[Federal Register Volume 61, Number 233 (Tuesday, December 3, 1996)]
[Notices]
[Pages 64062-64066]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30754]
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DEPARTMENT OF COMMERCE
[C-401-401]
Certain Carbon Steel Products from Sweden; Preliminary Results of
Countervailing Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary results of countervailing duty
administrative review.
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SUMMARY: The Department of Commerce (the Department) is conducting an
administrative review of the countervailing duty order on certain
carbon steel products from Sweden. For information on the net subsidy
for the reviewed company, as well as for any non-reviewed companies,
please see the Preliminary Results of Review section of this notice. If
the final results remain the same as these preliminary results of
administrative review, we will instruct the U.S. Customs Service to
assess countervailing duties as detailed in the Preliminary Results of
Review section of this notice. Interested parties are invited to
comment on these preliminary results.
EFFECTIVE DATE: December 3, 1996.
FOR FURTHER INFORMATION CONTACT: Gayle Longest or Lorenza Olivas,
Office of CVD/AD Enforcement, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: Gayle
Longest (202) 482-3338 or (202) 482-2786.
SUPPLEMENTARY INFORMATION:
Background
On October 4, 1985, the Department published in the Federal
Register (50 FR 48517) the countervailing duty order on certain carbon
steel products from Sweden. On October 5, 1995, the Department
published a notice of ``Opportunity to Request an Administrative
Review'' (60 FR 52149) of this countervailing duty order. We received
timely requests for review, and we initiated the review, covering the
period January 1, 1994 through December 31, 1994, on November 16, 1995
(60 FR 57573).
In accordance with section 355.22(a) of the Department's Interim
Regulations, this review covers only those producers or exporters for
which a review was specifically requested (see Antidumping and
Countervailing Duties: Interim Regulations; Request for Comments, (60
FR 25130; May 11, 1995) (Interim Regulations)). Accordingly, this
review covers SSAB Svenskt Stal AB (SSAB), the sole known producer/
exporter of the subject merchandise during the period of review (POR).
This review also covers 10 programs.
On July 30, 1996, we extended the period for completion of the
preliminary results pursuant to section 751(a)(3) of the Tariff Act of
1930, as amended (see Certain Carbon Steel Products From Sweden;
Extension of Time Limit for Countervailing Duty Administrative Review
(61 FR 39632). As explained in the memoranda from the Assistant
Secretary for Import Administration to the File, dated November 22,
1995, and January 11, 1996 (both on file in the public file of the
Central Records Unit, Room B-099 of the Department of Commerce), all
deadlines were extended to take into account the partial shutdowns of
the Federal Government from November 15 through November 21, 1995, and
December 15, 1995, through January 6, 1996. Therefore, the deadline for
these preliminary results is no later than November 27, 1996, and the
deadline for the final results of this review is no later than 120 days
from the date on which these preliminary results are published in the
Federal Register.
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). The Department is conducting this administrative review in
accordance with section 751(a) of the Act. References to the
Department's Countervailing Duties; Notice of Proposed Rulemaking and
Request for Public Comments (54 FR 23366; May 31, 1989) (1989 Proposed
Regulations) are provided solely for further explanation of the
Department's countervailing duty practice. Although the Department has
withdrawn the particular rulemaking proceeding pursuant to which the
1989 Proposed Regulations were issued, the subject matter of these
regulations is being considered in connection with an ongoing
rulemaking proceeding which, among other things, is intended to conform
the Department's regulations to the URAA. See Advance Notice of
Proposed Rulemaking for Public Comments, (60 FR 80; Jan. 3, 1995);
Antidumping Duties; Countervailing Duties; Notice of Proposed Rulmaking
and Request for Public Comments, (61 FR 7308; February 27, 1996).
Scope of the Review
Imports covered by this review are shipments of certain carbon
steel products from Sweden. These products include cold-rolled carbon
steel, flat-rolled products, whether or not corrugated, or crimped:
whether or not pickled, not cut, not pressed and not stamped to non-
rectangular shape; not coated or pleated with metal and not clad; over
12 inches in width and of any thickness; whether or not in coils.
During the review period, such merchandise was classifiable under the
Harmonized Tariff Schedule (HTS) item numbers 7209.11.0000,
7209.12.0000, 7209.13.0000, 7209.21.0000, 7209.22.0000, 7209.23.0000,
7209.24.5000, 7209.31.0000, 7209.32.0000, 7209.33.0000, 7209.34.0000,
7209.41.0000, 7209.43.0000, 7209.44.0000, 7209.90.0000, 7211.30.5000,
7211.41.7000 and 7211.49.5000. The written description remains
dispositive.
Allocation Methodology
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 nonrecurring
grant benefits. See General Issues Appendix appended to Final
Countervailing Duty Determination; Certain Steel Products from Austria
(58 FR 37063, 37226; July 9, 1993). However, in British Steel plc. v.
United States, 879 F. Supp. 1254 (CIT 1995) (British Steel), the U.S.
Court of International Trade (the Court) ruled against this allocation
methodology. In
[[Page 64063]]
accordance with the Court's remand order, the Department calculated a
company-specific allocation period for nonrecurring subsidies based on
the average useful life (AUL) of non-renewable physical assets. This
remand determination was affirmed by the Court on June 4, 1996. British
Steel, 929 F. Supp. 426, 439 (CIT 1996).
The Department has decided to acquiesce to the Court's decision
and, as such, we intend to determine the allocation period for
nonrecurring subsidies using company-specific AUL data where reasonable
and practicable. Specifically, the Department has preliminarily
determined that it is reasonable and practicable to allocate all new
nonrecurring subsidies (i.e., subsidies that have not yet been assigned
an allocation period) based on a company-specific AUL. However, if a
subsidy has already been countervailed based on an allocation period
established in an earlier segment of the proceeding, it does not appear
reasonable or practicable to reallocate that subsidy over a different
period of time. In other words, since the countervailing duty rate in
earlier segments of the proceeding was calculated based on a certain
allocation period and resulting benefit stream, redefining the
allocation period in later segments of the proceeding would entail
taking the original grant amount and creating an entirely new benefit
stream for that grant. Such a practice may lead to an increase or
decrease in the amount countervailed and, thus, would result in the
possibility of over-countervailing or under-countervailing the actual
benefit. The Department has preliminarily determined that a more
reasonable and accurate approach is to continue using the allocation
period first assigned to the subsidy. We invite the parties to comment
on the selection of this methodology and provide any other reasonable
and practicable approaches for complying with the Court's ruling.
In the current review, there are no new subsidies. All of the
nonrecurring grants under review were provided prior to the POR;
allocation periods for these grants were established during prior
segments of this proceeding. Therefore, for purposes of these
preliminary results, the Department is using the original allocation
period assigned to each grant.
Privatization and Sale of Assets to Other Companies
SSAB is the only Swedish company that produces and exports the
subject merchandise. SSAB has sold several productive units and the
company was partially privatized twice, in 1987 and in 1989. During the
review period, SSAB was completely privatized.
In Final Affirmative Countervailing Duty Determinations: Certain
Steel Products from Sweden (58 FR 37385; July 9, 1993) (Final
Determination), the Department found that SSAB had received
countervailable subsidies prior to the sale of the productive units and
the two partial privatizations. Further, the Department found that a
private party purchasing all or part of a government-owned company can
repay prior subsidies on behalf of the company as part or all of the
sales price (see General Issues Appendix (58 FR 37217, 37262; July 9,
1993)). Therefore, to the extent that a portion of the sales price paid
for a privatized company can be reasonably attributed to prior
subsidies, that portion of those subsidies will be extinguished.
To calculate a rate for the subsidies that were allocated to the
spin-off, i.e., a productive unit that was sold, we first determined
the amount of the subsidies attributable to each productive unit by
dividing the asset value of that productive unit by the total asset
value of SSAB in the year of the spin-off. We then applied this ratio
to the net present value (NPV), in the year of the spin-off, of the
future benefit streams from all of SSAB's prior subsidies allocable to
the POR. The future benefit streams at the time of the sale of each
productive unit reflect the Department's allocation over time of prior
subsidies to SSAB in accordance with the declining balance methodology
(see section 355.49 of the Department's 1989 Proposed Regulations), and
reflect also the effect of prior spin-offs of SSAB productive units.
We next estimated the portion of the purchase price which
represents repayment of prior subsidies by determining the portion of
SSAB's net worth that was accounted for by subsidies. To do that, we
divided the face value of the allocable subsidies received by SSAB in
each year from fiscal year 1979 through fiscal year 1993 by SSAB's net
worth in the same year. We calculated a simple average of these ratios,
which was then multiplied by the purchase price of the productive unit.
Thus, we determined the amount of the purchase price which represents
repayment of prior subsidies. This amount was subtracted from the
subsidies attributed to the productive unit at the time of sale to
arrive at the amount of subsidies allocated to the productive unit
being spun-off.
To calculate the subsidies remaining with SSAB after privatization,
we performed the following calculations. We first calculated the NPV of
the future benefit stream of the subsidies at the time of the sale of
the shares. Next, we estimated the portion of the purchase price which
represents repayment of prior subsidies in accordance with the
methodology described in the ``Privatization'' section of the General
Issues Appendix (58 FR 37217, 37259). This amount was then subtracted
from the amount of the NPV eligible for repayment, and the result was
divided by the NPV to calculate the ratio representing the amount of
subsidies remaining with SSAB.
To calculate the benefit provided to SSAB in the POR, where
appropriate, we multiplied the benefit calculated for 1994, adjusted
for sales of productive units, by the ratio representing the amount of
subsidies remaining with SSAB after privatization. We then divided the
results by the company's total sales in 1994.
Analysis of Programs
I. Programs Conferring Subsidies
Programs Previously Determined to Confer Subsidies
(1) Equity Infusions
In 1981, the Government of Sweden (GOS) provided equity capital to
SSAB totaling 1,125 million Swedish kronor (MSEK). Simultaneously,
Granges, a private company and the only other shareholder at the time,
contributed 375 MSEK. To persuade Granges to contribute this equity
capital, the GOS guaranteed a specified sum to be paid to Granges in
1991. Because of this arrangement, we determined that the 375 MSEK paid
by Granges was an equity infusion provided indirectly by the GOS,
through Granges, specifically to SSAB. See Final Determination (58 FR
37385, 37387).
In the Final Determination and in the final determination from a
previous investigation of Swedish steel, Final Affirmative
Countervailing Duty Determinations; Certain Carbon Steel Products from
Sweden (50 FR 33377; August 19, 1985) (Final Certain Carbon Steel
Products), we determined that SSAB was unequityworthy in 1981 when it
received the equity infusions, and that the two equity infusions are
therefore countervailable. There has been no new information or
evidence of changed circumstances in this review to warrant
reconsideration of this determination.
In accordance with the ``Equity'' section of the General Issues
Appendix, we treated the equity infusions as grants. To calculate the
benefit from these equity infusions for the POR, we used the grant
methodology as
[[Page 64064]]
described in the ``Allocation Methodology'' section above. Because the
Department determined in the Final Determination that the infusions are
non-recurring subsidies, we have allocated the subsidies over 15 years,
as discussed in the ``Allocation Methodology'' section above. As the
discount rate, we have used SSAB's company-specific interest rate on
fixed-rate long-term loans (see Sec. 355.49(b)(2)(i) of the 1989
Proposed Regulations).
We reduced the benefit from these equity infusions attributable to
the POR according to the methodology outlined in the ``Privatization''
section above. We then divided the result by SSAB's total sales for
1994. On this basis, we preliminarily determine the net subsidy for
equity infusions to be 0.53 percent ad valorem.
(2) Structural Loans
Under three separate pieces of legislation, SSAB received
structural loans for investment in plant and equipment. The loans were
disbursed in installments between 1978 and 1983. All three loans were
outstanding during the POR.
According to the terms of the loans, all three structural loans
were interest-free for three years from the date of disbursement. After
that time, one loan incurred interest at a fixed rate of five percent
per annum while the other two loans incurred interest at a variable
rate subject to change every five years. The variable interest rate on
these two loans is set at the rate of the long-term government bonds
plus a 0.25 percent margin. After a five-year grace period, the
principal is repaid in 20 equal installments at the end of each
calendar year.
In Final Determination and in Final Certain Carbon Steel Products,
we determined that these loans are countervailable because they were
provided specifically to SSAB on terms inconsistent with commercial
considerations. There has been no new information or evidence of
changed circumstances in this review to warrant reconsideration of this
determination.
To calculate the benefit from the fixed-rate structural loan, we
employed the long-term loan methodology described in section
355.49(c)(1) of the 1989 Proposed Regulations. To calculate the
benefits from the two variable-rate loans, we used the variable-rate
long-term loan methodology described in section 355.49(d)(1) of the
1989 Proposed Regulations. As the discount rate, we used SSAB's
company-specific long-term interest rates, a benchmark previously
established in the Final Determination.
We reduced the benefit attributable to the POR from the fixed-rate
structural loan according to the methodology outlined in the
``Privatization'' section above. We then aggregated the benefits for
the three loans (fixed interest rate and variable interest rate) and
divided the results by SSAB's total sales for 1994. On this basis, we
preliminarily determine the net subsidy from the three structural loans
to be 0.27 percent ad valorem.
(3) Forgiven Reconstruction Loans
The GOS provided reconstruction loans to SSAB between 1979 and 1985
to cover operating losses, investment in certain plants and equipment,
and for employment promotion purposes. The loans were interest free for
three years, after which a fixed interest rate was charged. According
to the terms of the loans, up to half of the outstanding amount of the
loan can be written off after the second calendar year following the
disbursement. The remainder of the loan can be written off entirely at
the end of the ninth calendar year after disbursement. Pursuant to the
terms of the reconstruction loans, the GOS wrote off large portions of
principal and accrued interest on these loans between 1980 and 1990.
In the Final Determination and in Final Certain Carbon Steel
Products, we determined that forgiveness of these loans is
countervailable. There has been no new information or evidence of
changed circumstances in this review to warrant reconsideration of this
determination.
To calculate the benefit, we treated the written-off portions of
the reconstruction loans as countervailable grants received in the
years the loans were forgiven and calculated the benefit using the
grant methodology as described in the ``Allocation Methodology''
section above. We reduced the benefits from these grants attributable
to the POR according to the methodology outlined in the
``Privatization'' section above. We then divided the results by SSAB's
total sales for 1994. On this basis, we preliminarily determine the net
subsidy from the three forgiven reconstruction loans to be 1.18 percent
ad valorem.
II. Program Preliminarily Determined Not to Confer Subsidies
(1) Research & Development (R&D) Loans and Grants
The Swedish National Board for Industrial and Technical Development
(NUTEK) provides research and development loans and grants to Swedish
industries for R&D purposes. One type of R&D loan (industrial
development loans) is mostly aimed at ``new'' industries such as the
biotechnical, electronic, and medical industries. Another type of R&D
loan (energy efficiency loans) is directed towards big energy
consumers.
The loans accrue interest equal to the official ``discount'' rate
plus a premium of 3.75 percent. However, no interest or principal
payments are due until the R&D project is completed. If, upon
completion of a project, the company wishes to use the research results
for commercial purposes, the loan must be repaid. On the other hand, if
the company decides not to utilize the results and, therefore, does not
claim proprietary treatment for the results, NUTEK will forgive the
loan and the results of the research become publicly available.
SSAB had several R&D loans outstanding during the POR on which it
did not make either principal or interest payments. However, under our
current practice, we cannot determine whether SSAB has received a
countervailable benefit until the research is completed and they will
be able to submit information demonstrating that the research results
are publicly available. It is only upon completion that it will be
known (1) whether the loans are forgiven and (2) if the loans are not
forgiven, whether the accrued interest is less than what would accrue
if the loans are provided at commercial rates. See Final Determination
(58 FR 37385, 37390). Therefore, we will continue to examine these R&D
loans in future administrative reviews.
As explained above, NUTEK may forgive R&D loans if the companies
receiving them disseminate publicly the results of the research
financed by the loans. The Department's current practice is to treat
forgiven R&D loans as non-countervailable if the research results are
publicly available. See Final Determination (58 FR 37385, 37390).
During the POR, three such loans to SSAB were forgiven. Official
documentation from NUTEK, provided in the questionnaire response,
indicates that the results of these research projects for which these
three loans were made to SSAB were made publicly available. On this
basis, we preliminarily determine that these three forgiven R&D loans
did not confer countervailable benefits on the subject merchandise
during the POR.
[[Page 64065]]
(2) Fund for Industry and New Business R&D
SSAB reported in its questionnaire response that SSAB Oxelosund, a
subsidiary, received a conditional repayment R&D loan from the Fund for
Industry and New Business (the Fund).
The Fund provides project financing to firms with a budget of at
least two million Swedish kroner (MSEK), and start-up loans to new
``limited'' companies. Projects are financed through (1) conditional
repayment loans, (2) capital in return for royalty, (3) project
guarantees, and (4) credit guarantees for developing new products,
processes and systems, and marketing. The terms and conditions of the
financing depend on the type of financing provided.
In October 1992, the Fund approved a 6-MSEK conditional repayment
loan for SSAB Oxelosund. Only 3 MSEK of the loan amount were disbursed.
Under the terms of the loan, 50 percent of the principal was to be paid
at the end of 1994, with the remaining 50 percent to be paid at the end
of 1995. The loan accrued interest from the date of disbursement at a
rate equal to the Central Bank's ``discount'' rate, plus a 4 percent
premium, paid quarterly, for the prior quarter. Because the base rate
changes quarterly, we have analyzed this loan under our variable rate
loan methodology. In Certain-Cut-to-Length Carbon Steel Plate from
Sweden; Preliminary Results of Countervailing Duty Administrative
Review (60 FR 44017; August 24, 1995) (92/93 Preliminary Results) and
Certain-Cut-to-Length Carbon Steel Plate from Sweden; Final Results of
Countervailing Duty Administrative Review (61 FR 5381; February 12,
1996) (92/93 Final Results), the previous administrative review of this
order, we found that SSAB paid a higher interest rate for this loan
than it would have paid at the commercial benchmark rates. Accordingly,
we determined that the program did not confer a countervailable benefit
on the subject merchandise during the POR. In this review period, the
entire outstanding principal and the accrued interest were paid.
During the POR, SSAB made two interest payments on the loan. The
first payment was in arrears and covered the last quarter of 1993; the
second payment was for interest accrued in 1994. Therefore, we selected
benchmarks for both 1993 and 1994, using the same source for benchmarks
established previously. See 92/93 Preliminary Results and 92/93 Final
Results. We compared the interest paid by the company with the amount
of interest that the company would have paid on a similar loan provided
at the benchmark rates, and we factored into the calculation the period
of time in which the interest payment was in arrears. We found that the
amount paid by the company was slightly lower than the amount that
would have been paid at the commercial benchmark rate. However, the
subsidy rate that would be attributable to this loan is 0.00002 percent
ad valorem. A rate this small would not change the overall subsidy rate
for SSAB. Moreover, since the principal of the loan was entirely repaid
during the POR, the issue of the countervailability of the loan will
not arise in subsequent administrative reviews. Since any benefit we
would calculate for the loan would not affect the overall subsidy rate
during the POR and since there is no possibility of future benefits
from this loan, we do not consider it necessary to make a determination
on the specificity of this loan program and are not including it in the
calculation of these preliminary results.
III. Programs Preliminarily Found to be Not Used
We also examined the following programs and preliminarily determine
that SSAB did not apply for or receive benefits under them during the
POR:
A. Regional Development Grants
B. Transportation Grants
C. Location-of-industry Loans
IV. Program Preliminarily Found to be Terminated
Mining Exploration Grants
Between 1983 and 1985, SSAB received grants for exploration of new
mineral deposits in its Grangesberg mines. In Final Determination, the
Department found that these grants were countervailable, because they
were provided specifically to a group of enterprises or industries
(mining companies). The amounts received under this program were less
than 0.5 percent of the value of SSAB's total sales for that year and
were expensed in the year of receipt in accordance with the Allocation
section of the General Issues Appendix.
In June 1993, the mining exploration grant program was terminated
by the Government of Sweden under law SFS 1993:693 which eliminated
Namnden for Statens Gruvegendom, the agency that administered the
program. No grants were given to SSAB under this program after 1985 and
there were no residual benefits during the POR from grants previously
bestowed.
Preliminary Results of Review
In accordance with section 355.22(c)(4)(ii) of the Department's
Interim Regulations, we calculated an individual subsidy rate for each
producer/exporter subject to this administrative review. For the period
January 1, 1994 through December 31, 1994, we preliminarily determine
the net subsidy for SSAB to be 1.98 percent ad valorem. If the final
results of this review remain the same as these preliminary results,
the Department intends to instruct the U.S. Customs Service (Customs)
to assess countervailing duties for SSAB at 1.98 percent ad valorem.
The Department also intends to instruct the Customs to collect a cash
deposit of 1.98 percent of the f.o.b. invoice price on all shipments of
the subject merchandise from SSAB, entered, or withdrawn from
warehouse, for consumption on or after the date of publication of the
final results of this review.
Because the URAA replaced the general rule in favor of a country-
wide rate with a general rule in favor of individual rates for
investigated and reviewed companies, the procedures for establishing
countervailing duty rates, including those for non-reviewed companies,
are now essentially the same as those in antidumping cases, except as
provided for in section 777A(e)(2)(B) of the Act. The requested review
will normally cover only those companies specifically named. Pursuant
to 19 CFR 355.22(g), for all companies for which a review was not
requested, duties must be assessed at the cash deposit rate, and cash
deposits must continue to be collected, at the rate previously ordered.
As such, the countervailing duty cash deposit rate applicable to a
company can no longer change, except pursuant to a request for a review
of that company. See Federal-Mogul Corporation and The Torrington
Company v. United States, 822 F.Supp. 782 (CIT 1993) and Floral Trade
Council v. United States, 822 F.Supp. 766 (CIT 1993) (interpreting 19
CFR 353.22(e), the antidumping regulation on automatic assessment,
which is the analogue to 19 CFR 355.22(g), the countervailing duty
regulation on automatic assessment). Therefore, the cash deposit rates
for all companies except those covered by this review will be unchanged
by the results of this review.
We will instruct Customs to continue to collect cash deposits for
non-reviewed companies at the most recent company-specific or country-
wide rate
[[Page 64066]]
applicable to the company. Accordingly, the cash deposit rate that will
be applied to all non-reviewed companies covered by this order is that
established in the most recently completed administrative proceeding.
See Certain Carbon Steel Products From Sweden; Final Results of
Countervailing Duty Administrative Review, 61 FR at 5378. This rate
shall apply to all non-reviewed companies until a review of a company
assigned these rates is requested. In addition, for the period January
1, 1994 through December 31, 1994, the assessment rates applicable to
all non-reviewed companies covered by this order are the cash deposit
rates in effect at the time of entry.
Public Comment
Parties to the proceeding may request disclosure of the calculation
methodology and interested parties may request a hearing not later than
10 days after the date of publication of this notice. Interested
parties may submit written arguments in case briefs on these
preliminary results within 30 days of the date of publication. Rebuttal
briefs, limited to arguments raised in case briefs, may be submitted
seven days after the time limit for filing the case brief. Parties who
submit written arguments in this proceeding are requested to submit
with the argument (1) a statement of the issue and (2) a brief summary
of the argument. Any hearing, if requested, will be held seven days
after the scheduled date for submission of rebuttal briefs. Copies of
case briefs and rebuttal briefs must be served on interested parties in
accordance with 19 CFR 355.38(e).
Representatives of parties to the proceeding may request disclosure
of proprietary information under administrative protective order no
later than 10 days after the representative's client or employer
becomes a party to the proceeding, but in no event later than the date
the case briefs, under Sec. 355.38(c), are due. The Department will
publish the final results of this administrative review, including the
results of its analysis of issues raised in any case or rebuttal brief
or at a hearing.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1) and 19 C.F.R.
Sec. 355.22(c)(5)).
Dated: November 25, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-30754 Filed 12-2-96; 8:45 am]
BILLING CODE 3510-DS-P