[Federal Register: March 4, 2002 (Volume 67, Number 42)]
[Page 9662-9670]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-427-823]
Notice of Preliminary Affirmative Countervailing Duty
Determination and Alignment of Final Countervailing Duty Determination:
With Final Antidumping Duty Determination: Certain Cold-Rolled Carbon
Steel Flat Products From France
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Preliminary determination of countervailing duty investigation.
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SUMMARY: The Department of Commerce preliminarily determines that
countervailable subsidies are being provided to producers or exporters
of certain cold-rolled carbon steel flat products from France. For
information on the estimated countervailing duty rates, see section
below on ``Suspension of Liquidation.''
EFFECTIVE DATE: March 4, 2002.
FOR FURTHER INFORMATION CONTACT: Suresh Maniam at (202) 482-0176;
Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, NW,
Washington, DC 20230.
Preliminary Determination
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the ``Act'') by
the Uruguay Round Agreements Act. In addition, unless otherwise
indicated, all citations to the Department of Commerce's (the
``Department'') regulations are to our regulations as codified at 19
CFR part 351 (2001).
The Petitioners
The petition in this investigation was filed by Bethlehem Steel
Corp., United States Steel LLC., LTV Steel Co., Inc., Steel Dynamics,
Inc., National Steel Corp., Nucor Corp., WCI Steel, Inc., and Weirton
Steel Corp. (collectively, ``the petitioners'').
Case History
The following events have occurred since the publication of the
notice of initiation in the Federal Register (see Notice of Initiation
of Countervailing Duty Investigations: Certain Cold-Rolled Carbon Steel
Flat Products From Argentina, Brazil, France, and the Republic of
Korea, 66 FR 54218 (October 26, 2001) (``Initiation Notice'')).
On November 3, 2001, we issued countervailing duty questionnaires
to the Government of France (``GOF''), the European Commission
(``EC''), and Usinor, a producer/exporter of the subject merchandise
from France. Our decision to select Usinor to respond to our
questionnaire is explained in the Memorandum to Susan H. Kuhbach,
``Respondent Selection,'' dated November 2, 2001, which is on file in
the Central Records Unit, room B-099 of the main Department building.
On November 30, 2001, we extended the time limit for the
preliminary determination of this investigation to January 28, 2002.
See Certain Cold-Rolled Carbon Steel Flat Products from Argentina,
Brazil, France, and the Republic of Korea: Extension of Time Limit for
Preliminary Determinations in Countervailing Duty Investigations, 66 FR
63523 (December 7, 2001).
On November 15, 2001, Emerson Electric Co. submitted a request to
exclude certain merchandise from the scope of this investigation. On
February 22, 2002, the petitioners submitted an objection to this
request. See section below on ``Scope of the Investigation: Scope
Comments'' for an analysis of these submissions and the Department's
resulting determination.
We received a response to our countervailing duty questionnaire
from the EC on December 20, 2001, and from the GOF and Usinor on
December 21, 2001. On January 2, 2002, the petitioners submitted
comments regarding these questionnaire responses.
We issued supplemental questionnaires to the GOF and Usinor on
January 7, 2002, and received responses to these questionnaires on
January 16, 2002.
On January 18, 2002, we further extended the time limit for the
preliminary determination of this investigation to February 25, 2002.
See Certain Cold-Rolled Carbon Steel Flat Products from Argentina,
Brazil, France, and the Republic of Korea: Extension of Time Limit for
Preliminary Determinations in Countervailing Duty Investigations, 67 FR
3482 (January 24, 2002).
On January 24, 2002, we requested that Usinor provide its sales
values for its French production from 1988 through 2000. See Memorandum
to File, dated January 24, 2002. Usinor submitted this information on
January 29, 2002.
We issued another supplemental questionnaire to Usinor on February
12,
[[Page 9663]]
2002, and received a response to this questionnaire on February 15,
2002.
Scope of the Investigation
For purposes of this investigation, the products covered are
certain cold-rolled (cold-reduced) flat-rolled carbon-quality steel
products. For a full description of the scope of this investigation,
see the Scope Appendix attached to the Notice of Preliminary Negative
Countervailing Duty Determination and Alignment of Final Countervailing
Duty Determination With Final Antidumping Duty Determinations: Certain
Cold-Rolled Carbon Steel Flat Products from Argentina, published
concurrently with this preliminary determination.
Scope Comments
In the Initiation Notice, we invited comments on the scope of this
proceeding. On November 15, 2001, we received a request from Emerson
Electric Company (``Emerson'') to amend the scope of this
investigation, as well as the concurrent countervailing and antidumping
duty investigations pertaining to subject merchandise. Specifically,
Emerson requested that the scope be amended to exclude all types of
nonoriented coated silicon electrical steel, whether fully-or semi-
processed, because such products are not treated in the marketplace as
carbon steel products.
On February 22, 2002, we received a response to the Emerson request
from the petitioners. The petitioners objected to excluding these
products from the scope and have explained that the scope language is
not overly inclusive with respect to these products. Therefore, we
determine that nonoriented coated silicon electric steel is within the
scope of these proceedings.
The Department has also received several other scope exclusion
requests in the cold-rolled steel investigations. We are continuing to
examine these exclusion requests, and plan to reach a decision as early
as possible in the proceedings. Interested parties will be advised of
our intentions prior to the final determinations and will have the
opportunity to comment.
Injury Test
Because France is a ``Subsidies Agreement Country'' within the
meaning of section 701(b) of the Act, the U.S. International Trade
Commission (``ITC'') is required to determine whether imports of the
subject merchandise from France materially injure, or threaten material
injury to, a U.S. industry. On November 19, 2001, the ITC published its
preliminary determination finding a reasonable indication of material
injury or threat of material injury to an industry in the United States
by reason of imports of certain cold-rolled carbon steel flat products
from France. See Certain Cold-Rolled Steel Products From Argentina,
Australia, Belgium, Brazil, China, France, Germany, India, Japan,
Korea, Netherlands, New Zealand, Russia, South Africa, Spain, Sweden,
Taiwan, Thailand, Turkey, and Venezuela, 66 FR 57985 (November 19,
2001).
Alignment With Final Antidumping Duty Determination
On February 21, 2002, the petitioners submitted a letter requesting
alignment of the final determination in this investigation with the
final determination in the companion antidumping duty investigations
(see Notice of Initiation of Antidumping Duty Investigations: Certain
Cold-Rolled Carbon Steel Flat Products from Argentina, Australia,
Belgium, Brazil, France, Germany, India, Japan, Korea, the Netherlands,
New Zealand, the People's Republic of China, the Russian Federation,
South Africa, Spain, Sweden, Taiwan, Thailand, Turkey, and Venezuela,
66 FR 54198 (October 26, 2001)). The companion antidumping duty
investigations and this countervailing duty investigation were
initiated on the same date and have the same scope. Therefore, in
accordance with section 705(a)(1) of the Act, we are aligning the final
determination in this investigation with the final determination in the
antidumping duty investigations of certain cold-rolled carbon steel
flat products.
In accordance with section 703(d) of the Act, the suspension of
liquidation resulting from this preliminary affirmative countervailing
duty determination will remain in effect no longer than four months.
Period of Investigation
The period of investigation (``POI'') for which we are measuring
subsidies is the calendar year 2000.
Changes in Ownership
On February 2, 2000, the U.S. Court of Appeals for the Federal
Circuit (``CAFC'') in Delverde Srl v. United States, 202 F.3d 1360,
1365 (Feb. 2, 2000), reh'g en banc denied, 2000 U.S. App. LEXIS 15215
(June 20, 2000) (``Delverde III''), rejected the Department's change-
in-ownership methodology as explained in the General Issues
Appendix.\1\ The CAFC held that ``the Tariff Act, as amended, does not
allow Commerce to presume conclusively that the subsidies granted to
the former owner of Delverde's corporate assets automatically `passed
through' to Delverde following the sale. Rather, the Tariff Act
requires that Commerce make such a determination by examining the
particular facts and circumstances of the sale and determining whether
Delverde directly or indirectly received both a financial contribution
and benefit from the government.'' Id., 202 F.3d at 1364.
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\1\ Final Affirmative Countervailing Duty Determination: Certain
Steel Products from Austria, 58 FR 37217, 37225 (July 9, 1993).
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Pursuant to the CAFC finding, the Department developed a new
change-in-ownership methodology, first announced in a remand
determination on December 4, 2000, following the CAFC's decision in
Delverde III, and also applied in Grain-Oriented Electrical Steel from
Italy; Final Results of Countervailing Duty Administrative Review, 66
FR 2885 (January 12, 2001). Likewise, we have applied this new
methodology in analyzing the changes in ownership in this preliminary
determination.
The first step under this new methodology is to determine whether
the legal person (entity) to which the subsidies were given is, in
fact, distinct from the legal person that produced the subject
merchandise exported to the United States. If we determine the two
persons are distinct, we then analyze whether a subsidy has been
provided to the purchasing entity as a result of the change-in-
ownership transaction. If we find, however, that the original subsidy
recipient and the current producer/exporter are the same person, then
that person benefits from the original subsidies, and its exports are
subject to countervailing duties to offset those subsidies. In other
words, we will determine that a ``financial contribution'' and a
``benefit'' have been received by the ``person'' under investigation.
Assuming that the original subsidy has not been fully amortized under
the Department's normal allocation methodology as of the POI, the
Department would then continue to countervail the remaining benefits of
that subsidy.
In making the ``person'' determination, where appropriate and
applicable, we analyze factors such as: (1) Continuity of general
business operations, including whether the successor holds itself out
as the continuation of the previous enterprise, as may be indicated,
for example, by use of the same name, (2) continuity of production
facilities, (3) continuity of assets and liabilities, and (4) retention
of personnel. No single factor will necessarily provide a dispositive
indication of any change in the entity
[[Page 9664]]
under analysis. Instead, the Department will generally consider the
post-sale person to be the same person as the pre-sale person if, based
on the totality of the factors considered, we determine the entity in
question can be considered a continuous business entity because it was
operated in substantially the same manner before and after the change
in ownership.
In Final Results of Redetermination Pursuant to Court Remand: GTS
Industries S.A. v. United States, No. 00-03-00118 (December 22, 2000)
and Final Results of Redetermination Pursuant to Court Remand:
Allegheny-Ludlum Corp., et al v. United States, No. 99-09-00566
(December 20, 2000), the Department determined that pre-sale Usinor is
the same person as respondent Usinor. The following summarizes the
analysis performed in these remands, which continues to hold true for
this investigation.
Usinor's Privatization
Up until the time of Usinor's privatization, Usinor was owned
(directly or indirectly) by the GOF. Usinor was privatized beginning in
July 1995, when the GOF and Clindus offered the vast majority of their
shares in the company for sale. Clindus was a subsidiary of Credit
Lyonnais, which at that time was controlled by the GOF. After the
privatization and, in particular, by the end of calendar year 1997,
82.28 percent of Usinor's shares were held by private shareholders who
could trade them freely. Usinor's employees owned 5.16 percent of
Usinor's shares; Clindus, 2.5 percent; and, the GOF, 0.93 percent. The
remaining 14.29 percent of Usinor's shares were held by the so-called
``Stable Shareholders.''
In analyzing whether the producer of merchandise subject to this
investigation is the same business entity as pre-privatization Usinor,
we have examined whether Usinor continued the same general business
operations, retained production facilities, assets and liabilities, and
retained the personnel of the pre-privatization Usinor. Based on our
analysis, we have concluded that the privatized Usinor is, for all
intents and purposes, the same ``person'' as the GOF-owned steel
producer of the same name which existed prior to the privatization.
Consequently, the subsidies bestowed on Usinor prior to its 1995
privatization are attributable to respondent Usinor, and continue to
benefit Usinor during the POI.
1. Continuity of General Business Operations
Usinor produced the same products and remained the same corporation
at least since the late 1980s. In 1987, Usinor became the holding
company for the French steel groups, Usinor and Sacilor (the GOF had
majority ownership of both Usinor and Sacilor since 1981). Usinor's
principal businesses covered flat products, stainless steel and alloys,
and specialty products. In 1994, these three product groups were
produced by three subsidiaries: Sollac, Ugine and Aster (respectively).
This same structure continued after Usinor's privatization in 1995.
Usinor's organizational chart during the period of investigation shows
the same three major products being produced by the same three
subsidiaries. In 1994 (prior to the privatization), flat products
contributed 55 percent of consolidated sales, while stainless and
specialty products contributed 20 and 18 percent respectively. In the
years following privatization (1995, 1996 and 1997), flat carbon steels
continued to contribute 49-53 percent of Usinor's consolidated net
sales, while stainless and alloy, and specialty steel accounted for 23-
25 percent, and 19-21 percent, respectively.
We have also examined whether post-privatization Usinor held itself
out as the continuation of the previous enterprise (e.g., did it retain
the same name). In this instance, Usinor retained its same name and
there is no indication that the privatized company held itself out as
anything other than a continuation of pre-privatization Usinor.
The continuity of Usinor's business operations is also reflected in
Usinor's customer base. Prior to privatization, the automobile industry
was a principal purchaser of Usinor's output, accounting for
approximately 30 percent of Usinor's sales in 1994. In 1997, the
automobile industry was still Usinor's major customer (36 percent of
Usinor's sales). The construction industry was the second largest
purchaser in both years, accounting for 26 and 23 percent,
respectively.
2. Continuity of Production Facilities
Neither product lines nor production capacity changed as a result
of the privatization, except those changes that occurred in an ongoing
manner in the ordinary course of business. No facilities or production
lines were added or eliminated specifically as a result of the sale. As
is clear from a comparison of the Prospectus for the 1995 privatization
and Usinor's 1997 Annual Report, steel production facilities have
remained intact. The company continued to focus on an ``all steel''
strategy, engaging in all aspects of the steel production process and
produces a wide variety of steel products. Finally, Usinor's steel
production facilities did not change their physical locations.
3. Continuity of Assets and Liabilities
Usinor was sold intact, with all of its assets and liabilities.
While the GOF continued to own a small percentage of Usinor's shares,
there is no indication that it retained any of Usinor's assets or
liabilities.
4. Retention of Personnel
Usinor's Articles of Incorporation changed as a result of the
privatization, and the new Articles of Incorporation specified new
procedures for electing the Board of Directors. New directors were
elected to the Board under the new procedures. However, Usinor's
Chairman and Chief Executive Officer remained the same before and after
the privatization. Similarly, Usinor's workforce did not change.
Therefore, based on the facts and our analysis of a variety of
relevant factors, once privatized, Usinor continued to operate, for all
intents and purposes, as the same ``person'' that existed prior to the
privatization and, thus, the pre-privatization subsidies continued to
benefit Usinor even under private ownership.
Use of Facts Available
Sections 776(a)(2)(A) and (B) of the Act require the use of facts
available when an interested party withholds information requested by
the Department, or when an interested party fails to provide
information required in a timely manner and in the format requested. In
selecting from among facts available, section 776(b) of the Act
provides that the Department may use an inference adverse to the
interests of a party if the Department determines that the party has
failed to cooperate to the best of its ability. Such adverse inference
may include reliance on information derived from: (1) The petition; (2)
a final determination in a countervailing duty or an antidumping duty
investigation; (3) any previous administrative review, new shipper
review, expedited antidumping review, section 753 review, or section
762 review; or (4) any other information placed on the record. See
Section 776(b) of the Act; see also, 19 CFR 351.308(a), (b), and (c).
Section 782(d) and 782(e) require the Department to inform a
respondent if
[[Page 9665]]
there are deficiencies in its responses and allow it a reasonable time
to correct these deficiencies before the Department applies facts
available. Even if the information provided is deficient, if it is
usable without undue difficulty, timely, verifiable, can serve as a
reliable basis for reaching our determination, and the party has
cooperated to the best of its ability in providing responses to the
Department's questionnaires, section 782(e) directs the Department to
not decline consideration of the deficient submissions.
In this case, the GOF did not provide the information altogether
for the Investment/Operating Subsidies, instead answering our question
by stating ``this question is not readily answerable given the
multiplicity of programs involved.'' See GOF Questionnaire Response,
dated December 21, 2001, at II-13. Moreover, in previous proceedings
where this same program was investigated, the GOF also failed to
provide the same requested information in response to the same
question, providing similar answers. See Final Affirmative
Countervailing Duty Determination: Certain Cut-to-Length Carbon-Quality
Steel Plate from France, 64 FR 73277, 73282 (December 29, 1999)
(``French Plate'') and Final Affirmative Countervailing Duty
Determination: Stainless Steel Sheet and Strip from France, 64 FR
30774, 30779 (June 8, 1999) (``French Stainless''). The relevant pages
of the questionnaire responses in those investigations have been placed
on the record of this investigation. See Memorandum to File,
``Miscellaneous Information'' at Attachment 1 (``Miscellaneous
Information Memo''). Thus, the GOF was made aware of the specific
information that the Department needed for its analysis on several
occasions, yet consistently failed to provide sufficient responses.
Thus, pursuant to 782(d) and (e), the Department was left with no
alternative but to apply facts available.
The GOF never stated why it was not able to provide the information
requested, just that the answers were not ``readily answerable.''
Furthermore, the GOF never requested an extension of time from the
Department in which it could follow up with more extensive research and
retrieve the information requested. Instead, the GOF basically informed
the Department that because the information was not readily answerable,
it would not answer our request. Furthermore, the GOF stated that it
would provide further documentation at verification, but the
Department's regulations state that we do not accept new information at
verification. 19 CFR 351.301)(b)(1). Based on the GOF's responses and
all of the information available on the record, we, therefore, do not
believe the GOF responded to the best of its ability to our
questionnaire. Because the GOF did not provide the distribution of
benefits for the investment/operating subsidies, the Department is
unable to determine the specificity of this program. We therefore find,
pursuant to sections 776(a) and (b) of the Act, that the use of adverse
facts available in this case is necessary, and subject to this analysis
find that the relevant investment/operating subsidy programs were de
facto specific.
Subsidies Valuation Information
Allocation Period
Pursuant to 19 CFR 351.524(b), non-recurring subsidies are
allocated over a period corresponding to the average useful life
(``AUL'') of the renewable physical assets used to produce the subject
merchandise. Section 351.524(d)(2) of the regulations creates a
rebuttable presumption that the AUL will be taken from the U.S.
Internal Revenue Service's 1977 Class Life Asset Depreciation Range
System (``the IRS Tables''). For certain cold-rolled carbon steel flat
products, the IRS Tables prescribe an AUL of 15 years.
In order to rebut the presumption in favor of the IRS tables, the
challenging party must show that the IRS tables do not reasonably
reflect the company-specific AUL or the country-wide AUL for the
industry in question, and that the difference between the company-
specific or country-wide AUL and the IRS tables is significant. 19 CFR
351.524(d)(2)(i). For this difference to be considered significant, it
must be one year or greater. 19 CFR 351.524(d)(2)(ii).
In this proceeding, Usinor has calculated a company-specific AUL of
12 years. We note, however, that the one allocable subsidy received by
Usinor, FIS Bonds, has previously been allocated over a company-
specific AUL of 14 years. The 14-year AUL was calculated in a remand
determination involving the Final Affirmative Countervailing Duty
Determination: Certain Steel Products from France, 58 FR 37304 (July 9,
1993) (``French Certain Steel'') and was subsequently used to allocate
this same subsidy in French Plate and French Stainless. Because the 14-
year AUL was calculated using company-specific information more
contemporaneous with the bestowal of the subsidy in question, we have
continued to use the 14-year AUL to allocate the benefits of the FIS
bonds in this proceeding. See French Plate, 64 FR at 73293.
For non-recurring subsidies to Usinor, we applied the ``0.5 percent
expense test'' described in 19 CFR 351.524(b)(2). Under this test, we
compare the amount of subsidies approved under a given program in a
particular year to sales (total or export, as appropriate) in that
year. If the amount of subsidies is less than 0.5 percent of sales, the
benefits are allocated to the year of receipt rather than being
allocated over the AUL period.
Equityworthiness and Creditworthiness
In French Certain Steel, we found Usinor to be unequityworthy from
1986 through 1988 and uncreditworthy from 1982 through 1988. No new
information has been presented in this investigation to warrant a
reconsideration of these findings. Therefore, based upon these previous
findings of unequityworthiness and uncreditworthiness, in this
investigation, we continue to find Usinor unequityworthy and
uncreditworthy from 1987 through 1988, the years relevant to this
investigation.
Benchmarks for Loans and Discount Rates
As discussed above, we have determined that Usinor was
uncreditworthy in 1988, the only year in which it received a
countervailable subsidy which is being allocated over time.
In accordance with 19 CFR 351.524(d)(3)(ii), the discount rate for
companies considered uncreditworthy is the rate described in 19 CFR
351.505(a)(3)(iii). To calculate that rate, the Department must specify
values for four variables: (1) The probability of default by an
uncreditworthy company; (2) the probability of default by a
creditworthy company; (3) the long-term interest rate for creditworthy
borrowers; and (4) the term of the debt.
For the probability of default by an uncreditworthy company, we
have used the average cumulative default rates reported for the Caa-to
C-rated category of companies as published in Moody's Investors
Service, ``Historical Default Rates of Corporate Bond Issuers, 1920-
1997'' (February 1998). For the probability of default by a
creditworthy company, we used the cumulative default rates for
investment grade bonds as published in Moody's Investor Services:
``Statistical Tables of Default Rates and Recovery Rates'' (February
1998). See Miscellaneous Information Memo at Attachment 2. For the
commercial interest rate charged to creditworthy borrowers, we used the
average of the following long-term interest rates: medium-term credit
to
[[Page 9666]]
enterprises, equipment loan rates as published by the OECD, cost of
credit rates published in the Bulletin of Banque de France, and private
sector bond rates as published by the International Monetary Fund. See
Miscellaneous Information Memo at Attachment 3. For the term of the
debt, we used the AUL period for Usinor, as the equity benefits are
being allocated over that period.
To measure the benefit from reimbursable advances received by
Usinor, we relied on the average, short-term interest rate in France as
reported in the International Financial Statistics, as published by the
International Monetary Fund (See Miscellaneous Information Memo at
Attachment 4). Usinor did not report a company-specific short term
interest rate.
I. Programs Preliminarily Determined to Be Countervailable
A. FIS Bonds
The 1981 Corrected Finance Law granted Usinor the authority to
issue convertible bonds. In 1983, the Fonds d'Intervention Siderurgique
(``FIS''), or steel intervention fund, was created to implement that
authority. In 1983, 1984, and 1985, Usinor issued convertible bonds to
the FIS, which in turn, with the GOF's guarantee, floated the bonds to
the public and to institutional investors. These bonds were converted
to common stock in 1986 and 1988.
In several previous cases, the Department has treated these
conversions of Usinor's FIS bonds into equity as countervailable equity
infusions. See French Certain Steel, 58 FR at 37307; French Plate, 64
FR at 73282; French Stainless, 64 FR at 30779; and Final Affirmative
Countervailing Duty Determinations: Certain Hot Rolled Lead and Bismuth
Carbon Steel Products From France, 58 FR 6221, 6224 (January 27, 1997).
These equity infusions were limited to Usinor and were, therefore,
specific within the meaning of section 771(5A)(D)(i) of the Act. Also,
these equity infusions provided a financial contribution to Usinor
within the meaning of section 771(5)(D)(i) of the Act.
No new information or evidence of changed circumstances has been
submitted in this proceeding to warrant a reconsideration of our past
findings. Therefore, we determine that a countervailable benefit exists
in the amount of the equity infusions in accordance with section
771(5)(E)(i) of the Act. In this investigation, because the 1986
conversion has already been fully allocated over the AUL prior to the
POI, only the 1988 equity infusions continue to provide a benefit in
the POI.
We have treated the 1988 equity infusion as a non-recurring subsidy
pursuant to 19 CFR 351.507(c). Because Usinor was uncreditworthy in
1988 (see section above on ``Subsidies Valuation Information:
Equityworthiness and Creditworthiness''), we used an uncreditworthy
discount rate to allocate the benefit of the equity infusion.
In French Plate, we attributed separately to Usinor and GTS
Industries S.A. (``GTS'') their relative portions of the benefits from
the equity infusion. 64 FR at 73282. We have continued to do so in this
proceeding. We note, however, that the amount attributed to the
respective companies differs from the amounts in French Plate. This is
because of the revisions to the Department's change-in-ownership
methodology since the French Plate determination. To calculate the
benefit attributable to GTS, we first divided GTS's sales in 1995 (the
year prior to which Usinor ownership fell below 50 percent) by Usinor's
consolidated sales of French produced merchandise in 1995. We then
multiplied this ratio by Usinor's percentage ownership in GTS in 1996.
The resulting percentage was multiplied by the total 1988 equity
infusion to determine the benefit to GTS. The remaining amount of the
equity infusion was attributed to Usinor.
Dividing the allocated benefit to Usinor in the POI by Usinor's
total sales of French-produced merchandise during the POI, we
preliminarily determine Usinor's net subsidy rate for this program to
be 1.13 percent ad valorem.
B. Investment/Operating Subsidies
During the period 1987 through the POI, Usinor received a variety
of small investment and operating subsidies from various GOF agencies
and from the European Coal and Steel Community (``ECSC''). These
subsidies were provided to Usinor for research and development,
projects to reduce work-related illnesses and accidents, projects to
combat water pollution, etc. The subsidies are classified as
investment, equipment, or operating subsidies in the company's
accounts, depending on how the funds are used.
In French Plate and French Stainless, the Department determined
that the funding provided to Usinor by the water boards (les agences de
l'eau) and certain work/training grants were not countervailable. See
64 FR at 73282; 64 FR at 30779 and 30782. Therefore, consistent with
these previous cases, we have not investigated these programs in this
proceeding.
For the remaining programs, the GOF did not answer our questions
regarding the distribution of funds, stating instead that, in the GOF's
view, these ``question[s are] not readily answerable given the
multiplicity of programs involved.'' As noted earlier, the GOF never
why it would not be possible to provide the requested information. It
also never asked the Department for an extension of time in which it
could successfully research and retrieve the requested information.
Instead, the GOF basically informed the Department that because the
information was not ``readily answerable,'' it would not answer our
request. We, therefore, do not believe that the GOF acted to the best
of its ability when it refused to provide the requested information.
Accordingly, the Department has drawn an adverse inference (as done
in French Plate, 64 FR at 73282 and French Stainless, 64 FR at 30779)
by concluding that the investment and operating subsidies (except those
provided by the water boards and certain work/training contracts) are
specific within the meaning of section 771(5A)(D) of the Act. See
section above on ``Use of Facts Available.''
We also determine that the investment and operating subsidies
provide a financial contribution, as described in section 771(5)(D)(i)
of the Act, and a benefit as described in 771(5)(E)(i). Accordingly, we
find this program to be countervailable.
The investment and operating subsidies provided in years prior to
1999 were already determined to be less than 0.5 percent of Usinor's
sales of French-produced merchandise in the relevant year and expensed
in the relevant year of receipt (see French Plate, 64 FR at 73283 and
French Stainless, 64 FR at 30780). Therefore, because it is not
possible for these subsidies to benefit Usinor in the POI, we have not
further examined them. The amount of investment and operating subsidies
in 1999 was also less than 0.5 percent of Usinor's sales of French-
produced merchandise in 1999. Therefore, this benefit was also expensed
in the years of receipt (1999), in accordance with 19 CFR
351.524(b)(2).
To calculate the benefit received during the POI, we divided the
subsidies received by Usinor in the POI by Usinor's total sales of
French-produced merchandise during the POI. Accordingly, we
preliminarily determine Usinor's net subsidy rate for this program to
be 0.19 percent ad valorem.
[[Page 9667]]
II. Programs Preliminarily Determined To Be Not Countervailable
A. Shareholder Advances After 1986
According to Usinor's 1991 financial statements, the funds in the
shareholder advances account were the funds provided by the GOF under
the Societes de Developpement Industriel (``SODI'') program. Because we
preliminarily find the funds received under the SODI program to not be
countervailable (see discussion below), these advances are likewise not
countervailable. However, at verification, we intend to examine the
source of the funds in the shareholder advances account to determine if
these funds are indeed SODI funds.
B. GOF Advances for SODIs
In French Certain Steel, we investigated advances made to SODIs
prior to 1991 and found them not countervailable. 58 FR at 37310-11. In
French Plate, we initiated an investigation of SODI advances after
1991. 64 FR at 73295. The information submitted by the petitioners in
French Plate in support of investigating the advances to SODIs after
1991 was 1) an apparent discrepancy between the funding received from
the GOF by Usinor and the funds ultimately loaned out by Usinor to the
SODIs, and 2) the notification of the SODI program by the EU to the
WTO. In French Plate, we did not make a final determination as to this
program's countervailability because the allegation was not initiated
upon in time to solicit adequate, verified information from all of the
necessary respondents. Id.
In response to our questionnaires in this proceeding, Usinor has
provided the amounts it received from the GOF and the amounts Usinor
loaned to the SODIs. While the amounts received from the GOF do not
match exactly the amounts loaned out by Usinor in any given year, over
the entire period in which Usinor was receiving funds from the GOF, it
did loan out all the funds it received from the GOF. Therefore, after
1991, the program continued to operate as it did prior to 1991.
Consequently, for the reasons articulated in French Certain Steel, we
preliminarily determine that the post-1991 SODI advances do not confer
a countervailable subsidy on Usinor.
Moreover, a notification of a program to the WTO is not, in and of
itself, a sufficient basis to find the program countervailable. In this
respect, we note, but do not rely on, Article 25.7 of the Agreement on
Subsidies and Countervailing Measures, which states that notification
of a measure does not prejudge either the measure's legal status or the
nature of the measure. Thus, while notification of a program to the WTO
may have warranted investigation of the measure, based on our
investigation of the program, we have found that it is not a
countervailable subsidy.
In the petition, the petitioners have alleged that the GOF funds
were compensation for SODI expenses, and raised questions about the
recording of SODI funds in Usinor's accounting records, whether and how
repayments of loaned funds by the SODIs to Usinor were made, whether
and how repayments of SODI advances by Usinor to the GOF were made, and
Usinor's handling of any surplus funds. We intend to seek further
information regarding these issues for our final determination.
C. Funding for Electric Arc Furnaces
In 1996, the GOF agreed to provide assistance in the form of
reimbursable advances to support Usinor's research and development
efforts regarding electric arc furnaces. The first disbursal of funds
occurred on July 22, 1998, and the second on August 31, 1999.
We preliminarily find that this program provides a financial
contribution because it is a direct transfer of funds, as described in
section 771(5)(D)(i) of the Act. Regarding specificity, the GOF stated
that, in 1997, FF 2 billion of assistance was provided to 190 projects
under the general Grands Projects Innovants (``GPI'') program, and that
only three of the 39 projects selected in 1997 were in the raw
materials sector (the sector that includes steel).
We preliminarily determine that the information reported by the GOF
does not provide a basis for finding benefits under this program to be
non-specific. First, Usinor's project was approved in 1996. However,
the data provided by the GOF addresses 1997. Second, there is no
information regarding the amount of benefits received by the companies
in the raw material sector. Stating that it does not collect such
information, the GOF did not provide the Department with any
information indicating the actual distribution of benefits by company
or by industry.
Regarding the benefit provided by this assistance, Usinor states
that the amount of the advances is so small that any benefit would be
virtually immeasurable.
Based upon our review of the amounts, we agree with Usinor that if
we treated the disbursements as grants in the year they were received,
the benefits would be expensed prior to the POI. Alternatively, if we
treated the reimbursable advances as short-term, zero interest
contingent liabilities, consistent with 19 CFR 351.505(d)(i), the
benefit to Usinor in the POI is 0.00 percent ad valorem. Therefore, we
find no countervailable subsidy under this program.
This finding of non-countervailability is based upon the amounts
received by Usinor to date under this program. Should Usinor receive
additional funding under this program in the future, we will re-examine
the program's countervailability at that time.
D. Funding for Myosotis Project
Since 1988, Usinor has been developing a continuous thin-strip
casting process, called ``Myosotis,'' in a joint venture with the
German steelmaker, Thyssen. The Myosotis project is intended to
eliminate the separate hot-rolling stage of Usinor's steelmaking
process by transforming liquid metal directly into a coil between two
to five millimeters thick.
To assist in this project, the GOF, through the Ministry of
Industry and Regional Planning and L'Agence pour la Maitrise de
L'energie (``AFME''), entered into three agreements with Usinor (in
1989) and Ugine (in 1991 and 1995). The first agreement, dated December
27, 1989, provided three payments, one in 1989, one in 1991, and one in
1993. The second agreement, between Ugine and the AFME, covered the
cost of some equipment for the project. This second agreement resulted
in two disbursements to Ugine from the AFME, one in 1991 and one in
1992. The third agreement, with Ugine, dated July 3, 1995, provided
interest-free reimbursable advances for the final two-year stage of the
project, with the goal of casting molten steel from ladles to produce
thin strips. The first reimbursable advance under this agreement was
made in 1997. Repayment of one-third of the reimbursable advance was
due July 31, 1999. The remaining two-thirds are due for repayment on
July 31, 2001.
In French Plate and French Stainless, we found these grants and
advances to be countervailable. 64 FR at 73283 and 64 FR at 30780.
However, the grants under the 1989 and 1991 agreements were found to be
less than 0.5 percent of sales in the year of receipt and, therefore,
expensed in the year of receipt. Id. Therefore, because it is not
possible for these grants to benefit Usinor in the POI, we have not
examined them further. The 1997 advance, however, was treated as a
short-term interest-free loan in French Plate and French Stainless. Id.
[[Page 9668]]
The 1995 agreement for the reimbursable advance was made between
the GOF and Ugine (a Usinor subsidiary which does not produce subject
merchandise). However, in its supplemental questionnaire response,
Usinor acknowledged that the technology being developed with these
funds would also benefit carbon steel flat products (which includes
subject merchandise). See Usinor Supplemental Questionnaire Response,
dated January 16, 2002, at 12. Consequently, we have analyzed these
reimbursable grants in this investigation.
We preliminarily find the reimbursable advance is a financial
contribution, as described in section 771(5)(D)(i) of the Act.
Regarding specificity, for the reasons described above regarding
assistance for Usinor's development of an electric arc furnace, the
information provided by the GOF does not provide a basis for finding
this program non-specific. Regarding the benefit of the Myosotis
assistance, Usinor has argued that the amount of the reimbursable
advances is so small that any possible benefit would be immeasurable.
We agree with Usinor. If we treat the entire amount of the
reimbursable advance received in 1997 as a grant in that year, the
benefit would be less than 0.5% of total sales in that year, and would,
thus, be expensed prior to the POI.
Alternatively, we could measure the benefit by treating a portion
of the reimbursable advance as a grant and the remainder as a zero-
interest contingent liability. According to Article 7a of the Myosotis
Agreement (see GOF December 21, 2001 Questionnaire Response, at Exhibit
10, p. 5), and as stated above, Usinor was required to reimburse a
portion of the advance on July 31, 1999 and the remainder on July 31,
2001. Article 7a additionally states that ``[t]he portion of the
advance which may not have been reimbursed pursuant to [this agreement]
shall acquire the status of a subsidy. [T]he Beneficiary shall retain
possession of this amount.'' Usinor has stated that it made only one
payment thus far, in September 2001 (after the POI).
In light of this, the amount that was due on July 31, 1999, could
be viewed as a grant received at the time the repayment was due.
Dividing this grant by Usinor's sales in 1999, the benefit is less than
0.5 percent of sales in 1999, and, hence, would be expensed prior to
the POI. The amount that was due on July 31, 2001, however, pursuant to
19 CFR 351.505(d)(1), and consistent with French Plate, is being
treated as a short-term, zero-interest contingent liability loan.
Treating the portion to be reimbursed on July 31, 2001, as a zero-
interest contingent liability, we multiplied the amount outstanding by
the short-term interest rate described in the section above ``Subsidies
Valuation Information: Benchmarks for Loans and Discount Rates.'' Since
Usinor would have been required to make an interest payment on a
comparable commercial loan during the POI, we calculated the benefit as
the amount that would have been due during the POI. Dividing these
interest savings by Usinor's sales of French-produced merchandise
during the POI, the benefit to Usinor in the POI is 0.00 percent ad
valorem. Therefore, we find no countervailable subsidy under this
program.
This finding of non-countervailability is based upon the amounts
received by Usinor to date under this program. Should Usinor receive
additional funding under this program in the future, we will re-examine
the program's countervailability at that time.
E. ECSC Article 56 Funding
According to the petitioners, ECSC Article 56 funds are targeted to
promote employment and economic revitalization in regions of declining
steel activity. Both steel-related and non-steel-related industries are
eligible for assistance. Conversion loans are provided at reduced rates
of interest and may be granted directly to companies or as global loans
to financial institutions which then issue sub-loans to individual
companies. Borrowers may also qualify for interest subsidies on all or
part of a conversion loan, contingent upon the geographic location of
the recipient or on the recipient agreeing that some percentage of the
new jobs created will be reserved primarily for unemployed steel
workers.
The EC states that Usinor did not benefit from this program because
it merely acts as a conduit in advancing ECSC Article 56 funds to SODIs
which, in turn, re-loan the funds to small- and medium-sized
businesses.
We preliminarily find that, because Usinor was acting only as a
conduit for Article 56(2)(a) funds for the benefit of third-party
companies, Usinor receives no benefit under this program and, hence, no
countervailable subsidy.
However, it is not clear at this stage how Usinor handles the
repayment of loan funds from loan recipients (i.e., what are the
repayment terms, what does Usinor do with the repaid funds, and what
are the repayment terms with the government). We intend to seek further
information regarding these issues for our final determination.
F. 1995 Capital Increase
The petitioners have alleged that, by authorizing a capital
increase of FF 5 billion at the time of Usinor's 1995 privatization,
the GOF conferred a benefit upon Usinor in the amount of the increased
capital. Specifically, they argue that the GOF ``directed or
entrusted'' private entities to infuse capital into Usinor.
As an initial matter, we note that the arguments set forth by the
petitioners may constitute a subsidy allegation made in untimely
manner. According to 19 CFR 351.301(d)(4)(i)(A) of the Department's
regulations, a subsidy allegation in an investigation is due no later
than 40 days before the scheduled date of the preliminary
determination. The record shows that the first instance on which the
petitioners presented this particular argument was a submission dated
February 19, 2002, merely seven days before the scheduled date of the
preliminary determination (February 25, 2001). We note that their
allegation does not rely on any new information developed in the course
of this investigation. Nor did the alleged changes in the Department's
practice occur after the filing of the petition. Nevertheless, in light
of the obligation under section 775 of the Act to investigate potential
subsidies discovered in the course of an investigation, we have
reviewed the evidence on the record of this proceeding regarding the
new shares issued by Usinor in connection with its privatization.
The capital increase identified by the petitioners was previously
examined in French Stainless and French Plate. In those proceedings, we
determined that the GOF did not forego any revenue by authorizing this
capital increase. 64 FR at 30787. We also stated that we did not reach
the issue of whether private investors were ``entrusted'' to provide a
subsidy because we found that no subsidy existed. Id. Therefore, we
found that no countervailable subsidy was conferred by this capital
increase.
The petitioners in this proceeding have asked the Department to
analyze this capital increase again based on their allegation that
Usinor was unequityworthy at the time of the capital increase. The
petitioners also point to developments in the Department's practice
since French Stainless and French Plate, the Department's treatment of
committed investments, and 19 CFR 351.507(a)(4)(i) and (ii).
[[Page 9669]]
Regarding the petitioners' claim that Usinor was unequityworthy in
1995, the petitioners have cited the company's poor performance in the
years proceeding the privatization. Under 19 CFR 351.507(a)(4)(i)(B),
we consider past indicators of performance, but we also consider, under
19 CFR 351.507(a)(4)(i)(D), equity investments by private investors.
Given that 75 percent of Usinor's shares previously owned by the
government were purchased by private investors in the 1995
privatization, we believe that investment in the company was consistent
with the practice of private investors (see section 771(5)(E)(i) of the
Act).
Regarding the petitioners' reference to changes in the Department's
practice, we do not believe the two precedents cited by the petitioners
(Certain Cut-to-Length Carbon Steel Plate From Mexico: Final Results of
Countervailing Duty Administrative Review, 66 FR 14549 (March 13, 2001)
and Final Affirmative Countervailing Duty Determination: Certain Hot-
Rolled Carbon Steel Flat Products from Argentina, 66 FR 37007 (July 16,
2001)) lead us to view this transaction differently. As noted above, we
found no revenue forgone as a result of this capital increase. Also,
because Usinor was equityworthy at the time, private investors have not
been entrusted or directed to provide a subsidy. Finally, 19 CFR
351.507(a)(4)(ii) addresses situations where a government did not
preform a study prior to an investment. In this instance, the investors
are private entities.
Based on the above, we preliminarily do not find this allegation to
be a basis for finding a subsidy.
III. Programs Preliminarily Determined To Be Not Used
Based on the information provided in the responses, we determine
that neither Usinor nor its affiliated companies that produce subject
merchandise received benefits under the following programs during the
POI:
A. Repayable Grant to Sollac for ``Pre-Coating'' Technology
Usinor claims that, while Sollac was approved for funding under
this program, no funds have yet been disbursed. Therefore, there is no
benefit during the POI.
B. Tax Subsidies Under Article 39
C. ESF Grants
While the Department normally treats benefits from worker training
programs to be recurring (see 19 CFR 351.524(c)(1)), we have found in
several cases that European Social Fund (``ESF'') grants relate to
specific, individual projects that require separate approval. See,
e.g., French Stainless at 30781.
Usinor records ESF benefits as investment/operating subsidies.
Because we find, for 1999, that these subsidies were less than 0.5
percent of Usinor's total sales of French produced merchandise in 1999,
any benefits in 1999 would have been expensed in 1999. In addition, for
the POI, Usinor claims it did not receive any benefits under the ESF
program.
D. ECSC Article 54 Loans
E. ERDF Funding
F. Funding Under Resider and Resider II
Verification
In accordance with section 782(i)(1) of the Act, we will verify the
information submitted by the respondents prior to making our final
determination.
Suspension of Liquidation
In accordance with section 703(d)(1)(A)(i) of the Act, we
calculated an individual rate for each manufacturer of the subject
merchandise. We preliminarily determine the total estimated net
countervailable subsidy rates to be:
------------------------------------------------------------------------
Net subsidy
Producer/Exporter rate
(percent)
------------------------------------------------------------------------
Usinor..................................................... 1.32
All Others................................................. 1.32
------------------------------------------------------------------------
In accordance with sections 777A(e)(2)(B) and 705(c)(5)(A), we have
set the ``all others'' rate as Usinor's rate, because it is the only
company which was individually investigated.
In accordance with section 703(d) of the Act, we are directing the
U.S. Customs Service to suspend liquidation of all entries of certain
cold-rolled carbon steel flat products from France for exports 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 above. This suspension will remain in effect
until further notice.
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 nonprivileged and nonproprietary information relating to this
investigation. We will allow the ITC access to all privileged and
business proprietary information in our files, provided the ITC
confirms 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.
In accordance with section 705(b)(2) of the Act, if our final
determination is affirmative, the ITC will make its final determination
within 45 days after the Department makes its final determination.
Public Comment
In accordance with 19 CFR 351.310, we will hold a public hearing,
if requested, to afford interested parties an opportunity to comment on
this preliminary determination. The hearing is tentatively scheduled to
be held 57 days from the date of publication of this preliminary
determination, at the U.S. Department of Commerce, 14th Street and
Constitution Avenue NW, Washington, DC 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
1870, 14th Street and Constitution Avenue, NW, Washington, DC 20230.
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. An
interested party may make an affirmative presentation only on arguments
included in that party's case brief and may make a rebuttal
presentation only on arguments included in that party's rebuttal brief.
Parties should confirm by telephone the time, date, and place of the
hearing 48 hours before the scheduled time.
In addition, six copies of the business proprietary version and six
copies of the nonproprietary version of the case briefs must be
submitted to the Assistant Secretary no later than 50 days from the
publication of this notice. As part of the case brief, parties are
encouraged to provide a summary of the arguments not to exceed five
pages and a table of statutes, regulations, and cases cited. Six copies
of the business proprietary version and six copies of the
nonproprietary version of the rebuttal briefs must be submitted to the
Assistant Secretary no later than 5 days after the filing of case
briefs. Written arguments should be submitted in accordance with 19 CFR
351.309 and
[[Page 9670]]
will be considered if received within the time limits specified above.
This determination is published pursuant to sections 703(f) and
777(i) of the Act.
Dated: February 25, 2002.
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 02-5105 Filed 3-1-02; 8:45 am]
BILLING CODE 3510-DS-P