Certain Carbon Steel Products From Sweden; Final Results of Countervailing Duty Administrative Review

DEPARTMENT OF COMMERCE

[C-401-401]

Certain Carbon Steel Products From Sweden; Final Results of

Countervailing Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Final Results of Countervailing Duty Administrative

Review.

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SUMMARY: On August 24, 1995, the Department of Commerce (the

Department) published in the Federal Register its preliminary results

of administrative review of the countervailing duty order on certain

carbon steel products from Sweden for the period January 1, 1993

through December 31, 1993. We have completed this review and determine

the net subsidy to be 2.98 percent ad valorem for all companies. We

will instruct the U.S. Customs Service to assess countervailing duties

as indicated above.

EFFECTIVE DATE: February 12, 1996.

FOR FURTHER INFORMATION CONTACT: Stephanie Moore or Gayle Longest,

Office of Countervailing Compliance, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W., Washington, D.C. 20230;

telephone: (202) 482-2849; (202) 482-3338.

SUPPLEMENTARY INFORMATION:

Background

On August 24, 1995, Department published in the Federal Register

(60 FR 44014) the preliminary results of its administrative review of

the countervailing duty order on certain carbon steel products from

Sweden. The Department has now completed this administrative review in

accordance with section 751 of the Tariff Act of 1930, as amended (the

Act).

We invited interested parties to comment on the preliminary

results. On September 25, 1995, a case brief was submitted on behalf of

U.S. Steel Group, a unit of USX Corporation, petitioner. On October 2,

1995, rebuttal comments were submitted by SSAB Svenskt Stal AB (SSAB),

respondent.

The review covers the period January 1, 1993 through December 31,

1993. The review involves one company, SSAB, the sole known producer/

exporter of the subject merchandise during the review period, and nine

programs.

Applicable Statute and Regulations

The Department is conducting this administrative review in

accordance with section 751(a) of the Act. Unless otherwise indicated,

all citations to the statute and to the Department's regulations are in

reference to the provisions as they existed on December 31, 1994.

However, references to the Department's Countervailing Duties; Notice

of Proposed Rulemaking and Request for Public Comments, 54 FR 23366

(May 31, 1989) (Proposed Regulations), are provided solely for further

explanation of the Department's countervailing duty practice. Although

the Department has withdrawn the particular rulemaking proceeding

pursuant to which the Proposed Regulations were issued, the subject

matter of these regulations is being considered in connection with an

ongoing rulemaking proceeding which, among other things, is intended to

conform the Department's regulations to the Uruguay Round Agreements

Act. See 60 FR 80 (Jan. 3, 1995).

Scope of the Review

Imports covered by this review are shipments of certain carbon

steel products from Sweden. These products include cold-rolled carbon

steel, flat-rolled products, whether or not corrugated or crimped;

whether or not corrugated or crimped: whether or not pickled, not cut,

not pressed and not stamped to non-rectangular shape; not coated or

pleated with metal and not clad; over 12 inches in width and of any

thickness; whether or not in coils. During the review period, such

merchandise was classifiable under the Harmonized Tariff Schedule (HTS)

item number 7209.11.0000, 7209.12.0000, 7209.13.0000, 7209.21.0000,

7209.22.0000, 7209.23.0000, 7209.24.5000, 7209.31.0000, 7209.32.0000,

7209.33.0000, 7209.34.0000, 7209.41.0000, 7209.43.0000, 7209.44.0000,

7209.90.0000, 7211.30.5000, 7211.41.7000 and 7211.49.5000.

The HTS item numbers are provided for convenience and customs

purposes. The written description remains dispositive.

Calculation Methodology for Assessment and Cash Deposit Purposes

Because SSAB is the only manufacturer/exporter of the subject

merchandise to the United States, SSAB's net subsidy rate is also the

country-wide rate.

Privatization

SSAB was partially privatized twice, in 1987 and in 1989. In the

Final Affirmative Countervailing Duty Determinations: Certain Steel

Products from Sweden (58 FR 37385; July 9, 1993) (Final Determination),

the Department found that SSAB had received countervailable subsidies

prior to these partial privatizations. Further, the Department found

that a private party purchasing all or part of a government-owned

company can repay prior subsidies on behalf of the company as part or

all of the sales price (see the General Issues Appendix appended to the

Final Countervailing Duty Determination: Certain Steel Products from

Austria (58 FR 37217, at 37262; July 9, 1993) (General Issues

Appendix)). Therefore, to the extent that a portion of the sales price

paid for a privatized company can be reasonably attributed to prior

subsidies, that portion of those subsidies will be extinguished.

To calculate the subsidies remaining with SSAB after each partial

privatization, we performed the following calculations. We first

calculated the net present value (NPV) of the future benefit stream of

the subsidies at the time of the sale of the shares. We then multiplied

the NPV by the percentage of shares the government retained after the

sale and derived the amount of subsidies not affected by privatization.

Next, we estimated the portion of the purchase price which represents

repayment of prior subsidies in accordance with the methodology

described in the ``Privatization'' section of the General Issues

Appendix (58 FR at 37259). This amount was then subtracted from the

NPV, and the result was divided by the NPV to calculate the ratio

representing the amount of subsidies remaining with SSAB after each

partial privatization.

With respect to sale of ``productive units'' by SSAB, we have

followed the

[[Page 5379]]

same methodology used in the Final Determination (58 FR 37385). In

accordance with that methodology, a portion of the price paid when a

productive unit is sold is allocable to the repayment of subsidies

received in prior years by the seller of the productive unit. The

subsidies allocated to the POR have been reduced for all of the

programs, as described above. These subsidies were further adjusted by

the asset value of the productive unit. For a further explanation of

the Department's methodology regarding ``sales of productive units''

and these calculations, see the ``Restructuring'' section of the

General Issues Appendix (58 FR at 37265).

To calculate the benefit provided to SSAB, we multiplied the

benefit calculated for 1993, adjusted for sales of productive units, by

the ratio representing the amount of subsidies remaining with SSAB

after the partial privatization. We then divided the results by the

company's total sales in 1993.

Analysis of Programs

Based upon our analysis of the questionnaire responses,

verification, and written comments from the interested parties, we

determine the following:

I. Programs Conferring Subsidies

1. Equity Infusion

In the preliminary results we found that this program conferred

countervailable benefits on the subject merchandise. Our analysis of

the comments submitted by the interested parties, summarized below, has

not led us to change our preliminary finding that the net subsidy for

this program is 0.82 percent ad valorem.

2. Structural Loans

In the preliminary results we found that this program conferred

countervailable benefits on the subject merchandise. Our analysis of

the comments submitted by the interested parties, summarized below, has

not led us to change our preliminary finding that the net subsidy for

this program is 0.38 percent ad valorem.

3. Forgiven Reconstruction Loans

In the preliminary results we found that this program conferred

countervailable benefits on the subject merchandise. Our analysis of

the comments submitted by the interested parties, summarized below, has

not led us to change our preliminary finding that the net subsidy for

this program is 1.77 percent ad valorem.

4. Grants for Temporary Employment for Public Works

In the preliminary results we found that this program conferred

countervailable benefits on the subject merchandise. Our analysis of

the comments submitted by the interested parties, summarized below, has

not led us to change our preliminary findings that the net subsidy for

this program is 0.01 percent ad valorem.

II. Program Found Not To Confer Subsidies

In the preliminary results we found the Research & Development

(R&D) Loans and Grants program did not confer countervailable benefits

during this period of review. Our analysis of the comments submitted by

the interested parties, summarized below, has not led us to change our

preliminary findings.

III. Programs Found Not To Be Used

In the preliminary results we found the following programs to be

not used:

1. Regional Development Grants

2. Transportation Grants

3. Location-of-Industry Loans

Our analysis of the comments submitted by the interested parties,

summarized below, has not led us to change our preliminary findings.

IV. Program Found To Be Terminated

In the preliminary results we found the State Stockpiling Subsidies

program to be terminated. Our analysis of the comments submitted by the

interested parties, summarized below, has not led us to change our

preliminary findings.

Analysis of Comments

Comment 1: Petitioner argues that the Department's privatization

methodology is contrary to economic reality and the requirements of the

countervailing duty law. According to petitioner, the Department's

determination that privatization ``repays'' a portion of the subsidies

received before privatization is contrary to economic reality because

the resources provided by the government to SSAB, which the market

would not have provided, still remain with SSAB after privatization and

continue to benefit the production of the merchandise. No resources

were transferred from SSAB to the Government of Sweden (GOS).

Furthermore, they contend that the Department's privatization

methodology is contrary to the countervailing duty law because the

countervailing duty statute, 19 U.S.C. Sec. 1671(a), requires that

subsidies bestowed upon the production, manufacture, or exportation of

merchandise imported into the United States be countervailed. Since the

subsidies received by SSAB continue to benefit its production of the

subject merchandise after the partial privatizations, these subsidies

continue to be fully countervailable.

The respondent argues in rebuttal that the new shareholders' arm's

length purchases result in the repayment of prior subsidies as a matter

of economic reality and as a result of the functional identity between

a company and its shareholders in the context of privatization.

Department's Position: We disagree with petitioner. The Department

previously addressed this issue in the Final Affirmative Countervailing

Duty Determinations: Certain Steel Products from Sweden (58 FR 37385,

July 9, 1993) (Final Determination) and in the General Issues Appendix

appended to the Final Affirmative Countervailing Duty Determination:

Certain Steel Products from Austria (58 FR 37261-2, July 9, 1993)

(General Issues Appendix). In this proceeding, petitioner has not

submitted any new arguments which would warrant reconsideration of this

issue.

Comment 2: Petitioner argues that the Department's privatization

methodology is flawed and not supported by facts. Petitioner contends

that the basis of the Department's methodology is that purchasers of

shares in a subsidized company paid more for those shares than they

would otherwise have absent subsidization; that because the new owners

are presumably profit-maximizers, the privatized firm must now generate

a reasonable rate of return on the owner's investment; and that to the

extent that the new owners invested more in the company because of the

subsidies, the company presumably faces an obligation to generate more

earnings so as to provide a reasonable rate of return. Petitioner

argues that this premise is incorrect, and that the Department is

confusing countervailable subsidy benefits with the effects of

subsidies on the value of the company. Petitioner also argues that the

Department's repayment methodology assumes that private investors have

different expectations than government investors, however the

Department offers no evidence to support this assumption. Finally,

petitioner argues that if the repayment methodology applies to

purchases of shares in state-owned companies, it must also apply to

purchases of shares in private companies that have received subsidies.

Department's Position: The arguments presented by the petitioner

have been previously addressed by the

[[Page 5380]]

Department. See General Issues Appendix (58 FR 37217, at 37259, 37264).

In this proceeding petitioner has presented no new evidence or

arguments regarding this issue that would warrant reconsideration of

the Department's determination that past subsidies bestowed upon SSAB

are affected by privatization. Thus, the Department's preliminary

results remain unchanged with respect to this issue.

We note, however, that petitioner went beyond the Department's

position in outlining their interpretation of the basis of the

Department's methodology by stating that ``purchasers of shares in a

subsidized company paid more for those shares than they would have, and

that to the extent that the new owners invested more in the company

because of the subsidies, the company presumably faces an obligation to

generate more earnings to provide a reasonable rate of return.'' The

Department neither stated nor implied such a position. The Department

has stated that the owner-shareholders' expectations of a return on

their investment cannot be separated from the profitability of the

newly privatized company, and that the owners will seek to extract a

rate of return from their company at least equal to that of alternative

investments of similar risk. The Department also stated that to the

extent that a portion of the price paid for a privatized company can

reasonably be attributed to prior subsidies, that portion of those

subsidies will be extinguished. See General Issues Appendix (58 FR

37217, at 37262).

Comment 3: Petitioner contends that the Department's privatization

methodology was rejected by the Court of International Trade (CIT) in

British Steel plc v. United States, British Steel plc v. U.S., 879 F.

Supp. 1254 (CIT 1995) (British Steel). Petitioner contends that in

British Steel, the court stated that it would seem at best that the

only way to extinguish a previously given gift or subsidy would be to

repay the gift or subsidy to the original donor government. To the

extent that the sale of shares involves only a change in the beneficial

ownership of the company, it does not cause any change in the company

itself and no such repayment occurs.

Petitioner also contends that although the CIT's statements in

British Steel regarding repayment are dicta, in the final remand

determinations in British Steel, the Department accepted the CIT's

reasoning and abandoned its repayment methodology. Therefore, the

petitioner argues that because SSAB has not repaid the GOS for prior

subsidies, such benefits remain with the company, and are

countervailable.

Respondent contends that because the CIT has yet to issue its final

judgment in British Steel, it is inappropriate to even suggest that the

CIT's opinion has any bearing on this case.

Department's Position: We disagree with petitioner. The CIT has not

entered an order with respect to the remand determinations in British

Steel. The Department is not required to follow a CIT opinion that is

still subject to litigation and to which the Department has not

acquiesced. In such instances, the Department does not change its

methodology while litigation is pending. See, Color Television

Receivers from the Republic of Korea: Final Results of Antidumping Duty

Administrative Review. (59 FR 13700, at 13702; March 23, 1994).

Therefore, we have followed our privatization methodology as set forth

in the Final Determination.

Comment 4: Petitioner argues that the Department has failed to

explain the logic underlying its privatization methodology.

Specifically, petitioner argues that the Department has failed to

explain why a ratio of the subsidies received by a company each year to

the company's net worth in that year serves as a ``reasonable

surrogate'' for the percentage of the company's net value that the

subsidies represent, and how a simple arithmetic average of these

ratios relates to the value of the subsidies at the time the company is

sold, much less to the extinguishment of subsidy benefits.

Respondent argues that the Department has substantial discretion

and wide latitude in developing reasonable methodologies to properly

implement the countervailing duty law. As a factual matter, the

Department has adequately explained the bases for its repayment formula

in the General Issues Appendix.

Department's Position: As explained in the General Issues Appendix,

the methodology applied by the Department attempts to estimate the

proportion of the purchase price attributable to subsidies. The ratio,

cited by petitioner, represents, in the Department's view, the most

reasonable approach to that estimation. In arguing the issue of the

impact of privatization upon formerly government-owned companies which

previously benefitted from subsidies, petitioners in the Final

Determination stated that privatization does not affect the amount of

subsidies allocable to the privatized steel companies, while

respondents argued that privatization of a government-owned company

extinguishes any pre-existing subsidies. The Department considered, but

ultimately rejected, both of these extreme positions. The Department

determined that prior subsidies are allocable to the privatized

companies upon their sale to private parties. However, it also

concluded that a portion of the price paid by the private parties

constituted repayment for the subsidies previously bestowed on the

formerly government-owned companies.

The Department recognized that any methodology developed to

determine what portion of the sales price constituted repayment for

prior subsidies would yield only a rough estimate.

In attempting to estimate that portion of the purchase price

attributable to prior subsidies, the Department concluded that the most

reasonable approach was to look at the ratio of the privatized

company's subsidies (over time) to the company's net worth during the

period from 1977 (the earliest point at which subsidies providing

countervailable benefits in the period of investigation could have been

bestowed) until the year before privatization. The subsidy-to-net worth

ratio is intended to provide the Department with an estimate of the

contribution subsidies have made to the value of a company.

Final Results of Review

For the period January 1, 1993 through December 31, 1993, we

determine the net subsidy to be 2.98 percent ad valorem for all

companies.

The Department will instruct the U.S. Customs Service to assess the

following countervailing duties:

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Manufacturer/exporter Rate

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SSAB Svenskt Stal AB.......................................... 2.98

Country-wide rate............................................. 2.98

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The Department will also instruct the U.S. Customs Service to

collect a cash deposit of estimated countervailing duties of 2.98

percent of the f.o.b. invoice price on all shipments of the subject

merchandise from Sweden, entered, or withdrawn from warehouse, for

consumption on or after the date of publication of the final results of

this review.

This notice serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 C.F.R. 355.34(d). Timely written notification

of return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

regulations

[[Page 5381]]

and the terms of an APO is a sanctionable violation.

This administrative review and notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.

Dated: January 30, 1996.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 96-3067 Filed 2-9-96; 8:45 am]

BILLING CODE 3510-DS-P