## United States Court of Appeals for the Federal Circuit

05-1117, -1118

ROYAL THAI GOVERNMENT and SAHAVIRIYA STEEL INDUSTRIES PU BLIC COMPANY LIMITED, Plaintiffs-Appellees,

v.

UNITED STATES, Defendant-Appellant, and UNITED STATES STEEL CORPORATION, Defendant-Appellant.

Kenneth J. Pierce , Willkie Farr & Gallagher LLP, of Washington, DC, argued for plaintiffs-appellees. With him on the brief were Victor S. Mroczka and Robert E. DeFrancesco . Of counsel was Matthew R. Nicely

. Patricia M. McCarthy , Assistant Director, Commerc ial Litigation Branch, Civil Division, United States D epartment of Justice, of Washington, DC, argued for defendant-appellant Unit ed States. On the brief were Peter D. Keisler , Assistant Attorney General; David M. Cohen , Director; Jeanne E. Davidson , Deputy Director; and Thomas B. Fatouros , Trial Attorney. Of counsel on the brief was James K. Lockett , Senior Attorney, Office of Chief Counsel for Import Administration, United States Department of Commerce, of Washington, DC and Mykhaylo A. Gryzlov

. Jeffrey D. Gerrish , Skadden, Arps, Slate, Meagher & Flom LLP, of Washington, DC, argued for defendant-appellant United States Steel Corporat ion. With him on the brief were John J. Mangan and Robert E. Lighthizer

. Appealed from: United States Court of International Trade Senior Judge Richard W. Goldberg

## United States Court of Appeals for the Federal Circuit

05-1117, -1118

ROYAL THAI GOVERNMENT and SAHAVIRIYA STEEL INDUSTRIES PU BLIC COMPANY LIMITED, Plaintiffs-Appellees,

v. UNITED STATES, Defendant-Appellant, and UNITED STATES STEEL CORPORATION, Defendant-Appellant.

______ ____________________ DECIDED: February 1, 2006

______ ____________________ Before CLEVENGER, GAJARSA, and PROST, Circuit Judges

. PROST, Circuit Judge

. United States Steel Corpor ation (“U.S. Steel”) and the United States separately challenge different aspects of the United States Court of International Trade’s decision in favor of the Royal Thai Government (“R TG”) and Sahaviriya Steel Industries Public Company Limited (“SSI”) that , on remand to the United States Department of Commerce (“Commerce”), resulted in a determi nation that no countervailable subsidies were provided to the production or exportati on of certain hot-rolled carbon steel flat products from Thailand. See Royal Thai Gov’t v. United States , 341 F. Supp. 2d 1315(Ct. Int’l Trade 2004) (“ Decis i on ”); Royal Th ai Gov’t v. United Stat es , No. 02-00026 (Ct. Int’l Trade July 27, 2004) (“ Remand Order ”); Royal Th a i Gov’t v. United State s , No. 02- 00026 (Ct. Int’l Trade Oct. 1, 2004) (“ Final Judgm ent ”). In particular, U.S. Steel challenges the Court of International Trade’s holdings (1) a ffirming Commerce’s determination that SSI’s debt restructuring was not specif ic; (2) affirming Commerce’s decision not to investigate U.S. Steel’s allegation of equity infusions; and (3) reversing Commerce’s decis ion to countervail the entir e amount of import duty exemptions, also called drawbacks, provided to SSI. The Unit ed States only challenges the third holding of the Court of International Trade. We affirm the Cour t of International Trade on the first two holdings, but reverse on the third. BACKGROUND In 2000, Commerce initiated an investigat ion to asses s whether countervailable subsidies were provided to the Thai steel industry. See Notice of Initiation o f Countervailing Duty Investigations: Certain Ho t-Rolled Carbon Steel Fl at Products From Argentina, India, Indo nesia, South Africa, and Thailand, 65 Fed. Reg. 77,580 (Dec. 12, 2000). Of the several Thai progr ams that Commerce investigated, one inv o lved import duty exemptions administered by Thailand’s B oard of Investment (t he “BOI”). Another involv ed debt restructuring. Commerce ul timately conclud e d that countervailable subsidies were being conferred on hot-ro lled steel from Tha iland and assigned a countervailing duty rate on SSI. See Notic e of Preliminary Affirmative Countervailing Duty Determination and Alignment With Final Antidum ping Duty Determinations: Certain Hot-Rolled Carbon Steel F l at Pr oducts From Thailand, 66 Fed. Reg. 20,251 (Apr. 20, 2001) (“ Prelimin ary Determination ”); Final Affirmative Countervailing Duty

05-1117, -1118 2Determination: Certain Hot-Ro lled Carbon Steel Fl at Products from Thailand, 66 Fed. Reg. 50410 (Oct. 3, 2001) (“ Fina l Determin a tion ”); Issues and Decision Me morandum in the Final Affirmative Counte rvailing Duty Determination: Cert ain Hot-Ro lled Carb o n Steel Flat Products from Thailand (Sept. 21, 2001) (“ Decision Memorandum ”). Two of Commerce’s determinati ons supporting its conclusion are relevant to this appeal. First, Commerce determined that the enti r e amount of SSI’s import duty exemptions were countervailabl e export subsidies. T h is determination was based on its finding that RTG did not have a s ystem or procedure in place that was reasonable and effective for the purpose of confirming which inputs were consumed in the pro duction of exported products and in what amounts those input s were co nsumed. In particula r, Commerce faulted RTG for not isolating and examining what was consumed in the production of the exported products and f o r not taking into ac count that some scrap metal generated in the production of hot-roll ed steel is recoverable and saleable. Second, Commerce determined that RTG’s debt restructuring program was not countervailable. This determi nation was based on its f i nding that the debt restructuring program was not specific to SSI. It cited the fact that numerous and divers e industrie s were invited to participate in the debt rest ructuring program, that SSI’s debt was less than a number of other invited companies, and that SSI’s debt was not signific antly greater than many other invited companies. It also stated that the primary metal industry, of which SSI is a part, did not have a dispropor ti onate or overwhelming amount of the overall debt. Also relevant to this a ppeal, Commerce decline d to inve stigate an allegation by U.S. Steel that a countervailable subsidy e x ists becau se RTG in jected equity into SSI

05-1117, -1118 3when SSI was not equityworthy. See Memorandum from the Team to the File Regarding New Subsidy All egation, (Sept. 21, 2001) (“ New Su bs idy A lleg a tion Memo ”). Commerce concluded that there was no basis for investigating the alle gation

. Commerce reviewed the evidence submitted by U.S. Steel and f ound that it did not establish a reasonable basis to believe or suspect that the compan y was not equityworthy at the time of its founding. To the contrary, Commerce found evidenc e indic a ting that at the time of SSI’s f ounding economic conditions were right for the development of a Thai hot-rolled steel industry. Commerce also noted that U.S. Steel’s allegation was untimely. In response to Commerce’s determinat ions, both SSI and U.S. Steel filed complaints in the Court of Internationa l Trade. U.S. Steel challenged Commerce’s determination that the debt restructuring was not s pecific and therefore not countervailable. U. S. Steel also challenged Commerce’s refusal to initiate an investigation into the allegation of counterva ilable equity infusions. Among ot her things, SSI challenged Commerce’s determination to count ervail the ent ire amount of the import duty exemptions. The Court of Internati onal Trade found fo r SSI on all three of these disputed issues. First, the court upheld Commerce’s det ermination that the s ubsidy conferred on SSI was not specific. The cour t found that the actual recipi ents of the subsidy were not limited in number, that neither SSI nor the steel industry we re predominant users of the subsidy or received a disproportionately lar ge amount of the subs idy, and that the manner in which RTG exercised discretion in granting the subsidy did not indicate that SSI or the steel indus t r y was preferred. Decision , 341 F. Supp. 2d at 1317-20.

05-1117, -1118 4Second, the Court of International Trade upheld Commerce’s decision not to investigate U.S. Steel’s allegation of coun tervailab l e equity infusions. T h e court ruled that the allegation did not reasonably appear to be c ounter vailable becaus e there is substantial evidence in the record indicating that SSI was in fact equityworthy at the time the equity infusions were made. It also ruled t hat, due to the complex nature of equityworthiness evaluations, the allegation was not discovered by Commerce within a reasonable time prior to the completion of the investigat ion. In addition, the court found that Commerce did not deny U.S. Steel’s basic procedural rights by waiting until issuance of the Fin a l Determination to notify U.S. Steel that its allegation wa s insufficient. Id. at 1320-23. Third, the Court of International Tr ade overturned Commerce’s dec ision to countervail the entire amount of the import duty exemptions provided to SSI, concluding that Commerce’s decision wa s neither supported by subs tantial ev idence nor in accordanc e with law. The court based its c onclus i on on Commerce’s interpretation and application of 19 C.F.R. § 351. 519, which governs drawba ck of import charges upon export. The court characterized Commerce’s in terpretation as r equiring that the entir e duty exem ption be countervailed whenever the system allows for any exc e ss amount of waste (no matter how small), because any ex cess waste necessarily makes the syste m unreasonable. Acc o rding to the court, this interpretation would render meaningless the separate regulatory s ubsection allowing only the excess porti on of the exemption to be countervailed. Furthermore, t he court stated that § 351.519 does not draw a distinction between waste that can be resold as scrap and waste that cannot be resold as scrap, and that under the regul ation it does not matter what ul timately happens t o the waste,

05-1117, -1118 5so long as there is a normal allowance for waste. The court then reviewed the evid ence and conc luded that RTG’s system does make a norm a l allowanc e for waste because it has specific procedures for determining what constitutes waste. In revi ewing the evidenc e, the court faulted Commerce for relying on two “ext raneous” sources of information to support its finding that RT G’ s waste rate is exce ss ive. Those two sources of information were a parallel antidum ping investigation and a fina ncial aud it. According to the court, Commerce should hav e limited its review to det e rmining whether, based on generally ac c epted com m ercial practices in T hailand (as oppose d to the United States presumabl y), RTG’s system make s a normal allowance for waste. The court also found Commerce’s relianc e on the “extraneous” sources of information to be misplac ed becaus e Commerce did not asse ss the reasonableness of the waste rates identified in these sources. Id. at 1323-26. Because c ountervailing only the excess, rather than the ent ire, import duty exemption resulted in a countervailing duty ra te of less than two percent, and further because T hailand is c onsidered a developing country for pur poses of the United States countervailing duty law and ther efore the threshold rate for Thailand is two percent, the Court of International Trade remanded the case to Commerce with instructi ons to find that the total estimated net counterva iling s ubsidy rate is de minimis. Id. at 1326-27; Remand O r der . Commerce issued a redetermination decision in accordanc e with the court’s instructions, noting its disagreem ent and reserving its appeal rights. Final Results of Redetermination on Remand (Sept. 15, 2004). The Court of International Trade affirmed. Final Judgment

.

05-1117, -1118 6We have j u risdiction to review t he fina l judgment of the Cour t of International Trade pursuant to 28 U. S.C. § 1295(a)(5). DISCUSSI ON
I We exercis e de nov o review over a decis ion of the Court of International T r ade affirming or reversing the final results of an administrative review. Torring ton Co. v. United States , 82 F.3d 1039, 1044 (Fed. Cir. 1996)

. “That is, we ‘apply anew’ the court’s statutorily-mandated st andard of r e view to t he administrative review.” Id. (quoting PPG Indus., Inc. v. United States , 978 F.2d 1232, 1236 (Fed. Cir. 1992)). Thus, in this case we will uphold Commerc e’s determinations, findings, and c o nclus i on s unless they are “unsupported by substantial evidenc e on the record, or otherwise not in accordanc e with law.” 19 U.S. C. § 1516a(b)(1)(B)(i) (2000). While we ess entially step into the shoes of the Court of Inte rnational Trade and dupl icate its review, Alleghen y Ludlum Corp. v. United States , 287 F.3d 1365, 1370 (Fed. Cir. 2002), in doing so we do not altoget her ignore its informed opinion, Suramerica de Aleaciones Laminadas, C.A. v. United States , 44 F.3d 978, 983 (Fed. Cir. 1994). See also Alt x , Inc. v. United States , 370 F.3d 1108, 1116 (Fed. Cir. 2004).
II This case presents three issues for us to re solve. We must decide, in light of the Court of International Trade’ s decision, whether (1) Comme rce’s determination that the debt restructuring was not specific is s upported by substantial ev idence and is otherwise in accordance with law; (2) Comme rce’s determination not to initiate an investigation in the allegation of equity infus i on is s upport ed by substantial ev idence and

05-1117, -1118 7is otherwis e in accordance with law; and (3) Commerce’s determination to c ountervail the entire amount of t he import duty exemptions is s uppor ted by substantial ev idenc e and is otherwise in ac cordance with law. A. Commerce’s Determination that the Debt Restructuring Was Not Specific As the Court of International Trade recogn ized, to determine whether a subsidy is de facto specific, Commerce is required to anal yze f our factors set forth in 19 U.S.C. § 1677(5A) ( D)(iii). That statutor y provision states that a subs idy is specific if one or more of the following situations exists: (I) The actual recipients of the subsidy, whether c onsidered on an enterprise or industry bas is, are limited in number. (II) An enterprise or industry is a predominant user of the subsidy. (III) An enterprise or industry re ceives a disproportionately large amount of the subsidy. (IV) The manner in whic h the aut hority providing the subs idy has exercis ed discretion in the decis ion to grant the subsidy indic a tes that an enterprise or industry is favored over others. 19 U.S.C. § 1677(5A) ( D)(iii) (2000). U.S. Steel does not separately take i ssue with Commerce’s analysis of each of the four factors. Rather, U.S. Steel generally argues t hat Commerce erred by only reviewing the distribution of the magnitude of the loans that were restructured rather than the magnitude of t he benefits conferred by the restru cturing. U.S. Steel would require an analys is that includes two parts : first, for each co mpany Commerce would compare the interest rate and repayment schedul e of the loan before restructuring wit h the rate and schedule of the loan after restruct uring to identify the benefit conferred by the restructuring; second, Commerce w ould compare the benefits between c o mpanies and industr ies to determine specificity.

05-1117, -1118 8RTG and SSI (hereinafter, collectively “RTG”) as w e ll as the United St ates contend that requiring Commerce to deter mine and compare benefits in this manner would result in unreasonably ex tensive inv e stigations. They als o argue that such a requirement would contradict this court’s indication in AK Steel Corp. v. Unit ed States that Commerce should be given lati tude in determining specificity: Determinations of dis p roporti onality and dominant use are not subject to rigid rules, but rather must be determined on a case-by-case basis taking into account all the facts and circumstances of a particular case. . . . Because Commerce’ s methodology in determining disproportionality was reasonable, we will n o t disturb it on appeal. 192 F.3d 1367, 1385 (Fed. Cir. 1999). We agree with the Court of International T r ade that Commerce’s determination that the debt restructuring was not specific is supported by substantial ev idence and is otherwise in accordance with law. U.S. Steel’s suggestion that Commerce shoul d obtain and analyz e the terms of each loan before and after restructuring has som e appeal, because a loan that includes vastly mo re favorable terms after restructuring would confer a greater benefit than a similarly sized loan t hat includes only s lightly mor e favorable terms afte r restructu r ing. As a practic a l matter, howev er, it is not unreasonable for Commerce to presume that the amount of benefit s conferred by debt restructuring would roughly be proportional to the magnit ude of the debts that were restructured, and as a result to compar e the magnitudes of the debts that wer e restructured rather than to engage in the ex tens iv e investigations and calculations contemplated by U.S. Steel.
In AK Stee l , this court recognized t hat “[d]eterminations of disproportionality and dominant use are not subj ect to rigid rules.” Id. In particular, this court found that

05-1117, -1118 9Commerce did not er r by comparing relative percent age b enefit s rather than abs o lut e benefits, as requiring a comparison of abs olute benef its “could produce an untenable result, i.e., that a benefit conferred on a large company might be disproportionate merely because of the size of the company.” Id. Thus, this court determined that Commerce had properly exercised the latitude afforded it in dete rmining the appropriate method by which to determine the specificity of benefits conferred by subsidies. Of course, that latitude does not excuse Commerce from c hoosing a reas onable method for determining the specificity of benefits. Indeed, Commerce itself has recognized that “the analysis of whether an enterprise or industr y or group thereof is a dominant user of, or has rec e ived dispr oportionate benefits u nder, a subsidy program should normally focus on the level of benefits provided,” even if someti mes “it may be impracticable or impossible to determine the relative level of benefits.” Countervaili ng Duties: Final Rule, 63 Fed. Reg. 65,348, 65,359 (Nov. 25, 1998). Here, we understand Comm erce to ha ve deter mined that obtaining the necessary information to engage in the ext ens ive calculations c ontemplated by U.S. Steel was impracticable. Moreover, we understand Commerc e to have deter m ined that the magnitude of debt that is restructured is roughly proporti onal to the benefit conferred by restructuring. We have no reason to dis agree with either deter mination. As a result, in our view Commerce’s decis ion to compare the magnitude of the loans, a relatively simple endeavor, rather t han to engage in exh austive calc ulations using unavailable pre- and post-restructuring l oan terms, was not unreasonable.

05-1117, -1118 10For the foregoing reasons, we conclude that Commerce’s determination that the debt restructuring was not spec ific is supported by s ubst antial evidenc e and otherwise in accorda n ce with la w. B. Comme rce’s Determinat ion Not to Investigate U.S. Steel’s Allegation of Equity Infusion Commerce only inves t igates an equity infu sion allegation when the allegation is specific and “supported by information establis hing a reasonable basis to believe or suspect that the firm received an equity infusi on that provides a co untervailable benefit.” 19 C.F.R. § 351.507(a)(7) (2004). Furthermore, a countervailabl e “benefit exists to the extent that the invest ment decision is inconsistent with the usual investm ent practice of private inv e stors, including t he practice regarding the provis ion of risk capital, in the country in which the equi ty infusion is made.” Id. § 351.507(a)(1). U.S. Steel argues that its allegation of equity infusion met the standard for initiation and that Commerce err ed by not initiating an investi g a t ion into th at alleg a tio n

. U.S. Steel maintains that it showed that an initial invitati on to bid for a steel mill in Thailand with only a moderate level of subsidies res u lted in no bids, while a later invitation accompanied by a substantial leve l of subsidies resulted in sev e ral bids

. Thus, U.S. Steel argues that RTG clearly and unequiv ocally induced bidder s to invest in an unequityworthy company using t he subsidies. It also cont en ds that the evidence of equityworthiness cited by Commerce consisted wholly of self-serving statements by RTG. We conclude that t here is s ubstantia l evidenc e in the rec o rd supporting Commerce’s determination that U.S. Steel di d not submit information establis hing a reasonable basis to believ e or suspect that SSI receiv ed an equit y infusion t hat provides

05-1117, -1118 11a countervailable benefit. Commerce reje cted U.S. Steel’s assumption that no reasonable investor would have invested in SSI wit hout the inc e ntives RT G provided because the information in the r e cord did not suppor t that assumption. New Su bsid y Allegation Memo at 4. While U.S. Steel is correct that Commerce relied on RT G’s testimony regarding the econom ic conditions in Thailand at the time SSI was formed, U.S. Steel is incorrect to the extent it charac terizes Commerc e as solely relying on selfserving statements by RTG. To the contrary , Commerce indic a ted that it relied not only on RTG’s testimony, but also on exhibits supplied by RTG: Evidenc e on the recor d indicates that at the time of SSI’s founding, economic conditions were right for t he dev elopment of a Thai hot-rolled steel indust r y: the economy was gro wing rapidly and domestic demand for hot-rolled s t eel was increasing and was being met exc l usively by imports. Indeed, the record shows that the B OI promoted a hot- r olled steel industry to meet this increasing domest i c demand for hot-rolled stee l products. See e.g. , RTG Questionnaire Res ponses and Exhibits. Id. at 5. F u rthermore, those exhibits do support Commerce’ s conclusions. One of the exhibits includes a r eport prepared by t he United Nations Indus trial Development Organization summarizing v a rious studi es regarding iron and steel industry development in Thailand. The report indicate s that a 1988 study conc luded that if “the private sector was to take on the project” the “return on the whole scheme was 10%.” The report also indicates that a 1990 study conclu ded that the “setup of [a] steelmakin g plant” was “viable.” The report, theref ore, supports Commerce’s conclusion that Thailand’s economic c onditions were right fo r the development of a Thai hot-rolled steel industry. For the foregoing reasons, we c onclude that Commerce’s deter mination not to initiate an investigation into the allegation of equi ty infusion is s upported by substantial

05-1117, -1118 12evidenc e and is other wise in ac c o rdance with law. In light of this conclus i on, we need not reach Commerce’s alternative finding that U.S. Steel’s all egation was untimely. C. Commerce’s Determinati on to Countervail the Entire Amount of Import Duty Exemptions Commerce’s ability to count ervail import duty exempti ons is governed by 19 C.F.R. § 351.519. In pertinent part, this regulation states: (a) (1) (i) Remission or drawback of import charges. In the case of the remission or drawback of im port c harges upon export, a bene fit exists to the ext ent that the Secretary determines that the amount of the remission or drawback exceeds t he am ount of import charges on imported inputs that are consumed in the production of the exported product, making normal allowances for waste.

. . . . (a) (3) (i) Remission or drawback of import c harges. If the Secretary determines that the remission or drawba ck . . . of import charges confers a benefit under paragraph (a)(1) . . . of this section, the Secretary normally will cons ider the amount of the benefit to be the difference bet w een the amount of import charges remitted or drawn back and the amount paid on imported inputs consumed in producti on for which remission or dr awbac k was claimed.

. . . . (a) (4) Exc eption. Not withstanding paragraph (a)(3) of this section, the Secretary will co nsider the entire amount of an exemptio n, deferral, remission or drawback to confer a benefit, unless the Secretary determines that: (i) The gov e rnment in question ha s in place and applies a system or procedure to confirm which inputs are consumed in the production of the exported products and in what am ounts, and the sy stem or procedure is reasonable, effective for the purposes intended, and is based on generally accepted commercial practices in the country of export . . . . 19 C.F.R. § 351.519 (2004). Responding to the arguments the United States and U.S. Steel present on appeal, RTG maintains that the Court of International Trade correctly decided that Commerce’s decis ion t o counterv a il the entir e import duty exemption was not supported by substantial evidenc e or was not in acco rdance with law. RTG argues that the Court

05-1117, -1118 13of Internati onal Trade properly recogniz ed t he circularity of the construction Commerce sought to apply to 19 C.F.R. § 351.519. RTG char acterizes Commerce as hav ing “countervailed the entire amount of SSI’s im port duty exemptio n for what it deemed t o be an excessive amount for waste.” (Appell ee Br. 17.) According to RTG, by doing s o Commerce elev ated t he exception of § 351.519(a)(4) over the r u le of § 35 1.519(a)(3). RTG points out that “waste” is not mentioned in § 351.519(a)(4), and that the only mention of waste is in subsection § 351.519(a)(1). It argues that reading § 351.519(a)(4) as justification for counterva iling an entire drawback program “by simply finding an exc e ssiv e allowance of any magnitude” rende rs § 351.519(a)(3) meaningles s . (Appellee Br. 20.) RTG cont ends that Commerce should c o untervail a n entire program only when the pr ogram is unreasonable. RTG maintains that its syste m is reasonable bas ed on the a cceptable practices in Thailand, and it also faults Commerce for referencing an accounting book that it alleges says nothing ab out whether waste includes reco verable or saleable scrap. Next, RTG, relying on a dictionar y definition of “waste,” contends that “waste that can be sold is still waste.” (Appellee Br. 27.) Furthermore , citing 19 C.F.R. § 191.23(c), RTG point s out that the U.S. Customs and Border Protection’s own drawback regulations only allow drawba ck on imported input reduced by recoverable and saleab le waste. But RTG maintains that these r egulations support rat her than defeat its arguments because they recognize that “w aste encompasses sale able scrap.” (Appellee’s Br. 31.) Finally, RT G argues that the Court of International Trade properly rejected Commerce’s reliance on the two “extraneous” sources of yiel d information, the parallel

05-1117, -1118 14antidumping investigation and the financial audit. It argues that the rejection of Commerce’s reliance on these sources of information does not undercut Commerce’s statutory a u thority, b e cause Commerce could have relied on RTG’s system. RTG, recognizing that the disp ositiv e question is whethe r its sys tem reasonably and effectively confirmed normal allowances for waste, argues that its system is reasonable and effective. RTG contends t hat the two ot her sources of informa tion only included slightly lower yield factors, and th at Commerce never even assessed the reasonableness of the other sources of information. We conclude that Commerce’s determination to countervail the entire amount of the import duty exem ptions is s upported by substantial ev idenc e and is otherwise in accordanc e with law. Subsection 351.519(a)(1 )(i) provides that a countervailable benefit exis ts where a program permits a drawback that “exceeds the amount of import charges on imported inputs that are co nsumed in the produc tion of the exported product, making normal allowanc es for wast e. ” Moreover, pursuant to § 351.519(a)(4), the “entire amount” of the drawback is countervailable “u nless” Commerce finds that [t]he government in question has in plac e and applies a system or procedure to confirm which inputs are cons umed in the production of the exported products and in what amounts, and the syst em or proc edure is reasonable, effective for the purpose s intended, and is based on generally accepted commercial practices in the country of export . . . . 19 C.F.R. § 351.519(a)(4) (2004). Only when Commerce finds that the government in question has the system required by § 351.519( a)(4) does it “n ormally consider the amount of the benef it to be the difference betwee n the amount of import charges remitted or drawn back and the amount paid on imported inputs cons umed in production for which remission or drawback was claim ed” pursuant to § 351.519(a)(3)(i ). Here,

05-1117, -1118 15following t he requirements of § 351.519(a )(4), Commerce determined that RTG’s system for determining which inputs are cons umed in the exported product, and in what amounts, is not reasonable beca use the system did not isol ate and examin e what was consumed in the pr oduction of the exported products and it did not consider in it s analys is whether any of the scr ap was recoverable an d saleable. We see no reason t o second guess the determination of Commerce t hat a s ystem that does not account for recoverable and saleable scrap is not a reasonab le s ystem. In short, we defer to the expertise of Commerce in concluding that normal allowances for waste do not include allowing dr awback on recover able and saleable scrap. Un lik e RTG, we do not fault Commerce for referencing acc o unting principl es disc ussed in an accounting book to determine that recoverable and s a leable scr ap cannot be cons ider ed waste because it does have value and can be sold. Furthe rmore, we reject RTG’s reliance on a dictionary definition of the term “w aste.” We also note t ha t, contrary to RTG’s argument, U.S. Customs and Border Prot ection’s regulation on this very same issue, 19 C.F.R. § 191.23(c), supports Commerce’s finding that reasonable systems do not allow drawback on imported inputs that are recoverable and resold. The Court of International Trade found Commerce’s logic to be circular . It understood Commerce to be countervaili ng the entire duty exemption because Commerce believes that any excess waste nec essarily makes a system unreasonable. The court stated that “[t]he problem with [Commerce’s] logic is that it renders § 351.519(a)(3)(i) meaningless, because there c ould never be a sit uation where only the excess ive portion of the exem ption would be countervailed.” Decision , 341 F. Sup p

. 2d at 1324. Contrary to the characterizati on of Commerce’s decision by RT G and the

05-1117, -1118 16Court of International Tr ade, however, Commerce did not countervail the entire drawback program simply because the pr ogram allowed for some amount of excessiv e drawback. We understand Commerce to have countervailed the entire drawbac k program because it f ound that program to be unreas onabl e for systematically allowing impermissible drawback of recoverable and re saleable scrap, result ing in unduly large amounts of impermissible drawback. We defer to this interpretation and application of § 351.519, Commerce’s own regulation, because it is reasonable. See L ee v. Unite d States , 329 F.3d 817, 822 (Fed. Cir. 2003) (“A great amount of deference is owed to a n agency’s interpretation of its own regulations .”); NSK, Ltd. v. Koyo Seiko Co. , 190 F.3d 1321, 1326 (Fed. Cir. 1999) (“[W]e accord substantial deference to Commerce’s interpretations of its own regulations.”). Commerce’s applic ation of § 351.519(a)(4) here does not mean that there could never be a situation where only the excess ive portion of the import duty exem ption would be countervailed. For example, Commerce might countervail only exc e ss drawback when the excess drawback is caused by random rather than systematic error. As another example, Commerce might only countervail excess drawback that is relatively very small. RTG agrees that Commerce should coun tervail an entire program when the program is unreasonable, but maintains t hat its system is reasonable based on the generally acceptable practices in Thailand. The Court of In ternational Trade agreed. The requirement of a reasonab le and effective system, however, is separ ate from the requirement that the system refl e c t local commercial practices. According to the text of 19 C.F.R. § 351.519(a)(4), to have only exc e ss drawback countervailed, a s ystem must be (1) reasonable, (2) effective for the pur poses intended, and (3) based on generally

05-1117, -1118 17accepted c o mmercial practices in the country of export. The langu age of the regulation does not clearly require that Commerce analyze the reasonableness of a system only from the perspective of the home country. Thus, we defer to Commerce’s interpretation of its own regulation as allowing the reas onableness of a system to be evaluated using general ac counting principles th at might not be prev alent in the country of export, as that interpretation of t he regulation is reasonable. Se e Lee , 329 F.3d at 822; NSK , 190 F.3d at 1326. Applying that pr inciple here, we conclude t hat Commerce’s reference to general ac counting pr inciples us ed outside Thailand was not reversible error. Finally, we disagree with RT G’s argument that the C our t of International T r ade was correct to disallow c ons ideration of information generated by the parallel antidumping investigation and the financia l audit. Commerce should be allowed t o verify the data that foreign sys tems generate using information generated through independent financial and produc tion audits. Indeed, pursuant to 19 U.S.C. § 1677m(i) and 19 C. F.R. § 351.307, Commerce is required to verify the factual basis for its determinations. And while the Court of International Trade was concerned that Commerce did not assess the reasonableness of the waste rates identified in thes e sources, Commerce did assess the reasonabl e ness of the waste rates identified by RTG in light of the significant percent diffe rences between the waste rates identified in those sources and RTG’s reported waste rate . Investigating the reasonableness of RTG’s system in light of these signific ant percent differe nces was not improper. For the foregoing reasons, we conclude that Commerce’s determination to countervail the entire am ount of the import duty exemptions is supported by s u bstantia l evidenc e and is otherwise in acc o rdance wit h law.

05-1117, -1118 18CONCLUS ION We affirm the Court of International Trade’s findings on issues of the specific ity of debt restructuring and t he allegations of equity infusion, but we reverse its finding that Commerce erred in countervailing the entire amount of the import duty exemptions. We remand the case to the Court of Internati onal Trade for further proceedings consistent with this opinion. AFFIRMED-IN-PART, REVER SED-IN-PART , and REMANDED

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