Before Rich, *fn1 * Newman, and Lourie, Circuit Judges.
The opinion of the court was delivered by: Lourie, Circuit Judge.
Appealed from: United States Court of International Trade
Chief Judge Gregory W. Carman
Usinor et al. appeal from the decision of the United States Court of International Trade which sustained several determinations of the Department of Commerce in an investigation of Usinor's importation of certain steel products. Inland et al. also cross-appeal from several of Commerce's determinations. See British Steel PLC v. United States, 879 F. Supp. 1254 (Ct. Int'l Trade 1995) (British Steel I); British Steel PLC v. United States, 929 F. Supp. 426 (Ct. Int'l Trade 1996) (British Steel II); Inland Steel Indus., Inc. v. United States, 967 F. Supp. 1338 (Ct. Int'l Trade 1997) (Inland Steel). We affirm in all respects.
Usinor is a French company with domestic and international steel-producing facilities. In the mid 1970s, the French government embarked upon a multi-faceted program to help French steel-producing companies, including Usinor, to restructure their massive debts. This appeal concerns the countervailability of certain of those programs, as well as Commerce's methodology for assigning the effects of such countervailable subsidies to Usinor's production. We begin by discussing each of these programs and Commerce's and the trial court's treatment of them.
A. The Programs Under Investigation
1. PACS and FIS Instruments
As part of this restructuring, the French government became the holder of PACS *fn2 and FIS *fn3 instruments. Usinor was obligated under the PACS instruments to pay to the French government the face value of the PACS, plus interest according to the following terms: for the first five years, Usinor was obligated to pay interest at a rate of 0.1%; after the first five years, the interest rate increased to 1.0%, and additionally, Usinor was to make principal payments and supplementary interest payments from its profits in amounts to be set by the French Minister of Economy. See Final Affirmative Countervailing Duty Determinations: Certain Steel Products From France, 58 Fed. Reg. 37304, 37307 (1993) (Final Determination II).
The FIS instruments were bonds issued to the French government's Steel Intervention Fund (i.e., the FIS). Usinor was obligated under the FIS instruments to pay the FIS interest at a rate of 0.1% plus an additional percentage dependent upon Usinor's profits. The FIS instruments carried a repayment schedule of fifteen annual principal repayments, the first two of which were to be made by the French government. The French government also acted as a guarantor in the event that Usinor did not meet its principal repayment obligations.
Usinor converted these instruments into common stock in the late 1980s, thus raising the question whether the conversion of these instruments to equity constituted a countervailable event. This in turn depends on whether the instruments constituted debt or equity at the time of their issuance, with conversion of only the former constituting a countervailable event. If the instruments were debt on issuance, then their conversion would constitute a subsidy by virtue of the forgiveness of the interest and the principal payments previously required. To determine whether these instruments constituted debt or equity at issuance, Commerce employed a four-factor test which explored: "(1) Expiration/Maturity Date/Repayment Obligation, (2) Guaranteed Interest or Dividends, (3) Ownership Rights, and (4) Seniority." Final Affirmative Countervailing Duty Determination: Certain Steel Products From Austria, 58 Fed. Reg. 37217, 37254 (1993) (Final Determination I). *fn4 Under this test, Commerce considered the four factors in the hope of finding a factor that was clearly indicative of the debt or equity status of the instrument. See id. ("Once a [factor] is clearly indicative of debt or equity, we will stop our analysis and categorize the hybrid as debt or equity.").
Commerce accordingly characterized the PACS and FIS instruments as debt at the time of issuance. Specifically, Commerce determined that the PACS instruments "carr[ied] an obligation for repayment, even though there was no determined maturity date." Id. at 37255. Commerce also noted that the PACS "instruments have guaranteed interest payments." Id. Commerce determined that the FIS instruments "have a fixed amortization schedule," and noted that the "fact that the [French Government] met the amortization schedules on these bonds for [Usinor] is irrelevant when analyzing whether the instruments constitute debt or equity." Id. Because these instruments constituted debt at the time of issuance, their subsequent conversion to equity was deemed countervailable by Commerce.
On appeal, the court found Commerce's determination concerning the characterization of the PACS and FIS instruments to be supported by substantial evidence and affirmed:
"For the first five years after their issuance, the PACS contracts provide [that] the debtor is obligated to make interest payments at a rate of 0.1 percent. Additionally, the Court notes [that] the PACS contracts provide that after the passage of five years from the date of issuance, the debtor is obligated to repay the loan principal "according to a schedule" established by the Minister of Economy, who is to "define . . . the amounts available for the loans with special characteristics, the allotment between supplementary remuneration and repayments." The Court also notes [that] the translations of the PACS contracts, which are part of the administrative record, contain terms such as "debt" and "repayment" which strongly suggest a debt, rather than an equity-type, arrangement.
The Court finds [that] the conditions established by the PACS contracts concerning repayment, as well as the language included in those contracts, support Commerce's determination the PACS constituted debt upon issuance. The fact that the PACS contained provisions making repayment contingent on [Usinor] earning a profit does not alter the Court's Conclusion. While [Usinor's] repayment obligation was contingent on earning a profit, the company nevertheless was subject to liabilities on the PACS contracts during the period contracts were outstanding prior to their conversion into common stock. Accordingly, the Court finds Commerce's determination [that] the PACS contracts were debt upon issuance is supported by substantial evidence on the record and is otherwise in accord with law.
With respect to the FIS bonds, the Court notes the parties agree [that] these instruments contain a fixed payment schedule. The Court is not persuaded, however, by [Usinor's] argument [that] the FIS bonds should be classified as equity instruments. While [Usinor] argues the GOF made the first few principal payments and guaranteed remaining principal payments in the event [that Usinor's] financial position did not improve, the fact remains Usinor Sacilor was at all times obligated to make interest payments on the bonds, and it was additionally responsible for repaying the bonds' principal. Accordingly, the Court rejects [Usinor's] arguments and finds Commerce's determination [that] the FIS bonds constituted debt upon their issuance is supported by substantial evidence on the record and is otherwise in accordance with law." Inland Steel, 967 F. Supp. at 1373 (citations omitted).
Beginning in 1982, the French Government supplied Usinor with grants, which were accounted for as shareholder advances. These advances carried no interest and no preconditions to the receipt of funds. See Final Determination II at 37307. Like the PACS and FIS instruments, the shareholder advances were eventually converted into common stock, see id., again raising the question whether this conversion constituted a countervailable event and whether the advances were debt or equity at issuance.
To determine whether the shareholder advances constituted grants instead of either debt or equity, Commerce employed a three-factor test pursuant to which funds were considered grants if they were "provided without expectation of a: (1) Repayment of the grant amount, (2) payment of any kind stemming directly from the receipt of the grant (including interest or claims on profits of the firm (i.e., dividends) . . . ), or (3) claim on any funds in case of company liquidation." Final Determination I at 37254. Because no shares were received by the French Government in exchange for the advances, Commerce concluded that the advances were grants at the time of their issuance.
The court found Commerce's determination concerning the characterization of the shareholder advances to be supported by ...