65 FR 64668, October 30, 2000
C-475-817
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 Oil Country Tubular Goods from Italy; Preliminary
Results
Summary:
We have analyzed the substantive responses and rebuttals of the interested
parties in the full sunset review of the countervailing duty order on oil
country tubular goods ("OCTG") 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 June 28, 1995, the Department issued the countervailing duty order on oil
country tubular goods ("OCTG") from Italy (60 FR 33577). 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: Oil Country Tubular
Goods ("OCTG") From Italy, 60 FR 33577, 33578-80 (June 28, 1995). 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 oil country tubular goods 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, IPSCO Tubulars, Inc., Lone Star
Steel Company, Maverick Tube Corporation, Newport Steel and Koppel Steel
Divisions of NS Group, Grant-Prideco, and North Star Steel Ohio (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. U.S. Steel Group,
IPSCO Steel, Inc., Maverick Tube Corporation, Koppel Steel Corporation, and
North Star Steel Ohio were petitioners in the investigation and have been
involved in this proceeding since its inception.
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 3). On August 2, 2000, we received a response from the Government of
Italy ("GOI") expressing its willingness to participate in this review as the
authority responsible for defending the interests of the Italian steel
industry. The GOI and EC note that they have in the past participated in this
proceeding (see August 1, 2000, Response of the EC at 3, and the August 1,
2000, Response of the GOI at 2).
On August 2, 2000, we received complete substantive responses 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 7, 2000. Pursuant to 19 CFR 351.218 (e)(2)(i), the Department
determined to conduct a full (240-day) sunset review of this order. (1)
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 2, 2000, substantive response, domestic interested parties
argue that revocation of the countervailing duty order on OCTG from Italy would
lead to continuation or recurrence of subsidies. Domestic interested parties
cite 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 193/84will continue beyond the end of this
sunset review (see August 2, 2000, Substantive Response of domestic interested
parties at 8).
Second, domestic interested parties contend that, although Exchange Rate
Guarantees Under Law 796/76 were 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 9.
Moreover, they assert that the Department has found that other producers that,
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. at 10.
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)). 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 the United States is not a major market for Dalmine; and Dalmine is still
subject to an antidumping order. (see August 2, 2000, Substantive Response of
Dalmine at 4). 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. at 5.
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 in the EU 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 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 GOI and EC state that the specific
programs found countervailable in the investigation are now terminated and are
therefore no longer available for the Italian steel industry. Id. They
further assert that the benefits allocated under those programs must have been
substantially reduced or even eliminated by the passing of time and that any
future subsidization of the steel sector is not only highly unlikely but no
longer possible. Id.
The GOI and EC contend that a major reason why it is unlikely that the
respondent companies would continue to be subsidized is Commission Decision
2496/96 of December 18, 1996 ("the 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 3. 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 why it is unlikely that the
respondent companies would continue to be subsidized is 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) exchange rate
guarantee program under Law 796/76, have been terminated and are, therefore, no
longer available to the Italian steel industry. Id. The GOI and EC assert
that the Department has 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)). According to the Department's
methodology, the benefits allocated under these programs during the original
investigation have now been substantially reduced, and are at de minimis
levels. Id. Furthermore, the GOI and EC contend that, due to the fact 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 assert that Dalmine does not
account for more than 50 percent of the total exports of subject merchandise to
the United States, as necessary for an adequate response from respondent
interested parties, and thus the Department should conduct an expedited review
and base its results on facts available. In addition, 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. SeeAugust 7, 2000, Response of U.S. Steel Group at 7.
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 8. Therefore, according to domestic interested
parties, under the Department's Sunset Policy Bulletin, the Department should
not recalculate the net subsidy from the grants as de minimis. Moreover, they
state that 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 10.
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 12. Because no
administrative reviews have been conducted in this case and no evidence of
repayment of the 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.
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. Id. at 13.
Further, domestic interested parties state that, although Dalmine claims that
Law 675/77was 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 13-14. 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, according
to domestic interested parties, the Department determined in the sunset review
of Italian grain-oriented electrical steel ("GOES") that AST and ILVA continued
to benefit from such subsidies. Id. at 14.
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, the allocated benefit in 1999 under Law
193/84 amounted to well below de minimis and if the Department corrects an
error in its original calculation, the residual benefit would be less than half
this below de minimis rate (see August 7, 2000, Rebuttal of Dalmine at 2).
Thus, any residual benefits to Dalmine underLaw 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, according to Dalmine, 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 1, through December 31, 1998). In
the current case, however, 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, because 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 the
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 had been 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 only Italian manufacturer of subject OCTG,
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
(seesection 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 theSunset Policy Bulletin).
With respect to the arguments of the GOI, EC and Dalmine that Grants under
Law 193/84 has been terminated and Dalmine's contention that the Department has
found in previous cases involving Italy that Law 193/84 was a "non-recurring"
program, we do not agree. Rather, we agree with domestic interested parties
that, 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, a determination as to 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 the sunset reviewCertain Corrosion-Resistant
Carbon Steel Flat Products; Cold-Rolled Carbon Steel Flat Products; and Cut-to-
Length Carbon Steel Plate Products From Germany; Final Results of Full Sunset
Reviews, 65 FR 47407 (August 2, 2000) ("Certain Steel Products from Germany"),
a de minimisrate, 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 benefits program, the
Department should determine that no further benefits accrued to Dalmine. As
domestic interested parties note, the Department in the original investigation
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: Oil Country Tubular Goods ("OCTG") from
Italy, (June 28, 1995)). Therefore, despite termination of the program in
1982, there may still be residual benefits under the program. Id. Although
Dalmine states that, because it is the only Italian manufacturer of subject
OCTG, there is no reasonable likelihood that any residual benefits under Law
675/77 could theoretically be available to Italian producers of other subject
OCTG, 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 subsidy programs
to the Italian steel industry have been terminated due to specific governmental
action and that subsidization of the steel sector in the EU 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 preliminarily 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 preliminarily 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 OCTG without the discipline of
the order in place (see August 2, 2000, Substantive Response of U.S. Steel
Group at 12-13).
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 3
and EC at 3). Thus, the GOI and EC contend that the amount of subsidy has been
reduced to nil or to a level lower than the de minimis threshold (1 percent ad
valorem) provided by Article 11.9 of the 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 Final Results of Full Sunset Review: Live Swine
From Canada, 64 FR 60301 (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 fromLaw
193/84 now is 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 (seeAugust 2, 2000, Substantive Response of Dalmine at 6-
8). 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 9.
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. at 10.
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 11.
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 underLaw 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. Further, according to
Dalmine, 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. at 12. 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.
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 7, 2000,
rebuttal of U.S. Steel Group at 19-20). 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 the recent sunset
review decision, 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 7, 2000, rebuttal of U.S. Steel Group at 21). 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 23. 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, according to
domestic interested parties, the only possible exception to the Department's
rule does not apply here. Id. at 24.
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 25. 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 451/94provided 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. August 7, 2000,
Rebuttal of U.S. Steel Group at 26. 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. 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
three 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 27. Domestic interested parties assert that Dalmine, as
a former ILVA subsidiary, benefitted and continues to benefit from this
subsidy. Id. at 28. 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 percentad 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 even consider Dalmine's
claims in the context of a sunset review. Id. at 29.
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
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, 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 OCTG 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 OCTG.
With respect to the subsidized mortgage loan and interest contribution
program underLaw 675/77 and the exchange rate guarantee program under Law
796/76, all interested parties acknowledge that the Department determined in
the investigation in this and other cases that these programs have been
terminated. However, as domestic interested parties point out, citingCertain
Steel Products from Germany, because no administrative reviews of the order
have been conducted, we are unable to determine whether all loans under these
programs have already been received, whether the lives of the loans under this
program have expired, or whether any additional benefits under these programs
were received subsequent to the period of investigation. Therefore, because
residual benefits from the program may have continued 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 of the Subsidies Agreement. None of the
programs described 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 RegisteC:\PROGRAM FILES\COFFEECUP SOFTWARE\Working\r.
AGREE_____ DISAGREE_____
Troy H. Cribb
Acting Assistant Secretary
for Import Administration
(Date)
Endnotes
____________________________________________________________________________
1. See August 22, 2000, Memorandum for Jeffrey A. May, Re: Oil Country
Tubular Goods from Italy; Adequacy of Respondent Interested Parties' Response
to the Notice of Initiation.