NOTICES
DEPARTMENT OF COMMERCE
Final Affirmative Countervailing Duty Determinations; Certain Steel Products
From France
Tuesday, September 7, 1982
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AGENCY: International Trade Administration, Commerce.
ACTION: Final affirmative countervailing duty determinations; certain steel products
from France.
SUMMARY: We have determined that certain benefits which constitute subsidies within
the meaning of the countervailing duty law are being provided to manufacturers,
producers, or exporters in France of certain steel products, as described in the "Scope of
the Investigations" section of this notice. The estimated net subsidy for each firm and for
each product is indicated under the "Suspension of Liquidation" section of this notice.,
The U.S. International Trade Commission (ITC) will determine within 45 days of the
publication of this notice whether these imports are materially injuring, or threatening to
materially injure, a U.S. industry.
EFFECTIVE DATE: September 7, 1982.
FOR FURTHER INFORMATION CONTACT:
Nicholas C. Tolerico, Office of Investigations, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and Constitution
Avenue, NW., Washington, D.C. 20230, telephone: (202) 377- 4036.
SUPPLEMENTARY INFORMATION:
Final Determinations
Based upon our investigations, we have determined that certain benefits which constitute
subsidies within the meaning of section 701 of the Tariff Act of 1930, as amended (the
Act), are being provided to manufacturers, producers, or exporters in France of certain
steel products, a described in the "Scope of Investigations" section of this notice. The
following programs are found to confer subsidies:
Preferential financing including equity infusions.
Certain labor-related aid.
Assistance for plant operating expenses.
Research and development.
We determine the estimated net subsidy to be the amount indicated for each firm and for
each product in the "Suspension of Liquidation" section of this notice.
Case History
On January 11, 1982, we received petitions from United Steel Corporation; counsel for
Bethlehem Steel Corporation; and counsel for Republic Steel Corporation, Inland Steel
Company, Vones & Laughlin Steel, Inc., National Steel Corporation, and Cyclops
Corporation (the Five), filed on behalf of the U.S. industry producing carbon steel
structural shaped, hot-rolled carbon steel sheet and strip, and cold-rolled carbon steel
sheet and strip. The petitioners alleged that certain benefits which constitute subsidies
within the meaning of section 701 of the Act are being provided, directly or indirectly, to
the manufacturers, producers, or exporters in France of the steel products listed above.
Counsel for Bethlehem Steel Corporation and counsel for the Five alleged that "critical
circumstances"; exist, as defined in section 703(e) of the Act. We found the petitions to
contain sufficient grounds upon which to initiate countervailing duty investigations,
and on February 1, 1982, we initiated countervailing duty investigations (47 FR
5739).
Since France is a "country under the Agreement" within the meaning of section 701(b) of
the Act, injury determinations are required for these investigations. Therefore, we
notified the ITC of our initiations. On February 26, 1982, the ITC determined that there is
a reasonable indication that imports of carbon steel structural shapes, hot-rolled carbon
steel sheet and strip, and cold-rolled carbon steel sheet and strip from France are
materially injuring, or threatening to materially injure, a U.S. industry.
We presented questionnaires concerning the allegations to the Delegation of the
Commission of the European Communities and to the government of France in
Washington, D.C. On April 28 and 30, 1982, we received the responses to the
questionnaires. Supplemental responses were received on May 14 and 17, 1982. On June
10, 1982, we issued our preliminary determinations in these investigations (47 FR
26315). These stated that the government of France was providing its manufacturers,
producers, or exporters of certain steel products with benefits which constitute subsidies.
The programs preliminarily determined to bestow countervailable benefits were:
Export credit insurance.
Preferential financing including equity infusions.
Regional development incentives.
Certain labor-related aid.
Assistance for plant operating expenses.
Research and development.
Scope of the Investigations
The products covered by these investigations are:
Carbon steel structural shapes.
Hot-rolled carbon steel sheet and strip.
Cold-rolled carbon steel sheet and strip.
The products are fully described in Appendix 1 which appears with the notice of "Final
Affirmative Countervailing Duty Determinations: Certain Steel Products from
Belgium," in this issue of the Federal Register. The product definition of hot-rolled carbon
steel sheet and strip has been amended since the initiation of these investigations (47 FR
5739).
Societe Anonyme des Forges et Acieries de Dilling (Dilling), Socie>= 1te
des Acieries et Laminoirs de Lorraine (Sacilor), Societe Me>= 1tallurgique de
Normandie (Normandie), and Union Siderurgique du Nord et de l'Est de la
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France (Usinor) are the only known producers and exporters in France of the subject
products which were exported to the United States.
The period for which we are measuring subsidization is the calendar year 1981. Dilling,
Sacilor and Usinor operate on a calendar year basis.
Analysis of Programs
In their responses, the government of France and the Delegation of the Commission of
the European Communities provided data for the applicable periods. Additionally, we
received information from Dilling, Sacilor, and Usinor. Sacilor and Usinor produced and
exported carbon steel structural shapes, hot-rolled carbon steel sheet and strip, and
cold-rolled carbon steel sheet and strip.
Dilling produced and exported hot-rolled carbon steel sheet and strip, and cold-rolled
carbon steel sheet and strip. Because we received no response from Normandie, we are
applying to it the highest subsidy rate found in France for each product under
investigation.
Dilling, also known as AG der Dillinger Hu>=4ttenwerke (Dillinger), is an integrated steel
producer located at Dillingen in the Saar area of the Federal Republic of Germany. There
is a substantial French interest in Dilling, as Sacilor owns 40.7 percent of Dilling's capital
stock and Marine- Wendel, Sacilor's former holding company, also owns an unspecified
amount of Dilling stock. Although Dilling is incorporated in Germany, we included that
portion of Dilling's output produced in France. Details of this arrangement are outlined
below.
Sacilor and Dilling both own substantial amounts of shares in Societe Lorraine de
Laminage Continu (Sollac), which produces hot-rolled carbon steel and sheet and
cold-rolled carbon steel sheet and strip. The capital ownership of Sollac is as follows:
TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE
Sollac, in turn, owns 50 percent of Societe Lorraine et Meridionale de
Laminage Continu (Solmer), which produces hot-rolled steel sheet and strip. The capital
ownership of Solmer is as follows:
TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE
Sollac and Solmer are run on a cooperative, non-profit basis on behalf of their respective
shareholders. Neither Sollac nor Solmer sell their steel products in the marketplace;
instead, each shareholder in Sollac and Solmer buys, at cost, a quantity of finished steel
proportionate to its share of ownership, which it then resells under its own name.
For purposes of these determinations, we are treating Sollac as a joint production facility
of its owners. Therefore, we are allocating Sollac's production and countervailable
benefits to Dilling and Sacilor, in proportion to their holdings in Sollac (25.09 and 64.29
percent, respectively).
Likewise, we are treating Solmer as a joint production facility of its owners, and allocating
Solmer's production and countervailable benefits to Usinor, Sacilor, and Dilling in
proportion to their holdings in Solmer. We are not allocating any of Solmer's production
and countervailable benefits to Thyssen, because Thyssen has not taken its share of
production for several years. Thyssen has been negotiating to divest itself of its holding in
Solmer, and the issue of Thyssen's participation in Solmer is currently under arbitration.
Dilling thus receives 12.55 percent, and Usinor 50.0 percent of Solmer's production and
countervailable benefits.
Since we do not consider Sollac and Solmer to be independent companies, any discussion
in the body of this notice of programs used by Dilling, Sacilor, and Usinor, must be
understood to cover the respondents' direct and indirect holdings in Sollac and Solmer.
Throughout this notice, general principles and conclusions of law applied by the
Department of Commerce to the facts of the current investigations concernng certain
steel products are described in detail in Appendices 2-4, which appear with the notice of
"Final Affirmative Countervailing Duty Determinations: Certain Steel Porducts from
Belgium," in this issue of the Federal Register. Unless otherwise noted, we allocated each
company's countervailable benefits as follows:
Where benefits were provided to all steel production, they were allocated over the value
of all steel sales of the company receiving the benefit;
Where benefits were provided to specific facilities producing hot-rolled carbon steel sheet
and strip, or hot-rolled and cold-rolled carbon steel sheet and strip, we determined the
value of the benefit for thse products as follows:
We allocated the benefit to each company in proportion to its share of ownership in the
facility;
Each company's benefit was then multiplied by the percentage that the sales value of
those products made at that facility represented of the total sales value of all products
from that facility received by each company;
This amount was then divided by the total value of each company's sales of those
products.
Based upon our analysis of the petitions, responses to our questionnaires, our verification
and oral and written comments by interested parties, we determine the following.
I. Programs Determined To Confer Subsidies
We have determined that subsidies are being provided under the programs listed below to
manufacturers, producers, or exporters in France of carbon steel structural shapes,
hot-rolled cabon steel sheet and strip, and cold-rolled carbon steel sheet and strip.
A. Preferential Financing Including Equity Infusions. Petitioners alleged preferential
financing in the form of low-interest loans and loan guarantees, and the conversion of
accumulated debt.
1. Loans and Loan Guarantees. A number of organizations of the French government and
of the European Community (EC) have issued loans and/or loan guarantees to the French
steel industry. The majority of these loans were provided by the following institutions:
Fonds de Developpement Economique et Social (FDES). Created by the French
Parliament in 1955, FDES is a fund which provides loans to businesses and corporations in
order to further the French government's economic, social, industrial, and regional
development objectives. The fund, which is actually a line item in the French government
budget, is approved every year by Parliament.
As FDES is not an organization but rather a budgetary item, it is administered by the
Ministry of Finance. Loan applications are filed with the Ministry of Finance, but the
decision to issue a loan rests with the FDES Board, which is composed of government
ministers and career civil servants whose agencies are involved in economic policy.
A semi-public financial institution, Credit National, disburses FDES funds to
recipients approved by the Ministry of Finance (see discussion on Credit National
below).
FDES loans are always part of a global financial package, as other lenders such as
government credit institutions and public and private banks participate in the funding of
a
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project (an FDES loan never covers the entire cost of a project). Usually, loans
are secured by a mortgage or a pledge. We were advised by the government of France
that FDES lending rates were consistently lower than commercial rates.
There is some evidence which suggests that FDES loans are available to all industries and
regions. At verification, we requested French government authorities to provide sample
FDES loan applications and agreements, and to specify the criteria on which these loans
were actually granted. The French government did not provide this information. In light
of this refusal, we cannot conclude that these loans are generally available. Therefore, we
consider these loans to confer subsidies within the meaning of the countervailing duty
law to the extent that they were provided at preferential, below-market rates.
Credit National (CN). Credit National is a semi-public credit institution, with
special legal status, which issues medium- and long-term loans to French industry,
including the steel industry. Loan funds are raised by offering bonds in the public
marketplace. These bonds are guaranteed by the government of France.
Credit National acted as the conduit through which FDES loans were granted to the
steel industry. The French government, either directly or through Cre>= 1dit National,
also guarantees some loans to the steel companies. In addition, Credit National has
participated in bank loans to the steel industry through such means as assuring the banks
that they can rediscount the loans with Cre>= 1dit National, which in effect constitutes a
guarantee.
In most cases, Credit National acts only as part of a loan syndicate. The terms of any
loans Credit National makes on behalf of the French government are set by the French
government. We verified that CN loans to the French steel industry were made with
government backing and that Credit National's operating budget is financed by the
French government.
There is some evidence suggesting that CN loans are available to all industries and
regions. At verification, we requested French government authorities to arrange a
meeting with CN officials, to provide sample loan applications, and to specify the criteria
on which these loans were actually granted. Since these requests were refused, we were
unable to establish that these loans were not given at the direction of the government of
France, or that CN loans are generally available. Therefore, we consider these loans to
confer subsidies within the meaning of the countervailing duty law, to the exent that
they were provided at preferential, below-market rates. Similarly, we find the bank loans
in which Credit National participated to confer subsidies within the meaning of the
countervailing duty law to the extent that they were provided at preferential,
below-market rates.
Caisse des Depots et Consignations (CDC). CDC is a government institution that
invests funds deposited in the Caisses d'Epargne (the French savings banks), pension
funds, and insurance company deposits. CDC makes both short- and long-term loans to
various industries, including steel. At verification, we requested an interview with CDC
from French government officials, in order to determine whether CDC loans were
generally available. This request was refused. Therefore, we were unable to estalish that
CDC loans to the steel industry were not given at the specific direction of the government,
or that CDC loans are generally available. Therefore, we consider these loans to confer
subsidies within the meaning of the countervailing duty law to the extent that they
were provided at preferential, below-market rates.
European Coal and Steel Community (ECSC) and European Investment Bank (EIB) Loans,
Loan Guarantees and Interest Rebates. For the reasons discussed in Appendix 3, ECSC
industrial investment loans and guarantees and EIB loans and loan guarantees confer
countervailable benefits to the extent that the loan was made at a preferential interest
rate, or that the guarantee enabled the loan recipient to obtain a preferential interest rate.
Interest rebates on ECSC loans were provided to Dilling, Sacilor, and Usinor. For the
reasons outlined in Appendix 3, we consider that portion of the rebates that was not
financed by producer-generated funds to confer a countervailable benefit.
Groupement de l'Industrie Siderurgique (GIS). GIS was founded in 1946 as a
corporation whose sole shareholders were 45 steel companies. The purpose of GIS was to
raise money for capital projects of the steel companies. By floating debt instruments in
the public marketplace, GIS raised monies to lend to the companies at a rate equal to the
rate being paid on bonds issued to the public, plus operating expenses. Five percent of the
funds received were left on deposit with GIS to cover individual steel company defaults.
Funds were raised in France, other EC countries, and abroad. GIS bonds are backed by
unconditional guarantees of the companies, with each company being liable to the
bondholders for the sums loaned to it by GIS. No loans have been issued by GIS since
1978, and no principal from previous loans remained outstanding on the steel companies'
books in 1981.
Specialized Financial Institutions. A number of private, cooperative financial institutions
emerged after World War II to raise capital for various sectors of French industry. By
floating bond issues, these cooperative institutions raised capital and made loans to their
member companies, including steel companies. Since 1978, none of these institutions has
floated bonds or loaned funds to the steel industry. These institutions include:
--Groupement Interprofessionnel Financier Antipollution (GIFIAP): environmental
protection;
--Groupement pour le Financement de la Region de Fos (GIFOS): development of the
Fos area near Marseille;
--Groupement des Industries de Materiaux de Construction (GIMAT): construction
materials;
--Groupement pour le Financement des Economies d'Energie (GENERCO): energy
conservation;
--Groupement d'Equipement pour le Traitement des Minerais de Fer (GETRAFER):
processing of iron ore.
Since these are private, cooperative institutions that issued loans at non- preferential
rates, we find that those loans issued prior to 1978 with principal still outstanding in 1981
do not confer any countervailable benefits.
Our treatment of loans and loan guarantees that were provided at perferential rates from
FDES, Credit National, bank syndicates in which Chedit National participated,
CDC, the ECSC and the EIB is outlined in section 5 (a) through (c) below. Our treatment of
ECSC interest rebates is described in section 5(d). Since loans from the GIS and other
specialized financial institutions were not issued after 1978, we did not find them
countervailable except when they were converted into Loans of Special Characteristics
("Prets a Caracteristiques Speciales" or PACS), as outlined in section 5(c).
The 1978 Rescue Plan. By 1978, the French steel industry had been experiencing severe
financial difficulties for a number of years. Usinor and Sacilor were unable to pay their
debts. In September 1978, the government of France instituted a major recapitalization
and restructuring program for the steel industry, hereinafter referred to as the "Rescue
Plan."
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A primary financial goal of the restructuring was the reduction of the companies'
debt service bruden. This was accomplished in three ways.
First, the banks refunded a certain amount of interest to Sacilor and Usinor over a
five-year period beginning in 1978. Since these refunds were provided under the
government-directed Rescue Plan, and are grants to specific enterprises, we determine
that they confer countervailable benefits. For our treatment of these refunds, refer to
section 5(d).
Second, the private holding companies, Marine-Wendel for Sacilor and Denain Nord-Est
Longwy (DNEL) for Usinor, cancelled a portion of Sacilor's and Usinor's debt. Since this
forgiveness of debt was provided at the direction of the government as part of the Rescue
Plan, we determine that it confers countervailable benefits. For our treatment of this
debt, see section 5(e).
Third, the loans from Credit National, FDES, the Caisse des Depots et
Consignations, the GIS, and the other specialized financial institutions, were converted
into PACS. Marine-Wendel and DNEL also converted a portion of their loans to Sacilor and
Usinor into PACS. The PACS bear an interest rate or 0.1 percent until 1983, when they are
scheduled to be renegotiated. Principal repayments are suspended until 1983 or
whenever the companies return to profitability, whichever is sooner. In addition to the
initial 1978 conversions, PACS were also issued between 1978 and 1981.
Under the Rescue Plan, the steel companies included in these investigations service both
the PAACS and other debt owed to Marine-Wendel, DNEL, CDC, and the FDES. The French
government created two institutions to service the debt, including PACS, owed to the
remaining lenders. These institutions are the Caisse d'Amortissement pour l'Acier (CAPA),
and the Groupement des Emprunts Collectifs de la Siderugie (GECS).
CAPA was created to service the debt owed to Credit National, the GIS, and the other
specialized financial institutions. CAPA was initially funded by the French government,
state-owned institutional investors, and the Caisse des De>= 1pots et Consignations.
CAPA services the debt through interest payments on PACS, loans from the French
Treasury, and borrowings on the financial markets, which are guaranteed by the French
government.
The GECS was created because the French government determined that the holders of
bonds issued by the GIS and the other specialized financial institutions should be
protected from losses. CAPA reimburses the GECS with the funds it has raised as
described above. The GECS then makes principal and interest payments to the
bondholders.
Because the PACS were created under the government-directed Rescue Plan and are
specific to the steel companies, we find that they confer countervailable benefits. Our
treatment of these PACS is outlined in section 5(c).
3. Equity Infusions. Two equity infusions were made in Sacilor and Usinor through which
the French government became a shareholder in both companies. The first infusion was
made in 1979 under the Rescue Plan, when funds were provided in exchange for stock by
CDC, the banks, GIS, FDES, and Credit National. The second infusion was made in
1981, when PACS held by FEDES were cancelled in exchange for stock.
Equity participation by the government is not a subsidy per se. Petitioners alleged,
however, that government infusions of equity into the French steel companies were made
at a time when these infusions were not consistent with commercial considerations. We
concluded that these infusions were made on terms inconsistent with commercial
considerations, because of the critical financial condition of the companies at the time the
infusions occurred (as described in the "Creditworthiness Issue" section below).
Therefore, a subsidy potentially exists.
Since the providers of the infusions received stock in exchange for cash, we calculated
average stock prices for the period preceding the infusions. We then compared the market
value of the new stock issued with the actual value to the company of the equity infusion.
Since the actual value was greater than the market value, we determine that the equity
infusions conferred a countervailable benefit. The difference is considered to be a grant
and is allocated over 15 years, the average useful life of capital assets in steel mills (see
grants section in Appendix 2). For our treatment of equity infusions, refer to section 5 (d)
and (e) below.
4. Creditworthiness Issue. Petitioners alleged that both Sacilor and Usinor are
uncreditworthy. In our preliminary determinations, we found that, for purposes of these
investigations, Sacilor and Usinor became uncreditworthy by the end of 1975. Upon
further examination of the relevant data, we determined that, although Sacilor and Usinor
had deteriorating financial situations through 1977, they were still in a position to obtain
credit from private lenders on terms consistent with commercial considerations without
government involvement.
Based on further analysis, we now find, for purposes of these determinations, that both
Sacilor and Usinor became uncreditworthy in 1978 and remained so through 1981 (for
additional information on the creditworthiness issue, see Appendix 2).
a. Sacilor. Our analysis of Sacilor's financial statements revealed a pattern of significant
operating losses every year beginning in 1975 (from a low of FF 1.1 billion in 1979 to a
high of FF 2.6 billion in 1981). Sacilor has had consistently high debt/equity ratios in
every year beginning in 1975. By 1978, Sacilor's financial situation had become so critical
that the government of France intervened with the Rescue Plan described above, under
which most of Sacilor's debt was converted into PACS. These carry an interest rate of 0.1
percent and no obligation to repay principal until the company returns to profitability. In
light of Sacilor's inability by 1978 to raise funds without the French government's heavy
involvement in the company, and the continuing deterioration of the company's financial
position (as indicated by certain financial ratios such as the current ratio, the debt/equity
ratio, the finance charges to sales ratio, and the operating loss to sales ratio), we consider
Sacilor to have been uncreditworthy since 1978.
b. Usinor. Our analysis of Usinor's financial statements revealed a pattern of significant
operating losses every year beginning in 1975 (from a low of FF 833 million in 1979 to a
high of FF 3 billion in 1981). Usinor has had consistently high debt/equity ratios in every
year beginning in 1975. By 1978, Usinor's financial situation had become so critical that
the government of France intervened with the Rescue Plan described above, under
which most of Usinor's debt was converted into PACS. In light of Usinor's inability by
1978 to raise funds without the French government's heavy involvement in the company,
and the continuing deterioration of the company's financial position (as indicated by
certain financial ratios such as the current ratio, the debt/equity ratio, the finance
charges to sales ratio, and the operating loss to sales ratio), we consider Usinor to have
been uncreditworthy since 1978.
c. Dilling. There were no allegations, and no evidence, that Dilling is uncreditworthy.
5. Calculation of Countervailable Benefits. Preferential loans and loan guarantees, PACS,
and equity infusions have been treated in the following five ways:
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a. Preferential Loans and Loan Guarantees Issued Prior to 1978. The subsidy rate
for any loan and loan guarantee from CDC, FDES, Credit National, bank syndicates in
which Credit National participated, the ECSC, and the EIB that was made prior to 1978
for which principal was still outstanding in 1981, and which was made at a rate below the
commercial benchmark for a comparable loan in the year of issue, is calculated according
to the general methodology for loans and loan grarantees outlined in Appendix 2. For
France, we used the monthly financial statistics published by the Organization for
Economic Cooperation and Development (OECD) to determine the commercial
benchmark. For the discount rate, we used the annual statistics published by the OECD.
Using the method outlined in Appendix 2, we computed the following subsidies:
TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE
b. Preferential Loans and Loan Guarantees Issued Since 1978. Because we consider
Sacilor and Usinor to have been uncreditworthy since 1978, loans and loan guarantees
issued since then by CDC, FDES, Credit National, bank syndicates in which Credit
National participated, the ECSC, and the EIB, with principal still outstanding during 1981,
are treated as loans to companies considered to be uncreditworthy. Using the equity
methodology for loans to uncreditworthy companies (see Appendix 2), we compared the
national average rate of return on equity in France with Sacilor's and Usinor's 1981 rates
of return on equity. To prevent countervailing a higher amount than if the loan had been
an outright grant to the company, we compared the 1981 benefit of these loans under the
equity methodology used for loans to uncreditworthy companies, with the result under
the grant methodology described in Appendix 2.
Since we do not consider Dilling to be uncreditworthy, for loans and loan guarantees
given since 1978 with principal still outstanding during 1981, we treated the portion of
each loan attributable to Dilling according to the preferential loan methodology
described in Appendix 2.
We calculated the following subsidies:
TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE
c. Loans and Loan Guarantees Converted into PACS. The benefits of Sacilor's and Usinor's
PACS were calculated using the equity methodology for loans to uncreditworthy
companies as described in part 5(b) above and as outlined in Appendix 2. In calculating
the benefit of loans that were converted into PACS, we did not include those PACS that
were subsequently cancelled in exchange for stock. These are discussed in section 5(e)
below.
For Dilling, which we determined not to be uncreditworthy, we treated that portion of
each PACS attributable to Dilling according to the preferential loan methodology
described in Appendix 2.
We calculated the following subsidy rates:
TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE
d. Loss Coverage. Since the cash infusions in exchange for stock and the interest refunds
are not tied to capital assets nor explicitly earmarked, we consider these funds are
available to cover cash-based losses.
We assume that when a company running large cash-based losses receives funds, these
funds will be used to meet immediate obligations such as wages, materials, and interest
expenses, which are items normally expensed in one year. Based on the above, we are
expensing the funds in the year in which they were received to cover the losses of the
previous year.
We calculated the annual cash losses as explained in Appendix 2, and compared the funds
received to the previous year's losses. In making this comparison, we considered interest
refunds before the cash infusions in exchange for equity.
With the exception of 1981, for those years in which the amounts received exceeded
losses, we treated the excess as follows:
In the case of interest refunds, we treated the excess as a grant and allocated it over 15
years, the average useful life of capital assets in steel mills;
In the case of cash infusions made in 1979 in exchange for stock, since the providers of
the infusions received stock in exchange for cash, we calculated average stock prices for
the two-week period preceding the infusions. We then compared the market value of the
new stock issued with the actual value to the company of the equity infusion. As the
actual value was greater than the market value, we treated the difference as a grant and
allocated it over 15 years, the average useful life of capital assets in steel mills (see grants
section in Appendix 2).
For 1981, the period for which we are measuring subsidization, we treated the entire
amount as a grant for loss coverage, and expensed it in the year received. Because Dilling
incurred no losses, Dilling's share of the interest refunds was treated as an untied grant
and allocated over 15 years, the average useful life of capital assets in steel mills,
according to the methodology outlined in Appendix 2.
We calculated the 1981 countervailable benefits, and allocated them over the total value
of each company's sales:
TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE
e. Cancellation of Debt. In 1978, as part of the government-directed Rescue Plan,
Marine-Wendel and DNEL cancelled part of Sacilor's and Usinor's debt. Since they did not
receive anything in exchange for this cancellation, we treated the amount cancelled as a
grant, and allocated it over 15 years, the average useful life of capital assets in steel mills
(see grants section in Appendix 2).
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At the end of 1981, the government of France cancelled PACS owed to it by
Sacilor and Usinor in exchange for additional shares in these companies. At that time, the
government's share of ownership in each company reached approximately 90 percent.
Since both Sacilor's and Usinor's stock was traded on the Paris Bourse at the time the
French government announced its intention to cancel its PACS for equity (see equity
section in Appendix 2), we calculated average stock prices for the period immediately
preceding the government's action. We then compared the average stock price with the
actual value to the company of the government's equity infusion. As the actual value was
greater than the market value, we treated the difference as a grant and allocated it over 15
years, the average useful life of capital assets in steel mills (see grants section in Appendix
2). We then applied the 1981 net benefit over the value of all sales, and computed the
following subsidies:
TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE
B. Certain Labor-Related Aid
1. Early Retirement and Layoff Benefits
French corporations have certain statutory and contractual obligations to pay severance
to their employees in case of interruption or cessation of employment. There are several
French government early retirement plans designed to compensate for the effects of mass
layoffs. The plan designed to cover all industries is the Fonds National de l'Emploi (FNE).
Because of the significant problems faced by the steel industry with respect to
restructuring, two early retirement and layoff agreements were negotiated between
certain steel companies and the labor unions.
These are the Convention de Protection Sociale of June 1977 (CPS), which applies to
engineers and executives of the steel industry, and the Convention Generale de
Protection Sociale of July 1979 (CGPS), which applies to all other steel industry workers.
Under these special steel agreements, workers laid off between the ages of 55 and 60 must
retire. This is the "anticipated cessation of activity" plan which is financed in the same
manner as the FNE; that is, government, employer, and employee contributions to the
unemployment fund and government contributions financed by company payments.
Workers between the ages of 50 and 55 who are laid off fall under the "dispensation of
activity" plan. Under this plan, the workers are still under contract to the company but
their salaries are paid by the government. While the companies are under no contractual
or statutory obligation to pay wages to laid-off workers, they do have contractual and
statutory obligations to pay severance to laid-off workers. Since the workers who are laid
off at age 50 continue to receive wages, the companies' requirement to pay severance is
deferred until the worker reaches age 55. The benefit to the steel companies is the
difference between the liability accrued in each year for severance pay and the actual
expense incurred in each year for severance pay.
We consider this benefit to be a grant to the steel companies. Because the benefit is less
than one percent of the total value of 1981 steel production, and is tied to an item
normally expensed in one year, we allocated the 1981 benefit over the total value of each
company's 1981 steel sales, and calculated the following subsidy rates:
TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE
2. Relocation and Moving Benefits. A number of employees have been relocated from
Sacilor, Sollac, and Usinor to Solmer's plant at Fos-sur-Mer near Marseille. The workers'
relocation and moving expenses were initially financed by advances from Sacilor, Sollac,
and Usinor to Solmer. The workers were reimbursed with ECSC funds channeled through
the Fonds National de l'Emploi (FNE), which were forwarded to Solmer by the workers.
Solmer in turn repaid Sacilor, Sollac, and Usinor.8
Since we requested and were not furnished any evidence concerning the exact amounts
or the type of assistance received, we are using, as best information available, the
information provided in the response that this was a special ECSC loan for employee
relocation. As explained in Appendix 3, the ECSC borrows funds on world capital markets.
These funds are relent at the same interest rate plus a one percent fee to cover
administrative expenses. Since this ECSC loan was not financed from producer-generated
funds (see Appendix 3), and was provided for the relocation of workers within the steel
industry, we consider it to be a government payment of a company's costs, and thus
countervailable.
Because the loan was awarded in 1980, a year in which we concluded Sacilor and Usinor
were uncreditworthy, we treated the entire amount as a loan to an uncreditworthy
company, as described above and in Appendix 2, except that portion attributable to
Dilling, which we treated as a preferential loan. We calculated the following subsidy rates:
TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE
C. Assistance for Plant Operating Expenses. Under the restructuring plan, three of
Usinor's plants were scheduled to be shut down. In 1980 and 1981, the French
government made payments to Usinor in order to postpone the closings. The government
payments reimbursed Usinor for certain of the expenses incurred as a result of the
government's postponing the closings. Two of the plants have since been completely
closed and the third shut down its steel melting operations.
The monies received constitute a countervailable grant to Usinor because the plants
continued to produce steel. Because the payments from the government reimbursed
operating expenses, we are allocating the benefits to the year in which the payments were
received, as explained in Appendix 2. According to this method, we calculated the
following subsidy rates:
TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE
At verification, we were not allowed to meet with IRSID officials and were not provide
with a 1981 annual report or any IRSID official documents. We were told, however, that
the results of IRSID research were not released to the public. Because this research is
industry-specific, and the results are not made publicly available, we consider that
portion of IRSID's budget funded by the government of France to be countervailable.
However, we find that R&D funding provided to IRSID by the ECSC is not countervailable,
as the results of the research are made publicly available by the ECSC. To calculate the
1981 countervailable benefit, we are using IRSID's 1980 annual report as the best
information available. The French government's share of IRSID's budget is 3 percent. We
applied this amount to the total value of 1980 French steel sales, since the benefits of the
research were available to all steel companies that are members of IRSID. We calculated
an estimated net subsidy for all products and all companies of 0.007 percent ad valorem.
II. Programs Determined Not To Confer Subsidies
We have determined that subsidies are not being provided under the following programs
to manufacturers, producers, or exporters in France of carbon steel structural shapes,
hot-rolled carbon steel sheet and strip, and cold-rolled carbon steel and strip.
A. Export Credit Insurance. The Compagnie Francaise d'Assurance pour le Commerce
Exterieur (COFACE) is a government corportation that provides export insurance to
cover commercial, political, exchange rate fluctuation and inflation risks. For our
preliminary determinations, we reviewed COFAC's 1980 annual report (the most recent
report available) and found that, while the company showed an overall profit, its
insurance activities operated at a deficit. Revenues from financial and real estate
investments allowed COFACE to offset the operating deficit on insurance. Our preliminary
review of the annual reports for 1976-1980 revealed a pattern of yearly operating deficits
on insurance activities that were offset by revenues from investments. However, we
reviewed the 1981 data and verified that only the political risk program suffered losses,
not the commercial risk program. The political risk program is not used for exports to the
United States by the companies under investigation. We also verified that premiums for
COFACE's commercial risk insurance program exceeded losses incurred by that program.
Consequently, we have determined that COFACE export insurance does not confer a
subsidy with respect to exports to the United States.
B. Vocational Training Assistance. We verified that the only vocational training assistance
programs utilized by the respondents during 1981 were provided through the European
Social Fund (ESF), the Fonds National de l'Emploi (FNE), and the Association de
Formation de l'Est (AFOREST), a regional training organization operating under the
auspices of the regional Chamber of Commerce and financed by dues from members.
In our preliminary determinations, we assumed that these programs were aimed at
retraining steelworkers for jobs within the steel industry. However, we verified that
Vocational training programs are aimed at retraining a majority of workers for jobs
outside the steel industry. For those workers subsequently reemployed in the steel
industry, we found that they were reemployed in jobs not related to steel production.
Therefore, we have determined that these programs do not confer subsidies under the
countervailing duty law.
C. ECSC Worker Housing Loans. For the reasons described in Appendix 3, we are
reversing our preliminary determinations that these loans confer a subsidy on steel
companies whose workers receive them, and determine instead that they do not.
D. Research and Development Assistance. Three government organizations provided a
small amount of R&D funding to French steel companies included in these investigations:
Agence Nationale de Valorisation de la Recherche (ANVAR): a public corporation which
is designed to support innovation and enhance resarch;
Direction Generale de la Recherch Scientifique et Technique (DGRST): a
subdivision of the Ministry of Research and Technology; and
Agence de l'Informatique (ADI): a public corporation which promotes the use of
computer technology.
We verified that R&D funding was not awarded on a regional or industry- specific basis,
and research results were made publicly available. Therefore, we have determined that
the amounts received through these programs did not confer subsidies within the
meaning of the Act.
E. Energy Assistance. The French steel companies involved in these investigations
received a few small grants from the Agence pour les Economies d'Energie (AEE). The AEE
is a government agency, created in 1974, that provides grants to foster energy efficiency.
Grants received from the agency may have to be repaid if target efficiency levels are not
met. Early in 1982, the AEE was merged with several other agencies to form the Agence
Franc>=9aise pour la Maitrise de l'Energie (AFME). We verified that these grants were
not provided on an regional or industry-specific basis. Therefore, we have determined
that the amounts received from AEE by the steel companies included in these
investigations do not confer subsidies.
F. Regional Anti-Pollution Agencies. Created by Law No. 64-1245 of 1964, these regional
agencies known generically as "Agences Financieres de Bassin" provide incentives for
the installation of anti-pollution devices. We believe that these programs are generally
available, and do not benefit a specific group of industries. The agencies' operations are
funded by dues from industrial users. In return, they award bonuses and loans to combat
pollution.
Since the dues paid to these agencies by the steel companies involved in these
investigations exceeded the amounts that they received, we find that the funds received
do not confer subsidies.
G. Assistance to Improve Working Conditions. One of the steel companies involved in
these investigations indicated that it had received a small grant from the Agence
Nationale pour l'Amelioration des Conditions de Travail (ANACT). ANACT is a public
corporation, established in 1973, to promote better working conditions. As ANACT funds
are not granted on a regional or industry- specific basis, we find that the amounts
provided do not confer subsidies.
H. Assistance to Iron Ore Suppliers. We verified that the only benefit provided to the iron
ore industry in France was the assumption by the French government of part of the
employers' share of pensions due to miners under a special pension plan for all employees
of extractive industries. Because these pensions are not specific to one industry, we find
that no subsidy was conferred.
I. Assistance to Coal Suppliers. In our preliminary determinations, we found
*39339
that
subsidies to French coal producers did not bestow a countervailable benefit upon the
production, manufacture or exportation of French steel.
Between the preliminary determinations and these final determinations, we analyzed and
verified aspects of the French coal subsidy program as it applies to steel. Based upon the
verified information in the records of these investigations, we find that this program does
not confer a countervailable benefit on French steel producers for the following reasons.
Benefits bestowed upon the manufacturer of an input do not flow down to the purchaser
of that input if the sale is transacted at arm's length. In an arm's length transaction, the
seller generally attempts to maximize its total revenue by charging as high a price and
selling as large a volume as the market will bear.
These principles apply to French coal sales as follows. We find that the price charged for
French coal does not undercut the market price. Absent special circumstances
warranting a contrary conclusion, the French steel producers apparently do not benefit
from French coal subsidies as long as the price for French coal does not undercut the
market price.
Further consideration is warranted, however, for one special circumstance. The
government of France directly or indirectly owns all French coal producers and
partially owns major French steel companies. The issue arises whether transactions
between them are conducted on an arm's length basis. We do not believe that government
ownership per se confers a subsidy, or that common government ownership of separate
companies necessarily precludes arm's length transactions between them. To determine
whether coal sales between government- owned coal and steel producers appear to have
been consummated on arm's length terms, we considered whether the
government-owned coal producers sold to the government-owned steel producer at the
prevailing market price. We found that French coal producers did charge the prevailing
market prices. On this basis, we conclude that coal subsidies were not conferred on steel
producers as a result of government ownership.
Based upon the above considerations, we determine that French coal subsidies do not
confer upon French steel producers a subsidy within the meaning of the Act.
Regarding the allegation that the French steel industry indirectly benefits from German
government assistance provided to the coal industry in the Federal Republic of Germany,
we do not consider such assistance to confer a countervailable benefit on the French steel
industry for the reasons outlined in Appendix 2.
The ECSC provides various production and marketing grants to ECSC coal and coke
producers. However, we do not consider this assistance to confer a countervailable
benefit on the French steel industry for the reasons described in Appendix 3.
J. Tax Exemptions and Assistance for Land Purchases. Petitioners alleged that Solmer
purchased the land for its Fos plant at reduced prices, and received exemptions from
value-added taxes on the purchase of the land and equipment. The Fos industrial complex
was developed by the Port Autonome de Marseille (Marseille Port Authority), and is part
of "Europort South."
Besides Solmer, a number of other companies are located at Fos. We found no evidence
that Solmer's purchase of land at Fos was not at a commerical price. Solmer paid several
times more for the land than its acquisition cost, and paid for the entire cost of a dock
used by Solmer and other companies.
With regard to tax exemptions, we found no evidence that Solmer benefited from any
value-added tax advantages on the purchase of land and equipment that were not
available to all manufacturers constructing new plants.
K. Funding for Infrastructure. Petitioners alleged that the French government provided
funding for infrastructure such as road, port, rail and communication facilities, at Usinor's
Dunkirk plant and Solmer's Fos plant.
Regarding the Dunkirk facilities, we verified that Usinor paid the French government for
constructing and improving the infrastructure. Other companies besides Usinor use the
facilities. Since we have no evidence that these facilities benefit Usinor exclusively or
even predominantly, we determined that no subsidies were conferred.
Solmer is only one of a number of companies located at Fos, all of which share port, road,
rail and communication facilities. Since we have no evidence that these facilities benefit
the Solmer plant exclusively or even predominantly, we determine that no subsidies were
conferred.
II. Programs Determined Not To Be Used
We have determined that the following programs which were listed in the notice of
"Initiation of Countervailing Duty Investigations" are not used by the manufacturers,
producers, or exporters in France of carbon steel structural shapes, hot-rolled carbon
steel sheet and strip, and cold-rolled carbon steel sheet and strip.
A. Regional Development Incentives. The government of France provides a series of tax
and non-tax regional incentives to French and foreign businesses to establish new, or to
expand existing, businesses in certain French regions.
The Delegation a l'Amenagement du Territoire et a l'Action Re>=
1gionale (DATAR) coordinates the programs of various government agencies and
ministries. For incentive purposes, France is divided into four zones. Each zone, or part
of a zone, is eligible for different types or levels of assistance. The assistance includes
development grants, non-industrial grants, research and development grants,
decentralization indemnities, and job training subsidies.
We have no evidence that DATAR provided any benefits to the steel companies involved
in these investigations.
B. Special Fund for Industrial Adaptation. Petitioners alleged that French steel companies
received grants and preferential loans through the Fonds Spe>= 1cial d'Adaptation
Industrielle (FSAI). FSAI was established in 1978 to promote job creation and industrial
diversification in the steel, textile, shipbuilding and coal regions of France. We have no
evidence that the steel companies included in these investigations received benefits from
FSAI.
C. Export Financing. In France, exports may be financed or guaranteed through the
Commission Interministerielle des Garanties et du Credit au Commerce
Exterieur and the Banque Franc>=9aise du Commerce Exterieur (BFCE). We have
no evidence that the steel companies involved in these investigations availed themselves
of any of these programs.
D. European Regional Development Funds (ERDF). This program is described in Appendix
3. We found no evidence that any company under investigation received ERDF funds.
IV. Petitioners' Comments
Comment 1
Counsel for Bethlehem and Armco contends that Solmer purchased land at Fos at a
preferential price.
DOC Position
We verified through the Marseille Port Authority that Solmer's purchase of land at Fos
was not on terms more
*39340
preferential than those afforded to other purchasers.
Comment 2
Counsel for Bethlehem and Armco argues that infrastructure provided at Usinor's Dunkirk
plant should be countervailable even though the company reimbursed the government
for this assistance. Counsel argues that we should determine whether the company
reimbursed the government for the full amount of the funds expended. Further, counsel
contends that even if the company did reimburse the full amount, we should take into
account the time value of money with respect to the extended repayment terms given to
Usinor.
DOC Position
We verified that the government billed Usinor for the construction of the facilities and
that Usinor paid these amounts in full. We have no reason to believe that the amount paid
was insufficient, nor that the payment terms were unusually long.
Comment 3
Counsel for Bethlehem and Armco argues that a more thorough investigation should be
done with respect to Marine-Wendel's forgiveness of debt to Sacilor.
DOC Position
During verification, we requested additional information concerning Marine- Wendel's
actions in relation to the debt owed to it by Sacilor. We also reviewed Marine-Wendel's
participation in the Rescue Plan. Our determination in regard to Marine-Wendel's actions
is included in the "Preferential Financing" section of this notice.
Comment 4
Counsel for Bethlehem and Armco argues that assistance from anti- pollution agencies is
countervailable since it is not available to all industries but just to those that pollute.
Counsel also contends that the dues and fines imposed by the agencies cannot be used to
offset the grants provided by the agencies.
DOC Position
We do not consider loans for pollution control to confer susidies, because such loans
constitute general assistance to any company with a pollution problem. Although not all
companies would necessarily be eligible at any one time, loans for pollution control are
not selective in the same manner as regional or industry-specific programs, because there
is no predetermination of eligible areas or industries and no part of the country, and no
industry, is excluded from eligibility in principle.
We verified that the levies paid by the steel companies to these anti- pollutions agencies
exceeded the amounts they received from the agencies.
Comment 5
Counsel for petitioner argues that all domestic subsidies in a country should be
countervailed, even if they are available to all industries.
DOC Position
See Appendix 4.
Comment 6
Counsel for petitioners argue that the Department allowed an offset or did not give full
weight to the term subsidy as defined in the Act when it did not countervail ECSC
assistance programs to the extent that funds for these programs were derived from the
ECSC budget.
DOC Position
See Appendix 3.
Comment 7
Counsel for petitioners argue that the Department has improperly applied offsets to
preferential loan benefits by subtracting principal and interest paid in 1981 and by use of
the grant cap.
DOC Position
See Appendix 2.
Comment 8
Counsel for petitioners argue that the Department should have considered purchases of
German-subsidized coal by unrelated European steel producers to be countervailable
because the intent of these subsidies is to stabilize coal supplies to the ECSC's steel
industry, insure against the risk of adverse price developments on the world market, and
without this subsidized coal the ECSC steel companies would have had to pay higher world
market prices.
DOC Position
See Appendix 2.
Comment 9
Counsel for petitioners argue that aid programs funded by the ECSC constitute subsidies
to ECSC steel producers, even though they pay levies into the ECSC budget, because the
ECSC has borrowed massively to supplement the levies.
DOC Position
See Appendix 3.
Comment 10
Counsel for petitioner argues that the time period to use to determine if critical
circumstances exist is the time period before the countervailing duty petitions are
filed.
DOC Position
See Appendix 4.
Comment 11
Counsel for petitioner argues that in reviewing the critical circumstances assertion the
Department should have considered the cumulative effects of the imported merchandise
during the period prior to the filing of the petitions.
DOC Position
See Appendix 4.
Comment 12
Counsel argue that, in our preliminary determinations, we used incorrect benchmarks.
DOC Position
See Appendix 2.
Comment 13
Counsel for petitioners argue that ECSC subsidies to coal benefit French steel companies
and are therefore countervailable.
DOC Position
See Appendix 3.
Comment 14
Counsel argue that, in the absence of subsidies, the steel companies included in these
investigations would not have been able to obtain supplier credits. Therefore, supplier
credits confer countervailable benefits.
DOC Position
See Appendix 2.
Comment 15
Counsel argues that French government subsidization of coal producers confers subsidies
on French steel producers. Counsel further argues that, by purchasing domestic coal
rather than imported coal, the Sacilor and Sollac group receives advantages such as
savings in carrying charges of inventories, terms of payment, and exchange rate risks.
DOC Position
For the reasons indicated above in the "Assistance to Coal Suppliers" section, we have
determined that subsidies conferred by the French government on coal producers do not
pass through to steel producers. Further, we believe that
*39341
the "advantages" cited
by counsel are merely factors which any purchaser takes into consideration in deciding
from which supplier to buy. Such business practices do not confer subsidies.
V. Respondents' Comments
Comment 1
Counsel contend that Credit National is not a government credit institution, but a
private bank subject to normal commercial practices, and that CN loans and loan
guarantees are not industry-specific.
DOC Position
We agree, as indicated in the section on preferential financing above, that there is some
evidence to suggest that Credit National loans are available to all industries.
However, the government of France would not provide us with the criteria on which the
loans were based. We were not allowed to meet with Credit National officials or to
view sample Credit National loan applications. Therefore, we were not satisfied that
CN loans were not industry-specific, and that they were not subsidies.
With regard to Credit National's legal status, France's foremost authority in
administrative law, Professor Andre de Laubadere, states in the "Traite
Elementaire de Droit Administratif" (Librairie Generale de Droit et de
Jurisprudence, Paris, 1966, vol. 3):
(pp. 439-440)
"Un troisieme groupe d'organismes est constitue par les Instituts spe>=
1cialises que l'on denomme frequemment 'auxiliaires' ou encore 'allies' * *
* du Tresor et dont l'intervention est nee du fait qu'elle prote sur des secteurs
dont la rentabilite n'est pas suffisante pour attirer les credits bancaires. Mais ces
instituts sont eux-memes tres divers: (* * *)
"D'autres sont des societes de droit prive, mais dotees d'un statut
particulier qui les soumet a un controle etroit de l'Etat et qui conduit a
les appeler generalement organismes para- ou semi- publics (Credit National,
etc.)."
(pp. 448-449)
"A cote des etablissements publics (* * *), on rencontre des institutions
financieres specialisees qui jouent un role analogue et qui, quoique
privees, occupent encore une place dans les institutions de l'Etatbanquier parce
qu'elles servent egalement d'intermediaires ou relais pour le Tresor; elles
rec>=9oivent du reste, en raison de ce ro>= 3le, des dotations de l'Etat et comportent, de
sa part, des controles tre>= 2s particuliers qui les font qualifier d'organismes
'para-publics' ou 'semi- pubics'.
"Ce sont notamment le Credit National (* * *).
"Le cas du Credit National est particulierement interessant car il * * * illustre
la montee du role bancaire de l'Etat.
"(* * *) le Credit National est devenu un instrument de financement de l'industrie par
des prets a long et moyen terme mais il est, a cet e>= 1gard, un moyen de
realiser une politique de prets des pouvoirs publics, un relais de l'Etat.
"Il en resulte un caractere complexe de cette institution aussi bien en ce qui
concerne sa structure que son role:
"En ce quie concerne sa structure, le Credit National est une societe anonyme
de droit prive dont le capital a ete souscrit par les principaux
etablissements de credit et par les plus importantes entreprises industrielles
franc>=9aises. Mais l'Etat possede des pre>= 1rogatives exorbitantes sur son
organisation et son fonctionnement: le pre>= 1sident du conseil d'administration et les
deux directeurs sont nommes par decret; deux des censeurs, charges des
fonctions de surveillance, sont nommes par le ministre des Finances et sont, en fait, le
directeur du Tre>= 1sor et les directeur de la Caisse des Depots.
"Quant a son role, le Credit National, s'il est une banque, est une banque
chargee d'une mission d'interet general. Ce trait est accentue par
l'importance actuelle du role du Credit National comme distributeur de fonds du
F.D.E.S. et comme auxiliaire de l'execution du Plan. Sans doute, certains prets
sont consentis par le Credit National sur sa seule decision, lorsqu'ils proviennent
de fonds propres; mais d'autres prets sont consentis soit apres avis
spontanement demande au Commissariat du Plan, soit sur decision
prealable du Conseil de direction du F.D.E.S.; ces derniers sont ceux qui sont
effectues a l'aide des fonds du F.D.E.S. transitant par le Credit National; ils
constituent la partie la plus importante des operations de celui-ci."
(Translation)
(pp. 439-440)
"A third group of organizations comprises the Specialized Institutions, which are
frequently labeled as 'auxiliaries' or 'allies' * * * of the Treasury, and whose intervention
was brought about by the fact that it bears on areas the profitability of which is
inadequate to attract bank loans. These institutions, however, are themselves very
diverse in nature: (* * *)
"Others are private corporations under a special legal status that submits them to tight
state control and causes them to be generally referred to as para- or semi-public
organizations (Credit National, etc.)."
(pp. 448-449)
"In addition to public entities (* * *), one also encounters specialized financial institutions
which play a similar part and which, although they are private, also fit within the
framework of the Banker-State because they also serve as intermediaries or relays for the
Treasury; besides, they receive, because of this role, funds from the State which entail
very particular controls by the State, which causes them to be called 'para-public' or
'semi- public' organizations.
"Among these are Credit National (* * *).
"The case of Credit National is particularly interesting as it * * * illustrates the
ever-growing role of the State as a banker.
"(* * *) Credit National has become a financing instrument for industry through
medium- and long-term loans, but it is, in this regard, a means for the implementation of
the government's lending policy, a relay of the State.
"As a consequence, this institution presents complex characteristics as regards its
structure as well as its role:
"With respect to its structure, Credit National is a private corporation whose capital
stock was subscribed by the principal credit institutions and the largest French industrial
corporations. The State, however, possesses exorbitant rights of oversight with regard to
its organization and activities: its president and both executive directors are appointed
by government decree; two of its four censors, which supervise the organization's
activities, are appointed by the Minister of Finance and are actually the Director of the
Treasury and the Director of the Caisse des Depots (et Consignations).
"With respect to its role, Credit National * * * is a bank entrusted with a mission of
general interest. This is emphasized by Credit National's role as a conduit for F.D.E.S.
funds and as an auxiliary to the implementation of the (Five-Year) Plan. It is true that
certain loans are granted by Credit National on its own, when they are backed by
Credit National's own funds; other loans, however, are granted either after seeking the
National Planning Board's opinion, either by a prior decision of the F.D.E.S. executive
board; the latter loans are those made with F.D.E.S. money transiting through Cre>= 1dit
National; they constitute the larger part of its operations."
These excerpts demonstrate that although Credit National is legally a private
corporation, it was created by a special law, the majority of its stockholders are
state-owned banks and financial institutions, and the government of France exercises
tight control over Credit National's operations. Further, Credit National does not
make loans under purely commercial considerations and acts as an agent of the
government of France.
Comment 2
Counsel argue that FDES loans are not made on a regional basis, and therefore are not
countervailable.
DOC Position
As indicated above in the section on preferential financing, there is some evidence to
suggest that FDES loans are available to all regions. However, FDES is a government fund
administered by the French Treasury. The government of France would not provide us
the criteria on which the loans were based. Therefore, we were not satisfied that FDES
loans were not regional and that they did not confer subsidies.
*39342
Comment 3
Counsel for Usinor contends that CN and FDES loans issured prior to 1976 are not
countervailable, since they are included in the purchase price Usinor paid for Cockerill's
plant at Rehon.
DOC Position
Usinor, in acquiring the assets of the Rehon plant, thereby acquired the benefit of the
preferential rates on loans to Cockerill.
Comment 4
Counsel for Sacilor argues that the Rescue Plan was not instituted by the government of
France, but rather was the product of negotiations between Sacilor and its creditors, and
that because the Rescue Plan was consistent with rational commercial policies, there were
no countervailable benefits from either the PACS or other elements of the Plan.
Counsel contend that the creditors acted reasonably, based on their conclusion that
Sacilor and Usinor would return to profitability as a result of the Rescue Plan.
Counsel for Sacilor further contends that "Sacilor's borrowing capacity, and hence its
creditworthiness, was restored" as a result of the Rescue Plan.
Counsel for Usinor contends that the fact Usinor showed a profit for the first half of 1980
demonstrates the accuracy of the assumptions underlying the Rescue Plan.
DOC Position
We concur that the negotiations that led to the Rescue Plan included Sacilor's creditors.
However, this point is immaterial since the result of the negotiations was substantial
government intervention in the steel companies' financing, which was the intent of the
creditors. Further, normal commercial considerations do not usually involve
government intervention to the extent of the Rescue Plan.
With respect to the second argument, the creditors' forecast of return to profitability
hinged on the guarantees given by the government of France that the steel companies
would be relieved of the responsibility of servicing their debt. Those circumstances are
not consistent with commercial considerations.
With regard to the Rescue Plan, we are not in a position to determine its success or failure;
however, we do note that Sacilor continued to sustain persistent, heavy losses in
succeeding years when loans were made, up to the present time.
With respect to the foruth argument, the fact that Usinor sustained a profit in the first half
of 1980 is indisputable; it is no less certain, however, that Usinor incurred a net loss for
1980 as a whole, which is the legal fiscal year, and that Usinor incurred an even greater
loss in 1981. Assuming that this argument is made to demonstrate that the Rescue Plan
was based on commercial considerations, it is our position, as discussed in Comment 5,
that increasing government intervention indicates that the actions taken under the
Rescue Plan were not on terms consistent with commercial considerations.
Comment 5
Counsel contend that the steel companies involved in these investigations are
creditworthy because they received loans from both nationalized and private banks
through 1980.
Counsel for Usinor also contends that the fact that GIS bonds were sold in public markets
from 1976 to 1980 is conclusive evidence that the public perception at that time was that
Usinor was creditworthy.
Counsel for Usinor contends that actions taken by lenders cannot be viewed as
non-commercial, since they faced only two options, foreclosure or revitalization.
Counsel for Sacilor argues that the Department should not have used hindsight in deciding
whether the lenders acted in accordance with commercial considerations.
DOC Position
In our preliminary determinations, we found Sacilor and Usinor to have been
uncreditworthy since the end of 1975. Upon further examination of the relevant data, we
determined that, although Sacilor and Usinor had deteriorating fanancial situations
through 1977, they were still in a position to obtain credit from private lenders on terms
consistent with commercial considerations without government involvement.
In a supplemental submission to its response, Usinor included an evaluation of its
financial situation. This evaluation paraphrases a speech by the President of Usinor
stating that "* * * indeed, the financial results which were already qualified as disastrous
at the end of fiscal 1975 further seriously deteriorated during the second half of 1977,
thus cornering Usinor in a dramatic situation."
Even though the companies received loans from private banks after 1978, most of these
loans were given with express government guarantees, and thus are not evidence of the
ability of the firms to raise funds on their own, and several were made at the express
request of the government to the banks.
Beginning with the 1978 Rescue Plan, there has been an obvious pattern of French
government direction of funds into the steel industry. We judge that the funds poured into
these companies have been the result of French government targeting, and that, absent
that targeting, the companies could not have obtained the funds on an arm's-length,
commercial basis, in view of the heavy persisting losses and the unfavorable financial
ratios. Consequently, we determine that Sacilor and Usinor remained uncreditworthy
from 1978 into the period for which subsidies are being measured.
Under the 1978 Rescue Plan, GIS bonds were converted into PACS and to protect the
private bondholders, debt service was assumed by CAPA and GECS with government
guarantee.
With regard to respondents' third argument, we determine that even though there were
only two options open to the lenders, the fact that the government of France had to
intervene massively in the reorganization of Sacilor and Usinor indicates that private
investors were unlikely to invest additional funds in these companies without
government intervention.
With regard to the hindsight argument, we reiterate that our assessment of the
creditworthiness of the companies for any given year is based on at that time, and not
hindsight (see Appendix 2).
Comment 6
Counsel argue that, when PACS are properly viewed as equity, the debt/equity ratio
decreases to an acceptable level, and that PACS are at least as valuable to the creditors as
the loans that they replaced.
DOC Position
We consider the PACS to be debt, because they are actually called loans ("Prets a
Caracteristiques Speciales"), bear interest, albeit at a very special rate, and must
be repaid when the recipients return to profitability. Accordingly, they should not be
included in the equity side of the debt/equity ratio. As discussed earlier, we calculated
the benefit of PACS using the equity methodology for loans to uncreditworthy companies
outlined in Appendix 2.
Comment 7
Counsel for Usinor argues that it is a valid commercial consideration to invest further in a
company where there is a realistic expection of ultimate
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profitability, when the
alternative is foreclosure, and the loss of funds already invested.
DOC Position
We do not disagree that further investment in a company may be based on valid
commercial considerations when the alternative is loss of investment. However, in this
case, it is our judgment that the government's intervention was not on terms consistent
with commercial considerations, as demonstrated by a 0.1 percent interest on loans,
suspension of principal repayments, forgiveness of debt, and assumption of payments due
to bondholders. Further, we consider that other creditors would not have participated
absent the government-directed Rescue Plan.
Comment 8
Counsel for Usinor contends that interest refunds do not constitute a subsidy, because
these refunds did not involve the French government, but were part of the financial
restructuring plan agreed to by the banks.
Counsel further contends that if interest refunds are determined to be a subsidy, they
should be allocated solely to the year of receipt.
DOC Position
We find interest refunds to be a subsidy, because the Rescue Plan was directed by the
government of France. We consider them as untied grants available to cover losses, and
treated them as described in the section on loss coverage.
Comment 9
Counsel objects to the valuation of Usinor at its stock market price, and argues that
estimated future earnings and company prospects must be considered.
DOC Position
The Department has not changed its methodology in this respect since its preliminary
determinations in these investigations. While we recognize that the French stock market
may involve a relatively low volume of shares, we believe the law shows a strong
preference for the use of market standards where available. In this case there is
insufficient evidence to rebut the presumptive correctness of the market's valuation of
the stock.
Comment 10
Counsel for the respondents argue that premiums paid over market value of stock are
common in takeovers where the objective is to gain control over the company. Counsel
for Sacilor also asserts that the French securities market is notoriously inefficient because
it is a thin market, and cities four examples of premiums for stock in companies with
losses.
DOC Position
We agree that in a commercial takeover by private investors, premiums may be paid over
the stock market price. However, in this instance we are not dealing with a commercial
undertaking, but rather with a French government nationalization of the steel companies,
which were not in a financial condition where a "control premium" would be expected in a
commercial context (see Appendix 2).
As described in Comment 9, we used Sacilor's and Usinor's stock market prices as best
information available to make a fair valuation of the companies' shares, for the reasons
described above and in Appendix 2.
Comment 11
Counsel for Usinor argues that conversion of PACS to common stock took place on
December 21, 1981, yet the equity subsidy is allocated over the entire year, resulting in
an allegedly exaggerated subsidy.
DOC Position
We compute benefits received by a firm during a period of time (in this case, the 181
calendar year), and apply them to the total value of sales for the same period. We do not
make adjustments for the fact that a particular benefit was received earlier or later in the
year for which we are measuring subsidization. Throughout these steel determinations,
we have not tied any subsidy to any time period shorter than a year.
Any other approach would not only be unnecessary as a matter of law, it would be
administratively impossible, given the information and time available.
Comment 12
Counsel for Sacilor contends that Sollac and Solmer are independent corporations.
Therefore, none of Sacilor's subsidies should be attributed to Sollac and Solmer, and none
of Sollac's and Solmer's subsidies should be passed on to their shareholders.
DOC Position
We find that neither Sollac nor Solmer are independent corporations for the following
reasons:
They cannot sell their products on the open market, but only to their respective
shareholders;
They operate without either profit or loss, as they must sell their products at cost to their
shareholders, in proportion to their respective holdings.
Our treatment of these companies is fully explained in the "Analysis of Programs" section
of this notice.
Comment 13
Counsel contends that neither Sollac nor Solmer are uncreditworthy.
DOC Position
As we find that Sollac and Solmer are not independent companies, the issue of their
creditworthiness need not be addressed.
Comment 14
Counsel for Usinor contends that COFACE's commercial risk and political risk insurance
programs should be considered separately, as the former operates at a profit and the
latter at a loss. Usinor's exports to the United States are insured under the commercial
risk program exclusively.
DOC Position
We agree with counsel's argument, and have taken it into account in section II-A of this
notice.
Comment 15
Counsel for Usinor contends that the government did not relieve the company of any
responsibilities under French labor laws. Counsel for Sacilor argues that French labor
assistance programs are not subsidies, because they are not regional or industry-specific.
Counsel argues that, as Sacilor's obligation is contractual rather than statutory, there can
be no subsidy. He also contends that Sacilor's contractual agreement was to serve as a
conduit for government largesse.
DOC Position
We determine that the steel companies do have contractual and statutory obligations to
pay severance to laid-off workers.
Counsel's contention that these programs are not regional or industry-specific is
inaccurate, as we found that there were specific social welfare protection agreements
relating to the steel industry.
We agree with counsel for Sacilor that the companies have contractual obligations to their
workers. We find these contractual obligations to be legally binding under law.
We agree that the companies serve as conduits for the distribution of certain funds, and
we are not countervailing against them in this respect.
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Comment 16
Counsel for Usinor alleges that money received from the French government to postpone
three plant closings is not countervailable.
DOC Position
Money received from the French government enabled Usinor to continue to produce
steel, and therefore confers a countervailable benefit.
Comment 17
Counsel stated that Usinor has not received a subsidy as a result of its involvement in
IRSID. Usinor is a dues-paying member of IRSID. Only 3 percent of IRSID's budget is
provided by the government of France. The only benefit that Usinor has received from
IRSID is the right to receive the results of the research performed by the organization. No
specific research was done for Usinor.
DOC Position
Although IRSID research may not have been carried out specifically for Usinor, Usinor
does derive a countervailable benefit from the results of this research, as described in
section I-D of this notice.
Comment 18
Counsel for Sacilor alleges that while the total amount of subsidies to Solmer was included
in the subsidy base for Sacilor in the preliminary determinations, only approximately half
of the value of Solmer's production was included in the total value of Sacilor's production.
DOC Position
We agree with counsel, and are now allocating Solmer's production to Dilling, Sacilor, and
Usinor, in proportion to their direct or indirect holdings in Solmer.
Comment 19
Counsel for Sacilor alleges that the interest rates chosen as benchmarks for our
preliminary determinations often exceeded the official rates. Counsel argues that rates in
excess of those published by the OECD are arbitrary.
DOC Position
We are using the rates published by the OECD in these final determinations.
Comment 20
Counsel for Sacilor contends that the ad valorem allocation of the subsidy is incorrect.
Counsel for Sacilor states that the Department "allocated all subsidies received by Sacilor
solely to the sales of the rather restricted set of products at issue in this determination."
Counsel contends that we should either trace the use of funds from each subsidy to a
particular product, or allocate the subsidies over all Sacilor's income, not merely the
value of products challenged in this proceeding.
DOC Position
In our preliminary determinations, we did not allocate benefits to the products under
investigations, but to the total value of steel production. For our final determinations, we
are allocating the benfits as described in the "Analysis of Programs" section of this notice,
except for the benefits from loss coverage and equity infusions, which we are allocating
over the value of all sales of each company.
Comment 21
Counsel for Sacilor asserts that our preliminary determinations treat funds received by
Sacilor from FNE and AFOREST as subsidies. Counsel states that the funds received from
FNE for relocation and moving expenses and retraining of workers did not benefit in any
manner Sacilor. Sacilor was at no time under any legal or contractual obligation to retrain
these employees.
DOC Position
We agree that the retraining of workers did not provide any benefits to Sacilor, for the
reasons stated in section II-B of this notice. However, for the reasons stated in section
I-B-2 of this notice, we find that relocation assistance provided a countervailable benefit.
Comment 22
Counsel for Usinor and Sacilor assert that the allegedly new methodology used in the
preliminary determinations should be rejected for failure to follow proper administrative
procedures.
DOC Position
See Appendix 4.
Comment 23
Counsel for respondents argue that the methodology used in the preliminary
determinations to calculate the benefits of loans and equity infusions is incorrect.
DOC Position
Neither counsel for petitioners nor counsel for respondents provided convincing reasons
for adopting their suggestions. For further information, see Appendix 2.
Comment 24
Counsel argue that the grants methodology which involves the imputation of a future
value designed to reflect the time value of money is a violation of the prohibitions in
Article IV, 3 of the GATT; Article IV, 2 of the Subsidies Code; and Section 701(a) and
Section 703(d)(2) of the Act, against imposing countervailing duties in excess of
subsidies.
DOC Position
See Appendix 4.
Comment 25
Counsel argue that no standards have been articulated for determining creditworthiness.
DOC Position
See Appendix 2.
Comment 26
Counsel contends that, because the Rescue Plan is akin to a Chapter XI reorganization
proceeding under U.S. bankruptcy law, it is not countervailable.
DOC Position
See Appendix 4.
Comment 27
Counsel for Sacilor argues that the assumption of financing costs is not countervailable.
Relying on the illustrative list of domestic subsidies contained in section 771(5)(B) of the
Act, he argues that only the assumption of operational costs is countervailable. In
addition, he argues that because the accounting definition of "operating costs" does not
include interest- related revenues and expenses, we should not countervail the provision
by the government of funds which relieve a business of its interest obligations.
DOC Position
We disagree. Any preferential absorption by a government of a cost of doing business--be
it wages, materials, taxes on income, or interest expenses--can give rise to a subsidy, as
recognized in subsection 771(5)(B)(iv) of the Act. We find that a subsidy to relieve debt
expenses is an assumption of a cost of manufacture, production, or distribution within the
meaning of subsection 771(5)(B)(iv), and is therefore countervailable. Although
subsection 771(5)(B)(iii) of the Act lists as an example of a subsidy "funds * * * to cover
operating losses," this illustrative example does not permit us to ignore the language of
subsection 771(5)(B)(iv).
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Negative Determination of Critical Circumstances
Bethlehem Steel Corporation and the Five alleged that imports of carbon steel structural
shapes, hot-rolled carbon steel sheet and strip, and cold-rolled carbon steel sheet and
strip under investigation present "critical circumstances." Under §§ 355.29 and 355.33(b)
of the Department's regulations, critical circumstances exist when the alleged subsidies
include an export subsidy inconsistent with the Agreement, and there have been massive
imports of the class or kind of merchandise which is the subject of the investigation over a
relatively short period.
We have not found any export subsidy in these investigations. Therefore, critical
circumstances do not exist in the investigations for carbon steel structural shapes,
hot-rolled carbon steel sheet and strip, and cold-rolled carbon steel sheet and strip from
France.
Verification
In accordance with section 776(a) of the Act, we verified the data used in making our final
determinations. During this verification, we followed normal procedures, including
inspection of documents, discussions with government officials and on-site inspection of
manufacturers' operations and records.
Administrative Procedures
The Department has afforded interested parties an opportunity to present oral views in
accordance with its regulations (19 CFR 355.35). A public hearing was held on July 12,
1982. In accordance with the Department's regulations (19 CFR 355.34(a)), written views
have been received and considered.
Suspension of Liquidation
The suspension of liquidation ordered in our preliminary affirmative countervailing
duty determinations shall remain in effect until further notice. The estimated net subsidy
for each firm and for each product is as follows:
TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE
We are directing the United States Customs Service to require a cash deposit or bond in
the amount indicated above for each entry of the subject merchandise entered on or after
September 7, 1982. Where the manufacturer is not the exporter, and the manufacturer is
known, the rate for that manufacturer shall be used in determining the amount of cash
deposit or bond. If the manufacturer is unknown, the rate for all other
manufacturers/producers/exporters shall be used. Where a company specifically listed
above has not exported a particular product under investigation during the period for
which we are measuring subsidization, the amount of cash deposit or bond for these
products shall be based on the highest rate for products that were exported by that
company.
ITC Notification
In accordance with section 705(d) of the Act, we will notify the ITC of our
determinations. In addition, we are making available to the ITC all non- privileged and
non-confidential information relating to these investigations. We will allow the ITC access
to all privileged and confidential information in our files, provided the ITC confirms that
it will not disclose such information, either publicly or under an administrative
protective order without the written consent of the Deputy Assistant Secretary for
Import Administration. The ITC will determine within 45 days of the publication of this
notice whether these imports are materially injuring, or threatening to materially injure,
a U.S. industry. If the ITC determines that material injury, or threat of material injury,
does not exist, this proceeding will be terminated and all securities posted or cash
deposited as a result of the suspension of liquidation will be refunded or cancelled. If,
however, the ITC determines that such injury does exist, within 7 days of notification by
the ITC of that determination, we will issue a countervailing duty order, directing
Customs officers to assess countervailing duty on certain steel products from France
entered, or withdrawn from warehouse, for consumption after the suspension of
liquidation, equal to the net subsidy determined or estimated to exist as a result of the
annual review process prescribed by section 751 of the Act. The provision of section
707(a) of the Act will apply to the first directive for assessment.
This notice is published pursuant to section 705(d) of the Act and § 355.33 of the
Department of Commerce Regulations (19 CFR 355.33).
Dated: August 24, 1982.
Gary N. Horlick,
Acting Assistant Secretary for Trade Administration.