[Federal Register Volume 64, Number 66 (Wednesday, April 7, 1999)]
[Notices]
[Pages 16915-16920]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-8621]
[[Page 16915]]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-428-812]
Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From
Germany: Preliminary Results of Countervailing Duty Administrative
Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce
ACTION: Notice of Preliminary Results of Countervailing Duty
Administrative Review
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SUMMARY: The Department of Commerce (the Department) is conducting an
administrative review of the countervailing duty order on certain hot-
rolled lead and bismuth carbon steel products from Germany for the
period January 1, 1997 through December 31, 1997. For information on
the net subsidy for the reviewed company as well as for non-reviewed
companies, please see the Preliminary Results of Review section of this
notice. If the final results remain the same as these preliminary
results of administrative review, we will instruct the U.S. Customs
Service to assess countervailing duties as detailed in the Preliminary
Results of Review section of this notice. Interested parties are
invited to comment on these preliminary results. (See the Public
Comment section of this notice.)
EFFECTIVE DATE: April 7, 1999.
FOR FURTHER INFORMATION CONTACT: Eric B. Greynolds or Robert Copyak,
Group II, Office of AD/CVD Enforcement VI, Import Administration, U.S.
Department of Commerce, Room 4012, 14th Street and Constitution Avenue,
N.W., Washington, D.C. 20230; telephone (202) 482-2786.
SUPPLEMENTARY INFORMATION:
Background
On March 22, 1993, the Department published in the Federal Register
(58 FR 15325) the countervailing duty order on certain hot-rolled lead
and bismuth carbon steel products from Germany. On March 11, 1998, the
Department published a notice of ``Opportunity to Request an
Administrative Review'' (63 FR 11868) of this countervailing duty
order. We received a timely request for review from Saarstahl AG
(Saarstahl), the respondent company to this proceeding. On April 24,
1998, we initiated the review, covering the period January 1, 1997
through December 31, 1997, (63 FR 20378). On April 28, 1999, Inland
Steel Bar Company and USS/KOBE Steel Co. (petitioners) requested that
the Department conduct verification of information submitted on the
record in all questionnaire responses.
In accordance with 19 CFR 351.213(b), this review covers only those
producers or exporters for which a review was specifically requested.
Accordingly, this review covers Saarstahl AG (Saarstahl). This review
also covers five programs. On November 19, 1998, we extended the period
for completion of the preliminary results pursuant to section 751(a)(3)
of the Tariff Act of 1930, as amended. See Hot-Rolled Lead and Bismuth
Carbon Steel Products from Germany: Extension of the Time Limit for
Preliminary Results of Countervailing Duty Administrative Review (63 FR
64235). The deadline for the final results of this review is no later
than 120 days from the date on which these preliminary results are
published in the Federal Register.
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). The Department is conducting this administrative review in
accordance with section 751(a) of the Act. All citations to the
Department's regulations reference 19 CFR Part 351(April 1998), unless
otherwise indicated.
Scope of the Review
The products covered by this investigation are hot-rolled bars and
rods of nonalloy or other alloy steel, whether or not descaled,
containing by weight 0.03 percent or more of lead or 0.05 percent or
more of bismuth, in coils or cut lengths, and in numerous shapes and
sizes. Excluded from the scope of this investigation are other alloy
steels (as defined by the Harmonized Tariff Schedule of the United
States (HTSUS) Chapter 72, note 1 (f)), except steels classified as
other alloy steels by reasons of containing by weight 0.4 percent or
more of lead, or 0.1 percent or more of bismuth, tellurium, or
selenium. Also excluded are semi-finished steels and flat-rolled
products. Most of the products covered in this review are provided for
under subheadings 7213.20.00.00 and 7214.30.00.00 of the HTSUS. Small
quantities of these products may also enter the United States under the
following HTSUS subheadings: 7213.31.30.00; 7213.31.60.00;
7213.39.00.30; 7213.39.00.60; 7213.39.00.90; 7213.91.30.00;
7213.91.45.00; 7213.91.60.00; 7213.99.00; 7214.40.00.10, 7214.40.00.30,
7214.40.00.50; 7214.50.00.10; 7214.50.00.30, 7214.50.00.50;
7214.60.00.10; 7214.60.00.30; 7214.60.00.50; 7214.91.00; 7214.99.00;
7228.30.80.00; and 7228.30.80.50. HTSUS subheadings are provided for
convenience and Customs purposes. The written description of the scope
of this proceeding is dispositive.
Duty Absorption
On April 28, 1998, the Department received a request from
petitioners to conduct a duty absorption review to determine whether
Saarstahl absorbed countervailing duties. The issue of whether it is
appropriate to examine duty absorption in the context of a
countervailing duty review was considered in the 1997 administrative
review of the countervailing duty order on lead and bismuth carbon
steel products from the United Kingdom. The Department concluded that,
because there is no relationship between the amount of duties absorbed
and the extent of government subsidization that will take place in the
future, it is not appropriate to examine duty absorption in a
countervailing duty reviews. Therefore, we are not conducting a duty
absorption review in this administrative review. A copy of the decision
memorandum which elaborates the Department's rationale with regard to
this issue (see memorandum through Holly A. Kuga, Acting Deputy
Assistant Secretary for Group II, to Robert S. LaRussa, Assistant
Secretary for Import Administration, dated March 18, 1999, a public
document on file in the Central Records Unit, Room B-099 of the Main
Commerce Building) has been placed on the record of this administrative
review as a public document from the team to the file, dated March 25,
1999.
Subsidies Valuation Information
Allocation Period
In British Steel plc. v. United States, 879 F.Supp. 1254 (February
9, 1995) (British Steel I), the U.S. Court of International Trade (the
Court) ruled against the allocation period methodology for non-
recurring subsidies that the Department had employed for the past
decade, a methodology that was articulated in the General Issues
Appendix appended to Final Affirmative Countervailing Duty
Determination: Certain Steel Products from Austria; 58 FR 37217 (July
9, 1993) (GIA). In accordance with the Court's decision on remand, the
Department determined that the most reasonable
[[Page 16916]]
method of deriving the allocation period for nonrecurring subsidies is
a company-specific AUL of non-renewable physical assets. This remand
determination was affirmed by the Court on June 4, 1996. British Steel
plc. v. United States, 929 F.Supp 426, 439 (CIT 1996) (British Steel
II).
However, in administrative reviews where the Department examines
non-recurring subsidies received prior to the POR which have been
countervailed based on an allocation period established in an earlier
segment of the proceeding, it is not practicable to reallocate those
subsidies over a different period of time. Since the countervailing
duty rate in earlier segments of the proceeding was calculated based on
a certain allocation period and resulted in a certain benefit stream,
redefining the allocation period in later segments of the proceeding
would entail taking the original grant amount and creating an entirely
new benefit stream for that grant. Such a practice may lead to an
increase or decrease in the total amount countervailed and, thus, would
result in the possibility of over-or under-countervailing the actual
benefit. In this administrative review, the Department is considering
non-recurring subsidies previously allocated in the initial
investigation. Therefore, for purposes of these final results, the
Department is using the original allocation period assigned to each
non-recurring subsidy received prior to the POR. See, e.g., Final
Results of Countervailing Duty Administrative Review: Industrial
Phosphoric Acid from Israel, 64 FR 2879 (January 19, 1999) and Final
Results of Countervailing Duty Administrative Review: Certain Carbon
Steel Products from Sweden, 62 FR 16549 (April 7, 1997).
Discount Rates
Pursuant to the Final Results of Redetermination Pursuant to Court
Remand Regarding The Privatization in Germany: Saarstahl Ag v. United
States, Consol. Ct. No. 93-04-00219 (June 30, 1997) (Remand
Determination), we find that Saarstahl was uncreditworthy in 1989 and,
therefore, have applied the uncreditworthy discount rate from the
Remand Determination for Saarstahl's calculations.
Change in Ownership
(I) Background
In the investigation of this proceeding, we examined Saarstahl's
changes in ownership prior to 1991. Specifically, in 1986, Arbed, a
company owned by the Government of Luxemburg, transferred 76 percent of
Saarstahl's shares to the Government of Saarland (GOS), making
Saarstahl a majority state-owned company. The GOS then began a search
for a new investor for Saarstahl. Usinor-Sacilor, a company owned by
the Government of France, expressed interest in Saarstahl. In 1989, the
GOS and Usinor-Sacilor reached an agreement in which: (1) the two steel
companies in Saarland, Saarstahl Volingen Gmbh. (Saarstahl) and
Dillinger Huttenwerke (Dillinger) would merge to form DHS Dillinger
Hutte Saarstahl AG (DHS); (2) Usinor-Sacilor would buy the newly
created DHS; and (3) in return for Usinor-Sacilor's purchase of DHS,
the GOS and the Government of Germany (GOG) would forgive Saarstahl's
debt obligations, also known as Ruckzahlungsverpflichtungen (RZVs), to
the regional and federal governments and release the company from any
obligation to repay Saarstahl's guaranteed loans. The last step of the
change in ownership took place in 1989 with the transfer of the long
products business from DHS to a newly-formed company, Saarstahl AG.
In the investigation of this case, the Department found that the
cancellation of Saarstahl's debts constituted countervailable
subsidies. See Final Affirmative Countervailing Duty Determination:
Certain Hot Rolled Lead and Bismuth Carbon Steel Products from Germany,
58 FR 6233, 6233 (January 27, 1993) (Lead and Bismuth). Further, the
Department determined that the change in ownership transaction did not
alter the effect of these previously bestowed subsidies. In the 1993
certain steel products investigations, the Department modified its
position in Lead and Bismuth concerning changes in ownership.
Specifically, the Department stated that it could no longer be assumed
that the entire amount of subsidies passes through to the new owners
after a change in ownership. Rather, when a company is sold, even
partially, a portion of the sales price represents repayment of prior
subsidies. See GIA, 58 FR at 37263. As a result of this change, the
Department, pursuant to the Remand Determination: Certain Hot Rolled
Lead and Bismuth Carbon Steel Products from Germany, (October 12,
1993), altered its original determination regarding the effects of
privatization on subsidies previously received by Saarstahl so that it
conformed with the methodology described in the GIA. This change in
ownership methodology was upheld in Saarstahl AG v. United States, 78
F. 3d 1539 (Fed. Cir. 1996) and British Steel plc v. Untied States, 127
F.3d 1471 (Fed. Cir. 1997).
In the recent investigation of steel wire rod from Germany, we
included in our change of ownership calculations the 1994 transaction
under which Usinor-Sacilor, via DHS, spun-off 100 percent of Saarstahl
AG to the GOS for DM 1. See Final Affirmative Countervailing Duty
Determination: Steel Wire Rod from Germany (German Wire Rod), 62 FR
54990, (October 22, 1997) (German Wire Rod). Respondents have reported
in this administrative review that, in 1997, the GOS transferred the
majority of its shareholdings in Saarstahl to three parties: (1)
Saarstahl Treuhand, (2) AG der Dillinger Huttenwerke (Dillinger), and
(3) Kreditanstalt fur Wiederaufbau (Kreditanstalt). Prior to this
transfer, the GOS held approximately 99.9 percent of Saarstahl's
shares. After the share transfer, the GOS held approximately 32 percent
of the company's shares. The remaining 68 percent was divided as
follows: Saarstahl Treuhand--28.1 percent, Dillinger--19.9 percent, and
Kreditanstalt--20 percent.
Regarding the 1997 privatization, petitioners argue in their March
11, 1999, submission that the new shareholders in Saarstahl should not
be considered private entities. They argue that Saarstahl Treuhand is a
trust that was set up and is controlled by the GOG because no private
investor could be found for these shares. They argue that the GOS
(through its ownership of Saarstahl) is an owner of the parent company
of Dillinger and, therefore, Dillinger is government-controlled. They
also argue that, because the Kreditanstalt is a development bank of the
GOG, shares assigned to it represent no ultimate change in the
ownership of Saarstahl. On this basis, petitioners argue that none of
the three parties' purchase price can constitute repayment of
Saarstahl's previously bestowed subsidies. In addition, petitioners
argue that the Department should treat all of the purchase price as a
grant to Saarstahl because none of the parties to the privatization
made its purchase on terms consistent with those of a private investor.
In its March 22, 1999, submission, respondent rebuts petitioners'
contention that the buyers of Saarstahl in 1997 were not private
actors. Respondent argues that Saarstahl Treuhand is a private trust
established under German law for the benefit of bankruptcy creditors
and that it is not, in any way, controlled by the government. Regarding
Dillinger, respondent states that approximately 5 percent is held by
individual investors
[[Page 16917]]
and the remaining 95 percent is held by DHS. They then explain that the
majority of DHS is owned by the private companies Usinor-Sacilor S.A.
and ARBED S.A. Regarding Kreditanstalt, respondent argues that the
administrative record of this proceeding clearly indicates that the
development bank's decision to invest in Saarstahl was made on terms
consistent with commercial considerations and, on this basis, its
payment should be included as part of the purchase price. Thus,
respondent argues that since all three parties made their decision to
invest in Saarstahl independent of the GOG and the GOS, the Department
should determine that 100 percent of the purchase price constitutes
repayment of Saarstahl's previously bestowed subsidies.
In this administrative review, we are analyzing the privatization
of Saarstahl in 1989, its subsequent spin-off in 1994, and the
company's partial privatization in 1997. For purposes of this
preliminary determination, we have applied the Department's change in
ownership methodology for the 1989 privatization and the 1994 spin-off.
However, we have not applied the change in ownership methodology for
the 1997 reorganization. In light of petitioner's arguments that the
new shareholders should not be considered private entities and that the
purchase price constituted a countervailable grant, we are considering
whether to treat contributions by the new shareholder as grants or as
repayment of prior subsidies. We will gather further information
regarding the 1997 change in ownership, and we will consider the
comments submitted on the record by interested parties. We note that
all information submitted on the record pertaining to this issue will
be subject to verification and further analysis.
(II) Change in Ownership Calculation Methodology
Under the Change in Ownership methodology described in the GIA
concerning the treatment of subsidies received prior to the sale of a
company or the spinning-off of a productive unit, 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 POR (in this case 1983) and ending one year prior
to the change in ownership.
As in German Wire Rod, we have modified this methodology with
respect to Saarstahl. See 62 FR 54991. Specifically, we calculated the
ratios in question by including in the calculation the assistance that
Saarstahl received prior to privatization in the year the assistance
was received. We did so even though we do not consider this prior
assistance, at the it was received, to be nonrecurring in nature, and,
thus, allocable over time.
We then take the simple average of the ratios of subsidies to net
worth. This simple average of the ratios serves as a reasonable
surrogate for the portion 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 unit
can be attributable to the repayment of 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 repayment of prior subsidies in accordance with the
privatization methodology outlined above.
Analysis of Programs
I. Programs Conferring Subsidies
A. Government Forgiveness of Saarstahl Debt in 1989
During the period 1978 to 1989, Saarstahl and its predecessor
companies received large amounts of assistance from the GOS and the GOG
in the form of RZVs. Repayment of these RZVs became contingent upon
Saarstahl returning to profitability and earning a profit above and
beyond the losses accumulated after 1978.
In 1989, the GOS reached an agreement with Usinor-Sacilor to
combine Saarstahl with Dillinger under a holding company, DHS. Pursuant
to the combination agreement and as a condition for sale, in 1989 the
GOG and GOS entered into a debt forgiveness contract
(Entschuldungsvertrag, or EV) which effectively forgave all the
outstanding repayment obligations owed by Saarstahl to the two
Governments (i.e., a total of DM 3.945 billion in debt was forgiven).
The EV specified, however, that if Saarstahl went bankrupt, the GOG and
GOS claims could be revived, but their claims would be subordinated to
those of all other creditors.
After several years of unprofitable operation, Saarstahl filed for
bankruptcy in 1993 under the German Bankruptcy Regulations
(Konkursordnung). In 1994, the GOS bought Saarstahl back from Usinor-
Sacilor for DM 1. At the time of its bankruptcy, Saarstahl's
liabilities exceeded its assets by a factor of four, not including its
liabilities to the GOG and GOS. Both Governments filed claims against
the Saarstahl bankruptcy estate based on the RZV debt that was
conditionally forgiven in 1989. These EV-related claims were rejected
by the bankruptcy trustee as invalid in 1995 on the grounds that the
degree of their subordination resulted in the fact that the GOG and GOS
would never be repaid. The GOG and GOS chose not to appeal the
rejection of their bankruptcy claims, on the grounds that the
subordination of their claims made the likelihood of recovery very
small, and not worth the high cost of litigating the matter.
In Lead and Bismuth, 58 FR at 6234, we found that Saarstahl's RZVs
and similar related debt were forgiven by the 1989 EV, thus conferring
a countervailable benefit on Saarstahl as of 1989. This was also the
Department's finding in Certain Steel and German Wire Rod. No new
information or evidence of changed circumstances was presented in this
review to warrant any reconsideration of these findings.
To calculate the countervailable benefit in the POR, we used our
standard declining balance grant methodology. We then divided the
benefit attributable to the POR, adjusted to reflect the changes in
ownership described above, by the total sales of Saarstahl during the
same period. On this basis, we preliminarily determine the net subsidy
for this program to be 11.61 percent ad valorem for Saarstahl.
B. Debt Forgiveness by Private Banks in 1989
Toward the end of 1985, the GOS presented a long-term restructuring
plan for Saarstahl to Saarstahl's creditors and requested that they
forgive loans in the amount of DM 350 million. In 1986, the private
banks agreed to forgive DM 217.33 million of debt owed to them by
Saarstahl (DM 216.82 of which was forgiven in 1989), if the GOG and GOS
fulfilled certain prerequisites. Two of
[[Page 16918]]
the prerequisites were that the Governments forgive all debt owed to
them by Saarstahl and that the GOS secure the future liquidity of
Saarstahl. In 1986, the GOS agreed to forgive all debts owed to it by
Saarstahl and to secure the liquidity of Saarstahl as it had in the
past.
In the investigation of this case, we determined that the 1989
forgiveness of principal by private banks in the amount of DM 216.82
constituted a countervailable subsidy. See Lead and Bismuth, 58 FR
6233-34; See also, German Wire Rod, 62 FR at 54991. No new information
or evidence of changed circumstances was presented in this review to
warrant any reconsideration of that finding.
To calculate the countervailable subsidy, we followed the
methodology described in the ``Government Forgiveness of Saarstahl's
Debt in 1989'' section of the notice, above. We then divided the
benefit attributable to the POR, adjusted to reflect the changes in
ownership described above, by the total sales of Saarstahl during the
same period. On this basis, we preliminarily determine the net subsidy
for this program to be 0.64 percent ad valorem for Saarstahl.
C. Worker Assistance Program (ECSC Redeployment Aid Under Article
56(2)(b)
Under Article 56(2)(b) of the European Coal and Steel Community
(ECSC) Treaty, persons employed in the iron, steel, and coal industries
who lose their jobs may receive assistance for social adjustment. This
assistance is provided to workers affected by restructuring measures,
particularly workers withdrawing from the labor market into early
retirement and workers forced into unemployment. The ECSC disburses
assistance under this program on the condition that the affected
country makes an equivalent contribution. During the POR, payments were
made to Saarstahl, on behalf of its workers, under Article 56(2)(b).
In Lead and Bismuth, 58 FR at 6235, the Department determined that
the portion of ECSC payments (i.e. 50 percent) made under this program
during the POI, 1991, was not countervailable because the funds for
this program came from the ECSC's operational budget, which is funded
by levies on the companies. In Lead and Bismuth, the Department also
previously found that the portion funded by the GOG was countervailable
to the extent that the GOG's payments relieved Saarstahl of an
obligation to its laid-off workers that the company would otherwise
have incurred. See Lead and Bismuth, 58 FR at 6235.
In German Wire Rod, the Department determined this program to be
countervailable but distinguished between GOG worker assistance
payments relating to the social plan established in conjunction with
Saarstahl's bankruptcy in 1993, and GOG worker assistance payments made
pursuant to the company's pre-bankruptcy social plans. See 62 FR at
54993. In that investigation, the Department reasoned that Saarstahl's
bankruptcy social plan provides the maximum allowable benefits to
workers under German bankruptcy law and that, therefore, the knowledge
of ECSC 56(2)(b) benefits did not affect the company's social plan
obligations. Thus, the Department determined that GOG payments relating
to Saarstahl's bankruptcy social plan are not countervailable. Id.
In this administrative review, we have followed the approach taken
in German Wire Rod and, therefore, preliminarily determine that only
the worker assistance payments received pursuant to Saarstahl's pre-
bankruptcy social plans are countervailable. Because a company can
expect to receive the benefits on an ongoing basis, we have limited our
analysis to funds received during the POR, 1997. In situations where
the company and its workers are aware at the time of their negotiations
that the government will be making contributions to the workers'
benefits, the Department's practice is to treat half of the amount paid
by the government as benefitting the company. See, GIA, 58 FR at 37225.
In the GIA, the Department stated that when the government's
willingness to provide assistance is known at the time the contract is
being negotiated, this assistance is likely to have an effect on the
outcome of the negotiations. In these situations, the Department will
assume that the differences between what the workers would have
demanded and what the company would have preferred to have paid would
have been split between the parties, with the result that one-half of
the government payment goes to relieving the company of an obligation
that would otherwise exist. See, GIA, 58 FR at 37256. This methodology
was upheld in LTV Steel Co. v. United States, 985 F. Supp. 95, 116 (CIT
1997).
Consistent with Department's practice described above, the benefit
to Saarstahl is one-half the amount paid to the workers by the GOG
under the pre-bankruptcy social plan. To calculate the benefit under
this program, we divided this amount by Saarstahl's total sales during
the POR. On this basis, we preliminarily determine the net subsidy to
Saarstahl under this program to be 0.06 percent ad valorem.
II. Program Preliminarily Determined to be Not Countervailable
A. ECSC Research and Development Assistance Under Article 55
Under Article 55 of the ECSC Treaty, assistance is available to
promote technical and economic research relating to the production and
increased use of coal and steel, and to occupational safety in the coal
and steel industries. Since the end of 1986, this program has been
funded solely through levies on steel producing companies.
During the POR, Saarstahl received research and development
assistance related to calcium treated and aluminum deoxidized steels
with high sulfur content under the ECSC Article 55 program.
In Final Affirmative Countervailing Duty Determination: Certain
Steel Products from Belgium, 58 FR 37273, 37285, (July 9, 1993), the
Department found this program to be not countervailable because funding
under this program was provided by levies on participating steel
companies and because the program stipulates that the results of
research conducted under Article 55 must be made publicly available.
No new information or evidence of changed circumstances has been
submitted in this proceeding to warrant reconsideration of this
determination. Therefore, for purposes of this preliminary
determination, we find this program not countervailable.
III. Other Program Examined
BRITE/EuRAM Research and Development Project (BRITE/EuRAM Project)
Under the BRITE/EuRAM Project, participants receive research and
development assistance in the form of grants from the European
Community (EC). In order to receive the assistance, participants must
make a formal proposal to the EC for the funding of a specific research
and development project. Applicants whose proposals have been accepted
then enter into a contract with the EC in which such items as the scope
of the project, project goals, applicant reporting requirements and EC
payments are established.
During the POR, Saarstahl received grants from the EC under the
BRITE/EuRAM Project for the development of a project entitled, ``World
Class Performance for Wire Drawing through Improved Quality of the
Manufacturing Process (WIREMAN).'' According to the
[[Page 16919]]
EC and Saarstahl, the objective of the WIREMAN project was to minimize
waste and resource usage in the drawing process with the main focus of
the project on the processing of steelcord for use in the manufacture
of tires.
Because the research and development assistance related to this
program is tied to merchandise other than subject merchandise, we
preliminarily determine that this assistance did not benefit
Saarstahl's production of subject merchandise during the POR. (For
further discussion, see the Memorandum to the File, ``BRITE/EuRAM
Project,'' dated March 31, 1999, on file in the Central Records Unit
(CRU)). We note that we intend to verify the EC's and Saarstahl's
statements as they relate to the tying of benefits under this program
to merchandise other than subject merchandise.
IV. Programs About Which More Information Is Needed
Subsidies Leading Up to the 1997 Reorganization
In this administrative review, petitioners argue that information
contained in Saarstahl's financial statements indicates that Saarstahl
claimed large write-offs of loans and other liabilities both in 1996
and in 1997. They argue that the Department should analyze these write-
offs within an overall context of Saarstahl's operation as a
government-owned but bankrupt company and its reorganization out of
bankruptcy in 1997.
In its original July 20, 1998, questionnaire response, Saarstahl
explained that it was unable to submit the 1997 financial data
requested by the Department because it had not yet completed its
financial statements for 1997. Saarstahl submitted its financial
statements for 1997 on the record on January 15, 1999. In a submission
dated February 9, 1999, petitioners raised the issue of potentially
large amounts of debt forgiveness and grants leading up to the 1997
reorganization. On February 26, 1999, Saarstahl submitted a
questionnaire response containing further information regarding its
large amounts of extraordinary income and writeoffs. On March 11, 1999,
upon reviewing this new information, petitioners suggested that the
Department should consider whether, as in the years leading up to the
1989 reorganization, massive debt forgiveness and additional government
contributions allowed Saarstahl to remain an ongoing concern and emerge
from its bankruptcy. Additionally, petitioners suggest that Saarstahl
may have been forgiven value-added taxes that it owed. Saarstahl
addressed petitioners claims in a submission dated March 22, 1999. In
general, Saarstahl argues that its bankruptcy proceeding was handled in
full accordance with German law and that the forgiveness of debts as a
result of bankruptcy is not countervailable, in accordance with the
Department's practice.
The issues raised by petitioners regarding Saarstahl's operation as
a government-owned bankrupt company and the nature of its extraordinary
income and write-offs leading up to its reorganization in 1997 merit
further examination in this administrative review. Due to the delayed
submission of Saarstahl's financial data for 1997, these issues were
raised with very little time for the Department to collect all of the
information needed to examine them fully. While the Department
preliminarily concludes that the information on the record is
insufficient to demonstrate the existence of a countervailable program,
the Department will consider the issues further and gather additional
information, which will be subject to verification. Among other things,
we will examine: (1) the terms of Saarstahl's bankruptcy, (2) its
operation as a going concern during bankruptcy, (3) the relationship
between Saarstahl and its creditors, (4) the nature of its liabilities,
(5) the terms of the 1997 reorganization, (6) the establishment of the
purchase price, (7) the nature of Saarstahl debt writeoffs, and (8) the
relationship between the new shareholders and the governments of
Saarstahl and Germany. We will consider whether Saarstahl's writeoffs
of liabilities leading up to the 1997 reorganization constitute
countervailable subsidies, whether it received countervailable
subsidies in the form of tax forgiveness, and whether the sale of
Saarstahl provided the company with countervailable grants. After we
collect additional information and conduct verification, we will
prepare an analysis memorandum addressing all of the pertinent issues
surrounding Saarstahl's reorganization in 1997. Prior to issuing our
final determination, we intend to provide all parties the opportunity
to comment on our analysis.
Verification
As provided in section 782(i) of the Act, we intend to verify the
information submitted by the Governments of Germany and Saarland and
Saarstahl. In addition, we will schedule our verification so that all
parties to the proceeding will have ample time to comment on our
findings prior to the publication of our final results of this
administrative review.
Preliminary Results of Review
In accordance with 19 CFR 355.221(b)(4)(i), we have calculated an
individual subsidy rate for Saarstahl, the producer/exporter subject to
this administrative review. For the period January 1, 1997 through
December 31, 1997, we preliminarily determine the net subsidy for
Saarstahl to be 12.31 percent ad valorem. If the final results of this
review remain the same as these preliminary results, the Department
intends to instruct the U.S. Customs Service to assess countervailing
duties for Saarstahl at 12.31 percent ad valorem. The Department also
intends to instruct the U.S. Customs Service (Customs) to collect a
cash deposit of 12.31 percent of the f.o.b. invoice price on all
shipments of the subject merchandise from Saarstahl, entered, or
withdrawn from warehouse, for consumption on or after the date of
publication of the final results of this review.
Because the URAA replaced the general rule in favor of a country-
wide rate with a general rule in favor of individual rates for
investigated and reviewed companies, the procedures for establishing
countervailing duty rates, including those for non-reviewed companies,
are now essentially the same as those in antidumping cases, except as
provided for in section 777A(e)(2)(B) of the Act. The requested review
will normally cover only those companies specifically named. See 19 CFR
355.22(b). Pursuant to 19 CFR 355.22(c), for all companies for which a
review was not requested, duties must be assessed at the cash deposit
rate, and cash deposits must continue to be collected, at the rate
previously ordered. As such, the countervailing duty cash deposit rate
applicable to a company can no longer change, except pursuant to a
request for a review of that company. See Federal-Mogul Corporation and
The Torrington Company v. United States, 822 F. Supp. 782 (CIT 1993)
and Floral Trade Council v. United States, 822 F. Supp. 766 (CIT 1993)
(interpreting 19 CFR 353.22(e), the antidumping regulation on automatic
assessment, which is identical to 19 CFR 355.22(g)). Therefore, the
cash deposit rates for all companies except those covered by this
review will be unchanged by the results of this review.
We will instruct Customs to continue to collect cash deposits for
non-reviewed companies at the most recent
[[Page 16920]]
company-specific or country-wide rate applicable to the company.
Accordingly, the cash deposit rates that will be applied to non-
reviewed companies covered by this order are those established in the
most recently completed administrative proceeding conducted under the
URAA. If such a review has not been conducted, the rate established in
the most recently completed administrative proceeding pursuant to the
statutory provisions that were in effect prior to the URAA amendments
is applicable. See Lead Bar. These rates shall apply to all non-
reviewed companies until a review of a company assigned these rates is
requested. In addition, for the period January 1, 1997 through December
31, 1997, the assessment rates applicable to all non-reviewed companies
covered by this order are the cash deposit rates in effect at the time
of entry.
Public Comment
Pursuant to 19 CFR 351.224(b), the Department will disclose to
parties to the proceeding any calculations performed in connection with
these preliminary results within five days after the date of
publication of this notice. Pursuant to 19 CFR 351.309, interested
parties may submit written comments in response to these preliminary
results. Case briefs must be submitted within 30 days after the date of
publication of this notice, and rebuttal briefs, limited to arguments
raised in case briefs, must be submitted no later than five days after
the time limit for filing case briefs. Parties who submit argument in
this proceeding are requested to submit with the argument: (1) A
statement of the issue, and (2) a brief summary of the argument. Case
and rebuttal briefs must be served on interested parties in accordance
with 19 CFR 351.303(f). Also, pursuant to 19 CFR 351.310, within 30
days of the date of publication of this notice, interested parties may
request a public hearing on arguments to be raised in the case and
rebuttal briefs. Unless the Secretary specifies otherwise, the hearing,
if requested, will be held two days after the date for submission of
rebuttal briefs, that is, thirty-seven days after the date of
publication of these preliminary results.
The Department will publish the final results of this
administrative review, including the results of its analysis of issues
raised in any case or rebuttal brief or at a hearing.
This administrative review is issued and published in accordance
with sections 751(a)(1) and 777(i)(1) of the Act (19 U.S.C. 1675(a)(1)
and 19 U.S.C. 1677f(i)(1)).
Dated: March 31, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-8621 Filed 4-6-99; 8:45 am]
BILLING CODE 3510-DS-P
