[Federal Register Volume 60, Number 117 (Monday, June 19, 1995)]
[Notices]
[Pages 31992-31998]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14934]



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DEPARTMENT OF COMMERCE
[C-475-815]


Final Affirmative Countervailing Duty Determination: Small 
Diameter Circular Seamless Carbon and Alloy Steel Standard, Line and 
Pressure Pipe (``Seamless Pipe'') From Italy

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

EFFECTIVE DATE: June 19, 1995.

FOR FURTHER INFORMATION CONTACT: Peter Wilkniss, Office of 
Countervailing Investigations, Import Administration, U.S. Department 
of Commerce, Room 3099, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230; telephone (202) 482-0588.

FINAL DETERMINATION: The Department determines that benefits which 
constitute subsidies within the meaning [[Page 31993]] of section 701 
of the Tariff Act of 1930, as amended (``the Act''), are being provided 
to manufacturers, producers, or exporters in Italy of seamless pipe. 
For information on the estimated net subsidies, please see the 
Suspension of Liquidation section of this notice.

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute and to the 
Department's regulations are references to the provisions as they 
existed on December 31, 1994. References to the Countervailing Duties: 
Notice of Proposed Rulemaking and Request for Public Comments, 54 FR 
23366 (May 31, 1989) (Proposed Regulations), which has been withdrawn, 
are provided solely for further explanation of the Department's CVD 
practice.

Case History

    Since the publication of the preliminary determination in the 
Federal Register (59 FR 60774, November 28, 1994), the following events 
have occurred.
    On December 23, 1994, we aligned the final countervailing duty 
determination in this investigation with the final determination in the 
companion antidumping investigation of seamless pipe from Italy (59 FR 
66296).
    We conducted verification of the responses submitted on behalf of 
the Government of Italy (``GOI''), and Dalmine S.p.A. (``Dalmine'') 
from January 22 through January 27, 1995.
    On April 19, 1995, we postponed the final determination in this 
case to June 12, 1995 (60 FR 19571).
    On May 2, 1995 we received a case brief from respondent. Neither 
petitioner or respondent requested a hearing in this investigation.

Scope of Investigation

    The following scope language reflects certain modifications made 
for purposes of the final determination, where appropriate, as 
discussed in the ``Scope Issues'' section of the final determination in 
the companion antidumping case of seamless pipe from Italy.
    The scope of this investigation includes seamless pipes produced to 
the ASTM A-335, ASTM A-106, ASTM A-53 and API 5L specifications and 
meeting the physical parameters described below, regardless of 
application. The scope of this investigation also includes all products 
used in standard, line, or pressure pipe applications and meeting the 
physical parameters below, regardless of specification.
    For purposes of this investigation, seamless pipes are seamless 
carbon and alloy (other than stainless) steel pipes, of circular cross-
section, not more than 114.3 mm (4.5 inches) in outside diameter, 
regardless of wall thickness, manufacturing process (hot-finished or 
cold-drawn), end finish (plain end, bevelled end, upset end, threaded, 
or threaded and coupled), or surface finish. These pipes are commonly 
known as standard pipe, line pipe or pressure pipe, depending upon the 
application. They may also be used in structural applications. Pipes 
produced in non-standard wall thicknesses are commonly referred to as 
tubes.
    The seamless pipes subject to these investigations are currently 
classifiable under subheadings 7304.10.10.20, 7304.10.50.20, 
7304.31.60.50, 7304.39.00.16, 7304.39.00.20, 7304.39.00.24, 
7304.39.00.28, 7304.39.00.32, 7304.51.50.05, 7304.51.50.60, 
7304.59.60.00, 7304.59.80.10, 7304.59.80.15, 7304.59.80.20, and 
7304.59.80.25 of the Harmonized Tariff Schedule of the United States 
(HTSUS).
    The following information further defines the scope of this 
investigation, which covers pipes meeting the physical parameters 
described above:
    Specifications, Characteristics and Uses: Seamless pressure pipes 
are intended for the conveyance of water, steam, petrochemicals, 
chemicals, oil products, natural gas and other liquids and gasses in 
industrial piping systems. They may carry these substances at elevated 
pressures and temperatures and may be subject to the application of 
external heat. Seamless carbon steel pressure pipe meeting the American 
Society for Testing and Materials (ASTM) standard A-106 may be used in 
temperatures of up to 1000 degrees fahrenheit, at various American 
Society of Mechanical Engineers (ASME) code stress levels. Alloy pipes 
made to ASTM standard A-335 must be used if temperatures and stress 
levels exceed those allowed for A-106 and the ASME codes. Seamless 
pressure pipes sold in the United States are commonly produced to the 
ASTM A-106 standard.
    Seamless standard pipes are most commonly produced to the ASTM A-53 
specification and generally are not intended for high temperature 
service. They are intended for the low temperature and pressure 
conveyance of water, steam, natural gas, air and other liquids and 
gasses in plumbing and heating systems, air conditioning units, 
automatic sprinkler systems, and other related uses. Standard pipes 
(depending on type and code) may carry liquids at elevated temperatures 
but must not exceed relevant ASME code requirements.
    Seamless line pipes are intended for the conveyance of oil and 
natural gas or other fluids in pipe lines. Seamless line pipes are 
produced to the API 5L specification.
    Seamless pipes are commonly produced and certified to meet ASTM A-
106, ASTM A-53 and API 5L specifications. Such triple certification of 
pipes is common because all pipes meeting the stringent A-106 
specification necessarily meet the API 5L and ASTM A-53 specifications. 
Pipes meeting the API 5L specification necessarily meet the ASTM A-53 
specification. However, pipes meeting the A-53 or API 5L specifications 
do not necessarily meet the A-106 specification. To avoid maintaining 
separate production runs and separate inventories, manufacturers triple 
certify the pipes. Since distributors sell the vast majority of this 
product, they can thereby maintain a single inventory to service all 
customers.
    The primary application of ASTM A-106 pressure pipes and triple 
certified pipes is in pressure piping systems by refineries, 
petrochemical plants and chemical plants. Other applications are in 
power generation plants (electrical-fossil fuel or nuclear), and in 
some oil field uses (on shore and off shore) such as for separator 
lines, gathering lines and metering runs. A minor application of this 
product is for use as oil and gas distribution lines for commercial 
applications. These applications constitute the majority of the market 
for the subject seamless pipes. However, A-106 pipes may be used in 
some boiler applications.
    The scope of this investigation includes all seamless pipe meeting 
the physical parameters described above and produced to one of the 
specifications listed above, regardless of application, and whether or 
not also certified to a non-covered specification. Standard, line and 
pressure applications and the above listed specifications are defining 
characteristics of the scope of this investigation. Therefore, seamless 
pipes meeting the physical description above, but not produced to the 
A-335, A-106, A-53, or API 5L standards shall be covered if used in a 
standard, line or pressure application.
    For example, there are certain other ASTM specifications of pipe 
which, because of overlapping characteristics, could potentially be 
used in A-106 applications. These specifications generally include A-
162, A-192, A-210, A-333, and A-524. When such pipes are used in a 
standard, line or pressure pipe application, such products are 
[[Page 31994]] covered by the scope of this investigation.
    Specifically excluded from this investigation are boiler tubing and 
mechanical tubing, if such products are not produced to A-335, A-106, 
A-53 or API 5l specifications and are not used in standard, line or 
pressure applications. In addition, finished and unfinished OCTG are 
excluded from the scope of this investigation, if covered by the scope 
of another countervailing duty order from the same country. If not 
covered by such an OCTG order, finished and unfinished OCTG are 
included in this scope when used in standard, line or pressure 
applications. Finally, also excluded from this investigation are redraw 
hollows for cold-drawing when used in the production of cold-drawn pipe 
or tube.
    Although the HTSUS subheadings are provided for convenience and 
customs purposes, our written description of the scope of this 
investigation is dispositive.
    Dalmine has raised a scope issue in this investigation. The 
Department has addressed all scope issues in the final determination of 
the companion antidumping investigation of seamless pipe from Italy.

Injury Test

    Because Italy is a ``country under the Agreement'' within the 
meaning of section 701(b) of the Act, the U.S. International Trade 
Commission (``ITC'') is required to determine whether imports of 
seamless pipe from Italy materially injure, or threaten material injury 
to, a U.S. industry. On August 3, 1994, the ITC preliminarily 
determined 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 Italy of the subject 
merchandise (59 FR 42286, August 17, 1994).

Corporate History of Respondent Dalmine

    Prior to its liquidation in 1988, Finsider S.p.A. (``Finsider'') 
was the holding company for all state-owned steel companies in Italy, 
including Dalmine. Dalmine was an operating company wholly owned by 
Finsider. After Finsider's liquidation, a new government-owned holding 
company, ILVA S.p.A. (``ILVA''), was created. ILVA took over the former 
Finsider companies, among them Dalmine, which became a subsidiary of 
ILVA in 1989 when Finsider's shareholding in Dalmine was transferred to 
ILVA.
    Between 1990 and 1993, Dalmine itself was radically restructured. 
Dalmine became a financial holding company, with industrial, trading, 
and service shareholdings. As part of its restructuring, Dalmine made 
several asset purchases, sold two of its subsidiaries to private 
parties, and closed several manufacturing facilities. As of December 
31, 1993, the Dalmine Group consisted of a holding company (Dalmine 
S.p.A.), four wholly-owned, and one majority-owned, manufacturing 
companies, and a number of sales and service subsidiaries.
    During the POI, ILVA was owned by the Istituto per la Ricostruzione 
Industriale (``IRI''), a holding company which was wholly-owned by the 
GOI.

Spin-offs

    In its questionnaire response, Dalmine reported that between 1990 
and 1991, as part of its overall restructuring process, the company 
twice sold ``productive units'' to private buyers. According to 
Dalmine, these sales involved facilities that do not produce the 
subject merchandise. In the preliminary determination, we determined 
that the amount of potentially spun-off benefits was insignificant. We 
did not learn anything at verification that would lead us to reverse 
this determination. Therefore, we have not reduced the subsidies 
allocated to sales of the subject merchandise. (See Final Concurrence 
Memorandum dated June 12, 1995).

Equityworthiness

    Petitioner has alleged that Dalmine was unequityworthy in 1989, the 
year it received an indirect equity infusion from the GOI, through ILVA 
S.p.A. (``ILVA''), and that the equity infusion was, therefore, 
inconsistent with commercial considerations.
    In accordance with section 355.44(e)(1) of the Proposed Regulations 
(Countervailing Duties; Notice of Proposed Rulemaking and Request for 
Public Comments (``Proposed Regulations''), 54 FR 23366, May 31, 
1989)), we preliminarily determined that ILVA's purchase of Dalmine's 
shares was consistent with commercial considerations because Dalmine 
provided evidence that private investors, unrelated to Dalmine or the 
GOI, purchased a significant percentage of the 1989 equity offering, on 
the same terms as ILVA. We did not learn anything at verification that 
would lead us to reverse this finding. Therefore, the Department 
determines that ILVA's purchase of Dalmine's shares was consistent with 
commercial considerations.

Creditworthiness

    Petitioner has alleged that Dalmine was uncreditworthy in every 
year between 1979 and 1993. In accordance with section 355.44(b)(6)(i) 
of the Proposed Regulations, we preliminarily determined that Dalmine 
was creditworthy from 1979 to 1993. In making this determination we 
examined Dalmine's current, quick, times interest earned, and debt-to-
equity ratios, in addition to its profit margin. Specifically, although 
a number of the financial indicators are weak for certain years, none 
of the indicators are weak over the medium or long term, and when 
examined together on a yearly basis, the indicators support the 
determination that Dalmine was creditworthy in every year examined. 
(See also Creditworthy Memorandum, November 18, 1994). In addition, 
Dalmine received long-term, commercial loans from private lenders in 
several of the years examined.
    We did not learn anything new at verification that would lead us to 
reconsider our preliminary determination. Therefore, we continue to 
find that Dalmine was creditworthy from 1979 to 1993.

Benchmarks and Discount Rates

    Dalmine did not take out any long-term, fixed-rate, lire-
denominated loans in any of the years of the government loans under 
investigation. Therefore, in accordance with section 355.44(b)(4) of 
the Proposed Regulations, in our preliminary determination we used, as 
the benchmark interest rate, the Bank of Italy reference rate which was 
determined in Final Affirmative Countervailing Duty Determinations: 
Certain Steel Products from Italy (``Certain Steel from Italy''), 58 
FR, 37327 (July 9, 1993), to be both the best approximation of the cost 
of long-term borrowing in Italy and the only long-term fixed interest 
rate commonly available in Italy. We also used this rate as the 
discount rate for allocating over time the benefit from non-recurring 
grants for the same reasons as explained in Final Affirmative 
Countervailing Duty Determination: Certain Steel Products from Spain, 
58 FR 37374, 37376 (July 9, 1993).
    At verification, we learned that the Bank of Italy reference rate 
reflects the cost for Italian banks to borrow long-term funds. 
Therefore, the reference rate does not incorporate the mark-up a bank 
would charge a corporate client when making a long-term loan. Long-term 
corporate interest rate data is not available in Italy. Accordingly, we 
have adjusted the reference rate used in the preliminary determination 
upward to reflect the mark-up an Italian bank would charge a corporate 
customer.

[[Page 31995]]

    In order to approximate this mark-up, we calculated the difference 
between the average short-term corporate borrowing rate in Italy and 
the average interest rate on short-term Italian government debt, for 
each year in which Dalmine received long-term lire loans or non-
recurring grants from the government. We then added this mark-up to the 
Italian reference rate used in the preliminary determination to 
approximate an average long-term corporate benchmark interest rate. We 
also used these rates as the discount rates for allocating over time 
the benefit from non-recurring grants. See Certain Steel Products from 
Spain, 58 FR at 37376.
    For long-term loans denominated in other currencies, we used, as 
the benchmark interest rate, an average long-term fixed interest rate 
for loans denominated in the same currency. (See section E--Article 54 
Loans below.)

Calculation Methodology

    For purposes of this determination, the period for which we are 
measuring subsidies (the POI) is calendar year 1993. In determining the 
benefits received under the various programs described below, we used 
the following calculation methodology. We first calculated the benefit 
attributable to the POI for each countervailable program, using the 
methodologies described in each program section below. For each 
program, we then divided the benefit attributable to Dalmine in the POI 
by Dalmine's total sales revenue, as none of the programs was limited 
to either certain subsidiaries or products of Dalmine. Next, we added 
the benefits for all programs, including the benefits for programs 
which were not allocated over time, to arrive at Dalmine's total 
subsidy rate. Because Dalmine is the only respondent company in this 
investigation, this rate is also the country-wide rate.
    Based upon our analysis of the petition, the responses to our 
questionnaires, verification, and comments by interested parties, we 
determine the following:

I. Programs Determined To Be Countervailable

A. Benefits Provided Under Law 675/77

    Law 675/77 was enacted to bring about restructuring and 
reconversion in the following industrial sectors: (1) electronic 
technology; (2) the manufacturing industry; (3) the agro-food industry; 
(4) the chemical industry; (5) the steel industry; (6) the pulp and 
paper industry; (7) the fashion sector; and (8) the automobile and 
aviation sectors. Law 675/77 also sought to promote optimal 
exploitation of energy resources, and ecological and environmental 
recovery.
    A primary goal of this legislation was to bring all government 
industrial assistance programs under a single law in order to develop a 
system to replace indiscriminate and random public intervention by the 
GOI. Other goals were (1) to reorganize and develop the industrial 
sector as a whole; (2) to increase employment in the South; and (3) to 
maintain employment in depressed areas. Among other measures taken, the 
Interministerial Committee for the Coordination of Industrial Policy 
(``CIPI'') was created as a result of Law 675/77. CIPI approves 
individual projects in each of the industrial sectors listed above.
    Six main programs were provided under Law 675/77: (1) interest 
contributions on bank loans; (2) mortgage loans provided by the 
Ministry of Industry at subsidized interest rates; (3) interest 
contributions on funds raised by bond issues; (4) capital grants for 
projects in the South; (5) personnel retraining grants; and (6) VAT 
reductions on purchases of capital goods by companies in the South. 
Dalmine reported that it received benefits under items (1), (2), and 
(5) above.
    In its response, the GOI asserts that the steel and automobile 
industries did not receive a ``disproportionate'' share of benefits 
associated with interest contributions when the extent of investment in 
those industries is compared to the extent of investment in other 
industries. However, in keeping with past practice, we did not consider 
the level of investment in the individual industries receiving benefits 
under Law 675/77. Instead, we followed the analysis outlined in Final 
Affirmative Countervailing Duty Determination: Grain-Oriented 
Electrical Steel From Italy (Grain-Oriented Electrical Steel), 59 FR 
18357 (April 18, 1994), and Final Affirmative Countervailing Duty 
Determination: Certain Steel Products From Brazil, 58 FR 37295, 37295 
(July 9, 1993), of comparing the share of benefits received by the 
steel industry to the collective share of benefits provided to other 
users of the programs.
    According to the information provided by the GOI, of the eight 
industrial sectors eligible for benefits under Law 675/77, the two 
dominant users of the interest contribution program were (1) the 
Italian auto industry which accounted for 34 percent of the benefits, 
and (2) the Italian steel industry which accounted for 33 percent of 
the benefits. Likewise, with respect to the mortgage loans, the two 
dominant users were the auto and steel industries which received 45 
percent and 31 percent of the benefits, respectively.
    In light of the above evidence, we determine that the steel 
industry was a dominant user of both the interest contribution and the 
mortgage loan programs under Law 675/77. (See section 355.43(b)(2)(iii) 
of the Proposed Regulations). Therefore, we determine that benefits 
received by Dalmine under these programs are being provided to a 
specific enterprise or industry or group of enterprises or industries. 
On this basis, we find Law 675/77 financing to be countervailable to 
the extent that it is granted on terms inconsistent with commercial 
considerations.
    Under the interest contribution program, Italian commercial banks 
provided loans to industries designated under Law 675/77. The interest 
owed by the recipient companies was partially offset by interest 
contributions from the GOI. Dalmine received bank loans with interest 
contributions under Law 675/77 which were outstanding in the POI.
    Because the GOI interest contributions were automatically available 
when the loans were taken out, we consider the contributions to 
constitute reductions in the interest rates charged, rather than grants 
(see Certain Steel From Italy at 37335).
    At verification, we established that Dalmine had repaid each of the 
loans it received under this program in June 1994. We further found 
that Dalmine had not yet received a portion of the interest 
contributions originally owed to it by the GOI under this program, due 
to delays in GOI approval of several Dalmine internal asset transfers. 
Finally, we established that Dalmine had paid interest on each of the 
loans during the loan grace periods, contrary to what Dalmine reported 
in its questionnaire responses.
    Dalmine argues that the GOI terminated the subsidized loan portion 
of this program in 1982, and that Dalmine repaid each of the loans in 
June 1994, after the POI, but before the publication of the preliminary 
determination. Consequently, Dalmine contends, no further benefits can 
accrue to Dalmine under this program. Therefore, according to Dalmine, 
the Department should, in accordance with the Department's policy to 
take program-wide changes into account in setting the duty deposit 
rate, set Dalmine's deposit rate for this program to zero.
    Contrary to Dalmine's assertion, we determine that the termination 
of the subsidized loan portion of this program [[Page 31996]] does not 
constitute a program-wide change as defined in section 355.50(b)(1) of 
the Proposed Regulations. Specifically, although Dalmine has repaid the 
loans it received under the program, there could be other Italian 
companies with loans that are still outstanding. Therefore, despite 
termination of the program in 1982, there may still be residual 
benefits under the program. Under our program-wide change policy, the 
change at issue cannot be limited to individual firms. Consequently, we 
determine that the ``termination'' of the subsidized loan portion of 
this program does not constitute a program-wide change. See Final 
Affirmative Countervailing Duty Determination and Countervailing Duty 
Orders; Certain Welded Carbon Steel Pipe and Tube Products From 
Argentina (Argentine Pipe), 53 FR 37619 (September 27, 1988); Section 
355.50(b)(1) of the Proposed Regulations.
    Alternatively, Dalmine claims that the Department should 
recalculate the benefits under this program to reflect the delayed 
receipt of GOI interest contributions, as well as Dalmine's payment of 
grace period interest.
    With respect to the grace period, we have adjusted our calculations 
to reflect that Dalmine paid interest during that time, as established 
at verification. However, we are treating the interest contributions as 
countervailable on the date Dalmine made the corresponding interest 
payments, despite any delay in receipt by Dalmine. This is because 
Dalmine's entitlement to the interest contributions was automatic when 
it made the interest payments. Thus, we find, for purposes of benefit 
calculation, that the interest contributions were received at the time 
the interest payments were made. See Steel Wire Nails from New Zealand, 
52 FR 37196 (1987).
    Under the mortgage loan program, the GOI provides long-term loans 
at subsidized interest rates. Dalmine received financing under this 
program which was outstanding in the POI.
    To determine whether these programs conferred a benefit, we 
compared the effective interest rate paid by Dalmine to the benchmark 
interest rate, discussed above. Based on this comparison, we determine 
that the financing provided under these programs is inconsistent with 
commercial considerations, i.e., on terms more favorable than the 
benchmark financing.
    To calculate the benefit from these programs, we used our standard 
long-term loan methodology as described in section 355.49(c)(1) of the 
Proposed Regulations. We then divided the benefit allocated to the POI 
for each program by Dalmine's total sales in 1993. On this basis, we 
determine the net subsidy from these programs to be 0.46 percent ad 
valorem for all manufacturers, producers, and exporters in Italy of the 
subject merchandise.
    With respect to retraining grants provided to Dalmine under Law 
675/77, it is the Department's practice to treat training benefits as 
recurring grants. (See Certain Steel General Issues Appendix at 37226). 
Since the only grant reported under this program was received by 
Dalmine in 1986, any benefit to Dalmine as a result of this grant 
cannot be attributed to the POI. Therefore, we determine that 
retraining benefits provided under Law 675/77 conferred no benefit to 
Dalmine during the POI.

B. Grants Under Law 193/84

    According to the GOI, Articles 2, 3, and 4 of Law 193/84 provide 
for subsidies to close steel plants. As stated in Art. 20 of Law N. 46 
of 17/2/1982, steel enterprises, including enterprises producing 
seamless pipes, welded pipes, conduits and welded pipes for water and 
gas, are the recipients of these subsidies. As benefits under this 
program are limited to the steel industry, we determine that Law 193/84 
is de jure specific and, therefore, countervailable.
    At verification, we found that Dalmine received an additional 
benefit under this program not reported in its questionnaire responses. 
We have included this additional benefit in our calculation of the 
benefits received by Dalmine under this program.
    To calculate the benefit during the POI, we used our standard grant 
methodology (see section 355.49(b) of the Proposed Regulations). We 
then divided the benefits attributable to Dalmine under Law 193/84 in 
the POI by Dalmine's total sales. On this basis, we determine the 
estimated net subsidy to be 0.81 percent ad valorem for all 
manufacturers, producers, and exporters in Italy of the subject 
merchandise.

C. Exchange Rate Guarantee Program

    This program, which was enacted by Law 796/76, provides exchange 
rate guarantees on foreign currency loans from the European Coal and 
Steel Community (``ECSC'') and The Council of European Resettlement 
Fund (``CER''). Under the program, repayment amounts are calculated by 
reference to the exchange rate in effect at the time the loan is agreed 
upon. The program sets a ceiling and a floor on repayment to limit the 
effect on the borrower of exchange rate changes over time. For example, 
if the lire depreciates five percent against the DM (the currency in 
which the loan is taken out), borrowers would normally find that they 
would have to repay five percent more (in lire terms). However, under 
the Exchange Rate Guarantee Program, the ceiling would act to limit the 
increased repayment amount to two percent. There is also a floor in the 
program which would apply if the lire appreciated against the DM. The 
floor would limit any windfall to the borrower.
    In Grain-Oriented Electrical Steel, the Department found this 
program to be not countervailable because of incomplete information 
regarding the specificity of the program. The Department stated that, 
because the determination was reached while lacking certain important 
information, the finding of non-countervailability would not carry over 
to future investigations.
    In this investigation, information provided by the GOI shows that 
the steel industry received 25% of the benefits under the program. 
Furthermore, at verification, we found that in the years Dalmine took 
out loans on which it received exchange rate guarantees under this 
program, the steel industry received virtually all the benefits under 
the program. Based on this information, the Department determines that 
the steel industry was a dominant user of exchange rate guarantees 
under Law 796/76 and, thus, that benefits received by Dalmine under 
this law are being provided to a specific enterprise or industry or 
group of enterprises or industries. (See section 355.43(b)(2)(iii) of 
the Proposed Regulations). Therefore, we determine that the exchange 
rate guarantees offered under the program are countervailable to the 
extent they are provided on terms inconsistent with commercial 
considerations.
    Dalmine provided information that it could have purchased an 
exchange rate guarantee from commercial sources. However, Dalmine's 
information pertained to 1993, not to the period when the government 
guarantees were provided. The GOI's response indicates that commercial 
exchange rate guarantees were not available in 1986, the year in which 
the loans and the guarantees were received. Therefore, we determine the 
benefit to be the total amount of payments to Dalmine made during the 
POI by the GOI. (Because the amount the government will pay in any 
given year will not be known until that year, benefits can only be 
calculated on a year-by-year basis.) We divided the GOI's payments in 
1993 by Dalmine's [[Page 31997]] 1993 total sales. On this basis, we 
determine the estimated net subsidy from this program to be 0.20 
percent ad valorem for all manufacturers, producers, and exporters in 
Italy of the subject merchandise.

II. Programs Determined To Be Not Countervailable

A. 1988/89 Equity Infusion

    In November 1989, Dalmine completed an equity rights offering which 
allowed existing shareholders to purchase 7 new shares for every 10 
shares they already owned. The new shares were offered at a price of 
LIT 300 per share. At that time, ILVA owned 81.7 percent of Dalmine's 
equity, with the remaining 18.3 percent owned by private investors. 
Pursuant to the rights offering, ILVA subscribed to its full allotment 
of the new shares issued. The remainder of the new shares were 
purchased by private shareholders. All shares were purchased at LIT 300 
per share.
    Petitioner argues that, although Dalmine's shares were nominally 
publicly traded, the vast majority of Dalmine shares were indirectly 
owned by the GOI and, therefore, shares were not purchased in adequate 
volume by private investors to establish a valid benchmark. 
Specifically, petitioner contends that, in 1991, ILVA owned 99.9 
percent of Dalmine and, therefore, Dalmine's shares were in fact not 
publicly traded. Consequently, because essentially no private purchases 
were being made, the market price at the time of the equity infusion 
cannot serve as a valid benchmark. Furthermore, petitioner asserts that 
it is highly likely that the remaining shares not purchased by ILVA 
were purchased indirectly by the GOI through other holding companies.
    In response to our questionnaire, Dalmine provided a list of all 
purchasers of shares in the 1989 offering. There was no evidence to 
indicate that the shares not purchased by ILVA were purchased by other 
government controlled or owned entities, as petitioner suggests.
    Moreover, the extent of ILVA's ownership in 1991 is not relevant to 
the choice of a benchmark for the equity investment in 1989.
    Therefore, in our preliminarily determination, we determined that, 
because 18.3 percent of the equity infusion was purchased by private 
shareholders, the sale of these shares provides the market-determined 
price for Dalmine's equity. Furthermore, in accordance with section 
355.44 (e)(1) of the Department's Proposed Regulations, we 
preliminarily determined that the equity infusion is not 
countervailable because the market-determined price for equity 
purchased from Dalmine is not less than the price paid by ILVA for the 
same form of equity. We did not learn anything at verification that 
would lead us to reconsider our preliminary determination. Therefore, 
we continue to find that the equity infusion is not countervailable.

B. European Social Fund (``ESF'') Grants

    The ESF was established by the 1957 European Economic Community 
Treaty to increase employment and help raise worker living standards.
    As described in Grain-Oriented Electrical Steel, the ESF receives 
its funds from the EC's general budget of which the main revenue 
sources are customs duties, agricultural levies, value-added taxes 
collected by the member states, and other member state contributions.
    The member states are responsible for selecting the projects to be 
funded by the EC. The EC then disburses the grants to the member states 
which manage the funds and implement the projects. According to the EC, 
ESF grants are available to (1) people over 25 who have been unemployed 
for more than 12 months; (2) people under 25 who have reached the 
minimum school-leaving age and who are seeking a job; and (3) certain 
workers in rural areas and regions characterized by industrial decline 
or lagging development.
    The GOI has stated that the ESF grants received by Italy have been 
used for vocational training. Certain regions in the South are also 
eligible for private sector re-entry and retraining schemes. Since 
1990, the vocational training grants have been available to unemployed 
youths and long-term unemployed adults all over Italy, according to the 
GOI. Before 1990, however, the GOI gave preference to certain regions 
in Italy.
    In Grain-Oriented Electrical Steel, we determined that this program 
was not regionally specific and not otherwise limited to a specific 
enterprise or industry, or group of enterprises or industries. 
Furthermore, we noted that to the extent there is a regional preference 
(i.e., southern Italy) in the distribution of ESF benefits, it has not 
resulted in a countervailable benefit to the production of the subject 
merchandise, which is produced in northern Italy.
    Information provided by the GOI in this investigation is consistent 
with the information provided in Grain-Oriented Electrical Steel. 
Therefore, we determine that this program is not limited to a specific 
enterprise or industry, or group of enterprises or industries, and 
therefore, is not countervailable.

C. ECSC Article 54 Loans

    Under Article 54 of the 1951 ECSC Treaty, the European Commission 
provides loans directly to iron and steel companies for modernization 
and the purchase of new equipment. The loans finance up to 50 percent 
of an investment project. The remaining financing needs must be met 
from other sources. The Article 54 loan program is financed by loans 
taken by the Commission, which are then re-lent to iron and steel 
companies in the member states at a slightly higher interest rate than 
that at which the Commission obtained them.
    Consistent with the Department's finding in Grain-Oriented 
Electrical Steel, we determine that this program is limited to the iron 
and steel industry. As a result, loans under this program are specific.
    Of the Article 54 loans Dalmine had outstanding during the POI, 
some were denominated in U.S. dollars and others were in Dutch guilders 
(``NLG''). To determine whether the loans were provided on terms 
inconsistent with commercial considerations, we used the benchmark 
interest rates for the currencies in which the loans were denominated. 
That is, for the U.S. dollar loans we used the average interest rate on 
long-term fixed-rate U.S. dollar loans obtained in the United States, 
as reported by the Federal Reserve. For the NLG denominated loan, we 
used the average long-term bond rate for private borrowers in the 
Netherlands, as reported by the Organization for Economic Cooperation 
and Development (``OECD'').
    Because the interest rates paid on Dalmine's Article 54 loans are 
higher than the benchmark interest rates, the Department determines 
that loans provided under this program are not inconsistent with 
commercial considerations and, therefore, not countervailable.

D. 1989 Provisional Payment in Connection With 1989 Equity Infusion

    In March 1989, ILVA made a payment to Dalmine in anticipation of 
purchasing new shares in Dalmine. The payment was provisional in nature 
because EC authorization of the capital increase was necessary and, if 
authorization was not granted, the money would have been repaid to 
ILVA. The capital increase was not finalized until November 1989, due 
to delays in EC approval. At that time, the payment became equity 
capital.

[[Page 31998]]

    Consistent with the Department's position in Grain-Oriented 
Electrical Steel, we determine that the funds provided by ILVA to 
Dalmine are countervailable.
    During the period March-November 1989, Dalmine had use of the money 
and paid no interest on it. Therefore, we have treated the funds 
provided by ILVA to Dalmine as an interest-free short-term loan from 
March 1989 to November 1989.
    Because any benefit from this interest-free loan would be allocable 
entirely to 1989, no benefit is attributable to the POI.

III. Programs Determined To Be Not Used

    We established at verification that the following programs were not 
used during the POI.

1. Preferential IMI Export Financing Under Law 227/77
2. Preferential Insurance Under Law 227/77
3. Retraining Grants under Law 181/89
4. Benefits under ECSC Article 56

Verification

    In accordance with section 776(b) of the Act, we verified the 
information used in making our final determination. We followed 
standard verification procedures, including meeting with government and 
company officials, examination of relevant accounting records and 
examination of original source documents. Our verification results are 
outlined in detail in the public versions of the verification reports, 
which are on file in the Central Records Unit (Room B-099 of the Main 
Commerce Building).

Suspension of Liquidation

    In accordance with our affirmative preliminary determination, we 
instructed the U.S. Customs Service to suspend liquidation of all 
entries of seamless pipe from Italy, which were entered or withdrawn 
from warehouse for consumption, on or after November 28, 1994, the date 
our preliminary determination was published in the Federal Register. 
This final countervailing duty determination was aligned with the final 
antidumping duty determination of seamless pipe from Italy, pursuant to 
section 606 of the Trade and Tariff Act of 1984 (section 705(a)(1) of 
the Act).
    Under article 5, paragraph 3 of the GATT subsidies Code, 
provisional measures cannot be imposed for more than 120 days without a 
final affirmative determination of subsidization and injury. Therefore, 
we instructed the U.S. Customs Service to discontinue the suspension of 
liquidation on the subject merchandise entered on or after March 28, 
1995, but to continue the suspension of liquidation of all entries, or 
withdrawals from warehouse, for consumption of the subject merchandise 
between November 28, 1994, and March 27, 1995. We will reinstate 
suspension of liquidation under section 703(d) of the Act, if the ITC 
issues a final affirmative injury determination, and will require a 
cash deposit of estimated countervailing duties for such entries of 
merchandise in the amounts indicated below.

Seamless Pipe

    Country-Wide Ad Valorem Rate 1.47 percent.

ITC Notification

    In accordance with section 705(c) of the Act, we have notified the 
ITC of our determination. The ITC will make its determination whether 
these imports materially injure, or threaten injury to, a U.S. industry 
within 45 days of the publication of this notice. If the ITC determines 
that material injury or threat of material injury does not exist, the 
proceeding will be terminated and all securities posted as a result of 
the suspension of liquidation will be refunded or cancelled. However, 
if the ITC determines that material injury or threat of material injury 
does exist, the Department will issue a countervailing duty order.

Return of Destruction of Proprietary Information

    This notice serves as the only reminder to parties subject to 
Administrative Protective Order (APO) of their responsibility 
concerning the return or destruction of proprietary information 
disclosed under APO in accordance with 19 CFR 355.34(d). Failure to 
comply is a violation of the APO.
    This determination is published pursuant to section 705(d) of the 
Act and 19 CFR 355.20(a)(4).

    Dated June 12, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-14934 Filed 6-16-95; 8:45 am]
BILLING CODE 3510-DS-P