[Federal Register Volume 64, Number 249 (Wednesday, December 29, 1999)]
[Notices]
[Pages 73277-73298]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33238]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-427-817]
Final Affirmative Countervailing Duty Determination: Certain Cut-
to-Length Carbon-Quality Steel Plate From France
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: December 29, 1999.
FOR FURTHER INFORMATION CONTACT: Cynthia Thirumalai and Gregory
Campbell, Office of Antidumping/Countervailing Duty Enforcement, Group
I, Import Administration, U.S. Department of Commerce, Room 3099, 14th
Street and Constitution Avenue, NW., Washington, D.C. 20230; telephone:
(202) 482-4087 or 482-2239, respectively.
Final Determination
The Department of Commerce (the Department) determines that
countervailable subsidies are being provided to producers or exporters
of certain cut-to-length carbon-quality plate (carbon plate) from
France. For information on the estimated countervailing duty rates,
please see the ``Suspension of Liquidation'' section of this notice.
Petitioners
The petition in this investigation was filed by the Bethlehem Steel
Corporation, U.S. Steel Group, Gulf States Steel, Inc., IPSCO Steel
Inc., and the United Steel Workers of America (collectively referred to
hereinafter as the ``petitioners'').
Case History
Since the publication of our preliminary determination in the
Federal Register (see Preliminary Affirmative Countervailing Duty
Determination and Alignment of Final Countervailing Duty Determination
With Final Antidumping Duty Determination: Certain Cut-to-Length
Carbon-Quality Steel Plate from France, 64 FR 40430 (July 26, 1999)
(Preliminary Determination)), the following events have occurred:
On September 21, 1999, we initiated an investigation of whether
advances by the Government of France (GOF) to the Societe pour le
Developpement de l'Industrie et de l'Emploi (SODIE) through Usinor
since 1991 provided countervailable benefits to Usinor (see Memorandum
on Inclusion of Previously Investigated Programs in the Countervailing
Duty Investigation of French Steel Plate, September 21, 1999). We
issued questionnaires on SODIE advances to the GOF and Usinor on
October 18, 1999. The GOF and Usinor responded to the SODIE
questionnaires on November 3, 1999.
On October 7-15, 1999, we verified the responses of Usinor, Sollac
S.A. (Sollac), Creusot Loire Industrie S.A.(CLI), GTS Industries S.A.
(GTS) and the GOF (collectively known as ``the respondents'').
Verification took place at: Usinor and the GOF in Paris, France; GTS in
Dunkirk, France; and AG
[[Page 73278]]
der Dillinger Huttenwerke (Dillinger), the parent company of GTS, in
Dillingen, Germany.
The petitioners and the respondents submitted case briefs on
November 12 , 1999. On November 18, 1999, the petitioners, the
respondents and Dillinger submitted rebuttal briefs. A public hearing
was held November 22, 1999.
Scope of Investigation
The products covered by this scope are certain hot-rolled carbon-
quality steel: (1) Universal mill plates (i.e., flat-rolled products
rolled on four faces or in a closed box pass, of a width exceeding 150
mm but not exceeding 1250 mm, and of a nominal or actual thickness of
not less than 4 mm, which are cut-to-length (not in coils) and without
patterns in relief), of iron or non-alloy-quality steel; and (2) flat-
rolled products, hot-rolled, of a nominal or actual thickness of 4.75
mm or more and of a width which exceeds 150 mm and measures at least
twice the thickness, and which are cut-to-length (not in coils).
Steel products to be included in this scope are of rectangular,
square, circular or other shape and of rectangular or non-rectangular
cross-section where such non-rectangular cross-section is achieved
subsequent to the rolling process (i.e., products which have been
``worked after rolling'')--for example, products which have been
beveled or rounded at the edges. Steel products that meet the noted
physical characteristics that are painted, varnished or coated with
plastic or other non-metallic substances are included within this
scope. Also, specifically included in this scope are high strength, low
alloy (HSLA) steels. HSLA steels are recognized as steels with micro-
alloying levels of elements such as chromium, copper, niobium,
titanium, vanadium, and molybdenum.
Steel products to be included in this scope, regardless of
Harmonized Tariff Schedule of the United States (HTSUS) definitions,
are products in which: (1) iron predominates, by weight, over each of
the other contained elements, (2) the carbon content is two percent or
less, by weight, and (3) none of the elements listed below is equal to
or exceeds the quantity, by weight, respectively indicated:
1.80 percent of manganese, or
1.50 percent of silicon, or
1.00 percent of copper, or
0.50 percent of aluminum, or
1.25 percent of chromium, or
0.30 percent of cobalt, or
0.40 percent of lead, or
1.25 percent of nickel, or
0.30 percent of tungsten, or
0.10 percent of molybdenum, or
0.10 percent of niobium, or
0.41 percent of titanium, or
0.15 percent of vanadium, or
0.15 percent zirconium.
All products that meet the written physical description, and in
which the chemistry quantities do not equal or exceed any one of the
levels listed above, are within the scope of this investigation unless
otherwise specifically excluded. The following products are
specifically excluded from this investigation: (1) products clad,
plated, or coated with metal, whether or not painted, varnished or
coated with plastic or other non-metallic substances; (2) SAE grades
(formerly AISI grades) of series 2300 and above; (3) products made to
ASTM A710 and A736 or their proprietary equivalents; (4) abrasion-
resistant steels (i.e., USS AR 400, USS AR 500); (5) products made to
ASTM A202, A225, A514 grade S, A517 grade S, or their proprietary
equivalents; (6) ball bearing steels; (7) tool steels; and (8) silicon
manganese steel or silicon electric steel.
The merchandise subject to this investigation is classified in the
HTSUS under subheadings: 7208.40.3030, 7208.40.3060, 7208.51.0030,
7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000,
7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045,
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7225.40.3050,
7225.40.7000, 7225.50.6000, 7225.99.0090, 7226.91.5000, 7226.91.7000,
7226.91.8000, 7226.99.0000.
Although the HTSUS subheadings are provided for convenience and
customs purposes, the written description of the merchandise under
investigation is dispositive.
The Applicable Statute
Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930, as amended by
the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the
Act). In addition, unless otherwise indicated, all citations to the
Department's regulations are to our regulations as codified at 19 CFR
Part 351 (1998) and Countervailing Duties; Final Rule, 63 FR 65348
(November 25, 1998) (CVD Regulations).
Injury Test
Because France is a ``Subsidies Agreement Country'' within the
meaning of section 701(b) of the Act, the U.S. International Trade
Commission (ITC) is required to determine whether imports of the
subject merchandise from France materially injure, or threaten material
injury to, a U.S. industry. On April 8, 1999, the ITC published its
preliminary finding that there is a reasonable indication that an
industry in the United States is being materially injured or threatened
with material injury by reason of imports from France of the subject
merchandise. See Certain Cut-to-Length Steel Plate from the Czech
Republic, France, India, Indonesia, Italy, Japan, Korea, and Macedonia;
Determinations, 64 FR 17198 (April 8, 1999). The ITC will make its
final injury determination within 45 days of this final determination
by the Department.
Period of Investigation
The period for which we are measuring subsidies (the POI) is
calendar year 1998.
Company History
The GOF identified Usinor, Sollac, CLI, and GTS as the only
producers of the subject merchandise that exported to the United States
during the POI. Sollac and CLI are wholly-owned subsidiaries of Usinor
(a holding company), and GTS is partially owned by Usinor.
Usinor
In 1984, the GOF was a majority shareholder of Usinor. In 1986,
Usinor was merged with another state-owned company, Sacilor, into a
single company called Usinor Sacilor. Usinor Sacilor was 100 percent
owned by the GOF.
In 1995, Usinor Sacilor was privatized, principally through the
public sale of shares. In October 1997, the GOF reduced its direct
shareholdings to 1 percent. As of August 1998, the GOF has no direct
ownership interest in Usinor but retains a minority indirect interest
in the company.
GTS
Prior to 1992, GTS was 89.73 percent owned by Sollac, a subsidiary
of Usinor. In 1992, Sollac transferred its shares in GTS to Dillinger.
In return, Dillinger transferred to Sollac shares it held in Sollac of
an equivalent value. At that time, Dillinger was majority owned by DHS-
Dillinger Hutte Saarstahl AG (DHS), a German holding company, which, in
turn, was 70 percent owned by Usinor.
In 1996, Usinor reduced its interest in DHS from 70 to 48.75
percent. At that time, DHS owned 95.3 percent of Dillinger, which in
turn, owned 99 percent of GTS.
[[Page 73279]]
Attribution of Subsidies
The GOF has identified three producers of subject merchandise in
this investigation: Sollac, CLI and GTS. During the POI, both Sollac
and CLI were wholly-owned by and consolidated subsidiaries of Usinor.
With respect to GTS, prior to 1996, it was majority owned by Usinor
since Usinor held 70 percent of DHS, which in turn, held approximately
95 percent of Dillinger, GTS' direct parent company. However, since
1996 and during the entire POI, Usinor's interest in DHS has been 48.75
percent, i.e., slightly less than a majority.
The issue before the Department is whether the subsidies granted to
Usinor are attributable to GTS given that GTS is no longer majority-
owned by Usinor. Section 351.525 of the CVD Regulations states that the
Department will attribute subsidies received by two or more
corporations to the products produced by those corporations where
cross-ownership exists. According to section 351.525(b)(6)(vi) of the
CVD Regulations, cross-ownership exists between two or more
corporations where one corporation can use or direct the individual
assets of the other corporation in essentially the same ways it can use
its own assets. The regulations state that this standard will normally
be met where there is a majority voting ownership interest between two
corporations. The Preamble to the CVD Regulations identifies situations
where cross-ownership may exist even though there is less than a
majority voting interest between two corporations: ``in certain
circumstances, a large minority interest (for example, 40 percent) or a
`golden share' may also result in cross-ownership'' (63 FR at 65401).
In the Preliminary Determination, we found that there was no cross-
ownership between Usinor and GTS. Interested parties commented on
cross-ownership and attribution (see Comment 1 below). Based on our
analysis of information on the record of this proceeding and comments
by interested parties, we continue to find that Usinor's ownership
interest in DHS, the holding company of GTS' parent, Dillinger, is
insufficient to establish cross-ownership between Usinor and GTS during
the POI. We base this determination on the following: (1) Usinor has
less than a majority voting ownership in DHS; (2) Usinor does not
control GTS directly or indirectly; and (3) although GTS uses Usinor
affiliates to transport and sell some of its merchandise, there is no
evidence that Usinor controls the sales that its affiliates make for
GTS. For more details, see the Department's position on Comment 1
below.
Therefore, for this final determination, we have calculated a
separate net subsidy rate for GTS. However, since GTS was part of the
Usinor Group for much of the allocation period, we have attributed a
portion of subsidies received by Usinor through 1996 to GTS (see the
``Change in Ownership'' section below).
Change in Ownership
In the General Issues Appendix (GIA) attached to the Final
Affirmative Countervailing Duty Determination: Certain Steel Products
from Austria, 58 FR 37217, 37226 (July 9, 1993), we applied a new
methodology with respect to the treatment of subsidies received prior
to the sale of the company (privatization) or the spinning-off of a
productive unit. Under this methodology, we estimate the portion of the
purchase price attributable to prior subsidies. We compute this by
first dividing the privatized company's subsidies by the company's net
worth for each year during the period beginning with the earliest point
at which nonrecurring subsidies would be attributable to the POI (i.e.,
in this case, 1985 for Usinor) and ending one year prior to the
privatization. We then take the simple average of the ratios. The
simple average of these ratios of subsidies to net worth serves as a
reasonable surrogate for the percent that subsidies constitute of the
overall value of the company. Next, we multiply the average ratio by
the purchase price to derive the portion of the purchase price
attributable to repayment of prior subsidies. Finally, we reduce the
benefit streams of the prior subsidies by the ratio of the repayment
amount to the net present value of all remaining benefits at the time
of privatization.
With respect to spin-offs, consistent with the Department's
position regarding privatization, we analyze the spin-off of productive
units to assess what portion of the sale price of the productive units
can be attributable to payment for prior subsidies. To perform this
calculation, we first determine the amount of the seller's subsidies
that the spun-off productive unit could potentially take with it. To
calculate this amount, we divide the value of the assets of the spun-
off unit by the value of the assets of the company selling the unit. We
then apply this ratio to the net present value of the seller's
remaining subsidies. We next estimate the portion of the purchase price
going towards payment for prior subsidies in accordance with the
privatization methodology outlined above.
As discussed above in the ``Case History'' section of this notice,
two important changes of ownership have occurred with respect to the
producers of the subject merchandise. First, Usinor's ownership of GTS
has declined over time so that Usinor is no longer a majority owner of
GTS. Second, Usinor has been privatized. In addition, Usinor sold (in
whole or in part) various productive units: Ugine (1994); Centrale
Siderurgique de Richemont (CSR) (1994); Entreprise Jean LeFebvre
(1994); and various productive units to FOS-OXY (1993).
To determine the amount of subsidies that potentially transfers
with a spun off productive unit, we have measured that productive
unit's assets in relation to the subsidized assets of the seller (see
Comment 8 below). In particular, because we normally attribute
subsidies to production occurring in the jurisdiction of the
subsidizing government (see section 351.525(b)(7)), we believe we
should calculate the share of subsidies that can potentially transfer
with the sale of Usinor's French productive units in relation to
Usinor's total French assets (as opposed to Usinor's total worldwide
assets). As explained below, we lack the information to make this
calculation in this determination, but for the spin-off of GTS, we have
developed a substitute measure for that amount based on sales.
Using this information, we have applied the spin-off and
privatization methodologies described in the GIA. Regarding spin offs,
we first determined the portion of subsidies that potentially transfers
with the spun-off unit based on that unit's share of assets (or French
sales). For the latter three transactions described above (involving
CSR, Entreprise Jean LeFebvre, and FOS-OXY), the entire productive unit
was transferred. Consequently, the entire amount of subsidies
attributable to these productive units were potentially transferred
and, also, potentially reallocated to Usinor through the payment for
these companies. Similarly, the privatization of Usinor involved
virtually all of Usinor's shares and, hence, the entire amount of
Usinor's remaining subsidies potentially transferred with Usinor and,
also, were potentially repaid to the seller.
The sales of Ugine and GTS present variations from the sales
discussed above. While the sales of Ugine and GTS are spin offs of
productive units, these units have been only partially spun off.
Moreover, the sale of Ugine must be distinguished from the sale of GTS
because after Usinor's sale of Ugine's
[[Page 73280]]
shares in 1994, Usinor continued to be the majority owner of Ugine.
While it would be possible to apply the change-in-ownership methodology
to this transaction (and we did so in French Stainless), there is no
impact on the subsidy to Usinor. This is because even after the partial
spin off, Ugine continued to be part of the consolidated Usinor Group.
Thus, the total amount of subsidies within the Usinor Group would not
diminish as a result of the partial spin off of Ugine, nor would
Usinor's denominator change. Since Usinor's ownership in Ugine did not
diminish further after 1994 (indeed, Usinor subsequently repurchased
the Ugine shares it had sold) and we have not applied the change-in-
ownership methodology to Usinor's repurchase of Ugine's shares (see
French Stainless), there is no need to perform the change-in-ownership
calculation for the partial spin off of Ugine.
GTS' situation by the POI was very different from that of Ugine. As
discussed above, after 1996, GTS was no longer part of the consolidated
Usinor Group. Therefore, any subsidies properly attributed to GTS would
no longer be counted among Usinor's subsidies, nor would GTS' sales be
included in Usinor's sales. To reflect this change in GTS' status, we
have applied the spin off methodology twice. First, we have applied the
methodology to the 1992 transfer of GTS shares from Sollac to DHS. We
have done this by determining the subsidies potentially allocable to
GTS in 1992. We have then reduced this total by the percentage of
ownership in GTS that transferred outside the Usinor Group in 1992 to
arrive at the amount of subsidies subjected this amount to the
repayment methodology. We note that Usinor continued to be a majority
owner of GTS after the 1992 transaction and, hence, that Usinor and GTS
would continue to be treated as a single company. However, unlike the
situation with Ugine, it is necessary for us to apply the change-in-
ownership methodology to this 1992 transaction. This is because we have
to calculate a subsidy rate for 1998, a point in time when Usinor and
GTS are being treated as separate companies. If we failed to apply the
change-in-ownership methodology to the 1992 transaction, and only
applied it to the 1996 transaction, the amount paid for GTS in 1996
(assuming we had that information) would not be commensurate with the
total amount of ownership that had transferred over time.
The second application of the change-in-ownership methodology to
Usinor/GTS is also a partial spin off. In recognition of the fact that
this transaction reduces Usinor's ownership of GTS below 50 percent and
our finding that Usinor does not direct or control the use of GTS'
assets (see Comment 1 below), with the result that GTS's sales will no
longer be treated as Usinor's sales, we believe the spin off
methodology requires us first to assign to GTS its full share of Usinor
subsidies (reduced in proportion to the amount of GTS sold in 1992).
The amount of these subsidies that are then reallocated to Usinor is
calculated taking into account the percentage change in Usinor's
ownership of GTS and the price paid by the new owner of the GTS shares.
The Use of Facts Available
Certain information requested of respondents was not provided in
this investigation. Specifically, Usinor failed to respond to the
Department's questions concerning creditworthiness for the years 1992
though 1995. The GOF failed to provide information on the distribution
of investment and operating subsidies (other than those from the water
boards) received by Usinor. Nor did it demonstrate at verification that
it had provided information on use of ESF funding by all Usinor group
members. Finally, the EC did not provide information with respect to
the distribution of European Social Fund (ESF) funding.
Section 776(a)(2) of the Act requires the use of facts available
when an interested party withholds information that has been requested
by the Department, or when an interested party fails to provide the
information requested in a timely manner and in the form required. In
such cases, the Department must use the facts otherwise available in
reaching the applicable determination. Because the EC, the GOF and
Usinor failed to submit the information that was specifically requested
by the Department, we have based our determination for these programs
on the facts available.
In accordance with section 776(b) of the Act, the Department may
use an inference that is adverse to the interests of that party in
selecting from among the facts otherwise available when the party has
failed to cooperate by not acting to the best of its ability to comply
with a request for information. Such adverse inference may include
reliance on information derived from (1) the petition; (2) a final
determination in a countervailing duty or an antidumping investigation;
(3) any previous administrative review, new shipper review, expedited
antidumping review, section 753 review, or section 762 review; or (4)
any other information placed on the record. See 19 C.F.R. 351.308(c).
In the absence of information from the EC, the GOF and Usinor, we
consider the February 16, 1999 petition, as well as our findings in
French Stainless and other information gathered during the course of
this investigation to be appropriate bases for a facts available
countervailing duty rate calculation.
The Statement of Administrative Action accompanying the URAA
clarifies that information from the petition and prior segments of the
proceeding is ``secondary information.'' See Statement of
Administrative Action, accompanying H.R. 5110 (H.R. Doc. No. 103-316)
(1994) (SAA), at 870. If the Department relies on secondary information
as facts available, section 776(c) of the Act provides that the
Department shall, to the extent practicable, corroborate such
information using independent sources reasonably at its disposal. The
SAA further provides that to corroborate secondary information means
simply that the Department will satisfy itself that the secondary
information to be used has probative value. However, where
corroboration is not practicable, the Department may use uncorroborated
information.
We relied upon French Stainless regarding Usinor's creditworthiness
during the period 1992 through 1995. With respect to ESF funding and
investment and operating subsidies (other than those provided by the
water boards) for which we did not receive complete information from
the respondents, we relied upon findings in French Stainless and
information in the petition indicating that these programs are
specific. Based on our review of the findings in French Stainless and
the information in the petition, we find that this secondary
information has probative value and, therefore, the information has
been corroborated.
Subsidies Valuation Information
Allocation Period
The current investigation includes untied, non-recurring subsidies
to Usinor that were found to be countervailable in Final Affirmative
Countervailing Duty Determinations: Certain Steel Products From France,
58 FR 37304 (July 9, 1993) (French Certain Steel): PACS, FIS, and
Shareholders' Advances. For the Preliminary Determination, we allocated
those subsidies over 14 years because we have already assigned this
company-specific allocation period to those subsidies in other
proceedings. See French Stainless. See also Final Results of
[[Page 73281]]
Redetermination Pursuant to Court Remand on General Issue of
Allocation, British Steel plc, v. United States, Consol. Ct. No. 93-09-
00550-CVD. After considering interested parties comments on this issue,
we have continued to apply a 14-year allocation period to these
subsidies for this final determination. For further details, see
Comment 13 below.
We have found no other allocable non-recurring subsidies received
by Usinor and GTS in the instant proceeding.
Creditworthiness
When the Department examines whether a company is creditworthy, it
is essentially attempting to determine if the company in question could
obtain commercial financing at commonly available interest rates. See
section 351.595 of the CVD Regulations.
Usinor was found to be uncreditworthy from 1982 through 1988 in
French Certain Steel, 58 FR at 37306. No new information has been
presented in this investigation that would lead us to reconsider these
findings. Therefore, we continue to find Usinor uncreditworthy from
1985 through 1988.
In Notice of Initiation of Countervailing Duty Investigations:
Certain Cut-To-Length Carbon-Quality Steel Plate from France, India,
Indonesia, Italy, and the Republic of Korea, 64 FR 12996 (March 16,
1999), we stated that the petitioners provided sufficient information
to lead us to believe or suspect that Usinor was uncreditworthy from
1992 through 1995. Therefore, we requested Usinor to provide data that
would allow us to analyze its creditworthiness during this period.
Usinor did not provide the information requested by the Department
citing the ``formidable burdens which would be involved in responding
to the Department's Creditworthiness questions.'' Consequently, the
Department has decided to use facts available in accordance with
section 776 (a)(2)(A) of the Act. Section 776(b) of the Act permits the
Department to draw an inference that is adverse to the interests of an
interested party if that party has ``failed to cooperate by not acting
to the best of its ability to comply with a request for information.''
In this investigation, Usinor refused to answer on more than one
occasion, the creditworthiness questions in the Department's original
and supplemental questionnaires. Therefore, the Department determines
it appropriate to use an adverse inference in selecting the discount
rate to be applied in these years.
Benchmarks for Loans and Discount Rates
In accordance with sections 351.505 (a) and 351.524 (c)(3)(i) of
the CVD Regulations, we used Usinor's company-specific cost of long-
term, fixed-rate loans, where available, for loan benchmarks and
discount rates for years in which Usinor was creditworthy. In the
Preliminary Determination for years where Usinor was creditworthy and a
company-specific rate was not available, we used the average yields on
long-term private-sector bonds in France as published by the OECD.
Interested parties commented on the calculation of the non-company-
specific benchmark rate. In response to these comments, we have revised
our benchmark for this final determination. Specifically, we are using
an average of the following long-term interest rates: medium-term
credit to enterprises (MTCE), and equipment loan rates as published by
the OECD, cost of credit rates published in the Bulletin of Banque de
France, and private sector bond rates as published by the International
Monetary Fund. (See Comment 18 below for further discussion of this
issue.)
For the years in which Usinor was uncreditworthy (see
``Creditworthiness'' section above), we calculated the discount rates
in accordance with section 351.524(c)(3)(ii) of the CVD Regulations. To
construct these benchmark rates, we used the formula described in
section 351.505(a)(3)(iii) of the CVD Regulations. This formula
requires values for the probability of default by uncreditworthy and
creditworthy companies. For the probability of default by an
uncreditworthy company, we relied on the average cumulative default
rate reported for Caa to C-rated category of companies as published in
Moody's Investors Service, ``Historical Default Rates of Corporate Bond
Issuers, 1920-1997,'' (February 1998). For the probability of default
by a creditworthy company we used the average cumulative default rates
reported for the Aaa to Baa-rated categories of companies as reported
in this study.1 See Memorandum to Case File; Clarification
of Moody's Default Data (December 13, 1999).
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\1\ We note that since publication of the CVD Regulations,
Moody's Investors Service no longer reports default rates for Caa to
C-rated category of companies. Therefore for the calculation of
uncreditworthy interest rates, we will continue to rely on the
default rates as reported in Moody Investor Service's publication,
February 1998.
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Based upon our verification and our analysis of the comments
received from interested parties, we determine the following:
I. Programs Determined To Be Countervailable
GOF Programs
A. Loans With Special Characteristics (PACS)
A plan was agreed upon in 1978 to help the principal steel
companies, Usinor, Sacilor, Chatillon-Neuves-Maisons, and their
subsidiaries, restructure their massive debt. This plan entailed the
creation of a steel amortization fund, called the Caisse
d'Amortissement pour l'Acier (CAPA), for the purpose of ensuring
repayment of funds borrowed by these companies prior to June 1, 1978.
In accordance with the restructuring plan of 1978, bonds previously
issued on behalf of the steel companies and pre-1978 loans from Credit
National and Fonds de Developpement Economique et Social (FDES) were
converted into ``loans with special characteristics,'' or PACS. As a
result of this process, the steel companies were no longer liable for
the loans and bonds, but did take on PACS obligations.
In 1978, Usinor and Sacilor converted 21.1 billion French francs
(FF) of debt into PACS. From 1980 to 1981, Usinor and Sacilor issued
FF8.1 billion of new PACS. PACS in the amount of FF13.8 billion, FF12.6
billion and FF2.8 billion were converted into common stock in 1981,
1986, and 1991, respectively.
In French Stainless, French Certain Steel, and Final Affirmative
Countervailing Duty Determinations: Certain Hot Rolled Lead and Bismuth
Carbon Steel Products from France, 58 FR 6221 (January 27, 1993)
(French Bismuth), the Department determined that the conversion of PACS
to common stock in 1986 constituted a countervailable equity infusion.
This equity infusion was limited to Usinor Sacilor and was, therefore,
specific within the meaning of section 771(5A)(D)(i) of the Act. Also,
this equity infusion provided a financial contribution to Usinor
Sacilor within the meaning of section 771(5)(D)(i) of the Act. No new
information or evidence of changed circumstances has been submitted in
this proceeding to warrant a reconsideration of our earlier finding.
Therefore, we determine that a countervailable benefit exists in the
amount of the 1986 equity infusion in accordance with section 77(5)(A)
of the Act.
We have treated the 1986 equity infusion as a non-recurring grant
[[Page 73282]]
received in the year the PACS were converted to common stock. Using the
allocation period of 14 years, the 1986 conversion of PACS continues to
yield a countervailable benefit during the POI. We used an
uncreditworthy discount rate to allocate the benefit of the equity
infusion over time. Additionally, we followed the methodology described
in the ``Change in Ownership'' section above to determine the amounts
of the equity infusion appropriately allocated to Usinor and GTS. We
divided these amounts by Usinor's and GTS' total sales of French-
produced merchandise during the POI. Accordingly, we determine the net
subsidy rate to be 1.35 percent ad valorem for Usinor and 1.70 percent
ad valorem for GTS.
B. Shareholders' Advances
The GOF provided Usinor and Sacilor grants in the form of
shareholders' advances in 1985 and 1986. The purpose of these advances
was to finance the revenue shortfall needs of Usinor and Sacilor while
the GOF planned for the next major restructuring of the French steel
industry. These shareholders' advances carried no interest and there
was no precondition for receipt of these funds. These advances were
converted to common stock in 1986.
In French Stainless, French Certain Steel, and French Bismuth, the
Department determined that the shareholders' advances constituted
countervailable grants because no shares were received for them. These
grants were limited to Usinor and Sacilor and were, therefore, specific
within the meaning of section 771(5A)(D)(i) of the Act. Also, these
grants provided a financial contribution to Usinor and Sacilor within
the meaning of section 771(5)(D)(i) of the Act. No new information or
evidence of changed circumstances has been submitted in this proceeding
to warrant a reconsideration of our earlier finding. Therefore, we
determine these grants provide a countervailable benefit in accordance
with section 77(5)(A) of the Act.
Because the 1986 shareholders' advance was less than 0.5 percent of
Usinor's sales of French-produced merchandise during the year of
approval, this grant was expensed in the year of receipt. See CVD
Regulations, 64 FR at 65415.
We have treated the 1985 shareholders' advance as a non-recurring
subsidy. Using the allocation period of 14 years, this shareholders'
advance continues to provide a countervailable benefit during the POI.
We used an uncreditworthy discount rate to allocate the benefits of the
1985 shareholders' advance over time. Additionally, we followed the
methodology described in the ``Change in Ownership'' section above to
determine the amount of the grant appropriately allocated to Usinor and
GTS. We divided these amounts by Usinor's and GTS'' total sales of
French-produced merchandise during the POI. Accordingly, we determine
the net subsidy rate to be 0.54 percent ad valorem for Usinor and 0.68
percent ad valorem for GTS.
C. Steel Intervention Fund (FIS)
The 1981 Corrected Finance Law granted Usinor and Sacilor the
authority to issue convertible bonds. In 1983, the Fonds d'Intervention
Siderurgique (FIS), or steel intervention fund, was created to
implement that authority. In 1983, 1984, and 1985, Usinor and Sacilor
issued convertible bonds to the FIS, which in turn, with the GOF's
guarantee, floated the bonds to the public and to institutional
investors. These bonds were converted to common stock in 1986 and 1988.
In French Stainless, French Certain Steel and French Bismuth, the
Department determined that the conversions of FIS bonds to common stock
in 1986 and 1988 were countervailable equity infusions. These equity
infusions were limited to Usinor Sacilor and were, therefore, specific
within the meaning of section 771(5A)(D)(i) of the Act. Also, these
equity infusions provided a financial contribution to Usinor Sacilor
within the meaning of section 771(5)(D)(i) of the Act. No new
information or evidence of changed circumstances has been submitted in
this proceeding to warrant a reconsideration of our earlier finding.
Therefore, we determine that a countervailable benefit exists in the
amount of the 1986 and 1988 equity infusions in accordance with section
77(5)(A) of the Act.
We have treated the 1986 and 1988 equity infusions as non-recurring
subsidies received in the years the FIS bonds were converted to common
stock. Using the allocation period of 14 years, the 1986 and 1988 FIS
bond conversions continue to yield a countervailable benefit during the
POI. We used an uncreditworthy discount rate to allocate the benefits
of the equity infusions over time. Additionally, we followed the
methodology described in the ``Change in Ownership'' section above to
determine the amount of the equity infusion appropriately allocated to
Usinor and GTS. Dividing these amounts by Usinor's and GTS' total sales
of French-produced merchandise during the POI, we determine the net
subsidy rate to be 3.56 percent ad valorem for Usinor and 4.48 percent
ad valorem for GTS.
D. Investment/Operating Subsidies
During the period 1987 through 1998, Usinor received a variety of
small investment and operating subsidies from various GOF agencies as
well as from the European Coal and Steel Community (ECSC). The
subsidies were provided for research and development, projects to
reduce work-related illnesses and accidents, projects to combat water
pollution, etc. The subsidies are classified as investment, equipment,
or operating subsidies in the company's accounts, depending on how the
funds are used.
In French Stainless, the Department determined that the funding
provided to Usinor by the water boards (les agences de l'eau) and
certain work/training grants were not countervailable. Therefore, we
are not investigating those programs in this proceeding.
For the remaining amounts in these accounts, including certain
work/training grants that differed from those found not countervailable
in French Stainless, the GOF did not provide any information regarding
the distribution of funds, stating that, in the GOF's view, the total
amount of investment and operating subsidies received by Usinor was
``insignificant and would * * * be expensed.'' Given the GOF's failure
to provide the requested information, we are using ``facts available''
in accordance with section 776(a)(2)(A) of the Act. Further, section
776(b) of the Act permits the Department to draw an inference that is
adverse to the interests of an interested party if that party has
``failed to cooperate by not acting to the best of its ability to
comply with a request for information.'' In this investigation, the GOF
has refused to answer the Department's repeated requests for data
regarding the distribution of grant funds. Therefore, the Department
determines it appropriate to use an adverse inference in concluding
that the investment and operating subsidies (except those provided by
the water boards and certain work/training contracts) are specific
within the meaning of section 771(5A)(D) of the Act.
We also determine that the investment and operating subsidies
provide a financial contribution, as described in section 771(5)(D)(i)
of the Act, in the form of a direct transfer of funds from the GOF and
the ECSC to Usinor, providing a benefit in the amount of the grants.
[[Page 73283]]
The investment and operating subsidies provided in the years prior
to the POI were less than 0.5 percent of Usinor's sales of French-
produced merchandise in those years. Therefore, we have expensed these
grants in the years of receipt, in accordance with section 351.524
(b)(2) of the CVD Regulations. To calculate the benefit received during
the POI, we divided the subsidies received by Usinor in the POI by
Usinor's total sales of French-produced merchandise during the POI.
Accordingly, we determine Usinor's net subsidy rate to be 0.11 percent
ad valorem. GTS did not receive any of these investment and operating
subsidies during the POI.
E. Subsidies Provided Directly to GTS
GTS' 1996 condensed financial statements include a ``capital
subsidy'' in the amount of FF 2.1 million. GTS claims that this amount
reflects the unamortized balance of a grant that was provided to GTS
pursuant to an agreement dated December 29, 1987, between the GOF and
Usinor. The grant was given to support the development of a machine for
the accelerated cooling of heavy plate during the hot-rolling process.
The grant was provided in two disbursements made in 1988 and 1990.
The GOF responded to the Department's questions on this capital
subsidy stating that because of its size, the amounts would be expensed
in a period outside the POI. Therefore, the GOF did not provide
information on the distribution of other grants that might have been
given under the same program.
The total amount approved in 1987 was less than 0.5 percent of
Usinor's sales of French-produced heavy plate in 1987. Therefore, we
determine that these grants did not confer a countervailable subsidy
during the POI.
F. Myosotis Project
Since 1988, Usinor has been developing a continuous thin-strip
casting process, called ``Myosotis,'' in a joint venture with the
German steelmaker, Thyssen. The Myosotis project is intended to
eliminate the separate hot-rolling stage of Usinor's steelmaking
process by transforming liquid metal directly into a coil between two
to five millimeters thick.
To assist this project, the GOF, through the Ministry of Industry
and Regional Planning and L'Agence pour la Maitrise de L'Energie
(AFME), entered into three agreements with Usinor Sacilor (in 1989) and
Ugine (in 1991 and 1995). The first agreement, dated December 27, 1989,
provided three payments in 1989, 1991, and 1993. The second agreement,
between Ugine and the AFME, covered the cost of some equipment for the
project. This agreement resulted in two disbursements to Ugine from the
AFME in 1991 and 1992. The third agreement, with Ugine, dated July 3,
1995, provided interest-free reimbursable advances for the final two-
year stage of the project, with the goal of casting molten steel from
ladles to produce thin strips. The first reimbursable advance under
this agreement was made in 1997. Repayment of one-third of the
reimbursable advance is due July 31, 1999. The remaining two-thirds are
due for repayment on July 31, 2001.
In French Stainless, the Department determined that funding
associated with the 1989 and 1991 contracts constituted countervailable
subsidies within the meaning of section 771(5) of the Act. Since the
GOF did not provide any information indicating that the grants were
provided to other companies in France, the Department determined that
the grants were specific within the meaning of section 771(5A)(D) of
the Act. Also, the Department found that these grants provided a
financial contribution within the meaning of section 771(5)(D)(i) of
the Act. No new information has been submitted to warrant a
reconsideration of our earlier finding. Therefore, we continue to find
that the grants associated with the 1989 and 1991 Myosotis contracts
constitute countervailable subsidies within the meaning of section
771(5) of the Act. Because the amounts received under the 1989 and 1991
contracts were less than 0.5 percent of Usinor's sales of French-
produced merchandise during their respective year of approval, these
grants were expensed in the years of receipt. See CVD Regulations, 64
FR at 65415.
With respect to the reimbursable advance received in 1997, the GOF
has requested that we find this subsidy non-countervailable under
section 771(5B)(B)(ii)(II) of the Act, i.e., that this is a green-light
subsidy. We have determined that we do not need to address the issue
whether this subsidy is countervailable because the benefit of the
reimbursable advance during the POI is less than 0.5 percent. As stated
in the Preamble to the CVD Regulations:
[W]e will not consider claims for green light status if the
subject merchandise did not benefit from the subsidy during the
period of investigation or review. Instead, consistent with the
Department's existing practice, the green light status of a subsidy
will be considered only in an investigation or review of a time
period where the subject merchandise did benefit from the subsidy.
See CVD Regulations, 63 FR at 65388.
In accordance with section 351.505(d)(1) of the CVD Regulations, we
are treating this reimbursable advance as a contingent liability loan
because the GOF has indicated that repayment of the loan is contingent
on the success of the project. We used as our benchmark a long-term
fixed-rate loan consistent with section 351.505(a)(2)(iii) of the
Department's regulations. Since Usinor would have been required to make
an interest payment on a comparable commercial loan during the POI (see
French Stainless), we calculated the benefit from the reimbursable
advance as the amount that would have been due during the POI. Dividing
these interest savings by Usinor's sales of French-produced merchandise
during the POI, we find the net subsidy rate to be 0.00 percent ad
valorem for Usinor. GTS did not receive subsidies under this program.
EC Programs
European Social Fund
The European Social Fund (ESF), one of the Structural Funds
operated by the EC, was established in 1957 to improve workers'
employment opportunities and to raise their living standards. The main
purpose of the ESF is to make employing workers easier and to increase
the geographical and occupational mobility of workers within the
European Union. It accomplishes this by providing support for
vocational training, employment, and self-employment.
Like the other EC Structural Funds, the ESF seeks to achieve six
different objectives explicitly identified in the EC's framework
regulations for Structural Funds: Objective 1 is to promote development
and structural adjustment in underdeveloped regions; Objective 2 is to
assist areas in industrial decline; Objective 3 is to combat long-term
unemployment and to create jobs for young people and people excluded
from the labor market; Objective 4 is to assist workers adapting to
industrial changes and changes in production systems; Objective 5 is to
promote rural development; and Objective 6 is to aid sparsely populated
areas in northern Europe.
The member states are responsible for identifying and implementing
the individual projects that receive ESF financing. The member states
also must contribute to the financing of the projects. In general, the
maximum benefit provided by the ESF is 50 percent of the project's
total cost for projects geared toward Objectives 2, 3, 4, and 5b (see
below), and 75 percent of
[[Page 73284]]
the project's total cost for Objective 1 projects. For all programs
implemented under Objective 4 in France, 35 percent of the funding
comes from the EC, 25 percent from the GOF, and the remaining 40
percent from the company.
According to the questionnaire responses, CLI received an ESF grant
for an Objective 4 project. The amount received during the POI was a
portion of a larger ESF grant authorized for CLI in 1996.
The Department considers worker assistance programs to provide a
countervailable benefit to a company when the company is relieved of a
contractual or legal obligation it would otherwise have incurred. See
section 357.513(a) of the CVD Regulations. Only limited information was
provided in the questionnaire responses about the purpose of this
grant; therefore, we are unable to determine whether it relieved CLI of
any legal or contractual obligations. With regard to specificity, the
EC has not provided complete information about the distribution of ESF
grants. In addition, the GOF was unable to show at verification that it
had reported all ESF grants to Usinor Group companies during the POI.
Consequently, the Department has decided to use facts available in
accordance with section 776(a)(2)(A) of the Act. Section 776(b) of the
Act permits the Department to draw an inference that is adverse to the
interests of an interested party if that party has ``failed to
cooperate by not acting to the best of its ability to comply with a
request for information.'' Since Usinor, the GOF and the EC failed to
provide complete information to the Department, we determine it
appropriate to use an adverse inference in concluding that: CLI was
relieved of an obligation in receiving the ESF grant; the ESF grant is
specific within the meaning of section 771(5A)(D) of the Act and that
the benefit was tied to goods produced by CLI. Also, we find the grant
to be a financial contribution within the meaning of section
771(5)(D)(i) of the Act. Based on the foregoing, we determine that the
1998 ESF grant is countervailable within the meaning of section 771(5)
of the Act.
The Department normally expenses the benefits from worker-related
subsidies in the year in which the recipient is relieved of a payment
it would normally incur. See CVD Regulations, 63 FR at 65412. Dividing
the amount received by CLI in 1998 by CLI's 1998 sales of French-
produced merchandise yields a net subsidy rate of 0.00 percent ad
valorem for Usinor. GTS did not benefit from ESF funding during the
POI.
II. Programs Determined Not To Be Countervailable
GOF Programs
A. 1994 Purchase of Power Plant for Excessive Remuneration
The Department initiated an investigation of this program prior to
the issuance of the final determination of French Stainless. This
program was subsequently found to be not countervailable in French
Stainless.
B. GOF Conditional Advance on New Steel Development
Usinor received an interest-free conditional advance from the GOF.
This advance was provided through the Ministry of Industry to support a
project aimed at developing a new type of steel for use in the
production of catalytic converters. Since the GOF conditional advance
is for a project aimed at developing a new type of steel which does
fall within the scope of this proceeding, we find that this program is
tied to non-subject merchandise and not countervailable with respect to
this investigation only.
III. Other Programs
A. Electric Arc Furnaces
In 1996, the GOF agreed to provide assistance in the form of
reimbursable advances to support Usinor's research and development
efforts regarding electric arc furnaces. The first disbursal of funds
occurred on July 17, 1998. Repayment of the reimbursable advances will
begin on July 31, 2002.
Since these advances may someday be repaid, we are treating them as
contingent liability loans. Section 351.505(d)(1) of the CVD
Regulations. Under the methodology specified in the Department's new
regulations, the benefit occurs when payment would have been made on a
comparable commercial loan. Section 351.505(b) of the CVD Regulations.
As stated in French Stainless, Usinor would make interest payments on
its long-term loans on an annual basis and such a payment schedule
would not be considered atypical of general French banking practices.
See French Stainless, 64 FR at 30780. Accordingly, we have assumed that
a payment on a comparable commercial loan taken out by Usinor at the
time of this reimbursable advance would not be due until the year 1999.
Given that no payment would be due during the POI, we determine
that there is no benefit to Usinor from these reimbursable advances
during the POI. Consequently, we have not addressed whether this
reimbursable advance is countervailable.
B. Post-1991 SODIE Advances
As discussed in the ``Case History'' section of this notice, the
decision to investigate post-1991 SODIE advances was made at a late
date in this investigation. Because of this, we were not able to seek
clarification of the information supplied in the GOF and Usinor
responses. Therefore, we are not making a determination on the
countervailability of the post-1991 SODIE advances in this
investigation. If this proceeding results in a countervailing duty
order, we will examine the post-1991 SODIE advances in an
administrative review, if requested. See Comment 16 below.
IV. Programs Determined To Be Not Used
Based on the information provided in the responses and our findings
at verification, we determine that the responding companies did not
apply for or receive benefits under the following programs during the
POI:
GOF Programs
A. Shareholders Guarantees
B. Long-Term Loans From CFDI
EC Programs
A. Resider and Resider II Program
B. ECSC Article 54 Loans
C. ECSC Article 56(2)(b) Redeployment/Readaptation Aid
D. Grants From the European Regional Development Fund (ERDF)
Interested Party Comments
Comment 1: Treatment of GTS
The petitioners argue that the Department's preliminary decision to
treat GTS as separate from Usinor was unreasonable, inconsistent with
past Department practice and contrary to law. The petitioners maintain
that GTS should continue to be treated as part of the Usinor group,
along with the other two producers of subject merchandise (i.e., CLI
and Sollac), with all receiving a single subsidy rate for the Usinor
group.
The petitioners base this on their claim that the Usinor group was
and remains fully vertically integrated, with ownership of raw
materials, basic production facilities, steel processing operations,
service centers, marketing arms and distribution services fully
consolidated. Furthermore, the petitioners argue that calculating a
single subsidy rate for the group is
[[Page 73285]]
consistent with past practice. The petitioners state that in French
Certain Steel, French Bismuth, and French Stainless, the Department
treated the Usinor group, not the individual group producers, as the
relevant respondent; consequently, GTS' subsidies were included in the
Usinor numerator and its sales were included in the Usinor denominator.
The petitioners argue that despite Usinor's reduction of its
indirect ownership interest in GTS below the 50 percent level in 1996,
the reasons for approaching Usinor as a group have not changed; namely:
(1) GTS and Usinor share common marketing and transportation services
which provide a vehicle for the transmittal of subsidies and the
potential for export shifting should the Department assign different
rates, and (2) GTS does not have audited financial statements for all
of the years that the Department would require in order to conduct an
analysis leading to a separate subsidy rate.
The petitioners dispute the Department's application of its cross-
ownership regulation in the Preliminary Determination. The petitioners
maintain that the relevant regulation is 19 CFR. 351.525(b)(6)(iii)
which states that if a subsidy is received by a holding company ``the
Secretary will attribute subsidies to the consolidated sales of the
holding company and its subsidiaries.'' Additionally, the petitioners
maintain that Usinor and GTS do not cross-own each other. Instead,
Usinor has one-way partial ownership of GTS.
Finally, even if the cross-ownership regulation does apply, the
Department should still treat GTS as part of the Usinor group, in the
petitioners' view. The petitioners point to Certain Cold-Rolled Flat-
Rolled Carbon-Quality Steel Products from Brazil, 64 FR 53332 (July 26,
1999) (Brazil Carbon Plate) in which the Department found cross-
ownership between two companies when one company owned only 49.8
percent of the other.
Moreover, the petitioners argue that Usinor effectively controls
GTS because: (1) Usinor's 48.31 percent ownership interest in GTS far
exceeds any other owner, (2) the next largest shareholder, Saarstahl
with 32.14 percent indirect ownership interest in GTS, is in bankruptcy
and its shares can only be voted on by the bankruptcy trustees, and (3)
Usinor, with three of the eight GTS Board members, controls GTS' Board
of Directors. Additionally, the petitioners point out that the
Department learned at verification that Dillinger controls GTS. The
petitioners argue that this control by Dillinger is not inconsistent
with Usinor's control of GTS since Usinor is the largest shareholder of
Dillinger's parent company, DHS. Furthermore, the petitioners argue
that the Chairman of both DHS and Dillinger Supervisory Boards is a
representative of Usinor and that Usinor's presence on DHS's and
Dillinger's Supervisory Board gives Usinor considerable power.
The respondents disagree with the petitioners that the Department
should treat GTS as if it were still part of the Usinor group. The
respondents maintain that under section 351.525(b)(6)(iii) of the CVD
Regulations (relating to holding companies), Usinor's subsidies should
not be attributed to GTS because it is not included in Usinor's
consolidated holdings. Instead, the Department properly looked to
section 351.525(b)(6)(ii) of the CVD Regulations, (relating to cross-
ownership) to determine whether any subsidies should be attributed to
GTS as a result of cross-ownership between GTS and Usinor. The
respondents argue that the Department correctly concluded that there is
no cross-ownership between GTS and Usinor since Usinor cannot control
or direct GTS' assets in essentially the same manner it could its own.
The respondents argue that the record is clear that Usinor does not
have any direct interest in GTS or Dillinger (GTS' parent company), and
only a minority interest in DHS (Dillinger's parent company). The
respondents argue that verification confirmed that Usinor cannot use or
direct the assets of DHS given its minority shareholding, the power
accorded to labor on DHS' Supervisory Boards, and that all the seats on
DHS' Management Board are held by employees. The respondents explain
that Usinor's role in GTS is further attenuated and that Dillinger
directs the individual assets of GTS. Therefore, the respondents
maintain that cross-ownership does not exist, and the Department cannot
attribute Usinor's subsidies to GTS.
Dillinger rejects petitioners' argument that the Department should
continue to treat GTS as part of the Usinor group based on the fact
that GTS was part of the Usinor group during the French Certain Steel
investigation. Dillinger points out that in the POI of the instant
proceeding, GTS is no longer consolidated in the Usinor group's
financial statements. Additionally, Dillinger points out that the
Department has promulgated new regulations which mandate that the
Department treat GTS as a separate company.
Dillinger also rejects petitioners' argument that internal
transfers and shared marketing services within the Usinor group provide
a vehicle for the transmittal of subsidies. Dillinger states that GTS
is no longer a consolidated member of the Usinor group so this argument
is not relevant. Furthermore, Dillinger argues that petitioners'
argument was not accepted by the Department in French Certain Steel nor
has it been adopted in subsequent cases. Dillinger also rejects the
petitioners' argument that the Department does not have audited
financial statements for GTS for all of the years that the Department
would require in order to conduct an analysis leading to a separate
subsidy rate. Dillinger argues that this is not true and that the
petitioners have not identified a single piece of missing information
that the Department would need to calculate a separate rate.
Dillinger argues that the Department should continue to calculate a
separate rate for GTS since the Department's new regulations at 19 CFR
351.525(b)(6)(iv) require a finding of cross-ownership in order to
attribute subsidies. Dillinger maintains that there is no cross-
ownership between the two companies because: (1) Usinor only has a
minority ownership interest in DHS, (2) Usinor does not have ``golden
share'' in DHS, and (3) Usinor's indirect ownership interest is matched
by the combined ownership of Saarstahl and the Government of Saarland.
Furthermore, Dillinger argues that Usinor's large minority ownership
interest in DHS is irrelevant because the DHS General Assembly requires
at least a 70 percent majority for approval. Therefore, Dillinger
points out that Usinor's ownership interest does not come close to the
level that would enable it control DHS, Dillinger, or GTS.
Lastly, Dillinger argues that petitioners' argument that Usinor has
a dominant presence on the GTS Board of Directors is irrelevant.
Dillinger points out that all shareholder representatives on GTS' Board
of Directors are elected by Dillinger. Dillinger points out that the
fact that three of the eight directors elected by Dillinger happen to
be representatives of Usinor is merely a business decision made by
Dillinger based on its prior affiliation with that company.
Department Position: Although the petitioners have raised several
valid concerns about treating GTS as separate from Usinor, we have
examined this matter closely and concluded that, on balance, the facts
of this case support calculating separate subsidy rates for Usinor and
GTS.
At the outset, we note that we do not share the petitioners' view
that Section
[[Page 73286]]
351.525 (b)(6)(iii) (regarding holding companies) is the relevant
provision for deciding how to attribute subsidies in this case.
Although Usinor was a holding/parent company during the POI, GTS was no
longer a consolidated member of the Usinor group and GTS' sales were
not reported in Usinor's consolidated sales. Thus, subparagraph
(b)(6)(iii) does not lead us to attribute Usinor's subsidies to GTS.
Instead, we believe that the applicable regulation is Section
351.525(b)(6)(ii), which addresses situations involving cross
ownership.
In applying this subparagraph, the petitioners have asked that we
take into account two types of concerns. First, because Usinor is a
vertically integrated company and because certain services are shared
among Usinor companies, including GTS, they should be viewed as a
single company. Second, although Usinor is not the majority owner of
GTS, it should be viewed as controlling GTS. We address these points in
turn.
The petitioners are correct that both GTS and Usinor, as producers
of subject merchandise, share service centers, marketing arms, and
channels of distribution. GTS makes a certain number of its French
sales through a subsidiary of Sollac and some of its U.S. sales to an
importer which is also owned by Sollac. However, we reviewed these
transactions carefully at verification and found no indication that
they were not at arm's length. Therefore, we found no basis to conclude
that subsidies were transmitted from Usinor to GTS (or vice versa) as a
result of GTS using Usinor affiliates for these services.
To the extent that the petitioners rely on the Department's
decision ``to collapse'' respondents in the Affirmative Countervailing
Duty Determination and Final Determination of Sales at Less Than Fair
Value: Certain Pasta From Italy and Turkey, 61 FR 30288, 30308 (June
14, 1996) (Italy Pasta) as the basis for treating Usinor and GTS as a
single company, we note that Italy Pasta predates the current
regulations. We also are not persuaded by the precedents involving the
Usinor group. Until 1996, GTS' results were consolidated in the Usinor
Group. Therefore, even under our current regulations, Usinor's
subsidies would be attributed to GTS and a single CVD rate would be
calculated. With respect to French Stainless, which had a 1997 POI,
GTS' sales were not included in Usinor's sales because GTS was no
longer included in Usinor's consolidated results.
Regarding Usinor's alleged control of GTS, as noted above, Usinor
indirectly owned 48.75 percent of GTS during the POI. Because this
level of ownership is close to the majority ownership required to find
cross ownership, we have examined closely whether Usinor controls GTS
directly, or indirectly through its ownership position in DHS. In
analyzing whether two companies should be treated as one for purposes
of calculating a countervailing duty rate, we believe that the control
analysis undertaken in connection with subparagraph (b)(6)(ii) should
identify situations where the ``interests of these two corporations
have merged to such a degree that one corporation can use or direct the
individual assets (or subsidy benefits) of the corporations in
essentially the same ways it can use its own assets (or subsidy
benefits).'' See the Preamble to the CVD Regulations (63 FR at 65401).
In this connection, the petitioners have pointed to Brazil Carbon
Plate, where the Department found cross ownership although the major
shareholder held less than a majority ownership position. We note that
the facts in this case differ from those in the Brazil case. In Brazil
Carbon Plate, one shareholder directly held 49.8 percent while the
remaining shareholders were numerous (i.e., more than 10) and each held
a small ownership interest percentage with no one shareholder coming
close to controlling one-quarter of the shares that the main
shareholder controlled (64 FR at 53334). In the instant proceeding,
Usinor's ownership interest is indirect (via DHS) and there are only
three other shareholders in DHS, two of which are affiliated and
together match Usinor's ownership interest. Specifically, while
Usinor's ownership interest in DHS is unquestionably large, it is
matched by two affiliated shareholders, SAG Saarstahl AG at 33.75
percent and Government of Saarland at 15 percent.
We have also considered whether Usinor controls GTS via control
over its Board of Directors and its parent companies, Dillinger and
DHS. First, we do not believe that Usinor controls GTS Board of
Directors, notwithstanding the fact that Usinor has three of the eight
representatives on GTS' current Board. According to the information we
received, Usinor cannot control the GTS Board because all Board members
are selected by Dillinger, and there is no indication that Usinor has
guaranteed ownership of these three seats. Dillinger has stated that
its decision to have Usinor representatives on GTS' Board was a
business decision based on their knowledge of the industry.
Second, we find that Usinor does not control Dillinger,
notwithstanding the fact that Usinor is the largest shareholder of
Dillinger's parent company, DHS. We recognize, in certain situations
and in certain countries, that a large minority interest such as
Usinor's interest in DHS could lead a finding of control by that
shareholder. However, because DHS and Dillinger are German companies in
the coal, iron and steel sector, they are governed by laws which limit
the shareholders' ability to control a company. In the case of DHS and
Dillinger, information on the record shows that the day-to-day
operational decisions and long-term business decisions concerning DHS
and Dillinger are made by DHS's and Dillinger's Supervisory and
Management Boards, and Usinor did not and could not control these
decision-making bodies given its ownership interest during the
POI.2
---------------------------------------------------------------------------
\2\ Because more specific information concerning the types of
decisions made by both Dillinger and DHS's Supervisory and
Management Boards is business proprietary, the Department cannot
discuss them here.
---------------------------------------------------------------------------
During the POI, Dillinger's Supervisory Board consisted of 15
members, three of which were Usinor company representatives. Given that
Supervisory Board decisions require a 50 percent majority and Usinor
had only three representatives on this Board, it was impossible for
Usinor to control Dillinger's Supervisory Board. Additionally, the
Department notes that laws governing the membership of Dillinger's
Supervisory Board require an equal number of labor and shareholders'
representatives. Given this legal requirement, Usinor's minority
indirect ownership interest could not enable it to gain a significant
presence on the Supervisory Board to control decision making. With
respect to Dillinger's Management Board, we note that it consists of
employees from DHS and Dillinger. Therefore, Usinor does not control
the Dillinger's Management Board.
Similarly with respect to DHS, resolutions requiring approval of
DHS' General Assembly of Shareholders (which includes the election of
the Supervisory Board members) require 70 and 90 percent majorities.
DHS' Supervisory Board requires a 50 percent majority for the approval
of decisions, and Usinor holds only three out of 21 seats on this
Board. Like Dillinger's Management Board, DHS' Management Board is made
up of employees.
Based on all the information regarding Usinor and its ability to
direct or control GTS, we have concluded, on balance, that such control
does not exist. Therefore, we have determined that
[[Page 73287]]
cross ownership does not exist between Usinor and GTS.
Comment 2: 1996 Transfer of Usinor's Ownership Interest in DHS Should
Not Be Treated as a Spin-Off of GTS
The respondents argue that the Department erroneously applied its
change-in-ownership methodology to the 1996 partial reduction of
Usinor's ownership interest in DHS. The respondents maintain that this
transaction was not a sale or transfer of GTS because no GTS shares
changed hands and, therefore, it should not be treated as a spin-off of
GTS. The respondents explain that the fact that the transaction had the
effect of reducing Usinor's indirect beneficial interest in GTS was an
incidental result of the transaction, not the focus.
The respondents point out that the Department has made clear that
it will not apply its change-in-ownership methodology to every
transaction that affects the ownership of a productive unit. The
respondents state that in Final Affirmative Countervailing Duty
Determination: Stainless Steel Plate in Coils from Italy, 64 FR 15508,
(March 31, 1999) (Italian Plate), the Department declined to perform
its change-in-ownership methodology to a transaction involving the
sale/transfer of indirect beneficial interests of the Italian
respondent, AST, because the ownership interest was relatively small
and so remote from the company upon which the subsidies were conferred.
The respondents argue that Usinor's 1996 transaction is similar to the
Italian one in that in both cases, the productive units (GTS and AST)
were not involved in the transaction and the exchange occurred two
levels up the corporate chain from the productive unit.
Additionally, the respondents argue that the Department's practice
and regulations preclude attributing subsidies to GTS as a consequence
of the 1996 transaction because the transfer of shares involved DHS, a
German company upon which no alleged subsidies involved in this
investigation were conferred. The respondents argue that the
Department's regulations at 19 CFR 351.525(b)(7) do not permit the
attribution of subsidies across borders. Therefore, they maintain it is
impossible for Usinor's subsidies to be attributed to GTS through
Usinor's transfer of shares in DHS, a German company.
The petitioners take issue with the respondents' claim that German
ownership of GTS' stock somehow relieves GTS' production of
countervailable French subsidies. The petitioners argue that the
subsidies in question were provided to French steel production which
included GTS. The petitioners argue that the real issue is whether
Usinor's reduction of its ownership interest in DHS in 1996 leads to
reallocation of the subsidies received by GTS. The petitioners believe
that there should be no reallocation of subsidies as a result of this
transaction since the respondents have contended that nothing
substantive really happened as a result of this transaction.
The petitioners object to the respondents' application of the
transnational rule because the petitioners believe that it is not
applicable here as it only deals with initial bestowal of subsidies not
attribution. The petitioners point out that even if the transnational
rule applies, it does not apply to subsidies tied to French production
which are the only subsidies at issue in this case. Finally, the
petitioners note that if the respondents' application of the
transnational rule is correct, then companies could insulate their
subsidiaries from all countervailing duty liability by setting up their
ownership in foreign holding companies.
Department Position: We disagree with the respondents that we
erroneously applied our change-in-ownership methodology to the 1996
reduction of Usinor's indirect interest in GTS. For this final
determination, the Department has revised its treatment of the
subsidies received by GTS when it was part of the Usinor Group by
assigning to GTS its pro rata share of Usinor's subsidies (based on
GTS' sales/assets as a percentage of Usinor's sales/assets). Since
those subsidies have been attributed to GTS and a portion of GTS has
been sold, it is appropriate to apply our change-in-ownership
methodology to the 1996 transaction in the instant proceeding.
We believe that the situation can be distinguished from that in
Italian Plate. First, the net result of this transaction resulted in
the termination of GTS' consolidation in Usinor's financial results.
Second, the seller (Usinor) was owned, in part, by the Government of
France. Therefore, Usinor's sale of its DHS shares resulted in the
disposition of a portion of GTS to private parties. This is in contrast
to Italian Plate where minority private owners were selling their
interests in AST's parent companies to other private companies.
We further disagree with the respondents that the Department's
regulations preclude the attribution of subsidies to GTS as a
consequence of the 1996 transaction because Usinor's sale of its DHS
shares was to a foreign company. While the Department's regulations
require it to attribute subsidies to products produced within the
territory of the subsidizing government, GTS is located in France (see
19 CFR 351.525(b)(7)). Therefore, even if those subsidies flowed from
Usinor to the German company which purchased Usinor's DHS shares, our
attribution rules require that the subsidies be attributed to DHS'
French production, i.e., GTS.
Comment 3: The Department Must Correct the Misapplication of its
Change-in-Ownership Methodology to the 1996 Transaction
The respondents suggest that if the Department were to continue to
treat the 1996 DHS transaction as a spin-off of GTS, then it must
correct the misapplication of its change-in-ownership methodology in
the Preliminary Determination. The respondents argue that in the
Preliminary Determination the Department treated the transaction as
involving 100 percent of GTS' assets rather than a partial spin-off of
a small portion of Usinor's indirect beneficial interest in GTS, as
stipulated in the GIA (58 FR at 37273). In the GIA, the respondents
point out that the Department stated that pass-through of subsidies
must correspond to the extent of the interest being transferred. The
respondents do not agree with the Department's analysis that Usinor's
reduction of its interest in DHS was ``akin to a total sale since
Usinor no longer had the ability to control or direct GTS' assets as
its own'' (see Memorandum from the Team to Susan Kuhbach regarding the
Ministerial Error Allegation for Preliminary Determination (September
22, 1999)). The respondents believe that the methodological rationale
advanced in the Preliminary Determination is not consistent with the
Department's decision not to require change in control before applying
its change-in-ownership methodology.
The respondents argue that it is impossible for the Department to
treat the 1996 DHS transaction as a 100 percent transfer of GTS when
the Department treated the 1992 sale of Sollac's ownership interest in
GTS as a partial spin-off. Additionally, the respondents argue that
methodology applied to the 1996 transaction in the Preliminary
Determination is inconsistent with the Department's repayment
methodology since the calculation provided for 100 percent of GTS'
assets as transferred but repayment could have been only been based on
the price paid for the assets actually
[[Page 73288]]
transferred which was 21.25 percent of DHS' shares. Therefore, the
respondents argue that if the Department continues to treat the 1996
transaction as a spin-off involving GTS, it should revise the assets to
reflect the percentage that was actually transferred.
The petitioners take issue with the respondents' suggestion that
because only 21 percent of DHS was transferred, a maximum of 21 percent
of the subsidies provided to GTS' production can be countervailed. The
petitioners point out that the respondents' argument is based on the
incorrect assumption that no subsidies are attributable to GTS'
production prior to the 1996 transaction. The petitioners contend that
the real question is to what extent, if any, is the 21 percent of the
subsidies repaid or reallocated. The petitioners further argue that the
1996 transaction does not change the fact that 79 percent of the
previously allocated subsidies inhere in GTS' assets and, therefore,
are attributable to GTS.
The petitioners do not believe that the methodology used in the
Preliminary Determination to attribute subsidies to GTS as a result of
the 1996 transfer is inconsistent with its past practice. The
petitioners argue that once the Department decided that the result of
the 1996 transaction required it to calculate a separate rate for GTS,
it first correctly determined the total amount of the subsidies
potentially allocable to GTS' production.
The petitioners point out that the second step of the change-in-
ownership calculation requires it to determine the amount of subsidies
repaid or reallocated by the partial sale. The petitioners believe that
the Department correctly applied its methodology by determining that
this transaction could have only resulted in the repayment/reallocation
of a maximum of 21 percent of the subsidies since only 21 percent of
the assets were transferred. The petitioners reject the respondents'
claim that there is inconsistency or unfairness in the Department's
application of its change-in-ownership methodology in this transaction.
Department Position: We have revised the calculation used in the
Preliminary Determination. Beginning with the 1992 transaction and
continuing with the 1996 transaction, we have determined the subsidies
allocable to GTS (in accordance with the spin-off methodology described
in the GIA). Then, as ownership of GTS transferred out of Usinor, we
applied our change-in-ownership methodology to measure the amount of
subsidies that were reallocated to Usinor. This approach was
necessitated by our decision that GTS should be treated as separate
from Usinor during the POI. In short, because GTS' sales were no longer
included in the Usinor Group's sales, it was incorrect to include
subsidies attributable to GTS (because it was part of the Usinor Group
when these subsidies were received) as Usinor's subsidies.
We disagree that this revision from the Preliminary Determination
conflicts with the position taken by the Department in Italian Plate
regarding changes in control. Specifically, there does not have to be a
change in control of a company for the Department to apply the change-
in-ownership methodology. However, when a company moves from being part
of a consolidated group to outside the consolidated group because of a
change in ownership, it is appropriate to ensure that the proper share
of subsidies is assigned to the company.
Comment 4: Privatization Should Extinguish Any Previously Bestowed
Subsidies
The respondents argue that the circumstances of Usinor's
privatization compel the Department to find that any previously
conferred subsidies were eliminated and did not pass through to the
privatized company. The respondents point out that the URAA directs the
Department to examine all the circumstances of a privatization to
determine whether and to what extent subsidies have been extinguished
or passed through to the private buyer. Similarly, the SAA at 928
directs the Department to devise an appropriate methodology to
determine whether and to what extent, the privatization of a
government-owned firm eliminates any previously conferred
countervailable subsidies. The respondents argue that the
countervailing duty law states that a subsidy can only be found where a
benefit is conferred as the result of a government financial
contribution. The respondents maintain that the payment of a market
price for all or part of a previously subsidized entity should
extinguish previously bestowed countervailable subsidies because the
purchased entity is acquired at full value and, thus, there is no
benefit. See 19 CFR 351.503(b)(1). Since Usinor's privatization
consisted mainly of the sale of shares to the public for fair market
value by means of international and French public offerings, the full
value of any previously conferred subsidies was embodied in the
purchase price and those subsidies were eliminated upon Usinor's
privatization.
Additionally, the respondents note that a WTO Dispute Settlement
Panel recently found in a case involving hot-rolled lead and bismuth
carbon steel products from the United Kingdom that the Department had
violated its WTO obligations in determining that the sale of a company
to private bidders did not automatically extinguish subsidies that the
company received when it was government owned.
The petitioners dispute the respondents' claim that Usinor's
privatization eliminates benefits from pre-privatization subsidies.
According to the petitioners, this same argument has been repeatedly
rejected by the Department, the CIT, and Congress. Specifically, the
respondents argument that there is no benefit after Usinor's
privatization because the shares were purchased at fair market value is
misplaced since the Department's obligation with respect to a benefit
analysis refers to the initial bestowal of the subsides not to a
competitive benefit received after privatization.
The petitioners further believe that the respondents have wrongly
accused the Department of failing to examine all factual circumstances
as directed by the statute. The petitioners argue that the requirement
to ``examine all circumstances'' relates to determining whether any
repayment of subsidies has taken place, not, as respondents
characterize, whether a competitive advantage has been received.
Petitioners claim that the respondents' argument would be tantamount to
a presumption that subsidies do not survive privatization, a
presumption which the petitioners argue the URAA's change-in-ownership
provision was enacted to preclude.
The petitioners argue that the record in the instant proceeding
fully supports the Department's decision to countervail Usinor's sales
post-privatization. In support of this, the petitioners point out that
Usinor is wholly unchanged by the privatization as the privatization
was merely a stock sale and Usinor has made clear that its management
did not change in any way after the privatization.
Lastly, with respect to the WTO report, the petitioners point out
that this interim report cannot change the clear Congressional mandate
which expressly overturns Usinor's argument with respect to this issue.
Department Position: Under our existing methodology we presume
neither automatic extinguishment nor automatic pass-through of prior
subsidies in an arm's-length transaction. Instead, our methodology
recognizes that a change in ownership has some impact on the allocation
of previously bestowed subsidies and, through an
[[Page 73289]]
analysis based on the facts of each transaction, determines the extent
to which the subsidies pass through to the privatized company. In the
instant proceeding, we have relied upon the pertinent facts of the case
in determining whether the countervailable benefits received by Usinor
Sacilor pass through to the privatized Usinor and to the productive
units that have been spun off by Usinor.
Following the GIA methodology, the Department subjected the level
of previously bestowed subsidies and Usinor's purchase price to a
specific, detailed analysis. This analysis resulted in a particular
``pass-through ratio'' and a determination as to the extent of
repayment of prior subsidies. On this basis, the Department determined
that when Usinor was privatized a portion of the benefits received by
Usinor Sacilor passed through to Usinor and a portion was repaid to the
government. This is consistent with our past practice and has been
upheld in Saarstahl AG v. United States, 78 F.3d 1539 (Fed. Cir. 1996),
British Steel plc v. United States, 127 F.3d 1471 (Fed. Cir. 1997)
(British Steel), and Delverde, SrL. v. United States, 24 F. Supp. 2d
314 (CIT 1998).
Furthermore, Usinor's contention that the sale of Usinor was an
arms-length, market-valued transaction does not demonstrate that
previous subsidies were extinguished. Section 771(5)(F) of the Act
states that the change in ownership of the productive assets of a
foreign enterprise does not require an automatic finding of no pass
through even if accomplished through an arms-length transaction.
Section 771(5)(F) of the Act instead leaves the choice of methodology
to the Department's discretion. Additionally, the SAA directs the
Department to exercise its discretion in determining whether a
privatization eliminates prior subsidies by considering the particular
facts of each case. See SAA at 928.
Lastly, with respect to the respondents' and the petitioners'
comments concerning the recent finding by a WTO Dispute Settlement
Panel that an arm's-length privatization automatically extinguishes
prior subsidies received by government-owned firms, the Department
notes that this was an interim (i.e., preliminary) confidential report.
As such, it is inappropriate for the parties or the Department to
comment on it.
Comment 5: Repayment Portion of Change-in-Ownership Analysis
According to the petitioners, Congress intended that countervailing
duties be imposed to offset subsidies to production. Since changes in
ownership do not affect production, the petitioners conclude that they
should also not affect countervailing duty liability.
The petitioners distinguish between the subsidies themselves and
countervailing duty liabilities arising from those subsidies. Citing
the GIA (58 FR at 37260) where it quotes British Steel Corp. v. United
States, 605 F. Supp. 286, 294 (CIT 1985), the petitioners state that
the Department is obligated, when injury exists, to impose duties when
subsidies have been provided ``with respect to the manufacture,
production or export . . . of a class or kind of merchandise'' imported
into the United States. To show that the liability for such subsidies
is attached to production, the petitioners cite to the same where it
states, ``if a benefit or advantage is received in connection with the
production of merchandise,'' that benefit or advantage is a ``bounty or
grant on production.'' To further demonstrate the linking of
countervailing duty liabilities to production in a post-URAA case, the
petitioners cite the Final Results of Redetermination Pursuant to Court
Remand, Delverde, SrL v. United States, Consol. Ct. No. 96-08-01997,
aff'd, Delverde, SrL v. United States, 24 F. Supp.2d 314 (CIT 1998)
where it states:
Once the Department determines that a ``subsidy'' has been
provided, it measures the amount of the subsidy, attributes the
subsidy to the appropriate production . . . Generally speaking, the
practical results of this system is to link liability for, as an
example, pasta subsidies to pasta production.''
The petitioners maintain that after a change in ownership, a
company will produce at the same cost, in the same volume and with the
same artificial advantages born of subsidies. This happens, state the
petitioners, because the profit-maximizing level of price and output
are unchanged. According to the petitioners, regardless of whether a
buyer or seller captures the benefit of a subsidy after a change in
ownership, the buyer still acquires the subsidy-augmented production
facilities and uses them at the same profit-maximizing level, thus
leaving the misallocation of resources arising from the subsidies and
the threat to the companies' competitors unchanged.
To show that the seller actually captures the benefit of previously
bestowed subsidies, the petitioners cite a publication by the U.S.
Department of Agriculture which states that subsidies to farmers have
created inequities between existing and entering farmers by increasing
the cost of acquiring land for entering farmers. 3 The
petitioners maintain that even though sellers gain the windfalls from
subsidies during a change in ownership, the reallocation of
countervailing duty liabilities back to the sellers is inappropriate.
First of all, the price paid by a buyer is discounted for the risk
associated with the countervailing duty liabilities, according to the
petitioners. In addition, since the seller no longer has control over
production, the petitioners state that imposing duties on the seller
would not have the effect of offsetting the artificial advantages on
production arising from the subsidies.
---------------------------------------------------------------------------
\3\ U.S. Farm Programs and Agricultural Resources, USDA
Economic Research Service, Agricultural Information Bulletin No. 614
(Sept. 1990).
---------------------------------------------------------------------------
The petitioners further argue that the reallocation/repayment
aspects of the Department's change-in-ownership methodology amount to
measuring the effects of subsidies and taking account of events
subsequent to the bestowal of the same. According to 19 CFR 351.504-
511, the Department should not take into account the effects of
subsidies and, instead, should measure benefits at the time of
bestowal.
Finally, the petitioners take issue with the Department's practice
of automatically conducting a repayment/reallocation analysis as part
of its change-in-ownership methodology. According to the petitioners,
the URAA legislative history makes it clear that such automaticity was
not intended by Congress where it says that the Department must
continue to countervail subsidies following a normal (i.e., fairly
priced) ownership change without lessening or reallocating unamortized
subsidy benefits unless something else occurs during the transaction
that ``actually serve[s] to eliminate . . . subsidies.'' See S. Rep.
No. 103-412 at 92 (1994).
The respondents emphasize that the petitioners' argument that there
must be specific evidence of repayment has been considered and rejected
by the Department in the GIA (58 FR at 37264). In addition, the
respondents state that there is nothing about the Ugine transactions or
Usinor's 1995 privatization that would disqualify these transactions
from being analyzed under the Department's change-in-ownership
methodology.
Department Position: The petitioners' main argument is that subsidy
liabilities are attached to production; therefore, subsidy amounts
cannot change when production remains unchanged. While we agree that
subsidies benefit production, that does not require the
[[Page 73290]]
conclusion that subsidies cannot change without changes in production.
Our rationale for applying repayment calculations as part of our
change-in-ownership methodology does not pre-suppose that production
has changed. Rather, our methodology is based on the idea that a
portion of the purchase price for ownership rights may remunerate the
seller for prior subsidies.
To the extent we countervail the portion of the subsidy existing
after repayment or reallocation, we are executing our mandate ``to
impose duties with respect to the manufacture, production or export of
a class or kind of merchandise.'' Our repayment/reallocation
methodology, as part of our change-in-ownership methodology, has been
litigated and upheld by the Courts (see Saarstahl AG v. United States,
78 F.3d 1539 (Fed. Cir. 1996), British Steel plc v. United States, 127
F.3d 1471 (Fed. Cir. Oct. 24, 1997) British Steel plc v. United States,
929 F. Supp. 426 439 (CIT 1996) and Delverde, SrL. v. United States, 24
F. Supp. 2d 314 (CIT 1998).
We disagree with the petitioners' assertion that the ``automatic''
nature of the repayment/reallocation analysis is contrary to the URAA
legislative history. The legislative history simply says that a change
in ownership ``does not by itself require the Commerce Department to
determine that a countervailable subsidy . . . continues to be
countervailable, even if the change in ownership occurs through an
`arm's length transaction' '' and that ``the sale of a firm at `arm's
length' does not automatically extinguish any previously-conferred
(sic) subsidies.'' See S. Rep No. 103-412 at 92 (1994). To the extent
our repayment/reallocation methodology does not make any presumptions
as to whether there will be any repayment/reallocation as a result of a
change in ownership, there is nothing inherently automatic in its
nature. Nowhere does the legislative history require that ``something
else'' must happen, as was argued by the petitioners, before subsidies
can be extinguished.
Finally, regarding the petitioners' argument that the repayment/
reallocation calculation amounts to measuring to the effects of
subsidies, we disagree. Our methodology does not examine the effects of
a subsidy.
Comment 6: Spin-Offs of Productive Assets
The petitioners maintain that in the event the Department decides
to continue applying the repayment portion of its change-in-ownership
analysis, it should only conduct such analyses for sales of enterprises
that Usinor has demonstrated to be productive units. In particular, the
petitioners question whether Usinor has demonstrated that the
enterprises sold to FOS-OXY and Enterprise Jean Lefebvre in 1994 were,
at the time of sale, ``productive'' within the meaning articulated in
the GIA, i.e., capable of generating sales and operating independently.
See GIA 58 FR at 37268.
In French Stainless, state the respondents, the Department found
that Entreprise Jean LeFebvre was a lime production facility and FOS-
OXY an oxygen-generating one. According to the respondents, the
production of oxygen and lime both constitute production; therefore,
the treatment of these two companies as ``productive units'' in the
Preliminary Determination was proper. In any event, the respondents
point out that the issue is moot in that no subsidies were spun-off
from Usinor as a result of either of these two transactions because all
benefits were found to be reallocated to Usinor.
Department Position: As stated above in Comment 5, we are
continuing to apply our repayment analysis. However, the application of
this analysis in this case results in all subsidies potentially spun-
off to Entreprise Jean LeFebvre and FOS-OXY remaining with Usinor.
Therefore, the respondents are correct that the issue is moot.
Comment 7: Assets v. Sales in Apportioning Subsidies
The petitioners point out that the Department's practice of using
relative asset value to apportion subsidies between units in a spin-off
analysis was born from administrative convenience in the Certain Steel
investigations to cover situations where a unit does not have
identifiable sales. See GIA 58 FR at 37268. Prior to Certain Steel, the
petitioners note that the Department acknowledged the reasonableness of
apportioning subsidies via relative sales by stating:
[B]ecause it is the Department's long-standing practice to
allocate subsidies over the sales of subject merchandise, it is
reasonable to use the ratio between the sales of [the spun-off unit]
and the sales of the [parent] . . . as the basis on which we would
apportion the subsidies.
See Certain Hot-Rolled Lead and Bismuth Carbon Steel Products from the
United Kingdom, 58 FR 6237 (July 9, 1993) (UK Bismuth). In situations
where sales are disproportionate compared to assets, the use of assets
to apportion subsidies can be distortive in light of the statute's goal
of offsetting subsidized U.S. sales, state the petitioners.
Accordingly, the petitioners argue that subsidies should be apportioned
based on relative sales in situations where both the parent and the
spun-off unit have sales.
Acknowledging that the Department expressed a preference for asset
values over sales values in UK Bismuth, the respondents argue that the
Department later expressed its clear intention in the GIA to adopt a
practice of using assets where it stated, ``asset values are the more
appropriate basis upon which to measure the portion of the subsidy
which potentially passes through'' (58 FR at 37268). According to the
respondents, adopting an approach that could be applied consistently
was a reasonable step by the Department as opposed to using different
measures from one case to another depending upon the information
available. In addition, the respondents state that the Department has
consistently used asset values in other proceedings, see, e.g., French
Stainless 64 FR at 30776-77.
Department Position: We agree with the respondents that it is the
Department's practice and preference to apportion subsidies based on
assets. In many instances, such as in spin-offs of units that were not
previously considered to be profit centers, sales values may not be
available. In using assets to apportion subsidies, we have a measure
that can be applied in all cases which adds to predictability.
Moreover, it avoids the situation where the spin off of one productive
unit in a company which happens to have a sales value would be treated
differently than the spin off of another productive unit in the same
company which does not have a sales value. However, we recognize that
there may be situations where an exception to this rule is necessary.
As stated in our response to Comment 8 below, information on the record
does not allow us to calculate a French-only asset value for Usinor for
any of the years in which spin offs occurred. For details on how we are
addressing this situation for purposes of this final determination, see
Comment 8:
Comment 8: French v. Total Usinor Assets
Should the Department continue to use assets as the basis for
allocating subsidies between GTS and the Usinor Group, argue the
petitioners, then it should base the calculation of Usinor's assets
only on the relevant pool of assets over which the subsidy benefits
would be applicable, i.e., French assets in this case. The petitioners
note that this information was requested at verification but not
provided. Lacking information on Usinor's French assets, the
petitioners suggest that the Department use sales to allocate the
[[Page 73291]]
subsidies between Usinor and GTS, in particular, Usinor's sales of
French-produced merchandise net of intra-company transactions.
The respondents argue that the use of total assets has been the
Department's practice since the Certain Steel cases where it said in
the GIA that the potential pass-through of subsidies would be
calculated by comparing the book value of ``the productive unit sold to
the book value of the assets of the entire company'' (58 FR at 37273).
The respondents add that this same methodology of allocating subsidies
based total assets was used in the French Stainless case.
Department Position: This is the first time that the question of
what group of assets to use in allocating subsidies between units under
our change-in-ownership methodology has arisen as an issue of
contention. While our prior general statements on the use of assets may
have referred to ``total assets,'' this is because our basic assumption
was that for a typical respondent, subsidy benefits would apply equally
to all assets. However, we acknowledge that the asset values used for
purposes of apportioning benefits between units as part of our change-
in-ownership methodology should correspond to those assets to which
subsidies would properly be attributed (i.e., assets in facilities
located in France). Such an approach is entirely consistent with our
view that governments subsidize domestic production and not foreign
production, which has been upheld by the Courts. See Preamble to the
CVD Regulations (63 FR at 65403); see also Inland Steel Industries v.
United States, 188 F. 3d 1349, 1360-61 (Fed. Cir. 1999) (where the
Court held that the Department's presumption that subsidies are tied to
domestic production on the premise that a foreign government normally
intends to principally benefit its domestic production ``is eminently
reasonable'').
Information on the record of this case, however, does not allow us
to calculate a French-only asset value for Usinor for any of the years
in which spin-offs occurred. This information was requested of Usinor
too late in the proceeding for it to provide. Therefore, for those
transactions for which French sales values are available for both
Usinor and the units being spun off, we are using sales to allocate
subsidies in this case. For those transactions for which French sales
values are not available, we will continue to use total assets to
allocate subsidies for purposes of this final determination. Should a
countervailing duty order be put in place in this case, we will,
however, pursue French asset values during the course of any
administrative review that may occur.
Comment 9: Sale of and Buyback of Ugine Shares
Should the Department continue to calculate repayment as part of
its change-in-ownership analysis, the petitioners take issue with its
application to the partial spin-off of Ugine shares that were
eventually repurchased by Usinor a short time later. If the Department
allows for the reduction in subsidy benefits in this case via
repayment, the petitioners argue that an incentive would be created for
foreign producers to buy and repurchase their productive units in order
to dissipate their countervailable subsidy benefits. The petitioners
note that while the amount of repayment with respect to the Ugine
transactions was small, the concept is important in principle.
The respondents counter by saying that both the initial sale of
Ugine shares and their later repurchase by Usinor were legitimate,
arm's-length transactions. According to the respondents, these were not
sham or churning transactions, as supposed by the petitioners. Since
these were legitimate transactions, the respondents maintain that
application of the Department's change-in-ownership methodology is
warranted.
Department Position: We agree with the respondents that there is
nothing on the record of this case indicating that there is anything
illegitimate about these transactions. However, because Ugine would
continue to be consolidated in the Usinor Group, and we did not apply
our change-in-ownership methodology to the repurchase of Ugine's shares
by Usinor, application of the change-in-ownership methodology would not
affect subsidies to the Usinor Group. This is because in any
reallocation of subsidies from the sale of Ugine's shares, the
reallocated portion would go to Usinor. However, Usinor's subsidy
benefits, including the amount reallocated would be attributed to all
members of the consolidated Usinor Group, including Ugine. Likewise,
any amount allocable to Ugine would have been attributed to the Usinor
Group.
Comment 10: The 1995 Privatization of Usinor
Should the Department continue to apply its repayment methodology
to privatizations, the petitioners argue that no repayment should be
found in the 1995 privatization of Usinor. According to the
petitioners, the ``repayment'' of subsidy benefits to the government
was not possible in this case since the purchase price for Usinor was
retained by Usinor, itself, and not passed on to the GOF.
According to the respondents, the 1995 privatization of Usinor
involved the sale of shares for cash and no part of the purchase price
inured to Usinor. The respondents add that Usinor's capital increase,
to which the petitioners allude, was properly not included among the
programs to be examined during this investigation because the purchase
of shares by private investors did not provide countervailable benefits
to Usinor.
Department Position: We agree with the respondents that the 1995
privatization of Usinor was a legitimate transaction for which a
change-in-ownership calculation is appropriate. All monies paid for
existing Usinor shares during the privatization process were received
by the parties holding those shares prior to the transaction, i.e.,
proceeds from the sale of shares held by the GOF were paid to the GOF,
those from shares held by Clindus (the subsidiary of Credit Lyonnais
holding Usinor shares) were paid to it. The only monies received by
Usinor during the privatization process were those it received for the
sale of new shares in a public offering. The sale by Usinor of new
shares was like any other private company offering shares as a means of
raising capital. In such cases, it is proper for the seller (i.e., the
company itself) to hold on to the proceeds of the sale.
Comment 11: Disposition of Benefits Spun-Off in 1992 GTS Transaction
Since the 1992 transaction was a share swap that did not push GTS
outside of the Usinor Group, state the petitioners, this transaction
should not be viewed as a spin off. Should the Department continue to
apply a spin-off calculation to this transaction, the petitioners state
that the distinct benefit stream for the spun-off portion of GTS should
be properly applied as was not done in the calculations for the
Preliminary Determination.
While the 1992 transaction did not result in the loss of control of
GTS by Usinor, the respondents argue that it was, nonetheless, a
partial spin-off to third parties. As such, the respondents conclude
that the Department's treatment of this transaction in the Preliminary
Determination as a partial spin-off was in accord with its practice
with respect to partial changes in ownership.
Department Position: As discussed in the ``Change in Ownership''
section of the notice, we have applied our change-
[[Page 73292]]
in-ownership methodology to the 1992 transaction. It is necessary to do
this because a portion of GTS moved from Usinor to non-Usinor ownership
and Usinor received payment for that portion of subsidies attributable
to GTS. Although GTS is not treated as a separate company until 1996,
we need to account for the 1992 transaction so that the amount of
subsidies potentially reallocated to Usinor 1996 is commensurate with
the amount of ownership that has transferred up to time.
Comment 12: Calculation of the Portion of Benefits Spun-Off in 1992 GTS
Transaction
Should the Department continue to do a partial spin-off calculation
with respect to the 1992 GTS transaction, the petitioners argue that it
must correct its calculation of the portion of Usinor benefits
potentially being spun-off by virtue of the partial sale of GTS.
According to the petitioners, the Department should first determine the
benefit attributable to GTS as a whole, and then multiply that amount
by the percentage of GTS being sold to determine what, if any,
reallocation occurs.
The respondents take issue with the petitioners' proposition that
subsidies should be attributed to all of GTS' assets, including those
not spun-off, with respect to the 1992 partial spin-off. According to
the respondents, under the Department's change-in-ownership methodology
with respect to partial changes in ownership, the subsidy benefits
attributable to the portion of GTS that was not sold and remained with
Usinor do not travel with the sold portion. Rather, the respondents
claim that those benefits should remain with Usinor and be attributed
across the consolidated French sales of Usinor.
Department Response: Given the circumstances of this case, in
particular the facts that GTS goes through two partial changes in
ownership prior to the POI and is being treated as a separate company,
we have performed our calculations as suggested by the petitioners.
That is, beginning in 1992, we have calculated subsidies attributable
to GTS based on GTS' share of Usinor's assets in that year. The level
of the ownership change in 1992 (and also 1996) serves to cap the
amount of subsidies reallocated to Usinor as a result of the payments
for GTS. Although only a portion of GTS is sold in each instance (i.e.,
these are partial privatizations) it is necessary to move the full
amount of subsidies out of Usinor and into GTS because after 1996, GTS
is separate from Usinor. To follow the respondent's suggestion would
understate the benefit to GTS.
Comment 13: Allocation Period
Should the Department continue to find that the 1995 privatization
of Usinor did not extinguish previously bestowed benefits, the
respondents argue that Usinor's company-specific calculation of its
average useful life of assets (AUL) for the POI should be used to
determine its allocation period. The respondents take issue with the
decision in French Stainless where the Department for the first time
rejected a verified, company-specific AUL in favor of one from another
previous investigation. Following the French Stainless precedent is not
justified in this case, argue the respondents, because the Preamble to
the regulations governing this investigation (which differ from those
governing French Stainless) require the Department to use a company's
own AUL when it varies from that in the IRS tables by one year or more.
See 19 CFR 351.524(d)(2)(iii).
The respondents also point out that the French Stainless decision
is inconsistent with prior court rulings mandating the use of company-
specific allocation periods based on record evidence which the
Department has followed consistently until French Stainless (see e.g.,
Italian Plate (64 FR at 15511); Certain Pasta From Italy: Final Results
of the Second Countervailing Duty Administrative Review, 64 FR 44489,
44490 (August 16, 1999)). According to the respondents, there is no
basis for using information that is decades old. Not only has the
current data been verified as being accurate, the respondents claim
that its privatization did not change Usinor's AUL nor has Usinor and
it has not suffered a bankruptcy, instances that petitioners state may
affect a company's AUL. As for the concern that changing the allocation
period from one case to another may result in under- or over-
countervailing a subsidy, the respondents state that this is simply not
the case.
Finally, the respondents note that the Department has not hesitated
to apply other parts of 19 CFR 351.524(d) (the section of the CVD
Regulations specifying the AUL methodology) when they work to the
detriment of the respondents, such as the use of a new policy for
calculating discount rates. For example, the use of the new discount
rates created entirely new benefit streams for Usinor's old subsides,
state the respondents. The respondents point out that this stands in
contrast to the rationale in French Stainless of applying an AUL from a
prior case to previously countervailed subsidies in order to maintain
consistency. According to the respondents, the Department cannot pick
and choose which parts of the applicable regulations it will apply.
The petitioners cite to French Stainless as precedent for
maintaining the allocation period for a particular subsidy benefit once
it has been countervailed. To change the allocation period in a future
segment or proceeding, argue the petitioners, would risk either over-
countervailing or under-countervailing the subsidy. Such a practice,
point out the petitioners, would also be at odds with the fact that the
subsidies themselves have not changed.
The petitioners also point out that the 14-year period used in the
Preliminary Determination was based on Usinor's own information and
approved by the CIT during the Certain Steel litigation. See British
Steel plc. versus United States, 929 F. Supp. 426 439 (CIT 1996). The
petitioners note that while the regulations require a company-specific
AUL, they do not mandate the period over which that AUL should be
calculated. The petitioners' take issue with the information submitted
by Usinor for the calculation of the allocation period noting that it
covers only post-bestowal years--a period not ``appropriate'' within
the meaning of section of the Preamble to the CVD Regulations
pertaining to company-specific AULs (63 FR at 65397).
With respect to the respondents' complaint about the change in the
discount rates affecting the benefit streams, the petitioners state
that changing a discount rate differs from changing an allocation
period in that the principal amount allocable to any particular year is
not affected by a change in the discount rate, but would be when the
allocation period changes.
Finally, should the Department contemplate using an allocation
period other than 14 years, the petitioners maintain that, pursuant to
19 CFR 351.524(d)(2), it should look to the IRS tables as they are the
default source for information on the useful life of assets when a
respondent has not demonstrated a significantly different and non-
aberrational average useful life of assets of its own.
Department Position: For this final determination, we are
continuing to allocate subsidies countervailed in prior cases over the
AUL established in those prior cases consistent with French Stainless.
See, e.g., French Certain Steel. In so doing, we maintain consistency
across cases and predictability, and we attach the most relevant period
possible to allocable subsidies.
[[Page 73293]]
Since the purpose of calculating an AUL is to determine the
relevant period over which an allocable subsidy would provide benefits
to a company, the year of most relevance is the year of receipt. In an
ideal setting, we would calculate a company's AUL, in accordance with
our methodology in the CVD Regulations, in each year that an allocable
subsidy is provided and then allocate each subsidy based on the AUL of
that year. This is what we do in administrative reviews when new
allocable subsidies are received during a review period. See, e.g.,
Industrial Phosphoric Acid from Israel: Final Results of Countervailing
Duty Administrative Review, 64 FR 2879, 2880 (January 19, 1999) (Israel
IPA).
The question of what AUL to use becomes particularly acute in
investigations where allocable subsidies have been received prior to
the POI because AULs have not been calculated on an on-going basis. As
a matter of convenience, we have elected as our practice to compute an
AUL for the POI to determine how far back in time to capture allocable
subsidies in our analysis. The alternative would be to have respondents
calculate all of the AULs for years in which allocable subsidies were
received in the past in the event the AUL for any of those prior years
would happen to call for the allocation of the subsidies received in
that year into the POI. This could be extremely burdensome for both
respondents and the Department, and involve the use of very old
information. Therefore, we find that calculating an AUL for the POI to
be reasonable in that it uses information as close in time to the year
of receipt of prior subsidies without posing a great burden on any
party.
An exception occurs for allocable subsidies that have been
countervailed in prior cases. Since the time period examined in any
prior case will always be the same as, or earlier than, the POI for an
on-going investigation, the information on the AUL for a company from a
prior proceeding will always be as close or closer to the year of
receipt for allocable subsidies being examined. Therefore, an AUL used
to allocate a previously countervailed subsidy will be as accurate, or
even more accurate, than an AUL calculated in an on-going
investigation. If we were to attach different AULs to the same subsidy
across proceedings, the possibility would arise of countervailing the
same subsidy across different products by different amounts in any
given period. Since a given subsidy intuitively should supply the same
benefit to a company across all the relevant products during the same
period of time, we find the method in French Stainless to be
reasonable.
Based on the foregoing, we find that the use of an AUL from a prior
investigation to allocate a previously countervailed subsidy to be
reasonable and as accurate as possible without being burdensome. With
respect to the respondents' argument regarding the application of the
new discount policy described in 19 CFR 351.524, we disagree. The
changes in the benefit stream brought about by application of a more
realistic discount rate result in a better measure of the subsidy. For
the reasons discussed above, using a more current AUL would not
increase the accuracy of our benefit calculation.
Comment 14: 1991 Equity Infusion
The petitioners argue that the ``voluminous new evidence'' they
submitted regarding the nature of and circumstances surrounding the
GOF's infusion of equity into Usinor in 1991, which has not previously
been considered by the Department, provides sufficient cause to believe
that Usinor was unequityworthy and, therefore, that a countervailable
subsidy had been conferred. The Department, the petitioners contend,
has violated the statute by refusing to reinvestigate this equity
infusion.
Department Position: The Department examined this program closely
in French Certain Steel and found it to be non-countervailable. Faced
with largely the same record evidence in French Stainless, the
Department declined to reinvestigate this program in that proceeding.
Likewise, we are not investigating this program in this proceeding. See
Memorandum to Richard W. Moreland from Susan Kuhbach; Petitioners'
Request for Initiation of 1991 Equity Infusion (July 16, 1999).
Comment 15: Shareholder Advances
The petitioners argue that the Department correctly found the 1982-
86 shareholder advances to be countervailable subsidies. However, in
the petitioners' view, the Department wrongly determined that these
advances were grants in the years of bestowal (1982-86) rather than
debts whose 1986 conversion to equity conferred a new subsidy in the
year of conversion. While conceding that the Department's treatment of
these advances in the Preliminary Determination is consistent with
French Certain Steel, the petitioners contend that this approach
results in an undervaluation of the benefit because the benefit stream
has been pushed back farther in time. The correct approach, according
to the petitioners, would be to treat the advances as loans in the year
of bestowal, and then treat the conversion of these loans as a
distinct, countervailable subsidy in the form of an equity infusion in
1986. The petitioners make the following points in support of their
argument:
First, in French Certain Steel the Department characterized these
advances as grants in part because there was no written agreement
between the shareholders and Usinor at the time of the advances
stipulating the terms of repayment. However, Usinor included these
advances in the ``liabilities'' section of its audited financial
statement, the same section in which PACs--which the Department found
to be loans--where included. There is no such thing as a grant giving
rise to a liability, and ``it is simply inconceivable that Usinor would
have chosen to record (or that auditors would have permitted it to
record) as liabilities funds for which it was not liable.''
Second, by reporting these advances as liabilities, Usinor clearly
expected to have to make a repayment of some sort. In fact, in its
questionnaire responses in French Bismuth, Usinor explicitly referred
to these advances as ``loans'' which are ``. . . repayable on demand.''
Furthermore, in a Usinor-Sacilor condensed balance sheet submitted by
the respondents in the French Certain Steel investigation, the
shareholder advances are reported in the category ``long term debt.''
Also, Usinor issued the new stock to the GOF in 1986 to avoid taxation
that would otherwise accompany the direct forgiveness of the
shareholder advances.
Third, the Department cannot assume that because no formal
repayment terms were written, no repayment was expected or required.
Expert opinions from PriceWaterhouse and others indicate French
accounting standards and French law clearly establish that where there
is no written agreement regarding the terms of the repayment of a
shareholder advance, the ``funds put at the disposal of a company by a
shareholder cannot be recorded otherwise (sic) than as a liability of
the company.'' The expert opinion further states that a French company
may not ``register funds put at the disposal of a company as a grant
without the written evidence of such intention from the provider.''
The respondents counter, first, by noting that the petitioners'
arguments are largely the same as those which the CAFC considered and
rejected in the petitioners' appeal of French Certain Steel. See Inland
Steel Indus., Inc.
[[Page 73294]]
versus United States, 188 F.3d 1349 (Fed. Cir. 1999). According to the
respondents, these arguments include: (1) shareholder advances were
accounted for by Usinor and Sacilor as loans; (2) the conversion of the
advances into common stock to avoid taxation demonstrates that they
were loans; and (3) French law and accounting practice required
treating them as loans. The ``new evidence'' submitted in this
proceeding by the petitioners, the respondents contend, in fact
consists of no new information over that reviewed by the CAFC in
upholding the Department's determination in French Certain Steel.
Therefore, these facts cannot ``overcome the preclusive or, at a
minimum, stare decisis effect'' of the CAFC's finding.
The respondents further argue that the petitioners arguments in
this regard become moot if the Department adopts--as the respondents
argue it should--Usinor's 11-year AUL to allocate subsidies. Under this
11-year allocation period, the benefits from the 1986 shareholder
advances would fall outside the POI.
Department Position: We disagree that, for purposes of calculating
the correct benefit stream for these subsidies, the Department should
treat the 1986 conversion of the shareholder advances to equity as a
separate subsidy event. The respondents are correct in noting that the
petitioners' arguments are largely the same as those which the CAFC
considered and rejected in the petitioners' appeal of French Certain
Steel. Although some additional information regarding this program is
available on the record of this proceeding, this information does not
include any substantive new facts that would merit a reevaluation of
our findings in French Certain Steel.
In response to the petitioners' arguments, we start by noting the
following excerpt from the Usinor Sacilor Verification Report in the
French Certain Steel investigation (at 18).4
---------------------------------------------------------------------------
\4\ Memorandum to Susan H. Kuhbach, from Julie Anne Osgood and
Susan Strumbel; Verification of the Responses of Usinor Sacilor in
the Countervailing Duty Investigations of Certain Steel Products
from France (April 9, 1993), Attached to Memorandum to Case File,
Excerpts Regarding Shareholder advances from Certain Steel Usinor
Verification Report (December 13, 1999).
---------------------------------------------------------------------------
Officials stated that the French versions of the companies'
Annual Reports show the outstanding amounts of the shareholders'
advance in the liabilities account ``dotation d'actionnaire.''
Officials explained that prior to the shareholders'' advance
designated for SODIs, shareholders' advances were called
``dotation,'' which when translated means ``grant,'' ``capital
advance,'' ``grant of capital,'' or ``capital injection.''
We asked officials why the shareholders' advances received from
1982 through 1985 were reported under liabilities in the balance
sheet. Officials explained that when the GOF paid shareholders'
advances to Usinor and Sacilor, they were reported under liabilities
because as cash was debited, the corresponding entry was a liability
account. We also asked why the receipt of shareholders' advances was
not originally reported as capital, given that they ultimately were
converted to common stock. Officials explained that recording
shareholders' advances under ``dotation d'actionnaire'' suggested,
essentially, that the shareholders' advances were designated to
become common stock rather than income. In 1986, when shareholders'
advances were received to fund the SODIs, officials explained that
they were placed under the account ``avance d'acctionnaire,''
indicating an ``advance of funds'' or ``loan.''
Several points are clear from the Usinor officials' above
statements. First, at the time of receiving the shareholder advances,
company officials expected that those funds would be converted into
equity rather than repaid in cash or in some other more liquid form of
reimbursement.
Second, Usinor officials perceived these shareholder advances as
uniquely different from other sources of funds the company received,
including shareholder advances for the SODIEs program, and signaled as
much by including the advances in a specially designated category
(``dotation'') indicating they were grants of capital. It is likewise
telling that these shareholder advances are in a category entirely
separate from the company's ``financial debts'' and ``operating
debts.'' Contrary to the petitioners'' assertion, the ``PAC'' loans are
included in the ``debts'' category of both Usinor and Sacilor's 1985
balance sheets, which is a distinctly separate category from
shareholder advances.
Although the petitioners are correct that shareholder advances were
reported under the heading ``long term debt'' in the Usinor-Sacilor
condensed balance sheets, we do not find this information conclusive.
The condensed balance sheet is clearly meant to be a summary of Usinor-
Sacilor's combined asset and liability accounts, and its summary format
does not supersede the more precise and specific breakout of accounts
provided in the annual reports. We note, for example, that in the
condensed statement, the PACs (i.e., loans with special
characteristics) comprise part of the ``total equity'' accounts whereas
in the detailed balance sheets these loans are categorized as
``debts.''
Third, as Usinor officials implied, recording these advances as
``liabilities'' was necessitated by the basic tenets of double-entry
bookkeeping. An infusion of cash into a company is recorded in an
accounting system by means of two entries: one ``on the left side'' of
the balance sheet (a debit to the cash account), and one ``on the right
side'' of the balance sheet (in this case, a credit to shareholder
advances). The petitioners are incorrect in their assertion that a
grant cannot involve an entry in the ``liabilities'' category of the
company's accounts. A cash infusion in the form of a grant to Usinor
would increase the value of assets, which would have to be matched by a
corresponding increase in the value of either the equityholders' or the
debtholders' stake in the company. However, as evidenced by the very
financial statements cited by the petitioners, both debt and equity in
Usinor/Sacilor's financial statements are included in the ``passif''
(liabilities) category. A cash infusion in the form of a loan would
have the same effect on the company's assets and ``liabilities''
accounts as a grant infusion. Therefore, the fact that the shareholder
advances are recorded as a liability is irrelevant to the issue of
whether an infusion is a grant or a loan.
With regard to the petitioners' expert opinion from PriceWaterhouse
on French accounting and law, we note that the Price Waterhouse opinion
states that a shareholder advance must ``become part of the company's
liability and must be recorded as a debt.'' The evidence on the record,
however, flatly refutes the later portion of this statement. In neither
the Usinor or Sacilor balance sheets are these shareholder advances
included in the debt category. And the Auditor's Report for these
statements makes no indication that the reporting of these advances is
incorrect or misleading.
Finally, our comments above notwithstanding, the meaning of
shareholder advances according to French accounting standards is
ultimately irrelevant to how we calculate the benefit from these
subsidies in this instance. Under the Department's established
methodology, this program is properly treated as a grant in the year of
receipt because, for as long as these funds were considered to be
shareholder advances, there was no expectation of a: (1) repayment of
the grant amount, (2) payment of any kind stemming directly from the
receipt of the grant, or (3) claim on any funds in case of company
liquidation. See the GIA (58 FR at 37254).
[[Page 73295]]
Comment 16: SODIEs
In 1983, Usinor and Sacilor established regional development
subsidiary companies, subsequently to be known as SODIEs, to promote
the retraining of redundant steelworkers. From 1983 through the mid-
1990s, Usinor provided funds to the subsidiary SODIEs which, in turn,
loaned these funds to local enterprises providing the worker
retraining. Starting in 1986, the GOF agreed to provide to the SODIEs
(through Usinor) additional funds matching the amount of Usinor's
contribution. In return, Usinor agreed to expand the coverage of its
SODIEs into other depressed regions of France. In French Certain Steel,
the Department determined that these GOF contributions were not
countervailable because they represented the GOF's share of the SODIE
program and were used only for GOF purposes, not to support Usinor's
steel operations. We further found that the GOF's contributions did not
relieve Usinor from any costs or obligations it would otherwise have
been required to incur.
The petitioners argue that the Department should find the post-1991
payments from the GOF to Usinor in support of the SODIES to be
countervailable subsidies. First, the petitioners argue, the Usinor
Group (including the subsidiary SODIEs) was entitled to keep full
repayment (both principal and interest) of the GOF's share of the loans
that the SODIEs provided to the local entities. This entitlement to
repayment of the GOF's funds constitutes a grant. Second, the
petitioners claim that neither the GOF nor Usinor has established that
the GOF's contributions did not relieve Usinor of certain obligations
to retrain redundant steelworkers. Finally, with respect to the post-
1991 advances, the petitioners state that the European Commission has
conceded that the SODIE advances are a financial contribution which
confers a benefit, as evidenced by the EC's notification of the SODIE
program to the World Trade Organization (WTO).
The petitioners also object to the Department's decision not to
reinvestigate the pre-1992 SODIE contributions by the GOF. (The pre-
1992 contributions were found to be not countervailable in French
Certain Steel.) According to the petitioners, the Department failed to
consider whether the GOF's SODIE contributions were ultimately grants
to Usinor. The petitioners also object to the Department's finding that
Usinor was not relieved of any obligations by the GOF's SODIE
contributions.
The respondents counter, to start, by noting that the Department
has not reinitiated an investigation into the 1980s SODIE advances and,
therefore, the petitioners' arguments that the Department should find
these countervailable are not relevant. With regard to the post-1990
SODIE payments by the GOF, the respondents state that the petitioners
have not shown how these are materially different from the 1980s SODIEs
payments, which the Department has previously found to be not
countervailable.5 Although there is additional evidence on
the record of this proceeding, none of it supports a different
conclusion regarding the countervailability of the program.
---------------------------------------------------------------------------
\5\ This determination, the respondents note, was subsequently
upheld by the CIT in Inland Steel, 967 F. Supp. at 1366-68.
---------------------------------------------------------------------------
Specifically with regard to the petitioners' argument that a
benefit was conferred on Usinor because it was entitled to repayment by
the SODIEs of funds provided by the GOF, the respondents state that the
Department has already considered this fact with regard to the 1980s
GOF payments and, nevertheless, found that the payments made by the GOF
do not confer a benefit on Usinor. This is because upon repayment of
the loan, the funds were simply loaned out again. The respondents also
state that, in addition to passing the GOF's contributions on to the
SODIEs, Usinor made its own contributions to the SODIEs that exceeded
substantially the GOF's contributions.
Finally, the respondents contend, the EC notification of the SODIE
program to the WTO does not represent a concession that the GOF's
payments were a subsidy to Usinor. In fact, the notification states
that the loans ``are not financed by the State funds but by the Usinor-
Sacilor iron and steel group.'' Rather, the program was notified
because the GOF was providing assistance to particular regions--
unrelated to Usinor's assistance to steel producing regions--for which
notification was appropriate.
Department's Position: On September 21, 1999, just prior to
verification, the Department formally notified the respondents that it
was initiating an investigation of the post-1991 GOF advances to Usinor
under the SODIE program. The decision to initiate was based on
questions raised by factual information submitted by the petitioners
regarding the EC's notification of the SODIE program to the WTO, and
the reporting of the SODIE funds in Usinor's financial
statements.6 On October 18, 1999, the Department sent a
questionnaire soliciting information from the respondents and the GOF
regarding this program.
---------------------------------------------------------------------------
\6\ See Memorandum to Richard Moreland from Susan Kuhbach;
Inclusion of Previously Investigated Programs in the Countervailing
Duty Investigation of French Steel Plate (September 21, 1999).
---------------------------------------------------------------------------
The Department received questionnaire responses regarding the SODIE
program from both the GOF and the respondents on November 3, 1999. In
their respective questionnaire responses, both the GOF and the
respondents stated that because the respondents did not apply, use, or
benefit from the SODIE program during the POI, in accordance with the
questionnaire instructions, no detailed response was required.
Consequently, neither party provided complete details regarding the
specificity of the program, or any financial contributions or benefits
Usinor may have received under this program. The parties did, however,
provide a general history of, and comments on, the SODIE program and
the WTO's notification.
Notwithstanding these general responses to the Department's
questionnaire, we find that we do not have sufficient information at
this time to determine whether this program represents a
countervailable subsidy. In particular, Usinor has claimed that it made
contributions to SODIE that exceed the GOF's contributions and that
Usinor loans to SODIE are reclassified as ``risk and losses.'' Without
further questioning, we are not able to track these amounts in Usinor's
financial statements. We note that we initiated our investigation of
the post-1991 SODIE contributions because the data presented in
Usinor's financial statements did not reflect our understanding of the
program. Without a full understanding of the amounts contributed by the
GOF and Usinor, we are not in a position to say whether the post-1991
advances should be viewed differently from the pre-1992.
Because an investigation of the post-1991 SODIE advances was not
initiated in time to solicit adequate, verified information from all of
the necessary respondents, we have no basis upon which to use adverse
facts available with respect to this program. Accordingly, we are not
making a determination on the countervailability of the SODIE program
in this investigation. Should a countervailing duty order be put in
place, however, we will solicit information on the post-1991 SODIE
advances in a future
[[Page 73296]]
administrative review, if one is requested. See 19 CFR 351.311(c)(2).
We note, moreover, that based on the limited information the
respondents have submitted, any potential benefits to Usinor during the
POI from the SODIE program appear to be very small and, therefore,
would likely have little or no impact on the overall ad valorem subsidy
rate. See Memorandum to the file, Calculations for Final Determination,
December 13, 1999.
Comment 17: Foreign Ownership
The petitioners argue that 19 CFR 351.525(b)(7) makes clear that
subsidies are allocable to all domestic production regardless of the
nationality of the owner of that production where it states:
If the firm that received the subsidy has production facilities
in two or more countries, the Secretary will attribute the subsidy
to products produced by the firm within the country of the
government that granted the subsidy. However, if it is demonstrated
that the subsidy was tied to more than domestic production, the
Secretary will attribute the subsidy to multinational production.
Therefore, state the petitioners, any subsidies allocated to DHS will
be tied to DHS' French production only. The petitioners point out that
if the Department were to adopt a policy of reducing the level of past
subsidies in any way in response to a purchase of a company by a
foreign entity, then governments could shield against countervailing
duties by selling shares in domestic producers to foreign entities.
Department's Position: We agree with the petitioners that it is not
the nationality of the owner of the productive unit that matters;
rather, it is the nationality of the productive unit, itself, that is
of consequence. If a unit is cross-owned by a company that receives
untied subsidies and both are in the same country, we would attribute
the subsidy benefits to both. For a subsidy to be considered trans-
national and, therefore, not countervailable, it would have to be given
by a government in one country to a company in a different country. The
owners of the subsidy recipient are of no consequence in making
transnational determinations.
Comment 18: Discount Rates
The petitioners state that in calculating benchmark interest rates,
the new regulations require the Department to use as a base rate a
long-term interest rate that would be paid by a creditworthy company.
The petitioners state that there are a number of possible creditworthy
rates on the current record and that, of those rates, the Department
should choose the OECD-published ``Medium Term Credit to Enterprises,
3-7 years'' (MTCE) rates which are rates that are both long-term and
rates which would be paid by a creditworthy company.
The respondents take issue with the petitioners' attempt to
increase the creditworthy interest rate used in the Department's
uncreditworthy interest rate calculation. The respondents argue that
the bond rates selected by the Department in the Preliminary
Determination are the most appropriate rates to use to match to default
rates of corporate bond issuers as contemplated by section
351.505(a)(3)(iii) of the CVD Regulations. The respondents point out
that the MTCE rates recommended by the petitioners are not appropriate
because these rates apply to credit that is for a much shorter period
of time than is typical of private sector bonds. Furthermore,
respondents believe that the MTCE rates recommended by the petitioners
do not match with either the bond default rates currently used or with
the Department's AUL-determined benefit stream. With respect to the IMF
rates, the respondents point out that they have been previously
rejected by the Department as unrepresentative of long-term corporate
borrowing (see French Certain Steel).
Department's Position: We agree with the petitioners that the
Department has a variety of creditworthy interest rates on the record
to select from. In calculating a creditworthy benchmark rate for use in
years in which Usinor was creditworthy, but did not have a company-
specific interest rate, and for use in constructing uncreditworthy
benchmark rates for years in which it was not creditworthy, we applied
the methodology as described in section 351.505(a)(3) of the CVD
Regulations. This methodology requires the use of a long-term interest
rate that would be paid by a creditworthy company.
On the record of the instant proceeding, there are several interest
rates that could serve as the long-term interest rates that would be
paid by a creditworthy company, i.e., MTCE and equipment loan rates as
published by the OECD, cost of credit rates published in the Bulletin
of Banque de France, and private sector bond rates as published by the
International Monetary Fund. With respect to the equipment loan rates,
the cost of credit rates, and the private sector bond rates, the
Department determined in prior cases that these rates are indicative of
a creditworthy company's long-term cost of borrowing, see French
Certain Steel (58 FR at 37314) and French Stainless (64 FR at 30790).
Although the Department has not previously used the MTCE rates, there
is no record information indicating that they would be not indicative
of a creditworthy company's long-term cost of borrowing. In addition,
there is no evidence on the record of this proceeding indicating that
any of these rates is more appropriate than the others for purposes of
constructing a creditworthy benchmark rate. Therefore, for this final
determination, we are using an average of these creditworthy long-term
interest rates to calculate a non-company-specific creditworthy
benchmark rate.
Contrary to the respondents' argument, the Department's regulations
require the use of a long-term interest rate, not an interest rate that
equals the term of a company's AUL or matches the term of the other
interest rates being used. We did not include the IMF-published line
60p ``lending rates'' because the Department has determined that these
interest rates are unrepresentative of the cost of corporate long-term
borrowing. See French Certain Steel (58 FR at 37315).
Comment 19: Sales Denominators
The petitioners state that the sales values used by Department in
its preliminary determination were inflated because they included
substantial transfers occurring between members of the Usinor Group.
The petitioners argue that the 1998 Usinor net sales of 9.4 billion
euros, as reported in its annual report, is a gross amount which
includes intersegment sales occurring within the Usinor Group and that
this figure does not represent the sales revenue derived by the Group
from selling French merchandise to outside parties. Instead, the
petitioners argue, the correct sales figure is 8.3 billion euros as
reported in the annual report as total sales (or net sales minus
intersegment sales).
The petitioners state that due to the manner in which GTS
determines its sales revenues, it is impossible to judge whether the
sales value reported by GTS is legitimate. However, the petitioners
point out that there was an error in the company's calculations of its
POI sales revenue as made clear by the GTS verification exhibit
detailing this calculation.
The respondents take issue with the petitioners' claim that Usinor
based its 1998 sales figure of French-produced merchandise on the wrong
line item in its 1998 Annual Report. Respondents argue that the figure
accepted by the Department includes sales of French-produced
merchandise to members of the Usinor Group outside France. This is in
accordance with Financial Accounting Standard 14 which requires
[[Page 73297]]
exclusion of intercompany sales within France in order to avoid double-
counting of French production. Respondents argue that the line item
entitled ``intersegment sales'' represents sales from one geographical
segment to another geographical segment (e.g., from France to the
United States) for which sales are reported.
The respondents argue that Usinor's use of the amount in the ``net
revenue'' column is consistent with the calculation of the French-only
sales denominator in French Certain Steel. The respondents point out
that this methodology was also upheld in Court, see Inland Steel
Industries, Inc., et al, v. United States, 967 F. Supp. 1338, 1368(CIT
1997) (Inland Steel). The respondents believe that the petitioners have
no reason and cite no precedent for excluding intersegment sales within
the Usinor Group. The respondents maintain that these sales are real
sales carried out under arm's-length conditions. Lastly, the
respondents argue that most of Usinor's U.S. sales are to affiliates
and that the petitioners would never contend that any subsidies found
should not be allocated to these intercompany sales.
Department Position: We disagree with the petitioners that the
appropriate net sales amount for Usinor should be net of intersegment
sales. According to the Interpretation and Application of International
Accounting Standard for 1998,7 ``intersegment sales'' are
defined as ``transfers or products or services, similar to those sold
to unaffiliated customers, between industry segments or geographic
areas of the enterprise.'' Therefore, since Usinor's intersegment sales
are similar to those sold to unaffiliated customers, and there is no
regulatory or statutory requirements to exclude these sales, the
Department will continue to include them in Usinor's net sales amount
for the POI.
---------------------------------------------------------------------------
\7\ Excerpts are found attached to the Memorandum to the file on
International Accounting Standards of December 1, 1999.
---------------------------------------------------------------------------
With respect to the petitioners' argument that it is impossible to
judge whether the sales value reported by GTS is legitimate, we
disagree. While the manner in which GTS records its sales value is
unusual, we do not find it to be inherently distortional. Therefore,
the verified sales value for GTS is appropriate to use in the
calculations for the final determination. Although GTS made a slight
error in calculating its reported POI sales value, it is not the error
alluded to by the petitioners. The ``error'' referred to by the
petitioners is not an error because the adjustment they said should
have been done was made in a later stage of the calculation. For more
information, see the GTS verification report.
Comment 20: FOB Calculation
The petitioners argue that Usinor's reported FOB adjustment is
inconsistent with other publicly available data for plate imports from
France. The petitioners maintain that Usinor understated the FOB port
adjustment by only including ocean freight in its shipping expenses.
The petitioners argue that there are other costs such as insurance
which should have been deducted which Usinor failed to account for in
its calculations. The petitioners argue that the Department only
verified that there were no discrepancies with Usinor's reported
shipping costs, but it did not verify that there were other expenses
such as insurance which should also be included in the FOB adjustment.
The petitioners urge the Department to apply a more meaningful and
realistic FOB port adjustment to Usinor's sales for the final
determination.
Additionally, the petitioners argue that the same FOB adjustment
was used to adjust GTS' French merchandise sales value with no
indication of whether: (1) GTS was more or less export-intensive than
the Usinor Group as a whole or (2) GTS' costs for shipping, insurance
and other items were higher or lower than those of the Usinor Group as
a whole. Furthermore, the petitioners point out that the Department did
not verify GTS' FOB adjustment and whether it should be identical to
that of the Usinor Group.
The respondents take issue with the petitioners' complaint that
Usinor's FOB sales adjustment is too small because it does not include
insurance and other non-shipping costs. The respondents point out that
the FOB adjustment made by Usinor in this investigation was verified
and is precisely the same methodology used in French Certain Steel and
French Stainless. The respondents assert that the petitioners also made
this same argument on appeal from French Certain Steel, and that the
Court rejected those challenges, see Inland Steel, 967 F. Supp. at
1368-69.
Department Position: We agree with the respondents. Usinor has
indicated that it does not maintain FOB (port) value information, as
requested in the Department's questionnaire, in the regular course of
business. Therefore, Usinor reported an FOB adjustment based on the
methodology that was used and verified in the French Stainless. This
methodology derived Usinor's estimated FOB value by calculating a
shipping expense based on the expenses of a sample of Usinor Group
companies (including ocean freight, loading and port/terminal fees) and
dividing the shipping expenses by the 1998 net sales of the sampled
companies to derive the ratio of shipping costs to net sales. At
verification we found no reason to suspect that this methodology was
distortional, rather, we found it to be a reasonable methodology for
deriving Usinor's sales value on an FOB (port) basis.
With respect to the petitioners' argument that the Department
accepted the same FOB adjustment for GTS without verifying whether or
not it should be the same, there is no record information indicating
that it would not be an inappropriate estimate. Furthermore, the
Department has consistently recognized that given the vast amount of
information provided during the course of an investigation and the
strict time constraints imposed on the proceeding and particularly,
verification, it is simply not possible to examine each and every piece
of information provided by the respondents. The Department has taken
the position that by testing the validity and integrity of a
significant amount of relevant information, the small portion of the
remaining information not examined cannot be considered inaccurate or
incomplete.
In this instance, the responding companies had reported a single
FOB adjustment to be applied to the sales of the Usinor Group and GTS.
As discussed in Usinor's verification report, see Memorandum to the
File dated November 4, 1999 regarding ``Results of Verification of
Usinor,'' this adjustment was derived by calculating the total shipping
expenses of four companies within the Usinor Group: Sollac, Ugine,
Unimetal and Ascometal. Although this adjustment does not include the
shipping costs of GTS or CLI (also a producer of subject merchandise),
we consider it to be a more reasonable estimate of shipping costs
incurred by GTS than the use of the difference between the customs
value and the landed value as suggested by the petitioners since the
landed value could include other expenses which are not representative
of the respondents' shipping costs. Nevertheless, we acknowledge that
the respondents' calculation of the FOB adjustment did not include
amounts for insurance. Should a countervailing duty order be put in
place, we will examine this issue further in an administrative review,
if one is requested.
Therefore, for the purposes of this final determination, we have
continued to use the FOB adjustment reported by the responding
companies and verified
[[Page 73298]]
by the Department. We note, however, that in the event a countervailing
duty order is put in place and an administrative review of GTS occurs,
GTS will be required, as a separate entity, to report its own sales
values on an FOB basis.
Comment 21: Mid-Year Grant Allocation Assumption
The petitioners take issue with the Department's allocation
methodology for non-recurring benefits codified as 19 CFR
351.503(c)(4)(i). According to the petitioners, this methodology is
biased in favor of respondents in the following respects:
First, the methodology assumes that the benefit was received on the
first day of the first year instead of, on average, midway through the
year, the petitioners claim. In so doing, claim the petitioners, it
reduces the remaining, unallocated portion of the benefit that goes
into subsequent years. Since it is on this unallocated portion that the
time value of money calculation is attached, the petitioners argue that
the benefits in subsequent years are artificially reduced.
Second, the Department's methodology provides that the yearly
portion of the benefit that is amortized in subsequent years is also
credited as of the first of the year, i.e., no time value of money
calculation is made for that portion during that year, according to the
petitioners. In reality, argue the petitioners, the yearly portion of
the benefit would be expended over the course of the year and another
time value of money calculation would be appropriate on that yearly
portion. As a result of the yearly portion being credited as of the
first of the year, state the petitioners, the remaining unallocated
amount of the benefit that gets moved to future years is artificially
reduced at the beginning of the year instead of across the span of the
year. Accordingly, point out the petitioners, the calculation of the
time value of money attached to the remaining unallocated amount is
also artificially reduced.
The petitioners propose adopting the assumption that benefits are
received mid-year in order to neutralize the bias in the Department's
methodology. To this end, the petitioners provide calculation
methodologies.
The respondents note that the petitioners made these same arguments
during the Department's recent countervailing duty rulemaking
proceedings and that the Department rejected them. According to the
respondents, the petitioners must either challenge the particular
regulation that embodies the Department's grant allocation formula as
unlawful or seek a new rulemaking proceeding.
Department Position: The petitioners' approach to allocating
subsidies was presented to the Department during the comment period of
the CVD Regulations. See CVD Regulations, 63 FR at 65399. In finalizing
its CVD Regulations, the Department considered and chose not to adopt
the methodology proposed by petitioners. We continue to follow our
policy as explained in the Preamble to the CVD Regulations.
Verification
In accordance with section 782(i)(1) of the Act, except as noted
above, we verified the information submitted by the respondents prior
to making our final determination.
Suspension of Liquidation
In accordance with section 703(d)(1)(A)(i) of the Act, we have
calculated an individual rate for Usinor (including CLI and Sollac) and
GTS, the sole manufacturers of the subject merchandise. We determine
that the total estimated net subsidy rate is 5.56 percent ad valorem
for Usinor and 6.86 percent ad valorem for GTS. The All Others rate is
6.80 percent, which is the weighted average of the rates for both
companies.
In accordance with our Preliminary Determination, we instructed the
U.S. Customs Service to suspend liquidation of all entries of carbon-
quality plate from France, which were entered or withdrawn from
warehouse, for consumption on or after July 26, 1999, the date of the
publication of our Preliminary Determination in the Federal Register.
In accordance with section 703(d) of the Act, we instructed the U.S.
Customs Service to discontinue the suspension of liquidation for
merchandise entered on or after November 23, 1999, but to continue the
suspension of liquidation of entries made between July 26, 1999 and
November 22, 1999. We will reinstate suspension of liquidation under
section 706(a) of the Act if the ITC issues a final affirmative injury
determination and will require a cash deposit of estimated
countervailing duties for such entries of merchandise in the amounts
indicated above. If the ITC determines that material injury, or threat
of material injury, does not exist, this proceeding will be terminated
and all estimated duties deposited or securities posted as a result of
the suspension of liquidation will be refunded or canceled.
ITC Notification
In accordance with section 705(d) of the Act, we will notify the
ITC of our determination. In addition, we are making available to the
ITC all non-privileged and non-proprietary information related to this
investigation. We will allow the ITC access to all privileged and
business proprietary information in our files, provided the ITC
confirms that it will not disclose such information, either publicly or
under an administrative protective order, without the written consent
of the Assistant Secretary for Import Administration.
If the ITC determines that material injury, or threat of material
injury, does not exist, these proceedings will be terminated and all
estimated duties deposited or securities posted as a result of the
suspension of liquidation will be refunded or canceled. If, however,
the ITC determines that such injury does exist, we will issue a
countervailing duty order.
Return or Destruction of Proprietary Information
In the event that the ITC issues a final negative injury
determination, this notice will serve as the only reminder to parties
subject to Administrative Protective Order (APO) of their
responsibility concerning the destruction of proprietary information
disclosed under APO in accordance with 19 CFR 351.305(a)(3). Failure to
comply is a violation of the APO.
This determination is published pursuant to sections 705(d) and
777(i) of the Act.
Dated: December 13, 1999.
Robert LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-33238 Filed 12-28-99; 8:45 am]
BILLING CODE 3510-DS-P