British Steel Corp. v. United States

The Tariff Act of 1930 made countervailing subsidies available to domestic firms if a foreign government made commercially unreasonable investments in the firms’ foreign competitors. Section 1677(5) of 19 U.S.C. explained that such investments included the provision of capital, loans, or loan guarantees inconsistent with commercial considerations. Previous cases held that an investment was consistent with commercial considerations if a reasonable investor could expect a reasonable rate of return on the investment within a reasonable time. The United States International Trade Administration (ITA) (defendant) used this test in determining that the British government’s investments in the British Steel Corporation (BSC) (plaintiff) in 1977 and 1978 were not consistent with commercial considerations. The ITA considered factors such as the cost of forming the BSC, the BSC’s net income, the BSC’s losses, and the state of the world steel market. The ITA concluded that a reasonable investor would not have invested in the BSC in 1977. The BSC appealed, arguing that the reasonable-investor test was inappropriate because the British government could not simply abandon the BSC and the equity infusions it made were intended to prevent further losses. The BSC also argued that the ITA should have considered the net present value (NPV) of each of the BSC’s individual projects.