66 FR 2885, January 12, 2001
C-475-812
ARP 1998
Public Document
Group II/VI:
SM/DB
MEMORANDUM FOR: Troy H. Cribb
Assistant Secretary
for Import Administration
FROM: Holly A. Kuga
Acting Deputy Assistant Secretary
for Import Administration
SUBJECT: Issues and Decision Memorandum: Final Results of
Countervailing Duty Administrative Review: Grain-
Oriented Electrical Steel from Italy
(January 1, 1998 - December 31, 1998)
Summary
We have analyzed the case and rebuttal briefs, and comments submitted by
interested parties in the administrative review of the countervailing duty
order on grain-oriented electrical steel from Italy. The Department has
also reexamined its change in ownership analysis and methodology in light
of the Court of Appeals for the Federal Circuit's ruling in Delverde
S.r.L. v. United States, 202 F. 3d 1360 (Fed. Cir. 2000) (Delverde III).
As a result of our analysis, we have made certain modifications to the net
subsidy rate previously calculated in the Grain-Oriented Electrical Steel
from Italy; Preliminary Results of Countervailing Duty Administrative
Review, 65 FR 41950 (July 7, 2000) (Preliminary Results) for Acciai
Speciali Terni S.p.A (AST), the sole producer and exporter of the subject
merchandise covered by this review. The "Background Information" and
"Analysis of Programs" sections below describe the decisions made in this
review. Also below is the "Analysis of Comments" section which contains
the Department's responses to the issues raised in the case and rebuttal
briefs, as well as the comments to the Department's new change in
ownership approach that were received from interested parties. We
recommend that you approve the positions we have developed in this
memorandum.
Corporate History of AST
Prior to 1987, Terni Societa' per l'Industria e l'Elettricita' S.p.A.
(Terni), an operating company within the Finsider S.p.A. (Finsider) group,
produced electrical steel. Finsider was a holding company that controlled
all state-owned steel companies in Italy. Finsider, in turn, was wholly-
owned by a government holding company, Instituto per la Ricostruzione
Industriale (IRI). During 1987, Finsider was restructured into four main
operating companies: Terni Acciai Speciali S.p.A. (TAS) (flat-rolled
stainless steel, electrical steel); Italsider S.p.A. (carbon steel flat-
rolled products); Nuova Deltasider S.p.A. (long products) and Dalmine
S.p.A. (pipe and tube). During the restructuring, Terni's steel
facilities, including electrical steel were transferred to the newly
formed TAS.
In 1988, the Government of Italy (GOI) submitted a new restructuring plan
for the steel industry to the European Commission (EC) for approval. Under
this plan, which was approved in December 1988, Finsider and its main
operating companies (TAS, Italsider S.p.A., and Nuova Deltasider S.p.A.)
entered into liquidation and a new company, ILVA S.p.A. (ILVA) was created
with some of the assets and liabilities of the liquidating companies. The
plan also envisioned the closure of certain plants and the sale of others
to private investors, which was carried out by ILVA between 1990 and 1992.
With respect to TAS, some of its liabilities, as well as its manufacturing
and other assets, were transferred to ILVA on January 1, 1989, except for
the production of forgings, round bars, and pressure vessels, which
remained with TAS in liquidation until April 1, 1990. On April 1, 1990,
these production units and certain additional liabilities were also
transferred to ILVA. After that date, TAS no longer possessed any
operating assets; only certain non-operating assets remained in TAS.
From 1989 to 1993, ILVA S.p.A. consisted of several operating divisions:
Carbon Steel Flat Products; Pipe Division; Long Products Division; and the
Specialty Steel Division located in Terni, which produced electrical
steel. In addition to these operating divisions, ILVA S.p.A. was the
majority owner of a large number of separately incorporated subsidiaries.
Some of these subsidiaries produced various types of steel products.
Others constituted service centers, trading companies, and an electric
power company, among others. ILVA S.p.A. together with its subsidiaries
constituted the ILVA Group, which was wholly-owned by IRI. All subsidies
received prior to 1994 were received by ILVA or its predecessors.
In September 1993, IRI endorsed a plan for the reorganization and
privatization of the ILVA Group through the splitting of ILVA's core
business into two new companies, and the rest of the ILVA Group was to be
known as ILVA Residua (a.k.a., ILVA in Liquidation). In accordance with
the plan, on December 31, 1993, the Terni division of ILVA was separately
incorporated by a demerger of ILVA into Acciai Speciali Terni S.r.l. (AST
S.r.l.) (specialty steel), and ILVA Laminati Piani S.R.l. (ILP) (carbon
steel flat products). The remainder of ILVA's assets and existing
liabilities, as well as much of the redundant workforce, were transferred
to ILVA Residua.
On December 31, 1993, AST S.r.l. was established as a separate
corporation, with all shares initially owned by IRI. At approximately the
same time, a public offering for the sale of AST S.r.l. was made. In
preparation for the sale of AST, IRI converted AST S.r.l. from a limited
liability company (S.r.l.) to a stock company (S.p.A.) on February 11,
1994. On July 14, 1994, a purchase agreement was signed by IRI and KAI
Italia S.r.l. (KAI), a privately-held holding company jointly owned by
German steelmaker Krupp AG Hoesch-Krupp and a consortium of private
Italian companies called FAR Acciai S.r.l., subject to approval by the EC.
The EC's approval was granted on December 21, 1994, with shares formally
changing hands effective December 23, 1994. As of that date, the GOI no
longer maintained any ownership interest in AST or its new owners.
In December 1994, AST was sold to KAI. Between 1995 and 1998, there were
several restructurings/changes in ownership of AST and its parent
companies. As a result, at the end of the POR, AST was owned 90 percent by
Krupp Thyssen Stainless GmbH (part of the Krupp AG Hoesch-Krupp group) and
10 percent by Fintad Securities S.A., a private Italian company.
Background Information
Change in Ownership
On February 2, 2000, the Court of Appeals for the Federal Circuit in
Delverde III, rejected the same change in ownership methodology that we
applied in the Preliminary Results in the instant review. It held that
"the Tariff Act, as amended, does not allow Commerce to presume
conclusively that the subsidies granted to the former owner of Delverde's
corporate assets automatically 'passed through' to Delverde following the
sale. Rather, the Tariff Act requires that Commerce make such a
determination by examining the particular facts and circumstances of the
sale and determining whether Delverde directly or indirectly received both
a financial contribution and benefit from the government." Delverde III,
202 F.3d at 1364.
Therefore, the Department has applied a new change in ownership approach
to the particular facts and circumstances in this case to determine
whether privatized AST directly or indirectly received both a financial
contribution and benefit from the GOI. The first step in this approach is
to examine whether the firm under review is the same person as the one
that received the subsidies. To make this determination, where appropriate
and applicable, we analyze factors such as (1) continuity of general
business operations, including whether the successor holds itself out as
the continuation of the previous enterprise, as may be indicated, for
example, by use of the same name, (2) continuity of production facilities,
(3) continuity of assets and liabilities, and (4) retention of personnel.
No single factor will necessarily provide a dispositive indication of any
change in the entity under analysis. Instead, the Department will
generally consider the post-sale entity to be the same person as the pre-
sale entity if, based on the totality of the factors considered, we
determine that the entity sold in the change-in-ownership transaction can
be considered a continuous business entity because it was operated in
substantially the same manner before and after the change in ownership.
For further discussion, see Final Results of Redetermination Pursuant to
Court Remand, Acciai Speciali Terni S.p.A. v. United States (December 19,
2000) (Final Redetermination), which was placed on this record.
In analyzing these factors in the context of the record in this case, we
find that the record information indicates that the specialty steel
operations of ILVA essentially continued in the form of AST through the
privatization process. In other words, AST's production base and the
products AST produced remained virtually the same after the privatization.
Similarly, respondents state that "{b}y selling AST as an operating
entity, rather than merely auctioning its individual assets, IRI expected
to obtain a higher sale price and thereby to maximize the revenue from the
sale to IRI." AST October 20, 2000 Questionnaire Response at 6.
An additional relevant area of inquiry is whether a successor company
after a sale holds itself out as the continuation of the previous
enterprise. We find that, in purchasing AST, the KAI consortium clearly
intended to benefit from and build upon the existing market exposure,
distribution network and reputation of the company. For instance, the
privatized entity continued to operate under the same name, AST. More
generally, however, KAI believed that AST's existing market presence was
an important part of what KAI would be purchasing. The questionnaire
response states that a factor that the purchaser considered in purchasing
AST is that "the company had access to desirable markets and customers for
its production." Id., at 41. Regarding the continuity of production
facilities, we note that following the 1994 privatization, AST's principal
specialty steel production facilities continued to be located in Terni.
With respect to continuity of assets and liabilities, virtually all of
AST's corporate assets were taken over by KAI. Likewise, the liabilities
of the pre-privatized AST were transferred through the privatization
intact. GOI November 14, 2000 Questionnaire Response at 3; see also "Debt
Forgiveness: 1993-1994 Restructuring Plan" section.
Regarding the retention of personnel, it is clear from information on the
record that KAI was committed to maintaining the existing AST workforce
largely in place after the privatization. Continuity in AST's personnel,
for example, was highlighted in the IMI Report, commissioned by the GOI to
determine the value of AST. See "Company Appraisal of AST: IMI," included
as Attachment 1 of the AST October 20, 2000 Questionnaire Response at 15.
For the reasons cited above, we determine that the privatized AST is for
all intents and purposes the same person as that which existed prior to
the privatization. Hence, the privatized AST received the financial
contributions and benefits at issue in this review. Once again, for
further discussion of these issues, see Final Redetermination.
Under this approach, (1) we calculated the benefit to AST from allocable
non-recurring subsidies during the period of review (POR), in accordance
with 19 CFR §351.524. See also Comments 1, 2, and 3, below.
Subsidies Valuation Information
A. Allocation Period
In the Preliminary Results, 65 FR at 41951, the Department allocated non-
recurring subsidies received by AST using a 12-year average useful life
(AUL) of renewable physical assets for the industry concerned. This
allocation period is consistent with two recent countervailing duty
investigations that involved AST. See Final Affirmative Countervailing
Duty Determination: Stainless Steel Sheet and Strip in Coils from Italy,
64 FR 30624, 30627 (June 8, 1999) (Stainless Sheet and Strip); and Final
Affirmative Countervailing Duty Determination: Stainless Steel Plate in
Coils from Italy, 64 FR 15508, 15511, 15520 (March 31, 1999) (Stainless
Plate in Coils).
In this review, no party has claimed that the 12-year AUL does not
reasonably reflect the AUL of the company's productive fixed assets or for
the industry. Therefore, in accordance with
§351.524(d), we have allocated, where applicable, the company's non-
recurring subsidies over 12 years.
B. Equityworthiness
As discussed in the Preliminary Results, the Department found ILVA/AST's
predecessor companies unequityworthy from 1984 through 1988, and from 1991
through 1992, in prior investigations and reviews. See, e.g., Final
Affirmative Countervailing Duty Determination: Grain-Oriented Electrical
Steel from Italy, 59 FR 18357, 18358 (April 18, 1994) (Electrical Steel);
Final Affirmative Countervailing Duty Determinations: Certain Steel
Products from Italy, 58 FR 37327, 37328 (July 9, 1993) (Certain Steel);
Stainless Plate in Coils, 64 FR at 15511; and Final Affirmative
Countervailing Duty Determination: Certain Stainless Steel Wire Rod from
Italy, 63 FR 40474, 40477 (July 29, 1998) (Wire Rod). No new information
or evidence of changed circumstances have been submitted in this review
that would lead us to reconsider these findings.
C. Creditworthiness
TAS and ILVA were found to be uncreditworthy from 1986 through 1993. See
Electrical Steel, 59 FR at 18358; Stainless Plate in Coils, 64 FR at
15511; Wire Rod, 63 FR at 40477. No new information has been presented in
this review that would lead us to reconsider these findings. Therefore,
consistent with our past practice, we continue to find TAS and ILVA
uncreditworthy from 1986 through 1993. See, e.g., Final Affirmative
Countervailing Duty Determinations: Certain Steel Products from Brazil, 58
FR 37295, 37297 (July 9, 1993). We did not analyze AST's creditworthiness
in the years 1994 through 1998, because the company did not negotiate new
loans with the GOI or the EC during these years, nor did it receive any
new subsidies that were allocated over time.
D. Benchmarks for Long-Term Loans and Discount Rates
Consistent with the Department's finding in Wire Rod, 63 FR at 40476-77,
Stainless Plate in Coils, 64 FR at 15510, and Final Affirmative
Countervailing Duty Determination: Certain Cut-to-Length Carbon-Quality
Steel Plate from Italy, 64 FR 73244, 73247- 48 (December 29, 1999) (CTL
Plate), we have based our discount rates on the Italian Bankers'
Association (ABI) rates. The ABI rate is the average of the interest rates
on overdraft facilities commercial banks charge to high quality borrowers.
In calculating the interest rate applicable to a borrower, commercial
banks typically add a spread ranging from 0.55 percent to 4.0 percent onto
the ABI rate, which is determined by the company's financial health.
In CTL Plate, we found that the published ABI rates do not include
amounts for fees, commissions, and other borrowing expenses. However,
information on the borrowing expenses on overdraft loans for 1998, which
was placed on that record, was used as an approximation of expenses on
long-term commercial loans. That information shows that expenses on
overdraft loans range from 6.0 to 11.0 percent of interest charged. Such
expenses, along with the applied spread, raise the effective interest rate
that a company would pay. CTL Plate, 64 FR at 73248. Because it is the
Department's practice to use effective interest rates, where possible, we
are including an amount for these expenses in the calculation of our
effective benchmark rates. See 19 CFR 351.505(a)(1). Specifically, we have
added the average of the spread (i.e., 2.28 percent) and borrowing
expenses (i.e., 8.5 percent of the interest charged) to the yearly ABI
rates to calculate the effective discount rates.
For the years in which AST or its predecessor companies were
uncreditworthy (see "Creditworthiness" section above), we calculated
discount rates in accordance with the formula for constructing a long-term
benchmark interest rate for uncreditworthy companies as stated in section
351.505(a)(3)(iii) of the Department's regulations. This formula requires
values for the probability of default by uncreditworthy and creditworthy
companies. For the probability of default by an uncreditworthy company, we
relied on the weighted-average cumulative default rates reported for the
Caa to C-rated category of companies as published in Moody's Investors
Service, "Historical Default Rates of Corporate Bond Issuers, 1920 - 1997"
(February 1998). (2) For the probability of default by a creditworthy
company, we used the weighted-average cumulative default rates reported
for the Aaa to Baa-rated categories of companies in the study. For non-
recurring subsidies, we based the average cumulative default rates for
both uncreditworthy and creditworthy companies on a 12-year term, since
all of AST's allocable subsidies were based on this allocation period.
In addition, AST had one long-term, fixed-rate loan under the ECSC
Article 54 program outstanding during the POR, denominated in U.S.
dollars. Therefore, we have selected a U.S. dollar-based interest rate as
our benchmark. See 19 CFR 351.505(a)(2)(i). Consistent with Wire Rod, 63
FR at 40486, and CTL Plate, 64 FR at 73248, we have used as our benchmark
the average yield to maturity on selected long-term corporate bonds as
reported by the U.S. Federal Reserve, since the loan was denominated in
U.S. dollars. We used these rates since we were unable to find a long-term
borrowing rate for loans denominated in U.S. dollars in Italy. Because
ILVA was uncreditworthy in the year the loan was contracted, we calculated
the uncreditworthy benchmark rate pursuant to section 351.505(a)(3)(iii)
of the Department's regulations.
II. Use of Facts Otherwise Available
Section 776(a)(2) of the Act provides that if an interested party (1)
withholds information that has been requested by the Department, (2) fails
to provide such information in a timely manner or in the form requested,
(3) significantly impedes a proceeding under the countervailing and
antidumping statute, or (4) provides information that cannot be verified,
the Department shall use, subject to section 782(d), facts available in
reaching the applicable determination.
With regard to the pre-privatization asset spin-offs, as well as the post-
privatization sales of shares, we note that neither AST nor the GOI
responded to the change in ownership questions as they relate to these
transactions, despite our requests in the September 28, 2000, and October
27, 2000, supplemental questionnaires (e.g., in the cover page). In the
October 27, 2000, supplemental questionnaire, AST and the GOI were
notified of this deficiency and given an opportunity to correct it under
section 782(d) of the Act, but failed to do so. Although there is some
information regarding these transactions on the record, we find that this
information does not provide an adequate basis on which to determine
whether these sales represented new entities that were sold from ILVA (the
pre-1993 asset spin-offs) or AST (the post-privatization sales of shares).
Consequently, we conclude that the information on the record is too
incomplete to serve as a reliable basis for the determination with respect
to these transactions. Moreover, as discussed below, we have concluded
that these parties have not acted to the best of their abilities with
respect to this issue. As a result, we conclude that section 782(e) of the
Act does not apply. Therefore, we determine that, in accordance with
sections 776(a)(2)(A) and (C) of the Act, the use of facts otherwise
available is appropriate for the respondent because neither the respondent
nor the GOI provided a complete response to the questions in the
supplemental questionnaires issued on September 28, 2000 or on October 27,
2000 regarding these other transactions.
In selecting from among the facts available, section 776(b) of the Act
authorizes the Department to use an adverse inference if the Department
finds that a party has failed to cooperate by not acting to the best of
its ability to comply with requests for information. See also Statement of
Administrative Action (SAA), H.R. Doc. 103-316 at 870 (1994). To examine
whether the respondent "cooperated" by "acting to the best of its ability"
under section 776(b) of the Act, the Department considers, inter alia, the
accuracy and completeness of submitted information and whether the
respondent has hindered the calculation of accurate subsidy rates.
As discussed above, AST and the GOI failed to adequately respond to the
Department's questions regarding these transactions. AST explained its
disregard for the Department's instructions by arguing that:
these transactions are not relevant to the terms of AST's privatization,
the Department's treatment of which is the subject of this administrative
review . . . If the Department believes it needs additional information
regarding any of these transactions, AST, the GOI and the EC respectfully
request that the Department explain how such information is pertinent to
the proper scope of this remand [sic].
(AST October 19, 2000 supplemental questionnaire response at 29). Thus,
AST did not state that it could not provide the requested information or
offer any alternative information. Instead, it has attempted to tell the
Department what information is relevant and necessary for the Department
to have. As a result, we have determined that the responding parties
withheld information that we requested and significantly impeded this
proceeding. Without this information, the Department is unable to
determine whether these transactions represent the sale of an entity and
whether that entity is the same as the one which benefitted from the
subsidies prior to the sale. We therefore find that the responding parties
have not acted to the best of their abilities to comply with our requests
for information.
Accordingly, consistent with section 776(b) of the Act, we have applied
adverse facts available to AST. As adverse facts available for the pre-
1993 asset spin-offs of ILVA, we find that, once sold, the assets did not
constitute the same entity as ILVA (the seller of those assets);
therefore, the subsidy benefits remained with the divisions of ILVA.
Likewise, we have applied to the post-privatization sales of shares the
adverse inference that these did not affect the subsidy benefits to AST.
This is consistent with our practice in Stainless Plate in Coils, where we
found that these transactions had no impact on AST's subsidy benefits.
Stainless Plate in Coils, 64 FR at 15510. See also Final Redetermination
at 24-25, and Comment 6 herein.
Analysis of Programs
Programs Conferring Subsidies
Government of Italy Programs
Equity Infusions to TAS and ILVA
The GOI, through IRI, provided new equity capital to TAS or ILVA between
1987 and 1992 (although there were no allegations of equity infusions in
1989 and 1990). These equity infusions were found countervailable in
Electrical Steel and Stainless Plate in Coils. No new information or
evidence of changed circumstances has been submitted in this proceeding to
warrant reconsideration of this finding. We treated the equity infusions
originally provided to TAS, the predecessor company to ILVA that produced
electrical steel, as though they had flowed directly through ILVA to AST
when the specialty steel (including subject merchandise) assets were
transferred from ILVA to AST. See Electrical Steel, 59 FR at 18360;
Stainless Plate in Coils, 64 FR at 15511-12.
We have treated these equity infusions as non-recurring grants given in
the year the infusion was received because each required a separate
authorization. We allocated the equity infusions over a 12-year AUL.
Because TAS and ILVA were uncreditworthy in the years the equity infusions
were received, we constructed uncreditworthy discount rates to allocate
the benefits over time. See "Subsidies Valuation Information" section,
above.
To calculate the benefit, we added the allocable amount in 1998 from the
equity infusions described above and divided the total by AST's total
consolidated sales during the POR. On this basis, we determine the net
countervailable subsidy to be 1.13 percent ad valorem.
B. Debt Forgiveness: 1988-1990 Restructuring Plan
As discussed in the Preliminary Results, the GOI liquidated Finsider and
its main operating companies, including TAS, in 1988 and assembled the
group's most productive assets into a new operating company, ILVA.
Although most of TAS's productive assets were transferred to ILVA, not all
of its liabilities were transferred; rather, many liabilities remained
with TAS which had to be repaid, assumed or forgiven. In 1990, additional
assets and liabilities of TAS, Italsider and Finsider were transferred to
ILVA. See Electrical Steel, 59 FR at 18359; Stainless Plate in Coils, 64
FR at 15508-09; CTL Plate, 64 FR at 73249.
In 1989, IRI forgave 99,886 million lire owed to Finsider by TAS. See
Electrical Steel, 59 FR at 18359. Even with this debt forgiveness, a
substantial amount of liabilities remained with TAS. In addition, losses
associated with the transfer of assets to ILVA were left behind in TAS.
These losses occurred because the value of the transferred assets had to
be written down. As TAS gave up assets whose book value was higher than
their appraised value, it was forced to absorb the losses. These losses
were generated during two transfers as reflected in: (1) an extraordinary
loss in TAS's 1988 Annual Report and (2) a reserve account created in 1989
for anticipated losses with respect to the 1990 transfer.
In Electrical Steel, Stainless Plate in Coils, and CTL Plate, we
determined that the debt and loss coverage provided to ILVA in 1989 and
1990, constituted countervailable subsidies within the meaning of section
771(5)(B)(i) of the Act. No new information or evidence of changed
circumstances has been submitted in this proceeding to warrant
reconsideration of this finding.
To determine the benefit from these subsidies, we have treated IRI's
forgiveness of TAS's 1989 debt owed to Finsider and the loss resulting
from the 1989 write-down as grants received in 1989. The second asset
write-down and the debt forgiven after the 1990 transfer were treated as
grants received in 1990. We treated these as non-recurring grants because
the company did not receive them on an on-going basis. Because ILVA was
uncreditworthy in 1989 and 1990, the years in which the assistance was
provided, we used constructed uncreditworthy discount rates to allocate
the benefits over time. We allocated the debt coverage provided in 1989
and 1990, over a 12-year AUL. See the "Subsidies Valuation Information"
section, above.
To calculate the benefit, we added the allocable amount in 1998 from the
debt forgiveness described above and divided the total by AST's total
consolidated sales during the POR. On this basis, we determine the net
countervailable subsidy to be 3.08 percent ad valorem for AST.
C. Debt Forgiveness: 1993-1994 Restructuring Plan
In September 1993, IRI endorsed a plan for the reorganization and
privatization of the ILVA Group, which was submitted to the EC for its
approval. The reorganization provided for splitting ILVA's core business
into two new companies, AST and ILP, and placing the remaining assets, as
well as certain liabilities and redundant workers in ILVA Residua. Under
the restructuring plan, ILVA Residua would sell the productive units, use
the proceeds to reduce ILVA's debt prior to liquidation, and IRI (i.e.,
the Italian government) would absorb any remaining debt.
As of December 31, 1993, the majority of ILVA's viable manufacturing
activities had been separately incorporated (or "demerged") into either
AST or ILP, thus, ILVA Residua became essentially a shell company with
liabilities far exceeding assets. In contrast, AST and ILP, now ready for
privatization, had operating assets and relatively modest debt loads. The
EC approved the GOI's restructuring and privatization plan for ILVA in its
Commission Decision 94/259/ECSC, dated April 12, 1994. This EC decision
states that IRI would take over ILVA Residua's residual indebtedness,
cover expenditures of 1,197 billion lira, and continue to be involved in
ILVA Residua's activities until its liquidation. It further states that if
the privatization and reorganization program was strictly implemented, the
ILVA group, namely
AST and ILP would have a reasonable chance of being viable by the end of
1994. See Stainless Plate in Coils, 64 FR at 15512; CTL Plate, 64 FR at
73251.
In Stainless Plate in Coils and Stainless Sheet and Strip, we determined
that AST received a countervailable subsidy in 1993, when the majority of
ILVA's debt was placed in ILVA Residua, rather than being proportionately
allocated to AST and ILP. See Stainless Plate in Coils, 64 FR at 15512;
Stainless Sheet and Strip, 64 FR at 30628. In addition to the debt that
was placed in ILVA Residua, we determined that the asset write-downs which
ILVA took in 1993, as part of the restructuring/privatization plan, were
countervailable subsidies under section 771(5)(B)(i) of the Act. The write-
down of the assets in 1993 increased the losses to be covered in
liquidation. It is the Department's position that when losses, which are
later covered by a government, can be tied to specific assets, those
assets bear the liability for the losses that resulted from the write-
downs. See CTL Plate, 64 FR at 73251. No new information or evidence of
changed circumstances has been submitted in this review that would warrant
reconsideration of these findings.
The amount of debt and losses resulting from the asset write-downs that
should have been attributable to AST, but were instead placed with ILVA
Residua, was equivalent to debt forgiveness for AST at the time of the
ILVA demerger. In accordance with our practice, debt forgiveness is
treated as a grant which constitutes a financial contribution under
section 771(5)(D)(i) of the Act, and provides a benefit in the amount of
the debt forgiveness.
In CTL Plate, we determined that the liquidation process of ILVA did not
occur under the normal application of a provision of Italian law and,
therefore, the debt forgiveness is de facto specific under section
771(5A)(D)(iii)(II) of the Act. See CTL Plate, 64 FR at 73252. As stated
above, the liquidation of ILVA was done in the context of a massive
restructuring/privatization plan of the Italian steel industry undertaken
by the GOI and approved and monitored by the EC. Because ILVA's
liquidation was part of an extensive state-aid package to privatize the
Italian state-owned steel industry, and the debt forgiveness was received
by only privatized ILVA operations, we determined that the assistance
provided under the 1993-1994 Restructuring Plan was de facto specific. See
CTL Plate, 64 FR at 73252.
Consistent with the methodology that we employed in Stainless Plate in
Coils, 64 FR at 15513, Stainless Sheet and Strip, 64 FR at 30628, and CTL
Plate, 64 FR at 73252, the amount of liabilities that we attributed to AST
is based on the gross liabilities left behind in ILVA Residua, as reported
in the EC's 10th Monitoring Report. (3) In calculating the amount of
unattributable liabilities remaining after the demerger of AST, we started
with the most recent "total comparable indebtedness" amount from the 10th
Monitoring Report, which represents the indebtedness, net of debts
transferred in the privatization of ILVA Residua's operations and residual
asset sales, of a theoretically reconstituted, pre-liquidation ILVA. In
order to calculate the total amount of unattributed liabilities which
amounted to countervailable debt forgiveness, we made adjustments
(additions/subtractions) to this figure for the following: the residual
assets that had not actually been liquidated as of the 10th and final
Monitoring Report; assets that comprised SOFINPAR, a real estate company
(because these assets were sold prior to the demergers of AST and ILP);
the liabilities transferred to AST and ILP; income received from the
privatization of ILVA Residua's operations; the amount of the asset write-
downs specifically attributable to AST, ILP, and ILVA Residua companies;
and the amount of debts transferred to Cogne Acciai Speciali (CAS), an
ILVA subsidiary that was left behind in ILVA Residua and later spun-off,
as well as the amount of ILVA's debt attributed to CAS and countervailed
in Wire Rod, 63 FR at 40478.
The amount of liabilities remaining represents the pool of liabilities
that were not individually attributable to specific ILVA assets. We
apportioned this debt to AST, ILP, and operations sold from ILVA Residua
based on their relative asset values. We used the total consolidated asset
values reported in AST's and ILP's financial statements for the year
ending December 31, 1993. For ILVA Residua, we used the sum of the
purchase price plus debts transferred as a surrogate for the viable asset
value of the operations sold from ILVA Residua. Because we subtracted a
specific amount of ILVA's gross liabilities attributed to CAS in Wire Rod,
we did not include its assets in the amount of ILVA Residua's privatized
assets. Also, we did not include in ILVA Residua's viable assets the
assets of the one ILVA Residua company sold to IRI, because this sale does
not represent sales to a non-governmental entity.
We have treated the debt forgiveness to AST as a non-recurring subsidy
because it was a one-time, extraordinary event. The discount rate we used
in our grant formula was a constructed uncreditworthy benchmark rate based
on our determination that ILVA was uncreditworthy in 1993. See "Benchmarks
for Long-Term Loans and Discount Rates" and "Creditworthiness" sections,
above. We divided the benefit allocated to the POR by AST's total
consolidated sales during the POR. On this basis, we determine the net
countervailable subsidy to be 8.97 percent ad valorem for AST.
D. Interest Contributions on IRI Loans/Bond Issues Under Law 675/77
Law 675/77 was designed to provide GOI assistance in the restructuring
and reconversion of Italian industries. There are six types of assistance
available under this law: (1) grants to offset interest payable on bank
loans; (2) mortgage loans provided by the Ministry of Industry (MOI) at
subsidized interest rates; (3) grants to reduce interest payments on loans
financed by IRI bond issues; (4) capital grants for the South; (5) value-
added taxed (VAT) reductions on capital good purchases for companies in
the South; and (6) personnel retraining grants.
Under Law 675/77, IRI issued bonds to finance restructuring measures of
companies within the IRI group. The proceeds from the sale of the bonds
were lent to IRI companies. During the POR, AST had long-term variable
interest rate loans outstanding that were financed by IRI bond issues for
which the effective interest rate was reduced by interest contributions
made by the GOI.
The Department previously found this program to be countervailable in
Electrical Steel, 59 FR at 18361, and Stainless Plate in Coils, 64 FR at
15513. No new information or evidence of changed circumstances has been
submitted in this proceeding to warrant reconsideration of these findings.
To measure the benefit from these loans, we compared the amount of
interest that should have been paid at the benchmark interest rate to the
amounts paid by AST, less the interest rebates claimed during the POR. We
divided the resulting difference by AST's total consolidated sales during
the POR. On this basis, we determine the net countervailable subsidy from
this program to be 0.09 percent ad valorem.
E. Pre-Privatization Retirement Benefits Under Law 451/94
Law 451/94 authorized early retirement packages for steel workers for the
years 1994 through 1996. The law entitled men of at least 50 years of age
and women of 47 years of age with at least 15 years of pension
contributions to retire early. Benefits applied for during the 1994-1996
period continue until the employee reaches his/her natural retirement age,
up to a maximum of ten years.
In Wire Rod, 64 FR at 40480, Stainless Plate in Coils, 64 FR at 15514,
and CTL Plate, 64 FR at 73253, we found this program to be specific, and
thus countervailable. In CTL Plate and Stainless Plate in Coils, the
Department stated that at the time an agreement was being reached with the
unions and the labor ministry on the terms of the lay-offs, ILVA and its
workers were aware that government contributions would ultimately be made
to workers' benefits. In such situations, i.e., where the company and its
workers are aware at the time of their negotiations that the government
will be making contributions to the workers' benefits, the Department's
practice is to treat half of the amount paid by the government as
benefitting the company. See Countervailing Duties; Final Rule, 63 FR
65348, 65380 (November 25, 1998). No new information or evidence of
changed circumstances has been submitted in this proceeding to warrant
reconsideration of this finding.
Consistent with the Department's practice with regard to allocation of
worker-related subsidies, we have treated benefits to AST under Law 451/94
as recurring grants expensed in the year of receipt. See Stainless Plate
in Coils, 64 FR at 15515; Wire Rod, 64 FR at 40480. To calculate the
benefit received by AST during the POR, we multiplied the number of AST
employees by employee type (blue collar, white collar, and senior
executive) who retired early by the average salary by employee type. Since
the GOI was making payments to these workers equaling 80 percent of their
salary, we attributed one-half of that amount to AST. Therefore, we
multiplied the total wages of the early retirees by 40 percent. We then
divided this total amount by AST's total consolidated sales during the
POR. On this basis, we determine a net countervailable subsidy of 0.69
percent ad valorem.
As mentioned above, in September 1993, IRI endorsed a plan for the
reorganization and privatization of the ILVA Group. In December 1993, IRI
initiated the splitting of ILVA's main productive assets into two new
companies, ILP and AST. On December 31, 1993, ILP and AST became
separately incorporated firms. The remainder of ILVA's productive assets
and existing liabilities, along with much of the redundant workforce, was
placed in ILVA Residua. The GOI issued two decrees under Law 451 to place
the early retirees from ILVA into ILVA Residua. In CTL Plate, the
Department found that by the GOI placing much of the redundant workforce
in ILVA Residua, ILP and AST were able to begin their respective
operations with a relatively "clean slate" in advance of their
privatizations. ILP and AST were relieved of having to assume their
respective portions of those redundant workers that were placed in ILVA
Residua and that received early retirement benefits under Law 451/94. See
CTL Plate, 64 FR at 73254. No new information or evidence of changed
circumstances has been submitted in this proceeding to warrant
reconsideration of this finding. Therefore, we determine that AST has
received a countervailable benefit since the company was relieved of a
financial obligation that would otherwise have been due.
To calculate the benefit received by AST during the POR, for retired
employees that were placed with ILVA Residua under the first decree dated
December 7, 1994, we first multiplied the number of employees according to
worker type (i.e., blue collar) times the average salary for each employee
type, using the same average salaries for AST employees. Since the GOI was
making payments to these workers equaling 80 percent of their salary, we
attributed one-half of that amount to AST. Therefore, we multiplied the
total wages of the early retirees by 40 percent. We then divided this
total amount by AST's total consolidated sales during the POR.
The GOI allocated additional slots to workers in ILVA Residua under a
second decree dated December 30, 1996. However, the number of workers
attributable to AST or the worker types were not submitted in the
questionnaire responses. Therefore, we first needed to determine the
appropriate number of early retirees placed in ILVA Residua that should
have been apportioned to AST. To determine this number, we took the asset
value of AST in relation to the asset value of ILVA at the time of the
spin-off of AST. Next, we multiplied this percentage by the total number
of ILVA Residua early retirees, pursuant to the second decree. It was then
necessary to estimate the number of employees according to worker types.
To do this, we calculated the ratio of employees according to worker types
under the first decree. We then multiplied the number of employees
according to worker type (i.e., blue collar) times the average salary for
each employee type, and multiplied the result by 40 percent. We then
divided this total amount by AST's total consolidated sales during the
POR. On this basis, we determine a net countervailable subsidy
attributable to AST for the retirees placed with ILVA Residua under both
decrees to be 0.13 percent ad valorem. Therefore, we determine the
combined rate for retired employees placed directly with AST and those
placed with ILVA Residua to be 0.82 percent ad valorem.
F. Exchange Rate Guarantees under Law 796/76
Law 796/76 established the exchange rate risk guarantee for the foreign
currency loans program to minimize the risk of exchange rate fluctuations
on loans contracted in foreign currency. All firms that contract foreign
currency loans from the European Coal and Steel Community (ECSC) or the
Council of Europe Resettlement Fund (CERF) could apply to the Ministry of
the Treasury (MOT) to obtain an exchange rate guarantee. The MOT, through
the Ufficio Italiano di Cambi (UIC), calculates loan payments based on the
lire-foreign currency exchange rate in effect at the time the loan is
contracted (i.e., the base rate). The program establishes a floor and
ceiling for exchange rate fluctuations, limiting the maximum fluctuation a
borrower would face to two percent above or below the base rate. If the
lire depreciates more than two percent against the foreign currency, a
borrower is still able to purchase foreign currency at the established
(guaranteed) ceiling rate. The MOT absorbs the loss in the amount of the
difference between the guaranteed rate and the actual rate. If the lire
appreciates against the
foreign currency, the MOT realizes a gain in the amount of the difference
between the floor rate and the actual rate.
This program was terminated effective July 10, 1992, by Decree Law
333/92. However, the pre-existing exchange rate guarantees continue on any
loans outstanding after that date. AST had outstanding ECSC loans during
the POR that benefitted from these guarantees. The Department found this
program to be countervailable in Stainless Plate in Coils, 64 FR at 15513,
and CTL Plate, 64 FR at 73254. No new information or evidence of changed
circumstances has been submitted in this proceeding to warrant
reconsideration of this finding.
Once a loan is approved for exchange rate guarantees, access to foreign
exchange at the established rate is automatic and occurs at regular
intervals throughout the life of the loan. Therefore, we are treating the
benefits under this program as recurring grants. AST and its predecessor
companies from which these loans were transferred, paid a foreign exchange
commission fee to the UIC for each payment made. We determine that this
fee qualifies as
an " . . . application fee, deposit, or similar payment paid in order to
qualify for, or to receive, the benefit of the countervailable subsidy."
See section 771(6)(A) of the Act. Thus, for the purposes of calculating
the countervailable benefit, we have added the foreign exchange commission
to the total amount AST paid under this program during the POR. See Wire
Rod, 63 FR at 40479; Stainless Plate in Coils, 64 FR at 15513; CTL Plate,
64 FR at 73255.
Under this program, we have calculated the total countervailable benefit
as the difference between the total loan payment due in foreign currency,
converted at the current exchange rate, less the sum of the total loan
payment due in foreign currency converted at the guaranteed rate and the
exchange rate commission. We divided this amount by AST's total
consolidated sales during the POR. On this basis, we determine the net
countervailable subsidy to be 0.12 percent ad valorem.
European Commission Programs
A. ECSC Loans Under Article 54
Article 54 of the 1951 ECSC Treaty established a program to provide
industrial investment loans directly to the member iron and steel
industries to finance modernization and purchase new equipment. Eligible
companies apply directly to the EC (which administers the ECSC) for up to
50 percent of the cost of an industrial investment project. The Article 54
loans are generally financed on a "back-to-back" basis. In other words,
upon granting loan approval, the ECSC borrows funds (through loans or bond
issues) at commercial rates in financial markets which it then immediately
lends to steel companies at a slightly higher interest rate. The mark-up
is to cover the costs of administering the Article 54 program.
The Department has found Article 54 loans to be specific countervailable
subsidies in several proceedings, including Electrical Steel, 59 FR at
18362, CTL Plate, 64 FR at 73256, and Stainless Plate in Coils, 64 FR at
15515, because loans under this program are provided only to iron and
steel companies. No new information or evidence of changed circumstances
has been submitted in this proceeding to warrant reconsideration of this
finding.
AST had one long-term, fixed-rate U.S. dollar denominated loan
outstanding during the POR. Consistent with Wire Rod, 63 FR at 40486 and
CTL Plate, 64 FR at 73256, we have used as our benchmark the average yield
to maturity on selected long-term corporate bonds as reported by the U.S.
Federal Reserve, since this loan was denominated in U.S. dollars. We used
this rate because we were unable to find a long-term borrowing rate for
loans denominated in U.S. dollars in Italy. The interest rate charged on
AST's Article 54 loan, which was contracted in 1978, was reduced in 1987.
Therefore, for the purpose of calculating the benefit, we have treated
this loan as if it was contracted on the date of the rate adjustment.
Because ILVA was uncreditworthy in the year this loan was contracted,
1987, we calculated the uncreditworthy benchmark rate as pursuant to
section 351.505(a)(3)(iii) of the Department's regulations. See "Benchmark
for Long-Term Loans and Discount Rates" section, above.
To calculate the benefit under this program, pursuant to section
351.505(c)(2) of the regulations, we employed the Department's long-term
fixed-rate loan methodology. We compared the amount of interest that
should have been paid at the benchmark interest rate for uncreditworthy
companies to the amount paid by AST during the POR. We then divided the
benefit by AST's total consolidated sales during the POR. On this basis,
we determine the net countervailable subsidy to be 0.01 percent ad valorem.
B. European Social Fund (ESF)
The ESF, one of the Structural Funds operated by the EC, was established
to improve workers' opportunities through training and to raise their
standards of living throughout the community by increasing their
employability. Like other EC structural funds, there are six different
Objectives (sub-programs) identified under ESF: Objective 1 covers
projects located in underdeveloped regions; Objective 2 addresses areas in
industrial decline; Objective 3 relates to the employment of persons under
25; Objective 4 funds training for employees in companies undergoing
restructuring; Objective 5 pertains to agricultural areas; and Objective 6
pertains to regions with very low population (i.e., the far north).
During the POR, AST received ESF assistance under Objective 4. To qualify
for Objective 4 funding, AST had to propose programs designed to re-train
its workers to increase their productivity. The Department considers
training programs to provide a countervailable benefit to a company when
the company is relieved of an obligation it would have otherwise incurred.
In Stainless Plate in Coils and Stainless Sheet and Strip, the Department
found this program to be countervailable. See Stainless Plate in Coils, 64
FR at 15516; Stainless Sheet and Strip, 64 FR at 30630. No new information
or evidence of changed circumstances has been submitted in this review to
warrant reconsideration of this finding.
The Department normally considers the benefits from worker training
programs to be recurring. However, as determined in Stainless Plate in
Coils, these grants relate to specific, individual projects which require
separate government approval, therefore, the benefits under this program
are treated as non-recurring grants. See Stainless Plate in Coils, 64 FR
at 15517; Wire Rod, 63 FR at 40488; see also Final Affirmative
Countervailing Duty Determination: Certain Pasta ("Pasta") From Italy, 61
FR 30288, 30295 (June 14, 1996) (Pasta). However, because the benefit
received under this program is less than 0.5 percent of AST's sales during
the relevant year, we have expensed these grants in the year of receipt.
We divided the benefit by AST's total consolidated sales during the POR.
On this basis, we determine the net countervailable subsidy to be 0.03
percent ad valorem.
II. Programs Determined To Be Not Used
In the Preliminary Results, we found the following programs listed below
to be not used by AST. No new information, evidence of changed
circumstances or comments from interested parties were presented in this
review to warrant reconsideration of these findings. Accordingly, in the
Final Results, we continue to find these programs to be not used.
A. Rotation Fund
B. Grants Under Law 10/81 - Energy Conservation
C. Brite-EuRam Project Grants
D. Loan from IRI to KAI for the Purchase of AST
E. Lending from the Ministry of Industry under Law 675/77
F. Mortgage Loans from the Ministry of Industry Under Law 675/77
G. Personnel Retraining Grants under Law 675/77
H. Capital Grants under Law 675/77
I. Reductions of the VAT under Law 675/77
J. Worker Training under Law 181/89 (Early Retirement Provision)
K. Reindustrialization under Law 181/89
L. Law 488/92 Investment Grants
M. Subsidized Export Financing Under Law 227/77
N. Finsider Loans
O. Interest Subsidies under Law 617/81
P. Financing under Law 464/7
Q. Interest Contributions under the Sabatini Law (Law 1329/65)
R. Social Security Exemptions
S. ILOR and IRPEG Exemptions
T. Law 345/92: Benefits for Early Retirement
III. Analysis of Comments
Comment 1: Change In Ownership (Privatization) - Interpretation of
Delverde III
AST raised several arguments why the Department should discontinue its
change in ownership (privatization) methodology applied in the Preliminary
Results and find that AST did not benefit from pre-privatization
subsidies, particularly in light of the Delverde III ruling. First, AST
argues that the record in this review establishes clearly that it does not
benefit from financial contributions received by an earlier company that
is not affiliated with AST. AST also argues that the record further
establishes that the price paid for AST was established through arm's-
length negotiations in an open and competitive bidding process.
Furthermore, AST argues that the purchase price was significantly higher
than originally projected by independent consultants; therefore, the
privatization took place at fair market value.
Second, AST argues that the Department's treatment of changes in
ownership, as set forth in the 1993 General Issues Appendix (GIA), must be
fundamentally modified because the Court of Appeals in Delverde III and
the World Trade Organization (WTO) have made it clear that the Department
may not utilize a methodology that disregards changes in ownership that
occurred at fair market value and presumes that old subsidies
automatically "pass through" to the new company or its new owners. AST
claims that the Court of Appeals in Delverde III determined that the GIA
methodology is inconsistent with the unambiguous language of the Uruguay
Round Agreements Act (URAA) and the Subsidies and Countervailing Measures
(SCM) Agreement because under the GIA methodology, the Department imposes
countervailing duties in the absence of a benefit during the period of
investigation or review to the company producing the merchandise under
consideration. Specifically, AST argues that Delverde III is directly and
clearly applicable to the current proceeding. Moreover, AST contends that
since the Court of Appeals' decision clearly holds that it is unlawful for
the Department to impose countervailing duties on products based on pre-
privatization subsidies provided to a previously existing enterprise that
is unrelated to the current corporation or its current owners, it is
unlawful for AST to be subjected to countervailing duties based on past
subsidies which were provided to ILVA or other previously existing
enterprises prior to AST's privatization.
AST claims that the Court of Appeals in Delverde III held that the
applicable statute requires the Department to examine the particular facts
and circumstances of the sale to determine whether there is evidence that,
during the period of investigation or review, the purchaser received both
a financial contribution and a benefit from subsidies granted prior to a
change of ownership. Therefore, AST argues that Delverde III stands for
the proposition that, in a change of ownership transaction, the purchasers
can receive a benefit from the subsidized company only if the purchasers
do not pay full value for the company or assets. AST contends that the
fact that Delverde III involved a private change in ownership does not
offer any principled basis for distinguishing that case from the case at
hand.
Finally, AST argues that the Department cannot factually support a
finding of financial contribution and a benefit to AST on the basis of
positive evidence which has been fairly assessed. Therefore, AST contends
that the Department must recalculate the countervailing duties it applies
to AST without regard to subsidies bestowed to previously existing
entities that produced grain-oriented electrical steel in Italy. AST also
contends that Delverde III is final and serves as a binding precedent that
the Department must apply fairly.
Petitioners counter that while Delverde III arguably overturned the
Department's methodology for assessing changes in ownership, it did
nothing to alter the agency's legal authority to countervail subsidies
after a change in ownership, even when that change results from a fair
market value transaction. Petitioners also counter that just as the
Department may not automatically presume that a new owner benefits from a
prior subsidy, it similarly may not presume that a fair market value sale
automatically eliminates the benefit from that subsidy. According to
petitioners, Congress established this point unambiguously in the language
of the change in ownership provision by expressly preserving the agency's
authority to countervail past subsidies "even if the change in ownership
is accomplished through an arm's-length transaction." See 19 USC
1677(5)(F). Thus, the Department should reject the fair market value
"rule" advocated by AST, as it is contrary to the plain language of both
the statute and Delverde III.
Petitioners also counter that AST misinterprets the holding and
significance of Delverde III and misapplies the Delverde III approach to
the facts of this record. Petitioners further counter that AST is
incorrect in stating that Delverde III is directly and clearly applicable
to analyzing the changes in ownership undergone by AST, because Delverde
III was decided in the unique and limited context of a purely private
change in ownership transaction in which the government had no role. Thus,
petitioners counter that Delverde III is neither directly nor clearly
relevant to the ownership change at issue in the instant review given the
different facts of this case.
Petitioners counter that AST's argument that "AST may not lawfully be
subjected to countervailing duties by virtue of any past subsidies to ILVA
or other previously existing enterprises prior to AST's privatization
sale" is flawed. According to petitioners, AST's mis- characterization of
Delverde III suggests that the Court declared the change in ownership
provision of the statute to be unlawful. On the contrary, petitioners
claim that the Court held that, under the change in ownership provision of
the statute, the Department may not "presume conclusively" that subsidies
granted to a former owner pass through to the purchaser; rather, subsidies
may be found to benefit the purchaser if such a finding follows from the
facts and circumstances of the sale. Petitioners also counter that AST has
wrongly narrowed the nature and scope of the factual analysis required in
Delverde III by arguing that the Department must examine the terms of the
change in ownership to determine whether any benefit passed through to the
newly privatized company. Petitioners claim that, in actuality, the extent
of the factual analysis required by Delverde III is not limited just to
the terms of sale, but is much broader, thereby necessitating an analysis
of all the facts and circumstances surrounding the change in ownership.
Petitioners also counter that AST's argument that Delverde III
establishes that the purchasers can receive a benefit from the subsidized
company only if the purchasers do not pay full value for the company or
assets purchased is incorrect, and is tantamount to saying that a sale at
fair market value automatically extinguishes a prior subsidy. Petitioners
assert that AST has created an automatic presumption about the effect of a
sale on previously bestowed subsidies that is expressly rejected in
Delverde III. According to petitioners, the Court of Appeals has clearly
stated that the Department may not automatically presume that a new owner
benefits from a prior subsidy, nor can the Department presume that a fair
market value sale automatically eliminates the benefit from that subsidy.
Petitioners further counter that although AST argues that the Department
cannot factually support a finding of financial contribution and a benefit
to AST on the basis of positive evidence which has been fairly assessed,
AST has not presented any record evidence concerning the facts and
circumstances of the sale besides its statement that the sale was for fair
market value arrived
at through arm's-length negotiations. Therefore, petitioners counter that
the Department should reject the approach and conclusions advocated by
AST.
On the other hand, petitioners argue that Delverde III is irrelevant to
this proceeding because Delverde III only addresses the sale of certain
assets at fair market value between private entities, in which there was
no government involvement. This set of facts is not present in the instant
review and, thus, the Delverde III holding is limited to circumstances
involving purely private sales of certain assets. Petitioners also argue
that because the change in ownership in the instant review involves a
stock sale in which AST survives as a corporate entity and liabilities
remain in the continuing business, a countervailing duty liability should
also survive the change in ownership.
Petitioners maintain that if the Department determines that Delverde III
is applicable to its analysis in this review, it must find that Delverde
III stands for the simple proposition that the Department cannot presume
that a portion of prior subsidies automatically survive an ownership
change. Instead, the Department must examine the facts of AST's
privatization in order to determine whether the subsidies AST received
prior to privatization continued to benefit the company after
privatization.
AST counters that the fact that Delverde III involved a private change in
ownership does not offer any principled basis for distinguishing that case
from the case at hand. According to AST, the applicable privatization test
for public-to-private sales is whether the purchaser received a benefit
from a government financial contribution as a result of the terms of the
transaction, which, in essence, is the same test for private-to-private
changes in ownership. Therefore, the fact that the transaction in Delverde
III involved an asset purchase rather than a stock sale does not permit a
different analysis under the statute. Moreover, AST counters that neither
it nor its current owner benefits from any subsidies previously bestowed
upon ILVA or other predecessor entities which were part of the Italian
state-owned steel industry because under the terms of the privatization
transaction, the purchasers paid full value for the company in an arm's-
length negotiation.
Department's Position:
We agree that the Federal Circuit invalidated the privatization/change-in-
ownership methodology that the Department had used to address the Delverde
III change-in-ownership transaction, which is the same methodology we
applied in the Preliminary Results of the instant review.
However, we disagree with AST's suggestion that the only relevant inquiry
is whether fair market value was paid. In the Department's view, the
Court's holding in Delverde III focused on the Department's methodological
approach to analyzing the transaction and faulted the Department's failure
to make specific findings regarding the existence of a subsidy benefitting
Delverde, as required by the countervailing duty statute. The Court stated
that the Tariff Act, as amended, does not allow the Department to presume
conclusively that the subsidies granted to the former owner of Delverde's
corporate assets automatically "passed through" to Delverde following the
sale. Rather, the Department is required to make its findings by examining
the particular facts and circumstances, including the terms of the
transaction, whether Delverde directly or indirectly received a financial
contribution and benefit. As a result, the Department has reexamined its
change in ownership methodology. As part of this reexamination, the
Department has carefully considered the Delverde III opinion and, in
particular, its admonition that the Department's inquiry seek to determine
whether "an authority provides a financial contribution, . . . to a person
and a benefit is thereby incurred." Delverde III, 202 F. 3d at 1365. To
this end, the Department has developed a new approach that begins by
analyzing the transaction at issue for the purpose of addressing the
subsidy element that it initially places in issue, i.e., the "person"
determination. In other words, the Department seeks to determine whether
the privatized AST is the same person that received the pre-privatization
financial contributions and benefits at issue in this review. As is
explained in the Final Redetermination, we would only reach AST's fair-
market-value claim in the event that we first find the privatized AST to
be a different person from the original recipient; at that point, we would
inquire into whether a subsidy was provided through the privatization
transaction.
An examination of the facts and circumstances, including the terms of the
transaction surrounding the changes in ownership in the instant case,
indicates that the business operations that eventually comprised
privatized AST basically existed intact as a discrete business entity
since at least the 1980's. Before and after the 1994 privatization, AST
used the same name, held itself out as the same company, maintained its
plants and headquarters in the same locations, and used the same
production facilities to manufacture and sell the same products.
Therefore, we find that the privatized AST is for all intents and purposes
the same person that existed prior to the privatization, and accordingly,
it received the pre-privatization financial contributions and benefits at
issue in this review. See Final Redetermination.
We also disagree with a notion that appears in the arguments of AST,
namely, that a mere change in the owners of a company, without more, is
sufficient to give rise to a new person. As should be evident, this type
of approach would result in a per se rule that a new person is created
whenever a sale occurs between two unrelated parties, or in other words,
whenever there is a change in ownership. At the very least, we do not
interpret the countervailing duty statute as requiring the Department to
base its "person" determination solely and dispositively on this
criterion.
We also consider such an approach to be ill-advised. It would mean, for
example, that a new "person" is created even when a company's shares
simply turn over through public trading on a stock market. Although we
have not adopted the test used under general corporate successorship law,
we note that a mere change in owners in that context is not dispositive of
whether a new person exists for liability purposes. In addition, in the
countervailing duty context, as a policy matter, we view the analysis that
we have developed in this case to be more consistent with the remedial
goals of the countervailing duty statute, namely, to "level the playing
field" by offsetting the benefit conferred by a subsidy.
Comment 2: The Department's New Change in Ownership Approach
AST argues that Delverde III clearly and unambiguously requires a finding
in every case that the purchaser of a formerly subsidized company benefits
from a financial contribution during the period of investigation, and that
such a benefit determination is to be made by determining whether full
value was paid for the company. However, AST maintains, the Department has
ignored these requirements in this case, on the justification that the
Delverde III court's reasoning was premised on an erroneous impression
that the Delverde III transaction involved a sale of assets rather than a
sale of shares. AST counters that, contrary to the Department's position,
the
court's determination in Delverde III is based on the clear language of
the statute and a clear understanding of the facts.
AST also argues that there is nothing in the statute or in Delverde III
that "even remotely suggests or supports" the Department's methodology in
the Draft Redetermination. Specifically, according to AST, the statute
uses the unambiguous term "person," which means "entity." The Department,
however, posits the concept of "distinct person" which AST interprets to
mean something totally different from the statutory term and which is used
to imply some "vague concept of successorship." Moreover, AST continues,
the Department's reliance on corporate law in defining person is
irrelevant in this context because the issue is not successorship, but
benefit.
Furthermore, according to AST, the Delverde III court's understanding of
the form of the Delverde privatization is not relevant to the Court's
finding given that the transactions analyzed in U.K. Lead Bar (4) examined
by the WTO involved both sales of assets and sales of shares, and the
result was the same in both instances. Given that the Delverde III court
found its decision to be "not inconsistent" with the WTO's findings, there
is no basis for finding that the Court's decision was contingent on the
form of the transaction.
Petitioners argue that the Department's interpretation of Delverde III is
"sound and accurate," and that the privatization methodology adopted in
the Draft Redetermination should remain unchanged in the Final
Redetermination, and should be adopted in the instant review. Petitioner
agrees that, as the first step in its analysis, the Department must focus
on the question of whether the original subsidy recipient and the current
producer/exporter can be considered the same person. Petitioners further
agree that the Department's approach for conducting this person analysis
is sound, well-reasoned and rigorous as well as appropriately flexible.
Department's Position:
We disagree with AST's argument that the Department failed to follow the
Federal Circuit's decision in Delverde III to determine whether KAI-owned
AST (i.e., "post-sale AST") received a financial contribution and a
benefit as a result of its purchase of GOI-owned AST (i.e., "pre-sale
AST"). In Delverde III, when it discussed how the Department should handle
changes in ownership, the Federal Circuit emphasized the "person"
requirement that appeared in the countervailing duty statute for the first
time following enactment of the URAA. In Delverde III itself, however, the
Federal Circuit did not treat this matter as in dispute, given its
understanding of the facts. It particular, it understood the facts to be
that the Delverde change-in-ownership transaction involved nothing more
than a sale of certain subsidized assets of one company to another
company, and it was in that situation that it considered the pre-sale
entity to be a person distinct from the post-sale entity. Nevertheless,
the Federal Circuit did not explain what criteria it used to reached this
conclusion, and it is for that reason that the Department has developed
criteria for deciding whether or not the firm under investigation is the
same person as the original subsidy recipient.
Consistent with Delverde III, we first examined the facts and
circumstances, including the terms of the transaction, to determine
whether post-sale AST, the firm under investigation, was the same person
as the original subsidy recipient, pre-sale AST. Because the Department
found it to be the same person, the Department was then able to determine
that all of the elements of a subsidy were established with regard to post-
sale AST and its analysis of the transaction necessarily ended.
Essentially, AST is arguing that the Department should have skipped this
first step in its analysis of the change-in-ownership transaction and
should have examined only whether a subsidy could be considered provided
to post-sale AST on the basis that the full value was not paid (e.g., less
than adequate remuneration). We do not believe that Delverde III stands
for such a limited proposition. Although the Federal Circuit did not seem
to view the application of the "person" requirement as in dispute under
the facts before it, it is still clear from the Federal Circuit's opinion
that it was the first inquiry that must be made by the Department when
confronting a change in ownership.
We also disagree with AST that the Department has unlawfully developed a
"person" inquiry. As AST concedes, the applicable statute requires the
Department to determine whether a financial contribution and a benefit are
provided "to a person." See 19 U.S.C. § 1677(5)(B). In this instance,
there is no dispute that pre-sale AST received subsidies. The Department's
person inquiry does nothing more than determine whether, as result of a
change in ownership, the person in the form of pre-sale AST is the same as
(or different from) the person in the form of post-sale AST. The essence
of AST's argument appears to be that such an inquiry is not permitted
under Delverde III, and that a change in ownership automatically gives
rise to a different person such that a "benefit" analysis is the only
inquiry permitted. We find nothing in the Federal Circuit's holding in
Delverde III that requires the approach AST posits. There is nothing in
the Federal Circuit's decision that indicates how the Department is to
decide whether the producer or exporter under investigation or review is
or is not the same person as the original subsidy recipient. The Federal
Circuit did not hold that a mere change in owners is the dispositive
criterion, as AST argues.
Comment 3: Successor-in-Interest Test
Petitioners argue that in order for the Department to implement the
factual analysis required by Delverde III, the Department should develop a
flexible, fact-based approach to assessing ownership changes by
incorporating factors, such as changes in management, production
facilities, supplier relationships, and the customer base, which it
currently examines in its successor-in-interest test. Petitioners claim
that although the successorship test has been applied most often in the
antidumping context, the Department used this test in Certain Hot-Rolled
Lead and Bismuth Carbon Steel Products from the United Kingdom to assess
whether a current owner should be held liable for the countervailing
duties imposed on its predecessor company. See Certain Hot-Rolled Lead and
Bismuth Carbon Steel Products from the United Kingdom, 64 FR 53994, 53995
(October 5, 1999). Thus, petitioners argue that an analysis of the factors
in a successor-in-interest test is consistent with the approach
articulated in Delverde III, and such an analysis demonstrates that AST
was identical, or substantially similar to the company that existed before
the change in ownership, and that AST continued to benefit from subsidies
bestowed on the "pre-privatized" AST.
Petitioners also argue that an analysis of the subsidies provided to AST
during the 1993-94 restructuring demonstrates that AST was provided with
substantial subsidies in preparation for a privatization sale. Thus, the
post-privatization entity was in fact intended by the government to be
substantially similar to the pre-privatization entity that was prepared
for sale. Petitioners also argue that this fact pattern demonstrates that
the GOI and EC intended that AST survive privatization as a continuing
entity. Thus, benefits identified in the predecessor company continued to
reside in AST regardless of the identity of the new owners of its stock.
AST counters that the successor-in-interest test violates the Court of
Appeals' holding in Delverde III. According to AST, Delverde III directs
the Department to consider the relevant facts in changes of ownership
situations to determine whether the purchaser received both a financial
contribution and a benefit. Further, Delverde III provides that the test
is whether the purchaser paid "full value" for the company. AST also
counters that Delverde III directs the Department to analyze the impact of
subsequent events by focusing on the perspective of the new owners.
However, AST counters that petitioners' arguments focus solely on whether
the pre-privatization and the post-privatization entities are the same or
similar companies, and ignore the benefit issue that Delverde III
requires.
Finally, AST counters that none of the other factors suggested or raised
by petitioners are relevant to this proceeding because petitioners fail to
demonstrate how consideration of such factors would be consistent with
Delverde III or the WTO U.K. Lead Bar report. AST claims that petitioners'
assertion that Delverde III implies that the nature of and intent behind
pre-privatization subsidies themselves can be examined as a part of the
factual analysis is incorrect, and such an approach would be clearly
inconsistent with the statute, which provides that the administering
authority is not required to consider the effect of the subsidy in
determining whether a subsidy exists.
Department's Position:
As explained in the Final Redetermination, the Department has decided not
to adopt the successor-in-interest test suggested by petitioners. Under
the successor-in-interest test, the Department examines a number of
factors, including but not limited to, changes in management, production
facilities, supplier relationships, and customer base and attempts to
determine how the successor will likely act subsequent to its sale or
merger and whether it remains essentially the same entity as the
predecessor following a sale or merger so that it is appropriate to impose
the existing antidumping or countervailing duty cash deposit rate of the
predecessor on the successor. The change-in-ownership context presents a
somewhat different inquiry. In a change-in-ownership situation, we are
focusing more fundamentally on whether the post-sale entity can be
considered the same "person" as the subsidized pre-sale entity, not how an
entity will act subsequent to a change in ownership. For this reason, in
making the "person" determination contemplated by Delverde III, we believe
that only limited guidance can be obtained from the Department's successor-
in-interest test. For further discussion, see Final Redetermination.
Comment 4: WTO Implications on Change in Ownership
AST argues that the WTO Panel and Appellate Body found that the
Department's privatization methodology in U.K. Lead Bar, which is the same
methodology the Department applied in the Preliminary Results of the
instant review, is contrary to the requirements of the U.S. international
obligations under the SCM Agreement. AST asserts that the Department
employed the pre-URAA "pass through" methodology which ensured that
countervailing duties would continue to be applied, even when a purchaser
of a privatized company received no benefit within the meaning of the SCM
Agreement and 19 U.S.C. § 1677(5)(B). AST argues that the SCM Agreement,
as construed in U.K. Lead Bar, does not permit the Department to impose
countervailing duties on a private company's production based on a finding
that a benefit existed years ago with respect to a previously existing
state-owned company. AST asserts that the Department's argument that no
such requirement existed, and that it was entitled to make an irrebuttable
presumption without any demonstration that the privately owned company
received any benefit from the long-past financial contribution, was
rejected by the WTO Panel and Appellate Body.
AST also argues that the Department cannot ignore the WTO's decision by
limiting it to the U.K. Lead Bar case. Such limitation, AST argues, would
effectively refute the Charming Betsy doctrine by ignoring what is a
clearly applicable precedent. AST argues that, consistent with the
Charming Betsy doctrine, the Department must construe U.S. law to comport
with the United States' international obligations unless U.S. law admits
of no other interpretation. The methodology of the Draft Redetermination,
AST contends, violates U.S. obligations under the WTO SCM Agreement, as
interpreted in the WTO Panel and Appellate Body decisions in U.K. Lead
Bar. Because it is clearly possible to construe the countervailing duty
statute (as interpreted in Delverde III) in a manner consistent with U.K.
Lead Bar, AST reasons, the Department violates U.S. law as well.
In particular, AST contends, the Draft Redetermination violates U.K. Lead
Bar (and the statute) because the Department cannot lawfully impose
countervailing duties on a private company based on pre-privatization
subsidies without first demonstrating that the privatized company received
a benefit during the period of investigation (or review). In the Draft
Redetermination, the Department failed to make this finding of benefit.
Moreover, AST continues, the Department's approach in the Draft
Redetermination was essentially the same as the U.S. arguments in U.K.
Lead Bar regarding successorship - - arguments which the Panel and
Appellate Body considered and rejected. In rejecting these arguments,
according to AST, the Panel held that the relevant issue is not whether a
company is a successor entity to a previously state-owned company but,
rather, whether the successor actually received a market benefit during
the period of review. (5) Likewise, the Appellate Body found the
Department must determine whether there is any benefit during the period
of investigation to the
producers of the merchandise at issue by means of pre-privatization
government financial contributions. (6)
AST further argues that the Department cannot ignore the WTO decision
based on 19 U.S.C. § 3533(g), because there is neither a regulation nor a
practice that is being modified in the implementation of a panel report,
and the U.S. Trade Representative has taken the position that the WTO
decision in U.K. Lead Bar has already been implemented. Thus, AST argues
that the Department should have no difficulty taking an approach in the
final results that is consistent with the United States obligations under
the SCM Agreement.
Petitioners counter that AST vastly overstates the relevance of the U.K.
Lead Bar decision, and ignores the legislative history underlying the U.S.
statute which explains how WTO panel and appellate body reports affect
U.S. law, and specifically how these reports affect the Department's
practice. Petitioners assert that the URAA and its legislative history
state that the WTO panel and appellate body reports have no binding effect
under U.S. law and cannot form a basis for a change in agency practice.
According to petitioners, this statutory language establishes specific,
highly detailed procedures that must be followed before a federal agency
regulation or practice, such as the Department's change in ownership
methodology, may be modified after a WTO panel or appellate body finds
that regulation or practice inconsistent with a provision of the URAA.
Petitioners claim that when the statute and its accompanying legislative
history are taken into account the Department must reject AST's
interpretation of the U.K. Lead Bar report, determine that U.K. Lead Bar
has no effect on U.S. law or agency practice, and conclude that the WTO
decision has no effect on the current review.
Petitioners also counter that AST admits that when there is a direct
conflict between a statute and a WTO obligation, the domestic statute must
prevail. This principle, which is derived from the Charming Betsy
doctrine, encourages courts and federal agencies to interpret U.S.
statutes in conformity with the law of nations. Petitioners assert that
because AST's interpretation of the meaning of the U.K. Lead Bar report is
in direct conflict with the statute's unambiguous statement that an arm's-
length change in ownership transaction does not automatically erase
subsidies, the U.S. statute prevails. Therefore, the Department must
reject AST's interpretation of the meaning of the U.K. Lead Bar report or
violate the Charming Betsy doctrine.
Department's Position:
We disagree with AST that the Department's Draft Redetermination is
inconsistent with the WTO Appellate Body's decision in U.K. Lead Bar and
that it has consequently failed to construe U.S. law to comport to its
international obligations consistent with the Charming Betsy doctrine. The
Department's Draft Redetermination is consistent with the U.K. Lead Bar
decision, just as it is consistent with the analysis set forth by the
Delverde III court. (7)
In U.K. Lead Bar, in construing the SCM Agreement, the Appellate Body
first asked whether the firm under investigation (the privatized company)
was the "natural or legal person" that had received the subsidies
investigated by the Department (grants and equity infusions provided by
the U.K. government years prior to the privatization). U.K. Lead Bar,
para. 58. Finding that the firm under investigation was not the same legal
person as the one that had received those subsidies, the Appellate Body
ruled that the Department could only have imposed countervailing duties on
the entity under investigation if the Department had found that that legal
person had itself received a subsidy. Id., paras. 58, 62. The Appellate
Body then examined the privatization transaction in question in order to
determine if the entity under investigation had received a subsidy. The
Appellate Body determined that the entity under investigation had received
no benefit and, therefore, no subsidy through this transaction because a
fair market value purchase price had been paid. Id., paras. 67-68.
As can be seen, the Appellate Body set forth essentially the same two-
step analysis as the Delverde III court. The first inquiry addressed the
identity of the firm under investigation and specifically whether it was
the "natural or legal person" that had originally received certain pre-
privatization subsidies. Then, having found that the two entities were
distinct, the Appellate Body inquired into whether a subsidy had been
provided through the privatization transaction. Thus, the initial "person"
inquiry the Department has undertaken in this remand is the same type of
initial inquiry contemplated by the Appellate Body in its U.K. Lead Bar
decision.
There is no indication or guidance in the Appellate Body's decision as to
how the "natural or legal person" determinations were made. Thus, contrary
to AST's assertions, the Appellate Body did not rule specifically on the
United States' argument regarding the criteria that could be used to
determine legal successorship.
In the case of AST, the Department applied the new "person" approach
developed in the Draft Redetermination to the facts and circumstances of
the change in ownership of AST and determined that the legal person in the
form of pre-sale AST was the same legal person in the form of post-sale
AST. Because AST was found to be one and the same before and after the
privatization transaction, all of the criteria for finding a subsidy were
met. That is, post-sale AST is the same legal person upon which the
original financial contributions were bestowed and therefore enjoys the
benefit from those financial contributions. Consequently, because the
Department's person inquiry, the first step contemplated by both Delverde
III and U.K. Lead Bar, led to a finding that post-sale AST was not a
different legal person from pre-sale AST, there was no need to conduct an
analysis of the fair market value nature of the privatization transaction.
Only when it is determined that the post-sale firm is different from the
pre-sale firm is that type of analysis warranted.
Given that the methodology the Department developed for this review is
not inconsistent with the Appellate Body's decision, it is also not
inconsistent with the Charming Betsy doctrine. In Alexander Murray v.
Schooner Charming Betsy, 6 U.S.(2 Cranch) 64, 2 L. Ed. 208 (1804), the
Supreme Court made the following observation:
It has also been observed that an act of Congress ought never to be
construed to violate the law of nations if any other possible construction
remains, and consequently can never
be construed to violate neutral rights, or to affect neutral commerce,
further than is warranted by the law of nations as understood in this
country.
These principles are believed to be correct, and they ought to be kept in
view in construing the act now under consideration.
Id. at (118) 226. Consequently, AST's reliance on this doctrine is to no
avail.
Because we believe that the Department's new "person" approach is
consistent with the holding in U.K. Lead Bar, we need not reach the
parties' arguments regarding implementation of that decision under U.S.
law.
Comment 5: Application of the Department's New Approach to Changes in
Ownership
AST argues that the crux of the Department's analysis - - that the proper
basis of comparison for its distinct person determination is between the
GOI-owned AST and the KAI-owned AST - - is based on "invalid and absurd
factual premises." In fact, AST alleges, the Department supplies no
explanation whatsoever for this comparison because it lacks any rational
basis. The Department's comparison is irrational, according to AST,
because under that approach the spin-off of a division into a wholly-owned
subsidiary of the same corporation is enough of a change to confer
"distinct personhood," but the total privatization of a subsidiary
corporation is not enough of a change to confer "distinct personhood." AST
argues that, instead, the only appropriate comparison is between ILVA and
KAI-owned AST, because the ultimate ownership and control of the assets
did not change as a result of the spin-off of a division into a wholly-
owned subsidiary.
Department's Position:
We disagree with AST. Respondent has not supported its contention that
the Department's comparison of GOI-owned AST and KAI-owned AST is based on
invalid and absurd factual premises, nor has it provided any concrete
reasons why its proposed alternative comparison (ILVA and KAI-owned AST)
is more reasonable. Moreover, AST's inference from the Department's
comparison, i.e., that the spin-off of a division into a wholly-owned
subsidiary of the same corporation is enough of a change to confer
"distinct personhood," is wrong. Nowhere have we stated or implied that
the 1993 incorporation of ILVA's specialty steel operations "conferred
distinct personhood" on AST. To the contrary, consistent with our past
practice, we have found the 1993 incorporation of AST to be, essentially,
a non-event for purposes of determining whether any pre-privatization
subsidies benefit post-privatization AST. For example, in the Draft
Redetermination (and as restated in the Final Redetermination), we stated:
Therefore, although the GOI on several occasions reconfigured the overall
corporate environment within which AST's predecessors operated, there was
no sale or ultimate change in ownership that would necessitate a
reconsideration of who the subsidy recipient was prior to the 1994
privatization of AST. Rather, the specialty steel business itself, as well
as the ultimate ownership of this business, remained essentially unchanged
from the early 1980s through December 1994.
Draft Redetermination at 18. Therefore, we find AST's arguments in this
regard to be without merit and, accordingly, have not changed our basis
for comparison of the pre- and post-sale entities.
Comment 6: Facts Otherwise Available
AST argues that the Department's use of facts otherwise available with
regard to the pre-privatization asset spin-offs as well as the post-
privatization sales of shares is illegal and unwarranted. There is
extensive verified data pertaining to these transactions already on the
record, AST contends, and any additional information "would hardly have
allowed the Department to analyze these transactions further." More
importantly, AST continues, these transactions are not relevant to AST's
privatization, nor has the Department ever articulated how such
information is pertinent to this proceeding. Given that it has already
provided a considerable amount of information in response to the other
questions in the Department's supplemental questionnaires, AST requests
that the Department reverse its preliminary decision regarding facts
available.
Department's Position:
We disagree with AST and have continued to use facts available in these
final results with regard to the pre-privatization asset spin-offs as well
as the post-privatization sales of shares. As explained in our October 27,
2000, cover letter of the supplemental questionnaire to the GOI and to
AST:
In light of the recent Court of Appeals decision in Delverde III
additional information or clarification of information previously
submitted is being requested. If a response to the information requested
is not complete, fully supported and on the record within the time
provided, the Department may rely on the facts available in its final
results. If you have
not acted to the best of your ability to comply with our requests for
information, we may use information that is adverse to your interests in
conducting our review.
We recognize the efforts of the responding parties in providing the
requested information in response to other questions in our supplemental
questionnaires, but those efforts are not at issue here. Neither AST nor
the GOI provided a substantive explanation as to why it could not provide
the requested additional information (i.e., not already on the record)
regarding these spinoffs and sales of shares. Their responses were,
instead, largely to question the relevance of the Department's questions.
We therefore have found them to be uncooperative in providing this
information.
Moreover, contrary to the assertions of AST and the GOI, we do not find
there to be sufficient information regarding these spinoffs and sales of
shares on the record to determine whether the entity sold in the
transaction can be considered a continuous business entity because it was
operated in substantially the same manner before and after the change in
ownership. Therefore, in lieu of the necessary information we have
resorted to facts available. In light of the responding parties' non-
cooperation in this regard, we have used adverse inferences when choosing
among the facts available. See also "Use of Facts Otherwise Available,"
section above.
Comment 7: Spin-Off Transactions
AST argues that the Department applied its unlawful GIA methodology to
account for its treatment of subsidies in AST's privatization and in the
spin-offs of productive units from government-owned ILVA to private
entities. However, if the Department appropriately applies the Delverde
III decision and the WTO Appellate Body U.K. Lead Bar report to the facts
of this case, the GIA methodology is no longer relevant because none of
the pre-privatization subsidies in this proceeding are lawfully
attributable to AST.
AST also argues that if the Department rules that pre-existing subsidies
should continue to be automatically passed through without regard to
market benefit, which is contrary to law, it should at a minimum, modify
its GIA repayment methodology to account for inconsistency between the
"gamma" calculation and the grant amortization methodology, the lack of
economic or accounting basis for measuring subsidies against historical
values of the seller's net worth, and to account for the full
consideration paid by the buyer. In addition, the Department should modify
its spin-off methodology to: (1) apportion untied grants to the spun-off
productive unit on the basis of the ratio of assets spun off to assets of
the entire company, and (2) attribute a portion of the subsidies to the
sale of the productive unit "Verres."
Petitioners counter that AST, in support of its arguments have provided
excerpts from their case brief in the investigations regarding Stainless
Plate in Coils and Stainless Steel Sheet and Strip from Italy, which were
rejected by the Department. Therefore, petitioners counter that since AST
has not presented any new information or argument in the context of this
administrative review, the Department should reject AST's arguments.
Department's Position:
Neither the GOI nor AST fully responded to the Department's request for
information regarding the pre-privatization asset spin-off transactions.
Therefore, we determine that once sold, the assets did not constitute the
same entity as ILVA (the seller of those assets) and, therefore, the
subsidy benefits remained with the divisions of ILVA. See Final
Redetermination, and "Use of Facts Otherwise Available," section above.
Comment 8: 1993 Debt Forgiveness Apportionment
AST argues that the Department improperly determined that AST received a
countervailable subsidy in 1993 when the amount of debt that the
Department believed should have been attributable to AST was placed with
ILVA Residua. AST argues that the 1993 demerger that resulted in the
creation of AST is not and cannot be a countervailable event in a rational
analytical framework because ILVA's assets and liabilities remained the
same; the only change was in the legal form since the divisions were
converted to wholly-owned subsidiaries. Therefore, the Department
inappropriately finds a subsidy where there is no financial contribution
and no benefit, as required by the statute, because no additional assets
were created and no debts were forgiven.
AST also argues that the Department departed from its normal practice of
countervailing a benefit at the time of receipt because at the time of the
1993 demerger, the Italian government did not assume or forgive any debt.
AST argues that to the extent that ILVA as a whole received any benefit
from debt forgiveness, such benefit could not have occurred until those
debts had been transferred or extinguished through government action. It
was not until a company had been sold that any third party rights would
have been affected by the amount of debt included with the company being
sold. Thus, they argue that this only occurred after the privatization and
liquidation of those units which originally comprised ILVA.
Petitioners counter that AST's arguments were thoroughly reviewed and
rejected by the Department in prior cases. Petitioners state that since
AST has not provided any new information to support its claims to warrant
the Department's reconsideration, consistent with agency practice, the
Department should reject AST's arguments and affirm the Preliminary
Results regarding the countervailability of the liabilities forgiven in
the context of the 1993 demerger. Petitioners also counter that AST failed
to address the Department's traditional approach toward finding that a
financial contribution and a benefit result from debt relief in the
context of corporate restructuring situations.
Department's Position:
As stated in Stainless Plate in Coils, 64 FR at 15523, it is the
Department's practice to allocate otherwise untied liabilities remaining
in a shell corporation to the new, viable operations that had been removed
from the predecessor company. Therefore, consistent with our past
practice, we have assigned a portion of these liabilities to AST based on
its proportion of assets taken to the total viable assets of ILVA. See
also, GIA, 58 FR at 37221.
Comment 10: 1993 Gross Debt vs. Net Debt
AST argues that the amount of debt the Department attributed to AST did
not reflect the amount of debt forgiven because the Department failed to
account for cash received in the sales of viable assets, which reduced the
amount of debt. AST argues that the Department's calculation of the amount
of debt forgiveness in this case clearly did not comply with the
Department's regulation 19 C.F.R.§ 351.508(a), which provides that, in the
case of an assumption or forgiveness of a firm's debt obligation, "a
benefit exists equal to the amount of the principal and/or interest . . .
that the government has assumed or forgiven."
Therefore, AST argues that the Department's calculation of debt
forgiveness substantially exceeded the amount of the debt that the
European Commission permitted the Government of Italy to write off for the
ILVA Group, which is information that was verified and placed in this
record, but ignored by the Department. Thus, the countervailed amount not
only exceeds the amount of actual debt forgiven, but also exceeds any
possible benefit to the recipient. AST suggests that the Department has
established a practice of giving effect to the determinations of foreign
tribunals concerning debt forgiveness, and based on this practice, the
Department is obligated to give effect to the European Commission's
determination on the amount of debt forgiven or provide an explanation.
Lastly, AST argues that the Department's approach failed to reflect
economic reality because the amount of debt forgiven would have been the
same if the GOI had increased the value of the assets sold to the amount
needed to induce the buyers to assume all the debt outstanding by
transferring cash to the balance sheets of the companies sold. Under this
scenario, the actual amount of countervailable benefit would equal the
amount that the GOI was authorized to forgive rather than the much higher
amount the Department calculated.
Petitioners counter that AST's argument that the level of debt
forgiveness should be based on the amount specified by the EC in the
monitoring reports represents a "cost to government" approach that is not
consistent with Section 771(5)(E) of the Act, which mandates a "benefit to
the recipient" approach. Rather, it is the Department's practice to
determine the size
of the benefit to a respondent as the amount of liabilities that are not
directly associated with any given assets and that the respondent should
have taken.
Petitioners also counter that AST's analysis of economic reality based
upon a hypothetical manner in which the debt forgiveness could have
occurred is specious. Moreover, in the scenario put forth by AST, while
the amount of debt forgiven by the GOI would have decreased, the
productive assets would have received a countervailable cash grant,
therefore, the
countervailable benefit to the company would have been the same.
Therefore, petitioners assert that the Department should reject AST's
arguments and affirm its Preliminary Results.
Department's Position:
AST's argument was previously addressed and rejected in Stainless Plate
in Coils, 64 FR at 15522, where we stated that the Department does not
dispute AST's contention that the liquidation of ILVA Residua proceeded as
detailed in the EC monitoring report, and that the final cost, after
subtracting income earned from the sale of productive units, to the GOI
for the liquidation was as reported in the EC monitoring report. However,
section 771(5)(e) of the Act, directs the Department to calculate
subsidies as the benefit to the recipient, rather than the cost to the
government. At the time of the demerger, AST clearly benefitted to the
extent that it did not assume a proportional share of ILVA's liabilities.
In fact, the cash transfer did not take place at the time of the demerger,
but nearly a year later when AST was privatized.
As stated in Stainless Sheet and Strip, while the EC's monitoring report
is a useful source of information about the liquidation of ILVA, the
methodologies the EC uses to measure and report amounts associated with
the liquidation may not be appropriate for our purposes, i.e., for
identifying and measuring the countervailable benefit to AST from the GOI
liquidation activities. For example, we could not rely on calculations
based on the cost to government rather than the benefit to the recipient.
See Stainless Sheet and Strip, 64 FR 30634.
Comment 11: 1993 Creditworthiness
AST argues that the Department's analysis of ILVA's creditworthiness is
incorrect and irrelevant, because if, as the Department contends, AST
benefitted from debt forgiveness in connection with the 1993 demerger of
ILVA, then the issue is whether AST was creditworthy as the alleged
recipient of the benefit, not whether ILVA was creditworthy. Therefore, as
mandated by the Delverde III decision, the Department should evaluate the
creditworthiness of AST, the respondent under review, and the Department's
failure to do so is arbitrary and not in accordance with law. Moreover,
AST states that in Steel Wire Rod from Germany, the Department
acknowledged that a company's future financial prospects can be a factor
in a creditworthiness determination. See Final Affirmative Countervailing
Duty Determination: Certain Stainless Steel Wire Rod from Germany, 62 FR
54990, 54998 (October 22, 1997) (Steel Wire Rod from Germany). AST argues
that the record contains extensive analysis of AST's future prospects that
were conducted by independent appraisers which shows that the company was
creditworthy at the time of its creation in 1993.
AST also argues that the Department failed to explain how the 1993
demerger, which merely divided ILVA's divisions into wholly-owned
subsidiaries, benefitted all of ILVA, when in fact at the time of the
demerger none of ILVA's debts were forgiven. Thus, there is an obvious and
unsupportable contradiction in the Department's approach. AST suggests
that the only lawful approach is to focus on AST, and that the record
demonstrates that it was creditworthy in 1993.
AST claims that it provided the available data relating to its financial
status as of 1993 and that the Department did not find any deficiencies in
that data. AST argues that there is no basis for the Department to apply
adverse facts available by determining the company is uncreditworthy
because further data does not exist. Moreover, it argues that even if
adverse facts available were appropriate, there is no justification for
using ILVA as a surrogate for facts not in the record. Furthermore, there
is no basis for using ILVA data to calculate the appropriate discount rate
for AST, if it is treated as a separate entity.
AST argues that the so-called contemporaneous debt forgiveness approach
taken by the Department is unjustified. According to AST, the Department's
practice and regulations direct the Department to ignore current and prior
subsidies received by the firm in determining whether a firm is
uncreditworthy. To do otherwise would result in using a standard different
from that used by a private lender, which would look to the financial
position of the firm at the time of the loan. Finally, AST argues that
because it was solvent at its creation and could borrow money at
commercial rates, the company was, by the Department's own standards,
creditworthy.
Petitioners counter that since AST's arguments regarding its
creditworthiness were raised in Stainless Plate in Coils, 64 FR at 15524,
and were rejected there, the Department should continue to find AST to be
uncreditworthy in 1993. Petitioners also counter that AST's claim that the
Department applied adverse facts available in determining that AST was
uncreditworthy is misguided because the Department found ILVA to be
uncreditworthy in previous investigations. Therefore, consistent with its
clear practice regarding creditworthiness determinations made in prior
proceedings, the Department did not re-examine ILVA's
creditworthiness because AST failed to present any new information that
would lead the Department to reconsider its earlier finding.
Petitioners also counter that before the demerger, AST operated as the
Terni Division of ILVA and its financial performance was, therefore,
reflected in ILVA's aggregate financial data. However, according to
petitioners, the demerger process separated ILVA's productive assets from
the financial burden of its previous weak performance. Thus, AST's
improved financial condition was the expected result of the
countervailable debt relief. Therefore, the Department correctly
determined that it could not base its creditworthiness determination on
AST's future prospects.
Department's Position:
As previously articulated in Stainless Plate in Coils, 64 FR 15524, the
Department has continued to base its creditworthiness analysis on ILVA as
a whole because the GOI ultimately assumed the losses involved in the
privatization and liquidation of those units which originally comprised
ILVA. Therefore, all of ILVA, of which AST was a part, directly benefitted
from this GOI assumption of losses. AST, in particular, benefitted from
the process because it was created with a disproportionate share of ILVA's
assets as compared to liabilities. Thus, consistent with Delverde III and
the Department's past practice, the Department is focusing on the receiver
of the benefit in conducting its creditworthy analysis. Moreover, as we
noted in Stainless Plate in Coils, it would be illogical for the
Department to base its creditworthiness analysis on AST's future prospects
after the debt forgiveness had been granted because this data was likely
considerably impacted by the same program for which the creditworthiness
analysis is necessary. Thus, consistent with our prior findings, the
appropriate level of the creditworthiness analysis is the receiver of the
debt forgiveness i.e., ILVA. Finally, the Department has not used facts
available in making this determination. Rather, as stated above, it has
focused on ILVA's creditworthiness since all of ILVA benefitted from the
debt forgiveness. AST has not provided any new information to warrant
reconsideration of these findings.
Comment 12: Countervailability of European Social Fund (ESF)
AST argues that Objective 4 funding under the ESF is not de facto
specific, and, therefore, should not be found countervailable. AST
maintains that Objective 4 funds, aimed at reducing unemployment and
funding training for employees in companies undergoing restructuring, are
provided throughout Italy, via both the national and regional governments,
to a wide array of industries, and are also available throughout the
European Union (EU) to member states. In addition, AST argues that to find
specificity, the Department would need to examine ESF funding within Italy
and compare it to funding within the other 14 EU member states.
AST claims that because the Department did not make a finding that either
the EU or the GOI failed to comply to the best of their respective
abilities, it was unlawful for the Department to find the aid under
Objective 4 of the ESF to be de facto specific given the lack of
information on the use of such funds by either the EU or the GOI. AST
argues that because the ESF Objective 4 funding is administered at the
regional level, the EU and the GOI could not be expected to collect or
maintain the information the Department requested of them. Therefore,
argues AST, there was no basis for the Department to resort to adverse
facts available in either the Stainless Plate in Coils or the Stainless
Sheet and Strip cases, and, consequently, it would be unlawful for the
Department to rely on those determinations as the basis for making its
determination in this case. As such, AST argues that the Department
should reverse its position in this case and find that the ESF Objective 4
is not countervailable.
Petitioners counter that the Department countervailed ESF Objective 4
funding in the Stainless Plate in Coils and the Stainless Sheet and Strip
cases, and AST failed to submit any new information or evidence of changed
circumstances in the context of this review to warrant reconsideration of
the prior findings. Moreover, petitioners argue that AST, the GOI, and the
EU failed to cooperate to the best of their abilities because they were
instructed to obtain the requested information regarding the use of
Objective 4 funds from the appropriate regional governments and failed to
do so. Therefore, petitioners assert that the use of facts available is
warranted in this case because respondents failed to submit the required
information that is essential for the Department to analyze de facto
specificity.
Department's Position:
We agree with petitioners that the Department previously found ESF
Objective 4 funding to be de facto specific and, therefore,
countervailable in Stainless Plate in Coils, 64 FR at 15525, and Stainless
Sheet and Strip, 64 FR at 30630-31. As in those cases, we requested that
the GOI, EU and AST provide information regarding use of this program in
this review, but no new information or evidence of changed circumstances
has been submitted to warrant reconsideration of this finding. Respondents
also have not demonstrated any efforts to obtain the information or
offered any alternatives. Therefore, as in Stainless Plate in Coils and
Stainless Sheet and Strip, we find that respondents have not cooperated to
the best of their ability in providing information needed to determine de
facto specificity and are, therefore, using an adverse inference to find
the existence of de facto specificity with respect to this program.
Comment 13: Countervailability of European Coal and Steel Community
(ECSC) Article 54
AST argues that in the Preliminary Results, the Department erroneously
countervailed an ECSC loan held by AST based on the fact that the
Department had found ECSC Article 54 loans countervailable in other
proceedings. AST asserts that ECSC loans are not financial contributions
provided by a government, nor do they provide a benefit, and, therefore,
ECSC loans cannot be countervailed. Instead, AST affirms that these loans
represent commercial-rate borrowings by the ECSC that are then re-lent on
a back-to-back basis to the relevant coal or steel company. Moreover, AST
argues that no public entity entrusted or directed the ECSC to make the
loan to AST. AST also argues that the Article 54 loan program is not
funded by the EU, any EU member state, or any other public or quasi-public
authority, and the only role of any public authority in this program is
that the European Commission administers levies on behalf of the ECSC.
Petitioners counter that in the Preliminary Results, the Department
properly found that AST's Article 54 loan was countervailable. Petitioners
respond that in this review, AST has not provided any new information that
would lead the Department to reexamine its prior determinations. Instead,
petitioners argue, AST repeats the same arguments concerning this program
that were rejected by the Department in the Stainless Plate in Coils and
Sheet and Strip CVD investigations, and should continue to do so here,
finding this program countervailable.
Department's Position:
The Department previously determined that ECSC Article 54 loans
constitute a countervailable subsidy within the meaning of section
771(5)(B)(i) of the Act because they provide a "financial contribution"
and a "benefit." See, e.g., Stainless Plate in Coils, 64 FR at 15515-16.
Under section 771(5)(D)(i) of the Act and Article 1.1 of the SCM
Agreement, a financial contribution includes the direct transfer of funds,
such as the provision of loans. Under section 771(5)(E) of the Act, a
benefit is conferred to the extent that the interest rate is less than the
benchmark interest rate. While AST has acknowledged receipt of ECSC loans,
it attempts to make the case that because the loans were not financed
directly from the EU or a quasi-public entity, they cannot be considered
"financial contributions." However, we see no requirement in the SCM
Agreement nor the Act that the financial contribution must be funded in a
particular manner. See Stainless Plate in Coils, 64 FR at 15529. No new
information or evidence of changed circumstances has been submitted in
this review to warrant reconsideration of this finding.
Comment 14: Pre-Privatization Retirement Benefits under Law 451/94
AST argues that employees were eligible to use Law 451/94 only through
1996, and, therefore, AST could not have received benefits from early
retirement under this law during the POR. AST also argues that this fact
was confirmed at prior verifications of AST and is not contradicted in the
record of this proceeding. Specifically, AST argues that as specified by
the terms of Law 451 (only applicable during the period 1994-1996) and
AST's own records, all AST employees who chose to leave the company under
Law 451 did so prior to the POR. In addition, AST points out that in the
Preliminary Results, the Department treated benefits to AST under Law 451
as recurring grants expensed in the year of receipt; therefore, AST argues
that it could not have received countervailable subsidies from this
program during the POR.
AST further argues that the use of this program did not benefit AST, as
prior Department verifications of AST and the GOI have confirmed that
AST's overall costs under its voluntary participation in Law 451 were
equal to or greater than those the company would have incurred had it
followed the normally applicable "Mobility" provisions of Law 223.
Moreover, AST argues that in the Preliminary Results, the Department not
only countervailed AST for the Law 451 retirement of its own employees,
but also for the Law 451 retirement of employees of ILVA Residua and AST
affiliates that neither produce nor process the subject merchandise.
AST also argues that it could not have received any benefits from the
early retirement of workers at ILVA Residua because AST did not exist at
the time when some workers were placed in ILVA Residua. Additionally, AST
argues that the company was privatized through a sale at fair market
value, and, therefore, any residual value of preexisting subsidies granted
to preceding entities could not have passed through to AST. Moreover, AST
argues that Law 451 is not countervailable because AST was under no de
jure or de facto obligation to retain workers who chose to retire early
under Law 451, and AST had the legal option of firing those workers and
placing them on Mobility.
Petitioners counter that although AST argues that payments to its former
employees ceased prior to the POR, AST does not deny that Law 451 benefits
applied for between 1994 and 1996 continue to benefit employees until the
natural retirement age, up to a maximum of ten years. Moreover,
petitioners assert that evidence that AST's payments to its former
employees ceased prior to the POR demonstrates the benefit to the company
from Law 451. Petitioners state that the Department has established that,
absent this law, AST would face the added financial obligation of either
continuing to have these employees on salary or paying severance packages.
Petitioners point out that in the Stainless Plate in Coils and Stainless
Sheet and Strip investigations, the Department clearly established that
the Mobility program was not the appropriate benchmark against which to
measure AST's obligations. Rather, petitioners counter, based on the fact
that the benefits of Law 451 were common knowledge at the time AST would
have had to enter into negotiations with its employees, the Department,
in the above-cited cases, treated half the amount paid by the GOI to AST's
former employees as a benefit to the company.
Petitioners maintain that AST received a countervailable benefit because
redundant workers were not transferred to AST upon its creation, but
rather remained in the company to be liquidated, ILVA Residua. Petitioners
counter that the Department's established practice does not consider Law
451 early retirement benefits to be tied to certain productive operations,
and instead clearly treats such benefits as a countervailable subsidy to
the company as a whole. Petitioners also argue that the privatization of
AST had no effect on previously bestowed subsidies. In addition,
petitioners argue that the placement of redundant workers in ILVA Residua
can be viewed as a precondition for the sale of AST and should not be
canceled by its sale.
Petitioners further counter that claims by AST that it had no de jure or
de facto obligation to retain workers previously have been rejected by the
Department and no new information or evidence of changed circumstances has
been submitted in this review to warrant reconsideration of that finding.
Department's Position:
We disagree with AST. Even if employees at AST were only eligible to
apply for Law 451 benefits between 1994 through 1996, the former employees
continue to receive benefits until the natural retirement age, up to a
maximum of ten years. Thus, receipt of retirement benefits under Law
451continued during the 1998 POR.
Regarding the question of whether or not AST's costs under its
participation in Law 451 were equal to or greater than those the company
would have incurred had it followed the Mobility provisions of Law 223, as
we determined in Stainless Plate in Coils, 64 FR at 15514 and Stainless
Sheet and Strip, 64 FR at 30629, we do not believe that any of the
alternatives described under Law 223 provide a benchmark per se for the
costs that AST would incur in the absence of Law 451.
As stated in the Analysis of Programs section above, ILP and AST were
relieved of having to assume their respective portions of those redundant
workers that were placed in ILVA Residua and received early retirement
benefits under Law 451/94. Moreover, as stated in that section, no new
information or evidence of changed circumstances has been submitted in
this review to warrant reconsideration of this finding.
Regarding AST's argument that it was privatized through a sale at fair
market value, and, therefore, any residual value of preexisting subsidies
granted to preceding entities could not have passed through to AST, as we
pointed out above, the Court clearly stated in Delverde III that "a
subsidy cannot be concluded to have been extinguished solely by an arm's-
length change of ownership" and found that the statute "prohibits a per se
rule either way." Under the Department's new "person" approach, we have
determined that AST is essentially the same "person" before and after the
privatization and, thus, is the "person" who benefitted from this
financial contribution.
Comment 15: 1988 Equity Infusion
AST argues that the Department incorrectly countervailed a 1988 payment
by Finsider to ILVA. AST asserts that at the time the payment was made by
Finsider, all of ILVA S.p.A.'s revenues were from real estate management,
and the company received no revenues from sales of steel products.
Therefore, AST argues that to the extent that this payment is
countervailable, it must be "tied" to products produced by the company at
the time the benefit was bestowed. In AST's view, to do otherwise is to
unlawfully attribute a subsidy to non-subject merchandise.
Petitioners counter that the Department rejected AST's arguments in
Stainless Plate in Coils, 64 FR at 15526, and should continue to reject
these arguments, because no new factual information that could form the
basis for the Department to change its approach has been provided.
Department's Position:
As pointed out by petitioners, the Department previously addressed AST's
arguments in Stainless Plate in Coils. We determined that the funds
provided to ILVA were an equity infusion. We consider equity infusions to
be untied subsidies benefitting the total consolidated sales of the
recipient company, not just subject merchandise. In the instant review, no
new information or evidence of changed circumstances has been submitted to
warrant reconsideration of this finding. See Stainless Plate in Coils, 64
FR 15527.
Final Results of Review
For the period January 1, 1998 through December 31, 1998, we determine
the net subsidy rate for the reviewed company to be as follows:
Margin
Manufacturer/Exporter Percent
AST 14.25 %
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 final results of review and the final net subsidy rate for the
reviewed producer/exporter of the subject merchandise in the Federal
Register.
Agree
Disagree
Richard W. Moreland
Acting Assistant Secretary
for Import Administration
(Date)
________________________________________________________________________
footnotes:
1. In response to our Preliminary Results, the parties filed comments on
the impact of Delverde on the Department's former "gamma repayment"
methodology. In light of the Department's new approach as discussed
herein, the Department's former "gamma repayment" methodology is
irrelevant to our determination.
2. We note that since publication of the regulations, Moody's Investors
Service no longer reports default rates for Caa to C-rated category of
companies. Therefore for the calculation of uncreditworthy interest rates,
we will continue to rely on the default rates as reported in Moody
Investor Service's publication dated February 1998.
3. In CTL Plate, 64 FR at 73252, we stated that we would prefer to base
our calculation on information at the time the relevant portion of ILVA's
assets were demerged. However, the information contained in ILVA's
financial statement was found to be unreliable by the company's auditors.
Therefore, as facts otherwise available, we used the information contained
in the EC's 10th Monitoring Report which provides the most reliable data
for determining the benefit conferred by this program.
4. Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating
in the United Kingdom, WT/DS138R, Report of the Panel (Dec. 23, 1999).
5. Panel Report at ¶6.70.
6. Appellate Body Report at ¶¶6.69 and 6.70.
7. We note that we confirmed the analysis set forth in the Draft
Redetermination in our Final Redetermination.