Cut-to-Length Carbon Steel Plate From Belgium; Final Results of Countervailing Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[C-423-806]

Cut-to-Length Carbon Steel Plate From Belgium; Final Results of

Countervailing Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Final Results of Countervailing Duty Administrative

Review.

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

SUMMARY: On September 9, 1998, the Department of Commerce (the

Department) published in the Federal Register its Preliminary Results

of administrative review of the countervailing duty order on cut-to-

length carbon steel plate from Belgium for the period January 1, 1996

through December 31, 1996 (63 FR 48188). The Department has now

completed this administrative review in accordance with section 751(a)

of the Tariff Act of 1930, as amended. For information on the net

subsidy for each reviewed company, and for all non-reviewed companies,

please see the Final Results of Review section of this notice. We will

instruct the U.S. Customs Service to assess countervailing duties as

detailed in the Final Results of Review section of this notice.

EFFECTIVE DATE: March 16, 1999.

FOR FURTHER INFORMATION CONTACT: Gayle Longest or Eva Temkin, Office of

CVD/AD Enforcement VI, Import Administration, International Trade

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

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

2786.

SUPPLEMENTARY INFORMATION:

Background

Pursuant to 19 CFR 351.213(b), this review covers only those

producers or exporters of the subject merchandise for which a review

was specifically requested. Accordingly, this review covers Fabrique de

Fer de Charleroi, S.A. (Fafer). This review also covers the period

January 1, 1996 through December 31, 1996 and 28 programs.

Since the publication of the Preliminary Results on September 9,

1998 (63 FR 48188), the following events have occurred. We invited

interested parties to comment on the Preliminary Results. On October 9,

1998, case briefs were submitted by Fafer, which exported cut-to-length

carbon steel plate to the United States during the review period

(respondent), and Bethlehem Steel Corporation, U.S.

[[Page 12983]]

Steel Group, and Inland Steel Industries, Inc. (petitioners). On

October 16, 1998, rebuttal briefs were submitted by petitioners and

respondent.

In November 1998, the Department conducted verification of the

government and company questionnaire responses. For additional

information on verification, see the Verification section of this

notice. Interested parties submitted comments to the Department's

verification reports on February 8, 1999 and rebuttal comments on

February 12, 1999.

On December 17, 1998, we extended the period for completion of the

Final Results to 180 days from the date on which the Preliminary

Results were published pursuant to section 351.221(h)(1) of the

Department's regulations. See Cut-to-Length Carbon Steel Plate from

Belgium; Extension of Time Limit for Countervailing Duty Administrative

Review (63 FR 69612). At the request of petitioners, the Department

held a public hearing on February 19, 1999.

Applicable Statute

Unless otherwise indicated, all citations to the statute are

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

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

Act). The Department is conducting this administrative review in

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

Department's regulations reference 19 CFR part 351 (1998).

Scope of the Review

The products covered by this review are certain cut-to-length

carbon steel plate. These products include hot-rolled carbon steel

universal mill plates (i.e., flat-rolled products rolled on four faces

or in a closed box pass, of a width exceeding 150 millimeters but not

exceeding 1,250 millimeters and of a thickness of not less than 4

millimeters, not in coils and without patterns in relief), of

rectangular shape, neither clad, plated nor coated with metal, whether

or not painted, varnished, or coated with plastics or other nonmetallic

substances; and certain hot-rolled carbon steel flat-rolled products in

straight lengths, of rectangular shape, hot rolled, neither clad,

plated, nor coated with metal, whether or not painted, varnished, or

coated with plastics or other nonmetallic substances, 4.75 millimeters

or more in thickness and of a width which exceeds 150 millimeters and

measures at least twice the thickness, as currently classifiable in the

Harmonized Tariff Schedule (HTS) under subheadings 7208.31.0000,

7208.32.0000, 7208.33.1000, 7208.33.5000, 7208.41.0000, 7208.42.0000,

7208.43.0000, 7208.90.0000, 7210.70.3000, 7210.90.9000, 7211.11.0000,

7211.12.0000, 7211.21.0000, 7211.22.0045, 7211.90.0000, 7212.40.1000,

7212.40.5000, and 7212.50.0000. Included in this review are flat-rolled

products of non-rectangular cross-section where such 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. Excluded from these investigations is

grade X-70 plate. The HTS subheadings are provided for convenience and

U.S. Customs Service (Customs) purposes. The written description of the

scope remains dispositive.

Allocation Methodology

In British Steel plc. v. United States, 879 F.Supp. 1254 (February

9, 1995) (British Steel I), the U.S. Court of International Trade (the

Court) ruled against the allocation period methodology for non-

recurring subsidies that the Department had employed for the past

decade, a methodology that was articulated in the General Issues

Appendix (58 FR 37227) appended to Final Affirmative Countervailing

Duty Determination: Certain Steel Products from Austria; 58 FR 37217

(July 9, 1993) (GIA). In accordance with the Court's decision on

remand, the Department determined that the most reasonable method of

deriving the allocation period for nonrecurring subsidies is a company-

specific average useful life (AUL) of non-renewable physical assets.

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

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

(British Steel II). Accordingly, the Department has applied this

methodology to those non-recurring subsidies that have not yet been

countervailed.

Fafer submitted an AUL calculation based on depreciation and asset

values of productive assets reported in its financial statements.

Fafer's AUL was derived by adding depreciation charges for ten years,

and dividing these charges by the sum of average gross book value of

depreciable fixed assets for the related periods. We found this

calculation to be reasonable and consistent with our company-specific

AUL objective. Fafer's calculation resulted in an average useful life

of 26 years. For non-recurring subsidies received prior to the POR and

which have already been countervailed based on an allocation period

established in an earlier segment of the proceeding, it is not

reasonable or practicable to reallocate those subsidies over a

different period of time. Since the countervailing duty rate in earlier

segments of the proceeding was calculated based on a certain allocation

period and the resulting benefit stream, redefining the allocation

period in later segments of the proceeding would entail taking the

original grant amount and creating an entirely new benefit stream for

that grant. Therefore, for purposes of these Final Results, the

Department is using the original allocation period assigned to each

nonrecurring subsidy received prior to the POR, which has already been

countervailed. See Certain Carbon Steel Products from Sweden; Final

Results of Countervailing Duty Administrative Review, 62 FR 16549

(April 7, 1997) (Carbon Steel Products from Sweden).

Verification

As provided in section 782(i) of the Act, we verified information

submitted by the Government of Belgium (GOB), the Government of

Wallonia (GOW), and Fafer, except as discussed in the ``Facts

Available'' section of this notice below. We followed standard

verification procedures, including meetings with government and company

officials and examination of relevant accounting and financial records

and other original source documents. Our verification results are

outlined in the public versions of the verification reports, which are

on file in the Central Records Unit (CRU) (Room B-099 of the Main

Commerce Building).

Facts Available

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

available if an interested party or any other person fails to provide

information that has been requested by the deadlines for submission of

the information. In this review, we found at verification that Fafer

did not report to the Department a loan provided for the purpose of

producing an audio-visual calling card for foreign businessmen. This

information was unreported in the questionnaire responses. We used

information that we obtained at verification about the loan to

determine the countervailable benefits provided by this program. For

additional information about the loan, see the New Programs Determined

to Confer Subsidies section of this notice.

Moreover, in the Preliminary Results, the Department did not

countervail cash grants received by Parachevement et Finitions de

Metaux (PFM) and S.A.

[[Page 12984]]

Chaleroi Deroulage (CD) CD and PFM (Fafer's subsidiaries) under the Law

of 1970, because Fafer claimed that these subsidiaries do not produce

the subject merchandise. At verification, company officials again

stated that the Fafer's subsidiaries CD and PFM did not manufacture the

subject merchandise. However, the company inferred in its February 12,

1999 submission that CD and PFM could possibly produce merchandise

subject to the order, but that this had not occurred during the POR.

Moreover, at the public hearing held on February 19, 1999, respondent's

counsel also clarified that there was no technical reason that the

equipment owned by CD and PFM could not be used to transform

downstream, non-subject merchandise into subject merchandise. See

Transcript of Public Hearing on Cut-to-Length Carbon Steel Plate from

Belgium dated February 19, 1999 at 55-57.

On the basis of the fact that CD and PFM can, in their down-stream

processing, produce merchandise which is covered by the scope of the

order, we determine that the cash grants under the Law of 1970, a

program previously found countervailable by the Department, are

attributable to the total sales of Fafer, including its subsidiaries

and thus benefitted the subject merchandise during the POR. This

approach is consistent with our practice to attribute subsidies

received by one company to the sales of another related company that

also produces the subject merchandise. Accordingly, we are attributing

benefits received by CD and PFM to the consolidated group in these

Final Results. (See Certain Pasta From Italy: Final Results of

Countervailing Duty Administrative Review 63 FR 43905-43912 (August 17,

1998.) This also conforms with section 351.525(b)(6)(ii) of the

Department's final countervailing duty regulations, which explicitly

states that ``if two (or more) corporations with cross-ownership

produce the subject merchandise, the Secretary will attribute the

subsidies received by either or both corporations to the products

produced by both corporations.'' While these regulations do not govern

this proceeding, they articulate the Department's practice and

application of the statute. Cross-ownership clearly exists between CD

and PFM and the parent company, Fafer; record evidence also shows that

all companies could produce the merchandise subject to the

countervailing duty order.

In our questionnaires, we asked the respondent to provide subsidy

information for those affiliates that are involved in the production of

the subject merchandise. If Fafer had accurately reported the

activities of its affiliates CD and PFM, the Department would have

asked CD and PFM to respond to the questionnaires with respect to

particular subsidies. As a result, grants received by affiliated

companies under the Law of 1970 during the POR were not reported in the

questionnaire responses. At verification, we found that CD and PFM

received grants under the Law of 1970 in 1993 and 1996, respectively

and collected information on these grants. Moreover, Fafer did not

provide total sales data for CD and PFM.

Although other subsidies provided under the Law of 1970, such as

research and development (R&D) assistance, have been found not specific

after 1988 (see Programs Found Not to Confer Subsidies), we have no

information on industry specificity for the cash grants program in the

Walloon region of Belgium after 1988. Therefore, we are using adverse

facts available and countervailing these grants in these Final Results.

Section 776(b) of the Act provides that the administering authority may

use an inference that is adverse to the interests of an interested

party in selecting from among the facts otherwise available. Such

adverse inference may include reliance on information derived from (1)

the petition, (2) a final determination in the investigation under this

title, (3) any previous review under section 751 or determination under

section 753, or (4) any other information placed on the record.

We used information that we obtained at verification about the

grants provided to affiliated companies to determine the

countervailable benefits provided by these programs. For additional

information about these grants to CD and PFM, see the Programs

Previously Determined to Confer Subsidies sections of this notice. In

addition, we used facts available to calculate Fafer's consolidated

sales for the POR, which includes sales of CD and PFM, because sales

information for these subsidiaries during the POR was not placed on the

record. An explanation of our calculation is provided in Comment 9

below.

Analysis of Programs

Based upon the responses to our questionnaires, the results of

verification, and written comments from the interested parties, we

determine the following:

I. Programs Conferring Subsidies

A. Program Previously Determined to Confer Subsidies

1. Cash Grants and Interest Subsidies Under the Economic Expansion Law

of 1970

In the Preliminary Results, we found that cash grants and interest

subsidies under the 1970 Law conferred countervailable subsidies on the

subject merchandise (see Cut-to-Length Carbon Steel Plate From Belgium

Preliminary Results of Countervailing Duty Review 63 FR 48188; 48189

(September 9, 1998) (Preliminary Results)). Our review of the record

and our analysis of the comments submitted by the interested parties,

summarized below, has led us to change our preliminary calculations. At

verification, we obtained more detailed information with which to

calculate the difference between benefits provided to Fafer in 1982,

1984, and 1985 under the 1970 Law and the 1959 Law than that used in

our preliminary calculations.

In the Preliminary Results, we found this program to be regionally

specific. As discussed in greater detail below, other subsidies

provided under the 1970 Law for R&D assistance have been found not

specific after 1988. (See Research and Development Loan Provided Under

the Economic Expansion Law of 1970 under the section titled ``Programs

Found Not to Confer Subsidies'' of this notice. All cash grants and

interest subsidies provided to Fafer were provided prior to 1988,

however at verification we found that subsidiaries of Fafer received

cash grants after 1988. Because we have no specificity information for

these years and for the reasons outlined in the facts available section

above, we are treating these grants as regionally specific. Therefore,

for these Final Results, we are countervailing grants provided after

1988 to Fafer's affiliates.

To calculate the benefit in this review for grants received by CD

and PFM, we employed the standard grant methodology outlined in the

allocation section of the GIA (58 FR 37227). We allocated the benefit

from each grant received by CD and PFM over 26 years, Fafer's AUL. As

the discount rate for grants received by CD and PFM, we used the long-

term prime rates for each year in which grants were provided. (For

information on the benchmark, see Comment 1 below). We summed the

benefit amounts attributable to the POR and divided the result by

Fafer's total consolidated sales during the POR. Accordingly, the net

subsidy for this program has changed and the subsidy rate is 0.35

percent ad valorem.

[[Page 12985]]

B. New Programs Determined to Confer Subsidies

1. Promotion Brochure

In the Preliminary Results, we found this program did not confer

subsidies because the loan interest rate was higher than the benchmark

rate in the year the loan was approved. Our review of the record and

our analysis of the comments submitted by the interested parties,

summarized below, has led us to modify our findings from the

Preliminary Results for this program.

The Walloon Export Agency (AWEX) administers this program and

provides assistance to companies in the Walloon region to make

advertising brochures for international markets. Under this program,

loans are extended for a five-year period with a fixed annual interest

rate. However, the company is not required to make interest payments on

the loan until the five-year period has ended. At the end of this

period, if the company has met certain targeted sales and profit goals

generated from exports, as established under the program, the loan must

be repaid. Fafer received a loan under this program in 1996, the POR.

We confirmed at verification that Fafer paid no interest on this

outstanding loan during the POR.

Under section 771(5A)(B) of the Act, an export subsidy is a subsidy

that is, in law or in fact, contingent upon export performance, alone

or as one of two or more conditions. After examination of this program,

we determine this program to be an export subsidy pursuant to section

771(5A)(B) of the Act. In addition, by waiving the interest fees on the

loan, the actions of the Walloon government conferred a benefit in

accordance with section 771(5)(E)(ii) of the Act. Therefore, we

determine this program to be countervailable.

To calculate the benefit from this long-term fixed-rate loan, the

repayment of which is contingent upon subsequent events, we treated the

balance on the outstanding loan during the 1996 review period as a

short-term loan. We measured the interest savings on this outstanding

loan during the 1996 review period using the long-term prime rate as

the benchmark (see Comment 1, below.) We then divided the benefit for

the POR by Fafer's total export sales during the POR. On this basis, we

determine the net subsidies for this program to be less than 0.005

percent ad valorem. Our analysis of the comments on this program

submitted by the interested parties are summarized in Comment 7, below.

2. Audio-Visual Calling Card

At verification, we found a new program under which Fafer received

in 1990 a fixed-rate long-term loan to produce an audio-visual calling

card to present to foreign businessmen. Under the terms of the loan, if

a company meets targeted sales and profit goals generated from exports,

it must repay the loan. In addition, companies are not obligated to pay

interest during the five-year term of the loan. At verification, we

found that Fafer had not made any interest payments on this outstanding

loan during the POR.

Under section 771(5A)(B) of the Act, an export subsidy is a subsidy

that is, in law or in fact, contingent upon export performance, alone

or as one of two or more conditions. After examination of this program,

we determine this program to be an export subsidy pursuant to section

771(5A)(B) of the Act. In addition, by waiving the interest fees on the

loan, the actions of the Walloon government conferred a benefit in

accordance with section 771(5)(E)(ii) of the Act. Therefore, we

determine this program to be countervailable.

To calculate the benefit on this loan, the repayment of which is

contingent upon subsequent events, we treated the balance on the

outstanding loan during the 1996 review period as a short-term loan. We

measured the interest savings on this outstanding loan during the 1996

review period using the long-term prime rate as the benchmark (see

Comment 1, below.) We then divided the amount allocated to the POR by

Fafer's total export sales during the POR. On this basis, we determine

the net subsidy for this program to be less than 0.005 percent ad

valorem. Our analysis of the comments on this program submitted by the

interested parties are summarized in Comment 8, below.

II. Programs Found Not to Confer Subsidies

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

In the Preliminary Results, we found that this program did not

confer subsidies during the POR. Our analysis of the comments submitted

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

our findings from the Preliminary Results.

B. Exhibition Stands

In the Preliminary Results, we found this program did not confer

subsidies during the POR. Our analysis of the comments submitted by the

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

findings from the Preliminary Results.

C. Research and Development Loan Provided Under the Economic Expansion

Law of 1970

In the Preliminary Results, we found that this program conferred

subsidies during the POR based on our finding in the Final Affirmative

Countervailing Duty Determinations: Certain Steel Products From Belgium

(Final Determination) 58 FR 37273; 37275 (July 9, 1993) that the 1970

Economic Expansion Law was regionally specific. However, at

verification, we found that the authority for administering the law of

1970 has devolved to the regional governments. This new information led

us to examine the specificity of R&D assistance provided under the 1970

Law in the context of the Walloon region rather than Belgium. On the

basis of this analysis, we determine that this program is not specific

in fact or in law. (See Memorandum to Holly A. Kuga from David Mueller

dated March 8, 1999, Decision Memorandum Re: Specificity of the

Research and Development (R&D) Aid in the 1996 Countervailing Duty

Administrative Review of Certain Cut-to-Length Carbon Steel Products

from Belgium, public version on file in room B-099 of the main Commerce

Building.) Our analysis of the comments on this program, submitted by

the interested parties, are summarized in Comment 10 below.

III. Programs Found to be Not Used

In the Preliminary Results we found that the producers and/or

exporters of the subject merchandise did not apply for or receive

benefits under the following programs:

A. Resider Program

B. European Commission-approved Grants

C. Early Retirement

D. The ``Invests'

E. SNSN

F. FSNW

G. Belgian Industrial Finance Company (Belfin) Loans

H. Government-Guaranteed Loans issued pursuant to the Economic

Expansion Laws of 1959 and 1970

I. Programs under the 1970 Law

1. Exemption of the Corporate Income Tax for Grants

2. Accelerated Depreciation Under Article 15

3. Exemption from Real Estate Taxes

4. Exemption from the Capital Registration

J. ECSC Article 54 Loans and Loan Guarantees

K. ECSC Redeployment Aid

L. European Social Funds Grants

M. Interest Rate Subsidies Provided by Copromex

N. Employment Premiums

O. Short-term Export Credit

[[Page 12986]]

P. New Community Instrument Loans

Q. European Regional Development Fund Aid

R. ECSC Interest Rebates under Article 54

S. ECSC Conversion Loans under Article 56

T. ECSC Interest Rebates under Article 56

Our analysis of the comments submitted by the interested parties,

summarized below, has not led us to change our findings from the

Preliminary Results.

Analysis of Comments

Comment 1: Kreditbank Interest Rates vs. the IMF Rates

Petitioners argue that in the Preliminary Results, the Department

used an incorrect benchmark interest rate for SNCI Loan 3. According to

petitioners, the Department used as its benchmark, the 1988 annual

Kreditbank interest rate instead of the Kreditbank interest rate for

the month in which the loan was approved. Petitioners assert that the

monthly Kreditbank interest rate is the correct rate and that by adding

an appropriate spread to this base rate, the Department will find that

the loan was provided on favorable terms. Petitioners assert that

during the summer of 1988, interest rates fluctuated significantly, and

that this justifies the use of the monthly Kreditbank interest rate

rather than an annual average interest rate.

Petitioners argue that between June and September 1988, the Belgian

prime interest rate reported by the International Monetary Fund (IMF)

rose substantially. According to petitioners, the IMF prime rate

represents the maximum rate charged by deposit money banks to prime

borrowers. Petitioners assert that the Kreditbank interest rates used

in the Preliminary Results contradict the IMF rates because: (1) The

basis points added to loans extended to firms that the Department

labels as uncreditworthy is substantially lower than the IMF prime rate

for September 1988; and (2) during the three month period in 1988 when

the IMF rates rose 125 basis points, the Kreditbank rate rose by only

23 basis points.

Petitioners argue that there are two explanations for the

discrepancies between the Kreditbank rates and those reported by the

IMF. First, Kreditbank interest rates could be for longer terms than

the IMF prime rate, which covers short-term and medium-term loans.

Petitioners maintain that this explanation is not likely because long-

term interest rates are usually higher than short-term rates, and a

comparison of Belgian government bond rates of differing maturities

supports this relationship during 1988. Second, Kreditbank loans could

be secured by collateral or have other features that make them lower

risk loans than the loans upon which the IMF prime rate is based. In

either case, the petitioners reiterate their assertion that the

Kreditbank rate is an inappropriate benchmark.

Moreover, petitioners argue that information collected at

verification demonstrates that the benchmark rate used in the

Preliminary Results understates the cost of borrowing in Belgium

because: (1) The average margin for a Kreditbank loan is 70 basis

points while the benchmark rate used in the Preliminary Results

includes only a margin of 15 basis points; and (2) the benchmark rate

does not include upfront fees that several of the bankers indicate are

commonly used. Petitioners maintain that the IMF reports the maximum

prime rate to eliminate the effect of the upfront fees indicated in the

banking verification report. (See Verification Report for Private

Commercial Banks dated January 22, 1999, public versions on file in

room B-099 of the main Commerce Building at 1). Petitioners also assert

that Fafer does not have any type of customer relationship with

Kreditbank because it had no long-term commercial debt and there is no

evidence on the record that demonstrates that Fafer has ever borrowed

from Kreditbank. Petitioners argue that Fafer probably borrowed from

SNCI because it could not procure funds elsewhere.

Petitioners further argue that the verification reports show that

the IMF rates submitted to the Department for use as the benchmark

rates are reliable. Petitioners maintain that they have demonstrated

that the IMF data accurately reflects the Belgian market at a

particular point in time, September 1988. Moreover, petitioners claim

that if the Department uses the IMF benchmark, it will, in the case of

Fafer's SNCI loans, find that the benchmark rate is higher than the

program interest rates. Thus, the Department will make the correct

determination that SNCI loans were provided at rates that were

inconsistent with commercial considerations. Since these loans are

specific and provided at favorable preferential rates, petitioners

maintain that the Department should countervail Fafer's SNCI loans in

these Final Results.

Petitioners argue that the Department can not use Kreditbank rates

as a benchmark, because at the time Fafer borrowed from SNCI,

Kreditbank rates were not available to Fafer. Petitioners further argue

that Kreditbank interest rates are inappropriate in this case for a

national average benchmark because they are a single bank's interest

rate.

As another alternative for the IMF rates, petitioners suggest using

LIBOR plus 70 basis points. Petitioners maintain that the commercial

bankers cited in the verification reports identified LIBOR as a common

basis of lending in Belgium and the 70 basis points is the mid-point of

the spreads cited by the bankers. In conclusion, petitioners maintain

than no matter which benchmark rate the Department selects, it should

use a monthly rate rather than an average annual rate, in light of the

fluctuations noted above.

Fafer argues that petitioners did not understand the source for the

Kreditbank interest rate used in the Department's calculation. Fafer

maintains that this interest rate was derived by averaging Kreditbank's

four published rates for 1988 and adding a 15 basis point spread to

obtain the national average to the year. Fafer claims that the base

interest rate used to determine benefits for this loan was not a

specific rate in Kreditbank's schedule, but the average of 1988

published rates. Thus, petitioners' concerns are moot because the

Department has incorporated the 15 point spread in its national average

rate for 1988. In response to petitioners' claim that the bank

verification report indicates that the average margin for a Kreditbank

loan is 70 basis points, Fafer asserts that the same bankers who cited

the 70 average basis points also noted that the number of basis points

can fluctuate depending on the circumstances and in some cases could be

zero. Moreover, Fafer claims that these bankers do not indicate that

for the year in question the average of 70 basis points was applicable.

Respondent also argues that the Department has selected the

Kreditbank rates in accordance with it's hierarchy for selecting

comparable benchmark rates as stated in the Final Determination 58 FR

37273 (July 9, 1993). In compliance with its hierarchy of selecting a

benchmark for the long-term loan, the Department first sought company-

specific information on lending. Because this information was not

available for Fafer, the Department went to the next level of its

hierarchy, and used a national, average long-term rate. Respondent

asserts that the Department's decision to use Kreditbank rates as the

national long-term interest rates are consistent with its practice for

long-term variable rate loans as described in the 1997 Proposed

Regulations. (See Notice of Proposed Rulemaking and Request for Public

Comments, 62 FR 8818 (February 26,

[[Page 12987]]

1997)). Respondent asserts that under section 351.504(a)(1) of the 1997

Proposed Regulations the Department uses comparable commercial loans to

determine the benefit on a government-provided loan. According to

respondent, the Department states in proposed section 351.504(a)(5)

that for long-term loans the Department will use a comparable long-term

loan. If the firm has no comparable commercial loans, as in Fafer's

case, respondent asserts that the Department will use an average

interest rate for comparable commercial loans, which it did in this

review by applying the Kreditbank rates.

In response to petitioners' argument that the benchmark rate does

not include ``upfront fees'' and is therefore unreasonable, Fafer

maintains that only one of the bankers interviewed stated in his

explanation of the Belgian banking system that up-front fees exist and

could affect the interest rate. Fafer further asserts that this banker

did not state that it was the normal banking practice in Belgium and

that Fafer would be required to pay such fees.

In response to petitioners' claim that the IMF prime rate should be

the benchmark, Fafer argues that the IMF prime rate is a short-term

rate which should not be applied as a benchmark for Fafer's long-term

variable interest rate loan. According to Fafer, the company received

SNCI loan 3 on June 10, 1983 and was able to renegotiate the interest

rate periodically. Fafer claims that although the Department's practice

may be to treat long-term, variable rate loans as a series of short-

term loans, the loan was not initially negotiated and received in 1988.

Fafer asserts that in 1988, it was not possible to withdraw from the

1983 loan it was repaying and negotiate for a new loan with other

commercial banks for a lower rate as petitioners suggest. With regard

to this loan, Fafer maintains that its only option was to renegotiate

the interest rate, which it did at the time short-term interest rates

began to fall. Moreover, Fafer supports the Department's application of

the average of Kreditbank rates for 1988 as the appropriate national

average long-term variable interest rate.

In reply to petitioners' claim that the benchmark is not reliable

because Fafer has no lending history and thus, did not have a special

relationship with Kreditbank, Fafer reasserts that it has no long-term

loans during the years in question; therefore, no bank is likely to

have a better lending history with the company. Fafer argues that

petitioners are incorrectly interpreting the verification report and

maintains that the bankers in the verification report only indicate

that a bank's relationship with its customer can influence the interest

rate. Fafer argues that nowhere in the verification report or in the

record does it state that a company without such a relationship with

the bank would not be able to obtain the average rate, which is the

benchmark.

Moreover, Fafer contends that, at verification in this review, the

Department found that there was no support for using the IMF rate as a

benchmark because it does not reflect the realities of banking in

Belgium. Fafer further argues that the verification report shows that

the Kreditbank rate is the correct benchmark because it is a specific

country rate that takes into account the actual and highly competitive

Belgian bank lending environment.

Fafer argues that, at the time the loan was renegotiated in 1988,

fifteen years of repayment remained, and that comparing a 15-year loan

to a short-term loan would not be appropriate.

Moreover, Fafer maintains that because the company has been

completely responsible for repayment of the 1983 SNCI loan since 1990,

and the commercial loan rates applicable to such a long-term loan have

fallen below the rate still applicable to the SNCI loan, the Department

does not have a basis for determining the government-provided loan

provided a benefit to Fafer in these Final Results.

Department's Position: Petitioners suggest that the Department

compare the SNCI loan, a government-provided long-term loan, to a

monthly benchmark, using the month in which the SNCI loan agreement was

renegotiated. In making the comparison of long-term government-provided

loans to comparable commercial loans, the Department's practice is to

use an annual average interest rate during the year in which the loan

was received. (See Final Affirmative Countervailing Duty Determination:

Certain Stainless Steel Wire Rod From Italy 63 FR 40474 (July 29,

1998)). We do not agree with petitioners argument that fluctuations in

the IMF interest rates for Belgium for a few months during 1988

warrants the use of a monthly benchmark instead of an annual benchmark

for all loans during the POR. Therefore, we are continuing to use an

average annual rate as the benchmark and discount rates in these Final

Results.

Petitioners also assert that the Department should use IMF rates as

the benchmark for long-term lending in these Final Results. At

verification, we discussed this possibility with commercial bankers,

and none supported the IMF rates as a reasonable reflection of

commercial market interest rates. (See Verification Report for

Commercial Banks dated January 22, 1999). In fact, the bankers strongly

indicated that these rates would not serve as an appropriate benchmark

for long-term lending in Belgium. Bank officials also indicated that

with regard to long-term lending, there is much competition among

Belgian banks which puts a downward pressure on commercial interest

rates. During the POR, bankers indicated that Belgian long-term

interest rates were based on the Belgian prime rate. (See Verification

Report for Commercial Banks dated January 22, 1999).

We agree with the respondent that IMF rates should not be used

because they do not reflect market rates on long-term lending. As

stated in the Final Determination, where the respondent did not have

long-term loans from commercial banks during or before the year in

which the terms of the government-provided loan were established, we

used a national, average long-term rate. See 58 FR 37273; 37288-37289

(July 8, 1993). Consistent with our approach in the Final

Determination, the Department has chosen the Kreditbank benchmark as a

national average interest rate because these rates apply to long-term

commercial loans in Belgian currency. In the Final Determination, we

explained that the verified Kreditbank rates can have a margin between

0 to 30 basis points, and we used the average estimate of this spread,

15 basis points, in our calculations. Accordingly, in these Final

Results, we are using as our benchmark the same rates as in the Final

Determination, the fixed long-term rates provided by Kreditbank, to

determine the benefit for non-recurring cash grants under the Law of

1970 that we have previously allocated in the original investigation,

and the SNCI long-term loan renegotiated prior to 1992. Moreover, with

regard to SNCI Loan 3, we will continue to use the annual average

benchmark that was established in the original investigation.

With regard to benchmark rates for the period since the

investigation (1992 through the 1996 POR), at verification we

determined that the most appropriate benchmark rate would be based on

the prime rates of the major commercial banks. We collected information

on commercial long-term lending rates in Belgium from KBC (the bank

resulting from the merger of Kreditbank with Cera Bank). Bank officials

provided the prime rates which are the base rate of commercial banks in

Belgium for credits with a term of five years or more. These prime

rates are

[[Page 12988]]

based on the banks' cost of funding, the interest rate swap (IRS) and

include a 40 to 50 basis points spread. Consequently, we have used 45

basis points as the average point spread above the IRS rate which is

included in these prime rates. Bank officials also indicated at

verification that the margin on long-term loans is, on average, 70

basis points above the IRS rate. Because we verified that the average

spread was 70 basis points above the IRS rate, we added 25 basis points

to the prime rate in our calculations to obtain our benchmark.

Comment 2: The Use of Varying Levels of Benefit Analysis to Countervail

Benefits Received Under the Economic Expansion Law of 1970

In the Preliminary Results, the Department countervailed the

benefits received from the cash grants under the 1970 Law only to the

extent that they exceeded the benefits available under the July 17,

1959 Law (1959 Law) which had been found generally available.

Petitioners maintain that this methodology is not consistent with

section 355.44(n) of the Department's 1989 Proposed Regulations and

past practice in applying the tiered benefits analysis only to benefits

under a single program. Petitioners claim that the Department departed

from its prior practice in the original investigation and applied the

tiered benefits analysis to the 1959 Law and the 1970 Law which are two

separate programs. (See 1989 Proposed Regulations, 54 FR at 23382).

Petitioners argue that the record evidence does not support the use of

a varying levels of benefit analysis.

According to petitioners, the Department only analyzes two separate

programs together in the context of an ``integral linkage'' analysis,

in which the specificity of the two programs are examined as one.

Petitioners cite the 1997 Proposed Regulations (62 FR 8825) and state

that the circumstances that lead to analyzing two programs as a single

program include circumstances ``where two or more programs have the

same particular purpose, bestow the same type of benefits, and confer

similar levels of benefits on similarly situated firms.'' (See Notice

of Proposed Rulemaking and Request for Public Comments, 62 FR 8818

(February 26, 1997).

Petitioners argue that in this case the 1959 Law and the 1970 Law

provide different types and levels of benefits, and can not be

considered a single program. For instance, the 1970 Law provides

accelerated depreciation, income tax exemption for cash grants, and

assistance for research and development, commercial program, and

management studies. More importantly, petitioners argue, record

evidence in this review suggests that the 1959 Law no longer exists.

Petitioners assert that by 1980, the 1959 Law had been repealed for the

Brussels-Capital region and the Flemish region. Petitioners assert that

even if the 1959 Law continued to exist through 1991, the record

indicates it was specific to the Walloon region after 1980 and can not

be the basis for a varying levels of benefit analysis. Accordingly, in

the Final Results, the Department should at a minimum countervail fully

the cash grants received under the Law of 1970 after August 31, 1991,

when the 1959 Law ceased to exist.

Petitioners further assert that the GOB's verification report in

the original investigation indicates that the July 18, 1959 law (a

separate 1959 Law) was repealed on December 30, 1970. Petitioners

maintain that to the extent that this 1959 law is used in the

Department's varying level of benefits methodology, there is no basis

for the tiered levels of benefit analysis with regard to both previous

and new countervailable subsidies.

In rebuttal, Fafer argues that the Department's tiered-benefits

analysis for the same cash grants under consideration in this review

was upheld by the U.S. Court of International Trade in Geneva Steel et

al. V United States, 914 F. Supp. 563 (CIT 1996) (Geneva Steel). Fafer

asserts that in Geneva Steel, the Court held that, the Department's

regulations do not limit the tiered-benefit analysis to a single

program. Fafer claims that petitioners' assertion, that these programs

can not be deemed a single program because there are certain

differences in the benefits received under the 1959 and 1970 Laws,

contradicts the Court's holding in Geneva Steel, in which the Court

ruled that the tiered-benefits analysis is not limited to a single

program. Furthermore, Fafer maintains that the verification reports of

the GOB and the GOW in this review indicate that these laws joined to

form a part of a larger whole of GOB's programs to support Belgian

economic development policy. According to Fafer, this treatment of the

1959 and 1970 laws supports the Department's findings in the Final

Determination and the Preliminary Results that the

noncountervailability of the 1959 law limits the countervailability of

the 1970 law.

Furthermore, Fafer argues that contrary to petitioners claims,

there is neither new factual information nor legal circumstances that

warrant re-examination of the two-tiered benefits analysis in this

review. Fafer argues that petitioners do not provide the proper

evidence to substantiate their claim that the 1959 Law was repealed in

1980. Rather, the information cited by petitioners indicates that the

1959 Law was repealed for the Brussels-Capital region and the Flemish

region in 1991. Fafer contends that the July 17, 1959 Law is the legal

basis for its cash grants received in the early 1980s, not the July 18,

1959 Law, as petitioners suggest. Moreover, Fafer asserts that the

Department's verification reports in this review indicate that,

contrary to petitioners assertions, the 1959 Law continued past the

years Fafer received benefits.

In addition, Fafer maintains that the record evidence in this

review indicates that only the level of subsidies differed between the

1959 and 1970 Laws, even after the administration of the program was

transferred to the GOW. Fafer claims that because it has not received

any new benefits under the 1970 law from the time of the original

investigation, to abandon the two-tiered analysis in this review would

be an usurpation of the Court's decision in Geneva Steel. Thus, the

Department does not have a basis for departing from its tiered-benefits

analysis in these Department's Position: In the Final Determination we

found cash grants and interest subsidies under the Law of 1970 to be

specific because eligibility was limited to firms located in certain

regions. However, because the same benefits were provided under the

1959 Law, which was found to be generally available (see Certain Steel

Products from Belgium 47 FR 39304; 39305 (September 7, 1982,) we

countervailed benefits under the 1970 Law only to the extent that they

exceeded benefits available under the 1959 Law. Based on the evidence

in the record of that case, we determined that this treatment was in

accordance with tiered levels of benefits in Final Negative

Countervailing Duty Determination: Certain Granite Products from Italy,

53 FR 27197 (July 19, 1988). In Geneva Steel, the CIT affirmed the

Department's decision on this issue, noting that it was consistent with

prior practice.

At verification in this review, we confirmed that the 1959 Law was

in effect in the Flanders and the Brussels-Capital regions of Belgium

prior to 1992, the period covered in the investigation. Therefore,

benefits under the 1959 Law were generally available in Belgium at the

time Fafer received its cash grants and interest rate subsidies

examined in the Final Determination. Moreover, there is no new evidence

on the record in this review that warrants a change in

[[Page 12989]]

this review of our finding in the Final Determination, that firms

qualifying for benefits under the 1970 Law would also qualify for

benefits under the 1959 Law. Therefore, we are not changing our

treatment of these subsidies received by Fafer prior to 1988 in these

Final Results.

Comment 3: Amortization of Countervailable Grants Using the Mid-Year

Convention

Petitioners argue that instead of using its standard amortization

method, the ``annuity due'' method, the Department should use the

``mid-year convention'' method to countervail the cash grants.

According to petitioners, the ``mid-year convention'' method of

amortizing subsidies is more accurate with respect to the commercial

reality of a company's ongoing production and sales activity because it

presumes that benefits are being used throughout the year and that

generally subsidies are being received in the middle of the year of

benefit. In contrast, the ``annuity due'' method is inconsistent with

commercial reality because it presumes that subsidies are always

received at the beginning of the year and that the subsidy benefits

allocated to that year are immediately expensed at that time. Moreover,

petitioners maintain that the mid-year convention method is consistent

with other allocation methods that the Department uses. For example, in

the remand determination in British Steel I, the Department reaffirmed

that financial events that occur sometime within a specific year should

be deemed to have occurred at the mid-point of the year to eliminate

any bias. (See Final Results of Redetermination Pursuant to Court

Remand on General Issue of Allocation, Case No. C-100-004 at 42 n.5

(June 30, 1995.) Petitioners assert that the Department's current

allocation method is not consistent with British Steel I because it

does not eliminate bias by taking into account events that occur at the

mid-point of the year.

In addition, petitioners claim that the mid-year convention is

consistent with the Department's view that a subsidy is deemed received

by a company on the actual date of receipt. Petitioners claim that this

method would, on average, more accurately reflect the date of receipt

across all programs.

Fafer argues that the Department has chosen to use the annuity due

method, and that the application of a different allocation methodology

is equivalent to a reallocation of subsidies for which the Department

has established benefit streams. Fafer maintains that the Department

has stated that in cases where an allocation period has been

established in an earlier segment of a proceeding, it will not

reallocate subsidies over a different period of time. In conclusion,

Fafer argues that the Department should continue to apply its standard

amortization methodologies in these Final Results.

Department's Position: The formula for allocating non-recurring

benefits over time, which was used in this review, has been a part of

the Department's longstanding practice since it appeared in the

Subsidies Appendix to Certain Cold-Rolled Carbon Steel Flat Products

from Argentina, 49 FR 18006 (April 26, 1984). As explained in the

Preamble to Countervailing Duties; Final Rule, 19 CFR Part 351, at 205

(November 25, 1998), we examined several alternative methodologies,

including the mid-year methodology and found these methodologies unduly

complicated. Our current methodology, which was applied in this case,

has been uncontroversial and worked well in past cases. Therefore, we

see no compelling need to change our methodology in this review and

have continued to apply our long-standing allocation methodology for

non-recurring grants in these Final Results.

Comment 4: Amortization Period Based on the IRS Class Asset Life Tables

Petitioners claim that the Department's company-specific average

useful life (AUL) methodology is flawed as is demonstrated by Fafer's

resulting calculation of an AUL that exceeds the period over which the

company actually depreciates its assets. Petitioners assert that

Fafer's calculated 26-year AUL is not acceptable given Fafer's

admission that no assets are depreciated for more than 20 years and

most assets are depreciated over 15 years or less. Moreover,

petitioners argue that the Department's company-specific AUL

methodology will provide inconsistent results when two companies with

similar asset bases use different depreciation methods. According to

petitioners, the Department's company-specific AUL methodology has not

been mandated by a Court or reviewing body, and is not required by any

international agreement. Therefore, petitioners contend that the

Department should return to the 15 year AUL period based on the

Internal Revenue Service (IRS) class asset life tables in these Final

Results.

In rebuttal, Fafer asserts that petitioners recognize that Fafer

derived its 26-year company-specific average useful life according to

the Department's instructions which were based on the CIT's decision in

British Steel I and upheld by the Court in British Steel II. Fafer

maintains that in British Steel I, the Court ruled against using the

IRS Class Asset Life Table to derive the allocation for non-recurring

subsidies. Fafer contends that as a result, the Department determined

``the most reasonable method of deriving the allocation period for the

nonrecurring subsidies is a company-specific average useful life of

non-renewable physical assets.'' See 63 FR at 48189.

In addition, Fafer contends that using the 15-year IRS amortization

rule would be in conflict with the tenets of the URAA that give

deference to the standards and generally accepted accounting principles

of the country and the company under investigation or review. Fafer

asserts that the company-specific AUL determined by the Department was

derived from questionnaire responses based on Fafer's own data.

Therefore, Fafer argues that a factually derived AUL should not be

altered for the convenience of the IRS rule, which does not

sufficiently address the actual allocation and accounting methods in

this review. Department's Position: As stated in our Preliminary

Results, we have applied in this administrative review the methodology

affirmed in the remand determination British Steel II 929 F.Supp. 426,

439 (CIT 1996). With regard to petitioners' claim that the Department's

methodology is flawed because Fafer's calculated AUL does not

correspond to the company's reported maximum depreciation rate of 20

years, a company's asset depreciation schedule for accounting purposes

does not always correspond to the productive life of these assets. We

explain in the Preamble to the Department's 1997 Regulations that

assets that are in service, even if they have been fully depreciated,

are included in the AUL calculation. See 62 FR 8818; 8828 (February 26,

1997). In Fafer's case for example, several assets in use since the

1960s that had been fully depreciated in accordance with the company's

accounting policy, such as the electric arc furnace, the four high

rolling mill, and the continuous caster, have been included in the AUL

calculation. Therefore, Fafer's depreciable lives for accounting

purposes are not commensurate with the AUL calculation which includes

the values of fully depreciated assets while they are still in service.

Accordingly, we are using Fafer's company-specific AUL of 26 years to

allocate non-recurring grants that were not previously allocated in the

original investigation.

[[Page 12990]]

Comment 5: The Countervailability of Grants Received by Fafer's

Consolidated Subsidiaries

Petitioners argue that in the Preliminary Results, the Department

failed to countervail grants provided since the original investigation

to two of Fafer's affiliates, PFM and CD. Petitioners assert that PFM

and CD are almost wholly-owned by Fafer and are fully consolidated with

Fafer. Moreover, both of these companies are located within Fafer's

production facilities. Petitioners maintain that at verification, the

Department found that PFM and CD received cash grant subsidies under

the Law of 1970. In addition, petitioners contend that the verification

proves that these grants benefitted subject merchandise. Therefore,

petitioners argue that the Department should countervail these grants

in the Final Results of this review.

Petitioners note that at verification in this review, the

Department found that the two grants received by PFM in 1996 were for

sheet metal finishing and painting and for sand blasting and painting

of flat, steel or nonferrous products, prior to their production. The

grant received by CD in 1993 was for an uncoiling machine. Petitioners

dispute company officials claims made at verification that the steel

coils that CD and PFM decoil, which are produced on a STECKEL mill,

were too thin to be cut-to-length carbon steel plate and that PFM's

processing equipment was not related to the production of the subject

merchandise because the subject merchandise was not painted, sand

blasted, or otherwise treated. Petitioners acknowledge that coils

produced on the STECKEL mill which are sold in coils could be outside

the scope of this countervailing duty order on cut-to-length carbon

steel plate. However, petitioners assert that if these same coils are

decoiled and cut, they are within the scope of this order. Petitioners

contend that at verification, the Department observed that decoiling

and slitting of steel in coils occurs at CD and PFM's facilities.

Moreover, petitioners argue that the Fafer verification report

indicates that coils made on the STECKEL mill are less than 10 mm

thick, while the scope of the order covers plate as thin as 4 mm.

Finally, petitioners note that at verification of the 1995-1996

administrative review of the antidumping duty order on cut-to-length

carbon steel plate, the Department found that PFM's production line

``is used mainly for carbon steel products, both structural and

pressure vessel'' and that CD ``is used to process carbon, alloy, and

stainless steel coils.'' 1

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

\1\ (See Verification of Cost of Production and Constructed

Value Data dated March 24, 1997, public version on file in CRU).

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

Petitioners contend that Fafer has not demonstrated that the grants

to CD and PFM are tied to products other than the subject merchandise.

Petitioners further argue that the evidence on the record indicates

that the decoiling machine is used to produce cut-to-length plate, or

at least can be used to produce the subject merchandise. Moreover,

petitioners argue that contrary to the official's claim at verification

(that PFM's grant to purchase sand blasting and painting equipment was

unrelated to the subject merchandise because ``the subject merchandise

did not have any of these finishings,'' (see Fafer's Verification

Report at 6)) the countervailing duty order includes all plate products

``whether or not painted, varnished, or coated with plastics or other

nonmetallic substances.'' See Preliminary Results, 63 FR 48189.

Petitioners further claim that according to the publication Iron and

Steel Works of the World, plates up to 3,000mm wide produced by the

STECKEL mill have been available since 1994 from Fafer. See Iron and

Steel Works of the World at 25 (Metal Bulletin Books 12th ed.) (1997).

Petitioners also dispute Fafer's claim that CD and PFM did not

engage in any financial transactions with Fafer, noting that the

company does not cite any record evidence to support this assertion.

Petitioners contend that subsidies to CD's and PFM's should be included

in the numerator because the production services that they perform for

Fafer-produced and sold products is included in the denominator (i.e.,

Fafer's total sales). Thus, petitioners claim, CD's and PFM's value-

added is a part of Fafer's reported total sales and grants these

companies received must be included in the numerator.

In response, Fafer argues that there is no evidence on the record

that indicates that Fafer's subsidiaries, CD and PFM, produced the

subject merchandise during the POR. According to Fafer, petitioners

acknowledge that coils made on a STECKEL mill are potentially outside

the scope of the countervailing duty order. Then, Fafer asserts,

further finished coils should also be outside the scope. Moreover, in

support of its assertion that subsidies to CD and PFM in any case would

not be attributable to Fafer, the company cites section 351.524(b)(6)

of the Department's 1997 proposed regulations, which state that ``[t]he

Secretary normally will attribute a subsidy to the products produced by

the corporation that received the subsidy.''

Fafer claims that the company's sales of subject merchandise to the

U.S. during the POR did not include any of the processing described by

petitioners at either of the two subsidiaries. Fafer further maintains

that the company verification report indicates that CD and PFM own

their own facilities and do not have the production equipment that

Fafer does. Fafer contends that although petitioners argue that the

machinery at CD and PFM could be used to process subject merchandise,

in fact, Fafer's shipment of the subject merchandise to the U.S. during

the POR did not have any processing done at CD or PFM. Therefore, Fafer

argues the issue is whether it produced subject merchandise that was

exported to the U.S. which benefitted from the further processing at CD

and PFM.

Fafer contends that countervailing CD and PFM's grants in these

final results would contradict the Court of International Trade's

rulings in Aimcor et. al. v. U.S. 18 CIT 1117; 871 F. Supp 447, (1994),

and Armco, Inc. v. U.S. (Armco), 14 CIT 211; 733 F. Supp. 1514 (1990).

Specifically, Fafer asserts that under these Court decisions, a subsidy

received by a subsidiary may not be countervailed against products

exported by the parent company, unless the subsidy was tied to the

subject merchandise exported by the parent.

Department's Position: We reject respondent's assertion that in

order for subsidies to CD and PFM to be countervailable, the exports of

the subject merchandise to the United States during the POR must have

been processed by CD or PFM. Initially, such an approach is not

required by the countervailing duty statute, which specifically states

that ``the administering authority is not required to consider the

effect of the subsidy in determining a subsidy exists.'' Section

771(5)(C) of the Act. Under Fafer's approach, however, the Department

would be required to examine specific sales from subsidized

subsidiaries that are capable of producing subject merchandise to

determine, on a sale by sale basis, whether the merchandise exported to

the U.S. ``passed-through'' the subsidiary. Then, and only then, under

respondent's approach, would a subsidiary's countervailable subsidies

be attributable to the subject merchandise. Presumably, this approach

could lead the Department to countervail such non-recurring subsidies

in one review, but not in another. Such an approach leads to absurd

results and is simply not

[[Page 12991]]

required under law or practice. Again, as stated in the GIA, ``nothing

in the statute directs the Department to consider the use to which

subsidies are put or their effect on the recipient's subsequent

performance * * *. nothing in the statute conditions countervailability

on the use or effect of a subsidy. Rather, the statute requires the

Department to countervail an allocated share of the subsidies received

by producers, regardless of their effect.'' 58 FR at 37260; see also

British Steel v. United States, 879 F. Supp. 1254, 1298 (CIT 1995)

(British Steel), appeals docketed, Nos. 96-1401 to -06 (Fed. Cir. June

21, 1996); British Steel Corp v. United States, 9 CIT 85, 95-96, 605 F.

Supp. 286, 294-95 (1985) (``[I]t is unnecessary to trace the use'' of

funds), citing Michelin Tire Corp. v. United States, 4 CIT 252, 255

(1982), vacated on agreed statement of facts, 9 CIT 38 (1985).

As outlined above, in the Facts Available section of this notice

because of the level of affiliation and the fact that both subsidiaries

are capable of producing subject merchandise, it is appropriate to

attribute CD and PFM's cash grants to Fafer's total sales including

sales of the subsidiaries.

We also disagree with respondent's assertion that the Court's

decisions in Aimcor and Armco do not permit the attribution of CD and

PFM's benefits to Fafer. Respondent reliance on these cases for the

proposition that the Department may not attribute countervailable

benefits to subsidiary companies to sales of the parent company, unless

the parent's shipment of the subject merchandise exported to the U.S.

during the POR was processed by the subsidiaries, is misplaced. The

facts in Aimcor and Armco are substantially different from those in the

instant review. In Aimcor, the relationship between parent and

subsidiary was the critical factor in determining whether subsidies to

the subsidiary are attributable to the parent company. Moreover, the

issue in Aimcor was whether a subsidy had been bestowed at all. The

issue was not whether countervailable subsidies that had been bestowed

on a wholly-owned subsidiary were attributable to the parent company.

Furthermore, the Court's ruling in Armco does not support Fafer's

position. As we noted in Certain Hot-Rolled Lead and Bismuth Carbon

Steel Products From the United Kingdom; Final Results of Countervailing

Duty Administrative Review 62 FR 53306 (October 14, 1997) the court

understood that attribution decisions in the Department's cases

``turn[ed] essentially upon the Department's findings in particular

cases.'' (See Certain Hot-Rolled Lead and Bismuth Carbon Steel Products

From the United Kingdom; Final Results of Countervailing Duty

Administrative Review 63 FR 18367; 18371 (April 15, 1998). The court

also recognized that ``the Department has attributed benefits received

by one company to a related company.'' Id. (emphasis in original).

Accordingly, we do not agree that Armco represents an endorsement of

respondent's position of not attributing subsidies received by a

subsidiary to the parent company.

Comment 6: Tax Subsidies Under the Law of 1970

According to petitioners, in Preliminary Affirmative Countervailing

Duty Determination and Alignment of Final Countervailing Duty

Determination with Final Antidumping Duty Determination: Stainless

Steel Plate in Coils from Belgium (Stainless Steel), the Department

found additional tax subsidies under Articles 15 and 16 of the Law of

1970. See Stainless Steel, 63 FR 47239 at 47242 (September 4, 1998).

Under Article 15, firms can declare twice the standard depreciation for

assets acquired using grants received under the 1970 Law, and under

Article 16, assets obtained with 1970 Law grants can be exempted from

real estate taxes for up to five years. Petitioners assert that the

Department preliminarily found both of these programs countervailable

and calculated the subsidy rate from the accelerated depreciation

program and the real estate tax exemption program to be 0.49 percent ad

valorem and 0.04 percent ad valorem, respectively.

Petitioners contend that at verification Fafer and the GOW

maintained that Fafer had not received any benefits under these

programs, however, they failed to include the use of these programs by

CD and PFM, Fafer's affiliates. Petitioners argue that the verification

exhibits show that PFM may have benefitted from these programs.

Moreover, petitioners assert that because Fafer failed to disclose

benefits under these programs, the Department should use facts

available and apply the rates calculated in Stainless Steel to

calculate the benefits received by Fafer in these Final Results.

In rebuttal to petitioners' assertion that PFM's double

depreciation should be applied to Fafer, respondent maintains that PFM

was not involved in the production, processing, or export of the

subject merchandise to the U.S. during the POR. Fafer contends that the

verification reports indicate that it did not receive these tax

subsidies and that such benefits were not attached to its exports. In

conclusion, Fafer asserts that PFM's supposed benefits from accelerated

depreciation should not be included in the calculation of Fafer's net

subsidy rate in these Final Results.

Department's Position: Although PFM's verification exhibits

indicate that it was approved to receive assistance under additional

tax programs under the Law of 1970, we have no evidence on the record

that PFM actually received these benefits during the POR. With respect

to real estate taxes, information collected at verification indicates

that CD and PFM did not use these grants to purchase real estate.

Moreover, with regard to benefits from accelerated depreciation,

Fafer's consolidated financial statement, which includes PFM, indicates

that the consolidated group did not use accelerated depreciation for

financial reporting purposes during the POR. Therefore, we are not

including benefits to PFM from these programs in the calculation of

Fafer's net subsidy rate in these Final Results. We will, however,

examine benefits under these programs provided to Fafer's affiliates,

CD and PFM in future administrative reviews.

Comment 7: Promotion Brochure Loan

Petitioners argue that in the Preliminary Results, the Department

incorrectly found that the fixed-rate, long-term loan Fafer received

for the publication of the promotion brochure did not provide

countervailable benefits, because the Department compared the interest

rate paid on the loan to (an inaccurate) benchmark rate, that was lower

than the program rate. Petitioners also assert that the Department

confirmed at verification that no interest was paid on this loan during

the POR. Furthermore, petitioners argue that the verification reports

indicate that Fafer does not anticipate paying any interest on the loan

which is granted on a contingent basis. The loan agreement indicates

that the company does not have to make any payments on this loan until

after five years, at which time the firm is required to pay only if the

targeted export sales volume and profit level has been obtained during

the five year period. Petitioners maintain that the likelihood of Fafer

meeting the contingent export sales and profit target levels is

unlikely. Therefore, the Department should treat this loan as a grant

pursuant to section 351.505(d)(2) of the Department's regulations in

these Final Results. If not, petitioners assert that this loan should

at a minimum be treated as an interest-free contingent liability loan

under

[[Page 12992]]

section 351.505(d)(1) of the Department's regulations.

In rebuttal, Fafer argues that the Department should not

countervail the export promotion brochure loan. Fafer maintains that

although the loan was received in 1996, the end result of the loan will

not be known until it matures. According to Fafer, there is no

information pertaining to whether this loan will be forgiven or whether

it will be repaid at the fixed rate specified in the agreement. Fafer

argues that until the loan matures and it is known whether it will be

repaid and at what rate of interest it is repaid, there may be no

benefit. On the other hand, if at maturity the total amount of the loan

is not repaid, Fafer contends that the portion of the loan that is

unpaid would be treated as a grant in the year the loan is forgiven.

Further, Fafer argues that even assuming the loan is not repaid, the

only amount to be considered during the POR would be the annual amount

of interest for part of 1996. Fafer maintains that the benefit from

this scenario is less than 0.00015 percent and should not be included

in the countervailing duty rate in these Final Results.

Department's Position: We agree with petitioners that this loan

provides countervailable benefits during the POR. However, at

verification we found that the assistance provided under this program

was an outstanding loan during the POR, and that this loan had not yet

been forgiven. Moreover, the respondent had no knowledge of whether it

would meet the targeted export goals which would result in repayment of

the loan. Because the loan under this program has not yet been

converted into a grant, we are treating this assistance as a contingent

liability loan in these Final Results. See New Programs Determined to

Confer Subsidies section above for a detailed description of the

calculation of this subsidy.

Comment 8: Promotion Audio-Visual Loan

Petitioners argue that at verification, the Department found that

Fafer had received an interest-free loan in 1990 to produce an audio-

visual calling card. Petitioners assert that the agreement for this

loan indicates that the company must repay the loan only if it obtains

the minimum volume and profit increases in export sales required within

the five year time period which begins at the closing of the first

fiscal year in which the loan is received. Petitioners also maintain

that although the loan agreement indicates that the loan was interest-

free for only five years, there is no indication that Fafer paid any

interest or made any repayment on the principle. Moreover, petitioners

contend that on April 7, 1997, the GOW converted the loan into a grant,

and Fafer subsequently wrote the loan off its books and amortized the

amount.

Petitioners argue that this loan, which was forgiven in 1997,

should be countervailed as a grant during the POR because Fafer knew

that the contingency, the minimum threshold level increase in exports

and profits, would not be met in 1996, the POR. Moreover, petitioners

maintain that the Department should further countervail the portion of

the subsidy which was an interest free loan until the time of

forgiveness.

Department's Position: We agree with petitioners that the loan for

an audio-visual calling card found at verification conferred benefits

during the POR. Our calculation of the benefit from this program is

described above under the section titled ``New Programs Determined to

Confer Subsidies.'' We found at verification that this loan was

outstanding during the POR and became a grant in 1997, subsequent to

the POR. Therefore, we have treated this assistance as a contingent

liability interest-free loan in these Final Results and calculated the

benefit using information collected at verification as discussed in the

Facts Available section of this notice.

Comment 9: Fafer's Consolidated Sales Value

Petitioners argue that since two of Fafer's consolidated

subsidiaries received countervailable subsidies during the POR, the

Department should use Fafer's consolidated sales value as the

denominator instead of the unconsolidated sales value used in the

Preliminary Results. Petitioners maintain that the Department sought

data on consolidated sales at verification and Fafer claimed that it

was unable to calculate consolidated sales on a calendar year basis.

Accordingly, petitioners argue that the Department should use facts

available to calculate the consolidated sales value and use this

information as the denominator in these Final Results.

In rebuttal, Fafer argues that it has provided sufficient

information regarding the fiscal/calendar year and that the company

also submitted half-year data to assist in tracking company records.

Fafer contests petitioners' suggestion of constructing consolidated

sales based on percentage factors, especially since the sales of

Fafer's subsidiaries are not at issue. Fafer asserts that the

verification report supports the Preliminary Results in which the

Department used Fafer's unconsolidated sales. Accordingly, Fafer argues

unconsolidated sales should be used in the Department's calculations of

these Final Results.

Department's Position: Because we are finding that grants provided

under the 1970 Law to Fafer's subsidiaries, CD and PFM, conferred

countervailable benefits on the subject merchandise during the POR (see

Comment 5 above), we must include their sales in the denominator to

determine the subsidy rate. Fafer's consolidated sales for the POR have

not been submitted in this review, notwithstanding Department requests

for this information, and we were not able to obtain this information

at verification. Therefore, in accordance with Section 776(a) of the

Act, we have used facts available to derive Fafer's consolidated sales.

To calculate Fafer's consolidated sales, we reduced Fafer's

unconsolidated sales for the POR, by the same percentage difference

between Fafer's 1995/96 fiscal year consolidated and unconsolidated

sales in the company's financial statements. We applied this ratio to

Fafer's reported unconsolidated 1996 sales to obtain an estimated

denominator for the POR. We are using this calculated consolidated

sales figure in these Final Results.

Comment 10: Green Light Treatment for the Research and Development Loan

(R&D Loan) Under the Law of 1970

Fafer first maintains that the Department did not provide any

substantive reason for denying its green light claim for the Research

and Development Loan (R&D Loan) in the preliminary results, and that

the claim should be considered for these final results. According to

Fafer, the R&D Loan meets the greenlight criteria of section 771(5B)(B)

of the Act.

According to petitioners, the Department correctly rejected Fafer's

claim that the interest-free R&D loan should be treated as a green

light subsidy in the preliminary results. Petitioners assert that the

Department properly rejected Fafer's claim on both a procedural and

substantive grounds. Moreover, petitioners argue that Fafer has not

demonstrated that the R&D loan meets the statutory criteria for green

light claims under the conditions of the SCM Agreement.

Petitioners also argue that because interest subsidies under the

1970 Law are specific, the interest-free loan is countervailable.

Petitioners contend that the Department stated in its preliminary

results that this program was specific because it provides incentives

to promote economic development in designated development zones.

[[Page 12993]]

Petitioners assert that this determination is consistent with the final

determination in which the Department found all grants and interest

subsidies provided under the 1970 Law to be specific and

countervailable.

Petitioners contend that subsequent to the preliminary results of

this review, the GOB made a new specificity claim. Specifically,

petitioners maintain that the GOB claims that the first part of the

1970 Law deals with aid to development zones and is regionally

specific, while the second part of the 1970 Law involves research and

development programs and is generally available. Petitioners argue that

the record does not support this claim.

Petitioners assert that Article 25 of the 1970 law, under which

this subsidy was granted, does not indicate that assistance under this

Article is generally available. Petitioners argue that at verification,

the Department found that this subsidy was provided under Article 25 of

the 1970 Law and that equivalent benefits were not available to firms

outside of the development zone areas. Thus, petitioners contend,

benefits bestowed under this program were regionally specific at the

time Fafer received its benefits.

Further, petitioners argue that to the extent Article 25 subsidies

were changed by later amendments to the 1970 Law, these amendments do

not affect the specificity of Fafer's loan. Petitioners contend that at

verification the Department found that Article 25 had been replaced by

the Walloon Decree of July 5, 1990. However, petitioners argue this

change was not implemented until September 29, 1994. Petitioners assert

that Fafer applied for its loan in 1988, was approved for the loan in

1989, and received all payments by 1992, years before changes to this

program took place. Therefore, petitioners argue that Fafer has not

demonstrated that this program is not specific.

Department's Position: As noted above, in the section titled

Programs Found Not to Confer Subsidies, on the basis of our findings at

verification, we find this program to be not specific in these final

results. See (See Memorandum to Holly A. Kuga from David Mueller dated

March 8, 1999, Decision Memorandum Re: Specificity of the Research and

Development (R&D) Aid in the 1996 Countervailing Duty Administrative

Review of Certain Cut-to-Length Carbon Steel Products From Belgium,

public version on file in room B-099 of the main Commerce Building.)

Accordingly, we have not addressed Fafer's claim for green light

status.

Final Results of Review

In accordance with 19 CFR 351.221(b)(4)(i), we calculated an

individual subsidy rate for each producer/exporter subject to this

administrative review. For the period January 1, 1996 through December

31, 1996, we determine the net subsidy for Fafer to be 0.35 percent ad

valorem.

As provided for in the Act, any rate less than 0.5 percent ad

valorem in an administrative review is de minimis. Accordingly, the

Department intends to instruct Customs to liquidate, without regard to

countervailing duties, shipments of the subject merchandise from Fafer

exported on or after January 1, 1996, and on or before December 31,

1996. Also, the cash deposits required for these companies will be

zero.

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

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

investigated and reviewed companies, the procedures for establishing

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

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

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

normally cover only those companies specifically named. See 19 CFR

351.213(b). Pursuant to 19 CFR 351.212(c), for all companies for which

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

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

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

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

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

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

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

Therefore, the cash deposit rates for all companies except those

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

We will instruct Customs to continue to collect cash deposits for

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

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

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

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

recently completed administrative proceeding conducted under the URAA.

If such a review has not been conducted, the rate established in the

most recently completed administrative proceeding pursuant to the

statutory provisions that were in effect prior to the URAA amendments

is applicable. See Final Determination. These rates shall apply to all

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

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

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

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

the time of entry.

This notice serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

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

return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

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

This administrative review and notice are issued and published in

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

1675(a)(1) and 19 U.S.C. 1677f(i)(7)).

Dated: March 8, 1999.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-6288 Filed 3-15-99; 8:45 am]

BILLING CODE 3510-DS-P