Open / Close Advertisement

Settlement Reached in U.S. Steel Kosice Production Cap Dispute

The settlement agreement calls for USSK’s tax credit to be reduced by $70 million from the $500 million limit provided for in the Accession Treaty. The tax credit is available to USSK through 2009.

USSK also agreed to a tax payment of $16 million to the Slovak government in 2004 and the payment of an additional $16 million tax in 2005.

While the company is still reviewing the agreement to determine the appropriate accounting, it could record a tax charge of up to $32 million in the first quarter of 2004.

USSK also agreed that the Treaty's production limitation provisions, which are based upon USSK's 2001 flat-rolled product production and provide for annual increases of 3%, will be honored by the company from January 1, 2004, through the end of 2009 to coincide with the effective period of the foreign investors' tax credit.

United States Steel Corp. confirmed an announcement by Slovak Prime Minister Mikulas Dzurinda and EU Commissioner for Enlargement Guenter Verheugen that an agreement had been reached resolving a dispute regarding the effective date of limitations upon the production of flat-rolled products at U. S. Steel's Kosice, Slovakia, subsidiary.

Those limitations, provided for in the Accession Treaty between Slovakia and the European Union, were a condition for the European Commission permitting U. S. Steel Kosice (USSK) to retain the benefit of Slovakia's foreign investors' tax credit provided for in Article 35 of the Slovak Republic's Income Tax Act and the agreement between U. S. Steel and the Slovak Republic signed in connection with U. S. Steel's purchase of the Kosice operations. While an agreement has been reached, it will not be finalized until a formal decision has been issued by the European Commission.

All parties involved in the negotiations acknowledged that the dispute arose out of a good faith misunderstanding with respect to the meaning of the language of the Accession Treaty providing for the production limitations.

U. S. Steel previously disclosed in its 2003 Form 10-K and prior filings that settlement of the discussions on this issue between representatives of Slovakia and the European Commission could take the form of a reduction in the tax credit limit and a payment for taxes.