[Federal Register Volume 62, Number 149 (Monday, August 4, 1997)]
[Notices]
[Pages 41933-41939]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20490]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-122-827]
Preliminary Affirmative Countervailing Duty Determination: Steel
Wire Rod From Canada
AGENCY: Import Administration, International Trade Administration,
Department of Commerce
EFFECTIVE DATE: August 4, 1997.
FOR FURTHER INFORMATION CONTACT: Robert Bolling or Rick Johnson, Office
of AD/CVD Enforcement, Office IX, Import Administration, International
Trade Administration, U.S. Department of Commerce, Room 1874, 14th
Street and Constitution Avenue, N.W., Washington, D.C. 20230;
telephone: (202) 482-1386, or 482-0165.
Preliminary Determination
The Department preliminarily determines that countervailable
subsidies have been provided to Sidbec-Dosco (Ispat) Inc. (see
``Corporate History'') a producer and exporter of steel wire rod from
Canada. We have also preliminarily determined that Ivaco, Inc. (Ivaco)
and Stelco, Inc. (Stelco) received no countervailable subsidies. For
information on the estimated countervailing duty rates, see the
Suspension of Liquidation section of this notice.
Case History
Since the publication of the notice of initiation in the Federal
Register (62 FR 13866, March 24, 1997) the following events have
occurred:
On April 1, 1997, we issued a questionnaire to the Government of
Canada (GOC), the Government of Quebec (GOQ), Sidbec-Dosco (Ispat) Inc.
(Sidbec-Dosco (Ispat)), Stelco, Inc. (Stelco) and Ivaco, Inc. (Ivaco).
On May 2, 1997, we postponed the preliminary determination in this
investigation until July 28, 1997 (62 FR 25172, May 8, 1997). On May
27, we received responses from the GOC, GOQ, Sidbec-Dosco (Ispat),
Stelco, and Ivaco. On June 13, 1997, we issued a supplemental
questionnaire to respondents. Additionally, on June 13, 1997, we issued
a questionnaire to the Government of Ontario (GOO). We received
responses on July 2, 1997 from respondents GOC, GOO, Sidbec-Dosco
(Ispat), Stelco, and Ivaco. On July 3, 1997, we received the GOQ's
response to this questionnaire. On July 10, 1997, we issued a second
supplemental questionnaire to the GOC, GOQ, GOO, and Sidbec-Dosco
(Ispat). We received responses on July 17, 1997.
On June 6, 1997, petitioners alleged that Sidbec, Inc., the
government-owned company which was the parent company to Sidbec-Dosco,
Inc., during the period in which the alleged subsidies were granted,
received subsidies from the GOC and the GOQ which benefitted the
subject merchandise. Petitioners requested that the Department include
these new subsidy allegations in its investigation of steel wire rod
from Canada.
On July 1, 1997, we initiated an investigation on these additional
subsidy allegations and issued questionnaires to Sidbec, Inc., the GOC
and GOQ on July 2, 1997. We received responses to this questionnaire on
July 16, 1997.
Scope of Investigation
The products covered by this investigation are certain hot-rolled
carbon steel and alloy steel products, in coils, of approximately round
cross section, between 5.00 mm (0.20 inch) and 19.0 mm (0.75
inch),inclusive, in solid cross-sectional diameter. Specifically
excluded are steel products possessing the above noted physical
characteristics and meeting the Harmonized Tariff Schedule of the
United States (HTSUS) definitions for (a) stainless steel; (b) tool
steel; (c) high nickel steel; (d) ball bearing steel; (e) free
machining steel that contains by weight 0.03 percent or more of lead,
0.05 percent or more of bismuth, 0.08 percent or more of sulfur, more
than 0.4 percent of phosphorus, more than 0.05 percent of selenium,
and/or more than 0.01 percent of tellurium; or (f) concrete reinforcing
bars and rods.
[[Page 41934]]
The following products are also excluded from the scope of this
investigation:
Coiled products 5.50 mm or less in true diameter with an average
partial decarburization per coil of no more than 70 microns in depth,
no inclusions greater than 20 microns, containing by weight the
following: carbon greater than or equal to 0.68 percent; aluminum less
than or equal to 0.005 percent; phosphorous plus sulfur less than or
equal to 0.040 percent; maximum combined copper, nickel and chromium
content of 0.13 percent; and nitrogen less than or equal to 0.006
percent. This product is commonly referred to as ``Tire Cord Wire
Rod.''
Coiled products 7.9 to 18 mm in diameter, with a partial
decarburization of 75 microns or less in depth and seams no more than
75 microns in depth; containing 0.48 to 0.73 percent carbon by weight.
This product is commonly referred to as ``Valve Spring Quality Wire
Rod.''
The products under investigation are currently classifiable under
subheadings 7213.91.3000, 7213.91.4500, 7213.91.6000, 7213.99.0030,
7213.99.0090, 7227.20.0000, and 7227.90.6050 of the HTSUS. Although the
HTSUS subheadings are provided for convenience and customs purposes,
our written description of the scope of this investigation is
dispositive.
The Applicable Statute
Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930, as amended by
the Uruguay Round Agreements Act effective January 1, 1995, (the
``Act'').
Injury Test
Because Canada is a ``Subsidies Agreement Country'' within the
meaning of section 701(b) of the Act, the International Trade
Commission (ITC) is required to determine whether imports of steel wire
rod from Canada materially injure, or threaten material injury to, a
U.S. industry. On April 30, 1997, 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 Canada of the subject
merchandise (62 FR 23485).
Petitioners
The petition in this investigation was filed by Connecticut Steel
Corp., Co-Steel Raritan, GS Industries, Inc., Keystone Steel & Wire
Co., North Star Steel Texas, Inc., and Northwestern Steel and Wire (the
petitioners), six U.S. producers of wire rod.
Corporate History
Sidbec, Inc. was established by the GOQ in 1964. In 1968, Sidbec,
Inc. acquired Dominion Steel and Coal Corporation Limited, a steel
producer, and later changed the name to Sidbec-Dosco, Inc. The GOQ
owned 100 percent of Sidbec, Inc.'s stock, and Sidbec, Inc. owned 100
percent of Sidbec-Dosco Inc.'s stock, until privatization in 1994.
In 1976, Sidbec Inc., British Steel Corporation, and Quebec Cartier
Mining Company entered into a joint venture to mine and produce iron
ore concentrates and iron oxide pellets. The company they formed was
Sidbec-Normines Inc. (Normines), of which Sidbec, Inc. owned 50.1%.
These mining activities were shut down in 1984.
Sidbec-Dosco (Ispat) operates steel making facilities in
Contrecoeur, Montreal and Longueuil, Quebec. Until 1987, all of the
facilities at Longueuil and a good portion of the facilities in
Contrecouer were owned by Sidbec, Inc. and leased to Sidbec-Dosco, Inc.
In 1987, Sidbec, Inc. reorganized in order to consolidate all steel-
related assets under its wholly-owned subsidiary Sidbec-Dosco, Inc. On
August 17, 1994, Sidbec-Dosco, Inc. was sold to Beheer-en
Beleggingsmaatschappij Brohenco B.V. (Brohenco), which is wholly-owned
by Ispat-Mexicana, S.A. de C.V. (Ispat Mexicana), thus becoming Sidbec-
Dosco (Ispat). Currently, Sidbec, Inc. continues to be 100% owned by
the GOQ.
Because Sidbec, Inc.'s financial statements were consolidated
including both its mining and steel manufacturing activities, and
because the alleged subsidies under investigation were granted through
Sidbec, Inc., we are treating Sidbec, Inc., Sidbec-Dosco, Inc. and
Sidbec-Normines as one entity for the purposes of determining benefits
to the subject merchandise from alleged subsidies. For purposes of this
investigation, we are collectively referring to Sidbec, Inc., Sidbec-
Dosco, Inc., and Sidbec-Normines as ``Sidbec''.
Subsidies Valuation Information
Period of Investigation: The period for which we are measuring
subsidies (the ``POI'') is the calendar year 1996.
Allocation Period: In the past, the Department has relied upon
information from the U.S. Internal Revenue Service on the industry-
specific average useful life of assets, in determining the allocation
period for nonrecurring subsidies. See General Issues Appendix appended
to Final Countervailing Duty Determination; Certain Steel Products from
Austria (58 FR 37217, 37226; July 9, 1993). However, in British Steel
plc. v. United States, 879 F. Supp. 1254 (CIT 1995) (British Steel),
the U.S. Court of International Trade (the Court) ruled against the
allocation methodology. In accordance with the Court's remand order,
the Department calculated a company-specific allocation period for
nonrecurring subsidies based on the average useful life (AUL) of non-
renewable physical assets. This remand determination was affirmed by
the Court on June 4, 1996. See British Steel, 929 F. Supp. 426, 439
(CIT 1996).
In this investigation, the Department has followed the Court's
decision in British Steel. Therefore, for the purposes of this
preliminary determination, the Department has calculated a company-
specific AUL.
Based on information provided by Sidbec, Inc. and Sidbec-Dosco
(Ispat) regarding Sidbec's depreciable assets, the Department has
preliminarily determined the appropriate allocation period for Sidbec.
We are unable to provide the specific AUL for Sidbec due to the
proprietary nature of data from Sidbec-Dosco (Ispat). Therefore, for
the calculation of Sidbec's AUL, see, Memorandum to The File:
Calculation of AUL Period, dated July 22, 1997, which is in the public
file (public version) in the Central Records Unit, Room B-099 of the
Department of Commerce.
Because we have preliminarily determined that Ivaco and Stelco were
not the recipients of non-recurring subsidies, we have not calculated
an AUL for either company.
Equityworthiness: In analyzing whether a company is equityworthy,
the Department considers whether or not that company could have
attracted investment capital from a reasonable, private investor in the
year of the government equity infusion based on information available
at that time. In this regard, the Department has consistently stated
that a key factor for a company in attracting investment capital is its
ability to generate a reasonable return on investment within a
reasonable period of time.
In making an equityworthiness determination, the Department
examines the following factors, among others:
1. Current and past indicators of a firm's financial condition
calculated from that firm's financial statements and accounts;
2. Future financial prospects of the firm including market studies,
economic forecasts, and projects or loan appraisals;
[[Page 41935]]
3. Rates of return on equity in the three years prior to the
government equity infusion;
4. Equity investment in the firm by private investors; and
5. Prospects in the world for the product under consideration.
For a more detailed discussion of the Department's equityworthiness
methodology, see General Issues Appendix, (58 FR at 37239 and 37244).
Petitioners have alleged that Sidbec, Inc. and Sidbec-Dosco, Inc.
were unequityworthy for the period 1982 through 1992. Therefore,
petitioners allege that any equity infusions received during those
years would not have been provided by a reasonable private investor and
therefore conferred a countervailable benefit within the meaning of
section 771(5)(E)(i) of the Act. In this case, we initiated an
investigation of Sidbec-Dosco Inc.'s equityworthiness for the years
1982 through 1988. See Memorandum from The Team to Joseph A. Spetrini
dated March 18, 1997, Re: Initiation of Countervailing Duty
Investigation: Steel Wire Rod from Canada (March Initiation Memo),
which is in the public file in the Central Records Unit, Room B-099 of
the Department of Commerce. Additionally, on July 1, 1997, we initiated
an investigation of Sidbec's equityworthiness for the period 1982
through 1992. See Memorandum from The Team to Joseph A. Spetrini dated
July 1, 1997, Re: Initiation of Countervailing Duty Investigation:
Steel Wire Rod from Canada (July Initiation Memo), which is in the
public file (public version) in the Central Records Unit, Room B-099 of
the Department of Commerce. Because we are treating Sidbec, Inc.,
Sidbec-Dosco Inc., and Sidbec-Normines as one entity for the purpose of
determining benefits to the subject merchandise from alleged subsidies,
we have limited our analysis of the equityworthiness of Sidbec to a
review of Sidbec, Inc.'s financial data. See Final Affirmative
Countervailing Duty Determinations; Certain Steel Products from France
(58 FR 37304, July 9, 1993).
Throughout the period 1982 to 1985, Sidbec, Inc. reported
substantial losses. Although Sidbec, Inc. reported a profit from 1986
through 1990, the profits were not of such a magnitude to offset the
substantial losses suffered from 1982 through 1985. Additionally,
Sidbec, Inc. again sustained substantial losses in 1991 and 1992.
Return on equity was either negative or not meaningful (due to a
negative equity balance) in every year from 1984 through 1988, and in
1991, and 1992. Additionally, for the years 1984 through 1988, 1991,
and 1992 Sidbec, Inc. had a negative debt-to-equity ratio, which
indicated the company's liabilities exceed the company's assets.
Furthermore, Sidbec, Inc.'s debt-to-equity ratio in 1989 and 1990 was
significantly high. Therefore, as a result of our analysis, we
preliminarily determine Sidbec, Inc. to be unequityworthy from 1982 to
1992.
Equity Methodology: In measuring the benefit from a government
equity infusion to an unequityworthy company, the Department compares
the price paid by the government for the equity to a market benchmark,
if such a benchmark exists, i.e., the price of publicly traded shares
of the company's stock or an infusion by a private investor at the time
of the government's infusion (the latter may not always constitute a
proper benchmark based on the specific circumstances in a particular
case).
Where a market benchmark does not exist, the Department has
determined in this investigation to continue to follow the methodology
described in the General Issues Appendix. Following this methodology,
equity infusions made into an unequityworthy firm are treated as
grants. Using the grant methodology for equity infusions into an
unequityworthy company is based on the premise that an
unequityworthiness finding by the Department is tantamount to saying
that the company could not have attracted investment capital from a
reasonable investor in the infusion year based on the available
information.
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. If a company receives comparable long-term financing
from commercial sources, that company will normally be considered
creditworthy. In the absence of comparable commercial borrowings, the
Department examines the following factors, among others, to determine
whether or not a firm is creditworthy:
1. Current and past indicators of a firm's financial health
calculated from that firm's financial statements and accounts;
2. The firm's recent past and present ability to meet its costs and
fixed financial obligations with its cash flow; and
3. Future financial prospects of the firm including market studies,
economic forecasts, and projects or loan appraisals.
For a more detailed discussion of the Department's creditworhiness
criteria, See, e.g., Final Affirmative Countervailing Duty
Determination: Certain Steel Products from France, 58 FR 37304, (July
9, 1993) and Final Affirmative Countervailing Duty Determination:
Certain Steel Products from the United Kingdom, 58 FR 37393 (July 9,
1993).
Petitioners have alleged that Sidbec, Inc. and Sidbec-Dosco, Inc.
were uncreditworthy from 1977 through 1993. In this case, we initiated
an investigation of Sidbec-Dosco, Inc.'s creditworthiness for the years
1982 and 1984 through 1988. March Initiation Memo. Additionally, on
July 1, 1997, we initiated an investigation of Sidbec's
creditworthiness for the period 1984 through 1993. July Initiation
Memo. We have limited our analysis to Sidbec, Inc.''s creditworthiness
and to the period 1980-1992, because petitioners did not allege that
Sidbec, Inc. or Sidbec-Dosco received any subsidies beyond 1992. To
determine the creditworthiness of Sidbec, Inc. during the period 1982
(the year of the first alleged subsidy in the AUL period) through 1992
(the year of the last alleged subsidy in the AUL period), we have
evaluated certain liquidity and debt ratios, i.e., quick, current,
times interest earned, and debt-to-equity, on a consolidated basis. For
the period 1982 through 1985, the company consistently incurred
substantial losses. Despite the fact that Sidbec, Inc. reported a
profit from 1986 through 1990, the company was still thinly capitalized
and had a high debt-to-equity ratio. Additionally, the interest
coverage ratio was negative for the years 1991 and 1992 and the
liquidity ratios (i.e., quick and current ratio) indicated that the
company may have had difficulty in meeting its short-term obligations.
Based on our analysis, we preliminarily determine that Sidbec, Inc. was
uncreditworthy for the years 1982 through 1992.
Discount Rates: Respondents did not provide company-specific
information relevant to the appropriate discount rates to be used in
calculating the countervailable benefit for non-recurring grants and
equity infusions in this investigation. For the preliminary
determination, we were unable to find long-term corporate rates (i.e.,
loans or bonds). Currently, we are still seeking information on long-
term rates, and, if we find this information, we will consider it in
our final determination. Accordingly, we have used the long-term
government bond rate in Canada published in the International Monetary
Fund (IMF) International Financial Statistics Yearbook as the discount
rate, plus a risk premium (because we have preliminarily determined
Sidbec to be
[[Page 41936]]
uncreditworthy), for each year in which there was a non-recurring
countervailable subsidy.
Privatization Methodology: In the General Issues Appendix, we
applied a new methodology with respect to the treatment of subsidies
received prior to the sale of a company (privatization).
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 a period beginning with the earliest point at
which non-recurring subsidies would be attributable to the POI (i.e., a
period equal to the company-specific allocation period) and ending one
year prior to the privatization. We then take the simple average of the
ratio of allocable subsidies received by the company in each year over
the company's net worth in that year. The simple average of the ratios
of subsidies to net worth serves as a reasonable surrogate for the
percent that subsidies constitute of the overall value (i.e., net worth
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.
In the current investigation, we are analyzing the privatization of
Sidbec-Dosco in the year 1994.
Based upon our analysis of the petition and the responses to our
questionnaires, we determine the following:
I. Programs Preliminarily Determined To Be Countervailable
A. 1988 Debt-to-Equity Conversion
Petitioners allege that Sidbec-Dosco, Inc. received a debt-to-
equity conversion from either the GOC or the GOQ in 1988 based on
Sidbec-Dosco, Inc.'s 1988 Annual Report. In its supplemental response,
Sidbec-Dosco (Ispat) stated that a portion of Sidbec Inc.'s debt was
converted into Sidbec, Inc. capital stock in 1988. Sidbec-Dosco (Ispat)
stated that the debt consisted of four loans provided to Sidbec, Inc.
by the GOQ during the period 1982-1985, plus accrued interest. Sidbec-
Dosco (Ispat) explained that every two years the GOQ had extended the
maturity date for these loans for another two years. According to the
GOQ, it converted four of Sidbec, Inc.'s debt instruments into equity
in Sidbec Inc. in 1988 in order to improve Sidbec-Dosco Inc.'s economic
profile, for the purpose of making it more attractive for
privatization, partnership, or investment. In the GOQ Act which
authorized this debt conversion, Sidbec, Inc. was authorized to acquire
an equivalent amount in shares of Sidbec-Dosco, Inc.
We have concluded that, consistent with our equity methodology,
benefits to Sidbec, Inc. occurred at the point when the debt
instruments (i.e., loans) were converted to capital stock. As discussed
above, we have preliminarily determined that Sidbec, Inc. was
unequityworthy from 1982 through 1992. As a result, we consider the
conversion of debt to capital stock in 1988 to constitute an equity
infusion inconsistent with the usual investment practice of private
investors.
When receipt of benefits under a program is not contingent upon
exportation, the Department must determine whether the program is
specific to an enterprise or industry, or group of enterprises or
industries. Under the specificity analysis, the Department examines
both whether a government program is limited by law to a specific
enterprise or industry, or group thereof (i.e., de jure specificity),
and whether the government program is in fact limited to a specific
enterprise or industry, or group thereof (i.e., de facto specificity),
See Section 771(5A)(D) of the Act. We preliminarily determine the 1988
debt-to-equity conversion to be specific, because it was provided to a
specific enterprise or industry, Sidbec, Inc.
For these reasons, we preliminarily determine that the 1988 debt-
to-equity conversion constitutes a countervailable subsidy within the
meaning of section 771(5) of the Act.
Consistent with the equity methodology, we followed our standard
declining balance grant methodology for allocating the benefits from
the equity infusion stemming from the debt-to-equity conversion. We
then reduced the benefit stream by applying the privatization
calculation described in the Privatization section of the General Issue
Appendix, 58 FR at 37262-3. We divided the benefit by Sidbec-Dosco
(Ispat) total sales. On this basis, we calculated an estimated net
subsidy for this program of 3.31 percent ad valorem for Sidbec-Dosco
(Ispat).
B. 1984-1992 Equity Infusions
According to information provided in Sidbec-Dosco (Ispat)'s
response, the GOQ provided an infusion of capital to Sidbec Inc. in
each year from 1984 to 1992. Additionally, the GOQ stated that it
assumed the responsibility for certain financial charges of Sidbec-
Normines, which had been shut down in 1984, and paid those charges
through contributions to Sidbec, Inc. as they came due. Since we have
preliminarily determined that Sidbec Inc. was unequityworthy from 1982
through 1992, we consider that these equity infusions were inconsistent
with the usual investment practice of private investors and constituted
specific financial contributions in which a benefit was conferred.
Furthermore, the Department has stated in the past that ``subsidies
do not diminish or disappear upon the closure of certain facilities but
rather are spread throughout, and benefit, the remainder of the
company's operations.'' General Issues Appendix, 58 FR at 37269.
Therefore, given that these equity infusions relate to Sidbec Inc.'s
closed mining operations, we preliminarily determine that these equity
infusions benefit the subject merchandise.
We analyzed whether the receipt of these equity infusions were
specific ``in law or fact'' within the meaning of section 771(5A) of
the Act. We preliminarily determine these equity infusions to be
specific, because they were provided to a specific enterprise or
industry, Sidbec, Inc.
For these reasons, we preliminarily determine that the equity
infusions received by Sidbec from 1984 to 1992 constitutes
countervailable subsidies within the meaning of section 771(5) of the
Act.
Consistent with the equity methodology, we followed our standard
declining balance grant methodology for allocating the benefits from
these equity infusions. We then reduced the benefit stream by applying
the privatization calculation described in the Privatization section of
the General Issues Appendix, 58 FR at 37262-3. We divided the total
benefit by Sidbec-Dosco (Ispat) total sales. On this basis, we
calculated an estimated net subsidy for this program of 5.25 percent ad
valorem for Sidbec-Dosco (Ispat).
C. 1983-1992 Grants
Based on information provided in Sidbec-Dosco (Ispat)'s responses,
Sidbec Inc. received a grant in each year from 1983 to 1992 from the
GOQ to compensate for the interest expenses incurred by Sidbec, Inc. to
finance the discontinued operations of its mining activities. The
receipt of these grants occurred as follows: (1) Sidbec, Inc. paid its
share of the interest and principal, as it came due, on loans that were
taken out to finance Sidbec-Normines; (2) Sidbec, Inc. then issued
statements to the GOQ for these
[[Page 41937]]
amounts relating to the discontinued mining operations; and (3) the
GOQ, after obtaining the necessary budgetary authority, issued checks
to Sidbec, Inc. to cover these expenses. According to the GOQ, to
process a request for these funds, approval was needed from four
agencies (i.e., the Quebec Ministry of Industry and Commerce, the
Treasury Board, the National Assembly and the Executive Counsel). Once
the approval process was completed, the GOQ issued a decree providing
funding to Sidbec, Inc. (or its subsidiaries). See July 3, 1997 GOQ
response, Exhibit H.
As these grants related to Sidbec Inc.'s closed mining operations,
we preliminarily determine that they benefitted Sidbec Inc.'s remaining
operations, which include the subject merchandise. See General Issues
Appendix, 58 FR at 37269.
We analyzed whether the receipt of these grants was specific ``in
law or fact,'' within the meaning of section 771(5A) of the Act. These
grants were not received as part of any wider government program.
Instead, they were provided by the GOQ for the sole purpose of paying
debt incurred by Sidbec-Normines, Sidbec, Inc.'s unsuccessful mining
operation. Therefore, we preliminarily determine these grants to be
specific under section 771(5A)(D) of the Act.
For these reasons, we preliminarily determine that the grants
Sidbec, Inc. received constitute countervailable subsidies within the
meaning of section 771(5) of the Act.
The GOQ has claimed these benefits were recurring in nature, in
that they were granted automatically based on Quebec's having
previously assumed responsibility for the finance charges pertaining to
the discontinued mining operations. However, for each year's grant to
cover the finance charges, the GOQ had to seek budgetary authority
prior to issuing Sidbec's grant. Therefore, government approval was
necessary prior to receipt of each individual subsidy. Moreover, the
benefits from the program were clearly exceptional, and once the
financial charges were paid off, the program did not continue into the
future. The Department has stated that ``the element of ``government
approval'' relates to the issue of whether the program provides
benefits automatically, essentially as an entitlement, or whether it
requires a formal application and/or specific government approval prior
to the provision of each yearly benefit. The approval of benefits under
the latter type of program cannot be assumed and is not automatic.''
General Issues Appendix, 58 FR at 37226. Therefore, we preliminarily
determine these grants to be non-recurring benefits and have allocated
them over Sidbec's AUL.
To calculate the countervailable subsidy, we followed our standard
declining balance grant methodology, as discussed above. We reduced the
benefit stream by applying the privatization calculation described in
the Privatization section of the General Issues Appendix, 58 FR at
37262-3. We divided the benefit attributable to the POI by Sidbec-Dosco
(Ispat) sales during the same period. On this basis, we determine the
countervailable subsidy for this program to be 0.99 percent ad valorem
for Sidbec-Dosco (Ispat).
II. Programs Preliminarily Determined To Be Not Countervailable
A. Canadian Steel Trade Employment Congress Skill Training Program
The GOC, through the Human Resources Development Canada (HRDC) and
provincial regional governments provide financial support to private-
sector-led human resource projects through the Sectoral Partnerships
Initiative (SPI). SPI has been active in over eighty Canadian
industrial sectors, including steel through the Canada Steel Trade and
Employment Congress (CSTEC). CSTEC's activities are divided into two
types of assistance: 1) worker adjustment assistance, for unemployed
steel workers; and 2) skills training assistance, for currently
employed workers.
With regard to the worker adjustment assistance, funds flowing from
HRDC do not go to the companies, but rather to unemployed workers in
the form of assistance for retraining costs or income support.
With regard to training, the GOC maintains that CSTEC provides
funds only for what it describes as ``additional training.'' Additional
training is training that is over-and-above ``established training';
essentially, it is training the company would provide even without
CSTEC funding. The amount of ``additional training'' required
determines the amount of CSTEC funding from the government. The GOC
matches 50 percent of the amount of ``additional training'' in the
annual training plans and budgets up to the maximum allowable
contribution. However, other information in the GOC's questionnaire
response suggests that the GOC funding supports both ``established
training'' and ``additional training''; the cost of the ``additional
training'' is merely an element in the formula which determines the
GOC's funding level. In addition, regardless of whether the company
would have provided the training at issue without CSTEC funding, it
remains clear that this program provides for the training of currently
employed steel workers and therefore benefits the steel industry.
According to the GOC and CSTEC documents on the record, CSTEC rules
prohibit the use of CSTEC funds for assistance that the companies are
required to provide by law or under a collective bargaining agreement,
or would have provided in the absence of CSTEC funding. Based on the
record information, we preliminarily determine that funds received by
Sidbec-Dosco (Ispat), Stelco and Ivaco from CSTEC for worker adjustment
and training purposes did not provide countervailable benefits during
the POI, as record evidence shows these companies were not relieved of
any obligations.
B. 1987 Grant to Sidbec-Dosco, Inc.
Petitioners alleged that in 1987, Sidbec-Dosco, Inc. received a
grant from the GOQ. In its questionnaire response, Sidbec-Dosco (Ispat)
stated that the GOQ did not provide a contribution in 1987.
Additionally, the GOQ stated in its questionnaire response that it did
not provide a grant July 24, 1997 to Sidbec-Dosco, Inc. in 1987.
Sidbec-Dosco (Ispat) described the circumstances concerning the
1987 debt-to-equity conversion in its business proprietary response of
July 2, 1997. Based on the information provided therein, (see, the
Department's Memorandum to The File: Programs that the Department of
Commerce has Determined to be Non-Countervailable, dated July 28, 1997
which is in the public file (public version) in the Central Records
Unit, Room B-099 of the Department of Commerce), we preliminarily
determine that no countervailable benefits were conferred through this
program.
C. 1987 Debt-to-Equity Conversion
Petitioners alleged that, in 1987, Sidbec-Dosco, Inc. received an
equity infusion from either the GOC or GOQ. Specifically, petitioners
stated that Sidbec, Inc. (which was wholly-owned by the GOQ) converted
loans to Sidbec-Dosco, Inc. into Sidbec-Dosco, Inc. shares. Both the
GOC and the GOQ stated in their respective responses that they did not
provide a debt-to-equity conversion for Sidbec-Dosco, Inc. or Sidbec,
Inc. in 1987.
Sidbec-Dosco (Ispat) described the circumstances concerning the
1987 debt-to-equity conversion in its business proprietary response of
July 2, 1997. Based on the information provided therein, (see, the
Department's
[[Page 41938]]
Memorandum to The File: Programs that the Department of Commerce has
Determined to be Non-Countervailable, dated July 28, 1997 which is in
the public file (public version) in the Central Records Unit, Room B-
099 of the Department of Commerce), we preliminarily determine that no
countervailable benefits were conferred through this program.
III. Programs Preliminarily Determined To Be Not Used
A. Industrial Development of Quebec
The Industrial Development of Quebec (IDQ) is a law administered by
the Societe de Developpement Industriel du Quebec (SDI), a Quebec
agency that funds a wide range of industrial development projects in
many industrial sectors. Under Article 2(a) of the IDQ, SDI provided
funding to help companies utilize modern technologies in order to
``increase efficiency and exploit the natural resources of Quebec.''
See GOQ July 3, 1997 response at page 12. Specifically, grants are in
the form of interest rebates to finance the project. SDI would review a
company's application to determine whether the project met the purpose
of Article 2(a) and whether the company had the financial and technical
ability to carry out the project. The GOQ reported that the IDQ was
available to any manufacturing company in Quebec. The criteria for
selection were: (1) the rate of growth in the product market that the
proposed project would serve; (2) the productivity of the firm applying
for the grant; and (3) the potential for the project to serve markets
outside of Quebec. However, in 1982, GOQ rescinded Article 2(a)
authorizing SDI to provide these grants.
Ivaco received funding in 1984 and 1985 which had been authorized
under Article 2(a) prior to the program's rescission in 1982. With
respect to the grants received by Ivaco under this program, we analyzed
the total amount of funding Ivaco received in each year, and we have
determined that the benefits Ivaco recovered under this program for
each year constituted a de minimis portion (i.e., less than 0.5
percent) of total sales value, and therefore should be expensed in each
year they were received. Accordingly, we preliminarily determine that
this program has not conferred a countervailable subsidy to Ivaco
during the POI.
B. Contributed Surplus
On July 1, 1997, we initiated an investigation on petitioners'
allegation that C$ 51.7 million in contributed surplus constituted a
countervailable subsidy. On July 16, 1997, we received Sidbec-Dosco
(Ispat)'s response to our questionnaire. Sidbec-Dosco (Ispat) stated
that this contributed surplus was related to a capital expenditure
program for fixed assets, and all of the assistance was received prior
to 1980. Additionally, the GOQ stated in its response that Sidbec, Inc.
received these funds from the GOQ and the GOC prior to Sidbec, Inc.'s
AUL period. The GOC stated in its response that its database does not
contain any record of financial assistance provided to Sidbec, Inc. in
1982 or 1983.
Therefore, based on record information about this alleged subsidy,
we preliminarily determine that these funds did not provide
countervailable benefits during the POI.
C. Payments Against Accumulated Grants Receivable
On July 1, 1997, we initiated an investigation on petitioners'
allegation that C$ 43.8 million in Payments against accumulated grants
receivable constituted a countervailable subsidy. On July 16, 1997, we
received Sidbec-Dosco (Ispat)'s response to our questionnaire. Sidbec-
Dosco (Ispat) stated that these grants receivable are included in the
amount of grants that went to the discontinued mining operations of
Sidbec-Normines.
Therefore, based on record information about these grants
receivable, we preliminarily determine that these funds did not provide
countervailable benefits during the POI.
IV. Programs for Which Additional Information Is Required
A. 1982 Assistance to Sidbec-Dosco, Inc.
Petitioners alleged that in 1982, Sidbec-Dosco, Inc. received an
infusion of emergency funds, either in the form of a grant or an equity
infusion, from the GOQ. In its questionnaire and supplemental
questionnaire responses, Sidbec-Dosco (Ispat) stated that neither
Sidbec-Dosco, Inc. nor Sidbec, Inc. received funds in the form of
equity infusions from either the GOC or the GOQ during 1982. Likewise,
both the GOC and the GOQ stated in their respective responses that they
did not provide any infusions in the form of equity to either Sidbec-
Dosco, Inc. or Sidbec, Inc. in 1982. However, during our review of the
questionnaire responses, the GOC, GOQ, Sidbec, Inc. and Sidbec-Dosco
(Ispat) did not provide an affirmative statement stating the neither
the GOC or GOQ provided grants to either Sidbec, Inc. or Sidbec-Dosco,
Inc. in 1982. Therefore, we are still seeking information on this
alleged program and the countervailability of this program will be
addressed in our final determination.
Verification
In accordance with section 782(i) of the Act, we will verify the
information submitted by 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 individual rates for each of the companies under
investigation. As noted above, Ivaco and Stelco reported that they both
received funds under the CSTEC program. However, we have preliminarily
determined that the CSTEC program is not countervailable. Additionally,
we have determined that the IDQ program did not constitutes a
countervailable subsidy, because the benefit would be de minimis.
To calculate the all others rate, we weight-averaged the individual
company rates by each company's exports of the subject merchandise to
the United States. However, because Stelco and Ivaco's rates are zero,
we are using Sidbec-Dosco (Ispat)'s rate as the All Others rate.
In accordance with section 703(d) of the Act, we are directing the
U.S. Customs Service to suspend liquidation of all entries of steel
wire rod from Canada, except those of Ivaco and Stelco, 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 below. Because the estimated net subsidy for
Ivaco and Stelco is de minimis they are exempt from the suspension of
liquidation. This suspension will remain in effect until further
notice.
------------------------------------------------------------------------
Ad
valorem
Manufacturers/exporters rate
(percent)
------------------------------------------------------------------------
Sidbec-Dosco (Ispat)......................................... 9.55
Ivaco, Inc................................................... 0
Stelco, Inc.................................................. 0
All Others................................................... 9.55
------------------------------------------------------------------------
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 non-privileged and nonproprietary information relating to this
investigation. We will allow the ITC
[[Page 41939]]
access to all privileged and business proprietary information in our
files, provided the ITC confirms that it will not disclose such
information, either publicly or under an administrative protective
order, without the written consent of the Assistant Secretary for
Import Administration.
If 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 355.38, we will hold a public hearing, if
requested, to afford interested parties an opportunity to comment on
this preliminary determination. The hearing will be held on September
22, 1997, at the U.S. Department of Commerce, Room 3708, 14th Street
and Constitution Avenue, N.W., Washington, D.C. 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 1874, 14th Street and Constitution Avenue, N.W.,
Washington, DC 20230. Parties should confirm by telephone the time,
date, and place of the hearing 48 hours before the scheduled time.
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. In
addition, eight copies of the business proprietary version and three
copies of the nonproprietary version of the case briefs must be
submitted to the Assistant Secretary no later than September 8, 1997.
Eight copies of the business proprietary version and three copies of
the nonproprietary version of the rebuttal briefs must be submitted to
the Assistant Secretary no later than September 15, 1997. An interested
party may make an affirmative presentation only on arguments included
in that party's case or rebuttal briefs. Written arguments should be
submitted in accordance with 19 CFR 355.38 and will be considered if
received within the time limits specified above. 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.
If this investigation proceeds normally, we will make our final
determination by October 14, 1997.
This determination is published pursuant to sections 703(f) and
777(i) of the Act.
Date: July 28, 1997.
Jeffrey P. Bialos,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-20490 Filed 8-1-97; 8:45 am]
BILLING CODE 3510-DS-P
