The Department 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. Case History Since the publication of the preliminary determinations in the Federal Register (57 FR 57739, December 7, 1992), the following events have occurred. On December 10, 1992, we issued supplemental questionnaires to the Government of Italy (GOI), ILVA S.p.A (ILVA) and Acciaierie e Ferriere Lombarde Falck SpA (Falck). We received responses from the GOI, ILVA and Falck on January 15, 1993. On January 25, 1993, ILVA informed us that it declined to be verified. In accordance with section 776(b) of the Act, verification of the responses received from the GOI and Falck was held in Italy from February 8 through February 18, 1993. On March 8, 1993, we published in the Federal Register a notice postponing the final determinations in these investigations in accordance with the postponement of the final determinations in the companion antidumping duty investigations (58 FR 12935). On April 6, 1993, we terminated the suspension of liquidation of all entries of the subject merchandise entered, or withdrawn for consumption, on or after that date (see Suspension of Liquidation section, below). Parties submitted case and rebuttal briefs on March 19 and 24, 1993, respectively. A public hearing was held on March 26, 1993. A public hearing regarding general issues in this and the 11 other investigations of certain steel products from various countries was held on May 5-6, 1993. 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 the Scope Appendix included in the Final Affirmative Countervailing Duty Determination: Certain Steel Products from Austria (Austria Steel): (1) Certain cold-rolled carbon steel flat products and (2) certain cut-to- length carbon steel plate. 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 the Instituto per la Riscostruzione Industriale (IRI), an 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 (by then, out of liquidation) and 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 its shares in each 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. 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 Acciarierie e Ferriere Lombarde.'' In 1931, the company became Acciaierie e Ferriere Lombarde Falck. Prior to 1991, Falck was the main industrial company of Gruppo Falck. The company was organized into divisions, four of which produced steel (Nastri, Lamiere, Tubi SS, and Lunghi). The company also held four separately incorporated financial and energy companies. In July of 1990, ILVA and Falck signed an agreement, which rationalized the production and commerce of the two companies. Pursuant to the agreement, ILVA produces large quantities of mass consumption steel and Falck specializes in smaller quantities of high quality product. The agreement resulted in the incorporation of Falck's strip and plate divisions, Nastri and Lamiere. ILVA bought 30 percent interest (minority interest) in each of these newly formed companies, and five percent interest in Falck. At verification, we established that ILVA does not exercise, nor is it entitled to exercise, any control over Falck or its affiliates, i.e., Falck operates independently of ILVA. As part of the 1991 restructuring, Falck was transformed from a production company to a holding company, AFL Falck. AFL Falck is organized into five areas including steelmaking, energy, property, ecology and services. Analysis of Programs Based on our analysis of the petition, the responses to our questionnaires, verification and comments by interested parties, we determine the following: General Issues Several issues raised by interested parties in these investigations and in other countervailing duty (CVD) investigations of certain steel products from various countries were not case-specific, but rather were general in nature. These included: · Allocation Issues; · Denominator Issues; · Equity Issues; · Prepension Program Issues; · Privatization Issues; and · Restructuring Issues. The comments submitted by interested parties concerning these issues, in both the general issues case and rebuttal briefs, as well as the country-specific briefs, and the Department's positions on each are addressed in the General Issues Appendix which is attached to the Austria Steel notice which is published concurrently with this notice. Period of Investigation For purposes of these final determinations, the period for which we are measuring subsidies, the period of investigation (POI), is calendar year 1991, which corresponds to the fiscal years of ILVA and Falck. Calculation of Country-Wide Rate 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 the firm's share of exports of each class or kind of merchandise, 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) of the Department's regulations (19 CFR 355.20(d)(1992)), 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, within the meaning of 19 CFR 355.20(d)(3). Therefore, this firm received an individual company rate. For ILVA, we recalculated the country- wide rate, based solely on the benefits received by that firm. This is the rate that will be applied to 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 determined the following: Equityworthiness For a discussion of equity methodology, see the Equity section of the General Issues Appendix. In our preliminary determinations, we found that ILVA and its predecessor companies, Italsider and Nuova Italsider, were unequityworthy during the period 1977-1991. Therefore, equity infusions received during those years were provided on terms 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 continue to 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 each infusion. Examination of these ratios shows that ILVA was unprofitable in every year from 1977 through 1988. Moreover, ILVA's rate of return on assets ratio was negative between 1977 and 1988 and 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 above, we determine ILVA to have been unequityworthy at the time of each government infusion. For a complete discussion of our equityworthiness analysis, see Memorandum to File dated June 21, 1993. Creditworthiness ILVA In our preliminary determinations, we found that ILVA and its predecessor companies, Italsider and Nuova Italsider, were uncreditworthy during the period 1977-1991. Therefore, 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 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, where information was 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. Moreover, ILVA's times interest earned and rate of return on assets ratios were negative between 1977 and 1988. Based on above, we determine ILVA to be uncreditworthy in each year from 1977 through 1991. For further discussion of our analysis, see Memorandum to File dated June 21, 1993. Falck In our preliminary determinations, we found that Falck was uncreditworthy from 1977 through 1979. Therefore, loans received during those years were made on terms inconsistent with commercial considerations. To determine whether Falck was creditworthy from 1977 through 1979, we examined the current ratio, times interest earned ratio, debt to equity ratios, and profit margin on sales for 1976 through 1979 (Falck did not provide financial information for years prior to 1976). Examination of these ratios show that Falck was unprofitable from 1976 through 1979. In addition, Falck's interest coverage was negative between 1976 and 1979. Based on above, we determine Falck to be uncreditworthy in each year from 1977 through 1979. Falck received medium- and long-term loans from private sources in 1980 through 1984 and in 1986 through 1987. On this basis, we have 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 had sufficient liquidity to meet its current debt obligations. Based on this information, we determine Falck to be creditworthy for the period 1988 through 1991. For a complete discussion of our creditworthy analysis, see Memorandum to File dated June 21, 1993. Best Information Available Section 776(c) of the Act requires the Department to use the best information available (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 * * *''. One of the companies included in these investigations, ILVA, declined to be verified. While we were able to verify from government records that ILVA did not use certain programs, we have no verified information relating to ILVA's use of the remaining programs. For those programs which ILVA has used and which are specific, we have used BIA in determining the extent to which ILVA benefitted from the program. In light of ILVA's refusal to permit verification of its initial questionnaire response and to participate further in the investigation, we have applied BIA using the most adverse assumptions, i.e., using the highest rate among the petitioners' rates, the preliminary determination rates, and previous investigation and review rates on a program by program basis. For most programs, the highest rate was that alleged by petitioners. For those programs which we were able to verify ILVA did not use or which were non-specific, we have adjusted the calculations accordingly. Additionally, in cases where we have verified non- company-specific information (e.g., program interest rates, interest rebate percentage, benchmark interest rates, etc.), we have used this information to adjust both the petitioners' and the preliminary determination calculations. Where the Department has changed its methodology, as discussed in the General Issues Appendix published concurrently with these determinations, we have adjusted neither the petitioners' nor the preliminary determination calculations. Notwithstanding our view that the methodological changes described in the General Issues Appendix represent the most accurate and appropriate methods for identifying and measuring the types of subsidies at issue in these investigations, we do not believe it is necessary to reconfigure the methodological assumptions underlying the petition or preliminary determinations for purposes of applying BIA. The petitioners' allegations and the Department's preliminary determinations were calculated on the basis of methodologies which were accepted as legitimate and reasonable at the time the allegations or determinations were made. Since BIA need not represent the most accurate information, but rather is merely a choice of information available on the record of the investigation, we have determined that modification of BIA rates to reflect new methodological thinking is unwarranted. A. Programs Determined To Be Countervailable We 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 two companies. In 1989, ILVA was formed by IRI with an equity infusion of 2.3 trillion lira. IRI then made additional equity infusions into ILVA between 1990 and 1991. IRI also extinguished equity in Finsider to cover losses from 1981 through 1986 and in 1988. We determine these equity infusions to be specific since they were provided by IRI to specific enterprises. Moreover, as discussed above, we have 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. As a result, they are countervailable. As BIA, we have used the rate from the preliminary determinations, adjusted to reflect verified discount rate information. For the final determinations, we used the reference rate published by the Bank of Italy as the discount rate. (For those years where we have determined the companies 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.) On this basis, we determine the country-wide subsidy rate for this program to be 24.80 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 equity extinguishments, we have continued to follow the reasoning set forth in our preliminary determination, i.e., that any potential benefits arise at the time of the equity investment. Because the equity methodology adopted in the preliminary determinations did not recognize the subsequent performance of the company receiving the equity investment, and treated the equity investment as a grant, the later write-off of the equity was considered 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 for 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. 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 described 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 determine that both the 696.4 billion lire debt forgiveness and the 563.5 billion lire debt forgiveness were specifically limited to the steel companies and are countervailable. As BIA, we have used petitioners' rate. We have adjusted this rate to account for the new discount rate described in 1. above. On this basis, we determine the country-wide subsidy rate for this program to be 5.63 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. 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 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. The Finsider 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. We 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. As BIA, we have used petitioners' rate. We have adjusted this rate to account for the new discount rate described in 1. above. On this basis, we determine the country-wide subsidy rate for this program to be 20.78 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. We have considered this debt forgiveness as grants to cover losses within the meaning of 771(5)(A)(ii)(III) of the Act. As BIA, we have used petitioners' rate. We have adjusted this rate to account for the new discount rate described in 1. above. Petitioners 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. ILVA, however, provided no evidence of what fees were actually paid. At verification, Italian bank representatives stated that it is common for government-owned companies to be responsible for their subholdings' financial obligations. However, they were unable to provide us information regarding the average guarantee fees charged by Italian banks. 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 private Italian companies to guarantee their subsidiaries' loans, we determine that government loan guarantees are countervailable. Because we did not receive sufficient information regarding guarantee fees, we have based our determination on BIA. As BIA, we have turned to the methodology used 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. Thus, any subsidy provided by guarantees will be reflected in the subsidy rates for each loan program discussed below. 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. Since we did not verify ILVA's response, we were unable to reconcile the amounts with the annual reports. On this basis, we determine that these grants are countervailable. Additionally, since the annual reports do not list the amounts provided under the individual programs, we are unable to adjust for those programs ILVA did not use or that we found to be not countervailable. Therefore, as BIA, we have used petitioners' rate. We have adjusted this rate to account for the new discount rate described in 1. above. 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. 7. Law 675/77 Preferential Lending, Interest Contributions, Capital Grants, Personnel Retraining, and VAT Reductions Law No. 675/77 established the Committee of Ministers for the Coordination of Industrial Policy (``CIPI'') and created a framework for planned intervention by the GOI in the economy. The law was implemented to integrate various types of assistance to specific industrial sectors. Law 675 specified that CIPI was responsible for designating those sectors which would be eligible for assistance. CIPI 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. When the industries were selected and approved by CIPI, specific investment plans were written for each industrial sector by the Ministry of Industry. These investment plans, which Ministry of Industry officials described as having varying levels of specificity, needed the approval of CIPI before their implementation. At verification, GOI officials stated that certain plans contain very specific recommendations because of the high degree of production concentration in the specific industrial sector and significant government ownership, i.e., steel and chemicals. The investment plans for the textile, paper and pulp and the machine tool sectors contain less specific recommendations because of the diversity and large number of companies in those sectors. Companies proposed specific projects to CIPI. Project proposals were evaluated according to the targeted projects and goals issued by the CIPI, for each industry covered. 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 provided 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 received direct mortgage loans and interest contributions under this program. ILVA 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. One of the factors we typically consider in determining whether a program is limited to a specific enterprise or industry or group of enterprises or industries is the number of enterprises, industries, or groups thereof that actually use a program, which may include the examination of disproportionate or dominant users. Law 675 applied to all industries in need of restructuring and reconversion, and provided that CIPI would target those industries in need of restructuring. CIPI identified 11 sectors, including the steel industry, for restructuring. We verified that of the ten sectors which actually received Law 675 funding, steel accounted for 36.4 percent of the total funding, and 31 percent of the loans provided by Law 675. Combined, the steel and auto sectors accounted for 66 percent of total funding, and 77 percent of the loans provided by Law 675. On this basis, we have determined that the steel industry was a dominant user of the Law 675 program. Therefore, we determine 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 reference rate as reported by the Bank of Italy. (Falck did not break out subsidized loans from unsubsidized loans in reporting its 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 section 355.44(b)(6)(iv) of the Department's Proposed Regulations. 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 determine that ILVA's and Falck's 675/77 loans are countervailable. To calculate the benefit to Falck from these loans, we employed our normal long-term loan methodology as described in section 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 the benefit by Falck's 1991 total sales (see, Denominator section of the General Issues Appendix). Falck's subsidy rate is 0.04 percent ad valorem, which has been determined to be significantly different. As BIA for ILVA, we have used the preliminary determination rate. We have adjusted this rate to account for the new benchmark interest rate. On this basis, we determine the country-wide subsidy rate for this program to be 3.00 percent ad valorem for cold-rolled carbon steel flat products and cut-to-length carbon steel plate. B. Interest Contributions Because companies knew at the time they 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 determine that Law 675/77 interest contributions are countervailable. To calculate the benefit to Falck from these interest contributions, we employed our normal long-term loan methodology as described in section 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 the benefit by Falck's 1991 total sales (see, Denominator section of the General Issues Appendix). Falck's subsidy rate is 0.05 percent ad valorem, which has been determined to be significantly different. As BIA for ILVA, we have used the preliminary determination rate. We have adjusted this rate to account for the new benchmark interest rate. On this basis, we determine the country-wide subsidy rate for this program to be 2.08 percent ad valorem for cold-rolled carbon steel flat products and cut-to-length carbon steel plate. C. Capital Grants As stated earlier, ILVA is the only investigated company that received capital grants under Law 675. As BIA for ILVA, we have used petitioners' rate. We have adjusted this rate to account for the new discount rate described in 1. above. On this basis, we determine the country-wide subsidy rate for this program to be 1.20 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. D. Personnel Retraining As stated earlier, ILVA is the only investigated company that received personnel retraining grants under Law 675. As BIA, we have used petitioners' rate. We have adjusted this rate to account for the new discount rate described in 1. above. Petitioners treated benefits provided under the personnel retraining grants as non-recurring. However, we have determined that retraining programs provide recurring benefits (see, Allocation section of General Issues Appendix). On this basis, we determine the country-wide subsidy rate for this program to be 0.21 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. E. VAT Reductions As stated earlier, ILVA is the only investigated company that received VAT reductions under Law 675. As BIA, we have used petitioners' rate. 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 Debt Outstanding During the Review Year We have found that the majority 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, reported in the government's response to questions regarding this debt, were not included under the individual programs, i.e., Law 675/77 and ECSC Article 54. Therefore, where those programs were found to be countervailable, we have included these unreported loans in our analysis of those programs. With respect to the Medio Credito Ligure loan, the GOI asserts that this loan was provided pursuant to a disaster relief program that was generally available in the Genoa area. We requested the GOI to provide information regarding the eligibility for and distribution of the disaster relief benefits. Since we did not receive specificity information regarding this loan, we have determined 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. As BIA for the Medio Credito Ligure loan, we have used the preliminary determination rate. We have adjusted this rate to account for the new benchmark interest rate as described in 7.A. above. 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 bank loans, we 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. Italsider and Nuova Italsider received grants under this program in 1983 and 1984. Because this program is limited to the steel industry we determine it to be countervailable. As BIA, we have used petitioners' rate. We have adjusted this rate to account for the new discount rate described in 1. above. On this basis, we determine the country-wide subsidy rate for this program to be 0.49 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 under Law 181 Law 181 was created to finance reindustrialization efforts to ease the impact that 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. We 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 steelmaking activities. However, since we were unable to verify what the grants were provided for, we are assuming that the assistance benefits ILVA's steel production. As BIA, we have used petitioners' rate. We have adjusted this rate to account for the new discount rate described in 1. above. Petitioners treated the urban redevelopment grants as non-recurring. However, because the benefits provided in each year were less than 0.50 percent of the company's sales in each of those years, we have expensed the benefits received under this program. On this basis, we determine the country- wide subsidy rate for this program to be 0.20 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 loans (exceeding 18 months and at either a fixed or variable interest rate) outstanding on January 1, 1983, and those loans taken out within three months after the law came into effect on May 31, 1984. These grants 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. The beneficiaries of this program were private steel enterprises which rationalized the production of finished steel products and some categories of semi-finished products. Falck received interest subsidies under this program in 1985 and 1986. Because benefits under Law No. 193/1984 are available only to the private steel industry, we determine that they are limited to a specific enterprise or industry, or group of enterprises or industries. We verified that prior to June 6, 1984, Falck did not know at the time that it received loans that the GOI would cover part of the interest expense. Therefore, we are treating the interest rebates on these loans as grants. We have determined these grants to be non-recurring. We calculated the benefit for the POI as described in the Allocation section of the General Issues Appendix. We divided the benefit by Falck's 1991 sales (see, Denominator section of the General Issues Appendix). 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 0.47 percent ad valorem. Given Falck's knowledge that it would receive rebates on loans provided after June 6, 1984, we are treating these interest rebates as reduced interest loans. However, because the loans on which interest rebates were provided after June 6, 1984 were repaid prior to the POI, there is no benefit attributable to the POI. 12. Closure Payments under Laws 46 and 193/84 Pursuant to an agreement introduced by the ECSC and approved by the European Commission, No. 2320/81/ECSC, a massive reduction in hot-rolled steel production capacity of 26.7 million tonnes was authorized. 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, semi-finished or rolled steel by closing down plants which were technologically obsolete or had marginal economic viability. The grants provided up to 100,000 lire for every ton of raw steel capacity which was reduced and up to 150,000 lire for every ton of semi-finished or rolled steel capacity which was reduced. 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. Because benefits under Law No. 46/1982 are available only to the private steel industry, we determine that they are limited to a specific enterprise or industry, or group of enterprises or industries. We have determined these grants to be non-recurring. Therefore, we calculated the benefit for the POI as described in the Allocation section of the General Issues Appendix. We divided the benefit by Falck's 1991 sales (see, Denominator section of the General Issues Appendix). 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 1.55 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 for companies located 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 determine that the social security exemptions are countervailable. As BIA, we have used petitioners' rate. On this basis, we determine 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 plate. 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 establishing 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 a sector of the economy considered to have priority and/or is situated in a particularly disadvantaged area. 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. ILVA received grants and interest contributions under Law 902. Falck did not use this program. We 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. We have used the preliminary determination rate as BIA. We have adjusted this rate to account for the new discount rate described in 1. above. We determined that the capital 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. 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. As BIA for the interest rate reductions, we used our preliminary determination rate. We adjusted this rate to account for the new benchmark interest rate. 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. Interest Subsidies Under Law 617/81 In 1981, the GOI passed a law titled ``Urgent Measures in Favor of the Steel Industry and in Matters of Antipollution Equipment.'' In February 1982, IRI issued two trillion lira of variable rate bonds for which the GOI guaranteed repayment of principal and interest. IRI then relent the money to Finsider and its operating companies. The companies were required to repay IRI with interest. However, the GOI would pay an amount equal to 11 percent of the interest on the bonds to the steel companies to subsidize their interest costs. Of the two trillion lira in bonds, 935 billion lira was provided to Nuova Italsider. The GOI claimed that neither ILVA nor its predecessor companies received interest grants pursuant to Law 617. However, we were unable to verify ILVA's non-use of this program. We determine that Law 617/81 interest grants are countervailable because they are limited to a specific enterprise or industry, or group of enterprises or industries. As BIA, we have assumed ILVA paid a maximum interest rate on its Law 617 debt. (We used our uncreditworthy benchmark as the highest rate in 1982.) In order to calculate the interest rebate, we multiplied the interest paid by 11 percent. On this basis, we determine the country-wide subsidy rate for this program to be 0.69 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. 16. Skipped 17. Interest Contributions Under the Sabatini Law The Sabatini Law was enacted to encourage the sale of machine tools and production machinery. The law provides for deferred payment of up to five years on installment contracts for the purchase of such equipment and for a one-time, lump sum contribution from Mediocredito Centrale, the administering agency, toward the interest owed by the buyer under the installment contracts. We were unable to verify ILVA's non-use of this program. However, we do not have any calculated rates to use as BIA from petitioners and the program was found not countervailable for companies in central and northern Italy in Granite. (ILVA has plants in southern Italy.) Acccording to the verification report in Granite, the interest contribution is calculated as 65 percent of the reference rate for companies in southern Italy, and 55 percent of the reference rate for companies in other parts of Italy. Based on these facts, as BIA we calculated a rate using the company's purchases of raw, ancillary, and consumable materials as well as semifinished and finished products, as surrogate information concerning the purchase of machine tools and production machinery, because the 1991 ILVA Annual Report did not separately report ILVA's purchases of machine tools and production machinery. In order to calculate the amount of the interest contribution, we multiplied ten percent (the difference between the rate available throughout Italy and the rate for southern Italy) by the reference rate. We multiplied this result by ILVA's purchases of raw, ancillary and consumable materials and semifinished and finished products in order to derive the benefit. We treated this amount as a non-recurring grant. Therefore, we calculated the benefit for the POI as described in the Grant Methodology section of the preliminary determination. We have adjusted this calculation to account for the new discount rate. On this basis, we determine the country-wide subsidy rate for this program to be 0.26 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. 18. Early Retirement There are a variety of laws the GOI provides for early retirement of workers. Laws 193/1984 and 181/1989 provided different requirements for steel workers, in particular, lowering the age workers can retire. Law 223/1991 extended early retirement to private steel companies, the aluminum industry and the shipbuilding industry. Because benefits provided pursuant to Laws 193/1984 and 181/1989 are limited to steel workers, and benefits provided pursuant to Law 223/1991 are limited to steel workers, public shipbuilding workers, and workers in refractory materials and graphite electrode industries, we have determined that the users of these programs comprise a specific enterprise or industry, or group of enterprises or industries. Law 193 and all successor early retirement laws allowed ILVA and Falck to reduce their labor force by retiring employees who would not otherwise be eligible for retirement benefits. To the extent that the companies were under an obligation to retain the workers who were retired early, the companies receive a countervailable benefit. We have determined that there are social factors in Italy, such as the threat of labor strikes and social unrest, which prevent companies from simply laying-off surplus labor. At verification, a Falck representative stated that ``legally the company was under no obligation to use early retirement, but labor unions could put pressure on the company, making early retirement more feasible than lay-offs.'' Therefore, the companies are avoiding the cost of keeping their employees on the payroll until they are eligible to retire, and are receiving a countervailable benefit. We have determined the benefits under this program are recurring. Therefore, we have calculated the benefits by multiplying the number of employees retired early in 1991 by the estimated annual salary for a steel worker. We divided the benefit by Falck's 1991 sales (see the Denominator section of the General Issues Appendix). On this basis, we determine Falck's that significantly different subsidy rate is 0.95 percent ad valorem. As BIA for ILVA, we have used petitioners' rate. However, because petitioners treated this as a non-recurring program, we have adjusted the rate to reflect only the benefits received in the POI. Therefore, we determine the country-wide subsidy rate for this program to be 6.83 percent ad valorem for cold- rolled carbon steel flat products and cut-to-length carbon steel plate. 19. Exchange Risk Guarantee Program Prior to 1976, Italian companies could not benefit from ECSC Articles 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. The Ministry of Treasury pays the differential between the exchange rate at the signature of the contract and the exchange rate at the moment of repayment, minus two percent. Both ILVA and Falck received exchange risk guarantees on their ECSC loans. We verified that premiums are not charged for the exchange risk guarantees. Therefore, we conclude that premiums are not adequate to cover the long-term operating costs and losses of the exchange rate risk guarantee program. Moreover, because we have determined ECSC Article 54 loans to be limited to steel producers, we have determined that the users of this program comprise a specific enterprise or industry, or group of enterprises or industries. Therefore, we determine that this program confers a countervailable benefit to the extent that borrowers received any compensation for exchange rate losses. As BIA for ILVA, we used petitioners' rate, adjusted for the fact that the grants are recurring. 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 plate. For Falck, we treated the payouts received as recurring grants. Therefore, we calculated the benefit for the POI as described in the Allocation section of the General Issues Appendix. We divided the benefit by Falck's 1991 sales (see the Denominator section of the General Issues Appendix). On this basis, we determine Falck's that significantly different subsidy rate is 0.21 percent ad valorem. 20. Exemptions from ILOR and IRPEG Taxes Articles 101, 102, and 105 of Decree 218/1978 exempt firms operating in the Mezzogiorno from the local income tax (ILOR) and the profits tax (IRPEG). Companies are eligible for 100 percent exemption from the 16.2 percent ILOR tax on profits arising from eligible projects in the Mezzogiorno and less developed regions of the center- north for ten consecutive years after profits first arise. New companies undertaking productive activities in the Mezzogiorno are entitled to a 100 percent exemption from the 36 percent IRPEG tax on profits for ten consecutive years after the project is completed. We determine that exemptions from ILOR and IRPEG taxes are countervailable because they are provided on a regional basis and are, therefore, limited to a specific enterprise or industry, or group of enterprises or industries. We were unable to verify ILVA's non-use of this program. Therefore, as BIA, we are assuming that ILVA claimed ILOR and IRPEG tax exemptions on its 1991 tax return. Since we do not have information regarding ILVA's projects or new productive activities in the Mezzogiorno, as BIA we have calculated the benefit using the total company profit for 1990 contained in the petition. Based on these figures, we calculated the amount of ILOR and IRPEG taxes the company would have been exempted from paying. We divided the result by ILVA's 1991 sales. On this basis, we determine the country-wide subsidy rate for this program to be 0.83 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. 21. ECSC Article 54 Loans Article 54 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 for the Commission to cover its costs. According to the EC response, the Commission has this program to facilitate the lending process for companies in the ECSC, some of which may not otherwise be able to obtain these loans. Both ILVA and Falck received Article 54 loans. We 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. As BIA for ILVA's Article 54 loans, we adjusted the preliminary determination rate to account for the new benchmark interest rate described in 7.A. above, and the interest rebates. On this basis, we determine the country-wide subsidy rate for this program to be 2.63 percent ad valorem for cold-rolled carbon steel flat products and cut-to-length carbon steel plate. For Falck, 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 determine that Article 54 financing is countervailable. To calculate Falck's benefit from these loans we employed our normal long-term loan methodology as described in program 7.A. We divided the benefit by Falck's 1991 sales (see, the Denominator section of the General Issues Appendix). On this basis, we determine Falck's significantly different subsidy rate is 0.44 percent ad valorem. 22. Interest Rebates on ECSC Article 54 Loans Article 54 loan interest rebates were granted to steel companies during the restructuring and modernization of the industry beginning in the 1980's. 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 improve efficiency. The interest rebates were limited to a maximum of three percent of the eligible investment and were provided over a period of three years. Funds were provided by the ECSC operational budget which is made up of levies charged to all ECSC companies. Deficits in the operational budget are made up by Member State contributions. While no Member State contributions have been made to the operational budget since 1984, the budget was supplemented by Member States from 1978 through 1984. In its response, ILVA claimed that it did not receive any Article 54 interest rebates. However, during the EC verification we discovered that ILVA received interest rebates on loans outstanding in 1991. The rebates were granted in 1981 and ended by 1985. Because we did not verify ILVA's use of this program in Italy, we do not have any information regarding the amount of the interest rebates or the terms of the loans. Based on the lack of information on the record, we have assumed that ILVA received the maximum interest rebate amount (three percent), for the period 1981 to 1985, on the Article 54 loans outstanding in 1991. Because the interest rebates given prior to 1985 were partially financed through Member State contributions, a portion of those interest rebates are countervailable. Consistent with past cases, e.g., Final Affirmative Countervailing Duty Determination: Certain Hot-Rolled Lead and Bismuth Carbon Steel Products from Germany (``Bismuth'') (58 FR 6233, January 27, 1993), we have not countervailed the portion financed by the ECSC's operating budget because those funds are obtained from company levies. To calculate the countervailable portion of the rebates, we calculated the ratio between the contribution from Member States and the ECSC's total available funds for the year, and then multiplied this ratio by the rebate amount. Moreover, because companies were aware that interest rebates would be available when the loans were taken out, we have treated these interest rate subsidies as reduced interest loans. Therefore, in calculating the benefits from the ECSC Article 54 Loans (see, 21., above), we reduced the interest paid on those loans by the amount of interest rebates. The estimated subsidy calculated for that program includes all benefits conferred by these interest rebates. 23. European Social Fund (ESF) Grants The ESF program is funded from the EC General Budget, the revenues for which are derived from customs duties, agricultural levies, Member State contributions, etc. The ESF is one part of the EC's Structural Funds. It is primarily responsible for two out of the five objectives of the Structural Funds. These two objectives relate to combating long-term unemployment and facilitating the occupational integration of young people. The ESF also has a secondary role in implementing projects that fall under other objectives. These latter objectives relate to promoting the development of regions whose development is lagging behind, assisting regions affected by industrial decline, and promoting the development of rural areas. The ESF does not provide on-going support; each beneficiary may receive vocational training actions and subsidies for 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 verified that in Italy preference was given to the southern region of the country. GOI officials stated that ``first priority was to employees under 25 residing in southern Italy; second priority was given to employees under 25 residing in central northern Italy; and third priority was given to employees over 25 in southern Italy.'' Therefore, because the Italian government has distributed benefits on a regional basis, we determine the program to be countervailable. As BIA for ILVA, we used the preliminary determination rate. We adjusted this rate to account for the new discount interest rate. On this basis, we determine the country-wide subsidy rate for this program to be 0.44 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. 24. ECSC Redeployment Aid (Article 56(2)(b)) Under Article 56(2)(b) of the European Coal and Steel Community (ECSC) Treaty, persons 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 workers withdrawing from the labor market into early retirement and workers 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 Italian steel workers under Article 56(2)(b). ILVA received benefits under this program. Since the ECSC portion of payments under this program comes from its Operational Budget, we determine the portion of payments provided by the ECSC, i.e., 50 percent, to be not countervailable. However, with respect to the matching contributions made by the GOI, we have no information regarding the obligations that ILVA had towards its workers. Therefore, we have assumed as BIA that the entire amount of GOI payments relieved ILVA of obligations it would otherwise have had. Therefore, we find them to be countervailable. We have used the preliminary determination rate as BIA. 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. B. Programs Determined Not to be Countervailable We determine that the following programs do not provide 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. Projects are evaluated and approved based on whether a 20 percent energy savings will be realized. We verified that Law 308 grants are provided to the following wide range of industries: (1) Food; (2) paper; (3) chemicals; (4) leather tanning; (5) distilleries; (6) pharmaceuticals; (7) brickworks; (8) wood; (9) machine tools; (10) metallurgicals; (11) mining; (12) petrochemicals; (13) iron and steel; (14) district heating; (15) the service sector; (16) textiles; and (17) glass, as well as to individual households. We also verified the amount of grants provided to each industrial sector since 1982. This indicated that benefits under this program are widely and fairly evenly distributed throughout the sectors with no sector receiving a disproportionate amount. Because Law 308/82 grants are not limited to a specific enterprise or industry, or group of enterprises or industries, we determine them to be not countervailable. 2. Transportation Subsidies Under Law 210 Law 210 of May 17, 1986, provides that the National Railway Agency may enter into reduced rate agreements with its clients based on volume and competition. In 1991, the agency entered into 1900 agreements. We verified that companies in a wide range of industries entered into reduced rate agreements. We also verified that a majority of the Agency's clients enjoy reduced rate agreements and that most of the tonnage shipped between 1988 and 1992 was pursuant to reduced rate agreements. Additionally, the iron and steel industry's reduced rates were within the median range of the rates charged other industries. Because Law 210 Transportation Subsidies are not limited to a specific enterprise or industry, or group of enterprises or industries, we determine them to be not countervailable. C. Programs Determined Not to be Used We verified 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. Rebate of Indirect Taxes under Law 639 3. Riconversider 4. Research and Development Aid under Law 46 of 1982 5. Closure Payments Under Law 706/85 6. European Regional Development Fund (ERDF) Loans 7. NCI Loans 8. Certain Falck Debt Outstanding During the Review Year 8. Illic Loan Outstanding 9. EIB Loans 10. ECSC Article 56 Interest Rebates 11. ECSC Article 56 Conversion Loans (Article 56(2)(a))
D. Programs Determined Not to Exist We verified that the following programs do not exist: 1. Transportation Subsidies under Law 866 2. Other ECSC Programs (ECSC Exchange Risk Guarantee Program) Interested Party Comments The following are country-specific comments only. All other issues are either addressed in the sections above, or in the General Issues Appendix. See, the Final Affirmative Countervailing Duty Determination: Certain Steel Products from Belgium for comments relating to European Community programs. Comment 1: Petitioners assert that the Department must use the highest rate in Italy adjusted upward for risk premiums as the discount rate in years that ILVA or Falck were uncreditworthy. They claim that the GOI did not provide the highest rate available in Italy. Rather, it provided the average cost of borrowing for creditworthy firms in Italy. Petitioners contend that the ``top rate'' published by the Italian Banker's Association (ABI) is an appropriate proxy for the highest rate available in Italy. In the alternative, petitioners assert that the Department should use the discount rate it used for uncreditworthy companies in the preliminary determination as BIA for the highest rate available in Italy. Petitioners also argue that the Department should use the discount rates from the preliminary determination as benchmarks for Falck in creditworthy years, since Falck did not separately report its subsidized and unsubsidized loans. Falck contends that, since it was creditworthy between 1977 and 1991, the highest interest rate available would not be an appropriate discount rate for Falck. Falck contends that petitioners' suggestion that the Department adopt the ``top rate'' published by the ABI as a ``proxy for the highest rate available in Italy'' is not supported by substantial evidence on the record. Falck asserts that even if it were determined to be uncreditworthy, the ABI rate would be inapplicable. DOC Position: We have used the reference rate reported by the Bank of Italy as the benchmark interest rate. We were unable to use company-specific benchmark interest rates because the companies did not break out their subsidized loans from unsubsidized loans in reporting 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 disagree with petitioners' assertion that the ``top rate'' published by the ABI is an appropriate proxy for the highest rate available in Italy. We verified at Italian commercial banks that the ABI rate is a short-term rate applied to overdrafts, and that it is never used for long-term lending. Based on these facts, it would be inappropriate to use the ABI rate as the benchmark interest rate for long-term loans even if the companies are determined to be uncreditworthy. Comment 2: Petitioners state that the Department should treat the interest rebates received pursuant to Law 193/84 as grants, regardless of whether Falck knew at the time it took out the loan that it would receive the rebate. They assert that the rebates were not provided pursuant to a below-market rate loan financing program. Petitioners further assert that even if the Department decides to treat these interest grants as below-market loans, it does not have the necessary information with which to calculate a benefit. Falck asserts that interest rebates provided pursuant to Law 193 should be treated as low interest loans since it knew at the time it obtained the loans that a portion of the interest would be rebated. According to Falck, petitioners wrongly assert that the Law 193/84 interest rebates should be treated as grants merely because the rebates were not tied to particular loans. Petitioners ignore the fact that borrowers, knowing their interest obligations would be reduced by Law 193/84 interest rebates, would take the interest reduction into account in their decision to undertake new financing. Since the Department verified that Falck knew at the time that it took on the post-program loans that the interest would be reduced, the Department should amortize the interest rebates over the terms of the loan and treat them as part of a low interest loan. DOC Position: In evaluating how to treat interest rebates, we have determined it appropriate to consider what expectations a company could reasonably be expected to have at the time a loan is taken out. When a company knows in advance that the government is likely to pay or rebate interest on a loan, the company will take this into account in deciding whether to take out the loan. In such a case, we would treat the rebate as a reduced interest loan. However, if the government decides to pay or rebate interest on a loan which the company took out not knowing there would be a government repayment or rebate, then we have determined that it is appropriate to model the repayment or rebate as a grant. We verified that regarding the loans it took out after June 6, 1984, Falck knew at the time it took out the loans it would receive Law 193 interest rebates on them. Contrary to petitioners' claim, we did verify the details of these loans and interest rebates, and have used this information in our calculations. As stated above, we have treated Law 193 interest rebates received on loans taken out prior to June 6, 1984, as grants. After that time, they were treated as reduced interest loans. Comment 3: Respondents urge the Department to use in the final determinations the actual loan proceeds and repayment data for Falck's Law 675 loans. They argue that the use of actual information supplied at verification which clarifies or corroborates previously submitted information, and which does not substantially amend previously submitted data, is supported by Department practice and precedent. For the same reasons, respondents argue the actual amounts of the interest contributions as verified at Falck should be used. DOC Position: Consistent with Department practice, we have used all verified information regarding Falck's Law 675 loans and interest contributions in our calculations. The clarifications submitted at verification were minor. Comment 4: Falck argues that since it maintained its line of short-term debt with commercial financial institutions, and because unprofitable periods were aberrations within the review period, the Department should determine that Falck was creditworthy throughout the entire period 1977 through 1991. Petitioners disagree. They state that there is no evidence that the unprofitable periods were aberrations and that it is irrelevant that Falck maintained its line of short-term credit. They maintain that since Falck was unprofitable and its interest coverage was negative from 1977 to 1979, Falck was uncreditworthy during the period. DOC Position: We have determined Falck to be uncreditworthy during the period 1977-1979. In determining the creditworthiness of a company, the Department normally considers the current ratio, quick ratio, times interest earned ratio, debt ratios, and profit margin. While we also consider the extent to which the company was able to obtain long-term financing from private sources, the Proposed Regulations direct us to consider a firm's receipt of comparable long-term commercial loans in our analysis of its creditworthiness. Moreover, the default risk of short- term loans is minimal. Consequently, the receipt of short-term loans from private sources is not indicative of the creditworthiness of the borrower. Therefore, Falck's maintenance of short-term loans from private sources is irrelevant. We examined Falck's ratios and financial statements at verification, and found no evidence that the unprofitable periods were aberrational. See creditworthy section of notice for a complete description of our determinations regarding ILVA and Falck's creditworthiness and the Memorandum to the File dated June 21, 1993. Comment 5: Petitioners contend that the Department should determine based on BIA that Law 155/81 grants are de facto specific. They assert that Law 155/81 grants were provided at the discretion of CIPI, similar to Law 675/77. Additionally, since the GOI did not provide the sector-by-sector distribution of benefits under this program, the Department should determine based on BIA that the GOI limited Law 155/81 benefits to a specified group of industries and provided the steel industry with a disproportionate amount of benefits. DOC Position: Law 155/81 expired in 1982. Therefore, as we have determined early retirement benefits to be recurring, there could be no benefits from this program during the POI. For this reason, we have made no determination regarding the specificity of this law. Verification In accordance with section 776(b) of the Act, we verified the information used in making our final determinations. We followed standard verification procedures, including meeting with government and company officials, examination of relevant accounting records, and examination of original source documents. Our verification results are outlined in detail in the public versions of the verification reports, which are on file in the Central Records Unit (Room B-099) of the Main Commerce Building. Suspension of Liquidation In accordance with our affirmative preliminary determinations, we instructed the U.S. Customs Service to suspend liquidation of all entries of certain steel products from Italy which were entered, or withdrawn from warehouse, for consumption on or after December 7, 1992, the date of publication of our preliminary determinations in the Federal Register. These final countervailing duty determinations were aligned with the final antidumping duty determinations on certain steel products from various countries, pursuant to section 606 of the Trade and Tariff Act of 1984 (section 705(a)(1) of the Act). Under article 5, paragraph 3 of the GATT Subsidies Code, provisional measures cannot be imposed for more than 120 days without final affirmative determinations of subsidization and injury. Therefore, we instructed the U.S. Customs Service to discontinue the suspension of liquidation on the subject merchandise entered on or after April 6, 1993, but to continue the suspension of liquidation of all entries, or withdrawals from warehouse, for consumption of the subject merchandise entered between December 7, 1992, and April 6, 1993. We will reinstate suspension of liquidation under section 703(d) of the Act, if the ITC issues a final affirmative injury determination, and will require a cash deposit of estimated countervailing duties for such entries of merchandise in the amounts indicated below. Certain Cold-Rolled Carbon Steel Flat Products Country-Wide Ad Valorem Rate-72.91 Falck's Ad Valorem Rate-3.71 Certain Cut-To-Length Carbon Steel Plate Country-Wide Ad Valorem Rate-72.91 Falck's Ad Valorem Rate-3.71 ITC Notification In accordance with section 705(c) of the Act, we will notify the ITC of our determinations. 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 the ITC determines that material injury, or threat of material injury, does not exist, these proceedings will be terminated and all estimated duties deposited or securities posted as a result of the suspension of liquidation will be refunded or cancelled. If, however, the ITC determines that such injury does exist, we will issue a countervailing duty order, directing Customs officers to assess countervailing duties on entries of certain steel products from Italy. Return or Destruction of Proprietary Information This notice serves as the only reminder to parties subject to Administrative Protective Order (APO) of their responsibility concerning the return or destruction of proprietary information disclosed under APO in accordance with 19 CFR 355.34(d). Failure to comply is a violation of the APO. These determinations are published pursuant to section 705(d) of the Act (19 U.S.C. 1671d(d) and 19 CFR 355.20(a)(4)). Dated: June 21, 1993. Joseph A. Spetrini, Acting Assistant Secretary for Import Administration. [FR Doc. 93-15634 Filed 7-8-93; 8:45 am] BILLING CODE 3510-DS-P
The Contents entry for this article reads as follows: International Trade Administration NOTICES Countervailing duties: Steel products from- Italy, 37327
