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

DEPARTMENT OF COMMERCE

International Trade Administration

[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 October 3, 1996, 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 January 1,

1994 through December 31, 1994 (61 FR 51683). The Department has now

completed this administrative review in accordance with section 751(a)

of the Tariff Act of 1930, as amended. For information on the net

subsidy for the reviewed company, and for all non-reviewed companies,

please see the Final Results of Review section of this notice. We will

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

detailed in the Final Results of Review section of this notice.

EFFECTIVE DATE: April 7, 1997.

FOR FURTHER INFORMATION CONTACT: Gayle Longest or Lorenza Olivas,

Office of CVD/AD Enforcement VI, Import Administration, International

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

Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)

482-2786.

[[Page 16552]]

SUPPLEMENTARY INFORMATION:

Background

Pursuant to 19 C.F.R. 355.22(a), this review covers only those

producers or exporters of the subject merchandise for which a review

was specifically requested. Accordingly, this review covers SSAB

Svenskt Stal AB (``SSAB''), the sole known producer/exporter of the

subject merchandise during the review period. This review also covers

the period January 1, 1994 through December 31, 1994, and 10 programs.

On May 29, 1996, the Department extended the time limit for the

preliminary and final results of this administrative review (61 FR

26878). The time for completion of the final results of this review was

extended from a 120-day period to not later than a 180-day period.

Since the publication of the preliminary results on October 3, 1996

(61 FR 51683), the following events have occurred. We invited

interested parties to comment on the preliminary results. On November

4, 1996, a case brief was submitted by the petitioners. On November 8,

1996, a rebuttal brief was submitted by SSAB, the respondent.

Applicable Statute

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.

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 exceeding 150

millimeters but not exceeding 1,250 millimeters and of a thickness of

not less than 4 millimeters, not in coils and without pattern 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, 4.75 millimeter 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, 7208.41.0000,

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 7212.50.5000. 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.

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 (``AUL'') 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 37217, 37226 (July 9, 1993) (General Issues Appendix).

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 accordance with

the Court's remand order, the Department calculated a company-specific

allocation period for nonrecurring subsidies based on the 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. In the preliminary results (61 FR 51683), the

Department preliminarily determined that it is reasonable and

practicable to allocate 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 total amount

countervailed and, thus, would result in the possibility of over-

countervailing or under-countervailing the actual benefit. The

Department preliminarily determined that a more reasonable and accurate

approach is to continue using the allocation period first assigned to

the subsidy. We invited the parties to comment on the selection of this

methodology and to provide any other reasonable and practicable

approaches for complying with the Court's ruling. We received no

comments on this issue.

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

nonrecurring subsidies currently under review were provided prior to

the period of review (POR); allocation periods for these grants were

established during prior segments of this proceeding. Therefore, for

purposes of these final results, the Department is using the original

allocation period assigned to each nonrecurring subsidy.

Privatization and Sale of Productive Units

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 at 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-offs, (i.e., productive units that were 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-

[[Page 16553]]

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 e.g., Final Affirmative Countervailing Duty

Determination; Fresh and Chilled Salmon from Norway, 56 FR 7678; 7679

(February 25, 1991)), and reflect also the 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 taking into account the spin-offs. 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 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

Based upon the responses to our questionnaire and written comments

from the interested parties we determine the following:

I. Programs Previously Determined to Confer Subsidies

We did not receive any comments on the following programs from the

interested parties; however, our review of the record uncovered a

clerical error in our preliminary calculations. In our calculation of

the subsidies remaining with SSAB after its privatization, we

inadvertently calculated the future benefit stream from the

nonrecurring subsidies at the time of the sale at their face value

without calculating their net present value. As stated above, in order

to determine the amount of subsidies remaining with SSAB and the amount

of subsidies repaid, we must calculate the net present value of the

remaining stream of benefits of the nonrecurring subsidies at the time

of the sale. Accordingly, for these final results, we have adjusted our

calculations to reflect the net present value at the time of the sale

of the remaining stream of benefits from the nonrecurring subsidies

listed below.

1. Equity Infusions

In the preliminary results, we found that this program conferred

countervailable subsidies on the subject merchandise. We did not

receive any comments on this program from interested parties; however,

due to the clerical error explained above, the net subsidy for this

program has changed from 0.53 percent ad valorem to 0.51 percent ad

valorem for SSAB.

2. Structural Loans

In the preliminary results, we found that this program conferred

countervailable subsidies on the subject merchandise. We did not

receive any comments on this program from interested parties; however,

due to the clerical error explained above, the net subsidy for this

program has changed from 0.27 percent ad valorem to 0.26 percent ad

valorem for SSAB.

3. Forgiven Reconstruction Loans

In the preliminary results, we found that this program conferred

countervailable subsidies on the subject merchandise. We did not

receive any comments on this program from interested parties; however,

due to the clerical error explained above, the net subsidy for this

program has changed from 1.18 percent ad valorem to 1.14 percent ad

valorem for SSAB.

II. Programs Found Not to Confer Subsidies

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

B. Fund for Industry and New Business R&D.

In the preliminary results, we found these programs did not confer

subsidies during the POR. Our analysis of the comments submitted by the

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

findings from the preliminary results.

III. Program Found to be Not Used

In the preliminary results, we found that the producer/exporter of

the subject merchandise did not apply for or receive benefits under the

following programs:

A. Regional Development Grants.

B. Transportation Grants.

C. Location-of Industry Loans.

Our analysis of the comments submitted by the interested parties,

summarized below, has not led us to change our findings from the

preliminary results.

IV. Program Found to be Terminated

In the preliminary results, we found the following program to be

terminated and that no residual benefits were being provided:

Mining Exploration Grants

Our analysis of the comments submitted by the interested parties,

summarized below, has not led us to change our findings from the

preliminary results.

Analysis of Comments

Comment: Petitioners argue that the Department's privatization

methodology is contrary to economic reality, and is inconsistent with

the countervailing duty statute. Petitioners claim that the

Department's determination that privatization ``repays'' a portion of

the subsidies received before privatization is contrary to economic

reality because resources provided to SSAB by the Government of Sweden

(GOS) still remain with the company after privatization. According to

petitioners, these resources, which ``represented a flow of resources

into SSAB that the market would not have provided,'' continue to

benefit the subject merchandise. No resources were transferred from

SSAB back to the GOS. Furthermore, petitioners argue that the

Department's privatization methodology is contrary to the

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

subsidies bestowed upon the production, manufacture, or exportation of

merchandise imported into the United States be countervailed.

Petitioners maintain that the subsidies received by SSAB continue to

benefit the production of the subject merchandise after privatization.

Thus,

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these subsidies continue to be fully countervailable.

The respondent claims in its rebuttal that the same arguments

against the Department's privatization methodology were raised by the

petitioners in the first administrative review. Respondents argue that

petitioners have provided no new arguments that would warrant the

Department to reconsider its privatization methodology. Therefore, the

Department should continue to apply its privatization methodology in

the final results of this administrative review.

Department's Position: Petitioners' claim that the Department's

privatization methodology is contrary to economic reality and

inconsistent with the countervailing duty statute is erroneous. On the

contrary, the application of this methodology is well within the

Department's discretion. The countervailing duty law instructs Commerce

to identify, measure and allocate subsidies. The law is intended to

provide remedial relief in the form of countervailing duties. See,

e.g., Chaparral Steel Co. v. United States, 901 F. 2d 1097, 1103-1104

(Fed. Cir. 1990). As we explained in the General Issues Appendix, the

Department interprets the law as allowing for the repayment or

reallocation of prior subsidies. See also, Certain Hot-Rolled Lead and

Bismuth Carbon Steel Products From the United Kingdom; Final Results of

Countervailing Duty Administrative Review, 61 FR 58377; 58381 (November

14, 1996). In the context of the sale of a government-owned company,

the Department found that a portion of the price paid for a privatized

company can go toward a partial repayment of prior subsidies. General

Issues Appendix, 58 at 37262-37263.

The General Issues Appendix is not inconsistent with the URAA with

regard to this issue. The URAA purposely leaves discretion to the

Department. It provides the Department with the flexibility to

determine both whether, and to what extent, a change in ownership

affects the countervailability of past subsidies. See, e.g., section

771(5)(F) of the Act and Final Affirmative Countervailing Duty

Determination: Certain Pasta from Italy, 61 FR at 30298. This clearly

was Congress' intent when it stated that ``[t]he Commerce Department

should continue to have the discretion to determine whether, and to

what extent (if any), actions such as the `privatization' of a

government-owned company actually serve to eliminate such subsidies.''

S. Rep. No. 412, 103d Cong., 2nd Sess. 92 (1994) (emphasis added).

Accordingly, as in the preliminary results, we continue to find

that because SSAB was a subsidized government-owned company, a portion

of the price paid for the privatized company represents partial

repayment of subsidies which were received prior to privatization. See,

Final Affirmative Countervailing Duty Determinations: Certain Steel

Products from Sweden (58 FR 37385, July 9, 1993).

Final Results of Review

In accordance with 19 CRF 355.22(c)(7)(ii), we calculated a subsidy

rate for the producer/exporter subject to this administrative review.

As a result of correcting the clerical errors in the preliminary

results, we determine the net subsidy for SSAB to be 1.91 percent ad

valorem for the period January 1, 1994 through December 31, 1994.

We will instruct the U.S. Customs Service (``Customs'') to assess

countervailing duties as indicated above. The Department will also

instruct Customs to collect cash deposits of estimated countervailing

duties in the percentages detailed above of the f.o.b. invoice price on

all shipments of the subject merchandise from the reviewed company,

entered or withdrawn form warehouse, for consumption on or after the

date of publication of the final results of this administrative 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. See 19

C.F.R. 355.22(a). Pursuant to 19 C.F.R. 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 C.F.R. 353.22(e), the antidumping

regulation on automatic assessment, which is identical to 19 C.F.R.

355.22(g), the countervailing duty regulation on automatic assessment.

Therefore, the cash deposit rates for all companies except SSAB 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 applicable to the company. Accordingly, the cash deposit

rates that will be applied to non-reviewed companies covered by this

order are those established in the most recently completed

administrative proceeding conducted pursuant to the statutory

provisions that were in effect prior to the URAA amendments. See

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

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

1996). These rates 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.

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(c)(8).

Dated: March 28, 1997.

Robert S. LaRussa

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-8843 Filed 4-4-97; 8:45 am]

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