[Federal Register Volume 61, Number 29 (Monday, February 12, 1996)]
[Notices]
[Pages 5381-5384]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3068]
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DEPARTMENT OF COMMERCE
[C-401-804]
Certain Cut-to-Length Carbon Steel Plate 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
cut-to-length carbon steel plate from Sweden for the period December 7,
1992 through December 31, 1993. We have completed this review and
determine the net subsidy to be 2.98 percent ad valorem for all
companies for the periods December 7, 1992 through April 5, 1993, and
August 17, 1993 through December 31, 1993. Merchandise entered on or
after April 6, 1993 and before August 17, 1993 is to be liquidated
without regard to countervailing duties.
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, NW., Washington, DC 20230; telephone:
(202) 482-2849; (202) 482-3338.
SUPPLEMENTARY INFORMATION:
Background
On August 24, 1995, the Department published in the Federal
Register (60 FR 44017) the preliminary results of its administrative
review of the countervailing duty order on certain cut-to-length carbon
steel plate 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
Bethlehem Steel Corporation, Geneva Steel, Gulf States Steel Inc. of
Alabama, Inland Steel Industries, Inc., Lukens Steel Company, Sharon
Steel Corporation, and U.S. Steel Group, a unit of USX Corporation
(petitioners). On October 2, 1995, rebuttal comments were submitted by
SSAB Svenskt Stal AB (SSAB) (respondent).
The review covers the period December 7, 1992 through December 31,
1993. The review involves one company, SSAB, the sole known producer/
exporter of the subject merchandise during the review period, and ten
programs.
Because the period of review (POR) covers only three weeks in 1992
(December 7 through December 31, 1992), the Department determined that
it was appropriate to apply the assessment rate calculated for 1993 to
exports made during the three-week period. See, Memorandum for Joseph
A. Spetrini from the Steel Team dated October 3, 1994, regarding
calculation of the assessment rate in the first administrative reviews
of the Certain Steel Countervailing Duty Orders, which is on file in
the Central Records Unit, Room B-099 of the Department of Commerce.
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 cut-to-
length carbon steel plate from Sweden. These products include hot-
rolled carbon steel universal mill plates (i.e., flat-rolled products
rolled on four faces or in a closed box pass, of a width or in a closed
box pass, or a width exceeding 150 millimeters but not exceeding 1,250
millimeters and of a thickness of not less than 4 millimeters and of a
thickness of not less than 4 millimeters, not in coils and without
patterns in relief), of rectangular shape, neither clad, plated nor
coated with metal, whether or not painted, varnished, or coated with
plastics or other nonmetallic substances; and certain hot-rolled carbon
steel flat-rolled products in straight lengths, or rectangular shape,
hot rolled, neither clad, plated, nor coated with metal, whether or not
painted, varnished, or coated with plastics or other nonmetallic
substances, 4.75 millimeters or more in thickness and of a width which
exceeds 150 millimeters and measures at least twice the thickness.
During the review period, such merchandise was classifiable under the
Harmonized Tariff Schedule (HTS) item numbers 7208.31.0000,
7208.32.0000, 7208.33.1000, 7208.33.5000, 7208.41.000, 7208.42.0000,
7208.43.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.11.0000,
7211.12.0000, 7211.21.0000, 7211.22.0045, 7211.90.0000, 7212.40.1000,
7212.40.5000, and 7212.50.0000. Included in this order are flat-rolled
products of non-rectangular cross-section where 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. Excluded from this order is grade X-70
plate. 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
[[Page 5382]]
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 sales of ``productive units'' by SSAB, we have
followed the same methodology used in the Final Determination (58 FR at
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 finding that the net subsidy for
this program is 0.01 percent ad valorem.
II. Programs Found Not To Confer Subsidies
In the preliminary results we found that the following programs did
not confer countervailable benefits during this period of review:
1. Research & Development (R&D) Loans and Grants.
2. Fund for Industry and New Business Research and Development
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: Petitioners argue that the Department's privatization
methodology is contrary to economic reality and the requirements of the
countervailing duty law. According to petitioners, 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 or privatization.
Department's Position: We disagree with petitioners. 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
[[Page 5383]]
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, petitioners have not submitted any new arguments which
would warrant reconsideration of this issue.
Comment 2: Petitioners argue that the Department's privatization
methodology is flawed and not supported by facts. Petitioners contend
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. They argue 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. Petitioners also argue 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, petitioners argue 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 petitioners
have been previously addressed by the Department. See General Issues
Appendix (58 FR 37217, at 37259, 37264). In this proceeding petitioners
have 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 petitioners 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: Petitioners contend 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). Petitioners contend 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. Petitioners also contend 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 petitioners argue 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 petitioners. 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: Petitioners argue that the Department has failed to
explain the logic underlying its privatization methodology.
Specifically, petitioners argue 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 petitioners, 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 ratio of the privatized company's subsidies (over time)
to the company's net worth
[[Page 5384]]
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
In accordance with 19 CFR Sec. 355.22(b)(1), an administrative
review ``normally will cover entries or exports of merchandise during
the most recently completed reporting year of the government of the
affected country.'' However, because this is the first administrative
review of this countervailing duty order, in accordance with 19 CFR
Sec. 355.22(b)(2), it covers the period, and the corresponding entries,
``from date of suspension of liquidation * * * to the end of the most
recently completed reporting year of the government of the affected
country.'' This period is December 7, 1992 through December 31, 1993.
The Department issued its preliminary affirmative countervailing
duty determination in the investigation on December 7, 1992 (57 FR
57793). On March 8, 1993 in accordance with section 705(a)(1) of the
Act, as amended, we aligned the final countervailing duty
determinations with the final antidumping duty determinations on
certain steel products from various countries (58 FR 12935; March 8,
1993). Under 19 CFR 355.20(c)(1)(ii), and pursuant to article 5.3 of
the GATT Subsidies Code, the Department cannot require suspension of
liquidation for more than 120 days without the issuance of a
countervailing duty order. Accordingly, the Department instructed
Customs to terminate the suspension of liquidation of the subject
merchandise entered, or withdrawn from warehouse, for consumption on or
after April 6, 1993. The Department reinstated suspension of
liquidation and the cash deposit requirement for entries made on or
after August 17, 1993, the date of publication of the countervailing
duty order. Thus, merchandise entered on or after April 6, 1993, and
before August 17, 1993 is to be liquidated without regard to
countervailing duties.
For the periods December 7, 1992 through April 5, 1993, and August
17, 1993 through December 31, 1993, we determine the net subsidy to be
2.98 percent ad valorem.
The Department will instruct the U.S. Customs Service to assess the
following countervailing duties:
------------------------------------------------------------------------
Rate
Period Manufacturer/exporter (percent)
------------------------------------------------------------------------
December 7, 1992-April 5, 1993..... All companies......... 2.98
April 6, 1993-August 16, 1993...... All companies......... ...........
August 17, 1993-December 31, 1993.. All companies......... 2.98
------------------------------------------------------------------------
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 all manufacturers, producers, and exporters, 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 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 31, 1996.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 96-3068 Filed 2-9-96; 8:45 am]
BILLING CODE 3510-DS-P
