Mexican Steel Company Challenges Commerce's Rejection of Info on 3 Subsidy Programs

The first of the subsidy programs at issue concerns a factoring program provided by El Banco Nacional de Comercio Exterior (Bancomext). Under this program, a financial product was offered by Bancomext for "factoraje," which allowed Ternium to receive "advance payments from certain domestic customers through Bancomext's specialized electronic platform."

During the investigation, the respondent responded to Commerce's second supplemental questionnaire and provided a loan template, which showed all payments related to all invoices paid under the factoring arrangements, and a sample transaction. After the agency's preliminary determination, Ternium filed a ministerial error allegation regarding the payment period for the factoring program. The respondent said Commerce "relied on the incorrect number of days (i.e., 365 instead of 180) to determine the benchmark interest payments."

Ternium pointed to the sample transaction, which showed that the "financial cost that was discounted from the invoiced amount represented the ratio of the financial cost to the invoice value." The respondent said this ratio was calculated by "dividing the discount amount by the total invoiced amount." The ratio was the "ratio of the discount to the total principal -- not the annual interest rate," the company clarified.

As a result of Commerce's mistake, the agency compared the actual cost of the factoring program, which is limited to invoices with payment terms under 180 days, with the cost of a commercial credit outstanding for 365 days, "thereby more than doubling the benchmark cost and, therefore, the calculated subsidy." Commerce refused to accept the ministerial error, finding that the company's allegations didn't meet the definition of a "ministerial error."

The respondent argued that Commerce "misunderstood" how the program works and disregarded key information. Despite the claims in the ministerial error allegation, Commerce didn't ask questions about the program in any of the five questionnaires issued after the preliminary determination, Ternium noted. Nevertheless, the respondent submitted clarifying information on the program in response to a supplemental questionnaire on other issues, which the agency rejected during verification as new factual information not requested by the agency.

Then, despite telling the company it would have a later chance to present information on the factoring program "as a minor correction," Commerce provided Ternium with no such opportunity, the complaint said. The agency then found that Ternium didn't act to the best of its ability with respect to the factoring program, resorting to adverse facts available.

The respondent argued that Commerce "abused its discretion" by rejecting record information on the factoring program and depriving it of the chance to present information on the program as a "minor correction." Ternium also contested the use of AFA, arguing it was a fully cooperative respondent.

The second subsidy program at issue concerns financing programs offered by the Nacional Financiera (NAFIN). Ternium told Commerce it entered into a factoring agreement with NAFIN that allowed the company to "receive advance payments from certain domestic customers through NAFIN’s ‘Cadenas productivas’ platform."

As with the Bancomext program, Commerce refused to accept updated data regarding the "correct calculation" for the NAFIN factoring program, despite the respondent repeatedly asking the agency for "guidance on how to provide clarifying information ahead of the on-site verification." The agency rejected record information regarding the program, "which remained on the record for more than a month, after Commerce officials completed the on-site verification and after Ternium had submitted its case brief," the complaint said.

The agency didn't give the company a chance to present any minor revisions related to the program, and it didn't verify any information related to the program, "even though this information had been properly submitted and was on the record during verification and at the time Ternium submitted its case brief." The respondent said this was an abuse of discretion and deprived the company of a chance to make its case.

Commerce also countervailed the alleged provision of mining rights for less than adequate remuneration. The petitioners alleged that Ternium's cross-owned affiliated mines held "preferential mining concessions from the Government of Mexico." The agency found in its post-preliminary determination that Ternium's annual per-unit cost to extract iron ore from the mines exceeded the annual, per-unit iron ore benchmark price, finding the program didn't confer a benefit.

However, Commerce changed course after the petitioners filed their case brief, which alleged that Commerce “unlawfully offset benefits that Ternium received from iron ore extraction in one location with so-called ‘negative benefits’ associated with iron ore extraction in a completely separate location.” Ternium filed a rebuttal brief, which the agency denied on the grounds that it was untimely filed and didn't satisfy the requirements for a rebuttal brief.

At CIT, Ternium said the rejection of the brief was an abuse of discretion and unsupported, since the brief responded directly to arguments made in the petitioner's case brief. The respondent said it had no reason to present the arguments found in the rebuttal brief any earlier, since "neither Commerce’s Preliminary Determination, nor its Post-Preliminary Determination, provided notice to Ternium that such arguments would be relevant until after the case brief deadline."

Ultimately, Commerce assigned Ternium a 13.26% CVD rate.