92-c07

57 FR 57739

NOTICES

DEPARTMENT OF COMMERCE

(C-475-808)

Preliminary Affirmative Countervailing Duty Determinations and Alignment
of
Final Countervailing Duty Determinations With Final Antidumping Duty
Determinations: Certain Steel Products From Italy

Monday, December 7, 1992

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AGENCY: Import Administration, International Trade Administration,
Department of Commerce.

EFFECTIVE DATE: December 7, 1992.

FOR FURTHER INFORMATION CONTACT:Ross Cotjanle or Beth Graham, Office of
Countervailing Investigations, U.S. Department of Commerce, room 3099, 14th
Street and Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-
3534 or 482-4105, respectively.

Preliminary Determinations and Alignments

The Department preliminarily determines that 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.
For information on the estimated net subsidies, please see the Suspension of
Liquidation section of this notice.
On November 24, 1992, in accordance with section 705(a)(1) of the Tariff Act of
1930, as amended (the Act) (19 U.S.C. 1671d(a)(1)), petitioners in the
above-referenced investigations requested that we align the due date for the final
countervailing duty determinations with that of the final antidumping duty
determinations for certain steel products. Accordingly, we are aligning these final
determinations. Therefore, the final countervailing duty determinations are
now due not later than April 12, 1993.

Case History

Since the publication of the notice of initiation and postponement of preliminary
determinations in the Federal Register (57 FR 32970, July 24, 1992), the following
events have occurred.
On August 10, 1992, we issued a questionnaire to the Government of Italy (GOI)
in Washington, DC, concerning petitioners' allegations. On August 20, 1992, we
received a partial response from the GOI indicating the proper responding
companies in these investigations.
On October 5, 1992, we received responses from the GOI, ILVA S.p.A. (ILVA) and
Acciaierie e Ferriere Lombarde Falck S.p.A. (Falck).
On October 23, 1992, we presented the GOI, ILVA and Falck with
supplemental/deficiency questionnaires and received responses from these parties
on November 9, 1992.

Scope of Investigations

The products covered by these investigations, certain steel products, constitute the
following two separate "classes or kinds" of merchandise, as found in Appendix 1 to
this notice: (1) Certain cold-rolled carbon steel flat products and (2) certain
cut-to-length carbon steel plate.

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Injury Test

Because Italy is a "country under the Agreement" within the meaning of section
701(b) of the Act, the U.S. International Trade Commission (ITC) is required to
determine whether imports of certain steel products from Italy materially
injure, or threaten material injury to, U.S. industries. On August 21, 1992, the ITC
preliminarily determined that there is a reasonable indication that industries in the
United States are being materially injured or threatened with material injury by
reason of imports from Italy of the subject merchandise (57 FR 38064, August
21, 1992).

Respondents

The GOI is a respondent for each class or kind of merchandise subject to these
investigations. The following is a list of respondent companies for each class or kind
of merchandise subject to these investigations:

Certain Cold-Rolled Carbon Steel Flat Products

ILVA and Falck.

Certain Cut-To-Length Carbon Steel Plate

ILVA and Falck.

Corporate History of Respondent Companies

Finsider/ILVA

Between 1937 and 1990, Finsider was the Italian public sector steel holding
company. Finsider was a financial subholding of Instituto per la Riscostruzione
Industriale (IRI), a public agency of the Italian government. Prior to 1981, the main
operating companies in the Finsider group were Italsider (primary producer of the
subject merchandise), Dalmine, Terni and Acciaierie di Piombino.
In 1981, the Finsider group was restructured into five operating companies: Nuova
Italsider (flat rolled products), Dalmine (tubes and pipes), Terni (special steels),
Acciaierie di Piombino (common long products) and Nuova Sias (special long
products). At the same time, Italsider transferred all of its assets (except two plants)
to Nuova Italsider. Italsider became a one-company holding company with Nuova
Italsider's stock as its primary asset.
In 1983, Finsider subscribed for additional Nuova Italsider shares and placed
Italsider in liquidation. In 1984, Italsider, in liquidation, transferred its
shareholdings in Nuova Italsider to Finsider. At the end of 1984, Finsider owned
100 percent of Nuova Italsider.
In 1987, Finsider restructured three of its main operating companies. Nuova
Italsider spun off its assets to Italsider (out of liquidation) and then transferred its
Italsider shares to Finsider. Deltasider spun off its assets to Nuova Deltasider,
Deltacogne and Deltavaldarno and transferred the shares of these three companies
to Finsider. Then, Finsider transferred Deltacogne and Deltavaldarno to Nuova
Deltasider. Terni spun off its assets to Terni Acciai Speciali, Lovere Sidermeccanica
and Attivita Industriali Triestine, and transferred each of the shares to Finsider.
Then, Lovere Sidermeccanica and Attivita Industriali Triestine were transferred to
Terni Acciai Speciali. After this restructuring, Nuova Italsider, Deltasider, and Terni
ceased operations. Italsider re-emerged as the steel sector's flat-rolled producer.
In 1988, the GOI liquidated Finsider and its main operating companies and
assembled the group's most productive assets, including Italsider's flat- products
facilities, into a new company, ILVA S.p.A. ILVA became operational on January 1,
1989, when it took over the viable assets from the liquidating companies (Italsider,
Terni Acciai Speciali, Nuova Deltasider) owned by the Finsider Group. The value of
the assets was based on an appraisal conducted under the auspices of the Civil Court
of Rome. Later, Nuova Deltasider sold
its ILVA shares to Italsider, and Nuova Deltasider was merged into ILVA.
On March 31, 1990, ILVA's remaining stockholders gave ILVA additional assets and
shareholdings for additional ILVA shares. Later that year, Finsider sold 100 percent
of Italsider's stock to ILVA, and Italsider was merged into ILVA.
On November 1, 1990, Finsider and Terni Acciai Speciali (ILVA's two remaining
stockholders) sold 100 percent of ILVA to IRI and IRI assumed all of Finsider's and
Terni Acciai Speciali's remaining debts. As of October 1, 1990, 100 percent of ILVA's
capital stock was owned by IRI.

Falck

Falck was established in 1906 in Milan as "Societa Anonima Acciaierie e Ferriere
Lombarde." In 1931, the company became Acciaierie e Ferriere Lombarde Falck.
Prior to 1991, Falck was the primary holding and operating company of the Falck
group. In 1991, the Falck group reorganized in order to implement an agreement
with ILVA. In early 1991, Falck transferred its strip division to Falck Nastri S.r.L.
(Nastri) and its plate division to Falck Lamiere S.r.L. (Lamiere). Nastri and Lamiere
were subsidiaries of Falck. ILVA purchased 30 percent (minority interest) of Nastri
and Lamiere. The agreement was
implemented to rationalize the production and commerce of the two companies.
ILVA also obtained a five percent equity interest in Falck in 1990. Respondents
state that ILVA does not exercise, nor is it entitled to exercise, any control over
Falck or its affiliates. Falck operates independently of ILVA.

Analysis of Programs

For purposes of these preliminary determinations, the period for which we are
measuring subsidies, the period of investigation (the POI) is calendar year 1991,
which corresponds to the fiscal years of ILVA and Falck.
In determining the benefits received under the various programs described below,
we used the following calculation methodology. We first calculated a country-wide
rate for each program. This rate comprised the ad valorem benefit received by each
firm weighted by each firm's share of exports, separately for each class or kind of
merchandise, to the United States. The rates for all programs were then summed to
arrive at a country-wide rate for each class or kind of merchandise. All benefits
calculated under the programs described below apply to both classes or kinds of
merchandise.
Pursuant to 19 CFR 355.20(d), for each class or kind of merchandise, we compared
the total ad valorem subsidy received by each firm to the country-wide
rate for all programs. The rate for Falck was significantly different from the
country-wide rate. Therefore, this firm received an individual company rate. For
ILVA, we recalculated the country-wide rate, based solely on the benefits received
by this firm. We then assigned the recalculated overall country-wide rate to ILVA,
and all other manufacturers, producers, and exporters, with the exception of Falck.
Based upon our analysis of the petition and the responses to our questionnaire, we
preliminarily determine the following:

Equityworthiness

We initiated on petitioners' allegation that ILVA and its predecessor companies,
Italsider and Nuova Italsider were unequityworthy during the period 1977-1991,
and, therefore, that equity infusions received during those years were inconsistent
with commercial considerations. The Department previously determined Italsider
to be unequityworthy throughout the period 1977-1981 in Final Affirmative
Countervailing Duty Determinations: Certain Steel Products from Italy,
47 FR 39356, (September 7, 1982), ("Steel Products"). Respondents have not
contested this finding; therefore, we

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preliminarily determine that Italsider was unequityworthy during the period
1977-1981.
To determine whether ILVA was equityworthy from 1982 through 1991, we
examined
several ratios including, the rate of return on assets, and rate of return on equity, in
each of these years and the three years prior to the infusion. Examination of these
ratios shows that ILVA was unprofitable in every year from 1977 through 1988.
ILVA's rate of return on assets ratios was negative between 1977 and 1988. Its rate
of return on equity was negative between 1977 and 1988, indicating that ILVA has
been unable to earn a positive rate of return for its shareholders. Based on these
ratios, we preliminarily determine ILVA to be unequityworthy at the time of each
government infusion.

Creditworthiness

ILVA

We initiated on petitioners' allegation that ILVA and its predecessor companies,
Italsider and Nuova Italsider were uncreditworthy during the period 1977-1991,
and, therefore, that loans received during those years were made on terms
inconsistent with commercial considerations. The Department previously
determined Italsider to be uncreditworthy throughout the period 1977-1981 in
Steel Products. Respondents have not contested this finding; therefore, we
preliminarily determine that Italsider was uncreditworthy during the period
1977-1981.

To determine whether ILVA was creditworthy from 1982 through 1991, we
examined the current ratio, quick ratio, times interest earned ratio, debt ratios, and
profit margin on sales for each of these years and the three prior years, when
available. In certain years, our analysis was limited to petitioners' data because the
respondents had not reported any information.
Examination of these ratios show that ILVA was unprofitable in every year from
1977 through 1988. ILVA's times interest earned and rate of return on assets ratios
were negative between 1977 and 1988. Based on these ratios, we preliminarily
determine ILVA to be uncreditworthy in each year from 1977 through 1991.

Falck

We initiated on petitioners' allegation that Falck was uncreditworthy during the
period 1977-1991, and, therefore, that loans received during those years were made
on terms inconsistent with commercial considerations.
To determine whether Falck was creditworthy, we examined the current ratio, times
interest earned ratio, debt to equity ratios, and profit margin on sales for each of
these years and the three prior years. Examination of these ratios show that Falck
was unprofitable from 1977 through 1979. Falck's interest coverage was negative
between 1977 and 1979. Based on these ratios, we
preliminarily determine Falck to be uncreditworthy in each year from 1977 through
1979.
Falck received minimum- and long-term loans from private sources in 1980 through
1984 and in 1986 through 1987. On this basis, we have preliminarily determined
Falck to be creditworthy for 1980 through 1988.
For the period 1989 through 1991, Falck's profit margin steadily increased and its
interest expense on long-term debt decreased. Falck's current ratio was stable
during this period. The company's quick ratio for 1990 was 1:1, which indicates that
Falck has sufficient liquidity to meet its current debt obligations. Based on these
ratios, we preliminarily determine Falck to be creditworthy for the period 1988
through 1991.

Specificity

When receipt of benefits under a program is not contingent upon exportation, the
Department must determine whether the program is specific to an enterprise or
industry, or group of enterprises or industries. Under the specificity analysis, the
Department examines both whether a government program is limited by law to a
specific enterprise or industry, or group thereof (i.e., de jure specificity) and
whether the government program is in fact limited to a specific enterprise or
industry, or group thereof (i.e., de facto
specificity). See 19 U.S.C. 1677(5)(B). In § 355.43(b)(2) of the Department's
proposed regulations (Countervailing Duties; Notice of Proposed
Rulemaking and Request for Public Comments 54 FR 23366 (May 31, 1989)
(Proposed Rules)), the Department has set forth the factors that may be considered
in determining whether there is specificity:
(i) The extent to which a government acts to limit the availability of a program;
(ii) The number of enterprises, industries, or groups thereof that actually use a
program;
(iii) Whether there are dominant users of a program, or whether certain enterprises,
industries, or groups thereof receive disproportionately large benefits under a
program; and
(iv) The extent to which a government exercises discretion in conferring benefits
under a program.
See also Final Affirmative Countervailing Duty Determination: Certain
Softwood Lumber Products from Canada 57 FR 22570 (May 28, 1992).

Equity Methodology

According to § 355.49(e) of the Proposed Rules, the Department measures the
benefit of equity investments in "unequityworthy" firms by comparing the
national average rate of return on equity with the company's rate of return on
equity during each year of the allocation period. The difference in these amounts,
the so-called rate of return shortfall (RORS), is then multiplied by the amount of the
equity investment to determine the countervailable benefit in the given year.
The Department has preliminarily concluded that the RORS methodology does not
provide an accurate measure of the benefits arising from government equity
investments in unequityworthy companies. When the Department finds that a
company is unequityworthy and, hence, that the government's equity investment is
inconsistent with commercial considerations, we are effectively finding that the
company could not attract share capital from a reasonable investor. When a
company is in such poor financial condition that it cannot attract capital, any
capital it receives benefits the company as if it were a grant and no earnings of the
company in subsequent years should be used to offset the benefit.
Moreover, in calculating the company's rate of return, no adjustment is made to
eliminate the effect of past or current subsidies. Therefore, those subsidies that
increase the company's rate of return serve to reduce the amount of the subsidy
arising from government equity investments in subsequent years. In addition, this
method does not compensate for the effect of prior year results on equity in
subsequent years, thus measuring the rate of return against an equity other than
that invested in the transaction in question.

For these reasons, we have preliminarily determined that equity investments in
unequityworthy companies will be treated as grants given in the year of the equity
investment. Accordingly, we will value the benefits using the grants methodology
described below.
When a market-determined benchmark price for equity exists, we will continue to
use that benchmark to determine whether the government's purchase of equity
confers a subsidy and to measure the amount of the subsidy.

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Grant Methodology

Our policy with respect to grants is (1) to expense recurring grants in the year of
receipt, and (2) to allocate non-recurring grants over the average useful life of assets
in the industry, unless the sum of grants provided under a particular program is less
than 0.5 percent of a firm's total or export sales (depending on whether the program
is a domestic or export subsidy) in the year in which the grant was received. See,
e.g., Final Affirmative Countervailing Duty Determination; Fresh and Chilled
Atlantic Salmon from Norway. (Salmon from Norway), 56 FR 7678 (February 25,
1991). We have considered the grants provided under the programs described
below to be non- recurring, unless otherwise noted, because the recipient cannot
expect to receive benefits on an ongoing basis from review period to review period.
See, Final Affirmative Countervailing Duty Determination; Certain Fresh Atlantic
Groundfish from Canada, 51 FR 10041 (March 24, 1986). (In this regard, we are
reexamining the approach to distinguishing recurring from non-recurring benefits
set forth in the three-part test found in the preamble of the Proposed Rules).
Therefore, we have allocated the benefits over 15 years, which the Department
considers to be reflective of the average useful life of assets in the steel industry (see
§ 355.49(b)(3) of the Proposed Rules).
The benefit form each of the grant programs discussed below was calculated using
the declining balance methodology described in the Department's Proposed Rules
(see, § 355.49(b)(3)) and used in prior investigations (see, e.g., Salmon from
Norway). For the discount rate used in these calculations, we used the lending rates
published in the International Monetary Fund's International Financial Statistics
because the companies did not break out their subsidized loans from unsubsidized
loans in their reporting of their actual cost for long- term, fixed-rate debt. Since
ILVA and Falck were uncreditworthy in years in which grants were approved, we
have used the highest annual interest rate reported in the IMF publication and have
added a risk premium to the benchmark interest rate in accordance with §
355.44(b)(6)(iv) of the Proposed Rules.

A. Programs Preliminarily Determined To Be Countervailable

We preliminarily determine that subsidies are being provided to manufacturers,
producers, or exporters in Italy of certain steel products under the following
programs:

1. Equity Infusions Into Italsider/Nuova Italsider/ILVA and Extinguishment of
Equity Infusions

The GOI, through IRI, made equity investments in Italsider and Nuova Italsider
between 1978 and 1987. The GOI made these investments by transferring funds to
the IRI Group which either directly or through Finsider made equity infusions into
the companies. In 1989, ILVA was formed by IRI with an equity infusion of 2.3
trillion lira. IRI made equity infusions into ILVA between 1990 and 1991. IRI also
extinguished equity in Finsider from 1981 through 1986 and in 1988 to cover losses.
We preliminarily determine these equity infusions to be specific since IRI provided
these funds to specific enterprises. Moreover, as discussed above, we have
preliminarily determined that Italsider and ILVA were unequityworthy between
1977 and 1991. Therefore, we find that the equity infusions were made on terms
inconsistent with commercial considerations and preliminarily determine them to
be countervailable.
Consistent with the methodology described above concerning valuation of
benefits from equity infusions, we treated each equity infusion as a non- recurring
grant.
We calculated the benefit for the POI as described in the Grant Methodology section
of the notice. We divided the benefit by ILVA's 1991 sales adjusted to reflect steel
activities prior to its restructuring. For equity infusions into ILVA made between
1989 and 1991, we divided the benefit by ILVA's total steel sales for 1991. On this
basis, we determine the country-wide subsidy rate for this program to be 24.57
percent ad valorem for cold-rolled carbon steel flat products and cut-to-length
carbon steel plate. Falck's significantly different subsidy rate is 0.00 percent ad
valorem.
ILVA has argued that some of the capital infusions benefitted facilities that are no
longer in use or have been sold. It asserts that the Department should reduce any
net subsidy rate by an amount attributable to such closed or sold facilities. ILVA
provided the percentage of each infusion that is attributable to facilities now
producing the subject merchandise; however it did not provide support
documentation for these percentages. As a result the Department has declined to
make any adjustment for purposes of these preliminary determinations, but will
consider this issue further particularly with respect to facilities sold, for the final
determinations.
With respect to equity extinguishments, we have determined that any potential
benefits from a government's purchase of equity arise at the time of the equity
investment. Because the equity methodology preliminarily adopted in these
determinations does not recognize the subsequent performance of the company
receiving the equity investment and treats the equity investment as a grant, the
later write-off of the equity is irrelevant. Therefore, no additional benefits arise at
the point of extinguishment.

2. Debt Forgiveness in Connection With the 1981 Restructuring Plan

The 1981 restructuring plan of the iron and steel industry included the closure of
plants, the assumption by Finsider of Italsider's debts to IRI, and the subsequent
forgiveness of these debts in 1985.
On September 19, 1981, Italsider conveyed all of its company facilities to Nuova
Italsider, and received 99.99 percent of Nuova Italsider's shares in return. In
December 1984, Italsider sold those shares to Finsider. The sales price was 714.6
billion lire. As payment, Finsider assumed Italsider's 696.4 billion lire debt to IRI.
The remaining amount Finsider paid directly to Italsider. ILVA argues that the debt
assumption should not be considered a grant by Finsider, but rather payment for a
package of Nuova Italsider's shares.
In 1984, when Italsider's liquidation was revoked, Finsider forgave a 563.5 billion
lire loan it had granted to Italsider.

We have determined that the restructuring discussed above merely shifted assets
and debt within a family of companies, all of which were owned by Finsider and,
ultimately, by the GOI. Therefore, we preliminarily determine that both the 696.4
billion lire and the 563.5 billion lire debt forgiveness were specifically limited to the
steel companies and are countervailable.
We are treating this debt forgiveness as a non-recurring grant. We calculated the
benefit for the POI as described in the Grant Methodology section of the notice. We
divided the benefit by ILVA's 1991 sales adjusted to reflect steel activities prior to
its restructuring. On this basis, we determine the country-wide subsidy rate for this
program to be 5.70 percent ad valorem for cold-rolled carbon steel flat products
and cut-to-length carbon steel plate. Falck's significantly different subsidy rate is
0.00 percent ad valorem.

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3. Debt Forgiveness in Connection With the 1987-88 Restructuring Plan

The Finsider Group restructuring plan was developed at the end of 1987 and was
approved by the GOI on June 19, 1988, and by the EC's Council of Ministers on
December 23, 1988. (According to respondents, there was not a separate 1988
restructuring plan.) The plan was aimed at restoring an industrial, financial, and
economic balance to the public iron and steelmaking sector in Italy. The
restructuring plan included the voluntary liquidation by IRI of the Finsider
Group, and IRI's assumption of the debts not covered by the assets of the companies
being liquidated. The Group's industrial and financial assets were to be sold to ILVA
at a price determined by an expert appraisal made under the auspices of the Civil
Court of Rome.
The Finsider's Group's total liabilities were 10.6 trillion lire, of which ILVA assumed
4.3 trillion lire and IRI covered the remaining 6.3 trillion lire. Respondents state
that under Italian law regarding voluntary liquidations, the shareholder (IRI) is
obliged to pay all liabilities. The GOI expects the liquidation to conclude in 1993.
ILVA asserts that, from 1988 onwards, IRI covered the expenses related to the last
phase of the steel industry restructuring directly from its own funds, without GOI
assistance. Since IRI was self-financing during the 1987-88 restructuring, ILVA
argues that the debt forgiveness did not confer countervailable benefits to ILVA.
We preliminarily determine that the debt assumption incurred by IRI related to the
1987-88 restructuring plan was specifically limited to these steel companies and is
countervailable. Based on our determination in Steel Products, we consider IRI to
be a government entity. IRI is 100 percent owned by the GOI and its board of
directors is made up of representatives from the major ministries in Italy.
Therefore, this restructuring transaction amounted to government assumption of
debt.
We treated this debt forgiveness as a non-recurring grant. We calculated the
benefit for the POI using the Grant Methodology section of the notice. We divided
the benefit by ILVA's 1991 total sales. On this basis, we determine the country-wide
subsidy rate for this program to be 18.00 percent ad valorem for cold-rolled carbon
steel flat products and cut-to-length carbon steel plate. Falck's significantly different
subsidy rate is 0.00 percent ad valorem.

4. Debt Forgiveness to ILVA (1990)

Prior to the creation of ILVA, Finsider assumed 48.2 billion lire in Italsider's losses.
Later when ILVA was created, ILVA paid 150 billion lire for Italsider's shares, which
included the 48.2 billion lire debt assumption. Because ILVA would have paid a
correspondingly lower price for Italsider's shares but for this debt assumption, we
have preliminarily determined this transaction to be countervailable.
However, ILVA argues that it received no benefit because Finsider was, in effect,
reimbursed for the amount of losses it covered since the price ILVA paid for shares
reflected the amount of the debt assumption. ILVA contends that since the debt
forgiveness is reflected in its books, the only benefit the company received was a
reduction in its tax liability.
We have treated this debt assumption as a non-recurring grant. However, because
the benefits provided in 1990 were less than 0.50 percent of the
company's sales in that year, we have expensed the benefit in 1990. Therefore, there
is no countervailable benefit attributable to the POI.

5. Government Loan Guarantees

Italsider and Nuova Italsider obtained guarantees from IRI on all of their loans.
ILVA asserts that these guarantees were obtained at commercial rates and, thus,
provide no countervailable benefits, but it provides no evidence of what fees were
actually paid. Also, the GOI states that it is common practice for Italian companies
to guarantee the loans of their subsidiaries. However, it has provided no evidence to
support this.
Based on the fact that we received no information on the guarantee fees paid by
Italsider, and no supporting evidence that it is standard practice for Italian
companies to guarantee their subsidiaries' loans, we preliminarily determine that
government loan guarantees are countervailable.
Because we did not receive sufficient information regarding guarantee fees, we have
based our determination on "best information available" (BIA). Section 776(c)
requires the Department to use BIA "whenever a party or any other person refuses
or is unable to produce information requested in a timely manner and in the form
required, or otherwise significantly impedes an investigation . . ." As BIA, we have
applied the subsidy rate determined for this program in Steel
Products. In that case, for the years in which Italsider was uncreditworthy, we
added to Italsider's benchmark interest rate an amount which Italsider paid to its
parent, Finsider, as a guarantee fee for all loans which Finsider guaranteed. In
creditworthy years we considered this guarantee fee as a normal commercial fee, to
be part of Italsider's cost of debt. We have used this same fee as BIA for this program
in these investigations.

6. Grants to ILVA

Petitioners assert that ILVA received grants worth 38.996 billion lira in 1989 and
68.327 billion lira in 1990. According to ILVA, the grants cited by petitioners were
provided to ILVA under ECSC Articles 54 and 56, and Italian Laws 64/88, 308/82,
46/82, and 675/77. While these grants have been analyzed under each of the
respective programs, the aggregate amounts listed in the annual reports do not
match the amounts listed under the individual programs.
We have preliminarily determined to use the grant amounts reported under the
individual programs and to reconcile the amounts with the annual reports at
verification.

7. Law 675/77 Preferential Lending, Interest Contributions, Capital Grants,
Personnel Retraining, and VAT Reductions

The goals of Law No. 675/77 were the reorganization and development of the
industrial sector, increasing employment in the south of Italy, and stabilizing
employment levels in depressed areas. One of the provisions of the law established a
"Fund for Industrial Restructuring and Reconversion." The GOI identified the
following economic sectors where industrial restructuring and reconversion were
necessary: (1) Research, development and industrialization for electronic
technology, (2) technological and marketing development of production machinery
for the manufacturing industry, (3) the agro-food industry, (4) the chemical
industry, (5) the steel industry, (6) the paper paste and paper industry, (7) the
fashion sector, (8) optimal exploitation of energy resources, and (9) production
plants for ecological and environmental recovery. The automobile and aeronautical
sectors were identified and added to this list later.
Companies proposed specific projects to the Committee for the Coordination of
Industrial Policy between Ministries ("CIPI"). Project proposals were evaluated
according to the targeted projects and goals issued by the CIPI, following a specific
set of goals established for each industry covered. For example, in the CIPI
Resolution of March 9, 1979, for the steel industry, the

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GOI defined general goals and operational guidelines, investment projects tied to
specific plants, and specific guidelines for the cast iron sector, steel
sector, rolled steel, finished products, and applied research. All proposed projects
submitted for the steel industry were evaluated according to the targeted program
for the steel industry approved by the GOI.
Three types of funding were provided under this program: (1) Interest payments on
bank loans and bond issues, (2) low interest loans granted by the Ministry of
Industry, and (3) grants for companies located in the south. The law also provides
personnel retraining grants, and increased VAT deductions for firms located in the
Mezzogiorno area. The interest rate charged on the loans differed according to the
location of the company, with companies in the south of Italy paying a lower
rate of interest.
Falck has received direct mortgage loans and interest contributions under this
program. ILVA has received direct mortgage loans, interest contributions, and
capital account grants between 1977 and 1991 under this program. Italsider
received retraining grants and increased VAT deductions under this program.
We view Law 675/77 as enabling the GOI to target specific projects for certain
companies and industries in each of the 11 sectors. While the GOI has indicated that
the application process is similar for all beneficiaries of this program in each sector,
information was provided only with respect to two sectors. i.e., steel and chemicals.
Although the process followed for application and approval of assistance may have
been generally uniform, the specific goals and objectives of the assistance indicate
that the aids were
tailored to each industry in order to advance highly specific priorities in each
sector. For instance, the targeted program for the steel industry, dated March 9,
1979, includes the following specific directives: "The recovery and restructuring of
the Bagnoli plant, where the production will be mainly directed towards the plating
of flat elements . . ." and "The completion of the works planned for the Italsider plant
at Taranto, required for producing a broader and better range of products."
Additionally, while the GOI has acknowledged that the goals and program measures
defined by it for each industrial sector, and used as the evaluating criteria for
proposed projects in that sector, are different, it has made no claim nor provided
the necessary information to determine whether the sectors were to be treated
similarly. Therefore, it is unclear whether the individual programs for the 11 sectors
should be viewed as integrally linked within the meaning of § 355.43(b)(6) of the
Proposed Rules. Finally, we have preliminarily determined that steel received a
disproportionately large share of the funding provided under this program, i.e., 33
percent.
On this basis, we have preliminarily determined that any assistance provided to
steel producers under Law 675/1977 is limited to a specific enterprise or industry,
or group of enterprises or industries.

A. Ministry of Industry Loans

We have used as the benchmark interest rate the national average long-term fixed
interest rate for Italy as reported in the IMF's International Financial Statistics
because the companies did not break out their subsidized loans from unsubsidized
loans in their reporting of their actual cost for long-term, fixed-rate debt. For those
years where we have determined Falck and ILVA to be uncreditworthy, we added to
this interest rate an amount equal to 12 percent of the prime rate in Italy to
derive our benchmark interest rate. See, Final Affirmative Countervailing Duty
Determination: New Steel Rail, Except Light Rail, from Canada, 54 FR 31991
(August 3, 1989) and § 355.44(b)(6)(iv) of the Department's Proposed Rules.
We then compared the benchmark financing, as constructed above, to the financing
received under Law 675 and found that these loans were provided on terms
inconsistent with commercial considerations. Therefore, we preliminarily
determine that ILVA's and Falck's 675/77 loans are countervailable.

B. Interest Contributions

Because ILVA knew at the time it took out the loans in question that the GOI would
cover part of the interest, we are treating the interest contributions as reduced rate
loans.

We calculated the benchmark interest rate as described in A. above. We then
compared the benchmark financing to the financing received under Law 675/77
and found that these loans were provided on terms inconsistent with commercial
considerations. Therefore, we preliminarily determine that Law 675/77 interest
contributions are countervailable.
To calculate the benefit from these loans and interest contributions, we employed
our normal long-term loan methodology as described in § 355.49(c)(1) of the
Department's Proposed Rules. (See also, Final Affirmative Countervailing Duty
Determination; Certain Granite Products from Spain, (Spanish Granite) 53 FR
24340, (June 28, 1988).) We divided each company's benefits by their respective
1991 total sales. On this basis, we determine the country-wide subsidy rate for this
program to be 2.84 percent ad valorem for cold-rolled carbon steel flat products
and cut-to-length carbon steel plate. Falck's significantly different subsidy rate is
0.08 percent ad valorem.

C. Capital Grants

We have determined the capital grants are non-recurring. Therefore, we calculated
the benefit for the POI as described in the Grant Methodology section of the notice.
We divided each company's benefits by their respective 1991 total sales. On this
basis, we determine the country-wide subsidy rate
for this program to be 1.03 percent ad valorem for cold-rolled carbon steel flat
products and cut-to-length carbon steel plate. Falck's significantly different subsidy
rate is 0.03 percent ad valorem.

D. Personnel Retraining

We have determined the personnel retraining grants are non-recurring. However,
because the benefits provided in each year from 1984 to 1986 were less than 0.50
percent of the company's sales in each of those years, we have expensed the benefits
in the years they were received. Therefore, there is no countervailable benefit
attributable to the POI.

E. VAT Reductions

We have determined VAT reductions are recurring grants. We divided the benefit by
ILVA's 1991 total sales. On this basis, we determine the country- wide subsidy rate
for this program to be 0.12 percent ad valorem for cold- rolled carbon steel flat
products and cut-to-length carbon steel plate. Falck's significantly different subsidy
rate is 0.00 percent ad valorem.

8. Certain ILVA/Falck Debt Outstanding During the Review Year

A. Falck

Falck states that all of its outstanding debt is being investigated under specific
programs, with the exception of certain bank loans. We have determined that all of
Falck's outstanding debt has been included in our analysis of Law 675 loans and
ECSC Article 54 loans, with the exception of the bank loans mentioned above.
Because there is no specific government program associated with these banks or the
remaining loans, we preliminarily determine that no countervailable benefits were
provided

*57745

to Falck by the GOI pursuant to these loans.

B. ILVA

Like Falck, the GOI asserts that all of ILVA's debt is being investigated under specific
programs, with the exception of certain bank loans.
We have found that some of ILVA's outstanding debt has been included in our
analysis of certain programs in these investigations (i.e., Law 675/77, Law 308/82,
and Law 64/86 (previously Law 717/65)). However, certain loans were reported in
the government's response to this program and were not included under the
individual programs i.e., Law 675/77 and ECSC Article 54. Therefore,
were those programs were found to be countervailable, we have included these
non-reported loans in our analysis of those programs.
With respect to the Medio Credito Ligure loan the GOI asserts that the loan was
provided pursuant to a disaster relief program, which was generally available in the
Genoa area. Since we did not receive specificity information regarding this loan, we
preliminarily determine that these loans are countervailable. To calculate the
benefit from these loans we employed our normal long-term loan methodology as
described in program 7.A. above. We divided the benefit by ILVA's 1991 total sales.
On this basis, we determine the country-wide subsidy rate for this program to be
0.00 percent ad valorem for cold-rolled carbon steel flat products and cut-to-length
carbon steel plate. Falck's significantly different subsidy rate is 0.00 percent ad
valorem.
Since there is no specific government program associated with the remaining banks
and loans, we preliminarily determine that no countervailable benefits were
provided to ILVA by the GOI pursuant to these loans.

9. Interest Grants for "Indirect Debts" Under Law 750/81

Law 750/81 was implemented to achieve IRI's intervention plans for the public
sector steel industry for 1981-83. The program provided grants to cover the
debts of the public steel industry and was terminated in 1983. Italsider and Nuova
Italsider received grants under this program in 1983 and 1984.
Because this program is limited to the steel industry we preliminarily determine it to
be countervailable.
We have determined these grants are non-recurring. Therefore, we calculated the
benefit for the POI as described in the Grant Methodology section of the notice. We
divided the benefit by ILVA's 1991 sales adjusted to reflect steel activities prior to
its restructuring. On this basis, we determine the country-wide subsidy rate for this
program to be 0.50 percent ad valorem for cold-rolled carbon steel flat products
and cut-to-length carbon steel plate. Falck's significantly different subsidy rate is
0.00 percent ad valorem.

10. Urban Redevelopment Packages Law 181

Law 181 was created to finance reindustrialization efforts to ease the impact
employment reductions have on priority areas hit by the steel crisis. The program
provides grants covering up to 25 percent of the total investment with projects in
the Mezzogiorno receiving the greatest benefit. Under Law 181, ILVA received a
grant to develop initiatives in Taranto, Terni and Genova to create 1,000 new jobs.
Law 181 was terminated on December 31, 1991.
We preliminarily determine that assistance under this program is
provided on a regional basis and is, therefore, limited to a specific enterprise or
industry, or group of enterprises or industries. The GOI asserts that these grants
were not provided for steel-making activities. However, they did not explain what
ILVA did with the funds. Therefore, we are assuming that the assistance benefits
ILVA's steel production.
We have determined the urban redevelopment grants are non-recurring. Therefore,
we calculated the benefit for the POI as described in the Grant Methodology section
of the notice. We divided the benefit by ILVA's 1991 sales adjusted to reflect steel
activities prior to its restructuring. On this basis, we determine the country-wide
subsidy rate for this program to be 0.04 percent ad valorem for cold-rolled carbon
steel flat products and cut-to-length carbon steel plate. Falck's significantly different
subsidy rate is 0.00 percent ad valorem.

11. Interest Subsidies Under Law 193/1984

Article 3 of Law No. 193/84 provided grants for interest payments on medium- term
borrowing (exceeding 18 months and at either a fixed or variable interest rate)
outstanding on January 1, 1983, or to be undertaken within three months starting
from June 6, 1984. This law reduced the rate of interest on medium- term financing
to 11 percent as long as any reduction did not exceed a maximum
of ten percent. Further interest reductions, or bonuses, were applied in the
following manner: (1) One percent, if investments were in the south; (2) 0.5 percent
for borrowing beyond the 1983-1985 period; and (3) 0.5 percent for enterprises
completing important restructuring and rationalization programs. The GOI states
that the beneficiaries of this program were steel enterprises which rationalized the
production of finished steel products and for some categories of semi-finished
products. Falck received interest subsidies under this program.
Because benefits under Law No. 193/1984 are available only to the steel industry,
we preliminarily determine that they are limited to a specific enterprise or industry,
or group of enterprises or industries. Because Falck did not know when it received
loans prior to June 6, 1984, that the GOI would cover part of the interest, we are
treating the interest subsidies on these loans as grants. Given Falck's knowledge that
it would receive rebates on later loans, we would prefer to treat these loans as
reduced interest loans. However, since we did not request the information needed
to treat these later loans as reduced interest loans, we have treated all of the interest
reductions as grants.
Therefore, we have determined these grants are non-recurring. We calculated the
benefit for the POI as described in the Grant Methodology section of the notice. We
divided the benefit by Falck's 1991 sales. On this basis, we
determine the country-wide subsidy rate for this program to be 0.00 percent ad
valorem for cold-rolled carbon steel flat products and cut-to-length carbon steel
plate. Falck's significantly different subsidy rate is 0.52 percent ad valorem.

12. Closure Payments

Pursuant to an agreement introduced by the ECSC and approved by the European
Commission, No. 2320/81/CECA, a massive reduction in hot-rolled steel
production capacity of 26.7 million tonnes was authorized, of which Italy was to
contribute a reduction of 5.8 million tonnes. This measure was adopted and
implemented by the GOI through Laws 46/1982, 193/1984, and 706/1985.
Law 46/1982, Article 20, provided capital account grants for privately-owned steel
companies that reduced their production capacity of raw steel, semi- finished or
rolled steel, by closing down plants which were technologically obsolete and with
marginal economic viability. The grants allowed up to a maximum of 100,000 lira
for every ton of raw steel and up to a maximum of 150,000 lira for every ton of
semi-finished or rolled steel capacity. Grants could be issued for 30, 50, and 80
percent of the maximum set by the law. Falck received closure payments under
Laws 46 and 193/84. ILVA did not use this program.

*57746

Because benefits under Law No. 46/1982 are available only to the steel industry, we
preliminarily determine that they are limited to a specific enterprise or industry, or
group of enterprises or industries.
We have determined these grants are non-recurring. Therefore, we calculated the
benefit for the POI as described in the Grant Methodology section of the notice. We
divided the benefit by Falck's 1991 sales. On this basis, we determine the
country-wide subsidy rate for this program to be 0.00 percent ad valorem for
cold-rolled carbon steel flat products and cut-to-length carbon steel plate. Falck's
significantly different subsidy rate is 1.12 percent ad valorem.

13. Social Security Exemptions

Employer contributions to the National Institute for Social Insurance ("INPS") are
normally equal to approximately 31 percent of salaries. However, pursuant to
various laws, the GOI reduced the social security contribution of companies in the
south of Italy in certain industrial sectors.
Law 1089/1968 allowed industrial companies and small-scale craft industries in
southern Italy a ten percent reduction in social security contributions for all
workers employed on September 30, 1968. (This base reduction was reduced to
eight and one-half percent by Law 887/1984.) An additional reduction of ten
percent was subsequently granted for all employees hired after September 30, 1968
and numbering more than the total number of persons employed on this date.
Law 589/1971 raised the additional reduction from ten to twenty percent for
employees hired after January 1, 1971. A total waiver from social security
contributions was granted to companies for all employees hired after July 1, 1976.
The total waiver was for ten years from the date the worker was hired. The waiver
was terminated on December 1, 1991, and replaced by Law 345/1992.
ILVA received social security reductions between 1978 and 1984. Falck did not use
the program.
Because this program is limited to firms in the Mezzogiorno region, we preliminarily
determine that the social security exemptions are countervailable.
We have determined that these grants are non-recurring. Therefore, we calculated
the benefit for the POI as described in the Grant Methodology section of the notice.
We divided the benefit by ILVA's 1991 sales. On this basis, we determined the
country-wide subsidy rate for this program to be 1.63 percent ad valorem for
cold-rolled carbon steel flat products and cut-to-length carbon steel plates. Falck's
significantly different subsidy rate is 0.00 percent ad valorem.

14. Capital Grants/Interest Rate Reductions Under Law 902

Under Laws 218/1978 and 64/1986, the GOI, through the Cassa per il Mezzogiorno
("CASMEZ"), and, since 1984, its successor agency, Agenzia per la Promozione dello
Sviluppo del Mezzogiorno, provides capital grants and low- interest loans to
projects providing for new factories in the Mezzogiorno, or for extending,
modernizing, reactivating, converting or reorganizing existing plants. The size of the
grant varies according to the size of the fixed investment. The grant may also be
increased by one-fifth if the enterprise is in sectors of the economy considered to
have priority and/or is situated in particularly disadvantaged areas.
The low-interest loans are provided through a loan contract between an investor
and the bank. The GOI pays a part of the interest which otherwise would be incurred
by the borrower. For fixed investments up to 25.5 million dollars, the GOI will pay
64 percent of the interest. For investments above 25.5 million dollars, the GOI will
pay 40 percent of the interest. The interest rates on these loans are fixed at the
government-set reference rate in effect at the time of the loan. According to the GOI,
the iron and steel industry became ineligible for these benefits on July 16, 1992.
ILVA received grants and interest contributions under Law 902. Falck did not use
this program.

We preliminarily determine that assistance under this program is limited to a
specific region.
We have determined the capital grants are nonrecurring. However, for those grants
where the benefits were less than 0.50 percent of the company's sales, we have
expensed the benefits in the years they were received. For the remaining grants, we
calculated the benefit for the POI as described in the Grant Methodology section of
the notice. We divided the benefit by ILVA's 1991 sales adjusted to reflect steel
activities prior to its restructuring. On this basis, we determine the country-wide
subsidy rate for this program to be 0.23 percent ad valorem for cold-rolled carbon
steel flat products and cut-to-length carbon steel plate. Falck's significantly different
subsidy rate is 0.00 percent ad valorem.
With respect to interest contributions, because ILVA knew at the time it received
the interest contributions that the GOI would cover part of the interest, we are
treating the interest contributions as a reduced rate loan.
Because we have preliminarily found Italsider/Nuova Italsider and ILVA to be
uncreditworthy from 1977-1991, we have calculated the benchmark interest rate as
described in program 7.A. above. We then compared the benchmark financing to
the financing ILVA received under Law 902 and found that these loans were
provided on terms inconsistent with commercial considerations. Therefore, we
preliminarily determine that the interest contributions received
by ILVA are countervailable.
To calculate the benefit from these interest contributions we employed our normal
long-term loan methodology as described in program 7.A. above. We divided the
benefit by ILVA's 1991 sales adjusted to reflect steel activities prior to its
restructuring. On this basis, we determine the country-wide subsidy rate for this
program to be 0.29 percent ad valorem for cold-rolled carbon steel flat products
and cut-to-length carbon steel plate. Falck's significantly different subsidy rate is
0.00 percent ad valorem.

15. Transportation Subsidies Under Law 210

Law 210 of May 17, 1986, provides that the National Railway Agency may enter into
special rate agreements with its clients. Railway customers agree to use the railway
for a specified volume of merchandise in exchange for reduced rates. The reduced
prices are calculated with reference to both the prices quoted by competing
carriers, and to the costs of the railway agency, plus a margin for profit. The average
reduction is approximately 25 percent.
The GOI states that the National Railway Agency entered into 1900 special rate
agreements in 1991. We requested that the GOI provide a list of the industries which
received reduced transportation rates, but only received a list of the firms in the
steel sector which received reduced rates. This list included both ILVA and Falck.
Because we did not receive sufficient information to determine whether rail rates
are provided specifically to respondents on preferential terms, we have based our
determination on BIA. As BIA, we have applied the subsidy rate determined for this
program in Steel Products.
On this basis, we determine the country-wide subsidy rate for this program to be
0.02 percent ad valorem for cold-rolled carbon steel flat products and cut-
to-length carbon steel plate. Falck's significantly different subsidy rate is 0.02
percent ad valorem.

*57747

16. Exchange Risk Guarantee Program

Prior to 1976, Italian companies could not benefit from ECSC Article 54 and 56
loans because of high inflation and fluctuating exchange rates. However, Law 796 of
November 30, 1976, provided state guarantees against exchange risk on foreign
currency loans received from the ECSC. Eligibility for the program was limited to
projects approved by the EC which would create or maintain jobs. A charge of +/-
two percent of the exchange differential between the day the loan was received and
the day it was repaid was imposed on the applicants.
Both ILVA and Falck received exchange risk guarantees on their ECSC loans.
Based on the GOI response, it appears that the premiums received are
not adequate to cover the long-term operating costs of the exchange rate risk
guarantee program. Moreover, because we have determined ECSC Article 54 loans
to be limited to steel producers, we have preliminarily determined that the users of
this program comprise a specific enterprise or industry, or group of enterprises or
industries.
Therefore, we preliminarily determine that this program confers a countervailable
benefit to the extent that premiums are less than the amounts received by the
borrower. We treated the payouts received as recurring grants. We calculated the
benefit for the POI as described in the Grant Methodology section of the notice. We
divided the benefit by ILVA's 1991 sales. On this basis, we determine the
country-wide subsidy rate for this program to be 0.51 percent ad valorem for
cold-rolled carbon steel flat products and cut-to-length carbon steel plate. Falck's
significantly different subsidy rate is 0.37 percent ad valorem.

17. ECSC Article 54 Loans

Article 54 industrial investment loans are provided for the purpose of purchasing
new equipment or financing modernization. The EC stated that Article 54 loans are
direct loans from the Commission and that the funds are loaned at a slightly higher
rate than that at which the Commission obtained
them in order to cover its costs. According to the EC Response, the Commission has
this program to facilitate the borrowing process for companies in the ECSC, some of
which may not otherwise be able to obtain these loans. These loans are only
available to the iron and steel industry. Both ILVA and Falck received Article 54
loans.
We preliminarily determine that this program is limited to the iron and steel
industry. Therefore, these loans are countervailable to the extent that they are
provided on terms inconsistent with commercial considerations.
We calculated the benchmark interest rate as described in program 7.A. above. We
then compared the benchmark financing to the financing received under Article 54
and found that these loans were provided on terms inconsistent with commercial
considerations. Therefore, we preliminarily determine that Article 54 financing is
countervailable.
To calculate the benefit from these loans we employed our normal long-term loan
methodology as described in program 7.A. We divided the benefit by ILVA's 1991
sales adjusted to reflect steel activities prior to its restructuring. On this basis, we
determine the country-wide subsidy rate for this program to be 3.04 percent ad
valorem for cold-rolled carbon steel flat products and cut-to- length carbon steel
plate. Falck's significantly different subsidy rate is 0.08 percent ad valorem.

18. ECSC Redeployment Aid (Article 56(2)(b))

Under Article 56(2)(b) of the ECSC Treaty, individuals employed in the coal and
steel industry who lose their jobs may receive assistance for social adjustment. This
assistance is provided for workers affected by restructuring measures, particularly
as workers withdraw from the labor market into early retirement or are forced into
unemployment. The ECSC disburses assistance under this program on the condition
that the affected country makes an equivalent contribution. Payments were made to
steel workers under Article 56(2)(b). Funds for the ECSC portion of these payments
are from the ECSC Operational Budget, made up entirely of levies on ECSC
companies. ILVA received benefits under this program.
Since the ECSC portion of payments under this program comes from its Operational
Budget, we preliminarily determine that the portion of payments provided by the
ECSC, i.e., 50 percent, to be not countervailable. However, to the extent that their
payments relieved ILVA of obligations it would otherwise incur, we have
preliminarily countervailed the matching contributions by Member State
governments. These matching contributions by Member State governments are
being treated as recurring grants.
We calculated the benefit for the POI as described in the Grant Methodology section
of the notice. We divided the benefit by ILVA's 1991 sales. On this
basis, we determine the country-wide subsidy rate for this program to be 0.09
percent ad valorem for cold-rolled carbon steel flat products and cut-to-length
carbon steel plate. Falck's significantly different subsidy rate is 0.00 percent ad
valorem.

19. European Social Fund (ESF) Grants

The ESF program is funded from the EC General Budget, whose revenues arise from
customs duties, agricultural levies, Member State contributions, etc. The ESF is also
part of the EC's structural funds. The ESF is designed to render employment
opportunities for workers by raising their standard of living and increasing their
geographical and occupational mobility within the Community. This program
provides vocational training as well as support for self- employment. However, the
ESF does not provide on-going support; each beneficiary may receive vocational
training actions and subsidies towards recruitment only once. According to the EC
response, specific projects under this program benefit individuals, not companies.
ESF grants are paid to the Member State governments, which proceed to allocate
and implement the funds under the Member State's provisions, be it on a regional or
local level. As such, the EC delegates to the Member State the task of managing the
grant.

We preliminarily determine that this program is countervailable. The EC did not
provide requested information on the de facto distribution of benefits to enable us
to determine whether it is limited to a specific enterprise or industry or group of
enterprises or industries. Moreover, we have no information that the funds cannot
be used to train workers for the steel industry.
We have determined ESF grants are non-recurring. However, for those grants where
the benefits were less than 0.50 percent of the company's sales, we have expensed
the benefits in the years they were received. For the remaining grants, we calculated
the benefit for the POI as described in the Grant Methodology section of the notice.
We divided the benefit by ILVA's 1991 sales. On this basis, we determine the
country-wide subsidy rate for this program to be 0.18 percent ad valorem for
cold-rolled carbon steel flat products and cut-to-length carbon steel plate. Falck's
significantly different subsidy rate is 0.00 percent ad valorem.

B. Programs Preliminarily Determined Not To Be Countervailable

We preliminarily determine that the following programs do not provide

*57748

subsidies to manufacturers, producers, or exporters in Italy of certain steel
products under the following programs:

1. Investments in Energy Conservation Law 308/82

Law 308 was initiated on May 29, 1982, and repealed on January 15, 1991. Law
308/82 provided grants to encourage lower energy consumption and the use of
renewable energy sources. The eligibility criteria include: (1) The utilization of at
least 20 percent of the recuperated energy sources; and (2) the recuperated
renewable energy sources must provide a pay back that is less than the age of the
plant.
The GOI provided a list of the sectors that are eligible for grants under this program.
This list includes the following wide range of industries: (1) Food; (2) paper; (3)
chemical; (4) leather tanning; (5) distilleries; (6) pharmaceutical; (7) brickworks; (8)
wood; (9) machine tools; (10) metallurgical; (11) mining; (12) petrochemical; (13)
iron and steel; (14) district heating; (15) service sector; (16) textile; and (17) glass.
The GOI also provided a list of the amount of grants provided to each industrial
sector since 1982 indicating that benefits under this program are widely distributed
throughout the sectors.
Because Law 308/82 grants are not limited to a specific enterprise or industry, or
group of enterprises or industries, we preliminarily determine them to be not
countervailable.

2. Law 617/81 Interest Grant Accruals

ILVA's annual reports reflect interest grant accruals of 97 million lira and 104
million lira in 1989 and 1990, respectively, from Law 617 loans. ILVA states that
these "relatively small amounts refer to minor differences between the amounts of
interest grant anticipated and interest grant received."
The 97 million and 104 million lira are listed in ILVA's annual reports as
receivables. Because the accruals are being treated as receivables, we do not
consider them to have benefitted ILVA during the POI. We generally consider a
benefit to be received at the time that there is a cash flow effect on the firm receiving
the benefit. (See, § 355.48 of the Proposed Rules). On this basis, we preliminarily
determine that the Law 617 accruals are not countervailable.

C. Programs Preliminarily Determined Not To Be Used

We preliminarily determine that the following programs were not used by
manufacturers, producers, or exporters in Italy of certain steel products:
1. Preferential Export Financing under Law 227/77
2. Interest Contributions under the Sabatini Law
3. Rebate of Indirect Taxes under Law 639
4. Reconversider
5. Exemptions from ILOR and IRPEG Taxes
6. Research and Development Aid under Law 46 of 1982
7. Closure Payments under Law Nos. 193/84 and 706/85
8. Interest Grants under Law 617/81
9. European Regional Development Fund (ERDF) Loans
10. NCI Loans
11. Illic Loan Outstanding
Falck asserts that the Illic loan listed in its annual report is not a loan, but rather a
payment channel for ILVA's purchase of Falck's seamless tube division.
Pursuant to the agreement between ILVA and Falck, whereby ILVA purchased
Falck's seamless tube division, ILVA used its financial subsidiary, Illic, as the
payment channel to purchase Falck's seamless tube division. The agreement
provided for Falck's seamless tube division to receive a loan from Illic at the prime
rate. At the same time, ILVA deposited its payment for the tube division in an
account with Illic. ILVA has likened this account to an escrow account.
When the sale took place, the deposit in the escrow account was transferred to Falck
as payment by ILVA for the seamless tube division. Additionally, the loan was
transferred to ILVA and taken off Falck's books.

Because Illic transactions were merely a payment for ILVA's purchase of Falck's
seamless tube assets, and the Falck loan was transferred to ILVA when it purchased
Falck's tube division, we preliminarily determine that any potential subsidy benefits
non-subject merchandise.

D. Programs Preliminarily Determined Not to Exist

We preliminarily determine that the following programs do not exist:
1. Transportation Subsidies under Law 866
2. Other ECSC Programs (ECSC Exchange Risk Guarantee Program)

E. Program for Which We Need More Information

1. Early Retirement

The GOI identified and explained early retirement programs under laws 1115/68,
155, 193/84, 181, 223/91, and 14/9. Although the GOI was responsive, there are
still areas which remain unclear. The issues we will be collecting information on
include the company and government obligations for retirement benefits and the
extent to which the government assumes company obligations.

2. ECSC Articles 54 and 56 Interest Rebates

Article 54 interest rebates were granted to steel companies during the restructuring
and modernization of the industry in the beginning of the 1980s. Companies
applying for these rebates had to meet certain criteria such as a reduction in steel
production and improvements in processing that would yield energy savings and
improved efficiency.
Interest rebates under Article 56 Conversion Loans are provided for productive
investment projects based on the number of new jobs created. Rebates were granted
by the Commission on part of the amount of the conversion loan. Eligibility for
rebates was determined by the number of new jobs created or the number of
ex-ECSC workers employed.
We have information to preliminarily determine that Articles 54 and 56 interest
rebates are countervailable to the extent that they are provided from the ECSC
Operational Budget during those years when Member States contributed to the
budget, i.e., 1978-1984. The EC and ILVA have indicated that ILVA has received
Articles 54 and 56 interest rebates. However, we do not have information regarding
the amounts or the years in which these rebates were received. Additionally, we do
not have any prior individual subsidy rates for these programs, and petitioners have
not provided any estimates of the benefit provided by these programs. Therefore,
we are unable to determine whether or
not ILVA received countervailable benefits under these programs.

3. ECSC Article 56 Conversion Loans (Article 56 (2)(a)) and European Investment
Bank (EIB) Loans

The Commission provides Article 56 conversion loans to ECSC companies to help
create new and economically healthy activities outside the steel industry. This
program was implemented in response to the reduction of activity and production
in the coal and steel industries. To be eligible, a company must be located in an area
severely affected by restructuring because of the loss of jobs in, or economic
dependence on, the coal or steel industry. We have preliminarily determined that
Article 56 conversion loans are countervailable because they provide regional
benefits.
*57749

EIB loans are provided for the purpose of contributing to the steady and balanced
development of the Community by providing loans and loan guarantees for capital
investment projects in all sectors of the economy. We have preliminarily
determined that the loans under this program are provided to a specific enterprise
or industry, or group of enterprises or industries. Although these loans may be de
jure available to all sectors and regions, the EC did not provide requested
information on the de facto distribution of benefits.

Thus, both Article 56 conversion loans and EIB loans are countervailable to the
extent that they are provided on terms inconsistent with commercial
considerations. The EC and company responses have indicated that ILVA has
received Article 56 conversion loans and Falck has received EIB loans. However,
there is no information on the record regarding the amounts or terms of these loans.
Additionally, we do not have any prior individual subsidy rates for these programs,
and petitioners have not provided any estimates of the benefit provided by these
programs. Therefore, we are unable to determine whether or not ILVA and Falck
received countervailable benefits under these programs.

Verification

In accordance with section 776(b) of the Act, we will verify the information used in
making our final determinations.

Suspension of Liquidation

In accordance with section 703(d) of the Act, we are directing the U.S. Customs
Service to suspend liquidation of all entries of certain steel products from Italy,
which are entered or withdrawn from warehouse, for consumption on
or after the date of the publication of this notice in the Federal Register and to
require a cash deposit or bond for such entries of the merchandise in the amounts
indicated below. This suspension will remain in effect until further notice.

Certain Cold-Rolled Carbon Steel Flat Products

Country-Wide Ad Valorem Rate .....58.79
Falck's Ad Valorem Rate .....2.22

Certain Cut-To-Length Carbon Steel Plate

Country-Wide Ad Valorem Rate .....58.79
Falck's Ad Valorem Rate .....2.22

ITC Notification

In accordance with section 703(f) of the Act, we will notify the ITC of our
determinations and alignments. In addition, we are making available to the ITC all
nonprivileged and nonproprietary information relating to this investigation. We will
allow the ITC access to all privileged and business
proprietary 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
Investigations, Import Administration.
If our final determinations are affirmative, the ITC will make its final determinations
within 45 days after the Department makes its final determinations.

Public Comment

Interested parties who wish to request or participate in a hearing must submit a
written request within ten days of the publication of this notice in the Federal
Register to the Assistant Secretary for Import Administration, U.S. Department of
Commerce, room B-099, 14th Street and Constitution Avenue, NW., Washington, DC
20230. Requests should contain: (1) The party's name, address, and telephone
number; (2) the number of participants; (3) the reason for attending; and (4) a list of
the issues to be discussed. Since investigations involving the same classes or kinds
of merchandise subject to these investigations from various other countries are
currently being conducted, we will publish a briefing and hearing schedule in the
Federal Register after receipt of all requests for hearings in these investigations.

These determinations and alignments are published pursuant to sections 703(f) and
705(d) of the Act (19 U.S.C. 1671b(f)).
Dated: November 27, 1992.

Alan M. Dunn,

Assistant Secretary for Import Administration.

Appendix 1

Scope of the Investigations

The products covered by these investigations, certain steel products, constitute the
following two separate "classes or kinds" of merchandise, as outline below.
Although the Harmonized Tariff Schedule of the United States (HTS) subheadings are
provided for convenience and customs purposes, our written descriptions of the
scope of these proceedings are dispositive.
We have received comments from petitioners regarding the types of coil included in
the scope of the investigation of the certain cold-rolled carbon steel flat products
investigation. We are considering these comments and will
address this issue at the final determinations.

Certain Cold-Rolled Carbon Steel Flat Products

These products include cold-rolled (cold-reduced) carbon steel flat products, of
solid rectangular (other than square) cross section, of rectangular shape, neither
clad, plated nor coated with metal, whether or not painted, varnished or coated with
plastics or other nonmetallic substances, in coils, or in straight lengths which, if of a
thickness less than 4.75 millimeters, are of a width measuring at least 10 times the
thickness or if of a thickness of 4.75 millimeters or more are of a width which
exceeds 150 millimeters and measures at least twice the thickness, as currently
classifiable in the HTS under item numbers 7209.11.0000, 7209.12.0030,
7209.12.0090, 7209.13.0030, 7209.13.0090, 7209.14.0030, 7209.14.0090,
7209.21.0000, 7209.22.0000, 7209.23.0000, 7209.24.1000, 7209.24.5000,
7209.31.0000, 7209.32.0000, 7209.33.0000, 7209.34.0000, 7209.41.0000,
7209.42.0000, 7209.43.0000, 7209.44.0000, 7209.90.0000, 7210.70.3000,
7210.90.9000, 7211.30.1030, 7211.30.1090, 7211.30.3000, 7211.30.5000,
7211.41.1000, 7211.41.3030, 7211.41.3090, 7211.41.5000, 7211.41.7030,
7211.41.7060, 7211.41.7090, 7211.49.1030, 7211.49.1090, 7211.49.3000,
7211.49.5030, 7211.49.5060, 7211.49.5090, 7211.90.0000, 7212.40.1000, and
7212.50.0000.

Certain Cut-to-Length Carbon Steel Plate

These products include hot-rolled carbon steel universal mill plates (i.e., flat-rolled
products rolled on four faces or in a closed box pass, of a width exceeding 150
millimeters but not exceeding 1,250 millimeters and of a thickness of not less than 4
millimeters, not in coils and without patterns in relief) of solid rectangular (other
than square) cross section, of rectangular shape, neither clad, plated nor coated
with metal, whether or not painted, varnished, or coated with plastics or other
nonmetallic substances; and certain hot-rolled carbon steel flat products in straight
lengths, of solid rectangular (other than square) cross section, of rectangular shape,
hot rolled, neither clad, plated, nor coated with metal, whether or not painted,
varnished, or coated with plastics or other nonmetallic substances, 4.75 millimeters
or more in thickness and of a width which exceeds 150 millimeters and measures at
least twice the thickness, as currently classifiable in the HTS under item numbers
7208.31.0000, 7208.32.0000, 7208.33.1000, 7208.33.5000, 7208.41.0000,
7208.42.0000, 7208.43.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000,
7211.11.0000, 7211.12.0000, 7211.21.0045, 7211.22.0045, 7211.90.0000,
7212.40.1000, 7212.40.5000, and 7212.50.0000.

(FR Doc. 92-29499 Filed 12-4-92; 8:45 am)

BILLING CODE 3510-DS-M