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[C-475-815]
Final Affirmative Countervailing Duty Determination: Small Diameter
Circular Seamless Carbon and Alloy Steel Standard, Line and
Pressure Pipe (``Seamless Pipe'') From Italy
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: June 19, 1995.
FOR FURTHER INFORMATION CONTACT: Peter Wilkniss, Office of Countervailing
Investigations, Import Administration, U.S. Department of Commerce,
Room 3099, 14th Street and Constitution Avenue, N.W., Washington,
D.C. 20230; telephone (202) 482-0588.
FINAL DETERMINATION: The Department determines that benefits
which constitute subsidies within the meaning
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of section 701 of the Tariff Act of 1930, as amended (``the
Act''), are being provided to manufacturers, producers, or exporters
in Italy of seamless pipe. For information on the estimated
net subsidies, please see the Suspension of Liquidation section
of this notice.
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute
and to the Department's regulations are references to the provisions
as they existed on December 31, 1994. References to the Countervailing
Duties: Notice of Proposed Rulemaking and Request for Public
Comments, 54 FR 23366 (May 31, 1989) (Proposed Regulations),
which has been withdrawn, are provided solely for further explanation
of the Department's CVD practice.
Case History
Since the publication of the preliminary determination in
the Federal Register (59 FR 60774, November 28, 1994), the following
events have occurred.
On December 23, 1994, we aligned the final countervailing
duty determination in this investigation with the final determination
in the companion antidumping investigation of seamless pipe
from Italy (59 FR 66296).
We conducted verification of the responses submitted on behalf
of the Government of Italy (``GOI''), and Dalmine S.p.A. (``Dalmine'')
from January 22 through January 27, 1995.
On April 19, 1995, we postponed the final determination in
this case to June 12, 1995 (60 FR 19571).
On May 2, 1995 we received a case brief from respondent.
Neither petitioner or respondent requested a hearing in this
investigation.
Scope of Investigation
The following scope language reflects certain modifications
made for purposes of the final determination, where appropriate,
as discussed in the ``Scope Issues'' section of the final determination
in the companion antidumping case of seamless pipe from Italy.
The scope of this investigation includes seamless pipes produced
to the ASTM A-335, ASTM A-106, ASTM A-53 and API 5L specifications
and meeting the physical parameters described below, regardless
of application. The scope of this investigation also includes
all products used in standard, line, or pressure pipe applications
and meeting the physical parameters below, regardless of specification.
For purposes of this investigation, seamless pipes are seamless
carbon and alloy (other than stainless) steel pipes, of circular
cross-section, not more than 114.3 mm (4.5 inches) in outside
diameter, regardless of wall thickness, manufacturing process
(hot-finished or cold-drawn), end finish (plain end, bevelled
end, upset end, threaded, or threaded and coupled), or surface
finish. These pipes are commonly known as standard pipe, line
pipe or pressure pipe, depending upon the application. They
may also be used in structural applications. Pipes produced
in non-standard wall thicknesses are commonly referred to as
tubes.
The seamless pipes subject to these investigations are currently
classifiable under subheadings 7304.10.10.20, 7304.10.50.20,
7304.31.60.50, 7304.39.00.16, 7304.39.00.20, 7304.39.00.24,
7304.39.00.28, 7304.39.00.32, 7304.51.50.05, 7304.51.50.60,
7304.59.60.00, 7304.59.80.10, 7304.59.80.15, 7304.59.80.20,
and 7304.59.80.25 of the Harmonized Tariff Schedule of the United
States (HTSUS).
The following information further defines the scope of this
investigation, which covers pipes meeting the physical parameters
described above:
Specifications, Characteristics and Uses: Seamless pressure
pipes are intended for the conveyance of water, steam, petrochemicals,
chemicals, oil products, natural gas and other liquids and gasses
in industrial piping systems. They may carry these substances
at elevated pressures and temperatures and may be subject to
the application of external heat. Seamless carbon steel pressure
pipe meeting the American Society for Testing and Materials
(ASTM) standard A-106 may be used in temperatures of up to 1000
degrees fahrenheit, at various American Society of Mechanical
Engineers (ASME) code stress levels. Alloy pipes made to ASTM
standard A-335 must be used if temperatures and stress levels
exceed those allowed for A-106 and the ASME codes. Seamless
pressure pipes sold in the United States are commonly produced
to the ASTM A-106 standard.
Seamless standard pipes are most commonly produced to the
ASTM A-53 specification and generally are not intended for high
temperature service. They are intended for the low temperature
and pressure conveyance of water, steam, natural gas, air and
other liquids and gasses in plumbing and heating systems, air
conditioning units, automatic sprinkler systems, and other related
uses. Standard pipes (depending on type and code) may carry
liquids at elevated temperatures but must not exceed relevant
ASME code requirements.
Seamless line pipes are intended for the conveyance of oil
and natural gas or other fluids in pipe lines. Seamless line
pipes are produced to the API 5L specification.
Seamless pipes are commonly produced and certified to meet
ASTM A-106, ASTM A-53 and API 5L specifications. Such triple
certification of pipes is common because all pipes meeting the
stringent A-106 specification necessarily meet the API 5L and
ASTM A-53 specifications. Pipes meeting the API 5L specification
necessarily meet the ASTM A-53 specification. However, pipes
meeting the A-53 or API 5L specifications do not necessarily
meet the A-106 specification. To avoid maintaining separate
production runs and separate inventories, manufacturers triple
certify the pipes. Since distributors sell the vast majority
of this product, they can thereby maintain a single inventory
to service all customers.
The primary application of ASTM A-106 pressure pipes and
triple certified pipes is in pressure piping systems by refineries,
petrochemical plants and chemical plants. Other applications
are in power generation plants (electrical-fossil fuel or nuclear),
and in some oil field uses (on shore and off shore) such as
for separator lines, gathering lines and metering runs. A minor
application of this product is for use as oil and gas distribution
lines for commercial applications. These applications constitute
the majority of the market for the subject seamless pipes. However,
A-106 pipes may be used in some boiler applications.
The scope of this investigation includes all seamless pipe
meeting the physical parameters described above and produced
to one of the specifications listed above, regardless of application,
and whether or not also certified to a non-covered specification.
Standard, line and pressure applications and the above listed
specifications are defining characteristics of the scope of
this investigation. Therefore, seamless pipes meeting the physical
description above, but not produced to the A-335, A-106, A-53,
or API 5L standards shall be covered if used in a standard,
line or pressure application.
For example, there are certain other ASTM specifications
of pipe which, because of overlapping characteristics, could
potentially be used in A-106 applications. These specifications
generally include A-162, A-192, A-210, A-333, and A-524. When
such pipes are used in a standard, line or pressure pipe application,
such products are
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covered by the scope of this investigation.
Specifically excluded from this investigation are boiler
tubing and mechanical tubing, if such products are not produced
to A-335, A-106, A-53 or API 5l specifications and are not used
in standard, line or pressure applications. In addition, finished
and unfinished OCTG are excluded from the scope of this investigation,
if covered by the scope of another countervailing duty order
from the same country. If not covered by such an OCTG order,
finished and unfinished OCTG are included in this scope when
used in standard, line or pressure applications. Finally, also
excluded from this investigation are redraw hollows for cold-
drawing when used in the production of cold-drawn pipe or tube.
Although the HTSUS subheadings are provided for convenience
and customs purposes, our written description of the scope of
this investigation is dispositive.
Dalmine has raised a scope issue in this investigation. The
Department has addressed all scope issues in the final determination
of the companion antidumping investigation of seamless pipe
from Italy.
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 seamless pipe from Italy materially injure, or threaten
material injury to, a U.S. industry. On August 3, 1994, the
ITC preliminarily determined that there is a reasonable indication
that an industry in the United States is being materially injured
or threatened with material injury by reason of imports from
Italy of the subject merchandise (59 FR 42286, August 17, 1994).
Corporate History of Respondent Dalmine
Prior to its liquidation in 1988, Finsider S.p.A. (``Finsider'')
was the holding company for all state-owned steel companies
in Italy, including Dalmine. Dalmine was an operating company
wholly owned by Finsider. After Finsider's liquidation, a new
government-owned holding company, ILVA S.p.A. (``ILVA''), was
created. ILVA took over the former Finsider companies, among
them Dalmine, which became a subsidiary of ILVA in 1989 when
Finsider's shareholding in Dalmine was transferred to ILVA.
Between 1990 and 1993, Dalmine itself was radically restructured.
Dalmine became a financial holding company, with industrial,
trading, and service shareholdings. As part of its restructuring,
Dalmine made several asset purchases, sold two of its subsidiaries
to private parties, and closed several manufacturing facilities.
As of December 31, 1993, the Dalmine Group consisted of a holding
company (Dalmine S.p.A.), four wholly-owned, and one majority-
owned, manufacturing companies, and a number of sales and service
subsidiaries.
During the POI, ILVA was owned by the Istituto per la Ricostruzione
Industriale (``IRI''), a holding company which was wholly-owned
by the GOI.
Spin-offs
In its questionnaire response, Dalmine reported that between
1990 and 1991, as part of its overall restructuring process,
the company twice sold ``productive units'' to private buyers.
According to Dalmine, these sales involved facilities that do
not produce the subject merchandise. In the preliminary determination,
we determined that the amount of potentially spun-off benefits
was insignificant. We did not learn anything at verification
that would lead us to reverse this determination. Therefore,
we have not reduced the subsidies allocated to sales of the
subject merchandise. (See Final Concurrence Memorandum dated
June 12, 1995).
Equityworthiness
Petitioner has alleged that Dalmine was unequityworthy in
1989, the year it received an indirect equity infusion from
the GOI, through ILVA S.p.A. (``ILVA''), and that the equity
infusion was, therefore, inconsistent with commercial considerations.
In accordance with section 355.44(e)(1) of the Proposed Regulations
(Countervailing Duties; Notice of Proposed Rulemaking and Request
for Public Comments (``Proposed Regulations''), 54 FR 23366,
May 31, 1989)), we preliminarily determined that ILVA's purchase
of Dalmine's shares was consistent with commercial considerations
because Dalmine provided evidence that private investors, unrelated
to Dalmine or the GOI, purchased a significant percentage of
the 1989 equity offering, on the same terms as ILVA. We did
not learn anything at verification that would lead us to reverse
this finding. Therefore, the Department determines that ILVA's
purchase of Dalmine's shares was consistent with commercial
considerations.
Creditworthiness
Petitioner has alleged that Dalmine was uncreditworthy in
every year between 1979 and 1993. In accordance with section
355.44(b)(6)(i) of the Proposed Regulations, we preliminarily
determined that Dalmine was creditworthy from 1979 to 1993.
In making this determination we examined Dalmine's current,
quick, times interest earned, and debt-to-equity ratios, in
addition to its profit margin. Specifically, although a number
of the financial indicators are weak for certain years, none
of the indicators are weak over the medium or long term, and
when examined together on a yearly basis, the indicators support
the determination that Dalmine was creditworthy in every year
examined. (See also Creditworthy Memorandum, November 18, 1994).
In addition, Dalmine received long-term, commercial loans from
private lenders in several of the years examined.
We did not learn anything new at verification that would
lead us to reconsider our preliminary determination. Therefore,
we continue to find that Dalmine was creditworthy from 1979
to 1993.
Benchmarks and Discount Rates
Dalmine did not take out any long-term, fixed-rate, lire-
denominated loans in any of the years of the government loans
under investigation. Therefore, in accordance with section 355.44(b)(4)
of the Proposed Regulations, in our preliminary determination
we used, as the benchmark interest rate, the Bank of Italy reference
rate which was determined in Final Affirmative Countervailing
Duty Determinations: Certain Steel Products from Italy (``Certain
Steel from Italy''), 58 FR, 37327 (July 9, 1993), to be both
the best approximation of the cost of long-term borrowing in
Italy and the only long-term fixed interest rate commonly available
in Italy. We also used this rate as the discount rate for allocating
over time the benefit from non-recurring grants for the same
reasons as explained in Final Affirmative Countervailing Duty
Determination: Certain Steel Products from Spain, 58 FR 37374,
37376 (July 9, 1993).
At verification, we learned that the Bank of Italy reference
rate reflects the cost for Italian banks to borrow long-term
funds. Therefore, the reference rate does not incorporate the
mark-up a bank would charge a corporate client when making a
long-term loan. Long-term corporate interest rate data is not
available in Italy. Accordingly, we have adjusted the reference
rate used in the preliminary determination upward to reflect
the mark-up an Italian bank would charge a corporate customer.
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In order to approximate this mark-up, we calculated the difference
between the average short-term corporate borrowing rate in Italy
and the average interest rate on short-term Italian government
debt, for each year in which Dalmine received long-term lire
loans or non-recurring grants from the government. We then added
this mark-up to the Italian reference rate used in the preliminary
determination to approximate an average long-term corporate
benchmark interest rate. We also used these rates as the discount
rates for allocating over time the benefit from non-recurring
grants. See Certain Steel Products from Spain, 58 FR at 37376.
For long-term loans denominated in other currencies, we used,
as the benchmark interest rate, an average long-term fixed interest
rate for loans denominated in the same currency. (See section
E-Article 54 Loans below.)
Calculation Methodology
For purposes of this determination, the period for which
we are measuring subsidies (the POI) is calendar year 1993.
In determining the benefits received under the various programs
described below, we used the following calculation methodology.
We first calculated the benefit attributable to the POI for
each countervailable program, using the methodologies described
in each program section below. For each program, we then divided
the benefit attributable to Dalmine in the POI by Dalmine's
total sales revenue, as none of the programs was limited to
either certain subsidiaries or products of Dalmine. Next, we
added the benefits for all programs, including the benefits
for programs which were not allocated over time, to arrive at
Dalmine's total subsidy rate. Because Dalmine is the only respondent
company in this investigation, this rate is also the country-
wide rate.
Based upon our analysis of the petition, the responses to
our questionnaires, verification, and comments by interested
parties, we determine the following:
I. Programs Determined To Be Countervailable
A. Benefits Provided Under Law 675/77
Law 675/77 was enacted to bring about restructuring and reconversion
in the following industrial sectors: (1) electronic technology;
(2) the manufacturing industry; (3) the agro-food industry;
(4) the chemical industry; (5) the steel industry; (6) the pulp
and paper industry; (7) the fashion sector; and (8) the automobile
and aviation sectors. Law 675/77 also sought to promote optimal
exploitation of energy resources, and ecological and environmental
recovery.
A primary goal of this legislation was to bring all government
industrial assistance programs under a single law in order to
develop a system to replace indiscriminate and random public
intervention by the GOI. Other goals were (1) to reorganize
and develop the industrial sector as a whole; (2) to increase
employment in the South; and (3) to maintain employment in depressed
areas. Among other measures taken, the Interministerial Committee
for the Coordination of Industrial Policy (``CIPI'') was created
as a result of Law 675/77. CIPI approves individual projects
in each of the industrial sectors listed above.
Six main programs were provided under Law 675/77:
(1) interest contributions on bank loans;
(2) mortgage loans provided by the Ministry of Industry at subsidized interest rates;
(3) interest contributions on funds raised by bond issues;
(4) capital grants for projects in the South;
(5) personnel retraining grants; and
(6) VAT reductions on purchases of capital goods by companies in the South.
Dalmine reported that it received benefits under
items (1), (2), and (5) above.
In its response, the GOI asserts that the steel and automobile
industries did not receive a ``disproportionate'' share of benefits
associated with interest contributions when the extent of investment
in those industries is compared to the extent of investment
in other industries. However, in keeping with past practice,
we did not consider the level of investment in the individual
industries receiving benefits under Law 675/77. Instead, we
followed the analysis outlined in Final Affirmative Countervailing
Duty Determination: Grain-Oriented Electrical Steel From Italy
(Grain-Oriented Electrical Steel), 59 FR 18357 (April 18, 1994),
and Final Affirmative Countervailing Duty Determination: Certain
Steel Products From Brazil, 58 FR 37295, 37295 (July 9, 1993),
of comparing the share of benefits received by the steel industry
to the collective share of benefits provided to other users
of the programs.
According to the information provided by the GOI, of the
eight industrial sectors eligible for benefits under Law 675/77,
the two dominant users of the interest contribution program
were (1) the Italian auto industry which accounted for 34 percent
of the benefits, and (2) the Italian steel industry which accounted
for 33 percent of the benefits. Likewise, with respect to the
mortgage loans, the two dominant users were the auto and steel
industries which received 45 percent and 31 percent of the benefits,
respectively.
In light of the above evidence, we determine that the steel
industry was a dominant user of both the interest contribution
and the mortgage loan programs under Law 675/77. (See section
355.43(b)(2)(iii) of the Proposed Regulations). Therefore, we
determine that benefits received by Dalmine under these programs
are being provided to a specific enterprise or industry or group
of enterprises or industries. On this basis, we find Law 675/77
financing to be countervailable to the extent that it is granted
on terms inconsistent with commercial considerations.
Under the interest contribution program, Italian commercial
banks provided loans to industries designated under Law 675/77.
The interest owed by the recipient companies was partially offset
by interest contributions from the GOI. Dalmine received bank
loans with interest contributions under Law 675/77 which were
outstanding in the POI.
Because the GOI interest contributions were automatically
available when the loans were taken out, we consider the contributions
to constitute reductions in the interest rates charged, rather
than grants (see Certain Steel From Italy at 37335).
At verification, we established that Dalmine had repaid each
of the loans it received under this program in June 1994. We
further found that Dalmine had not yet received a portion of
the interest contributions originally owed to it by the GOI
under this program, due to delays in GOI approval of several
Dalmine internal asset transfers. Finally, we established that
Dalmine had paid interest on each of the loans during the loan
grace periods, contrary to what Dalmine reported in its questionnaire
responses.
Dalmine argues that the GOI terminated the subsidized loan
portion of this program in 1982, and that Dalmine repaid each
of the loans in June 1994, after the POI, but before the publication
of the preliminary determination. Consequently, Dalmine contends,
no further benefits can accrue to Dalmine under this program.
Therefore, according to Dalmine, the Department should, in accordance
with the Department's policy to take program-wide changes into
account in setting the duty deposit rate, set Dalmine's deposit
rate for this program to zero.
Contrary to Dalmine's assertion, we determine that the termination
of the subsidized loan portion of this program
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does not constitute a program-wide change as defined in section
355.50(b)(1) of the Proposed Regulations. Specifically, although
Dalmine has repaid the loans it received under the program,
there could be other Italian companies with loans that are still
outstanding. Therefore, despite termination of the program in
1982, there may still be residual benefits under the program.
Under our program-wide change policy, the change at issue cannot
be limited to individual firms. Consequently, we determine that
the ``termination'' of the subsidized loan portion of this program
does not constitute a program-wide change. See Final Affirmative
Countervailing Duty Determination and Countervailing Duty Orders;
Certain Welded Carbon Steel Pipe and Tube Products From Argentina
(Argentine Pipe), 53 FR 37619 (September 27, 1988); Section
355.50(b)(1) of the Proposed Regulations.
Alternatively, Dalmine claims that the Department should
recalculate the benefits under this program to reflect the delayed
receipt of GOI interest contributions, as well as Dalmine's
payment of grace period interest.
With respect to the grace period, we have adjusted our calculations
to reflect that Dalmine paid interest during that time, as established
at verification. However, we are treating the interest contributions
as countervailable on the date Dalmine made the corresponding
interest payments, despite any delay in receipt by Dalmine.
This is because Dalmine's entitlement to the interest contributions
was automatic when it made the interest payments. Thus, we find,
for purposes of benefit calculation, that the interest contributions
were received at the time the interest payments were made. See
Steel Wire Nails from New Zealand, 52 FR 37196 (1987).
Under the mortgage loan program, the GOI provides long-term
loans at subsidized interest rates. Dalmine received financing
under this program which was outstanding in the POI.
To determine whether these programs conferred a benefit,
we compared the effective interest rate paid by Dalmine to the
benchmark interest rate, discussed above. Based on this comparison,
we determine that the financing provided under these programs
is inconsistent with commercial considerations, i.e., on terms
more favorable than the benchmark financing.
To calculate the benefit from these programs, we used our
standard long-term loan methodology as described in section
355.49(c)(1) of the Proposed Regulations. We then divided the
benefit allocated to the POI for each program by Dalmine's total
sales in 1993. On this basis, we determine the net subsidy from
these programs to be 0.46 percent ad valorem for all manufacturers,
producers, and exporters in Italy of the subject merchandise.
With respect to retraining grants provided to Dalmine under
Law 675/77, it is the Department's practice to treat training
benefits as recurring grants. (See Certain Steel General Issues
Appendix at 37226). Since the only grant reported under this
program was received by Dalmine in 1986, any benefit to Dalmine
as a result of this grant cannot be attributed to the POI. Therefore,
we determine that retraining benefits provided under Law 675/77
conferred no benefit to Dalmine during the POI.
B. Grants Under Law 193/84
According to the GOI, Articles 2, 3, and 4 of Law 193/84
provide for subsidies to close steel plants. As stated in Art.
20 of Law N. 46 of 17/2/1982, steel enterprises, including enterprises
producing seamless pipes, welded pipes, conduits and welded
pipes for water and gas, are the recipients of these subsidies.
As benefits under this program are limited to the steel industry,
we determine that Law 193/84 is de jure specific and, therefore,
countervailable.
At verification, we found that Dalmine received an additional
benefit under this program not reported in its questionnaire
responses. We have included this additional benefit in our calculation
of the benefits received by Dalmine under this program.
To calculate the benefit during the POI, we used our standard
grant methodology (see section 355.49(b) of the Proposed Regulations).
We then divided the benefits attributable to Dalmine under Law
193/84 in the POI by Dalmine's total sales. On this basis, we
determine the estimated net subsidy to be 0.81 percent ad valorem
for all manufacturers, producers, and exporters in Italy of
the subject merchandise.
C. Exchange Rate Guarantee Program
This program, which was enacted by Law 796/76, provides exchange
rate guarantees on foreign currency loans from the European
Coal and Steel Community (``ECSC'') and The Council of European
Resettlement Fund (``CER''). Under the program, repayment amounts
are calculated by reference to the exchange rate in effect at
the time the loan is agreed upon. The program sets a ceiling
and a floor on repayment to limit the effect on the borrower
of exchange rate changes over time. For example, if the lire
depreciates five percent against the DM (the currency in which
the loan is taken out), borrowers would normally find that they
would have to repay five percent more (in lire terms). However,
under the Exchange Rate Guarantee Program, the ceiling would
act to limit the increased repayment amount to two percent.
There is also a floor in the program which would apply if the
lire appreciated against the DM. The floor would limit any windfall
to the borrower.
In Grain-Oriented Electrical Steel, the Department found
this program to be not countervailable because of incomplete
information regarding the specificity of the program. The Department
stated that, because the determination was reached while lacking
certain important information, the finding of non-countervailability
would not carry over to future investigations.
In this investigation, information provided by the GOI shows
that the steel industry received 25% of the benefits under the
program. Furthermore, at verification, we found that in the
years Dalmine took out loans on which it received exchange rate
guarantees under this program, the steel industry received virtually
all the benefits under the program. Based on this information,
the Department determines that the steel industry was a dominant
user of exchange rate guarantees under Law 796/76 and, thus,
that benefits received by Dalmine under this law are being provided
to a specific enterprise or industry or group of enterprises
or industries. (See section 355.43(b)(2)(iii) of the Proposed
Regulations). Therefore, we determine that the exchange rate
guarantees offered under the program are countervailable to
the extent they are provided on terms inconsistent with commercial
considerations.
Dalmine provided information that it could have purchased
an exchange rate guarantee from commercial sources. However,
Dalmine's information pertained to 1993, not to the period when
the government guarantees were provided. The GOI's response
indicates that commercial exchange rate guarantees were not
available in 1986, the year in which the loans and the guarantees
were received. Therefore, we determine the benefit to be the
total amount of payments to Dalmine made during the POI by the
GOI. (Because the amount the government will pay in any given
year will not be known until that year, benefits can only be
calculated on a year-by-year basis.) We divided the GOI's payments
in 1993 by Dalmine's
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1993 total sales. On this basis, we determine the estimated
net subsidy from this program to be 0.20 percent ad valorem
for all manufacturers, producers, and exporters in Italy of
the subject merchandise.
II. Programs Determined To Be Not Countervailable
A. 1988/89 Equity Infusion
In November 1989, Dalmine completed an equity rights offering
which allowed existing shareholders to purchase 7 new shares
for every 10 shares they already owned. The new shares were
offered at a price of LIT 300 per share. At that time, ILVA
owned 81.7 percent of Dalmine's equity, with the remaining 18.3
percent owned by private investors. Pursuant to the rights offering,
ILVA subscribed to its full allotment of the new shares issued.
The remainder of the new shares were purchased by private shareholders.
All shares were purchased at LIT 300 per share.
Petitioner argues that, although Dalmine's shares were nominally
publicly traded, the vast majority of Dalmine shares were indirectly
owned by the GOI and, therefore, shares were not purchased in
adequate volume by private investors to establish a valid benchmark.
Specifically, petitioner contends that, in 1991, ILVA owned
99.9 percent of Dalmine and, therefore, Dalmine's shares were
in fact not publicly traded. Consequently, because essentially
no private purchases were being made, the market price at the
time of the equity infusion cannot serve as a valid benchmark.
Furthermore, petitioner asserts that it is highly likely that
the remaining shares not purchased by ILVA were purchased indirectly
by the GOI through other holding companies.
In response to our questionnaire, Dalmine provided a list
of all purchasers of shares in the 1989 offering. There was
no evidence to indicate that the shares not purchased by ILVA
were purchased by other government controlled or owned entities,
as petitioner suggests.
Moreover, the extent of ILVA's ownership in 1991 is not relevant
to the choice of a benchmark for the equity investment in 1989.
Therefore, in our preliminarily determination, we determined
that, because 18.3 percent of the equity infusion was purchased
by private shareholders, the sale of these shares provides the
market-determined price for Dalmine's equity. Furthermore, in
accordance with section 355.44 (e)(1) of the Department's Proposed
Regulations, we preliminarily determined that the equity infusion
is not countervailable because the market-determined price for
equity purchased from Dalmine is not less than the price paid
by ILVA for the same form of equity. We did not learn anything
at verification that would lead us to reconsider our preliminary
determination. Therefore, we continue to find that the equity
infusion is not countervailable.
B. European Social Fund (``ESF'') Grants
The ESF was established by the 1957 European Economic Community
Treaty to increase employment and help raise worker living standards.
As described in Grain-Oriented Electrical Steel, the ESF
receives its funds from the EC's general budget of which the
main revenue sources are customs duties, agricultural levies,
value-added taxes collected by the member states, and other
member state contributions.
The member states are responsible for selecting the projects
to be funded by the EC. The EC then disburses the grants to
the member states which manage the funds and implement the projects.
According to the EC, ESF grants are available to (1) people
over 25 who have been unemployed for more than 12 months; (2)
people under 25 who have reached the minimum school-leaving
age and who are seeking a job; and (3) certain workers in rural
areas and regions characterized by industrial decline or lagging
development.
The GOI has stated that the ESF grants received by Italy
have been used for vocational training. Certain regions in the
South are also eligible for private sector re-entry and retraining
schemes. Since 1990, the vocational training grants have been
available to unemployed youths and long-term unemployed adults
all over Italy, according to the GOI. Before 1990, however,
the GOI gave preference to certain regions in Italy.
In Grain-Oriented Electrical Steel, we determined that this
program was not regionally specific and not otherwise limited
to a specific enterprise or industry, or group of enterprises
or industries. Furthermore, we noted that to the extent there
is a regional preference (i.e., southern Italy) in the distribution
of ESF benefits, it has not resulted in a countervailable benefit
to the production of the subject merchandise, which is produced
in northern Italy.
Information provided by the GOI in this investigation is
consistent with the information provided in Grain-Oriented Electrical
Steel. Therefore, we determine that this program is not limited
to a specific enterprise or industry, or group of enterprises
or industries, and therefore, is not countervailable.
C. ECSC Article 54 Loans
Under Article 54 of the 1951 ECSC Treaty, the European Commission
provides loans directly to iron and steel companies for modernization
and the purchase of new equipment. The loans finance up to 50
percent of an investment project. The remaining financing needs
must be met from other sources. The Article 54 loan program
is financed by loans taken by the Commission, which are then
re-lent to iron and steel companies in the member states at
a slightly higher interest rate than that at which the Commission
obtained them.
Consistent with the Department's finding in Grain-Oriented
Electrical Steel, we determine that this program is limited
to the iron and steel industry. As a result, loans under this
program are specific.
Of the Article 54 loans Dalmine had outstanding during the
POI, some were denominated in U.S. dollars and others were in
Dutch guilders (``NLG''). To determine whether the loans were
provided on terms inconsistent with commercial considerations,
we used the benchmark interest rates for the currencies in which
the loans were denominated. That is, for the U.S. dollar loans
we used the average interest rate on long-term fixed-rate U.S.
dollar loans obtained in the United States, as reported by the
Federal Reserve. For the NLG denominated loan, we used the average
long-term bond rate for private borrowers in the Netherlands,
as reported by the Organization for Economic Cooperation and
Development (``OECD'').
Because the interest rates paid on Dalmine's Article 54 loans
are higher than the benchmark interest rates, the Department
determines that loans provided under this program are not inconsistent
with commercial considerations and, therefore, not countervailable.
D. 1989 Provisional Payment in Connection With 1989 Equity Infusion
In March 1989, ILVA made a payment to Dalmine in anticipation
of purchasing new shares in Dalmine. The payment was provisional
in nature because EC authorization of the capital increase was
necessary and, if authorization was not granted, the money would
have been repaid to ILVA. The capital increase was not finalized
until November 1989, due to delays in EC approval. At that time,
the payment became equity capital.
---- page 31998 ----
Consistent with the Department's position in Grain-Oriented
Electrical Steel, we determine that the funds provided by ILVA
to Dalmine are countervailable.
During the period March-November 1989, Dalmine had use of
the money and paid no interest on it. Therefore, we have treated
the funds provided by ILVA to Dalmine as an interest-free short-
term loan from March 1989 to November 1989.
Because any benefit from this interest-free loan would be
allocable entirely to 1989, no benefit is attributable to the
POI.
III. Programs Determined To Be Not Used
We established at verification that the following programs
were not used during the POI.
1. Preferential IMI Export Financing Under Law 227/77
2. Preferential Insurance Under Law 227/77
3. Retraining Grants under Law 181/89
4. Benefits under ECSC Article 56
Verification
In accordance with section 776(b) of the Act, we verified
the information used in making our final determination. 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 determination,
we instructed the U.S. Customs Service to suspend liquidation
of all entries of seamless pipe from Italy, which were entered
or withdrawn from warehouse for consumption, on or after November
28, 1994, the date our preliminary determination was published
in the Federal Register. This final countervailing duty determination
was aligned with the final antidumping duty determination of
seamless pipe from Italy, 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 a final affirmative determination 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 March 28, 1995, but to continue the suspension
of liquidation of all entries, or withdrawals from warehouse,
for consumption of the subject merchandise between November
28, 1994, and March 27, 1995. 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.
Seamless Pipe
Country-Wide Ad Valorem Rate 1.47 percent.
ITC Notification
In accordance with section 705(c) of the Act, we have notified
the ITC of our determination. The ITC will make its determination
whether these imports materially injure, or threaten injury
to, a U.S. industry within 45 days of the publication of this
notice. If the ITC determines that material injury or threat
of material injury does not exist, the proceeding will be terminated
and all securities posted as a result of the suspension of liquidation
will be refunded or cancelled. However, if the ITC determines
that material injury or threat of material injury does exist,
the Department will issue a countervailing duty order.
Return of 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.
This determination is published pursuant to section 705(d)
of the Act and 19 CFR 355.20(a)(4).
Dated June 12, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-14934 Filed 6-16-95; 8:45 am]
BILLING CODE 3510-DS-P
The Contents entry for this article reads as follows:
International Trade Administration
NOTICES
Countervailing duties:
Small diameter circular seamless carbon and alloy steel, standard,
line and pressure pipe from-
Italy, 31992