[Federal Register: May 10, 2002 (Volume 67, Number 91)]
[Page 31774-31780]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
International Trade Administration
[C-427-815]
Stainless Steel Sheet and Strip in Coils from France: Preliminary
Results of Countervailing Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Preliminary Results of Countervailing Duty
Administrative Review.
-----------------------------------------------------------------------
SUMMARY: The Department of Commerce is conducting an administrative
review of the countervailing duty order on stainless steel sheet and
strip in coils from France for the period January 1, 2000, through
December 31, 2000. We have preliminarily determined that Ugine SA, the
sole producer/exporter covered by this review, has received
countervailable subsidies during the period of review.
Interested parties are invited to comment on these preliminary
results.
EFFECTIVE DATE: May 10, 2002.
FOR FURTHER INFORMATION CONTACT: Suresh Maniam, Group I, Office 1,
Import Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230; telephone (202) 482-
0176.
SUPPLEMENTARY INFORMATION:
Applicable Statute and Regulations
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 (``URAA'') effective January 1, 1995
(``the Act''). Unless otherwise indicated, all citations to the
Department's regulations are to the regulations codified at 19 CFR Part
351 (2001).
Case History
The Department published the countervailing duty order on stainless
steel sheet and strip in coils from France on August 6, 1999 (Amended
Final Determination: Stainless Steel Sheet and Strip in Coils From the
Republic of Korea; and Notice of Countervailing Duty Orders: Stainless
Steel Sheet and Strip in Coils from France, Italy, and the Republic of
Korea, 64 FR 42923 (August 6, 1999)). On August 1, 2001, the Department
published a notice of ``Opportunity to Request Administrative Review''
of this countervailing duty order for calendar year 2000 (Notice of
Opportunity to Request Administrative Review of Antidumping or
Countervailing Duty Order, Finding, or Suspended Investigation, 66 FR
39729). We received a review request from Ugine SA (``Ugine'') and we
initiated this review on October 1, 2001 (Initiation of Antidumping and
Countervailing Duty Administrative Reviews and Requests for Revocation
in Part, 66 FR 49924 (October 1, 2001)).
On October 26, 2001, we issued countervailing duty questionnaires
to the Commission of the European Union (``EC''), the Government of
France (``GOF''), and Ugine. We received responses to our
questionnaires on December 20, 2001 (EC), and January 8, 2002 (GOF and
Ugine). On February 25, 2002, the petitioners, Allegheny Ludlum
Corporation, AK Steel, Inc., North American Stainless, United
Steelworkers of America, AFL-CIO/CLC, Butler Armco Independent Union,
and Zanesville Armco Independent Organization, filed comments on the
responses received from the GOF and Ugine. We issued a supplemental
questionnaire to Ugine on March 5, 2002, and received Ugine's responses
on April 2, and April 22, 2002.
Scope of the Review
The products covered by this countervailing duty order are certain
stainless steel sheet and strip in coils. Stainless steel is an alloy
steel containing, by weight, 1.2 percent or less of carbon and 10.5
percent or more of chromium, with or without other elements. The
subject sheet and strip is a flat-rolled product in coils that is
greater than 9.5 mm in width and less than 4.75 mm in thickness, and
that is annealed or otherwise heat treated and pickled or otherwise
descaled. The subject sheet and strip may also be further processed
(e.g., cold-rolled, polished, aluminized, coated, etc.) provided that
it maintains the specific dimensions of sheet and strip following such
processing.
The merchandise covered by this order is currently classifiable in
the Harmonized Tariff Schedule of the United States (``HTSUS'') at the
following subheadings:
7219.13.00.30, 7219.13.00.50, 7219.13.00.70, 7219.13.00.80,
7219.14.00.30, 7219.14.00.65, 7219.14.00.90, 7219.32.00.05,
7219.32.00.20, 7219.32.00.25, 7219.32.00.35, 7219.32.00.36,
7219.32.00.38, 7219.32.00.42, 7219.32.00.44, 7219.33.00.05,
7219.33.00.20, 7219.33.00.25, 7219.33.00.35, 7219.33.00.36,
7219.33.00.38, 7219.33.00.42, 7219.33.00.44, 7219.34.00.05,
7219.34.00.20, 7219.34.00.25, 7219.34.00.30, 7219.34.00.35,
7219.35.00.05, 7219.35.00.15, 7219.35.00.30, 7219.35.00.35,
7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 7219.90.00.60,
7219.90.00.80, 7220.12.10.00, 7220.12.50.00, 7220.20.10.10,
7220.20.10.15, 7220.20.10.60, 7220.20.10.80, 7220.20.60.05,
7220.20.60.10, 7220.20.60.15, 7220.20.60.60, 7220.20.60.80,
7220.20.70.05, 7220.20.70.10, 7220.20.70.15, 7220.20.70.60,
7220.20.70.80, 7220.20.80.00, 7220.20.90.30, 7220.20.90.60,
7220.90.00.10, 7220.90.00.15, 7220.90.00.60, and 7220.90.00.80.
Although the HTSUS subheadings are provided for convenience and
customs purposes, the Department's written description of the
merchandise under investigation is dispositive.
Excluded from the scope of this order are the following: (1) sheet
and strip that is not annealed or otherwise heat treated and pickled or
otherwise descaled; (2) sheet and strip that is cut to length; (3)
plate (i.e., flat-rolled stainless steel products of a thickness of
4.75 mm or more); (4) flat wire (i.e., cold-rolled sections, with a
prepared edge, rectangular in shape, of a width of not more than 9.5
mm); and (5) razor blade steel. Razor blade steel is a flat-rolled
product of stainless steel, not further worked than cold-rolled (cold-
reduced), in coils, of a width of not more than 23 mm and a thickness
of 0.266 mm or less, containing, by weight, 12.5 to 14.5 percent
chromium, and certified at the time of entry to be used in the
manufacture of razor blades. See Chapter 72 of the HTSUS, ``Additional
U.S. Note'' 1(d).
Also excluded from the scope of this order are:
Flapper Valve Steel: Flapper valve steel is defined as stainless
steel strip in coils containing, by weight, between 0.37 and 0.43
percent carbon, between 1.15 and 1.35 percent molybdenum, and between
0.20 and 0.80 percent manganese. This steel also contains, by weight,
phosphorus of 0.025 percent or
[[Page 31775]]
less, silicon of between 0.20 and 0.50 percent, and sulfur of 0.020
percent or less. The product is manufactured by means of vacuum arc
remelting, with inclusion controls for sulphide of no more than 0.04
percent and for oxide of no more than 0.05 percent. Flapper valve steel
has a tensile strength of between 210 and 300 ksi, yield strength of
between 170 and 270 ksi, plus or minus 8 ksi, and a hardness (Hv) of
between 460 and 590. Flapper valve steel is most commonly used to
produce specialty flapper valves in compressors.
Suspension Foil: Suspension foil is a specialty steel product used
in the manufacture of suspension assemblies for computer disk drives.
Suspension foil is described as 302/304 grade or 202 grade stainless
steel of a thickness between 14 and 127 microns, with a thickness
tolerance of plus-or-minus 2.01 microns, and surface glossiness of 200
to 700 percent Gs. Suspension foil must be supplied in coil widths of
not more than 407 mm and with a mass of 225 kg or less. Roll marks may
only be visible on one side, with no scratches of measurable depth. The
material must exhibit residual stresses of 2 mm maximum deflection and
flatness of 1.6 mm over 685 mm length.
Certain Stainless Steel Foil for Automotive Catalytic Converters:
This stainless steel strip in coils is a specialty foil with a
thickness of between 20 and 110 microns used to produce a metallic
substrate with a honeycomb structure for use in automotive catalytic
converters. The steel contains, by weight, carbon of no more than 0.030
percent, silicon of no more than 1.0 percent, manganese of no more than
1.0 percent, chromium of between 19 and 22 percent, aluminum of no less
than 5.0 percent, phosphorus of no more than 0.045 percent, sulfur of
no more than 0.03 percent, lanthanum of less than 0.002 or greater than
0.05 percent, and total rare earth elements of more than 0.06 percent,
with the balance iron.
Permanent Magnet Iron-chromium-cobalt Alloy Stainless Strip: This
ductile stainless steel strip contains, by weight, 26 to 30 percent
chromium and 7 to 10 percent cobalt, with the remainder of iron, in
widths 228.6 mm or less, and a thickness between 0.127 and 1.270 mm. It
exhibits magnetic remanence between 9,000 and 12,000 gauss, and a
coercivity of between 50 and 300 oersteds. This product is most
commonly used in electronic sensors and is currently available under
proprietary trade names such as ``Arnokrome III.''\1\
---------------------------------------------------------------------------
\1\ ``Arnokrome III'' is a trademark of the Arnold Engineering
Company.
---------------------------------------------------------------------------
Certain Electrical Resistance Alloy Steel: This product is defined
as a non-magnetic stainless steel manufactured to American Society of
Testing and Materials (ASTM) specification B344 and containing, by
weight, 36 percent nickel, 18 percent chromium, and 46 percent iron,
and is most notable for its resistance to high-temperature corrosion.
It has a melting point of 1390 degrees Celsius and displays a creep
rupture limit of 4 kilograms per square millimeter at 1000 degrees
Celsius. This steel is most commonly used in the production of heating
ribbons for circuit breakers and industrial furnaces, and in rheostats
for railway locomotives. The product is currently available under
proprietary trade names such as ``Gilphy 36.''\2\
---------------------------------------------------------------------------
\2\ ``Gilphy 36'' is a trademark of Imphy, S.A.
---------------------------------------------------------------------------
Certain Martensitic Precipitation-hardenable Stainless Steel: This
high-strength, ductile stainless steel product is designated under the
Unified Numbering System (UNS) as S45500-grade steel, and contains, by
weight, 11 to 13 percent chromium and 7 to 10 percent nickel. Carbon,
manganese, silicon and molybdenum each comprise, by weight, 0.05
percent or less, with phosphorus and sulfur each comprising, by weight,
0.03 percent or less. This steel has copper, niobium, and titanium
added to achieve aging and will exhibit yield strengths as high as 1700
Mpa and ultimate tensile strengths as high as 1750 Mpa after aging,
with elongation percentages of 3 percent or less in 50 mm. It is
generally provided in thicknesses between 0.635 and 0.787 mm, and in
widths of 25.4 mm. This product is most commonly used in the
manufacture of television tubes and is currently available under
proprietary trade names such as ``Durphynox 17.''\3\
---------------------------------------------------------------------------
\3\ ``Durphynox 17''is a trademark of Imphy, S.A.
---------------------------------------------------------------------------
Three Specialty Stainless Steels Typically Used in Certain
Industrial Blades and Surgical and Medical Instruments: These include
stainless steel strip in coils used in the production of textile
cutting tools (e.g., carpet knives)\4\. This steel is similar to AISI
grade 420 but containing, by weight, 0.5 to 0.7 percent of molybdenum.
The steel also contains, by weight, carbon of between 1.0 and 1.1
percent, sulfur of 0.020 percent or less, and includes between 0.20 and
0.30 percent copper and between 0.20 and 0.50 percent cobalt. This
steel is sold under proprietary names such as ``GIN4 Mo.'' The second
excluded stainless steel strip in coils is similar to AISI 420-J2 and
contains, by weight, carbon of between 0.62 and 0.70 percent, silicon
of between 0.20 and 0.50 percent, manganese of between 0.45 and 0.80
percent, phosphorus of no more than 0.025 percent, and sulfur of no
more than 0.020 percent. This steel has a carbide density on average of
100 carbide particles per 100 square microns. An example of this
product is ``GIN5'' steel. The third specialty steel has a chemical
composition similar to AISI 420 F, with carbon of between 0.37 and 0.43
percent, molybdenum of between 1.15 and 1.35 percent, but lower
manganese of between 0.20 and 0.80 percent, phosphorus of no more than
0.025 percent, silicon of between 0.20 and 0.50 percent, and sulfur of
no more than 0.020 percent. This product is supplied with a hardness of
more than Hv 500 guaranteed after customer processing, and is supplied
as, for example, ``GIN6.''\5\
---------------------------------------------------------------------------
\4\ This list of uses is illustrative and provided for
descriptive purposes only.
\5\ ``GIN4 Mo,''``GIN5'' and ``GIN6'' are the proprietary grades
of Hitachi Metals America, Ltd.
---------------------------------------------------------------------------
Period of Review
The period of review (``POR'') for which we are measuring subsidies
is January 1, 2000, through December 31, 2000.
Attribution of Subsidies
Ugine has filed its response on behalf of Usinor and all of
Usinor's affiliates involved in the manufacture, production or
exportation of the subject merchandise. These affiliates are: Ugine SA,
Imphy Ugine Precision, Ugine France Service, Sollac Mediterrannee,
Usinor Packaging, Sollac Lorraine, Sollac Atlantique, CARLAM, G. Fer,
IRSID, and Usinor Stainless. Usinor holds a majority interest in all of
these companies. Therefore, in accordance with 19 CFR
351.525(b)(6)(iii), we have preliminarily attributed subsidies received
by these companies to the total sales by Usinor of French-produced
merchandise.
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\6\. 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
[[Page 31776]]
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. at 1364.
---------------------------------------------------------------------------
\6\ Final Affirmative Countervailing Duty Determination: Certain
Steel Products from Austria, 58 FR 37217, 37225 (July 9, 1993).
---------------------------------------------------------------------------
Pursuant to the CAFC's finding, the Department developed a new
change-in-ownership methodology, first announced in a remand
determination on December 4, 2000. This new methodology was also
applied in remand determinations resulting from remand orders in
Allegheny-Ludlum Corp., et al v. United States, No. 99-09-00566
(``Allegheny-Ludlum I'') and GTS Industries S.A. v. United States, No.
00-03-00118 (``GTS I''). (See Final Results of Redetermination Pursuant
to Court Remand: Allegheny-Ludlum Corp., et al v. United States, No.
99-09-00566 (December 20, 2000) and Final Results of Redetermination
Pursuant to Court Remand: GTS Industries S.A. v. United States, No. 00-
03-00118 (December 22, 2000).) In Allegheny-Ludlum I, the CAFC was
reviewing the final determination which gave rise to the countervailing
duty order covered by this review. In both of the cited remand
determinations, the Department examined the privatization of Usinor and
found that the pre-privatization subsidies continued to benefit subject
merchandise exported to the United States after Usinor's privatization.
Ugine argues that in Allegheny Ludlum Corp. v. United States, Slip
Op. 02-01 (Ct. Int'l Trade Jan. 4, 2002) (``Allegheny Ludlum II''), the
Court of International Trade (``CIT'') rejected as unlawful the change-
in-ownership test applied by the Department in the Allegheny Ludlum I
remand determination. We note, however, that the CIT has remanded this
issue to the Department again in Allegheny Ludlum II and that the
results of our redetermination have not yet been filed with the CIT.
Consequently, the CIT's ruling in Allegheny Ludlum II is not final.
Thus, we have continued to apply the same change-in-ownership
methodology that we employed in the Allegheny Ludlum I remand
determination in these preliminary results.
The first step under this 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 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.
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.'' According to Usinor's 2000 annual report, the
government-owned Electricite de France continues to own 3.6 percent of
Usinor's shares.
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 present-day Usinor and continue to
benefit the subject merchandise during the POR.
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 -2000), flat carbon steels continued to contribute
49 - 58 percent of Usinor's consolidated net sales. Sales of stainless
and alloy, and specialty steel accounted for 23 - 25 percent, and 19 -
21 percent, respectively, during the years 1995 - 1997. Since then,
sales of the stainless, alloy, and specialty steel have been combined
in Usinor's annual report and a separate category has been reported for
``processing and distribution.'' The combined sales of stainless, alloy
and specialty steel ranged from 21 - 28 percent of Usinor's
consolidated net sales over the period 1998 - 2000, while processing
and distribution ranged from 6 - 18 percent over the same period. In
[[Page 31777]]
1999, Usinor divested itself of its specialty steels business.
We have also examined whether post-privatization Usinor held itself
out as the continuation of the previous enterprise (e.g., by retaining
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 and 2000,
the automobile industry was still Usinor's major customer (36 percent
of Usinor's sales in 1997 and 38 percent in 2000). The construction
industry has continued as the second largest purchaser: 26 percent in
1994, 23 percent in 1997, and 15 percent in 2000.
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 has 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).
Sections 782(d) and 782(e) of the Act require the Department to
inform a respondent if 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, is timely, is
verifiable, can serve as a reliable basis for reaching our
determination, and if the party has cooperated to the best of its
ability in providing responses to the Department's questionnaires,
section 782(e) of the Act directs the Department not to decline to
consider deficient submissions.
In this proceeding, the GOF did not provide information regarding
the specificity of benefits under certain programs included under
Investment/Operating Subsidies reported by Usinor. Instead, the GOF
responded, ``this question is not readily answerable given the
multiplicity of programs involved. The GOF will undertake to provide
responsive information at verification.'' See GOF Questionnaire
Response, dated January 8, 2002, at II-9. Similarly, the GOF was asked
to provide this information in the investigation segment of this
proceeding and elected not to do so. (See Final Affirmative
Countervailing Duty Determination: Stainless Steel Sheet and Strip in
Coils from France, 64 FR 30774, 30779 (June 8, 1999) (``SSSS from
France'').) Thus, the GOF is aware of the specific information needed
by the Department and apparently possesses responsive information, but
has declined to provide it in response to our questionnaires.
In these circumstances, the Department has no alternative but to
apply facts available, pursuant to section 776(a) of the Act. Further,
we preliminarily determine that an adverse inference is warranted in
applying facts available because the GOF elected not to provide
information which it could provide and, hence, has not acted to the
best of its ability. We do not believe that verification, if one is
conducted, is the appropriate means for gathering this information.
Because the GOF did not provide information about these programs,
including the distribution of benefits under the programs, the
Department is unable to make specificity findings. Therefore, in
applying adverse facts available, we preliminarily determine that these
programs are de facto specific. (Our analysis of the financial
contribution and benefit under these programs is discussed below under
``Investment/Operating Subsidies.'')
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 stainless steel sheet and strip in
coils, 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 and attributed to Ugine, FIS Bonds, has previously been
allocated over a company-specific AUL of 14 years. The
[[Page 31778]]
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
SSSS from France (64 FR at 30778) and Final Affirmative Countervailing
Duty Determination: Certain Cut-to-Length Carbon-Quality Steel Plate
From France, 64 FR 73277, 73280 (December 29, 1999) (``French Plate'').
Because the 14-year AUL was calculated using company-specific
information and the information is more contemporaneous with the
bestowal of the subsidy in question than the information underlying
Usinor's 12-year calculation, we have continued to use the 14-year AUL
to allocate the benefits of the FIS bonds in this proceeding.
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 over the AUL
period.
Equityworthiness and Creditworthiness
In French Certain Steel and SSSS from France, we found Usinor to be
unequityworthy from 1986 through 1988 and uncreditworthy from 1982
through 1988. No new information has been presented in this review to
warrant a reconsideration of these findings. Therefore, based upon
these previous findings of unequityworthiness and uncreditworthiness,
in this review, 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). For the commercial interest rate charged to creditworthy
borrowers, we used the average of the following long-term interest
rates: medium-term credit to 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. 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 an average long-term interest rate developed in
SSSS from France for 1989, and on Usinor's company-specific borrowing
rate for 1995.
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; SSSS from France, 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. Finally, because
Usinor was unequityworthy at the time of the infusions, we determined
that Usinor received a benefit in the amount of the investments.
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 is
being bestowed on the subject merchandise. Because the final year of
the benefit stream for the 1986 infusion was 1999, i.e., prior to this
POR, we determine that there is no countervailable benefit to the
subject merchandise in this POR for the 1986 conversion. Thus, only the
1988 equity infusion continues to provide a benefit in the POR.
We have determined that the 1988 equity infusion should be treated
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. 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.
Dividing the POR benefit attributed to Usinor by Usinor's total
sales of French-produced merchandise during the POR, 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 POR, 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 SSSS from France and French Plate, the Department determined
that
[[Page 31779]]
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 30779, 30782; 64 FR at 73282. Consistent with these previous
cases, the Department has not included these programs in this review.
For the remaining programs, we preliminarily 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 section 771(5)(E)(i) of the Act. Also, as discussed above
under ``Use of Facts Available,'' we preliminarily determine that these
investment and operating subsidies are specific within the meaning of
section 771(5A)(D) of the Act. Therefore, consistent with SSSS from
France, 64 FR at 30779, and French Plate, 64 FR at 73282, we determine
that these investment and operating subsidies are countervailable
subsidies.
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 years in which they were received (see SSSS from France, 64 FR
at 30780, and French Plate, 64 FR at 73283). 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 year of receipt (1999), in accordance
with 19 CFR 351.524 (b)(2).
To calculate the benefit received during the POR, we divided the
subsidies received by Usinor in the POR by Usinor's total sales of
French-produced merchandise during the POR. Accordingly, we
preliminarily determine Usinor's net subsidy rate for this program to
be 0.16 percent ad valorem.
II. Programs Preliminarily Determined To Be Not Countervailable
A. Loans With Special Characteristics (PACS)
In SSSS from France, we determined that Usinor received a
countervailable subsidy as a result of the GOF's 1986 conversions of
PACS into common shares of Usinor. Because the final year of the
benefit stream for this subsidy was 1999, i.e., prior to this POR, we
determine that there is no countervailable benefit to the subject
merchandise in the POR.
B. Shareholders' Advances
In SSSS from France, we determined that Usinor received a
countervailable subsidy as a result of shareholder advances made by the
GOF in 1984 - 1986. Because the final year of the benefit streams for
these advances was 1999, prior to this POR, we determine that there is
no countervailable benefit to the subject merchandise in the POR.
C. Electric Arc Furnace
In SSSS from France, we explained that the GOF had agreed to
provide Usinor with reimbursable advances to support the company's
efforts to increase the efficiency of the melting process, the first
stage in steel production. Because the first disbursements were not to
be made until 1998, i.e., after the POI in SSSS from France, the
Department found no benefit during the POI. (See SSSS from France, 64
FR at 30780). In French Plate, the Department also found no benefit
during the POI (1998), because the reimbursable advance was treated as
a loan and no payment would be due on the loan until 1999. (See French
Plate, 64 FR at 73284)
In the instant review, Usinor has reported that it received
reimbursable advances under this program in 1998 and 1999, and that the
program was phased out in 1999 and 2000. These advances were approved
in 1995 and they are to be repaid in 2002 and 2005, respectively.
We divided the total amount approved by the GOF for this project by
Usinor's total sales of French-produced merchandise in 1995, the year
the reimbursable advances were approved. The result was less than 0.5
percent. Therefore, even if these reimbursable advances were treated as
grants, they would be expensed prior to the POR. Alternatively, we have
calculated the possible benefit to Usinor if the reimbursable advances
were treated as zero-interest long-term loans. The benefit (when
rounded to the nearest hundredth) is zero during the POR.
Therefore, we have not analyzed these reimbursable advances further
and preliminarily determine that they do not confer a countervailable
benefit on the subject merchandise during the POR.
D. Funding for Myosotis Project
In SSSS from France, we explained that Usinor received grants and
reimbursable advances from the GOF to fund the Myosotis project. We
found that the amounts received by Usinor between 1989 and 1993 were
properly expensed in the years of receipt and, hence, that there was no
countervailable subsidy to the subject merchandise from these grants.
We also found that Usinor has received a reimbursable advance from the
GOF in support of the Myosotis project in 1997. We viewed the
reimbursable advance as a loan and found no countervailable benefit
from the 1997 reimbursable advance during the 1997 POI. (See SSSS from
France, 64 FR at 30780) In French Plate, we also found no
countervailable benefit from the 1997 reimbursable advance. (See French
Plate, 64 FR at 73283) In the instant review, Usinor has responded that
it received a second reimbursable advance in 1999.
The reimbursable advances provided by the GOF to support the
Myosotis project were approved in 1995. The advances were to be repaid
in 1999 and 2001, respectively.
We divided the total amount approved by the GOF for this project by
Usinor's total sales of French-produced merchandise in 1995, the year
the reimbursable advances were approved. The result was less than 0.5
percent. Therefore, even if these reimbursable advances were treated as
grants, they would be expensed prior to the POR. Alternatively, we have
calculated the possible benefit to Usinor if the reimbursable advances
were treated as zero-interest long-term loans. The benefit (when
rounded to the nearest hundredth) is zero during the POR.
Therefore, we have not analyzed these reimbursable advances further
and preliminarily determine that they do not confer a countervailable
benefit on the subject merchandise during the POR.
E. Conditional Advances
InSSSS from France, we explained that Usinor received a conditional
advance from the GOF in connection with a project aimed at developing a
new type of steel used in the production of catalytic converters.
Payments were received by Usinor in 1992 and 1995. Repayment of the
conditional advance was contingent upon sales of the product resulting
from the project exceeding a set amount. In SSSS from France, we found
that no repayment had been made and we treated the advance as a
countervailable short-term, interest-free loan. In this review, Usinor
has responded that it repaid a portion of the conditional advance in
November 1999, and that the balance remained outstanding in the POR.
Assuming the conditional advance was approved in either 1991 or
1992, we divided the total amount received by Usinor's total sales of
French-produced merchandise in each of those years. The result in both
instances was less than 0.5 percent. Therefore, even if the
[[Page 31780]]
conditional advance were treated as a grant, it would have been
expensed prior to the POR. Alternatively, we have calculated the
possible benefit to Usinor if the outstanding amount of the conditional
advance were treated as a zero-interest long-term loan. The benefit
(when rounded to the nearest hundredth) is zero during the POR.
Therefore, we have not analyzed the conditional advance further and
preliminarily determine that it does not confer a countervailable
benefit on the subject merchandise during the POR.
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. ESF Grants
In SSSS from France and French Plate, we found that certain Usinor
companies had received grants under the European Social Fund (``ESF'')
for worker training, and that the grants provided countervailable
subsidies. Normally, the Department treats benefits from worker
training programs to be recurring (see 19 CFR 351.524(c)(1)). However,
we have found in several cases that ESF grants relate to specific,
individual projects that require separate approval and, hence, should
be treated as non-recurring grants. See, e.g., SSSS from France, 64 FR
at 30781.
Because ESF grants are non-recurring subsidies and potentially
allocable over time, we reviewed SSSS from France and French Plate
regarding past disbursements to Usinor under this program. In SSSS from
France, we determined that ESF grants received in 1995 and 1997 were
less than 0.5 percent of Ugine's sales in those years. Hence, the
benefits of those ESF grants were expensed in the years of receipt. See
SSSS from France, 64 FR at 30781. In French Plate, an ESF grant
received in 1998 by CLI, an Usinor subsidiary, was also expensed in the
year of receipt.
In this review, Usinor has stated that any ESF grants received by
the Usinor companies in 1999 would be included among the investment and
operating subsidies reported in Usinor's financial statement. 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.
Therefore, we determine that ESF grants received by Usinor and it
affiliates prior to the POR do not confer a countervailable benefit on
the subject merchandise during the POR. Moreover, Usinor has responded
that it did not receive any ESF grants during the POR.
B. Export Financing under Natexis Banque Programs
C. DATAR Regional Development Grants (PATs)
D. DATAR 50 Percent Taxing Scheme
E. DATAR Tax Exemption for Industrial Expansion
F. DATAR Tax Credit for Companies Located in Special Investment Zone
G. DATAR Tax Credits for Research
H. GOF Guarantees
I. Long-term Loans from CFDI
J. Resider I and II Programs
K. Youthstart
L. ECSC Article 54 Loans
M. ECSC Article 56(2)(b) Redeployment/Readaptation Aid
N. ERDF Grants
Preliminary Results of Review
In accordance with 19 CFR 351.221(b)(4)(i), we calculated an
individual subsidy rate for Ugine. For the period January 1, 2000,
through December 31, 2000, we preliminarily determine Ugine's net
subsidy rate to be 1.29 percent. The calculations will be disclosed to
the interested parties in accordance with section 351.224(b) of the
regulations.
If the final results of this review remain the same as these
preliminary results, the Department intends to instruct the U.S.
Customs Service (``Customs'') to collect cash deposits of estimated
countervailing duties at the rate of 1.29 percent on the f.o.b. value
of all shipments of the subject merchandise from Ugine that are
entered, or withdrawn from warehouse, for consumption on or after the
date of publication of the final results of this administrative review.
For companies that were not named in our notice initiating this
administrative review, we will instruct Customs to collect cash
deposits of estimated countervailing duties at the most recent company-
specific or country-wide rate applicable to the company. Accordingly,
the cash deposit rates that will be applied to non-reviewed companies
covered by this order are those established in the Amended Final
Determination: Stainless Steel Sheet and Strip in Coils From the
Republic of Korea; and Notice of Countervailing Duty Orders: Stainless
Steel Sheet and Strip in Coils from France, Italy, and the Republic of
Korea. These rates shall apply to all non-reviewed companies until a
review of a company assigned these rates is requested.
While the countervailing duty deposit rate for Ugine may change as
a result of this administrative review, we have been enjoined from
liquidating any entries of the subject merchandise after August 6,
1999. Consequently, we do not intend to issue liquidation instructions
for these entries until such time as the injunction, issued on December
22, 1999, is lifted.
Public Comment
Interested parties may submit written arguments in case briefs
within 30 days of the date of publication of this notice. 19 CFR
351.509(c). Rebuttal briefs, limited to issues raised in case briefs,
may be filed not later than five days after the date of filing the case
briefs. Parties who submit briefs in this proceeding should provide a
summary of the arguments not to exceed five pages and a table of
statutes, regulations, and cases cited. Copies of case briefs and
rebuttal briefs must be served on interested parties in accordance with
19 CFR 351.303(f).
Interested parties may request a hearing within 30 days after the
date of publication of this notice. Any hearing, if requested, will be
held two days after the scheduled date for submission of rebuttal
briefs. 19 CFR 351.310(c).
Representatives of parties to the proceeding may request disclosure
of proprietary information under administrative protective order no
later than 10 days after the representative's client or employer
becomes a party to the proceeding, but in no event later than the date
the case briefs, under 19 CFR 351.309(c)(ii), are due.
The Department will publish a notice of the final results of this
administrative review within 120 days from the publication of these
preliminary results.
This administrative review and notice are in accordance with
sections 751(a)(1) and 777(i)(1) of the Act.
DATED: May 3, 2002
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 02-11768 Filed 5-9-02; 8:45 am]
BILLING CODE 3510-DS-S