NOTICES
DEPARTMENT OF COMMERCE
(C-351-818)
Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Countervailing Duty Determinations With Final Antidumping Duty Determinations: Certain Steel Products From Brazil
Monday, December 7, 1992
*57806
(Cite as: 57 FR 57806, *57806)
AGENCY: Import Administration, International Trade Administration, Department of Commerce.
EFFECTIVE DATE: December 7, 1992.
FOR FURTHER INFORMATION CONTACT:Philip Pia or Laurel Lynn, Office of
Countervailing Compliance, U.S. Department of Commerce, Room 3099, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-3961 or 482-1168, respectively.
*57807
PRELIMINARY DETERMINATIONS AND ALIGNMENTS: The Department preliminarily determines that benefits which constitute subsidies within the meaning of section 701 of the Tariff Act of 1930, as amended (the Act), are being provided to manufacturers, producers, or exporters in Brazil of certain steel products.
For information on the estimated net subsidies, please see the Suspension of Liquidation section of this notice. On November 24, 1992, in accordance with section 705(a)(1) of the Tariff Act of 1930, as amended (the Act) (19 U.S.C. 1671d(a)(1)), petitioners in the above-referenced investigations requested that we align the due date for the final countervailing duty determinations with that of the final antidumping duty determinations for certain steel products. Accordingly, we are aligning these final determinations. Therefore, the final countervailing duty determinations are now due not later than April 12, 1993.
Case History
Since the publication of the notice of initiation and postponement of preliminary determinations in the Federal Register (57 FR 32970, July 24, 1992) the following events have occurred. On August 10, 1992, we issued a questionnaire to the Government of Brazil (GOB). On August 20, 1992, we received a partial response from the GOB indicating the proper responding companies in these investigations. On October 5, 1992, we received responses from the GOB and Usinas Siderurgicas de Minas Gerais (USIMINAS), Companhia Siderurgica Paulista (COSIPA), and Companhia Siderurgica Nacional (CSN). See the Respondents section, below, for a list of respondent companies for each class or kind of merchandise subject to these investigations. On October 22, 1992, we issued a supplemental/deficiency questionnaire to respondents. We received responses to this questionnaire on November 5, 1992.
Scope of Investigations
The products covered by these investigations, certain steel products, constitute the following four separate "classes or kinds" of merchandise, as found in appendix 1 to this notice: (1) certain hot-rolled carbon steel flat products, (2) certain cold-rolled carbon steel flat products, (3) certain corrosion-resistant carbon steel flat products, (4) certain cut-to-length carbon steel plate.
Injury Test
Because Brazil is a "country under the Agreement" 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 certain steel products from Brazil materially injure, or threaten material injury to, U.S. industries. On August 21, 1992, the ITC preliminarily determined that there is a reasonable indication that industries in the United States are being materially injured or threatened with material injury by reason of imports from Brazil of the subject merchandise (57 FR 38064, August 21, 1992).
Respondents
The GOB is a respondent for each class or kind of merchandise subject to these investigations. The following is a list of respondent companies for each class or kind of merchandise subject to these investigations:
Certain Hot-Rolled Carbon Steel Flat Products
USIMINAS, COSIPA, CSN
Certain Cold-Rolled Carbon Steel Flat Products
USIMINAS, COSIPA, CSN
Certain Corrosion-Resistant Carbon Steel Flat Products
CSN
Certain Cut-To-Length Carbon Steel Plate
USIMINAS, COSIPA
Analysis of Programs
For purposes of these preliminary determinations, the period for which we are measuring subsidies (the period of investigation (POI)) is calendar year 1991, which corresponds to the fiscal years of USIMINAS, COSIPA, and CSN. In determining the benefits received under the various programs described below, we used the following calculation methodology. We first calculated a country-wide rate for each program. This rate comprised the ad valorem benefit received by each firm weighted by each firm's share of exports, separately for each class or kind of merchandise, to the United States. The rates for all programs were then summed to arrive at a country-wide rate for each class or kind of merchandise.
Pursuant to 19 CFR 355.20(d), for each class or kind of merchandise, we compared the total ad valorem subsidy received by each firm to the country-wide rate for all programs. Only one company, CSN, is a respondent in the corrosion-resistant carbon steel flat products investigation. Its rate, therefore, is the country-wide rate for corrosion-resistant carbon steel flat products.
Of the three respondent companies in the hot-rolled carbon steel flat products investigation, two of the companies, USIMINAS and COSIPA, have rates that are significantly different than the country-wide rate as defined in section 355.20(d) of the Department's regulations. Therefore, USIMINAS and COSIPA received individual company rates for this class or kind of merchandise. For the remaining firm, CSN, we recalculated the country-wide rate, based solely on the benefits received by this firm for this class or kind of merchandise. This is the rate that will be applied to all other manufacturers, producers, and exporters, with the exception of USIMINAS and COSIPA.
For the cut-to-length carbon steel plate investigation, both companies under investigation, USIMINAS and COSIPA, were significantly different from the country-wide rate. Therefore, these firms received individual company rates for this class or kind of merchandise. Because all of the firms under investigation were significantly different from the country-wide rate, we are applying the weighted-average rate for these two companies to all other manufacturers, producers, and exporters of cut-to-length carbon steel plate, with the exception of USIMINAS and COSIPA.
For the cold-rolled carbon steel flat products investigation, all three companies under investigation, USIMINAS, CSN and COSIPA, were significantly different from the country-wide rate. Therefore, these firms received individual company rates for this class or kind of merchandise. Because all of the firms under investigation were significantly different from the country- wide rate, we are applying the weighted-average rate for these three companies to all other manufacturers, producers, and exporters of cold-rolled carbon steel flat products, with the exception of USIMINAS, CSN and COSIPA Based upon our analysis of the petition and the responses to our questionnaires, we preliminarily determine the following:
Equityworthiness
The Department considers a company equityworthy if, from the perspective of a reasonable private investor examining the firm at the time the government equity infusions was made, the firm showed an ability to generate a reasonable rate of return within a reasonable period of time.
Petitioners have alleged that USIMINAS, COSIPA and CSN were unequityworthy during 1980-1988,
*57808
1977-1989 and 1991, and 1977-1991, respectively, and, therefore, that equity infusions received during those years were inconsistent with commercial considerations. The Department has previously analyzed the equityworthiness of some of these years. The respondents provided no new information regarding the previous determinations that these companies were unequityworthy. Therefore, based on prior Department determinations and analysis of respondents' data, we have determined that respondents were unequityworthy in the following years: USIMINAS 1980-1988 (USIMINAS did not receive equity infusions after 1988); COSIPA 1977-1989, 1991; CSN 1977-1991. We therefore determine that equity infusions provided by the GOB to each company in these respective years were inconsistent with commercial considerations. See Memorandum to File regarding equityworthy and creditworthy analyses.
Creditworthiness
The Department will find a firm uncreditworthy if the firm did not have sufficient revenues or resources to meet its fixed financial obligations in the three years prior to the year in which the firm and the government agreed upon the terms of the loan.
Based on petitioners' allegation, we initiated an investigation to determine whether USIMINAS, COSIPA, and CSN were uncreditworthy during the period 1979- 1991. For certain years, we had previously determined that these companies were uncreditworthy and respondents provided no new information that would lead us to reconsider those determinations. Based on previous Department determinations and respondents' submitted financial data, we have determined that respondents were uncreditworthy in the following years: USIMINAS, 1980- 1988; COSIPA, 1979-1991; and CSN, 1979-1991. See Memorandum to File regarding equityworthy and creditworthy analyses.
Privatization
USIMINAS was privatized in October 1991 in accordance with Brazil's national privatization plan. According to the responses, USIMINAS's value was assessed by two sets of outside consultants, and a third consultant monitored the integrity of the entire process. A minimum sale price was established based on the two assessments. An Invitation to Bid was published in advance of the sale. The sale itself comprised auctions of the common and preferred stock, and offerings to employees and the public. Petitioners argue that the privatization of USIMINAS should not prevent the Department from countervailing equity infusions. Respondents argue that the privatization of USIMINAS precludes the imposition by the Department of countervailing duties, because any residual value of GOB equity infusions was accounted for in the sale of the company's assets.
The Department preliminarily determines that subsidies to government- owned companies are not extinguished by the subsequent privatization of those companies. The amount we countervail is the value of the benefit received by the company allocated over time under the Department's standard methodology. The only event that the Department would recognize as extinguishing a countervailable subsidy would be the repayment to the government by a recipient company of the remaining value of that subsidy in accordance with the Department's methodology. (See Memorandum to File Re: Privatization in the general issue file (C-100-004) for these investigations for a more detailed discussion of privatization.)
Specificity
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 19 U.S.C. 1677(5)(B). § 355.43(b)(2) of the Department's proposed regulations, (Countervailing Duties; Notice of Proposed Rulemaking and Request for Public Comments 54 FR 23366 (May 31, 1989) (Proposed Rules)), the Department has set forth the factors that may be considered in determining whether there is specificity:
(i) The extent to which a government acts to limit the availability of a program;
(ii) The number of enterprises, industries, or groups thereof that actually use a program;
(iii) Whether there are dominant users of a program, or whether certain enterprises, industries, or groups thereof receive
disproportionately large benefits under a program; and
(iv) The extent to which a government exercises discretion in conferring benefits under a program.
See also Final Affirmative Countervailing Duty Determination: Certain Softwood
Lumber Products from Canada 57 FR 22570 (May 28, 1992).
Equity Methodology
According to § 355.49(e) of the Proposed Rules, the Department measures the benefit of equity investments in "unequityworthy" firms by comparing the national average rate of return on equity with the company's rate of return on equity during each year of the allocation period. The difference in these amounts, the so-called rate of return shortfall (RORS), is then multiplied by the amount of the equity investment to determine the countervailable benefit in the given year.
The Department has preliminarily concluded that the RORS methodology does not provide an accurate measure of the benefits arising from government equity investments in unequityworthy companies. When the Department finds that a company is unequityworthy and, hence, that the government's equity investment is inconsistent with commercial considerations, we are effectively finding that the company could not attract share capital from a reasonable investor. When a company is in such poor financial condition that it cannot attract capital, any capital it receives benefits that company as if it were a grant and no earnings of the company in subsequent years should be used to offset the benefit. Moreover, in calculating the company's rate of return, no adjustment is made to eliminate the effect of past or current subsidies. Therefore, those subsidies that increase the company's rate of return serve to reduce the amount of the subsidy arising from government equity investments in subsequent years. In additional this method does not compensate for the effect of prior year results on equity in subsequent years, thus measuring the rate of return against an equity other than that invested in the transaction in question. For these reasons, we have preliminarily determined that equity investments in unequityworthy companies will be treated as grants given in the year of the equity investment. Accordingly, we will value the benefits using the grants methodology described below.
We are market-determined benchmark price for equity exists, we will continue to use that benchmark to determine whether the government's purchase of equity confers a subsidy and to measure the amount of the subsidy.
*57809
Grant Methodology
Our policy with respect to grants is (1) to expense recurring grants in the year of receipt, and (2) to allocate non-recurring grants over the average useful life of assets in the industry, unless the sum of grants provided under a particular program is less than 0.5 percent of a firm's total or export sales (depending on whether the program is a domestic or export subsidy) in the year in which the grant was received. See, e.g., Final Affirmative Countervailing Duty Determination: Fresh and Chilled Atlantic Salmon from Norway, (Salmon from Norway), 56 FR 7678 (February 25, 1991). We have considered the grants provided under the programs described below to be non- recurring, unless otherwise noted, because the recipient cannot expect to receive benefits on an ongoing basis from review period to review period. See Final Affirmative Countervailing Duty Determination; Certain Fresh Atlantic Groundfish from Canada, 51 FR 10041 (March 24, 1986). (In this regard, we are reexamining the approach to distinguished recurring from non-recurring benefits set forth in the three-part test found in the preamble of the Proposed Rules.) Therefore, we have allocated the benefits over 15 years, which the Department considers to be reflective of the average useful life of assets in the steel industry (see section 355.49(b)(3) of the Proposed Rules).
The benefit from each of the grant programs discussed below was calculated using the declining balance methodology described in the Department's Proposed Rules (see § 355.49(b)(3)) and used in prior investigations (see, e.g., Salmon from Norway). For the discount rate used in these calculations, we used, whenever possible, each company's actual cost for long-term, fixed-rate debt. If a company did not report this cost, or when a company had no long-term borrowing in the year in which the grant was approved, we used the national average long-term interest rate. If a company was uncreditworthy in the year in which the grant was approved, we added a risk premium to the benchmark interest rate in accordance with section 355.44(b)(6)(iv) of the Proposed Rules.
A. Programs Preliminarily Determined To Be Countervailable
We preliminarily determine that subsidies are being provided to manufacturers, producers, or exporters in Brazil of certain steel products under the following programs:
USIMINAS, COSIPA, and CSN received equity infusions from the GOB in each of the years for which we initiated unequityworthy investigations. We have consistently held that government provision of equity does not per se confer a subsidy (see, e.g., Final Affirmative Countervailing Duty Determination: Steel Wheels from Brazil (54 FR 15523, April 18, 1989) (Steel Wheels). Based on our analysis of the record, we preliminarily determine that these infusions were specific to USIMINAS, COSIPA, and CSN, and that USIMINAS, COSIPA, and CSN were unequityworthy when they received equity infusions. As such, these infusions are countervailable.
Because there has been hyperinflation in the Brazilian economy throughout the last fifteen years, and monetary correction is required, it is inappropriate to use the nominal amounts of the equity infusion in our calculations. Therefore, we have converted all equity infusions into U.S. dollars. Where we had information on equity infusions on a monthly basis, we used a monthly exchange rate to convert to U.S. dollars. Where we had only annual infusion information, we used an annually-averaged exchange rate to convert to U.S. dollars.
In calculating a benefit from the infusions, we first established a discount rate, as provided for in § 355.49(b)(2) of the Proposed Rules. Because we have converted the equity infusions into dollars in order to account for hyperinflation, we must use a long-term discount rate in dollars. For our benchmark discount rates, we used data for U.S. dollar lending in Brazil for long-term non-guaranteed loans from private lenders as published in World Bank Debt Tables: External Debt of Developing Countries. Because respondents were found to be uncreditworthy in each year they received equity infusions, we added a risk premium to the benchmark. This risk premium was calculated in accordance with the Proposed Rules. We used the non-recurring grant methodology, as described in the "Grant Methodology" section above, in calculating the benefit from these subsidies.
On this basis, we determine the net subsidies for this program to be 40.80 percent ad valorem for certain hot-rolled carbon steel flat products except for USIMINAS (5.53 percent ad valorem) and COSIPA (53.41 percent ad valorem); 18.96 percent ad valorem for certain cold-rolled carbon steel flat products except for USIMINAS (5.53 percent ad valorem), CSN (40,80 percent ad valorem), and COSIPA (53.41 percent ad valorem); 40.80 percent ad valorem for certain corrosion-resistant carbon steel flat products; and 29.05 percent ad valorem for certain cut-to-length carbon steel plate except for USIMINAS (5.53 percent ad valorem) and COSIPA (53.41 percent ad valorem).
2. Fiscal Benefits By Virtue Of CDI
Under Decree-Law 1428, the Industrial Development Council (CDI) provides for the exemption of up to 100 percent of the import duties and up to 10 percent of the IPI tax on certain imported machinery for specific projects in 14 industries approved by the GOB. The recipient must prove that the machinery or equipment to be imported is not available from a Brazilian manufacturer. In Steel Wheels, this program was found to be limited to a specific enterprise or industry or group of enterprises or industries and therefore countervailable. In response to our questionnaire, the respondents provided no new information which would lead us to conclude that the program is not specific.
Decree-Law 1726 repealed this program in 1979. However, companies whose projects were approved prior to the repeal continue to receive benefits from this program pending completion of the project. USIMINAS received benefits under this program during the POI.
Respondents have claimed that, due to subsequent legislation, both import duty and IPI tax reductions were available to all companies in Brazil, and therefore should not be considered specific to an enterprise or group of enterprises. Respondents have argued that the Department should adjust the deposit rate accordingly. See § 355.50(a)(2) of the Department's Proposed Rules. Respondents claim that Decree-Law 8085 of October 1990 made import duty reductions available to any company in
Brazil provided that the machinery to be imported was not produced in Brazil (the same requirement of the CDI program). To receive an import duty exemption under this law, companies must apply to the GOB for an exemption. The GOB publishes a notice of the application to determine if there are any domestic producers of the machinery. If no Brazilian company demonstrate that it can produce the machinery for which the exemption was requested, the GOB grants the exemption. Such duty reductions are not automatic, but must be approved by the GOB. Although the respondents provided a copy of Decree-Law 8085 to
*57810
the Department, they did not provide sufficient information on the record to demonstrate that Decree-Law 8085 is, in fact, non-specific and that there is no discretion in the application and approval process. Therefore, for this preliminary determination we will make no adjustment to the deposit rate.
Decree-Law 8191/91 automatically exempts all imports of machinery made after June 11, 1991 from IPI tax. No application is required. The law applies to every import of machinery by any company or industry in Brazil. USIMINAS's CDI-related import was made after June 11, 1991. We therefore preliminarily find that, because IPI exemptions are now automatically provided on all imports of machinery, the IPI exemption under CDI is no longer specific, and, as such, is no longer countervailable. Therefore, we have only included in our subsidy calculation the import duty reduction and not the IPI exemption.
USIMINAS claims in its responses that the machinery imported under CDI was destined for use solely in the production of cut-to-length carbon steel plate. Therefore, to calculate the benefit, we divided the total amount of the import duty reduction in 1991 by USIMINAS' sales of cut-to-length carbon steel plate. On this basis, we determine the net subsidies to for this program to be 0.48 percent ad valorem for cut-to-length carbon steel plate except for USIMINAS (0.95 percent ad valorem) and COSIPA (0.00 percent ad valorem).
3. IPI Rebate Program Under Law 7554/86
The IPI Rebate Program, which consists of a rebate of 95 percent of the value- added sales tax (IPI) paid on domestic sales of industrial products, was established by Decree-Law 1547 in 1977. Although the program was suspended in April 1990 (Decree-Law 8034), steel companies with projects approved before April 12, 1990, are eligible for IPI rebates until 1996 (pursuant to the old legislation (Law 7554)).
In Final Negative Countervailing Duty Determination: Circular Welded Non-Alloy Steel Pipe From Brazil 57 FR 42968 (September 17, 1992), we determined that this program was limited to a specific enterprise or industry or groups of enterprises or industries. The GOB did not provide any information in the questionnaire responses that warrants a reconsideration of that determination. USIMINAS, COSIPA, and CBN received benefits under this program during the POI. These benefits are company-specific and are not tied to any class or kind of merchandise. Therefore, to calculate the benefit, we divided the total amount of each company's IPI rebates received during the POI by their respective total sales in 1991.
On this basis, we determine the net subsidies for this program to be 2.02 percent ad valorem for certain hot-rolled carbon steel flat products except for USIMINAS (0.20 percent ad valorem) and COSIPA (0.07 percent ad valorem); 0.42 percent ad valorem for certain cold-rolled carbon steel flat products except for USIMINAS (0.20 percent ad valorem), CSN (2.02 percent ad valorem) and COSIPA (0.07 percent ad valorem); 2.02 percent ad valorem for certain corrosion-resistant carbon steel flat products; and 0.14 percent ad valorem for certain cut-to-length carbon steel plate except for USIMINAS (0.20 percent ad valorem) and COSIPA (0.07 percent ad valorem).
4. Exemption of IPI and Duties on Imports under Decree-Law 2324
Decree-Law 2324 of March 30, 1987, provided exporters of manufactured products exemptions from IPI and duties on imported spare parts and machinery. This benefit was not tied to specific classes or kinds of merchandise. Because this exemption was limited to exporters, and because the imported goods were not physically incorporated into the subject merchandise, we preliminarily determine that it is countervailable.
To calculate the benefit, we divided the amount of IPI and import duties exempted in 1991 by each company's total exports in 1991. On this basis, we determine the net subsidy to be 0.01 percent ad valorem for certain hot-rolled carbon steel flat products except for USIMINAS (0.47 percent ad valorem) and COSIPA (0.00 percent ad valorem); 0.32 percent ad valorem for certain cold- rolled carbon steel flat products except for USIMINAS (0.47 percent ad valorem), COSIPA (0.00 percent ad valorem), and CSN (0.01 percent ad valorem); 0.01 percent ad valorem for certain corrosion-resistant carbon steel flat products; and 0.24 percent ad valorem for certain cut-to-length carbon steel plate except for USIMINAS (0.47 percent ad valorem), and COSIPA (0.00 percent ad valorem).
The GOB and respondent companies have provided documentation that Decree-Law 2324 terminated by its own decree in 1991 and stated that no residual benefits are being provided under this program. Because the program was terminated prior to the preliminary determinations in these investigations, we will reduce the estimated cash deposit of countervailing duties to zero in accordance with section 355.50(a)(2) of the Department's Proposed Rules
The Banco Nacional de Desenvolvimento Economico e Social (BNDES) is Brazil's government-owned bank for economic and social development. BNDES lends to a variety of sectors of the economy through a set of operating programs in accordance with government economic objectives.
BNDES financing has been found to be non-specific and therefore non- countervailable in prior Department determinations. See, e.g., Final Affirmative Countervailing Duty Determinations: Certain Carbon Steel Products From Brazil 49 FR 17988 (April 26, 1984). In this investigation, however, petitioners alleged that BNDES provided a disproportionate share of loans to the steel sector. See "Specificity" section above. Petitioners also alleged that the loans were provided on terms inconsistent with commercial considerations because the companies were uncreditworthy at the time of receipt of loans. USIMINAS, COSIPA, and CSN received loans from BNDES for which there were amounts outstanding during the POI.
In previous investigations, the Department has applied several different analyses in considering whether respondents received disproportionate benefits under a program. See, e.g., Final Affirmative Countervailing Duty Determination: Iron Ore Pellets from Brazil (Iron Ore), 51 FR 21961 (June 17, 1986); Final Affirmative Countervailing Duty Determination: Fresh Cut Flowers form the Netherlands, 52 FR 3301 (February 3, 1987). In Iron Ore, the Department specifically found BNDES lending to the mining sector (the notice mistakenly refers to the metallurgy sector) did not bestow disproportionate benefits to that sector, as the benefits to that sector were not disproportionately large compared to total BNDES lending to the industrial sector. In this investigation, petitioner alleged that, while BNDES lending was nominally non-specific, BNDES lending to the steel sector was in fact disproportionate to that sector's share of Brazil's Gross Domestic Product (GDP). Petitioners provided loan ratios, calculated by dividing the metallurgy sector's share of total loans by that sector's share of GDP, as evidence of the steel sector's disproportionate share of BNDES financing as a whole.
In examining data submitted by the respondents regarding BNDES operating policies, loan programs, and disbursement records, we have
*57811
compared
BNDES lending to the metallurgy sector to (a) all BNDES lending, and (b) BNDES lending to various other industrial sectors. Disparities between relative shares of BNDES lending from 1982 through 1987 show evidence of disproportionately large amounts of lending to the metallurgy sector, and therefore indicate de facto specificity. Based on this analysis, we preliminarily determine that the amount of BNDES lending to the metallurgy sector is disproportionate, and, therefore, specific to the steel industry.
BNDES loans were provided in foreign currencies as well as in domestic currency. Because we have preliminarily determined that USIMINAS, COSIPA, and CSN were uncreditworthy when these loans were provided, we used the highest rate for long-term fixed-rate debt available for each currency. As our benchmark rate for dollar loans, we used data for U.S. dollar lending in Brazil for long-term non-guaranteed loans from private lenders as published in World Bank Debt Tables: External Debt of Developing Countries. As a benchmark rate for loans denominated in foreign currencies other than dollars, we used "Lending Rates" published the International Monetary Fund's International Financial Statistics. For loans denominated in Brazilian inflation indices, such as ORTNs, OTNs, BTNs, and URMs, we have been unable to establish a benchmark. Therefore, we will request more information from respondents before attempting to measure the countervailability of such loans. Because respondents were found to be uncreditworthy in each year they received these loans, we added a risk premium to the benchmark. This risk premium was calculated in accordance with the Proposed Rules. See Final Affirmative Countervailing Duty Determination: New Steel Rail, Except Light Rail, from Canada, 54 FR 31991 (August 3, 1989) and section 355.44(b)(6)(iv) of the Department's.
Proposed Rules
A comparison of the benchmark rates for the foreign currency loans to the interest rates on these loans indicates that at least some of these loans are inconsistent with commercial considerations. We calculated the benefit in accordance with our loan methodology.
On this basis, we determine the net subsidies to be less than 0.001 percent ad valorem for all manufacturers, producers, and exporters in Brazil of certain hot-rolled carbon steel flat products except for USIMINAS (less than 0.001 percent ad valorem) and COSIPA (less than 0.001 percent ad valorem); less than 0.001 percent ad valorem for certain cold-rolled carbon steel flat products except for USIMINAS (less than 0.001 percent ad valorem), COSIPA (less than 0.001 percent ad valorem) and CSN (less than 0.001 percent ad valorem); less than 0.001 percent ad valorem for certain corrosion-resistant carbon steel flat products; and 0.01 percent ad valorem for certain cut-to-length carbon steel plate except for USIMINAS (0.01 percent ad valorem) and COSIPA (0.01 percent ad valorem).
6. Provision of Infrastructure: Port of Praia Mole
Petitioners allege that the construction and operation of the port, and the sale of the port facilities, constitute a provision of subsidized infrastructure to USIMINAS.
Praia Mole Port consists of a pier, terminals, and other facilities designed for use by steel and coal companies. Praia Mole Port is located within the larger Vitoria Bay Port, which contains port facilities for a variety of industries. Praia Mole Port was jointly constructed by SIDERBRAS (GOB-owned steel holding company), CVRD (GOB-owed mining concern) and PORTOBRAS (GOB entity responsible for ports and associated infrastructure). The port was built for the exclusive use of CVRD and three steel manufacturers which were subsidiaries of SIDERBRAS: USIMINAS, CST, and ACOMINAS. The port contains distinct facilities for the steel and coal companies; there are no mixed-use facilities. Because the port facilities were specifically designed for steel and coal, it was not possible for any other industry to use these port facilities. Construction started in 1980, and the companies started to use the facilities in 1984.
According to the responses, from 1984 through 1991, the three steel companies paid the following four types of fees for the use of the facilities: (1) To SIDERBRAS, a fee of twelve percent of the total of its invested capital per year for recovery of its investment; (2) to CST, which held a contract to operate the port, a fee for operating expenses such as management, maintenance, and insurance; (3) to PORTOBRAS, a fee to cover costs of the general port infrastructure; (4) to unrelated third parties, a fee for handling cargo. SIDERBRAS's charge is based on the cost to SIDERBRAS of constructing the port facilities plus a twelve percent return on investment. The operating costs are based on use of the facilities. The PORTOBRAS charges are based on the agency's standard charges applicable to all ports. The charges for cargo handling are negotiated directly with the outside parties.
In 1991, SIDERBRAS entered liquidation, and sold the steel pier and terminal of Praia Mole Port to USIMINAS and the two other using companies. CST, the company with the contract to operate the port, hired an outside engineering firm to perform a valuation study of the facilities. The valuation study comprised only the steel-related assets of the port. The valuation used two appraisal methods to evaluate the port facilities. The replacement value of the facilities was based on the investment that would be required to establish a new equivalent facility. The fixed asset appraisal took into account the depreciation of the facilities. The replacement value was higher than the fixed asset value. Both values were higher than the book value of the assets as recorded in SIDERBRAS's financial statements.
SIDERBRAS's interest in the port was sold in October 1991 in three equal shares to the three steel companies. The sale price was the fixed asset appraisal found in the valuation study. The purchase agreement between SIDERBRAS and USIMINAS stipulated that USIMINAS would make 15 quarterly installments of principal and interest beginning in January 1, 1993. Although payments would not begin until 1993, interest began to accrue as of the date of the agreement and the principal was adjusted for inflation beginning as well on the date of the agreement. After the sale, the fees paid by USIMINAS, CST, and ACOMINAS changed only in that there was no longer a fee to SIDERBRAS for its return on investment.
We preliminarily determine that a benefit did accrue to USIMINAS in the form of a preferential interest rate on the purchase agreement with SIDERBRAS. We have analyzed the purchase agreement (effectively a loan), and find that interest rate is preferential based on a comparison to a real short-term benchmark rate. Therefore, the benefit to USIMINAS during the POI is the difference between the interest that accrued from the date of the agreement to October 1, 1991 (the date of the first and only payment during the POI) and the interest that would have accrued had SIDERBRAS charged USIMINAS the benchmark rate. The amount of that differential is then divided by total export sales to derive the rate for this program.
On this basis, we preliminarily determine the net subsidies to be 0.00
*57812
percent ad valorem for certain hotrolled carbon steel flat products except for USIMINAS (0.002 percent ad valorem) and COSIPA (0.00 percent ad valorem); 0.001 percent ad valorem for certain cold-rolled carbon steel flat products except for USIMINAS (0.002 percent ad valorem), CSN (0.00 percent ad valorem) and COSIPA (0.00 percent ad valorem); and 0.001 percent ad valorem for certain cut-to-length carbon steel plate except for USIMINAS (0.002 percent ad valorem) and COSIPA (0.00 percent ad valorem).
B. Programs Preliminarily Determined Not To Exist
We preliminarily determine that the following program does not exist:
Deferred Income Tax and Social Contribution
Verification
In accordance with section 776(b) of the Act, we will verify the information used in making our final determinations.
Suspension of Liquidation
In accordance with section 703(d) of the Act, we are directing the U.S. Customs Service to suspend liquidation of all entries of certain steel products from Brazil, 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. This suspension will remain in effect until further notice.
---------------------------------------------------------
Net subsidy rate Deposit rate
---------------------------------------------------------
Certain Hot-Rolled Carbon Steel Flat Products
Country-Wide ................... 42.83 ............. 42.82
USIMINAS ........................ 6.20 .............. 5.73
COSIPA ......................... 53.48 ............. 53.48
Certain Cold-Rolled Carbon Steel Flat Products
Country-Wide ................... 19.70 ............. 19.38
USIMINAS ........................ 6.20 .............. 5.73
CSN ............................ 42.83 ............. 42.82
COSIPA ......................... 53.48 ............. 53.48
Certain Corrosion-Resistant Carbon Steel Flat Products
Country-Wide ................... 42.83 ............. 42.82
Certain Cut-To-Length Carbon Steel Plate
Country-Wide ................... 29.91 ............. 29.67
USIMINAS ........................ 7.15 .............. 6.68
COSIPA ......................... 53.48 ............. 53.48
---------------------------------------------------------
ITC Notification
In accordance with section 703(f) of the Act, we will notify the ITC of our determinations and alignments. In addition, we are making available to the ITC all nonprivileged and nonproprietary information relating to these investigations. 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 Deputy Assistant Secretary for Investigations, Import Administration.
If our final determinations are affirmative, the ITC will make its final determinations within 45 days after the Department makes its final determinations.
Public Comment
Interested parties who wish to request or participate in a hearing must submit a written request within ten years of the publication of this notice in the Federal Register to the Assistant Secretary for Import Administration, U.S. Department of Commerce, room B-099, 14th Street and Constitution Avenue, NW., Washington, DC 29230. Reuqests 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 the discussed. Since investigations involving the same classes or kinds of merchandise subject to these investigations from various other countries are currently being conducted, we will publicly a briefing and hearing schedule in the Federal Register after receipt of all requests for hearings in these investigations.
These determinations are published pursuant to section 703(f) of the Act (19 U.S.C. 1671b(f)).
Dated: November 27, 1992.
Alan M. Dunn,
Assistant Secretary for Import Administration.
Appendix 1
Scope of the Investigations
The products covered by these investigations, certain steel products, constitute the following four separate "classes or kinds" of merchandise, as outlined below.
Althugh the Harmonized Tariff Schedule of the United States (HTS) subheadings are provided for convenience and customs purposes, our written descriptions of the scope of these proceedings are dispositive.
We have received comments from petitioners regarding the types of coil included in the scopes of the certain hot-rolled carbon steel products investigation, the certain cold-rolled carbon steel flat products investigation, and the certain corrosion-resistant carbon steel flat products investigation. We are considering these comments and will address this issue at the final determinations.
Certain Hot-Rolled Carbon Steel Flat Products
These products include hot-rolled carbon steel flat products, of solid rectangular (other than square) cross section, or rectangular shape, neither clad, plated nor coated with metal, whether or not painted, varnished or coated with plastics or other nonmetallic substances, in coils, or in straight lengths which are less than 4.75 millimeters in thickness and of a width measuring at least 10 times the thickness, as currently classifiable in the HTS under item numbers 7208.11.0000, 7208.12.0000, 7208.13.1000, 7208.13.5000, 7208.14.1000, 7208.14.5000, 7208.21.1000, 7208.21.5000, 7208.22.1000, 7208.22.5000, 7208.23.5000, 7208.23.5030, 7208.23.5090, 7208.24.1000, 7208.24.5030, 7208.24.5090, 7208.34.1000, 7208.34.5000, 7208.35.1000, 7208.35.5000, 7208.44.0000, 7208.45.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.12.0000, 7211.19.1000, 7211.19.5000, 7211.22.0090, 7211.29.1000, 7211.29.3000, 7211.29.5000, 7211.29.7030, 7211.29.7060, 7211.29.7090, 7211.90.0000, 7212.40.1000, 7212.40.5000, and 7212.50.0000.
Certain Cold-Rolled Carbon Steel Flat Products
These products include cold-rolled (cold-reduced) carbon steel flat products, of solid rectangular (other than square) cross section, of rectangular shape, neither clad, plated nor coated with metal, whether or not painted, varnished or coated with plastics or other nonmetallic substances, in coils, or in straight lengths which, if of a thickness less than 4.75 millimeters, are of a width measuring at least 10 times the thickness or if of a thickness of 4.75 millimeters or more are of a width which exceeds 150 millimeters and measures at least twice the thickness, as currently classifiable in the HTS under item numbers 7209.11.0000, 7209.12.0030, 7209.12.0090, 7209.13.0030, 7209.13.0090, 7209.14.0030, 7209.14.0090, 7209.21.0000, 7209.22.0000, 7209.23.0000, 7209.24.1000, 7209.24.5000, 7209.31.0000, 7209.32.0000, 7209.33.0000, 7209.34.0000, 7209.41.0000, 7209.42.0000, 7209.43.0000, 7209.44.0000, 7209.90.0000, 7210.70.3000, 7210.90.9000, 7211.30.1030, 7211.30.1090, 7211.30.3000, 7211.30.5000, 7211.41.1000, 7211.41.3030, 7211.41.3090, 7211.41.5000, 7211.41.7030, 7211.41.7060, 7211.41.7090, 7211.49.1030, 7211.49.1090, 7211.49.3000, 7211.49.5030, 7211.49.5060, 7211.49.5090, 7211.90.0000, 7212.40.1000, 7212.40.5000, and 7212.50.0000.
Certain Corrosion-Resistant Carbon Steel Flat Products
These products include flat-rolled carbon steel products, of solid rectangular (other than square) cross section, of rectangular shape, either clad, plated, or coated with corrosion-resistant metals such as zinc, aluminum, or zinc-, aluminum-, nickel- or
*57813
iron-based alloys, whether or not corrugated or painted, varnished or coated with plastics or other nonmetallic substances in addition to the metallic coating, in coils, or in straight lengths which, if of a thickness less than 4.75 millimeters are of a width measuring at least 10 times the thickness or if of a thickness of 4.75 millimeters or more are of a width which exceeds 150 millimeters and measures at least twice the thickness, as currently classifiable in the HTS under item numbers 7210.31.0000, 7210.39.0000, 7210.41.0000, 7210.49.0030, 7210.49.0090, 7210.60.0000, 7210.70.6030, 7210.70.6060, 7210.70.6090, 7210.90.1000, 7210.90. 6000, 7210.90.9000, 7212.21.0000, 7212.29.0000, 7212.30.1030, 7212.30.1090, 7212.30.3000, 7212.30.5000, 7212.40.1000, 7212.40.5000, 7212.50.0000, and 7212.60.0000. Excluded from these investigations are flat-rolled steel products either plated or coated with tin, lead, chromium, chromium oxides, both tin and lead ("terne plate"), or both chromium and chromium oxides ("tin- free steel").
Certain Cut-To-Length Carbon Steel Plate
These products include hot-rolled carbon steel universal mill plates (i.e., flat-rolled products rolled on four faces or in a closed box pass, of a width exceeding 150 millimeters but not exceeding 1,250 millimeters and of a thickness of not less than 4 millimeters, not in coils and without patterns in relief) of solid rectangular (other than square) cross section, of rectangular shape, neither clad, plated nor coated with metal, whether or not painted, varnished, or coated with plastics or other nonmetallic substances; and certain hot-rolled carbon steel flat products in straight lengths, of solid rectangular (other than square) cross section, of rectangular shape, hot rolled, neither clad, plated, nor coated with metal, whether or not painted, varnished, or coated with plastics or other nonmetallic substances, 4.75 millimeters or more in thickness and of a width which exceeds 150 millimeters and measures at least twice the thickness, as currently classifiable in the HTS under item numbers 7208.31.0000, 7208.32.0000, 7208.33.1000, 7208.33.5000, 7208.41.0000, 7208.42.0000, 7208.43.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.11.0000, 7211.12.0000, 7211.21.0000, 7211.22.0045, 7211.90.0000, 7212.40.1000, 7212.40.5000, and 7212.50.0000.