(Cite as: 57 FR 57799)
NOTICES
DEPARTMENT OF COMMERCE
(C-469-804)
Preliminary Affirmative Countervailing Duty Determinations and Alignment of Final Countervailing Duty Determinations with the Final Antidumping Duty Determinations: Certain Steel Products from Spain
Monday, December 7, 1992
*57799 AGENCY: Import Administration, International Trade Administration, Department of Commerce.
EFFECTIVE DATE: December 7, 1992.
FOR FURTHER INFORMATION CONTACT:Kristal Eldredge or Stephanie Hager, Office of Countervailing Investigations, U.S. Department of Commerce, room 3099, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482- 0631 or 482-5055, respectively.
Preliminary Determinations and Alignments
The Department preliminarily determines that benefits which constitute subsidies within the meaning of section 701 of the Tariff Act of 1930, as amended (the Act), are being provided to manufacturers, producers, or exporters in Spain of certain steel products.
For information on the estimated net subsidies, please see the Suspension of Liquidation section of this notice. On November 24, 1992, in accordance with section 705(a)(1) of the Act (19 U.S.C. 1671d(a)(1)), petitioners in the above- referenced investigations requested that we align the due date for the final countervailing duty determinations with that of the final antidumping duty determinations for certain steel products. Accordingly, we are aligning these final determinations. Therefore, the final countervailing duty determinations are now due not later than April 12, 1993.
Case History
Since the publication of the notice of initiation and postponement of preliminary determinations in the Federal Register, 57 FR 32970 (July 24, 1992), the following events have occurred.
On August 10, 1992, we issued questionnaires to the Government of Spain (GOS) and the European Communities. On August 20, 1992, we received a partial response from the GOS indicating the proper responding companies in these investigations.
On October 5, 1992, we received responses from the GOS and Empresa National Siderurgica, S. A. (ENSIDESA). Both the GOS and ENSIDESA are respondents for both classes or kinds of merchandise subject to this investigation. On October 19, 1992, the GOS and ENSIDESA filed additional responses. On October 21, 1992, we issued a supplemental/deficiency questionnaire to respondents. We received responses to this questionnaire on November 5 and November 10, 1992.
Scope of Investigations
The products covered by these investigations, certain steel products, constitute two separate "classes or kinds" of merchandise, as found in appendix 1 to this notice: 1) certain cold-rolled carbon steel flat products and 2) certain cut-to-length carbon steel plate.
Injury Test
Because Spain is a "country under the Agreement" within the meaning of section 701(b) of the Act, the U.S. International Trade Commission (ITC) is required to determine whether imports of the certain steel products from Spain materially injure, or threaten material injury to, U.S. industries. On August 21, 1992, the ITC preliminarily determined that there is a reasonable indication that industries in the United States are being martially injured or threatened with material injury by reason of imports from Spain of the subject merchandise (57 FR 38064 (August 21, 1992)).
Respondents
Petitioners alleged that Altos Hornos de Vizcaya (AHV), Altos Hornos del Mediterra>=1neo (AHM), and ENSIDESA benefitted from subsidies during the period of investigation (POI). According to the responses, ENSIDESA represents over 85 percent of the exports of each class or kind of merchandise to the United States. Therefore, ENSIDESA is the only required respondent company for both classes or kinds of merchandise
ENSIDESA is a state-owned integrated steel producer established in the 1950's. The National Industrial Institute (INI) owns 97.5 percent of ENSIDESA (as of 1983). INI is a large state-owned industrial conglomerate which receives direct financial contributions from the Spanish Treasury. We consider all benefits provided to ENSIDESA by INI as being provided by the GOS.
In December 1985, AHM, which is 100 percent owned by INI, spun-off its cold- rolling plant into a separate corporation, Sideru>=1gica del Mediterra>=1neo, S.A. (SIDMED), and sold it to ENSIDESA. SIDMED is now a subsidiary of ENSIDESA and their financial statements are consolidated. Although requested to do so, ENSIDESA has not responded to our questionnaire with respect to alleged subsidies provided to AHM. Therefore, we are using the best information available with respect to AHM and applying this rate to certain cold-rolled carbon steel flat products.
Analysis of Programs
For purposes of these preliminary determinations, the period for which we are measuring subsidies (the POI) is calendar year 1991, which corresponds to the fiscal year of ENSIDESA.
Based upon our analysis of the petition and the responses to our questionnaires, we preliminarily determine the following:
*57800 Creditworthiness
Petitioners have alleged that ENSIDESA was uncreditworthy in each year from 1979 through 1991. In the Final Countervailing Duty Determination: Certain Steel Products from Spain, 47 FR 51438 (November 15, 1982) (Certain Steel from Spain) the Department determined that ENSIDESA was uncreditworthy in each of the years 1979 through 1982. Respondents have not asked the Department to reexamine these findings.
To determine whether ENSIDESA was creditworthy from 1983 through 1991, we examined the quick ratio, times interest earned ratio, debt ratios, and profit levels for each of these years and three prior years.
Examination of these ratios shows that ENSIDESA sustained substantial net losses in every year from 1983 through 1991 with the exception of 1989. Furthermore, the company's interest coverage ratios were extremely weak and in several years the company had negative interest coverage ratios. It's debt-to- equity ratios show that the company's debt far out-weighed its equity in every year. In fact, the financial indicators show that there has been no change in the company's performance since the 1979-1982 period in which we previously found ENSIDESA uncreditworthy. Therefore, we preliminarily determine ENSIDESA to be uncreditworthy in each year from 1979 through 1991.
Equityworthiness
Petitioners have alleged that ENSIDESA received equity infusions and was unequityworthy from 1984 through 1987. In addition to these infusions, both the petition and the responses state that ENSIDESA received equity infusions in 1979, 1981, and 1983. As discussed in greater detail below, even though the shares purchased by INI in these years were later written off, we are only examining the original equity infusion. We previously found countervailable equity infusions made to ENSIDESA in 1979 and 1981 in Certain Steel from Spain. Nothing on the record in this investigation disputes this earlier finding.
To determine whether ENSIDESA was equityworthy from 1983 through 1987, we examined the same ratios discussed above and, in addition, we examined the profit margin as a percentage of sales, the rate of return on assets, and the rate of return on equity for each of these years and the three years prior to each infusion. These ratios indicate that the company was in poor health for the entire period with little prospect for improvement, and that a reasonable investor would not have put capital into the company. Therefore, we preliminarily determine that ENSIDESA was unequityworthy at the time of each government infusion.
Treatment of AHM
As stated above, in December 1985, AHM spun off its cold-rolling plant into a separate corporation, SIDMED, and sold it to ENSIDESA. According to AHM's 1985 Annual Report, the transfer of AHM's cold-rolling facility to SIDMED expressly included a transfer of all assets, liabilities, and financial assistance associated with that facility.
According to AHM's 1986 Annual Report, AHM ceased all commercial operations following the formation and sale of SIDMED and is a shell existing only to administer the liabilities derived from closing the plant. Hence, AHM no longer operates production facilities.
Both AHM and ENSIDESA were owned by the same holding company (INI) at the time of the transfer. Therefore, based on the information on the record, we preliminarily determine that any alleged subsidies received by AHM are wholly attributed to its productive assets, i.e., the cold-rolling facility, and not to the remaining administrative shell of the company. Furthermore, because subsidies to AHM benefited the production of cold-rolled products, the benefits calculated for AHM have been allocated solely to ENSIDESA's sales of cold- rolled products.
Specificity
When receipt of benefits under a program is not contingent upon exportation, the Department must determine whether the program is specific to an enterprise or industry, or group of enterprise or industries. Under the specificity analysis, the Department examines both whether a government program is limited by law to a specific enterprise or industry, or group thereof (i.e., de jure specificity) and whether the government program is in fact limited to a specific enterprise or industry, or group thereof (i.e., de facto specificity). See 19 U.S.C. s 1677(5)(B). In section 355.43(b)(2) of the Department's proposed regulations (Countervailing Duties; Notice of Proposed Rulemaking and Request for Public Comments, 54 FR 23366 (May 31, 1989) (Proposed Rules), the Department has set forth the factors that may be considered in determining whether there is specificity:
(i) The extent to which a government acts to limit the availability of a program;
(ii) The number of enterprises, industries, or groups thereof that actually use a program;
(iii) Whether there are dominant users of a program, or whether certain enterprises, industries, or groups thereof receive disproportionately large benefits under a program; and
(iv) The extent to which a government exercises discretion in conferring benefits under a program. See also Final Affirmative Countervailing Duty Determination: Certain Softwood Lumber Products from Canada, 57 FR 22570 (May 28, 1992).
Equity Methodology
According to s 355.49(e) of the Proposed Rules, the Department measures the benefit of equity investments in "unequityworth" firms by comparing the national average rate of return on equity with the company's rate of return on equity during each year of the allocation period. The difference in these amounts, the so-called rate of return shortfall (RORS), is then multiplied by the amount of the equity investment to determine the countervailable benefit in the given year.
The Department has preliminarily concluded that the RORS methodology does not provide an accurate measure of the benefits arising from government equity investments in unequityworthy companies. When the Department finds that a company is unequityworthy and, hence, that the government's equity investment is inconsistent with commercial considerations, we are effectively finding that the company could not attract share capital from a reasonable investor. When a company is in such poor financial condition that it cannot attract capital, any capital it receives benefits the company as if it were a grant and no earnings of the company in subsequent years should be used to offset the benefit.
Moreover, in calculating the company's rate of return, no adjustment is made to eliminate the effect of past or current subsidies. Therefore, those subsidies that increase the company's rate of return serve to reduce the amount of the subsidy arising from government equity investments in subsequent years. In addition, this method does not compensate for the effect of prior year results on equity in subsequent years, thus measuring the rate of return against an equity other than that invested in the transaction in question.
For these reasons, we have preliminarily determined that equity investments in unequityworthy companies will be treated as grants *57801 given in the year of the equity investment. Accordingly, we will value the benefits using the grant methodology described below.
Where a market-determined benchmark price for equity exists, we will continue to use that benchmark to determine whether the government's purchase of equity confers a subsidy and to measure the amount of the subsidy.
Grant Methodology
Our policy with respect to grants is (1) to expense recurring grants in the year of receipt, and (2) to allocate non-recurring grants over the average useful life of assets in the industry, unless the sum of grants provided under a particular program is less than 0.5 percent of a firm's total or export sales (depending on whether the program is a domestic or export subsidy) in the year in which the grant was received. See, e.g., Final Affirmative Countervailing Duty Determination; Fresh and Chilled Atlantic Salmon from Norway, (Salmon from Norway), 56 FR 7678 (February 25, 1991). We have considered the grants provided under the programs described below to be non- recurring, unless otherwise noted, because the recipient cannot expect to receive benefits on an ongoing basis from review period to review period. See, Final Affirmative Countervailing Duty Determination; Certain Fresh Atlantic Groundfish from Canada, 51 FR 10041 (March 24, 1986). (In this regard, we are reexamining the approach to distinguishing recurring from non-recurring benefits set forth in the three-part test found in the preamble of the Proposed Rules). Therefore, we have allocated the benefits over 15 years, which the Department considers to be reflective of the average useful life of assets in the steel industry (see, s 355.49(b)(3) of the Proposed Rules).
The benefit from each of the grant programs discussed below was calculated using the declining balance methodology described in the Department's Proposed Rule (see, s 355.49(d)(3)) and used in prior investigations (see, e.g., Salmon from Norway). For the discount rate used in these calculations, we used, whenever possible, each company's actual cost for long-term, fixed-rate debt. If a company did not report this cost, or when a company had a non long-term borrowing in the year in which the grant was approved, we used the national average long-term interest rate. If a company was uncreditworthy in the year in which the grant was approved, we added a risk premium to the benchmark interest rate in accordance with s 355.44(b)(6)(iv) of the Proposed Rules.
A. Programs Preliminary Determined To Be Countervailable
We preliminarily determine that subsidies are being provided to manufacturers, producers, or exporters in Spain of certain steel products under the following programs:
ENSIDESA
1. Long-Term Loans from Bank of Industrial Credit (BCI) Under Law 60/78
On December 23, 1978, a set of emergency measures in support of the steel industry was enacted. Law 60/78 appropriated 15 billion pesetas to the budgets of the Ministry of Industry and Energy and INI for this purpose. According to the responses, ENSIDESA had three loans under this program outstanding during the POI. These loans were received in 1979. (Loans under Law 60/78 were found countervailable in Certain Steel from Spain).
Because Law 60/78 is limited to the steel industry, we preliminarily determine that benefits under this program are de jure specific to an enterprise or industry, or group of enterprises or industries. Therefore, ENSIDESA's loans under this program are countervailable to the extent that they were provided on terms more favorable than the benchmark financing.
Because we have preliminarily found ENSIDESA to be uncreditworthy in 1979, we have used as the benchmark interest rate, the highest long-term fixed interest rate applicable to firms in the country in question, plus an amount equal to 12 percent of the country's prime rate. See, Final Affirmative Countervailing Duty Determination: New Steel Rail, Except Light Rail, from Canada, 54 FR 31991 (August 3, 1989) and s 355.44(b)(6)(iv) of the Department's Proposed Rules.
In addition, loans under this program had a grace period of seven years on the repayment of principal. Because respondents did not answer our questions with respect to the average grace period provided on commercial loans in Spain, we used as a "grace period benchmark" an average of the grace periods on ENSIDESA's few commercial loans.
We then compared the benchmark financing, as constructed above, to the financing ENSIDESA received under this program and found that the BCI loans were provided on more favorable terms than the benchmark financing. Therefore, we preliminarily determine that ENSIDESA's BCI loans are countervailable.
To calculate the benefit from these loans we employed our normal long- term loan methodology as described in s 355.49(c)(1) of the Department's Proposed Rules. (See also, Final Affirmative Countervailing Duty Determination; Certain Granite Products from Spain, 53 FR 24340 (June 28, 1988.)) We then divided the benefit attributable to the POI by ENSIDESA's total sales. On this basis, we calculated an estimated net subsidy of .63 percent ad valorem for all manufacturers, producers, and exporters in Spain. This rate applies equally to both classes or kinds of merchandise.
2. Royal Decree 878/81
On May 8, 1981, the GOS enacted Royal Decree 878/81 which set forth the "Integrated Iron and Steel Reconversion Plan." According to the GOS questionnaire response, the basic objectives of this reconversion plan were "1) the financial recovery of ENSIDESA, AHV, and AHM, 2) a reduction of the participation of salary costs in invoicing, and 3) the development of programs which reduce the unit operating costs and improve production by means of a commercial policy." Benefits from R.D. 878/81 were found countervailable in Certain Steel from Spain.
Outlined below are the benefits which were provided to ENSIDESA pursuant to R.D. 878/81. Because R.D. 878/81 is limited to the steel industry, we preliminary determine that each of these measures is de jure specific to an enterprise or industry, or group of enterprises or industries.
According to the responses, ENSIDESA had seven BCI loans outstanding under this program during the POI. These loans were received in each of the years 1981 through 1985.
To determine whether the loans were made on terms inconsistent with commercial considerations, we employed the same analysis as described in A.1. above. Because we have preliminarily found ENSIDESA to be uncreditworthy in each of the years 1981 through 1985, we have constructed the same benchmark interest rate and used the same "grace period benchmark" as described in A.1. above. Based on a comparison of the interest rates charged on these loans and the benchmark interest rates, we preliminarily determine these loans to be countervailable.
To calculate the benefit from these loans, we used the same long-term loan methodology as described in A.1. above. We then divided the benefit attributable *57802 to the POI by ENSIDESA's total sales of all products. On this basis, we calculated an estimated net subsidy of .45 percent ad valorem for all manufacturers, producers, and exporters in Spain. This rate applies equally to both classes or kinds of merchandise.
According to the responses, ENSIDESA had five INI loans under this program outstanding during the POI. These loans were received in each of the years 1981 through 1985.
To determine whether the loans were made on terms inconsistent with commercial considerations, we employed the same analysis as described in A.1. above. Because we have preliminarily found ENSIDESA to be uncreditworthy in each of the years 1981 through 1985, we have constructed the same benchmark interest rate and used the same "grace period benchmark" as described in A.1. above. Based on a comparison of the interest rates charged on these loans and the benchmark interest rate, we preliminarily determine these loans to be countervailable.
To calculate the benefit from these loans, we used the same long-term loan methodology as described in A.1. above. We then divided the benefit attributable to the POI by ENSIDESA's total sales of all products. On this basis, we calculated an estimated net subsidy of .33 percent ad valorem for all manufacturers, producers, and exporters in Spain. This rate applies equally to both classes or kinds of merchandise.
c. Grants Provided to "Decrease Financial Charges" and "Compensate for Losses"
According to the responses, ENSIDESA received grants in 1982 and 1983 to decrease financial charges and to compensate for losses. R.D. 878/81 approved a maximum amount to compensate for losses, but the actual amounts were determined each year in light of the actual amount of losses.
As discussed above, we have treated these grants as non-recurring benefits, and have, therefore, allocated them over the useful life of the assets in the industry, i.e., 15 years. We calculated the benefits for the POI using the methodology described in the Grant Methodology section above. Because we have determined ENSIDESA to be uncreditworthy in the years in which the company received grants under this program, we used as the discount rate the same rates, for the appropriate years, as described in A.1. above. We then summed the benefits from each grant during the POI and divided by ENSIDESA's total sales of all products. On this basis, we calculated an estimated net subsidy of 1.02 percent ad valorem for all manufacturers, producers, and exporters in Spain. This rate applies equally to both classes or kinds of merchandise.
3. The 1984 Council of Ministers Meeting
Royal Decree 878/81 stipulated that the Coordinating Commission of the Integrated Steel Sector should present an industrialization plan for the integrated steel companies ten months after the effective date of the decree. In Royal Decree 1853/83, the GOS adopted a series of industrial measures for the reconversion and restructuring of the production installation of the integrated steel companies. This decree authorized the companies to carry out the necessary investments in accordance with the labor and financial plans, in order to achieve the future competitiveness of the integrated steel sector. The Council of Ministers, on March 14, 1984, approved the industrial, labor, and financial plans included in the reconversion process of the integrated steel companies and the measures necessary to implement these plans.
Outlined below are the benefits which were provided to ENSIDESA pursuant to the 1984 Council of Ministers Meeting. Because these measures were limited to the steel industry, we preliminarily determine that each of these measures is de jure specific to an enterprise or industry, or group of enterprises or industries.
According to the responses, INI made equity infusions during each of the years 1984 through 1987. As stated in the Equityworthiness section above, we have preliminarily determined ENSIDESA to be unequityworthy in each of these years, and therefore, that these infusions were made on terms inconsistent with commercial considerations.
As discussed above in the Equity Methodology section, we have preliminarily determined that equity infusions should be treated as grants. Therefore, to calculate the benefits from these infusions, we used the same methodology as discussed in the Equity Methodology section above. We then summed the benefits from each infusion and divided by ENSIDESA's total sales of all products. On this basis, we calculated an estimated net subsidy of 12.50 percent ad valorem for all manufacturers, producers, and exporters in Spain. This rate applies equally to both classes or kinds of merchandise.
According to the responses, INI loan guarantees were provided for loans received in each of the years 1985 through 1988. INI charged a fee equal to . 77 percent which was added to the interest paid per quarter. Respondents provided information on the guarantee fees charged by private banks on ECSC Article 54 peseta denominated loans as a commercial benchmark for these loan guarantees.
To determine whether the fees charged by INI for these loans were inconsistent with commercial considerations, we compared the fees charged by INI to the fees charged by commercial banks consistent with s 355.44(c) of the Proposed Rules. We found that the INI fees were lower than the commercial fees. Therefore, we preliminarily determine that the INI loan guarantees are countervailable.
Although respondents did not provide the interest rates or the repayment terms of the loans, the information they provided regarding the payment schedule of the other countervailable loans provided to ENSIDESA allowed us to calculate the benefit from this program. To calculate the benefit from these guarantees, we used the same long-term loan methodology as described in A.1. above, with the difference in the guarantee fee comprising the interest differential. We then divided the benefit attributable to the POI by ENSIDESA's total sales of all products. On this basis, we calculated an estimated net subsidy of .05 percent ad valorem for all manufacturers, producers, and exporters in Spain. This rate applies equally to both classes or kinds of merchandise.
According to the responses, in 1986, a premium was paid by INI on ENSIDESA's series 3 shares which were issued in conjunction with the 1986 equity infusion. The share issue premium can only be used to increase the share capital or to compensate for losses. No shares were issued in return for this premium.
We treated the issue premium as a grant and calculated the benefit in the same manner as described in the Grant Methodology section above. On this basis, the estimated net subsidy is 1.96 percent ad valorem for all manufacturers, producers, and exporters in Spain. This rate applies equally to both classes or kinds of merchandise.
*57803 d. Grants Provided to "Decrease Financial Charges" and "Compensate for Losses"
According to the responses, grants were received under this program in 1984, 1985, and 1987. This is the same type of grant program as was authorized under R.D. 878/81 and is similarly limited by law to the steel industry. Therefore, we calculated benefits under this program in the same manner as discussed in A.2.c. above. On this basis, the estimated net subsidy is 7.09 percent ad valorem for all manufacturers, producers, and exporters in Spain. This rate applies equally to both classes or kinds of merchandise.
e. Amount Held in a Special INI Finance Account
In 1984, ENSIDESA offset reductions in the capital share account and the accumulated loss account by converting almost all of the INI special financing reflected on the books into new share capital. This conversion is a portion of the 1984 equity infusion mentioned in A.3.a. above. However, a portion of this special financing was not converted and remains in a capital reserve account (Special INI Finance Account) with no shares having been issued in conjunction with this portion of the capital increase. Instead it was integrated into the shareholders equity as a reserve. According to the responses, the effect of capital contributions in the form of special INI financing is to increase the shareholders equity to avoid triggering Article 150.3. Article 150.3 is discussed in A.7. below.
We treated the creation of this reserve as a grant and calculated the benefit in the same manner as described in the Grant Methodology section above. On this basis, the estimated net subsidy is .31 percent ad valorem for all manufacturers, producers, and exporters in Spain. This rate applies equally to both classes or kinds of merchandise.
4. The 1987 Government Delegated Commission on Economic Affairs.
According to the responses, Protocol 10 of Spain's Treaty of Accession to the European Communities stipulated that after Spain's accession on January 1, 1986, the European Commission and the GOS would evaluate the implementation of certain reconversion plans already approved by the GOS.
In the event that the viability of the companies could not be satisfactorily guaranteed within three years following the accession (i.e., by January 1, 1989), according to the Communities' criteria the Commission would propose a number of complementary measures to be executed by the GOS in order to assure viability after the three-year period. The actions of the Government Delegated Commission for Economic Affairs provided for the additional new measures authorized by the European Commission in March 1987.
Outlined below are the benefits which were provided to ENSIDESA pursuant to the 1987 Delegated Commission. Because the measures authorized by the 1987 Delegated Commission are limited to the steel industry, we preliminarily determine that each of these measures is de jure specific to an enterprise or industry, or group of enterprises or industries.
a. Deferral of Social Security and Other Tax Obligations
The 1987 Delegated Commission authorized the Ministry of Economy and Finance and the Ministry of Labor and Social Security to grant a deferral of payments due as of December 1, 1986, by ENSIDESA to the Public Treasury and Social Security. Repayment was to begin in 1992 and continue in equal installments until 2001.
According to the responses, no interest has been or will be charged on the deferred sum. Therefore, we have treated the deferred amount as an interest- free long-term loan given in 1986.
To determine whether the deferral was made on terms inconsistent with commercial considerations, we employed the same analysis as described in A.1. above. Because we have preliminarily found ENSIDESA to be uncreditworthy in 1986, we have constructed the same benchmark interest rate and used the same "grace period benchmark" as described in A.1. above. Based on a comparison of the interest rate charged on these loans and the benchmark interest rate, we preliminarily determine this deferral to be countervailable.
To calculate the benefit from this deferral, we used the same long-term loan methodology as described in A.1. above. We then divided the benefit attributable to the POI by ENSIDESA's total sales of all products. On this basis, we calculated an estimated net subsidy of 2.89 percent ad valorem for all manufacturers, producers, and exporters in Spain. This rate applies equally to both classes or kinds of merchandise.
According to the responses, one grant was received under this program in 1987. As discussed above, we have treated this grant as a non-recurring benefit, and have, therefore, allocated it over the useful life of assets in the industry, i.e., 15 years. To calculate the benefit, we used the same methodology as described in the Grant Methodology section above. On this basis, we calculated an estimated net subsidy of 3.19 percent ad valorem for all manufacturers, producers, and exporters in Spain. This rate applies equally to both classes or kinds of merchandise.
5. Fund For Employment Promotion and Early Retirement
The 1987 Delegated Commission for Economic Affairs also authorized the granting of funds to the Employment Promotion Fund to cover the costs resulting from the reductions in the labor force for each of the years between 1987 and 1992. There are four Funds for Employment Promotion established for the following industries: (1) Naval construction, (2) appliance/white line, (3) integrated steel, and (4) specialty steel. These programs provide the following benefits: (1) Workers under 55 years of age that can be reemployed can participate for three years; (2) workers over 55 years of age can receive benefits until they turn 60; and (3) workers from 60 to 65 can receive early retirement benefits.
R.D. 878/81 specifically provides for early retirement for excess workers at age 60 as a result of the integrated steel reconversion. According to the responses, this same measure was extended two months later to the domestic appliance industry and the naval construction industry as these industries were also declared to be in reconversion. Payments are made to workers between the ages of 60 and 65. The GOS continues to make the workers' contributions to Social Security during this period in order that their final retirement pension would be similar to that which they would have received if they had continued working. Payments under this program are made to the retired workers and not to the steel companies.
Although the "Early Retirement" program was enacted prior to the "Fund for Employment Promotion," it appears that the "Fund for Employment Promotion" expanded this program and, therefore, is now the part of the "Fund for Employment Promotion" that applies to workers between the ages of 60 and 65.
According to the responses, under this program, the GOS decided to have the Ministry of Industry and Energy cover the following excess labor costs for companies in the integrated steel sector: (1) company indemnification costs and (2) the company's share of up to 75 percent of salary for early retirement and corresponding social *57804 security payments for workers 60 and over. According to the responses, the GOS supplied 2,929 million pesetas during the POI to the Fund to cover ENSIDESA's worker indemnification costs for terminating excess workers entering the Fund.
Because only four industries are eligible for this program, we preliminarily determine that it is specific to an enterprise or industry or group of enterprises or industries. We also preliminarily determine that these benefits are recurring benefits and, therefore, have expensed them in the year of receipt (1991).
As the denominator we used ENSIDESA's total sales of all products. On this basis, we calculated an estimated net subsidy of 1.78 percent ad valorem for all manufacturers, producers, and exporters in Spain. This rate applies equally to both classes or kinds of merchandise.
Petitioners alleged that steel companies received a discount on the cost of electricity pursuant to an agreement of July 1986 and a 1987 Ministry of Industry and Energy Resolution.
According to the original responses, neither the July 1986 Agreement nor the 1987 Resolution provided electricity discounts to ENSIDESA.
However, in petitioners' October 9, 1992 submission, they supplied a market research report which indicates that ENSIDESA pays, on average, less than half the price paid by other comparable users of electricity. The research report indicates that ENSIDESA is one of only three Spanish companies that have been granted special G-4 tariff status by the Ministry of Industry and Energy which entitles them to a much lower rate than other users of comparable size. Furthermore, ENSIDESA's 1991 Annual Report indicates that the company has benefitted from G-4 rates.
In our supplemental/deficiency questionnaire we asked specific questions regarding the G-4 tariff schedule and ENSIDESA's tariff rates compared to other comparable users. Neither the GOS nor ENSIDESA responded to any of the questions.
Given the documentation provided by petitioners, the statement in ENSIDESA's Annual Report which lends credence to petitioners' information, and respondents' unresponsiveness with respect to this program, we preliminarily determine that ENSIDESA has benefitted from electricity discounts. Furthermore, because of respondents' lack of cooperation in answering questions concerning this program, we are using, as the best information available, the specificity information contained in petitioners' October 9 and November 12, 1992 submissions. We are also using the rate calculated by petitioners in their November 12, 1992 submission as the best information available. Therefore, the estimated net subsidy rate for this program is 7.91 percent ad valorem for all manufacturers, producers, and exporters in Spain. This rate applies equally to both classes or kinds of merchandise.
7. Other Equity Infusions Which Were Subsequently Extinguished
Article 150.3 of Spanish corporate law requires that a company be dissolved if its losses reduce the net capital worth (capital stock + reserves + losses) to an amount less than one-third of the share capital, unless such capital is replenished or reduced. The writing-off or extinguishment of share capital restates the capital account to reflect the fact that the funds represented by that capital had already been lost.
According to the responses, each year, INI reviews the company's financial statements and reports to determine whether any action is necessary to meet the requirements of Article 150.3 and avoid having to dissolve the company.
According to the responses, series E, F, G, H, I, and J shares were written- off. In each case, the final share capital reduction was approved by the Administrative Council on June 6, 1984. Series E and F shares were originally received by ENSIDESA in 1979. Series G and H shares were tied to an original equity injection received by ENSIDESA in 1981. Series I and J shares resulted from the 1983 conversions of INI special financing to share capital.
With respect to these equity write-offs/extinguishments, we have preliminarily determined that it is at the time that the infusions of equity (1979 and 1981) and the conversion of INI special financing to equity (1983) occurred that the benefit was realized. Because the equity methodology does not recognize the subsequent performance of the company receiving the equity investment and treats the equity investment as a grant, the later write-off of the equity is irrelevant. Therefore, we have not countervailed the benefit at the point of extinguishment. (See Equity Methodology section above.)
To calculate the benefit from these infusions, we have followed the same methodology as discussed in A.3.a. above. On this basis, we calculated an estimated net subsidy of 2.90 percent ad valorem for all manufacturers, producers, and exporters in Spain. This rate applies equally to both classes or kinds of merchandise.
8. ECSC Article 54 Loans and Loan Guarantees
Article 54 industrial investment loans are provided for the purpose of purchasing new equipment or financing modernization. The EC stated that Article 54 loans are direct loans from the Commission and that the funds are loaned at a slightly higher rate than that at which the Commission obtained them in order to cover its costs. According to the EC Response, the Commission has this program to facilitate the borrowing process for companies in the ECSC, some of which may not otherwise be able to obtain these loans. These loans are only available to the iron and steel industry.
We preliminarily determine that this program is limited to the iron and steel industry. Therefore, these loans are counteravailable to the extent that they are provided on terms inconsistent with commercial considerations.
According to the responses, ENSIDESA received four loans under this program. The loans were received in 1988, 1990, and 1991. The loans received in 1988 were long-term variable rate loans and the loans received in 1990 and 1991 were long-term fixed rate loans.
Two of the loans were received in 1988. One of these loans was denominated in Deutsche Marks (DM) and the other in European Currency Units (ECU). Both of these loans had variable interest rates and were guaranteed by INI. For the actual interest rates paid on these loans we used average 1991 LIBOR rates minus a certain percentage plus the guarantee fee. For the benchmark interest rate we used the average maximum long-term interest rate in Spain (we did not have information regarding maximum variable rates) for 1988 plus 12 percent of the prime rate (because we have preliminarily determined ENSIDESA to be uncreditworthy in 1988) plus the commercial guarantee fee as discussed in the Loan Guarantee section above.
We then compared the benchmark financing, as constructed above, to the financing ENSIDESA received under this program and found that the ECSC variable rate loans were provided on more favorable terms than the benchmark financing. Therefore, we preliminarily determine that ENSIDESA's ECSC variable rate loans are countervailable.
To calculate the benefit, we took the amount outstanding at the beginning of *57805 the POI and treated it as a short-term loan.
The fixed-rate loan received in 1990 was calculated as a long-term loan provided to an uncreditworthy company, as described in A.1. above. There is no benefit in the POI for the fixed-rate long-term loan received in 1991. We summed the benefits attributed to the loans received in 1988 and 1990 and divided the total by ENSIDESA's total sales of all products. On this basis, we calculated an estimated net subsidy of 2.55 percent ad valorem for all manufacturers, producers, and exporters in Spain. This rate applies equally to both classes or kinds of merchandise.
AHM
9. Equity Infusions for AHM Under Law 60/78
Petitioners alleged that AHM received equity infusions in 1978 from both INI and private investors. They stated that Law 60/78 (discussed above) conditioned a government bail-out of the company on additional private sector contributions. In addition, petitioners alleged that INI made equity infusions into AHM in 1980, 1981, 1982, 1984, and 1985.
Petitioners alleged that AHM was both unequityworthy and uncreditworthy in each of these years. In Certain Steel from Spain, the Department determined that AHM was unequityworthy in 1980 and 1981.
As mentioned above, respondents stated in both their original and deficiency questionnaire responses that they would not supply information with respect to the AHM programs alleged in the petition because they did not believe that AHM was a related company for purposes of this investigation. However, as discussed above, in the section concerning Treatment of AHM, we preliminarily determine that all subsidies allegedly received by AHM in the period prior to the creation and sale of SIDMED are allocable to ENSIDESA's production of cold- rolled steel products.
As the best information available, we assumed, based on petitioners' information, that AHM was unequityworthy and uncreditworthy and calculated the benefit from the equity infusions in the same manner as done for ENSIDESA.
To calculate the benefit we summed the benefits attributable to each equity infusion and then divided by ENSIDESA's sales of cold-rolled carbon steel flat products. On this basis, we calculated an estimated net subsidy of 10.32 percent ad valorem for all manufacturers, producers, and exporters in Spain. This rate will be added to ENSIDESA's total estimated net subsidy rate for cold-rolled carbon steel flat products.
10. AHM's Receipt of Loans Under The BCI Exceptional Credit Program
Petitioners alleged that AHM received 2.8 billion pesetas in loans from BCI under this program.
As the best information available, we calculated the benefits conferred by these loans in the same manner as loans provided to ENSIDESA under this program. We used the amount of the loans provided in the petition and accepted petitioners' allegation that the company was uncreditworthy. We also assumed that the entire amount of the loans was given in 1981, the year of the decree authorizing the loans. On this basis, we calculated an estimated net subsidy during the POI of .40 percent ad valorem for all manufacturers, producers, and exporters in Spain. This rate will be added to ENSIDESA's total estimated net subsidy rate for cold-rolled carbon steel flat products.
B. Program Preliminarily Determined To Need More Information
We preliminarily determine that the Department needs further information with respect to the following program:
Petitioners alleged that a negative tax liability noted in ENSIDESA's 1990 Annual Report was a benefit from the parent company (INI). According to the responses, this "program" only in part represents a payment by the parent company to ENSIDESA, insofar as it is a function of the corporate taxes that the parent company does not have to pay. The Spanish Consolidated Tax Structure provides for the imposition of corporate income tax on a corporate group as a single company. This income tax is based upon the consolidated accounts of the group as a whole, with the parent company making the required payments. The parent company later allocates the tax liability between the members of the group, negatively or positively, as a function of their contribution to the total amount paid by the group. The losses of one subsidiary are consequently offset by the profits of the parent company or another subsidiary, or vice versa. Based on the responses, the negative tax liability does not appear to arise from tax credits as alleged by petitioners, but instead is a result of Spanish tax laws for consolidated companies. However, it is not clear how taxes or losses are allocated among companies. Therefore, we are seeking further information regarding this program.
C. Program Preliminarily Determined Not To Be Countervailable
We preliminarily determine that the following program does not provide subsidies to manufacturers, producers, or exporters in Spain of certain steel products under the following program:
Partial Extinguishment of AHM Equity in 1982
Petitioners alleged that AHM extinguished equity in the amount of 7,800 million pesetas in 1982. For the reasons discussed above, we do not consider the writing-off of equity a subsidy. Instead, any benefit arises at the time of the equity investment. In this instance, we are countervailing equity investments made in 1978, 1980, and 1981. Therefore, to the extent that the equity being written-off in 1982 was received in 1978, 1980, and 1981, we are already capturing the benefit to AHM. Therefore, we preliminarily determine this program to be not countervailable.
D. Programs Preliminarily Determined Not To Be Used
We preliminarily determine that the following programs were not used by manufacturers, producers, or exporters in Spain of certain steel products:
1. Long-Term Loans Provided Under Decree 669/74
2. BCI Exceptional Credits (Two Repaid Loans)
3. Long-Term Investment Loans Under R.D. 878/81
4. Loan Guarantees Provided Between 1979-1982
5. Payment for Capacity Closures
6. Tax Exemptions Under Royal Decree 612/82
a. ECSC Article 54 Interest Rebates
b. Interest Rebates on ECSC Conversion Loans Under Article 56
d. European Investment Bank Loans and Loan Guarantees
e. New Community Instruction Loans
9. Export Grants From the Basque Government
10. Deferral of Social Security and Other Tax Obligations Owed to the Basque Government
11. Deferral of Social Security and Other Tax Obligations Owed to the Navarre Government
E. Programs Which the Department is Not Investigating
The following programs were included in these investigations at the *57806 time of the initiation. However, these programs only relate to AHV. As discussed above, AHV is not a company under investigation and, therefore, responses to the questions regarding these programs were not required.
1. Participative Credits for AHV Under 1984 Council of Ministers Meeting
2. Private Sector Loans to AHV Under Law 60/78
3. BCI Purchase of AHV Promissory Notes
4. Loan Guarantees for AHV Under R.D. 878/81
5. Grant to Compensate for Delay in Issuance of Bonds for AHV
6. Forgiveness of AHV Tax Penalties
7. Type A Bonds Authorized by the 1987 Government Delegate Commission for Economic Affairs for AHV
8. Type B Bonds Authorized by the 1987 Government Delegate Commission for Economic Affairs for AHV
Verification
In accordance with section 776(b) of the Act, we will verify the information used in making our final determinations.
Suspension of Liquidation
In accordance with section 703(d) of the Act, we are directing the U.S. Customs Service to suspend liquidation of all entries of certain steel products from Spain, which are entered or withdrawn from warehouse, for consumption on or after the date of the publication of this notice in the Federal Register and to require a cash deposit or bond for such entries of the merchandise in the amounts indicated below. This suspension will remain in effect until further notice.
Certain Cold-Rolled Carbon Steel Flat Products
Country-Wide Ad Valorem Rate 56.30 Percent
Certain Cut-To-Length Carbon Steel Plate
Country-Wide Ad Valorem Rate 45.58 Percent
ITC Notification
In accordance with section 703(f) of the Act, we will notify the ITC of our determinations and alignments. In addition, we are making available to the ITC all nonprivileged and nonproprietary information relating to this investigation. We will allow the ITC access to all privileged and business proprietary information in our files, provided the ITC confirms that it will not disclose such information, either publicly or under an administrative protective order, without the written consent of the Deputy Assistant Secretary for Investigations, Import Administration.
If our final determinations are affirmative, the ITC will make its final determinations within 45 days after the Department makes its final determinations.
Public Comment
Interested parties who wish to request or participate in a hearing must submit a written request within ten days of the publication of this notice in the Federal Register to the Assistant Secretary for Import Administration, U.S. Department of Commerce, room B-099, 14th Street and Constitution Avenue, NW., Washington, DC 20230. Requests should contain: (1) The party's name, address, and telephone number; (2) the number of participants; (3) the reason for attending; and (4) a list of the issues to be discussed. Since investigations involving the same classes or kinds of merchandise subject to these investigations from various other countries are currently being conducted, we will publish a briefing and hearing schedule in the Federal Register after receipt of all requests for hearings in these investigations.
These determinations and alignments are published pursuant to section 703(f) and 705(d) of the Act (19 U.S.C. 1671b(f)).
Dated: November 27, 1992.
Alan M. Dunn,
Assistant Secretary for Import Administration.
Appendix 1
Scope of the Investigations
The products covered by these investigations, certain steel products, constitute the following two separate "classes or kinds" of merchandise, as outlined below.
Although the Harmonized Tariff Schedule of the United States (HTS) subheadings are provided for convenience and customs purposes, our written descriptions of the scope of these proceedings are dispositive.
We have received comments from petitioners regarding the types of coil included in the scopes of the certain cold-rolled carbon steel products investigation. We are considering these comments and will address this issue at the final determination.
Certain Cold-Rolled Carbon Steel Flat Products
These products include cold-rolled (cold-reduced) carbon steel flat products, of solid rectangular (other than square) cross section, of rectangular shape, neither clad, plated nor coated with metal, whether or not painted, varnished or coated with plastics or other nonmetallic substances, in coils, or in straight lengths which, if of a thickness less than 4.75 millimeters, are of a width measuring at least 10 times the thickness or if of a thickness of 4.75 millimeters or more are of a width which exceeds 150 millimeters and measures at least twice the thickness, as currently classifiable in the HTS under item numbers 7209.11.0000, 7209.12.0030, 7209.12.0090, 7209.13.0030, 7209.13.0090, 7209.14.0030, 7209.14.0090, 7209.21.0000, 7209.22.0000, 7209.23.0000, 7209.24.1000, 7209.24.5000, 7209.31.0000, 7209.32.0000, 7209.33.0000, 7209.34.0000, 7209.41.0000, 7209.42.0000, 7209.43.0000, 7209.44.0000, 7209.90.0000, 7210.70.3000, 7210.90.9000, 7211.30.1030, 7211.30.1090, 7211.30.3000, 7211.30.5000, 7211.41.1000, 7211.41.3030, 7211.41.3090, 7211.41.5000, 7211.41.7030, 7211.41.7060, 7211.41.7090, 7211.49.1030, 7211.49.1090, 7211.49.3000, 7211.49.5030, 7211.49.5060, 7211.49.5090, 7211.90.0000, 7212.40.1000, 7212.40.5000, and 7212.50.0000.
Certain Cut-To-Length Carbon Steel Plate
These products include hot-rolled carbon steel universal mill plates (i.e., flat-rolled products rolled on four faces or in a closed box pass, of a width exceeding 150 millimeters but not exceeding 1,250 millimeters and of a thickness of not less than 4 millimeters, not in coils and without patterns in relief) of solid rectangular (other than square) cross section, of rectangular shape, neither clad, plated nor coated with metal, whether or not painted, varnished, or coated with plastics or other nonmetallic substances; and certain hot-rolled carbon steel flat products in straight lengths, of solid rectangular (other than square) cross section, of rectangular shape, hot rolled, neither clad, plated, nor coated with metal, whether or not painted, varnished, or coated with plastics or other nonmetallic substances, 4.75 millimeters or more in thickness and of a width which exceeds 150 millimeters and measures at least twice the thickness, as currently classifiable in the HTS under item numbers 7208.31.0000, 7208.32.0000, 7208.33.1000, 7208.33.5000, 7208.41.0000, 7208.42.0000, 7208.43.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.11.0000, 7211.12.0000, 7211.21.0000, 7211.22.0045, 7211.90.0000, 7212.40.1000, 7212.40.5000, and 7212.50.0000.
(FR Doc. 92-29508 Filed 12-4-92; 8:45 am)