Certain Carbon Steel Products from Sweden; Preliminary Results of Countervailing Duty Administrative Review

DEPARTMENT OF COMMERCE

[C-401-401]

Certain Carbon Steel Products from Sweden; Preliminary Results of

Countervailing Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of preliminary results of countervailing duty

administrative review.

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SUMMARY: The Department of Commerce (the Department) is conducting an

administrative review of the countervailing duty order on certain

carbon steel products from Sweden. For information on the net subsidy

for the reviewed company, as well as for any non-reviewed companies,

please see the Preliminary Results of Review section of this notice. If

the final results remain the same as these preliminary results of

administrative review, we will instruct the U.S. Customs Service to

assess countervailing duties as detailed in the Preliminary Results of

Review section of this notice. Interested parties are invited to

comment on these preliminary results.

EFFECTIVE DATE: December 3, 1996.

FOR FURTHER INFORMATION CONTACT: Gayle Longest or Lorenza Olivas,

Office of CVD/AD Enforcement, Import Administration, International

Trade Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, N.W., Washington, D.C. 20230; telephone: Gayle

Longest (202) 482-3338 or (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

On October 4, 1985, the Department published in the Federal

Register (50 FR 48517) the countervailing duty order on certain carbon

steel products from Sweden. On October 5, 1995, the Department

published a notice of ``Opportunity to Request an Administrative

Review'' (60 FR 52149) of this countervailing duty order. We received

timely requests for review, and we initiated the review, covering the

period January 1, 1994 through December 31, 1994, on November 16, 1995

(60 FR 57573).

In accordance with section 355.22(a) of the Department's Interim

Regulations, this review covers only those producers or exporters for

which a review was specifically requested (see Antidumping and

Countervailing Duties: Interim Regulations; Request for Comments, (60

FR 25130; May 11, 1995) (Interim Regulations)). Accordingly, this

review covers SSAB Svenskt Stal AB (SSAB), the sole known producer/

exporter of the subject merchandise during the period of review (POR).

This review also covers 10 programs.

On July 30, 1996, we extended the period for completion of the

preliminary results pursuant to section 751(a)(3) of the Tariff Act of

1930, as amended (see Certain Carbon Steel Products From Sweden;

Extension of Time Limit for Countervailing Duty Administrative Review

(61 FR 39632). As explained in the memoranda from the Assistant

Secretary for Import Administration to the File, dated November 22,

1995, and January 11, 1996 (both on file in the public file of the

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

deadlines were extended to take into account the partial shutdowns of

the Federal Government from November 15 through November 21, 1995, and

December 15, 1995, through January 6, 1996. Therefore, the deadline for

these preliminary results is no later than November 27, 1996, and the

deadline for the final results of this review is no later than 120 days

from the date on which these preliminary results are published in the

Federal Register.

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

references to the provisions of the Tariff Act of 1930, as amended by

the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the

Act). The Department is conducting this administrative review in

accordance with section 751(a) of the Act. References to the

Department's Countervailing Duties; Notice of Proposed Rulemaking and

Request for Public Comments (54 FR 23366; May 31, 1989) (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

1989 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 URAA. See Advance Notice of

Proposed Rulemaking for Public Comments, (60 FR 80; Jan. 3, 1995);

Antidumping Duties; Countervailing Duties; Notice of Proposed Rulmaking

and Request for Public Comments, (61 FR 7308; February 27, 1996).

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 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 numbers 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 written description remains

dispositive.

Allocation Methodology

In the past, the Department has relied upon information from the

U.S. Internal Revenue Service on the industry-specific average useful

life of assets in determining the allocation period for nonrecurring

grant benefits. See General Issues Appendix appended to Final

Countervailing Duty Determination; Certain Steel Products from Austria

(58 FR 37063, 37226; July 9, 1993). However, in British Steel plc. v.

United States, 879 F. Supp. 1254 (CIT 1995) (British Steel), the U.S.

Court of International Trade (the Court) ruled against this allocation

methodology. In

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accordance with the Court's remand order, the Department calculated a

company-specific allocation period for nonrecurring subsidies based on

the average useful life (AUL) of non-renewable physical assets. This

remand determination was affirmed by the Court on June 4, 1996. British

Steel, 929 F. Supp. 426, 439 (CIT 1996).

The Department has decided to acquiesce to the Court's decision

and, as such, we intend to determine the allocation period for

nonrecurring subsidies using company-specific AUL data where reasonable

and practicable. Specifically, the Department has preliminarily

determined that it is reasonable and practicable to allocate all new

nonrecurring subsidies (i.e., subsidies that have not yet been assigned

an allocation period) based on a company-specific AUL. However, if a

subsidy has already been countervailed based on an allocation period

established in an earlier segment of the proceeding, it does not appear

reasonable or practicable to reallocate that subsidy over a different

period of time. In other words, since the countervailing duty rate in

earlier segments of the proceeding was calculated based on a certain

allocation period and resulting benefit stream, redefining the

allocation period in later segments of the proceeding would entail

taking the original grant amount and creating an entirely new benefit

stream for that grant. Such a practice may lead to an increase or

decrease in the amount countervailed and, thus, would result in the

possibility of over-countervailing or under-countervailing the actual

benefit. The Department has preliminarily determined that a more

reasonable and accurate approach is to continue using the allocation

period first assigned to the subsidy. We invite the parties to comment

on the selection of this methodology and provide any other reasonable

and practicable approaches for complying with the Court's ruling.

In the current review, there are no new subsidies. All of the

nonrecurring grants under review were provided prior to the POR;

allocation periods for these grants were established during prior

segments of this proceeding. Therefore, for purposes of these

preliminary results, the Department is using the original allocation

period assigned to each grant.

Privatization and Sale of Assets to Other Companies

SSAB is the only Swedish company that produces and exports the

subject merchandise. SSAB has sold several productive units and the

company was partially privatized twice, in 1987 and in 1989. During the

review period, SSAB was completely privatized.

In 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 the sale of the productive units and

the two 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 General Issues Appendix (58 FR 37217, 37262; July 9,

1993)). 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 a rate for the subsidies that were allocated to the

spin-off, i.e., a productive unit that was sold, we first determined

the amount of the subsidies attributable to each productive unit by

dividing the asset value of that productive unit by the total asset

value of SSAB in the year of the spin-off. We then applied this ratio

to the net present value (NPV), in the year of the spin-off, of the

future benefit streams from all of SSAB's prior subsidies allocable to

the POR. The future benefit streams at the time of the sale of each

productive unit reflect the Department's allocation over time of prior

subsidies to SSAB in accordance with the declining balance methodology

(see section 355.49 of the Department's 1989 Proposed Regulations), and

reflect also the effect of prior spin-offs of SSAB productive units.

We next estimated the portion of the purchase price which

represents repayment of prior subsidies by determining the portion of

SSAB's net worth that was accounted for by subsidies. To do that, we

divided the face value of the allocable subsidies received by SSAB in

each year from fiscal year 1979 through fiscal year 1993 by SSAB's net

worth in the same year. We calculated a simple average of these ratios,

which was then multiplied by the purchase price of the productive unit.

Thus, we determined the amount of the purchase price which represents

repayment of prior subsidies. This amount was subtracted from the

subsidies attributed to the productive unit at the time of sale to

arrive at the amount of subsidies allocated to the productive unit

being spun-off.

To calculate the subsidies remaining with SSAB after privatization,

we performed the following calculations. We first calculated the NPV of

the future benefit stream of the subsidies at the time of the sale of

the shares. 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 37217, 37259). This amount was then subtracted

from the amount of the NPV eligible for repayment, and the result was

divided by the NPV to calculate the ratio representing the amount of

subsidies remaining with SSAB.

To calculate the benefit provided to SSAB in the POR, where

appropriate, we multiplied the benefit calculated for 1994, adjusted

for sales of productive units, by the ratio representing the amount of

subsidies remaining with SSAB after privatization. We then divided the

results by the company's total sales in 1994.

Analysis of Programs

I. Programs Conferring Subsidies

Programs Previously Determined to Confer Subsidies

(1) Equity Infusions

In 1981, the Government of Sweden (GOS) provided equity capital to

SSAB totaling 1,125 million Swedish kronor (MSEK). Simultaneously,

Granges, a private company and the only other shareholder at the time,

contributed 375 MSEK. To persuade Granges to contribute this equity

capital, the GOS guaranteed a specified sum to be paid to Granges in

1991. Because of this arrangement, we determined that the 375 MSEK paid

by Granges was an equity infusion provided indirectly by the GOS,

through Granges, specifically to SSAB. See Final Determination (58 FR

37385, 37387).

In the Final Determination and in the final determination from a

previous investigation of Swedish steel, Final Affirmative

Countervailing Duty Determinations; Certain Carbon Steel Products from

Sweden (50 FR 33377; August 19, 1985) (Final Certain Carbon Steel

Products), we determined that SSAB was unequityworthy in 1981 when it

received the equity infusions, and that the two equity infusions are

therefore countervailable. There has been no new information or

evidence of changed circumstances in this review to warrant

reconsideration of this determination.

In accordance with the ``Equity'' section of the General Issues

Appendix, we treated the equity infusions as grants. To calculate the

benefit from these equity infusions for the POR, we used the grant

methodology as

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described in the ``Allocation Methodology'' section above. Because the

Department determined in the Final Determination that the infusions are

non-recurring subsidies, we have allocated the subsidies over 15 years,

as discussed in the ``Allocation Methodology'' section above. As the

discount rate, we have used SSAB's company-specific interest rate on

fixed-rate long-term loans (see Sec. 355.49(b)(2)(i) of the 1989

Proposed Regulations).

We reduced the benefit from these equity infusions attributable to

the POR according to the methodology outlined in the ``Privatization''

section above. We then divided the result by SSAB's total sales for

1994. On this basis, we preliminarily determine the net subsidy for

equity infusions to be 0.53 percent ad valorem.

(2) Structural Loans

Under three separate pieces of legislation, SSAB received

structural loans for investment in plant and equipment. The loans were

disbursed in installments between 1978 and 1983. All three loans were

outstanding during the POR.

According to the terms of the loans, all three structural loans

were interest-free for three years from the date of disbursement. After

that time, one loan incurred interest at a fixed rate of five percent

per annum while the other two loans incurred interest at a variable

rate subject to change every five years. The variable interest rate on

these two loans is set at the rate of the long-term government bonds

plus a 0.25 percent margin. After a five-year grace period, the

principal is repaid in 20 equal installments at the end of each

calendar year.

In Final Determination and in Final Certain Carbon Steel Products,

we determined that these loans are countervailable because they were

provided specifically to SSAB on terms inconsistent with commercial

considerations. There has been no new information or evidence of

changed circumstances in this review to warrant reconsideration of this

determination.

To calculate the benefit from the fixed-rate structural loan, we

employed the long-term loan methodology described in section

355.49(c)(1) of the 1989 Proposed Regulations. To calculate the

benefits from the two variable-rate loans, we used the variable-rate

long-term loan methodology described in section 355.49(d)(1) of the

1989 Proposed Regulations. As the discount rate, we used SSAB's

company-specific long-term interest rates, a benchmark previously

established in the Final Determination.

We reduced the benefit attributable to the POR from the fixed-rate

structural loan according to the methodology outlined in the

``Privatization'' section above. We then aggregated the benefits for

the three loans (fixed interest rate and variable interest rate) and

divided the results by SSAB's total sales for 1994. On this basis, we

preliminarily determine the net subsidy from the three structural loans

to be 0.27 percent ad valorem.

(3) Forgiven Reconstruction Loans

The GOS provided reconstruction loans to SSAB between 1979 and 1985

to cover operating losses, investment in certain plants and equipment,

and for employment promotion purposes. The loans were interest free for

three years, after which a fixed interest rate was charged. According

to the terms of the loans, up to half of the outstanding amount of the

loan can be written off after the second calendar year following the

disbursement. The remainder of the loan can be written off entirely at

the end of the ninth calendar year after disbursement. Pursuant to the

terms of the reconstruction loans, the GOS wrote off large portions of

principal and accrued interest on these loans between 1980 and 1990.

In the Final Determination and in Final Certain Carbon Steel

Products, we determined that forgiveness of these loans is

countervailable. There has been no new information or evidence of

changed circumstances in this review to warrant reconsideration of this

determination.

To calculate the benefit, we treated the written-off portions of

the reconstruction loans as countervailable grants received in the

years the loans were forgiven and calculated the benefit using the

grant methodology as described in the ``Allocation Methodology''

section above. We reduced the benefits from these grants attributable

to the POR according to the methodology outlined in the

``Privatization'' section above. We then divided the results by SSAB's

total sales for 1994. On this basis, we preliminarily determine the net

subsidy from the three forgiven reconstruction loans to be 1.18 percent

ad valorem.

II. Program Preliminarily Determined Not to Confer Subsidies

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

The Swedish National Board for Industrial and Technical Development

(NUTEK) provides research and development loans and grants to Swedish

industries for R&D purposes. One type of R&D loan (industrial

development loans) is mostly aimed at ``new'' industries such as the

biotechnical, electronic, and medical industries. Another type of R&D

loan (energy efficiency loans) is directed towards big energy

consumers.

The loans accrue interest equal to the official ``discount'' rate

plus a premium of 3.75 percent. However, no interest or principal

payments are due until the R&D project is completed. If, upon

completion of a project, the company wishes to use the research results

for commercial purposes, the loan must be repaid. On the other hand, if

the company decides not to utilize the results and, therefore, does not

claim proprietary treatment for the results, NUTEK will forgive the

loan and the results of the research become publicly available.

SSAB had several R&D loans outstanding during the POR on which it

did not make either principal or interest payments. However, under our

current practice, we cannot determine whether SSAB has received a

countervailable benefit until the research is completed and they will

be able to submit information demonstrating that the research results

are publicly available. It is only upon completion that it will be

known (1) whether the loans are forgiven and (2) if the loans are not

forgiven, whether the accrued interest is less than what would accrue

if the loans are provided at commercial rates. See Final Determination

(58 FR 37385, 37390). Therefore, we will continue to examine these R&D

loans in future administrative reviews.

As explained above, NUTEK may forgive R&D loans if the companies

receiving them disseminate publicly the results of the research

financed by the loans. The Department's current practice is to treat

forgiven R&D loans as non-countervailable if the research results are

publicly available. See Final Determination (58 FR 37385, 37390).

During the POR, three such loans to SSAB were forgiven. Official

documentation from NUTEK, provided in the questionnaire response,

indicates that the results of these research projects for which these

three loans were made to SSAB were made publicly available. On this

basis, we preliminarily determine that these three forgiven R&D loans

did not confer countervailable benefits on the subject merchandise

during the POR.

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(2) Fund for Industry and New Business R&D

SSAB reported in its questionnaire response that SSAB Oxelosund, a

subsidiary, received a conditional repayment R&D loan from the Fund for

Industry and New Business (the Fund).

The Fund provides project financing to firms with a budget of at

least two million Swedish kroner (MSEK), and start-up loans to new

``limited'' companies. Projects are financed through (1) conditional

repayment loans, (2) capital in return for royalty, (3) project

guarantees, and (4) credit guarantees for developing new products,

processes and systems, and marketing. The terms and conditions of the

financing depend on the type of financing provided.

In October 1992, the Fund approved a 6-MSEK conditional repayment

loan for SSAB Oxelosund. Only 3 MSEK of the loan amount were disbursed.

Under the terms of the loan, 50 percent of the principal was to be paid

at the end of 1994, with the remaining 50 percent to be paid at the end

of 1995. The loan accrued interest from the date of disbursement at a

rate equal to the Central Bank's ``discount'' rate, plus a 4 percent

premium, paid quarterly, for the prior quarter. Because the base rate

changes quarterly, we have analyzed this loan under our variable rate

loan methodology. In Certain-Cut-to-Length Carbon Steel Plate from

Sweden; Preliminary Results of Countervailing Duty Administrative

Review (60 FR 44017; August 24, 1995) (92/93 Preliminary Results) and

Certain-Cut-to-Length Carbon Steel Plate from Sweden; Final Results of

Countervailing Duty Administrative Review (61 FR 5381; February 12,

1996) (92/93 Final Results), the previous administrative review of this

order, we found that SSAB paid a higher interest rate for this loan

than it would have paid at the commercial benchmark rates. Accordingly,

we determined that the program did not confer a countervailable benefit

on the subject merchandise during the POR. In this review period, the

entire outstanding principal and the accrued interest were paid.

During the POR, SSAB made two interest payments on the loan. The

first payment was in arrears and covered the last quarter of 1993; the

second payment was for interest accrued in 1994. Therefore, we selected

benchmarks for both 1993 and 1994, using the same source for benchmarks

established previously. See 92/93 Preliminary Results and 92/93 Final

Results. We compared the interest paid by the company with the amount

of interest that the company would have paid on a similar loan provided

at the benchmark rates, and we factored into the calculation the period

of time in which the interest payment was in arrears. We found that the

amount paid by the company was slightly lower than the amount that

would have been paid at the commercial benchmark rate. However, the

subsidy rate that would be attributable to this loan is 0.00002 percent

ad valorem. A rate this small would not change the overall subsidy rate

for SSAB. Moreover, since the principal of the loan was entirely repaid

during the POR, the issue of the countervailability of the loan will

not arise in subsequent administrative reviews. Since any benefit we

would calculate for the loan would not affect the overall subsidy rate

during the POR and since there is no possibility of future benefits

from this loan, we do not consider it necessary to make a determination

on the specificity of this loan program and are not including it in the

calculation of these preliminary results.

III. Programs Preliminarily Found to be Not Used

We also examined the following programs and preliminarily determine

that SSAB did not apply for or receive benefits under them during the

POR:

A. Regional Development Grants

B. Transportation Grants

C. Location-of-industry Loans

IV. Program Preliminarily Found to be Terminated

Mining Exploration Grants

Between 1983 and 1985, SSAB received grants for exploration of new

mineral deposits in its Grangesberg mines. In Final Determination, the

Department found that these grants were countervailable, because they

were provided specifically to a group of enterprises or industries

(mining companies). The amounts received under this program were less

than 0.5 percent of the value of SSAB's total sales for that year and

were expensed in the year of receipt in accordance with the Allocation

section of the General Issues Appendix.

In June 1993, the mining exploration grant program was terminated

by the Government of Sweden under law SFS 1993:693 which eliminated

Namnden for Statens Gruvegendom, the agency that administered the

program. No grants were given to SSAB under this program after 1985 and

there were no residual benefits during the POR from grants previously

bestowed.

Preliminary Results of Review

In accordance with section 355.22(c)(4)(ii) of the Department's

Interim Regulations, we calculated an individual subsidy rate for each

producer/exporter subject to this administrative review. For the period

January 1, 1994 through December 31, 1994, we preliminarily determine

the net subsidy for SSAB to be 1.98 percent ad valorem. If the final

results of this review remain the same as these preliminary results,

the Department intends to instruct the U.S. Customs Service (Customs)

to assess countervailing duties for SSAB at 1.98 percent ad valorem.

The Department also intends to instruct the Customs to collect a cash

deposit of 1.98 percent of the f.o.b. invoice price on all shipments of

the subject merchandise from SSAB, entered, or withdrawn from

warehouse, for consumption on or after the date of publication of the

final results of this review.

Because the URAA replaced the general rule in favor of a country-

wide rate with a general rule in favor of individual rates for

investigated and reviewed companies, the procedures for establishing

countervailing duty rates, including those for non-reviewed companies,

are now essentially the same as those in antidumping cases, except as

provided for in section 777A(e)(2)(B) of the Act. The requested review

will normally cover only those companies specifically named. Pursuant

to 19 CFR 355.22(g), for all companies for which a review was not

requested, duties must be assessed at the cash deposit rate, and cash

deposits must continue to be collected, at the rate previously ordered.

As such, the countervailing duty cash deposit rate applicable to a

company can no longer change, except pursuant to a request for a review

of that company. See Federal-Mogul Corporation and The Torrington

Company v. United States, 822 F.Supp. 782 (CIT 1993) and Floral Trade

Council v. United States, 822 F.Supp. 766 (CIT 1993) (interpreting 19

CFR 353.22(e), the antidumping regulation on automatic assessment,

which is the analogue to 19 CFR 355.22(g), the countervailing duty

regulation on automatic assessment). Therefore, the cash deposit rates

for all companies except those covered by this review will be unchanged

by the results of this review.

We will instruct Customs to continue to collect cash deposits for

non-reviewed companies at the most recent company-specific or country-

wide rate

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applicable to the company. Accordingly, the cash deposit rate that will

be applied to all non-reviewed companies covered by this order is that

established in the most recently completed administrative proceeding.

See Certain Carbon Steel Products From Sweden; Final Results of

Countervailing Duty Administrative Review, 61 FR at 5378. This rate

shall apply to all non-reviewed companies until a review of a company

assigned these rates is requested. In addition, for the period January

1, 1994 through December 31, 1994, the assessment rates applicable to

all non-reviewed companies covered by this order are the cash deposit

rates in effect at the time of entry.

Public Comment

Parties to the proceeding may request disclosure of the calculation

methodology and interested parties may request a hearing not later than

10 days after the date of publication of this notice. Interested

parties may submit written arguments in case briefs on these

preliminary results within 30 days of the date of publication. Rebuttal

briefs, limited to arguments raised in case briefs, may be submitted

seven days after the time limit for filing the case brief. Parties who

submit written arguments in this proceeding are requested to submit

with the argument (1) a statement of the issue and (2) a brief summary

of the argument. Any hearing, if requested, will be held seven days

after the scheduled date for submission of rebuttal briefs. Copies of

case briefs and rebuttal briefs must be served on interested parties in

accordance with 19 CFR 355.38(e).

Representatives of parties to the proceeding may request disclosure

of proprietary information under administrative protective order no

later than 10 days after the representative's client or employer

becomes a party to the proceeding, but in no event later than the date

the case briefs, under Sec. 355.38(c), are due. The Department will

publish the final results of this administrative review, including the

results of its analysis of issues raised in any case or rebuttal brief

or at a hearing.

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 C.F.R.

Sec. 355.22(c)(5)).

Dated: November 25, 1996.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-30754 Filed 12-2-96; 8:45 am]

BILLING CODE 3510-DS-P