Full opinion text
MEMORANDUM OPINION CARMAN, Judge: Before the Court are four related cases arising out of the importation of industrial nitrocellulose from France. These cases result from challenges by both the domestic producer and the importer of the anti-dumping and the countervailing duty determinations. In Court No. 83-07-00951 (CV2D 951), the domestic producer of industrial nitrocellulose, Hercules, Inc. (Hercules), moves pursuant to Rule 56.1 of the Rules of this Court for judgment upon the agency record challenging a portion of the countervailing duty findings of the United States Department of Commerce, International Trade Administration (Commerce) in Final Affirmative Countervailing Duty Determination; Industrial Nitrocellulose From France, 48 Fed.Reg. 11,971 (1983), amended, Industrial Nitrocellulose From France; Amendment to Notice of Final Affirmative Countervailing Duty Deter mination, 48 Fed.Reg. 25,254 (1983) (Final CVD Determination). In its second action, Court No. 83-09-01324 (LTFV 1324), Hercules moves for judgment upon the agency record challenging a portion of the less than fair value findings of Commerce in Final Determination of Sales at Less Than Fair Value; Industrial Nitrocellulose from France, 48 Fed.Reg. 21,615 (1983) (Final LTFV Determination). The foreign producer and exporter of industrial nitrocellulose from France, So-ciete Nationale des Poudres et Explosifs (SNPE) has filed with this Court its Rule 56.1 motion challenging, in Court No. 83-07-01075 (CVD 1075), the same countervailing duty determination challenged by Hercules, Final CVD Determination. In this action, SNPE also challenges the injury determination of the United States International Trade Commission (ITC). Similarly, in Court No. 83-09-01325 (LTFV 1325), SNPE moves for judgment upon the agency record challenging the same less than fair value dumping investigation, Final LTFV Determination, challenged by Hercules in LTFV 1324. In addition, SNPE challenges the ITC injury determination in LTFV 1325. I. BACKGROUND Industrial nitrocellulose (INC), the subject of the investigations, is a dry, white, amorphous, synthetic chemical which results from the action of nitric acid on cellulose and is extremely flammable. Industrial nitrocellulose contains between 10.8% and 12.2% nitrogen, differentiating it from explosive grades of nitrocellulose, which contain over 12.2% nitrogen. INC is stored and shipped wet with alcohol. Industrial nitrocellulose comes in several viscosities and is used in the production of lacquers, films, coatings, furniture finishes, and printing inks. The product has been classified as cellulosic plastic materials, other than cellulose ascetate, under item 445.-2500 of the Tariff Schedules of the United States (TSUS). Explosive grade nitrocellulose has a different classification under the TSUS. At the time of the investigation, SNPE was the sole French producer and exporter of INC to the United States. Since 1978, Hercules was the sole United States producer of INC. Prior to the creation of SNPE, the French Government had historically maintained a monopoly over trade in powders and explosives which extended to industrial nitrocellulose, a co-product of explosive grade nitrocellulose. The monopoly was operated by the Ministry of Defense through Service des Poudres (SP), one of the Ministry’s divisions. Pursuant to the Treaty of Rome which established the European Economic Community (EEC) and in response to its treaty obligations, the French Government transferred, in exchange for stock, the commercial and industrial assets and operations of SP to SNPE, a newly formed public corporation. The French Government received over 99% of the outstanding stock of SNPE. At the time of SNPE’s incorporation, pursuant to French law, the employment of all military and civilian personnel of SNPE’s predecessor, SP, was at the disposal of the president of SNPE. After a period of one year, these employees were permitted to be either placed again at the disposal of the Minister of Defense or recruited by SNPE in accordance with French labor laws. Employees with civil service status who remained with SNPE had the option of retaining that status and continuing to be subject to the conditions applicable to any facility under the jurisdiction of the Ministry of National Defense. Some employees continued to retain civil service status; however, all newly hired employees were not given this status. II. THE COUNTERVAILING DUTY INVESTIGATION A. Introduction On September 14, 1982, Hercules filed a countervailing duty petition with Commerce and the ITC alleging subsidies were being provided to French producers of INC by the Government of France (GOF). Hercules also alleged the United States INC industry was materially injured, or was threatened with material injury, by reason of imports of INC from France. On September 17, 1982, upon notification from Commerce, the ITC instituted a preliminary countervailing duty investigation of INC from France. On October 4, 1982, Commerce instituted a preliminary countervailing duty investigation. Initiation of Countervailing Duty Investigation; Industrial Nitrocellulose From France, 47 Fed.Reg. 44,807 (1982). The ITC issued an affirmative preliminary determination, on October 29, 1982. Nitrocellulose From France; Determination, 47 Fed.Reg. 51,024 (1982). The ITC determined there was a reasonable indication imports of INC from France were materially injuring, or threatening to materially injure, a U.S. industry. The vote of the Commission making the determination was unanimous. On December 8,1982, Commerce, at Hercules’ request, declared the investigation “extraordinarily complicated,” as defined in section 703(c) of the Tariff Act of 1930 (the Act), as amended, 19 U.S.C. 1671b(c) (1981), and extended the deadline for the preliminary determination from December 8, 1982 to December 22, 1982. Commerce made a negative preliminary determination on December 22,1982, stating the Government of France was providing SNPE with certain benefits constituting subsidies within the meaning of the Act. However, the estimated ad valorem amount of the net subsidies was found to be de minimis. Preliminary Negative Countervailing Duty Determination; Industrial Nitrocellulose From France, 47 Fed.Reg. 58,330 (1982). Commerce made a final affirmative countervailing duty determination on March 14, 1983. Final CVD Determination. Commerce found “certain benefits which constitute subsidies within the meaning of the counterviling [sic] duty law [were] being provided to [SNPE].... [at] [t]he estimated net subsidy [of] 3.248 percent ad valorem." 48 Fed.Reg. at 11,971. The 3.248 figure, however, was amended to 3.604 on June 6, 1983. 48 Fed.Reg. 25,254. Commerce, in its final determination, found the following benefits constituted countervailable subsidies: (1) A grant from the Ministry of Defense to SNPE for plant modernization at Bergerac; (2) Cross-subsidization of industrial nitrocellulose through military sales of nitrocellulose; (3) Assumption of certain labor costs by the Government of France; and (4) Tax and non-tax regional development incentives. The ITA determined the following programs did not confer subsidies: (1) The reorganization of the explosive powders and substances industry, pursuant to the Treaty of Rome, by creating SNPE; (2) Equity infusions; (3) Financing from Credit National; (4) Research and development funding; (5) Energy conservation grants; (6) Labor assistance programs; (7) Anti-pollution incentives; . (8) Local business tax reductions; (9) Equipment subsidies; and (10) Input discounts. Finally, the ITA determined that certain other government programs were not used by the French nitrocellulose producer. In accordance with 19 U.S.C. § 1671d, the ITC had 75 days after Commerce’s affirmative final determination to determine whether or not the imports were materially injuring or threatening to materially injure a U.S. industry. On March 22, 1983, the ITC instituted a final countervailing duty investigation of INC from France. Nitrocellulose From France, 48 Fed.Reg. 15,018 (1983). On June 15, 1983, the Commission transmitted its affirmative final countervailing duty determination and report to Commerce finding a U.S. industry was materially injured by imports of INC. Nitrocellulose From France, 48 Fed.Reg. 27,453 (1983). The vote of the Commission was 2 to 1, with Commissioner Stem dissenting. Thereafter, on June 22, 1983, notification of Commerce’s countervailing duty order was published in the Federal Register. Industrial Nitrocellulose From France; Countervailing Duty Order, 48 Fed.Reg. 28,521 (1983). Hercules initiated an action seeking judicial review of Commerce’s countervailing duty order, CVD 951, on June 29, 1983. SNPE followed by filing an action challenging both Commerce’s countervailing duty order and the ITC’s injury determination, on August 19, 1983. B. Contentions of the Parties in Court No. 83-07-00951 In this case Hercules, the plaintiff domestic producer, contends the following: (1) Commerce erred in utilizing an equity methodology rather than a grant methodology to calculate the cross-subsidization of industrial nitrocellulose sales by military nitrocellulose sales; (2) Commerce incorrectly determined that the creation of SNPE and its modernization were consistent with commercial considerations. Commerce also erred in finding the transfer of assets and funds by the French Government to SNPE in 1970 and subsequent years was not countervailable; (3) The finding by Commerce that the purchases by SNPE of inputs from suppliers were not countervailable subsidies, based upon the unsupported and unverified assumption that government controlled and subsidized suppliers would not pass along a portion of their subsidies to SNPE which was also government controlled, was unsupported by substantial evidence or otherwise not in accordance with law; and (4)The reliance by Commerce upon partial and preselected verified information supplied by SNPE or the government of France following the refusal by SNPE or the government of France to supply all the information required by Commerce was contrary to the requirements of section 776 of the Act which requires Commerce to use the best information otherwise available. The United States defends its determination as follows: (1) The calculations employed by Commerce of the cross-subsidization of the production of industrial nitrocellulose by the French Government’s purchase of military nitrocellulose at excessive prices was reasonable and in accordance with law in light of the best information available; (2) The formation of SNPE by the transfer of assets by the French Government to SNPE in exchange for stock on terms consistent with commercial considerations did not constitute a subsidy; (3) The determination by Commerce that the purchase of inputs from government owned companies did not constitute a countervailable benefit to SNPE was supported by substantial evidence on the record and was otherwise in accordance with law; and (4) Commerce based its final determination upon information that was verified upon the best information otherwise available in conformity with the countervailing duty laws and regulations of the Department of Commerce. Defendant-intervenor SNPE generally concurs with the contentions of the defendant United States. C. Contentions of the Parties in Court No. 83-07-01075 Plaintiff SNPE, the foreign producer, contends the following: (1) The finding by Commerce that the production of industrial nitrocellulose was cross-subsidized by military sales is unsupported by substantial evidence on the record and is otherwise not in accordance with law for the following reasons: A. The theory of cross-subsidization was contrary to the intent of Congress; B. This theory is also contrary to established and sound administrative practice; C. Commerce was in error when it found military sales were at premium or excess prices; D. Commerce was in error in assuming a benefit was conferred on INC where INC operations were assumed to be unprofitable; E. Commerce adopted the theory of cross-subsidization because of political pressure; and F. The methodology of Commerce did not represent or adequately estimate the amount of any subsidy. (2) Commerce’s determination that the French law permitting government workers at SNPE to retain government status conferred a countervailable subsidy is unsupported by substantial evidence on the record and is otherwise not in accordance with law; (3) The finding by Commerce that the funds received from the Ministry of Defense of France to upgrade SNPE’s pyrotechnical safety equipment were counter-vailable is unsupported by substantial evidence on the record and is otherwise not in accordance with law; and (4) The finding by Commerce that DA-TAR Regional Assistance was counter-vailable is unsupported by substantial evidence on the record and is otherwise not in accordance with law. SNPE, the foreign producer, also challenges the ITC’s determination Hercules was materially injured prior to 1982 by reason of French imports. SNPE contends this decision is unsupported by substantial evidence on the record and is otherwise not in accordance with the law. Defendant United States counters SNPE's arguments as follows: 1. The subsidy conferred upon SNPE by the assumption by the Government of France of certain labor costs for employees with civil service status should not be offset by the higher cost of wages of employees with civil service status. Moreover, the Court should not consider the merits of SNPE’s argument since it was not raised at the administrative level; (2) Commerce correctly determined that the assistance provided to SNPE through DATAR constituted a countervailable subsidy because the benefits were conferred upon a regional basis and were therefore preferential. In any event the Court should not consider the merits of SNPE’s argument since it was not raised at the administrative level; (3) Funds received by SNPE from the French Ministry of Defense for the purchase of pyrotechnical safety equipment constituted a countervailable subsidy; and (4) The determination by Commerce that the government of France was subsidizing the production of industrial nitrocellulose by paying excessive prices for military nitrocellulose was reasonable and in accordance with law, was based upon the best information available, and was properly calculated. Defendant United States further indicates the administrative record does not support SNPE’s allegation Commerce’s decision was the result of political pressure. As to the determination of the ITC, defendant United States argues there is substantial evidence on the record supporting the Commission’s determination that the domestic nitrocellulose industry was materially injured. Defendant-intervenor Hercules contends the determination that the military nitrocellulose sales by SNPE subsidized the production and export of industrial nitrocellulose was supported by substantial evidence on the record and was otherwise in accordance with law. Defendant-intervenor further contends there is substantial evidence on the record of decreased production, shipments, and employment to support the Commission’s finding that a domestic industry, ie. Hercules, suffered material injury on account of the imports from France. D. Discussion 1. Introduction The Secretary of Commerce has been entrusted with the authority and responsibility for administering the countervailing duty law. In this capacity, the Secretary is vested with broad discretion. Smith Corona Group v. United States, 713 F.2d 1568 (Fed.Cir.1983), cert, denied, 465 U.S. 1022, 104 S.Ct. 1274, 79 L.Ed.2d 679 (1984). The countervailing duty law provides if Commerce finds a foreign government or entity is subsidizing the manufacture, production, or exportation of goods imported into the United States, and where required, the ITC issues an affirmative injury determination, then Commerce must impose countervailing duties on the goods equal to the amount of the subsidy. The Court in reviewing the present action must sustain Commerce’s countervailing duty determination unless it finds it is “unsupported by substantial evidence on the record, or otherwise not in accordance with law.” 19 U.S.C.A. § 1516a(b)(l)(B) (1982). It is also well settled that the administrative agency “has broad discretion in the enforcement of the trade laws and ... [its] ‘decision does not depend on the “weight” of the evidence, but rather on [its] expert judgment ... based on the evidence of the record.’ ” Manufacturas In-dustriales de Nogales, S.A. v. United States, — CIT -, -, 666 F.Supp. 1562 (1987) (quoting Matsushita Electric Industrial Co. v. United States, 750 F.2d 927, 933 (Fed.Cir.1984)). The “substantial evidence test” restricts the scope of the Court’s review of the agency record. Much deference is given to the agency’s interpretation. As long as the interpretation is sufficiently reasonable, it will be upheld. Furthermore, it need not be the only reasonable interpretation. Atcor, Inc. v. United States, — CIT -,-, 658 F.Supp. 295, 299 (1987). In arriving at a clear understanding of the meaning of “substantial evidence,” it has been recognized: ‘Substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.’ Substantial evidence ‘is something less than the weight of the evidence, and the possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency’s finding from being supported by substantial evidence.’ Matsushita Electric Industrial Co. v. United States, 750 F.2d 927, 933 (Fed. Cir.1984) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 216, 83 L.Ed. 126 (1938); and quoting Consolo v. Federal Maritime Comm’n, 383 U.S. 607, 619, 86 S.Ct. 1018, 1026, 16 L.Ed.2d 131 (1966) respectively). 2. Court No. 83-07-00951 In challenging Commerce’s Final CVD Determination, plaintiff Hercules concurs with the determination that SNPE benefited from certain subsidies bestowed by the Government of France (GOF), but disputes other findings of Commerce as not supported by substantial evidence on the record or not otherwise in accordance with law. Hercules first argues that, although Commerce was correct in finding sales of military nitrocellulose subsidized sales of industrial nitrocellulose, nevertheless, Commerce incorrectly calculated the ad valo-rem subsidy amounts. Hercules argues Commerce mischaracterized the subsidy as an equity infusion, rather than a grant. Hercules maintains no stock was issued for this subsidy, and therefore, Commerce should not have treated this subsidy as an equity infusion, but as a grant. Hercules continues: Even if the subsidy should be treated as an equity infusion, Commerce’s methodology .., is incorrect because (a) [it] is an unjustifiable deviation from Commerce’s normal equity methodology ...; (b) Commerce should have included in its measurement of the equity infusion ... increases in its industrial nitrocellulose net working capital because the subsidy earned on SNPE’s sales of military nitrocellulose could be used to acquire other industrial nitrocellulose assets in addition to fixed assets; and (c) Commerce should have assumed a negative, instead of ... zero, rate of return on operations from industrial nitrocellulose.... Plaintiff Hercules’ Brief in Support of its Motion for Judgment upon the Administrative Record at 7-8, Hercules, Inc. v. United States, Court No. 83-07-00951, Joined Issue Calendar. Commerce, on the other hand, contends its calculation of the subsidy was reasonable under the circumstances and in accordance with law. Both SNPE and the GOF refused to provide information about the sales of military nitrocellulose or profit and loss figures for the industrial nitrocellulose production to rebut Hercules’ allegations concerning cross-subsidization. Commerce argues it had no other alternative but to assume the validity of cross-subsidization and employ an equity methodology utilizing the best information available to calculate the subsidy derived from the GOF’s payment of excessive prices for military nitrocellulose. Commerce compared the company-wide rate of return for SNPE on equity with the rate of return on equity for industrial nitrocellulose. Commerce assumed the rate of return on equity for industrial nitrocellulose was zero as the best information available because SNPE and the GOF refused disclosure of the necessary information to construct this rate. The resultant differential between the companywide rate of return and rate of return for industrial nitrocellulose, which ultimately became the percentage rate of return for the entire company, was then applied to the amount of fixed assets purchased for the industrial nitrocellulose operations. This fixed assets figure, Commerce explains, was chosen as a substitute for equity infusions due to the impossibility Commerce had in determining and allocating the GOF’s infusions of equity for the industrial nitrocellulose production. Commerce determined the subsidy rate by applying the formula to fixed assets over a ten-year average useful life period. The Court does not agree Commerce’s decision to use an equity method was not supported by substantial evidence on the record or was not otherwise in accordance with law. The GOF and SNPE provided limited information for Commerce to utilize in formulating a rate of subsidy. The equity methodology was chosen “because cash infusions by means of government purchases of military products at premium or ‘excess’ prices may, when such prices are paid to a wholly government-owned company, properly be viewed as infusions of equity.” 48 Fed.Reg. at 11,973. Commerce asserts the unique facts of this investigation as well as the time constraints and limited information were crucial factors in the decision to choose this method. Hercules’ assertion the cross-subsidy was a grant is without merit. Commerce has explained its view of the difference between an equity purchase and a grant as follows: The essential difference between an equity purchase and the bestowal of a grant is the potential for return on equity. The domestic interested parties contend that the potential for any return on investment in these companies is mimimal [sic] and therefore the Department should [sic] this difference in its treatment of equity infusions. Their argument focuses on the poor prospects for potential dividends at average rates, while ignoring the potential return in terms of retained earnings or increasing worth tof [sic] the company. Because we cannot discount this potential at the time the infusion is made, we should not treat equity infusions as an outright grant. To do so would raise the possibility of countervailing more than the net subsidy in cases where the government receives a return, in retained earnings or increasing worth from its investment. The treatment of equity infusions as grants ... implies that the government could expect no return, in terms of dividends, retained earnings, or through increased worth, from its investment. We lack the ability to look into the future that would be necessary to make such a judgement [sic]. Because of the difference betwen [sic] equity purchases and grants, the treatment of equity infusions as grants is inappropriate. We believe that our ‘rate of return shortfall methodology appropriately measures benefits from equity by an equity-based standard. Cold-Rolled Carbon Steel Flat-Rolled Products From Argentina: Final Affirmative Countervailing Duty Determination and Countervailing Duty Order, 49 Fed.Reg. 18,006, 18,022, (1984). The GOF, owning over 99 percent of the outstanding stock of SNPE could receive potential returns in the form of retained earnings or increased worth of holdings from any profits generated by SNPE from alleged “excess” prices paid. From review of the record and in granting Commerce deference in the administration of the trade law, it is clear substantial evidence on the record supports Commerce’s stance. Neither does this Court concur with Hercules that Commerce was incorrect in the way it utilized its equity method in valuing the cross-subsidy. As discussed above, SNPE and the GOF refused to disclose certain information. The facts of the investigation were unique, and Commerce was confronted with constricting time limitations for verification. Commerce explained by letter, dated April 14, 1983, to counsel for Hercules, that it employed its equity method in a manner that “most accurately measures the [subsidy] benefit to the recipient.” Record at 3475-76. Hercules also urges Commerce was deficient in considering the amount of the equity infusions to be measured only by the fixed assets purchased by SNPE. Hercules claims “[t]his assumption does not take into account the fact that cash from the GOF may be used for other purposes necessary for the production of industrial nitrocelluose.” Plaintiff Hércules’ Brief in Support of its Motion for Judgment upon the Administrative Record, supra, at 18 (emphasis added). Commerce explains its rationale as follows: [We c]hose not to treat the total value of the assets purchased for INC production as the amount of subsidy from military sales, as suggested by Hercules, because in so doing [Commerce] would have grossly over-estimated the amount of the subsidy.... Hercules’ suggested methodology assumes that all assets purchased for INC operations were paid for with funds from cross-subsidization. This in turn assumes that INC sales were not generating any revenues from which assets could be purchased. However, the assumptions inherent in Hercules’ proposed methodology were not borne out by the other information available to [Commerce]. Defendant’s Opposition to Plaintiff’s Motion for Judgment upon the Agency Record at 18-19, Hercules, Inc. v. Unit ed States, Court No. 83-07-00951, Joined Issue Calendar. Clearly, it is within Commerce’s “discretion to make reasonable interpretations of the evidence and to determine the overall significance of any particular factor or piece of evidence.” Maine Potato Council v. United States, 9 CIT 293, 300, 613 F.Supp. 1237,1244 (1985). Similarly, it was within Commerce’s reasonable discretion to assume a negative, rather than a zero, rate of return on equity on INC production when determining the cross-subsidization rate. Hercules claims Commerce erred by not considering and adopting the findings of the concurrent antidumping record as the best information available to establish the zero rate determination. In the concurrent antidumping investigation, Commerce determined: For certain grades, we found that sufficient sales of industrial nitrocellulose were made at or above the cost of production and, therefore, those sales were used in making price-to-price comparisons with sales in the U.S. market. For certain other grades of industrial nitrocellulose, we found that sales which were made above the cost of production were inadequate as a basis for the determination of foreign market value.... Final LTFV Determination, 48 Fed. Reg. at 21,615-16. Here, Commerce’s determination was based on evidence of below cost sales only in France; not all sales in France were below cost. In contrast, Commerce’s determination in the countervailing duty investigation was based on SNPE’s worldwide rate of return on INC production. Accordingly, the findings do not conclusively establish the overall rate of return on INC sales in France was negative. At the very least, there is no firm basis to assume the INC loss on French sales would augment a loss on INC overall operations, even if French sales were below cost. Commerce’s assumption of a zero return rate as based on the best information otherwise available was a reasonable exercise of the agency's explicit statutory discretion. Hercules’ second major contention with Commerce’s countervailing duty determination is that Commerce failed to characterize the GOF’s creation of SNPE from SP as a legal fiction, failed to treat the transfer of assets from the one to the other as a coun-tervailable subsidy, and erroneously determined both acts were consistent with commercial considerations. Hercules further complains Commerce failed to examine SP’s books and records for proper valuation of the transferred assets. Commerce’s language in the Federal Register responds to this argument: The record in this case shows that SNPE was organized in response to binding directive that certain state monopolies be adjusted to operate on a competitive, commercial basis. Indeed we have discovered no evidence that the purpose or intent of the French Government was anything other than the commercialization of SP. Given that government ownership of a business is not a subsidy per se, the French Government’s decision to fulfill its treaty obligations by ‘spinning off its industrial nitrocellulose operations does not, on its face, constitute subsidization of those operations. In sum, viewing SNPE’s industrial nitrocellulose operations within the context of the whole company, and in the larger context of the special circumstances of the company’s creation, there is no evidence to suggest an intent to subsidize industrial production. To the contrary, the evidence we have gathered and verified supports the conclusion the French Government has no purpose other than the fulfillment of its treaty obligation to commercialize SP. Consequently, we conclude the creation of SNPE and the transfer of assets by which it was carried out did not take place on terms inconsistent with commercial consideration [sic] and, therefore did not give rise to countervailable benefits. Final CVD Determination, 48 Fed.Reg. at 11,974. Commerce’s determination that the creation of SNPE was not a legal fiction, was consistent with commercial considerations, and did not constitute a countervailable subsidy is supported by substantial evidence on the record. The GOF’s creation of SNPE from SP was in keeping with terms of its obligations under the Treaty of Rome, Article 37 , which calls for the commercial adjustment of any State monopoly to ensure against unfair trade discrimination among the member states. The GOF retained a majority shareholder status upon receiving value for the equity infusion of assets from SP to SNPE. Thus, the determination of Commerce was reasonable and supported by substantial evidence in the record that SP was transformed into a newly-formed public corporation to operate on a competitive basis consistent with commercial considerations and was not transformed to serve as a legal fiction. Hercules further contends, in the alternative, if the creation of SNPE was not a legal fiction, then SNPE’s creation and the GOF’s transfer of assets were inconsistent with commercial considerations. Commerce defends its position by asserting the GOF transferred assets from SP to SNPE in accordance with treaty obligations for creating a newly formed corporation. Commerce verified these assets were properly valued in accordance with generally-accepted accounting principles and commercial law and practice in France. Commerce found these equity infusions were consistent with commercial considerations as set forth at § 771(5)(B)(i) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1677(5)(B)(i) and that the GOF exercised sound government investment policy by investing in a creditworthy company. When Commerce finds certain transfers of assets provided by a foreign government are infusions of equity, then Commerce, pursuant to § 1677(5)(B)(i) must scrutinize these benefits to determine their consistency with commercial considerations. See British Steel Corp. v. United States, 9 CIT 85, 605 F.Supp. 286 (1985). The GOF, in creating SNPE, transferred commercial and industrial assets and operations of SP to SNPE in exchange for over 99 percent of the outstanding stock. 48 Fed.Reg. at 11,974. These equity infusions, by the GOF, were directed into an apparently healthy and sound enterprise, SNPE. Commerce scrutinized the decision of France to commercialize SP into SNPE, the latter of which has apparently maintained a profitable stance since its inception. Commerce summarizes its position as follows: Our treatment of government equity investment in a company hinges essentially on the soundness of the investment. If the government investment was reasonably sound at the time it was made, we do not consider it a subsidy. If, on the contrary, the investment appears to have been unsound, a subsidy may exist. Government investment confers a subsidy only when it is on terms inconsistent with commercial considerations. An equity subsidy potentially arises when the government makes equity infusions into a company which is sustaining deep or significant continuing losses and for which there does not appear to be any reasonable indication of a rapid recovery. British Steel Corp., 9 CIT at 92, 605 F.Supp. at 291 (1985) (citing Final Affirmative Countervailing Duty Determinations on Stainless Steel Sheet, Strip, and Plate From the United Kingdom, 48 Fed.Reg. 19,048, 19,049 (1983) (emphasis added). In the context of a government investment in a company sustaining deep or significant continuing losses, the equity infusion will be considered at the time of the government’s investment. The important criterion to be considered is the soundness of the investment. In a situation where a new entity is created, there is no past record of a company’s creditworthiness to examine. The crucial issue is whether or not the investment appears to be sound. Here, Commerce observed there was no “track record” of SP, the predecessor of SNPE, and no profit-and-loss statement to examine. Consequently, Commerce in light of the best information available examined the overall financial health of SNPE and its INC operations and found the GOF’s creation of and investment in SNPE was a sound investment in a creditworthy company. Commerce explains its procedures as follows: To be “equityworthy,” a company must show ability to generate a reasonable rate of return within a reasonable period of time. In making our equityworthiness determinations, we assess a company’s current and past financial health, as reflected in various financial indicators taken from its financial statements, and where appropriate, internal accounts. We give great weight to the company’s recent rate of return on equity as an indication of financial health and prospects. Like our creditworthiness test, our eq-uityworthiness analysis also takes into account the company’s prospects as reflected in market studies, country and industry forecasts, and project and loan appraisals, when these types of analyses are available. Cold-Rolled Carbon Steel Flat-Rolled Products From Argentina, 49 Fed.Reg. at 18,020. There is substantial evidence in the record to support the finding by Commerce that the GOF’s decision to create and invest equity in SNPE was consistent with commercial considerations. The discretionary power to make such a determination is vested in Commerce; this Court will not supplant its own expertise for that which is exercised by the agency. Hercules’ third area of dissatisfaction concerns Commerce's determination that SNPE’s purchases of inputs from government-owned companies are not countervail-able subsidies. Hercules also claims Commerce’s manner of verification was deficient because Commerce did not conduct a thorough comparison of prices set by SNPE’s input suppliers. These input suppliers were government-owned purveyors of electric power, gas, nitric acid, and ole-um. Hercules contends subsidies are conferred upon SNPE when it purchases these inputs. Commerce responds as follows: [the sale] of natural gas and electricity did not confer subsidies upon SNPE because [Commerce] had verified that the utility rates charged to SNPE were based upon a standard pricing formula which is applicable to all industrial users in the area of SNPE’s nitrocellulose production facility. [Commerce] determined that there were no subsidies with respect to purchases of ole-um or nitric acid because SNPE’s suppliers of these commodities were privately owned and controlled during the period of investigation, and there was no evidence that the volume discounts obtained by SNPE were unduly favorable when compared with prices charged to other large volume buyers of these inputs. Defendant’s Opposition to Plaintiffs Motion for Judgment Upon the Agency Record, supra, at 3-4. In its final determination, Commerce discussed the oleum and nitric acid purchases as follows: With respect to SNPE’s purchases of oleum and nitric acid, we have verified that while the suppliers of these inputs are now owned by the government of France, during the period of investigation these companies were privately owned and controlled. Any counter-vailable benefits flowing to the company which occur outside the period for which we are measuring subsidization would be included in an annual review following any issuance of a countervailing duty order in this investigation. Final CVD Determination, 48 Fed.Reg. at 11,975. Nevertheless, Commerce performed a verification of these purchases by checking the documents presented setting forth the prices before and after nationalization and determined there were no changes to signify a subsidy. Concerning the purchase of natural gas and electricity, Commerce employed an “arm’s-length test” in its verification of the alleged subsidies from input suppliers. This arm’s-length test is explained by Commerce, as follows: Benefits bestowed upon the manufacturer of an input do not flow down to the purchaser of that input, if the sale is transacted at arm’s-length. In an arm’s-length transaction the seller generally attempts to maximize its total revenue by charging as high a price and selling as large a volume as the market will bear.... Where a subsidized coal producer and a steel producer are related companies, it is reasonable to question whether, in fact, the transfer price for coking coal is established on an arm’s-length basis. In general, our tests for whether the prices for coking coal charged to a related company were established on an arm’s-length basis include: (1) Whether the coal producer sold to its related steel producers at the prevailing price, and/or (2) whether the coal producers sold to its related steel producers and all other purchasers of coking coal at the same price. Final Affirmative Countervailing Duty Determinations; Certain Steel Products From Belgium, 47 Fed.Reg. 39,304, 39,308, 39,324 (1982). Hercules argues Commerce should have employed a different method of verification in this instance. Hercules urges a “comparison of prices” methodology should have been utilized. The decision to select a particular methodology rests solely within Commerce’s sound discretion. As long as there is “substantial evidence on the record” to support the choice, the Court will sustain the methodology chosen by Commerce. Thus, while Hercules proposes the Court choose an alternative method for verification, “[this C]ourt may not substitute its judgment for that of [Commerce] when the choice is ‘between two fairly conflicting views, even though the court would justifiably have made a different choice had the matter been before it de novo....'” Penntech Papers, Inc. v. NLRB, 706 F.2d 18, 22 (1st Cir.1983), cert, denied, 464 U.S. 892, 104 S.Ct. 237,78 L.Ed.2d 228 (1983) (citing Universal Camera Corp. v. NLRB, 340 U.S. 474, 488, 71 S.Ct. 456, 465, 95 L.Ed. 456 (1951)). Hercules further urges Commerce did not adequately verify the information submitted by SNPE establishing arm’s-length transactions for the input purchases. The Court does not agree. When Commerce applies a reasonable standard to verify materials submitted and the verification is supported by such “relevant evidence as a reasonable mind might accept,” the Court will not impose its own standard, superced-ing that of Commerce. See Agrexco, Agricultural Export, Co., Ltd. v. United States, 9 CIT 40, 47, 604 F.Supp. 1238,1244 (1985). Commerce verified the utility rates charged to SNPE were based on standard pricing with respect to all industries in the region who use the utilities. Commerce did not find preferential pricing was afforded SNPE from the government-owned utility companies. Commerce examined the documents and other pertinent data submitted and concluded that SNPE’s purchases were at arm’s-length. Hercules contends that Commerce erroneously interpreted and applied the “best information otherwise available” standard. According to Hercules, since the GOF and SNPE failed to provide pertinent or otherwise provided incomplete data, Commerce should have employed the “best information otherwise available." Furthermore, Hercules argues, Commerce should have drawn negative inferences from the failure to provide the data. Hercules challenges Commerce’s action as contravening the language and intent of Section 776 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1677e. Hercules concludes by asking the Court to order Commerce to draw adverse inferences from the GOF’s refusal to supply complete information. Commerce defends its verification procedure, maintaining it relied upon verified information. Where information was not verifiable, Commerce relied upon the “best information otherwise available,” in conformity with the statute and regulations. Commerce argues it employed the usual verification procedure which included inspecting documents, SNPE’s plant, operations, and records, and performing interviews. Commerce verified the information supplied by SNPE and the GOF in the questionnaires. As to the four alleged areas of unverified information, Commerce urges it received and verified sufficient information to properly make its determination. Commerce contends the agency need not verify all information it receives. Rather, according to Commerce, only that information relied upon in making a determination must be verified. When the agency is alleged to have included or excluded certain information from a determination, it is the Court’s function, on review, in accordance with the “best information otherwise available” rule, to determine whether or not the inclusion or exclusion of such information distorts or detracts from the evidence. The distortion or detraction must render the evidence on the record insubstantial to support the agency’s determination. See Atlantic Sugar, Ltd. v. United States, 744 F.2d 1556, 1562 (Fed.Cir.1984). This test emanates from the “substantial evidence on the record” standard which requires such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Id. In accordance with the above language, the Court finds the information Hercules alleges was not supplied or not verified and used by Commerce has not been established as such information that would so detract from or distort the evidence as to render the evidence on the record insubstantial to support Commerce’s determination. Section 1677e establishes the administering agency must verify all the information it relies upon for its determination. Commerce was not required to use or verify all information it received from SNPE and the GOF. It is enough for Commerce to receive and verify sufficient information to reasonably and properly make its determination. It appears the GOF submitted incomplete information and refused to submit other requested information. The GOF relied upon Article XXI of the General Agreement on Trade and Tariffs (GATT), which authorizes the nondisclosure of information for reasons of national security. This application of Article XXI to justify nondisclosure appears not to be incorporated in Section 771 of the Trade Act. Nevertheless, the Court finds, upon review of the record, that despite Commerce’s failure to obtain and verify the omitted information, it is clear there is substantial evidence on the record to support Commerce’s determination. It is also clear that no distortion or detraction from the record occurred which would warrant the Court to remand the determination to Commerce. In conclusion, the Court borrows from the language of the United States Court of Appeals for the Federal Circuit, which has aptly stated: [Considering ... the entire record ... [this Gourt] cannot find that [there is] so little evidence on the record as to be less than a “mere scintilla” or less than that which “a reasonable mind might accept as adequate to support a conclusion.” To the contrary, [this Court] find[s] that [Commerce’s] determination ... is quite reasonable and supported by substantial evidence on the record. Considering the compromise which [Commerce] must make between a perfectly accurate and an extremely rapid determination under this complex statute, [Commerce’s “errors” of which Hercules complains, “if they do so exist” are] not so debilitating as to render the final determination unsupported under the substantial evidence standard. Atlantic Sugar, Ltd., 744 F.2d at 1563. 3. Court No. 83-07-01075 By a Rule 56.1 motion, plaintiff Societe Nationale des Poudres et Explosifs (SNPE), challenges the countervailing duty order, the underlying affirmative countervailing duty determination, and the ITC’s injury determination. SNPE claims Commerce’s determination that INC production was cross-subsidized by military nitrocellulose sales is not supported by substantial evidence on the record and is otherwise not in accordance with law. Specifically, SNPE argues Commerce’s theory of cross-subsidization, adopted in response to political pressure, is both contrary to the intent of Congress and to established and sound administrative practice. SNPE contends the finding military sales were made at “premium or excess” prices was unsubstantiated by any evidence on the record. Furthermore, SNPE claims Commerce’s assumption INC production was unprofitable does not establish INC operations received a benefit. SNPE also urges Commerce’s methodology erroneously represented the estimated amount of any subsidy that may have existed. Defendant United States opposes these arguments contending its findings and methodology were reasonable, in accordance with law, and should be sustained. With respect to the validity of Commerce’s cross-subsidization methodology, there is no indication this methodology violates the intent of Congress or is contrary to sound administrative practice. The countervailing duty law provides for the levy and payment of duties equal to the net amount of subsidies. Countervailing duties must be determined and imposed by the administering agency in accordance with subtitle IV of the Tariff Act of 1930, as amended, 19 U.S.C. § 1671-1677g. The administering agency has statutory authority to use the best information otherwise available when a party involved in the determination process refuses or is unable to produce requested information in the format or timely fashion required. 19 U.S.C. § 1677e(b). Nothing within the statutory framework leads the Court to conclude Commerce’s application of the law is not sufficiently reasonable. Zenith Radio Corp. v. United States, 437 U.S. 443, 450, 98 S.Ct. 2441, 2445, 57 L.Ed.2d 337 (1978). Commerce investigated the possibility of cross-subsidization because Hercules contended that earnings from sales of military nitrocellulose were transferred for the purpose of asset purchases for INC production. SNPE and the GOF refused to supply Commerce with pertinent information to verify the independent profitability of INC production. Consequently, Commerce adopted the following position: “[i]n view of respondent’s refusal to furnish the information required to prove or disprove the petitioner’s allegation that military sales are used to provide a subsidized basis for industrial nitrocellulose, we must assume its validity.” Final CVD Determination, 48 Fed.Reg. at 11,972. When requested information is not disclosed upon request, § 1677e(b) directs Commerce to use the best information otherwise available. In this case the best information otherwise available was verifiable information Hercules provided as well as other information gathered from SNPE. Commerce calculated the subsidy by utilizing a method suited for the situation and the information available. An equity based methodology was employed to provide the proper analogous representation of the cross-subsidization received by SNPE in the production of INC from the military nitrocellulose sales. It appears this methodology most accurately measured the benefit to INC operations. Commerce’s formulation of the equity methodology involved the following three elements: “(1) The respondent’s company-wide rate of return on equity, (2) the rate of return achieved on industrial nitrocellulose, which was compared against the respondent’s company-wide rate of return on equity, and (3) the results of these comparisons applied against purchases of fixed assets associated with industrial nitrocellulose production.” Final CVD Determination, 48 Fed.Reg. at 11,973. The rate of return achieved from INC was assumed at a rate of zero, pursuant to the best information otherwise available rule, because SNPE was unable to cooperate in providing relevant information. Fixed asset purchases were also used because of SNPE’s inability to provide pertinent data for the calculations. SNPE was unable to provide any verifiable, relevant information to assist Commerce in determining otherwise. Commerce’s cross-subsidization methodology decisions were reasonable and supported by substantial evidence on the record. In light of all the circumstances and specifically the refusal by SNPE to supply information and the facts on the record, the Court finds Commerce was justified in countervailing the subsidy provided by the earnings of military sales diverted to benefit INC production. Contrary to the argument of SNPE, that Commerce countervailed INC production upon a a suspicion of a subsidy and utilized erroneous methodology calculations and assumptions, the Court finds Commerce did not make unreasonable or unsubstantiated assumptions or erroneous calculations of the subsidy to justify the Court substituting its judgment for that of Commerce. American Spring Wire Corp. v. United States, 8 CIT 20, 590 F.Supp. 1273 (1984), aff'd sub nom., Armco, Inc. v. United States, 760 F.2d 249 (Fed.Cir.1985). The Court finds there is insubstantial evidence on the record Commerce bowed to political pressure in its determination. Commerce employed a reasonable methodology and considered all factors including asset purchases, rates of return, and INC operations. In short, Commerce’s conclusions regarding cross-subsidization were based on substantial evidence in the record. SNPE also challenges Commerce’s finding a certain French law conferred labor-related countervailable subsidies. SNPE contends this finding is unsupported by substantial evidence on the record and is otherwise not in accordance with law. Commerce found GOF assumptions of certain civil-status labor costs conferred countervailable subsidies upon SNPE. SNPE argues although the GOF assumed these costs for civil status employees of SNPE, the overall amount of the benefit was offset by the higher government wage level at which SNPE had to pay those civil status employees. SNPE therefore urges there was no competitive benefit to countervail under 19 U.S.C. § 1677(5). Commerce contends there is no allowance for such an offset under 19 U.S.C. § 1677(5)(B)(iv), but regardless, Commerce continues, SNPE did not raise this argument on the record of the administrative review which is before the present Court and, therefore, is barred from doing so now. Commerce specifically argues SNPE did not make the argument the assumption of labor costs should be offset by the higher salaries of civil service workers in any of its comments in the administrative record. Defendant’s Opposition to Plaintiffs Motion for Judgment Upon the Agency Record at 13, Societe Nationale des Poudres et Explosifs v. United States, Court No. 83-07-01075, Joined Issue Calendar (emphasis added). SNPE agrees with Commerce that SNPE did not raise the argument in its pre-hearing, hearing, and post-hearing statements. SNPE urges these statements were addressed to the issues raised in Commerce’s preliminary determination which found that there was no labor subsidy. Thus, SNPE had no reason to believe that Commerce would reach a different conclusion than it had in the preliminary determination. SNPE was not notified of Commerce’s changed position until the final determination. Plaintiffs Brief in Reply to Defendant’s and Intervenor’s Responses in Opposition to Plaintiff’s Motion for Judgment Upon the. Agencies’ Records at 32-33, Societe Nationale des Poudres et Explosifs v. United States, Court No. 83-07-01075, Joined Issue Calendar. Regardless of SNPE’s reasons for not making this argument during the hearing, the Court is more concerned with SNPE’s allegation that the argument was raised during verification. The record contains a letter from SNPE to Commerce. Record at 2711-13. This letter responds to questions Commerce submitted to SNPE on the comparison of the cost to SNPE of “workers under status” and “private workers.” SNPE argues in this letter the total cost of workers under civil status was higher than the cost of private workers and admits it does not pay “social expenses” for workers under civil status. The letter ends as follows: “[t]he difference is therefore.... for people being employed in the manufacture of INC. One must remember, however, that this ‘saving of social costs’ is offset by higher wages. SNPE has therefore not benefitted [sic] by employing workers under status. Instead, the contrary is true.” Record at 2713 (confidential information omitted). Although the Court is not at liberty to make de novo determinations, but only review the determinations on the basis of the administrative record pursuant to 19 U.S.C. § 1516a, the above language of the letter in the record clearly stands in contradiction to Commerce’s argument SNPE never raised the argument in the administrative proceedings. Accordingly, the Court will entertain this claim. Section 771(5)(B)(iv) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1677(5)(B)(iv) establishes a countervailable subsidy includes the assumption of production costs. Section 1677(5)(B)(iv) provides in pertinent part as follows: (5) Subsidy. — The term “subsidy” has the same meaning as the term “bounty or grant” as that term is used in section 1303 of this title, and includes, but is not limited to, the following: (B) The following domestic subsidies, if provided or required by government action to a specific enterprise or industry, or group of enterprises or industries, whether publicly or privately owned, and whether paid or bestowed directly or indirectly on the manufacture, production, or export of any class or kind of merchandise: (iv) The assumption of any costs or expenses of manufacture, production, or distribution. 19 U.S.C.A. § 1677(5)(B)(iv) (1982). Offset allowances in the calculation of a net subsidy are comprised within § 1677(6), which provides as follows: (6) Net Subsidy. — For the purpose of determining the net subsidy, the administering authority may subtract from the gross subsidy the amount of— (A) any application fee, deposit, or similar payment paid in order to qualify for, or to receive, the benefit of the subsidy, (B) any loss in the value of the subsidy resulting from its deferred receipt, if the deferral is mandated by Government order, and (C) export taxes, duties, or other charges levied on the export of merchandise to the United States specifically intended to offset the subsidy received. 19 U.S.C.A. § 1677(6) (1982). It is clear SNPE was relieved of the costs of certain wage benefits (pension, unemployment, and health insurance premiums) constituting expenses of the production of INC. These benefits constitute subsidies as set forth in § 1677(5)(B)(iv). It is also apparent the offset of higher wages, which SNPE claims should be applied in the net subsidy calculation, does not fit into any enumerated exception set forth at § 1677(6). No application fee, deposit, or similar payment was made which would warrant an offset in the computation of the net subsidy. SNPE pays its employees on a determined pay scale and the GOF pays the work related benefits to those employees retaining civil status. SNPE does not exist as a conduit of benefits transferred from the GOF to SNPE’s workers, thereby justifying an offset. Commerce’s determination that labor-related subsidies were countervailable is therefore sustained. SNPE’s third dispute with Commerce’s determination concerns the treatment of certain grants received by SNPE from the GOF to modernize the pyrotechnical safety works of SNPE’s plant at Bergerac. SNPE contends Commerce’s determination that these funds were a countervailable subsidy was unsupported by substantial evidence on the record and is otherwise not in accordance with law. SNPE claims this GOF grant by the Ministry of Defense was bestowed at the time of SNPE’s incorporation and was partial consideration for the GOF’s transfer of assets for equity. This is evident, argues SNPE, in the valuation performed by the auditors on assets completed during SP’s restructuring. Valuation was based on the assumption that modernization of the pyrotechnical safety works would occur. Commerce contends the record clearly shows the money given by the GOF to SNPE for the purchase of pyrotechnical equipment was a monetary grant given to a single corporation with no expectation of return on equity. This monetary grant was unlike the separate “equity for assets” swap the GOF made with SNPE in the restructuring of SP. Commerce argues that although the creation of SNPE and the decision to bestow the grant on SNPE occurred at the same time, this fact, in and of itself, does not establish the grant was reimbursement for the original restructuring agreement and asset transfer between the GOF and SNPE. Commerce asserts the grant was taxed by the GOF as income to SNPE. Substantiation for SNPE’s argument includes a reference to Commerce’s verification report of March 11, 1983. This report alludes to the valuation process undertaken by the auditors in France and includes the following: We questioned Mr. Benichou about the program to upgrade security installations at the SNPE facilities. When the government decided to create SNPE, the Economics Ministry, in conjunction with accounting and engineering experts, valuated all assets which were to be exchanged for equity. The auditors certified that the value of the assets had appreciated and made it known that they had reservations about the security installations at the facilities. They let it be known that the company would face great liabilities in case of an accident and therefore, would not certify the valuations without the government’s commitment to undertake the necessary improvements. The government accepted those recommendations and agreed to undertake the improvements at the time of SNPE’s incorporation. Plaintiff’s Brief in Reply to Defendant’s and Intervenor’s Responses in Opposition to Plaintiff’s Motion for Judgment Upon the Agencies’ Records, supra, at 39 (quoting the record at 2909) (emphasis deleted). It is clear from the record the grant for modernization was not tied in to the original bargained for agreement and transfer of assets for equity but existed as an independent countervailable subsidy. 19 U.S.C. § 1677(5)(B)(i). It appears the auditors did not value the assets to include the yet-to-be obtained modernization grants. They merely refused to certify their valuatio