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 April 7, 1999, the Department of Commerce (``the

Department'') 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 (``lead bar'') from

the United Kingdom for the period January 1, 1997 through December 31,

1997. 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: August 11, 1999.

FOR FURTHER INFORMATION CONTACT: Gayle Longest or Stephanie Moore,

Group II, Office of CVD/AD Enforcement VI, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W., Washington, D.C. 20230;

telephone: (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

Pursuant to 19 C.F.R. 351.213(b), 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 plc./British Steel Engineering Steels Limited (formerly United

Engineering Steels Limited). This review also covers the period January

1, 1997 through December 31, 1997 and nine programs.

Since the publication of the preliminary results on April 7, 1999

(64 FR 16920), the following events have occurred. We invited

interested parties to comment on the preliminary results. On May 7,

1999 case briefs were submitted by British Steel Engineering Steels

Limited (``BSES''), which exported to the United States during the

review period (``respondent''), and Inland Steel Bar Co.

(``petitioner''). On May 12, 1999 rebuttal briefs were submitted by

BSES and Inland Steel Bar Co.

Applicable Statute

Unless otherwise indicated, all citations to the statute are

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

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

(``the Act''). The Department is conducting this administrative review

in accordance with section 751(a) of the Act. All citations to the

Department's regulations reference 19 C.F.R. Part 351, (1998) unless

otherwise indicated.

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; 7213.91.30.00,

45.00. 60.00; 7213.99.00; 7214.40.00.10, 00.30, 00.50; 7214.50.00.10,

00.30, 00.50; 7214.60.00.10, 00.30, 00.50; 7214.91.00; 7214.99.00 and

7228.30.80.00, 80.50. Although the HTSUS subheadings are provided for

convenience and for Customs purposes, our written description of the

scope of this proceeding is dispositive.

Subsidies Value Information

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. 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

[[Page 43674]]

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, 58 FR 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'').

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

determining how this change in ownership affects our 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. (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. SAA at 928.

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

plc's acquisition of GKN's 50 percent ownership stake in 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'') and 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 is 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; Lead Bar 95 Preliminary Results.

(II) Calculation of Benefit

To calculate the countervailing duty rate for the subject

merchandise in 1997, we first determined BS plc's benefits in 1997,

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; Lead

Bar 95 Preliminary 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 1997.

Allocation Methodology

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

(``British Steel''), the U.S. Court of International Trade (``the

Court'') ruled against the allocation period methodology for non-

recurring subsidies that the Department has employed for the past

decade, a

[[Page 43675]]

methodology that was articulated in the General Issues Appendix (58 FR

at 37226). In accordance with the Court's decision on remand, the

Department determined that the most reasonable method of deriving the

allocation period for nonrecurring subsidies is a company-specific

average useful life (``AUL'') of non-renewable physical assets. For

British Steel, we determined this allocation period to be 18 years.

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

British Steel, 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).

Moreover, UES became a wholly-owned subsidiary of BS plc in 1995. In

the 1995 review of Lead Bar, 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. 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 shows that no new information has been placed on it which shows

that this program does not continue to confer countervailable

subsidies. This 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 subsidies

for this program, which is 4.07 percent ad valorem, remains unchanged

from the preliminary results.

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 shows that no new information has been placed on it which shows

that this program does not continue to confer countervailable

subsidies. This 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 subsidies

for this program, which is 0.14 percent ad valorem, remains unchanged

from the preliminary results.

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 shows that no new information has been placed on it which shows

that this program does not continue to confer countervailable

subsidies. This 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 subsidies

for this program, which is 0.43 percent ad valorem, remains unchanged

from the preliminary results.

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. NLF Loans

C. Regional Selective Loans

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

E. Inner Urban Areas Act of 1978

F. LINK Initiative

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. 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 the

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).

Analysis of Comments

Comment 1: Application of the Repayment Methodology

According to the petitioner, the Department's subsidy repayment

methodology is inconsistent with the countervailing duty statute, basic

economic principles, and evidence produced in this proceeding. The

petitioner contends 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 in the same position as

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

travel back to BS plc, subsequent to GKN's sale of UES shares to BS

plc. Furthermore, the petitioner asserts that the GIA and Certain Pasta

from Italy are distinguishable from the current case.

In rebuttal, the respondent points out that the petitioner's

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

subsidies to GKN have been examined by the Department in the 1995 and

1996 administrative reviews and rejected by the Department. The

respondent argues that petitioner's contention that the Department's

repayment methodology should not be applied to the1986 privatization of

the assets of British Steel Corporation's Special Steel Division and BS

plc's 1995 acquisition of GKN is not correct. The respondent asserts

that these two transactions were authentic and substantive undertakings

enacted for separate and important commercial reasons. The respondent

further argues that these transactions were not carried

[[Page 43676]]

out for purposes of evading U.S. countervailing duties. Therefore, the

respondent asserts that the Department has no basis to disregard the

validity or substance of these transactions and there is no basis to

not apply the repayment methodology.

Department's Position

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

in detail in the 1995 review of this case. See Lead Bar 95 Final

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

arguments or facts that would lead the Department to depart from its

original conclusion with respect to this issue. Further, the

Department's position was strengthened with the CAFC's holding in

British Steel, affirming the Department's discretion to apply the

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

repayment methodology in these final results.

Comment 2: The ``Change in Ownership'' Issue

BSES argues that the Department should revisit its determinations

on the change-in-ownership issues in this case because the effect of

the URAA amendments on change in ownership transactions is currently

under consideration by the United States Court of Appeals for the

Federal Circuit (``CAFC'') in Delverde, SRL v. United States, 24

F.Supp.2d 314 (CIT 1998), appeal docketed, No. 99-1186 (Federal Circuit

Jan. 13, 1999). The respondent states that pursuant to consent motions,

the CIT has stayed the appeals of the Department's final results in

both the 1995 and 1996 administrative reviews of this case pending the

CAFC's decision in Delverde. According to the respondent, by raising

this issue again in this review, BSES preserves the possibility that

the final decision in Delverde may be applied to entries covered by

this administrative review.

The respondent claims that the Department countervailed BS plc's

1997 production without any analysis of its 1988 privatization. The

respondent also contends that to comply with the Change in Ownership

provision of the URAA, the Department is required to conduct an

analysis of the privatization transaction in order to determine whether

subsidies pass through. Moreover, the respondent argues that 19 U.S.C.

section 1677(5)(B) requires the Department to conduct an analysis to

determine whether the privatized company has received a financial

benefit from the past subsidies received by BSC. The respondent argues

that current production of BS plc subject to countervailing duties is

no longer subsidized because, as of the 1988 privatization, the company

bears its full cost of capital to its shareholders on all funds and

assets in the company. Moreover, the respondent contends that BSES

received no financial benefit from the past subsidies to BSC.

Therefore, the respondent argues that BSES cannot be subjected to

countervailing duties based on past subsidies.

In rebuttal, petitioner points out that BSES raises no new

arguments in its case brief and the Department has already addressed

and ruled against these arguments in Certain Hot-Rolled Lead and

Bismuth Carbon Steel Products From the United Kingdom (``Lead Bar 1994

Final Results''), 61 FR 58377 (November 14, 1996). According to

petitioner, the Department decided that its subsidy allocation

methodology was in agreement with the URAA and used its discretion in

determining the impact the change in ownership had on the

countervailability of BS plc's past subsidies. The petitioner asserts

that the Department has rejected BSES's claim that countervailable

subsidies must be current benefits and the CAFC has also rejected

similar arguments made by British Steel in Inland Steel Bar Co. v.

United States, 155 F.3d 1370 (Federal Circuit 1998).

The petitioner further argues that BSES has mischaracterized the

Department's analysis in the preliminary results of this review and in

the investigation and previous administrative reviews of this case in

claiming that the Department has refused ``to consider the effect of a

privatization'' and has used an ``irrebuttable presumption.'' The

petitioner contends that the Department has examined the specific facts

of this case and considered arguments raised by the parties in its

determination of the allocation of subsidies. The petitioner cites to

Comment 5 of the Lead Bar 1994 Final Results and asserts that the

Department considered interested parties arguments regarding the

``subsequent events rule'' and explained that the Department did not

rely on such a rule in its findings in that review. See 61 FR at 58381.

Department's Position

Our position with respect to the respondent's comments on these

``change in ownership'' issues was outlined in detail in the 1994

review of this case. See Lead Bar 1994 Final Results, 61 FR at 58378-

58380. The respondent has not presented any new arguments or facts that

would lead the Department to depart from its original conclusion with

respect to this issue. For these reasons, our preliminary determination

with respect to the changes in ownership remains unchanged in these

final results.

Final Results of Review

In accordance with 19 C.F.R. 351.221(b)(4)(i), 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, 1997 through December 31, 1997,

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

Engineering Steels (BS plc/BSES) to be 4.64 percent ad valorem.

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

countervailing duties on entries of subject merchandise from BS plc/

BSES during the POR at 4.64 percent ad valorem. The Department will

also instruct Customs to collect a cash deposit of estimated

countervailing duties of 4.64 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 section 777A(e)(2)(B) of the Act. The requested review

will normally cover only those companies specifically named. See 19

C.F.R. 351.213(b). Pursuant to 19 C.F.R. 351.212(c), 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 cannot 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).

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-

[[Page 43677]]

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

will be the rate for that company established in the most recently

completed administrative proceeding conducted under the URAA. If such a

review has not been conducted, the rate established in the most

recently completed administrative proceeding pursuant to the statutory

provisions that were in effect prior to the URAA amendments is

applicable. 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, 1997 through December 31, 1997, the assessment rates applicable to

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

rates in effect at the time of entry.

This notice serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 C.F.R. Sec. 351.305(a)(3). 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 issued and published in

accordance with section 751(a)(1) and 777(i)(1) of the Act (19 U.S.C.

1675(a)(1) and 19 U.S.C. 1677f(i)(1)).

Dated: August 5, 1999.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-20736 Filed 8-10-99; 8:45 am]

BILLING CODE 3510-DS-P