NOTICES
DEPARTMENT OF COMMERCE
[C-427-603]
Preliminary Affirmative Countervailing Duty Determination: Brass Sheet and
Strip From France
Monday, June 9, 1986
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AGENCY: Import Administration, International Trade Administration,
Commerce.
ACTION: Notice.
SUMMARY: We preliminarily determine that certain benefits which constitute subsidies
within the meaning of the countervailing duty law are being provided to
manufactures, producers, or exporters in France of brass sheet and strip. The estimated
net subsidy is 7.19 percent ad valorem.
We have notified the U.S. International Trade Commission (ITC) of our determination. We
are directing the U.S. Customs Service to suspend liquidation of all entries of brass sheet
and strip from France that are entered, or withdrawn from warehouse, for consumption
on or after the date of publication of this notice, and to require a cash deposit or bond on
entries of these products in the amount equal to the estimated net subsidy.
If this investigation proceeds normally, we will make our final determination on or before
August 18, 1986.
EFFECTIVE DATE: June 9, 1986.
FOR FURTHER INFORMATION CONTACT: Mary Martin or Loc Nguyen, Office of
Investigations, Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC
20230; telephone: (202) 377-2830 or (202) 377-0167.
SUPPLEMENTARY INFORMATION:
Preliminary Determination
Based upon our investigation, we preliminarily determine that there is reason to believe
or suspect that 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 brass sheet and strip. For purposes of this
investigation, the following programs are found to confer subsidies:
- Government Equity Infusions and Other Financial Assistance to Trefimetaux S.A.
(Trefimetaux) through Pechiney S.A. (Pechiney); and
- Certain Financing from Credit National.
We preliminarily determine the estimated net subsidy to be 7.19 percent ad valorem for
all manufacturers, producers, or exporters in France of brass sheet and strip.
Case History
On March 10, 1986, we received a petition in proper form from American Brass,
Bridgeport Brass Corporation, Chase Brass & Copper Company, Hussey Copper Ltd., the
Miller Company, Olin Corporation-Brass Group, and Revere Copper Products, Inc.,
domestic manufacturers of brass sheet and strip, and the International
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Association of Machinists and Aerospace Workers, International Union, Allied Industrial
Workers of America (AFL-CIO), Mechanics Educational Society of America (Local 56),
and the United Steelworkers of America (AFL-CIO/CLC), filed on behalf of the U.S.
industry producing brass sheet and strip. In complaince with the filing requirements of §
355.26 of the Commerce Regulations (19 CFR 355.26), the petition alleges that
manufacturers, producers, or exporters in France of brass sheet and strip, directly or
indirectly, receive subsidies within the meaning of section 701 of the Act, and that these
imports materially injure, or threaten material injury to, a U.S. industry.
We found that the petition contained sufficient grounds upon which to intitiate a
countervailing duty investigation, and on March 31, 1986, we initiated such an
investigation (51 FR. 11778). We stated that we expected to issue a preliminary
determination on or before June 3, 1986.
Since France is entitled to an injury determination under section 701(b) of the Act, the
ITC is required to determine whether imports of the subject merchandise from France
materially injury, or theaten material injury to, a U.S. industry. Therefore, we notified the
ITC of our initiation. On April 24, 1986, the ITC determined that there is a reasonable
indication that an industry in the United States is materially injured by reason of imports
from France of certain brass sheets and strip (51 FR. 16235).
On April 9, 1986, we presented a questionnaire to the government of France, in
Washington, DC, concerning the petitioners' allegations, and we requested a response by
May 9, 1986. On May 7, 1986, we received a letter from the French Embassy in
Washington, DC., requesting an extension of tex days for the filing of the questionnaire
responses. An extension until May 16, 1986, was granted by the Department. On May 19,
1986, we received responses to our questionnaire from Pechiney, Trefimetaux, and the
government of France. Additional information was supplied on May 22, 27, 29, and 30,
1986.
The government's response stated that Griset S.A. (Griset) had exported one small
shipment of brass strip to the United States in 1985, but that it had no intention of
exporting the products to the United States in the future. Griset requested that it be
allowed not to respond to the questionnaire and that it be excluded from any
countervailing duty order that the Department might publish. Griset's application for
exclusion was not timely because it was not made within 30 days after publication of the
notice of initiation of the countervailing duty investigation. See 19 CFR 355.38.
Moreover, Griset did not state that it had not participated in the programs under
investigation. Therefore, we have not excluded Griset from this investigation.
Scope of Investigation
The products covered by this investigation are brass sheet and strip other than leaded
brass and tin brass sheet and strip, currently classified under the Tariff Schedules of the
United States Annotated (TSUSA) item numbers 612.3960, 612.3982, and 612.3986. The
chemical compositions of the products under investigation are currently defined in the
Copper Development Association (C.D.A.) 200 series or the Unified Numbering System
(U.N.S.) C20000 series. Products whose chemical compositions are defined by other
C.D.A. or U.N.S. series are not covered by this investigation.
Analysis of Programs
Throughout this notice, we refer to certain general principles applied to the facts of the
current investigation. These general principles are described in the "Subsidies Appendix"
attached to the notice of "Cold-Rolled Carbon Steel Flat-Rolled Products from Argentina:
Final Affirmative Countervailing Duty Determination and Countervailing Duty
Order," which was published in the April 26, 1984, issue of the Federal Register (49 FR.
18006).
Consistent with our practice in preliminary determinations, when a response to an
allegation denies the existence of a program, receipt of benefits under a program, or
eligibility of a company or industry under a program, and the Department has no
persuasive evidence showing that the response is incorrect, we accept the response for
purposes of the prelimiary determination. All such responses are subject to verification.
If the response cannot be supported at verification, and the program is otherwise
countervailable, the program will be considered a subsidy in the final determination.
For purposes of this preliminary determination, the period for which we are measuring
subsidies ("the review period") is calendar year 1985.
Petitioners alleged that Trefimetaux has been both unequityworthy and uncreditworthy
since 1981. We address this issue in the program-specific section of this notice.
Based upon our analysis of the petition and the responses to our questionnaire submitted
by the government of France, Pechiney and Trefimetaux, we preliminarily determine the
following:
I. Programs Preliminarily Determined to Confer Subsidies
We preliminarily determine that subsidies are being provided to manufacturers,
producers, or exporters in France of brass sheet and strip under the following programs:
A. Government Equity Infusions and Other Financial Assistance to Trefimetaux
Trefimetaux is the copper subsidiary of Pechiney, which has been owned by the French
government since it was nationalized by French Law No. 82-155 of February 11, 1982.
During 1985, the French government owned 85 percent of the voting shares of Pechiney
and Societe Francaise de Participations Industrielles, a nationalized company, owned all
the remaining voting shares with the exception of one share owned by each of the
members of Pechiney's board. Pechiney owns virtually all the stock of Trefimetaux.
The Government of France provided funds to Pechiney during 1982-1985 in the form of
direct equity investments, conversion of debt into equity, and subordinated shareholder
investments. These subordinated shareholder investments, which were treated by the
company as equity for financial analysis purposes, have a yearly return based on the
company's yearly cash flow and gross income and a fixed percentage component.
Although the French government made no direct investments in Trefimetaux, Pechiney
provided equity infusions and other financial assistance to Trefimetaux. For purposes of
this preliminary determination, we consider Pechiney to be under the direction of the
French government, its sole owner, and the transfer of money from Pechiney to
Trefimetaux to constitute a receipt of money indirectly from the French government.
1. Equity Infusions
During 1983-1985, Pechiney provided Trefimetaux with equity infusions. These infusions
resulted from conversion of debt, stock purchases and subordinated shareholder
investments which were made without provisions for schedules of repayment or
payments of interest.
We have consistently held that government provision of equity does not per se confer a
subsidy. Government infusions bestow countervailable benefits only when provided on
terms
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inconsistent with commercial considerations.
For the purpose of this preliminary determination, government equity purchases bestow
countervailable bounties or grants only when they occur on terms inconsistent with
commercial considerations. When there is no market- determined price for equity, it is
necessary to determine whether equity purchases in the company are reasonable
commercial investments. Trefimetaux's shares are not publicly traded and there are no
market-determined prices for its shares.
For purposes of this preliminary determination, we reviewed and assessed financial
statements from 1976 to 1985. In analyzing the financial statements, we considered the
impact of the accounting practices used by the company on its overall financial results. In
this review, we analyzed the results and evaluated the information from the viewpoint of
an investor. This review included analysis of the following ratios:
- Rate of return on sales and equity;
- Gross margin to sales;
- Financial expenses to sales;
- Cash flow to debt service payment;
- Current ratio; and
- Debt to equity.
Based on these factors, we preliminarily determine Trefimetaux to be unequityworthy
between 1983-1985. Consequently, the action of the government, through Pechiney, in
taking an equity position in the company in those years is inconsistent with commercial
considerations and may confer a subsidy.
To calculate the benefit, we compared Trefimetaux's rate of return on equity with the
average rate of return in France for 1985. We then applied the "rate of return" shortfall to
all purchases of equity that we consider to be inconsistent with commercial
considerations. For this preliminary determination, we used as best information available
for the rate of return on equity in France figures developed for U.S. Direct Investment
Abroad as published in Survey of Current Business.
Because the amount of benefit calculated exceeded the amount of benefit calculated by
treating the equity infusions as outright grants, we have limited the benefits realized to
the "grant cap." We divided these benefits by Trefimetaux's total sales in 1985 to calculate
an estimated net subsidy of 4.47 percent ad valorem.
2. Preferential Loans
During the period 1982-1985, the government, through Pechiney, provided loans to
Trefimetaux on terms inconsistent with commercial considerations. We have no
information indicating that such loans are available to any other company in France.
Petitioners alleged that Trefimetaux has been uncreditworthy since at least 1981. We
preliminarily determine that Trefimetaux was uncreditworthy for the years 1982-1985.
To determine the creditworthiness of Trefimetaux, we analyzed its present and past
health, as reflected in various financial indicators calculated from its financial statements.
In making our perliminary determination of uncreditworthiness, we considered
Trefimetaux's inability to meet its costs and financial obligations from its cash flow, its
consistent pattern of losses, and its deteriorating capital structure.
We applied the loan methodology for uncreditworthy companies described in the
Subsidies Appendix. We treated all loans with variable interest rates as short-term loans
and compared the principal and interest a company would pay a normal commercial
lender in any given year with amounts actually repaid in that year under these loans. We
also treated the loans with fixed interest rates as short term loans because no information
was provided on the duration of these loans.
For the benchmark rate, we used the "taux de base bancaire" (TBB), plus the maximum
premium and other charges, plus the risk premium as explained in the Subsidies
Appendix. The TBB is the rate used in France by banks for loans to corporations. We
allocated the benefits from these loans over Trefimetaux's total sales in 1985 and
calculated an estimated net subsidy of 0.44 percent ad valorem.
3. Government Grant
During 1983, the government, through Pechiney, provided Trefimetaux with a short-term
advance. This debt was subsequently written off. Since no additional information has been
provided about this money, we have preliminarily determined to treat it as a grant. We
have no information indicating that such grants are available to any other company in
France, nor do we have reason to believe that the grant was tied to exports. Therefore,
we are considering the grant to be a domestic subsidy.
To calculate the benefits attributable to this grant, we used our grant methodology and
allocated the grant money over 14 years (the average useful life of renewable physical
assets for the manufacture of primary nonferrous metals) using the weighted-average cost
of capital for Trefimetaux as the discount rate. The estimated net subsidy is 1.10 percent
ad valorem.
B. Certain Financing from Credit National (CN)
Trefimetaux received financing from Credit National during the period 1976- 1985. Credit
National is a major financial institution which plays an important role in the French
financial banking system, and it has a special legal status. See "Final Affirmative
Countervailing Duty Determination; Industrial Nitrocellulose from France" (48 FR
11971 at 11974). Though not nationalized, 36.85 percent of Credit National's stock is
owned by nationalized institutions. The General Manager of Credit National is nominated
by the President of France and the government is at least indirectly represented by a
majority of its board of directors. Credit National undertakes special operations for the
government. These include extending "special procedure loans" on behalf of the
government and performing certain advisory and management functions on projects
designated for the government, its agencies and authorities. A substantial portion of
Credit National's economic and financial activity is directed to sectors of French national
interest. Thus, while Credit National is not a government institution, it does maintain a
variety of official, semi-official and indirect ties with the government of France.
While some of the loans made by Credit National are of a "special" nature (i.e., at interest
rates set by the government and made in conjunction with medium term credits which
may be rediscounted), "ordinary loans are also extended on commercial terms, with
interest rates similar to those of commercial banks in France. In the Nitrocellulose case
cited above, we found the "ordinary" loans to be made on commercial terms and hence
not countervailable. We have no indication that the nature of these loans has changed
from our previous determination.
Trefimetaux states that it received both "ordinary" and "special" loans from Credit
National. While some of the special loans were for products not subject to this
investigation, one loan was specifically related to brass sheet and strip. This "special" loan
included an interest reduction contingent upon increasing exports of certain products
including brass sheet and strip.
Because the "special" Credit National loan for the products under investigation is at a
preferential interest rate that is specifically linked to a target level of exports, we
preliminarily determine that
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it is an export subsidy within the meaning of the
countervailing duty law.
We calculated the benefits conferred by this loan in accordance with our long- term loan
methodology as contained in the Subsidies Appendix. We divided the benefit provided by
the loan by the value of Trefimetaux's 1985 exports of brass sheet and strip to arrive at an
estimated net subsidy of 0.18 percent ad valorem.
II. Program Preliminarily Determined not To Confer Subsidies
We preliminarily determine that the French government is not providing subsidies to
manufacturers, producers or exporters in France of brass sheet and strip under the
following program:
Fonds National de l'Emploi (FNE)
The FNE was established in 1963 to provide vocational training programs and early
retirement allowances to workers confronted with industrial changes brought about by
economic development. The government of France's response states that the FNE's
adjustment assistance programs are generally available in France. The FNE provides
benefits to individuals and groups dismissed from employment because of technological
evolution or by adverse economic conditions. These benefits consist of training
agreements for wage-earners eligible for retraining and allowance agreements for older
wage-earners who are not likely to be reemployed. The allowance agreements involve
employees between the ages of 55 and 60 who choose early retirement and then receive
their unemployment allowance from the FNE until they reach the retirement age of 60.
The special allowance funds are obtained entirely from dues paid by employers and
employees.
Trefimetaux's response states that it was not compensated by the French government
through FNE for reductions in its work force. To avoid labor problems, Trefimetaux
entered into collective agreements with the labor unions which provided training
programs and severance pay to certain employees in amounts that exceeded the amounts
the company would have otherwise been legally required to pay.
Because this program does not appear to be limited to a specific enterprise or industry or
group of enterprises or industries, we preliminary determine that the program is not
countervailable.
III. Programs Preliminary Determined Not To Be Used
We preliminary determine that the following programs are not used by the
manufacturers, producers or exporters in France of brass sheet and strip:
A. Preferential Electricity Rates for Trefimetaux
Pechiney on behalf of several subsidiaries entered into agreements with Electricite de
France to provide electricity. However, Trefimetaux's response states that it did not
receive electricity under any agreement providing preferential rates. Trefimetaux
purchases electricity from Electricite de France at rates established by published tariffs
depending on the type of current and the customers' power requirements.
B. 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 selected as those in which to promote additional development.
The Delegation a l'Amenagement du Territoire et a l'Action Regionale (DATAR)
coordinates the programs of various government agencies and ministries. The responses
state that Trefimetaux did not receive any benefits through DATAR.
C. Export Credit Insurance for Political, Exchange Rate Fluctuation and Inflation Risks
The Compagnie Francais d'Assurance pour le Commerce Exterieur (COFACE) is a
government corporation that provides export insurance to cover commercial, political,
exchange rate fluctuation and inflation risks. We have previously determined that
COFACE export insurance does not confer a subsidy with respect to exports to the United
States. See "Final Affirmative Countervailing Duty Determination: Carbon Steel Wire
Rod from France" (47 Fed. Reg. 42422 at 42427). Trefimetaux's response states that
COFACE does not insure the company for inflation or exchange rate fluctuation risks. In
addition, Trefimetaux has no COFACE political risk insurance on its sales to the United
States.
D. Export Financing
In France, exports may be financed or guaranteed through the Banque Francais du
Commerce Exterieur (BFCE), and French companies may receive financing for the
transfer abroad of their inventories of capital goods from Compagnie pour le Financement
du Stock a l'Etranger (COFISE). Trefimetaux's response stated that it received no export
financing under these programs during the review period.
Suspension of Liquidation
In accordance with section 703(d) of the Act, we are directing the U.S. Customs Service
to suspend liquidation of all entries of brass sheet and strip from France which are
entered, or withdrawn from warehouse, for consumption on or after the date of
publication of this notice in the Federal Register and to require a cash deposit or bond for
each entry of this merchandise in the amount of the estimated ad valorem rate. The
estimated net subsidy is 7.19 percent ad valorem for all manufacturers, producers, or
exporters in France of brass sheet and strip. This suspension will remain in effect until
further notice.
Verification
In accordance with section 776(a) of the Act, we will verify the data used in making our
final determination. We will not accept any statement in a response that cannot be
verified for our final determination.
ITC Notification
In accordance with section 703(f) of the Act, we will notify the ITC of our determination.
In addition, we are making available to the ITC all non- privileged and non-confidential
information relating to this investigation. 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.
If our final determination is affirmative, the ITC will determine whether these imports
materially injure, or threaten material injury to, a U.S. industry within 45 days after the
Department makes its final affirmative determination.
Public Comment
In accordance with section 355.35 of the Commerce Regulations, we will hold a public
hearing, if requested, to afford interested parties an opportunity to comment on this
preliminary determination at 10:00 a.m. July 16, 1986, at the U.S. Department of
Commerce, Room 3708, 14th Street 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 B-099, at the above address
within 10 days of the publication of this notice in the Federal Register. Requests should
contain: (1)
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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, at least ten copies of the confidential version and seven copies of the
nonconfidential version of the pre-hearing briefs must be submitted to the Deputy
Assistant Secretary by July 10, 1986. Oral presentations will be limited to issues raised in
the briefs.
In accordance with 19 CFR 355.33(d) and 19 CFR 355.34, written views will be considered
if received not less than 30 days before the final determination or, if a hearing is held,
within 10 days after the hearing transcript is available.
This notice is published pursuant to sectin 703(f) of the Act (19 U.S.C. 1671b(f)).
Gilbert B. Kaplan,
Deputy Assistant Secretary for Import Administration.
June 4, 1986.
[FR Doc. 86-12930 Filed 6-6-86; 8:45 am]
BILLING CODE 3510-DS-M