66 FR 50410, October 3, 2001 C-549-818 Investigation Public Document III/VII: DM, SC, JB, SL September 21, 2001 MEMORANDUM TO: Faryar Shirzad Assistant Secretary for Import Administration FROM: Joseph A. Spetrini Deputy Assistant Secretary for AD/CVD Enforcement III SUBJECT: Issues and Decision Memorandum in the Final Affirmative Countervailing Duty Determination: Certain Hot-Rolled Carbon Steel Flat Products from Thailand Summary We have analyzed the comments submitted by interested parties for the final determination of the above-mentioned countervailing duty (CVD) investigation for the period January 1 through December 31, 2001, the period of investigation (POI). Our review of the comments has led us to change our preliminary determination. Below are the "Subsidies Valuation Information," "Programs Determined to Confer Subsidies," "Programs Determined Not to Confer Subsidies," "Programs Determined to be Not Used," "Programs Determined Not to Exist," "Total Ad Valorem Rate," and "Recommendation" sections of this memorandum that describe the decisions made in this investigation with respect to Sahaviriya Steel Industries Public Company Limited (SSI), the producer/exporter of subject merchandise. Also below is the "Analysis of Comments" section in which we discuss the issues raised by petitioners and respondents. We recommend that you approve the positions we have developed in this memorandum. I. Subsidies Valuation Information A. Allocation Period Section 351.524(d)(2) of the Department's regulations states that we will presume the allocation period for non-recurring subsidies to be the average useful life (AUL) of renewable physical assets for the industry concerned, as listed in the Internal Revenue Service's (IRS) 1977 Class Life Asset Depreciation Range System, as updated by the Department of Treasury. The presumption will apply unless a party claims and establishes that these tables do not reasonably reflect the AUL of the renewable physical assets for the company or industry under investigation, and the party can establish that the difference between the company-specific or country-wide AUL for the industry under investigation and the AUL from the IRS tables is significant. As explained in the preliminary determination, the Department used an allocation period of 15 years, which is the AUL listed in the IRS tables for the steel industry. See Notice of Preliminary Affirmative Countervailing Duty Determination and Alignment With Final Antidumping Duty Determinations: Certain Hot-Rolled Carbon Steel Flat Products From Thailand, 66 FR 20251, 20253 (April 20, 2001) (Preliminary Determination). No party provided comments. For the reasons set forth in the preliminary determination, we are therefore using the 15-year AUL as reported in the IRS tables to allocate any non-recurring subsidies under investigation which were provided directly to SSI. B. Discount Rates Both SSI and its subsidiary, Prachuab Port Company (PPC) received exemptions from import duties on the importation of machinery (under IPA Section 28), which we determined to provide non-recurring benefits. See Duty Exemptions on Imports of Machinery Under IPA Section 28 section below. SSI received IPA Section 28 exemptions in the years 1992 through 1997 and PPC received IPA Section 28 benefits in 1994 through 1996. Section 351.524(d)(3) of the regulations directs us regarding the selection of a discount rate for the purposes of allocating non-recurring benefits over time. The regulations provide several options in order of preference. The first among these is the cost of long-term fixed-rate loans of the firm in question, excluding any loans which have been determined to be countervailable, for each year in which non-recurring subsidies have been received. However, SSI and PPC did not take out any long-term fixed-rate loans. We verified both SSI's and PPC's calculated annual average cost of long-term loans. SSI has provided information for the years 1994 through 1997; PPC for the years 1993 through 1997. Since we are not investigating the countervailability of SSI's or PPC's loans during this period, there is no reason to seek another source of appropriate discount rate information. However, for the years 1992 and 1993, during which SSI received IPA Section 28 benefits, and during which SSI took out no long-term loans, we calculated the interest rates in the following manner: we first subtracted the Minimum Lending Rate (MLR) from SSI's cost of long-term loans for each year in which SSI received Section 28 benefits and for which SSI reported long-term loan information (1994 through 1997). We averaged the resulting spreads and added this average spread to the MLRs for 1992 and 1993. We initiated an investigation of whether SSI was creditworthy for the years 1997 through 1999. However, we have not found benefits granted in those years that are allocable to the POI, under any of the non-recurring subsidy programs under investigation. See Duty Exemptions on Imports of Machinery Under IPA Section 28 section below. Therefore, we need not reach the issue of SSI's creditworthiness in the years 1997 through 1999. Furthermore, we declined to initiate an investigation of SSI's creditworthiness for 1996. Therefore, there is no basis for adjusting the discount rates to include an uncreditworthiness risk premium in any of the relevant years. Calculation of Ad Valorem Subsidy Rates In the preliminary determination, we found that SSI and PPC are cross- owned; however, a finding of cross-ownership does not mean that the subsidies provided directly to one company are attributable to the combined sales of both companies, unless both companies produce and sell subject merchandise (see section 351.525(b)(6)(ii) of the regulations). We verified that SSI is the producer and exporter of subject merchandise, and that PPC is a non-producing subsidiary of SSI. Both SSI and PPC received benefits under some of the programs which we are finding countervailable. As discussed in the regulations, the general rule with respect to attribution is that a subsidy will be attributable to the products produced by the corporation that received the subsidy (see section 351.525(b)(6)(i)). Thus, if SSI directly received a subsidy, the benefit from that subsidy is attributable to the products produced and sold by SSI, assuming no other tying rules are present (e.g., it is not an export subsidy, or a subsidy tied to subject merchandise). Where there is a non-producing subsidiary that receives subsidies, and if those subsidies are untied, the benefits from those subsidies are attributable to the consolidated sales of the corporate group with which the non-producing subsidiary is consolidated (see Countervailing Duties; Final Rule, 63 FR 65348, 65393 (November 25, 1998) (Preamble to the regulations concerning non-producing subsidiaries)(Preamble)). As discussed in the Preamble, the situation of a non-producing subsidiary is analogous to the situation of a holding or parent company. Where the government provides a subsidy to a non-producing subsidiary, and there are no conditions on the use of that subsidy, the subsidy would be attributed to the ". . . consolidated sales of the corporate group that includes the non-producing subsidiary." (See Preamble, at 65402, see also, section 351.525(b)(6)(iii).) As a non-producing subsidiary, PPC's subsidies are appropriately calculated according to the method set forth in the regulations. Thus, to calculate the ad valorem subsidy rate in this final determination, we divided the benefit from each subsidy provided directly to SSI by the appropriate sales value (either export or total) for products sold by SSI. For untied subsidies provided to PPC, we divided the benefit by the consolidated sales of the SSI corporate group. Where SSI and PPC both received subsidies under the same program, the two calculated ad valorem rates were added together to determine the subsidy rate which is attributable to subject merchandise from that particular program. II. Programs Determined to Confer Subsidies A. Incentives Under the Investment Promotion Act The Investment Promotion Act of 1977 (IPA) is administered by the Board of Investment (BOI) and is designed to provide investors with tax exemptions, duty exemptions and reductions, and other types of assistance, such as exceptions to immigration laws when hiring foreign technicians. In order to receive IPA benefits, a company must apply to the BOI for a Certificate of Promotion (license), which specifies goods to be produced, production and export expectations, and benefits requested. The licenses are granted at the discretion of the BOI and are periodically amended or reissued to change or extend benefits or requirements. Each IPA benefit for which a company is eligible must be specifically stated in the license. Companies may approach the BOI on their own initiative and apply for IPA benefits. Such benefits are provided only after a company is evaluated and approved by the BOI. In addition, the BOI may actively promote projects in particular industry sectors by publishing announcements indicating the availability of promotion privileges for projects in those sectors. There is also a formal application process for those responding to such a BOI announcement, and approval will only be granted to applicants meeting the BOI's criteria (as detailed in the announcement). It was through this type of BOI announcement that promotion privileges were offered to the hot-rolled steel industry. Thailand had been considering the establishment of a private domestic steel industry since the 1960's, but the lack of natural resources and limited domestic demand made the creation of such an industry unviable. By the late 1980's, however, developing market factors in Thailand made a flat-rolled steel industry feasible. Domestic demand in Thailand had increased significantly and was, in the BOI's view, sufficient to support a domestic flat-rolled steel industry. To promote the development of the industry, the BOI issued, on August 2, 1988, Announcement of the Office of the Board of Investment No. Por. 1/1988, Re: Promotion of Steel Sheet Production. This announcement requested applications from investors interested in developing a steel facility in Thailand. In the application, each applicant was asked to identify the BOI privileges it wanted. Six applications were submitted. SSI was selected from among these applicants because they met all of the BOI requirements (e.g., domestic ownership requirement of at least 60 percent), and because the SSI proposal was far more developed than the other proposals. See discussion of BOI subcommittee recommendation to the Board of Investment in RTG Verification Report, at page 5, and BOI Exhibit 2. On November 8, 1989, the BOI approved a package of benefits for SSI. After the BOI gave their approval, the Ministry of Industry (MOI) issued SSI a factory license. The MOI then announced on November 24, 1989, in Ministry of Industry Announcement, Re: Policy on Steel Sheet Industry, that it would "suspend its consideration for the establishment or the expansion of factories producing hot-rolled, cold-rolled, and surface treatment sheet (plate mill excluded), for a period of ten years." When determining whether a program is countervailable, we must examine whether it is an export subsidy or whether it provides benefits to a specific enterprise, industry, or group thereof, either in law (de jure specificity) or in fact (de facto specificity). See section 771(5A) of the Act. There are no explicit export conditions in the general legislation of the IPA, although the introduction does discuss exports as one of several factors that may be considered. Some specific sections of the IPA do contain explicit export requirements, however. At verification, we reviewed in detail SSI's application as well as internal documentation on BOI's selection and approval process. The general application contains a section entitled "product export plan," which SSI completed. SSI also requested privileges under specific sections of the IPA that contained export requirements, but its application requested assistance under every possible section of the IPA. Our review of the internal report of the BOI subcommittee which recommended SSI for promotion did not reveal any analysis or condition pertaining to, or contingent upon, anticipated or actual exportation. Moreover, in the initial approval, SSI was not approved for receipt of any assistance under those discrete sections of the IPA that contained an export requirement or condition. Because receipt of the initial benefits package was not contingent upon export performance, we determine that the assistance approved in the initial package does not constitute a de jure or de facto export subsidy. Subsequent to the initial approval, SSI again requested assistance under sections of the IPA which contained export requirements. The BOI approved the request for duty exemptions under Section 36(1). Our analysis of Section 36(1) is set forth in detail below in the section entitled Duty Exemptions on Imports of Raw and Essential Materials Under IPA Section 36(1). Because we have determined that the BOI assistance to SSI does not constitute an export subsidy, we must examine whether it constitutes a domestic subsidy. There is no element of the law explicitly limiting eligibility for IPA program benefits from the BOI, to an enterprise, industry, or group thereof. Thus, this program is not de jure specific, and we must analyze whether the program meets the de facto criteria defined under section 771(5A)(D)(iii) of the Act. The BOI solicited applicants for the creation of a steel-sheet industry. A package of IPA benefits was tailored to meet the winning applicant's requirements, and the MOI announced it would not issue a license to any other companies in the hot-rolled steel industry for a period of ten years. We find that these factors (a special BOI announcement to promote a steel-sheet industry, a tailored package of benefits, and a prohibition against domestic competition), taken together, demonstrate that SSI's IPA benefits are de facto specific to an enterprise or industry within the meaning of section 771(5A)(D)(iii)(I) of the Act. In addition to IPA benefits to SSI, petitioners alleged that PPC, a subsidiary of SSI, also received a package of benefits under IPA. PPC, which owns and operates the port facility where SSI is located, was established in 1991, after SSI was established and approved for its package of IPA benefits. Although the BOI did not expressly solicit applicants to establish a port facility, the fact that PPC was created after SSI to develop a port facility in the same location as SSI's plant; that it is a subsidiary of SSI; and, that it services SSI's import and export needs, leads us to conclude that the BOI's approval of a package of incentives to PPC was part of its effort to develop a hot-rolled steel industry, and therefore, that PPC's package of incentives is specific in accordance with section 771(5A)(D)(iii)(I) of the Act, because the actual recipients are limited in number. Because the packages of benefits were composed of different types of incentives under different sections of the IPA, we are separately analyzing the issues of financial contribution and benefit under each relevant section. 1. Duty Exemptions on Imports of Machinery Under IPA Section 28 Under IPA Section 28, an approved company is exempted from import duties and VAT on imports of machinery (VAT exemptions under IPA Section 28 are discussed separately below in the section titled Programs Determined to be Not Countervailable. Import duty exemptions provide a financial contribution under section 771(5)(D)(ii) of the Act in the form of foregone revenue that is otherwise due to the RTG. The benefit is the amount of the revenue foregone by the RTG. Although import duty exemptions are identified as recurring in the illustrative list of recurring benefits in section 351.524(c)(1) of the regulations, petitioners alleged that, since these import duty exemptions were for the purchase of capital equipment, they should be treated as non- recurring in accordance with section 351.524(c)(2)(iii) of the regulations. In the Preamble to our regulations, we stated that if a government provides an import duty exemption tied to major equipment purchases, it may be reasonable to conclude that, because these duty exemptions are tied to capital assets, the benefits from such duty exemptions should be considered non-recurring. Because the benefit from the exemption of import duties under IPA Section 28 is tied to the capital assets of SSI and PPC, in the preliminary determination, we treated Section 28 benefits as non-recurring. See Preliminary Determination. After the preliminary determination, SSI provided information indicating that some of the imports on which Section 28 exemptions were granted were not tied to SSI's capital structure, and urged the Department to exclude those import duty exemptions from our calculations of the benefit. In considering whether such an adjustment to our calculations is warranted and whether we should treat a subsidy traditionally considered to be recurring as non-recurring, or vice-versa, we are guided by sections 351.524(b) and (c) of our regulations. The regulations direct us to consider (i) whether the subsidy is exceptional in the sense that the recipient cannot expect to receive additional subsidies from the same program on an ongoing basis from year to year, (ii) whether the subsidy required or received the government's express authorization or approval (i.e., receipt of benefits is not automatic); or (iii) whether the subsidy was provided for or tied to the capital assets of the firm. There can be no question that machinery is a capital asset. Thus, duty exemptions on machinery are tied to the capital assets of the firm. While SSI's license authorizes the company to receive duty exemptions on machinery, each import for which SSI received duty exemptions under Section 28, required express government approval. At verification we reviewed the procedures established for receiving these duty exemptions. SSI had to write a letter to the BOI, in advance of the entry of the equipment, and include the supplier invoices. The BOI examined the supplier invoices to determine whether the listed equipment was consistent with the conditions of SSI's promotion certificate and whether the particular items were not domestically manufactured. Only when the BOI was satisfied that the goods being imported met those criteria did the BOI issue a letter to Customs authorizing duty exemptions for that particular importation. RTG Verification Report at page 7. There were instances when duty exemptions were not authorized. Because duty exemptions on machinery are tied to capital assets and because each importation required express approval from the BOI, we find that, consistent with 351.524(c)(ii), it is appropriate to treat all Section 28 exemptions as non-recurring benefits. To measure the benefit allocable to the POI, we first conducted the "0.5 percent test" for the Section 28 import duty exemptions received by SSI and PPC. See section 351.524(b)(2) of the Department's regulations. For each year in which there were Section 28 import duty exemptions, we summed the exemptions provided in that year and divided that sum by the relevant total sales for that year. For PPC, none of the exemptions exceeded the "0.5 percent test." For SSI, Section 28 import duty exemptions for each year, except 1997, exceeded the "0.5 percent test," and therefore should be allocated over time. For those years, we allocated the annual total exemptions, in accordance with section 351.524(d) of the Department's regulations, to determine the Section 28 benefits attributable to the POI (See Allocation Period and Discount Rates sections above). We summed the portions of each year's benefits attributable to the POI and divided that amount by SSI's total sales during the POI to determine a countervailable subsidy of 0.83 percent ad valorem. 2. Duty Exemptions on Imports of Raw and Essential Materials Under IPA Section 30 IPA Section 30 allows companies reductions of import duties on raw and essential materials that are consumed in production. Under Section 30, SSI was originally approved for a reduction of duties on imported raw and essential materials; the rate of duty reduction was later reduced, and this rate was in effect during the POI. We verified that, during the POI, SSI only used Section 30 for imports of steel slab. Pursuant to section 771(5)(D)(ii) of the Act, Section 30 provides a financial contribution in the form of revenue forgone by the RTG, i.e., the duties which would otherwise be assessed on the imported raw and essential materials. There is a benefit to SSI in the amount of the duties they would otherwise have to pay. According to SSI, the duty rate on steel slab was one percent. The tariff schedule provided by the RTG in the questionnaire responses shows that the "normal rate" of duties on steel slab imports is ten percent, while one percent is the "discount rate." At verification, the RTG explained the difference between the "normal rate" and the "discount rate." The "normal rate" is the ceiling rate necessary to meet Thailand's obligations under the WTO, and the "discount rate" is the rate that is actually paid by importers. See RTG Verification Report, at page 4, and Ministry of Finance (MOF) Exhibit 1. They further explained that in the case where a raw material is not being domestically produced, as with slab, the MOF usually will reduce the tariff rate for that product to one percent. In the Thai tariff schedule in effect during the POI, we found the rate of duty for steel slab is one percent. Because there is a government policy to reduce the duty rates on raw and essential materials that are not produced in Thailand and because this policy appears to be uniformly applied, we find it appropriate to use a one percent duty rate to calculate the benefit from the Section 30 import duty reductions. To measure the benefit, we have calculated the difference between the duties SSI actually paid and the duties that they should have paid absent the Section 30 reduction. We divided that difference by the value of SSI's total sales during the POI and we determine the countervailable subsidy to be 0.07 percent ad valorem. 3. Duty Exemptions on Imports of Raw and Essential Materials Under IPA Section 36(1) SSI was not approved for privileges under Section 36 in its initial package of IPA benefits. SSI, however, did eventually reapply for Section 36 privileges and was approved for benefits under Sections 36(1), 36(2), and 36(4) in 1997. Sections 36(2) and 36(4) are addressed below in the Programs Determined To Be Not Used section of this memorandum. Under Section 36 of the Investment Promotion Act of 1977, and of the 1991 amendment to the Investment Promotion Act, it states: "{S}ection 36: For the purpose of promoting exports, the Board may grant the promoted person one or more of the special rights and benefits as follows:. . . ." Since the express purpose of Section 36 is to promote exports, we find that Section 36, and the privileges provided under each subsection of Section 36, constitute a de jure export subsidy in accordance with section 771(5A)(B) of the Act. Furthermore, a financial contribution is provided by Section 36(1) in the form of revenue foregone by the RTG (i.e., the duties which would otherwise be assessed on imported raw and essential materials) (see section 771(5)(D)(ii) of the Act.) Section 36(1) exempts companies from duties on imports of raw and essential materials that are incorporated into goods for export. The RTG reported that Section 36(1) essentially operates as a duty drawback scheme and as such, is not countervailable, because the exemptions on imported raw and essential materials can only be received for imported goods consumed in the production of exports. SSI reported that it only received exemptions under Section 36(1) on its imports of raw materials that were consumed in the production of merchandise for export. In our preliminary determination, we stated that we needed additional information in order to determine whether this program meets the standards for non-countervailability set forth in section 351.519(a)(4) of the regulations. We indicated that we needed to confirm that the Thai Customs Authority has in place a system for Section 36(1) to confirm which inputs are consumed in the production of exported products, that there are provisions related to the normal allowance for waste, that the system is effective for the purposes intended, and it is based on generally accepted commercial practices. Based on additional information collected since the preliminary determination, and at verification, we have now analyzed whether Section 36(1) meets the standards set forth in section 351.519 of our regulations for non-countervailability of remission or drawback of import charges upon export. As stated in section 351.519(a) of the regulations, "{t}he term 'remission or drawback' includes full or partial exemptions and deferrals of import charges"; thus, the Section 36(1) duty exemptions on imports of raw materials by SSI are appropriately analyzed under this section of the regulations. Under section 351.519(a)(1)(ii) of the regulations, in the case of exemptions of import charges upon export, ". . . a benefit exists to the extent that the exemption extends to inputs that are not consumed in the production of the exported product, making normal allowance for waste . . .." Under section 351.519(a)(4)(i) of the regulations, the entire amount of such exemptions will confer a benefit, unless the Department determines that "{t}he government in question has in place and applies a system or procedure to confirm which inputs are consumed in the production of the exported products and in what amounts, and the system or procedure is reasonable, effective for the purposes intended, and is based on generally accepted commercial practices in the country of export." At verification, we examined whether the RTG has a system in place to confirm which inputs are consumed in the production of the exported products and in what amounts, and whether the system or procedure is reasonable and effective for the purposes intended. This included an examination of the RTG's system for determining a normal allowance for waste, which is a key part of determining whether the exemption is countervailable. At verification, the Department explored in detail the system in place to monitor and track the consumption and/or re-export of goods imported under Section 36(1). See RTG Verification Report at pages 9- 11 and SSI Verification Report at page 8. We found that the system which the BOI uses to monitor raw material imports is set up to match exports of finished products against imports of raw materials. However, to ". . . confirm which inputs are consumed in the production of the exported products and in what amounts" (19 CFR 351.519(a)(4)(i), emphasis added), it is necessary to examine whether the BOI has in place a system for appropriately determining the normal allowance for waste. See 19 CFR 351.519(a)(1)(ii). We have examined in detail the allowance for waste which the BOI uses in administering this program. As discussed in the verification report, companies using Sections 30 and 36(1) are required to submit for the BOI's approval a calculated yield factor. This yield factor is analyzed annually by the BOI; BOI officials conduct site visits to monitor a company's compliance with the conditions of their promotion certificate, and to analyze any proposed yield factors. At verification, we reviewed documents relating to the proposal and approval of SSI's yield factor. See RTG Verification Report at pages 9-10 and BOI Exhibit 5. Companies receiving benefits under Section 30 of the IPA are required to receive approval for a yield factor which is then used to ensure that, in any year, a company does not import raw materials in excess of its annual production capacity. However, the yield factor approved for the purposes of Section 36(1) must fulfill two purposes: to determine the maximum volume of raw material the company is allowed to import for re-export; and to calculate the volume of raw material, including a normal allowance for waste, incorporated into each reported export. The yield factor which the BOI used for administering SSI's import duty reductions under Section 30 is the same yield factor applied to Section 36(1) imports. SSI reported that the yield factor approved by BOI reflects a normal allowance for waste. See SSI's May 31, 2001 Response, page 7. In examining this issue at verification, we identified two other sources of information that addressed SSI's yield factors. The first was from an independent financial review, which showed a yield factor significantly lower than that approved by the BOI. The second source, which was provided at the Department's request, was the yield and waste information reported in the companion antidumping investigation. That information too showed a yield factor below the yield factor approved by the BOI. SSI stated that its exported products undergo additional processes and, consequently, exported products generate more waste. See SSI Verification Report, page 10. As such, according to SSI officials, the yield factors reported in the financial review and in the AD investigation were not reflective of the yield on exported products since those figures were based on total production, not just production for export. Even if that were the case (which the record does not clearly support), then the BOI should not have relied on the yield formula it developed for SSI's total production under Section 30 to determine the yield factor (which should reflect the normal allowance for waste) on exported products under Section 36(1). Moreover, the yield factor approved by the BOI as representative of the normal allowance for waste, does not include any provision for recoverable and saleable scrap. Waste is defined as ". . . shrinkage, evaporation, and so on." See Seigal, Joel G., Jae K. Shim, Dictionary of Accounting Terms, Second Edition. New York, Barron's Educational Series, Inc., 1995. By the very definition of the term "waste," a company is unable to recover and use any waste incurred during the production process. Thus, recoverable and saleable scrap cannot be considered waste, as it does have value and can be sold. In fact, SSI does sell its scrap. In its yield factor formula, which, according to the questionnaire responses, is supposed to reflect the normal allowance for waste, the BOI did not take recoverable and saleable scrap into account when determining which inputs are consumed in the production of the exported products and in what amounts. When recoverable scrap is factored in, the gap between the BOI approved yield factor and SSI's actual experience widens even further. While there is no requirement or expectation, in administering this type of program, that a yield factor used to determine the normal allowance for waste precisely reflect a company's actual experience during a given period, there must be a reasonable correlation. In this case, the BOI uses the company's actual experience to determine the yield factor which it claims represents the normal allowance for waste. Therefore, the Department must analyze how that yield factor was calculated. The evidence on the record indicates that the BOI did not isolate and examine what was consumed in the production of the exported products and that it did not consider in its analysis whether any of the scrap was recoverable and saleable. We consider both of these elements to be essential in determining a normal allowance for waste. We therefore determine that the allowance for waste which the BOI uses in administering SSI's Section 36(1) duty exemptions is not "normal." Consequently, the RTG's system for determining which inputs are consumed in the exported product, and in what amounts, is not reasonable or effective for the purposes intended, and the entire amount of SSI's import duty exemptions under Section 36(1) provides a countervailable benefit, consistent with section 351.519(a)(4)(i) of the Department's regulations. To calculate the benefit, we summed the duties otherwise due on SSI's imports of slab under Section 36(1) during the POI using the one percent duty rate discussed above in Duty Exemptions on Imports of Raw and Essential Materials Under IPA Section 30. We divided this sum by the value of SSI's exports, to determine a countervailable subsidy of 0.58 percent ad valorem. 4. Additional Tax Deductions Under IPA Section 35(3) IPA Section 35 provides various income tax deductions and exemptions for promoted firms. SSI, through Section 35(3), claimed benefits under this program on the tax return filed during the POI. IPA Section 35(3) allows promoted companies to deduct double the cost of transportation, electricity, and water for ten years after the promoted company first derives income. Income tax deductions provide a financial contribution under section 771(5)(D)(ii) of the Act in the form of foregone revenue that is otherwise due to the RTG. The benefit is the amount of the revenue foregone by the RTG. Under the provisions of section 351.509(a)(1) of the Department's regulations, we determine that SSI received a benefit under IPA Section 35(3) during the POI. To measure the benefit, we assumed, consistent with Final Affirmative Countervailing Duty Determination and Countervailing Duty Order; Extruded Rubber Thread from Malaysia, 57 FR 38475 (August 25, 1992), that SSI first used its pool of countervailable tax deductions under IPA Section 35(3) , earned in 1998, to reduce its tax liability on its income tax return for 1998, filed during the POI. See Id., Department's Position at Comment 13; also Extruded Rubber Thread From Malaysia; Final Results of Countervailing Duty Administrative Review, 60 FR 17516 (April 6, 1995), Department's Position at Comment 7. We then determined the extent to which that countervailable tax deduction reduced SSI's taxable income. We calculated the benefit by multiplying the amount of taxable income which SSI was able to offset with its Section 35(3) tax deduction by the income tax rate. We then divided this benefit by SSI's total sales during the POI. We determine the countervailable subsidy to be 0.13 percent ad valorem. B. Provision of Electricity for Less than Adequate Remuneration The RTG owns and controls most of the generation, transmission and distribution of electricity in Thailand. Rate-setting policy is developed by the National Energy Policy Council (NEPC) and is implemented by the National Energy Policy Office (NEPO) through the three RTG authorities responsible for generation, transmission and distribution. The authority responsible for generation and transmission is the Electricity Generating Authority of Thailand (EGAT) and the two entities responsible for the distribution are the Metropolitan Electricity Authority (MEA), which serves Bangkok and the surrounding areas, and the Provincial Electricity Authority (PEA), which serves the remainder of the country. The RTG maintains a "uniform national tariff policy" which provides that consumers in the same customer category will pay the same rate regardless of whether they are in MEA's distribution area or PEA's distribution area. Other than EGAT, which supplies approximately 73 percent of the electricity used in Thailand, there are Independent Power Providers (IPP) and Small Power Providers (SPP). IPPs generate approximately 15.4 percent of Thailand's electricity, and SPPs generate approximately 9 percent. Thailand also imports approximately 2.4 percent of its electricity from Laos and Malaysia. IPPs sell electricity only to EGAT. SPPs sell electricity to EGAT, as well as to end users in industrial estates. IPPs and SPPs are privately owned. The SPPs that sell to end users are prohibited from selling electricity at rates higher than those charged by the agencies owned by the RTG (see, Concession of Electricity Business, which was issued by the Ministry of Interior and states that the rates charged by SPPs shall not exceed those charged by PEA). We verified that PEA's costs of delivery are higher than MEA's; however, the RTG requires that there can be no difference in tariffs charged by PEA and MEA regardless of cost differences. Therefore, in order to implement the uniform tariff policy, EGAT provided a discount to PEA and charged MEA a surcharge on the bulk supply tariff rate that EGAT charges them for their electricity purchases. According to the RTG National Energy Policy Office Recommendations to Cabinet Report (the NEPO Report), dated September 26, 2000, the original objectives of the RTG's uniform tariff policy, which has been in place since 1991, were to establish a tariff that reflects the economic costs and secures the financial status of the three power utilities, and to promote efficiency of electricity usage and equity for all power consumer categories. The RTG's tariff policy consists of the base tariff, plus an automatic adjustment mechanism which ensures that the electricity charges cover fluctuations in marginal costs. There are four criteria the RTG uses in determining the electricity tariff structure: 1) marginal costs; 2) load pattern; 3) revenue requirements of the power utilities and financial criteria; and, 4) social criteria for the electricity tariff determination. The social criteria require that uniform tariffs be applied across the country for each customer category. Also, the social criteria call for subsidization of small, residential customers with low usage. Finally, the social criteria maintain that the structure of the electricity tariffs for customer groups other than small residential customers should reflect marginal costs as closely as possible. According to the NEPO Report, prior to 1997, the electricity tariff was established on a flat-rate basis. Under this system, EGAT sold electricity at a lower rate to PEA than it did to MEA. This bulk supply tariff afforded an internal subsidy to PEA via the higher rates charged to MEA because the distribution cost for PEA was higher than for MEA. In November 1996, the NEPC approved a modification of the bulk supply tariff to go into effect in January 1997. This modification altered the bulk supply tariff from the initial flat rate to a time-of-use rate. The time-of-use rates were based on usage during peak and off-peak hours. The modification also created an internal subsidization of PEA in the form of a surcharge added to the bulk supply tariff EGAT charged to MEA and a deduction from the bulk supply tariff that EGAT charged PEA. The NEPC has altered the surcharge and deductions charged to PEA and MEA on three separate occasions thus far. On May 22, 1997, an adjustment was made so the surcharge and deduction would correspond with the former average bulk supply tariff. This change was retroactive to January 1997. On October 8, 1997, the surcharge and deduction were altered again as a result of the economic crisis in Thailand, and the changes were retroactive to July 1997. On March 30, 2000, the third alteration of the surcharge and deduction was authorized, retroactive to October 1998, in order to keep the power utilities in line with the financial criteria established when the electricity tariff structure was created. The retroactive application of the alteration authorization on March 30, 2000 was accomplished through a lump sum adjustment paid by MEA to PEA in 2001. The uniform national tariff charged by MEA and PEA varies only based on the category of consumer. The following are the categories of consumers: Residential; Small General Services; Medium and Large General Services, and Specific Business Services; Government Institutions and Non-Profit Organizations; and Agricultural Pumping Service. SSI is considered to be a Large General Services customer, and PPC is considered to be a Medium General Services customer. SSI and PPC purchased electricity during the POI only from PEA. In order to find a countervailable subsidy under the Act, the Department must determine that a financial contribution is provided (section 771(5)(D) of the Act), that there is a benefit to the recipient (section 771(5)(E) of the Act), and that the program is specific (section 771(5A) of the Act ). The government's provision of electricity constitutes a financial contribution because it is the provision of a good as defined in 771(5)(D)(iii). To determine whether there is a benefit from the provision of a good, the Act specifies that the Department must examine whether the good was provided for less than adequate remuneration. According to section 771(5)(E) of the Act, the adequacy of remuneration with respect to a government's provision of a good or service, " . . . shall be determined in relation to prevailing market conditions for the good or service being provided or the goods being purchased in the country which is subject to the investigation or review. Prevailing market conditions include price, quality, availability, marketability, transportation, and other conditions of purchase or sale." The regulations set forth, in order of preference, the benchmarks that we will examine in determining the adequacy of remuneration (see section 351.511). Under the regulations, the first preference is to compare the government price to a market-determined price stemming from actual transactions within the country. However, in the Preamble, we made clear that if the government provider constitutes a majority of the market, we would have to resort to other alternatives, including a comparison to world market prices, and if no such market- determined prices were available, we would examine whether the government applied market principles in setting its price. See 19 CFR § 351.511(a)(2)(iii) and Preamble, 63 FR 65378. In this case, the RTG provides electricity through EGAT, as the major generator of electricity, and then through MEA and PEA which are the major distributors of electricity. Of the two types of private electricity producers, IPPs sell their product to EGAT and not to end users, and SPPs are prohibited by the RTG from charging prices higher than PEA's. Regarding import prices or other types of market reference prices, although Thailand does import a small percentage of electricity (2.4 percent), this electricity is purchased by EGAT and sold through the same tariff structure that is described above. Additionally, any exports of electricity are sold through the government agencies. The private providers are prohibited from charging rates higher than PEA, which renders their prices inappropriate for purposes of our analysis. The other private purchases are imports made by EGAT and not end users, and those purchases are then distributed under the same tariff structure as the electricity generated by EGAT itself. Because the RTG essentially controls the entire domestic electricity market, there are no in-country, market- determined prices to end users that we can use for comparison to the price paid by SSI. In the Preamble to section 351.511, we discuss the fact that the nature of the provision of electricity would normally prevent us from examining a "world market price" (see Preamble, 63 FR at 65377-65378), and no evidence or argument has been placed on the record of this investigation concerning the application of a world market price. Therefore, based on the situation in Thailand, it becomes necessary to examine whether the price charged for electricity is consistent with market principles, in accordance with section 351.511(a)(2)(iii) of the regulations. As discussed in the Preamble, in assessing whether the government price was set in accordance with market principles, we will analyze such factors as the government's price-setting philosophy, costs (including rates of return sufficient to ensure future operations), or possible price discrimination. The Preamble further explains that these factors are not listed in any hierarchy, and that we may rely on one or more of these factors in any particular case. See Preamble, 63 FR at 65378. Under NEPO guidelines that were in effect during the POI, the tariff rate must be sufficient to cover each authority's marginal costs and specified financial criteria. The specified financial criteria are included as conditions of the World Bank loans to each of the three electricity authorities. The RTG has adopted these World Bank loan conditions as part of its own internal requirements in order to determine whether the tariff rate is sufficient (See RTG Verification Report at 15 and NEPO Report at 7). The three financial criteria are: (1) a minimum self-financing ratio; (2) a maximum debt to equity ratio; and (3) a minimum debt-service coverage ratio (the exact ratios are proprietary). On its face, a system that requires the tariff rate for electricity to be sufficient to cover both marginal costs and to meet specific financial criteria should meet the standard set forth in the Preamble to the regulations that the government's price be set in accordance with market principles (i.e., sufficient to cover costs and to ensure future operations). Under the RTG's own guidelines, the tariff rate is supposed to be sufficient for each of the three authorities to cover marginal costs and to meet these financial criteria. According to RTG officials at verification, the last time each of the authorities conducted an analysis of whether the tariff rate was sufficient to cover marginal costs and to meet the financial criteria was in October 2000, but when we requested to review the analyses that had been prepared by MEA and PEA, we were informed that copies had not been retained. See RTG Verification Report at 15. Therefore, at verification, we asked the RTG to prepare these analyses in order to demonstrate that PEA could meet the RTG's own requirements without the internal subsidy (i.e., the difference between the surcharge to MEA and the deduction to PEA). Although we gave officials several opportunities to demonstrate that the required financial criteria could be met by the tariff rate even without the internal subsidy, they were unable to demonstrate this. The Department requested these analyses at verification in order to verify the RTG's questionnaire response that the provision of electricity by PEA was provided for adequate remuneration. The record shows that the analyses that were requested at verification are the type of analyses that the electricity authorities are required to do under their own guidelines. The RTG's decision on the level of the internal subsidy that must be provided to PEA is rooted in an analysis of whether the tariff rate is sufficient to meet PEA's marginal costs and the specified financial criteria. See NEPO Report at 7. Because the RTG could not demonstrate that the required financial criteria was being met without the internal subsidy, and that the tariff rate charged by PEA was sufficient to cover marginal costs, we could not verify the RTG's questionnaire response that electricity is provided for adequate remuneration. Accordingly, pursuant to section 776(a)(2)(D) of the Act, we have determined that we must apply facts available in determining whether electricity has been provided by PEA for adequate remuneration. In applying the facts available, if the Department finds that the interested party has failed to cooperate to the best of its ability to comply with a request for information, the Department may use an inference that is adverse to the party in selecting from the facts otherwise available (see section 776(b) of the Act). While we recognize that the request for these analyses was made at verification, it was made in order to verify the RTG's questionnaire response that electricity is provided to PEA's users for adequate remuneration. Furthermore, the Department's verifiers requested that the RTG electricity officials prepare the very same types of analyses which they themselves must undertake to analyze whether the tariff rate is sufficient to meet marginal costs and the required financial criteria. Thus, we find that the RTG did not act to the best of its ability in complying with a request for information by the Department, and, accordingly, are applying adverse inferences, and determine that electricity was provided for less than adequate remuneration. In selecting from the facts available in determining the benefit, we consider that the amount of the internal subsidy (which is calculated on a per kilowatt-hour basis) most closely approximates what the increase in the tariff rate (also calculated on a per kilowatt-hour basis) would need to be in order for PEA to cover marginal costs and to meet the required financial criteria. This is the most appropriate basis for determining the benefit because a tariff rate which covers marginal costs and meets required financial criteria could be considered to be determined in accordance with market principles, which, in turn, is reflective of adequate remuneration. Since the amount of the internal subsidy is on the record and has been verified, we determine that the benefit, on a per kilowatt hour basis, is equal to the internal subsidy. We also find this provision of electricity to be specific in accordance with section 771(5A)(D)(iv) of the Act (see also The Statement of Administrative Action Accompanying the Uruguay Round Agreements Act (SAA), H.Doc. 103-316, Vol. 1 (1994) at 262) because it is limited to users who are located in a designated geographical region within Thailand (i.e., those customers outside the Bangkok metropolitan area). To calculate the subsidy, we first determined the difference, on a per kilowatt hour basis, between MEA's rate during the POI (bulk supply tariff plus surcharge) and PEA's rate during the POI (bulk supply tariff minus deduction) which comprises the total amount of the internal subsidy. We then multiplied that difference by the kilowatt hours purchased by SSI and PPC during the POI to determine the benefit. In the Preliminary Determination, we took into account the lump-sum adjustment to the surcharge and deduction that was made after the POI but retroactively applied. However, we now determine that making that adjustment was inappropriate because it was agreed to, and provided, well after the end of the POI. As such, it did not affect the actual rates paid during the POI. We then divided SSI's benefit by its sales during the POI, and divided PPC's benefit by the consolidated sales of the SSI corporate group (see Calculation of Ad Valorem Subsidy Rates section above), to determine an ad valorem subsidy of 0.77 percent. III. Programs Determined Not to Confer Subsidies A. SSI and PPC Debt Restructuring SSI and PPC each underwent comprehensive financial debt restructurings, beginning in 1998 and concluding during the POI, which resulted in all of their debts being restructured, and which included the conversion to equity of previously issued convertible debentures. We have investigated petitioners' allegations that SSI's and PPC's debt restructurings gave rise to countervailable benefits in light of SSI's and PPC's financial condition, and as a result of direct and/or indirect actions of the RTG. We have examined and analyzed information provided by the RTG and SSI with respect to the operation of the Thai financial sector and the RTG's role therein, including actions of the RTG in response to the financial crisis caused by the collapse of the baht, the RTG's role in corporate debt restructurings in general, and the corporate debt restructurings of SSI and PPC in particular, to determine whether the RTG played a role which would give rise to countervailable subsidies. 1. Collapse of the Baht and the Thai Economic Crisis In July 1997, the RTG floated the baht against other currencies, causing the baht to depreciate by as much as 56 percent against the U.S. dollar by the end of the year and resulting in the general contraction of the Thai economy. The Thai economy subsequently experienced massive failures both of companies and their creditors. The RTG implemented programs to prevent further bank failures and to get the economy back on its feet. These included implementing the August 14, 1998 Announcement for Comprehensive Financial Restructuring, the RTG's intervention in financial institutions unable to achieve sufficient recapitalization because of their large non- performing loan portfolios, and the injection of new capital into several banks. 2. Corporate Debt Restructuring Following the Baht's Collapse After the collapse of the baht, and as part of its broad effort at financial reforms, the RTG implemented plans to facilitate corporate debt restructurings. To do so, the RTG established the Corporate Debt Restructuring Advisory Committee (CDRAC) in 1998 to improve the financial standing and operation of Thailand's financial institutions by formulating policies that promote effective debt restructuring negotiations between the private sector and these financial institutions. See Exhibit 5 of the RTG's May 30, 2001 submission. The CDRAC is chaired by the Bank of Thailand (BOT) Governor, and its members are the Board of Trade of Thailand, the Federation of Thai Industries, the Thai Bankers' Association, the Association of Finance Companies, and the Foreign Bankers' Association. The CDRAC framework (the so-called "Bangkok Approach") is set forth in the August 25, 1998 agreement among CDRAC members. The record indicates that many, but not all, major corporate debt restructurings were undertaken within the context of the framework established through the CDRAC. According to the RTG, CDRAC initially focused its attention on the largest and most complicated debts in the economy, without respect to specific industries or regions, and regardless of whether the debtors or creditors were public or private sector entities. In late 1998, CDRAC created a list of the first 351 firms, in 200 groups, as priority cases that were targeted for debt restructuring and selected to participate in the CDRAC process. According to the questionnaire response, the selection criteria used in developing the list of 351 companies were: 1) debtors with sizable credit outstanding; 2) debtors proposed by the Thai Bankers' Association, the Foreign Bankers' Association, the Association of Finance Companies, the Federation of Thai Industries and the Board of Trade of Thailand; 3) debtors who expressed their intention to participate in the restructuring process; and, 4) debt restructurings involving multiple creditors. The Department examined this list at verification to determine which companies and industries were included on the list; to verify the amount of debt subject to restructuring for each company and within industries; and, the extent of each company's participation in the CDRAC process. We also discussed the application of the selection criteria in the development of this list. This list was developed in late 1998 and was finalized by CDRAC in March 1999. In April 1999, the CDRAC identified and approved a second list of 316 companies. At the same time that the first list of 351 companies was being developed, CDRAC also recognized that little debt restructuring was being pursued or achieved under the Bangkok Approach guidelines for debt restructuring. In an effort to establish a process by which parties would be bound, the CDRAC developed the Debtor-Creditor Agreement (DCA) and the Inter-Creditor Agreement (ICA). These agreements were to be signed by creditors and debtors on a purely voluntary basis. Parties signing these agreements would be bound to follow procedures that were negotiated and agreed to by both parties. Independent experts consulted at verification explained that the important features of the procedures were: 1) the requirement that a debtor negotiate with all creditors at once; 2) the designation of an independent financial advisor to report on a debtor's financial condition; 3) the establishment of a time-bound process with consequences for any party who does not adhere to the procedures; 4) and, the requirement that creditors reach a consensus on the debt restructuring. See Memoranda on Department's Verification and Meeting with Independent Experts (August 17, 2001) (Experts Memoranda). 3. SSI, PPC and Their Restructuring SSI's debt restructuring was accomplished pursuant to an agreement, concluded during the POI, which was the final of four amendments to the original Credit Facilities Agreement (CFA) of February 18, 1994. The original CFA agreement between SSI and its private creditors, provided for all of SSI's financing needs, which included short- and long-term financing from both secured and unsecured lenders in baht and foreign currency denominations. This financing was provided by a syndicate of lending institutions following SSI's initial startup in 1992. PPC's debt restructuring also was accomplished pursuant to an agreement with its creditors during the POI and also involved both short- and long-term financing. Evidence on the record indicates that SSI, PPC, and their creditors were prompted to pursue debt restructuring by factors internal and external to the companies and their creditors, including the economic climate following the collapse of the baht in July 1997, and the financial management strategy these companies pursued before and after this collapse. All parties involved had incentives to achieve a loan arrangement that would enable SSI and PPC to continue their operations and repay their debts. The secured loans and unsecured bonds were restructured at the same time to assure all creditors that the restructuring was viable. While the details of the debt restructuring are proprietary, it is sufficient for purposes of this final determination to characterize the restructurings as having involved the reorganization of SSI's and PPC's short-term and long-term debts to provide repayment terms under which SSI and PPC could service their debt obligations in the coming years, based on general economic and company-specific forecasts. The unsecured bonds, which had been issued on the bond market in 1995 as debentures convertible to equity, were converted to equity on terms which the private bondholders (some of which were foreign) and SSI agreed would enable SSI to meet its obligations. 4. Analysis of SSI's and PPC's Debt Restructurings In order to find a countervailable subsidy under the Act, the Department must determine that the program is specific (section 771(5A) of the Act; section 351.502 of the Department's regulations), that a financial contribution is provided (section 771(5)(D) of the Act), and that there is a benefit to the recipient (section 771(5)(E) of the Act; section 351.503 of the Department's regulations). According to the information on the record, SSI and PPC were invited to participate in this process by virtue of them being named on CDRAC's first list in March 1999, even though their debt restructurings were finalized shortly thereafter, in June 1999. SSI and PPC reported that the restructurings were achieved without adherence to any CDRAC procedures as neither SSI nor PPC signed a DCA. The balance of evidence on the record indicates that SSI and PPC were restructured before the procedures of the CDRAC restructuring process were implemented with respect to their debt restructurings. Nevertheless, given the parallel tracks of the placement of SSI and PPC on the list, and the development of the CDRAC procedures for debt restructuring, we consider that an examination of the CDRAC process and the creation of the first list of 351 firms, including the manner in which the RTG exercised its discretion in the selection of these firms, should be considered in our analysis. In the preliminary determination, the Department resorted to adverse facts available as a result of the RTG's failure to act to the best of its ability to provide the requested information related to the list. The RTG had stated that they were prohibited by Thai law from releasing this information because of confidentiality constraints, but failed to explain why they were unable to provide the requested information in accordance with the Department's procedures for the protection of business proprietary information. However, this list of 351, including the identification of companies that had undergone debt restructuring, was provided for the Department's examination at verification in order to analyze it in the context of the de facto specificity criteria under section 771(5A)(D)(iii)(I)-(IV) of the Act. Our examination of this list has made it possible for us to analyze whether Thailand's debt restructuring was limited to an enterprise or industry, or group thereof. In our examination of this list, we took into account information which petitioners argue indicates that the steel industry may have received special consideration prior to the CDRAC process, and that the steel industry was identified by the RTG for debt restructuring (32 of the 351 companies on the list are in the primary metal production sector). See Steel Industry in Crisis, Bank of Thailand (December 1999). We also examined the procedures used by CDRAC for developing the list, as well as CDRAC's application of its stated criteria that were used in identifying companies on the list. Finally, we discussed whether all of the firms on the list were restructured. The information contained in the list specifically identified, among other things, the name of each company, each company's status in terms of whether it signed a DCA, the amount of debt owed by each company, including the name of its largest creditor, and an International Standard of Industrial Classification (ISIC) code associated with each company to identify its relevant industry. The list also noted the outcomes of each company's debt restructuring as being either a completed case (for those who either signed or did not sign a DCA), an unsuccessful case (for those that signed a DCA), a case where the debtor did not sign a DCA, or a case where a company had normal loans that did not need to be restructured. Based on these various outcomes, the Department is unable to draw any meaningful conclusions as to whether specific creditors or companies were targeted by the RTG to undergo debt restructuring. Much of our analysis of this list is based on proprietary information and is discussed in the Memorandum from Case Analysts to Barbara E. Tillman, Certain Hot-Rolled Carbon Steel Flat Products from Thailand: Analysis of the List of 351 Firms (September 21, 2001) (List of 351 Memorandum). However, for purposes of this public decision memorandum, we note that our analysis of the list, in accordance with section 771(5)(A)(D)(iii)(I) of the Act, indicated that the list was composed of 351 companies which represented numerous and diverse industries (as identified by their ISIC code at the two digit level). In determining whether an enterprise or industry was either a predominant user or received a disproportionately large amount of a subsidy as outlined in 771(5)(A)(D)(iii)(II) and (III) of the Act, we examined the amount of debt restructuring identified for each company and for each industry on the list (using the ISIC codes noted above). SSI had a large amount of debt but its debt was less than a number of other companies also identified on the list, and was not significantly greater than many other companies named to the list of 351. An examination at the industry level shows that the primary metal industry did not have the largest percentage of debt and that a number of other industries also had large amounts of debt outstanding. Although the primary metal industry, of which SSI is a part, had a meaningful portion of the debt it did not represent a disproportionate or overwhelming amount of the overall debt restructuring on the list. When determining whether an analysis of the list, based on the examination of the factors contained in section 771 (5A)(D)(iii) of the Act, supports a finding that the debt restructurings were limited to a specific enterprise or industry or group thereof, the Department looks to the length of time during which a program has been in operation to inform the application of the specificity factors enumerated above. See SAA at 261. This first list of 351 firms was approved by the CDRAC in March of 1999, and accounted for only a fraction of its 1,694 cases representing numerous industries identified during the POI (1999). The 1,694case amounted to 2,141.2 billion baht in debt to be restructured. Thus, in the first complete year of the CDRAC process, the actual users of the CDRAC process were not limited in number. See section 771(5A)(D)(iii)(I) of the Act. See 1999 BOT Annual Report, Exhibit 4 of the RTG's Questionnaire Response at 85 (February 6, 2001). Furthermore, the cases identified by CDRAC from March 1999 through April 2001, total 2,845 and account for 2,313.8 billion baht, of which the primary metal industry represents 9.2 percent of the total debt subject to restructuring. See Table 1 and 2 of Exhibit 6 of the RTG's May 30, 2001 submission. This percentage reflects that the metal industry's representation among cases identified by the CDRAC, decreased over this 25-month period when compared to its representation in the first list of 351 firms, and further supports our finding that the primary metal industry, did not account for a disproportionate or dominant share of the debt restructurings. At verification, we reviewed the criteria used to identify companies on the list of 351 firms in order to determine the manner in which the RTG exercised its discretion and in accordance with section 771(5)(A)(D)(iii)(IV) of the Act. According to BOT officials, the CDRAC initially aimed to develop a list of the first 200 cases, based on the recommendation of the International Monetary Fund (IMF), as part of a pilot program to expedite much needed debt restructuring in Thailand. These recommendations are reflected in Letter of Intent (LOI) number Five from the BOT to the IMF in response to meeting IMF conditions on which further financial assistance was contingent. See RTG Verification Report at 22. The Department found that the criteria, which were discussed in the minutes of CDRAC's seventh board meeting, were consistently applied to these initial 200 cases. In response to our inquiries as to why these criteria were not fully applied to the remaining cases that ended up on the first list, BOT officials provided a reasonable explanation of the practical implications of including these cases, and described their relationship to the original 200 cases. Again, this information is proprietary. See List of 351 Memorandum. Although the list of 351 firms plays a significant role in conducting our specificity analysis, the question of whether the RTG exercised any discretion or influence in the debt restructuring process in general and on the CDRAC in particular, must also be addressed. At verification, the Department interviewed a number of independent experts to gather additional insight into the economic environment and the RTG's involvement during the Thai economic crisis. One theme that was consistently expressed by these experts was that this financial crisis was a systemic meltdown of the economy, of which the non-performing loan (NPL) crisis was just one symptom (NPLs in Thailand's financial system reached 50 percent overall at the peak of the crisis). These experts uniformly noted that the CDRAC process itself was not tailored to any specific industry group or sector, and the development of the list was based on identifying large debtors with many creditors in an attempt to stabilize the banking system in Thailand. The CDRAC debt restructuring process was developed with the express aim of bringing order to the Thai financial system. See Exhibit 5 of the RTG's May 30, 2001 submission. The experts also highlighted the weakness of the Thai bankruptcy system and the poor judicial enforcement of creditors' rights as important background against which to analyze the development of DCA and ICA agreements, and the CDRAC process overall. In the opinion of these experts, the signing of these agreements by creditors and debtors was voluntary, and removed some of the uncertainties associated with the Thai legal system. The experts also noted that the CDRAC process overall provided some advantages to both debtors and creditors. See Experts Memoranda. Thus, our analysis of the RTG's discretion in applying the criteria used to identify the companies on the list of 351 firms, amidst the background of the financial crisis and the economic and legal environment existing at the time of SSI's and PPC's restructuring, does not yield any conclusions which detract from our finding of non-specificity under the de facto specificity criteria enumerated in section 771(5A)(D)(iii)(I-IV) of the Act, nor does it allow the Department to draw any inferences as to whether being named by the CDRAC influenced the financial institutions or the companies in Thailand to act in any specific manner. As a result of our finding that SSI's and PPC's debt restructurings were not specific pursuant to section 771(5A)(D)(iii) of the Act, it is not necessary to examine the issues of financial contribution and benefit. B. VAT Exemptions Under the Investment Promotion Act In the preliminary determination, the Department mistakenly identified Section 21(4) of the VAT Act as a program that provided benefits to BOI- promoted companies. The Department has since learned that Section 21(4) is in fact a provision in the Thai Revenue Code that addresses the treatment of companies which received business tax exemptions or deductions before January, 1, 1992, when Thailand switched to a VAT system, and after that time, received exemptions or reductions from VAT. Section 21(4) states that these companies must track the business tax that they would have paid under the previous system, while receiving their VAT exemptions or reductions, so that if for any reason a company were to lose its BOI privileges (e.g., if the certificate were revoked due to violation of its terms), the amount of the business tax would come due as a penalty. See RTG Supplemental Response, March 7, 2001, Exhibit 2 and RTG Verification Report, page 11. However, the issue of how to deal with VAT exemptions provided by BOI certificates to promoted companies still remains. In examining indirect taxes, we are directed by section 351.510(a)(1) the Department's regulations for domestic subsidies like Section 28: "{i}n the case of a program, other than a export program, that provides for the full or partial exemption or remission an indirect tax or an import charge, a benefit exists to the extent that the taxes or import charges paid by a firm as a result of the program are less than the taxes the firm would have paid in the absence of the program." We are also directed by section 351.517(a)(1) for export subsidies like Section 36(1): "{i}n the case of exemption or remission upon export of indirect taxes, a benefit exists to the extent that the Secretary determines that the amount remitted or exempted exceeds the amount levied with respect to the production and distribution of like products when sold for domestic consumption." At verification, the Department examined the Thai VAT system, and particularly how it is used by SSI. Under the current system, VAT is reconciled in SSI's accounting records on the fifteenth of every month. The input and output VAT amounts for the month are totaled. If the total input VAT is more than the total output VAT, then the company is due a refund from the government. If the reverse is true, then the company owes the government. Refunds from the government can be handled in two ways: the company can ask the government for a refund (the amount of time it takes to actually receive a refund check varies, but was found by the Department to be well less than one year); or the company can take the refund as a credit, which can be used to offset future VAT obligations that will be owed the RTG. See SSI Verification Report, pages 11-12. The Department normally treats exemptions of indirect taxes and import charges the same way that rebates of such taxes are treated. (see section 351.510 and 351.517 of the Department's regulations). Absent evidence that the exemption gives rise to a potential time-value-of-money benefit because the tax rebates do not occur on a timely basis, there is no reason to treat an exemption differently from a rebate or remission. The Department found no evidence that there is a significant amount of lag- time between a company's reconciliation of its VAT account and the time when the RTG would provide refunds or credits. Thus, in this case, there is no potential time-value-of-money benefit and we find that the VAT exemptions provided to SSI through its BOI-promoted status provide no benefit. The Department, therefore, finds this program not countervailable. IV. Programs Determined to be Not Used We verified that neither SSI nor PPC applied for or received benefits under the following programs during the POI. A. Duty Exemptions to PPC under Investment Promotion Act Section 29 B. Corporate Income Tax Exemptions under IPA Section 31 C. Incentives Under Investment Promotion Act Sections 36(2) and 36(4) D. Ministry of Industry's Steel Industrial Restructuring Plan E. Loans from the Industrial Finance Corporation of Thailand and the Thai Export-Import Bank F. Other Loans and Loan Guarantees from Banks Owned, Controlled, or Influenced by the RTG G. Export Packing Credits H. Pre-shipment Finance Facilities I. Trust Receipt Financing for Raw Materials J. Export Insurance Program K. Tax Certificates for Export L. Import Duty Exemptions for Industrial Estates M. Export Processing Zone Incentives V. Programs Determined Not to Exist Based on verification, we find that the following programs do not exist. A. IPA Subsidies for Construction of SSI's On-Site Power Plant B. Provision of Water Infrastructure for Less Than Adequate Remuneration VI. Analysis of Comments Comment 1: Availability of IPA benefits to companies and industries within Thailand In their case brief, respondents argue that the benefit packages that SSI and PPC received are not specific to an enterprise, industry or group thereof. They also argue that IPA benefits are available to a wide variety of industries throughout the Thai economy, are non-sector specific, and aimed at promoting Thailand's overall economic development. Citing to Rice from Thailand, 51 FR 12356 (April 10, 1986), respondents note that the Department determined IPA Section 35 benefits to be not specific to an enterprise, industry, group of industries, or specific region of Thailand. Respondents state that because the Department has previously found Section 35 to be non-specific and therefore not countervailable, all benefits provided under IPA should also be found not countervailable. In their rebuttal brief, petitioners argue that IPA benefits are specific because of the following: access to these benefits is limited to certain companies that were awarded certificates even within the same industries; the BOI limits these benefits to a handful of promoted industries prominently including steel; approval of IPA promotion benefits depends on BOI evaluation of a host of subjective criteria which do not meet the test for a non-specific subsidy based on objective and automatic criteria for eligibility; IPA subsidies (at least for the steel industry) appear to be regionally specific; and, IPA benefits are contingent, at least as one among several factors, on export, making them specific as export subsidies. Department's Position: While the Department did, as respondents point out, find IPA Section 35 to be non- specific in Rice from Thailand, the facts in this case are very different. Because the BOI solicited applications for the creation of a hot rolled steel industry and tailored a specific package of IPA benefits to meet SSI's requirements, and the MOI announced it would not issue a license approving hot-rolled production to any other companies for a period of ten years, we find SSI's IPA benefits to be de facto specific to an enterprise within the meaning of section 771(5A)(D)(iii)(I) of the Act. Rice from Thailand, as cited by the respondents, is not relevant to this case. Because the BOI certificate awarded to SSI includes a package of IPA benefits from the BOI that was specifically tailored for SSI, the Department finds that all of the benefits provided under the umbrella of the certificate are specific. Petitioners have made other arguments regarding the specificity of the IPA programs. However, because we have found that these programs are specific to SSI, we are not addressing petitioners' other arguments. The Department also finds that the promotion certificate awarded to SSI is not export specific, as the initial approval did not consider export performance among the eligibility criteria. The Department notes however, that Section 36(1) was eventually granted to SSI, and that it does contain explicit export requirements. Therefore, as discussed above in the section Duty Exemptions on Imports of Raw and Essential Materials Under IPA Section 36(1), we have treated Section 36(1) as an export subsidy. Comment 2: Tariff Rate for Duty Exemptions for Raw and Essential Materials Under IPA Sections 30 and 36 In their brief, respondents argue that the Department should calculate the benefit for Section 30 or 36(1) based on the one percent duty rate for slab because this is the rate that SSI would have paid, but for BOI benefits. Respondents claim that the current Thai tariff structure specifically provides that the import duty rate for any "raw materials not produced locally" would be reduced to one percent. They also note that the Department found at verification that the "normal" rate, which the Department used in its calculation in the preliminary determination, is merely the ceiling rate in the Thai tariff schedule, and that the "discount" rate is the rate paid by all importers of slab in Thailand. Petitioners argue that the 10 percent duty rate is the appropriate rate for calculating the benefits received by SSI under Sections 30 and 36(1). They state that while the MOF has the ability to lower the duty rates, such changes are only temporary, and the lowering of the duty rate for slab to one percent was a narrowly-targeted government action. Further, they argue that, even if access to the one percent duty rate was "generally available," this would not excuse the subsidy, because flat steel producers are the only beneficiaries of the MOF's manipulation of the duty rates for slab. Department's Position: The Department has used the one the percent duty rate for slab in the benefit calculations for Sections 30 and 36(1). This rate is appropriate because, as respondents point out, the MOF has the authority to adjust the duty rates in the Thai tariff schedule as they see fit for the good of the Thai economy. In addition, this is the rate used by the Thai Customs Authority to determine the amount of duties SSI had to pay on imports made under the duty reduction scheme pursuant to Section 30. While petitioners are correct that the reduction of duty rates for slab by the MOF is temporary, the policy in which this reduction is founded has been generally applied to any raw materials that are not produced in Thailand. See RTG Verification Report, MOF Exhibit 1. The mere fact that it may be utilized by only one industry in this instance does not mean that the system is not uniformly applied. Many products have had their duty rate lowered to one percent, not just slab. Accordingly, the Department finds that one percent is the appropriate rate to use in the calculations. Comment 3: Countervailability of Section 36(1) Benefits. Respondents argue that benefits received by SSI under Section 36(1) are not countervailable. Because the BOI has in place a reasonable and effective system for monitoring inputs and amounts that are consumed in production of the exported product, and this system is based on generally accepted commercial practices in Thailand, Section 36(1) meets the requirements of the Department's regulations at section 351.519(a)(4). Respondents note that the Department verified that the BOI has in place a system for monitoring the consumption and re-export of goods imported under Section 36(1), which includes a reasonable provision related to the normal allowance for waste. Respondents further argue that the BOI's procedures for determining what is "waste," and the process through which they determine what is a "normal" allowance for waste, is reasonable and effective in tracking yield amounts under Section 36(1). They state that because the BOI calculates the "normal" allowance for waste prior to actual exportation, as they did for SSI, in accordance with their own published regulations for calculating yields, the BOI reasonably confirmed a "normal allowance for waste." Petitioners argue that the respondents have not demonstrated that the RTG either has in place or applies an effective system to confirm which imported inputs exempted from duty are consumed in the production process. They contend that the slab exempted from import duty under SSI's BOI certificate can be used for export production at any time within the approved period of benefits, which is more than five years. Petitioners therefore argue that five years can pass before the correspondence between exempted imports and qualifying exports must be shown. Petitioners further argue that Section 36(1) duty exemptions also apply to slab imported by SSI and used to make products sold to domestic customers, which prevents Section 36(1) from qualifying as a duty drawback-like scheme. Petitioners also argue that respondents have not demonstrated that under the exempted program, normal allowances for waste have been made, because the waste factors in use for Section 36(1) purposes, as the Department found at verification, were different from the waste factors found in the anti- dumping proceeding. Department's Position: The Department agrees that the RTG does in fact have a system in place to monitor and track the consumption and/or re-export of goods imported under Section 36(1). However, the yield factor approved for the purposes of Section 36(1) must fulfill two purposes: to determine the maximum volume of raw material the company is allowed to import for re-export; and to calculate the volume of raw material, including a normal allowance for waste, incorporated into each reported export. The yield factor which the BOI used for administering SSI's import duty reductions under Section 30 is the same yield factor applied to Section 36(1) imports. SSI also reported that the yield factor approved by BOI reflects a normal allowance for waste. SSI further argued that its exported products undergo additional processes and, consequently, exported products generate more waste. See SSI Verification Report, page 10. If this is the case (which the record does not clearly support), then the BOI should not have relied on the yield formula it developed for SSI's total production under Section 30 to determine the yield factor on exported products under Section 36(1). Furthermore, in its yield factor formula, which, according to the questionnaire responses, is supposed to reflect the normal allowance for waste, the BOI did not take recoverable and saleable scrap into account when determining which inputs are consumed in the production of the exported products and in what amounts. Therefore, the Department finds that there is not an effective or accurate system in place for calculating a "normal allowance for waste" and confirming which inputs are consumed in production and in what amounts. As such, we have found the entire exemption countervailable in accordance with section 351.519(a)(4). Petitioners' argument that the correspondence between exempted imports and qualifying exports must be shown every five years is inaccurate. As respondents noted, SSI's eligibility for Section 36(1) benefits was limited to a five-year period. SSI demonstrated that its exports incorporating duty-exempt imported inputs were made within a 12 to 18 month period. See discussion of Section 36(1) above. Comment 4: Countervailability of a Portion of Section 36(1) benefits Respondents argue that if the Department finds that Section 36(1) is countervailable, then the benefit amount is only the amount of the duties exempted on the excessive allowance for waste, and not the entire amount of the import duty exemption. They argue that because Section 36(1) deals with a duty exemption, and not a remission or drawback, section 351.519(a)(1)(ii) of the Department's regulations should apply. They further argue that the BOI has in place a reasonable and effective system for monitoring inputs and amounts that are consumed in production of the exported product (including a normal allowance for waste) that is based on generally accepted commercial practices in Thailand. Respondents cite Certain Cut-to-Length Carbon-Quality Steel Plate from India, 64 FR 73131 (December 29, 1999) as evidence of the validity of their position. Respondents also argue that even though there are differences in the reported waste rates found on the record for SSI, it does not mean that the BOI waste rate is not a "normal allowance for waste." They further claim that, under section 351.519(a)(4) of the Department's regulations, the administering authority only need have in place a reasonable and effective system that takes into account and calculates a "normal allowance for waste" in calculating yield factors, and that the BOI has such a system. Respondents argue that the antidumping duty investigation of hot-rolled carbon steel flat products from Thailand, in calculating SSI's "normal allowance for waste," failed to take into account several factors which would change their finding. These factors included out- sourced processing and the inclusion of products in addition to those for export (exported products require additional processing and give rise to greater waste). The respondents argue that in determining the excessive amount of "waste," the Department should use the amount of allowable "waste" reported in the AD investigation (as this amount is actually based on SSI's experience, is closest to the POI, and was verified by the Department) subtracted from the amount reported to the BOI. The difference represents the excessive "waste." Petitioners argue that the respondents have not made the necessary showing that Section 36(1) operates as a bona fide duty drawback program, and that section 351.519(a)(4) of the Department's regulations provides that, absent such a showing, in a case of an exemption of import charges upon export, or when the "waste" criterion is found to not be satisfied "the Secretary will consider the entire amount of an exemption . . . to confer a benefit." Petitioners support this by stating that the information provided by respondents is inadequate in showing that a mechanism, even if in place, is effective and actually applied to enforce the conditions of the certificate and police violations. They also argue that the RTG has not actually examined the inputs involved to confirm that they were consumed in the production of the exported product and in what amounts under section 351.519(a)(4). Therefore, petitioners argue, the Department should countervail Section 36(1) at the full amount of the duties exempted. Department's Position: The Department disagrees with respondents that the countervailable benefit from this program is only the "excessive amount of waste." Under section 351.519(a)(4)(i) of the regulations, the entire amount of exemptions will confer a benefit, unless the Department determines that: "{t}he government in question has in place and applies a system or procedure to confirm which inputs are consumed in the production of the exported products and in what amounts, and the system or procedure is reasonable, effective for the purposes intended, and is based on generally accepted commercial practices in the country of export" (emphasis added). The evidence on the record indicates that the BOI did not isolate and examine the amount of inputs consumed in the production of the exported products and that it did not consider in its analysis whether any of the scrap was recoverable and saleable. As discussed above in our analysis of Section 36(1), we consider both of these elements to be essential in determining the effectiveness of the system for the purposes intended. We therefore determine that the allowance for waste which the BOI uses in administering SSI's Section 36(1) duty exemptions is not "normal." Consequently, the RTG's system for determining which inputs are consumed in the exported product, and in what amounts, is not reasonable or effective for the purposes intended, and the entire amount of SSI's import duty exemptions under Section 36(1) provides a countervailable benefit, consistent with section 351.519(a)(4)(i) of the Department's regulations. Contrary to respondents' argument, Certain Cut-to-Length Carbon-Quality Steel Plate from India, 64 FR 73131 (December 29, 1999) does not demonstrate that Section 36(1) is not countervailable. In that case the Department found that the Government of India did not have in place a system for tracking imports to be consumed in the production of exports, or for determining if or in what amounts these imports were consumed in products that are exported. In that case, the Department determined that the entire amount of the import duty exemption was countervailable. While the RTG does have a system in place to match imports with exports, the Department has determined the system is not reasonable or effective for the purposes intended, and therefore, and in accordance with section 351.519(a)(4)(i) of the Department's regulations, finds the entire exemption countervailable. Comment 5: Benefits under IPA Section 35(3) In their case brief, respondents argue that the double deduction on income taxes for the cost of transportation, electricity, and water under Section 35(3) did not provide a benefit to SSI. They point out that section 351.509(a)(1) of the Department's regulations states that "a benefit exists to the extent that the tax paid by a firm would have been paid in the absence of the program." Respondents claim that SSI had losses carried forward at the end of fiscal year 1998 that were well in excess of the potential taxable profits in 1998 on non-BOI activities. As a result, they state that even absent Section 35(3) deductions, SSI would not have paid any taxes for that year, and therefore did not receive any benefit. Respondents further state that in the preliminary determination, the Department assumed that, in theory, SSI would first use Section 35(3) tax deductions, earned in 1998, to reduce any tax liability on its 1998 income tax return filed during the POI. As a result, respondents argue, the Department's analysis does not square with the requirements of the WTO Agreement on Subsidies and Countervailing Measures, because this determination is not based on "positive evidence." Lastly, respondents argue that, should the Department find Section 35(3) deductions to provide a countervailable benefit, a more appropriate calculation would take into account the percent of total loses in 1998 generated by Section 35(3) deductions, and would figure this percentage into the calculations. Petitioners argue in their rebuttal brief that the Department correctly found countervailable and calculated the benefit for Section 35(3). Petitioners state that SSI did, in fact, use its Section 35(3) benefits to avoid taxes during the POI. They further argue that the Department's finding at the preliminary determination is accurate because it is consistent with the Department's findings in Final Affirmative Countervailing Duty Determination and Countervailing Duty Order; Extruded Rubber Thread From Malaysia 57 FR 38475, (August 25, 1992), and Final Results of Countervailing Duty Administrative Review: Extruded Rubber Thread from Malaysia 60 FR 17,516 (April 6, 1995). Department's Position: We disagree with respondents' argument that SSI's losses carried forward from earlier years prevented SSI from achieving any benefit from the Section 35(3) tax deductions in the POI. As stated in our preliminary determination, we reasonably found that SSI would have claimed its Section 35(3) deductions first to offset the taxable income generated in 1998, the tax return which was filed during the POI. SSI's use of Section 35(3) deductions thus gave rise to countervailable benefits. As stated in the preliminary determination, this finding is consistent with the approach developed by the Department in Final Affirmative Countervailing Duty Determination and Countervailing Duty Order; Extruded Rubber Thread from Malaysia, 57 FR 38472 (August 25, 1992) (Malaysia Rubber Thread). Furthermore, use of this approach minimizes the need to track SSI's tax position and use of countervailable and non-countervailable tax deductions in the future. In each year in which SSI claims a countervailable tax deduction to offset taxable income, we recognize the tax benefits associated with that use, without regard to losses carried forward from previous years. With respect to SSI's argument that we calculate a ratio of Section 35(3) benefits to total tax losses and apply that ratio to the taxable income in determining the countervailable benefits, such an approach would be inconsistent with our reasoning in Malaysia Rubber Thread. There is no basis for assuming that, in offsetting taxable income, SSI's tax losses come out of the pool in proportion to the pool's composition. Our approach reasonably assumes that countervailable tax programs should be considered first. To do otherwise would require the Department to investigate and analyze the source of tax losses carried forward to determine if they were generated by the use of countervailable tax programs. Our approach simplifies and makes predictable the Department's calculation of countervailable benefits from income tax programs, and is consistent with our finding in Malaysia Rubber Thread, where we stated "if we treat only a portion of the countervailable allowances as having been used, some of the amount carried forward for future use would also be countervailable when used. This means that we would have to track carry forwards and trace from year to year what portion of the allowances carried forward is countervailable. To avoid an unadministrable system of tracking and tracing, we have treated the countervailable portions as having been used in the year under investigation." 57 FR at 38480. Comment 6: Countervailability of Section 28 imports identified by respondents as recurring. Respondents note that the Department's preliminary determination found duty exemptions received under Section 28 to be non-recurring, and therefore countervailable, because they were tied to the capital assets of SSI and PPC. In accordance with this finding, SSI separately identified and reported those Section 28 imports that are not tied to capital assets or costs. Respondents argue that the Department should exclude from the calculations of Section 28 duty exemptions on those imports that SSI has identified as recurring because they are not capital assets. Therefore, under the Department's methodology for recurring benefits, duty exemptions on such imports would be expensed in the year of receipt rather that allocated over time. As such, respondents argue, these import duty exemptions provide no countervailable benefits during the POI. Petitioners argue that the Department correctly found the entire amount of SSI's import duty exemptions under Section 28 to be non-recurring and fully countervailable. In rebutting respondents' argument, petitioners state that the benefits provided under Section 28 are not amortizable only as a result of how SSI's accountants treat them; petitioners argue that they are amortizable because they are provided with respect to capital assets. See Memorandum to Barbara E. Tillman: Analysis of Business Proprietary Information on IPA Section 28 (April 13, 2001). Petitioners further argue that all Section 28 benefits should be considered non- recurring under section 351.524(c)(2)(ii) of the Department's regulations, because all of these benefits required the government's express authorization. Lastly, petitioners argue that amortizability of subsidy benefits must be considered on a program-by-program basis, not on an entry- by-entry basis. They claim there is no provision in the Department's regulations, nor any precedent in its practice, for selectively expensing individual benefits handed out under a non-recurring subsidy program. Department's Position: The Department agrees with petitioners. In considering whether an adjustment to our calculations is warranted based on SSI's identification of particular imports they considered to be not tied to capital assets of the firm, and whether we should treat a subsidy traditionally considered to be recurring as non-recurring, or vise-versa, we are guided by sections 351.524(b) and (c) of our regulations. The regulations direct us to consider; (i) whether the subsidy is exceptional in the sense that the recipient cannot expect to receive additional subsidies from the same program on an ongoing basis from year to year; (ii) whether the subsidy required or received the government's express authorization or approval (i.e., receipt of benefits is not automatic); or, (iii) whether the subsidy was provided for or tied to the capital assets of the firm. SSI was approved for its BOI package to receive duty exemptions on imports of machinery. Machinery is a capital asset. Thus, duty exemptions on machinery are reasonably tied to the capital assets of a firm. Furthermore, as reported by SSI and verified by the Department, each import for which SSI received duty exemptions under Section 28 required express government approval. SSI had to write a letter to the BOI, in advance of the entry of the equipment, and include the supplier invoices. BOI approval was granted in the form of a BOI letter to the RTG Customs authorizing the exemption of the entry from duties. See RTG Verification Report at page 7. Because duty exemptions on machinery are tied to capital assets and because each importation required express approval from the BOI, we find that, consistent with 351.524(c)(ii) and (c)(iii), it is appropriate to treat all Section 28 exemptions as non-recurring benefits. Because we find all Section 28 benefits to be non-recurring based on the first two arguments made by petitioners, we have not analyzed their third argument concerning the selective expensing of individual benefits on a program-by-program or entry-by-entry basis. Comment 7: Methodology for Calculating IPA's Section 28 Benefits Respondents argue that the Department made errors in the preliminary determination with regard to the methodology that was used to calculate Section 28 benefits and the countervailing duty rate. Respondents argue that the we incorrectly performed the 0.5 percent test separately for SSI and PPC. They claim the Department's regulations and the Preamble provide that, where both the producer and a non-producing subsidiary receive benefits, the subsidies should be attributed to the sales of both corporations. Respondents argue, therefore, that the sales of both corporations together are the relevant denominator in the calculation of the subsidy. Also, the amount of benefits should be determined by adding SSI's and PPC's benefits together. Respondents further argue that the Department should correct its use of SSI's discount rates from Exhibit 9 of SSI's February 6, 2001 response, and utilize the corrected version in Exhibit 23 of SSI's March 13, 2001 response. Petitioners argue that the dilution of SSI's subsidies by combining SSI's and PPC's sales is not required by the Department's regulations on cross- ownership and attribution of subsidies. See section 351.525(b)(6) of the Department's regulations. Petitioners further argue that the Department rejected this flawed approach in the preliminary determination, and has received no compelling reason to change its decision. Department's Position: In reviewing the facts in this case, and taking into account the comments that have been submitted by petitioners and respondents, the Department has found it necessary to clarify the calculation methodology that was used in the preliminary determination. As discussed in the section on Calculation of Ad Valorem Subsidy Rates above, because PPC is a non- producing subsidiary, its sales are not included with SSI's in determining the benefit attributable to subject merchandise from subsidies provided directly to SSI. Therefore, for the 0.5 percent test for Section 28, we compared SSI's duty exemptions in each year to SSI's sales in that year. For the 0.5 percent test for PPC, we divided its duty exemptions by the consolidated sales of the corporate group in which PPC's sales are consolidated, which are the consolidated sales of SSI, net of inter- company sales (see Calculation of Ad Valorem Subsidy Rates section above). For those years in which the duty exemption exceeded 0.5 percent, we allocated the annual total exemptions, in accordance with section 351.524(d) of the Department's regulations, to determine the Section 28 benefits attributable to the POI. As the discount rate, we used SSI's average long-term interest rate, as reported in SSI's March 13, 2001 response and verified by the Department (see Allocation Period and Discount Rates sections above). Comment 8: The Time Value of Money and Countervailability of VAT Exemptions under the Investment Promotion Act In their brief, petitioners argue that, contrary to the Department's preliminary findings, SSI received a countervailable benefit during the POI from VAT exemptions under Section 21(4) of the VAT Act. Petitioners state that the Department noted in the preliminary determination that the only potential benefit to a promoted company receiving VAT exemptions is the time value of money. Petitioners also state that the courts have recognized the significance of the time value of money. See Bethlehem Steel Corporation et al., Slip-Op 01-38 at 9 and 18-19. Petitioners argue that considering the high time value of money in Thailand and for steel makers, the benefit from VAT exemptions is quite high. Respondents argue that, in recognition of the widespread use of VAT, Annex I of the WTO Agreement on Subsidies and Countervailable Measures (SCM) in footnote 60 specifically excludes VAT from countervailable subsidies and only permits VAT taxes to be countervailed if they involve excessive remission, which is not the case here. Respondents point out that the Department recently determined in Final Negative Countervailing Duty Determination: Elastic Rubber Tape from India, 64 FR 19124, 19130 (April 19, 1999), to not countervail an exemption under India's excise tax, similar to Thailand's VAT, because that exemption from the tax does not confer a benefit. The respondent's also note that the Department has specifically stated in Rubber Tape from India, "{t}he excise tax, like a value added tax, is treated as being passed on to the consumer. . ." and because the company does not bear the tax, the Department determined that the exemption was not a countervailable benefit. Respondents further argue that even if the Department decides to countervail VAT exemptions, there would be no benefit to SSI during the POI. VAT exemptions are recurring benefits. See section 351.524(c) of the regulations. Respondents argue that because all of SSI's VAT exemptions related to Section 28 occurred outside of the POI, from 1992-1997, they are not countervailable. Department's Position: The Department agrees with respondents. In the preliminary determination, the Department found not countervailable VAT exemptions received on imports under Section 28. As discussed in the VAT Exemptions Under the Investment Promotion Act section above, the Department uncovered no evidence to change this decision. In the preliminary determination, the Department stated that it would address the VAT exemptions received under Section 36(1) in the final determination, after it had examined Section 36(1) more thoroughly at verification. The Department has found no reason to believe that the VAT system in Thailand provides an excessive remission, nor does it appear that the amount of time which the RTG takes to reconcile its VAT system is inordinate or that it would give rise to a time-value-of-money benefit. Comment 9: IPA Benefits and Investments by SSI's Initial Investors Petitioners argue that the initial investment by investors into SSI is a countervailable benefit because the RTG acted to induce equity infusions by private investors through its "announcement," offering benefits to parties for the creation of a steel facility, which eventually became SSI. Petitioners further argue the RTG offered these benefits as a matter of national interest as opposed to one of the economic merit of steel production in Thailand. Respondents argue that the "economic boom" in the late 1980's, and the fact that all flat steel demand in Thailand then was served by imports, were catalysts for SSI's decision to develop a flat steel mill. They cite the fact that SSI was already in discussions with foreign steel companies about the creation of a flat steel mill before the BOI announced its intent to promote a flat steel industry as evidence that the benefits offered by the BOI did not cause SSI to build their factory. SSI further argues that the MOI announcement that it would not consider any applications for a factory license for hot-rolled steel production for a period of 10 years was lifted on November 11, 1994, shortly after SSI commenced production in February 1994, as evidence that the creation of a steel industry Thailand was imminent and inevitable. Department's Position: We analyzed the elements of petitioners' allegation and found it insufficient to warrant an investigation of SSI's equityworthiness at its founding. See Memorandum to the File through Barbara E. Tillman, Countervailing Duty Investigation of Certain Hot-Rolled Carbon Steel Flat Products from Thailand: New Subsidy Allegation on file in the CRU. Comment 10: Provision of Electricity as General Infrastructure Respondents argue that the government provision of electricity to SSI and PPC constitutes general infrastructure, and therefore, does not provide a financial contribution pursuant to section 351.511(d) of the Department's regulations. Respondents cite to the Preamble to the regulations, which states, "{f}or example, interstate highways, schools, health care facilities, sewage systems, or police protection would constitute general infrastructure if we found that they were provided for the good of the public and were available to all citizens or to all members of the public . . . Any infrastructure that satisfies this public welfare concept is general infrastructure and therefore, by definition, not subject to any specificity analysis." 63 FR 65348, 65378-79 (November 25, 1998). Respondents note that Thai electricity utilities provide an essential service for the broad public welfare of all Thais, and that this service is made available to all members of the public and all citizens at the same rates within a user category. Further, there are no special discounts or payment schemes being extended to SSI or PPC; there were no special facilities constructed to generate or distribute power to SSI or PPC; and there are no unique contracts or other pricing arrangements for the provision of electricity to SSI or PPC. SSI and PPC pay the same electricity rates as any other industrial company in Thailand. Respondents claim that the fact that EGAT charges a different transfer price to MEA than it does to PEA does not establish countervailability, and that the reasons for the difference only prove that the program is general infrastructure. The differential, respondents note, arises from three broad public policy goals: 1) providing electricity to low-income households; 2) rural electrification; and, 3) promoting the location of industries outside of the congested Bangkok metropolitan area. That the pricing differential is designed to serve these goals demonstrates that the provision of electricity is general infrastructure, and requires a finding of non-countervailability. Petitioners rebut respondents' argument by noting that electricity is a good, and unlike infrastructure, once used, does not remain to be used again (like a road, bridge, or school). Petitioners reiterate their allegation that the RTG is providing electricity to SSI and PPC at a subsidized price, not that the RTG built a power grid over which electricity could flow to SSI and PPC. Department's Position: The RTG's provision of electricity does not constitute general infrastructure, and as such it does constitute a financial contribution by the RTG in accordance with section 771(5)(D)(iii) of the Act. The RTG is responsible for providing the vast majority of electricity to all consumers in Thailand through three government-owned entities: EGAT, which is responsible for generation and transmission, MEA which is responsible for distribution and service in the Bangkok Metropolitan area, and PEA, which is responsible for distribution and service to the region outside the Bangkok Metropolitan area. These three authorities are required to follow broad social criteria in the provision of electricity to consumers, including supporting low rates for low-income customers and promoting rural electrification. In addition, they promote the location of industries outside of the Bangkok metropolitan area. They also are required, as a matter of policy, to charge a uniform national tariff rate to each class of customer including industrial users, as well as residential users. Respondents argue that the application of these broad social criteria and the uniform national tariff requirement mean that electricity in Thailand is a service that is provided for the good of the public and is available to all citizens. We disagree. Section 351.511(d) of the regulations states that, for goods and services, a financial contribution does not exist in the case of government provision of general infrastructure. First, the electricity at issue here is not a service, as respondents argue, but a good that, as petitioners point out, has its own tariff schedule classification. Furthermore, the electricity at issue here is not general infrastructure, but a good that is bought and sold in the marketplace. In the Department's view, the term infrastructure refers to the types of goods and services described in the Preamble to the regulations, including schools, interstate highways, health care facilities and police protection. According to our regulations, if we find that these types of infrastructure were provided for the broad societal welfare, they would be considered general infrastructure. However, we make clear in the regulations that even infrastructure of the types described may not constitute general infrastructure if it does not satisfy the public welfare concept. The good at issue in this investigation is not the physical plant associated with the generation, transmission and distribution of the electricity. Moreover, even if it were the physical plant, that does not necessarily mean that it would constitute general infrastructure unless the public welfare concept articulated in the regulations is met. The fact that the RTG applies a uniform national tariff for electricity to meet broad social goals cannot be equated with the public welfare concept set forth in the Preamble to the regulations. The price of electricity cannot be the basis on which a decision is made that electricity constitutes general infrastructure. The analysis of whether a good or service constitutes general infrastructure falls under the financial contribution standard, while the pricing of the good must be analyzed as a function of the adequacy of remuneration under the benefit standard. Although the government has established a uniform national tariff structure, that fact cannot and does not render the provision of electricity to be general infrastructure. Nothing in the regulations points to the Department ever considering the provision of electricity to constitute general infrastructure. Rather, in the Preamble to the regulations, the Department uses electricity to illustrate its point that other approaches to determining adequate remuneration (the benefit standard) may be necessary when the government is the sole or major provider of a good in an economy. Respondents cite no case precedent to support their claim that the provision of electricity should be considered general infrastructure, and as petitioners point out, under both pre- and post-URAA precedents, we have found the government's provision of electricity to provide countervailable benefits in a number of cases. Accordingly, there is no basis for considering the provision of electricity by the RTG to constitute general infrastructure. Comment 11: The Uniform National Tariff and Specificity Respondents argue that, because the prices paid for electricity do not vary depending on whether a company is located inside or outside of Bangkok, there is no regional specificity. All Thai industries in the same tariff category are charged the same electricity prices regardless of where they are located. Petitioners argue that the benefits associated with PEA's provision of electricity to SSI and PPC are regionally specific, because of the considerable variations in the cost/price ratios from one region of Thailand to another. Department's Position: The fact that the RTG has established a policy for social reasons that a uniform national tariff rate be charged to all users across the country in each customer category does not eliminate the issue of whether electricity is being provided to a specific group of users for less than adequate remuneration. The definition of specificity includes subsidies that are " . . . limited to enterprises or industries located within a designated geographical region within the jurisdiction of the authority providing the subsidy" (section 771(5A)(D)(iv) of the Act). In this case, the RTG is providing a financial contribution in the form of a good (electricity), and a benefit is conferred because the electricity is being provided for less than adequate remuneration to a specific group of users (i.e., companies located in the region designated by the RTG to be served by PEA). While, on its face, the application of a uniform national tariff rate structure appears to be non-specific, a closer examination of why this national policy was created and how it is implemented reveals that the uniform national tariff structure was established to encourage economic activity outside the Bangkok Metropolitan area, and is maintained through internal subsidies within the RTG electricity authorities. At verification, RTG officials stated that the uniform national tariff rate structure was created to support low income users across the country and to ensure rural electrification (RTG Verification Report at 12 and 15). In response to further questioning as to why it was necessary to retain a uniform national tariff for industrial users, if the purpose of the uniform national tariff was to support low-income users and to ensure rural electrification, officials responded that another purpose of the uniform national tariff structure was to promote economic activity outside of the Bangkok Metropolitan area (the area outside the Bangkok Metropolitan area is the region served by PEA). Thus, PEA serves a designated region of Thailand, and one of the purposes of a uniform national tariff is to promote economic activity in that region. Taken together, these two factors support a finding that PEA's provision of electricity is regionally specific. When added to the analysis of adequate remuneration (detailed in the Department's Position to Comment 12 below, it is clear that the subsidy is specifically provided to enterprises or industries located in a designated geographical region within the jurisdiction of the authority providing the subsidy. Comment 12: Provision of Electricity and Adequate Remuneration Respondents argue that the Department's analysis in the preliminary determination is an unprecedented price discrimination analysis which did not consider the RTG's price setting from a national perspective, which is how pricing policy is made. Instead, the Department determined that PEA's remuneration was not adequate because there is transfer price discrimination, even though retail prices are uniform nationally. While PEA's distribution costs are higher than MEA's, respondents argue that the Department ignored extensive evidence in the record that SSI and PPC are not the type of customers which are the cause of PEA's higher distribution costs, and that the Department wrongly assumed that the prices charged to companies like SSI and PPC were insufficient to cover PEA's distribution cost, and therefore did not constitute adequate remuneration. Respondents note that the Price Waterhouse Coopers report (PWC Report) which was provided in the February 6, 2001 questionnaire response, was an independent analysis of the costs and pricing of EGAT, PEA, and MEA, delineated by customer category. The PWC Report demonstrates, according to respondents, that there are significant cost variances among customer categories, and further, that customers in the same category as SSI and PPC are "generating revenues in excess of their marginal costs," by an estimated 15 percent. Thus, respondents argue, there is overwhelming third- party evidence that the RTG has received adequate remuneration for its electricity sales to SSI and PPC. Further, respondents argue that the Department ignored the recommendation in the PWC Report that electricity charges to customers like SSI should be reduced in order to align them more closely with marginal costs and still provide PEA with adequate returns on investment. They argue that PWC found that, even without the cross-subsidy, large general service users, like SSI, would pay a lower tariff rate. If anything, respondents argue, SSI and PPC have paid too much, rather than too little, for their electricity purchases from PEA, and therefore there can be no countervailable benefit. In addition, respondents claim that, at verification, the Department was unwilling to tackle the complicated and highly technical issues in analyzing the electricity allegations. They also argue that the Department's requests, at verification, for PEA to demonstrate that, without the internal subsidy, the tariff rate was still sufficient for it to meet the required financial criteria were complicated and confusing, and could not be accomplished in perfect detail in a quick turnaround. Petitioners argue that record evidence does not support respondents' conclusion that covering costs establishes the adequacy of remuneration. Petitioners specifically note that, at verification, PEA was unable to demonstrate that its high overall costs derive from the cost of serving rural villages and agricultural pumping stations, not Large General Service users, like SSI and PPC. Further, petitioners note that the claims that PEA was profitable during the POI and would have been able to meet its own financial criteria without the deduction from the bulk supply tariff were essentially unverified. Department's Position: As discussed above, EGAT generates and transmits electricity to MEA, which distributes electricity to the Bangkok Metropolitan area, and to PEA, which distributes electricity to the rest of Thailand. All three of these authorities are owned by the RTG. EGAT charges MEA and PEA the same bulk supply tariff rate; however, it then requires MEA to pay a surcharge on its purchases of electricity and it provides PEA a deduction on its purchases of electricity. It is only through this surcharge and deduction that the tariff rates charged to PEA's customers are sufficient to cover PEA's marginal costs and to meet its financial criteria. With respect to respondents' argument that the Department has used an unprecedented price discrimination analysis which did not consider the RTG's price-setting from a national perspective, which is how pricing policy is made, we note that, for this final determination, we have not relied on a price discrimination analysis. Moreover, we have examined the RTG's price setting policy, and find that, in theory, it meets the precepts of market principles (i.e., each of the three RTG electricity authorities must ensure that the tariff rate is sufficient to meet marginal costs and required financial criteria). In implementation, however, social criteria (including the promotion of economic activity outside of the Bangkok area), have been given precedence over these market principles. Consequently, it was necessary for the Department to examine whether the provision of electricity by PEA was at tariff rates that reflect adequate remuneration. With respect to respondents' argument that the PWC Report shows that the categories in which SSI and PPC are classified (large and medium general service users) generate revenues in excess of their marginal costs, we note that the RTG itself requires the tariff rate to be sufficient to cover not only marginal costs, but also to meet specific financial criteria (see RTG Verification Report at 15, and also NEPO Report at 2 and 7). Furthermore, contrary to respondents' argument, the Department has not ignored the recommendation in the PWC Report that electricity charges to large general service users should be reduced, we simply do not find it probative of whether the RTG, through PEA, is receiving adequate remuneration for the electricity sold in the region. One of the conditions imposed by the RTG on PWC in undertaking its review of electricity tariffs was that the uniform national tariff rate be maintained. As such, PWC did not examine the issue of what rates PEA should or would charge to any of its customer classes in the absence of this policy, and whether they should or would be different from the rates charged by MEA. Regarding respondents' arguments concerning the Department's verification, we note that our requests were based on verifying the RTG's questionnaire responses that it had received adequate remuneration in the provision of electricity to the region served by PEA. Furthermore, the RTG itself has a requirement in place that each electricity authority be able to cover its marginal costs and to meet the specified financial criteria (RTG Verification Report at 15, "NEPO officials stated that the first three World Bank criteria have been adopted by . . . NEPO as the basis for evaluating whether the tariff rate is sufficient"). Because the RTG has a pricing philosophy for electricity that incorporates the precepts of market principles set forth in our regulations (i.e., setting of prices that are sufficient to cover costs and to ensure future operations (see Preamble at 65378)), the Department had to examine at verification whether the RTG, in the actual provision of electricity in the region served by PEA, met this pricing philosophy without the internal subsidy. Thus, the Department asked the officials at verification to undertake the same type of analyses that they stated the electricity authorities undertake in analyzing the sufficiency of the tariff rates (see RTG Verification Report at 15), but to factor out the internal subsidy. Since the electricity authorities are required to undertake this type of analysis on a regular basis (albeit with the subsidy included), we do not think that the Department's request was either complicated or confusing, and, as documented in the verification report, we provided the authorities with several opportunities to prepare the requested information. Each time they presented the analyses, the results either changed, or the officials did not provide the requested supporting calculations or documentation. Thus, the RTG was not able to demonstrate that, without the internal subsidy, the tariff rates charged by PEA are sufficient to meet the pricing philosophy of the RTG, and as discussed, above, the Department has applied facts available in determining the benefit from the provision of electricity. We also disagree with respondents' argument that PWC concluded that, even without the cross-subsidy between MEA and PEA, large general service users would pay a lower rate. Our review of the NEPO report, to which respondents cite, indicates that the cross-subsidies to which PWC referred are those within and across the customer categories at the retail level, not the lower rates that PEA pays on the bulk supply tariff in order for the retail tariff rate to be sufficient to cover marginal costs and meet the required financial criteria. As such, we find the following statement in the NEPO report (NEPO is the RTG authority that contracted PWC to undertake the review of the electricity tariffs) to be more probative of whether PEA is receiving adequate remuneration from the electricity tariff charged to users in the region, "{s}ince the supply costs of the two distribution utilities are different while the uniform retail tariff is applied nationwide, the financial transfers from the MEA to the PEA are, therefore, essential so that the financial status of the two utilities would meet the specified criteria." (NEPO report at p. 23 submitted as Exhibit J-8 to the RTG February 6, 2001 questionnaire response)." Thus, the NEPO Report supports the conclusion that, without the internal subsidy to PEA, PEA would not be able to meet its required financial criteria and cover its marginal costs under the uniform national tariff rate structure, and would have to charge higher tariff rates to its customers. Therefore, based on the evidence on the record, we are not able to conclude that electricity in the region served by PEA is provided at prices that reflect adequate remuneration. Comment 13: PEA's Financial Performance and Adequacy of Remuneration Respondents argue that EGAT's and PEA's significant operating profits in 1999 should be sufficient to demonstrate the adequacy of their remuneration. Indeed, respondents note that both agencies were able to return large remittances to the Ministry of Finance. Furthermore, PEA made a profit in 1999 even without the EGAT transfer price discount. Respondents note that only the extraordinary foreign exchange losses in 1999 turned EGAT and PEA operating profits into net losses and that these losses resulted from changes in accounting practices concerning unforeseeable exchange losses in 1997 as a result of foreign borrowings. Between 1995 and 1999, 1999 is the only year in which either agency experienced net losses, and respondents note that these losses are extraordinary, and directly attributable to the change in accounting policies to recognize the exchange losses from an earlier period. Regardless of these extraordinary losses, both agencies were required to make remittances to the Ministry of Finance. Respondents argue that these extraordinary losses also affect the assessment of whether the rates of return are sufficient to ensure future operations. However, even with the lower transfer price charged to PEA, and the extraordinary losses, EGAT's performance, measured against the World Bank lending criteria, met one of the required financial criteria in 1999. Finally, respondents maintain that the Department has received and verified enough information to determine that PEA's prices to SSI and PPC allow for an adequate rate of return. Even without the EGAT discount, in 1999, PEA realized net operating income and paid a large remittance to the Ministry of Finance. Petitioners note that the Department was unable to verify respondents' claims that the PEA was profitable and able to meet the financial criteria without the deduction and surcharge to the bulk supply tariff. Therefore, petitioners argue, these claims cannot form the basis for a finding of adequacy of remuneration. Department's Position: As discussed in the Department's Position on the prior comment, the RTG has developed a pricing philosophy for its electricity authorities. The tariff rate must be sufficient for the authority to cover marginal costs and to meet the specified financial criteria. PEA could not demonstrate that without the internal subsidy that it receives, the tariff rates it charges would meet the specified financial criteria. Thus, whether or not EGAT and/or PEA made a profit in any given year (and we do not necessarily agree with respondents' statements that we should only consider operating profits and not the profit, or in this case, the loss, after all adjustments) or made remittances to the Ministry of Finance, neither is sufficient to undermine an analysis based on the RTG's own price-setting philosophy for determining the sufficiency of its electricity tariffs; tariff rates must cover all marginal costs and meet the specified financial criteria. Comment 14: Provision of Electricity and Adjustment of Benefit Respondents argue that, should the Department continue to countervail electricity, it should adjust the calculations to exclude electricity which SSI purchases from PEA and resells to other users. This adjustment should be made, respondents maintain, because SSI has separate electric meters in place, the meters are calibrated by PEA, and the electricity is resold to the other users at precisely the rates the other users would pay if they purchased electricity directly from PEA. Respondents cite to section 351.525(b)(5) of the Department's regulations to support their contention that, because these onward electricity sales represent electricity use which is not tied to the production of subject merchandise, any benefits associated with this electricity use should be excluded from the Department's calculations. Petitioners argue that respondents have not demonstrated that SSI derived no benefit from these subsidized electricity purchases. Moreover, they argue that SSI has not demonstrated that these benefits are tied to non- subject merchandise. As such, petitioners argue that no calculation adjustment is warranted. Department's Position: The tying arguments presented by both parties are inapposite. As explained in the Preamble to the regulations, " {o}ur tying rules are an attempt at a simple, rational set of guidelines for reasonably attributing the benefit from a subsidy based on the stated purpose of the subsidy or the purpose we evince from record evidence at the time of bestowal" (63 FR 65403, emphasis added). The Preamble also makes clear that we will ". . . not trace the use of subsidies through a firm's books and records. Rather we analyze the purpose of the subsidy based on information available at the time of the bestowal." Our tying rules follow the legislative history in H.R. Rep. No. 96-317 at 74-75 (1979). They also reflect the guidance provided in section 771(5)(C) of the Act, the Statement of Administrative Action at 926, and section 351.503(c) of the regulations which provide that the effect of a subsidy on a firm is not considered in determining whether there is a benefit to the firm. The time of bestowal for electricity is the point at which PEA provides the electricity. SSI is the only entity to which PEA is providing the electricity, and at the point of bestowal, PEA does not direct or require SSI to sell it or distribute it to any other entities. Thus, the subsidy is not tied to non-subject merchandise and there is no basis for adjusting the benefit calculation because SSI decides, on its own accord, that it will resell some of the electricity it purchases from PEA. Furthermore, the respondents, in effect, are requesting that the Department offset the amount of the subsidy provided to SSI by these resales. Such an offset is not permitted under the Act. Section 771(6) expressly limits any adjustments to the gross countervailable subsidy to: application fees, loss in value of the subsidy due to deferred receipt of the subsidy, and export taxes or duties. Thus, what a company chooses to do with a subsidy it receives is not relevant to our determination of the amount of the benefit (see also discussion on benefit, Preamble, at 65361). Accordingly, no adjustment was made in calculating the benefit from the provision of electricity. Comment 15: CDRAC List of 351 and De Facto Specificity Petitioners note that the purpose of the specificity test is to "function as an initial screening mechanism to winnow out only those foreign subsidies which truly are broadly available and widely used throughout an economy." Uruguay Round Agreements Act, Statement of Administrative Action, H.R. Doc No. 103-316 at 929 (SAA). Further, the specificity test is only intended to avoid the absurd result of imposing countervailing duties on subsidies "available to all industries and sectors," such as "public roads and bridges." Carlisle Tire & Rubber Co. v. United States 564 F. Supp. 834, 838 (Ct. Intel Trade, 1983). Subsidy benefits are specific if the allocation of the subsidy has the ability to distort the allocation of resources within an economy. Thus, a subsidy is specific if government laws or regulations limit its use; if in fact, it is used by an industry or a limited group of industries; if in fact an industry or a limited group of industries receives a dominant share of the benefits; if in fact an industry or a limited group of industries receives a disproportionate share of the benefits of the subsidy compared to its contribution to the economy; or if the government exercises its discretion such that the distribution is otherwise capable of misallocating resources. In each instance, the allocation of resources within an economy can be distorted. Petitioners argue that the steel industry's and SSI's representation on the list is disproportionate in relation to their share of Thailand's GDP. Petitioners argue that SSI's restructured loans provided benefits that are not like public highways and bridges. The benefits here, according to petitioners, are limited both by specific government action and in fact to a very limited industry or group of industries. Further, petitioners note that the SAA speaks of specificity as a "rule of reason . . . to avoid the imposition of countervailing duties in situations where, because of the widespread availability and use of a subsidy, the benefit of the subsidy is spread throughout an economy." SAA at 930 (italics original, underlining added). Thus, according to petitioners, the statute directs the Department not to consider the distribution of the financial contribution alone, but the distribution of the subsidy - the "benefit" from the "financial contribution" under section 771(5)(B) of the Act. Petitioners argue that this is consistent with the purpose of the specificity test to identify subsidies capable of distorting allocation of resources within an economy. More precisely, petitioners argue that SSI is part of a limited group of companies that benefitted from having their debts restructured despite their commercial unviability. Petitioners argue that SSI was not viable and gained access to restructuring in the first place because of the application of the Bangkok Approach, which diverged sharply from the London Approach, on which it was reportedly based. The London Approach, according to petitioners, is a model for market-based debt restructuring under which the government plays no role in determining which creditors or debtors receive priority attention, and companies considered commercially unviable without the effects of the financial crisis are not to be kept afloat through restructuring. Petitioners argue that the correct application of the London Approach would not have resulted in non-viable companies, like SSI, being named to the list. Further, petitioners assert that the non-viable companies named to the list of 351 constituted a limited group of enterprises or industries, and there is no evidence that a large number of the 351 debtors were non-viable for reasons independent of the Thai financial crisis. Respondents maintain that the Department verified that the list shows that debt restructuring was not targeted to SSI or the steel industry. The list includes a wide range of industries segregated into eight broad categories: manufacturing, real estate, public utilities, services, commerce, banking and other financial business, mining and quarrying, and agriculture and forestry. After reviewing the list, respondents note, the Department found information which is dispositive evidence that neither SSI nor the steel industry are disproportionately represented on the list. According to respondents, the verification reports of the independent experts indicated that the RTG did not target particular companies or industries in the CDRAC process. Respondents add that petitioners failed to address the role of the IMF in developing this process, and that petitioners made an unsupported claim that steel was the single largest industry on the list. Respondents state that this claim that steel was the single largest industry on the list is irrelevant to arguing disproportionality or to otherwise assessing specificity, and is inapplicable in this investigation because a comparison cannot be made using a static list of 351 companies and the economy of Thailand of undefined scope. Furthermore, respondents note that the Department verified that SSI and the steel industry were not disproportionately represented on the list of 351, a point which respondents illustrated by comparing the total debt from the first two lists to Thailand's national debt. Petitioners rebut respondents' point by noting that the questions relevant to specificity and the list of 351 hinge in part on whether SSI and PPC were among a limited number of companies named to the list on a non-commercial basis given that they were commercially non-viable for reasons unrelated to the financial crisis; on whether steel was disproportionately represented on the list or in the group of debtors actually restructured during 1999; and, on whether benefits were made available to debtors on a specific basis. Petitioners take issue with respondents' calculation of the portion of total debt accounted for by the steel industry on the list, and note that petitioners' calculated figure is higher, indicating that respondents' calculation understates the true value of steel industry debt in that it excludes some steel industry debt. This higher figure, according to petitioners, demonstrates specificity. Petitioners also reject respondents' conclusion that independent experts dispelled the idea that there was targeting in developing the CDRAC list, noting that targeting is not a requirement of the specificity test, and that the opinions of the independent sources were mixed and include statements indicating that the RTG did intervene to put favored companies on the list. Finally, petitioners believe that respondents' provision of information related to the list does not overcome the requirement that the Department rely on adverse facts available in finding debt restructuring to be specific. Respondents argue that petitioners' claim, that the Bangkok Approach sharply diverged from the London Approach because viability was not determined before a company was named to the list of 351 or underwent debt restructuring, is misleading. According to respondents, the verification and independent expert reports establish that the Bangkok Approach was modeled on the London Approach and did not operate to induce or compel banks to restructure the debts of unviable companies. Furthermore, respondents state that before a debt restructuring plan was proposed, a company's viability was determined by an independent financial expert. Citing to one of the independent experts, respondents added "that while accountants are always tasked with the job of commenting on a company's viability, the determination in these cases, were left to the creditors." Respondents state that SSI's and PPC's debt restructuring was achieved outside the CDRAC process and were not bound by the DCA, and they argue that these debt restructurings rested on an independent financial expert report. Department's Position: The Department's analysis of the list of 351 firms, which is based on information obtained at verification and on the record of this proceeding, indicated the following: the RTG-led CRDAC group named numerous companies in a wide array of industries to the original and subsequent lists developed during the POI; no one industry represented a disproportionate amount of the debt on the list; and, companies were named to the list based on neutral and objective criteria that were established in consultation with the IMF as part of broader commitments to economic reform in Thailand. The detail of each of these issues is discussed in the SSI and PPC Debt Restructuring analysis section above. We identified several industries within the list of 351 using the Industrial Standard of Industrial Classification (ISIC) code at the two-digit level. Although a certain number of industries on the list, including the primary metal industry of which SSI is a part, may be seen as constituting a meaningful portion of the debt, these industries did not represent a disproportionate or overwhelming amount of the overall debt restructuring. As noted above in the analysis section, the Department was also able to examine publicly available information related to all of the debt restructuring lists issued by the CDRAC from March 1999 through April 2001. This examination further supports our finding that no one industry or company was targeted or accounted for a disproportionate or dominant amount of the restructuring of debt in either the original or subsequent lists. While we do not disagree with petitioners that in programs such as economy-wide debt restructuring, it is permissible to use a GDP analysis to inform our examination of whether such debt restructuring was provided disproportionately to an enterprise or industry, we do not find that the petitioners' analysis is reasonable or appropriate. Petitioners compare the percentage that SSI's debt represented of all the debt on the list of 351, to the percentage that SSI contributes to the overall Thai GDP. First, the figure that they use for SSI's contribution to GDP is only the value added by labor because SSI has large losses. They provide no basis for why labor value added should be considered a reliable surrogate for a company's actual contribution to the GDP. Even assuming that labor value added would be an appropriate surrogate for determining SSI's contribution to the GDP, the percentage that the petitioners state that SSI represented of the total debt on the list exceeds the percentage that the Department has calculated based on verification that SSI itself represented of the total debt on the list of 351. See List of 351 Memo on file in CRU. Thus, petitioners are not making an apples to apples comparison because they are comparing SSI's contribution to the GDP with something more than the percentage that SSI represents of the total debt on the list of 351. When the appropriate figure for SSI's debt is used, the difference between SSI's contribution to the GDP and the percentage that SSI represents of total debt is relatively small. Although the Court of Appeals for the Federal Circuit has found such GDP analysis to be a reasonable methodology, it has noted that "{d}eterminations of disproportionality and dominant use are not subject to rigid rules, but rather must be determined on a case-by-case basis taking into account all the facts and circumstances of a particular case." See AK Steel Corp. v. United States, 192 F.3d 1367, 1385 (Fed. Cir. 1999). In the instant case, petitioners themselves point to the difficulty of assessing SSI's contributions to Thailand's gross domestic product as a result of the company losses sustained by SSI. See petitioner's April 5, 2001 submission on SSI's debt restructuring at 31. Given the large amount of NPLs found throughout the Thai economy, similar difficulties would arise in using such GDP analysis as the basis for determining whether the steel industry received a disproportionate share of benefits resulting from the restructuring of debt. Furthermore, there are other facts on the record, as discussed in the "Debt Restructuring" section above, that outweigh the value of the proposed GDP analysis in determining whether SSI's debt restructuring was specific. The Department agrees with petitioners' argument that the representation of viable companies on the list should be considered in determining whether a limited sub-group of debtors disproportionately benefitted from non- commercial debt restructuring in light of the failure of the Bangkok Approach to consider a company's viability. However, we have no evidence on the record that indicates that the RTG was able to use the CDRAC process to discretely single-out SSI or any other allegedly non-viable company which might have been named to the list. In fact, we do find that the "Framework for Corporate Debt Restructuring in Thailand" (the guidelines espoused by the Bangkok Approach), specifically addresses the need for an analysis of the long-term viability of the debtor without reliance on short-term concessions. Furthermore, this framework states that viability should be determined by an "independent and reputable accountant or other expert as nominated by the creditors to undertake appropriate due diligence," in order to meet "{t}he provision of credible and reliable financial and operational information {that} is essential in determining the future viability of the affected business." See the Bangkok Approach Agreement, Exhibit 17 of the RTG's Questionnaire Response (February 6, 2001). SSI did undertake such due diligence, and its creditors were provided an independent report of SSI's financial condition to assist in the debt restructuring process prior to SSI being named to the list of 351 firms. See SSI Verification Report at 16. The report itself, which was provided as Exhibit 10 of the SSI Verification Report, indicates that the projected financial statements and assumptions are appropriate as the basis for developing a debt restructuring plan. Id. at 18. Therefore, we find that the issue of SSI's viability was addressed even though the CDRAC may have failed to directly evaluate these issue themselves in the naming of these companies to the list. Comment 16: Objective and Neutral Criteria, and RTG Discretion Other evidence which supports a finding of specificity, according to petitioners, is that benefits were not distributed based on "neutral and objective" criteria. Petitioners note that subsidies are not specific when provided through automatic eligibility determined by the evaluation of objective criteria which are neutral, economic in nature and horizontal in application. Although companies were reportedly named to the list because of their large debts and their multi-creditor situations, petitioners note the presence of what appears to be numerous smaller companies which indicates that these criteria were not objectively applied. Petitioners further argue that, even setting aside the characteristics of the 351 companies named to the list, debt restructuring is specific because the list of 351 debtors was plainly a limited group of enterprises, especially in light of the hundreds of thousands of debtors in Thailand eager for debt restructuring at the time. Petitioners argue that the conferral of debt restructuring benefits is wholly discretionary, and RTG officials used their discretion to steer benefits to the steel industry and to SSI. Petitioners maintain that the benefits extended to SSI through its debt restructuring were the result of a negotiation in which company officials sat on one side of the table and government representatives sat on the other. Petitioners argue that government officials enjoyed discretion in determining who would have access to early restructuring, and what particular terms would be offered to each debtor once restructuring talks were underway. Petitioners offer as evidence of this discretion the RTG's repeated identification of the steel industry as a "targeted" industry of national importance; the BOI's contribution as a facilitator of SSI's restructuring; and senior personnel linkages between SSI and the RTG's Financial Sector Restructuring Authority (FRA). This use of discretion in developing the list is also evident, according to petitioners, in the over-representation of the steel industry on the list; SSI's presence on the list despite its non-viability for reasons unconnected to the financial crisis; and the granting to SSI of loans terms vastly more favorable than those available under a benchmark loan. Respondents contend that the Department's verification of the list employed several different approaches and resulted in no finding that SSI or the steel industry was targeted by the RTG. Department's Position: As noted above in the SSI and PPC Debt Restructuring section above, the RTG's criteria for debt restructuring were objectively applied in accordance with the recommendations of the IMF, as reflected in the BOT's LOI number 5, and discussed in the minutes of CDRAC's seventh board meeting. With respect to petitioners' observation that numerous smaller companies were included in the list contrary to the enumerated criteria, the BOT officials did provide the Department a reasonable explanation as to their inclusion. See RTG Verification Report at 25. We disagree with petitioners' argument that the initial list of 351 companies itself limits the participation to a specific group of enterprises. As noted above in the SSI and PPC Debt Restructuring analysis section, we find that the companies on the list represent numerous and diverse industries. Further, our finding is also supported by our examination of the number of companies and industries reflected in the 1,694 cases named by CDRAC during the POI alone, and our consideration of the fact that cases were being added and the number reached 2,845 by April 2001. There is no evidence in the record which would support a finding that the government played a role in negotiating SSI's debt restructuring, or in determining the particular terms that would be offered to each debtor. As pointed out to the Department at verification, SSI's banks were not provided any guidance by the RTG with respect to focusing on any specific industry sector for debt restructuring, nor did the Department find any evidence that the RTG engaged in any meaningful discussions with SSI's creditors. See Experts Memoranda. In describing the attempts made by SSI's banks and finance companies to negotiate the actual terms of SSI's debt restructuring deal, no reference was made of any RTG involvement in the negotiation process. See SSI Verification Report at 17-18. Finally, the uniform opinion of the independent experts that we interviewed at verification, as noted above, was that the CDRAC did not target any specific industry group. Comment 17: SSI's BOI Certificate and Debt Restructuring Petitioners argue that SSI was among a limited group of enterprises to have its debt restructuring facilitated with a BOI certificate. According to petitioners, SSI's specific BOI investment-promotion certificate constituted a government facilitation of its debt-restructuring and SSI's certificate encouraged restructuring on more favorable terms. Moreover, petitioners contend that such certificates were not generally available and that SSI's certificate resulted from government actions specific to SSI. Petitioners claim that the BOI rejected suggestions that it issue such certificates more widely to facilitate debt restructuring generally. Thus, petitioners argue, the advantage to certificate-holders like SSI was maintained and even enhanced. Department's Position: We agree with petitioners that SSI, as a BOI promoted company, received BOI incentives during the POI. We have determined that these benefits are specific and countervailable as a result of the manner in which the certificate was originally provided. See Incentives Under the Investment Promotion Act, above. However, we do not find the petitioners' arguments concerning the nexus between SSI's BOI incentives and SSI's restructuring to be persuasive. The BOI's decision not to offer incentives on a wider basis to assist in the overall debt restructuring after the economic collapse cannot be a basis for determining that companies like SSI, which had been approved for its BOI privileges well before its restructuring, received advantages from their pre-existing BOI privileges in their debt restructuring. Comment 18: Specificity and Facts Available Petitioners argue that SSI's debt restructuring is specific based on adverse facts available. Petitioners contend that the respondent failed to disclose the "full" details of the list which prevents an analysis of the application of the large debtor and multicreditor criteria in its creation. Petitioners assert that the RTG withheld requested information, failed to cooperate fully, and did not act to the best of its ability, impeding the Department's analysis of specificity such that the Department is permitted by section 776(b) to use an adverse inference to determine that benefits from debt restructuring are specific. Petitioners argue that respondents' claim that disclosure of the requested information is prohibited by Thai law is unsubstantiated because the RTG did not provide documents supporting this claim, and that, even under the alleged prohibition, disclosure of the requested information is allowed with the consent of parties. Petitioners maintain that the RTG reasonably could have obtained consent and provided the requested information. In addition, petitioners contend that the confidentiality of requested information is not a legally valid ground for refusing to provide information, as the Department's APO regulations are designed to protect such information. Petitioners assert that respondents' provision, during verification, of a truncated list of debtors in no way cures respondents' failure to supply the information requested. Petitioners contend that the list presented at verification lacked much of the information necessary to do a complete specificity analysis, i.e., precise terms of the new (restructured) loans extended to various debtors and industries, so that a comparison of benefits conferred to various industries and enterprises (and groups thereof) could be conducted in order to examine the consistency with which the "multicreditor" criterion and other criteria were applied in the creation of the list. Petitioners assert that the list provided contains no information on the outcome of the restructuring process for any debtor, or industry, or group thereof, nor does it indicate which debtors had multiple creditors. As evidence of the inadequacy of the information included in the version of the list provided by respondents at verification, petitioners note that PPC was not classified as a "steel" company in the list, and the debts of one of SSI's affiliates, a steel producer, were excluded from the steel totals in the list. Respondents maintain that they have overcome the information deficiency which formed the basis of the Department's use of adverse facts available for determining specificity in the Preliminary Determination. Respondents note that the list of 351 debtors was provided for the Department's review at verification, and argue that the Department verified that the list demonstrates that debt restructuring was not targeted at SSI or at the steel industry. Further, respondents maintain that the list includes a wide range of industries segregated into eight broad categories: manufacturing; real estate; public utilities; services; commerce; banking and other financial business; mining and quarrying; and, agriculture and forestry. Respondents argue that the Department's review of the list showed that the steel industry and SSI, by their shares of the total debt on the list, are not disproportionately represented, and therefore the information on the list is dispositive of non-specificity. Respondents refute petitioners assertions that the RTG failed to cooperate during the verification by not providing precise terms of the restructured loans that were extended to various debtors and industries. According to respondents, the RTG does not have this information since the debt restructurings were independently negotiated, and it would be impossible for the RTG to acquire such information when more than 300,000 debt restructurings have occurred in Thailand since the financial crisis. Respondents state that petitioners' claim that respondents' worksheet for the list of 351 was specifically prepared for use in this investigation is a false statement given the Department's extensive review of these documents during verification. Department's Position: Respondents provided the Department complete access to the list of 351 at verification which allowed the Department to obtain the information necessary to complete a specificity analysis. The list of 351 firms provided information such as: the name of the company; the company's status as to whether it had signed a DCA agreement or not; the industry or ISIC code that the company was included in; the debt amount of each company; and, the name of each company's largest creditor. Furthermore, the list organized each case under the following outcomes: completed cases; unsuccessful cases; cases of legal action; and, those cases involving normal loans. See RTG Verification Report at 24. All of the Department's requests at verification for additional information and documentation related to the list were met by the RTG. In response to petitioners' contention that PPC was improperly classified, we found that PPC was correctly classified as water transportation infrastructure. See RTG Verification Report at 25. In conducting a specificity analysis, it is not the Department's standard practice to examine the specific terms of each loan as the basis for comparing benefits among various industries and enterprises as suggested by petitioners. The Department's normal practice is to examine the distribution of the number of loans to determine whether recipients are limited in number and to examine tha amount of the loans to determine; if one recipient in particular is a predominant user; or, if a disproportionate amount is received by one recipient. In addition, we have no reason to suspect that the RTG maintains this type of information since their direct involvement in the negotiation of these agreements appears limited given the totality of evidence on the record of this investigation. Comment 19: SSI Loans before Debt Restructuring and Creditworthiness of PPC Petitioners argue that the Department undervalued the benefits to SSI by failing to calculate the benefit arising from SSI's loans prior to the completion of the debt restructuring. Petitioners also argue that since the Department correctly used an uncreditworthiness benchmark to calculate SSI's debt restructuring benefits, the Department also should use an uncreditworthiness benchmark to calculate PPC's debt restructuring benefits, as PPC was plainly uncreditworthy at the time. Department's Position: Since we have found SSI's debt restructuring not specific to an enterprise, industry, or group thereof, we need not address petitioners' argument with respect to calculating any alleged benefit prior to SSI's debt restructuring, or for using an uncreditworthiness benchmark to calculate PPC's alleged benefit arising from debt restructuring. Comment 20 : Benefit from Restructured Loans from Private Creditors Petitioners argue that countervailable subsidies arise from restructured loans provided to SSI by private creditors. Petitioners maintain that there were three independent inducements by which the RTG "entrusted or directed" the private creditors' actions. First, according to petitioners, the RTG led a debt restructuring exercise in which government creditors themselves contributed handsomely. Petitioners cite to Certain Steel Products from Germany, 58 FR 37315, 37320 and 37323 (July 9, 1993), in which the Department found that the government took the lead in organizing the private creditors to rewrite loan contracts on terms more favorable to the borrower. Second, petitioners maintain that the RTG made government capital available to the private creditors as a reward for their compliance with CDRAC priorities and in such a way as to induce the provision of soft loans and equity infusions to SSI. The third category of inducement, according to petitioners, is that the BOI promotion certificate provided waivers of taxes and customs duties. Petitioners argue that this certificate facilitated the early restructuring of its holder. Petitioners reject as unpersuasive respondents' argument that because SSI achieved its restructuring outside the CDRAC process, the existence of the CDRAC process is irrelevant. Petitioners argue that the record shows that even the private element of SSI's debt restructuring was heavily influenced by the RTG. Department's Position: Since we have found SSI's debt restructuring not specific to an enterprise, industry, or group thereof, we need not address petitioners' argument with respect to calculating any alleged benefit arising from restructured loans provided to SSI by its private creditors as a result of RTG inducements. Comment 21: Benefit from Private Creditors' Loans and Equity Infusions Petitioners argue that the extension of loans by private creditors and the conversion of SSI's debentures into equity provided a benefit to SSI in that these actions were inconsistent with the usual investment practices of private investors. Because SSI was both uncreditworthy and unequityworthy, according to petitioners, both the loans and the conversions to equity provide benefits. Department's Position: Since we have found SSI's debt restructuring not specific to an enterprise, industry, or group thereof, we need not address petitioners' argument with respect to calculating any alleged benefit arising from loan or equity conversions provided to SSI on allegedly non-commercial terms by its private creditors and bondholders. Comment 22: RTG Financial Contribution and SSI's Debt Restructuring Petitioners argue that the new loans provided by SSI's creditors qualify as government financial contributions because the lenders included several banks and finance companies which were under government control and acted on behalf of the RTG at the time of the debt restructuring process. In addition, petitioners argue that the BOI's involvement constitutes a parallel line of government action, inasmuch as SSI's promotional certificate from the BOI played a substantial role in causing and shaping the company's debt restructuring. Respondents argue that the Department verified that there was no government financial contribution evident in SSI's debt restructuring. Respondents note that SSI's debt restructuring was achieved on commercial terms, through a protracted negotiation, and with financial institutions that were acting in their commercial self-interest, regardless of their government or private ownership. According to respondents, SSI's creditors forced the restructuring of its debt to protect their commercial interests; the Department thoroughly verified every detail and found no instance of RTG influence or control; these were true commercial negotiations, involving several independent financial advisors and consultants, which ultimately required the approval of the private bondholders; several proposals were made and many rejected, and each new proposal imposed tougher requirements on SSI; every party, including the creditors with RTG ownership, was seeking to advance their own commercial interests; and, SSI came out no better or worse with its private creditors than with those taken over by the RTG. Respondents maintain that the negotiating history itself reveals no direct or indirect financial contribution from the RTG. With respect to PPC's debt restructuring, respondents note that it, too, involved an independent financial advisor, multiple proposals by both parties as a result of the negotiation process, and monetary disputes. Again, according to respondents, the Department found no direct or indirect financial contribution by the government at verification. Petitioners rebut each of respondents' arguments. Petitioners question the independence of the outside experts whom the Department consulted, and note that their views are "mixed" and include several statements indicating that the RTG did intervene. Petitioners dismiss respondents' point regarding the commercial nature of the conversion of foreign debt to baht as irrelevant. Petitioners note that the inclusion of SSI's BOI privileges in the independent financial review shows that the BOI privileges constitute a government inducement of the debt restructuring. Petitioners also dismiss respondents' claim that SSI's banks hoped to avoid direct write-offs of debt. However, according to petitioners, this did not eliminate the banks losses in net present value (NPV) associated with the debt restructuring, which should be considered as benefits to SSI. Petitioners dismiss respondents' claim that, at verification, the Department found no RTG control, in light of the Department's Preliminary Determination that there was "ownership and control sufficient to support a conclusion that the provision of restructured loans by government-owned or controlled creditors constitutes a financial contribution" (66 FR at 20258), and the verification which confirmed these findings. Petitioners argue that the approval of the private bondholders is irrelevant, because the bondholders would have wanted the creditors to write down their loans and take large NPV losses. Petitioners note that respondents' claim that SSI's requirements got tougher at each stage of the negotiations is unsubstantiated by the record. On the contrary, in petitioners' view, the verification reports show that SSI's creditors which were government-owned steadily improved their terms; and, that SSI's creditors not yet under the control of the government became more generous after the government- control was established during the process. Petitioners dismiss respondents' claim as sheer speculation that the creditors vigorously pursued their own commercial interest, and note the personnel relationships between SSI and its creditors during the debt restructuring process. Respondents argue that there is no evidence to support petitioners' claims of a financial contribution by the government in the debt restructuring of SSI and PPC. Respondents cite to the RTG Report (at 26) in which BOT officials explained that "{i}f {the DCA and ICA} were not signed, the BOT was not included in these meetings and monitored the progress of the negotiations from a distance." Department's Position: Since we have found SSI's debt restructuring was not specific to an enterprise, industry, or group thereof, we need not address petitioners' arguments with respect to alleged benefits arising from SSI's government- owned and allegedly government-controlled banks, or derived from allegedly favorable debt restructuring as a result of its BOI promotional certificates. Comment 23: Financial Contribution: The Bangkok Approach and CDRAC Petitioners argue that the CDRAC is an RTG-created and controlled entity which rewarded SSI's and PPC's creditors with generous doses of Tier 1 capital that can be considered RTG financial contributions to SSI. Petitioners note that two of SSI's creditors participated in the CDRAC process by signing inter-creditor agreements, and thereby, were eligible to receive this additional Tier 1 capital. Respondents contend that the CDRAC was formed to adopt resolutions to augment the existing BOT debt restructuring guidelines, and to encourage more negotiations between the creditors and debtors. However, according to respondents, the CDRAC's initial efforts were ineffective due to the complex nature of dealing with debt involving multiple creditors. Therefore, the CDRAC adopted a voluntary framework known as the Bangkok Approach (based on principles outlined in the London Approach) to encourage debt restructuring. Respondents claim that this was unsuccessful. Subsequently, respondents contend that the inter-creditor and debtor-creditor agreements (ICA and DCA, respectively) were created in order to get creditors and debtors to independently negotiate debt restructuring without substantive RTG involvement. None of these aforementioned initiatives, according to respondents, constituted a government financial contribution to debt restructuring, and even if they did, it would be irrelevant, as SSI's and PPC's debt restructurings were achieved outside the CDRAC process (SSI did not sign a DCA). Respondents contend that petitioners' assertion that the RTG made governmental capital available to private creditors in order to reward compliance with CDRAC priorities and guidelines, is not based on fact. Respondents argue that petitioners are unable to link the RTG's general, IMF-directed recapitalization efforts to any specific RTG involvement in the debt restructurings of SSI and PPC. Likewise, respondents claim that petitioners fail to provide any evidence of RTG involvement or influence in SSI's bond-to-equity conversions since these conversions were voted on and approved by the private bondholders acting in their own commercial interests. Respondents reject petitioners' claim that the RTG influenced the negotiated terms of the debt restructurings in a manner beneficial to the companies. According to respondents, CDRAC is an organization which is led and controlled by creditor and debtor representatives who used neutral criteria to develop long lists of potential participants, such as SSI and PPC. Respondents claim that the verification reports contain no evidence to support petitioners' claim of RTG influence over the terms of the debt restructurings. Finally, respondents note that CDRAC was occasionally informed of the status of these negotiations as a "courtesy gesture," and that the BOT inquired on the status of all the debt restructuring and recommended legal proceedings against non-cooperative debtors. Respondents maintain that these actions hardly constitute a sufficient causal nexus for the Department to determine that the RTG exercised influence or control, directly or indirectly, over the debt restructurings of SSI and PPC, which essentially constituted a financial contribution to SSI and PPC. In their view, the financial contributions are the loans and equity infusions provided in mid- 1999, by government-owned or -controlled financial institutions or by private creditors entrusted or directed by the RTG. Department's Position: Since we have found SSI's debt restructuring was not specific to an enterprise, industry, or group thereof, we need not reach the issue of whether the terms of SSI's and PPC's debt restructuring conferred a benefit and financial contribution from the government as a result of the alleged direct or indirect actions of the RTG through the CDRAC or its Tier 1 recapitalization program. Comment 24: Terms of SSI's and PPC's Debt Restructuring Confer Financial Contribution from the RTG Petitioners argue that the new government loans given to SSI provided a benefit in the form of softened loan terms that were advantageous to SSI: increased access to debt restructuring would otherwise have been unavailable to SSI given its unviable condition, and by virtue of its early identification on CDRAC's initial debt restructuring list. Petitioners note that the Department had found in its Preliminary Determination that the loan terms provided a benefit. According to petitioners, the government-controlled entities should be considered secured creditors given that they were in a position to assert a priority claim on the proceeds from the sale of SSI's assets. This fact would have influenced the creditors' behavior, and in petitioners' view, set a ceiling on their tolerance for NPV losses in the debt restructuring. Petitioners also reject respondents' assertion that the loans were provided on the same terms as those accepted by the private creditors, which indicates that the government-controlled creditors were acting on commercial terms. In fact, petitioners argue, the actions of the government-controlled creditors and the RTG resulted in the private creditors being entrusted or directed to extend new loans to SSI at the same soft terms, giving rise to additional countervailable benefits. Respondents reject petitioners' claim that SSI's debt restructuring was in effect, a new loan, and that some of its creditors were government- controlled financial institutions. According to respondents, verification showed that SSI's debt restructuring did not involve any new loans but was a restructuring of existing loans which allowed SSI to remain in operation and repay its debts. Respondents contend that there is no evidence of government influence or control in the debt restructuring negotiations between SSI and its creditors, or that SSI's debt restructuring was provided on non-commercial terms. SSI's banks are described by respondents as being private, or in the cases where some of SSI's banks had RTG ownership, still acting independent of the government in the making of their financial decisions. In addition, respondents note that these banks agreed to the same loan terms as the other finance companies involved in the restructuring of SSI's loans, and because these banks were not bound by the State Employees Liability Act (a statute which holds state employees personally liable for losses of state assets), they cannot be viewed as RTG entities. Respondents also contend that the banks acted in their own interest in pressuring SSI to convert its foreign currency loans to baht, and were opposed to any debt forgiveness because it would harm the financial standing of the banks. In addition, the banks used an independent financial advisor to help develop SSI's restructuring plan. Finally, respondents argue that petitioners' reliance on Certain Steel Products from Germany: Final Affirmative Countervailing Duty Determination, (58 FR 37315, 37320, and 37323; July 9, 1993), is irrelevant because there are no facts on the record of this investigation that indicate that SSI's private debt forgiveness was required by the government, as was true in the cited case. Respondents note that in the case of SSI's affiliate, PPC, PPC's bank acted in accordance with normal private banking practices without RTG involvement in PPC's debt restructuring. As evidence of this, respondents cite to the verification report which indicates that PPC's creditor is not subject to the State Employees Liability Act, and acted independently in refusing multiple PPC debt restructuring proposals. Respondents argue that there is no record evidence that either company received a benefit as a result of being on the CDRAC list of 351. Respondents cite to the verification interviews with six independent experts to confirm that being included on the list of 351 provided no advantage to a debtor during its debt restructuring negotiations. Respondents note that one of the experts explained that it was common for the debt restructuring terms to include interest holidays and low interest rates that gradually increased over the loan period. In addition, the CDRAC process was described as being completely voluntary, with the identification process being driven by the banks and the recommendations of CDRAC committee members who had knowledge of the particular debtors. Respondents cite to the statement of one expert who noted that no major companies with NPLs avoided being identified by CDRAC, and that the negotiations and terms of the restructured debt were decided by the banks, themselves. In addition, respondents refer to the statements of another expert who characterized the RTG's involvement as a "hands-off" approach that helped banks by pressuring debtors to proceed with debt restructuring. Finally, respondents contend that their was no evidence that being named on the list of 351 influenced the success or the terms of the restructuring, especially in the case where companies did not sign the debtor-creditor agreements (DCA), such as SSI and PPC. Department's Position: Since we have found SSI's debt restructuring was not specific to an enterprise, industry, or group thereof, we need not reach the issue of whether the terms of SSI's and PPC's debt restructuring conferred a benefit and financial contribution from the government as a result of: alleged direct or indirect influence or control by the RTG over the debt restructuring negotiations between SSI and its creditors; CDRAC's early naming of SSI and PPC as companies listed for debt restructuring; and, SSI's and PPC's debt restructuring being provided on non-commercial terms. VII. Total Ad Valorem Rate We have revised the net subsidy rate that was calculated in the Preliminary Determination. The revised subsidy rate for SSI is 2.38 percent ad valorem. VIII. Recommendation Based on our analysis of the comments received, we recommend adopting all of the above positions. If these recommendations are accepted, we will publish the results of the final determination in the Federal Register. __________ __________ Agree Disagree ______________________ Faryar Shirzad Assistant Secretary for Import Administration ______________________ Date