Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From the United Kingdom; Final Results of Countervailing Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[C-412-811]

Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From

the United Kingdom; Final Results of Countervailing Duty Administrative

Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of countervailing duty administrative

review.

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SUMMARY: On December 8, 1997, the Department of Commerce published in

the Federal Register its preliminary results of administrative review

of the countervailing duty order on certain hot-rolled lead and bismuth

carbon steel products from the United Kingdom for the period January 1,

1996 through December 31, 1996. The Department has now completed this

administrative review in accordance with section 751(a) of the Tariff

Act of 1930, as amended. For information on the net subsidy for each

reviewed company, and for all non-reviewed companies, please see the

Final Results of Review section of this notice. We will instruct the

Customs Service to assess countervailing duties as detailed in the

Final Results of Review section of this notice.

EFFECTIVE DATE: April 15, 1998.

FOR FURTHER INFORMATION CONTACT: Christopher Cassel or Richard Herring,

[[Page 18368]]

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

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

Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-

2786.

SUPPLEMENTARY INFORMATION:

Background

Pursuant to 19 CFR 355.22(a), this review covers only those

producers or exporters of the subject merchandise for which a review

was specifically requested. Accordingly, this review covers British

Steel Engineering Steels Holdings, British Steel Engineering Steels

Limited, and British Steel plc. This review also covers the period

January 1, 1996 through December 31, 1996 and 16 programs.

Since the publication of the preliminary results on December 8,

1997 (62 FR 64568) (Lead Bar 96 Preliminary Results), the following

events have occurred. We invited interested parties to comment on the

preliminary results. On January 7, 1998 case briefs were submitted by

British Steel Engineering Steels Limited (BSES), which exported to the

United States during the review period (the respondent), and Inland

Steel Bar Co. (petitioner). On January 12, 1998 and January 14, 1998

rebuttal briefs were submitted by BSES and Inland Steel Bar Co.,

respectively.

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 regulations codified at 19 CFR Part

355 (1997). The Department is conducting this administrative review in

accordance with section 751(a) of the Act.

Scope of the Review

Imports covered by this review are hot-rolled bars and rods of non-

alloy or other alloy steel, whether or not descaled, containing by

weight 0.03 percent or more of lead or 0.05 percent or more of bismuth,

in coils or cut lengths, and in numerous shapes and sizes. Excluded

from the scope of this review are other alloy steels (as defined by the

Harmonized Tariff Schedule of the United States (HTSUS) Chapter 72,

note 1 (f)), except steels classified as other alloy steels by reason

of containing by weight 0.4 percent or more of lead or 0.1 percent or

more of bismuth, tellarium, or selenium. Also excluded are semi-

finished steels and flat-rolled products. Most of the products covered

in this review are provided for under subheadings 7213.20.00.00 and

7214.30.00.00 of the HTSUS. Small quantities of these products may also

enter the United States under the following HTSUS subheadings:

7213.31.30.00, 60.00; 7213.39.00.30, 00.60, 00.90; 7214.40.00.10,

00.30, 00.50; 7214.50.00.10, 00.30, 00.50; 7214.60.00.10, 00.30, 00.50;

and 7228.30.80. Although the HTSUS subheadings are provided for

convenience and for Customs purposes, our written description of the

scope of this proceeding is dispositive.

Change in Ownership

(I) Background

On March 21, 1995, British Steel plc (BS plc) acquired all of

Guest, Keen & Nettlefolds' (GKN) shares in United Engineering Steels

(UES), the company which produced and exported the subject merchandise

to the United States during the original investigation. Thus, UES

became a wholly-owned subsidiary of BS plc and was renamed British

Steel Engineering Steels (BSES).

Prior to this change in ownership, UES was a joint venture company

formed in 1986 by British Steel Corporation (BSC), a government-owned

company, and GKN, a privately-owned company. In return for shares in

UES, BSC contributed a major portion of its Special Steels Business,

the productive unit which produced the subject merchandise. GKN

contributed its Brymbo Steel Works and its forging business to the

joint venture. BSC was privatized in 1988 and now bears the name BS

plc.

In the investigation of this case, the Department found that BSC

had received a number of nonrecurring subsidies prior to the 1986

transfer of its Special Steels Business to UES. See Final Affirmative

Countervailing Duty Determination: Certain Hot-Rolled Lead and Bismuth

Carbon Steel Products From the United Kingdom, 58 FR 6237, 6243

(January 27, 1993) (Lead Bar). Further, the Department determined that

the sale to UES did not alter these previously bestowed subsidies, and

thus the portion of BSC's pre-1986 subsidies attributable to its

Special Steels Business transferred to UES. Lead Bar at 6240.

In the 1993 certain steel products investigations, the Department

modified the allocation methodology developed for Lead Bar.

Specifically, the Department stated that it would no longer assume that

all subsidies allocated to a productive unit follow it when it is sold.

Rather, when a productive unit is spun-off or acquired, a portion of

the sales price of the productive unit represents the reallocation of

prior subsidies. See the General Issues Appendix (GIA), appended to the

Final Countervailing Duty Determination; Certain Steel Products From

Austria, 58 FR 37217, 37269 (July 9, 1993) (Certain Steel). In a

subsequent Remand Determination, the Department aligned Lead Bar with

the methodology set forth in the ``Privatization'' and

``Restructuring'' sections of the GIA. Certain Hot-Rolled Lead and

Bismuth Carbon Steel Products from the United Kingdom: Remand

Determination (October 12, 1993) (Remand).

(II) Analysis of BS plc's Acquisition of UES

On March 21, 1995, BS plc acquired 100 percent of UES. In

determining how this change in ownership affects the attribution of

subsidies to the subject merchandise, we relied on Section 771(5)(F) of

the Act, which states that a change in ownership does not require a

determination that past subsidies received by an enterprise are no

longer countervailable, even if the transaction is accomplished at

arm's length. The Statement of Administrative Action, H.R. Doc. No.

316, Vol. 1, 103d Cong., 2d Sess. 928 (1994) (SAA), explains that the

aim of this provision is to prevent the extreme interpretation that the

arm's length sale of a firm automatically, and in all cases,

extinguishes any prior subsidies conferred. While the SAA indicates

that the Department retains the discretion to determine whether and to

what extent a change in ownership eliminates past subsidies, it also

indicates that this discretion must be exercised carefully by

considering the facts of each case. Id.

In accordance with the Act and the SAA, we examined the facts of BS

plc's acquisition of GKN's shares of UES, and we determined that the

change in ownership does not render previously bestowed subsidies

attributable to UES no longer countervailable. However, we also

determined that a portion of the purchase price paid for UES is

attributable to its prior subsidies. Therefore, we reduced the amount

of the subsidies that ``traveled'' with UES to BS plc, taking into

account the allocation of subsidies to GKN, the former joint-owner of

UES. See Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From

the United Kingdom; Final Results of Countervailing Duty Administrative

Review, 62 FR 53306 (October 14, 1997) (Lead Bar 95 Final Results); see

also the

[[Page 18369]]

discussion in Certain Hot-Rolled Lead and Bismuth Carbon Steel Products

From the United Kingdom; Preliminary Results of Countervailing Duty

Administrative Review, 62 FR 16555 (April 7, 1997) (Lead Bar 95

Preliminary Results). To calculate the amount of UES's subsidies that

passed through to BS plc as a result of the acquisition, we applied the

methodology described in the ``Restructuring'' section of the GIA. See

GIA, 58 FR at 37268-37269. This determination is in accordance with our

changes in ownership finding in Final Affirmative Countervailing Duty

Determination; Pasta From Italy, 61 FR 30288, 30289-30290 (June 14,

1996), and our finding in the 1994 administrative review of this case,

in which we determined that ``[t]he URAA is not inconsistent with and

does not overturn the Department's General Issues Appendix methodology

or its findings in the Lead Bar Remand Determination.'' Certain Hot-

Rolled Lead and Bismuth Carbon Steel Products From the United Kingdom;

Final Results of Countervailing Duty Administrative Review, 61 FR

58377, 58379 (November 14, 1996).

With the acquisition of UES, we also determined that BS plc's

remaining subsidies are attributable to the subject merchandise, now

produced by BS plc's wholly-owned subsidiary, BSES. Where the

Department finds that a company has received untied countervailable

subsidies, to determine the countervailing duty rate, the Department

attributes those subsidies to that company's total sales of

domestically produced merchandise, including the sales of 100-percent-

owned domestic subsidiaries. If the subject merchandise is produced by

a subsidiary company, and the only subsidies in question are the untied

subsidies received by the parent company, the countervailing duty rate

calculation for the subject merchandise is the same as described above.

Similarly, if such a company purchases another company, as was the case

with BS plc's purchase of UES, then the current benefit from the parent

company's allocable untied subsidies is attributed to total sales,

including the sales of the newly acquired company. See, e.g., GIA, 58

FR at 3762 (``the Department often treats the parent entity and its

subsidiaries as one when determining who ultimately benefits from a

subsidy''). Accordingly, in the Lead Bar 95 Final Results, we

determined that it was appropriate to collapse BSES with BS plc for

purposes of calculating the countervailing duty for the subject

merchandise. BSES, as a wholly-owned subsidiary of BS plc, continues to

benefit from the remaining benefit stream of BS plc's untied subsidies.

In collapsing UES with BS plc, we also determined that UES's untied

subsidies ``rejoined'' BS plc's pool of subsidies with the company's

1995 acquisition. All of these subsidies were untied subsidies

originally bestowed upon BSC (BS plc). After the formation of UES in

1986, the subsidies that ``traveled'' with the Special Steels Business

were also untied, and were found to benefit UES as a whole. See Lead

Bar 95 Final Results.

(III) Calculation of Benefit

To calculate the countervailing duty rate for the subject

merchandise in 1996, we first determined BS plc's benefits in 1996,

taking into account all spin-offs of productive units (including the

Special Steel Business) and BSC's full privatization in 1988. See Final

Affirmative Countervailing Duty Determination; Certain Steel Products

from the United Kingdom, 58 FR 37393 (July 9, 1993) (UK Certain Steel).

We then calculated the amount of UES's subsidies that ``rejoined'' BS

plc after the 1995 acquisition, taking into account the reallocation of

subsidies to GKN. See Lead Bar 95 Final Results. As indicated above, in

determining both these amounts, we followed the methodology outlined in

the GIA. After adding BS plc's and UES's benefits for each program, we

then divided that amount by BS plc's total sales of merchandise

produced in the United Kingdom in 1996.

Allocation Methodology

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

(British Steel), the U.S. Court of International Trade ruled against

the Department's allocation methodology, which relied on U.S. Internal

Revenue Service information on the industry specific average useful

life (AUL) of assets for determining the allocation period for non-

recurring subsidies. In accordance with the court's remand order, the

Department calculated a company-specific allocation period based on the

AUL of non-renewable physical assets for BS plc. This allocation period

was determined to be 18 years. This remand determination was affirmed

by the Court on June 4, 1996. British Steel plc v. United States, 929

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

The Department's acquiescence to the CIT's decision in the Certain

Steel cases resulted in different allocation periods between the UK

Certain Steel and Lead Bar proceedings (18 years vs. 15 years,

respectively). Different allocation periods for the same subsidies in

two different proceedings involving the same company generate

significant inconsistencies. These inconsistencies are even more

pronounced because UES became a wholly-owned subsidiary of BS plc in

1995. Therefore, in order to maintain a consistent allocation period

across the UK Certain Steel and Lead Bar proceedings, as well as in the

different segments of Lead Bar, we altered the allocation methodology

previously used to determine the allocation period for non-recurring

subsidies previously bestowed on BSC and attributed to UES. In the 1995

review, we applied the company-specific 18-year allocation period to

all non-recurring subsidies. See Lead Bar 95 Final Results. BSES

submitted comments on this issue (see Comment 5, below). Based on our

decision in the 1995 administrative review of this order, we determine

that it is appropriate in this review to continue to allocate all of

BSC's non-recurring subsidies over BS plc's company-specific average

useful life of renewable physical assets (i.e., 18 years).

Analysis of Programs

Based upon the responses to our questionnaire and written comments

from the interested parties we determine the following:

I. Programs Conferring Subsidies

A. Programs Previously Determined to Confer Subsidies

1. Equity Infusions. In the preliminary results, we found that this

program conferred countervailable subsidies on the subject merchandise.

Our review of the record and our analysis of the comments submitted by

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

findings from the preliminary results. Accordingly, the net subsidy for

this program, which is 4.69 percent ad valorem, remains unchanged from

the preliminary results. Lead Bar 96 Preliminary Results, 62 FR at

64570.

2. Regional Development Grant Program. In the preliminary results,

we found that this program conferred countervailable subsidies on the

subject merchandise. Our review of the record and our analysis of the

comments submitted by the interested parties, summarized below, has not

led us to change our findings from the preliminary results.

Accordingly, the net subsidy for this program, which is 0.15 percent ad

valorem, remains unchanged from the preliminary results. Id.

[[Page 18370]]

3. National Loan Funds Loan Cancellation. In the preliminary

results, we found that this program conferred countervailable subsidies

on the subject merchandise. Our review of the record and our analysis

of the comments submitted by the interested parties, summarized below,

has not led us to change our findings from the preliminary results.

Accordingly, the net subsidy for this program, which is 0.44 percent ad

valorem, remains unchanged from the preliminary results. Id. at 64570-

71.

II. Programs Found to be Not Used

In the preliminary results we found that the producers and/or

exporters of the subject merchandise did not apply for or receive

benefits under the following programs:

A. New Community Instrument Loans

B. ECSC Article 54 Loan Guarantees

C. NLF Loans

D. ECSC Conversion Loans

E. European Regional Development Fund Aid

F. Article 56 Rebates

G. Regional Selective Assistance

H. ECSC Article 56(b)(2) Redeployment Aid

I. Inner Urban Areas Act of 1978

J. LINK Initiative

K. European Coal and Steel Community (ECSC) Article 54 Loans/Interest

Rebates

We did not receive any comments on these programs from the

interested parties, and our review of the record has not led us to

change our findings from the preliminary results.

III. Program Previously Found to be Terminated

Transportation Assistance

The Department found this program to be terminated in the 1995

administrative review of this countervailing duty order. See Lead Bar

1995 Final Results.

IV. Other Programs Examined

BRITE/EuRAM and Standards Measurement and Testing Program

BS plc received assistance under these two European Union programs

to fund research and development. The European Union claimed that

assistance provided under both of these programs is non-countervailable

in accordance with Article 8.2(a) of the WTO Agreement on Subsidies and

Countervailing Measures and section 771(5B)(B) of the Act (which

provide that certain research and development subsidies are not

countervailable). We determine that it is not necessary to address

whether BRITE/EuRAM and the Standards Measurement and Testing Program

qualify for non-countervailable treatment because combined, the

assistance provided under both of these programs would result in a rate

of less than 0.005 percent ad valorem, and thus would have no impact on

the overall countervailing duty rate calculated for this POR. For this

same reason we have not conducted a specificity analysis of these

programs. See, e.g., Final Affirmative Countervailing Duty

Determination: Steel Wire Rod from Germany, 62 FR 54990, 54995-54996

(October 22, 1997); Certain Carbon Steel Products from Sweden; Final

Results of Countervailing Duty Administrative Review, 62 FR 16549

(April 7, 1997) and Certain Carbon Steel Products from Sweden;

Preliminary Results of Countervailing Duty Administrative Review, 61 FR

64062, 64065 (December 3, 1996); Final Negative Countervailing Duty

Determination: Certain Laminated Hardwood Trailer Flooring (``LHF'')

From Canada, 62 FR 5201 (February 4, 1997); Industrial Phosphoric Acid

From Israel; Final Results of Countervailing Duty Administrative

Review, 61 FR 53351 (October 11, 1996) and Industrial Phosphoric Acid

From Israel; Preliminary Results of Countervailing Duty Administrative

Review, 61 FR 28845 (June 6, 1996).

Analysis of Comments

Comment 1: Whether British Steel plc's Reported Total Sales Should Be

Adjusted

According to the petitioner, the BS plc sales figure used in the

calculations for the preliminary determination appears to include

intra-corporate sales. Therefore, the Department should adjust BS plc's

reported total sales to exclude intra-corporate sales. Because BS plc

did not report a separate total for 1996 intra-corporate sales in this

review, the Department should use, as facts available, the sales figure

for the fiscal year that ended in March 1997 from BS plc's 1997 Annual

Report.

The respondent has certified that the 1996 sales figure that the

Department used for the preliminary results does not include intra-

corporate sales. The respondent further states that the reported figure

was calculated on the same basis as the figure reported for the 1995

administrative review.

Department's Position

In the 1995 proceeding, we verified the basis by which BS plc

prepared its total sales, excluding intra-corporate sales. The

respondent has certified that the sales figure reported in this

proceeding was prepared on the same basis as in the 1995 proceeding.

Therefore, in the calculations for the final results of this review, we

have not modified the BS plc 1996 sales figure used for the preliminary

results.

Comment 2: Allocation of Subsidies to Guest, Keen & Nettleford (GKN)

The petitioner asserts that the Department should not allocate

subsidies to GKN as a result of GKN's sale of its shares of UES to BS

plc. According to the petitioner, the Department's subsidy repayment

methodology is inconsistent with the countervailing duty statue, basic

economic principles, and evidence produced in this proceeding. The

petitioner asserts that the Department's subsidy credit methodology is

invalid, that there is no evidence of repayment, and that BS plc's

acquisition of GKN's shares does not differ from sales of shares traded

daily on the stock market. Because BSES is the same position as BSC's

special steels business in 1985, all of UES's subsidies should travel

back to BS plc with the sale of GKN's UES shares to BS plc.

Furthermore, the petitioner asserts that the GIA and Certain Pasta from

Italy are distinguishable from the current case. The petitioner

submitted the same arguments in the 1995 review of this case. See 1995

UK Lead Bar Final, 62 FR at 53309.

The respondent points out that the petitioner did not acknowledge

that, in the 1995 review, the Department rejected the petitioner's

arguments with respect to the attribution of a portion of UES's

subsidies to GKN. Therefore, the respondent asserts that the Department

should reject the petitioner's arguments again. The respondent also

notes that the petitioner did not discuss the CAFC's recent holding in

British Steel plc v. United States, 1997 U.S. App. LEXIS 29,353,

(October 24, 1997) (British Steel II) that the Department has the

discretion to apply a subsidy credit methodology. Finally, the

respondent asserts that if the petitioner is correct and the statute

focuses on the production of merchandise and the ownership of

production is irrelevant, then the Department must determine that UES

is now in the same position as before the March 1995 acquisition, not

the same position as in 1985.

Department's Position

Our position with respect to the petitioner's comments was outlined

in detail in the 1995 review of this case. See 1995 UK Lead Bar Final,

62 FR at 53309-10. The petitioner has not presented any new arguments

or facts that would lead the Department to

[[Page 18371]]

depart from its original conclusion with respect to this issue.

Further, the Department's position has been strengthened, as the

respondent notes, with the CAFC's recent holding in British Steel II,

affirming the Department's discretion to apply the subsidy credit

methodology. For these reasons, we continue to apply the credit

methodology in these final results.

Comment 3: The ``Change in Ownership'' Issue

BSES argues that the Department should revisit its determinations

on the change-in-ownership issues in this case because of the CIT's

recent decision in Delverde SrL v. United States (No. 96-08-01997, Slip

Op. 97-163) (CIT Dec. 2, 1997) (Delverde). According to the respondent,

the Delverde court concluded that while the change in ownership

provision would permit the Department to find that subsidies pass

through in an arm's length transaction, the Department may not conclude

that they always pass through. Because the Department determined that

the 1986 sale of the special steels business was an arm's length

transaction and was consistent with commercial considerations, the

respondent argues that the Department must find that UES received no

financial benefit when it acquired BSC's special steels division in

1986. According to the respondent, the same conclusion applied to 1995

acquisition of UES, which occurred at arm's length and for fair market

value.

In rebuttal, the petitioner argues that the Delverde decision has

limited precedential value in this case because, in Delverde, the CIT

explicitly excluded privatization from the analysis, and issued limited

instructions about private transactions. The petitioner asserts that

the Department's change of ownership methodology is fully consistent

with the statute, the legislative history, and the concerns expressed

in Delverde. The petitioner also contends that the Department's

existing privatization and repayment methodologies determine whether

and to what extent a subsidy passes through by measuring how much of

the subsidy remains with the seller and how much with the buyer and

are, therefore, consistent with Delverde.

Department's Position

In its opinion in Delverde, the CIT did not overturn the

Department's methodology. It only directed the Department, on remand,

to provide a fuller explanation of its methodology and how it applied

it to the facts of the change of ownership transaction at issue. While

the CIT did present its views regarding many of the issues that it

wanted the Department to address when explaining its methodology, it

did not, however, order the Department to adopt any of its views.

On April 2, 1998, the Department filed its remand determination in

Delverde. In it, the Department continued to follow its existing

methodology, and it provided the CIT with the full explanations that it

had requested. In these final results, the Department similarly has not

made any changes to its methodology based on the Delverde opinion.

Comment 4: Whether Subsidies Provided to BS plc Benefit UES

According to the respondent, the Department incorrectly assumed in

its preliminary determination that BSES's production of leaded bar

benefits from subsidies provided to BS plc solely due to the corporate

relationship between the two companies. The respondent asserts that the

preliminary determination conflicts with two final CIT decisions: Armco

Inc. v. United States, 733 F. Supp. 1514 (CIT 1990) and Aimcor v.

United States, 871 F. Supp. 447 (CIT 1994). The respondent contends

that under the CIT's decisions in Armco and Aimcor, the Department is

required to examine more than the corporate relationship in deciding

whether a subsidy has been bestowed.

According to the respondent, in its characterization of Armco in

the 1995 final results, the Department distorted and confused the CIT's

holding that the corporate relationship alone does not support a

blanket policy of subsidy attribution. The respondent claims that the

Department turned the court's decision on its head when it attempted to

limit Armco's statements to the facts of the case. The respondent

emphasizes that the Armco court did not intend to overturn the

Department's general policy of not attributing subsidies between

related companies. According to the respondent, the Department

contended in the 1995 review that the attribution of subsidies between

BS plc and BSES was consistent with Armco because BS plc also produced

a small quantity of the subject merchandise, which creates the

possibility of circumvention. The respondent argues, however, that

there is no meaningful possibility of circumvention in this case,

because BS plc has a higher countervailing duty rate than BSES,

manufactures only a small quantity of subject merchandise, and has not

exported any subject merchandise to the United States.

With respect to Aimcor, the respondent states that, in the final

results of the 1995 review, the Department contended that the issue

involved the bestowal rather than the attribution of a subsidy. The

respondent argues that the issue decided by the CIT in Aimcor did

involve attribution, and the Department's position in its brief to the

CIT in that case demonstrates that this was the Department's

understanding. The respondent emphasizes that even if the parent-

company, CVG, had been found to receive a subsidy, the CIT would have

concluded in Aimcor that such a subsidy did not provide a benefit to

the subsidiary, FESILVEN, because the fact that ``CVG exercised some

control over FESILVEN does not necessarily indicate that the benefit to

CVG passed through to FESILVEN.'' 871 F. Supp. at 451-52.

The respondent also argues that the Department's attribution policy

is problematic from a policy perspective. First, it conflicts with the

Department's privatization policy, which is based upon the premise that

subsidies are provided to the manufacture, production or export of

subject merchandise rather than to companies or businesses that produce

subject merchandise. Second, the Department's policy will dilute the

duties that otherwise would have been imposed on a subsidized

productive unit. Therefore, the respondent contends, the Department

should not attribute BS plc's subsidies to the production of BSES for

the final results of this review.

The petitioner contends that the statue, Department practice, and

the particular facts of this review support the Department's

attribution of untied subsidies from BS plc to BSES. Petitioner

disputes the respondent's attempt to limit Armco to a single principle:

that attribution of subsidies was appropriate due to the threat of

circumvention rather than the corporate relationship between parent and

subsidiary. According to the petitioner, the court's decision to

attribute subsidies from parent to subsidiary was based on two

considerations in addition to circumvention concerns: (1) The status of

ASM and Angkasa as parent and wholly owned subsidiary, and (2) the

substantial control that ASM exercised over Angkasa's activities. The

petitioner argues that all three of these concerns are also present in

this case, and that Armco therefore supports the Department's

attribution decision in the preliminary results. The petitioner also

made these arguments in the 1995 administrative review. See Lead Bar 95

Final Results, 62 FR at 53111.

Department's Position

The respondent's argument focuses on the Department's

interpretation of

[[Page 18372]]

Armco and Aimcor in the 1995 proceeding, concluding that these CIT

decisions prohibit the Department's attribution approach. In the 1995

proceeding, we stated that the Aimcor and Armco cases ``do not

undermine the Department's general principle of attributing untied

parent company subsidies to the parent company's consolidated sales.''

More importantly, we stated that the facts of this case do not require

the Department ``to find factors in addition to the corporate

relationship'' when attributing subsidies from one corporation to

another. Lead Bar 1995 Final Results, 62 FR at 53313. The Department

analyzed numerous cases to illustrate that parent company subsidies

have in fact been attributed to the consolidated sales, including the

sales of consolidated subsidiaries, solely on the basis of the

corporate relationship.1 The arguments presented by the

respondent in this review have not led us to reach a different

conclusion.

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\1\ See, e.g., Final Affirmative Countervailing Duty

Determinations: Certain Steel Products from Belgium, 58 FR 37293,

37282 (July 9, 1993) (untied subsidies to Sidmar, the parent

company, were attributed to the ``total 1991 sales of the Sidmar

Group''); Final Affirmative Countervailing Duty Determinations:

Certain Steel Products from Italy, 58 FR 37327 (July 9, 1993) (a

subsidy determined to benefit all production activities was

``allocated over Falck's total consolidated sales,'' GIA, 58 FR at

37235); GIA, 58 FR at 37262 (the Department ``often treats the

parent entity and its subsidiaries as one when determining who

ultimately benefits from a subsidy,'' and ``generally allocate[s]

subsidies received by parents over sales of their entire group of

companies''). See also, Final Affirmative Countervailing Duty

Determination: Certain Hot Rolled Lead and Bismuth Carbon Steel

Products from France, 58 FR 6221, 6223 (January 27, 1993); Final

Affirmative Countervailing Duty Determination: Certain Steel

Products from France, 58 FR 37304 (July 9, 1993) (French Steel); UK

Steel (BS plc argued in that case that untied subsidies ``must be

allocated to a company's total corporate output {including foreign

operations} and not just to specific products or operations,'' GIA,

58 FR at 37236).

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As a preliminary matter, the respondent's arguments reveal a

misunderstanding of the Department's position. According to the

respondent's interpretation, the Department would in all cases

attribute subsidies from one corporation to another, solely based on

the relatedness of those companies. However, the position outlined in

the 1995 review concerns only untied subsidies to a parent company and

the principle, supported by numerous prior cases, that those subsidies

are attributed to the consolidated domestically produced sales of the

company, including the domestically produced sales of consolidated

subsidiaries. This attribution principle hinges on the facts specific

to this case, that the subsidies to the parent company are untied, and

the subsidiary companies are consolidated with the parent company.

Thus, contrary to the respondent's contention, the position outlined in

the 1995 proceeding does not stand for the proposition that subsidies,

regardless of their nature, would in all cases be attributed to related

companies without an examination of the type of relationship between

the companies.

According to the respondent, the Armco court required attribution

between ASM and Angkasa solely because of the case-specific evidence of

circumvention. This decision to attribute subsidies between the related

companies, the respondent states, was not intended to ``swallow the

Department's general rule of non-attribution, with which the court

agreed.'' BSES'' case brief, January 7, 1998 at 17. We disagree with

this interpretation. While the Armco court may not have endorsed an

across-the-board policy of attributing subsidies between related

companies, the court clearly stated that the Department's prior

determinations ``do not show a blanket policy of automatically not

attributing benefits received by one company to a closely related

company.'' Armco, 733 F. Supp. 1522 (emphasis in original). Rather, the

court understood that attribution decisions in prior cases ``turn[ed]

essentially upon the Department's findings in particular cases.'' Id.

The court also recognized that ``the Department has attributed benefits

received by one company to a related company'' in other cases. Id.

(emphasis in original). Accordingly, we do not agree that Armco

represents an endorsement of a ``general rule of non-attribution.''

Moreover, the case-specific evidence upon which the court relied

was not limited solely to evidence of circumvention, as the respondent

suggests. As petitioner correctly points out, other crucial factors

considered by the court included the nature of the relationship between

the parent, ASM, and the subsidiary, Angkasa, and the degree of

involvement in each other's business. The court emphasized that ``[a]s

the owner of 100 percent of Angkasa's stock, ASM clearly benefits from

Angkasa's revenues derived from the export of products to the United

States'' and that ``ASM was intimately involved in Angkasa's business

decisions and operations. . . .'' Id. at 1524. The Armco court

concluded that ``[t]he present decision is based in part upon the

status of ASM and Angkasa as parent and wholly-owned

subsidiary. . .'' Id. at 1526. To that extent, the Department's

determination to attribute BS plc's untied subsidies to the

consolidated sales of the company is in conformance with the CIT's

decision in Armco. Specifically, the Department examined the nature of

the subsidies originally bestowed upon BS plc, as well as the

relationship between the parent, BS plc, and subsidiary,

BSES.2 In the 1995 proceeding, we stated that BS plc, as 100

percent owner of BSES, ``has the authority to make all major decisions

for UES, including any decision to invest in the subsidiary, change its

operations, restructure or even close it down.'' See the ``Acquisition

Memorandum'' at 4, attached as Exhibit 1 to the petitioner's rebuttal

brief, January 14, 1998 (Acquisition Memo). Given these case-specific

circumstances, the Department appropriately treated parent, BS plc, and

subsidiary, BSES, as one company for purposes of attributing BS plc's

untied subsidies. Nothing in the Armco decision prohibits such a

conclusion, which our discussion in the 1995 final results of this case

makes clear.

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\2\ We also continue to maintain that legitimate circumvention

concerns exist in this case. See the discussion in the Lead Bar 1995

Final Results, 62 FR at 53313.

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

According to the respondent, however, the Department's discussion

in the 1995 final results sought to limit Armco to the specific facts

underlying the court's ruling. We disagree. Our discussion of Armco

merely recognized that ``different conclusions may be drawn from

different scenarios involving various kinds of subsidies, tied and

untied, and companies of varying degrees of relatedness.'' Lead Bar

1995 Final Results, 62 FR at 53313. As the court stated, attribution

decisions are based ``essentially upon the Department's findings in

particular cases.'' Armco, 733 F. Supp. at 1522. In light of this, it

is the respondent and not the Department that attempts to restrict the

court's attribution decision, by stating that the Armco ruling

represents an ``exception'' to the Department's general rule of non-

attribution. However, the court's ruling in Armco was not an attempt to

create a blanket rule that favored automatic attribution or non-

attribution of subsidies between related companies. Rather, the court

recognized that, even in the absence of evidence of pass-through, the

facts of a case may allow a subsidy to be attributed among related

companies. The court specifically stated that subsidies to one company

should not escape countervailing duties ``merely because there is no

evidence that the subsidiary itself overtly transfers to the parent any

specific subsidy benefits received.'' Id. at 1525. This was

[[Page 18373]]

precisely our position in the 1995 proceeding, in which we argued that

the CIT's decision in Armco does not require the Department to find, in

all cases, factors in addition to the corporate relationship, when

attributing untied parent company subsidies to that company's

consolidated sales, including the sales of consolidated subsidiaries.

The respondent has not shown that Armco requires such factors, or that

the Department erred in the many prior cases where precisely the same

attribution principle was followed.

The respondent argues that the issue in Aimcor involved corporate

attribution, and not whether a subsidy was bestowed, as claimed by the

Department in the 1995 proceeding. The respondent also makes extensive

reference to the Government's February 1994 brief to the court (to

restate its position that Aimcor prohibits the Department from

attributing parent company subsidies to a subsidiary without showing

that the subsidy passed-through to the subsidiary). Even assuming,

arguendo, that attribution was an issue, the facts in Aimcor are

significantly different from this case such that the Department's

decision here is not in conflict with Aimcor.3

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\3\ It remains our view that the issue of the bestowal of a

subsidy was an important issue in the Department's decision in

ferrosilicon from Venezuela. See the discussion in the Lead Bar 1995

Final Results, 62 FR at 53313.

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

In the investigation underlying the Aimcor decision, the Department

decided to treat the parent company, CVG, as a separate entity from its

subsidiary, FESILVEN, because there was an insufficient ``identity of

interests'' between the companies. Final Affirmative Countervailing

Duty Determination: Ferrosilicon from Venezuela, 58 FR 27539 (May 10,

1993) (Ferrosilicon from Venezuela). In this proceeding, however, we

did not make a determination that BS plc and BSES should be treated as

separate entities. Rather, we found the inverse, that BS plc, as 100-

percent owner of its consolidated subsidiary, BSES, ``has the authority

to make all major decision for UES, including any decision to invest in

the subsidiary, change its operations, restructure or even close it

down.''

The Department's analysis in this proceeding, therefore, is

fundamentally different from that presented in Ferrosilicon from

Venezuela. This is further illustrated by the fact that the parent

company in Ferrosilicon from Venezuela, CVG, was a government-owned

holding company. Cases involving the attribution of subsidies between

government-owned holding companies and their related companies are not

illustrative of the Department's attribution policy concerning untied

subsidies to corporations which produce merchandise and which also have

numerous consolidated subsidiaries. Rather, in cases involving

government-owned holding companies, we have examined whether the

holding company, acting as the government, through its investments

provided subsidies to its producing subsidiaries. We noted this policy

in the 1995 final results, where we stated that in cases involving

government-owned holding companies, ``the Department considered whether

the government-owned holding company acted as the government in

bestowing subsidies to the affiliated companies, i.e., the

subsidiaries.'' Id. at 53314. No such practice exists, however, for

cases involving untied subsidies benefitting corporations such as BS

plc, and their consolidated subsidiaries. Rather, the Department's

practice in such cases is to ``generally allocate subsidies received by

parents over sales of their entire group of companies.'' GIA, 58 FR at

37262. This was also the position of the Aimcor court, when it stated

that ``if Commerce was incorrect in treating the two companies

separately, any benefit to CVG may be attributable to FESILVEN.''

Aimcor, 871 F. Supp. at 451. In other words, if the ``identity of

interests'' between the companies had not been found to be

insufficient, any benefit to CVG would also be attributable to

FESILVEN. This conforms with our approach in this case, and in the

numerous other cases cited by the Department. Accordingly, the

respondent has failed to show that the Aimcor decision is in conflict

with our attribution approach in this proceeding.

Comment 5: Allocation Methodology

The respondent argues that the Department should not apply a

company-specific period for allocating subsidies over time, because it

produces arbitrary and fluctuating results. Instead, the Department

should return to its prior practice of using the IRS tables for the

average useful life of assets, and promulgate a regulation consistent

with that approach. This approach would provide sufficient support to

comply with the concerns raised by the CIT in British Steel, because,

the respondent states, the CIT's ruling was premised on the fact that

the Department's allocation methodology was not supported by

regulations. The respondent argues that if the Department does

promulgate a regulation stating that it will use the IRS tables, the

Department should follow this approach for the final results of this

review.

However, if the Department does apply a company-specific allocation

period for the final results, the Department should calculate this AUL

based on BS plc's average useful life of assets during the ten-year

period that most closely overlaps the period of subsidization. This

would exclude the period FY 1986/87 through FY 1990/91, where BS plc

was found not to have received any subsidies. The respondent further

claims that using 14 years to calculate BS plc's AUL is inconsistent

with the approach taken by the Department in the countervailing duty

questionnaires, in which only ten years of information is sought for

the AUL calculation.

The petitioner maintains that the Department should continue to

apply BS plc's 18-year company-specific AUL in this review, based upon

the prior record of this case and the proposed countervailing duty

regulations. Moreover, the CIT in British Steel found the prior

methodology to be contrary to law. In any case, the petitioner states

that BS plc was originally opposed to the IRS tables approach, stating

that it was arbitrary.

Department's Position

The countervailing duty regulations have not yet been finalized.

Even if the regulations were finalized and the Department did

promulgate a regulation stating that it will use the IRS tables, the

regulations would not be controlling in the instant review.

The Department's acquiescence to the CIT's decision in British

Steel resulted in different allocation periods for the same subsidies

in two proceedings. Therefore, in the 1995 review of this case, we

applied BS plc's company-specific AUL to all nonrecurring subsidies in

order to maintain a consistent allocation period across the UK Steel

and UK Lead Bar proceedings. This approach brought the Lead Bar

proceeding in line with the CIT's ruling in British Steel. To now

return to the IRS tables in this administrative review would run

counter to that ruling, which the Department has followed in all

countervailing duty cases since the court affirmed the Department's

remand. See British Steel plc v. United States, 929 F. Supp. 426, 439

(CIT 1996). Therefore, we will not return to the IRS tables for

purposes of calculating the allocation period for the final results of

this review.

We also find no merit in the respondent's argument that the AUL

calculation should be based on BS plc's average useful life of assets

during the

[[Page 18374]]

ten-year period that most closely overlaps the period of subsidization,

i.e., FY 1976/77 through 1985/86. The Department's decision in the

British Steel remand to use 14 years of data to calculate the AUL was

reasonable. Fourteen years of data were on the record at the time we

calculated BS plc's AUL, and we found no reason to exclude it from the

calculation. Rather, we found that these data provided a reasonable

calculation of BS plc's AUL.

Contrary to the respondent's contention, the approach taken in the

British Steel remand is not in conflict with the Department's

countervailing duty questionnaire. We have found that basing the AUL

calculation on ten years of data, as requested in the questionnaire, is

reasonable and administrable. However, this does not indicate that an

AUL calculation based on more or fewer years would be incorrect or

inaccurate. Furthermore, assuming the Department had chosen ten years

of data, that information would be taken from the years immediately

preceding the investigation. In this case, that would be FY 1981/82

through FY 1990/91. Therefore, the respondent cannot argue in hindsight

and for its own convenience that the AUL should be recalculated using

the ten-year period that most closely overlaps the period of

subsidization. For these reasons, we will not recalculate BS plc's AUL.

Comment 6: Subsidy Repayment Methodology

BSES asserts that the Department should revise its calculation of

the amount of subsidies that are considered repaid with privatization.

According to the respondent, the ratio of subsidies to net worth that

the Department currently uses is unreasonable because it is based upon

the subsidies' historical value. The result is arbitrary because the

company's historical subsidy worth may have no relationship to the

company's subsidy worth at the time of privatization. The respondent

argues that it would make more sense to use a ratio of (1) the total

unamortized value of non-recurring subsidies at the time of

privatization to (2) the net worth of the company being privatized.

According to the respondent, the suggested approach would also be

consistent with the Department's practice of amortizing subsidies.

According to the petitioner, the only appropriate change to the

Department's methodology would be its abolition; however, if the

Department continues to assume that a portion of the purchase price of

a government-owned company represents the repayment of subsidies, the

Department's existing methodology is the most reasonable valuation of

repayment. The petitioner contends that BSES's proposed approach is

ill-advised and inconsistent with the Department's practice.

Department's Position

While respondent has suggested some alternatives to the

Department's subsidy payment methodology, we believe the Department's

current methodology is reasonable in accomplishing the intended purpose

of determining what portion of the purchase price is allocable to prior

subsidies. Indeed, the Federal Circuit has stated that ``the

methodology developed by Commerce to account for the repayment of

subsidies during privatization is a reasonable interpretation of the

countervailing duty statute.'' British Steel plc v. United States, 127

F.3d 1471, 1475 (Fed. Cir. 1997). Moreover, the Department's subsidy

calculation methodology is currently subject to judicial review which

the court has yet to address. For these reasons, we will continue to

use the methodology as set out and explained in the GIA.

Final Results of Review

In accordance with 19 CFR 355.22(c)(4)(ii), we calculated an

individual subsidy rate for each producer/exporter subject to this

administrative review. As discussed in the ``Change in Ownership''

section of the notice, above, we are treating British Steel plc and

British Steel Engineering Steels as one company for purposes of this

proceeding. For the period January 1, 1996 through December 31, 1996,

we determine the net subsidy for British Steel plc/British Steel

Engineering Steels (BS plc/BSES) to be 5.28 percent ad valorem.

We will instruct the Customs Service to assess countervailing

duties for BS plc/BSES at 5.28 percent ad valorem. The Department will

also instruct Customs to collect a cash deposit of estimated

countervailing duties of 5.28 percent of the f.o.b. invoice price on

all shipments of the subject merchandise from BS plc/BSES entered, or

withdrawn from warehouse, for consumption on or after the date of

publication of the final results of this review.

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

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

investigated and reviewed companies, the procedures for establishing

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

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

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

will normally cover only those companies specifically named. See 19 CFR

355.22(a). Pursuant to 19 CFR 355.22(g), for all companies for which a

review was not requested, duties must be assessed at the cash deposit

rate, and cash deposits must continue to be collected at the rate

previously ordered. As such, the countervailing duty cash deposit rate

applicable to a company can no longer change, except pursuant to a

request for a review of that company. See Federal-Mogul Corporation and

The Torrington Company v. United States, 822 F.Supp. 782 (CIT 1993) and

Floral Trade Council v. United States, 822 F.Supp. 766 (CIT 1993)

(interpreting 19 CFR 353.22(e) (now 19 CFR 351.212(c)), the antidumping

regulation on automatic assessment, which is identical to 19 CFR

355.22(g)). Therefore, the cash deposit rates for all companies except

those covered by this review will be unchanged by the results of this

review.

We will instruct Customs to continue to collect cash deposits for

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

wide rate applicable to the company. Accordingly, the cash deposit

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

order are those established in the most recently completed

administrative proceeding, conducted pursuant to the statutory

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

Certain Hot-Rolled Lead and Bismuth Carbon Steel Products from the

United Kingdom; Final Results of Countervailing Duty Administrative

Review, 60 FR 54841 (October 26, 1995). These rates shall apply to all

non-reviewed companies until a review of a company assigned these rates

is requested. In addition, for the period January 1, 1996 through

December 31, 1996, the assessment rates applicable to all non-reviewed

companies covered by this order are the cash deposit rates in effect at

the time of entry.

This notice serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 355.34(d). Timely written notification of

return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

regulations and the terms of an APO is a sanctionable violation.

This administrative review and notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).

[[Page 18375]]

Dated: April 7, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-9870 Filed 4-14-98; 8:45 am]

BILLING CODE 3510-DS-P