65 FR 16176, March 27, 2000
C-428-817
Sunset Reviews
Public Document
MEMORANDUM TO: Richard W. Moreland
Acting Assistant Secretary
for Import Administration
FROM: Jeffrey A. May
Director
Office of Policy
SUBJECT: Issues and Decision Memo for the Sunset Reviews of the
Countervailing Duty Orders on Certain Corrosion-Resistant Carbon
Steel Flat Products; Cold-Rolled Carbon Steel Flat Products; and
Cut-to-Length Carbon Steel Plate Products from Germany; Preliminary
Results
Summary
We have analyzed the substantive responses and rebuttals of
interested parties in the full sunset reviews of the countervailing
duty orders on certain corrosion-resistant carbon steel flat products
("corrosion-resistant steel"), cold-rolled carbon steel flat products
("cold-rolled steel"), and cut-to-length carbon steel plate ("cut-to-
length steel") (hereinafter collectively referred to as the "steel
products") from Germany. We recommend that, for our preliminary
results, you approve the positions we have developed in the
Discussion of the Issues section of this memorandum. Below is the
complete list of the issues in these full sunset reviews for which we
received substantive responses and rebuttals by parties:
1. Likelihood of continuation or recurrence of countervailable subsidy
Net countervailable subsidy
Changes in programs
Other factors
2. Net countervailable subsidy likely to prevail
Net countervailable subsidy from investigation
Adjustments to the subsidy
3. Nature of Subsidy
History of Orders:
On August 17, 1993, the Department published its countervailing duty
orders on steel products from Germany determining, inter alia, net
countervailable subsidies for manufacturers/exporters of the steel
products as follows:
(1) Corrosion-resistant steel; country-wide rate of 0.60 percent,
(2) Cold-rolled steel; country-wide rate of 0.85 percent, and
(3) Cut-to-length steel; Ilsenburg: 0.80 percent, Preussag: 1.72
percent, Thyssen Stahl AG ("Thyssen"): 0.51 percent, and country-wide
rate: 14.84 percent ad valorem.(1)
In the original investigations, the Department determined that the
German manufacturers, producers, and exporters of the steel products
were benefitting from thirteen subsidy programs:(2)
(1) Capital Investment Grants
(2) Structural Improvement Aids
(3) Investment Premium Act
(4) Joint Scheme: Improvement of Regional Economic Structure-GA
Investment and Other GA Subsidies ("Joint Scheme")
(5) Special Subsidies for Companies in the Zonal Border Area
("Zonal Area")
(6) Ruhr District Action Program
(7) Aid for Closure of Steel Operations
(8) Joint Program: Upswing East ("Upswing East")
(9) Treuhandanstalt Subsidies ("TRA/BvS")
(10) Subsidies Related to the Creation of Dillinger Hu4tte Saarstahl
AG (DHS) ("SVK grant")
(11) ECSC Redeployment Aid Under Article 56(2)(b) ("ECSC 56")
(12) ECSC Article 54 Long-Term Loans ("ECSC 54")
(13) Interest Rebate on ECSC Article 54 Loans ("ECSC 54 Interest")(3)
The Department has not conducted any administrative review of these
countervailing duty orders. On September 22, 1999 and August 5, 1999,
the Department issued the final results of changed circumstances
reviews and revoked the orders, in part, with respect to certain
corrosion-resistant steel(4) and certain cut-to-length steel,(5)
respectively. The orders remain in effect for all manufacturers and
exporters of the steel products.
Background:
On September 1, 1999, the Department initiated sunset reviews of the
countervailing duty orders on the steel products from Germany (64 FR
47767), pursuant to section 751(c) of the Tariff Act of 1930, as
amended ("the Act"). The Department received joint Notices of Intent
to Participate on behalf of Bethlehem Steel Corp. ("Bethlehem"),
Ispat Inland Inc., LTV Steel Inc., National Steel Corp., and U.S.
Steel Group, a unit of USX Corp. ("USX") (all five are participating
in the review of the corrosion-resistant and cold-rolled steel
proceedings (this group is collectively referred to as the "domestic
interested parties (I)") while only Bethlehem and USX are
participating in the review of the cut-to-length proceedings (this
group is collectively referred to as the "domestic interested parties
(II)"), and both groups are collectively referred to as the "domestic
interested parties") on September 10, 1999, within the deadline
specified in section 351.218(d)(1)(i) of the Sunset Regulations. The
domestic interested parties note that none of them is an importer of
the subject merchandise. While the domestic interested parties (II)
note that they are neither importers of cut-to-length steel nor are
they affiliated with a foreign producer or exporter of cut-to-length
steel, the domestic interested parties (I) indicate that several of
them are affiliated with foreign manufacturers/exporters of corrosion-
resistant and/or cold-rolled steel products.(6)
Within the deadline specified in the Sunset Regulations under
section 351.218(d)(3)(i), we received complete substantive responses
from the domestic interested parties and respondent interested
parties: on September 30, 1999, the European Union, Delegation of the
European Commission ("EC") and the Government of Germany ("GOG")
submitted their substantive responses with respect to all the subject
merchandise; on October 4, 1999, the domestic interested parties
submitted their substantive responses with respect to all the subject
merchandise; on October 4, 1999, Thyssen Krupp Stahl AG ("TKS"),(7)
Stahlwerke Bremen GmbH ("Bremen"), EKO Stahl GmbH ("EKO"), and
Salzgitter AG ("SZAG")(8) (hereinafter referred to as "German Group")
jointly submitted their substantive response for the corrosion-
resistant and cold-rolled steel countervailing duty orders; and, on
the same day, Salzgitter AG Stahl und Technologie ("Salzgitter"), AG
der Dillinger Hüttenwerke ("Dillinger"), and Thyssen Krupp Stahl AG
("TKS") individually submitted substantive responses for the order on
cut-to-length steel. Each member of the German Group, TKS, and
Dillinger claim that they are manufacturers of the foreign like
product and that, therefore, they qualify as interested parties, as
defined in section 771(9)(A) of the Act.
The domestic interested parties indicate that one or more of them
have been involved in various proceedings of the orders since the
original investigations and that they, as a group, remain committed
to a full participation in the instant proceedings.(9) (See October
4, 1999, domestic interested parties' substantive response at 3-5.)
The German Group states that TKS and SZAG participated in the
original investigation by the virtue of being successors-in-interest
to companies which were parties to the investigation.(10) The German
Group further notes that its members are willing to participate fully
in these sunset reviews by providing information requested by the
Department. (See October 4, 1999, the German Group's substantive
responses at 2 and 3, respectively.)
Both TKS and Salzgitter note that their respective predecessors in
interest, Thyssen for TKS, Preussag and Ilsenburg for Salzgitter,
participated fully in the Department's original investigation and
that they are willing to participate fully in the sunset review of
the order pertaining to cut-to-length steel by providing information
requested by the Department.(11) (See October 4, 1999, TKS and
Salzgitter's substantive responses at 2 and 3, respectively.)
Likewise, Dillinger states that it participated in the investigation
and expresses that it is willing to participate in the sunset review
of the order (cut-to-length steel). (See Dillinger's October 4, 1999,
substantive response at 3.) Similarly, both the EU and the GOG
indicate that they were parties to the original investigations and
that they are willing to participate in the instant reviews. (See
September 30, 1999, substantive responses of EU and GOG at 2 and 5,
respectively.)
On October 15, 1999, the domestic interested parties, the German
Group, TKS, Dillinger, and the GOG submitted their respective
rebuttal comments.(12)
Because, for each order, the Department received complete
substantive responses from the domestic interested parties, from
foreign respondent companies, and from the German government (and the
EU), in accordance with section 351.218(e)(2)(i) of the Sunset
Regulations, the Department is conducting full (240-day) sunset
reviews.
In accordance with section 751(c)(5)(C)(v) of the Act, the
Department may treat a review as extraordinarily complicated if it is
a review of a transition order (i.e., an order in effect on January
1, 1995). These reviews concern transition orders within the meaning
of section 751(c)(6)(C)(i) of the Act. Therefore, on December 22,
1999, the Department determined that the sunset reviews of the
countervailing duty orders on the steel products from Germany are
extraordinarily complicated and extended the time limit for
completion of the preliminary results of these reviews until not
later than March 20, 2000, in accordance with section 751(c)(5)(B) of
the Act.(13)
Discussion of the Issues
In accordance with section 751(c)(1) of the Act, the Department is
conducting these reviews to determine whether revocation of the
countervailing duty orders would be likely to lead to continuation or
recurrence of a countervailable subsidy. Section 752(b) of the Act
provides that, in making this determination, the Department shall
consider the net countervailable subsidy determined in the
investigation and subsequent reviews, and whether any change in the
program which gave rise to the net countervailable subsidy has
occurred that is likely to affect that net countervailable subsidy.
Pursuant to section 752(b)(3) of the Act, the Department shall
provide to the International Trade Commission ("the Commission") the
net countervailable subsidy likely to prevail if the orders are
revoked. In addition, consistent with section 752(a)(6) of the Act,
the Department shall provide to the Commission information concerning
the nature of the subsidy and whether the subsidy is a subsidy
described in Article 3 or Article 6.1 of the 1994 WTO Agreement on
Subsidies and Countervailing Measures ("Subsidies Agreement").
Below we address the substantive responses and rebuttals of
interested parties.
1. Likelihood of Continuation or Recurrence of Countervailing Duty
Interested Parties' Comments:
The domestic interested parties state that were the orders revoked,
countervailable subsidies to the German manufacturers/exporters of
steel products would continue or recur. The domestic interested
parties claim that inasmuch as nonrecurring subsidies(14) conferred
benefits to German manufacturers/exporters of the subject merchandise
after 1985, the Department should find that the benefit streams from
those programs continue beyond the end of the sunset review and that,
therefore, countervailable subsidies from those programs continue to
exist.
Specifically, with respect to Capital Investment Grant, the domestic
interested parties note that, in the original investigation, Preussag
(which produced all three types of subject merchandise) reported
receiving Capital Investment Grants as late as 1990. As for Aid for
Closure of Steel Operations, the domestic interested parties indicate
that, since the benefit from this program was put into effect by two
measures taken in 1988,(15) it is reasonable to assume that the
German manufacturers/exporters of the subject merchandise received
the grants under this program after 1985. Moreover, the domestic
interested parties state that Preussag reported receiving grants
under Aid for Closure of Steel Operations in 1989 and in 1991.
Similarly, the domestic interested parties (II) argue that since the
benefits from the SVK grant was effectuated by a 1989 agreement,(16)
German manufacturers/exporters of cut-to-length steel must have
received the benefit from the program after 1985. Also, the domestic
interested parties (II) claim that Ilsenburg, which produces cut-to-
length steel, received grants under the Joint Scheme and Upswing East
in 1991. Finally, the domestic interested parties (I) also claim that
Preussag received grants under the Investment Premium Act during the
period 1977 through 1997 with respect to cold-rolled and cut-to-
length steel. Consequently, the domestic interested parties assert
that either because some of the German manufacturers/exporters of the
steel products reported receiving benefits from these non-recurring
subsidies after 1985 and/or because some programs were put into place
after 1985, the Department should conclude that the benefit streams
from these grants continue beyond the end of this sunset review and
that, therefore, subsidies from those programs continue to exist.
The domestic interested parties further claim that various subsidy
programs the Department determined countervailable in the original
investigation that continue to exist for manufacturers/exporters of
one or more of German steel products. (1) Joint Scheme: the domestic
interested parties claim that the GOG, in its report in the World
Trade Organization ("WTO") Subsidies Notification (December 3, 1998),
indicated that the Joint Scheme is available to provide regional
assistance in the form of grants to commerce and industry. (2)
TRA/BvS: the domestic interested parties claim that, as late as 1996
and 1997, this loan guarantee was made available to assist
privatization of the state-owned assets of former East Germany and
that there is no indication that this program has been
terminated.(17) (3) ECSC 56: the domestic interested parties allege
that two employee-assistance programs may have been instituted under
the auspices of ECSC 56.(18) (4) ECSC 54: by referring to ECSC 1997
Financial Report,(19) which lists the German steel and coal
industries as recipients of loans under the program, the domestic
interested parties claim that the program still exists. The domestic
interested parties argue that the continued availability of these
programs, which were found counteravailable by the Department in the
original investigation, should lead the Department to conclude that
continuation or recurrence of the countervailable subsidies is likely
were the orders revoked.
Finally, the domestic interested parties note that the Department
has not conducted any administrative review since the orders were
imposed. To the extent that there has not been any recent
administrative review, the domestic interested parties contend that
the Department may consider newly alleged subsidies in the context of
a sunset review. To wit, the domestic interested parties claim that,
if the Department fails to find the likelihood based on the
continuation of subsidies previously countervailed or based on the
continued benefit streams of the non-recurring grants beyond the end
of the sunset review, the Department should consider the programs
which are newly alleged by the domestic interested parties and should
find likelihood therefrom.
Each of the respondent interested parties contends that revocation
of the orders is not likely to lead to continuation or recurrence of
a countervailable subsidy to the German manufacturers/exporters of
the subject merchandise.
The GOG claims that all the countervailable subsidies that were
relevant to the orders are currently not used by German companies of
steel products, have been de minimis, or have been terminated since
the issuance of the orders. Specifically, the GOG contends that Ruhr
District Action Program, Capital Investment Grants, Zonal Area,
Structural Improvement Aids, and TRA/BvS were either terminated or
dissolved in 1984, 1985, 1986, 1994, and 1995,
respectively.(20) The GOG further notes that cut-to-length steel
manufacturers/exporters did not use Structural Improvement Aids,
Investment premium Act, Zonal Area, ECSC 54, and ECSC 54 Interest;
cold-rolled steel manufacturers/exporters did not use Investment
Premium Act, Joint Scheme, Upswing East, TRA/BvS, SVK grants; and
corrosion-resistant steel manufacturers/exporters did not use
Investment Premium Act, Joint Scheme, Zonal Area, TRA/BvS, Upswing
East, SVK grants, ECSC 54, and ECSC 54 Interest. For ECSC 56 and Aid
for Closure of Steel Operation, the GOG claims that the benefits from
those programs are de minimis and that the programs will be
terminated in 2002 when the ECSC Treaty expires.
The GOG further contends that Investment Premium Act, Joint Scheme,
Zonal Area, TRA/BvS, and Upswing East should not be deemed
countervailable pursuant to Article 8.2(b) of the Subsidies Agreement
and section 771(5B)(C) of the Act. Finally, with respect to the SVK
grant, the GOG contends that the Department's application of the pass-
through principle in the case of a privatization, in which a private
company is purchasing a state-owned enterprise, contravenes the
Subsidies Agreement.(21)
The EU avers that the subsidies which were found countervailable in
the original investigation have provided only negligible benefits,
have been terminated, or have been rendered obsolete because the
Commission Decision 2496/96 of 18 December 1996 ("Commission
Decision"), which entered into force on January 1, 1997, prohibits
the granting of aid to the steel industry.(22) The EU further notes
that, in any case, regional aid programs are not actionable pursuant
to Article 8 of the Subsidies Agreement.
Specifically, the EU notes that the Steel Investment Allowance Act
(Capital Investment Grants) and Structural Improvement Aids no longer
exist, that Investment Premium Act, Joint Scheme, Zonal Area, Ruhr
District Action Program, and Upswing East either do not exist or can
no longer provide benefits to the steel sector due to the Community's
Steel Aid Code ("CSAC"), and that ECSC 56 only provides negligible
benefits.
Arguing for German manufacturers/exporters of corrosion-resistant
and cold-rolled steel, the German Group asserts that the Department
should revoke the orders if we find that any subsidies which will
continue to exist beyond the end of the sunset review are de minimis.
The German Group urges that we consider the subsidies, found not used
by the German manufacturers/exporters of corrosion-resistant and cold-
rolled steel in the investigation, to be non-countervailable
subsidies. The German Group further urges that the Department
consider the German reunification as an unique event and, as such,
any assistance provided by the GOG associated with the reunification
should not result in a determination that subsidization is likely to
continue or recur upon revocation of the orders. Finally, the German
Group contends that, within the context of a sunset review, the
programs intended to provide assistance for regions with economic
disadvantages, for research and development, and for adaptation of
existing facilities to environmental requirements, should be found
non-countervailable pursuant to section 771(5B)(C) of the Act.
With respect to Capital Investment Grants, the German Group states
that the German manufacturers/exporters of the subject merchandise
received benefits under this program in 1984-1985 but that the
program was terminated in 1985. The German Group further notes that
the benefit stream associated with a 1985 grant under this program
would end in 1999 and, therefore, in the year 2000, the net
countervailable subsidy applicable to the Capital Investment Grants
will revert to zero.
The German Group's contention pertaining to other countervailable
subsidy programs are as follows: Structural Improvement Aids was
terminated in 1986 and the benefit streams thereof either will have
ended by the end of the sunset review or will have been reduced
considerably from 1991 levels;(23) Zonal Area, which provided a
benefit of only 0.01 percent in 1991, expired in 1996, and should be
nonactionable as per section 771(5B)(C) of the Act; the benefit from
Aid for Closure of Steel Operation in 1991 was 0.06, and this benefit
will have ended or will have been reduced considerably from the 1991
level in the year 2000; and ECSC 56 provides only de minimis benefits
through 1999 and will automatically expire upon the termination of
ECSC in 2002.
In regard to cut-to-length steel, TKS indicates that the Department
found in its final determination that Thyssen received only small
benefits under three programs, totaling 0.50 percent ad valorem:(24)
Capital Investment Grants - 0.36 percent, ECSC 56 - 0.07 percent, and
Aid for Closure of Steel Operations - 0.07 percent. TKS argues that
the net countervailable duty rate of 0.50 percent would have been de
minimis under the Subsidies Agreement. With respect to Capital
Investment Grants, although TKS acknowledges that the program was
applicable to investment made prior to January 1, 1986, and that the
Department uses a 15-year average-useful-life standard for German
steel-industry assets, TKS asserts that the benefit stream of this
program would not continue after the end of the instant sunset review.
As for ECSC 56, TKS contends that the program is not
countervailable, that its benefits are de minimis, and that the
program will automatically expire upon the termination of the ECSC in
2002. With respect to Aid for Closure of Steel Operation, TKS
suggests that the benefit streams of this program would either end or
be reduced considerably from the 1991-level upon revocation of the
orders.(25)
Also, with respect to the order regarding cut-to-length steel,
Salzgitter claims that it did not receive any countervailable
benefits which were attributed to Preussag and Ilsenburg in the
countervailing duty investigation. Salzgitter argues that among four
programs, which were found to afford countervailiable benefits to
Preussag in the original investigation (1.72 percent ad valorem),
Capital Investment Grants does not provide benefit streams beyond the
end of this review; Investment Allowance Act is not countervailable
as per Article 8.2(b) of the Subsidies Agreement, or, alternatively,
the benefit streams thereof would not continue after the end of the
sunset review in any meaningful amount; Zonal Area provided a
recurring benefit and was subsequently terminated by a legislative
action and, thus, no countervailable benefit is associated with this
program (Salzgitter contends that, besides, this program should be
non-countervailable pursuant to Article 8.2(b) of the Subsidies
Agreement and section 771(5B)(C) of the Act); and ECSC 56 conferred
only a minuscule benefit, was modified by German administrative
regulation to significantly reduce the level of benefit, and will
automatically expire upon the termination of the ECSC in 2002. (See
Salzgitter's substantive response at 3-6.)
Next, Salzgitter contends that the three programs, Joint Scheme,
Upswing East, and TRA/BvS, which the Department determined to confer
countervailable subsidies to Ilsenburg in the original investigation
at the rate of 0.80 percent ad valorem, should have been found de
minimis according to Article 11.9 of the Subsidies Agreement.
Salzgitter further claims that Joint Scheme and Upswing East are non-
countervailable pursuant to Article 8.2(b) of the Subsidies Agreement
and section 771(5B)(C) of the Act or, alternatively, that the benefit
streams thereof would not continue beyond the end of the instant
review in any meaningful amount. As for TRA/BvS, Salzgitter claims
that the program was dissolved by operation of law in 1995, was a
recurring-benefits program providing only a minimal benefit, and
should be noncountervailable within the meaning of Article 8.2(b) of
the Subsidies Agreement and section 771(5B)(C) of the Act.
Dillinger, which is participating only cut-to-length steel portion
of the orders, insists that it did not directly receive any
significant amount of subsidies.(26) Dillinger claims that the
Department's application of the pass-through principle with respect
to the SVK grant in the original investigation was contrary to the
Subsidies Agreement. In addition, Dillinger argues that the
Department incorrectly treated the SVK grant as a lump-sum payment in
1989 when, in reality, the benefits from the program were
installments for the period from 1978 through 1989. Dillinger further
contends that, in any case, the Department improperly deemed the SVK
grant as a contingent, long-term, and interest-free loan without
further elaborating whether the contingency, on which repayment of
the SVK grant was based, was viable in accordance with commercial
considerations. Moreover, Dillinger asserts that, in light of the
fact that the Department adopted the current Department Regulations
in 1998, which significantly amended its practice with respect to
contingent liability interest-free loans, the Department must
reexamine whether the event upon which the repayment of the loan
depends is a viable contingency. Had the Department done so,
Dillinger contends that the Department would have found the
manifestation of the non-viability of the contingency long before
1989 and, consequently, would have determined the vast majority of
the SVK grant was effectuated no later than 1985. Dillinger further
suggests that, therefore, the Department should determine that the
benefit streams from the SVK grant would not continue beyond the end
of this sunset review.
Continuing its argument with respect to the SVK grant, Dillinger
notes that the Department erred in determining the private banks'
debt forgiveness constitutes a countervailable subsidy. According to
Dillinger, the private banks acted on their own and for their own
self-interest and were not influenced or directed by the Government
of Saarland or Germany. Without the necessary action by a government
authority, Dillinger further claims that the private banks' debt
forgiveness cannot be treated as a countervailable subsidy.
In addition, Dillinger contends that the portion of the SVK grant
that was attributed to Dillinger in the original investigation was
too high and that the Department's fifteen-year average-useful-life
standard does not properly reflect the actual useful life of
productive assets in the German steel industry; viz., the
Department's fifteen-year useful life standard is too long. Had the
Department adopted a shorter average-useful-life standard,(27)
Dillinger notes that the benefit streams of the SVK grant would end
before the end of this sunset review.
In their rebuttal comments, the domestic interested parties contend
that (1) the debt forgiveness pertaining to SVK took place in 1989
and, therefore, the benefit streams of the program would last beyond
the end of the instant review; (2) benefit streams from Capital
Investment Grants continue beyond the end of the sunset review
because the program is a non-recurring grant and because Preussag
reported receiving grants under Capital Investment Grants as late as
in 1990 (two in 1986, one in 1987, one in 1989, and one in 1990); and
(3) Joint Scheme, Aid for Closure of Steel Operation, Upswing East,
ECSC 56, ECSC 54 Interest, and ECSC 54 continue to exist. Finally,
according to the domestic interested parties, the Department should
determine Structural Improvement Aids also continue to exist because
the respondent interested parties failed to prove otherwise.
With respect to the German Group and the GOGs contention that,
pursuant to Article 8.2(b) of the Subsidies Agreement and section
771(5B)(C) of the Act, Zonal Area, Investment Premium Act, Joint
Scheme, Upswing East, and TRA/BvS should qualify as non-
countervailable subsidies, the domestic interested parties argue that
a sunset review is not the proper forum to revisit the issues
pertaining to the countervailability of a program (the domestic
interested parties suggest that, instead, respondent interested
parties should discuss the issues in an administrative review segment
of the proceedings). Also, the domestic interested parties argue
that, in any case, the Department should not afford green light (per
se non-countervailable) treatment to the above programs because
respondent interested parties failed to demonstrate that the programs
were created based on the statutes or regulations which incorporate
clearly stated, objective, and neutral criteria, or appropriate and
development-based ceilings. In addition, the domestic interested
parties claim that the language of the EC Regional Subsidy Rules,(28)
on which the European Union ("EU") determines whether a region of its
member country is disadvantaged, poses a vague, subjective, and
unverifiable standard. Finally, the domestic interested parties
suggest that each of the above programs failed to meet the
requirements set forth in section 771(5B)(C) of the Act.
With respect to respondent interested partiess argument that the
subsidization of the steel sector in the EU is strictly prohibited as
per the Commission Decision, the domestic interested parties claim
that the argument is untenable because historically, although it may
have some limiting effects upon subsidies, the Commission Decision
failed to stop further countervailable subsidization in the EU for
various reasons.
As for respondent interested parties' contention that the Department
should apply an 11-year average-useful-life standard instead of the
15-year standard, the domestic interested parties argue that the
respondent interested parties failed to appeal the Department's
finding and that even if the Department is to redetermine the average-
useful-life standard, it must determine a company-specific standard.
In other words, the Department cannot use the 11-year standard which
was determined for a different company and for a different product.
In its rebuttal, the German Group argues that the Department should
reject all allegations of new subsidies advanced by the domestic
interested parties because those subsidies are applicable to
producers of non-subject merchandise and because the Department
historically has not been inclined to entertain the idea of examining
new subsidies in the context of a sunset reviews. The German Group
further indicates that benefit streams associated with coutervailable
programs will either end or will be reduced to even lesser amounts at
the end of the sunset review than existed in 1991, that the EU
prohibits the GOG from granting subsidies to the steel industry, and
that the benefit from ECSC 56 is de minimis and the program will
expire in 2002.
Similarly, the GOG contends that none of the newly alleged subsidies
advanced by the domestic interested parties is relevant to the
subject merchandise. The GOG also notes that the Commission Decision
places stringent limits on any grant to the steel industry in Germany
and, thus, no aid in contravention of the Subsidies Agreement will be
granted to German manufacturers/exporters of steel products in the
future. The GOG further argues that the vast majority of the programs
found countervailable by the Department in the investigation either
have been terminated or would qualify as non-countervailable
assistance under Article 8.2(b) of the Subsidies Agreement and
section 771(5B)(C) of the Act. Finally, the GOG claims that the 15-
year average-useful-life standard employed by the Department in the
original investigation is unreasonable. Instead, the GOG suggests
that the Department adopt an 11-year average-useful-life standard.
In addition to concurring with the German Group's rebuttal, SZAG
notes the following in its rebuttal comments: after merging with
Walzewerk Ilsenburg GmbH ("Ilsenburg") in 1995, Preussag changed its
name to SZAG in 1998;(29) Preussag received only a small fraction
(0.6 percent) of benefits under the Capital Investment Grants after
the end of the 1985/86 fiscal year, and in light of the small net
countervailable subsidy attributed to the program (0.39 percent), the
current effect of this program is nonexistent; and contrary to the
domestic interested parties' allegation that Preussag and Ilsenburg
received new countervailable benefits between 1986 and 1997, those
benefits are from programs which, although found countervailable by
the Department in the investigation, qualify as non-countervailable
assistance to disadvantaged regions as per the GOG's substantive
response. SZAG argues that, besides, even if these programs are found
countervailable, the benefits that would continue after the end of
this review are not substantial and that the 1994 tax concession
Ilsenburg received should have been expensed in the year of receipt.
In their rebuttal, Dillinger and Salzgitter(30) contend that none of
the benefit streams from the programs found countervailable in the
investigation, will continue beyond the end of the instant sunset
review. Dillinger and Salzgitter argue that the domestic interested
parties did not sufficiently refute Dillinger and Salzgitter's claim
that no benefit would continue after the end of this review.
Dillinger and Salzgitter claim that the Department's use of a front-
loading or decreasing allocation method for non-recurring subsidy
would substantially decrease the net countervailable subsidy
applicable to the latter part of the average-useful-life period.(31)
Also, Dillinger and Salzgitter argue that any benefit received before
1987 would expire, at the latest, in 2000 and, therefore, would not
continue beyond the end of this review. If the Department properly
considers all the above arguments, Dillinger and Salzgitter conclude
that the Department would determine that the benefit streams of non-
recurring countervailable subsidies will not continue beyond the end
of the sunset review.
In addition, Dillinger and Salzgitter argue that the Department
should reject all allegations of new subsidies advanced by the
domestic interested parties because those subsidies were already
reviewed by the Department in the investigation, qualify as non-
actionable pursuant to section 771(5B)(C) of the Act, or relate
exclusively to producers of non-subject merchandise. Finally,
Dillinger and Salzgitter reiterate the arguments from their
substantive responses: the Department's pass-through application in
an arm's length and fair market-value privatization transaction
violates the Subsidies Agreement; and the Department should apply an
11-year average-useful-life standard instead of its 15-year standard.
In its rebuttal, TKS argues that the Department should reject all
allegations of new subsidies advanced by the domestic interested
parties because a more appropriate forum for the consideration of new
subsidies is an administrative review of the orders and because it
did not receive new subsidies from the GOG. TKS further indicates
that benefit streams associated with coutervailable programs will
either end or will be reduced to even lesser amounts than existed in
1991, that the EC prohibits the GOG from granting subsidies to the
steel industry, and that the benefit from ECSC 56 is de minimis and
the program will expire in 2002.
Department's Position:
Drawing on the guidance provided in the legislative history
accompanying the Uruguay Round Agreements Act ("URAA"), specifically
the SAA, H.R. Doc. No. 103-316, vol. 1 (1994), the House Report, H.R.
Rep. No. 103-826, pt.1 (1994), and the Senate Report, S. Rep. No. 103-
412 (1994), the Department issued its Sunset Policy Bulletin
providing guidance on methodological and analytical issues, including
the basis for likelihood determinations. The Department clarified
that determinations of likelihood will be made on an order-wide basis
(see section III.A.2 of the Sunset Policy Bulletin). Additionally,
the Department normally will determine that revocation of a
countervailing duty order is likely to lead to continuation or
recurrence of a countervailable subsidy where (a) a subsidy program
continues, (b) a subsidy program has been only temporarily suspended,
or (c) a subsidy program has been only partially terminated (see
section III.A.3.a of the Sunset Policy Bulletin). Exceptions to this
policy are provided where a company has a long record of not using a
program (see id. at section III.A.3.b). Also, if the Department
determines that the fully allocated benefit stream of a
countervailable subsidy is likely to continue after the end of a
sunset review, it will normally determine that the subsidy continues
to exist regardless whether the program that gave rise to such
benefit continues to exist. (See Id. at section III.A.4.)
In its final affirmative countervailing duty determination, as
amended, the Department determined that the combined net
countervailable subsidies with respect to the steel products from
Germany are as follows: (1) Corrosion-resistant steel; country-wide
rate of 0.60 percent,
(2) Cold-rolled steel; country-wide rate of 0.85 percent, and (3)
Cut-to-length steel; Ilsenburg: 0.80 percent, Preussag: 1.72 percent,
Thyssen Stahl AG ("Thyssen"): 0.51 percent, and country-wide rate:
14.84 percent ad valorem.(32) We note that the Department has not
conducted an administrative review of these orders.
As an initial matter, we note that the Department determined in the
investigation that the average useful life of renewable assets in the
German steel-industry is 15 years because such allocation period
reflects the average useful life of assets in the steel industry as a
whole.(33) As a result, any non-recurring grants received by a
respondent steel company after 1985 continue to provide benefits
beyond the end of this sunset review.(34)
Second, in the context of a sunset review, we normally do not
determine whether any change to the program which gave rise to the
net countervailable subsidy has occurred without the knowledge that
such change was found and verified in the original investigation
and/or subsequent administrative review(s) of the orders.
(1) Capital Investment Grants.
The domestic interested parties came forth with evidence in which
Preussag admitted receiving benefits under Capital Investment Grants
as late as in 1990. Because the Department determined that Capital
Investment Grants is a non-recurring program and that Preussag
received the grant as late as in 1990, regardless of the GOG's claim
that Capital Investment Grants was terminated in 1985, or the EC's
claim that the program no longer exists, based on the 15-year
allocation period used by the Department in its investigations,(35)
we preliminarily determine that benefit streams from this program
continue beyond the end of this sunset review and that, therefore, a
countervailable subsidy from Capital Investment Grants to
manufacturers/exporters of subject merchandise will continue to
exist.(36)
(2) Structural Improvement Aids.
The Department indicated in its original investigations that this
recurring program provided funds to German manufacturers/exporters of
corrosion-resistant and cold-rolled steel through 1986. At the same
time, the GOG contends that Structural Improvement Aids was
terminated in 1986 and that the program was not used by German cut-to-
length steel manufacturers/exporters. In addition, the EC claims that
this program no longer exists. Absent any evidence to the contrary,
we agree with respondent interested parties that this program is
terminated.
(3) Investment Premium Act.
In its original investigations, the Department noted that German
manufacturers/exporters of cut-to-length and cold-rolled steel
received grants under this non-recurring program through 1989.
Furthermore, the domestic interested parties claim that Preussag
received grants under the Investment Premium Act during the period
1977 through 1991. Although the EC contends that the program can no
longer provide benefits and the GOG argues that this program should
be deemed not countervailable pursuant to Article 8.2(b) of the
Subsidies Agreement and section 771(5B)(C) of the Act, without any
further tangible evidence, we preliminarily determine that the
benefit stream from this program continues beyond the end of this
sunset review with respect to German manufacturers/exporters of cut-
to-length and cold-rolled steel.
(4) Joint Scheme.
According to the Department's finding in the investigations, this
non-recurring program would be nullified as per the Commission
Decision, effective 1989 (however, exceptions were made for new
states of the former East Germany). Also, the domestic interested
parties (I) claim that, in 1991, Ilsenburg received grants under the
Joint Scheme in association with the production of cut-to-length
steel. In addition, the domestic interested parties (I) claim that
the GOG, in its World Trade Organization ("WTO") Subsidies
Notification (December 3, 1998), indicated that the Joint Scheme is
available to provide regional assistance in the form of grants to
commerce and industry. Therefore, despite the EC's contention that
the program can no longer provide benefits, and the GOG's claim that
this program should be deemed not countervailable pursuant to Article
8.2(b) of the Subsidies Agreement and section 771(5B)(C) of the Act,
without any further tangible evidence, we preliminarily determine
that the benefit stream from Joint Scheme continues beyond the end of
this sunset review as far as German manufacturers/exporters of cut-to-
length steel are concerned.
(5) Zonal Area.
The Department found in its original investigations that the need
for this recurring program disappeared with the unification of
Germany and that this program would expire by 1996. The EC asserts
that this program can no longer provide benefits, and the GOG claims
that this program was terminated 1994 and that the program should be
deemed not countervailable pursuant to Article 8.2(b) of the
Subsidies Agreement and section 771(5B)(C) of the Act. Absent any
tangible evidence indicating otherwise, we preliminarily determine
that the program was terminated with respect to the subject
merchandise.
(6) Ruhr District Action Program.
The Department determined in its original investigations that this
non-recurring program provided grants from 1980 through 1984. The GOG
contends that Ruhr District Action Program was terminated in 1984 and
that the program was not used by cut-to-length and corrosion-
resistant steel manufacturers/exporters in Germany. Also, the EC
claims that this program can no longer provide benefits to German
steel manufacturers. Hence, without any evidence to the contrary, we
preliminarily determine that this program was terminated.
(7) Upswing East.
While the EC claims this program can no longer provide benefits, the
GOG argues that the program should be deemed not countervailable
pursuant to Article 8.2(b) of the Subsidies Agreement and section
771(5B)(C) of the Act and that the program was not used by cold-
rolled and corrosion resistant steel manufacturers/exporters in
Germany. However, in its investigations, the Department found that
this non-recurring program was created by the Investment Act of 1991.
Also, the domestic interested parties (I) claim that Ilsenburg
received grants under the Upswing East in 1991 in association with
manufacturing/exporting of cut-to-length steel. Because the
Department determined that Upswing East is a non-recurring program,
based on the 15-year allocation period used by the Department in its
investigations, we preliminarily determine that the benefit stream of
the program continues beyond the end of the instant sunset review.
(8) TRA/BvS.
The Department noted in its original investigations that the purpose
of this recurring program is to accomplish a comprehensive
privatization of former East German companies by 1995. The EC
contends the program can no longer provide benefits, and the GOG
argues that the program was dissolved in 1995.(37) The GOG further
argues that TRA/BvS should be deemed not countervailable pursuant to
Article 8.2(b) of the Subsidies Agreement and section 771(5B)(C) of
the Act, that the program was not used by cold-rolled and corrosion-
resistant steel manufacturers/exporters in Germany, and that the
program only provides minimal benefits. However, the domestic
interested parties (I) claim that, as late as 1996 and 1997, this
loan guarantee was made available to assist privatization of the
state-owned assets of former East Germany and that there is no
indication that this program has been terminated.(38) Because the
domestic interested parties came forth with argument and evidence
which indicate that this program may still exist, we preliminarily
determine that the program continues to exist with respect to cut-to-
length steel.
(9) SVK grant.
The Department indicated in its investigations that this non-
recurring grant was effectuated by 1989 agreement affecting only one
respondent interested party, Dillinger, which manufactures cut-to-
length steel.(39) Although the GOG contends that the Department's
various methodologies in deriving the original determination
contravene the Subsidies Agreement, it does not present any
persuasive evidence or argument that the benefit stream of the
program would not continue beyond this sunset review. Consequently,
we preliminarily determine that the benefit stream will continue
beyond this review and that, therefore, the countervailable subsidy
from the program continues to exist with respect to cut-to-length
steel.
(10 - 13) Aid for Closure of Steel Operations; ECSC 56; ECSC 54; and
ECSC 54 Interests.
Insofar as the GOG and EC acknowledge that these program will last
until the year 2002, it is unnecessary for us to discuss any other
arguments from either domestic or respondent interested parties.
Thus, we preliminarily determine that these programs continue to
exist.
We disagree with the German Group's argument that the Department
should revoke the orders if we find that a particular subsidy would
be likely to continue but only at a de minimis level. Section III.A.6
of the Sunset Policy Bulletin enunciates that zero or de minimis
rates alone shall not, by themselves, require the Department to
determine that continuation or recurrence of the countervailable
subsidy is not likely if the order is revoked. Moreover, even if the
combined benefit of all programs is de minimis, unless such combined
rate was never above de minimis at any time the order was in effect,
and there is no likelihood the combined benefit will exceed the de
minimis level in the event the order is revoked, with continuing
countervailable subsidy programs, we will normally determine that
continuation or recurrence of the countervailable subsidies is likely
if the order is revoked.
By the same token, we do not entirely agree with the German Group's
contention that the programs which were found not used by the German
manufacturers/exporters of the subject merchandise in the original
investigation should be considered non-countervailable for that
reason alone. However, section III.A.2.b of the Sunset Policy
Bulletin explains that the mere availability of the program does not,
by itself, indicate likelihood of continuation or recurrence of a
countervailable subsidy if a company has a long record of not using a
program. Therefore, we preliminarily determine that the
manufacturers/exporters of corrosion-resistant and cold-rolled steel
have a consistent record of not using SVK grant, including during the
investigation, because the Department determined that none of German
manufacturers/exporters of corrosion-resistant and cold-rolled steel
used this program during the investigation period, because the GOG
contends that the manufacturers/exporters of the subject merchandise
did not use the program, and because the domestic interested parties
(I) do argue any German manufacturer/exporter of corrosion-resistant
and cold-rolled steel used the program. As a result, we did not
consider the SVK grants in making our likelihood determination with
respect to corrosion-resistant and cold-rolled steel in this sunset
review.
During the investigation, the Department found that Investment
Premium Act, Upswing East, Ruhr District Action Program, ECSC 54,
ECSC 54 Intrerest, and Joint Scheme provided a zero-benefit to German
manufacturers/exporters of corrosion-resistant steel; Joint Scheme
and Upswing East provided a zero-benefit to cold-rolled; and
Structural Improvement Aids, Ruhr District Action Program, ECSC 54,
and ECSC 54 Interest provided a zero-benefit to cut-to-length steel
products. However, at the same time, the Department found that those
programs were used by the respective German steel companies. As a
result, we cannot determine that the German steel companies have a
long record of not using those programs, despite the fact that the
GOG claims the above programs were not used by the respective German
companies of the subject merchandise. As a result, we preliminarily
determine that manufacturers/exporters of the respective subject
merchandise do not have a record of not using these corresponding
programs and that, therefore, those programs continue to exist with
respect to subject merchandise for corresponding German
manufacturers/exporters.
We agree with the German Group and acknowledge that the German
reunification was an extraordinary and unique event. However, we
disagree with the German Group's statement that the Department should
disregard any GOG assistance provided in conjunction with the German
reunification processes from our likelihood consideration. First,
this transnational subsidy issue is moot with respect to the orders
regarding corrosion-resistant and cold-rolled steel because we
already have determined that manufacturers/exporters of corrosion-
resistant and cold-rolled steel have a consistent record of not using
TRA/BvS. Second, regarding cut-to-length steel, insofar as TRA/BvS is
a recurring program, any loan guarantees provided by the GOG to East
German companies prior to the reunification are irrelevant to
determining the likelihood in this sunset review. Third, if the GOG
is currently providing loan guarantees under TRA/BvS, such subsidy
would not qualify as transnational subsidies because the GOG would
not be considered as a government of a country other than the country
in which the recipient firm is located or as an international lending
or development institution. (See section 351.527 of the Department's
Regulations.)
We agree with the German Group's contention that in the context of a
sunset review, if we find a subsidy program falls within the purview
of section 771(5B)(C) of the Act, we should determine that program
non-actionable. (See section III.B.3(e) of the Sunset Policy
Bulletin.) In the instant case, however, we do not have record
evidence which would indicate that any of the programs found
countervailable in the original investigation, are non-actionable
because there have not been any administrative reviews of the
relevant orders. The Sunset Policy Bulletin explains that when the
Department has not conducted an administrative review of the order,
we limit our scope of a sunset review by permitting adjustments to
the net countervailable subsidy only to instances in which an
interested party presents other factors with good cause arguments.
(See section III.B.3.(g) and III.C of the Sunset Policy Bulletin.) In
the instant review, respondent interested parties did not present the
Department with other factors accompanied by good cause arguments.
Furthermore, while claiming that Zonal Area, Investment Premium Act,
Joint Scheme, Upswing East, and TRA/BvS grants fall within section
771(5B)(C) of the Act, the German Group does not substantiate the
claim. In other words, the German Group does not supply the
Department with information regarding whether the programs are non-
specific, whether the region is clearly, neutrally, objectively
identified based on statute, regulation, or official document, and
whether a measurement of economic development (per capita income
and/or
unemployment analysis) was incorporated in determining the
disadvantaged region.(40) As a result, we cannot agree with the
German Group that the above programs fall within the purview of
section 771(5B)(C) of the Act.
As for SVK grant, we disagree with the GOG and Dillinger's arguments
that the Department's usage of pass-through principle, based solely
upon subsidies granted to the state-owned enterprise prior to the
privatization in an arm's-length and fair-market-value privatization
transaction, contravenes the Subsidies Agreement. Following a court
ruling from the Court of International Trade (the "CIT),(41) the
Department submitted its remand, which was later affirmed by the
CIT.(42) In its remand determination,(43) the Department found that,
after the privatization, DHS and Dillinger remained, for all intents
and purposes, the same entities as the pre-privatization
Saarstahl/DHS and that the debt forgiveness conferred to
Saarstahl/DHS was not tied to any specific products. As a result, the
Department allocated the benefits from relevant portion of SVK grant
over all DHS sales including that of Dillinger.(44)
Furthermore, we do not consider that a recent WTO interim panel
finding(45) requires the Department to alter its approach to
privatization in the instant case. Because the final panel report has
not been adopted by the Dispute Settlement Body, the United States
has no obligation with respect to the report. As the report has not
been adopted, it is premature to consider what obligations, if any,
the panel report may impose on the United States.
Even if it were not premature for us to reconsider our approach to
privatization in light of the panel report, and it were otherwise
appropriate to do so, 19 U.S.C.§ 3533(g)(1) provides that a
regulation or practice may not be amended, rescinded, or otherwise
modified in the implementation of such report unless and until very
specific statutorily mandated actions have been fulfilled and the
appropriate congressional committees have been consulted. Thus, we
preliminarily determine that a portion of subsidies bestowed on a
government-owned company prior to privatization continues to benefit
the production of the privatized company.
Similarly, Dillinger's assertions that the Department should change
the formula for amortizing benefits over time, should pro-rate the
SVK grant rather than considering it as a lump-sum grant, and should
reassess Dillinger's portion of the SVK grant because its portion was
assessed too high were all denied by the Department in the original
determination.(46)
For the same reason, we disagree with Dillinger's contention that
the Department's 15-year allocation methodology is arbitrary and that
such methodology fails to reflect the actual useful life of
productive assets in the German steel industry.(47) Although the U.S.
Court of International Trade ("Court") in British Steel Plc. v.
United States, 879 F. Supp. 1254 (CIT 1995) rejected the Department's
previous methodology of relying on the U.S. IRS based industry-
specific average useful life of assets, the Court's remand order was
order- and country-specific: the Court ordered the Department to
reconsider the average-useful-life methodology which the Department
applied to the British and French steel industries but not to the
German steel industry. Therefore, in the instant review of the
orders, the Department's application of the 15-year average useful
life for assets in the German steel industry remains valid.
As for Dillinger's contention that, with respect to contingent
liability interest-free loans, the Department should reexamine the
viability of a contingency based on the Department's 1998
Regulations, we disagree. We consider that it is inappropriate, in
the context of a sunset review, to apply 1998 rules (post-WTO rules)
retroactively to a 1993 countervailing duty case (pre-WTO case).
Furthermore, we determine that there is no basis to reject the
Department's findings in an investigation due to subsequent changes
in methodology because such changes do not invalidate the
Department's findings under the prior methodology.
As for Salzgitter's contention that it did not receive any benefits
attributed to Preussag and Ilsenburg, we disagree. Since Salzgitter
in its substantive response explicitly stipulates that Preussag and
Ilsenburg are its predecessors-in-interest and that we have no basis,
in this sunset review, to determine the level of any countervailable
benefits received by Salzgitte, we preliminarily determine that it is
appropriate for us to rely on the information related to Preussag and
Ilsenburg.
Finally, with respect to the GOG and the EU's contention that a
particular subsidy would not have been found countervailable had the
Department applied WTO provisions or post-WTO U.S. statutes, we note
that these countervailing duty orders are pre-WTO orders and that we
do not apply rules, regulations, or laws retroactively in a sunset
review of an antidumping or countervailing duty order.
2. Net Countervailable Subsidy Likely to Prevail
Interested Parties' Comments:
The domestic interested parties contend that, since the Department
has not conducted any administrative review of the orders and the
production of German steel products are still heavily subsidized, the
appropriate country-wide net countervailable subsidies likely to
prevail if the orders are revoked are the ones from the original
investigation.
The GOG states that the likely-to-prevail net countervailable duty
rate for respective subject merchandise, were the orders revoked, is
de minimis.
Neither the domestic interested parties nor respondent interested
parties submitted rebuttal comments with respect to other parties
likely-to-prevail net coutervailable subsidy arguments.
Department's Position:
In the Sunset Policy Bulletin, the Department stated that,
consistent with the SAA and House Report, the Department normally
will select a rate from the investigation, because that is the only
calculated rate that reflects the behavior of exporters and foreign
governments without the discipline of an order or suspension
agreement in place. The Department noted that this rate may not be
the most appropriate rate if, for example, the rate was derived from
subsidy programs which were found in subsequent reviews to be
terminated, there has been a program-wide change, or the rate ignores
a program found to be countervailable in a subsequent administrative
review. (See Section III.B.3 of the Sunset Policy Bulletin.)
Since the issuance of the orders, the Department has not conducted
any administrative review. As a result, we do not have any verified,
updated information with respect to whether a particular
countervailable subsidy has been terminated, whether any program-wide
changes thereof have been effectuated, or whether additional programs
provide countervailable subsidies to the manufacturers and/or
exporters of the subject merchandise. Nor do we have any updated
information regarding the current level of benefits. Therefore, the
only net countervailable subsidies available to us in these reviews
are from the original investigation.
As stated above, we preliminarily determined that some programs were
terminated without any of its benefit streams continuing beyond the
end of this sunset review. Therefore, in deriving the final net
countervailable subsidies that are likely-to-prevail if the orders
are revoked, we subtracted the subsidy rates pertaining to such
terminated programs.(48) (See Memorandum to File Regarding
Calculation of the Net Countervailable Subsidy, March 20, 2000.)
However, although a program is terminated, where the benefit stream
from such program continues beyond the end of this sunset review, we
did not subtract net countervailable subsidy from such program.
Nature of the Subsidy
In the Sunset Policy Bulletin, the Department stated that,
consistent with section 752(a)(6) of the Act, the Department will
provide information to the Commission concerning the nature of the
subsidy and whether the subsidy is a subsidy described in Article 3
or Article 6.1 of the Subsidies Agreement.
We agree with the German Group that none of the thirteen programs
that the Department determined to confer positive countervailable
benefits to German manufacturers/exporters of the subject merchandise
in its original investigation is contingent, either solely or as one
of several other conditions, upon export performance. Namely, none of
these programs falls within the definition of an export subsidy under
Article 3.1(a) of the Subsidies Agreement.
All ten subsidies that we found continue to exist, individually
and/or as a group may fall within Article 6 if the total net
countervailable subsidy for the subject merchandise exceeds 5
percent, as measured in accordance with Annex IV of the Subsidies
Agreement, if the subsidies cover operating losses sustained by an
industry, or if the subsidies directly forgive debts. Nonetheless,
the Department does not have enough information to preliminarily
determine, other than to note that all ten subsidies were provided to
a specific enterprise/industry or group of enterprises/industries,
whether the subsidies were to cover operating losses or for direct
forgiveness of debt, or whether the net countervailable subsidy
exceeds 5 percent. Nor does the Department believe such calculation
or determination would be appropriate in the course of a sunset
review. Instead, we are providing the Commission with the following
program descriptions.
Capital Investment Grants: This non-recurring program provided
grants to reimburse a certain percentage of the acquisition-cost of
assets purchased or produced after July 1981 but prior to January
1986. Because this program was available only to iron and steel
industries, the Department determined that this program was
countervailable.
Aid for Closure of Steel Operations: Based on two laws, this non-
recurring program was created to reduce the economic and social costs
of plant closings in the steel industry between 1987 and 1990.
Because this program was available only to a specific enterprise or
industry, the Department determined that this program was
countervailable.
ECSC 56: This program was created to provide assistance to persons
who lost their jobs in the iron, steel, and coal industries. Because
the GOG's funding has relieved the steel companies of an obligation
they would otherwise have, the Department determined the program to
be countervailable.
Investment Premium Act: Under this non-recurring program, which was
supposedly in effect from 1969 through 1989, grants were provided to
companies investing in specific regions of Germany as long as the
project would be implemented by the company within three years of the
certification. Because this program was limited to enterprises or
industries located in specific geographical areas within Germany, the
Department determined the program to be specific and, thus,
countervailable.
SVK Grants: the Government of Saarland and Dillinger's parent
company, Usinor Sacilor, created a new holding company, DHS-Dillinger
Hutte Saarstahl AG ("DHS"), making Dillinger and Saarstahl Volklingen
GmbH ("Saarstahl") wholly-owned subsidiaries of DHS. In the process
of this privatization, the governments of Germany and Saarland
forgave debts owed to them by Saarstahl. Also, in conjunction with
this privatization process, private creditors forgave Saarstahl's
debts as a part of restructuring two companies. The total amount
involved in this debt forgiveness was DM 4.153 Billion. Because this
program was limited to enterprises or industries located in specific
geographical areas within Germany, the Department determined the
program to be specific and, thus, countervailable.
Joint Scheme: This non-recurring program, which was signed in
October 1969 and came into force in January 1970, was designed to
assist companies in depressed areas. Because this program was limited
to enterprises or industries located in specific geographical areas
within Germany, the Department determined the program to be specific
and, thus, countervailable.
Upswing East: This non-recurring program was established to provide
a special investment allowance in five new states in Berlin. Because
this program was limited to enterprises or industries located in
specific geographical areas within Germany, the Department determined
the federal government portion of the program to be specific and,
thus, countervailable.
TRA/BvS: The purpose of this non-recurring program is to take over
the government-held assets in the former GDR and place them within
the competition-directed market economy of the unified Germany.
Because this program was limited to enterprises or industries located
in specific geographical areas within Germany, the Department
determined the program to be specific and, thus, countervailable.
ECSC 54: This program was available only to the iron, steel, and
coal industries to purchase new equipment or finance modernization.
Because this program was de jure specific to an enterprise or
industry or a group of enterprises or industries, the Department
determined the program to be countervailable to the extent that loans
from this program were provided on terms inconsistent with commercial
considerations.
ECSC 54 Interest: This program was available only to the iron,
steel, and coal industries providing rebates during the restructuring
and modernization of the industry beginning in the 1980s. Because
this program was de jure specific to an enterprise or industry or a
group of enterprises or industries, the Department determined the
program to be countervailable to the extent that the portion of the
rebates from this program were provided on terms inconsistent with
commercial considerations.
Preliminary Results of Review
As a result of these reviews, the Department preliminarily finds
that revocation of the countervailing duty orders would be likely to
lead to continuation or recurrence of a countervailable subsidy at
the rates listed below:
---------------------------------------------------------------------
Manufacturer/Exporters Margin (percent)
---------------------------------------------------------------------
Corrosion-resistant carbon steel flat products:
Country-wide rate 0.54
Cold-rolled carbon steel flat products:
Country-wide rate 0.55
Cut-to-length steel plate products:
Salzgitter 1.62
TKS 0.51
Country-wide (Dillinger) 14.84
---------------------------------------------------------------------
Recommendation
Based on our analysis of the comments received, we recommend
adopting all of the above positions. If these recommendations are
accepted, we will publish the preliminary results of review in the
Federal Register.
AGREE____ DISAGREE____
_________________________
Richard W. Moreland
Acting Assistant Secretary
for Import Administration
__________________________
(Date)
____________________________________________________________________
footnotes
1. See Countervailing Duty Orders and Amendment to Final Affirmative
Countervailing Duty Determinations: Certain Steel Products From
Germany, 58 FR 43756 (August 17, 1993). Finding that AG der Dillinger
Hüttenwerke's ("Dillinger") rate was not significantly different from
the country-wide rate, the Department assigned Dillinger the country-
wide rate.
2. See Final Affirmative Countervailing Duty Determinations: Certain
Steel Products from Germany,
58 FR 37315(July 9, 1993); also see Final Affirmative Countervailing
Duty Determination: Certain Steel Products From Austria, 58 FR 37217
(July 9, 1993), GENERAL ISSUES APPENDIX ("General Issues").
3. See id. Also, the Department determined that some programs fall
outside the purview of the countervailing duty law: such as, Wage
Subsidies (Kurzarbeitergeld), Nordrhein-Westfalen's Technology
Program Materials and Substances Development, and Loan Guarantees
from Nordrhein-Westfalen. Also, the Department found that some other
programs are either not countervailable or not used by German
manufacturers/exporters of the subject merchandise: such as, Loans
with Reduced Interest Rates under the Steel Restructuring Plan,
Federal and State Government, Loan Guarantees under the Steel
Restructuring Plan, Special Ruhr Plan, Zukunftsinitiative
Montanregionen (ZIM) Initiative, Kreditanstalt fu4r Wiederaufbau
(KfW) Investment Loans for Eastern Germany, European Recovery Program
Loans for Eastern Germany, Loan Guarantee Program for Eastern Germany
Peine-Salzgitter Profit Transfer Agreement and Other Operating Loss
Subsidies, Elimination of Duisburg Harbor Tolls, Export Credits at
Preferential Rates, Miscellaneous Tax Subsidies, Loans from the
Government of Nordrhein -Westfalen, Tax Subsidies for Eastern
Germany, ECSC Article 54 Loan Guarantees, ECSC Article 56 Conversion
Loans, Interest Rebates on ECSC Conversion Loans under Article 56,
European Investment Bank Loans and Loan Guarantees, New Community
Instrument Loans, European Regional Development Fund Aid, Nordrhein-
Westfalen's Air Pollution Control Program.
4. See Notice of Final Results of Changed Circumstances Antidumping
Duty and Countervailing Duty Reviews and Revocation of Orders in
Part: Certain Corrosion-Resistant Carbon Steel Flat Products From
Germany, 64 FR 51292 (September 22, 1999). The Department noted that
the affirmative statement of no interest by petitioners, combined
with the lack of comments from interested parties, is sufficient to
warrant partial revocation. This partial revocation applies to
certain corrosion-resistant deep-drawing carbon steel strip, roll-
clad on both sides with aluminum (AlSi) foils in accordance with St3
LG as to EN 10139/10140. The merchandise's chemical composition
encompasses a core material of U St 23 (continuous casting) in which
carbon is less than 0.08; manganese is less than 0.30; phosphorous is
less than 0.20; sulfur is less than 0.015; aluminum is less than
0.01; and the cladding material is a minimum of 99% aluminum with
silicon/copper/iron of less than 1%. The products are in strips with
thicknesses of 0.07mm to 4.0mm (inclusive) and widths of 5mm to 800mm
(inclusive). The thickness ratio of aluminum on either side of steel
may range from 3%/94%/3% to 10%/80%/10%.
5. See Certain Cut-to-Length Carbon Steel Plate from Finland,
Germany, and United Kingdom: Final Results of Changed Circumstances
Antidumping Duty and Countervailing Duty Reviews, and Revocation of
Orders in Part, 64 FR 46343 (August 25, 1999). This partial
revocation applies to cut-to-length steel with a maximum thickness of
80 mm in steel grades BS 7191, 355 EM and 355 EMZ, as amended by
Sable Offshore Energy Project Specification XB MOO Y 15 0001, types 1
and 2.
6. Ispat Inland Inc. is a wholly owned subsidiary of Ispat
International N. V. of the Netherlands; L-SE is 60% owned by a
subsidiary of LTV Steel Company, Inc. and 40% owned by Sumitomo of
Japan; NKK of Japan owns 68.8% of National Steel's voting stock; USS-
Posoc is owned 50% by USX and 50% by Pohang Iron and Steel of Korea;
and PRO-TEC Coating Company is owned 50% by USX and 50% by Kobe Steel
of Japan. (See the domestic interested parties (I)' September 10,
1999, intent to participate, ATTACHMENT 2.)
7. In 1993, Krupp Stahl AG and Hoesch Stahl AG merged to form Krupp
Hoesch Stahl AG, and in 1997, Thyssen Stahl AG and Krupp Hoesch Stahl
AG merged to form TKS. (See the German Group's substantive response
at 5.)
8. Salzgitter AG - Stahl and Technologic ("Salzgitter") and SZAG are
the same company. SZAG (Salzgitter) is the successor to Preussag.
(See id.) Also, SZAG (Salzgitter) elaborates, in its October 15,
1999, rebuttal comments, that after merging with Walzewerk Ilsenburg
GmbH ("Ilsenburg") in 1995, Preussag changed its name to SZAG in
1998. In this review, we will use both Salzgitter when we refer to
cut-to-length steel and SZAG when we refer to corrosion-resistant
steel/cold-rolled steel portions of the orders.
9. The domestic interested parties note that they filed the original
petition and that they participated in all facets of subsequent
litigation of the orders as well as in scope and changed circumstance
reviews.
10. The German Group indicates that EKO was not party to the
original investigation. In addition, although the German Group notes
that Bremen is a successor to Klockner, since Klockner was not party
to the original investigation regarding the corrosion-resistant and
cold-rolled steel, Bremen was not deemed a party to the original
investigation.
11. Salzgitter and TKS also state that they did not export cut-to-
length steel to the United State during the five years (1994-1998)
preceding the year of publication of the notice of initiation for
these sunset reviews. (See October 4, 1999, Salzgitter and TKS's
substantive responses at 7 and 4, respectively.)
12. On the same day SZAG (Salzgitter), which is a member of the
German Group, also individually submitted rebuttal comments with
respect to all three orders.
13. See Extension of Time Limit for Preliminary Results of Full Five-
Year Reviews, 64 FR 71726 (December 22, 1999).
14. See footnote 2, supra. The nonrecurring countervailable
subsidies the domestic interested parties refer to in their
substantive responses are Capital Investment Grants, Aid for Closure
of Steel Operations, Joint Scheme, Upswing East, SVK and Investment
Premium Act.
15. See footnote 2, supra, at 37318. The Department found that the
GOG adopted two measures: on May 3, 1988, "Rules on Providing Funds
to Iron and Steel Companies to Give Social Assistance for Structural
Adjustment" was adopted (this program provided grants to the iron and
steel industry for expenses incurred with respect to displaced
employees); and on June 27, 1988, "the Guideline for Granting Aid to
the Iron and Steel Industry" was adopted (this measure increased the
amount of aid provided to employees under Article 56(2)(b) of the
ECSC Treaty).
16. See footnote 2, supra. In April of 1989, the Government of
Saarland and Dillinger's parent company, Usinor Sacilor, created a
new holding company, DHS-Dillinger Hutte Saarstahl AG ("DHS"), making
Dillinger and Saarstahl Volklingen GmbH ("Saarstahl") wholly-owned
subsidiaries of DHS. In the process of this privatization, the
governments of Germany and Saarland forgave debts owed to them by
Saarstahl. Also, in conjunction with this privatization process,
private creditors forgave Saarstahl's debts as a part of
restructuring the two companies. The total amount involved in this
debt forgiveness was DM 4.153 Billion.
17. See domestic interested parties' substantive response,
Attachment 8 (Seventh Survey of State Aid in the European Union in
the Manufacturing and Certain Other Sectors. Commission of the
European Communities at 25 (March 30, 1999) ("SSSA")). TRA was
succeeded by the program, Bundesanstalt fur Vereinigungsbedingte
Sanderaufgaben ("BvS").
18. However, the domestic interested parties acknowledge that they
are unable to establish a definite nexus between ECSC 56 and the
aforementioned two employee-assistance programs; namely, the domestic
interested parties stipulate that they have "no information available
to tie directly" the programs to the ECSC 56.
19. See domestic interested parties' substantive response,
Attachment 9 (ECSC 1997 Financial Report, Financing of Industrial
Investment (Article 54 of the ECSC Treaty), and Financing of
Investment in the Iron and Steel Industry (first paragraph of Article
54 of the ECSC Treaty)).
20. However, for each of these alleged terminations, the GOG does
not provide the mode and/or nature of each termination. That is, the
GOG does not indicate whether a particular termination was done via
legislative or administrative action. Also, the GOG does not explain
whether a particular termination is partial only with respect to
exports to the United States, with respect to the German steel
industry, or in its entirety.
21. Although no grant directly benefitted Dillinger, in its
investigation, the Department attributed a portion of the grant
package, which forgave DHS's debt, to Dillinger because the
Department deemed the grant as being passed through. In its
substantive response, the GOG indicates that the Department's
application of the aforementioned pass-through practice is currently
a subject before a WTO Dispute Settlement Panel. (See General Issues
at Restructuring and Privatization.)
22. The EU states that the Commission Decision allows aid only in
three circumstances: factory closures, environmental reasons, and
research and development. In all three cases, the aid must be
notified and approved by the EU according to the procedure specified
in the Commission Decision. (See the EC's substantive response at
II(G)(3).)
23. The German Group bases its contention of reduced rate on the
allocation formula set forth in section 351.524(d) of the Department
Regulations. Accordingly, the German Group claims that the Department
usually allocates the non-recurring benefits at a gradually reduced
rate over the years.
24. See footnote 1, supra and 58 FR 43758. The Department amended
this figure to 0.51 percent.
25. However, TKS does not elaborate the reason for its suggestion
that the benefit stream will either end or have been reduced
considerably from the 1991 level.
26. See footnote 21, supra. Dillinger notes that without the pass-
through portion of debt-forgiveness, the SVK grant benefitting DHS,
the total amount of countervailing duty rate assigned to Dillinger
would have been de minimis, 0.21 percent ad valorem.
27. Dillinger indicates that the Department should adopt an 11-year
allocation period as it did in Final Affirmative Countervailable Duty
Determination: Steel Wire Rod from Germany, 62 FR 54990 (April 15,
1997) ("Steel Wire Rod"). In this case, the Department explained that
its previous methodology of relying on US IRS based industry-specific
average useful life of assets (as it was used in the investigation of
the subject merchandise) was rejected by the U.S. Court of
International Trade (the "Court") in British Steel Plc. v. United
States, 879 F. Supp. 1254 (CIT 1995). At the same time, Dillinger
urges the Department to utilize the principle enunciated in Certain
Hot-Rolled Lead and Bismuth Carbon Steel Products from the United
Kingdom; Final Results of Countervailing Duty Administrative Review,
63 FR 18367 (October 22, 1998). In this case, finding that applying
different allocation periods (15 years and 18 years) for the same
subsidies in two different proceedings involving the same company
generates significant inconsistencies, the Department harmonized two
different allocation periods into one period, 18 years. However, in
this review we are dealing with different companies and a different
set of subsidies.
28. See, Commission Communication on the Method for the Application
of Article 92(3)(a) and (c) to Regional Aid, Official Journal of the
European Communities at 212/5 (December 8, 1988).
29. With this, SZAG is rebutting the domestic interested parties'
characterization of SZAG in their substantive response: in 1998,
Preussag was acquired by the government of Lower Saxony, merged with
affiiliated companies and renamed SZAG. (See the domestic interested
parties' substantive response at 7.)
30. Although Dillinger and Salzgitter submitted their substantive
response separately, they filed their rebuttal comments jointly.
31. See section 351.524(d) of the Department's Regulations.
32. See footnote 1, supra.
33. See Final Affirmative Countervailing Duty Determination: Certain
Steel Products From Austria, GENERAL ISSUES APPENDIX, Allocation, 58
FR 37217, 37227 (July 9, 1993).
34. The effective date for revocation or termination of any
transition order is January 1, 2000. (See section 351.222(i)(2)(ii)
of the Department's Regulation.)
35. See footnote 2, supra.
36. Thus, the domestic interested parties' acknowledgment, in their
rebuttal comments, that this program has expired is immaterial.
37. However, for each of these alleged terminations, the GOG does
not provide the nature of each termination. That is, the GOG does not
indicate whether a particular termination was done via legislative or
administrative action. Also, the GOG does not explain whether a
particular termination is partial only with respect to exports to the
United States, with respect to the German steel industry, or in its
entirety.
38. See domestic interested parties' substantive response,
Attachment 8 (Seventh Survey of State Aid in the European Union in
the Manufacturing and Certain Other Sectors. Commission of the
European Communities at 25 (March 30, 1999) ("SSSA")). TRA was
succeeded by the program, Bundesanstalt fur Vereinigungsbedingte
Sanderaufgaben ("BvS").
39. See footnote 2 and 16 supra.
40. The GOG submitted a copy of its September 1997, Case Brief
pertaining to the Countervailing Duty Investigation of Steel Wire Rod
from Germany purportedly in support of its claim that some subsidies
are not-countervailable pursuant to section 771(5B)(C) of the Act.
However, the submitted case brief deals with a different product and
pertains mostly the different interested parties. Moreover, it is not
even clear whether the same aspects of a program or even whether the
same programs are discussed in the case brief as in the orders. For
this reason, we conclude that the information from the case brief
should not affect the Department's decision in the instant review.
(See the GOG's substantive response Appendix 1 and 2.)
41. See British Steel plc v. United States, 879 F. Supp. 1254 (Ct.
Int'l Trade 1995).
42. See British Steel plc v. United States, Slip Op. 96-130 (CIT
August 13, 1996).
43. See May 22, 1996, Final Results of Redetermination Pursuant to
Court Remand on Certain Factual Issues Regarding the Privatization in
Germany, British Steel Plc v. United States Consol. Ct. NO. 93-09-
00550-CVD ("Remand Determination") (affirmed, British Steel plc v.
United States, Slip Op. 96-130 (CIT August 13, 1996)).
44. Also see Delverde SRL v. United States, Appeal No. Op. 99-1186
(Fed. Cir. 2000). (The Court of Appeals for the Federal Circuit
("CAFC") recently ruled that the Department may not presume that non-
recurring subsidies survive a private-to-private transfer in a
subsidized company's ownership. To the extent that the CAFC-ruling
may be relevant to the instant orders, that decision is not final and
conclusive. Specifically, under the Federal Rules of Appellate
Procedure, the time for petitioning for rehearing in banc, or
appealing, has not yet run. Further, the Court has not yet issued a
mandate.
45. See October 8,1999, WTO Interim Panel Finds Against U.S. CVD
Rules on Privatization, 17 Inside U.S. Trade No. 140 at 4.
46. See footnote 2, supra at GENERAL ISSUES APPENDIX -- Allocation
and Restructuring. The Department indicated that it is inappropriate
for the Department to take into account the timing of each and every
receipt of benefits in calculating the allocation of non-recurring
benefits. Also, in the Restructuring segment, the Department
explained how it allocated the SVK grant to Dillinger in The
Calculation of the Portion of the Sale Price Allocable to Previously
Received Subsidies.
47. See footnotes 2 and 43, supra. Moreover, in British Steel Plc.
v. United States, with respect to allocation methodology, the order
pertaining to Germany was not contested (only orders of the United
Kingdom and France were remanded by the Court).
48. Although the domestic interested parties raised a newly-alleged-
subsidies issue within their likely effects argument, they did not
attempt to incorporate the newly-alleged-subsidies rate with the
likely-to-prevail margin. Furthermore, the domestic interested
parties did not attempt to put forth good-cause argument.