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