# Final Affirmative Countervailing Duty Determination; Stainless Steel Plate in Coils from Belgium

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## Record

- **Collection:** Federal Register
- **Document type:** Notice
- **Published:** March 31, 1999
- **Citation:** 64 FR 15567

## Text

DEPARTMENT OF COMMERCE

International Trade Administration
[C-423-809]

Final Affirmative Countervailing Duty Determination; Stainless
Steel Plate in Coils from Belgium

AGENCY: Import Administration, International Trade Administration, U.S.
Department of Commerce.

EFFECTIVE DATE: March 31, 1999.

FOR FURTHER INFORMATION CONTACT: Zak Smith, Stephanie Hoffman, James
Breeden, or Melani Miller, AD/CVD Enforcement, Group I, Office 1,
Import Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-
0189, 482-4198, 482-1174, or 482-0116, respectively.

Final Determination

The Department of Commerce determines that countervailable
subsidies are being provided to producers and exporters of stainless
steel plate in coils from Belgium. 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 on March 31, 1998, by
Armco, Inc., Lukens Inc., Butler Armco Independent Union, Zanesville
Armco Independent Organization, and the United Steelworkers of America,
AFL-CIO/CLC (``the petitioners'').

Case History

Since the publication of the preliminary determination in the
Federal Register on September 4, 1998 (63 FR 47239) (``Preliminary
Determination''), the following events have occurred:
We conducted verification in Belgium of the questionnaire responses
from the Government of Flanders (``GOF''), the Government of Belgium
(``GOB''), SIDMAR N.V. (``Sidmar''), and ALZ N.V. (``ALZ'') from
November 9 through November 20, 1998. We postponed the final
determination of this investigation until March 19, 1999 (see
Countervailing Duty Investigations of Stainless Steel Plate in Coils
From Belgium, Italy, the Republic of Korea, and the Republic of South
Africa; Notice of Extension of Time Limit for Final Determinations, 64
FR 2195 (January 13, 1999)). The petitioners and ALZ filed case briefs
on February 10, the GOB filed a case brief on February 11, and we
received rebuttal briefs from the petitioners and ALZ on February 18,
1999.

The Applicable Statute and Regulations

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 of Commerce's (``the Department's'') regulations are
to the regulations codified at 19 CFR part 351 (April 1998).

Scope of Investigation

For purposes of this investigation, the product covered is
stainless steel plate in coils. Stainless steel is an alloy steel
containing, by weight, 1.2 percent or less of carbon and 10.5 percent
or more of chromium, with or without other elements. The subject plate
products are flat-rolled products, 254 mm or over in width and 4.75 mm
or more in thickness, in coils, and annealed or otherwise heat treated
and pickled or otherwise descaled. The subject plate may also be
further processed (e.g., cold-rolled, polished, etc.) provided that it
maintains the specified dimensions of plate following such processing.
Excluded from the scope of this investigation are the following: (1)
Plate not in coils, (2) plate that is not annealed or otherwise heat
treated and pickled or otherwise descaled, (3) sheet and strip, and (4)
flat bars.
The merchandise subject to this investigation is currently
classifiable in the Harmonized Tariff Schedule of the United States
(``HTSUS'') at subheadings: 7219.11.00.30, 7219.11.00.60,
7219.12.00.05, 7219.12.00.20, 7219.12.00.25, 7219.12.00.50,
7219.12.00.55, 7219.12.00.65, 7219.12.00.70, 7219.12.00.80,
7219.31.00.10, 7219.90.00.10, 7219.90.00.20, 7219.90.00.25,
7219.90.00.60, 7219.90.00.80, 7220.11.00.00, 7220.20.10.10,
7220.20.10.15, 7220.20.10.60, 7220.20.10.80, 7220.20.60.05,
7220.20.60.10, 7220.20.60.15, 7220.20.60.60, 7220.20.60.80,
7220.90.00.10, 7220.90.00.15, 7220.90.00.60, and 7220.90.00.80.
Although the HTSUS subheadings are provided for convenience and Customs
purposes, the written description of the merchandise under
investigation is dispositive.

Injury Test

Because Belgium is a ``Subsidies Agreement Country'' within the
meaning of section 701(b) of the Act, the International Trade
Commission (``ITC'') is required to determine whether imports of the
subject merchandise from Belgium materially injure, or threaten
material injury to, a U.S. industry. See section 701(a)(2) of the Act.
On May 28, 1998, the ITC published its preliminary determination
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 Belgium of the subject merchandise
(see 63 FR 29251 (May 28, 1998)).

Period of Investigation

The period for which we are measuring subsidies (the ``POI'') is
calendar year 1997.

Subsidies Valuation Information

Responding Producers

The GOB identified one producer of the subject merchandise that
exported to the United States during the POI, ALZ. There are also two
subsidiaries of ALZ which are involved in the production of the subject
merchandise, ALBUFIN N.V. (``Albufin'') and AL-FIN N.V. (``Alfin''),
and we have included any subsidies to these companies in the subsidy
rate for ALZ. Furthermore, Sidmar owns either directly or indirectly
100 percent of ALZ's voting shares and is the overall majority
shareholder of ALZ.

Benchmarks for Long-term Loans and Discount Rates

ALZ and Sidmar reported that they obtained long-term commercial
loans contemporaneously with the receipt of certain government loans or
grants. Where appropriate, we have used these

[[Page 15568]]

company-specific interest rates as the long-term loan benchmark
interest rate or discount rate (see Comments 5 and 6, below). For those
years in which ALZ or Sidmar did not receive commercial loans, we are
using national average rates for long-term, fixed-rate debt. In the
Preliminary Determination, we used rates reported by the GOF as the
national average rates. However, as explained in the Interested Party
Comments section below, we determine that those rates are inappropriate
benchmarks and have changed our national average benchmarks for this
final determination. For further discussion on benchmarks and discount
rates, see Comment 4 in the Interested Party Comments section below.

Allocation Period

In the past, the Department has relied upon information from the
U.S. Internal Revenue Service on the industry-specific average useful
life of assets in determining the allocation period for non-recurring
subsidies (see the General Issues Appendix (``GIA'') to the Final
Affirmative Countervailing Duty Determination: Certain Steel Products
from Austria, 58 FR 37217, 37225 (July 9, 1993)). However, in British
Steel plc v. United States, 879 F. Supp. 1254 (CIT 1995) (``British
Steel I''), the U.S. Court of International Trade (``CIT'') ruled
against this allocation methodology. In accordance with the CIT's
remand order, the Department calculated a company-specific allocation
period for non-recurring subsidies based on the average useful life
(``AUL'') of non-renewable physical assets. This remand determination
was affirmed by the CIT on June 4, 1996. See British Steel plc v.
United States, 929 F. Supp. 426, 439 (CIT 1996) (``British Steel II'').
In recent countervailing duty investigations, it has been our practice
to follow the CIT's decision in British Steel II, and to calculated a
company-specific allocation period for all countervailable non-
recurring subsidies. Thus, for purposes of this investigation we have
determined the allocation period for non-recurring subsidies using
company-specific AUL data because it was reasonable and practicable to
do so.
As in the Preliminary Determination, we determine that the AUL for
ALZ is 15 years. In a change from the Preliminary Determination
however, we have allocated non-tied subsidies received by Sidmar over
Sidmar's AUL, 19 years.

Equity Methodology

Consistent with the Department's methodology, the first question in
analyzing an equity infusion is whether, at the time of infusion, there
was a market price for newly-issued equity (see GIA, 58 FR 37239). The
Department will find an equity investment to be inconsistent with the
usual practice of a private investor if the market-determined price for
equity is less than the price paid by the government for the same form
of equity purchased directly from the firm. In this investigation, for
those years in which market prices do not exist, the Department has
conducted an equityworthiness analysis of the firm as described in the
GIA, 58 FR at 37239. See 1985 Debt to Equity Conversion and Purchase of
ALZ Shares in the program descriptions, below.

I. Programs Determined To Be Countervailable

A. Regional Subsidies under the Economic Expansion Law of 1970

The 1970 Law offers various incentives to enterprises located
within designated disadvantaged regions. While the 1970 Law is
currently administered by the GOF, the GOB originally oversaw the
implementation of 1970 Law benefits to disadvantaged regions throughout
Belgium. Pursuant to the overall devolution of power from the GOB to
the regional governments since the early 1980s, the authority to
administer the 1970 Law has been transferred to the regional
governments. With respect to Flanders, many of the 1970 Law subsidy
programs have been implemented and administered by the GOF since the
late 1980s and the ``execution modalities'' have been amended by
several Flemish decrees. Currently, funding for programs under the 1970
Law is included in a lump sum amount from the GOB as part of the funds
needed to finance the overall operation of the GOF. The GOF retains
full authority over the distribution of funds within its budget.
ALZ received several types of assistance under the 1970 Law (the
initiation and Preliminary Determination notices identified these
subsidies as: 1993 Expansion Grant, 1994 Environmental Grants,
Investment and Interest Subsidies, Accelerated Depreciation, and Real
Estate Tax Exemption). Most of this assistance was provided after the
GOF assumed control of the subsidy programs. Therefore, we are treating
the GOF as the authority providing these subsidies. However, ALZ
received one grant in 1983 (identified in the initiation notice as
Investment and Interest Subsidies). Because this grant was received
prior to the GOF takeover of 1970 Law authority, we consider this one
grant as having been bestowed by the GOB.
The GOF framework of economic expansion consists of the 1970 Law
(for medium and large-sized businesses located in a disadvantaged
region), the Act of August 4, 1978 (``1978 Act,'' for small businesses
and one-man companies), and the 1993 Economic Expansion Decree (``1993
Decree,'' for medium and large-sized businesses not eligible for
assistance under the 1970 Law). The 1993 Decree replaced the Economic
Expansion Law of 1959 (``1959 Law'') which was repealed in 1991. These
laws offer various subsidies designed to promote expansion, employment,
investment, research and development, and conformance with
environmental standards (Vlaams Reglement betreffende de
Milieuvergunning, ``VLAREM''). Because the 1970 Law is part of a
framework of economic expansion, the question arises whether particular
assistance provided under the various laws should be considered one
program for specificity purposes.
In the Final Affirmative Countervailing Duty Determinations:
Certain Steel Products from Belgium, 58 FR 37273 (July 9, 1993)
(``Certain Steel''), we determined that assistance provided under the
1970 Law complemented that provided under the 1959 Law, because it
generally increased the amount of assistance for companies located in
certain development zones. Subsidies provided pursuant to the 1959 Law
were found not countervailable in the Final Affirmative Countervailing
Duty Determinations: Certain Steel Products From Belgium, September 7,
1982 (47 FR 39305) (``Belgian Steel'') because they were not specific.
Therefore, in Certain Steel, we countervailed benefits under the 1970
Law only to the extent they exceeded benefits available under the 1959
Law (see Certain Steel at 37275 and 37289 and Sec. 355.44(n) of the
Department's 1989 Proposed Regulations (Proposed Rules, Department of
Commerce, International Trade Administration, Countervailing Duties, 54
FR 23366, 23380 (May 31, 1989))).
ALZ has argued for the same treatment in this case. However, as
noted above, the 1959 Law was repealed in 1991 and replaced with the
Flemish 1993 Decree. Therefore, the question is whether subsidies
provided under the current economic expansion laws--the 1978 Act, the
1993 Decree and the 1970 Law--should be considered as one program for
specificity purposes. We examined each subsidy received by ALZ and
Albufin under the context of all three laws and determine that
environmental grants and

[[Page 15569]]

environmental real estate tax exemptions provided pursuant to these
laws are integrally linked. For further discussion, see Comment 17 in
the Interested Party Comments and the Memorandum to Richard Moreland,
``Specificity of Assistance Provided Pursuant to the Economic Expansion
Laws,'' dated March 19, 1999 (``Economic Expansion Memorandum'').
Moreover, we determine that these programs are not specific and,
therefore, not countervailable. For further discussion, see Comments 18
and 20 in the Interested Party Comments section.
The other subsidies received by Albufin under the 1970 Law (i.e.,
the 1993 Expansion Grant, the Real Estate Tax Exemption for Albufin's
expansion investment, and Accelerated Depreciation) are either not
available to large companies under the 1993 Decree or the 1978 Act, or,
in the case of the 1993 Expansion Grant, the 1993 Decree was not in
effect at the time the subsidy was approved. Therefore, we determine
that these subsidies provided under the 1970 Law cannot be integrally
linked with the 1993 Decree or the 1978 Act. For further discussion,
see Comment 17 in the Interested Party Comments section and the
Economic Expansion Memorandum.
1. 1993 Expansion Grant
The GOF gave Albufin a cash grant in 1994 to construct an annealing
and pickling line. The grant is a financial contribution as described
in section 771(5)(D)(i) of the Act which provides a benefit to the
recipient in the amount of the grant. Expansion grants are only
available to large firms under the 1970 Law, and as noted above,
benefits under the 1970 Law are available only to firms in certain
regions of Flanders. On this basis, we determine that this program is
specific under section 771(5A)(D)(iv) of the Act. Therefore, the 1993
Expansion Grant received by Albufin is countervailable within the
meaning of section 771(5) of the Act.
We further determine that this grant is non-recurring because the
company could not expect to receive it on an ongoing basis. Because the
benefit to Albufin was below 0.50 percent of ALZ's sales in the year of
receipt, we expensed the grant in that year. Thus, Albufin received no
benefit during the POI.
2. Investment and Interest Subsidies
The petitioners alleged that ALZ's financial statements for 1996
and 1997 show entries for ``investment subsidies'' and ``interest
subsidies.'' According to ALZ, the majority of these figures are
captured under the heading 1994 Environmental Grants (addressed below).
However, as mentioned above, in 1983, ALZ received one cash grant from
the GOB under the old system of assistance. At that time, the 1959 Law
was still in effect.
We determine that this grant received by ALZ is countervailable
within the meaning of section 771(5) of the Act. The 1983 grant is a
financial contribution as described in section 771(5)(D)(i) of the Act.
Because the countervailable portion of the assistance was received from
the GOB pursuant to the 1970 Law and, as mentioned above, benefits
under the 1970 Law were available only to firms in certain regions of
the country, we determine that the program is specific under section
771(5A)(D)(iv) of the Act.
Furthermore, because cash grants of this nature were also available
to companies under the 1959 Law, we determine that only the difference
in the assistance level between the two laws constitutes a
countervailable benefit (see Certain Steel, 58 FR 37273, 37275). To
derive the benefit, we calculated the difference in the benefit level
between what was actually granted pursuant to the 1970 Law and what
could have been received pursuant to the 1959 Law.
We further determine that this grant is non-recurring because it
was not provided on an ongoing basis. In calculating the benefit, we
applied the Department's standard grant methodology. We divided the
benefit attributable to the POI by ALZ's total sales during the POI. On
this basis, we determine the countervailable subsidy to be 0.02 percent
ad valorem.
3. Accelerated Depreciation
Article 15 of the 1970 Law allows certain companies to declare
twice the standard depreciation for assets acquired using grants
bestowed under the law. The tax benefit is a financial contribution as
described in section 771(5)(D)(ii) of the Act which provides a benefit
to the recipient in the amount of the tax savings. Because only
enterprises situated in certain development zones are eligible to apply
for accelerated depreciation, we determine that the program is specific
under section 771(5A)(D)(iv) of the Act. Therefore, we determine that
this tax benefit received by ALZ is countervailable within the meaning
of section 771(5) of the Act.
Albufin, an ALZ subsidiary, received tax savings under this program
during the POI. In calculating the benefit, we treated the tax savings
as a recurring benefit and divided it by ALZ's total sales during the
POI. On this basis, we determine the countervailable subsidy to be 0.50
percent ad valorem.
4. Expansion Real Estate Tax Exemption
Pursuant to Article 16 of the 1970 Law, assets acquired using
benefits received under the 1970 Law may be exempted from real estate
taxes for up to five years, depending on the extent to which objectives
of the 1970 Law are achieved. Albufin utilized this tax exemption for
an expansion project.
The expansion real estate tax exemption received by Albufin is a
financial contribution as described in section 771(5)(D)(ii) of the Act
which provides a benefit to the recipient in the amount of the tax
savings. As noted above, only the 1970 Law provides tax exemptions for
expansion investments to large enterprises. Because the 1970 Law only
provides subsidies to companies located in certain regions, we
determine that this expansion real estate tax exemption is specific
under section 771(5A)(D)(iv) of the Act. Therefore, we determine that
the expansion real estate tax exemption received by Albufin is
countervailable within the meaning of section 771(5) of the Act.
Albufin received tax savings under this program during the POI. In
calculating the benefit, we treated the tax savings as a recurring
benefit and divided it by ALZ's total sales during the POI. On this
basis, we determine the countervailable subsidy to be 0.09 percent ad
valorem.

B. 1985 ALZ Share Subscriptions and Subsequent Transactions (identified
in the initiation notice as 1985 Debt to Equity Conversion and Purchase
of ALZ Shares)

In 1985, the GOB made three share subscriptions in ALZ pursuant to
the Royal Decree No. 245 of December 31, 1983. This Royal Decree
allowed the GOB to make preference share subscriptions in the steel
industry as long as the subscriptions did not exceed one-half of the
social capital of the company. The Nationale Maatschappig voor de
Herstructurering van de Nationale Sectoren (``NMNS''), the government
agency purchasing the shares, acquired common shares and preference
shares through this plan.
In analyzing whether these share purchases conferred a benefit on
ALZ, we must determine whether the GOB investment was inconsistent with
the usual investment practice of private investors in Belgium. Neither
ALZ's common nor preference shares were publicly traded. Therefore, we
have analyzed the circumstances of the transaction.

[[Page 15570]]

According to ALZ, the price at which the GOB purchased shares in
ALZ was determined by two separate studies as discussed in ALZ's
shareholders' meeting of September 26, 1985. These studies were
performed by an independent accounting firm and a group of experts
selected by ALZ. In addition, we have performed our own analysis of
ALZ's financial health at the time of the stock purchase. This analysis
indicates that the company was equityworthy.
Pursuant to the Department's equity methodology, a finding of
equityworthiness means that the Department need not inquire further
regarding the commercial soundness of a government's purchase of common
shares. Hence, we determine that the GOB's 1985 purchase of common
shares was consistent with the usual investment practice of private
investors in Belgium.
With respect to ALZ's preference shares, we have applied the
standard established in Aimcor v. the United States, 871 F. Supp. 447,
454 (CIT 1994) and Geneva Steel et al. v. United States, 914 F. Supp.
563, 582 (CIT 1996) (``Geneva Steel'') and analyzed the characteristics
and the subscription price of the preference stock purchased by the
GOB. Although the record evidence is mixed, on balance, we have
determined that the terms at which the GOB ultimately purchased the
preference shares was consistent with the usual investment practice of
private investors in Belgium (see memorandum from Team to Richard
Moreland, ``ALZ Preference Shares,'' public version, dated March 19,
1999).
In 1987, the GOB sold ALZ's common shares purchased under the Royal
Decree No. 245 to Kempense Investeringsvennootschap (``KIV''), a
company controlled by Sidmar. Based on the relevant record evidence
concerning this transaction, we have concluded that the GOB did not
behave as a private investor when selling its shares because it
accepted a lower price than it otherwise could have obtained for the
shares. Specifically, the GOB agreed to sell its shares of ALZ common
stock at the value assigned by a statutory auditor. However, the
valuation methodology used by the auditor failed to reflect the market
value of the stock. This is evident because in a relatively
contemporaneous transaction a private seller of ALZ's shares obtained a
much higher value. Also, circumstances surrounding the GOB's sale of
shares to KIV indicate that the GOB may have been willing to accept
less than the fair value of its shares in order to ensure that the
shares were purchased by a Belgian company.
We have determined that the GOB's sale of ALZ's common shares to
Sidmar constitutes a countervailable subsidy within the meaning of
section 771(5) of the Act. This program provides a financial
contribution, as described in section 771(5)(D)(i) of the Act. As
discussed above, benefits under Royal Decree No. 245 are available only
to the steel sector. On this basis, we determine that the program is
specific under section 771(5A)(D) of the Act.
To calculate the benefits, we took the difference between market
value for ALZ's common stock and the price paid by Sidmar for the
stock. We then applied the Department's standard grant methodology and
divided the benefit attributable to the POI by Sidmar's total
consolidated sales during the POI. On this basis, we determine the
countervailable subsidy to be 0.09 percent ad valorem.
In addition, we determined in our Preliminary Determination that
Sidmar received a countervailable benefit via the creation of a joint
venture between Sidmar and the GOB. In this transaction, the GOB
contributed its ALZ preference shares in exchange for shares in the
joint venture. However, the Department verified that this transaction
was structured in such a way that the government maintained ownership
of ALZ's preference shares. Moreover, it was established at
verification that Sidmar does not control the company. Thus, Sidmar
neither controls the ALZ preference shares contributed to this company
nor can profit from the shares. Accordingly, contrary to our
Preliminary Determination, we determine that Sidmar did not ``acquire''
the preference shares originally purchased by the GOB. Therefore, no
countervailable benefit was conferred upon Sidmar through the creation
of the joint venture by Sidmar and the GOB.

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

SNCI was a public credit institution, which, through medium- and
long-term financing, encouraged the development and growth of
industrial and commercial enterprises in Belgium. SNCI was organized as
a limited liability company and, until 1997, was 50-percent owned by
the Belgian government. ALZ received investment loans from SNCI which
were outstanding during the POI. All SNCI loans received by ALZ and
outstanding during the POI were approved and disbursed after 1986.
In Certain Steel, we examined whether investment loans from SNCI
were specific by analyzing whether the steel industry received a
disproportionate share of loans outstanding (58 FR 37273, 37280-37281).
We compared the steel industry's share of outstanding loans to the
share of outstanding loans provided to all other users of the program.
Although SNCI made loans to many sectors of the Belgian economy, we
determined that the steel industry had received a disproportionately
large share of investment loans outstanding in years prior to 1987.
However, we did not find disproportionality in 1987 and 1988 as the
steel industry's share of benefits dropped significantly.
In the Preliminary Determination, we followed the same analysis
employed in Certain Steel and examined data on outstanding SNCI
investment loans in 1989 and 1990, and preliminarily determined that
the steel industry did not receive a disproportionate share of benefits
in those years. Therefore, for loans approved between 1987 and 1990, we
preliminarily determined that SNCI investment loans were non-specific
and, therefore, not countervailable.
In a change from the analysis used in Certain Steel and the
Preliminary Determination, we have focused our analysis on the steel
industry's share of loans approved in a given year rather than that
industry's share of loans outstanding in a given year. We believe the
former provides a better indication of whether loans are limited to
specific industries. Loans outstanding can be affected by other factors
besides the approval process which are not relevant to a specificity
determination, such as the terms of loans. Therefore, for the final
determination, we are modifying our analysis to examine the percentage
of loans approved for the basic metals industry in each year. On this
basis, we determine that the steel industry did not receive a
disproportionate share of SNCI loans for the years 1987 through 1990.
See Memorandum to Richard Moreland, ``Specificity of SNCI Loans,''
dated March 19, 1999 (``SNCI Memorandum'').
Since the Preliminary Determination, the petitioners provided
information indicating that the steel industry's share of SNCI loans
was not completely captured in the data used by the Department because
it did not include loans provided to the steel industry through
``coordination centers.'' SNCI classifies loans to coordination centers
as loans to the ``banking and finance, insurance, business services,
and renting'' sector. Therefore, the petitioners argue that the data
should be

[[Page 15571]]

adjusted to account for all loans provided to the steel industry.
The data we are using for our final determination (loans approved)
also do not include loans provided to the metals industry through
coordination centers. However, we observed that in the one instance
where loans through coordination centers are accounted for in the
statistics reflecting loans outstanding, the increase in the metals
industry's share was not significant. See Comment 12 in the Interested
Party Comments section. Therefore, although we do not have information
on loans approved through coordination centers, based upon the
information on the record, we determine that their effect would not
alter our specificity determination for the years 1987 through 1990.
See SNCI Memorandum.
For the period 1991-1995, the GOB did not provide any industry
usage information for SNCI loans. We requested this information from
the GOB in both the original and supplemental questionnaires as well as
in the verification outline. The GOB did provide information for 1996
and 1997, however, these figures could not be verified. Because the GOB
failed to provide verifiable information with respect to the loans
provided since 1991, the Department must use facts available in
determining whether these loans are specific. See section 776(a) of the
Act. Moreover, the GOB did not provide an adequate explanation as to
why it was unable to supply the requested information. GOB officials
simply stated that they did not have access to the necessary
information. Therefore, we determine that the GOB did not act to the
best of its ability and, pursuant to section 776(b) of the Act, are
applying adverse inferences to determine that SNCI loans provided after
1991 are specific under section 771(5A)(D)(iii) of the Act. For further
discussion, see Comment 12 in the Interested Party Comments section.
To calculate the subsidy conferred by these loans, we used our
long-term fixed-rate loan methodology. Because the interest rates on
ALZ's loans were periodically revised, we examined the fixed segment
which included the POI. We measured the cost savings to ALZ in each
year of this segment. We then took the present value of each of these
amounts as of the time the interest rate was revised. Finally, using
the benchmark as a discount rate, we allocated the subsidy over the
period of the segment. We then divided the benefit attributable to the
POI by ALZ's total 1997 sales. On this basis, we determine the
countervailable subsidy to be 0.04 percent ad valorem.

D. Belgian Industrial Finance Company (``Belfin'') Loans

Belfin was established by Royal Decree on June 29, 1981, as a mixed
corporation with 50 percent GOB participation and 50 percent private
industry participation. In Certain Steel, we determined that Belfin's
objective is to finance investments needed for the restructuring and
development of various sectors of industry, commerce, and state
services. Belfin borrows money in Belgium and on international markets,
with the benefit of government guarantees, in order to obtain the funds
needed to make loans to Belgian companies. The government's guarantee
makes it possible for Belfin to borrow at favorable interest rates and
to pass the savings along when it lends the funds to Belgian companies.
Belfin loans to Belgian companies are not guaranteed by the GOB.
Moreover, these loans carry a one percent commission which is used to
maintain a guarantee fund to support the GOB's guarantee of Belfin's
borrowing. ALZ received Belfin loans which were outstanding during the
POI.
We determine that this program constitutes a countervailable
subsidy within the meaning of section 771(5) of the Act. These loans
provide a financial contribution, as described in section 771(5)(D)(i)
of the Act, with the benefit equal to the difference between the
benchmark rate and the rate ALZ pays on these loans. Although the
objective of Belfin loans is to assist the restructuring and
development of various sectors, steel companies are the predominant
recipients of Belfin loans. Therefore, we determine that the Belfin
loans to the steel industry are specific under section 771(5A) of the
Act.
To measure the benefit on these loans, we used our long-term fixed-
rate loan methodology. We divided the subsidy allocated to the POI by
ALZ's total 1997 sales. On this basis, we determine the countervailable
subsidy to be 0.00 percent ad valorem.

E. Industrial Reconversion Zones

Alfin
Alfin was established as a ``proper'' reconversion company in 1985
under the reconversion program ``Herstelwet 1984.'' It was financed by
a government agency, Nationale Investeringsmaatschappij (``NIM'') and
ALZ. In exchange for its investment, NIM received preferred non-voting
shares and a two percent annual return on its investment. ALZ is
obligated to repurchase all of the shares purchased by NIM at the
issued price over a ten-year period.
We have used the hierarchical criteria discussed in the
``Classification of Hybrid Financial Instruments Issue'' section of the
GIA to examine these shares and find that they constitute debt
instruments because they have a fixed repayment period.
We determine that this program constitutes a countervailable
subsidy within the meaning of section 771(5) of the Act. This program
provides a financial contribution, as described in section 771(5)(D)(i)
of the Act. Moreover, because benefits under the ``Herstelwet 1984''
law are limited to firms in certain regions of the country, we
determine that this program is specific under section 771(5A)(D)(iv) of
the Act.
To measure the benefit of this loan, we used our long-term fixed-
rate loan methodology. We divided the subsidy allocated to the POI by
ALZ's total 1997 sales. On this basis, we determine the countervailable
subsidy to be 0.00 percent ad valorem.
Albufin
Albufin was established as an ``improper'' reconversion company in
1989, also under the reconversion program ``Herstelwet 1984.'' It
received its initial capital from the government (NIM), the Sidmar
Group (FININDUS), a private company (Klockner Stahl) and ALZ. Because
Klockner Stahl was a private company at the time of Albufin's
establishment, and it invested on the same terms as the government, we
determine that there is no countervailable benefit resulting from the
establishment of the company. However, as an ``improper'' reconversion
company, Albufin benefits from a tax exemption on dividend payments and
is exempt from the capital registration tax. We determine that these
tax benefits received by Albufin are countervailable subsidies within
the meaning of section 771(5) of the Act. The tax benefits are a
financial contribution as described in section 771(5)(D)(ii) of the Act
which provide a benefit to the recipient in the amount of the tax
savings. Because benefits under the ``Herstelwet 1984'' law are limited
to firms in certain regions of the country, we determine that this
program is specific under section 771(5A)(D)(iv) of the Act.
During the POI, Albufin did not receive tax savings under the
capital registration tax but did benefit from the exemption on dividend
payments. To measure the benefit from this tax exemption, we treated
the tax savings as a recurring benefit and divided them by ALZ's total
sales during the POI. On this

[[Page 15572]]

basis, we determine the countervailable subsidy to be 0.05 percent ad
valorem.

F. Subsidies Provided to Sidmar that are Attributable to ALZ

As discussed in the ``Responding Producers'' section above, Sidmar
owns either directly or indirectly 100 percent of ALZ's voting shares
and is the overall majority shareholder of ALZ. In Certain Steel and in
the Department's redetermination on remand of Certain Steel, we found
that Sidmar received several countervailable benefits that were
attributable to the entire Sidmar group. Because ALZ is a fully
consolidated subsidiary of Sidmar, any untied subsidies provided to
Sidmar are attributable to ALZ (see Certain Hot-Rolled Lead and Bismuth
Carbon Steel Products From the United Kingdom; Final Results of
Countervailing Duty Administrative Review, 63 FR 18367 (April 15, 1998)
(``UK Lead and Bismuth'')). Thus, we determine that the following two
programs provide countervailable benefits to ALZ via its parent
company, Sidmar.
1. Assumption of Sidmar's Debt
Between 1979 and 1983, the GOB assumed the interest costs
associated with medium- and long-term loans for certain steel
producers, including Sidmar. In exchange for the GOB's assumption of
financing costs, Sidmar agreed to the conditional issuance of
convertible profit sharing bonds (``OCPCs'') to the GOB. In 1985,
Sidmar and the GOB agreed to substitute parts beneficiaires (``PBs'')
for the OCPCs.
Consistent with Certain Steel and the attendant litigation, we
determine that the GOB's initial assumption of interest costs was
specific under section 771(5A) of the Act. Furthermore, we determine
that the OCPCs are properly classifiable as debt and that the
conversion of OCPCs to PBS constituted a debt to equity conversion.
Comparing the price paid for the PBs to an adjusted market value of
Sidmar's common stock, we determine that the debt to equity conversion
provided a benefit to Sidmar as the share transactions were on terms
inconsistent with the usual practice of a private investor. See Amended
Final Affirmative Countervailing Duty Determinations; Certain Carbon
Steel Products From Belgium, 62 FR 37880 (July 15, 1997).
We determine that this program constitutes a countervailable
subsidy within the meaning of section 771(5) of the Act. This program
provides a financial contribution, as described in section 771(5)(D)(i)
of the Act. As discussed above, benefits under this program were
available only to certain steel producers. On this basis, we determine
that the program is specific under section 771(5A)(D)(i) of the Act.
To measure the benefit from the debt to equity conversion, we
calculated the premium paid by the government as the difference between
the price paid by the government for the PBs and the adjusted market
price of the common shares. We then applied the Department's standard
grant methodology and divided the benefit attributable to the POI by
Sidmar's total consolidated sales during the POI. On this basis, we
determine the countervailable subsidy to be 0.56 percent ad valorem.
2. SidInvest
The right to establish ``Invests'' was limited to the five national
industries, including the steel industry. SIDINVEST N.V.
(``SidInvest'') was incorporated on August 31, 1982, as a holding
company jointly owned by Sidmar and the Societe Nationale
d'Investissement, S.A. (``SNI'') (a government financing agency).
SidInvest was given drawing rights on SNI to finance specific projects.
The drawing rights took the form of conditional refundable advances
(``CRAs''), which were interest-free, but repayable to SNI based on a
company's profitability.
SidInvest made periodic repayments of the CRAs it had drawn from
SNI. However, in 1987, the GOB moved to accelerate the repayment of the
CRAs. The government agency NMNS and SidInvest discussed two options
including (i) paying back the CRAs at a rate of three percent per year
and (ii) repaying immediately the discounted value calculated as if the
full amount were due 32 years later. In early 1988, under the first
option, SidInvest agreed to pay back the outstanding balance on the
CRAs at a rate of 3 percent per year.
Later, in July 1988, an agreement was reached for NMNS to become a
shareholder in SidInvest by contributing the CRAs owed to the
government by SidInvest in exchange for SidInvest stock. In a second
agreement, through a series of transactions the Sidmar group then
repurchased the SidInvest shares obtained by NMNS.
Consistent with Certain Steel, we determine that the CRAs were
interest-free loans with no fixed repayment. However, the various
agreements that took place on July 29, 1988, changed the CRAs. First,
it was agreed that repayment would be achieved over 32 years. Second,
the GOB swapped that repayment obligation for shares in SidInvest and
sold those shares back to various members of the Sidmar group. The
benefit to Sidmar in these transactions was that it was able to
purchase the GOB's shares at too low a price. This occurred because:
(i) The GOB agreed to accept in payment the net present value of the
amount due in 32 years and (ii) it calculated the net present value
using a non-commercial interest rate. The combination of these two
elements of the July 29, 1988, agreements meant that the GOB forgave a
considerable portion of the amount it had loaned thru the CRAs.
We determine that this debt cancellation provides a countervailable
subsidy within the meaning of section 771(5) of the Act. It is a
financial contribution within the meaning of section 771(5)(D)(i) of
the Act. Moreover, because the right to establish ``Invests'' (and,
consequently, any forgiveness of loans given to the Invests) was
limited to the five national sectors, we view this debt cancellation as
being limited to a specific group of industries. On this basis, we
determine that the benefit is specific under section 771(5A)(D) of the
Act.
To measure the benefit arising from the events of July 29, 1988, we
have deducted from SidInvest's outstanding indebtedness the cash
received by the GOB. We have treated the remainder as a grant and
allocated the benefit over Sidmar's AUL. We divided the total benefit
attributable to the POI by Sidmar's consolidated total sales during the
POI. On this basis, we determine the countervailable subsidy to be 0.47
percent ad valorem.
The analysis here differs from that followed in Certain Steel. In
Certain Steel, we considered the events of July 29, 1988, to constitute
two separate events, the creation of a zero-interest, 32-year loan and
the use of a non-commercial interest rate to calculate the benefit.
Although useful as an analytical tool, the approach in Certain Steel
was flawed because it created a loan that was basically repaid the same
day. Under our standard loan methodology this countervailable loan
would cease to be countervailable the same day it was forgiven. To
avoid such an anomaly, we have revised our analytical approach, as
described above, to capture the full benefit to Sidmar of this
transaction.

II. Programs Determined To Be Not Countervailable

A. 1994 Environmental Grants

Pursuant to the 1970 Law, ALZ received several grants for
environmental investments undertaken to conform its operations with
VLAREM. As noted above, we determine that environmental grants
available under the 1970 Law are integrally linked with those available

[[Page 15573]]

under the 1993 Decree and the 1978 Act. Because the combination of
these laws makes this assistance available to everyone in Flanders, we
determine that these grants are not de jure specific. See, also,
Comment 17 in the Interest Party Comments section.
We also examined usage data provided by the GOF for the years 1995-
1997 and further determine that these grants are not de facto specific.
Therefore, the 1994 environmental grants are not countervailable. See
also Economic Expansion Memorandum.
The GOF requested green light treatment for environmental grants.
Because these grants are not specific, the green light issue is moot.

B. Environmental Real Estate Tax Exemption

We preliminarily determined that ALZ did not benefit from this
program. However, at verification we learned that real estate taxes are
paid separately from taxes on revenue and that ALZ did benefit from
these environmental tax exemptions. Accordingly, for purposes of our
final determination, we have analyzed the countervailability of the
environmental real estate tax exemptions received by ALZ.
As noted above, we determine that environmental real estate tax
exemptions available under the 1970 Law are integrally linked with
those available under the 1993 Decree and the 1978 Act. Because the
environmental tax exemptions under the 1970 Law, the 1978 Act, and the
1993 Decree are generally available, these environmental tax exemptions
are not de jure specific. Moreover, following the same analysis
employed for the 1994 Environmental Grants, we determine that these
environmental tax exemptions are also not de facto specific under
section 771(5A)(D)(iii) of the Act. Therefore, the environmental real
estate tax exemptions received by ALZ are not countervailable. See
Comments 17 and 20 in the Interested Party Comments section and
Economic Expansion Memorandum.

III. Programs Determined To Be Not Used

Based upon the information provided in the responses, we determine
that neither Sidmar nor ALZ applied for or received attributable
benefits under the following programs during the POI.

A. Government of Belgium Programs

1. Subsidies Provided to Sidmar that are Potentially Attributable to
ALZ
a. Water Purification Grants
2. Societe Nationale pour la Reconstruction des Secteurs Nationaux
(``SNSN'')

B. Government of Flanders Programs

1. Regional subsidies under the 1970 Law
a. Corporate Income Tax Exemption
b. Capital Registration Tax Exemption
c. Government Loan Guarantees
2. Special Depreciation Allowance
3. Preferential Short-Term Export Credit
4. Interest Rate Rebates

C. Programs of the European Commission

1. ECSC Article 54 Loans and Interest Rebates
2. ECSC Article 56 Conversion Loans, Interest Rebates and Redeployment
Aid
3. European Social Fund Grants
4. European Regional Development Fund Grants
5. Resider II Program
Interested Party Comments
Comment 1: Sidmar's Sales Denominator. The petitioners argue that
Sidmar's sales denominator should be adjusted to exclude production
that occurred outside of Belgium because the subsidies provided to
Sidmar were not intended to benefit non-Belgian production. In support
of their argument, the petitioners cite 19 CFR 351.525(7) of the
Department's new regulations, which states that if a firm has
production facilities in two or more countries, the Department will
attribute these subsidies to products produced by the firm within the
country of the government that granted the subsidy. (See Countervailing
Duties; Final Rule, 63 FR 65348, 65417 (November 25, 1998) (``Final CVD
Regulations'')).
Department Position: We have used Sidmar's sales denominator
exclusive of all non-Belgian production for purposes of attributing the
subsidies provided to Sidmar. We believe that it is reasonable to
presume that the government of a country normally provides subsidies
for the general purpose of promoting the economic health of that
country. See GIA at 37231. Sidmar has not offered any information
rebutting this presumption.
Comment 2: Sidmar Sales Denominator--Transportation Expenses. The
petitioners argue that the Department should calculate subsidy benefits
to ALZ and Sidmar on an f.o.b. basis rather than on the basis of the
companies' accounting and financial statements. The petitioners note
that the Final CVD Regulations are clear that sales values should be
determined on an f.o.b. basis. While ALZ appears to have provided an
f.o.b. based sales figure at verification, the petitioners contend that
Sidmar calculated its sales figure on a c.i.f. basis. According to the
petitioners, Sidmar's calculation of the total sales figure for the
Sidmar Group's Belgian-located companies is based on the companies'
revenues, which are reported on a c.i.f. basis. Accordingly, the
petitioners argue that transportation costs should be subtracted from
this calculation in order to derive the appropriate f.o.b. sales value.
ALZ argues that the Department verified that there is no method for
calculating a consolidated f.o.b. figure for the Sidmar Group, a
holding company consisting of Sidmar NV and other steel related
companies. ALZ notes that Sidmar rarely sells on an f.o.b. basis
because its main markets are in Europe, with the result that its
products do not go through a port. Furthermore, the Department verified
that the type of information Sidmar receives in order to calculate the
consolidated financial statements does not provide any figures on
transportation costs.
The respondent further argues that using Sidmar NV's cost
information to adjust the Sidmar Group's consolidated figures, as
recommended by petitioners, serves to overestimate the transportation
costs contained in the consolidated revenue figure. ALZ notes that the
companies included in the consolidated group are involved in a wide
variety of activities, some of which do not incur any transportation
expenses. Accordingly, it is not reasonable to assume that all of these
companies would incur transportation costs at the same level as Sidmar
NV. Consequently, according to ALZ, the petitioners' calculation
derives an ex-factory amount as opposed to an f.o.b. amount. Moreover,
the petitioners' calculation understates even the ex-factory amount by
deducting transportation expenses from companies that incur none.
Department Position: In cases where the company's sales are not
recorded on an f.o.b. basis, the Department adjusts the sales value to
conform with the Department's longstanding practice of calculating an
f.o.b.-based ad valorem subsidy rate, which is consistent with the
assessment of the countervailing duties. Accordingly, we have adjusted
certain sales figures of Sidmar's Belgian-located companies by the
ratio of Sidmar NV's transportation expenses to its total sales.
However, we have not adjusted the sales figures of companies that are
not involved in production or manufacturing because these companies
incur little to no transportation expenses. We believe this to be the
most

[[Page 15574]]

accurate estimate of the f.o.b. value of Sidmar's sales.
Comment 3: Sidmar Sales Denominator--Other Income. The petitioners
argue that the Sidmar Group sales figure includes additional income
that is inappropriately reported. The petitioners note that Sidmar
officials calculated the total sales figure for the Group's Belgian-
located companies by adding accounts 70 (``Turnover'') and 74 (``Other
Operating Income: Miscellaneous'') for each company. The petitioners
argue that account 74 includes various forms of revenue that were
derived from sources that bear no relation to Sidmar's operations.
Accordingly, these sources of revenue could not have benefitted from
the subsidies under investigation. Therefore, account 74 should be
removed from Sidmar's sales figure.
ALZ counters that it is necessary to include ``Other Operating
Income'' in order to consolidate the revenues of the Sidmar Group's
Belgian companies. The respondent explains that it totaled the revenues
of the Sidmar Group companies located in Belgium and reduced this
amount by each company's intra-group acquisitions. However, the cost
accounts used to calculate intra-group transactions do not correspond
exactly to accounts 70 and 74. The respondent notes that while cost
accounts beginning with the number 60, in which Sidmar subsidiaries
record purchases, correspond mostly to 70 accounts, some of the items
included therein correspond to items recorded in the 74 account. Cost
accounts beginning with the number 61 reflect other costs corresponding
to account 74. Consequently, reducing the 70 revenue account by the 60
account serves to understate revenue because some of the items recorded
in the 60 accounts correspond to revenues recorded in the 74 accounts.
Therefore, in order to achieve complete correspondence between revenues
and expenditures, the respondent totaled accounts 70 and 74 and
deducted from that combined total the intra-group acquisitions
reflected in accounts 60 and 61. ALZ notes that this was the most
accurate calculation of the Sidmar Group's Belgian sales given the
accounting records of each company.
Department's Position: We verified that the entries recorded in
Sidmar's account 74 include non-operational income. We did not request
nor collect additional information as to revenue recorded in account 74
by the Sidmar Group's Belgian subsidiaries and there is no indication
that all of the Sidmar Group companies record their revenue using the
same accounting standard. As noted by respondents, simply deducting the
60 account from the 70 account results in an understatement of Sidmar's
operating income. Thus, for purposes of our final determination, we
have retained in Sidmar's sales denominator the revenue from account 74
because this is the most accurate information on the record.
Comment 4: Loan Benchmarks and Discount Rates. Both the petitioners
and ALZ argue that the national average, long-term benchmark interest
rates used in the Preliminary Determination are inappropriate because
they are rates for all outstanding government loans, not commercial
loans extended in a particular year. The petitioners suggest that the
Department should use the SNCI rates collected at verification plus a
15 point spread for the years 1982 to 1997.
ALZ states that because prime rates are set each day, the
Department should use the prime rate provided by Kredietbank and
Generale Bank for the specific day that a loan was approved or an
interest rate was revised. Because these rates are provided for the
specific day and length of the loan, they are the best approximations
of a commercially available interest rate. Short of using these rates,
ALZ argues that the Department should calculate an annual average
interest rate from the prime rates collected at verification. Prior to
1991, when prime rates are not available, ALZ argues that the
Department should approximate a prime rate from the SNCI rate as was
done in Certain Steel.
Department's Position: We agree that the rates used in the
Preliminary Determination are inappropriate benchmarks because they
represent rates for total government debt outstanding. Therefore, we
are changing our benchmark rates for the final determination to reflect
long-term national averages for commercial debt taken out in each year.
For years in which there was no company-specific benchmark and in which
a prime rate is available (i.e., 1991-1993 and 1995-1997), we have used
the prime rate plus a 15 point spread as our benchmark. This
methodology comports with information collected at verification (see
Appendix I of the Memorandum to Susan Kuhbach, ``Verification Report
for a Private Commercial Bank,'' dated January 25, 1999). However, we
are not using the prime rate for the specific day that the interest
rate on the subsidized loan was revised because 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) (``Wire Rod from Italy'').
For the period prior to 1991, when Belgium did not publish a prime
rate, we are using the national average interest rate calculated in the
Certain Steel investigation and used in the recently published
administrative review of that case. Consistent with both of those
proceedings, we are using Kredietbank rates for the years 1982 to 1990,
which were supplied in the Certain Steel investigation, and adding a
margin of 15 points to these rates. See Certain Steel, 37288-37289 and
Cut-to-Length Carbon Steel Plate From Belgium; Final Results of
Countervailing Duty Administrative Review, 64 FR 12982, 12987 (March
16, 1999).
We did not approximate a prime rate for the years prior to 1991 as
ALZ suggested. Although we did construct a prime rate in Certain Steel,
we only did so to calculate a margin for uncreditworthiness, not to
calculate the benchmark rate. As stated above, for benchmark rates
prior to 1991, we used the Kredietbank rates from Certain Steel plus a
spread.
Comment 5: ALZ Company-Specific Benchmarks. The petitioners argue
that company-specific benchmark rates used by the Department in the
Preliminary Determination for ALZ in 1989 and 1993 are not appropriate
benchmarks because they are based on a loan which is not a true
commercial loan. The petitioners maintain that the loan originally
taken out in 1989 by ALZ, and revised in 1993, should not be used
because it was linked to a project which also received SNCI financing
two years earlier. According to the petitioners, because both the
private bank loan and the SNCI loan were taken out to finance the same
project, they are part of a consortium loan and the participation of
SNCI may have affected the terms of the private bank loan. Moreover,
the petitioners argue that the interest rate revision on this loan used
to determine the 1993 benchmark rate for ALZ was not applicable until
1994 and, therefore, should not be used as a benchmark for 1993.
Instead of using these aforementioned company-specific rates, the
Department should use the SNCI rates collected from Kredietbank for the
years 1982 to 1997.
It is ALZ's position that its 1989 loan is a commercial loan and
the fact that an SNCI loan was taken out two years earlier to finance
the same project should have no bearing. In addition, the relevant date
in determining benchmarks is the date on which the rate is established.
Therefore, the interest rate revision in 1993 is applicable to 1993.

[[Page 15575]]

Department's Position: It is the Department's policy to use a
company-specific benchmark rate to determine the benefit conferred by a
government loan program. See, e.g., Certain Iron-Metal Castings from
India; Final Results and Partial Rescission of Countervailing Duty
Administrative Review, 63 FR 64050, 64057 (November 18, 1998).
Therefore, where available, we have used ALZ's loans as benchmarks. We
disagree with the petitioners that ALZ's 1989 loan was not a commercial
loan merely because the loan was used to finance a project which
received SNCI financing years earlier. When the loan contract was
reviewed at verification, there was nothing in the document to indicate
that the loan was not a commercial loan or was in any way connected
with the SNCI loan. Therefore, consistent with the Department's
practice, we are using ALZ's 1989 loan as a company-specific benchmark.
With regard to the 1993 interest rate revision, we agree with the
petitioners that while the interest rate revision occurred in 1993 it
did not go into effect until 1994. Given that this was an interest rate
revision to an ongoing loan, and the revision would not apply until the
next year, we are treating this revised rate as a 1994 benchmark.
Therefore, we are including this interest rate in our calculation of
the company-specific benchmark for 1994.
Comment 6: Sidmar Company-Specific Benchmarks. The petitioners
argue that the company-specific benchmark rate used by the Department
in the Preliminary Determination for Sidmar in 1988 is not an
appropriate benchmark because Sidmar's loan does not represent
comparable commercial financing in terms of structure and maturity.
Specifically, the petitioners maintain that one of Sidmar's loans was
not a fixed-rate loan. The petitioners also state that the maturities
of two of Sidmar's loans used as benchmarks are not comparable to the
maturity of the subsidized loan. Therefore, the petitioners state that
the Department should reject Sidmar's 1988 company-specific rate.
With respect to Sidmar's 1988 loans, ALZ contends that the national
average interest rate for five-year loans is not more comparable to the
subsidized loan than Sidmar's company-specific rate. Therefore, the
Department should continue to use Sidmar's loans for 1988.
Department's Position: As noted in the comment above, it is the
Department's policy to use a company-specific benchmark rate in
determining the benefit conferred by a government loan program.
Therefore, where available, we used Sidmar loans as benchmarks.
However, we agree with the petitioners that one of Sidmar's loans taken
out in 1988 is not a long-term, fixed-rate loan. Therefore, it does not
provide an appropriate benchmark for our purposes and we are excluding
that loan from our benchmark calculation. Consequently, we are using a
recalculated company-specific benchmark rate for Sidmar in 1988. We
agree with the respondents that Sidmar's company-specific rate
calculated from its other 1988 loans is a more appropriate benchmark
than a national average benchmark. The maturity of Sidmar's loans and
the maturity of the national average interest rate (five-years) do not
differ enough to warrant deviating from the Department's preference for
using company-specific benchmarks when available.
Comment 7: Government Equity Infusions In Sidmar. The petitioners
allege that the GOB equity infusion into Sidmar in 1984 was made on
terms inconsistent with the usual investment practice of private
investors and, therefore, constitute countervailable studies. The
petitioners base their argument on the GOB's decision to invest in
these companies without evaluating information typically examined by
private investors. In support of their position, the petitioners refer
to Sec. 351.507(a)(4)(ii) of the Final CVD Regulations, which state
that the government investor must provide ``the information and
analysis completed prior to the infusion and * * * absent the existence
or provision of an objective analysis, containing information examined
by potential private investors considering an equity investment, the
Secretary will normally consider that the equity infusion provides a
countervailable benefit.'' The petitioners argue that the information
on the record demonstrates that the GOB failed to meet this standard
when it invested in Sidmar.
Specifically, the petitioners note that the GOB made substantial
equity investments in Sidmar pursuant to the Claes and Gandois plans.
The petitioners assert that information on the record establishes that
the objective of these programs was to restructure and revitalize the
Belgian steel industry. Thus, the objective and circumstances
surrounding the investments render it contrary to the behavior of a
normal private investor. Moreover, the Department previously found the
Gandois Plan to provide countervailable benefits to steel companies
because it was ``commissioned and adopted by the GOB * * * specifically
to assist the Belgian Steel industry.'' See Certain Steel at 37277. The
petitioners argue that consistent with the GOB's primary objective of
restructuring the Belgian steel industry regardless of the commercial
soundness of its investments, the GOB failed to conduct objective
analyses containing information typically examined by private
investors.
ALZ counters that the petitioners' attempt to include a new
allegation regarding the GOB's purchase of Sidmar's common and
preference shares in 1984 should be rejected. Pursuant to
Sec. 351.301(d)(4)(i)(A) of the Department's regulations, the time
limit for making new allegations is 40 days before the scheduled date
of the preliminary determination. Moreover, ALZ notes that in Certain
Steel, the Department refused to examine the common share transaction
and determined that no countervailable subsidy arose from the preferred
share transactions.
Department Position: With respect to the Sidmar share transactions,
our regulations (at Sec. 351.301(d)(4)(i)(A)) are clear regarding the
time limit for making new allegations. The petitioners first made this
allegation in their case brief. Thus, for purposes of our final
determination, we have not conducted an investigation of the Sidmar
share transactions because the petitioners did not meet this regulatory
deadline.
Comment 8: GOB Decision to Invest in ALZ. With respect to the ALZ's
common and preference shares purchased in 1985, the petitioners contend
that the GOB's share valuation methodology and objectives were
inconsistent with the actions of a reasonable private investor. The
petitioners argue that by valuing ALZ's shares based on the replacement
value of its assets, the GOB failed to consider factors that would
provide a commercial rationale for the investment, such as financial
performance. Furthermore, the petitioners allege that the GOB was not
commercially motivated when it purchased ALZ's common stock in order to
obtain a blocking share of the company's equity. The petitioners assert
that the GOB's objective to block decisions made by ALZ's major
stockholders is inconsistent with the usual investment practice of
private investors.
ALZ argues that the petitioners ignore the evidence on the record
regarding the valuation studies conducted in preparation for ALZ's
share subscription. Citing the minutes of ALZ's General Shareholders'
meeting, at which it was determined to issue the shares and permit the
GOB to subscribe them, the respondent notes that return on investment
was considered in

[[Page 15576]]

determining the value of the shares issued, contrary to petitioners'
contention.
In addition, ALZ objects to the petitioners' allegation that the
GOB's purchase of ALZ's common stock in order to gain a blocking share
of the company's equity is inconsistent with the Department's private
investor standard. ALZ argues that private investors frequently
purchase equity in a company specifically in order to obtain a blocking
share and, thus, gain a measure of control.
Department Position: The objective of the Department's private
investor standard is to determine if a particular investment reflects a
rational assessment of whether a reasonable return on the investment
would be generated in a reasonable period of time. See GIA 58 FR 37217,
37249. As noted by respondents, return on investment was analyzed by
the statutory auditor in determining the value of the preference
shares. Thus, the GOB's share valuation methodology was consistent with
our private investor standard.
Furthermore, the petitioners indicate that methodologies which
focus on earnings and financial performance are typically used by
private investors for purposes of valuing private companies. However,
this represents only one of the valuation approaches available to
private investors. The replacement value methodology used to estimate
the value of the preference shares is a common approach for valuing
privately held companies and, therefore, consistent with the actions of
a private investor.
Finally, we agree with the respondent that the GOB's purchase of
ALZ common shares for purposes of obtaining a blocking share is not
inconsistent with the actions of a private investor. As verified by the
Department, the GOB obtained a blocking share in order to protect its
investment in ALZ. Thus, we determine that the GOB's purchase of ALZ
common shares was consistent with the usual practice of a private
investor.
Comment 9: The Formation of Sidfin International. ALZ argues that
neither it nor Sidmar received a countervailable benefit through the
formation of the joint venture, Sidfin International, because Sidmar
did not acquire ALZ's preference shares. ALZ notes that the Department
verified that the joint venture was neither controlled by Sidmar nor
was Sidmar able to benefit from the returns associated with ALZ's
preferred shares. Thus, regardless of the valuation of the shares
performed in 1993 at the time of Sidfin creation, Sidmar received no
benefit from this transaction.
ALZ further argues that the valuation of ALZ's preference shares in
this transaction was consistent with a reasonable private investor
standard. ALZ notes that the parties involved in this transaction,
including the private company Sidmar, valued their assets according to
the same standards. The valuation of the assets contributed was also
reviewed by a statutory auditor. In addition, the respondent contends
that the Department has previously accepted the use of net present
value as a reasonable valuation approach for a private investor. See
Certain Steel, 37278.
The petitioners argue that Sidmar's audited financial statements
clearly indicate that Sidfin International is controlled only by
Sidmar. The admission by Sidmar in a public document provides unbiased
documentary evidence that, while Sidmar owned only half of Sidfin
International's shares, it effectively controlled all of the company.
The petitioners rely on statements made during verification as further
indication that Sidmar controlled Sidfin.
Furthermore, the petitioners contend that contrary to respondent's
claim, private investors do not employ the valuation methodology used
in this transaction. In support of its argument, ALZ refers to
Accounting Principles Board Opinion 16 which explains that the NPV is
used in the context of business combinations to assign a value to debt
instruments. Conversely, marketable securities such as ALZ's preference
shares should be valued at the current net realizable value of the
shares. In the case of ALZ's preference shares, the current net
realizable value was the market value of the shares at the time of the
transaction. Thus, for purposes of measuring the benefit conferred by
the 1993 capitalization of Sidfin International, the petitioners argue
that the Department should use the market value of ALZ's preference
shares in 1993 as the benchmark share price rather than the 1985
subscription price.
Department's Position: As noted above, we have determined that the
1993 capitalization of Sidfin International did not involve a sale of
shares or any other potentially countervailable event. Consequently,
the valuation methodologies used in this transaction are irrelevant.
Comment 10: GOB Sale of Common Share--Consistency With Actions of a
Private Investor. ALZ argues that the GOB's 1987 sale of ALZ's common
stock to KIV/Sidmar was consistent with the actions of a reasonable
private investor. ALZ contends that the 1987 transactions reflect pre-
existing contractual relationships among ALZ's shareholders which
limited the potential buyers of the GOB's shares and, thus, affected
the GOB's sale of its shares. According to ALZ, these contractual
relationships created constraints on the GOB's freedom to transfer the
shares but such constraints were common private investor practices
among the entities involved in this transaction.
ALZ explains that, as required by the rights of preemption agreed
to in 1980 by the GOB, KIV and Klockner Stahl, the GOB was obligated to
offer its shares of ALZ first to KIV and then to Klockner Stahl before
it could sell the shares to an outside party. Thus, the GOB structured
the sale such that it sold the shares to KIV. Subsequently, Sidmar
gained control of these shares when it acquired KIV. ALZ argues that
the structure of this transaction enabled the GOB to sell freely
without violating Klockner Stahl's preemption rights.
The petitioners counter that the respondent's argument ignores the
fact that the GOB structured the 1987 transaction to account for
noncommercial concerns regarding the nationality of potential buyers.
The petitioners argue that a private investor would not share the GOB's
concern regarding the nationality of a potential investor. Rather,
private investors would seek to obtain the highest return for their
investment. As a result, the GOB neglected a potentially higher
purchase price offered by Klockner Stahl due to its concern regarding
the nationality of the investor and, instead, accepted the discounted
price paid by Sidmar. Thus, the sale of ALZ's common shares by the GOB
to Sidmar was not consistent with actions of a reasonable private
investor.
Department Position: Although the preemption agreements affected
the transferability of ALZ's shares, the GOB elected not to pursue a
potentially higher offer by Klockner Stahl and, instead, accepted the
discounted offer by Sidmar. Moreover, record evidence indicates that
the GOB and Sidmar structured the 1987 sale of ALZ common shares to
account for noncommercial concerns regarding the nationality of
potential buyers. Accordingly, we have determined that the GOB did not
act as a reasonable private investor.
Comment 11: GOB Sale of Common Shares. ALZ argues that, consistent
with the actions of a private investor, the GOB negotiated a purchase
price for ALZ common shares in ALZ with KIV/Sidmar. After evaluating
the offer and

[[Page 15577]]

gaining an understanding with Sidmar regarding the protection of the
GOB's interests in the preferred shares which it retained, the GOB
determined that the price offered for its shares was reasonable.
Moreover, a statutory auditor valued the same number of shares held by
KIV in ALZ at the same price.
In addition, the respondent maintains that the ALZ stock Sidmar
purchased later in 1987, which the Department used as a benchmark in
its preliminary determination, is not comparable. ALZ argues that this
sale was not constrained by the preemption agreements of 1980. Thus, it
is logical that a private investor would require a higher price for its
shares under these circumstances. The respondent also notes that it is
reasonable to assume that Sidmar was willing to pay a higher price for
the shares because it was consolidating its holdings in ALZ at the
time.
The petitioners assert that the purchase price was significantly
below the market-determined prices paid at the time of, and prior to,
the transaction in question. According to the petitioners, the
arguments offered by the respondent are unsubstantiated and,
furthermore, conflict with the evidence on the record.
The petitioners further argue that the share purchase used as the
benchmark in the Preliminary Determination reflects the market value of
ALZ stock because it was negotiated between private companies unrelated
to each other. Given the disparity between the price at which the GOB
sold the shares to Sidmar, the Department should consider the share
price received by the GOB to be below the market-determined share
price.
Department Position: We agree with the petitioners that, while the
GOB agreed to sell its shares of ALZ's common stock at the same value
assigned by a statutory auditor to KIV's shares of ALZ stock, the
valuation methodology used by the auditor failed to reflect the market
value of the stock. Pursuant to the Department's equity methodology, we
have compared the price at which the GOB sold its shares of ALZ common
stock against a contemporaneous market transaction for purposes of
measuring the countervailable benefit.
With respect to the market benchmark used in our Preliminary
Determination, the relevant record evidence indicates that the
preemption agreements did affect the transferability of ALZ's shares.
However, these agreements did not meaningfully restrict the ability of
the GOB to sell to Klockner Stahl and, thereby, to obtain the market
price of the shares. Consequently, the market transaction involving
ALZ's common shares absent these contractual constraints represents a
comparable benchmark. Thus, we have continued to use this transaction
as our market benchmark in our final determination.
Comment 12: SNCI Loans. As noted above in the SNCI Loan section,
the petitioners argue that the Department erred in its Preliminary
Determination when it found SNCI loans provided between 1987 and 1990
to be non-specific, because the usage data did not include all loans
provided to the steel industry.
The petitioners further argue that, with respect to SNCI loans
approved after 1990, the respondents have failed to provide any
breakdown of benefits by industrial sector between 1991 and 1995, and
have failed to document how they derived the percentages reported for
1996 and 1997. Given the respondents' failure to provide the
information necessary to conduct a specificity analysis, the Department
should apply adverse facts available and countervail all SNCI loans
provided to ALZ between 1990 and 1997.
ALZ argues that in Certain Steel, the Department found that SNCI
loans not expressly given under a government plan were not specific in
1987 and 1988, and in its Preliminary Determination, the Department
extended this finding to include 1989 and 1990. Moreover, ALZ notes
that an SNCI official explained at verification that SNCI treated
investment loans to the steel industry in the same manner as loans to
any other industry and that the steel industry could not have been
given a disproportionate share of SNCI loans. Therefore, ALZ contends
that the Department should determine that SNCI loans are not specific
to the steel industry.
ALZ further argues that the lack of information on loans through
coordination centers should not lead to a determination that loans to
the steel industry are specific because any industry can have a
coordination center. Therefore, the respondent reasons that if loans to
the steel industry are underreported because of coordination centers,
likewise the loans to all industries are also underreported.
Moreover, ALZ maintains that the use of adverse facts available is
not appropriate in this case. It argues that U.S. law requires that for
adverse inferences to be applied in this case, the Department must find
that a respondent has ``failed to cooperate by not acting to the best
of its ability to comply with a request for information'' from the
Department. See section 776(b) of the Act. ALZ states that the GOB
attempted to accommodate the Department's request for information and
verification, but the requested information is not available because
SNCI no longer aggregates the loan usage data in the format requested.
ALZ argues that the respondents have acted to the best of their
ability, and the Department should not view any deficiencies in the
information they have provided as a cause for applying adverse
inferences in this case.
Department's Position: We agree with the petitioners that loans
provided to the steel industry through coordination centers should be
included in the specificity analysis. However, the petitioners'
argument overstates the effect of loans through coordination centers on
the percentage of loans to the steel industry. The 1990 SNCI annual
report provides specific information on this issue and indicates that
when coordination center loans to the steel industry are included in
the calculation for 1990, the steel industry's share of SNCI loans
increases by 2.3 percent. Instead of employing the petitioners'
suggestion to include all coordination center loans to industrial
sectors and adding 10 percentage points to the calculation of loans
provided to the steel industry, we are accounting for coordination
centers by using the information specific to the steel industry.
In addition, we modified our final analysis to include the
percentage of loans approved in each year, as well as the percentage of
loans outstanding. When both statistics are taken into account, the
percentage of SNCI loans directed toward the steel industry greatly
decreases. Therefore, for the years in which ALZ received SNCI loans
and for which we have the relevant information (i.e., 1987 through
1990), we do not find SNCI loans to be specific to the steel industry.
(See, also, SNCI Memorandum.)
In response to ALZ's argument that, based upon comments at
verification, the steel industry did not receive a disproportionate
share of SNCI loans, we have already determined that SNCI investment
loans provided in the years 1987-1990 are not specific. However, as
noted above in the SNCI Loans section, the Department repeatedly
requested information on the breakdown of loans in the years 1991-1997.
The GOB did not provide any information for the years 1991-1995 and was
unable to provide verifiable figures for 1996 and 1997. Therefore, the
comments made at verification are completely unsubstantiated with
respect to these years. Moreover, the GOB never

[[Page 15578]]

explained why it could not provide the required data. While SNCI may
not aggregate the information in the manner requested by the
Department, the GOB never indicated why the usage information could not
be collected through other sources. As a result, we determine that the
GOB did not act to the best of its ability with respect to providing
the requested information and, pursuant to section 776(b) of the Act,
we are applying adverse inferences in those years and determine that
SNCI investment loans are de facto specific for the years 1991-1997.
Comment 13: Fictive Withholding Tax. The petitioners argue that the
Department's calculation methodology for SNCI loans should include
benefits from the Fictive Withholding Tax (``FWT''). The FWT permitted
lending institutions to deduct a certain percentage of the taxes due on
interest income from loans to coordination centers and to pass those
savings on to the coordination centers. As a result, the petitioners
argue, the GOB provides a financial contribution to the borrower
through the lender.
ALZ states that the FWT was available for loans provided to
coordination centers through any lending institution, not just SNCI.
Therefore, the benefits from FWT are not specific. In addition, the FWT
was abolished in 1991 and the ALZ group did not benefit from it after
1995. Therefore, the program was terminated prior to the POI. Lastly,
ALZ argues that the FWT had no effect on interest rates paid by ALZ,
Alfin and Albufin from SNCI. The Department verified that the
coordination centers did not pass on the savings to the ultimate
borrowers, but instead retained those savings. Thus, ALZ, Alfin, and
Albufin did not benefit from the FWT during the time it was in effect
and the Department should use the interest rates actually paid by the
ultimate borrowers.
The petitioners counter that ALZ's attempt to distinguish between
the rates paid by Al-Center (ALZ's coordination center) and the rates
paid by ALZ, Alfin and Albufin admits to the preferentiality of the
loan terms, in particular through the FWT.
Department's Position: The FWT only applied to loans taken out by
coordination centers such as Al-Center. Al-Center took out SNCI loans
under investigation in the years 1987, 1989 and 1990. Because we have
already determined that SNCI loans provided in those years are not
specific, this issue is moot.
Comment 14: GOB Control of SNCI. ALZ argues that SNCI acts like any
other commercial entity and partial government ownership does not
change this fact. ALZ cites to Certain Granite Products from Italy,
(Final Negative Countervailing Duty Determination: Certain Granite
Products from Italy, 53 FR 27197, 27202 (July 19, 1988)) where it is
stated that the Department's practice has been to find that ``long-term
lending * * * in which (a government) has direct or indirect ownership,
that involves no government program'' does not confer countervailable
subsidies. Moreover, ALZ cites to the final concurrence memorandum in
Certain Steel in which the Department found that ``fifty percent
government ownership does not necessarily lead to the conclusion that
SNCI operates in other than a commercial fashion.'' Further, ALZ
contends that SNCI was purchased by ASLK prior to the approval of ALZ's
1997 loan from SNCI. Therefore, SNCI was not ``government-controlled''
or ``government-owned'' and this loan is not countervailable.
The petitioners state that because ASLK itself was partially owned
by the GOB, the sale of SNCI to ASLK did not eliminate the GOB control
and, to the extent it was provided on preferential terms, the 1997 loan
is countervailable. Moreover, the fact that SNCI was not acting as a
``commercial lender'' is apparent from the interest rates charged on
ALZ's investment loans. The preferential terms associated with ALZ's
SNCI loans prove that SNCI provided ALZ with a countervailable benefit.
Department's Position: We agree that fifty percent GOB ownership of
SNCI does not, in and of itself render SNCI loans countervailable.
However, the fact that SNCI was providing loans at rates lower than
those otherwise available does indicate that SNCI was not acting as a
commercial entity. We have examined the record evidence and determined
that SNCI loans provided between 1991 and 1997 contain all the elements
of a countervailable subsidy (i.e., specificity, financial
contribution, and benefit).
We agree with the petitioners that although ASLK purchased 99
percent of SNCI in 1995, ASLK continued to remain under GOB control
through the fall of 1997. Because ALZ's loan was approved in early
1997, SNCI cannot be considered beyond the control of the government at
that time and the purchase of SNCI by ASLK does not diminish the
potential countervailability of the loan.

Benefits Received Pursuant to the 1970 Law

Comment 15: Interest Rebate. The petitioners argue that the
Department should countervail the interest rate subsidy found at
verification even though the relevant loan is no longer outstanding.
The petitioners base this argument on the Department's practice to
treat interest rate rebates as a grant if the company does not know if
the government will provide the rebate when the firm agrees to the
terms of the loan. Consequently, because the government approval for
this interest rebate occurred after the loan was approved, the
Department should treat the interest subsidy as a non-recurring grant.
ALZ argues that it did not report this interest subsidy because it
was for a loan which is no longer outstanding. Moreover, ALZ points out
that the Department made a specific decision to treat interest
subsidies under the 1970 Law as interest rebates and not grants in
Certain Steel. ALZ argues that in that case, the Department did so
because, although the government approval occurred after the loan was
granted, this approval was merely a ``rubber stamp'' and companies were
reasonably certain that their application would be approved at the time
they withdrew the loan. In addition, they knew the precise amount of
the rebate they would receive and the length of time that it would
remain in effect.
Department's Position: In the concurrence memorandum for Certain
Steel, the Department stated that ``although applicants for the
interest rebate did not receive approval of their applications until
about 60 days after receipt of the loan in question, they were,
nonetheless, reasonably certain that their application would be
approved. In addition, they knew the precise amount of the rebate they
would receive and the length of time that it would remain in effect.
Therefore, we (view) these rebates as interest reductions rather than
grants.'' Based upon our analysis of the interest rebates in question
in Certain Steel, we agree with the respondent. Because the loan in
question was no longer outstanding during the POI, we find that ALZ did
not benefit from the interest rebate at issue during the POI.
Comment 16: Applicability of Integral Linkage Analysis. The
petitioners argue that in Certain Steel, the Department stated that it
would not conduct an integral linkage analysis of the 1970 Law due to
the fact that the law was specific in that it provided benefits only to
firms in certain regions. The petitioners state that no evidence has
been placed on the record to support a different conclusion in this
proceeding. Therefore, the Department should determine that the
subsidies provided pursuant to the 1970 Law are provided

[[Page 15579]]

to a specific enterprise or industry or group of enterprises or
industries.
ALZ argues that the Department found in Certain Steel that the 1959
Law complemented the 1970 Law and, hence, the two should be considered
together when determining benefit levels. The same situation now exists
with respect to the 1993 Decree and the 1970 Law, in ALZ's view.
Therefore, ALZ argues, nothing changed with the replacement of the 1959
Law by the 1993 Decree--except the level of benefits.
Department's Position: In Certain Steel, we were examining a
situation where firms qualifying for benefits under the 1970 Law would
also qualify for benefits which were ``generally available'' under the
1959 Law. In situations where a firm can qualify for the same benefit
(or virtually the same benefit) under two laws, the issue is not one of
integral linkage, but one of ``tiered benefits.'' Hence, as the
Department stated in Certain Steel, ``* * * the question of linkage
does not apply here.'' Instead, we stated, ``we have determined to
countervail benefits under the 1970 Law only to the extent that they
exceed benefits available under the 1959 Law. This approach is in
accordance with our treatment of programs with tiered levels of
benefits in Granite from Italy.'' (See Certain Steel at 37289)
In this proceeding, the 1959 Law was replaced by the 1993 Decree.
To apply the same analysis would require the Department to determine
that the 1993 Decree is generally available (i.e., neither de jure nor
de facto specific). ALZ did not receive any benefits under the 1993
Decree and the record evidence does not allow the Department to fully
analyze the specificity of the 1993 Decree. The data that is on the
record includes subsidies provided under both the 1993 Decree and the
1970 Law and does not distinguish between the monies provided under
each law. Moreover, the 1993 Decree states that benefits under it are
provided for investments ``which do not fall under'' the 1970 Law. This
implies that investments eligible to receive assistance under the 1970
Law would not receive assistance under the 1993 Decree. Therefore, the
tiered benefits analysis is not applicable in this case.
Therefore, in order to view subsidies provided under more than one
law as constituting a single program, the Department must determine
that those subsidies are integrally linked. In response to the
petitioners' argument that benefits under the 1970 Law will always be
regionally specific, we acknowledge that the 1970 Law provides benefits
only to specific regions. However, the regional specificity aspect may
be removed when the 1970 Law is combined with the 1993 Decree and the
1978 Act. See, also, the Department's Position in Comment 18.
Comment 17: Integral Linkage. The petitioners argue that the 1993
Decree should not affect the countervailability of subsidies received
pursuant to the 1970 Law. Although the 1993 Decree replaced the 1959
Law, it did so because a 1991 EC Directive stated that the 1959 Law had
to be revised and benefit levels reduced to be consistent with European
regulations. The petitioners argue that by itself, this fact suggests
that the benefits under the 1993 Decree are more limited than those
available under the 1959 Law. The petitioners state that the 1993
Decree is distinctly different from both the 1970 Law and the 1959 Law,
which was found noncountervailable in the 1983 Belgian Steel case.
Therefore, the Department should not treat the 1993 Decree in the same
manner that it treated the 1959 Law in Certain Steel.
The petitioners argue that the eligibility criteria and the
benefits provided under the 1993 Decree are different from those under
the 1970 Law or the 1959 Law. Therefore, the benefits received by ALZ
pursuant to the 1970 Law after the 1959 Law was repealed should be
countervailed in their entirety. However, the petitioners do not
disagree with the Department's conclusion in Certain Steel and the
Preliminary Determination that 1970 Law benefits are not specific when
assessed against the type and level of benefits available under the
1959 Law.
ALZ and the GOB state that the Laws of 1959, 1970, the 1978 Act and
the 1993 Decree are all part of the same GOF comprehensive program of
economic expansion and should be considered together in determining
benefits. Moreover, the record evidence makes clear that the 1993
Decree replaced the 1959 Law and the only part that the 1991 EC
directive required to change and, therefore, the only point that
differs between the two laws is the level of benefits. The GOB further
argues that it is common knowledge in Belgium that the GOF intended the
1993 Decree to replace the 1959 Law and that the benefits available
under the 1993 Decree are the same ones that were available under the
1959 Law. The record evidence dictates that the Department must
consider the economic expansion laws as a whole when analyzing any
benefits received under the 1970 Law. Therefore, consistent with the
Department's treatment of the 1959 Law in Belgian Steel and Certain
Steel and with the facts of this case, the Department should only
countervail benefits under the 1970 Law to the extent they exceed those
available under the 1993 Decree.
Department's Position: In Belgian Steel, the Department found the
1959 Law to be not specific. In Certain Steel, we countervailed
benefits provided under the 1970 Law only to the extent they exceeded
those available under the 1959 Law. The 1959 Law was replaced with the
1993 Decree and the record evidence suggests that the 1959 Law, the
1970 Law, and the 1993 Decree all have similar types of benefits. In
addition, the 1978 Act provides the same types of benefits to small
companies. Moreover, the level and type of environmental assistance
provided under all laws is identical.
Section 355.43(b)(6) of the Department's 1989 Proposed Regulations
requires that in determining whether two programs are integrally
linked, the Secretary will examine factors such as ``the administration
of the programs, evidence of a government policy to treat industries
equally, the purposes of the programs, and the manner of funding the
programs.'' The evidence on the record of this proceeding suggests
that, since their inceptions, the 1970 Law, the 1978 Act, and the 1993
Decree are related to each other and complement each other in the types
of subsidies offered and the goals they seek to achieve. The 1970 Law
targets development zones, while the 1978 Act and the 1993 Decree offer
assistance to companies that cannot receive assistance under the 1970
Law. The Department confirmed at verification that from the time the
GOF assumed authority for economic expansion, all laws, including the
1993 Decree, have promoted similar objectives and have been
administered by the same authority. Moreover, all applicants go through
the same approval process, use the same application form for assistance
(the application form for the 1978 Act is less detailed than the one
for the 1970 Law and the 1993 Decree), and receive their funding from
the same source.
Consistent with Live Swine from Canada; Final Results of
Countervailing Duty Administrative Reviews (61 FR 52408, 52415 (October
7, 1996)) which stated that an integral linkage analysis should be
performed on a ``program by program'' basis, the Department considered
particular types of assistance under the 1993 Decree, the 1970 Law, and
the 1978 Act separately to determine whether such programs under each
law (i.e., expansion grants, environmental grants, etc.) are integrally
linked for specificity purposes. Given

[[Page 15580]]

this analysis, when looking at the subsidies received by ALZ and
Albufin, we determine that the environmental grants available under the
1993 Decree, the 1970 Law, and the 1978 Act are integrally linked.
Likewise, the environmental real estate tax exemptions available under
all three laws are also integrally linked. Consequently, for purposes
of this investigation, we consider environmental grants available under
all three laws to constitute a single program. Likewise, we consider
environmental real estate tax exemptions available under all three laws
to constitute a single program. For further information on integral
linkage, see Economic Expansion Memorandum.
Comment 18: Specificity of Environmental Grants. ALZ argues that
the 1994 Environmental Grants are not countervailable because the
evidence on the record shows that they are not de jure or de facto
specific when examined in the context of the 1970 Law, the 1978 Act,
and the 1993 Decree.
Department's Position: As noted in Comment 17 above, we determine
that the environmental grants available under the 1970 Law are
integrally linked with those available under the 1993 Decree and the
1978 Act. Since environmental grants under all of these laws are
generally available, these grants are not de jure specific. Moreover,
after analyzing the usage data for the environmental grants bestowed
under the 1993 Decree and the 1970 Law, we observed that these
environmental grants are provided to 35 distinct industry groupings and
that the steel industry did not receive a disproportionate share of
benefits. Therefore, we determine that the environmental grants are
also not de facto specific. For further discussion, see Economic
Expansion Memorandum.
Comment 19: Green Light Treatment for Environmental Grants. We
received several comments from interested parties on green light
issues. ALZ and the GOB argued that the environmental grants qualified
for green light treatment under section 771(5B)(D) of the Act. The
petitioners disputed this assertion and argued that all of the criteria
for green light treatment had not been met. Specifically, the
petitioners argued that the assertion that there was no manufacturing
cost savings had not been sufficiently documented.
Department's Position: Although the Department conducted some green
light analysis in the Preliminary Determination, we did not make a
green light determination because more information was needed. Because
in the final determination we determine that the environmental grants
are not specific, the Department need not determine whether this
subsidy meets all the criteria for green light treatment.
Comment 20: Real Estate Tax Exemptions. ALZ argues that the
environmental real estate tax exemption is not specific and, therefore,
does not provide a countervailable subsidy. In support of its argument,
ALZ notes that the Department verified that ALZ's real estate tax
exemptions were tied to the environmental projects approved for
assistance under the 1970 Law. Moreover, the Department verified that
the 1993 Decree, the 1970 Law, and the 1978 Law allow the same real
estate tax exemption for ecological adaptions. Thus, the environmental
real estate tax exemption is neither de jure nor de facto specific
because any company in Flanders that made ecological adaptions can
qualify for the real estate tax exemption.
Should the Department determine that the real estate tax exemption
is countervailable, ALZ argues that the alleged subsidy rate should be
calculated only on those investments eligible for the exemption. ALZ
explains that it initially calculated the tax exemption for all
investments approved to receive this exemption because it does not
track the amount of taxes not paid. However, certain investments were
not eligible for the exemption during the POI because they had not been
completed by 1996. Thus, the calculations were corrected and
resubmitted. ALZ contends that the Department should use the corrected
figures for purposes of calculating the alleged benefit.
The petitioners comment that ALZ failed to address the expansion
real estate tax exemptions received by Albufin in conjunction with the
1993 Expansion Grant. The Department preliminarily determined that the
1993 Expansion Grant conferred a countervailable benefit upon Albufin.
Accordingly, the Department should continue to countervail the real
estate tax exemptions benefits provided to Albufin for purposes of its
final determination.
Department Position: As stated above, we've determined that the
environmental real estate tax exemptions received by ALZ are not
specific and, therefore, not countervailable. See, also, Economic
Expansion Memorandum at 10.
With respect to the expansion real estate tax exemption received by
Albufin, we affirm our preliminary determination that this subsidy is
regionally specific because only the 1970 Law provides expansion real
estate tax exemptions to large-sized enterprises. Therefore, firms must
be situated in a development zone to receive this real estate tax
exemption. Since the expansion real estate tax exemption received by
Albufin is specific, we are continuing to countervail it.
Comment 21: Accelerated Depreciation Methodology. ALZ and the GOB
argue that accelerated depreciation should be treated as a tax deferral
rather than a tax exemption. In support of its argument, ALZ refers to
the Department's 1997 proposed rules, in which the Department
recognized that its existing methodology ``focused on the tax savings,
but has not acknowledged the later tax increases.'' See Countervailing
Duties, 62 FR 8818, 8835 (February 26, 1997). Furthermore, ALZ contends
that the treatment of accelerated depreciation as a tax deferral rather
than a tax exemption is a basic accounting principle. See A.N. Mosich
and E. John Larsen, Intermediate Accounting, (6th ed. 1987), 617. ALZ
further argues that the U.S. tax law and U.S. courts have also
recognized that accelerated depreciation in a tax deferral rather than
a tax exemption. In order to calculate the benefit, ALZ suggests
treating the deferred taxes as an interest-free contingent loan. This
methodology allows the Department the opportunity to address changes in
the tax laws or a company's financial position.
The petitioners argue that the Department should reject ALZ's
argument because it contradicts the agency's longstanding approach to
measuring benefits from accelerated depreciation. The petitioners refer
to the Final CVD Regulations, in which the Department reaffirmed its
practice of treating accelerated depreciation as a tax exemption
without regard for any later tax increases that may be incurred. See
Final CVD Regulations, 65376. According to the Department, the
speculation inherent in giving a company credit for a contingent tax
liability that it may never incur supports the continued treatment of
accelerated depreciation benefits as tax exemptions. See Extruded
Rubber Thread from Malaysia, 57 FR 38472 (August 25, 1992).
The petitioners also contend that ALZ has offered no evidence that
compels the Department to modify its current methodology. Rather, the
petitioners note that the respondent relies primarily on authorities
such as accounting texts and the U.S. tax law, none of which are
concerned with the implications of accelerated depreciation benefits in
the context of the countervailing duty law.

[[Page 15581]]

Therefore, the Department should continue to use its current
methodology for purposes of its final determination.
Department Position: It is our practice to treat the tax savings
from accelerated depreciation as a tax exemption rather than a tax
deferral because we cannot be certain that the benefits of an
accelerated depreciation program will be offset by higher taxes in the
future. See Final Affirmative Countervailing Duty Determinations:
Certain Steel Products from Germany, 58 FR 37315, 37324-25, (July 9,
1993). Such factors as changes in tax provisions and government tax
policies, the provision of additional future tax benefits, or the
possibility that the recipient company is in a tax loss position in the
future might prevent higher taxes from materializing. Therefore, for
purposes of our final determination, we have continued to countervail
the tax savings received from accelerated depreciation.
Comment 22: Accelerated Depreciation--Albufin. ALZ contends that
even if the Department continues to treat accelerated depreciation as a
tax exemption rather than a tax deferral, Albufin did not benefit from
this program after 1997. The respondent notes that in fiscal year 1997
Albufin decided not to participate in this program. Therefore, there is
no benefit from accelerated depreciation after the POI. Consequently,
no benefit from accelerated depreciation is applicable to any entries
potentially subject to countervailing duties.
The petitioners contend that the respondent's argument conflicts
with Department practice. Citing 19 CFR 351.509(b), the petitioners
assert that Albufin received a benefit in 1997 in conjunction with
taxes paid for the 1996 tax year when it filed its tax return in 1997.
According to the petitioners, the fact that Albufin did not apply for
accelerated depreciation with respect to taxes incurred in 1997 and
payable in 1998 has no bearing on the POI.
Department Position: We agree with petitioners. Pursuant to
Sec. 355.48(b)(4) of the 1989 Proposed Regulations, the Secretary
normally will consider the benefit as having been received on the date
on which the recipient firm would otherwise have had to pay the taxes
associated with the exemption or remission. Normally, this date will be
the date on which the firm filed its tax return. Therefore, for
purposes of our final results, we have countervailed the benefit
Albufin received in conjunction with taxes paid in 1997 for the 1996
fiscal year.
Comment 23: Treatment of Public Investment in Alfin. ALZ argues
that the Department's classification of the NIM's investment in Alfin
as a loan was inappropriate and that the Department should instead
treat it as a noncountervailable equity investment. In the first
instance, ALZ argues that, under the Department's hybrid financial
instrument methodology, NIM's investment should be treated as equity
because each criterion of the Department's analysis of hybrid financial
instruments indicates that the investment was equity and not debt.
With respect to the first criterion (Expiration/Maturity Date/
Repayment Obligation), ALZ states that NIM's shares in Alfin are
properly characterized as equity because they do not have an
expiration/maturity date nor is there a repayment obligation on the
part of the ``debtor.'' Specifically, ALZ argues that, unlike a loan
which has a specific expiration date, the shares in question never
expire, rather they are being purchased by ALZ (a private shareholder)
and not being repaid by Alfin (the supposed ``debtor''). According to
respondent, because ALZ's purchase does not eliminate the shares, a
repayment is not indicated. ALZ also argues that, while its requirement
to purchase the shares is legally enforceable in court, it differs from
the requirement to repay a debt because no legal action can be taken
against the ``debtor,'' Alfin.
ALZ argues that because NIM's dividends are paid from profit, must
be specifically declared by the board, and are conditional rather than
guaranteed, NIM's shares are properly characterized as equity rather
than debt under the second criterion (Guaranteed Interest or
Dividends). As for the third criterion (Ownership Rights), ALZ argues
that NIM does have ownership rights, as evidenced by NIM's appointment
of half of the Board of Directors and by the fact that the shares carry
a dividend and, thus, NIM has a claim on the profits of the firm. As
for the last criterion (Seniority), ALZ states that NIM's shares do not
have a liquidation priority over other shares and, thus, creditors
would come before NIM in the event of a liquidation which indicates
that the shares are properly characterized as equity.
ALZ also argues that, when applying the hybrid financial instrument
methodology, the Department should review all the relevant
characteristics of a financial instrument rather than apply a strict
hierarchy. ALZ notes that while the Department has stated that it will
end its analysis when a characteristic is clearly indicative of debt or
equity, its practice has been to review all of the relevant
characteristics in making a determination. ALZ cites to the GIA (at
37254) where the Department made a determination in the Final
Affirmative Countervailing Duty Determinations: Certain Steel Products
From France, 58 FR 37304 (July 9, 1993) on more than one criteria. In
further support of its argument, ALZ cites to the CIT's decision in
Inland Steel, 967 F. Supp. at 1273, in which the CIT discussed
characteristics outside of the Department's stated hierarchy. ALZ also
cites to the preamble of the final regulations in which the Department
stated that it would be premature to codify the treatment of its
hierarchy. Thus, ALZ contends that the Department does not have a
practice of adhering to a strict hierarchy or of examining only the
above four criteria and, thus, the Department should consider all
relevant characteristics and determine that, when viewed in their
entirety, Alfin's shares must be classified as equity.
Finally, ALZ argues that NIM's investment was consistent with that
of a reasonable private investor and, thus, does not provide a
countervailable subsidy. ALZ contends that it is the Department's
practice to compare the price paid by the private investor with that
paid by the government. If this practice is followed, ALZ notes, the
Department will find that the terms of shares subscribed to by NIM were
better than the terms of those purchased by the private investor. Thus,
because NIM paid the same price paid by the private investor the
transaction did not provide a countervailable subsidy.
The petitioners argue that the Department's treatment of NIM's
investment as debt instead of equity was appropriate and consistent
with Department practice. Specifically, petitioners note that the
Department states in the GIA that ``once a characteristic is clearly
indicative of debt or equity, we will stop our analysis and categorize
the hybrid as debt or equity.'' Thus, according to petitioners, to the
extent that NIM's investment had a repayment obligation it should be
classified as debt. The petitioners argue that the Department verified
that ALZ is required to repay the principal over the course of ten
years and, thus, NIM's shares contain a repayment obligation and are
more appropriately categorized as debt.
The petitioners also disagree with ALZ's contention that because
ALZ (the private shareholder) is buying the shares from NIM instead of
Alfin (the ``debtor'') it is not a debt instrument. The petitioners
state that the Department's hierarchy does not require that repayment
be made by the debtor

[[Page 15582]]

because the key fact is that the shares have a repayment obligation.
Finally, the petitioners argue that if the Department does
categorize NIM's investment in Alfin as equity instead of debt, the
Department should find the investment inconsistent with the practice of
private investors and not use ALZ's subscription in Alfin as a
benchmark. On the latter point, petitioners argue that in fact NIM did
not purchase its shares on the same terms as ALZ, but paid a
significant premium. In the petitioners' view this demonstrates that
NIM's involvement was on noncommercial terms. According to petitioners,
because NIM involved itself in a noncommercial manner it impacted the
reasonableness of the investment and, thus, altered ALZ's evaluation of
the commercial reasonableness of the project. Thus, the petitioners
argue that the share price paid by ALZ is distorted and unacceptable as
a commercial benchmark.
Further, the petitioners argue that NIM's investment was
inconsistent with the practice of private investors, for two additional
reasons. First, NIM failed to evaluate the commercial reasonableness of
its investment prior to making its decision. Second, the shares
purchased by NIM offered an unreasonably low rate of return. Based on
these factors, petitioners argue that NIM's investment was inconsistent
with the practice of private investors and, thus, countervailable.
Department's Position: We are continuing to categorize NIM's
investment in Alfin as debt. As stated in the GIA (at 37254), ``even if
the instrument has no pre-set repayment date, but a repayment
obligation exists when the instrument is provided, the instrument has
characteristics more in line with loans then equity.'' NIM's investment
in Alfin was in accordance with the Economic Recovery Law of July 31,
1984 (Herstelwet 1984). Under the law, the contract amongst the parties
must contain an undertaking by the private shareholders that they will
repurchase the shares representing the public contribution at the
issuing price. Furthermore, ``the repurchase must be effected at the
rate of one-tenth per year, from the fourth to the thirteenth calendar
year following that in which the shares were issued.'' Additionally, we
found at verification that ALZ, in accordance with the contract, has
been repurchasing the shares. Thus, a repayment obligation clearly
existed with a pre-set repayment date. Based on the above, we find that
the instrument has characteristics more in line with a loan than
equity.
With respect to ALZ's argument that the Department must look at all
relevant information in making such a determination, we note that our
practice is to consider, in order, the four criteria for determining
the nature of hybrid financial instruments and stop our analysis when
one characteristic is clearly indicative of debt or equity. In this
case, ALZ's repayment obligation is clearly indicative of debt under
the first criterion and, thus, it is not necessary to address the other
criteria. Even if other evidence reflects equity rather than debt, we
have found that a repayment obligation bears such significance and
outweighs other evidence that the instrument should be properly
categorized as debt. In Geneva Steel, the CIT held that this
hierarchical method of classifying hybrid instruments is based on a
permissible construction of the Act and is in accord with Congressional
intent. See Geneva Steel at 578-79. Thus, in reviewing all relevant
information on the record, we continue to find that this financial
instrument is properly classified as debt.
Because we are affirming our preliminary determination that this
financial instrument is properly treated as a loan, it is not necessary
to address the other issues raised by ALZ and petitioners with respect
to the commercial reasonableness of NIM's investment.
Comment 24: Attribution of Sidmar and Sidmar Group Subsidies to
ALZ. ALZ argues that while a company may exercise considerable control
over its consolidated subsidiaries, if there is an insufficient
identity of interests between the parent and its subsidiary, the
Department has not allocated untied subsidies to the subsidiary. See
Wire Rod from Italy (in which we stated, ``if there is an insufficient
identity of interest among the corporate group, the Department will
consider these facts and determine whether it is appropriate to
attribute subsidies to the consolidated group holdings''). Respondent
argues that such a situation exists here in that Sidmar and ALZ have an
insufficient identity of purpose. ALZ notes that Sidmar has
considerable interests in other businesses, is a producer of carbon
steel, and does not produce stainless steel. Further, ALZ notes that
both companies use different distribution systems for their products.
ALZ also points out that Sidmar's ownership interest in ALZ was
insignificant when the the alleged subsides were provided.
ALZ notes that if the Department finds a countervailable subsidy
provided to a company within the Sidmar Group, the Department must base
any attribution analysis on the relationship between ALZ and the
company in question, not between Sidmar and ALZ. Specifically, ALZ
argues that because SidInvest and ALZ have never had any direct
ownership interest in one another, the Department's practice with
respect to parent companies does not apply to this situation. While ALZ
admits that the two companies may be affiliated, it notes that the
Department's practice has been to consider subsidies to affiliated
parties only when both parties are involved in the production or
distribution of the subject merchandise or if there is a specific pass-
through of subsidies. ALZ argues that neither of these two situations
exists with respect to SidInvest and ALZ and, moreover, there is no
convergence of interests between the two companies, as SidInvest's list
of investments does not indicate significant involvement in steel
production or distribution.
ALZ makes a similar argument with respect to the relationship
between it and Sidfin. Specifically, ALZ notes that while Sidfin does
have an ownership interest in ALZ, the interest is not controlling and,
thus, no cross-ownership is indicated. Also, ALZ argues that it did not
receive any financing nor waive any obligation out of the government's
transaction with Sidfin and, thus, no benefit can be attributed to ALZ.
Finally, ALZ argues that Sidmar's 1985 debt-to-equity conversion should
not be attributed to ALZ because the assumption of the loans was tied
to Sidmar's carbon steel activities.
The petitioners argue that while Sidmar and ALZ may produce
different products and use different distribution systems, these facts
have no bearing on the question of whether subsidies provided to Sidmar
should be attributed to ALZ. The petitioners note that the Department
has a basic rule for determining whether subsidies should be attributed
amongst companies when cross-ownership exists. Specifically, the
petitioners cite to the Department's Final CVD Regulations which state
that subsidies should be attributed when ``the interests of two
corporations have merged to such a degree that one corporation can use
or direct the individual assets (or subsidy benefits) of the other
corporation in essentially the same ways it can use its own assets (or
subsidy benefits).'' See Final CVD Regulations, Sec. 351.525(b)(6)(vi).
The petitioners note that since 1987 Sidmar has, either directly or
indirectly, controlled ALZ. Prior to 1987, according to the
petitioners, both Sidmar and ALZ were under common ownership of

[[Page 15583]]

either the GOB or Arbed. Based on the above, the petitioners argue that
this overlapping ownership is sufficient to attribute subsidies
received by Sidmar to ALZ.
On a specific level, the petitioners argue that SidInvest's
relationship with ALZ is sufficient to allocate subsidies received by
SidInvest to ALZ. They base this argument on the fact that Sidmar has a
common ownership interest in both SidInvest and ALZ, thereby
establishing a degree of cross-ownership that supports attribution of
subsidies received by SidInvest to ALZ. The petitioners argue that
while SidInvest is not the parent of ALZ and SidInvest has no ownership
or control over ALZ, such facts have no bearing on the Department's
attribution of subsidies because SidInvest is a non-producing financial
subsidiary of Sidmar. Given this status, petitioners argue that
SidInvest is more properly treated as a holding or parent company and,
thus, any benefits it receives are attributable to ALZ. Petitioners
point to Wire Rod from Italy, in which the Department attributed equity
infusions received by different companies, all of whom were owned by a
government holding company, in support of their argument.
With respect to subsidies received by Sidfin, the petitioners argue
that the record establishes that Sidfin is a non-producing holding
company controlled by the GOB and that the GOB also controls a
significant portion of ALZ. Thus, the petitioners contend that because
Sidfin is a non-producing holding company, subsidies related to Sidfin
are attributable to ALZ's sales. Furthermore, the petitioners argue
that Sidfin's degree of ownership in ALZ is adequate to establish
cross-ownership and, thus, subsidies should be attributed between these
companies.
With respect to ALZ's argument Sidmar's 1985 debt-to-equity
conversion should not be attributed to ALZ because the benefit was tied
to Sidmar's carbon steel activities, the petitioners argue that the
subsidy was provided in conjunction with the government's restructuring
plans for the entire steel sector, not just carbon steel. Secondly, the
petitioners note that the Department treated the subsidy as a debt-to-
equity conversion in the Preliminary Determination and, therefore, it
is an untied subsidy.
Department's Position: As in the Preliminary Determination, we are
attributing the benefits from non-recurring untied subsidies received
by Sidmar, including subsidies related to SidInvest to the consolidated
operations of the Sidmar Group which includes ALZ. This is consistent
with the Department's practice that attributes untied subsidies to the
company's total domestically-produced sales. See GIA at 37267.
With respect to the subsidies received by Sidmar, when the parent
company of a consolidated group receives untied subsidies, such as
equity infusions, these domestic subsidies are normally attributed to
the consolidated group. See Certain Hot-Rolled Lead and Bismuth Carbon
Steel Products From the United Kingdom; Final Results of Countervailing
Duty Administrative Review, 62 FR 53306, 53311 (October 14, 1997). In
this case, we have attributed untied subsidies received by Sidmar to
the consolidated sales of that company, including the sales of ALZ. We
disagree with ALZ that there is an insufficient ident

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A99-7531. Public record. Not legal advice.