Sunset Review
Public Document

MEMORANDUM TO: Troy H. Cribb
Acting Assistant Secretary
for Import Administration

FROM: Jeffrey A. May
Director
Office of Policy

SUBJECT: Issues and Decision Memorandum for the Full Sunset Review of the Countervailing Duty Order on Seamless Carbon and Alloy Steel Standard, Line and Pressure Pipe from Italy; Preliminary Results

Summary:

We have analyzed the substantive responses of the interested parties in the full sunset review of the countervailing duty order on seamless carbon and alloy steel standard, line and pressure pipe ("seamless pipe") from Italy. We recommend that you approve the positions we have developed in the Discussion of the Issues section of this memorandum for these preliminary results of review. Below is the complete list of the issues in this full sunset review for which we received substantive responses by parties:
1. Likelihood of continuation or recurrence of countervailable subsidies
A. Programs from the investigation
B. Changes in programs
C. Other factors
2. Net countervailable subsidy likely to prevail
A. Net countervailable subsidy from the investigation
B. Adjustments to the subsidy
History of the Order:
On August 9, 1995, the Department issued the countervailing duty order on seamless pipe from Italy (59 FR 29414). In the final affirmative countervailing duty determination, the following programs were found to confer countervailable subsidies:
(1) Benefits Under Law 675/77;

(2) Grants Under Law 193/84;

(3) Exchange Rate Guarantee Payments Under Law 796/76.

See Final Affirmative Countervailing Duty Determination: Small Diameter Circular Seamless Carbon and Alloy Steel Standard, Line and Pressure Pipe from Italy, 60 FR 31992 (June 19, 1995) ("Final Affirmative CVD Determination: Seamless Pipe from Italy"). The Department determined a country-wide countervailing duty rate of 1.47 percent ad valorem.

There have been no administrative reviews of the subject countervailing duty order. Additionally, there have been no circumvention determinations or changed circumstances reviews.

Background:
On July 3, 2000, the Department initiated a sunset review of the countervailing duty order on seamless pipe from Italy (65 FR 41053), pursuant to section 751(c) of the Tariff Act of 1930, as amended, ("the Act"). The Department received a notice of intent to participate on behalf of U.S. Steel Group, a unit of USX Corporation, and Vision Metals, Inc. (collectively, "domestic interested parties"), within the applicable deadline (July 18, 2000) specified in section 351.218(d)(1)(i) of the Sunset Regulations. Domestic interested parties claimed interested-party status under section 771(9)(C) of the Act, as U.S. manufacturers of the domestic like product. Vision Metals, Inc., formerly the Gulf States Tube Division of Quanex Corporation, was a petitioner in the investigation and has been involved in this proceeding since its inception (see August 2, 2000, Substantive Response of domestic interested parties at 3).

On August 1, 2000, we received a response from the European Union Delegation of the European Commission ("EC") expressing its willingness to participate in this review as the authority responsible for defending the interest of the Member States of the European Union ("EU") (see August 1, 2000, Response of the EC at 2). On August 2, 2000, we received a response from the Government of Italy ("GOI") expressing its willingness to participate in this review as the government of a country in which subject merchandise is produced and exported. The GOI and EC note that they have in the past participated in this proceeding (see August 1, 2000, Response of the EC at 2, and the August 2, 2000, Response of the GOI at 2). On August 2, 2000, we received a complete substantive response from domestic interested parties, within the 30-day deadline specified in the Sunset Regulations under section 351.218(d)(3)(i), and a complete substantive response from Dalmine S.p.A. ("Dalmine"), a foreign producer and exporter of the subject merchandise, and a respondent interested party under section 771(9)(A) of the Act.

We received rebuttal comments from domestic interested parties and Dalmine, on August 8, 2000, and August 7, 2000, respectively. Pursuant to 19 CFR 351.218 (e)(2)(i), the Department determined to conduct a full (240-day) sunset review of this order. See August 22, 2000, Memorandum for Jeffrey A. May, Re: Seamless Pipe from Italy; Adequacy of Respondent Interested Party Response to the Notice of Initiation.

Discussion of the Issues:
In accordance with section 751(c)(1) of the Act, the Department is conducting this review to determine whether revocation of the countervailing duty order 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 and 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 order is 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 it is a subsidy described in Article 3 or Article 6.1 of the 1994 World Trade Organization ("WTO") Agreement on Subsidies and Countervailing Measures ("Subsidies Agreement").

Below we address the responses of interested parties.

1. Continuation or Recurrence of a Countervailable Subsidy:

Interested Party Comments

In their August 4, 2000, substantive response, domestic interested parties argue that revocation of the countervailing duty order on seamless pipe from Italy would lead to continuation or recurrence of subsidies. Domestic interested parties cite the Statement of Administrative Action ("SAA"), H.R. Doc. No. 316, Vol. 1, 103d Cong., 2d Sess. at 889 (1994), and the Department's Sunset Policy Bulletin, and argue that the subsidies found in the investigation continue to confer benefit on Italian producers/exporters of subject merchandise. First, domestic interested parties assert that, using the Department's grant methodology of a 15-year average useful life ("AUL") of renewable physical assets for the steel industry, the benefit stream of Grants Under Law 193/84 will continue beyond the end of this sunset review (see August 2, 2000, Substantive Response of domestic interested parties at 6-7).

Second, domestic interested parties contend that, although Exchange Rate Guarantees Under Law 796/76, was terminated on July 10, 1992, the Department has determined in subsequent investigations that pre-existing exchange rate guarantees remained in effect on loans outstanding after that date. Id. at 8. Moreover, they assert that the Department has found that other producers who, like Dalmine, were subsidiaries of the government holding company ILVA S.p.A. ("ILVA") when the program was in existence, have continued to benefit from this program as recently as 1998. Id.

Finally, domestic interested parties note that, in the investigation, the Department determined that Dalmine benefitted from two programs established under Law 675/77, Subsidized Mortgage Loans, and Interest Contributions. Further, they note that, on June 23, 2000, in another sunset review involving ILVA, Acciai Special Terni S.p.A. and Acciai Speciali Terni USA, Inc. (collectively "AST"), the Department continued the order, concluding that the Italian producers/exporters continued to benefit from these subsidy programs (see Grain-Oriented Electrical Steel from Italy: Preliminary Results of Full Sunset Review of Countervailing Duty Order, 65 FR 39129, 39131 (June 23, 2000) ("GOES from Italy"). Domestic interested parties assert that the same result should apply to this case. In particular, with respect to Interest Contributions under Law 675/677, domestic interested parties assert that during the investigation Dalmine had argued that because the government terminated the subsidized loan program in 1982, and Dalmine had paid off its subsidized loans in 1994 (after the investigation period), the Department should determine that no further benefits accrued to Dalmine. Id. at 10. However, domestic interested parties note that the Department, according to its regulations under 19 CFR 351.526(b)(1), rejected this argument when it found that there could be other Italian companies with outstanding loans which may provide residual benefits under the program.

Dalmine states that revocation of the subject order will have no effect on shipments to the United States or the U.S. industry; export volumes demonstrate that Dalmine is still subject to an antidumping order and is not a major supplier to the United States (see August 2, 2000, Substantive Response of Dalmine at 7). Further, Dalmine asserts that because the programs deemed countervailable have been terminated and all benefits have ceased, revocation of the countervailing duty order would not be likely to lead to continuation or recurrence of a countervailing subsidy. Id. Dalmine contends that, therefore, under the statute, the Department should terminate the countervailing duty order in this proceeding. Further, according to Dalmine, termination also is mandated by Article 21.1 and Article 23.3 of the Subsidies Agreement. Id.

In their individual responses, the GOI and the EC state that revocation of the order is not likely to lead to recurrence of subsidization because the EU steel sector has undergone a major restructuring in recent years under the careful monitoring of the EC, and steel producers are now mostly privately operated and compete on commercial terms in international markets (see August 1, 1999, Responses of the GOI at 2 and the EC at 2). In addition, the GOI and EC state that revocation of the order will not impact on the EC policy on aid to the steel sector, which is one of the strictest among WTO Members following the adoption of a series of Commission Decisions ("the Community Steel Aid Codes"). Id. Further, the specific programs found countervailable in the investigation are now terminated and their benefits have expired. Id.

The GOI and EC contend that a major reason for the unlikelihood of continuation of subsidization is Commission Decision 2496/96 of December 18, 1996 ("Commission Decision"), which entered into force on January 1, 1997, and which prohibits the granting of aid to the steel industry except under three distinct circumstances: for the closing of facilities, for environmental reasons, and for research and development (the last two types reflect the type of aid which is not actionable under Article 8 of the Subsidies Agreement) (see August 1, 2000, Responses of the GOI at 3 and the EC at 2). Further, the GOI and the EC state that, in all three cases, aid must first be notified and approved by the EC following the procedures provided in the EU Commission Decision. Id. In addition, the GOI and the EC assert that, with the exception of the aid for the closure of facilities, the other two types of aid must be provided in accordance with the relevant Community Frameworks (namely, the Community frameworks for State Aid for research and development and on State Aid for environmental protection – Articles 2 and 3 of the Commission Decision), which specify that aid can only compensate for a part of the eligible costs incurred by the company (see August 1, 2000, Responses of the GOI at 3 and the EC at 3).

The GOI and EC state that another reason for the unlikelihood of continuation of subsidization is that the three programs found to be countervailable during the original investigation, namely, (1) benefits provided under Law 675/77, (2) grants under Law 193/84 and (3) exchange rate guarantee program under Law 796/76, are terminated and are, therefore, no longer available to the Italian steel industry. Id. The GOI and EC assert that the Department recognized that the Exchange Rate Guarantee Program was terminated effective July 10, 1992, by the Decree Law 333/92 (in Final Countervailing Duty Determination: Stainless Steel Sheet and Strip in Coils from Italy, 64 FR 30624 (June 8, 1999)), and, according to the Department's methodology, the benefits allocated under these programs during the original investigation have now been substantially reduced to de minimis levels. Id. Furthermore, the GOI and EC contend that, given that Dalmine has been privatized and the European steel sector has been completely reformed and state aid is strictly monitored by the EC, any subsidization of the sector is not only highly unlikely, but is also no longer possible. Id.

In their rebuttal, domestic interested parties state that, contrary to the arguments of Dalmine, the GOI, and the EC, the record evidence refutes any claim that benefits have ceased under the programs found to be countervailable in the investigation. Domestic interested parties state that the Department allocated the benefits from the grants of the 15-year average useful life of renewable physical assets in the steel industry, and that Dalmine had received grants under Law 193/84 in 1985, 1986, 1990, 1991, and 1992. Id. at 4. Domestic interested parties contend that, because the grants provided to Dalmine under Law 193/84 are non-recurring subsidies, the Department must determine that the benefit stream from the grants will continue beyond the end of this sunset review. Id. at 5. Under the Department's Sunset Policy Bulletin, the Department should not, therefore, recalculate the net subsidy from the grants as de minimis. Moreover, a subsidy rate may not be adjusted in a sunset review where, as here, the Department has not conducted an administrative review of the order. Id. at 7.

With respect to the exchange rate guarantees under Law 796/76, which Dalmine, the GOI, and EC all argue was terminated July 10, 1992, by Decree 333/92, domestic interested parties state that neither Dalmine nor the GOI nor the EC has provided any evidence that Dalmine has paid off any of the loans received by it under the exchange rate guarantee program. Id. at 8. Because no administrative reviews have been conducted in this case and no evidence of repayment of loans in question has been presented, domestic interested parties contend that the Department must find that Dalmine continues to benefit from the exchange rate guarantee program and, moreover, other Italian producers and exporters under the order could continue to benefit from exchange rate guarantees that went into effect before the termination of the program. Id. at 8-9. Accordingly, domestic interested parties assert that the Department should find that this countervailable subsidy is likely to continue not only for Dalmine, but also for other Italian producers and exporters of the subject merchandise if the order is revoked.

Further, domestic interested parties state that, although Dalmine claims that Law 675/77 was terminated in 1982, the Department rejected this claim in the investigation and determined that there could be other Italian companies with loans that are still outstanding and, therefore, that there may still be residual benefits under the program. Id. at 10. In fact, domestic interested parties assert that the Department has determined in several recent cases that Italian steel producers have continued to benefit from subsidized loans and interest contributions provided under Law 675/77. Indeed, the Department determined in GOES from Italy that AST and ILVA continued to benefit from subsidies. Id. at 11.

In its rebuttal, Dalmine asserts that domestic interested parties' comments ignore the record evidence demonstrating that the benefit stream under all these programs combined is less than de minimis, as explained in Dalmine's August 2, 2000, substantive response. First, Dalmine asserts that, based on the Department's calculation documents, any benefits under Law 193/84 are now de minimis and if the Department corrects an error in its original calculation, the residual benefit would be less than this de minimis rate (see August 7, 2000, Rebuttal of Dalmine at 2). Thus, any residual benefits to Dalmine under Law 193/84 would be de minimis upon revocation of the subject order; as the benefit is declining and Dalmine's revenue is stable and increasing, this de minimis rate can only decline between now and the termination of the grant program. Id. Moreover, Dalmine states that this program has been irrevocably terminated, and that the Department has found in previous cases involving Italy that Law 193/84 was a "non-recurring" program. Thus, there is no likelihood of continuation or recurrence of the benefits granted under Law 193/84 beyond a de minimis level.

Second, Dalmine asserts that the underlying record shows that the Department verified that the GOI terminated the Exchange Rate Guarantees under Law 796/76 in 1992. Dalmine contends that the program examined in the Italian GOES case cited by U.S. Steel concerned a loan that had not yet expired during the relevant period of review ("POR") (January 31, through December 31, 1998). Rather, in the current case, record evidence shows that the loans at issue have expired and Dalmine has no outstanding loans which might carry over any benefits under the Exchange Rate Guarantees program. Id. at 3. Further, no benefits under this program will "recur" because exchange rate guarantees were available only during the life of these loans and, as the program expired before the original determination, there could be no new loans under the program.

Third, Dalmine states that both the subsidized mortgage loans and interest contribution programs established under Law 675/77 were terminated by the GOI in 1982, as the Department concluded in the original investigation of this case. Id. Dalmine notes that in the sunset review of ILVA ("GOES from Italy"), cited by U.S. Steel, the Department found a likelihood of continuation or recurrence of the subsidy benefit because the Department found that no evidence had been submitted on the record of the sunset proceeding to establish that the programs administered under Law 675/77 had been terminated, or that benefits allocated over time would not continue beyond the sunset review. Id. Dalmine asserts that, by contrast, in this case, the Department verified in the original investigation that Law 675/77 was terminated, and that the benefit stream for those programs was tied to the life of the loans. Id. at 4. Thus, Dalmine states, although there was a continuing benefit during 1993, the original investigation period, the record evidence shows that these loans all have expired and that there can be no further benefit. Further, Dalmine asserts that, because it is the principal supplier of subject merchandise, there is no reasonable likelihood that any residual benefits could theoretically be available to other Italian companies. Finally, Dalmine asserts that domestic interested parties' citations to the Department's finding in a separate sunset review with regard to evidence on the record in that review are irrelevant for the purposes of this sunset review and the Department should find no likelihood of continuation or recurrence of the benefits provided under Law 675/77. Id.

The 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 section III.A.3.b of the Sunset Policy Bulletin).

We disagree with the GOI, EC, and Dalmine, that Grants under Law 193/84 have been terminated. We also disagree with Dalmine's contention that the Department has found in previous cases involving Italy that Law 193/84 was a "non-recurring" program. Absent an administrative review of the order, the Department cannot determine that Italian producers/exporters are no longer receiving residual benefits from this program, or recalculate the net subsidy from the grants provided to Dalmine under Law 193/84 as de minimis. Further, with respect to Dalmine's assertion that the Department erred in its original calculation (whereby the residual benefit from this program would be less than a de minimis rate), we do not find that the sunset review is an appropriate forum for such inquiry. Moreover, the determination of whether benefits from this subsidy program are not likely to continue or recur is not based on, as Dalmine's response suggests, whether the benefits conferred are below a de minimis level. Even if the Department were to recalculate the total benefits as de minimis, as stated in the Final Results of Full Sunset Review of Certain Corrosion-Resistant Carbon Steel Flat Products; Cold- Rolled Carbon Steel Flat Products; and Cut-to-Length Carbon Steel Plate Products from Germany (65 FR 47407, August 2, 2000) ("Certain Steel products from Germany"), a de minimis rate, by itself, does not automatically require a revocation of the order.

With respect to Exchange Rate Guarantees Under Law 796/76, we agree with domestic interested parties that, although the program was terminated in 1992, the Department has received no evidence in parties' submissions that Dalmine has paid off the loans it received under this program. Further, without an administrative review of the order, the Department cannot assume that Dalmine has repaid the loans in question, or that Italian producers and exporters under the order would not continue to benefit from exchange rate guarantees that went into effect before the termination of the program.

With respect to Subsidized Mortgage Loans (under Law 675/77), we disagree with Dalmine that because the GOI in 1982 terminated the portion of the benefits program, the Department should determine that no further benefits accrued to Dalmine. As domestic interested parties note, in the original investigation, the Department determined that the termination of the subsidized loan portion of this program does not constitute a program-wide change as defined in section 355.50(b)(1) of the Department's regulations. The Department stated that although Dalmine has repaid the loans it received under the program, there could be other Italian companies with loans that are still outstanding (see Final Affirmative Countervailing Duty Determination: Seamless Pipe from Italy, (June 19, 1995)). Therefore, despite termination of the program in 1982, there may still be residual benefits under the program. Id. Although Dalmine in this review states that because it is the principal supplier of subject merchandise, there is no reasonable likelihood that any residual benefits under Law 675/77 could theoretically be available to other Italian producers, the change at issue under the Department's program-wide change policy cannot be limited to individual firms. Consequently, we determine that "termination" of the subsidized loan portion of this program does not constitute a program-wide change.

Finally, the Department notes the EC and the GOI assert that the subsidy programs to the Italian steel industry have been terminated due to specific governmental action and subsidization of the steel sector in the EU that is strictly prohibited following the adoption of the EU Commission Decision. However, without evidence that the programs have been terminated, or that the benefits from programs for which benefits are allocated over time will not continue beyond this sunset review, we determine that revocation of the countervailing duty order is likely to lead to continuation or recurrence of a countervailable subsidy.

Thus, although the Department found that the programs found countervailable in the investigation, with the exception of Law 193/84, have been terminated, absent an administrative review, we cannot determine in this proceeding that Italian producers/exporters no longer receive benefits from the above programs. As such, we determine that benefits of a countervailable subsidy on Italian producers/exporters are likely to continue or recur were the order revoked.

2. Net Countervailable Subsidy Likely to Prevail

Interested Party Comments:

In their substantive response, domestic interested parties, citing the SAA, note that the Department normally will select the 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 in place. Accordingly, domestic interested parties contend, the Department should select the rate of 1.47 percent from the investigation as the rate that is likely to prevail if the order is revoked because it is the only calculated rate that reflects the behavior of Italian exporters of seamless pipe without the discipline of the order in place (see August 2, 2000, Substantive Response of domestic interested parties at 11).

In their responses, the GOI and EC reassert that the three programs found to be countervailable during the original investigation – (1) benefits provided under Law 675/77, (2) grants under Law 193/84 and (3) the Exchange Rate Guarantee Program – have been terminated and are therefore no longer available for the Italian steel industry (see August 1, 2000, responses of the GOI at 2 and EC at 3). Thus, the GOI and EC contend that the amount of subsidy has been reduced to zero or to a level lower than the de minimis threshold (1 percent ad valorem) provided by Article 11.9 ASCM. Id.

In its substantive response, Dalmine contends that each of the programs that the Department determined countervailable in 1995 has been terminated by the GOI. Dalmine cites section 752(b)(i)(B) of the Act and the Department's Sunset Policy Bulletin, which provide that Department shall consider 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. Further, Dalmine notes that, as seen in Live Swine from Canada (63 FR 60306, November 4, 1999), the Department will accept evidence in a sunset review of the termination of a program previously deemed countervailable.

First, Dalmine asserts that the GOI terminated the Plant Closing Grants (Law 193/84) and that, in previous cases involving Italy, the Department has found that Law 193/84 provided by the Italian government in 1984, over 15 years ago, was a "non-recurring" program. Dalmine notes that the Department's disclosure calculations from the final determination show a precise calculation of the benefits under Law 193/84 from 1985 through expiration, and any benefit from Law 193/84 is now de minimis. Moreover, as the benefit is declining and Dalmine's revenue is stable and increasing, this de minimis rate can only decline between now and the expiration (see August 2, 2000, Substantive Response of Dalmine at 11). Further, Dalmine asserts that because it is the primary producer of subject merchandise in Italy, a de minimis calculation for Dalmine operates as a de minimis calculation for Italy. Id.

Second, Dalmine asserts that the GOI terminated the Long-Term Loan Program (Law 675/77) at the end of 1982, and that the Department verified the termination of this program in the original investigation and established that Dalmine had repaid each of the loans it received under this program. Id. at 12. Dalmine also states that the benefit stream for these loans as determined by the Department was limited to the life of the loan, which expired over five years ago, and the loans were completely repaid by Dalmine. Id.

Third, Dalmine states that the GOI terminated the Exchange Guarantee Program (Law 796/76) when it issued Decree 333/92, Article 5 in 1992, and that the Department verified in another case involving Italy, Cut-to-Length Plate, that this program has been terminated. Further, Dalmine states that although the Department determined in 1995 that the program was terminated in 1991, and that benefits may continue on loans outstanding after that date, all loans under this program had already been received and that the life of the loans under this program has expired. Id. at 13.

Therefore, Dalmine asserts, under all three of the programs above, the total benefit to Dalmine is de minimis: there are no benefits conferred upon Italian producers/exporters under Law 675/77 and Law 796/76, and only a de minimis benefit from Law 193/94; because the GOI has terminated these programs, there is no likelihood of recurrence of subsidization. Id. at 14. Further, the Commission Decision 2496/96, which entered into force on January 1, 1997, prohibits all subsidies to the steel industry in Italy and other EU countries, except in narrow circumstance not present here. Id. Dalmine asserts that future subsidization is simply not possible in this case because Dalmine has been fully privatized and no longer is owned or controlled by the GOI. Id. at 15. Domestic interested parties restate in their rebuttal that under section 752(b)(3) of the Act and the Department's Sunset Policy Bulletin the Department normally will provide to the Commission the net countervailable subsidy that was determined in the final determination in the original investigation. Further, domestic interest parties assert that the Department's Sunset Policy Bulletin and practice plainly refute Dalmine's argument that the Department should adjust the subsidy rate for the programs at issue (see August 18, 2000, Rebuttal of domestic interested parties at 16). For instance, the Sunset Policy Bulletin expressly provides that where the Department has not conducted an administrative review of the order, the Department normally will not make adjustments to the net countervailable subsidy rate determined in the original investigation, and the Department applied this policy in Certain Steel Products from Germany. Domestic interested parties note that in Certain Steel Products from Germany, the Department rejected an argument that the benefits from two subsidy programs had ceased and refused to adjust the subsidy rates for those programs despite the fact that the programs were found in the original investigation to have been terminated (see August 18, 2000, Rebuttal of domestic interested parties at 18). Because residual benefits from the programs continued subsequent to the period of investigation and no administrative reviews were held to show that such benefits had ceased, the Department found that subsidies were likely to continue under the programs. Accordingly, the domestic interested parties assert that the Department should not make any adjustment to the net countervailable subsidy in this case and should report to the Commission the rate of 1.47 percent from the investigation.

In addition, domestic interested parties state that although the Department has determined in the investigation in this and other cases that the subsidized mortgage loan and interest contribution program under Law 675/77 and the exchange rate guarantee program under Law 796/76 have been terminated, the Department has explicitly found that residual benefits have continued from these programs well after the periods of investigation and into the present time. Id. at 20. Under the Department's Sunset Policy Bulletin and as seen in the Department's decision in Certain Steel Products from Germany, the Department may only adjust a subsidy rate in the absence of an administrative review for programs found in the investigation to have been terminated with no residual benefits after the period of investigation. Id. Thus, the only possible exception to the Department's rule does not apply here. Id.

Domestic interested parties state that in several investigations the Department has conducted since the subject order was issued, the Department has determined that countervailable subsidies other than those investigated here have been conferred on the Italian steel industry and particularly on companies that, like Dalmine, are former subsidiaries of ILVA. Id. at 21. These new subsidies include the early retirement benefits provided under Law 451/94 and the debt forgiveness provided under the 1993/94 Restructuring Plan for ILVA.

Domestic interested parties state that in three of the Department's investigations conducted in 1998 and 1999, Final Affirmative Countervailing Duty Determination: Certain Cut-to-Length Carbon-Quality Steel Plate From Italy (64 FR 73244, December 29, 1999) ("CTL Plate from Italy"), Final Affirmative Countervailing Duty Determination: Stainless Steel Plate in Coils From Italy (64 FR 15508, March 31, 1999) ("SS Plate from Italy"),and Final Affirmative Countervailing Duty Determination: Stainless Steel Sheet and Strip in Coils From Italy (64 FR 30624, June 8, 1999) ("SS Sheet and Strip from Italy"), the Department found that Law 451/94 provided governmental benefits that enable the Italian steel industry to implement workforce reductions by allowing steel workers to retire early. Further, the domestic interested parties state that the Department found the benefit to the steel companies to be one-half of the amount paid to the workers by the GOI under Law 451/94. Id. at 23-23. Based on the liquidation of ILVA and the "demerger" of its subsidiaries, the Department attributed the benefits received by ILVA under this program to its subsidiaries. Id. at 23. Domestic interested parties assert that, as a former ILVA subsidiary, Dalmine has benefitted from this program.

Another program which domestic interested parties assert that the Department found to provide a countervailable subsidy is the debt forgiveness provided as part of the 1993/1994 Restructuring Plan for ILVA. Domestic interested parties note that, at the end of 1993, pursuant to a restructuring plan developed by the GOI, ILVA was split up into three entities, and that the Department has determined that the retention of liabilities by ILVA Residua, one of these such entities, and the eventual absorption of the liabilities by the GOI was a countervailable subsidy equivalent to debt forgiveness for the ILVA subsidiaries. Id. at 24. Domestic interested parties assert that, as a former ILVA subsidiary, Dalmine benefitted and continues to benefit from this subsidy. Id. They state that the subsidy rates determined for other former ILVA subsidiaries under this program have been significant, ranging from 6.79 percent to 13.27 percent ad valorem.

Finally, domestic interested parties contend that the Department may, in the context of an administrative review, consider petitioners' allegations regarding the above-described new subsidies and also consider and attempt to verify Dalmine's claims regarding termination of and cessation of the benefits under the programs in the original investigation in this case. However, under the Sunset Policy Bulletin, the Department should not attempt to consider Dalmine's claims in the context of a sunset review. Id. at 25.

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 as the net countervailable subsidy likely to prevail if the order is revoked, 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. However, 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.

Additionally, where the Department determined company-specific countervailing duty rates in the original investigation, the Department normally will report to the Commission company-specific rates from the original investigation or where no company-specific rate was determined for a company, the Department normally will provide to the Commission the country-wide or "all-others" rate (see Sunset Policy Bulletin at section III.B.2.) Concerning the rate to report to the Commission, we agree with domestic interested parties. As noted above, the Department normally will select the 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 in place. Although, as Dalmine notes, the Department normally considers whether any change in the program is likely to affect that net countervailable subsidy, as domestic interested parties point out, the Sunset Policy Bulletin further provides that the Department normally will not make adjustments to the subsidy rate where it has not conducted an administrative review of the order.

With respect to Grants Under Law 193/84, we disagree with Dalmine's assertion that any benefit from this program is declining and is now de minimis and that, because Dalmine is the primary producer of subject merchandise in Italy, a de minimis calculation for Dalmine operates as a de minimis calculation for Italy. The Department cannot conclude from the record of the sunset review whether benefits received by Italian producers/manufacturers of seamless pipe under Law 193/84 are less than 0.5 percent. Therefore, we determine that the net subsidy of 0.81 percent ad valorem from the original investigation continues to benefit Italian producers/manufacturers of seamless pipe.

With respect to the subsidized mortgage loan and interest contribution program under Law 675/77 and the exchange rate guarantee program under Law 796/76, all interested parties acknowledge that the Department has determined in the investigation in this and other cases that these programs have been terminated. However, as domestic interested parties point out, citing Certain Steel Products from Germany, given that no administrative reviews of the order have been conducted, we are unable to determine whether all loans under these programs have already been received and that the life of the loans under this program has expired, or that any additional benefits under these programs were received subsequent to the period of investigation.

Therefore, because residual benefits from the program may continue subsequent to the period of investigation and no administrative reviews were conducted to show that such benefits have ceased, we will report to the Commission the rate of 1.47 percent from the investigation for all Italian producers/exporters.

Nature of the Subsidy:

In the Sunset Policy Bulletin, the Department states that, consistent with section 752(a)(6) of the Act, the Department will 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 Subsidies Agreement. None of the programs above is a subsidy described in Article 3 of the Subsidies Agreement.

Preliminary Results of Review

As a result of this review, the Department preliminarily finds that revocation of the countervailing duty order would likely lead to continuation or recurrence of a countervailable subsidy at the rate listed below: Producer/Exporter Net Countervailable Subsidy (%)

All Producers/Exporters from Italy 1.47

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 X DISAGREE____

/S/

Troy H. Cribb
Acting Assistant Secretary
for Import Administration

October 23, 2000
(Date)