[Federal Register: May 14, 2001 (Volume 66, Number 93)]
[Notices]
[Page 24329-24339]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-428-829; C-421-809; C-412-821]
Notice of Preliminary Affirmative Countervailing Duty
Determinations and Alignment With Final Antidumping Duty
Determinations: Low Enriched Uranium From Germany, the Netherlands, and
the United Kingdom
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Preliminary Affirmative Countervailing Duty
Determination.
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EFFECTIVE DATE: May 14, 2001.
FOR FURTHER INFORMATION CONTACT: Robert Copyak (Germany) at (202) 482-
2209, Stephanie Moore (the Netherlands) at (202) 482-3692, and Eric B.
Greynolds (United Kingdom) at (202) 482-6071, Office of AD/CVD
Enforcement VI, Group II, Import Administration, International Trade
Administration, U.S. Department of Commerce, Room 4012, 14th Street and
Constitution Avenue, NW., Washington, DC 20230.
Preliminary Determination
The Department of Commerce (the Department) preliminarily
determines that countervailable subsidies are being provided to
producers and exporters of low enriched uranium (subject merchandise)
from Germany, the Netherlands, and the United Kingdom. For information
on the estimated countervailing duty rates, please see the ``Suspension
of Liquidation'' section of this notice.
SUPPLEMENTARY INFORMATION:
Petitioners
The petition in this investigation was filed by USEC Inc., its
wholly-owned subsidiary, United States Enrichment Corporation (USEC),
and Paper, Allied-Industrial, Chemical and Energy Workers International
Union, AFL-CIO, CLC, and Local 5-550 and Local 5-689 (collectively
PACE) (the petitioners).
Case History
Since the publication of the notice of initiation in the Federal
Register (see Notice of Initiation of Countervailing Duty
Investigations: Low Enriched Uranium from France, Germany, the
Netherlands, and the United Kingdom, 66 FR 1085 (January 5, 2001)
(Initiation Notice)), the following events have occurred: Beginning on
January 16, 2001, we issued countervailing duty questionnaires to the
Government of Germany (GOG), the Government of the Netherlands (GON),
and the Government of the United Kingdom (UKG).\1\ Beginning on March
22, 2001, we received questionnaire responses from Urenco Deutschland
GmbH of Germany (Urenco Deutschland), Urenco Nederland BV of the
Netherlands (UNL), and Urenco (Capenhurst) Limited (UCL), the GOG, the
GON, and the UKG (collectively referred to as respondents). Beginning
on April 9, 2001, we issued supplemental questionnaires to respondents.
Beginning on April 23, 2001, we received supplemental questionnaire
responses from respondents.
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\1\ Upon the issuance of the questionnaire, we informed the GOG,
GON, and the UKG that it was their governments' responsibility to
forward the questionnaires to all producers/exporters that shipped
subject merchandise to the United States during the period of
investigation.
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On February 21, 2001, we issued an extension of the due date for
this preliminary determination from March 2, 2001 to May 7, 2001. See
Low Enriched Uranium from France, Germany, the Netherlands, and the
United Kingdom: Extension of Time Limit for Preliminary Determinations
in Countervailing Duty Investigations, 66 FR 11000 (February 21, 2001)
(Extension Notice).
On May 3, 2001, consultations in accordance with Article 13.2 of
the Agreement on Subsidies and Countervailing Measures were held in
Geneva, Switzerland with the Governments of Germany, the Netherlands,
the United Kingdom, and the Delegation of the European Commission.
In our Initiation Notice, we invited interested parties to comment
on the scope of these investigations. We received comments from
respondents on January 17, 2001, and from petitioners on January 23,
2001. In addition, we received comments from the Ad Hoc Utilities
Group, an industrial user/consumer, on April 5, 2001. Our analysis of
these comments can be found in the May 7, 2001 Public Memorandum to
Bernard Carreau, entitled Low Enriched Uranium from France, Germany,
the Netherlands and the United Kingdom; Comments on the Scope of the
Investigations, on file in the Central Records Unit, room B-099, of the
Main Commerce Building.
Petitioners' New Subsidy Allegations
On April 23, 2001, petitioners submitted a new subsidy allegation
involving Urenco Deutschland, UNL, and UCL (collectively referred to as
the Urenco Group). In their submission, they alleged that the one-third
ownership obtained by British Nuclear Fuels Limited (BNFL) and Ultra-
Centrifuge Nederland (UCN) along with the shareholder loans made by the
two government-owned companies constituted equity infusions into the
Urenco Group, which they assert was unequityworthy at the time the
alleged infusions were made. In support of their allegation,
petitioners cite to various annual reports of BNFL, UCN, and
Uranitisotopentrennungsgeselleschaft mbH (Uranit) (the privately-held
German arm of the Urenco Group) as well as several corporate studies
which they claim indicated a bleak outlook for the LEU industry in the
years preceding the impending merger. In addition, petitioners claim
that, prior to the merger there was no objective evidence before BNFL
or UCN indicating that the planned restructuring and merger would do
anything to improve the efficiency and financial prospects of the
companies involved. On this basis, petitioners request that the
Department investigate whether the investments constituted
countervailable equity infusions into an unequityworthy company.
We have determined not to initiate an investigation of this
allegation. As discussed in further detail below in the ``Urenco Group
Corporate History'' section, immediately preceding the creation of the
Urenco Group, the enrichment operations were controlled by BNFL in the
United Kingdom, UCN in the Netherlands, and Uranit in Germany. Both
BNFL and UCN were owned and controlled by their respective governments
while Uranit was privately-held. On September 1, 1993, pursuant to the
terms of the merger agreement, BNFL, UCN, and Uranit transferred their
enrichment operations to the Urenco Group. In return, BNFL, UCN, and
Uranit each received a one-third ownership interest in the Urenco
Group. Thus, based on the information submitted by respondents, we find
that this aspect of the merger did not constitute an equity infusion
but rather represented a restructuring of the Urenco Group in which the
three companies, BNFL, UCN, and Uranit,
[[Page 24330]]
contributed their respective assets in return for one-third ownership
of the Group.
In addition to the allegation involving the E23 asset write down,
which we are addressing in this preliminary determination, on April 27
and 30, 2001, petitioners made an allegation with respect to the
Netherlands and the United Kingdom involving an additional asset write
down. We are not addressing this allegation in this determination due
to the lateness of the allegation. We will address it after this
determination. If we decide to initiate on this allegation then prior
to making our final determination, we will issue a preliminary analysis
memorandum regarding this allegation and allow the parties to comment.
Scope of the Investigation
For purposes of these investigations, the product covered is low
enriched uranium (LEU). LEU is enriched uranium hexafluoride
(UF6) with a U235 product assay of less than 20
percent that has not been converted into another chemical form, such as
UO2, or fabricated into nuclear fuel assemblies, regardless
of the means by which the LEU is produced (including LEU produced
through the down-blending of highly enriched uranium).
Certain merchandise is outside the scope of the investigation.
Specifically, this investigation does not cover enriched uranium
hexafluoride with a U235 assay of 20 percent or greater,
also known as highly enriched uranium. In addition, fabricated LEU is
not covered by the scope of these investigations. For purposes of this
investigation, fabricated uranium is defined as enriched uranium
dioxide (UO2), whether or not contained in nuclear fuel rods
or assemblies. Natural uranium concentrates
(U3O8) with a U235 concentration of no
greater than 0.711 percent and natural uranium concentrates converted
into uranium hexafluoride with a U235 concentration of no
greater than 0.711 percent are not covered by the scope of the
investigation.
The merchandise subject to these investigations is classified in
the Harmonized Tariff Schedule of the United States (HTSUS) at
subheading 2844.20.0020. Subject merchandise may also enter under
2844.20.0030, 2844.20.0050, and 2844.40.00. Although the HTSUS
subheadings are provided for convenience and U.S. Customs purposes, the
written description of the merchandise under investigation is
dispositive.
In our notice of initiation we invited parties to comment on scope
issues raised by these investigations. These comments are addressed in
a scope memo dated May 7, 2001. However, to the extent that some of the
comments on scope issues re-argue the determination of industry support
for the petition, we draw parties attention to section 702(c)(4)(E) and
732(c)(4)(E) which states in pertinent part: ``after the administering
authority makes a determination with respect to initiating an
investigation, the determination regarding industry support shall not
be reconsidered.''
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to the Department's regulations are to the
regulations codified at 19 CFR Part 351 (2000).
Injury Test
Because Germany, the Netherlands, and the United Kingdom are
``Subsidy Agreement Countries'' within the meaning of section 701(b) of
the Act, the International Trade Commission (ITC) is required to
determine whether imports of the subject merchandise from these
countries materially injure or threaten material injury to a U.S.
industry. On January 31, 2001, the ITC published its preliminary
determination finding that there is a reasonable indication that an
industry in the United States is being materially injured, or is
threatened with material injury, by reason of imports from Germany, the
Netherlands, and the United Kingdom of subject merchandise. See Low
Enriched Uranium from France, Germany, the Netherlands, and the United
Kingdom, 66 FR 8424 (January 31, 2001).
Alignment With Final Antidumping Duty Determination
On May 4, 2001, petitioners submitted a letter requesting alignment
of the final determination in these investigations with the final
determinations in the companion antidumping duty investigations.
Therefore, in accordance with section 705(a)(1) of the Act, we are
aligning the final determination in these investigations with the final
determinations in the antidumping duty investigations of low enriched
uranium from Germany, the Netherlands, and the United Kingdom.
Period of Investigation
The period of investigation (POI) for which we are measuring
subsidies is January 1, 1999, through December 31, 1999.
Urenco Group: Corporate History
Pre-Merger
Prior to the Treaty of Almelo, the production group of the U.K.
Atomic Energy Authority (UKAEA) was responsible for the U.K. enrichment
program. BNFL was created from the existing assets of UKAEA. The
Capenhurst site assets and all of the British centrifuge enrichment
development work were transferred to BNFL. In the Netherlands, UCN was
incorporated in November 1969, as a limited company, with the Dutch
government holding 55 percent and the remaining 45 percent held by
various industrial interests. UCN was designated by the Dutch
government to develop ultracentrifuge technology for uranium enrichment
in the Netherlands. By the time the Treaty of Almelo (the Treaty) came
into effect in 1971, Germany already had two centrifuge companies
dedicated to the enriched uranium industry: Gesellschaft fur
Nuklearverfahrestechnik mbH (GnV), which was involved in centrifuge
development and manufacturing and plant design; and Uranit, which took
over earlier R&D and cascade work. Both companies were owned by private
industrial shareholders.
Treaty of Almelo
In March 1970, the GOG, the GON, and the UKG signed the Treaty,
which became effective in July 1971. The purpose of the Treaty was for
the three governments to collaborate in the development and
exploitation of the gas centrifuge process for producing enriched
uranium. Prior to 1971, the centrifuge R&D programs in each country
were independent.
Pursuant to Article 1(2) of the Treaty, the three governments
agreed that there should be two ``joint industrial enterprises'' to
carry out the centrifuge collaboration: one to conduct R&D and to
design and build centrifuge equipment, and the other, an enrichment
organization to own and operate the enrichment plants and market the
output. Centec GmbH was established in Germany, its shareholders being
BNFL, UCN and GnV, to conduct R&D and plant design work. Urenco Ltd.,
located in the U.K., gained responsibility for the marketing. Urenco
Ltd. was incorporated in September 1971, and its shareholders were
BNFL, UCN and Uranit.
In addition, in 1971, the production organization had two
established partnerships. The first was Urenco
[[Page 24331]]
(U.K.), a partnership under English Law, between BNFL (75 percent), UCN
(12.5 percent) Uranit (12.5 percent), and Urenco Ltd. with a nominal
share. The second was the Dutch partnership, Urenco Nederland v.o.f.,
which then consisted of UCN (43.75 percent), Uranit (43.75 percent),
BNFL (12.5 percent), and Urenco Ltd. with a nominal share. In the late
1970s, a third partnership, Urenco Deutschland was established under
German law. The partners were Uranit (96 percent), BNFL and UCN with
two percent shares each, and Urenco Ltd. with a nominal share. In 1980,
ownership in Urenco Nederland v.o.f. changed; UNC and Uranit increased
their share in the company to 49 percent each, while BNFL reduced its
participation to 2 percent. Likewise, for Urenco (U.K.), BNFL's share
increased to 96 percent, while UCN and Uranit decreased their
participation to two percent each.
In preparation for the merger, each of the three operating
partnerships was combined and their assets transferred into a limited
company, owned in each case by the managing partner. Specifically, BNFL
changed the name of its subsidiary BNFL Enrichment Ltd. to Urenco
(Capenhurst) Ltd. (UCL), and transferred to UCL the relevant portion of
the Capenhurst site, buildings and equipment related to the enrichment
business. The activities of the former Urenco Nederland v.o.f.
(enrichment) and of UCN (centrifuge manufacturing) were transferred
into a new company, Urenco Nederland B.V. (UNL). At the request of
Uranit, the German shareholder, the enrichment plant was initially
leased to Urenco Deutschland on a basis comparable to UCL and UCN. Each
of these limited companies became the sole owner of the relevant
plants, including the sites, buildings, R&D facilities and centrifuge
manufacturing.
1993 Merger
Subsequently, in September 1993, the Urenco operations in the three
countries were merged.\2\ This was accomplished by a two-step process
whereby the partnerships in each country were collapsed and replaced by
newly created limited companies, UCL of the United Kingdom managed by
International Nuclear Fuels Limited (INFL), BNFL's wholly-owned
subsidiary, Urenco Deutschland of Germany managed by Uranit, and UNL of
the Netherlands managed by UCN and Uranit. The limited companies became
the sole owners of the enrichment facilities. On September 1, 1993, the
voting shares of the limited companies were transferred to Urenco Ltd.
in exchange for one-third interest in Urenco. Therefore, Urenco Ltd.,
became the parent company and, indirectly, ultimate owner of the
plants, R&D facilities, and centrifuge manufacturing facilities.
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\2\ Respondents have argued that this merger constituted a
``change in ownership'' under section 771(5)(F) of the Act. However,
in both the Netherlands and the UK, the assets at the enrichment
operations were directly owned by their respective governments
before the merger and indirectly after the merger. We preliminarily
determine that there was no change in ownership in 1993 but merely a
merging and restructuring of assets by the three Urenco Group
partners, i.e., the Government of the Netherlands, the Government of
the United Kingdom, and the private German shareholders of the
Group, each of whom remained as owners in Urenco Ltd.
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Joint Committee
Pursuant to Article II 5(e) of the Treaty, a Joint Committee of
government representatives was created to ensure that the terms of the
Treaty were carried out. Through the Joint Committee and under the
Treaty, each of the member countries had to give their consent and
approval for the merger. Since the merger, Urenco Ltd. provides status
reports to the Joint Committee twice a year. These reports include a
description of operations, volume of production and secured service
contracts as well as any health and safety issues, and capacity
extension and major production milestones.
Post Merger
Urenco Ltd. is a private limited company which wholly owns four
subsidiary companies: UCL, Urenco Deutschland, UNL and Urenco Inc.
(UI). Urenco Ltd. owns 100 percent of the voting shares and exercises
control over the subsidiaries. Urenco Ltd. functions as the
``headquarters'' for the Urenco Group and is also the worldwide
marketing arm of the Urenco Group. The Board of Directors (Board) is
made up of four Executive Directors, ten non-Executive Directors, nine
of which are appointed by the shareholders of Urenco and one of which
is elected by the board as an independent Director. The Board meets
four times a year, during which it sets major policies, monitors
financial performances, and monitors the performance of the executive
directors. The Board is further divided into three sub-committees: The
Executive Board, which is responsible for conducting day-to-day
management, the Remuneration Committee, which decides the terms of
employment and remuneration of the Executive Directors, and the Audit
Committee.
UCL, Urenco Deutschland, UNL
While Urenco Ltd. is responsible for the marketing and contracting
of the Urenco Group, it is the responsibility of each of the
subsidiaries to produce and deliver the product based upon the
contractual terms. The day-to-day responsibilities of running the
operations, meeting the agreed targets and implementing the group
strategies lies with each of the companies. Each of the companies
continues to provide the enrichment products sold by Urenco Ltd. While
the enrichment facilities were transferred to the managing partnerships
and then to Urenco's subsidiaries, local business activities were not
transferred to Urenco Ltd. and are not shared across the group. Each
company within the Urenco Group is a separate legal entity, with its
own directors and senior management team; however, they work under the
direction and in close co-operation with the Executive Board.
International Consortium
As discussed above, the Treaty of Almelo was signed in 1970 by the
Governments of Germany, the Netherlands, and the United Kingdom in
order to collaborate in the development and exploitation of the gas
centrifuge process for producing enriched uranium. Towards this end,
the three governments provided subsidies for the research and
development of gas centrifuge technology and for the construction and
support of enrichment production operations. For example, the GOG
provided grants specifically to help construct enrichment plants used
by the Urenco Group in the Netherlands and the United Kingdom. Further,
as a result of the 1993 merger, each of the respective participants in
Germany, the Netherlands, and the United Kingdom owns a one-third
interest in Urenco Ltd. Therefore, given that the Treaty of Almelo was
specifically entered into by the three governments to produce and sell
the subject merchandise and that each of these participating companies
share R&D, as well as share in the production and marketing of the
subject merchandise, we preliminarily determine that such an
arrangement constitutes an international consortium.
Under section 701(d) of the Act, if the members of an international
consortium engaged in the production of the subject merchandise receive
countervailable subsidies from their respective home countries to
assist, permit, or otherwise enable their participation through
production or manufacturing operations in their respective home
countries, then
[[Page 24332]]
the Department will cumulate all such countervailable subsidies, as
well as subsidies provided directly to the international consortium, in
determining any countervailing duty upon such merchandise. Based upon
the information on the record, section 701(d) of the Act is applicable
to these investigations. As explicitly instructed by Congress in the
legislative history of this provision, section 701(d) of the Act ``is
applicable to cases in which foreign governments provide subsidized
assistance for participation in international production and marketing
ventures.'' \3\
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\3\ H.R. No. 100-576, 100th Cong., 2d Sess. 589 (1988)
(``Omnibus Trade and Competitiveness Act of 1988,'' Conference
Report) (Conference Report).
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Therefore, because we find the Urenco Group of companies to
constitute an international consortium, pursuant to section 701(d) of
the Act, we have cumulated all countervailable subsidies received by
the member companies from the GOG, GON, and the UKG in order to
calculate one countervailing duty rate applicable to the production and
exportation of the subject merchandise from this consortium.
Subsidies Valuation Information
Allocation Period
Under section 351.524(d)(2) of the Department's CVD Regulations, 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 (IRS Tables), 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 is significant. In this instance,
however, the IRS Tables do not provide a specific asset guideline class
for the uranium enrichment industry.
In their questionnaire responses, the Urenco Group companies have
calculated company-specific AULs by dividing their respective
aggregate, annual, average gross book values of their depreciable
productive fixed assets by their aggregated annual charge to
accumulated depreciation for a ten-year period in the manner specified
by section 351.524(d)(2)(iii) of the CVD Regulations. Based on this
calculation, Urenco Deutschland reports an AUL of 13 years, UNL reports
an AUL of 12 years, and UCL reports an AUL of 10 years. Based on
information submitted by respondents, we have preliminarily used
company-specific AUL data when calculating the AUL of the Urenco Group.
As discussed above, we preliminarily determine that the companies
of the Urenco Group operate as an international consortium within the
meaning of section 701(d) of the Act. We note that our decision to
apply the international consortium provision affects the manner in
which we must calculate the AUL in this investigation. The legislative
history clarifies the application of that provision. It points out that
the amendment, i.e., section 701(d) of the Act, explicitly authorized
the Department to ``* * * cumulate the amounts of subsidies from all
{participating countries in an international consortium} in determining
the relevant countervailing duty to be applied to the product subject
to that investigation.'' See Conference Report at 589. Thus, consistent
with the Congressional intent, which directed the Department to
cumulate the subsidies received from countries in an international
consortium, we have calculated a single AUL for the Urenco Group by
weight-averaging the company-specific AULs of the Urenco Group
companies by their respective total average gross book values. On this
basis, we derived an AUL of 12 years for the Urenco Group.
We note that at verification we will closely examine the AUL
information submitted by the Urenco Group companies. In addition, we
welcome any comments interested parties may have with regard to our
approach on this issue.
In the Initiation Notice, we stated that, with respect to
petitioners' allegations regarding UNL's receipt of certain research
and development (R&D) subsidies, we would determine during the course
of this investigation whether the provisions of section
351.524(d)(2)(iv) of the CVD Regulations should apply to this case. See
page 14 of the December 27, 2000, Initiation Checklist, the public
version of which is on file in room B-099 of the main Commerce Building
(Initiation Checklist). Section 351.524(d)(2)(iv) of the CVD
Regulations states that under certain ``extraordinary circumstances''
the Department may consider an allocation period other than the AUL or
it may determine that the benefit stream of a non-recurring subsidy
should begin at a date other than the date at which the subsidy was
bestowed. In the Preamble to the CVD Regulations, we explain that when
a government provides a subsidy to fund the development of certain new
technologies, or to fund an extraordinarily large project for the
development of new products that encompasses not only basic research
and development, but also implementation and commercialization, the
duration of the benefit may not necessarily be related to the AUL of
assets for that industry. See the Preamble, 63 FR 65348, 65396
(November 25, 1998). We further state in the Preamble that there could
be a significant lead time between receipt of the subsidy and
development of the product and the product's commercialization. We have
explained that, in those instances, even if we were to rely on the AUL
of assets, there is a question as to whether the benefit stream should
begin at the time the grant is received or at the time the product
reaches commercial production. Id. at 65396.
As stated above, we have preliminarily determined that the AUL for
the Urenco Group companies is 12 years. Thus, in using a 12-year AUL,
1988 marks the last year in which one of the Urenco Group companies
could have received a non-recurring grant and still have those
subsidies be allocable to the POI. With respect to R&D subsidies
received by the Urenco Group companies, namely those of UNL and Urenco
Deutschland, in which the application of the ``extraordinary
circumstances'' provision under section 351.524(d)(2)(iv) of the CVD
Regulations might have been an issue, we note that all of the
production plants for which the R&D subsidies were received began
commercial production prior to 1988. In other words, even if the
Department were to apply the ``extraordinary circumstances'' provision
under section 351.524(d)(2)(iv) of the CVD Regulations to the R&D
subsidies received by the Urenco Group companies, the use of a 12-year
AUL would result in the benefit streams of the respective subsidies
being fully allocated prior to the POI. Accordingly, we preliminarily
determine that section 351.524(d)(2)(iv) of the CVD Regulations is not
relevant to this case.
Benchmarks for Loans and Discount Rate
In accordance with section 351.524(d)(3)(i)(A) of the CVD
Regulations, we used, where available, discount rates that were based
on the cost of long-term, fixed-rate financing for commercial loans
received by the Urenco Group companies. Where the
[[Page 24333]]
Urenco Group companies had no comparable commercial loans, we used
national average interest rates as provided by the companies'
corresponding government as specified by section 351.505(a)(3)(ii) of
the CVD Regulations. In addition, we note that one countervailable
program used by the Urenco Group required the use of discount rate
benchmarks denominated in several foreign currencies. In those
instances where the Urenco Group did not report a comparable,
commercial discount rate benchmark for a particular foreign currency,
we used currency-specific ``Lending Rates'' from private creditors as
published in the International Financial Statistics as the foreign
currency denominated discount rate.
Treatment of the Denominator
Based on our review of the responses, it appears as though
respondents did not report a value for the natural uranium component of
certain LEU sales. Therefore, in order to determine more accurately the
level of subsidy applicable to the subject merchandise, we have
estimated a value for this component. Based on petitioners' estimation
that the enrichment component accounts for 60 percent of the value of
LEU, we have increased the reported sales value to include an estimated
value for the natural uranium component. We recognize that this is an
estimate of the value of LEU sold by respondents. We intend to seek
additional information from respondents prior to our final
determination.
I. Programs Preliminarily Determined To Confer Subsidies From the
Government of Germany
A. Enrichment Technology Research and Development Program
Under this program, the Government of Germany promoted the research
and development of uranium enrichment technologies. The Federal
Ministry for Research and Technology provided Urenco Deutschland a
series of grant disbursements for the funding of research and
development projects. The funds were provided to encourage continuous
improvements of centrifuge technologies and to fund the research of
lasers and other advanced technologies. The grant disbursements under
this program were made during the years 1980 through 1993. The total
amount of grant disbursements made under both this program equaled DM
244.3 million.
Assistance under this program was provided for in two agreements
entitled ``Financing Agreement'' and ``Terms and Conditions for
Allocations on a Cost Basis to Companies in Industry for Research and
Development Projects' (Laser R&D Agreement). According to Article 4,
Section 6, of the Financing Agreement, the funds provided to Urenco
Deutschland under this agreement had repayment obligations. The funds
were repayable within five years of disbursement, contingent upon the
company's earnings. If the funds were not repaid within five years,
then the repayment obligation lapsed. The second agreement covered
grants for laser enrichment R&D. Under the Laser R&D Agreement, the
obligation to make repayment began three years after the project's
completion, and repayment was to be made in five equal annual
installments. However, the obligation for repayment would be terminated
if the objective of the project was not achieved. According to the
responses of both the company and the government, no portion of any of
the disbursements received by Urenco Deutschland was repaid.
We preliminarily determine that the assistance provided under this
program constitutes countervailable subsidies within the meaning of
section 771(5) of the Act. The grant disbursements constitute a
financial contribution and confer a benefit, as described in sections
771(5)(D)(i) and 771(5)(B) of the Act. Also, we preliminarily determine
that this program is specific under section 771(5A)(D)(i) of the Act
because provision of assistance under this program was limited to one
company. In addition, we preliminarily determine that this program
provided non-recurring benefits to Urenco Deutschland under section
351.524(c)(2) of the CVD Regulations because the assistance provided to
Urenco Deutschland was made pursuant to specific government agreements
and was not provided under a program that would provide assistance on
an ongoing basis from year to year.
Under the Financing Agreement, there was a contingent repayment
obligation attached to each of the grant disbursements. Within the
first five years of receipt of the funds, Urenco Deutschland had an
obligation to repay the government contingent upon the company's
earnings. At the end of the five-year period, the repayment obligation
expired. Because the company was no longer obligated to repay the
assistance, the amount of the funds disbursed became a grant equal to
the amount of the disbursement. Consistent with our treatment of
``contingent liabilities,'' we determine the year of receipt of the
grant to be the year in which the five-year time frame for repayment
expired, that is, the fifth year from the day the funds were disbursed
to the company. (See e.g., the treatment of the ``Export Promotion
Capital Goods Scheme'' in the Final Affirmative Countervailing Duty
Determination: Certain Cut-to-Length Carbon-Quality Steel Plate From
India, 64 FR 73131 (December 29, 1999); and ``Government Debt
Forgiveness in 1989'' in the Final Affirmative Countervailing Duty
Determination: Certain Hot Rolled Lead and Bismuth Carbon Steel
Products From Germany, 58 FR 6233 (January 27, 1993)). With respect to
the grant disbursements made under the Laser R&D Agreement, we find
that the obligation for repayment ended when the GOG terminated the
project in 1993 because it was determined the project would not achieve
commercial results. Therefore, consistent with our treatment of
contingent liabilities, we determine that the R&D funds provided under
this Agreement should be treated as grants having been received in 1993
when the repayment obligation effectively ended.
In order to calculate the benefits received under this program, we
first determined the total amount of grants provided each year under
both the Financing Agreement and the Laser R&D Agreement. We then
applied the Department's standard grant methodology and allocated the
grants over the AUL. See the allocation period discussion under the
``Subsidies Valuation Information'' section, above. We used as our
discount rates the long-term corporate bond rates in Germany because
the grants were denominated in Deutschmarks. We then summed the
benefits received by Urenco Deutschland during 1999, from each of the
grant disbursements. We then divided the total benefit attributable to
the POI by the Urenco Group's total sales for the POI.\4\ On this
basis, we preliminarily determine the countervailable subsidy rate
under this program to be 0.77 percent ad valorem for the Urenco Group.
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\4\ Because we have determined that the Urenco Group constitutes
an international consortium as defined by section 701(d) of the Act,
we have calculated the ad valorem rates by dividing the benefits
received by the companies of the Urenco Group by the applicable
sales denominator of the Urenco Group.
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B. Forgiveness of Centrifuge Enrichment Capacity Subsidies
In accordance with the ``Risk Sharing Agreement'' and the ``Profit
Sharing Agreement'' signed between the GOG and Urenco Deutschland, the
GOG agreed to provide funds to Urenco Deutschland to support the
promotion of an uranium enrichment industry.
[[Page 24334]]
These two Agreements were signed on July 18, 1975. Under the Risk
Sharing Agreement and the Profit Sharing Agreement, the GOG provided
contributions totaling DM 338.3 million to Urenco Deutschland in
support of the Treaty of Almelo's goal of creating and promoting the
enrichment industry. An amount of DM 158.8 million was provided during
the years 1980 through 1993 with regard to expanding the enrichment
capacity of the Urenco Group. Prior to 1980, the GOG provided Urenco
Deutschland with a total amount of funds equal to DM 179.5 million,
which was used for the construction of enrichment facilities in Almelo
and Capenhurst.
Under the terms of the assistance provided by the GOG under the
Risk Sharing Agreement and Profit Sharing Agreement, the funds were
conditional in that Urenco Deutschland was required to make repayments
to the GOG based upon the financial performance of the company.
However, in no case was the amount of the total repayments to exceed
twice the amount of the funds provided to Urenco Deutschland by the GOG
under these Agreements. Repayment obligations were of indefinite
duration. During the years 1980 through 1992, Urenco Deutschland made
repayments to the GOG equal to DM 5.6 million.
In 1987, Urenco Deutschland and the GOG signed an Adjustment
Agreement, under which the GOG would be relieved of providing further
funding under the program and Urenco Deutshland's repayment obligations
would be capped at MDM 370.
According to the response of the company, with the 1993 merger of
the Urenco Group enrichment operations, the German enrichment operation
would be merged with its counterparts in the Netherlands and the United
Kingdom. Prior to the merger, the GOG and Urenco Deutschland negotiated
a basis to terminate the repayment obligations of the Risk Sharing
Agreement and the Profit Sharing Agreement. Based upon the negotiations
between the GOG and Urenco Deutschland, a ``Termination Agreement'' was
signed on July 13, 1993, and amended on October 27, 1993. Under the
terms of the Termination Agreement, Urenco Deutschland was to pay the
government DM 101.1 million in final payment of the funds provided
under the Risk Sharing and Profit Sharing Agreements. With this payment
under the Termination Agreement, the repayment obligations under the
Risk Sharing and Profit Sharing Agreements terminated. On July 1, 1994,
the entire amount of the DM 101.1 million was repaid by the company to
the GOG.
We preliminarily determine that assistance provided under this
program to Urenco Deutschland is specific under section 771(5A)(D)(i)
of the Act because the program was limited to one company. In addition,
we determine that a financial contribution was provided under section
771(5)(D)(i) of the Act. A benefit was also provided to the company,
within the meaning of section 771(5)(E) of the Act to the extent that
the repayments made to the GOG were less than the amount of assistance
provided to the company under this program.
Under this program, the company was provided with a total of DM
338.3 million in repayable funds and was obligated in a 1987 Agreement
signed with the GOG to repay the GOG DM 370 million for this
assistance. Prior to the Termination Agreement, the company had made
repayments totaling DM 5.6 million. Under the Termination Agreement,
which terminated the company's repayment obligations, Urenco
Deutschland made a final repayment of DM 101.1 million to the
government. However, Urenco Deutschland was obligated to make DM 370
million in repayments for the assistance it received under this
program, but only repaid DM 106.7 million by the time the repayment
obligation was terminated in 1993. Therefore, we preliminarily
determine that the difference, DM 263.3 million, constitutes a grant
provided to Urenco Deutschland in 1993, the year in which the repayment
obligation under the program was terminated. Therefore, we
preliminarily determine that a countervailable benefit was provided to
Urenco Deutschland under this program. Because the termination of the
repayment obligation was a one-time government action, we preliminarily
determine the resultant benefit arising from this program to be non-
recurring under section 351.524(c)(2) of the CVD Regulations.
To determine the benefit conferred by this program during the POI,
we applied the Department's standard grant methodology and allocated
the grant amount of DM 263.3 million over the AUL. See the allocation
period discussion under the ``Subsidies Valuation Information''
section, above. We used as our discount rate the long-term corporate
bond rate in Germany for 1993. We then took the benefit attributable to
Urenco Deutschland during the POI from the grant and divided that
benefit by the Urenco Group's total sales for the POI. On this basis,
we preliminarily determine the net countervailable subsidy under this
program to be 1.98 percent ad valorem for the Urenco Group.
C. Investment Allowance Act
Urenco Deutschland received grants from the GOG under the
Investment Allowance Act. This program is administered by the Federal
Ministry of Economics. Under this program, grants are provided by the
GOG to companies located in identified regional development areas
within the country. Urenco Deutschland received grants under this
program for its enrichment plant in Gronau and for its R&D facility in
Julich. Under the Investment Allowance Act, both Gronau and Julich
qualified as regional development areas. A total of DM 51.403 million
in grant disbursements was received by Urenco Deutschland during the
years 1982 through 1990.
We preliminarily determine this program to be specific under
section 771(5A)(D)(iv) of the Act because grants provided under this
program are limited to companies located in designated regions within
Germany. A financial contribution is also provided by this program
under section 771(5)(D)(i) of the Act. In addition, a benefit is
provided to Urenco Deutschland within the meaning of section 771(5)(E)
of the Act in the amount of grant disbursements it received under this
program. Therefore, we preliminarily determine this program to be
countervailable. We also preliminarily determine that this program
provided non-recurring benefits to Urenco Deutschland under section
351.524(c)(2) of the CVD Regulations because the assistance provided to
Urenco Deutschland was tied to the capital assets of the company and
assistance under this program was not provided on an ongoing basis from
year to year.
To determine the benefit during the POI, we applied the
Department's standard grant methodology and allocated the grants it
received over the AUL. See the allocation period discussion under the
``Subsidies Valuation Information'' section, above. We used as our
discount rate the long-term corporate bond rate in Germany at the time
of the grant approval. We then took the benefit attributable to Urenco
Deutschland during the POI from the grants and divided that amount by
the Urenco Group's total sales for the POI. On this basis, we
preliminary determine the net countervailable subsidy rate under this
program to be 0.18 percent ad valorem for the Urenco Group.
[[Page 24335]]
II. Program Preliminarily Determined To Confer Subsidies From the
Government of the Netherlands
A. Regional Investment Premium
Under the Regional Investment Premium (IPR) program, the GON
provided UCN grants for the expansion of its centrifuge manufacturing
facilities. Grants under this program are only available to companies
located in certain regions of the Netherlands. UCN received four grants
under this program. Although grants under this program were first
approved by the GON in 1982, the disbursement of the grants occurred
during the years 1982 through 1993.
We preliminarily determine that this program is specific under
section 771(5A)(D)(iv) of the Act because grants provided under this
program are limited to companies in designated regions of the country.
A financial contribution is also provided by this program under section
771(5)(D)(i) of the Act. In addition, a benefit is provided to UCN
under section 771(5)(E) of the Act in the amount of grants it received
under this program. Therefore, we preliminarily determine this program
to be countervailable. We also preliminarily determine that this
program provided non-recurring benefits to UCN under section
351.524(c)(2) of the CVD Regulations because the assistance provided to
UCN was tied to the capital assets of the company and the assistance
under this program was not provided on an ongoing basis from year to
year.
To determine the benefit during the POI, we applied the
Department's standard grant methodology and allocated the grants UCN
received over the AUL. See the allocation period discussion under the
``Subsidies Valuation Information'' section, above. We used as our
discount rate the long-term government bond rate in the Netherlands at
the time of the grant approval. The Department took the allocated
benefits received during the POI for the two grant amounts and
converted this amount to Pounds using the average Dutch Guilder to
Pounds exchange rate for the POI. We then took this amount over the
adjusted total sales of Urenco Group. Based on the information on the
record, the Department preliminarily determines that the net
countervailable subsidy rate under this program to be 0.06 percent ad
valorem for the Urenco Group.
III. Program Preliminarily Determined To Confer Subsidies From the
Government of the United Kingdom
A. Assumption of Debt: European Investment Bank Loans
Beginning in 1978, BNFL received four long-term loans from the
European Investment Bank that were guaranteed by the UKG under the
Nuclear Industry (Finance) Act (NIFA). According to UCL's questionnaire
response, the loans were extended to finance the construction of two
enrichment plants at the Capenhurst facility.
As explained above in the ``Urenco Group: Corporate History''
section of this notice, in preparation for the 1993 merger, BNFL
changed the name of its subsidiary BNFL Enrichment Ltd. to UCL, and
transferred to UCL the relevant portion of the Capenhurst site (the
buildings and equipment related to the enrichment business), which
included the buildings that were constructed with the EIB financing.
Though BNFL transferred the enrichment operations to UCL, it retained
the liabilities for the EIB loans that were tied to those facilities.
Because BNFL is owned by the UKG, we find that BNFL's retention of
the EIB liabilities constitutes a government assumption of debt.
Therefore, we preliminarily determine that BNFL's failure to transfer
those liabilities to UCL constituted a financial contribution and
conferred a benefit within the meaning of sections 771(5)(D)(i) and
771(5)(E) of the Act. Furthermore, because the benefit stemming from
this event was limited to UCL, we preliminarily determine that it was
specific to a particular enterprise within the meaning of section
771(5A)(D)(i) of the Act. We note that this approach is consistent with
the approach taken by the Department in past proceedings involving the
assumption or retention of debts that resulted in the bestowal of
countervailable subsidies. See, e.g., Final Affirmative Countervailing
Duty Determination: Stainless Steel Sheet and Strip in Coils From
Italy, 64 FR 30624, 30628 (June 8, 1999).
Under section 351.508(a) of the CVD Regulations, in the case of an
assumption or forgiveness of a firm's debt obligation, a benefit exists
equal to the amount of the principal and/or interest (including
accrued, unpaid interest) that the government has assumed or forgiven.
Furthermore, section 351.508(c) states that the benefit from an
assumption of debt will be treated as a non-recurring subsidy.
Therefore, for purposes of this preliminary determination, we are
treating the benefit attributable to UCL under this program as a non-
recurring subsidy that is equal to the principal payments made by BNFL
after the merger.
According to information in the questionnaire responses of the UKG
and UCL, the transfer of the enrichment operations took place in
September of 1993. Therefore, for purposes of this preliminarily
determination, we are using September 1993 as the date of bestowal. In
addition, in accordance with section 351.508(c) of the CVD Regulations,
we are treating the principal outstanding retained by BNFL as a non-
recurring subsidy received as of the date of the merger.
Because the subsidy amounts were denominated in foreign currencies,
we allocated the subsidies over time in their original currency. We
used as our discount rates the rates discussed in the ``Benchmarks for
Loans and Discount Rate'' section of this notice. Once we allocated the
foreign currency-denominated benefit to the POI, we converted the
benefit amount into pounds using the average annual exchange in effect
during the POI. We then divided the amounts of the benefits
attributable to the POI by the Urenco Group's total sales during the
POI. On this basis, we preliminarily determine the net countervailable
subsidy under this program to be 0.73 percent ad valorem for the Urenco
Group.
IV. Programs Preliminarily Determined Not To Confer a Benefit From
the Government of Germany
Based upon the information in the response, the programs listed
below meet the requirements for specificity and provision of a
financial contribution under the Act.\5\ However, based upon a 12 year
AUL, we have preliminarily determined that no benefit was received
under these programs during the POI.
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\5\ The Regional Government Provision of Industrial Site program
is specific under section 771(5A)(D)(i) of the Act because the
program was limited to one company. A financial contribution was
also provided under section 771(5)(D)(iii) of the Act. The Regional
Development Grant program is specific under section 771(5A)(D)(iv)
of the Act because grants under this program are issued to companies
located in designated regions. A financial contribution is also
provided under section 771(5)(D)(i) of the Act.
---------------------------------------------------------------------------
A. Regional Government Provision of Industrial Site
B. Regional Development Grants
V. Programs Preliminarily Determined Not To Confer a Benefit From
the Government of the Netherlands
Based upon the information in the response, the programs listed
below meet the requirements for specificity
[[Page 24336]]
and provision of a financial contribution under the Act.\6\ However,
based upon a 12 year AUL, we have preliminarily determined that no
benefits were received under these three programs during the POI.
---------------------------------------------------------------------------
\6\ The Centrifuge Enrichment Technology Research and
Development Programs (R&D Program), funding given from 1969 through
1981, and the 1981 Equity Conversion are specific under section 771
(5A)(D)(i) of the Act because these programs are limited to one
company. The R&D program provided a financial contribution under
section 771(5)(D)(i) and the 1981 Equity Conversion Program provided
a financial contribution under section 771(5)(D)(i) of the Act
because we determine that no objective studies of the company had
been prepared prior to the GON's 1981 equity infusion as reuqired
under section 351.5079(a)(4)(ii) of the CVD Regulations.
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A. Centrifuge Enrichment Technology Research and Development
B. 1981 Equity Conversion
VI. Program Preliminarily Determined Not To Confer a Benefit From
the Government of the United Kingdom
A. Regional Development Grants
Based upon the information in the response, this program meets the
requirements for specificity and provision of a financial contribution
under the Act.\7\ However, based upon a 12 year AUL, we have
preliminarily determined that no benefits were received under this
program during the POI.
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\7\ The Department found this program countervailable in Certain
Hot-Rolled Lead and Bismuth Carbon Steel Products from the United
Kingdom: Preliminary Results of Countervailing Duty Administrative
Review, 64 FR 16920, 16923 (April 7, 1999). Affirmed in Certain Hot-
Rolled Lead and Bismuth Carbon Steel Products From the United
Kingdom: Final Results of Countervailing Duty Administrative Review,
64 FR 43673, 43675 (August 11, 1999).
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B. Centrifuge Development Grant
Petitioners alleged that BNFL/E received a grant of
47.8 million from the UKG to fund the development work and
plant construction of a tripartite gas centrifuge project. According to
UCL's questionnaire response, the Centrifuge Development Grant received
by BNFL was repaid in 1987 as a lump sum. Supporting documentation
confirms that in 1987 a payment of 47.5 million was made to
the UKG in full and final settlement of the grant.
We note that information submitted by UCL indicates that it paid
back 47.5 million of the original grant amount of
47.8 million, leaving 300,000 unpaid. Although
this 300,000 could be considered a subsidy to UCL, the
amount is so small that, pursuant to section 351.524(b)(2) of the CVD
Regulations, it would be expensed in the year of receipt, 1987.
Therefore, we preliminarily determine that no benefits were provided
under this program during the POI.
C. Fossil Fuel Levy
Petitioners state that pursuant to the Electricity Act of 1989, the
UKG established a governmental levy known as the Fossil Fuel Levy (FFL)
that was in place from 1990 until the late 1990s. This tax was placed
on electricity sales to make up the difference between the price of
fossil-fuel fired electricity and the cost of nuclear-generated
electricity. Petitioners allege that the portion of the levy received
by the nuclear power companies was dedicated, in principle, to fund the
future decommissioning of the United Kingdom's nuclear electrical power
plants.
UCL states in its questionnaire response that neither Urenco Ltd.
nor UCL was eligible to receive benefits under the FFL. According to
UCL's questionnaire response, the money for the levy was paid out to
generators of electricity from non-fossil fuel sources, such as
producers of nuclear power. UCL states that because Urenco and UCL are
not nuclear generators, they were not eligible to receive monies under
the FFL. They add that BNFL did receive such benefits from the FFL
solely with respect to electricity generated by its Calder Hall
Sellafield Power Station.
We preliminarily determine that this program did not confer
countervailable benefits on subject merchandise during the POI.
According to information in its questionnaire response, BNFL received
FFL levies with respect to a power-generating plant that was not
related to the production or exportation of LEU. Therefore, we
preliminarily determine that any assistance received by BNFL under this
program was tied to non-subject merchandise, and, therefore, did not
provide a benefit to subject merchandise.
D. Forgiveness of Decommissioning Debt
Starting in 1983, the year after the facility ceased operations,
and continuing to the present day, BNFL decommissioned its gaseous
diffusion plant which was located at the Capenhurst enrichment plant.
Petitioners allege that the retention by BNFL of responsibility for
decommissioning the older gaseous diffusion enrichment plant was a
liability that should have been borne by Urenco and UCL, and,
therefore, constitutes, in effect, a financial contribution that
bestowed a countervailable grant to Urenco in the form of debt
forgiveness. According to UCL's questionnaire response, the
decommissioning liabilities of BNFL relating to its gaseous diffusion
plant were not transferred to UCL because that plant was built to
produce high enriched uranium (HEU) for defense purposes, and,
therefore, is not related to the business and asset base of the Urenco
organization. According to UCL's questionnaire response, BNFL's gaseous
diffusion plant was never used to produce subject merchandise, LEU, and
neither Urenco nor any of the predecessor entities within BNFL had any
involvement in its operation.
Because the plant in question was never related to the production
of LEU, we preliminarily determine that any benefits received by BNFL
under this program are tied to non-subject merchandise, and, therefore,
do not confer a benefit on the subject merchandise.
VII. Program Preliminarily Determined Not Countervailable From the
Government of the Netherlands
A. Subordinated Shareholder Loan Provided to Urenco Ltd. by UCN
Petitioners allege that the Dutch government directly subsidized
the Urenco Group through a 1993 shareholder loan made by UCN on non-
commercial terms. As part of the 1993 restructuring arrangements a loan
was made by the shareholders of Urenco Ltd. UCN, as one-third
shareholder in Urenco Ltd., granted one-third of the loan.
According to information in UCL's questionnaire response, the
shareholders of the Urenco Ltd., (International Nuclear Fuels Limited
(INFL),\8\ UCN, and Uranit), advanced subordinated shareholder loans to
the company. Each shareholder contributed equal principal amounts and
each charged the same interest rate. In its questionnaire response, UCN
further explains that in the event of the liquidation of Urenco Ltd.,
the subordinated loans would be repaid only after all other creditors
had been repaid, but before share capital would be returned to
investors. Information in UCN's questionnaire response also indicates
that the repayment terms (principal, interest rates charged, repayment
periods) are set by reference to a number of factors, including likely
period of the loans and the risks attached to the loans.
---------------------------------------------------------------------------
\8\ INFL is a wholly-owned subsidiary of the UKG-owned BNFL.
---------------------------------------------------------------------------
Section 771(5)(E)(ii) of the Act and section 351.505(a)(1) of the
CVD Regulations stipulate that in the case of a loan, a benefit exists
to the extent that the amount a firm pays on the
[[Page 24337]]
government-provided loan is less than the amount the firm would pay on
a comparable commercial loan that the firm could actually obtain on the
market. Under section 351.505(a)(2) of the CVD Regulations, a
comparable commercial loan is defined as a loan that is comparable to
the government-provided loan. The provision goes on to state that the
Department will place primary emphasis on similarities in the structure
of the loans.
There are three shareholders of Urenco Ltd., with each shareholder
owning one-third interest in the company. Two of the shareholders are
government-owned, one by the UKG and one owned by the GON. The third
shareholder, Uranit, is a privately-owned company in Germany. According
to information on the record, this private shareholder also extended a
loan to Urenco Ltd., in the same amount, at the same terms and on the
same date as the UCN loan to Urenco Ltd. The Department finds that this
loan from Uranit, a private source, constitutes a comparable commercial
loan to use as the benchmark. See section 351.505(a)(2)(ii) of the CVD
Regulations. Because the two government loans were on the same terms as
the Uranit loans, we preliminarily determine that this loan was made on
a commercial basis and is not countervailable. We note that for the
final determination, we will examine the use of this benchmark closely,
given the nature of the three governments' involvement in the
consortium.
B. 1998 Shareholder Loan
Petitioners alleged that a loan on Urenco Ltd.'s annual report may
be a shareholders loan made by UCN. Petitioners further alleged that
the loan may be non-commercial and not consistent with the usual
practices of private investors. In UNL's questionnaire response, it
stated that the 1998 loan is not a shareholder loan; it was provided
from a commercial bank and did not carry a government guarantee. Based
upon this information, we preliminarily determine that this loan does
not constitute a countervailable subsidy under 701(a)(1) of the Act.
VIII. Programs Preliminary Determined Not Countervailable From the
Government of the United Kingdom
A. Loan-Stock Debt Forgiveness Program
Petitioners allege that UCL received countervailable benefits when
its obligation to repay loan stock issued to BNFL was nullified in the
1993 corporate restructuring of the Urenco Group.
In its questionnaire response, UCL stated that all loans from BNFL
to UCL were repaid with the exception of a 16.2 million
``loan waiver.'' \9\ With respect to the 16.2 million
``loan waiver,'' which is referred to in Urenco's 1994 Annual report,
UCL explains that the figure reflects the loss incurred by BNFL in
connection with the merger. Specifically, UCL explains that the
16.2 million represents the difference between the total
sum owed to BNFL in the books of UCL on the merger date and the agreed
merger valuation of UCL. UCL further states that the 16.2
million appears on its financials as a ``loan waiver'' because,
according to its accounting practices, the amount had to be accounted
for either as a loss on a disposal of assets or a failure to recover
money advanced.
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\9\ In the Initiation Notice, we also initiated an investigation
of the 1993 Debt Forgiveness of 16.2 million as a
separate program. See 66 FR at 1087. According to information in
UCL's questionnaire response, this loan is the same loan that was
involved in the Loan Stock Debt Forgiveness program.
---------------------------------------------------------------------------
Based on information submitted by UCL, it appears that the 6.2
million at issue is the result of a difference in the manner in which
the assets that were transferred from BNFL to Urenco Ltd. were valued
rather than the result of a loan waiver. Therefore, we preliminarily
determine that there was no debt forgiveness under this program.
However, we must also examine whether there was a potential
countervailable subsidy provided in this transaction.
We addressed a similar program in the Initiation Notice involving
the transfer of assets from BNFL and whether the transfer provided a
subsidy on enrichment production. In the Initiation Notice, we
determined not to initiate on petitioners' allegation that the transfer
of one of the enrichment plants from BNFL to Urenco Ltd. was at less
than adequate remuneration. Specifically, in the Initiation Notice, we
stated that ``{t}he mere fact that the A3 plant was allegedly sold at a
price that was below its book value is not enough information to
warrant initiating an investigation of less than adequate remuneration
allegation without any reference to prevailing market conditions for
the good in question.'' See, 66 FR at 1087.
With respect to the program under investigation, the amount of
16.2 million is due to the transfer or sale of assets to
Urenco at below the book value as recorded by BNFL. Similar to the
situation with the sale of the A3 plant addressed in the Initiation
Notice, there is no evidence on the record that indicates that these
assets were sold for less than adequate remuneration. Therefore, based
on the information on the record and on our approach in the Initiation
Notice, we preliminarily determine that this program is not
countervailable. We will, however, examine all aspects of the
restructuring and subsequent merger of the Urenco Group during
verification.
B. Subordinated Shareholder Loan Provided to Urenco Ltd. by INFL
Petitioners allege that the UKG directly subsidized Urenco Ltd.
through a 1993 shareholder loan made on non-commercial terms by INFL.
According to information in UCL's questionnaire response, the
shareholders of Urenco Ltd., INFL, UCN, and Uranit, advanced
subordinated shareholder loans to the company. Each shareholder
contributed equal principal amounts and each charged the same interest
rate. In its questionnaire response, UCL further explains that in the
event of the liquidation of Urenco Ltd., the subordinated loans would
be repaid only after all other creditors had been repaid, but before
share capital would be returned to investors. Information in UCL's
questionnaire response also indicates that the repayment terms
(principal interest rates charged, repayment periods) are set by
reference to a number of factors, including duration of the loans and
the risks attached to the loans.
Section 771(5)(E)(ii) of the Act and section 351.505(a)(1) of the
CVD Regulations stipulates that in the case of a loan, a benefit exists
to the extent that the amount a firm pays on the government-provided
loan is less than the amount the firm would pay on a comparable
commercial loan that the firm could actually obtain on the market.
Under section 351.505(a)(2) of the CVD Regulations, a comparable
commercial loan is defined as a loan that is comparable to the
government-provided loan. The provision goes on to state that the
Department will place primary emphasis on similarities in the structure
of the loans.
There are three shareholders of Urenco Ltd., with each shareholder
owning one-third interest in the company. Two of the shareholders are
government-owned, one by the UKG and one owned by the GON. The third
shareholder, Uranit, is a privately-owned company in Germany. According
to information on the record, this private shareholder also extended a
loan to Urenco Ltd., in the same amount, at
[[Page 24338]]
the same terms and on the same date as the INFL loan to Urenco Ltd. The
Department finds that this loan from Uranit, a private source,
constitutes a comparable commercial loan to use as the benchmark. See
section 351.505(a)(2)(ii) of the CVD Regulations. Therefore, we
preliminarily determine that the loan provided to Urenco Ltd. by INFL
was made on a commercial basis and is not countervailable. We note that
for the final determination, we will examine the use of this benchmark
closely, given the nature of the three governments' involvement in the
consortium.
C. Extraordinary Asset Write Downs Prior to Transfer of BNFL Enrichment
Facilities
Petitioners explain that the 1992-1993 Annual Report of UCL
indicates that the value of the physical assets of the Capenhurst
enrichment operations decreased to 196 million as of March
31, 1993, due in large part to a extraordinary depreciation charge of
20 million. Petitioners allege that this extraordinary
depreciation charge could have conferred a benefit upon UCL.
In its questionnaire response, UCL states that the extraordinary
depreciation relates to the value of a building known as the E23
building, which was constructed in the mid-1980s for the purpose of
housing centrifuge operations. UCL further explains in its response
that due to a downturn in market conditions, the centrifuge machines
were never installed in the E23 building. Because it was estimated
during the merger that there was little chance that production of LEU
would ever take place in the E23 building, the parties to the merger
agreed to write down the value of the building.
According to information provided in the response, the write down
of the E23 plant was required by law. Under the Companies Act of 1985,
Schedule 4 Paragraph 19(2), the government requires that:
Provisions for diminution in value shall be made in respect of
any fixed asset which has diminished in value if the reduction in
its value is expected to be permanent. * * * and any such provisions
which are not shown in the profit and loss account shall be
disclosed (either separately or in aggregate) in a note to the
accounts.
Furthermore, UCL's questionnaire response indicates that the
extraordinary write downs taken by BNFL on the E23 building did not
give rise to any changes in the corporation tax computation or any
benefits on the tax returns filed in fiscal years 1992-1993 or 1993-
1994 for UCL.
According to information on the record of this investigation,
pursuant to UKG corporate law, BNFL was apparently required to write
down the value of the E23 building in order to more accurately reflect
its true value. On this basis, we preliminarily determine that this
program is not countervailable.
IX. Programs Preliminarily Determined Not To Be Not Used in the
Netherlands
A. Wet Investeringsrekening Law (WIR)
B. Subsidized Loan Forgiveness
X. Program Preliminarily Determined Not To Be Not Used in the
United Kingdom
A. Financial Assistance Under the Electricity Act of 1989
Verification
In accordance with section 782(i) of the Act, we will verify the
information submitted by respondents prior to making our final
determination.
Suspension of Liquidation
In accordance with 703(d)(1)(A)(i) of the Act, we have calculated
an individual rate for the Urenco Group. The ``all others'' rate is the
same as the rate for UCL. These rates are summarized in the table
below:
------------------------------------------------------------------------
Producer/exporter Net subsidy rate
------------------------------------------------------------------------
Urenco Group Ltd..................... 3.72% ad valorem.
All Others........................... 3.72% ad valorem.
------------------------------------------------------------------------
In accordance with section 703(d) of the Act, we are directing the
U.S. Customs Service to suspend liquidation of all entries of the
subject merchandise from the UK, which are entered or withdrawn from
warehouse, for consumption on or after the date of the publication of
this notice in the Federal Register, and to require a cash deposit or
bond for such entries of the merchandise in the amounts indicated
above. This suspension will remain in effect until further notice.
ITC Notification
In accordance with section 703(f) of the Act, we will notify the
ITC of our determination. In addition, we are making available to the
ITC all non-privileged and nonproprietary information relating to this
investigation. We will allow the ITC access to all privileged and
business proprietary information in our files, provided the ITC
confirms that it will not disclose such information, either publicly or
under an administrative protective order, without the written consent
of the Assistant Secretary for Import Administration.
In accordance with section 705(b)(2) of the Act, if our final
determination is affirmative, the ITC will make its final determination
within 45 days after the Department makes its final determination.
Public Comment
In accordance with 19 CFR 351.310, we will hold a public hearing,
if requested, to afford interested parties an opportunity to comment on
this preliminary determination. Any requested hearing will be
tentatively scheduled to be held 57 days from the date of publication
of the preliminary determination at the U.S. Department of Commerce,
14th Street and Constitution Avenue, NW., Washington, DC 20230.
Individuals who wish to request a hearing must submit a written request
within 30 days of the publication of this notice in the Federal
Register to the Assistant Secretary for Import Administration, U.S.
Department of Commerce, Room 1870, 14th Street and Constitution Avenue,
NW., Washington, DC 20230. Parties should confirm by telephone the
time, date, and place of the hearing 48 hours before the scheduled
time.
Requests for a public hearing should contain: (1) The party's name,
address, and telephone number; (2) the number of participants; and, (3)
to the extent practicable, an identification of the arguments to be
raised at the hearing. In addition, six copies of the business
proprietary version and six copies of the non-proprietary version of
the case briefs must be submitted to the Assistant Secretary no later
than 50 days from the date of publication of the preliminary
determination. As part of the case brief, parties are encouraged to
provide a summary of the arguments not to exceed five pages and a table
of statutes, regulations, and cases cited. Six copies of the business
proprietary version and six copies of the non-proprietary version of
the rebuttal briefs must be submitted to the Assistant Secretary no
later than 5 days from the date of filing of the case briefs. An
interested party may make an affirmative presentation only on arguments
included in that party's case or rebuttal briefs. Written arguments
should be submitted in accordance with 19 CFR 351.309 and will be
considered if received within the time limits specified above.
This determination is published pursuant to sections 703(f) and
777(i) of the Act. Effective January 20, 2001, Bernard T. Carreau is
fulfilling the
[[Page 24339]]
duties of the Assistant Secretary for Import Administration.
Dated: May 7, 2001.
Bernard T. Carreau,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 01-12064 Filed 5-11-01; 8:45 am]
BILLING CODE 3510-DS-P