Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Countervailing Duty Determination With Final Antidumping Duty Determination: Stainless Steel Plate in Coils From Belgium

DEPARTMENT OF COMMERCE

International Trade Administration

[C-423-809]

Preliminary Affirmative Countervailing Duty Determination and

Alignment of Final Countervailing Duty Determination With Final

Antidumping Duty Determination: Stainless Steel Plate in Coils From

Belgium

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: September 4, 1998.

FOR FURTHER INFORMATION CONTACT: Zak Smith, Stephanie Hoffman, or James

Breeden, Office I, AD/CVD Enforcement, Import Administration, U.S.

Department of Commerce, Room 3099, 14th Street and Constitution Avenue,

N.W., Washington, D.C. 20230; telephone (202) 482-0189, (202) 482-4198,

or (202) 482-1174, respectively.

Preliminary Determination

The Department of Commerce preliminarily determines that

countervailable subsidies are being provided to producers and exporters

of stainless steel plate in coils from Belgium. For information on the

estimated countervailing duty rates, please see the ``Suspension of

Liquidation'' section of this notice.

Petitioners

The petition in this investigation was filed on March 31, 1998. The

petitioners are Allegheny Ludlum Corp., Armco, Inc., Lukens Inc., and,

United Steelworkers of America, AFL-CIO/CLC (``the petitioners'').

Case History

Since the publication of the notice of initiation in the Federal

Register (see Notice of Initiation of Countervailing Duty

Investigations: Stainless Steel Plate in Coils from Belgium, Italy, the

Republic of Korea, and the Republic of South Africa, 63 FR 23272 (April

28, 1998)), the following events have occurred. On April 30, 1998, we

issued countervailing duty questionnaires to the Government of Belgium

(``GOB''), the Government of Flanders (``GOF''), the European

Commission (``EC''), and the producers/exporters of the subject

merchandise. The GOB identified ALZ N.V. (``ALZ'') as the sole

producer/exporter of subject merchandise from Belgium.

On May 18, 1998, ALZ, filed a submission stating that the petition

was inadequate in its allegations of certain programs. This allegation

was repeated in several submissions. The petitioners responded with

several submissions challenging these arguments. Following a review of

the respondent's and petitioners' submissions, we determined not to

continue investigating the Funding for Early Retirement program alleged

in the petition. (See Memorandum to Richard Moreland, ``Initiation of

Certain Programs Alleged to Benefit ALZ,'' June 18, 1998.)

On June 8, 1998, we postponed the preliminary determination of this

investigation until August 28, 1998 (see Notice of Postponement of Time

Limit for Countervailing Duty Investigations: Stainless Steel Plate in

Coils From Belgium, Italy, the Republic of Korea and the Republic of

South Africa, 63 FR 31201 (June 8, 1998)).

We received responses to our initial questionnaires from the GOB,

the GOF, the EC, and ALZ on June 19, 1998. On July 14, 1998, we issued

supplemental questionnaires to the GOB, GOF and ALZ. We received

responses to these supplemental questionnaires on August 3, 1998.

Scope of Investigation

For purposes of this investigation, the product covered is

stainless steel plate in coils. Stainless steel is an alloy steel

containing, by weight, 1.2 percent or less of carbon and 10.5 percent

or more of chromium, with or without other elements. The subject plate

products are flat-rolled products, 254 mm or over in width and 4.75 mm

or more in thickness, in coils, and annealed or otherwise heat treated

and pickled or otherwise descaled. The subject plate may also be

further processed (e.g., cold-rolled, polished, etc.) provided that it

maintains the specified dimensions of plate following such processing.

Excluded from the scope of this petition are the following: (1) plate

not in coils, (2) plate that is not annealed or otherwise heat treated

and pickled or otherwise descaled, (3) sheet and strip, and (4) flat

bars.

The merchandise subject to this investigation is currently

classifiable in the Harmonized Tariff Schedule of the United States

(HTS) at subheadings: 7219.11.00.30, 7219.11.00.60, 7219.12.00.05,

7219.12.00.20, 7219.12.00.25, 7219.12.00.50, 7219.12.00.55,

7219.12.00.65, 7219.12.00.70, 7219.12.00.80, 7219.31.00.10,

7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 7219.90.00.60,

7219.90.00.80, 7220.11.00.00, 7220.20.10.10, 7220.20.10.15,

7220.20.10.60, 7220.20.10.80, 7220.20.60.05, 7220.20.60.10,

7220.20.60.15, 7220.20.60.60, 7220.20.60.80, 7220.90.00.10,

7220.90.00.15, 7220.90.00.60, and 7220.90.00.80. Although the HTS

subheadings are provided for convenience and Customs purposes, the

written description of the merchandise under investigation is

dispositive.

The 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 effective January 1, 1995 (``the

Act''). In addition, unless otherwise indicated, all citations to the

Department of Commerce's (``the Department's'') regulations are to the

current regulations as codified at 19 CFR Part 351 and published in the

Federal Register on May 19, 1997 (62 FR 27295).

Injury Test

Because Belgium is a ``Subsidies Agreement Country'' within the

meaning of section 701(b) of the Act, the International Trade

Commission (``ITC'') is required to determine whether imports of the

subject merchandise from Belgium materially injure, or threaten

material injury to, a U.S. industry. On May 28, 1998, the ITC published

its preliminary determination finding that there is a reasonable

indication that an industry in the United States is being materially

injured, or threatened with material injury, by reason of imports from

Belgium of the subject merchandise (see 63 FR 29251 (May 28, 1998)).

Alignment With Final Antidumping Duty Determination

On May 27, 1998, the petitioners submitted a letter requesting

alignment of the final determination in this investigation with the

final determination in the companion antidumping duty investigations.

See Initiation of Antidumping Duty Investigations: Stainless Steel

Plate in Coils From Belgium, Canada, Italy, Republic of South Africa,

South Korea and Taiwan, 63 FR 20580 (April 27, 1998). In accordance

with section 705(a)(1) of the Act, we are aligning the final

determination in this investigation with the final determinations in

the antidumping investigations of stainless steel plate in coils.

Period of Investigation

The period for which we are measuring subsidies (``the POI'') is

calendar year 1997.

Company History

The GOB identified one producer of the subject merchandise that

exported to

[[Page 47240]]

the United States during the POI, ALZ. There are also two subsidiaries

of ALZ which are involved in the production of the subject merchandise,

ALBUFIN N.V. (``Albufin'') and AL-FIN N.V. (``Alfin''), and we have

included any subsidies to these companies in the subsidy rate for ALZ.

In 1987, the GOB sold its ownership interest in ALZ to SIDMAR N.V.

(``Sidmar''). Normally, we would apply our privatization methodology

under the circumstances presented. However, because the subsidies

provided to ALZ prior to 1987 were extremely small, the amount of that

could be considered as repayment would be insignificant. See, e.g.,

Industrial Phosphoric Acid from Israel; Final Results of Countervailing

Duty Administrative Review, 61 FR 53351 (October 11, 1996), see also

Industrial Phosphoric Acid from Israel; Preliminary Results of

Countervailing Duty Administrative Review, 61 FR 28845 (June 6, 1996).

Therefore, we did not apply our privatization methodology to the 1987

transaction.

Subsidies Valuation Information

Allocation Period

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 non-recurring

subsidies (see the General Issues Appendix (``GIA'') to the Final

Affirmative Countervailing Duty Determination: Certain Steel Products

from Austria, 58 FR 37217, at 37225 (July 9, 1993)). However, in

British Steel plc v. United States, 879 F. Supp. 1254 (CIT 1995)

(``British Steel I''), 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 non-recurring 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. See British

Steel plc v. United States, 929 F. Supp. 426, 439 (CIT 1996) (``British

Steel II''). Thus, we intend to determine the allocation period for

non-recurring subsidies using company-specific AUL data where

reasonable and practicable. See, e.g., Certain Cut-to-Length Carbon

Steel Plate from Sweden; Final Results of Countervailing Duty

Administrative Review, 62 FR 16551 (April 7, 1997).

In this investigation, the Department has followed the Court's

decision in British Steel I, and examined information submitted by the

respondent as to its average useful life of assets. Based on the

information submitted by ALZ on the average useful life of its non-

renewable physical assets, we preliminarily determine that the AUL for

ALZ is 15 years. Furthermore, for those subsidies received by Sidmar,

which may be, in part, attributable to ALZ, we intend to seek

information prior to the final determination regarding Sidmar's AUL. If

necessary, for those years in which Sidmar was not consolidated with

ALZ, we intend to use Sidmar's AUL for purposes of determining the

allocation period for non-recurring subsidies received by Sidmar. For

those years in which ALZ was consolidated with Sidmar, we intend to use

a company-specific AUL, based on Sidmar's consolidated information, for

purposes of determining the allocation period for non-recurring

subsidies granted to Sidmar.

Equity Methodology

Consistent with the Department's methodology, the first question in

analyzing an equity infusion is whether, at the time of infusion, there

was a market price for newly-issued equity (see GIA, 58 FR 37239). The

Department will find an equity investment to be inconsistent with the

usual practice of a private investor if the market-determined price for

equity purchased from the firm is less than the price paid by the

government for the same form of equity purchased directly from the

firm. In this investigation, for those years in which market prices do

not exist, the Department has conducted an equityworthiness analysis of

the firm as described in the GIA, 58 FR at 37239. See ``1985 Debt to

Equity Conversion and Purchase of ALZ Shares'' section, below.

Benchmarks for Long-Term Loans and Discount Rates

ALZ reported that it obtained long-term commercial loans

contemporaneously with the receipt of certain government loans or

grants. Therefore, when available, we have used these company-specific

interest rates as the long-term loan benchmark interest rate or

discount rate. For those years in which ALZ did not receive commercial

loans, we used the national average rates for long-term, fixed-rate

debt as reported by the GOF.

Green Light

The GOF requested green light treatment for certain benefits

provided pursuant to the Economic Expansion Law of 1970 (``1970 Law'').

Among other things, the 1970 Law offers incentives to promote the

establishment of new enterprises or the expansion of existing ones

which contribute directly to the creation of new activities and new

employment within designated development zones.

While the 1970 Law is currently administered by the GOF, the GOB

originally oversaw the implementation of 1970 Law benefits to

disadvantaged regions throughout Belgium. Pursuant to the overall

devolution of power from the GOB to the regional governments since the

early 1980s, the authority to administer the 1970 Law has been

transferred to the regional governments. With respect to Flanders, many

of the 1970 Law subsidy programs have been implemented and administered

by the GOF since the late 1980s and the ``execution modalities'' have

been amended by several Flemish decrees. Currently, funding for

programs under the 1970 Law at issue in this investigation is included

in a lump sum amount from the GOB as part of the funds needed to

finance the overall operation of the GOF. This understanding of the

authority and funding of the 1970 Law relates only to the benefits

examined in this investigation and is based upon record evidence of

this case. We will seek more clarification on the administration and

funding of the 1970 Law.

ALZ received several types of assistance under the 1970 Law (the

initiation notice identified these subsidies as: 1993 Expansion Grant,

1994 Environmental Grants, Investment and Interest Subsidies,

Accelerated Depreciation, and Real Estate Tax Exemption). Most of this

assistance was granted after the GOF assumed control of the subsidy

programs. Therefore, for purposes of this preliminary determination, we

are treating the GOF as the granting government for these bestowals.

However, ALZ received one grant in 1983 (identified in the initiation

notice as Investment and Interest Subsidies). Because this grant was

received prior to the GOF takeover of 1970 Law authority, we consider

this one grant as having been bestowed by the GOB.

As mentioned above, the GOF requested green light treatment for

certain benefits provided pursuant to the 1970 Law. They requested such

treatment under both sections 771(5B)(C) (disadvantaged regions) and

771(5B)(D) (environmental adaptations) of the Act. In order for an

otherwise countervailable benefit to be accorded green light status, it

must meet each of the requirements set forth in sections 771(5B)(C) or

(D) of the Act (see also Statement of Administrative Action,

[[Page 47241]]

H.R. Doc. 316, Vol. 1, 103d Cong., 2d sess. 870, 266 (1994)).

Aid to Disadvantaged Regions

At this time, the record lacks certain fundamental information

necessary to evaluate this program for potential regional green light

treatment. Section 771(5B)(C) of the Act permits green light status for

only those subsidies provided pursuant to a general framework of

regional development, which means that the regional subsidy programs

are part of an internally consistent and generally applicable regional

development program. See also section 771(5B)(E)(iii)(I) of the Act.

Moreover, sections 771(5B)(C)(i) (II) and (III) of the Act require that

each region be considered disadvantaged on the basis of neutral and

objective criteria, including a measurement of economic development. In

response to questions regarding the process by which regions are

classified as disadvantaged, the GOF stated that the EC establishes the

regions as disadvantaged and that neither the GOB nor the GOF are

involved in this process. The information on the record to date does

not provide a full understanding of the EC process and how it relates

to the framework of GOF regional assistance. Moreover, it appears that

the GOF distinguishes its own regions (similar to the EC's regions) and

provides this information in an application to the EC. The GOF did not

provide any information regarding its own system of identifying

disadvantaged regions. Consequently, there is an absence of record

evidence relating to whether the subsidies are provided pursuant to a

``general framework of regional development which is internally

consistent and generally applicable.''

Therefore, we preliminarily determine that subsidies provided

pursuant to the 1970 Law for the reduction of regional disparities are

countervailable.

Aid for Environmental Adaptations

Section 771(5B)(D)(i) of the Act stipulates that subsidies provided

to promote the adaptation of existing facilities to new environmental

requirements that are imposed by statute or by regulation shall not be

countervailable, assuming other statutory requirements are met. In this

investigation, we are evaluating only the grants received by ALZ under

the 1970 Law for ecological investments (identified in the initiation

notice as 1994 Environmental Grants).

Section 771(5B)(D)(i) of the Act requires that the adaptation must

be made to satisfy specific environmental requirements and those

environmental requirements must ``* * * result in greater constraints

and financial burdens on the recipient of the subsidy * * *'' In

addition, a subsidy must: (I) be a one-time nonrecurring measure, (II)

be limited to 20% of the cost of adaptation, (III) not cover the cost

of replacing and operating the subsidized investment, and (IV) be

directly linked and proportionate to the recipient's planned reduction

of nuisances and pollution, and must not cover any manufacturing cost

savings that may be achieved. Based upon the information currently on

the record, we preliminarily determine the following.

ALZ has shown that a financial burden was incurred because, by law,

it was required to pay a large majority of the costs of the

environmental adaptations necessary to conform to environmental

regulations; non-compliance with these regulations would result in

fines. Moreover, because these subsidies are one-time, non-recurring

grants which are limited to 15 percent de jure, and 12 percent de facto

(due to GOF budgetary constraints) of the adaptation costs, we

preliminarily determine that ecological grants provided under the 1970

Law fulfill requirements (I) and (II). With respect to requirements

(III) and (IV), ALZ has shown that the calculation of assistance is

based solely on the costs of the environmental adaptation, and does not

include any costs of expansion. Moreover, the assistance cannot cover

plant expansion or result in manufacturing cost savings. In this

regard, there is a provision in the 1970 Law which states that if an

investment is associated with an increase in the capacity of the plant,

the eligible costs shall be proportionate to the initial capacity of

the plant. Stated differently, the amount of aid granted for an

ecological investment can only apply to an existing facility and may

not be used to build or adapt an expanded facility.

Notwithstanding the analysis outlined above, certain questions have

arisen which are not fully addressed by the information currently on

the record. For example, section 771(5B)(D)(i) stipulates that

subsidies provided to promote the adaptation of existing facilities to

new environmental requirements that are imposed by statute or by

regulation shall not be countervailable (emphasis added). There is a

question as to whether certain projects were performed by ALZ to adapt

to a published law or regulation.

Moreover, section 771(5B)(D)(i)(V) of the Act states that the

subsidy must be ``available to all persons that can adopt the new

equipment or production processes.'' The 1970 Law provides

environmental grants only to enterprises located in a development

region. Shortly before this preliminary determination, we discovered

that two Flemish acts may supplement the 1970 Law: the 1993 Economic

Expansion Decree (``1993 Decree'') and the Act of August 4, 1978

(``1978 Act''). There is a copy of the 1993 Decree on the record and it

appears that the 1993 Decree provides the same assistance for

ecological investments to any medium-and large-sized enterprises in

Flanders not eligible for assistance under the 1970 Law. However, the

1978 Act is not on the record and there is no record evidence to

suggest that the same provisions for ecological adaptations are

provided to small-sized enterprises under the 1978 Act.

Because of these outstanding questions, we preliminarily determine

that more information is needed to complete our analysis. After we

collect additional information and conduct verification, we will

prepare an analysis memorandum addressing the green light status of

this program during this period, and provide all parties an opportunity

to comment on our analysis.

I. Programs Preliminarily Determined To Be Countervailable

A. Regional Subsidies Under the Economic Expansion Law of 1970

As stated above, the 1970 Law offers incentives to enterprises

located within designated disadvantaged regions. This law provides

benefits specifically to firms in certain development zones of

Flanders. Therefore, we preliminarily determine that benefits provided

under this law are specific under section 771(5A)(D)(i) of the Act.

In the Final Affirmative Countervailing Duty Determinations:

Certain Steel Products from Belgium, 58 FR 37273 (July 9, 1993)

(``Certain Steel''), we determined that assistance provided under the

1970 Law complemented that provided under the 1959 Economic Expansion

Law (``1959 Law''), because it generally increased the amount of

assistance for companies located in certain development zones.

Subsidies provided pursuant to the 1959 Law were found not

countervailable in the Final Affirmative Countervailing Duty

Determinations: Certain Steel Products From Belgium, September 7, 1982

(47 FR 39305) (``Belgian Steel'') because they were not specific.

Therefore, in Certain Steel, we countervailed benefits under the 1970

Law only to the extent they exceeded benefits available under the 1959

Law (see Certain Steel at 37275 and 37289

[[Page 47242]]

and section 355.44(n) of the 1989 Proposed Regulations).

ALZ has argued for the same treatment in this case. However, the

verification report of the GOB in Certain Steel states that the 1959

Law was repealed effective August 1, 1991. Therefore, for benefits

received by ALZ after 1991, it is not appropriate to take into account

the benefits that might have been provided under the 1959 Law. The GOB

stated that the 1959 Law was replaced with the Flemish 1993 Decree.

However, we need more information on the 1993 Decree to determine

whether benefits available under it are non-specific and whether such

benefits should affect the level of countervailable benefits provided

under the 1970 Law.

1. 1993 Expansion Grant

The GOF gave Albufin, a subsidiary of ALZ, a cash grant in 1994 to

construct an annealing and pickling line. The grant is a financial

contribution as described in section 771(5)(D)(i) of the Act which

provides a benefit to the recipient in the amount of the grant.

Furthermore, as mentioned above, benefits under the 1970 Law are

available only to firms in certain regions of Flanders. On this basis,

we preliminarily determine that the program is specific under section

771(5A)(D)(i) of the Act. Therefore, we preliminarily determine that

the 1993 Expansion Grant received by Albufin is countervailable within

the meaning of section 771(5) of the Act.

We further preliminarily determine that this grant is non-recurring

because the company could not expect to receive it on an ongoing basis.

Because the benefit to Albufin was below 0.5 percent of sales in the

year of receipt, we expensed the grant in that year. Thus, Albufin

received no benefit during the POI.

2. Investment and Interest Subsidies

The petitioners alleged that ALZ financial statements for 1996 and

1997 show entries for ``investment subsidies'' and ``interest

subsidies.'' According to ALZ, the majority of these figures are

comprised of the environmental grants described above. However, as

mentioned above, in 1983, ALZ received one cash grant from the GOB

under the old system of assistance. At that time, the 1959 Law was

still in effect.

We preliminarily determine that this grant received by ALZ is

countervailable within the meaning of section 771(5) of the Act. The

1983 grant is a financial contribution as described in section

771(5)(D)(i) of the Act which provides a benefit to the recipient in

the amount of the grant. Because the countervailable portion of the

assistance was received from the GOB pursuant to the 1970 Law and, as

mentioned above, benefits under the 1970 Law were available only to

firms in certain regions of the country, we preliminarily determine

that the program is specific under section 771(5A)(D)(i) of the Act.

Therefore, because cash grants of this nature were also available

to companies under the 1959 Law, we preliminarily determine that only

the difference in the assistance level between the two laws constitutes

a countervailable benefit (see also Certain Steel, 58 FR 37273, 37275).

To derive the benefit, we calculated the difference in the level of

benefit between what was actually granted pursuant to the 1970 Law and

what could have been received pursuant to the 1959 Law.

We further determine that this grant is non-recurring because it

was not provided on an ongoing basis. In calculating the benefit, we

applied the Department's standard grant methodology. We divided the

benefit attributable to the POI by ALZ's total sales during the POI. On

this basis, we preliminarily determine the countervailable subsidy to

be 0.02 percent ad valorem.

3. Accelerated Depreciation

Article 15 of the 1970 Law allows companies to declare twice the

standard depreciation for assets acquired through funds provided by the

grants bestowed under the law. The tax benefit is a financial

contribution as described in section 771(5)(D)(ii) of the Act which

provides a benefit to the recipient in the amount of the tax savings.

Because only enterprises situated in certain development zones are

eligible to apply for accelerated depreciation, we preliminarily

determine that the program is specific under section 771(5A)(D)(i) of

the Act. Therefore, we preliminarily determine that this tax benefit

received by ALZ is countervailable within the meaning of section 771(5)

of the Act.

Albufin, an ALZ subsidiary, received tax savings under this program

during the POI. In calculating the benefit, we treated the tax savings

as a recurring benefit and divided it by ALZ's total sales during the

POI. On this basis, we preliminarily determine the countervailable

subsidy to be 0.49 percent ad valorem.

4. Real Estate Tax Exemption

Pursuant to Article 16, assets acquired through investments

financed in part by the 1970 Law may be exempted from real estate taxes

for up to five years, depending on the extent to which objectives of

the 1970 Law are achieved. The tax benefit is a financial contribution

as described in section 771(5)(D)(ii) of the Act which provides a

benefit to the recipient in the amount of the tax savings. Because only

enterprises situated in certain development zones are eligible to apply

for a real estate tax exemption, we preliminarily determine that the

program is specific under section 771(5A)(D)(i) of the Act. Therefore,

we preliminarily determine that this tax benefit received by ALZ is

countervailable within the meaning of section 771(5) of the Act.

Albufin received tax savings under this program during the POI. In

calculating the benefit, we treated the tax savings as a recurring

benefit and divided it by ALZ's total sales during the POI. On this

basis, we preliminarily determine the countervailable subsidy to be

0.04 percent ad valorem.

B. 1985 ALZ Share Subscriptions and Subsequent Transactions (Identified

in the Initiation Notice as 1985 Debt to Equity Conversion and Purchase

of ALZ Shares)

On September 26, 1985, the GOB made three share subscriptions in

ALZ pursuant to the Royal Decree No. 245 of December 31, 1983. This

Royal Decree allowed the GOB to make preference share subscriptions in

the steel industry as long as the subscriptions did not exceed one-half

of the social capital of the company. The Nationale Maatschappig voor

de Herstructurering van de Nationale Sectoren (``NMNS''), the

government agency purchasing the shares, acquired ordinary shares and

preference shares through this transaction.

In analyzing whether these share purchases conferred a benefit on

ALZ, we must determine whether the GOB investment was inconsistent with

the usual investment practice of private investors in Belgium. Neither

ALZ's ordinary nor preference shares were publicly traded. Therefore,

we have analyzed the circumstances of the transaction.

According to ALZ, the price at which the GOB purchased shares in

ALZ was determined by two separate studies as discussed in ALZ's

shareholders' meeting of September 26, 1985. These studies were

performed by an independent accounting firm and a group of experts

selected by ALZ. ALZ also submitted documentation from the European

Commission notifying the GOB that ALZ's capital increase met the

Commission's private investor standard. In addition, we have performed

an

[[Page 47243]]

independent analysis of ALZ's financial health at the time of the stock

purchase. This analysis indicates that the company was equityworthy.

Consistent with the standard established in Aimcor v. the United

States, 871 F. Supp. 447, 454 (CIT 1994) and Geneva Steel et al. v.

United States, 914 F. Supp. 563, at 582, (CIT 1996), a finding of

equityworthiness means that the Department need not inquire further

regarding the commercial soundness of a government's purchases of

ordinary shares. Hence, we preliminary determine that the GOB's 1985

purchase of ordinary shares was consistent with the usual investment

practice of private investors in Belgium.

With respect to ALZ's preference shares, we have analyzed the

characteristics of the shares and the price paid per share, and have

concluded that the government's 1985 investment in these preferred

shares was consistent with the usual investment practice of private

investors in Belgium (see memorandum from Team to Richard Moreland,

``Concurrence Memorandum; Summary of Issues,'' public version, dated

August 28, 1998 (``Concurrence Memorandum'')).

However, in 1987, the GOB sold ALZ's ordinary shares purchased

under the Royal Decree No. 245 to Kempense Investeringsvennootschap

(``KIV''), a company controlled by Sidmar. The price received by the

GOB was lower than the price Sidmar paid a private company for its

ordinary shares in ALZ, in a relatively contemporaneous transaction.

Furthermore, in 1993, Sidmar acquired the preference shares

originally purchased under the Royal Decree No. 245 from the GOB in

return for an ownership interest in a Sidmar controlled company. Based

on our analysis, the GOB sold these preference shares at a price below

the market value for ALZ stock (the exact terms of this transaction are

proprietary in nature and are discussed in the Concurrence Memorandum.

We preliminarily determine that the GOB's sales of ALZ's ordinary

and preferred shares to Sidmar constitute countervailable subsidies

within the meaning of section 771(5) of the Act. These programs provide

a financial contribution, as described in section 771(5)(D)(i) of the

Act. As discussed above, benefits under Royal Decree No. 245 are

available only to the steel sector. On this basis, we preliminarily

determine that the programs are specific under section 771(5A)(D) of

the Act.

To calculate the benefits, we took the difference between market

values for ALZ's ordinary and preferred shares and the price paid by

Sidmar for the stock in question. We then applied the Department's

standard grant methodology and divided the benefit attributable to the

POI by Sidmar's total sales during the POI. On this basis, we

preliminarily determine the countervailable subsidies to be 0.05 and

0.12 percent ad valorem, respectively.

C. Belgian Industrial Finance Company (``Belfin'') Loans

Belfin was established by Royal Decree on June 29, 1981, as a mixed

corporation with 50 percent GOB participation and 50 percent private

industry participation. In Certain Steel, we determined that Belfin's

objective is to finance investments needed for the restructuring and

development of various sectors of industry, commerce, and state

services. Belfin borrows money in Belgium and on international markets,

with the benefit of government guarantees, in order to obtain the funds

needed to make loans to Belgian companies. The government's guarantee

makes it possible for Belfin to borrow at favorable interest rates and

to pass the savings along when it lends the funds to Belgian companies.

Belfin loans to Belgian companies are not guaranteed by the GOB.

However, these loans carry a one percent commission which is used to

maintain a guarantee fund to support the GOB's guarantee of Belfin's

borrowing. ALZ received Belfin loans which were outstanding during the

POI.

We preliminarily determine that this program constitutes a

countervailable subsidy within the meaning of section 771(5) of the

Act. These loans provide a financial contribution, as described in

section 771(5)(D)(i) of the Act, with the benefit equal to the

difference between the benchmark rate and the rate ALZ pays on these

loans. Although the objective of Belfin loans is to assist the

restructuring and development of various sectors, steel companies are

the predominant recipients of Belfin loans. Therefore, we preliminarily

determine that the Belfin loans to the steel industry are specific

under section 771(5A) of the Act.

To calculate the subsidy conferred by these loans we used our long-

term fixed-rate loan methodology. We measured the interest savings to

ALZ in each year the loans were outstanding. We then took the present

value of each of these amounts as of the time the loan was received.

Finally, using the benchmark as a discount rate, we allocated the

subsidy over the life of the loan. We then divided the benefit

attributable to the POI by ALZ's total 1997 sales. On this basis, we

preliminarily determine the countervailable subsidy to be 0.01 percent

ad valorem.

D. Industrial Reconversion Zones

Alfin

Alfin was established as a ``proper'' reconversion company in 1985

under the reconversion program ``Herstelwet 1984.'' It was financed by

a government agency, Nationale Investeringsmaatschappij (``NIM'') and

ALZ. In exchange for its investment, NIM received preferred non-voting

shares and a two percent annual return on its investment. ALZ is

obligated to repurchase all of the shares purchased by NIM over a ten

year period at the issued price.

We used the hierarchical criteria discussed in the ``Classification

of Hybrid Financial Instruments Issue'' section of the GIA to examine

these shares and preliminarily find that they constitute debt

instruments because they have a fixed repayment period. We

preliminarily determine that this program constitutes a countervailable

subsidy within the meaning of section 771(5) of the Act. This program

provides a financial contribution, as described in section 771(5)(D)(i)

of the Act. Because the ``Herstelwet 1984'' law provides benefits

specifically to firms in certain regions of the country, we

preliminarily determine that it is specific under section 771(5A) of

the Act.

To measure the benefit on this loan, we used our long-term fixed-

rate loan methodology and measured the cost savings conferred by the

loan in each year the loan was outstanding, as described above. We

divided the subsidy allocated to the POI by ALZ's total 1997 sales. On

this basis, we preliminarily determine the countervailable subsidy to

be 0.20 percent ad valorem.

Albufin

Albufin was established as an ``improper'' reconversion company in

1989, also under the reconversion program ``Herstelwet 1984.'' It

received capital with partial financing from the government (NIM), the

Sidmar Group (FININDUS), a private company (Klockner Stahl) and ALZ.

Because Klockner Stahl was a private company at the time of Albufin's

establishment, and it invested on the same terms as the government, we

preliminarily determine that there is no countervailable benefit

resulting from the establishment of the company. However, as an

``improper'' reconversion company, Albufin benefits from a tax

exemption on dividend payments and is exempt from the capital

registration tax. We

[[Page 47244]]

preliminarily determine that these tax benefits received by Albufin are

countervailable subsidies within the meaning of section 771(5) of the

Act. The tax benefits are a financial contribution as described in

section 771(5)(D)(ii) of the Act which provide a benefit to the

recipient in the amount of the tax savings. Because the ``Herstelwet

1984'' law provides benefits specifically to firms in certain regions

of the country, we preliminarily determine that it is specific under

section 771(5A) of the Act.

In the POI, Albufin did not receive tax savings under the capital

registration tax but did benefit from the exemption on dividend

payments. To measure the benefit from this tax exemption, we treated

the tax savings as a recurring benefit and divided it by ALZ's total

sales during the POI. On this basis, we preliminarily determine the

countervailable subsidy to be 0.05 percent ad valorem.

E. Subsidies Provided to Sidmar That Are Attributable to ALZ

As discussed in the ``Company History'' section above, Sidmar owns

either directly or indirectly 100 percent of ALZ's voting shares and is

the overall majority shareholder of ALZ. In Certain Steel and in the

Department's redetermination on remand of Certain Steel, we found that

Sidmar received several countervailable benefits that were attributable

to the entire Sidmar group. Because ALZ is a fully consolidated

subsidiary of Sidmar, any untied subsidies provided to Sidmar are

attributable to ALZ (see Certain Hot-Rolled Lead and Bismuth Carbon

Steel Products From the United Kingdom; Final Results of Countervailing

Duty Administrative Review, 63 FR 18367 (April 15, 1998) (``UK Lead and

Bismuth'')). Thus, we preliminarily determine that the following two

programs provide countervailable benefits to ALZ via its parent

company, Sidmar.

1. Assumption of Sidmar's Debt

Between 1979 and 1983, the GOB assumed the interest costs

associated with medium- and long-term loans for certain steel

producers, including Sidmar. In exchange for the GOB's assumption of

financing costs, Sidmar agreed to the conditional issuance of

convertible profit sharing bonds (``OCPCs'') to the GOB. In 1985,

Sidmar and the GOB agreed to substitute parts beneficiaires (``PBS'')

for the OCPCs.

Consistent with Certain Steel and the attendant litigation, we

preliminarily determine that the GOB's initial assumption of interest

costs was specific under section 771(5A) of the Act. Furthermore, we

preliminarily determine that the OCPCs are properly classifiable as

debt and that the conversion of OCPCs to PBS constituted a debt to

equity conversion. Comparing the price paid for the PBS to the market

value of Sidmar's common stock, we preliminarily determine that the

debt to equity conversion provided a benefit to Sidmar as the share

transactions were on terms inconsistent with the usual practice of a

private investor.

We preliminarily determine that this program constitutes a

countervailable subsidy within the meaning of section 771(5) of the

Act. This program provides a financial contribution, as described in

section 771(5)(D)(i) of the Act. As discussed above, benefits under

this program were available only to certain steel producers. On this

basis, we preliminarily determine that the program is specific under

section 771(5A)(D) of the Act.

To measure the benefit from the debt to equity conversion, we

calculated the premium paid by the government as the difference between

the price paid by the government for the PBS and the adjusted market

price of the common shares. We then applied the Department's standard

grant methodology and divided the benefit attributable to the POI by

Sidmar's total sales during the POI. On this basis, we preliminarily

determine the countervailable subsidy to be 0.31 percent ad valorem.

2. SidInvest

The right to establish ``Invests'' was limited to the five national

industries. SIDINVEST N.V. (``SidInvest'') was incorporated on August

31, 1982, as a holding company jointly owned by Sidmar and the Societe

Nationale d'Investissement, S.A. (``SNI''). SidInvest was given drawing

rights on SNI to finance specific projects. The drawing rights took the

form of conditional refundable advances (``CRAs''), which were

interest-free, but repayable to SNI based on a company's profitability.

In 1987, the GOB moved to accelerate the repayment of the CRAs and

thus, in 1988, SidInvest agreed to pay back the outstanding balance on

the CRAs at a rate of 3 percent per year. Later in July 1988, an

agreement was reached for NMNS to become a shareholder in SidInvest by

contributing the CRAs owed to it by SidInvest in exchange for SidInvest

stock. Through a series of transactions the Sidmar group then

repurchased the SidInvest shares obtained by NMNS.

Consistent with Certain Steel, we preliminarily determine that the

CRAs were interest-free loans. On July 29, 1988, a fixed repayment

schedule over 32 years was established for these interest-free loans.

Thus, the first benefit arising from the July 1988, transactions was

the creation of a 32-year interest-free loan.

The second benefit arose from the GOB's subsequent exchange of the

loan for shares in SidInvest and the selling of those shares back to

various members of the Sidmar group. Because SidInvest paid less than

the net present value in 1988 of the amount due in 32 years for the

repurchase of its loan, we are treating the difference between what

SidInvest should have been willing to pay and what NMNS received as a

benefit.

We preliminarily determine that both transactions provided a

countervailable subsidy within the meaning of section 771(5) of the

Act. Both provide a financial contribution, as described in section

771(5)(D)(i) of the Act. Moreover, because the right to establish

``Invests'' was limited to the five national sectors, we view these

programs as being limited to a specific group of industries. On this

basis, we preliminarily determine that the programs are specific under

section 771(5A)(D) of the Act.

To measure the benefit from the interest-free loan, we allocated

the benefit over the life of the loan using our standard long-term loan

methodology. To calculate the benefit from the selling of the loan, we

applied the Department's standard grant methodology. We divided the

benefits attributable to the POI by Sidmar's consolidated total sales

during the POI. On this basis, we preliminarily determine the

countervailable subsidies to be 0.25 and 0.05 percent ad valorem,

respectively.

II. Programs Preliminarily Determined To Be Not Countervailable

A. Societe Nationale de Credite a l'Industrie (``SNCI'') Loans (Loans

Approved Between 1987 and 1990)

The SNCI was a public credit institution, which, through medium-

and long-term financing, encouraged the development and growth of

industrial and commercial enterprises in Belgium. SNCI was organized as

a limited liability company and, until 1997, was 50-percent owned by

the Belgian government. ALZ received investment loans from SNCI which

were outstanding during the POI. All SNCI loans received by ALZ and

outstanding during the POI were approved and disbursed after 1986.

[[Page 47245]]

In Certain Steel, we examined whether investment loans from SNCI

were specific by analyzing whether the steel industry received a

disproportionate share of benefits (58 FR 37273, 37280-37281). We

compared the steel industry's share of benefits to the share of

benefits provided to all other users of the program. Although SNCI made

loans to many sectors of the Belgian economy, we determined that the

steel industry had received a disproportionately large share of

investment loans granted between 1975 and 1986. However, we did not

find disproportionality or specificity in 1987 and 1988 as the steel

industry's share of benefits dropped significantly. No new information

has been presented in this investigation to change our Certain Steel

determination.

In the present case, we examined data on the distribution of SNCI

investment loans after 1988 to determine whether they were specific

under section 771(5A)(D)(iii) of the Act. The GOB provided information

on the sectoral distribution of loans under the program for the years

1989 and 1990. This information indicates that the steel industry did

not receive a disproportionate share of benefits in those years.

Therefore, for loans approved between 1989 and 1990, we preliminarily

determine that SNCI investment loans were non-specific, and therefore,

not countervailable. Moreover, ALZ stated that it received one loan

from SNCI after the institution was completely privatized. Because the

loan was approved and disbursed after SNCI's privatization, we

preliminarily determine that this loan is not countervailable under

section 771(5B) of the Act.

We do not have specific industry usage information for SNCI loans

for years after 1990 and before SNCI was privatized. We requested this

information from the GOB in both the original and supplemental

questionnaires. While the GOB provided SNCI's annual reports for all

relevant years, after 1990 these reports ceased to provide specific

information on sectoral distribution of loans. However, there are

general descriptions of changes in SNCI lending patterns. These

descriptions provide no indication that the steel industry received a

disproportionate share of investment loans from SNCI during this

period. Therefore, we need more information to determine whether SNCI

loans approved after 1990 were specific under section 771(5A)(D)(iii)

of the Act. However, after we collect additional information and

conduct verification, we will prepare an analysis memorandum addressing

the specificity of this program during the period under investigation,

and provide all parties an opportunity to comment on our analysis.

III. Programs for Which We Need More Information

A. Societe Nationale de Credite a l'Industrie (``SNCI'') Loans (loans

approved after 1990)

See ``SNCI Loans'' section, above.

B. 1994 Environmental Grants under the 1970 Law

See ``Green Light'' section, above.

IV. Programs Preliminarily Determined To Be Not Used

Based upon the information provided in the responses, we determine

that the company under investigation did not apply for or receive

benefits under the following programs during the POI.

A. Government of Belgium Programs

1. Subsidies Provided to Sidmar that are Potentially Attributable to

ALZ

a. Water Purification Grants

2. Societe Nationale pour la Reconstruction des Secteurs Nationaux

(``SNSN'')

3. Regional subsidies under the Economic Expansion Law of 1970 (``1970

Law'')

a. Corporate Income Tax Exemption

b. Capital Registration Tax Exemption

c. Government Loan Guarantees

4. Special Depreciation Allowance

5. Preferential Short-Term Export Credit

6. Interest Rate Rebates

B. Programs of the European Commission

1. ECSC Article 54 Loans and Interest Rebates

2. ECSC Article 56 Conversion Loans, Interest Rebates and Redeployment

Aid

3. European Social Fund Grants

4. European Regional Development Fund Grants

5. Resider II Program

Verification

In accordance with section 782(i) of the Act, we will verify the

information submitted by respondents prior to making our final

determination.

Suspension of Liquidation

In accordance with section 703(d)(1)(A)(i) of the Act, we have

calculated an individual rate for ALZ, the sole manufacturer of the

subject merchandise. We preliminarily determine that the total

estimated net countervailable subsidy rate is 1.59 percent ad valorem.

Because we only investigated one producer/exporter, ALZ's rate will

also serve as the ``all others'' rate. Therefore, the ``all others''

rate is 1.59 percent ad valorem.

In accordance with section 703(d) of the Act, we are directing the

U.S. Customs Service to suspend liquidation of all entries of plate in

coils from Belgium, which are entered or withdrawn from warehouse, for

consumption on or after the date of the publication of this notice in

the Federal Register, and to require a cash deposit or bond for such

entries of the merchandise in the amount of 1.59 percent ad valorem.

This suspension will remain in effect until further notice.

ITC Notification

In accordance with section 703(f) of the Act, we will notify the

ITC of our determination. In addition, we are making available to the

ITC all nonprivileged and nonproprietary information relating to this

investigation. We will allow the ITC access to all privileged and

business proprietary information in our files, provided the ITC

confirms that it will not disclose such information, either publicly or

under an administrative protective order, without the written consent

of the Assistant Secretary, Import Administration.

If our final determination is affirmative, the ITC will make its

final determination within 45 days after the Department makes its final

determination.

Public Comment

In accordance with 19 CFR 351.310, we will hold a public hearing,

if requested, to afford interested parties an opportunity to comment on

this preliminary determination. The hearing is tentatively scheduled to

be held 57 days from the date of publication of the preliminary

determination at the U.S. Department of Commerce, 14th Street and

Constitution Avenue, N.W., Washington, D.C. 20230. Individuals who wish

to request a hearing must submit a written request within 30 days of

the publication of this notice in the Federal Register to the Assistant

Secretary for Import Administration, U.S. Department of Commerce, Room

1870, 14th Street and Constitution Avenue, N.W., Washington, DC 20230.

Parties should confirm by telephone the time, date, and place of the

hearing 48 hours before the scheduled time.

Requests for a public hearing should contain: (1) the party's name,

address, and telephone number; (2) the number of participants; and, (3)

to the extent practicable, an identification of the arguments to be

raised at the hearing. In addition, six copies of the business

proprietary version and six copies of the

[[Page 47246]]

nonproprietary version of the case briefs must be submitted to the

Assistant Secretary no later than 50 days from the date of publication

of the preliminary determination. As part of the case brief, parties

are encouraged to provide a summary of the arguments not to exceed five

pages and a table of statutes, regulations, and cases cited. Six copies

of the business proprietary version and six copies of the

nonproprietary version of the rebuttal briefs must be submitted to the

Assistant Secretary no later than 55 days from the date of publication

of the preliminary determination. An interested party may make an

affirmative presentation only on arguments included in that party's

case or rebuttal briefs. Written arguments should be submitted in

accordance with 19 CFR 351.309 and will be considered if received

within the time limits specified above.

This determination is published pursuant to sections 703(f) and

777(i) of the Act.

Dated: August 28, 1998.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 98-23911 Filed 9-3-98; 8:45 am]

BILLING CODE 3510-DS-P