NOTICES
DEPARTMENT OF COMMERCE
[C-427-016]
Industrial Nitrocellulose From France; Final Results of Countervailing Duty
Administrative Review
Friday, January 9, 1987
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AGENCY: International Trade Administration/Import Administration,
Department of Commerce.
ACTION: Notice of final results of countervailing duty administrative review.
SUMMARY: On February 13, 1986, the Department of Commerce published the
preliminary results of its administrative review of the countervailing duty order on
industrial nitrocellulose from France. The review covers the period March 22, 1983
through December 31, 1983 and 12 programs.
We gave interested parties an opportunity to comment on the preliminary results. After
reviewing all of the comments received, we have determined the net subsidy for the
period of review to be 0.37 percent ad valorem.
EFFECTIVE DATE: January 9, 1987.
FOR FURTHER INFORMATION CONTACT: Bernard Carreau or David Layton, Office of
Compliance, International Trade Administration, U.S. Department of Commerce,
Washington, DC 20230; telephone (202) 377-2786.
SUPPLEMENTARY INFORMATION:
Background
On February 13, 1986, the Department of Commerce ("the Department") published in the
Federal Register (51 FR 5386) the preliminary results of its administrative review of the
countervailing duty order on industrial nitrocellulose from France (48 FR 28521,
June 22, 1983). The Department has now
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completed that administrative review in
accordance with section 751 of the Tariff Act of 1930 ("the Tariff Act").
Scope of Review
Imports covered by the review are shipments of French industrial nitrocellulose
containing between 10.8 and 12.2 percent nitrogen, not explosive grade nitrocellulose
which contains over 12.2 percent nitrogen. Such merchandise is currently classifiable as
cellulosic plastic materials, other than cellulose acetate, under item 445.2500 of the
Tariff Schedules of the United States Annotated ("TSUSA").
The review covers the period March 22, 1983 through December 31, 1983 and 12
programs: (1) Cross-subsidization through military sales; (2) a grant from the Ministry of
Defense; (3) a grant from DATAR; (4) the assumption of labor costs for civil servants; (5)
increased government equity; (6) raw material purchases from government-owned firms;
(7) the assumption of labor costs by the FNE; (8) research and development assistance;
(9) financing from the Fonds de Developpement Economique et Social; (10) loans from
Credit National; (11) financing from the Caisse des Depots et Consignations; and (12) loans
from the Ministry of Research and Industry.
Analysis of Comments Received
We invited interested parties to comment on the preliminary results. We received written
comments from the petitioner, Hercules, Inc., and from the respondents, the Government
of France and the Societe Nationale des Poudres et Explosifs ("SNPE").
Comment 1: Hercules disputes the Department's statement that it would be inconsistent
with the legislative history of the countervailing duty law to allocate to industrial
nitrocellulose benefits clearly tied to military nitrocellulose. Hercules contends that the
Department ignored both the legislative intent of the Tariff Act and administrative
precedent in its analysis of possible indirect subsidies to SNPE's industrial nitrocellulose
production from the excess profits purportedly made on military nitrocellulose. The
Department cites no legislative justification for its treatment of the issue.
The legislative history of the Tariff Act indicates that Congress intended that the
Department interpret the countervailing duty law in a broad, flexible, and creative
manner. Section 701(a) of the Tariff Act requires Commerce to impose countervailing
duties on products benefiting from both direct and indirect subsidies. Congress
emphasized that the term "subsidy" defined in section 771(5) of the Tariff Act must not be
treated as a static concept. Its definition must evolve in order to counteract new types of
government action that distort market forces and place U.S. companies at a competitive
disadvantage.
Contrary to the intent of the Tariff Act, the Department applied a narow and restrictive
interpretation of the concept of countervailing subsidy to the cross-subsidization issue.
Furthermore, the courts have held that the Department must be concerned with the
effects of a particular government program, not its nominal form. The Tariff Act is
concerned exclusively with the unfair competitive effect of a benefit, not the
government's supposed intent in providing the benefit.
SNPE states that the Department was correct in determining that, even if there were a
benefit from excessive prices for military nitrocellulose, it would not affect nitrocellulose.
Hercules' novel theory of cross-subsidization is contrary to Congressional intent. In the
case of SNPE, there is no clear connection between the alleged subsidy provided and the
product exported. Upstream subsidization marks the outer limit of what constitutes a
subsidy under the Tariff Act. The alleged cross-subsidization does not fit in this category.
Department's position: We agree that the countervailing duty law requires the
Department to countervail indirect subsidies, to construe the term "subsidy" broadly, and
to measure the actual amount of countervailable benefits. However, these requirements
must be interpreted along with other provisions and purposes of the law.
While Congress did not intend that the countervailing duty law be applied in a narrow
and restrictive fashion, it also did not intend that the law be applied without regard to
statutory guidelines, international obligations, and administrative precedents. We believe
that we have applied the countervailing duty law in as broad and flexible a manner as
the circumstances of this case permit. Having considered cross-subsidization from
various viewpoints, we conclude that it does not occur with respect to industrial
nitrocellulose (see, Department's Position on Comment 3). We will in general consider
cross- subsidization as a potential subsidy, but we are not doing so here based on the facts
of this case.
The legislative history is not silent with regard to the appropriate allocation of benefits. In
their remarks on the calculation of the "net subsidy," the House Ways and Means
Committee and the Senate Finance Committee stated that subsidies in the form of the
provision of capital equipment or plants, and nonrecurring grants and loans, are to be
related to, and allocated over, the production or exportation of products which benefit
from those subsidies.
Production subsidies such as these are even more distantly linked to a particular product
than the payment of excessive prices would be. The House Ways and Means Committee
stated:
Definition of "Net Subsidy."
. . . There is, however, a special problem with regard to subsidies which provide an
enterprise with capital equipment or a plant. In such cases, the net amount of the subsidy
should be amortized over a reasonable period, following the beginning of full scale
commercial operation of the equipment or plant, and assessed in relation to the products
produced with such equipment or plant during such a period. Furthermore, in calculating
the ad valorem effect of non-recurring subsidy grants or loans, reasonable methods of
allocating the value of such subsidies over the production or exportation of products
benefiting from them will be used.
H. Rep. No. 317, 96th Cong. 1st Sess. 74-75 (1979) (emphasis added). The Senate Finance
Committee Report contains nearly identical language:
Net Subsidy (Section 771 (6))
. . . There is a special problem in determining the gross subsidy with respect to a product
in the case of nonrecurring subsidy grants or loans, such as those which aid an enterprise
in acquiring capital equipment or a plant. Reasonable methods of allocating the value of
such subsidies over the production or exportation of the products benefiting from the
subsidy must be used.
S. Rep. No. 249, 96th Cong., 1st Sess. 85 (1979) (emphasis added).
The single most important principle that both committees stressed here was that the
Department should reasonably allocate subsidies to the products that they benefit. It is
reasonable to allocate fully to products under review benefits directly tied to those
products (rather than diluting the benefit by allocating it over total sales). It is also
reasonable not to allocate to products under review benefits tied directly to products
outside the scope of review. We believe that it is eminently reasonable not to allocate the
potential benefit from allegedly excessive prices for military nitrocellulose to industrial
nitrocellulose.
Allegedly excessive prices on military nitrocellulose would provide an incentive to
produce and sell only that product. It is unreasonable and counter-intuitive to conclude
that SNPE would want to produce and sell more indutrial
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nitrocellulose if military
nitrocellulose commanded a higher price.
Finally, we did not concentrate exclusively on the intent of the alleged payment of
excessive prices for military nitrocellulose in determining that cross-subsidization does
not occur. Rather, we considered the effect of such a practice and concluded that it would
encourage the production and sale of military nitrocellulose, a product not under
investigation. We made clear in the preliminary results that only in those limited
circumstances where the effect of a program is not demonstrable might we consider the
intent to subsidize to be a surrogate for the effect of a subsidy.
The main issue, however, is not whether we have considered the intent or the effect, but
whether we have appropriately and reasonably allocated the benefits. To the extent that
our conclusions regarding tied benefits rely in some measure on intent, our position in
this case is consistent with administrative precedent. Whenever we allocate a benefit tied
to a product under investigation only to that product, there is an implicit assumption that
the benefit is intended to affect only that product. Yet, some would argue that since
money is fungible, any funds obtained under a particular program effectively enter into a
pool of cash that can be drawn upon for use in any other product line. Even if there is very
strict government control over the use of the funds, one could still argue that the effect of
the government funds is to free up private money for use in other areas of the company,
so that there would still be an indirect benefit to the company's total production. As noted
in our preliminary results, the extreme extension of this line of reasoning is to allocate all
benefits, regardless of their intent or effect, over a company's total sales. This practice
raises the specter of having to dilute benefits (perhaps to de minimis levels) that we know
are tied to products under investigation.
So, while the tying of benefits may seem inequitable at times, the alternative "fungibility of
money" approach is even more troublesome. Moreover, to waver between the two
policies only encourages interested parties to insist that we tie benefits to particular
products in some cases but not in others, an approach that defies reason, logic, and
fairness.
Given the inherent complexities concerning the effects of government funds on a
particular product, we believe that our policy stated in the preliminary results is the most
reasonable one. We will not allocate benefits tied to a product not under investigation
over a product under investigation unless we have a clear reason to believe that such a
benefit encourages the production or export to the United States of the product under
investigation. We have no such indication in this case. Therefore, we believe that our
conclusion regarding cross-subsidization is reasonable and that it is consistent with
Congressional intent.
Comment 2: Hercules contends that the Department contradicted its own precedents in
its preliminary results by concluding that potential benefits from excessive profits on
sales of military nitrocellulose to the French government would not benefit the product
under investigation, industrial nitrocellulose. Hercules cites four cases to demonstrate
that the Department usually takes a different approach to this issue.
In the final affirmative countervailing duty determination on certain carbon steel
products from Brazil (49 FR 17988, April 26, 1984), the Department found that
value-added tax rebates on domestic steel sales conferred a countervailable subsidy on
steel exports. In the final affirmative countervailing duty determination and order on
cold-rolled carbon steel flat- rolled products from Argentina (49 FR 18006, April 26,
1984), the Department countervailed import duty exemptions that were tied only to
domestic production. In the preliminary results of administrative review on viscose
rayon staple fiber from Sweden (48 FR 24183, May 31, 1983), the Department determined
that certain grants and interest-free loans that the Swedish government provided to
establish production capacity for military production also conferred a countervailable
subsidy on the production of civilian rayon. Finally, in the final affirmative
countervailing duty determinations on stainless steel sheet, strip, and plate from the
United Kingdom (48 FR 19048, April 27, 1983), the Department found that funds
provided by the British government to British Steel Corp. to close redundant production
facilities and purchase certain assets unrelated to the production or export of stainless
steel indirectly conferred a countervailable subsidy on the merchandise under
investigation.
SNPE maintains that the Department has consistently avoided imputing benefits given on
a product not under investigation to the product under investigation. The cases cited by
Hercules are inapposite because they deal with the allocation of domestic subsidies linked
to the products actually under investigation. In the final affirmative countervailing
duty determination on fuel ethanol from Brazil (51 FR 3361, January 27, 1986), the
Department rejected the contention that it should compare the profitability of the
product under investigation with that of other product lines in order to determine
whether an equity investment was consistent with commercial considerations. Under this
rationale, the Department stated that "any product line which achieved less than the
average rate of return for the company as a whole would be considered as benefiting from
the more profitable product lines. This leads to the absurd result that half of the
company's activities are potentially subsidized."
Department's position: Far from contradicting our position in the preliminary results, the
Department's precedents support the principle that benefits tied to a product not under
investigation should be allocated only over that product unless there is a clear reason to
believe that such a benefit encourages the production or export to the United States of
the merchandise under investigation. The four cases that Hercules cites do not
demonstrate that we have contradicted our own precedents. On the contrary, the four
cases are either irrelevant to, or consistent with, our determination.
In certain carbon steel products from Brazil, we countervailed IPI tax rebates because we
considered them to be passed on from the parent company to its subsidiaries in the form
of equity infusions. We allocate the benefit from equity infusions over a company's total
sales. In other Brazilian cases, we have found that IPI rebates are not directly tied to
domestic sales. The taxes go into a fund that the Brazilian government disburses at it
discretion. A firm does not necessarily receive more rebates if it sells more domestically.
In carbon steel products from Argentina, we countervailed import duty exemptions on
raw materials used in carbon steel, the product under review. We treated the exemptions
as a domestic subsidy and allocated the benefit over the companies' total sales. Hercules
has misunderstood the operation and purpose of the import duty exemption scheme.
Argentine law allows import duty exemptions on raw materials when there is no domestic
production or insufficient domestic production to meet domestic demand. The issue is
not, as Hercules suggests, whether this program is intended as an incentive to develop
Argentina's domestic steel production, but whether the benefit accrues only to domestic
sales. The program in no way provides an incentive to sell exclusively in the
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domestic market. Export sales may just as well contain raw materials that were exempt
from import duties.
In viscose rayon staple fiber from Sweden, we allocated the benefit from interest-free
loans used to produce a modal fiber plant over both modal fiber (a product under
investigation but not exported to the United States) and regular fiber (a product under
investigation that was actually exported to the United States) only after we obtained
evidence that the modal fiber plant had been modified to produce regular fiber as well as
modal fiber. In our two prior reviews, we had allocated the benefit only over modal fiber
because the benefit was tied to that product and we had no reason to believe that the
benefit encouraged the production or export to the United States of regular fiber.
In stainless steel sheet, strip, and plate from the United Kingdom, the government funds
purportedly used to close redundant production facilities or purchase assets unrelated to
stainless steel were in the form of equity infusions. We have repeatedly held that equity
infusions benefit all aspects of a firm's activities. We therefore allocated the benefit over
the company's total sales.
We have recently taken the position that benefits tied solely to domestic sales of a
product under investigation are not countervailable. In the final affirmative
countervailing duty determination on porcelain-on-steel cooking ware from Mexico
(51 FR 36447, October 10, 1986), we found that FOMEX Frontier loans were not
countervailable because they were tied to domestic sales. Therefore, they do not benefit
the production or export of the subject merchandise to the United States. Since SNPE
does not sell military nitrocellulose to the United States, any potentially excessive prices
on military nitrocellulose are not countervailable. Therefore, the benefit from alleged
excessive prices for military nitrocellulose would not affect industrial nitrocellulose on
two accounts: it would be tied to non-U.S. sales and to a product not under investigation.
In numerous cases, Commerce and the Treasury Department have tied benefits to certain
products or markets. See, e.g., certain fish from Canada (44 FR 1372, January 5, 1979);
paper-making machinery from Finland (44 FR 10451, February 20, 1979); certain steel
products from Belgium (47 FR 39304, September 7, 1982); certain steel products from
South Africa (47 FR 39379, September 7, 1982); certain steel wire rod from Belgium (47
FR 42403, September 27, 1982); float grass from Italy (47 FR 56160, December 15,
1982); galvanized steel wire strand from South Africa (48 FR 19451, April 29, 1983);
certain table wine from France (49 FR 6779, February 23, 1984); certain table wine
from Italy (49 FR 6778, February 23, 1984); unprocessed float glass from Mexico (49 FR
7264, February 28, 1984); castor oil products from Brazil (49 FR 9921, March 16, 1984);
amoxicillin trihydrate from Spain (49 FR 12730, March 30, 1984); ampicillin trihydrate
from Spain (49 FR 12731, March 30, 1984; bicycle tires and tubes from Taiwan (49 FR
14777, April 13, 1984); and cotton yarn from Brazil (49 FR 15250, April 18, 1984).
Comment 3: Hercules contends that the Department neglected its legal obligations by
failing to investigate the facts surrounding cross- subsidization. Instead, the Department
employed a sort of circular logic: it neglected to request pertinent data on the cost of
production and sales of military nitrocellulose and then concluded it was unable to
determine that cross-subsidization occurred because there was no evidence to support
allegations that SNPE made excess profits on military sales or that those excess profits
were then transferred to industrial nitrocellulose.
In the course of an administrative review, the Tariff Act and Commerce Regulations
mandate a review of each practice found to be a subsidy in the original investigation. The
Department failed to request data on military nitrocellulose apparently because the
French government previously thwarted the Department's efforts to obtain such data
during the original investigation. Therefore, the Department's decision in this review is
not based on complete information.
Hercules contends that nothing has occurred since the time of the original final
determination that should alter the Department's position in that determination that "in
the face of the allegation that industrial nitrocellulose production receives indirect
subsidies through military sales, and in view of the fact that industrial nitrocellulose is a
co-product of military grade nitrocellulose, the Department must carry out its charge to
investigate petitioner's claim" (48 FR 11976, March 22, 1983).
The assumption that profits from SNPE's military sales benefit only military production is
not supported by the actual situation of the company. SNPE is an established producer of
military nitrocellulose in France. Its customer for military nitrocellulose, the French
military, is essentially a peacetime force and, as such, probably has a finite demand for
the product. Given this fixed demand for military nitrocellulose and the pre-established
production facilities of SNPE, the possible excess profits from military sales cannot be
incentives to expand military nitrocellulose production (unless there are customers
outside of France).
Further, due to French government ownership of a large portion of SNPE, the company is
a de facto subsidiary of the government despite its formal independence. Military sales
are in effect an internal transfer between parent and subsidiary. The Department's
assumption that SNPE's high profits for military nitrocellulose accrue only to military
production might be valid only if SNPE were not owned by the government. Under the
actual circumstances however, the French government essentially pays itself for military
nitrocellulose. It seems questionable that the government would pay itself excessive
prices through its subsidiary for a product that has a finite demand and sufficient
production capacity if the subsidy can benefit only that product. It is more likely that the
excess profits confer benefits on other sectors of SNPE where there is potential for
expansion.
In this context, the Deparment should request more detailed information on military
nitrocellulose production and sales prior to making its final decision on the
cross-subsidization issue. Even if the Department's conclusion on cross-subsidization in
the preliminary results was correct, it was based on facts in the record.
SNPE argues first that, contrary to Hercules' statements, industrial nitrocellulose and
military nitrocellulose are not co-products. They have different production lines and
processes. Thus, a benefit to the production of military nitrocellulose would not directly
affect the production of industrial nitrocellulose.
SNPE states that the Department checked the allegation of cross-subsidization with a
complete cost of production analysis of industrial nitrocellulose. The investigation
established that there was no economic or business reason for supporting industrial
nitrocellulose production through military sales. It is therefore impossible to conclude
that industrial nitrocellulose is cross- subsidized.
The Government of France states that military nitrocellulose production and sales data
involve military secrets and national security. SNPE would be subject to criminal
penalties for revealing such information. The government has a legitimate claim of
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national security, which is sanctioned by Article XXI of the General Agreement on Tariffs
and Trade ("the GATT"). The Department should not draw an adverse inference from
SNPE's refusal to provide this information.
Department's position: We disagree with Hercules' position. Consistent with our legal
obligations, we have reviewed each practice, including cross- subsidization, found to be a
subsidy in the original investigation. We acknowledge that cross-subsidization is
potentially countervailable, and we will in general consider this issue in other cases, but
we find that cross- subsidization does not confer a benefit here based on the facts of this
case. Our conclusions regarding cross-subsidization are based on the facts that are in the
record, which includes all of the information that we requested from the French
government and SNPE during this review.
We did not request information on sales of military nitrocellulose because we recognize
the right of the French government to withhold, under certain circumstances,
information that is vital to its national security.
As stated in our final determination (48 FR 11972):
In our view, while national security considerations cannot serve as a blanket excuse for
non-cooperation, nor for non-compliance with or countervailing duty and
antidumping laws, the legitimate national security interests of a respondent government
must be taken into account in any decision regarding what constitutes best information
available.
Our position on this issue has been clear and unequivocal throughout this proceeding. In
our final determination, we made adverse assumptions based not on the French
government's refusal to provide information on military nitrocellulose, but on its refusal
to provide information on the cost of production of industrial nitrocellulose. We believed
at the time that the cost of production information would provide a reasonable basis for
determining whether industrial nitrocellulose was being subsidized from earnings on
military sales.
In this review, both the French government and SNPE fully cooperated with the
Department. We requested, received, and verified complete date on the cost of
production of industrial nitrocellulose. Although we found that SNPE's industrial
nitrocellulose operations were profitable during the period of review, which is favorable
indication that cross-subsidization does not occur, we have determined that this
information by itself is not conclusive. This conclusion is based on new information in the
record, which necessitated careful reconsideration of the issue. Thus, there is sound
reason for the difference in results on this issue.
The independent profitability of industrial nitrocellulose in and of itself is not a reliable
indication of the potential benefits arising from government purchases of military
products and the potential funneling of those benefits into the company's industrial
nitrocellulose operations. We have no information on the profitability of other industrial
product lines or other military product lines at SNPE, and there are many other variables
that could affect the short-term profitability of industrial nitrocellulose, such as market
demand, changes in exchange rates, and fluctuations in input costs.
We disagree with Hercules' assertion that our reliance on tied benefits might be valid only
if SNPE were not owned by the govenment. There is no connection between government
ownership of SNPE and the effect of potentially excessive prices paid for one of the
company's products. In fact, carrying Hercules' erroneous characterization of the French
government and SNPE as parent and subsidiary to its logical extreme, it would be difficult
to explain why any company would pay itself excessive prices for anything or, if it did,
how such a practice could be intended to affect anything but the particular product
receiving the excessive prices. Concerning the benefits that Hercules implies by the
relationship of the French government and SNPE, we have consistently held that
government ownership per se does not confer a subsidy. We have found that the 1972
creation of SNPE was in response to the international obligations of the French
government and that the 1983 government equity infusions in SNPE were made in
accordance with commercial considerations. The company has earned a profit in every
year since 1972 except 1975. All this has led us to conclude that SNPE has been operated
as an independent commercial enterprise. See also, Department's Positions on Comments
9, 10, and 11.
Furthermore, we have no basis for concluding the SNPE owes its profitability entirely to
its military sales. During the period of review, military sales (including military
nitrocellulose) represented approximately 45 percent of SNPE's total sales. As we stated
in our final determination (48 FR 11974):
The fact [that] SNPE, by virtue of its status as the sole supplier of certain military
products, retains close business ties with the government does not necessarily lead to the
conclusion that it cannot operate as a truly commercial entity. In the United States, there
are a number of companies which function as independent, commercial entities even
though they serve primarily or exclusively as defense contractors. Petitioner Hercules
also performs defense work for the U.S. government. For example, it manages and
operates the U.S. government-owed military nitrocellulose plant at Radford, Virginia.
We acknowledge that military and industrial nitrocellulose are co- products. Under
certain circumstances, we might find that cross-subsidization between similar products
does occur. Without diminishing the importance of the close relation between the two
products, we believe that this information would be more significant if we were dealing
with production subsidies. However, Hercules alleges that the benefit occurs not during
the production process, but at the point of sale. We also note that the markets for military
and industrial nitrocellulose are entirely different, and the uses of the two products are
entirely different.
Finally, we disagree with SNPE that, purely on the basis of our cost of production analysis,
we have proved conclusively that industrial nitrocellulose does not benefit from
cross-subsidization. Although such an analysis may help to show, under certain
circumstances, whether or not cross-subsidization occurs, it does not by itself prove that
cross-subsidization does not occur in this case.
Comment 4: Hercules contends that the Department has shifted the burden of proof to the
petitioner. The data necessary to refute the Department's assumption on
cross-subsidization are beyond the petitioner's grasp. Instead of granting SNPE the
benefit of a favorable assumption on this question, the Department should draw an
adverse inference, as it did in the investigation. It is standard Department practice to
draw adverse inferences against recalcitrant parties. Furthermore, section 776 of the
Tariff Act in effect provides that respondents have the burden to prove the lack of receipt
of alleged subsidies once the investigation is begun.
Department's position: Although we have repeatedly noted Hercules' failure to furnish
any evidence that the French government pays excessive prices for military
nitrocellulose, we have not shifted the burden of proof to the petitioner. Rather, we have
concluded that any such proof would be irrelevant without a clear indication that those
excessive prices encourage the production or export of the product subject to this
investigation, industrial
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nitrocellulose. We have found no such indication.
Section 776(b) of the Tariff Act does not provide that respondents have the burden to
prove the lack of receipt of alleged subsidies once the investigation is begun. Rather, it
provides that the Department shall use "the best information otherwise available . . .
whenever a party. . . refuses or is unable to produce information requested in a timely
manner and in the form required. . . ." Since SNPE and the French government did not
refuse to provide any information that we requested in this review, we are not using the
best information otherwise available.
Comment 5: Hercules contends that the Department's position on cross- subsidization
creates an enormous loophole in the countervailing duty law. Following the
Department's logic, foreign governments will now be able to subsidize their industries
covertly by purchasing at exorbitant prices merchandise that is only slightly different
from the merchandise that is exported to the United States. Unless the Department
further investigates the potential indirect benefits to industrial nitrocellulose from
military nitrocellulose sales, there will be unlimited potential for similar subsidy schemes
in other cases.
SNPE argues that the Department's position does not create a loophole in the law. On the
contrary, if the Department reversed itself, it would create a loophole that would allow
petitioners to make unsubstantiated allegations concerning issues requiring disclosure of
national security information. The petitioner could count on a subsidy finding since the
respondents would never be able to disclose the information needed to disprove the
allegation.
Department's position: We disagree that our position on cross-subsidization creates a
loophole in the countervailing duty law. As shown in our response to Comment 2, we
have used the concept of tied benefits on numerous occasions. Since our position is not a
deviation from past practice, we are neither creating nor destroying an opportunity for
circumvention of the countervailing duty law. Furthermore, where there is a clear
indication that a benefit tied to products not under review directly or indirectly affects
merchandise subject to the review, we will find that benefit countervailable.
Comment 6: Hercules contends that the Department should not allow SNPE or the French
government to avoid providing data on military nitrocellulose because of self-serving
national security claims. Neither the Tariff Act nor the Agreement on Interpretation of
Articles VI, XVI, and XXIII of the General Agreement on Tariffs and Trade ("the Subsidies
Code") recognizes national security interests of the country under investigation as an
exception to another country's right to use the "best information available" in calculating
countervailing duties. In addition, Congress has never approved the GATT. 19 U.S.C.
2504 (1982) specifically states that in a conflict between a trade agreement and a U.S.
statute, the U.S. law shall prevail.
To create a national security exception to the best information available requirement of
section 776 would require the Department to accept without qualification a foreign
government's determinations on which data are to be withheld for national security
reasons. The Department lacks the legal authority to accept this option. Furthermore, the
precedent of a national security exception to the best information rule creates another
dangerous loophole through which subsidizing countries might evade the
countervailing duty law.
SNPE on the other hand insists that the Department should respect the legitimate national
security claims of the French govrenment and SNPE. The French Ministry of Defense has
certified to the Department that it could not authorize the release of information
concerning its national security interests. In the final determination in this case, the
Department stated that such claims must be considered in decisions regarding what
constitutes the "best information available."
Department's position: Article XXI of the GATT provides that any contracting party has
the right to refuse disclosure of information when it considers such disclosure contrary to
its security interests. There is no direct conflict between article XXI of the GATT and U.S.
law. The Tariff Act does not expressly prohibit the Department from considering the
national security concerns of responding governments. In such cases where there is no
direct confiict between U.S. and international law, U.S. law should be construed so as not
to bring it into conflict with international law or with an international agreement of the
United States. See, Restatement of the Foreign Relations Law of the United States
(Revised), section 134 (Tent. Draft No. 6--Vol. 1, 1985).
We therefore believe that, under certain circumstances, we are justified in considering the
national security concerns of responding governments. Our standard is to determine
whether national security claims are being used legitimately or merely as a blanket for
non-cooperation. In this case, we find the French claims to be legitimate.
Comment 7: Hercules argues that any precedent established by the finding of
cross-subsidization would not create an unworkable administrative burden because this
type of subsidy would apply only in those situations where the products involved were
closely related (i.e., co-products) and the government was purchasing one of the
products to inject funds into the company. Contrary to the Department's position, the
Department need not embrace a strict "fungibility of money" approach in analyzing the
potential benefit to industrial nitrocellulose from excessive profits on military
nitrocellulose. The Department requires only specific cost of production and sales data on
military nitrocellulose to ascertain the existence of a cross-subsidy and subsequently to
quantify it. If the Department finds that military nitrocellulose sales were meerly a
conduit for government assistance to the production of industrial nitrocellulose, it could
impose contervailing duties without adopting a strict "fungibility of money" approach
across the board.
In contrast, SNPE contends that the Department's acceptance of the petitioner's novel
theory of cross-subsidization would create an unworkable administrative burden. In
order to verify the existence of such subsidization and to quantify it, the Department
would be required to make a complete analysis of the profitability of every product that
the company under investigation produces and also of the sources and uses of funds for
the company as a whole. The petitioner's theory involves the issue of the fungibility of
money and extends the concept of subsidy beyond anything the Department has been
willing to accept in the past.
Department's position: A finding of cross-subsidization in this case would not create an
unworkable administrative burden. If we had a clear indication that benefits on military
nitrocellulose directly or indirectly affected the production of industrial nitrocellulose,
we could find a countervailable benefit. Without the indication, we consider any potential
benefits on military nitrocellulose to be tied to that product. Difficulties in administration
of the law would arise not in the potential finding of cross- subsidization, but in the
assumption of cross-subsidization in the absence of evidence that benefits tied to a
product outside the scope of review affect a product under review. If we made such an
assumption, we might set
*839
a precedent for such undesirable practices as diluting
benefits tied to a product under investigation by allocating the benefits over sales of all
products, diluting benefits on export subsidies by allocating them over both export and
domestic sales, and including benefits on sales to countries other than the United States.
Comment 8: Hercules contends that the creation of SNPE as an independent entity was a
transparent legal fiction that the French government undertook in accordance with its
obligation under the Treaty of Rome to "spin- off" certain government monopolies. SNPE
remains under the government's de facto control. The Department should treat all
transfers to SNPE from the government as countervailable grants, given the vast array of
opportunities that a government has to subsidize an enterprise under its direct control.
Since the French government controls all data that would substantiate the subsidization
of SNPE through transfers of assets and funds since 1971, it is the French government that
has the burden to prove that these transfers are not countervailable grants.
On the other hand, SNPE maintains that there is no evidence in this case to support
Hercules' claim that the creation of SNPE as a separate legal and commercial entity was a
legal fiction. SNPE's predecessor, Service des Poudres (SP), was an agency of the French
Ministry of Defense and, as such, was not subject to the financial reporting and accounting
requirements imposed on private companies. As part of a government ministry, SP was
not run as a profit-making enterprise. In contrast, SNPE is an independent, commercially
motivated enterprise. It must comply with the French Code of Commerce, which
regulates the business conduct and financial reporting requirements of private firms in
France.
Department's postion: We disagree with Hercules' contentions. We examined this
allegation in the investigation, and Hercules has presented no new information that
warrants a reversal of our decision in the final determination.
SNPE was organized in response to a binding directive under the Treaty of Rome that
provided that certain state monopolies be adjusted to operate on a competitive basis.
Since our final determination, we have found no evidence indicating that the creation of
SNPE was a "legal fiction" or that the transfer of funds to SNPE was equivalent to a grant.
SNPE has functioned as an independently operated, profit-oriented enterprise since its
creation. We disagree with Hercules' contention that the government's almost total
ownership of SNPE belies any claims of independence because we do not consider
government ownership of a business per se to be a subsidy and we have found that SNPE
operates as an independent commercial enterprise.
We agree with Hercules that SNPE's de jure creation as a commercial entity in and of itself
is insufficient proof of SNPE's independent status. Rather than considering the company's
legal status in isolation, we have focused on the company's actual commercial behavior
and have concluded that SNPE operates as a de facto independent commercial entity.
Comment 9: Hercules argues that, if the Department maintains that SNPE's creation was
not a legal fiction, it should still conclude that the company's creation was not consistent
with commercial considerations. The Department must reconsider the question of SNPE's
intial commercial viability in light of the Department's refined methodology that requires
an evaluation of the commercial consistency of equity infusions at the time the
investment decisions are made.
In the final determination, the Department found that the creation of SNPE was not
inconsistent with commercial considerations because: government assets transferred to
SNPE were properly valued; since its inception, SNPE operated in a commercial fashion,
and industrial nitrocellulose operations and plant improvements were financed from
operating revenues; except for one year, SNPE achieved company-wide profits since its
inception; and finally, the relatively small share of SNPE's overall sales that industrial
nitrocellulose represents indicates that there is no reason to believe SNPE was created
solely or primarily to subsidize the production of industrial nitrocellulose.
Current Department methodology stresses the commercial soundness of government
equity purchases at the time those purchases are made if the enterprise has no market
price for its shares. The Department has refined its standard of equityworthiness to take
into account the company's prospects as reflected in market studies, country and
industry forecasts, and project and loan appraisals, all of which might predict the
company's ability to generate a reasonable rate of return in a reasonable time. The
Department has stated that, where the past history of a company is of little use in
assessing its future performance, it will place greater emphasis on feasibility and market
studies.
In the case of SNPE, the Department has noted that the company had no financial "track
record" prior to its creation. In light of its revised equity methodology, the Department
should reevaluate the creation of SNPE and subsequent government equity infusions in
that company. In its original analysis, the Department did not take into account the
history of SNPE's predecessor, SP, and the commercial prospects of SNPE at the time of its
formation. SNPE's subsequent performance record is not relevant to the determination of
whether a subsidy was conferred at the time of the equity purchases. Current Department
policy focuses on whether the commercial investor would have invested in SNPE as a
whole at the time the government made the equity purchase. The Department should
therefore reexamine the valuation of SNPE at the time of its creation and compare this
valuation of assets to that of its predecessor organization, SP.
SNPE argues that the initial government equity infusion related to the creation of SNPE
cannot be considered countervailable for the period of review even if that infusion were
determined to be inconsistent with commercial considerations. The Department's policy
dictates that it cannot countervail in any given year an amount greater than that which it
would have countervailed by treating the government's equity infusion as an outright
grant. For the purpose of calculating this maximum amount, grants are allocated over the
average useful life of a company's renewable physical assets, as determined by the
Internal Revenue Service. In the chemical and allied products industry, the average
useful life of such assets is 9.5 years. As the creation of SNPE occurred in 1971, 12 years
prior to the current period of review, no countervailable subsidy could be found even if
the original infusion were treated as a grant. Thus, Hercules' concern over SNPE's lack of a
proven financial "track record" at the time of its creation is irrelevant.
Department's position: Because Hercules has presented no new information that affects
our decision in the final determination regarding the creation of SNPE, we find no reason
to reconsider this issue. Hercules merely relies on what it perceives to be our revised
equity methodology. However, we have not revised our equity methodology to that
extent the Hercules believes.
At the time of our final determination, it had already been our policy to use the
*840
"reasonable private investor" standard in determining whether government equity
infusions were consistent with commercial considerations. It had also been our policy
then, as it is now, to consider the soundness of an investment at the time the government
made the equity purchase, not in subsequent years. These policies, as well as our policy of
examining the past performance and current financial status of a company that has
received an equity infusion, were described in Appendix II to the notice of final
affirmative countervailing duty determination on certain steel products from Belgium
(47 FR 39304, September 7, 1982). However, because of the unique circumstances
surrounding SNPE's creation, we determined that our normal equity methodology was
inappropriate. Instead, we used the criteria described by Hercules in this Comment.
We continue to consider the criteria employed in the final determination appropriate for
determining whether the creation of a company such as SNPE confers any countervailable
benefits.
Comment 10: Hercules argues that the Department erred in determining that the French
government's subsequent equity infusions in SNPE, in particular the 1983 infusion, are
not subsidies. When the Department judged the commercial soundness of the government
equity purchases, it mistakenly based its analysis in part on the company's financial
experience after the purchases were made.
Also, the country and industry forecasts cited in the preliminary results are irrelevant to
an evaluation of SNPE's equityworthiness because they pertain to private, profit-oriented
companies.
Favorable forecasts for private chemical companies do not necessarily apply to
companies managed by the government. The Department should use contemporaneous
market analyses for government-owned chemical producers and, if possible, the
government's own analysis of the merits of its 1983 investment in SNPE.
Finally, and most importantly, in its financial analysis of SNPE, the Department
overlooked the possibility that SNPE's favorable position may be the result of excess
profits from military nitrocellulose sales to the French government during the period
considered in the Department's equityworthiness analysis. As the public record in the
antidumping proceeding on this same product shows, the Department has concluded that,
at least during the first half of 1982, each grade of industrial nitrocellulose that SNPE sold
in the home market was sold below cost. In the same period, SNPE was also selling
industrial nitrocellulose in the United States at less than fair value (See, final affirmative
antidumpting duty determination on nitrocellulose from France (48 FR 21615, May 13,
1983). Therefore, SNPE probably incurred losses for its industrial nitrocellulose sales in
that period. At the same time, the Department found in its preliminary results of
antidumping duty administrative review (51 FR 18819, May 22, 1986) that SNPE
"reported a high return on sales for all products." The Department should not allow SNPE
to be considered equityworthy based on financial information that may be inflated by
indirect government subsidies. To do so creates a huge loophole for governments to
subsidize industries covertly through high-priced purchases and, in so doing, ensure that
appearance of "equityworthiness," or commercial soundness.
SNPE disputes Hercules' contention that new criteria compel us to reevaluate the French
government's equity infusions in SNPE from any period. SNPE argues that equity infusions
provided by the French government subsequent to its creation are not countervailable
because they were made on terms consistent with commercial considerations. By 1973,
the earliest time that an equity infusion treated as a grant might have figured as a
countervailable benefit in the review period, SNPE had an established record of financial
performance, demonstrating that any goverment investment in the company was
consistent with commercial considerations. No government equity infusions occurred
before 1973.
Department's position: Before we consider government equity infusions as
countervailable subsidies, we must find the company under investigation not to be
equityworthy. Our equityworthy analysis involves assessing the company's current and
past financial health and gives great weight to a company's recent rate of return on equity.
In the original investigation, we verified the SNPE made a profit in every year between
1972 and 1981, except one year due to a plant accident. In our preliminary results, we
examined SNPE's financial ratios for 1981 and 1982--specifically, its interest to income
ratio, quick ratio, current ratio, cash flow from operations, return on sales, and return on
equity. We also examined trade journals and periodicals published in France and abroad
in 1982 and 1983.
We disagree with Hercules' contention that, since SNPE is government-owned and
managed, literature dealing with the prospects of the private chemical industry is not
pertinent. SNPE competes in the same marketplace as other private firms when it sells its
products.
Contrary to Hercules' contention, we did not rely on SNPE's financial history after the fact
to establish its equityworthiness. Based on SNPE's favorable financial history up to the
period of review and the optimistic trends reported in trade journals, we determine that
SNPE was equityworthy during the period of review and that, therefore, the government's
1983 purchase of shares in SNPE was consistent with commercial considerations. We
consider the question of earlier equity infusions to have been settled in the final
determination.
We also disagree with Hercules' assertion that, in making our equityworthy
determination, we should consider the possibility that SNPE's favorable financial position
results from excessive profits on military sales. In making an equityworthy
determination, we consider the company as a whole, not specific areas of the company.
This is the approach a reasonable private investor would take. A reasonable investor
would not invest in a company that has earned a profit in one comparatively small
product line (industrial nitrocellulose made up approximately 10 percent of SNPE's total
sales in 1983) if all other product lines lost money. Furthermore, we have no evidence
that any other division of the company depends on profits from military sales for its good
financial standing. (See, Department's Position on Comment 3.)
Comment 11: SNPE argues that funds from the French Ministry of Defense (MOD) to
upgrade the company's pyrotechnical safety equipment at the Bergerac plant in 1975 do
not constitute a countervailable subsidy. The French government's provision of funds was
linked to its original equity infusions undertaken at the time of SNPE's transformation to
independent status. Since the Department has found that the French government's prior
acquisition of SNPE stock, to which the MOD grant is linked, was not countervailable, it
should also find the MOD grant not countervailable.
Hercules disputes SNPE's contention. The fact that the Department determined that the
original infusion was not countervailable does not exempt subsequent and related
transfers. There is no evidence on the record showing that the French government
received stock in return for the 1975 grant. On the contrary, the evidence shows that the
funds received
*841
in 1975 from the MOD were treated by SNPE as a taxable grant. If
these funds had been part of the original equity infusion, they would have been tax
exempt under French law.
Department's position: SNPE does not dispute the fact that the MOD assistance was in the
form of a grant. In our final determination, we found that this grant was limited to a
particular enterprise or industry and that it specifically benefited the production of
industrial nitrocellulose. Therefore, regardless of whether the grant was contractually
linked to the original equity infusion obligations, it is countervailable.
Comment 12: SNPE argues that the application of French law No. 575, Art. V, which
permits certain SNPE employees to retain their government status, confers no
countervailable benefit. Under the law, the government pays certain social security
benefits for the status employees. The government's assumption of some of the status
employees' benefit costs does not provide a subsidy because, under the same law, SNPE is
obliged to retain those employees and pay them higher salaries than it pays equivalent
non-government workers. SNPE does not gain any net financial advantage from the
government's coverage of some of the status workers' social security costs. The
government's assumption of these costs merely serves to relieve the company of some of
the extra burden of the status employees' higher salaries. In certain steel products from
Belgium, the Department did not countervail "extraordinary" severance benefits paid by
the government to workers for early retirement because it found that the assistance
merely relieved the companies of the special burden imposed by the steel restructuring
plan. This precedent should be followed.
Hercules disputes SNPE's assertion. A foreign government's intention in conferring a
subsidy is irrelevant since it is the effect and not the intention of the program which
determines whether it bestows an unfair competitive advantage on the company. Without
govrenment intervention, SNPE would have to bear the social security costs of the status
employees regardless of what the law required the company to pay in salary. The
circumstances in the Belgian steel case are clearly distinguishable from those of SNPE.
Unlike the severance benefits that the government of Belgium paid to steel workers for
early retirement, the social security benefits paid by the French government for status
employees are ordinary benefits. Also, in contrast to Belgian steel, the French
government payments are not related to a major restructuring plan for the industry.
Department's position: We agree with Hercules that the French government assumes
social security costs that would otherwise be the responsibility of SNPE. This constitutes a
subsidy within the meaning of the Tariff Act. We have not taken into account the higher
wages paid to government employees because they do not qualify as an offset under
section 771(6) of the Tariff Act. The higher wages also do not represent a deduction we
would normally make to obtain the net amount of subsidization because thay are not
directly related to the assumption of social security benefits.
Comment 13: Hercules asserts that the Department understated the subsidy that SNPE
received from the Freench government's assumption of labor costs for the company's
government-status workers. The Department erroneously accepted a set number of status
workers assigned to industrial nitrocellulose production without a factual basis for doing
so. In addition, the Department mistakenly assumed that status workers' salaries are the
same as those of private workers. Since the labor benefits are calculated as a percentage
of the workers' salaries, the Department should base its calculation on the actual salaries
of the status workers.
The Department should calculate the labor benefit as follows: (1) It should determine the
percentage of salary that private workers' fringe benefits represent at the Bergerac plant
during the period of review; (2) it should then multiply this percentage by the total salary
of all of the status workers at the Bergerac Plant; (3) it should find the cost that SNPE
actually incurred for the fringe benefits of its status workers (i.e., the part that the
government did not pay) and subtract that amount from the total fringe benefit cost; and
(4) it should divide the result by the total value of production at the Bergerac plant. This
calculation yields a subsidy almost twice as great as the figure the Department calculated
in the preliminary results.
Although SNPE maintains that there is no net benefit from the assumption of labor costs,
it also contends that, if the Department continues to consider this program
countervailable, it has miscalculated the benefit. The appropriate method is to determine
the average annual difference between the fringe benefits for status employees and those
for private employees, multiply that amount by the number of workers involved in the
production of industrial nitrocellulose, and allocate the result over total sales of
industrial nitrocellulose during the period of review.
Department's position: We disagree with Hercules' suggested method because we verified
the number of workers involved in the production of industrial nitrocellulose.
Furthermore, to apply the percentage of fringe benefits for private workers to the higher
salaries for status workers would overstate the benefit. If we assume that, under normal
commercial circumstances, SNPE would have been responsible for paying the fringe
benefits of its status employees, we must also assume that the company would have paid
those status employees the same salary as it pays its private employees.
We agree with SNPE's method and have recalculated the benefit. We determine the benefit
from this program to be 0.10 percent ad valorem during the period of review.
Comment 14: SNPE argues that assistance from the Delegation a l'Amenagement du
Territoire et a l'Action Regionale ("DATAR") is not industry-specific and cannot be
considered a countervailable subsidy under the Tariff Act. Although the Tariff Act
considers benefits to a "group of enterprises or industries" as potentially countervailable,
SNPE disputes the Department's interpretation of this phrase as including "industries in a
particular region."
Since the phrase "group of enterprises or industries" is subject to different interpretations,
it should be considered in a manner consistent with the international agreements that
gave rise to the current countervailing duty law. In signing the Subsidies Code, the
United States agreed not to restrict the rights of other signatories to grant aid to eliminate
industrial, economic and social disadvantages of specific regions (Article 11). The
objectives of the DATAR program are consistent with this Code provision.
The Department is thus wrong to conclude that, because DATAR programs are granted
according to regional criteria, they constitute subsidies within the meaning of the
countervailing duty law. SNPE contends that the countervailing duty law applies
only to those subsidies which are provided to a specific enterprise or industry, or a group
of enterprises or industries. Because DATAR assistance is not industry-specific, it is not
countervailable. Finally, SNPE contends that regional subsidies are exempt from the
Tariff Act by Article 11 of the Subsidies Code.
Hercules asserts that the DATAR grants fall within the general definition
*842
of a
subsidy in section 771(5)(B) of the Tariff Act because they are specifically used by
enterprises or industries in certain regions. Hercules criticizes the assertion that regional
subsidies are exempted from the Tariff Act by Article 11, contending that SNPE has
misinterpreted the relationship between the Tariff Act and the Subsidies Code. Under the
Tariff Act, domestic subsidies provided for in section 771(5)(B) must be countervailed.
Furthermore, Article 11 is only concerned with the obligations of the signatories of the
Subsidies Code, not with the implementation by the signatories of their own
countervailing duty laws.
Department's position: We have consistently held that grants which confer incentives on
the basis of regional preferences constitute subsidies within the meaning of the Tariff Act.
Such grants constitute benefits provided to a group of enterprises or industries. The
Department's position has been frequently upheld by the courts. (See, e.g., Carlisle
Rubber Co. v. United States, 5 CIT 229 (1983) and United States Steel Corp. v. United
States, 5 CIT 245 (1983).
Moreover, the Subsidies Code does not prohibit any country from imposing
countervailing duties on products that benefit from regional subsidies. Article 11(1) of
the Subsidies Code provides that ". . . signatories recognize that subsidies other than
export subsidies are widely used as important instruments for the promotion of social
and economic policy objections . . ." (emphasis added). Article 11(2) provides that ". . .
signatories recognize, however, that subsidies other than export subsidies. . . may cause
or threaten to cause injury to a domestic industry of another signatory . . ." Finally,
Article 11(3) provides that "[s]ignatories note that the above forms of subsidies are
normally granted either regionally or by sector" (emphasis added).
For these reasons, we uphold our determination that the DATAR program is
countervailable under the Tariff Act.
Comment 15: Hercules asserts that the Department erred in finding that SNPE received no
countervailable subsidies from its input purchases from government- owned firms. The
Department examined only one supplier of nitric acid and found that the supply contract,
which was executed prior to the supplier's nationalization, was still in effect. The
Department should go further and investigate whether any government-owned supplier
provided any inputs at preferential prices. This should include purchases from other
government-owned nitric acid suppliers as well as purchases of other inputs, such as
electricity and gas.
Department's position: We did examine inputs other than nitric acid. We found that SNPE
purchased oleum and woodpulp at arm's length prices. Since SNPE continued to purchase
nitric acid under a contract negotiated at arm's length before the supplier was
nationalized, we find purchases subsequent to nationalization also to be at arm's length
and, therefore, not countervailable. We have not reexamined purchases of electricity or
natural gas because Hercules has provided no new information or rationale that would
cause us to reverse our finding in the final determination that these inputs are not
preferentially priced.
Comment 16: Hercules asserts that the response of the companion antidumping
administrative review on industrial nitrocellulose must be incorporated in the record of
this countervailing duty review. Both the legislative intent of the Tariff Act and
established Department practice support the use of any available relevant material in the
conduct of a countervailing duty proceeding. There is no statutory or regulatory
provision barring the inclusion of portions of the antidumping review in the record of the
countervailing duty proceeding. SNPE should have no legitimate expectation that the
information contained in its antidumping response would be used only for the
antidumping review. Although, in general, antidumping and countervailing duty
investigations involve different facts and result in different factual determinations, there
is a significant overlap between the issues involved in the concurrent cases concerning
industrial nitrocellulose from France. The fact that SNPE is a state-owned enterprise that
has been found to sell industrial nitrocellulose below cost may have bearing on the
company's level of subsidization.
SNPE argues that the countervailing and antidumping duty laws define separate legal
actions that depend on different factual conclusions. Since the two laws deal with
fundamentally different trade issues, the Department must administer these two cases
independently of each other and not commingle the records.
Department's position: Business proprietary data submitted in the course of one
proceeding may not be used in another proceeding unless the party who submitted the
data agrees to its use in the second proceeding. This is necessary to ensure the free flow of
information to the Department in its antidumping and countervailing duty
proceedings, and to protect the confidentiality of such information. Without the
guarantee of protection of such information, the Department would be seriously hindered
in its attempts to acquire business proprietary information and therefore seriously
hindered in its ability to administer effectively the trade laws.
Furthermore, section 777(b) of the Tariff Act limits disclosure of confidential information
submitted in a proceeding (except under administrative protective order) to an officer or
employee of the Department or International Trade Commission"...who is directly
concerned with carrying out the investigation in connection with which the information is
submitted..." Section 777(c) of the Tariff Act limits administrative protective orders to
parties to the proceeding in which the information is submitted. (See also, § 355.18,
355.20, 353.28, and 353.30 of the Commerce Regulations.)
Because SNPE has denied permission to place its confidential antidumping response in the
records of this review, we have not done so.
Comment 17: Hercules argues that the Department should reexamine those subsidy
programs it found to be generally available in the original investigation. These programs
include assistance in research and development, energy inputs, antipollution compliance,
and assumption of labor costs. Three court rulings since the Department issued its final
determination have rejected the Department's general availability doctrine (including
Cabot Corp. v. United States, 620 F. Supp. 722 (CIT 1985); Agrexco Agricultural Export
Co. v. United States, 604 F. Supp. 1238 (1985); and Bethlehem Steel Corp. v. United States
590 F. Supp. 1237 (1984)). The court in Cabot stressed that the Department must focus on
whether the program in question has the effect of conferring a competitive advantage on a
product regardless of the program's nominal intent. For example, SNPE receives
antipollution subsidies generally available in France. Hercules does not receive a similar
benefit in the United States. The Department should consider the differential in the two
companies' antipollution costs to be a competitive advantage for SNPE and, therefore,
countervailable. Similar situations may exist for other programs originally found to be
generally available.
Department's position: Hercules ignores the CIT's decision in Carlisle Tire and Rubber Co.
v. United States, 5 CIT 229 (1983), which upheld the Department's specificity (general
availability) test. This decision has not
*843
been overturned, and we continue to follow
it.
The relevant portion of the decision in Cabot has been vacated, and in neither Agrexco
nor Bethlehem did the CIT overturn our specificity test. Therefore, we have not
reexamined these programs.
Final Results of Review
After reviewing all of the comments received and correcting a calculation error, we
determine the net subsidy to be 0.37 percent ad valorem for the period of review. The
Department considers any rate less than 0.50 percent to be de minimis.
The Department will instruct the Customs Service not to assess countervailing duties
on shipments of this merchandise entered, or withdrawn from warehouse, for
consumption on or after March 22, 1983 and exported on or before December 31, 1983.
Further, the Department will instruct the Customs Service to waive deposits of estimated
countervailing duties, as provided by section 751(a)(1) of the Tariff Act, on all
shipments of this merchandise entered, or withdrawn from warehouse, for consumption
on or after the date of publication of this notice. This deposit waiver shall remain in effect
until publication of the final results of the next administrative review.
This administrative review and notice are inaccordance with section 751(a)(1) of the
Tariff Act (19 U.S.C. 1675(a)(1)) and § 355.10 of the Commerce Regulations (19 CFR
355.10).
Dated: December 31, 1986.
Gilbert B. Kaplan,
Deputy Assistant Secretary, Import Administration.
[FR Doc. 87-475 Filed 1-8-87; 8:45 am]
BILLING CODE 3510-DS-M