[Federal Register Volume 61, Number 29 (Monday, February 12, 1996)]
[Notices]
[Pages 5378-5381]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3067]
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DEPARTMENT OF COMMERCE
[C-401-401]
Certain Carbon Steel Products From Sweden; Final Results of
Countervailing Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Final Results of Countervailing Duty Administrative
Review.
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SUMMARY: On August 24, 1995, the Department of Commerce (the
Department) published in the Federal Register its preliminary results
of administrative review of the countervailing duty order on certain
carbon steel products from Sweden for the period January 1, 1993
through December 31, 1993. We have completed this review and determine
the net subsidy to be 2.98 percent ad valorem for all companies. We
will instruct the U.S. Customs Service to assess countervailing duties
as indicated above.
EFFECTIVE DATE: February 12, 1996.
FOR FURTHER INFORMATION CONTACT: Stephanie Moore or Gayle Longest,
Office of Countervailing Compliance, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, N.W., Washington, D.C. 20230;
telephone: (202) 482-2849; (202) 482-3338.
SUPPLEMENTARY INFORMATION:
Background
On August 24, 1995, Department published in the Federal Register
(60 FR 44014) the preliminary results of its administrative review of
the countervailing duty order on certain carbon steel products from
Sweden. The Department has now completed this administrative review in
accordance with section 751 of the Tariff Act of 1930, as amended (the
Act).
We invited interested parties to comment on the preliminary
results. On September 25, 1995, a case brief was submitted on behalf of
U.S. Steel Group, a unit of USX Corporation, petitioner. On October 2,
1995, rebuttal comments were submitted by SSAB Svenskt Stal AB (SSAB),
respondent.
The review covers the period January 1, 1993 through December 31,
1993. The review involves one company, SSAB, the sole known producer/
exporter of the subject merchandise during the review period, and nine
programs.
Applicable Statute and Regulations
The Department is conducting this administrative review in
accordance with section 751(a) of the Act. Unless otherwise indicated,
all citations to the statute and to the Department's regulations are in
reference to the provisions as they existed on December 31, 1994.
However, references to the Department's Countervailing Duties; Notice
of Proposed Rulemaking and Request for Public Comments, 54 FR 23366
(May 31, 1989) (Proposed Regulations), are provided solely for further
explanation of the Department's countervailing duty practice. Although
the Department has withdrawn the particular rulemaking proceeding
pursuant to which the Proposed Regulations were issued, the subject
matter of these regulations is being considered in connection with an
ongoing rulemaking proceeding which, among other things, is intended to
conform the Department's regulations to the Uruguay Round Agreements
Act. See 60 FR 80 (Jan. 3, 1995).
Scope of the Review
Imports covered by this review are shipments of certain carbon
steel products from Sweden. These products include cold-rolled carbon
steel, flat-rolled products, whether or not corrugated or crimped;
whether or not corrugated or crimped: whether or not pickled, not cut,
not pressed and not stamped to non-rectangular shape; not coated or
pleated with metal and not clad; over 12 inches in width and of any
thickness; whether or not in coils. During the review period, such
merchandise was classifiable under the Harmonized Tariff Schedule (HTS)
item number 7209.11.0000, 7209.12.0000, 7209.13.0000, 7209.21.0000,
7209.22.0000, 7209.23.0000, 7209.24.5000, 7209.31.0000, 7209.32.0000,
7209.33.0000, 7209.34.0000, 7209.41.0000, 7209.43.0000, 7209.44.0000,
7209.90.0000, 7211.30.5000, 7211.41.7000 and 7211.49.5000.
The HTS item numbers are provided for convenience and customs
purposes. The written description remains dispositive.
Calculation Methodology for Assessment and Cash Deposit Purposes
Because SSAB is the only manufacturer/exporter of the subject
merchandise to the United States, SSAB's net subsidy rate is also the
country-wide rate.
Privatization
SSAB was partially privatized twice, in 1987 and in 1989. In the
Final Affirmative Countervailing Duty Determinations: Certain Steel
Products from Sweden (58 FR 37385; July 9, 1993) (Final Determination),
the Department found that SSAB had received countervailable subsidies
prior to these partial privatizations. Further, the Department found
that a private party purchasing all or part of a government-owned
company can repay prior subsidies on behalf of the company as part or
all of the sales price (see the General Issues Appendix appended to the
Final Countervailing Duty Determination: Certain Steel Products from
Austria (58 FR 37217, at 37262; July 9, 1993) (General Issues
Appendix)). Therefore, to the extent that a portion of the sales price
paid for a privatized company can be reasonably attributed to prior
subsidies, that portion of those subsidies will be extinguished.
To calculate the subsidies remaining with SSAB after each partial
privatization, we performed the following calculations. We first
calculated the net present value (NPV) of the future benefit stream of
the subsidies at the time of the sale of the shares. We then multiplied
the NPV by the percentage of shares the government retained after the
sale and derived the amount of subsidies not affected by privatization.
Next, we estimated the portion of the purchase price which represents
repayment of prior subsidies in accordance with the methodology
described in the ``Privatization'' section of the General Issues
Appendix (58 FR at 37259). This amount was then subtracted from the
NPV, and the result was divided by the NPV to calculate the ratio
representing the amount of subsidies remaining with SSAB after each
partial privatization.
With respect to sale of ``productive units'' by SSAB, we have
followed the
[[Page 5379]]
same methodology used in the Final Determination (58 FR 37385). In
accordance with that methodology, a portion of the price paid when a
productive unit is sold is allocable to the repayment of subsidies
received in prior years by the seller of the productive unit. The
subsidies allocated to the POR have been reduced for all of the
programs, as described above. These subsidies were further adjusted by
the asset value of the productive unit. For a further explanation of
the Department's methodology regarding ``sales of productive units''
and these calculations, see the ``Restructuring'' section of the
General Issues Appendix (58 FR at 37265).
To calculate the benefit provided to SSAB, we multiplied the
benefit calculated for 1993, adjusted for sales of productive units, by
the ratio representing the amount of subsidies remaining with SSAB
after the partial privatization. We then divided the results by the
company's total sales in 1993.
Analysis of Programs
Based upon our analysis of the questionnaire responses,
verification, and written comments from the interested parties, we
determine the following:
I. Programs Conferring Subsidies
1. Equity Infusion
In the preliminary results we found that this program conferred
countervailable benefits on the subject merchandise. Our analysis of
the comments submitted by the interested parties, summarized below, has
not led us to change our preliminary finding that the net subsidy for
this program is 0.82 percent ad valorem.
2. Structural Loans
In the preliminary results we found that this program conferred
countervailable benefits on the subject merchandise. Our analysis of
the comments submitted by the interested parties, summarized below, has
not led us to change our preliminary finding that the net subsidy for
this program is 0.38 percent ad valorem.
3. Forgiven Reconstruction Loans
In the preliminary results we found that this program conferred
countervailable benefits on the subject merchandise. Our analysis of
the comments submitted by the interested parties, summarized below, has
not led us to change our preliminary finding that the net subsidy for
this program is 1.77 percent ad valorem.
4. Grants for Temporary Employment for Public Works
In the preliminary results we found that this program conferred
countervailable benefits on the subject merchandise. Our analysis of
the comments submitted by the interested parties, summarized below, has
not led us to change our preliminary findings that the net subsidy for
this program is 0.01 percent ad valorem.
II. Program Found Not To Confer Subsidies
In the preliminary results we found the Research & Development
(R&D) Loans and Grants program did not confer countervailable benefits
during this period of review. Our analysis of the comments submitted by
the interested parties, summarized below, has not led us to change our
preliminary findings.
III. Programs Found Not To Be Used
In the preliminary results we found the following programs to be
not used:
1. Regional Development Grants
2. Transportation Grants
3. Location-of-Industry Loans
Our analysis of the comments submitted by the interested parties,
summarized below, has not led us to change our preliminary findings.
IV. Program Found To Be Terminated
In the preliminary results we found the State Stockpiling Subsidies
program to be terminated. Our analysis of the comments submitted by the
interested parties, summarized below, has not led us to change our
preliminary findings.
Analysis of Comments
Comment 1: Petitioner argues that the Department's privatization
methodology is contrary to economic reality and the requirements of the
countervailing duty law. According to petitioner, the Department's
determination that privatization ``repays'' a portion of the subsidies
received before privatization is contrary to economic reality because
the resources provided by the government to SSAB, which the market
would not have provided, still remain with SSAB after privatization and
continue to benefit the production of the merchandise. No resources
were transferred from SSAB to the Government of Sweden (GOS).
Furthermore, they contend that the Department's privatization
methodology is contrary to the countervailing duty law because the
countervailing duty statute, 19 U.S.C. Sec. 1671(a), requires that
subsidies bestowed upon the production, manufacture, or exportation of
merchandise imported into the United States be countervailed. Since the
subsidies received by SSAB continue to benefit its production of the
subject merchandise after the partial privatizations, these subsidies
continue to be fully countervailable.
The respondent argues in rebuttal that the new shareholders' arm's
length purchases result in the repayment of prior subsidies as a matter
of economic reality and as a result of the functional identity between
a company and its shareholders in the context of privatization.
Department's Position: We disagree with petitioner. The Department
previously addressed this issue in the Final Affirmative Countervailing
Duty Determinations: Certain Steel Products from Sweden (58 FR 37385,
July 9, 1993) (Final Determination) and in the General Issues Appendix
appended to the Final Affirmative Countervailing Duty Determination:
Certain Steel Products from Austria (58 FR 37261-2, July 9, 1993)
(General Issues Appendix). In this proceeding, petitioner has not
submitted any new arguments which would warrant reconsideration of this
issue.
Comment 2: Petitioner argues that the Department's privatization
methodology is flawed and not supported by facts. Petitioner contends
that the basis of the Department's methodology is that purchasers of
shares in a subsidized company paid more for those shares than they
would otherwise have absent subsidization; that because the new owners
are presumably profit-maximizers, the privatized firm must now generate
a reasonable rate of return on the owner's investment; and that to the
extent that the new owners invested more in the company because of the
subsidies, the company presumably faces an obligation to generate more
earnings so as to provide a reasonable rate of return. Petitioner
argues that this premise is incorrect, and that the Department is
confusing countervailable subsidy benefits with the effects of
subsidies on the value of the company. Petitioner also argues that the
Department's repayment methodology assumes that private investors have
different expectations than government investors, however the
Department offers no evidence to support this assumption. Finally,
petitioner argues that if the repayment methodology applies to
purchases of shares in state-owned companies, it must also apply to
purchases of shares in private companies that have received subsidies.
Department's Position: The arguments presented by the petitioner
have been previously addressed by the
[[Page 5380]]
Department. See General Issues Appendix (58 FR 37217, at 37259, 37264).
In this proceeding petitioner has presented no new evidence or
arguments regarding this issue that would warrant reconsideration of
the Department's determination that past subsidies bestowed upon SSAB
are affected by privatization. Thus, the Department's preliminary
results remain unchanged with respect to this issue.
We note, however, that petitioner went beyond the Department's
position in outlining their interpretation of the basis of the
Department's methodology by stating that ``purchasers of shares in a
subsidized company paid more for those shares than they would have, and
that to the extent that the new owners invested more in the company
because of the subsidies, the company presumably faces an obligation to
generate more earnings to provide a reasonable rate of return.'' The
Department neither stated nor implied such a position. The Department
has stated that the owner-shareholders' expectations of a return on
their investment cannot be separated from the profitability of the
newly privatized company, and that the owners will seek to extract a
rate of return from their company at least equal to that of alternative
investments of similar risk. The Department also stated that to the
extent that a portion of the price paid for a privatized company can
reasonably be attributed to prior subsidies, that portion of those
subsidies will be extinguished. See General Issues Appendix (58 FR
37217, at 37262).
Comment 3: Petitioner contends that the Department's privatization
methodology was rejected by the Court of International Trade (CIT) in
British Steel plc v. United States, British Steel plc v. U.S., 879 F.
Supp. 1254 (CIT 1995) (British Steel). Petitioner contends that in
British Steel, the court stated that it would seem at best that the
only way to extinguish a previously given gift or subsidy would be to
repay the gift or subsidy to the original donor government. To the
extent that the sale of shares involves only a change in the beneficial
ownership of the company, it does not cause any change in the company
itself and no such repayment occurs.
Petitioner also contends that although the CIT's statements in
British Steel regarding repayment are dicta, in the final remand
determinations in British Steel, the Department accepted the CIT's
reasoning and abandoned its repayment methodology. Therefore, the
petitioner argues that because SSAB has not repaid the GOS for prior
subsidies, such benefits remain with the company, and are
countervailable.
Respondent contends that because the CIT has yet to issue its final
judgment in British Steel, it is inappropriate to even suggest that the
CIT's opinion has any bearing on this case.
Department's Position: We disagree with petitioner. The CIT has not
entered an order with respect to the remand determinations in British
Steel. The Department is not required to follow a CIT opinion that is
still subject to litigation and to which the Department has not
acquiesced. In such instances, the Department does not change its
methodology while litigation is pending. See, Color Television
Receivers from the Republic of Korea: Final Results of Antidumping Duty
Administrative Review. (59 FR 13700, at 13702; March 23, 1994).
Therefore, we have followed our privatization methodology as set forth
in the Final Determination.
Comment 4: Petitioner argues that the Department has failed to
explain the logic underlying its privatization methodology.
Specifically, petitioner argues that the Department has failed to
explain why a ratio of the subsidies received by a company each year to
the company's net worth in that year serves as a ``reasonable
surrogate'' for the percentage of the company's net value that the
subsidies represent, and how a simple arithmetic average of these
ratios relates to the value of the subsidies at the time the company is
sold, much less to the extinguishment of subsidy benefits.
Respondent argues that the Department has substantial discretion
and wide latitude in developing reasonable methodologies to properly
implement the countervailing duty law. As a factual matter, the
Department has adequately explained the bases for its repayment formula
in the General Issues Appendix.
Department's Position: As explained in the General Issues Appendix,
the methodology applied by the Department attempts to estimate the
proportion of the purchase price attributable to subsidies. The ratio,
cited by petitioner, represents, in the Department's view, the most
reasonable approach to that estimation. In arguing the issue of the
impact of privatization upon formerly government-owned companies which
previously benefitted from subsidies, petitioners in the Final
Determination stated that privatization does not affect the amount of
subsidies allocable to the privatized steel companies, while
respondents argued that privatization of a government-owned company
extinguishes any pre-existing subsidies. The Department considered, but
ultimately rejected, both of these extreme positions. The Department
determined that prior subsidies are allocable to the privatized
companies upon their sale to private parties. However, it also
concluded that a portion of the price paid by the private parties
constituted repayment for the subsidies previously bestowed on the
formerly government-owned companies.
The Department recognized that any methodology developed to
determine what portion of the sales price constituted repayment for
prior subsidies would yield only a rough estimate.
In attempting to estimate that portion of the purchase price
attributable to prior subsidies, the Department concluded that the most
reasonable approach was to look at the ratio of the privatized
company's subsidies (over time) to the company's net worth during the
period from 1977 (the earliest point at which subsidies providing
countervailable benefits in the period of investigation could have been
bestowed) until the year before privatization. The subsidy-to-net worth
ratio is intended to provide the Department with an estimate of the
contribution subsidies have made to the value of a company.
Final Results of Review
For the period January 1, 1993 through December 31, 1993, we
determine the net subsidy to be 2.98 percent ad valorem for all
companies.
The Department will instruct the U.S. Customs Service to assess the
following countervailing duties:
------------------------------------------------------------------------
Manufacturer/exporter Rate
------------------------------------------------------------------------
SSAB Svenskt Stal AB.......................................... 2.98
Country-wide rate............................................. 2.98
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The Department will also instruct the U.S. Customs Service to
collect a cash deposit of estimated countervailing duties of 2.98
percent of the f.o.b. invoice price on all shipments of the subject
merchandise from Sweden, entered, or withdrawn from warehouse, for
consumption on or after the date of publication of the final results of
this review.
This notice serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 C.F.R. 355.34(d). Timely written notification
of return/destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulations
[[Page 5381]]
and the terms of an APO is a sanctionable violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.
Dated: January 30, 1996.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 96-3067 Filed 2-9-96; 8:45 am]
BILLING CODE 3510-DS-P
