Final Affirmative Countervailing Duty Determination: Certain Cut- to-Length Carbon-Quality Steel Plate From France

DEPARTMENT OF COMMERCE

International Trade Administration

[C-427-817]

Final Affirmative Countervailing Duty Determination: Certain Cut-

to-Length Carbon-Quality Steel Plate From France

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: December 29, 1999.

FOR FURTHER INFORMATION CONTACT: Cynthia Thirumalai and Gregory

Campbell, Office of Antidumping/Countervailing Duty Enforcement, Group

I, Import Administration, U.S. Department of Commerce, Room 3099, 14th

Street and Constitution Avenue, NW., Washington, D.C. 20230; telephone:

(202) 482-4087 or 482-2239, respectively.

Final Determination

The Department of Commerce (the Department) determines that

countervailable subsidies are being provided to producers or exporters

of certain cut-to-length carbon-quality plate (carbon plate) from

France. For information on the estimated countervailing duty rates,

please see the ``Suspension of Liquidation'' section of this notice.

Petitioners

The petition in this investigation was filed by the Bethlehem Steel

Corporation, U.S. Steel Group, Gulf States Steel, Inc., IPSCO Steel

Inc., and the United Steel Workers of America (collectively referred to

hereinafter as the ``petitioners'').

Case History

Since the publication of our preliminary determination in the

Federal Register (see Preliminary Affirmative Countervailing Duty

Determination and Alignment of Final Countervailing Duty Determination

With Final Antidumping Duty Determination: Certain Cut-to-Length

Carbon-Quality Steel Plate from France, 64 FR 40430 (July 26, 1999)

(Preliminary Determination)), the following events have occurred:

On September 21, 1999, we initiated an investigation of whether

advances by the Government of France (GOF) to the Societe pour le

Developpement de l'Industrie et de l'Emploi (SODIE) through Usinor

since 1991 provided countervailable benefits to Usinor (see Memorandum

on Inclusion of Previously Investigated Programs in the Countervailing

Duty Investigation of French Steel Plate, September 21, 1999). We

issued questionnaires on SODIE advances to the GOF and Usinor on

October 18, 1999. The GOF and Usinor responded to the SODIE

questionnaires on November 3, 1999.

On October 7-15, 1999, we verified the responses of Usinor, Sollac

S.A. (Sollac), Creusot Loire Industrie S.A.(CLI), GTS Industries S.A.

(GTS) and the GOF (collectively known as ``the respondents'').

Verification took place at: Usinor and the GOF in Paris, France; GTS in

Dunkirk, France; and AG

[[Page 73278]]

der Dillinger Huttenwerke (Dillinger), the parent company of GTS, in

Dillingen, Germany.

The petitioners and the respondents submitted case briefs on

November 12 , 1999. On November 18, 1999, the petitioners, the

respondents and Dillinger submitted rebuttal briefs. A public hearing

was held November 22, 1999.

Scope of Investigation

The products covered by this scope are certain hot-rolled carbon-

quality steel: (1) Universal mill plates (i.e., flat-rolled products

rolled on four faces or in a closed box pass, of a width exceeding 150

mm but not exceeding 1250 mm, and of a nominal or actual thickness of

not less than 4 mm, which are cut-to-length (not in coils) and without

patterns in relief), of iron or non-alloy-quality steel; and (2) flat-

rolled products, hot-rolled, of a nominal or actual thickness of 4.75

mm or more and of a width which exceeds 150 mm and measures at least

twice the thickness, and which are cut-to-length (not in coils).

Steel products to be included in this scope are of rectangular,

square, circular or other shape and of rectangular or non-rectangular

cross-section where such non-rectangular cross-section is achieved

subsequent to the rolling process (i.e., products which have been

``worked after rolling'')--for example, products which have been

beveled or rounded at the edges. Steel products that meet the noted

physical characteristics that are painted, varnished or coated with

plastic or other non-metallic substances are included within this

scope. Also, specifically included in this scope are high strength, low

alloy (HSLA) steels. HSLA steels are recognized as steels with micro-

alloying levels of elements such as chromium, copper, niobium,

titanium, vanadium, and molybdenum.

Steel products to be included in this scope, regardless of

Harmonized Tariff Schedule of the United States (HTSUS) definitions,

are products in which: (1) iron predominates, by weight, over each of

the other contained elements, (2) the carbon content is two percent or

less, by weight, and (3) none of the elements listed below is equal to

or exceeds the quantity, by weight, respectively indicated:

1.80 percent of manganese, or

1.50 percent of silicon, or

1.00 percent of copper, or

0.50 percent of aluminum, or

1.25 percent of chromium, or

0.30 percent of cobalt, or

0.40 percent of lead, or

1.25 percent of nickel, or

0.30 percent of tungsten, or

0.10 percent of molybdenum, or

0.10 percent of niobium, or

0.41 percent of titanium, or

0.15 percent of vanadium, or

0.15 percent zirconium.

All products that meet the written physical description, and in

which the chemistry quantities do not equal or exceed any one of the

levels listed above, are within the scope of this investigation unless

otherwise specifically excluded. The following products are

specifically excluded from this investigation: (1) products clad,

plated, or coated with metal, whether or not painted, varnished or

coated with plastic or other non-metallic substances; (2) SAE grades

(formerly AISI grades) of series 2300 and above; (3) products made to

ASTM A710 and A736 or their proprietary equivalents; (4) abrasion-

resistant steels (i.e., USS AR 400, USS AR 500); (5) products made to

ASTM A202, A225, A514 grade S, A517 grade S, or their proprietary

equivalents; (6) ball bearing steels; (7) tool steels; and (8) silicon

manganese steel or silicon electric steel.

The merchandise subject to this investigation is classified in the

HTSUS under subheadings: 7208.40.3030, 7208.40.3060, 7208.51.0030,

7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000,

7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045,

7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7225.40.3050,

7225.40.7000, 7225.50.6000, 7225.99.0090, 7226.91.5000, 7226.91.7000,

7226.91.8000, 7226.99.0000.

Although the HTSUS subheadings are provided for convenience and

customs purposes, the written description of the merchandise under

investigation is dispositive.

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 our regulations as codified at 19 CFR

Part 351 (1998) and Countervailing Duties; Final Rule, 63 FR 65348

(November 25, 1998) (CVD Regulations).

Injury Test

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

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

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

subject merchandise from France materially injure, or threaten material

injury to, a U.S. industry. On April 8, 1999, the ITC published its

preliminary finding that there is a reasonable indication that an

industry in the United States is being materially injured or threatened

with material injury by reason of imports from France of the subject

merchandise. See Certain Cut-to-Length Steel Plate from the Czech

Republic, France, India, Indonesia, Italy, Japan, Korea, and Macedonia;

Determinations, 64 FR 17198 (April 8, 1999). The ITC will make its

final injury determination within 45 days of this final determination

by the Department.

Period of Investigation

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

calendar year 1998.

Company History

The GOF identified Usinor, Sollac, CLI, and GTS as the only

producers of the subject merchandise that exported to the United States

during the POI. Sollac and CLI are wholly-owned subsidiaries of Usinor

(a holding company), and GTS is partially owned by Usinor.

Usinor

In 1984, the GOF was a majority shareholder of Usinor. In 1986,

Usinor was merged with another state-owned company, Sacilor, into a

single company called Usinor Sacilor. Usinor Sacilor was 100 percent

owned by the GOF.

In 1995, Usinor Sacilor was privatized, principally through the

public sale of shares. In October 1997, the GOF reduced its direct

shareholdings to 1 percent. As of August 1998, the GOF has no direct

ownership interest in Usinor but retains a minority indirect interest

in the company.

GTS

Prior to 1992, GTS was 89.73 percent owned by Sollac, a subsidiary

of Usinor. In 1992, Sollac transferred its shares in GTS to Dillinger.

In return, Dillinger transferred to Sollac shares it held in Sollac of

an equivalent value. At that time, Dillinger was majority owned by DHS-

Dillinger Hutte Saarstahl AG (DHS), a German holding company, which, in

turn, was 70 percent owned by Usinor.

In 1996, Usinor reduced its interest in DHS from 70 to 48.75

percent. At that time, DHS owned 95.3 percent of Dillinger, which in

turn, owned 99 percent of GTS.

[[Page 73279]]

Attribution of Subsidies

The GOF has identified three producers of subject merchandise in

this investigation: Sollac, CLI and GTS. During the POI, both Sollac

and CLI were wholly-owned by and consolidated subsidiaries of Usinor.

With respect to GTS, prior to 1996, it was majority owned by Usinor

since Usinor held 70 percent of DHS, which in turn, held approximately

95 percent of Dillinger, GTS' direct parent company. However, since

1996 and during the entire POI, Usinor's interest in DHS has been 48.75

percent, i.e., slightly less than a majority.

The issue before the Department is whether the subsidies granted to

Usinor are attributable to GTS given that GTS is no longer majority-

owned by Usinor. Section 351.525 of the CVD Regulations states that the

Department will attribute subsidies received by two or more

corporations to the products produced by those corporations where

cross-ownership exists. According to section 351.525(b)(6)(vi) of the

CVD Regulations, cross-ownership exists between two or more

corporations where one corporation can use or direct the individual

assets of the other corporation in essentially the same ways it can use

its own assets. The regulations state that this standard will normally

be met where there is a majority voting ownership interest between two

corporations. The Preamble to the CVD Regulations identifies situations

where cross-ownership may exist even though there is less than a

majority voting interest between two corporations: ``in certain

circumstances, a large minority interest (for example, 40 percent) or a

`golden share' may also result in cross-ownership'' (63 FR at 65401).

In the Preliminary Determination, we found that there was no cross-

ownership between Usinor and GTS. Interested parties commented on

cross-ownership and attribution (see Comment 1 below). Based on our

analysis of information on the record of this proceeding and comments

by interested parties, we continue to find that Usinor's ownership

interest in DHS, the holding company of GTS' parent, Dillinger, is

insufficient to establish cross-ownership between Usinor and GTS during

the POI. We base this determination on the following: (1) Usinor has

less than a majority voting ownership in DHS; (2) Usinor does not

control GTS directly or indirectly; and (3) although GTS uses Usinor

affiliates to transport and sell some of its merchandise, there is no

evidence that Usinor controls the sales that its affiliates make for

GTS. For more details, see the Department's position on Comment 1

below.

Therefore, for this final determination, we have calculated a

separate net subsidy rate for GTS. However, since GTS was part of the

Usinor Group for much of the allocation period, we have attributed a

portion of subsidies received by Usinor through 1996 to GTS (see the

``Change in Ownership'' section below).

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 (i.e.,

in this case, 1985 for Usinor) 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.

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 payment for 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 payment for prior subsidies in accordance with the

privatization methodology outlined above.

As discussed above in the ``Case History'' section of this notice,

two important changes of ownership have occurred with respect to the

producers of the subject merchandise. First, Usinor's ownership of GTS

has declined over time so that Usinor is no longer a majority owner of

GTS. Second, Usinor has been privatized. In addition, Usinor sold (in

whole or in part) various productive units: Ugine (1994); Centrale

Siderurgique de Richemont (CSR) (1994); Entreprise Jean LeFebvre

(1994); and various productive units to FOS-OXY (1993).

To determine the amount of subsidies that potentially transfers

with a spun off productive unit, we have measured that productive

unit's assets in relation to the subsidized assets of the seller (see

Comment 8 below). In particular, because we normally attribute

subsidies to production occurring in the jurisdiction of the

subsidizing government (see section 351.525(b)(7)), we believe we

should calculate the share of subsidies that can potentially transfer

with the sale of Usinor's French productive units in relation to

Usinor's total French assets (as opposed to Usinor's total worldwide

assets). As explained below, we lack the information to make this

calculation in this determination, but for the spin-off of GTS, we have

developed a substitute measure for that amount based on sales.

Using this information, we have applied the spin-off and

privatization methodologies described in the GIA. Regarding spin offs,

we first determined the portion of subsidies that potentially transfers

with the spun-off unit based on that unit's share of assets (or French

sales). For the latter three transactions described above (involving

CSR, Entreprise Jean LeFebvre, and FOS-OXY), the entire productive unit

was transferred. Consequently, the entire amount of subsidies

attributable to these productive units were potentially transferred

and, also, potentially reallocated to Usinor through the payment for

these companies. Similarly, the privatization of Usinor involved

virtually all of Usinor's shares and, hence, the entire amount of

Usinor's remaining subsidies potentially transferred with Usinor and,

also, were potentially repaid to the seller.

The sales of Ugine and GTS present variations from the sales

discussed above. While the sales of Ugine and GTS are spin offs of

productive units, these units have been only partially spun off.

Moreover, the sale of Ugine must be distinguished from the sale of GTS

because after Usinor's sale of Ugine's

[[Page 73280]]

shares in 1994, Usinor continued to be the majority owner of Ugine.

While it would be possible to apply the change-in-ownership methodology

to this transaction (and we did so in French Stainless), there is no

impact on the subsidy to Usinor. This is because even after the partial

spin off, Ugine continued to be part of the consolidated Usinor Group.

Thus, the total amount of subsidies within the Usinor Group would not

diminish as a result of the partial spin off of Ugine, nor would

Usinor's denominator change. Since Usinor's ownership in Ugine did not

diminish further after 1994 (indeed, Usinor subsequently repurchased

the Ugine shares it had sold) and we have not applied the change-in-

ownership methodology to Usinor's repurchase of Ugine's shares (see

French Stainless), there is no need to perform the change-in-ownership

calculation for the partial spin off of Ugine.

GTS' situation by the POI was very different from that of Ugine. As

discussed above, after 1996, GTS was no longer part of the consolidated

Usinor Group. Therefore, any subsidies properly attributed to GTS would

no longer be counted among Usinor's subsidies, nor would GTS' sales be

included in Usinor's sales. To reflect this change in GTS' status, we

have applied the spin off methodology twice. First, we have applied the

methodology to the 1992 transfer of GTS shares from Sollac to DHS. We

have done this by determining the subsidies potentially allocable to

GTS in 1992. We have then reduced this total by the percentage of

ownership in GTS that transferred outside the Usinor Group in 1992 to

arrive at the amount of subsidies subjected this amount to the

repayment methodology. We note that Usinor continued to be a majority

owner of GTS after the 1992 transaction and, hence, that Usinor and GTS

would continue to be treated as a single company. However, unlike the

situation with Ugine, it is necessary for us to apply the change-in-

ownership methodology to this 1992 transaction. This is because we have

to calculate a subsidy rate for 1998, a point in time when Usinor and

GTS are being treated as separate companies. If we failed to apply the

change-in-ownership methodology to the 1992 transaction, and only

applied it to the 1996 transaction, the amount paid for GTS in 1996

(assuming we had that information) would not be commensurate with the

total amount of ownership that had transferred over time.

The second application of the change-in-ownership methodology to

Usinor/GTS is also a partial spin off. In recognition of the fact that

this transaction reduces Usinor's ownership of GTS below 50 percent and

our finding that Usinor does not direct or control the use of GTS'

assets (see Comment 1 below), with the result that GTS's sales will no

longer be treated as Usinor's sales, we believe the spin off

methodology requires us first to assign to GTS its full share of Usinor

subsidies (reduced in proportion to the amount of GTS sold in 1992).

The amount of these subsidies that are then reallocated to Usinor is

calculated taking into account the percentage change in Usinor's

ownership of GTS and the price paid by the new owner of the GTS shares.

The Use of Facts Available

Certain information requested of respondents was not provided in

this investigation. Specifically, Usinor failed to respond to the

Department's questions concerning creditworthiness for the years 1992

though 1995. The GOF failed to provide information on the distribution

of investment and operating subsidies (other than those from the water

boards) received by Usinor. Nor did it demonstrate at verification that

it had provided information on use of ESF funding by all Usinor group

members. Finally, the EC did not provide information with respect to

the distribution of European Social Fund (ESF) funding.

Section 776(a)(2) of the Act requires the use of facts available

when an interested party withholds information that has been requested

by the Department, or when an interested party fails to provide the

information requested in a timely manner and in the form required. In

such cases, the Department must use the facts otherwise available in

reaching the applicable determination. Because the EC, the GOF and

Usinor failed to submit the information that was specifically requested

by the Department, we have based our determination for these programs

on the facts available.

In accordance with section 776(b) of the Act, the Department may

use an inference that is adverse to the interests of that party in

selecting from among the facts otherwise available when the party has

failed to cooperate by not acting to the best of its ability to comply

with a request for information. Such adverse inference may include

reliance on information derived from (1) the petition; (2) a final

determination in a countervailing duty or an antidumping investigation;

(3) any previous administrative review, new shipper review, expedited

antidumping review, section 753 review, or section 762 review; or (4)

any other information placed on the record. See 19 C.F.R. 351.308(c).

In the absence of information from the EC, the GOF and Usinor, we

consider the February 16, 1999 petition, as well as our findings in

French Stainless and other information gathered during the course of

this investigation to be appropriate bases for a facts available

countervailing duty rate calculation.

The Statement of Administrative Action accompanying the URAA

clarifies that information from the petition and prior segments of the

proceeding is ``secondary information.'' See Statement of

Administrative Action, accompanying H.R. 5110 (H.R. Doc. No. 103-316)

(1994) (SAA), at 870. If the Department relies on secondary information

as facts available, section 776(c) of the Act provides that the

Department shall, to the extent practicable, corroborate such

information using independent sources reasonably at its disposal. The

SAA further provides that to corroborate secondary information means

simply that the Department will satisfy itself that the secondary

information to be used has probative value. However, where

corroboration is not practicable, the Department may use uncorroborated

information.

We relied upon French Stainless regarding Usinor's creditworthiness

during the period 1992 through 1995. With respect to ESF funding and

investment and operating subsidies (other than those provided by the

water boards) for which we did not receive complete information from

the respondents, we relied upon findings in French Stainless and

information in the petition indicating that these programs are

specific. Based on our review of the findings in French Stainless and

the information in the petition, we find that this secondary

information has probative value and, therefore, the information has

been corroborated.

Subsidies Valuation Information

Allocation Period

The current investigation includes untied, non-recurring subsidies

to Usinor that were found to be countervailable in Final Affirmative

Countervailing Duty Determinations: Certain Steel Products From France,

58 FR 37304 (July 9, 1993) (French Certain Steel): PACS, FIS, and

Shareholders' Advances. For the Preliminary Determination, we allocated

those subsidies over 14 years because we have already assigned this

company-specific allocation period to those subsidies in other

proceedings. See French Stainless. See also Final Results of

[[Page 73281]]

Redetermination Pursuant to Court Remand on General Issue of

Allocation, British Steel plc, v. United States, Consol. Ct. No. 93-09-

00550-CVD. After considering interested parties comments on this issue,

we have continued to apply a 14-year allocation period to these

subsidies for this final determination. For further details, see

Comment 13 below.

We have found no other allocable non-recurring subsidies received

by Usinor and GTS in the instant proceeding.

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

section 351.595 of the CVD Regulations.

Usinor was found to be uncreditworthy from 1982 through 1988 in

French Certain Steel, 58 FR at 37306. No new information has been

presented in this investigation that would lead us to reconsider these

findings. Therefore, we continue to find Usinor uncreditworthy from

1985 through 1988.

In Notice of Initiation of Countervailing Duty Investigations:

Certain Cut-To-Length Carbon-Quality Steel Plate from France, India,

Indonesia, Italy, and the Republic of Korea, 64 FR 12996 (March 16,

1999), we stated that the petitioners provided sufficient information

to lead us to believe or suspect that Usinor was uncreditworthy from

1992 through 1995. Therefore, we requested Usinor to provide data that

would allow us to analyze its creditworthiness during this period.

Usinor did not provide the information requested by the Department

citing the ``formidable burdens which would be involved in responding

to the Department's Creditworthiness questions.'' Consequently, the

Department has decided to use facts available in accordance with

section 776 (a)(2)(A) of the Act. Section 776(b) of the Act permits the

Department to draw an inference that is adverse to the interests of an

interested party if that party has ``failed to cooperate by not acting

to the best of its ability to comply with a request for information.''

In this investigation, Usinor refused to answer on more than one

occasion, the creditworthiness questions in the Department's original

and supplemental questionnaires. Therefore, the Department determines

it appropriate to use an adverse inference in selecting the discount

rate to be applied in these years.

Benchmarks for Loans and Discount Rates

In accordance with sections 351.505 (a) and 351.524 (c)(3)(i) of

the CVD Regulations, we used Usinor's company-specific cost of long-

term, fixed-rate loans, where available, for loan benchmarks and

discount rates for years in which Usinor was creditworthy. In the

Preliminary Determination for years where Usinor was creditworthy and a

company-specific rate was not available, we used the average yields on

long-term private-sector bonds in France as published by the OECD.

Interested parties commented on the calculation of the non-company-

specific benchmark rate. In response to these comments, we have revised

our benchmark for this final determination. Specifically, we are using

an average of the following long-term interest rates: medium-term

credit to enterprises (MTCE), and equipment loan rates as published by

the OECD, cost of credit rates published in the Bulletin of Banque de

France, and private sector bond rates as published by the International

Monetary Fund. (See Comment 18 below for further discussion of this

issue.)

For the years in which Usinor was uncreditworthy (see

``Creditworthiness'' section above), we calculated the discount rates

in accordance with section 351.524(c)(3)(ii) of the CVD Regulations. To

construct these benchmark rates, we used the formula described in

section 351.505(a)(3)(iii) of the CVD Regulations. This formula

requires values for the probability of default by uncreditworthy and

creditworthy companies. For the probability of default by an

uncreditworthy company, we relied on the average cumulative default

rate reported for Caa to C-rated category of companies as published in

Moody's Investors Service, ``Historical Default Rates of Corporate Bond

Issuers, 1920-1997,'' (February 1998). For the probability of default

by a creditworthy company we used the average cumulative default rates

reported for the Aaa to Baa-rated categories of companies as reported

in this study.1 See Memorandum to Case File; Clarification

of Moody's Default Data (December 13, 1999).

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\1\ We note that since publication of the CVD Regulations,

Moody's Investors Service no longer reports default rates for Caa to

C-rated category of companies. Therefore for the calculation of

uncreditworthy interest rates, we will continue to rely on the

default rates as reported in Moody Investor Service's publication,

February 1998.

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Based upon our verification and our analysis of the comments

received from interested parties, we determine the following:

I. Programs Determined To Be Countervailable

GOF Programs

A. Loans With Special Characteristics (PACS)

A plan was agreed upon in 1978 to help the principal steel

companies, Usinor, Sacilor, Chatillon-Neuves-Maisons, and their

subsidiaries, restructure their massive debt. This plan entailed the

creation of a steel amortization fund, called the Caisse

d'Amortissement pour l'Acier (CAPA), for the purpose of ensuring

repayment of funds borrowed by these companies prior to June 1, 1978.

In accordance with the restructuring plan of 1978, bonds previously

issued on behalf of the steel companies and pre-1978 loans from Credit

National and Fonds de Developpement Economique et Social (FDES) were

converted into ``loans with special characteristics,'' or PACS. As a

result of this process, the steel companies were no longer liable for

the loans and bonds, but did take on PACS obligations.

In 1978, Usinor and Sacilor converted 21.1 billion French francs

(FF) of debt into PACS. From 1980 to 1981, Usinor and Sacilor issued

FF8.1 billion of new PACS. PACS in the amount of FF13.8 billion, FF12.6

billion and FF2.8 billion were converted into common stock in 1981,

1986, and 1991, respectively.

In French Stainless, French Certain Steel, and Final Affirmative

Countervailing Duty Determinations: Certain Hot Rolled Lead and Bismuth

Carbon Steel Products from France, 58 FR 6221 (January 27, 1993)

(French Bismuth), the Department determined that the conversion of PACS

to common stock in 1986 constituted a countervailable equity infusion.

This equity infusion was limited to Usinor Sacilor and was, therefore,

specific within the meaning of section 771(5A)(D)(i) of the Act. Also,

this equity infusion provided a financial contribution to Usinor

Sacilor within the meaning of section 771(5)(D)(i) of the Act. No new

information or evidence of changed circumstances has been submitted in

this proceeding to warrant a reconsideration of our earlier finding.

Therefore, we determine that a countervailable benefit exists in the

amount of the 1986 equity infusion in accordance with section 77(5)(A)

of the Act.

We have treated the 1986 equity infusion as a non-recurring grant

[[Page 73282]]

received in the year the PACS were converted to common stock. Using the

allocation period of 14 years, the 1986 conversion of PACS continues to

yield a countervailable benefit during the POI. We used an

uncreditworthy discount rate to allocate the benefit of the equity

infusion over time. Additionally, we followed the methodology described

in the ``Change in Ownership'' section above to determine the amounts

of the equity infusion appropriately allocated to Usinor and GTS. We

divided these amounts by Usinor's and GTS' total sales of French-

produced merchandise during the POI. Accordingly, we determine the net

subsidy rate to be 1.35 percent ad valorem for Usinor and 1.70 percent

ad valorem for GTS.

B. Shareholders' Advances

The GOF provided Usinor and Sacilor grants in the form of

shareholders' advances in 1985 and 1986. The purpose of these advances

was to finance the revenue shortfall needs of Usinor and Sacilor while

the GOF planned for the next major restructuring of the French steel

industry. These shareholders' advances carried no interest and there

was no precondition for receipt of these funds. These advances were

converted to common stock in 1986.

In French Stainless, French Certain Steel, and French Bismuth, the

Department determined that the shareholders' advances constituted

countervailable grants because no shares were received for them. These

grants were limited to Usinor and Sacilor and were, therefore, specific

within the meaning of section 771(5A)(D)(i) of the Act. Also, these

grants provided a financial contribution to Usinor and Sacilor within

the meaning of section 771(5)(D)(i) of the Act. No new information or

evidence of changed circumstances has been submitted in this proceeding

to warrant a reconsideration of our earlier finding. Therefore, we

determine these grants provide a countervailable benefit in accordance

with section 77(5)(A) of the Act.

Because the 1986 shareholders' advance was less than 0.5 percent of

Usinor's sales of French-produced merchandise during the year of

approval, this grant was expensed in the year of receipt. See CVD

Regulations, 64 FR at 65415.

We have treated the 1985 shareholders' advance as a non-recurring

subsidy. Using the allocation period of 14 years, this shareholders'

advance continues to provide a countervailable benefit during the POI.

We used an uncreditworthy discount rate to allocate the benefits of the

1985 shareholders' advance over time. Additionally, we followed the

methodology described in the ``Change in Ownership'' section above to

determine the amount of the grant appropriately allocated to Usinor and

GTS. We divided these amounts by Usinor's and GTS'' total sales of

French-produced merchandise during the POI. Accordingly, we determine

the net subsidy rate to be 0.54 percent ad valorem for Usinor and 0.68

percent ad valorem for GTS.

C. Steel Intervention Fund (FIS)

The 1981 Corrected Finance Law granted Usinor and Sacilor the

authority to issue convertible bonds. In 1983, the Fonds d'Intervention

Siderurgique (FIS), or steel intervention fund, was created to

implement that authority. In 1983, 1984, and 1985, Usinor and Sacilor

issued convertible bonds to the FIS, which in turn, with the GOF's

guarantee, floated the bonds to the public and to institutional

investors. These bonds were converted to common stock in 1986 and 1988.

In French Stainless, French Certain Steel and French Bismuth, the

Department determined that the conversions of FIS bonds to common stock

in 1986 and 1988 were countervailable equity infusions. These equity

infusions were limited to Usinor Sacilor and were, therefore, specific

within the meaning of section 771(5A)(D)(i) of the Act. Also, these

equity infusions provided a financial contribution to Usinor Sacilor

within the meaning of section 771(5)(D)(i) of the Act. No new

information or evidence of changed circumstances has been submitted in

this proceeding to warrant a reconsideration of our earlier finding.

Therefore, we determine that a countervailable benefit exists in the

amount of the 1986 and 1988 equity infusions in accordance with section

77(5)(A) of the Act.

We have treated the 1986 and 1988 equity infusions as non-recurring

subsidies received in the years the FIS bonds were converted to common

stock. Using the allocation period of 14 years, the 1986 and 1988 FIS

bond conversions continue to yield a countervailable benefit during the

POI. We used an uncreditworthy discount rate to allocate the benefits

of the equity infusions over time. Additionally, we followed the

methodology described in the ``Change in Ownership'' section above to

determine the amount of the equity infusion appropriately allocated to

Usinor and GTS. Dividing these amounts by Usinor's and GTS' total sales

of French-produced merchandise during the POI, we determine the net

subsidy rate to be 3.56 percent ad valorem for Usinor and 4.48 percent

ad valorem for GTS.

D. Investment/Operating Subsidies

During the period 1987 through 1998, Usinor received a variety of

small investment and operating subsidies from various GOF agencies as

well as from the European Coal and Steel Community (ECSC). The

subsidies were provided for research and development, projects to

reduce work-related illnesses and accidents, projects to combat water

pollution, etc. The subsidies are classified as investment, equipment,

or operating subsidies in the company's accounts, depending on how the

funds are used.

In French Stainless, the Department determined that the funding

provided to Usinor by the water boards (les agences de l'eau) and

certain work/training grants were not countervailable. Therefore, we

are not investigating those programs in this proceeding.

For the remaining amounts in these accounts, including certain

work/training grants that differed from those found not countervailable

in French Stainless, the GOF did not provide any information regarding

the distribution of funds, stating that, in the GOF's view, the total

amount of investment and operating subsidies received by Usinor was

``insignificant and would * * * be expensed.'' Given the GOF's failure

to provide the requested information, we are using ``facts available''

in accordance with section 776(a)(2)(A) of the Act. Further, section

776(b) of the Act permits the Department to draw an inference that is

adverse to the interests of an interested party if that party has

``failed to cooperate by not acting to the best of its ability to

comply with a request for information.'' In this investigation, the GOF

has refused to answer the Department's repeated requests for data

regarding the distribution of grant funds. Therefore, the Department

determines it appropriate to use an adverse inference in concluding

that the investment and operating subsidies (except those provided by

the water boards and certain work/training contracts) are specific

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

We also determine that the investment and operating subsidies

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

of the Act, in the form of a direct transfer of funds from the GOF and

the ECSC to Usinor, providing a benefit in the amount of the grants.

[[Page 73283]]

The investment and operating subsidies provided in the years prior

to the POI were less than 0.5 percent of Usinor's sales of French-

produced merchandise in those years. Therefore, we have expensed these

grants in the years of receipt, in accordance with section 351.524

(b)(2) of the CVD Regulations. To calculate the benefit received during

the POI, we divided the subsidies received by Usinor in the POI by

Usinor's total sales of French-produced merchandise during the POI.

Accordingly, we determine Usinor's net subsidy rate to be 0.11 percent

ad valorem. GTS did not receive any of these investment and operating

subsidies during the POI.

E. Subsidies Provided Directly to GTS

GTS' 1996 condensed financial statements include a ``capital

subsidy'' in the amount of FF 2.1 million. GTS claims that this amount

reflects the unamortized balance of a grant that was provided to GTS

pursuant to an agreement dated December 29, 1987, between the GOF and

Usinor. The grant was given to support the development of a machine for

the accelerated cooling of heavy plate during the hot-rolling process.

The grant was provided in two disbursements made in 1988 and 1990.

The GOF responded to the Department's questions on this capital

subsidy stating that because of its size, the amounts would be expensed

in a period outside the POI. Therefore, the GOF did not provide

information on the distribution of other grants that might have been

given under the same program.

The total amount approved in 1987 was less than 0.5 percent of

Usinor's sales of French-produced heavy plate in 1987. Therefore, we

determine that these grants did not confer a countervailable subsidy

during the POI.

F. Myosotis Project

Since 1988, Usinor has been developing a continuous thin-strip

casting process, called ``Myosotis,'' in a joint venture with the

German steelmaker, Thyssen. The Myosotis project is intended to

eliminate the separate hot-rolling stage of Usinor's steelmaking

process by transforming liquid metal directly into a coil between two

to five millimeters thick.

To assist this project, the GOF, through the Ministry of Industry

and Regional Planning and L'Agence pour la Maitrise de L'Energie

(AFME), entered into three agreements with Usinor Sacilor (in 1989) and

Ugine (in 1991 and 1995). The first agreement, dated December 27, 1989,

provided three payments in 1989, 1991, and 1993. The second agreement,

between Ugine and the AFME, covered the cost of some equipment for the

project. This agreement resulted in two disbursements to Ugine from the

AFME in 1991 and 1992. The third agreement, with Ugine, dated July 3,

1995, provided interest-free reimbursable advances for the final two-

year stage of the project, with the goal of casting molten steel from

ladles to produce thin strips. The first reimbursable advance under

this agreement was made in 1997. Repayment of one-third of the

reimbursable advance is due July 31, 1999. The remaining two-thirds are

due for repayment on July 31, 2001.

In French Stainless, the Department determined that funding

associated with the 1989 and 1991 contracts constituted countervailable

subsidies within the meaning of section 771(5) of the Act. Since the

GOF did not provide any information indicating that the grants were

provided to other companies in France, the Department determined that

the grants were specific within the meaning of section 771(5A)(D) of

the Act. Also, the Department found that these grants provided a

financial contribution within the meaning of section 771(5)(D)(i) of

the Act. No new information has been submitted to warrant a

reconsideration of our earlier finding. Therefore, we continue to find

that the grants associated with the 1989 and 1991 Myosotis contracts

constitute countervailable subsidies within the meaning of section

771(5) of the Act. Because the amounts received under the 1989 and 1991

contracts were less than 0.5 percent of Usinor's sales of French-

produced merchandise during their respective year of approval, these

grants were expensed in the years of receipt. See CVD Regulations, 64

FR at 65415.

With respect to the reimbursable advance received in 1997, the GOF

has requested that we find this subsidy non-countervailable under

section 771(5B)(B)(ii)(II) of the Act, i.e., that this is a green-light

subsidy. We have determined that we do not need to address the issue

whether this subsidy is countervailable because the benefit of the

reimbursable advance during the POI is less than 0.5 percent. As stated

in the Preamble to the CVD Regulations:

[W]e will not consider claims for green light status if the

subject merchandise did not benefit from the subsidy during the

period of investigation or review. Instead, consistent with the

Department's existing practice, the green light status of a subsidy

will be considered only in an investigation or review of a time

period where the subject merchandise did benefit from the subsidy.

See CVD Regulations, 63 FR at 65388.

In accordance with section 351.505(d)(1) of the CVD Regulations, we

are treating this reimbursable advance as a contingent liability loan

because the GOF has indicated that repayment of the loan is contingent

on the success of the project. We used as our benchmark a long-term

fixed-rate loan consistent with section 351.505(a)(2)(iii) of the

Department's regulations. Since Usinor would have been required to make

an interest payment on a comparable commercial loan during the POI (see

French Stainless), we calculated the benefit from the reimbursable

advance as the amount that would have been due during the POI. Dividing

these interest savings by Usinor's sales of French-produced merchandise

during the POI, we find the net subsidy rate to be 0.00 percent ad

valorem for Usinor. GTS did not receive subsidies under this program.

EC Programs

European Social Fund

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

operated by the EC, was established in 1957 to improve workers'

employment opportunities and to raise their living standards. The main

purpose of the ESF is to make employing workers easier and to increase

the geographical and occupational mobility of workers within the

European Union. It accomplishes this by providing support for

vocational training, employment, and self-employment.

Like the other EC Structural Funds, the ESF seeks to achieve six

different objectives explicitly identified in the EC's framework

regulations for Structural Funds: Objective 1 is to promote development

and structural adjustment in underdeveloped regions; Objective 2 is to

assist areas in industrial decline; Objective 3 is to combat long-term

unemployment and to create jobs for young people and people excluded

from the labor market; Objective 4 is to assist workers adapting to

industrial changes and changes in production systems; Objective 5 is to

promote rural development; and Objective 6 is to aid sparsely populated

areas in northern Europe.

The member states are responsible for identifying and implementing

the individual projects that receive ESF financing. The member states

also must contribute to the financing of the projects. In general, the

maximum benefit provided by the ESF is 50 percent of the project's

total cost for projects geared toward Objectives 2, 3, 4, and 5b (see

below), and 75 percent of

[[Page 73284]]

the project's total cost for Objective 1 projects. For all programs

implemented under Objective 4 in France, 35 percent of the funding

comes from the EC, 25 percent from the GOF, and the remaining 40

percent from the company.

According to the questionnaire responses, CLI received an ESF grant

for an Objective 4 project. The amount received during the POI was a

portion of a larger ESF grant authorized for CLI in 1996.

The Department considers worker assistance programs to provide a

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

contractual or legal obligation it would otherwise have incurred. See

section 357.513(a) of the CVD Regulations. Only limited information was

provided in the questionnaire responses about the purpose of this

grant; therefore, we are unable to determine whether it relieved CLI of

any legal or contractual obligations. With regard to specificity, the

EC has not provided complete information about the distribution of ESF

grants. In addition, the GOF was unable to show at verification that it

had reported all ESF grants to Usinor Group companies during the POI.

Consequently, the Department has decided to use facts available in

accordance with section 776(a)(2)(A) of the Act. Section 776(b) of the

Act permits the Department to draw an inference that is adverse to the

interests of an interested party if that party has ``failed to

cooperate by not acting to the best of its ability to comply with a

request for information.'' Since Usinor, the GOF and the EC failed to

provide complete information to the Department, we determine it

appropriate to use an adverse inference in concluding that: CLI was

relieved of an obligation in receiving the ESF grant; the ESF grant is

specific within the meaning of section 771(5A)(D) of the Act and that

the benefit was tied to goods produced by CLI. Also, we find the grant

to be a financial contribution within the meaning of section

771(5)(D)(i) of the Act. Based on the foregoing, we determine that the

1998 ESF grant is countervailable within the meaning of section 771(5)

of the Act.

The Department normally expenses the benefits from worker-related

subsidies in the year in which the recipient is relieved of a payment

it would normally incur. See CVD Regulations, 63 FR at 65412. Dividing

the amount received by CLI in 1998 by CLI's 1998 sales of French-

produced merchandise yields a net subsidy rate of 0.00 percent ad

valorem for Usinor. GTS did not benefit from ESF funding during the

POI.

II. Programs Determined Not To Be Countervailable

GOF Programs

A. 1994 Purchase of Power Plant for Excessive Remuneration

The Department initiated an investigation of this program prior to

the issuance of the final determination of French Stainless. This

program was subsequently found to be not countervailable in French

Stainless.

B. GOF Conditional Advance on New Steel Development

Usinor received an interest-free conditional advance from the GOF.

This advance was provided through the Ministry of Industry to support a

project aimed at developing a new type of steel for use in the

production of catalytic converters. Since the GOF conditional advance

is for a project aimed at developing a new type of steel which does

fall within the scope of this proceeding, we find that this program is

tied to non-subject merchandise and not countervailable with respect to

this investigation only.

III. Other Programs

A. Electric Arc Furnaces

In 1996, the GOF agreed to provide assistance in the form of

reimbursable advances to support Usinor's research and development

efforts regarding electric arc furnaces. The first disbursal of funds

occurred on July 17, 1998. Repayment of the reimbursable advances will

begin on July 31, 2002.

Since these advances may someday be repaid, we are treating them as

contingent liability loans. Section 351.505(d)(1) of the CVD

Regulations. Under the methodology specified in the Department's new

regulations, the benefit occurs when payment would have been made on a

comparable commercial loan. Section 351.505(b) of the CVD Regulations.

As stated in French Stainless, Usinor would make interest payments on

its long-term loans on an annual basis and such a payment schedule

would not be considered atypical of general French banking practices.

See French Stainless, 64 FR at 30780. Accordingly, we have assumed that

a payment on a comparable commercial loan taken out by Usinor at the

time of this reimbursable advance would not be due until the year 1999.

Given that no payment would be due during the POI, we determine

that there is no benefit to Usinor from these reimbursable advances

during the POI. Consequently, we have not addressed whether this

reimbursable advance is countervailable.

B. Post-1991 SODIE Advances

As discussed in the ``Case History'' section of this notice, the

decision to investigate post-1991 SODIE advances was made at a late

date in this investigation. Because of this, we were not able to seek

clarification of the information supplied in the GOF and Usinor

responses. Therefore, we are not making a determination on the

countervailability of the post-1991 SODIE advances in this

investigation. If this proceeding results in a countervailing duty

order, we will examine the post-1991 SODIE advances in an

administrative review, if requested. See Comment 16 below.

IV. Programs Determined To Be Not Used

Based on the information provided in the responses and our findings

at verification, we determine that the responding companies did not

apply for or receive benefits under the following programs during the

POI:

GOF Programs

A. Shareholders Guarantees

B. Long-Term Loans From CFDI

EC Programs

A. Resider and Resider II Program

B. ECSC Article 54 Loans

C. ECSC Article 56(2)(b) Redeployment/Readaptation Aid

D. Grants From the European Regional Development Fund (ERDF)

Interested Party Comments

Comment 1: Treatment of GTS

The petitioners argue that the Department's preliminary decision to

treat GTS as separate from Usinor was unreasonable, inconsistent with

past Department practice and contrary to law. The petitioners maintain

that GTS should continue to be treated as part of the Usinor group,

along with the other two producers of subject merchandise (i.e., CLI

and Sollac), with all receiving a single subsidy rate for the Usinor

group.

The petitioners base this on their claim that the Usinor group was

and remains fully vertically integrated, with ownership of raw

materials, basic production facilities, steel processing operations,

service centers, marketing arms and distribution services fully

consolidated. Furthermore, the petitioners argue that calculating a

single subsidy rate for the group is

[[Page 73285]]

consistent with past practice. The petitioners state that in French

Certain Steel, French Bismuth, and French Stainless, the Department

treated the Usinor group, not the individual group producers, as the

relevant respondent; consequently, GTS' subsidies were included in the

Usinor numerator and its sales were included in the Usinor denominator.

The petitioners argue that despite Usinor's reduction of its

indirect ownership interest in GTS below the 50 percent level in 1996,

the reasons for approaching Usinor as a group have not changed; namely:

(1) GTS and Usinor share common marketing and transportation services

which provide a vehicle for the transmittal of subsidies and the

potential for export shifting should the Department assign different

rates, and (2) GTS does not have audited financial statements for all

of the years that the Department would require in order to conduct an

analysis leading to a separate subsidy rate.

The petitioners dispute the Department's application of its cross-

ownership regulation in the Preliminary Determination. The petitioners

maintain that the relevant regulation is 19 CFR. 351.525(b)(6)(iii)

which states that if a subsidy is received by a holding company ``the

Secretary will attribute subsidies to the consolidated sales of the

holding company and its subsidiaries.'' Additionally, the petitioners

maintain that Usinor and GTS do not cross-own each other. Instead,

Usinor has one-way partial ownership of GTS.

Finally, even if the cross-ownership regulation does apply, the

Department should still treat GTS as part of the Usinor group, in the

petitioners' view. The petitioners point to Certain Cold-Rolled Flat-

Rolled Carbon-Quality Steel Products from Brazil, 64 FR 53332 (July 26,

1999) (Brazil Carbon Plate) in which the Department found cross-

ownership between two companies when one company owned only 49.8

percent of the other.

Moreover, the petitioners argue that Usinor effectively controls

GTS because: (1) Usinor's 48.31 percent ownership interest in GTS far

exceeds any other owner, (2) the next largest shareholder, Saarstahl

with 32.14 percent indirect ownership interest in GTS, is in bankruptcy

and its shares can only be voted on by the bankruptcy trustees, and (3)

Usinor, with three of the eight GTS Board members, controls GTS' Board

of Directors. Additionally, the petitioners point out that the

Department learned at verification that Dillinger controls GTS. The

petitioners argue that this control by Dillinger is not inconsistent

with Usinor's control of GTS since Usinor is the largest shareholder of

Dillinger's parent company, DHS. Furthermore, the petitioners argue

that the Chairman of both DHS and Dillinger Supervisory Boards is a

representative of Usinor and that Usinor's presence on DHS's and

Dillinger's Supervisory Board gives Usinor considerable power.

The respondents disagree with the petitioners that the Department

should treat GTS as if it were still part of the Usinor group. The

respondents maintain that under section 351.525(b)(6)(iii) of the CVD

Regulations (relating to holding companies), Usinor's subsidies should

not be attributed to GTS because it is not included in Usinor's

consolidated holdings. Instead, the Department properly looked to

section 351.525(b)(6)(ii) of the CVD Regulations, (relating to cross-

ownership) to determine whether any subsidies should be attributed to

GTS as a result of cross-ownership between GTS and Usinor. The

respondents argue that the Department correctly concluded that there is

no cross-ownership between GTS and Usinor since Usinor cannot control

or direct GTS' assets in essentially the same manner it could its own.

The respondents argue that the record is clear that Usinor does not

have any direct interest in GTS or Dillinger (GTS' parent company), and

only a minority interest in DHS (Dillinger's parent company). The

respondents argue that verification confirmed that Usinor cannot use or

direct the assets of DHS given its minority shareholding, the power

accorded to labor on DHS' Supervisory Boards, and that all the seats on

DHS' Management Board are held by employees. The respondents explain

that Usinor's role in GTS is further attenuated and that Dillinger

directs the individual assets of GTS. Therefore, the respondents

maintain that cross-ownership does not exist, and the Department cannot

attribute Usinor's subsidies to GTS.

Dillinger rejects petitioners' argument that the Department should

continue to treat GTS as part of the Usinor group based on the fact

that GTS was part of the Usinor group during the French Certain Steel

investigation. Dillinger points out that in the POI of the instant

proceeding, GTS is no longer consolidated in the Usinor group's

financial statements. Additionally, Dillinger points out that the

Department has promulgated new regulations which mandate that the

Department treat GTS as a separate company.

Dillinger also rejects petitioners' argument that internal

transfers and shared marketing services within the Usinor group provide

a vehicle for the transmittal of subsidies. Dillinger states that GTS

is no longer a consolidated member of the Usinor group so this argument

is not relevant. Furthermore, Dillinger argues that petitioners'

argument was not accepted by the Department in French Certain Steel nor

has it been adopted in subsequent cases. Dillinger also rejects the

petitioners' argument that the Department does not have audited

financial statements for GTS for all of the years that the Department

would require in order to conduct an analysis leading to a separate

subsidy rate. Dillinger argues that this is not true and that the

petitioners have not identified a single piece of missing information

that the Department would need to calculate a separate rate.

Dillinger argues that the Department should continue to calculate a

separate rate for GTS since the Department's new regulations at 19 CFR

351.525(b)(6)(iv) require a finding of cross-ownership in order to

attribute subsidies. Dillinger maintains that there is no cross-

ownership between the two companies because: (1) Usinor only has a

minority ownership interest in DHS, (2) Usinor does not have ``golden

share'' in DHS, and (3) Usinor's indirect ownership interest is matched

by the combined ownership of Saarstahl and the Government of Saarland.

Furthermore, Dillinger argues that Usinor's large minority ownership

interest in DHS is irrelevant because the DHS General Assembly requires

at least a 70 percent majority for approval. Therefore, Dillinger

points out that Usinor's ownership interest does not come close to the

level that would enable it control DHS, Dillinger, or GTS.

Lastly, Dillinger argues that petitioners' argument that Usinor has

a dominant presence on the GTS Board of Directors is irrelevant.

Dillinger points out that all shareholder representatives on GTS' Board

of Directors are elected by Dillinger. Dillinger points out that the

fact that three of the eight directors elected by Dillinger happen to

be representatives of Usinor is merely a business decision made by

Dillinger based on its prior affiliation with that company.

Department Position: Although the petitioners have raised several

valid concerns about treating GTS as separate from Usinor, we have

examined this matter closely and concluded that, on balance, the facts

of this case support calculating separate subsidy rates for Usinor and

GTS.

At the outset, we note that we do not share the petitioners' view

that Section

[[Page 73286]]

351.525 (b)(6)(iii) (regarding holding companies) is the relevant

provision for deciding how to attribute subsidies in this case.

Although Usinor was a holding/parent company during the POI, GTS was no

longer a consolidated member of the Usinor group and GTS' sales were

not reported in Usinor's consolidated sales. Thus, subparagraph

(b)(6)(iii) does not lead us to attribute Usinor's subsidies to GTS.

Instead, we believe that the applicable regulation is Section

351.525(b)(6)(ii), which addresses situations involving cross

ownership.

In applying this subparagraph, the petitioners have asked that we

take into account two types of concerns. First, because Usinor is a

vertically integrated company and because certain services are shared

among Usinor companies, including GTS, they should be viewed as a

single company. Second, although Usinor is not the majority owner of

GTS, it should be viewed as controlling GTS. We address these points in

turn.

The petitioners are correct that both GTS and Usinor, as producers

of subject merchandise, share service centers, marketing arms, and

channels of distribution. GTS makes a certain number of its French

sales through a subsidiary of Sollac and some of its U.S. sales to an

importer which is also owned by Sollac. However, we reviewed these

transactions carefully at verification and found no indication that

they were not at arm's length. Therefore, we found no basis to conclude

that subsidies were transmitted from Usinor to GTS (or vice versa) as a

result of GTS using Usinor affiliates for these services.

To the extent that the petitioners rely on the Department's

decision ``to collapse'' respondents in the Affirmative Countervailing

Duty Determination and Final Determination of Sales at Less Than Fair

Value: Certain Pasta From Italy and Turkey, 61 FR 30288, 30308 (June

14, 1996) (Italy Pasta) as the basis for treating Usinor and GTS as a

single company, we note that Italy Pasta predates the current

regulations. We also are not persuaded by the precedents involving the

Usinor group. Until 1996, GTS' results were consolidated in the Usinor

Group. Therefore, even under our current regulations, Usinor's

subsidies would be attributed to GTS and a single CVD rate would be

calculated. With respect to French Stainless, which had a 1997 POI,

GTS' sales were not included in Usinor's sales because GTS was no

longer included in Usinor's consolidated results.

Regarding Usinor's alleged control of GTS, as noted above, Usinor

indirectly owned 48.75 percent of GTS during the POI. Because this

level of ownership is close to the majority ownership required to find

cross ownership, we have examined closely whether Usinor controls GTS

directly, or indirectly through its ownership position in DHS. In

analyzing whether two companies should be treated as one for purposes

of calculating a countervailing duty rate, we believe that the control

analysis undertaken in connection with subparagraph (b)(6)(ii) should

identify situations where the ``interests of these two corporations

have merged to such a degree that one corporation can use or direct the

individual assets (or subsidy benefits) of the corporations in

essentially the same ways it can use its own assets (or subsidy

benefits).'' See the Preamble to the CVD Regulations (63 FR at 65401).

In this connection, the petitioners have pointed to Brazil Carbon

Plate, where the Department found cross ownership although the major

shareholder held less than a majority ownership position. We note that

the facts in this case differ from those in the Brazil case. In Brazil

Carbon Plate, one shareholder directly held 49.8 percent while the

remaining shareholders were numerous (i.e., more than 10) and each held

a small ownership interest percentage with no one shareholder coming

close to controlling one-quarter of the shares that the main

shareholder controlled (64 FR at 53334). In the instant proceeding,

Usinor's ownership interest is indirect (via DHS) and there are only

three other shareholders in DHS, two of which are affiliated and

together match Usinor's ownership interest. Specifically, while

Usinor's ownership interest in DHS is unquestionably large, it is

matched by two affiliated shareholders, SAG Saarstahl AG at 33.75

percent and Government of Saarland at 15 percent.

We have also considered whether Usinor controls GTS via control

over its Board of Directors and its parent companies, Dillinger and

DHS. First, we do not believe that Usinor controls GTS Board of

Directors, notwithstanding the fact that Usinor has three of the eight

representatives on GTS' current Board. According to the information we

received, Usinor cannot control the GTS Board because all Board members

are selected by Dillinger, and there is no indication that Usinor has

guaranteed ownership of these three seats. Dillinger has stated that

its decision to have Usinor representatives on GTS' Board was a

business decision based on their knowledge of the industry.

Second, we find that Usinor does not control Dillinger,

notwithstanding the fact that Usinor is the largest shareholder of

Dillinger's parent company, DHS. We recognize, in certain situations

and in certain countries, that a large minority interest such as

Usinor's interest in DHS could lead a finding of control by that

shareholder. However, because DHS and Dillinger are German companies in

the coal, iron and steel sector, they are governed by laws which limit

the shareholders' ability to control a company. In the case of DHS and

Dillinger, information on the record shows that the day-to-day

operational decisions and long-term business decisions concerning DHS

and Dillinger are made by DHS's and Dillinger's Supervisory and

Management Boards, and Usinor did not and could not control these

decision-making bodies given its ownership interest during the

POI.2

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

\2\ Because more specific information concerning the types of

decisions made by both Dillinger and DHS's Supervisory and

Management Boards is business proprietary, the Department cannot

discuss them here.

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

During the POI, Dillinger's Supervisory Board consisted of 15

members, three of which were Usinor company representatives. Given that

Supervisory Board decisions require a 50 percent majority and Usinor

had only three representatives on this Board, it was impossible for

Usinor to control Dillinger's Supervisory Board. Additionally, the

Department notes that laws governing the membership of Dillinger's

Supervisory Board require an equal number of labor and shareholders'

representatives. Given this legal requirement, Usinor's minority

indirect ownership interest could not enable it to gain a significant

presence on the Supervisory Board to control decision making. With

respect to Dillinger's Management Board, we note that it consists of

employees from DHS and Dillinger. Therefore, Usinor does not control

the Dillinger's Management Board.

Similarly with respect to DHS, resolutions requiring approval of

DHS' General Assembly of Shareholders (which includes the election of

the Supervisory Board members) require 70 and 90 percent majorities.

DHS' Supervisory Board requires a 50 percent majority for the approval

of decisions, and Usinor holds only three out of 21 seats on this

Board. Like Dillinger's Management Board, DHS' Management Board is made

up of employees.

Based on all the information regarding Usinor and its ability to

direct or control GTS, we have concluded, on balance, that such control

does not exist. Therefore, we have determined that

[[Page 73287]]

cross ownership does not exist between Usinor and GTS.

Comment 2: 1996 Transfer of Usinor's Ownership Interest in DHS Should

Not Be Treated as a Spin-Off of GTS

The respondents argue that the Department erroneously applied its

change-in-ownership methodology to the 1996 partial reduction of

Usinor's ownership interest in DHS. The respondents maintain that this

transaction was not a sale or transfer of GTS because no GTS shares

changed hands and, therefore, it should not be treated as a spin-off of

GTS. The respondents explain that the fact that the transaction had the

effect of reducing Usinor's indirect beneficial interest in GTS was an

incidental result of the transaction, not the focus.

The respondents point out that the Department has made clear that

it will not apply its change-in-ownership methodology to every

transaction that affects the ownership of a productive unit. The

respondents state that in Final Affirmative Countervailing Duty

Determination: Stainless Steel Plate in Coils from Italy, 64 FR 15508,

(March 31, 1999) (Italian Plate), the Department declined to perform

its change-in-ownership methodology to a transaction involving the

sale/transfer of indirect beneficial interests of the Italian

respondent, AST, because the ownership interest was relatively small

and so remote from the company upon which the subsidies were conferred.

The respondents argue that Usinor's 1996 transaction is similar to the

Italian one in that in both cases, the productive units (GTS and AST)

were not involved in the transaction and the exchange occurred two

levels up the corporate chain from the productive unit.

Additionally, the respondents argue that the Department's practice

and regulations preclude attributing subsidies to GTS as a consequence

of the 1996 transaction because the transfer of shares involved DHS, a

German company upon which no alleged subsidies involved in this

investigation were conferred. The respondents argue that the

Department's regulations at 19 CFR 351.525(b)(7) do not permit the

attribution of subsidies across borders. Therefore, they maintain it is

impossible for Usinor's subsidies to be attributed to GTS through

Usinor's transfer of shares in DHS, a German company.

The petitioners take issue with the respondents' claim that German

ownership of GTS' stock somehow relieves GTS' production of

countervailable French subsidies. The petitioners argue that the

subsidies in question were provided to French steel production which

included GTS. The petitioners argue that the real issue is whether

Usinor's reduction of its ownership interest in DHS in 1996 leads to

reallocation of the subsidies received by GTS. The petitioners believe

that there should be no reallocation of subsidies as a result of this

transaction since the respondents have contended that nothing

substantive really happened as a result of this transaction.

The petitioners object to the respondents' application of the

transnational rule because the petitioners believe that it is not

applicable here as it only deals with initial bestowal of subsidies not

attribution. The petitioners point out that even if the transnational

rule applies, it does not apply to subsidies tied to French production

which are the only subsidies at issue in this case. Finally, the

petitioners note that if the respondents' application of the

transnational rule is correct, then companies could insulate their

subsidiaries from all countervailing duty liability by setting up their

ownership in foreign holding companies.

Department Position: We disagree with the respondents that we

erroneously applied our change-in-ownership methodology to the 1996

reduction of Usinor's indirect interest in GTS. For this final

determination, the Department has revised its treatment of the

subsidies received by GTS when it was part of the Usinor Group by

assigning to GTS its pro rata share of Usinor's subsidies (based on

GTS' sales/assets as a percentage of Usinor's sales/assets). Since

those subsidies have been attributed to GTS and a portion of GTS has

been sold, it is appropriate to apply our change-in-ownership

methodology to the 1996 transaction in the instant proceeding.

We believe that the situation can be distinguished from that in

Italian Plate. First, the net result of this transaction resulted in

the termination of GTS' consolidation in Usinor's financial results.

Second, the seller (Usinor) was owned, in part, by the Government of

France. Therefore, Usinor's sale of its DHS shares resulted in the

disposition of a portion of GTS to private parties. This is in contrast

to Italian Plate where minority private owners were selling their

interests in AST's parent companies to other private companies.

We further disagree with the respondents that the Department's

regulations preclude the attribution of subsidies to GTS as a

consequence of the 1996 transaction because Usinor's sale of its DHS

shares was to a foreign company. While the Department's regulations

require it to attribute subsidies to products produced within the

territory of the subsidizing government, GTS is located in France (see

19 CFR 351.525(b)(7)). Therefore, even if those subsidies flowed from

Usinor to the German company which purchased Usinor's DHS shares, our

attribution rules require that the subsidies be attributed to DHS'

French production, i.e., GTS.

Comment 3: The Department Must Correct the Misapplication of its

Change-in-Ownership Methodology to the 1996 Transaction

The respondents suggest that if the Department were to continue to

treat the 1996 DHS transaction as a spin-off of GTS, then it must

correct the misapplication of its change-in-ownership methodology in

the Preliminary Determination. The respondents argue that in the

Preliminary Determination the Department treated the transaction as

involving 100 percent of GTS' assets rather than a partial spin-off of

a small portion of Usinor's indirect beneficial interest in GTS, as

stipulated in the GIA (58 FR at 37273). In the GIA, the respondents

point out that the Department stated that pass-through of subsidies

must correspond to the extent of the interest being transferred. The

respondents do not agree with the Department's analysis that Usinor's

reduction of its interest in DHS was ``akin to a total sale since

Usinor no longer had the ability to control or direct GTS' assets as

its own'' (see Memorandum from the Team to Susan Kuhbach regarding the

Ministerial Error Allegation for Preliminary Determination (September

22, 1999)). The respondents believe that the methodological rationale

advanced in the Preliminary Determination is not consistent with the

Department's decision not to require change in control before applying

its change-in-ownership methodology.

The respondents argue that it is impossible for the Department to

treat the 1996 DHS transaction as a 100 percent transfer of GTS when

the Department treated the 1992 sale of Sollac's ownership interest in

GTS as a partial spin-off. Additionally, the respondents argue that

methodology applied to the 1996 transaction in the Preliminary

Determination is inconsistent with the Department's repayment

methodology since the calculation provided for 100 percent of GTS'

assets as transferred but repayment could have been only been based on

the price paid for the assets actually

[[Page 73288]]

transferred which was 21.25 percent of DHS' shares. Therefore, the

respondents argue that if the Department continues to treat the 1996

transaction as a spin-off involving GTS, it should revise the assets to

reflect the percentage that was actually transferred.

The petitioners take issue with the respondents' suggestion that

because only 21 percent of DHS was transferred, a maximum of 21 percent

of the subsidies provided to GTS' production can be countervailed. The

petitioners point out that the respondents' argument is based on the

incorrect assumption that no subsidies are attributable to GTS'

production prior to the 1996 transaction. The petitioners contend that

the real question is to what extent, if any, is the 21 percent of the

subsidies repaid or reallocated. The petitioners further argue that the

1996 transaction does not change the fact that 79 percent of the

previously allocated subsidies inhere in GTS' assets and, therefore,

are attributable to GTS.

The petitioners do not believe that the methodology used in the

Preliminary Determination to attribute subsidies to GTS as a result of

the 1996 transfer is inconsistent with its past practice. The

petitioners argue that once the Department decided that the result of

the 1996 transaction required it to calculate a separate rate for GTS,

it first correctly determined the total amount of the subsidies

potentially allocable to GTS' production.

The petitioners point out that the second step of the change-in-

ownership calculation requires it to determine the amount of subsidies

repaid or reallocated by the partial sale. The petitioners believe that

the Department correctly applied its methodology by determining that

this transaction could have only resulted in the repayment/reallocation

of a maximum of 21 percent of the subsidies since only 21 percent of

the assets were transferred. The petitioners reject the respondents'

claim that there is inconsistency or unfairness in the Department's

application of its change-in-ownership methodology in this transaction.

Department Position: We have revised the calculation used in the

Preliminary Determination. Beginning with the 1992 transaction and

continuing with the 1996 transaction, we have determined the subsidies

allocable to GTS (in accordance with the spin-off methodology described

in the GIA). Then, as ownership of GTS transferred out of Usinor, we

applied our change-in-ownership methodology to measure the amount of

subsidies that were reallocated to Usinor. This approach was

necessitated by our decision that GTS should be treated as separate

from Usinor during the POI. In short, because GTS' sales were no longer

included in the Usinor Group's sales, it was incorrect to include

subsidies attributable to GTS (because it was part of the Usinor Group

when these subsidies were received) as Usinor's subsidies.

We disagree that this revision from the Preliminary Determination

conflicts with the position taken by the Department in Italian Plate

regarding changes in control. Specifically, there does not have to be a

change in control of a company for the Department to apply the change-

in-ownership methodology. However, when a company moves from being part

of a consolidated group to outside the consolidated group because of a

change in ownership, it is appropriate to ensure that the proper share

of subsidies is assigned to the company.

Comment 4: Privatization Should Extinguish Any Previously Bestowed

Subsidies

The respondents argue that the circumstances of Usinor's

privatization compel the Department to find that any previously

conferred subsidies were eliminated and did not pass through to the

privatized company. The respondents point out that the URAA directs the

Department to examine all the circumstances of a privatization to

determine whether and to what extent subsidies have been extinguished

or passed through to the private buyer. Similarly, the SAA at 928

directs the Department to devise an appropriate methodology to

determine whether and to what extent, the privatization of a

government-owned firm eliminates any previously conferred

countervailable subsidies. The respondents argue that the

countervailing duty law states that a subsidy can only be found where a

benefit is conferred as the result of a government financial

contribution. The respondents maintain that the payment of a market

price for all or part of a previously subsidized entity should

extinguish previously bestowed countervailable subsidies because the

purchased entity is acquired at full value and, thus, there is no

benefit. See 19 CFR 351.503(b)(1). Since Usinor's privatization

consisted mainly of the sale of shares to the public for fair market

value by means of international and French public offerings, the full

value of any previously conferred subsidies was embodied in the

purchase price and those subsidies were eliminated upon Usinor's

privatization.

Additionally, the respondents note that a WTO Dispute Settlement

Panel recently found in a case involving hot-rolled lead and bismuth

carbon steel products from the United Kingdom that the Department had

violated its WTO obligations in determining that the sale of a company

to private bidders did not automatically extinguish subsidies that the

company received when it was government owned.

The petitioners dispute the respondents' claim that Usinor's

privatization eliminates benefits from pre-privatization subsidies.

According to the petitioners, this same argument has been repeatedly

rejected by the Department, the CIT, and Congress. Specifically, the

respondents argument that there is no benefit after Usinor's

privatization because the shares were purchased at fair market value is

misplaced since the Department's obligation with respect to a benefit

analysis refers to the initial bestowal of the subsides not to a

competitive benefit received after privatization.

The petitioners further believe that the respondents have wrongly

accused the Department of failing to examine all factual circumstances

as directed by the statute. The petitioners argue that the requirement

to ``examine all circumstances'' relates to determining whether any

repayment of subsidies has taken place, not, as respondents

characterize, whether a competitive advantage has been received.

Petitioners claim that the respondents' argument would be tantamount to

a presumption that subsidies do not survive privatization, a

presumption which the petitioners argue the URAA's change-in-ownership

provision was enacted to preclude.

The petitioners argue that the record in the instant proceeding

fully supports the Department's decision to countervail Usinor's sales

post-privatization. In support of this, the petitioners point out that

Usinor is wholly unchanged by the privatization as the privatization

was merely a stock sale and Usinor has made clear that its management

did not change in any way after the privatization.

Lastly, with respect to the WTO report, the petitioners point out

that this interim report cannot change the clear Congressional mandate

which expressly overturns Usinor's argument with respect to this issue.

Department Position: Under our existing methodology we presume

neither automatic extinguishment nor automatic pass-through of prior

subsidies in an arm's-length transaction. Instead, our methodology

recognizes that a change in ownership has some impact on the allocation

of previously bestowed subsidies and, through an

[[Page 73289]]

analysis based on the facts of each transaction, determines the extent

to which the subsidies pass through to the privatized company. In the

instant proceeding, we have relied upon the pertinent facts of the case

in determining whether the countervailable benefits received by Usinor

Sacilor pass through to the privatized Usinor and to the productive

units that have been spun off by Usinor.

Following the GIA methodology, the Department subjected the level

of previously bestowed subsidies and Usinor's purchase price to a

specific, detailed analysis. This analysis resulted in a particular

``pass-through ratio'' and a determination as to the extent of

repayment of prior subsidies. On this basis, the Department determined

that when Usinor was privatized a portion of the benefits received by

Usinor Sacilor passed through to Usinor and a portion was repaid to the

government. This is consistent with our past practice and has been

upheld in Saarstahl AG v. United States, 78 F.3d 1539 (Fed. Cir. 1996),

British Steel plc v. United States, 127 F.3d 1471 (Fed. Cir. 1997)

(British Steel), and Delverde, SrL. v. United States, 24 F. Supp. 2d

314 (CIT 1998).

Furthermore, Usinor's contention that the sale of Usinor was an

arms-length, market-valued transaction does not demonstrate that

previous subsidies were extinguished. Section 771(5)(F) of the Act

states that the change in ownership of the productive assets of a

foreign enterprise does not require an automatic finding of no pass

through even if accomplished through an arms-length transaction.

Section 771(5)(F) of the Act instead leaves the choice of methodology

to the Department's discretion. Additionally, the SAA directs the

Department to exercise its discretion in determining whether a

privatization eliminates prior subsidies by considering the particular

facts of each case. See SAA at 928.

Lastly, with respect to the respondents' and the petitioners'

comments concerning the recent finding by a WTO Dispute Settlement

Panel that an arm's-length privatization automatically extinguishes

prior subsidies received by government-owned firms, the Department

notes that this was an interim (i.e., preliminary) confidential report.

As such, it is inappropriate for the parties or the Department to

comment on it.

Comment 5: Repayment Portion of Change-in-Ownership Analysis

According to the petitioners, Congress intended that countervailing

duties be imposed to offset subsidies to production. Since changes in

ownership do not affect production, the petitioners conclude that they

should also not affect countervailing duty liability.

The petitioners distinguish between the subsidies themselves and

countervailing duty liabilities arising from those subsidies. Citing

the GIA (58 FR at 37260) where it quotes British Steel Corp. v. United

States, 605 F. Supp. 286, 294 (CIT 1985), the petitioners state that

the Department is obligated, when injury exists, to impose duties when

subsidies have been provided ``with respect to the manufacture,

production or export . . . of a class or kind of merchandise'' imported

into the United States. To show that the liability for such subsidies

is attached to production, the petitioners cite to the same where it

states, ``if a benefit or advantage is received in connection with the

production of merchandise,'' that benefit or advantage is a ``bounty or

grant on production.'' To further demonstrate the linking of

countervailing duty liabilities to production in a post-URAA case, the

petitioners cite the Final Results of Redetermination Pursuant to Court

Remand, Delverde, SrL v. United States, Consol. Ct. No. 96-08-01997,

aff'd, Delverde, SrL v. United States, 24 F. Supp.2d 314 (CIT 1998)

where it states:

Once the Department determines that a ``subsidy'' has been

provided, it measures the amount of the subsidy, attributes the

subsidy to the appropriate production . . . Generally speaking, the

practical results of this system is to link liability for, as an

example, pasta subsidies to pasta production.''

The petitioners maintain that after a change in ownership, a

company will produce at the same cost, in the same volume and with the

same artificial advantages born of subsidies. This happens, state the

petitioners, because the profit-maximizing level of price and output

are unchanged. According to the petitioners, regardless of whether a

buyer or seller captures the benefit of a subsidy after a change in

ownership, the buyer still acquires the subsidy-augmented production

facilities and uses them at the same profit-maximizing level, thus

leaving the misallocation of resources arising from the subsidies and

the threat to the companies' competitors unchanged.

To show that the seller actually captures the benefit of previously

bestowed subsidies, the petitioners cite a publication by the U.S.

Department of Agriculture which states that subsidies to farmers have

created inequities between existing and entering farmers by increasing

the cost of acquiring land for entering farmers. 3 The

petitioners maintain that even though sellers gain the windfalls from

subsidies during a change in ownership, the reallocation of

countervailing duty liabilities back to the sellers is inappropriate.

First of all, the price paid by a buyer is discounted for the risk

associated with the countervailing duty liabilities, according to the

petitioners. In addition, since the seller no longer has control over

production, the petitioners state that imposing duties on the seller

would not have the effect of offsetting the artificial advantages on

production arising from the subsidies.

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

\3\ U.S. Farm Programs and Agricultural Resources, USDA

Economic Research Service, Agricultural Information Bulletin No. 614

(Sept. 1990).

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

The petitioners further argue that the reallocation/repayment

aspects of the Department's change-in-ownership methodology amount to

measuring the effects of subsidies and taking account of events

subsequent to the bestowal of the same. According to 19 CFR 351.504-

511, the Department should not take into account the effects of

subsidies and, instead, should measure benefits at the time of

bestowal.

Finally, the petitioners take issue with the Department's practice

of automatically conducting a repayment/reallocation analysis as part

of its change-in-ownership methodology. According to the petitioners,

the URAA legislative history makes it clear that such automaticity was

not intended by Congress where it says that the Department must

continue to countervail subsidies following a normal (i.e., fairly

priced) ownership change without lessening or reallocating unamortized

subsidy benefits unless something else occurs during the transaction

that ``actually serve[s] to eliminate . . . subsidies.'' See S. Rep.

No. 103-412 at 92 (1994).

The respondents emphasize that the petitioners' argument that there

must be specific evidence of repayment has been considered and rejected

by the Department in the GIA (58 FR at 37264). In addition, the

respondents state that there is nothing about the Ugine transactions or

Usinor's 1995 privatization that would disqualify these transactions

from being analyzed under the Department's change-in-ownership

methodology.

Department Position: The petitioners' main argument is that subsidy

liabilities are attached to production; therefore, subsidy amounts

cannot change when production remains unchanged. While we agree that

subsidies benefit production, that does not require the

[[Page 73290]]

conclusion that subsidies cannot change without changes in production.

Our rationale for applying repayment calculations as part of our

change-in-ownership methodology does not pre-suppose that production

has changed. Rather, our methodology is based on the idea that a

portion of the purchase price for ownership rights may remunerate the

seller for prior subsidies.

To the extent we countervail the portion of the subsidy existing

after repayment or reallocation, we are executing our mandate ``to

impose duties with respect to the manufacture, production or export of

a class or kind of merchandise.'' Our repayment/reallocation

methodology, as part of our change-in-ownership methodology, has been

litigated and upheld by the Courts (see Saarstahl AG v. United States,

78 F.3d 1539 (Fed. Cir. 1996), British Steel plc v. United States, 127

F.3d 1471 (Fed. Cir. Oct. 24, 1997) British Steel plc v. United States,

929 F. Supp. 426 439 (CIT 1996) and Delverde, SrL. v. United States, 24

F. Supp. 2d 314 (CIT 1998).

We disagree with the petitioners' assertion that the ``automatic''

nature of the repayment/reallocation analysis is contrary to the URAA

legislative history. The legislative history simply says that a change

in ownership ``does not by itself require the Commerce Department to

determine that a countervailable subsidy . . . continues to be

countervailable, even if the change in ownership occurs through an

`arm's length transaction' '' and that ``the sale of a firm at `arm's

length' does not automatically extinguish any previously-conferred

(sic) subsidies.'' See S. Rep No. 103-412 at 92 (1994). To the extent

our repayment/reallocation methodology does not make any presumptions

as to whether there will be any repayment/reallocation as a result of a

change in ownership, there is nothing inherently automatic in its

nature. Nowhere does the legislative history require that ``something

else'' must happen, as was argued by the petitioners, before subsidies

can be extinguished.

Finally, regarding the petitioners' argument that the repayment/

reallocation calculation amounts to measuring to the effects of

subsidies, we disagree. Our methodology does not examine the effects of

a subsidy.

Comment 6: Spin-Offs of Productive Assets

The petitioners maintain that in the event the Department decides

to continue applying the repayment portion of its change-in-ownership

analysis, it should only conduct such analyses for sales of enterprises

that Usinor has demonstrated to be productive units. In particular, the

petitioners question whether Usinor has demonstrated that the

enterprises sold to FOS-OXY and Enterprise Jean Lefebvre in 1994 were,

at the time of sale, ``productive'' within the meaning articulated in

the GIA, i.e., capable of generating sales and operating independently.

See GIA 58 FR at 37268.

In French Stainless, state the respondents, the Department found

that Entreprise Jean LeFebvre was a lime production facility and FOS-

OXY an oxygen-generating one. According to the respondents, the

production of oxygen and lime both constitute production; therefore,

the treatment of these two companies as ``productive units'' in the

Preliminary Determination was proper. In any event, the respondents

point out that the issue is moot in that no subsidies were spun-off

from Usinor as a result of either of these two transactions because all

benefits were found to be reallocated to Usinor.

Department Position: As stated above in Comment 5, we are

continuing to apply our repayment analysis. However, the application of

this analysis in this case results in all subsidies potentially spun-

off to Entreprise Jean LeFebvre and FOS-OXY remaining with Usinor.

Therefore, the respondents are correct that the issue is moot.

Comment 7: Assets v. Sales in Apportioning Subsidies

The petitioners point out that the Department's practice of using

relative asset value to apportion subsidies between units in a spin-off

analysis was born from administrative convenience in the Certain Steel

investigations to cover situations where a unit does not have

identifiable sales. See GIA 58 FR at 37268. Prior to Certain Steel, the

petitioners note that the Department acknowledged the reasonableness of

apportioning subsidies via relative sales by stating:

[B]ecause it is the Department's long-standing practice to

allocate subsidies over the sales of subject merchandise, it is

reasonable to use the ratio between the sales of [the spun-off unit]

and the sales of the [parent] . . . as the basis on which we would

apportion the subsidies.

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

United Kingdom, 58 FR 6237 (July 9, 1993) (UK Bismuth). In situations

where sales are disproportionate compared to assets, the use of assets

to apportion subsidies can be distortive in light of the statute's goal

of offsetting subsidized U.S. sales, state the petitioners.

Accordingly, the petitioners argue that subsidies should be apportioned

based on relative sales in situations where both the parent and the

spun-off unit have sales.

Acknowledging that the Department expressed a preference for asset

values over sales values in UK Bismuth, the respondents argue that the

Department later expressed its clear intention in the GIA to adopt a

practice of using assets where it stated, ``asset values are the more

appropriate basis upon which to measure the portion of the subsidy

which potentially passes through'' (58 FR at 37268). According to the

respondents, adopting an approach that could be applied consistently

was a reasonable step by the Department as opposed to using different

measures from one case to another depending upon the information

available. In addition, the respondents state that the Department has

consistently used asset values in other proceedings, see, e.g., French

Stainless 64 FR at 30776-77.

Department Position: We agree with the respondents that it is the

Department's practice and preference to apportion subsidies based on

assets. In many instances, such as in spin-offs of units that were not

previously considered to be profit centers, sales values may not be

available. In using assets to apportion subsidies, we have a measure

that can be applied in all cases which adds to predictability.

Moreover, it avoids the situation where the spin off of one productive

unit in a company which happens to have a sales value would be treated

differently than the spin off of another productive unit in the same

company which does not have a sales value. However, we recognize that

there may be situations where an exception to this rule is necessary.

As stated in our response to Comment 8 below, information on the record

does not allow us to calculate a French-only asset value for Usinor for

any of the years in which spin offs occurred. For details on how we are

addressing this situation for purposes of this final determination, see

Comment 8:

Comment 8: French v. Total Usinor Assets

Should the Department continue to use assets as the basis for

allocating subsidies between GTS and the Usinor Group, argue the

petitioners, then it should base the calculation of Usinor's assets

only on the relevant pool of assets over which the subsidy benefits

would be applicable, i.e., French assets in this case. The petitioners

note that this information was requested at verification but not

provided. Lacking information on Usinor's French assets, the

petitioners suggest that the Department use sales to allocate the

[[Page 73291]]

subsidies between Usinor and GTS, in particular, Usinor's sales of

French-produced merchandise net of intra-company transactions.

The respondents argue that the use of total assets has been the

Department's practice since the Certain Steel cases where it said in

the GIA that the potential pass-through of subsidies would be

calculated by comparing the book value of ``the productive unit sold to

the book value of the assets of the entire company'' (58 FR at 37273).

The respondents add that this same methodology of allocating subsidies

based total assets was used in the French Stainless case.

Department Position: This is the first time that the question of

what group of assets to use in allocating subsidies between units under

our change-in-ownership methodology has arisen as an issue of

contention. While our prior general statements on the use of assets may

have referred to ``total assets,'' this is because our basic assumption

was that for a typical respondent, subsidy benefits would apply equally

to all assets. However, we acknowledge that the asset values used for

purposes of apportioning benefits between units as part of our change-

in-ownership methodology should correspond to those assets to which

subsidies would properly be attributed (i.e., assets in facilities

located in France). Such an approach is entirely consistent with our

view that governments subsidize domestic production and not foreign

production, which has been upheld by the Courts. See Preamble to the

CVD Regulations (63 FR at 65403); see also Inland Steel Industries v.

United States, 188 F. 3d 1349, 1360-61 (Fed. Cir. 1999) (where the

Court held that the Department's presumption that subsidies are tied to

domestic production on the premise that a foreign government normally

intends to principally benefit its domestic production ``is eminently

reasonable'').

Information on the record of this case, however, does not allow us

to calculate a French-only asset value for Usinor for any of the years

in which spin-offs occurred. This information was requested of Usinor

too late in the proceeding for it to provide. Therefore, for those

transactions for which French sales values are available for both

Usinor and the units being spun off, we are using sales to allocate

subsidies in this case. For those transactions for which French sales

values are not available, we will continue to use total assets to

allocate subsidies for purposes of this final determination. Should a

countervailing duty order be put in place in this case, we will,

however, pursue French asset values during the course of any

administrative review that may occur.

Comment 9: Sale of and Buyback of Ugine Shares

Should the Department continue to calculate repayment as part of

its change-in-ownership analysis, the petitioners take issue with its

application to the partial spin-off of Ugine shares that were

eventually repurchased by Usinor a short time later. If the Department

allows for the reduction in subsidy benefits in this case via

repayment, the petitioners argue that an incentive would be created for

foreign producers to buy and repurchase their productive units in order

to dissipate their countervailable subsidy benefits. The petitioners

note that while the amount of repayment with respect to the Ugine

transactions was small, the concept is important in principle.

The respondents counter by saying that both the initial sale of

Ugine shares and their later repurchase by Usinor were legitimate,

arm's-length transactions. According to the respondents, these were not

sham or churning transactions, as supposed by the petitioners. Since

these were legitimate transactions, the respondents maintain that

application of the Department's change-in-ownership methodology is

warranted.

Department Position: We agree with the respondents that there is

nothing on the record of this case indicating that there is anything

illegitimate about these transactions. However, because Ugine would

continue to be consolidated in the Usinor Group, and we did not apply

our change-in-ownership methodology to the repurchase of Ugine's shares

by Usinor, application of the change-in-ownership methodology would not

affect subsidies to the Usinor Group. This is because in any

reallocation of subsidies from the sale of Ugine's shares, the

reallocated portion would go to Usinor. However, Usinor's subsidy

benefits, including the amount reallocated would be attributed to all

members of the consolidated Usinor Group, including Ugine. Likewise,

any amount allocable to Ugine would have been attributed to the Usinor

Group.

Comment 10: The 1995 Privatization of Usinor

Should the Department continue to apply its repayment methodology

to privatizations, the petitioners argue that no repayment should be

found in the 1995 privatization of Usinor. According to the

petitioners, the ``repayment'' of subsidy benefits to the government

was not possible in this case since the purchase price for Usinor was

retained by Usinor, itself, and not passed on to the GOF.

According to the respondents, the 1995 privatization of Usinor

involved the sale of shares for cash and no part of the purchase price

inured to Usinor. The respondents add that Usinor's capital increase,

to which the petitioners allude, was properly not included among the

programs to be examined during this investigation because the purchase

of shares by private investors did not provide countervailable benefits

to Usinor.

Department Position: We agree with the respondents that the 1995

privatization of Usinor was a legitimate transaction for which a

change-in-ownership calculation is appropriate. All monies paid for

existing Usinor shares during the privatization process were received

by the parties holding those shares prior to the transaction, i.e.,

proceeds from the sale of shares held by the GOF were paid to the GOF,

those from shares held by Clindus (the subsidiary of Credit Lyonnais

holding Usinor shares) were paid to it. The only monies received by

Usinor during the privatization process were those it received for the

sale of new shares in a public offering. The sale by Usinor of new

shares was like any other private company offering shares as a means of

raising capital. In such cases, it is proper for the seller (i.e., the

company itself) to hold on to the proceeds of the sale.

Comment 11: Disposition of Benefits Spun-Off in 1992 GTS Transaction

Since the 1992 transaction was a share swap that did not push GTS

outside of the Usinor Group, state the petitioners, this transaction

should not be viewed as a spin off. Should the Department continue to

apply a spin-off calculation to this transaction, the petitioners state

that the distinct benefit stream for the spun-off portion of GTS should

be properly applied as was not done in the calculations for the

Preliminary Determination.

While the 1992 transaction did not result in the loss of control of

GTS by Usinor, the respondents argue that it was, nonetheless, a

partial spin-off to third parties. As such, the respondents conclude

that the Department's treatment of this transaction in the Preliminary

Determination as a partial spin-off was in accord with its practice

with respect to partial changes in ownership.

Department Position: As discussed in the ``Change in Ownership''

section of the notice, we have applied our change-

[[Page 73292]]

in-ownership methodology to the 1992 transaction. It is necessary to do

this because a portion of GTS moved from Usinor to non-Usinor ownership

and Usinor received payment for that portion of subsidies attributable

to GTS. Although GTS is not treated as a separate company until 1996,

we need to account for the 1992 transaction so that the amount of

subsidies potentially reallocated to Usinor 1996 is commensurate with

the amount of ownership that has transferred up to time.

Comment 12: Calculation of the Portion of Benefits Spun-Off in 1992 GTS

Transaction

Should the Department continue to do a partial spin-off calculation

with respect to the 1992 GTS transaction, the petitioners argue that it

must correct its calculation of the portion of Usinor benefits

potentially being spun-off by virtue of the partial sale of GTS.

According to the petitioners, the Department should first determine the

benefit attributable to GTS as a whole, and then multiply that amount

by the percentage of GTS being sold to determine what, if any,

reallocation occurs.

The respondents take issue with the petitioners' proposition that

subsidies should be attributed to all of GTS' assets, including those

not spun-off, with respect to the 1992 partial spin-off. According to

the respondents, under the Department's change-in-ownership methodology

with respect to partial changes in ownership, the subsidy benefits

attributable to the portion of GTS that was not sold and remained with

Usinor do not travel with the sold portion. Rather, the respondents

claim that those benefits should remain with Usinor and be attributed

across the consolidated French sales of Usinor.

Department Response: Given the circumstances of this case, in

particular the facts that GTS goes through two partial changes in

ownership prior to the POI and is being treated as a separate company,

we have performed our calculations as suggested by the petitioners.

That is, beginning in 1992, we have calculated subsidies attributable

to GTS based on GTS' share of Usinor's assets in that year. The level

of the ownership change in 1992 (and also 1996) serves to cap the

amount of subsidies reallocated to Usinor as a result of the payments

for GTS. Although only a portion of GTS is sold in each instance (i.e.,

these are partial privatizations) it is necessary to move the full

amount of subsidies out of Usinor and into GTS because after 1996, GTS

is separate from Usinor. To follow the respondent's suggestion would

understate the benefit to GTS.

Comment 13: Allocation Period

Should the Department continue to find that the 1995 privatization

of Usinor did not extinguish previously bestowed benefits, the

respondents argue that Usinor's company-specific calculation of its

average useful life of assets (AUL) for the POI should be used to

determine its allocation period. The respondents take issue with the

decision in French Stainless where the Department for the first time

rejected a verified, company-specific AUL in favor of one from another

previous investigation. Following the French Stainless precedent is not

justified in this case, argue the respondents, because the Preamble to

the regulations governing this investigation (which differ from those

governing French Stainless) require the Department to use a company's

own AUL when it varies from that in the IRS tables by one year or more.

See 19 CFR 351.524(d)(2)(iii).

The respondents also point out that the French Stainless decision

is inconsistent with prior court rulings mandating the use of company-

specific allocation periods based on record evidence which the

Department has followed consistently until French Stainless (see e.g.,

Italian Plate (64 FR at 15511); Certain Pasta From Italy: Final Results

of the Second Countervailing Duty Administrative Review, 64 FR 44489,

44490 (August 16, 1999)). According to the respondents, there is no

basis for using information that is decades old. Not only has the

current data been verified as being accurate, the respondents claim

that its privatization did not change Usinor's AUL nor has Usinor and

it has not suffered a bankruptcy, instances that petitioners state may

affect a company's AUL. As for the concern that changing the allocation

period from one case to another may result in under- or over-

countervailing a subsidy, the respondents state that this is simply not

the case.

Finally, the respondents note that the Department has not hesitated

to apply other parts of 19 CFR 351.524(d) (the section of the CVD

Regulations specifying the AUL methodology) when they work to the

detriment of the respondents, such as the use of a new policy for

calculating discount rates. For example, the use of the new discount

rates created entirely new benefit streams for Usinor's old subsides,

state the respondents. The respondents point out that this stands in

contrast to the rationale in French Stainless of applying an AUL from a

prior case to previously countervailed subsidies in order to maintain

consistency. According to the respondents, the Department cannot pick

and choose which parts of the applicable regulations it will apply.

The petitioners cite to French Stainless as precedent for

maintaining the allocation period for a particular subsidy benefit once

it has been countervailed. To change the allocation period in a future

segment or proceeding, argue the petitioners, would risk either over-

countervailing or under-countervailing the subsidy. Such a practice,

point out the petitioners, would also be at odds with the fact that the

subsidies themselves have not changed.

The petitioners also point out that the 14-year period used in the

Preliminary Determination was based on Usinor's own information and

approved by the CIT during the Certain Steel litigation. See British

Steel plc. versus United States, 929 F. Supp. 426 439 (CIT 1996). The

petitioners note that while the regulations require a company-specific

AUL, they do not mandate the period over which that AUL should be

calculated. The petitioners' take issue with the information submitted

by Usinor for the calculation of the allocation period noting that it

covers only post-bestowal years--a period not ``appropriate'' within

the meaning of section of the Preamble to the CVD Regulations

pertaining to company-specific AULs (63 FR at 65397).

With respect to the respondents' complaint about the change in the

discount rates affecting the benefit streams, the petitioners state

that changing a discount rate differs from changing an allocation

period in that the principal amount allocable to any particular year is

not affected by a change in the discount rate, but would be when the

allocation period changes.

Finally, should the Department contemplate using an allocation

period other than 14 years, the petitioners maintain that, pursuant to

19 CFR 351.524(d)(2), it should look to the IRS tables as they are the

default source for information on the useful life of assets when a

respondent has not demonstrated a significantly different and non-

aberrational average useful life of assets of its own.

Department Position: For this final determination, we are

continuing to allocate subsidies countervailed in prior cases over the

AUL established in those prior cases consistent with French Stainless.

See, e.g., French Certain Steel. In so doing, we maintain consistency

across cases and predictability, and we attach the most relevant period

possible to allocable subsidies.

[[Page 73293]]

Since the purpose of calculating an AUL is to determine the

relevant period over which an allocable subsidy would provide benefits

to a company, the year of most relevance is the year of receipt. In an

ideal setting, we would calculate a company's AUL, in accordance with

our methodology in the CVD Regulations, in each year that an allocable

subsidy is provided and then allocate each subsidy based on the AUL of

that year. This is what we do in administrative reviews when new

allocable subsidies are received during a review period. See, e.g.,

Industrial Phosphoric Acid from Israel: Final Results of Countervailing

Duty Administrative Review, 64 FR 2879, 2880 (January 19, 1999) (Israel

IPA).

The question of what AUL to use becomes particularly acute in

investigations where allocable subsidies have been received prior to

the POI because AULs have not been calculated on an on-going basis. As

a matter of convenience, we have elected as our practice to compute an

AUL for the POI to determine how far back in time to capture allocable

subsidies in our analysis. The alternative would be to have respondents

calculate all of the AULs for years in which allocable subsidies were

received in the past in the event the AUL for any of those prior years

would happen to call for the allocation of the subsidies received in

that year into the POI. This could be extremely burdensome for both

respondents and the Department, and involve the use of very old

information. Therefore, we find that calculating an AUL for the POI to

be reasonable in that it uses information as close in time to the year

of receipt of prior subsidies without posing a great burden on any

party.

An exception occurs for allocable subsidies that have been

countervailed in prior cases. Since the time period examined in any

prior case will always be the same as, or earlier than, the POI for an

on-going investigation, the information on the AUL for a company from a

prior proceeding will always be as close or closer to the year of

receipt for allocable subsidies being examined. Therefore, an AUL used

to allocate a previously countervailed subsidy will be as accurate, or

even more accurate, than an AUL calculated in an on-going

investigation. If we were to attach different AULs to the same subsidy

across proceedings, the possibility would arise of countervailing the

same subsidy across different products by different amounts in any

given period. Since a given subsidy intuitively should supply the same

benefit to a company across all the relevant products during the same

period of time, we find the method in French Stainless to be

reasonable.

Based on the foregoing, we find that the use of an AUL from a prior

investigation to allocate a previously countervailed subsidy to be

reasonable and as accurate as possible without being burdensome. With

respect to the respondents' argument regarding the application of the

new discount policy described in 19 CFR 351.524, we disagree. The

changes in the benefit stream brought about by application of a more

realistic discount rate result in a better measure of the subsidy. For

the reasons discussed above, using a more current AUL would not

increase the accuracy of our benefit calculation.

Comment 14: 1991 Equity Infusion

The petitioners argue that the ``voluminous new evidence'' they

submitted regarding the nature of and circumstances surrounding the

GOF's infusion of equity into Usinor in 1991, which has not previously

been considered by the Department, provides sufficient cause to believe

that Usinor was unequityworthy and, therefore, that a countervailable

subsidy had been conferred. The Department, the petitioners contend,

has violated the statute by refusing to reinvestigate this equity

infusion.

Department Position: The Department examined this program closely

in French Certain Steel and found it to be non-countervailable. Faced

with largely the same record evidence in French Stainless, the

Department declined to reinvestigate this program in that proceeding.

Likewise, we are not investigating this program in this proceeding. See

Memorandum to Richard W. Moreland from Susan Kuhbach; Petitioners'

Request for Initiation of 1991 Equity Infusion (July 16, 1999).

Comment 15: Shareholder Advances

The petitioners argue that the Department correctly found the 1982-

86 shareholder advances to be countervailable subsidies. However, in

the petitioners' view, the Department wrongly determined that these

advances were grants in the years of bestowal (1982-86) rather than

debts whose 1986 conversion to equity conferred a new subsidy in the

year of conversion. While conceding that the Department's treatment of

these advances in the Preliminary Determination is consistent with

French Certain Steel, the petitioners contend that this approach

results in an undervaluation of the benefit because the benefit stream

has been pushed back farther in time. The correct approach, according

to the petitioners, would be to treat the advances as loans in the year

of bestowal, and then treat the conversion of these loans as a

distinct, countervailable subsidy in the form of an equity infusion in

1986. The petitioners make the following points in support of their

argument:

First, in French Certain Steel the Department characterized these

advances as grants in part because there was no written agreement

between the shareholders and Usinor at the time of the advances

stipulating the terms of repayment. However, Usinor included these

advances in the ``liabilities'' section of its audited financial

statement, the same section in which PACs--which the Department found

to be loans--where included. There is no such thing as a grant giving

rise to a liability, and ``it is simply inconceivable that Usinor would

have chosen to record (or that auditors would have permitted it to

record) as liabilities funds for which it was not liable.''

Second, by reporting these advances as liabilities, Usinor clearly

expected to have to make a repayment of some sort. In fact, in its

questionnaire responses in French Bismuth, Usinor explicitly referred

to these advances as ``loans'' which are ``. . . repayable on demand.''

Furthermore, in a Usinor-Sacilor condensed balance sheet submitted by

the respondents in the French Certain Steel investigation, the

shareholder advances are reported in the category ``long term debt.''

Also, Usinor issued the new stock to the GOF in 1986 to avoid taxation

that would otherwise accompany the direct forgiveness of the

shareholder advances.

Third, the Department cannot assume that because no formal

repayment terms were written, no repayment was expected or required.

Expert opinions from PriceWaterhouse and others indicate French

accounting standards and French law clearly establish that where there

is no written agreement regarding the terms of the repayment of a

shareholder advance, the ``funds put at the disposal of a company by a

shareholder cannot be recorded otherwise (sic) than as a liability of

the company.'' The expert opinion further states that a French company

may not ``register funds put at the disposal of a company as a grant

without the written evidence of such intention from the provider.''

The respondents counter, first, by noting that the petitioners'

arguments are largely the same as those which the CAFC considered and

rejected in the petitioners' appeal of French Certain Steel. See Inland

Steel Indus., Inc.

[[Page 73294]]

versus United States, 188 F.3d 1349 (Fed. Cir. 1999). According to the

respondents, these arguments include: (1) shareholder advances were

accounted for by Usinor and Sacilor as loans; (2) the conversion of the

advances into common stock to avoid taxation demonstrates that they

were loans; and (3) French law and accounting practice required

treating them as loans. The ``new evidence'' submitted in this

proceeding by the petitioners, the respondents contend, in fact

consists of no new information over that reviewed by the CAFC in

upholding the Department's determination in French Certain Steel.

Therefore, these facts cannot ``overcome the preclusive or, at a

minimum, stare decisis effect'' of the CAFC's finding.

The respondents further argue that the petitioners arguments in

this regard become moot if the Department adopts--as the respondents

argue it should--Usinor's 11-year AUL to allocate subsidies. Under this

11-year allocation period, the benefits from the 1986 shareholder

advances would fall outside the POI.

Department Position: We disagree that, for purposes of calculating

the correct benefit stream for these subsidies, the Department should

treat the 1986 conversion of the shareholder advances to equity as a

separate subsidy event. The respondents are correct in noting that the

petitioners' arguments are largely the same as those which the CAFC

considered and rejected in the petitioners' appeal of French Certain

Steel. Although some additional information regarding this program is

available on the record of this proceeding, this information does not

include any substantive new facts that would merit a reevaluation of

our findings in French Certain Steel.

In response to the petitioners' arguments, we start by noting the

following excerpt from the Usinor Sacilor Verification Report in the

French Certain Steel investigation (at 18).4

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

\4\ Memorandum to Susan H. Kuhbach, from Julie Anne Osgood and

Susan Strumbel; Verification of the Responses of Usinor Sacilor in

the Countervailing Duty Investigations of Certain Steel Products

from France (April 9, 1993), Attached to Memorandum to Case File,

Excerpts Regarding Shareholder advances from Certain Steel Usinor

Verification Report (December 13, 1999).

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

Officials stated that the French versions of the companies'

Annual Reports show the outstanding amounts of the shareholders'

advance in the liabilities account ``dotation d'actionnaire.''

Officials explained that prior to the shareholders'' advance

designated for SODIs, shareholders' advances were called

``dotation,'' which when translated means ``grant,'' ``capital

advance,'' ``grant of capital,'' or ``capital injection.''

We asked officials why the shareholders' advances received from

1982 through 1985 were reported under liabilities in the balance

sheet. Officials explained that when the GOF paid shareholders'

advances to Usinor and Sacilor, they were reported under liabilities

because as cash was debited, the corresponding entry was a liability

account. We also asked why the receipt of shareholders' advances was

not originally reported as capital, given that they ultimately were

converted to common stock. Officials explained that recording

shareholders' advances under ``dotation d'actionnaire'' suggested,

essentially, that the shareholders' advances were designated to

become common stock rather than income. In 1986, when shareholders'

advances were received to fund the SODIs, officials explained that

they were placed under the account ``avance d'acctionnaire,''

indicating an ``advance of funds'' or ``loan.''

Several points are clear from the Usinor officials' above

statements. First, at the time of receiving the shareholder advances,

company officials expected that those funds would be converted into

equity rather than repaid in cash or in some other more liquid form of

reimbursement.

Second, Usinor officials perceived these shareholder advances as

uniquely different from other sources of funds the company received,

including shareholder advances for the SODIEs program, and signaled as

much by including the advances in a specially designated category

(``dotation'') indicating they were grants of capital. It is likewise

telling that these shareholder advances are in a category entirely

separate from the company's ``financial debts'' and ``operating

debts.'' Contrary to the petitioners'' assertion, the ``PAC'' loans are

included in the ``debts'' category of both Usinor and Sacilor's 1985

balance sheets, which is a distinctly separate category from

shareholder advances.

Although the petitioners are correct that shareholder advances were

reported under the heading ``long term debt'' in the Usinor-Sacilor

condensed balance sheets, we do not find this information conclusive.

The condensed balance sheet is clearly meant to be a summary of Usinor-

Sacilor's combined asset and liability accounts, and its summary format

does not supersede the more precise and specific breakout of accounts

provided in the annual reports. We note, for example, that in the

condensed statement, the PACs (i.e., loans with special

characteristics) comprise part of the ``total equity'' accounts whereas

in the detailed balance sheets these loans are categorized as

``debts.''

Third, as Usinor officials implied, recording these advances as

``liabilities'' was necessitated by the basic tenets of double-entry

bookkeeping. An infusion of cash into a company is recorded in an

accounting system by means of two entries: one ``on the left side'' of

the balance sheet (a debit to the cash account), and one ``on the right

side'' of the balance sheet (in this case, a credit to shareholder

advances). The petitioners are incorrect in their assertion that a

grant cannot involve an entry in the ``liabilities'' category of the

company's accounts. A cash infusion in the form of a grant to Usinor

would increase the value of assets, which would have to be matched by a

corresponding increase in the value of either the equityholders' or the

debtholders' stake in the company. However, as evidenced by the very

financial statements cited by the petitioners, both debt and equity in

Usinor/Sacilor's financial statements are included in the ``passif''

(liabilities) category. A cash infusion in the form of a loan would

have the same effect on the company's assets and ``liabilities''

accounts as a grant infusion. Therefore, the fact that the shareholder

advances are recorded as a liability is irrelevant to the issue of

whether an infusion is a grant or a loan.

With regard to the petitioners' expert opinion from PriceWaterhouse

on French accounting and law, we note that the Price Waterhouse opinion

states that a shareholder advance must ``become part of the company's

liability and must be recorded as a debt.'' The evidence on the record,

however, flatly refutes the later portion of this statement. In neither

the Usinor or Sacilor balance sheets are these shareholder advances

included in the debt category. And the Auditor's Report for these

statements makes no indication that the reporting of these advances is

incorrect or misleading.

Finally, our comments above notwithstanding, the meaning of

shareholder advances according to French accounting standards is

ultimately irrelevant to how we calculate the benefit from these

subsidies in this instance. Under the Department's established

methodology, this program is properly treated as a grant in the year of

receipt because, for as long as these funds were considered to be

shareholder advances, there was no expectation of a: (1) repayment of

the grant amount, (2) payment of any kind stemming directly from the

receipt of the grant, or (3) claim on any funds in case of company

liquidation. See the GIA (58 FR at 37254).

[[Page 73295]]

Comment 16: SODIEs

In 1983, Usinor and Sacilor established regional development

subsidiary companies, subsequently to be known as SODIEs, to promote

the retraining of redundant steelworkers. From 1983 through the mid-

1990s, Usinor provided funds to the subsidiary SODIEs which, in turn,

loaned these funds to local enterprises providing the worker

retraining. Starting in 1986, the GOF agreed to provide to the SODIEs

(through Usinor) additional funds matching the amount of Usinor's

contribution. In return, Usinor agreed to expand the coverage of its

SODIEs into other depressed regions of France. In French Certain Steel,

the Department determined that these GOF contributions were not

countervailable because they represented the GOF's share of the SODIE

program and were used only for GOF purposes, not to support Usinor's

steel operations. We further found that the GOF's contributions did not

relieve Usinor from any costs or obligations it would otherwise have

been required to incur.

The petitioners argue that the Department should find the post-1991

payments from the GOF to Usinor in support of the SODIES to be

countervailable subsidies. First, the petitioners argue, the Usinor

Group (including the subsidiary SODIEs) was entitled to keep full

repayment (both principal and interest) of the GOF's share of the loans

that the SODIEs provided to the local entities. This entitlement to

repayment of the GOF's funds constitutes a grant. Second, the

petitioners claim that neither the GOF nor Usinor has established that

the GOF's contributions did not relieve Usinor of certain obligations

to retrain redundant steelworkers. Finally, with respect to the post-

1991 advances, the petitioners state that the European Commission has

conceded that the SODIE advances are a financial contribution which

confers a benefit, as evidenced by the EC's notification of the SODIE

program to the World Trade Organization (WTO).

The petitioners also object to the Department's decision not to

reinvestigate the pre-1992 SODIE contributions by the GOF. (The pre-

1992 contributions were found to be not countervailable in French

Certain Steel.) According to the petitioners, the Department failed to

consider whether the GOF's SODIE contributions were ultimately grants

to Usinor. The petitioners also object to the Department's finding that

Usinor was not relieved of any obligations by the GOF's SODIE

contributions.

The respondents counter, to start, by noting that the Department

has not reinitiated an investigation into the 1980s SODIE advances and,

therefore, the petitioners' arguments that the Department should find

these countervailable are not relevant. With regard to the post-1990

SODIE payments by the GOF, the respondents state that the petitioners

have not shown how these are materially different from the 1980s SODIEs

payments, which the Department has previously found to be not

countervailable.5 Although there is additional evidence on

the record of this proceeding, none of it supports a different

conclusion regarding the countervailability of the program.

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

\5\ This determination, the respondents note, was subsequently

upheld by the CIT in Inland Steel, 967 F. Supp. at 1366-68.

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

Specifically with regard to the petitioners' argument that a

benefit was conferred on Usinor because it was entitled to repayment by

the SODIEs of funds provided by the GOF, the respondents state that the

Department has already considered this fact with regard to the 1980s

GOF payments and, nevertheless, found that the payments made by the GOF

do not confer a benefit on Usinor. This is because upon repayment of

the loan, the funds were simply loaned out again. The respondents also

state that, in addition to passing the GOF's contributions on to the

SODIEs, Usinor made its own contributions to the SODIEs that exceeded

substantially the GOF's contributions.

Finally, the respondents contend, the EC notification of the SODIE

program to the WTO does not represent a concession that the GOF's

payments were a subsidy to Usinor. In fact, the notification states

that the loans ``are not financed by the State funds but by the Usinor-

Sacilor iron and steel group.'' Rather, the program was notified

because the GOF was providing assistance to particular regions--

unrelated to Usinor's assistance to steel producing regions--for which

notification was appropriate.

Department's Position: On September 21, 1999, just prior to

verification, the Department formally notified the respondents that it

was initiating an investigation of the post-1991 GOF advances to Usinor

under the SODIE program. The decision to initiate was based on

questions raised by factual information submitted by the petitioners

regarding the EC's notification of the SODIE program to the WTO, and

the reporting of the SODIE funds in Usinor's financial

statements.6 On October 18, 1999, the Department sent a

questionnaire soliciting information from the respondents and the GOF

regarding this program.

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

\6\ See Memorandum to Richard Moreland from Susan Kuhbach;

Inclusion of Previously Investigated Programs in the Countervailing

Duty Investigation of French Steel Plate (September 21, 1999).

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

The Department received questionnaire responses regarding the SODIE

program from both the GOF and the respondents on November 3, 1999. In

their respective questionnaire responses, both the GOF and the

respondents stated that because the respondents did not apply, use, or

benefit from the SODIE program during the POI, in accordance with the

questionnaire instructions, no detailed response was required.

Consequently, neither party provided complete details regarding the

specificity of the program, or any financial contributions or benefits

Usinor may have received under this program. The parties did, however,

provide a general history of, and comments on, the SODIE program and

the WTO's notification.

Notwithstanding these general responses to the Department's

questionnaire, we find that we do not have sufficient information at

this time to determine whether this program represents a

countervailable subsidy. In particular, Usinor has claimed that it made

contributions to SODIE that exceed the GOF's contributions and that

Usinor loans to SODIE are reclassified as ``risk and losses.'' Without

further questioning, we are not able to track these amounts in Usinor's

financial statements. We note that we initiated our investigation of

the post-1991 SODIE contributions because the data presented in

Usinor's financial statements did not reflect our understanding of the

program. Without a full understanding of the amounts contributed by the

GOF and Usinor, we are not in a position to say whether the post-1991

advances should be viewed differently from the pre-1992.

Because an investigation of the post-1991 SODIE advances was not

initiated in time to solicit adequate, verified information from all of

the necessary respondents, we have no basis upon which to use adverse

facts available with respect to this program. Accordingly, we are not

making a determination on the countervailability of the SODIE program

in this investigation. Should a countervailing duty order be put in

place, however, we will solicit information on the post-1991 SODIE

advances in a future

[[Page 73296]]

administrative review, if one is requested. See 19 CFR 351.311(c)(2).

We note, moreover, that based on the limited information the

respondents have submitted, any potential benefits to Usinor during the

POI from the SODIE program appear to be very small and, therefore,

would likely have little or no impact on the overall ad valorem subsidy

rate. See Memorandum to the file, Calculations for Final Determination,

December 13, 1999.

Comment 17: Foreign Ownership

The petitioners argue that 19 CFR 351.525(b)(7) makes clear that

subsidies are allocable to all domestic production regardless of the

nationality of the owner of that production where it states:

If the firm that received the subsidy has production facilities

in two or more countries, the Secretary will attribute the subsidy

to products produced by the firm within the country of the

government that granted the subsidy. However, if it is demonstrated

that the subsidy was tied to more than domestic production, the

Secretary will attribute the subsidy to multinational production.

Therefore, state the petitioners, any subsidies allocated to DHS will

be tied to DHS' French production only. The petitioners point out that

if the Department were to adopt a policy of reducing the level of past

subsidies in any way in response to a purchase of a company by a

foreign entity, then governments could shield against countervailing

duties by selling shares in domestic producers to foreign entities.

Department's Position: We agree with the petitioners that it is not

the nationality of the owner of the productive unit that matters;

rather, it is the nationality of the productive unit, itself, that is

of consequence. If a unit is cross-owned by a company that receives

untied subsidies and both are in the same country, we would attribute

the subsidy benefits to both. For a subsidy to be considered trans-

national and, therefore, not countervailable, it would have to be given

by a government in one country to a company in a different country. The

owners of the subsidy recipient are of no consequence in making

transnational determinations.

Comment 18: Discount Rates

The petitioners state that in calculating benchmark interest rates,

the new regulations require the Department to use as a base rate a

long-term interest rate that would be paid by a creditworthy company.

The petitioners state that there are a number of possible creditworthy

rates on the current record and that, of those rates, the Department

should choose the OECD-published ``Medium Term Credit to Enterprises,

3-7 years'' (MTCE) rates which are rates that are both long-term and

rates which would be paid by a creditworthy company.

The respondents take issue with the petitioners' attempt to

increase the creditworthy interest rate used in the Department's

uncreditworthy interest rate calculation. The respondents argue that

the bond rates selected by the Department in the Preliminary

Determination are the most appropriate rates to use to match to default

rates of corporate bond issuers as contemplated by section

351.505(a)(3)(iii) of the CVD Regulations. The respondents point out

that the MTCE rates recommended by the petitioners are not appropriate

because these rates apply to credit that is for a much shorter period

of time than is typical of private sector bonds. Furthermore,

respondents believe that the MTCE rates recommended by the petitioners

do not match with either the bond default rates currently used or with

the Department's AUL-determined benefit stream. With respect to the IMF

rates, the respondents point out that they have been previously

rejected by the Department as unrepresentative of long-term corporate

borrowing (see French Certain Steel).

Department's Position: We agree with the petitioners that the

Department has a variety of creditworthy interest rates on the record

to select from. In calculating a creditworthy benchmark rate for use in

years in which Usinor was creditworthy, but did not have a company-

specific interest rate, and for use in constructing uncreditworthy

benchmark rates for years in which it was not creditworthy, we applied

the methodology as described in section 351.505(a)(3) of the CVD

Regulations. This methodology requires the use of a long-term interest

rate that would be paid by a creditworthy company.

On the record of the instant proceeding, there are several interest

rates that could serve as the long-term interest rates that would be

paid by a creditworthy company, i.e., MTCE and equipment loan rates as

published by the OECD, cost of credit rates published in the Bulletin

of Banque de France, and private sector bond rates as published by the

International Monetary Fund. With respect to the equipment loan rates,

the cost of credit rates, and the private sector bond rates, the

Department determined in prior cases that these rates are indicative of

a creditworthy company's long-term cost of borrowing, see French

Certain Steel (58 FR at 37314) and French Stainless (64 FR at 30790).

Although the Department has not previously used the MTCE rates, there

is no record information indicating that they would be not indicative

of a creditworthy company's long-term cost of borrowing. In addition,

there is no evidence on the record of this proceeding indicating that

any of these rates is more appropriate than the others for purposes of

constructing a creditworthy benchmark rate. Therefore, for this final

determination, we are using an average of these creditworthy long-term

interest rates to calculate a non-company-specific creditworthy

benchmark rate.

Contrary to the respondents' argument, the Department's regulations

require the use of a long-term interest rate, not an interest rate that

equals the term of a company's AUL or matches the term of the other

interest rates being used. We did not include the IMF-published line

60p ``lending rates'' because the Department has determined that these

interest rates are unrepresentative of the cost of corporate long-term

borrowing. See French Certain Steel (58 FR at 37315).

Comment 19: Sales Denominators

The petitioners state that the sales values used by Department in

its preliminary determination were inflated because they included

substantial transfers occurring between members of the Usinor Group.

The petitioners argue that the 1998 Usinor net sales of 9.4 billion

euros, as reported in its annual report, is a gross amount which

includes intersegment sales occurring within the Usinor Group and that

this figure does not represent the sales revenue derived by the Group

from selling French merchandise to outside parties. Instead, the

petitioners argue, the correct sales figure is 8.3 billion euros as

reported in the annual report as total sales (or net sales minus

intersegment sales).

The petitioners state that due to the manner in which GTS

determines its sales revenues, it is impossible to judge whether the

sales value reported by GTS is legitimate. However, the petitioners

point out that there was an error in the company's calculations of its

POI sales revenue as made clear by the GTS verification exhibit

detailing this calculation.

The respondents take issue with the petitioners' claim that Usinor

based its 1998 sales figure of French-produced merchandise on the wrong

line item in its 1998 Annual Report. Respondents argue that the figure

accepted by the Department includes sales of French-produced

merchandise to members of the Usinor Group outside France. This is in

accordance with Financial Accounting Standard 14 which requires

[[Page 73297]]

exclusion of intercompany sales within France in order to avoid double-

counting of French production. Respondents argue that the line item

entitled ``intersegment sales'' represents sales from one geographical

segment to another geographical segment (e.g., from France to the

United States) for which sales are reported.

The respondents argue that Usinor's use of the amount in the ``net

revenue'' column is consistent with the calculation of the French-only

sales denominator in French Certain Steel. The respondents point out

that this methodology was also upheld in Court, see Inland Steel

Industries, Inc., et al, v. United States, 967 F. Supp. 1338, 1368(CIT

1997) (Inland Steel). The respondents believe that the petitioners have

no reason and cite no precedent for excluding intersegment sales within

the Usinor Group. The respondents maintain that these sales are real

sales carried out under arm's-length conditions. Lastly, the

respondents argue that most of Usinor's U.S. sales are to affiliates

and that the petitioners would never contend that any subsidies found

should not be allocated to these intercompany sales.

Department Position: We disagree with the petitioners that the

appropriate net sales amount for Usinor should be net of intersegment

sales. According to the Interpretation and Application of International

Accounting Standard for 1998,7 ``intersegment sales'' are

defined as ``transfers or products or services, similar to those sold

to unaffiliated customers, between industry segments or geographic

areas of the enterprise.'' Therefore, since Usinor's intersegment sales

are similar to those sold to unaffiliated customers, and there is no

regulatory or statutory requirements to exclude these sales, the

Department will continue to include them in Usinor's net sales amount

for the POI.

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

\7\ Excerpts are found attached to the Memorandum to the file on

International Accounting Standards of December 1, 1999.

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

With respect to the petitioners' argument that it is impossible to

judge whether the sales value reported by GTS is legitimate, we

disagree. While the manner in which GTS records its sales value is

unusual, we do not find it to be inherently distortional. Therefore,

the verified sales value for GTS is appropriate to use in the

calculations for the final determination. Although GTS made a slight

error in calculating its reported POI sales value, it is not the error

alluded to by the petitioners. The ``error'' referred to by the

petitioners is not an error because the adjustment they said should

have been done was made in a later stage of the calculation. For more

information, see the GTS verification report.

Comment 20: FOB Calculation

The petitioners argue that Usinor's reported FOB adjustment is

inconsistent with other publicly available data for plate imports from

France. The petitioners maintain that Usinor understated the FOB port

adjustment by only including ocean freight in its shipping expenses.

The petitioners argue that there are other costs such as insurance

which should have been deducted which Usinor failed to account for in

its calculations. The petitioners argue that the Department only

verified that there were no discrepancies with Usinor's reported

shipping costs, but it did not verify that there were other expenses

such as insurance which should also be included in the FOB adjustment.

The petitioners urge the Department to apply a more meaningful and

realistic FOB port adjustment to Usinor's sales for the final

determination.

Additionally, the petitioners argue that the same FOB adjustment

was used to adjust GTS' French merchandise sales value with no

indication of whether: (1) GTS was more or less export-intensive than

the Usinor Group as a whole or (2) GTS' costs for shipping, insurance

and other items were higher or lower than those of the Usinor Group as

a whole. Furthermore, the petitioners point out that the Department did

not verify GTS' FOB adjustment and whether it should be identical to

that of the Usinor Group.

The respondents take issue with the petitioners' complaint that

Usinor's FOB sales adjustment is too small because it does not include

insurance and other non-shipping costs. The respondents point out that

the FOB adjustment made by Usinor in this investigation was verified

and is precisely the same methodology used in French Certain Steel and

French Stainless. The respondents assert that the petitioners also made

this same argument on appeal from French Certain Steel, and that the

Court rejected those challenges, see Inland Steel, 967 F. Supp. at

1368-69.

Department Position: We agree with the respondents. Usinor has

indicated that it does not maintain FOB (port) value information, as

requested in the Department's questionnaire, in the regular course of

business. Therefore, Usinor reported an FOB adjustment based on the

methodology that was used and verified in the French Stainless. This

methodology derived Usinor's estimated FOB value by calculating a

shipping expense based on the expenses of a sample of Usinor Group

companies (including ocean freight, loading and port/terminal fees) and

dividing the shipping expenses by the 1998 net sales of the sampled

companies to derive the ratio of shipping costs to net sales. At

verification we found no reason to suspect that this methodology was

distortional, rather, we found it to be a reasonable methodology for

deriving Usinor's sales value on an FOB (port) basis.

With respect to the petitioners' argument that the Department

accepted the same FOB adjustment for GTS without verifying whether or

not it should be the same, there is no record information indicating

that it would not be an inappropriate estimate. Furthermore, the

Department has consistently recognized that given the vast amount of

information provided during the course of an investigation and the

strict time constraints imposed on the proceeding and particularly,

verification, it is simply not possible to examine each and every piece

of information provided by the respondents. The Department has taken

the position that by testing the validity and integrity of a

significant amount of relevant information, the small portion of the

remaining information not examined cannot be considered inaccurate or

incomplete.

In this instance, the responding companies had reported a single

FOB adjustment to be applied to the sales of the Usinor Group and GTS.

As discussed in Usinor's verification report, see Memorandum to the

File dated November 4, 1999 regarding ``Results of Verification of

Usinor,'' this adjustment was derived by calculating the total shipping

expenses of four companies within the Usinor Group: Sollac, Ugine,

Unimetal and Ascometal. Although this adjustment does not include the

shipping costs of GTS or CLI (also a producer of subject merchandise),

we consider it to be a more reasonable estimate of shipping costs

incurred by GTS than the use of the difference between the customs

value and the landed value as suggested by the petitioners since the

landed value could include other expenses which are not representative

of the respondents' shipping costs. Nevertheless, we acknowledge that

the respondents' calculation of the FOB adjustment did not include

amounts for insurance. Should a countervailing duty order be put in

place, we will examine this issue further in an administrative review,

if one is requested.

Therefore, for the purposes of this final determination, we have

continued to use the FOB adjustment reported by the responding

companies and verified

[[Page 73298]]

by the Department. We note, however, that in the event a countervailing

duty order is put in place and an administrative review of GTS occurs,

GTS will be required, as a separate entity, to report its own sales

values on an FOB basis.

Comment 21: Mid-Year Grant Allocation Assumption

The petitioners take issue with the Department's allocation

methodology for non-recurring benefits codified as 19 CFR

351.503(c)(4)(i). According to the petitioners, this methodology is

biased in favor of respondents in the following respects:

First, the methodology assumes that the benefit was received on the

first day of the first year instead of, on average, midway through the

year, the petitioners claim. In so doing, claim the petitioners, it

reduces the remaining, unallocated portion of the benefit that goes

into subsequent years. Since it is on this unallocated portion that the

time value of money calculation is attached, the petitioners argue that

the benefits in subsequent years are artificially reduced.

Second, the Department's methodology provides that the yearly

portion of the benefit that is amortized in subsequent years is also

credited as of the first of the year, i.e., no time value of money

calculation is made for that portion during that year, according to the

petitioners. In reality, argue the petitioners, the yearly portion of

the benefit would be expended over the course of the year and another

time value of money calculation would be appropriate on that yearly

portion. As a result of the yearly portion being credited as of the

first of the year, state the petitioners, the remaining unallocated

amount of the benefit that gets moved to future years is artificially

reduced at the beginning of the year instead of across the span of the

year. Accordingly, point out the petitioners, the calculation of the

time value of money attached to the remaining unallocated amount is

also artificially reduced.

The petitioners propose adopting the assumption that benefits are

received mid-year in order to neutralize the bias in the Department's

methodology. To this end, the petitioners provide calculation

methodologies.

The respondents note that the petitioners made these same arguments

during the Department's recent countervailing duty rulemaking

proceedings and that the Department rejected them. According to the

respondents, the petitioners must either challenge the particular

regulation that embodies the Department's grant allocation formula as

unlawful or seek a new rulemaking proceeding.

Department Position: The petitioners' approach to allocating

subsidies was presented to the Department during the comment period of

the CVD Regulations. See CVD Regulations, 63 FR at 65399. In finalizing

its CVD Regulations, the Department considered and chose not to adopt

the methodology proposed by petitioners. We continue to follow our

policy as explained in the Preamble to the CVD Regulations.

Verification

In accordance with section 782(i)(1) of the Act, except as noted

above, we verified 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 Usinor (including CLI and Sollac) and

GTS, the sole manufacturers of the subject merchandise. We determine

that the total estimated net subsidy rate is 5.56 percent ad valorem

for Usinor and 6.86 percent ad valorem for GTS. The All Others rate is

6.80 percent, which is the weighted average of the rates for both

companies.

In accordance with our Preliminary Determination, we instructed the

U.S. Customs Service to suspend liquidation of all entries of carbon-

quality plate from France, which were entered or withdrawn from

warehouse, for consumption on or after July 26, 1999, the date of the

publication of our Preliminary Determination in the Federal Register.

In accordance with section 703(d) of the Act, we instructed the U.S.

Customs Service to discontinue the suspension of liquidation for

merchandise entered on or after November 23, 1999, but to continue the

suspension of liquidation of entries made between July 26, 1999 and

November 22, 1999. We will reinstate suspension of liquidation under

section 706(a) of the Act if the ITC issues a final affirmative injury

determination and will require a cash deposit of estimated

countervailing duties for such entries of merchandise in the amounts

indicated above. If the ITC determines that material injury, or threat

of material injury, does not exist, this proceeding will be terminated

and all estimated duties deposited or securities posted as a result of

the suspension of liquidation will be refunded or canceled.

ITC Notification

In accordance with section 705(d) 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.

If the ITC determines that material injury, or threat of material

injury, does not exist, these proceedings will be terminated and all

estimated duties deposited or securities posted as a result of the

suspension of liquidation will be refunded or canceled. If, however,

the ITC determines that such injury does exist, we will issue a

countervailing duty order.

Return or Destruction of Proprietary Information

In the event that the ITC issues a final negative injury

determination, this notice will serve as the only reminder to parties

subject to Administrative Protective Order (APO) of their

responsibility concerning the destruction of proprietary information

disclosed under APO in accordance with 19 CFR 351.305(a)(3). Failure to

comply is a violation of the APO.

This determination is published pursuant to sections 705(d) and

777(i) of the Act.

Dated: December 13, 1999.

Robert LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-33238 Filed 12-28-99; 8:45 am]

BILLING CODE 3510-DS-P