69 FR 61800, October 21, 2004
C-475-823
Sunset Review
Public Document
October 15, 2004
MEMORANDUM TO: Jeffrey A. May
Acting Assistant Secretary
for Import Administration
FROM: Ronald K. Lorentzen
Acting Director, Office of Policy
SUBJECT: Issues and Decision Memorandum for the Full Sunset Review of the
Countervailing Duty Order on Stainless Steel Plate in Coils from Italy:
Preliminary Results
Summary:
We analyzed the substantive responses and rebuttals to those responses of the interested
parties in the full sunset review of the countervailing duty order on Stainless Steel Plate in Coils
(“SSPC”) from Italy. We recommend that you approve the positions we have developed in the
Discussion of the Issues section of this memorandum for these preliminary results of review. Below is
the complete list of the issues in this full sunset review for which we received substantive responses by
parties:
1. Likelihood of continuation or recurrence of countervailable subsidies
2. Net countervailable subsidy likely to prevail
History of the Order:
On May 11, 1999, the Department published the countervailing duty order on SSPC from
Italy. See Notice of Amended Final Determinations: Stainless Steel Plate in Coils from Belgium and
South Africa; and Countervailing Duty Orders: Stainless Steel Plate in Coils from Belgium, Italy, and
South Africa, 64 FR 25288 (May 11, 1999). In the final affirmative countervailing duty determination,
the following eleven programs were found to confer countervailable subsidies:
Government of Italy
1) Equity Infusions to Terni, TAS, and ILVA 1.03
percent
2) Benefits from the 1988-90 Restructuring of Finsider 2.81 percent
3) Debt Forgiveness: ILVA-to-AST 9.58 percent
4) Law 796/76 Exchange Rate Guarantees 0.82 percent
5) Law 675/77 0.07 percent
6) Law 10/91 0.00 percent
7) Law 451/94 Pre-Privatization Employment Benefits 0.69 percent
8) Law 181/89 Worker Adjustment and Redevelopment Assistance 0.00 percent
9) Law 488/92 0.00 percent
European Union:
1) ECSC Article 54 Loans 0.12 percent
2) European Social Fund 0.03 percent
See Final Affirmative Countervailing Duty Determination: Stainless
Steel Plate in Coils from Italy, 64 FR 15508 (March 31, 1999), (“Investigation”).
The Department determined a countervailing duty rate of 15.16 percent for ThyssenKrupp
Acciai Speciali Terni, S.p.A. (“TKAST”) (formerly Acciai Speciali Terni, S.p.A.).
The Department determined the all others rate also at 15.16 percent ad valorem.
The Department completed no administrative reviews of the subject countervailing
duty order. One review was requested but later rescinded. On May 11, 1999 the
Department amended the final determination to agree with the International Trade
Commission’s (“ITC”) determination. The ITC determined that a domestic industry
was not materially injured or threatened with material injury by reason of imports
of certain cold-rolled SSPC from Italy because these imports were “negligible.”
See Notice of Amended Final Determinations: Stainless Steel Plate in Coils from
Belgium and South Africa; and Countervailing Duty Orders: Stainless Steel Plate
in Coils from Belgium, Italy, and South Africa, 64 FR 25288, 25289 (May 11, 1999).
However, the net subsidy rates did not change for SSPC from Italy. Id. Respondents
appealed the affirmative material injury findings of the ITC with respect to hotrolled
SSPC. The Court of International Trade (“CIT”) affirmed those findings in Acciai
Speciali Terni v. United States, 118 F. Supp. 2d 1298 (CIT 2000). On a separate
appeal, petitioners argued against the ITC’s negative material injury determination
with respect to cold-rolled SSPC. Again, the CIT upheld the ITC’s findings. See
Allegheny Ludlum Corp. v. United States, 116 F. Supp. 2d 1276 (CIT 2000). However,
on a subsequent appeal to the Court of Appeals for the Federal Circuit, the Federal
Circuit court vacated the Court’s decision and remanded for proceedings not in
consistent with its decision. Id., 287 f.3d 1365 (Fed.Cir. 2002). On remand, the
ITC reversed its original negative injury findings with respect to cold-rolled
SSPC to determine that an industry in the United States is materially injured
by imports of SSPC from Italy and to include both hot-rolled and cold-rolled SSPC
within the scope of these orders. See Certain Stainless Steel Plate from Belgium,
Canada, Italy, Korea, South Africa, and Taiwan; Notice of Final Court Decision
Affirming Remand Determinations, 68 FR 8925 (February 26, 2003). Therefore, in
accordance with the court decisions and the ITC’s determination, the Department
amended the countervailing duty orders for Italy to include cold-rolled SSPC;
however, the net subsidy rates remained the same from the original investigation.
See Notice of Amended Countervailable Duty 3 Orders; Certain Stainless Steel Plate
in Coils from Belgium, Italy, and South Africa, 68 FR 11524 (March 11, 2003).
In this notice the Department listed AST under its new name, TKAST. The Department
realized it had failed to convert certain old numbers under the Harmonized Tariff
System of the United States (“HTSUS”) and issued a correction. See Certain Stainless
Steel Plate in Coils from Belgium, Italy, and South Africa; Notice of Correction
to the Amended Countervailing Duty Orders, 68 FR 20115 (April 24, 2003). In the
Issues and Decision Memorandum for the Determination under Section 129 of the
Uruguay Round Agreements Act: Final Affirmative Countervailing Duty Determination:
Stainless Steel Plate in Coils from Italy, October 24, 2003, ("Section 129 Memo"),
the Department determined that the privatization of AST (currently TKAST) was
at arm’s-length and for fair-market-value, and that allegations of broader market
distortions were not sufficiently supported. Accordingly, any allocable, non-recurring
subsidies granted to AST prior to its privatization were extinguished in their
entirety and, therefore, are non-countervailable. On November 7, 2003, the U.S.
Trade Representative requested the Department, pursuant to section 129(b)(4) of
the Uruguay Round Agreements Act, to implement the determination in the Section
129 Memo. See Notice of Implementation under Section 129 of the Uruguay Round
Agreements Act, 68 FR 64858, (November 17, 2003).
Accordingly, the Department
revised the cash deposit rates for TKAST and “all other” Italian exporters at
1.62 percent to reflect the impact that privatization had on non-recurring, allocable
subsidies for the countervailing duty order on SSPC from Italy as listed in following
programs. Id. European Social Fund 0.04 percent Law 451/94 Pre-Privatization Employment
Benefits 0.69 percent Law 675/77 0.07 percent Law 796/76 Exchange Rate Guarantees
0.82 percent This preliminary sunset determination reflects the Department’s implementation
with regards to the exclusion of programs relating to pre-privatization subsidies
from this order pursuant to the Department’s Section 129 determination. We note
that petitioners have appealed to the CIT challenging our decision to lower the
net subsidy rate. See Allegheny Ludlum v. United States, Court No. 03-00920. This
appeal is stayed pending the resolution of an appeal involving stainless steel
sheet and strip in coils from Italy which addresses similar privatization issues
. See Allegheny Ludlum v. United States, Court No. 03-00919. There have been no
changed circumstances reviews of this order. Thus, the order remains in effect
for all known producers and exporters of SSPC from Italy.
The programs that will
be considered in this sunset review are: 1) Law 796/76 Exchange Rate Guarantees
2) Law 675/77 3) Law 451/94 Early Retirement Benefits 4) European Social Fund
Background: 4 On April 1, 2004, the Department initiated a sunset review of the
countervailing duty (“CVD”) order on SSPC from Italy pursuant to section 751(c)
of the Tariff Act of 1930, as amended (“the Act”). See Initiation of Five-Year
(Sunset) Reviews, 69 FR 17129 (April 1, 2004). The Department received a notice
of intent to participate from Allegheny Ludlum Corp. (“Allegheny Ludlum”), North
America Stainless (“NAS”), and the United Steelworkers of America, AFL-CIO/CLC
(“USWA”), the domestic interested parties (collectively “domestic interested parties”),
within the applicable deadline (April 16, 2004) specified in section 351.218(d)(1)(i)
of the Sunset Regulations. See Response of the Domestic Interested Parties at
2, May 3, 2004 (“Domestic Response”).
All domestic interested parties claimed
interested-party status under section 771(9)(C) and (D) of the Act, as a U.S.
producer of the domestic like product or a certified union whose workers are engaged
in the production of the subject merchandise in the United States. See Domestic
Response. The USWA was a petitioner in the investigation and has been involved
in this proceeding since its inception. Id. at 6. Armo, Inc., J&L Specialty Steels,
Inc., Lukens Inc., were also petitioners in the original investigation but are
either no longer producers of subject merchandise or are scheduled to cease production
of SSPC shortly. Id. According to the domestic parties of this review, two unions,
Butler Armco Independent Union and Zanesville Armco Independent Organization,
that were original petitioners are not participating in this sunset review because
very few workers at these unions are engaged in the production of SSPC in the
United States. Id. at 7. The domestic interested parties have participated as
a group at various segments of this order. Id. The Department received a complete
substantive response to the notice of initiation on behalf of three respondent
interested parties: the Government of Italy (“GOI”), the Delegation of the European
Commission (“EC”), and TKAST. On May 3, 2004, we received substantive responses
from all three respondent interested parties expressing their willingness to participate
in this review as the authority responsible for defending the interest of the
Member States of the European Union. See Responses of the GOI (unpaginated), May
3, 2004, (“GOI Response”); EC (unpaginated), April 30, 2004, (“EC Response”);
and TKAST, May 3, 2004 (“TKAST Response”) at 2.
All respondent interested parties
note that they have in the past participated in this proceeding. On May 3, 2004,
we received a substantive response from TKAST, a foreign producer and exporter
of the subject merchandise as well as the respondent interested party under section
771(9)(A) of the Act, expressing its willingness to participate in this review
as well as the Section 129 review. See TKAST Response at 2. On May 3, 2004, we
received a complete substantive response from the domestic interested parties
within the 30-day deadline specified in the Department’s Regulations under section
351.218(d)(3)(i). See Domestic Response. We received rebuttal comments from the
domestic interested parties on May 10, 2004 (“Rebuttal”). No rebuttal comments
were received from the respondent interested parties. Accordingly, on May 21,
2004, the Department of Commerce issued its determination that respondent parties
did not provide an adequate response in the sunset review of the countervailing
duty order on SSPC from Italy. On June 10, 2004, pursuant to section 351.309(e)(ii)
of the Department’s regulations, TKAST filed comments on the Department’s adequacy
determination stating that the Department’s determination of respondents’ inadequacy
was incorrect and should be reconsidered. See Letter of 5 TKAST, Stainless Steel
Plate from Italy (Sunset): Adequacy of Responses (June 10, 2004). TKAST stated
that no party had contested its statement on the record that it was the sole Italian
producer as well as the sole significant Italian exporter of stainless steel plate
in coils to the United States. Id.
TKAST also stated that the Harmonized Tariff
Schedules (HTS) codes identified in the scope of the order that were used to determine
the export data submitted by the Government of Italy and the statistical data
gathered on U.S. imports were too broad and included non-subject merchandise (e.g.,
black plate and stainless steel cut-to-length plate). Id. As a result, TKAST maintained
that the Department should look to data reported by the U.S. Bureau of Customs
and Border Protection (Customs) as part of its administration of the Continued
Dumping and Subsidy Offset Act (CDSOA) for confirmation that TKAST’s reported
exports account for more than 50 percent of exports of the subject merchandise
from Italy to the United States. Id. According to TKAST, these data help corroborate
its assertion that TKAST accounts for more than 50 percent of the exports of subject
merchandise to the United States in that the value of imports of subject merchandise
derived from the reported data based on the total amount of duties collected on
imports of subject merchandise from October 2000 through September 2002 is not
only similar to the data reported by TKAST for the 2000-2003 period but also significantly
below the GOI export data and U.S. import data relied upon by the Department in
its adequacy determination. Id.
Also, on June 10, 2004, Allegheny Ludlum Corporation,
North American Stainless and the United Steelworkers of America, petitioners in
this case, filed comments arguing that the Department’s adequacy determination
was correct and that the expedited review is warranted. See Letter of Domestic
Interested Parties, Stainless Steel Plate in Coils from Belgium, Canada, Italy,
South Africa, South Korea and Taiwan: Five Year (“Sunset”) Reviews of Antidumping
Duty and Countervailing Duty Orders (June 10, 2004). Upon consideration of the
comments submitted by the interested parties, further examination of the HTS codes,
and an examination of the CDSOA data, the Department reversed the May 21, 2004
adequacy determination, and pursuant to 19 C.F.R. § 351.218 (e)(2)(i), the Department
determined to conduct a full sunset review of this order. See Memorandum for James
J. Jochum, Re: Adequacy Determination in Sunset Review of Stainless Steel Plate
in Coils from Italy (C-475-823), July 13, 2004.
Discussion of the Issues: In accordance
with section 751(c)(1) of the Act, the Department is conducting this review to
determine whether revocation of the countervailing duty order would be likely
to lead to continuation or recurrence of a countervailable subsidy. Section 752(b)
of the Act provides that, in making this determination, the Department shall consider
the net countervailable subsidy determined in the investigation and subsequent
reviews and whether any change in the program which gave rise to the net countervailable
subsidy has occurred and is likely to affect that net countervailable subsidy.
Pursuant to section 752(b)(3) of the Act, the Department shall provide to the
ITC the net countervailable subsidy likely to prevail if the order is revoked.
In addition, consistent with section 752(a)(6) of the Act, the Department shall
provide to the ITC information concerning the nature of the subsidy and whether
it is a 6 subsidy described in Article 3 or Article 6.1 of the 1994 WTO Agreement
on Subsidies and Countervailing Measures (“Subsidies Agreement”).
Below we address
the substantive responses and rebuttal comments of the interested parties. Due
to numerous programs determined to be countervailable during the investigation,
we address the interested parties’ comments in the following order. Continuation
or Recurrence of a Countervailable Subsidy Comment 1: Termination of Countervailable
Programs Comment 2: Law 796/76 Exchange Rate Guarantees Comment 3: Law 675/77
Comment 4: Law 451/94 Early Retirement Benefits Comment 5: European Social Fund
Net Countervailable Subsidy Likely to Prevail Comment 6: The Use of the Net Subsidy
Rate from the Section 129 Process Comment 7: Reduction of Rate for Law 451/94
Early Retirement Benefits: New Subsidy Allegation Comment 8: Newly Alleged Subsidies
- Power Rate to Electrical Steel Operations Plant
1. Continuation or Recurrence
of a Countervailable Subsidy: Interested Parties’ Comments
Comment 1: Termination of Countervailable Programs
In their May 3, 2004 substantive response, the domestic
interested parties argue that the revocation of the countervailing duty order
on SSPC from Italy would lead to unfair subsidization by the GOI, as well as material
injury to the U.S. industry. See Domestic Response at 27. We note that the domestic
interested parties did not comment on a specific program in their substantive
response; however, they argued that there is evidence of a likelihood of continuation
or recurrence of subsidies if this order were revoked based on the respondents’
dramatic reduction in sales to the United States. Id. In addition, domestic interested
parties, citing to the Department’s Sunset Policy Bulletin and the Statement of
Administrative Action (“SAA”) in the Uruguay Round Agreements Act, argue that
the subsidies found in the investigation continue to confer benefits on Italian
producers/exporters of subject merchandise. Id. at 29-30.
In its substantive response,
the EC contends that it does not foresee any negative impact from revocation of
the order or termination of the suspended investigation under review because previous
investigations regarding other steel products from Italy have demonstrated that
the Italian sector and TKAST, in particular, no longer benefit from any subsidy
and there is no likelihood whatsoever that the situation may change in the foreseeable
future. See EC Response. The EC states that revocation of the order is not likely
to lead to recurrence of subsidization because the EU steel sector has undergone
a major restructuring in recent years under the careful monitoring of 7 the EC,
and steel producers in the EU are now fully privately operated and compete on
commercial terms in international markets. See GOI Response and the EC Response.
In addition, both respondents state that revocation of the order will not impact
the EC policy on aid to the steel sector, which is one of the strictest among
WTO Members following the adoption of a series of Commission Decisions (“the Community
Steel Aid Code”). Id. Further, the GOI submits that Commission Decision 2496/96
of December 18, 1996 (recently updated as “the Multilateral Steel Framework”),
prohibits the granting of aid to the steel industry, except under three distinct
circumstances: for the closing of facilities, for environmental reasons, and for
research and development. See GOI Response at Annex 1. Moreover, there is no allegation
that any of these types of subsidies have been made available to Italian producers
in this case. Id.
The GOI and EC further state that TKAST did not benefit from
pre-privatization subsidies, competes on the basis of commercial criteria and
did not benefit from aid from its predecessor, ILVA, and received minimal financial
assistance after privatization. Id. They further assert that most of the specific
programs found countervailable in the investigation are now terminated, as they
involved a onetime government action of the then state-owned steel sector, and
are therefore no longer available for the Italian steel industry. Id. Thus, the
benefits allocated under those programs must have been substantially reduced or
even eliminated by the passing of time, such as the expiration of the European
Coal and Steel Community (“ECSC”) Treaty in 2002, and no new loans were granted
after 1998. Id.
The GOI adds that almost every Italian program found to be countervailable
in the investigation is either formally terminated with no residual benefits,
or, by its own nature, no longer conferring benefits and will not confer any benefit
on TKAST in the future. See GOI Response. Therefore, all respondents assert that
because most of the programs deemed countervailable have been terminated or unlikely
to be restarted, revocation of the countervailing duty order would not be likely
to lead to continuation or recurrence of a countervailing subsidy.
The domestic
interested parties rebut the respondent interested parties’ claims that the subsidies
provided to TKAST have terminated. See Rebuttal at 4 (May 10, 2004). The domestic
interested parties state that the Department has not conducted a review examining
those claims, citing to the Policy Bulletin and the SAA. Id. Therefore, the domestic
interested parties state that the Department should reject the respondent interested
parties’ contentions and report the original investigation net subsidy rate to
the ITC.
Department Position: The arguments raised by the EC and the GOI regarding
industry restructuring and changes in steel policy within the EU, have been raised
previously. See Stainless Steel Wire Rod From Italy; Final Results of Sunset Review
of Countervailing Duty Order, 69 FR 40354 (July 2, 2004). Contrary to the assertions
of the EC and the GOI, subsidies regarding the environment and research and development
may be actionable. The green light provisions of Article 8 expired on December
31, 1999, and when in force, only applied to programs that met certain strict
requirements. Thus, the green light provision is not relevant to this case. However,
we note that no allegations regarding the environment and research and development
have been submitted. Nevertheless, without any evidence that the programs have
been terminated, and/or that the benefits from programs for which benefits are
allocated over time will not continue beyond this sunset review, we preliminarily
determine that revocation of the countervailing duty order is likely to lead to
continuation or recurrence of a 8 countervailable subsidy.
The Department found
eleven countervailable programs in the investigation. See Investigation. However,
as a result of the exclusion of programs relating to privatization, pursuant to
Section 129, only four programs from the investigation remain for consideration
in this sunset review. Of these remaining programs, some have residual benefits
beyond the period of the sunset review. The Department will normally determine
that a countervailable subsidy will continue to exist when the benefit stream
continues beyond November 2004, the completion date of the sunset review. See
Policy Bulletin 98-3, Section III(A)(4), 63 FR 18871, 18874-5, (April 16, 1998).
Therefore, we preliminarily determine that benefits from certain countervailable
subsidies on Italian producers/exporters are likely to continue or recur were
the order revoked.
Comment 2: Law 796/76 Exchange Rate Guarantees
The GOI (TKAST
and the EC defer to the GOI for all explanations of the programs in this preliminary
determination) state that this program was terminated on July 10, 1992 by Decree
Law 333/92 and is no longer available to the Italian steel industry. See GOI Response.
The GOI refers to the Department’s administrative review in 2001 of grain-oriented
electrical steel from Italy that the benefit provided to TKAST , then AST, under
Law 796/76 was linked to the exchange risks of the Article 54 loans that were
also provided to AST and that the last outstanding Article 54 loans were repaid
on April 11, 1998. Id. The GOI concludes that its repayment of the exchange rate
guarantee loans coupled with the expiration of the ECSC Treaty provide enough
evidence for the Department to determine definitively that this program is terminated,
unlikely to be reinstated, and no longer provides residual benefits.
The domestic
interested parties did not specifically address the countervailable programs in
their substantive response or rebuttal.
Department Position: In the original investigation,
we determined that AST had two outstanding ECSC loans in 1997, the period of our
investigation that qualified for the law 796/76 exchange rate guarantees. See
Investigation, 64 FR at 15513. We 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; then,
we divided this amount by AST's total consolidated sales during that period of
review. Id. Because the exchange rate converted the payments at the current exchange
rate during the life of the loans, we treated the repayments as recurring grants.
Id. We agree that this program was terminated and TKAST would have been unable
to acquire new loans after the expiration of the ECSC Treaty. Upon review, we
found that the AST verification report that was submitted during the original
investigation, as indicated in Annex 4 of the GOI substantive response, and the
information referred to in the verification report from the administrative review
of grain-oriented steel imports from Italy provide sufficient information that
the loans associated with these exchange rate guarantees have been repaid. See
AST Exhibit 13 of the Investigation, CVD Verification of AST, C-475-823, C-475-825,
ECSC Article 54 Loans, p. S-1500. Thus, based on 9 evidence that the law was terminated
and the loans were repaid, we find that revocation of the countervailing duty
order is not likely to lead to continuation or recurrence of a countervailable
subsidy with respect to Law 796/76.
Comment 3: Law 675/77
The GOI states that
TKAST repaid the last of loans provided under Law 675/77 on July 1, 2000, and
therefore TKAST no longer receives benefits from this program. See GOI Response
at Annex 2. AST received these pre-privatization loans when it was still the state-owned
company, IRI. Id. The GOI argues that the likelihood for the receipt of benefits
disappeared when IRI privatized and was later dissolved. Id.
Department Position:
The Department found that loans provided under Law 675/77 were recurring, non-allocable
countervailable loans in the original investigation. See Investigation 64 FR at
15513. Under 675/77, IRI issued bonds to finance restructuring measures of companies
within the IRI group during its privatization. See Investigation, 64 FR at 15513.
During the period of the investigation, the Department found that AST had outstanding
loans in which it was responsible for making semi-annual interest payments and
annual bond payments. Id. In this sunset review, the respondent interested parties
simply asserted and provided no evidence that these loans were repaid in 2000.
Without such evidence, we preliminarily determine that revocation of the countervailing
duty order is likely to lead to continuation or recurrence of a countervailable
subsidy.
Comment 4: Law 451/94 Early Retirement
Benefits
The respondent interested
parties explained that steelworkers could apply for the early retirement benefits
under this early retirement program only between 1994 and 1996 to receive benefits
until their normal ages of retirement for a maximum of ten years. See GOI Response
at Annex 2. The respondent interested parties also contend that there can be no
benefit from this program after 2006 and the remaining benefits are so small as
to be de minimis. Id. The respondent interested parties support their argument
by estimating that at least 282 of the original 806 individuals receiving benefits
under this program are no longer eligible based on their eligibility to receive
regular retirement benefits as former employees of TKAST and its subsidiaries.
Id. See also id. at Annex 5 for the list of individuals. In addition, the respondent
interested parties state that at most, 404 former AST workers, representing half
of the original 806 individuals, could still be receiving benefits after December
31, 2004. Id. at Annex 2 The respondent interested parties also note that this
number is necessarily overstated because an additional number of former employees
would have already achieved regular retirement status through military service,
years at the university, or previous work before being hired at TKAST or its predecessors.
Id. Thus, the GOI requests that the Department adjust its net subsidy rate of
this program to 0.35 percent which is de minimis. The domestic interested parties
did not comment on this program.
Department Position: In our investigation we
found that early retirement benefits under Law 451/94 were recurring grants and
expensed them in the years of receipt. See Investigation, 64 FR at 10 15514. As
the respondent parties stated, we found that Law 451/94 benefits were granted
to individuals who applied during 1994-1996 until the individuals reached their
regular retirement age, up to a maximum of ten years. Id. The respondent interested
parties acknowledge that workers could still receive early retirement benefits
beyond the period of this sunset review, November 30, 2004. Because this record
evidence indicates that this program may continue to provide benefits after this
review period, we find it likely that countervailable subsidies will continue
if this order were revoked. The net subsidy rate that is likely to prevail is
discussed below in “Net Countervailable Subsidy Likely to Prevail” section.
Comment 5: European Social Fund
The EC states that the reform of the European Structural
Funds (“Agenda 2000”) has consolidated legislation into new general regulations
to cover all the principles common to the Structural Funds as well as new regulations
specific to each of the funds, including the ESF, to provide economic and social
conversion of regional areas facing structural difficulties and support the European
Employment Strategy; thus, the reform underlines the lack of specificity of assistance.
See EC Response, Annex 1 at 0-1 and 0-7. Thus, the respondent interested parties
argue that the European Social Fund has substantially changed so that it is no
longer specific, and therefore, not countervailable. See EC Response, Annex 1.
Department Position: We found benefits under the European Social Fund’s (ESF)
Objectives 2 and 4 to be countervailable in the original investigation. See Investigation,
64 FR at 15516. Although there have been no administrative reviews of this order,
the program has continued to be found countervailable in other proceedings. See,
e.g., Grain-Oriented Electrical Steel from Italy; Final Results of Administrative
Review of Countervailing Duty Order, 66 FR 2885 (January 12, 2001). Because the
European Social Fund still exists and has been found to provide a countervailable
subsidy, we preliminarily determine that the revocation of the countervailing
duty order is likely to lead to a continuation or recurrence of a countervailable
subsidy.
2. Net Countervailable Subsidy Likely to Prevail: Interested Party Comments:
Comment 6: Applicability of Section 129 Review:
The domestic interested parties
assert that based on information from the original investigation involving the
subject producer, the Department should find that countervailable subsidies would
likely prevail at the investigation rate, 15.16 percent, if the order were revoked.
See Domestic Response at 36-39. The domestic parties urge the Department to use
the investigation rate of 15.16 percent instead of the Section 129 review rate
of 1.62 percent because the Section 129 review rate is not equivalent to an administrative
review for sunset review purposes. See Rebuttal at 3.
The domestic interested
parties argue that Section 129 reviews are not discussed in the Policy Bulletin
and do not give the Department the opportunity to issue questionnaires concerning
existing subsidies and verify new subsidies, as in administrative reviews. Id.
Nevertheless, the Department should not revoke the order as long as this order
is on appeal in the Court of Appeals for the Federal Circuit and a subsidy program
11 continues to exist. Id. at 4-5. In their responses, the respondent interested
parties assert that the likelihood of continuation or recurrence of subsidization
is nil and does not justify the maintenance of countervailing duty measures on
exports of the subject merchandise at any rate for the reasons stated above. See
GOI Response. The EC specifically states that it does not foresee any negative
impact from revocation of the order. See EC Response. TKAST argues, at a minimum,
that the Department should reduce the countervailable benefits from the Section
129 determination to reflect reductions in the actual benefit stream. See TKAST
Response at 2; TKAST Response to the Department’s Adequacy Determination (June
10, 2004) at 4; Responses of GOI and EC.
Department Position: Consistent with
the SAA at 890, and the H.R. Rep. No. 103-826, Pt. 1, 103d Cong., 2d Sess. (1994)
(“House Report”) 64, the Department normally will select a rate from the investigation
as the net countervailable subsidy likely to prevail if the order is revoked because
that is the only calculated rate that reflects the behavior of exporters and foreign
governments without the discipline of an order in place. See also Sunset Policy
Bulletin, Section III.B.1. Where the Department determined company-specific countervailing
duty rates in the original investigation, the Department normally will report
to the International Trade Commission company-specific rates from the original
investigation or, where no company-specific rate was determined for a company,
the Department normally will provide to the USITC the country-wide or “all others”
rate. See Sunset Policy Bulletin, Section III.B.1. Although the SAA at 890, and
the House Report at 64, provide that the Department normally will select a rate
from the investigation, this rate may not be the most appropriate if, for example,
the rate was derived (in whole or part) from subsidy programs which were found
in subsequent reviews to be terminated, there has been a program-wide change,
or the rate ignores a program found to be countervailable in a subsequent administrative
review.
Therefore, the Department may make adjustments to the net countervailable
subsidy determined. See Sunset Policy Bulletin, Sections III.B.1 and III.B.2.
In the original investigation the Department found a net subsidy rate of 15.16
percent for TKAST, and 15.16 percent “all others.” Eleven programs were found
to be countervailable for TKAST. However, in the Section 129 Determination, the
Department applied its modified privatization methodology and found that pre-privatization
subsidies were terminated as a result of an arm’s length, fair market sale. Accordingly,
the Department revised the all others rate from 15.16 percent to 1.62 percent,
effective November 7, 2003. See Notice of Implementation Under Section 129 of
the Uruguay Round Agreements Act; Countervailing Measures Concerning Certain Steel
Products From the European Communities, 68 FR 64858 (November 17, 2003). Because
the Department stated that we would implement the privatization methodology prospectively,
it is appropriate for the Department to rely upon its Section 129 methodology
and the results derived therefrom.
Comment 7: Reduction of Rate for Law 451/94 Early
Retirement Benefits:
TKAST contends that this program is the only program
under which benefits could be attributed to TKAST. See TKAST Response at 2. The
GOI requests that the Department determine that Law 451-94 schemes terminated
in 1996, and the outstanding benefits are now de minimis. See 12 GOI Response
at Annex 2, para. G and TKAST Response at 2. The GOI states that the law was effective
only for three years, 1994-96, to applicants with at least 15 years of pension
and at least 50 years old for men and 47 years old for women. See GOI Response.
The participants can only receive benefits for a maximum of ten years up to year
2006. Id. From the 806 participants, about 28% of the participated were terminated
in 1994, 68% in 1995, and 4% in 1996. Id. In addition, at least 282 of the original
802 participants are no longer eligible for this program because they became eligible
for regular retirement by the end of this sunset review. Id. An additional 120
participants are also no longer eligible because they will have received their
benefits for the maximum ten years under Law 451/94 by December 31, 2004. Id.
The GOI notes that these statistics are necessarily overstated because an additional
number of employees would have worked the requisite number of years through military
service, years at the university, or prior work experience. Id. Also, employees
of subsidiaries are excluded from these estimates. The GOI contends that because
at least 402 participants – roughly half of the original total – cannot receive
benefits under Law 451/94 after December 31, 2004, the Department should adjust
the net subsidy rate by 50% from 0.69 to 0.35 percent.
Department Position: In
the Policy Bulletin, we stated that the Department may make adjustments to the
net countervailable subsidy determined pursuant to section III. B.2., including,
but not limited to, where the Department has conducted an administrative review
of the order and found that a program was terminated with no residual benefits
and no likelihood of reinstatement. For the countervailing duty order on SSPC
from Italy, the Department conducted no administrative reviews. Although we agree
with GOI and the EC that Law 451/94 has officially been terminated, the benefits
from this program have not ceased. See Investigation at 15514. Because the Department
has not conducted an administrative review and benefits continue to exist after
the termination of this sunset review, we cannot adjust the net subsidy rate as
found in the original investigation, in accordance with section III. B.2 of the
Policy Bulletin. Consistent with the Policy Bulletin, the SAA at 890, and the
House Report at 64, the Department will provide to the USITC the net countervailable
subsidy rate for this program as contained in the investigation.
3. New Subsidy Allegation
Comment 8: Newly Alleged Subsidy - Energy
Subsidies to Electrical Steel Operations Plant
Citing to the Policy Bulletin and section 752 of the Act in their
rebuttal, domestic interested parties request that the Department investigate
the possible provision of electricity at subsidized rates to TKAST. The domestic
interested parties submitted several press articles containing statements from
the European Parliament and the Italian Ministry of Industry calling for possible
assistance to TKAST to keep it from shutting down a portion of its Terni facility
that produces grain-oriented electrical steel and laying off several hundred workers.
See Rebuttal at 6 and attached articles. The articles discussed the possibility
that such assistance could extend to local infrastructure improvements and the
possible renegotiation of the company’s electricity contracts. Id. The domestic
interested parties contend that such assistance contradicts the EC and GOI’s assurances
that steel sector subsidy assistance is prohibited. See Rebuttal at 6. The domestic
interested parties, therefore, request an investigation into 13 these new subsidies
because they are granted to a particular company and involve a financial contribution
at less than adequate remuneration at market price. Id. at 7.
Department Position:
In accordance with section 752(b)(2)(B) of the Act, the Department will consider
programs newly alleged to provide countervailable subsidies where good cause is
shown. See also Policy Bulletin Section (III)(C)(2), 63 FR at 18876-77. The Department
normally will consider a new subsidy allegation in the context of a sunset review
only where information on such program came into existence after the most completed
administrative review, and interested parties provided information or evidence
to warrant consideration of the newly alleged program. Id. In this case, there
have been no administrative reviews, but the information regarding the alleged
subsidy program did not come into existence until after the last opportunity to
request an administrative review. However, the information provided by the domestic
interested parties does not indicate that such programs have been actually established
by either the EC, the GOI or the provincial governments, only that they may be
desirable to resolve the potential plant closure, layoffs and current strife in
the workplace. Further, the statements regarding the possible renegotiation of
electricity rates were from TKAST officials not government officials and there
is no indication that any renegotiated rate would be for less than adequate renumeration.
Therefore, we preliminarily determine that the information by domestic interested
parties does not warrant initiation of an investigation of this subsidy allegation
within the context of this sunset review.
Preliminary Results of Review:
We preliminarily
determine that benefits from the following programs would be likely to continue
or recur were the order revoked. 1) Law 675/77 2) Law 451/94 Early Retirement
Benefits 3) European Social Fund Accordingly, for the reasons discussed above,
we preliminarily determine there is a likelihood that countervailable subsidies
will continue or recur were the order revoked. See Policy Bulletin, Section III(A)(3)(a).
We also preliminarily determine that such countervailable subsidies will continue
or recur at the rates listed below:
--------------------------------------------------------------------------------------------------------
Manufacturer/Producer/Exporter Net Countervailable Subsidy (percent)
TKAST 0.80 All Others 1.62
--------------------------------------------------------------------------------------------------------
Any interested party may request a hearing within 30 days of publication
of this notice in 14 accordance with 19 CFR 351.310(d)(i). Any hearing, if requested,
will be held on December 20, 2004. Interested parties may submit case briefs no
later than December 10, 2004, in accordance with 19 CFR 351.309(c)(1)(i). Rebuttal
briefs, which must be limited to issues raised in the case briefs, may be filed
not later than December 16, 2004, in accordance with 19 CFR 351.309(d)(1). The
Department will issue a notice of final results of this sunset review, which will
include the results of its analysis of issues raised in any such briefs not later
than February 25, 2005.
Recommendation:
Based on our analysis of the comments
received, we recommend adopting all of the above positions. If these recommendations
are accepted, we will publish the Preliminary Results of Review in the Federal
Register.
AGREE _____X______ DISAGREE
___________ ORIGINAL SIGNED ______________
Jeffrey A. May Acting Assistant Secretary
for Import Administration
10/15/04
___________________________
Date