 - 25 percent, and 19 - 21 percent, respectively. See GOF Original Questionnaire Response, Exhibit 12 at 6.

We have also examined whether post-privatization Usinor held itself out as the continuation of the previous enterprise (e.g., did it retain the same name). In this instance, Usinor retained its same name and there is no indication that the privatized company held itself out as anything other than a continuation of pre-privatization Usinor.

The continuity of Usinor's business operations is also reflected in Usinor's customer base. Prior to privatization, the automobile industry was a principal purchaser of Usinor's output, accounting for approximately 30 percent of Usinor's sales in 1994. In 1997, the automobile industry was still Usinor's major customer (36 percent of Usinor's sales). The construction industry was the second largest purchaser in both years, accounting for 26 and 23 percent respectively. See Prospectus at 17. See also GOF Original Questionnaire Response, Exhibit 12 at 8.

Continuity of Production Facilities

According to Usinor, neither product lines nor production capacity changed as a result of the privatization, except those changes that "occurred in an ongoing manner in the ordinary course of business." ⁽¹⁷⁾ Usinor adds that, "no facilities or production lines were added or eliminated specifically as a result of the sale." ⁽¹⁸⁾ As is clear from a comparison of the Prospectus for the 1995 privatization and Usinor's 1997 Annual Report, steel production facilities have remained intact. The company continues to focus on an "all steel" strategy, in which it engages in all aspects of the steel production process and produces a wide variety of steel products. ⁽¹⁹⁾ Finally, Usinor's steel production facilities did not change their physical locations.

Continuity of Assets and Liabilities

Based on our review of the Prospectus describing the sale of Usinor's shares, Usinor was sold intact, with all of its assets and liabilities. While the GOF continued to own a small percentage of Usinor's shares, there is no indication that it retained any of Usinor's assets or liabilities.

Retention of Personnel

Usinor's Articles of Incorporation changed as a result of the privatization and the new Articles of Incorporation specified new procedures for electing the Board of Directors. New directors were elected to the Board under the new procedures. However, Usinor states that its Chairman and Chief Executive Officer remained the same before and after the privatization. ⁽²⁰⁾ Similarly, Usinor's workforce did not change. ⁽²¹⁾

Therefore, based on the facts of the case and our analysis of a variety of relevant factors, once privatized, Usinor continued to operate, for all intents and purposes, as the same "person" that existed prior to the privatization and, thus, the pre-privatization subsidies continued to benefit Usinor even under private ownership.

Other Changes in Ownership

In French Carbon Plate, we examined several spin-offs of Usinor-owned facilities (the 1993 sale of FOS-OXY, the 1994 sale to Entreprise Jean LeFebvre, the 1994 sale of Richemont, the 1994 sale of Ugine shares, and the 1995 repurchase of Ugine shares). Given the small size of these transactions, we have not analyzed them for purposes of this remand determination. With regard to the partial changes in ownership of GTS in 1992 and 1996, GTS has argued that Usinor's 1995 privatization had the effect of eliminating the subsidies to Usinor and GTS. See e.g., Remand Questionnaire Response at 2. Therefore, GTS has argued in the context of this remand,"{a}t this stage in the proceedings, the Department should focus its attention upon the 1995 privatization of Usinor." Id. Consistent with this view, neither GTS nor the GOF provided a full, narrative response to the change-in-ownership questions in our remand questionnaire as they relate to the 1992 and 1996 transactions. Specifically, in the cover letter to the Remand Questionnaire the Department requested that parties "answer each question as it may apply to each sale of assets or shares analyzed in the final determination." However, the respondent merely submitted a list of citations to various documents on the record that generally addressed some of the questions posed. See Remand Questionnaire Response at Appendices 2 and 3. The parties, therefore, have failed to provide the information requested in the form requested. Without this data, the Department cannot analyze the 1992 and 1996 GTS transactions (e.g., whether GTS was a business entity that changed as a result of these transactions). As a result, we have applied facts available pursuant to sections 776(a)(2)(A) and (B) of the Act, and have made the inference that the 1992 and 1996 partial changes in ownership did not affect the subsidy benefits attributable to GTS. Therefore, in calculating an ad valorem subsidy rate for GTS, as discussed above, we have assigned to GTS its pro rata share of pre-privatization Usinor subsidies.

IV. Comments

Comment 1:

GTS argues that the Department erroneously based the scope of this remand proceeding upon the CIT's initial remand order of August 9, 2000, rather than the revised remand order of August 24, 2000. Pursuant to the revised remand order, the Department was required to amend its original determination in light of "all relevant authority" which, according to GTS, includes the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement) and the WTO Dispute Settlement Panel and Appellate Body reports interpreting the SCM Agreement. The Department, therefore, erred in treating U.K. Lead Bar as "not directly relevant" to this proceeding.

GTS argues that the U.S. countervailing duty statute, the SCM Agreement and the binding precedent established in Delverde III and U.K. Lead Bar require the Department to analyze whether a producer/exporter has received a countervailable benefit during the period of investigation. The Department violated this requirement, GTS contends, by failing to undertake any analysis of whether GTS received, during the period of investigation, a benefit from the pre-privatization subsidies paid to Usinor. According to GTS, the Department simply ignored the fair market value nature of the change-in-ownership transaction and imposed its non-recurring grant allocation methodology as an irrebuttable presumption of continuing countervailable benefit.

According to GTS, the essential requirement of showing a benefit to the producer/exporter during the period of investigation is not somehow dependent upon a so-called "person requirement" as claimed by the Department; rather, both the identity of a "person" and a "benefit" must be made with reference to the period of investigation. The relevant "person" is the producer/exporter in existence at the time of the period of investigation and against whom countervailing duties are sought to be imposed. The relevant "benefit" is the benefit received by that producer/exporter during the period of investigation.

According to GTS, the contention that, when the operations of the post-privatization company are essentially the same as the operations of the pre-privatization company, the Department can rely upon the original benefit determination at the time the subsidies were granted was raised and specifically rejected in U.K. Lead Bar. Both Delverde III and U.K. Lead Bar require that, after a change-in-ownership transaction, the Department must demonstrate continuing benefit to the company against which countervailing duties are to be imposed.

The E.C. did not comment specifically on whether the Draft Redetermination was consistent with the findings of Delverde III, but the E.C. agrees with GTS 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.

The petitioners counter by arguing that, to the contrary, the methodology that the Department adopted in the Draft Redetermination reflects the only correct interpretation of Delverde III. That decision mandates that, in the context of changes in ownership, "{a} subsidy can only be determined by finding that a person," meaning "the producer or exporter" of the subject imports, "received a 'financial contribution' and a 'benefit'. . . ." If the current producer is the same as the person who received the subsidy, the subsidy which has been determined to confer countervailable benefits remains unchanged and fully countervailable. The petitioners further contend that though the Federal Circuit in Delverde III directed the Department to determine whether the change in ownership itself provided the producer/exporter with a financial contribution and a benefit, as the Department correctly notes in the Draft Redetermination, the Federal Circuit did so with the clear (if erroneous) understanding that in that case the original subsidy recipient and the producer under investigation were distinct persons.

The petitioners argue further that the Department's analysis is entirely consistent with the decision of the WTO Appellate Body in U.K. Lead Bar. The petitioners first note that the respondents' efforts to argue to the contrary are based almost entirely on the Panel report in that case. ⁽²²⁾ The Appellate Body, by contrast, was clear on two key points: First, as did the Federal Circuit in Delverde III, the Appellate Body saw the essential legal issue as whether the producer under investigation had, itself, received a subsidy. Second, the petitioners maintain that the Appellate Body emphatically limited its decision to the narrow facts of that case.

Department's Position: We disagree with GTS and the E.C. that the Draft Redetermination is inconsistent with Delverde III and the WTO Appellate Body's decision in U.K. Lead Bar, and that we have failed to construe U.S. law to comport the United States' international obligations under the SCM Agreement.

The Department's Draft Redetermination is consistent with the Federal Circuit's decision in Delverde III. The Department followed the Federal Circuit's decision in Delverde III in determining whether post-sale GTS received a financial contribution and a benefit as a result of the sale of GTS.

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, 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.

With regard to the remainder of the Federal Circuit's decision, we note that, after faulting the Department for conclusively presuming that the benefits of the pre-change in ownership subsidies automatically passed through to Delverde, the Delverde III court instructed the Department to "examine the facts and circumstances, including the terms of the transaction," and then determine "whether Delverde indirectly received a subsidy" by virtue of its purchase of the FSM pasta operation. Delverde III, 202 F.3d at 1369-70. In the instant case, that is what the Department has done concerning the sale of Usinor. The Department examined the facts and circumstances, including the terms of the transaction, first to determine whether post-sale Usinor was the same person as the original subsidy recipient, pre-sale Usinor. 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 Usinor (and, subsequently, GTS) and its analysis of the transaction necessarily ended.

Essentially, GTS 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 Usinor 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.

Decisions reached under the WTO dispute settlement procedures do not constitute "relevant authority" for the purposes of a remand order issued by a U.S. court. Nevertheless, we note that the Department's Draft Redetermination is consistent with the U.K. Lead Bar decision and the SCM Agreement, 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, the Appellate Body did not rule specifically on the United States' argument regarding the criteria that could be used to determine legal successorship.

In the case of GTS, the Department applied its "legal person" factors to the facts and circumstances of the change in ownership of Usinor and determined that the legal person in the form of pre-sale Usinor was, for all intents and purposes, the same legal person in the form of post-sale Usinor. Because Usinor 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 Usinor 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 Usinor was not a different legal person from pre-sale Usinor, 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.

Comment 2:

GTS contends that the Department has long held that "the CVD law is not based upon principles of corporate law or property law." Rather, GTS continues, the countervailing duty law is concerned with "benefit" to the recipient during the period of investigation. "Benefit" is a special term under the countervailing duty law meaning a benefit received from a government that is inconsistent with commercial considerations.

According to GTS, this concept is foreign to corporate law and property law. Corporate law and property law are concerned only with the ownership of certain assets or responsibility for certain liabilities, but ownership and corporate liability say nothing about whether a company received a benefit that is inconsistent with commercial considerations. For that, GTS maintains, the Department must analyze whether a change-in-ownership transaction was consistent with market principles.

The interplay between commercial law and countervailing duty law is clearly seen in the Department's treatment of upstream subsidies and goods purchased from a government. In either case, mere ownership under the principles of commercial law are not enough to impose countervailing duties upon the company purchasing input products or government-provided goods. Instead, the company would only be liable for countervailing duties if the price it paid for the products was less than their normal market price.

Department's Position: In the absence of any definitive criteria for making the "person" determination, the Department has developed its own criteria to determine what is a "person"under the CVD law. While the Department did examine how a person is defined in certain commercial law settings, that does not mean that the Department has simply followed the definition of person in corporate successorship law. There are some basic similarities between the corporate successorship context and the countervailing duty context being addressed by the Department. 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" by offsetting the benefit conferred by a subsidy.

We also note that GTS' reference to upstream subsidies and goods provided by a government is misplaced. When only the sale of an input is at issue (as in these two situations) as opposed to the sale of a company, there is no argument to be made that the two companies involved are the same "person." Furthermore, in the first place, the subsidy bestowal investigated by Commerce takes place at the time when the firm under investigation receives the subsidized input or when the firm under investigation receives the good or service provided by the government. Thus, there is no relationship between predecessor and successor firms that must be addressed.

Comment 3:

GTS contends that the record in this case contains a plethora of information demonstrating that the 1995 privatization of Usinor was at arm's length, based upon commercial considerations and made for fair market value. According to GTS, because the owners of the newly privatized Usinor paid full fair market value for the company in an arm's length transaction based upon commercial considerations, the newly privatized company received no benefit from the subsidies bestowed before privatization. GTS suggests that there is nothing in the facts of this case that can distinguish it from U.K. Lead Bar-both cases involve a privatization accomplished through a public offering of stock.

Likewise, the E.C. argues that the Department's entity test completely ignores the necessary finding that the producer of subject merchandise received a benefit during the period of investigation and views the payment of fair market value as completely irrelevant to the issue of benefit.

Department's Position: As discussed in detail above under the heading Interpreting Delverde III, the first requirement in our analysis of whether a business benefitted in the period of investigation from prior subsidies 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 original subsidy recipient and the current producer/exporter are the same person, all elements of a subsidy are satisfied with regard to that person, including the benefit element, and its exports are subject to countervailing duties to offset those subsidies.

With regard to the 1995 privatization of Usinor, the Department applied its "legal person" factors to the facts and circumstances of the transaction and determined that the legal person in the form of pre-sale Usinor was, for all intents and purposes, the same legal person in the form of post-sale Usinor. Because Usinor 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 Usinor and its formerly majority-owned subsidiary GTS are the same legal persons upon which the original financial contributions were bestowed and, therefore, 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 privatized Usinor was not a different legal person from pre-sale Usinor, there was no need to conduct an analysis of the fair market value nature of the privatization transaction. Accordingly, GTS' argument that the owners of the newly privatized Usinor paid fair market value for the company in an arm's length transaction based upon commercial considerations is not relevant to this analysis. Only when it is determined that the post-sale firm is different from the pre-sale firm is that type of analysis warranted.

We also disagree with a notion that is implicit in the arguments of both GTS and the E.C., namely, that a mere change in the owners of a company, without more, is sufficient to give rise to a new person. As should be evident, this type of approach would result in a per se rule that a new person is created whenever a sale occurs between two unrelated parties, or in other words, whenever there is a change in ownership. At the very least, we do not interpret the countervailing duty statute as requiring the Department to base its "person" determination solely and dispositively on this criterion.

We also consider such an approach to be ill-advised. It would mean, for example, that a new "person" is created even when a company's shares simply turn over through public trading on a stock market. Although we have not adopted the test used under general corporate successorship law, we note that a mere change in owners in that context is not dispositive of whether a new person exists for liability purposes. In addition, in the countervailing duty context, as a policy matter, we view the analysis that we have developed in this case to be more consistent with the remedial goals of the countervailing duty statute, namely, to "level the playing field" by offsetting the benefit conferred by a subsidy.

Comment 4:

The Department's revised methodology, GTS maintains, is not based upon clearly defined criteria but, rather, on arbitrarily selected factors that change from case to case and ignore certain crucial evidence. For example, GTS argues, the Department has ignored the fact that the privatization of Usinor was made at fair market value, and has ignored the fundamental transformation that a privatization causes in a company.

Moreover, according to GTS, the Department has selectively and unfairly characterized the evidence contained in the administrative record, ignoring the fact that the vast majority of Usinor's post-privatization Board of Directors were not members of the Board of Directors prior to privatization. GTS states that, had the Department objectively analyzed all of the relevant evidence, it would have concluded that post-privatization Usinor was not the same person that existed prior to the privatization.

Likewise, the E.C. argues, the Department's methodology presumes that a state-owned firm and a privatized firm are the same based on an "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.

Department's Position: We disagree with the contention of GTS and the E.C. that our "person" determination is based on ad hoc or arbitrarily selected factors that change from case to case and ignore certain crucial evidence. As we explain above, in the absence of any definitive criteria identified by the Delverde III court for making the "person" determination, the Department has developed its own fact-based approach for assessing changes in the entity under consideration. With this goal in mind, the Department identified four basic factors which it believed would be flexible enough to be applicable to a wide variety of business configurations. The criteria were carefully selected to enable the Department to make as meaningful a comparison as possible in the countervailing duty context 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. Thus, no single factor will necessarily provide a dispositive indication of any change in the entity under analysis. Accordingly, other factors may also be considered as circumstances warrant. However, we believe that these particular factors are generally common to the types of business configurations the Department normally encounters.

It does not follow that, merely because we have not established an all-inclusive, set list of factors in this remand to be used to analyze every transaction we encounter, we have not established clearly defined criteria for analyzing these transactions. Contrary to the E.C.'s and GTS' contention, our approach is not ad hoc or arbitrary. Rather, our express intent is to analyze all relevant and available information in determining whether a change in ownership involves a continuous business entity that was operated in substantially the same manner before and after a change in ownership. We have adopted this approach because we recognize that the specific facts and circumstances surrounding each change in ownership will be unique and, therefore, will require a flexible approach. Thus, this flexible approach is fully consistent with the statute, which directs the Department to examine the particular facts and circumstances of a transaction. We also disagree with GTS when it faults the Department for ignoring "all financial aspects of the change in ownership" and the "radical, fundamental transformation that a privatization causes," and for unfairly characterizing the changes in Usinor's board of directors. In specifically analyzing the effect of Usinor's privatization on the continuity of that business entity, we considered all relevant record facts, without mis-characterizing them.

The statement by GTS that we ignored all financial aspects of the transaction is not correct. In the Continuity of Assets and Liabilities section of the Draft Redetermination, as above, we noted our findings regarding the effect of the transaction of Usinor's financial position. GTS is correct in that we did not consider whether Usinor was purchased at fair market value, but that is only because we found the pre-sale entity and the post-sale entity to be the same person; the existence of a fair market value purchase price only becomes relevant when the pre-sale entity and the post-sale entity are found to be different persons and an inquiry is made into whether a subsidy was provided through the privatization transaction.

Meanwhile, GTS did not specify what "radical" and "fundamental" changes we overlooked, other than to suggest that Usinor "must now operate under the rigors of the sober and often merciless international stock markets." It is unclear, however, how this fact alone undermines the determination that Usinor was an ongoing business entity. While the new shareholders elected a new Board of Directors, the Chairman of the Board remained the same and Usinor's management remained largely the same. More fundamentally, the business operations of Usinor remained largely unchanged, and Usinor continued to hold itself out as the same company despite its new owners.

Comment 5:

GTS states that, during the original investigation, the Department collected and analyzed a plethora of information concerning the 1992 and 1996 GTS changes-in-ownership and concluded that Usinor did not have the ability to direct or control GTS and that, therefore, the subsidies granted to Usinor were not "attributable to GTS" under 19 C.F.R. § 351.525. Having determined that GTS was free from Usinor's direction and control, GTS reasons that it is logically indefensible to say that Usinor and GTS continue "to operate, for all intents and purposes, as the same 'person'."

Moreover, GTS continues, there is no way that it could have benefitted, after the 1992 and 1996 change-in-ownership transactions, from the subsidies paid to Usinor. In economic terms, Usinor did not give up anything when it transferred GTS. It transferred its interest in GTS but received in return a corresponding payment for that interest. Thus, even assuming for the sake of argument that Usinor is benefitting from countervailable subsidies, that benefit would not somehow have been taken away from Usinor and transferred to GTS as a result of the 1992 and 1996 change-in-ownership transactions.

The petitioners argue that the Department developed and articulated in this remand a test for determining whether the original subsidy recipient and the post-change-in-ownership producer/exporter are the same person based on continuity of general business operations, continuity of production facilities, continuity of assets and liabilities and retention of personnel. This test is very sensibly built upon the Department's successor-in-interest test and corporate legal principles. Based on that analysis, the Department concluded that Usinor/GTS is the same person as the subsidy recipient and the subsidies bestowed on Usinor/GTS prior to the 1995 privatization are attributable to Usinor after 1995 and, thus, in part to GTS during the 1998 POI.

Department's Position: GTS suggests that a change in control is dispositive evidence of a change in entity under our "person" test. We disagree. As discussed above, despite the change in ownership of Usinor, which included a change in control, Usinor continued to be the same person after its 1995 privatization. With regard to GTS, in French Carbon Plate we examined Usinor's potential cross-ownership of GTS as well as its potential ability to direct and control GTS in order to determine whether these two companies should be treated as one for the purposes of calculating a CVD rate in the period of investigation. Towards that end, we determined that, as a result of the 1996 partial change in ownership of GTS, Usinor no longer had the ability to direct or control GTS. ⁽²³⁾

But this finding is not dispositive of the issue examined in this remand, which focuses more fundamentally on whether the change in ownership of Usinor, or the changes in Usinor's ownership of GTS, resulted in a new business entity. As discussed above, because GTS did not provide an adequate response to our remand questionnaire, we have assumed that GTS remained the same entity before and after the 1992 and 1996 transactions.

Comment 6:

According to GTS, as required by Article 19.1 of the SCM Agreement, the Department has long held that subsidies can be repaid, thereby diminishing a company's liability for countervailing duties. Because the Department's revised methodology does not account for any repayment to the government or even analyze the amount of consideration paid to the government in the privatization transaction, GTS argues that it conflicts with this long-established principle.

Department's Position: The issue of repayment is not relevant to a case such as this one in which the pre- and post-sale entities are determined to be the same.

Comment 7:

GTS argues that the Department erred in applying facts available to the 1992 and 1996 changes in ownership. According to GTS, it responded fully to the Department's requests for information. Because all of the information requested by the Department concerning the 1992 and 1996 GTS transactions were already on the administrative record, GTS submitted detailed appendices showing precisely where the information could be found on the record and explaining how the information addressed the Department's questions. GTS argues that this complied entirely with the explicit instructions contained in the Department's information request, and the Department never informed GTS that its submission was in anyway deficient as required by 19 U.S.C. § 1677m(d).

The petitioners argue that, with respect to these other transactions, including the partial spin-offs of GTS to related and unrelated parties, even GTS agrees that they were irrelevant to this remand and the relevant inquiry related solely to privatization of Usinor. ⁽²⁴⁾ Thus, the Department does not have to reach the conclusion that those transactions did not affect the subsidy benefits attributable to GTS by applying facts otherwise available with adverse inference, albeit such a finding is justified by GTS' failure to provide the requested information. ⁽²⁵⁾ The Department should simply make the same conclusion on the facts and on the ground that it is not contested.

Department's Position: We disagree with GTS' contention that the use of facts available is not warranted. In the cover letter to the Remand Questionnaire, we stated the following:

We realize that some of the information requested in the attached questionnaire may already be included in some form in the original investigation case file. If you believe that there is already an adequate response to a particular question contained in the investigation file documents, please cite to the pertinent document(s) and page number(s), and explain how that information addresses the question posed. Otherwise, provide a full and detailed response to the question. (Emphasis added.)

. . . Some of the questions pertain specifically to the privatization of Usinor or to the partial privatizations of GTS, while others are more applicable to changes in ownership generally. Please answer each question as it may apply to each sale of assets or shares analyzed in the final determination. (Emphasis in original.)

Subsequently, in the cover letter to our October 17, 2000, remand supplemental questionnaire, we noted that

we find that certain requested information has not yet been provided or that certain additional information or clarification is required. Enclosed is a supplemental remand questionnaire which highlights certain of these areas. A complete response, fully supported by source documentation, to these supplemental questions as well as to the questions in the remand questionnaire regarding the seller and the company sold for all changes in ownership is required at this time. (Emphasis added).

Thus, the responding parties were notified of the deficiencies in their reported information. Yet in their Remand Supplemental Responses, both GTS and the GOF continued to provide insufficient responses to the Department's questions regarding the effects of the 1992 and 1996 transactions. Examples of specific questions posed by the Department to which the GTS and GOF responses were insufficient are as follows: ⁽²⁶⁾

1. Identify any production facilities that will be or have been acquired or disposed of as a result of the sale.

2. Identify any and all anticipated changes in the product lines and production capacity in any of Usinor's or GTS's facilities producing the subject merchandise that may have occurred as a result of the sale.

3. Identify any new or different facilities that may have been acquired as a result of the sale at which the subject merchandise would be produced.

4. Identify any facilities that will be closed or have been closed as a result of the sale.

5. Please identify the number and job description (management, production workers, sales personnel, etc.) of any employees whose jobs were terminated as a result of the sale. Please identify the number and job description (management, production workers, sales personnel, etc.) of any job positions that were created as a result of the sale.

6. Indicate whether any of the suppliers of Usinor or GTS changed as a result of the sale.

7. Please identify what impact, if any, the sale had on the company's customer base.

As noted above, in response to the questions regarding the 1992 and 1996 transactions in the Remand Questionnaire Response, the respondent merely submitted a list of citations to various documents on the record that generally addressed some of the questions posed. ⁽²⁷⁾ However, the bulk of the record information cited addressed only the questions concerning the form of the transactions, and the resulting changes in the corporate ownership of GTS' corporate parents. There was little information cited on the record pertaining to the effects of the transactions on GTS' operations. As one source for the information requested, for example, GTS cited to various financial statements and annual reports in its verification exhibits. Yet, these exhibits are in the original French and of little use our analysis here.

Thus, GTS and the GOF did not provide sufficient answers, in the form requested, to our requests for information and, as a result, the Department was unable to apply the criteria for its entity test (as explained above) to the 1992 and 1996 transactions in determining whether GTS was a continuous entity. Thus, we find that the use of facts available is appropriate.

Comment 8:

According to GTS, the Department conducted this remand proceeding pursuant to very specific written instructions as to permitted filings, page limits and deadlines. GTS maintains that the petitioners' submissions of September 28 and October 13, 2000 were filed in contravention of these rules. The Department should, therefore, strike these submissions from the record and not consider them in making its determination.

Department's Position: We disagree with GTS' argument that certain submissions of the petitioners were filed in contravention of the established rules for comment submissions in this remand. On August 22, 2000, the Department sent letters to the petitioners and the respondent "inviting interested parties to submit initial comments regarding the remand." In these letters, the Department specified a deadline for these initial comments of September 5, 2000. Though we did not explicitly allow for rebuttal comments, our letter did not preclude them either. Subsequently, the petitioners submitted their initial comments on August 29, 2000, followed by a rebuttal to the respondent's comments on September 28, 2000, and further followed by comments on the respondent's Remand Questionnaire Response on October 13, 2000. The respondent did not object at the time to the petitioners' additional comments.

On November 28, 2000, the Department again sent letters to the petitioners and the respondent, inviting comments on the Draft Redetermination. In these letters, however, we stated explicitly that we would not consider any comments submitted after the established December 11, 2000 deadline. The petitioners and the respondent submitted their comments accordingly.

Therefore, all interested parties to this remand had ample opportunity, in their December 11, 2000, comments on the Draft Redetermination, to comment on all aspects of the Department's draft methodology as well as on all facts and arguments submitted by other parties prior to the final December 11, 2000 deadline. Thus, we find that GTS has not been unfairly disadvantaged by our acceptance of any of the petitioners' earlier submissions.

Comment 9:

By letter dated October 5, 2000, GTS requested that the Department place on the record of this proceeding a complete copy of the Appellate Submission of the United States (dated 7 February 2000) in United States -- Imposition of Countervailing Duties On Certain Hot-rolled Lead And Bismuth Carbon Steel Products Originating In The United Kingdom. As explained by GTS, the petitioners had submitted an excerpt from this submission as Exhibit 1 to their September 28, 2000 comments to the Department. According to GTS, although this document was not generally available to the public, the government had apparently made it available to the petitioners. Because the proper interpretation of U.K. Lead Bar is such a crucial issue in this proceeding it is essential that the complete appellate submission be placed on the record so that all parties are able to evaluate the full impact of this decision. To date, the Department has not placed the appellate submission on the record of this case, which has, according to GTS, limited GTS' ability to fully participate in this proceeding.

Department's Position: The public version of the Appellate Submission of the United States to the WTO in the UK Lead Bar case is available at the USTR Public File Room. The Department did not distribute it in this case to selected parties and has never refused to place it on the record. GTS had ample opportunity to place the document on the record, if it so desired.

Comment 10:

The petitioners argue that though the Department's analysis is very sound, there are, several key elements in support of the Department's decision that are either not addressed in the Draft Redetermination or that should be addressed more clearly by the Department. One is that the Department should add a short section explaining that the history surrounding Saarstahl I ⁽²⁸⁾ and the Delverde III court's treatment of Saarstahl mandate the adoption of the Department's analysis. According to the petitioners, Saarstahl I supported the respondents' claim that subsidies cannot be countervailed after any arm's-length, fair-market-value transaction. As the Delverde III court made clear in its rehearing, however, Congress added the change-in-ownership provision to overrule Saarstahl I. Therefore, the Department should expressly state that its interpretation of Delverde is the only correct one in light of the clear intention of Congress to reverse Saarstahl I and that respondents' position must be erroneous.

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

Comment 11:

The petitioners also suggest that the Department should state more clearly that its interpretation of Delverde III is consistent with the holding of the CIT in British Steel I, which also focused its analysis on the "person," and explain more clearly the substantial relevance of British Steel I.

Department's Position: As explained in footnote 11 of the Draft Redetermination, the British Steel I decision addressed the pre-URAA statute. The Delverde III court has indicated that the post-URAA statute is materially different.

Comment 12:

The petitioners suggest that while the Department apparently has not applied its repayment methodology in calculating GTS' CVD rate, the Department should expressly reject the application of its repayment methodology in cases where the current producer is the same person as the original subsidy recipient. As the EU holds in its own cases, subsidies are not repaid unless disgorged or removed.

Department's Position: As explained above, because the pre- and post-sale entities were determined to be the same, repayment is not an issue.

Comment 13:

The petitioners suggest that the Department should also expressly note that its methodology is necessary to effectuate the purpose of the CVD law of offsetting market distortions.

Department's Position: We have explained above that we view the analysis that we have developed to be consistent with the remedial goals of the countervailing duty statute, namely, to "level the playing field" by offsetting the benefit conferred by a subsidy.

V. Conclusion

We have recalculated the net subsidy rate applicable to GTS as shown in a separate memorandum to the file. The new, recalculated ad valorem subsidy rate for GTS is 6.10 percent.

___________________

Troy H. Cribb

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.

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) (§§ 351.524 and 525).

5. Delverde III does not directly address this point because, as discussed below, 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, 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).

10. 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.

11. We note that GTS-not Usinor- is the plaintiff in this case and, therefore, the analysis and determination in this remand applies only to GTS. We explain below the reasons for examining in this remand the 1995 Usinor privatization.

12. See French Carbon Plate, 64 FR at 73279, for an in-depth discussion of the history of GTS, and the attribution of Usinor subsidies to GTS.

13. For reasons discussed below, we have not re-examined Usinor's asset spin-offs or GTS' partial privatizations.

14. See Memorandum to the Case File; Final Calculations for Usinor and GTS (December 13, 1999) Shares of Usinor as Privatized.

15. For this remand, we have attributed a portion of Usinor's subsidies to GTS based on the ratio of GTS' sales of French-produced merchandise to Usinor's sales of French-produced merchandise at the time just prior to the 1996 partial change in ownership of GTS. See Final Remand Calculations.

16. See, e.g., Respondent's Original Questionnaire Response at III-5, See also Respondent's June 24, 1999 submission (Usinor's Sheet and Strip Verification Report) at 1.

17. See Remand Questionnaire Response at 27.

18. Id. at 25.

19. See GOF Original Questionnaire Response, Exhibit 12 at 3; see also Usinor Valuation Report at 13, attached as exhibit 2 to GOF Remand Supplemental Response.

20. See GOF Remand Supplemental Response at 10-12, and at Exhibit 4 (Article 9); see also, Usinor's financial statements, as contained on the record.

21. According to Usinor, "the privatization did not result in the termination of employees or the creation of new positions other than in the ordinary course of business." See Remand Questionnaire Response at 27.

22.

²² United States - Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, WT/DS138/R (Dec. 23, 1999) ("U.K. Lead Bar Panel Report").

23. French Carbon Plate, 64 FR at 73286.

24.

²⁴ Letter from deKieffer & Horgan to the U.S. Department of Commerce, Case No. C-427-817 at 1-2 (Oct. 10, 2000) ("GTS' Oct. 10 Letter").

25.

²⁵ Draft Remand at 19-20 (citing 19 U.S.C. §§ 1677e(a)(2)(A) and (B) (1995)).

26. Remand Questionnaire at 11-12.

27. See Remand Questionnaire Response at Appendices 2 and 3.

28.

²⁸ Saarstahl AG v. United States, 858 F. Supp. 187, 193 (Ct. Int'l Trade 1994) (Saarstahl I), rev'd, 78 F.3d 1539 (Fed. Cir. 1996) (Saarstahl II).