82-c30

NOTICES

DEPARTMENT OF COMMERCE

Preliminary Negative Countervailing Duty Determination; Industrial
Nitrocellulose From France

Thursday, December 30, 1982

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AGENCY: International Trade Administration, Commerce.

ACTION: Preliminary Negative Countervailing Duty Determination.

SUMMARY: We preliminarily determine 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 industrial nitrocellulose, as
described in the "Scope of Investigation" section of this notice. However, the estimated
net subsidy is de minimis and therefore our preliminary determination is negative. If this
investigation proceeds normally, we will make our final determination by February 21,
1983.

EFFECTIVE DATE: December 30, 1982.

FOR FURTHER INFORMATION CONTACT:Gary Taverman, Office of Investigations,
Import Administration, International Trade Administration, U.S. Department of
Commerce, 14th and Constitution Avenue, NW., Washington, D.C. 20230, telephone:
(202) 377-0161.

SUPPLEMENTARY INFORMATION:

Preliminary Determination

Based upon our investigation, we preliminarily determine that there is reason to believe
or suspect 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 industrial nitrocellulose, as described in the "Scope
of Investigation" section of this notice.
For purposes of this investigation we preliminarily determine that while preferential
financing from Credit National, and grants from the Ministry of Defense and DATAR,
confer benefits to Societe Nationale des Poudres et Explosifs (SNPE), the estimated net
subsidy is de minimis, and therefore our preliminary determination is negative.

Case History

On September 14, 1982, we received a petition from counsel for Hercules, Incorporated,
filed on behalf of the U.S. industry producing industrial nitrocellulose. The petition
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 subject merchandise.
We found the petition to contain sufficient grounds upon which to initiate a
countervailing duty investigation, and on October 4, 1982, we initiated a
countervailing duty investigation (47 FR 44807). We stated that we expected to issue
a preliminary determination by December 8, 1982. We subsequently determined that the
investigation is "extraordinarily complicated." as defined in section 703(c) of the Act, and
postponed our preliminary determination for two weeks until December 22, 1982 (47 FR
53441).
Since France is a "country under the Agreement" within the meaning of section 701(b) of
the Act, an injury determination is required for this investigation. Therefore, we notified
the U.S. International Trade Commission (ITC) of our initiation. On October 29, 1982, the
ITC preliminarily determined that there is a reasonable indication that these imports are
materially injuring, or threatening material injury of, a U.S. industry.
We presented questionnaires concerning the allegations to the government of France
and to counsel for SNPE in Washington, D.C. On November 17, 1982, we received the
responses to the questionnaires. A supplemental response was received on December 15,
1982.

Scope of Investigation

The merchandise covered by this investigation consists of industrial nitrocellulose
containing between 10.8 percent and 12.2 percent nitrogen, not to be confused with
explosive grade nitrocellulose which contains over 12.2 percent nitrogen. Industrial
nitrocellulose is a dry, white, amorphous synthetic chemical produced by the action of
nitric acid on cellulose. It is extremely flammable, so it is stored and shipped wet with
alcohol. Industrial nitrocellulose comes in several viscosities and is used to form films in
lacquers, coatings, furniture finishes and printing ink. This product is currently classified
as cellulosic plastic materials, other than cellulose acetate, under item number 445.2500
of the Tariff Schedules of the United States Annotated. Explosive grade nitrocellulose is
classified differently.
SNPE is the only producer and exporter in France of the subject merchandise which was
exported to the United States. The period for which we are measuring subsidization is
calendar year 1981.

Analysis of Programs

Based on our analysis to date of the petition and the responses to our questionnaires, we
have preliminarily determined the following.

I. Programs Preliminarily Determined to Confer Subsidies

We preliminarily determine that subsidies are being provided under the programs
described below to manufacturers, producers, or exporters in France of the industrial
nitrocellulose included in this investigation.

(A) Preferential financing--Credit National.--Credit National (CN) is a semi- public credit
institution, with special legal status, which issues medium- and long-term loans to French
industry. Loan funds are raised by offering bonds in the public marketplace. These bonds
are guaranteed by the government of France.
In addition, CN has participated in bank loans to French industries through such means as
assuring the banks that they can rediscount the loans with CN. In effect, this constitutes a
guarantee. In most cases, CN acts as only part of a loan syndicate. The terms of any loans
CN makes on behalf of the French government are set by the French government.
There is some evidence suggesting that CN loans are available to all industries and
regions. However, we are unable to establish that these loans are not given at the
direction of the government of France, or that CN loans are generally available.
Therefore, we preliminarily determine that these loans confer a subsidy within the
meaning of the countervailing duty law, to the extent that they were provided at
preferential, below-market rates.
The subsidy rate for any loan or loan guarantee from CN bank syndicates in which CN
participated 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 by comparing what a company would pay a commercial lender in principal and
interest in any given year with what the company actually pays on the preferential loan in
that year. After calculating the payment differential in each year of the loan, we then
calculated the present value of this stream of benefits in the year the loan was made, using
a risk-free interest rate as the discount rate. In other words, we determined the subsidy
value of a

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preferential loan as if the benefits had been bestowed in the year the
loan was given. For the commercial benchmark, we used the monthly financial statistics
on the secondary market yields of private bonds in France published by the Organization
for Economic Cooperation and Development (OECD). For the discount rate, we used the
average annual yield of public and semi-public sector bonds on the secondary market
published by the OECD because it represents the best estimate of the risk-free rate in
France. Dividing the present value of the 1981 benefit by all SNPE's 1981 sales, we
calculated and ad valorem benefit of 0.043 percent.

(B) Grants from the Ministry of Defense.--In its 1979 annual report, SNPE indicates that
the company had received FF 56 million, most of it in the form of an advance from the
Ministry of Defense. The purpose of this advance was to partially finance the up-grading of
the pyrotechnical safety arrangements in the government plants transferred to SNPE
during the reorganization of the industry. Counsel for SNPE reports that while a portion of
the funds took the form of a non-repayable grant, the majority of the funds were received
in exchange for additional equity in the company. As discussed in the section entitled
"Reorganization of the Explosive Powders and Substances Industry" in this notice, we
have preliminarily determined that government equity participation in SNPE does not
confer countervailable benefits. However, we preliminarily determine that those funds
which were received in the form of a non-repayable grant and used by SNPE in plants
involved in the production of industrial nitrocellulose confer a benefit within the meaning
of the countervailing duty law.
The subsidy rate for this program is calculated according to the Department's usual
methodology for grants. As indicated in several recent determinations, our allocation
technique is a present value analysis which is based on the concept that a sum of money
to be received in the future does not have the same value as that sum received today. See
Appendix 2 to Final Countervailing Duty Determinations: Certain Steel Products from
Belgium, 47 FR 39316-39317 (1982). The present value of any series of payments under
this program is calculated using a risk-free discount rate. For France, we used the
average annual yield of public and semi-public sector bonds on the secondary market
published by the OECD because it represents the best estimate of the risk-free rate in
France. Dividing the present value of the 1981 benefit by SNPE's 1981 industrial
nitrocellulose sales, we calculated an ad valorem benefit of 0.327 percent.

(C) 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 l'Action Regionale (DATAR) coordinates
the programs of various government agencies and ministries. The Department has
information which indicates that for incentive purposes, France is divided into four
zones. Each zone, or part of a zone, is eligible for different types and levels of assistance.
The assistance includes development grants, non-industrial grants, research and
development grants, decentralization indemnities, and job training subsidies. Since there
appears to be a regional preference in the manner in which programs are administered
and funding allocated, we preliminarily determine that assistance provided through
DATAR constitutes subsidies within the meaning of the Act.
SNPE reports the receipt of a grant in 1979, designated for the Bergerac plant, for the
purpose of improving production. Using the Department's usual methodology for grants,
we calculated an ad valorem benefit of 0.056 percent.

II. Programs Preliminarily Determined Not To Confer Subsidies

We preliminarily determine that the French government is not providing subsidies to
manufacturers, producers or exporters of industrial nitrocellulose under the following
programs.

(A) Reorganization of the Explosive Powders and Substances Industry.--The government
of France, as authorized by Law No. 575 of July 3, 1970, established guidelines and
regulations for the reorganization of the explosive powders and substances industry. This
action was taken pursuant to the requirements of the Treaty of Rome. According to
Article 37 of the Treaty, European Community Member States were required to
adjust any state monopolies of a commercial character so as to ensure that * * * no
discrimination regarding the conditions under which goods are procured and marketed
exists between nationals of Member States. The provisions of this Article shall apply to
any body through which a Member State, in law or in fact, either directly or indirectly
supervises, determines or appreciably influences imports or exports between Member
States. These provisions shall likewise apply to monopolies delegated by the State to
others.
Prior to the enactment of Law No. 575, Service des Poudres, a division of the French
Ministry of Defense, retained monopoly control over the manufacture of and trade in
powders and explosives, including industrial nitrocellulose, the merchandise subject to
this investigation. In order to avoid any possible violation of the Treaty, in 1971 the
government of France established the public corporation Societe Nationale des Poudres
et Explosifs, transferred to it all of the industrial and commercial activities of Service des
Poudres, and received shares of SNPE in return. The government of France remains the
majority shareholder in SNPE, holding over 99 percent of its outstanding stock.
As a result of the reorganization of the explosive powders and substances industry and
the incorporation of SNPE, petitioner alleges that the government of France has
subsidized SNPE as follows:

(1) Equity participation

(a) Acquisition of assets.--Petitioner alleges that SNPE acquired all its land, equipment,
and other assets--including its plants at Bergerac, St. Medard, Sorgues, Vonges and Le
Bouchet--from the Ministry of Defense in 1971 without any cost to it, thereby constituting
a "provision of capital on terms inconsistent with commercial considerations," as defined
by section 771(5)(B)(i) of the Act.
Counsel for SNPE indicates that the transfer of operations and assets from Service des
Poudres to SNPE occurred in several stages over the past 10 years in accordance with the
applicable rules governing the transfer of corporate assets in France. The valuation of
those assets and the mechanism by which the transfer occurred were monitored by the
President of the Commerce Court in Paris. In exchange for the commercial activities and
industrial facilities of Service des Poudres, SNPE issued equity to the government of
France in amounts equal to the value of the transferred assets.
(b) Facilities modernization.--Prior to the reorganization of the industry, the government
of France had instituted a program for the modernization of the facilities of Service des
Poudres. Included in that modernization program were plans to upgrade all facilities so
that they would be in compliance with the regulations governing pyrotechnical safety,
security and environmental protection. SNPE has continued the required modernization
program. The costs of that program have been covered

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by the government,
which has received equity shares from SNPE in return.
As previously stated, petitioner alleges that the various government of France equity
infusions into SNPE confer a countervailable benefits equal to the entire amount of the
equity infusions. Counsel for SNPE claims that the equity infusions are the result of a
mandated divestiture of the government's commercial operations, and thus do not confer
subsidies on the company.
It is well settled that neither government equity ownership per se, nor any secondary
benefit to the company reflecting the private market's reaction to government ownership,
confers a subsidy. Government ownership confers a subsidy only when it is on terms
inconsistent with commercial considerations. We have no evidence at present which
indicates that the equity infusions were on terms inconsistent with commercial
considerations.
Therefore, we preliminarily determine that SNPE has not received benefits which
constitute subsidies within the meaning of the countervailing duty law resulting from
equity participation by the government of France.

(2) Composition of SNPE's workforce

When SNPE was incorporated, all military and civilian personnel of Service des Poudres
were placed at the disposal of the president of the company, as authorized by Article 5 of
Law No. 575 dated July 5, 1970. After a period of one year, those employees had the
option of either: (a) Being placed again at the disposal of the Minister of National Defense;
or (b) being recruited by SNPE in accordance with the provisions of the labor laws.
Employees with government civil service status in the facilities transferred to SNPE had
the option of retaining their status. If that option were elected, then those employees
would continue to be subject to the terms applicable to government employees in any
facility which falls under the jurisdiction of the Minister of National Defense.
Petitioner alleges that SNPE is relieved of the payment of certain wage costs due to the
fact that a portion of its workforce maintains civil service status. According to the 1982
Report of the Auditor General's Office, there are still a number of government workers
employed at SNPE. In all cases, however, SNPE is responsible for the payment of the
salaries and benefits of all its employees. In fact, SNPE has experienced increases in
personnel expenditures resulting from the employment of workers with civil service
status. Because of the recent salary raises granted by the Minister of Defense to workers
with such status, SNPE was required to grant similar increases to those non-status
workers represented by the Union of Chemical Industries.
Therefore, based upon information currently available, we preliminarily determine that
no countervailable benefits are conferred as a result of SNPE's employment of workers
with civil service status.

(B) Research and Development (R & D) Assistance.--SNPE reported receiving funding for R
& D projects from the French government through the Direction Generale a la Recherche
et a la Technologie (DGRT), formerly the Delegation Generale a la Recherche Scientifique
et Technique, a subdivision of the Ministry of Research and Industry.
Information indicates that DGRT funding is awarded neither on a regional nor
industry-specific basis, and research results are made publicly available. Therefore, we
preliminarily determine that the amounts received through these programs do not confer
subsidies within the meaning of the Act.

(D) Labor Programs.--SNPE indicates that it has participated in the following labor
programs:
Contract Emploi-Formation--Under this program, the government of France provides
funds for the training of young people first entering the job market.

Reduction of Benefit Costs--Under this program, companies may reduce by 50 percent for
up to one year the amount of payments made to the government for health insurance,
pensions and family allowances on behalf of those young people who are given new jobs.
Inasmuch as assistance under these programs is available to all industrial sectors and not
specific to any particular region in France, we preliminarily determine that no
countervailable benefit exists.

III. Programs Preliminarily Determined Not to be Used

We preliminarily determine that the following programs are not used by the
manufacturers, producers, or exporters of the product subject to this investigation.

(A) 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.
Based upon our investigation, we preliminarily determine that SNPE has not had any
FDES loans outstanding in 1981.

(B) 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.
Based upon our investigation, we preliminarily determine that SNPE has not had any CDC
loans outstanding in 1981.

(C) Fonds Special d'Adaptation Industrielle (FSAI).--FSAI was established in 1978 to
promote job creation and industrial diversification in various industries in France.
Based upon our investigation, we preliminarily determine that SNPE has not received any
funds from the FSAI.

(D) Loan Guarantees.--Based upon our investigation, we preliminarily determine that
SNPE has not received any loan guarantees from the French government, or any financial
institution controlled or directed by the government.

(E) Fonds National de l'Emploi (FNE).--FNE was established in 1963 to provide vocational
training programs, and relocation and early retirement allowances to workers that are
confronted with industrial changes brought about by economic development.
Based upon our investigation, we preliminarily determine that SNPE has not received any
funds from the FNE.

(F) 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.8
We have no evidence that SNPE has received benefits under these early retirement plans.

(G) National Agency for Energy Conservation (NAEC).--The NAEC provides grants to
industries in France for the purpose of conserving energy. SNPE indicates that it has
received funds from this program for the installation of energy saving equipment, heating
and cooling systems, boilers, and water distribution systems at its Le Bouchet,
Pont-de-Buis, St. Medard, Sorgues and Toulouse plants. All of these funds, however, were
expressly designated and used solely for plants other than Bergerac, the only SNPE

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plant involved in the manufacture of industrial nitrocellulose.

(H) Grants from the River Dock Agency.--Various grants are awarded by the local River
Dock Agencies to industries in France for the purpose of disposal of industrial wastes.
SNPE indicates that it has received funds from this program for the regeneration and
treatment of waste acids at its Sorgues plant. All of these funds, however, were expressly
designated and used solely for plants other than Bergerac, the only SNPE plant involved
in the manufacture of industrial nitrocellulose.

(I) Local Business Tax Deductions.--Under the direction of the French tax authority
("Direction Generale des Imports"), all French industries are eligible for reductions of
local business taxes ("taxe professionelle") for the purpose of expansion of business
activities. SNPE has received tax reductions in 1980 for expansion at its Angoulene plant.
All of these funds, however, were expressly designated and used solely for plants other
than Bergerac, the only SNPE plant involved in the manufacture of industrial
nitrocellulose.

IV. Programs for Which Additional Information is Needed

We preliminarily determine that additional information is needed for the following
programs alleged by the petitioner to provide countervailable benefits to the
manufacturers, producers, or exporters in France of the merchandise subject to this
investigation.

(A) Reduced Input Costs.--Petitioner alleges that SNPE benefits from reduced costs of
inputs purchased from other institutions owned or controlled by the government of
France. In its questionnaire response, SNPE indicates that it purchases gas, electric
power, nitric acid, and oleum from unrelated government-controlled institutions at arm's
length.
We will seek additional information on the costs of these inputs to SNPE and to other
industries of similar size and demand.

(B) Subvention d'equipment (Equipment Subsidies).--Petitioners allege that SNPE has
received grants from the government of France for the purchase of capital equipment.
The cumulative value of these grants appears in SNPE's 1981 balance sheet under the
heading "Subvention d'equipment." Counsel for SNPE indicates that these funds are
available to all industrial sectors in France for projects such as pollution control, energy
conservation and waste disposal, and are administered through various local
governmental agencies.
We will seek additional information on the agencies which serve as the sources of funds
that are accounted for in SNPE's financial statement.

Verification

In accordance with section 776(a) of the Act, we will verify all data used in making our
final determination.

Summary of Preliminary Benefits

We preliminarily determine that benefits which constitute subsidies within the meaning of
the countervailing duty law are being provided to SNPE, the only known
manufacturer, producer or exporter in France of industrial nitrocellulose in an amount
equal to 0.426 percent ad valorem. However, because the net subsidy rate is de minimis,
our preliminary countervailing duty determination is negative.

ITC Notification

In accordance with section 703(e) of the Act, we will notify the ITC of our determination.

Public Comment

In accordance with � 355.35 of the Commerce Department Regulations, if requested, we
will hold a public hearing to afford interested parties an opportunity to comment on this
preliminary determination at 9 a.m. on January 25, 1983, at the U.S. Department of
Commerce, Room 3708, 14th and Constitution Avenue, NW, Washington, DC 20230.
Individuals who wish to participate in the hearing must submit a request to the Deputy
Assistant Secretary for Import Administration, Room 3099B, at the above address within
10 days of this notice's publication. Requests should contain: (1) The party's name,
address and telephone number; (2) the number of participants; (3) the reason for
attending; and (4) a list of the issues to be discussed. In addition, prehearing briefs must
be submitted to the Deputy Assistant Secretary by January 18, 1983. Oral presentations
will be limited to issues raised in the briefs. All written views should be filed in accordance
with 19 CFR 355.43, within 30 days of this notice's publication, at the above address and
in at least 10 copies.
Dated: December 22, 1982.

Gary N. Horlick,

Deputy Assistant Secretary for Import Administration.

[FR Doc. 82-35437 Filed 12-29-82; 8:45 am]

BILLING CODE 3510-25-M