INLAND STEEL INDUSTRIES, INC., ET AL., Plaintiffs, v. UNITED
                 STATES, Defendant, and USINOR SACILOR, ET AL.,
                             Defendant-Intervenors

                       Consol. Court No. 93-09-00567-CVD

                   UNITED STATES COURT OF INTERNATIONAL TRADE

           967 F. Supp. 1338; 1997 Ct. Intl. Trade LEXIS 69; SLIP OP.
                                     97-71

 
                             June 2, 1997, Decided

DISPOSITION:   [**1]

   Held: This Court sustains the Final Determination in its entirety finding it
is supported by substantial evidence on the record and otherwise in accordance
with law, with the exception that the Court will remand to Commerce the sole
issue of whether certain Credit National export loans discovered at verification
conferred a countervailable benefit on Usinor Sacilor.

SYLLABUS: Plaintiffs and defendant-intervenors challenge portions of the United
States Department of Commerce's ("Commerce" or "Department") determination in
Final Affirmative Countervailing Duty Determinations: Certain Steel Products
from France, 58 Fed. Reg. 37,304 (Dep't Comm. 1993) (final determ.) ("Final
Determination"). Plaintiffs challenge the Final Determination's incorporation of
several methodological and factual determinations published in the General
Issues Appendix to Final Affirmative Countervailing Duty Determination: Certain
Steel Products from Austria, 58 Fed. Reg. 37,217, 37,225-73 (Dep't Comm. 1993)
(" General Issues Appendix") which affected the results of the Final
Determination. Plaintiffs assert these determinations resulted in Commerce
incorrectly concluding certain programs  [**2]   and transactions which
conferred subsidies on Usinor Sacilor were not countervailable and incorrectly
measuring the benefits conferred by those programs and transactions.
Defendant-Intervenors raise similar challenges to the Final Determination.
Defendant asserts this Court should affirm the Final Determination, with the
exception of the issue of the countervailability of certain Credit National
export loans, which defendant asserts should be remanded for further
consideration.

COUNSEL: Dewey Ballantine (Alan Wm. Wolff, Michael H. Stein, Martha J. Talley,
John A. Ragosta and John R. Magnus), for plaintiffs Inland Steel Industries,
Incorporated; Bethlehem Steel Corporation; LTV Steel Company, Incorporated;
National Steel Corporation; Armco Steel Company, L.P.; Geneva Steel; U.S. Steel
Group a Unit of USX Corporation; Gulf States Steel Incorporated of Alabama;
Sharon Steel Corporation; WCI Steel, Incorporated; Laclede Steel Company; and
Lukens Steel Company.

   Frank W. Hunger, Assistant Attorney General of the United States; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division, United States
Department of Justice (A. David Lafer); Terrence   [**3]    J. McCartin, Office
of Chief Counsel for Import Administration, United States Department of
Commerce, of Counsel, for defendant.



   Weil, Gotshal & Manges (Stuart M. Rosen, Mark F. Friedman and Jonathan
Bloom), for defendant-intervenors Usinor Sacilor, Sollac and GTS.

   Skadden, Arps, Slate, Meagher & Flom (John J. Mangan), for
defendant-intervenors U.S. Steel Group et al.

JUDGES: Carman, Chief Judge.

OPINIONBY: CARMAN

OPINION:   [*1344]   OPINION

   This case is before the Court on plaintiffs' Motion for Judgment on the
Agency Record, pursuant to U.S. C.I.T. R. 56.2. Both plaintiffs and
defendant-intervenors challenge certain aspects of the Department of Commerce's
("Department" or "Commerce") Final Affirmative Countervailing Duty
Determinations: Certain Steel Products from France, 58 Fed. Reg. 37,304 (Dep't
Comm. 1993) (final determ.) ("Final Determination"), and relevant portions of
the General Issues Appendix to Final Affirmative Countervailing Duty
Determination: Certain Steel Products from Austria, 58 Fed. Reg. 37,217,
37,225-73 (Dep't Comm. 1993) ("General Issues Appendix"). Defendant asserts this
Court should affirm Commerce's Final Determination,  [**4]   with the exception
that it requests the Court remand to Commerce the issue of whether certain
Credit National export loans discovered at verification are countervailable.

   The Court has jurisdiction pursuant to 19 U.S.C. @ 1581(c)(1988), and for the
reasons set forth below, sustains the Final Determination with the exception
that the Court remands to Commerce the issue of whether certain Credit National
export loans discovered for the first time at verification conferred a
countervailable benefit on Usinor Sacilor.

   BACKGROUND

   In accordance with a February 18, 1994 scheduling order, and after extensive
consultation with the parties and upon their consent the parties were directed
to brief five general issues arising out of determinations by the International
Trade Administration addressing steel products from various countries, as well
as country-specific issues raised by those determinations. In prior opinions,
this Court has disposed of all challenges to the general issues. See British
Steel plc v. United States, 936 F. Supp. 1053 (C.I.T. 1996) ("British Steel
IV"); British Steel plc v. United States, 929 F. Supp. 426 (C.I.T. 1996)
("British Steel III"),; British   [**5]    Steel plc v. United States, 924 F.
Supp. 139 (C.I.T. 1996) ("British Steel II"), appeals docketed, Nos. 96-1401 to
-06 (Fed. Cir. June 21, 1996); British Steel plc v. United States, 879 F. Supp.
1254 (C.I.T. 1995) ("British Steel I"), appeals docketed, Nos. 96-1401 to -06
(Fed. Cir. June 21, 1996). What remains before the Court are the parties'
country-specific challenges to Commerce's steel determinations. This opinion
addresses the French country-specific issues raised by the parties with respect
to Commerce's Final Determination that remain following the issuance of this
Court's opinions addressing the general issues. While the Court believes this
opinion is in no way inconsistent with its prior opinions addressing the general
issues, to the extent any perceived inconsistencies arise, this Court's findings
in the general issues opinions prevail.



   In this consolidated action, Inland Steel Industries, Incorporated, Bethlehem
Steel Corporation, LTV Steel Company, Incorporated, National Steel Corporation,
Armco Steel Company, L.P., Geneva Steel, U.S. Steel Group a Unit of USX
Corporation, Gulf States Steel Incorporated of Alabama, Sharon Steel
Corporation, WCI Steel,   [**6]   Incorporated, Laclede Steel Company, and
Lukens Steel Company (collectively "plaintiffs" or "Inland Steel"), and Usinor
Sacilor and two of its subsidiaries, Sollac and GTS (collectively
"defendant-intervenors" or "Usinor Sacilor"), challenge certain aspects of the
Final Determination and relevant portions of the General Issues Appendix.

   The Final Determination addresses subject merchandise manufactured and
exported by Usinor Sacilor during the period of investigation ("POI") of
calendar year 1991. The Final Determination found a subsidy rate of   [*1345]
15.49% ad valorem, although this rate was later revised downward to 15.12% ad
valorem when certain clerical errors in the Final Determination were corrected.
See Countervailing Duty Order and Amendment to Final Affirmative Countervailing
Duty Determination: Certain Steel Products from France, 58 Fed. Reg. 43,759
(Dep't Comm. 1993) ("Amended Final Determination").

   A. Subsidies Examined in the Final Determination

   During the course of its investigation, Commerce examined subsidies provided
by the Government of France ("GOF") to the French steel industry, particularly
to Usinor Sacilor and its predecessors.   [**7]   n1 Commerce's investigation
revealed Usinor Sacilor and its predecessors received substantial subsidies,
including various forms of grants, equity infusions and loans, from the GOF
during the fifteen years preceding the POI, as the GOF tried to restructure and
revitalize the French steel industry.

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   n1 In its efforts to restructure the French steel industry in 1978, the GOF
consolidated French steel producers into two major groups, Usinor and Sacilor.
As part of a second restructuring plan, the GOF merged Usinor and Sacilor to
create Usinor Sacilor in 1986.

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   1. PACS

   A principal component of the GOF's 1978 plan to assist French steel companies
in restructuring their debts was the creation and issuance of prets a
caracteristiques speciales ("PACS"), or loans with special characteristics, a
new type of debt instrument. The principal terms of the PACS required the debtor
company to: (1) make interest payments of 0.1 percent for the first five years
following the loan; (2) make interest payments of 1.0 percent  [**8]   and make
principal and supplementary interest payments, with the amount to be set by the
Minister of Economy, beginning in the sixth year after receipt of the loan; (3)
make the principal and supplementary interest payments from its profits; (4) pay
the face amount of the PACS plus interest; and (5) subordinate the PACS to all
other forms of debt, although PACS were superior to common stock.


   Commerce concluded the PACS constituted debt instruments upon their issuance,
based on its observation the PACS' repayment obligation and interest payment
provisions were characteristics of a debt instrument. n2 See General Issues
Appendix, 58 Fed. Reg. at 37,255. In reaching its determination, Commerce
focused on the first criteria, noting "these instruments carry an obligation for
repayment, even though there is no predetermined maturity date." Id.
Additionally, with respect to the second criteria, Commerce observed "these
instruments have guaranteed interest payments." Id.

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   n2 In reaching this conclusion, Commerce applied a new methodology designed
to differentiate hybrid financial instruments which could not easily be
classified as either a debt or equity instrument. In order to classify financial
instruments as either debt or equity instruments, Commerce "applied the
following hierarchy [of criteria] which in the Department's view establishes
whether an instrument has the qualities of debt or equity: (1)
Expiration/Maturity Date/Repayment Obligation, (2) Guaranteed Interest or
Dividends, (3) Ownership Rights, and (4) Seniority." General Issues Appendix, 58
Fed. Reg. at 37,254.

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[**9]

   In the course of subsequent restructuring of the French steel industry, the
GOF and French steel companies periodically agreed to convert PACS into the
debtor company's common stock in order to ease the steel companies' debt
burdens. In 1981, French steel companies converted FF 13.8 billion worth of PACS
into common stock, while the companies converted FF 12.6 billion and FF 2.8
billion worth of PACS into common stock in 1986 and 1991, respectively. With
respect to the PACS conversions that occurred in 1981 and 1986, Commerce
determined Usinor and Sacilor were not equityworthy in those years. As a result,
Commerce determined the transactions were equity infusions n3 made on terms
inconsistent with commercial considerations, and therefore countervailable. n4
[*1346]   As for the 1991 conversions, Commerce determined Usinor Sacilor was
equityworthy in 1991 and the equity infusion was not inconsistent with
commercial considerations, and thus was not countervailable.

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   n3 Based on its determination that PACS were debt instruments upon issuance,
Commerce treated the conversion of PACS into common stock as a debt-to-equity
conversion, a form of equity infusion.  [**10]

   n4 The statute defines a domestic subsidy to include "the provision of
capital, loans, or loan guarantees on terms inconsistent with commercial
considerations." 19 U.S.C. @ 1677(5)(A)(ii)(I) (1988).

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   2. FIS Bonds


   In 1983, the GOF created the Fonds d'Intervention Siderurgique ("FIS"), or
Steel Intervention Fund, to facilitate Usinor and Sacilor's exercise of their
authority to issue convertible bonds. n5 Usinor and Sacilor issued convertible
bonds to the FIS in 1983, 1984, and 1985. The FIS in turn issued bonds,
guaranteed by the GOF, to the public. In 1986 and 1988, these bonds were
converted to the companies' common stock as a means of easing their debt burden.

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   n5 The Corrected Finance Law, approved in 1982, granted Usinor and Sacilor
authority to issue convertible bonds.

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   As with its analysis of the PACS, Commerce first determined the FIS bonds
constituted debt upon issuance, noting the FIS bonds satisfied  [**11]   the
first set of hierarchical criteria used to classify hybrid instruments as debt
because "these instruments have fixed amortization schedules." n6 General Issues
Appendix, 58 Fed. Reg. at 37,255. Additionally, Commerce determined the
conversion of FIS bonds into common stock constituted a debt-to-equity
conversion, or equity infusion, which was countervailable because Usinor and
Sacilor were unequityworthy in 1986 and 1988 when the conversions were made.

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   n6 See supra n.2 (discussing criteria applied by Commerce in classifying
hybrid financial instruments).

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   3. Shareholders' Advances

   Beginning in 1982, the GOF supplied Usinor and Sacilor with grants which were
accounted for as shareholders' advances. The advances, which carried no interest
or other precondition, were intended to finance revenue shortfalls experienced
by Usinor and Sacilor. The advances were distributed on an ad hoc basis, without
any legislative mandate or specific agreement, although they did have to be
authorized by the  [**12]   Ministry of Treasury. While Usinor and Sacilor did
not distribute any of the shares to the GOF at the time they received the
grants, the GOF and Usinor and Sacilor converted all the advances into the
companies' common stock in 1986. In an effort to comply with the European
Community's then newly applicable State Aids Code, which limited the subsidies a
member state could bestow on its steel industry, the GOF discontinued its grants
to Usinor and Sacilor in 1986.

   Commerce determined the shareholders' advances constituted grants to Usinor
and Sacilor. While Commerce typically treats typical shareholders' advances as
loans, Commerce determined the shareholders' advances to the French steel
companies should be treated as grants based on the facts surrounding their
provision by the GOF. n7 Additionally, Commerce determined the shareholders'
advances were nonrecurring grants based upon its observation the grants were
"exceptional" n8 because "the [French steel companies] cannot expect to receive
benefits on an ongoing basis from review period to review period and/or the
provision of funds by the government must be approved every year." General
Issues Appendix, 58 Fed. Reg. at 37,226.   [**13]


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   n7 The criteria established by Commerce to differentiate among grants, debt,
and equity state that grants are "funds provided without expectation of a: (1)
Repayment of the grant amount, (2) payment of any kind stemming 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."
General Issues Appendix, 58 Fed. Reg. at 37,254.

   n8 Prior to the issuance of the Final Determination, Commerce considered
three factors in distinguishing recurring grants from nonrecurring grants, i.e.,
"(1) Whether the program providing the benefit is exceptional; (2) whether the
program is longstanding; [and] (3) whether there is any reason to believe that
the program will not continue into the future." General Issues Appendix, 58 Fed.
Reg. at 37,226. In the General Issues Appendix, however, Commerce noted it had
recently modified this test in completing its analysis in the Final
Determination, placing its primary focus on the first element. Commerce stated
it is more appropriate to examine only whether the benefits are of an
"exceptional" nature because the new test focused "on the nature of the benefit
provided to the recipient" and the last "two factors ... have been difficult to
interpret and apply in practice." Id.

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[**14]

   [*1347]   4. FDES Loans

   The GOF's Fonds de Developpement Economique et Social ("FDES"), or Economic
and Social Development Fund, was another means the GOF used to provide loans to
the French steel industry. Following passage of The Law of July 13, 1978, FDES
made available prets participatives, or participative loans, to all French
companies. These loans were made available at below market interest rates, and
provided for repayment through a share of future profits according to a formula
agreed to by the parties. In 1990, FDES consolidated the principal amounts on
outstanding FDES loans made to Usinor, Sacilor, and their subsidiaries. The
result of the consolidation was the creation of multiple long-term loans which
had a different structure and interest rate from the previous loans.

   Commerce's Final Determination analyzed whether FDES' consolidation of the
outstanding loans in 1990 satisfied the three elements of a countervailable
loan. n9 Based on its determination the interest rates charged on the loans
consolidated by FDES in 1990 were consistent with Usinor Sacilor's benchmark
interest rate for 1990, Commerce concluded the consolidated loans were not
countervailable  [**15]   because no special benefits were conferred on Usinor
Sacilor through FDES' consolidation.

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   n9 In order to be countervailable, Commerce must determine a loan satisfies
the following three criteria: (1) the existence of government action caused the
issuance of the loan; (2) a benefit was conferred on the recipient firm by the
loan; and (3) the loan was specific. See 19 U.S.C. @ 1677(5) (1988);
Countervailing Duties; Notice of Proposed Rulemaking and Request for Public
Comments, 54 Fed. Reg. 23,365, 23,379 (to be codified at 19 C.F.R. @ 355.42)
(hereinafter "Proposed Regulations").


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   5. CFDI Loans

   Similar to the FDES loans, participative loans were also issued by the Caisse
Francaise de Developpement Industriel ("CFDI"). The participative loans issued
by CFDI were available to all French companies and were provided at below market
interest rates with repayment based on a share of future profits according to an
agreed upon formula. In 1991, outstanding CFDI loans held by Usinor, Sacilor and
[**16]   their subsidiaries were transferred, with the terms unchanged, to
Usinor Sacilor.

   Commerce determined the key issue in analyzing the countervailability of the
loans provided by CFDI was their specificity. In order to determine the
specificity of the loans, Commerce examined data supplied by the GOF concerning
the distribution of the CFDI loans issued from 1983 to 1988, rather than the
distribution of the CFDI loans when Usinor Sacilor's outstanding loans were
consolidated in 1991. While the GOF did provide Commerce with information on the
distribution of the CFDI loans issued between 1983 and 1988, the information
failed verification because "GOF officials could not provide any documentation
supporting the data provided." Final Determination, 58 Fed. Reg. at 37,309.
Commerce ultimately concluded the CFDI loans were countervailable, based on its
determinations the CFDI loans were "de facto limited to a specific enterprise or
industry or group of enterprises or industries," id., and that the other two
elements of a countervailable loan were satisfied. n10

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   n10 See supra n.9.

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[**17]

   6. Other Participative Loans

   In addition to the participative loans issued by FDES and CFDI to Usinor
Sacilor, during verification Commerce discovered loans described as "other
participative loans" which had not been reported previously by Usinor Sacilor.
Usinor Sacilor officials could not offer any explanation of these loans and
failed to explain the number of loans involved, the duration of the loans, the
outstanding principal balances on the loans, the interest rates applicable to
the loans, and the principal and interest payments made on the loans. Because
the "loans were unreported" and it had "no information about the programs under
which these loans might have been issued," Commerce used best information
available ("BIA") to calculate the countervailable benefit to Usinor Sacilor
from the loans, treating them as zero interest rate, short-term loans. See Final
Determination, 58 Fed. Reg. at 37,310.

   [*1348]   7. Credit National Loans


   Credit National, a financial institution owned by the GOF, was another source
of long-term loans for Usinor Sacilor. In 1991, Usinor Sacilor's outstanding
loans from Credit National were consolidated. Commerce's determination the loans
were  [**18]   consolidated in such a manner that "Credit National would
obtain the same return that it would have earned on the pre-consolidated loans,"
led it to conclude the consolidation should not be treated as a new loan. Id. at
37,311.

   In analyzing the specificity of the Credit National loans, consistent with
the methodology applied in examining the CFDI loans, Commerce "looked to the
years in which the original loans were issued." Id. The Final Determination
notes "the law creating Credit National does not in any way limit the industries
to which loans can be made" and "Credit National's Annual Reports demonstrate
that loans in these years were in fact provided to numerous sectors and were not
disproportionately provided to the steel industry." Id. Based on these
observations, Commerce concluded the loans were non-specific, and therefore not
countervailable.

   8. ECSC Article 54 Investment Loans

   Under Article 54 of the treaty establishing the European Coal and Steel
Community ("ECSC"), the Commission of the European Communities ("EC") provides
industrial development loans to companies within the ECSC seeking to purchase
new equipment or finance the modernization of  [**19]   existing plants.
Commerce's EC Verification Report illustrates the importance of these loans to
many member companies of the ECSC, noting "commercial banks were not willing to
provide financing to the steel and coal industries due to the difficulties faced
by these industries." EC Verification Report, Def.'s App. Tab 8 at 13.

   Commerce determined the Article 54 loans, made possible by the EC
Commission's obtaining funds from the financial markets and then reloaning those
funds to ECSC member companies, were made to Usinor Sacilor at an interest rate
below the long-term market rate. At verification, Commerce also determined the
Article 54 loans were not made from any pool of funds to which Usinor Sacilor or
other ECSC member companies may have contributed, thus eliminating any
possibility the EC Commission was essentially loaning Usinor Sacilor its own
money. Additionally, Commerce determined the Article 54 loans satisfied the
remaining two elements of the countervailable loan criteria, n11 and therefore
countervailed the Article 54 loans received by Usinor Sacilor.

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   n11 See supra n.9.

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[**20]

   9. DNEL-held PACS


   In the course of the 1978 restructuring, the former private majority
shareholders of Usinor and Sacilor, Denain Nord-Est Longwy ("DNEL") and
Marine-Wendel, n12 respectively, agreed to convert certain loans to PACS at the
direction of the GOF. The Final Determination concluded the PACS held by DNEL
were "essentially written off in 1981 at a redemption value of FF 100," and
stated that Commerce "treated the difference between the original value of the
loan and the amount repaid as a grant." Final Determination, 58 Fed. Reg. at
37,308. Commerce determined the grant was not countervailable, however, because
it did not exceed 0.50 percent of sales in 1981, and therefore the grant's
benefit was expensed in 1981 and Usinor Sacilor received no countervailable
benefit during the POI.

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   n12 Although Usinor Sacilor did not pay any interest on the Marine-Wendel's
PACS, in 1989 it repaid the full face value of the PACS held by Marine-Wendel.
While Commerce treated these PACS as zero interest rate loans, it did not
countervail them because the benefits from the PACS expired when Usinor Sacilor
repaid Marine-Wendel in 1989, prior to the POI of calendar year 1991.

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[**21]

   10. SODIs

   In 1983, Usinor and Sacilor created subsidiaries known as regional
development companies, or SODIs, at the request of the GOF. The SODIs sought to
revitalize depressed steel regions in France and retrain steel workers for jobs
outside the steel industry by loaning funds the SODIs obtained from Usinor and
Sacilor to regional enterprises. Between 1983 and 1986, the SODIs made a
substantial number of loans to enterprises in   [*1349]   the depressed steel
regions. In 1986, however, Usinor Sacilor's obligation to fund the SODIs
expired. Based on the success of the SODIs in generating regional economic
development, the GOF requested Usinor Sacilor continue to provide loans to the
SODIs in depressed steel regions and other regions in France. Following
negotiations between Usinor Sacilor and the GOF, it was agreed Usinor Sacilor
and the GOF would contribute funds to the SODIs on an equal basis. The agreement
provided the GOF would transmit its share of the funds through Usinor Sacilor,
with Usinor Sacilor receiving the funds from the GOF as shareholders' advances
and then funneling those same funds to the SODIs. At verification, Commerce
determined the GOF closely monitored Usinor Sacilor  [**22]   to verify the
funds were being forwarded to the SODIs for regional development purposes, and
that the funds were not used to support Usinor Sacilor's steel operations.

   In evaluating whether Usinor Sacilor received a countervailable benefit from
the GOF's contributions to the SODIs, Commerce examined whether the funds
contributed by the GOF relieved Usinor Sacilor of any obligations it may have
had to retrain or otherwise assist its displaced workers. The Final
Determination noted that the SODIs' mission expanded after 1986, when they began
"servicing depressed regions other than those suffering from steel industry
lay-offs." Final Determination, 58 Fed. Reg. at 37,311. Commerce found the terms
of the 1986 agreement between Usinor Sacilor and the GOF did not relieve Usinor
Sacilor of any obligations it had when it was solely responsible for funding the
SODIs between 1983 and 1986. The Final Determination concluded the GOF's
contributions provided "no benefit to the company" and that "Usinor Sacilor
merely channeled these contributions to the SODIs." Id.

   B. Commerce's Equityworthiness Findings


   As part of its analysis in determining whether certain equity infusions
[**23]   made by the GOF between 1978 and 1991 are countervailable, Commerce
examined whether Usinor Sacilor and its predecessors were equityworthy at the
time of each of the infusions. Commerce determined the companies were
unequityworthy between 1978 and 1988, and therefore countervailed equity
infusions made by the GOF during that period. Commerce also determined Usinor
Sacilor was equityworthy in 1991, and therefore did not countervail the GOF's
equity infusions made during the POI.

   1. 1986 and 1988

   In concluding Usinor Sacilor was unequityworthy in 1986 and 1988, Commerce
noted

   Usinor, Sacilor and Usinor Sacilor reported substantial losses in each year
until 1987. Stockholders' equity was negative in every year except 1986.
Accordingly, certain financial indicators, such as rate of return on assets and
equity and profit margin on sales, were negative until 1987. In 1988, Usinor
Sacilor reported positive rates of return on assets and equity, profit margin on
sales, and a positive debt to equity ratio.



Final Determination, 58 Fed. Reg. at 37,305.

   Additionally, Commerce rejected defendant-intervenors' argument Usinor
Sacilor became equityworthy following the  [**24]   implementation of the GOF's
1986 steel industry restructuring plan. In the General Issues Appendix Commerce
stated while it "currently gives great weight to the company's recent rate of
return on equity as an indication of financial health," it "tend[s] to place
greater reliance on past indicators ... [which] provide a clear track record of
the company's performance." General Issues Appendix, 58 Fed. Reg. at 37,244.
Finally, Commerce determined a study prepared by McKinsey & Company, analyzing
whether the GOF's proposals to restructure the French steel industry complied
with EC Commission guidelines, was not worthy of consideration in analyzing
Usinor Sacilor's equityworthiness. Commerce based this conclusion on its
determination potential investors would not rely on the McKinsey study's use of
EBITD (earnings before interest, taxes, and depreciation) figures, but rather
would consider a company's net income in determining whether or not to invest in
that company.

   [*1350]   2. 1991

   In determining Usinor Sacilor to be equityworthy in 1991, Commerce considered
Usinor Sacilor's relevant financial ratios from the preceding three years, as
well as an independent Swiss consulting  [**25]   firm's analysis of a large
investment by Credit Lyonnais, a bank in which the GOF held a majority interest,
in Usinor Sacilor. Commerce relied on various financial data as an indicator of
Usinor Sacilor's past performance, while it utilized the Swiss consulting firm's
report as an indicator of Usinor Sacilor's future prospects, and specifically
whether Credit Lyonnais was acting as a prudent investor in acquiring twenty
percent of Usinor Sacilor's voting stock. Final Determination, 58 Fed. Reg. at
37,306.

   C. Commerce's Subsidy Rate Calculations


   1. Benchmark Interest Rate
   In calculating the countervailable benefit a company receives from a
preferential long-term government loan, Commerce compares the actual interest
rate on the loan to a benchmark interest rate, which is calculated based on the
methodologies established in Commerce's Proposed Regulations. See Countervailing
Duties; Notice of Proposed Rulemaking and Request for Public Comments, 54 Fed.
Reg. 23,365, 23,380 (to be codified at 19 C.F.R. @ 355.44(b)) (hereinafter
"Proposed Regulations"). In determining the applicable benchmark interest rate,
Commerce considers whether the company which received  [**26]   the loan was
creditworthy or uncreditworthy at the time it received the loan. Commerce
includes a risk premium in the benchmark interest rate for companies that are
determined to be uncreditworthy, whereas risk premiums are not included in the
benchmark interest rate for creditworthy companies.

   Once Commerce has determined the benchmark interest rate, it then must
determine whether the company which received the loan obtained a countervailable
benefit. To the extent a company's payments on a hypothetical loan made at the
benchmark rate exceed the actual payments on the loan at issue, the company has
received a countervailable benefit. Additionally, Commerce allocates the total
amount of countervailable benefit over time, and determines the amount of the
countervailable benefit allocable to the POI.

   With respect to the determination at issue, Commerce concluded Usinor Sacilor
received a countervailable benefit from certain long-term, fixed rate government
loans. Some of these loans were obtained by Usinor Sacilor in years when it was
creditworthy, n13 and other loans were obtained during a time in which it was
uncreditworthy. n14 While the GOF's and Usinor Sacilor's questionnaire  [**27]
responses reported various national long-term interest rates commonly available
in France, they did not identify which rate or rates would be appropriate for
use as a benchmark interest rate.

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   n13 In determining the benchmark interest rate for loan subsidy calculations
in creditworthy years, Commerce's Proposed Regulations provide for the use of
the average annual fixed interest rate for long-term loans (loans of one year or
more in duration) commonly available to the firms in question in France. See
Proposed Regulations, 54 Fed. Reg. at 23,380 (to be codified at 19 C.F.R. @
355.44(b)(4)(iv)).

   n14 In determining the benchmark interest rate for loan subsidy calculations
in uncreditworthy years, Commerce's Proposed Regulations provide for the use of
the highest annual fixed interest rate for long-term loans (loans of one year or
more in duration) commonly available to the firms in question in France, plus a
risk premium. See Proposed Regulations, 54 Fed. Reg. at 23,381 (to be codified
at 19 C.F.R. @ 355.44(b)(6)(iv)).

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[**28]


   During verification, Commerce examined two French banks in an effort to
determine an appropriate benchmark interest rate. Because the two banks did not
issue long-term, fixed rate loans, however, Commerce considered other available
information on French interest rates prior to the issuance of the Final
Determination, and concluded a long-term corporate interest rate published in
the Organization for Economic Cooperation Development ("OECD") Monthly Financial
Statistics for equipment loans made by Credit National was an appropriate
benchmark interest rate. Commerce used the Credit National equipment loan rate
as the basis for both creditworthy years (which call for the   [*1351]   average
long-term fixed rate in France) and uncreditworthy years (which call for the
highest long-term fixed rate in France plus a risk premium). Commerce's
investigation revealed that banks in France do not vary the interest rates
charged to account for a customer's good standing or the risk associated with a
loan.

   2. Discount Interest Rate

   In determining what portion of a countervailable grant or equity infusion is
allocable to the POI, Commerce utilizes a discount rate which is adjusted
depending on whether  [**29]   the company is creditworthy or uncreditworthy at
the time it receives the benefit. Commerce determined Usinor Sacilor was
uncreditworthy in each year in which it received a countervailable grant or
equity infusion, and consistent with the methodology developed in Final
Affirmative Countervailing Duty Determination: Certain Hot Rolled Lead and
Bismuth Carbon Steel Products From France, 58 Fed. Reg. 6,221, 6,225 (Dep't
Comm. 1993) (final determ.) ("France Bismuth"), selected the long-term fixed
rate it used as the benchmark interest rate for the discount interest rate.

   3. Inclusion of Usinor Sacilor's French-Produced Merchandise in the Sales
Denominator

   Once Commerce has determined a countervailable subsidy exists, it calculates
the per-unit subsidy rate by dividing the amount of the subsidy, decreased by
certain offsets, by the appropriate portion of the subsidized firm's sales.
Because Commerce determined the countervailable subsidies received by Usinor
Sacilor were "tied" to its production in France, Commerce adjusted the sales
denominator to include only sales of merchandise Usinor Sacilor produced in
France, and to exclude sales of merchandise Usinor Sacilor produced  [**30]
outside of France.

   At verification, Commerce determined the figures submitted by Usinor Sacilor
for total sales of French-produced merchandise were accurate, with one
exception. Commerce determined some of the sales Usinor Sacilor categorized as
sales of French-produced merchandise were in fact re-sales of merchandise
purchased from Usinor Sacilor's German group producers or resellers. Therefore,
in calculating the final sales denominator, Commerce "excluded . . . an amount
equal to the value of sales made by Usinor Sacilor group companies outside
France to Usinor Sacilor group companies within France. This sales value
represents sales of foreign production and, therefore, must be excluded from the
denominator." General Issues Appendix, 58 Fed. Reg. at 37,235.

   4. F.O.B. (Port) Value


   In calculating the sales denominator, Commerce endeavors to obtain the F.O.B.
(port) value of the merchandise at issue. Usinor Sacilor, however, does not
record F.O.B. (port) value in the regular course of business, and therefore it
included two methodologies n15 in its questionnaire responses in an effort to
assist Commerce in calculating an accurate F.O.B. (port) value for the
French-produced  [**31]   sales. Following verification, Commerce concluded
Usinor Sacilor had "attempted to provide the Department with as accurate an
estimate as possible of its sales value based on F.O.B. (port)" and decided to
"use[] the particular percentage provided in the [questionnaire] responses to
derive the amount of transportation charges to be deducted from the sales value
of French-produced merchandise." General Issues Appendix, 58 Fed. Reg. at
37,238.

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   n15 One methodology estimated an F.O.B. (port) value by deducting
transportation costs incurred by Usinor Sacilor outside of France, while the
second methodology estimated an F.O.B. (port) value by deducting a particular
percentage of Usinor Sacilor's sales. See General Issues Appendix, 58 Fed. Reg.
at 37,237.

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   STANDARD OF REVIEW

   In reviewing a final determination of the Commerce Department, this Court
will sustain the determination unless it is "unsupported by substantial evidence
on the record, or otherwise not in accordance with law." 19 U.S.C. @
1516a(b)(1)(B)(i)   [**32]   (1988). Substantial evidence is that which "'a
reasonable mind might accept as adequate to support a conclusion.'" Universal
Camera Corp. v. NLRB, 340 U.S. 474, 477, 71 S. Ct. 456, 459, 95 L. Ed. 456
(1951) (citation omitted), quoted   [*1352]   in Matsushita Elec. Indus. Co.,
Ltd. v. United States, 3 Fed. Cir. (T) 44, 51, 750 F.2d 927, 933 (1984).

   The Court must accord substantial weight to the agency's interpretation of
the statute it administers. American Lamb Co. v. United States, 4 Fed. Cir. (T)
47, 54, 785 F.2d 994, 1001 (1986) (citations omitted). While Commerce has
discretion in choosing one interpretation over another, "the traditional
deference courts pay to agency interpretation is not to be applied to alter the
clearly expressed intent of Congress." Board of Governors of the Fed. Reserve
Sys. v. Dimension Fin. Corp., 474 U.S. 361, 368, 106 S. Ct. 681, 686, 88 L. Ed.
2d 691 (1986), cited in Ceramica Regiomontana, S.A. v. United States, 10 C.I.T.
399, 405, 636 F. Supp. 961, 966 (1986) ("This Court will not allow an agency,
under the guise of lawful discretion, to contravene or ignore the intent of the
legislature or the guiding purpose of the statute."), aff'd, 5 Fed.   [**33]
Cir. (T) 77, 810 F.2d 1137 (1987). The Court is not to substitute its own
determination for the agency's, but rather is to determine whether Commerce's
determination is supported by substantial evidence on the record and is
otherwise in accordance with law. See, e.g., Consolo v. Federal Maritime Comm'n,
383 U.S. 607, 620, 86 S. Ct. 1018, 1026, 16 L. Ed. 2d 131 (1966) (noting "the
possibility of drawing two inconsistent conclusions from the evidence does not
prevent an administrative agency's finding from being supported by substantial
evidence"); Universal Camera Corp., 340 U.S. at 488, 71 S. Ct. at 465, 95 L. Ed.
at 467-68 (1951) (the reviewing court may not "even as to matters not requiring
expertise . . . displace the [agency's] choice between two fairly conflicting
views, even though the court would justifiably have made a different choice had
the matter been before it de novo").


   DISCUSSION
   PART I.

   Plaintiffs raise the following ten challenges to the Final Determination.

   A. Usinor Sacilor's Equityworthiness as of 1991

   Inland Steel first argues Commerce's determination that Usinor Sacilor was
equityworthy in 1991 is unreasonable and unsupported by record evidence. In
[**34]   advancing this argument, Inland Steel makes three assertions. First,
plaintiffs maintain Commerce ignored precedent by refusing to rely on audited
information obtained from Usinor Sacilor, and instead improperly based its
analysis on a McKinsey & Company report which evaluated Usinor Sacilor's future
prospects. Second, plaintiffs contend Commerce improperly delegated its
responsibility by relying on the McKinsey report, which plaintiffs assert did
not analyze potential investments in Usinor Sacilor according to the "reasonable
investor" standard, and that Commerce improperly applied a cost-to-government
standard in analyzing the report. Finally, plaintiffs assert Commerce
unreasonably determined not to countervail other equity infusions received by
Usinor Sacilor from the GOF in 1991, based on its determination Usinor Sacilor
was equityworthy at that time.

   Defendant responds "although Commerce could not discuss its findings in
detail in its final determination because significant evidence on which it
relied . . . was proprietary, its analysis, nevertheless, was fact-intensive and
reflected a thorough consideration of the record evidence and points raised by
the parties." (Def.'s  [**35]   Mem. in Opp'n to Pls.' and Def.-Intervs.' Mots.
for J. on Agency R. ("Def.'s Br.") at 103.) In responding to Inland Steel's
criticism that Commerce failed to explain which financial ratios were
significant to its analysis, the government notes "the final determination shows
that Commerce considered numerous relevant current and past financial ratios."
(Id. at 104 (footnote omitted).) Additionally, in response to Inland Steel's
criticism that ratios calculated using Usinor Sacilor's audited financial
information did not support the conclusion a reasonable private investor would
invest in Usinor Sacilor in 1991, the government observes "Commerce did not make
a definitive conclusion at this point because its equityworthiness methodology
requires it to consider . . .   [*1353]   not only the relevant financial
ratios, but also evidence . . . regarding the future prospects of a firm." (Id.
at 105 (citing General Issues Appendix, 58 Fed. Reg. at 37,244).) According to
the government, Commerce concluded Usinor Sacilor was equityworthy in 1991,
"only after considering and weighing not only the relevant financial rations but
also the Swiss consulting report." (Id. at 106.)

   The Court is  [**36]   not persuaded by plaintiffs' arguments. Initially, the
Court notes the Proposed Regulations specify four criteria Commerce will
consider in determining whether a company is equityworthy. Those criteria are:

(i) Current and past indicators of a firm's financial health calculated from
that firm's statement and accounts . . .;
(ii) Future financial prospects of the firm, including market studies, economic
forecasts, and project or loan appraisals;
(iii) Rates of return on equity in the three years prior to the government
equity infusion; and
(iv) Equity investment in the firm by private investors.

Proposed Regulations, 54 Fed. Reg. at 23,381 (to be codified at 19 C.F.R. @
355.44(e)(2)). The text of the Final Determination indicates Commerce considered
both historical and forward-looking information in evaluating Usinor Sacilor's
equityworthiness in 1991. See Final Determination, 58 Fed. Reg. at 37,306
(stating "we have looked to both the relevant financial data and the Swiss
consulting report" in concluding Usinor Sacilor was equityworthy in 1991).

   The Court rejects plaintiffs' assertion Commerce ignored audited financial
information obtained  [**37]   from Usinor Sacilor and improperly based its
determination on the McKinsey report. As noted above, the Final Determination
specifically states Commerce reached its equityworthiness determination after
evaluating both the financial data obtained from Usinor Sacilor and the McKinsey
report. The Court finds Commerce's consideration of various financial ratios for
Usinor Sacilor as well as the McKinsey report complies with the Proposed
Regulations.

   Additionally, the Court rejects Inland Steel's argument Commerce improperly
delegated its responsibility by relying on the report, which plaintiffs assert
utilizes a "cost-to-government" standard in evaluating Credit Lyonnais' purchase
of a twenty percent stake in Usinor Sacilor. The Court notes Commerce's decision
to utilize information contained in the McKinsey report was made with
considerable thought, and only after an independent review of the report's
analysis and findings. See Memorandum from Julie Anne Osgood to Susan Kuhbach
re: Equityworthy and Creditworthy Analysis of Usinor Sacilor, Def.-Interv. App.,
Tab 4 at 4-6 (hereinafter "Equityworthy and Creditworthy Memorandum"). The Court
also notes plaintiffs' assertion the  [**38]   McKinsey report does not analyze
the transaction from the standpoint of a reasonable private investor in
incorrect. The McKinsey report states quite plainly that it evaluated Credit
Lyonnais' acquisition of Usinor Sacilor shares from the perspective of a private
investor. See McKinsey Report, Def. App., Tab 19 at 1 ("it is also a question of
determining whether the acquisition of shares in Usinor Sacilor by Credit
Lyonnais corresponds to the action of a private investor who decides to make a
contribution to risk capital by following criteria that identify normal
conditions of a market economy"); id. at 9 ("The issue here is to determine
whether an investor, regardless of whether he belongs to the public or private
sector, could be interested in investing in the Group, based on objective
criteria for making the decision, relevant to the normal conditions of a market
economy.").

   Additionally, the Court notes Commerce specifically examined whether the
transaction between Credit Lyonnais and Usinor Sacilor [TEXT REDACTED BY THE
COURT] as plaintiffs contend. A memorandum prepared by Commerce analyzing Usinor
Sacilor's equityworthiness and creditworthiness states
the consultants  [**39]   did consider whether there could be a [TEXT REDACTED
BY THE COURT]. This is evident in their statement in the report that [TEXT
REDACTED BY THE COURT].

Equityworthy and Creditworthy Analysis of Usinor Sacilor, Def.-Intervs. App.,
Tab 4 at 5.


   Finally, the Court rejects Inland Steel's argument that Commerce improperly
failed   [*1354]   to countervail other equity infusions received by Usinor
Sacilor in 1991. Based on the reasons discussed above, the Court finds
Commerce's determination that Usinor Sacilor was equityworthy as of 1991 is
supported by substantial evidence on the record and is otherwise in accordance
with law, and accordingly Commerce appropriately determined not to countervail
other equity infusions received by Usinor Sacilor in 1991.

   B. Benefits Received by Usinor Sacilor From PACS Outstanding During the POI

   Commerce determined not to countervail the benefits Usinor Sacilor received
from PACS prior to their conversion in 1991 stating

because we do not prorate equity benefits to correspond to the amount of time
the equity was "outstanding" during the year of receipt, we can only countervail
the equity portion of debt to equity conversions in the year  [**40]   of
conversion. To do otherwise would lead to overcountervailing.



(Br. in Supp. of Pls.' R. 56.2 Mot. for J. Upon the Agency R. ("Pls.' Br.") at
27 (quoting Final Determination, 58 Fed. Reg. at 37,312).) Plaintiffs challenge
Commerce's decision not to countervail the benefits conferred by PACS which were
outstanding during a portion of the POI, contending Commerce's determination is
contrary to law. Plaintiffs argue certain PACS, converted to equity during the
POI in March 1991, gave rise to two separate and countervailable subsidies,
"one, a soft loan, benefitting the company for the first (approximately) two
months of the POI, and the other, an equity infusion benefitting the company for
the POI's last ten months." (Id. at 27.) Plaintiffs challenge Commerce's
statement it was concerned about over countervailing, noting "the fact remains
that the conversion was not countervailed. Thus, countervailing the benefit
derived from the loans during part of the POI presents no risk of 'over
countervailing.'" (Id. at 27.) Finally, plaintiffs assert the PACS were
undisputedly inconsistent with commercial considerations, and thus satisfy the
statute's definition of  [**41]   a subsidy upon which countervailing duties
"shall" be imposed. n16

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   n16 See supra n.4.

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   In response, the government contends Commerce properly followed its
"longstanding practice of valuing equity infusions . . . as though they were in
the possession of the recipient firm for the entire year of receipt regardless
of when actually received during that year." (Def.'s Br. at 60.) The government
asserts Commerce developed this methodology "principally for administrative
convenience and because of the difficulty that it would encounter in trying to
calculate subsidy benefits for varying periods of days rather than on a yearly
basis." (Id. at 60-61.)


   The Court notes while the methodology adopted and utilized by Commerce
calculates the benefits received by companies on a yearly basis, and therefore
arguably is not as precise as it might be in measuring benefits conferred on a
company, Commerce's methodology is a reasonable means of carrying out the
statute's mandate. In reviewing an agency's interpretation  [**42]   of a
statute in which Congress has left a gap, this Court examines whether the
agency's interpretation of the statute is reasonable. See Chevron U.S.A. v.
Natural Resources Defense Council, Inc., 467 U.S. 837, 844, 104 S. Ct. 2778,
2782, 81 L. Ed. 2d 694 (1984) (stating "a court may not substitute its own
construction of a statutory provision for a reasonable interpretation made by
the administrator of an agency"). The Court finds Commerce's determination not
to countervail the benefits received by Usinor Sacilor from the outstanding PACS
during the first few months of 1991 is a reasonable interpretation of the
statute and is supported by substantial evidence on the record and is otherwise
in accordance with law. Accordingly, that portion of Commerce's Final
Determination is sustained.

   C. Treatment of Stockholders' Advances as Grants

   In the Final Determination, Commerce concluded the shareholders' advances
received by Usinor and Sacilor between 1982 and 1986 were grants, noting "no
shares   [*1355]   were received [by the GOF] for them." See Final
Determination, 58 Fed. Reg. at 37,307. Based on its conclusion the shareholders'
advances were grants when provided, Commerce  [**43]   determined the
countervailable event occurred when the advances were received by Usinor and
Sacilor between 1982 and 1986. Plaintiffs challenge Commerce's determination,
arguing the shareholders' advances were debt (not grants) when provided, and
therefore, Usinor Sacilor's 1986 write-off of the debt created by the
shareholders' advances was a countervailable event.

   Plaintiffs assert "the companies had no obligation to pay interest on the
funds advanced, but were plainly obligated to repay the principal as they
accounted for the [shareholders' advances] by creating a new 'liability'
category on their balance sheets." (Pls.' Br. at 28 (footnote omitted).)
Plaintiffs contend Commerce "significantly undervalued[] the subsidy" as a
result of its determination that "the [shareholders' advances] were grants when
provided, rather than debt, and that the bestowal of these funds, not the 1986
write-off of the debt, constituted the subsidy." (Id. at 29 (citing Final
Determination, 58 Fed. Reg. at 37,307).) Plaintiffs dispute Commerce's
determination the shareholders' advances were grants at the outset, contending
it is contrary to and not supported by record information. In support  [**44]
of its argument, plaintiffs note Usinor Sacilor has admitted: the shareholders'
advances were debt; Usinor Sacilor did not record the shareholders' advances as
"income" on its annual financial statements (even though its practice was to
record donated funds not giving rise to liability as "income"); Usinor Sacilor
converted the shareholders' advances in 1986 in order to avoid taxation
associated with loan forgiveness; and French law and accounting practice provide
shareholders' advances create debts and must be treated as loans, absent an
explicit agreement to the contrary. According to the plaintiffs, "the
Department's determination was . . . internally inconsistent; in its view, funds
which were 'donated' to the companies by the GOF, and carried with them no
liability at all, were later turned into equity (with a concomitant expectation
of return) in the 1986-87 restructuring." (Id. at 32 (emphasis omitted).)


   The government responds substantial evidence on the record supports
Commerce's findings the shareholders' advances were nonrecurring grants at the
time they were made. The government's brief specifically asserts "there was no
evidence of loan or repayment agreements, payment  [**45]   schedules or actual
principal or interest payments being made, nor was there any other evidence
tending to show that the GOF or Usinor Sacilor contemplated a repayment
obligation." (Def.'s Br. at 64.) The government also challenges Inland Steel's
assertion Usinor Sacilor did not treat the shareholders' advances as loans by
accounting for them in a debt account, but rather "Usinor Sacilor listed [the
shareholders' advances] in a hybrid debt/equity category." (Id. at 65.) Further,
the government asserts "the listing is inconclusive, as it equally could be
argued that the listing is an acknowledgment that the advances were considered
to be equity instruments." (Id.)

   Additionally, the government contends Commerce's determination the
shareholders' advances were exceptional, and therefore nonrecurring, is
supported by substantial record evidence. The government's brief asserts
"despite the fact that these advances were provided on a somewhat regular basis
from 1982 to 1986, each advance required specific approval by the GOF." (Id. at
66-67.) The government also argues the shareholders' advances were exceptional
because "they clearly did not represent a long-term solution  [**46]   to
Usinor's and Sacilor's financial problems. Rather, the advances were given by
the GOF merely to provide time for the development of a long-term solution."
(Id. at 67.)

   The Court is unpersuaded by plaintiffs' arguments. Despite plaintiffs'
statement that Usinor Sacilor was "plainly obligated to repay the principal as
they accounted for the [shareholders' advances] by creating a new 'liability'
category on their balance sheet", (Pls.' Br. at 28), plaintiffs fail to point to
any record evidence which definitively establishes the existence of a repayment
obligation on the part of Usinor and Sacilor. Indeed, as defendant notes, the
record contains "no evidence of loan or   [*1356]   repayment agreements,
payment schedules or actual principal or interest payments being made, nor was
there any other evidence tending to show that the GOF or Usinor Sacilor
contemplated a repayment obligation." (Def.'s Br. at 64.)

   The Court also finds unpersuasive Inland Steel's contention the shareholders'
advances should be considered debt based on Usinor Sacilor's treatment of the
advances on its balance sheets. In asserting Usinor Sacilor treated the
shareholders' advances as "long-term debt", plaintiffs  [**47]   cite to
materials prepared by Usinor Sacilor in responding to Commerce questionnaires in
1992. The Court notes, however, that contemporaneous financial statements and
accompanying notes prepared by Usinor Sacilor between 1982 and 1985 classify the
shareholders' advances as either contributions set aside for a future capital
increase or as other equity. (See Mem. in Opp'n to Pls.' R. 56.2 Mot. for J. on
the Agency R. ("Def.-Intervs.' Opp'n Br.") at 27.)

   The Court additionally rejects Inland Steel's argument that Usinor Sacilor's
conversion of the shareholders' advances to common stock in 1986 is inconsistent
with its treatment of the advances as grants prior to the conversion. The Court
finds Usinor Sacilor's conversion of the grants into common stock in 1986 was
made pursuant to article 241 of the Law of July 24, which requires the
maintenance of equity to stated capital ratio of one to two. The
reclassification was necessary because article 241 counts only pure equity, not
grants or quasi-equity, towards the mandatory ratio.


   Finally, the Court rejects plaintiffs' contention that under French law
shareholders' advances create debts and must be treated as loans. While French
[**48]   law may generally provide shareholders' advances create debts and must
be treated as loans, the record evidence clearly establishes a different
arrangement was reached between Usinor Sacilor and the GOF with respect to the
shareholders' advances at issue in this case. The Court finds Commerce's
determination the shareholders' advances received by Usinor Sacilor were grants
when provided and that the countervailable event occurred in 1986 when the
grants were converted to common stock is supported by substantial evidence on
the record and is otherwise in accordance with law.

   D. Provision of FDES Loans on Terms Consistent with Commercial Considerations

   The outstanding principal on two groups of FDES loans issued to Usinor
Sacilor during the 1980s was consolidated on July 1, 1990 into two loan
instruments which were outstanding during the POI. Commerce determined the
consolidations "resulted in a different structure for the loan and a different
interest rate", treated them as if they were new loans in 1990 and examined the
consolidated loans to determine whether they were consistent with commercial
considerations. Final Determination, 58 Fed. Reg. at 37,311. In the Preliminary
[**49]    Affirmative Countervailing Duty Determinations: Certain Steel Products
From France and Alignment of Final Countervailing Duty Determination: Certain
Steel Products From France, 57 Fed. Reg. 57,785 (Dep't Comm. 1992) (prelim.
determ.) ("Preliminary Determination"), Commerce determined the consolidated
loans were countervailable. In the Final Determination, however, Commerce
concluded the consolidated loans were not countervailable when compared with the
benchmark interest rate.

   A fourth challenge raised by plaintiffs asserts substantial record evidence
does not support Commerce's determination that certain FDES loans on Usinor
Sacilor's books during the POI were consistent with commercial considerations.
According to plaintiffs, by utilizing the Credit National equipment loan rate as
the benchmark rate, Commerce committed three errors. First, plaintiffs contend
Commerce abandoned, without explanation, its policy of using a nongovernment
source of funding in selecting a benchmark interest rate. Additionally,
plaintiffs assert Commerce improperly determined Credit National loans are not
countervailable. Finally, plaintiffs contend Commerce's determination that
Credit National's  [**50]   equipment loan rate reflects the cost of corporate
long-term borrowing cannot   [*1357]   form the basis for Commerce's selection
of a benchmark rate.


   Defendant responds Commerce acted properly in selecting Credit National's
equipment loan rate as the benchmark rate in analyzing whether the consolidated
loans were made at preferential rates. The government advances three arguments
that Commerce acted properly. First, the government contends Commerce selected
the highest long-term fixed interest rate from among the available evidence. The
government contends plaintiffs are mistaken in asserting Commerce's selection of
the Credit National equipment loan rate as the benchmark interest rate failed to
comply with Section 355.(b)(6)(iv) of the Proposed Regulations, which requires
the selection of the highest long-term fixed interest rate commonly available as
the benchmark interest rate. The government asserts "record evidence showed that
the [International Monetary Fund] rate included both short-term and long-term
borrowing, while section 355.44(b)(6)(iv) directs Commerce to use a long-term
interest rate." (Def.'s Br. at 112 (footnote omitted).) The government notes
Commerce's selection of  [**51]   Credit National's equipment loan rate
satisfied the Proposed Regulations, because it "reflected exclusively 'the cost
of corporate long-term borrowing.'" (Id. at 112-13 (citing Final Determination,
58 Fed. Reg. at 37,314).)
   Second, the government asserts Commerce's selection of Credit National's
equipment loan rate is consistent with Commerce's past practice. Initially, the
government notes "Inland Steel does not cite to any Commerce cases to support
its characterization of Commerce's past practice," and continues on to note "[a]
review of relevant Commerce cases . . . shows that Commerce frequently uses
rates based on government-owned bank loans, . . . provided that the program from
which the loans originate is not...specific." (Id. at 113.) Because Commerce did
not determine the Credit National equipment loans were specific, the government
contends Commerce's "use [of] the rates on [Credit National's equipment] loans
as possible benchmark interest rates" was consistent with its past practice and
was supported by substantial evidence on the record and otherwise in accordance
with law. (Id. at 114.)

   Finally, the government contends Commerce properly selected  [**52]   a
country-wide rate for use as the benchmark interest rate. The government
contends Inland Steel's assertion that Commerce erred by utilizing the Credit
National equipment loan rates because those rates were not company-specific is
without merit. The government notes Commerce's statement in the Preliminary
Determination that "Usinor Sacilor did not report its actual cost for long-term
fixed-rate debt", Preliminary Determination, 57 Fed. Reg. at 57,787, and asserts
the Proposed Regulations direct Commerce to utilize a long-term, fixed interest
rate commonly available in France. Therefore, "when Commerce eventually selected
the Credit National equipment loan rates as the benchmark interest rates (in the
final determination), it was not attempting to find a company-specific rate",
but rather "Commerce was attempting to find a country-wide rate, regardless of
whether Usinor Sacilor had access to it." (Def.'s Br. at 115.)

   The Court is not persuaded by plaintiffs' arguments. First, the Court notes
the Proposed Regulations state that in selecting a benchmark rate, "where
necessary, . . . the Secretary may use loans made available under one or more
government programs, provided  [**53]   that any such program is not deemed to
be selective." Proposed Regulations, 54 Fed. Reg. at 23,281 (to be codified at
19 C.F.R. @ 355.44(b)(7)). In the Final Determination, Commerce found the Credit
National equipment loan rates "to be more consistent with our Regulations than
either the IMF or the PIBOR rates because they reflect the cost of corporate
long-term borrowing", Final Determination, 58 Fed. Reg. at 37,314, indicating
Commerce considered non-government sources of financing in calculating a
benchmark interest rate, but concluded the Credit National equipment loan rates
were more appropriate for use in calculating the benchmark rate. Additionally,
the Court notes Commerce determined the IMF rates were inappropriate for use as
a benchmark interest rate because they included both short- and long-term
interest   [*1358]   rates, contrary to the Proposed Regulations. See
Preliminary Determination Disclosure Documents, Def. App. Tab 11, attachment;
Proposed Regulations, 54 Fed. Reg. at 23,381 (to be codified at 19 C.F.R. @
355.44(b)(6)(iv)).


   Additionally, the Court rejects Inland Steel's contention the methodology
utilized by Commerce in the Final Determination  [**54]   departed improperly
from its past practice. The Court observes Commerce's utilization of rates based
on non-specific government-owned bank loans in the Final Determination does not
represent the first time Commerce has utilized such rates. See, e.g., Final
Affirmative Countervailing Duty Determination; Industrial Phosphoric Acid from
Israel, 52 Fed. Reg. 25,447, 25,448-49, 25,452 (Dep't Comm. 1987); Final
Affirmative Countervailing Duty Determination and Countervailing Duty Order;
Certain Frest (sic) Cut Flowers from Ecuador, 52 Fed. Reg. 1,361, 1,364,
1,366-67 (Dep't Comm. 1987). The Court finds not only is Commerce's utilization
of the Credit National equipment loan rate consistent with its past practice,
but it also is consistent with the requirements established in the Proposed
Regulations.

   Second, the Court rejects Inland Steel's contention the Credit National
equipment loan rates cannot be used in calculating a benchmark interest rate
because those loans are specific, and thus violate the Proposed Regulations'
condition that loans made available under government programs that are "deemed
to be selective" cannot be used in calculating a benchmark interest  [**55]
rate. Proposed Regulations, 54 Fed. Reg. at 23,381 (to be codified at 19 C.F.R.
@ 355.44(b)(7)). This matter is discussed more fully below. See infra Part I.F.

   Finally, the Court rejects Inland Steel's assertion that Commerce improperly
utilized the Credit National equipment loan rates in calculating a benchmark
interest rate based on its determination the Credit National rates "reflect the
cost of corporate long-term borrowing", Final Determination, 58 Fed. Reg. at
37,314, is an inappropriate basis for the selection of a benchmark interest
rate. The Court notes the Proposed Regulations establish a two-track approach to
selecting a benchmark interest rate, differentiating between calculating a
company-specific benchmark rate and a country-wide benchmark rate. See Proposed
Regulations, 54 Fed. Reg. at 23,380 (to be codified at 19 C.F.R. @
355.44(b)(4)(i)-(iii) (providing for the calculation of a company-specific
benchmark interest rate based on a loan taken out, or a debt obligation issued,
"by the firm receiving the government loan"); @ 355.44(b)(4)(iv)-(v) (providing
for the calculation of a country-wide benchmark interest rate based on "the
national" long-term  [**56]   fixed or variable interest rate "in the country in
question")). Because "Usinor Sacilor did not report its actual cost for
long-term fixed-rate debt", Preliminary Determination, 57 Fed. Reg. at 57,787,
Commerce calculated a benchmark interest rate based on the country-specific
provisions set out in the Proposed Regulations.

   Contrary to plaintiffs' contention Commerce improperly selected Credit
National's equipment loan rate as a benchmark based on its observation those
rates "reflect the cost of corporate long-term borrowing", the Court finds this
is the type of consideration the Proposed Regulations intended Commerce to
undertake. As plaintiffs note "the very purpose of selecting a benchmark
interest rate is to estimate the loan recipient's alternative (unsubsidized)
cost of loan capital." (Pls.' Br. at 35.) The Court observes that in determining
the Credit National equipment loan rates "reflect the cost of corporate
long-term borrowing", Commerce is complying with the Proposed Regulations'
direction that a country-specific rate be utilized where a company-specific rate
is unavailable. Accordingly, the Court rejects plaintiffs' challenges and finds
Commerce's use  [**57]   of Credit National's equipment loan rates as the
benchmark interest rate in evaluating whether the FDES loans consolidated in
1990 were countervailable is supported by substantial evidence on the record and
is otherwise in accordance with law.

   E. Benefits Received by Usinor Sacilor From CFDI Loans


   Plaintiffs next contest Commerce's calculation of the benefits conferred upon
Usinor   [*1359]   Sacilor by loans issued by the Caisse Francaise de
Developpement Industriel ("CFDI"). Plaintiffs raise four specific objections
concerning Commerce's actions with respect to this portion of the investigation.

   1. Commerce's Selection of A [TEXT REDACTED BY THE COURT] to Calculate the
Benefits Conferred Upon Usinor Sacilor

   The first objection raised by plaintiffs asserts Commerce improperly selected
[TEXT REDACTED BY THE COURT]. According to plaintiffs, Commerce calculated the
benefits certain CFDI loans conferred upon Usinor Sacilor using its [TEXT
REDACTED BY THE COURT], in both the France Bismuth investigation and the
Preliminary Determination. Plaintiffs assert Commerce's application of its [TEXT
REDACTED BY THE COURT] departs without any explanation from its prior
methodology,   [**58]   and therefore must be remanded because "while the
Department is permitted to change its methodology, it may not apply an utterly
new methodology, which could not possibly have been anticipated during the
investigation, without explaining why." (Pls.' Br. at 41 (footnote omitted).)

   The defendant responds Commerce properly analyzed the CFDI loans given the
record evidence. According to the defendant, in analyzing the CFDI loans,
Commerce "applied [TEXT REDACTED BY THE COURT]" because "Commerce was able to
identify and verify [TEXT REDACTED BY THE COURT], [and] it would have been
inappropriate for Commerce to use [TEXT REDACTED BY THE COURT]." (Def.'s Br. at
72, 73.) Defendant also responds to plaintiffs' assertion that Commerce acted
inconsistently by [TEXT REDACTED BY THE COURT] in the France Bismuth
investigation and not in the investigation presently under review. According to
the defendant, "Commerce was unable to [TEXT REDACTED BY THE COURT] [in the
France Bismuth investigation] because 'respondents did not provide legible
repayment schedules.'" (Id. at 73.)

   The Court rejects plaintiffs' contention Commerce improperly applied its
[TEXT REDACTED BY  [**59]   THE COURT] in measuring the countervailable benefits
conferred on Usinor Sacilor by the CFDI loans. While plaintiffs note Commerce
applied its [TEXT REDACTED BY THE COURT] in the France Bismuth investigation and
the Preliminary Determination, they fail to note Commerce [TEXT REDACTED BY THE
COURT] because "respondents did not provide legible repayment schedules" for the
CFDI loans. See Final Determination Concurrence Memorandum, Def. App. Tab 16 at
20. The Court finds Commerce's identification and verification of [TEXT REDACTED
BY THE COURT] of the CFDI loans makes Commerce's application of its [TEXT
REDACTED BY THE COURT] appropriate. See Company Verification Report, Def. App.
Tab 1 at 29; Supplemental Company Response, Def. App. Tab 7, Ex. 12-A, P I.
Moreover, the Court notes the [TEXT REDACTED BY THE COURT] was not, as
plaintiffs contend, an "utterly new methodology", (Pls.' Br. at 41), but rather
was a methodology established in the Proposed Regulations, the application of
which was justified based on the information obtained during verification. The
Court finds Commerce's application of its [TEXT REDACTED BY THE COURT] in
measuring the countervailable  [**60]   benefits conferred on Usinor Sacilor by
the CFDI loans is supported by substantial evidence on the record and is
otherwise in accordance with law.

   2. Commerce's [TEXT REDACTED BY THE COURT ]


   Plaintiffs' second challenge to Commerce's calculations of the benefits
conferred upon Usinor Sacilor by certain CFDI loans asserts Commerce erred by
[TEXT REDACTED BY THE COURT ]. According to plaintiffs, these [TEXT REDACTED BY
THE COURT ]. (Pls.' Br. at 42.) Plaintiffs also argue Commerce erroneously
departed from the methodology applied in the Preliminary Determination and the
France Bismuth investigation by [TEXT REDACTED BY THE COURT ] in the Final
Determination. Finally, plaintiffs contend even though [TEXT REDACTED BY THE
COURT ]. (Id. at 43.)

   In response, defendant quotes Commerce's verification report which notes
[TEXT REDACTED BY THE COURT ]. (Def.'s Br. at 74 (quoting Company Verification
Report, Def. App. Tab 1 at 30).) Additionally, defendant asserts it is
Commerce's practice to allocate interest payments to the year in which they are
actually made. Finally, defendant rejects plaintiffs' argument Commerce treated
the payments inconsistently in  [**61]   the France Bismuth investigation and
the Preliminary Determination. Defendant asserts "Commerce did treat [TEXT
REDACTED BY THE COURT]" in the France Bismuth investigation. (Id. at 75.)

   The Court rejects plaintiffs' arguments. First, the Court notes plaintiffs'
assertion that Commerce did not [TEXT REDACTED BY THE COURT ] in the France
Bismuth investigation and the Preliminary   [*1360]   Determination is
incorrect. The Court notes Commerce did count Usinor Sacilor's [TEXT REDACTED BY
THE COURT ]. n17

- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -

   n17 The Court notes the administrative record in the France Bismuth
determination is not part of the administrative record of the case presently
under review. Those records, however, are on file with the Court and were
reviewed in order to determine the accuracy of Inland Steel's characterization
of the France Bismuth investigation. See, e.g., Win-Tex Products, Inc. v. United
States, 17 C.I.T. 786, 789, 829 F. Supp. 1349, 1352 (1993) (noting "indisputable
facts like the agency's own prior determinations may be judicially noticed by
the court when such notice is requested by a party and is otherwise
appropriate").

- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
[**62]

   Second, the Court rejects Inland Steel's contention that the [TEXT REDACTED
BY THE COURT ] (Pls.' Br. at 43 (emphasis omitted).) The Court observes the
arrangement by which the GOF and Usinor Sacilor agreed Usinor Sacilor would make
[TEXT REDACTED BY THE COURT] was in the form of an amendment of [TEXT REDACTED
BY THE COURT] CFDI loans. The Court finds Commerce's treatment of the [TEXT
REDACTED BY THE COURT ] attached to the CFDI loans as [TEXT REDACTED BY THE
COURT] on the CFDI loans was reasonable, is supported by substantial evidence on
the record and is otherwise in accordance with law.


   Finally, the Court rejects plaintiffs' argument that [TEXT REDACTED BY THE
COURT ]. The Court finds Commerce's allocation of [TEXT REDACTED BY THE COURT]
is consistent with Commerce's past practice and the Proposed Regulations. The
Court notes the Proposed Regulations explicitly state in calculating the
benefits conferred upon a company, Commerce determines [TEXT REDACTED BY THE
COURT ]. Additionally, the Court notes Commerce's allocation of [TEXT REDACTED
BY THE COURT] is consistent with its practice in past investigations. See, e.g.,
Final Affirmative Countervailing   [**63]    Duty Determination and
Countervailing Duty Order; Carbon Steel Butt-weld Pipe Fittings from Thailand,
55 Fed. Reg. 1,695, 1,697 (Dep't Comm. 1990); Final Affirmative Countervailing
Duty Determination and Partial Countervailing Duty Order; Ball Bearings and
Parts Thereof from Thailand; Final Negative Countervailing Duty Determinations:
Antifriction Bearings (Other Than Ball or Tapered Roller Bearings) and Parts
Thereof From Thailand; 54 Fed. Reg. 19,130, 19,132 (Dep't Comm. 1989).
Accordingly, the Court finds Commerce's allocation of [TEXT REDACTED BY THE
COURT ] is supported by substantial evidence in the record and is otherwise in
accordance with law.

   3. Commerce's Verification of[TEXT REDACTED BY THE COURT]

   A third challenge raised by plaintiffs asserts Commerce erred by "[TEXT
REDACTED BY THE COURT ] without verifying that this had indeed happened." (Pls.'
Br. at 44 (footnote omitted).) Plaintiffs assert Usinor Sacilor, which reported
[TEXT REDACTED BY THE COURT ], would have also reported [TEXT REDACTED BY THE
COURT ]. Plaintiffs argue despite the fact that Usinor Sacilor [TEXT REDACTED BY
THE COURT ], Commerce "[TEXT REDACTED BY THE COURT ]." (Id.  [**64]   at 45.)
Plaintiffs contend Commerce's failure to base this calculation on verified
evidence requires a remand.

   Commerce responds that in measuring the benefit arising from the CFDI loans,
Commerce "[TEXT REDACTED BY THE COURT ]" and that this calculation was "[TEXT
REDACTED BY THE COURT ]." (Def.'s Br. at 78.) Defendant's response continues on
to assert "Commerce did not attempt to [TEXT REDACTED BY THE COURT ], but rather
"in accord with its consistent and longstanding practice, it treated [TEXT
REDACTED BY THE COURT ]." (Id. at 78.)

   The Court rejects plaintiffs' argument Commerce failed to verify that [TEXT
REDACTED BY THE COURT ]. The Court believes Inland Steel's characterization
misstates Commerce's methodology, and notes Commerce did not [TEXT REDACTED BY
THE COURT ]. Rather, Commerce treated the [TEXT REDACTED BY THE COURT ]. As
previously noted, the Court finds Commerce's methodology is supported by
substantial evidence on the record and is otherwise in accordance with law.

   4. Commerce's Use of Credit National Equipment Loan Rates as the Benchmark
Loan Rate to Countervail Certain CFDI Loans

   Finally, plaintiffs argue Commerce's decision to use Credit  [**65]
National equipment loan rates in setting the benchmark interest rate used to
calculate the benefits conferred on Usinor Sacilor by the CFDI loans is
unsupported by record evidence and is not in accordance with law. Because the
Court has addressed this contention in considerable detail, see infra Part I.G.,
the Court will not repeat its discussion.

   F. Specificity of Loans Usinor Sacilor Received from Credit National

   Plaintiffs continue their challenge of the Final Determination, asserting
Commerce   [*1361]   erred when it failed to countervail certain
industry-specific loans from Credit National which benefitted Usinor Sacilor
during 1991. Plaintiffs raise four specific challenges to Commerce's treatment
of Credit National's loans to Usinor Sacilor which are discussed in more detail
below.


   1. Commerce's Prior Determinations Addressing the Specificity of Credit
National's Loans
   Plaintiffs contend Commerce's Final Determination "reverse[s], without any
explanation, earlier determinations with respect to the specificity of Credit
National loans generally and Credit National loans to the French steel industry
in particular during the relevant period (1977-1987)." (Pls.'   [**66]   Br. at
47 (emphasis omitted).) n18 Plaintiffs assert Commerce's failure to explain
"what was incorrect about these earlier determinations or even what prompted
their reconsideration in the first place" and "how its new specificity ruling is
consistent with, or even remotely connected to, facts in the record" requires a
remand for Commerce to address these issues. (Id. at 48, 49 (footnote omitted).)

- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -

   n18 The three determinations cited by plaintiffs in support of this assertion
are Final Affirmative Countervailing Duty Determination; Brass Sheet and Strip
From France, 52 Fed. Reg. 1,218, 1,221 (Dep't Comm. 1987) (final determ.); Final
Affirmative Countervailing Duty Determination; Industrial Nitrocellulose from
France, 48 Fed. Reg. 11,971, 11,974-75 (Dep't Comm. 1983) (final determ.); Final
Affirmative Countervailing Duty Determinations; Certain Steel Products From
France, 47 Fed. Reg. 39,332, 39,334 (Dep't Comm. 1982) (final determ.) ("Certain
Steel Products").

- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -

   Commerce responds "it is well-established  [**67]   that Commerce's findings
in a particular case are not binding on it in a subsequent case. Rather,
Commerce's findings in a particular case must be based solely on the facts in
the administrative record of that case, regardless of the findings made in an
earlier case." (Def.'s Br. at 84.) Defendant goes on to note, at least with
respect to Commerce's finding of specificity in Final Affirmative Countervailing
Duty Determinations; Certain Steel Products From France, 47 Fed. Reg. 39,332,
39,334 (Dep't Comm. 1982) (final determ.) ("Certain Steel Products"), Commerce
"found these loans to be specific not because the proffered evidence lacked
probity, but rather because the GOF had not cooperated at verification." (Id. at
85.) Defendant contrasts this with the determination presently under review in
which "Usinor Sacilor submitted probative evidence of general availability, and
Commerce verified this information." (Id. at 86.)

   The Court rejects plaintiffs' arguments. The Court notes only Commerce's 1982
Certain Steel Products determination cited by Inland Steel is relevant to
evaluating whether the Credit National loans at issue are specific. n19 The
Court also notes  [**68]   Commerce's determination that Credit National loans
were specific in the 1982 Certain Steel Products determination was a result of
the GOF's failure to fully respond to Commerce's inquiries at verification. See
Certain Steel Products, 47 Fed. Reg. at 39,334 (noting Commerce's request to
meet with Credit National officials was denied and as a result Commerce was
"unable to establish that these loans...are generally available"). With respect
to the present investigation, however, the record contains verified information
supporting Commerce's determination that Credit National loans are generally
available. See Final Determination, 58 Fed. Reg. at 37,311 (noting "Credit
National's Annual Reports demonstrate that loans in these years were in fact
provided to numerous sectors and were not disproportionately provided to the
steel industry.")


- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - -
-

   n19 The plaintiffs' references to Commerce's determination in Final
Affirmative Countervailing Duty Determination; Industrial Nitrocellulose From
France, 48 Fed. Reg. 11,971 (Dep't Comm. 1983) (final determ.) and Final
Affirmative Countervailing Duty Determination; Brass Sheet and Strip From
France, 52 Fed. Reg. 1,218 (Dep't Comm. 1987) (final determ.) are misplaced. In
the Industrial Nitrocellulose investigation, Commerce determined the Credit
National loan at issue "was of the 'ordinary' type and made on commercial
terms", 48 Fed. Reg. at 11,975, while in the Brass Sheet investigation Commerce
determined one of the Credit National loans to be specific only because it was
an export loan. 52 Fed. Reg. at 1,221.

- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
[**69]

   [*1362]   2. Classification of All Credit National Loans Within a Single
Program

   Plaintiffs also challenge Commerce's alleged failure to "identify the
'program' under which Usinor-Sacilor's loans were provided." (Pls.' Br. at 50.)
Plaintiffs contend Commerce's analysis with respect to whether the Credit
National loans were de jure n20 or de facto n21 specific cannot be sustained by
this Court. According to plaintiffs, "it is unreasonable and wholly inconsistent
with the Department's precedents to treat everything such an institution does as
a single program." (Id. at 51.)

- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -

   n20 With respect to Commerce's de jure specificity analysis, plaintiffs note
Commerce "cited only the law under which Credit National was created--not the
many other laws pursuant to which it made, and continues to make, loans to
different kinds of borrowers." (Pls.' Br. at 50.)

   n21 With respect to Commerce's de facto analysis, plaintiffs contend "the
Department made a broad and unsupported assumption that all Credit National
loans for the period in question were part of a single program for purposes of
specificity analysis." (Pls.' Br. at 51.)

- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
[**70]

   Defendant responds the program investigated by Commerce is this case was
limited to loans originated by Credit National. As for plaintiffs' assertion
Commerce improperly consolidated certain Credit National activities into a
single program, defendant responds "the FDES, CFDI and ECSC loans are not
included in [the charts verified by Commerce]--nor in the Credit National
program being investigated here--because Credit National did not originate them;
rather, Credit National merely administers them." (Def.'s Br. at 89.)


   The Court rejects plaintiffs' arguments. The Court notes the record contains
verified information establishing the charts provided to and relied on by
Commerce in concluding Credit National loans are non-specific include only
information on loans originated by Credit National. See GOF Verification
Report, Def. App. Tab 4 at 12-13. The other loans noted by plaintiffs, such as
the FDES, CFDI, and ECSC loans, are administered by Credit National but are not
included in the figures upon which Commerce relied. See id. Based on the fact
Commerce considered only loans originated by Credit National, the Court finds
Commerce properly classified the loans as constituting  [**71]   a single
program.

   3. Provision of Benefits to a Specific Industry of Enterprise of Group
Thereof

   Plaintiffs' third challenge with respect to the CFDI loans asserts Commerce
failed to determine whether a specific industry or enterprise or group of
industries or enterprises were provided with subsidy benefits. n22 Plaintiffs
maintain the charts reflecting Credit National's loan exposure in various years,
which Commerce relied on in determining the CFDI loans were de facto
non-specific, are deficient. First, plaintiffs claim "the source documents for
these charts, including particularly the types of loans included and the laws
under which they were issued, were not placed on the record or examined by the
Department" (Pls.' Br. at 53), and as a result Commerce "had no way of knowing
the contents and methodology of the 'pie chart' loan breakouts or the types of
Credit National loans whose distribution they purportedly reflect, or the nature
of the programs under which loans were made." (Id. at 54.) Plaintiffs also claim
Commerce failed to place on the record information useful for identifying the
program under which the loans were made to Usinor Sacilor.

- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -

   n22 The statute provides that in determining whether a subsidy is present,
Commerce

shall determine whether the bounty, grant, or subsidy in law or in fact is
provided to a specific enterprise or industry, or group of enterprises or
industries. Nominal general availability, under the terms of the law,
regulation, program, or rule establishing a bounty, grant, or subsidy, of the
benefits thereunder is not a basis for determining that the bounty, grant, or
subsidy is not, or has not been, in fact provided to a specific enterprise or
industry, or group thereof.



19 U.S.C. @ 1677(5)(B) (1988) (emphasis added).

- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
[**72]


   Finally, plaintiffs argue even if the previous two challenges are rejected,
Commerce "did not perform a de facto specificity analysis as required by law and
its Proposed Regulations." (Pls. Br. at 54.) In particular, plaintiffs focus
their challenge on the   [*1363]   fourth element in Commerce's de facto
specificity analysis as set out in the Proposed Regulations. See Proposed
Regulations, 54 Fed. Reg. at 23,379 (to be codified at 19 C.F.R. @
355.43(b)(2)(iv)) (providing Commerce will consider "the extent to which a
government exercises discretion in conferring benefits under a program").
Plaintiffs assert Commerce's specificity findings in the Final Determination are
inconsistent with its findings in Final Affirmative Countervailing Duty
Determination; Brass Sheet and Strip From France, 52 Fed. Reg. 1,218, 1,221
(Dep't Comm. 1987) (final determ.) and Final Affirmative Countervailing Duty
Determination; Carbon Steel Wire Rod From France, 47 Fed. Reg. 42,422, 42,423
(Dep't Comm. 1982) (final determ.), where according to plaintiffs, Commerce
determined "the GOF exercises near-total control in determining who gets loans
from Credit National and on what terms." (Pls.   [**73]   Br. at 55.)

   Defendant responds by asserting Commerce's analysis of the GOF's exercise of
its discretion is "subsumed within Commerce's finding regarding the actual
distribution of Credit National loans by and within sectors. This evidence shows
how the GOF exercised its discretion." (Def.'s Br. at 90.) Defendant's brief
continues on to discuss the Court of Appeals for the Federal Circuit's opinion
in PPG Industries, Inc. v. United States, 978 F.2d 1232, 1241 (Fed. Cir. 1992),
asserting it stands for the proposition that "the governmental discretion factor
listed in the Proposed Regulations is not concerned so much with the existence
of governmental discretion, but rather with how that governmental discretion is
exercised." (Def.'s Br. at 91.) According to defendant, record evidence "shows
that the GOF exercised its discretion to provide Credit National loans on a
non-specific basis." (Id.)

   The Court rejects plaintiffs' argument Commerce improperly relied upon the
Credit National Annual Reports because the source documents supporting the
Annual Reports were not on the record. The Court observes the data contained in
the Annual Reports are especially reliable based on their  [**74]   being
audited by an independent accounting firm. Commerce regularly accepts
independently audited data for verification purposes. See, e.g., France Bismuth,
58 Fed. Reg. at 6,227; Final Affirmative Countervailing Duty Determination;
Steel Wire Rope from India, 56 Fed. Reg. 46,292, 46,294 (Dep't Comm. 1991);
Final Negative Countervailing Duty Determination: Industrial Belts and
Components and Parts Thereof, Whether Cured or Uncured, From the Republic of
Korea, 54 Fed. Reg. 15,513, 15,516 (Dep't Comm. 1989).

   Additionally, the Court rejects plaintiffs' contention Commerce failed to
consider "the extent to which [the GOF] exercises discretion in conferring
benefits [through Credit National loans]." Proposed Regulations, 54 Fed. Reg. at
23,379 (to be codified at 19 C.F.R. @ 355.43(b)(2)(iv)). As noted above, the
Court finds Commerce's determination that Credit National loans are non-specific
is supported by substantial evidence on the record and is otherwise in
accordance with law. Because the Court has sustained Commerce's determination
regarding the specificity of Credit National's loans, the Court finds the
existence of any governmental discretion is irrelevant.   [**75]

   4. Commerce's Failure to Countervail Export Subsidies

   Plaintiffs' final challenge with respect to Commerce's finding certain CFDI
loans are countervailable asserts Commerce improperly departed from prior
practice by failing to countervail a loan discovered during verification which
was used to promote exports. Plaintiffs claim because "export subsidies are per
se selective," (Pls.' Br. at 57 (citing Proposed Regulations, 54 Fed. Reg. at
23,379 (to be codified at 19 C.F.R. @ 355.43(a)(1)))), Commerce's failure to
countervail the export promotion loans discovered at verification requires a
remand.



   Defendant responds "after reviewing Inland Steel's argument and the record of
this case, Commerce has discovered that it inadvertently failed to find certain
Credit National loans to be specific", (Def.'s Br. at 92), and accordingly
requests this Court remand the matter. Defendant asserts that on remand
"Commerce . . . will determine whether to countervail these loans after
examining . . .   [*1364]   whether the loans conferred a benefit upon Usinor
Sacilor." (Id. at 93.)

   The Court finds defendant's request for a remand is reasonable and plaintiffs
are correct in asserting Commerce's  [**76]   determination not to countervail
certain loans, discovered at verification, used to finance export activities
requires a remand. See Proposed Regulations, 54 Fed. Reg. at 23,379 (to be
codified at 19 C.F.R. @ 355.43(a)(1) (stating "Selective treatment, and a
potential countervailable export subsidy, exists where the Secretary determines
that eligibility for, or the amount of, benefits under a program is tied to
actual or anticipated exportation or export earnings.")). Accordingly, the Court
will remand this portion of the Final Determination for Commerce to determine
whether any countervailable benefits were conferred upon Usinor Sacilor by these
loans. With the exception of the remand on this issue, however, the Court finds
the Final Determination's conclusion that Credit National loans are non-specific
is supported by substantial evidence on the record and otherwise in accordance
with law.

   G. Use of Credit National's Equipment Loan Rates In Calculating Usinor
Sacilor's Benchmark and Discount Rates

   A seventh challenge raised by plaintiffs to the Final Determination asserts
Commerce improperly utilized Credit National equipment loan rates in calculating
Usinor  [**77]   Sacilor's benchmark and discount rates, and as a result vastly
undervalued the benefits various countervailable grants and loans conferred upon
Usinor Sacilor. Plaintiffs assert Commerce improperly departed from the
benchmark and discount rates used in the Preliminary Determination, and erred by
utilizing the rates Credit National charged to borrowers obtaining equipment
loans in calculating the benchmark and discount rates in the Final
Determination.


   Inland Steel raises three objections to Commerce's utilization of Credit
National's equipment loan rates in calculating a benchmark interest rate to
determine whether certain loans received by Usinor Sacilor were countervailable.
First, plaintiffs allege Commerce unreasonably departed from its Proposed
Regulations, which require the use of the "highest long-term fixed interest rate
commonly available to firms in the country in question" in calculating the
benchmark and discount rates for an uncreditworthy company, when it utilized
Credit National's equipment loan rate in the Final Determination. (See Pls.' Br.
at 60 (citing Proposed Regulations, 54 Fed. Reg. at 23,381 (to be codified at 19
C.F.R. @ 355.44(b)(6)(iv)(A)(1))).)   [**78]   According to Inland Steel,
Commerce erred by failing to apply a series of French long-term interest rates
published by the International Monetary Fund ("IMF"), which Commerce utilized in
the France Bismuth investigation and in the Preliminary Determination.
Plaintiffs also assert Commerce failed to comply with its past practice and the
Proposed Regulations by utilizing a government source of financing in selecting
a benchmark interest rate for Usinor Sacilor, noting "Credit National . . . is
owned by, and makes its lending decisions wholly at the direction of, the GOF."
(Id. at 62.) Finally, Inland Steel asserts Commerce acted improperly in
utilizing Credit National's equipment loan rate because "there is no evidence in
the record that Usinor Sacilor had access to these loans, (id. at 64 (emphasis
omitted)), and therefore the Credit National equipment loan rates cannot serve
as an accurate measure of whether Usinor Sacilor received loans on terms
inconsistent with commercial considerations.

   Second, plaintiffs allege Commerce acted contrary to its long-standing
practice and Proposed Regulations in utilizing Credit National's equipment loan
rates to calculate  [**79]   Usinor Sacilor's discount rate, which was used in
determining whether certain grants received by Usinor Sacilor were
countervailable. Plaintiffs argue Commerce should have used the "highest
long-term fixed interest rate commonly available to firms in the country in
question." (Pls.' Br. at 66 (citing Proposed Regulations, 54 Fed. Reg. at 23,381
(to be codified at 19 C.F.R. @ 355.44(b)(6)(iv)(A)(1))).)

   Defendant responds Commerce did not select the IMF rates, which "include both
short-term and long-term borrowing", because   [*1365]   "it was not the most
appropriate rate within the meaning of section 355.44(b)(6)(iv)." (Def.'s Br. at
112.) Defendant also notes "Commerce frequently uses rates based on
government-owned bank loans, . . . provided that the program from which the
loans originate is not selective." (Id. at 113.) Finally, defendant argues
Commerce's utilization of Credit National's equipment loan rate as a
country-specific benchmark rate should be sustained because Usinor Sacilor
failed to report its actual cost for long-term fixed-rate debt, leaving Commerce
with no choice but to utilize a country-specific rate. (Id. at 115.)

   The Court rejects plaintiffs' arguments.   [**80]   First, with respect to
plaintiffs' contention Commerce erred by failing to utilize the IMF lending
rates, the Court notes the Proposed Regulations specifically state Commerce
shall use "the highest long-term fixed interest rate commonly available to firms
in the country in question" in calculating the benchmark interest rate. See
Proposed Regulations, 54 Fed. Reg. at 23,381 (to be codified at 19 C.F.R. @
355.44(b)(6)(iv)(A)(1)). The Court notes Commerce determined it would be
inappropriate to use the IMF rates because they include "both short-term and
long-term borrowing", (id. at 112), and therefore do not fully satisfy the
Proposed Regulations. Accordingly, the Court finds Commerce's determination not
to utilize the IMF rates in calculating the benchmark interest rate for Usinor
Sacilor is supported by substantial evidence on the record and is otherwise in
accordance with law.


   The Court also finds Commerce's use of a loan rate from a government-owned
bank is appropriate. The Proposed Regulations provide Commerce may use
government rates "where necessary" and when the government loans are determined
to be non-specific. See Proposed Regulations, 54 Fed. Reg.   [**81]   at 23,381
(to be codified at 19 C.F.R. @ 355.44(b)(7)). Additionally, the Court notes the
Final Determination's utilization of government-owned bank loan rates as a
benchmark rate is consistent with Commerce's past practice. See, e.g., Final
Affirmative Countervailing Duty Determination; Industrial Phosphoric Acid from
Israel, 52 Fed. Reg. 25,447, 25,448-49, 25,452 (Dep't Comm. 1987); Final
Affirmative Countervailing Duty Determination and Countervailing Duty Order;
Frest (sic) Cut Flowers from Ecuador, 52 Fed. Reg. 1,361, 1,364, 1,366-67 (Dep't
Comm. 1987). Accordingly, the Court finds Commerce's utilization of Credit
National's equipment loan rate in calculating Usinor Sacilor's benchmark
interest rate is supported by substantial evidence on the record and is
otherwise in accordance with law.

   Finally, the Court rejects plaintiffs' arguments Commerce improperly utilized
the Credit National equipment loan rate as a benchmark interest rate because
there was no evidence in the record that Usinor Sacilor had access to those
loans. The Court finds the Proposed Regulations establish a two-track system
through which Commerce may either select a company-specific rate,   [**82]   see
Proposed Regulations, 54 Fed. Reg. 23,380 (to be codified at 19 C.F.R. @
355.44(b)(4)(i)-(iii)), or a country-specific rate to serve as a surrogate for
the company-specific rate when company-specific information is either not
available or not in the record. See Proposed Regulations, 54 Fed. Reg. at 23,380
(to be codified at 19 C.F.R. @ 355.44(b)(4)(iv)-(v). In the Preliminary
Determination, Commerce noted "Usinor Sacilor did not report its actual cost for
long-term fixed-rate debt." Preliminary Determination, 57 Fed. Reg. at 57,787.
Because there was no company-specific information in the record, the Court finds
Commerce properly elected to utilize a country-specific interest rate in its
calculations of a benchmark interest rate for Usinor Sacilor.

   With respect to plaintiffs' assertions Commerce improperly utilized Usinor
Sacilor's benchmark interest rate as the discount interest rate, the Court finds
it has been Commerce's practice to utilize the benchmark interest rate as the
discount rate for uncreditworthy companies. See infra Part II.C. The Court
discusses this practice more fully below, and finds Commerce's utilization of
the Credit National equipment  [**83]   loan rate as the underlying rate in
calculating the uncreditworthy discount rate for Usinor Sacilor is   [*1366]
supported by substantial evidence on the record and is otherwise in accordance
with law.

   H. DNEL's Government-Mandated Write-off of Usinor Sacilor Debt in 1981

   An eighth challenge raised by Inland Steel against the Final Determination
argues Commerce improperly determined the cancellation of Denain Nord-Est
Longwy's ("DNEL") PACS in 1981 for FF 100 amounted to a grant of less than 0.5
percent of Usinor Sacilor's sales in 1981, and therefore Commerce erred by
expensing the grant in 1981. Plaintiffs note "the write-off of DNEL's PACS was
treated in France [Bismuth] as a nonrecurring grant and amortized over 15 years,
with no reference to the size of the grant relative to Usinor's 1981 sales."
(Pls.' Br. at 73 (footnote omitted).) Inland Steel argues "although the grant
itself involved an amount lower than 0.5 percent of Usinor's 1981 sales, it was
provided as part of the broader 1981 bailout, the countervailable benefit from
which was far in excess of 0.5 percent of Usinor's 1981 sales." (Id. at 73-74
(footnote omitted)), and therefore Commerce's determination  [**84]   is
unsupported by record evidence and contrary to law.


   In response, the government notes Commerce expensed in 1981 the benefit
arising from DNEL's grant "in accordance with section 355.49(a) of the Proposed
Regulations, . . . with the result that there was no benefit to Usinor Sacilor
in the POI." (Def.'s Br. at 95.) The government also asserts the inconsistent
treatment of the DNEL grant in the Final Determination and the France Bismuth
investigations resulted from the fact that "Commerce mistakenly failed to apply
section 355.49(a) [in the France Bismuth investigation]." (Id. at 95.) The
government asserts that had Commerce done so, "it would have, as in [the Final
Determination], expensed the benefit arising from the grant in 1981 and,
therefore, found no countervailable benefit to Usinor Sacilor." (Id. at
95-96.)

   The Court is not persuaded by plaintiffs' argument. While the Court notes
Commerce's treatment of DNEL's 1981 write-off of its PACS differs in the France
Bismuth investigation and the Final Determination, defendant explains this
difference is due to an error committed by Commerce in the France Bismuth
determination. The Court  [**85]   notes the Proposed Regulations provide
Commerce will allocate nonrecurring countervailable benefits over two or more
years if "in the case of grants or equity infusions provided pursuant to a
domestic program, [the benefit is] equal to or greater than 0.50 percent of all
sales of the firm in question during the same year." Proposed Regulations, 54
Fed. Reg. at 23,384 (to be codified at 19 C.F.R. @ 355.49(a)(3)(i)(A)). With
respect to its consideration of DNEL's PACS write-off in the Final
Determination, however, Commerce expensed DNEL's PACS write-off in 1981 because
the amount of the grant did not exceed 0.50 percent of Usinor Sacilor's sales in
1981.

   Although there is a discrepancy between these two investigations, the Court
finds it is due to Commerce's improper application of the Proposed Regulations
in the France Bismuth determination. The Court finds Commerce properly followed
the Proposed Regulations in concluding DNEL's write-off of its PACS in 1981 did
not confer a countervailable benefit upon Usinor Sacilor during the POI.
Accordingly, the Court finds Commerce's determination Usinor Sacilor did not
receive a countervailable benefit during the  [**86]   POI because the amount of
the grant did not exceed 0.50 percent of Usinor Sacilor's sales in 1981 is
supported by substantial evidence on the record and is otherwise in accordance
with law.

   I. Benefits Received by Usinor Sacilor From SODI's Regional Development
Activities

   A ninth challenge raised by Inland Steel alleges Commerce erred in concluding
Usinor Sacilor received no benefits from funds the GOF provided to Usinor
Sacilor, which it in turn loaned to regional development entities known as
Societes de Developpement Industriel ("SODIs"). Inland Steel challenges three
aspects of Commerce's Final Determination with respect to this issue. First,
Inland Steel asserts Commerce incorrectly "suggested--without using the word
'offset'--that the obligation Usinor-Sacilor   [*1367]   incurred when it
received each SODI Advance somehow entitled the company to an offset or negated
the subsidy." (Pls.' Br. at 76.) Plaintiffs assert in reaching this
determination, Commerce failed to verify information to support its
determination that "the entry of a liability on Usinor-Sacilor's balance sheet
when SODI Advances were received reflected the company's obligation, after 1986,
to make a loan  [**87]   to the SODIs to 'match' any GOF contribution received
by the company and reloaned to the SODIs." (Id. at 76 (footnote omitted).)
Additionally, plaintiffs assert Commerce failed to adequately explain what
plaintiffs characterize as its conclusion "that the SODI Advances were in effect
'tied' to something other than steel production" and therefore were "likely to
benefit only a subset of Usinor-Sacilor's French operations." (Id. at 77
(footnote omitted).)


   Finally, plaintiffs assert "the Department either ignored or misconstrued
evidence suggesting that the GOF through the SODI program assumed
Usinor-Sacilor's legal obligations." (Id.) Plaintiffs assert the funds
provided by the GOF to Usinor Sacilor between 1983 and 1986 were provided "to
assist Usinor-Sacilor in meeting existing legal obligations 'to assist in the
retraining of personnel who had lost their jobs.'" (Id. at 78 (emphasis omitted)
(footnote omitted).) Inland Steel also asserts with respect to funds provided by
the GOF to Usinor Sacilor after 1986, Commerce failed to verify information to
support its finding that the funds did not relieve Usinor Sacilor of obligations
to provide funds to the SODIs. Plaintiffs  [**88]   argue Commerce "simply
assumed that the GOF's contributions . . . no longer relieved Usinor-Sacilor of
legal obligations." (Id. (footnote omitted).)

   In response, the government notes Commerce's determination Usinor Sacilor
received no benefit from the GOF's contributions was the basis for its decision
not to countervail them, and not, as Inland Steel contends, because the
contributions were tied to non-steel operations. Defendant also counters Inland
Steel's assertion that the GOF's contributions between 1983 and 1986 helped
Usinor Sacilor meet its existing legal obligations, noting "the GOF did not make
any SODIs contributions at all during the period from 1983 to 1986; the GOF only
began advancing funds after 1986 when the GOF and Usinor Sacilor agreed upon an
expanded role for the SODIs." (Def.'s Br. at 97 (citing Final Determination, 58
Fed. Reg. at 37,310).) Finally, the government asserts Commerce relied on record
evidence, including Usinor Sacilor's questionnaire responses and the testimony
of Usinor Sacilor officials at verification in concluding the GOF's post-1986
SODIs contributions did not relieve Usinor Sacilor of any legal obligations.
While the government  [**89]   acknowledges Commerce's statement that "it had
not found 'hard evidence' at verification", it goes on to note Commerce "did not
concede that there was no evidence at all" and that "certain facts turned up at
verification . . . [that] were consistent with the testimony and seemed to
indicate that the GOF's post-1986 contributions did not relieve Usinor Sacilor
of any legal obligations." (Id. at 98.)

   The Court is unpersuaded by Inland Steel's arguments. With respect to
plaintiffs' arguments that Commerce implicitly concluded the GOF's SODI
contributions were characterized appropriately as an "offset" or as "tied" to
non-steel operations, the Court finds plaintiffs mischaracterized the Final
Determination, which clearly states Commerce found "no benefit to the company as
a result of the GOF's contributions." Final Determination, 58 Fed. Reg. at
37,311 (emphasis added). The Court does not read the Final Determination to
contain "veiled terminology" addressing offsets and tied subsidies as plaintiffs
claim. Rather, the Final Determination contains several statements supporting
Commerce's determination that the GOF's SODI contributions did not benefit
Usinor Sacilor.   [**90]   First, Commerce verified that "the GOF monitored the
funds provided for the SODIs to ensure that they were being used for the
purposes established by the GOF." Id. at 37,310. Additionally, the Final
Determination notes, "when the funds were repaid to the SODIs, the principal
plus any interest paid was reloaned." Id. Accordingly, the Court finds
Commerce's determination that the GOF's SODI contributions did not benefit
Usinor Sacilor is supported by   [*1368]   substantial evidence on the record
and is otherwise in accordance with law.


   Additionally, the Court rejects plaintiffs' assertion Commerce "simply
assumed that the GOF's contributions after 1986 no longer relieved
Usinor-Sacilor of legal obligations." (Pls.' Br. at 78 (emphasis omitted)
(footnote omitted).) The Court finds while the Final Determination states
Commerce was unable to uncover "hard evidence" during verification to support
its determination, Commerce's determination is supported by record evidence,
including Usinor Sacilor's questionnaire responses and the testimony of various
Usinor Sacilor officials at verification. Accordingly, the Court finds
Commerce's determination the GOF's SODI contributions, which  [**91]   began in
1986, did not relieve Usinor Sacilor of any legal obligations to make funds
available to the SODIs is supported by substantial evidence on the record and is
otherwise in accordance with law.

   J. Commerce's Sales Denominator Calculations

   Inland Steel's last challenge to the Final Determination asserts calculations
made by Commerce with respect to Usinor Sacilor's sales denominator were not
based on verified evidence and were methodologically flawed. Specifically,
Inland Steel contends Commerce failed to verify the sales volume and value
information submitted by Usinor Sacilor during verification. According to Inland
Steel, the documents Usinor Sacilor provided at verification "focused
(apparently at Usinor-Sacilor's request) almost exclusively on [the sale of]
Sollac." (Pls.' Br. at 81.) Inland Steel asserts Commerce's examination of sales
by Sollac, Europipe, Ugine and Lorfonte do not account for a significant or
representative sample of Usinor Sacilor's total sales, and therefore "it was
unreasonable for the Department to consider the whole of Usinor-Sacilor's
newly-reported sales data as having been verified." (Id. at 82.) Additionally,
plaintiffs assert  [**92]   rather than "examining 'original source documents,
accounting records, financial statements, and any other pertinent documentation
. . .'", (id. at 82-83 (quoting General Issues Appendix, 58 Fed. Reg. at
37,235)), Commerce verified the information submitted by checking it against a
data-base maintained by Usinor Sacilor, which according to Inland Steel "does
not provide assurance that the information is correct." (Id. at 83.) Finally,
Inland Steel asserts that because Commerce could not obtain the information
necessary to verify the information submitted by Usinor Sacilor, it should have
relied on best information available ("BIA") in the Final Determination.

   Additionally, Inland Steel asserts Commerce unreasonably relied on Usinor
Sacilor's analysis accompanying the sales volume and value information it
provided to Commerce, and therefore the Final Determination is not supported by
substantial evidence on the record. Specifically, Inland Steel alleges Commerce
adopted an inappropriate methodology "for isolating the sales value of French
merchandise and reducing that value to an FOB (port) value." (Id. at 84
(footnote omitted).)

   Finally, Inland Steel  [**93]   asserts Commerce failed to calculate the
sales denominator by making an adjustment to the F.O.B. (port) value, despite
what the plaintiffs characterize as Commerce's "apparent[] intent to use as a
sales denominator some estimate of FOB (port) value." (Id. at 88 (footnote
omitted).)

   In response, the government contends Commerce verified the accuracy of Usinor
Sacilor's sales data as well as the accuracy of Usinor Sacilor's methodology for
calculating total sales of its French-produced merchandise, and utilized an
adjustment to the F.O.B.(port) value of Usinor Sacilor's French-produced sales
in calculating the sales denominator.


   The Court is not persuaded by plaintiffs' assertions. First, with respect to
plaintiffs' argument Commerce improperly relied on the sales data contained in
Exhibit C-3, which Usinor Sacilor submitted during verification, the Court notes
Commerce not only compared the information submitted during verification to
Usinor Sacilor's SIRUS database, but also consulted the audited sales figures
for members of the consolidated Usinor Sacilor group. As noted above, Commerce
typically relies on audited information   [*1369]   received during verification
if it has been examined  [**94]   and confirmed by an independent accounting
firm. See supra Parts I.A., I.F. The Court finds Commerce's actions were
sufficient to verify the sales data's accuracy, and finds Commerce's utilization
of the sales data contained in Exhibit C-3 is supported by substantial evidence
on the record and is otherwise in accordance with law.

   As for plaintiffs' arguments Commerce improperly assumed all French company
sales were of French-produced merchandise and relied on a flawed F.O.B.(port)
methodology, the Court is again unpersuaded. The Court notes verification is not
intended to constitute a comprehensive examination of all relevant sources.
Rather, "verification is a spot check and is not intended to be an exhaustive
examination of the respondent's business." Monsanto Co. v. United States, 12
C.I.T. 937, 944, 698 F. Supp. 275, 281 (1988). Precedent establishes this Court
will give Commerce latitude in conducting verification. See, e.g., Floral Trade
Council v. United States, 17 C.I.T. 392, 399, 822 F. Supp. 766, 772 (1993); PPG
Industries, Inc. v. United States, 15 C.I.T. 615, 620, 781 F. Supp. 781, 787
(1991); Kerr-McGee Chemical Corp. v. United States, 14 C.I.T. 344, 362, 739
[**95]   F. Supp. 613, 628 (1990). The Court finds Commerce has satisfied these
requirements in verifying the information contained in Exhibit C-3, and finds
Commerce's reliance on the data contained in that exhibit is supported by
substantial evidence in the record and is otherwise in accordance with law.

   The Court also rejects Inland Steel's contention Commerce improperly relied
on sales figures submitted by Usinor Sacilor in concluding "everything sold by a
French company in the Usinor-Sacilor group was French merchandise" and on a
flawed methodology submitted by Usinor Sacilor in calculating the F.O.B.(port)
values for French-produced merchandise. (Pls.' Br. at 85.) With respect to
Commerce's efforts to exclude non-French produced merchandise in calculating the
sales value of Usinor Sacilor's French-produced merchandise, the Court notes
only a small number of cross-border transactions were involved and that Commerce
subtracted "an amount equal to the value of sales made by Usinor Sacilor group
companies outside France to Usinor Sacilor group companies within France" from
Usinor Sacilor's sales figures. (Def.'s Br. at 124 (quoting General Issues
Appendix, 58 Fed. Reg. at 37,235).)   [**96]   As for Commerce's supposed
"adoption" of the methodologies submitted by Usinor Sacilor at verification to
calculate an F.O.B.(port) value for the French-produced merchandise, the Court
notes Commerce did not adopt the methodologies submitted at verification, but
rather used them to evaluate the accuracy of two methodologies Usinor Sacilor
provided in its questionnaire responses. Commerce found both sets of
methodologies produced "similar results." General Issues Appendix, 58 Fed. Reg.
37,238. The Court finds Commerce's calculation of the value of Usinor Sacilor's
French-produced sales and its utilization of the methodology to calculate an
F.O.B.(port) adjustment provided in Usinor Sacilor's questionnaire responses is
supported by substantial evidence in the record and is otherwise in accordance
with law.


   Finally, the Court rejects plaintiffs' argument Commerce failed to adjust the
F.O.B.(port) value in calculating a sales denominator for Usinor Sacilor. The
Court notes a section of the General Issues Appendix addressing the sales
denominator calculations entitled "F.O.B. (Port) Value" addresses plaintiffs'
concerns. In that section, Commerce notes "we have used the particular  [**97]
percentage provided in the responses to derive the amount of transportation
charges to be deducted from the sales value of French-produced merchandise."
General Issues Appendix, 58 Fed. Reg. at 37,238.

   PART II.

   In addition to plaintiffs' challenges to the Final Determination, Usinor
Sacilor, Sollac, and GTS ("defendant-intervenors" or "Usinor Sacilor") raise
four challenges to Commerce's determination.

   A. Commerce's Determination the Reclassification of PACS and FIS Instruments
Conferred Countervailable Benefits in Their Face Amount on Usinor Sacilor

   Usinor Sacilor challenges three findings made by Commerce supporting its
conclusion   [*1370]   that the conversion of PACS and FIS instruments conferred
countervailable benefits in their face amount on Usinor Sacilor.

   1. Equityworthiness of Usinor Sacilor in 1986 and 1988

   Defendant-Intervenors assert this Court should reverse Commerce's finding
Usinor Sacilor was unequityworthy in 1986 and 1988 due to Commerce's failure to
consider "compelling and uncontested record evidence concerning the Company's
dramatic and successful restructuring", contrary to Commerce's practice of
"generally 'analyzing the future prospects of  [**98]   a company.'" (Mem. in
Supp. of Mot. for J. on the Agency R. on Behalf of Usinor Sacilor, Sollac and
GTS ("Def.-Intervs.' Br.") at 11 (quoting General Issues Appendix, 58 Fed. Reg.
at 37,244.) Specifically, defendant-intervenors fault Commerce's failure to
analyze, in either the Final Determination or the General Issues Appendix, the
McKinsey report, which evaluated the GOF's restructuring of the French steel
industry in 1986 and predicted Usinor Sacilor's return to a solid financial
position. Additionally, defendant-intervenors assert Commerce's
unequityworthiness findings are further undermined by

(i) its unreasonable rejection of [earnings before interest, taxes and
depreciation (EBITD)] as a measure of return on equity; and (ii) its refusal to
distinguish between the investment perspectives of an 'inside' investor, such as
the GOF, with an existing ownership stake in the Company, and an 'outside'
investor with no preexisting ownership interest in the Company.



(Id. at 14 n.33.)


   Defendant responds Commerce not only considered, but also properly weighed,
evidence of Usinor Sacilor's future prospects contained in the McKinsey report.
Defendant asserts  [**99]   Commerce "discussed the study at length in a
proprietary file memorandum and, in particular, the study's measurement of
Usinor Sacilor's rate of return on equity using earnings before interest, taxes
and depreciation (or EBITD), rather than net income." (Def.'s Br. at 101.) In
responding to Usinor Sacilor's assertion Commerce improperly rejected EBITD as a
measurement of return on equity, defendant responds Commerce was "'not persuaded
that EBITD is the best means of measuring the rate of return on equity. . . .
The Department considers that the net income of a company, not EBITD, reflects
the amount which would potentially accrue to the benefit of the shareholders.'"
(Id. at 102 (quoting Final Determination, 58 Fed. Reg. at 37,305-06).)
Additionally, defendant asserts even if the EBITD methodology were used in
determining Usinor Sacilor's rate of return on equity, "under Usinor Sacilor's
approach . . . it is . . . impossible to calculate a rate of return on equity
for 1985 and 1986 because the equity denominator was negative." (Id. at 103
n.42.) n23 Finally, defendant responds that with respect to distinctions between
"inside" and "outside" investors, Commerce addressed  [**100]   the issue at
length in the General Issues Appendix, concluding "'the perspectives of inside
and outside investors cannot legitimately be distinguished.'" (Id. at 100 n.39
(quoting General Issues Appendix, 58 Fed. Reg. at 37,249).)

- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -

   n23 Commerce's observation is relevant because under the Proposed
Regulations, Commerce may examine a firm's return on equity for the previous
three years in determining whether it is equityworthy. In this case, to
determine whether Usinor Sacilor was equityworthy in 1988, Commerce would
examine Usinor Sacilor's return on equity in 1985, 1986, and 1987. See Proposed
Regulations, 54 Fed. Reg. at 23,371 (to be codified at 19 C.F.R. @ 355.44(e)(2)
(providing Commerce may examine "recent rate of return on equity" in evaluating
equityworthiness)).

- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -

   The Court rejects defendant-intervenors' arguments. Initially, the Court
notes Commerce's Proposed Regulations provide that in determining whether a firm
is equityworthy, Commerce shall examine "whether a reasonable private  [**101]
investor could expect from the firm a reasonable rate of return within a
reasonable period of time." Proposed Regulations, 54 Fed. Reg. at 23,371 (to be
codified at 19 C.F.R. @ 355.44(e)(2)). The Proposed Regulations also state
Commerce may examine "current and past indicators of a firm's financial health",
"future financial prospects" of the firm, "recent rate of return on equity", and
"participation by private investors." Id. In the General Issues Appendix,
Commerce states in applying these factors,   [*1371]   "we tend to place greater
reliance on past indicators as they are known with certainty and provide a clear
track record of the company's performance, unlike studies of future expected
performance which necessarily involve assumptions and speculation." General
Issues Appendix, 58 Fed. Reg. at 37,244.

   Despite its preference for relying on a firm's past financial indicators in
evaluating equityworthiness, the Court notes Commerce did evaluate the McKinsey
study and Usinor Sacilor's future prospects in a proprietary file memorandum.
Commerce concluded a reasonable private investor would not have invested in
Usinor Sacilor based on the projections in the McKinsey study  [**102]   and the
financial difficulties of Usinor and Sacilor prior to the 1986 restructuring.
See Final Equityworthiness Memorandum, Def.'s App. Tab 9 at 2-3.

   Additionally, this Court previously has held Commerce's utilization of a
methodology which does not consider EBITD as a measurement of a firm's rate of
return on equity is in accordance with law. See Usinor Sacilor v. United States,
893 F. Supp. 1112, 1122-24 (C.I.T. 1995). In that case, the Court upheld the
methodology utilized by Commerce in the France Bismuth investigation, stating


Usinor has not suggested any basis for finding Commerce's chosen methodology
unreasonable other than the fact that French investors frequently apply the
EBITD methodology. Plaintiffs' position clearly does not address the substance
of the "net income" methodology that Commerce adopted. Because the court finds
that the "net income" methodology provides a reasonable measure of the
companies' return on equity, the court concludes that its application in this
investigation is proper.



Usinor Sacilor, 893 F. Supp. at 1124.

   The Court notes even if Commerce had used EBITD to calculate Usinor Sacilor's
rate of return on equity,   [**103]   it only would have been able to calculate
that rate using EBITD in 1987. For the three years preceding 1986, Commerce
would not have been able to calculate a rate of return on equity using the EBITD
methodology because Usinor Sacilor's equity denominator was negative in each of
those three years. Similarly, in evaluating Usinor Sacilor's equityworthiness in
1988, Commerce would not have been able to calculate an EBITD measurement in
1985 and 1986 because the denominator would have been negative, and the rate of
return on equity in 1987 would have been negative. (See Def.'s Br. at 102-03
n.42.)

   Based on these observations, the Court finds Commerce correctly concluded the
projections made in the McKinsey study would not have persuaded a reasonable
private investor to invest in Usinor Sacilor. Additionally, the Court finds
Commerce's rejection of EBITD as a measurement of Usinor Sacilor's return on
equity and its refusal to distinguish between "outside" and "inside" investors
is supported by substantial evidence on the record and is otherwise in
accordance with law. The Proposed Regulations clearly state Commerce will make a
determination with respect to "a private investor"   [**104]   and the Court
finds Commerce complied with the Proposed Regulations in conducting its
analysis. See Proposed Regulations, 54 Fed. Reg. at 23,371 (to be codified at 19
C.F.R. @ 355.44(e)(2) (stating Commerce's "principal criterion [in evaluating a
firm's equityworthiness] is whether a reasonable private investor could expect
from the firm a reasonable rate of return within a reasonable period of time")
(emphasis added). Accordingly, the Court finds Commerce's determination that
Usinor Sacilor was not equityworthy in 1986 or 1988 is supported by substantial
evidence on the record and is otherwise in accordance with law.

   2. Commerce's Determination the PACS and FIS Instruments Were Debt Upon
Issuance


   Additionally, defendant-intervenors argue Commerce erred in concluding the
reclassification of the PACS n24 and FIS instruments n25   [*1372]   conferred
counteravailable benefits on Usinor Sacilor because, defendant-intervenors
assert, these instruments were equity upon issuance. In advancing this argument,
Usinor Sacilor asserts Commerce failed to consider "conclusive record evidence
demonstrating that the PACS and FIS instruments were equity upon issuance" and
Commerce improperly  [**105]   found the PACS and FIS instruments "carried with
them an 'obligation for repayment' and guaranteed interest payments."
(Def.-Intervs.' Br. at 15 (quoting General Issues Appendix, 58 Fed. Reg. at
37,255).) According to defendant-intervenors, any counteravailable benefit
conferred on Usinor Sacilor "occurred upon issuance of the instruments, not upon
their reclassifications, which were little more than bookkeeping
transactions." (Id. at 16.)

- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -

   n24 PACS are loans with special characteristics, the principal terms of which
required the debtor company to: (1) make interest payments of 0.1 percent for
the first five years following the loan; (2) make interest payments of 1.0
percent and make principal and supplementary interest payments, with the amount
to be set by the Minister of Economy, beginning in the sixth year after receipt
of the loan; (3) make the principal and supplementary interest payments from its
profits; (4) pay the face amount of the PACS plus interest; and (5) subordinate
the PACS to all other form of debt, although PACS were superior to common stock.

   n25 In 1983, the GOF created the Steel Intervention Fund ("FIS") to
facilitate Usinor and Sacilor's exercise of their authority to issue convertible
bonds. Usinor and Sacilor issued convertible bonds to the FIS, which in turn
issued bonds, guaranteed by the GOF, to the public.

- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
[**106]

   With respect to the PACS, Usinor Sacilor contends they "lacked the features
long recognized by the courts as essential characteristics of genuine debt: they
lacked a real, compensatory interest rate, they carried no repayment schedule,
and the only provision for repayment was out of profits." (Id. at 17-18
(footnote omitted).) According to Usinor Sacilor, "[a] contingent obligation to
repay, ...characterizes equity, not debt." (Id. at 18.)

   Usinor Sacilor also raises similar arguments with respect to the
reclassification of the FIS instruments. Defendant-Intervenors argue "the record
establishes that the FIS instruments, like the PACS, effectively represented a
permanent commitment of funds by the GOF to Usinor Sacilor." (Id. at 20.) Usinor
Sacilor also asserts "although the FIS agreements did contain nominal repayment
schedules", "the only funds changing hands were within the Government of
France." (Id.) Finally, Usinor Sacilor asserts it "never made any payments under
the repayment schedules." (Id.)

   With respect to Usinor Sacilor's assertions regarding PACS, Commerce's
response asserts "clearly, it was contemplated that Usinor and Sacilor would
repay the  [**107]   face amount of the PACS plus interest." (Def.'s Br. at 47.)
Additionally, Commerce asserts the repayments were to be made pursuant to a
schedule "set by the PACS holder after an initial period in which the PACS
holder could evaluate the debtor company's financial condition." (Id. at 47-48.)
With respect to Usinor Sacilor's argument the PACS should be considered to be
equity because the repayments were to be made from Usinor Sacilor's profits,
defendant notes that even if Usinor Sacilor was unable to make certain scheduled
payments, "the debtor company remains obligated, and only the length of its
payment schedule is affected. Indeed, the debtor company's repayment obligation
only disappeared when the PACS were converted to common stock." (Id. at 49.)


   With respect to Commerce's finding the conversion of FIS bonds into common
stock conferred a counteravailable benefit upon Usinor Sacilor, defendant's
brief asserts that at the time of their issuance "the FIS bonds carried a
repayment obligation." (Id. at 62.) According to the defendant
the nature of the FIS bonds was not altered by the fact that the GOF made the
initial one or two principal repayments, nor by the  [**108]   fact that the GOF
guaranteed Usinor Sacilor's subsequent principal repayments. The FIS bonds
remained debt instruments, as they indisputably obligated Usinor Sacilor to pay
off the bond principal.



(Id. at 63.) Finally, the government concludes "the GOF's payments only altered
the amount of the benefit conferred on Usinor Sacilor by the preferential terms
of the FIS bonds while they were outstanding debt instruments, i.e., prior to
being converted to common stock." (Id. at 64.)

   [*1373]   The Court rejects Usinor Sacilor's assertions concerning Commerce's
treatment of the PACS. The Court observes as of the time of their issuance, the
PACS contained repayment obligations. For the first five years after their
issuance, the PACS contracts provide the debtor is obligated to make interest
payments at a rate of 0.1 percent. See Company Verification Report, Def. App.
Tab 1, Ex. C-32 (art. 2); GOF Response, Def. App. Tab 2, Exs. 28-A (art. 3),
28-B (art. 2). Additionally, the Court notes 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  [**109]   Minister of Economy, who is to "define . . . the amounts
available for the loans with special characteristics, the allotment between
supplementary remuneration and repayments." See Company Verification Report,
Def. App. Tab 1, Ex. C-32 (arts. 2, 5); GOF Response, Def. App. Tab 2, Ex. 28-B
(arts. 2,5). The Court also notes 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. See Company Verification Report, Def. App. Tab 1, Ex. C-32 (article
2 provides "the debt shall bear interest at a rate of 0.1%" and "the debt shall
be amortized according to a schedule and with a repayment rate that is identical
to these of the loan with special characteristics authorized in article 1")
(emphasis added); GOF Response, Def. App. Tab 2, Ex. 28-B (article 5 provides
"the Minister of Economy shall define . . . the allotment between supplementary
remuneration and repayments").

   The Court finds the conditions established by the PACS contracts concerning
repayment, as well as the language included in those contracts, support
Commerce's  [**110]   determination the PACS constituted debt upon issuance. The
fact that the PACS contained provisions making repayment contingent on Usinor
Sacilor earning a profit does not alter the Court's conclusion. While Usinor
Sacilor's repayment obligation was contingent on earning a profit, the company
nevertheless was subject to liabilities on the PACS contracts during the period
the contracts were outstanding prior to their conversion into common stock.
Accordingly, the Court finds Commerce's determination 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 these
instruments contain a fixed payment schedule. The Court is not persuaded,
however, by Usinor Sacilor's argument the FIS bonds should be classified as
equity instruments. While Usinor Sacilor argues the GOF made the first few
principal payments and guaranteed remaining principal payments in the event
Usinor Sacilor'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  [**111]   repaying the bonds' principal.
See Def. App. Tab 4, Ex. GOF-2 (article 6 of the FIS contract provides that
after Jan. 1, 1987, Usinor and Sacilor will meet the repayment obligations due
under the FIS bonds, assuming a recovery of their financial position).
Accordingly, the Court rejects Usinor Sacilor's arguments and finds Commerce's
determination the FIS bonds constituted debt upon their issuance is supported by
substantial evidence on the record and is otherwise in accordance with law.

   3. Commerce's Valuation of the Benefits Conferred Upon Usinor Sacilor from
the Conversion of the PACS and FIS Instruments

   Finally, defendant-intervenors argue in the alternative that even if Usinor
Sacilor was unequityworthy in 1986 and 1988 and the PACS and FIS instruments
were debt upon issuance, Commerce improperly measured the benefit to Usinor
Sacilor from the conversion, and the conversion conferred no measurable benefit
on Usinor Sacilor. First, defendant-intervenors assert Commerce overvalued the
benefits received by Usinor Sacilor because "most, if not all, of the benefits
from these infusions had been consumed by the time of the reclassifications."
(Def.-Intervs.' Br. at 21.)   [**112]   Usinor Sacilor contends that rather than
countervailing the face   [*1374]   amount of the PACS and FIS instruments, "the
cognizable and measurable benefit is the then present value of the forgiven
obligations, not the face amount of the reclassified instruments." (Id. at 22
(footnote omitted).) Second, defendant-intervenors argue Commerce's finding
Usinor Sacilor uncreditworthy in 1986 and 1988 "should have required the
[International Trade Administration] to find that there was no significant
measurable benefit to the Company from the 'forgiveness' of the PACS obligations
because the right to share in future distributable earnings was virtually
worthless." (Id. at 25.) Additionally, Usinor Sacilor asserts Commerce's failure
to calculate the present value of the benefits conferred by the PACS "is
particularly egregious in light of record evidence that PACS issued by Usinor
Sacilor to its former majority shareholder 'were essentially written off in 1981
at a redemption value of FF 100.'" (Id. at 25-26 (quoting Final Determination,
58 Fed. Reg. at 37,308) (emphasis in Def.-Intervs.' Br. omitted).)

   Usinor Sacilor raises similar arguments with respect to Commerce's  [**113]
valuation of the benefits conferred by the reclassification of the FIS
instruments. Defendant-Intervenors assert "the record establishes that the
fundamental effect of these reclassifications was to eliminate a 'contingent'
repayment obligation tied to the Company's profitability and the nominal
interest obligation." (Id. at 26.) Usinor Sacilor argues

since the [International Trade Administration] found the Company to be
unequityworthy in 1986 and 1988, the years in which the FIS instruments were
converted, it should have also determined that the value of this obligation was
virtually nothing--not the full face value of the instruments.



(Id. at 27.)


   Commerce responds with two arguments. First, with respect to Usinor Sacilor's
argument the benefit should be measured in terms of its present value, the
government emphasizes Commerce's methodology calls for it "to measure the
counteravailable benefit of preferential loans before and after their
forgiveness, i.e., [by applying] Commerce's loan methodology and Commerce's
grant methodology." (Def.'s Br. at 51.) Therefore, defendant asserts, the only
reasonable measurement of the benefit conferred  [**114]   at the time of loan
forgiveness "is the total outstanding principal of the loan, which, in this
case, is the original face value of the PACS (because Usinor Sacilor had made no
principal payments)." (Id. at 51.) Defendant's brief notes that prior to the
forgiveness, "Commerce had treated Usinor Sacilor as having an obligation to
repay the outstanding principal in full, and Commerce consequently did not
attempt to countervail any part of it." (Id. at 52-53.)

   Additionally, defendant responds to Usinor Sacilor's argument the value of
the benefit received when the instruments were converted was "essentially zero"
because Commerce found Usinor Sacilor to be unequityworthy in 1986 and 1988. The
government's brief raises three arguments in response. First, defendant notes

a finding of unequityworthiness does not mean that a firm is not profitable, nor
does it mean that the firm will continue to be unprofitable in the future. It
simply means that, from the perspective of a reasonable private investor at the
time of an investigated investment, the firm was unable to generate a reasonable
rate of return--not no return at all--within a reasonable period of time.



(  [**115]   Id. at 57.) Second, defendant notes "under the PACS contract,
Usinor Sacilor's repayment obligation does not disappear if, in a given
year,...it did not realize profits." (Id. at 57-58.) Finally, defendant
challenges Usinor Sacilor's suggestion the PACS were worth only FF 100 in 1981
when Usinor repaid PACS issued to its former majority shareholder. Commerce
notes it "found in the final determination that Usinor's former majority
shareholder accepted the FF 100 payment only at the direction of the GOF" and
that "in 1989, Usinor Sacilor repaid the entire face value of PACS held by the
former majority shareholder of Sacilor, totalling (sic) FF 62.5 million." (Id.
at 58, 58-59 (footnote omitted).)

   The Court rejects Usinor Sacilor's contention that Commerce's failure to
consider the present value of the PACS and FIS   [*1375]   instruments, rather
than the face value of the outstanding principal, renders Commerce's analysis
improper. As discussed above, both the PACS and FIS bonds were debt upon their
issuance. The conversion of those instruments to common stock eliminated Usinor
Sacilor's obligation to repay the remaining principal on those debts, and
therefore conferred a counteravailable  [**116]   benefit upon Usinor Sacilor in
the amount of the face value of the outstanding debt. This Court previously
noted "the extent to which the companies' unprofitability might have delayed
repayment on the instruments is irrelevant to an analysis of whether and to what
extent the instruments' conversions conferred counteravailable benefits on the
companies." Usinor Sacilor, 893 F. Supp. at 1125. Accordingly, the Court finds
Commerce's determination the conversion of PACS and FIS bonds conferred
counteravailable benefits upon Usinor Sacilor in the amount of the face value of
the remaining principal is supported by substantial evidence on the record and
is otherwise in accordance with law.


   B. Commerce's Determination the Shareholders' Advances Were Nonrecurring
Grants
   In the Final Determination, Commerce considered three criteria in
differentiating recurring and nonrecurring benefits. According to Commerce's
methodology, a benefit is nonrecurring if: (1) the benefits are exceptional; (2)
the recipient cannot expect to receive benefits on an ongoing basis from review
period to review period; and (3) the provision of funds by the government must
be approved every year. See   [**117]    General Issues Appendix, 58 Fed. Reg.
at 37,226. In applying this analytical framework to the shareholders' advances
received by Usinor Sacilor, Commerce determined the shareholders' advances
"constituted nonrecurring benefits because each advance was contingent upon
specific government approval" and amortized the benefits they conferred upon
Usinor Sacilor over 15 years. Id. at 37,228.

   Defendant-Intervenors contend Commerce's determination the shareholders'
advances were nonrecurring grants is unsupported by substantial record evidence
and is contrary to law. Usinor Sacilor contends "the record demonstrates that
shareholder advances were provided to the Company on a regular basis" and
therefore, the advances should have been treated as recurring grants and
expensed in the years Usinor Sacilor received them. (Def.-Intervs.' Br. at 29.)
Defendant-Intervenors argue the fact that the GOF held 74% of Usinor Sacilor's
stock as of 1981 reflects "there was never any question that funds to enable the
Company to continue in operation would be provided." (Id. at 30 n.70.)
Additionally, Usinor Sacilor contends "the record clearly shows that only the
precise amount of the grants--not  [**118]   whether the grants would be
made--was subject to a monthly pro forma review with the GOF's Ministry of the
Treasury based upon the Company's forecast of daily cash needs." (Id. at 31.)

   Defendant responds that based on the record evidence before it, Commerce
concluded the shareholders' advances "were exceptional and, therefore,
non-recurring." (Def.'s Br. at 66.) Defendant notes while "these advances were
provided on a somewhat regular basis from 1982 to 1986, each advance required
specific approval by the GOF." (Id. at 66-67.)

   The Court notes Commerce's Proposed Regulations initially established the
elements Commerce considered in determining whether a grant is recurring. Those
factors were: (1) whether the program providing benefits is exceptional; (2)
whether the program is longstanding; and (3) whether there is reason to believe
the program will not be continued in the future. See Proposed Regulations, 54
Fed. Reg. at 23,376 (to be codified at 19 C.F.R. @ 355.49(a)(2)). In the General
Issues Appendix, however, Commerce notes it adopted a revised test in the France
Bismuth investigation. The factors weighed by Commerce were: (1) the benefits
were exceptional;   [**119]   (2) the recipient could not expect to receive the
benefits on an ongoing basis; and or (3) the provision of funds from the
government had to be approved every year. General Issues Appendix, 58 Fed. Reg.
at 37,226. The General Issues Appendix continues on to state "if any of the
questions in the modified test are answered affirmatively, the benefit provided
will generally   [*1376]   be considered nonrecurring and we will allocate the
benefit over time." Id. at 37,226.


   In the investigation presently under review, Commerce determined Usinor and
Sacilor received advances from the GOF between 1982 and 1986, that the advances
carried no interest payments, that the GOF did not place any preconditions on
their receipt, and that "the advances constitute counteravailable grants, as no
shares were received for them." Final Determination, 58 Fed. Reg. at 37,307. The
Court notes the administrative record establishes a Bureau Chief in the French
Ministry of Treasury was responsible for authorizing the advances, and therefore
some form of government approval, whether "formal" or "informal", was required
before the shareholders' advances were issued. The Court notes Commerce's
methodology does  [**120]   not require a particular form of government
approval, but rather only states it will consider whether "the provision of
funds by the government must be approved every year." General Issues Appendix,
58 Fed. Reg. at 37,226. Additionally, the ad hoc nature of the grant is
reflected by the fact that the amount of the shareholders' advances was not
constant, but rather depended on the magnitude of the losses incurred by Usinor
and Sacilor. Accordingly, the Court finds Commerce's determination the
shareholders' advances received by Usinor and Sacilor constitute
counteravailable grants is supported by substantial evidence on the record and
is otherwise in accordance with law

   C. Commerce's Inclusion of a Risk-Premium in Calculating the Discount Rate
During Usinor Sacilor's Uncreditworthy Years

   In allocating benefits received during the POI from a nonrecurring
counteravailable grant, Commerce (1) determines the amount of the
counteravailable benefit; (2) assigns a discount rate; and (3) constructs a
benefit stream. See Proposed Regulations, 54 Fed. Reg. at 23,384 (to be codified
at 19 C.F.R. @ 355.49(b)(1)). In assigning a discount rate, Commerce's Proposed
Regulations  [**121]   specify, in order of priority, the use of "(i) the cost
of long-term, fixed-rate debt of the firm in question...; (2) the average cost
of long-term, fixed-rate debt in the country in question; or (iii) [a] rate
which the Secretary considers to be most appropriate." Proposed Regulations, 54
Fed. Reg. at 23,384 (to be codified at 19 C.F.R. @ 355.49(b)(1)). Commerce's
objective in applying this methodology is to

create a stream of benefits in such a way that the company in question would be
indifferent between: (1) Receiving the benefit in a lump sum, and (2) receiving
a series of payments over the allocation period. The use of a company-specific
discount rate is what guarantees that we will achieve indifference.



Final Determination, 58 Fed. Reg. at 37,314. In the Final Determination,
Commerce used Usinor Sacilor's benchmark interest rate as the discount rate in
calculating the benefits certain grants conferred upon Usinor Sacilor. Commerce
used this rate because a company-specific rate for Usinor Sacilor was not
available. See Memorandum from Team to Barbara R. Stafford re: Final
Determinations of Countervailing Duty Investigation of Certain Steel  [**122]
Products from France, Def.-Interv. App. Tab 15 at 26 ("Usinor Sacilor did not
report its actual cost for long-term, fixed or variable rate debt. Therefore,
our regulations instruct us to use the national average long-term fixed rate
interest rate in France."). Additionally, the Proposed Regulations provide the
benchmark interest rate for uncreditworthy companies shall include a risk
premium equal to 12 percent of the prime rate. See Proposed Regulations, 54 Fed.
Reg. 23,381 (to be codified at 19 C.F.R. @ 355.44(b)(6)(iv) ("In the Secretary
deems a firm to be uncreditworthy..., the Secretary will calculate the benchmark
interest rate for a long-term government loan by taking the sum of 12 percent of
the prime interest rate in the country in question and: [other relevant factors]
....")).



   Defendant-Intervenors contend Commerce improperly departed from its Proposed
Regulations by using the benchmark interest rate calculated for Usinor Sacilor,
which defendant-intervenors note is the "highest long-term fixed interest rate
commonly available to firms in the country in question", (Def.-Intervs.'
[*1377]   Br. at 33 (quoting Proposed Regulations, 54 Fed. Reg. at 23,381 (to be
codified  [**123]   at 19 C.F.R. @ 355.44(b)(6)(iv)(A)(1)))), as Usinor
Sacilor's discount rate. Usinor Sacilor notes "the [International Trade
Administration] concedes that its Proposed Regulations, which purport to codify
its existing practice with respect to the identification and measurement of
subsidies under the CVD law, 'do not provide for uncreditworthy discount rates,'
including the addition of a risk premium." (Id. at 33-34 (footnote omitted).)
Additionally, defendant-intervenors maintain Commerce improperly departed from
its Proposed Regulations by adding a risk premium to the discount rate in the
years Usinor Sacilor was determined to be uncreditworthy. Usinor Sacilor asserts
Commerce has failed to articulate a rationale explaining why it equated "an
'uncreditworthy' interest rate used as a benchmark to determine the
counteravailability of loans . . . with a company-specific discount rate
intended to reflect the firm's actual cost of long-term debt." (Id. at 34
(emphasis omitted).)

   Defendant responds "Commerce's practice is not to follow the Proposed
Regulations when setting the discount rate for an uncreditworthy company", and
"Commerce uses the same rate for both the benchmark  [**124]   interest rate and
the discount rate in order to avoid understating the benefit stream being
measured." (Def.'s Br. at 116.) Defendant contends since the issuance of the
Proposed Regulations in 1989, Commerce consistently has used the benchmark rate
as the discount rate for uncreditworthy companies. Similarly, plaintiffs
maintain Commerce's practice was adopted in the 1984 Subsidies Appendix, see
Cold-Rolled Carbon Steel Flat-Rolled Products From Argentina: Final Affirmative
Countervailing Duty Determination and Countervailing Duty Order, 49 Fed. Reg.
18,006, 18,020-21 (Dep't Comm. 1984) (final determ.) ("Subsidies Appendix"), and
that Commerce consistently has utilized this methodology since its adoption.

   The Court rejects defendant-intervenors challenge. In reaching this
conclusion, the Court notes although the utilization of an uncreditworthy
discount rate is not addressed in the Proposed Regulations, Commerce
consistently has followed its practice of using uncreditworthy discount rates
both before and after issuance of the Proposed Regulations. See, e.g., Final
Affirmative Countervailing Duty Determination: Certain Hot Rolled Lead and
Bismuth Carbon Steel Products   [**125]    From France, 58 Fed. Reg. 6,221,
6,224 (Dep't Comm. 1993) (final determ.) (benchmark interest rate used as
discount rate); Final Affirmative Countervailing Duty Determinations: Certain
Steel Products From Spain, 58 Fed. Reg. 37,374,37,384-85 (Dep't Comm 1993)
(final determ.) (same); Final Affirmative Countervailing Duty Determination: New
Steel Rail, Except Light Rail, From Canada, 54 Fed. Reg. 31,991, 31,994 (Dep't
Comm. 1989) (final determ.) (same); Certain Carbon Steel Products From Brazil;
Final Results of Countervailing Duty Administrative Review, 52 Fed. Reg. 829,
831 (Dep't Comm. 1987) (final results of admin. review) (same).


   Additionally, the Court finds Commerce's utilization of a company's benchmark
interest rate as a discount rate in countervailing the benefits of grants
conferred on that company is a reasonable means of allocating the benefits of
grants in a manner that corresponds to commercial reality. The Court finds
Commerce's practice is reasonable as a means of treating both grants and loans
similarly in order to avoid creating incentives for foreign governments to
provide assistance to companies in one form over another. See Usinor Sacilor,
893  [**126]   F. Supp. at 1134 (citing S. Rep. No. 249, 96th Cong., 1st Sess.
85-86 (1979), reprinted in 1979 U.S.C.C.A.N. 381, 471-72 (stressing the
importance of developing reasonable methods of subsidy allocation in order to
account for the commercial and competitive benefit provided to the recipient).

   Based on the fact Commerce consistently has followed its methodology for
allocating the benefits provided to uncreditworthy firms from government grants
and equity infusions, and the fact that Commerce's methodology is reasonable in
treating countervailable loans and grants similarly, this Court finds Commerce's
use of Usinor Sacilor's benchmark interest rate as the discount rate in
allocating the benefits provided to   [*1378]   Usinor Sacilor during a period
when it was uncreditworthy is supported by substantial evidence on the record
and is otherwise in accordance with law.

   D. Commerce's Determinations on the Countervailability of Various Loan
Programs

   Finally, Usinor Sacilor challenges Commerce's finding various programs under
which Usinor Sacilor received loans are countervailable. The challenges raised
by Usinor Sacilor apply to the following programs.

   1. CFDI Loans

   Commerce concluded  [**127]   the CFDI loans n26 received by Usinor Sacilor
were countervailable based on its determination the loans were "de facto limited
to a specific enterprise or industry or group of enterprises or industries" due
to its inability to obtain "sufficient verified information on the record
regarding the distribution of CFDI loans." Final Determination, 58 Fed. Reg. at
37,309.

- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -

   n26 CFDI loans are participative loans available to all French companies
provided at below market interest rates with repayment based on a share of
future profits according to an agreed upon formula.

- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -


   Usinor Sacilor asserts Commerce's conclusion is inappropriate given that
"respondents cooperated with the [International Trade Administration] to the
maximum extent possible and provided information supplied by the CFDI which
clearly demonstrated that the loans were not de facto specific to the steel
industry." (Def.-Intervs.' Br. at 36.) Defendant-Intervenors also assert
Commerce's determination is "directly contrary to the evidence   [**128]    of
record" which reflects "the basic industries of energy, chemical, coal and
steel, metallurgy and paper . . . received only 13.28% of the CFDI loans
distributed during the period 1983-1988" while these industries were responsible
for roughly a third of industrial production in France between 1987 and 1990.
(Id.) Finally, Usinor Sacilor argues it should not be penalized by Commerce's
adverse inference because "GOF officials could not provide documentation of the
thousands of loans on which the statistics presented to the [International Trade
Administration] were based." (Id. at 36-37.)
   Commerce responds that following its determination the consolidation of
Usinor Sacilor's outstanding CFDI loans in 1991 created new loans with new terms
and conditions, it examined the distribution of all CFDI loans issued in 1991.
Based on record evidence Usinor Sacilor received "new" CFDI loans as a result of
the 1991 consolidation and the failure of the GOF to produce verifiable evidence
that the loans were non-specific, Commerce determined the CFDI loans were
specific to Usinor Sacilor. In response to Usinor Sacilor's argument that a
letter from the president of CFDI provides record  [**129]   evidence the CFDI
loans were not specific, Commerce notes "the GOF wholly failed verification of
the CFDI president's letter. The GOF did not produce a single document to
substantiate the statistics in that letter, nor did it produce any of the source
documents or worksheets used to derive those statistics." (Def.'s Br. at 71.)
Commerce asserts under these circumstances, "[it] was entirely justified in
using BIA." (Id. at 71 (citing 19 U.S.C. @ 1677e(b) ("If the administering
authority is unable to verify the accuracy of the information submitted, it
shall use the best information available to it as the basis for its action. . .
.").)

   Initially, the Court notes Commerce officials provided the GOF with several
opportunities to provide documentation during verification to support the
statistics contained in the letter signed by the president of CFDI. The
Verification Report notes Commerce officials conducting the verification "asked
for supporting documentation for" the letters statistics, and "asked if [the]
distribution percentages [in the letter] were published." GOF Verification
Report, reprinted in Def. App. Tab 4 at 13. In responding to these requests, the
CFDI officials  [**130]   replied they were unable to provide documentation
supporting the statistics and that there was no published source containing the
statistics. Because the CFDI officials did not respond to these requests, the
Court finds Commerce was justified in resorting to use of BIA. Accordingly, the
Court finds   [*1379]   Commerce's adverse inference that the CFDI loans were
"de facto limited to a specific enterprise or industry or group of enterprises
or industries", Final Determination, 58 Fed. Reg. at 37,309, is supported by
substantial evidence on the record and is otherwise in accordance with law.

   2. ECSC Article 54 Investment Loans

   Usinor Sacilor challenges Commerce's decision to countervail certain Article
54 industrial development loans provided to Usinor Sacilor by the European Coal
and Steel Community ("ECSC"). Usinor Sacilor asserts "because any purported
benefit associated with the Article 54 loans was conferred by the ECSC, an
entity that is funded entirely by ECSC companies such as Usinor Sacilor, the
[International Trade Administration]'s determination that these loans are
countervailable cannot stand." (Def.-Intervs.' Br. at 37.) Additionally,
defendant-intervenors argue "in  [**131]   exchange for its contribution to the
ECSC, a member company receives a variety of benefits" including "the
availability of Article 54 loans." (Id. at 38.) Usinor Sacilor contends because
"any benefits conferred by the ECSC are made possible by the contributions of
its member companies, and as such, cannot be treated as countervailable." (Id.
at 39.)


   Commerce responds while it "does recognize that no benefit is conferred on
the recipient company when the grant is sourced directly from the ECSC operating
budget, given that this budget is funded by levies on ECSC member companies",
the case at hand involves the ECSC "lending money that it obtains from the
financial markets." (Def.'s Br. at 94.) Defendant's brief continues on to
contend "the ECSC conferred a real benefit on Usinor Sacilor when it made loans
to it" because "the money loaned by the ECSC is not money that the recipient
company--at least in the case of Usinor Sacilor--could have obtained on its
own." (Id.) Finally, defendant notes "in both creditworthy and uncreditworthy
years, Commerce found that the interest rates on the countervailed ECSC loans
were below the market rate of interest that would have been available  [**132]
to Usinor Sacilor." (Id. at 94-95.)

   The Court notes Usinor Sacilor acknowledges the funds made available through
Article 54 loans were not provided through membership dues, but rather were
"provided by the ECSC from funds it obtained in the financial markets."
(Def.-Intervs.' Br. at 38 (citation omitted).) Additionally, the Court notes
Commerce did not countervail ECSC Redeployment Aid payments made from the ECSC
operational budget. See Final Determination, 58 Fed. Reg. at 37,309. Therefore,
while Usinor Sacilor contends the ECSC Article 54 loans should not be
countervailed because "any benefits conferred by the ECSC are made possible by
the contributions of its member companies, and as such, cannot be treated as
countervailable", (Def.-Intervs.' Br. at 39), the Court notes Commerce
established at verification that "Article 54 loans are not funded through the
ECSC budget", but rather the Article 54 loans "are direct loans from the EC
Commission carrying a slightly higher rate than that at which the Commission
obtained them." Final Determination, 58 Fed. Reg. at 37,308.

   The Court notes the ECSC Article 54 loans were not made available from funds
comprising the operating  [**133]   budget, but rather were made available by
obtaining funds through the financial markets, and thus the ECSC made funds
available to Usinor Sacilor which it otherwise would not have been able to
obtain. Additionally, these loans were made available to Usinor Sacilor at
interest rates below the market rates, and therefore conferred a benefit on
Usinor Sacilor. Accordingly, the Court finds Commerce's determination that
certain ECSC Article 54 industrial development loans are countervailable is
supported by substantial evidence on the record and is otherwise in accordance
with law.

   3. Unreported Participative Loans

   Finally, Usinor Sacilor challenges Commerce's determination to countervail
certain additional participative loans discovered by Commerce during
verification. Defendant-Intervenors contend that "despite . . . record evidence
that these were not zero rate loans, the [International Trade Administration]
used information available and treated the outstanding principal as a zero rate
short-term loan." (Def.-Intervs.' Br. at 39   [*1380]   (emphasis omitted).)
Usinor Sacilor asserts "the [International Trade Administration] was unjustified
in completely disregarding this record evidence  [**134]   that these loans
carried an interest obligation solely because it was not provided with
additional information about the programs under which these loans were issued."
(Id. (footnote omitted).)


   Commerce responds because these participative loans were discovered for the
first time at verification "it had no choice but to use BIA and countervail
these loans." (Def.'s Br. at 79.) Defendant's brief also asserts that because
"the type of data that Commerce needs to make accurate calculations" was missing
from the record, "Commerce must make an adverse inference regarding the
missing data." (Id. at 80.) Finally, with respect to its selection of an
interest rate by BIA, Commerce states it "should not select a BIA that somehow
attempts to approximate the missing data, as Usinor Sacilor seems to be
suggesting", and asserts "in selecting the particular BIA interest rate in this
case, . . . Commerce followed its normal practice." (Id. at 80, 81.)

   The regulations require the use of BIA whenever the Secretary "(1) Does not
receive a complete, accurate, and timely response to the Secretary's request for
factual information; or (2) Is unable to verify, within the time specified, the
[**135]   accuracy and completeness of the factual information submitted." 19
C.F.R. @ 353.37(a) (1993). The statute provides Commerce "shall, whenever a
party or any other person refuses or is unable to produce information requested
in a timely manner and in the form required, or otherwise significantly impedes
an investigation, use the best information otherwise available." 19 U.S.C. @
1677e(c) (1988). Regarding Commerce's selection of BIA, in Allied-Signal
Aerospace Co. v. United States, 996 F.2d 1185, 1191 (Fed. Cir. 1993), the
Federal Circuit notes "because Congress has 'explicitly left a gap for the
agency to fill' in determining what constitutes the best information available,
the [International Trade Administration]'s construction of the statute must be
accorded considerable deference." (quoting Chevron U.S.A., Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837, 843-44, 81 L. Ed. 2d 694, 104 S.
Ct. 2778 (1984)).

   Because the statute contains a gap, it is within Commerce's discretion to
decide what constitutes best information available in a particular case and this
Court must review that decision deferentially. Allied-Signal Aerospace, 996 F.2d
at 1191-92. It is therefore within Commerce's  [**136]   discretion to choose
BIA adverse to non-cooperating parties. See Saha Thai Steel Pipe Co. v. United
States, 17 C.I.T. 727, 732-35, 828 F. Supp. 57, 62-64 (1993). Commerce explained
its choice of BIA, noting that after discovering the previously unreported loans
during verification.

[Usinor Sacilor] officials could give no further explanation of this category
[of loans].

   Because these loans were unreported and we have no information about the
programs under which these loans might have been issued, we are applying best
information available.



Final Determination, 58 Fed. Reg. at 37,310. This Court finds Commerce exercised
its discretion in this matter reasonably and its application and choice of BIA
in estimating the net subsidy provided to Usinor Sacilor by the unreported
participative loans discovered during verification is supported by substantial
evidence on the record and is otherwise in accordance with law.

   CONCLUSION

   This Court sustains the Final Determination in its entirety finding it is
supported by substantial evidence on the record and otherwise in accordance with
law, with the exception that the Court will remand to Commerce the sole
[**137]   issue of whether certain Credit National export loans discovered at
verification conferred a countervailable benefit upon Usinor Sacilor.



   Schedule of Consolidated Cases

Usinor Sacilor, et. al v. United States, Court No. 93-09-00588-CVD

Usinor Sacilor, et. al v. United States, Court No. 93-09-00589-CVD

Usinor Sacilor, et. al v. United States, Court No. 93-09-00590-CVD

Usinor Sacilor, et. al v. United States, Court No. 93-09-00591-CVD

   ORDER

   This case having been duly submitted for decision and this Court, after due
deliberation, having rendered a decision herein; now, in conformity with said
decision, it is hereby

   [*1381]   ORDERED that plaintiffs' Motion for Judgment Upon the Agency Record
challenging the United States Department of Commerce's determination in Final
Affirmative Countervailing Duty Determinations: Certain Steel Products from
France, 58 Fed. Reg. 37,304 (Dep't Comm. 1993) ("Final Determination") is
granted in part and denied in part; and it is further

   ORDERED that defendant-intervenors' Motion for Judgment on the Agency Record
challenging the Final Determination is denied; and it is further

   ORDERED that  [**138]   the Final Determination is sustained with the
exception of the issue whether certain Credit National loans made for export
promotion, discovered during verification, conferred a countervailable benefit
upon Usinor Sacilor; and it is further

   ORDERED that the issue of whether certain Credit National loans made for
export promotion conferred a countervailable benefit upon Usinor Sacilor is
remanded for further analysis to the Department of Commerce, International Trade
Administration; and it is further

   ORDERED that Commerce will file the results