NOTICES
DEPARTMENT OF COMMERCE
[C-427-603]
Final Affirmative Countervailing Duty Determination: Brass Sheet and Strip
From France
Monday, January 12, 1987
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AGENCY: Import Administration, International Trade Administration,
Commerce.
ACTION: Notice.
SUMMARY: We determine that certain benefits which constitute subsidies within the
meaning of the countervailing duty law are being provided to manufacturers,
producers, or exporters in France of brass sheet and strip. The estimated net subsidy is
7.24 percent ad
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valorem. We have notified the U.S. International Trade
Commission (ITC) of our determination.
Therefore, if the ITC determines that imports of brass sheet and strip from France
materially injure, or threaten material injury to, a U.S. industry, we will direct the U.S.
Customs Service to resume the suspension of liquidation of brass sheet and strip from
France and to require a cash deposit on entries or withdrawals from warehouse, for
consumption in an amount equal to 7.24 percent ad valorem.
EFFECTIVE DATE: January 12, 1987.
FOR FURTHER INFORMATION CONTACT:Mary Martin or Barbara Tillman, 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) 377-2438.
SUPPLEMENTARY INFORMATION:
Final Determination
Based upon our investigation, we determine that certain benefits which constitute
subsidies within the meaning of section 701 of the Tariff Act of 1930, as amended (the
Act), are being provided to manufacturers, producers, or exporters in France of 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).
- Certain Financing from Credit National
We determine the estimated net subsidy to be 7.24 percent ad valorem for all
manufacturers, producers, or exporters of brass sheet and strip from France.
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 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
Steetworkers of America (AFL-CIO/CLC), filed on behalf of the U.S. industry producing
brass sheet and strip. In compliance 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 initiate a
countervailing duty investigation, and on March 31, 1986, we initiated such an
investigation (51 FR 11778, April 7, 1986). 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 merchanise from France
materially injure, or threaten 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 brass sheet and strip (51 FR 16235, May 1, 1986).
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 ten 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.
On the basis of the information contained in these responses, we made our preliminary
determination on June 3, 1986 (51 FR 20867, June 9, 1986). Based upon the request of
the petitioners, we extended the deadline dates for the final determinations in the
countervailing duty investigations of brass sheet and strip from Brazil and France to
correspond to the date of the final determinations in the antidumping duty investigations
of the same products pursuant to section 705(a)(1) of the Act, as amended by section 606
of the Trade and Tariff Act of 1984 (Pub. L. 98-573) (51 FR 25379, July 14, 1986).
On September 16, 1986, Trefimetaux requested a postponement of the final antidumping
duty determination until not later than January 5, 1987. After the antidumping duty
determination was postponed on November 3, 1986, we extended the deadline date for
the final countervailing duty determination to correspond with the date of the
extended final determination deadline in the antidumping duty investigation of the same
products from France (51 FR 40843, November 10, 1986).
Article 5, paragraph 3 of the Agreement on Interpretation and Application of Articles VI,
XVI, and XXIII of the General Agreement on Tariffs and Trade (the subsidies Code),
prohibits provisional measures (i.e., suspension of liquidation) for more than four months
in the absence of a final determination of subsidization and injury. Therefore, on October
7, 1986, we terminated the suspension of liquidation ordered in our preliminary
determination.
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.
From June 30 to July 10, 1986, we verified the information submitted by the Government
of France, Pechiney, and Trefimetaux. We afforded interested parties an opportunity to
present views orally in accordance with our regulations (19 CFR 355.35). Pechiney and
Trfimetaux made a timely request for a public hearing, but subsequently withdrew their
request. Accordingly, no public hearing was held. We received case briefs from
respondents on September 17 and 24, 1986, and from petitioners on September 24, 1986.
On October 3, 1986, we received rebuttal briefs.
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
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currently defined
in the Copper Development Association (C.D.A.) 200 series or the Unified Numbering
Systems (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 Countervialing Duty Determination and Countervailing Duty Order
(49 FR 18006, April 26, 1984).
For purposes of this final determination, the period for which we are measuring subsidies
("the review period") is calendar year 1985, which corresponds to the last complete fiscal
year of both Peachiney and Trefimetaux.
Petitioners alleged that Trefimetaux has been both unequityworthy and uncreditworthy
since 1981. We address this issue in section I.A. 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, our verification and written
comments submitted by interested parties, we determine the following:
I. Programs Determined to Confer Subsidies
We 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 Infusion and Other Financial Assistance to Trefimetaux
Trefimetaux, the producer and exporter of brass sheet and strip, is a subsidiary of
Pechiney, which has been owned by the French government since it was nationalized by
Frency Law No. 82-155 of February 11, 1982. During 1985, the French government
owned 85 percent of the voting shares of Pechiney. Societe Francaise de Participations
Industrielles, a nationalized company, owned all the remaining voting shares with the
exception that each of the members of Pechiney's board owned one share ot that
company's stock.
Pechiney is a holding company that does not produce any goods itself. Pechiney has
numerous subsidiaries, and the subsidiaries' expertise is concentrated in the area of
non-ferrous metal manufacturing. 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 investment, 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 equity investments in Trefimetaux,
Pechiney provided equity infusions and other financial assisance to Trefimetaux. As
discussed in detail below, we have concluded that Trefimetaux was neither equityworthy
nor creditworthy during this period. This raises the question of whether Pechiney's
transfer of funds to Trefimetaux during the same period that Pechiney was receiving funds
from the French government should properly be viewed as transfers of funds from the
French government to Trefimetaux. We have concluded that this is the appropriate
characterization of these transactions.
As noted above and discussed below, Trefimetaux was neither equityworthy nor
creditworthy during this period. Accordingly, Trefimetaux could not have raised funds
from commercial sources. Pechiney's infusion of funds into Trefimetaux makes sense only
when viewed in connection with the fact that the French government made funds
available to Pechiney during the relevant period that substantially exceeded the amounts
Pechiney transferred to Trefimetaux. Furthermore, since Pechiney was merely a holding
company, these funds, for the most part, benefitted its subsidiaries. Therefore, we
consider the funds that Trefimetaux received from Pechiney to be provided by the French
government.
1. Equity Infusions
During 1983-1985, Pechiney made equity infusions into Trefimetaux in the form of
conversion of debt, stock purchases and subordinated shareholder investments, which
were made without provisions for repayment or the payment of interest.
We have consistently held that government provision of equity does not per se confer a
subsidy. Government equity infusions bestow countervailable benefits only when
provided 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 voting
shares are not publicly traded, and there are no market- determined prices for its shares.
We reviewed Trefimetaux's financial statements from 1976 to 1985, analyzing its financial
results and evaluating this 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 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 confers a subsidy.
To calculate the benefit during the review period, we compared Trefimetaux's rate of
return on equity with the average rate of return in France for 1985. We used as best
information available for the rate of return on equity in France, figures developed from
U.S. Direct Investment Abroad as published in Survey of Current Business.
During the review period, Trefimetaux's losses were large, resulting in negative returns on
equity. Comparing the national average returns with Trefimetaux's large negative returns
yielded benefits exceeding the amounts we would have calculated for each year of the
review period had we treated the equity infusions as outright grants rather than as equity.
Under no circumstances do we countervail in any year an amount greater than what we
would have countervailed had we treated the government's equity infusion as an outright
grant. Therefore, we have capped the subsidy for each year at the level that would have
resulted if we had treated the equity infusions as grants. We divided the benefit from this
program by Trefimetaux's total sales in 1985 to calculate an estimated net subsidy of 5.50
percent ad valorem.
2. Loans on Terms Inconsistent With Commercial Considerations
Petitioners alleged that Trefimetaux had received loans on terms inconsistent with
commercial considerations and that Trefimetaux was uncreditworthy since at least 1981.
During the period 1982-1985, Pechiney provided loans to Trefimetaux. For the reasons
discussed in section I.A., we conclude that these loans came from funds provided by the
Government of France. We have no information
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indicating that such loans are
available to any other company in France.
To determine the creditworthiness of Trefimetaux, we analyzed its present and past
health, as reflected in various financial indicators calculated from its financial statements.
Trefimetaux's inability to meet its costs and financial obligations from its cash flow, its
consistent pattern of losses, and its deteriorating capital structure led us to determine the
company was uncreditworthy during the period 1982-1985.
To determine whether the loans to Trefimetaux from Pechiney were on terms inconsistent
with commercial considerations, 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 on short-term loans given at the benchmark rate in any given year with
amounts actually repaid in that year under these loans.
For the benchmark rates, 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. Since
the interest rates charged by Pechiney are less than the benchmark rates, we determine
that these loans are inconsistent with commercial considerations. 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 Grants
During 1983, Pechiney provided Trefimetaux with a short-term advance. This debt and
another loan provided in 1980 were subsequently written off in 1983. We verified that
these funds were treated as grants in Trefimetaux's accounts. For the reasons discussed in
section I.A., we conclude that the grants came from funds provided by the French
government. 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 grants were tied to
exports. Therefore, we are considering the grants to be domestic subsidies.
To calculate the benefits attributable to these grants, we used our grant methodology and
allocated the grant amounts 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 in 1983 as the discount rate. We divided the benefits provided
by the grants by the value of Trefimetaux's 1985 sales to arrive at an estimated net
subsidy of 1.11 percent ad valorem.
B. Certain Financing from Credit National
Trefimetaux received financing from Credit National during the period 1976- 1985. Credit
National is a major financial institution, and it has a special legal status. Although Credit
National is not nationalized, the General Manager 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 procedures loans" on behalf of the government and performing
certain advisory and management functions on projects designated by the government,
its agencies and authorities. At the beginning of the year, the Government of France
notifies Credit National of how many special loans it can grant, and the government
provides funds to make up the difference between the ordinary and the special loan rates.
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 Final Affirmative
Countervailing Duty Determination: Industrial Nitrocellulose from France (48 FR
11971, March 22, 1983) we found the "ordinary" loans to be made on commercial terms
and hence not countervailable. We found that the nature of these "ordinary" loans has not
changed since the time of our previous investigation.
We verified that Trefimetaux received both "ordinary" and "special" loans from Credit
National. During 1985, Trefimetaux received a loan on terms inconsistent with
commercial considerations under the special refinancing program for the modernization
of production facilities, as well as an "ordinary" loan at commercial rates. Because no
interest was due on the special refinancing loan in 1985, we determine that no benefits
were conferred by this loan during the review period.
While some of Trefimetaux's 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 determine that 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 0.19 percent ad valorem.
II. Programs Determined Not To Confer Subsidies
We determine that subsidies are not being provided to manufacturers, producers or
exporters in France of brass sheet and strip under the following programs:
A. 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 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 participated in the
FNE programs.
Because we verified that the FNE programs are not limited to a specific enterprise or
industry, or group of enterprises or industries, we determine that the program is not
countervailable. As part of its labor negotiations, Trefimetaux also 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
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legally required to pay. At verification we saw no evidence that the
government provided assistance to Trefimetaux to relieve it of any of these labor-related
obligations.
B. Loans from Nationalized Banks
After the preliminary determination, petitioners alleged that the loans that Trefimetaux
received from nationalized banks constituted subsidies.
We verified that Trefimetaux received the loans from nationalized banks at rates
comparable to other similarly situated companies in France. We also verified that loans
from these banks are not limited to a specific enterprise or industry or group of
enterprises or industries. Therefore, we find that such loans do not provide a
countervailable benefit to Trefimetaux.
III. Programs Determined Not to be Used
Based on our verification of the responses of the Government of France and Pechiney
and Trefimetaux, we determined that manufacturers, producers or exporters in France
of brass sheet and strip did not use the following programs, which were listed in our
notice of initiation:
A. Preferential Electricity Rates for Trefimetaux
Pechiney, on behalf of several subsidiaries, entered into agreements with Electricite de
France to provide electricity. However, according to Trefimetaux's response and
verified information, Trefimetaux did not receive electricity under any agreement
providing preferential rates. We verified that Trefimetaux purchased electricity from
Electricite de France at rates established in published tariffs, based on the level of
consumption.
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 where the government wishes 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. We
verified that Trefimetaux did not receive any benefits through DATAR for the products
under investigation.
C. Export Credit Insurance for Political, Exchange Rate Fluctuation and Inflation Risks
The Companies Francaise 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 the commercial risk
program. See Final Affirmative Countervailing Duty Determination: Carbon Steel Wire
Rod from France (47 FR 42422 at 42427, September 27, 1982). We verified that
COFACE does not insure Trefimetaux for political, exchange rate fluctuation, or inflation
risk on its sales to the United States.
D. Export Financing
In France, exports may be financed of guaranteed throught the Banque Francaise du
Commerce Exterieur ((BFCE), and French companies may receive financing from
Companies pour le Financement du Stock a l'Etranger (COFISE) for the transfer abroad of
their inventories of capital goods. Trefimetaux's response stated and we verified that it
had no export financing under these programs outstanding during the review period.
Petitioners' Comments
Comment: Petitioners concur with the Department's conclusion in the preliminary
determination that government equity infusions and other financial assistance to
Trefimetaux through Pechiney constitute countervailable subsidies to Trefimetaux.
Petitioners contend that the subsidies to Trefimetaux were both provided by government
action and were also required by government action. Because Pechiney is a nationalized
company, Pechiney's provisions of fund to Trefimetaux should be considered as funds
provided by government action. The Government of France stated in its questionnaire
response that: "The Government of France adopted a selective policy of recapitalization .
. . [focusing on] Pechiney's traditional areas of expertise . . . including copper products. . .
." This shows that Pechiney's provision of funds to Trefimetaux was required by
government action.
DOC Postion: We agree that Pechiney's provisions of funds to Trefimetaux should be
considered as funds provided by the French government. We note, however, that we have
not been able to find any concrete evidence that the French government explicitly
directed Pechiney to invest in Trefimetaux. Instead, we found that without the funds
provided by the French government to Pechiney, Trefimetaux, as an unequityworthy
company, would not have had certain financial assistance available to it. Therefore,
although it was not the initial recipient of government funds, Trefimetaux was the
beneficiary of these funds.
Comment 2: Petitioners contend that Trefimetaux received an additional countervailable
benefit in 1983 when Pechiney wrote off the balance of a loan provided in an earlier year.
DOC Position: We agree. We verified that Pechiney forgave the loan in 1983, and we have
calculated the benefit from it along with the other grant Trefimetaux received in the same
year.
Comment 3: Petitioners maintain that Trefimetaux is a separate, subsidiary company
owned by Pechiney and not a division of Pechiney. Information submitted by
Trefimetaux in the companion antidumping investigation directly contradicts
Trefimetaux's claim that it is merely a division of Pechiney.
DOC Position: We agree. We verified that Trefimetaux is an independent company that
maintains its own audited financial records and has its own related companies and
subsidiary corporations separate from Pechiney. In addition, Trefimetaux negotiates for
and obtains all of its short-term loans, and Credit National and other long-term loans are
made directly to Trefimetaux.
Comment 4: Petitioners allege that treatment of government funds passed through
Pechiney to Trefimetaux as a subsidy is consistent with U.S. law and with its underlying
legislative history.
DOC Position: We agree. Congress made clear that if a government is providing benefits to
a specific enterprise or industry or group thereof, either "directly or indirectly," with
respect to the production of the relevant merchandise, then the program is
countervailable. The reference in the law to indirect subsidies clearly encompasses a
situation like this where government monies are channeled through a nationalized
holding company to a subsidiary company. To allow a government to pass money to a
subsidiary through a holding company, which has not been alleged to be uncreditworthy
or unequityworthy, would permit our countervailing duty law to be circumvented.
Such a rule in this case would allow the French government to subsidize unfairly
Trefimetaux's brass sheet and strip.
Comment 5: Petitioners maintain that investments by the Government of France in
Trefimetaux were inconsistent with commercial considerations. Because Trefimetaux is
the recipient and beneficiary of the government
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funds. Pechiney's financial status
is irrelevant to this investigation.
DOC Position: We agree. See our discussion in section I.A. of this notice explaining the
basis for our determination that Trefimetaux was unequityworthy and uncreditworthy
during the years funds were provided by the Government of France.
Comment 6: Petitioners allege that the loans Trefimetaux received from nationalized
banks also constituted subsidies. Trefimetaux, as an uncreditworthy entity, could never
on its own obtain the significant loans and the low rates of interest that it has obatined
from various financial institutions. The only reason Trefimetaux has obtained these loans
is because Pechiney has either: (1) Directly borrowed the funds and funneled the monies
down to Trefimetaux, or (2) served as a guarantor of the loans to Trefimetaux. To the
extent any of these loans from nationalized banks were provided to Trefimetaux directly
and without Pechiney's guarantee, these loans should be seen as separate government
subsidies to Trefimetaux.
DOC Position: We verified that the loans from the nationalized banks were provided
directly to Trefimetaux, and Pechiney did not serve as an explicit guarantor on these
loans. In addition these loans to Trefimetaux from nationalized French banks were not
given at the direction of the French government or at rates set by the French
government. Since loans at similar rates are available to other companies in France, we
find that the granting of such loans is not limited to a specific enterprise or industry or
group of enterprises or industries and does not provide a countervailable benefit to
Trefimetaux.
Respondents' Comments
Comment 1: Respondents contend that Pechiney is not "under the direction of the French
[government]." Pechiney currently is, and has always been, a purely commercial entity,
and not a political arm or agent of the French government.
DOC Position: Since February 1982, when Pechiney was nationalized, the French
Government has appointed Pechiney's president, and one-third of Pechiney's Board of
Directors are government officials. However, even though the French government
undoubtedly has a great deal of influence on Pechiney's management, government
direction is not the primary factor in our decision in this case. More important in this case
is the government provision of funds rather than the government's direction in how the
funds should be used.
Comment 2: Respondents argue that, unlike Pechiney, the government-owned entities
whose funding the Department has countervailed in the past have been significantly
political in nature, with close ties to, and closely coordinated policies with, the
government.
DOC Position: We disagree that Pechiney does not have close ties to, and closely
coordinated policies with, the government. See our response to Respondents' Comment 1.
In addition, we verified that Pechiney, like the parent companies in Certain Carbon Steel
Products from Austria, Final Affirmative Countervailing Duty Determination (50 FR
33369, August 19, 1985); Certain Carbon Steel Products from Brazil, Final Affirmative
Countervailing Duty Determination (49 FR 17988, April 26, 1984); and Certain Steel
Products from Italy, Final Affirmative Countervailing Duty Determinations (47 FR
39356, September 7, 1982), is merely a holding company; it is its subsidiaries that
produce goods. The fact that Pechiney's origins were as a private entity rather than as a
public or government entity is irrelevant.
Comment 3: Respondents argue that if an entity is not an agent of the State, as Pechiney is
not, then any funds must be traceable as subsidies from the government in order to be
countervailable. The Department clearly imposed a threshold requirement that funds
received from the government be legally countervailable in order to support a
determination that a subsequent reinvestment of these funds is countervailable in Fuel
Ethanol from Brazil; Final Affirmative Countervailing Duty Determination (51 FR
3361, January 27, 1986). In that case, the Department was requested to examine equity
infusions from the predominantly state-owned conglomerate Petroleos do Brasil, S.A.
(PETROBRAS) to its wholly-owned subsidiary, INTERBRAS. The Department applied a
two-prong test to determine whether or not these equity infusions could be considered
subsidies. First, PETROBRAS had to have received countervailable subsidies from the
Brazilian government. Second, any infusions made into INTERBRAS by PETROBRAS had
to have been inconsistent with commercial considerations. If the Department applies this
same test to the facts of this case, it will find that the funds to Pechiney from the French
government did not constitute a subsidy. Therefore, there was no subsidy that Pechiney
could pass on to Trefimetaux.
DOC Position: In Ethanol, petitioners alleged that equity infusions and loans to
PETROBRAS conferred a benefit on ethanol. Unlike the present situation. PETROBRAS was
involved in the distribution of ethanol in the domestic market and its subsidiary,
INTERBRAS, exported the merchandise under investigation. The Department found that
investments by PETROBRAS into INTERBRAS were not inconsistent with commercial
considerations.
In this case, however, we have determined that investment in Trefimetaux is inconsistent
with commercial considerations. Therefore, we have examined whether the French
government's equity infusions into Pechiney are a potential source of subsidy funds for
Trefimetaux.
As explained in section I.A., we have determined that these funds are the only funds from
which Trefimetaux, as an unequityworthy company, can draw to support its operations.
Under these circumstances, and particularly since Pechiney is merely a holding
company, owned by the government and directed by a board consisting of one-third
government officials, we consider Pechiney to be simply a conduit through which the
French government provides equity funds to Trefimetaux.
Comment 4: Respondents argue that none of Pechiney's investment decisions have been
directed by the government shareholder and that there is no evidence that the
government directed Pechiney to make specific investments anywhere in the Pechiney
Group.
DOC Position: Whether or not the government provided explicit instructions on their use,
it still provided equity funds that were used by Trefimetaux. See our discussion in section
I.A. of this notice and our response to Respondents' Comment 1.
Comment 5: Respondents contend that the Government of France invested in Pechiney,
not Trefimetaux, and did so on terms consistent with commercial considerations. The
French government's investment in Pechiney was the only money at issue "provided or
required" by the government to a specific enterprise or industry. Consequently, the
commercial reasonableness of such investment must, by law, be judged with reference to
the health of Pechiney, not the health of any individual activity taken in isolation.
DOC Position: The equityworthiness and creditworthiness of Pechiney are not at issue in
this case. We determined that the transfer of money from Pechiney to Trefimetaux
constituted a receipt of money by Trefimetaux indirectly from the French government.
*1224
Comment 6: Respondents contend that Pechiney and Trefimetaux are a single
commercial entity; the intracompany transactions between them are irrelevant under the
statute. Internal company investment decisions cannot be meaningfully or fairly judged
by the "commercial considerations" test provided by the statute. The legal form of a
company's activity does not by itself change this analysis.
In the Department's investigation of Ethanol, the petitioners alleged three levels of equity
infusions inconsistent with commercial considerations. On the first level, they alleged
that government equity infusions into the predominantly state-owned energy
conglomerate, PETROBRAS, were inconsistent with commercial considerations and were,
therefore, subsidies. On the second level, the same allegation was made concerning
PETROBRAS' equity infusions into its wholly-owned subsidiary, INTERBRAS. Finally, the
same allegation was made concerning INTERBRAS' equity infusion into INTERNOR,
INTERBRAS' wholly-owned trading company in the United States. The Department
supported its decision not to examine the funding of INTERNOR, which was a separately
incorporated entity, on the basis that INTERNOR was merely an extension of INTERBRAS'
activities.
DOC Position: Pechiney is a holding company, while Trefimetaux is an independent
subsidiary, with subsidiaries of its, own, that produces and sells fabricated copper
products. They are not a single commercial entity. In contrast, INTERNOR in Ethanol was
a selling arm of INTERBRAS, and it was not considered to be separate corporate entity.
Comment 7: Respondents argue that if the Departmernt erroneously concludes that
Pechiney's investments in Trefimetaux constitute a countervailable "pass- through" of
subsidies from the French government, then the funding should be limited to the
percentage of funds provided by the French government that was available to Pechiney
for investment in its activities in each of the years 1982-1985. Because Pechiney had
investment funds available from operating profits, bank loans, stock earnings, sales of
assets, and other normal commercial sources available to any business, it is
inappropriate to assume that 100 percent of Trefimetaux's financial support came from
government sources.
DOC Position: We disagree. During verification we were not able to obtain documentation
used by the French government and Pechiney in connection with the equity infusions that
would have indicated if any set amounts were earmarked for Trefimetaux. However,
because Trefimetaux was unequitworthy and uncredityworthy during the period
1982-1985, no reasonable investor would have provided funding to Trefimetaux.
Therefore, it is not reasonable to assume, without supporting documentation, that
Pechiney would have transferred profits from its other subsidiaries to Trefimetaux in light
of its financial health. Moreover, the funds provided to Pechiney by the French
government more than exceeded the amounts transferred to Trefimetaux by Pechiney.
Comment 8: Respondents argue that, contrary to the claims of petitioners, there is
nothing commercially inconsistent about Pechiney's investments in Trefimetaux, either
before or after nationalization. Financial and commercial data submitted by respondents
show that Trefimetaux's favorable commercial prospects more than justified the
commitment of Pechiney funds to copper production.
DOC Position: We disagree. See section I.A. of this notice for a discussion of why we
determine Trefimetaux is unequityworthy.
Verification: In accordance with section 776b(a) of the Act, we verified the information
and data used in making our final determination. During verification we followed normal
verification procedures, including meetings with government officials and inspection of
documents, as well as on-site inspection of the accounting records of Pechiney and
Trefimetaux.
Suspension of Liquidation: In accordance with our preliminary countervailing duty
determination, published on June 9, 1986, we directed the U.S. Customs Service to
suspend liquidation on the products under investigation and to require a cash deposit or
bond equal to the estimated net subsidy. This final countervailing duty determination
was extended to coincide with the final antidumping determination on the same products
from France, pursuant to section 606 of the Trade and Tariff Act of 1984 (section
705(a)(1) of the Act). However, we cannot impose a suspension of liquidation on the
subject merchandise for more than 120 days without the issuance of a final affirmative
determination of subsidization and injury. Therefore, on October 7, 1986, we instructed
the U.S. Customs Service to terminate the suspension of liquidation on the subject
merchandise entered on or after October 7, 1986, but to continue the suspension of
liquidation of all entries, or withdrawals from warehouse for consumption of the subject
merchandise entered between June 9, 1986, and October 6, 1986. We will reinstate
suspension of liquidation if the ITC issues a final affirmative injury determination and
require a cash deposit on all entries of the subject merchandise in an amount equal to
7.24 percent ad valorem.
ITC Notification
In accordance with section 705(d) of the Act, we will notify the ITC of our determination.
In addition, we are making available to the ITC all nonprivileged and nonproprietary
information relating to this investigation. We will allow the ITC access to all privileged
and proprietary 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 the ITC determines that material injury, or the threat of material injury, does not exist,
this proceeding will be terminated, and all estimated duties deposited or securities posted
as a result of the suspension of liquidation will be refunded or cancelled. If, however, the
ITC determines that such injury does exist, we will issue a countervailing duty order
directing the Customs officers to assess countervailing duties on all entries of brass
sheet and strip from France entered, or withdrawn from warehouse, for consumption, as
described in the "Suspension of Liquidation" section of this notice.
This notice is published pursuant to section 705(d) of the Act (19 U.S.C. 1671(d)).
Paul Freedenberg,
Assistant Secretary for Trade Administration.
January 5, 1987.
[FR Doc. 87-606 Filed 1-9-87; 8:45 am]
BILLING CODE 3510-DS-M