47 FR 26327
NOTICES
DEPARTMENT OF COMMERCE
Preliminary Affirmative Countervailing Duty Determinations; Certain
Steel Products From Italy
Thursday, June 17, 1982
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AGENCY: International Trade Administration, Commerce.
ACTION: Preliminary affirmative countervailing duty determinations.
SUMMARY: We preliminarily determine certain benefits which constitute subsidies
within the meaning of the countervailing duty law are being provided to
manufacturers, producers, or exporters in Italy of certain steel products, as
described in the "Scope of the Investigations" section of this notice. The estimated
net subsidy is indicated in the "Suspension of Liquidation" section
of this notice. Therefore, we are directing the U.S. Customs Service to suspend
liquidation of all entries of the products subject to these determinations which are
entered, or withdrawn from warehouses, for consumption, and to require a cash
deposit or bond on these products in the amount equal to the estimated net subsidy.
If these investigations proceed normally, we will make our final determinations by
August 24, 1982.
EFFECTIVE DATE: June 17, 1982.
FOR FURTHER INFORMATION CONTACT:
Charles E. Wilson, Office of Investigations, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, NW., Washington, D.C. 20230, telephone: (202)
377- 5288.
SUPPLEMENTARY INFORMATION:
Preliminary Determinations
Based upon our investigations, we preliminarily determine there is reason to believe
or suspect certain benefits which constitute subsidies within the meaning of section
701 of the Tariff Act of 1930, as amended ("the Act"), are being provided to
manufacturers, producers, or exporters in Italy of certain steel products, as
described in the "Scope of the Investigations" section of this notice. For purposes of
these investigations, the following programs are preliminarily found to be subsidies.
Recapitalizations and conversion of debt to equity.
Preferential loans.
Capital grants.
Social security payment exemptions.
We estimate the net subsidy to be the amount indicated in the "Suspension of
Liquidation" section of this notice.
Case History
On January 11, 1982 we received petitions from the United States Steel Corporation;
counsel for Bethlehem Steel Corporation; and counsel for Republic Steel
Corporation, Inland Steel Company, Jones & Laughlin Steel, Inc., National Steel
Corporation, and Cyclops Corporation ("the Five"), filed on
behalf of the U.S. industry producing hot-rolled carbon steel sheet and strip and
cold-rolled carbon steel sheet and strip. The petitions alleged that certain benefits
which constitute subsidies within the meaning of section 701 of the Act are being
provided, directly or indirectly, to the manufacturers, producers, or exporters in
Italy of the steel products listed above. Counsel for Bethlehem Steel Corporation
and counsel for the Five also alleged that "critical circumstances" exist, as defined in
section 703(e) of the Act.
We found the petitions to contain sufficient grounds upon which to initiate
countervailing duty investigations, and on February 1, 1982, we initiated
countervailing duty investigations (47 FR 5746-47). We stated that we
expected to issue preliminary determinations by April 6, 1982. We subsequently
determined that the investigations are "extraordinarily complicated", as defined in
section 703(c) of the Act, and postponed our preliminary determinations for 65
days until June 10, 1982 (47 FR 11738-39).
Since Italy is a "country under the Agreement" within the meaning of section
701(b) of the Act, injury determinations are required for these investigations.
Therefore, we notified the U.S. International Trade Commission ("ITC") of our
initiations. On February 26, 1982, the ITC preliminarily determined that there is a
reasonable indication that these imports are materially injuring a U.S. industry.
We presented questionnaires concerning the allegations to the Delegation of
the Commission of the European Communities and the government of Italy in
Washington, D.C. On April 30, 1982, we received the responses to the
questionnaires.
Scope of the Investigations
The products covered by these investigations are:
Hot-rolled carbon steel sheet and strip.
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Cold-rolled carbon steel sheet and strip.
The products are fully described in Appendix A which appears with the notice of
"Preliminary Affirmative Countervailing Duty Determinations, Certain Steel
Products from Belgium", in this issue of the Federal Register. The product definition
of hot-rolled carbon steel sheet and strip has been amended since the initiation of
these investigations (47 FR 5739-40).
Italsider S.p.A., now reorganized as Nuova Italsider S.p.A. ("Italsider"), Teksid S.p.A.
and Falck S.p.A. are the only known producers and exporters in Italy of the
subject products which were exported to the United States. The period for which we
are measuring subsidization is the calendar year 1981, which coincides with
Italsider's fiscal year.
Analysis of Programs
In their responses, the government of Italy and the Delegation of the
Commission of the European Communities provided data for the applicable periods.
Additionally, we received information from Italsider, which produced and exported
hot-rolled carbon steel sheet and strip and cold-rolled carbon steel sheet and strip
which were exported to the United States during 1981.
Throughout this notice, general principles applied by the Department of Commerce
to the facts of the current investigations concerning certain steel products are
described in detail in Appendix B which appears with the notice of "Preliminary
Affirmative Countervailing Duty Determinations, Certain Steel Products from
Belgium", in this issue of the Federal Register (hereinafter Appendix B). Appendix C
which also appears with the above cited Belgium Federal Register notice is a
description of programs administered by organizations of the European
Communities (hereinafter Appendix C). Based upon our analysis to date of the
petitions and responses to our questionnaires, we preliminarily determine the
following.
I. Programs Preliminarily Determined to be Subsidies
We preliminarily determine subsidies are being provided to manufacturers,
producers, or exporters in Italy of hot-rolled carbon steel sheet and strip and
cold-rolled carbon steel sheet and strip under the following programs.
A. Equity Infusions
From 1977 through 1981 Italsider, an indirectly government-owned steel producer,
received five equity infusions, including a conversion of debt to equity in 1977. The
funding flowed directly from Italsider's government- controlled parent and holding
company, Finsider, or indirectly from Finsider's government-owned parent, the
Institute of Industrial Reconstruction (IRI).
As described in more detail in Appendix B, we do not consider equity infusions by
the government or, in this case, a government-controlled company, as subsidies per
se. In this case, however, a government-controlled entity directed the infusion of
capital in the form of equity shares into a company which had sustained a
succession of massive losses (see section below on preferential loans). Since we have
preliminarily concluded that the investments were inconsistent with commercial
considerations at the time made, a subsidy potentially exists.
Since Italsider's shares were traded, we compared the price the Italian government
paid per share when it bought Italsider's stock through Finsider with the average
price of Italsider's stock on the market the month before the equity infusion was
announced. We compared the difference in the stock prices
and multiplied this figure by the additional number of shares the government
received. We found this overpayment to be a subsidy and treated it as a grant in the
year it was received, assuming a fifteen year average useful life of capital assets
(according to the grant methodology in Appendix B). We then totaled the 1981
allocations of each of these equity infusions to determine the total benefit from the
program in 1981.
Based on information available to us to date, the equity infusions do not appear
earmarked for specific products. we allocated the subsidies arising from the capital
infustions over all Italsider steel products, which resulted in an ad valorem subsidy
value of 5.15 percent for each of the two products under investigation.
B. Preferential Loans
We preliminarily determine that Italsider has received benefits from several types
of preferential loans. We considered all preferential loans countervailable. We
included loans for reconstruction and reconversion of certain Italsider steel
facilities that produce the products under investigation, because we were unable to
determine from the information furnished to us which, if any, loans were from
programs which might be generally available and, therefore, not countervailable.
We did not, however, include loans made for disaster relief since this was general
assistance available to anyone in affected areas. Although not all areas would be
eligible at any one time, disaster relief is not selective in the same manner as other
regional programs since there is no predetermination of eligible areas and no part of
the country is excluded from eligibility in principle.
For loans made to Italsider before 1975 with principal outstanding in 1981, we
compared the repayment schedule of the actual loan with a repayment schedule of a
commercial loan made at the benchmark interest rate (the rate for a similar loan
made consistent with commercial considerations). Because of a lack of data on
comparable commercial loans, for purposes of this preliminary determination we
used average corporate bond rates, by month, as the benchmark. Where we found
loans from special credit institutions with interest rates below the benchmark or
preferential repayment schedules, we have considered these loans preferential and
calculated the subsidy using the methodology described in Appendix B.
Loans to Italsider made through the Cassa per il Mezzogiorno, a regional
development fund for southern Italy, were of two kinds: those with preferential
interest rates, and those where part of the interest payments was paid by Casmez, a
government agency. The former we treated as we have other preferential loans,
determining a benchmark interest rate and comparing the
repayment schedule of a loan using this rate with the repayment schedule of the
preferential loan for loans made in years before 1975. For loans before 1975 with
partial interest paid by Casmez, we treated the government's partial interest
payment in 1981 as a grant in that year. These amounts were each less than one
percent of gross revenues and normally expensed in one year (see Appendix B). If
those loans contained preferential repayment terms as well, we used the general
loan methodology and found both provisions to be countervailable.
Petitioners alleged that Italsider has been uncreditworthy. Italsider has lost money
consistently in recent years, losing 72 billion lire in 1975, 130 billion lire in 1976,
395 billion lire in 1977, 349 billion lire in 1978, 258 billion lire in 1979, 747 billion
lire in 1980, and 1,688 billion lire in 1981. In light of the fact that Italsider's
revenues have not covered its costs for several years, we concur with the
petitioners that Italsider should be considered uncreditworthy for the years 1975
through 1981. Therefore, loans made during these years with principal outstanding
in 1981 were treated as loans to uncreditworthy companies as described in
Appendix B.
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Essentially we treated the loans as equity investments (for reasons described in
Appendix B) and compared Italsider's rate of return in 1981 with the average rate of
return on investment in Italy less 1981 principal and interest payments on the
loan. The average rate of return on investment in
Italy was based on an average earnings yield on industrial shares. Where the
subsidy calculated for 1981, using this methodology, exceeds the subsidy amount
which would be calculated for 1981 if the loans were treated as outright grants of the
principal in the year received, we used the grant methodology described in
Appendix B, for reasons described therein.
Loans were also granted to Italsider for housing aid from the European Coal and
Steel Community ("ECSC"). Our reasons for preliminarily determining that the ECSC
assistance for housing loans constitutes a subsidy are presented in Appendix C.
To determine the subsidy value of these housing loans, lacking information on which
Italian loans were paid through ECSC borrowings and which were from
producer-generated funds, we have determined the percentage of total ECSC funds
which came from borrowings each year and considered that portion of each housing
loan in that year to be a subsidy. For Italsider, all housing loans attributable to the
products under investigation were made in years after 1974 and, therefore, we
calculated the value of the subsidy essentially as though it were an equity infusion in
the year given, minus any principal and/or interest paid on these loans in 1981 (see
uncreditworthy loan methodology in Appendix B). If this methodology resulted in a
subsidy for 1981 exceeding the amount which would be calculated for 1981 if the
loans were treated as outright grants, we used the grants methodology (see
Appendix B).
Italsider claimed that one loan was given under Article 54 of the ECSC for
environmental purposes and that this was not a subsidy. According to the
methodology in Appendix C, we preliminarily determine that the interest rebate
portion of this loan is not a subsidy. Since the loan itself was given under Article 54,
we preliminarily determine that this is countervailable (see Appendix C). When
calculating the amount as an uncreditworthy loan (see Appendix B), the result was
an amount greater than if we had treated the principal as an outright grant.
Therefore, we used the grant methodology as described in Appendix B.
We received information regarding a preferential loan for research and
development given to Italsider which then shared the results with the Finsider
group of steel producers. Thus, we allocated the 1981 subsidy benefit from this loan
over all Finsider steel production for 1981.
For all talsider preferential loans specifically targeted to facilities procducing the
products under investigation,we determine the ad valorem subsidy by dividing the
total benefit, in lire, by Italsider's value of production of hot-and cold-rolled sheet
and strip in 1981. For any loans not specifically targeted to such facilities for which
we received information, we determined the ad valorem subsidy by dividing the
total benefit, in lire, by Italsider's total value of production of all products in 1981.
We have determined that the net subsidy due to preferential loans for hot-rolled
sheet and strip and cold- rolled sheet and strip is 8.39 percent ad valorem.
C. Capital Grants
Italsider received grants from the Cassa per il Mezzogiorno as well as loans,
described above. Firms locating in the Mezzogiorno (southern Italy) are eligible
for special incentives. These grants were awarded from 1967 through 1981 for the
general construction and expansion of its facilities. We have information only about
grants received for Italsiders plants which produce the products under
investigation. We find these grants to be countervailable because they are available
only to plants located in this region.
To determine the amount of the subsidy, we used the grant methodology in
Appendix B. We allocated the grants over 15 years and, to obtain an ad valorem
subsidy, divide by Italsider's total value of production of hot- and cold- rolled
carbon steel sheet and strip. Based on these calculations, we preliminarily
determine the subsidy on hot- and cold-rolled sheet and strip to be 1.48 percent ad
valorem.
D. Social Security Payments Exemption
Under the Cassa per il Mezzogiorno regional development program, the
government of Italy allows exemptions from social security payments
(normally paid to the Istituto Nazionale Previdenza Sociale) for companies which
operate plants in the south of Italy. We preliminarily determine these
exemptions to be countervailable. Italsider operates a plant in this area which
produces the products under investigation and received exemptions in 1981 from
these payments. Therefore, we calculated the ad valorem subsidy by dividing the
amount of the exemption granted by the total value of Italsider's production of hot-
and cold-rolled sheet and strip. For the products under investigation this subsidy is
3.28 percent ad valorum.
II. Programs Preliminarily Determined Not To Be Subsidies
We preliminarily determine subsidies are not being provided to manufacturers,
producers, or exporters in Italy of the products under investigation under the
following programs.
A. ECSC Restructuring Loan
Petitioners alleged that ECSC loans for restructuring are subsidies. Italsider claims
that, under Article 56, it has received one such loan, relevant in 1981, for the
products under investigation, but that this is not an
assist to steel products. As discussed in Appendix C, we preliminarily determine
that this program does not confer countervailable benefits.
B. Italian Government Labor Assistance
Petitioners alleged that the Italian steel industry benefits from labor assistance
programs where the government of Italy assumes such costs as redundancy
payments, housing allowances and special assistance to support employment.
Italsider has received such assistance. We have determined that these programs are
not countervailable because our information indicates that these programs are
generally available on equal terms to all firms in Italy.
C. Assistance to Coal Suppliers
Petitioners alleged that Italsider received a subsidy through its purchases of
subsidized German coking coal. Italsider claims that all of its coal is brought at
world prices from various suppliers, including purchases from companies in the
United States. For the reasons described in Appendix B, Italsider does not receive a
countervailable benefit from its purchases of German coking coal which might be
subsidized.
D. Research and Development ("R&D") Aid
Petitioners alleged that the EC and the government of Italy provided funds for
R&D. We have evidence that an ECSC grant was given to Italsider for the products
mentioned in the "Scope of the Investigations" section. For the reasons elaborated in
Appendix C, we preliminarily determine this ECSC progam does not confer
countervailable benefits. We have no knowledge of any R&D grants given by the
Italian government.
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Following the receipt of responses by the Italian government and Italsider,
petitioner urged that the Department obtain additional information regarding ECSC
funding to Italsider through the Centro Sperimentale Metallurgico, an Italian
research organization. We will seek such information.
III. Programs Preliminarily Determined Not To Be Utilized
We preliminarily determine subsidies are not being provided to manufacturers,
producers, or exporters in Italy of hot- and cold-rolled carbon steel sheet and
strip under the following programs because they have not been utilized.
A. Preferential Bond Issuances
Petitioners alleged that Italsider has received benefits from bond issuances
containing preferential provisions Italsider has no outstanding bonds.
B. Tax Incentives
Petitioners alleged that under the Cassa per il Mezzogiorno regional development
program the Italian steel industry receives exemptions from national and local
income taxes. To be eligible for any decreased national income taxes under this
program a company must be headquartered in the south of Italy. Since Italsider
is headquartered in Genoa which is not in southern Italy, we preliminary
determine that it receives no exemption from national income taxes under this
program. As regards exemption from local income taxes, Italsider claims that it has
not applied for these exemptions recently, and stated that there are no carry
forward provisions. We will seek additional information regarding this program.
C. Forgiveness of Utility Payments
One of the petitioners alleged that the Italian government excused Italsider from
paying several of its utility bills for the first half of 1981. Italsider claims that this
forgiveness was not during the period of time for which we had
requested information and also that the assistance did not relate to the products
under investigation. We will seek further information.
IV. Programs for Which Additional Information Is Needed
The following programs were alleged by the petitioners to be subsidies. At this time,
we do not have sufficient information to determine whether these programs are
providing manufacturers, producers, or exporters in Italy of hot- rolled carbon
steel sheet and strip and cold-rolled carbon steel sheet and strip benefits which
constitute subsidies within the meaning of the countervailing duty law. We
will seek additional information regarding these programs before reaching final
determinations.
A. Labor Assistance
Italsider states that EC labor aid is channelled through the European Social Fund
and that the programs funded are not the legal responsibility of the company. We
will seek further clarification regarding the operation of this fund and any assistance
thus provided to Italsider.
One petitioner also asserted that the Italian government paid Italsider's monthly
payroll costs for part of 1981. At present, we have insufficient data
about this alleged assistance. We will seek further information.
B. Preferential Export Financing
Petitioners alleged that the Italian steel industry benefits from prefential export
financing. Italsider replies that such aid does not apply to it.
C. Preferential Transportation Rates
Petitioners alleged that Italian steel companies receive preferential transportation
rates for their products. Italsider states this program was not applicable to it. We
have reason to believe that some firms located in southern Italy can benefit
from reduced transportation fees through the Cassa per il Mezzogiorno. We will seek
further information.
Negative Determination of Critical Circumstances
Counsel for Bethlehem Steel Corporation and counsel for the Five alleged that
imports of all steel products under investigation present "critical circumstances".
Under section 703(e)(1) of the Act, critical circumstances exist when the alleged
subsidy is inconsistent with the Subsidies Code of the General Agreement on Tariffs
and Trade and "there have been massive imports of the class or kind of merchandise
which is the subject of the investigation over a relatively short period."
Since these investigations were initiated, U.S. imports of hot-rolled carbon
steel sheet and strip from Italy amounted to 13,525 net tons in February,
15,716 net tons in March, and 1,994 net tons in April, the most recent month for
which import statistics are available. U.S. imports of cold-rolled carbon steel sheet
and strip from Italy averaged 626 net tons in February, 11,583 net tons in
March, and 1,399 net tons in April.
In the context of this industry, these products have not recently been massively
imported from Italy over a relatively short period of time. Therefore, critical
circumstances do not exist for hot-rolled carbon steel sheet and strip and
cold-rolled carbon steel sheet and strip from Italy.
Verification
In accordance with section 776(a) of the Act, we will verify data used in making our
final determinations.
Suspension of Liquidation
In accordance with section 703 of the Act, we are directing the U.S. Customs
Service to suspend liquidation of all entries of hot-rolled carbon steel sheet and strip
and cold-rolled carbon steel sheet and strip which are entered, or withdrawn from
warehouse, for consumption, on or after the date of publication
of this notice in the Federal Register and to require a cash deposit or bond for each
such entry of the merchandise in the amounts indicated below:
---------------------------------------------------------------
Manufacturer/producer/exporter Ad valorem rate (percent)
---------------------------------------------------------------
Italsider ............................................... 18.30
All others .............................................. 18.30
---------------------------------------------------------------
This suspension will remain in effect until further notice.
ITC Notifications
In accordance with section 703(f) of the Act, we will notify the ITC of our
determinations. In addition, we are making available to the ITC all nonprivileged
and nonconfidential information relating to this investigation. We will allow the ITC
access to all privileged and confidential information in our files, provided the ITC
confirms that it will not disclose such information, either publicly or under an
administrative protective order, without the written consent of the Deputy
Assistant Secretary for Import Administration.
Public Comment
In accordance with ยง 355.35 of the Commerce Department Regulations, if requested,
we will hold a public hearing to afford interested parties an opportunity to comment
on these preliminary determination at 3:00 p.m. on July 15, 1982, at the U.S.
Department of Commerce, Room 6802, 14th Street and Constitution Avenue, NW.,
Washington, D.C. 20230. Individuals who wish to participate in the hearing must
submit a request to the Deputy Assistant Secretary for Import Administration,
Room 3099B, at the above address within ten days of this notice's publication.
Requests should contain: (1) The party's name, address,
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and telephone number; (2) the number of participants; (3) the reason for attending;
and (4) a list of the issues to be discussed. In addition, prehearing briefs must be
submitted to the Deputy Assistant Secretary by July 8, 1982. Oral presentations will
be limited to issues raised in the briefs. All written views should be filed in
accordance with 19 CFR 355.34, on or before July 19, 1982, at the above address
and in at least ten copies.
June 10, 1982.
Gary N. Horlick,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 82-16249 Filed 6-14-82; 9:30 am]
BILLING CODE 3510-25-M