MEMORANDUM OPINION AND ORDER

BARZILAY, Judge.

I. INTRODUCTION

In this case, the court is asked, yet again, to review the subsidy calculation methodology employed by the Department of Commerce ("Commerce") during countervailing duty investigations and reviews to determine under what circumstances a privatized company is the recipient of a benefit pursuant to United States law. This case comes before the court pursuant to Plaintiffs' and Defendant-Intervenors' USCIT R. 56.2 Motions for Judgment Upon an Agency Record. Plaintiffs and Defendant-Intervenors challenged certain aspects of the final determination of the Department of Commerce International Trade Administration's countervailing duty investigation of stainless steel sheet and strip from France. See Final Affirmative Countervailing Duty Determination: Stainless Steel Sheet and Strip in Coils from France, 64 Fed. Reg. 30,774 (1999) ( "Final Determination"). While this case was pending before the court, the Federal Circuit issued its opinion in Delverde SrL v. United States, 202 F.3d 1360 (Fed. Cir. 2000) reh'g denied, Ct. No. 99-1186 (June 20, 2000) ( "Delverde III"). On February 29, 2000, Usinor filed, and the court granted, a motion to amend its complaint to add a claim based upon the Federal Circuit's ruling in Delverde III. On July 13, 2000, the United States requested a remand to Commerce to consider the impact of the Federal Circuit's holding in Delverde III to the facts of this case. The subsequent remand order instructed Commerce to "issue a determination consistent with United States law, interpreted pursuant to all relevant authority, including the decision of the Court of Appeals for the Federal Circuit in Delverde SrL v. United States 202 F.3d 1360 (Fed. Cir. 2000)." Remand Order (August 15, 2000). The court now reviews Commerce's Final Results of Redetermination Pursuant to Court Remand: Allegheny-Ludlum Corp., et al v. United States, No. 99-09-00566 (December 20, 2000). ( "Remand Determination"). The court exercises jurisdiction pursuant to 28 U.S.C. § 1581(c) (1994) which provides for judicial review of a final determination by the Department of Commerce in accordance with the provisions of 19 U.S.C. § 1516a(a)(2)(B)(i) (1994).

II. BACKGROUND

On July 13, 1998, Commerce initiated countervailing duty investigations to determine whether manufacturers, producers or exporters of stainless steel sheet and strip from France, Italy and the Republic of Korea were receiving countervailable subsidies. See Initiation of Countervailing Duty Investigations: Stainless Steel Sheet and Strip in Coils From France, Italy and the Republic of Korea, 63 Fed. Reg. 37,539 (July 13, 1998). The period of investigation was calender year 1997. Id. Commerce issued its preliminary affirmative determination on November 17, 1998 and its final affirmative determination on June 8, 1999, finding that the total estimated net countervailable subsidy ("CVD") rate was 5.38% ad valorem for Usinor and all others. See Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Countervailing Duty Determination With Final Antidumping Duty Determination: Stainless Steel Sheet and Strip in Coils from France, 63 Fed. Reg. 63,876 (Nov. 17, 1998) (" Preliminary Determination"); Final Determination, 64 Fed. Reg. 30,790. During the investigation, the Government of France ("France" or "French Government") identified a division of Usinor as the sole French producer of the subject merchandise that was exported to the United States during the period of investigation. The French Government was the majority owner of Usinor and Sacilor, another steel producer, until the mid-1980s. Final Determination, 64 Fed. Reg. at 30,776. After a capital restructuring in 1986, France was the sole owner of both companies. Id. In 1987, France placed Usinor and Sacilor under the ownership of a holding company, with the holding company retaining Usinor as its name. Remand Determination at 17. In 1991, Credit Lyonnais, a government-owned bank, purchased 20% of Usinor. Final Determination, 64 Fed. Reg. at 30,776. Beginning in the summer of 1995 and continuing through 1996 and 1997, the French Government privatized Usinor through a public stock offering. Id. By the end of 1997, approximately 82% of Usinor's shares were owned by private shareholders, with the remaining shares owned by employees and "stable shareholders." Remand Determination at 17.

Despite the public stock offering that privatized Usinor, Commerce concluded in the Remand Determination that Usinor was the "same person" after the privatization and, since it had already determined that Usinor had previously received subsidies, it did not have to analyze whether the past subsidies were extinguished by the change in ownership transaction. In making its "same person" finding Commerce used principles of United States law "in the general corporate context." Remand Determination at 10. Additionally, Commerce used a 14-year average useful life (AUL) to allocate the benefits bestowed by nonrecurring subsidies. Based upon its findings, Commerce recalculated Usinor's CVD rate to be 7.72% ad valorem.

III. STANDARD OF REVIEW

IV. DISCUSSION

A. History of the Issue

A brief history of the privatization subsidy issue is appropriate. The applicable law attempts to level the playing field by imposing a countervailing duty on subsidized imported goods sold in the United States which materially injure a domestic industry. A subsidy is a financial benefit conferred on a natural or legal person (usually the producing company) by a government entity or agent. See 19 U.S.C. § 1677(5)(B)

In the past twenty years many countries have moved to privatize state-owned enterprises and thereby shift major manufacturing activity from public to private entities. Thus many plants formerly run entirely or mostly under government finance and control are now under the control of private shareholders. The question then becomes: if the plant received non-recurring financial benefits when it was government owned and operated, do those benefits survive the privatization and are the new owners, therefore, subject to countervailing duties on products they export to the United States?

Commerce first confronted this issue in 1989 when it decided that no benefits had passed to the recently privatized firm under review because the sale was for full market value and at arm's length. See Lime from Mexico; Preliminary Results of Changed Circumstances Countervailing Duty Administrative Review, 54 Fed. Reg. 1,753, 1,754-55 (Jan. 17, 1989). By 1993, however, Commerce had changed its views in the context of steel countervailing duty investigations. Commerce ignored the change of ownership at fair market value, which it had found significant in Lime from Mexico, and held that the previously bestowed subsidies survived such a sale and thus it assumed a continuing benefit to the new owners. See Certain Hot Rolled Lead and Bismuth Carbon Steel Products from the U.K., 58 Fed. Reg. 6,237 (Jan. 27, 1993). Commerce then issued a fuller explanation of its position on subsidies in the privatization context when it published the General Issue Appendix covering several different CVD investigations. See Final Affirmative Countervailing Duty Determination: Certain Steel Products from Austria, General Issues Appendix, 58 Fed. Reg. 37,217, 37,225 (July 9, 1993). In this new privatization methodology Commerce essentially assumed that a portion of the previously bestowed subsidy passed through to the new owners from the state owned entity depending on when it had been initially granted. In this methodology the life of the subsidy in years (calculated by a formula based on amortization of assets) was the critical component and whether the sale was for full market value had no significance.

Commerce's methodology of ignoring a sale at full market value was rejected by this court but reinstated by the Court of Appeals for the Federal Circuit. In Saarstahl, AG v. United States, 18 CIT 525, 858 F. Supp. 187 (CIT 1994) this court applied pre-URAA law and held that subsidies are extinguished in a true arms-length sale for full market value because the value of the company includes the benefit of any previous subsidies which the buyer pays for at time of purchase, leaving no remaining competitive advantage.

The Federal Circuit disagreed, holding that Commerce's decision to countervail previously bestowed subsidies was reasonable absent an explicit mandate from Congress to the contrary and that the CIT should have deferred to Commerce's interpretation. See Saarstahl AG v. United States, 78 F.3d 1539, 1544 (Fed. Cir. 1996). The appeals court reasoned that the statute at issue did not require countervailable subsidies to confer a benefit and that once Commerce finds a governmental subsidy it can assess countervailing duties on the new entity if the private purchaser repaid none or only some of the subsidy received prior to privatization.

In December 1999, the World Trade Organization first addressed the issue in a case also originating in the steel industry. See WTO Dispute Panel Report on United States-Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, No. WT/DS138/R (Dec. 23, 1999). The Panel examined Commerce's assessment of countervailing duties on steel after a complaint by the European Communities. Commerce had specifically determined that the privatization at issue was at arm's-length for fair market value and consistent with commercial considerations. Panel Report, ¶ 6.23. The Panel held that Commerce's decision to countervail was contrary to the definition of a subsidy contained in the Agreement on Subsidies and Countervailing Measures, Pt. I, Art. 1 (1994). Specifically the Panel stated, inter alia, that the existence of a benefit could only be found by comparing whether the recipient was better off than it would be without the contribution and that "the marketplace provides an appropriate basis for comparison . . . whether the recipient has received a `financial contribution' on terms more favorable than those available to the recipient in the market." Panel Report, ¶ 6.65. The Panel found that the privatization of a government owned company in an arm's length, fair market value transaction eliminates any benefit from prior subsidization. The United States appealed to the WTO's Appellate Body which upheld the Panel's Report and recommended "the United States [to] bring its measures found in the Panel Report, as upheld by this Report, to be inconsistent with its obligations under the SCM agreement into conformity with its obligations under that agreement." WTO Dispute Appellate Body Report on United States-Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, No. WT/DS138/R at ¶ 76 (May 10, 2000).

The Federal Circuit noted the Panel decision in Delverde III when it reviewed a decision by this court in a CVD case involving pasta from Italy. See Delverde SrL v. United States, 22 CIT 947, 24 F. Supp.2d 314 (1998) ( "Delverde II"). Delverde, the foreign producer, had asked this court to review the imposition of CVD by Commerce when the department, using its General Issues Appendix methodology, held Delverde responsible for a pro-rata portion of nonrecurring subsidies that had been granted to the former owner. Initially, this court had agreed with Delverde's argument that Commerce could not assume the pro-rata portion survived the sale and remanded to Commerce to examine the sale itself to determine whether Delverde received a subsidy through its purchase of plant assets from an owner that had previously received subsidies. Delverde SrL v. United States, 21 CIT 1294, 989 F. Supp. 218 (1997) (" Delverde I").

On remand, however, after Commerce had further explained its position, the result was different. This court found permissible Commerce's presumption of pass through of subsidies when it assessed benefit only at the time the subsidization occurred. Delverde II, 24 F. Supp.2d at 317. The Federal Circuit disagreed, holding that the statutory language required Commerce to determine whether the purchaser received both a financial contribution and a benefit from a government before concluding that the purchaser was subsidized. See Delverde III, 202 F.3d at 1367. The court went on to instruct that Commerce examine the issue "based on the facts and circumstances, including the terms of the transaction. . . ." Id. at 1369-70. It specifically stated that its decision was not inconsistent with that of the WTO Dispute Panel. Id. at 1369.

B. What does Delverde require?

The court views the Delverde decision as central to the resolution of this case. The parties have sharply divergent views on the meaning of that decision and its application to the administrative action now before the court. Commerce asserts that, in accordance with the Federal Circuit's holding in Delverde III, it formulated a new two-step inquiry to determine if prior subsidies passed through to the new privatized entity.

Consistent with the Federal Circuit's analysis in Delverde III, Commerce announced a two-step inquiry. As the Remand Determination shows, Commerce first analyzes whether the pre-sale and post-sale entities are for all intents and purposes the same person. If they are, Commerce's analysis stops, as all of the elements of a subsidy will have been established with regard to the producer under investigation, i.e., the post-sale entity. If, however, the two entities are not the same person, Commerce will proceed to the second step in its inquiry and will examine whether a subsidy has been provided to the post-sale entity through the change-in-ownership transaction itself.

After a lengthy review and analysis of the remand record, Commerce determined that government-owned Usinor and privatized Usinor were for all intents and purposes the same person. As a result, the prior subsidies remained attributable to privatized Usinor, as all of the elements of a subsidy were established with regard to privatized Usinor.

With this outcome it became unnecessary for Commerce to proceed to the second step in its privatization analysis, which would have involved an inquiry into whether a subsidy had nevertheless been provided to the privatized entity through the privatization transaction itself. Commerce, therefore, did not address the issue whether the transaction's purchase price had been fair market value.

Usinor asserts the Remand Determination is contrary to Delverde III because Commerce "deems wholly irrelevant" the fact that Usinor was privatized through an arm's-length global public stock offering and failed to analyze the terms of the change in ownership transaction to determine if the subsidies passed through to the privatized entity. Def.-Intervenors' Supplemental Mem. In Supp. of Mot. for J. Upon the Agency Record at 3-4 (" Def.Intervenors' Supp. Mem."). Usinor claims "Commerce's `same person approach' . . . ignores the terms of the transaction and instead focuses exclusively on whether the newly-purchased entity is `substantially the same business' as the company that received the subsidies. Id. at 3. Additionally, Usinor claims that the Remand Determination is contrary to Agreement on Subsidies and Countervailing Measures and inconsistent with the WTO decision in Appellate Body Report on United States — Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, No. WT/DS138/R at ¶ 76 (May 10, 2000). In the alternative, Usinor argues that "even if some type of `same person' analysis were appropriate, the record facts relating to [Usinor's] privatization show that it was not the `same person' following the privatization and thus should not be saddled with prior subsidies" Def.Intervenors' Supp. Mem. at 4.

The central question is whether Commerce's application of its method complies with congressional intent embodied in the statutory language of 19 U.S.C. § 1677(5)(F), as interpreted by the Federal Circuit in Delverde. Consistent with the court of appeals' decision in Delverde, this court finds the statute's meaning to be clear, and, therefore, does not reach the issue of deference to Commerce's interpretation under the Chevron doctrine. See Delverde III, 202 F.3d at 1367. "[W]e need only determine whether Commerce's methodology is in accordance with the statute." Id. As noted above, the Delverde decision assumed the sale of assets from one private company to another. The question directly before the court was whether Commerce's methodology for determining a subsidy was permitted under the new statutory direction by Congress. Commerce assumed that when a company sells "productive assets" previously subsidized during their "average usual life" a pro rata portion of the subsidy "passes through." Id. at 1363.

The Federal Circuit struck down this methodology as not in accordance with 19 U.S.C. § 1677(5). The court characterized the method used in Delverde as a per se rule which avoided looking at the "facts and circumstances of the sale." Delverde III, 202 F.3d at 1364. The Federal Circuit stated:

[W]e have come to the conclusion that the Tariff Act as amended does not allow Commerce to presume conclusively that the subsidies granted to the former owner of Delverde's corporate assets automatically "passed through" to Delverde following the sale. Rather, the Tariff Act requires that Commerce make such a determination by examining the particular facts and circumstances of the sale and determining whether Delverde directly or indirectly received both a financial contribution and benefit from a government.

Commerce, the court granted, did have some flexibility to establish a methodology for calculating the financial contribution and benefit conferred on a person. Id. However, contrary to Commerce's assertion in the case now before the court, the Delverde court expressed no doubt that the new statute required two actions from Commerce: one, that the terms of the sale must be examined, and must include analysis of the entire transaction to determine if the subsidy (not the corporate identity) passed through to a person now under investigation. Id. at 1365-66. In addition, such examination must focus on the new owner. According to the Delverde decision, the term "person" is not open to interpretation. The court said that "person" means the purchaser of the asset.

[W]e conclude that the statute does not contemplate any exception to the requirement that Commerce determine that a government provided both a financial contribution and benefit to a person, either directly or indirectly, by one of the acts enumerated, before charging it with receipt of a subsidy, even when that person bought corporate assets from another person who was previously subsidized.

The Federal Circuit emphasizes that the legislative history supports a reading of the statute, "as plainly requiring Commerce to make a determination that a purchaser of corporate assets received both a financial contribution and a benefit from a government. . . ." Id. The court was even more specific and found the methodology contrary to law because,

[i]t did not consider any of the facts or circumstances of the sale relevant. Commerce produced no evidence that Delverde received goods for less than "adequate remuneration."

The court in Delverde did not have Commerce's novel "personhood" methodology before it, but was explicit enough in its description of when a rule can be considered per se that the decision provides clear guidance. A methodology is per se, and therefore contrary to the statute, when it determines that a subsidy continues to be countervailable to a new owner following a change in ownership without looking at the transaction itself. Id. The Federal Circuit directed that any methodology must examine the facts of the sale to determine if the new owner, "paid full value for the asset and thus received no benefit from the prior owner's subsidies. . . ." Id. at 1368. Such an analysis must focus on the new owner, since that entity is the producer of the goods at issue during the period of investigation under review.

The Delverde III court did note that there are differences between the sale of a single asset and a wholesale privatization. A private seller will presumably always seek the highest price for its assets, while a government may have other goals. Id. at 1369. Similarly, there are differences between the elements of the transaction which must be evaluated when the sale is of a single asset or is a privatization of an entire company through the sale of stock. These differences, however, do not alter the statutory requirements for determining if a financial contribution and benefit was conferred on the new owner. Variations in the structure of a transaction and the motives of the parties involved do not relieve Commerce of its responsibility to look at the facts and circumstances of the sale to determine if the new owner received directly or indirectly a subsidy for which it did not pay "adequate remuneration." Id. at 1368.

Finally, the Federal Circuit, to re-enforce its underlying reasoning and amplify the analysis required of Commerce, referred to the WTO decision in British Steel. There, as noted above, when looking at the facts of government privatization of a steel company, where the terms were at arms-length and for fair market value, the WTO determined no subsidy passed through to the new owners. The Federal Circuit emphasized that its reasoning in Delverde is not inconsistent with the WTO's reasoning in British Steel. Id. at 1369. The court reads this portion of the Delverde opinion to mean that any methodology adopted Commerce must recognize the possibility that a subsidy can be extinguished by a privatization, even the privatization of an entire company, if a thorough analysis of the transaction supports that conclusion.

The Federal Circuit in Delverde laid out certain criteria that at a minimum any new methodology must include. First, Commerce cannot rely on any per se rule. Second, it must look at the facts and circumstances of the TRANSACTION, to determine if the PURCHASER, received a subsidy, directly or indirectly, for which it did not PAY ADEQUATE COMPENSATION. In this instance, Commerce avoids examining the terms of the sale by arguing that under the four-part test it developed, if the pre- and post-corporation is the same person, it is not required to determine if the subsidy it found to exist preprivatization continues post-privatization. This argument contravenes the Federal Circuit's holding in Delverde III.

From Delverde III, it is evident that the court interpreted section 1677(5)(F) as requiring Commerce to determine if the subsidy continued to benefit the post-privatized corporation. In this instance, Commerce has developed a methodology that circumvents its statutorily mandated duty to determine if a benefit was conferred on the privatized corporation. To determine if Usinor was the same "person" Commerce used a four-factor test based on general corporate law principles.

[W]here appropriate and applicable we would analyze such factors as (1) continuity of general business operations, including whether the successor holds itself out as the continuation of the previous enterprise, as may be indicated, for example, by the use of the same name, (2) continuity of production, (3) continuity of assets and liabilities, and (4) retention of personnel. . . . [T]he Department will generally consider the post-sale entity to be the same person as the pre-sale entity if, based on the totality of the factors considered, we determine that the entity sold in the change-in-ownership transaction can be considered a continuous business entity because it operated in substantially the same manner before and after the change in ownership.

Although Commerce's "person" analysis is not an explicit per se rule, it still fails to meet the requirements of the statute because it concludes that a purchaser received a subsidy without making "specific findings of financial contribution and benefit . . . that are required by §§ 1677(5)(D) and (E)." Delverde III, 202 F.3d at 1367. An initial public offering of a formerly government controlled corporation will often involve the same entity pre- and postsale using Commerce's criteria. Indeed, in nearly every circumstance that a state-run enterprise is privatized as a whole entity, Commerce would be able to find that the same "person" exists. Commerce's use of a methodology that eliminated the need to determine if the subsidies passed through to the privatized entity in this situation was specifically rejected by the Federal Circuit in Delverde III.

Commerce's methodology conclusively presumed that Delverde received a subsidy from the Italian government i.e., a financial contribution and a benefit, simply because it bought assets from another person who earlier received subsidies. Commerce deemed the fact that Delverde bought the assets, as agreed to by both parties, at fair market value to be irrelevant to the determination whether it received a subsidy. It did not consider any of the facts and circumstances of the sale relevant. Commerce produced no evidence that Delverde received goods at less than "adequate remuneration."

The court recognizes that the Usinor privatization is a complex transaction. This, however, only heightens the need for in-depth and focused analysis. A short review of the privatization reveals several facts ignored by Commerce in its Remand Determination, which may prove significant to the required inquiry. In 1995 the French Government moved to privatize Usinor. Final Determination, 64 Fed. Reg. at 30,776. France publicly announced the decision to privatize on May 31, 1995. An invitation to bid on shares published in the Official Gazette in June 1, 1995. Usinor Verification Report at 7 (Feb. 19, 1999). The price of those shares was determined by the French Privatization Commission, based on a valuation report by outside financial banking firms, Paribas and SBC Warburg. Id. at 8.

The Privatization Commission is an independent body. Members serve five year terms and cannot be removed other than in extreme circumstances. Government of France Verification Report at 2 (Feb. 21, 1999). Generally, the Commission, relying on the analysis of the outside banks, sets a market value to price the stock for a privatization. In this case Usinor's value was compared to other steel companies in Europe. Usinor Verification Report at 7. The Commission will allow a privatization to go forward only if the stock can be sold above the minimum price set by the Commission. So, in theory, no company will be sold at less than fair market value under the French law. Government of France Verification Report at 3.

The privatization of the controlling interest here involved two public offerings. 64 Fed. Reg. 30,776. The French public offering was set at FF 86 per share. The international public offering was set at FF 89. Usinor Verification Report at 7. In addition an employee offering was done with the price ranging from FF 68.8 to FF 86, and a sale of certain stock at FF 90.78, was placed with so-called "Stable Shareholders." Id. At the end of 1995, the French Government retained a 9.8% interest in Usinor. Mem. in Supp. of Mot. for J. on the Agency Record, June 16, 2000, at 6. (" Def.-Intervenors' Initial Br.") International or French public investors held 82% of the stock. Def.'s Br. at 5. The remaining stock was held by stable shareholders and employees of Usinor. 64 Fed. Reg. 30,776.

In 1997, France distributed most of its remaining stock, so that it held less than 1%. Def.-Intervenors' Initial Br. at 6. The Government of France turned over this stock, without compensation, to stable shareholders and employees who held their initial purchase of stock for a required time. 64 Fed. Reg. 30,776. By 1998 the government had completely divested itself of Usinor. Id. Even this cursory examination of the record raises several questions. Some facts point to the probability that the stock offering represented a true arms-length transaction for fair market value, which may include "adequate remuneration" to the government by the new owners for any previous subsidies bestowed. Other facts point to possible mechanisms, such as the use of "stable shareholders," that could provide a vehicle for subsidy pass-through. On remand it is imperative, and required by 19 U.S.C. § 1677(5), as interpreted by the court in Delverde III, that Commerce examine the details of the transaction to determine if goods imported by Usinor during the POI of 1997 were subsidized.

V. CONCLUSION

For the foregoing reasons, the court holds that the Department's Final Results of Redetermination Pursuant to Court Remand: Allegheny-Ludlum Corp., et al v. United States, No. 99-09-00566 (December 20, 2000) is not in accordance with law and therefore will be remanded to the agency for review and action consistent with this opinion.

SO ORDERED.