(Cite as: 49 FR 19551)
NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[C-469-009]
Carbon Steel Wire Rod From Spain; Final Affirmative Countervailing Duty Determination
Tuesday, May 8, 1984
*19551 AGENCY: International Trade Administration, Commerce.
ACTION: Notice.
SUMMARY: We determine that certain benefits constituting subsidies within the meaning of the countervailing duty law are being provided to manufacturers, producers, or exporters in Spain of carbon steel wire rod. The net subsidy for each company is identified in the "Suspension of Liquidation" section of this notice. In addition, we determine that critical circumstances exist with respect to the importation of carbon steel wire rod from Spain. We have notified the United States International Trade Commission (ITC) of our determinations. We also are directing the U.S. Customs Service to continue to suspend liquidation of all entries of carbon steel wire rod from Spain that are entered, or withdrawn from warehouse, for consumption on or after November 28, 1983, and to require a cash deposit or bond on this product in an amount equal to the estimated net subsidy.
EFFECTIVE DATE: May 8, 1984.
FOR FURTHER INFORMATION CONTACT: John M. Davies, Office of Investigations, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, D.C. 20230, telephone: (202) 377-1784.
SUPPLEMENTARY INFORMATION:
Final Determination
Based upon our investigation, we determine that certain benefits constituting subsidies within the meaning of section 701 of the Tariff Act of 1930, as amended (the Act), are being provided to manufacturers, producers, or exporters in Spain of carbon steel wire rod. For the purpose of this investigation, the following programs are found to confer subsidies:
1/8 Long-term Noncommercial Loans and Loan Guarantees
1/8 Benefits from Long-term Noncommercial Construction Loans to Related Suppliers
1/8 Short-term Working Capital Loans under the Privileged Circuit Exporter Credits Program
1/8 Excessive Rebates of Indirect Taxes on Exports under the Desgravacion Fiscal a la Exportacion (DFE)
1/8 Government Provision of Equity Capital
1/8 Government Interest-free Loans
1/8 Government Grants
We determine the net subsidy to be the rates specified for each company in the "Suspension of Liquidation" section of this notice.
Case History
On November 23, 1983, we received a petition from Atlantic Steel Company, Continental Steel Company, Georgetown Steel Corporation, North Star Steel Company-Texas, and Raritan River Steel Company filed on behalf of the carbon steel wire rod industry. In compliance with the filing requirements of section 355.26 of our regulations (19 CFR 355.26), petitioners alleged that manufacturers, producers, or exporters in Spain of carbon steel wire rod receive, directly or indirectly, benefits constituting subsidies within the meaning of section 701 of the Act, and that these imports are materially injuring, or threatening to meterially injure, a U.S. industry. Petitioners also alleged that "critical circumstances" exist, as defined in section 703(e) of the Act.
We found that the petition contained sufficient grounds upon which to initiate a countervailing duty investigation, and on December 13, 1983, we initiated an investigation (48 Fed. Reg. 56420). We stated that we expected to issue a preliminary determination by February 16, 1984.
Since Spain is a "country under the Agreement" within the meaning of section 701(b) of the Act, an injury determination is required for this investigation. On January 9, 1984, the ITC determined that there is a reasonable indication that these imports are materially injuring, or threatening to materially injure, a U.S. industry (49 Fed. Reg. 2165).
We presented a questionnaire concerning the allegations to the government of Spain at its embassy in *19552 Washington, D.C. on January 4, 1984. On January 24, the government of Spain requested that this case be declared " extraordinarily complicated" under section 703(c) of the Act. On January 27, we determined that the case was not extraordinarily complicated. We received responses to the questionnaire on February 3, 6, 14, 15, and 27.
On February 16, we preliminarily determined that benefits constituting subsidies within the meaning of the countervailing duty law were being provided to manufacturers, producers, or exporters in Spain of carbon steel wire rod and that critical circumstances did exist with respect to imports of carbon steel wire rod from Spain (49 FR 6962).
On March 2, we presented a supplemental questionnaire to the government of Spain at its embassy in Washington, D.C. We received responses to the supplemental questionnaire on March 22 and 23.
In response to requests received on February 29 and March 5, a public hearing on this case was held on March 22. We received briefs from the parties to the proceeding on March 15 and April 9.
We held a verification of the responses in Madrid, Spain, on March 26-30. At the verification on March 30 and later in a letter dated April 4, we requested from the government of Spain additional information on the DFE program; however, we did not receive the requested information.
Scope of Investigation
The product covered by this investigation is carbon steel wire rod. For the purpose of this investigation, the term "carbon steel wire rod" covers a coiled, semi-finished, hot-rolled carbon steel product of approximately round solid cross-section, not under 0.20 inch nor over 0.74 inch in diameter, not tempered, not treated, and not partly manufactured; and valued over 4 cents per pound, as currently provided for in item 607.17 of the Tariff Schedules of the United States (TSUS).
There are three firms in Spain that produced and exported carbon steel wire rod to the United States during the period under investigation, calendar year 1982. We have received information from the government of Spain regarding Empresa Nacional Siderurgica, S.A. (ENSIDESA), Nueva Montana Quijano, S.A. (NMQ), and Forjas Alavesas, S.A. (FASA), who together accounted for over 95 percent of Spain's carbon steel wire rod exports to the United States during 1982. The government of Spain provided additional infomation regarding Siderurgica de Galacia, S.A. (SIDEGASA). Esteban Orbegozo, S.A., and Union Cerrajera, S.A. However, since none of these companies exported carbon steel wire rod to the United States during the period of investigation, we did not verify or use their information in this determination.
Analysis of Programs
Certain subsidies discussed in this notice were conveyed through a series of laws and decrees issued by the government of Spain. Those laws and decrees include the following:
Decree 669/1974 of March 14, 1974: This decree established the National Steel Industry Program 1974-1982. To achieve the specific goals established by this program, the government authorized certain benefits for integrated and non- integrated steel firms, which included noncommercial loans and loan terms, accelerated amortization of non-liquid investments, substantial reduction of certain taxes, and expropriation of land for new plant construction.
Law 60/1978 of December 23, 1978: This law authorized government aid in the form of noncommercial loans and loan terms and capital infusions for the three integrated steel producers in Spain, including ENSIDESA.
Order of May 22, 1980: This order authorized the Banco de Credito Industrial (BCI) to extend additional government credits to non-integrated steel companies who had made investments under Decree 669/1974 . BCI is a government credit institution which issues loans under government direction to companies in the Spanish steel industry.
Royal Decree 878/1981 of May 8, 1981: This decree, also known as the Integral Iron and Steel Reconversion Plan, provided aid to the integrated steel producers in the form of noncommercial interest rates and terms on outstanding loans, new loans with noncommercial interest rates and terms, loan guarantees, and capital infusions. Certain of the subsidy programs are administered by the Instituto Nacional de Industria (INI), a public holding company created in 1941 as an autonomous government agency to promote and stimulare the industrial development of Spain. INI's responsibilities cover a variety of sectors ranging from basic services to basic industries such as the iron and steel industry.
Throughout this notice, we refer to general principles applied to the facts of the current investigation. These principles are described in the "Subsidies Appendix" contained in the Federal Register notice of "Cold-Rolled Carbon Steel Flat-Rolled Products from Argentina: Final Affirmative Countervailing Duty Determination and Countervailing Duty Order" (49 FR 18006).
For purposes of this final determination, we have calculated company-specific ad valorem subsidy rates in accordance with 19 CFR 355.28(a)(3), which states that "if separate enterprises have received materially different benefits, such differences shall also be estimated and stated." We have found that there are significant differences in the size and structure of the companies under investigation and in the usage of programs determined to confer subsidies.
To calculate a company-specific ad valorem rate, we allocated the benefits received by each company in 1982 over the total sales value or total export value, as appropriate, of each company. For those Spanish carbon steel wire rod producers not covered under this investigation, we calculated a trade- weighted ad valorem subsidy rate based on an average of the three company- specific rates as weighted by each company's 1982 export tonnage of carbon steel wire rod to the United States.
Based on petitioners' allegations regarding the financial condition of ENSIDESA and NMQ, we are required to make an assessment of the "creditworthiness" of these two companies before determining if an to what extent countervailable benefits have been received under certain programs.
We have consistently held that government provision of, or assistance in obtaining, capital or debt does not per se confer a subsidy. Government equity purchases or financial backing bestow a countervailable benefit only when they occur on terms inconsistent with commercial considerations. To determine if such actions are commercially unsound, we review and assess financial data for the company in question.
For this final determination, we conducted a comprehensive review of the factors relevant to a determination of inconsistency with commercial considerations for ENSIDESA and NMQ. For loans and loan guarantees, we analyzed whether ENSIDESA was "creditworthy" since 1976 and whether NMQ was "creditworthy" since 1978. In making this assessment, we examined cash flow and other measures of the ability of a company to meet its long-term debt obligations.
*19553 In its responses, the government of Spain provided data for the 1982 period of investigation including financial statements and debt information on ENSIDESA, NMQ, and FASA. Based upon our analysis of the petition, the responses to our questionnaires, and our verification, we determine the following:
I. Programs Determined To Confer Subsidies
We determine that subsidies are being provided to manufacturers, producers, or exporters in Spain of carbon steel wire rod under the following programs.
A. Long-Term Noncommercial Loans and Loan Guarantees
Petitioners alleged that Spanish wire rod producers were receiving noncommercial loans, loan terms, and loan guarantees which constitute subsidies. We requested information from each company under investigation on all medium- and long-term loans outstanding during the period of investigation. In Spain medium-term financing is from two to five years, and long-term financing, which is less prevalent, is currently for about 10 years. ENSIDESA, NMQ, and FASA reported medium- and long-term loans outstanding during the period of investigation.
We determine that the government of Spain leads or directs banks to lend funds to certain companies in certain industry sectors at rates or on terms inconsistent with commercial considerations.
We used the methodology in the Subsidies Appendix to calculate subsidy rates on the noncommercial loans and loan quarantees reviewed by the three Spanish wire rod producers.
For purposes of this final determination, we determine that NMQ was creditworthy through 1982. Although it experienced operating losses for the 1980-1982 period, NMQ had adequate cash flow to cover its interest expenses in 1980 and received substantial private commercial credit without government intervention in 1981.
We also determine, for the purposes of this final determination, that ENSIDESA was not creditworthy for the period 1979-1982. In the 1982 countervailing duty investigation on certain steel products from Spain and in the preliminary determination in this case, we found ENSIDESA to be uncreditworthy for 1979- 1982. Based on a new review of ENSIDESA's financial records under the Subsidies Appendix, we continue to find that ENSIDESA is uncreditworthy because of unhealthy financial ratios during 1977-1982 in times interest earned (operating income divided by interest charges); net income as a percent of sales; and net working capital as a percent of total assets.
Under the Subsidies Appendix methodology, we continued to use most of the benchmark interest rates and all of the discount rates from our preliminary determination in this case. We used company-specific loan rates as benchmarks in those years where verified information on private commercial loans was available. For the 1979-1982 uncreditworthy period of ENSIDESA, we used the benchmark rates plus the "risk premium" as described in the Subsidies Appendix. We allocated total loan benefits over the life of the loans using the declining balance method and calculated subsidy rates by dividing the 1982 loan benefits by total company sales of all steel products in 1982.
Most of the loans reported by these companies contained provisions for deferred principal payments. Since we verified that noncommercial loans and private commercial loans to these companies contained similar deferral periods, we are not treating deferred principal payments as a separate subsidy.
During 1979-1982, ENSIDESA received private commercial loans with INI guarantees. At verification we found that ENSIDESA pays INI a fee for all such loan guarantees. This fee, paid quarterly, amounts to a set percentage of the outstanding principal on the loan. We also found that the INI guarantee fees were less than comparable loan guarantee fees charged by private banks. Since noncommercial INI guarantees on private commercial loans were provided during the period when ENSIDESA was found to be uncreditworthy, we included in our calculations the interest rate benefits derived by ENSIDESA from these loans.
We determine that the following categories of loans to Spanish wire rod producers do not confer subsides: (a) loans that carried no INI or government guarantee and were not the result of a government mandate; and (b) loans from official non-Spanish export-import lending institutions (e.g., U.S. Export- Import Bank) which were guaranteed by INI. Such guarantee are commonly required by official export-import institutions as a condition for this type of lending activity, and therefore the provision of a guarantee by INI does not confer a countervailable benefit in connection with these types of loans.
We determine that the ad valorem subsidy rates for noncommercial long-term loans and loan guarantees are 8.03 percent for ENSIDESA, 0.23 percent for NMQ, and 0.29 percent for FASA.
B. Benefits From Long-Term Noncommercial Construction Loans To Related Suppliers
Petitioners alleged that NMQ was receiving subsidies from two of its related suppliers, SIDEGASA and Aceria de Santander, S.A. (ACERIASA), whose plant facilities were constructed using long-term construction loans granted under the National Steel Industry Program (Decree 669/1974).
During verification we found that NMQ has a 6.4 percent share of the stock outstanding in SIDEGASA. In 1981 SIDEGASA was declared by the courts in Spain to be in legal suspension of payments for provisional insolvency and was placed in reorganization in bankruptcy. We also found that SIDEGASA did not supply any of the blooms used by NMQ in production of wire rod. Therefore, we determine that wire rod produced by NMQ does not receive benefits from long- term construction loans granted to SIDEGASA.
In the mid-1970's NMQ and three other Spanish steel companies, not covered by this investigation, formed a joint venture to build a crude-steel manufacturing plant using construction funds available under the National Steel Industry Program. The ACERIASA plant was built in 1978-1979. Currently, NMQ owns 57.8 percent and the other three Spanish steel companies own the remainder of ACERIASA's stock outstanding. There is government stock ownership in ACERIASA.
All of the blooms used by NMQ to product wire rod are purchased from outside sources. In 1982, a large majority of these blooms was purchased by NMQ at cost from ACERIASA. We determine, therefore, that the long-term noncommercial loans granted under Decree 669/1974 for plant construction of ACERIASA are providing countervailable benefits to the production of carbon steel wire rod by NMQ. We used the loan methodology, described earlier in this notice, to calculate the 1982 benefits conferred on ACERIASA from these construction loans. These 1982 benefits were prorated to determine the amount of benefits attributable to wire rod production at NMQ in 1982. We allocated this final amount over total wire rod sales by NMQ in 1982 to arrive at an ad valorem subsidy rate of 0.98 percent.
*19554 C. Short-Term Working Capital Loans Under the Privileged Circuit Exporter Credits Program (PCECP)
Petitioners alleged that Spanish wire rod producers received benefits constituting subsidies from short-term working capital loans under PCECP. Short-term borrowing in Spain is for any period up to 18 months. Each of the three companies under investigation received short-term working capital PCECP loans.
The government of Spain requires all Spanish commercial banks to maintain a specific percentage of their lendable funds as privileged circuit accounts available for low-interest loans under certain government-mandated programs. While there is no direct outlay of government funds, the countervailable benefits consist of noncommercial interest rate loans provided by the banks under the export promotion programs of PCECP. We determine that the three Spanish wire rod producers received subsidies under only one of the four available PCECP programs, the short-term working capital loan program.
Under PCECP, companies may obtain working capital loans of up to one year in duration for an amount not to exceed a specified percentage of the value of company exports in the previous year. In November 1981 this percentage was 24 percent for companies with government issued exporter cards and 16 percent for companies without exporter cards. In April 1982 the percentage was reduced to 22.5 percent and 15 percent, respectively. All three Spanish wire rod companies have exporter cards. The government mandated interest rate ceiling on short-term working capital PCECP loans in 1982 was 10 percent, including fees and commissions.
To calculate the subsidy amount, we compared the noncommercial 10 percent interest rate with the national average commercial interest rate on loans with similar terms and conditions. The national average commercial interest rate in 1982 ws calculated to be the average 1982 prime rate in Spain, 16.88 percent, plus two percentage points, reflecting average borrowing experience, plus an additional 0.5 percent, the maximum allowable charge for fees and commissions under Spanish law. We determine the 1982 national average commercial interest rate to average borrowers to be 19.38 percent for one year loans, including fees and commissions.
We applied the appropriate interest differential to PCECP loans received by each company in 1982, and allocated the resulting loan benefits over total company exports of all steel products in 1982. We determine that the ad valorem subsidy rates for short-term working capital PCECP loans is 2.19 percent for ENSIDESA, 1.42 percent for NMQ, and 1.06 percent for FASA.
D. Excessive Rebates of Indirect Taxes on Exports Under the Desgravacion Fiscal a la Exportation (DFE)
Petitioners alleged that countervailable benefits are conferred on Spanish wire rod producers under the DFE program by the excessive rebate of indirect taxes on the export of carbon steel wire rod.
Spain employs a cascading tax system under which a turnover tax is levied on each intermediate sale of a product through its various stages of production, up to, but not including, the final sale at the retail level. The DFE is the program designed to rebate to exporters these accumulated turnover taxes as well as final stage taxes on exportation.
We requested in our questionnaire of January 4, 1984, certain specific information concerning the DFE. The response provided by the government of Spain was inadequate, and requests for further information were made during the verification on March 30 and again by letter on April 4. Because the government of Spain failed to respond to our initial request for this specific information and refused our subsequent requests, we are unable to determine what, if any, amount of the DFE rebate is a proper export rebate of indirect taxes allowable under the Act and our regulations. Accordingly, for purposes of this final determination, we find the entire amount of the DFE rebate, 14.5 percent, to be a subsidy as best information available.
E. Government Provision of Equity Capital
Petitioners alleged that ENSIDESA received equity infusions from the government of Spain under the Law 60/1978 and Royal Decree 878/1981.
INI purchased new stock issuances of ENSIDESA in 1979 and 1981. The 1979 stock issuance by ENSIDESA was subscribed to and paid for by INI in that year. The stock issuance by ENSIDESA in 1981 was subscribed to in full by INI that year; however, INI paid for one fourth of the stock in 1981 and for the remaining stock in 1982.
As stated in the Subsidies Appendix, we do not consider equity infusions by the government or its agencies to be subsidies per se. Government provision of equity capital confers a subsidy only when it is on terms inconsistent with commercial considerations.
In accordance with the Subsidies Appendix, we calculated the subsidy amount to be the difference between the stock price paid by INI and the market price of ENSIDESA's stock. We used ENSIDESA's average stock price prior to the time of INI's purchases as our basis for comparison because ENSIDESA's stock was traded on the Spanish exchange and our countervailing duty law indicates a strong presumption for market-based methods of value.
We allocated the resulting subsidy amount using the declining balance method over 15 years, the average useful life of assets in this industry. We then allocated the 1982 portions of these equity infusions over total company sales of all steel products in 1982 to arrive at an ad valorem subsidy rate of 2.86 percent.
F. Government Interest-Free Loans
Petitioners requested that we investigate the nature of the "Special INI Funds" capital account to see if any countervailable benefits were involved.
In March 1982, the principal and interest outstanding on certain long-term INI loans to ENSIDESA were consolidated into a capital account "Special INI Funds" appearing in ENSIDESA's 1982 financial reports. In June 1983 a large portion of these funds was used by INI to purchase new stock in ENSIDESA. Since this equity infusion occurred in 1983 and was not reflected in ENSIDESA's 1982 financial reports, we have not included it in this determination. We determine, however, that for the March-December 1982 period, the "Special INI Funds" did confer a benefit to ENSIDESA equivalent to that of an interest-free loan. Using the short-term benchmark interest rate of 19.38 percent as derived earlier in this notice, we calculated the March-December benefit and allocated it over total ENSIDESA sales of all steel products in 1982 to arrive at an ad valorem subsidy of 2.36 percent.
During verification, we found that FASA had received investment grants from national and local governments in Spain. The government grants were designed to cover a portion of FASA's total investment in purchasing certain new technological equipment. From the information in the record, however, we are unable to determine that these grants are not countervailable subsidies. Therefore, we determine that such grants do provide countervailable benefits to FASA.
We allocated the total amount of these grants over 15 years using the *19555 declining balance method from the Subsidies Appendix. The 1982 grant benefits were divided by total FASA sales of all steel products in 1982 to arrive at an ad valorem subsidy of 0.18 percent.
II. Programs Determined Not To Confer Subsidies
We determine that subsidies are not being provided to manufacturers, producers, or exporters in Spain of carbon steel wire rod under the following programs.
A. Amendment of Annual Finance Investment Plans
The government of Spain allowed ENSIDESA to obtain additional loans by permitting amendments to the company's annual finance plans. This, in itself, is not a subsidy. Benefits resulting from the loans under this amendment are dealt with in the loans section of this notice.
B. Deferral of Tax and Social Security Debt
The deferral of company tax and social security debt owed to the government of Spain is authorized by general legislation and is available on equal terms to all Spanish companies. Therefore, we determine that Spanish wire rod producers do not receive a countervailable benefit from their deferrals of these debts.
III. Programs Determined Not To Be Used
We determine that the following programs, listed in the notice of "Initiation of Countervailing Duty Investigation," were not used by manufacturers, producers, or exporters in Spain of carbon steel wire rod.
A. Certain Benefits Under the Privileged Circuit Export Credits Program
In our analysis of the PCECP programs earlier in this notice, we found that one PCECP program, short-term working capital loans, did provide subsidies to wire rod manufacturers, producers, or exporters. We determine that the three remaining PCECP programs identified in our notice of intiation are not used. They are:
B. Warehouse Construction Loans
Exporters desiring to construct warehouse facilities adjacent to loading zones may borrow 70-75 percent of the total investment. None of the three companies in this investigation received loans under this program.
C. Regional Investment Incentives and Development Programs
The government of Spain and regional and municipal authorities provide various investment incentive programs. We determine that none of the three companies investigated has participated in these regional programs.
D. Accelerated Depreciation and Reduction in Taxes
Decree 669/1974 permits the steel industry to employ accelerated depreciatiion of non-liquid investments and to obtain a substantial reduction in certain taxes. We determine that these programs were not used by the three companies under investigation.
Petitioners' Comments
Comment 1
Co-counsel for petitioners argue the countervailable benefits are conferred as a result of loans from non-Spanish official lending institutions which were guaranteed by INI.
DOC Position
We disagree. It is our established policy that loans from official export- import lending institutions to foreign purchasers of goods produced in the lending institution's own country are not countervailable. INI guarantees on loans from non-Spanish official lending institutions are the result of the policy requirements of these lending institutions rather than an effort by INI to facilitate debt financing or to encourage exports by Spanish wire rod producers.
Comment 2
Co-counsel for petitioners contend that countervailable benefits are conferred under the DFE program by the excessive remission of indirect taxes on the export of carbon steel wire rod.
DOC Position
Because the government of Spain did not provide sufficient information regarding the DFE program, we have countervailed the entire amount of the DFE rebate as best information available.
Comment 3
Co-counsel for petitioners contend that if the government of Spain refuses to supply the additional information on DFE requested by the DOC in a letter of April 4, 1984, then the DOC should consider the initial Spanish response to be deficient and should draw the most adverse inference by finding the entire amount of the DFE export rebate to be a subsidy.
DOC Position
We agree. See our discussion in section I.D. of this notice.
Comment 4
Co-counsel for petitioners contend that because NMQ owns a majority of the stock in ACERIASA and because ACERIASA sells billets to NMQ used in producing carbon steel wire rod, Spanish government subsidies to ACERIASA are passed on to NMQ.
DOC Position
We agree. See our discussion in section I.B. of this notice.
Comment 5
Co-counsel for petitioners contend that NMQ should be declared uncredit worthy because of operating losses in 1981 and 1982 and because no dividends were paid out in these years.
DOC Position
We evaluate creditworthiness by analyzing several factors relating to a company's ability to obtain commercial loans, to maintain its debt obligations, and to meet its other costs. While operating losses and non-payment of dividends are relevant to this analysis, they are not the only bases for determining whether a company is creditworthy. For reasons stated in the "Analysis of Programs" section of this notice, we have determined NMQ was creditworthy during the period of review.
Comment 6
Co-counsel for petitioners contend that critical circumstances exist because, in part, section 703 (e) of the Act neither requires nor sets any minimum ad valorem effect of an unlawful export subsidy such as the PCECP.
DOC Position
This issue is irrelevant to this case because the export subsidies determined to be in violation of the Subsidies Code are not de minimis.
Comment 7
Co-counsel for petitioners do not object to establishing individual company- specific subsidy rates provided that the information submitted by such companies is fully responsive to the DOC questionnaire and has been fully verified by the DOC.
DOC Position
We have verified all information used in making this final determination in accordance with section 766(a) of the *19556 Act, except where the absence of needed or requested information has forced us to use the best information available. We established individual company-specific subsidy rates.
Comment 8
Co-counsel for petitioners argue that the DOC should not exclude SIDEGASA based on the claim that SIDEGASA no longer benefits from prior noncommercial government loans because it is in bankruptcy reorganization.
DOC Position
As stated earlier in this notice, we found that SIDEGASA did not supply any of the blooms used by NMQ in the production of wire rod as alleged by petitioners. Therefore, we determined that NMQ does not receive benefits from long-term construction loans granted to SIDEGASA. SIDEGASA did not export wire rod to the U.S. in 1982.
Comment 9
Co-counsel for petitioners alleged for the first time in their prehearing brief on March 22, 1984, that Spanish wire rod producers appear to be receiving noncommercial government loans under Law 21/1982.
DOC Position
Since petitioners raised this issue late in the investigation, we will examine it more closely during any administrative annual review under section 751 of the Act should an order be issued. At verification we found that the provisions of Law 21/1982 related primarily to post-1982 policies regarding the restructuring of the Spanish steel industry.
Comment 10
Co-counsel for petitioners contend that the General Answers submitted by the government of Spain to the DOC are insufficient because the Spanish government did not furnish specifc government reports regarding the government's actions in improving the structure of the steel industry.
DOC Position
Although the government of Spain did not provide this specific information in this case, we did not need this information for proper resolution of the issues raised.
Respondent's Comments
Comment 1
Counsel for respondents states that the petition does not mention or describe the technical characteristics or end-uses of three specific types of carbon steel wire rod that are included in TSUS item 607.17 and that account for much of the Spanish wire rod imports to the U.S. Counsel argues, therefore, that these three types of carbon steel wire rod should be excluded from the scope of investigation in this case.
DOC Position
We disagree. We have held in previous wire rod cases, most recently in the countervailing duty annual review under section 751 of the Act on carbon steel wire rod from Brazil, that all qualities of wire rod within TSUS item 606.17 are of the same class or kind of merchandise.
Comment 2
Counsel for respondents states that the petitioner's production facilities either cannot be used for or are not commonly used for production of the three specific types of Spanish wire rod imports. Counsel argues, therefore, that the lack of any significant production by petitioners of these three types of carbon steel wire rod requires their exclusion from the scope of investigation in accord with our decision in the recent petitions filed by Gilmore Steel Corporation against carbon steel plate from Belgium and West Germany.
DOC Position
We disagree. Petitioners do produce all three of these types of wire rod and do properly represent the carbon steel wire rod industry in the United States.
Comment 3
Counsel for respondents contends that with respect to the three Spanish wire rod producers that did not export to the U.S. during the investigation period, the DOC either must completely exclude them from the final determination or must verify their responses and establish a company-specific rate, if any.
DOC Position
We disagree. These producers are covered by a trade weighted ad valorem rate for "All Other Manufacturers/Producers/Exporters" as listed in the "Suspension of Liquidation" section of this notice.
Comment 4
Counsel for respondents contends that imports of carbon steel wire rod from Spain were not "massive over a relatively short period" because in 1983 such imports were level throughout the year on a quarterly basis and represented only about 8 percent of total imports and less than 2 percent of apparent U.S. consumption.
DOC Position
We disagree. For purposes of determining whether massive imports have occurred, we are not constrained to review only 1983 imports nor segments of any year, such as calendar quarters. Furthermore, we found that import levels since the filing of this petition (November 1983-February 1984) were higher than in the four months preceding the investigation (July-October 1983) and were higher than in the corresponding four months of the previous year (November 1982-February 1983).
Comment 5
Counsel for respondents argues that the best proof of creditworthiness is a company's ability to obtain private commercial credit (other than short-term supplier credits or receivables financing) without the benefits of government guarantee or direction. Therefore, ENSIDESA, which has been able to obtain significant amounts of private commercial credit in Spain and abroad in recent years without government intervention, should be considered creditworthy.
DOC Position
We do not agree that ENSIDESA is creditworthy. A determination of creditworthiness is based on several factors including, but not limited to, the availability of credit from commercial sources. See our discussion in section I.A of this notice.
Comment 6
Counsel for respondents contends that interest rates on private commercial loans received without any government intervention provide appropriate benchmark interest rates for determining subsidies in those years when such loans are received.
DOC Position
We do not use individual company interest rates as benchmarks for short-term loans. For some of the long-term benchmark rates, however, we have used verified interest rates on company-specific private commercial loans, as available.
Comment 7
Counsel for respondents contends that the short-term working capital loans under the PCECP are not inconsistent with the Subsidies Code since they are covered by a specific Spanish reservation to that Code, under which this export loan program is being rapidly phased out by the Spanish Government.
*19557 DOC Position
We disagree. Despite the fact that this program is being phased out, we found that all three companies obtained subsidies under this program during the period of investigation. See our discussion of this in the "Critical Circumstances" section of this notice.
Comment 8
Counsel for respondents contends that the 10 percent rate set by Spanish law on short-term working capital loans under PCECP is in accord with the existing OECD consensus rate for export financing, and that the OECD export financing rate is specifically excluded from consideration as an export subsidy under the Subsidies Code.
DOC Position
Since the OECD consensus rates for export financing do not apply to loans under two years, such as the short-term working capital PCECP loans, the question of the terms of these loans being consistent with the OECD consensus rates is not relevant.
Comment 9
Counsel for respondents contends that the PCECP is not a countervailable subsidy because these credits are not subsidized or paid for by the government of Spain. Spanish banks are required to maintain over 20 percent of their investments in low-interest privileged circuit accounts for financing housing, equipment, exports, and other investments determined to be in the public interest. Therefore, these loans are simply a cost of engaging in the banking business in Spain, a cost that Spanish banks must make up for in interest rates and other charges applied to their normal commercial operations.
DOC Position
As stated earlier in this notice, the short-term working capital loan program is provided by banks under a series of government-mandated programs. The government-mandated interest rate is below the national average short-term borrowing rate and provides a subsidy on exports.
Comment 10
Counsel for respondents argues that since the cost of the low-interest PCECP is passed on by banks in the form of higher interest rates and other charges, the Spanish steel companies do not receive a subsidy because they end up paying for the cost of these PCECP loans in their normal commercial banking transactions.
DOC Position
The banks may have increased their commercial interest rates to pay for the cost of the privileged circuit program. The fact that everyone, including the steel companies, pays these higher commercial rates does not eliminate the benefits conveyed to exporters participating in the program.
Comment 11
Counsel for respondents argues that if the PCECP is determined by DOC to be a countervailable subsidy, then the benchmark interest rates should be adjusted downward so as to reflect the additional costs of the low-rate PCECP loans.
DOC Position
We do not agree with this argument that the benchmark interest rates should be adjusted downward. The benchmark interest rates used in this final determination represent the national average commercial interest rate available for short-term loans.
Comment 12
Counsel for respondents contends that increasing the short-term benchmark interest rate by two percent to reflect "average borrowing experience" is unsupported by evidence in the record and is contrary to the rates actually being charged to exporters for short-term commercial credit.
DOC Position
Our preference for using a national average rate as opposed to company- specific rates for a short-term benchmark is explained in the Subsidies Appendix. The benchmark we have chosen in this case is based on information gathered from Spanish banks.
Comment 13
Counsel for respondents contends that the DOC should take into account the higher rates paid by some companies in their PCECP loans due to financial discounting, where the interest, fees, and other charges are prepaid in advance by deducting these charges from the face amount of the loan.
DOC Position
We took account of discounting practices in our calculations of benefits under those loans where respondents had specifically demonstrated during verification that financial discounting had occurred.
Comments by an Interested Party
Counsel for Davis Walker Corporation, an interested party to the proceeding, submitted comments.
Comment 1
Counsel for Davis Walker Corporation argues that Spanish wire rod imports to the West Coast, which accounted for about half of all Spanish imports in 1983, do not compete with any available U.S. made wire rod and should be excluded from the DOC evaluation of whether Spanish wire rod imports have been "massive."
DOC Position
For our determination we looked at the entire range of imported products subject to the investigation. In the data available, we had no means by which to evaluate "non-competitive West Coast products," and, even if we had such means, we doubt that we have the authority to exclude such imports from our consideration of this issue.
Comment 2
Counsel for Davis Walker Corporation argues that since the PCECP is currently being phased out and will disappear by January 1, 1986, the future benefit of the 1.85 percent subsidy calculated in the DOC preliminary determination for ENSIDESA in 1982 will be minimal if not de minimis on future exports to the U.S.
DOC Position
We will evaluate any future change in subsidies at the time of any pertinent administrative annual review under section 751 of the Act.
Verification
In accordance with section 766(a) of the Act, we verified all the information used in making this final determination, except where the absence of needed or requested information has forced us to use the best information available.
Suspension of Liquidation
The suspension of liquidation ordered in our preliminary affirmative countervailing duty determination (49 Fed. Reg. 6962) will remain in effect until further notice. The net subsidy rate for duty deposit purposes for each firm is as follows:
-------------------------------------------------------------------------------
Manufacturers/producers/exporters Ad valorem rate (percent)
-------------------------------------------------------------------------------
Empresa Nacional Siderurgica, S.A........................................ 29.94
Nueva Montana Quijano, S.A............................................... 17.13
Forjas Alavesas, S.A..................................................... 16.03
All Other Manufacturers/producers/exporters ............................. 16.95
-------------------------------------------------------------------------------
*19558 We are directing the U.S. Customs Service to require a cash deposit or bond in the amount indicated for each entry of carbon steel wire rod from Spain that is entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the Federal Register. Where the manufacturer is known but is not the exporter, the rate for the manufacturer will be used. If the manufacturer is not known, the rate for all other manufacturers/producers/exporters will be used for the amount of each deposit or bond required.
Final Affirmative Determination of Critical Circumstances
Since petitioners have alleged the existence of critical circumstances in this case, we are required under section 705(a)(2) of the Act to include in our final determination "a finding as to whether--(A) the subsidy is inconsistent with the Agreement, and (B) there have been massive imports of the class or kind of merchandise involved over a relatively short period."
A. Inconsistency with the Subsidies Code
One of the subsidies alleged in this case is short-term noncommercial loans for working capital provided under the privileged circuit exporter credits program. As discussed above, we have determined that each of the three Spanish producers of carbon steel wire rod has received such loans.
In 1982, Spain acceded to the Subsidies Code with a time-limited reservation concerning its current export subsidy programs. On November 15, 1982, in our final affirmative countervailing duty determinations on certain steel products from Spain (47 Fed. Reg. 51438), we concluded that "Spain's reservation does not preclude us from finding, for purposes of a critical circumstances determination, that Privileged Circuit Exporter Credits are inconsistent with the Subsidies Code." We continue to believe this, and therefore this criterion for critical circumstances is satisfied.
B. Massive Imports
In determining whether imports of carbon steel wire rod from Spain have been massive over a relatively short period of time, we considered the following factors: whether recent imports have increased significantly; whether recent import penetration ratios have increased significantly; whether the pattern of recent imports may be explained by seasonal factors; and whether recent imports are significantly above average imports calculated over the last three years. Based on these factors, we determine that imports of carbon steel wire rod from Spain have been massive over a relatively short period of time.
For the reasons discussed above, we find that critical circumstances exist within the meaning of section 705(a)(2) of the Act. Therefore, the suspension of liquidation of entries for a period of 90 days prior to our preliminary determination will remain in effect.
ITC Notification
In accordance with section 705(d) of the Act, we will notify the ITC of our determination. In addition, we are making available to the ITC all non- privileged and non-confidential information relating to this investigation. We will allow the ITC access to all privileged and confidential information in our files, provided the ITC confirms that it will not disclose such information, either publicly or under an administrative protective order, without the written consent of the Deputy Assistant Secretary for Import Administration.
The ITC will make its determination whether these imports are materially injuring, or threatening to materially injure, a U.S. industry within 45 days of the publication of this notice.
If the ITC determines that material injury or the threat of material injury does not exist, this proceeding will be terminated and all estimated duties deposited or securities posted as a result of the suspension of liquidation will be refunded or cancelled. If, however, the ITC determines that such injury does exist, we will issue a countervailing duty order, directing the Customs Service to assess countervailing duties on all entries of carbon steel wire rod from Spain entered, or withdrawn from warehouse, for consumption on or after the suspension of liquidation date, and to require a cash deposit or bond for an amount equal to the net subsidy amount indicated in the "Suspension of Liquidation" section of this notice.
This notice is published pursuant to section 705(d) of the Act (19 U.S.C. 1671(d)).
Alan F. Holmer,
Acting Assistant Secretary for Trade Administration.
BILLING CODE 3510-DS-M