Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Countervailing Duty Determination with Final Antidumping Duty Determination: Stainless Steel Sheet and Strip in Coils from Italy

DEPARTMENT OF COMMERCE

International Trade Administration

[C-475-825]

Preliminary Affirmative Countervailing Duty Determination and

Alignment of Final Countervailing Duty Determination with Final

Antidumping Duty Determination: Stainless Steel Sheet and Strip in

Coils from Italy

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: November 17, 1998.

FOR FURTHER INFORMATION CONTACT: Craig W. Matney, Gregory W. Campbell,

or Alysia Wilson, AD/CVD Enforcement, Group I, Office 1, Import

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

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

482-1778, 482-2239, or 482-0108, respectively.

Preliminary Determination: The Department of Commerce (the

Department) preliminarily determines that countervailable subsidies are

being provided to producers and exporters of stainless steel sheet and

strip in coils from Italy.

Petitioners

The petition in this investigation was filed by the Allegheny

Ludlum Corporation, Armco Inc., J&L Specialty Steel, Inc., Washington

Steel Division of Bethlehem Steel Corporation, United Steel Workers of

America, AFL-CIO/CLC, Butler Armco Independent Union, and Zanesville

Armco Independent Organization, Inc. (collectively referred to

hereinafter as the ``petitioners'').

Case History

Since the publication of the notice of initiation in the Federal

Register (see Notice of Initiation of Countervailing Duty

Investigations: Certain Stainless Steel Sheet and Strip in Coils from

France, Italy, and the Republic of Korea, 63 FR 37539 (July 13, 1998)

(Initiation Notice)), the following events have occurred. On July 13,

1998, we issued questionnaires to the Government of Italy (GOI), the

European Commission (EC), Acciai Speciali Terni S.p.A. (AST), and

Arinox S.r.l. (Arinox). On August 6, 1998, we postponed the preliminary

determination of this investigation until November 9, 1998 (see Notice

of Postponement of Time Limit for Countervailing Duty Investigations:

Stainless Steel Sheet and Strip in Coils from France, Italy, and the

Republic of Korea, 63 FR 43140 (August 12, 1998)).

We received responses to our initial questionnaires from the GOI,

the EC, AST, and Arinox between July 29 and September 14. Between

September 21 and October 16, 1998, we issued supplemental

questionnaires to the GOI, the EC, AST, and Arinox. We received

responses to these supplemental questionnaires between October 9 and

October 22, 1998.

Scope of Investigation

For purposes of these investigations, the products covered are

certain stainless steel sheet and strip 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 sheet and strip is a flat-rolled product in coils that is

greater than 9.5 mm in width and less than 4.75mm in thickness, and

that is annealed or otherwise heat treated and pickled or otherwise

descaled. The subject sheet and strip may also be further processed

(e.g., cold-rolled, polished, aluminized, coated, etc.) provided that

it maintains the specific dimensions of sheet and strip following such

processing.

The merchandise subject to this investigation is classified in the

Harmonized Tariff Schedule of the United States (``HTSUS'') at

subheadings: 7219.13.00.30, 7219.13.00.50, 7219.13.00.70,

7219.13.00.80, 7219.14.00.30, 7219.14.00.65, 7219.14.00.90,

7219.32.00.05, 7219.32.00.20, 7219.32.00.25, 7219.32.00.35,

7219.32.00.36, 7219.32.00.38, 7219.32.00.42, 7219.32.00.44,

7219.33.00.05, 7219.33.00.20, 7219.33.00.25, 7219.33.00.35,

7219.33.00.36, 7219.33.00.38, 7219.33.00.42, 7219.33.00.44,

7219.34.00.05, 7219.34.00.20, 7219.34.00.25, 7219.34.00.30,

7219.34.00.35, 7219.35.00.05, 7219.35.00.15, 7219.35.00.30,

7219.35.00.35, 7219.90.00.10, 7219.90.00.20, 7219.90.00.25,

7219.90.00.60, 7219.90.00.80, 7220.12.10.00, 7220.12.50.00,

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, 7220.20.70.05, 7220.20.70.10, 7220.20.70.15,

7220.20.70.60, 7220.20.70.80, 7220.20.80.00, 7220.20.90.30,

7220.20.90.60, 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.

Excluded from the scope of this petition are the following:

(1)Sheet and strip that is not annealed or otherwise heat treated and

pickled or otherwise descaled, (2) sheet and strip that is cut to

length, (3) plate (i.e., flat-rolled stainless steel products of a

thickness of 4.75 mm or more), (4)flat wire (i.e., cold-rolled

sections, rectangular in shape, of a width of not more than 9.5 mm, and

a thickness of not more than 6.35 mm), and (5)razor blade steel. Razor

blade steel is a flat rolled product of stainless steel, not further

worked than cold-rolled (cold-reduced), in coils, of a width of not

more than 23mm and a thickness of 0.266 mm or less, containing, by

weight, 12.5 to 14.5 percent chromium, and certified at the time of

entry to be used in the manufacture of razor blades. See Chapter 72 of

the HTSUS, ``Additional U.S. Note'' 1(d).

The Department has determined that certain specialty stainless

steel products are also excluded from the scope of these

investigations. These excluded products are described below: Flapper

valve steel is defined as stainless steel strip in coils with a

chemical composition similar to that of AISI 420F grade steel and

containing, by weight, between 0.37 and 0.43 percent carbon, between

1.15 and 1.35 percent molybdenum, and between 0.20 and 0.80 percent

manganese. This steel also contains, by weight, phosphorus of 0.025

percent or less, silicon of between 0.20 and 0.50 percent, and sulfur

of 0.020 percent or less. The product is manufactured by means of

vacuum arc remelting, with inclusion controls for sulphide of no more

than 0.04 percent and for oxide of no more than 0.05 percent. Flapper

valve steel has a tensile strength of 185 kgf/mm2, plus or minus 10,

yield strength of 150 kgf/mm2, plus or minus 8, and hardness (Hv) of

540, plus or minus 30.

Also excluded is suspension foil, a specialty steel product used,

e.g., in the manufacture of suspension assemblies for computer disk

drives. Suspension foil is described as 302/304 grade or 202

[[Page 63901]]

grade stainless steel of a thickness between 14 and 127 m,

with a thickness tolerance of plus-or-minus 2.01 m, and

surface glossiness of 200 to 700 percent Gs. Suspension foil must be

supplied in coil widths of not more than 407 mm, and with a mass of 225

kg or less. Roll marks may only be visible on one side, with no

scratches of measurable depth, and must exhibit residual stresses of 2

mm maximum deflection, and flatness of 1.6 mm over 685 mm length.

Permanent magnet iron-chromium-cobalt alloy stainless strip is also

excluded from the scope of these investigations. This ductile stainless

steel strip contains, by weight, 26 to 30 percent chromium, and 7 to 10

percent cobalt, with the remainder of iron, in widths of 1.016 to 228.6

mm, and a thickness between 0.0127 and 1.270 mm. It exhibits magnetic

remanence between 9,000 and 12,000 gauss, and a coercivity of between

50 and 300 oersteds. This product is most commonly used in electronic

sensors and is currently available, e.g., under the trade name

``Arnokrome III,'' 1

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\1\ ``Arnokrome III'' is a trademark of the Arnold Engineering

Company.

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Electrical resistance alloy steel is also not included in the scope

of these investigations. This product is defined as a non-magnetic

stainless steel manufactured to American Society of Testing and

Materials (ASTM) specification B344 and containing, by weight, 36

percent nickel, 18 percent chromium, and 46 percent iron, and is most

notable for its resistance to high temperature corrosion. It has a

melting point of 1390 degrees Celsius and displays a creep rupture

limit of 4 kilograms per square millimeter at 1000 degrees Celsius.

This steel is most commonly used in the production of heating ribbons

for circuit breakers and industrial furnaces, and in rheostats for

railway locomotives. The product is currently available, e.g., under

the trade name ``Gilphy 36.'' 2

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\2\ ``Gilphy 36'' is a trademark of Imphy, S.A.

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Finally, certain stainless steel strip in coils used in the

production of textile cutting tools (e.g., carpet knives) is also

excluded. This steel is similar to ASTM grade 440F, but containing

higher levels of molybdenum. This steel contains, by weight, carbon of

between 1.0 and 1.1 percent, sulphur of 0.020 percent or less, and

includes between 0.20 and 0.30 percent copper and cobalt. This steel is

sold under, e.g. the proprietary name GIN4Mo.3

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\3\ ``Gin4Mo'' is the proprietary grade of Hitachi Metals

America, Ltd.

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All interested parties are advised that additional issues

pertaining to the scope of these investigations are still pending.

Furthermore, the exclusions outlined above are subject to further

revision and refinement. The Department plans on notifying interested

parties of its determinations on all scope issues in sufficient time

for parties to comment before the final determination.

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

Department's regulations are to the current regulations codified at 19

CFR Part 351 (1998).

Injury Test

Because Italy 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 Italy materially injure, or threaten material

injury to, a U.S. industry. On August 9, 1998, the ITC published its

preliminary determination 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 Italy of the

subject merchandise (see Certain Stainless Steel Sheet and Strip From

France, Germany, Italy, Japan, the Republic of Korea, Mexico, Taiwan,

and the United Kingdom, 63 FR 41864 (August 9, 1998)).

Alignment With Final Antidumping Determination

On July 22, 1998, the petitioners submitted a letter requesting

alignment of the final determination in this investigation with the

final determination in the companion antidumping duty investigation.

See Initiation of Antidumping Investigations: Stainless Steel Sheet and

Strip in Coils From France, Germany, Italy, Japan, Mexico, South Korea,

Taiwan, and the United Kingdom, 63 FR 37521 (July 13, 1998). Therefore,

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 sheet and strip in

coils.

Period of Investigation

The period of investigation for which we are measuring subsidies

(the POI) is calendar year 1997.

Company History of AST

Prior to 1987, Terni, S.p.A, (Terni), a main operating company of

Finsider, was the sole producer of stainless steel sheet and strip in

coils (sheet and strip) in Italy. Finsider was a holding company that

controlled all state-owned steel companies in Italy. Finsider, in turn,

was wholly-owned by a government holding company, Istituto per la

Ricostruzione Industriale (IRI). As part of a restructuring in 1987,

Terni transferred its assets to a new company, Terni Acciai Speciali

(TAS).

In 1988, another restructuring took place in which Finsider and its

main operating companies (TAS, Italsider, and Nuova Deltasider) entered

into liquidation and a new company, ILVA S.p.A. was formed. ILVA S.p.A.

took over some of the assets and liabilities of the liquidating

companies. With respect to TAS, part of its liabilities and the

majority of its viable assets, including all the assets associated with

the production of sheet and strip, were transferred to ILVA S.p.A. on

January 1, 1989. ILVA S.p.A. became operational on the same day. Part

of TAS's remaining assets and liabilities were transferred to ILVA

S.p.A. on April 1, 1990. After that date, TAS no longer had any

manufacturing activities. Only certain non-operating assets remained in

TAS.

From 1989 to 1994, ILVA S.p.A. consisted of several operating

divisions. The Specialty Steels Division, located in Terni, produced

subject merchandise. ILVA S.p.A. was also the majority owner of a large

number of separately incorporated subsidiaries. The subsidiaries

produced various types of steel products and also included service

centers, trading companies, and an electric power company, among

others. ILVA S.p.A. together with its subsidiaries constituted the ILVA

Group (ILVA). ILVA was wholly-owned by IRI. All subsidies received

prior to 1994 were received by ILVA or its predecessors.

In October 1993, ILVA entered into liquidation and became known as

ILVA Residua. On December 31, 1993, two of ILVA's divisions were

removed and separately incorporated: AST and ILVA Laminati Piani (ILP).

ILVA's Specialty Steels Division was transferred to AST while its

carbon steel flat products operations were placed in ILP. The remainder

of ILVA's assets and liabilities, along with much of the

[[Page 63902]]

redundant workforce, were left in ILVA Residua.

In December 1994, AST was sold to KAI Italia S.r.L. (KAI), a

privately-held holding company jointly owned by German steelmaker

Hoesch-Krupp (50 percent) and a consortium of private Italian companies

called FAR Acciai (50 percent). Between 1995 and the POI, there were

several restructurings/changes in ownership of AST and its parent

companies. As a result, at the end of the POI, AST was owned 75 percent

by Krupp Thyssen Stainless GmbH and 25 percent by Fintad Securities

S.A.

Change in Ownership

In the General Issues Appendix (GIA), attached to the Final

Affirmative Countervailing Duty Determination: Certain Steel Products

from Austria, 58 FR 37217, 37226 (July 9, 1993), we applied a new

methodology with respect to the treatment of subsidies received prior

to the sale of the company (privatization) or the spinning-off of a

productive unit.

Under this methodology, we estimate the portion of the purchase

price attributable to prior subsidies. We compute this by first

dividing the privatized company's subsidies by the company's net worth

for each year during the period beginning with the earliest point at

which nonrecurring subsidies would be attributable to the POI and

ending one year prior to the privatization. We then take the simple

average of the ratios. The simple average of these ratios of subsidies

to net worth serves as a reasonable surrogate for the percent that

subsidies constitute of the overall value of the company. Next, we

multiply the average ratio by the purchase price to derive the portion

of the purchase price attributable to repayment of prior subsidies.

Finally, we reduce the benefit streams of the prior subsidies by the

ratio of the repayment amount to the net present value of all remaining

benefits at the time of privatization. For further discussion of our

privatization methodology, see, e.g., Preliminary Affirmative

Countervailing Duty Determination and Alignment of Final Countervailing

Duty Determination with Final Antidumping Duty Determination: Stainless

Steel Plate in Coils from Italy, 63 FR 47246 (September 4, 1998)

(Italian Plate).

With respect to spin-offs, consistent with the Department's

position regarding privatization, we analyze the spin-off of productive

units to assess what portion of the sale price of the productive units

can be attributable to the repayment of prior subsidies. To perform

this calculation, we first determine the amount of the seller's

subsidies that the spun-off productive unit could potentially take with

it. To calculate this amount, we divide the value of the assets of the

spun-off unit by the value of the assets of the company selling the

unit. We then apply this ratio to the net present value of the seller's

remaining subsidies. We next estimate the portion of the purchase price

going towards repayment of prior subsidies in accordance with the

privatization methodology outlined above.

AST, the GOI and the EC have all expressed the opinion that the

sale of AST to a private consortium in an arm's length transaction

extinguished all prior subsidies. An analogous argument was rejected in

the GIA. There is no basis for distinguishing the sale of AST from

other sales that we have analyzed under the GIA methodology. See, e.g.,

Final Affirmative Countervailing Duty Determination: Steel Wire Rod

From Trinidad and Tobago, 62 FR 55003 (October 22, 1997) (Wire Rod from

Trinidad and Tobago); Final Affirmative Countervailing Duty

Determination: Steel Wire Rod from Canada, 62 FR 54972 (October 22,

1997); and Final Affirmative Countervailing Duty Determination:

Stainless Steel Wire Rod from Italy, 63 FR 40474 (July 29, 1998) (Wire

Rod from Italy). Therefore, we have applied the methodology set forth

in the GIA for the 1994 privatization. After the 1994 privatization of

AST, there were numerous changes in the ownership structure of the

parent companies of AST. AST provided information for only one of these

changes. We have preliminarily applied the methodology to that

transaction, and we are evaluating whether it is appropriate to apply

the change in ownership methodology to the other post-privatization

transactions. We request interested parties to comment on this issue.

Subsidies Valuation Information

Benchmarks for Long-term Loans and Discount Rates: Consistent with

the Department's finding in Wire Rod from Italy, 63 FR at 40476-77, we

have based our long-term benchmarks and discount rates on the Italian

Bankers' Association (ABI) rate. Because the ABI rate represents a

long-term interest rate provided to a bank's most preferred customers

with established low-risk credit histories, commercial banks typically

add a spread ranging from 0.55 percent to 4 percent onto the rate for

other customers depending on their financial health.

In years in which AST or its predecessor companies were

creditworthy, we added the average of that spread onto the ABI rate to

calculate a nominal benchmark rate. In years in which AST or its

predecessor companies were uncreditworthy (see Creditworthiness section

below), we calculated the discount rates in accordance with our

methodology for constructing a long-term interest rate benchmark for

uncreditworthy companies. Specifically, we added to the ABI rate a

spread of 4 percent in order to reflect the highest commercial interest

rate available to companies in Italy. We added to this rate a risk

premium equal to 12 percent of the ABI, as described in section

355.44(b)(6)(iv) of the Department's 1989 Proposed Regulations, which

remain a statement of the Department's practice (see Countervailing

Duties; Notice of Proposed Rulemaking and Request for Public Comment,

54 FR 23366, 23374 (May 31, 1989) (1989 Proposed Regulations).

Additionally, information on the record of this case indicates that

published ABI rates do not include amounts for fees, commissions and

other borrowing expenses. Since such expenses raise the effective

interest rate that a company would experience and it is the

Department's practice to use effective interest rates, where possible,

we are including an amount for these expenses in the calculation of our

effective benchmark rates. While we do not have information on the

expenses that would be applied to long-term commercial loans,

information on the record shows that borrowing expenses on overdraft

loans range from 6 to 11 percent of interest charged. For purposes of

this preliminary determination, we are assuming that the level of

borrowing expenses on overdraft loans approximates the level on long-

term commercial loans. Accordingly, we are increasing the nominal

benchmark rate by 8.5 percent, representing the average reported level

of borrowing expenses, to arrive at an effective benchmark rate.

Allocation Period: In the past, the Department has relied upon

information from the U.S. Internal Revenue Service (IRS) for the

industry-specific average useful life of assets in determining the

allocation period for non-recurring subsidies. See the GIA. 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) held that the IRS

information did not necessarily reflect a reasonable period based on

the actual commercial and competitive benefit of the subsidies to

[[Page 63903]]

the recipients. 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).

In recent countervailing duty investigations, it has been our

practice to follow the Court's decision in British Steel II, and to

calculate a company-specific allocation period for all countervailable

non-recurring subsidies. In this investigation, we examined the

company-specific AUL for both AST and Arinox because both received non-

recurring subsidies. In the case of Arinox, we preliminarily determine

a company specific AUL of their non-renewable physical assets of 12

years.

However, our analysis of the data submitted by AST regarding the

AUL of its assets has revealed several problems. It appears that the

methodology used to value AST's assets during and subsequent to AST's

privatization may be distorting the company-specific AUL calculation.

Moreover, it appears that AST has not included all of its non-renewable

physical assets in the AUL figure it reported. Furthermore, the

methodology used to value ILVA's assets is unclear and may be

distortional.

Based on the concerns outlined above, we preliminarily determine

that AST's calculation of its company-specific AUL should not be used

to determine the appropriate allocation period for non-recurring

subsidies. Rather, for purposes of this preliminary determination we

are using the 15 years as set out in the IRS Tables. We intend to

request clarification and additional information concerning AST's AUL

data in the course of this investigation.

While we have not used AST's company-specific AUL because of the

concerns outlined above, even if we were to use the company-specific

data submitted by AST, the facts of this case pose additional concerns

and possible inconsistencies. In particular, this investigation covers

countervailable non-recurring subsidies benefitting AST that were found

to be countervailable in Final Affirmative Countervailing Duty

Determination: Grain-Oriented Electrical Steel from Italy, 59 FR 18357

(April 18, 1994), (Electrical Steel from Italy), i.e., equity

infusions, equity infusions to Terni and ILVA, benefits from the 1988-

90 restructuring (called debt forgiveness: Finsider-to-ILVA

restructuring in Initiation Notice), debt forgiveness: ILVA-to-AST

(included under this debt forgiveness are the following programs from

the Initiation Notice: working capital grants to ILVA, 1994 debt

payment assistance by IRI, and ILVA restructuring and liquidation

grant), Law 675/77, and ECSC Article 54 Loans. See 63 FR at 37543. In

Electrical Steel From Italy, the Department allocated these subsidies

over 15 years based on information from the U.S. Internal Revenue

Service (IRS) for the industry-specific average useful life of assets.

Under current Department practice, previously allocated subsidies

within the same proceeding are not given a new allocation period.

Rather, it is our policy to retain the allocation period originally

established for the subsidies in subsequent administrative reviews of

the same preceding.

We note here that in the concurrent investigation of stainless

steel sheet and strip in coils from France, the Department

preliminarily determined that it is more appropriate to continue

allocating non-recurring subsidies over the company-specific AUL of 14

years, which was calculated as a result of British Steel II. Although

this was a company-specific AUL, it was the AUL applied in a prior

investigation of the same subsidies to the same company that are

currently being examined in the investigation of stainless steel sheet

and strip in coils from France. The issue we are presented with is

whether the allocation period, once established for a subsidy to a

company, should change in different proceedings. If the allocation

period did not change across proceedings, the same subsidies described

above would be allocated over 15 years in both the current

investigation and under the countervailing duty order on Electrical

Steel From Italy. However, if we were to adopt different allocation

periods for different proceedings, the same subsidy to the same company

would be allocated over different periods, since AST has calculated an

AUL of 9 years, assuming the calculation presented by and based on

company-specific data was accepted by the Department. Thus, the same

subsidy to the same company would have different allocation periods

across separate proceedings: 15 years in Electrical Steel From Italy

and 9 years in this investigation.

We encourage parties to comment on this issue and whether an

alternative approach may be more appropriate. One option may be to

retain the allocation period of a subsidy previously investigated in a

prior investigation, rather than assign a new company-specific

allocation period based on company-specific AUL data. As described

above, this would conform with our practice in administrative reviews

of the same countervailing duty order. Alternatively, an additional

option would be to determine an individual AUL for each year in which a

non-recurring subsidy is provided to a company, rather than to

determine a company-specific AUL for non-recurring subsidies that could

change with each investigation and result in different allocation

periods for the same subsidy, as detailed above. We also welcome any

additional comments on this issue not raised above.

Equityworthiness

In analyzing whether a company is equityworthy, the Department

considers whether that company could have attracted investment capital

from a reasonable private investor in the year of the government equity

infusion, based on information available at that time. See GIA, 58 FR

at 37244. Our review of the record has not led us to change our finding

in Final Affirmative Countervailing Duty Determination: Grain-Oriented

Electrical Steel from Italy, 59 FR 18357 (April 18, 1994), (Electrical

Steel from Italy), in which we found AST's predecessors unequityworthy

from 1984 through 1988, and from 1991 through 1992.

In measuring the benefit from a government equity infusion into an

unequityworthy company, the Department compares the price paid by the

government for the equity to a market benchmark, if such a benchmark

exists. In this case, a market benchmark does not exist, so we used the

methodology described in the GIA, 58 FR at 37239. See, also, Wire Rod

from Trinidad and Tobago, 62 FR at 55004. Following this methodology,

equity infusions made on terms inconsistent with the usual practice of

a private investor are treated as grants. Use of this methodology is

based on the premise that an unequityworthiness finding by the

Department is tantamount to saying that the company could not have

attracted investment capital from a reasonable investor in the infusion

year. This determination is based on the information available in that

year.

Creditworthiness

When the Department examines whether a company is creditworthy, it

is essentially attempting to determine if the company in question could

obtain commercial financing at commonly available interest rates. See,

e.g., Final Affirmative Countervailing Duty Determinations: Certain

Steel Products from France, 58 FR 37304 (July 9, 1993) (Certain Steel

from France); Final

[[Page 63904]]

Affirmative Countervailing Duty Determination: Steel Wire Rod from

Venezuela, 62 FR 55014 (Oct. 21, 1997).

Terni, TAS and ILVA were found to be uncreditworthy from 1983

through 1993 in Electrical Steel from Italy at 18358 and Wire Rod from

Italy at 40477. No new information has been presented in this

investigation that would lead us to reconsider these findings.

Therefore, consistent with our past practice, we continue to find

Terni, TAS and ILVA uncreditworthy from 1985 through 1993. See, e.g.,

Final Affirmative Countervailing Duty Determinations: Certain Steel

Products from Brazil, 58 FR 37295, 37297 (July 9, 1993). There was no

allegation by petitioners that Arinox was uncreditworthy. Therefore, we

did not analyze its creditworthiness. In accordance with section

355.44(b)(6)(i) of the Department's 1989 Proposed Regulations, 54 FR at

23380, we did not analyze AST's creditworthiness in 1994 through 1997

because AST did not negotiate the terms of loans with the GOI or EC

during these years.

I. Programs Preliminarily Determined To Be Countervailable

GOI Programs

A. Equity Infusions to Terni and ILVA

The GOI, through IRI, provided new equity capital to Terni or ILVA

in every year from 1984 through 1992, except in 1989 and 1990. We

preliminarily determine that these equity infusions constitute

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

Act. These equity infusions provided a financial contribution, as

described in section 771(5)(D)(i) of the Act, and were not consistent

with the usual investment practices of private investors (see

Equityworthiness section above). Because these equity infusions were

limited to Finsider and its operating companies and ILVA, we

preliminarily determine that they are specific within the meaning of

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

AST did not report, in its response to our questionnaires, the 1988

equity infusion provided to ILVA. We have public information from

Electrical Steel from Italy on the existence and amount of this

infusion and are including it in our calculations for the preliminary

determination.

We have treated these equity infusions as non-recurring grants

given in the year the infusion was received because each required a

separate authorization. Because Terni and ILVA were uncreditworthy in

the years of receipt, we used discount rates that include a risk

premium to allocate the benefits over time. Additionally, we followed

the methodology described in the Change in Ownership section above to

determine the amount of each equity infusion appropriately allocated to

AST after its privatization. We divided this amount by AST's total

sales during the POI. Accordingly, we preliminarily determine the

countervailable subsidy to be 0.12 percent ad valorem for AST.

B. Benefits from the 1988-90 Restructuring of Finsider (called Debt

Forgiveness: Finsider-to-ILVA Restructuring in Initiation Notice)

As discussed above in the Company History of AST section of this

notice, the GOI liquidated Finsider and its main operating companies in

1988 and assembled the group's most productive assets into a new

operating company, ILVA S.p.A. In 1990, additional assets and

liabilities of TAS, Italsider and Finsider went to ILVA.

Not all of TAS's liabilities were transferred to ILVA S.p.A.;

rather, many remained with TAS and had to be repaid, assumed or

forgiven. In 1989, Finsider forgave 99,886 million lire of debt owed to

it by TAS. Even with this debt forgiveness, a substantial amount of

liabilities left over from the 1990 transfer of assets and liabilities

to ILVA S.p.A. remained with TAS. In addition, losses associated with

the transfer of assets to ILVA S.p.A. were left behind in TAS. These

losses occurred because the value of the transferred assets had to be

written down. As TAS gave up assets whose book value was higher than

their appraised value, it was forced to absorb the losses. These losses

were generated during two transfers as reflected in: (1) an

extraordinary loss in TAS's 1988 Annual Report and (2) a reserve

against anticipated losses posted in 1989 with respect to the 1990

transfer.

Consistent with our treatment of the 1988-90 restructuring in

Electrical Steel from Italy, 59 FR at 18359, we preliminarily determine

that the debt and loss coverage provided to ILVA constitutes a

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

Act. The debt and loss coverage provided a financial contribution as

described in section 771(5)(D)(i) of the Act. Because this debt and

loss coverage was limited to TAS, AST's predecessor, we preliminarily

determine that it is specific within the meaning of section 771(5A)(D)

of the Act.

In calculating the benefit from this program, we followed our

methodology in Electrical Steel from Italy, except for the correction

of a calculation error which had the effect of double-counting the

write-down from the first transfer of assets in 1988 by including it in

the calculations of losses generated upon the second transfer of assets

in 1990. We have treated Finsider's 1989 forgiveness of TAS' debt and

the loss resulting from the 1989 write-down as grants received in 1989.

The second asset write down and the debt outstanding after the 1990

transfer were treated as grants received in 1990. We treated these as

non-recurring grants because they were a one-time, extraordinary event.

Because ILVA was uncreditworthy in these years, we used discount rates

that include a risk premium to allocate the benefits over time.

Finally, we followed the methodology described in the Change in

Ownership section above to determine the amount of each benefit

appropriately allocated to AST after its privatization and subsequent

changes in ownership. We divided this amount by AST's total sales

during the POI. Accordingly, we preliminarily determine the

countervailable subsidy to be 1.52 percent ad valorem for AST.

C. Debt Forgiveness: ILVA-to-AST (Included Are The Following Programs

From the Initiation Notice: Working Capital Grants to ILVA, 1994 Debt

Payment Assistance by IRI, and ILVA Restructuring and Liquidation

Grant)

As of December 31, 1993, the majority of ILVA's viable

manufacturing activities had been separately incorporated into either

AST or ILP; ILVA Residua was primarily a shell company with liabilities

far exceeding assets. In contrast, AST and ILP, now ready for

privatization, had operating assets and relatively modest debt loads.

The liabilities remaining with ILVA Residua after the privatization

of AST and ILP had to be repaid, assumed, or forgiven. AST has stated

that IRI, in accordance with Italian Civil Code, bears responsibility

for all liabilities remaining in ILVA Residua. Furthermore, information

submitted by AST indicates that the EC has approved IRI's plan to cover

ILVA Residua's remaining liabilities when its final liquidation occurs.

Although this debt has yet to be eliminated completely by any

specific act of the GOI or its holding company IRI, we preliminarily

determine that AST (and consequently the subject merchandise) received

a countervailable subsidy in 1993 when the bulk of ILVA's debt was

placed in ILVA Residua, rather than being placed also with AST and ILP.

The placing of this debt with ILVA Residua was equivalent to debt

forgiveness for AST. In accordance with our past practice, debt

forgiveness is treated as a grant which constitutes a financial

contribution under section

[[Page 63905]]

771(5)(D)(ii) and provides a benefit in the amount of the debt

forgiveness. Because the debt forgiveness was received only by

privatized ILVA operations, we preliminarily determine that it is

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

As noted above, certain operating assets (e.g., pipe and tube

operations) and non-operating assets (e.g., cash, bank deposits)

remained in ILVA Residua. Some of these assets have been privatized or

otherwise used to fund repayment of the liabilities remaining in ILVA

Residua. The EC, in its monitoring of the ILVA liquidation, has

accounted for the fact that certain assets have been privatized or

otherwise used to fund repayment of ILVA Residua's liabilities. The

Department has followed similar methodology. We have also subtracted

the amount of debt (i.e., 253 billion lire) that was tied to Cogne

Acciai Speciali (CAS), an ILVA subsidiary privatized in 1994, which was

left behind in ILVA Residua. This amount was countervailed in Wire Rod

from Italy (see 63 FR at 40478). We have attributed ILVA Residua's

remaining residual indebtedness as of the end of 1997 to AST based on

the proportion of assets assigned to AST to the total viable assets

assigned to AST, ILP, and other ILVA operations which were privatized,

as appropriate, and considered this amount as debt forgiveness. For the

final determination, we intend to examine further the liquidation of

ILVA Residua's assets as well as any liquidation costs that might not

have been accounted for in the EC monitoring process.

We treated the debt forgiveness to AST as a non-recurring grant

because it was a one-time, extraordinary event. The discount rate we

used in our grant formula included a risk premium based on our

determination that ILVA was uncreditworthy in 1993. (For purposes of

the final determination we will examine the issue of whether it is more

appropriate to analyze the creditworthiness of AST rather than ILVA in

1993.) We followed the methodology described in the Change in Ownership

section above to determine the amount appropriately allocated to AST

after its privatization and subsequent changes in ownership. We divided

this amount by AST's total sales during the POI. Accordingly, we

determine the estimated net subsidy to be 3.47 percent ad valorem for

AST.

D. Law 796/76: Exchange Rate Guarantees

Law 796/76 established a program to minimize the risk of exchange

rate fluctuations on foreign currency loans. All firms that had

contracted foreign currency loans from the European Coal and Steel

Community (ECSC) or the Council of Europe Resettlement Fund (CER) could

apply to the Ministry of the Treasury (MOT) to obtain an exchange rate

guarantee. The MOT, through the Ufficio Italiano di Cambi (UIC),

calculated loan payments based on the lira-foreign currency exchange

rate in effect at the time the loan was approved. The program

established a floor and ceiling for exchange rate fluctuations,

limiting the maximum fluctuation a borrower would face to two percent.

If the lira depreciated against the foreign currency, AST was still

able to purchase foreign currency at the established ceiling rate, and

the UIC would absorb a loss in the amount of the difference between the

ceiling rate and the actual rate. If the lira appreciated against the

foreign currency, the UIC would realize a gain in the amount of the

difference between the floor rate and the actual rate.

This program was terminated effective July 10, 1992, by Decree Law

333/92. However, the exchange rate guarantees continue on any loans

outstanding after that date. AST had two outstanding ECSC loans during

the POI that benefitted from these guarantees. Arinox did not receive

foreign exchange rate guarantees under this program.

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, to the extent that the lira

depreciates against the foreign currency beyond the two percent band.

When this occurs, the borrower receives a benefit in the amount of the

difference between the two percent floor and the actual exchange rate.

The GOI did not provide information regarding the types of the

enterprises that have used this program. However, we have previously

found the steel industry to be a dominant user of the exchange rate

guarantees provided under Law 796/76. Therefore, we preliminarily

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

Act. See Final Affirmative Countervailing Duty Determination: Small

Diameter Circular Seamless Carbon and Alloy Steel Standard, Line and

Pressure Pipe From Italy, 60 FR 31996 (June 19, 1995).

Once a loan is approved for exchange rate guarantees, access to

foreign exchange at the established rate is automatic and occurs at

regular intervals throughout the life of the loan. Therefore, we have

treated benefits under this program as recurring grants. The benefit

was calculated as the difference between the total payment due (i.e.,

the sum of interest, principal, and any guarantee fees paid by AST) in

foreign currency converted at the current exchange rate minus the total

payment due in foreign currency at the established (ceiling) rate. We

divided this amount by AST's total sales during the POI. Accordingly,

we determine the countervailable subsidy to AST for this program to be

0.86 percent ad valorem.

E. Law 675/77

Law 675/77 was designed to provide GOI assistance in the

restructuring and reconversion of Italian industries. There are six

types of assistance available under this law: (1) grants to pay

interest on bank loans; (2) mortgage loans provided by the Ministry of

Industry (MOI) at subsidized interest rates; (3) grants to pay interest

on loans financed by IRI bond issues; (4) capital grants for the South;

(5) VAT reductions on capital good purchases for companies in the

South; and (6) personnel retraining grants. During the POI, AST had two

outstanding loans financed by IRI bond issues for which it received

interest contributions from the GOI. Arinox did not receive assistance

under this program.

Under Law 675/77, IRI issued bonds to finance restructuring

measures of companies within the IRI group. The proceeds from the sale

of the bonds were then re-lent to IRI companies. During the POI, AST

had two outstanding loans financed by IRI bond issues for which the

effective interest rate was reduced by interest contributions made by

the GOI. In addition to interest contributions on these variable rate

long-term loans, the GOI also made other financial contributions

relating to ``expenses'' associated with the loans.

We preliminarily determine that these loans constitute a

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

Act. These loans provided a financial contribution as described in

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

With regard to specificity, a number of different industrial

sectors have received benefits under Law 675/77. However, in Electrical

Steel from Italy, the Department determined that assistance under this

law was specific because the steel industry was a dominant user of the

program (the steel industry received 34 percent of the benefits). See

Electrical Steel from Italy, 59 FR at 18361. In the instant proceeding,

the GOI submitted additional information regarding the distribution of

benefits under this

[[Page 63906]]

program. While it is unclear whether this information reflects the

distribution of benefits at the time the subsidies in question were

given, the new information is nevertheless consistent with our previous

finding of specificity. Therefore, we preliminarily find the program to

be specific.

To measure the benefit from these loans, we compared the benchmark

interest rate to the amounts paid by AST on these loans during the POI.

We divided the resulting difference by AST's total sales during the

POI. Accordingly, we determine the estimated net subsidy from this

program to be 0.04 percent ad valorem for AST.

F. Law 488/92

Law 488/92 provides grants for industrial projects in depressed

regions of Italy. The subsidy amount is based on the location of the

investment and the size of the enterprise. The funds used to pay

benefits under this program are derived in part from the GOI and in

part from the Structural Funds of the EU. To be eligible for benefits

under this program, the enterprise must be located in one of the

regions in Italy identified in EU Objectives 1, 2 or 5b. Arinox

received assistance under this program because it is located in an

economically depressed region, AST did not.

We preliminarly 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 assistance is limited to

enterprises located in certain regions, we preliminarily determine that

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

Under this program Arinox received one grant, disbursed in two

tranches during the POI. We have treated benefits under this program as

non-recurring because each grant requires separate government approval.

The benefit to Arinox was calculated as the sum of the two tranches

provided. Because this sum is greater than 0.5 percent of Arinox's

sales, we allocated the benefit over Arinox's AUL. We divided the

benefit allocated to the POI by Arinox's total sales during the POI.

Accordingly, we determine the countervailable subsidy to Arinox for

this program to be 0.12 percent ad valorem.

EC Programs

A. ECSC Article 54 Loans

Article 54 of the 1951 ECSC Treaty established a program to provide

industrial investment loans directly to the iron and steel industries

to finance modernization and the purchase of new equipment. Eligible

companies apply directly to the EU for up to 50 percent of the cost of

an industrial investment project. The Article 54 loan program is

financed by loans taken out by the European Union, which are then

refinanced at slightly higher interest rates than those at which the EU

obtained them. AST had two long-term, fixed-rate loans outstanding

during the POI under this program. Arinox did not receive loans under

this program.

We preliminarily determine that these loans constitute 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. The Department has found Article 54

loans to be specific in several proceedings, including Electrical Steel

from Italy, 59 FR at 18362, and Final Affirmative Countervailing Duty

Determinations: Certain Steel Products from Italy, 58 FR 37327, 37335

(July 9, 1993), because loans under this program are provided only to

iron and steel companies. The EU has also indicated on the record of

this investigation that Article 54 loans are for steel undertakings.

Therefore, we preliminarily determine that this program is specific.

AST had two long-term, fixed-rate loans outstanding during the POI,

each one denominated in a foreign currency. Consistent with Electrical

Steel from Italy, 59 FR at 18362, we have used the lira-denominated

interest rate discussed in the Subsidies Valuation Information section

of this notice as our benchmark interest rate. The interest rate

charged on one of AST's two ECSC loans was lowered part way through the

life of the loan. Therefore, for the purpose of calculating the

benefit, we have treated this loan as if it were contracted on the date

of this rate adjustment. We used the outstanding principal as of that

date as the new principal amount, to which the new, lower interest rate

applied. As our interest rate benchmark, we used the long-term, lira-

based rate in effect on the date of the downward rate adjustment.

To calculate the benefit under this program, we employed the

Department's standard long-term loan methodology. We calculated the

grant equivalent and allocated it over the life of each loan. We

followed the methodology described in the Change in Ownership section

above to determine the amount appropriately allocated to AST after its

privatization and subsequent changes in ownership. We divided this

benefit by AST's total sales during the POI. Accordingly, we determine

the countervailable subsidy to AST for these two loans together to be

0.06 percent ad valorem.

B. European Social Fund

The European Social Fund (ESF), one of the Structural Funds

operated by the EU, was established to improve workers' opportunities

through training and to raise their standards of living throughout the

Community by increasing their employability. Like other EU Structural

Funds, there are five different Objectives (sub-programs) identified

under ESF: Objective 1 covers projects located in underdeveloped

regions, Objective 2 addresses areas in industrial decline, Objective 3

relates to the employment of persons under 25, Objective 4 funds

training for employees in companies undergoing restructuring, and

Objective 5 pertains to agricultural areas.

During the POI, AST received ESF assistance under Objectives 2 and

4, and Arinox received assistance under Objective 2. In the case of

AST, the Objective 2 funding was to retrain production, mechanical,

electrical maintenance, and technical workers, and the Objective 4

funding was to train AST's workers to increase their productivity.

Arinox stated that the grants it received were for worker training.

The Department considers worker training programs to provide a

countervailable benefit to a company when the company is relieved of an

obligation it would have otherwise incurred. See Final Affirmative

Countervailing Duty Determination: Certain Pasta (``Pasta'') From

Italy, 61 FR 30287, 30294 (June 14, 1996) (Pasta From Italy). Since

companies normally incur the costs of training to enhance the job-

related skills of their own employees, we preliminarily determine that

this ESF funding relieves AST and Arinox of obligations they would have

otherwise incurred.

Therefore, we preliminarily determine that the ESF grants received

by AST and Arinox are countervailable within the meaning of section

771(5) of the Act. The ESF grants are a financial contribution as

described in section 771(5)(D)(i) of the Act which provide a benefit to

the recipient in the amount of the grant.

Consistent with prior cases, we have examined the specificity of

the funding under each Objective separately. See Wire Rod from Italy,

63 FR at 40487. In this case, the Objective 2 grants received by AST

and Arinox were funded by the EU, the GOI, and the regional government

of Umbria acting through the provincial government of Terni for AST and

the regional government of

[[Page 63907]]

Liguria for Arinox. In Pasta From Italy, 61 FR at 30291, the Department

determined that Objective 2 funds provided by the EU and the GOI were

regionally specific because they were limited to areas within Italy

which are in industrial decline. No new information or evidence of

changed circumstances has been submitted in this proceeding to warrant

reconsideration of this finding. Regarding funding provided by the

regional governments, neither government provided information on the

distribution of its grants under Objective 2. Therefore, since these

governments failed to cooperate to the best of their ability by not

supplying the requested information on the distribution of grants under

Objective 2, we are assuming for purposes of this preliminary

determination, as adverse facts available under section 776(b) of the

Act, that the funds provided by the provincial governments of Terni and

Liguria are also specific.

In the case of Objective 4 funding, the Department has determined

in past cases that the EU portion is de jure specific because its

availability is limited on a regional basis within the EU. The GOI

funding was also determined to be de jure specific because eligibility

is limited to the center and north of Italy (non-Objective 1 regions).

See Wire Rod from Italy, 63 FR at 40487. No new information or evidence

of changed circumstances has been submitted in this proceeding to

warrant reconsideration of this finding.

The Department normally considers the benefits from worker training

programs to be recurring. See GIA, 58 FR at 37255. However, consistent

with the Department's determination in Wire Rod from Italy, 63 FR at

40488, that these grants relate to specific, individual projects, we

have treated these grants as non-recurring grants because each required

separate government approval. Because the amount of funding for each of

AST's projects was less than 0.5 percent of AST's sales in the year of

receipt, we have expensed these grants received in the year of receipt.

Two of AST's grants were received during the POI. For these grants, we

divided this benefit by AST's total sales during the POI and calculated

a benefit of 0.01 percent ad valorem for ESF Objective 2 funds and 0.03

percent ad valorem for ESF Objective 4 funds.

Arinox received ESF Objective 2 grants in 1991 and 1992. Because

the amount of funding for each of Arinox's projects project was more

than 0.5 percent of Arinox's sales in the year of receipt, we have

allocated these grants over its AUL. In allocating Arinox's benefits,

we used the appropriate discount rate which corresponded to the year in

which the funds were approved by the GOI. Accordingly, we determine the

countervailable subsidy under the ESF Objective 2 program for Arinox to

be 0.34 percent ad valorem.

II. Programs Preliminarily Determined to be Not Countervailable

A. AST Participation in the THERMIE Program

The EU provided funds to AST for the development of a demonstration

project (pilot plant) through an EU program promoting research and

development in the field of non-nuclear energy (THERMIE). The objective

of the THERMIE program is to encourage the development of efficient,

cleaner, and safer technologies for energy production and use. The

THERMIE program is part of a larger program categorized under the EU's

Fourth Framework Programme which covers activities in research and

technological development from 1994-1998. Arinox did not receive funds

from this program.

The objective of AST's demonstration plant is to reduce energy

consumption in the production of stainless steel by eliminating some of

the traditional production steps through the adoption of ``strip

casting'' technology. In Italian Plate, as well as in the instant

proceeding, the EU has requested noncountervailable (green light)

treatment for this project as a research and development subsidy under

section 771(5B)(B)(ii)(II) of the Act.

In Italian Plate, 63 FR at 47252, the Department preliminarily

determined that the THERMIE program did not merit green light treatment

because it did not meet the statutory requirement that ``the

instruments, equipment, land or buildings be used exclusively and

permanently (except when disposed on a commercial basis) for the

research activity'' (see section 771(5B)(B)(i) of the Act). No new

information has been submitted on the record in the instant proceeding

to warrant a reconsideration of this finding.

However, in Italian Plate, we did not have sufficient information

to determine if the technology and the demonstration plant provided a

benefit to subject merchandise. Furthermore, we did not have

information on the distribution of project funds by industry or by

company for the year in which AST's project was approved.

In the instant proceeding, it is clear that the project does have

applications to the subject merchandise. Also, in this proceeding, the

EU has submitted information on the distribution of assistance under

the THERMIE program for 1995 and 1996. Based on the information on the

record, there is no indication that this program is de jure specific.

Additionally, based on an examination of the distribution information,

it appears that the program benefitted a large number of users in

different industries, and that neither AST nor the steel industry

received a disproportionate share of the benefits (see Memorandum to

Susan Kuhbach from Case Analysts, dated November 9, 1998.) Therefore,

we preliminarily determine that the THERMIE program is not specific

within the meaning of section 771(5A)(D) of the Act and, consequently,

not countervailable.

III. Programs for Which We Need More Information

GOI Programs

A. Law 10/91

In its October 9 response, AST stated that it received a grant

under Law 10/91 in a year prior to the POI.

Law 10/91 is designed to provide grants to fund energy conservation

projects. Companies seeking assistance under this program can apply

under Article 8, 10, 11, 12, 13, or 14 of the Law. According to the

GOI, aid under articles 8, 10, and 13 is limited to the autonomous

regions and the provinces of Trento and Bolzano, while aid under

articles 11, 12, and 14 is available throughout Italy. AST received its

grant under article 12.

In its October 23 response, the GOI provided a description and

certain usage information regarding this program. Because we did not

seek additional clarifying information on specificity prior to our

preliminary determination, we intend to do so prior to our final

determination. After we collect additional information and conduct

verification, we will prepare an analysis memorandum addressing the

countervailability of this program, and provide all parties an

opportunity to comment on our analysis. However, we note that even if

this program were found to be specific, the grant received by AST was

less than 0.5 percent of AST's sales in the year of receipt. Therefore,

the benefit would be expensed in the year of receipt and no benefit

would be allocated to the POI.

IV. Programs Preliminarily Determined To Be Not Used

A. Pre-Privatization Employment Benefits (Law 451/94)

Law 451/94 authorized early retirement packages for Italian steel

workers from 1994-1996. The program,

[[Page 63908]]

as described by the GOI, was designed to comply with the EC's

reorganization of the iron and steel industry, specifically in regards

to reducing productive capacity. The law entitled men of at least 50

years of age and women of 47 years of age with at least 15 years of

pension contributions to retire early. AST and Arinox employees made

use of this program during the three years of the program.

In Wire Rod from Italy, we determined that Italian companies such

as AST and Arinox could not simply lay off workers, but instead would

be required to provide early retirement assistance to them. Hence, we

reviewed other GOI programs that would be widely used by Italian

companies in order to determine what obligations AST and Arinox would

have to their workers who retired early in the absence of Law 451. In

Wire Rod from Italy, we determined that the Cassa Integrazione Guadagni

(CIG)-Extraordinary program provided the best benchmark for Law 451.

Like Law 451, CIG-Extraordinary addresses workers whose companies are

restructuring, reorganizing, and/or downsizing.

New information submitted on the record in the instant proceeding

indicates that a different program, ``CIG-Mobility,'' provides a more

appropriate benchmark to Law 451. Like CIG-Extraordinary, CIG-Mobility

was not developed for particular Italian industries and is used by a

wide variety of them. However, whereas CIG-Extraordinary addresses

temporary layoffs, CIG-Mobility is designed to address assistance to

workers who are being permanently laid off. Because Law 451 also

addresses an employees' permanent separation from the company, we

preliminarily determine that CIG-Mobility is a more appropriate

benchmark to determine what costs AST and Arinox would have incurred in

laying off employees had they not been able to take advantage of Law

451.

Under CIG-Mobility, a company must make a final payment to the

employee upon the employees' departure from the company. Since

employees at AST and Arinox were eligible to use Law 451 from 1994-1996

only, the companies would have incurred the payments to the employees

under the benchmark program prior to the POI. Because it is the

Department's practice to treat early retirement benefits as recurring

grants which are expensed in the year of receipt, the companies did not

incur costs under the benchmark program during the POI. See GIA, 58 FR

at 37226. Therefore, Law 451 does not provide a financial contribution

during the POI which relieves AST and Arinox of costs that they

otherwise would incur if they participated in more broadly used early

retirement programs.

B. Benefits from the 1982 Transfer of Lovere and Trieste to Terni

(called Benefits Associated With the 1988-90 Restructuring in the

Initiation Notice)

C. Decree Law 120/89: Recovery Plan for the Steel Industry

D. Law 181/89: Worker Adjustment and Redevelopment Assistance

E. Law 345/92: Benefits for Early Retirement

F. Law 706/85: Grants for Capacity Reduction

G. Law 46/82: Assistance for Capacity Reduction

H. Loan to KAI for Purchase of AST

I. Debt Forgiveness: 1981 Restructuring Plan

J. Law 675/77: Mortgage Loans, Personnel Retraining Aid and VAT

Reductions

K. Law 193/84: Interest Payments, Closure Assistance and Early

Retirement Benefits

L. Law 394/81: Export Marketing Grants and Loans

M. Law 341/95 and Circolare 50175/95

N. Law 227/77: Export Financing and Remission of Taxes

EC Programs

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

Aid

B. European Regional Development Fund

C. Resider II Program and Successors

D. 1993 EU Funds

Verification

In accordance with section 782(i)(1) of the Act, we will verify the

information submitted by the 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 each company investigated. Because

the rate for Arinox is de minimis, and the Department does not include

de minimis rates in the calculation of the all-others rate, AST's rate

also will serve as the all-others rate. We preliminarily determine that

the total estimated net countervailable subsidy rate is 6.11 percent ad

valorem for AST and 0.46 percent ad valorem for Arinox.

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

U.S. Customs Service to suspend liquidation of all entries of stainless

steel sheet and strip from Italy, 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 amounts listed above.

Since the estimated preliminary net countervailing duty rate for Arinox

is de minimis, it will be excluded from the suspension of liquidation.

The 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 non-privileged and non-proprietary information related 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 for Import Administration.

In accordance with section 705(b)(2) of the Act, 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 this preliminary

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

Constitution Avenue N.W., Washington, DC 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, NW., Washington, DC 20230.

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

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

reason for attending; and (4) a list of the issues to be discussed. An

interested party may make an affirmative presentation only on arguments

included in that party's case brief and may make a rebuttal

presentation only on arguments

[[Page 63909]]

included in that party's rebuttal brief. Parties should confirm by

telephone the time, date, and place of the hearing 48 hours before the

scheduled time.

In addition, six copies of the business proprietary version and six

copies of the nonproprietary version of the case briefs must be

submitted to the Assistant Secretary no later than 50 days from the

publication of this notice. 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 publication of this

notice. 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: November 9, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-30738 Filed 11-16-98; 8:45 am]

BILLING CODE 3510-DS-P