99-726

64 FR 40416
NOTICES

DEPARTMENT OF COMMERCE

International Trade Administration

[C-475-827]

Preliminary Affirmative Countervailing Duty Determination and Alignment of
Final Countervailing Duty Determination With Final Antidumping Duty
Determination: Certain Cut-to-Length Carbon-Quality Steel Plate From Italy

Monday, July 26, 1999

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

EFFECTIVE DATE: July 26, 1999.

FOR FURTHER INFORMATION CONTACT: Kristen Johnson or Michael Grossman, Office of CVD/AD
Enforcement II, Import Administration, U.S. Department of Commerce, Room 4012, 14th Street and
Constitution Avenue, NW, Washington, DC 20230; telephone (202) 482-2786.

PRELIMINARY DETERMINATION: The Department of Commerce (the Department) preliminarily
determines that countervailable subsidies are being provided to certain producers and exporters of
certain cut-to-length carbon-quality steel plate from Italy. For information on the estimated
countervailing duty rates, please see the "Suspension of Liquidation" section of this notice.

SUPPLEMENTARY INFORMATION:

Petitioners

The petition in this investigation was filed by Bethlehem Steel Corporation, U.S. Steel Group,
a Unit of USX Corporation, Gulf States, Inc., IPSCO Steel Inc., and the United Steelworkers of
America (the petitioners).

Case History

Since the publication of the notice of initiation in the Federal Register (see Notice of Initiation of
Countervailing Duty Investigations: Certain Cut-To- Length Carbon-Quality Steel Plate
from France, India, Indonesia, Italy, and the Republic of Korea, 64 FR 12996 (March 16, 1999)
(Initiation Notice)), the following events have occurred: On March 19, 1999, we issued
countervailing duty questionnaires to the Government of Italy (GOI), the European
Commission (EC), and the producers/exporters of the subject merchandise (CTL plate). On April 21,
1999, we postponed the preliminary determination of this investigation until no later than July 16,
1999. See Certain Cut-To-Length Carbon-Quality Steel Plate from France, India, Indonesia,
Italy, and the Republic of Korea: Postponement of Time Limit for Preliminary Determination of
Countervailing Duty Investigations, 64 FR 23057 (April 29, 1999).
We received responses to our initial questionnaires from the EC on May 6, 1999, and the GOI on May
10 and 28, 1999. Palini & Bertoli S.p.A. (Palini & Bertoli), a producer of the subject merchandise
which had exports to the United States in 1998, submitted its questionnaire response on May 11,
1999. ILVA Lamiere e Tubi S.p.A. and ILVA S.p.A. (collectively referred to as ILVA/ILT) submitted
their joint questionnaire response on May 13, 1999. (ILT produced the subject merchandise which
was exported to the United States by ILVA in 1998.) On May 25, 1999, we issued a supplemental
questionnaire to Palini &
Bertoli, and received the company's response on June 14, 1999. On June 1, 1999, we issued
supplemental questionnaires to the EC, GOI, and ILVA/ILT. The supplemental questionnaire
responses were submitted by the EC on June 15, 1999, by ILVA/ILT on June 21, 1999, and by the
GOI on June 22, 1999. We also issued supplemental questionnaires on June 22, 1999, to Palini &
Bertoli, and June 29, 1999, to the EC, GOI, and ILVA/ILT. The responses were submitted on July 6,
1999, by Palini & Bertoli and the EC, on July 8 and 9, 1999, by the GOI, and July 9, 1999, by
ILVA/ILT. On July 13 and 14, 1999, ILVA/ILT submitted additional information on the record.
In its supplemental response, Palini & Bertoli indicated that the company received benefits under
two regional government laws during the POI, i.e., Law 25/65 and Law 30/84. The Department did
not receive a request by petitioners to examine these potential benefits, hence we did not initiate on
these laws in the Initiation Notice. Law 25/65, adopted by the Regional Government of
Friuli-Venezia Giulia, provides interest contributions on loans taken by small- and medium-sized
enterprises for the construction, enlargement, or technical renovation of industrial plants
throughout the region. Palini & Bertoli received interest contributions during the POI on one loan
contracted in 1990. Palini & Bertoli also received a capital grant under Law 30/84 of the Regional
Government of Friuli-Venezia Giulia. Regional Law 30/84 provides capital grants to industrial and
handicraft enterprises intending to open new
productive sites or to restructure existing plants within certain mountainous areas of the region.
Due to the fact that this information was brought to the Department's attention just prior to the
preliminary determination, the Department is unable to make a determination on the
countervailability of these programs at this time. More specifically, the Department does not have
sufficient information to perform an appropriate specificity analysis of the above mentioned
programs. We will request additional and clarifying information with regard to these programs from
Palini & Bertoli and the Regional Government of Friuli-Venezia Giulia, and will present our findings in
the Final Determination of this investigation.

Scope of Investigation

The products covered by this scope are certain hot-rolled carbon-quality steel: (1) universal mill
plates (i.e., flat-rolled products rolled on four faces or in a closed box pass, of a width exceeding 150
mm but not exceeding 1250 mm, and of a nominal or actual thickness of not less than 4 mm, which
are cut-to-length (not in coils) and without patterns in relief), of iron or non- alloy-quality steel;
and (2) flat-rolled products, hot-rolled, of a nominal or actual thickness of 4.75 mm or more and of a
width which exceeds 150 mm and measures at least twice the thickness, and which are cut-to-length
(not in coils).
Steel products to be included in this scope are of rectangular, square, circular or other shape
and of rectangular or non-rectangular cross-section where such non-rectangular cross-section is
achieved subsequent to the rolling process (i.e., products which have been "worked after
rolling")--for example, products which have been beveled or rounded at the edges. Steel
products that meet the noted physical characteristics that are painted, varnished or coated with
plastic or other non-metallic substances are included within this scope. Also, specifically included in
this scope are high strength, low alloy (HSLA) steels. HSLA steels are recognized as steels
with micro-alloying levels of elements such as chromium, copper, niobium, titanium, vanadium,
and molybdenum.
Steel products to be included in this scope, regardless of Harmonized Tariff Schedule of the
United States (HTSUS) definitions, are products in which: (1) Iron predominates, by weight, over
each of the other contained elements, (2) the carbon content is two percent or less, by weight, and
(3) none of the elements listed below is equal to or exceeds the quantity, by weight, respectively
indicated:
1.80 percent of manganese, or
1.50 percent of silicon, or
1.00 percent of copper, or

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0.50 percent of aluminum, or
1.25 percent of chromium, or
0.30 percent of cobalt, or
0.40 percent of lead, or
1.25 percent of nickel, or
0.30 percent of tungsten, or
0.10 percent of molybdenum, or
0.10 percent of niobium, or
0.41 percent of titanium, or
0.15 percent of vanadium, or
0.15 percent zirconium.
All products that meet the written physical description, and in which the chemistry quantities do not
equal or exceed any one of the levels listed above, are within the scope of these investigations unless
otherwise specifically excluded. The following products are specifically excluded from these
investigations: (1) Products clad, plated, or coated with metal, whether or not painted, varnished or
coated with plastic or other non-metallic substances; (2) SAE grades (formerly AISI grades) of series
2300 and above; (3) products made to ASTM A710 and A736 or their proprietary equivalents; (4)
abrasion-resistant steels (i.e., USS AR 400, USS AR 500); (5) products made to ASTM A202,
A225, A514 grade S, A517 grade S, or their proprietary equivalents; (6) ball bearing steels; (7)
tool steels; and (8) silicon manganese steel or silicon electric steel.
The merchandise subject to these investigations is classified in the HTSUS under subheadings:
7208.40.3030, 7208.40.3060, 7208.51.0030, 7208.51.0045, 7208.51.0060, 7208.52.0000,
7208.53.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030,
7211.14.0045, 7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7225.40.3050,
7225.40.7000, 7225.50.6000, 7225.99.0090, 7226.91.5000, 7226.91.7000, 7226.91.8000,
7226.99.0000.
Although the HTSUS subheadings are provided for convenience and Customs purposes, the written
description of the merchandise under investigation is dispositive.

Scope Comments

As stated in our notice of initiation, we set aside a period for parties to raise issues regarding product
coverage. In particular, we sought comments on the specific levels of alloying elements set out in the
description below, the clarity of grades and specifications excluded from the scope, and the physical
and chemical description of the product coverage.
On March 29, 1999, Usinor, a respondent in the French antidumping and countervailing duty
investigations and Dongkuk Steel Mill Co., Ltd. and Pohang
Iron and Steel Co., Ltd., respondents in the Korean antidumping and countervailing duty
investigations (collectively the Korean respondents), filed comments regarding the scope of the
investigations. On April 14, 1999, the petitioners responded to Usinor's and the Korean respondents'
comments. In addition, on May 17, 1999, ILVA/ILT, a respondent in the Italian antidumping and
countervailing duty investigations, requested guidance on whether certain products are
within the scope of these investigations.
Usinor requested that the Department modify the scope to exclude: (1) Plate that is cut to
non-rectangular shapes or that has a total final weight of less than 200 kilograms; and (2) steel
that is 4'' or thicker and which is certified for use in high-pressure, nuclear or other technical
applications; and (3) floor plate (i.e., plate with "patterns in relief") made from hot- rolled coil.
Further, Usinor requested that the Department provide clarification of scope coverage with respect
to what it argues are over- inclusive HTSUS subheadings included in the scope language.
The Department has not modified the scope of these investigations because the current language
reflects the product coverage requested by the petitioners, and Usinor's products meet the product
description. With respect to Usinor's clarification request, we do not agree that the scope language
requires further elucidation with respect to product coverage under the HTSUS. As indicated in the
scope section of every Department antidumping and countervailing duty
proceeding, the HTSUS subheadings are provided for convenience and Customs purposes only; the
written description of the merchandise under investigation or review is dispositive.
The Korean respondents requested confirmation whether the maximum alloy percentages listed in
the scope language are definitive with respect to covered HSLA steels.
At this time, no party has presented any evidence to suggest that these maximum alloy percentages
are inappropriate. Therefore, we have not adjusted the scope language. As in all proceedings,
questions as to whether or not a specific product is covered by the scope should be timely raised
with Department officials.
ILVA/ILT requested guidance on whether certain merchandise produced from billets is within the
scope of the current CTL plate investigations. According to ILVA/ILT, the billets are converted into
wide flats and bar products (a type of long product). ILVA/ILT notes that one of the long products,
when rolled, has a thickness range that falls within the scope of these investigations. However,
according to ILVA/ILT, the greatest possible width of these long products would only slightly
overlap the narrowest category of width covered by the scope of the investigations. Finally,
ILVA/ILT states that these products have different production processes and properties than
merchandise covered by the scope of the investigations and therefore are not covered by the scope
of the investigations.
As ILVA/ILT itself acknowledges, the particular products in question appear to fall within the
parameters of the scope and, therefore, we are treating them as covered merchandise for purposes
of these investigations.

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are references to the provisions effective
January 1, 1995, the effective date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise indicated, all citations to the
Department's regulations are to the regulations codified at 19 CFR part 351 (1998) and to the
substantive countervailing duty regulations published in the Federal Register on November
25, 1998 (63 FR 65348) (CVD Regulations).

Injury Test

Because Italy is a "Subsidies Agreement Country" within the meaning of section 701(b) of the
Act, the International Trade Commission (ITC) is required to determine whether imports of the
subject merchandise from Italy materially injure, or threaten material injury to, a U.S. industry.
On April 8, 1999, the
ITC published its preliminary determination 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 (see Certain Cut-to-Length Steel Plate From
the Czech Republic, France, India, Indonesia, Italy, Japan, Korea, and Macedonia;
Determinations, 64 FR 17198 (April 8, 1999)).

Alignment With Final Antidumping Duty Determination

On July 2, 1999, the petitioners submitted a letter requesting alignment of the final determination in
this investigation with the final determination in the companion

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antidumping duty investigation. See Initiation of Antidumping Duty Investigations: Certain
Cut-To-Length Carbon-Quality Steel Plate from the Czech Republic, France, India, Indonesia,
Italy, Japan, Republic of Korea, and the Former Yugoslav Republic of Macedonia, 64 FR 12959
(March 16, 1999). In accordance with section 705(a)(1) of the Act, we are aligning the final
determination in this investigation with the final determinations in the antidumping investigations of
certain cut-to-length carbon-quality steel plate.

Period of Investigation

The period of investigation for which we are measuring subsidies (the POI) is calendar year 1998.

Corporate History of ILVA/ ILT super1

Prior to 1981, the Italian government holding company Istituto per la Ricostruzione Industriale
(IRI), controlled Italy's nationalized steel industry through its wholly-owned subsidiary,
Finsider S.p.A (Finsider). The steel operations of Finsider were subdivided into three main
companies: Italsider (carbon steel); Terni (stainless and special steel); and Dalmine (pipe and
tube). Italsider was the sector leader and the primary producer of the subject merchandise. In 1981,
the GOI implemented a restructuring plan, and Finsider was restructured into several operating
companies including Nuova Italsider (carbon steel flat products); Terni (speciality flat steels);
Nuova Sias (special long products); and other steel product divisions. In the course of the
1981 Restructuring Plan, Italsider transferred all of its assets, with the exception of certain plants, to
Nuova Italsider. Italsider became a one- company holding company with Nuova Italsider's stock as
its primary asset.

FN1 As discussed in this section, ILVA/ILT's carbon steel predecessor companies are: Nuova
Italsider (1981-1987), Italsider (1987-1988), ILVA S.p.A. (1989-1993), and ILP (1994-1996).
During 1987, Finsider restructured three of its main operating companies: Nuova Italsider,
Deltasider, and Terni. Nuova Italsider spun-off its assets to Italsider and transferred its shares in
Italsider to Finsider. Nuova Italsider ceased operations after this divestment and Finsider had direct
ownership of Italsider. Upon completion of the 1987 restructuring, Italsider re-emerged as the
steel sector's carbon steel products producer.
Later in 1987, Finsider and its main operating companies (Italsider, TAS, and Nuova Deltasider)
were placed in liquidation and the GOI subsequently implemented the 1988 Restructuring Plan. The
goal of the 1988 Restructuring Plan was to restructure Finsider and its operating companies,
assembling the group's most productive assets into a new operating company, ILVA S.p.A. (ILVA
S.p.A. or (old) ILVA), which began operations on January 1, 1989. The 1988 Restructuring Plan, like
the 1981 plan, was submitted and approved by the EC. In accordance with the plan, ILVA S.p.A. took
over some of the assets and liabilities of the liquidating companies, and Finsider closed certain
facilities to comply with the EC's requirements. With respect to Italsider, part of the company's
liabilities and the majority of its viable assets, including all the assets associated with the production
of carbon steel flat- rolled products, were transferred to ILVA S.p.A. on January 1, 1989. Non-
productive assets and a substantial amount of liabilities were left behind with
Finsider and the liquidating operating companies.
The facilities retained by ILVA S.p.A were organized into four primary operating groups: Carbon
steel flat products, stainless steel flat products, stainless steel long products, and
seamless pipe and tube. In 1992, ILVA Lamiere e Tubi (ILT), a carbon steel flat products
operation, was created as a wholly-owned subsidiary of ILVA S.p.A. ILVA S.p.A. was also the
majority owner of a large number of separately incorporated subsidiaries. Some of these subsidiaries
produced various types of steel products. Others constituted service centers, trading
companies, and an electric power company, among others. ILVA S.p.A., together with its
subsidiaries, constituted the ILVA Group. The ILVA Group was wholly-owned by IRI.
Although, ILVA S.p.A. was profitable in 1989 and 1990, the company encountered financial
difficulties in 1991, and became insolvent by 1993. In October 1993, ILVA S.p.A. entered into
liquidation and became known as ILVA Residua (a.k.a., ILVA in Liquidation). In December 1993, IRI
initiated the splitting of ILVA S.p.A.'s main productive assets into two new companies: ILVA
Laminati Piani (carbon steel flat products) (ILP) and Acciai Speciali Terni (AST) (speciality and
stainless steel flat products). On December 31, 1993, ILP and AST became separately
incorporated firms in advance of privatization. ILT, the carbon flat steel products operation, was
transferred to ILP as its wholly-owned subsidiary. The remainder of ILVA S.p.A.'s productive assets
and existing
liabilities, along with much of the redundant workforce, was placed in ILVA Residua.
On January 1, 1994, ILP was formally established as a separate corporation. In 1995, 100 percent of
ILP was sold through a competitive public tender managed by IRI with the assistance of Istituto
Mobiliare Italiano (IMI). The sale of ILP was executed through a share purchase agreement between
IRI and a consortium of investors led by Riva Acciaio S.p.A. (RIVA) and investment companies. The
contract of sale was signed on March 16, 1995, and all shares of ILP were transferred to the
consortium on April 28, 1995. As of that date, the GOI no longer maintained any ownership interest
in ILP or had any ownership interest in any of ILP's new owners.
On January 1, 1997, RIVA changed the name of ILP to ILVA S.p.A (creating the "new" ILVA, referred
to hereafter as ILVA or (new) ILVA). ILVA continues to wholly-own ILT. Within RIVA's corporate
structure, ILT, at its Taranto Works facility, produces the subject merchandise, which is exported to
the United States. ILVA, with the assistance of ILVA Commerciale S.p.A. (ICO), a sales company
wholly-owned by ILVA, is responsible for selling and exporting the subject merchandise to the
United States and other markets.
As of 1998, RIVA owns and/or controls 82.0 percent of ILVA and two foreign- incorporated
investment companies own the remaining 18.0 percent of ILVA.
According to ILVA/ILT, Sidercomit Taranto C.S. Lamiere S.r.l. (Sidercomit) was
created in 1992, as an indirect subsidiary of (old) ILVA. Sidercomit became an operating unit within
(new) ILVA in 1997, and currently operates service centers for the distribution of merchandise,
including the subject merchandise for ILVA/ILT. Any benefits to Sidercomit under programs that
have preliminarily been found countervailable have been mentioned separately within those
program sections below.

Corporate History of Palini & Bertoli

Palini & Bertoli, a 100 percent privately-owned corporation, was incorporated in December 1963.
Palini & Bertoli has never been part of the Italian state- owned steel industry.

Change in Ownership

In the General Issues Appendix (GIA), appended to the Final Affirmative Countervailing Duty
Determination: Certain Steel Products from Austria, 58 FR 37217, 37226 (July 9, 1993) (Certain
Steel from Austria), we applied a new methodology with respect to the treatment of subsidies
received prior to the sale of a government-owned

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company to a private entity (i.e., privatization), or the spinning-off (i.e., sale) of a productive unit
from a government-owned company to a private entity.
Under this methodology, we estimate the portion of the purchase price attributable to prior
subsidies. We do this by first dividing the sold company's subsidies by the company's net worth for
each year during the period beginning with the earliest point at which non-recurring subsidies would
be attributable to the POI and ending one year prior to the sale of the company. We then take the
simple average of these ratios. This averaged ratio serves as a reasonable estimate of the percent
that subsidies constitute of the overall value of the company. Next, we multiply this ratio by the
purchase price to derive the portion of the purchase price attributable to the payment of prior
subsidies. Finally, we reduce the benefit streams of the prior subsidies by the ratio of the repayment
amount to the net present value of all remaining benefits at the time the company is sold.
With respect to the spin-off of a productive unit, consistent with the Department's methodology set
out above, we analyze the sale of a productive unit to determine what portion of the sales price of the
productive unit can be attributable to the repayment of prior subsidies. To perform this calculation,
we first determine the amount of the seller's subsidies that the spun-off productive unit could
potentially take with it. To calculate this amount, we divide the value of the assets of the spun-off
unit by the value of the assets of the company selling the unit. We then apply this ratio to the net
present
value of the seller's remaining subsidies. The result of this calculation yields the amount of remaining
subsidies attributable to the spun off productive unit. We next estimate the portion of the purchase
price going towards repayment of prior subsidies in accordance with the methodology set out
above, and deduct it from the maximum amount of subsidies that could be attributable to the
spun-off productive unit.

Use of Facts Available

Both the GOI and ILVA/ILT failed to fully respond to the Department's questionnaires concerning
the program "Debt Forgiveness: 1981 Restructuring Plan." Section 776(a)(2) of the Act requires the
use of facts available when an interested party withholds information that has been requested by the
Department, or when an interested party fails to provide the information requested in a timely
manner and in the form required. In such cases, the Department must use the facts otherwise
available in reaching the applicable determination. Because the GOI and ILVA/ILT failed to submit
the information that was specifically requested by the Department, we have based our preliminary
determination for this program on the facts available. In addition, the Department finds that by not
providing the requested information, respondents have failed to cooperate to the best of their
abilities.

In accordance with section 776(b) of the Act, the Department may use an inference that is adverse
to the interests of that party in selecting from among the facts otherwise available when the party
has failed to cooperate by not acting to the best of its ability to comply with a request for
information. Such adverse inference may include reliance on information derived from (1) the
petition; (2) a final determination in a countervailing duty or an antidumping investigation;
(3) any previous administrative review, new shipper review, expedited antidumping review, section
753 review, or section 762 review; or (4) any other information placed on the record. See 19 CFR
351.308(c). In the absence of information from the GOI and ILVA/ILT, we consider the petition, as
well as our findings from the final determination of Certain Steel from Italy to be appropriate
bases for a facts available countervailing duty rate calculation.
The Statement of Administrative Action accompanying the URAA clarifies that information from the
petition and prior segments of the proceeding is "secondary information." See Statement of
Administrative Action, accompanying H.R. 5110 (H.R. Doc. No. 103-316) (1994) (SAA), at 870. If
the Department relies on secondary information as facts available, section 776(c) of the Act
provides that the Department shall, to the extent practicable, corroborate such information using
independent sources reasonably at its disposal. The SAA further provides that to corroborate
secondary information means simply that
the Department will satisfy itself that the secondary information to be used has probative value.
However, where corroboration is not practicable, the Department may use uncorroborated
information. With respect to the program for which we did not receive complete information from
the respondents, the secondary information was corroborated through exhibits (i.e., financial
statements) attached to the petition. The financial transactions discussed within Finsider's 1984 and
1985 financial statements confirm that the GOI engaged in transactions which are tantamount to the
assumption of debt and debt forgiveness. Based on such review of the transactions discussed in the
financial statements, we find that the secondary information (i.e., the petition and Certain Steel
from Italy) has probative value and, therefore, the information regarding the debt forgiveness
provided under the 1981 Restructuring Plan has been corroborated.

Claims for "Green Light" Subsidy Treatment

Section 771(5B) of the Act describes subsidies that are non- countervailable, the so-called "green
light" subsidies. Among these are subsidies to disadvantaged regions. The GOI has requested that
certain of their regional subsidies be considered non-countervailable under the green light
provisions of section 771(5B).

The GOI has maintained a system of "extraordinary intervention" in southern Italy since the
1950's, authorizing aid to the disadvantaged region. Over time, various laws were passed, including
Decree 218/78, relating to the extraordinary intervention in the South. In 1986, Law 64/86 was
passed in order to consolidate all laws relating to the extraordinary intervention in the south into
one development policy. Tax exemptions under Decree 218/78, for which the GOI has requested
green light treatment, is considered part of Law 64/86 for this reason.
In determining whether a specific subsidy should be accorded green light status, section 771(5B)(C)
of the Act establishes the threshold that the subsidy be provided pursuant to a general framework of
regional development, i.e., must be part of an internally consistent and generally applicable regional
development policy. The region must be considered disadvantaged on the basis of neutral and
objective criteria which do not favor certain regions beyond what is appropriate for the elimination
or reduction of regional disparities within this framework. In Certain Pasta from Italy, 61 FR at
30307, the Department determined that the GOI did not perform a systematic analysis, using
neutral and objective criteria, in order to identify the regions which would receive regional
development assistance under Law 64/86. There is no evidence on the record of this investigation
that the GOI performed this necessary analysis. While detailed analysis may have been done by the
EC with respect to its own regional development policy

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concerning Italy, there is no indication that the GOI undertook the same or similar efforts on a
national level.
In addition, the Act outlines that a subsidy program cannot provide more aid than is appropriate for
reduction of regional disparities and must include ceilings on the amount of assistance for each
project. There is no evidence on the record that the GOI has given any consideration to a limit on the
amount of assistance that could be awarded with regard to the program in question. Furthermore,
there is no evidence that the GOI may have been concerned about awarding potentially
disproportionate amounts to particular enterprises or industries.
Based on this analysis, we preliminarily determine that subsidies received under this program do not
meet the standard for green light treatment. Our treatment of the benefits provided under this
program is discussed below in the "Programs Determined To Be Countervailable" section of our
notice.

Subsidies Valuation Information

Allocation Period

Section 351.524(d)(2) of the CVD Regulations states that we will presume the
allocation period for non-recurring subsidies to be the average useful life (AUL) of renewable
physical assets for the industry concerned, as listed in the Internal Revenue Service's (IRS) 1977
Class Life Asset Depreciation Range System and updated by the Department of Treasury. The
presumption will apply unless a party claims and establishes that these tables do not reasonably
reflect the AUL of the renewable physical assets for the company or industry under investigation,
and the party can establish that the difference between the company-specific or country-wide AUL
for the industry under investigation is significant.
On June 21, 1999, ILVA/ILT submitted to the Department four tables illustrating its
company-specific AUL calculations for (old) ILVA, ILP, ILT, and (new) ILVA, both separately and in
combination. Based upon our analysis of the data submitted by ILVA/ILT regarding the AUL of its
assets, we preliminarily determine that the calculation which takes into consideration all producers
of the subject merchandise over the past 10 years is the most appropriate AUL calculation.
However, because this calculation does not yield a company-specific AUL which is significantly
different from the AUL listed in the IRS tables, we are using the 15 year AUL as reported in the IRS
tables to allocate non-recurring subsidies under investigation for ILVA/ILT in the preliminary
calculations.

Equityworthiness

In measuring the benefit from a government equity infusion, in accordance with �351.507 (a)(2) of
the Department's CVD Regulations, the Department compares the price paid by the government for
the equity to actual private investor prices, if such prices exist. According to �351.507(a)(3) of the
Department's CVD Regulations, where actual private investor prices are unavailable, the Department
will determine whether the firm was unequityworthy at the time of the equity infusion. In this case,
private investor prices were unavailable. Therefore, our review of the record has not led us to
change our finding from prior investigations, in which we found ILVA/ILT's predecessor companies,
Nuova Italsider and (old) ILVA, unequityworthy from 1984 through 1988, and from 1991 through
1992. See, e.g., Final Affirmative Countervailing Duty Determinations: Certain Steel
Products from Italy, 58 FR 37327, 37328 (July 9, 1993) (Certain Steel from Italy); Final
Affirmative Countervailing Duty Determination: Certain Stainless Steel Wire Rod from
Italy, 63 FR 40,474, 40,477 (July 29, 1998) (Wire Rod from Italy); and Final Affirmative
Countervailing Duty Determination: Stainless Steel Sheet and Strip in Coils from Italy,
64 FR 30624, 30627 (June 8, 1999) (Sheet and Strip from Italy).
Section 351.507(a)(3) of the Department's CVD Regulations provides that a determination that a firm
is unequityworthy constitutes a determination that
the equity infusion was inconsistent with usual investment practices of private investors. The
Department will then apply the methodology described in � 351.507(a)(6) of the regulations, and
treat the equity infusion as a grant. Use of the grant methodology for equity infusions into an
unequityworthy company is based on the premise that an unequityworthiness finding by the
Department is tantamount to saying that the company could not have attracted investment capital
from a reasonable investor in the infusion year based on the available information.

Creditworthiness

When the Department examines whether a company is creditworthy, it is essentially attempting to
determine if the company in question could obtain commercial financing at commonly available
interest rates. See, e.g., Final Affirmative Countervailing Duty Determinations: Certain
Steel Products from France, 58 FR 37304 (July 9, 1993), and Final Affirmative
Countervailing Duty Determination: Steel Wire Rod from Venezuela, 62 FR 55014
(October 21, 1997). The Department will consider a firm to be uncreditworthy if it is determined
that, based on information available at the time of the government-provided loan, the firm could not
have obtained a long-term loan from conventional sources. See �351.505(a)(4)(i) of the CVD
Regulations.

Italsider, Nuova Italsider, and (old) ILVA were found to be uncreditworthy from 1977 through
1993. See Certain Steel from Italy, 58 FR at 37328-29, Wire Rod from Italy, 63 FR at
40477, and Sheet and Strip from Italy, 64 FR at 30627. No new information has been presented
in this investigation that would lead us to reconsider these findings. Therefore, consistent with our
past practice, we continue to find Italsider, Nuova Italsider, and (old) ILVA uncreditworthy from
1977 through 1993. We did not analyze ILP's, (new) ILVA's, or ILT's creditworthiness in the years
1994 through 1998, because the companies did not negotiate new loans with the GOI or EC during
these years.

Benchmarks for Long-Term Loans and Discount Rates

Consistent with the Department's finding in Wire Rod from Italy, 63 FR at 40477 and Sheet and
Strip from Italy, 64 FR at 30626-30627, we have based our discount rates on the Italian
Bankers' Association (ABI) rates. The ABI rate represents a long-term interest rate provided to a
bank's most preferred customers with established low-risk credit histories. In calculating the interest
rate applicable to a borrower, commercial banks typically add a spread ranging from 0.55 percent to
4.0 percent onto the ABI rate, which is determined by the company's financial health.
Additionally, information on the record indicates that the published ABI rates
do not include amounts for fees, commissions, and other borrowing expenses. While we do not have
information on the expenses that would be applied to long- term commercial loans, the GOI supplied
information on the borrowing expenses on overdraft loans for 1997, as an approximation of
expenses on long-term commercial loans. This information shows that expenses on overdraft loans
range from 6.0 to 11.0 percent of interest charged. Such expenses, along with the applied spread,
raise the effective interest rate

*40421

that a company would pay. Because it is the Department's practice to use effective interest rates,
where possible, we are including an amount for these expenses in the calculation of our effective
benchmark rates. See �351.505(a)(1) of the CVD Regulations. Therefore, we have added the average
of the spread (i.e., 2.28 percent) and borrowing expenses (i.e., 8.5 percent of the interest charged) to
the yearly ABI rates to calculate the effective discount rates.
For the years in which ILVA/ILT or their predecessor companies were uncreditworthy (see
Creditworthiness section above), we calculated the discount rates in accordance with the formula for
constructing a long-term interest rate benchmark for uncreditworthy companies as stated in section
351.505(a)(3)(iii) of the CVD Regulations. This formula requires values for the probability of default
by uncreditworthy and creditworthy companies. For the probability of default by an
uncreditworthy company, we relied on the average cumulative default rates reported for the Caa to
C-rated category of companies as
published in Moody's Investors Service, "Historical Default Rates of Corporate Bond Issuers,
1920-1997" (February 1998). For the probability of default by a creditworthy company, we used the
average cumulative default rates reported for the Aaa to Baa-rated categories of companies as
reported in this study. [FN2] For non-recurring subsidies, the average cumulative default rates for
both uncreditworthy and creditworthy companies were based on a 15 year term, since all of
ILVA/ILT's allocable subsidies were based on this allocation period.

FN2 We note that since publication of the CVD Regulations, Moody's Investors Service no longer
reports default rates for Caa to C-rated category of companies. Therefore for the calculation of
uncreditworthy interest rates, we will continue to rely on the default rates as reported in Moody
Investor Service's publication dated February 1998 (at Exhibit 28).
In addition, ILVA/ILT had two long-term, fixed-rate loans under ECSC Article 54 outstanding during
the POI, each denominated in U.S. dollars. Therefore, we have selected a U.S. dollar-based interest
rate as our benchmark. See �351.505(a)(2)(i) of the CVD Regulations. Consistent with Wire Rod from
Italy, 63 FR at 40486, we have used as our benchmark the average yield to maturity on selected
long-term corporate bonds as reported by the U.S. Federal Reserve, since both of these loans were
denominated in U.S. dollars. We used these rates since we were unable to find a long-term borrowing
rate for
loans denominated in U.S. dollars in Italy. Because ILVA was uncreditworthy in the year these
loans were contracted, we calculated the uncreditworthy benchmark rates as per �351.505(a)(3)(iii)
of the CVD Regulations.

I. Programs Determined To Be Countervailable

Government of Italy Programs

A. Equity Infusions to Nuova Italsider and (old) ILVA [FN3]

FN3 In the Initiation Notice, these equity infusions were separately listed as "Equity Infusions into
Italsider/Nuova Italsider" and "Equity Infusions into ILVA."
The GOI, through IRI, provided new equity capital to Nuova Italsider or (old) ILVA in every year
from 1984 through 1992, except in 1987, 1989, and 1990. We preliminarily determine that these
equity infusions constitute countervailable subsidies within the meaning of section 771(5)(B)(i) of
the Act. These equity infusions constitute financial contributions, as described in section
771(5)(D)(i) of the Act. Because they were not consistent with the usual investment practices of
private investors (see Equityworthiness section above), the equity infusions confer a benefit within
the meaning of section
771(5)(E)(i) of the Act. Because these equity infusions were limited to Finsider and its operating
companies, Nuova Italsider and (old) ILVA, we preliminarily determine that they are specific within
the meaning of section 771(5A)(D)(iii) of the Act.
We have treated these equity infusions as non-recurring subsidies given in the year the infusion was
received because each required a separate authorization. We allocated the equity infusions over a 15
year AUL. Because Nuova Italsider and (old) ILVA were uncreditworthy in the years the equity
infusions were received, we constructed uncreditworthy discount rates to allocate the benefits over
time. See "Subsidies Valuation Information" section, above.
For equity infusions originally provided to Nuova Italsider, a predecessor company that produced
carbon steel plate, we examined these equity infusions as though they had flowed directly
through (old) ILVA to ILP when ILP took the carbon steel flat product assets out of (old) ILVA.
Accordingly, we did not apportion to the other operations of (old) ILVA any part of the equity
infusions originally provided directly to Nuova Italsider. While we acknowledge that it would be our
preference to look at equity infusions into (old) ILVA as a whole and then apportion an amount to
ILP when it was spun-off from (old) ILVA, we find our approach in this case to be the most feasible
since information on equity infusions provided to the non-carbon steel operations of (old) ILVA
is not available. For the equity infusions to (old)
ILVA, however, we did apportion these by asset value to all (old) ILVA operations in determining
the amount applicable to ILP.
We applied the repayment portion of our change in ownership methodology to all of the equity
infusions described above to determine the subsidy allocable to ILP after its privatization. We
divided this amount by ILVA/ILT's total consolidated sales during the POI. On this basis, we
preliminarily determine the net countervailable subsidy to be 2.76 percent ad valorem for
ILVA/ILT. Palini & Bertoli did not receive any equity infusions from the GOI.

B. Debt Forgiveness: 1981 Restructuring Plan

The GOI reported that the objective of the 1981 Restructuring Plan was to redress the economic and
financial difficulties the iron and steel industry was realizing in the early 1980's. The GOI stated
that this plan, which extended to 1985, due to the prolonged crisis within the sector, envisaged
financial interventions to aid in the recovery of the Finsider group. As discussed above in the "Use of
Facts Available" section, the GOI and ILVA/ILT failed to submit complete information in regard to
the assistance provided under the 1981 Restructuring Plan. Therefore, based on the facts available,
we preliminarily determine that certain financial transactions conducted in association with the
1981 Restructuring Plan are countervailable subsidies.

Following Italsider's transfer of all its company facilities to Nuova Italsider in September 1981,
Italsider held 99.99 percent of Nuova Italsider's shares. In 1983, Italsider was placed in liquidation.
While in liquidation, Italsider sold its shares of Nuova Italsider to Finsider in December 1994. The
sales price was 714.6 billion lire. As part of this payment, Finsider assumed Italsider's debts owed to
IRI of 696.4 billion lire. The difference between the 714.6 billion lire and 696.4 billion lire was paid
directly by Finsider to Italsider.
On December 31, 1984, Finsider also granted to Italsider a non-interest bearing loan of 563.5 billion
lire to cover losses realized from the liquidation. A matching provision was also made to Finsider's
"Reserve for

*40422

Losses on Investments and Securities," to cover the losses of the liquidation of Italsider. Following a
shareholders' meeting of Finsider on December 30, 1985, the amount of 563.5 billion lire was
disbursed to cover the losses of Italsider and Italsider's state of liquidation was revoked.
In Certain Steel from Italy, the Department determined that the 1981 Restructuring Plan
merely shifted assets and debts within a family of companies, all of which were owned by Finsider,
and ultimately, by the GOI. Therefore, we determined that both the 696.4 billion lire assumption of
debt and the 563.5 billion lire debt forgiveness were specifically limited to the steel companies
and constitute countervailable subsidies. See Certain Steel
from Italy, 58 FR at 37330. No new factual information or evidence of changed circumstances
has been provided to the Department in this instant investigation to warrant a reconsideration of the
earlier determination that the debt assumption and debt forgiveness are countervailable subsidies.
Therefore, consistent with our treatment of these transactions in Certain Steel from Italy, we
preliminarily determine that the 1984 assumption of debt and 1985 debt forgiveness constitute
countervailable subsidies within the meaning of section 771(5)(B)(i) of the Act. In accordance with
Certain Steel from Italy, debt assumption and debt forgiveness are treated as grants which
constitute financial contributions under section 771(5)(D)(i) of the Act. The transactions also confer
benefits to the recipient within the meaning of section 771(5)(E)(i) of the Act, in the amount of the
debt coverage. Because the debt assumption and debt forgiveness were limited to Italsider,
ILVA/ILT's predecessor, we preliminarily determine that these transactions are specific within the
meaning of section 771(5A)(D)(iii) of the Act.
To calculate the benefit, we have treated the assumption of debt and debt forgiveness to Italsider as
non-recurring subsidies because each transaction was a one-time, extraordinary event. We allocated
the 1984 debt assumption and 1985 debt forgiveness over a 15 year AUL. See the "Allocation Period"
section, above. In our grant formula, we used constructed uncreditworthy discount rates based on
our determination that Italsider was
uncreditworthy in 1984 and 1985. See "Benchmark for Long-Term Loans and Discount Rates" and
"Creditworthiness" sections, above. As with the equity infusions made into Nuova Italsider and (old)
ILVA, we have treated the assumption of debt and debt forgiveness as though the transactions had
flowed directly through (old) ILVA to ILP. To determine the amount appropriately allocated to ILP
after its privatization, we followed the methodology described in the "Change in Ownership" section
above. We divided this amount by ILVA/ILT's total consolidated sales during the POI. On this basis,
we preliminarily determine the net countervailable subsidy to be 1.10 percent ad valorem for
ILVA/ILT. Palini & Bertoli did not receive any benefit under this program.

C. Debt Forgiveness: 1988 Restructuring Plan

As discussed above in the "Corporate History of ILVA/ILT" section of this notice, the GOI liquidated
Finsider and its main operating companies in 1988, and assembled the group's most productive
assets into a new operating company, ILVA S.p.A. (i.e., (old) ILVA). The Finsider restructuring plan
was developed at the end of 1987, and was approved by the GOI on June 14, 1988, and by the EC on
December 23, 1988. The objective of the plan was to restore the industrial, financial, and economic
balance to the public iron and steel-making sector in
Italy. The restructuring plan included the voluntary liquidation by IRI of Finsider, and IRI's
assumption of the debts not covered by the sale of assets of the companies being liquidated. IRI was
the sole owner of Finsider, and therefore, the party responsible for payment of the debts of Finsider's
liquidation.
A transfer of assets and liabilities from Finsider to (old) ILVA was to be accomplished at the latest by
March 31, 1989. Upon completion of the 1988 Restructuring Plan, (old) ILVA owned Finsider's
productive assets and a small portion of the group's liabilities. Included in the transfer were the
productive portions of the flat-rolled facilities located at Taranto, Genoa, and Novi Ligure. [FN4] The
liquidating companies retained the non-productive assets and the vast majority of the liabilities,
which had to be repaid, assumed, or forgiven. Thus, while (old) ILVA emerged from the process with
a positive net worth, the other companies were left with capital structures in which their liabilities
greatly exceeded the liquidation value of their assets.

FN4 The subject merchandise which ILT produced and (new) ILVA exported to the United States in
1998, was produced at the Taranto facilities.
We preliminarily determine that certain financial transactions associated with the 1988
Restructuring Plan constituted countervailable subsidies. In 1988, IRI established a fund of 2,943
billion lire to cover
losses which Finsider would realize while in liquidation. As of December 31, 1988, Finsider had
accumulated losses in excess of its equity. In order to prevent Finsider from becoming insolvent
during 1989, IRI utilized 1,364 billion lire of the fund to forgive debts it was owed by Finsider to
cover the losses.
Later in 1990, IRI forgave debts it was owed by Finsider when it purchased (old) ILVA's stock from
Finsider and Terni for 2,983 billion lire. The 2,983 billion lire was used to pay off the liquidation
companies' debts which existed at the time of the sale.
In Certain Steel from Italy, we found IRI's purchase of ILVA's stock to be a countervailable
subsidy because it effectively forgave Finsider's debts. Though ILVA/ILT, in its July 8, 1999
response, does not dispute that IRI purchased (old) ILVA's stock in 1990, the company disagrees
with our earlier characterization that the share purchase was an act of debt forgiveness. We disagree
with ILVA/ILT and preliminarily find that IRI's purchase of (old) ILVA's stock to be tantamount to
debt forgiveness; however, we will seek further clarification of the stock purchase transaction from
ILVA/ILT and the GOI.
In the February 16, 1999 petition, petitioners also alleged that IRI forgave approximately 1.9 trillion
lire of Finsider's debt in 1991. They note that the Department countervailed such an amount in
Certain Steel from Italy. In the
instant investigation, both the GOI and ILVA/ILT reported that neither party has record
information of such debt forgiven by IRI in 1991. We reviewed the petitioners' allegation and the
documentation submitted to support their claim that IRI provided debt forgiveness of 1.9 trillion
lire in 1991. In particular, we note that Finsider's 1989 Annual Report at page 12 states that: "During
the fiscal year, your company [Finsider] recorded losses totaling 1,568 billion lire; therefore, the
circumstances reoccur for which the shareholder IRI later renounced its own credits necessary to
cover the difference."
Because Finsider realized a net loss of 1,568 billion lire for fiscal year 1989, in order to avoid
insolvency of the company, as in 1988, IRI should have forgiven the 1,568 billion lire it was due
from Finsider to cover the company's losses in excess of equity during 1990. However, according to
IRI's 1990 Annual Report, IRI did not forgive the 1,568 billion lire by drawing down from the fund it
established in 1988, to cover Finsider's losses while in liquidation. Since we cannot track with any
degree

*40423
of certainty what became of Finsider's indebtedness to IRI in 1990, or in subsequent fiscal years, we
will gather information on what became of the 1,568 billion lire of losses in the context of seeking
clarification of the assistance provided under the 1988 Restructuring Plan.
Also, in the GOI's July 8, 1999 response, the government reported that, in addition to the debt
forgiveness IRI provided to Finsider in 1989, IRI
disbursed 205 billion lire as authorized by the EC, to cover losses before plant closures. ILVA/ILT,
however, in its July 8, 1999 response, stated that IRI provided 738 billion lire to cover losses and
expenditures during the liquidation process. For purposes of this preliminary determination, we
conclude, based on the information provided to the Department by ILVA/ILT, that IRI provided
738 billion lire to Finsider to cover losses in 1989. However, because the information submitted on
the record with respect to the assistance IRI provided to cover losses during the liquidation process
is ambiguous, we will seek further clarification of the assistance provided from the GOI and
ILVA/ILT at verification.
Consistent with our determination in Certain Steel from Italy, we preliminarily determine
that the debt forgiveness and coverage of losses, which IRI provided in 1989 and 1990, constitute
countervailable subsidies within the meaning of section 771(5)(B)(i) of the Act. In accordance with
our practice, debt forgiveness and coverage of losses are treated as grants which constitutes a
financial contribution under section 771(5)(D)(i) of the Act, and provides a benefit in the amount of
the debt coverage. Because the debt forgiveness and coverage of losses were received by only (old)
ILVA, a predecessor company of ILVA/ILT, we preliminarily determine that the debt coverage is
specific under section 771(5A)(D)(iii) of the Act. See Certain Steel from Italy, 58 FR at
37330.

To determine the benefit from these subsidies, we have treated the amount of debt forgiveness and
coverage of losses provided under the 1988 Restructuring Plan as non-recurring grants because they
were one-time, extraordinary events. In its July 8, 1999 response, ILVA/ILT reported that (old)
ILVA did not receive all of Finsider's assets when the company was established. ILVA/ILT provided
an asset allocation table, which demonstrates that only 68.4 percent of Finsider's assets were
transferred to (old) ILVA. In performing the preliminary calculations, we applied this percentage to
the total amount of debt forgiveness and coverage of losses provided to Finsider in 1989 and 1990,
to determine the amount of debt coverage attributable to (old) ILVA. Because (old) ILVA was
uncreditworthy in 1989 and 1990, the years in which the assistance was provided, we used
constructed uncreditworthy discount rates to allocate the benefits over time. We allocated the debt
coverage provided in 1989 and 1990, over a 15 year AUL. See the "Subsidies Valuation Information"
section, above.
We also apportioned the debt coverage by asset value to all (old) ILVA operations in determining
the amount applicable to ILP. We next applied the repayment portion of our change in ownership
methodology to the debt forgiveness to determine the amount of the subsidy allocable to ILP after
its privatization. We divided this amount by ILVA/ILT's total consolidated sales during the POI. On
this basis, we preliminarily determine the net
countervailable subsidy to be 3.64 percent ad valorem for ILVA/ILT. Palini & Bertoli did not receive
any benefit under this program.

D. Debt Forgiveness: 1993-1994 Restructuring Plan, ILVA-to-ILP [FN5]

FN5 This program was referred to as "Debt Forgiveness Given in the Course of Privatization in
Connection with the 1993-1994 Restructuring Plan" in the Initiation Notice (see 64 FR at 13000).
During 1992 and 1993, (old) ILVA incurred heavy financial losses, which compelled IRI to place the
company into liquidation. In December 1993, the Italian government proposed to the EC a plan to
restructure and privatize (old) ILVA by the end of 1994. The reorganization provided for splitting
(old) ILVA's main productive assets into two new companies, ILP and AST. ILP would consist of the
carbon steel flat production of (old) ILVA, receiving the Taranto facilities. AST would consist of
the speciality and stainless steel production. The rest of (old) ILVA's productive assets (i.e.,
tubes, electricity generation, specialty steel long products, and sea transport), together with the
bulk of (old) ILVA's existing debt and redundant work force were placed in a third entity known as
ILVA Residua. Under the restructuring plan, ILVA Residua would sell those productive units it
could and then would be liquidated, with IRI (i.e., the Italian government) absorbing the debt.

As of December 31, 1993, the majority of (old) ILVA's viable manufacturing activities had been
separately incorporated (or "demerged") into either AST or ILP; ILVA Residua was primarily a shell
company with liabilities far exceeding assets, although it did contain some operating assets that were
later spun- off. In contrast, AST and ILP, ready for sale, had operating assets and relatively modest
debt loads. The liabilities remaining with ILVA Residua had to be repaid, assumed, or forgiven. On
April 12, 1994, the EC, through the 94/259/ECSC decision, approved the GOI's restructuring and
privatization plan for (old) ILVA and IRI's intention to cover ILVA Residua's remaining liabilities.
We preliminarily determine that ILP (and consequently the subject merchandise) received a
countervailable subsidy in 1993, within the meaning of section 771(5)(B)(i) of the Act, when the bulk
of (old) ILVA's debt was placed in ILVA Residua, rather than being proportionately allocated to AST
and ILP. In addition to the debt that was placed in ILVA Residua, we preliminarily determine that
the asset write-downs which (old) ILVA took in 1993, as part of the restructuring/privatization plan,
are countervailable subsidies under section 771(5)(B)(i) of the Act. The write-down of assets in 1993
officially removed the assets from (old) ILVA's books and, thus, increased the losses to be covered in
liquidation. It is the Department's position that when losses, which are later covered by a
government, can be tied to specific assets those
assets bear the liability for the losses that resulted from the write-downs. See Final Affirmative
Countervailing Duty Determination: Grain-Oriented Electrical Steel from Italy, 59 FR
18357, 18359 (April 18, 1994) (Electrical Steel from Italy). The 1993 financial statement of
(old) ILVA identifies that the write-downs can be tied to the specific assets.
We preliminarily determine that the amount of debt and losses resulting from the asset write-downs
that should have been attributable to ILP, but were instead placed with ILVA Residua, was
equivalent to debt forgiveness for ILP at the time of its demerger. In accordance with our practice,
debt forgiveness is treated as a grant which constitutes a financial contribution under section
771(5)(D)(i) of the Act, and provides a benefit in the amount of the debt forgiveness.
We also preliminarily determine, based on record evidence, that the liquidation process of (old)
ILVA did not occur under the normal application of a provision of Italian law, and therefore, the
debt forgiveness is de facto specific under section 771(5A)(D)(iii)(II) of the Act. As stated above, the
liquidation of (old) ILVA was done in the context of a massive restructuring/privatization plan of the

*40424

Italian steel industry undertaken by the GOI and approved and monitored by the EC. Because
(old) ILVA's liquidation was part of an extensive state-aid package to privatize the Italian
state-owned steel industry, and the debt forgiveness was received by
only privatized (old) ILVA operations, we preliminarily find that the assistance provided under the
1993-1994 Restructuring Plan is de facto specific. In support of this preliminary finding, we note the
EC's 94/259/ECSC decision, in which the Commission identified the restructuring of (old) ILVA as a
single program, the basic objective of which was the privatization of the ILVA steel group by the
end of 1994. As set forth in the EC's decision, the 1993-1994 Restructuring Plan was limited by its
terms to (old) ILVA and the benefits of the plan were received by only (old) ILVA's successor
companies.
Consistent with the methodology that we employed in the final determination of Sheet and Strip from
Italy, the amount of liabilities that we attributed to ILP is based on the gross liabilities left
behind in ILVA Residua, as reported in the EC's 10th Monitoring Report. See 64 FR at 30628. In
calculating the amount of unattributable liabilities remaining after the demerger of ILP, we started
with the most recent "total comparable indebtedness" amount from the 10th Monitoring Report,
which represents the indebtedness, net of debts transferred in the privatization of ILVA Residua's
operations and residual asset sales, of a theoretically reconstituted, pre-liquidation (old) ILVA. In
order to calculate the total amount of unattributed liabilities which amount to countervailable debt
forgiveness, we made the following adjustments to this figure: for the residual assets that had not
actually been liquidated as of the 10th and final Monitoring Report; for assets that comprised
SOFINPAR, a real
estate company (because these assets were sold prior to the demergers of AST and ILP); for the
liabilities transferred to AST and ILP; for income received from the privatization of ILVA Residua's
operations; for the amount of the asset write-downs specifically attributable to AST, ILP, and ILVA
Residua companies; and for the amount of debts transferred to Cogne Acciai Speciali (CAS), an ILVA
subsidiary that was left behind in ILVA Residua and later spun off, as well as the amount of (old)
ILVA debt attributed to CAS and countervailed in Wire Rod from Italy, (see, 63 FR at 40478).
The amount of liabilities remaining represents the pool of liabilities that were not individually
attributable to specific (old) ILVA assets. We apportioned this debt to AST, ILP, and operations sold
from ILVA Residua based on their relative asset values. We used the total consolidated asset values
reported in AST's and ILP's financial statements for the year ending December 31, 1993. For ILVA
Residua, we used the sum of the purchase price plus debts transferred as a surrogate for the viable
asset value of the operations sold from ILVA Residua. Because we subtracted a specific amount of
ILVA's gross liabilities attributed to CAS in Wire Rod from Italy, we did not include its assets in
the amount of ILVA Residua's privatized assets. Also, we did not include in ILVA Residua's viable
assets those assets sold to IRI, because the sale does not represent sales to a non-governmental
entity. To the amount of liabilities apportioned to ILP, we added the write-downs that were tied to
the asset pool which ILP took when it was separately incorporated from (old) ILVA.
We have treated the debt forgiveness to ILP as a non-recurring subsidy because it was a one-time,
extraordinary event. The discount rate we used in our grant formula was a constructed
uncreditworthy benchmark rate based on our determination that (old) ILVA was uncreditworthy in
1993. See "Benchmarks for Long-Term Loans and Discount Rates" and "Creditworthiness" sections,
above. We followed the methodology described in the "Change in Ownership" section above to
determine the amount appropriately allocated to ILP after its privatization. We divided this amount
by ILVA/ILT's total consolidated sales during the POI. On this basis, we preliminarily determine the
net countervailable subsidy to be 12.40 percent ad valorem for ILVA/ILT. Palini & Bertoli did not
receive any benefits under this program.

E. Capital Grants to Nuova Italsider Under Law 675/77

The Department has investigated Law 675/77 in prior investigations. See, e.g., Certain Steel
from Italy, 58 FR at 37330-31, and the Final Affirmative Countervailing Duty
Determination: Stainless Steel Plate in Coils from Italy, 64 FR 15508, 15513-14 (March 31,
1999) (Plate in Coils from Italy). In Certain Steel from Italy, we learned that Law 675/77
created a framework for planned intervention by the GOI in the economy. The law provided financial
incentives
to industrial firms in certain sectors that submitted development, restructuring, and conversion
plans for production facilities. In total, eleven sectors were identified as eligible for assistance. The
types of funding provided under Law 675/77 included: (1) Interest payments on bank loans and
bond issues; (2) low interest loans granted by the Ministry of Industry; (3) grants for companies
located in the South; (4) grants for personnel retraining; and (5) increased VAT reductions for firms
located in the Mezzogiorno area. In that prior investigation, we found that (old) ILVA and its
predecessor companies received direct mortgage loans, interest contributions, and capital grants
between 1977 and 1991, under Law 675/77.
In Certain Steel from Italy, we verified that of the ten sectors which received Law 675/77
funding, steel accounted for 36.4 percent of the total funding provided under Law 675/77. On
this basis we determined that assistance provided to steel companies under Law 675/77 is
limited to a specific enterprise or industry, or group of enterprises or industries. We therefore found
countervailable capital grants which (old) ILVA and its predecessor companies received under Law
675/77.
In the instant investigation, the GOI and ILVA/ILT reported that Italsider applied for a capital grant
in 1981, for an investment project at the Taranto plant. The GOI approved the application in 1982,
and awarded a grant of 125,040 million lire to Nuova Italsider. The capital grant was disbursed in
four tranches in the years 1985 and 1987. The GOI stated that the capital grant program was
established in 1977, to support the development of regions in the south of Italy. The only
eligibility criterion for the receipt of this "one-time" assistance was the location of factories in the
south of Italy.
Consistent with our finding in Certain Steel from Italy, we preliminarily determine that this
program constitutes a countervailable subsidy within the meaning of section 771(5)(B)(i) of the Act.
The capital grants constitute a financial contribution under section 771(5)(D)(i) of the Act providing
a benefit in the amount of the grants. Because the steel sector was found to be the dominant user
of Law 675/77 and the capital grants were limited to enterprises located in the south of Italy, we
preliminarily determine that the program is specific under section 771(5A)(D)(iii) of the Act.
To determine the benefit, we have treated the capital grants as non-recurring subsidies because the
receipt of the grants was a one-time, extraordinary event. Because the benefit to Nuova Italsider is
greater than 0.5 percent of the company's sales for 1982 (the year in which the grant was approved),
we allocated the benefit over a 15 year AUL. See �351.524(b)(2) of the CVD Regulations. We applied
the

*40425

change in ownership methodology to the capital grant to determine the subsidy allocable to ILP
after its privatization. We divided this amount by ILVA/ILT's total consolidated sales for the POI. On
this basis, we preliminarily determine the net countervailable
subsidy to be 0.13 percent ad valorem for ILVA/ILT. Palini & Bertoli did not use this program.

F. Early Retirement Benefits

Law 451/94 was created to conform with EC requirements of restructuring and capacity reduction of
the Italian steel industry. Law 451/94 was passed in 1994, and enabled the Italian steel
industry to implement workforce reductions by allowing steel workers to retire early. During the
1994-1996 period, and into January 1997, Law 451/94 provided for the early retirement of up to
17,100 Italian steel workers. Benefits applied for during this period continue until the employee
reaches his/her natural retirement age, up to a maximum of ten years.
In the final determinations of Plate in Coils from Italy and Sheet and Strip from Italy, 64 FR
at 15514-15 and 64 FR at 30629-30, respectively, the Department determined that early retirement
benefits provided under Law 451/94 are countervailable subsidies under section 771(5)(B)(i) of the
Act. Law 451/94 provides a financial contribution, as described in section 771(5)(D)(i) of the Act,
because Law 451/94 relieves the company of costs it would have normally incurred by having to
employ individuals until the normal age of retirement. Also, because Law 451/94 was developed for,
and exclusively used
by, the steel industry, we determined that Law 451/94 is specific within the meaning of section
771(5A)(D)(iii) of the Act. No new factual information or evidence in the instant investigation has
led us to change our prior findings that early retirements under Law 451/94 are countervailable.
As we have in the recent final determinations of Plate in Coils from Italy and Sheet and Strip from
Italy, we treated one-half of the amount paid by the GOI as benefitting the company. Recognizing
that ILP [FN6] would have been required to enter into negotiations with the unions before laying off
workers, it is impossible for the Department to determine the outcome of those negotiations absent
Law 451/94. At one extreme, the unions might have succeeded in preventing any lay offs. If so, the
benefit to ILP would be the difference between what it would have cost to keep those workers on the
payroll and what ILP actually paid under Law 451/94. At the other extreme, the negotiations might
have failed and ILP would have incurred only the minimal costs described under the so-called
"Mobility" provision of Law 223/91, which identifies the minimum payment the company would
incur when laying off workers permanently. Then the benefit to ILP would have been the difference
between what it would have paid under Mobility and what the company actually paid under Law
451/94.

FN6 On December 31, 1993, (old) ILVA's main productive assets were spun into
two new companies: ILVA Laminati Piani (carbon steel flat products) (ILP) and Acciai Speciali
Terni (speciality and stainless steel products) (AST).
We have no basis for believing either of these extreme outcomes would have occurred. It is clear,
given the EC regulations, that ILP would have laid off workers. However, we do not believe that ILP
would have simply fired the workers without reaching accommodation with the unions. The GOI has
indicated that failure to negotiate a separation package with the unions would likely lead to strikes,
lawsuits and general social unrest. Therefore, we have proceeded on the assumption that ILP's early
retirees would have received some support from ILP.
In attempting to determine the level of post-employment support that ILP would have negotiated
with its unions, we examined the situation facing (old) ILVA before ILP and AST were spun off. By
the end of 1993, (old) ILVA had established an overall plan for terminating redundant workers--a
plan that would ultimately affect both ILP and AST. Under this plan, early retirees would first be
placed on a temporary worker assistance measure under Law 223/91, Cassa Integrazione
Guadagni--Extraordinario (CIG-E), while waiting for the passage of Law 451/94, and then would
receive benefits under Law 451/94 when implemented. During the verification of Plate in Coils from
Italy and Sheet and Strip from Italy, the Department learned from AST officials that workers
were indeed receiving temporary benefits under CIG-E while they were
awaiting the passage of Law 451. See Results of AST Verification, Memorandum to the File, dated
February 3, 1999 (public version of the document is available on the public file in the Central
Records Unit (CRU) of the Department, Room B-099). This indicates that, at the time an agreement
was being negotiated with the unions and the labor ministry on the terms of the lay offs, (old) ILVA
and its workers were aware that government contributions would ultimately be made to workers'
benefits. In such situations, i.e., where the company and its workers are aware at the time of their
negotiations that the government will be making contributions to the workers' benefits, the
Department's prior practice was to treat half of the amount paid by the government as benefitting the
company. We have stated that when the government's willingness to provide assistance is known at
the time the contract is being negotiated, this assistance is likely to have an effect on the outcome of
the negotiations. While we continue to adhere to this logic in the preamble to the CVD Regulations,
we stated that we would examine the facts of each case to determine the appropriate portion of the
funds to be considered countervailable. See CVD Regulations, 63 FR at 65380.
With respect to ILP and its workers, we preliminarily determine that, under Italian Law 223, ILP
would be required to negotiate with its unions about the level of benefits that would be made to
workers permanently separated from the company. Since (old) ILVA and its unions were aware at
the time of their
negotiations that the GOI would be making payments to those workers under Law 451/94, some
portion of the payment is countervailable. However, based on the record before us, we have no basis
for apportioning the benefit. Therefore, for the preliminary determination, we consider the benefit
to ILVA/ILT to be one half of the amount paid to the workers by the GOI under Law 451/94. We will
verify this program further to determine the appropriate benefit.
Consistent with the Department's practice, we have treated benefits to ILVA/ILT under Law 451/94
as recurring grants expensed in the year of receipt. To calculate the benefit received by ILVA/ILT
during the POI, we multiplied the number of employees by employee type (blue collar, white collar,
and senior executive) who retired early by the average salary by employee type. Since the GOI was
making payments to these workers equaling 80 percent of their salary, we attributed one-half of that
amount to ILVA/ILT. Therefore, we multiplied the total wages of the early retirees by 40 percent.
We then divided this total amount by ILVA/ILT's total consolidated sales during the POI. On this
basis, we preliminarily determine a net countervailable subsidy to be 1.41 percent ad valorem for
ILVA/ILT.
As mentioned in the "Corporate History of ILVA/ILT" section of this notice, in October 1993, (old)
ILVA entered into liquidation and became known as ILVA Residua (a.k.a., ILVA in Liquidation). In
December 1993, IRI

*40426

initiated the splitting of (old) ILVA's main productive assets into two new
companies, ILP and AST. On December 31, 1993, ILP and AST became separately incorporated
firms. The remainder of (old) ILVA's productive assets and existing liabilities, along with much of the
redundant workforce, was placed in ILVA Residua. By placing much of this redundant workforce in
ILVA Residua, ILP and AST were able to begin their respective operations with a relatively "clean
slate" in advance of their privatizations. ILP and AST were relieved of having to assume their
respective portions of those redundant workers that were placed in ILVA Residua and received early
retirement benefits under Law 451/94. We have, therefore, determined that ILVA/ILT has received
a countervailable benefit during the POI since it was relieved of a financial obligation that would
otherwise have been due.
In order to calculate the benefit received by ILVA/ILT during the POI, we first needed to determine
the appropriate number of early retirees in ILVA Residua that originally should have been
apportioned to ILP. To determine this number, we took the asset value of ILP in relation to the asset
value of (old) ILVA at the time of the spin-off of ILP. We multiplied this percentage by the total
number of ILVA Residua early retirees. It was then necessary to estimate the numbers and salaries
of early retirees by employee type since the GOI did not provide this information. To do this, we
applied the same ratios of workers by employee type as ILP retired, and applied this to ILVA
Residua. We also used the same salaries of ILVA/ILT employees by worker type. As we did
with ILP early retirees, we then multiplied the number of employees, by employee type, by the
average salary by employee type. Since the GOI was making payments to these workers equaling 80
percent of their salary, we attributed one-half of that amount to ILVA/ILT. Therefore, we multiplied
the total wages of the early retirees by 40 percent. We then divided this total amount by ILVA/ILT's
total consolidated sales during the POI. On this basis, we preliminarily determine a net
countervailable subsidy to be 0.67 percent ad valorem for ILVA/ILT.
The Sidercomit unit of ILVA/ILT also received early retirement benefits under Law 451/94
separately from ILVA/ILT. As we did with ILVA/ILT, we multiplied the total wages of the early
retirees by 40 percent and then divided this amount by the total consolidated sales of ILVA/ILT
during the POI. On this basis, we preliminarily determine the net countervailable subsidy to be less
than 0.005 percent ad valorem for ILVA/ILT.
Upon consolidation of the above determined rates, we preliminarily determine a total net
countervailable subsidy of 2.08 percent ad valorem for ILVA/ILT under Law 451/94 for the POI.
Palini & Bertoli did not use this program.

G. Exemptions From Taxes

Presidential Decree 218/1978 exempted firms operating in the Mezzogiorno from
the local income tax (ILOR) and the profits tax (IRPEG). Companies are eligible for full 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 full exemption
from the 37 percent IRPEG tax on profits for ten consecutive years after the project is completed.
We preliminarily determine that exemptions from ILOR and IRPEG taxes are countervailable
subsidies in accordance with section 771(5)(B)(i) of the Act. These tax exemptions constitute
financial contributions under section 771(5)(D)(ii) of the Act since revenue that is otherwise due is
being foregone. Because these exemptions are limited to a group of enterprises or industries within a
designated geographical region, they are specific in accordance with section 771(5A)(D)(iv).
Benefits resulting from ILOR and IRPEG tax exemptions were found to be countervailable in Certain
Steel from Italy, 58 FR at 37334-35.
ILT received an exemption from the IRPEG tax in 1998. In order to calculate the benefit, we
multiplied ILT's total profits that would otherwise have been subject to IRPEG by the IRPEG tax rate
of 37 percent. We then divided the result by ILVA/ILT's total consolidated sales during the POI to
determine the ad valorem benefit. On this basis, we preliminarily determine the net countervailable
subsidy to be 1.07 percent ad valorem for ILVA/ILT. Palini & Bertoli did not use this program.

H. Exchange Rate Guarantees Under Law 796/76

Law 796/76 established a program to minimize the risk of exchange rate fluctuations on foreign
currency loans. All firms that contract foreign currency loans from the European Coal and Steel
Community (ECSC) or the Council of Europe Resettlement Fund (CERF) could apply to the Ministry
of the Treasury (MOT) to obtain an exchange rate guarantee. The MOT, through the Ufficio Italiano di
Cambi (UIC), calculates loan payments based on the lire-foreign currency exchange rate in effect at
the time the loan is contracted (i.e., the base rate). The program establishes a floor and ceiling for
exchange rate fluctuations, limiting the maximum fluctuation a borrower would face to two percent
above or below the base rate. If the lire depreciates more than two percent against the foreign
currency, a borrower is still able to purchase foreign currency at the established (guaranteed)
ceiling rate. The MOT absorbs the loss in the amount of the difference between the guaranteed rate
and the actual rate. If the lire appreciates against the foreign currency, the MOT realizes a gain in the
amount of the difference between the floor rate and the actual rate.
This program was terminated effective July 10, 1992, by Decree Law
333/92. However, the pre-existing exchange rate guarantees continue on any loans outstanding
after that date. Italsider contracted two loans, one in 1978, the other in 1979. Both of these loans
were ultimately transferred to ILVA/ILT. These two foreign currency denominated loans were
outstanding during the POI and exchange rate guarantees applied to both.
We preliminarily determine that this program constitutes a countervailable subsidy within the
meaning of section 771(5)(B)(i) of the Act. This program provides a financial contribution, as
described in section 771(5)(D)(i) of the Act, to the extent that the lire depreciates against the foreign
currency beyond the two percent limit. When this occurs, the borrower receives a benefit in the
amount of the difference between the guaranteed rate and the actual exchange rate.
During the verification of the GOI in the Plate in Coils from Italy and Sheet and Strip from Italy
investigations, GOI officials explained that over the last decade, roughly half of all guarantees
made under this program were given to coal and steel companies. See Results of Verification of
the Government of Italy, Memorandum to the File, dated February 3, 1999 (public version of the
document is available on the public file in the CRU, Room B-099). This is consistent with the
Department's finding in a previous proceeding that the Italian steel industry has been a
dominant user of the exchange rate guarantees provided under Law 796/76. See Final Affirmative
Countervailing Duty
Determination: Small Diameter Circular Seamless Carbon and Alloy Steel Standard, Line and
Pressure Pipe From Italy, 60 FR 31996 (June 19, 1995). Therefore, we determine that the

*40427
program is specific under section 771(5A)(D)(iii)(II) of the Act.
Once a loan is approved for exchange rate guarantees, access to foreign exchange at the established
rate is automatic and occurs at regular intervals throughout the life of the loan. Therefore, we are
treating the benefits under this program as recurring grants. ILVA/ILT and its predecessor
companies from which these loans were transferred, paid a foreign exchange commission fee to the
UIC for each payment made. We determine that this fee qualifies as an "* * * application fee, deposit,
or similar payment paid in order to qualify for, or to receive, the benefit of the countervailable
subsidy." See section 771(6)(A) of the Act. Thus, for the purposes of calculating the countervailable
benefit, we have added the foreign exchange commission to the total amount ILVA/ILT paid under
this program during the POI. See Wire Rod from Italy, 63 FR at 40479.
Under this program, we have calculated the total countervailable benefit as the difference between
the total loan payment due in foreign currency, converted at the current exchange rate, less the sum
of the total loan payment due in foreign currency converted at the guaranteed rate and the exchange
rate commission. We divided this amount by ILVA/ILT's total consolidated sales
during the POI. On this basis, we preliminarily determine the net countervailable subsidy to be 0.07
percent ad valorem for ILVA/ILT. Palini & Bertoli did not use this program.

European Commission Programs

A. ECSC Loans Under Article 54

Article 54 of the 1951 ECSC Treaty established a program to provide industrial investment loans
directly to the member iron and steel industries to finance modernization and purchase new
equipment. Eligible companies apply directly to the EC (which administers the ECSC) for up to 50
percent of the cost of an industrial investment project. The Article 54 loans are generally financed
on a "back-to-back" basis. In other words, upon granting loan approval, the ECSC borrows funds
(through loans or bond issues) at commercial rates in financial markets which it then immediately
lends to steel companies at a slightly higher interest rate. The mark-up is to cover the costs of
administering the Article 54 program.
We preliminarily determine that these loans constitute a countervailable subsidy within the meaning
of section 771(5)(B)(i) of the Act. This program provides a financial contribution, as described in
section 771(5)(D)(i) of the
Act, which confers a benefit to the extent the interest rate is less than the benchmark interest rate.
The Department has found Article 54 loans to be specific in several proceedings, including Electrical
Steel from Italy, 59 FR at 18362, Certain Steel from Italy, 58 FR at 37335, and Plate
in Coils from Italy, 64 FR at 15515, because loans under this program are provided only to iron
and steel companies. The EC has also indicated on the record of this investigation that Article 54
loans are only available to steel and coal companies which fall within the scope of the ECSC
Treaty. Therefore, we preliminarily determine that this program is specific pursuant to section
771(5A)(D)(i) of the Act.
ILVA/ILT had two long-term, fixed-rate loans outstanding during the POI, each denominated in U.S.
dollars. These loans were contracted by Italsider, one in 1978 and one in 1979. Consistent with Wire
Rod from Italy, 63 FR at 40486, we have used as our benchmark the average yield to maturity
on selected long-term corporate bonds as reported by the U.S. Federal Reserve, since both of these
loans were denominated in U.S. dollars. We used these rates since we were unable to find a long-term
borrowing rate for loans denominated in U.S. dollars in Italy. The interest rate charged on both
of ILVA/ILT's two Article 54 loans was lowered part way through the life of the loan. The interest
rate on the loan contracted in 1978 was lowered in 1987, and the rate on the loan contracted in 1979
was lowered in 1992. Therefore, for the purpose of
calculating the benefit, we have treated these loans as if they were contracted on the date of this rate
adjustment. Because ILVA was uncreditworthy in the year these loans were contracted, 1987 and
1992 (based on the interest rate adjustments mentioned above), we calculated the uncreditworthy
benchmark rate as per section 351.505 (a)(3)(iii) of the CVD Regulations. See "Benchmark for
Long-Term Loans and Discount Rates" section, above.
To calculate the benefit under this program, pursuant to section 351.505(c)(2) of the CVD
Regulations, we employed the Department's long-term fixed-rate loan methodology. We compared
ILVA/ILT's interest rates on the two loans to our benchmark interest rate for uncreditworthy
companies on interest paid by ILVA/ILT during the POI. We then divided the benefit by ILVA/ILT's
total consolidated sales during the POI. On this basis, we preliminarily determine the net
countervailable subsidy to be 0.02 percent ad valorem for ILVA/ILT. Palini & Bertoli did not use
this program.
ILVA/ILT was also repaying four ECSC loans under Article 54 during the POI that were taken by ILP
for the construction of housing for coal and steel industry workers. Funding for these loans came
entirely from the ECSC operational budget, which is composed of levies imposed on coal and steel
producers, investment income on those levies, guarantee fees and fines paid to the ECSC, and
interest received from companies that have obtained loans from the ECSC. Consistent with previous
determinations, because ECSC funding is
based on producer levies, we find these loans to be not countervailable. See Electrical Steel from
Italy, 59 FR at 18364 and Certain Steel from Italy, 58 FR at 37336.

II. Programs Preliminarily Determined To Be Not Countervailable

A. Law 308/82

Law 308/82 was initiated on May 29, 1982, and repealed on January 15, 1991. The GOI and
ILVA/ILT reported that Italsider was approved for a grant for investments that reduced energy
consumption at the Taranto facilities in 1983. ILP received payment of the grant in 1996. In Certain
Steel from Italy, we learned that Law 308/82 provided grants to encourage lower energy
consumption and the use of renewable energy sources. In that prior investigation, we verified that
Law 308 grants were provided to a wide range of industries and confirmed the amount of grants
provided to each industrial sector. We found that benefits under Law 308/82 were widely and fairly
evenly distributed throughout the sectors with no sector receiving a disproportionate amount.
Therefore, because Law 308/82 grants were not limited to a specific enterprise or industry, or group
of enterprises or industries, we determined them to be not countervailable. See Certain Steel
from Italy, 58 FR at 37336. No new
factual information or evidence of changed circumstances has been provided to the Department in
this instant investigation to warrant the Department to revisit its earlier determination that grants
provided under Law 308/82 are not countervailable.

B. Unpaid Portion of Payment Price for ILP

In the February 16, 1999 petition, petitioners alleged that the GOI effectively gave RIVA a
zero-interest loan on a portion of the contract price agreed to by RIVA for ILP, because RIVA has
not paid the full contract price for
*40428

ILP. RIVA reported that the company entered into arbitration after the transfer of ownership of ILP
in April 1995. RIVA stated that it did not invoke arbitration to challenge the purchase price of ILP,
but invoked arbitration to obtain an indemnity from pre-existing and unreported liabilities in
accordance with the indemnification provision of the contract of sale. The dispute concerns whether
IRI owes RIVA a sum of money as indemnification for liabilities, which RIVA has potentially
incurred as a result of the acquisition of ILP. To preserve its leverage in the dispute and ensure that
the company will obtain relief in the event that it is awarded indemnification by the arbitration
panel, RIVA has withheld payment of amounts due to IRI under the contract of sale.

We inquired about the arbitration procedure and whether any Italian company which purchases
either a government-owned or private entity can enter into arbitration to remedy a dispute. RIVA
reported that Article 25 of the contract of sale provides for arbitration under the rules of the
International Chamber of Commerce (ICC). Any company in Italy that purchases another
company from either the government or a private seller can include such an arbitration provision in
the contract of sale. Article 806 of the Italian Civil Code authorizes the use of arbitration to settle
litigation. Because the arbitration which RIVA invoked to obtain an indemnity from liabilities was
provided under the rules of the ICC and the Italian Civil Code, we preliminarily determine that the
monetary amount, which RIVA has withheld from IRI for the purchase of ILP, is not tantamount to a
zero-interest loan provided by the government.

III. Programs Preliminarily Determined To Be Not Used

Government of Italy Programs

1. Lending From the Ministry of Industry Under Law 675/77

ILVA/ILT reported that at the time of its privatization the company became
responsible for certain loan obligations of its predecessor companies. ILVA/ILT were responsible
for repaying the loans under Law 675/77, which were applicable to those facilities that produce the
subject merchandise. Repayment obligations on these loans ended in December 1997. The GOI and
ILVA/ILT both reported that no new loans have been provided under Law 675/77 since 1987.
Because there were no loans provided under Law 675/77 outstanding in 1998, we preliminarily
determine that the program was not used during the POI by ILVA/ILT.

2. Interest Contributions Under Law 675/77

ILVA/ILT reported that an interest contribution was received in 1998, against a loan provided
under Law 675/77. Because the loan against which the interest contribution was received was
repaid in full in December 1997, we preliminarily determine that this program was not used during
the POI. It is the Department's policy to treat interest contributions as countervailable on the date
the company made the corresponding interest payments, despite any delay in the receipt of the
interest contributions. This is so because the company's entitlement to the interest contributions
was automatic when it made the interest payments. Therefore, we find, for purposes of the benefit
calculation, that the interest contributions were received at the time the interest payments were
made. See e.g., Stainless Steel Sheet & Strip, and Final Affirmative
Countervailing Duty Determination: Oil Country Tubular Goods from Italy, 60 FR 33577,
33579 (June 28, 1995) (Oil Country Tubular Goods from Italy).

3. Law 305/89

ILVA/ILT reported that (old) ILVA, its predecessor company, applied for a grant under Law 305/89
in 1990. The GOI approved (old) ILVA's application in 1991, and awarded the company a grant of 2.2
billion lire. Because payment of the grant was delayed, ILP received a portion of the grant in 1994,
and ILVA/ILT received payment of the remaining portion of the grant in 1996. We applied the 0.5
percent allocation test against the full grant amount approved in 1991. See section 351.524(b)(2) of
the CVD Regulations. We calculated the benefit under Law 305/82 as less than 0.5 percent ad
valorem of (old) ILVA's sales in 1991. Therefore, even if we preliminarily determined that Law
305/89 is countervailable, the grant would be expensed in the years of receipt, 1994 and 1996.
Because the grant would be expensed and not provide any benefit to ILVA/ILT during the POI, we
preliminarily determine that Law 305/89 was not used by ILVA/ILT.

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

In 1984, Nuova Italsider received a residual payment of 25.3 billion lire against interest grants
provided in the fiscal years 1982 and 1983. Because we do not know what portion of the 1984
payment was approved in 1982, and what portion was approved in 1983, to determine whether the
1984 grant payment should be allocated or expensed, we assumed, for purposes of the 0.5 percent
allocation test, that the residual amount was approved in 1984. See � 351.524(b)(2) of the CVD
Regulations. On this basis, we calculated the benefit of the 1984 interest grant to be less than 0.5
percent ad valorem of Nuova Italsider's sales in 1984. Therefore, because the interest grant is
expensed in the year of receipt, we preliminarily determine that this program was not used during
the POI by ILVA/ILT.

5. Capital Grants Under Law 218/78

The GOI reported that (old) ILVA received a grant in 1988, under Law 218/78. The original grant
amount was approved in 1978. We applied the 0.5 percent test against the full grant amount
approved in 1978. See �351.524(b)(2) of the CVD Regulations. We calculated the benefit as less than
0.5 percent ad valorem of Italsider's sales in 1978. Additionally, Sidercomit received a grant in
1996, that was approved in 1995. We applied the 0.5 percent test against the full grant amount
approved in 1995. We calculated the benefit as less than 0.5
percent ad valorem of ILP's sales in 1995. Therefore, even if we determined that this program is
countervailable, the above-mentioned grants would be expensed in the respective years of receipt.
Because the grants would be expensed and would not provide any benefit to ILVA/ILT during the
POI, we preliminarily determine that capital grants were not used.

6. Urban Redevelopment Packages Under Law 181/89

ILVA/ILT and its predecessor companies, ILP and (old) ILVA, received grants under Law 181/89
between 1991 and 1997. No grants were received during the POI. Because the approved amount of
each grant, separately, was less than 0.5 percent of total sales of ILVA/ILT (or predecessor
company) in the corresponding year, we would expense the benefit of each approved grant in that
year. See �351.524(b)(2) of the CVD Regulations. Therefore, since the grants would be expensed in
the years of receipt, and ILVA/ILT would not realize any benefit during the POI, we preliminarily
determine that Urban Redevelopment Packages under Law 181/89 was not used.

*40429

7. Closure Payments Under Law 481/94 and Predecessor Law
8. Closure Grants Under Laws 46 and 706
9. Decree Law 120/89
10. Law 488/92
11. Law 341/95 Tax Concessions
12. Interest Rate Reductions Under Law 902
13. Interest Contributions Under the Sabatini Law
14. Export Marketing Grants Under Law 394/81
15. Law 549/95: Tax Exemptions on Reinvested Profits for Steel Producers in Objective 1, 2, and
5(B) Areas

European Commission Programs

1. European Social Fund (ESF)

The GOI has reported ESF grants were provided to Nuova Italsider,
Italsider and (old) ILVA from 1985 through 1993. Because the amount of each grant, separately, was
less than 0.5 percent of total sales of Nuova Italsider, Italsider or (old) ILVA (depending on the year
of receipt) in the corresponding year, we would expense the benefit of each grant payment received
in that year. See �351.524(b)(2) of the CVD Regulations.
ILVA/ILT has reported that ESF payments were also made to ILP in 1994 and 1995, and to
ILVA/ILT in 1998, for projects having taken place in 1994 and 1995. ILVA/ILT has reported that
ESF funding was not used for training of ILVA/ILT employees, but for other initiatives in the
Mezzogiorno region. ILVA/ILT has provided documentation that payments received by the
company were solely for goods and services to IRI that were provided by ILP and ILVA/ILT.
With regard to ESF grants and payments received, because the amounts would either be expensed in
the corresponding years of receipt, or were simply payments received for invoiced goods and
services, ILVA/ILT would not see any benefit during the POI. Therefore, we preliminarily determine
that the European Social Fund was not used.

2. Interest Rebates on ECSC Article 54 Loans

3. ECSC Conversion Loans, Interest Rebates, Restructuring Grants and Traditional and Social Aid
Under Article 56

4. ERDF Aid

5. Resider and Resider II (Commission Decision 88/588)

IV. Programs Preliminarily Determined Not To Exist

1. Additional Debt Forgiveness in the Course of Privatization

2. Grants to ILVA to Cover Closure and Liquidation Expenses as Part of the 1993-1994 Privatization
Plan

3. Working Capital Grants to ILVA in 1993

With respect to the programs 1, 2, and 3 listed above, the GOI reported in its May 10, 1999
questionnaire response that all monetary assistance (old) ILVA received in the course of the
1993-1994 Restructuring Plan was effected in the EC Decision 94/259/ECSC of April 12, 1994. There
were no additional debt forgiveness or grants provided as part of the 1993-1994 Restructuring Plan.
Therefore, we preliminary determine that these programs do not exist.

4. Personnel Retraining Grants Under Law 675/77

The GOI reported that personnel retraining grants provided under Law 675/77 were terminated in
1987. The government stated that the resources provided under this program were allocated over
the years 1981 through 1987. The GOI reported that no other law providing personnel retraining
grants or financial allocations under Law 675/77 have been approved since 1987.

5. VAT Reductions Under Law 675/77

The GOI reported that the tax reductions referred to in section 18 of Law 675 of August 12, 1977,
were terminated effective March 29, 1991. Pursuant to section 14(3) of Law 64 of March 1, 1986,
section 18 of Law 675/77, applied for a period of five years from the date of promulgation of the law.

6. Grants to ILVA

7. Grants to RIVA/ILP

Verification

In accordance with section 782(i)(1) of the Act, we will verify the information submitted by
respondents prior to making our final determination.

Suspension of Liquidation

In accordance with section 703(d)(1)(A)(i) of the Act, we calculated an individual subsidy rate for
ILVA/ILT and Palini & Bertoli. We preliminarily determine that the total estimated net
countervailable subsidy rate is 23.27 percent ad valorem for ILVA/ILT and 0.0 percent ad valorem
for Palini & Bertoli. The All Others rate is 23.27 percent ad valorem, which is the rate calculated for
ILVA/ILT. See section 705(c)(5)(A) of the Act.

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Company Net subsidy rate
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ILVA/ILT .......... 23.27% ad valorem.
Palini & Bertoli .. 0.0% ad valorem.
All Others ........ 23.27% ad valorem.
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In accordance with section 703(d) of the Act, we are directing the U.S.
Customs Service to suspend liquidation of all entries of certain cut-to-length carbon-quality steel
from Italy, which are entered or withdrawn from warehouse, for consumption on or after the
date of the publication of this notice in the Federal Register, and to require a cash deposit or bond
for such entries of the merchandise in the amounts listed above. Since the estimated preliminary net
countervailing duty rate for Palini & Bertoli is zero, the company will be excluded from the
suspension of liquidation. This suspension will remain in effect until further notice.

ITC Notification

In accordance with section 703(f) of the Act, we will notify the ITC of our determination. 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 Assistant
Secretary for Import Administration.
If our final determination is affirmative, the ITC will make its final determination within 45 days after
the Department makes its final determination.

Public Comment

In accordance with 19 CFR 351.310, we will hold a public hearing, if requested, to afford interested
parties an opportunity to comment on this preliminary determination. The hearing is tentatively
scheduled to be held 57 days from the date of publication of the preliminary determination at the
U.S.

*40430

Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230.
Individuals who wish to request a hearing must submit a written request within 30 days of the
publication of this notice in the Federal Register to the Assistant Secretary for Import
Administration, U.S. Department of Commerce, Room 1870, 14th Street and Constitution Avenue,
NW., Washington, DC 20230. Parties should confirm by telephone the time, date, and place of the
hearing 48 hours before the scheduled time.
Requests for a public hearing should contain: (1) The party's name, address, and telephone number;
(2) the number of participants; and, (3) to the extent practicable, an identification of the arguments
to be raised at the hearing. In addition, six copies of the business proprietary version and six copies
of the non-proprietary version of the case briefs must be submitted to the Assistant Secretary no
later than 50 days from the date of publication of
the preliminary determination. As part of the case brief, parties are encouraged to provide a
summary of the arguments not to exceed five pages and a table of statutes, regulations, and cases
cited. Six copies of the business proprietary version and six copies of the non-proprietary version of
the rebuttal briefs must be submitted to the Assistant Secretary no later than 5 days from the date of
filing of the case briefs. An interested party may make an affirmative presentation only on arguments
included in that party's case or rebuttal briefs. Written arguments should be submitted in
accordance with 19 CFR 351.309 and will be considered if received within the time limits specified
above.
This determination is published pursuant to sections 703(f) and 777(i) of the Act.
Dated: July 16, 1999.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.

[FR Doc. 99-18853 Filed 7-23-99; 8:45 am]

BILLING CODE 3510-DS-P