Certain Cut-to-Length Carbon Steel Plate From Sweden; Final Results of Countervailing Duty Administrative Review

DEPARTMENT OF COMMERCE

[C-401-804]

Certain Cut-to-Length Carbon Steel Plate 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

cut-to-length carbon steel plate from Sweden for the period December 7,

1992 through December 31, 1993. We have completed this review and

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

companies for the periods December 7, 1992 through April 5, 1993, and

August 17, 1993 through December 31, 1993. Merchandise entered on or

after April 6, 1993 and before August 17, 1993 is to be liquidated

without regard to countervailing duties.

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, NW., Washington, DC 20230; telephone:

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

SUPPLEMENTARY INFORMATION:

Background

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

Register (60 FR 44017) the preliminary results of its administrative

review of the countervailing duty order on certain cut-to-length carbon

steel plate 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

Bethlehem Steel Corporation, Geneva Steel, Gulf States Steel Inc. of

Alabama, Inland Steel Industries, Inc., Lukens Steel Company, Sharon

Steel Corporation, and U.S. Steel Group, a unit of USX Corporation

(petitioners). On October 2, 1995, rebuttal comments were submitted by

SSAB Svenskt Stal AB (SSAB) (respondent).

The review covers the period December 7, 1992 through December 31,

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

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

programs.

Because the period of review (POR) covers only three weeks in 1992

(December 7 through December 31, 1992), the Department determined that

it was appropriate to apply the assessment rate calculated for 1993 to

exports made during the three-week period. See, Memorandum for Joseph

A. Spetrini from the Steel Team dated October 3, 1994, regarding

calculation of the assessment rate in the first administrative reviews

of the Certain Steel Countervailing Duty Orders, which is on file in

the Central Records Unit, Room B-099 of the Department of Commerce.

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 cut-to-

length carbon steel plate from Sweden. These products include hot-

rolled carbon steel universal mill plates (i.e., flat-rolled products

rolled on four faces or in a closed box pass, of a width or in a closed

box pass, or a width exceeding 150 millimeters but not exceeding 1,250

millimeters and of a thickness of not less than 4 millimeters and of a

thickness of not less than 4 millimeters, not in coils and without

patterns in relief), of rectangular shape, neither clad, plated nor

coated with metal, whether or not painted, varnished, or coated with

plastics or other nonmetallic substances; and certain hot-rolled carbon

steel flat-rolled products in straight lengths, or rectangular shape,

hot rolled, neither clad, plated, nor coated with metal, whether or not

painted, varnished, or coated with plastics or other nonmetallic

substances, 4.75 millimeters or more in thickness and of a width which

exceeds 150 millimeters and measures at least twice the thickness.

During the review period, such merchandise was classifiable under the

Harmonized Tariff Schedule (HTS) item numbers 7208.31.0000,

7208.32.0000, 7208.33.1000, 7208.33.5000, 7208.41.000, 7208.42.0000,

7208.43.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.11.0000,

7211.12.0000, 7211.21.0000, 7211.22.0045, 7211.90.0000, 7212.40.1000,

7212.40.5000, and 7212.50.0000. Included in this order are flat-rolled

products of non-rectangular cross-section where cross-section is

achieved subsequent to the rolling process (i.e., products which have

been ``worked after rolling'')--for example, products which have been

beveled or rounded at the edges. Excluded from this order is grade X-70

plate. 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

[[Page 5382]]

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 sales of ``productive units'' by SSAB, we have

followed the same methodology used in the Final Determination (58 FR at

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 finding that the net subsidy for

this program is 0.01 percent ad valorem.

II. Programs Found Not To Confer Subsidies

In the preliminary results we found that the following programs did

not confer countervailable benefits during this period of review:

1. Research & Development (R&D) Loans and Grants.

2. Fund for Industry and New Business Research and Development

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: Petitioners argue that the Department's privatization

methodology is contrary to economic reality and the requirements of the

countervailing duty law. According to petitioners, 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 or privatization.

Department's Position: We disagree with petitioners. 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

[[Page 5383]]

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, petitioners have not submitted any new arguments which

would warrant reconsideration of this issue.

Comment 2: Petitioners argue that the Department's privatization

methodology is flawed and not supported by facts. Petitioners contend

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. They argue 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. Petitioners also argue 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, petitioners argue 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 petitioners

have been previously addressed by the Department. See General Issues

Appendix (58 FR 37217, at 37259, 37264). In this proceeding petitioners

have 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 petitioners 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: Petitioners contend 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). Petitioners contend 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. Petitioners also contend 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 petitioners argue 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 petitioners. 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: Petitioners argue that the Department has failed to

explain the logic underlying its privatization methodology.

Specifically, petitioners argue 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 petitioners, 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 ratio of the privatized company's subsidies (over time)

to the company's net worth

[[Page 5384]]

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

In accordance with 19 CFR Sec. 355.22(b)(1), an administrative

review ``normally will cover entries or exports of merchandise during

the most recently completed reporting year of the government of the

affected country.'' However, because this is the first administrative

review of this countervailing duty order, in accordance with 19 CFR

Sec. 355.22(b)(2), it covers the period, and the corresponding entries,

``from date of suspension of liquidation * * * to the end of the most

recently completed reporting year of the government of the affected

country.'' This period is December 7, 1992 through December 31, 1993.

The Department issued its preliminary affirmative countervailing

duty determination in the investigation on December 7, 1992 (57 FR

57793). On March 8, 1993 in accordance with section 705(a)(1) of the

Act, as amended, we aligned the final countervailing duty

determinations with the final antidumping duty determinations on

certain steel products from various countries (58 FR 12935; March 8,

1993). Under 19 CFR 355.20(c)(1)(ii), and pursuant to article 5.3 of

the GATT Subsidies Code, the Department cannot require suspension of

liquidation for more than 120 days without the issuance of a

countervailing duty order. Accordingly, the Department instructed

Customs to terminate the suspension of liquidation of the subject

merchandise entered, or withdrawn from warehouse, for consumption on or

after April 6, 1993. The Department reinstated suspension of

liquidation and the cash deposit requirement for entries made on or

after August 17, 1993, the date of publication of the countervailing

duty order. Thus, merchandise entered on or after April 6, 1993, and

before August 17, 1993 is to be liquidated without regard to

countervailing duties.

For the periods December 7, 1992 through April 5, 1993, and August

17, 1993 through December 31, 1993, we determine the net subsidy to be

2.98 percent ad valorem.

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

following countervailing duties:

------------------------------------------------------------------------

Rate

Period Manufacturer/exporter (percent)

------------------------------------------------------------------------

December 7, 1992-April 5, 1993..... All companies......... 2.98

April 6, 1993-August 16, 1993...... All companies......... ...........

August 17, 1993-December 31, 1993.. All companies......... 2.98

------------------------------------------------------------------------

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 all manufacturers, producers, and exporters, 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 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 31, 1996.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 96-3068 Filed 2-9-96; 8:45 am]

BILLING CODE 3510-DS-P