[Federal Register Volume 64, Number 142 (Monday, July 26, 1999)]
[Notices]
[Pages 40430-40438]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-18854]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-427-817]
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
AGENCY: Import Administration, International Trade Administration,
Department of Commerce
EFFECTIVE DATE: July 26, 1999.
FOR FURTHER INFORMATION CONTACT: Cynthia Thirumalai, Alysia Wilson, 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, DC 20230; telephone (202) 482-4087, 482-0108, or 482-2239,
respectively.
Preliminary Determination
The Department of Commerce (the Department) preliminarily
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 the notice of initiation in the Federal
Register (see 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) (Initiation Notice)), the following events have
occurred:
On March 25, 1999, we met with representatives from the Government
of France (GOF) and the European Commission (EC) for a second round of
consultations.
On March 17, 1999, we issued countervailing duty questionnaires to
the GOF, EC, and the producers/exporters of the subject merchandise. On
April 29, 1999, we postponed the preliminary determination of this
investigation until July 16, 1999 (see Certain Cut-to-Length Carbon-
Quality Steel Plate From France, India, Indonesia, Italy and the
Republic of Korea: Postponement of Time Limit for Countervailing Duty
Investigations, 64 FR 23057 (April 29, 1999)).
On May 11, 1999, we received responses from the GOF and the
responding companies (Usinor, Sollac S.A., Creusot Loire Industrie S.A.
and GTS Industries S.A.). On June 4, 1999, we issued supplemental
questionnaires to the GOF, and responding companies. On June 6, 1999,
we issued a supplemental questionnaire to the EC.
In their petition, the petitioners asked the Department to
reinvestigate whether the 1991 equity infusions by the GOF and Credit
Lyonnais provided to Usinor conferred a subsidy. These investments were
found not countervailable in the Final Affirmative Countervailing Duty
Determinations: Certain Steel Products from France, 58 FR 37304, (July
9, 1993), (Certain Steel From France). At the time this proceeding was
initiated, we determined that the petitioners had not submitted
sufficient information to warrant a reinvestigation of these equity
infusions. On June 10, 1999, the petitioners submitted additional
information supporting their request. After a review of the
petitioners' submission, we have determined that the information they
have provided still does not warrant a reinvestigation of these
investments. See Memorandum to Richard W. Moreland, Deputy Assistant
Secretary for AD/CVD Enforcement, ``Petitioners'' Supplemental
Allegations,'' dated July 16, 1999, on file in the Central Records Unit
of the Department of Commerce.
On June 16, 1999, the Department invited interested parties to
comment regarding the attribution of subsidies between GTS Industries
(GTS), Sollac, and Creusot-Loire (CLI). Comments were submitted by
petitioners and respondents on June 28, 1999.
On June 21, 1999, we received responses to the supplemental
questionnaires from the EC and on June 23, 1999, from the responding
companies and the GOF.
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
[[Page 40431]]
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 these investigations
unless otherwise specifically excluded. The following products are
specifically excluded from these investigations: (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 these investigations 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.
Scope Comments
As stated in our notice of initiation, we set aside a period for
parties to raise issues regarding product coverage. In particular, we
sought comments on the specific levels of alloying elements set out in
the description below, the clarity of grades and specifications
excluded from the scope, and the physical and chemical description of
the product coverage.
On March 29, 1999, Usinor, a respondent in the French antidumping
and countervailing duty investigations and Dongkuk Steel Mill Co., Ltd.
and Pohang Iron and Steel Co., Ltd., respondents in the Korean
antidumping and countervailing duty investigations (collectively the
Korean respondents), filed comments regarding the scope of the
investigations. On April 14, 1999, the petitioners responded to
Usinor's and the Korean respondents' comments. In addition, on May 17,
1999, ILVA/ILT, a respondent in the Italian antidumping and
countervailing duty investigations, requested guidance on whether
certain products are within the scope of these investigations.
Usinor requested that the Department modify the scope to exclude:
(1) Plate that is cut to non-rectangular shapes or that has a total
final weight of less than 200 kilograms; and (2) steel that is 4'' or
thicker and which is certified for use in high-pressure, nuclear or
other technical applications; and (3) floor plate (i.e., plate with
``patterns in relief'') made from hot-rolled coil. Further, Usinor
requested that the Department provide clarification of scope coverage
with respect to what it argues are over-inclusive HTSUS subheadings
included in the scope language.
The Department has not modified the scope of these investigations
because the current language reflects the product coverage requested by
the petitioners, and Usinor's products meet the product description.
With respect to Usinor's clarification request, we do not agree that
the scope language requires further elucidation with respect to product
coverage under the HTSUS. As indicated in the scope section of every
Department antidumping and countervailing duty proceeding, the HTSUS
subheadings are provided for convenience and Customs purposes only; the
written description of the merchandise under investigation or review is
dispositive.
The Korean respondents requested confirmation whether the maximum
alloy percentages listed in the scope language are definitive with
respect to covered HSLA steels.
At this time, no party has presented any evidence to suggest that
these maximum alloy percentages are inappropriate. Therefore, we have
not adjusted the scope language. As in all proceedings, questions as to
whether or not a specific product is covered by the scope should be
timely raised with Department officials.
ILVA/ILT requested guidance on whether certain merchandise produced
from billets is within the scope of the current CTL plate
investigations. According to ILVA/ILT, the billets are converted into
wide flats and bar products (a type of long product). ILVA/ILT notes
that one of the long products, when rolled, has a thickness range that
falls within the scope of these investigations. However, according to
ILVA/ILT, the greatest possible width of these long products would only
slightly overlap the narrowest category of width covered by the scope
of the investigations. Finally, ILVA/ILT states that these products
have different production processes and properties than merchandise
covered by the scope of the investigations and therefore are not
covered by the scope of the investigations.
As ILVA/ILT itself acknowledges, the particular products in
question appear to fall within the parameters of the scope and,
therefore, we are treating them as covered merchandise for purposes of
these investigations.
The Applicable Statute
Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930,
[[Page 40432]]
as amended by the Uruguay Round Agreements Act 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 determination 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)).
Alignment With Final Antidumping Duty Determination
On July 2, 1999, the petitioners submitted a letter requesting
alignment of the final determination in this investigation with the
final determination in the companion antidumping duty investigation.
See Initiation of Antidumping Duty Investigations: Certain Cut-To-
Length Carbon-Quality Steel Plate From the Czech Republic, France,
India, Indonesia, Italy, Japan, the Republic of Korea, and the Former
Yugoslav Republic of Macedonia, 64 FR 12959 (March 16, 1999).
Therefore, in accordance with section 705(a)(1) of the Act, we are
aligning the final determination in this investigation with the final
determination in the antidumping investigation of carbon plate from
France.
Period of Investigation
The period for which we are measuring subsidies (the POI) is
calendar year 1998.
Company History
The GOF identified Usinor, Sollac S.A., Creusot Loire Industrie
S.A. (``CLI''), and GTS Industries S.A. (``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 an affiliated company.
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 direct
subsidiary of Usinor. In 1992, Sollac transferred its shares in GTS to
AG der Dillinger Httenwerke (``Dillinger''), a German steel producer.
In return, Dillinger transferred shares it held in Sollac to Sollac
which were 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.
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 are 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 is 48.9
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 Sec. 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 65401)
In this investigation, we have preliminarily determined that
Usinor's 48.9 percent interest in DHS, the holding company of GTS'
parent, Dillinger, is insufficient to establish cross-ownership between
Usinor and GTS. We base this determination on the following facts: (1)
Usinor has less than a majority voting ownership in DHS; (2) Usinor
does not have a ``golden share'' in GTS; (3) there is another
shareholder which effectively controls an equivalent amount of shares
in DHS; and (4) information submitted by respondents indicates that
there are certain limitations on the shareholders' ability to control
Dillinger by virtue of labor's representation on its Supervisory and
Management Boards. For more information, see Memorandum to Susan
Kuhbach regarding Treatment of GTS Industries S.A. dated July 16, 1999.
Therefore, for purposes of this preliminarily determination, we
have calculated a separate countervailing 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)
[[Page 40433]]
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.
In accordance with the Final Affirmative Countervailing Duty
Determination: Stainless Steel Sheet and Strip in Coils from France, 64
FR 30774, (June 8, 1999), (French Stainless), in this investigation we
have applied the change-in-ownership methodology to the following
transactions: (1) The sale of Ugine's shares in 1994; (2) the 1994 sale
of Centrale Siderurgique de Richemont (CSR); (3) the privatization of
Usinor which spans 1995, 1996, and 1997; (4) the spin-off of assets to
Entreprise Jean LeFebvre in 1994; and (5) the spin-off of assets to
FOS-OXY in 1993. Additionally, in this investigation, we have also
applied our change-in-ownership methodology to Sollac's sale of GTS
shares to Dillinger in 1992. In 1996, Usinor reduced its interest in
GTS, see the Attribution section above. We applied our change-in-
ownership methodology to this transaction. However, because of the lack
of information on the record regarding the amount paid for the shares,
we have not provided for any reallocation of subsidies to Usinor in
this transaction. During the course of this investigation, we will
further examine this transaction.
Subsidies Valuation Information
Allocation Period: The current investigation includes untied, non-
recurring subsidies to Usinor that were found to be countervailable in
Certain Steel from France: PACS, FIS, and Shareholders' Advances.
Because we have already assigned a company-specific allocation period
of 14 years to those subsidies, we have continued to allocate those
subsidies over 14 years. See, French Stainless.
We have found no other allocable non-recurring subsidies received
by Usinor and GTS in the instant proceeding. However, had there been
other allocable non-recurring subsidies received we would apply the
methodology stated in Sec. 351.524(d)(2) of the CVD Regulations.
Section 351.524(d)(2) states that we will presume the allocation period
for non-recurring subsidies to be the average useful life (AUL) of
renewable physical assets for the industry concerned, as listed in the
Internal Revenue Service's (IRS) 1977 Class Life Asset Depreciation
Range System and updated by the Department of Treasury. The presumption
will apply unless a party claims and establishes that these tables do
not reasonably reflect the AUL of the renewable physical assets for the
company or industry under investigation, and the party can establish
that the difference between the company-specific or country-wide AUL
for the industry under investigation is significant.
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, Sec. 351.595 of the CVD Regulations.
Usinor was found to be uncreditworthy from 1982 through 1988 in
Certain Steel from France, 58 FR at 37306. No new information has been
presented in this investigation that would lead us to reconsider these
findings. Therefore, consistent with our past practice, we continue to
find Usinor uncreditworthy from 1985 through 1988. See, e.g., Final
Affirmative Countervailing Duty Determinations: Certain Steel Products
from Brazil, 58 FR 37295, 37297 (July 9, 1993).
In the Initiation Notice, we stated that the petitioners provided
sufficient information in the petition to believe or suspect that
Usinor was uncreditworthy from 1992 through 1995. Our change-in-
ownership methodology in addition to the fact that Usinor received a
contingent liability interest free loan under the Myosotis project,
require the Department to make a creditworthy determination for the
1992-1995 period.
Usinor did not provide the information requested by the Department
to make a creditworthy determination, 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 concluding that the Usinor
was uncreditworthy in 1992 through 1995.
Since there was no allegation regarding the creditworthiness of
GTS, we have not examined whether GTS is creditworthy.
Benchmarks for Loans and Discount Rates: In accordance with
Secs. 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. For years where Usinor was creditworthy and a
company-specific rate was not available, we used the rates for average
yields on long-term private-sector bonds in France as published by the
OECD.
For the years in which Usinor was uncreditworthy (see
Creditworthiness section above), we calculated the discount rates in
accordance with Sec. 351.524(c)(3)(ii) of the CVD Regulations. To
construct these benchmark rates, we used the formula described in
Sec. 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
rated 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
[[Page 40434]]
Aaa to Baa-rated categories of companies as reported in this
study.1
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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
dated February 1998 (see Exhibit 28).
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Based upon our analysis of the petition and the responses to our
questionnaires, we determine the following:
I. Programs Preliminarily 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, Certain Steel from France, and Final
Affirmative Countervailing Duty Determinations: Certain Hot Rolled Lead
and Bismuth Carbon Steel Products from France, 58 FR 6221 (January 27,
1993) (Lead and Bismuth), the Department determined that the conversion
of PACS to common stock in 1986 constituted a countervailable equity
infusion. No new information or evidence of changed circumstances has
been submitted in this proceeding to warrant a reconsideration of our
earlier finding. Therefore, we preliminarily determine that a
countervailable benefit exists in the amount of the 1986 equity
infusion in accordance with Sec. 351.507(a)(6) of the CVD Regulations.
We have treated the 1986 equity infusion as a non-recurring grant
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 and GTS' total sales of French-produced
merchandise during the POI. Accordingly, we preliminarily determine the
countervailable subsidy to be 1.31 percent ad valorem for Usinor and
0.93 percent ad valorem for GTS.
B. 1986 Shareholders' Advances
The GOF provided Usinor and Sacilor grants in the form of
shareholders' advances in 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, Certain Steel from France, and Lead and
Bismuth, the Department determined that the shareholders' advances
constituted countervailable grants because no shares were received for
them. No new information or evidence of changed circumstances has been
submitted in this proceeding to warrant a reconsideration of our
earlier finding. Therefore, we continue to find that these grants
constitute countervailable subsidies within the meaning of section
771(5) of the Act.
We have treated the 1986 shareholders' advance as non-recurring
subsidies received in 1986. Using the allocation period of 14 years,
these shareholders' advances continue to provide countervailable
benefits during the POI. We used an uncreditworthy discount rate to
allocate the benefits of these shareholders' advances 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 and GTS' total sales of French-produced merchandise during the
POI. Accordingly, we preliminarily determine the countervailable
subsidy to be 0.54 percent ad valorem for Usinor and 0.38 percent ad
valorem.
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, Certain Steel from France and Lead and
Bismuth, the Department determined that the conversions of FIS bonds to
common stock in 1986 and 1988 were countervailable equity infusions. No
new information or evidence of changed circumstances has been submitted
in this proceeding to warrant a reconsideration of our earlier finding.
Therefore, we preliminarily determine that a countervailable benefit
exists in the amounts of the 1986 and 1988 equity infusions in
accordance with Sec. 351.507(a)(6) of the CVD Regulations.
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 and GTS's total sales
of French-produced merchandise during the POI, we preliminarily
determine the countervailable subsidy to be 3.46 percent ad valorem for
Usinor and 2.46 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
[[Page 40435]]
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.
For the investment and operating subsidies received in the years
prior to the POI, we have followed the methodology in French Stainless.
Since these subsidies were less than 0.5 percent of Usinor's sales of
French-produced merchandise, we have expensed these grants in the years
of receipt, in accordance with Sec. 351.524 (b)(2) of the Department's
new 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 the countervailable subsidy to be 0.11 percent ad valorem.
GTS use of investment and operating subsidies is discussed below.
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.
We preliminarily determine that the total amount approved in 1987
was less than 0.5 percent of Usinor's sales of French-produced
merchandise in 1987. Therefore, we preliminarily determine that these
grants do not confer a countervailable subsidy in 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 made 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. Furthermore,
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. 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 Myosotis 1989 and 1991
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 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 preliminarily 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 0.00
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.
To measure whether any benefit was received during the POI, we
treated this advance as a long-term interest free loan, consistent with
our finding in French Stainless (see, 64 FR at 30780). Additionally, in
accordance with Sec. 351.505 (d)(1) of the Department's new
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 (see, CVD Regulations 63 FR
65410). We used as our benchmark, a long-term fixed rate loan
consistent with Sec. 351.505 (a)(2)(iii) of the Department's
regulations. Since Usinor would have been required to make an interest
[[Page 40436]]
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, the benefit is 0.00 percent.
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 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 total 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,
Sec. 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. Likewise, with regard to
specificity, the EC has not provided complete information about the
distribution of ESF grants.
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 preliminarily
determine it appropriate to use an adverse inference in concluding that
in receiving the ESF grant that CLI was relieved of an obligation, and
that the ESF grant is specific within the meaning of section 771(5A)(D)
of the Act.
We preliminarily determine that the 1998 ESF grant is
countervailable within the meaning of section 771(5) of the Act. The
grant is a financial contribution, as described in section 771(5)(D)(i)
of the Act, which provides a benefit to the recipient in the amount of
the grant.
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 at 63 FR 65412. Dividing
the amount of CLI's 1998 ESF grant by CLI's total 1998 sales yields a
countervailable subsidy of 0.00 percent ad valorem for this program.
II. Programs Preliminarily 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. In French
Stainless, the Department investigated whether the purchase of the
Richemont power plant by Electricite de France (EDF), a government-
owned entity, was an arm's-length transaction for full market value.
The Department determined that while FF 1 billion represented a large
gain over the book value of CSR's physical assets, the purchase price
included an exclusive supply contract from EDF to Usinor's factories in
the Lorraine region. Moreover, the transaction price was supported by
reasonable estimates of projected costs and revenues. Therefore, the
Department determined this transaction was an arm's-length transaction
for full-market value and that EDF's purchase of Richemont did not
constitute a countervailable subsidy within the meaning of section
771(5) of the Act.
In this investigation, the petitioners stated that to the extent
that the Department determines that the transaction is for full-market
value based on the commitments by Usinor to purchase power from EDF,
evidence suggests that EDF canceled the contract obligating Usinor to
purchase electricity exclusively from EDF. Specifically, the
petitioners point to a note in Usinor's 1996 financial statements which
states that ``other income mainly includes the positive impact (MF 250)
of a compensation received from EDF and relating to the termination of
a distribution contract''.
As indicated in the our Initiation Checklist and in an additional
Memorandum to the File through Susan Kuhbach, dated June 2, 1999, the
Department indicated that it is terminating its investigation into
those programs found not countervailable in French Stainless. In French
Stainless, the Department determined that the 1994 Richemont power
plant transaction was a market-based transaction. The information
contained in Usinor's 1996 financial statements cited by the
petitioners describes an event that occurred two years after the
investigated transaction and there is no indication that the 1996
compensation from EDF relates to the Richemont transaction. Therefore,
we do not consider this information sufficient to reconsider our prior
determination in French Stainless.
B. GOF Conditional Advance
In French Stainless, the Department learned on verification that
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 used in the production
of catalytic converters. Ugine, Sollac, and two unaffiliated companies
participated in the project and each company received a portion of the
total project funding provided by the GOF. Ugine received its first
payment in 1992 and a second payment in 1995. There is no information
on the record
[[Page 40437]]
indicating exactly when Sollac received payment. According to the
agreement between the GOF and the participating companies, repayment of
the advance was contingent upon sales of the product resulting from
this project exceeding a set amount. The Department learned in French
Stainless, that since this condition has not been met, the entire
amount of the advance received by Ugine remained outstanding in 1997.
Usinor did not provide information indicating the outstanding balance
of the loans during the POI.
The responding companies have indicated that the GOF conditional
advance is for a project aimed at developing a new type of steel for
catalytic converters which does not cover subject merchandise.
Additionally, the width of this product does not fall within the width
range of the subject merchandise as specified in the scope section of
this notice. Therefore, the Department preliminarily determines that
this program is tied to non-subject merchandise.
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. (See, Sec. 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. (See, Sec. 351.505(b) of the CVD
Regulations). Information provided at verification in the French
Stainless case indicates that Usinor would make interest payments on
its long-term loans on an annual basis. Likewise, information from the
Department's discussions in French Stainless with private banks in
France confirms that 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 preliminarily
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.
IV. Programs Preliminarily Determined To Be Not Used
Based on the information provided in the responses, we determine
that 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
C. Subsidies Provided Directly To GTS
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)
V. Programs Preliminarily Determined Not To Exist
In French Stainless, we determined that the alleged program did not
exist: ``Soft Loans from Credit Lyonnais''. Therefore, we are not
pursuing this allegation further in this investigation.
Verification
In accordance with section 782(i)(1) of the Act, we will verify 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 and GTS the sole manufacturers
of the subject merchandise. We preliminarily determine that the total
estimated net countervailable subsidy rate is 5.42 percent ad valorem
for Usinor and 3.77 percent ad valorem for GTS. The All Others rate is
3.84 percent, which is the weighted average of the rates for both
companies. In accordance with section 703(d) of the Act, we are
directing the US Customs Service to suspend liquidation of all entries
of certain cut-to-length carbon-quality steel plate from France which
are entered, or withdrawn from warehouse, for consumption on or after
the date of the publication of this notice in the Federal Register, and
to require a cash deposit or bond for such entries of the merchandise
in the amounts indicated above. This suspension will remain in effect
until further notice.
ITC Notification
In accordance with section 703(f) of the Act, we will notify the
ITC of our determination. In addition, we are making available to the
ITC all nonprivileged and nonproprietary information relating 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, Import Administration.
In accordance with section 705(b)(2) of the Act, if our final
determination is affirmative, the ITC will make its final determination
within 45 days after the Department makes its final determination.
Public Comment
In accordance with 19 CFR 351.310, we will hold a public hearing,
if requested, to afford interested parties an opportunity to comment on
this preliminary determination. The hearing is tentatively scheduled to
be held 57 days from the date of publication of this preliminary
determination, at the U.S. Department of Commerce, 14th Street and
Constitution Avenue N.W., Washington, DC 20230. Individuals who wish to
request a hearing must submit a written request within 30 days of the
publication of this notice in the Federal Register to the Assistant
Secretary for Import Administration, U.S. Department of Commerce, Room
1870, 14th Street and Constitution Avenue, NW., Washington, D.C. 20230.
Requests for a public hearing should contain: (1) The party's name,
address, and telephone number; (2) the number of participants; (3) the
reason for attending; and (4) a list of the issues to be discussed. An
interested party may make an affirmative presentation only on arguments
included in that party's case brief and may make a rebuttal
presentation only on arguments included in that party's rebuttal brief.
Parties should confirm by telephone the time, date, and place of the
hearing 48 hours before the scheduled time.
In addition, six copies of the business proprietary version and six
copies of the nonproprietary version of the case briefs must be
submitted to the Assistant Secretary no later than 50 days from the
publication of this notice. As part of the case brief, parties are
encouraged to provide a summary of the arguments not to exceed five
pages and a table of statutes, regulations, and cases cited. Six copies
of the business proprietary version and six copies of the
nonproprietary version of the rebuttal briefs must be submitted to the
Assistant Secretary no later than 5 days
[[Page 40438]]
after the filing of case briefs. Written arguments should be submitted
in accordance with 19 CFR 351.309 and will be considered if received
within the time limits specified above.
This determination is published pursuant to sections 703(f) and
777(i) of the Act.
Dated: July 16, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-18854 Filed 7-23-99; 8:45 am]
BILLING CODE 3510-DS-P
