NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
(C-427-810)
Preliminary Affirmative Countervailing Duty Determinations: Certain Steel
Products From France and Alignment of Final Countervailing Duty Determinations
With Final Antidumping Duty Determinations: Certain Steel Products From France
Monday, December 7, 1992
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AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: December 7, 1992.
FOR FURTHER INFORMATION CONTACT:Julie Anne Osgood or Susan Strumbel, Office of
Countervailing Investigations, U.S. Department of Commerce, Room 3099, 14th Street
and Constitution Avenue NW., Washington, DC 20230; telephone (202) 482- 0167 or
482-1442, respectively.
Preliminary Determinations and Alignments
The Department preliminarily determines that benefits which constitute subsidies within
the meaning of section 701 of the Tariff Act of 1930, as amended (the Act), are being
provided to manufacturers, producers, or exporters in France of certain steel products.
For information on the estimated net subsidies, please see the Suspension of Liquidation
section of this notice.
On November 24, 1992, in accordance with section 705(a)(1) of the Tariff Act of 1930, as
amended (the Act) (19 U.S.C. 1671d(a)(1)), petitioners in the above-referenced
investigations requested that we align the due date for the final countervailing duty
determinations with that of the final antidumping duty determinations for certain steel
products. Accordingly, we are aligning these final determinations. Therefore, the final
countervailing duty determinations are now due not later than April 12, 1993.
Case History
Since the publication of the notice of initiation and postponement of preliminary
determinations in the Federal Register (57 FR 32970, July 24, 1992) the following events
have occurred.
On August 10, 1992, we issued a questionnaire to the Government of France (GOF). On
August 21, 1992, we received a partial response from the GOF indicating that Usinor
Sacilor was the proper respondent company in these investigations.
On October 5, 1992, we received responses from the GOF and Usinor
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Sacilor. On
October 23, 1992, we issued a supplemental/deficiency questionnaire to respondents. We
received responses to this questionnaire on November 9, 1992.
Scope of Investigations
The products covered by these investigations, certain steel products, constitute the
following four separate "classes or kinds" of merchandise, as found in Appendix 1 to this
notice: (1) Certain hot-rolled carbon steel flat products; (2) certain cold-rolled carbon
steel flat products; (3) certain corrosion-resistant carbon steel flat products; and (4)
certain cut-to-length carbon steel plate.
Injury Test
Because France is a "country under the Agreement" within the meaning of section 701(b)
of the Act, the U.S. International Trade Commission (ITC) is required to determine
whether imports of the certain steel products from France materially injure, or threaten
material injury to, U.S. industries. On August 21, 1992, the ITC preliminarily determined
that there is a reasonable indication that U.S. industries are being materially injured or
threatened with material injury by reason of imports from France of the subject
merchandise (57 FR 38064, August 21, 1992).
Respondents
The GOF is respondent for each class or kind of merchandise subject to these
investigations. Usinor Sacilor is the only respondent company for each class or kind of
merchandise subject to these investigations.
Corporate History
At the end of 1986, Usinor and Sacilor, which were separate subsidiaries owned by the
GOF, were merged to become one holding company called Usinor Sacilor.
Analysis of Programs
For purposes of these preliminary determinations, the period for which we are measuring
subsidies (the period of investigation (POI)) is calendar year 1991, which corresponds to
the fiscal year of Usinor Sacilor.
Based upon our analysis of the petition and the responses to our questionnaire, we
preliminarily determine the following:
Equityworthiness
Petitioners have alleged that Usinor, Sacilor and Usinor Sacilor were unequityworthy for
certain years during the period 1979 through 1991, and, therefore, that equity infusions
received during those years were inconsistent with commercial considerations. The
Department previously determined that Usinor and Sacilor were unequityworthy for the
years 1978 and 1981 in Final Affirmative Countervailing Determinations: Certain Steel
Products from France, 47 FR 39332 (September 7, 1982) (Certain Steel). Respondents
have presented no new evidence in these investigations that contradicts the Department's
findings.
Based on the following analysis, we have preliminarily determined in these investigations
that Usinor, Sacilor, and Usinor Sacilor were unequityworthy during the years 1982
through 1988 and that Usinor Sacilor was eqityworthy during 1991.
Throughout the period 1982 to 1987, Usinor, Sacilor, and Usinor Sacilor reported
substantial losses. Stockholders' equity was negative in every year except 1986.
Accordingly, certain financial indicators, such as rate of return on assets and equity and
profit margin on sales, were negative. Therefore, we preliminarily determine Usinor,
Sacilor, and Usinor Sacilor to be unequityworthy in those years.
In its responses, Usinor Sacilor has derived a return on equity for 1984 through 1991
using earnings before interest, taxes and depreciation (EBIDT) for the numerator. (Usinor
Sacilor consolidated data for Usinor and Sacilor for those years prior to the merger in
1986.) On this basis, Usinor Sacilor has calculated a positive return on equity for these
years.
During the verification of Certain Hot-Rolled Lead and Bismuth Carbon Steel from
France, 57 FR 42977 (September 17, 1992) (Bismuth), we were informed by GOF
officials that EBIDT is the primary measure in France used to evaluate a company's
ability to meet its obligations. (See the public version of the report on the Verification of
the Government of France, on file in Room B-099 of the Department of Commerce.)
However, EBITD is not a reflection of the net income of the company in which an investor
would be interested for purposes of determining the rate of return on equity. Therefore,
the net income of a company, not EBITD, reflects the amount which would potentially
accrue to the benefit of the shareholders. For these reasons, we have disregarded Usinor
Sacilor's calculations and relied instead upon the companies' return on assets and return
on equity calculated on the basis of net income divided by the average shareholder's
equity.
In Bismuth, we preliminarily determined that Usinor Sacilor was not equityworthy in
1991 based upon a review of the financial data and a summary of an analysis of Usinor
Sacilor performed by an independent consulting firm. Although the company reported
positive rates of return on both assets and equity for all of the preceding years, the
financial position of the firm weakened yearly. Respondents provided a summary of a
study conducted by a Swiss consulting firm, hired by the European Commission, to
evaluate Credit Lyonnais' proposed acquisition of 20 percent of Usinor Sacilor's voting
stock. According to respondent, the evaluation of the financial condition of Usinor Sacilor
as a whole was performed to enable the Commission to determine whether the proposed
investment by Credit Lyonnais was one that a prudent investor would make, and whether
Credit Lyonnais was paying a fair price, in accordance with the EC State Aids Code.
Respondent only provided a summary, not a translated version of the complete report,
for use in our preliminary analysis in the Bismuth case. The summary did not provide
sufficient information or data for the Department to assess whether the analysis met the
standards of our "reasonable investor" test. Therefore, we preliminarily determined that
Usinor Sacilor was unequityworthy for 1991.
In these investigations of certain steel products, respondents have provided the
complete, translated Swiss report. Based on our review of the complete report, we have
reevaluated Usinor Sacilor's potential for generating a reasonable rate of return within a
reasonable period of time and concluded that Usinor Sacilor was equityworthy during
1991.
Creditworthiness
Petitioners have alleged that Usinor, Sacilor and Usinor Sacilor were uncreditworthy
from 1982 through 1992.
Usinor Sacilor disagrees with the Department's previous determination of
uncreditworthiness in Certain Steel. Usinor Sacilor has simply provided tables indicating
certain debt-to-equity ratios and the ratios of debt obtained from private sources to funds
raised from government sources. However, respondents have not provided sufficient
detail with respect to the information contained in these tables nor the nature of the loans
from private sources.
Usinor Sacilor also did not provide information concerning its interest obligations for the
years 1978 through 1983. Usinor Sacilor simply stated that it never failed to meet its
interest
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obligations. However, Usior and Sacilor reported net losses in each of
these years. During these same years the debt equity ratios indicated the company was
highly leveraged, and the current and quick ratios appear to indicate low level of liquidity
available to pay debts. Therefore, we do not have a sufficient basis on which to reconsider
our earlier determination that Usinor and Sacilor were uncreditworthy from 1978
through 1981.
To determine the creditworthiness of Usinor, Sacilor, and Usinor Sacilor during the
period 1982 through 1991, we have evaluated certain liquidity and debt ratios, i.e.,
current and quick, times interest earned, long-term debt, and debt-to-equity on a
consolidated basis. For the period, 1979 through 1987, the company consistently
incurred substantial losses. The interest coverage ratios were negative and the liquidity
ratios indicated that the company may have difficulty in meeting its short-term
obligations. Although Usinor Sacilor reported a profit in 1988, as a result of our analysis,
we preliminary determine that Usinor, Sacilor, and Usinor Sacilor were uncreditworthy
for the years 1982 through 1989.
However, for the years 1990 through 1991, we preliminarily determine that Usinor
Sacilor was creditworthy because the financial statements and certain ratios indicated
that Usinor Sacilor was able to generate sufficient cashflow to meet its current and
long-term obligations.
Equity Methodology
According to § 355.49(e) of the (Countervailing Duties; Notice of Proposed
Rulemaking and Request for Public Comments 54 FR 23366 (May 31, 1989) (Proposed
Rules)) the Department measures the benefit of equity investments in "unequityworthy"
firms by comparing the national average rate of return on equity with the company's rate
of return on equity during each year of the allocation period. The difference in these
amounts, the so-called rate of return shortfall (RORS), is then multiplied by the amount of
the equity investment to determine the countervailable benefit in the given year.
The Department has preliminarily concluded that the RORS methodology does not
provide an accurate measure of the benefits arising from government equity investments
in unequityworthy companies. When the Department finds that a company is
unequityworthy and, hence, that the government's equity investment is consistent with
commercial considerations, we are effectively finding that the company could not attract
share capital from a reasonable investor. When a company is in such poor financial
condition that it cannot attract capital, any capital it receives benefits the company as if it
were a grant and no earnings of the company in subsequent years should be used to offset
the benefit.
Moreover, in calculating the company's rate of return, no adjustment is made to eliminate
the effect of past or current subsidies. Therefore, those subsidies that increase the
company's rate of return serve to reduce the amount of the subsidy arising from
government equity investments in subsequent years. In addition, this method does not
compensate for the effect of prior year results on equity in subsequent years, thus
measuring the rate of return against an equity other than that invested in the transaction
in question.
For these reasons, we have preliminarily determined that equity investments in
unequityworthy companies will be treated as grants given in the year of the equity
investment. Accordingly, we will value the benefits using the grants methodology
described below.
Where a market-determined benchmark price for equity exists, we will continue to use
that benchmark to determine whether the government's purchase of equity confers a
subsidy and to measure the amount of the subsidy.
Grant Methodology
Our policy with respect to grants is (1) to expense recurring grants in the year of receipt,
and (2) to allocate non-recurring grants over the average useful life of assets in the
industry, unless the sum of grants provided under a particular program is less than 0.5
percent of a firm's total or export sales (depending on whether the program is a domestic
or export subsidy) in the year in which the grant was received. See, e.g., Final Affirmative
Countervailing Duty Determination; Fresh and Chilled Atlantic Salmon from Norway
(Salmon from Norway), 56 FR 7678 (February 25, 1991).
We have considered the grants provided under the programs described below to be
non-recurring, unless otherwise noted, because the recipient cannot expect to receive
benefits on an ongoing basis from review period to review period. See, Final Affirmative
Countervailing Duty Determination; Certain Fresh Atlantic Groundfish from Canada,
51 FR 10041 (March 24, 1986). (In this regard, we are reexamining the approach to
distinguishing recurring from non- recurring benefits set forth in the three-part test found
in the preamble of the Proposed Rules, 54 23366, 23376 (May 31, 1989)). Therefore, we
have allocated the benefits over 15 years, which the Department considers to be
reflective of the average useful life of assets in the steel industry (see, § 355.49(b)(3) of the
Proposed Rules).
The benefit from each of the grant programs discussed below was calculated using the
declining balance methodology described in the Department's Proposed Rules (see, §
355.49(b)(3)) and used in prior investigations (see e.g., Salmon from Norway). For the
discount rate used in these calculations, we used the lending rates published in the
International Monetary Fund's International Financial Statistics because Usinor Sacilor
did not report its actual cost for long-term, fixed-rate debt. Since Usinor Sacilor was
uncreditworthy in the years in which all grants were approved we have used the highest
annual interest rate reported in the IMF publication and have added a risk premium to
the benchmark interest rate in accordance with § 355.44(b)(6)(iv) of the Proposed Rules.
We preliminarily determine that each of the grant programs listed below (unless
otherwise stated) are "non-recurring" and are equal to or greater than 0.50 percent of all
sales of the company during that year (see, Final Affirmative Countervailing Duty
Determination: Certain Fresh Atlantic Groundfish from Canada, 51 FR 10041 (March 24,
1986)). Therefore, we allocated the benefits provided under these programs over the
useful life of assets in the steel industry, i.e., 15 years.
Specificity
When receipt of benefits under a program is not contingent upon exportation, the
Department must determine whether the program is specific to an enterprise or industry,
or group of enterprises or industries. Under the specificity analysis, the Department
examines both whether a government program is limited by law to a specific enterprise or
industry, or group thereof (i.e., de jure specificity) and whether the government program
is in fact limited to a specific enterprise or industry, or group thereof (i.e., de facto
specificity). See 19 U.S.C. 1677(5)(B). In section 355.43(b)(2) of the Department's
Proposed Rules, the Department has set forth the factors that may be considered in
determining whether there is specificity:
(i) The extent to which a government acts to limit the availability of a program;
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(ii) The number of enterprises, industries, or groups thereof that actually use a
program;
(iii) Whether there are dominant users of a program, or whether certain enterprises,
industries, or groups thereof receive disproportionately large benefits under a program;
and
(iv) The extent to which a government exercises discretion in conferring benefits under a
program.
See also Final Affirmative Countervailing Duty Determination: Certain Softwood
Products from Canada 57 FR 22570 (May 28, 1992).
A. Programs Preliminarily Determined To Be Countervailable
We preliminarily determine that subsidies are being provided to manufacturers,
producers, or exporters in France of certain steel products under the following
programs. The analysis provided below applies equally to each of the four classes or kinds
of merchandise.
1. Equity Infusions
Loans with Special Characteristics (PACS)
A plan was agreed upon in 1978 to help the principal steel companies, Usinor, Sacilor,
Chatillon-Neuves-Maisons, and their subsidiaries, restructure their massive debt. This
plan entailed the creation of a steel amortization fund, called the Caisse d'Amortissement
pour l'Acier (CAPA) for the purpose of assuring repayment of funds borrowed by these
companies prior to June 1, 1978. In accordance with the restructuring plan of 1978,
bonds previously issued on behalf of the steel companies and pre-1978 loans from Credit
National and Fonds de Developpement Economique et Social (FDES) were converted into
PACS. As a result of this process, the steel companies were no longer liable for the loans
and bonds, but did take on PACS obligations.
According to the responses, PACS were an instrument akin to redeemable subordinated
nonvoting preferred stock. PACS would be included in the shareholders' equity on the
balance sheet, and had the following characteristics: 1) a symbolic 0.10 percent
remuneration for the first five years and 1.0 percent thereafter, 2) no schedule of
reimbursement but in the event the steel companies became profitable, the PACS holders
could elect to redeem their PACS or share in profits according to a predetermined
formula, and 3) PACS were subordinated to all but the common stock.
In 1978, Usinor and Sacilor converted 21.1 billion French francs (FF) of debt into PACS.
From 1980 to 1981, Usinor and Sacilor issued FF8.1 billion of new PACS. PACS in the
amount of FF13.8 billion, FF12.6 billion and FF2.8 billion were converted into common
stock in 1981, 1986 and 1991, respectively.
Fonds d'Intervention Siderurgique (FIS)
The 1981 Corrected Finance Law granted Usinor and Sacilor the authority to issue
convertible bonds. The FIS, or steel intervention fund, was created by a decree of May 18,
1983, in order to implement that authority. According to the responses, Usinor and
Sacilor issued convertible bonds to the FIS, which, in turn, with the GOF guarantee,
floated bonds to the public and to institutional investors.
In 1983, 1984, and 1985, Usinor and Sacilor issued convertible bonds to the FIS. These
FIS bonds were converted to common stock in 1986 and 1988.
Shareholders' Advances
According to the responses, the GOF financed the recurring needs of Usinor and Sacilor
through shareholders' advances beginning in 1982. These shareholders' advances carried
no interest and there was no precondition for receipt of these funds. The responses
indicated that, consistent with the GOF's policy of full adherence to the EC State Aids
Code, and with the GOF's private investor policy articulated by President Mitterrand in
1984, the GOF, in 1986, paid out the last of the advances it had agreed to make under this
program.
All of these advances were converted to common stock in 1986.
In 1981, 1986, 1988, and 1991, virtually all the common stock purchased through
conversions of PACS, FIS bonds and shareholder's advances was offset against company
losses, with the result of reducing paid-in capital. In the preliminary determination in
Bismuth, we concluded that the benefit was realized at the time of the reduction in
paid-in-capital and we treated each reduction in paid-in-capital as a grant.
We have reconsidered the approach taken in Bismuth and, consistent with the equity
methodology preliminarily adopted in these investigations, we have concluded that any
benefits to Usinor Sacilor occurred at the point when the debt instruments were
converted to common stock. Because the equity methodology does not recognize the
subsequent performance of the company receiving the equity investment and treats the
equity investment as a grant, the later write-off of the equity is irrelevant. As discussed
above, we have preliminarily determined that Usinor Sacilor was unequityworthy from
1981 through 1988 and equityworthy in 1991.
As a result, we consider the conversion of PACS to common stock in 1981 and 1986 to
constitute equity infusions on terms inconsistent with commercial considerations.
Similarly, we consider the conversion of FIS bonds to common stock in 1986 and 1988 to
constitute equity infusions on terms inconsistent with commercial considerations
because Usinor Sacilor was unequityworthy in 1986 and 1988.
However, because we have preliminarily determined that Usinor Sacilor was
equityworthy in 1991, the PACS to equity conversion in that year was consistent with
commercial considerations.
Consistent with the decision concerning equity methodology preliminarily adopted in
these investigations, we followed the grant methodology outlined above for allocating the
benefits from the equity infusions stemming from PACS and FIS bonds.
With respect to shareholders' advances, we have preliminarily determined that
shareholders' advances constitute countervailable grants as no shares were received for
these advances when they were made to Usinor and Sacilor.
We calculated the benefit from shareholders' advances for the POI using the grant
methodology discussed above. We then added the benefits accruing from PACS, FIS
bonds and shareholders' advances. We divided this total benefit by Usinor Sacilor's total
sales excluding shipping expenses and sales of non- French produced merchandise. On
this basis, we calculated an estimated net subsidy of 23.95 percent ad valorem.
Equity Infusion 1978
Based on information provided in the Changes in Capital exhibits in the responses, it is
evident that the GOF provided an infusion of capital to Usinor and Sacilor. Given that we
have preliminarily determined that Usinor and Sacilor were unequityworthy in 1978, this
equity infusion was provided on terms inconsistent with commercial considerations.
Consistent with the decision concerning equity methodology preliminarily adopted in
these investigations, we followed the grant methodology outlined above for allocating the
benefits from this equity infusion in 1978. We divided this benefit by Usinor Sacilor's total
sales excluding shipping expenses and sales of non-French produced merchandise. On
this basis, we calculated an
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estimated net subsidy of 0.05 percent ad valorem.
2. Long-Term Loans from FDES
The Law of July 13, 1978, created participative loans (prets participatifs) which were by
law available to all French companies. Under these loans, which were issued by the FDES
and the Caisse Francaise de Developpement Industriel (CFDI), the borrower paid a
lower-than-market interest rate plus a share of future profits according to an agreed upon
formula. These loans were obtained by either Usinor, Sacilor, or their subsidiaries. On
July 1, 1990, the outstanding principal on the FDES loans to Usinor and Sacilor was
consolidated into multiple long-term loans where repayment did not include a share of
profits.
In these investigations, the GOF has provided the total distribution of FDES loans for 1985
through 1990. This information indicates that the amount of Usinor Sacilor's debt
consolidated in 1990 exceeded the total amount of FDES loans distributed to all sectors of
the economy for the years 1987, 1988, and 1989 combined. Moreover, it does not appear
that the consolidated loans at issue are included in the 1990 distribution.
For these reasons, we have preliminarily determined that the 1990 consolidated loans are
de facto limited to a specific enterprise or industry or group of enterprises or industries.
Accordingly, Usinor Sacilor's FDES loans are countervailable to the extent that they were
provided on terms more favorable than the benchmark financing.
We have used as the benchmark and the discount rate the OECD-TMO average and highest
long-term fixed interest rate published in the OECD Financial Statistics publication for
1990. Because we have preliminarily determined that Usinor Sacilor was creditworthy
during 1990, for purposes of calculating the benefit, we have made no adjustment to the
benchmark interest rate. We then compared this benchmark financing to the financing
provided by FDES and found that the FDES loans were provided on more favorable terms
than the benchmark financing. Therefore, we preliminarily determine that Usinor
Sacilor's loans are countervailable.
To calculate the benefit from these loans we employed our normal long-term loan
methodology as described in section 355.49(c)(1) of the Department's Proposed Rules.
(See also Final Affirmative Countervailing Duty Determination: Certain Granite
Products from Spain, 53 FR 24340 (June 28, 1988).) We divided the benefit attributable
to the POI by Usinor Sacilor's total sales excluding shipping expenses and those sales of
non-French produced merchandise. On this basis, we calculated an estimated net subsidy
of 0.02 percent ad valorem.
3. Loans from Credit National and CFDI
In 1991, outstanding loans to Usinor Sacilor from Credit National and CFDI were
consolidated. Consistent with our treatment of the FDES loans, we are treating these
consolidations as new loans in 1991.
Because we are treating these as new loans taken out in 1991, no interest would be due
until 1992. Hence, there would be no cash flow effect until 1992. Only at that time would
any potential subsidy from these loans be realized. However, the old loans which were
consolidated in 1991 were outstanding during a portion of the POI and potentially, give
rise to a benefit.
The GOF has claimed that loans from Credit National and CFDI are not limited to a specific
enterprise or industry or group of enterprises or industries. However, with respect to the
Credit National loans, no information has been provided on the distribution of these
loans. With respect to CFDI loans, the GOF provided a regional and an industry
distribution. However, the distribution chart did not indicate the period of time over
which this distribution applied.
Respondents further provided the law creating Credit National which indicated that loans
made by Credit National were non-specific. However, respondents did not provide any
information to demonstrate that Credit National loans are not limited to a specific
enterprise or industry or group of enterprises or industries on a de facto basis. Unlike
Bismuth, however, respondents provided the terms of these old Credit National and CFDI
loans for all but one of the Credit National loans.
Since respondents have not provided sufficient evidence that these old loans from Credit
National and CFDI are non-specific, we preliminarily determine that these old loans are
de facto limited to a specific enterprise or industry or group of enterprises or industries.
Therefore, Usinor Sacilor's Credit National and CFDI loans are countervailable to the
extent that they were provided on terms more favorable than the benchmark financing.
For those years in which Unisor, Sacilor, and Usinor Sacilor were uncreditworthy, we
have used as the benchmark the same interest rate as described in the Grant Methodology
section above. For those years in which Usinor, Sacilor, and Usinor Sacilor were
creditworthy, we have used as the benchmark the interest rate described in the
"Long-Term Loans from FDES" section above.
We then compared the appropriate benchmark financing to the financing Usinor, Sacilor,
and Usinor Sacilor received by Credit National and CFDI and found that these loans were
provided on terms inconsistent with commercial considerations. Therefore, we
preliminarily determine that Usinor Sacilor's old loans from Credit National and CFDI are
countervailable. To calculate the benefit from these loans, we employed the long-term
loan methodology described above in our discussion of "Long-Term Loans from FDES."
For the one Credit National loan where respondents did not provide the terms of the old
loans, we calculated the benefit arising from these loans during the POI, assuming that no
interest was paid. We have compared this to the benchmark rate from the OECD Financial
Statistics publication "Typical Short- Term Interest Rates." We found that this loan was
provided on terms inconsistent with commercial considerations.
We then added all benefits received from Credit National and CFDI financing and divided
the total benefit attributable to the POI by Usinor Salicor's total sales excluding shipping
expenses and those sales of non-French produced merchandise. On this basis, we
calculated an estimated net subsidy of 1.67 percent ad valorem.
4. Investment Subsidies
Petitioners allege that Usinor and Sacilor received significant sums of money from 1977
through at least 1984 which were listed in the balance sheets as "equipment subsidies."
Petitioners have also questioned so-called "investment subsidies," which may have been
related to equipment subsidies.
According to the responses, "investment subsidies" are provided for investment projects.
Companies receive funds from the following sources: the ECSC, Health Insurance Offices,
Agencies for Energy Control and Water Authorities, among others. With respect to
eligibility criteria, the responses indicate that these investment subsidies are generally
available and are not aimed at specific merchandise but rather are designed to
accomplish various social purposes, except that the ECSC programs pertain only to
numerous classes of steel merchandise.
According to the responses, investment subsidies are provided by (1) the ECSC, which
funds projects for
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research and development that must be made available to
Community members, (2) Health Insurance Offices, which provide funds to all companies
investing in projects aimed at preventing accidents at work and work-related illnesses, (3)
indirect taxes which are paid by all companies to water authorities which in turn provide
funds to companies who carry out water purification, and (4) the French agency for
Energy Control which makes funds available for all projects promoting a rational use of
energy. Usinor Sacilor provided a chart in its responses indicating investment subsidies
as of 1991. Respondents have indicated that these subsidies are provided on a recurring
basis.
Respondents have not provided sufficient evidence demonstrating that these subsidies
are not specific on a de facto basis. Therefore, for purposes of this preliminary
determination, we are treating these investment subsidies as recurring grants received in
1991. Accordingly, we have divided this total amount of grants received by Usinor
Sacilor's total sales excluding shipping expenses and sales of non-French produced
merchandise. On this basis, we calculated an estimated net subsidy of 0.12 percent ad
valorem.
5. Grants in the Form of Cancellation of Debt by Marine-Wendel and DNEL
Petitioners alleged that in 1978, at the GOF's behest, Marine-Wendel and DNEL cancelled a
portion of the debt of Usinor and Sacilor and received nothing in return. In Certain Steel,
the Department stated that since this forgiveness of debt was provided at the direction of
the GOF as part of the Rescue Plan, it conferred a countervailable benefit. Accordingly, we
treated the canceled amount as a grant and allocated it over a 15-year period.
Based on our findings in Certain Steel and information provided in the responses, we
continue to believe that the GOF was involved with the decision to change Usinor's and
Sacilor's debts to their former majority shareholders into PACS. Respondents have not
provided any new evidence that these grants were not countervailable.
According to the responses, in the 1978 restructuring, part of the loans made by the
(private) majority stockholders were written off and another portion was converted to
PACS. Because the debt forgiveness represented by the loan write- off was specific to
Usinor and Sacilor, we preliminarily find it countervailable. We have calculated the
benefit from this program using the grant methodology described above.
Sacilor's former majority shareholder redeemed its PACS in 1989. Although Sacilor paid
no interest on the PACS, the full value was repaid. Therefore, consistent with our
approach in Bismuth, we are treating this as a zero interest loan where benefits expired
prior to the POI.
The remaining portion of the loans from Usinor's former majority shareholder which also
were converted to PACS were essentially written off in 1981 at a redemption value of
FF100. Accordingly, we are treating the difference between the original shareholder's
advance and the amount repaid as a nonrecurring grant. We have applied the grant
methodology discussed above to calculate the benefit.
We then added the benefits from the debt forgiveness and the write-off. We divided this
total benefit by total sales excluding shipping expenses and sales of non-French produced
merchandise. On this basis, we calculated an estimated net subsidy of 0.09 percent ad
valorem.
6. ECSC Article 54 Loans
Article 54 industrial investment loans are provided for the purpose of purchasing new
equipment or financing modernization. The EC stated that Article 54 loans are direct
loans from the Commission and that the funds are loaned at a slightly higher rate than that
at which the Commission obtained them in order to cover its costs. According to the EC
response, the Commission has this program to facilitate the borrowing process for
companies in the ECSC, some of which may not otherwise be able to obtain these loans.
These loans are only available to the iron and steel industry.
These loans were used by companies in France, Germany, Spain, Italy and the United
Kingdom. The EC identifies a Belgian company as well, Cockerill Sambre, as having
participated in this loan program. However, this particular company provided no
response to the Department's questionnaire.
We preliminarily determine that this program is limited to the iron and steel industry.
Therefore, these loans are countervailable to the extent that they are provided on terms
inconsistent with commercial considerations.
For those years in which Usinor, Sacilor, and Usinor Sacilor were uncreditworthy, we
have used as the benchmark the same interest rate as described in the Grant Methodology
section above. For those years in which Usinor, Sacilor, and Usinor Sacilor were
creditworthy, we have used as the benchmark the interest rate described in the
"Long-Term Loans from FDES" section above.
We then compared the appropriate benchmark financing to the financing Usinor, Sacilor,
and Usinor Sacilor received by the EC and found that these loans were provided on terms
inconsistent with commercial considerations. Therefore, we preliminarily determine that
Usinor Sacilor's loans from the EC are countervailable. To calculate the benefit from these
loans, we employed the long-term loan methodology described above in our discussion of
"Long-Term Loans from FDES." We divided this total benefit by total sales excluding
shipping expenses and sales of non-French produced merchandise. On this basis, we
calculated an estimated net subsidy of 0.50 per cent ad valorem.
7. ECSC Redeployment Aid (Article 56(2)(b)
Under Article 56(2)(b) of the ECSC Treaty, individuals employed in the coal and steel
industry who lose their jobs may receive assistance for social adjustment. This assistance
is provided for workers affected by restructuring measures, particularly as workers
withdraw from the labor market into early retirement or are forced into unemployment.
The ECSC disburses assistance under this program on the condition that the affected
country makes an equivalent contribution. Payments were made to steel workers under
Article 56(2)(b). Funds for the ECSC portion of these payments are from the ECSC
Operational Budget, made up entirely of levies on ECSC companies.
Since the ECSC portion of payment under this program comes from its Operational
Budget, we preliminarily determine that the portion of payments provided by the ECSC,
i.e., 50 percent, to be not countervailable. However, to the extent that their payments
relieve companies of obligations they would otherwise incur, we are preliminarily
countervailing the matching contributions by Member State governments.
Moreover, we preliminarily determine that matching contributions by Member State
governments should be treated as recurring grants because the program is one under
which recipients can expect to receive benefits on an ongoing basis year after year.
Therefore, we are preliminarily countervailing Member State payments under this
program received in 1991.
We consider this program to provide recurring benefits and we expensed the payments
provided under this program by the GOF in 1991. Therefore, we took
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50 percent
of the funds provided in 1991 under this program, the amount attributable to the GOF,
and divided that amount by Usinor Sacilor's total sales excluding shipping expenses and
sales of non-French produced merchandise. On this basis, we calculated an estimated net
subsidy of 0.08 percent ad valorem.
8. European Investment Bank (EIB) Loans and Loan Guarantees
EIB loans are provided for the purpose of contributing to the steady and balanced
development of the Community by providing loans and loan guarantees for capital
investment projects in all sectors of the economy.
The EIB borrows the major part of its recourses on international capital markets--mainly
through public bond issues. Often, EIB loans complement the borrower's own funds and
other sources of finance. EIB loans rarely exceed 50% of investment cost of project and
there is no differentiation between sector or client type. Loans are disbursed in all
denominations (single or mixed), with different interest rates being applied to each
separate denomination, as appropriate.
We preliminarily determine that loans under this program are provided to a specific
enterprise or industry, or group of enterprises or industries. Although these loans may be
de jure available to all sectors and regions, the EC did not provide requested information
on the de facto distribution of benefits. Thus, these loans are countervailable to the extent
that they are provided on terms inconsistent with commercial considerations.
For those years in which Usinor, Sacilor, and Usinor Sacilor were uncreditworthy, we
have used as the benchmark the same interest rate as described in the Grant Methodology
section above. For those years in which Usinor, Sacilor, and Usinor Sacilor were
creditworthy, we have used as the benchmark the interest rate described in the
"Long-Term Loans from FDES" section above.
We then compared the appropriate benchmark financing to the financing Usinor, Sacilor,
and Usinor Sacilor received by EIB and found that these loans were provided on terms
inconsistent with commercial considerations. Therefore, we preliminarily determine that
Usinor Sacilor's loans from EIB are countervailable. To calculate the benefit from these
loans, we employed the long-term loan methodology described above in our discussion of
"Long-Term Loans from FDES." We divided this benefit by Usinor Sacilor's total sales
excluding shipping expenses and sales of non-French produced merchandise. On this
basis, we calculated an estimated net subsidy of 0.002 percent ad valorem.
B. Programs Preliminarily Determined Not To Be Countervailable
We preliminarily determine that the following programs do not provide subsidies to
manufacturers, producers, or exporters in France of certain steel products under the
following programs:
Grants in the Form of Redemption Premiums
Petitioners allege that Usinor appears to have received, or at least been promised,
interest rebates in several different years beginning in 1983. According to petitioners, the
interest rebates took the form of "redemption premiums," which applied to certain loan
and debentures and which were "amortized over the life of the (debt) in proportion to the
interest expense incurred."
According to the responses, Usinor issued a bond in 1985. Because of the merger between
Sollac and Usinor, the original Usinor bond is now recorded in the records of Sollac.
"Redemption premiums" refer to the amount recorded in the company's balance sheet
when a bond is issued at less than par. The difference between the par value of the bond
and the funds received is then amortized over the life of the bond and added to the
nominal interest charge. Based on this information, we have preliminarily determined
that redemption premiums do not constitute a countervailable subsidy because this
practice is not on terms inconsistent with commercial considerations.
C. Programs Preliminarily Determined Not To Be Used
We preliminarily determine that the following programs were not used by manufacturers,
producers, or exporters in France of certain steel products:
1. Equity Infusions in 1982 and 1983 Under the Plan Acier
Petitioners argue that President Mitterrand's 1982 Plan Acier called for equity infusions
into Usinor and Sacilor of FF2.4 billion in 1982 and FF3.5 billion in 1983. Petitioners
maintain that these injections appear to have been accomplished through the creative use
of loss reserves. According to petitioners, in 1982 and 1983, the companies used loss
reserves set up by the GOF to bolster their equity position.
In the responses, Usinor Sacilor maintains that, because all companies must reflect losses
on their financial statements, French corporate law and accounting principles allow a firm
to decrease its reserves from prior years and reduce paid-in capital by the difference.
Further, according to the responses, the GOF made public, in 1982, a steel industry
restructuring plan that news reports called "Plan Acier." This plan called for an investment
in the modernization of production facilities over a five-year period. These funds were
obtained from shareholders' advances and the issuance of FIS bonds.
We have information with respect to equity infusions that took place in 1981 as well as the
amounts reported for shareholders' advances and conversions of FIS bonds during the
period 1983 through 1986, which are discussed above. However, we have no indication,
based on our analysis of the changes in capital formation provided in the responses, that
there were additional equity infusions not previously reported by respondents.
Therefore, we preliminarily determine that this program was not used.
2. Loan Guarantees 1978 Through 1982
In Certain Steel, the Department found countervailable a wide variety of loan guarantees.
These guarantees were provided by, or were provided to guarantee loans from, Credit
National, bank syndicates in which Credit National participated, Caisse des Depots et
Consignations (CDC), Groupement de l'Industrie Siderurgique (GIS), FDES, the ECSC, and
the European Investment Bank. According to petitioners, Usinor Sacilor and its affiliates
have continued to carry outstanding debts to these organizations since 1982.
Because we have no indication that Usinor Sacilor has guarantees on any outstanding
loans from Credit National, CDC, GIS, and FDES, etc., we preliminarily determine that loan
guarantees are not used.
3. ECSC Article 54 Interest Rebates and Loan Guarantees
4. ECSC Article 56 Conversion Loans (Article (56)(2)(a))
5. ESCS Article 56 Interest Rebates
6. European Regional Development Fund (ERDF) Loans
7. New Community Investment (NCI) Loans
D. Programs For Which More Information is Needed
1. Shareholders' Advances After 1986
According to the responses, Usinor and Sacilor began funding regional development
projects to promote jobs in economically depressed areas through their subsidiary
companies, SODIs. These activities included providing loans to the SODIs, which then
offered
*57792
reduced rate loans to unrelated companies in the areas involved. Due to
their success, the GOF later chose the SODIs as a conduit for its own funding to such areas.
Further, according to the responses, GOF funds provided to the SODIs after 1986 were
temporarily recorded on the books of Usinor and Sacilor as shareholders' advances but
were subsequently transferred to the SODIs.
However, in Usinor Sacilor's Annual Report (1991), we note that shareholders' advances
were reclassified under shareholders' equity by a decision of the Board of Directors.
Usinor Sacilor maintains that the Finance Minister requested at the end of 1991 that funds
advanced to the SODIs, remaining in the balance sheet of Usinor Sacilor, be taken into
equity with a view toward simplification.
We question whether Usinor Sacilor actually benefitted from these shareholders'
advances. Usinor Sacilor claims that it contributed to the financing of the SODIs and that
its advances to SODIs exceed the funds it received for this purpose by the GOF. However,
we do not understand why, although designated for disbursement to the SODIs, certain
advances were included in shareholders' equity at the end of 1991. In addition, we do not
know why Usinor Sacilor is required to provide its own funds to the SODIs. Finally, the
Annual Report (1991) indicates that Usinor Sacilor repaid FF250 million of these
advances to the GOF. Again, we question why Usinor Sacilor would be required to repay
these advances if it is only acting as a conduit for the funds to the SODIs. For these
reasons, we preliminarly determine that more information is needed.
2. Equipment Operating Subsidies
Petitioners argue that "equipment subsidies" appeared to have disappeared from Usinor's
and Sacilor's books after 1983 due to a change in accounting method. According to
petitioners, based on information provided in Usinor Sacilor's supplemental responses,
"these subsidies were not discontinued after 1983 but rather were re-designated as
'Operating Subsidies' and reported in consolidated income statements rather than profit
and loss accounts." Petitioners maintain that Usinor, Sacilor, or Usinor Sacilor have
reported either equipment or operating subsidies in their annual reports each year from
1977 through 1990.
In its response to our questions regarding these alleged subsidies, Usinor Sacilor stated
that "equipment subsidies" refer to the funding of specific and identifiable expenditures
whereas "investment subsidies" are provided for investment projects. However, Usinor
Sacilor has reported only investment subsidies received in 1991 and, as discussed above,
we have expensed these subsidies as recurring grants.
Based on our review of the information provided by respondents, we have not been able
to establish that equipment subsidies are, indeed, the predecessors to operating subsidies
because it appears that Usinor and Sacilor may have received operating subsidies as well
as equipment subsidies prior to 1983. Although petitioners maintain that operating
subsidies do not represent a new program, but are part of the equipment subsidies
program, we currently lack sufficient information to determine whether equipment and
operating subsidies constitute one or two separate programs. As a result, we intend to
solicit specific information from respondents concerning the receipt and possible
interrelationship between equipment, operating, and investment subsidies. For purposes
of this preliminary determination, however, we determine that more information is
needed.
E. Programs Preliminarily Determined Not To Exist
We preliminarily determine that the following program does not exist:
1. Additional Financing from FIS and CAPA
2. Withdraw and Recover Order
3. Equity Infusions in 1979 and 1981
Verification
In accordance with section 776(b) of the Act, we will verify the information used in
making our final determinations.
Suspension of Liquidation
In accordance with section 703(d) of the Act, we are directing the U.S. Customs Service
to suspend liquidation of all entries of certain steel products from France, which are
entered or withdrawn from warehouse, for consumption on or after the date of the
publication of this notice in the Federal Register and to require a cash deposit or bond for
such entries of the merchandise in the amounts indicated below. This suspension will
remain in effect until further notice.
Certain Hot-Rolled Carbon Steel Flat Products
Country-Wide Rate--26.47
Certain Cold-Rolled Carbon Steel Flat Products
Country-Wide Rate--26.47
Certain Corrosion-Resistant Carbon Steel Flat Products
Country-Wide Rate--26.47
Certain Cut-To-Length Carbon Steel Plate
Country-Wide Rate--26.47
ITC Notification
In accordance with section 703(f) of the Act, we will notify the ITC of our determinations
and alignments. In addition, we are making available to the ITC all nonprivileged and
nonproprietary information relating to these investigations. We will allow the ITC access
to all privileged and business 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 Investigations, Import Administration.
If our final determinations are affirmative, the ITC will make its final determinations
within 45 days after the Department makes its final determinations.
Public Comment
Interested parties who wish to request or participate in a hearing must submit a written
request within ten days of the publication of this notice in the Federal Register to the
Assistant Secretary for Import Administration, U.S. Department of Commerce, Room
B-099, 14th Street and Constitution Avenue, NW., Washington, DC 20230. Requests
should contain: (1) The party's name, address, and telephone number; (2) the number of
participants; (3) the reason for attending; and (4) a list of the issues to be discussed. Since
investigations involving the same classes or kinds of merchandise subject to these
investigations from various other countries are currently being conducted, we will
publish a briefing and hearing schedule in the Federal Register after receipt of all requests
for hearings in these investigations.
The determinations and alignments are published pursuant to sections 703(f) and 705(d)
of the Act (19 U.S.C. 1671b(f)).
Dated: November 27, 1992.
Alan M. Dunn,
Assistant Secretary for Import Administration.
Appendix 1
Scope of the Investigations
The products covered by these investigations, certain steel products,
*57793
constitute
the following four separate "classes or kinds" of merchandise, as outlined below.
Although the Harmonized Tariff Schedule of the United States (HTS) subheadings are
provided for convenience and customs purposes, our written descriptions of the scope of
these proceedings are dispositive.
We have received comments from petitioners regarding the types of coil included in the
scopes of the certain hot-rolled carbon steel products investigation, the certain
cold-rolled carbon steel flat products investigation, and the certain corrosion-resistant
carbon steel flat products investigation. We are considering these comments and will
address this issue at the final determinations.
Certain Hot-Rolled Carbon Steel Flat Products
These products include hot-rolled carbon steel flat products, of solid rectangular (other
than square) cross section, or rectangular shape, neither clad, plated nor coated with
metal, whether or not painted, varnished or coated with plastics or other nonmetallic
substances, in coils, or in straight lengths which are less than 4.75 millimeters in
thickness and of a width measuring at least 10 times the thickness, as currently
classifiable in the HTS under item numbers 7208.11.0000, 7208.12.0000,
7208.13.1000, 7208.13.5000, 7208.14.1000, 7208.14.5000, 7208.21.1000,
7208.21.5000, 7208.22.1000, 7208.22.5000, 7208.23.1000, 7208.23.5030,
7208.23.5090, 7208.24.1000, 7208.24.5030, 7208.24.5090, 7208.34.1000,
7208.34.5000, 7208.35.1000, 7208.35.5000, 7208.44.0000, 7208.45.0000,
7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.12.0000, 7211.19.1000,
7211.19.5000, 7211.22.0090, 7211.29.1000, 7211.29.3000, 7211.29.5000,
7211.29.7030, 7211.29.7060, 7211.29.7090, 7211.90.0000, 7212.40.1000,
7212.40.5000, and 7212.50.0000.
Certain Cold-Rolled Carbon Steel Flat Products
These products include cold-rolled (cold-reduced) carbon steel flat products, of solid
rectangular (other than square) cross section, of rectangular shape, neither clad, plated
nor coated with metal, whether or not painted, varnished or coated with plastics or other
nonmetallic substances, in coils, or in straight lengths which, if of a thickness less than
4.75 millimeters, are of a width measuring at least 10 times the thickness or if of a
thickness of 4.75 millimeters or more are of a width which exceeds 150 millimeters and
measures at least twice the thickness, as currently classifiable in the HTS under item
numbers 7209.11.0000, 7209.12.0030, 7209.12.0090, 7209.13.0030, 7209.13.0090,
7209.14.0030, 7209.14.0090, 7209.21.0000, 7209.22.0000, 7209.23.0000,
7209.24.1000, 7209.24.5000, 7209.31.0000, 7209.32.0000, 7209.33.0000,
7209.34.0000, 7209.41.0000, 7209.42.0000, 7209.43.0000, 7209.44.0000,
7209.90.0000, 7210.70.3000, 7210.90.9000, 7211.30.1030, 7211.30.1090,
7211.30.3000, 7211.30.5000, 7211.41.1000, 7211.41.3030, 7211.41.3090,
7211.41.5000, 7211.41.7030, 7211.41.7060, 7211.41.7090, 7211.49.1030,
7211.49.1090, 7211.49.3000, 7211.49.5030, 7211.49.5060, 7211.49.5090,
7211.90.0000, 7212.40.1000, 7212.40.5000, and 7212.50.0000.
Certain Corrosion-Resistant Carbon Steel Flat Products
These products include flat-rolled carbon steel products, of solid rectangular (other than
square) cross section, of rectangular shape, either clad, plated, or coated with
corrosion-resistant metals such as zinc, aluminum, or zinc-, aluminum-, nickel- or
iron-based alloys, whether or not corrugated or painted, varnished or coated with
plastics or other nonmetallic substances in addition to the metallic coating, in coils, or in
straight lengths which, if of a thickness less than 4.75 millimeters are of a width measuring
at least 10 times the thickness or if of a thickness of 4.75 millimeters or more are of a
width which exceeds 150 millimeters and measures at least twice the thickness, as
currently classifiable in the HTS under item numbers 7210.31.0000, 7210.39.0000,
7210.41.0000, 7210.49.0030, 7210.49.0090, 7210.60.0000, 7210.70.6030,
7210.70.6060, 7210.70.6090, 7210.90.1000, 7210.90.6000, 7210.90.9000,
7212.21.0000, 7212.29.0000, 7212.30.1030, 7212.30.1090, 7212.30.3000,
7212.30.5000, 7212.40.1000, 7212.40.5000, 7212.50.0000, and 7212.60.0000.
Excluded from these investigations are flat-rolled steel products either plated or coated
with tin, lead, chromium, chromium oxides, both tin and lead ("terne plate"), or both
chromium and chromium oxides ("tin- free steel").
Certain Cut-To-Length Carbon Steel Plate
These products include hot-rolled carbon steel universal mill plates (i.e., flat-rolled
products rolled on four faces or in a closed box pass, of a width exceeding 150 millimeters
but not exceeding 1,250 millimeters and of a thickness of not less than 4 millimeters, not
in coils and without patterns in relief) of solid rectangular (other than square) cross
section, of rectangular shape, neither clad, plated nor coated with metal, whether or not
painted, varnished, or coated with plastics or other nonmetallic substances; and certain
hot-rolled carbon steel flat products in straight lengths, of solid rectangular (other than
square) cross section, of rectangular shape, hot rolled, neither clad, plated, nor coated
with metal, whether or not painted, varnished, or coated with plastics or other
nonmetallic substances, 4.75 millimeters or more in thickness and of a width which
exceeds 150 millimeters and measures at least twice the thickness, as currently
classifiable in the HTS under item numbers 7208.31.0000, 7209.32.0000,
7208.33.1000, 7208.33.5000, 7208.41.0000, 7208.42.0000, 7208.43.0000,
7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.11.0000, 7211.12.0000,
7211.21.0000, 7211.22.0045, 7211.90.0000, 7212.40.1000, 7212.40.5000, and
7212.50.0000.
(FR Doc. 92-29506 Filed 12-4-92; 8:45 am)
BILLING CODE 3510-DS-M