64 FR 73519 December 30, 1999 DEPARTMENT OF COMMERCE International Trade Administration [C-122-805] Final Results of Expedited Sunset Review: New Steel Rail From Canada AGENCY: Import Administration, International Trade Administration, Department of Commerce. ACTION: Notice of final results of expedited sunset review: New steel rail from Canada. ----------------------------------------------------------------------- SUMMARY: On June 1, 1999, the Department of Commerce (``the Department'') initiated a sunset review of the countervailing duty order on new steel rail from Canada (64 FR 29261) pursuant to section 751(c) of the Tariff Act of 1930, as amended (``the Act''). On the basis of a notice of intent to participate and an adequate substantive response filed on behalf of domestic interested parties and inadequate response (in this case, no response) from respondent interested parties, the Department determined to conduct an expedited review. As a result of this review, the Department finds that revocation of the countervailing duty order would be likely to lead to continuation or recurrence of a countervailable subsidy. The net countervailable subsidy and the nature of the subsidy are identified in the Final Results of Review section of to this notice. FOR FURTHER INFORMATION CONTACT: Darla D. Brown or Melissa G. Skinner, Office of Policy for Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street & Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-3207 or (202) 482-1560, respectively. Effective Date: December 30, 1999. Statute and Regulations This review was conducted pursuant to sections 751(c) and 752 of the Act. The Department's procedures for the conduct of sunset reviews are set forth in Procedures for Conducting Five-year (``Sunset'') Reviews of Antidumping and Countervailing Duty Orders, 63 FR 13516 (march 20, 1998) (``Sunset Regulations'') and 19 CFR Part 351 (1999) in general. Guidance on methodological or analytical issues relevant to the Department's conduct of sunset reviews is set forth in the Department's Policy Bulletin 98:3--Policies Regarding the Conduct of Five-year (``Sunset'') Reviews of Antidumping and Countervailing Duty Orders; Policy Bulletin, 63 FR 18871 [[Page 73520]] (April 16, 1998) (``Sunset Policy Bulletin''). Scope The merchandise subject to this countervailing duty order is new steel rail, whether of carbon, high carbon, alloy or other quality steel from Canada. Subject merchandise includes but is not limited to, standard rails, all main line sections (at least 30 kilograms per meter or 60 pounds per yard), heat-treated or head-hardened (premium) rails, transit rails, contact rails (or `'third rail'') and crane rails. Rails are used by the railroad industry, by rapid transit lines, by subways, in mines, and in industrial applications. Specifically excluded from the order are light rails (less than 30 kilograms per meter or 60 pounds per yard). Also excluded from the order are relay rails, which are used rails taken up from primary railroad track and relaid in a railroad yard or on a secondary track. As a result of a changed circumstances review in 1996, the countervailing duty order on new steel rail from Canada was partially revoked with regard to 100ARA-A new steel rail, except light rail.\1\ Moreover, nominal 60 pounds per yard steel rail is outside the scope of this order.\2\ --------------------------------------------------------------------------- \1\ See New Steel Rail, Except Light Rail, From Canada; Final Results of Changed Circumstances Antidumping and Countervailing Duty Administrative Reviews, and Revocation in Part of Antidumping and Countervailing Duty Orders, 61 FR 11607 (March 21, 1996). \2\ See New Steel Rail, Except Light Rail, From Canada; Notice of Termination of Changed Circumstances Administrative Reviews and Clarification of Scope Language, 63 FR 43137 (August 12, 1998). --------------------------------------------------------------------------- This merchandise is currently classifiable under the Harmonized Tariff Schedule (HTS) items 7302.10.1010, 7302.10.1015, 7302.10.1035, 7302.10.1045, 7302.10.5020, 8548.90.0000.\3\ The HTS item numbers are provided for convenience and U.S. Customs purposes only. The written description remains dispositive. --------------------------------------------------------------------------- \3\ Per conversation with April Avalone at U.S. Customs on September 7, 1999. --------------------------------------------------------------------------- This order covers imports from all producers and exporters of new steel rail from Canada, except the Algoma Steel Corporation, which was excluded from the original order. History of the Order In the final determination, as amended, the Department determined that the following programs conferred countervailable benefits: Federal Programs (1) Debenture Guarantees Provided to Sydney Steel Corporation (``Sysco''); (2) Forgiven Wharf Loan; (3) Regional Development Incentives Program (``RDIP''); (4) Certain Investment Tax Credits (``ITCs''); Joint Federal-Provincial Programs (5) General Development Agreements (``GDA''); (6) Economic and Regional Development Agreements (``ERDA''); (7) Iron Ore Freight Subsidy to Algoma; Provincial Programs (Province of Nova Scotia) (8) Grants for Payment of Principal and Interest on Debentures; (9) Operating Grants Provided to Sysco; and (10) Equity Infusions Provided to Sysco.\4\ --------------------------------------------------------------------------- \4\ See Final Affirmative Countervailing Duty Determination; New Steel Rail, Except Light Rail, from Canada, 54 FR 31991 (August 3, 1989), as amended, Countervailing Duty Order and Amendment to the Final Affirmative Countervailing Duty Determination of New Steel Rail, Except Light Rail, from Canada, 54 FR 39032 (September 22, 1989), and, as amended New Steel Rail, Except Light Rail, from Canada: Amendment to Final Affirmative Countervailing Duty Determination and Order in Accordance with Decision on Remand, 55 FR 35702 (August 31, 1990). --------------------------------------------------------------------------- Specifically, the Department calculated that these programs conferred a total net subsidy of 94.57 percent ad valorem for all Canadian manufacturers, producers, or exporters, excluding Algoma. As a result of a de minimis net subsidy determined for Algoma, this Canadian producer/exporter was excluded from the order. Since the original investigation, the Department has conducted a changed circumstances review of the order.\5\ As noted above, as a result of this review, the Department revoked the countervailing duty order with regard to 100ARA-A new steel rail, except light rail from Canada.\6\ The Department has not conducted any administrative reviews of this order. The order remains in effect for all manufacturers and exporters of the subject merchandise from Canada, except for Algoma. --------------------------------------------------------------------------- \5\ See footnote 1. \6\ See id. --------------------------------------------------------------------------- Background On June 1, 1999, the Department initiated a sunset review of the countervailing duty order on new steel rail from Canada (64 FR 29261), pursuant to section 751(c) of the Act. The Department received a Notice of Intent to Participate on behalf of Pennsylvania Steel Technologies, Inc. (``PST''), a subsidiary of Bethlehem Steel Corporation, and Rocky Mountain Steel Mills (``RMSM'') (collectively, the ``domestic interested parties'') on June 16, 1999, within the deadline specified in section 351.218(d)(1)(i) of the Sunset Regulations. We received a complete substantive response from the domestic interested parties on July 1, 1999, within the 30-day deadline specified in the Sunset Regulations under section 351.218(d)(3)(i). Both PST and RMSM claimed interested party status under 19 USC 1677(9)(C) as U.S. manufacturers of the subject merchandise. In addition, PST stated that it is a subsidiary of Bethlehem Steel Corporation, a petitioner in the original investigation. We did not receive a substantive response from any respondent interested party in this case. As a result, pursuant to 19 CFR 351.218(e)(1)(ii)(C), the Department determined to conduct an expedited, 120-day, review of the order. In accordance with section 751(c)(5)(C)(v) of the Act, the Department may treat a review as extraordinarily complicated if it is a review of a transition order (i.e., an order in effect on January 1, 1995). On October 12, 1999, the Department determined that the sunset review of the countervailing duty order on new steel rail from Canada is extraordinarily complicated, and extended the time limit for completion of the final results of this review until not later than December 28, 1999, in accordance with section 751(c)(5)(B) of the Act.\7\ --------------------------------------------------------------------------- \7\ See extension of Time Limit for Final Results of Five-Year Reviews, 64 FR 55233 (October 12, 1999). --------------------------------------------------------------------------- Determination In accordance with section 751(c)(1) of the Act, the Department conducted this review to determine whether revocation of the countervailing duty order would be likely to lead to continuation or recurrence of a countervailable subsidy. Section 752(b) of the Act provides that, in making this determination, the Department shall consider the net countervailable subsidy determined in the investigation and subsequent reviews, and whether any change in the programs which gave rise to the net countervailable subsidy has occurred that is likely to affect the net countervailable subsidy. Pursuant to section 752(b)(3) of the Act, the Department shall provide to the International Trade Commission (``the Commission'') the net countervailable subsidy likely to prevail if the order is revoked. In addition, consistent with section 752(a)(6), the Department shall provide the Commission information concerning the nature of each subsidy and whether the subsidy is a subsidy [[Page 73521]] described in Article 3 or Article 6.1 of the 1994 WTO Agreement on Subsidies and Countervailing Measures (``Subsidies Agreement''). The Department's determinations concerning continuation or recurrence of a countervailable subsidy, the net countervailable subsidy likely to prevail if the order is revoked, and nature of the subsidy are discussed below. In addition, parties' comments with respect to each of these issues are addressed within the respective sections below. Continuation or Recurrence of a Countervailable Subsidy Drawing on the guidance provided in the legislative history accompanying the Uruguay Round Agreements Act (``URAA''), specifically the Statement of Administrative Action (``the SAA''), H.R. Doc. No. 103-316, vol. 1 (1994), the House Report, H.R. Rep. No. 103-826, pt. 1 (1994), and the Senate Report, S. Rep. No. 103-412 (1994), the Department issued its Sunset Policy Bulletin providing guidance on methodological and analytical issues, including the basis for likelihood determinations. The Department clarified that determinations of likelihood will be made on an order-wide basis (see section III.A.2 of the Sunset Policy Bulletin). Additionally the Department normally will determine that revocation of a countervailing duty order is likely to lead to continuation or recurrence of a countervailable subsidy where (a) a subsidy program continues, (b) a subsidy program has been only temporarily suspended, or (c) a subsidy program has been only partially terminated (see section III.A.3.a of the Sunset Policy Bulletin). In addition to considering the guidance on likelihood cited above, section 751(c)(4)(B) of the Act provides that the Department shall determine that revocation of the order would be likely to lead to continuation or recurrence of a countervailable subsidy where a respondent interested party waives its participation in the sunset review. Pursuant to the SAA, at 881, in a review of a countervailing duty order, when the foreign government has waived participation, the Department shall conclude that revocation of the order would be likely to lead to continuation or recurrence of a countervailable subsidy for all respondent interested parties.\8\ In this instant review, the Department did not receive a substantive response from the foreign government or from any other respondent interested party. Pursuant to section 351.218(d)(2)(iii) of the Sunset Regulations, this constitutes a waiver of participation. --------------------------------------------------------------------------- \8\ See 19 CFR 351.218(d)(2)(iv). --------------------------------------------------------------------------- In their substantive response, the domestic interested parties argue that revocation of the countervailing duty order would likely result in the continuation or recurrence of countervailable subsidies. First, they describe several programs administered on the provincial level by the Province of Nova Scotia that were determined in the original investigation to confer bounties or grants. They argue that Sysco was and continues to be the recipient of these subsidies (see July 1, 1999, Substantive Response of the domestic interested parties at 8). The domestic interested parties argue that the Grants for Payment of Principal and Interest on Debentures, Operating Grants, and Equity Infusions programs continue to exist and confer countervailable subsidies. As for Long-Term Loan Guarantees, the domestic interested parties state that Sysco's public financial statements do not indicate that the trust company guarantees found countervailable in the original investigation have continued. However, they maintain that the financial position of the company is so weak that it could not obtain any commercial funding absent provincial guarantees of its debt (see id. at 10). Of the three joint-federal programs, the domestic interested parties argue that under the General Development Agreements and Economic and Regional Development Agreements programs no direct or specific outlays were made to Sysco in the most recent budget, but the province or company may still be benefitting from these programs. Moreover, they point out that the Canadian government has notified the World Trade Organization that it uses both of these programs but that it considers them to be ``green box'' programs that cannot be countervailed (see id. at 12-13). Finally, the domestic interested parties point out that the Iron Ore Freight Subsidy to Algoma did not apply to Sysco, but rather to Algoma. The domestic interested parties also state that there is no evidence that the federal programs found to be countervailable in the original investigation, namely, Debenture Guarantees, Forgiven Wharf Loan, Regional Development Incentives Program, and Investment tax Credits, continue to benefit Sysco. However, they point out, there has not been an administrative review of the order and the Government of Canada has not provided any information concerning these four programs (see id. at 13). The domestic interested parties maintain that Sysco benefits from past and present subsidies, and therefore, the Department should determine that revocation of the countervailing duty order on new steel rail from Canada would likely result in the continuation or recurrence of countervailable subsidies. As noted above, in our final determination, as amended, the Department determined that the programs in question conferred a bounty or grant, the net amount of which was calculated to be 94.57 percent ad valorem for Canadian exporters/producers other than Algoma. The Department has conducted no administrative reviews of this outstanding countervailing duty order. Given that the Department has not conducted an administrative review of this order nor have we reviewed the programs in question in any other administrative review, the Department does not have any information that programs have been terminated without residual benefits. Therefore, we agree with the domestic interested parties that the Canadian programs remain in place. Based on the continued existence of programs found to confer countervailable subsidies, the fact that the foreign government and other respondent parties waived their right to participate in this review before the Department, and absent argument and evidence to the contrary, the Department determines that it is likely that a countervailable subsidy will continue if the order is revoked. Net Countervailable Subsidy In the Sunset Policy Bulletin, the Department stated that, consistent with the SAA and House Report, the Department normally will select a rate from the investigation as the net countervailable subsidy likely to prevail if the order is revoked because that is the only calculated rate that reflects the behavior of exporters and foreign governments without the discipline of an order or suspension agreement in place. The Department noted that this rate may not be the most appropriate rate if, for example, the rate was derived from subsidy programs which were found in subsequent reviews to be terminated, if there has been a program-wide change, or if the rate ignores a program found to be countervailable in a subsequent administrative review. (See section III.B.3 of the Sunset Policy Bulletin). Additionally, where the Department determined company-specific countervailing duty rates in the original investigation, the Department normally will report to the Commission [[Page 73522]] company-specific rates from the original investigation or where no company-specific rate was determined for a company, the Department normally will provide to the Commission the country-wide or ``all others'' rate. (See section III.B.2 of the Sunset Policy Bulletin). In their substantive response, the domestic interested parties argue that the countervailing duty rate likely to prevail if the order on new steel rail from Canada is revoked would be at least as large as that existing at the time of the original order. The domestic interested parties argue that as the rate determined in the original investigation is the only calculated rate which reflects the behavior of exporters without the discipline of the order in place, the Department's policy provides that it normally will select this rate to provide to the Commission. Noting that the programs found to provide subsidies in the original investigation continue to exist, the domestic interested parties maintain that the Department should utilize the subsidy rate it originally determined when calculating the net countervailable subsidy in this sunset review. As discussed in the Sunset Policy Bulletin, the Department normally will report to the Commission an original subsidy rate as adjusted to take into account terminated programs, program-wide changes, and programs found to be countervailable in subsequent reviews. We agree with the domestic interested parties that all programs, with the exception of the Long-term Loan Guarantees program (which was determined on remand not to confer a countervailable subsidy), found in the original investigation to provide countervailable subsidies continue to exist. Absent evidence or argument that there have been any changes to the programs found to be countervailable in the original determination, as amended, that would affect the net countervailable subsidy, consistent with the Sunset Policy Bulletin, the Department determines that the net countervailable subsidy likely to prevail if the order were revoked is 94.57 percent. Nature of the Subsidy In the Sunset Policy Bulletin, the Department stated that, consistent with section 752(a)(6) of the Act, the Department will provide information to the Commission concerning the nature of the subsidy and whether it is a subsidy described in Article 3 or Article 6.1 of the Subsidies Agreement. The domestic interested parties maintain that the provincial subsidy programs fall under Article 6 of the Subsidies Agreement because they cause serious prejudice to the importing country and the total value of the subsidies provided over the past ten years, spread over the total sales value of that period, far exceeds five percent of sales (see July 1, 1999, Substantive Response of the domestic interested parties at 21). Given that receipt of benefits under any of the programs included in our calculation is not contingent upon export, none of these programs fall within the definition of an export subsidy under Article 3.1(a) of the Subsidies Agreement. The Department agrees with the domestic interested parties that because the benefits received under the provincial programs include subsidies to cover operating losses sustained by an enterprise (Operating Grants) and direct forgiveness of debt and grants to cover debt repayment (Grants for Payment of Principal and Interest Debentures), these programs are actionable under Article 6 of the Subsidies Agreement. Moreover, the Equity Infusions program could be found to be inconsistent with Article 6 if the net countervailable subsidy exceeds 5 percent, as measured in accordance with Annex IV of the Subsidies Agreement. The Department, however, has no information with which to make such a calculation, nor do we believe it appropriate to attempt such a calculation in the course of a sunset review. Rather, we are providing the Commission the following program descriptions. Subsidy Programs The subsidy programs, including a description of each, identified by the Department and used in its determination of the net countervailable subsidy likely to prevail if the order were revoked are listed below. Grants for Payment of Principal and Interest on Debentures The Government of Nova Scotia has provided Sysco with grants to cover principal payments and interest payments on its long-term debentures since 1982. Operating Grants Provided to Sysco The Government of Nova Scotia has provided Sysco with operating grants to cover its general operating expenses and for capital expenditures. Equity Infusions Provided to Sysco The Department determined in the original investigation that Sysco is unequityworthy and, therefore, the equity infusions made by the Government of Nova Scotia were found to be countervailable. Debenture Guarantees Provided to Sysco Federal debentures were issued in 1973 and 1975 for 20 years. Forgiven Wharf Loan In 1972, the federal government provided Sysco with a loan to construct a loading wharf, which was completed in June 1978. Regional Development Incentive Program This program was established in 1969 for the purpose of creating stable employment opportunities in certain regions in Canada where employment and economic opportunities are chronically low, particularly in the Atlantic provinces. General Development Agreements (GDA) GDAs provided the legal basis for various departments of the federal and provincial governments to cooperate in the establishment of economic assistance programs. Economic and Regional Development Agreements (ERDA) Essentially a continuation of GDAs, ERDAs established programs, delineated administrative procedures, and set up the relative funding commitments of the federal and provincial governments. Final Results of Review As a result of this review, the Department finds that revocation of the countervailing duty order on new steel rail from Canada would be likely to lead to continuation or recurrence of countervailable subsidies at the rates listed below.\9\ --------------------------------------------------------------------------- \9\ As noted above, due to a de minimis net subsidy found for Algoma, this Canadian producer/exporter was excluded from the order. ------------------------------------------------------------------------ Net subsidy Manufacturer/exporter rate (percent) ------------------------------------------------------------------------ Sydney Steel Corporation.................................... 94.57 Bernard Railtrack Export Inc................................ 94.57 All Others.................................................. 94.57 ------------------------------------------------------------------------ This notice serves as the only reminder to parties subject to administrative protective order (``APO'') of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305 of the Department's regulations. Timely notification of return/destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and the terms of an APO is a sanctionable violation. [[Page 73523]] This five-year (``sunset'') review and notice are in accordance with sections 751(c), 752, and 777(i)(1) of the Act. Dated: December 23, 1999. Richard W. Moreland, Acting Assistant Secretary for Import Administration. [FR Doc. 99-33975 Filed 12-29-99; 8:45 am] BILLING CODE 3510-DS-M