C-475-825
Sunset Review
Public Document
December 17, 2004
MEMORANDUM TO: James J. Jochum
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 Sheet and Strip 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 Sheet and Strip in
Coils (“SSSSC”) 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
3. New Subsidy Allegation
4. Nature of the Subsidy
History of the Order:
On August 6, 1999, the Department of Commerce (“the Department”) published the
countervailing duty order on SSSSC from Italy. See Amended Final Determination: Stainless Steel
Sheet and Strip in Coils from the Republic of Korea; and Notice of Countervailing Duty Orders:
Stainless Steel Sheet and Strip in Coils from France, Italy, and Republic of Korea, 64 FR 42923
(August 6, 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 0.99 percent
2) Benefits from the 1988-90 Restructuring of Finsider 2.71 percent
3) Debt Forgiveness: ILVA-to-AST 6.79 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 Early Retirement Benefits
AST 0.69 percent
Arinox 0.57 percent
8) Law 181/89 Worker Adjustment and Redevelopment Assistance 0.00 percent
9) Law 488/92 (Arinox) 0.12 percent
European Union:
1) ECSC Article 54 Loans (AST) 0.11 percent
2) European Social Fund
AST 0.04 percent
Arinox 0.34 percent
See Final Affirmative Countervailing Duty Determination: Stainless Steel Sheet and Strip in Coils from
Italy, Part II, 64 FR 30624 (June 8, 1999), (“Investigation”). The Department determined a
countervailing duty rate of 12.22 percent ad valorem for ThyssenKrupp Acciai Speciali Terni, S.p.A.
(“TKAST”) (formerly Acciai Speciali Terni, S.p.A. (“AST”)) and 1.03 percent for Arinox S.r.l
(“Arinox”). The Department determined an “all others rate” of 12.09 percent ad valorem.
Respondents appealed the Department’s final determination to the U.S. Court of International
Trade (“CIT”) with respect to privatization issues. See Acciai Speciali Terni S.p.A. v. United States,
CIT No. 99-00567. The appeal is currently stayed pending a final and conclusive court opinion in the
stainless steel plate-in-coils from Italy litigation. See Acciai Speciali Terni S.p.A. v. United States, CIT
No. 99-00364.
The Department completed no administrative reviews of the subject countervailing duty order.
One review was requested but later rescinded. See Stainless Steel Sheet and Strip in Coils from Italy;
Rescission of Countervailing Duty Administrative Review, 65 FR 76986 (December 8, 2000).
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
Sheet and Strip 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-marketvalue
and that allegations of broader market distortions were not sufficiently supported. Accordingly,
1 Initiation of Five-Year (“Sunset”) Reviews, 69 FR 30874 (June 1, 2004).
any allocable, non-recurring subsidies granted to AST prior to its privatization were extinguished 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 rate for TKAST to 1.62 percent to reflect the following programs in the
Investigation that were not extinguished as a result of the Section 129 Determination.
European Social Fund 0.04 percent
Law 451/94 Early Retirement Benefits 0.69 percent
Law 675/77 0.07 percent
Law 796/76 Exchange Rate Guarantees 0.82 percent
1.62 percent
The “All Others” rate from the Section 129 Determination was revised to 1.61 percent.
This preliminary sunset determination reflects the Department’s implementation with regard 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 the Department’s
Section 129 Determination to the CIT challenging our decision to lower the net subsidy rate. 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 SSSSC 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:
On June 1, 2004, the Department published the notice of initiation of the sunset review of the
countervailing duty (“CVD”) order on SSSSC from Italy pursuant to section 751(c) of the Tariff Act of
1930, as amended (“the Act”).1 The Department received a Notice of Intent to Participate from the
domestic interested parties Nucor Corporation; Allegheny Ludlum Corporation; North American
Stainless; the United Steelworkers of America, AFL-CIO; the local 3303 United Auto Workers; and
Zanesville Armco Independent Organization, Inc. (collectively “the domestic interested parties”) within
the deadline specified in section 351.218(d)(1)(i) of the Department’s Regulations (“Sunset
Regulations”). The domestic interested parties claimed interested party status under section 771(9)(C)
and (D) of the Act, as domestic manufacturers of SSSSC or certified unions whose workers are
engaged in the production of SSSSC in the United States. On July 1, 2004, we received a complete
substantive response collectively from the domestic interested parties within the 30-day deadline
specified in 19 CFR 351.218(d)(3)(i). See Domestic Response.
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. See Responses of the GOI (unpaginated), June 30, 2004, (“GOI
Response”); EC (unpaginated), June 30, 2004, (“EC Response”); and TKAST, July 1, 2004,
(“TKAST Response”), at 1. All respondent interested parties note that they participated in the original
investigation as well as the Section 129 review.
We received rebuttal comments from the domestic interested parties on July 9, 2004
(“Rebuttal”). No rebuttal comments were received from the respondent interested parties.
On July 21, 2004, the Department issued its determination that respondent parties provided an
adequate response in the sunset review of the CVD order on SSSSC from Italy. Therefore, the
Department is conducting a full sunset review based on the adequate responses from all interested
parties in accordance with section 351.218(e)(1)(ii)(A) and (e)(2)(i) of the Department’s regulations.
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 CVD 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 International Trade Commission (“ITC”) information concerning the
nature of the subsidy and whether it is a subsidy described in Article 3 or Article 6.1 of the 1994 World
Trade Organization (“WTO”) Agreement on Subsidies and Countervailing Measures (“Subsidies
Agreement”).
Below we address the 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 July 1, 2004 substantive response, the domestic interested parties argue that the
revocation of the CVD order on SSSSC from Italy would lead to unfair subsidization by the GOI as
well as material injury to the U.S. industry. See Domestic Response at 45. 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 export volumes to the United States. Id. In
addition, the domestic parties argue that the discipline of the order has forced subject producers either
to increase their prices or to reduce significantly the volumes exported to the United States. Id. at 48.
Moreover, the Department’s determination regarding Section 129 provides evidence of continued
subsidization. Id. at 51. Thus, the domestic interested parties conclude that subsidization would
continue and imports from Italy would return to pre-order levels if this order were revoked. Id.
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 European Union (“EU”) steel sector has undergone a major restructuring in recent years under the
careful monitoring of the EC, and steel producers in the EU are now fully privately operated and
compete on commercial terms in international markets. See GOI Response and the EC Response.
Moreover, Arinox has always been privately owned since its incorporation in 1990. Id.
In addition, the GOI and EC state that revocation of the order will not impact the EC policy on
aid to the steel sector, which is one of the strictest among WTO Members following the adoption of a
series of Commission Decisions (“the Community Steel Aid 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. The GOI and EC state that there is no allegation that any of these types of subsidies
have been made available to Italian producers in this case. See GOI Response and EC Response.
The GOI and EC also state that the now 100 percent privately-owned steel industry has not received
substantial assistance since 1992. 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 CVD 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 2. The domestic interested parties state that the
Department has not conducted a review examining those claims, citing the Policy Bulletin and the SAA.
Id. at 3. 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: We note that no allegations regarding environmental and research and
development subsidies have been submitted in this case. Nonetheless, the GOI and EC state that the
Multilateral Steel Framework does permit subsidies for environmental purposes and for research and
development. Accordingly, the Department must state that subsidies regarding the environment and
research and development under the Multilateral Steel Framework may be actionable. The green light
provisions of Article 8 of the Community Steel Aid Code 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.
The Department found eleven programs countervailable in the investigation. See Investigation.
However, as a result of the exclusion of programs relating to privatization, pursuant to Department’s
Section 129 Determination, 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 normally will determine that a countervailable subsidy will continue to
exist when a benefit stream will continue beyond the completion date of the sunset review. In this case,
we preliminarily determine that benefits from certain countervailable subsidies on Italian
producers/exporters are likely to continue were the order revoked.
Comment 2: Law 796/76 Exchange
Rate Guarantees
The GOI states 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 at Annex 1(D). (TKAST
and the EC defer to the GOI for all explanations of the programs in this preliminary determination.) The
GOI contends that the Department recognized in the final determination of this case that the exchange
rate guarantee program was terminated. See GOI Response; see also Investigation. The GOI refers to
the Department’s administrative review in 2001 of grain-oriented electrical steel from Italy to explain
that the benefit provided to TKAST, then AST, under Law 796/76 was linked to the exchange risks of
the Article 54 loans 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 of imports of stainless steel plate in coils from Italy
that qualified for the law 796/76 exchange rate guarantees. See Investigation, 64 FR at 30628 citing
Final Affirmative Countervailing Duty Determination: Stainless Steel Plate in Coils from Italy (“Plate
Final”), 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.
In this sunset review, the Department determines that this program was terminated, and
TKAST would have been unable to acquire new loans after the expiration of the ECSC Treaty. Our
review of this program led us to the stainless steel plate in coils investigation. Upon review, we found
that the AST verification report and the corresponding information referred to in the verification report
from an 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, the Department determines that there is sufficient evidence to find that the Law 796/96,
Exchange Rate Guarantees, has been terminated and the loans associated with these guarantees have
been repaid. Therefore, we find that this program is not likely to continue or recur.
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 1(E). 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 30628
citing Plate Final, 64 FR at 15513. As explained in the Plate Final, IRI issued bonds to finance
restructuring measures of companies within the IRI group during its privatization. Id. During the period
of the stainless steel plate 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 but provided no evidence that these
loans were repaid in 2000. Without such evidence, we preliminarily determine benefits continue under
this program.
Comment 4: Law 451/94 Early Retirement
Benefits
The GOI explains 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 1(G). The GOI also contends
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 GOI states that information from the Ministry of Labor indicates that 58
workers will still receive benefits at the end of this sunset review. Id. According to the GOI, these 58
workers represent less than 10 percent of the original number of former AST employees that were
entitled to Law 451 benefits. As a result, any remaining benefits from the program would calculate to
0.049 percent, a level that would be de minimis in the absence of any other subsidies. Id.
Regarding Arinox, the GOI points out that the holding group Arvedi, a company that controls
Arinox, received benefits from this program in 1994 through the Decree of December 9, 1994. Id.
The Decree authorized Arvedi to early retire up to 200 workers, 42 of which were Arinox workers.
Id. Based on information from the Ministry of Labor, no Arinox workers now benefit from this
program. Id.
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 30630.
As the respondent parties state, 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. at 30629. The respondent interested parties acknowledge that workers could still
receive early retirement benefits beyond the period of this sunset review. Therefore, this record
evidence indicates that this program may continue to provide benefits after this review period.
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 European Social Fund
(“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 ESF has substantially changed, so that it is no longer specific, and therefore, not
countervailable. See EC Response, Annex 1.
The GOI responds that the ESF has been substantially modified and can no longer be
considered to provide a countervailable subsidy due to lack of specificity. See GOI Response at
Annex 2, para. I. Further, Arinox received benefits under the ESF in the years 1990-92 under the old
program period which no longer exists. Id.
Department Position: We found benefits under the ESF Objectives 2 and 4 to be countervailable in
the original investigation. See Investigation, 64 FR at 30630-1. 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). Thus, we find that the
European Social Fund still exists and continues to provide 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 the Department should report the rate calculated in
the investigation as the rate most indicative if the order were revoked. See Domestic Response at 58.
The domestic parties urge the Department to use the investigation rates instead of the Section 129
review rates because the Section 129 review rates are 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.
In any case, the Department should not revoke the order as 1) subsidies continue to exist – even the
Department’s section 129 Determination indicates that TKAST continues to receive subsidies at a 1.62
percent rate; and 2) the Section 129 Determination is on appeal in the CIT, and if overturned, would
result in an even higher level of subsidization. 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 CVD 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.
Department Position: The Department normally will report to the ITC, as the net countervailable
subsidy likely to prevail if the order is revoked, a rate selected from the investigation because that is the
only calculated rate that reflects the behavior of exporters and foreign governments without the
discipline of an order in place. However, this rate may not be the most appropriate to report 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 does not take
into account a program found to be countervailable in a subsequent administrative review. Therefore,
under appropriate circumstances, the Department may make adjustments to the net countervailable
subsidy determined.
In the original investigation the Department found a net subsidy rate of 12.22 percent for
TKAST, 1.03 percent for Arinox, and 12.09 percent for “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 TKAST’s pre-privatization subsidies were
terminated as a result of an arm’s length, fair market sale. Accordingly, the Department revised
TKAST’s rate from 12.22 percent to 1.62 percent and the “all others” rate from 12.09 percent to 1.61
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). Thus, the Department believes that
it is appropriate to take into account the Section 129 results in this subsequent sunset review.
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 contends that there can be no benefit
from this program after 2006 and the remaining benefits are so small – 0.049 percent based on its
calculations – as to be de minimis in the absence of any other subsidies. See GOI Response at Annex
1(G).
Department Position: The Department may make adjustments to the net countervailable subsidy
determined in the investigation under certain circumstances, 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 CVD order on SSSSC
from Italy, the Department conducted no administrative reviews. We agree with GOI and the EC that
Law 451/94 has officially been terminated and that Arinox no longer receives benefits from this
program. See GOI Response at Annex 3(C) and Calculation Memorandum for Arinox, Final
Countervailing Duty Determination of Stainless Steel Sheet and Strip in Coils from Italy - Law 451/94
Early Retirement Program. However, record evidence shows that TKAST workers continue to
receive benefits under this program. See GOI Response at Annex 1(G). As a result, we will not adjust
the net subsidy rate that we report to the ITC. Even if it were appropriate to adjust the rate for
declining benefits to TKAST, the respondent interested parties provide no data that would allow an
accurate adjustment. However, record evidence shows that this program has terminated and benefits
have ceased for Arinox; therefore, we will adjust the rate for Arinox.
3. New Subsidy Allegation
Comment 8: Newly Alleged Subsidy - Energy Subsidies to Electrical Steel Operations Plant
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 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.
Good cause may be shown where information on such program came into existence after the most
2We note Article 6.1 of the Subsidies Agreement expired effective January 1, 2000.
completed administrative review, and interested parties provided information or evidence to warrant
consideration of the newly alleged program.
In this case, because there have been no administrative reviews, and the information regarding
the alleged subsidy program did not come into existence until after the last opportunity to request an
administrative review, we find good cause to consider the domestic interested parties’ allegation.
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
provide a benefit, (e.g., 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.
Nature of the Subsidy
Consistent with section 752(a)(6) of the Act, the Department will provide information to the
ITC on the nature of the subsidy and whether the subsidy is a subsidy described in Article 3 or Article
6.1 of the Subsidies Agreement. No receipt of benefits under these countervailable programs are
contingent upon exports or the substitution of domestic over imported goods; therefore, these programs
do not fall within the definition of a subsidy under Article 3 of the Subsidies Agreement. Furthermore,
our review of the determinations on the record does not lead us to conclude that these programs fall
within the definition of a subsidy under Article 6.1.2
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:
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13
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Manufacturer/Producer/Exporter Net Countervailable Subsidy (percent)
TKAST 0.80
Arinox 0.34
All Others 1.61
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Any interested party may request a hearing within 30 days of publication of this notice in
accordance with 19 CFR 351.310(d)(1). Any hearing, if requested, will be held on February 16,
2005. Interested parties may submit case briefs no later than February 8, 2005, 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 February 14, 2005, 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 April 27, 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
____________________________
James J. Jochum
Assistant Secretary
for Import Administration
12/17/04
____________________________
Date