(65 FR 18065, April 6, 2000)
                                                      C-351-818
                                                      Sunset Review
                                                      Public Document

MEMORANDUM TO:  Robert S. LaRussa
                Assistant Secretary
                  for Import Administration

FROM:           Jeffrey A. May
                Director
                Office of Policy

SUBJECT:        Issues and Decision Memo for the Sunset Review of the
                Countervailing Duty Order on Certain Cut-to-Length
                Carbon Steel Plate from Brazil;
                Final Results of Expedited Review


Summary

We have analyzed the comments of interested parties in the expedited
sunset review of the countervailing duty order covering certain cut-
to-length carbon steel plate ("cut-to-length plate") from Brazil. We
recommend that you approve the positions we have developed in the
Discussion of the Issues section of this memorandum. Below is the
complete list of the issues in these expedited sunset review for
which we received a substantive response:

1. Likelihood of continuation or recurrence of a countervailable
   subsidy

        A. Continuation of subsidies
        B. Temporary or partial termination of subsidies

2. Net Countervailable Subsidy

        A. Rates from investigation
        B. Use of a more recent rate

3. Nature of the Subsidy

        A. Article 3 or Article 6.1 subsidy
        B. Program descriptions

History of the Order

The Department published its final affirmative determination on cut-
to-length plate from Brazil in the Federal Register on July 9, 1993
(58 FR 37295). In this determination, the Department found an
estimated net subsidy of 6.07 percent for Usinas Siderurgicas de
Minas Gerais S.A. ("USIMINAS"), 44.66 percent for Companhia
Siderurgica Paulista ("COSIPA"), and 21.84 percent for "all others,"
based on six programs: (1) Equity Infusions program; (2) Fiscal
Benefits by Virtue of Industrial Development Council ("CDI") program;
(3) IPI Rebate Program Under Law 7554/86 program; (4) Exemption of
IPI and Duties on Imports under Decree-law 2324 program;(1) (5) Banco
Nacional de Desenvolvimento Economico e Social Financing ("BNDES")
program; and (6) Provision of Infrastructure program.

On August 17, 1993, the Department published an amended final
determination and countervailing duty order.(2) On February 9, 1995,
the United States Court of International Trade ("CIT") held that the
Department's privatization methodology for USIMINAS was unlawful, and
remanded the determinations in question.(3) In accordance with the
CIT's instructions the Department re-examined the privatization
transactions in question. The Department found that the privatization
of USIMINAS was through sales of shares, and that the privatized
entity continued to be the same entity that had received the
subsidies prior to privatization.(4) Therefore, the Department
determined that the pre-privatization subsides remained
countervailable in full. The Department did not attribute any portion
of the sales price for any of the producers to a partial repayment of
prior subsidies. On April 2, 1996, the CIT affirmed the remand
determinations made by the Department. In doing so the Court
implicitly rejected the "repayment" aspect of the Department's
privatization methodology. While the Court of Appeals for the Federal
Circuit ("CAFC") recently ruled that the Department may not presume
that non-recurring subsidies survive a transfer in a subsidized
company's ownership, that decision is not final and conclusive. See
Delverde SRL v. United States, Appeal No. Op. 99-1186 (Fed. Cir.
2000). The Department has not conducted an administrative review of
this order since its imposition.

Background

On September 1, 1999, the Department published the notice of
initiation of the sunset review of the countervailing duty order on
cut-to-length plate from Brazil (63 FR 47767). The Department
received a Notice of Intent to Participate on behalf of Bethlehem
Steel Corporation and U.S. Steel Group, a unit of USX Corporation
("the domestic interested parties"), within the deadline specified in
section 351.218(d)(1)(i) of the Department's regulations as codified
19 CFR Part 351 (1999) ("Sunset Regulations"). The domestic
interested parties claimed interested party status under section
771(9)(C) of the Tariff Act of 1930, as amended ("the Act"), as U.S.
manufacturers of cut-to-length plate. We received a complete
substantive response from the domestic interested parties on October
1, 1999, within the 30-day deadline specified in the Sunset
Regulations under section 351.218(d)(3)(i). In their substantive
response, the domestic interested parties stated that they were the
petitioner in the original investigations of cut-to-length plate from
Brazil. Furthermore, the domestic interested parties stated that they
had participated in each subsequent segment of the case. We did not
receive a substantive response from any respondent interested party
to this proceeding. As a result, pursuant to 19 CFR
351.218(e)(1)(ii)(C), the Department determined to conduct an
expedited, 120-day, review of this order.

In accordance with section 751(c)(5)(C)(v) of the Act, the
Department may treat a review as extraordinarily complicated if it is
a review of a transition order (i.e., an order in effect on January
1, 1995). The review at issue concerns a transition order within the
meaning of section 751(c)(6)(C)(i) of the Act. Therefore, the
Department determined that the sunset review of the countervailing
duty order on cut-to-length plate from Brazil is extraordinarily
complicated and extended the time limit for completion of the final
results of this review until not later than March 29, 2000, in
accordance with section 751(c)(5)(B) of the Act.(5)

Discussion of the Issues

In accordance with section 751(c)(1) of the Act, the Department
conducted this review to determine whether revocation of the
countervailing duty order would be likely to lead to continuation or
recurrence of a countervailable subsidy. Section 752(b) of the Act
provides that, in making this determination, the Department shall
consider the net countervailable subsidy determined in the
investigation and subsequent reviews, and whether any change in the
program which gave rise to the net countervailable subsidy has
occurred and is likely to affect that net countervailable subsidy.
Pursuant to section 752(b)(3) of the Act, the Department shall
provide to the International Trade Commission ("the Commission") the
net countervailable subsidy likely to prevail if the order is
revoked. In addition, consistent with section 752(a)(6), the
Department shall provide to the Commission information concerning the
nature of the subsidy and whether it is a subsidy described in
Article 3 or Article 6.1 of the 1994 WTO Agreement on Subsidies and
Countervailing Measures ("Subsidies Agreement").

Below we address the comments of the interested parties.

1.  Likelihood of Continuation or Recurrence of a Countervailable
        Subsidy:

Interested Party Comments

In their substantive response, the domestic interested parties argue
that revocation of the countervailing duty order would likely lead to
continuation or recurrence of a countervailable subsidy by Brazilian
manufacturers and exporters of the subject merchandise. Citing the
SAA, at 888, the domestic interested parties assert that
continuation, or temporary or partial termination, of a subsidy
program will be highly probative of the likelihood of continuation or
recurrence of countervailable subsidies, absent significant evidence
to the contrary.

The domestic interested parties argue that the same programs found
in the original investigation are either still being used or still
conferring a benefit. Specifically, the domestic interested parties
note that the benefit stream from non-recurring subsides (equity
infusions and BNDES long-term financing) which were allocated over
time, continue to benefit USIMINAS and COSIPA, and will continue to
do so in the future. Furthermore, the domestic interested parties
argue that the three recurring subsides found in the original
investigation (fiscal benefits by virtue of CDI, exemptions of IPI
and duties on imports under decree-law 2324, and the IPI rebate
program under law 7554/86), continue to confer benefits upon USIMINAS
and COSIPA.

Department's Position

Drawing on the guidance provided in the legislative history
accompanying the Uruguay Round Agreements Act ("URAA"), specifically
the Statement of Administrative Action (the "SAA"), H.R. Doc. No. 103-
316, vol. 1 (1994), the House Report, H.R. Rep. No. 103-826, pt.1
(1994), and the Senate Report, S. Rep. No. 103-412 (1994), the
Department issued its Sunset Policy Bulletin providing guidance on
methodological and analytical issues, including the basis for
likelihood determinations. The Department clarified that
determinations of likelihood will be made on an order-wide basis (see
section III.A.2 of the Sunset Policy Bulletin). Additionally, the
Department normally will determine that revocation of a
countervailing duty order is likely to lead to continuation or
recurrence of a countervailable subsidy where (a) a subsidy program
continues, (b) a subsidy program has been only temporarily suspended,
or (c) a subsidy program has been only partially terminated (see
section III.A.3.a of the Sunset Policy Bulletin). Exceptions to this
policy are provided where a company has a long record of not using a
program (see section III.A.3.b of the Sunset Policy Bulletin).

Section 751(c)(4)(B) of the Act provides that, in addition to
considering the guidance on likelihood cited above, the Department
shall determine that revocation of an order is likely to lead to
continuation or recurrence of a countervailable subsidy where a
respondent interested party waives its participation in the sunset
review. Pursuant to the SAA, at 881, in a review of a countervailing
duty order, when the foreign government has waived participation, the
Department shall conclude that revocation of the order would be
likely to lead to a continuation or recurrence of a countervailable
subsidy for all respondent interested parties.(6) In the instant
review, the Department did not receive a response from the foreign
government or from any other respondent interested party. Pursuant to
section 351.218(d)(2)(iii) of the Sunset Regulations, this
constitutes a waiver of participation.

As stated above, the continued use of a program is highly probative
of the likelihood of continuation or recurrence of countervailable
subsidies if the order were revoked. Additionally, the continuation
of a benefit stream beyond the end of the sunset review, regardless
of whether the program that gave rise to the long-term benefit
continues to exist, is also probative of the likelihood of
continuation or recurrence of a countervailable subsidy. Absent
argument or evidence to the contrary, we find that countervailable
programs continue to exist and be used. Given that (i)
countervailable programs continue to exist and be used; (ii) the
benefit stream from non-recurring subsides allocated over time
continues to benefit USIMINAS and COSIPA; (iii) the foreign
government and other respondent interested parties waived their right
to participate in this review before the Department; and (iv) the
absence of argument and evidence to the contrary, the Department
therefore concludes that revocation of the order would be likely to
lead to a continuation or recurrence of a countervailable subsidy for
all respondent interested parties.(7)

2.  Net Countervailable Subsidy:

Interested Parties Comments

The domestic interested parties, citing the SAA, note that the
Department normally will select the rate from the investigation as
the net countervailable subsidy likely to prevail if the order is
revoked, because that is the only calculated rate that reflects the
behavior of exporters and foreign governments without the discipline
of an order in place (see October 1, 1999, Substantive Response of
the domestic interested parties regarding cut-to-length plate from
Brazil, at 15). However, citing 752(b)(1)(B) of the Act, they note
that the Department shall consider whether there has been any change
in any of the programs, which gave rise to the net countervailable
subsidy, that is likely to affect the net countervailable subsidy.
Id. at 16. Pursuant to this authority, the domestic interested
parties assert that the Department should report to the Commission
the 9.45 percent subsidy rate calculated for USIMINAS/COSIPA in the
investigation of certain hot-rolled flat-rolled carbon-quality steel
products ("Hot-Rolled Steel").(8) They argue that the subsidy rate
found in the Hot-Rolled Steel case is more accurate, as it takes into
account changes in ownership and equity infusion received by COSIPA,
and does not include any amount attributable to terminated programs.

Department's Position

In the Sunset Policy Bulletin, the Department stated that, consistent
with the SAA and House Report, the Department normally will select a
rate from the investigation as the net countervailable subsidy likely
to prevail if the order is revoked, because that is the only
calculated
rate that reflects the behavior of exporters and foreign governments
without the discipline of an order or suspension agreement in place.
The Department noted that this rate may not be the most appropriate
rate if, for example, the rate was derived from subsidy programs which
were found in subsequent reviews to be terminated, there has been a
program-wide change, or the rate ignores a program found to be
countervailable in a subsequent administrative review.(9)

Although, as the domestic interested parties asserted, there may
have been changes in the level of subsidies received by, and in the
relationship of, the Brazil manufacturers and exporters of the
subject merchandise, as noted above, the Department has not conducted
an administrative review of this order. While we agree with the
domestic interested parties that the Department determined it
appropriate to treat USIMINAS and COSIPA as a single company for
purposes of the countervailing duty investigation covering hot-rolled
steel, we do not agree that it is appropriate to do so for the
purpose of this sunset review. In the original investigation of the
merchandise subject to this order, the Department determined company-
specific net subsidy rates for both USIMINAS and COSIPA. Even if we
were to agree that it is appropriate to treat these companies as a
single company for the purpose of this sunset review, on the basis of
information on the record, we would be unable to determine the net
countervailable subsidy applicable to such a single company. We do
not agree with domestic interested parties that it would be
appropriate to rely on the net countervailable subsidy determined in
the determination with respect to hot-rolled steel. Although the same
producers may be involved, different products are involved and the
level of subsidization may vary from product to product. Therefore,
consistent with the Sunset Policy Bulletin, we determine that the
rate from the original investigation is probative of the net
countervailable subsidy likely to prevail were the order to be
revoked.

3.  Nature of the Subsidy:

In the Sunset Policy Bulletin, the Department states that,
consistent with section 752(a)(6) of the Act, the Department will
provide to the Commission information concerning the nature of the
subsidy, and whether the subsidy is a subsidy as described in Article
3 or Article 6.1 of the Subsidies Agreement. The domestic interested
parties did not address this issue in their substantive response of
October 1, 1999.

Because receipt of benefits provided by the Government of Brazil's
("GOB's") countervailable program Exemption of IPI and Duties on
Imports under Decree-Law 2324 is contingent upon exports, this
program fall within the definition of an export subsidy under Article
3.1(a) of the Subsidies Agreement.

All of the other programs provided by the GOB are, however, programs
that could be found inconsistent with Article 6.1 of the Subsides
Agreement(10) if the net subsidy exceeds 5 percent ad valorem as
measured in accordance with Annex IV of the Subsidies Agreement.
However, the Department does not have enough information to calculate
or determine whether the total ad valorem subsidization of the
subject merchandise from these programs exceeds five-percent or
whether they were meant to cover operating losses or to be used as
direct forgiveness of debt. Nor does the Department believe such
calculation or determination would be appropriate in the course of a
sunset review. Instead, we are providing the Commission with program
descriptions listed below.

Equity Infusions

This program enabled USIMINAS and COSIPA to receive equity infusions
from the GOB in the following years: USIMINAS, 1980 to 1988; and
COSIPA, 1977 through 1991. We determined that equity infusions by the
GOB into USIMINAS, in these years, and into COSIPA in the years 1997
through 1989 and 1991 were made on terms inconsistent with commercial
considerations.

Fiscal Benefits by Virtue of the CDI

The CDI provides for the reduction of up to 100 percent of the
import duties and up to 10 percent of the IPI tax (value-added tax)
on certain imported machinery for specific projects.

IPI Rebate Program Under Law 7554/86

This Program consists of a rebate of 95 percent of the IPI tax paid
on domestic sales of industrial products.

BNDES Financing

In this program loans were provided in terms inconsistent with
commercial considerations because the companies that received the
loans were uncreditworthy.

Provision of Infrastructure

This program provides preferential interest on purchasing agreements
with a government-owned steel holding company.

Final Results of Review:

As a result of this review, the Department finds that revocation of
the countervailing duty order would be likely to lead to continuation
or recurrence of a countervailable subsidy at the rates listed below:

Brazilian Manufacturers/Exporters        Cash Deposit Rate (percent)

---------------------------------------------------------------------

USIMINAS. . . . . . . . . . . . . . . . . . . . . .5.44
COSIPA . . . . . . . . . . . . . . . . . . . . . .48.64
All Others . . . . . . . . . . . . . . . . . . . .23.10

---------------------------------------------------------------------

Recommendation

Based on our analysis of the substantive response received, we
recommend adopting all of the above positions. If these
recommendations are accepted, we will publish the final results of
review in the Federal Register.



AGREE ____ DISAGREE____





Joseph A. Spetrini
Acting Assistant Secretary
 for Import Administration



(Date)

_____________________________________________________________
Footnotes:

1. In the investigation, the Department found that this program was
terminated prior to the preliminary determination and no residual
benefits have been provided since before the preliminary
determination. Therefore, for cash deposit purposes, we adjusted the
estimated net subsidy from this program to zero in accordance with
section 355.50(a)(2) of the Department's Regulations.

2. The petitioners and respondents alleged that the Department made
ministerial errors in calculating the subsidy rate. Specifically, the
respondents contended that the Department overstated COPISA's benefit
from the BNDES loan program. We agreed and reduced COSIPA's estimated
net subsidy from this program from 0.96 percent to zero. Although the
Department found the net subsidy during the period of review to be
zero, because COSIPA resumed service payments in 1992 on its
outstanding BNDES loan program, the deposit rate was set at 0.66%.
Respondents argued further that the Department overstated USMINAS'
benefit from the IPI rebate program. We agreed and reduced USMINAS'
net subsidy from this program from 2.00 percent to 1.98 percent ad
valorem. The respondents contended further that the Department
overstated USIMINAS' benefit, and the petitioners argued that the
Department understated COSIPA's benefits, from countervailable equity
infusions. We agreed with both the respondents and the petitioners,
and reduced the net subsidy from equity infusion from 3.45 percent to
3.03 percent ad valorem for USIMINAS, and increased the net subsidy
from 43.12 percent to 47.40 percent ad valorem for COSIPA. See
Countervailing Duty Order and Amendment to Final Affirmative
Countervailing Duty Determination: Certain Steel Products from
Brazil, August 17, 1993 (58 FR 43751).

3. See British Steel Plc. et al. v. United States, 879 F. Supp 1254.

4. See British Steel Plc. et al. v. United States, Slip Op. 96-6011.

5. See Extension of Time Limit for Final Results of Five-Year Reviews,
   64 FR 71726 (December 22, 1999).

6. See 19 CFR 351.218(d)(2)(iv).

7. See 19 CFR 351.218(d)(2)(iv).

8. In this investigation the Department determined that USIMINAS and
COSIPA should be collapsed and treated as a single entity. See Final
Affirmative Countervailing Duty Determination: Certain Hot-Rolled
Flat-Rolled Carbon-Quality Steel Products From Brazil, 64 FR 38742
(July 19, 1999).

9. See section III.B.3 of the Sunset Policy Bulletin

10. We note that as of January 1, 2000, Article 6.1 has ceased to
apply (see Article 31 of the Subsidies Agreement).