1 In other proceedings under this order, Fafer has at times been referred to as “Fabfer.”
71 FR 58585, October 4, 2006
C-423-806
2nd Sunset Review
Public Document
Office 6: SMC
MEMORANDUM TO: James C. Leonard III
Acting Assistant Secretary
for Import Administration
FROM: Stephen J. Claeys
Deputy Assistant Secretary
for Import Administration
SUBJECT: Issues and Decision Memorandum for Final Results of Full Sunset
Review of the Countervailing Duty Order on Cut-to-length Carbon
Steel Plate from Belgium
Summary
We have analyzed the case briefs of interested parties in the full sunset review of the
countervailing duty (CVD) order on cut-to-length carbon steel plate (CTL plate) from Belgium.
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 we are addressing
in these final results of full sunset review.
1. Likelihood of continuation or recurrence of a countervailable subsidy
2. Net countervailable subsidy likely to prevail
3. Privatization of Cockerill
4. Nature of the subsidy
History of the Order
On July 9, 1993, the Department of Commerce (the Department) published in the Federal
Register the final affirmative countervailing duty determination on cut-to-length carbon steel
plate from Belgium (“Investigation”). See Final Affirmative Countervailing Duty
Determinations; Certain Steel Products From Belgium, 58 FR 37273 (July 9, 1993) (Final) and
Countervailing Duty Order and Amendment to Final Affirmative Countervailing Duty
Determination; Certain Steel Products From Belgium, 58 FR 43749 (August 17, 1993) (Order).
The Department investigated three companies: Forges de Clabecq S.A. (Clabecq),
Fabrique de Fer de Charleroi (Fafer)1 and Cockerill Sambre (Cockerill). The Department found
20 programs to be countervailable. Of these programs, three had several sub-programs for which
2
a separate countervailability decision was made and rate calculated, thus bringing the total
number of countervailable programs to 29.
1. Cash Grants and Interest Subsidies under the Economic Expansion Law of 1970
2. Government Funding of Early Retirement Pensions (ERP)
3. Ecological Incentives
4. Assumption of Debt
a. Assumption of Debt Related to Closing of Valfil Plant
b. Assumption of Financing Costs
c. Forgiveness of Societe Nationale de Credite a l’Industrie (SNCI) Loans
5. Debt Conversions
a. Conversion of Clabecq Debt into Ordinary and non-Voting Shares
b. Conversion of Clabecq Debt into Parts and Beneficiaries
c. Conversion of Cockerill Sambre Debt to Equity under the Claes Plan
d. Conversion of Cockerill Sambre Debt Held by the Fund pour la Restructuration des
Secteurs Nationaux en Region Walloon (FSNW) into Equity
e. Conversion of Cockerill Debt to Equity under the Gandois Plan
6. Equity Infusions
a. Equity Infusions for Hainaut-Sambre
b. The Societe Nationale pour des Reconstruction des Secteurs Nationaux (SNSN) Capital
for Cockerill Sambre’s Liege Cold-Rolling Mill
c. 1981 Equity Infusion into Cockerill Sambre
d. Clabecq Infusion from SOCOCLABECQ
7. SNCI Loans
8. Belgian Industrial Finance Company (Belfin) Loans
9. Clabecq lease (Invests)
10. SNSN Loans
11. FSNW Loans
12. Government Guaranteed Loans
13. Exemption of Corporate Taxes for Grants Received under the 1970 law
14. Accelerated Depreciation
15. Exemption from Real Estate Taxes
16. Exemption from the Capital Registration Tax
17. European Coal and Steel Community (ECSC) Article 54 Loans and Loan Guarantees
18. ECSC Redeployment Aid
19. European Social Fund
20. Other Loans - Clabecq
As a result of litigation concerning the investigation, and a 1996 Court of International
Trade (CIT) decision, the Department recalculated the rates for the final determination. See
Geneva Steel et al v. United States, 937 F. Supp 946 (CIT 1996) and Amended Final Affirmative
Countervailing Duty Determinations; Certain Carbon Steel Products from Belgium, 62 FR 37880
(July 15, 1997) (Amended Final). The adjusted rates were 23.15 percent ad valorem for
3
Cockerill, 1.05 percent ad valorem for Fafer (unchanged from the Order), and 5.92 percent ad
valorem for all other companies (including Clabecq).
The Department has conducted only one administrative review of this order since its
issuance. Fafer was the only company subject to that review. See Cut-to-Length Carbon Steel
Plate from Belgium; Final Results of Countervailing Duty Administrative Review, 64 FR 12982
(March 16 1999) and Cut-to-Length Carbon Steel Plate from Belgium; Amended Final Results
of Countervailing Duty Administrative Review (Administrative Review), 64 FR 18001
(April 13, 1999) (Administrative Review Amended Final). In that review, the Department found
a rate of 0.69 percent ad valorem for Fafer, resulting from Fafer’s use of “Cash Grants and
Interest Subsidies under the Economic Expansion Law of 1970,” and two new programs:
“Promotion Brochure” and “Audio-Visual Calling Card.”
The Department has completed one sunset review of this order pursuant to section 751(c) of
the Tariff Act of 1930, as amended (the Act). See Certain Cut-to-Length Carbon Steel Plate
from Belgium; Final Results of Expedited Sunset Review, 65 FR 18066 (April 6, 2000) (First
Sunset Review). As a result of that review, the Department determined that revocation of the
CVD order would be likely to lead to continuation or recurrence of a net countervailable subsidy
and reported to the International Trade Commission (ITC) the rates determined in the Amended
Final as the rates likely to prevail if the order were revoked.
In accordance with 19 CFR 351.218(f)(4), the Department published a notice of
continuation of the CVD order based on affirmative findings by both the Department and the
ITC. See Continuation of Antidumping and Countervailing Duty Orders on Certain Carbon Steel
Products from Australia, Belgium, Brazil, Canada, Finland, France, Germany, Japan, South
Korea, Mexico, Poland, Romania, Spain, Sweden, Taiwan, and the United Kingdom, 65 FR
78469 (December 15, 2000).
Since the conclusion of the first five-year sunset review, no other reviews of this CVD order
have been conducted.
History of the Sunset Review
On November 1, 2005, the Department initiated a sunset review of the CVD order on CTL
steel plate from Belgium, pursuant to section 751(c) of the Act. See Initiation of Five-year
(“Sunset”) Reviews, 70 FR 65884 (November 1, 2005). On December 21, 2005, the Department
determined that the participation of the respondents was adequate, and that it was appropriate to
conduct a full sunset review. See Memorandum to Stephen J. Claeys, Deputy Assistant
Secretary, Import Administration, Re: Adequacy Determination; Sunset Review of the
Countervailing Duty Order on Cut-to-Length Carbon Steel Plate from Belgium, dated
December 21, 2005, and on file in in the Central Records Unit, Room B-099 of the Department
of Commerce building (CRU).
2Although Duferco reported that it purchased Forges de Clabecq S.A., and Arcelor claims to be successorin-
interest to the other two original respondent companies, the Department has not made a determination in the past
that Duferco and Arcelor are the successors-in-interest to the respective respondent companies and is not making
such a determination in this sunset review. However, we have considered in this sunset review the historical
information provided with respect to Duferco and Arcelor for purposes of our privatization and change-in-ownership
analyses. See Memorandum to Stephen J. Claeys, Deputy Assistant Secretary, Import Administration, Re: Sunset
Review of Countervailing D uty Order on Cut-to-Length Carbon Steel Plate from Belgium; Analysis of Changes in
Ownership, dated July 14, 2006, (CIO Memo), incorporated in the Preliminary Results and on file in the CRU.
4
On February 10, 2006, the Department extended the time limit for the preliminary and final
results of the sunset review of the CVD order on CTL plate from Belgium to no later than July 14
and September 27, 2006, respectively. See Cut-to-Length Carbon Steel Plate from Belgium,
Sweden, and the United Kingdom; Extension of Time Limits for Preliminary and Final Results
of Full Five-Year (“Sunset”) Reviews of Countervailing Duty Orders, 71 FR 7017
(February 10, 2006). On July 21, 2006, the Department published the preliminary results of the
full sunset review of the instant order. See Preliminary Results of Full Sunset Review: Cut-to-
Length Carbon Steel Plate from Belgium, 71 FR 41424 (Preliminary Results). In our Preliminary
Results, we found that revocation of the order would likely lead to continuation or recurrence of
countervailable subsidies on the subject merchandise.
Interested parties were invited to comment on our Preliminary Results. On August 4, 2006,
we received a timely case brief from the Government of Belgium (GOB). On August 7, 2006,
we received timely case briefs from Duferco Clabecq S.A. (Duferco), which purchased Forges de
Clabecq S.A.(Clabecq), and Arcelor S.A. (Arcelor), claiming to be the successor-in-interest to
both Fabrique de Fer de Charleroi (Fafer) and Cockerill Sambre (Cockerill).2 We received no
comments from domestic interested parties.
Discussion of the Issues
In accordance with section 751(c)(1) of the Act, the Department is conducting this review to
determine whether revocation of the CVD order would be likely to lead to continuation or
recurrence of a countervailable subsidy. Section 752(b)(1) of the Act provides that, in making
this determination, the Department shall consider the net countervailable subsidy determined in
the investigation and any subsequent reviews, and whether any changes in the programs which
gave rise to the net countervailable subsidy have occurred that are likely to affect that net
countervailable subsidy.
Pursuant to section 752(b)(3) of the Act, the Department shall provide to the ITC the net
countervailable subsidy likely to prevail if the order were revoked. In addition, consistent with
section 752(a)(6) of the Act, the Department shall provide to the ITC information concerning the
nature of the subsidy and whether the subsidy is a subsidy described in Article 3 or Article 6.1 of
the 1994 World Trade Organization (WTO) Agreement on Subsidies and Countervailing
Measures (ASCM). Below we address the comments provided by respondent interested parties.
5
1. Likelihood of Continuation or Recurrence of a Countervailable Subsidy
Interested Parties’ Comments
The GOB, Duferco, Cockerill, and Fafer state that the programs the Department relied on
the Preliminary Results to find likelihood have been terminated or are expired and that benefits
will not continue beyond the sunset period. Duferco specifically argues that the Department has
not demonstrated that there were residual benefits from the terminated programs, and notes that
the Department based its determination on benefits found countervailable in the original
investigation and the subsequent administrative review.
Duferco contends that the Department did not meet the standards to support its
determination of likelihood in its Preliminary Results. To support its argument, Duferco cites
AG der Dillinger v. U.S. and the subsequent remand determination. See AG der Dillinger
Huttenwerke et al v. United States, 193 F.Supp.2d 1339 (February 28, 2002) (Dillinger) and AG
der Dillinger Huttenwerke et al v. United States, 26 CIT 1091 (September 5, 2002) (Dillinger).
Duferco states that if the Department found its evidence of termination lacking, the Department
is obligated to seek the necessary information in accordance with Dillinger. Furthermore,
Duferco states that, in accordance with Dillinger, the Department must make a factual finding
that it is probable that the benefits will continue beyond the sunset review period, and that it is
not enough for the Department to indicate the possibility that benefits could still be given under
the program. Duferco claims that, contrary to the Department’s statement that insufficient
evidence was provided to demonstrate termination, all information on the record demonstrates
that all relevant programs have been eliminated. In conclusion, Duferco argues that because the
Department has not cited any evidence on the record to support its preliminary affirmative
determination, the Department must make a negative likelihood determination for the final
results and revoke the order.
Department’s Position
The Department continues to find that revocation of the order would likely lead to
continuation or recurrence of a countervailable subsidy to the subject merchandise. In
accordance with section 752(b)(1) of the Act, in determining whether revocation of a CVD order
would likely lead to continuation or recurrence of a countervailable subsidy, the Department will
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
determined in the investigation and subsequent reviews has occurred that is likely to affect that
net countervailable subsidy.
The Department makes its likelihood determination (i.e., of whether revocation of the order
is likely to lead to continuation or recurrence of a countervailable subsidy) on an order-wide
(country-wide) basis, although company-specific rates are reported to the ITC. Based on the
information in the original investigation, the Administrative Review Amended Final, and the
6
First Sunset Review, as well as the substantive responses from the interested parties, the record
evidence does not establish that all of the programs found countervailable in the investigation
and subsequent administrative review have been terminated with no residual benefits or
replacement programs. Our analysis of this information leads us to conclude that only the
following four programs previously found countervailable were terminated by the end of the
sunset period such that, for these programs, there is no likelihood that subsidization will continue
or recur were the order to be revoked: Ecological Incentives, Other Loans-Clabecq, Clabecq
Infusion from SOCOCLABECQ, and SNSN Loans.
In the investigation, we noted that Ecological Incentives were terminated in 1981 because of
budget shortfalls, and that those grants were received prior to the period of investigation and
expensed in the year of receipt. Likewise, Other Loans-Clabecq were also treated as grants and
expensed in the year of receipt before the period of investigation. These loans constituted a onetime,
company-specific subsidy to cover a specific event that was not part of a broader
government program under which subsidies would continue to be available. In addition, we find
that the fully allocated Clabecq Infusion from SOCOCLABECQ similarly constituted a one-time,
company-specific subsidy that was limited to the government directing a single private
shareholder of Clabecq to provide subsidies to preserve its ownership interest. Finally,
information from the investigation shows that the SNSN loans were provided as temporary
measures which were later “rolled” into other aid packages that were countervailed separately.
Therefore, for these four programs, as we stated in the preliminary results of review, it is not
likely that subsidization will continue or recur were the order to be revoked.
As explained below, with respect to the remaining programs, the evidence does not establish
that these programs have been terminated with no residual benefits or replacement programs, or
that these were one-time, company-specific subsidies that were not part of a government
program, and that have been fully allocated or that otherwise no longer provide any benefits. As
such, there is no basis for eliminating these programs from consideration for purposes of our
likelihood determination.
While a number of programs no longer provided benefits by the end of the sunset period, the
evidence provided by the GOB did not establish the conditions necessary to find that these
programs should not be taken into account in our likelihood determination. Specifically, the
GOB has not provided supporting documentation such as the enactment of a statute, regulation,
or decree. Cf. 19 CFR 351.526(b) and (d). Instead, the GOB relied on general statements
without supporting documentation in arguing that many programs have been terminated; that
benefits under many of the programs are fully allocated; or that EC rules generally prohibit state
aid without any documentation showing that the GOB had implemented these prohibitions.
Therefore, we find that there is a likelihood of continuation or recurrence of a countervailable
subsidy were the order to be revoked for these remaining programs.
7
Finally, in Dillinger, the CIT found that the Department failed to consider evidence that was
reasonably brought to the Department’s attention. By contrast, in this sunset review, the issue is
that the GOB has failed to bring to the Department’s attention evidence sufficient under the
Department’s regulatory criteria to indicate that the programs in question have been terminated.
Consequently, the GOB has failed to demonstrate that these remaining programs should not be
considered in the Department’s likelihood determination.
2. Net Countervailable Subsidy Likely to Prevail
Interested Parties’ Comments
Cockerill and Fafer argue that the Department should recalculate the net countervailable
subsidy rate likely to prevail since the Department incorrectly used a program rate from the ERP
program, which is terminated. The ERP consists of two parts: the first component was a waiver
given to the steel industry so that they would not have to replace retiring workers; the second
component involved a GOB program that assisted companies to help pay workers who took early
retirement. Cockerill and Fafer contend that the Department should subtract 0.50 percent from
the net subsidy likely to prevail since the Department determined in the investigation that the first
component of the ERP was terminated during the period of investigation (POI), and that the
countervailable subsidy provided by this program was de minimis. See Final at 58 FR 37273,
37276.
Cockerill and Fafer note that in the only administrative review, the Department found that
Fafer was no longer benefitting from the ERP program. Cockerill and Fafer argue that the
Department’s determination in the first administrative review is evidence that the program no
longer confers any benefit. In addition, Cockerill and Fafer state that, according to the GOB’s
substantive response dated December 1, 2005, the second component of the ERP program was
phased out by the GOB in the early 1990s. Accordingly, Cockerill and Fafer conclude that the
Department must recalculate each company’s net countervailable subsidy rates minus the ERP
program to account for the Department’s administrative review finding. Finally, Cockerill and
Fafer argue that if, after recalculating, the resulting rate is de minimis, then the Department must
revoke the order in accordance with Dillinger.
Department’s Position
The Department normally will provide to the ITC the net countervailable subsidy that was
determined in the original investigation because that is the only calculated rate that reflects the
behavior of exporters and foreign governments without the discipline of an order in place.
Accordingly, we are using the rates calculated in the Order and in the Administrative Review
Amended Final which included two new programs, as the basis for determining the rate likely to
prevail. As noted in the Order, the ERP program rate associated with payment to workers who
took early retirement was not calculated in the final determination because the Department
erroneously found that the benefit amount was included in other program calculations.
8
Accordingly, the Department calculated a rate in the Order for recurring early retirement grants
received under this program by Fafer and Cockerill in 1991. See Order at 43750. The
Department has assigned these rates to the ERP program in the instant sunset review.
For the purposes of a sunset review, the Department may make adjustments to the net
countervailable subsidy rate. See, e.g., Stainless Steel Sheet and Strip in Coils From Italy: Final
Results of the Full Sunset Review of the Countervailing Duty Order, 70 FR 23094 at
Comment 6 (May 4, 2005) (SSPC from Italy Sunset Review). The purpose of the net
countervailable subsidy in the context of sunset reviews is to provide the ITC with a rate which
represents the subsidy rate that is likely to prevail if the order is revoked. As noted above, we
have preliminarily determined that all programs found countervailable in the investigation, with
the exception of the four programs for which we find that subsidization is not likely to continue
or recur, remain in place. In addition, the two programs which were first found countervailable
in the only administrative review remain in place. In accordance with the SSPC from Italy
Sunset Review, we are including the rates from those programs in our calculation of the net
countervailable subsidy likely to prevail.
In calculating the net countervailable subsidy likely to prevail, we recognize that, for many
of these programs, the benefits have been fully allocated prior to the end of the sunset review
period; for such programs, the net countervailable subsidy likely to prevail is zero. For the
remaining programs, we have relied on prior segments of this proceeding, as appropriate. Our
determination of the net countervailable subsidy likely to prevail for each program was discussed
in detail in the Memorandum to Stephen J. Claeys, Deputy Assistant Secretary for Import
Administration, Re: Sunset Review of Countervailing Duty Order on Cut-to-length Carbon Steel
Plate from Belgium; Likelihood of Continuation or Recurrence of Subsidization and Net
Countervailable Subsidy Likely to Prevail, issued concurrently with the Preliminary Results on
July 21, 2006 (Likelihood Memorandum). As discussed in the Likelihood Memorandum, the
overall rates likely to prevail are 2.82 percent ad valorem for Cockerill, 0.56 percent ad valorem
for Fafer, and 0.50 percent ad valorem for “All Others” (including Clabecq). As discussed
above, none of the arguments raised by the parties have persuaded the Department to modify
these rates.
3. Privatization of Cockerill
Interested Parties’ Comments
Cockerill contends that the Department should reconsider its determination that the sale of
Cockerill by the Societe Wallone pour la Siderugie (SWS) to Usinor did not result in transfer of
effective control and in the extinguishment of all subsidies. Cockerill argues that the Department
is incorrect in determining that the 75 percent purchase does not represent the sale of a company
and the right to effective control by the purchaser. Respondent states that under the sales
agreement, Usinor bought 75 percent of Cockerill shares at full market value and subsequently
acquired the remaining 25 percent shares from SOGEPA (SWS’ successor) within a five-year
9
period. Cockerill argues that the 75 percent purchase by Usinor gave Usinor effective control of
the company under the sales agreement. Respondent notes that after the sale, Usinor integrated
Cockerill into its corporate structure and that SWS became a minority shareholder with limited
rights. Cockerill further states that it is currently 100 percent owned by Arcelor, a fully
privatized company. Respondent concludes that if the Department determines that a sale that
transfers control over a set period of time is less valid than a sale with a single transfer, then it
must explain its reasoning.
Cockerill argues further that the Department is erroneous in concluding that the remaining
25 percent of Cockerill shares held by SWS constituted a substantial minority. Respondent states
that, in analyzing SWS’s remaining rights to block a limited number of transactions, the
Department did not determine whether these restrictions affected the ability of Usinor to exercise
effective control of Cockerill. Respondent contends that the Department overlooked the fact that
SWS’s rights as a minority shareholder only applied if they held a minimum percentage of shares
in the company as noted in the “Strategic Partnership Agreement” between Usinor and SWS.
See Government of Belgium’s Change in Ownership Questionnaire Response, (March 15, 2006),
Exhibit C at Attachment 1.
Cockerill maintains that under the Department’s policy, a sale of a company or its assets
rebuts the presumption of continuation of a benefit from allocated subsidies. See Notice of Final
Modification of Agency Practice Under Section 123 of the Uruguay Round Agreements Act,
68 FR 37125 at 37127 (June 23, 2003) (Modification Notice). Respondent argues that based on
this statement, the Department must determine that all non-recurring subsidies have been
extinguished. Respondent contends that since Cockerill was a publicly-traded company at the
time of sale, it was not necessary for Usinor to purchase 100 percent of Cockerill’s shares in
order to have effective control. Respondent notes that under the Modification Notice, Usinor’s
75 percent acquisition of Cockerill constituted the sale of all or substantially all of the company
or its assets. See Modification Notice, at 37127. Respondent further argues that the purpose of
conducting a privatization analysis is to determine if the sale extinguished benefits conferred by
the prior subsidies. See Allegheny Ludlum Corp. v. United States, 367 F.3d 1339 (May 13,
2004).
Respondent concludes that the Department cannot rely on its preliminary determination that
75 percent ownership of a publicly-traded company does not constitute a controlling stake.
Instead, Respondent suggests that the Department must evaluate Cockerill’s privatization based
on the fact that Usinor purchased 100 percent of Cockerill shares and that the company has been
fully privatized.
Department’s Position
On December 28, 2005, the Department issued its standard change-in-ownership
questionnaire to Cockerill, as well as to Clabecq and Fafer. In the cover letter of that
questionnaire, we asked respondents to provide information regarding “the nature and
3 As the Department noted in our Preliminary Results of this sunset review, we were able to infer from the
financial statements of Arcelor (Usinor’s successor) that SW S was probably no longer an owner of Co ckerill.
However, there was nothing on the record that discussed SWS’s apparent exit, or that it had taken place via a
purchase by Usinor. See CIO Memo at 8.
4 We emphasize here that our determination regarding Cockerill’s change in ownership only affects nonrecurring
subsidies, whereas the majority of the programs the Department has determined not to be terminated, and
which affected our calculation of the rate likely to prevail, are recurring sub sidy programs. Thus, even if we were to
conclude that Cockerill’s sale was a privatization at arm’s length and for fair market value, the only likely effect
might be to decrease the calculated rate likely to prevail.
5 The Department determined that it was not necessary to reject this argument concerning the second
Usinor-SWS transaction since we recognized in the Preliminary Results that SWS was probably no longer an owner
of Cockerill. See CIO Memo at 8.
10
circumstances of any changes in the ownership of the respondent company or its assets during the
average useful life (AUL) of its reviewable physical assets.” We did not identify any particular
transactions of interest, and certainly did not limit by any means which transactions the
respondents could address.
Nevertheless, Cockerill provided a complete response concerning only the initial Usinor-
SWS transaction, after which SWS retained 25 percent of Cockerill shares. In fact, the
subsequent Usinor-SWS transaction, in which Usinor purchased the remaining 25 percent of
Cockerill held by SWS, was not addressed in Cockerill’s substantive response.3 Having not
provided the information required by the Department to conduct a change-in-ownership analysis
of this later transaction, Cockerill nonetheless argues that the Department should reach the
conclusion that this transaction was at arm’s length and for fair market value. The Department
simply cannot reach such a conclusion, with the possible associated result of extinguishing the
benefit received by Cockerill under every non-recurring subsidy program,4 on the basis of
Cockerill’s statement regarding this second Usinor-SWS transaction.5
As indicated in the Modification Notice, our privatization analysis, whether done in the
context of a sunset or an administrative review, specifically indicates that the burden is on
respondent to rebut the presumption that subsidies survived a change in ownership. We note that
the Department granted significant extensions to all respondents to submit their responses to the
questionnaire, and we issued supplemental questionnaires. At no point did respondents provide
the necessary details about the second transaction.
Thus our analysis has to focus and our conclusion has to rest on the initial Usinor-SWS
transaction, for which Cockerill completed the questionnaire. Regarding our analysis of that
transaction, Cockerill misstates our policy. It states, several times, that our policy in examining a
privatization requires us to determine whether the government has sold “a substantial share of a
company” (see, e.g., page 4 of Cockerill’s case brief), before examining the arm’s length nature
and fair market value of the sale. It then goes on to argue that SWS’s sale to Usinor was the sale
of a “substantial share,” because it resulted in Usinor owning 75 percent of Cockerill and having
6 In certain instances, it appears that Cockerill’s argument is that if Usinor had operational control of
Cockerill after the sale, then SW S cannot also have control. While Usinor may have been the dominant post-sale
partner, its control of Cockerill and SWS’s control of Cockerill are not mutually exclusive.
11
effective control. However, as stated in our Preliminary Results, where we quoted the
Modification Notice, 68 FR 37127, our policy does not involve a determination of whether a
“substantial share” was sold, but whether the government sold “substantially all” of a company
or its assets, retaining no control. Thus, in this case, the sale to Usinor of 50 percent of Cockerill,
bringing Usinor’s total ownership to 75 percent, may have been a sale of a “substantial share” by
the government to Usinor; however, SWS still owned 25 percent of Cockerill and could not,
therefore, be said to have sold “substantially all” of Cockerill. Moreover, the Modification
Notice states unequivocally that the sale should result in the government “retaining no control of
the company or its assets,” which was clearly not the outcome of this transaction, as explained in
our Preliminary Results.
Cockerill insists through various arguments that the Department’s concern should be with
whether control “shifted,” how the relative positions of SWS and Usinor in Cockerill essentially
flip flopped, and the nature of Usinor’s ownership after the transaction. At one point, Cockerill
states that “{i}n the Preliminary Results the Department claimed that SWS controlled a
substantial share of the remaining shares {after the sale}. It should be noted that this is not the
test the Department has laid out. The question is whether 75 percent {Usinor’s post-sale
ownership} represents a substantial percentage of the company.”6 The Department’s statement in
the Preliminary Results is consistent with the Department’s privatization practice, and is in
accordance with the plain meaning of the Modification Notice. Cockerill does not provide any
support for its alternative reading of this language.
Finally, Cockerill argues that the Department failed: 1) to examine the significance of the
rights held by SWS as a minority shareholder after the sale was completed and how these rights
“affected the ability of Usinor to exercise effective control of the company,” and, 2) how these
rights changed over time, in accordance with the terms of the sales agreement. However, as we
noted above, our conclusion does not rest on the dominance of Usinor vis-a-vis SWS, but on the
fact that SWS did not sell substantially all of its ownership in Cockerill. Even if SWS’s rights as
a minority shareholder did decline over time, and even if this decline was in accordance with the
terms of the original sales agreement, the fact remains that it owned 25 percent of Cockerill’s
shares after the sale was completed, and any subsequent changes in its ownership were the result
of a later transaction, about which Cockerill did not complete a questionnaire response. While
the Department did discuss the rights SWS retained as a minority shareholder in our Preliminary
Results, we clearly rested our conclusion on the fact that SWS had not sold substantially all of its
ownership in Cockerill, and not on these other indicia of the control SWS retained after the sale.
Finally, in so far as Cockerill’s argument that we have to examine the significance of SWS’s
control over Cockerill, our concern is with what powers SWS had at the point of sale, not with
how those powers declined over time. Thus, we cannot ignore the fact that SWS had significant
powers of control over Cockerill at the time of sale and for five years thereafter, including, as we
12
noted in our Preliminary Results, seats on Cockerill’s board of directors and a special veto power
exercised by these SWS-nominated board members.
4. Nature of the Subsidy
Consistent with section 752(a)(6) of the Act, the Department is providing the following
information to the ITC concerning the nature of the subsidy, and whether the subsidy is a subsidy
as described in Article 3 or Article 6.1 of the ASCM. We note that Article 6.1 of the ASCM
expired effective January 1, 2000.
With the exception of the “Promotion Brochure” and “Audio Visual Calling Card”
programs, the following programs do not fall within the meaning of Article 3.1 of the ASCM.
However, they could be subsidies described in Article 6.1 of the ASCM if the amount of the
subsidy exceeds five percent, as measured in accordance with Annex IV of the ASCM. They
also could fall within the meaning of Article 6.1 if they constitute debt forgiveness or are
subsidies to cover operating losses sustained by an industry or enterprise. However, there is
insufficient information on the record of this review for the Department to make such a
determination. We are, however, providing the ITC with the following program descriptions:
1. Cash Grants and Interest Subsidies under the Economic Expansion Law of 1970
The Economic Expansion Law of December 30, 1970 (the 1970 law), offers incentives to
promote the establishment of new enterprises or the expansion of existing ones which contribute
directly to the creation of new activities and new employment within designated development
zones.
2. Government Funding of Early Retirement Pensions
The early retirement system was established as a result of the lengthy economic recession
triggered by the first oil crisis. To alleviate the social hardships stemming from the recession,
Collective Labor Convention (CLC) Number 17 of the National Labor Council provided for
additional allowances over and above unemployment benefits for certain laid-off workers over 60
years of age for all industries.
3. Assumption of Debt
a. Assumption of Debt Related to Closing of Valfil Plant
In 1984, pursuant to the Gandois Plan, the Societe Nationale de Credite a l'Industrie (SNCI)
provided BF1,616 million in credits to Cockerill to finance the closing of the company's Valfil
plant. The Gandois Plan was a plan commissioned and adopted by the GOB in 1983 specifically
to assist the Belgian steel industry.
b. Assumption of Financing Costs
The GOB assumed the interest costs of Cockerill and Clabecq for the five-year period from 1979
through 1983.
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c. Forgiveness of SNCI Loans to Cockerill Sambre
Loans granted by the SNCI in the amount of BF14,947 million were contributed to Cockerill's
capital in 1981. Because shares were apparently not issued to SNCI. or any government entity
for its contribution, this transaction represents debt forgiveness.
4. Debt Conversions
a. Conversion of Clabecq Debt into Ordinary and Non-Voting Shares
Pursuant to the approval of the Belgian Council of Ministers on December 30, 1983, the SNSN
and Clabecq agreed to convert Clabecq debt held by SNSN to ordinary and non-voting preference
shares.
b. Conversion of Clabecq's Debt into Parts Beneficiaries
The Department treated these conversions of debt to parts beneficiaries as debt to equity
conversions which are limited to a specific enterprise or industry or group of enterprises or
industries.
c. Conversion of Cockerill Sambre Debt to Equity Under the Claes Plan
In June 1979, pursuant to the Claes Plan, the GOB converted BF2.051 billion in outstanding
SNCI claims against Cockerill into 1,578,150 shares, for approximately BF1,300 per share. The
debt conversions made to acquire the equity were on terms inconsistent with commercial
considerations and were found to be countervailable.
d. Conversion of Cockerill Sambre Debt Held by FSNW into Equity
Under the Claes plan, which is limited to the steel industry, the GOB converted outstanding
SNCI claims against Cockerill into shares.
e. Conversion of Cockerill Debt to Equity under the Gandois Plan
In 1983 the GOB forgave BF15.785 billion of SNCI debt in exchange for common shares in the
company priced at BF160 per share, the average market price of Cockerill’s shares traded
between July and November 1983. The Department found that the GOB paid a premium for
these shares and treated the premium as a non-recurring grant.
5. Equity Infusions
a. Equity Infusions for Hainaut-Sambre
Hainaut-Sambre merged with Cockerill. In Final Affirmative Countervailing Duty
Determinations: Certain Carbon Steel Products from Belgium, 47 FR 39304 (September 7,
1982), this equity infusion was determined to be countervailable because the GOB paid more per
share than the market price of the stock at that time and, hence, its investment was inconsistent
with commercial considerations. We found this equity infusion countervailable in the Final.
b. SNSN Capital for Cockerill Sambre’s Liege Cold-Rolling Mill
Pursuant to the Gandois Plan, SNSN purchased 26,666,666 common shares of Cockerill's stock
in 1985 for BF6 billion in order to finance an investment in Cockerill's cold-rolling facilities at
Liege. SNSN purchased Cockerill’s common shares at a price of BF225 per share. The market
price of the stock at that time was BF197 per share.
c. 1981 Equity Infusion into Cockerill Sambre
In 1981, the GOB decided to increase the capital of Cockerill by infusing BF11 billion in cash in
exchange for equity.
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6. SNCI Loans
The SNCI is a public credit institution which, through medium- and long-term financing,
encourages the development and growth of industrial and commercial enterprises in Belgium,
including the national industries.
7. Belgian Industrial Finance Company (Belfin) Loans
Belfin borrows money in Belgium and on international markets, with the benefit of government
guarantees, to obtain the funds needed to make loans to Belgian companies. The government's
guarantee makes it possible for Belfin to borrow at favorable interest rates and to pass the
savings along when it lends the funds to Belgian companies.
8. Clabecqlease (Invests)
Pursuant to the Belgian government's 20-point plan adopted in 1981 to restructure the steel
industry, the GOB created holding companies (INVESTS) that were financed jointly by Societe
Nationale d'Investissement (SNI) and private companies. Invests were found to be
countervailable because they were industry specific.
9. FSNW Loans
In 1989, according to petitioners, after the conversion of large amounts of FSNW loans to equity,
FSNW made a new loan to Cockerill in the amount of BF158 million to finance investments in
accordance with the Gandois Plan.
10. Government-Guaranteed Loans
Government loan guarantees issued pursuant to the Economic Expansion Laws of either 1959 or
1970 were received by Fafer and Clabecq on SNCI loans and, in the case of Clabecq, also on
Belfin loans which were outstanding during the POI.
11. Exemption of Corporate Income Tax for Grants Received under the 1970 Law
Under the 1970 Law, companies located in development zones are exempt from income tax on
cash grants in the year in which the grant is received. Because this program is limited to specific
zones, we have found the exemption to be countervailable.
12. Accelerated Depreciation
Under Article 15 of the 1970 Law, companies located in development zones may take twice the
normal straight-line depreciation on assets acquired in part by grants received under this law.
Because this benefit is limited to companies located in development zones, it is countervailable.
13. Exemption from Real Estate Taxes
Assets acquired through investments financed in part under the 1970 Law may be exempted from
real estate tax for up to five years, depending on the extent to which objectives of the 1970 Law
are achieved. The exemption is provided for under Article 16 of the 1970 Law and is restricted
to firms located in development zones. The Department found this program to be
countervailable because it was regionally specific.
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14. Exemption from the Capital Registration Tax
A capital registration tax is assessed at the time capital is formally registered with a company.
Under the 1970 Law, companies located in development zones may be exempted from the one
percent capital registration tax. The Department found this program to be countervailable
because it was regionally specific.
15. European Coal and Steel Community (ECSC) Article 54 Loans and Loan Guarantees
Article 54 industrial investment loans are provided for the purpose of purchasing new equipment
or financing modernization. These loans are only available to the steel and coal industries and
are, therefore, limited. Thus, these loans are countervailable to the extent that they are provided
on terms inconsistent with commercial considerations.
16. ECSC Redeployment Aid
Under Article 56 (2)(b) of the ECSC Treaty, individuals employed in the coal and steel industry
who lose their jobs may receive assistance for social adjustment. This assistance is provided for
workers affected by restructuring measures, particularly as workers withdraw from the labor
market into early retirement or are forced into unemployment.
17. European Social Fund (ESF)
The ESF program is funded from the EC General Budget, the revenues for which are derived
from customs duties, agricultural levies, Member State contributions, etc. The ESF is one part of
the EC’s Structural Funds. It is primarily responsible for two out of the five objectives of the
Structural Funds. These two objectives relate to combating long-term unemployment and
facilitating the occupational integration of young people.
18. Promotion Brochure
Under this export subsidy program, loans are extended for a five-year period with a fixed annual
interest rate. However, the company is not required to make interest payments on the loan until
the five-year period has ended. At the end of the period, if the company has not met certain
targeted sales and profit goals generated from exports, the loan must be repaid. The Department
determined in Administrative Review that this program constitutes an export subsidy; therefore,
it meets the definition established in Article 3.1(a) of the ASCM.
19. Audio-Visual Calling Card
Under this export subsidy program, a company may receive a fixed-rate long-term loan to
produce an audio-visual calling card to present to foreign businessmen. Under the terms of the
loan, if a company has not met targeted sales and profit goals generated from exports, it must
repay the loan. In addition, companies are not obligated to pay interest during the five-year term
of the loan. The Department determined in Administrative Review that this program constitutes
an export subsidy; therefore, it meets the definition established in Article 3.1(a) of the ASCM.
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Final Results of Review
As a result of this sunset review, the Department finds that revocation of the countervailing
duty order on CTL plate from Belgium would be likely to lead to continuation or recurrence of a
countervailable subsidy for the reasons set forth in this memorandum. Further, we find the net
countervailable subsidy likely to prevail if the order were revoked to be 2.82 percent ad valorem
for Cockerill, 0.56 percent ad valorem for Fafer, and 0.50 percent ad valorem for “All Others”
(including Clabecq).
Recommendation
Based on our examination of the record and analysis of the comments 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.
_____________________
James C. Leonard III
Acting Assistant Secretary
for Import Administration
______________________
Date