INTRODUCTION

The United States appeals certain issues of law and legal interpretations in the Panel Report, United States - Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom (the “Panel Report”). The Panel was established to consider a complaint by the European Communities with respect to countervailing duties imposed by the United States on certain hot-rolled lead and bismuth carbon steel products (“leaded bars”) originating in the United Kingdom.

The alleged subsidies countervailed relate principally to equity infusions granted by the British Government to a state-owned company, British Steel Corporation (“BSC”), between 1977 and 1986. In 1986, BSC and Guest, Keen and Nettlefolds (“GKN”), a privately-owned company, created United Engineering Steels Limited (“UES”) as a joint venture. Both BSC and GKN provided assets to UES, in return for equal shares in the joint venture. In particular, BSC spun-off its leaded bar-producing assets to UES. Negotiations concerning the spin-off were conducted at arm's length, consistent with commercial considerations. BSC ceased producing leaded bars after the spin-off of its leaded bar-producing assets to UES. In preparation for the privatization of BSC, British Steel plc (“BSplc”) assumed, in September 1988, the property, rights and liabilities of BSC, including BSC's holding in UES. In December 1988, the British government completed the privatization through a sale of BSplc shares on the stock market. The United States Department of Commerce (“USDOC”) found that the sale of BSplc shares was at arm's length, for fair market value and consistent with commercial considerations. On 20 March 1995, BSplc purchased GKN's holding in UES, whereupon UES was renamed British Steel Engineering Steels (“BSES”).

Countervailing duties on imports of leaded bars were originally imposed in 1993. Since then, the USDOC has undertaken a number of annual reviews of the countervailing duties applied to imports of leaded bars originating in the United Kingdom. The European Communities’ claims in this case relate to the countervailing duties imposed following administrative reviews initiated in 1995, 1996 and 1997, which dealt with leaded bar imports in the calendar years 1994, 1995 and 1996, respectively. In each of these reviews, the USDOC applied its allocation methodology for untied, non-recurring subsidies to determine the amount of the benefit from the pre-1986 subsidies to BSC allocable to the relevant period of review.